-6-
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): October
19, 1995
RESOURCE MORTGAGE CAPITAL, INC.
(Exact Name of Registrant as Specified in Charter)
Virginia 1-
9819 52-1549373
(State or Other (Commission File Number)
(IRS Employer
Jurisdiction of
Identification No.)
Incorporation)
4880 Cox Road, Glen Allen, Virginia
23060
(Address of Principal Executive
Offices) (Zip Code)
Registrant's telephone number, including area code: (804)
967-5800
Not Applicable
(Former Name or Former Address, if Changed Since Last
Report)
<PAGE>
Item 5. Other Events.
This filing is made to effect the incorporation by
reference of the accompanying exhibits in the Company's
Registration Statement No. 33-50705 on Form S-3, filed with
the Securities and Exchange Commission, which became
effective on January 28, 1994, to supply information omitted
from Item 14 of the above described Registration Statement
(Attached as Annex A), and to include a press release in
connection with the offering of Series B Cumulative
Convertible Preferred Stock of the Company (Attached as
Annex B).
Item 7. Exhibits.
(c). Exhibits.
1.1 Form of Underwriting Agreement.
4.1 Form of Amendment to Articles of Incorporation.
4.2 Form of Certificate for the Series B Cumulative
Convertible Preferred Stock.
5.1 Legal Opinion of Venable, Baetjer and Howard, LLP.
8.1 Tax Opinion of Venable, Baetjer and Howard, LLP.
12.1 Ratio of Available Earnings to Fixed Charges.
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of Venable, Baetjer and Howard, LLP (contained
in Exhibits 5.1 and 8.1 filed herewith).
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, as amended, the Registrant has duly
caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: October 20, 1995 RESOURCE MORTGAGE
CAPITAL, INC.
By: /s/ Thomas H. Potts
Thomas H. Potts
President
<PAGE>
ANNEX A
Item 14. Other Expenses of Issuance and Distribution
The estimated expenses, other than underwriting discounts
and commissions, in connection with the offering of
Securities are:
<TABLE>
<CAPTION>
<S> <C>
Registration Fee $20,70
0
Legal Fees and Expenses 50,000
Accounting Fees and Expenses 20,000
Blue Sky Qualification and Expenses 5,000
including Counsel Fees
New York Stock Exchange Listing Fee 1,500
Nasdaq/NMS Entry and Listing Fees 10,500
NASD Fee 5,000
Printing and Engraving Expenses 16,000
Transfer and Registrar Fees 7,500
Miscellaneous 3,800
TOTAL 140,00
0
</TABLE>
<PAGE>
ANNEX B
PRESS RELEASE
FOR IMMEDIATE RELEASE CONTACT: ANDREA GARRETT
October 19, 1995 (804) 967-
5800
RESOURCE MORTGAGE CAPITAL ANNOUNCES
PREFERRED STOCK OFFERING
Resource Mortgage Capital, Inc. (NYSE: RMR) today
announced the public offering of 2,100,000 shares of the
Company's Series B Cumulative Convertible Preferred Stock at
an offering price of $24.50 per share in an underwritten
offering managed by Stifel, Nicolaus & Company,
Incorporated, Robert W. Baird & Co., Scott & Stringfellow,
Inc. and Stephens Inc. The Company has also granted the
underwriters an option to purchase up to 315,000 additional
shares of preferred stock to cover over-allotments, if
necessary. It is expected the purchase by the underwriters
of such shares will close on October 25, 1995. A copy of
the prospectus may be obtained from Stifel, Nicolaus.
The Series B Cumulative Convertible Preferred Stock
will be convertible into Resource Mortgage common stock at a
conversion price of $24.50 per share (initially equal to a
one for one conversion ratio). The quarterly dividend rate
will be $0.585 per share.
This release shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any
sales of these securities in any state in which such offer,
solicitation or sales would be unlawful prior to
registration or qualification under the securities laws of
any such state.
Resource Mortgage Capital, Inc. is a self-managed real
estate investment trust that originates, services,
securitizes and invests in residential mortgage loans and
securities. The Company's strategy is to grow its net
margin income and to use its mortgage operations to create
investments for its portfolio.
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
<S> <C>
Exhibit Page
1.1 Underwriting Agreement.
7
4.1 Form of Amendment to Articles of Incorporation.
26
4.2 Form of Certificate for the Series B Cumulative
Convertible Preferred Stock.
48
5.1 Legal Opinion of Venable, Baetjer and Howard, LLP.
50
8.1 Tax Opinion of Venable, Baetjer and Howard, LLP.
52
12.1 Ratio of Available Earnings to Fixed Charges.
60
23.1 Consent of KPMG Peat Marwick LLP.
61
23.2 Consent of Venable, Baetjer and Howard, LLP (contained
in Exhibits 5.1
and 8.1 filed herewith).
</TABLE>
<PAGE>
EXHIBIT 1.1
RESOURCE MORTGAGE CAPITAL, INC.
Underwriting Agreement
October 19, 1995
St. Louis, Missouri
TO: STIFEL, NICOLAUS & COMPANY, INCORPORATED
Representative of the Underwriters
named in Schedule I hereto
Dear Sirs:
Resource Mortgage Capital, Inc., a Virginia
corporation (the "Company"), proposes to sell to the
underwriters named in Schedule I hereto (the
"Underwriters"), for whom you (the "Representative") are
acting as representative, shares of Series B Cumulative
Convertible Preferred Stock, $.01 par value, of the Company
(the "Stock"). The number of shares of the Stock that will
be purchased by the Underwriters is set forth in Schedule I
hereto (the "Firm Stock").
The Company also grants to the Underwriters an
option to purchase additional shares of the Stock (the
"Option Stock", and, together with the Firm Stock, herein
called the "Preferred Stock"). Such option is granted
solely for the purpose of covering over-allotments in the
sale of the Firm Stock and is exercisable as provided in
Section 3 hereof. Shares of the Option Stock shall be
purchased severally for the account of the Underwriters in
proportion to the number of shares of Firm Stock set
opposite the name of such Underwriters in Schedule I hereto
and on the terms and conditions contained therein and in
this Agreement. The respective purchase obligations of each
Underwriter with respect to the Option Stock shall be
adjusted by the Representative so that no Underwriter shall
be obligated to purchase Option Stock other than in round
lots. The respective purchase obligation of each
Underwriter with respect to the Option Stock shall be
adjusted by the Representative so that no Underwriter shall
be obligated to purchase Option Stock other than in round
lots. The price paid by the Underwriters for both the Firm
Stock and any Option Stock shall be $23.459 per share. Upon
authorization by the Representative of the release of the
Firm Stock and, if applicable, the Option Stock, the several
Underwriters propose to offer the Firm Stock and, if
applicable, the Option Stock for sale upon the terms and
conditions set forth in the Final Prospectus.
<PAGE>
1. Representations and Warranties. The Company
represents and warrants to, and agrees with, each
Underwriter as set forth below in this Section 1. Certain
terms used in this Section 1 are defined in paragraph (c)
hereof.
(a) The Company meets the requirements for
use of Form S-3 under the Securities Act of 1933,
as amended (the "Act") and has filed with the
Securities and Exchange Commission (the
"Commission") Registration Statement No. 33-50705,
on such Form, including a Basic Prospectus, for
registration under the Act of the offering and
sale of securities, including the Preferred Stock.
The Company may have filed one or more amendments
thereto, and may have used a Preliminary Final
Prospectus, each of which has previously been
furnished to you. Such registration statement, as
so amended, has become effective. The offering of
the Preferred Stock is a delayed offering and,
although the Basic Prospectus may not include all
the information with respect to the Preferred
Stock and the offering thereof required by the Act
and the rules thereunder to be included in the
Final Prospectus, the Basic Prospectus includes
all such information required by the Act and the
rules thereunder to be included therein as of the
Effective Date. The Company will next file with
the Commission pursuant to Rules 415 and 424(b)(2)
or (5) a final supplement to the form of
prospectus included in such registration statement
relating to the Preferred Stock and the offering
thereof. As filed, such Final Prospectus
Supplement shall include all required information
with respect to the Preferred Stock and the
offering thereof and, except to the extent the
Representative shall agree in writing to a
modification, shall be in all substantive respects
in the form furnished to you prior to the
Execution Time or, to the extent not completed at
the Execution Time, shall contain only such
specific additional information and other changes
(beyond that contained in the Basic Prospectus and
any Preliminary Final Prospectus) as the Company
has advised you, prior to the Execution Time, will
be included or made therein or to which you have
agreed.
(b) On the Effective Date, the Registration
Statement did, and when the Final Prospectus is
first filed (if required) in accordance with Rule
424(b) and on the Closing Date (as hereinafter
defined) and the Second Closing Date (as
hereinafter defined), the Final Prospectus (and
any supplement thereto) will, comply in all
material respects with the applicable requirements
of the Act and the Securities Exchange Act of 1934
(the "Exchange Act") and the respective rules
thereunder; on the Effective Date, the
Registration Statement did not or will not contain
any untrue statement of a material fact or omit to
state any material fact required to be stated
therein or necessary in order to make the
statements
<PAGE>
therein not misleading; and, on the date of any
filing pursuant to Rule 424(b), the Closing Date
and the Second Closing Date, the Final Prospectus
(together with any supplement thereto) will not,
include any untrue statement of a material fact or
omit to state a material fact necessary in order
to make the statements therein, in the light of
the circumstances under which they were made, not
misleading; provided, however, that the Company
makes no representations or warranties as to the
information contained in or omitted from the
Registration Statement or the Final Prospectus (or
any supplement thereto) in reliance upon and in
conformity with information furnished in writing
to the Company by or on behalf of any Underwriter
through the Representative specifically for
inclusion in the Registration Statement or the
Final Prospectus (or any supplement thereto).
(c) The terms which follow, when used in
this Agreement, shall have the meanings indicated.
The term the "Effective Date" shall mean each date
that the Registration Statement and any post-
effective amendment or amendments thereto became
or become effective. "Execution Time" shall mean
the date and time that this Agreement is executed
and delivered by the parties hereto. "Basic
Prospectus" shall mean the prospectus referred to
in paragraph (a) above contained in the
Registration Statement at the Effective Date.
"Preliminary Final Prospectus" shall mean any
preliminary prospectus supplement to the Basic
Prospectus which describes the Preferred Stock and
the offering thereof and is used prior to filing
of the Final Prospectus. "Final Prospectus" shall
mean the prospectus supplement relating to the
Preferred Stock that is first filed pursuant to
Rule 424(b) after the Execution Time, together
with the Basic Prospectus. "Registration
Statement" shall mean the registration statement
referred to in paragraph (a) above, including
incorporated documents, exhibits and financial
statements, as amended at the Execution Time (or,
if not effective at the Execution Time), in the
form in which it shall become effective and, in
the event any post-effective amendment thereto
becomes effective prior to the Closing Date, shall
also mean such registration statement as so
amended. Such term shall include any Rule 430A
Information deemed to be included therein at the
Effective Date as provided by Rule 430A. "Rule
415," "Rule 424," "Rule 430A" and "Regulation S-K"
refer to such rules or regulation under the Act.
"Rule 430A Information" means information with
respect to the Preferred Stock and the offering
thereof permitted to omitted from the Registration
Statement when it becomes effective pursuant to
Rule 430A. Any reference herein to the
Registration Statement, the Basic Prospectus, any
Preliminary Final Prospectus or the Final
Prospectus shall be deemed to
<PAGE>
refer to and include the documents incorporated by
reference therein pursuant to Item 12 of Form S-3
which were filed under the Exchange Act on or
before the Effective Date of the Registration
Statement or the issue date of the Basic
Prospectus, any Preliminary Final Prospectus or
the Final Prospectus, as the case may be; and any
reference herein to the terms "amend," "amendment"
or "supplement" with respect to the Registration
Statement, the Basic Prospectus, any Preliminary
Final Prospectus or the Final Prospectus shall be
deemed to refer to and include the filing of any
document under the Exchange Act after the
Effective Date of the Registration Statement or
the issue date of the Basic Prospectus, any
Preliminary Final Prospectus or the Final
Prospectus, as the case may be, deemed to be
incorporated therein by reference.
2. Purchase and Sale. Subject to the terms and
conditions and in reliance upon the representations and
warranties herein set forth, the Company agrees to sell to
each Underwriter, and each Underwriter agrees, severally and
not jointly, to purchase from the Company, at the purchase
price per share, the number of shares of Preferred Stock set
forth opposite such Underwriter's name in Schedule I hereto.
3. Delivery and Payment. Delivery of and payment
for the Preferred Stock shall be made on the date and at the
time specified in Schedule I hereto, which date and time may
be postponed by agreement between the Representative and the
Company or as provided in Section 8 hereof. The date and
time of delivery and payment for the Firm Stock shall be
referred to herein as the "Closing Date," and the date and
time of delivery and payment for the Option Stock shall be
referred to herein as the "Second Closing Date." Delivery
of the Preferred Stock shall be made to the Representative
for the respective accounts of the several Underwriters
against payment by the several Underwriters through the
Representative of the purchase price thereof to or upon the
order of the Company payable in same day funds. Delivery of
the Firm Stock and the Option Stock, as the case may be,
shall be made at such location as the Representative shall
reasonably designate at least one business day in advance of
the Closing Date and the Second Closing Date, respectively,
and payment for the Preferred Stock shall be made at the
office specified in Schedule I hereto. Certificates for the
Firm Stock shall be registered in such names and in such
denominations as the Representative may request not less
than three full business days in advance of the Closing
Date. Certificates for the Option Stock shall be registered
in such names and in such denominations as provided below.
The Company agrees to have the certificates for
each of the Firm Stock and the Option Stock available for
inspection, checking and packaging by the Representative in
New York, New York, not later than 1:00 P.M. on the business
day prior to the Closing Date and the Second Closing Date,
respectively.
<PAGE>
The over-allotment option granted herein may be
exercised at any time, in whole or in part but only once, on
or before the thirtieth day after the date of this Agreement
by written notice being given to the Company by the
Underwriters. Such notice shall set forth the aggregate
number of shares of Option Stock as to which the option is
being exercised, the names in which the shares of the Option
Stock are to be registered, the denominations in which the
shares of the Option Stock are to be issued and the date and
time, as determined by the Underwriters, when the shares of
the Option Stock are to be delivered; provided, however,
that this date and time shall not be earlier than the
Closing Date nor earlier than the second business day after
the date on which the option shall have been exercised nor
later than the third business day after the date on which
the option shall have been exercised. If the option is
exercised two business days prior to the Closing Date, then
the Second Closing Date shall be the same as the Closing
Date.
4. Agreements. The Company agrees with the
several Underwriters that:
(a) The Company will use its best efforts to
cause any amendment to the Registration Statement,
to become effective that may in its judgment be
required by the Act. Prior to the termination of
the offering of the Preferred Stock, the Company
will not file any amendment of the Registration
Statement or supplement (including the Final
Prospectus or any Preliminary Final Prospectus) to
the Basic Prospectus unless the Company has
furnished you a copy for your review prior to
filing and will not file any such proposed
amendment or supplement to which you reasonably
object. Subject to the foregoing sentence, the
Company will cause the Final Prospectus, properly
completed, and any supplement thereto to be filed
with the Commission pursuant to the applicable
paragraph of Rule 424(b) within the time period
prescribed and will provide evidence satisfactory
to the Representative of such timely filing. The
Company will promptly advise the Representative
(i) when any amendment to the Registration
Statement shall have been filed and become
effective, (ii) when the Final Prospectus shall
have been filed with the Commission pursuant to
Rule 424(b), (iii) of any request by the
Commission for any amendment of the Registration
Statement or supplement to the Final Prospectus or
for any additional information, (iv) of the
issuance by the Commission of any stop order
suspending the effectiveness of the Registration
Statement or the institution or threatening of any
proceeding for that purpose and (v) of the receipt
by the Company of any notification with respect to
the suspension of the qualification of the
Preferred Stock for sale in any jurisdiction or
the initiation or threatening of any proceeding
for such purpose. The Company will use its best
efforts to prevent the issuance of any such stop
order and, if issued, to obtain as soon as
possible the withdrawal thereof.
<PAGE>
(b) If, at any time when a prospectus
relating to the Preferred Stock is required to be
delivered under the Act, any event occurs as a
result of which the Final Prospectus as then
supplemented would include any untrue statement of
a material fact or omit to state any material fact
necessary to make the statements therein in the
light of the circumstances under which they were
made not misleading, or if it shall be necessary
to amend the Registration Statement or supplement
the Final Prospectus to comply with the Act or the
Exchange Act or the respective rules thereunder,
the Company promptly will prepare and file with
the Commission, subject to the second sentence of
paragraph (a) of this Section 4, an amendment or
supplement which will correct such statement or
omission or effect such compliance.
(c) As soon as practicable, the Company will
make generally available to its security holders
and to the Representative an earnings statement or
statements of the Company and its subsidiaries
which will satisfy the provisions of Section 11(a)
of the Act and Rule 158 under the Act.
(d) The Company will furnish to the
Representative and counsel for the Underwriters,
without charge, copies of the Registration
Statement (including exhibits thereto) and, so
long as delivery of a prospectus by an Underwriter
or dealer may be required by the Act, as many
copies of any Preliminary Final Prospectus and the
Final Prospectus and any supplement thereto as the
Representative may reasonably request. The
Company will pay the expenses of printing or other
production of all documents relating to the
offering.
(e) The Company will arrange for the
qualification of the Preferred Stock for sale
under the laws of such jurisdictions as the
Representative may designate and will maintain
such qualifications in effect so long as required
for the distribution of the Preferred Stock and
will pay the fee of the National Association of
Securities Dealers, Inc., in connection with its
review of the offering.
(f) Until the date 30 days from the later of
the Closing Date or the Second Closing Date, the
Company will not, without the prior written
consent of the Representative, offer, sell or
contract to sell, or otherwise dispose of,
directly or indirectly, or announce the offering
of, any other shares of Common Stock or any
securities convertible into, or exchangeable for,
shares of Common Stock; provided, however, that
the Company may issue and sell Common Stock
pursuant to any employee
<PAGE>
stock option plan, stock ownership plan or
dividend reinvestment plan of the Company and the
Company may issue Common Stockssuable upon the
conversion of Series A 9.75% Cumulative
Convertible Preferred Stock or other outstanding
securities or the exercise of warrants outstanding
at the Execution Time.
5. Conditions to the Obligations of the
Underwriters. The obligations of the Underwriters to
purchase each of the Firm Stock or the Option Stock, as the
case may be, shall be subject to the accuracy of the
representations and warranties on the part of the Company
contained herein as of the Execution Time, the Closing Date
or the Second Closing Date, as the case may be, to the
accuracy of the statements of the Company made in any
certificates pursuant to the provisions hereof, to the
performance by the Company of its obligations hereunder and
to the following additional conditions:
(a) If filing of the Final Prospectus, or any
supplement thereto, is required pursuant to Rule
424(b), the Final Prospectus, and any such
supplement, shall have been filed in the manner
and within the time period required by Rule
424(b); and no stop order suspending the
effectiveness of the Registration Statement shall
have been issued and no proceedings for that
purpose shall have been instituted or threatened.
(b) The Company shall have furnished to the
Representative the written opinion of Venable,
Baetjer and Howard, LLP, counsel for the Company,
dated the Closing Date, in form reasonably
satisfactory to the Representative and counsel for
the Underwriters, which opinion shall be confirmed
by a subsequent opinion, dated the Second Closing
Date, to the extent applicable, in the event of
the Second Closing Date, to the effect that:
(i) Each of the Company and,
Resource Finance Company One, and Merit
Securities Corp. (individually, a
"Subsidiary" and collectively, the
"Subsidiaries") and SMFC Holding, Inc., SMFC
Funding Corporation and Saxon Mortgage, Inc.
(individually, an "Affiliate" and
collectively, the "Affiliates") has been duly
incorporated and is validly existing as a
corporation in good standing under the laws
of the jurisdiction in which it is chartered
or organized, with full corporate power and
authority to own its properties and conduct
its business as described in the Final
Prospectus, and is duly qualified to do
business as a foreign corporation and is in
good standing under the laws of each
jurisdiction which requires such
qualification wherein it owns or
<PAGE>
leases material properties or conducts
material business and where the failure to so
qualify would have a material adverse effect
on the Company and its subsidiaries and
affiliates taken as a whole;
(ii) All the outstanding shares of
capital stock of each Subsidiary and each
Affiliate have been duly and validly
authorized and issued and are fully paid and
nonassessable, and, except as otherwise set
forth in the Final Prospectus, all
outstanding shares of capital stock of the
Subsidiaries are owned by the Company either
directly or through wholly owned subsidiaries
free and clear of any perfected security
interest and, to counsel's knowledge, after
due inquiry, any other security interests,
claims, liens or encumbrances.
(iii) The Company's authorized
equity capitalization is as set forth in the
Final Prospectus; the capital stock of the
Company conforms to the description thereof
contained in the Final Prospectus; the
Preferred Stock has been duly and validly
authorized, and, when issued and delivered to
and paid for by the Underwriters pursuant to
the Agreement, will be fully paid and
nonassessable; the shares of underlying
Common Stock into which the Preferred Stock
is convertible have been duly and validly
authorized and reserved for issuance on
conversion of the Preferred Stock; the
Preferred Stock is duly authorized for
listing, subject to official notice of
issuance, on the NASDAQ National Market
System of the National Association of
Securities Dealers, Inc.; the certificates
for the Preferred Stock are in valid and
sufficient form; and the holders of
outstanding shares of capital stock of the
Company are not entitled, to preemptive or,
to counsel's knowledge, other rights to
subscribe for the Preferred Stock or the
underlying Common Stock;
(iv) To counsel's knowledge, there
is no pending or threatened action, suit or
proceeding before any court or governmental
agency, authority or body or any arbitrator
involving the Company or any of its
Subsidiaries, Affiliates or Meritech Mortgage
Services, Inc. ("Meritech"), of a character
required to be disclosed in the Registration
Statement which is not adequately disclosed
in the Final Prospectus, and, to counsel's
knowledge, there is no franchise, contract or
other document of a character required to be
described in the Registration Statement or
Final Prospectus, or to be filed as required
that have not been so
<PAGE>
described or filed; and the statements
included or incorporated in the Final
Prospectus describing any legal proceedings
or material contracts or agreements relating
to the Company fairly summarize such matters;
(v) The Registration Statement has
become effective under the Act; any required
filing of the Basic Prospectus, any
Preliminary Final Prospectus and the Final
Prospectus, and any supplements thereto,
pursuant to Rule 424(b) has been made in the
manner and within the time period required by
Rule 424(b); no stop order suspending the
effectiveness of the Registration Statement
has been issued, no proceedings for that
purpose have been instituted or threatened,
and the Registration Statement and the Final
Prospectus (other than the financial
statements and other financial and
statistical data as to which such counsel
need express no opinion) comply as to form in
all material respects with the applicable
requirements of the Act and the Exchange Act
and the respective rules thereunder;
(vi) The Agreement has been duly
authorized, executed and delivered by the
Company;
(vii) No consent, approval,
authorization or order of any court or
governmental agency or body is required for
the consummation of the transactions
contemplated herein, except such as have been
obtained under the Act and Exchange Act.
Such counsel need express no opinion as to
the requirements of the National Association
of Securities Dealers, Inc. with respect to
the participation by the Underwriters in the
offering or state securities or "blue sky"
matters;
(viii) Neither the issue and sale
of the Preferred Stock by the Company, nor
the consummation of the transactions
contemplated by the Agreement nor the
fulfillment of the terms thereof will
conflict with, result in a breach or
violation of, or constitute a default under,
any law or the charter or by-laws of the
Company or the terms of any material
indenture or other agreement or instrument
known to such counsel and to which the
Company or any of its Subsidiaries,
Affiliates or Meritech is a party or bound or
any judgment, order or decree known to such
counsel to be applicable to the Company or
any of its Subsidiaries, Affiliates or
<PAGE>
Meritech of any court, regulatory body,
administrative agency, governmental body or
arbitrator having jurisdiction over the
Company or any of its Subsidiaries,
Affiliates or Meritech;
(ix) Meritech, an affiliate of the
Company, is in good standing under the laws
of Texas;
(x) All the outstanding shares of
capital stock of Meritech are owned of record
and, to counsel's knowledge, beneficially by
SMFC Funding Corporation;
(xi) To counsel's knowledge, no
holders of securities of the Company have
rights to the registration of such securities
under the Registration Statement;
(xii) The Company is not an
"investment company" within the meaning of
the Investment Company Act of 1940; and
(xiii) The statements contained
under "Federal Income Tax Considerations" in
the Basic Prospectus, insofar as they
describe Federal statutes, rules and
regulations, constitute a fair summary
thereof.
In rendering such opinion, such counsel may rely
as to matters of fact, to the extent deemed
proper, on certificates of responsible officers of
the Company and public officials and, with respect
to items (ix) and (x) only, certificates of
certain third parties. References to the Final
Prospectus in this paragraph (b) include any
supplements thereto at the Closing Date or the
Second Closing Date, as the case may be. Such
counsel shall also confirm in such opinion that
such counsel has no reason to believe without
independent verification that at the Effective
Date the Registration Statement contained any
untrue statement of a material fact or omitted to
state any material fact required to be stated
therein or necessary to make the statements
therein not misleading or that the Final
Prospectus includes any untrue statement of a
material fact or omits to state a material fact
necessary to make the statements therein, in the
light of the circumstances under which they were
made, not misleading.
(c) The Representative shall have received
from Thompson & Mitchell, counsel for the
Underwriters, such opinion or opinions, dated the
Closing Date, with respect to the issuance and
sale of Preferred Stock, the Registration
Statement, the Final Prospectus (together with any
<PAGE>
supplement thereto) and other related matters as
the Representative may reasonably require, which
opinion or opinions shall be confirmed by a
subsequent opinion, dated the Second Closing Date,
to the extent applicable, in the event of the
Second Closing Date. In addition the Company
shall have furnished to such counsel such
documents as they request for the purpose of
enabling them to pass upon such matters.
(d) The Company shall have furnished to the
Representative certificate of the Company, signed
by the Chairman of the Board or the President and
the principal financial or accounting officer of
the Company, dated the Closing Date, which
certificate shall be confirmed by a subsequent
certificate, dated the Second Closing Date, to the
extent applicable, in the event of the Second
Closing Date, to the effect that the signers of
such certificate have carefully examined the
Registration Statement, the Final Prospectus, any
supplement to the Final Prospectus and this
Agreement and that:
(i) the representations and
warranties of the Company in this Agreement
are true and correct in all material respects
on and as of the Closing Date or the Second
Closing Date, as the case may be, with the
same effect as if made on the Closing Date or
the Second Closing Date, as the case may be,
and the Company has complied with all the
agreements and satisfied all the conditions
on its part to be performed or satisfied at
or prior to the Closing Date or the Second
Closing Date, as the case may be;
(ii) no stop order suspending the
effectiveness of the Registration Statement
has been issued and no proceedings for that
purpose have been instituted or, to the
Company's knowledge, threatened; and
(iii) since the date of the most
recent financial statements included in the
Final Prospectus (exclusive of any supplement
thereto), there has been no material adverse
change in the condition (financial or other),
earnings, business or properties of the
Company and its subsidiaries, whether or not
arising from transactions in the ordinary
course of business, except as set forth in or
contemplated in the Final Prospectus
(exclusive of any supplement thereto).
<PAGE>
(e) At the Execution Time, KPMG Peat Marwick
LLP shall have furnished to the Representative a
letter, dated as of the Execution Time, in form
and substance satisfactory to the Representative
(the "initial letter"), and at the Closing Date,
KPMG Peat Marwick LLP shall have furnished another
letter (the "bring-down letter"), which letter
shall be confirmed by a subsequent letter, dated
the Second Closing Date, to the extent applicable,
in the event of the Second Closing Date,
confirming that they are independent accountants
within the meaning of the Act and the respective
applicable published rules and regulations
thereunder and stating in effect that:
(i) in their opinion the audited
financial statements and financial statement
schedules which are included in the Company's
most recent Annual Report on Form 10-K, which
is incorporated by reference in the
Registration Statement and the Final
Prospectus comply as to form in all material
respects with the applicable accounting
requirements of the Act and the Exchange Act
and the related published rules and
regulations;
(ii) on the basis of a reading of
the latest unaudited financial statements
made available by the Company and its
subsidiaries; carrying out certain specified
procedures (but not an examination in
accordance with generally accepted auditing
standards), including reading of the minutes
of the meetings of the stockholders, the
Board of Directors and Audit Committee of the
Company since the end of the year covered by
the Form 10-K as set forth in the minutes
books through a specified date not more than
five business days prior to the Execution
Time, the Closing Date or the Second Closing
Date, respectively, reading the unaudited
interim financial statements of the Company
incorporated by reference in the Prospectus
and the latest available unaudited interim
financial statements of the Company, and
making inquiries of certain officials of the
Company who have responsibility for financial
and accounting matters, nothing has come to
their attention that has caused them to
believe that (1) any unaudited financial
statements incorporated by reference in the
Prospectus do not comply as to form in all
material respects with the accounting
requirements of the Exchange Act and the
related published rules and regulations; (2)
the latest available financial statements,
not incorporated by reference in the
Prospectus, have not been prepared on a basis
substantially consistent with that of the
audited financial statements incorporated in
the Prospectus; (3) for the period from the
closing date of the latest income statement
<PAGE>
incorporated by reference in the Prospectus
to the closing date of the latest available
income statement read by them there were any
decreases, as compared with the corresponding
period of the previous year, in net margin on
mortgage assets or net income; or (4) at a
specified date not more than five business
days prior to the Execution Time, Closing
Date or Second Closing Date, respectively,
there was any change in the capital stock or
long term debt of the Company or, at such
date, there was any decrease in net assets of
the Company as compared with amounts shown in
the latest balance sheet incorporated by
reference in the Prospectus, except in all
cases for changes or decreases which the
Prospectus discloses have occurred or may
occur, or which are described in such letter;
and
(iii) certain specified procedures
not constituting an audit in accordance with
generally accepted auditing standards have
been applied to certain financial or other
statistical information (to the extent such
information was obtained from the general
accounting records of the Company) set forth
or incorporated by reference in the
Prospectus and that such procedures have not
revealed any disagreement between the
financial and statistical information so set
forth or incorporated and the underlying
general accounting records of the Company,
except as described in such letter.
(f) Subsequent to the Execution Time or, if
earlier, the dates as of which information is
given in the Registration Statement (exclusive of
any amendment thereof) and the Final Prospectus
(exclusive of any supplement thereto), there shall
not have been (i) any change or decrease specified
in the letter or letters referred to in paragraph
(e) of this Section 5 or (ii) any change, or any
development involving a prospective change, in or
affecting the business or properties of the
Company and its subsidiaries the effect of which,
in any case referred to in clause (i) or (ii)
above, is, in the judgment of the Representative,
so material and adverse as to make it impractical
or inadvisable to proceed with the offering or
delivery of the Preferred Stock as contemplated by
the Registration Statement (exclusive of any
amendment thereof) and the Final Prospectus
(exclusive of any supplement thereto).
<PAGE>
(g) Prior to the Closing Date and the Second
Closing Date, the Company shall have furnished to
the Representative such further information,
certificates and documents as the Representative
may reasonably request in connection with each of
the Closing Date and the Second Closing Date, as
the case may be.
If any of the conditions specified in this Section
5 shall not have been fulfilled in all material respects
when and as provided in this Agreement, or if any of the
opinions and certificates mentioned above or elsewhere in
this Agreement shall not be in all material respects
reasonably satisfactory in form and substance to the
Representative and counsel for the Underwriters, this
Agreement and all obligation of the Underwriters hereunder
may be cancelled at, or at any time prior to, the Closing
Date by the Representative. Notice of such cancellation
shall be given to the Company in writing or by telephone or
telegraph confirmed in writing.
6. Reimbursement of Underwriters' Expenses. If
the sale of the Preferred Stock provided for herein is not
consummated because any condition to the obligations of the
Underwriters set forth in Section 5 hereof is not satisfied,
because of any termination pursuant to Section 9 hereof or
because of any refusal, inability or failure on the part of
the Company to perform any agreement herein or comply with
any provision hereof other than by reason of a default by
any of the Underwriters, the Company will reimburse the
Underwriters severally upon demand for all out-of-pocket
expenses (including reasonable fees and disbursements of
counsel) that shall have been incurred by them in connection
with the proposed purchase and sale of the Preferred Stock.
7. Indemnification and Contribution. (a) The
Company agrees to indemnify and hold harmless each
Underwriter, the directors, officers, employees and agents
of each Underwriter and each person who controls any
Underwriter within the meaning of either the Act or the
Exchange Act against any and all losses, claims, damages or
liabilities, joint or several, to which they or any of them
may become subject under the Act, the Exchange Act or other
Federal or state statutory law or regulation, at common law
or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue
statement of a material fact contained in the registration
statement for the registration of the Preferred Stock as
originally filed or in any amendment thereof, or in the
Basic Prospectus, any Preliminary Final Prospectus or the
Final Prospectus, or in any amendment thereof or supplement
thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements
therein not misleading, and agrees to reimburse each such
indemnified party, as incurred, for any legal or other
expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company
will not be liable in any such
<PAGE>
case to the extent that any such loss, claim, damage or
liability arises out of or is based upon any such untrue
statement or alleged untrue statement or omission or alleged
omission made therein in reliance upon and in conformity
with written information furnished to the Company by or on
behalf of any Underwriter through the Representative
specifically for inclusion therein. This indemnity
agreement will be in addition to any liability which the
Company may otherwise have.
(b) Each Underwriter severally agrees to
indemnify and hold harmless the Company, each of its
directors, each of its officers who signs the Registration
Statement, and each person who controls the Company within
the meaning of either the Act or the Exchange Act, to the
same extent as the foregoing indemnity from the Company to
each Underwriter, but only with reference to written
information relating to such Underwriter furnished to the
Company by or on behalf of such Underwriter through the
Representative specifically for inclusion in the documents
referred to in the foregoing indemnity. This indemnity
agreement will be in addition to any liability which any
Underwriter may otherwise have. The Company acknowledges
that the statements set forth in the last paragraph of the
cover page and under the heading "Underwriting" in any
Preliminary Final Prospectus or the Final Prospectus
constitute the only information furnished in writing by or
on behalf of the several Underwriters for inclusion in the
documents referred to in the foregoing indemnity, and you,
as the Representative, confirm that such statements are
correct.
(c) Promptly after receipt by an indemnified
party under this Section 7 of notice of the commencement of
any action, such indemnified party will, if a claim in
respect thereof is to be made against the indemnifying party
under this Section 7, notify the indemnifying party in
writing of the commencement thereof; but the failure so to
notify the indemnifying party (i) will not relieve it from
liability under paragraph (a) or (b) above unless and to the
extent it did not otherwise learn of such action and such
failure results in the forfeiture by the indemnifying party
of substantial rights and defenses and (ii) will not, in any
event, relieve the indemnifying party from any obligations
to any indemnified party other than the indemnification
obligation provided in paragraph (a) or (b) above. The
indemnifying party shall be entitled to appoint counsel of
the indemnifying party's choice at the indemnifying party's
expense to represent the indemnified party in any action for
which indemnification is sought (in which case the
indemnifying party shall not thereafter be responsible for
the fees and expenses of any separate counsel retained by
the indemnified party or parties except as set forth below);
provided, however, that such counsel shall be reasonably
satisfactory to the indemnified party. Notwithstanding the
indemnifying party's election to appoint counsel to
represent the indemnified party in an action, the
indemnified party shall have the right to employ separate
counsel (including local counsel), and the indemnifying
party shall bear the reasonable fees, costs and expenses of
such separate counsel if (i) the use of counsel chosen by
the indemnifying party to represent the indemnified party
would present such
<PAGE>
counsel with a conflict of interest, (ii) the actual or
potential defendants in, or targets of, any such action
include both the indemnified party and the indemnifying
party and the indemnified party shall have reasonably
concluded that there may be legal defenses available to it
and/or other indemnified parties which are different from or
additional to those available to the indemnifying party,
(iii) the indemnifying party shall not have employed counsel
reasonably satisfactory to the indemnified party to
represent the indemnified party within a reasonable time
after notice of the institution of such action or (iv) the
indemnifying party shall authorize the indemnified party to
employ separate counsel at the expense of the indemnifying
party. An indemnifying party will not, without the prior
written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with
respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or
contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such
claim or action) unless such settlement, compromise or
consent includes an unconditional release of such
indemnified party from all liability arising out of such
claim, action, suit or proceeding.
(d) In the event that the indemnity provided
in paragraph (a) or (b) of this Section 7 is unavailable to
or insufficient to hold harmless an indemnified party for
any reason, the Company and the Underwriters agree to
contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses reasonably
incurred in connection with investigating or defending same)
(collectively "Losses") to which the Company and one or more
of the Underwriters may be subject in such proportion as is
appropriate to reflect the relative benefits received by the
Company and by the Underwriters from the offering of the
Preferred Stock; provided, however, that in no case shall
any Underwriter (except as may be provided in any agreement
among underwriters relating to the offering of the Preferred
Stock) be responsible for any amount in excess of the amount
by which the total price at which the Preferred Stock
underwritten by it and distributed to the public was offered
to the public exceeds the amount of any damages which such
Underwriter has otherwise paid or otherwise become liable to
pay by reason of any untrue statement or omission or alleged
omission. If the allocation provided by the immediately
preceding sentence is unavailable for any reason, the
Company and the Underwriters shall contribute in such
proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the Company
and of the Underwriters in connection with the statements or
omissions which resulted in such Losses as well as any other
relevant equitable considerations. Benefits received by the
Company shall be deemed to be equal to the total net
proceeds from the offering (before deducting expenses), and
benefits received by the Underwriters shall be deemed to be
equal to the total underwriting discounts and commissions,
in each case as set forth on the cover page of the Final
Prospectus. Relative fault shall be determined by reference
to whether any alleged untrue statement or omission relates
to information provided by the Company or the Underwriters.
The Company and the Underwriters agree that it would
<PAGE>
not be just and equitable if contribution were determined by
pro rata allocation or any other method of allocation which
does not take account of the equitable considerations
referred to above. Notwithstanding the provisions of this
paragraph (d), no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 7, each person who controls an
Underwriter within the meaning of either the Act or the
Exchange Act and each director, officer, employee and agent
of an Underwriter shall have the same rights to contribution
as such Underwriter, and each person who controls the
Company within the meaning of either the Act or the Exchange
Act, each officer of the Company who shall have signed the
Registration Statement and each director of the Company
shall have the same rights to contribution as the Company,
subject in each case to the applicable terms and conditions
of this paragraph (d).
8. Default by an Underwriter. If any one or more
Underwriters shall fail to purchase and pay for any of the
Preferred Stock agreed to be purchased by such Underwriter
or Underwriters hereunder and such failure to purchase shall
constitute a default in the performance of its or their
obligations under this Agreement, the remaining Underwriters
shall be obligated severally to take up and pay for (in the
respective proportions which the amount of Preferred Stock
set forth opposite their names in Schedule I hereto bears to
the aggregate amount of Preferred Stock set forth opposite
the names of all the remaining Underwriters) the Preferred
Stock which the defaulting Underwriter or Underwriters
agreed but failed to purchase; provided, however, that in
the event that the aggregate amount of Preferred Stock which
the defaulting Underwriter or Underwriters agreed but failed
to purchase shall exceed 10% of the aggregate amount of
Preferred Stock set forth in Schedule I hereto, the
remaining Underwriters shall have the right to purchase all,
but shall not be under any obligation to purchase any, of
the Preferred Stock, and if such nondefaulting Underwriters
do not purchase all the Preferred Stock, this Agreement will
terminate without liability to any nondefaulting Underwriter
or the Company. In the event of a default by any
Underwriter as set forth in this Section 8, the Closing Date
or the Second Closing Date, as the case may be, shall be
postponed for such period, not exceeding seven days, as the
Representative shall determine in order that the required
changes in the Registration Statement and the Final
Prospectus or in any other documents or arrangements may be
effected. Nothing contained in this Agreement shall relieve
any defaulting Underwriter of its liability, if any, to the
Company and any nondefaulting Underwriter for damages
occasioned by its default hereunder.
9. Termination. This Agreement shall be subject
to termination in the absolute discretion of the
Representative, by notice given to the Company prior to
delivery of and payment for the Preferred Stock, if prior to
such time (i) trading in the Company's Common Stock shall
have been suspended by the Commission or the New York Stock
Exchange or trading in securities generally on the New York
Stock Exchange
<PAGE>
or the National Association of Securities Dealers Automated
Quotation National Market System shall have been suspended
or limited or minimum prices shall have been established on
either of such Exchange or Market System, (ii) a banking
moratorium shall have been declared either by Federal or New
York or Missouri State authorities or (iii) there shall have
occurred any outbreak or escalation of hostilities,
declaration by the United States of a national emergency or
war or other calamity or crisis the effect of which on
financial markets is such as to make it, in the judgment of
the Representative, impracticable or inadvisable to proceed
with the offering or delivery of the Preferred Stock as
contemplated by the Final Prospectus (exclusive of any
supplement thereto).
10. Representations and Indemnities to Survive.
The respective agreement, representations, warranties,
indemnities and other statements of the Company or its
officers and of the Underwriters set forth in or made
pursuant to this Agreement will remain in full force and
effect, regardless of any investigation made by or on behalf
of any Underwriter or the Company or any of the officers,
directors or controlling persons referred to in Section 7
hereof, and will survive delivery of and payment for the
Preferred Stock. The provisions of Sections 6 and 7 hereof
shall survive the termination or cancellation of this
Agreement.
11. Notices. All communications hereunder will
be in writing and effective only on receipt, and, if sent to
the Representative, will be mailed, delivered or telegraphed
and confirmed to them, at 500 North Broadway, St. Louis,
Missouri; or, if sent to the Company, will be mailed,
delivered or telegraphed and confirmed to it at 4880 Cox
Road, Glen Allen, Virginia 23060.
12. Successors. This Agreement will inure to the
benefit of and be binding upon the parties hereto and their
respective successors and the officers and directors and
controlling persons referred to in Section 7 hereof, and no
other person will have any right or obligation hereunder.
13. Counterparts. This Agreement may be executed
in any number of counterparts, each of which shall be deemed
to be an original and all of which together shall constitute
one and the same instrument.
14. Applicable Law. This Agreement will be
governed by and construed in accordance with the laws of the
State of Missouri.
<PAGE>
If the foregoing is in accordance with your
understanding of our agreement, please sign and return to us
the enclosed duplicate hereof, whereupon this letter and
your acceptance shall represent a binding agreement among
the Company and the several Underwriters.
Very truly yours,
RESOURCE MORTGAGE CAPITAL, INC.
By ______________________
STIFEL, NICOLAUS & COMPANY, INCORPORATED
By:
Its Officer
For itself and the other several
Underwriters, if any, named in Schedule I
to the foregoing Agreement.
<PAGE>
SCHEDULE I
Amount and Purchase Price of Series B 9.55% Cumulative
Convertible Preferred Stock:
Number of shares--Firm Stock: 2,100,000
shares
Purchase price per share: $23.459
Closing Date, Time and Location:
October 25, 1995, 10:00 a.m.
Thompson & Mitchell
700 14th Street, N.W. (Ste. 900)
Washington, D.C. 20005
Number of shares of Option Stock subject
to 30-day option (ending November 23,
1995) to purchase at same price with same
underwriting discount to cover over-allotments:
315,000 shares
<TABLE>
<CAPTION>
<S> <C>
Underwriters Number
of Shares
Stifel, Nicolaus & Company,
Incorporated
............................................................
417,500
Robert W. Baird & Co. Incorporated
........................ 417,500
Scott & Stringfellow, Inc.
..........................................
417,500
Stephens Inc.
............................................................
.. 417,500
A.G. Edwards & Sons, Inc.
.........................................
70,000
Paine Webber Incorporated
........................................
70,000
Advest, Inc.
............................................................
..... 30,000
J.C. Bradford & Co.
....................................................
30,000
Dain Bosworth Incorporated
...................................... 30,000
Friedman, Billings, Ramsey & Co., Inc. .....................
30,000
Piper Jaffray Inc.
.........................................................
30,000
Principal Financial Securities, Inc.
.............................. 30,000
Rauscher Pierce Refsnes, Inc.
..................................... 30,000
The Robinson-Humphrey Company, Inc. ....................
30,000
<PAGE>
Wedbush Morgan Securities
....................................... 30,000
Branch Cabell & Co.
....................................................
10,000
Davenport & Co. of Virginia Inc.
................................ 10,000
TOTAL
2,100,000
</TABLE>
<PAGE>
EXHIBIT 4.1
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
RESOURCE MORTGAGE CAPITAL, INC.
1. The name of the Corporation is Resource Mortgage
Capital, Inc.
2. A new Article IIIB shall be inserted following the
existing text of Article IIIA and shall read as set forth in
Exhibit A hereto.
3. This Amendment to the Articles of Incorporation was
duly adopted by the Board of Directors of the Corporation by
unanimous written consents dated September 25, 1995 and
October 19, 1995. In accordance with Sections 13.1-706.6
and 13.1-639 of the Virginia Stock Corporations Act, no
shareholder action was required.
IN WITNESS WHEREOF, the undersigned President of the
Corporation has executed these Articles of Amendment on
behalf of the Corporation.
Date: October 20, 1995 RESOURCE MORTGAGE CAPITAL,
INC.
By:
Lynn K. Geurin
Executive Vice President
<PAGE>
RESOURCE MORTGAGE CAPITAL, INC.
Section 1. Number of Shares and Designation. This
series of Preferred Stock shall be designated as Series B
9.55% Cumulative Convertible Preferred Stock (the "Series B
Preferred Stock") and up to Four Million Seven Hundred Sixty
Thousand (4,760,000) shall be the number of shares of such
Preferred Stock constituting such series.
Section 2. Definitions. For purposes of the Series
B Preferred Stock, the following terms shall have the
meanings indicated:
"Act" shall mean the Securities Act of 1933, as
amended.
"affiliate" of a person means a person that directly,
or indirectly through one or more intermediaries,
controls or is controlled by, or is under common
control with, the person specified.
"Board of Directors" shall mean the Board of Directors
of the Corporation or any committee authorized by such
Board of Directors to perform any of its
responsibilities with respect to the Series B Preferred
Stock.
"Business Day" shall mean any day other than a
Saturday, Sunday or a day on which state or federally
chartered banking institutions in New York, New York
are not required to be open.
"Call Date" shall have the meaning set forth in
paragraph (b) of Section 5 hereof.
"Common Stock" shall mean the common stock, $.01 par
value per share, of the Corporation or such shares of
the Corporation's capital stock into which such Common
Stock shall be reclassified.
"Conversion Price" shall mean the conversion price per
share of Common Stock for which each share of Series B
Preferred Stock is convertible, as such Conversion
Price may be adjusted pursuant to paragraph (d) of
Section 7. The initial Conversion Price shall be
$24.50 (equivalent to an initial conversion rate of one
share of Common Stock for each share of Series B
Preferred Stock).
"Current Market Price" of publicly traded shares of
Common Stock or any other class or series of capital
stock or other security of the Corporation or of any
similar security of any other issuer for any day shall
mean the closing price,
<PAGE>
regular way on such day, or, if no sale takes place on
such day, the average of the reported closing bid and
asked prices regular way on such day, in either case as
reported on the New York Stock Exchange ("NYSE") or, if
such security is not listed or admitted for trading on
the NYSE, on the principal national securities exchange
on which such security is listed or admitted for
trading or, if not listed or admitted for trading on
any national securities exchange, on the National
Market of the National Association of Securities
Dealers, Inc. Automated Quotations System ("NASDAQ")
or, if such security is not quoted on such National
Market, the average of the closing bid and asked prices
on such day in the over-the-counter market as reported
by NASDAQ or, if bid and asked prices for such security
on such day shall not have been reported through
NASDAQ, the average of the bid and asked prices on such
day as furnished by any NYSE or National Association of
Securities Dealers, Inc. member firm regularly making a
market in such security selected for such purpose by
the Chief Executive Officer or the Board of Directors
or if any class or series of securities are not
publicly traded, the fair value of the shares of such
class as determined reasonably and in good faith by the
Board of Directors of the Corporation.
"Distribution" shall have the meaning set forth in
paragraph (d)(iii) of Section 7 hereof.
"Dividend Payment Date" shall mean, with respect to
each Dividend Period, the last day of January, April,
July and October, in each year, commencing on January
31, 1996 with respect to the period commencing on the
date of issue and ending December 31, 1995; provided,
however, that if any Dividend Payment Date falls on any
day other than a Business Day, the dividend payment due
on such Dividend Payment Date shall be paid on the
Business Day immediately following such Dividend
Payment Date.
"Dividend Periods" shall mean quarterly dividend
periods commencing on January 1, April 1, July 1 and
October 1 of each year and ending on and including the
day preceding the first day of the next succeeding
Dividend Period (other than the initial Dividend
Period, which shall commence on the Issue Date and end
on and include December 31, 1995).
"Fair Market Value" shall mean the average of the daily
Current Market Prices of a share of Common Stock during
five (5) consecutive Trading Days selected by the
Corporation commencing not more than twenty (20)
Trading Days before, and ending not later than, the
earlier of the day in question and the day before the
"ex" date with respect to the issuance or distribution
requiring such computation. The term "`ex' date," when
used with respect to any issuance or distribution,
means
<PAGE>
the first day on which the share of Common Stock trades
regular way, without the right to receive such issuance
or distribution, on the exchange or in the market, as
the case may be, used to determine that day's Current
Market Price.
"Issue Date" shall mean October 25, 1995.
"Junior Stock" shall mean the Common Stock and any
other class or series of capital stock of the
Corporation over which the shares of Series B Preferred
Stock have preference or priority in the payment of
dividends or in the distribution of assets on any
liquidation, dissolution or winding up of the
Corporation.
"Parity Stock" shall have the meaning set forth in
paragraph (b) of Section 8 hereof. Series A Preferred
Stock is Parity Stock.
"Person" shall mean any individual, firm, partnership,
corporation or other entity and shall include any
successor (by merger or otherwise) of such entity.
"Press Release" shall have the meaning set forth in
paragraph (a)(i) of Section 5 hereof.
"Series A Preferred Stock" shall mean the Series A
Cumulative Convertible Preferred Stock of the
Corporation as set forth in Article IIIA, Section 1 of
the Corporation's Articles of Incorporation (as
amended).
"Series B Preferred Stock" shall have the meaning set
forth in Section 1 hereof.
"set apart for payment" shall be deemed to include,
without any action other than the following, the
recording by the Corporation in its accounting ledgers
of any accounting or bookkeeping entry which indicates,
pursuant to a declaration of dividends or other
distribution by the Board of Directors, the allocation
of funds to be so paid on any series or class of
capital stock of the Corporation; provided, however,
that if any funds for any class or series of Junior
Stock or any class or series of Parity Stock are placed
in a separate account of the Corporation or delivered
to a disbursing, paying or other similar agent, then
"set apart for payment" with respect to the Series B
Preferred Stock shall mean placing such funds in a
separate account or delivering such funds to a
disbursing, paying or other similar agent.
"Trading Day", as to any securities, shall mean any day
on which such securities are traded on the NYSE or, if
such securities are not listed or admitted for trading
on the NYSE, on the principal national securities
exchange on which such securities are listed or
admitted or, if such securities are not listed or
admitted for
<PAGE>
trading on any national securities exchange, on the
National Market of NASDAQ or, if such securities are
not quoted on such National Market, in the securities
market in which such securities are traded.
"Transaction" shall have the meaning set forth in
paragraph (e) of Section 7 hereof.
"Transfer Agent" means First Union National Bank of
North Carolina or such other transfer agent as may be
designated by the Board of Directors or their designee
as the transfer agent for the Series B Preferred Stock.
"Voting Preferred Stock" shall have the meaning set
forth in Section 9 hereof.
Section 3. Dividends.
(a) The holders of Series B Preferred Stock shall
be entitled to receive, when and as declared by the Board of
Directors out of funds legally available for that purpose,
cumulative dividends payable in cash in an amount per share
of Series B Preferred Stock equal to the greater of (i) the
base dividend of $0.585 per quarter (the "Base Rate") or
(ii) the cash dividends declared on the number of shares of
Common Stock, or portion thereof, into which a share of
Series B Preferred Stock is convertible. The initial
Dividend Period shall commence on the Issue Date and end on
December 31, 1995. The dividends payable with respect to
the portion of the initial Dividend Period commencing on the
Issue Date and ending on December 31, 1995, shall be
determined by reference to the Base Rate. The amount
referred in clause (ii) of this paragraph (a) with respect
to each Dividend Period shall be determined as of the
applicable Dividend Payment Date by multiplying the number
of shares of Common Stock, or portion thereof calculated to
the fourth decimal point, into which a share of Series B
Preferred Stock would be convertible at the opening of
business on such Dividend Payment Date (based on the
Conversion Price then in effect) by the quarterly cash
dividend payable or paid for such Dividend Period in respect
of a share of Common Stock outstanding as of the record date
for the payment of dividends on the Common Stock with
respect to such Dividend Period or, if different, with
respect to the most recent quarterly period for which
dividends with respect to the Common Stock have been
declared. Such dividends shall be cumulative from the Issue
Date, whether or not in any Dividend Period or Periods such
dividends shall be declared or there shall be funds of the
Corporation legally available for the payment of such
dividends, and shall be payable quarterly in arrears on the
Dividend Payment Dates, commencing on the first Dividend
Payment Date after the Issue Date. Each such dividend shall
be payable in arrears to the holders of record of the Series
B Preferred Stock, as they appear on the stock records of
the Corporation at the close of business on a record date
which shall be not more than 60 days prior to the applicable
Dividend Payment Date and shall be fixed by the Board of
Directors to coincide with the
<PAGE>
record date for the regular quarterly dividends, if any,
payable with respect to the Common Stock; provided, however,
that the record dates for the Dividend Period ending
December 31, may be separated so that the record date for
the Common Stock dividend is December 31 and the record date
for the Series B Preferred Stock dividend is January 1 and
vice versa. Accumulated, accrued and unpaid dividends for
any past Dividend Periods may be declared and paid at any
time, without reference to any regular Dividend Payment
Date, to holders of record on such date, which date shall
not precede by more than 45 days the payment date thereof,
as may be fixed by the Board of Directors.
Upon a final administrative determination by the
Internal Revenue Service that the Corporation does not
qualify as a real estate investment trust in accordance with
Section 856 of the Internal Revenue code of 1986 (the
"Code"), the Base Rate set forth in (a)(i) will be increased
to $0.615 until such time as the Corporation regains its
status as a real estate investment trust; provided, however,
that if the Corporation contests its loss of real estate
investment trust status in Federal Court, following its
receipt of an opinion of nationally recognized tax counsel
to the effect that there is a reasonable basis to contest
such loss of status, the Base Rate shall not be increased
during the pendency of such judicial proceeding; provided
further, however, that upon a final judicial determination
in Federal Tax Court, Federal District Court or the Federal
Claims Court that the Corporation does not qualify as a real
estate investment trust, the Base Rate as stated above will
be increased.
(b) The amount of dividends payable per share of
Series B Preferred Stock for the portion of the initial
Dividend Period commencing on the Issue Date and ending and
including December 31, 1995, or any other period shorter
than a full Dividend Period, shall be computed ratably on
the basis of twelve 30-day months and a 360-day year.
Holders of Series B Preferred Stock shall not be entitled to
any dividends, whether payable in cash, property or stock,
in excess of cumulative dividends, as herein provided, on
the Series B Preferred Stock. No interest, or sum of money
in lieu of interest, shall be payable in respect of any
dividend payment or payments on the Series B Preferred Stock
that may be in arrears.
(c) So long as any of the shares of Series B
Preferred Stock are outstanding, except as described in the
immediately following sentence, no dividends shall be
declared or paid or set apart for payment by the Corporation
and no other distribution of cash or other property shall be
declared or made directly or indirectly by the Corporation
with respect to any class or series of Parity Stock for any
period unless dividends equal to the full amount of
accumulated, accrued and unpaid dividends have been or
contemporaneously are declared and paid or declared and a
sum sufficient for the payment thereof has been or
contemporaneously is set apart for such payment on the
Series B Preferred Stock for all Dividend Periods
terminating on or prior to the Dividend Payment Date with
respect to such class or series of Parity Stock. When
dividends are not paid in full or a sum sufficient for such
payment is not set apart, as aforesaid, all
<PAGE>
dividends declared upon the Series B Preferred Stock and all
dividends declared upon any other class or series of Parity
Stock shall be declared ratably in proportion to the
respective amounts of dividends accumulated, accrued and
unpaid on the Series B Preferred Stock and accumulated,
accrued and unpaid on such Parity Stock.
(d) So long as any of the shares of Series B
Preferred Stock are outstanding, no dividends (other than
dividends or distributions paid in shares of or options,
warrants or rights to subscribe for or purchase shares of
Junior Stock) shall be declared or paid or set apart for
payment by the Corporation and no other distribution of cash
or other property shall be declared or made directly or
indirectly by the Corporation with respect to any shares of
Junior Stock, nor shall any shares of Junior Stock be
redeemed, purchased or otherwise acquired (other than a
redemption, purchase or other acquisition of Common Stock
made for purposes of an employee incentive or benefit plan
of the Corporation or any subsidiary) for any consideration
(or any moneys be paid to or made available for a sinking
fund for the redemption of any shares of any such stock)
directly or indirectly by the Corporation (except by
conversion into or exchange for Junior Stock), nor shall any
other cash or other property otherwise be paid or
distributed to or for the benefit of any holder of shares of
Junior Stock in respect thereof, directly or indirectly, by
the Corporation unless in each case (i) the full cumulative
dividends (including all accumulated, accrued and unpaid
dividends) on all outstanding shares of Series B Preferred
Stock and any other Parity Stock of the Corporation shall
have been paid or such dividends have been declared and set
apart for payment for all past Dividend Periods with respect
to the Series B Preferred Stock and all past dividend
periods with respect to such Parity Stock and (ii)
sufficient funds shall have been paid or set apart for the
payment of the full dividend for the current Dividend Period
with respect to the Series B Preferred Stock and the current
dividend period with respect to such Parity Stock.
Section 4. Liquidation Preference.
(a) In the event of any liquidation, dissolution
or winding up of the Corporation, whether voluntary or
involuntary, before any payment or distribution of the
assets of the Corporation (whether capital or surplus) shall
be made to or set apart for the holders of Junior Stock, the
holders of shares of Series B Preferred Stock shall be
entitled to receive Twenty-Four and 50/100 Dollars ($24.50)
per share of Series B Preferred Stock ("Liquidation
Preference"), plus an amount equal to all dividends (whether
or not earned or declared) accumulated, accrued and unpaid
thereon to the date of final distribution to such holders;
but such holders shall not be entitled to any further
payment. Until the holders of the Series B Preferred Stock
have been paid the Liquidation Preference in full, plus an
amount equal to all dividends (whether or not earned or
declared) accumulated, accrued and unpaid thereon to the
date of final distribution to such holders, no payment will
be made to any holder of Junior Stock upon the liquidation,
dissolution or winding up of the Corporation. If, upon any
liquidation,
<PAGE>
dissolution or winding up of the Corporation, the assets of
the Corporation, or proceeds thereof, distributable among
the holders of Series B Preferred Stock shall be
insufficient to pay in full the preferential amount
aforesaid and liquidating payments on any other shares of
any class or series of Parity Stock, then such assets, or
the proceeds thereof, shall be distributed among the holders
of Series B Preferred Stock and any such other Parity Stock
ratably in the same proportion as the respective amounts
that would be payable on such Series B Preferred Stock and
any such other Parity Stock if all amounts payable thereon
were paid in full. For the purposes of this Section 4, (i)
a consolidation or merger of the Corporation with one or
more corporations, (ii) a sale or transfer of all or
substantially all of the Corporation's assets, or (iii) a
statutory share exchange shall not be deemed to be a
liquidation, dissolution or winding up, voluntary or
involuntary, of the Corporation.
(b) Subject to the rights of the holders of any
shares of Parity Stock, upon any liquidation, dissolution or
winding up of the Corporation, after payment shall have been
made in full to the holders of Series B Preferred Stock and
any Parity Stock, as provided in this Section 4, any other
series or class or classes of Junior Stock shall, subject to
the respective terms thereof, be entitled to receive any and
all assets remaining to be paid or distributed, and the
holders of the Series B Preferred Stock and any Parity Stock
shall not be entitled to share therein.
Section 5. Redemption at the Option of the
Corporation.
(a) Shares of Series B Preferred Stock shall not
be redeemable by the Corporation prior to October 31, 1998.
On and after October 31, 1998, the Corporation, at its
option, may redeem shares of Series B Preferred Stock, in
whole or from time to time in part, as set forth herein,
subject to the provisions described below:
(i) Shares of Series B Preferred Stock may
be redeemed, in whole or in part, at the option of the
Corporation, at any time on or after October 31, 1998
by issuing and delivering to each holder for each share
of Series B Preferred Stock to be redeemed such number
of authorized but previously unissued shares of Common
Stock as equals the Liquidation Preference (excluding
any accumulated, accrued and unpaid dividends which are
to be paid in cash as provided below) per share of
Series B Preferred Stock divided by the Conversion
Price as in effect as of the opening of business on the
Call Date (as defined in paragraph (b) below);
provided, however, that the Corporation may redeem
shares of Series B Preferred Stock pursuant to this
paragraph (a)(i) only if for twenty (20) Trading Days,
within any period of thirty (30) consecutive Trading
Days, including the last Trading Day of such 30-Trading
Day period, the Current Market Price of the Common
Stock on each of such 20 Trading Days equals or exceeds
the Conversion Price in effect on such Trading Day. In
order to
<PAGE>
exercise its redemption option pursuant to this
paragraph (a)(i), the Corporation must issue a press
release announcing the redemption (the "Press Release")
prior to the opening of business on the second Trading
Day after the condition in the preceding sentence has,
from time to time, been satisfied. The Corporation may
not issue a Press Release prior to August 31, 1998.
The Press Release shall announce the redemption and set
forth the number of shares of Series B Preferred Stock
that the Corporation intends to redeem; or
(ii) Shares of Series B Preferred Stock may
be redeemed, in whole or in part, at the option of the
Corporation at any time on or after October 31, 1998
out of funds legally available therefor at a redemption
price payable in cash equal to $24.50 per share of
Series B Preferred Stock (plus all accumulated, accrued
and unpaid dividends as provided below).
(iii) In the event of a redemption
pursuant to Section 5(a)(i), the Corporation shall pay
in cash all cumulative, accrued and unpaid dividends
for all Dividend Periods ending prior to the Dividend
Period in which the redemption occurs; but no dividend
shall accrue or be payable on the Series B Preferred
Stock to be redeemed for the Dividend Period in which
the redemption occurs unless the Call Date is after the
record date for the dividend payable on the Common
Stock for such Dividend Period in which event such
dividend with respect to the Series B Preferred Stock
shall accrue and be payable from the period beginning
of the Dividend Period in which the redemption occurs
and ending on the Call Date. In the event of a
redemption pursuant to Section 5(a)(ii), the
Corporation shall pay in cash all cumulative, accrued
and unpaid dividends for all Dividend Periods ending
prior to the Dividend Period in which the redemption
occurs, plus the dividend (determined by reference to
the Base Rate if the Call Date precedes the date on
which the dividend on the Common Stock is declared for
such Dividend Period) accrued from the beginning of the
Dividend Period in which the redemption occurs and
ending on the Call Date.
(b) Shares of Series B Preferred Stock shall be
redeemed by the Corporation on the date specified in the
notice to holders required under paragraph (d) of this
Section 5 (the "Call Date"). The Call Date shall be
selected by the Corporation, shall be specified in the
notice of redemption and shall be not less than 30 days nor
more than 60 days after (i) the date on which the
Corporation issues the Press Release, if such redemption is
pursuant to paragraph (a)(i) of this Section 5, and (ii) the
date notice of redemption is sent by the Corporation, if
such redemption is pursuant to paragraph (a)(ii) of this
Section 5. In the event of a redemption pursuant to Section
5(a)(i) or 5(a)(ii), if the Call Date falls after a dividend
payment record date and prior to the corresponding Dividend
Payment Date, then (i) in the event of a redemption pursuant
to Section 5(a)(i) each holder of Series B Preferred Stock
at the close of business on such dividend
<PAGE>
payment record date shall be entitled to the dividend
payable on such shares on the corresponding Dividend Payment
Date notwithstanding the redemption of such shares prior to
such Dividend Payment Date and (ii) in the event of a
redemption pursuant to Section 5(a)(ii), each holder of
Series B Preferred Stock at the close of business on such
dividend payment record date shall be entitled to the
portion of the dividend accrued from the beginning of the
Dividend Period in which the redemption occurs and ending on
the Call Date notwithstanding the redemption of such shares
prior to such Dividend Payment Date. Except as provided
above, the Corporation shall make no payment or allowance
for accumulated or accrued dividends on shares of Series B
Preferred Stock called for redemption or on the shares of
Common Stock issued upon such redemption.
(c) If full cumulative dividends on all
outstanding shares of Series B Preferred Stock and any other
class or series of Parity Stock of the Corporation have not
been paid or declared and set apart for payment, no shares
of Series B Preferred Stock may be redeemed unless all
outstanding shares of Series B Preferred Stock are
simultaneously redeemed and neither the Corporation nor any
affiliate of the Corporation may purchase or acquire shares
of Series B Preferred Stock, otherwise than pursuant to a
purchase or exchange offer made on the same terms to all
holders of shares of Series B Preferred Stock.
(d) If the Corporation shall redeem shares of
Series B Preferred Stock pursuant to paragraph (a) of this
Section 5, notice of such redemption shall be given to each
holder of record of the shares to be redeemed and, if such
redemption is pursuant to paragraph (a)(i) of this Section
5, such notice shall be given not more than ten (10)
Business Days after the date on which the Corporation issues
the Press Release. Such notice shall be provided by first
class mail, postage prepaid, at such holder's address as the
same appears on the stock records of the Corporation, or by
publication in The Wall Street Journal or The New York
Times, or if neither such newspaper is then being published,
any other daily newspaper of national circulation not less
than 30 nor more than 60 days prior to the Call Date. If
the Corporation elects to provide such notice by
publication, it shall also promptly mail notice of such
redemption to the holders of the shares of Series B
Preferred Stock to be redeemed. Neither the failure to mail
any notice required by this paragraph (d), nor any defect
therein or in the mailing thereof, to any particular holder,
shall affect the sufficiency of the notice or the validity
of the proceedings for redemption with respect to the other
holders. Any notice which was mailed in the manner herein
provided shall be conclusively presumed to have been duly
given on the date mailed whether or not the holder receives
the notice. Each such mailed or published notice shall
state, as appropriate: (1) the Call Date; (2) the number of
shares of Series B Preferred Stock to be redeemed and, if
fewer than all such shares held by such holder are to be
redeemed, the number of such shares to be redeemed from such
holder; (3) whether redemption will be for shares of Common
Stock pursuant to paragraph (a)(i) of this Section 5 or for
cash pursuant to paragraph (a)(ii) of this Section 5, and,
if
<PAGE>
redemption will be for Common Stock, the number of shares of
Common Stock to be issued with respect to each share of
Series B Preferred Stock to be redeemed; (4) the place or
places at which certificates for such shares are to be
surrendered for certificates representing shares of Common
Stock; and (5) the then-current Conversion Price. Notice
having been published or mailed as aforesaid, from and after
the Call Date (unless the Corporation shall fail to issue
and make available the number of shares of Common Stock
and/or amount of cash necessary to effect such redemption),
(i) except as otherwise provided herein, dividends on the
shares of Series B Preferred Stock so called for redemption
shall cease to accumulate or accrue on the shares of Series
B Preferred Stock called for redemption (except that, in the
case of a Call Date after a dividend record date and prior
to the related Dividend Payment Date, holders of Series B
Preferred Stock on the dividend record date will be entitled
on such Dividend Payment Date to receive the dividend
payable on such shares), (ii) said shares shall no longer be
deemed to be outstanding, and (iii) all rights of the
holders thereof as holders of Series B Preferred Stock of
the Corporation shall cease (except the rights to receive
the shares of Common Stock and/or cash payable upon such
redemption, without interest thereon, upon surrender and
endorsement of their certificates if so required and to
receive any dividends payable thereon). The Corporation's
obligation to provide shares of Common Stock and/or cash in
accordance with the preceding sentence shall be deemed
fulfilled if, on or before the Call Date, the Corporation
shall deposit with a bank or trust company (which may be an
affiliate of the Corporation) that has, or is an affiliate
of a bank or trust company that has, a capital and surplus
of at least $50,000,000, such number of shares of Common
Stock and such amount of cash as is necessary for such
redemption, in trust, with irrevocable instructions that
such shares of Common Stock and/or cash be applied to the
redemption of the shares of Series B Preferred Stock so
called for redemption. In the case of any redemption
pursuant to paragraph (a)(i) of this Section 5, at the close
of business on the Call Date, each holder of shares of
Series B Preferred Stock to be redeemed (unless the
Corporation defaults in the delivery of the shares of Common
Stock or cash payable on such Call Date) shall be deemed to
be the record holder of the number of shares of Common Stock
into which such shares of Series B Preferred Stock are to be
converted at redemption, regardless of whether such holder
has surrendered the certificates representing the shares of
Series B Preferred Stock to be so redeemed. No interest
shall accrue for the benefit of the holders of shares of
Series B Preferred Stock to be redeemed on any cash so set
aside by the Corporation. Subject to applicable escheat
laws, any such cash unclaimed at the end of two years from
the Call Date shall revert to the general funds of the
Corporation, after which reversion the holders of shares of
Series B Preferred Stock so called for redemption shall look
only to the general funds of the Corporation for the payment
of such cash.
<PAGE>
As promptly as practicable after the surrender in
accordance with said notice of the certificates for any such
shares so redeemed (properly endorsed or assigned for
transfer, if the Corporation shall so require and if the
notice shall so state), such certificates shall be exchanged
for certificates representing shares of Common Stock and/or
any cash (without interest thereon) for which such shares
have been redeemed in accordance with such notice. If fewer
than all the outstanding shares of Series B Preferred Stock
are to be redeemed, shares to be redeemed shall be selected
by the Corporation from outstanding shares of Series B
Preferred Stock not previously called for redemption by lot
or, with respect to the number of shares of Series B
Preferred Stock held of record by each holder of such
shares, pro rata (as nearly as may be) or by any other
method as may be determined by the Board of Directors in its
discretion to be equitable. If fewer than all the shares of
Series B Preferred Stock represented by any certificate are
redeemed, then a new certificate representing the unredeemed
shares shall be issued without cost to the holders thereof.
(e) In the case of any redemption pursuant to
paragraph (a)(i) of this Section 5, no fractional shares of
Common Stock or scrip representing fractions of shares of
Common Stock shall be issued upon redemption of the shares
of Series B Preferred Stock. Instead of any fractional
interest in a share of Common Stock that would otherwise be
deliverable upon redemption of shares of Series B Preferred
Stock, the Corporation shall pay to the holder of such share
an amount in cash (computed to the nearest cent) based upon
the Current Market Price of the Common Stock on the Trading
Day immediately preceding the Call Date. If more than one
share shall be surrendered for redemption at one time by the
same holder, the number of full shares of Common Stock
issuable upon redemption thereof shall be computed on the
basis of the aggregate number of shares of Series B
Preferred Stock so surrendered.
(f) In the case of any redemption pursuant to
paragraph (a)(i) of this Section 5, the Corporation
covenants that any shares of Common Stock issued upon
redemption of shares of Series B Preferred Stock shall be
validly issued, fully paid and non-assessable. The
Corporation shall use its best efforts to list, subject to
official notice of issuance, the shares of Common Stock
required to be delivered upon any such redemption of shares
of Series B Preferred Stock, prior to such redemption, upon
each national securities exchange, if any, upon which the
outstanding shares of Common Stock are listed at the time of
such delivery.
The Corporation shall take any action necessary to
ensure that any shares of Common Stock issued upon the
redemption of Series B Preferred Stock are freely
transferable and not subject to any resale restrictions
under the Act, or any applicable state securities or blue
sky laws (other than any shares of Common Stock issued upon
redemption of any Series B Preferred Stock which are held by
an "affiliate" (as defined in Rule 144 under the Act) of the
Corporation).
<PAGE>
Section 6. Stock To Be Retired. All shares of
Series B Preferred Stock which shall have been issued and
reacquired in any manner by the Corporation shall be
restored to the status of authorized, but unissued shares of
Preferred Stock, without designation as to series. The
Corporation may also retire any unissued shares of Series B
Preferred Stock, and such shares shall then be restored to
the status of authorized but unissued shares of Preferred
Stock, without designation as to series.
Section 7. Conversion.
Holders of shares of Series B Preferred Stock shall
have the right to convert all or a portion of such shares
into shares of Common Stock, as follows:
(a) Subject to and upon compliance with the
provisions of this Section 7, a holder of shares of Series B
Preferred Stock shall have the right, at such holder's
option, at any time to convert such shares, in whole or in
part, into the number of fully paid and non-assessable
shares of authorized but previously unissued shares of
Common Stock per each share of Series B Preferred Stock
obtained by dividing the Liquidation Preference (excluding
any accumulated, accrued and unpaid dividends) by the
Conversion Price (as in effect at the time and on the date
provided for in the last clause of paragraph (b) of this
Section 7) and by surrendering such shares to be converted,
such surrender to be made in the manner provided in
paragraph (b) of this Section 7; provided, however, that the
right to convert shares of Series B Preferred Stock called
for redemption pursuant to Section 5 shall terminate at the
close of business on the Call Date fixed for such
redemption, unless the Corporation shall default in making
payment of shares of Common Stock and/or cash payable upon
such redemption under Section 5 hereof.
(b) In order to exercise the conversion right,
the holder of each share of Series B Preferred Stock to be
converted shall surrender the certificate representing such
share, duly endorsed or assigned to the Corporation or in
blank, at the office of the Transfer Agent, accompanied by
written notice to the Corporation that the holder thereof
elects to convert such share of Series B Preferred Stock.
Unless the shares issuable on conversion are to be issued in
the same name as the name in which such share of Series B
Preferred Stock is registered, each share surrendered for
conversion shall be accompanied by instruments of transfer,
in form satisfactory to the Corporation, duly executed by
the holder or such holder's duly authorized attorney and an
amount sufficient to pay any transfer or similar tax (or
evidence reasonably satisfactory to the Corporation
demonstrating that such taxes have been paid).
Holders of shares of Series B Preferred Stock at the
close of business on a dividend payment record date shall be
entitled to receive the dividend payable on such shares on
the corresponding Dividend Payment Date notwithstanding the
conversion thereof following such dividend payment record
date and prior to such Dividend Payment
<PAGE>
Date. Except as provided above, the Corporation shall make
no payment or allowance for unpaid dividends, whether or not
in arrears, on converted shares or for dividends on the
shares of Common Stock issued upon such conversion.
As promptly as practicable after the surrender of
certificates for shares of Series B Preferred Stock as
aforesaid, the Corporation shall issue and shall deliver at
such office to such holder, or send on such holder's written
order, a certificate or certificates for the number of full
shares of Common Stock issuable upon the conversion of such
shares of Series B Preferred Stock in accordance with
provisions of this Section 7, and any fractional interest in
respect of a share of Common Stock arising upon such
conversion shall be settled as provided in paragraph (c) of
this Section 7.
Each conversion shall be deemed to have been effected
immediately prior to the close of business on the date on
which the certificates for shares of Series B Preferred
Stock shall have been surrendered and such notice received
by the Corporation as aforesaid, and the person or persons
in whose name or names any certificate or certificates for
shares of Common Stock shall be issuable upon such
conversion shall be deemed to have become the holder or
holders of record of the shares represented thereby at such
time on such date and such conversion shall be at the
Conversion Price in effect at such time on such date unless
the stock transfer books of the Corporation shall be closed
on that date, in which event such person or persons shall be
deemed to have become such holder or holders of record at
the close of business on the next succeeding day on which
such stock transfer books are open, but such conversion
shall be at the Conversion Price in effect on the date on
which such shares shall have been surrendered and such
notice received by the Corporation. If the dividend payment
record date for the Series B Preferred Stock and Common
Stock do not coincide, and the preceding sentence does not
operate to ensure that a holder of shares of Series B
Preferred Stock whose shares are converted into Common Stock
does not receive dividends on both the shares of Series B
Preferred Stock and the Common Stock into which such shares
are converted for the same Dividend Period, then
notwithstanding anything herein to the contrary, it is the
intent, and the Transfer Agent is authorized to ensure that
no conversion after the earlier of such record dates will be
accepted until after the latter of such record dates.
(c) No fractional share of Common Stock or scrip
representing fractions of a share of Common Stock shall be
issued upon conversion of the shares of Series B Preferred
Stock. Instead of any fractional interest in a share of
Common Stock that would otherwise be deliverable upon the
conversion of shares of Series B Preferred Stock, the
Corporation shall pay to the holder of such share an amount
in cash based upon the Current Market Price of the Common
Stock on the Trading Day immediately preceding the date of
conversion. If more than one share shall be surrendered for
conversion at one time by the same holder, the number of
full shares of Common Stock issuable upon conversion thereof
shall be computed on the basis of the aggregate number of
shares of Series B Preferred Stock so surrendered.
<PAGE>
(d) The Conversion Price shall be adjusted from
time to time as follows:
(i) If the Corporation shall after the Issue
Date (A) pay a dividend or make a distribution on its
capital stock in shares of Common Stock, (B) subdivide
its outstanding Common Stock into a greater number of
shares, (C) combine its outstanding Common Stock into a
smaller number of shares or (D) issue any shares of
capital stock by reclassification of its Common Stock,
the Conversion Price in effect at the opening of
business on the day following the date fixed for the
determination of stockholders entitled to receive such
dividend or distribution or at the opening of business
on the day following the day on which such subdivision,
combination or reclassification becomes effective, as
the case may be, shall be adjusted so that the holder
of any share of Series B Preferred Stock thereafter
surrendered for conversion shall be entitled to receive
the number of shares of Common Stock (or fraction of a
share of Common Stock) that such holder would have
owned or have been entitled to receive after the
happening of any of the events described above had such
share of Series B Preferred Stock been converted
immediately prior to the record date in the case of a
dividend or distribution or the effective date in the
case of a subdivision, combination or reclassification.
An adjustment made pursuant to this paragraph (d)(i) of
this Section 7 shall become effective immediately after
the opening of business on the day next following the
record date (except as provided in paragraph (h) below)
in the case of a dividend or distribution and shall
become effective immediately after the opening of
business on the day next following the effective date
in the case of a subdivision, combination or
reclassification.
(ii) If the Corporation shall issue after the
Issue Date rights, options or warrants to all holders
of Common Stock entitling them (for a period expiring
within 45 days after the record date described below in
this paragraph (d)(ii) of this Section 7) to subscribe
for or purchase Common Stock at a price per share less
than the Fair Market Value per share of the Common
Stock on the record date for the determination of
stockholders entitled to receive such rights or
warrants, then the Conversion Price in effect at the
opening of business on the day next following such
record date shall be adjusted to equal the price
determined by multiplying (A) the Conversion Price in
effect immediately prior to the opening of business on
the day following the date fixed for such determination
by (B) a fraction, the numerator of which shall be the
sum of (X) the number of shares of Common Stock
outstanding on the close of business on the date fixed
for such determination and (Y) the number of shares
that the aggregate proceeds to the Corporation from the
exercise of such rights or warrants for Common Stock
would purchase at such Fair Market Value, and the
denominator of which shall be the sum of (XX) the
number of shares of Common Stock outstanding on the
close
<PAGE>
of business on the date fixed for such determination
and (YY) the number of additional shares of Common
Stock offered for subscription or purchase pursuant to
such rights or warrants. Such adjustment shall become
effective immediately after the opening of business on
the day next following such record date (except as
provided in paragraph (h) below). In determining
whether any rights or warrants entitle the holders of
Common Stock to subscribe for or purchase Common Stock
at less than such Fair Market Value, there shall be
taken into account any consideration received by the
Corporation upon issuance and upon exercise of such
rights or warrants, the value of such consideration, if
other than cash, to be determined in good faith by the
Board of Directors.
(iii) No adjustment in the Conversion
Price shall be required unless such adjustment would
require a cumulative increase or decrease of at least
1% in such price; provided, however, that any
adjustments that by reason of this paragraph (d)(iii)
are not required to be made shall be carried forward
and taken into account in any subsequent adjustment
until made; and provided, further, that any adjustment
shall be required and made in accordance with the
provisions of this Section 7 (other than this paragraph
(d)(iii)) not later than such time as may be required
in order to preserve the tax-free nature of a
distribution to the holders of shares of Common Stock.
Notwithstanding any other provisions of this Section 7,
the Corporation shall not be required to make any
adjustment of the Conversion Price for the issuance of
any shares of Common Stock pursuant to any plan
providing for the reinvestment of dividends or interest
payable on securities of the Corporation and the
investment of additional optional amounts in shares of
Common Stock under such plan. All calculations under
this Section 7 shall be made to the nearest cent (with
$.005 being rounded upward) or to the nearest one-tenth
of a share (with .05 of a share being rounded upward),
as the case may be. Anything in this paragraph (d) of
this Section 7 to the contrary notwithstanding, the
Corporation shall be entitled, to the extent permitted
by law, to make such reductions in the Conversion
Price, in addition to those required by this paragraph
(d), as it in its discretion shall determine to be
advisable in order that any stock dividends,
subdivision of shares, reclassification or combination
of shares, distribution of rights or warrants to
purchase stock or securities, or a distribution of
other assets (other than cash dividends) hereafter made
by the Corporation to its stockholders shall not be
taxable, or if that is not possible, to diminish any
income taxes that are otherwise payable because of such
event.
(e) If the Corporation shall be a party to any
transaction (including without limitation a merger,
consolidation, statutory share exchange, issuer or self
tender offer for all or a substantial portion of the shares
of Common Stock outstanding, sale of all or substantially
all of the Corporation's assets or recapitalization of the
Common Stock, but excluding any transaction as to which
paragraph (d)(i) of this Section 7
<PAGE>
applies) (each of the foregoing being referred to herein as
a "Transaction"), in each case as a result of which shares
of Common Stock shall be converted into the right to receive
stock, securities or other property (including cash or any
combination thereof), each share of Series B Preferred Stock
which is not converted into the right to receive stock,
securities or other property in connection with such
Transaction shall thereupon be convertible into the kind and
amount of shares of stock, securities and other property
(including cash or any combination thereof) receivable upon
such consummation by a holder of that number of shares of
Common Stock into which one share of Series B Preferred
Stock was convertible immediately prior to such Transaction.
The Corporation shall not be a party to any Transaction
unless the terms of such Transaction are consistent with the
provisions of this paragraph (e), and it shall not consent
or agree to the occurrence of any Transaction until the
Corporation has entered into an agreement with the successor
or purchasing entity, as the case may be, for the benefit of
the holders of the Series B Preferred Stock that will
contain provisions enabling the holders of the Series B
Preferred Stock that remain outstanding after such
Transaction to convert into the consideration received by
holders of Common Stock at the Conversion Price in effect
immediately prior to such Transaction. The provisions of
this paragraph (e) shall similarly apply to successive
Transactions.
(f) If:
(i) the Corporation shall declare a dividend
(or any other distribution) on the Common Stock (other
than cash dividends and cash distributions); or
(ii) the Corporation shall authorize the
granting to all holders of the Common Stock of rights
or warrants to subscribe for or purchase any shares of
any class or series of capital stock or any other
rights or warrants; or
(iii) there shall be any reclassification
of the Common Stock or any consolidation or merger to
which the Corporation is a party and for which approval
of any stockholders of the Corporation is required, or
a statutory share exchange, or an issuer or self tender
offer by the Corporation for all or a substantial
portion of its outstanding shares of Common Stock (or
an amendment thereto changing the maximum number of
shares sought or the amount or type of consideration
being offered therefor) or the sale or transfer of all
or substantially all of the assets of the Corporation
as an entirety; or
(iv) there shall occur the voluntary or involuntary
liquidation, dissolution or winding up of the
Corporation, then the Corporation shall cause to be
filed with the Transfer Agent and shall cause to be
mailed to each holder of shares of Series B Preferred
Stock at such holder's address as shown on the stock
<PAGE>
records of the Corporation, as promptly as possible,
but at least 15 days prior to the applicable date
hereinafter specified, a notice stating (A) the record
date for the payment of such dividend, distribution or
rights or warrants, or, if a record date is not
established, the date as of which the holders of Common
Stock of record to be entitled to such dividend,
distribution or rights or warrants are to be determined
or (B) the date on which such reclassification,
consolidation, merger, statutory share exchange, sale,
transfer, liquidation, dissolution or winding up is
expected to become effective, and the date as of which
it is expected that holders of Common Stock of record
shall be entitled to exchange their shares of Common
Stock for securities or other property, if any,
deliverable upon such reclassification, consolidation,
merger, statutory share exchange, sale, transfer,
liquidation, dissolution or winding up or (C) the date
on which such tender offer commenced, the date on which
such tender offer is scheduled to expire unless
extended, the consideration offered and the other
material terms thereof (or the material terms of any
amendment thereto). Failure to give or receive such
notice or any defect therein shall not affect the
legality or validity of the proceedings described in
this Section 7.
(g) Whenever the Conversion Price is adjusted as
herein provided, the Corporation shall promptly file with
the Transfer Agent an officer's certificate setting forth
the Conversion Price after such adjustment and setting forth
a brief statement of the facts requiring such adjustment
which certificate shall be conclusive evidence of the
correctness of such adjustment absent manifest error.
Promptly after delivery of such certificate, the Corporation
shall prepare a notice of such adjustment of the Conversion
Price setting forth the adjusted Conversion Price and the
effective date such adjustment becomes effective and shall
mail such notice of such adjustment of the Conversion Price
to each holder of shares of Series B Preferred Stock at such
holder's last address as shown on the stock records of the
Corporation.
(h) In any case in which paragraph (d) of this
Section 7 provides that an adjustment shall become effective
on the day next following the record date for an event, the
Corporation may defer until the occurrence of such event (A)
issuing to the holder of any share of Series B Preferred
Stock converted after such record date and before the
occurrence of such event the additional Common Stock
issuable upon such conversion by reason of the adjustment
required by such event over and above the Common Stock
issuable upon such conversion before giving effect to such
adjustment and (B) paying to such holder any amount of cash
in lieu of any fraction pursuant to paragraph (c) of this
Section 7.
(i) There shall be no adjustment of the
Conversion Price in case of the issuance of any capital
stock of the Corporation in a reorganization, acquisition or
other similar transaction except as specifically set forth
in this Section 7.
<PAGE>
(j) If the Corporation shall take any action
affecting the Common Stock, other than action described in
this Section 7, that in the opinion of the Board of
Directors would materially adversely affect the conversion
rights of the holders of Series B Preferred Stock, the
Conversion Price for the Series B Preferred Stock may be
adjusted, to the extent permitted by law, in such manner, if
any, and at such time as the Board of Directors, in its sole
discretion, may determine to be equitable under the
circumstances.
(k) The Corporation shall at all times reserve
and keep available, free from preemptive rights, out of the
aggregate of its authorized but unissued Common Stock solely
for the purpose of effecting conversion of the Series B
Preferred Stock, the full number of shares of Common Stock
deliverable upon the conversion of all outstanding shares of
Series B Preferred Stock not theretofore converted into
Common Stock. For purposes of this paragraph (k), the
number of shares of Common Stock that shall be deliverable
upon the conversion of all outstanding shares of Series B
Preferred Stock shall be computed as if at the time of
computation all such outstanding shares were held by a
single holder.
The Corporation covenants that any shares of Common
Stock issued upon conversion of the shares of Series B
Preferred Stock shall be validly issued, fully paid and non-
assessable.
The Corporation shall use its best efforts to list the
shares of Common Stock required to be delivered upon
conversion of the shares of Series B Preferred Stock, prior
to such delivery, upon each national securities exchange, if
any, upon which the outstanding shares of Common Stock are
listed at the time of such delivery.
The Corporation shall take any action necessary to
ensure that any shares of Common Stock issued upon
conversion of shares of Series B Preferred Stock are freely
transferable and not subject to any resale restrictions
under the Act, or any applicable state securities or blue
sky laws (other than any shares of Common Stock which are
held by an "affiliate" (as defined in Rule 144 under the
Act)).
(l) The Corporation will pay any and all
documentary stamp or similar issue or transfer taxes payable
in respect of the issue or delivery of shares of Common
Stock or other securities or property on conversion or
redemption of shares of Series B Preferred Stock pursuant
hereto; provided, however, that the Corporation shall not be
required to pay any tax that may be payable in respect of
any transfer involved in the issue or delivery of shares of
Common Stock or other securities or property in a name other
than that of the holder of the shares of Series B Preferred
Stock to be converted or redeemed, and no such issue or
delivery shall be made unless and until the person
requesting such issue or delivery has paid to the
Corporation the amount of any such tax or established, to
the reasonable satisfaction of the Corporation, that such
tax has been paid.
<PAGE>
Section 8. Ranking. Any class or series of capital
stock of the Corporation shall be deemed to rank:
(a) prior or senior to the Series B Preferred
Stock, as to the payment of dividends and as to distribution
of assets upon liquidation, dissolution or winding up, if
the holders of such class or series shall be entitled to the
receipt of dividends or of amounts distributable upon
liquidation, dissolution or winding up, as the case may be,
in preference or priority to the holders of Series B
Preferred Stock;
(b) on a parity with the Series B Preferred
Stock, as to the payment of dividends and as to distribution
of assets upon liquidation, dissolution or winding up,
whether or not the dividend rates, dividend payment dates or
redemption or liquidation prices per share thereof be
different from those of the Series B Preferred Stock, if the
holders of such class of stock or series and the Series B
Preferred Stock shall be entitled to the receipt of
dividends and of amounts distributable upon liquidation,
dissolution or winding up in proportion to their respective
amounts of accrued and unpaid dividends per share or
liquidation preferences, without preference or priority one
over the other ("Parity Stock"); and
(c) junior to the Series B Preferred Stock, as to
the payment of dividends or as to the distribution of assets
upon liquidation, dissolution or winding up, if such stock
or series shall be Common Stock or if the holders of Series
B Preferred Stock shall be entitled to receipt of dividends
or of amounts distributable upon liquidation, dissolution or
winding up, as the case may be, in preference or priority to
the holders of shares of such class or series ("Junior
Stock").
Section 9. Voting.
(a) If and whenever (i) six quarterly dividends
(whether or not consecutive) payable on the Series B
Preferred Stock or any series or class of Parity Stock shall
be in arrears (which shall, with respect to any such
quarterly dividend, mean that any such dividend has not been
paid in full), whether or not earned or declared, or (ii)
the consolidated shareholders' equity of the Corporation
(determined in accordance with generally accepted accounting
principles and giving effect to any adjustment for the net
unrealized gain or loss on available-for-sale mortgage
securities) at the end of any calendar quarter is less than
150% of the aggregate Liquidation Preference (excluding any
accumulated, accrued and unpaid dividends) of the then
outstanding Series B Preferred Stock and aggregate
liquidation preference (excluding any accumulated, accrued
and unpaid dividends) of the then outstanding Series A
Preferred Stock, the number of directors then constituting
the Board of Directors shall be increased by two (if not
already increased by reason of similar types of provisions
with respect to Voting Preferred Stock (as defined below))
and the holders of shares of Series B Preferred Stock,
together with the holders of shares of every other series of
Parity Stock (any other such series, the
<PAGE>
"Voting Preferred Stock"), voting as a single class
regardless of series, shall be entitled to elect the two
additional directors to serve on the Board of Directors at
any annual meeting of stockholders or special meeting held
in place thereof, or at a special meeting of the holders of
the Series B Preferred Stock and the Voting Preferred Stock
called as hereinafter provided. Notwithstanding anything
herein to the contrary, if any class or series of Voting
Preferred Stock (with which the Series B Preferred Stock is
entitled to vote as a single class) is entitled to elect two
directors as a result of a failure to maintain a specified
level of consolidated shareholders' equity required by the
terms of such Voting Preferred Stock, then when such
entitlement is triggered, the separate entitlement to elect
two directors pursuant to Section 9(a)(ii) hereof shall be
suspended. Whenever the entitlement pursuant to Section
9(a)(ii) of the Series B Preferred Stock (together with
holders of Voting Preferred Stock voting as a single class
regardless of series) to vote is suspended as described in
the preceding sentence, the terms of office of all persons
elected as directors pursuant to Section 9(a)(ii) shall
terminate upon the election of the two directors elected
pursuant to a vote of the Series B Preferred Stock and
Voting Preferred Stock voting as a single class as a result
of a failure to maintain a specified level of consolidated
shareholders' equity required by the terms of such class or
series of Voting Preferred Stock. Whenever (1) in the case
of an arrearage in dividends described in clause (i), all
arrears in dividends on the Series B Preferred Stock and the
Voting Preferred Stock then outstanding shall have been paid
and dividends thereon for the current quarterly dividend
period shall have been paid or declared and set apart for
payment, or (2) in the case of a shortfall in the
Corporation's consolidated shareholders' equity described in
clause (ii), the consolidated shareholders' equity of the
Corporation (determined in accordance with generally
accepted accounting principles and giving effect to any
adjustment for the net unrealized gain or loss on available-
for-sale mortgage securities) at the end of any subsequent
calendar quarter equals or exceeds 150% of the aggregate
Liquidation Preference (excluding any accumulated, accrued
and unpaid dividends) of the then outstanding Series B
Preferred Stock and the aggregate liquidation preference
(excluding any accumulated, accrued and unpaid dividends) of
the then outstanding Series A Preferred Stock, then the
right of the holders of the Series B Preferred Stock and the
Voting Preferred Stock to elect such additional two
directors shall cease (but subject always to the same
provision for the vesting of such voting rights in the case
of any similar future arrearages in six quarterly dividends
or shortfall in consolidated shareholders' equity), and the
terms of office of all persons elected as directors by the
holders of the Series B Preferred Stock and the Voting
Preferred Stock shall forthwith terminate and the number of
the Board of Directors shall be reduced accordingly. At any
time after such voting power shall have been so vested in
the holders of Series B Preferred Stock and the Voting
Preferred Stock, if applicable, the Secretary of the
Corporation may, and upon the written request of any holder
of Series B Preferred Stock (addressed to the Secretary at
the principal office of the Corporation) shall, call a
special meeting of the holders of the Series B Preferred
Stock and of the Voting Preferred
<PAGE>
Stock for the election of the two Directors to be elected by
them as herein provided, such call to be made by notice
similar to that provided in the Bylaws of the Corporation
for a special meeting of the stockholders or as required by
law. If any such special meeting required to be called as
above provided shall not be called by the Secretary within
20 days after receipt of any such request, then any holder
of Series B Preferred Stock may call such meeting, upon the
notice above provided, and for that purpose shall have
access to the stock books of the Corporation. The Directors
elected at any such special meeting shall hold office until
the next annual meeting of the stockholders or special
meeting held in lieu thereof if such office shall not have
previously terminated as above provided. If any vacancy
shall occur among the Directors elected by the holders of
the Series B Preferred Stock and the Voting Preferred Stock,
a successor shall be elected by the Board of Directors, upon
the nomination of the then-remaining Director elected by the
holders of the Series B Preferred Stock and the Voting
Preferred Stock or the successor of such remaining Director,
to serve until the next annual meeting of the stockholders
or special meeting held in place thereof if such office
shall not have previously terminated as provided above.
(b) So long as any shares of Series B Preferred
Stock are outstanding, in addition to any other vote or
consent of stockholders required by law or by the Articles
of Incorporation, as amended, the affirmative vote of at
least 66 2/3% of the votes entitled to be cast by the
holders of the Series B Preferred Stock, given in person or
by proxy, either in writing without a meeting or by vote at
any meeting called for the purpose, shall be necessary for
effecting or validating:
(i) Any amendment, alteration or repeal of
any of the provisions of this amendment to the Articles
of Incorporation, the Articles of Incorporation or the
Bylaws of the Corporation that materially adversely
affects the voting powers, rights or preferences of the
holders of the Series B Preferred Stock; provided,
however, that the amendment of the provisions of the
Articles of Incorporation so as to authorize or create,
or to increase the authorized amount of, any Junior
Stock or any shares of any class ranking on a parity
with the Series B Preferred Stock shall not be deemed
to materially adversely affect the voting powers,
rights or preferences of the holders of Series B
Preferred Stock; or
(ii) The authorization or creation of, or the
increase in the authorized amount of, any shares of any
class or any security convertible into shares of any
class ranking prior or senior to the Series B Preferred
Stock in the distribution of assets on any liquidation,
dissolution or winding up of the Corporation or in the
payment of dividends; provided, however, that no such
vote of the holders of Series B Preferred Stock shall
be required if, at or prior to the time when such
amendment, alteration or repeal is to take effect, or
when the
<PAGE>
issuance of any such prior shares or convertible
security is to be made, as the case may be, provision
is made for the redemption of all shares of Series B
Preferred Stock at the time outstanding.
For purposes of the foregoing provisions of this
Section 9, each share of Series B Preferred Stock shall have
one (1) vote per share, except that when any other series of
preferred stock shall have the right to vote with the Series
B Preferred Stock as a single class on any matter, then the
Series B Preferred Stock and such other series shall have
with respect to such matters one (1) vote per $24.50 of
stated liquidation preference. Except as otherwise required
by applicable law or as set forth herein, the Series B
Preferred Stock shall not have any relative, participating,
optional or other special voting rights and powers other
than as set forth herein, and the consent of the holders
thereof shall not be required for the taking of any
corporate action.
Section 10. Record Holders. The Corporation and the
Transfer Agent may deem and treat the record holder of any
share of Series B Preferred Stock as the true and lawful
owner thereof for all purposes, and neither the Corporation
nor the Transfer Agent shall be affected by any notice to
the contrary.
<PAGE>
EXHIBIT 4.2
NUMBER [FACE OF CERTIFICATE] SHARES
RB_______ Resource Mortgage Capital, Inc.
_________
ORGANIZED UNDER THE SEE
REVERSE FOR
LAWS OF THE COMMONWEALTH CERTAIN
DEFINITIONS
OF VIRGINIA
CUSIP 76121E 30 1
This certifies that [insert name of holder] is the
record holder of FULLY PAID AND NON-ASSESSABLE SHARES OF THE
SERIES B CUMULATIVE CONVERTIBLE PREFERRED STOCK, $.01 PAR
VALUE, OF RESOURCE MORTGAGE CAPITAL, INC. transferable on
the books of the Corporation in person or by duly authorized
attorney upon surrender of the Certificate properly
endorsed. This Certificate is not valid unless
countersigned by the Transfer Agent and registered by the
Registrar.
Witness the facsimile seal of the Corporation and the
facsimile signatures of its duly authorized officers.
Date: (SEAL)
/s/Thomas H. Potts
President
/s/Lynn K. Geurin
Secretary
COUNTERSIGNED AND REGISTERED:
FIRST UNION NATIONAL BANK OF NORTH CAROLINA
(SEAL) (Charlotte, North Carolina)
Transfer Agent and Registrar
By:
Authorized Signature
<PAGE>
[REVERSE SIDE OF CERTIFICATE]
TRANSFER RESTRICTIONS
THE TRANSFER OF THE SHARES REPRESENTED BY THIS
CERTIFICATE IS RESTRICTED. NO TRANSFER MAY BE MADE TO ANY
PERSON (i) WHO IS A NONRESIDENT ALIEN INDIVIDUAL OR
FOREIGN ENTITY, (ii) WHO IS AN ENTITY EXEMPT FROM FEDERAL
INCOME TAXATION THAT IS NOT SUBJECT TO TAX ON UNRELATED
BUSINESS TAXABLE INCOME (OR ANY PASS-THROUGH ENTITY IN
WHICH SUCH A TAX-EXEMPT ENTITY HOLDS OR IS PERMITTED TO
HOLD AN INTEREST), OR (iii) IF SUCH PERSON OR GROUP OF
PERSONS DIRECTLY OR THROUGH THE OPERATION OF CERTAIN
ATTRIBUTION RULES WOULD OWN IN EXCESS OF 9.8% OF THE
CORPORATION'S OUTSTANDING CAPITAL STOCK AFTER THE
TRANSFER.
THE CORPORATION MAY REQUIRE EVIDENCE OF A PROPOSED
TRANSFEREE'S STATUS AND OWNERSHIP INTEREST BEFORE
PERMITTING ANY TRANSFER AND MAY REDEEM ANY SHARES HELD IN
VIOLATION OF THE PRECEDING PARAGRAPH. THE CORPORATION
WILL FURNISH TO ANY STOCKHOLDER WITHOUT CHARGE A FULL
STATEMENT OF THE TRANSFER RESTRICTIONS UPON REQUEST TO THE
SECRETARY OF THE CORPORATION AT ITS PRINCIPAL OFFICE.
THE CORPORATION WILL FURNISH TO THE STOCKHOLDER
INFORMATION REGARDING THE DESIGNATIONS, RELATIVE RIGHTS,
PREFERENCES, AND LIMITATIONS APPLICABLE TO EACH CLASS OF
ITS CAPITAL STOCK ON REQUEST AND WITHOUT CHARGE.
KEEP THIS CERTIFICATE IN A SAFE PLACE. IF IT IS LOST,
STOLEN, OR DESTROYED THE CORPORATION WILL REQUIRE A BOND OF
INDEMNITY AS A CONDITION TO THE ISSUANCE OF A REPLACEMENT
CERTIFICATE.
The following abbreviations, when used in the
inscription on the face of this certificate, shall be
constituted as though they were written out in full
according to applicable laws or regulations:
TEN COM--as tenants in common UNIF GIFT MIN ACT--
______Custodian_____
TEN ENT --as tenants by the entireties
(Cust) (Minor)
JT TEN --as joint tenants with right of survivorship
under Uniform Gift to and not as tenants in
common Minors Act _____
(State)
Additional abbreviations may be used though not in the above
list.
For value received, ____ hereby sell assign an transfer unto
_____________shares of the capital stock represented by the
within Certificate and do hereby irrevocably constitute and
appoint _______ Attorney to transfer the said stock on the
books of the within named Corporation with full power of
substitution in the premises. Dated _______.
<PAGE>
EXHIBIT 5.1
VENABLE, BAETJER AND HOWARD, LLP
Including professional corporations
1800 Mercantile Bank & Trust Building
Two Hopkins Plaza
Baltimore, Maryland 21201-2978
(410) 244-7400, Fax (410) 244-7742
October 20, 1995
Resource Mortgage Capital, Inc.
4880 Cox Road
Glen Allen, VA 23060
Re: Registration Statement on Form S-3
(Reg. No. 33-50705)
Ladies and Gentlemen:
We have acted as counsel to Resource Mortgage
Capital, Inc., a Virginia corporation (the "Company"), in
connection with its proposed public offering of 2,100,000
shares of its Series B Cumulative Convertible Preferred
Stock, $0.01 par value ("Series B Preferred Stock") subject
to an option to offer an additional 315,000 shares to cover
over-allotments, if any, pursuant to a Registration
Statement filed on Form S-3 (Registration No. 33-50705)
("Registration Statement"). On October 20, 1995, the
Company filed a final prospectus supplement (the "Prospectus
Supplement") to the Prospectus dated October 19, 1995
("Prospectus") with the Securities and Exchange Commission
with respect to the Series B Preferred Stock.
In that connection, we have examined originals or
copies of such documents, corporate records and other
instruments as we have deemed necessary or appropriate for
purposes of this opinion including the Articles of
Incorporation, as amended, By-laws of the Company, and the
proposed Articles of Amendment
<PAGE>
establishing the Series B Preferred Stock. We have assumed
without independent verification the genuineness of
signatures, the authenticity of documents, and the
conformity with originals of copies.
Based on the foregoing, we are of the opinion that
the shares of Series B Preferred Stock being sold by the
Company, when issued and sold in accordance with the terms
of the Underwriting Agreement in substantially the same form
filed as Exhibit 1.1 to the Form 8-K filed this day by the
Company with Securities and Exchange Commission ("8-K") and
upon filing with, and acceptance by, the Virginia State
Corporation Commission of the Articles of Amendment
establishing the Series B Preferred Stock, will be validly
issued, fully paid and non-assessable.
We hereby consent to the use of this opinion as an
exhibit to the 8-K and incorporation by reference into the
Registration Statement and to the reference to our firm
under "Legal Opinions" in the Prospectus and "Legal Matters"
in the Prospectus Supplement comprising a part of the
Registration Statement.
By giving the foregoing consent, we do not admit
that we come within the category of persons whose consent is
required under Section 7 of the Securities Act of 1933.
Very truly yours,
VENABLE, BAETJER AND HOWARD, LLP
<PAGE>
EXHIBIT 8.1
VENABLE, BAETJER AND HOWARD, LLP
Including professional corporations
1800 Mercantile Bank & Trust Building
Two Hopkins Plaza
Baltimore, Maryland 21201-2978
(410) 244-7400, Fax (410) 244-7742
October 20, 1995
Resource Mortgage Capital, Inc.
4880 Cox Road
Glen Allen, Virginia 23060
Re: Tax Opinion
Ladies and Gentlemen:
We have acted as counsel to Resource Mortgage
Capital, Inc. ("RMC") in connection with the preparation of
a registration statement (the "Registration Statement") to
be filed with the Securities and Exchange Commission with
respect to an offering of shares of RMC's convertible
preferred stock. You have requested our opinion regarding
RMC's qualification as a real estate investment trust
("REIT") pursuant to sections 856 through 860 of the
Internal Revenue Code of 1986, as amended (the "Code"), for
its 1994 taxable year. Unless otherwise stated, all section
references herein are to the Code. In addition, you have
requested our opinion with respect to whether RMC's
organization and contemplated method of operations are such
as to enable it to continue to qualify as a REIT for its
1995 taxable year and subsequent taxable years.
RMC has a number of wholly-owned subsidiaries
("qualified REIT subsidiaries"), the income, liabilities,
and assets of which are consolidated with those of RMC for
federal income tax purposes. This letter refers to RMC,
together with such subsidiaries, as "Consolidated RMC." In
connection with the opinions rendered below, we have
examined the following:
<PAGE>
1. The Articles of Incorporation of RMC, as
amended on August 17, 1992 and the Articles of Amendment
establishing the Series A and Series B convertible preferred
stock;
2. The bylaws of RMC as restated on June 22,
1992;
3. Consolidated RMC's federal income tax returns
for its taxable years 1992, 1993 and 1994; and
4. The prospectus included in the registration
statement with which this letter has been filed.
In connection with the opinions rendered below, we
have assumed that:
1. Each of the documents referred to above has
been duly authorized, executed, and delivered, is authentic,
if an original, or accurate, if a copy, and has not been
amended;
2. During Consolidated RMC's 1995 taxable year
and subsequent taxable years, it will continue to conduct
its affairs in a manner that will make the representations
set forth below true for such years;
3. Neither RMC nor any subsidiary of RMC will
make any amendments to its organizational documents after
the date of this opinion that would affect Consolidated
RMC's qualification as a REIT for any taxable year; and
4. No actions will be taken by Consolidated RMC
or any subsidiary of RMC after the date hereof that would
have the effect of altering the facts upon which the
opinions set forth below are based.
Furthermore, we have relied upon the correctness of
the following representations of Consolidated RMC and its
authorized representatives that, at all times relevant
hereto:
1. Neither RMC nor any subsidiary thereof has
ever been subject by law to the supervision or examination
by state, or federal authorities having supervision over
banking institutions.
<PAGE>
2. Neither RMC nor any subsidiary thereof has
ever been a savings institution chartered or supervised as a
savings and loan or similar association under federal or
state law.
3. Neither RMC nor any subsidiary thereof has
ever been a small business investment company operating
under the Small Business Investment Act of 1958.
4. Neither RMC nor any subsidiary thereof was
created by or pursuant to an act of a state legislature for
purposes of promoting, maintaining, and assisting the
economy and industry within a state on a regional or state-
wide basis by making loans to be used in trades or
businesses which would generally not be made by banks within
such region or state in the ordinary course of business.
5. Neither RMC nor any subsidiary thereof was an
insurance company to which Subchapter L of the Code applies.
6. Beneficial ownership of the shares of RMC (the
"Shares") was held by 100 or more persons.
7. At no time during the last half of any taxable
year was more than 50% in value of the outstanding stock of
RMC owned, directly or indirectly, by or for not more than
five individuals. For this purpose, the Shares are treated
as owned indirectly by or for an individual if such
individual would be treated as owning such Shares under
section 544 as modified by section 856(h)(1)(B).
8. Consolidated RMC's election to be treated as a
REIT was properly made and has not been terminated or
revoked.
9. At the close of each quarter of each taxable
year seventy-five percent (75%) or more of the value of
Consolidated RMC's total assets consisted of cash and cash
items (including receivables arising in the ordinary course
of Consolidated RMC's operations), government securities,
and real estate assets (including interests in real
property, interests in mortgages on real property, and
interests in REMICs to the extent provided in section
856(c)(6)(E)), and shares or transferable certificates of
beneficial interest in other qualified REITs) (the "75%
test").
<PAGE>
10. Not more than five percent (5%) of the value
of Consolidated RMC's total assets consisted of securities
of any one issuer (if such securities are not includable
under the 75% test), and Consolidated RMC owned not more
than ten percent (10%) of the outstanding voting securities
of any one issuer (if such securities are not includable
under the 75% test).
11. Consolidated RMC did not receive or accrue any
rents from either real or personal property.
12. Consolidated RMC did not receive or accrue as
income, directly or indirectly, any interest or other amount
determined in whole or in part with reference to the income
or profits derived by any person (excluding interest (A)
based solely on a fixed percentage or percentages of
receipts or sales or (B) to the extent described in section
856(f)(2) of the Code).
13. Consolidated RMC did not own any mortgage
whose terms entitled it to receive a specified portion of
any gain realized on the sale or exchange of the real
property securing the mortgage or any gain that would be
realized if such property were sold on a specified date.
14. At least seventy-five percent (75%) of
Consolidated RMC's gross income (excluding gross income from
prohibited transactions) for any taxable year was derived
from:
(a) interest on obligations secured by
mortgages on real property or on interests in real property,
(b) gain from the sale or other disposition
of real property (including interests in real property and
interests in mortgages on real property) which was not held
as inventory or primarily for sale to customers in the
ordinary course of its trade or business,
(c) dividends or other distributions on, and
gain (other than gain from prohibited transactions) from the
sale or other disposition of, transferable shares (or
transferable certificates of beneficial interest) in other
REITs,
(d) abatements and refunds of taxes on real
property,
<PAGE>
(e) income and gain derived from foreclosure
property,
(f) amounts (other than amounts the
determination of which depends in whole or in part on the
income or profits of any person) received or accrued as
consideration for entering into agreements (i) to make loans
secured by mortgages on real property or on interests in
real property, or (ii) to purchase or lease real property
(including interests in real property and interests in
mortgages on real property),
(g) gain from the sale or other disposition
of real estate assets which is not a prohibited transaction
solely by reason of section 857(b)(6), and
(h) income which was attributable to stock or
debt instruments acquired through the temporary investment
of new capital and received or accrued during the one year
period beginning on the date on which Consolidated RMC
received such capital.
15. At least ninety-five percent (95%) of
Consolidated RMC's gross income (excluding gross income from
prohibited transactions) for any taxable year was derived
from:
(a) sources which satisfy the seventy-five
percent (75%) income test described in paragraph 14 above,
(b) dividends,
(c) interest,
(d) payments with respect to bona fide
interest rate swap, cap, or floor agreements entered into to
hedge any variable interest rate indebtedness incurred or to
be incurred to acquire or carry real estate assets
("interest rate agreements"), and
(e) gain from the sale or other disposition
of stocks and securities (including interest rate
agreements).
16. Less than thirty percent (30%) of Consolidated
RMC's gross income for any taxable year was derived from the
sale or other disposition of:
<PAGE>
(a) stock or securities (including interest
rate agreements) held for less than one year,
(b) property in a transaction which is a
prohibited transaction, and
(c) real property (including interests in
real property and interests in mortgages on real property)
held for less than four years other than (i) property
compulsorily or involuntarily converted within the meaning
of section 1033, and (ii) property which is foreclosure
property.
17. For each taxable year, the deduction for
dividends paid during the taxable year (determined without
regard to capital gains dividends) equaled or exceeded (i)
the sum of ninety-five percent (95%) of Consolidated RMC's
real estate investment trust taxable income for the taxable
year (determined without regard to the deduction for
dividends paid and excluding any net capital gains), and
ninety-five percent (95%) of the excess of the net income
from foreclosure property over the tax imposed on such
income by section 857(b)(4)(A), minus (ii) any excess
noncash income as determined under section 857(e).
18. All distributions paid by Consolidated RMC
with respect to its Shares were pro rata with no preference
to any share of stock as compared to any other shares of the
same class and with no preference to one class of stock as
compared to another class.
19. As of the close of any taxable year,
Consolidated RMC had no earnings and profits accumulated in
any non-REIT year.
20. During its taxable year 1994, RMC has had at
least 2001 shareholders of record of its Shares on any
dividend record date. In prior taxable years, RMC had at
least 201 shareholders of record of its Shares in any
dividend record date.
21. Within thirty (30) days after the end of each
taxable year, RMC demanded written statements from
shareholders of record who at any time during the last six
(6) months of RMC's taxable year owned 5% (or 1%, as the
case may be), or more of the Shares disclosing (i) the
actual owners of the Shares (those persons required to
include RMC's dividends in gross income), (ii) and the
maximum number of Shares (including the number and face
value of securities convertible into Shares) that were
considered owned, directly or indirectly (within the meaning
of section 544 as modified by section 856(h)(1)(B)) by each
of the actual owners of the Shares.
<PAGE>
22. RMC maintained the information received with
respect to such written demands in its filing district
available for inspection by the Internal Revenue Service at
any time.
23. RMC maintained sufficient records to show that
it complied with the 75% test described at paragraph 9 above
for all taxable years in its filing district available for
inspection by the Internal Revenue Service at any time.
24. RMC and the plan administrator under RMC's
Dividend Reinvestment and Stock Purchase Plan (the "Plan")
have administered the Plan in accordance with the terms of
the prospectus describing the Plan.
25. RMC has owned all the stock of each qualified
REIT subsidiary at all times during the period of such
corporation's existence.
26. During its 1995 taxable year and subsequent
taxable years, Consolidated RMC expects to continue to
satisfy all of the representations described in paragraphs 1
through 24 above.
As used herein, the term "prohibited transaction"
means the sale or other disposition of property held as
inventory or primarily for sale to customers in the ordinary
course of Consolidated RMC's trade or business. The term
"foreclosure property" means any real property (including
interests in real property) and any personal property
incident to such real property, acquired by Consolidated RMC
as the result of its having bid in such property at
foreclosure, or having otherwise reduced such property to
ownership or possession by agreement or process of law after
there was a default (or default was imminent) on a lease of
such property or on an indebtedness which such property
secured. Such term does not include property acquired by
Consolidated RMC as a result of indebtedness arising from
the sale or other disposition of property held as inventory
or for sale in the ordinary course of Consolidated RMC's
trade or business which was not originally acquired as
foreclosure property.
Based solely on the documents, assumptions, and
representations set forth above, and without further
investigation, we are of the opinion that Consolidated RMC
qualified as a REIT in its 1994 taxable year and that its
organization and contemplated method of operation are such
that it will continue to so qualify for its 1995 taxable
year and subsequent taxable years. Except as described
herein we have performed no further due diligence and have
made no efforts to verify the accuracy or genuineness of the
documents, assumptions, and representations set forth above.
<PAGE>
The foregoing opinion is based on current
provisions of the Code and Treasury Regulations, published
administrative interpretations thereof, and published court
decisions. The Internal Revenue Service has not yet issued
Regulations or administrative interpretations with respect
to various provisions of the Code relating to REIT
qualification. No assurance can be given that the law will
not change in a way that will prevent Consolidated RMC from
qualifying as a REIT or that the Internal Revenue Service
will not disagree with this opinion.
The foregoing opinion is limited to federal income
tax matters addressed herein, and no other opinions are
rendered with respect to other federal tax matters or any
issues arising under the tax laws of any state or locality.
We undertake no obligation to update this opinion after the
date of this letter. This opinion letter is solely for the
information and use of the addressee and may not be relied
upon, quoted, or otherwise used for any purpose by any other
person without our express written consent.
We consent to the references to this firm in the
prospectus supplement to be filed and the prospectus filed
with the Registration Statement and to the filing of this
opinion as an exhibit to the Registration Statement in which
the prospectus is and prospectus supplement will be
included. We do not thereby admit that we are within the
category of persons whose consent is required under Section
7 of the Securities Act of 1933, as amended, or the rules
and regulations of the Securities and Exchange Commission
thereunder.
Very truly yours,
VENABLE, BAETJER AND
HOWARD, LLP
<PAGE>
EXHIBIT 12.1
<TABLE>
<CAPTION>
RATIO OF EARNINGS TO FIXED CHARGES
Six Months ended
June 30, Year ended
<S> <C> <C> <C> <C> <C> <C> <C>
1995 1994 1994 1993 1992 1991 1990
Net earnings as reported14,63730,869 52,257 54,127 38,169
21,636 12,793
Costs and taxes5,990888(2,577) 3,164 7,048 3,828 711
Fixed Charges
CMO19,289 15,78331,458 37,198 55,376 85,622
98,856
Less Nonrecourse CMO(16,024)(15,783)(31,146)(37,198)(55,376)
(85,622) (98,856)
Repo76,311 55,642134,79174,822 47,828 29,352
14,597
Notes 5,852 2,181 6,189 4,299 4,727 6,901
5,580
Comm. paper 0 1,582 1,986 3,465 3,786 756
0
Total85,428 59,405143,27882,586 56,341 37,009
20,177
Net earnings
(excluding fixed charges
and taxes)106,05591,142192,958139,877101,55862,473
33,681
RATIO 1.24 1.53 1.35 1.69 1.80 1.69 1.67
</TABLE>
<PAGE>
EXHIBIT 23.1
Consent of Independent Auditors
The Board of Directors
Resource Mortgage Capital, Inc.:
We consent to the use of our reports incorporated in the
registration statement on Form
S-3 (Registration No. 33-50705) and to the reference to our
firm under the heading "Experts" in the prospectus.
Richmond, Virginia
October 19, 1995
