Exhibit 99.1
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ARTICLES SUPPLEMENTARY
OF
ANTHRACITE CAPITAL, INC.
Anthracite Capital, Inc., a Maryland corporation (the "Corporation"),
certifies as follows:
FIRST: Under the authority set forth in Article FIFTH of the
charter of the Corporation, as heretofore amended (which, as
hereinafter amended or restated from time to time is, together with
the Articles Supplementary, herein called the "Articles"), the Board
of Directors of the Corporation on September 16, 1999, by resolution
duly designated and classified 1,200,000 of the authorized, but
unissued shares of the preferred stock, par value $.001 per share, of
the Corporation as the "10.5% Series A Senior Cumulative Convertible
Redeemable Preferred Stock" (the "Convertible Preferred Stock") and
has authorized the issuance and sale of such shares.
SECOND: The preferences, conversion and other rights, voting
powers, restrictions, limitations as to dividends, qualifications, and
other provisions of shares of Convertible Preferred Stock shall be
included as part of Article FIFTH of the Articles and are as follows:
1. Designation: A series of Preferred Shares, designated as "10.5%
Series A Senior Cumulative Convertible Redeemable Preferred Stock," is
hereby established. The number of shares constituting such series shall be
1,200,000.
2. Voting Rights. Subject to Section 18, the holders of shares of
the Convertible Preferred Stock shall be entitled to vote as a single class
with the holders of Common Stock (defined below) on all matters submitted
to a vote of the holders of Common Stock, and shall be entitled to such
number of votes per share on each matter submitted to a vote of the holders
of Common Stock as shall equal the number of whole shares of Common Stock
into which such shares of the Convertible Preferred Stock are convertible
as of the record date for the determination of stockholders entitled to
vote.
3. Dividends.
(a) From the date of original issuance of Convertible Preferred
Stock (the "Issue Date"), the holders of the outstanding shares of
Convertible Preferred Stock shall be entitled to receive, when, as and if
declared by the Board of Directors, out of funds legally available
therefor, dividends payable in cash on each share of Convertible Preferred
Stock in an amount per annum equal to $2.625, of which an amount equal to
$.65625 will be payable quarterly. Dividends shall be cumulative, whether
or not declared, on a daily basis from the Issue Date and shall be payable
quarterly in arrears on each of January 5, April 5, July 5 and October 5
(each a "Dividend Payment Date"). The first Dividend Payment Date after
the Issue Date with respect to the quarter ended December 31, 1999 shall be
January 5, 2000 and the dividend payment on such date shall be $.21875 per
share. If dividends are payable on a date that is not a business day,
payment will be made on the next business day (and without any interest or
other payment in respect of such delay). The amount of the dividends
payable for any period less than a calendar quarter will be computed on the
basis of a 360-day year of 12 30-day months, based on the actual number of
days elapsed. All unpaid dividends will compound on a quarterly basis at a
rate of 10.5% per annum. Such dividends shall commence to accrue on each
share of Convertible Preferred Stock from the date of issuance, whether or
not authorized by the Board of Directors, and whether or not there are
profits, surplus or other funds of the Corporation legally available for
the payment of dividends, and such dividends shall continue to accrue
thereon until all amounts payable upon liquidation or redemption of the
Convertible Preferred Stock are paid in full in cash or upon the conversion
of the Convertible Preferred Stock into Common Stock as provided in Section
5. If the dividends in respect of any previous or current quarter shall
not have been paid, at the rate provided herein, or a sum sufficient for
the payment thereof shall not have been set aside for payment, any and all
arrearages in the payment thereof shall be paid in full before (i) any
dividends or other distributions shall be declared and set aside for
payment in respect of any class or series of capital stock of the
Corporation that ranks junior to or on a parity with (subject to the last
clause of this Section 3(a)) the Convertible Preferred Stock with respect
to the right to receive dividends or distributions from the Corporation
(including, without limitation, the Common Stock) or (ii) any class or
series of capital stock of the Corporation that ranks junior to or on a
parity with the Convertible Preferred Stock with respect to the right to
receive dividends or distributions from the Corporation or upon liquidation
is redeemed, repurchased or otherwise acquired in whole or in part by the
Corporation for any consideration (or any moneys are paid to or made
available for a sinking fund for the redemption of any such capital stock),
unless at the same time or prior thereto all accrued but unpaid dividends
on any then-outstanding shares of Convertible Preferred Stock for all
previous quarters and for the current quarter shall be declared, set aside
and paid in full to the holders thereof; provided, that if the Corporation
pays less than the total amount of dividends then accrued with respect to
the Convertible Preferred Stock and any class or series of capital stock of
the Corporation that ranks on a parity with the Convertible Preferred
Stock, such payment shall be made ratably among the shares of Convertible
Preferred Stock and all classes or series of capital stock of the
Corporation that rank on a parity with the Convertible Preferred Stock in
such manner so that the amount of distributions paid per share on such
shares shall in all cases bear to each other the same ratio that accrued
but unpaid distributions per share on such shares (which shall not include
any accumulation in respect of unpaid distributions for prior distribution
periods if such shares do not have cumulative distribution rights) bear to
each other.
(b) Any distribution payment made on shares of Convertible
Preferred Stock shall first be credited against the earliest accrued but
unpaid distribution due with respect to shares of Convertible Preferred
Stock which remains payable.
4. Liquidation of the Corporation.
(a) Liquidation Preference. Upon any liquidation, dissolution
or winding up of the Corporation, whether voluntary or involuntary, the
holders of the shares of Convertible Preferred Stock shall be entitled to
receive, before any distribution or payment is made on any shares of any
class or series of the capital stock of the Corporation ranking junior to
the Convertible Preferred Stock with respect to the right to receive
distributions upon the liquidation, dissolution or winding up of the
Corporation (including, without limitation, the Common Stock), a per share
amount equal to the sum of (i) $27.75 (the "Liquidation Preference"), and
(ii) an amount equal to the amount of all accrued but unpaid dividends
thereon and unpaid interest, computed up to the date that payment thereof
is made available. In the event that there are not sufficient assets
available to permit payment in full of the Liquidation Preference and all
accrued but unpaid dividends thereon and unpaid interest, then such
remaining assets shall be distributed ratably to the holders of shares of
the Convertible Preferred Stock in proportion to the number of shares held
by each such holder. In the event that, upon any such voluntary or
involuntary liquidation, dissolution or winding up of the Corporation, the
available assets of the Corporation are insufficient to pay the amount of
the liquidation distributions on all outstanding shares of Convertible
Preferred Stock and the corresponding amounts payable on all shares of
capital stock ranking on a parity with the Convertible Preferred Stock with
respect to distributions upon liquidation, dissolution or winding up, the
holders of shares of Convertible Preferred Stock and capital stock ranking
on a parity with the Convertible Preferred Stock with respect to
distributions upon such event of liquidation, shall share ratably in any
such distribution of assets in proportion to the full liquidating
distributions to which they would otherwise be respectively entitled.
Except as provided in the immediately preceding sentence, unless and until
the Liquidation Preference and such accrued but unpaid dividends and unpaid
interest has been paid in full to the holders of shares of the Convertible
Preferred Stock, no dividends or distributions will be made to the holders
of the Common Stock or any other stock of the Corporation ranking junior to
or on a parity with the Convertible Preferred Stock as to liquidations and
no payments shall be made (or monies put aside) to redeem, repurchase or
otherwise acquire, with respect to any sinking fund by the Corporation, any
class or series of capital stock of the Corporation. The liquidation
preference of the outstanding Convertible Preferred Stock will not be added
to the liabilities of the Corporation for purposes of determining whether
under Maryland law, a distribution by dividend, redemption or otherwise,
may be made to stockholders of the Corporation whose preferential rights
upon liquidation, dissolution or winding up of the affairs of the
Corporation, either voluntarily or involuntarily, are junior to those of
holders of Convertible Preferred Stock.
(b) Notice of Liquidation. The Corporation shall provide each
holder of record of shares of the Convertible Preferred Stock with written
notice of any proposed liquidation, dissolution or winding up of the
Corporation, which notice shall set forth the amount of the Liquidation
Preference and all accrued but unpaid dividends thereon and unpaid interest
per share and the date on which payments of the Liquidation Preference and
all accrued but unpaid dividends thereon and unpaid interest shall be
payable, not less than 20 days prior to the payment date stated therein,
such notice to be addressed to each such holder at its address as shown by
the records of the Corporation.
5. Conversions.
(a) Automatic Conversion. Beginning on the third anniversary of
the Issue Date, each outstanding share of the Convertible Preferred Stock
shall be converted automatically, without any action on the part of the
holder thereof or the Corporation, and whether or not any of the
certificates for such shares are surrendered to the Corporation,
immediately upon the occurrence of the Automatic Conversion Event, into the
number of shares of Common Stock into which such share of the Convertible
Preferred Stock could have been converted as of the date of the Automatic
Conversion Event pursuant to Section 5(b). Upon the occurrence of an
Automatic Conversion Event, the holders of shares of the Convertible
Preferred Stock shall be obligated to surrender to the Corporation the
certificates evidencing such shares at the principal office of the
Corporation (or at such other office or agency of the Corporation as the
Corporation may designate by notice in writing to the holders of the
Convertible Preferred Stock). The Corporation shall then issue and deliver
to each such holder a certificate or certificates for the number of shares
of the Common Stock into which the shares of the Convertible Preferred
Stock so surrendered were convertible on the date of the Automatic
Conversion Event.
(b) Right to Convert. Subject to the adjustments contemplated
by Section 6 hereof, shares of the Convertible Preferred Stock may be
converted, in whole or in part, at any time after the issuance thereof
until the close of business on the last Trading Day (defined below) prior
to the date fixed for redemption of such shares or the liquidation,
dissolution or winding up of the Corporation, by the holder thereof,
without the payment of any additional consideration, in the form of shares
of fully paid and nonassessable shares of Common Stock. For purposes
hereof, the "Conversion Price" per share shall be equal to $7.35 per share,
subject to adjustment from time to time in accordance with the provisions
of Section 6. Each share of Convertible Preferred Stock shall be
convertible into the number of shares of Common Stock determined by
dividing $25.00 by the Conversion Price (initially equivalent to a
conversion ratio of 3.4014 shares of Common Stock for each Convertible
Preferred Share). Upon conversion, any accrued and unpaid dividends and
interest shall be payable in the form of either shares of Common Stock
(valued at the Closing Prices of the Common Stock on the business day prior
to the date of conversion) or cash as the Corporation may decide.
(c) Exercise of Right to Convert. The right to convert the
shares of the Convertible Preferred Stock into shares of the Common Stock
set forth in Section 5(b) above shall be exercised by the holder of
Convertible Preferred Stock only by surrendering to the Corporation for
that purpose the certificate or certificates representing the shares to be
converted at its principal office (or at such other office or agency of the
Corporation as the Corporation may designate by notice in writing to the
holders of the Convertible Preferred Stock) at any time during its usual
business hours, accompanied by written notice to the Corporation stating
that the holder elects to convert all or a stated number of shares of the
Convertible Preferred Stock into shares of the Common Stock and identifying
the name or names (with address and social security or taxpayer
identification number) in which the certificate or certificates for shares
of the Common Stock issuable upon such conversion shall be issued and the
address at which such certificate or certificates should be delivered
(each, a "Conversion Notice").
(d) Issuance of Certificates. As promptly as practicable after
the receipt by the Corporation of a Conversion Notice but in no event later
than five (5) business days thereafter, and the surrender of the
certificate or certificates for the share or shares of Convertible
Preferred Stock to be converted, the Corporation shall issue and deliver,
or cause to be issued and delivered, to the holder at the address specified
in the Conversion Notice, (i) a certificate or certificates evidencing the
number of duly authorized and issued, fully paid and nonassessable shares
of the Common Stock to which the holder of shares of the Convertible
Preferred Stock so converted shall be entitled and (ii) if less than the
full number of shares of the Convertible Preferred Stock evidenced by the
surrendered certificate or certificates are to be converted, a new
certificate or certificates, for the number of shares of the Convertible
Preferred Stock evidenced by such surrendered certificate or certificates
less the number of shares of the Convertible Preferred Stock converted into
shares of the Common Stock of the Corporation.
(e) Effect of Conversion.
(1) Any conversion of shares of the Convertible Preferred
Stock made pursuant to Section 5(b) shall be deemed to have been made at
the close of business on the date the Corporation receives the certificate
or certificates evidencing the shares of the Convertible Preferred Stock
being converted and the Conversion Notice, and the rights of the holder
thereof with respect to the shares of the Convertible Preferred Stock being
converted shall cease, except that the holder thereof shall thereafter have
and retain (i) the right to receive shares of the Common Stock (and
certificates therefor) in respect of the converted shares of the
Convertible Preferred Stock in accordance with Section 5(d), and (ii) the
right to vote such shares of the Convertible Preferred Stock in connection
with any matters submitted to a vote of the stockholders or to receive
distributions with respect to such shares of Convertible Preferred Stock,
in either case as to which the applicable record date established by the
Board of Directors for determining stockholders entitled to vote on such
matter or entitled to receive distributions, as the case may be, shall
occur prior to the date on which such holder shall have delivered the
Conversion Notice to the Corporation and surrendered to the Corporation the
certificate or certificates evidencing the shares of the Convertible
Preferred Stock to be converted. The Person or Persons entitled to receive
the shares of the Common Stock upon the conversion of the shares of the
Convertible Preferred Stock shall be treated for all purposes as having
become the record holder of such shares of the Common Stock as of the close
of business on the date such shares are converted.
(2) Upon the conversion of any shares of the Convertible
Preferred Stock into shares of the Common Stock of the Corporation, each
share of the Common Stock issued upon the conversion thereof shall be duly
authorized, fully paid and non-assessable.
(f) No Fractional Shares. No fractional shares or scrip
representing fractional shares shall be issued upon conversion of any
shares of the Convertible Preferred Stock into Common Stock. If any
fractional share of the Common Stock would be issuable upon the conversion
of any share or shares of the Convertible Preferred Stock but for the
provisions of the first sentence of this Section 5(f), the Corporation, in
lieu of delivering such fractional share, shall pay to the holder of the
shares of the Convertible Preferred Stock surrendered for conversion an
amount in cash equal to the Current Market Price (as defined below) of such
fractional share.
(g) Notwithstanding any other provision hereof, if a conversion
of shares of Convertible Preferred Stock is to be made in connection with a
redemption of such shares, a Change of Control, or the liquidation,
dissolution or winding up of the Corporation, such conversion may, at the
election of any holder tendering Convertible Preferred Stock for
conversion, be conditioned upon the consummation of such event, in which
case such conversion shall not be deemed to be effective until the
satisfaction of such conditions.
6. Adjustments to the Conversion Price.
(a) Issuance of Additional Shares. Except as otherwise provided
in Section 6(h), if the Corporation shall issue or sell any shares of the
Common Stock without consideration or for consideration per share less than
the Current Market Price, then, and in each such event, the Conversion
Price shall be adjusted, effective as of the close of business on the date
of such issuance or sale, to an amount determined by multiplying the
Conversion Price in effect immediately prior to such issuance or sale, by
the following fraction:
X + Y
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X + Z
Where:
"X" equals the sum of (i) the number of shares of Common
Stock issued and outstanding immediately prior to such
issuance or sale, (ii) the number of shares of Common
Stock issuable upon conversion of any shares of the
Convertible Preferred Stock and any other class or
series of convertible securities of the Corporation
issued and outstanding immediately prior to such
issuance or sale and (iii) the number of shares of
Common Stock issuable upon the exercise of any options
or warrants to purchase shares of the Common Stock or
securities convertible into or exchangeable for shares
of the Common Stock, or other securities that are
convertible into or exchangeable for shares of the
Common Stock, issued and outstanding immediately prior
to such issuance or sale (collectively, the "Common
Stock Equivalents");
"Y" equals the number of shares of Common Stock which the
aggregate consideration received by the Corporation for
the total number of shares of the Common Stock issued
without consideration or for consideration per share
less than the Current Market Price would purchase at
the Current Market Price in effect immediately prior to
such issuance or sale; and
"Z" equals the number of additional shares of Common Stock
issued or deemed issued by the Corporation without
consideration or for consideration per share less than
the Current Market Price.
For the purpose of any computation of the Current Market Price
per share of Common Stock, the "Current Market Price" per share of Common
Stock on any date in question shall be deemed to be the average of the
daily Closing Prices for the five Trading Days ending the earlier of the
day in question and, if applicable, the day before the "ex" date with
respect to the issuance or distribution requiring such computation. For
purposes of this paragraph, the term "ex" date means the first date on
which the Common Stock trades regular way on the New York Stock Exchange
(the "NYSE") or on such successor securities exchange as the Common Stock
may be listed or in the relevant market from which the Closing Prices were
obtained without the right to receive such issuance or distribution.
"Closing Price" of any share of Common Stock on any day shall
mean the last reported sale price regular way on such day or, in case no
such sale takes place on such day, the average of the reported closing bid
and asked prices regular way of such common stock, in each case on the NYSE
Composite Tape or, if the Common Stock is not listed or admitted to trading
on such exchange, on the principal national securities exchange on which
the Common Stock is listed or admitted to trading, or, if not listed or
admitted to trading on any national securities exchange, the average of the
closing bid and asked prices as furnished by any NYSE member firm selected
from time to time by the Board of Directors of the Corporation for that
purpose or, if not so available in such manner, as otherwise determined in
good faith by the Board of Directors.
"Trading Day" shall mean a day on which securities are traded on
the national securities exchange or quotation system used to determine the
Closing Price.
(b) Issuance of Options or Convertible Securities, Etc. For
purposes of Section 6(a), in case at any time the Corporation shall in any
manner grant, issue or sell (whether directly or by assumption in a merger
or otherwise) any (i) warrants or other rights to subscribe for or to
purchase, or any options for the purchase of (such warrants, rights or
options hereinafter being referred to as "Options"), any shares of the
Common Stock or any stock or other securities convertible into or
exchangeable for shares of the Common Stock (such convertible or
exchangeable stock or securities being hereinafter referred to as
"Convertible Securities"), or (ii) any Convertible Securities, whether or
not such Options or the right to convert or exchange any such Convertible
Securities are immediately exercisable, and the Net Aggregate Consideration
Per Share to be received by the Corporation for the shares of the Common
Stock issuable upon exercise thereof or the exchange or conversion thereof
shall be less than the Current Market Price in effect immediately prior to
the time of the granting, issuance or sale of such Options or Convertible
Securities, then the total maximum number of shares of Common Stock
issuable upon (x) the exercise of such Options or upon conversion or
exchange of the total maximum amount of such Convertible Securities
issuable upon the exercise of such options or (y) the conversion or
exchange of all such Convertible Securities, shall be deemed to have been
issued, as of the date of granting, issuance or sale of such Options or
Convertible Securities, for such Net Aggregate Consideration Per Share. No
adjustment to the Conversion Price shall be made upon the actual issuance
of shares of the Common Stock upon (A) the exercise of any Options or upon
the issuance of Convertible Securities upon exercise of any Options (or
upon the actual issuance of any shares of the Common Stock upon conversion
or exchange of Convertible Securities) or (B) conversion or exchange of
such Convertible Securities if an adjustment shall have been made upon the
issuance of any such Options or Convertible Securities.
(c) Net Aggregate Consideration Per Share. For purposes of
Section 6(b), the "Net Aggregate Consideration Per Share" with respect to
any Options or Convertible Securities shall mean the amount which is equal
to the total amount of consideration, if any, received by the Corporation
for the issuance of such Options or Convertible Securities, plus the
minimum amount of consideration, if any, payable to the Corporation upon
exercise (plus, in the case of Options to subscribe for or acquire
Convertible Securities, the minimum aggregate of additional consideration,
if any, payable to the Corporation upon the issuance of such Convertible
Securities or upon the conversion or exchange thereof) or upon the
conversion or exchange of the Convertible Securities divided by the
aggregate number of shares of the Common Stock that would be issuable upon
(i) the exercise of such Options or upon the conversion or exchange of such
Convertible Securities issuable upon exercise of such Options or (ii)
conversion or exchange of such Convertible Securities.
(d) Consideration for Stock. In cases where any shares of
Common Stock, Options or Convertible Securities shall be issued or sold by
the Corporation for cash, the consideration received therefor shall be
deemed to be the amount received by the Corporation therefor, net of any
expenses incurred or any underwriting commissions or concessions paid or
allowed by the Corporation in connection therewith. In cases where any
shares of Common Stock, Options or Convertible Securities shall be issued
or sold for a consideration other than cash, the amount of the
consideration other than cash received by the Corporation shall be deemed
to be the fair value of such consideration as determined in good faith by
the Board of Directors of the Corporation, net of deduction of any expenses
incurred or any underwriting commissions or concessions paid or allowed by
the Corporation in connection therewith. In case any Options shall be
issued in connection with the issue and sale of other securities of the
Corporation, together comprising one integral transaction in which no
specific consideration is allocated to such Options by the parties thereto,
such Options shall be deemed to have been issued for such consideration as
determined in good faith by the Board of Directors of the Corporation.
(e) Change in Option Price or Conversion Rate. Upon the
happening of any of the following events, namely, if the purchase price
provided for in any Option referred to in Section 5(b), the additional
consideration, if any, payable upon the conversion or exchange of any
Convertible Securities referred to in Section 5(b) or (d), or the rate at
which such Convertible Securities are convertible into or exchangeable for
Common Stock shall change at any time (including, but not limited to,
changes under or by reason of provisions designed to protect against
dilution), the Conversion Price in effect for the Convertible Preferred
Stock at the time of such event shall forthwith be readjusted to the
Conversion Price which would have been in effect at such time had such
Options or Convertible Securities still outstanding provided for such
changed purchase price, additional consideration or conversion rate, as the
case may be, at the time initially granted, issued or sold, but only if as
a result of such adjustment the Conversion Price then in effect hereunder
is thereby reduced; and on the expiration of any such Option or the
termination of any such right to convert or exchange such Convertible
Securities, the Conversion Price then in effect hereunder shall forthwith
be increased to the Conversion Price which would have been in effect at the
time of such expiration or termination had such Option or Convertible
Securities, to the extent outstanding immediately prior to such expiration
or termination, never been issued.
(f) Record Date. In case the Corporation shall take a record of
the holders of its Common Stock for the purpose of entitling them (i) to
receive a dividend or other distribution payable in Common Stock, Options
or Convertible Securities or (ii) to subscribe for or purchase Common
Stock, Options or Convertible Securities, then such record date shall be
deemed (but only to the extent that one of the preceding events actually
occurs) to be the date of the issue or sale of the shares of Common Stock
deemed to have been issued or sold upon the declaration of such dividend or
the making of such other distribution or the date of the granting of such
right of subscription or purchase, as the case may be.
(g) Certain Issuances of Stock Excepted. Anything contained
herein to the contrary notwithstanding, the Corporation shall not be
required to make any adjustment to the Conversion Price in the case of (i)
the conversion of shares of Convertible Preferred Stock into shares of
Common Stock, (ii) the issuance of shares of the Common Stock in connection
with the Automatic Conversion Event, (iii) the issuance to employees of the
Manager of options to purchase up to 500,000 shares of the Common Stock
pursuant to the Corporation's compensatory stock option plans approved by
the Board of Directors at a price not less than 95% of Current Market
Price, or the issuance of shares of the Common Stock upon the exercise of
any of such options or (iv) issuances pursuant to the Corporation's
Dividend Reinvest and Stock Purchase Plan.
(h) Calculation of Adjustments to Conversion Price. The
calculation by the Board of Directors of the Corporation of any adjustment
to the Conversion Price, made in good faith and in accordance with the
foregoing provisions of this Section 6, shall be final and binding on all
stockholders of the Corporation.
(i) Extraordinary Common Stock Events. In the event that the
Corporation shall (i) issue additional shares of the Common Stock or
Convertible Securities as a dividend or other distribution on outstanding
shares of the Common Stock, (ii) subdivide outstanding shares of the Common
Stock into a greater number of shares of the Common Stock, or (iii) combine
outstanding shares of the Common Stock into a smaller number of shares of
the Common Stock, then, and in each such event, the Conversion Price shall,
simultaneously with the happening of each such event, be adjusted by
multiplying the Conversion Price then in effect by a fraction, the
numerator of which shall be the number of shares of the Common Stock
outstanding immediately prior to such event and the denominator of which
shall be the number of shares of the Common Stock outstanding immediately
after such event.
7. Other Adjustments.
(a) In the event the Corporation shall make or declare, or fix a
record date for the determination of holders of shares of the Common Stock
entitled to receive, a dividend or other distribution payable in securities
of the Corporation other than shares of the Common Stock or in assets
(excluding cash dividends or distributions), then and in each such event,
adequate provision shall be made so that holders of shares of the
Convertible Preferred Stock shall be entitled to receive upon conversion
thereof, in addition to the number of shares of the Common Stock receivable
upon conversion thereof, an amount per share of Convertible Preferred Stock
equal to (i) the aggregate amount of capital stock, securities or other
assets, as the case may be, that would have been received per share of the
Common Stock by holders of the Convertible Preferred Stock had their shares
of Convertible Preferred Stock been converted into shares of the Common
Stock on the record date established by the Board of Directors of the
Corporation for determining stockholders entitled to receive such dividend
or distribution multiplied by (ii) the number of shares of the Common Stock
into which each share of the Convertible Preferred Stock could have been
converted on such record date. No adjustments or provision for adjustments
shall be made to the Conversion Price as a result of any of the events
described in this Section 7(a).
(b) If the shares of the Common Stock issuable upon the
conversion of the shares of the Convertible Preferred Stock shall be
changed into the same or a different number of shares of any other class or
classes or series of capital stock of the Corporation, whether by
recapitalization, reclassification or otherwise, then, and in each such
event, adequate provisions shall be made such that the holder of each share
of the Convertible Preferred Stock shall have the right thereafter to
convert such share into the kind and amount of shares of capital stock and
other securities and property receivable upon such reorganization,
reclassification or other change by holders of the number of shares of the
Common Stock into which such share of the Convertible Preferred Stock could
have been converted immediately prior to such recapitalization,
reclassification or other change. No adjustments or provision for
adjustments shall be made with respect to the Conversion Price as a result
of any of the events described in this Section 7(b).
(c) Except as otherwise provided in this Section 7(c), if, at
any time or from time to time, the Corporation shall be a party to a merger
or consolidation of the Corporation with or into another Person, a share
exchange involving the Corporation or shall sell, lease, exchange or
transfer all or substantially all of the property or assets of the
Corporation to any other Person, then, as a condition to the consummation
of such transaction, adequate provision shall be made so that each holder
of shares of the Convertible Preferred Stock shall thereafter be entitled
to receive, per share of Convertible Preferred Stock, upon conversion of
the shares of the Convertible Preferred Stock, (i) the number of shares of
capital stock or other securities or property of the Corporation, or of the
successor corporation, resulting from such merger, consolidation, share
exchange or sale, lease, exchange or transfer, that would have been
received per share of Common Stock by holders of shares of the Convertible
Preferred Stock had their shares of Convertible Preferred Stock been
converted into shares of the Common Stock immediately prior to the
consummation of such transaction multiplied by (ii) the number of shares of
the Common Stock into which each share of the Convertible Preferred Stock
could have been converted immediately prior to the consummation of such
transaction. No adjustments or provision for adjustments shall be made
with respect to the Conversion Price as a result of any of the events
described in this Section 7(c).
8. Reports of Adjustments. Upon any adjustment of the Conversion
Price or the number of shares of Common Stock into which the Convertible
Preferred Stock shall be convertible, or upon the occurrence of any other
event requiring adjustments pursuant to Section 7 hereof, then and in each
such case, the Corporation shall give written notice thereof to each holder
of shares of the Convertible Preferred Stock, by first class mail, postage
prepaid, addressed to each such holder at the address of such holder as
shown on the books of the Corporation, which notice shall state the
adjusted Conversion Price or the adjusted number of shares of Common Stock
into which the Convertible Preferred Stock shall be convertible (or which
shall describe the new stock, securities, cash or other property receivable
by such holder upon conversion of the Convertible Preferred Stock), as
applicable, resulting from such adjustment and setting forth in reasonable
detail the facts requiring such adjustment and the method upon which such
adjustment was made, and the effective date of such adjustment.
9. Notices. Whenever (i) the Corporation shall declare any dividend
upon the shares of its capital stock payable in cash or stock or other
securities or make any other distribution to the holders of shares of its
capital stock, (ii) the Corporation shall offer for subscription to the
holders of the shares of its capital stock any additional shares of stock
of any class or other rights, (iii) there shall be any capital
reorganization or reclassification of the capital stock of the Corporation,
or a consolidation or merger of the Corporation with or into, or a sale of
all or substantially all its assets to, another entity or entities, or (iv)
there shall be a liquidation, dissolution or winding up of the Corporation,
then, in each such event, the Corporation shall give, by first class mail,
postage prepaid, addressed to each holder of shares of the Convertible
Preferred Stock at the address of such holder as shown on the books of the
Corporation, at least 20 business days prior to the date hereinafter
specified, a notice stating (i) in the case of any dividend or distribution
referred to in clause (i) above, the date on which the books of the
Corporation shall close or a record shall be taken for determining
stockholders entitled to receive such dividend or distribution, (ii) in the
case of any reorganization, reclassification, consolidation, merger, share
exchange, sale or liquidation, dissolution or winding up of the
Corporation, the date on which the books of the Corporation shall close or
a record shall be taken for determining stockholders entitled to vote upon
such transaction and the date, if any is to be fixed, on which the holders
of shares of the Common Stock shall be entitled to exchange such shares for
securities or other property in connection with any such transaction.
10. Stock to be Reserved. The Corporation will at all times reserve
and keep available out of its authorized Common Stock, free from preemptive
rights, solely for the purpose of issuance upon the conversion of the
shares of the Convertible Preferred Stock as herein provided, such number
of shares of the Common Stock as shall then be issuable upon the conversion
of all outstanding shares of the Convertible Preferred Stock.
11. No Reissuance of Converted Shares. Each share of the Convertible
Preferred Stock converted by the holder thereof into shares of the Common
Stock as provided herein shall be canceled and retired and shall not be
reissued.
12. Issue Tax. The issuance of certificates for shares of Common
Stock upon conversion of the Convertible Preferred Stock shall be made
without charge to the holders thereof of any issuance or other tax in
respect thereof or other cost incurred by the Corporation in connection
with such conversion and the related issuance of shares of Common Stock;
provided, however, that the Corporation shall not be required to pay any
tax which may be payable in respect of any transfer involved in the
issuance and delivery of any certificate in a name other than that of the
holder of the Convertible Preferred Stock which is being converted.
13. Closing of Books. The Corporation will at no time close its
transfer books against the transfer of any shares of the Convertible
Preferred Stock or of any shares of the Common Stock issued or issuable
upon the conversion of the shares of the Convertible Preferred Stock in any
manner which interferes with the timely conversion of the shares of the
Convertible Preferred Stock, except as may otherwise be required to comply
with applicable securities laws.
14. Optional Redemption By the Company.
(a) At any time after the third anniversary of the Issue Date,
in accordance with the notice procedures set forth below, the Corporation
shall have the right, at its sole option and election, to redeem all but
not less than all outstanding shares of Convertible Preferred Stock held by
each holder thereof at a redemption price per share payable in cash equal
to the Liquidation Preference together with accrued but unpaid dividends
thereon and unpaid interest to the date fixed for redemption, provided,
that the average Closing Price per share of the Common Stock for the 90
days immediately prior to the date of such notice is at least 150% of the
applicable Conversion Price on the date of such notice.
(b) Notice of any redemption pursuant to this Section shall be
sent by or on behalf of the Corporation not less than 10 nor more than 60
business days prior to the date specified for redemption in such notice, by
first class mail, postage prepaid, to all holders of record of the
Convertible Preferred Stock at their last addresses as they shall appear on
the books of the Corporation; provided, however, that no failure to give
such notice or any defect therein or in the mailing thereof shall affect
the validity of the proceedings for the redemption of any shares of
Convertible Preferred Stock except as to the holder to whom the Corporation
has failed to give notice or except as to the holder to whom notice was
defective. In addition to any information required by law, such notice
shall state: (i) the redemption date, (ii) the redemption price, (iii) the
place or places where certificates for such shares are to be surrendered
for payment of the redemption price and (iv) that dividends on the shares
to be redeemed will cease to accumulate on the redemption date. Subject to
Section 4(b), upon the mailing of any such notice of redemption, the
Corporation shall become obligated to redeem at the time of redemption
specified thereon all shares called for redemption.
(c) If notice has been mailed in accordance with Section 14(b)
above and provided that the Corporation pays, or sets aside for payment,
the applicable redemption price, on or before the redemption date specified
in such notice, then, from and after the redemption date, dividends on the
shares of the Convertible Preferred Stock so called for redemption shall
cease to accumulate, and said shares shall no longer be deemed to be
outstanding and shall not have the status of shares of Convertible
Preferred Stock, and all rights of the holders thereof as stockholders of
the Corporation (except the right to receive from the Corporation the
redemption price) shall cease. Upon surrender, in accordance with said
notice, of the certificates for any shares so redeemed (properly endorsed
or assigned for transfer, if the Corporation shall so require and the
notice shall so state), such shares shall be redeemed by the Corporation at
the redemption price.
15. Optional Redemption by the Holders.
(a) On the seventh anniversary of the Issue Date and at any time
thereafter, each holder shall have the right to cause the Corporation to
redeem all of its shares of Convertible Preferred Stock then outstanding,
at a redemption price per share payable in cash equal to the Liquidation
Preference, plus accrued but unpaid dividends thereon and unpaid interest
to the date fixed for redemption. To effect such redemption, a redeeming
holder shall notify the Corporation in writing of its election to exercise
its redemption right; provided, that a redeeming holder may only send a
redeeming notice on the date which is five months prior to the seventh
anniversary of the Issue Date or at any time thereafter. Upon receipt of
such notice, the Corporation shall promptly notify the remaining holders of
Convertible Preferred Stock and shall set the applicable redemption date,
which redemption date shall be no later than five months following the
Corporation's receipt of such notice. If notice has been mailed and
provided that the Corporation pays, or sets aside for payment, the
applicable redemption price, on or before the redemption date as set by the
Corporation, then, from and after the redemption date, dividends on the
shares of the Convertible Preferred Stock so called for redemption shall
cease to accumulate, and said shares shall no longer be deemed to be
outstanding and shall not have the status of shares of Convertible
Preferred Stock, and all rights of the holders thereof as stockholders of
the Corporation (except the right to receive from the Corporation the
redemption price) shall cease. Upon surrender, in accordance with said
notice, of the certificates for any shares so redeemed (properly endorsed
or assigned for transfer, if the Corporation shall so require and the
notice shall so state), such shares shall be redeemed by the Corporation at
the redemption price. Holders electing to have their shares redeemed
pursuant to this Section 15(a) will be required to surrender the
certificate or certificates representing such shares to the Corporation at
the principal office of the Corporation prior to the close of business on
the third business day prior to the date of such redemption.
(b) Upon the occurrence of a Change of Control, each holder will
have the right to require that the Corporation purchase for cash all or a
portion of such holder's Convertible Preferred Stock at a purchase price
equal to the Liquidation Preference, plus accrued but unpaid dividends
thereon and unpaid interest to the date of purchase. As soon as
practicable following the earlier of the date the Corporation obtains
actual knowledge that a Change of Control has occurred or will occur
(subject to the Corporation's duties to maintain the confidentiality of a
prospective Change of Control), the Corporation must send, by first class
mail, a notice to each holder of Convertible Preferred Stock with all
relevant information concerning such Change of Control, which notice shall
govern the terms of the purchase of such shares. Such notice shall state,
among other things, the purchase date, which must be no later than the
earlier of ten (10) business days from the date such notice is mailed or
the date of the consummation of a prospective Change of Control, other than
as may be required by law. Such notice shall be mailed by first class
mail, postage prepaid, to all holders of record of the Convertible
Preferred Stock at their last addresses as they shall appear on the books
of the Corporation; provided, however, that no failure to give such notice
or any defect therein or in the mailing thereof shall affect the validity
of the proceedings for repurchase of any shares of Convertible Preferred
Stock except as to the holder to whom the Corporation has failed to give
notice or except as to the holder to whom notice was defective. Each
holder who wishes to exercise its right of redemption pursuant to this
Section 15(b) shall notify the Corporation in writing of its exercise to
later than ten (10) business days after receipt of notice from the
Corporation. Holders electing to have shares of Convertible Preferred
Stock purchased pursuant to this Section 15(b) will be required to
surrender the certificate or certificates representing such shares of
Convertible Preferred Stock to the Corporation at the address specified in
the Corporation's notice prior to the close of business on the purchase
date. The Corporation will comply with the requirements of Rule 14e-1
under the Securities Exchange Act of 1934 and any other securities laws and
regulations thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of Convertible Preferred Stock
upon the occurrence of a Change of Control. To the extent that the
provisions of any securities laws or regulations conflict with this Section
15(b), the Corporation shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under
this Section 15(b) by virtue thereof. Any notice by holders of Convertible
Preferred Stock electing redemption pursuant to this Section 15(b) can be
conditioned upon the occurrence of the Change of Control.
(c) If the funds of the Corporation legally available for
redemption of Convertible Preferred Stock pursuant to Sections 15(a), 15(b)
or 18(c) are insufficient to redeem the total number of outstanding shares
of Convertible Preferred Stock entitled to redemption, the Corporation
shall redeem only such number of shares of Convertible Preferred Stock as
may be allowed out of funds legally available for redemption of such
shares. In such event, the Corporation shall select the shares for
redemption on a pro rata basis for each holder based on its percentage of
Convertible Preferred Stock held. At any time thereafter when additional
funds of the Corporation are legally available for the redemption of
Convertible Preferred Stock, such funds will be used at the earliest
permissible time, to redeem the balance of such shares, or such portion
thereof for which funds are then legally available.
16. Rank. The shares of the Convertible Preferred Stock shall rank
prior to all shares of any other class or series of capital stock of the
Corporation, unless such other class or series by its terms ranks senior to
the shares of the Convertible Preferred Stock, with respect to voting
powers, preferences and relative, participating, optional and other special
rights of the shares of such series and the qualifications, limitations and
restrictions thereof, including, without limitation, with respect to the
payment of dividends and the distribution of assets, whether upon
liquidation or otherwise.
17. Board Representation.
(a) The holders of the Convertible Preferred Stock shall have
the exclusive right to nominate and elect one member of the Corporation's
Board of Directors on or after the Issue Date at any annual or special
meeting of the stockholders of the Corporation, at any special meeting
called by the holders of at least 10% of the outstanding shares of
Convertible Preferred Stock or by a written consent in lieu of a meeting
undertaken by the holders of at least a majority of the outstanding shares
of Convertible Preferred Stock. Such member shall become a member of the
Corporation's Board of Directors and shall (subject to the provisions of
this Section 17) be subject to the same provisions of the Corporation's
Bylaws as other members of such class.
(b) If the Corporation shall fail, (i) within 60 days after any
Dividend Payment Date set forth in Section 3 hereof, to pay in full two
consecutive dividends on the Convertible Preferred Stock, or (ii) to redeem
shares of the Convertible Preferred Stock upon the redeeming holder's
election pursuant to Sections 15 or 18 hereof, then the holders of the
Convertible Preferred Stock shall have the right to elect a majority of the
members of the Board of Directors of the Corporation at any annual or
special meeting of stockholders, at any special meeting called by the
holders of record of at least 10% of the Convertible Preferred Stock or by
a written consent in lieu of a meeting undertaken by the holders of at
least a majority of the outstanding shares of Convertible Preferred Stock
until (i) all such distributions have been declared and paid or set aside
for payment or (ii) all shares to be redeemed have been redeemed in full.
The term of office of all directors so elected will terminate with the
termination of such voting rights, which will be such time as (i) all
accrued and unpaid dividends are paid in cash or (ii) all shares to be
redeemed have been redeemed in full.
(c) Any director elected by the holders of the Convertible
Preferred Stock may be removed at any time with or without cause by and
only by the vote or written consent of the holders of a majority of the
shares of Convertible Preferred Stock then outstanding at any annual or
special meeting of the stockholders of the Corporation, at any special
meeting called by the holders of at least 10% of the outstanding shares of
Convertible Preferred Stock or by a written consent in lieu of a meeting
undertaken by the holders of at least a majority of the outstanding shares
of Convertible Preferred Stock, and any vacancy occurring by reason of such
removal or by reason of death, resignation or inability to serve of any
director so elected, shall be filled by and only by a vote or written
consent of the holders of a majority of the Convertible Preferred Stock
then outstanding at any annual or special meeting of the stockholders of
the Corporation, at any special meeting called by the holders of at least
10% of the outstanding shares of Convertible Preferred Stock or by a
written consent in lieu of a meeting undertaken by the holders of at least
a majority of the outstanding shares of Convertible Preferred Stock. Any
director so elected under this paragraph shall serve until his or her
successor is duly elected and qualified at or his or her earlier death,
resignation or removal as provided herein.
18. Covenants.
(a) The Corporation may not, without the consent of the holders
of a majority of the shares of Convertible Preferred Stock, (i) issue any
class or series of equity security ranking senior to or on a parity with
the Convertible Preferred Stock as to payment of dividends or as to
payments on any liquidation, dissolution or winding up of the Corporation,
(ii) enter into any agreement that would restrict the Corporation's ability
to perform its obligations under Section 4 of the Securities Purchase
Agreement, (iii) amend its charter or Bylaws in any manner which would
materially impair or reduce the rights of the holders of the Convertible
Preferred Stock, (iv) make any single investment or series of related
investments in an amount exceeding $50 million in market value (other than
investments in investment grade assets), (v) acquire or merge with or into
or consolidate with another entity, the value of whose common stock equity
and equity of securities convertible into common stock equity at a price
lower than the market price of the common stock equity on the date of such
merger or consolidation is greater than $50 million, (vi) enter into any
transaction in excess of $5 million with an Affiliate of the Corporation,
except for any payments made pursuant to the Management Agreement between
the Corporation and BlackRock Financial Management, Inc. in effect on
December 2, 1999, (vii) make investments which are not consistent with the
Corporation's stated objective of investing in a diversified portfolio of
multifamily, commercial and residential mortgage loans, mortgage-backed
securities and other real estate-related assets in U.S. and non-U.S.
markets, (viii) amend, repeal or change, directly or indirectly, any of the
provisions of these Articles Supplementary, including the authorization,
creation or issuance of additional or new classes or series of shares of
Convertible Preferred Stock, (ix) amend Article II, Section 4.1.2 or
Section 4.2 of the Articles, (x) increase the number of members of the
Corporation's Board of Directors except in connection with an acquisition
of a business, a Change of Control or an investment by a third party (that
is not an affiliate of the Corporation or the Manager) in the Corporation
pursuant to which such third party is granted the right to elect members to
the Board of Directors, or (xi) pay any dividends in the course of any
fiscal year which, in the aggregate, exceed the greater of either the
Corporation's tax basis income or GAAP income for such year (except to the
extent necessary to preserve the Corporation's election to be subject to
tax as a real estate investment trust within the meaning of Sections 856-
860 of the Code (as hereinafter defined).
(b) As long as any shares of Convertible Preferred Stock are
outstanding, the Corporation shall comply with all of the following
financing requirements:
The ratio of the Corporation's Indebtedness to the
Corporation's book net worth (calculated in accordance with generally
accepted accounting principles ("GAAP")) shall not exceed the lesser of (x)
4.5 to 1.0 and (y) the Weighted Average Leverage Limit, calculated on the
last day of each calendar quarter. "Weighted Average Leverage Limit"
shall be determined by taking the sum of (A), (B) and (C), described below,
and dividing that result by the aggregate principal balance of the
Corporation's assets.
(A) The product of (i) TWO, and (ii) the book value of
the Corporation as determined under GAAP (the "GAAP Book Value") of
Corporation's assets which are unrated securities, non-securitizable loans
and mezzanine loans.
(B) The product of (i) THREE, and (ii) the GAAP Book
Value of Corporation's assets which are non-investment grade securities and
securitizable whole loans.
(C) The product of (i) EIGHT, and (ii) the GAAP Book
Value of Corporation's assets which are investment grade securities;
The classification of the above referenced assets shall be made
by the Corporation.
(c) In the event that the Corporation fails to comply with any
of the covenants listed in Section 18 (a) or (b), each holder, subject to
the notification provisions and the Corporation's opportunity to remedy
such breach set forth below, will have the right to cause the Corporation
to redeem all of its shares of Convertible Preferred Stock at a redemption
price per share payable in cash equal to 110% of the Liquidation Preference
together with accrued but unpaid dividends thereon and unpaid interest to
the date fixed for such redemption ("Premium Redemption Price"). To effect
such a redemption, a redeeming holder shall notify the Corporation in
writing of the Corporation's breach of the covenant(s) set forth in Section
18 (a) or (b) and of its election to exercise its redemption right ("Notice
of Breach"). The Corporation shall have the opportunity to remedy such
breach for a period of 150 days following the Corporation's receipt of the
Notice of Breach. If the Corporation fails to remedy such breach during
the 150 days following the receipt of the Notice of Breach, the Corporation
shall redeem the electing holders' shares of Convertible Preferred Stock at
the Premium Redemption Price not later than the 150th day following the
Corporation's receipt of the Notice of Breach. Upon receipt of the Notice
of Breach, the Corporation shall promptly notify the remaining holders of
Convertible Preferred Stock. If notice has been mailed and provided that
the Corporation pays, or sets aside for payment, the applicable redemption
price, on or before the redemption date as set by the Corporation, then,
from and after the redemption date, dividends on the shares of the
Convertible Preferred Stock so called for redemption shall cease to
accumulate, and said shares shall no longer be deemed to be outstanding and
shall not have the status of shares of Convertible Preferred Stock, and all
rights of the holders thereof as stockholders of the Corporation (except
the right to receive from the Corporation the redemption price) shall
cease. Upon surrender, in accordance with said notice, of the certificates
for any shares so redeemed (properly endorsed or assigned for transfer, if
the Corporation shall so require and the notice shall so state), such
shares shall be redeemed by the Corporation at the redemption price.
Holders electing to have their shares redeemed pursuant to this Section
18(c) will be required to surrender the certificate or certificates
representing such shares to the Corporation at the principal office of the
Corporation prior to the close of business on the date of such redemption.
19. Right of First Offer.
(a) In the event a holder of Convertible Preferred Stock (the
"Selling Holder") intends to sell all or any portion of its shares (the
"Offered Shares"), it will first notify the Corporation in writing (the
"Offer Notice").
(b) The Offer Notice shall contain a written offer (the "Offer")
to sell the Offered Shares to the Corporation stating the price (the "Offer
Price") and the other material terms upon which the Selling Holder desires
to sell the Offered Shares. The Corporation may accept the Offer by giving
written notice thereof to the Selling Holder within twenty-five (25) days
of receipt of the Offer Notice (the "Acceptance"). The Corporation and the
Selling Holder must then close on such transaction within twenty-five (25)
days of receipt of the Acceptance, time being of the essence.
(c) Subject to paragraph (d) below, if the Offer contained in
the Offer Notice is not accepted in its entirety by the Corporation in
accordance with this Section, the Selling Holder may sell the Offered
Shares to any other Person (a "Third Party") without further restriction;
provided, that (i) such sale occurs within six months from the earlier of
the affirmative rejection of the Offer Notice by the Corporation and the
expiration of the 25-day period in which the Corporation may accept the
Offer Notice, (ii) the purchase price to be paid by such Third Party shall
be an amount equal to or greater than 92.5% of the Offer Price payable by
such Third Party in cash and (iii) the non-price related terms shall be
substantially similar to the Offer. After such six month period the
provisions of this Section will apply again.
(d) In connection with any permitted sale by a Selling Holder to
a Third Party, in accordance with the provisions of this Section, the
Corporation shall provide all information such Third Party reasonably
requests to make its investment decision and the officer and directors of
the Corporation and the Manager shall make themselves reasonably available
to answer questions and/or to meet with such Third Party to help promote
the sale of the Offered Shares.
20. Preemptive Rights.
(a) The Corporation shall not issue any New Securities (as
defined below) unless it first delivers to each holder of Convertible
Preferred Stock (each such holder being referred to in this Section 20 as a
"Holder") a written notice (the "Notice of Proposed Issuance") specifying
the type and total number of such New Securities that the Corporation then
intends to issue (the "Offered New Securities"), all of the terms,
including the price upon which the Corporation proposes to issue the
Offered New Securities and stating that the Holders shall have the right to
purchase the Offered New Securities in the manner specified in this Section
20 for the same price per share and in accordance with the same terms and
conditions specified in such Notice of Proposed Issuance.
(b) During the 30 consecutive day period commencing on the date
the Corporation delivers to all of the Holders the Notice of Proposed
Issuance (the "Exercise Period"), the Holders shall have the option to
purchase a portion of the Offered New Securities at the same price per
share and upon the same terms and conditions specified in the Notice of
Proposed Issuance. Each Holder electing to purchase Offered New Securities
must give written notice of its election to the Corporation prior to the
expiration of the Exercise Period.
(c) Each Holder shall have the right to purchase that number of
the Offered New Securities as shall be equal to the number of the Offered
New Securities multiplied by a fraction, the numerator of which shall be
the number of shares of Common Stock then held by such Holder plus all
shares of Common Stock issuable upon conversion of all Convertible
Securities then held by such Holder and the denominator of which shall be
the aggregate number of shares of Common Stock Deemed Outstanding (as
defined below). The amount of such Offered New Securities that each Holder
is entitled to purchase under this Section 20 shall be referred to as its
"Proportionate Share."
(d) If all of the Offered New Securities have not been purchased
by the Holders pursuant to Section 20(a)-(c) hereof, then the Corporation
shall have the right, until the expiration of 180 consecutive days
commencing on the first day immediately following the expiration of the
Exercise Period, to issue the Offered New Securities at not less, and on
terms no more favorable to the purchasers thereof, than the price and terms
specified in the Notice of Proposed Issuance. If for any reason the
Offered New Securities are not issued within such period and at such price
and on such terms, the right to issue in accordance with the Notice of
Proposed Issuance shall expire and the provisions of this Section 20 shall
continue to be applicable to the Offered New Securities.
21. Legends. Certificates representing the Convertible Preferred
Stock shall bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES. THE SECURITIES REPRESENTED HEREBY
MAY NOT BE OFFERED, SOLD, OR OTHERWISE TRANSFERRED OR ASSIGNED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
APPLICABLE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID
ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED AS
COLLATERAL IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LENDING
ARRANGEMENT."
The legend set forth above shall be removed and the Corporation
shall issue a certificate without such legend to the holder of any
Convertible Preferred Stock upon which it is stamped, if, unless otherwise
required by applicable state securities laws, (a) such Convertible
Preferred Stock is sold pursuant to an effective registration statement
filed under the Securities Act of 1933 or otherwise may be sold pursuant to
Rule 144 of the Securities Act of 1933 without any restriction as to the
number of securities as of a particular date that can then be immediately
sold, or (b) such holder provides the Corporation with reasonable
assurances that such Convertible Preferred Stock can be sold pursuant to
Rule 144 of the Securities Act of 1933. The holder agrees to sell all
Convertible Preferred Stock, including those shares represented by a
certificate(s) from which the legend has been removed, in compliance with
applicable prospectus delivery requirements, if any.
Until (i) the Board of Directors of the Corporation determines it
is no longer in the best interests of the Corporation to attempt to, or
continue to, qualify as a REIT and (ii) there is an affirmative vote of not
less than two-thirds of all of the votes ordinarily entitled to be cast in
the election of directors, voting together as a single class approving the
determination of the Board of Directors set forth in clause (i) above, the
Convertible Preferred Stock shall bear a legend in substantially the
following form (and a stop-transfer order may be placed against transfer of
the certificates for such Convertible Preferred Stock):
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS ON TRANSFER FOR THE PURPOSE OF THE COMPANY'S ELECTION TO BE
SUBJECT TO TAX AS A REAL ESTATE INVESTMENT TRUST UNDER THE INTERNAL REVENUE
CODE OF 1986, AS AMENDED (THE "CODE"). SUBJECT TO THE EXEMPTIONS GRANTED
(I) UNDER THE SECURITIES PURCHASE AGREEMENT DATED DECEMBER 2, 1999, BETWEEN
THE COMPANY AND RECP II ANTHRACITE, LLC, A DELAWARE LIMITED LIABILITY
COMPANY ("RECP II"), A WHOLLY OWNED SUBSIDIARY OF DLJ REAL ESTATE CAPITAL
PARTNERS II, L.P. ("RECP") AND THAT CERTAIN LETTER FROM THE COMPANY TO RECP
II AND RECP DATED DECEMBER 2, 1999 REGARDING SUCH EXEMPTIONS OR (II)
PURSUANT TO SECTION 6.1.7 OF THE ARTICLES OF INCORPORATION OF THE COMPANY,
NO PERSON MAY (I) BENEFICIALLY OWN OR CONSTRUCTIVELY OWN SHARES OF COMMON
STOCK IN EXCESS OF 9.8% OF THE NUMBER OF OUTSTANDING SHARES OF COMMON
STOCK, (II) BENEFICIALLY OWN OR CONSTRUCTIVELY OWN SHARES OF ANY CLASS OR
SERIES OF PREFERRED STOCK IN EXCESS OF 9.8% OF THE NUMBER OF OUTSTANDING
SHARES OF SUCH CLASS OR SERIES OF PREFERRED STOCK, (III) BENEFICIALLY OWN
SHARES OF EQUITY STOCK THAT WOULD RESULT IN THE SHARES OF EQUITY STOCK
BEING BENEFICIALLY OWNED BY FEWER THAN 100 PERSONS (DETERMINED WITHOUT
REFERENCE TO ANY RULES OF ATTRIBUTION), OR (IV) BENEFICIALLY OWN OR
CONSTRUCTIVELY OWN SHARES OF EQUITY STOCK THAT WOULD RESULT IN THE COMPANY
BEING "CLOSELY HELD" WITHIN THE MEANING OF SECTION 856(H) OF THE CODE. ANY
PERSON WHO ATTEMPTS TO BENEFICIALLY OWN OR CONSTRUCTIVELY OWN SHARES OF
EQUITY STOCK IN EXCESS OF THE ABOVE LIMITATIONS MUST IMMEDIATELY NOTIFY THE
COMPANY IN WRITING. IF THE RESTRICTIONS ABOVE ARE VIOLATED, THE SHARES OF
EQUITY STOCK REPRESENTED HEREBY WILL BE TRANSFERRED AUTOMATICALLY AND BY
OPERATION OF LAW TO A TRUST AND SHALL BE DESIGNATED SHARES-IN-TRUST. ALL
CAPITALIZED TERMS IN THIS LEGEND HAVE THE MEANINGS DEFINED IN THE COMPANY'S
ARTICLES OF AMENDMENT AND RESTATEMENT FILED WITH THE DEPARTMENT OF
ASSESSMENTS AND TAXATION OF THE STATE OF MARYLAND ON MARCH 20, 1998, AS THE
SAME MAY BE FURTHER AMENDED FROM TIME TO TIME, A COPY OF WHICH, INCLUDING
THE RESTRICTIONS ON TRANSFER, WILL BE SENT WITHOUT CHARGE TO EACH
STOCKHOLDER WHO SO REQUESTS."
22. Lost or Damaged Certificates. Upon receipt by the Corporation of
evidence of the loss, theft, destruction or mutilation of any Convertible
Preferred Stock Certificates representing shares of Convertible Preferred
Stock, and (in the case of loss, theft or destruction) of indemnity
reasonably satisfactory to the Corporation, and upon surrender and
cancellation of the Preferred Stock Certificate(s), if mutilated, the
Corporation shall execute and deliver new Preferred Stock Certificate(s) of
like tenor and date.
23. Certain Definitions. The following terms, whenever used in
capitalized form herein without definition, shall have the meanings
indicated below:
"Affiliate" means a Person who directly or indirectly through one or
more intermediaries controls, or is controlled by, or is under common
control with, the respective Person. The term "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
"Automatic Conversion Event" shall mean the occurrence on or after the
date that is the third anniversary of the Issue Date of the closing of a
public offering of Common Stock pursuant to a registration statement filed
by the Corporation with the Securities and Exchange Commission pursuant to
which (i) the aggregate offering price is not less than $10 million and
(ii) the offering price per share is at least 150% of the then applicable
Conversion Price, subject to adjustments pursuant to Section 6 hereof.
"Change of Control" shall mean either (i) the acquisition by a person
or group of persons (as defined in Section 13(d)(3) of the Securities
Exchange Act of 1934) of the right to elect a majority of the members of
the Corporation's Board of Directors, (ii) a change in the Manager, or
(iii) a sale of all or substantially all of the assets of the Corporation.
"Common Stock" shall mean and include the authorized Common Stock,
$.001 par value per share, as constituted as of the date hereof and any
other capital stock of any class of the Corporation hereafter authorized
which shall not be limited to a fixed sum or percentage of par value in
respect of the rights of the holders thereof to participate in dividends or
in the distribution of assets upon liquidation or dissolution of the
Corporation.
"Conversion Notice" shall have the meaning set forth in Section 4(c).
"Manager" shall mean BlackRock Financial Management Inc.,
("BlackRock").
"New Securities" shall mean (a) any shares of equity securities of the
Corporation, (b) or any rights, options, or warrants to purchase such
equity securities, and (c) securities of any type whatsoever that are, or
may become, convertible into, exercisable, exchangeable, or that carry
rights to subscribe for any such equity securities, in each case with the
exception of any securities issued in connection with (i) a public offering
registered under the Securities Act of 1933, as amended or (ii) issuances
to employees of the Manager pursuant to the Corporation's compensatory
stock option plans approved by the Board of Directors.
"Person" shall mean any individual, corporation, partnership, limited
liability company, limited liability partnership, trust, unincorporated
association or other entity.
"Securities Purchase Agreement" shall mean that certain Securities
Purchase Agreement dated as of December 2, 1999, with respect to the
issuance and sale of the Convertible Preferred Stock, by and between the
Corporation and the Buyer named as such therein, as the same may be amended
from time to time.
"Shares of Common Stock Deemed Outstanding" shall mean, at any given
time, the number of shares of Common Stock actually outstanding at such
time, plus the number of shares of Common Stock issuable upon conversion in
full of all Convertible Securities whether or not the Convertible
Securities are convertible into, exercisable or exchangeable for shares of
Common Stock at such time.
IN WITNESS WHEREOF, the Corporation has caused these Articles
Supplementary to be signed in its name and on its behalf on this second day
of December, 1999 by its Chief Financial Officer who acknowledges that
these Articles Supplementary are the act of the Corporation and the best of
his knowledge, information and belief and under penalties for perjury, all
matters and facts contained in these Articles Supplementary are true in all
material respects.
ATTEST ANTHRACITE CAPITAL, INC.
(SEAL)
By:/s/ Robert Friedberg By: /s/ Christopher Milner
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Secretary Name: Christopher Milner
Title: Vice President