MERGER AGREEMENT
DATED AS OF JULY 22, 1999
BY AND AMONG
IMPERIAL CREDIT INDUSTRIES, INC.
ICCMIC ACQUISITION CORP.
AND
IMPERIAL CREDIT COMMERCIAL MORTGAGE INVESTMENT CORP.
TABLE OF CONTENTS
Page
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ARTICLE I
THE MERGER.................................................................................................. 2
Section 1.1 The Merger............................................................................. 2
Section 1.2 Effective Time......................................................................... 2
Section 1.3 Closing of the Merger.................................................................. 2
Section 1.4 Effects of the Merger.................................................................. 2
Section 1.5 Charter and Bylaws; Amendments of Governing
Documents of Surviving Corporation Subsidiaries........................................ 2
Section 1.6 Board and Officers of the Surviving Corporation........................................ 3
Section 1.7 Conversion of Shares, Cancellation of Shares........................................... 3
Section 1.8 Appraisal of the Management Contract Termination
Fee.................................................................................... 3
Section 1.9 Payment for Shares..................................................................... 5
Section 1.10 Stock Option and Other Plans........................................................... 6
Section 1.11 Stockholders' Meeting; SEC Materials................................................... 9
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................................................... 11
Section 2.1 Organization and Qualification of the Company.......................................... 11
Section 2.2 Corporate Authorization................................................................ 11
Section 2.3 SEC Reports; Financial Statements...................................................... 12
Section 2.4 Consents and Approvals; No Violations.................................................. 12
Section 2.5 Opinion of Financial Advisor........................................................... 12
Section 2.6 Brokers................................................................................ 13
Section 2.7 Information............................................................................ 13
Section 2.9 Rights Agreement; Charter.............................................................. 13
Section 2.10 Capitalization of the Company and Its Subsidiaries..................................... 13
Section 2.11 No Defaults............................................................................ 14
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND
PURCHASER................................................................................................... 14
Section 3.1 Organization and Qualification of ICII and Merger
Sub.................................................................................... 14
Section 3.2 Corporate Authorization................................................................ 15
Section 3.3 SEC Reports; Financial Statements...................................................... 15
Section 3.4 Consents and Approvals; No Violations.................................................. 15
Section 3.5 Brokers................................................................................ 16
Section 3.6 Ownership of Company Capital Stock..................................................... 16
Section 3.7 Information............................................................................ 16
Section 3.8 Financing.............................................................................. 16
Section 3.9 Conduct of Business of Merger Sub...................................................... 17
ARTICLE IV
COVENANTS................................................................................................... 17
Section 4.1 Conduct of Business of the Company..................................................... 17
Section 4.2 Other Actions.......................................................................... 19
Section 4.3 Solicitation........................................................................... 19
Section 4.4 Additional Agreements; Reasonable Best Efforts......................................... 21
Section 4.5 Consents............................................................................... 21
Section 4.6 Public Announcements................................................................... 21
Section 4.7 Indemnification; Directors' and Officers' Insurance.................................... 22
Section 4.8 Notification of Certain Matters........................................................ 24
Section 4.9 SEC and Other Filings.................................................................. 24
Section 4.10 Stockholder Litigation................................................................. 25
Section 4.11 SPB Loans.............................................................................. 25
Section 4.12 Final Company Dividend................................................................. 25
Section 4.13 Employee Matters....................................................................... 25
Section 4.14 Standstill............................................................................. 25
Section 4.15 Transfer and Gains Taxes............................................................... 27
Section 4.16 Access to Information.................................................................. 28
Section 4.17 Excess Share Provision................................................................. 28
Section 4.18 State Takeover Statutes................................................................ 29
ARTICLE V
CONDITIONS TO CONSUMMATION OF THE MERGER.................................................................... 29
Section 5.1 Conditions to Each Party's Obligations to Effect the
Merger................................................................................. 29
Section 5.2 Conditions to the Obligations of the Company........................................... 30
Section 5.3 Conditions to the Obligations of ICII and Merger
Sub.................................................................................... 30
Section 5.4 Frustration of Closing Conditions...................................................... 31
ARTICLE VI
TERMINATION; AMENDMENT; WAIVER.............................................................................. 31
Section 6.1 Termination............................................................................ 31
Section 6.2 Effect of Termination.................................................................. 32
Section 6.3 Expenses............................................................................... 32
Section 6.4 Amendment.............................................................................. 33
Section 6.5 Extension; Waiver...................................................................... 33
ARTICLE VII
MISCELLANEOUS............................................................................................... 33
Section 7.1 Non-survival of Representations and Warranties......................................... 33
Section 7.2 Entire Agreement; Assignment........................................................... 33
Section 7.3 Notices................................................................................ 33
Section 7.4 Governing Law.......................................................................... 35
Section 7.5 Descriptive Headings; Schedules, Interpretation........................................ 35
Section 7.6 Parties in Interest.................................................................... 36
Section 7.7 Severability........................................................................... 36
Section 7.8 Consent to Jurisdiction................................................................ 36
Section 7.9 Enforcement............................................................................ 37
Section 7.10 Counterparts........................................................................... 37
TABLE OF DEFINED TERMS
Cross Reference
Term in Agreement Page
Actions...................................... Section 4.7(a)......................... 22
Adjusted Company Option...................... Section 1.10(a)........................ 6
Affiliate.................................... Section 1.10(f)........................ 8
Agreement.................................... Preamble............................... 1
Appraiser.................................... Section 1.8............................ 3
Appraised Value.............................. Section 1.8(a)......................... 4
Articles of Merger........................... Section 1.2............................ 2
Certificates................................. Sections 1.7(b)........................ 3
Closing...................................... Section 1.3............................ 2
Closing Date................................. Section 1.3............................ 2
Code......................................... Section 1.10(a)........................ 6
Company...................................... Preamble............................... 1
Company Board................................ Recitals............................... 1
Company Charter.............................. Section 2.8............................ 13
Company Disclosure Schedule.................. Section 2.4............................ 12
Company Material Adverse Effect.............. Section 2.1(b)......................... 11
Company SEC Reports.......................... Section 2.3............................ 12
Company Securities........................... Section 2.9 13
Company Stockholders......................... Recitals............................... 1
Company Stock Option......................... Section 1.10(a)........................ 6
Company Stock Option Plan.................... Section 1.10(a)........................ 6
Competing Transaction........................ Section 4.3(c)......................... 20
Confidentiality Agreement.................... Section 4.16(b)........................ 28
Control...................................... Section 7.5(b)......................... 35
Controlled by................................ Section 7.5(b)......................... 35
Effective Time............................... Section 1.2............................ 2
Exemption.................................... Section 4.17........................... 28
Exchange Act................................. Section 1.10(e)........................ 8
Final Company Dividend....................... Section 4.12........................... 25
Financial Advisor............................ Recitals............................... 1
FBR.......................................... Section 3.5............................ 16
GAAP......................................... Section 2.3............................ 12
ICII......................................... Preamble............................... 1
ICII Common Stock............................ Section 1.10(a)........................ 6
ICII Material Adverse Effect................. Section 3.1(b)......................... 14
ICII SEC Reports............................. Section 3.3............................ 15
ICII Shares.................................. Recitals............................... 1
Indemnified Party............................ Section 4.7(a)......................... 22
Individual Ownership Limit................... Section 4.17........................... 28
Knowledge.................................... Section 7.5(b)......................... 36
Liens........................................ Section 4.1(i)......................... 18
Management Agreement......................... Section 1.8(a)......................... 3
Management Contract Amount................... Section 1.8(a)......................... 3
Manager...................................... Section 1.8(a)......................... 3
Maryland Department.......................... Section 1.2............................ 2
Merger....................................... Recitals............................... 1
Merger Consideration......................... Recitals............................... 1
Merger Sub................................... Preamble............................... 1
Merger Sub Common Stock...................... Section 1.7(c )........................ 3
MGCL......................................... Recitals............................... 1
Opinion...................................... Section 4.17........................... 28
Other Filings................................ Section 2.7............................ 13
Paying Agent................................. Section 1.9(a)......................... 5
Payment Fund................................. Section 1.9(a)......................... 5
Person....................................... Section 7.5(b)......................... 35
Proxy Statement.............................. Section 1.11(a)........................ 9
Qualifying Alternative Transaction........... Section 4.14(b)........................ 26
Regulatory Entity............................ Section 2.4............................ 12
REIT......................................... Section 4.1(c)......................... 17
Rights Agreement............................. Section2.8............................. 13
S-8.......................................... Section 1.10(f)........................ 8
Schedule 13D................................. Section 4.14(a)........................ 26
Schedule 13E-3............................... Section 1.11(d)........................ 10
SEC.......................................... Section 1.10(e)........................ 8
Securities Act............................... Section 1.10(f)........................ 8
Shares....................................... Recitals............................... 1
Solicitation Period.......................... Section 4.3(a)......................... 19
SPB.......................................... Section 4.11........................... 25
SPB Loans.................................... Section 4.11........................... 25
Special Committee............................ Recitals............................... 1
Special Meeting.............................. Section 1.11(a)........................ 9
Superior Proposal............................ Section 4.3(c)......................... 21
Surviving Corporation........................ Recitals............................... 1
Surviving Corporation Common Stock........... Section 1.7(c)......................... 3
Transfer and Gains Taxes.................... Section 4.15........................... 27
Under Common Control With.................... Section 7.5(b)......................... 35
MERGER AGREEMENT
THIS MERGER AGREEMENT, dated as of July 22, 1999 (this "Agreement"),
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by and among Imperial Credit Commercial Mortgage Investment Corp., a Maryland
corporation (the "Company"), Imperial Credit Industries, Inc., a California
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corporation ("ICII"), and ICCMIC Acquisition Corp., a Maryland corporation and
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wholly owned subsidiary of ICII ("Merger Sub").
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WHEREAS, ICII and certain of its subsidiaries and affiliates as set
forth on Schedule I beneficially own 2,790,053 shares (the "ICII Shares") of the
---------- -----------
common stock, par value $0.0001 per share, of the Company (the "Shares");
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WHEREAS, it is proposed that Merger Sub will merge with and into the
Company (the "Merger"), with the Company continuing as the surviving corporation
------
(the "Surviving Corporation"), in accordance with the Maryland General
---------------------
Corporation Law ("MGCL"), pursuant to which Merger each issued and outstanding
----
Share other than Shares held by ICII and its subsidiaries will be converted into
the right to receive $11.50 per Share in cash, subject to adjustment as provided
herein (as so adjusted, the "Merger Consideration"), upon the terms and subject
--------------------
to the conditions provided herein;
WHEREAS, a special committee (the "Special Committee") comprised of
-----------------
the four independent directors of the Board of Directors of the Company (the
"Company Board") has received the written opinion of Prudential Securities
--------------
Incorporated (the "Financial Advisor") that, based on, and subject to, the
-----------------
various assumptions and qualifications set forth in such opinion, as of the date
of such opinion, the Merger Consideration to be received by the holders of
Shares (other than ICII and its subsidiaries and affiliates listed on Schedule
I) pursuant to the Merger is fair to such holders from a financial point of
view;
WHEREAS, the Special Committee has determined that it is in the best
interests of the stockholders of the Company (the "Company Stockholders") to
--------------------
approve this Agreement and, subject to the provisions hereof, the Merger, and
has voted to recommend to the Company Board that the Company Board recommend
that the Company Stockholders approve this Agreement and, subject to the
provisions hereof, the Merger; and
WHEREAS, the Company Board has determined that it is in the best
interests of the Company Stockholders to approve this Agreement and, subject to
the provisions hereof, the Merger, has declared the Merger advisable, and has
voted to approve the Merger upon the terms and subject to the conditions of this
Agreement.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements herein contained, and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, intending to be legally bound hereby, the Company, ICII and
Merger Sub hereby agree as follows:
ARTICLE I
THE MERGER
Section 1.
Section 1.1 The Merger. At the Effective Time (as defined in Section
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1.2) and upon the terms and subject to the conditions of this Agreement and in
accordance with the MGCL, Merger Sub shall be merged with and into the Company
in the Merger. Following the Merger, the Company shall continue as the
Surviving Corporation and the separate corporate existence of Merger Sub shall
cease.
Section 1.2 Effective Time. Subject to the terms and conditions set
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forth in this Agreement, as soon as practicable on the Closing Date (as defined
in Section 1.3), the Company and Merger Sub will cause articles of merger (the
"Articles of Merger") with respect to the Merger to be executed and filed with
------------------
the State Department of Assessments and Taxation of Maryland (the "Maryland
--------
Department") pursuant to the MGCL. The Merger shall become effective at such
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time on or after October 1, 1999 as the Articles of Merger have been duly filed
with and accepted for record by the Maryland Department or at such subsequent
time as is agreed between the parties and specified in the Articles of Merger,
and such time is hereinafter referred to as the "Effective Time."
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Section 1.3 Closing of the Merger. Subject to the satisfaction or
---------------------
waiver of all of the conditions contained in Article V, but in no event prior to
the expiration of the Solicitation Period (as defined in Section 4.3(a)), the
closing of the Merger (the "Closing") will take place at a time and on a date to
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be specified by the parties, which shall be no later than the second business
day after satisfaction or waiver of all of the conditions set forth in Article V
(the "Closing Date"), at the offices of Wachtell, Lipton, ▇▇▇▇▇ & ▇▇▇▇, 51 West
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▇▇/▇▇/ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, unless another time, date or place is
agreed to in writing by the parties hereto.
Section 1.4 Effects of the Merger. From and after the Effective
---------------------
Time, the Merger shall have the effects set forth in Section 3-114 of the MGCL.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time, all the properties, rights, privileges, powers and franchises,
of a public or private nature, of the Company and Merger Sub shall vest in the
Surviving Corporation, and all debts, liabilities and duties of the Company and
Merger Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
Section 1.5 Charter and Bylaws; Amendments of Governing Documents of
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Surviving Corporation Subsidiaries.
----------------------------------
(a) The charter of the Surviving Corporation shall be amended and
restated as of the Effective Time so as to conform in all material respects with
the terms of the charter of Merger Sub.
(b) The bylaws of Merger Sub, as in effect immediately prior to the
Effective Time, shall be the bylaws of the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable law.
Section 1.6 Board and Officers of the Surviving Corporation.
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(a) The directors of Merger Sub immediately prior to the Effective
Time shall be the initial directors of the Surviving Corporation following the
Merger, each to hold office until the earlier of such person's resignation or
removal or until a successor is duly elected and qualified, as the case may be.
(b) The officers of Merger Sub immediately prior to the Effective Time
shall be the initial officers of the Surviving Corporation following the Merger,
each to hold office until the earlier of such person's resignation or removal or
until a successor is duly elected and qualified, as the case may be.
Section 1.7 Conversion of Shares, Cancellation of Shares.
--------------------------------------------
(a) At the Effective Time, each Share issued and outstanding
immediately prior to the Effective Time (other than Shares held by ICII or the
Company or any subsidiary of ICII or the Company, which Shares, by virtue of the
Merger and without any action on the part of the holder thereof, shall be
cancelled and retired and shall cease to exist with no payment being made with
respect thereto) shall be converted into the right to receive the Merger
Consideration.
(b) At the Effective Time, the holders of such certificates previously
evidencing the Shares outstanding immediately prior to the Effective Time (the
"Certificates") shall cease to have any rights with respect to such Shares other
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than the right to receive the Merger Consideration for each such Share or as
otherwise provided herein or by law (including the right to receive dividends
permitted hereby). Such Shares shall, by virtue of the Merger and without any
action on the part of Merger Sub, the Company or the holder thereof, be
cancelled, retired and cease to exist, and no payment shall be made with respect
thereto except as provided for herein.
(c) At the Effective Time, each share of common stock, par value
$0.0001 per share, of Merger Sub ("Merger Sub Common Stock") issued and
-----------------------
outstanding immediately prior to the Effective Time shall be converted into an
equal number of fully paid and nonassessable
shares of common stock of the Surviving Corporation, par value $0.0001 per share
("Surviving Corporation Common Stock").
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Section 1.8 Appraisal of the Management Contract Termination Fee.
----------------------------------------------------
(a) ICII and the Company shall cause one of the appraisal firms listed
on Schedule II (or, in the event they cannot agree on a mutually acceptable firm
-----------
from such list, they shall appoint one or more independent, nationally
recognized appraisal firms in accordance with the procedures set forth in
Section 15 of the Management Agreement (as defined below)) (the "Appraiser"), to
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determine, by an independent appraisal, the amount (the "Management Contract
-------------------
Amount") that would be payable to Imperial Credit Commercial Asset Management
------
Corp. (the "Manager") pursuant to Section 15 of the Management Agreement, dated
-------
as of October 22, 1997 by and among the Company and the Manager (the "Management
----------
Agreement") if the Management Agreement were not renewed by the Company and
---------
expired on October 22, 1999. The Appraiser shall complete the determination of
the Management Contract Amount within 30 days of the date of this Agreement.
The amount of the Management Contract Amount as determined by the Appraiser
shall be referred to as the "Appraised Value". The Appraiser shall be
---------------
instructed to fix the Appraised Value at a single dollar amount; provided,
however, that in the event the Appraiser cannot for any reason provide a single
dollar amount for the Appraised Value, despite the specific request of ICII and
the Company, the Appraiser shall provide a range of values for the Appraised
Value not greater than $5 million, in which case the Appraised Value shall be
deemed to equal the average of the maximum and minimum dollar amounts of such
range. ICII and the Company agree to share equally the fees and expenses of the
Appraiser.
(b) The Merger Consideration in respect of each Share shall be
increased by an amount, if greater than zero, equal to the quotient of (i) the
amount by which $35 million exceeds the Appraised Value, divided by (ii) the sum
of (x) the number of issued and outstanding Shares as of the date hereof
entitled to receive the Merger Consideration and (y) the aggregate number of
Shares issuable pursuant to Company Stock Options having an exercise price less
than $11.50 per share. The Merger Consideration shall not be reduced in the
event the Appraised Value is greater than $35 million. ICII and Merger Sub
shall, not later than the next business day after the determination of the
Appraised Value, make a public announcement as to the determination thereof,
and, if applicable, amend the Schedule 13E-3 (as defined in Section 1.11) to
reflect the adjustment, if any, of the Merger Consideration contemplated and
required hereby.
(c) The Company and ICII agree, and ICII shall cause the Manager to
agree, that, in the event this Agreement is terminated, other than as a result
of a breach by the Company, the Management Agreement shall be terminated on the
earlier of the consummation of any Superior Proposal (as defined in Section
4.3), October 22, 1999, or such earlier date as the Company may request, and,
thereafter, the Management Agreement shall be of no further force and effect,
other than with respect to the payment of accrued but unpaid amounts then due
thereunder. Anything to the contrary herein or in the Management Agreement
notwithstanding, as a result of the termination of the Management Agreement as
contemplated by the foregoing sentence, the Manager shall be entitled to
receive, following the termination of this Agreement and
the Management Agreement, a payment from the Company of the lesser of (i) $35
million and (ii) the Appraised Value, which payment shall constitute payment in
full of any obligations that exist or may hereafter arise pursuant to the
Management Agreement, other than with respect to the payment of accrued but
unpaid amounts then due thereunder. In no event shall the Company be held
responsible to ICII, the Manager or any of their respective affiliates for
damages (whether actual, punitive, consequential or otherwise) resulting from
the termination of the Management Agreement as contemplated by this Section.
ICII shall cause the Manager to take any such further action as the Company may
reasonably require to evidence the agreements contemplated by this Section and
ICII shall hold the Company and any successor-in-interest to the Company and
their respective affiliates harmless from and against any and all claims arising
from any assertion by the Manager as to any different or greater entitlement
pursuant to the Management Agreement.
Section 1.9 Payment for Shares.
------------------
(a) From and after the Effective Time, such bank or trust company as
shall be mutually acceptable to ICII and the Company, shall act as paying agent
(the "Paying Agent") in effecting the payment of the aggregate Merger
------------
Consideration in respect of Certificates that, prior to the Effective Time,
represented Shares entitled to payment of the Merger Consideration pursuant to
Section 1.7(a). As of the Effective Time, ICII and Merger Sub shall, jointly
and severally, for the benefit of the Company Stockholders, deposit with the
Paying Agent for payment in accordance with this Article I, by the Paying Agent,
the aggregate Merger Consideration for all of the Shares entitled to payment of
the Merger Consideration pursuant to Section 1.7(a) (the "Payment Fund").
------------
(b) Promptly after the Effective Time, the Paying Agent shall mail to
each holder of Certificates entitled to payment of the Merger Consideration
pursuant to Section 1.7(a), a form of letter of transmittal which shall specify
that delivery shall be effected, and risk of loss and title to the Certificates
shall pass, only upon proper delivery of the Certificates to the Paying Agent
and instructions for use in surrendering such Certificates and receiving the
aggregate Merger Consideration in respect thereof. Upon the surrender of each
such Certificate, the Paying Agent shall pay the holder of such Certificate, by
check or by wire transfer of immediately available funds, in consideration
therefor, the Merger Consideration multiplied by the number of Shares formerly
represented by such Certificate, and such Certificate shall be cancelled. Until
so surrendered, each such Certificate entitled to payment of the Merger
Consideration pursuant to Section 1.7(a) shall represent solely the right to
receive the aggregate Merger Consideration relating thereto (and the right to
receive dividends permitted hereby). No interest shall be paid or accrued on
the Merger Consideration. If the Merger Consideration (or any portion thereof)
is to be delivered to any person other than the person in whose name the
Certificate formerly representing Shares surrendered therefor is registered, it
shall be a condition to such right to receive such Merger Consideration that the
Certificate so surrendered shall be properly endorsed or otherwise be in proper
form for transfer and that the person surrendering such Shares shall pay to the
Paying Agent any transfer or other taxes required by reason of the payment of
the Merger Con-
sideration to a person other than the registered holder of the Certificate
surrendered, or shall establish to the satisfaction of the Paying Agent that
such tax has been paid or is not applicable.
(c) Promptly following the date which is 180 days after the Effective
Time (or such later date as the Surviving Corporation shall request), the Paying
Agent shall deliver to the Surviving Corporation any undistributed portion of
the Payment Fund and any other documents in its possession relating to the
Merger, and the Paying Agent's duties shall thereupon terminate. Thereafter,
each holder of a Certificate formerly representing Shares may surrender such
Certificate to the Surviving Corporation and (subject to applicable abandoned
property, escheat and similar laws) receive in consideration therefor the
aggregate Merger Consideration relating thereto, without any interest or
dividends thereon.
(d) In the event that any Certificate shall have been lost, stolen or
destroyed, the Paying Agent shall pay or issue (as applicable) in exchange
therefor, upon the making of an affidavit of that fact and, if the Surviving
Corporation so requires, the delivery of a reasonably suitable bond or indemnity
by the holder thereof, such Merger Consideration as may be required pursuant to
this Agreement.
(e) After the Effective Time, there shall be no transfers on the stock
transfer books of the Surviving Corporation of any Shares which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates formerly representing Shares are presented to the Surviving
Corporation or the Paying Agent, they shall be surrendered and cancelled in
return for the payment of the Merger Consideration relating thereto, as provided
in this Section, subject to applicable law.
(f) None of the Company, ICII, Merger Sub, the Paying Agent or the
Surviving Corporation shall be liable to any holder of Shares for cash from the
Payment Fund delivered to a public official as required pursuant to any
applicable abandoned property, escheat or similar law.
(g) The provisions in this Section are intended to be for the benefit
of, and shall be enforceable by, each holder of Certificates previously
evidencing the Shares outstanding immediately prior to the Merger entitled to
payment of the Merger Consideration pursuant to Section 1.7(a) (it being
expressly agreed that such persons shall be the third party beneficiaries of
this Section).
Section 1.10 Stock Option and Other Plans.
----------------------------
(a) As of the Effective Time, (i) each outstanding option to purchase
Shares (each, a "Company Stock Option") issued pursuant to the Company's 1997
--------------------
Stock Option Plan, as amended (the "Company Stock Option Plan"), shall be
-------------------------
converted into an immediately exercisable option (each, an "Adjusted Company
----------------
Option") to purchase a number of shares of common stock, no par value, of ICII
------
("ICII Common Stock"), at an exercise price as shall be determined in accordance
-----------------
with the provisions hereof so that the Fair Value (as defined below) of each
such Company Stock Option equals the Fair Value of the Adjusted Company Options
to purchase ICII
Common Stock into which such Company Stock Option is converted, and all
references in each such Company Stock Option (including the plans and agreements
under which they were issued) to the Company shall be deemed to refer to ICII,
where appropriate; provided, however, that the adjustments provided in this
paragraph with respect to any options which are "incentive stock options" (as
defined in Section 422 of the Internal Revenue Code of 1986, as amended, (the
"Code"), shall be effected in a manner consistent with the requirements of
----
Section 424(a) of the Code, unless the option holder, in his or her sole
discretion, waives such requirement, and (ii) ICII shall assume the obligations
of the Company under the Company Stock Option Plan. Approval of the Merger
Agreement by the Company Stockholders shall constitute a "Change of Control" (as
defined in the Company Stock Option Plan) and as a result each Company Stock
Option shall vest and become exercisable in full on the date of such Change of
Control. The other terms of each Adjusted Company Option, and the plans or
agreements under which they were issued, in each case as amended in accordance
herewith, shall continue to apply in accordance with their terms. The date of
grant of each Adjusted Company Option shall be the date on which the
corresponding Company Stock Option was granted. For the purposes hereof, the
"Fair Value" of the Company Stock Options and of the Adjusted Company Options to
purchase ICII Common Stock into which the Company Stock Options are converted
shall be determined in the manner set forth on Schedule III and utilizing the
Black-Scholes option pricing model incorporating historical data available on
the Bloomberg system and reflecting, among other things, the relative current
price, strike price, the risk-free rate, expected duration, volatility and
dividend policies of each of ICII and the Company and of the Company Stock
Options and the Adjusted Company Options into which they will be converted,
based on the principle of preserving for the holders of the Company Stock
Options the current value and upside potential of the Company Stock Options, as
well as the level of the Merger Consideration (including any adjustment pursuant
to Section 1.8(b) in respect of the Appraised Value of the Management
Agreement). The Company and ICII shall work together during the 30-day period
following the date hereof to determine the precise methodology to be used in
determining Fair Value and with respect to the conversion of the Company Stock
Options into the Adjusted Company Options. In the event they are unable to agree
within such 30-day period, their respective positions on the subject shall be
submitted to the Appraiser, and the Appraiser shall be directed to select one of
the positions or any other intermediate position.
(b) Each holder of Company Stock Options may, prior to or within 90
days following the later of the Effective Time or the date of the notices set
forth in paragraph (d) below, elect to receive, in lieu of all or a portion of
such holder's Adjusted Company Options as provided in Section 1.10(a), the
following: (i) with respect to all or a portion of each Company Stock Option
which has an option exercise price less than the Merger Consideration, a cash
payment from ICII equal to the product of (A) the amount by which the Merger
Consideration amount exceeds the exercise price of such Company Stock Option and
(B) the number of shares issuable upon exercise of such Company Stock Option or
portion thereof, as applicable, and/or (ii) with respect to all or a portion of
each Company Stock Option (including those referred to in clause (i) above in
lieu of the payment contemplated by clause (i)), a cash payment from ICII equal
to the Fair Value of such option or portion thereof, as applicable, determined
in accordance with Section 1.10(a). All cash payments shall be subject to any
applicable withholding taxes and
shall be made as promptly as practicable upon ICII's receipt of such holder's
election pursuant to this paragraph.
(c) ICII and the Company agree that the Company Stock Option Plan
shall be amended (or the Company Board or the Compensation Committee of the
Company Board shall take other appropriate actions), such amendment to be
effective as of the Effective Time, (i) to provide that, with respect to any
particular holder of Company Stock Options, unless such option holder shall
remain or become an employee of ICII or the Manager immediately after the
Effective Time, the employee shall be considered to have had a Voluntary
Termination of Affiliation (as defined in the Company Stock Option Plan) and, as
a result, such holder's Company Stock Options shall remain exercisable by such
holder for a period of one year from the Effective Time, and (ii) to reflect the
transactions contemplated hereby, including the conversion of Shares held or to
be awarded or paid pursuant to such benefit plans, programs or the Company Stock
Option Plan into shares of ICII Common Stock (or fractions thereof) on a basis
consistent with the transactions contemplated by this Agreement. The parties
agree that any "voluntary" termination of employment by an employee of the
Company or the Manager pursuant to a constructive termination or a termination
for good reason in an employment or severance agreement shall be treated as a
Voluntary Termination of Affiliation for which the employee's Adjusted Company
Options shall remain exercisable for a period of at least one year following
such termination.
(d) Prior to or as soon as practicable after the Effective Time, ICII
shall deliver to the holders of Company Stock Options appropriate notices
setting forth such holders' rights pursuant to the Company Stock Option Plan and
the agreements evidencing the grants of such Company Stock Options and informing
such holders that such Company Stock Options and the related agreements shall be
assumed by ICII at the Effective Time and that such Company Stock Options shall
continue in effect on the same terms and conditions as in effect immediately
prior to the Effective Time (subject to the adjustments required by this Section
after giving effect to the Merger).
(e) ICII and the Company shall take all such steps as may be required
or reasonably requested to cause the transactions contemplated by this Section
and any other dispositions of Company equity securities (including derivative
securities) or acquisitions of ICII equity securities (including derivative
securities) in connection with this Agreement by each individual who (a) is a
director or officer of the Company or (b) at the Effective Time, will become a
director or officer of ICII, to be exempt under Rule 16b-3 promulgated under the
Securities Exchange Act of 1934 (the "Exchange Act") and the rules and
------------
regulations promulgated thereunder, such steps to be taken in accordance with
the No-Action Letter dated January 12, 1999, issued by the Securities and
Exchange Commission (the "SEC") to Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP, or
as may otherwise be reasonably requested by the Company.
(f) ICII shall (i) prior to the Effective Time, reserve for issuance
the maximum number of shares of ICII Common Stock that may become subject to the
Adjusted Company Options referred to in this Section and (ii) issue or cause to
be issued the appropriate number of shares of ICII Common Stock (or fractions
thereof) pursuant to the terms of the Adjusted Company Options upon the exercise
thereof. No later than the Effective Time, ICII shall prepare
and file with the SEC one or more registration statements on Form S-8 (or on any
other appropriate form) (the "S-8") registering the number of shares of ICII
---
Common Stock necessary to fulfill ICII's obligations under this Section. ICII
shall also file a supplemental listing application with the Nasdaq Stock Market
in respect of such shares and use its reasonable best efforts to cause such
shares to be approved for listing on the Nasdaq Stock Market, subject to
official notice of issuance prior to the Effective Time. Such registration
statement shall be kept effective (and the current status of the prospectus
required thereby shall be maintained) for at least as long as until the later of
(i) the last date on which any Adjusted Company Options remain outstanding, or
(ii) the last date on which shares of ICII Common Stock issued on exercise of
Adjusted Company Options are held by an affiliate, as defined by Rule 144 of the
General Rules and Regulations (an "Affiliate") under the Securities Act of 1933,
---------
as amended (the "Securities Act") of ICII and any of such shares of ICII Common
Stock cannot be otherwise sold immediately pursuant to Rule 144.
(g) The provisions of this Section are intended to be for the benefit
of, and shall be enforceable by, each holder of Company Stock Options or
Adjusted Company Options and such Affiliate of ICII holding shares of ICII
Common Stock issued on exercise of Adjusted Company Options (it being expressly
agreed that such persons shall be the third party beneficiaries of this
Section).
Section 1.11 Stockholders' Meeting; SEC Materials.
------------------------------------
(a) The Company, acting through the Company Board, shall, in
accordance with applicable law and the Company's Charter and By-laws, and
provided that this Agreement shall not have been terminated as contemplated by
Section 4.3:
(i) duly call, give notice of, convene and hold a special
meeting of its stockholders (the "Special Meeting"), which meeting
---------------
shall be held as soon as reasonably practicable following the
expiration of the Solicitation Period for the purpose of considering
and taking action upon this Agreement, but in no event prior to
October 1, 1999;
(ii) together with ICII, prepare and file with the SEC a
preliminary proxy statement relating to this Agreement in form and
substance reasonably satisfactory to ICII and the Company, and,
together with ICII, use their reasonable efforts (x) to obtain and
furnish the information required to be included by the SEC in the
Proxy Statement (as defined below) and, after consultation with each
other, to respond promptly to any comments made by the SEC or its
staff with respect to the preliminary proxy statement and cause a
definitive proxy statement (the "Proxy Statement"), which the parties
---------------
agree shall comply as to form in all material respects with all
applicable requirements of law, to be mailed to the Company
Stockholders and (y) subject to the fiduciary duties of the Company
Board under applicable law and subject to the provisions of Section
4.3, to obtain the necessary approval of this Agreement by the Company
Stockholders repre-
senting a majority of the outstanding Shares entitled to vote at the
Special Meeting (other than the ICII Shares); and
(iii) subject to the fiduciary obligations of the Company Board
and the Special Committee under applicable law and subject to the
provisions of Section 4.3, include in the Proxy Statement the
recommendation of the Company Board and the Special Committee that the
Company Stockholders vote in favor of the approval of this Agreement.
(b) ICII shall, and shall cause the other holders of ICII Shares to,
vote (whether in person or by proxy) for the approval of this Agreement at the
Special Meeting or any adjournment or postponement thereof.
(c) Whenever any event occurs which is required to be set forth in an
amendment or supplement to the Proxy Statement, ICII or the Company, as the case
may be, shall promptly inform the other of such occurrences and cooperate in
filing with the SEC and/or mailing to the Company Stockholders such amendment or
supplement. Each of the parties agree that the information provided by it for
inclusion in the Proxy Statement and each amendment or supplement thereto, at
the time of mailing thereof and at the time of the Special Meeting, will not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. If, at
any time prior to the Effective Time, any information pertaining to one of the
parties or, to such party's knowledge, any of its affiliates or its officers or
directors, contained in or omitted from the Proxy Statement makes statements
contained therein materially false or misleading, such party shall promptly so
advise the other parties and provide such other parties with the information
necessary to make the statements contained therein not false or misleading. In
the event of such advice being given pursuant to the preceding sentence, the
Company and ICII shall cooperate to promptly file with the SEC (after reasonable
opportunity to ICII and the Company to review and comment thereon) any required
amendments or supplements to the Proxy Statement and, to the extent required by
law, disseminate such amendments or supplements to the Company Stockholders. No
filings of the Proxy Statement (or any amendments or supplements thereto) shall
be made without the prior approval of both ICII and the Company (which consent
shall not be unreasonably withheld, conditioned or delayed).
(d) Simultaneously with the filing of the preliminary proxy statement
contemplated by Section 1.11(a)(ii), ICII shall file with the the SEC a Rule
13e-3 Transaction Statement on Schedule 13E-3, including the exhibits thereto
(together with all amendments and supplements thereto, the "Schedule 13E-3")
--------------
with respect to the Merger and the other transactions contemplated hereby. The
Schedule 13E-3 shall include the information required to be included by the SEC
in a Rule 13e-3 Transaction Statement. ICII shall cause the information
contained in the Schedule 13E-3 to be disseminated to Company Stockholders as
and to the extent required by applicable law. ICII, Merger Sub and the Company
agree to correct promptly any information provided by any of them for use in the
Schedule 13E-3 which shall have become materially incorrect or misleading, and
ICII and Merger Sub further agree to take all steps necessary to cause the
Schedule 13E-3 as so corrected to be filed with the SEC and to be disseminated
to Company
Stockholders as and to the extent required by applicable law. The Company, the
Special Committee and their respective counsel shall be given a reasonable
opportunity to review and comment on the Schedule 13E-3 and any amendments
thereto prior to the filing thereof with the SEC or dissemination thereof to the
Company Stockholders. ICII and Merger Sub shall promptly inform the Company, the
Special Committee and their respective counsel of any comments, whether oral or
written that ICII or Merger Sub may receive from the SEC or its staff with
respect to the Schedule 13E-3 promptly after the receipt thereof and shall
promptly provide the Company, the Special Committee and their respective counsel
with copies of any such written comments. ICII and Merger Sub shall provide the
Company and the Special Committee, and their respective counsel, with a
reasonable opportunity to participate in all communications with the SEC and its
staff, including any meetings and telephone conferences, relating to the
Schedule 13E-3 or the Merger.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to ICII and Merger Sub as
follows:
Section 2.
Section 2.1 Organization and Qualification of the Company.
---------------------------------------------
(a) The Company and each of its subsidiaries is a corporation or other
legal entity duly organized, validly existing and in good standing under the
laws of the jurisdiction in which it is organized and has all requisite
corporate or other power, as the case may be, and authority to own, lease and
operate its properties and to carry on its businesses as now being conducted.
(b) Each of the Company and its subsidiaries is duly qualified or
licensed and in good standing (with respect to jurisdictions which recognize
such concept) to do business in each jurisdiction in which the property owned,
leased or operated by it or the nature of the business conducted by it makes
such qualification or licensing necessary, except in such jurisdictions where
the failure to be so duly qualified or licensed and in good standing would not
have a Company Material Adverse Effect. The term "Company Material Adverse
------------------------
Effect" means any change or effect that individually or in the aggregate is or
------
would reasonably be expected to be materially adverse to (i) the business,
properties, assets, results of operations or financial condition of the Company
and its subsidiaries, taken as a whole, other than any change or effect arising
out of (x) a decline or deterioration in the economy in general or the real
estate or capital markets in which the Company and its subsidiaries operate, or
(y) this Agreement or the transactions contemplated hereby or the announcement
thereof or (ii) the ability of the Company to consummate the transactions
contemplated hereby without material delay.
Section 2.2 Corporate Authorization. The Company has all necessary
-----------------------
corporate power and authority to execute and deliver this Agreement and,
subject, in the case of the Merger, to approval by the Company Stockholders, to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly and validly authorized by the Company Board and no other corporate
proceedings on the part of the Company are necessary to authorize this Agreement
or to consummate the transactions contemplated hereby (other than, with respect
to the Merger, the approval and adoption of this Agreement by Company
Stockholders representing a majority of the outstanding Shares entitled to vote
at the Special Meeting (other than the ICII Shares)). This Agreement has been
duly and validly executed and delivered by the Company and, assuming the due
authorization, execution and delivery hereof by each of ICII and Merger Sub,
constitutes the valid, legal and binding agreement of the Company, enforceable
against the Company in accordance with its respective terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally and subject, as to
enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity).
Section 2.3 SEC Reports; Financial Statements. The Company has filed
---------------------------------
all required forms, reports and documents with the SEC since January 1, 1998
(the "Company SEC Reports"). As of their respective dates and giving effect to
-------------------
any amendments thereto, each of the Company SEC Reports complied as to form in
all material respects with all applicable requirements of the Securities Act or
the Exchange Act, as the case may be, each as in effect on the dates such forms,
reports and documents were filed. None of the Company SEC Reports contained,
when filed, any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The consolidated financial statements of the Company included
in the Company SEC Reports complied as to form, as of their respective dates of
filing with the SEC, in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto and fairly present, in conformity with United States generally accepted
accounting principles ("GAAP") applied on a consistent basis throughout the
----
relevant periods (except as may be indicated in the notes thereto and, except in
the case of unaudited quarterly statements, as permitted by Form 10-Q of the
SEC), the consolidated financial position of the Company and its consolidated
subsidiaries as of the dates thereof and the consolidated results of their
operations and changes in financial position and cash flows for the periods then
ended (subject, in the case of unaudited interim financial statements, to normal
year-end adjustments).
Section 2.4 Consents and Approvals; No Violations. Except as set
-------------------------------------
forth in Section 2.4 of the Company's Disclosure Schedule (the "Company
-------
Disclosure Schedule") and except for such filings, permits, authorizations,
-------------------
consents and approvals as may be required under, and other applicable
requirements of, the Securities Act, the Exchange Act, the rules and regulations
of the Nasdaq Stock Market, state takeover laws, state securities or "blue sky"
laws and the filing and
recordation of the Articles of Merger as required by the MGCL and such other
filings, permits, authorizations, consents and approvals the failure of which to
be obtained or made would not, in the aggregate, reasonably be expected to have
a Company Material Adverse Effect, no filing or registration with or notice to,
and no permit, authorization, consent or approval of, any court or tribunal of
competent jurisdiction in any jurisdiction or any foreign, federal, state or
municipal governmental, regulatory or other administrative agency, department,
commission, board, bureau, political subdivision or other authority or
instrumentality including the National Association of Securities Dealers, Inc.
and the SEC (each a "Regulatory Entity") is necessary in connection with the
-----------------
execution and delivery by the Company of this Agreement or the consummation by
the Company of the transactions contemplated hereby.
Section 2.5 Opinion of Financial Advisor. The Financial Advisor has
----------------------------
delivered to the Special Committee its written opinion, dated the date of this
Agreement, to the effect that, based on, and subject to the various assumptions
and qualifications set forth in such opinion, as of the date of such opinion,
the Merger Consideration to be received by the Company Stockholders (other than
ICII and Merger Sub and any other holders of ICII Shares listed on Schedule I)
is fair to such Company Stockholders from a financial point of view, a signed
copy of which opinion has been delivered to the Special Committee, and such
opinion has not been withdrawn or modified.
Section 2.6 Brokers. Other than the Financial Advisor, no broker,
-------
finder, investment banker or other intermediary is entitled to any brokerage,
finder's or other similar fee or commission or expense reimbursement in
connection with the transactions contemplated by this Agreement based upon
arrangements made by and on behalf of the Company or any of its affiliates.
Section 2.7 Information. None of the information supplied or to be
-----------
supplied by the Company in writing specifically for inclusion or incorporation
by reference in (i) the Proxy Statement, (ii) the Schedule 13E-3, or (iii) any
other document to be filed with the SEC or any other Regulatory Entity prior to
the Effective Time (the "Other Filings") will, at the respective times filed
-------------
with the SEC or other Regulatory Entity and, in addition, in the case of the
Proxy Statement and the Schedule 13E-3, at the date it or any amendment or
supplement is mailed to the stockholders, at the time of the Special Meeting and
at the Effective Time, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements made therein, in light of the circumstances under which
they were made, not misleading.
Section 2.8 Rights Agreement; Charter. The Company has taken or will
-------------------------
take all action necessary to exempt the Merger from the provisions of the Rights
Agreement, dated as of September 21, 1998, between the Company and U.S. Stock
Transfer Corporation (the "Rights Agreement") and to provide for expiration of
----------------
the Rights thereunder at the time immediately prior to the Effective Time. The
Company will not exercise any rights or ability it may have under the Rights
Agreement or its charter (the "Company Charter") to nullify or delay the
---------------
consummation of the Merger.
Section 2.9 Capitalization of the Company and Its Subsidiaries. As
--------------------------------------------------
of the date hereof, the authorized capital stock of the Company consists of
500,000,000 shares of capital stock, of which: (i) 496,500,000 are classified
as Common Stock, par value $0.0001 per share, 28,500,000 shares are issued and
outstanding, and (ii) 3,500,000 are classified as Series A Junior Participating
Preferred Stock, par value $0.0001 per share, none of which shares are issued or
outstanding. The Series A Junior Participating Preferred Stock has been
reserved for issuance upon the exercise of the preferred share purchase rights
in accordance with the Rights Agreement. As of the date hereof, there are
outstanding Company Stock Options in respect of 1,437,250 Shares at the exercise
prices set forth in Section 2.9(a) of the Company Disclosure Schedule. Except
as set forth above or as set forth in Section 2.9(a) of the Company Disclosure
Schedule, there are outstanding (i) no shares of capital stock or other voting
securities of the Company, (ii) no securities of the Company or its subsidiaries
convertible into or exchangeable or exercisable for shares of capital stock or
voting securities of the Company, (iii) no options, calls or other rights
(including warrants or other contractual rights, including contingent rights) to
acquire from the Company or its subsidiaries, and no obligations of the Company
or its subsidiaries to issue, deliver or sell, or cause to be issued, delivered
or sold, any capital stock, voting securities or securities convertible into or
exchangeable or exercisable for capital stock or voting securities of the
Company and (iv) no equity equivalents, interests in the ownership or earnings
of the Company or its subsidiaries or other similar rights (including stock
appreciation rights) (collectively, "Company Securities"). Except for the
------------------
Company Stock Option Plan or as set forth in Section 2.9(a) of the Company
Disclosure Schedule, there are no outstanding obligations of the Company or any
of its subsidiaries to repurchase, redeem or otherwise acquire any Company
Securities or any capital stock, voting securities or other ownership interests
in any subsidiary of the Company.
Section 2.10 No Defaults. As of the date hereof, none of the Company
-----------
or any of its subsidiaries is in default or violation (and no event has occurred
which with notice or the lapse of time or both would constitute a default or
violation) of any term, condition or provision of (i) its charter or bylaws (or
similar governing documents), (ii) any note, bond, mortgage, collateralized
mortgage obligation, reverse repurchase agreement, indenture, letter of credit,
warehouse line of credit, other evidence of indebtedness, franchise, permit,
guarantee, lease, license, contract, agreement or other instrument or obligation
to which the Company or any of its subsidiaries is a party or by which any of
them or any of their respective properties or assets is bound, or (iii) any
order, writ, injunction, decree, law, statute, rule or regulation applicable to
the Company, its subsidiaries or any of their respective properties or assets,
except in the cases referred to in the preceding clauses (ii) and (iii) for
violations, breaches or defaults that would not have a Company Material Adverse
Effect.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF ICII AND MERGER SUB
ICII and Merger Sub, jointly and severally, hereby represent and
warrant to the Company as follows:
Section 3.
Section 3.1 Organization and Qualification of ICII and Merger Sub.
-----------------------------------------------------
(a) ICII and each of its subsidiaries is a corporation or other legal
entity duly organized, validly existing and in good standing under the laws of
the jurisdiction in which it is organized and has all requisite corporate or
other power, as the case may be, and authority to own, lease and operate its
properties and to carry on its businesses as now being conducted.
(b) Each of ICII and its subsidiaries is duly qualified or licensed
and in good standing (with respect to jurisdictions which recognize such
concept) to do business in each jurisdiction in which the property owned, leased
or operated by it or the nature of the business conducted by it makes such
qualification or licensing necessary, except in such jurisdictions where the
failure to be so duly qualified or licensed and in good standing would not have
an ICII Material Adverse Effect. The term "ICII Material Adverse Effect" means
----------------------------
any change or effect that individually or in the aggregate is or would
reasonably be expected to be materially adverse to (i) the business, properties,
assets, results of operations or financial condition of ICII and its
subsidiaries, taken as a whole, other than any change or effect arising out of
(x) a decline or deterioration in the economy in general or the real estate or
capital markets in which ICII and its subsidiaries operate, or (y) this
Agreement or the transactions contemplated hereby or the announcement thereof or
(ii) the ability of ICII or Merger Sub to consummate the transactions
contemplated hereby without material delay.
Section 3.2 Corporate Authorization. Each of ICII and Merger Sub has
-----------------------
all necessary corporate power and authority to execute and deliver this
Agreement, and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
board of directors of each of ICII and Merger Sub and by ICII as sole
stockholder of Merger Sub and no other corporate proceedings on the part of
either of them is necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by ICII and Merger Sub and, assuming the due
authorization, execution and delivery hereof by the Company, constitutes the
valid, legal and binding agreement of each of ICII and Merger Sub, enforceable
against each of them in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally and subject, as to
enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity).
Section 3.3 SEC Reports; Financial Statements. ICII has filed all
---------------------------------
required forms, reports and documents with the SEC since January 1, 1998 (the
"ICII SEC Reports"). As of their respective dates and giving effect to any
----------------
amendments thereto, each of the ICII SEC Reports complied as to form in all
material respects with all applicable requirements of the Securities Act or the
Exchange Act, as the case may be, each as in effect on the dates such forms,
reports and documents were filed. None of the ICII SEC Reports, including any
financial statements, contained, when filed, any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. The consolidated financial
statements of ICII included in the ICII SEC Reports complied as to form, as of
their respective dates of filing with the SEC, in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto and fairly present, in conformity with GAAP applied
on a consistent basis throughout the relevant periods (except as may be
indicated in the notes thereto and, except in the case of unaudited quarterly
statements, as permitted by Form 10-Q of the SEC), the consolidated financial
position of ICII and its consolidated subsidiaries as of the dates thereof and
the consolidated results of their operations and changes in financial position
and cash flows for the periods then ended (subject, in the case of unaudited
interim financial statements, to normal year-end adjustments).
Section 3.4 Consents and Approvals; No Violations.
-------------------------------------
(a) Except as set forth in Section 3.4 of the ICII Disclosure Schedule
and except for such filings, permits, authorizations, consents and approvals as
may be required under, and other applicable requirements of, the Securities Act,
the Exchange Act, the rules and regulations of the Nasdaq Stock Market, state
takeover laws, state securities or "blue sky" laws and the filing and
recordation of the Articles of Merger as required by the MGCL, filings to
maintain the good standing of the Surviving Corporation and such other filings,
permits, authorizations, consents and approvals the failure of which to be
obtained or made would not, in the aggregate, reasonably be expected to have an
ICII Material Adverse Effect, no filing or registration with or notice to, and
no permit, authorization, consent or approval of, any Regulatory Entity is
necessary in connection with the execution and delivery by ICII or Merger Sub of
this Agreement or the consummation by ICII or Merger Sub of the transactions
contemplated hereby.
(b) Upon consummation of the transactions contemplated hereby, each of
ICII and the Surviving Corporation (i) will not become insolvent, (ii) will not
be left with unreasonably small capital, (iii) will not have incurred debts
beyond its ability to pay all of its debts as they mature, and (iv) will not
have its capital impaired.
Section 3.5 Brokers. Other than Friedman, Billings, ▇▇▇▇▇▇ & Co.,
-------
Inc. ("FBR"), no broker, finder, investment banker or other intermediary is
---
entitled to any brokerage, finder's or other similar fee or commission or
expense reimbursement in connection with the transactions contemplated by this
Agreement based upon arrangements made by and on behalf of ICII, Merger Sub or
any of their affiliates (other than the Company). In the event this Agreement
is terminated in accordance with Section 6.1, no broker, finder, investment
banker or other intermediary is or will be entitled to any brokerage, finder's
or other similar fee or commission or expense reimbursement in connection with
the transactions contemplated by this Agreement based upon arrangements made by
and on behalf of ICII, Merger Sub or any of their affiliates (other than the
Company), except that FBR shall be entitled to reimbursement from ICII for its
reasonable out-of-pocket expenses incurred in connection with the negotiation
and preparation of this Agreement.
Section 3.6 Ownership of Company Capital Stock. Except for the ICII
----------------------------------
Shares and except as listed on Section 3.6 of the ICII Disclosure Schedule,
neither ICII nor, to its knowledge, any of its subsidiaries or affiliates (other
than the Company), (i) beneficially owns (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, or (ii) is party to any agreement,
arrangement or understanding for the purpose of acquiring, holding, voting or
disposing of, in each case, shares of capital stock of the Company or securities
convertible into or exchangeable for shares of capital stock of the Company.
Section 3.7 Information. None of the information supplied or to be
-----------
supplied by ICII and Merger Sub in writing specifically for inclusion in (i) the
Schedule 13E-3, (ii) the Proxy Statement, or (iii) the Other Filings will, at
the respective times filed with the SEC or such other Regulatory Entity and, in
addition, in the case of the Schedule 13E-3 and the Proxy Statement, at the date
it or any amendment or supplement is mailed to the stockholders, at the time of
the Special Meeting and at the Effective Time, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
Section 3.8 Financing. ICII has available, and shall provide Merger
---------
Sub with, all of the funds necessary to consummate the Merger and the
transactions contemplated hereby in accordance with the terms hereof. In no
event shall the receipt or availability of any funds or financing by ICII or any
affiliate or any other financing or other transaction be a condition to any of
ICII's obligations hereunder or to the consummation of the Merger.
Section 3.9 Conduct of Business of Merger Sub. Merger Sub was formed
---------------------------------
solely for the purpose of engaging in the transactions contemplated hereby, has
engaged in no other business activities and has conducted its operations only as
contemplated hereby.
ARTICLE IV
COVENANTS
Section 4.
Section 4.1 Conduct of Business of the Company. Except as expressly
----------------------------------
contemplated by this Agreement or as set forth in Section 4.1 of the Company
Disclosure Schedule, during the period from the date hereof to the Effective
Time, the Company will, and will cause each of its subsidiaries to, conduct its
operations only in the ordinary course of business consistent with past
practice, seek to preserve intact its current business organizations, seek to
keep available the service of its current officers and seek to preserve its
relationships with customers, suppliers and others having business dealings with
them. Without limiting the generality of the foregoing, and except as otherwise
expressly provided in this Agreement or as set forth in Section 4.1 of the
Company Disclosure Schedule, after the date hereof and prior to the earlier of
the (i) Effective Time or (ii) termination of this Agreement, the Company will
not and will cause its subsidiaries not to, without the prior written consent of
ICII, such consent not to be unreasonably withheld, conditioned or delayed:
(a) amend its charter or bylaws or the articles or other similar
governing instrument of any of its subsidiaries;
(b) except pursuant to the Rights Agreement, authorize for issuance,
issue, sell, deliver or agree or commit to issue, sell or deliver (whether
through the issuance or granting of options, warrants, commitments,
subscriptions, rights to purchase or otherwise) any stock of any class or any
other securities or equity equivalents (including any stock options or stock
appreciation rights), except for the issuance of Shares (and the associated
rights) upon the exercise of Company Stock Options outstanding at the date of
this Agreement under the Company Stock Option Plan, in accordance with the terms
of such Company Stock Option Plan and Company Stock Options as in effect on the
date hereof;
(c) split, combine or reclassify any shares of its capital stock,
declare, set aside or pay any dividend or other distribution (whether in cash,
stock or property or any combination thereof) in respect of its capital stock
(other than (i) regular quarterly dividends not in excess of 105% of its
taxable income for each quarter or (ii) distributions not in excess of 105% of
its taxable income for the applicable period as may be necessary to maintain the
Company's status as a real estate investment trust for federal income tax
purposes ("REIT")), make any other actual, constructive or deemed distribution
----
in respect of any shares of its capital stock or otherwise make any payments to
Company Stockholders in their capacity as such or redeem or otherwise acquire
any of its securities or any securities of any of its subsidiaries; provided,
however, that notwithstanding the foregoing, the Company shall be permitted to
declare and pay the Final Company Dividend (as defined in Section 4.12) in
accordance with Section 4.12;
(d) acquire, sell, lease, license or dispose of any assets, or enter
into any material contract outside the ordinary course of business consistent
with past practice;
(e) except as may be required as a result of a change in law or in
GAAP, change any of the accounting principles or practices used by it and
maintain its books and records other than in accordance with GAAP consistently
applied;
(f) acquire, whether by merger, consolidation or acquisition of stock
or assets or otherwise, any corporation, partnership or other business
organization or division thereof;
(g) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction in the ordinary course of business
consistent with past practice or in accordance with their terms, of claims,
liabilities or obligations reflected or reserved against in, or contemplated by,
the most recent consolidated financial statements (or the notes thereto) of the
Company and its subsidiaries included in the Company SEC Reports or arising in
the ordinary course of business since the date thereof or reflecting debt
between the Company and its wholly owned subsidiaries or between its wholly
owned subsidiaries or which are not otherwise material to the business of the
Company or its subsidiaries;
(h) settle or compromise, or agree to settle or compromise, any claim,
suit or other litigation or matter in an arbitration proceeding for an amount in
excess of $100,000 (after taking into account any insurance proceeds to which
the Company or any of its subsidiaries receives), or otherwise on terms which
would constitute a Company Material Adverse Effect;
(i) create or assume with respect to any asset of the Company
(including any security), any mortgage, lien, pledge, charge, security interest,
assignment of leases, revenues, rents and/or profits, fixture, filing or other
encumbrance of any kind in respect of such asset (the "Liens") other than Liens
-----
which would not have, or reasonably be expected to have, a Company Material
Adverse Effect;
(j) make any loans, advances or capital contributions in excess of
$500,000 to, or investments in, any other Person, other than (i) pursuant to
previous commitments listed in Section 4.1 of the Company Disclosure Schedule or
in Company SEC Reports filed prior to the date hereof, and (ii) loans, advances
and capital contributions to wholly owned subsidiaries of the Company;
(k) take any action, or omit to take any action, which action or
omission would terminate the Company's continuing status as a REIT; and
(l) take, or agree in writing or otherwise to take, (i) any of the
actions described in Sections 4.1(a) through 4.1(k) to the extent that such
actions would be prohibited thereby, except to the extent such actions would not
have, or reasonably be expected to have, a Company Material Adverse Effect, or
(ii) any action which would result in any of the material conditions to the
Merger set forth herein not being satisfied.
Notwithstanding anything to the contrary herein, Section 4.1 shall not be deemed
violated by any action taken by the Company as a result of any action by an
officer of the Company that is not specifically approved by the Special
Committee.
Section 4.2 Other Actions. Each of the Company, on the one hand, and
-------------
ICII and Merger Sub, on the other hand, shall not, and shall use commercially
reasonable efforts to cause their respective subsidiaries and affiliates not to,
take any action that would result in (i) any representations and warranties of
such party (without giving effect to any "knowledge" qualification) set forth in
this Agreement that are qualified as to materiality becoming untrue, (ii) any of
such representations and warranties (without giving effect to any "knowledge"
qualification) that are not so qualified becoming untrue in any material
respect, or (iii) any of the conditions to the Merger set forth in Article V not
being satisfied.
Section 4.3 Solicitation.
------------
(a) For a period of 60 days following the later of (x) the date of
this Agreement or (y) the date on which the Appraiser is engaged (the
"Solicitation Period"):
-------------------
(i) Nothing contained in this Agreement shall prohibit the
Company or any third party or any of the affiliates, officers,
directors, employees, representatives or agents of the Company,
directly or indirectly, from encouraging, soliciting, participating
in, initiating discussions or negotiations with, providing any
information or offering access to the properties, books or records of
the Company, or entering into any agreement respecting fees and
expenses or similar matters with any Person or group concerning any
Competing Transaction (as defined below), and it is contemplated and
expected that the Company and such persons will do so for the purpose
of determining if any Competing Transaction constituting a Superior
Proposal is available to the Company.
(ii) Notwithstanding anything to the contrary herein, after
consultation with and based upon the advice of both an outside legal
counsel and an independent financial adviser, the Company Board may
enter into an agreement with respect to, or approve or recommend, a
Superior Proposal; provided, however, that the Company shall
concurrently with entering into such an agreement terminate this
Agreement and pay, or cause to be paid, to ICII the expenses required
by Section 6.3.
(b) Following the expiration of the Solicitation Period:
(i) The Company shall not (whether directly or indirectly through
advisors, agents or other intermediaries) and shall use its reasonable
efforts to cause its officers, directors, employees, affiliates,
agents and representatives, not to directly or indirectly encourage,
solicit, participate in or initiate discussions or negotiations with,
or provide any information or offer access to the properties, books or
records of the Company, to any Person or group (other than ICII or any
designees of ICII) concerning any Competing Transaction.
Notwithstanding the fore-
going, the Company may furnish information and access, in each case
only in response to an unsolicited written proposal that constitutes a
Superior Proposal (provided that the Company shall use its reasonable
efforts to enter into a confidentiality agreement with such third
party) and participate in discussions and negotiate with the Person or
group making such Superior Proposal. The Company shall provide a copy
of such written proposal (which shall identify the party making such
proposal) and any amendments thereto to ICII promptly upon receipt
thereof and, thereafter, shall keep ICII promptly advised of material
developments with respect thereto; provided, however, that, nothing
contained in this Section 4.3(b) shall prevent the Company, the
Company Board or the Special Committee from (i) taking, and disclosing
to the Company's stockholders, a position complying with Rule 14e-2(a)
or Rule 14d-9 promulgated under the Exchange Act with respect to a
Competing Transaction, (ii) making any disclosure to its stockholders,
if, in the good faith judgment of the Company Board or the Special
Committee, after receiving advice of outside legal counsel, failure to
disclose would be reasonably likely to constitute a breach of its
fiduciary duties to the Company or its stockholders under applicable
law (including a duty of candor) or otherwise be a violation of any
applicable law, (iii) issuing a press release or publicly disclosing
the terms of this Agreement in accordance with Section 4.6, or (iv)
taking any action which, in the good faith judgment of the Company
Board or the Special Committee, after receiving advice of outside
legal counsel, is required pursuant to an order entered by a court of
competent jurisdiction.
(ii) Except as set forth in this Section, neither the Company
Board nor any committee thereof shall approve or recommend, or cause
the Company to enter into any agreement or letter of intent with
respect to, any Competing Transaction. Notwithstanding the foregoing,
prior to the Effective Time, after consultation with and based upon
the advice of both an outside legal counsel and an independent
financial adviser, the Special Committee may recommend and the Company
Board may authorize and cause the Company to enter into an agreement
with respect to, or approve or recommend, a Superior Proposal;
provided, however, that the Company shall concurrently with entering
into such an agreement terminate this Agreement and pay, or cause to
be paid, to ICII the expenses required by Section 6.3.
(c) For purposes of this Agreement:
(i) "Competing Transaction" shall mean any of the following with
---------------------
respect to the Company or any subsidiary thereof (other than the
transactions contemplated by this Agreement (including all schedules
and exhibits attached hereto or referred to herein)): any merger,
consolidation, share exchange, business combination or similar
transaction, or any sale, exchange, mortgage, pledge, transfer or
other disposition of all or substantially all of the assets or equity
securities of the Company and its subsidiaries taken as a whole, in a
single transaction or series of related transactions; any tender offer
or exchange offer for 50% or more of the
outstanding shares of beneficial interest of the Company or any
transaction resulting in the issuance of shares representing 50% or
more of the outstanding shares of beneficial interest of the Company,
or the filing of a registration statement under the Securities Act in
connection therewith.
(ii) "Superior Proposal" shall mean any bona fide proposal
-----------------
relating to a Competing Transaction which is on terms which the
Company Board determines in its good faith judgment (after consulting
with an independent financial advisor of nationally recognized
reputation) (i) to be more favorable to the Company Stockholders than
the Merger and (ii) is reasonably capable of being consummated.
Section 4.4 Additional Agreements; Reasonable Best Efforts. Subject
----------------------------------------------
to the terms and conditions herein provided, each of the parties hereto agrees
to use its reasonable best efforts to take, or cause to be taken, all actions,
and to do, or cause to be done, all things reasonably necessary, proper or
advisable under applicable laws and regulations to consummate and make effective
the transactions contemplated by this Agreement, including (i) contesting any
legal proceeding challenging the Merger and (ii) the execution of any additional
instruments, including the Articles of Merger, necessary to consummate the
transactions contemplated hereby. Subject to the terms and conditions of this
Agreement, each party hereto agrees to use reasonable best efforts to cause the
Effective Time to occur as soon as practicable after the stockholder vote with
respect to the Merger. In case at any time after the Effective Time any further
action is necessary to carry out the purposes of this Agreement, the proper
officers and directors of each party hereto shall take all such necessary
action.
Section 4.5 Consents. Without in any way limiting Section 4.4, ICII,
--------
Merger Sub and the Company each will use its reasonable best efforts to obtain
consents, approvals or waivers of all third parties and Regulatory Entities
necessary, proper or advisable for the consummation of the transactions
contemplated by this Agreement; provided that, nothing contained herein shall
require either party to dispose of any business, properties or assets or cease
engaging in any business which, individually or in the aggregate, would
reasonably be expected to have a material adverse effect on the business,
assets, results of operations or financial condition of the Surviving
Corporation and its subsidiaries, taken as a whole, after giving effect to the
Merger.
Section 4.6 Public Announcements. ICII, Merger Sub and the Company
--------------------
will consult with each other and give each other reasonable advance notice
before issuing any press release or otherwise making any public statements with
respect to the transactions contemplated hereby, including the Merger (but
excluding any press release or announcement by the Company relating to any
Competing Transaction or Superior Proposal). Each party hereto shall
incorporate in the press release or other public statement such information as
shall reasonably be requested to be included therein by the other party hereto.
Notwithstanding the foregoing, either party hereto may, without the prior
consent of the other party, issue any press release or make any public
announcement that may be
required by law or the rules or requirements of the Nasdaq Stock Market, if it
has used its reasonable best efforts to consult with the other party but has
been unable to do so in a timely manner, and the Company may issue any press
release or make any public announcement as it may desire with respect to any
Competing Transaction or Superior Proposal. The parties agree that the initial
press release to be issued with respect to the Merger shall be in the form
heretofore agreed to by the parties.
Section 4.7 Indemnification; Directors' and Officers' Insurance.
---------------------------------------------------
(a) ICII and Merger Sub agree that all rights to indemnification or
exculpation (whether contained in the charter, by-laws or other similar
governing instruments, or in any indemnification agreements, each as in effect
as of the date hereof, or otherwise available) now existing in favor of the
directors, officers, employees and agents (and their respective heirs,
representatives, successors and assigns) of the Manager and/or the Company and
its subsidiaries (each an "Indemnified Party") with respect to actions or
-----------------
omissions occurring prior to the Effective Time shall survive the Merger and
shall continue in full force and effect for a period of six years from the
Effective Time; provided, however, that, all rights to indemnification in
respect of any claim asserted or made within such period shall continue until
the disposition of such claim. In addition to the foregoing, from and after the
Effective Time, ICII and the Surviving Corporation, jointly and severally, shall
indemnify, hold harmless and defend each person who is a current or former
officer or director of the Manager and/or the Company or any of its subsidiaries
against all losses, claims, damages, liabilities, judgments, costs or expenses
(including attorneys' fees) arising out of or pertaining to acts or omissions
(or alleged acts or omissions) by them in their capacities as such
(collectively, "Actions"), which Actions occurred at or prior to the Effective
-------
Time. To the maximum extent permitted by the MGCL, the indemnification and
related rights hereunder shall be mandatory rather than permissive and ICII
and/or the Surviving Corporation shall promptly advance expenses in connection
with such indemnification to the fullest extent permitted under applicable law,
provided that, to the extent required by law, the person to whom expenses are
advanced provides an undertaking to repay such advances if it is ultimately
determined that such person is not entitled to indemnification. Notwithstanding
anything to the contrary herein, immediately upon consummation of the Merger,
ICII and the Surviving Corporation shall (and ICII agrees to cause the Surviving
Corporation to), jointly and severally, expressly assume the obligations of the
Company under any indemnification agreements entered into by the Company for the
benefit of its directors and officers.
(b) ICII shall cause the Surviving Corporation to maintain in effect
for not less than six years from the Effective Time policies of directors' and
officers' liability and fiduciary insurance, which may be in the form of tail
coverage under the Company's current policies of such insurance (if and to the
extent that such tail coverage is available and provides insurance coverage that
meets all of the requirements of this Section), on terms with respect to
coverage and amount no less favorable than those of such policy or policies in
effect on the date hereof pursuant to which the Company's directors and officers
currently are insured with respect to claims arising from facts or events
occurring prior to the Effective Time to the extent required to cover the types
of actions and omissions with respect to which the Company's directors and
offi-
cers are currently insured; provided, that in no event shall ICII or the
Surviving Corporation be required to pay aggregate annual premiums for insurance
under this paragraph (b) in excess of 300% of the aggregate annual premium paid
by the Company as of the date of this Agreement for such purpose; provided,
further, that if the premium for such coverage exceeds such amount, ICII shall,
or shall cause the Surviving Corporation to, purchase a policy with the greatest
coverage available for such 300% of the aggregate annual premium. In the event
that any person is or would have been entitled to coverage under a directors'
and officers' liability and fiduciary insurance policy pursuant to this Section
and such policy has lapsed, not been purchased, terminated, been repudiated or
is otherwise in breach or default or affords lesser coverage than is required
under this Section as a result of the Surviving Corporation's failure to
maintain and fulfill its obligations pursuant to this Section or for any other
reason, ICII shall pay to such persons such amounts and provide any other
coverage or benefits as such person would have received pursuant to such policy.
(c) Any Indemnified Party wishing to claim indemnification under
paragraph (a) of this Section, upon actually learning of any such Action, shall
promptly notify ICII thereof; provided, however, that any failure of an
Indemnified Party to promptly so notify ICII shall not excuse ICII or the
Surviving Corporation from any of its obligations hereunder except to the extent
of any actual harm suffered by ICII or the Surviving Corporation as a result of
such delay. In the event of any such claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Time), (i) ICII and
the Surviving Corporation shall have the right, from and after the Effective
Time, to assume the defense thereof if the relief sought therein is solely
monetary (and provided that ICII or the Surviving Corporation, jointly and
severally, admit and covenant in writing their liability to indemnify and hold
the Indemnified Party harmless from and against any losses, damages, expenses
and liabilities arising out of such matter), (ii) the Indemnified Party (or
Parties, if more than one) shall have the right to engage separate counsel to
represent its or their interests, and ICII and the Surviving Corporation shall,
jointly and severally, bear the reasonable expenses of such counsel (such
counsel or counsels, as the case may be, to coordinate with counsel for ICII in
order to avoid unreasonable duplication of legal expenses among ICII and the
Indemnified Parties); provided, however, that ICII and the Surviving Corporation
shall, jointly and severally, be obligated to bear the expenses of only one such
separate counsel unless there exists or may exist one or more legal defenses
available to an Indemnified Party that are not available to, or the assertion of
which would be adverse to the interest of, one or more of the other Indemnified
Parties (it being further understood and agreed that if and to the extent one or
more of the Independent Directors of the Company (as such term is defined in the
Company's charter) are Indemnified Parties with respect to any particular
Action, ICII and the Surviving Corporation shall, jointly and severally, be
obligated to bear the expenses of one counsel for the Independent Directors with
no other representation in the matter, and shall be so obligated with respect to
individual counsel for any Independent Director in the event there exists or may
exist one or more legal defenses available to such Independent Director that are
not available to, or the assertion of which would be adverse to the interest of,
one or more of the other Independent Directors), (iii) the Indemnified Parties
will reasonably cooperate in the defense of any such matter, (iv) ICII and the
Surviving Corporation shall not be liable for any settlement effected without
ICII's prior written consent (which consent shall not be unreasonably withheld,
conditioned or delayed), and (v) neither ICII, nor the Surviving Corporation,
nor any of their affiliates shall con-
sent to a settlement of, or the entry of any judgment arising from, any such
matter, without the prior written consent of each Indemnified Party that is a
party to such matter, unless the Indemnified Party is the beneficiary of a full
and complete release from any losses, damages, expenses and liabilities arising
out of such claim or Action by the person or persons bringing such claim or
Action, in form and substance reasonably satisfactory to the Indemnified Party.
(d) Notwithstanding any other provisions hereof, the obligations of
ICII and the Surviving Corporation shall be binding upon the successors and
assigns of each of them. In the event ICII or the Surviving Corporation or any
of their successors or assigns (i) consolidates with or merges into any other
Person and shall not be the continuing or surviving corporation or entity of
such consolidation or merger or (ii) transfers or conveys all or any substantial
portion of its properties and assets to any Person, then, and in each such case,
proper provision shall be made so that the successors and assigns of such party
assume the obligations set forth in this Section.
(e) The obligations of the Surviving Corporation hereunder shall be
the joint and several obligations of ICII and the Surviving Corporation and
their respective successors and assigns, whether or not expressly provided in
this Section.
(f) The provisions in this Section (i) are intended to be for the
benefit of, and shall be enforceable by, each person entitled to indemnification
hereunder, and each such person's heirs, representatives and successors or
assigns (it being expressly agreed that such persons shall be the third party
beneficiaries of this Section) and (ii) are in addition to, and not in
substitution for, any other rights to indemnification or contribution that any
such person may have by contract or otherwise.
Section 4.8 Notification of Certain Matters. The Company shall give
-------------------------------
prompt notice to ICII, and ICII shall give prompt notice to the Company, of (i)
the occurrence or nonoccurrence of any event the occurrence or nonoccurrence of
which would be likely to cause any of its representations or warranties
contained in this Agreement to be untrue or inaccurate in any material respect
at or prior to the Effective Time, (ii) any material failure by it to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by it hereunder, (iii) any notice of, or other communication relating
to, a default or event which, with notice or lapse of time or both, would become
a default, if received by it or any of its subsidiaries subsequent to the date
of this Agreement and prior to the Effective Time, under any contract material
to the financial condition, properties, assets, businesses or results of
operations of it and its subsidiaries taken as a whole to which it or any of its
subsidiaries is a party or is subject, (iv) any notice or other communication
from any third party alleging that the consent of such third party is or may be
required in connection with the transactions contemplated by this Agreement (but
notice to ICII or the Company, as the case may be, shall be required only if the
absence of such consent would have an ICII Material Adverse Effect or Company
Material Adverse Effect, as the case may be), or (v) any Company Material
Adverse Effect or ICII Material Adverse Effect, as the case may be; provided,
however, that the delivery of any notice pursuant to this Section shall not cure
such breach
or non-compliance or limit or otherwise affect the remedies available hereunder
to the party receiving such notice.
Section 4.9 SEC and Other Filings. The Company and ICII each shall
---------------------
provide the other and its counsel with copies of all filings made by it or any
of its subsidiaries with the SEC after the date hereof and the Company and ICII
each shall provide the other and its counsel with copies of all filings made by
it with any other Regulatory Entity in connection with this Agreement and the
transactions contemplated hereby.
Section 4.10 Stockholder Litigation. Each of ICII and the Company
----------------------
shall give the other the reasonable opportunity to participate in the defense of
any stockholder litigation against ICII, Merger Sub or the Company, as
applicable, and/or their respective officers and directors relating to the
transactions contemplated hereby.
Section 4.11 SPB Loans. ICII shall repurchase (unless Southern
---------
Pacific Bank ("SPB") has previously repurchased) the 16 real estate mortgage
---
loans previously sold by SPB to the Company that (i) had an aggregate principal
balance of $3,911,864.85 as of June 30, 1999, (ii) were described in that
certain notice from the Company to SPB, dated May 21, 1999, and (iii) have not
been repurchased by SPB from the Company as of the date hereof (collectively,
the "SPB Loans"; provided that, in those instances in which a foreclosure sale
---------
of the real property underlying one or more SPB Loans has already occurred, all
references in this Agreement to SPB Loans shall be deemed to be references to
such real property, and in those instances, ICII shall purchase such real
property from the Company in lieu of purchasing such mortgage loans), by the
later of (x) 60 days from the date of this Agreement or (y) 5 days after the
termination of this Agreement, at a price per SPB Loan as provided for in the
relevant Agreement for Purchase and Sale of Real Estate Loans between the
Company and SPB pursuant to which such SPB Loan was acquired by the Company.
Section 4.12 Final Company Dividend. The Company shall declare a
----------------------
cash dividend (the "Final Company Dividend") to the Company Stockholders, the
----------------------
record date for which shall be the close of business on the last business day
prior to the Effective Time, in an amount not in excess of (x) 100% of the
Company's taxable income for the taxable year through the Effective Time reduced
by (y) the amount of all prior dividends paid in respect of the Company's
taxable year ending as of the Effective Time, to be paid to Company Stockholders
as promptly as practicable after the Effective Time.
Section 4.13 Employee Matters. ICII shall cause the Manager to fully
----------------
honor and pay all existing employment and severance arrangements with respect to
its employees. The provisions of this Section are intended to be for the benefit
of, and shall be enforceable by, each employee of the Manager (it being
expressly agreed that each such person shall be a third party beneficiary of
this Section).
Section 4.14 Standstill.
----------
(a) Except with respect to the Merger or any Qualifying Alternative
Transaction (including, in either case, any of the matters permitted by this
Agreement in connection with the negotiation, approval or consummation of the
Merger), ICII (including its affiliates, each of its and their directors,
officers, employees, agents and representatives, and any "group", within the
meaning of Section 13(d)(3) of the Exchange Act, in which it, any of its
affiliates, or any of its or their directors, officers, employees, agents or
representatives, is a member) shall not directly or indirectly: (i) acquire
beneficial ownership or control of any equity securities of the Company, other
than the ICII Shares owned prior to the date of this Agreement; (ii) other than
certain mortgage loans (or underlying real property) that may be resold to SPB
and/or Franchise Mortgage Acceptance Corp., in any manner acquire or agree,
attempt, seek or propose to acquire (or make any request for permission with
respect thereto), by purchase, merger, through the acquisition of control of
another person, by joining a partnership, limited partnership, syndicate or
other group, or otherwise, ownership (including, but not limited to, beneficial
ownership as defined in Rule 13d-3 under the Exchange Act) of any of the assets
or businesses of the Company or any securities issued by the Company, or any
rights or options to acquire such ownership (including from a third party);
(iii) make, or in any way cause or participate in, any "solicitation" of
"proxies" to vote (as such terms are defined in Regulation 14A under the
Exchange Act), or communicate with, seek to advise, encourage or influence any
person or entity, in any manner, with respect to the voting of, any voting
securities of the Company, or become a "participant" in any "election contest"
(as such terms are defined or used in Rule 14a-11 promulgated under the Exchange
Act) with respect to the Company, or execute any written consent with respect to
the Company; (iv) make or cause to be made or reasserted any proposal for the
acquisition of the Company or any assets or securities thereof or for any
extraordinary transaction involving the Company, including any merger, or other
business combination, restructuring, recapitalization, liquidation or similar
transaction; (v) initiate, propose or otherwise solicit stockholders for the
approval of one or more stockholder proposals with respect to the Company or
induce or attempt to induce any other person to initiate any stockholder
proposal, or seek election to or seek to place a representative on the Board of
Directors of the Company (other than existing members of the Company Board on
the date hereof) or seek the removal of any member of the Company Board; (vi)
form, join or in any way participate in a "group" (within the meaning of Section
13(d)(3) of the Exchange Act) with respect to any voting securities of the
Company; (vii) otherwise act, alone or in concert with others, to seek to
control or influence the management, the Company Board or the policies of the
Company (except as permitted or required by the Management Agreement or by such
person's status as a director or officer of the Company); (viii) disclose any
intention, plan or arrangement, or make any public announcement inconsistent
with the foregoing; (ix) advise, assist or encourage or finance (or assist or
arrange financing to or for) any other person in connection with any of the
foregoing; (x) enter into any discussions, negotiations, arrangements or
understandings with any other person in connection with any of the foregoing; or
(xi) request a waiver of any of the foregoing. In the event ICII shall
determine to do any of the foregoing with respect to a Qualifying Alternative
Transaction, it shall promptly amend its Schedule 13D filed with respect to the
Shares (the "Schedule 13D") to reflect such change.
------------
(b) A "Qualifying Alternative Transaction" shall refer to any
----------------------------------
transaction (i) by which ICII, alone or with others, acquires or seeks to
acquire all of the Shares for cash consid-
eration to the holders of Shares (payable in U.S. dollars) at a price that is
not less than the Merger Consideration (except that such price may be adjusted
to take account of any extraordinary distribution made by the Company following
the termination of the Merger Agreement, or any issuance or repurchase by the
Company of interests or instruments convertible or exchangeable into or for
capital stock of the Company following the termination of the Merger Agreement)
(provided, however, that the amount of any break-up fee agreed to be paid by the
Company to a third party pursuant to an agreement relating to a Superior
Proposal with such third party shall not exceed $6 million); (ii) proposed after
the Merger Agreement is terminated by ICII solely in response to a definitive
Superior Proposal for which the consideration to be paid thereunder does not
consist entirely of cash or cash equivalent securities or instruments; and (iii)
(x) not subject to any conditions to consummation not contained in this
Agreement with respect to the Merger and (y) in connection with which ICII shall
undertake and remain subject to (A) all the terms and conditions of this
Agreement that are for benefit of any third party (whether or not such party is
a third party beneficiary hereof) as contemplated herein and (B) all of the
terms and conditions of this Agreement set forth on Schedule IV, and the
consummation of any Qualifying Alternative Transaction by ICII shall constitute
an agreement by ICII to abide by the terms hereof referred to in this clause
(y), mutatis mutandis.
(c) If such Qualifying Alternative Transaction is effected by tender
offer (i) such offer shall have a non-waivable minimum condition that ICII shall
not accept for payment any tendered Shares, unless there are validly tendered
and not properly withdrawn prior to the expiration date for such offer, that
number of Shares representing a majority of the total number of issued and
outstanding Shares, other than the ICII Shares, and (ii) if such offer is
consummated, ICII shall effect a second-step merger in which Company
Stockholders not tendering in such offer shall receive the same per share
consideration as they would have received had they tendered in the tender offer.
ICII shall, in accordance with Section 1.11, promptly amend its Schedule 13E-3
and its Schedule 13D to reflect the terms of any Qualifying Alternative
Transaction it may propose.
(d) ICII covenants and agrees that it shall not (i) with respect to
any Qualifying Alternative Transaction to be effected by tender offer or by the
purchase of any Shares, permit the tender of any Shares to become irrevocable or
purchase any Shares tendered or offered to be sold in connection with such
Qualifying Alternative Transaction, or (ii) with respect to any Qualifying
Alternative Transaction to be effected in any other manner, obtain the required
approval of the Company Stockholders for such Qualifying Alternative
Transaction, consummate such Qualifying Alternative Transaction or make the
consummation of such Qualifying Alternative Transaction otherwise not subject to
further approval by Company Stockholders, in either case before two business
days following the date of the meeting of the Company Stockholders called for
the purpose of approving a Superior Proposal, with the purpose and effect that
the Company Stockholders shall in fact have the opportunity to accept and
benefit from such Superior Proposal should they so desire, without any timing
advantage being afforded to such Qualifying Alternative Transaction.
Section 4.15 Transfer and Gains Taxes. The Company and ICII shall
------------------------
cooperate in the preparation, execution
and filing of any returns, questionnaires, applications or other documents
regarding any real property transfer or gains, sales, use, transfer, value
added, stock transfer or stamp taxes, any transfer, recording, registration or
other fees or any similar taxes which may become payable in connection with the
Merger (together with any related interests, penalties or additions to tax,
"Transfer and Gains Taxes"). The Surviving Corporation shall pay, and not deduct
------------------------
or withhold, any Transfer and Gains Taxes from any amounts payable to the former
holders of the Company's Shares.
Section 4.16 Access to Information.
---------------------
(a) Between the date hereof and the Effective Time, the Company, upon
reasonable notice and during the Company's ordinary business hours, (i) will not
prevent ICII and its authorized representatives from having reasonable access to
the employees of the Manager, and to the offices and other facilities and the
books and records of the Company and its subsidiaries, (ii) will permit ICII and
its authorized representatives to make such inspections as ICII and its
authorized representatives may, from time to time, reasonably request and will
cause the Company's officers and those of its subsidiaries, and their respective
accountants and outside legal counsel, to furnish ICII and its authorized
representatives with such financial and operating data and other information
with respect to the business, properties and personnel of the Company and its
subsidiaries as ICII and its authorized representatives may from time to time
reasonably request, provided that no investigation pursuant to this Section
4.16(a) shall affect or be deemed to modify any of the representations or
warranties made by the Company.
(b) ICII agrees that all information received from the Company or the
Manager as contemplated by this Section shall be deemed received pursuant to the
Confidentiality Agreement, dated as of June 22, 1999, between the parties (the
"Confidentiality Agreement"), and that ICII shall, and shall cause its
-------------------------
subsidiaries, affiliates and their respective directors, officers, employees,
agents and representatives to, comply with the provisions of the Confidentiality
Agreement with respect to such information, and the provisions of the
Confidentiality Agreement are hereby incorporated by reference with the same
effect as if fully set forth herein.
Section 4.17 Excess Share Provision. The parties agree that the
----------------------
provisions of Article VII of the Company Charter may apply to the transactions
contemplated by this Agreement. Therefore, prior to the Effective Time, the
Board of Directors of the Company shall, pursuant to the second sentence of
Section 7.1.7 of the Company Charter and subject to and conditioned upon receipt
of the items contemplated by clauses (i), (ii) and (iii) below, exempt the
transactions contemplated hereby, including the Merger (the "Exemption"), from
---------
the restrictions set forth in Section 7.1.2(a) of the Company Charter. In
furtherance of the foregoing, prior to the Effective Time, ICII shall cooperate
with the Company in obtaining, or shall cause to be delivered to the Company's
Board of Directors, as applicable, the following:
(i) an opinion of Piper & Marbury L.L.P. (the "Opinion") to the
-------
effect that the restrictions contained in Section 7.1.2(b), Section
7.1.2(c) and/or Section
7.1.2(d) of the Company Charter will not be violated by the
consummation of the transactions contemplated by this Agreement,
(ii) such representations and undertakings contemplated by
Section 7.1.7 of the Company Charter and such representations and
warranties appropriate for the tax opinion certificate to be delivered
to support the legal opinion described in clause (i), in each case
including the representations and undertakings set forth in Exhibit A
---------
to this Agreement, as are reasonably necessary to ascertain that no
individual's "Beneficial Ownership" or "Constructive Ownership" of
shares of "Equity Stock" will violate the "Ownership Limit" (as each
of those terms is defined in Section 7.1.1 of the Company Charter;
such Ownership Limit being referred to herein as the "Individual
----------
Ownership Limit"), and
---------------
(iii) the written agreement of ICII that any violation or
attempted violation of the Individual Ownership Limit will result in
the Shares acquired pursuant to this Agreement being transferred to a
trust contemplated by Section 7.1.3 of the Company Charter to the
extent necessary to avoid such violation.
The parties agree that application of Article VII of the Company Charter to the
Merger shall not be deemed to constitute a breach of any representation,
warranty, covenant or agreement contained in this Agreement, nor the failure to
satisfy any condition to the consummation of the transactions contemplated
hereby (except as provided in Section 5.2(c), with respect to the Company, and
Section 5.3(c), with respect to ICII).
Section 4.18 State Takeover Statutes. The Company will use its
-----------------------
reasonable efforts to take all permissible actions it believes necessary to
exempt the Merger from the operation of any applicable "fair price,"
"moratorium," "business combination," "control share acquisition" or any other
applicable anti-takeover statute enacted under the state or federal laws of the
United States or any similar statute or regulation. The Company will not
exercise any rights it may have under applicable anti-takeover statutes to
nullify or delay this Agreement or the consummation of the transactions
contemplated hereby.
ARTICLE V
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 5.
Section 5.1 Conditions to Each Party's Obligations to Effect the
----------------------------------------------------
Merger. The respective obligations of ICII, Merger Sub and the Company to
------
effect the transactions contemplated hereby are subject to the satisfaction or
waiver at or prior to the Effective Time of the following conditions:
(a) this Agreement and the transactions contemplated hereby shall have
been approved at the Special Meeting held after October 1, 1999 (i) by Company
Stockholders in accordance with the Company Charter and (ii) by Company
Stockholders representing a majority of the outstanding Shares entitled to vote
at the Special Meeting (other than the ICII Shares); and
(b) no existing or future statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
enforced by any Regulatory Entity which has the effect of making the
consummation of the Merger illegal or prevents or prohibits consummation of the
Merger. Each party agrees that, in the event that any such statute, rule,
regulation, executive order, decree, ruling or injunction shall have been
enacted, entered, promulgated or enforced, such party shall use its reasonable
best efforts to cause such statute, rule, regulation, executive order, decree,
ruling or injunction to be complied with, lifted or vacated.
Section 5.2 Conditions to the Obligations of the Company. The
--------------------------------------------
obligation of the Company to effect the Merger and the transactions contemplated
hereby is subject to the satisfaction or waiver at or prior to the Effective
Time of the following conditions:
(a) The representations and warranties of ICII and Merger Sub
contained in this Agreement or in any other document delivered pursuant hereto
shall be true and correct at and as of the Effective Time with the same effect
as if made at and as of the Effective Time (except to the extent expressly made
as of an earlier date, in which case, as of such date), except where the failure
of such representations and warranties to be true and correct (without giving
effect to any supplement to the ICII Disclosure Schedule after the date hereof
or any materiality or material adverse effect qualifier) does not constitute an
ICII Material Adverse Effect and at the Closing ICII and Merger Sub shall have
delivered to the Company a certificate signed by their respective Chief
Executive Officers to that effect;
(b) Each of the obligations of ICII and Merger Sub to be performed at
or before the Effective Time pursuant to the terms of this Agreement shall have
been duly performed at or before the Effective Time, except for such non-
performances as would not, in the aggregate, either have an ICII Material
Adverse Effect or prevent or prohibit consummation of the Merger, and at the
Closing ICII and Merger Sub shall have delivered to the Company a certificate
signed by their respective Chief Executive Officers to that effect; and
(c) The deliveries contemplated by clauses (i), (ii) and (iii) of
Section 4.17 shall have been made.
Section 5.3 Conditions to the Obligations of ICII and Merger Sub.
----------------------------------------------------
The obligation of ICII and Merger Sub to effect the Merger and the transactions
contemplated hereby is subject to the satisfaction or waiver at or prior to the
Effective Time of the following conditions:
(a) the representations and warranties of the Company contained in
this Agreement or in any other document delivered pursuant hereto shall be true
and correct at and as
of the Effective Time with the same effect as if made at and as of the Effective
Time (except to the extent expressly made as of an earlier date, in which case,
as of such date), except where the failure of such representations and
warranties to be true and correct (without giving effect to any supplement to
the Company Disclosure Schedule after the date hereof or any materiality or
material adverse effect qualifier) does not have and would not have a Company
Material Adverse Effect and at the Closing the Company shall have delivered to
ICII a certificate signed by its Chief Executive Officer to that effect;
(b) each of the obligations of the Company to be performed at or
before the Effective Time pursuant to the terms of this Agreement shall have
been duly performed at or before the Effective Time, except for such non-
performances as would not, in the aggregate, have a Company Material Adverse
Effect or prevent or prohibit consummation of the Merger, and at the Closing the
Company shall have delivered to ICII a certificate signed by its Chief Executive
Officer to that effect; and
(c) The Exemption shall have been granted; provided, however, that
-------- -------
neither ICII nor Merger Sub may rely on the failure of this condition if any of
the deliveries contemplated by clauses (ii) and (iii) of Section 4.17 required
to be delivered by ICII have not been made (or if the delivery contemplated by
clause (i) of Section 4.17 has not been made as a result of the failure of such
deliveries).
Section 5.4 Frustration of Closing Conditions. Neither ICII, Merger
---------------------------------
Sub nor the Company may rely on the failure of any condition set forth in
Sections 5.1 through 5.3 to be satisfied if such failure was caused by such
party's failure to use reasonable best efforts to consummate the Merger and the
transactions contemplated hereby, as required by and subject to Section 4.4.
ARTICLE VI
TERMINATION; AMENDMENT; WAIVER
Section 6.
Section 6.1 Termination. This Agreement may be terminated and the
-----------
Merger and the transactions contemplated hereby may be abandoned at any time
prior to the Effective Time, whether before or after the Company Stockholders
approve the Merger:
(a) by mutual written consent of ICII and the Company;
(b) by ICII or the Company if (i) any Regulatory Entity shall have
issued an order, decree or ruling or taken any other action permanently
restraining, enjoining or otherwise prohibiting the acceptance for payment of,
or payment for Shares and such order, decree, ruling or other action is or shall
have become final and nonappealable; provided that no party may ter-
minate this Agreement pursuant to this paragraph if such party has failed to
fulfill its obligations under Section 5.1(b) of this Agreement; (ii) the Merger
has not been consummated prior to January 31, 2000; or (iii) the approval of
this Agreement by the Company Stockholders as provided in Section 5.1(a) shall
not have been obtained at the Special Meeting or any adjournment or postponement
thereof;
(c) by the Company if, prior to the Effective Time, the Company Board
approves or recommends another offer or an agreement to effect a proposal made
by a third party to effect a Superior Proposal in accordance with Section 4.3;
(d) by ICII if, prior to the Effective Time, the full Company Board
(i) shall have withdrawn or modified in a manner adverse to ICII or Merger Sub
its approval or recommendation of this Agreement or the Merger, (ii) shall have
approved or recommended another offer or an agreement to effect a proposal made
by a third party (other than an affiliate of ICII) to effect a Superior
Proposal, or (iii) shall have resolved to effect any of the foregoing;
(e) by the Company if prior to the consummation of the Merger (i)(A)
any of the representations and warranties of ICII or Merger Sub contained in
this Agreement and qualified as to materiality or ICII Material Adverse Effect
were untrue or incorrect when made or have since become untrue or incorrect or
(B) any other representations or warranties of ICII or Merger Sub contained in
this Agreement were when made or have since become untrue or incorrect and,
except as to the representations and warranties in Section 3.9 as to which the
following qualification shall not apply, such breach could reasonably be
expected, individually or in the aggregate, to have an ICII Material Adverse
Effect, or (ii) ICII or Merger Sub shall have breached or failed to comply in
any material respect with any of their respective agreements or obligations
under this Agreement, which breach shall not have been cured prior to 20
business days following notice of such breach (provided that such notice and
grace period shall not be applicable to ICII's covenants in Section 4.11 as to
the SPB Loans);
(f) by ICII if prior to the consummation of the Merger (i) (A) any of
the representations or warranties of the Company contained in this Agreement and
qualified as to materiality or Company Material Adverse Effect were untrue or
incorrect when made or have since become untrue or incorrect or (B) any other
representations or warranties of the Company contained in this Agreement were
when made or have become untrue or incorrect and such breach could reasonably be
expected, individually or in the aggregate, to have a Company Material Adverse
Effect, or (ii) the Company shall have breached or failed to comply in any
material respect with any of its agreements or obligations under this Agreement,
which breach shall not have been cured 20 business days following notice of such
breach.
The party desiring to terminate this Agreement pursuant to this Section 6.1
shall give written notice of such termination to the other party. Neither party
may terminate this Agreement pursuant to this Section if such party has failed
to use reasonable best efforts to consummate the Merger and the transactions
contemplated hereby, as required by and subject to Section 4.4.
In the event this Agreement is terminated pursuant to Section 6.1(c) or
6.1(d)(ii) as the result of a Superior Proposal entered into as contemplated by
Section 4.3(a), ICII hereby agrees to vote,
tender or exchange, and to use its reasonable best efforts to cause any other
ICII Shares to be voted, tendered or exchanged, in favor of such Superior
Proposal; provided, that such Superior Proposal is an all-cash transaction.
--------
Section 6.2 Effect of Termination. In the event of the termination
---------------------
and abandonment of this Agreement pursuant to Section 6.1, this Agreement shall
forthwith become void and have no effect, without any liability on the part of
any party hereto or its affiliates, directors, officers or stockholders, other
than the provisions of this Section and Sections 1.8, 2.6, 3.5, 4.11, 4.14, 6.3
and Article VII. Nothing contained in this Section shall relieve any party from
liability for any willful breach of this Agreement.
Section 6.3 Expenses.
--------
(a) Upon the termination of this Agreement pursuant to Section 6.1(c)
or 6.1(d)(ii), the Company shall promptly pay ICII an amount equal to the lesser
of (x) two million dollars ($2,000,000) and (y) ICII's actual expenses related
to this Agreement and the transactions contemplated hereby (not including any
investment banking fees other than the reimbursement of out-of-pocket expenses
and not including any fees relating to arrangements related to the financing of
the transactions contemplated hereby).
(b) In the event that this Agreement shall be deemed void or voidable
pursuant to Section 3-602 of the MGCL by a final, non-appealable order, ICII
shall promptly after such determination pay to the Company an amount equal to
the Company's actual expenses related to this Agreement and the transactions
contemplated hereby.
(c) Except as specifically provided in this Section, each party shall
bear its own expenses in connection with this Agreement and the transactions
contemplated hereby.
Section 6.4 Amendment. This Agreement may be amended by action taken
---------
by the Company, ICII and Merger Sub at any time before or after approval of the
Merger by the Company Stockholders but, after any such approval, no amendment
shall be made which requires the approval of such stockholders under applicable
law without such approval. This Agreement may not be amended except by an
instrument in writing signed on behalf of the parties hereto.
Section 6.5 Extension; Waiver. At any time prior to the Effective
-----------------
Time, each party hereto may (i) extend the time for the performance of any of
the obligations or other acts of the other parties, (ii) waive any inaccuracies
in the representations and warranties of the other parties contained herein or
in any document, certificate or writing delivered pursuant hereto, or (iii)
waive compliance by the other parties with any of the agreements or conditions
contained herein. Any agreement on the part of any party hereto to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party and expressly referring to this Agreement. The
failure of any party hereto to assert any of its rights hereunder shall not
constitute a waiver of such rights.
ARTICLE VII
MISCELLANEOUS
Section 7.
Section 7.1 Non-survival of Representations and Warranties. The
----------------------------------------------
representations and warranties made herein shall not survive beyond the
Effective Time or a termination of this Agreement. This Section shall not limit
any covenant or agreement which by its terms contemplates performance after the
Effective Time.
Section 7.2 Entire Agreement; Assignment. This Agreement (including
----------------------------
the documents and instruments referred to herein) (i) constitutes the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersedes all other prior agreements and understandings, both written and
oral, between the parties with respect to the subject matter hereof and (ii)
shall not be assigned by operation of law or otherwise.
Section 7.3 Notices. All notices, requests, demands and other
-------
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given if delivered by hand (including recognized
courier service) or mailed, certified or registered mail with postage prepaid,
or communicated by facsimile transmission (receipt confirmed), as follows:
if to ICII or Merger Sub:
Imperial Credit Industries Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇-▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: H. ▇▇▇▇▇ ▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with copies to:
Imperial Credit Industries Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇-▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
and:
▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇/▇▇/ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
if to the Company:
Imperial Credit Commercial
Mortgage Investment Corp.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with copies to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
Chairman of the Special Committee
of the ICCMIC Board of Directors
▇▇▇▇▇▇ ▇▇▇▇▇▇ Company, Inc.
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
and:
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
and:
Wachtell, Lipton, ▇▇▇▇▇ & ▇▇▇▇
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address as the person to whom notice is given may have
previously furnished to the other in writing in the manner set forth above.
Each such notice, request, demand, application, service of process and
other communication shall be deemed to have been given (i) as of the date faxed
or delivered (which, with respect to a recognized courier service, shall be
deemed to mean the business day following the date sent), (ii) as of the fifth
business day after the date mailed, or (iii) if given by any other means, only
when actually received by the addressee.
Section 7.4 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Maryland without regard to
the principles of conflicts of law thereof.
Section 7.5 Descriptive Headings; Schedules, Interpretation.
-----------------------------------------------
(a) The descriptive headings herein are inserted for convenience of
reference only and are not intended to be part of or to affect the meaning or
interpretation of this Agreement. Any matter disclosed pursuant to any Section
of the Company Disclosure Schedule or the ICII Disclosure Schedule shall be
deemed to qualify each representation and warranty of the Company, ICII and
Merger Sub, respectively. Any matter set forth in the Company SEC Reports or
the ICII SEC Reports, as the case may be, shall be deemed to be set forth in the
applicable Section of the Company Disclosure Schedule or the ICII Disclosure
Schedule, as the case may be, and no matter disclosed in the Company SEC Reports
or the ICII SEC Reports shall be deemed to constitute a breach of any
representation or warranty of the Company, ICII or Merger Sub, as the case may
be, set forth herein.
(b) As used in this Agreement, (i) the term "includes" and the word
--------
"including" and words of similar import shall be deemed to be followed by the
----------
words "without limitation"; (ii) "control" (including its correlative meanings,
-------
"controlled by" and "under common control with") shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of
management or policies of a person, whether through the ownership of securities
or partnership or other interests, by contract or otherwise; (iii) "Person"
------
means, as applicable, a natural person, firm, partnership, limited liability
company, joint venture, corporation, association, business enterprise, joint
stock company, unincorporated association, trust, Regulatory Entity (as defined
in Section 2.4 hereof) or any other entity, whether acting in an individual,
fiduciary or other capacity; (iv) references to "knowledge" in this Agreement,
---------
or words of similar import, shall mean the actual knowledge of the Persons named
in Section 7.5 of the Company Disclosure Schedule (where used herein with
respect to the Company) and shall mean the actual knowledge of the Persons named
in Section 7.5 of the ICII Disclosure Schedule (where used with respect to
ICII); (v) definitions contained in this Agreement apply to singular as well as
the plural forms of such terms and to the masculine as well as to the feminine
and neuter genders of such terms; (vi) words in the singular shall be held to
include the plural and vice versa and words of one gender shall be held to
include the other gender as the context requires; (vii) the terms "hereof,"
------
"herein," and "herewith" and words of similar import shall, unless otherwise
------- --------
stated, be construed to refer to this Agreement as a whole and not to any
particular provision of this Agreement, and Article, Section, paragraph,
Schedule and Exhibit references are to the Articles, Sections, paragraphs,
Schedules and Exhibit to this Agreement unless otherwise specified; (viii)
the word "or" shall not be exclusive; (ix) provisions shall apply, when
--
appropriate, to successive events and transactions; and (x) the terms
"subsidiary" and "affiliate", as used herein with reference to ICII, shall be
---------- ---------
deemed not to include the Company and its subsidiaries, and the term
"affiliate", as used herein with reference to the Company, shall be deemed not
---------
to include ICII and its subsidiaries and affiliates, other than the Company and
its subsidiaries.
Section 7.6 Parties in Interest. This Agreement shall be binding
-------------------
upon and inure solely to the benefit of each party hereto and its successors and
permitted assigns, and except as provided in Sections 1.9, 1.10, 4.7 and 4.13
nothing in this Agreement, express or implied, is intended to or shall confer
upon any other person any rights, benefits or remedies of any nature whatsoever
under or by reason of this Agreement.
Section 7.7 Severability. If any term or other provision of this
------------
Agreement is invalid, illegal or unenforceable, all other provisions of this
Agreement shall remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible to the fullest extent
permitted by applicable law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
Section 7.8 Consent to Jurisdiction. Each of the parties hereto (i)
-----------------------
consents to submit itself to the personal jurisdiction of any federal court
located in the State of Maryland or any Maryland state court in the event any
dispute arises out of this Agreement or any of the transactions contemplated
hereby, (ii) agrees that it will not attempt to deny or defeat such personal
jurisdiction by motion or other request for leave from any such court, and (iii)
agrees that it will not bring any action relating to this Agreement in any court
other than a federal court sitting in the State of Maryland or a Maryland state
court.
Section 7.9 Enforcement. The parties hereto agree that irreparable
-----------
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in any federal court
sitting in the State of Maryland or in any Maryland state court, in addition to
any other remedy to which any party is entitled at law or in equity.
Section 7.10 Counterparts. This Agreement may be executed in
------------
counterparts, each of which shall be deemed to be an original, but both of which
shall constitute one and the same agreement.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be duly executed on its behalf as of the day and year first above written.
IMPERIAL CREDIT COMMERCIAL
MORTGAGE INVESTMENT CORP.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: President and CEO
IMPERIAL CREDIT INDUSTRIES, INC.
By: /s/ H. ▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------
Name: H. ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Chairman
ICCMIC ACQUISITION CORP.
By: /s/ H. ▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------
Name: H. ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Chairman
