<PAGE>1
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): September 16, 1999
(September 9, 1999)
-----------------
CRIIMI MAE INC.
(Exact name of registrant as specified in its charter)
Maryland 1-10360 52-1622022
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
-------------------
11200 Rockville Pike
Rockville, Maryland 20852
(Address of principal executive offices, including zip code, of Registrant)
(301) 816-2300
(Registrant's telephone number, including area code)
<PAGE>2
Item 5. Other Events
Attached as exhibits to this Current Report on Form 8-K are (1) a Stock
Purchase Agreement between the Company and AP-CM, L.L.C. dated September 9,
1999, including draft Articles Supplementary to the Articles of Incorporation
of CRIIMI MAE Inc. for Series E Cumulative Convertible Preferred Stock attached
as an exhibit to the Stock Purchase Agreement, (2) a press release issued by the
Company on September 9, 1999 announcing the execution of a stock purchase
agreement between the Company and an affiliate of Apollo Real Estate Advisors
IV, L.P., and (3) a press release issued by the Company on September 15, 1999
announcing the declaration of a dividend to common shareholders of 1.61 million
shares of a new series of $10 Face Value Series F Redeemable Cumulative Dividend
Preferred Stock. Each of the above referenced documents is hereby incorporated
by reference herein.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
The following exhibits are filed as a part of this Current Report on Form
8-K:
(c) Exhibit
10 Stock Purchase Agreement between CRIIMI MAE Inc. and AP-CM, L.L.C.
dated September 9, 1999, including draft Articles Supplementary to
the Articles of Incorporation of CRIIMI MAE Inc. attached as an exhibit
to the Stock Purchase Agreement.
99.1 Press Release issued by CRIIMI MAE Inc. on September 9, 1999.
99.2 Press Release issued by CRIIMI MAE Inc. on September 15, 1999.
<PAGE>3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CRIIMI MAE Inc.
Dated: September 16, 1999 /s/ William B. Dockser
- -------------------------- ----------------------
William B. Dockser
Chairman of the Board
<PAGE>4
EXHIBIT INDEX
Exhibit
No. Description
- --------------------------------------------------------------------------------
*10 Stock Purchase Agreement between CRIIMI MAE Inc. and AP-CM, L.L.C.
dated September 9, 1999, including draft Articles Supplementary
to the Articles of Incorporation of CRIIMI MAE, Inc. attached as an
exhibit to the Stock Purchase Agreement.
*99.1 Press Release issued by CRIIMI MAE Inc. on September 9, 1999.
*99.2 Press Release issued by CRIIMI MAE Inc. on September 15, 1999.
- ----------------
*Filed herewith.
<PAGE>5
EXHIBIT 10
CONFORMED COPY
STOCK PURCHASE AGREEMENT
dated September 9, 1999,
between
CRIIMI MAE INC.
and
AP-CM, L.L.C.
<PAGE>6
TABLE OF CONTENTS
Page
ARTICLE I
THE PURCHASE AND SALE OF SERIES E PREFERRED STOCK......... 2
1.1 The Purchase..................................... 2
1.2 Use of Proceeds.................................. 2
1.3 The Closing...................................... 2
1.4 Additional Actions at the Closing................ 2
1.5 Certain Adjustments of Initial Conversion Price
of Series E Preferred Stock by Reason of Stock
Issuances, etc................................... 3
1.6 Certain Adjustments of Initial Conversion Price
of Series E Preferred Stock by Reason of Financing
Terms............................................ 3
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY.............. 4
2.1 Organization, Qualification, Corporate Power
and Authority..................................... 4
2.2 Capitalization.................................... 5
2.3 Articles Supplementary, etc....................... 5
2.4 Noncontravention.................................. 6
2.5 Company Entities.................................. 6
2.6 Financial Statements.............................. 7
2.7 Absence of Certain Changes........................ 8
2.8 Undisclosed Liabilities........................... 8
2.9 Tax Matters....................................... 8
2.10 Tangible Assets................................... 10
2.11 Owned Real Property............................... 10
2.12 Intellectual Property............................. 11
2.13 Real Property Leases.............................. 11
2.14 Contracts......................................... 12
2.15 Licenses and Authorizations....................... 13
2.16 Litigation........................................ 14
2.17 Employees......................................... 14
2.18 Employee Benefits................................. 14
2.19 Environmental Matters............................. 15
2.20 Legal Compliance.................................. 16
2.21 Assets............................................ 16
2.22 Brokers' Fees..................................... 16
2.23 Certain Information............................... 17
2.24 Company SEC Reports............................... 17
2.25 Transactions with Affiliates...................... 17
<PAGE>7
2.26 Discontinued Operations........................... 18
2.27 Cash Flow From Operating Activities............... 18
2.28 Debtors' Compliance............................... 18
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYER................ 18
3.1 Organization Qualification, Corporate Power and
Authority......................................... 18
3.2 Noncontravention.................................. 19
3.3 Litigation........................................ 19
3.4 Legal Compliance.................................. 19
3.5 Brokers' Fees..................................... 20
3.6 Certain Information............................... 20
3.7 Investment Intent................................. 20
Minimum Net Worth................................. 20
3.8 Effect on Company REIT Status..................... 20
ARTICLE IV
COVENANTS.................................................. 20
4.1 Best Efforts...................................... 20
4.2 Approvals; Consents............................... 21
4.3 Bankruptcy Covenants.............................. 21
4.4 Operation of Business............................. 22
4.5 Notice of Breaches................................ 25
4.6 Exclusivity....................................... 25
4.7 Delivery of Financial Statements.................. 26
4.8 Full Access....................................... 26
4.9 Disclosure Statement.............................. 27
4.10 Sale of Certain Bonds; Treatment of Differential.. 27
4.11 Restrictions on Transfer of Securities............ 29
4.12 Restrictions on Certain Transactions.............. 31
4.13 Good Faith Deposit................................ 31
ARTICLE V
CONDITIONS TO CLOSING...................................... 31
5.1 Conditions to Obligations of Each Party........... 31
5.2 Conditions to Obligations of the Buyer............ 32
5.3 Conditions to Obligations of the Company.......... 33
ARTICLE VI
TERMINATION................................................ 34
6.1 Termination....................................... 34
6.2 Effect of Termination; Buyer Breakup Fee.......... 36
<PAGE>8
ARTICLE VII
DEFINITIONS................................................ 37
ARTICLE VIII
GENERAL PROVISIONS........................................ 40
8.1 Press Releases and Announcements................. 40
8.2 No Third Party Beneficiaries..................... 40
8.3 Entire Agreement................................. 40
8.4 Succession and Assignment........................ 41
8.5 Counterparts..................................... 41
8.6 Headings......................................... 41
8.7 Notices.......................................... 41
8.8 Governing Law.................................... 42
8.9 Amendments and Waivers........................... 42
8.10 Severability..................................... 43
8.11 Expenses......................................... 43
8.12 Construction..................................... 43
8.13 Incorporation of Exhibits and Schedules.......... 43
8.14 Survival of Representations...................... 43
8.15 Commitment Fee................................... 44
Exhibit A - Debtors' Joint Plan of Reorganization
Exhibit B - Intentionally Omitted
Exhibit C - Articles Supplementary
Exhibit D - Opinion of Counsel to the Company
Exhibit E - Intentionally Omitted
Exhibit F - Term Sheet for Dividend Preferred Stock
<PAGE>9
INDEX OF DEFINED TERMSINDEX OF DEFINED TERMS
Page
Additional Financing............................................... 29
Adjustment Event................................................... 3
Affiliate.......................................................... 35
Agreement.......................................................... 1
Apollo............................................................. 1
Articles Supplementary............................................. 2
Assignee........................................................... 41
Audited Company Financial Statements............................... 7
Bankruptcy Code.................................................... 4
Bankruptcy Court................................................... 1
Breakup Event...................................................... 36
Business Day....................................................... 37
Buyer.............................................................. 1
Buyer Breakup Fee.................................................. 36
Buyer Material Adverse Effect...................................... 37
Buyer Reimbursement................................................ 43
CERCLA............................................................. 38
Chapter 11 Proceeding.............................................. 1
Closing............................................................ 2
Closing Date....................................................... 2
CMBS Bonds......................................................... 27
Code............................................................... 9
Company............................................................ 1
Company Acquisition Proposals...................................... 25
Company Affiliated Group........................................... 38
Company Affiliated Period.......................................... 36
Company Assets..................................................... 17
Company Authorizations............................................. 13
Company Balance Sheet Date......................................... 7
Company Capital Stock.............................................. 1
Company Common Stock............................................... 1
Company Contracts.................................................. 12
Company Employee Benefit Plans..................................... 14
Company Financial Statements....................................... 7
Company Group...................................................... 9
Company Intellectual Property...................................... 11
Company Material Adverse Effect.................................... 38
Company Preferred Stock............................................ 1
Company SEC Reports................................................ 17
Confidentiality Agreement.......................................... 26
<PAGE>10
Confirmation Order................................................. 1
Contracts.......................................................... 12
Debtor............................................................. 1
Debtors............................................................ 1
Deposit............................................................ 31
Differential....................................................... 28
Diligence Period................................................... 27
Disclosure Letter.................................................. 4
Disclosure Statement............................................... 22
Dispose............................................................ 23
Due Diligence Period............................................... 36
Eligible Holder.................................................... 28
Employee Benefit Plan.............................................. 38
Environment........................................................ 38
Environmental Authorization........................................ 38
Environmental Law.................................................. 38
Environmental Property Transfer Act................................ 39
ERISA.............................................................. 39
ERISA Affiliate.................................................... 39
Escrow Agreement................................................... 31
Exchange Act....................................................... 6
Exclusivity Provisions............................................. 25
Filing Date........................................................ 39
Fully Diluted Common Stock......................................... 3
GAAP............................................................... 7
Governmental Entity................................................ 39
Higher and Better Offer............................................ 26
Holder Preferred Stock............................................. 28
Initial Purchase Motion............................................ 21
Initial Purchase Order............................................. 21
Interim Monthly Financial Statements............................... 26
Junior Dividend Stock.............................................. 3
Knowledge.......................................................... 39
Materials of Environmental Concern................................. 39
NYSE............................................................... 31
October 5 Unaudited Company Balance Sheet.......................... 8
Ordinary Course of Business........................................ 39
Parties............................................................ 1
Person............................................................. 40
Pre-Filing Period.................................................. 6
Proceeding......................................................... 42
Purchase........................................................... 1
Purchase Price..................................................... 2
<PAGE>11
Purchased Shares................................................... 2
QIB................................................................ 20
Record Date........................................................ 28
Registration Rights Agreement...................................... 1
Restated Articles of Incorporation................................. 2
Restricted Securities.............................................. 29
Rights............................................................. 28
Rights Offering.................................................... 28
SEC................................................................ 7
Securities Act..................................................... 1
Security Interest.................................................. 40
Series B Preferred Stock........................................... 5
Series C Preferred Stock........................................... 5
Series D Preferred Stock........................................... 5
Series E Preferred Stock........................................... 1
State Authority.................................................... 13
Tax Returns........................................................ 40
Taxes.............................................................. 40
Third Party........................................................ 25
Unaudited Quarterly Financial Statements........................... 26
<PAGE>12
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is dated September 9,
1999, and is between AP-CM, L.L.C., a Delaware limited liability company (the
"Buyer"), and CRIIMI MAE INC., a Maryland corporation (the "Company" and,
together with the Buyer, the "Parties").
PRELIMINARY STATEMENT
A. The Company and those subsidiaries of the Company set forth in
Schedule A (collectively, the "Debtors" and individually, a "Debtor") are
debtors in certain Chapter 11 cases (Case Nos. 98-23115 through and including
98-23117) pending before the United States Bankruptcy Court for the District of
Maryland, Greenbelt Division (the "Bankruptcy Court"; those cases collectively,
the "Chapter 11 Proceeding").
B. The members of the Buyer include among others Apollo Real Estate
Advisors IV, L.P. and/or one or more of its Affiliates and funds under
management.
C. The Company wishes to sell to the Buyer, and the Buyer wishes to
purchase from the Company, 500,000 shares of a new series of the preferred
stock, par value $.01 per share, of the Company (the "Company Preferred Stock")
designated Series E Cumulative Convertible Preferred Stock of the Company (the
"Series E Preferred Stock").
D. The purchase of the Series E Preferred Stock pursuant to this Agreement
(the "Purchase") forms part of the Joint Plan of Reorganization of the Debtors
attached hereto in preliminary form as Exhibit A (such Plan, in such form as the
parties shall agree, the "Plan").
E. No later than the eighteenth (18th) Business Day following the date of
execution and delivery of this Agreement, the Parties will execute and deliver a
Registration Rights Agreement on such terms as they mutually shall agree (the
"Registration Rights Agreement"), pursuant to which the Company shall agree to
provide certain registration rights under the Securities Act of 1933 Act, as
amended (the "Securities Act"), and the rules and regulations promulgated
thereunder and applicable state securities laws, with respect to the shares of
common stock, par value $.01 per share, of the Company (the "Company Common
Stock"; together with the Company Preferred Stock, the "Company Capital Stock")
into which the shares of Series E Preferred Stock purchased by the Buyer
pursuant to this Agreement are convertible (and, to the limited extent provided
therein, with respect to such shares of Series E Preferred Stock).
F. The transactions contemplated by this Agreement, including the Purchase,
will be consummated pursuant to the Plan as confirmed by an order of the
Bankruptcy Court entered pursuant to Section 1129 of the Bankruptcy Code (the
"Confirmation Order").
The Parties therefore agree as follows:
ARTICLE I
<PAGE>13
THE PURCHASE AND SALE OF SERIES E PREFERRED STOCK
1.1 The Purchase. Upon the terms and subject to the conditions hereof, at
the Closing (as defined below) the Company shall issue and sell to the Buyer,
and the Buyer shall purchase from the Company, 500,000 shares of Series E
Preferred Stock, subject to adjustment pursuant to Section 1.5 (those shares,
the "Purchased Shares"). The Company shall issue to or at the direction of the
Buyer certificates for the Purchased Shares registered in the names and
evidencing the percentages of the Purchased Shares as directed by the Buyer
consistent with the terms hereof no less than three (3) Business Days prior to
the Closing. The Purchased Shares must be free and clear of any liens, charges,
encumbrances, security interests, options or rights or claims of others with
respect thereto. The Buyer shall transfer and deliver to the Company in
immediately available funds in payment for the Purchased Shares an amount equal
to $100 multiplied by the number of Purchased Shares (that amount, the "Purchase
Price").
1.2 Use of Proceeds. Use of Proceeds. The Company shall use the net
proceeds of the Purchase to satisfy partially the Company's obligations under
the Plan and for general corporate purposes.
1.3 The Closing. Unless this Agreement is terminated pursuant to Article
VI, the Parties shall cause the closing of the transactions contemplated by this
Agreement (the "Closing") to take place at the offices of Venable, Baetjer and
Howard, LLP commencing at 10:00 a.m., local time, on a date to be agreed by the
Company and the Buyer, which date must be at least seven, but no more than ten,
Business Days after the date upon which all the conditions to the obligations of
the Parties to consummate the transactions contemplated hereby set forth in
Section 5.1 (other than Section 5.1(4) and (5)) have first been satisfied or
waived, which date will be the same date as the Effective Date under, and as
defined in, the Plan (the "Closing Date"), except that the Closing may not occur
unless, contemporaneously therewith, the conditions set forth in Section 5.1(4)
and (5) are satisfied.
1.4 Additional Actions at the Closing. At the Closing, the Debtors shall
"substantially consummate" the Plan (as such term is used in the Bankruptcy
Code). In addition, upon the terms and subject to the conditions hereof, at the
Closing, the Company shall deliver to the Buyer the various certificates,
instruments and documents referred to in Section 5.2; the Buyer shall deliver to
the Company the Purchase Price in immediately available funds and the various
certificates, instruments and documents referred to in Section 5.3, and the
Company shall cause Amended and Restated Articles of Incorporation in form
reasonably acceptable to the Buyer (the "Restated Articles of Incorporation")
and the Articles Supplementary thereto in the form attached as Exhibit C, with
such changes therein as may be required pursuant to Section 1.6 or as the
parties otherwise may agree (the "Articles Supplementary"), to be duly filed
with the Maryland State Department of Assessments and Taxation.
1.5 Certain Adjustments of Initial Conversion Price of Series E Preferred
Stock by Reason of Stock Issuances, etc. If after the date of this Agreement and
on or prior to the Closing the outstanding shares of Company Capital Stock are
changed into a different number of shares by reason of any reclassification,
recapitalization, split-up, combination or exchange
<PAGE>14
of shares, or any dividend payable in stock or other securities is declared
thereon with a record date within that period (except one or more dividends
payable solely (except for cash in lieu of fractional shares) in shares of a new
series of preferred stock junior to the Series E Preferred Stock as to
dividends, liquidation preference and voting and redemption rights and otherwise
having the terms set forth in Exhibit F hereto with such changes therein, not
inconsistent with the material terms thereof or adverse to the interests of the
Series E Preferred Stock, as the Company shall determine, subject to the
approval of the Buyer, which approval shall not unreasonably be withheld (the
"Junior Dividend Stock")), in an amount no greater than that reflected in the
pro forma capitalization table included in Schedule 2.2, provided that, in the
event that the amount of Junior Dividend Stock shall exceed the amount reflected
in Schedule 2.2, the adjustment contemplated hereby shall operate only with
respect to that increment in the amount of Junior Dividend Stock above the
amount reflected in such Schedule 2.2, or any similar event occurs (any such
action, an "Adjustment Event"), the Conversion Price of the Series E Preferred
Stock will be adjusted so that the Buyer, upon conversion of the Series E
Preferred Stock, would hold the same percentage of Company Common Stock on a
fully diluted basis (assuming conversion of all shares of Series E Preferred
Stock and exercise or conversion in full of all outstanding options or other
securities or rights convertible into or exercisable to acquire Company Common
Stock) (the "Fully Diluted Common Stock") as is set forth in the pro forma
capitalization table included in Schedule 2.2.
1.6 Certain Adjustments of Initial Conversion Price of Series E Preferred
Stock by Reason of Financing Terms. The terms of the Series E Preferred Stock as
set forth in the form of Articles Supplementary attached as Exhibit C shall be
subject to adjustment as of the Closing as follows: In the event that the
Weighted Average Financing Costs (as defined in Schedule 1.6) for the Company
and its affiliates of the financing entered into by the Company as of the
Closing Date as described in Section 5.1(5) exceed the amount therefor set forth
in Schedule 1.6, the Conversion Price per share of Series E Preferred Stock
specified in the Articles Supplementary shall be reduced by an amount equal to
(x) the net present value over the stated term of such financing (as described
in Schedule 1.6), assuming a discount rate of 14%, of such excess of the
Weighted Average Financing Costs over the amount therefor set forth in Schedule
1.6 divided by (y) the total number of shares of Fully Diluted Common Stock to
be outstanding immediately after the Closing as set forth in Schedule 1.6. For
illustrative purposes, Schedule 1.6 sets forth certain examples of adjustments
contemplated by Section 1.6.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Buyer, except in each case as
set forth in the Schedules hereto which shall be delivered subject to review and
approval by the Parties no later than September 20, the disclosure letter
delivered to the Buyer by the Company upon execution of this Agreement and
incorporated herein by reference (the "Disclosure Letter") or the Company SEC
Reports (as defined in Section 2.24 (excluding items incorporated by reference
therein), as follows:
<PAGE>15
2.1 Organization, Qualification, Corporate Power and Authority. (a) Each of
the Company Entities as defined in Section 2.5 (a) is a corporation, limited
partnership or other legal entity duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation or organization.
Each of the Company Entities is duly qualified to conduct business and is in
good standing under the laws of each jurisdiction in which the nature of its
businesses or the ownership or leasing of its properties requires such
qualification, other than where the failure to be so qualified would not
individually or in the aggregate have a Company Material Adverse Effect (each
such jurisdiction being set forth in Schedule 2.1(a)). Each of the Company
Entities (subject, in the case of the Debtors, to supervision and approval by
the Bankruptcy Court in accordance with Title 11 of the United States Code (the
"Bankruptcy Code")), has all requisite corporate or partnership power and
authority to carry on the businesses in which it is engaged and to own and use
the properties owned and used by it. Each of the Company Entities has furnished
to the Buyer a copy of its charter, by-laws or other similar organizational
documents, each as amended and as in effect on the date of this Agreement. Each
of the Company Entities has at all times complied with, and is not in default
under or in violation of, any provision of its charter, by-laws or other
organizational documents.
(b) Subject to the entry of the Initial Purchase Order (as defined in
Section 4.3(a)), with respect to the Exclusivity Provisions, the Buyer Breakup
Fee, the Buyer Reimbursement and the Commitment Fee (all as defined below), and
subject to the entry of the Confirmation Order, with respect to the remaining
terms and conditions of this Agreement, (1) the Company has all requisite power
and authority to execute and deliver this Agreement, (2) this Agreement has been
(i) duly and validly executed and delivered by the Company and (ii) duly and
validly authorized by all necessary corporate action on the part of the Company,
and (3) this Agreement constitutes a valid and binding obligation of the Company
enforceable (assuming the Confirmation Order has not been stayed or reversed)
against the Company in accordance with its terms.
(c) Each of the Debtors has the requisite power and authority to execute
the Plan and file it with the Bankruptcy Court. The Plan will be (i) duly and
validly executed by each Debtor, (ii) duly and validly authorized by all
necessary corporate or partnership action on the part of each Debtor and (iii)
subject to the entry of the Confirmation Order the Plan will constitute a valid
and binding obligation of each Debtor enforceable (assuming the Confirmation
Order has not been stayed or reversed) against each Debtor in accordance with
its terms.
2.2 Capitalization. (a) As of the date hereof, the authorized capital stock
of the Company consists of 120,000,000 shares of Company Common Stock and
25,000,000 shares of Company Preferred Stock, of which 2,100,000 shares have
been designated Series B Cumulative Convertible Preferred Stock (the "Series B
Preferred Stock"), 300,000 shares have been designated Series C Preferred Stock
(the "Series C Preferred Stock") and 300,000 shares have been designated Series
D Preferred Stock (the "Series D Preferred Stock"). As of the date hereof,
53,553,161 shares of Company Common Stock are issued and outstanding, 1,796,982
shares of Company Preferred Stock are issued and outstanding, including
<PAGE>16
103,000 shares of Series C Preferred Stock, 100,000 shares of Series D Preferred
Stock and 1,593,982 shares of Series B Preferred Stock, and 4,433,728 stock
options to acquire Company Common Stock are issued and outstanding. All of the
outstanding shares of Series C Preferred Stock and Series D Preferred Stock
shall be redeemed at the Closing pursuant to the Plan. All of the issued and
outstanding shares of Company Capital Stock are validly issued, fully paid and
nonassessable and free of preemptive rights. Except as set forth above or as set
forth in Schedule 2.2, as of the date hereof, there are no shares of capital
stock of the Company issued or outstanding, no options, warrants or rights to
acquire, or other securities convertible into, capital stock of the Company, and
no agreements or commitments obligating the Company to issue, sell or acquire
any shares of its capital stock. Schedule 2.2 also sets forth the capitalization
of the Company on a pro forma basis giving effect to the dividend payable in
Junior Dividend Stock contemplated to be declared on or about September 15, 1999
and to the issuance of Series E Preferred Stock pursuant to this Agreement.
(b) All the outstanding shares of capital stock of or other equity interest
in each of the Company Entities, except CRIIMI MAE Holdings II, L.P., CRIIMI MAE
Services Inc. and CRIIMI MAE Services Limited Partnership, are beneficially
owned by the Company, directly or indirectly, free and clear of any restrictions
on transfer (other than restrictions under the Bankruptcy Code that will not
survive the Effective Date, the Securities Act, state or foreign securities laws
and partnership constituent documents), claims, Security Interests, options,
warrants, rights, contracts, or commitments, and all such shares are duly
authorized, validly issued, fully paid, nonassessable and free of preemptive
rights.
(c) There are no voting trusts, proxies or other agreements or
understandings to which any of the Company Entities is a party or by which any
of the Company Entities is bound with respect to the voting of the capital stock
of or other equity interest in any of the Company Entities or, to the Company's
Knowledge, any other such trusts, proxies, agreements or understandings
affecting any of the Company Entities. Except as contemplated by the Plan
(including without limitation the redemption of the Series C Preferred Stock and
Series D Preferred Stock as described therein), none of the Company Entities is
required to redeem, repurchase or otherwise acquire shares of capital stock or
debt securities of or other equity interest in any of the Company Entities as a
result of the transactions contemplated by this Agreement.
(d) On the Closing Date, after giving effect to the Plan, the authorized
capital stock of or other equity interest in each of the Company Entities will
be as set forth in Schedule 2.2.
(e) The Purchased Shares and the shares of Company Common Stock to be
issued and delivered upon conversion of shares of Series E Preferred Stock, when
so converted in accordance with the Articles Supplementary, will all be duly
authorized, validly issued, fully paid, nonassessable and free of preemptive
rights.
2.3 Articles Supplementary, etc. The Board of Directors of the Company has
approved the Articles Supplementary. The Articles Supplementary as well as the
Restated
<PAGE>17
Articles of Incorporation and the amended and restated Bylaws will be valid and
in full force and effect on the Closing Date and will have been approved by the
Bankruptcy Court prior thereto.
2.4 Noncontravention. None of execution and delivery of this Agreement by
the Company, or consummation of the transactions contemplated hereby, after
giving effect to the Plan, (a) will violate any provision of the charter,
by-laws or similar organizational documents of any of the Company Entities
except to the extent duly authorized by the Bankruptcy Court pursuant to the
Confirmation Order; (b) except for the applicable requirements of the Securities
Act, the Securities Exchange Act of 1934, as amended (the "Exchange Act"), any
applicable state and foreign securities laws, and the Trust Indenture Act of
1939, and other than approval by the Bankruptcy Court of the Plan, will require
on the part of any of the Company Entities any filing with, or any permit,
authorization, consent or approval of, any Governmental Entity for the operation
of, following the Closing Date, the business of the Company Entities as
currently conducted or as conducted during the one year period prior to the
Filing Date (the "Pre-Filing Period"), except where the failure to make such
filing or obtain such permit, authorization, consent or approval would not
individually or in the aggregate have a Company Material Adverse Effect; (c)
violate, result in a breach of, constitute (with or without due notice or lapse
of time or both) a default under, result in the acceleration of, create in any
party any right to accelerate, terminate, modify or cancel, or require any
notice, consent or waiver under, any order of the Bankruptcy Court or contract,
lease, sublease, license, sublicense, franchise, permit, indenture, agreement or
mortgage for borrowed money, instrument of indebtedness, Security Interest or
other arrangement including any arrangement entered on or after the Filing Date
or "assumed" under Section 365 of the Bankruptcy Code, to which any of the
Company Entities is a party or by which any of the Company Entities is bound or
to which any of their respective assets is subject or any judgment, order, writ,
injunction, decree, statute, rule or regulation applicable to any of the Company
Entities or any of their respective properties or assets, other than such
conflicts, violations, breaches, defaults, accelerations, terminations,
modifications, cancellations or notices, consents or waivers as would not
individually or in the aggregate have a Company Material Adverse Effect; or (d)
result in the imposition of any Security Interest upon any material assets of
any of the Company Entities which Security Interest would materially detract
from the value or materially interfere with the use of such assets.
2.5 Company Entities. (a) Schedule 2.5(a) sets forth
a true and complete list of each corporation, partnership, limited liability
company or other form of business association which constitutes a "Significant
Subsidiary" within the meaning of Rule 1-02 of Regulation S-X under the Exchange
Act (each a "Company Entity", and collectively, the "Company Entities").
(b) The Company Entities listed in Schedule 2.5(b) are the only
corporations, partnerships, limited liability companies or other business
associations which currently conduct or during the Pre-Filing Period have
conducted any material operations, trade or businesses of the Company and its
subsidiaries or which hold any Company Authorizations or own any assets
necessary for the conduct of the businesses of the Company
<PAGE>18
and its subsidiaries in all material respects as currently conducted or as
conducted during the Pre-Filing Period.
(c) The Company or one or more other Company Entities own all the
outstanding equity interests in each Company Entity except CRIIMI MAE Services
Inc. ("Services"). The sole shareholders of Services are Fred Burchill, Cynthia
Azzara, David Iannarone, H. William Willoughby and William B. Dockser, all of
whose shares are subject to repurchase pursuant to the terms of a shareholders
agreement a copy of which has been provided or made available to the Buyer. The
sole directors of Services are H. William Willoughby and William B. Dockser.
(d) All the issued and outstanding equity interests of each Company Entity
are duly authorized, validly issued, fully paid, nonassessable and free of
preemptive rights. On the Closing Date, after giving effect to the Plan, all
equity interests of each Company Entity that are held of record or owned
beneficially by the Company or another Company Entity on the date of this
Agreement or immediately prior to the Closing Date will be held or owned free
and clear of any restrictions on transfer (other than restrictions under the
Securities Act, state or foreign securities laws and partnership constitutive
document), claims, Security Interests, options, warrants, rights, contracts, or
commitments.
2.6 Financial Statements. The Company previously has provided or has made
available to the Buyer (i) the audited consolidated balance sheets and
statements of operations and changes in stockholders' equity and cash flows of
the Company as of December 31, 1996, 1997 and 1998 and for the years ended
December 31, 1996, 1997 and 1998 (the "Audited Company Financial Statements"),
and (ii) the unaudited consolidated balance sheet and statements of operations
and changes in stockholders' equity and cash flows of the Company as of June 30,
1999 and for the six-month period ended June 30, 1999 (the "Company Balance
Sheet Date"). These financial statements (collectively, the "Company Financial
Statements") (i) comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the U.S.
Securities and Exchange Commission (the "SEC") with respect thereto; (ii) except
as set forth therein, have been prepared in accordance with United States
generally accepted accounting principles applied on a consistent basis
throughout the periods covered thereby ("GAAP") (except as may be indicated
therein or in the notes thereto and, in the case of interim financial
statements, except for normal recurring year-end audit adjustments consistent
with past practice which are not in the aggregate material, or as permitted by
Form 10-Q under the Exchange Act); (iii) fairly present the consolidated
financial condition, results of operations and cash flows of the Company as of
the respective dates thereof and for the periods referred to therein; and (iv)
are consistent with the books and records of the Company, subject, in the case
of clauses (i), (ii) and (iii), to the paragraph in the report of independent
auditors on the Audited Company Financial Statements describing conditions that
raise substantial doubt about the Company's ability to continue as a going
concern. The Company has also provided or made available to the Buyer the
unaudited Debtors' balance sheets indicating separately liabilities existing as
of the Filing Date (the "October 5 Unaudited Company Balance Sheet") as duly
filed with the Bankruptcy Court in connection with the Chapter 11 Proceeding.
<PAGE>19
2.7 Absence of Certain Changes. Since June 30, 1999, (a) other than the
commencement of the Chapter 11 Proceeding or as disclosed in the Company's
Report on Form 10-Q for the Quarter Ended June 30, 1999, there has not been any
Company Material Adverse Effect, nor has there occurred any event or development
that would reasonably be expected to have a Company Material Adverse Effect, and
(b) none of the Company Entities has taken any action that would be prohibited
by Section 4.4(b) if taken from and after the date of this Agreement, except as
specifically approved by order of the Bankruptcy Court. The Company has provided
or made available true and correct copies of the Statement of Affairs and
Schedules of Assets and Liabilities and Executory Contracts of the Debtors filed
with the Bankruptcy Court in the Chapter 11 Proceeding, as amended, including a
list that is true and complete in all material respects of all the material
creditors, whether secured or unsecured, of the Debtors at the Filing Date and a
Claims Register that reflects all proofs of claims that have been filed through
the dates thereof.
2.8 Liabilities. Since June 30, 1999, none of the Company Entities has
incurred any material liability (whether known or unknown, whether absolute or
contingent, whether liquidated or unliquidated, whether due or to become due,
and whether arising prior to or subsequent to the Filing Date). All material
liabilities of the Company on a consolidated basis as of June 30, 1999 are set
forth in reasonable detail in Schedule 2.8. The aggregate amounts payable by the
Debtors pursuant to or required to fund the Plan shall not exceed the amount set
forth in Schedule 2.8, and the consolidated balance sheet of the Company and its
subsidiaries after giving effect to the foregoing, and otherwise to the
transactions contemplated by this Agreement, shall be as set forth in said
Schedule 2.8.
2.9 Tax Matters. (a) Each of the Company Entities has filed all material
Tax Returns that it was required to file, and all such Tax Returns were true and
complete in all material respects. None of the Company Entities is or has ever
been a member of a group of corporations with which it has filed (or been
required to file) consolidated, combined or unitary Tax Returns, other than a
group of which only the Company Entities are or were members. The Company
Entities have paid all material Taxes of the Company Entities that were due and
payable prior to the date hereof. All Taxes that any of the Company Entities is
or was required by law to withhold or collect have been duly withheld or
collected and, to the extent required, have been paid to the proper Governmental
Entity, except for amounts being contested in good faith by appropriate
proceedings for which adequate reserves are reflected on the Company Balance
Sheet and amounts which are properly disclosed in the Company's Financial
Statements.
(b) The Company Entities have delivered or otherwise made available to the
Buyer true and complete copies of all federal income Tax Returns for the
"affiliated group" (as defined in Section 1504(a) of the Internal Revenue Code
of 1986, as amended (the "Code")) of which the Company is the common parent and
the Company Entities are members (the "Company Group"), together with all
related examination reports and statements of deficiency, for all periods
commencing on or after December 31, 1993 and, to the extent in the possession of
the Company Entities, true and complete copies of the portion of the federal
income Tax
<PAGE>20
Returns of any member of a Company Affiliated Group, together with all related
examination reports and statements of deficiency, relating to the activities of
any of the Company Entities for all Company Affiliated Periods.
(c) The federal income Tax Returns of the Company Group have been audited
by the Internal Revenue Service or are closed by the applicable statute of
limitations for all taxable years through the taxable year 1993.
(d) The Company Entities have made available to the Buyer true and complete
copies of all other Tax Returns of the Company Entities in the possession of the
Company Entities, together with all related examination reports and statements
of deficiency, and, to the extent in the possession of the Company Entities,
true and complete copies of the portion of all other Tax Returns of any member
of a Company Affiliated Group, together with all related examination reports and
statements of deficiency, relating to the activities of any of the Company
Entities for all Company Affiliated Periods.
(e) No examination or audit of any Tax Return of any of the Company
Entities by any Governmental Entity is currently in progress or, to the
Company's Knowledge, threatened or contemplated. None of the Company Entities
has been informed by any jurisdiction that the jurisdiction believes that any of
the Company Entities was required to file any Tax Return that has not since been
timely filed or, if not timely filed, with respect to which an assessed amount
has not since been paid. None of the Company Entities has waived any statute of
limitations with respect to Taxes or agreed to an extension of time with respect
to a Tax assessment or deficiency which waiver or extension of time is still in
effect.
(f) None of the Company Entities (1) is a "consenting corporation" within
the meaning of Section 341(f) of the Code and none of the assets of the Company
Entities is subject to an election under Section 341(f) of the Code; (2) has
made any payments, is obligated to make any payments, or is a party to any
agreement that could obligate it to make any payments that may be treated as an
"excess parachute payment" under Section 280G of the Code; (3) has any actual or
potential liability for any Taxes of any Person (other than the Company
Entities) under Treasury Regulation Section 1.1502-6 (or any similar provision
of federal, state, local, or foreign law), or as a transferee or successor, by
contract, or otherwise; or (4) is or has been required to make a basis reduction
pursuant to Treasury Regulation Section 1.1502-20(b) or Treasury Regulation
Section 1.337(d)-2(b) other than a reduction required by reason of the
transactions contemplated by this Agreement, if any.
(g) None of the assets of any of the Company Entities (1) is property that
is required to be treated as being owned by any other Person pursuant to the
provisions of former Section 168(f)(8) of the Code, (2) is "tax-exempt use
property" within the meaning of Section 168(h) of the Code, or (3) directly or
indirectly secures any debt the interest on which is tax exempt under Section
103(a) of the Code.
(h) None of the Company Entities will have undergone a change in its method
of accounting requiring an inclusion in its taxable income of an adjustment
pursuant to
<PAGE>21
Section 481(c) of the Code for any taxable period beginning on or after the
Closing Date other than a change occurring by reason of the transactions
contemplated by this Agreement, if any.
(i) There has not been, and the consummation of the transactions
contemplated by this Agreement shall not cause, any state or federal "net
operating loss" of the Company Entities determined as of the Closing Date to be
limited as to its use pursuant to Section 382 of the Code or comparable
provisions of state law as a result of any "ownership change" within the meaning
of Section 382(g) of the Code occurring prior to the Closing Date.
(j) Schedule 2.9(j) sets forth in reasonable detail the following
information with respect to the consolidated Company as of June 30, 1999:
(1) the basis of the consolidated Company in its material assets; (2) the basis
of the stockholder(s) of the Company on a consolidated basis in its stock (or
the amount of any "excess loss account"); (3) the amount of any net operating
loss, net capital loss, unused investment or other credit, unused foreign tax,
or excess charitable contribution allocable to the Company on a consolidated
basis; and (4) the amount of any deferred gain or loss allocable to the Company
on a consolidated basis arising out of any "deferred intercompany transaction."
(k) The Company has not been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
2.10 Tangible Assets. The Company Entities own or lease all tangible
assets, if any, necessary for the conduct of their respective businesses as
presently conducted and as conducted during the Pre-Filing Period. Each such
tangible asset is free from material defects, has been maintained in accordance
with normal industry practice, is in good operating condition and repair and is
suitable for the purposes for which it is presently used, other than where the
failures or defects would not, individually or in the aggregate have a Company
Material Adverse Effect.
2.11 Owned Real Property. With respect to all real property that is
currently owned by any of the Company Entities, the identified owner has good
record and marketable title to that parcel, free and clear of any Security
Interest, easement, covenant or other restriction, except for Security
Interests, easements, covenants and other restrictions which do not materially
impair the use, occupancy or value of such parcel as presently used and as used
during the Pre-Filing Period in the Company Entities' businesses.
2.12 Intellectual Property. (a) The Company Entities own, license or
otherwise have the legally enforceable right to use all patents, trademarks,
trade names, service marks, copyrights, any applications for patents,
trademarks, trade names, service marks and copyrights, schematics, technology,
know-how, computer software programs or applications and tangible or intangible
proprietary information or material, if any, material to the operation of the
businesses of the Company Entities as presently conducted and as conducted
during the Pre-Filing Period by the Company Entities (collectively, "Company
Intellectual Property"). Each item of Company Intellectual Property owned or
available for use by the Company
<PAGE>22
Entities immediately prior to Closing will be owned or available for use by the
Company Entities on substantially similar terms and conditions immediately
following the Closing. No other Person has any rights to any of the Company
Intellectual Property, and no other Person is infringing, violating or
misappropriating any of the Company Intellectual Property used in the businesses
of the Company Entities, other than such infringements, violations or
misappropriations as would not, individually or in the aggregate, have a Company
Material Adverse Effect.
(b) The business, operations and activities of each of the Company Entities
as presently conducted or as conducted during the Pre-Filing Period have not
materially infringed or violated, or constituted a material misappropriation of,
and do not now materially infringe or violate, or constitute a material
misappropriation of, any intellectual property rights of any other Person, other
than such infringements, violations or misappropriations as would not,
individually or in the aggregate, have a Company Material Adverse Effect. Since
the Filing Date, none of the Company Entities has received any written or, to
the Company's Knowledge, verbal complaint, claim or notice alleging any such
infringement, violation or misappropriation.
(c) Schedule 2.12(c) sets forth each item of Company Intellectual Property
(other than commercially available software generally available to the public at
a license fee of less than $10,000) used by any of the Company Entities in the
current operation of its business and the operation of its business during the
Pre-Filing Period that is not owned by the Company Entities. The Company
Entities have delivered or otherwise made available to the Buyer true and
complete copies of all licenses, sublicenses or other agreements (each as
amended to date) pursuant to which any of the Company Entities uses such Company
Intellectual Property, all of which are set forth in Schedule 2.12(c).
(d) The Company Entities have previously delivered or otherwise made
available to the Buyer true and complete copies of all internal reports,
investigations, analyses or other documents concerning the Company Entities'
Year 2000 compliance.
2.13 Real Property Leases. (a) Schedule 2.13 lists all material real
property leased or subleased to the Company Entities, indicating, in each case,
the term of the lease and any extension and expansion options and the rent
payable under such lease. The Company Entities have made available to the Buyer
true and complete copies of all such leases and subleases (each as amended to
date).
(b) With respect to each such lease and sublease:
(1) such lease of a Debtor (as identified on Schedule 2.13) to be assumed
pursuant to Section 365 of the Bankruptcy Code, is and will continue to be,
legal, valid, binding, enforceable and in full force and effect, subject to the
effect of bankruptcy, insolvency, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and except as the availability of
equitable remedies may be limited by general principles of equity, and, in
connection therewith, such Debtors are able to cure all
<PAGE>23
defaults thereunder, such that pursuant to any such assumptions, all such leases
will be legal, valid, binding, enforceable and in full force and effect;
(2) each lease or sublease of a non-Debtor Company Entity is, and following
the Closing Date will continue to be, legal, valid, binding, enforceable and in
full force and effect, subject to the effect of bankruptcy, insolvency,
moratorium or other similar laws affecting the enforcement of creditors' rights
generally and except as the availability of equitable remedies may be limited by
general principles of equity;
(3) on or prior to the Closing Date, such lease to which any Debtor is a
party will be assumed pursuant to the Plan and, to the Company's Knowledge
(other than, as to the Debtors, non-payment of rent prior to the Filing Date)
there are no material disputes, oral agreements or forbearance programs in
effect as to the lease or sublease;
(4) none of the Company Entities has assigned, transferred, conveyed,
mortgaged, deeded in trust or encumbered any interest in any leasehold of a
Debtor to be so assumed or any leasehold or subleasehold of a non-Debtor;
(5) all facilities leased or subleased thereunder are supplied with
utilities and other services necessary for the operation of said facilities; and
(6) other than in the Ordinary Course of Business as presently conducted
and as conducted during the Pre-Filing Period, no construction, alteration or
other leasehold improvement work with respect to the lease or sublease remains
to be paid for or performed by the Company Entities (except, as to the Debtors,
amounts owing for periods prior to the Filing Date which will be paid in full on
or prior to the Closing Date at a cost which, in the aggregate, does not exceed
$300,000).
2.14 Contracts. (a) Schedule 2.14 sets forth a list of all contracts,
agreements, arrangements or understandings (written or oral) ("Contracts") to
which any of the Company Entities is a party or by which any of them is bound
that are material to the business, assets, financial condition or operating
income of the Company Entities taken as a whole (collectively, the "Company
Contracts").
(b) The Company Entities have delivered or otherwise made available to the
Buyer a true and complete copy of each Company Contract (each as amended to
date). With respect to each Company Contract (except for any contracts rejected
and not assumed under which the Company Entities shall have no further
obligations or potential liabilities after the Effective Date): (i) (x) as to a
prepetition agreement of a Debtor susceptible of assumption, such agreement
shall be assumed no later than the Closing Date and upon the assumption thereof
by such Debtor pursuant to Section 365 of the Bankruptcy Code, that Company
Contract will continue to be, and (y) as to any other Company Entity, that
Company Contract is and will continue to be, legal, valid, binding, enforceable
and in full force and effect immediately following the Closing with the same
terms as in effect immediately prior to the Closing, subject to the effect of
bankruptcy, insolvency, moratorium or other similar laws
<PAGE>24
affecting the enforcement of creditors' rights generally and except as the
availability of equitable remedies may be limited by general principles of
equity; and (ii) none of the Company Entities nor, to the Company's Knowledge,
any other party is in material breach or default, and no event (other than as to
Debtors, in the case of Company Contracts which will be assumed, (x) the failure
by a Debtor to pay an amount due thereunder with respect to goods or services
rendered prior to the Filing Date, (y) the failure by a Debtor to render goods
or services thereunto prior to the Filing Date or (z) the commencement of the
Chapter 11 Proceeding) has occurred which with notice or lapse of time would
constitute a material breach or default by the Company Entities or, to the
Company's Knowledge, by any such other party, or permit termination,
modification or acceleration, under that Company Contract. In particular,
without limiting the foregoing, the master servicing and special servicing
functions with respect to the assets described on Schedule 2.14 are currently
performed, and shall be retained after the Closing Date, by CRIIMI MAE Services
Limited Partnership pursuant to the agreements described in said Schedule 2.14,
without any breach or default thereunder on the part of CRIIMI MAE Services
Limited Partnership, and without any right of termination on the part of any
third party.
2.15 Licenses and Authorizations. (a) The Company Entities hold all
material licenses, permits, certificates, franchises, ordinances, registrations,
or other rights, applications and authorizations filed with, granted or issued
by, or entered by any Governmental Entity, including, without limitation, any
state or local regulatory authorities asserting jurisdiction over any of the
Company Entities or its businesses or assets (each a "State Authority"), that
are required for the conduct of their businesses as currently conducted or as
conducted during the Pre-Filing Period (each as amended to date) (collectively,
the "Company Authorizations"), other than such licenses, permits, certificates,
franchises, ordinances, registrations or other rights, applications and
authorizations the absence of which would not individually or in the aggregate
materially impair the ability of the Company to consummate the transactions
contemplated hereby or of the Company Entities to own and operate the
properties, assets and businesses of the Company Entities following the Closing
in the Ordinary Course of Business.
(b) The Company Authorizations are in full force and effect and have not
been pledged or otherwise encumbered, assigned, suspended, modified in any
material adverse respect, canceled or revoked, and each of the Company Entities
has operated in compliance with all terms thereof or any renewals thereof
applicable to it, other than where the failure to so comply would not
individually or in the aggregate have a Company Material Adverse Effect or
materially impair the ability of the Company Entities to own and operate the
properties, assets and businesses of the Company Entities following the Closing.
No event has occurred with respect to any of the Company Authorizations which
permits, or after notice or lapse of time or both would permit, revocation or
termination thereof or would result in any other material impairment of the
rights of the holder of any such Company Authorizations. To the Company's
Knowledge, there is not pending any application, petition, objection or other
pleading with any State Authority or any similar body having jurisdiction or
authority over the operations of the Company Entities which questions the
validity of or contests any Company Authorization or which could reasonably be
expected, if accepted or granted, to result in the
<PAGE>25
revocation, cancellation, suspension or any materially adverse modification of
any Company Authorization.
2.16 Litigation. Except as to claims arising prior to the date of this
Agreement (whether before or after the Filing Date), that are within the
jurisdiction of the Bankruptcy Court and will be fully discharged pursuant to
the Plan as of the Closing Date, (a) there is no action, suit, proceeding or
investigation to which any Company Entity is a party (either as a plaintiff or
defendant) pending or, to the Company's Knowledge, threatened before any
Governmental Entity, and, to the Company's Knowledge, there is no basis for any
such action, suit, proceeding or investigation; (b) none of the Company Entities
nor any officer, director or employee of any Company Entity has been permanently
or temporarily enjoined by any order, judgment or decree of any Governmental
Entity from engaging in or continuing to conduct the business of the Company
Entities; and (c) no order, judgment or decree of any Governmental Entity has
been issued in any proceeding to which any of the Company Entities is or was a
party or, to the Company's Knowledge, in any other proceeding, that enjoins or
requires any of the Company Entities to take action of any kind with respect to
its businesses, assets or properties. None of the actions, suits, proceedings or
investigations listed in Schedule 2.16, individually or collectively, would have
a Company Material Adverse Effect.
2.17 Employees. There are no collective bargaining agreements to which any
of the Company Entities is a party. None of the Company Entities has experienced
any strikes, grievances, claims of unfair labor practices or other collective
bargaining disputes and no organizational effort is presently being made or
threatened by or on behalf of any labor union with respect to its employees. To
the Company's Knowledge, there is no reasonable basis to believe that any of the
Company Entities will be subject to any labor strike or other organized work
force disturbance following the Closing.
2.18 Employee Benefits. (a) Schedule 2.18(a) contains a true and complete
list of all Employee Benefit Plans maintained, or contributed to, by any of the
Company Entities or any ERISA Affiliate of any of the Company Entities ("Company
Employee Benefit Plans"). True and complete copies of (i) all Company Employee
Benefit Plans that have been reduced to writing; (ii) written summaries of all
unwritten Company Employee Benefit Plans; (iii) all trust agreements, insurance
contracts and summary plan descriptions related to the Company Employee Benefit
Plans; (iv) the annual report filed on IRS Form 5500, 5500C or 5500R, if
applicable, for the most recent plan year for each Company Employee Benefit
Plan; and (v) the most recent qualification letter issued by the Internal
Revenue Service with respect to each Company Employee Benefit Plan that is
intended to qualify under Section 401(a) of the Code, have been made available
to the Buyer. Each Company Employee Benefit Plan has been administered in
accordance with its terms in all material respects, and each of the Company
Entities and each ERISA Affiliate of any of the Company Entities has in all
material respects met its obligations (if any) with respect to each Company
Employee Benefit Plan and has made all required contributions (if any) thereto.
The Company Entities and all Company Employee Benefit Plans are in compliance in
all material respects with the currently applicable provisions (if any) of
ERISA, the Code and other applicable federal, state and foreign laws and the
regulations thereunder.
<PAGE>26
(b) Neither any of the Company Entities nor any ERISA Affiliate of any of
the Company Entities has ever maintained a Company Employee Benefit Plan subject
to Section 412 of the Code, Part 3 of Subtitle B of Title I of ERISA, or Title
IV of ERISA. At no time has any of the Company Entities or, to the Company's
Knowledge, any ERISA Affiliate of any of the Company Entities been obligated to
contribute to any "multiemployer plan" (as defined in Section 4001(a)(3) of
ERISA) that is subject to Title IV of ERISA.
2.19 Environmental Matters. (a) Each of the Company Entities is in
compliance with all applicable Environmental Laws, other than where the failure
to be in compliance would not individually or in the aggregate have a Company
Material Adverse Effect. There is no pending or, to the Company's Knowledge,
threatened civil or criminal litigation, written notice of violation, formal
administrative proceeding, or written notice of investigation or inquiry or
written information request by any Governmental Entity, relating to any
Environmental Law involving any of the Company Entities or their respective
assets and properties.
(b) There have been no releases of any Materials of Environmental Concern
into the environment at any parcel of real property or any facility formerly or
currently owned, operated or controlled by any of the Company Entities for which
any of the Company Entities may be liable under any Environmental Law of the
jurisdiction in which such property or facility is located, other than such
releases as would not individually or in the aggregate have a Company Material
Adverse Effect. With respect to any such releases of Materials of Environmental
Concern, the Company Entity has given all required notices (if any) to
Governmental Entities (copies of which have been provided or made available to
the Buyer). There have been no releases of Materials of Environmental Concern at
parcels of real property or facilities other than those owned, operated or
controlled by the Company Entities that could reasonably be expected to have an
impact on the real property or facilities owned, operated or controlled by the
Company Entities, other than such impacts as would not individually or in the
aggregate have a Company Entities Material Adverse Effect.
(c) Set forth in Schedule 2.19 is a list of all environmental reports,
investigations and audits that to the Company's Knowledge (whether conducted by
or on behalf of the Company Entities or a third party, and whether done at the
initiative of the Company Entities or directed by a Governmental Entity or other
Person) were issued during the past five years relating to premises formerly or
currently owned, operated or controlled by the Company Entities. True and
complete copies of any such report, or the results of any such investigation or
audit, which to the Company's Knowledge are in the possession of the Company (or
can be obtained by the Company through reasonable efforts), have been delivered
or otherwise made available to the Buyer.
(d) To the Company's Knowledge, the solid and hazardous waste transporters
and treatment, storage and disposal facilities that have been utilized by
Company Entities are not subject to any material environmental liability.
<PAGE>27
(e) The Company Entities hold all Environmental Authorizations that are
legally required for the conduct of their businesses as currently conducted or
as conducted during the Pre-Filing Period, other than where the failure to hold
such Environmental Authorizations would not individually or in the aggregate
have a Company Material Adverse Effect, and such Environmental Authorizations
(if any) are listed in Schedule 2.18. Each of the Company Entities is and has
been in compliance with all such Environmental Authorizations, other than such
noncompliance as would not individually or in the aggregate have a Company
Material Adverse Effect.
(f) None of the transactions contemplated by this Agreement or the Plan
will require any of the Company Entities to comply with an Environmental
Property Transfer Act.
2.20 Legal Compliance. Each of the Company Entities and the conduct and
operation of its respective business is and has been in compliance with each law
(including rules, regulations and administrative orders thereunder) of any
Governmental Entity that (a) affects or relates to this Agreement or the
transactions contemplated hereby or (b) is applicable to the Company Entities or
their respective businesses, other than where the failure to be or to have been
in compliance would not individually or in the aggregate have a Company Material
Adverse Effect or materially impair the ability of the Company Entities to own
and operate the properties, assets and businesses of the Company Entities
following the Closing in the Ordinary Course of Business.
2.21 Assets. Schedule 2.21 and Schedule 2.9(j) set forth a materially
accurate and complete list of the assets ("Company Assets") of the Company on a
consolidated basis as of June 30, 1999, together with the cost basis, book or
amortized value, as the case may be, and investment rating as of June 30, 1999
of such Company Assets. Except as set forth in Schedule 2.21, the Company, on a
consolidated basis, has good and marketable title to the Company Assets.
2.22 Brokers' Fees. None of the Company Entities has any liability or
obligation to pay any fees or commissions to any broker, finder or agent with
respect to the transactions contemplated by this Agreement, except for the fees
payable to Wasserstein Perella & Co., Inc., financial advisor to the Company.
2.23 Certain Information. None of the information supplied by the Company
Entities for inclusion or incorporation by reference in any document to be filed
with the SEC in connection with the transactions contemplated hereby will, at
the respective times filed with the SEC and, in addition, in the case of any
registration statement, at the time it becomes effective under the Securities
Act, contain any untrue statement of the Company Entities of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading (provided that the foregoing shall not extend to exhibits
thereto or documents incorporated by reference therein, except to the extent a
statement or omission in such exhibit or document would cause to be untrue a
statement of a material fact in the body of such Company SEC Report or would
cause to be omitted from the body of such Company SEC Report a material
<PAGE>28
fact required to be stated therein or necessary to make the statements made in
the body of such Company SEC Report not misleading). Notwithstanding the
foregoing, no representation is made by the Company and the Debtors with respect
to statements made in any of the foregoing documents based upon information
supplied by the Buyer in writing.
2.24 Company SEC Reports. The Company has filed with the SEC and made
available to the Buyer true and complete copies of each registration statement,
report and proxy or information statement (including exhibits and any amendments
thereto) filed or required to be filed by the Company with the SEC since
December 31, 1998 (collectively, the "Company SEC Reports"). As of the
respective dates the Company SEC Reports were filed with the SEC or amended,
each of the Company SEC Reports (a) complied as to form in all material respects
with all applicable requirements of the Securities Act and Exchange Act, and the
rules and regulations promulgated thereunder and (b) did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading (provided that this
clause (b) shall not extend to exhibits thereto or documents incorporated by
reference therein, except to the extent a statement or omission in such exhibit
or document would cause to be untrue a statement of a material fact in the body
of such Company SEC Report or would cause to be omitted from the body of such
Company SEC Report a material fact required to be stated therein or necessary to
make the statements made in the body of such Company SEC Report not misleading).
2.25 Transactions with Affiliates. Except as set forth in Schedule 2.25 or
as disclosed in any of the Company SEC Reports, none of the Company Entities has
entered into any material transaction, contract or arrangement with an Affiliate
(other than the Company or other Company Entities or subsidiaries) in respect of
which any of the Company Entities has or may in the future have continuing
obligations.
2.26 Discontinued Operations. Schedule 2.26 accurately describes all of the
businesses and operations that (a) have been dissolved, sold, transferred or
otherwise disposed of by any of the Company Entities, any former subsidiary of
any of the Company Entities, or any predecessor thereto and (b) were businesses
and operations of the Company Entities or any former subsidiary of any of the
Company Entities or any predecessor thereto, in either case, in respect of which
any of them may have any continuing material liability or obligation.
2.27 Cash Flow From Operating Activities. Schedule 2.27 accurately and
completely sets forth the consolidated cash flow from operating activities
(determined as set forth in said Schedule) generated by the Company for the 12
calendar months ended June 30, 1999.
2.28 Debtors' Compliance, etc. The Debtors have fully complied, and are
currently in compliance, with all applicable provisions of the Bankruptcy Code
and the Federal Rules of Bankruptcy Procedure, and the U.S. Trustee Guidelines
and all local rules and procedures applicable to Debtors. The Company has
previously provided or made available to the Buyer true and correct copies of
all orders of the Bankruptcy Court issued or stipulations entered into in the
Chapter 11 Proceeding.
<PAGE>29
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to the Company as follows:
3.1 Organization Qualification, Corporate Power and Authority. (a) The
Buyer is a limited liability company duly organized, validly existing and in
good standing under the laws of the State of Delaware. The Buyer is duly
qualified to conduct business and is in good standing under the laws of each
jurisdiction in which the nature of its businesses or the ownership or leasing
of its properties requires such qualification, other than where the failure to
be so qualified would not individually or in the aggregate have a Buyer Material
Adverse Effect. The Buyer has all requisite limited liability company power and
authority to carry on the businesses in which it is engaged and to own and use
the properties owned and used by it. The Buyer has at all times complied with,
and is not in default under or in violation of, any provision of its certificate
of formation or operating agreement, other than where the failure to so comply
and such defaults and violations would not individually or in the aggregate have
a Buyer Material Adverse Effect.
(b) The Buyer has all requisite power and authority to execute and deliver
this Agreement. The execution and delivery of this Agreement by the Buyer, the
performance of this Agreement and the consummation of the transactions
contemplated hereby by the Buyer have been duly and validly authorized by all
necessary limited liability company action on the part of the Buyer. This
Agreement has been duly and validly executed and delivered by the Buyer and
constitutes a valid and binding obligation of the Buyer, enforceable against the
Buyer in accordance with its terms.
3.2 Noncontravention. Neither the execution and delivery of this Agreement
by the Buyer nor the consummation of the transactions contemplated hereby will
(a) violate any provision of the Buyer's certificate of formation or operating
agreement, (b) except for the applicable requirements of the Securities Act and
the Exchange Act and any applicable state and foreign securities laws, require
on the part of the Buyer any filing with, or any permit, authorization, consent
or approval of, any Governmental Entity, other than where the failure to make or
obtain such filings, permits, authorizations, consents or approvals would not
individually or in the aggregate have a Buyer Material Adverse Effect, (c)
violate, result in a breach of, constitute (with or without due notice or lapse
of time or both) a default under, result in the acceleration of, create in any
party any right to accelerate, terminate, modify or cancel, or require any
notice, consent or waiver under, any contract, lease, sublease, license,
sublicense, franchise, permit, indenture, agreement or mortgage for borrowed
money, instrument of indebtedness, Security Interest or other arrangement to
which the Buyer is a party or by which the Buyer is bound or to which any of its
assets is subject or any judgment, order, writ, injunction, decree, statute,
rule or regulation applicable to the Buyer or any of its properties or assets,
other than such conflicts, violations, breaches, defaults, accelerations,
terminations, modifications, cancellations or notices, consents or waivers as
would not
<PAGE>30
individually or in the aggregate have a Buyer Material Adverse Effect, or (d)
result in the imposition of any Security Interest upon any material assets of
the Buyer which Security Interest would materially detract from the value or
materially interfere with the use of such assets.
3.3 Litigation. As of the date of this Agreement: (a) there is no action,
suit, proceeding or investigation to which the Buyer is a party (either as a
plaintiff or defendant) pending or, to the Buyer's Knowledge, threatened before
any Governmental Entity and, to the Buyer's Knowledge, there is no basis for any
such action, suit, proceeding or investigation; (b) neither the Buyer nor to the
Buyer's knowledge, any officer, director or employee of the Buyer has been
permanently or temporarily enjoined by any order, judgment or decree of any
Governmental Entity from engaging in or continuing to conduct the business of
the Buyer; and (c) no order, judgment or decree of any Governmental Entity has
been issued in any proceeding to which the Buyer is or was a party or, to the
Buyer's Knowledge, in any other proceeding, that enjoins or requires the Buyer
to take action of any kind with respect to its business, assets or properties.
3.4 Legal Compliance. The Buyer and the conduct and operation of its
business is and has been in compliance with each law (including rules,
regulations and administrative orders thereunder) of any Governmental Entity
that (1) affects or relates to this Agreement or the transactions contemplated
hereby or (2) is applicable to the Buyer or its business, other than where the
failure to be or to have been in compliance would not individually or in the
aggregate have a Buyer Material Adverse Effect.
3.5 Brokers' Fees. The Buyer does not have any liability or obligation to
pay any fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement, except for the fees payable to
Chase Securities Corp., financial advisor to the Buyer.
3.6 Certain Information. None of the information supplied by the Buyer in
writing expressly for use therein, for inclusion or incorporation by reference
in any document to be filed with the SEC or any other Governmental Entity in
connection with the transactions contemplated hereby will, at the respective
times filed with the SEC or other Governmental Entity and, in addition, in the
case of any registration statement, at the time it becomes effective under the
Securities Act, contain any untrue statement of the Buyer of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading. Notwithstanding the foregoing, no representation is made
by the Buyer with respect to statements made in any of the foregoing documents
based upon information supplied by the Company in writing expressly for use
therein.
3.7 Investment Intent. (a) The Buyer is a "qualified institutional buyer,"
as defined in Rule 144A under the Securities Act (a "QIB"), with such knowledge
and experience in financial and business matters as are necessary in order to
evaluate the merits and risks of an investment in the Purchased Shares.
<PAGE>31
(b) The Buyer is acquiring the Purchased Shares for investment for the
Buyer's own account, and not with a view to, or for resale in connection with,
any distribution or public offering thereof in violation of the Securities Act.
3.8 Minimum Net Worth. As of the date hereof, the Buyer has a minimum net
worth of $50 million (including binding obligations to contribute to the equity
of the Buyer or guaranty the obligations of the Buyer under this Agreement up to
the amount of $50 million from one or more Persons with an aggregate net worth
of at least $50 million), in each case less the amount of the Deposit.
3.9 Effect on Company REIT Status. The holding of the equity interests in
the Buyer and the holding of the equity interests in each entity holding an
ownership interest in the Buyer is sufficiently diversified such that the
acquisition of the Purchased Shares by the Buyer will not cause the Company to
be considered "closely held" within the meaning of Section 856(h)(i) of the
Code.
ARTICLE IV
COVENANTS
4.1 Best Efforts. Each Party shall cooperate and use its reasonable best
efforts to fulfill the conditions precedent to the other Party's obligations
hereunder and to cause the transactions contemplated by this Agreement to be
consummated in accordance with the terms hereof, and without limiting the
generality of the foregoing shall use its best efforts to obtain all necessary
approvals, waivers, consents, permits, licenses, registrations and other
authorizations required in connection with this Agreement and the transactions
contemplated hereby, including, without limitation, entry of the Confirmation
Order, and to make all filings with and to give all notices to third parties
which may be necessary or reasonably required of it in order to consummate the
transactions contemplated hereby and thereby. Notwithstanding the foregoing, the
Buyer shall not be required to make any payment or incur any financial
obligation in excess of the Purchase Price and the reasonable and customary
expenses of completing the closing of the transactions contemplated by this
Agreement in accordance with its present reasonable expectations, or waive any
right or benefit under this Agreement or the Exhibits hereto (it being agreed
that the Buyer shall retain the right in its sole discretion to waive any right
or benefit in whole or in part).
4.2 Approvals; Consents. Each Party shall obtain and maintain in full force
and effect all approvals, consents, permits, licenses and other authorizations
from all Governmental Entities reasonably necessary or required, in the case of
the Buyer, for the purchase of the Purchased Shares, and in the case of the
Company, for the operation of the businesses of the Company Entities in the
Ordinary Course of Business, as and when such approvals, consents, permits,
licenses or other authorizations are necessary or required, except where the
failure to do so would not have a Company Material Adverse Effect or a Buyer
Material Adverse Effect, as applicable, or materially impair the ability of the
Company or the Buyer to consummate the
<PAGE>32
transactions contemplated hereby or the Company Entities to own and operate the
properties, assets and businesses of the Company Entities following the Closing
in the Ordinary Course of Business. Without limiting the generality of the
foregoing, each Party shall maintain its respective authorizations in full force
and effect, shall not take any action which could reasonably be expected to have
a material adverse effect on such authorizations or any licenses and
authorizations, shall diligently pursue all applications and shall, prior to the
expiration date of any material authorization, timely file for the renewal of
any such authorization. The Parties shall consult with one another as to the
approach to be taken with any Governmental Entity with respect to obtaining any
necessary consent to the transactions contemplated hereby and by the Plan, and
each of the Parties shall keep the other Party reasonably informed as to the
status of any such communications with any Governmental Entity.
4.3 Bankruptcy Covenants. (a) Within five (5) Business Days after the
execution of this Agreement, the Company shall, and shall cause each of the
other Debtors to, file a motion (the "Initial Purchase Motion") for expedited
determination of approval of the Exclusivity Provisions, the Buyer Breakup Fee,
the Buyer Reimbursement and the Commitment Fee provided for in this Agreement in
form and substance reasonably acceptable to the Buyer. The Company shall, and
shall cause each of the other Debtors to, use its best efforts to obtain an
order approving the Initial Purchase Motion (the "Initial Purchase Order")
within twenty-two (22) days after the filing of the Initial Purchase Motion,
which order shall be in form and substance acceptable to the Buyer.
(b) As soon as practicable following the execution of this Agreement (and
in no event later than September 17, 1999), the Company shall, and shall cause
each of the other Debtors to, file the Plan with the Bankruptcy Court. As soon
as practicable following the filing of the Plan (and in no event later than
September 17, 1999), the Company shall, and shall cause each of the Debtors to,
file with the Bankruptcy Court a Disclosure Statement related thereto in form
and substance reasonably acceptable to the Buyer and the Company (the
"Disclosure Statement"). Without the prior written consent of the Buyer, the
Company shall not, and shall cause each of the other Debtors not to, amend or
modify any provision of the Plan material to the interests of the Buyer pursuant
to this Agreement, or withdraw the Plan or file any other plan of reorganization
of the Debtors, except in connection with termination of this Agreement pursuant
to Section 6.1(5) and payment of the applicable Buyer Breakup Fee. Without the
prior written consent of the Buyer, which consent shall not be unreasonably
withheld, the Company shall not, and shall cause each of the other Debtors not
to, amend or modify the Disclosure Statement. Except in conjunction with
termination of this Agreement pursuant to Section 6.1(5) and payment of the
applicable Buyer Breakup Fee, all motions, agreements, orders, stipulations and
settlements entered into with respect to the Debtors or any of their rights,
obligations, assets or liabilities shall be consistent with the rights of the
Buyer pursuant to this Agreement.
(c) Without limiting the provisions of this Agreement or the Plan, the
Company shall, and shall cause each of the other Debtors to, promptly provide
the Buyer with drafts of all documents, motions, orders, filings or pleadings
that the Company or any other Debtor proposes to file with the Bankruptcy Court
which relate to the consummation or
<PAGE>33
approval of the Plan or this Agreement, and will provide the Buyer with
reasonable opportunity to review such filings to the extent reasonably
practicable. The Company shall, and shall cause each of the other Debtors to,
promptly (and, in any event, within 48 hours after receipt of such pleadings by
the Debtors) provide the Buyer with copies of all pleadings (other than proofs
of claim below $10,000 in amount) received by or served by or upon any of the
Debtors in connection with the Chapter 11 Proceeding after the date hereof,
unless the Buyer is specifically listed on the certificate of service relating
to such pleading.
4.4 Operation of Business. (a) Except as otherwise contemplated or
permitted by this Agreement, the Company shall, and shall cause each of the
other Company Entities to, conduct its operations in the Ordinary Course of
Business and in compliance with all other applicable laws and regulations, and,
to the extent consistent therewith, use all reasonable and prudent business
efforts to preserve intact its current business organization, keep its physical
assets in good working condition, pay all Taxes (all post-petition Taxes in the
case of the Debtors) as they become due and payable, maintain insurance on its
business and assets (in amounts and types consistent with past practice), keep
available the services of its current officers and employees and preserve its
relationships with customers, suppliers and others having business dealings with
it to the end that its goodwill and ongoing business shall not be impaired in
any material respect.
(b) Without limiting the generality of the foregoing, prior to the Closing,
the Company shall not, and shall not permit any other Company Entity to, without
the prior written consent of the Buyer and except as otherwise contemplated by
this Agreement, or as otherwise provided in Schedule 4.4:
(1) amend its certificate of incorporation, by-laws or other comparable
organizational documents;
(2) (A) declare, set aside or pay any dividends on, or make any other
distributions (whether in cash, securities or other property) in respect of, any
of its outstanding capital stock (other than, with respect to a Company Entity
other than the Company, to its corporate parent) (except a dividend payable
solely (except for cash in lieu of fractional shares) in shares of the Company's
Junior Dividend Stock in an amount no greater than that reflected in the pro
forma capitalization table included in Schedule 2.2), (B) split, combine or
reclassify any of its outstanding capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of, or in substitution
for, shares of its outstanding capital stock, or (C) purchase, redeem or
otherwise acquire any shares of outstanding capital stock or any rights,
warrants or options to acquire any such shares;
(3) except for assets not in excess of $60,000,000 in aggregate fair market
value to be sold as described in Schedule 4.4 and except to the extent that
certain CMBS Bonds (as defined in Section 4.10) are sold in the manner set forth
in Section 4.10 for the minimum proceeds provided in said Section 4.10, sell,
lease, license, mortgage, pledge, encumber or dispose (collectively, "Dispose")
of any of its assets or acquire or
<PAGE>34
Dispose of any assets or shares or other equity interests in or securities of
any Company Entity, other than in the Ordinary Course of Business;
(4) enter into, materially amend, terminate, breach in any manner that
would prevent the assumption thereof under Section 365 of the Bankruptcy Code,
or reject or be deemed to reject any Company Contract other than entering into
agreements with unaffiliated third parties, on an arms-length basis and in the
Ordinary Course of Business, on terms comparable with its existing agreements of
such nature;
(5) change in any material respect its accounting methods, principles or
practices, except insofar as may be required by a generally applicable change in
GAAP;
(6) issue, sell, grant or pledge any shares of its capital stock (other
than by way of dividend and common stock issuable upon conversion of Junior
Dividend Stock issued as permitted by (2) above), any other voting securities or
any securities convertible into or exchangeable for, or any rights, warrants or
options to acquire, any such shares, voting securities or convertible or
exchangeable securities, other than upon the exercise of options, or upon the
conversion or exchange of securities, outstanding on the date of this Agreement;
(7) settle or compromise any material Tax liability or any pending or
threatened suit or action other than consistent with any of the Company
Entities' practice since the Filing Date or pursuant to the terms of the Plan or
with the consent of the Buyer (which consent shall not unreasonably be
withheld), or elect to treat the Company other than as a REIT for federal income
tax purposes;
(8) establish, or transfer any assets to, a trust for purposes of funding
any Company Employee Benefit Plan, including, without limitation, a so-called
"rabbi trust," except as required by applicable law;
(9) conduct material transactions in Company Assets except in compliance in
all material respects with the investment policies of the Company Entities
established from time to time in the Ordinary Course of Business and in all
material respects all applicable laws and regulations;
(10) amend or otherwise increase, accelerate the payment or vesting of the
amounts payable or to become payable under or fail to make any required
contribution to, any Company Employee Benefit Plan or materially increase any
non-salary benefits payable to any employee or former employee, except in the
Ordinary Course of Business and except as has been approved by the Bankruptcy
Court prior to the date of this Agreement, as required by applicable law or as
otherwise permitted by this Agreement;
(11) except in the Ordinary Course of Business, as may be required by
applicable law or as may be necessary for compliance under Section 401(a) of the
Code, if applicable, the Company shall not, and shall not permit any other
Company Entity to (w) grant
<PAGE>35
Company Options or other equity-related awards; (x) grant any increase in the
compensation, bonus, severance, termination pay or other benefits of any former
or current employee, agent, consultant, officer or director of the Company or
any other Company Entity; (y) enter into or amend any employment agreement,
deferred compensation, consulting, severance, termination, indemnification or
any other such agreement with any such former or current employee, agent,
consultant, officer or director of the Company or any other Company Entity; or
(z) amend, adopt or terminate any Company Employee Benefit Plan;
(12) incur any material indebtedness except in the Ordinary Course of
Business (including obligations in respect of capital leases); except in the
Ordinary Course of Business assume, guarantee, endorse or otherwise become
liable or responsible (whether directly, contingently or otherwise) for the
obligations of any other Person; or make any loans, advances or capital
contributions to, or investments in, any other Person;
(13) enter into any transaction, contract or arrangement whatsoever with an
Affiliate (other than the Company, any other Company Entity or any 95% or more
owned direct or indirect subsidiary of the Company), except renewals or
extensions in the Ordinary Course of Business of pre-existing contracts;
(14) release any third party from any material obligation, or grant any
consent, under any confidentiality or other material agreement, or fail to fully
enforce any such agreement, except in the Ordinary Course of Business;
(15) enter into any repurchase agreements except with the consent of the
Buyer which consent shall be exercised in good faith; or
(16) agree, in writing or otherwise, to take or file a motion seeking
permission for, or consent to any motion or other request by a third party in
respect of, any of the foregoing actions.
4.5 Notice of Breaches. Each Party shall promptly deliver to the other
Party written notice of any event or development that would (a) render any
statement, representation or warranty of such Party in this Agreement (including
the Disclosure Letter) inaccurate or incomplete in any respect, or (b)
constitute or result in a breach by such Party of, or a failure by such Party to
comply with, any agreement or covenant in this Agreement applicable to such
Party. No such disclosure shall be deemed to avoid or cure any such
misrepresentation or breach.
4.6 Exclusivity. (a) From and after the date hereof, the Company shall not,
and shall cause each other Company Entity and each of their respective
directors, officers, employees, financial advisors, representatives or agents
not to, directly or indirectly, (i) solicit, initiate, engage or participate in
or encourage discussions or negotiations with any Person (other than the Buyer)
concerning any merger, consolidation, sale of material assets, tender offer for,
recapitalization of or accumulation or acquisition of securities issued by any
<PAGE>36
Company Entity, proxy solicitation or other business combination involving any
Company Entity (collectively, "Company Acquisition Proposals") or (ii) provide
any non-public information concerning the business, properties or assets of any
Company Entity to any Person (other than to the Buyer and to the Debtors'
creditors in accordance with existing confidentiality arrangements). The Company
shall, and shall cause each other Company Entity to, cease immediately any and
all existing activities, discussions or negotiations with any Person other than
the Buyer with respect to any Company Acquisition Proposal. The Company shall
immediately notify the Buyer of, and shall disclose to the Buyer all details of,
any inquiries, discussions or negotiations of the nature described in the first
sentence of this Section 4.6. The provisions of this Section 4.6 are referred to
in this Agreement as the "Exclusivity Provisions".
(b) Notwithstanding the provisions of Section 4.6(a), the Debtors may, to
the extent required by the fiduciary duties imposed under applicable law, in
good faith after consultation with outside legal counsel, participate in
discussions or negotiations with, and, subject to the requirements of Section
4.6(b)(iii), furnish information to, any Person or group of Persons (a "Third
Party") from which the Debtors have received a bona fide unsolicited indication
of interest which is reasonably likely to result in a Company Acquisition
Proposal from which the Company would receive value in an amount at least 10%
greater than the value of the transactions contemplated by this Agreement (a
"Higher and Better Offer"), so long as:
(i) The Company in good faith reasonably believes that such Third Party has
the financial wherewithal to consummate the transactions contemplated by such
Higher and Better Offer;
(ii) The Company promptly discloses to the Buyer the identity of each Third
Party with whom there is any written communication and promptly provides the
Buyer with copies of all written offers, term sheets, draft documents,
correspondence and any other writing relating to such potential Higher and
Better Offer under discussion and of all non-public information requested by or
furnished to that Third Party in the format requested by or furnished to that
Third Party; and
(iii) The Company and the other Debtors do not provide any non-public
information to a Third Party except pursuant to a written non-disclosure
agreement executed by such Third Party with terms regarding the protection of
confidential information at least as restrictive as such terms in the
Confidentiality Agreement between the Company and the Buyer dated November 30,
1998 (the "Confidentiality Agreement").
4.7 Delivery of Financial Statements. As promptly as possible following the
last day of each month after the date of this Agreement until the Closing Date,
and in any event within 30 days after the end of each such month, the Company
shall deliver to the Buyer its monthly operating reports for the Debtor
Entities, prepared in the same format as the monthly operating reports of the
Company provided to the Bankruptcy Court (collectively, the "Interim
<PAGE>37
Monthly Financial Statements"). As promptly as possible following the last day
of the first three fiscal quarters in each fiscal year, and in any event within
45 days after the end of each such quarter, the Company shall deliver to the
Buyer its unaudited consolidated balance sheet and the related unaudited
consolidated statements of operations and cash flows for the year-to-date period
then ended, prepared in accordance with GAAP (except as otherwise described
therein) applied on a basis consistent with that of the Audited Financial
Statements, and complying as to form with the applicable accounting requirements
and the published rules and regulations of the SEC with respect thereto
(collectively, the "Unaudited Quarterly Financial Statements").
4.8 Full Access. The Company shall permit the Buyer and the financial
advisors, legal counsel, accountants, consultants and other authorized
representatives of the Buyer to have full access (at all reasonable times, and
in a manner so as not to interfere with normal business operations) to all
premises, properties, financial and accounting records, contracts, other records
and documents, and personnel, of or pertaining to the Company, provided that
each such authorized representative of the Buyer other than legal counsel has
executed a confidentiality agreement which is satisfactory to the Company. The
Company shall cause its officers and management to cooperate fully with the
representatives and agents of the Buyer and shall make themselves available to
the extent reasonably necessary to complete the due diligence process and the
consummation of the transactions contemplated hereby. During the period prior to
the Closing, the Company shall furnish as promptly as practicable to the Buyer
(a) a copy of each report, schedule and other document filed or received by it
pursuant to the requirements of federal securities laws, and (b) all other
information as the Buyer reasonably may request.
4.9 Disclosure Statement. The Buyer shall furnish the Company with all
information and shall take such other action as the Company may reasonably
request in connection with the Disclosure Statement. The Company shall consult
with the Buyer and its counsel in connection with, and shall permit the Buyer
and its counsel to participate in, the preparation and Bankruptcy Court approval
process of the Disclosure Statement and any amendments or supplements thereto.
4.10 Sale of Certain Bonds; Treatment of Differential. (a) Subject to the
terms and conditions set forth herein, the Buyer or any designated Affiliate or
Affiliates thereof shall purchase from the Company and its Affiliates, and the
Company and such Affiliates of the Company shall be obligated to sell to the
Buyer or such Affiliates of the Buyer, all of those certain CMBS bonds held by
the Company and its Affiliates specified in Schedule 4.10 (the "CMBS Bonds").
Any purchase of the CMBS Bonds by the Buyer or its Affiliate(s) pursuant to this
Section 4.10 shall be at an aggregate price (the "Bond Purchase Price")
determined as set forth in Schedule 4.10 hereto based on interest rate spreads
no greater than those specified therein. The current servicing structure for
such CMBS Bonds shall be retained so long as the Buyer or an Affiliate thereof
controls the entity which holds such CMBS Bonds and no default has occurred
under the relevant servicing arrangements with respect thereto. The Buyer may
terminate the obligation to purchase the CMBS Bonds by giving written notice to
the Company, within eighteen (18) Business Days following the date of this
Agreement (or if the
<PAGE>38
Initial Purchase Order has not been entered within sixteen (16) Business Days
following the date of this Agreement, within two (2) Business Days following the
entry of the Initial Purchase Order) and the payment of the Buyer Reimbursement
pursuant Section 8.11 (the "Diligence Period") in the event that the Buyer is
not satisfied, for any reason whatsoever in its sole discretion, with its due
diligence review of the CMBS Bonds and matters relating thereto, or if at any
time the Buyer has terminated this Agreement pursuant to Sections 6.1(2), (4),
(6), (7), or (8). The consummation of any purchase of the CMBS Bonds by the
Buyer or such Affiliate(s) shall occur on the earlier of (x) the Closing of the
transactions contemplated by this Agreement or (y) such date, within thirty (30)
Business Days following termination of this Agreement pursuant to Article VI
hereof, as the parties mutually shall agree, and the Bond Purchase Price shall
be determined as of the third (3rd) Business Day prior to the consummation of
such purchase. The obligation of the Buyer or such Affiliate(s) to purchase the
CMBS Bonds shall be subject to the satisfaction, or waiver by the Buyer or such
Affiliate(s), of the conditions set forth in Section 5.2(1). In the event that,
prior to the purchase of the CMBS Bonds by the Buyer or such Affiliate(s), the
Company is compelled to sell any portion of such CMBS Bonds by creditors
claiming an interest therein, the Buyer or such Affiliate(s) shall be given a
reasonable opportunity to purchase such portion of the CMBS Bonds at the portion
of the Bond Purchase Price applicable thereto determined in accordance with
Schedule 4.10; provided, however, that if the Buyer or such Affiliate(s) decline
to purchase such portion of the CMBS Bonds at such price, the Buyer or such
Affiliate(s) shall remain obligated to purchase the remainder of the CMBS Bonds
in accordance with the terms hereof and the Company thereafter may sell such
portion of the CMBS Bonds to one or more third parties at such price and on such
terms as the Company shall determine in its sole discretion, subject to the
Company's obligation to use its best efforts to sell the CMBS Bonds, no later
than the Closing Date, for greatest possible aggregate gross sale proceeds.
(b) If the excess of $425,000,000 over the gross proceeds from the sale of
the CMBS Bonds (such excess, the "Differential"), is $20,000,000 or less, the
Company shall have the right and the obligation to use its best efforts to raise
the amount of such Differential, on or prior to the Closing Date, from the
proceeds of Additional Financing pursuant to Section 4.10(e) below, the proceeds
of a Rights Offering to holders of Company Common Stock pursuant to Section
4.10(d) below, or the proceeds of a sale of additional shares of Series E
Preferred Stock to the Buyer pursuant to Section 4.10(c) below, or any
combination thereof as the Company in its sole discretion shall determine;
provided that in no event shall the aggregate proceeds from any purchase of
additional shares of Series E Preferred Stock by the Buyer and from any Rights
Offering, plus 55% of the proceeds of any Additional Financing, exceed
$11,000,000.
(c) In the event that any proceeds from the exercise of Rights pursuant to
a Rights Offering and/or from any Additional Financing are less than the
Differential, then, at the election of the Company, the Buyer shall purchase
additional shares of Series E Preferred Stock on the terms and conditions set
forth herein in an amount equal to difference between the Differential and the
proceeds of any Rights Offering and/or Additional Financing, provided, however,
that in no event shall the Buyer be required to purchase shares of Series E
Preferred Stock having an aggregate purchase price of more than $11,000,000.
<PAGE>39
(d) In the event that the proceeds from the sale of any additional shares
of Series E Preferred Stock to the Buyer and/or from any Additional Financing
are less than the Differential, then the Company may, at its election and in its
sole discretion, conduct a rights offering (the "Rights Offering") to the record
holders of Company Common Stock (the "Eligible Holders") as of the record date
determined for that purpose by the Board of Directors of the Company (the
"Record Date"). Pursuant to the Rights Offering, Eligible Holders will be issued
transferable rights ("Rights") to purchase, for cash at the stated liquidation
value, shares of a new series of senior cumulative convertible preferred stock
(the "Holder Preferred Stock") having the same rights and preferences as the
Series E Preferred Stock except that shares of such Holder Preferred Stock shall
have only those voting rights required by applicable law (including the
Bankruptcy Code) or by the rules of the NYSE and otherwise shall comply with the
rules of the NYSE. The Rights shall be allocated among the Eligible Holders pro
rata, based upon the number of shares of Company Common Stock held by each such
Eligible Holder on the Record Date (rounded up to the next whole number of
shares); provided, however, that Eligible Holders will be afforded
oversubscription rights. The Holder Preferred Stock shall be listed on the NYSE
subject to satisfaction of the listing eligibility requirements thereof. The
Buyer agrees to underwrite Holder Preferred Stock having a purchase price of up
to $11,000,000, minus the purchase price of any Series E Preferred Stock
purchased pursuant to Section 4.10(c), issued in connection with the Rights
Offering pursuant to a standby underwriting agreement on customary terms but
providing for the payment of no fees to the Buyer. Anything contained herein to
the contrary notwithstanding, in no event shall the aggregate proceeds from any
purchase of additional shares of Series E Preferred Stock by the Buyer and from
any Rights Offering, plus 55% of the proceeds of any Additional Financing,
exceed $11,000,000. In the event that the Company does not elect to conduct a
Rights Offering to provide proceeds to fund the Differential, or to the extent
that it conducts such a Rights Offering in an amount less than the maximum
otherwise permitted hereby, for a period commencing with the date of execution
of this Agreement and ending six (6) months following consummation of the Plan,
the Company, in its discretion, may conduct a Rights Offering on the terms and
subject to the maximum amount set forth above.
(e) In the event that the Company elects to fund some or all of the
Differential through additional debt financing, the Buyer shall use its best
efforts to arrange for the Company, and the Company shall use its best efforts
to obtain, third party debt financing in the amount of the Differential or such
portion thereof as the Company shall designate, on terms reasonably acceptable
to the Company and the Buyer ("Additional Financing"); provided, however, that
the amount of such Additional Financing shall in no event exceed $20,000,000.
4.11 Restrictions on Transfer of Securities. (a) Each certificate
representing (i) the Purchased Shares; (ii) shares of Company Common Stock
received upon conversion of any of the Purchased Shares; or (iii) any other
securities issued in respect of the Purchased Shares or such shares of Common
Stock upon any stock split, stock dividend, recapitalization, merger,
consolidation or similar event (the securities described in clauses (i) through
(iii) above being referred to collectively as "Restricted Securities") shall,
unless otherwise permitted by this Section 4.11, be stamped or otherwise
imprinted with a legend in
<PAGE>40
substantially the following form (in addition to any other legend(s) required
under any applicable state securities or "blue sky" laws):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY
STATE OR OTHER JURISDICTION. SUCH SECURITIES MAY NOT BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF IN ANY WAY IN THE ABSENCE OF SUCH REGISTRATION OR DELIVERY
OF AN OPINION TO THE COMPANY (FROM LEGAL COUNSEL REASONABLY ACCEPTABLE TO THE
COMPANY) REASONABLY SATISFACTORY TO THE COMPANY TO THE EFFECT THAT THE SALE,
TRANSFER OR OTHER DISPOSITION IS EXEMPT FROM REGISTRATION UNDER SUCH ACT AND
LAWS. COPIES OF THE AGREEMENT COVERING THE PURCHASE OF THESE SECURITIES AND
THEIR TRANSFER MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE RECORD
HOLDER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE DIRECTED TO THE
SECRETARY OF THE COMPANY.
The Company shall promptly remove any such legend upon written request of
the record holder of any such certificate accompanied by an opinion of counsel
(by counsel reasonably acceptable to the Company) reasonably satisfactory to the
Company to the effect that such legend is no longer required by applicable law
and when such legend no longer is required by the terms of this Agreement or the
Registration Rights Agreement.
(b) Prior to any proposed sale, transfer or other disposition of any
Restricted Securities, unless there is in effect a registration statement under
the Securities Act covering such proposed transfer, the record holder of such
Restricted Securities shall give written notice to the Company of its intention
to effect such sale, transfer or disposition. Each such notice shall described
the manner and circumstances of the proposed sale, transfer or disposition in
reasonable detail and shall be accompanied by either (i) an opinion of counsel
(by counsel reasonably acceptable to the Company) reasonably acceptable to the
Company to the effect that the proposed sale, transfer or disposition may be
effected without registration under the Securities Act and will be in compliance
with or exempt from applicable state securities or "Blue Sky" laws or (ii) or a
no action letter from the SEC to the effect that the sale, transfer or
disposition of such Restricted Securities without registration under the
Securities Act will not result in a recommendation by the staff of the SEC that
action be taken with respect thereto and an opinion of counsel as contemplated
by clause (i) above as to compliance with state law, whereupon, in each case,
the record holder shall be entitled to sell, transfer or dispose of such
Restricted Securities in accordance with the terms of the notice delivered to
the Company by such record holder. Unless there is in effect a registration
statement under the Securities Act
<PAGE>41
covering the proposed sale, transfer, or disposition, each certificate to be
issued to evidence the Restricted Securities sold, transferred or disposed of as
permitted hereby shall hear a restrictive legend as set forth in Section 4.11(a)
above, except that such certificate need not bear a restrictive legend (and may
be thereafter sold, transferred or disposed of) if (x) in the opinion of counsel
to the record holder (which counsel and opinion shall be reasonably acceptable
to the Company), such legend is not required in order to establish compliance
with any provision of the Securities Act, and (y) a period of at least one (1)
year has elapsed from the later of the date the Restricted Securities were
acquired from the Company or from an Affiliate of the Company and the record
holder represents to the Company, in writing, that it is not an Affiliate of the
Company and has not been an Affiliate of the Company during the prior three (3)
month period and shall not become an Affiliate of the Company without submitting
the certificate(s) representing the Restricted Securities for reimposition of a
restrictive legend or (z) the Restricted Securities have been sold pursuant to
Rule 144(k) under the Securities Act (or any successor provision thereto) and
the certificate is accompanied by a written representation of the record holder
that such holder is not an Affiliate of the Company, has not been an Affiliate
of the Company during the prior three (3) month period and has held the
Restricted Securities for at least two (2) years.
(c) Any sale, transfer or disposition of Restricted Securities during the
period ending eighteen (18) months subsequent to the Closing Date shall be
conditioned upon the written agreement of the purchaser, transferee or other
recipient thereof to be bound by the terms of Section 4.12 of this Agreement and
any purported sale, transfer or disposition absent such written agreement shall
be void ab initio and without force and effect.
4.12 Restrictions on Certain Transactions. Commencing on the date of
execution of this Agreement and continuing during the period ending eighteen
(18) months subsequent to the Closing Date, the Buyer and its Affiliates shall
not, directly or indirectly, enter into any short position, put option or other
similar instrument or position with respect to Company Common Stock, take any
action for the purpose of increasing the conversion rate or decreasing the
conversion price at which the Purchased Shares are convertible into Company
Common Stock, or take any similar action with respect to the Company Common
Stock prohibited under the Exchange Act (including, without limitation, Section
10(b) thereof) or any successor statute thereto, and the rules and regulations
thereunder. The Buyer shall cause any transferees or assignees to be bound by
this provision.
4.13 Good Faith Deposit. Within two Business Days after the earlier of (i)
the expiration of the Due Diligence Period or (ii) the waiver of the Due
Diligence Period by the Buyer, the Buyer shall deposit at Crestar Bank the sum
of $5 million (the "Deposit"), to be held in escrow, pending the consummation of
the transactions contemplated by this Agreement, pursuant to an escrow agreement
among the Buyer, the Company and the Bank as Escrow Agent thereunder on such
terms as such parties mutually shall agree (the "Escrow Agreement").
<PAGE>42
ARTICLE V
CONDITIONS TO CLOSING
5.1 Conditions to Obligations of Each Party. The respective obligations of
each Party to consummate the transactions to be performed by it in connection
with the Closing is subject to the satisfaction, or waiver by that Party, of the
following conditions:
(1) no statute, rule, order, decree or regulation shall have been enacted
or promulgated by any Governmental Entity that prohibits, and no action, suit or
proceeding shall be pending or threatened by any Governmental Entity
challenging, the consummation of any of the transactions contemplated hereby;
(2) all consents, orders and approvals from all Governmental Entities, the
New York Stock Exchange ("NYSE") and other Persons or entities listed in
Schedule 2.4 or Schedule 3.2 shall have been obtained and shall be in effect
(subject to right of the Buyer to eliminate (but not otherwise amend) rights of
Preferred Stock to obtain NYSE consent);
(3) the Confirmation Order, in a form reasonably satisfactory to each of
the Parties, shall have been entered by the Bankruptcy Court and shall have been
in full force and effect for 11 days without any stay or material modification
or amendment thereof, and the time to appeal or petition for certiorari
designated by statute or regulation shall have expired and no appeal or petition
for certiorari shall be pending or, if an appeal or petition for certiorari has
been timely filed or taken, the order or judgment of the tribunal shall have
been affirmed (or such appeal or petition shall have been dismissed as moot) by
the highest court (or other tribunal having appellate jurisdiction over the
order or judgment) to which the order was appealed, or the petition for
certiorari shall have been denied, and the time to take any further appeal or to
seek further certiorari designated by statute or regulation shall have expired;
(4) the CMBS Bonds shall contemporaneously be sold, as of the Closing Date,
(or to the extent, if any, permitted by Section 4.4(b)(3), shall have previously
been sold) for minimum aggregate gross sale proceeds of $425,000,000 (or such
lesser amount as, together with such additional funds (if any) as may be
provided pursuant to Section 4.10, shall generate proceeds to the Company of at
least $425,000,000); and
(5) the Company shall have entered into debt financing agreements,
including issuance of debt instruments in partial settlement of liabilities as
contemplated by the Plan, with one or more lenders pursuant to which those
lenders have provided debt financing yielding proceeds to the Company of not
less than $435,000,000 (plus the amount of any Additional Financing pursuant to
Section 4.10(e)) as of the Closing Date on terms and conditions (A) under which
the Weighted Average Financing Costs as defined in Schedule 1.6 of such debt
(including any equity component) does not exceed 10% per annum, (B) under which
the minimum Weighted Average Term as defined in said Schedule 1.6 is not less
than 5 years and (C) otherwise customary in the market and
<PAGE>43
reasonably satisfactory to the Buyer in its sole discretion.
5.2 Conditions to Obligations of the Buyer. The obligation of the Buyer to
consummate the transactions to be performed by the Buyer in connection with the
Closing is subject to the satisfaction, or waiver by the Buyer, at and as of the
Closing Date, of the following conditions:
(1) the representations and warranties of the Company contained in this
Agreement, which representations and warranties shall be deemed for purposes of
this Section 5.2 not to include any qualification or limitation with respect to
materiality (whether by reference to a Company Material Adverse Effect or
otherwise), shall be true and correct as of the Closing Date, with the same
effect as though such representations and warranties were made as of the Closing
Date, except where the matters in respect of which such representations and
warranties are not true and correct result from actions permitted by this
Agreement or would not individually or in the aggregate have a Company Material
Adverse Effect, and the Company shall in all respects have performed or complied
with the agreements and covenants required to be performed or complied with by
it under this Agreement as of or prior to the Closing, except where the failure
to so perform or comply would not have a Company Material Adverse Effect, and
the Company shall have delivered to the Buyer a certificate (without
qualification as to Knowledge or materiality or otherwise) to the effect that
each of the conditions specified herein is satisfied in all respects;
(2) there shall not have occurred between the date of this Agreement and
the Closing Date a Company Material Adverse Effect;
(3) the Company shall have executed and delivered the Registration Rights
Agreement and all of the documents contemplated to be delivered hereby and
thereby and the Buyer shall have received a favorable opinion addressed to the
Buyer, dated as of the Closing, from counsel to the Company, reasonably
satisfactory to the Buyer, in substantially the form set forth in Exhibit D;
(4) the director of the Company listed as the resigning director in a
letter from the Company to the Buyer delivered prior to the Closing shall have
delivered to the Company an irrevocable resignation from such position, such
resignation to be contingent upon and effective as of the Closing, and the
directors of the Company listed as new directors in a letter from the Buyer to
the Company delivered prior to the Closing shall have been duly elected as
directors of the Company effective as of Closing;
(5) the Company shall have issued the Purchased Shares and, as of the
Closing Date, the Company shall have reserved out of its authorized and unissued
Common Stock, solely for the purpose of effecting the conversion of the Series E
Preferred Stock, a number of shares of Common Stock equal to at least 225% of
the number of shares of Common Stock which would be issuable upon conversion of
the shares of Series E Preferred
<PAGE>44
Stock;
(6) all of the shares of Company Common Stock issuable upon the conversion
of the Series E Preferred Stock to be issued as contemplated by this Agreement
shall have been listed or approved for listing upon issuance on the NYSE;
(7) The Company shall have sold, or been ready, willing and able to sell,
the CMBS Bonds to the Buyer or an Affiliate thereof pursuant to Section 4.10 if
the Buyer or such Affiliate has committed to purchase such CMBS Bonds as
contemplated by such Section 4.10; and
5.3 Conditions to Obligations of the Company. The obligations of the
Company to consummate the transactions to be performed by it in connection with
the Closing is subject to the satisfaction, or waiver by the Company, at and as
of the Closing Date, of the following conditions:
(1) the representations and warranties of the Buyer contained in this
Agreement, which representations and warranties shall be deemed for purposes of
this Section 5.3 not to include any qualification or limitation with respect to
materiality (whether by reference to a Buyer Material Adverse Effect or
otherwise), shall be true and correct as of the Closing Date with the same
effect as though such representations and warranties were made as of the Closing
Date, except where the matters in respect of which such representations and
warranties are not true and correct result from actions permitted by this
Agreement or would not individually or in the aggregate have a Buyer Material
Adverse Effect, and the Buyer shall have delivered to the Company a certificate
(without qualification as to knowledge or materiality or otherwise) to the
effect that each of the conditions specified herein is satisfied in all
respects;
(2) the Buyer shall have delivered the Purchase Price against delivery of
the Purchased Shares and otherwise shall in all respects have performed or
complied with the agreements and covenants required to be performed or complied
with by it under this Agreement as of or prior to the Closing, except where the
failure to so perform or comply would not have a Buyer Material Adverse Effect
and the Buyer shall have delivered to the Company a certificate (without
qualification as to knowledge or materiality or otherwise) to the effect that
each of the conditions specified herein is satisfied in all respects; and
(3) Within two Business Days after the earlier of (i) the expiration of the
Due Diligence Period or (ii) the waiver of the Due Diligence Period by the
Buyer, the Buyer shall deposit at Crestar Bank the Deposit, to be held in
escrow, pending the consummation of the transactions contemplated by this
Agreement, pursuant to the Escrow Agreement.
<PAGE>45
ARTICLE VI
TERMINATION
6.1 Termination. At any time prior to the Closing, this Agreement may be
terminated as follows:
(1) the Parties may terminate this Agreement by mutual written consent;
(2) the Buyer may terminate this Agreement by giving written notice to the
Company in the event the Company is in breach (i) of any of its representations
and warranties contained in this Agreement, which representations and warranties
shall be deemed for purposes of this clause (2) not to include any qualification
or limitation with respect to materiality (whether by reference to a Company
Material Adverse Effect or otherwise), except where the matters in respect of
which such representations and warranties are in breach would not individually
or in the aggregate have a Company Material Adverse Effect or have a material
adverse effect on the interests of the Buyer pursuant to this Agreement, or (ii)
of any covenant or agreement contained in this Agreement in any material respect
except where the breach(es) would not, individually or in the aggregate, have a
Company Material Adverse Effect or material adverse effect on the interests of
the Buyer pursuant to this Agreement, and in either case such breach either (x)
is not subject to cure or (y) if subject to cure, is not cured by the earlier of
the Confirmation Date or fifteen (15) Business Days after delivery of written
notice thereof (which notice shall specify in reasonable detail the nature of
such breach);
(3) the Company may terminate this Agreement by giving written notice to
the Buyer in the event the Buyer is in breach (i) of any of its representations
and warranties contained in this Agreement, which representations and warranties
shall be deemed for purposes of this clause (3) not to include any qualification
or limitation with respect to materiality (whether by reference to a Buyer
Material Adverse Effect or otherwise), except where the matters in respect of
which such representations and warranties are in breach would not individually
or in the aggregate have a Buyer Material Adverse Effect, or (ii) of its
covenants or agreements contained in this Agreement in any material respect
except where the breach(es) would not, individually or in the aggregate, have a
Buyer Material Adverse Effect, and in either case such breach either (x) is a
default in payment due from the Buyer hereunder or otherwise is not subject to
cure or (y) if subject to cure, is not cured by the earlier of the Confirmation
Date or fifteen (15) Business Days after delivery of written notice thereof
(which notice shall specify in reasonable detail the nature of such breach);
(4) (a) the Buyer may terminate this Agreement by giving written notice to
the Company (i) if the Initial Purchase Motion is not filed within five (5)
Business Days after execution of this Agreement, (ii) if the Initial Purchase
Order has not been entered by the Bankruptcy Court on or prior to the 22nd day
following the date of filing of the Initial Purchase Order; (iii) if on or prior
to November 15, 1999, the Disclosure Statement is not approved to the Buyer's
reasonable satisfaction; (iv) if on or prior to
<PAGE>46
December 10, 1999, the Confirmation Order has not been entered by the Bankruptcy
Court; or (v) on or after December 31, 1999, if the Closing shall not have
occurred on or before such date (in each case unless the failure results
primarily from a breach of any representation, warranty or covenant contained in
this Agreement by the Buyer);
(b) the Company may terminate this Agreement by giving written notice to
the Buyer (i) if the Initial Purchase Order has not been entered by the
Bankruptcy Court on or prior to the 22nd day following the date of filing of the
Initial Purchase Order; (ii) if on or prior to November 15, 1999, the Disclosure
Statement is not approved to the Company's reasonable satisfaction; (iii) if on
or prior to December 10, 1999, the Confirmation Order has not been entered by
the Bankruptcy Court; or (iv) on or after December 31, 1999, if the Closing
shall not have occurred on or before such date (in each case unless the failure
results primarily from a breach of any representation, warranty or covenant
contained in this Agreement by the Company);
(5) the Company may terminate this Agreement in connection with an
alternative transaction with a Third Party pursuant to a Higher and Better Offer
by giving written notice to the Buyer, provided that on or before such
termination the Debtors shall have paid to the Buyer the applicable Buyer
Breakup Fee;
(6) the Buyer may terminate this Agreement by giving written notice to the
Company if the Board of Directors of the Company shall have withdrawn, modified
or changed in a manner adverse to the Buyer its approval or recommendation of
this Agreement or the Purchase. if the Company or any other Debtor files either
an amendment to any provision of the Plan which the Buyer reasonably determines
in good faith to be materially adverse to Buyer's interest or if the Board of
Directors of the Company shall have recommended a Company Acquisition Proposal,
or shall have executed an agreement in principle (or similar agreement) or
definitive agreement providing for a Company Acquisition Proposal with a Person
other than the Buyer;
(7) the Buyer may terminate this Agreement by giving written notice to the
Company, within Eighteen (18) Business Days following the date of this Agreement
(or, if the Initial Purchase Order has not been entered within 16 Business Days
following the date of this Agreement, within two Business Days following the
entry of the Initial Purchase Order) and the payment of the Buyer Reimbursement
pursuant to Section 8.11 (the "Due Diligence Period"), in the event that the
Buyer is not satisfied, for any reason whatsoever in its sole discretion, with
its due diligence review of the Company Entities and their businesses, assets,
operations and financial condition (including without limitation review of items
covered by the Disclosure Letter or the Schedules hereto); and
(8) the Buyer may terminate this Agreement by giving written notice to the
Company if a trustee or an examiner with expanded powers is appointed in the
Debtors' cases, or any of the cases are dismissed or converted to any Chapter
under the Bankruptcy Code other than Chapter 11.
<PAGE>47
6.2 Effect of Termination; Buyer Breakup Fee. (a) If either Party
terminates this Agreement pursuant to Section 6.1, all obligations of the
Parties hereunder will terminate without any liability of either Party to the
other Party except as specifically provided in this Section 6.2, provided that
this Section 6.2 and Article VIII shall survive any such termination. Any claim
arising out of or in connection with the Company's willful or intentional breach
of any covenant or agreement herein will be treated as a claim for an expense of
administration under 11 U.S.C.Section 503(b)(1) of the Company's bankruptcy
estate.
(b) In the event that this Agreement is terminated other than pursuant to
Section 6.1(3), 6.1(7) or 6.1(4)(a)(v)) (in the case of Section 6.1(4)(a)(v),
where the Closing has not occurred by reason of the failure to satisfy any of
the conditions set forth in Section 5.1(2), 5.1(4) or 5.1(5) without breach of
this Agreement by the Company) (such a termination being herein called a
"Breakup Event"), then the Company shall pay to the Buyer the amount of
$1,000,000 (the "Buyer Breakup Fee") by wire transfer of immediately available
funds, on the earliest of (i) the confirmation of any alternative plan of
reorganization with respect to any of the Debtors, (ii) any merger,
consolidation, sale of material assets, tender offer for, recapitalization of or
accumulation or acquisition of material securities issued by, or other business
combination involving, the Company or any of the Company Entities or (iii) 180
days after termination of this Agreement. The claims of the Buyer to the Buyer
Breakup Fee shall constitute a first priority administrative expense under 11
U.S.C.Section 507(a) (1).
(c) In the event that this Agreement is terminated pursuant to Section
6.1(3), then no Buyer Breakup Fee shall be payable and the Buyer shall (i)
forfeit the Deposit in whole or in part pursuant to terms of the Escrow
Agreement, (ii) shall be liable for and pay to the Company any and all
additional damages available thereto at law or in equity to the extent of proven
damages incurred by the Company by reason thereof, (iii) repay the Commitment
Fee pursuant to Section 8.15, and (iv) repay the Buyer Reimbursement pursuant to
Section 8.11.
(d) In the event of a breach of this Agreement by the Company, its damages
and liability shall be limited to (i) payment of the Commitment Fee to the
extent the condition therefor set forth in Section 8.15 has been met, (ii)
payment of the Buyer Reimbursement, and (iii) to the extent applicable pursuant
to Section 6.2(b) hereof, payment of the Buyer Breakup Fee.
(e) Except as provided in Section 6.2(f), in no event shall the liability
or obligations of the Buyer or any Affiliate thereof pursuant to or arising out
of this Agreement or the transactions contemplated hereby, by reason of a breach
of this Agreement or otherwise, exceed $50 million in the aggregate (including
the Deposit).
(f) In the event that the Buyer or an Affiliate thereof shall deliver a
binding commitment to purchase the CMBS Bonds pursuant to Section 4.10 and shall
fail to purchase such CMBS Bonds in breach of such commitment and this
Agreement, the Buyer or such Affiliate, as the case may be, shall be liable for
any and all proven damages incurred by the Company by reason of such breach, up
to a maximum of $100 million.
<PAGE>48
ARTICLE VII
DEFINITIONS
When used in this Agreement, the following terms have the following
meanings:
"Affiliate" means a Person that directly or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with, the
first Person, including but not limited to a subsidiary of the first Person, a
Person of which the first Person is a subsidiary, or another subsidiary of a
Person of which the first Person is also a subsidiary.
"Business Day" means any day that is not a Saturday or Sunday or a legal
holiday on which banks are authorized or required by law to be closed in
Maryland or New York.
"Buyer Material Adverse Effect" means a material adverse effect on (i) the
businesses, assets (including licenses, franchises and other intangible assets)
or financial condition, operating income or prospects of the Buyer and its
subsidiaries, taken as a whole or (ii) the ability of the Buyer to consummate
the transactions contemplated hereby.
"CERCLA" means the United States Comprehensive Environmental Compensation,
Liability and Response Act of 1980.
"Company Affiliated Group" means each group of corporations with which any
of the Company Entities has filed (or was required to file) consolidated,
combined, unitary or similar Tax Returns.
"Company Affiliated Period" means a period in which any of the Company
Entities was a member of a Company Affiliated Group;
"Company Material Adverse Effect" means a material adverse effect on (i)
the businesses, assets (including licenses, franchises and other intangible
assets), or financial condition or operating income of the Company Entities,
taken as a whole, except where such effect results from changes in prevailing
interest rates or interest rate spreads or changes in prevailing economic or
market conditions having a similar effect on the industry generally, or (ii) the
ability of the Company to consummate the transactions contemplated hereby.
"control" (including the terms "controls" "controlled by" and "under common
control with") means the possession, directly or indirectly, of the power to
direct or cause the direction of the management policies of a Person, whether
through the ownership of voting securities, by contract or credit arrangement,
as trustee or executor, or otherwise.
"Employee Benefit Plan" means any "employee pension benefit plan" (as
defined in Section 3(2) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")), any "employee welfare benefit plan" (as defined in
Section 3(l) of ERISA), and
<PAGE>49
any other material written or oral plan, agreement or arrangement involving
direct or indirect employee compensation, including, without limitation,
insurance coverage, severance benefits, disability benefits, pension, retirement
plans, profit sharing, deferred compensation, bonuses, stock options, stock
purchase, phantom stock, stock appreciation or other forms of incentive
compensation or post-retirement compensation.
"environment" has the meaning set forth in CERCLA.
"Environmental Authorization" means any license, permit, certificate, or
other authorization from a Governmental Entity under any applicable
Environmental Law.
"Environmental Law" means any foreign, federal, state or local law,
statute, permits, orders, rule or regulation or the common or decisional law
relating to the environment or occupational health and safety, including,
without limitation, any statute, regulation or order pertaining to (i)
treatment, storage, disposal, generation and transportation of industrial, toxic
or hazardous substances or solid or hazardous waste; (ii) air, water and noise
pollution; (iii) groundwater and soil contamination; (iv) the release or
threatened release into the environment of industrial, toxic or hazardous
substances, or solid or hazardous waste, including, without limitation,
emissions, discharges, injections, spills, escapes or dumping of pollutants,
contaminants or chemicals; (v) the protection of wildlife, marine sanctuaries
and wetlands, including, without limitation, all endangered and threatened
species; (vi) storage tanks, vessels and containers; (vii) underground and other
storage tanks or vessels, abandoned, disposed or discarded barrels, containers
and other closed receptacles; (viii) health and safety of employees and other
persons; and (ix) manufacture, processing, use, distribution, treatment,
storage, disposal, transportation or handling of pollutants, contaminants,
chemicals or industrial, toxic or hazardous substances or oil or petroleum
products or solid or hazardous waste.
"Environmental Property Transfer Act" means any applicable law (including
rules, regulations and administrative orders thereunder) of any Government
Entity that requires any notification or disclosure of environmental conditions
in connection with the transfer, sale, lease or closure of any property.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means any member of (i) a controlled group of
corporations (as defined in Section 414(b) of the Code); (ii) a group of trades
or businesses under common control (as defined in Section 414(c) of the Code);
or (iii) an affiliated service group (as defined under Section 414(m) of the
Code or the regulations under Section 414(o) of the Code).
"Filing Date" means October 5, 1998.
"Governmental Entity" means any government or any court, arbitrational
tribunal, administrative agency or commission or other governmental or
regulatory authority or agency, whether federal, state, local, or foreign.
<PAGE>50
"Knowledge" in the case of the Company shall mean the actual knowledge of
any senior officer listed on Schedule 7 hereto after due inquiry and
investigation including inquiry of such other persons known by a senior officer
to have material knowledge of such matters, and in the case of the Buyer shall
mean the actual knowledge of any of the persons listed on Schedule 7 hereto.
"Materials of Environmental Concern" means any material regulated under any
Environmental Law, including chemicals, pollutants or contaminants, hazardous
substances (as the term "hazardous substance" is defined under CERCLA or any
Environmental Law), solid wastes and hazardous wastes (as the terms "solid
waste" and "hazardous waste" are defined under the United States Resources
Conservation and Recovery Act or any Environmental Law), toxic materials, or oil
or petroleum and petroleum products, or any other material subject to regulation
under any Environmental Law, but not including normal office and cleaning
products.
"Ordinary Course of Business" means the ordinary course of business of the
Company Entities as currently conducted or as conducted during the Pre-Filing
Period consistent with past custom and practice, including with respect to
frequency and amount.
"Person" means any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, Governmental
Entity or other entity.
"Release" has the meaning set forth in CERCLA.
"Security Interest" means any mortgage, pledge, security interest,
encumbrance, charge or other lien (whether arising by contract or by operation
of law), other than liens arising in the Ordinary Course of Business.
"Taxes" means all taxes, charges, fees, levies or other similar assessments
or liabilities, including, without limitation, income, gross receipts, ad
valorem, premium, value-added, excise, real property, personal property, sales,
use, transfer, withholding, employment, payroll and franchise taxes imposed by
any Governmental Entity, and any interest, fines, penalties, assessments or
additions to tax resulting from, attributable to or incurred in connection with
any tax or any contest or dispute thereof.
"Tax Returns" means all reports, returns, declarations, statements or other
information required to be supplied to a taxing authority in connection with
Taxes.
<PAGE>51
ARTICLE VIII
GENERAL PROVISIONS
8.1 Press Releases and Announcements. Neither Party shall issue any press
release or announcement relating to the subject matter of this Agreement without
the prior written approval of the other Party; provided, however, that either
Party may make any public disclosure it determines in good faith, after
consultation with counsel, is required by law or regulation (in which case the
disclosing Party shall advise the other Party and provide it with a copy of the
proposed disclosure prior to making the disclosure).
8.2 No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
8.3 Entire Agreement. This Agreement and the exhibits and schedules
attached hereto and the Confidentiality Agreement constitute the entire
agreement between the Parties and supersede any prior understandings, agreements
or representations by or among the Parties, written or oral, that may have
related in any way to the subject matter of the Agreement.
8.4 Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. Neither Party may assign either this Agreement or any of
its rights, interests or obligations hereunder without the prior written
approval of the other Party, except that the Buyer may assign any of its rights,
but not its obligations, under this Agreement to any one or more of its
Affiliates, or, with the consent of the Company (not to be unreasonably
withheld), any other Person, so long as (i) the Buyer and its Affiliates shall
acquire or otherwise have the power to vote or direct the voting of more than
50% of the Purchased Shares after giving effect to all such assignments, and
(ii) the Buyer remains liable for all its obligations hereunder. Any Person to
which the Buyer may assign any portion of its rights to purchase Purchased
Shares pursuant to this Agreement as provided above (an "Assignee") shall as a
condition to such purchase deliver to the Company at the Closing a letter
containing representations and warranties by and with respect to such Assignee
to the effect set forth in Sections 3.1(b), 3.2, 3.7 and 3.9 and shall agree to
be bound by Sections 4.11 and 4.12 hereof.
8.5 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
8.6 Headings. The section headings contained in this Agreement are inserted
for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
8.7 Notices. (a) All notices, requests, demands, claims and other
communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication
<PAGE>52
hereunder shall be deemed duly delivered three business days after it is sent by
registered or certified mail, return receipt requested, postage prepaid, or two
Business Days after it is sent via a reputable international overnight courier
service, in each case to the intended recipient as set forth below:
If to the Company: With a copy to:
CRIIMI MAE Inc. Venable, Baetjer and Howard, LLP
11200 Rockville Pike Two Hopkins Plaza, Suite 1800
Rockville, MD 20852 Baltimore, MD 21201
Attn: General Counsel Attn: Richard L. Wasserman, Esq.
Anita J. Finkelstein, Esq.
If to the Buyer: With a copy to:
AP-CM, L.L.P. Kramer Levin Naftalis & Frankel LLP
1301 Avenue of the Americas 919 Third Avenue
New York, New York 10019 New York, NY 10022
Attn: Richard Mack Attn: Kenneth H. Eckstein, Esq.
Peter G. Smith, Esq.
(b) Either Party may give any notice, request, demand, claim or other
communication hereunder by personal delivery, but no such notice, request,
demand, claim or other communication shall be deemed to have been duly given
unless and until it actually is received by the Party for whom it is intended.
Either Party may change the address to which notices, requests, demands, claims
and other communications hereunder are to be delivered by giving the other Party
notice in the manner herein set forth.
8.8 Governing Law. (a) This Agreement is governed by the law of the State
of Maryland, without regard to conflicts of laws principles.
(b) With respect to any suit, action or proceeding (any "Proceeding")
arising out of or relating to this Agreement, each of the Company, the other
Debtors and the Buyer (including any permitted assigns or transferees thereof)
hereby irrevocably (i) submits to the exclusive jurisdiction of the Bankruptcy
Court and waives any objection to venue in the Bankruptcy Court, whether on the
grounds of forum non conveniens or otherwise, provided, however, that nothing
herein shall limit the appellate rights of any party; and (ii) consents to
service of process in any Proceeding by the mailing of copies thereof by
registered or certified mail, return postage prepaid, or by recognized express
carrier or delivery service to the Company and the Buyer at their respective
addresses as set forth in Section 8.7 hereof; provided, however, that nothing
herein shall limit the right of any party to serve process in any other manner
permitted by law.
8.9 Amendments and Waivers. The Parties may amend any provision of this
Agreement at any time by a written instrument signed by both Parties. No waiver
by either
<PAGE>53
Party of any default, misrepresentation or breach of warranty or covenant
hereunder, whether intentional or not, will be deemed to extend to any prior or
subsequent default, misrepresentation or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of any prior or
subsequent such occurrence.
8.10 Severability. If any court of competent jurisdiction determines that
any material provision of this Agreement is invalid or unenforceable, then, only
to the extent the Parties agree, such provision shall be severable and null and
void, and, in such event, such determination shall in no way limit or affect the
enforceability or operative effect of any or all other portions of this
Agreement.
8.11 Expenses. (a) Promptly upon entry of the Initial Purchase Order, the
Company shall pay to the Buyer, by wire transfer of immediately available funds
to the account specified by the Buyer, the sum of $300,000 to compensate Buyer
for all costs and expenses (including fees and expenses of legal, accounting and
financial advisors and including due diligence fees of third parties, whether or
not affiliated with the Buyer) incurred by the Buyer in connection with this
Agreement and the transactions contemplated hereby (the "Buyer Reimbursement").
In the event that this Agreement is terminated pursuant to Section 6.1(3), then
the Buyer shall repay the full amount of the Buyer Reimbursement to the Company
within five Business Days after the Buyer's receipt of a final order of the
Bankruptcy Court finding that the Buyer has breached this Agreement as required
for such termination. If this Agreement is terminated other than pursuant to
Section 6.1(3), then within fifteen Business Days thereafter, the Buyer shall
provide to the Company reasonable documentation of all such costs and expenses
(including fees and expenses of legal, accounting and financial advisors, and
including due diligence fees of third parties, whether or not affiliated with
the Buyer) incurred by the Buyer and the excess, if any, of $300,000 over the
sum of such costs and expenses shall be refunded to the Company. If the
transactions contemplated by this Agreement are consummated, then the Buyer
shall retain the full amount of the Buyer Reimbursement without any requirement
to provide documentation of costs and expenses incurred. The Bankruptcy Court
shall be the final arbiter of any disputes between the Buyer and the Company or
any of its official committees regarding the reasonableness of the costs and
expenses incurred by the Buyer.
(b) The Company shall bear its own costs and expenses (including fees and
expenses of its legal, accounting and financial advisors) incurred in connection
with this Agreement and the transactions contemplated hereby.
8.12 Construction. The language used in this Agreement shall be deemed to
be the language chosen by the Parties hereto to express their mutual intent, and
no rule of strict construction shall be applied against either Party. Any
reference to any federal, state, local or foreign statute or law shall be deemed
also to refer to all rules and regulations promulgated thereunder, unless the
context requires otherwise.
8.13 Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
<PAGE>54
8.14 Survival of Representations. None of the representations and
warranties made by the Parties in this Agreement shall survive the Closing,
except that the representations and warranties of the Company regarding its
material liabilities and amounts payable by the Debtors pursuant to or required
to fund the Plan set forth in Section 2.8 shall survive for a period of three
(3) years after the Closing. The Buyer shall have no claim for breach of the
representations and warranties set forth in Section 2.8 except to the extent
that the liabilities and amounts payable by the Debtors pursuant to or required
to fund the Plan exceed the amounts represented therein by $5 million in the
aggregate.
8.15 Commitment Fee. Subject to Bankruptcy Court approval, within two
Business Days after the earlier of (x) the expiration of the Due Diligence
Period or (y) the waiver of the Due Diligence Period by the Buyer, but in no
event prior to the entry of the Initial Purchase Order, unless this Agreement
has been terminated prior to such expiration or waiver, the Company shall pay to
the Buyer, by wire transfer of immediately available funds, a non-refundable
commitment fee of $500,000, which amount shall be retained by the Buyer subject
to repayment by the Buyer (with interest) only if this Agreement is terminated
by the Company pursuant to Section 6.1(3) (that is, by reason of a material
breach by the Buyer of any representation, warranty, covenant or agreement
hereunder.)
Signatures Begin on the Following Page
<PAGE>55
The Parties hereby execute this Agreement on the date stated in the
introductory clause.
CRIIMI MAE INC.
By: /s/ William B. Dockser
---------------------------
Name: William B. Dockser
Title: Chairman
AP-CM, L.L.C.
By: /s/ Richard Mack
---------------------------
Name: Richard Mack
Title: Vice President
<PAGE>56
ARTICLES SUPPLEMENTARY
TO THE
ARTICLES OF INCORPORATION
OF
CRIIMI MAE INC.
CRIIMI MAE INC., a Maryland corporation (the "Corporation"), by and through
its undersigned Chairman, does hereby certify that:
A. On , 1999, the Board of Directors of the Corporation (the
"Board of Directors"), pursuant to Section 2-105 of the Maryland General
Corporation Law (the "GCL") and Article SIXTH of the Articles of Incorporation
of the Corporation, duly classified 500,000 unissued shares of the Corporation's
preferred stock, $.01 par value per share ("Preferred Stock"), into a class of
preferred stock designated "Series E Cumulative Convertible Preferred Stock"
(the "Series E Preferred Stock") and established and fixed the preferences,
conversion or other rights, voting powers, restrictions and terms and conditions
of redemption of such shares of stock, and authorized the execution and delivery
of these Articles Supplementary to the Maryland State Department of Assessments
and Taxation for filing pursuant to Section 2-208 of the GCL.
B. The terms of the Series E Preferred Stock, as set by the Board of
Directors, are as follows:
1. Definitions. For the purposes of these Articles Supplementary, the
following terms shall have the meanings indicated:
"Affiliate" shall mean such term as defined in Rule 405 under the
Securities Act of 1933, as amended.
"Business Day" shall mean any day other than a Saturday, Sunday or a day on
which banking institutions in the State of New York or Maryland are authorized
or obligated by law or executive order to close.
"Cash Flow from Operating Activities" shall mean net income as defined in
accordance with generally accepted accounting principles (GAAP) as adjusted for
certain non-cash and reclassification items. Annex 1 hereto and incorporated
herein by reference contains illustrations of the computation of Cash Flow from
Operating Activities.
"Common Stock" shall mean the common stock of the Corporation, par value
$.01 per share.
"Conversion Price" shall mean $3.50 per share of Common Stock, subject to
adjustment as described in Section 10. [Final price to be adjusted if necessary
based on final debt cost.]
<PAGE>57
"Initial Purchaser" shall mean that holder (or, if more than one, those
holders collectively) of Series E Preferred Stock which acquired such stock
directly from the Corporation at the time shares of Series E Preferred Stock
were first authorized and issued.
"Liquidation Value" with respect to a share of Series E Preferred Stock
shall mean $100.00, subject to appropriate adjustment in the event of stock
splits, stock dividends, combinations or similar recapitalizations affecting
such share.
"Person" shall mean any individual, firm, corporation or other entity, and
shall include any successor (by merger or otherwise) of such entity.
"Redemption Price" with respect to a share of Series E Preferred Stock
shall mean $100.00, subject to appropriate adjustment in the event of stock
splits, stock dividends, combinations or similar recapitalizations affecting
such share.
"Series B Preferred Stock" means the series of the Corporation's preferred
stock designated "Series B Convertible Preferred Stock", the preferences,
rights, powers, restrictions and terms and conditions of redemption of which are
set forth in Articles Supplementary to the Articles of Incorporation of the
Corporation filed with the Maryland State Department of Assessments and Taxation
on August 8, 1996.
"Subsidiary" of any Person means any corporation or other entity of which a
majority of (i) the voting power of the voting equity securities or (ii) the
equity interest is owned, directly or indirectly, by such Person, other than any
trust in which the Corporation, directly or indirectly, owns a majority equity
interest in accordance with the ordinary course of the Corporation's business as
of the date of issuance of the Series E Preferred Stock.
"Weighted Average Financing Cost" shall mean, with respect to any
indebtedness, any interest coupon appertaining to debt (i.e., bank debt,
repurchase agreements, if any, unsecured debt). Weighted Average Financing Cost
does not include amortization of deferred financing costs (including, but not
limited to, bank commitment/placement fees of 1.5%-or as otherwise agreed, other
related debt placement costs) and does not include amortization of debt
discount/premium, if any.
2. Designation and Number. The shares of such series of preferred stock
shall be designated as "Series E Cumulative Convertible Preferred Stock" (the
"Series E Preferred Stock"). The number of shares initially constituting the
Series E Preferred Stock shall be 500,000, which number may be decreased (but
not increased) by the Board of Directors without a vote of the holders of Series
E Preferred Stock; provided, however, that such number may not be decreased
below the number of then-outstanding shares of Series E Preferred Stock.
3. Rank. The Series E Preferred Stock shall, with respect to dividend
rights and rights upon liquidation, dissolution or winding up, rank senior to
the Common Stock and to all other
<PAGE>58
capital stock of the Corporation (collectively, together with the Common Stock,
the "Junior Securities"); provided that from and after the date which is 20
months plus one day after the date of issuance of the Series E Preferred Stock
(x) the Series B Preferred Stock issued and outstanding on the date of issuance
of the Series E Preferred Stock, in a number not to exceed 1,593,982 shares,
having an aggregate liquidation value not to exceed $40 million and bearing
dividends at a per annum rate not to exceed 12% of such liquidation value, shall
rank pari passu with the Series E Preferred Stock and (y) the Series B Preferred
Stock shall no longer constitute "Junior Securities" for purposes hereof.
4. Dividends and Distributions. (a) The holders of shares of Series E
Preferred Stock shall be entitled to receive, when, as and if declared by the
Board of Directors, out of the assets of the Corporation legally available
therefor, cumulative cash dividends at the per annum rate per share equal to 12%
of the Liquidation Value, representing an initial rate of $12.00 per share,
subject to appropriate adjustment in the event of stock splits, stock dividends,
combinations or similar recapitalizations affecting such shares.
(b) All dividends with respect to the Series E Preferred Stock shall be
cumulative (whether or not declared by the Board of Directors) from the date of
original issuance and shall be payable, out of the assets of the Corporation
legally available therefor, in quarterly installments on the 15th day of
___________, ______________, ____________ and ___________ in each year (each
such date being referred to herein as a "Quarterly Dividend Payment Date")
commencing ________________, 2000. Each such quarterly dividend shall be fully
cumulative, to the extent not paid, and shall accrue (whether or not earned or
declared), without interest, from the date of issuance of the Series E Preferred
Stock, and thereafter from the first day of the quarterly period in respect of
which such dividend may be payable as herein provided. Dividends payable for
each quarterly dividend period (including the period corresponding to the
initial Quarterly Dividend Payment Date on ____________, 2000) shall be computed
by dividing the annual dividend by four. Dividends payable with respect to any
partial dividend period (other than the period corresponding to the initial
Quarterly Dividend Payment Date) shall be computed on the basis of a 360-day
year of twelve 30-day months.
(c) Dividends paid on the shares of the Series E Preferred Stock in an
amount less than the total amount of such dividends at the time accrued and
payable on such shares shall be allocated among all such shares of Series E
Preferred Stock at the time outstanding pro rata. The Board of Directors may fix
a record date for the determination of holders of shares of the Series E
Preferred Stock entitled to receive payment of a dividend declared thereon,
which record date shall be no more than sixty (60) days nor less than ten (10)
days prior to the date fixed for the payment thereof.
(d) Any dividend payment made on shares of the Series E Preferred Stock
shall first be credited against the earliest accrued but unpaid dividend due
with respect to shares of the Series E Preferred Stock which remains payable.
(e) The holders of shares of the Series E Preferred Stock shall not be
entitled to receive
<PAGE>59
any dividends or other distributions except as expressly provided herein.
5. Voting Rights. (a) In addition to the rights hereinafter specified in
this Section 5 and any other rights provided by law or the By-laws of the
Corporation, (x) each holder of shares of Series E Preferred Stock outstanding
shall be entitled to one vote for each share of Common Stock into which each
share of Series E Preferred Stock could then be converted (with any fractional
share determined on an aggregate conversion basis being rounded to the nearest
whole share), and with respect to that vote, each holder shall have full voting
rights and powers equal to the voting rights and powers of the holders of Common
Stock, and shall be entitled, notwithstanding any provision hereof, to notice of
any stockholders' meeting in accordance with the By-laws of the Corporation, and
shall be entitled to vote, together with holders of Common Stock, with respect
to any matter submitted to a vote of holders of Common Stock except to any
matter with respect to which the holders of Series E Preferred Stock have voted,
or are simultaneously voting, separately as a single class (including, without
limitation, voting separately as a class with respect to the election
directors), and (y) the holders of Series E Preferred Stock, voting separately
as a single class, shall be entitled to vote with respect to, and the
affirmative vote or consent, in person or by proxy or at a special meeting of
Series E Preferred Stock holders called for such purpose, of holders of at least
a majority of the shares of Series E Preferred Stock then-outstanding shall be
required to approve, any of the following matters (whether or not they are
otherwise matters upon which holders of Common Stock or any other capital stock
of the Corporation have the right to vote):
1. Financings or refinancings senior in right of payment, liquidation or
otherwise to the Series E Preferred Stock, of any material indebtedness of the
Corporation and its Subsidiaries at a financing cost in excess of 10%.
2. Issuance or sale of any class of capital stock, or any right to acquire
or any security exchangeable for or convertible into any class of capital stock,
of the Corporation or any of its Subsidiaries for a price per share less than
the then-Current Market Price thereof or, in the case of the Common Stock, less
than the greater of such Current Market Price, the Conversion Price or Revised
Conversion Price, as applicable, or the Average Market Price (in each case as
defined below), except shares of Junior Preferred Stock and shares of Common
Stock, or options to acquire Common Stock, granted under any employee benefit or
director option plan, in an aggregate amount not to exceed ____________________
and issuances of Common Stock pursuant to the Corporation's Dividend
Reinvestment Plan.
3. Dividends or distributions with respect to any class of capital stock of
the Corporation other than (i) quarterly dividends on the Series E Preferred
Stock as provided herein, and (ii) quarterly dividends on the Series B Preferred
Stock as provided in Section 4 of the Series B Articles at a rate per annum no
greater than 12%; provided that the Corporation may pay, in respect of any year,
a dividend or dividends in an aggregate amount equal to up to 95% (or such
lesser percentage as may then be required under the REIT Provisions as defined
in the
<PAGE>60
Articles of Incorporation, as amended) of the Corporation's income for such year
taxable for federal income tax purposes, of which amount up to 35% may be paid
in cash and the remainder of which dividend or dividends may be paid by issuing
shares of one or more new series of preferred stock junior to the Series E
Preferred Stock as to dividends, liquidation preference and redemption rights,
convertible into Common Stock at a price no less than the Current Market Price,
and otherwise having the terms set forth in Annex 2 hereto and incorporated
herein by reference with such changes thereto as are not inconsistent with the
material terms thereof or adverse to the interest of holders of Series E
Preferred Stock (the "Junior Dividend Stock").
4. Acquisitions by the Corporation or its Subsidiaries of a business or
line of business substantially as a whole or mergers with other businesses,
except as provided in the Corporation's Business Plan in effect on the date of
issuance of the Series E Preferred Stock.
The foregoing rights of the Series E Preferred Stock to vote separately as
a class shall cease at such time as the Initial Purchaser, its managing members
and any Affiliates of such managing member, shall cease to beneficially own or
otherwise have the power to vote or direct the voting of, in the aggregate, at
least 40% of the shares of Series E Preferred Stock originally issued.
(b) (i) Except as provided in Sections 5(b)(ii), 5(b)(iii) or 5(d) below,
or as required by the current terms of any currently existing series of
preferred stock, the Board of Directors of the Corporation shall consist of nine
members, and at each annual or other election of directors, the holders of at
least a majority of the then-outstanding shares of Series E Preferred Stock,
voting together as a single class, shall be entitled to elect four of the nine
members of the Board of Directors (of whom two shall be members of Class __, one
shall be a member of Class __, and one shall be a member of Class __). Any
vacancy occurring because of the death, resignation, or removal of a director
elected by the holders of Series E Preferred Stock shall be filled by the vote
of the remaining directors elected by the holders of Series E Preferred Stock
or, if there are none, by the holders of a majority (or by unanimous written
consent) of the then-outstanding shares of Series E Preferred Stock.
(ii) If (x) as of the end of any calendar month ended 18 months or more
after the date of issuance of the Series E Preferred Stock, the Corporation's
Cash Flow from Operating Activities for the last six full calendar months ending
with such month, multiplied by two, shall be less than $60 million, or (y) the
Corporation shall not effect the redemption of the Series E Preferred Stock as
required by Section 7 for any reason, then the number of directors constituting
the Board of Directors shall, without further action, be increased by two, and
the holders of Series E Preferred Stock shall have the exclusive right to elect
the members of the Board of Directors to fill such two newly created
directorships, of whom one shall belong to each of the two Classes then having
the longest remaining terms in office, in addition to the four members of the
Board of Directors which the holders of Series E Preferred Stock shall be
entitled to elect pursuant to (i) above.
<PAGE>61
(iii) In the event that no more than 250,000 shares of the Series E
Preferred Stock (as such shares may be adjusted for stock splits, stock
dividends and the like) shall remain outstanding, the number of members of the
Board of Directors which the holders of Series E Preferred Stock are entitled to
elect pursuant to this Section 5(b) shall be reduced proportionately as follows:
(A) Pursuant to Section 5(b)(i), the holders of Series E Preferred Stock
shall be entitled to elect three directors if more than 187,500 shares of Series
E Preferred Stock are outstanding, two directors if more than 125,000 but not
more than 187,500 shares of Series E Preferred Stock are outstanding, and one
director if more than 50,000 but not more than 125,000 shares of Series E
Preferred Stock are outstanding.
(B) Pursuant to Section 5(b)(ii), under the circumstances set forth therein
the number of directors shall be increased by one, from nine to ten, and the
holders of Series E Preferred Stock shall be entitled to elect the director to
fill such newly created vacancy, if more than 125,000 shares of Series E
Preferred Stock are outstanding.
(C) In the event of any such decrease in the number of directors which the
holders of Series E Preferred Stock are entitled to elect, the directors so
elected shall be deemed to resign immediately and automatically to the extent
required to reduce the number continuing in office to the number provided above,
in the following order: (x) first, the director or directors most recently
elected to the Class or Classes which then include the most directors elected by
holders of Series E Preferred Stock, until such Classes are even and (y) second,
the director with the shortest remaining term in office. Notwithstanding the
foregoing, to the extent that the number of directors which the holders of
Series E Preferred Stock are entitled to elect is decreased because the number
of shares of Series E Preferred Stock has decreased as a result of a conversion
of shares of Series E Preferred Stock following a notice of redemption thereof
pursuant to Section 7(a), that number of directors previously elected by the
holders of Series E Preferred Stock (or successors thereto) set forth in the
following sentence shall remain in office until the expiration of their
respective terms and shall thereafter be nominated by the Board of Directors for
reelection, such that each such director shall serve an additional term or terms
ending with the Company's annual meeting in the third (3rd) calendar year
following the year in which such redemption notice was delivered or, if there is
no such annual meeting, on December 31 of such third calendar year. The number
of directors to remain in office and be nominated in accordance with the
preceding sentence shall be as follows:
Three: so long as the Initial Purchaser, the managing member of the
Initial Purchaser and Affiliates of such managing member own (i) at
least one (1) share of Series E Preferred Stock and (ii) in the
aggregate, shares of Series E Preferred Stock and shares of Common
Stock issued upon conversion of shares of Series E Preferred Stock
representing at least 20% of the number of shares of Series E
Preferred Stock originally issued (subject to
<PAGE>62
appropriate adjustment in the case of stock dividends, stock splits,
combinations or similar recapitalizations affecting such shares);
Two: so long as so long as the Initial Purchaser, the managing member
of the Initial Purchaser and Affiliates of such managing member own
(i) at least one (1) share of Series E Preferred Stock and (ii) in the
aggregate, shares of Series E Preferred Stock and shares of Common
Stock issued upon conversion of shares of Series E Preferred Stock
equal to at less than 20% but at least 15% of the number of shares of
Series E Preferred Stock originally issued (subject to appropriate
adjustment in the case of stock dividends, stock splits, combinations
or similar recapitalizations affecting such shares);
One: so long as the Initial Purchaser, the managing member of the
Initial Purchaser and Affiliates of such managing member own at least
10% of the number of shares of Series E Preferred Stock originally
issued.
(iv) The right of the holders of shares of Series E Preferred Stock to act
as a single class to elect members of the Board of Directors pursuant to Section
5(b)(i), (ii) and (iii) above shall terminate at such time, if any, as the
Initial Purchaser and the managing member of such Initial Purchaser and
Affiliates of such managing member shall cease to own or otherwise have the
power to vote or direct the voting of, in the aggregate, a majority of the
shares of Series E Preferred Stock then outstanding; provided, however, that
under such circumstances the Series E Preferred Stock, shall have the right to
elect, in the manner described in Section 5(b)(i), one member of the Board of
Directors (and to fill any vacancy occurring because of the death, resignation
or removal of a director so elected) so long as the Initial Purchaser, the
managing member of such Initial Purchaser and Affiliates of such managing member
beneficially own, in the aggregate, shares of Series E Preferred Stock, and
shares of Common Stock issued upon conversion of shares of Series E Preferred
Stock, representing at least 10% of the shares of Series E Preferred Stock
originally issued.
(v) So long as holders of shares of Series E Preferred Stock voting
separately as a class shall be entitled to elect any member or members of the
Board of Directors pursuant to Section 5(b), the Board of Directors shall have
no Executive Committee or other committee to which all or substantially all of
the powers of the Board of Directors are delegated, and shall have no other
committee to which any significant portion of the powers of the Board of
Directors are delegated, except those other committees specifically authorized
by, and the powers of which are specifically set forth in, By-laws of the
Corporation (x) approved by two-thirds of the Board of Directors (at a time when
members of the Board of Directors constitute more than one-third of number of
directors then constituting the whole Board of Directors) or (y) approved by the
members of the Board of Directors elected by the holders of Series E Preferred
Stock, each of which committees shall. except as otherwise required by the rules
of the New York Stock Exchange or other principal trading market of the
Corporation's securities, include at least one member of the Board of Directors
elected by the holders of the Series E Preferred Stock.
<PAGE>63
(c) The affirmative vote or consent, in person or by proxy, in writing or
at a special or annual meeting of stockholders called for the purpose, of the
holders of at least:
(i) two-thirds of the outstanding shares of Series E Preferred Stock,
voting separately as a class, shall be necessary to authorize, create
or increase the authorized or issued amount of, any class or series of
the Corporation's capital stock ranking prior to or on a parity with
the Series E Preferred Stock with respect to payment of dividends or
distribution of assets upon liquidation, dissolution or winding up or
to reclassify any authorized capital stock of the Corporation into any
such capital stock, or create, authorize or issue any obligation or
security convertible into or evidencing the right to purchase any such
capital stock;
(ii) two-thirds of the outstanding shares of Series E Preferred Stock,
voting separately as a class, shall be necessary to amend, alter or
repeal any of the provisions of the Articles of Incorporation or the
Articles Supplementary to the Articles of Incorporation for the Series
E Preferred Stock, whether by merger, consolidation or otherwise so as
to materially and adversely affect any right, preference, privilege or
voting power of the Series E Preferred Stock or the holders thereof;
or
(iii) a majority of the outstanding shares of Series E Preferred
Stock, voting separately as a class, shall be necessary to (x)
increase the amount of authorized Common Stock or authorize or create
other class or series of capital stock or (y) increase the amount of
authorized shares of any other class or series of capital stock,
whether or not ranking junior to the Series E Preferred Stock with
respect to the payment of dividends or the distribution of assets upon
liquidation, dissolution or winding up, provided that the voting
rights granted by this clause (iii) shall not apply in respect of
authorization of shares of any series of Junior Dividend Stock and
shall cease at such time as the Initial Purchaser, the managing member
of such Initial Purchaser and Affiliates of such managing member no
longer beneficially own, in the aggregate, shares of Series E
Preferred Stock representing at least 10% of the shares of Series E
Preferred Stock originally issued.
(d) During any period in which (x) dividends on the Series E Preferred
Stock are cumulatively in arrears for not less than five quarterly dividend
payments (whether or not consecutive), or (y) for any two consecutive quarterly
periods either dividends on the Series E Preferred Stock for any such period are
not paid in full or dividends on the Series E Preferred Stock for any prior
period are in arrears, or both, then, in the case of either (x) or (y), the
number of directors constituting the Board of Directors shall, without further
action, be increased by two and the directors elected by the holders of Series E
Preferred Stock, if any, and otherwise the holders of shares of the Series E
Preferred Stock shall have, in addition to the other voting rights set forth
herein, the exclusive right, voting separately as a single class, to elect the
members of the Board of Directors to fill such newly created directorships, of
whom one member shall belong to each of the two Classes then having the longest
remaining terms in office, the remaining directors to be elected by the other
classes of stock entitled to
<PAGE>64
vote therefor at each meeting of stockholders held for the purpose of electing
directors. Thereafter, upon expiration of the terms of the directors so elected,
the successors thereto shall be elected by the holders of Series E Preferred
Stock. Such additional voting rights shall continue until such time as all
dividends accumulated on the Series E Preferred Stock shall have been paid in
full, at which time such additional directors shall cease to be directors and
such additional voting right of the holders of Series E Preferred Stock shall
terminate subject to revesting in the event of each and every subsequent event
of the character indicated above. In no event shall the holders of Series E
Preferred Stock voting separately as a class be entitled to elect a total of
more than two directors to the Board of Directors pursuant to this Section 5(d),
or more than six directors to the Board of Directors, out of a total of no more
than eleven members of the Board of Directors, pursuant to this Section 5(d) and
Section 5(b) hereof.
(e) (i) The foregoing rights of holders of shares of Series E Preferred
Stock to take any actions as provided in this Section 5 may be exercised at any
annual meeting of stockholders or at a special meeting of stockholders held for
such purpose as hereinafter provided or at any adjournment thereof, of the
holders of the minimum number of shares required to take such action, or by
unanimous written consent, delivered to the Secretary of the Corporation. So
long as such right to vote continues (and unless such right has been exercised
by written consent of the minimum number of shares required to take such
action), the Chairman of the Board of Directors may call, and upon the written
request of holders of record of 20% or more of the outstanding shares of Series
E Preferred Stock addressed to the Secretary of the Corporation at the principal
office of the Corporation, shall call, a special meeting of the holders of
shares entitled to vote as provided herein. Such meeting shall be held within
sixty (60) days after delivery of such request to the Secretary, at the place
and upon the notice provided by law and in the By-laws of the Corporation for
the holding of meetings of stockholders.
(ii) Notwithstanding the foregoing, to the extent, if any, that the shares
of Series E Preferred Stock may then be registered under Section 12 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), so as to
render Section 14(a) or Section 14(c) of the Exchange Act applicable thereto,
then such a special meeting of holders of shares of Series E Preferred Stock is
not required to be called by the Corporation and unanimous written consent of
holders of shares of Series E Preferred Stock is not required to be sought by
the Corporation except (x) in connection with any annual meeting or special
meeting of stockholders of the Corporation generally or (y) to the extent that
one or more holders of shares of Series E Preferred Stock or their Affiliates
shall agree to reimburse the Corporation for its reasonable expenses relating to
compliance with the requirements of the Exchange Act applicable to such meeting
or unanimous written consent, and under such circumstances, if no vote or
unanimous consent of holders of Series E Preferred Stock at a meeting or by
unanimous written consent is obtained or required to be obtained as provided in
(x) or (y) above, any action otherwise requiring the affirmative vote or
unanimous written consent of holders of Series E Preferred Stock pursuant to
Section 5(a) or (b) may be approved by the affirmative vote of two-thirds of the
members of the Board of Directors including at least one of the members of the
Board of Directors then in office theretofore elected by
<PAGE>65
the holders of Series E Preferred Stock as provided in Section 5(b) or (d).
(iii) At each meeting of stockholders at which the holders of shares of
Series E Preferred Stock shall have the right, voting separately as a single
class, to elect directors of the Corporation as provided in this Section 5 or to
take any action, the presence in person or by proxy of the holders of record of
a majority of the total number of shares of Series E Preferred Stock then
outstanding and entitled to vote on the matter shall be necessary and sufficient
to constitute a quorum. At any such meeting or at any adjournment thereof:
(A) the absence of a quorum of the holders of shares of Series E
Preferred Stock shall not prevent the election of directors other than
those to be elected by the holders of shares of Series E Preferred
Stock and the absence of a quorum of the holders of shares of any
other class or series of capital stock shall not prevent the election
of directors to be elected by the holders of shares of Series E
Preferred Stock or the taking of any action as provided in this
Section 5; and
(B) in the absence of a quorum of the holders of shares of Series
E Preferred Stock, the holders of a majority of such shares present in
person or by proxy shall have the power to adjourn the meeting as to
the actions to be taken by the holders of shares of Series E Preferred
Stock from time to time and place to place without notice other than
announcement at the meeting until a quorum shall be present.
For the taking of any action as provided in Sections 5(a), (b), (c), and
(d) by the holders of Series E Preferred Stock, each such holder shall have one
vote for each share of such stock standing in such holder's name on the transfer
books of the Corporation, in each case as of any record date fixed for such
purpose or, if no such date be fixed, at the close of business on the Business
Day next preceding the day on which notice is given, or if notice is waived, at
the close of business on the Business Day next preceding the day on which the
meeting is held or action by written consent is taken.
Each director elected by the holders of shares of Series E Preferred Stock
as provided in Section 5(b), or as provided in Section 5(d), unless his or her
term shall expire earlier upon payment in full by the Corporation of all
accumulated dividends on the Series E Preferred Stock, shall hold office until
the next annual meeting of stockholders after his or her election at which
members of the Class of directors to which such director belongs are to be
elected pursuant to the Articles of Incorporation or until his or her successor,
if any, is elected and qualified.
In case any vacancy shall occur among the directors elected by the holders
of shares of Series E Preferred Stock as provided in Section 5(b) or (d), such
vacancy may be filled for the unexpired portion of the term of such director by
vote of the remaining director
<PAGE>66
or directors theretofore elected by such holders (if there is a remaining
director or directors), or of such director's successors in office. If any such
vacancy is not so filled within twenty (20) days after the creation thereof or
if all directors so elected by the holders of Series E Preferred Stock shall
cease to serve as directors before their terms shall expire, the holders of the
Series E Preferred Stock then outstanding and entitled to vote for such
directors may, by written consent as herein provided, or at a special meeting of
such holders called as provided herein, elect successors to hold office for the
unexpired terms of such directors whose places shall be vacant.
Any director elected by the holders of shares of Series E Preferred Stock
voting separately as a single class may be removed from office with or without
cause by the vote of at least a majority (or by unanimous written consent) of
the outstanding shares of Series E Preferred Stock. A special meeting of the
holders of shares of Series E Preferred Stock may be called for any of the
foregoing purposes in accordance with the procedures set forth in Section
5(e)(i).
(f) Notwithstanding any other provision of these Articles Supplementary or
the Articles of Incorporation of the Corporation, any vacancy on the Board of
Directors occurring because of the death, resignation or removal of any director
who is not an officer or employee of or consultant to the Corporation or its
Subsidiaries shall be filled only by another director who is not an officer or
employee of or consultant to the Corporation or its Subsidiaries.
6. Certain Restrictions. (a) If shares of Series E Preferred Stock are
outstanding, unless full cumulative dividends have been or contemporaneously are
declared and paid or declared and a sum sufficient for the payment thereof set
apart for such payment on the Series E Preferred Stock for all past dividend
periods and the then-current dividend period, other than pursuant to Section
4(c) the Corporation will not declare, make, pay or set apart for payment or
distribution any dividends or other distributions (other than in Junior
Securities and cash in lieu of fractional shares) on the Common Stock or any
other series or class of capital stock ranking, as to dividends, junior to the
Series E Preferred Stock for any period.
(b) If shares of Series E Preferred Stock are outstanding, unless full
cumulative dividends have been or contemporaneously are declared and paid or
declared and a sum sufficient for the payment thereof set apart for such payment
on the Series E Preferred Stock for all past dividend periods and the
then-current dividend period, the Corporation shall not redeem, purchase or
otherwise acquire for any consideration (or pay or make available money for a
sinking fund for the redemption of) any Common Stock or any other series or
class of capital stock (except by conversion into or exchange for Junior
Securities); provided, however, that the foregoing shall not prevent the
purchase or acquisition of any shares of capital stock of the Corporation by the
Corporation (i) in order to preserve the status of the Corporation as a REIT or
(ii) pursuant to a purchase or exchange offer made on comparable terms to all
holders of outstanding shares of capital stock of the Corporation and approved
by the affirmative vote or consent of the holders of at least a majority of the
outstanding shares of Series E Preferred Stock, voting separately as a class.
(c) The Corporation shall not permit any Subsidiary of the Corporation to
purchase or
<PAGE>67
otherwise acquire for consideration any shares of capital stock of the
Corporation unless the Corporation could, pursuant to Section 6(b), purchase or
otherwise acquire such shares at such time and in such manner.
7. Redemption. (a) The Series E Preferred Stock shall not be redeemable in
whole or in part prior to 24 months after the date of issuance of the Series E
Preferred Stock. Thereafter, (x) to the extent the Corporation shall have funds
legally available therefor, the Series E Preferred Stock shall be subject to
redemption at the option of the Corporation (as determined by a vote of the
Board of Directors, excluding the votes of any directors elected by the holders
of the Series E Preferred Stock) on any Quarterly Dividend Payment Date from the
date 24 months after the date of issuance of the Series E Preferred Stock
through the eighth anniversary of the date of issuance of the Series E Preferred
Stock, in whole but not in part, in cash, at the Redemption Price, together in
each case with an amount equal to accrued and unpaid dividends to (and
including) the date fixed for redemption, and (y) on the eighth anniversary of
the issuance of the Series E Preferred Stock, any shares of Series E Preferred
Stock not theretofore redeemed or converted are required to be redeemed by the
Corporation in whole, in cash, at the Redemption Price, together with an amount
equal to accrued but unpaid dividends to (and including) the date fixed for
redemption, which in the case of such mandatory redemption shall be the eighth
anniversary of the date of issuance of the Series E Preferred Stock. To the
extent that the Corporation does not have funds legally available for such
required redemption or does not otherwise effect such required redemption for
any reason, the holders of the Series E Preferred Stock, in addition to any
other rights or remedies they may have, shall have the right voting separately
as a single class to compel the Corporation to sell assets to the extent
necessary to fully effect the required redemption. On and after the date fixed
for redemption, provided that the Redemption Price (including any accrued and
unpaid dividends to (and including) the date fixed for redemption) has been duly
paid or deposited in trust for the benefit of the holders of the Series E
Preferred Stock, dividends shall cease to accrue on the Series E Preferred Stock
called for redemption, such shares shall no longer be deemed to be outstanding,
and all rights of the holders of such shares as stockholders of the Corporation
shall cease, except the right to receive the monies payable upon such
redemption, without interest thereon, upon surrender of the certificates
evidencing such shares. Any monies deposited in trust by the Corporation which
shall not be required for redemption, because of the exercise of any right of
conversion by the holders of the Series E Preferred Stock, shall be repaid to
the Corporation forthwith. Any monies deposited in trust by the Corporation and
unclaimed at the end of two years from the date fixed for such redemption shall
be repaid to the Corporation upon its written request, after which repayment the
holders of the shares of Series E Preferred Stock so called for redemption shall
look only to the Corporation for the payment thereof.
(b) Notice of any redemption pursuant to Section 7(a) shall be given to the
holders of shares of Series E Preferred Stock once not less than sixty (60) days
prior to the date fixed for redemption. Notice of redemption shall be given by
first class mail to each such holder's address as shown on the stock books of
the Corporation and will specify (i) the date fixed for redemption, (ii) the
number of shares of Series E Preferred Stock to be redeemed, (iii) the
Redemption Price (including any accrued and unpaid dividends to (and including)
the date
<PAGE>68
fixed for redemption), (iv) the place or places where certificates for shares of
Series E Preferred Stock are to be surrendered for payment of the Redemption
Price (including any accrued and unpaid dividends to (and including) the date
fixed for redemption), (v) that dividends on the shares of Series E Preferred
Stock to be redeemed will cease to accrue on the date fixed for redemption, and
(vi) in the case of any redemption pursuant to Section 7(a)(x), the date upon
which the holders' conversion rights will terminate and in the case of any
redemption pursuant to Section 7(a)(y), the fact that holders shall have no
further conversion rights with respect to the shares called for redemption.
(c) If a notice of redemption has been given pursuant to Section 7(a)(x),
but not pursuant to Section 7(a)(y), and any holder of shares of the Series E
Preferred Stock shall, prior to the close of business on the fifth day preceding
the date fixed for redemption, give written notice to the Corporation pursuant
to Section 10 below of the conversion of any or all of the shares to be redeemed
held by the holder (accompanied by a certificate or certificates for such
shares, duly endorsed, or assigned to the Corporation, and any necessary
transfer tax payment, as required by Section 10 below), then such redemption
shall not become effective as to such shares to be converted and such conversion
shall become effective as provided in Section 10 below, whereupon any funds
deposited by the Corporation for the redemption of such shares shall (subject to
any right of the holder of such shares to receive the dividend payable thereon
as provided in Section 10 below) immediately upon such conversion be returned to
the Corporation or, if then held in trust by the Corporation, shall be
discharged from the trust.
8. Reacquired Shares. Any shares of Series E Preferred Stock converted,
redeemed, purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and canceled promptly after the acquisition thereof.
All such shares of Series E Preferred Stock shall upon their cancellation, and
upon the filing of appropriate articles supplementary with the Maryland State
Department of Assessments and Taxation, become authorized but unissued shares of
Preferred Stock and may be reissued as part of another series of Preferred Stock
subject to the conditions or restrictions on issuance set forth herein, to the
extent any Series E Preferred Stock remains outstanding.
9. Liquidation, Dissolution or Winding Up. (a) Upon any voluntary or
involuntary liquidation, dissolution or winding up of the affairs of the
Corporation, before any distribution or payment shall be made to the holders of
any shares of Junior Securities, the holders of Series E Preferred Stock shall
be entitled to receive, in respect of each share, out of assets of the
Corporation legally available for distribution to stockholders, liquidating
distributions equal to the greater of (x) the amount of the Liquidation Value
per share, plus an amount equal to all dividends accrued and unpaid thereon as
of the date of liquidation, dissolution or winding up or (y) the amount which
would be received in such liquidation in respect of the number of shares of
Common Stock into which such share of Series E Preferred Stock is then
convertible. After payment of the full amount of the liquidating distributions
to which they are entitled, the holders of Series E Preferred Stock will have no
right or claim to any of the remaining assets of the Corporation. In the event
that, upon any such voluntary or involuntary liquidation, dissolution or winding
up, the available assets of the Corporation are insufficient to pay the
<PAGE>69
amount of the liquidating distributions on all outstanding shares of Series E
Preferred Stock, then the holders of the Series E Preferred Stock shall share
ratably in any such distribution of assets in proportion to the full liquidating
distributions to which they would otherwise be respectively entitled.
(b) Neither the consolidation, merger or other business combination of the
Corporation with or into any other Person, nor the sale, lease or conveyance of
all or substantially all of the property or business of the Corporation, shall
be deemed to constitute a liquidation, dissolution or winding up of the
Corporation for purposes of this Section 9.
10. Conversion. (a) (i) Except as provided in Section 10(a)(ii) below,
holders of shares of Series E Preferred Stock shall have the right, exercisable
at any time, except in the case of shares of Series E Preferred Stock
theretofore called for redemption to the extent provided in Section 7 above, to
convert shares of Series E Preferred Stock into fully paid and nonassessable
shares of Common Stock (calculated as to each conversion to the nearest 1/100th
of a share) at a price that is the lesser of (A) the Conversion Price or (B) the
Revised Conversion Price (as defined below). The number of shares of Common
Stock into which a share of Series E Preferred Stock shall be convertible shall
be determined by dividing (x) the Liquidation Value (plus accrued but unpaid
dividends through the date of Conversion unless such accrued but unpaid
dividends are paid by the Corporation in cash within five Business Days after
delivery of the Conversion Notice (as defined in Section 10(b) below) with
respect to such Conversion) by (y) the Conversion Price or the Revised
Conversion Price, as the case may be. In the case of shares of the Series E
Preferred Stock called for redemption pursuant to Section 7(a)(x), conversion
rights shall expire at the close of business on the fifth Business Day
immediately preceding the date fixed for redemption. No payment or adjustment
for accrued dividends on the shares of Series E Preferred Stock is to be made on
conversion, but holders of record of shares of Series E Preferred Stock on a
record date applicable to a Quarterly Dividend Payment Date shall be entitled to
receive such quarterly dividend payment notwithstanding the conversion of such
shares prior to such Quarterly Dividend Payment Date.
Prior to 18 months from the date of issuance of the Series E Preferred
Stock, the Conversion Price applicable to such conversion shall be 92.86% of the
Conversion Price otherwise applicable, reflective of the private issuance of the
Series E Preferred Stock and the Common Stock into which it is convertible.
(ii) After 18 months from the date of issuance of the Series E Preferred
Stock, the Conversion Price shall be revised to a price (the "Revised Conversion
Price") equal to that percentage of the Average Market Price (as defined below)
for the Reference Periods (as defined below) specified below:
<PAGE>70
Average Market Price
During Reference Periods
- ---------------------------------------------------------------------------
Revised Conversion Price as
a Percentage of such Average
Greater Than or Equal to Less Than Market Price
$4.75 1 - 60.0%
$4.00 $4.75 62.5%
$3.00 $4.00 65.0%
- $3.00 70.0%
1 There will be no adjustment if the Average Market Price during the
Reference Periods is equal to at least $4.75.
For purposes of determining the Revised Conversion Price, the "Average
Market Price" means the weighted average of the Trading Prices (as defined
below) of the Common Stock for all Trading Days (as defined below) during the
Reference Periods; provided that in no event will the Average Market Price be
greater than (x) the product of (A) two times the Corporation's Cash Flow from
Operating Activities for the last six full calendar months ending 18 months
after the date of issuance of the Series E Preferred Stock, multiplied by (B)
8.5, divided by (y) the total number of shares of Common Stock outstanding on a
fully diluted basis (assuming conversion of all outstanding shares of Series E
Preferred Stock and exercise or conversion in full of all outstanding options or
other securities or rights convertible into or exercisable to acquire Common
Stock), and in no event shall the Revised Conversion Price be greater than $3.50
per share. The term "Reference Periods" shall mean the two 60-day periods
beginning no less than 9 months from the date of issuance of the Series E
Preferred Stock and ending no more than 18 months from the date of issuance of
the Series E Preferred Stock chosen at random in the manner described in Annex B
hereto. The "Trading Price" as to any Trading Day means the weighted average of
the trading prices of the Common Stock on such Trading Day or, if no trade of
the Common Stock takes place on that Trading Day, the weighted average of the
bid and asked prices of the Common Stock, in either case on the New York Stock
Exchange ("NYSE") (or on such other national securities exchange as may then
constitute the primary market for the Common Stock) as reported by Bloomberg
Financial Markets (or such other source as the Board of Directors of the
Corporation shall reasonably designate in good faith), or, if the shares of
Common Stock are not listed or admitted to
<PAGE>71
trading on the NYSE or any other national securities exchange, the weighted
average quoted prices, or if not so quoted, the weighted average of the bid and
asked prices in the over-the-counter market, as reported by the Nasdaq Stock
Market, Inc. ("Nasdaq"), or, if Nasdaq is no longer in use, the principal
automated quotation system that may then be in use or, if shares of Common Stock
are not quoted by any such organization, the weighted average of the bid and
asked prices as furnished by a professional market maker making a market in such
shares reasonably selected in good faith by the Board of Directors of the
Corporation. The term "Trading Day" means a day on which the principal national
securities exchange or national automated quotation system on which shares of
the Common Stock are listed or admitted to trading is open for the transaction
of business or, if such shares are not listed or admitted to trading on any
national securities exchange or national automated quotation system, any day
other than a Saturday, a Sunday or a day on which banking institutions in the
State of Maryland are authorized or obligated by law or executive order to
close. Notwithstanding the foregoing, if the Revised Conversion Price as
otherwise determined pursuant to this Section 10(a)(ii) would be less than
$1.75, then the Corporation, in its sole discretion, may elect to fix the
Revised Conversion Price at $1.75 and to issue promptly to the record holders of
Series E Preferred Stock as of the date 18 months from the date of initial
issuance of the Series E Preferred Stock, pro rata in proportion to the number
of shares of Series E Preferred Stock then held of record by such holders,
warrants to purchase, at a price of $2.00 per share, shares of Common Stock in
such number as may be required so that the value of such warrants at the time of
their issuance (determined using the Black-Scholes valuation method) shall be
equal to the product of (x) $1.75 multiplied by (y) the difference between (A) a
fraction the numerator of which is the total Liquidation Value of the Series E
Preferred Stock (plus accrued but unpaid dividends thereon unless such accrued
but unpaid dividends are paid by the Corporation in cash no later than the date
as of which this calculation is made) and the denominator of which is the
Revised Conversion Price as it would have otherwise been determined pursuant to
this Section (10)(a)(ii) except for the limitation provided in this sentence,
and (B) a fraction the numerator of which is the total Liquidation Value of the
Series E Preferred Stock (plus accrued but unpaid dividends thereon unless such
accrued but unpaid dividends are paid by the Corporation) and the denominator of
which is $1.75. Such warrants shall be exercisable at any time or from time to
time until the fifth anniversary of the date of issuance of such warrants.
Application of the Black-Scholes valuation method for such purpose shall assume
volatility equal to the REIT industry average, dividends equal to the actual
dividends on Common Stock and Series E Preferred Stock, exercise after three (3)
years and a risk free rate equal to the Treasury bills rate for the issue with a
maturity most closely matching the assumed time of exercise of the warrants. In
the event that any warrants shall be issued pursuant to this Section 10(a)(ii),
the Company shall grant registration rights in respect thereof and in respect of
the Common Stock issuable upon exercise thereof pursuant to the Registration
Rights Agreement between the Corporation and the Initial Purchaser; provided
that expenses of registration of the warrants shall be borne by the holders
thereof seeking registration and expenses of registration of the underlying
Common Stock shall be borne by the Corporation.
Note: Final Conversion Price and Revised Conversion Price range will be
adjusted and specified in these Articles Supplementary as actually filed, based
on final debt costs.
<PAGE>72
(b) Holders of Series E Preferred Stock may convert such Series E Preferred
Stock into Common Stock by surrendering to the Corporation at its principal
offices, or, if the Corporation has appointed a transfer agent for the Series E
Preferred Stock, to the Corporation's transfer agent (the "Transfer Agent"), at
its designated offices in the City of _________________, the certificate of such
Series E Preferred Stock to be converted, properly endorsed and medallion
certified and accompanied by a written notice stating that such holder elects to
convert all or a specified whole number of such shares in accordance with the
provisions of this Section 10 and specifying the name or names in which such
holder wishes the certificate or certificates for shares of Common Stock to be
issued (a "Conversion Notice"). In case a Conversion Notice shall specify a name
or names other than that of such holder, such Conversion Notice shall be
accompanied by payment of all transfer taxes, if any, payable upon the issuance
of shares of Common Stock in such name or names. Other than such taxes, the
Corporation will pay any and all issue and other taxes (other than taxes based
on income) that may be payable in respect of any issue or delivery of shares of
Common Stock on conversion of Series E Preferred Stock pursuant hereto.
(c) As promptly as practicable, and in any event within five Business Days
after the date of delivery of the shares of Series E Preferred Stock to be
converted (and the Conversion Notice), the Corporation shall deliver or cause to
be delivered (i) certificates representing the number of validly issued, fully
paid and nonassessable full shares of Common Stock to which the holder of shares
of Series E Preferred Stock being converted shall be entitled and (ii) if less
than the full number of shares of Series E Preferred Stock evidenced by the
surrendered certificate or certificates is being converted, a new certificate or
certificates, of like tenor, for the number of shares evidenced by such
surrendered certificate or certificates less the number of shares being
converted. All conversions shall be deemed to have been made at the close of
business on the date of delivery of the Conversion Notice, so that the rights of
the holder thereof as to the shares being converted shall cease except for the
right to receive shares of Common Stock in accordance herewith, and the Person
entitled to receive the shares of Common Stock shall be treated for all purposes
as having become the record holder of such shares of Common Stock at such time.
The Corporation shall not be required to convert, and no surrender of shares of
Series E Preferred Stock shall be effective for that purpose, while the transfer
books of the Corporation for the Common Stock are closed for any purpose (but
not for any period in excess of ten (10) calendar days); but the surrender of
shares of Series E Preferred Stock for conversion during any period while such
books are so closed shall become effective for conversion immediately upon the
reopening of such books, as if the conversion had been made on the date such
shares of Series E Preferred Stock were surrendered, and at a rate of conversion
which assumes the conversion took place during the period immediately prior to
the closing of such books.
(d) No fractional shares of Common Stock or scrip representing fractional
shares shall be issued upon conversion of shares of the Series E Preferred
Stock. If more than one share of the Series E Preferred Stock shall be
surrendered for conversion at one time by the same holder, the number of full
shares of Common Stock issuable upon conversion thereof shall be computed on the
basis of the aggregate number of shares of the Series E Preferred Stock so
surrendered. Instead of any fractional share of Common Stock otherwise issuable
upon
<PAGE>74
conversion of any shares of the Series E Preferred Stock, the Corporation shall
pay a cash adjustment in respect to such fraction in an amount equal to the same
fraction of Sale Price (as defined below) of the Common Stock at the close of
business on the day of conversion. In the absence of a Sale Price, the Board of
Directors shall in good faith determine the current market price on the basis of
such quotation as it considers appropriate. As used herein, "Sale Price" means
the closing sales price of the Common Stock (or if no sale price is reported,
the average of the high and low bid prices) as reported by the principal
national or regional stock exchange on which the Common Stock is listed or, if
the Common Stock is not listed on a national or regional stock exchange, as
reported by the Nasdaq Stock Market and if not so reported, then as reported by
the National Quotation Bureau Incorporated.
(e) The Corporation shall reserve out of its authorized but unissued Common
Stock or its Common Stock held in treasury enough shares of Common Stock to
permit the conversion of all of the then-outstanding shares of the Series E
Preferred Stock. For the purposes of this Section 10(e), the full number of
shares of Common Stock then issuable upon the conversion of all then-outstanding
shares of the Series E Preferred Stock shall be computed as if at the time of
computation, all outstanding shares of the Series E Preferred Stock were held by
a single holder. The Corporation shall from time to time, in accordance with the
laws of the State of Maryland, increase the authorized amount of its Common
Stock if at any time the authorized amount of its Common Stock remaining
unissued shall not be sufficient to permit the conversion of all shares of the
Series E Preferred Stock (as provided herein) at the time outstanding. If any
shares of Common Stock required to be reserved for issuance upon conversion of
shares of the Series E Preferred Stock hereunder require registration with or
approval of any governmental authority under any federal or state law before the
shares may be issued upon conversion, the Corporation will in good faith and as
expeditiously as possible endeavor to cause the shares to be so registered or
approved. All shares of Common Stock issued upon conversion of the shares of the
Series E Preferred Stock shall be validly issued, fully paid and nonassessable.
(f) Each of the Conversion Price and the Revised Conversion Price shall be
subject to adjustment as follows:
(i) In case the Corporation shall (A) pay a dividend or make a
distribution on any class of its capital stock in shares of its Common
Stock, (B) subdivide or reclassify its outstanding shares of Common
Stock into a greater number of shares or (C) combine or reclassify its
outstanding shares of Common Stock into a smaller number of shares,
the Conversion Price or the Revised Conversion Price, as applicable,
in effect immediately prior thereto shall be adjusted as provided
below so that the Conversion Price or the Revised Conversion Price, as
applicable, thereafter shall be determined by multiplying the
Conversion Price or the Revised Conversion Price, as applicable, at
which the shares of the Series E Preferred Stock were theretofore
convertible by a fraction of which the denominator shall be the number
of shares of Common Stock outstanding on a fully diluted basis
immediately following such action and of which the numerator shall be
the number of shares of Common Stock outstanding on a fully diluted
basis immediately prior thereto. Such adjustment shall be made
whenever any
<PAGE>75
event listed above shall occur and shall become effective
retroactively immediately after the record date in the case of a
dividend and immediately after the effective date in the case
of a subdivision, combination or reclassification.
Notwithstanding anything to the contrary in these Articles
Supplementary, Common Stock issued pursuant to the Corporation's
dividend reinvestment plan shall not result in any adjustment to the
Conversion Price or the Revised Conversion Price.
(ii) In case the Corporation shall issue rights or warrants to
all holders of its Common Stock entitling them (for a period expiring
within forty-five (45) days after the record date therefor) to
subscribe for or purchase shares of Common Stock at a price per share
less than the greater of (x) the Conversion Price or Revised
Conversion Price, as applicable, or (y) the current market price per
share of Common Stock (as determined in accordance with the provisions
of Section 10(f)(iv) below) at the record date therefor (the "Current
Market Price"), or (z) after 18 months from the date of issuance of
the Series E Preferred Stock, the Average Market Price, or in case the
Corporation shall issue any shares of Common Stock or other securities
convertible into or exchangeable for Common Stock for a consideration
per share of Common Stock so issued or deliverable upon conversion or
exchange thereof less than the greater of (x) the Conversion Price or
Revised Conversion Price, as applicable, or (y) the Current Market
Price or (z) after 18 months from the date of issuance of the Series E
Preferred Stock, the Average Market Price, then the Conversion Price
or the Revised Conversion Price, as applicable, in effect immediately
prior thereto shall be adjusted as provided below so that the
Conversion Price or the Revised Conversion Price, as applicable,
thereafter shall be determined by multiplying (A) the Conversion Price
or the Revised Conversion Price, as applicable, at which shares of the
Series E Preferred Stock were theretofore convertible by (B) a
fraction of which the denominator shall be the sum of (1) the number
of shares of Common Stock outstanding on a fully diluted basis on the
date of issuance of such Common Stock or convertible or exchangeable
securities, rights or warrants and (2) the number of additional shares
of Common Stock offered for subscription or purchase, and of which the
numerator shall be the sum of (1) the number of shares of Common Stock
outstanding on a fully diluted basis on the date of issuance of such
Common Stock or convertible or exchangeable securities, rights or
warrants and (2) the number of additional shares of Common Stock which
the aggregate offering price of the number of shares of Common Stock
so offered would purchase at the greater of (x) the Conversion Price
or Revised Conversion Price, as applicable, or (y) the Current Market
Price or (z) the Average Market Price, as the case may be. Such
adjustment shall be made whenever such Common Stock or convertible or
exchangeable securities, rights or warrants are issued, and shall
become effective immediately after the record date for the
determination of stockholders entitled to receive such securities.
However, upon the expiration of any right or warrant to purchase
Common Stock, the issuance of which resulted in an adjustment in the
Conversion Price or the Revised Conversion Price pursuant to this
Section 10(f)(ii), if any such right or warrant shall expire and shall
not have been exercised, the
<PAGE>76
Conversion Price or the Revised Conversion Price, as applicable, shall
be recomputed immediately upon such expiration and effective
immediately upon such expiration shall be increased to the price it
would have been (but reflecting any other adjustments to the
Conversion Price or the Revised Conversion Price, as applicable, made
pursuant to the provisions of Section 10(f) after the issuance of such
rights or warrants) had the adjustment of the Conversion Price or the
Revised Conversion Price, as applicable, made upon the issuance of
such rights or warrants been made on the basis of offering for
subscription or purchase only that number of shares of Common Stock
actually purchased upon the exercise of such rights or warrants
actually exercised. Notwithstanding anything to the contrary in this
Section 10(f)(ii), (A) no adjustment to the Conversion Price or the
Revised Conversion Price shall be required with respect to the
issuance or exercise of employee or director stock options granted
under any employee benefit or director option plan, in an aggregate
amount not to exceed _______________________, (B) no adjustment to the
Conversion Price or the Revised Conversion Price shall be required
with respect to the issuance of Junior Dividend Stock, convertible
into Common Stock at a price of no less than $1.75 per share, in an
aggregate amount not to exceed $15.5 million in aggregate conversion
price and cash dividends thereon and (C) in the case of any adjustment
of the Conversion Price or the Revised Conversion Price, as
applicable, with respect to the issuance of Junior Dividend Stock, in
any amount in excess of $15.5 million, the amount referred to in each
clause (z) of the first sentence of this Section 10(f)(ii) shall be
95% of the Average Market Price.
(iii) In case the Corporation shall pay a dividend or make a
distribution to all holders of its Common Stock (including any such
distribution made in connection with a consolidation or merger in
which the Corporation is the continuing corporation) of any shares of
capital stock of the Corporation or its Subsidiaries (other than
Common Stock) or evidences of its indebtedness or assets (excluding
cash dividends payable solely in cash that may from time to time be
fixed by the Board of Directors, or dividends or distributions in
connection with the liquidation, dissolution or winding up of the
Corporation) or rights to subscribe for or purchase any of its
securities or those of its Subsidiaries (excluding those referred to
in Sections 10(f)(i) and 10(f)(ii) above including the Junior Dividend
Stock), then in each such case the number of shares of Common Stock
into which each share of the Series E Preferred Stock shall thereafter
be convertible shall be determined by multiplying (A) the Conversion
Price or the Revised Conversion Price in effect on the record date
mentioned below by (B) a fraction, the numerator of which shall be the
lesser of (x) the Conversion Price or (y) the Current Market Price per
share of Common Stock on the record date mentioned below less the
then-fair market value (as determined by the Board of Directors, whose
good faith determination shall be conclusive) as of such record date
of the portion of the capital stock or assets or evidences of
indebtedness so distributed or of such rights or warrants applicable
to one share of Common Stock, and the denominator of which shall be
the lesser of (x) the Conversion Price or (y) the Current Market Price
per share of Common Stock on such record date; provided, however, that
in the event the then-fair market value (as so determined) of the
portion of securities so distributed applicable to
<PAGE>77
one share of Common Stock is equal to or greater than the lesser
of (x) the Conversion Price or (y) the Current Market Price per
share of Common Stock on the record date mentioned above, in lieu of
the foregoing adjustment, adequate provision shall be made so that
each holder of shares of the Series E Preferred Stock shall have the
right to receive the amount and kind of securities such holder
would have received had such holder converted each such share of
the Series E Preferred Stock immediately prior to the record
date for the distribution of the securities. Such adjustment shall
be made whenever any such payment or distribution is made, and
shall become effective retroactively immediately after the record
date for the determination of stockholders entitled to receive the
distribution.
(iv) Attached to these Articles as Annex 3 and incorporated
herein by reference are examples demonstrating the operation of the
computations set forth in Sections 10(f)(i), 10(f)(ii) and 10(f)(iii).
In the event of any ambiguity in the operation of the computations
described in such Sections or conflict between the description of the
computations set forth in such Sections and the examples set forth in
Annex 3, the methodology set forth in Annex 3 shall govern.
(v) For the purpose of any computation under Sections 10(f)(ii)
and 10(f)(iii) and Section 5(a) above, the Current Market Price per
share of Common Stock at any date shall be deemed to be the weighted
average of the Trading Prices for the thirty (30) consecutive trading
days commencing forty-five (45) trading days before the day in
question.
(vi) No adjustment in the Conversion Price or the Revised
Conversion Price shall be required unless the adjustment would require
an increase or decrease of at least 1% of the Conversion Price or the
Revised Conversion Price then in effect; provided, however, that any
adjustment that by reason of this Section 10(f) is not required to be
made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 10(f) shall be made to
the nearest cent.
(vii) In the event that, at any time as a result of an adjustment
made pursuant to Section 10(f)(i) or 10(f)(iii) above, the holder of
any share of the Series E Preferred Stock thereafter surrendered for
conversion shall become entitled to receive any shares of the
Corporation other than shares of the Common Stock, thereafter the
number of such other shares so receivable upon conversion of any share
of the Series E Preferred Stock shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Common Stock
contained in Section 10(f)(i) through 10(f)(v) above, and the other
provisions of this Section 10 with respect to the Common Stock shall
apply on like terms to any such other shares.
(viii) In the event of a distribution of evidence of indebtedness
or other assets (as described in Section 10(f)(iii)) or a dividend to
all holders of Common Stock of rights to subscribe for additional
shares of the Corporation's capital stock (other than
<PAGE>78
those referred to in Section 10(f)(ii)), the Corporation may,
instead of making an adjustment of the Conversion Price or the Revised
Conversion Price, make prior provision so that each holder who
converts such shares of Series E Preferred Stock will be entitled to
receive upon such conversion, in addition to shares of Common Stock,
an appropriate number of such rights, warrants, evidences of
indebtedness or other assets.
(ix) Whenever the Conversion Price or the Revised Conversion
Price is adjusted, as herein provided, the Corporation shall promptly
file with the transfer agent for the Series E Preferred Stock a
certificate of an officer of the Corporation setting forth the
Conversion Price or the Revised Conversion Price after the adjustment
and setting forth a brief statement of the facts requiring such
adjustment and a computation thereof. The certificate shall be
conclusive evidence of the correctness of the adjustment. The
Corporation shall promptly cause a notice of the adjusted Conversion
Price or the Revised Conversion Price to be mailed to each registered
holder of shares of the Series E Preferred Stock.
(x) In case of any reclassification of the Common Stock, any
consolidation of the Corporation with, or merger of the Corporation
into, any other entity, any merger of another entity into the
Corporation (other than a merger that does not result in any
reclassification, conversion, exchange or cancellation of outstanding
shares of Common Stock of the Corporation), any sale or transfer of
all or substantially all of the assets of the Corporation or any
compulsory share exchange, pursuant to which share exchange the Common
Stock is converted into other securities, cash or other property, then
lawful provision shall be made as part of the terms of such
transaction whereby the holder of each share of the Series E Preferred
Stock then outstanding shall have the right thereafter, during the
period such share shall be convertible, to convert such share only
into the kind and amount of securities, cash and other property
receivable upon the reclassification, consolidation, merger, sale,
transfer or share exchange by a holder of the number of shares of
Common Stock of the Corporation into which a share of the Series E
Preferred Stock would have been convertible immediately prior to the
reclassification, consolidation, merger, sale, transfer or share
exchange. The Corporation, the Person formed by the consolidation or
resulting from the merger or which acquires such assets or which
acquires the Corporation's shares, as the case may be, shall make
provisions in its certificate or articles of incorporation or other
constituent document to establish such rights. The certificate or
articles of incorporation or other constituent document shall provide
for adjustments, which, for events subsequent to the effective date of
the certificate or articles of incorporation or other constituent
document, shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 10. The provisions of this
Section 10(f)(ix) shall similarly apply to successive
reclassification, consolidations, mergers, sales, transfers or share
exchanges.
(g) The Corporation from time to time may reduce the Conversion Price or
the Revised Conversion Price by any amount for any period of time if the period
is at least twenty (20) days and if the reduction is irrevocable during the
period. Whenever the Conversion Price or
<PAGE>79
the Revised Conversion Price is so reduced, the Corporation shall mail to
holders of record of the Series E Preferred Stock a notice of the reduction at
least fifteen (15) days before the date the reduced Conversion Price or the
Revised Conversion Price takes effect, stating the reduced Conversion Price or
the Revised Conversion Price and the period it will be in effect. A voluntary
reduction of the Conversion Price or the Revised Conversion Price does not
change or adjust the Conversion Price or the Revised Conversion Price otherwise
in effect for purposes of Section 10(f) above.
11. REIT Status. Nothing contained in these Articles Supplementary or the
Articles of Incorporation shall limit the authority of the Board of Directors to
take such other action as it deems necessary or advisable to protect the
Corporation and the interests of the stockholders by preservation of the
Corporation's qualification as a REIT under the REIT Provisions (as defined in
the Articles of Incorporation), including, without limitation, the enforcement
of the provisions of Article EIGHTEENTH of the Articles of Incorporation.
12. Reservation of Rights. The right to amend these Articles Supplementary
in any manner now or hereafter authorized by law, including any amendment that
alters the contract rights of the shares of Series E Preferred Stock then
outstanding, is expressly reserved to the holders of Series E Preferred Stock.
IN WITNESS WHEREOF, this instrument has been executed for and on behalf and
in the name of the Corporation by its officers thereunto duly authorized on
_________, 1999.
CRIIMI MAE INC.
By: /s/ William B. Dockser
-----------------------
Chairman
[Seal]
Attest:
- -----------------------
Name:
Title: Secretary
THE UNDERSIGNED, Chairman of the Corporation, who executed on behalf of the
Corporation Articles Supplementary of which this Certificate is made a part,
hereby acknowledges in the name and on behalf of said Corporation the foregoing
Articles Supplementary to be the corporate act of said Corporation and hereby
certifies that the matters and facts set forth herein with respect to the
authorization and approval thereof are true in all
<PAGE>80
material respects under the penalties of perjury.
By: /s/ William B. Dockser
-----------------------
Chairman
<PAGE>81
EXHIBIT 99.1
APOLLO REAL ESTATE TO INVEST IN NEW SERIES OF CRIIMI MAE SHARES
AGREEMENT IS PART OF A $910 MILLION REORGANIZATION PLAN UNDER WHICH CRIIMI MAE
WOULD EMERGE FROM CHAPTER 11
ROCKVILLE, MARYLAND, SEPTEMBER 9, 1999 - CRIIMI MAE Inc. (NYSE:CMM) today
entered into a Stock Purchase Agreement ("Agreement") with an affiliate of
Apollo Real Estate Advisors IV, L.P. ("Apollo"). Under the Agreement, Apollo
will purchase $50 million, (up to $61 million under certain circumstances), of a
new series of convertible preferred stock which would be part of the financing
of an approximately $910 million plan of reorganization (the "Proposed Plan")
whereby the Company would emerge from Chapter 11. The Agreement, which is
subject to bankruptcy court approval, received the unanimous approval of CRIIMI
MAE's Board of Directors. The Special Reorganization Committee, composed of the
outside directors of the Company, recommended Board approval of the Agreement
with Apollo.
In addition to the new equity investment, the Agreement and the Proposed
Plan call for approximately $435 million of debt financing, some of which would
come from existing debtholders, and $425 million of additional amounts, the bulk
of which will result from the sale of certain commercial mortgage-backed
securities ("CMBS"). Prior to October 5, 1999, which date could be extended
under certain conditions, Apollo has the right to commit to purchase these CMBS
at specified spreads over relevant treasury rates. The Company would retain
related servicing rights so long as Apollo controls the entity which holds these
bonds. At the Company's option, up to $11 million of the $425 million of the
additional amounts may come from a rights offering in which existing common
stockholders would be able to purchase new preferred stock on a pro rata basis.
<PAGE>82
The new preferred stock to be purchased by Apollo would be convertible into
common stock at an initial conversion price of $3.25 per share, subject to an
initial adjustment based on the Company's debt costs and thereafter subject to
certain anti-dilution adjustments. Eighteen months from the issuance of the
preferred stock, the conversion price would be subject to a one-time revision if
the average market price during two 60-day reference periods is less than $4.75
per share. If such a revision is necessary, the revised conversion price will
become a percentage, (60% to 70% based on an agreed schedule), of the average
market price during the reference periods.
Under the Proposed Plan, the existing Series B Preferred Stock would become
junior to the new preferred stock for 20 months and pari passu thereafter, with
the current Series B dividend subject to upward adjustment as a result of
confirmation of the Proposed Plan by the bankruptcy court. The Series C and
Series D Preferred Stock would be redeemed in accordance with their terms.
Holders of the Company's publicly-traded 91/8 % Senior Notes and other unsecured
creditors would be paid in full, a portion in cash and a portion in new debt.
Pursuant to the Agreement, the Board of Directors will be increased to nine
members with holders of the new preferred stock electing four of the members.
The Company has agreed that within five business days it will file a motion
for expedited approval of certain provisions of the Agreement involving, among
other things, a buyer break-up fee and buyer reimbursement and commitment fees.
The Agreement is also subject to certain other conditions, including an
eighteen-business day due diligence condition.
CRIIMI MAE chairman, William B. Dockser said, "The Agreement is an
important step toward emerging from Chapter 11. Apollo's investment with us
provides additional capital while the plan to sell CMBS slims down CRIIMI MAE.
Taken in its entirety, the Agreement and the Proposed Plan establish a base for
growth."
<PAGE>83
The Company is filing a report on Form 8-K with the Securities and Exchange
Commission which will include the Agreement as an exhibit. The above summary of
the Agreement is qualified in its entirety by reference to the entire Agreement
(including the draft Articles Supplementary and the Proposed Plan).
The Company has filed a motion to extend the period in which it has the
exclusive right to file a plan of reorganization, and solicit acceptances
thereof, for a period of an additional sixty days. A hearing on such motion will
be held in bankruptcy court tomorrow.
On October 5, 1998, the Company and two affiliates filed for protection
under Chapter 11 of the U.S. Bankruptcy Code. Before filing for reorganization,
the Company had been actively involved in acquiring, originating, securitizing
and servicing multi-family and commercial mortgages and mortgage related assets
throughout the United States. Since filing for Chapter 11 protection, CRIIMI MAE
has suspended its loan origination, loan securitization and CMBS acquisition
businesses. The Company continues to hold a substantial portfolio of
subordinated CMBS and, through its servicing affiliates, acts as a servicer for
its own as well as third party securitizations.
Note: Except for historical information, forward-looking statements
contained in this release involve a variety of risks and uncertainties. These
risks and uncertainties include the continued instability of the capital
markets, the trends in the CMBS market, the ability of the Company to obtain the
additional capital called for by the Proposed Plan, competitive pressures, the
effect of future losses on CRIIMI MAE's need for liquidity, the effects of the
bankruptcy proceeding on CRIIMI MAE's ongoing business, the action of CRIIMI
MAE's creditors, the ability to obtain the necessary bankruptcy court approval
of the Agreement, confirmation of the Proposed Plan in the form contemplated by
the Agreement, the successful completion of due diligence by the investor, the
satisfaction of all conditions to closing of the Agreement and the
reorganization financing and the outcome of litigation to which the Company is a
party, as well as the risks and uncertainties that are set forth from time to
time in CRIIMI MAE's SEC reports,
<PAGE>84
including the report on Form 10-K for the year ended December 31, 1998 and the
Form 10-Q for the quarter ended June 30, 1999.
More information on CRIIMI MAE is available on its website -
www.criimimae.com - or for investors, call Andy Blocher, 301-231-0371 or for
news media, call Jim Pastore, 202-546-6451.
<PAGE>85
Exhibit 99.2
CRIIMI MAE DECLARES DIVIDEND ON COMMON SHARES
TO BE PAID IN NEW SERIES OF PREFERRED STOCK
ROCKVILLE, MD, September 15, 1999 - (NYSE:CMM) - The board of directors of
CRIIMI MAE Inc. yesterday, September 14, 1999, declared a dividend for common
shareholders of record as of October 20, 1999. The dividend will be payable on
November 5, 1999 in up to an aggregate of 1.61 million shares of a new series of
$10 Face Value Series F Redeemable Cumulative Dividend Preferred Stock (the
"Series F Dividend Preferred Stock") (NYSE: CMM-PrF). The distribution is
designed to satisfy the Company's remaining federal income tax obligation for
the 1998 tax year.
Holders of record of each share of CRIIMI MAE common stock will be entitled
to receive 3/100ths of a share of the new Series F Dividend Preferred Stock
(i.e., three shares of Series F Dividend Preferred Stock for every 100 shares of
common stock held). Series F Dividend Preferred Stock will be issued in whole
shares, with shareholders receiving cash from a transfer agent for their
fractional share interests at a price equal to the average sales price of all
aggregated fractional shares sold by the transfer agent, less transaction costs.
The Series F Dividend Preferred Stock will be convertible into shares of common
stock during two, 10-business day windows: the first commencing on November 15,
1999, and the second commencing on January 21, 2000. Conversions will be based
on the volume-weighted average of the sale prices of the common stock for the
10-trading days prior to the date converted, subject to a floor of 50% of the
volume-weighted average of the sale prices of the common stock on November 5,
1999. At the end of the second conversion period, February 4, 2000, all
conversion rights of Series F Dividend Preferred stockholders will expire.
<PAGE>86
The Series F Dividend Preferred Stock provides for cash dividends at an
annual fixed rate of 12%. The first dividend will be paid no earlier than the
end of the calendar quarter in which the Company's anticipated plan of
reorganization becomes effective, and no more than quarterly thereafter. Series
F Dividend Preferred Stock is redeemable at the Company's option after November
5, 2000 at a price of $10.00 per preferred share plus accrued dividends.
On October 5, 1998, CRIIMI MAE Inc. and two affiliates filed for protection
under Chapter 11 of the U.S. Bankruptcy Code. Before filing for reorganization,
the Company had been actively involved in acquiring, originating, securitizing
and servicing multi-family and commercial mortgages and mortgage related assets
throughout the United States. Since filing for Chapter 11 protection, CRIIMI MAE
has suspended its loan origination, loan securitization and CMBS acquisition
businesses. The Company continues to hold a substantial portfolio of
subordinated CMBS and, through its servicing affiliate, acts as a servicer for
its own as well as third party securitizations. While the Company is in
bankruptcy, the symbol for the Series F Dividend Preferred Stock will appear as
QCMM Pr F on the NYSE tape.
Note: Except for historical information, forward-looking statements
contained in this release involve a variety of risks and uncertainties. These
risks and uncertainties include the continued instability of the capital
markets, the trends in the CMBS market, competitive pressures, the effect of
future losses on CRIIMI MAE's need for liquidity, confirmation and effectiveness
of the anticipated plan of reorganization, the effects of the bankruptcy
proceeding on CRIIMI MAE's ongoing business, the action of CRIIMI MAE's
creditors, and the outcome of litigation to which the Company is a party, as
well as the risks and uncertainties that are set forth from time to time in
CRIIMI MAE's SEC reports, including the report on Form 10-K for the year ended
December 31, 1998 and the Form 10-Q for the quarter ended June 30, 1999.
<PAGE>87
More information on CRIIMI MAE is available on its website -
www.criimimae.com - or for investors, call Andy Blocher, 301-231-0371 or for
news media, call Jim Pastore, 202-546-6451.
