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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Act of 1934
Date of Report (Date of earliest event reported): January 22, 1997
THORNBURG MORTGAGE ASSET CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
MARYLAND 011-11914 85-0404134
(State or other (Commission (I.R.S. Employer
jurisdiction File Number) Identification No.)
of incorporation)
</TABLE>
119 EAST MARCY STREET, SUITE 201
SANTA FE, NEW MEXICO 87501
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (505) 989-1900
_________________________________________________________________________
(Former name or former address, if changed since last report.)
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ITEM 5 OTHER EVENTS.
On January 20, 1997, in connection with the Company's registration
statement (No. 333-16799 the "Registration Statement") that was declared
effective by the Securities and Exchange Commission (the "SEC") on December 13,
1996, the Company entered into an underwriting agreement (the "Underwriting
Agreement") with certain underwriters for which Stifel, Nicolaus & Company,
Incorporated, EVEREN Securities, Inc., Principal Financial Securities, Inc.,
Sutro & Co. Incorporated and Thornburg Securities Corporation are acting as
representatives (the "Underwriters"). The Underwriting Agreement provides for
the purchase by the Underwriters from the Company, subject to the terms and
conditions set forth therein, of an aggregate of 2,400,000 shares of Series A
9.68% Cumulative Convertible Preferred Stock ("Preferred Stock"). The Company
has also agreed to grant to the Underwriters an option to purchase an
additional 360,000 shares of Preferred Stock on the terms and for the purposes
set forth therein.
The Underwriting Agreement has been filed as an exhibit to this report
and is incorporated by reference herein. This report, including the
Underwriting Agreement filed as an exhibit hereto, is incorporated by reference
into the Registration Statement.
ITEM 7(C) EXHIBITS.
The following exhibits are filed as part of this report in accordance
with the provisions of Item 601 of Regulation S-K:
<TABLE>
<CAPTION>
Exhibit Name of Exhibit
- ------- ---------------
<S> <C>
1.3 Underwriting Agreement
3.1.3 Articles Supplementary
10.4 Amendment to 1992 Stock Option Plan dated
December 18, 1996
</TABLE>
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SIGNATURE
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.
THORNBURG MORTGAGE ASSET CORPORATION
Date: January 22, 1997 /s/ Richard Story
-------------------------------------
Richard P. Story
Chief Financial Officer and Treasurer
(Principal Accounting Officer)
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Name of Page
Number Exhibit Number
- ------- ------- ------
<S> <C> <C>
1.3 Underwriting Agreement
3.1.3 Articles Supplementary
10.4 Amendment to 1992 Stock Option Plan dated
December 18, 1996
</TABLE>
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EXHIBIT 1.3
2,400,000 Shares
THORNBURG MORTGAGE ASSET CORPORATION
Series A 9.68% Cumulative Convertible Preferred Stock
UNDERWRITING AGREEMENT
----------------------
January 20, 1997
STIFEL, NICOLAUS & COMPANY, INCORPORATED
EVEREN SECURITIES, INC.
PRINCIPAL FINANCIAL SECURITIES, INC.
SUTRO & CO. INCORPORATED
THORNBURG SECURITIES CORPORATION
As Representatives of the
several Underwriters
c/o Stifel, Nicolaus & Company, Incorporated
500 North Broadway, Suite 1500
St. Louis, Missouri 63102
Dear Sirs:
Thornburg Mortgage Asset Corporation, a Maryland corporation (the
"Company") proposes to sell 2,400,000 shares (the "Firm Preferred Shares") of
the Company's Series A 9.68% Cumulative Convertible Preferred Stock, $.01 par
value per share (the "Preferred Stock"), to you and to the other underwriters
named in Schedule I (collectively, the "Underwriters"), for whom you are acting
as representatives (the "Representatives"). The Company has also agreed to
grant to you and the other Underwriters an option (the "Option") to purchase
up to an additional 360,000 shares of Preferred Stock (the "Option Preferred
Shares") on the terms and for the purposes set forth in Section 1(b). The
Firm Preferred Shares and the Option Preferred Shares are hereinafter
collectively referred to as the "Preferred Shares."
The initial public offering price per share for the Preferred Shares
and the purchase price per share for the Preferred Shares to be paid by the
several Underwriters shall be agreed upon by the Company and the
Representatives, acting on behalf of the several Underwriters, and such
agreement shall be set forth in a separate written instrument substantially in
the form of Exhibit A hereto (the "Price Determination Agreement"). The Price
Determination Agreement may take the form of an exchange of any standard form of
written telecommunication among the Company and the Representatives and shall
specify such applicable information as is indicated in Exhibit A hereto. The
offering of the Preferred Shares will be governed by this Agreement, as
supplemented by the Price Determination Agreement. From and after the date of
the execution and delivery of the Price Determination Agreement, this Agreement
shall be deemed to incorporate, and, unless the context otherwise indicates, all
references contained herein to "this Agreement" and to the phrase
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"herein" shall be deemed to include the Price Determination Agreement.
The Company confirms as follows its agreements with the Representatives
and the several other Underwriters.
1. Agreement to Sell and Purchase.
------------------------------
(a) On the basis of the representations, warranties and agreements
of the Company herein contained and subject to all the terms and conditions of
this Agreement, (i) the Company agrees to sell to the several Underwriters and
(ii) each of the Underwriters, severally and not jointly, agrees to purchase
from the Company, at the purchase price per share for the Firm Preferred Shares
to be agreed upon by the Representatives and the Company in accordance with
Section 1(c) and set forth in the Price Determination Agreement, the number of
Firm Preferred Shares set forth opposite the name of such Underwriter in
Schedule I, plus such additional number of Firm Preferred Shares which such
Underwriter may become obligated to purchase pursuant to Section 8 hereof.
Schedule I may be attached to the Price Determination Agreement.
(b) Subject to all the terms and conditions of this Agreement, the
Company grants the Option to the several Underwriters to purchase, severally and
not jointly, the Option Preferred Shares from the Company at the same price per
share as the Underwriters shall pay for the Firm Preferred Shares. The option
may be exercised only to cover overallotments in the sale of the Firm Preferred
Shares by the Underwriters and may be exercised in whole or in part at any time
(but not more than once) on or before the 30th day after the date of this
Agreement (or, if the Company has elected to rely on Rule 430A, on or before the
30th day after the date of the Price Determination Agreement), upon written or
telegraphic notice (the "Option Preferred Shares Notice") by the Representatives
to the Company no later than 12:00 noon, New York City time, at least two and no
more than five business days before the date specified for closing in the Option
Preferred Shares Notice (the "Option Closing Date") setting forth the aggregate
number of Option Preferred Shares to be purchased and the time and date for such
purchase. On the Option Closing Date, the Company will issue and sell to the
Underwriters the number of Option Preferred Shares set forth in the Option
Preferred Shares Notice, and each Underwriter will purchase such percentage of
the Option Preferred Shares as is equal to the percentage of Firm Preferred
Shares that such Underwriter is purchasing, as adjusted by the Representatives
in such manner as they deem advisable to avoid fractional shares.
(c) The initial public offering price per share for the Firm
Preferred Shares and the purchase price per share for the Firm Preferred Shares
to be paid by the several Underwriters shall be agreed upon and set forth in the
Price Determination Agreement. In the event such price has not been agreed upon
and the Price Determination Agreement has not been executed by the close of
business on the fourteenth business day
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following the date of this Agreement, this Agreement shall terminate forthwith,
without liability of any party to any other party except that Section 6 shall
remain in effect.
2. Delivery and Payment.
--------------------
Delivery of the Firm Preferred Shares shall be made to the
Representatives for the accounts of the Underwriters against payment of the
purchase price by federal wire transfer to the Company. Such payments shall be
made on the third business day (or, if the Firm Preferred Shares are priced as
contemplated by Rule 15c6-1(c) of the Securities Exchange Act of 1934 (the
"Exchange Act") after 4:30 p.m., New York City time, the fourth business day)
following the date of this Agreement or, if the Company has elected to rely on
Rule 430A, the third or fourth business day, as applicable, after the date on
which the first bona fide offering of the Preferred Shares to the public is made
by the Underwriters or at such time on such other date as may be agreed upon by
the Company and the Representatives, but in no event later than 10 days after
such date (such date is hereinafter referred to as the "Closing Date").
To the extent the Option is exercised, delivery of the Option Preferred
Shares against payment by the Underwriters (in the manner specified above) will
take place at the offices specified above for the Closing Date at the time and
date (which may be the Closing Date) specified in the Option Preferred Shares
Notice.
If the Representatives request that the Preferred Shares be delivered in
certificated form, then certificates representing the Preferred Shares shall be
in definitive form and shall be registered in such names and in such
denominations as the Representatives shall request at least two business days
prior to the Closing Date or the Option Closing Date, as the case may be, by
written notice to the Company. For the purpose of expediting the checking and
packaging of certificates for the Preferred Shares, the Company agrees to make
such certificates available for inspection at least 24 hours prior to the
Closing Date or the Option Closing Date, as the case may be.
The cost of original issue tax stamps, if any, in connection with the
issuance and delivery of the Firm Preferred Shares and Option Preferred Shares
by the Company to the respective Underwriters shall be borne by the Company. The
Company will pay and save each Underwriter and any subsequent holder of the
Preferred Shares harmless from any and all liabilities with respect to or
resulting from any failure or delay in paying Federal and state stamp and other
transfer taxes, if any, which may be payable or determined to be payable in
connection with the original issuance or sale to such Underwriter of the Firm
Preferred Shares and Option Preferred Shares.
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3. Representations and Warranties of the Company and the Manager.
-------------------------------------------------------------
The Company and, where applicable, the Manager (as such term is defined
below), represents, warrants and covenants to each Underwriter that:
(a) The Company meets the requirements for use of Form S-3 and a
registration statement (Registration No. 333-16799) on Form S-3 relating to the
Preferred Shares, including a preliminary prospectus (the "Base Prospectus") and
such amendments to such registration statement as may have been required to the
date of this Agreement, has been prepared by the Company under the provisions of
the Securities Act of 1933, as amended (the "Act"), and the rules and
regulations (collectively referred to as the "Rules and Regulations") of the
Securities and Exchange Commission (the "Commission") thereunder, and has been
filed with the Commission and has become effective. Copies of such registration
statement and amendments and of each related Base Prospectus have been delivered
to the Representatives. The term "Registration Statement" means the
registration statement as amended at the time it becomes or became effective
(the "Effective Date"), including financial statements and all exhibits and any
information deemed to be included by Rule 430 or Rule 430A of the Rules and
Regulations ("Rule 430A") or Rule 434 of the Rules and Regulations. The term
"Prospectus" means collectively the Base Prospectus together with any
preliminary prospectus supplement or prospectus supplement (the "Prospectus
Supplement") as first filed with the Commission pursuant to Rule 424(b) of the
Rules and Regulations. Any reference herein to the Registration Statement, the
Base Prospectus, any prospectus supplement or the Prospectus shall be deemed to
refer to and include the documents incorporated by reference therein pursuant to
Item 12 of Form S-3 which were filed under the Exchange Act on or before the
Effective Date or the date of such Base Prospectus, any prospectus supplement or
the Prospectus, as the case may be. Any reference herein to the terms "amend,"
"amendment" or "supplement" with respect to the Registration Statement, the Base
Prospectus, any prospectus supplement or the Prospectus shall be deemed to refer
to and include the filing of any document under the Exchange Act after the
Effective Date, or the date of any Base Prospectus, any prospectus supplement or
the Prospectus, as the case may be, and deemed to be incorporated therein by
reference.
(b) On the Effective Date, the date the Prospectus is first filed
with the Commission pursuant to Rule 424(b) (if required), at all times
subsequent to and including the Closing Date and, if later, the Option Closing
Date and when any post-effective amendment to the Registration Statement becomes
effective or any amendment or supplement to the Prospectus is filed with the
Commission, the Registration Statement and the Prospectus (as amended or as
supplemented if the Company shall have filed with the Commission any amendment
or supplement thereto), including the financial statements included or
incorporated by reference in the Prospectus, did or will comply with all
applicable provisions of the Act, the Exchange Act, the rules and regulations
thereunder (the "Exchange Act
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Rules and Regulations") and the Rules and Regulations and will contain all
statements required to be stated therein in accordance with the Act, the
Exchange Act, the Exchange Act Rules and Regulations and the Rules and
Regulations. On the Effective Date and when any post-effective amendment to
the Registration Statement becomes effective, no part of the Registration
Statement or any such amendment did or will contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein not misleading. At the
Effective Date, the date the Prospectus or any amendment or supplement to the
Prospectus is filed with the Commission and at the Closing Date and, if later,
the Option Closing Date, the Prospectus did not or will not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading. The foregoing representations and warranties in this
Section 3(b) do not apply to any statements or omissions made in reliance on
and in conformity with information relating to any Underwriter furnished in
writing to the Company by the Representatives specifically for inclusion in the
Registration Statement or Prospectus or any amendment or supplement thereto.
For all purposes of this Agreement, the amounts of the selling concession and
reallowance set forth in the Prospectus constitute the only information
relating to any Underwriter furnished in writing to the Company by the
Representatives specifically for inclusion in the Prospectus Supplement or the
Registration Statement. The Company has not distributed any offering material
in connection with the offering or sale of the Preferred Shares other than the
Registration Statement, the Prospectus, the prospectus supplement or any other
materials, if any, permitted by the Act and the Rules and Regulations.
(c) The documents which are incorporated by reference in the
preliminary prospectus and the Prospectus or from which information is so
incorporated by reference, when they become effective or were filed with the
Commission, as the case may be, complied in all material respects with the
requirements of the Act or the Exchange Act, as applicable, the Exchange Act
Rules and Regulations and the Rules and Regulations; and any documents so filed
and incorporated by reference subsequent to the Effective Date shall, when they
are filed with the Commission, conform in all material respects with the
requirements of the Act and the Exchange Act, as applicable, the Exchange Act
Rules and Regulations and the Rules and Regulations.
(d) The Company and Thornburg Mortgage Advisory Corporation (the
"Manager") are, and at the Closing Date will be, corporations duly organized,
validly existing and in good standing under the laws of their jurisdiction of
incorporation. The Company and the Manager have, and at the Closing Date will
have, full power and authority to conduct all the activities conducted by them,
to own or lease all the assets owned or leased by them and to conduct their
businesses as described in the
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Registration Statement and the Prospectus. The Company and the Manager are,
and at the Closing Date will be, duly licensed or qualified to do business and
in good standing as foreign corporations in all jurisdictions in which the
nature of the activities conducted by them or the character of the assets owned
or leased by them make such licensing or qualification necessary. Except as
disclosed in the Registration Statement, the Company and the Manager have no
subsidiaries and do not own, and at the Closing Date will not own, directly or
indirectly, any shares of stock or any other equity or long-term debt
securities of any corporation or have any equity interest in any firm,
partnership, joint venture, association or other entity. Complete and correct
copies of the certificates of incorporation and of the by-laws of the Company
and the Manager and all amendments thereto have been delivered to the
Representatives, and no changes therein will be made subsequent to the date
hereof and prior to the Closing Date or, if later, the Option Closing Date.
(e) The Company has authorized and outstanding Capital Stock as set
forth under the heading "Capitalization" in the Prospectus. The issued and
outstanding shares of Capital Stock have been duly authorized and validly
issued, are fully paid and nonassessable, have been issued in compliance with
all federal and state securities laws, were not issued in violation of or
subject to any preemptive rights or other rights to subscribe for or purchase
securities, and conform to the description thereof contained in the Prospectus.
Except as disclosed or contemplated by the Prospectus, the Company has no
outstanding options to purchase, or preemptive rights or other rights to
subscribe for or to purchase, any securities or obligations convertible into, or
any contracts or commitments to issue or sell, shares of its Capital Stock or
any such options, rights, convertible securities or obligations.
(f) The Preferred Shares to be issued and sold by the Company upon
such issuance will be, duly authorized, validly issued, fully paid and
nonassessable and will not be subject to any preemptive or similar right. The
description of the Preferred Stock in the Registration Statement and the
Prospectus is, and at the Closing Date will be, complete and accurate in all
respects. Except as set forth in the Prospectus, the Company does not have
outstanding, and at the Closing Date will not have outstanding, any options to
purchase, or any rights or warrants to subscribe for, or any securities or
obligations convertible into, or any contracts or commitments to issue or sell,
any shares of Preferred Stock, any shares of capital stock of any Subsidiary or
any such warrants, convertible securities or obligations. No shareholder of the
Company has any right which has not been waived to require the Company to
register the sale of any shares owned by such shareholder under the Act in the
public offering contemplated by this Agreement. No further approval or
authority of the shareholders or the Board of Directors of the Company will be
required for the issuance and sale of the Preferred Shares to be sold by the
Company as contemplated herein. The description of the Company's share
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option, share bonus and other share plans or arrangements and the options or
other rights granted and exercised thereunder, set forth in the Prospectus
accurately and fairly presents the information required to be shown with
respect to such plans, arrangements, options and rights. The shares of
underlying Common Stock into which the Preferred Shares are convertible or for
which they may be redeemed have been duly and validly authorized and reserved
for issuance upon the conversion or redemption of the Preferred Shares as
described in the Prospectus.
(g) The financial statements and schedules included or incorporated
by reference in the Registration Statement or the Prospectus present fairly the
financial condition of the Company as of the respective dates thereof and the
results of operations and cash flows of the Company for the respective periods
covered thereby, all in conformity with generally accepted accounting principles
applied on a consistent basis throughout the entire period involved, except as
otherwise disclosed in the Prospectus. Any pro forma financial statements and
any other pro forma financial information included in the Registration Statement
or the Prospectus (i) present fairly in all material respects the information
shown therein, (ii) have been prepared in accordance with the Commission's rules
and guidelines with respect to pro forma financial statements and (iii) have
been properly computed on the bases described therein. The assumptions used in
the preparation of the pro forma financial statements and other pro forma
financial information incorporated by reference in the Registration Statement or
the Prospectus are reasonable and the adjustments used therein are appropriate
to give effect to the transactions or circumstances referred to therein. No
other financial statements or schedules of the Company are required by the Act,
the Exchange Act or the Rules and Regulations to be incorporated by reference in
the Registration Statement or the Prospectus. McGladrey & Pullen, LLP (the
"Accountants) who have reported on such financial statements and schedules, are
independent accountants with respect to the Company as required by the Act and
the Rules and Regulations. The statements included in the Registration Statement
with respect to the Accountants pursuant to Rule 509 of Regulation S-K of the
Rules and Regulations are true and correct in all material respects. The
selected financial data set forth in the Prospectus under the captions
"Capitalization," and "Selected Financial Data" fairly present the information
set forth therein on the basis stated in the Registration Statement.
(h) The Company and the Manager maintain a system of internal
accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorization; (ii) transactions are recorded as necessary to permit preparation
of financial statements in conformity with generally accepted accounting
principles and to maintain accountability for assets; (iii) access to assets is
permitted only in accordance with management's general or specific
authorization; and (iv) the
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recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(i) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus and prior to the Closing
Date, except as set forth in or contemplated by the Registration Statement and
the Prospectus: (i) there has not been and will not have been any change in the
capitalization of the Company or the Manager, or in the business, properties,
business prospects, condition (financial or otherwise) or results of operations
of the Company or the Manager, arising for any reason whatsoever; (ii) the
Company and the Manger have not incurred nor will they incur any material
liabilities or obligations, direct or contingent, nor have they entered into nor
will they enter into any material verbal or written agreements or other
transactions other than pursuant to this Agreement and the transactions referred
to herein; (iii) the Company and the Manager have not and will not have paid or
declared any dividends or other distributions of any kind on any class of
capital stock, and the Company and the Manager are not in default in the payment
of principal or interest on any outstanding debt obligations; (iv) the Company
and the Manager have not sustained any material loss or interference with its
business or properties from fire, flood, windstorm, accident or other calamity,
whether or not covered by insurance; and (v) there have not been any material
adverse changes in the condition (financial or otherwise), business, properties,
results of operations or prospects of the Company or the Manager.
(j) The Company is not an "investment company" or an "affiliated
person" of, or "promoter" or "principal underwriter" for, an "investment
company," as such terms are defined in the Investment Company Act of 1940, as
amended.
(k) Except as set forth in the Registration Statement and the
Prospectus, there are no legal or governmental actions, suits or proceedings
pending or threatened against or affecting the Company, the Manager or the
officers of the Company or the Manager in their capacity as such, or of which
property owned or leased by the Company or the Manager is or may be the subject,
or related to environmental or discrimination matters, which actions, suits or
proceedings might, individually or in the aggregate, prevent or adversely affect
the transactions contemplated by this Agreement or result in a material adverse
change in the condition (financial or otherwise), properties, business, results
of operations or prospects of the Company or the Manager; and no labor
disturbance by the employees of the Company or the Manager exists or is imminent
which might be expected to affect adversely such condition, properties,
business, results of operations or prospects. The Company and the Manager are
not a party or subject to the provisions of any material injunction, judgment,
decree or order of any court, regulatory body, administrative agency or other
governmental body.
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(l) The Company and the Manager have, and at the Closing Date will
have, (i) all governmental licenses, permits, consents, orders, approvals and
other authorizations necessary to carry on their business as contemplated in the
Prospectus, (ii) complied in all respects with all laws, regulations and orders
applicable to it or its business and (iii) performed all its obligations
required to be performed by it, and is not, and at the Closing Date will not be,
in default, under any indenture, mortgage, deed of trust, voting trust
agreement, loan agreement, bond, debenture, note agreement, lease, contract or
other agreement or instrument (collectively, a "contract or other agreement") to
which it is a party or by which its property is bound or affected. To the best
knowledge of the Company and the Manager, no other party under any contract or
other agreement to which they are a party is in default in any respect
thereunder. The Company and the Manager are not, nor at the Closing Date will
be, in violation of any provision of their certificate of incorporation or
by-laws.
(m) The Company and the Manager are in compliance with all
applicable laws, rules and regulations of the jurisdictions in which they are
conducting business, including, without limitation, all applicable local, state
and federal environmental laws and regulations; except where failure to be so in
compliance would not materially adversely affect the condition (financial or
otherwise), business, results of operations or prospects of the Company or the
Manager.
(n) No consent, approval, authorization or order of, or any filing
or declaration with, any court or governmental agency or body is required in
connection with the authorization, issuance, transfer, sale or delivery of the
Preferred Shares by the Company, in connection with the execution, delivery and
performance of this Agreement by the Company or in connection with the taking by
the Company of any action contemplated hereby, except such as have been obtained
under the Act or the Rules and Regulations and such as may be required under
state securities or Blue Sky laws or the bylaws and rules of the National
Association of Securities Dealers, Inc. (the "NASD") in connection with the
purchase and distribution by the underwriters of the Preferred Shares to be sold
by the Company.
(o) The Company has full corporate power and authority to enter
into this Agreement. This Agreement has been duly authorized, executed and
delivered by the Company and constitutes a valid and binding agreement of the
Company and is enforceable against the Company in accordance with the terms
hereof. The performance of this Agreement and the consummation of the
transactions contemplated hereby and the application of the net proceeds from
the offering and sale of the Preferred Shares to be sold by the Company in the
manner set forth in the Prospectus under "Use of Proceeds" will not result in
the creation or imposition of any lien, charge or encumbrance upon any of the
assets of the Company pursuant to the terms or provisions of, or result in a
breach or violation of any of the
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terms or provisions of, or constitute a default under, or give any other party
a right to terminate any of its obligations under, or result in the
acceleration of any obligation under, the certificate of incorporation or
by-laws of the Company, any contract or other agreement to which the Company is
a party or by which the Company or any of its properties is bound or affected,
or violate or conflict with any judgment, ruling, decree, order, statute, rule
or regulation of any court or other governmental agency or body applicable to
the business or properties of the Company.
(p) The Company owns no real property. The Company has good and
marketable title to all the properties and assets reflected as owned in the
financial statements hereinabove described (or elsewhere in the Prospectus),
subject to no lien, mortgage, pledge, charge or encumbrance of any kind except
(i) those, if any, reflected in such financial statements (or elsewhere in the
Prospectus), or (ii) those which are not material in amount and do not adversely
affect the use made and proposed to be made of such property by the Company.
The Company holds its leased properties under valid and binding leases, with
such exceptions as are not materially significant in relation to the business of
the Company. Except as disclosed in the Prospectus, the Company owns or leases
all such properties as are necessary to its operations as now conducted or as
proposed to be conducted.
(q) There is no document or contract of a character required to be
described or incorporated by reference in the Registration Statement or the
Prospectus or to be filed as an exhibit to the Registration Statement which is
not described, filed or incorporated by reference as required. All such
contracts to which the Company or the Manager is a party have been duly
authorized, executed and delivered by the Company or the Manager, constitute
valid and binding agreements of the Company or the Manager and are enforceable
against the Company or the Manager in accordance with the terms thereof.
(r) No statement, representation, warranty or covenant made by the
Company in this Agreement or made in any certificate or document required by
this Agreement to be delivered to the Representatives was or will be, when made,
inaccurate, untrue or incorrect.
(s) Neither the Company, the Manager nor any of their directors,
officers or controlling persons have taken, directly or indirectly, any action
intended, or which might reasonably be expected, to cause or result, under the
Act or otherwise, in, or which has constituted, stabilization or manipulation of
the price of any security of the Company to facilitate the sale or resale of the
Preferred Shares.
(t) No holder of securities of the Company has rights to the
registration of any securities of the Company because of the filing of the
Registration Statement.
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(u) Prior to the Closing Date, the Preferred Shares will be duly
authorized for listing, upon official notice of issuance, on the New York Stock
Exchange.
(v) The Company has all necessary trademarks, trade names, patent
rights, mask works, copyrights, licenses, approvals and governmental
authorizations to conduct its business as now conducted or proposed to be
conducted; the expiration of any trademarks, trade names, patent rights, mask
works, copyrights, licenses, approvals or governmental authorizations would not
have a material adverse effect on the condition (financial or otherwise),
business, results of operations or prospects of the Company; and the Company has
no knowledge of any material infringement by it of trademark, trade name rights,
patent rights, mask works, copyrights, licenses, trade secret or other similar
rights of others, and there is no claim being made against the Company regarding
trademark, trade name, patent, mask work, copyright, license, trade secret or
other infringement which could have a material adverse effect on the condition
(financial or otherwise), business, results of operations or prospects of the
Company.
(w) Neither the Company, the Manager nor, to the Company's or
Manager's knowledge, any employee or agent of the Company or Manager have made
any payment of funds of the Company or Manager or received or retained any funds
in violation of any law, rule or regulation or of a character required to be
disclosed in the Prospectus.
(x) Neither the Company nor its officers, directors, employees and
agents have distributed or will distribute prior to the Closing Date any
offering material in connection with the offering and sale of the Preferred
Shares other than the Prospectus, the Registration Statement and the other
materials permitted by the Act.
(y) The Company and the Manager have filed all necessary federal,
state and foreign income and franchise tax returns and have paid all taxes shown
as due thereon; and the Company and the Manager have no knowledge of any tax
deficiency which has been or might be asserted or threatened against the Company
or the Manager which could materially and adversely affect the business,
operations or properties of the Company or the Manager.
(z) Neither the Company, the Manager nor to the knowledge of the
Company or the Manager any officers, directors, employees or agents acting on
behalf of the Company has at any time (i) made any contributions to any
candidate for political office in violation of law, or failed to disclose fully
any contributions to any candidate for political office in accordance with any
applicable statute, rule, regulation or ordinance requiring such disclosure,
(ii) made any payment to any local, state, federal or foreign governmental
officer or official, or other person charged with similar public or quasi-public
duties,
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<PAGE> 12
other than payments required or allowed by applicable law, (iii) made any
payment outside the ordinary course of business to any purchasing or selling
agent or person charged with similar duties of any entity to which the Company
sells or from which the Company buys products for the purpose of influencing
such agent or person to buy products from or sell products to the Company, or
(iv) except as described in the Prospectus, engaged in any transaction,
maintained any bank account or used any corporate funds except for
transactions, bank accounts and funds which have been and are reflected in the
normally maintained books and records of the Company.
(aa) As of the Closing Date and, if later, the Option Closing Date,
the Company and the Manager shall be insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are prudent
and customary in the business in which they propose to engage as described in
the Prospectus; the Company and the Manager have not been refused any insurance
coverage sought or applied for; and the Company and the Manager have no reason
to believe that they will not be able to renew their existing insurance coverage
as and when such coverage expires or to obtain similar coverage from similar
insurers as may be necessary to continue their proposed business at a cost that
would not result in a material adverse effect.
(bb) As of the Closing Date and, if later, the Option Closing Date,
the Company shall be qualified as a real estate investment trust ("REIT") under
Sections 856 through 860 of the Internal Revenue Code of 1986, as amended, and
intends to operate in a manner so as to continue to remain so qualified.
(cc) Neither the Company nor the Manager will be a "broker" within
the meaning of Section 3(a)(4) of the Exchange Act or a "dealer" within the
meaning of Section 3(a)(5) of the Exchange Act or required to be registered
pursuant to Section 15(a) of the Exchange Act.
(dd) Neither the Company nor any affiliate has incurred any
liability for a fee, commission or other compensation on account of the
employment of a broker or finder in connection with the transactions
contemplated by this Agreement other than as disclosed in the Registration
Statement.
4. Covenants and Agreements of the Company.
---------------------------------------
The Company covenants and agrees with the several Underwriters as
follows:
(a) The Company will cause the Prospectus to be filed as required
by Section 3(a) hereof (but only if the Representatives have not reasonably
objected thereto by notice to the Company after having been furnished a copy a
reasonable time prior to filing) and will notify the Representatives promptly of
such filing; it will notify the Representatives promptly of the time when any
subsequent amendment to the Registration Statement
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<PAGE> 13
has become effective or any supplement to the Prospectus has been filed and of
any request by the Commission for any amendment or supplement to the
Registration Statement or Prospectus or for additional information; it will
prepare and file with the Commission, promptly upon the Representatives'
request, any amendments or supplements to the Registration Statement or
Prospectus that, in the Representatives' opinion, may be necessary or advisable
in connection with the distribution of the Preferred Shares by the
Underwriters; and it will file no amendment or supplement to the Registration
Statement or Prospectus to which the Representatives shall reasonably object by
notice to the Company after having been furnished a copy at a reasonable time
prior to the filing.
(b) The Company will advise the Representatives, promptly after it
shall receive notice or obtain knowledge thereof, of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement, of the suspension of the qualification of the Preferred Shares for
offering or sale in any jurisdiction, or of the initiation or threatening of any
proceeding for any purpose; and it will promptly use its best efforts to prevent
the issuance of any stop order or to obtain its withdrawal if such a stop order
should be issued.
(c) Within the time during which a Prospectus relating to the
Preferred Shares is required to be delivered under the Act, the Company will
comply with all requirements imposed upon it by the Act and by the Rules and
Regulations, as from time to time in force, so far as necessary to permit the
continuance of sales of or dealings in the Preferred Shares as contemplated by
the provisions hereof and the Prospectus. If during such period any event
occurs as a result of which the Prospectus as then amended or supplemented would
include an untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the circumstances then
existing, not misleading, or if during such period it is necessary to amend or
supplement the Registration Statement or Prospectus to comply with the Act, the
Company will promptly notify the Representatives and will amend or supplement
the Registration Statement or Prospectus (at the expense of the Company) so as
to correct such statement or omission or effect such compliance.
(d) The Company will furnish to the Representatives, without
charge, two signed copies of the Registration Statement and of any
post-effective amendment thereto, including financial statements and schedules,
and all exhibits thereto (including any document filed under the Exchange Act
and deemed to be incorporated by reference into the Prospectus), and will
furnish to the Representatives, without charge, for transmittal to each of the
other Underwriters, a copy of the Registration Statement and any post-effective
amendment thereto, including financial statements and schedules but without
exhibits.
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<PAGE> 14
(e) The Company will comply with all the provisions of any
undertakings contained in the Registration Statement.
(f) As soon after the execution and delivery of this Agreement as
possible and thereafter from time to time, the Company will deliver to each of
the Underwriters, without charge, as many copies of the Prospectus or any
amendment or supplement thereto as the Representatives may reasonably request.
The Company consents to the use of the Prospectus or any amendment or supplement
thereto by the several Underwriters and by all dealers to whom the Preferred
Shares may be sold, both in connection with the offering or sale of the
Preferred Shares and for any period of time thereafter during which the
Prospectus is required by law to be delivered in connection therewith. If at any
time within the nine-month period referred to in Section 10(a)(3) of the Act
during which a prospectus relating to the Preferred Shares is required to be
delivered under the Act any event shall occur which in the judgment of the
Company or counsel to the Underwriters should be set forth in the Prospectus in
order to make any statement therein, in the light of the circumstances under
which it was made, not misleading, or if it is necessary to supplement or amend
the Prospectus to comply with law, the Company will promptly advise the
Representatives thereof and will forthwith prepare and duly file with the
Commission an appropriate supplement or amendment thereto, and will deliver to
each of the Underwriters, without charge, such number of copies thereof as the
Representatives may reasonably request. In the event that any Underwriter is
required to deliver a Prospectus after such nine-month period, the Company upon
request, but at the expense of such Underwriter, will promptly prepare such
amendment or amendments to the Registration Statement and such Prospectus or
Prospectuses as may be necessary to permit compliance with the requirements of
Section 10(a)(3) of the Act. The Company shall not file any document under the
Exchange Act before the termination of the offering of the Preferred Shares by
the Underwriters if such document would be deemed to be incorporated by
reference into the Prospectus which is not approved by the Representatives after
reasonable notice thereof.
(g) Prior to any public offering of the Preferred Shares by the
Underwriters, the Company shall cooperate with the Representatives and their
counsel in order to qualify or register the Preferred Shares for sale under (or
obtain exemptions from the application of) the Blue Sky laws of such
jurisdictions as the representatives designate, will comply with such laws and
will continue such qualifications, registrations and exemptions in effect so
long as reasonably required for the distribution of the Preferred Shares. The
Company shall not be required to qualify as a foreign corporation or to file a
general consent to service of process in any such jurisdiction where it is not
presently qualified or where it would be subject to taxation as a foreign
corporation. The Company will advise the Representatives promptly of the
suspension of the qualification or registration of (or any such exemption
relating to) the Preferred Shares for
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<PAGE> 15
offering; sale or trading in any jurisdiction or any initiation or threat of
any proceeding for any such purpose, and in the event of the issuance of any
order suspending such qualification, registration or exemption, the Company,
with the cooperation of the Representatives, will use its best efforts to
obtain the withdrawal thereof.
(h) During the period of five years hereafter, the Company will
furnish to the Representatives and, upon request of the Representatives, to each
of the other Underwriters: (i) as soon as practicable after the end of each
fiscal year, copies of the Annual Report of the Company containing the balance
sheet of the Company as of the close of such fiscal year and statements of
income, stockholders' equity and cash flows for the year then ended and the
opinion thereon of the Company's independent public accountants; (ii) as soon as
practicable after the filing thereof, copies of each proxy statement, Annual
Report on Form 10-K, Quarterly Report on Form 10-Q, Report on Form 8-K or other
report filed by the Company with the Commission, the NASD or any securities
exchange; and (iii) as soon as available, copies of any report or communication
of the Company mailed generally to holders of its Preferred Stock.
(i) The Company will make generally available to holders of its
securities as soon as may be practicable but in no event later than the last day
of the fifteenth full calendar month following the calendar quarter in which the
effective date falls, an earnings statement (which need not be audited but shall
be in reasonable detail) for a period of 12 months ended commencing after the
effective date, and satisfying the provisions of Section 11(a) of the Act
(including Rule 158 of the Rules and Regulations). "Effective date" for
purposes of this Section 4(i) shall be as defined in Section 158 of the Rules
and Regulations.
(j) Whether or not the transactions contemplated by this Agreement
are consummated or this Agreement is terminated, the Company will pay, or
reimburse if paid by the Representatives, all costs and expenses incident to the
performance of the obligations of the Company under this Agreement, including
but not limited to costs and expenses of or relating to (1) the preparation,
printing and filing of the Registration Statement and exhibits to it, each
preliminary prospectus, the Prospectus and any amendment or supplement to the
Registration Statement or the Prospectus, (2) the preparation and delivery of
certificates representing the Preferred Shares, (3) the printing of this
Agreement, the Agreement Among Underwriters, any Dealer Agreements and any
Underwriters Questionnaire, (4) furnishing (including costs of shipping, mailing
and courier) such copies of the Registration Statement, the Prospectus and any
preliminary prospectus, and all amendments and supplements thereto, as may be
requested for use in connection with the offering and sale of the Preferred
Shares by the Underwriters or by dealers to whom Preferred Shares may be sold,
(5) the listing for quotation of the Preferred Shares on the New York Stock
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<PAGE> 16
Exchange, (6) any filings required to be made by the Underwriters with the
NASD, and the fees, disbursements and other charges of counsel for the
Underwriters in connection therewith, (7) the registration or qualification of
the Preferred Shares for offer and sale under the securities or Blue Sky laws
of such jurisdictions designated pursuant to Section 4(f), including the fees,
disbursements and other charges of counsel to the Underwriters in connection
therewith, and the preparation and printing of preliminary, supplemental and
final Blue Sky memoranda, (8) counsel to the Company, (9) the transfer agent
for the Preferred Shares and (10) the Accountants.
(k) If this Agreement shall be terminated by the Company pursuant
to any of the provisions hereof (other than pursuant to Section 8) or if for any
reason the Company shall be unable to perform its obligations hereunder, the
Company will reimburse the several Underwriters for all out-of-pocket expenses
(including the fees, disbursements and other charges of counsel to the
Underwriters) reasonably incurred by them in connection herewith.
(l) The Company will not at any time, directly or indirectly, take
any action intended, or which might reasonably be expected, to cause or result
in, or which will constitute, stabilization of the price of the shares of
Preferred Stock to facilitate the sale or resale of any of the Preferred Shares.
(m) The Company will apply the net proceeds from the offering and
sale of the Preferred Shares to be sold by the Company in the manner set forth
in the Prospectus under "Use of Proceeds". The Company will not use the
proceeds of the sale of the Preferred Shares in such a manner as to require the
Company to be registered under the Investment Company Act.
(n) The Company will not, and will cause each of its executive
officers to enter into agreements with the Representatives in the form set forth
in Exhibit B hereto to the effect that they will not, for a period of 90 days
after the commencement of the public offering of the Preferred Shares, without
the prior written consent of Stifel, Nicolaus & Company, Incorporated, sell,
contract to sell or otherwise dispose of any shares of the Company's equity
securities or any other securities convertible into or exchangeable with its
Preferred Stock or any other equity security (other than pursuant to employee
stock option plans or in connection with other employee incentive compensation
arrangements).
(o) The Company will use its best efforts to list, upon official
notice of issuance, on the New York Stock Exchange, the Preferred Shares to be
issued and sold by the Company.
(p) The Company intends to continue to meet the requirements to
qualify as a REIT and will not revoke its
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<PAGE> 17
election to be a REIT unless the Board determines that such revocation is
advantageous to the Company.
(q) The Company will not invest in futures contracts, options on
futures contracts or options on commodities unless the Company and Manager (as
defined in the Prospectus) are exempt from the registration requirements of the
Commodity Exchange Act, as amended, or otherwise comply with the Commodity
Exchange Act, as amended. Additionally, neither the Company nor the Manager
will engage in any activities bearing on the Commodity Exchange Act, as amended,
except as described in the Lord Day & Lord, Barrett Smith opinion dated June 21,
1993, unless such activities are exempt from the Commodity Exchange Act, as
amended, or otherwise comply with the Commodity Exchange Act, as amended.
(r) The Company will not permit Manager (for so long as it is the
Manager) to engage in any activity which would cause Manager to register as an
investment advisor under the Investment Advisors Act or 1940. Without
limitation, the Company will not permit Manager to (i) render investment advice
to more than fifteen clients, (ii) hold itself out generally to the public as an
investment advisor, or (iii) act as an investment advisor to any investment
company that is registered under the Investment Company Act.
The Representatives, on behalf of the Underwriters, may, in the
Representatives sole discretion, waive in writing the performance by the
Company of any one or more of the foregoing covenants or extend the time for
their performance.
5. Conditions of the Obligations of the Underwriters.
-------------------------------------------------
In addition to the execution and delivery of the Price Determination
Agreement, the obligations of each Underwriter hereunder are subject to the
following conditions:
(a) The Prospectus shall have been filed as required by Section
3(a) hereof and (i) no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall be pending or threatened by the Commission, (ii) no order
suspending the effectiveness of the Registration Statement or the qualification
or registration of the Preferred Shares under the securities or Blue Sky laws of
any jurisdiction shall be in effect and no proceeding for such purpose shall be
pending before or threatened or contemplated by the Commission or the
authorities of any such jurisdiction, (iii) any request for additional
information on the part of the staff of the Commission or any such authorities
shall have been complied with to the satisfaction of the staff of the Commission
or such authorities and (iv) after the date hereof no amendment or supplement to
the Registration Statement or the Prospectus shall have been filed unless a copy
thereof was first submitted to Stifel, Nicolaus & Company, Incorporated and
Stifel,
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<PAGE> 18
Nicolaus & Company, Incorporated did not object thereto in good faith, and
Stifel, Nicolaus & Company, Incorporated shall have received certificates dated
the Closing Date and the Option Closing Date and signed by the Chairman of the
Board of Directors or President of the Company and the Chief Financial Officer
of the Company (who may, as to proceedings threatened, rely upon the best of
their information and belief), to the effect of clauses (i), (ii) and (iii).
(b) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus, (i) there shall not have been a
material adverse change in the general affairs, business, business prospects,
properties, management, condition (financial or otherwise) or results of
operations of the Company, whether or not arising from transactions in the
ordinary course of business, in each case other than as set forth in or
contemplated by the Registration Statement and the Prospectus and (ii) the
Company has not sustained any material loss or interference with its business or
properties from fire, explosion, flood or other casualty, whether or not covered
by insurance, or from any labor dispute or any court or legislative or other
governmental action, order or decree, which is not set forth in the Registration
Statement and the Prospectus, if in the judgment of Stifel, Nicolaus & Company,
Incorporated any such development makes it impracticable or inadvisable to
consummate the sale and delivery of the Preferred Shares by the Underwriters at
the initial public offering price.
(c) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus, there shall have been no
litigation or other proceeding instituted against the Company or any of its
respective officers or directors in their capacities as such, before or by any
Federal, state or local court, commission, regulatory body, administrative
agency or other governmental body, domestic or foreign, in which litigation or
proceeding an unfavorable ruling, decision or finding would materially and
adversely affect the business, properties, business prospects, condition
(financial or otherwise) or results of operations of the Company.
(d) Each of the representations and warranties of the Company
contained herein shall be true and correct in all material respects at the
Closing Date and, with respect to the Option Preferred Shares at the Option
Closing Date, as if made at the Closing Date and, with respect to the Option
Preferred Shares, at the Option Closing Date, and all covenants and agreements
herein contained to be performed on the part of the Company and all conditions
herein contained to be fulfilled or complied with by the Company at or prior to
the Closing Date and, with respect to the Option Preferred Shares, at or prior
to the Option Closing Date, shall have been duly performed, fulfilled or
complied with.
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<PAGE> 19
(e) Stifel, Nicolaus & Company, Incorporated shall have received an
opinion, dated the Closing Date and the Option Closing Date, and satisfactory in
form and substance to counsel for the Underwriters, from Jeffers, Wilson &
Shaff, LLP, counsel to the Company, to the effect set forth in Exhibit C hereto.
(f) Stifel, Nicolaus & Company, Incorporated shall have received an
opinion of O'Melveny & Myers, counsel for the Underwriters, dated the Closing
Date and the Option Closing Date, as the case may be, with respect to the
Registration Statement, the Prospectus and this Agreement, which opinion shall
be satisfactory in all respects to Stifel, Nicolaus & Company, Incorporated.
(g) Stifel, Nicolaus & Company, Incorporated shall have received on
the date before this Agreement is executed and also on the Closing Date and the
Option Closing Date a letter from the Accountants, the first one to be dated the
day before the date of this Agreement, the second one to be dated the Closing
Date and the third one (in the event of an Option Closing) to be dated the
Option Closing Date, to the effect that:
(1) They are independent accountants with respect to the
Company within the meaning of the Act and the applicable rules and
regulations thereunder;
(2) In their opinion, the financial statements examined by
them and contained in the Registration Statement or incorporated by
reference therein and the Prospectus comply in form in all material
respects with the applicable accounting requirements of the Act and
the related published rules and regulations;
(3) On the basis of a reading of the latest available interim
unaudited financial statement of the Company, carrying out certain
specified procedures (which do not constitute an examination made in
accordance with generally accepted auditing standards) that would
not necessarily reveal matters of significance with respect to the
comments set forth in this paragraph (3), a reading of the minute
books of the stockholders, the board of directors and any committees
thereof of the Company, and inquiries of certain officials of the
Company who have responsibility for financial and accounting
matters, nothing came to their attention that caused them to believe
that as of a date not more than five days prior to the date of such
letter, there were any changes in the capital stock or long-term
debt of the Company or any decreases in net current assets or
19
<PAGE> 20
stockholders' equity of the Company in each case compared with
amounts shown on the balance sheet included in the Registration
Statement and the Prospectus; and
(4) they have carried out certain specified procedures, not
constituting an audit, with respect to any pro forma financial
information, amounts, percentages and other financial information
that are derived from the general accounting records of the Company
and are included in the Registration Statement and the Prospectus as
marked on the copy of the Prospectus attached to such letter, and
have compared such amounts, percentages and financial information
with such records of the Company and with information derived from
such records and have found them to be in agreement, excluding any
questions of legal interpretation.
(h) At the Closing Date and, as to the Option Preferred Shares, the
Option Closing Date, there shall be furnished to Stifel, Nicolaus & Company,
Incorporated an accurate certificate, dated the date of its delivery, signed by
each of the Chairman of the Board or President and the Chief Financial Officer
of the Company, in form and substance satisfactory to Stifel, Nicolaus &
Company, Incorporated, to the effect that:
(1) Each of the respective signers of the certificate has
carefully examined the Registration Statement and the Prospectus
(including any documents filed under the Exchange Act and deemed to
be incorporated by reference into the Prospectus); in his opinion
and to the best of his knowledge, such documents and any amendments
or supplements thereto contain all statements required to be stated
therein regarding the Company; and neither the Registration
Statement nor the Prospectus nor any amendment or supplement thereto
includes any untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary to make
the statements therein not misleading;
(2) Each of the representations and warranties of the Company
contained in this Agreement are true and correct as of the date of
this Agreement and as of the Closing Date or the Option Closing
Date, as the case may be;
(3) The Commission has not issued any order preventing or
suspending the use of the Prospectus or any preliminary prospectus
filed as a part of the Registration Statement or any amendment
thereto; no stop order suspending
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<PAGE> 21
the effectiveness of the Registration Statement has been issued; and
to the best of the knowledge of the respective signers, no
proceedings for that purpose have been instituted or are pending or
contemplated under the Act;
(4) Since the initial date on which the Registration Statement
was filed, no agreement, written or oral, transaction or event has
occurred which should have been set forth in an amendment to the
Registration Statement or in a supplement to or amendment of any
prospectus which has not been disclosed in such a supplement or
amendment;
(5) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, and except
as disclosed in or contemplated by the Prospectus, there has not
been any material adverse change or a development involving a
material adverse change in the condition (financial or otherwise),
business, properties, results of operations, management or prospects
of the Company; and no legal or governmental action, suit or
proceeding is pending or threatened against the Company which is
material to the Company, whether or not arising from transactions in
the ordinary course of business, or which may adversely affect the
transactions contemplated by this Agreement; since such dates and
except as so disclosed, the Company has not entered into any verbal
or written agreement or other transaction which is not in the
ordinary course of business or which could result in a material
reduction in the future earnings of the Company or incurred any
material liability or obligation, direct, contingent or indirect,
made any change in its capital stock, made any material change in
its short-term debt or funded debt or repurchased or otherwise
acquired any of the Company's capital stock; and the Company has not
declared or paid any dividend, or made any other distribution, upon
its outstanding capital stock payable to stockholders of record on a
date prior to the Closing Date or the Option Closing Date; and
(6) Each of the covenants required herein to be performed by
the Company on or prior to the date of such certificate has been
duly, timely and fully performed and each condition herein required
to be complied with by the Company on or prior to the delivery of
such certificate has been duly, timely and fully complied with.
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<PAGE> 22
(i) On or prior to the Closing Date, Stifel, Nicolaus & Company,
Incorporated shall have received the executed agreements referred to in Section
4(n) hereof.
(j) The Preferred Shares shall be qualified for sale in such states
as Stifel, Nicolaus & Company, Incorporated may reasonably request, each such
qualification shall be in effect and not subject to any stop order or other
proceeding on the Closing Date and the Option Closing Date.
(k) Prior to the Closing Date, the Preferred Shares shall have been
duly authorized for listing by the New York Stock Exchange upon official notice
of issuance.
(l) The Company shall have furnished to Stifel, Nicolaus & Company,
Incorporated such certificates, in addition to those specifically mentioned
herein, as Stifel, Nicolaus & Company, Incorporated may have reasonably
requested as to the accuracy and completeness at the Closing Date and the Option
Closing Date of any statement in the Registration Statement or the Prospectus or
any documents filed under the Exchange Act and deemed to be incorporated by
reference into the Prospectus, as to the accuracy at the Closing Date and the
Option Closing Date of the representations and warranties of the Company herein,
as to the performance by the Company of its respective obligations hereunder, or
as to the fulfillment of the conditions concurrent and precedent to the
obligations hereunder of Stifel, Nicolaus & Company, Incorporated.
All such opinions, certificates, letters and documents shall be in
compliance with the provisions hereof only if they are satisfactory to Stifel,
Nicolaus & Company, Incorporated and to O'Melveny & Myers, counsel for the
Underwriters. The Company shall furnish the Representatives with such manually
signed or conformed copies of such opinions, certificates, letters and
documents as you request. Any certificate signed by any officer of the Company
and delivered to the Representatives or to counsel for the Underwriters shall
be deemed to be a representation and warranty by the Company to the
Underwriters as to the statements made therein.
If any condition to the Underwriters' obligations hereunder to be
satisfied prior to or at the Closing Date is not so satisfied, this Agreement
at your election will terminate upon notification by you as Representatives to
the Company without liability on the part of any Underwriter or the Company
except for the expenses to be paid or reimbursed by the Company pursuant to
Sections 4(j) and 4(k) hereof and except to the extent provided in Section 6
hereof.
6. Indemnification.
---------------
(a) The Company will indemnify and hold harmless each Underwriter,
the directors, officers, employees and agents of each Underwriter and each
person, if any, who controls each
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<PAGE> 23
Underwriter within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act from and against any and all losses, claims, liabilities, expenses
and damages (including any and all investigative, legal and other expenses
reasonably incurred in connection with, and any amount paid in settlement of any
action, suit or proceeding between any of the indemnified parties and any
indemnifying parties or between any indemnified party and any third party, or
otherwise, or any claim asserted), to which they, or any of them, may become
subject under the Act, the Exchange Act or other Federal or state statutory law
or regulation, at common law or otherwise, insofar as such losses, claims,
liabilities, expenses or damages arise out of or are based on any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus, the Registration Statement or the Prospectus or any
amendment or supplement to the Registration Statement or the Prospectus or in
any documents filed under the Exchange Act and deemed to be incorporated by
reference into the Prospectus or the omission or alleged omission to state in
such document a material fact required to be stated in it or necessary to make
the statements in it not misleading, provided that the Company will not be
liable to the extent that such loss, claim, liability, expense or damage arises
from the sale of the Preferred Shares in the public offering to any person by an
Underwriter and is based on an untrue statement or omission or alleged untrue
statement or omission made in reliance on and in conformity with information
relating to any Underwriter furnished in writing to the Company by Stifel,
Nicolaus & Company, Incorporated on behalf of any underwriter expressly for
inclusion in the Registration Statement, any preliminary prospectus or the
Prospectus. This indemnity agreement will be in addition to any liability that
the company might otherwise have.
(b) Each Underwriter will indemnify and hold harmless the Company,
each person, if any, who controls the Company within the meaning of Section 15
of the Act or Section 20 of the Exchange Act, each director of the Company and
each officer of the Company who signs the Registration Statement to the same
extent as the foregoing indemnity from the Company to each Underwriter, but only
insofar as losses, claims, liabilities, expenses or damages arise out of or are
based on any untrue statement or omission or alleged untrue statement or
omission made in reliance on and in conformity with information relating to any
Underwriter furnished in writing to the Company by Stifel, Nicolaus & Company,
Incorporated on behalf of such Underwriter expressly for use in the Registration
Statement, any preliminary prospectus or the Prospectus. This indemnity will be
in addition to any liability that each Underwriter might otherwise have.
(c) Any party that proposes to assert the right to be indemnified
under this Section 6 will, promptly after receipt of notice of commencement of
any action against such party in respect of which a claim is to be made against
an indemnifying party or parties under this Section 6, notify each
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<PAGE> 24
such indemnifying party of the commencement of such action, enclosing a copy of
all papers served, but the omission so to notify such indemnifying party will
not relieve it from any liability that it may have to any indemnified party
under the foregoing provisions of this Section 6 unless, and only to the extent
that, such omission results in the forfeiture of substantive rights or defenses
by the indemnifying party. If any such action is brought against any
indemnified party and it notifies the indemnifying party of its commencement,
the indemnifying party will be entitled to participate in and, to the extent
that it elects by delivering written notice to the indemnified party promptly
after receiving notice of the commencement of the action from the indemnified
party, jointly with any other indemnifying party similarly notified, to assume
the defense of the action, with counsel satisfactory to the indemnified party,
and after notice from the indemnifying party to the indemnified party of its
election to assume the defense, the indemnifying party will not be liable to
the indemnified party for any legal or other expenses except as provided below
and except for the reasonable costs of investigation subsequently incurred by
the indemnified party in connection with the defense. The indemnified party
will have the right to employ its own counsel in any such action, but the fees,
expenses and other charges of such counsel will be at the expense of such
indemnified party unless (1) the employment of counsel by the indemnified party
has been authorized in writing by the indemnifying party, (2) the indemnified
party has reasonably concluded (based on advice of counsel) that there may be
legal defenses available to it or other indemnified parties that are different
from or in addition to those available to the indemnifying party, (3) a
conflict or potential conflict exists (based on advice of counsel to the
indemnified party) between the indemnified party and the indemnifying party (in
which case the indemnifying party will not have the right to direct the defense
of such action on behalf of the indemnified party) or (4) the indemnifying
party has not in fact employed counsel to assume the defense of such action
within a reasonable time after receiving notice of the commencement of the
action, in each of which cases the reasonable fees disbursements and other
charges of counsel will be at the expense of the indemnifying party or parties.
It is understood that the indemnifying party or parties shall not, in
connection with any proceeding or related proceedings in the same jurisdiction,
be liable for the reasonable fees, disbursements and other charges of more than
one separate firm admitted to practice in such jurisdiction at any one time for
all such indemnified party or parties. All such fees, disbursements and other
charges will be reimbursed by the indemnifying party promptly as they are
incurred. All fees, disbursements and other charges not reimbursed as they are
incurred shall accrue interest, compounded daily, determined on the basis of
the prime rate (or other commercial lending rate for borrowers of the highest
credit standing) announced from time to time by Bank of America NT&SA, San
Francisco, California. An indemnifying party will not be liable for any
settlement of any action or claim effected without its written consent (which
consent will not be
24
<PAGE> 25
unreasonably withheld). No indemnifying party shall, without the prior written
consent of each indemnified party, settle or compromise or consent to the entry
of any judgment in any pending or threatened claim, action or proceeding
relating to the matters contemplated by this Section 6 (whether or not any
indemnified party is a party thereto), unless such settlement, compromise or
consent includes an unconditional release of each indemnified party from all
liability arising or that may arise out of such claim, action or proceeding.
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in the foregoing
paragraphs of this Section 6 is applicable in accordance with its terms but for
any reason is held to be unavailable from the Company or the Underwriters, the
Company and the Underwriters will contribute to the total losses, claims,
liabilities, expenses and damages (including any investigative, legal and other
expenses reasonably incurred in connection with, and any amount paid in
settlement of, any action, suit or proceeding or any claim asserted, but after
deducting any contribution received by the Company from persons other than the
Underwriters, such as persons who control the Company within the meaning of the
Act, officers of the Company who signed the Registration Statement and directors
of the Company, who also may be liable for contribution) to which the Company
and any one or more of the Underwriters may be subject in such proportion as
shall be appropriate to reflect the relative benefits received by the Company on
the one hand and the Underwriters on the other. The relative benefits received
by the Company on the one hand and the Underwriters on the other shall be deemed
to be in the same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Company bear to the total underwriting
discounts and commissions received by the Underwriters, in each case as set
forth in the table on the cover page of the Prospectus. If, but only if, the
allocation provided by the foregoing sentence is not permitted by applicable
law, the allocation of contribution shall be made in such proportion as is
appropriate to reflect not only the relative benefits referred to in the
foregoing sentence but also the relative fault of the Company on the one hand,
and the Underwriters, on the other, with respect to the statements or omissions
which resulted in such loss, claim, liability, expense or damage, or action in
respect thereof, as well as any other relevant equitable considerations with
respect to such offering. Such relative fault shall be determined by reference
to whether the untrue or alleged untrue statement of a material fact or omission
or alleged omission to state a material fact relates to information supplied by
the Company or Stifel, Nicolaus & Company, Incorporated on behalf of the
Underwriters, the intent of the parties and their relative knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Underwriters agree that it would not be just and equitable
if contributions pursuant to this Section 6(d) were to be determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose)
25
<PAGE> 26
or by any other method of allocation which does not take into account the
equitable considerations referred to herein. The amount paid or payable by an
indemnified party as a result of the loss, claim, liability, expense or damage,
or action in respect thereof, referred to above in this Section 6(d) shall be
deemed to include, for purpose of this Section 6(d), any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 6(d), no Underwriter shall be required to contribute
any amount in excess of the underwriting discounts received by it, and no
person found guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) will be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation. The Underwriters'
obligations to contribute as provided in this Section 6(d) are several in
proportion to their respective underwriting obligations and not joint. For
purposes of this Section 6(d), any person who controls a party to this
Agreement within the meaning of the Act will have the same rights to
contribution as that party, and each officer of the Company who signed the
Registration Statement will have the same rights to contribution as the
Company, subject in each case to the provisions hereof. Any party entitled to
contribution, promptly after receipt of notice of commencement of any action
against such party in respect of which a claim for contribution may be made
under this Section 6(d), will notify any such party or parties from whom
contribution may be sought, but the omission so to notify will not relieve the
party or parties from whom contribution may be sought from any other obligation
it or they may have under this Section 6(d). No party will be liable for
contribution with respect to any action or claim settled without its written
consent (which consent will not be unreasonably withheld).
(e) The indemnity and contribution agreements contained in this
Section 6 and the representations and warranties of the Company contained in
this Agreement shall remain operative and in full force and effect regardless of
(i) any investigation made by or on behalf of the Underwriters, (ii) acceptance
of any of the Preferred Shares and payment therefor or (iii) any termination of
this Agreement.
7. Termination.
-----------
Without limiting the right to terminate this Agreement pursuant to
any other provision hereof, the obligations of the several Underwriters under
this Agreement may be terminated at any time prior to the Closing Date (or, with
respect to the Option Preferred Shares, on or prior to the Option Closing Date),
by notice to the Company from Stifel, Nicolaus & Company, Incorporated, without
liability on the part of any Underwriter to the Company if, prior to delivery
and payment for the Firm Preferred Shares (or the Option Preferred Shares, as
the case may be), in the sole judgment of Stifel, Nicolaus & Company,
Incorporated, (i) trading in any of the equity securities of the
26
<PAGE> 27
Company shall have been suspended by the Commission, by an exchange that lists
the Preferred Shares or by the New York Stock Market, (ii) trading in
securities generally on the New York Stock Exchange shall have been suspended
or limited or minimum or maximum prices shall have been generally established
on such exchange, or additional material governmental restrictions, not in
force on the date of this Agreement, shall have been imposed upon trading in
securities generally by such exchange or by order of the Commission or any
court or other governmental authority, (iii) a general banking moratorium shall
have been declared by either Federal or New York State authorities or (iv) any
material adverse change in the financial or securities markets in the United
States or in political, financial or economic conditions in the United States
or any outbreak or material escalation of hostilities or declaration by the
United States of a national emergency or war or other calamity or crisis shall
have occurred, the effect of any of which is such as to make it, in the sole
judgment of Stifel, Nicolaus & Company, Incorporated, impracticable or
inadvisable to market the Preferred Shares on the terms and in the manner
contemplated by the Prospectus.
8. Substitution of Underwriter; Representations of Underwriters.
------------------------------------------------------------
(a) If any one or more of the Underwriters shall fail or refuse to
purchase any of the Firm Preferred Shares which it or they have agreed to
purchase hereunder, and the aggregate number of Firm Preferred Shares which such
defaulting Underwriter or Underwriters agreed but failed or refused to purchase
is not more than one-tenth of the aggregate number of Firm Preferred Shares, the
other Underwriters shall be obligated, severally, to purchase the Firm Preferred
Shares which such defaulting Underwriter or Underwriters agreed but failed or
refused to purchase, in the proportions which the number of Firm Preferred
Shares which they have respectively agreed to purchase pursuant to Section 1
hereof bears to the aggregate number of Firm Preferred Shares which all such
non-defaulting Underwriters have so agreed to purchase, or in such other
proportions as Stifel, Nicolaus & Company, Incorporated may specify; provided
that in no event shall the maximum number of Firm Preferred Shares which any
Underwriter has become obligated to purchase pursuant to Section 1 hereof be
increased pursuant to this Section 8 by more than one-ninth of the number of
Firm Preferred Shares agreed to be purchased by such Underwriter without the
prior written consent of such Underwriter. If any Underwriter or Underwriters
shall fail or refuse to purchase any Firm Preferred Shares and the aggregate
number of Firm Preferred Shares which such defaulting underwriter or
Underwriters agreed but failed or refused to purchase exceeds one-tenth of the
aggregate number of the Firm Preferred Shares and arrangements satisfactory to
Stifel, Nicolaus & Company, Incorporated, the Company and the Committees for the
purchase of such Firm Preferred Shares are not made within 48 hours after such
default, this Agreement will terminate without liability on the part of any
non-defaulting Underwriter
27
<PAGE> 28
or the Company for the purchase or sale of any Preferred Shares under this
Agreement. In any such case either Stifel, Nicolaus & Company, Incorporated or
the Company and the Committee shall have the right to postpone the Closing
Date, but in no event for longer than seven days, in order that the required
changes, if any, in the Registration Statement and in the Prospectus or in any
other documents or arrangements may be effected. Any action taken pursuant to
this Section 8 shall not relieve any defaulting Underwriter from liability in
respect of any default of such Underwriter under this Agreement.
(b) The Representatives, on behalf of the several Underwriters,
represent and warrant to the Company that the information set forth (i) on the
cover page of the Prospectus Supplement with respect to price, underwriting
discounts and commissions and terms of offering and (ii) under "Underwriting" in
the Prospectus Supplement was furnished to the Company by and on behalf of the
Underwriters for use in connection with the preparation of the Prospectus
Supplement and is correct in all material respects. The Representatives
represent and warrant that they have been authorized by each of the other
Underwriters as the Representatives to enter into this Agreement on its behalf
and to act for it in the manner herein provided.
9. Miscellaneous.
-------------
(a) Notice given pursuant to any of the provisions of this
Agreement shall be in writing and unless otherwise specified, shall be mailed or
delivered (a) if to the Company, at the office of the Company, 119 East Marcy
Street, Suite 201, Santa Fe, New Mexico 87501, Attention: Larry A. Goldstone, or
(b) if to the Underwriters, to Stifel, Nicolaus & Company, Incorporated at the
offices of Stifel, Nicolaus & Company, Incorporated, 500 North Broadway, Suite
1500, St. Louis, Missouri 63102, Attention: Corporate Finance Department. Any
such notice shall be effective only upon receipt. Any notice under Section 6 or
8 may be made by telex or telephone, but if so made shall be subsequently
confirmed in writing.
(b) This Agreement has been and is made solely for the benefit of
the several Underwriters, the Company and of the controlling persons, directors
and officers referred to in Section 6 hereof, and their respective successors
and assigns, and no other person shall acquire or have any right under or by
virtue of this Agreement. The term "successors and assigns" as used in this
Agreement shall not include a purchaser, as such purchaser, of Preferred Shares
from any of the several Underwriters.
(c) The invalidity or unenforceability of any Section, paragraph or
provision of this Agreement shall not affect the validity or enforceability of
any other Section, paragraph or provision hereof. If any Section, paragraph or
provision of this Agreement is for any reason determined to be invalid or
unenforceable, there shall be deemed to be made such
28
<PAGE> 29
minor changes (and only such minor changes) as are necessary to make it valid
and enforceable.
(d) Any action required or permitted to be taken by the
Representatives under this Agreement may be taken by them jointly or by Stifel,
Nicolaus & Company, Incorporated.
(e) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE INTERNAL LAWS (AND NOT THE LAWS PERTAINING TO CONFLICTS OF LAWS) OF THE
STATE OF CALIFORNIA.
(f) The Company and the Underwriters each hereby irrevocably waive
any right they may have to a trial by jury in respect of any claim based upon or
arising out of this Agreement or the transactions contemplated hereby.
(g) This Agreement may not be amended or otherwise modified or any
provision hereof waived except by an instrument in writing signed by Stifel,
Nicolaus & Company, Incorporated and the Company.
29
<PAGE> 30
(h) This Agreement constitutes the entire agreement of the parties
to this Agreement and supersedes all prior written or oral and all
contemporaneous oral agreements, understandings and negotiations with respect to
the subject matter hereof. This Agreement may be executed in several
counterparts, each one of which shall be an original, and all of which shall
constitute one and the same document.
(i) In this Agreement, the masculine, feminine and neuter genders
and the singular and the plural include one another. The section headings in
this Agreement are for the convenience of the parties only and will not affect
the construction or interpretation of this Agreement.
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us the enclosed copies hereof, whereupon it
will become a binding agreement between the Company and the several Underwriters
including you, all in accordance with its terms.
Very truly yours,
THORNBURG MORTGAGE ASSET
CORPORATION
By: /s/ LARRY A. GOLDSTONE
----------------------------
Larry A. Goldstone
President
30
<PAGE> 31
Confirmed as of the date first above mentioned:
STIFEL, NICOLAUS & COMPANY, INCORPORATED
EVEREN SECURITIES, INC.
PRINCIPAL FINANCIAL SECURITIES, INC.
SUTRO & CO. INCORPORATED
THORNBURG SECURITIES CORPORATION
Acting on behalf of itself and as the
Representatives of the
other several Underwriters
By: Stifel, Nicolaus & Company, Incorporated
By: /s/ JEFFREY D. EVANS
------------------------------
Jeffrey D. Evans
Its: Vice President
31
<PAGE> 32
SCHEDULE I
UNDERWRITERS
Number of
Firm Preferred
Names of Shares
Underwriters to be Purchased
------------ ---------------
Stifel, Nicolaus & Company, Incorporated 475,000
EVEREN Securities, Inc. 475,000
Principal Financial Securities, Inc. 475,000
Sutro & Co. Incorporated 475,000
Thornburg Securities Corporation 140,000
Advest, Inc. 24,000
J.C. Bradford & Co. 24,000
Cowen & Co. 24,000
Dain Bosworth Incorporated 24,000
Friedman, Billings, Ramsey & Co., Inc. 24,000
McDonald & Company Securities, Inc. 24,000
Mesirow Financial, Inc. 24,000
Morgan Keegan & Company, Inc. 24,000
Piper Jaffray Inc. 24,000
Rauscher Pierce Refsnes, Inc. 24,000
The Robinson-Humphrey Company, Inc. 24,000
Scott & Stringfellow, Inc. 24,000
Stephens Inc. 24,000
Tucker Anthony Incorporated 24,000
Wedbush Morgan Securities 24,000
---------
Total 2,400,000
=========
1
<PAGE> 1
EXHIBIT 3.1.3
ARTICLES SUPPLEMENTARY
THORNBURG MORTGAGE ASSET CORPORATION
Series A 9.68% CUMULATIVE CONVERTIBLE PREFERRED STOCK
(PAR VALUE $.01 PER SHARE)
Thornburg Mortgage Asset Corporation., a Maryland corporation
(hereinafter called the "Corporation"), having its principal office at c/o
Patrick J.D. Donnelly, Suite 1400, 111 S. Calvert Street, Baltimore, Maryland
21202, hereby certifies to the Department of Assessments and Taxation of the
State of Maryland that:
FIRST: Pursuant to authority expressly vested in the Board of Directors
of the Corporation by Article FIFTH (A) of the Charter of the Corporation, the
Board of Directors has duly divided and classified 2,760,000 authorized but
unissued shares of the capital stock of the Corporation into a class designated
as Series A 9.68% Cumulative Convertible Preferred Stock and has provided for
the issuance of such class.
SECOND: The reclassification increases the number of shares classified
as Series A 9.68% Cumulative Convertible Preferred Stock, par value $.01 per
share, from no shares immediately prior to the reclassification to 2,760,000
shares immediately after the reclassification. The reclassification decreases
the number of shares classified as Common Stock, par value $.01 per share, from
50,000,000 shares immediately prior to the reclassification to 47,240,000 shares
immediately after the reclassification. The number of shares classified as
Series A 9.68% Cumulative Convertible Preferred Stock may be decreased pursuant
to paragraph 6 of Article Third of these Articles Supplementary upon
reacquisition thereof in any manner, or by retirement thereof, by the
Corporation.
THIRD: The terms of the Series A 9.68% Cumulative Convertible Preferred
Stock (including the preferences, conversions or other rights, voting powers,
restrictions, limitations as to dividends and other distributions,
qualifications, or terms or conditions of redemption) as set by the Board of
Directors are as follows:
1. Number of Shares and Designation.
This class of Preferred Stock shall be designated as Series A 9.68%
Cumulative Convertible Preferred Stock (the "Series A Preferred Stock") and Two
Million Seven Hundred Sixty Thousand (2,760,000) shall be the authorized number
of shares of such Series A Preferred Stock constituting such class.
<PAGE> 2
2. Definitions.
For purposes of the description of the terms of the Series A Preferred
Stock, the following terms shall have the meanings indicated:
"Act" shall mean the Securities Act of 1933, as amended.
"affiliate" of a person means a person that directly, or indirectly
through one or more intermediaries, controls or is controlled by, or is
under common control with, the person specified.
"Board of Directors" shall mean the Board of Directors of the
Corporation or any committee authorized by such Board of Directors to
perform any of its responsibilities with respect to the Series A
Preferred Stock.
"Business Day" shall mean any day other than a Saturday, Sunday or a day
on which state or federally chartered banking institutions in New York,
New York are not required to be open.
"Call Date" shall have the meaning set forth in paragraph (b) of
Section 5.
"Series A Preferred Stock" shall have the meaning set forth in
Section 1.
"Common Stock" shall mean the common stock, $.01 par value per share, of
the Corporation or such shares of the Corporation's capital stock into
which outstanding shares of Common Stock shall be reclassified.
"Conversion Price" shall mean the conversion price per share of Common
Stock for which each share of Series A Preferred Stock is convertible,
as such Conversion Price may be adjusted pursuant to paragraph (d) of
Section 7. The initial Conversion Price shall be $25.00 (equivalent
to an initial conversion rate of one share of Common Stock for each
share of Preferred Stock).
"Current Market Price" of publicly traded shares of Common Stock of the
Corporation or of any similar security of any other issuer for any day
shall mean the closing price, regular way on such day, on the New York
Stock Exchange ("NYSE").
"Distribution" shall have the meaning set forth in paragraph d(iii) of
Section 7.
"Dividend Payment Date" shall mean, with respect to each Dividend
Period, the tenth (10th) day of January, April, July and October in each
year, commencing with April 10, 1997, with respect to the period
commencing on the Issue Date and ending March 31, 1997; provided,
however, that if any Dividend Payment Date falls on any day other than
2
<PAGE> 3
a Business Day, the dividend payment due on such Dividend Payment Date
shall be paid on the Business Day immediately following such Dividend
Payment Date.
"Dividend Periods" shall mean quarterly dividend periods commencing on
January 1, April 1, July 1, and October 1 of each year and ending on and
including the day preceding the first day of the next succeeding
Dividend Period (other than the initial Dividend Period, which shall
commence on the Issue Date and end on and include March 31, 1997).
"Fair Market Value" shall mean the average of the daily Current Market
Prices of a share of Common Stock during five (5) consecutive Trading
Days selected by the Corporation commencing not more than twenty (20)
Trading Days before, and ending not later than, the earlier of the day
in question and the day before the "ex" date with respect to the
issuance or distribution requiring such computation. The term "ex" date,
when used with respect to any issuance or distribution, means the first
day on which the shares of Common Stock trade regular way, without the
right to receive such issuance or distribution, on the exchange or in
the market, as the case may be, used to determine that day's Current
Market Price.
"Incentive Compensation" shall mean the performance-based Incentive
Compensation component of the management compensation payable to
Thornburg Mortgage Advisory Corporation ("the Manager") under the
Management Agreement.
"Issue Date" shall mean January 24, 1997.
"Junior Stock" shall mean the Common Stock and any other class or series
of Capital Stock of the Corporation over which the shares of Series A
Preferred Stock have preference or priority in the payment of dividends
or in the distribution of assets on any liquidation, dissolution or
winding up of the Corporation.
"Management Agreement" shall mean the Management Agreement, as amended,
in effect between the Corporation and the Manager providing for, among
other things, the management and administration of the Corporation by
the Manager.
"NYSE" shall mean the New York Stock Exchange.
"Parity Stock" shall have the meaning set forth in paragraph (a)(i) of
Section 8.
"Person" shall mean any individual, firm, partnership, corporation or
other entity and shall include any successor (by merger or otherwise) of
such entity.
"Press Release" shall have the meaning set forth in paragraph (a)(i) of
Section 5.
3
<PAGE> 4
"set apart for payment" shall be deemed to include, without any action
other than the following, the recording by the Corporation in its
accounting ledgers of any accounting or bookkeeping entry which
indicates, pursuant to a declaration of dividends or other distribution
by the Board of Directors, the allocation of funds to be so paid on any
series or class of capital stock of the Corporation; provided, however,
that if any funds for any class or series of Junior Stock or any class
or series of Parity Stock are placed in a separate account of the
Corporation or delivered to a disbursing, paying or other similar agent,
then "set apart for payment" with respect to the Series A Preferred
Stock shall mean placing such funds in a separate account or delivering
such funds to a disbursing, paying or other similar agent.
"Trading Day", as to any securities, shall mean any day on which such
securities are traded on the NYSE.
"Transaction" shall have the meaning set forth in paragraph (e) of
Section 7.
"Transfer Agent" means State Street Bank & Trust Company, or such other
transfer agent as may be designated by the Board of Directors or their
designee as the transfer agent for the Series A Preferred Stock.
"Voting Preferred Stock" shall have the meaning set forth in Section 9.
3. Dividends.
(a) The holders of Series A Preferred Stock shall be entitled to
receive, when and as declared by the Board of Directors out of funds legally
available for that purpose, cumulative dividends payable in cash in an amount
per share of Series A Preferred Stock equal to the greater of (i) the base
dividend of $0.605 per quarter (the "Base Rate") or (ii) the cash dividends
declared on the number of shares of Common Stock, or portion thereof, into which
a share of Series A Preferred Stock is convertible. The initial Dividend Period
shall commence on the Issue Date and end on March 31, 1997. The dividends
payable with respect to the portion of the initial Dividend Period commencing on
the Issue Date and ending on March 31, 1997, shall be determined solely by
reference to the Base Rate. The amount referred to in clause (ii) of this
paragraph (a) with respect to each succeeding Dividend Period shall be
determined as of the applicable Dividend Payment Date by multiplying the number
of shares of Common Stock, or portion thereof calculated to the fourth decimal
point, into which a share of Series A Preferred Stock would be convertible at
the opening of business on such Dividend Payment Date (based on the Conversion
Price then in effect) by the aggregate cash dividends payable or paid for such
Dividend Period in respect of a share of Common Stock outstanding as of the
record date for the payment of dividends on the Common Stock with respect to
such Dividend Period or, if different, with respect to the most recent quarterly
period for which dividends with respect to the Common Stock have been declared.
Such dividends shall be cumulative from the Issue Date, whether or not in any
Dividend Period or Periods such dividends shall be declared or there shall be
funds of the
4
<PAGE> 5
Corporation legally available for the payment of such dividends, and shall be
payable quarterly in arrears on the Dividend Payment Dates, commencing on the
first Dividend Payment Date after the Issue Date. Each such dividend shall be
payable in arrears to the holders of record of the Series A Preferred Stock,
as they appear on the stock records of the Corporation at the close of
business on a record date fixed by the Board of Directors which shall be not
more than 60 days prior to the applicable Dividend Payment Date and, within
such 60-day period, shall be the same date as the record date for the regular
quarterly dividend payable with respect to the Common Stock for the Dividend
Period to which such Dividend Payment Date relates (or, if there is no such
record date for such Common Stock, then such date as the Board of Directors
may fix). Accumulated, accrued but unpaid dividends for any past Dividend
Periods may be declared and paid at any time, without reference to any regular
Dividend Payment Date, to holders of record on such date, which date shall not
precede by more than 45 days the payment date thereof, as may be fixed by the
Board of Directors.
Upon a final administrative determination by the Internal Revenue
Service that the Corporation does not qualify as a real estate investment trust
in accordance with Section 856 of the Internal Revenue Code of 1986, as amended
(the "Code"), the Base Rate set forth in (a)(i) will be increased to $0.6375
until such time as the Corporation regains its status as a real estate
investment trust; provided, however, that if the Corporation contests its loss
of real estate investment trust status in Federal Court, following its receipt
of an opinion of nationally recognized tax counsel to the effect that there is a
reasonable basis to contest such loss of status, the Base Rate shall not be
increased during the pendency of such judicial proceeding; provided further,
however, that upon a final judicial determination in Federal Tax Court, Federal
District Court or the Federal Claims Court that the Corporation does not qualify
as a real estate investment trust, the Base Rate, will be increased as stated
above.
(b) The amount of dividends payable per share of Series A Preferred
Stock for the portion of the initial Dividend Period commencing on the Issue
Date and ending and including March 31, 1997, or any other period shorter than a
full Dividend Period, shall be computed ratably on the basis of twelve 30-day
months and a 360-day year. Holders of Series A Preferred Stock shall not be
entitled to any dividends, whether payable in cash, property or stock, in excess
of cumulative dividends, as herein provided, on the Series A Preferred Stock. No
interest, or sum of money in lieu of interest, shall be payable in respect of
any dividend payment or payments on the Series A Preferred Stock that may be in
arrears.
(c) So long as any of the shares of Series A Preferred Stock are
outstanding, except as described in the immediately following sentence, no
dividends shall be declared or paid or set apart for payment by the Corporation,
no Incentive Compensation payments shall be made under the Management Agreement
and no other distribution of cash or other property shall be declared or made
directly or indirectly by the Corporation with respect to any class or series of
Parity Stock for any period unless dividends equal to the full amount of
accumulated, accrued but unpaid dividends have been or contemporaneously are
declared and paid or declared and a sum sufficient for the payment thereof has
been or contemporaneously is set apart for such payment
5
<PAGE> 6
on the Series A Preferred Stock for all Dividend Periods terminating on or
prior to the Dividend Payment Date with respect to such class or series of
Parity Stock. When dividends are not paid in full or a sum sufficient for such
payment is not set apart, as aforesaid, all dividends declared upon the Series
A Preferred Stock and all dividends declared upon any other class or series of
Parity Stock shall be declared ratably in proportion to the respective amounts
of dividends accumulated, accrued but unpaid on the Series A Preferred Stock
and accumulated, accrued but unpaid on such Parity Stock.
(d) So long as any of the shares of Series A Preferred Stock are
outstanding, no dividends (other than dividends or distributions paid in shares
of or options, warrants or rights to subscribe for or purchase shares of Junior
Stock) shall be declared or paid or set apart for payment by the Corporation, no
Incentive Compensation shall be paid under the Management Agreement, and no
other distribution of cash or other property shall be declared or made directly
or indirectly by the Corporation with respect to any shares of Junior Stock, nor
shall any shares of Junior Stock be redeemed, purchased or otherwise acquired
(other than a redemption, purchase or other acquisition of Common Stock made for
purposes of any employee incentive or benefit plan of the Corporation or any
subsidiary) for any consideration (or any moneys be paid to or made available
for a sinking fund for the redemption of any shares of any such stock) directly
or indirectly by the Corporation (except by conversion into or exchange for
Junior Stock), nor shall any other cash or other property otherwise be paid or
distributed to or for the benefit of any holder of shares of Junior Stock in
respect thereof, directly or indirectly, by the Corporation unless in each case
(i) the full cumulative dividends (including all accumulated, accrued but unpaid
dividends) on all outstanding shares of Series A Preferred Stock and any other
Parity Stock of the Corporation shall have been paid or such dividends have been
declared and set apart for payment for all past Dividend Periods with respect to
the Series A Preferred Stock and all past Dividend Periods with respect to such
Parity Stock and (ii) sufficient funds shall have been paid or set apart for the
payment of the full dividend for the current Dividend Period with respect to the
Series A Preferred Stock and the current Dividend Period with respect to such
Parity Stock.
4. Liquidation Preference.
(a) In the event of any liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, before any payment or
distribution of the Corporation (whether capital or surplus) shall be made to or
set apart for the holders of Junior Stock, or any performance-based Incentive
Compensation payments shall be made under the Management Agreement, the holders
of shares of Series A Preferred Stock shall be entitled to receive Twenty Five
Dollars ($25.00) per share of Series A Preferred Stock (the "Liquidation
Preference"), plus an amount equal to all dividends (whether or not earned or
declared) accumulated, accrued but unpaid thereon to the date of final
distribution to such holders, but such holders shall not be entitled to any
further payment. Until the holders of the Series A Preferred Stock have been
paid the Liquidation Preference in full, plus an amount equal to all dividends
(whether or not earned or declared) accumulated, accrued but unpaid thereon to
the date of final distribution to such holders, no payment will be made to any
holder of Junior Stock, nor shall any
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performance-based Incentive Compensation payments be made under the Management
Agreement, upon the liquidation, dissolution or winding up of the Corporation.
If, upon any liquidation, dissolution or winding up of the Corporation, the
assets of the Corporation, or proceeds thereof, distributable among the holders
of Series A Preferred Stock shall be insufficient to pay in full the
preferential amount aforesaid and liquidating payments on any other shares of
any class or series of Parity Stock, then such assets, or the proceeds thereof,
shall be distributed among the holders of Series A Preferred Stock and any such
other Parity Stock ratably in the same proportion as the respective amounts
that would be payable on such Series A Preferred Stock and any such other
Parity Stock if all amounts payable thereon were paid in full. For the
purposes of this Section (4), (i) a consolidation or merger of the Corporation
with one or more corporations, (ii) a sale or transfer of all or substantially
all of the Corporation's assets, or (iii) a statutory share exchange shall not
be deemed to be a liquidation, dissolution or winding up, voluntary or
involuntary, of the Corporation.
(b) Subject to the rights of the holders of any shares of Parity
Stock, upon any liquidation, dissolution or winding up of the Corporation, after
payment shall have been made in full to the holders of Series A Preferred Stock
and any Parity Stock, any other series or class or classes of Junior Stock
shall, subject to the respective terms thereof, be entitled to receive any and
all assets remaining to be paid or distributed, and the holders of the Series A
Preferred Stock and any Parity Stock shall not be entitled to share therein.
5. Redemption at the Option of the Corporation.
(a) Shares of Series A Preferred Stock shall not be redeemable by
the Corporation prior to December 31, 1999. On and after December 31, 1999, the
Corporation, at its option, may redeem shares of Series A Preferred Stock, in
whole or from time to time in part, subject to the provisions described below:
(i) Shares of Series A Preferred Stock may be redeemed, in
whole or in part, at the option of the Corporation, at any time on or after
December 31, 1999 by issuing and delivering to each holder for each share of
Series A Preferred Stock to be redeemed such number of authorized but previously
unissued shares of Common Stock as equals the Liquidation Preference (excluding
any accumulated, accrued but unpaid dividends which are to be paid in cash as
provided below) per share of Series A Preferred Stock divided by the Conversion
Price as in effect as of the opening of business on the Call Date; provided,
however, that the Corporation may redeem shares of Series A Preferred Stock
pursuant to this provision only if for twenty (20) Trading Days, within any
period of thirty (30) consecutive Trading Days, including the last Trading Day
of such 30-day Trading Day period, the Current Market Price of the Common Stock
on each of such 20 Trading Days equals or exceeds the Conversion Price in effect
on such Trading Day. In order to exercise its redemption option pursuant to this
paragraph (a)(i), the Corporation must issue a press release announcing the
redemption (the "Press Release") prior to the opening of business on the second
Trading Day after the condition in the preceding sentence has, from time to
time, been satisfied. The Corporation may not issue a Press Release prior to
November 30,
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<PAGE> 8
1999. The Press Release shall announce the redemption and set forth the number
of shares of Series A Preferred Stock that the Corporation intends to redeem.
(ii) Shares of Series A Preferred Stock may also be redeemed,
in whole or in part, at the option of the Corporation at any time on or after
December 31, 1999 out of funds legally available therefor at a redemption price
payable in cash equal to $25.00 per share of Series A Preferred Stock (plus all
accumulated, accrued but unpaid dividends as provided below).
(iii) In the event of a redemption pursuant to Section 5(a)(i),
the Corporation shall pay in cash all accumulated, accrued but unpaid dividends
for all Dividend Periods ending prior to the Dividend Period in which the
redemption occurs; but no dividend shall accrue or be payable on the Series A
Preferred Stock to be redeemed for the Dividend Period in which the redemption
occurs unless the Call Date is after the record date for the dividend payable on
the Common Stock for such Dividend Period in which event each holder of Series
A Preferred Stock at the close of business on such dividend record date shall be
entitled to the dividend payable on such shares for the full Dividend Period on
the corresponding Dividend Payment Date notwithstanding the redemption of such
shares prior to such Dividend Payment Date and prior to the end of the Dividend
Period. In the event of a redemption pursuant to Section 5(a)(ii), the
Corporation shall pay in cash all accumulated, accrued but unpaid dividends for
all Dividend Periods ending prior to the Dividend Period in which the redemption
occurs, plus the dividend (determined by reference to the Base Rate if the Call
Date precedes the date which the dividend on the Common Stock is declared for
such Dividend Period) accrued from the beginning of the Dividend Period in which
the redemption occurs and ending on the Call Date, provided, however, that if
such Call Date is after the record date for such Dividend Period, each holder of
Series A Preferred Stock at the close of business on such dividend record date
shall be entitled to the dividend payable on such shares for the full Dividend
Period on the corresponding Dividend Payment Date notwithstanding the redemption
of such shares prior to such Dividend Payment Date and prior to the end of the
Dividend Period. Except as provided above, the Corporation shall make no
payment or allowance for accumulated or accrued dividends on shares of Series A
Preferred Stock called for redemption or on the shares of Common Stock issued
upon such redemption.
(b) Shares of Series A Preferred Stock shall be redeemed by the
Corporation on the date specified in the required notice to holders (the "Call
Date"). The Call Date shall be selected by the Corporation, shall be specified
in the notice of redemption and shall be not less than 30 days nor more than 60
days after the date on which the Corporation issued the Press Release, if such
redemption is pursuant to paragraph (a)(i) of this Section 5, and (ii) the date
notice of redemption is sent by the Corporation, if such redemption is pursuant
to paragraph (a)(ii) of this Section 5.
(c) If full cumulative dividends on all outstanding shares of Series
A Preferred Stock and any other class or series of Parity Stock of the
Corporation have not been paid or declared and set apart for payment, no shares
of Series A Preferred Stock may be redeemed unless
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<PAGE> 9
all outstanding shares of Series A Preferred Stock are simultaneously redeemed
and neither the Corporation nor any affiliate of the Corporation may purchase
or acquire shares of Series A Preferred Stock, otherwise than pursuant to a
purchase or exchange offer made on the same terms to all holders of shares of
Series A Preferred Stock.
(d) If the Corporation shall redeem shares of Series A Preferred
Stock pursuant to paragraph (a) of this Section 5, notice of such redemption
shall be given to each holder of record of the shares to be redeemed and, if
such redemption is pursuant to paragraph (a)(i) of this Section 5, such notice
shall be given not more than ten (10) Business Days after the date on which the
Corporation issues the Press Release. Such notice shall be provided by first
class mail, postage prepaid, at such holder's address as the same appears on the
stock records of the Corporation, or by publication in The Wall Street Journal
or The New York Times, or if neither such newspaper is then being published, any
other daily newspaper of national circulation not less than 30 nor more than 60
days prior to the Call Date. If the Corporation elects to provide such notice by
publication, it shall also promptly mail notice of such redemption to the
holders of the shares of Series A Preferred Stock to be redeemed. Neither the
failure to mail any required notice required by this paragraph (d), nor any
defect therein or in the mailing thereof to any particular holder, shall affect
the sufficiency of the notice or the validity of the proceedings for redemption
with respect to the other holders. Any notice which was mailed in the manner
herein provided shall be conclusively presumed to have been duly given on the
date mailed whether or not the holder receives the notice. Each mailed or
published notice shall state, as appropriate: (1) the Call Date; (2) the number
of shares of Series A Preferred Stock to be redeemed and, if fewer than all such
shares held by such holder are to be redeemed, the number of such shares to be
redeemed from such holder; (3) whether redemption will be for shares of Common
Stock pursuant to paragraph (a)(i) of this Section 5 or for cash pursuant to
paragraph (a)(ii) of this Section 5, and, if redemption will be for Common
Stock, the number of shares of Common Stock to be issued with respect to each
share of Series A Preferred Stock to be redeemed; (4) the place or places at
which certificates for such shares are to be surrendered for certificates
representing shares of Common Stock; and (5) the then-current Conversion Price.
Notice having been published or mailed as aforesaid, from and after the Call
Date (unless the Corporation shall fail to issue and make available the number
of shares of Common Stock and/or amount of cash necessary to effect such
redemption), (i) except as otherwise provided herein, dividends on the shares of
Series A Preferred Stock so called for redemption shall cease to accumulate or
accrue on the shares of Series A Preferred Stock called for redemption (except
that, in the case of a Call Date after a dividend record date and prior to the
related Dividend Payment Date, holders of Series A Preferred Stock on the
dividend record date will be entitled on such Dividend Payment Date to receive
the dividend payable on such shares), (ii) said shares shall no longer be deemed
to be outstanding, and (iii) all rights of the holders thereof as holders of
Series A Preferred Stock of the Corporation shall cease (except the rights to
receive the shares of Common Stock and/or cash payable upon such redemption,
without interest thereon, upon surrender and endorsement of their certificates
if so required and to receive any dividends payable thereon). The Corporation's
obligation to provide shares of Common Stock and/or cash in accordance with the
preceding sentence shall be deemed fulfilled if, on or before the Call Date, the
Corporation shall deposit
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with a bank or trust company (which may be an affiliate of the Corporation)
that has, or is an affiliate of a bank or trust company that has, a capital and
surplus of at least $50,000,000, such number of shares of Common Stock and such
amount of cash as is necessary for such redemption, in trust, with irrevocable
instructions that such shares of Common Stock and/or cash be applied to the
redemption of shares of Series A Preferred Stock so called for redemption. In
the case of any redemption pursuant to paragraph (a)(i) of this Section 5, at
the close of business on the Call Date, each holder of shares of Series A
Preferred Stock to be redeemed (unless the Corporation defaults in the delivery
of the shares of Common Stock or cash payable on such Call Date) shall be
deemed to be the record holder of the number of shares of Common Stock into
which such shares of Series A Preferred Stock are to be converted at a
redemption, regardless of whether such holder has surrendered the certificates
representing the shares of Series A Preferred Stock to be so redeemed. No
interest shall accrue for the benefit of the holders of shares of Series A
Preferred Stock to be redeemed on any cash so set aside by the Corporation.
Subject to applicable escheat laws, any such cash unclaimed at the end of two
years from the Call Date shall revert to the general funds of the Corporation,
after which reversion the holders of shares of Series A Preferred Stock so
called for redemption shall look only to the general funds of the Corporation
for the payment of such cash.
As promptly as practicable after the surrender in accordance with said
notice of the certificates for any such shares so redeemed (properly endorsed or
assigned for transfer, if the Corporation shall so require and if the notice
shall so state), such certificates shall be exchanged for certificates
representing shares of Common Stock and/or any cash (without interest thereon)
for which such shares have been redeemed in accordance with such notice. If
fewer than all the outstanding shares of Series A Preferred Stock are to be
redeemed, shares to be redeemed shall be selected by the Corporation from
outstanding shares of Series A Preferred Stock not previously called for
redemption by lot or, with respect to the number of shares of Series A Preferred
Stock held of record by each holder of such shares, pro rata (as nearly as may
be) or by any other method as may be determined by the Board of Directors in its
discretion to be equitable. If fewer than all the shares of Series A Preferred
Stock represented by any certificate are redeemed, then a new certificate
representing the unredeemed shares shall be issued without cost to the holders
thereof.
(e) In the case of any redemption pursuant to paragraph (a)(i) of
this Section 5, no fractional shares of Common Stock or scrip representing
fractions of shares of Common Stock shall be issued upon redemption of the
shares of Series A Preferred Stock. Instead of any fractional interest in a
share of Common Stock that would otherwise be deliverable upon redemption of
shares of Series A Preferred Stock, the Corporation shall pay to the holder of
such share an amount in cash (rounded to the nearest cent) based upon the
Current Market Price of the Common Stock on the Trading Day immediately
preceding the Call Date. If more than one share shall be surrendered for
redemption at one time by the same holder, the number of full shares of Common
Stock issuable upon redemption thereof shall be computed on the basis of the
aggregate number of shares of Series A Preferred Stock so surrendered.
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(f) In the case of any redemption pursuant to paragraph (a)(i) of
this Section 5, the Corporation covenants that any shares of Common Stock issued
upon redemption of shares of Series A Preferred Stock shall be validly issued,
fully paid and non-assessable. The Corporation shall list on the NYSE, subject
to official notice of issuance, the shares of Common Stock required to be
delivered upon any such redemption of shares of Series A Preferred Stock.
The Corporation shall take any action necessary to ensure that any
shares of Common Stock issued upon the redemption of Series A Preferred Stock
are freely transferable and not subject to any resale restrictions under the
Act, or any applicable state securities or blue sky laws (other than any shares
of Common Stock issued upon redemption of any Series A Preferred Stock which are
held by an "affiliate" (as defined in Rule 144 under the Act) of the
Corporation).
The Company will pay any and all documentary stamp or similar issue or
transfer taxes payable in respect of the issue or delivery of shares of Common
Stock or other securities or property upon redemption of shares of Preferred
Stock pursuant hereto; provided, however, that the Company shall not be required
to pay any tax that may be payable in respect of any transfer involved in the
issue or delivery of shares of Common Stock or other securities or property in a
name other than that of the holder of the shares of Preferred Stock to be
redeemed, and no such issue or delivery shall be made unless and until the
person requesting such issue or delivery has paid to the Company the amount of
any such tax or established, to the reasonable satisfaction of the Company, that
such tax has been paid.
6. Stock To Be Retired.
All shares of Series A Preferred Stock which shall have been issued and
reacquired in any manner by the Corporation shall be restored to the status of
authorized, but unissued shares of Common Stock, par value $.01 per share. The
Corporation may also retire any unissued shares of Series A Preferred Stock, and
such shares shall then be restored to the status of authorized but unissued
shares of Common Stock, par value $.01 per share.
7. Conversion.
Holders of shares of Series A Preferred Stock shall have the right to
convert all or a portion of such shares into shares of Common Stock, as follows:
(a) Subject to and upon compliance with the provisions of this
Section 7, a holder of shares of Series A Preferred Stock shall have the right,
at such holder's option, at any time to convert such shares, in whole or in
part, into the number of fully paid and non-assessable shares of authorized but
previously unissued shares of Common Stock per each share of Series A Preferred
Stock obtained by dividing the Liquidation Preference (excluding any
accumulated, accrued but unpaid dividends) per share of Series A Preferred Stock
by the Conversion Price (as in effect at the time and on the date provided for
in the last subparagraph (b) of this Section 7) and by surrendering such shares
to be converted, such surrender to be made in the manner provided
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in paragraph (b) of this Section 7; provided, however, that the right to
convert shares of Series A Preferred Stock called for redemption pursuant to
Section 5 shall terminate at the close of business on the Call Date fixed for
such redemption, unless the Corporation shall default in making payment of
shares of Common Stock and/or cash payable upon such redemption under Section
5.
(b) In order to exercise the conversion right, the holder of each
share of Series A Preferred Stock to be converted shall surrender the
certificate representing such share, duly endorsed or assigned to the
Corporation or in blank, at the office of the Transfer Agent, accompanied by
written notice to the Corporation that the holder thereof elects to convert such
share of Series A Preferred Stock. Unless the shares issuable on conversion are
to be issued in the same name as the name in which such share of Series A
Preferred Stock is registered, each share surrendered for conversion shall be
accompanied by instruments of transfer, in form satisfactory to the Corporation,
duly executed by the holder or such holder's duly authorized attorney and an
amount sufficient to pay any transfer or similar tax (or evidence reasonably
satisfactory to the Corporation demonstrating that such taxes have been paid).
Holders of shares of Series A Preferred Stock at the close of business
on a dividend payment record date shall be entitled to receive the dividend
payable on such shares on the corresponding Dividend Payment Date
notwithstanding the conversion thereof following such dividend payment record
date and prior to such Dividend Payment Date. Except as provided above, the
Corporation shall make no payment or allowance for unpaid dividends, whether or
not in arrears, on converted shares or for dividends on the shares of Common
Stock issued upon such conversion.
As promptly as practicable after the surrender of certificates for
shares of Series A Preferred Stock as aforesaid, the Corporation shall issue and
shall deliver at such office to such holder, or send on such holder's written
order, a certificate or certificates for the number of full shares of Common
Stock issuable upon the conversion of such shares of Series A Preferred Stock,
and any fractional interest in respect of a share of Common Stock arising upon
such conversion shall be settled as provided in paragraph (c) of this Section 7.
Each conversion shall be deemed to have been effected immediately prior
to the close of business on the date on which the certificates for shares of
Series A Preferred Stock shall have been surrendered and such notice received by
the Corporation as aforesaid, and the Person or Persons in whose name or names
any certificate or certificates for shares of Common Stock shall be issuable
upon such conversion shall be deemed to have become the holder or holders of
record of the shares represented thereby at such time on such date and such
conversion shall be at the Conversion Price in effect at such time on such date
unless the stock transfer books of the Corporation shall be closed on that date,
in which event such Person or Persons shall be deemed to have become such holder
or holders of record at the close of business on the next succeeding day on
which such stock transfer books are open, but such conversion shall be at the
Conversion Price in effect on the date on which such shares shall have been
surrendered and such notice
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received by the Corporation. If the dividend record date for the Series A
Preferred Stock and Common Stock do not coincide, and the preceding sentence
does not operate to ensure that a holder of shares of Series A Preferred Stock
whose shares are converted into Common Stock does not receive dividends on both
the shares of Series A Preferred Stock and the Common Stock into which such
shares are converted for the same Dividend Period, then notwithstanding
anything herein to the contrary, it is the intent, and the Transfer Agent is
authorized to ensure that no conversion after the earlier of such record dates
will be accepted until after the latter of such record dates; conversely, if
the dividend record date for the Series A Preferred Stock and the Common Stock
do not coincide, and a holder of shares of Series A Preferred Stock whose
shares are converted into Common Stock would receive a dividend on neither the
Series A Preferred Stock nor the Common Stock for the related Dividend Period,
the Transfer Agent is likewise authorized to defer giving effect to the
conversion until after the latter of such record dates.
(c) No fractional share of Common Stock or scrip representing
fractions of a share of Common Stock shall be issued upon conversion of the
shares of Series A Preferred Stock. Instead of any fractional interest in a
share of Common Stock that would otherwise be deliverable upon the conversion of
shares of Series A Preferred Stock, the Corporation shall pay to the holder of
such share an amount in cash based upon the Current Market Price of the Common
Stock on the Trading Date immediately preceding the date of conversion. If more
than one share shall be surrendered for conversion at one time by the same
holder, the number of full shares of Common Stock issuable upon conversion
thereof shall be computed on the basis of the aggregate number of shares of
Series A Preferred Stock so surrendered.
(d) The Conversion Price shall be adjusted from time to time as
follows:
(i) If the Corporation shall after the Issue Date (A) pay a
dividend or make a distribution on its Capital Stock in shares of Common Stock,
(B) subdivide its outstanding Common Stock into a greater number of shares, (C)
combine its outstanding Common Stock into a smaller number of shares or (D)
issue any shares of Capital Stock by reclassification of its outstanding Common
Stock, the Conversion Price in effect at the opening of business on the day
following the date fixed for the determination of shareholders entitled to
receive such dividend or distribution or at the opening of business on the day
following the day on which such subdivision, combination or reclassification
becomes effective, as the case may be, shall be adjusted so that the holder of
any share of Series A Preferred Stock thereafter surrendered for conversion
shall be entitled to receive the number of shares of Common Stock (or fraction
of a share of Common Stock) that such holder would have owned or have been
entitled to receive after the happening of any of the events described above had
such share of Series A Preferred Stock been converted immediately prior to the
record date in the case of a dividend or distribution or the effective date in
the case of a subdivision, combination or reclassification. An adjustment made
pursuant to this paragraph (d)(i) of Section 7 shall become effective
immediately after the opening of business on the day next following the record
date (except as provided in paragraph 7 below) in the case of a dividend or
distribution and shall become effective immediately after the opening of
business
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on the day next following the effective date in the case of a subdivision,
combination or reclassification.
(ii) If the Corporation shall issue after the Issue Date
rights, options or warrants to all holders of Common Stock entitling them (for a
period expiring within 45 days after the record date described below in this
paragraph (d)(ii) of this Section 7) to subscribe for or purchase Common Stock
at a price per share less than the Fair Market Value per share of the Common
Stock on the record date for the determination of shareholders entitled to
receive such rights, options or warrants, then the Conversion Price in effect at
the opening of business on the day next following such record date shall be
adjusted to equal the price determined by multiplying (A) the Conversion Price
in effect immediately prior to the opening of business on the day following the
date fixed for such determination by (B) a fraction, the numerator of which
shall be the sum of (X) the number of shares of Common Stock outstanding on the
close of business on the date fixed for such determination and (Y) the number of
shares that could be purchased at such Fair Market Value from the aggregate
proceeds to the Corporation from the exercise of such rights, options or
warrants for Common Stock, and the denominator of which shall be the sum of (XX)
the number of shares of Common Stock outstanding on the close of business on the
date fixed for such determination and (YY) the number of additional shares of
Common Stock offered for subscription or purchase pursuant to such rights or
warrants. Such adjustment shall become effective immediately after the opening
of business on the date next following such record date (except as provided in
paragraph h below). In determining whether any rights, options or warrants
entitle the holders of Common Stock to subscribe for or purchase Common Stock at
less than such Fair Market Value, there shall be taken into account any
consideration received by the Corporation upon issuance and upon exercise of
such rights, options or warrants, the value of such consideration, if other than
cash, to be determined in good faith by the Board of Directors.
(iii) If the Corporation shall after the Issue Date make a
distribution on its Common Stock other than in cash or shares of Common Stock
(including any distribution in securities other than rights, options or warrants
as set forth below) (each of the foregoing being referred to herein as a
"distribution"), then the Conversion Price in effect at the opening of business
on the next day following the record date for the determination of shareholders
entitled to receive such distribution shall be adjusted to equal the price
determined by multiplying (A) the Conversion Price in effect immediately prior
to the opening of business on the day following the record date by (B) a
fraction, the numerator of which shall be the difference between (X) the number
of shares of Common Stock outstanding on the close of business on the record
date and (Y) the number of shares determined by dividing (aa) the aggregate
value of the property being distributed by (bb) the Fair Market Value per share
of Common Stock on the record date, and the denominator of which shall be the
number of shares of Common Stock outstanding on the close of business on the
record date. Such adjustment shall become effective immediately after the
opening of business on the day next following such record date (except as
provided below). The value of the property being distributed shall be as
determined in good faith by the Board of Directors. Neither the issuance by the
Corporation of rights, options or warrants to subscribe for or purchase
securities of the Corporation nor the exercise thereof shall be deemed a
distribution
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under this paragraph. Notwithstanding the foregoing provisions of this
paragraph, the Corporation will not make any distribution that, when taken
together with all prior distributions after the Issue Date, would result in an
aggregate adjustment constituting 50% or more of the Conversion Price on the
Issue Date without obtaining prior consent by the affirmative vote of at least
66 2/3% of the votes entitled to be cast by the holders of Series A Preferred
Stock and any other class or series of preferred stock at the time outstanding
that constitutes Parity Stock, voting together as a single class, given in
Person or by proxy, either in writing without a meeting or by vote at any
meeting called for the purpose.
(iv) No adjustment in the Conversion Price shall be required
unless such adjustment would require a cumulative increase or decrease of at
least 1% in such price; provided, however, that any adjustments that by reason
of this paragraph (d)(iv)are not required to be made shall be carried forward
and taken into account in any subsequent adjustment until made; and provided,
further, that any adjustment shall be required and made in accordance with the
provisions of this Section 7 (other than paragraph (d)(iv)) not later than such
time as may be required in order to preserve the tax-free nature of a
distribution to the holders of shares of Common Stock. Notwithstanding any other
provisions of this Section 7, the Corporation shall not be required to make any
adjustment of the Conversion Price for the issuance of (A) any shares of Common
Stock pursuant to any plan providing for the reinvestment of dividends or
interest payable on securities of the Corporation and the investment of optional
amounts in shares of Common Stock under such plan or (B) any options, rights or
shares of Common Stock pursuant to any stock option, stock purchase or other
stock-based plan maintained by the Corporation. All calculations under this
Section 7 shall be made to the nearest cent (with $.005 being rounded upward) or
to the nearest one-tenth of a share (with .05 of a share being rounded upward),
as the case may be. Anything in this paragraph (d) of this Section 7 to the
contrary notwithstanding, the Corporation shall be entitled, to the extent
permitted by law, to make such reductions in the Conversion Price, in addition
to those required by this paragraph (d), as it in its discretion shall determine
to be advisable in order that any stock dividends, subdivision of shares,
reclassification or combination of shares, distribution of rights or warrants to
purchase stock or securities, or a distribution of other assets (other than cash
dividends) hereafter made by the Corporation to its shareholders shall not be
taxable, or if that is not possible, to diminish any income taxes that are
otherwise payable because of such event.
(e) If the Corporation shall be a party to any transaction
(including without limitation a merger, consolidation, statutory share exchange,
issuer or self tender offer for all or a substantial portion of the shares of
Common Stock outstanding, sale of all or substantially all of the Corporation's
assets or recapitalization of the Common Stock, but excluding any transaction as
to which paragraph (d)(i) of this Section 7 applies) (each of the foregoing
being referred to herein as a "Transaction"), in each case as a result of which
shares of Common Stock shall be converted into the right to receive stock,
securities or other property (including cash or any combination thereof), each
share of Series A Preferred Stock which is not converted into the right to
receive stock, securities or other property in connection with such Transaction
shall thereupon be convertible into the kind and amount of shares of stock,
securities and other property (including
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cash or any combination thereof) receivable upon such consummation by a holder
of that number of shares of Common Stock into which one share of Series A
Preferred Stock was convertible immediately prior to such Transaction. The
Corporation shall not be a party to any Transaction unless the terms of such
Transaction are consistent with the provisions of this paragraph (e), and it
shall not consent or agree to the occurrence of any Transaction until the
Corporation has entered into an agreement with the successor or purchasing
entity, as the case may be, for the benefit of the holders of the Series A
Preferred Stock that will contain provisions enabling the holders of the Series
A Preferred Stock that remain outstanding after such Transaction to convert into
the consideration received by holders of Common Stock at the Conversion Price in
effect immediately prior to such Transaction. The provisions of this paragraph
(e) shall similarly apply to successive Transactions.
(f) If:
(i) the Corporation shall declare a dividend (or any other
distribution) on the Common Stock (other than cash dividends and cash
distributions); or
(ii) the Corporation shall authorize the granting to all
holders of the Common Stock of rights or warrants to subscribe for or
purchase any shares of any class or series of capital stock or any other
rights or warrants; or
(iii) there shall be any reclassification of the outstanding
Common Stock or any consolidation or merger to which the Corporation is
a party and for which approval of any shareholders of the Corporation is
required, or a statutory share exchange, or an issuer or self tender
offer by the Corporation for all or a substantial portion of its
outstanding shares of Common Stock (or an amendment thereto changing the
maximum number of shares sought or the amount or type of consideration
being offered therefor) or the sale or transfer of all or substantially
all of the assets of the Corporation as an entirety; or
(iv) there shall occur the voluntary or involuntary
liquidation, dissolution or winding up of the Corporation,
then the Corporation shall cause to be filed with the Transfer Agent and shall
cause to be mailed to each holder of shares of Series A Preferred Stock at such
holder's address as shown on the stock records of the Corporation, as promptly
as possible, but at least 15 days prior to the applicable date hereinafter
specified, a notice stating (A) the record date for the payment of such
dividend, distribution or rights or warrants, or, if a record date is not
established, the date as of which the holders of Common Stock of record to be
entitled to such dividend, distribution or rights or warrants are to be
determined or (B) the date on which such reclassification, consolidation,
merger, statutory share exchange, sale, transfer, liquidation, dissolution or
winding up is expected to become effective, and the date as of which it is
expected that holders of Common Stock of record shall be entitled to exchange
their shares of Common Stock for securities or other
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property, if any, deliverable upon such reclassification, consolidation,
merger, statutory share exchange, sale, transfer, liquidation, dissolution or
winding up or (C) the date on which such tender offer commenced, the date on
which such tender offer is scheduled to expire unless extended, the
consideration offered and the other material terms thereof (or the material
terms of any amendment thereto). Failure to give or receive such notice or any
defect therein shall not affect the legality or validity of the proceedings
described in this Section 7.
(g) Whenever the Conversion Price is adjusted as herein provided,
the Corporation shall promptly file with the Transfer Agent an officer's
certificate setting forth the Conversion Price after such adjustment and setting
forth a brief statement of the facts requiring such adjustment which certificate
shall be conclusive evidence of the correctness of such adjustment absent
manifest error. Promptly after delivery of such certificate, the Corporation
shall prepare a notice of such adjustment of the Conversion Price setting forth
the adjusted Conversion Price and the effective date such adjustment becomes
effective and shall mail such notice of such adjustment of the Conversion Price
to each holder of shares of Series A Preferred Stock at such holder's last
address as shown on the stock records of the Corporation.
(h) In any case in which paragraph (d) of this Section 7 provides
that an adjustment shall become effective on the day next following the record
date for an event, the Corporation may defer until the occurrence of such event
(A) issuing to the holder of any share of Series A Preferred Stock converted
after such record date and before the occurrence of such event of the additional
Common Stock issuable upon such conversion by reason of the adjustment required
by such event over and above the Common Stock issuable upon such conversion
before giving effect to such adjustment and (B) paying to such holder any amount
of cash in lieu of any fraction pursuant to paragraph (c) of this Section 7.
(i) There shall be no adjustment of the Conversion Price in case of
the issuance of any Capital Stock of the Corporation in a reorganization,
acquisition or other similar transaction, except as specifically set forth in
this Section 7.
(j) If the Corporation shall take any action affecting the Common
Stock, other than action described in this Section 7, that in the opinion of the
Board of Directors would materially adversely affect the conversion rights of
the holders of Series A Preferred Stock, the Conversion Price for the Series A
Preferred Stock may be adjusted, to the extent permitted by law, in such manner,
if any, and at such time as the Board of Directors, in its sole discretion, may
determine to be equitable under the circumstances.
(k) The Corporation shall at all times reserve and keep available,
free from preemptive rights, out of the aggregate of its authorized but unissued
Common Stock solely for the purpose of effecting conversion of the Series A
Preferred Stock, the full number of shares of Common Stock deliverable upon the
conversion of all outstanding shares of Series A Preferred Stock not theretofore
converted into Common Stock. For purposes of this paragraph (k), the number of
shares of Common Stock that shall be deliverable upon the conversion of all
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outstanding shares of Series A Preferred Stock shall be computed as if at the
time of computation all such outstanding shares were held by a single holder (
and without regard to the ownership Limit set forth in the Articles of
Incorporation of the Corporation).
The Corporation covenants that any shares of Common Stock issued upon
conversion of the shares of Series A Preferred Stock shall be validly issued,
fully paid and nonassessable.
The Corporation shall use its best efforts to list the shares of Common
Stock required to be delivered upon conversion of the shares of Series A
Preferred Stock, prior to such delivery, upon the NYSE (subject to notice of
issuance) at the time of such delivery.
The Corporation shall take any action necessary to ensure that any
shares of Common Stock issued upon conversion of shares of Series A Preferred
Stock are freely transferable and not subject to any resale restrictions under
the Act, or any applicable state securities or blue sky laws (other than any
shares of Common Stock which are held by an "affiliate" (as defined in Rule 144
under the Act)).
(l) The Corporation will pay any and all documentary stamp or
similar issue or transfer taxes payable in respect of the issue or delivery of
shares of Common Stock or other securities or property on conversion or
redemption of shares of Series A Preferred Stock pursuant hereto; provided,
however, that the Corporation shall not be required to pay any tax that may be
payable in respect of any transfer involved in the issue or delivery of shares
of Common Stock or other securities or property in a name other than that of the
holder of the shares of Series A Preferred Stock to be converted or redeemed,
and no such issue or delivery shall be made unless and until the Person
requesting such issue or delivery has paid to the Corporation the amount of any
such tax or established, to the reasonable satisfaction of the Corporation, that
such tax has been paid.
8. Ranking.
Any class or series of Capital Stock of the Corporation shall be deemed
to rank:
(a) prior or senior to the Series A Preferred Stock, as to the
payment of dividends and as to distribution of assets upon liquidation,
dissolution or winding up, if the holders of such class or series shall be
entitled to the receipt of dividends or of amounts distributable upon
liquidation, dissolution or winding up, as the case may be, in preference or
priority to the holders of Series A Preferred Stock;
(b) on a parity with the Series A Preferred Stock, as to the
payment of dividends and as to distribution of assets upon liquidation,
dissolution or winding up, whether or not the dividend rates, dividend payment
dates or redemption or liquidation prices per share thereof be different from
those of the Series A Preferred Stock, if the holders of such class of stock or
series and the Series A Preferred Stock shall be entitled to the receipt of
dividends and of amounts
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distributable upon liquidation, dissolution or winding up in proportion to
their respective amounts of accrued but unpaid dividends per share or
liquidation preferences, without preference or priority one over the other
("Parity Stock"); and
(c) junior to the Series A Preferred Stock, as to the payment of
dividends or as to the distribution of assets upon liquidation, dissolution or
winding up, if such stock or series shall be Common Stock or if the holders of
Series A Preferred Stock shall be entitled to receipt of dividends or of amounts
distributable upon liquidation, dissolution or winding up, as the case may be,
in preference or priority to the holders of shares of such class or series
("Junior Stock").
9. Voting.
(a) If and whenever (i) six quarterly dividends (whether or not
consecutive) payable on the Series A Preferred Stock or any series or class of
Parity Stock shall be in arrears (which shall, with respect to any such
quarterly dividend, mean that any such dividend has not been paid in full),
whether or not earned or declared, or (ii) the consolidated shareholders' equity
of the Corporation (determined in accordance with generally accepted accounting
principles which gives effect to any adjustment for the net unrealized gain or
loss on assets available for sale) at the end of any calendar quarter is less
than 150% of the sum of the aggregate Liquidation Preference (excluding any
accumulated, accrued but unpaid dividends) of the then outstanding Series A
Preferred Stock and the aggregate liquidation preference (excluding any
accumulated, accrued but unpaid dividends) of any then outstanding Parity Stock,
the number of directors then constituting the Board of Directors shall be
increased by two (if not already increased by reason of similar types of
provisions with respect to Voting Preferred Stock (as defined below)) and the
holders of shares of Series A Preferred Stock, together with the holders of
shares of every other class or series of Parity Stock (any other such series,
the "Voting Preferred Stock"), voting as a single class regardless of series,
shall be entitled to elect the two additional directors to serve on the Board of
Directors at any annual meeting of shareholders or special meeting held in place
thereof, or at a special meeting of the holders of the Series A Preferred Stock
and the Voting Preferred Stock called as hereinafter provided. Notwithstanding
anything herein to the contrary, if any class or series of Voting Preferred
Stock (with which the Series A Preferred Stock is entitled to vote as a single
class) is entitled to elect two directors as a result of a failure to maintain a
specified level of consolidated shareholders' equity required by the terms of
such Voting Preferred Stock, then when such entitlement is triggered, the
separate entitlement to elect two directors pursuant to Section 9(a)(ii) shall
be suspended. Whenever the entitlement pursuant to Section 9(a)(ii) of the
Series A Preferred Stock (together with holders of Voting Preferred Stock voting
as a single class regardless of series) to vote is suspended as described in the
preceding sentence, the terms of office of all Persons elected as directors
pursuant to Section 9(a)(ii) shall terminate upon the election of the two
directors elected pursuant to a vote of the Series A Preferred Stock and Voting
Preferred Stock voting as a single class as a result of a failure to maintain a
specified level of consolidated shareholders' equity required by the terms of
such class or series of Voting Preferred Stock. Whenever (1) in the case of an
arrearage in dividends described in clause (i), all arrears in dividends on the
Series A Preferred Stock and the Voting
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Preferred Stock then outstanding shall have been paid and dividends thereon for
the current quarterly dividend period shall have been paid or declared and set
apart for payment, or (2) in the case of a shortfall in the Corporation's
consolidated shareholders' equity described in clause (ii), the consolidated
shareholders' equity of the Corporation (determined in accordance with
generally accepted accounting principles and giving effect to any adjustment
for the net unrealized gain or loss on assets available for sale) at the end of
any subsequent calendar quarter equals or exceeds 150% of the sum of the
aggregate Liquidation Preference (excluding any accumulated, accrued but unpaid
dividends) of the then outstanding Series A Preferred Stock and the aggregate
liquidation preference (excluding any accumulated, accrued but unpaid
dividends) of the then outstanding Parity Stock, then the right of the holders
of the Series A Preferred Stock and the Voting Preferred Stock to elect such
additional two directors shall cease (but subject always to the same provision
for the vesting of such voting rights in the case of any similar future
arrearages in six quarterly dividends or shortfall in consolidated
shareholders' equity), and the terms of office of all Persons elected as
directors by the holders of the Series A Preferred Stock and the Voting
Preferred Stock shall forthwith terminate and the number of directors
constituting the Board of Directors shall be reduced accordingly. At any time
after such voting power shall have been so vested in the holders of Series A
Preferred Stock and the Voting Preferred Stock, if applicable, the Secretary of
the Corporation may, and upon the written request of any holder of Series A
Preferred Stock (addressed to the Secretary at the principal office of the
Corporation) shall, call a special meeting of the holders of the Series A
Preferred Stock and of the Voting Preferred Stock for the election of the two
Directors to be elected by them as herein provided, such call to be made by
notice similar to that provided in the Bylaws of the Corporation for a special
meeting of the shareholders or as required by law. If any such special meeting
required to be called as above provided shall not be called by the Secretary
within 20 days after receipt of any such request, then any holder of Series A
Preferred Stock may call such meeting, upon the notice above provided, and for
that purpose shall have access to the stock books of the Corporation. The
Directors elected at any such special meeting shall hold office until the next
annual meeting of the shareholders or special meeting held in lieu thereof if
such office shall not have previously terminated as above provided. If any
vacancy shall occur among the Directors elected by the holders of the Series A
Preferred Stock and the Voting Preferred Stock, a successor shall be elected by
the Board of Directors, upon the nomination of the then-remaining Director
elected by the holders of the Series A Preferred Stock and the Voting Preferred
Stock or the successor of such remaining Director, to serve until the next
annual meeting of the shareholders or special meeting held in place thereof if
such office shall not have previously terminated as provided above.
(b) So long as any shares of Series A Preferred Stock are
outstanding, in addition to any other vote or consent of shareholders required
by law or by the Articles of Incorporation of the Corporation, as amended, the
affirmative vote of at least 66 2/3% of the votes entitled to be cast by the
holders of the Series A Preferred Stock, given in Person or by proxy, either in
writing without a meeting or by vote at any meeting called for the purpose,
shall be necessary for effecting or validating:
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(i) Any amendment, alteration or repeal of any of the
provisions of these Articles Supplementary to the Articles of
Incorporation, the Articles of Incorporation or the Bylaws of the
Corporation that materially adversely affects the voting powers, rights
or preferences of the holders of the Series A Preferred Stock; provided,
however, that the amendment of the provisions of the Articles of
Incorporation so as to authorize or create, or to increase the
authorized amount of, any Junior Stock or any shares of any class
ranking on a parity with the Series A Preferred Stock shall not be
deemed to materially adversely affect the voting powers, rights or
preferences of the holders of Series A Preferred Stock; or
(ii) The authorization or creation of, or the increase in the
authorized amount of, any shares of any class or any security
convertible into shares of any class ranking prior or senior to the
Series A Preferred Stock in the distribution of assets on any
liquidation, dissolution or winding up of the Corporation or in the
payment of dividends; provided, however, that no such vote of the
holders of Series A Preferred Stock shall be required if, at or prior to
the time when such amendment, alteration or repeal is to take effect, or
when the issuance of any such prior shares or convertible security is to
be made, as the case may be, provision is made for the redemption of all
shares of Series A Preferred Stock at the time outstanding.
For purposes of the foregoing provisions and all other voting rights
under these Articles Supplementary, each share of Series A Preferred Stock shall
have one (1) vote per share, except that when any other class or series of
preferred stock shall have the right to vote with the Series A Preferred Stock
as a single class on any matter, then the Series A Preferred Stock and such
other class or series shall have with respect to such matters one (1) vote per
$25.00 of the stated Liquidation Preference. Except as otherwise required by
applicable law or as set forth herein, the Series A Preferred Stock shall not
have any relative, participating, optional or other special voting rights and
powers other than as set forth herein, and the consent of the holders thereof
shall not be required for the taking of any corporate action.
10. Record Holders.
The Corporation and the Transfer Agent may deem and treat the record
holder of any share of Series A Preferred Stock as the true and lawful owner
thereof for all purposes, and neither the Corporation nor the Transfer Agent
shall be affected by any notice to the contrary.
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IN WITNESS WHEREOF, the Corporation has caused these presents to be
signed in its name and on its behalf by its President and witnessed by its
Secretary on January 20, 1997.
WITNESS: THORNBURG MORTGAGE ASSET CORPORATION
/s/ Michael B. Jeffers /s/ Larry A. Goldstone
- ---------------------------------- -----------------------------------
Michael B. Jeffers, Secretary Larry A. Goldstone, President
THE UNDERSIGNED, President of Thornburg Mortgage Asset Corporation, who
executed on behalf of the Corporation the 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
material respects under the penalties of perjury.
/s/ Larry A. Goldstone
-----------------------------
Larry A. Goldstone, President
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EXHIBIT 10.4
THORNBURG MORTGAGE ASSET CORPORATION
AMENDMENT TO 1992 STOCK OPTION PLAN
December 18, 1996
The Amended and Restated 1992 Stock Option Plan (the "Plan") of Thornburg
Mortgage Asset Corporation, a Maryland corporation (the "Corporation") is
amended, effective December 18, 1996, as follows:
1. Under Section 2. DEFINITIONS, a new section (r)(r) is added, after section
(r), as follows:
(rr) "Preferred Stock" shall mean the preferred stock, par value $.01, of
the Corporation, of any class and series, as shall be authorized from time
to time.
2. A new subparagraph 7 (a)(v) is added after subparagraph 7(a)(iv), as
follows:
(v) Issuance of Preferred Stock As of the pricing date of any firm
commitment public offering or direct placement of Preferred Stock, a number
of shares of Common Stock equal to the total number of shares of Common
Stock into which the Preferred Stock may be converted, exercisable at the
price of the Common Stock on the pricing date of the Preferred Stock that
is sold under the offering (including shares sold under the underwriter's
overallotment) multiplied by .002. Options issued to Class I Participants
with respect to Preferred Stock shall not be exercisable until the
Preferred Stock with respect to which such Options were issued is converted
into Common Stock.
3. This amendment shall be effective as of December 18, 1996.
To record the amendment of the Plan in the form set forth above by the
Board of Directors effective as of December 18, 1996, the Company has caused
this amendment to the Plan to be executed in the name and on behalf of the
Company.
THORNBURG MORTGAGE ASSET CORPORATION
By: /s/ Larry A. Goldstone
---------------------------------
Larry A. Goldstone, President
