SHAREHOLDER AGREEMENT
November 14, 2002
Forest Merger Corporation
0000 Xxxxxxxxxx Xxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Re: Shareholder Agreement
Ladies and Gentlemen:
The undersigned understands that Friedman, Billings, Xxxxxx Group,
Inc., a Virginia corporation ("FBR Group"), FBR Asset Investment Corporation, a
Virginia corporation ("FBR Asset"), and Forest Merger Corporation, a Virginia
corporation ("Newco"), have entered into an Agreement and Plan of Merger dated
of even date herewith (the "Merger Agreement"), pursuant to which (i) FBR Asset
will merge with and into Newco, and (ii) FBR Group will merge with and into
Newco, all as more particularly set forth in the Merger Agreement (together, the
"Mergers"). All capitalized terms used but not defined herein shall have the
meanings set forth in the Merger Agreement.
As an inducement to FBR Asset's entering into the Merger Agreement
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the undersigned hereby agrees as follows:
1. Definitions. As used in this Agreement, the following capitalized
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terms shall have the following meanings:
"AFFILIATE" means, with respect to any person, any other person
which, directly or indirectly, controls, is controlled by or is under common
control with such person. The term "control" has the meaning ascribed to such
term in Rule 405 of the Securities Act.
"BENEFICIAL OWNER" shall mean any person deemed to be a "beneficial
owner" of a security as defined in Rule 13d-3 under the Securities Exchange Act
of 1934, as amended. The term "BENEFICIALLY OWN" has a correlative meaning.
"IMMEDIATE FAMILY" shall mean, for any person, such person's
(natural, adoptive, or by re-marriage) spouse, parents, descendants, nephews,
nieces, brothers, sisters and their respective spouses.
"SPECIFIED TRANSFEREE" shall mean--
(i) any member of the holder's Immediate Family, (ii) any trust established
solely for the benefit of the holder and/or one or more members of the holder's
Immediate Family, (iii) any entity controlled by the holder and/or members of
the holder's Immediate Family, (iv) any charitable foundations established and
maintained by or on behalf of the holder or a member of the holder's Immediate
Family, or (v) any lender to which any of the holder's Newco Class A Common
Shares or Newco Class B Common Shares (together, the "Newco Securities") are
pledged in accordance with Section 4.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"TRANSITION PERIOD" shall mean the one-year period ending on the
first anniversary of the Effective Time.
2. Transition Period.
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(a) Except for Transfers (as defined below) made to Specified Transferees,
if, during the Transition Period, the undersigned offers, sells, contracts to
sell, sells any option or contract to purchase, purchases any option or contract
to sell, grants any option, right or warrant to purchase, pledge, or otherwise
transfers or disposes of, directly or indirectly (including the Transfer (as
defined herein) of all or a portion of the economic consequences or voting
rights associated with the ownership of such Newco Securities) (any such
transaction a "Transfer"), more than 460,000 Newco Securities during any
three-month period, then such Transfer shall constitute a "Conversion Event" in
relation to all Newco Class B Common Shares then Beneficially Owned by the
undersigned for purposes of Section 5.6(b) of the Newco Articles of
Incorporation, and all Newco Class B Common Shares then owned by the undersigned
shall be converted to Newco Class A Common Shares; provided, however, that such
Conversion Event shall not occur if the undersigned inadvertently disposes of
more than 460,000 Newco Securities (but not more than 500,000 Newco Securities)
during a three-month period, and, within 30 days of receipt of notice thereof,
acquires Beneficial Ownership of that number of Newco Securities equal to the
amount by which the number transferred in such three-month period exceeds
460,000 (provided, further, that any such acquisitions of Beneficial Ownership
may be structured as necessary to avoid the earning of any "short swing profits"
for purposes of Section 16 of the Securities Exchange Act of 1934).
(b) As used herein, a "Transfer" shall be deemed to occur on the date when
the undersigned or a Specified Transferee first enters into a contract to sell
or grants an option to purchase or otherwise becomes obligated (subject to
applicable conditions) to sell, transfer, or dispose of the applicable Newco
Securities and any subsequent sale, transfer, or disposition pursuant to such
contract, option, or other
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obligation shall not be deemed to be a separate Transfer. The transfer of Newco
Securities to the estate of the undersigned upon the undersigned's death shall
not be deemed to be a Transfer for purposes of this Agreement. Any Transfer by
the undersigned or a Specified Transferee of Newco Securities to a charitable
organization or foundation without consideration shall not be deemed to be a
Transfer by the undersigned.
(c) Any Specified Transferee to whom any Newco Securities are transferred
pursuant to this agreement (including by means of a foreclosure, deed in lieu of
foreclosure, or similar means) shall be subject to the terms and conditions of
this Agreement as if such Specified Transferee were an original party hereto (it
being understood that all calculations made pursuant to Section 2 of this
Agreement shall be made on a collective basis taking into account all Newco
Securities held by the undersigned and by all Specified Transferees who hold any
of the Newco Securities acquired by the undersigned in connection with the
Merger).
3. Pledges. Notwithstanding any provision hereof, the undersigned (and his
Specified Transferees) may at any time to pledge any Newco Securities
Beneficially Owned by the undersigned (and his Specified Transferees) to any
existing or future lender to whom any Newco Securities Beneficially Owned by the
undersigned (and his Specified Transferees) are pledged pursuant to a bona fide
financing incurred for investment or other purposes upon customary commercial
terms without being subject to the provision of Section 2 of this Agreement, and
such lender may foreclose on its security interest in and take title to such
Newco Securities without being subject to the provision of Section 2 of this
Agreement; provided, however, that, for the purposes of this Agreement,
Transfers of such Newco Securities by the lender to a third party purchaser
following foreclosure shall be subject to the provisions of Section 2 hereof.
4. Voting Agreement; Agreement to Vote Shares.
(a) Subject to the terms and conditions of this Agreement, the undersigned
agrees to vote, or cause to be voted, all Newco Securities Beneficially Owned by
the undersigned (as to which the undersigned has voting power) in favor of the
election of each of Xxxxx Xxxxxxxxx, Xxxxxxx Xxxxxx and Xxxxxxx Xxxxxxx
(together, the "FBR Asset Nominees") to the Board of Directors of Newco at the
2003 annual meeting of the shareholders of Newco and at every adjournment
thereof.
(b) The undersigned agrees that he will not, nor will he permit any
of his Affiliates or any Specified Transferee to, deposit any of the
undersigned's Newco Securities in a voting trust or grant any proxies or
otherwise subject any of the undersigned's Newco Securities to any right,
agreement, arrangement or commitment with respect to the voting of such Newco
Securities, in each case, if that would be inconsistent with the express terms
of this Agreement.
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(c) Nothing contained in this Section 5 shall be deemed to require
the undersigned to own or hold beneficially or of record any Newco Securities or
impose any limitation on the undersigned's right or ability to Transfer any of
the undersigned's Newco Securities at any time after the Transition Period;
provided, however, that the undersigned agrees that he shall not transfer his
Newco Securities to any of his Affiliates or any Specified Transferee unless
such Affiliate or Specified Transferee agrees prior to such transfer to be bound
by all of the terms and conditions of this Agreement by executing a counterpart
signature page to this Agreement and delivering the same to each of the FBR
Asset Nominees.
5. Assignment; Binding on Successors and Assigns. This Agreement and any
of the rights, interests or obligations under this Agreement shall be binding
upon, inure to the benefit of, and be enforceable by and against, the parties
and their respective Specified Transferees, successors and assigns.
6. Adjustment for Reorganization and Reclassification. All share amounts
of Newco Securities referred to in this Agreement shall be adjusted
appropriately to reflect any subdivision or combination of Newco (including
securities convertible into or exchangeable for Newco Securities) and any
adjustments arising as a result of any reorganization, reclassification or
similar events of Newco occurring after the date of the Merger Agreement.
7. Miscellaneous. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York. This Agreement is irrevocable
and will be binding on the undersigned and the respective successors, heirs,
personal representatives, and assigns of the undersigned. The undersigned has
carefully read this Agreement and discussed its requirements, to the extent the
undersigned believed necessary, with its counsel.
8. This Agreement shall terminate on the first anniversary of the
Effective Date and shall thereafter be of no further force or effect.
IN WITNESS WHEREOF, each of the undersigned, intending to be legally
bound, has executed this Agreement or caused this Agreement to be executed on
the date first set forth above.
Very truly yours,
XXXX XXXXXXXX
/s/ Xxxx Xxxxxxxx
