UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported)

February 26, 2016 (February 26, 2016)

 

 

APOLLO COMMERCIAL REAL ESTATE FINANCE, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Maryland   001-34452   27-0467113

(State or Other Jurisdiction

of Incorporation)

 

(Commission

File Number)

 

(I.R.S. Employer

Identification No.)

c/o Apollo Global Management, LLC

9 West 57 th Street, 43rd Floor

New York, New York 10019

(Address of principal executive offices including Zip Code)

(212) 515-3200

(Registrant’s telephone number, including area code)

N.A.

(Former name or former address, if changed since last report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

x Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 


Item 1.01 Entry into a Material Definitive Agreement.

On February 26, 2016, Apollo Commercial Real Estate Finance, Inc. (the “Company”) entered into (i) an Agreement and Plan of Merger (the “Merger Agreement”) with Apollo Residential Mortgage, Inc., a Maryland corporation (“AMTG”), and Arrow Merger Sub, Inc., a Maryland corporation and wholly owned subsidiary of the Company (“Merger Sub”). In connection with financing the transactions contemplated by the Merger Agreement, the Company has entered into a series of agreements with certain subsidiaries of Athene Holding Ltd. (“Athene”): (i) a Commitment Letter (the “Commitment Letter”) with Athene USA Corporation (“Athene USA”), (ii) an Asset Purchase and Sale Agreement (the “Asset Purchase Agreement”) with Athene Annuity & Life Assurance Company and Athene Annuity and Life Company (collectively, “Athene Annuity”), and (iii) a Stock Purchase Agreement (the “Stock Purchase Agreement”) with Athene USA. In addition, concurrently with the execution of the Merger Agreement, the Company and its subsidiary, ACREFI Operating, LLC, entered into a letter agreement (the “Letter Agreement”), dated as of February 26, 2016, with ACREFI Management, LLC, its manager (the “Manager”) under the Management Agreement, dated as of September 29, 2009 (the “Management Agreement”). The Company and AMTG are externally managed and advised by the Manager and ARM Manager, LLC, respectively, each of which is an indirect subsidiary of Apollo Global Management, LLC.

Merger Agreement

The Merger Agreement provides that, upon the terms and subject to the conditions set forth in the Merger Agreement, (i) Merger Sub will merge with and into AMTG, with AMTG continuing as the surviving corporation (the “First Merger”) and (ii) promptly thereafter, AMTG will merge with and into the Company, with the Company continuing as the surviving corporation (the “Second Merger,” and together with the First Merger, the “Mergers”). The amount of the consideration payable in the First Merger will be determined based on the book value of AMTG as of the date that is three business days prior to the date on which the definitive proxy statement relating to the Mergers is mailed to AMTG’s stockholders (the “Pricing Date”).

At the effective time of the First Merger, each outstanding share of common stock, par value $0.01 per share, of AMTG (“AMTG Common Stock”) will be automatically converted into the right to receive (i) a number of shares of the Company’s common stock, par value $0.01 per share (the “Company Common Stock”) equal to 13,400,000 divided by the number of shares of AMTG Common Stock outstanding as of the Pricing Date, on a fully diluted basis (calculated after giving effect to the vesting of all AMTG Restricted Shares (defined below)) (the “Per Share Stock Consideration”) and (ii) an amount of cash (the “Per Share Cash Consideration”) equal to (A) 89.25% of AMTG’s book value per share as of the Pricing Date minus (B) the value of the Per Share Stock Consideration (based on a fixed per share value of Company Common Stock of $16.75), less (C) the per share amount of any dividend declared or paid by AMTG between the Pricing Date and the effective time of the First Merger, plus (D) in the event the First Merger does not occur within 45 days of the Pricing Date, an amount of cash equal to 3% of AMTG’s book value as of the Pricing Date on an annualized basis accruing daily beginning on and including the 45 th day following the Pricing Date and ending on, but excluding, the last business day prior to the date on which the First Merger occurs, divided by the number of shares of AMTG Common Stock outstanding as of the Pricing Date, on a fully diluted basis (calculated after giving effect to the vesting of all AMTG Restricted Shares (defined below)). Immediately prior to the effective time of the First Merger, each outstanding share of restricted stock or restricted stock unit that settles for shares of AMTG Common Stock (collectively, the “AMTG Restricted Shares”) which was not then vested will vest and be converted into the right to receive, with respect to the share of AMTG Common Stock underlying such AMTG Restricted Share, the Per Share Stock Consideration and the Per Share Cash Consideration.

At the effective time of the Second Merger, each share of AMTG’s 8.00% Series A Cumulative Redeemable Preferred Perpetual Stock, par value $0.01 per share, will be automatically converted into and become the right to receive one newly issued share of preferred stock, par value $0.01 per share, of a newly-designated series of the Company’s preferred stock, which the Company expects will be classified and designated as 8.00% Series C Cumulative Redeemable Preferred Perpetual Stock.


The closing of the Mergers is subject to the satisfaction of customary closing conditions, including, among others, the registration and listing of the shares of Company Common Stock that will be issued in the Mergers and the approval and adoption of the Merger Agreement by the holders of a majority of the shares of AMTG Common Stock entitled to vote on the transaction, including a majority of the votes entitled to be cast by persons unaffiliated with Apollo Global Management, LLC.

The Merger Agreement contains customary representations, warranties and covenants of each party, including, covenants providing for the Company and AMTG and their respective subsidiaries (i) to conduct their respective businesses in all material respects in the ordinary course of business and in a manner consistent with past practice during the period between the execution of the Merger Agreement and the effective time of the First Merger, (ii) not to engage in certain kinds of transactions during such period, and (iii) only with respect to AMTG, to convene and hold a meeting of its stockholders to consider and vote upon the approval of the First Merger.

The Merger Agreement provides AMTG with a limited “go-shop” period which commences on the date of the Merger Agreement and expires at 11:59 p.m., Eastern time, on April 1, 2016 (the “Go-Shop Period”), during which AMTG and its representatives may (i) initiate, solicit, facilitate and encourage any inquiry or the making of any proposals or offers relating to certain alternative transactions, including by providing access to non-public information relating to AMTG and its subsidiaries pursuant to a confidentiality agreement and (ii) engage and enter into, continue and otherwise participate in discussions or negotiations with respect to potential alternative transactions or otherwise cooperate with, or assist or participate in, or facilitate, any such inquiries, proposals, discussions or negotiations.

Following the expiration of the Go-Shop Period, AMTG will be subject to customary “no shop” restrictions prohibiting AMTG, its subsidiaries and their respective representatives from (i) initiating, soliciting, knowingly facilitating and knowingly encouraging any inquiry regarding, or the making of any proposals or offers that constitutes, or would reasonably be expected to lead to an alternative transaction, (ii) furnishing any non-public information regarding AMTG to any third party or (iii) engaging in, entering into, continuing or otherwise participating in any discussions or negotiations regarding, or providing any information concerning AMTG or its subsidiaries or afford access to AMTG’s or its subsidiaries’ books, records, management, employees or properties to any third party (other than discussions in the ordinary course of business). However, after the Go-Shop Period, AMTG may continue to engage in discussions and negotiations with any third party that made a bona fide alternative acquisition proposal prior to the end of the Go-Shop Period that remains pending and has not been withdrawn and that AMTG’s board of directors, or a committee thereof, determines in good faith constitutes or would be reasonably expected to lead to a superior proposal (such third party, an “Excluded Party”).

At any time prior to obtaining the AMTG Requisite Vote, under specified circumstances AMTG’s board of directors may change its recommendation regarding the Mergers and, if such change of recommendation is made in response to a proposal that the AMTG board of directors has determined in good faith (after consultation with outside legal counsel and a nationally recognized financial advisor) remains a “superior proposal”, after taking into account any changes to the terms of the Merger Agreement proposed by the Company, AMTG may terminate the Merger Agreement to accept such superior proposal upon payment of the termination fee described below.

The Merger Agreement contains certain termination rights for both the Company and AMTG, including if the Mergers are not completed on or before August 26, 2016 (subject to extension under certain circumstances), or if the AMTG Requisite Vote is not obtained. In the event of a termination of the Merger Agreement under certain circumstances, including termination of the Merger Agreement by the Company as a result of a change of recommendation by AMTG’s board of directors or a termination by AMTG to accept a superior proposal, AMTG will be required to pay the Company a termination fee of (i) $7.5 million if such termination occurs in respect of a superior proposal from an Excluded Party or (ii) in all other circumstances where the Company is obligated to pay a termination fee, $12 million. In addition, upon termination of the Merger Agreement by the Company or AMTG under specified circumstances, AMTG will be required to reimburse the Company for its transaction expenses, up to a maximum of $6.0 million.


This summary description of the Merger Agreement does not purport to be complete and is qualified in its entirety by reference to the Merger Agreement, a copy of which is attached hereto as Exhibit 2.1 and incorporated herein by reference. The Merger Agreement has been included to provide investors and security holders with information regarding its terms. It is not intended to provide any other factual information about the Company, Merger Sub or any of their respective subsidiaries or affiliates.

The representations and warranties of each of the parties set forth in the Merger Agreement have been made solely for the benefit of the other parties to the Merger Agreement and such representations and warranties should not be relied on by any other person. In addition, such representations and warranties (i) have been qualified by disclosures made to the other parties in connection with the Merger Agreement, (ii) are subject to the materiality standards contained in the Merger Agreement that may differ from what may be viewed as material by investors, and (iii) were made only as of the date of the Merger Agreement or such other date as is specified in the Merger Agreement.

Arrangements with Athene

Asset Purchase Agreement

Under the terms of the Asset Purchase Agreement, promptly following the consummation of the First Merger, Athene Annuity will purchase from the Company, and the Company will sell to Athene Annuity, up to approximately $1.2 billion (subject to increase or decrease in certain circumstances) of primarily non-Agency residential mortgage backed securities at a price to be set (based on a pre-agreed methodology) as of the Pricing Date (the “Asset Sale”).

The closing of the Asset Sale is subject to the consummation of the First Merger in accordance with the terms of the Merger Agreement and other customary closing conditions. Each party is allowed to terminate the Asset Purchase Agreement under certain circumstances, including, among other things, (i) if the Merger Agreement is terminated in accordance with its terms, or (ii) if the other party has breached any of its representations, warranties, covenants or agreements and such breach would prevent the satisfaction of such party’s closing conditions and such breach cannot be cured prior to the closing of the Asset Sale.

This summary description of the Asset Purchase Agreement does not purport to be complete and is qualified in its entirety by reference to the Asset Purchase Agreement, a copy of which is attached hereto as Exhibit 2.2 and incorporated herein by reference. The Asset Purchase Agreement has been included to provide investors and security holders with information regarding its terms. It is not intended to provide any other factual information about the Company or any of its subsidiaries or affiliates.


The representations and warranties of each of the parties set forth in the Asset Purchase Agreement have been made solely for the benefit of the other parties to the Asset Purchase Agreement and such representations and warranties should not be relied on by any other person. In addition, such representations and warranties (i) have been qualified by disclosures made to the other parties in connection with the Asset Purchase Agreement, (ii) are subject to the materiality standards contained in the Asset Purchase Agreement that may differ from what may be viewed as material by investors, and (iii) were made only as of the date of the Asset Purchase Agreement or such other date as is specified in the Asset Purchase Agreement.

Stock Purchase Agreement

Under the Stock Purchase Agreement, Athene has committed to purchase (or cause one of its subsidiaries to purchase), during the first thirty (30) trading days following the closing of the Mergers, up to $20 million (subject to reduction in certain circumstances) shares of Company Common Stock in the open market at the then-current market price if the quoted price of a share of Company Common Stock on the New York Stock Exchange at any time during such specified period is less than $16.75 (which is the price per share at which the Company Common Stock will be issued to holders of AMTG Common Stock upon effectiveness of the First Merger). In order to fulfill its purchase obligations under the Stock Purchase Agreement, Athene USA will adopt and enter into a purchase plan established for purposes of complying with Rule 10b5-1 and Rule 10b-18 as promulgated by the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended, with one or more broker-dealers or other agents. The Stock Purchase Agreement will automatically terminate upon the termination of the Merger Agreement or, subject to certain exceptions, the Asset Purchase Agreement in accordance with their respective terms.

This summary description of the Stock Purchase Agreement does not purport to be complete and is qualified in its entirety by reference to the Stock Purchase Agreement, a copy of which is attached hereto as Exhibit 10.1 and incorporated herein by reference. The Stock Purchase Agreement has been included to provide investors and security holders with information regarding its terms. It is not intended to provide any other factual information about the Company or any of its subsidiaries or affiliates.

The representations and warranties of each of the parties set forth in the Stock Purchase Agreement have been made solely for the benefit of the other parties to the Stock Purchase Agreement and such representations and warranties should not be relied on by any other person. In addition, such representations and warranties (i) have been qualified by disclosures made to the other parties in connection with the Stock Purchase Agreement, (ii) are subject to the materiality standards contained in the Stock Purchase Agreement that may differ from what may be viewed as material by investors, and (iii) were made only as of the date of the Stock Purchase Agreement or such other date as is specified in the Stock Purchase Agreement.

Commitment Letter

Under the Commitment Letter, Athene USA has committed to provide the Company with up to $200 million of term loans to consummate the Mergers (the “Loan Commitment”). The loans made pursuant to the Loan Commitment will be secured by liens on the equity interests of, and guaranteed by, certain of the Company’s subsidiaries and will mature within 364 days of funding. The Loan Commitment will be reduced, and any loans made thereunder are required to be repaid, by (i) 100% of the net cash proceeds from the sale of non-Agency residential mortgage backed securities in accordance with the Asset Purchase Agreement and (ii) 100% of the net proceeds from any issuance of debt by the Company and its subsidiaries. The Commitment Letter contains conditions to funding customary for commitments of this type. The description of the Commitment Letter above does not purport to be complete and is qualified in its entirety by reference to the full text of the Commitment Letter, which is attached as Exhibit 10.2 to this Form 8-K and incorporated herein by reference.

Letter Agreement with the Manager

Concurrently with the execution of the Merger Agreement, the Company entered into the Letter Agreement with the Manager, pursuant to which the Manager has agreed to perform such services and activities as may be necessary to enable the Company to consummate the Mergers and the other transactions contemplated by the Merger Agreement. In consideration of the services provided and to be provided to the Company by the Manager in connection with the Mergers and the process leading to the Mergers, the Company agreed to pay the Manager an aggregate amount of up to $500,000, in monthly installments of $150,000 payable on the first of each calendar month between the execution of the Merger Agreement and the closing of the Mergers.

The Letter Agreement also provides that, following the closing of the transactions, and in accordance with the provisions of the Management Agreement, an additional amount (based on an agreed formula) will be added to Stockholders’ Equity (as defined in the Management Agreement) for purposes of calculating the amount of the management fee payable by the Company to the Manager pursuant to the Management Agreement. In addition, the Manager acknowledged that, as a result of the Second Merger, the management agreement between AMTG and its manager, ARM Manager, LLC (the “ AMTG Management Agreement ”), will be assigned to the Company and, following the Mergers, any management fees paid by the Company to ARM Manager, LLC pursuant to the AMTG Management Agreement will offset, and therefore reduce (but not below zero), the Company’s obligation to pay corresponding management fees to the Manager under of Management Agreement. This summary description of the Letter Agreement with the Manager does not purport to be complete and is qualified in its entirely by reference to the Letter Agreement, a copy of which is attached hereto as Exhibit 10.3 and incorporated herein by reference.

 

Item 5.03 Amendment to Articles of Incorporation or Bylaws.

Effective February 26, 2016, all of the members of the Board of Directors (with the exception of Mark Biderman, who recused himself) of the Company approved and adopted an amendment to the Bylaws (the


“Bylaws”) of the Company. The amendment designates the Circuit Court for Baltimore City, Maryland (or, if that court does not have jurisdiction because the action asserts a federal claim, the United States District Court for the District of Maryland, Baltimore Division) for certain claims or proceedings brought against the Company or its directors, officers, employees or agents.

The Bylaws are otherwise unchanged.

The foregoing description is qualified in its entirety by reference to the Amendment to Bylaws of the Company, a copy of which is filed as Exhibit 3.1 and incorporated by reference herein.

 

Item 7.01 Regulation FD Disclosure.

On February 26, 2016, the Company issued a press release announcing the execution of the Merger Agreement, the Asset Purchase Agreement, the Stock Purchase Agreement and the Commitment Letter, a copy of which is attached hereto as Exhibit 99.1 and incorporated herein by reference.

 

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

 

Exhibit
Number

  

Description of Exhibits

  2.1    Agreement and Plan of Merger, dated as of February 26, 2016, by and among Apollo Commercial Real Estate Finance, Inc., Arrow Merger Sub, Inc. and Apollo Residential Mortgage, Inc.*
  2.2    Asset Purchase and Sale Agreement, dated as of February 26, 2016, by and among Apollo Commercial Real Estate Finance, Inc., Athene Annuity & Life Assurance Company and Athene Annuity and Life Company*
  3.1    Amendment to Bylaws of Apollo Commercial Real Estate Finance, Inc.
10.1    Stock Purchase Agreement, dated as of February 26, 2016, by and between Apollo Commercial Real Estate Finance, Inc. and Athene USA Corporation
10.2    Commitment Letter, dated as of February 26, 2016, by and among Athene USA Corporation, Apollo Commercial Real Estate Finance, Inc. and Arrow Merger Sub, Inc.
10.3    Letter Agreement, dated as of February 26, 2016 by and among Apollo Commercial Real Estate Finance, Inc., ACREFI Operating, LLC and ACREFI Management, LLC
99.1    Press Release of Apollo Commercial Real Estate Finance, Inc. and Apollo Residential Mortgage, Inc. dated February 26, 2016

 

* Schedules and exhibits omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company agrees to furnish supplementally a copy of any omitted schedule to the Securities and Exchange Commission upon request.


Forward-Looking Statements

This Form 8-K contains, and other written or oral statements made by or on behalf of the Company may include, forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995. In addition, we or our executive officers on our behalf, may from time to time make forward-looking statements in reports and other documents that are filed with the Securities and Exchange Commission (SEC) or in connection with oral statements made to the press, potential investors or others. Specifically, forward-looking statements may include, but are not limited to, statements relating to our future economic performance, business prospects, revenue, income, and financial condition; and statements preceded by, followed by, or that include the words “expects,” “believes,” “intends,” “will,” “anticipates,” and similar terms that relate to future events, performance, or our results. Examples of forward-looking statements in this press release include, but are not limited to, statements about the price, terms and closing date of the proposed transaction and statements regarding stockholder and regulatory approvals. Forward-looking statements are subject to certain risks and uncertainties that could cause actual results, expectations, or outcomes to differ materially from our historical experience as well as management’s present expectations or projections. These risks and uncertainties include, but are not limited to: (i) the occurrence of any event, change or other circumstances that could give rise to the termination of the Merger Agreement; (ii) the inability to complete the proposed merger due to the failure of AMTG to obtain AMTG Requisite Vote or the failure to satisfy other conditions of the Mergers within the proposed timeframe or at all; (iii) the failure to obtain the necessary financing arrangements as set forth in the debt commitment letter entered into in connection with the Merger Agreement; (iv) risks related to disruption of management’s attention from the Company’s ongoing business operations due to the transaction; (v) the outcome of any legal proceedings, regulatory proceedings or enforcement matters that may be instituted against the Company and others relating to the Merger Agreement; (vi) the risk that the pendency of the Mergers disrupts current plans and operations and the potential difficulties in retention of our manager’s employees as a result of the pendency of the Mergers; (vii) the effect of the announcement of the proposed transaction on the Company’s operating results and business generally; and (viii) the amount of the costs, fees, expenses and charges related to the Mergers. Consider these factors carefully in evaluating the forward-looking statements. Additional factors that may cause results to differ materially from those described in the forward-looking statements are set forth in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014, which was filed with the SEC on February 26, 2015, and other filings with the SEC, which are available at www.sec.gov. The forward-looking statements represent the Company’s views as of the date on which such statements were made and the Company undertakes no obligation to publicly update such forward-looking statements.

Participants in the Solicitation

The Company and its directors, executive officers and certain other members of management and employees of the Company may be deemed to be “participants” in the solicitation of proxies from the stockholders of AMTG in connection with the Mergers. Information regarding the interests of the persons who may, under the rules of the SEC, be considered participants in the solicitation of the stockholders of AMTG in connection with the Mergers, which may be different than those of AMTG’s stockholders generally, will be set forth in the proxy statement and the other relevant documents to be filed by AMTG with the SEC. Stockholders can find information about the Company and its directors and executive officers and their ownership of the Company’s common stock in the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2014 and in its definitive proxy statement relating to its 2015 annual meeting of stockholders filed with the SEC on March 19, 2015. Additional information regarding the interests of such individuals in the Mergers will be included in the proxy statement relating to the merger when it is filed with the SEC. These documents may be obtained free of charge from the SEC’s website at www.sec.gov and the Company’s website at www.apolloreit.com .

Important Additional Information and Where to Find It

This communication may be deemed to be solicitation material in respect of the proposed acquisition of AMTG by the Company. In connection with the proposed transaction, AMTG will file with the SEC and furnish to its stockholders a registration statement and other relevant documents. AMTG’S STOCKHOLDERS ARE ADVISED TO READ THE REGISTRATION STATEMENT WHEN IT BECOMES AVAILABLE (INCLUDING ALL AMENDMENTS AND SUPPLEMENTS THERETO) BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION. Investors may obtain a free copy of the registration statement (when it becomes available) and


other relevant documents filed by the Company with the SEC at the SEC’s Web site at http://www.sec.gov. The registration statement and such other documents filed by the Company with the SEC may also be obtained for free from the Investor Relations section of the Company’s web site (https://www.apolloreit.com/) or by directing a request to: Apollo Commercial Real Estate Finance, Inc., c/o Apollo Global Management, LLC, 9 West 57 th Street, 43 rd Floor, New York, NY 10019, Attention: Investor Relations.

This document is for informational purposes only and shall not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such jurisdiction. This document is not a substitute for the registration statement or any other document that the Company may file with the SEC in connection with the proposed transaction. No offering of securities shall be made, except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

    APOLLO COMMERCIAL REAL ESTATE FINANCE, INC.
    (Registrant)
Dated: February 26, 2016     By:  

/s/ Stuart A. Rothstein

    Name:   Stuart A. Rothstein
    Title:   President and Chief Executive Officer


EXHIBIT INDEX

 

Exhibit
Number

  

Description of Exhibits

  2.1    Agreement and Plan of Merger, dated as of February 26, 2016, by and among Apollo Commercial Real Estate Finance, Inc., Arrow Merger Sub, Inc. and Apollo Residential Mortgage, Inc.*
  2.2    Asset Purchase and Sale Agreement, dated as of February 26, 2016, by and among Apollo Commercial Real Estate Finance, Inc., Athene Annuity & Life Assurance Company and Athene Annuity and Life Company*
  3.1    Amendment to Bylaws of Apollo Commercial Real Estate Finance, Inc.
10.1    Stock Purchase Agreement, dated as of February 26, 2016, by and between Apollo Commercial Real Estate Finance, Inc. and Athene USA Corporation
10.2    Commitment Letter, dated as of February 26, 2016, by and among Athene USA Corporation, Apollo Commercial Real Estate Finance, Inc. and Arrow Merger Sub, Inc.
10.3    Letter Agreement, dated as of February 26, 2016 by and among Apollo Commercial Real Estate Finance, Inc., ACREFI Operating, LLC and ACREFI Management, LLC
99.1    Press Release of Apollo Commercial Real Estate Finance, Inc. and Apollo Residential Mortgage, Inc. dated February 26, 2016

 

* Schedules and exhibits omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company agrees to furnish supplementally a copy of any omitted schedule to the Securities and Exchange Commission upon request.

Exhibit 2.1

Execution Version

AGREEMENT AND PLAN OF MERGER

by and among

APOLLO COMMERCIAL REAL ESTATE FINANCE, INC.,

ARROW MERGER SUB, INC.

and

APOLLO RESIDENTIAL MORTGAGE, INC.

dated as of

February 26, 2016


TABLE OF CONTENTS

 

ARTICLE I THE MERGERS      2   

Section 1.1

 

The Mergers

     2   

Section 1.2

 

Closing

     2   

Section 1.3

 

Effective Times

     3   

Section 1.4

 

Effects of Mergers

     3   

Section 1.5

 

Governing Documents

     3   

Section 1.6

 

Directors and Officers of each Surviving Entity

     4   

Section 1.7

 

Tax Consequences

     4   

Section 1.8

 

Transaction Structure

     4   

Section 1.9

 

Further Assurances

     4   
ARTICLE II TREATMENT OF SECURITIES      5   

Section 2.1

 

Treatment of Stock

     5   

Section 2.2

 

Payment for Securities; Surrender of Certificates

     6   

Section 2.3

 

Dissenters’ Rights

     11   

Section 2.4

 

Treatment of Company Restricted Shares; and DRIP

     11   

Section 2.5

 

Withholding

     11   

Section 2.6

 

Fractional Shares

     12   
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY      12   

Section 3.1

 

Organization and Qualification; Subsidiaries

     12   

Section 3.2

 

Capitalization

     13   

Section 3.3

 

Authorization; Validity of Agreement; Company Action

     15   

Section 3.4

 

Board Approvals

     15   

Section 3.5

 

Consents and Approvals; No Violations

     15   

Section 3.6

 

Company SEC Documents and Company Financial Statements

     16   

Section 3.7

 

Internal Controls; Sarbanes-Oxley Act

     17   

Section 3.8

 

Absence of Certain Changes

     18   

Section 3.9

 

No Undisclosed Liabilities

     18   

Section 3.10

 

Litigation

     18   

Section 3.11

 

Company Employee Benefit Plans; ERISA

     19   

Section 3.12

 

Taxes

     20   

Section 3.13

 

Contracts

     22   

Section 3.14

 

Investment Company Act

     24   

Section 3.15

 

Intellectual Property

     24   

Section 3.16

 

Compliance with Laws; Permits

     24   

Section 3.17

 

Assets and Properties

     25   

Section 3.18

 

Investments

     25   

Section 3.19

 

Information in the Proxy Statement

     25   

Section 3.20

 

Opinion of Company Financial Advisor

     26   

Section 3.21

 

Insurance

     26   

Section 3.22

 

Related Party Transactions

     26   

Section 3.23

 

Brokers; Expenses

     27   

Section 3.24

 

Takeover Statutes

     27   


Section 3.25

 

Vote Required

     27   

Section 3.26

 

No Other Representations or Warranties

     27   

Section 3.27

 

Acknowledgement by the Company

     27   

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB

     28   

Section 4.1

 

Organization and Qualification

     28   

Section 4.2

 

Capitalization

     29   

Section 4.3

 

Authorization; Validity of Agreement; Parent Action

     31   

Section 4.4

 

Board Approvals

     31   

Section 4.5

 

Consents and Approvals; No Violations

     31   

Section 4.6

 

Parent SEC Documents and Parent Financial Statements

     32   

Section 4.7

 

Internal Controls; Sarbanes-Oxley Act

     33   

Section 4.8

 

Absence of Certain Changes

     33   

Section 4.9

 

No Undisclosed Liabilities

     34   

Section 4.10

 

Litigation

     34   

Section 4.11

 

Parent Employee Benefit Plans; ERISA

     34   

Section 4.12

 

Taxes

     34   

Section 4.13

 

Investment Company Act

     37   

Section 4.14

 

Compliance with Laws; Permits

     37   

Section 4.15

 

Information in the Proxy Statement

     38   

Section 4.16

 

Opinion of Parent Financial Advisor

     38   

Section 4.17

 

Brokers; Expenses

     38   

Section 4.18

 

Sufficiency of Funds

     39   

Section 4.19

 

Ownership of Company Common Stock

     39   

Section 4.20

 

Related Party Transactions

     39   

Section 4.21

 

Takeover Statutes

     39   

Section 4.22

 

Vote Required

     39   

Section 4.23

 

No Other Representations or Warranties

     39   

Section 4.24

 

Acknowledgement by Parent and Merger Sub

     39   

ARTICLE V COVENANTS RELATING TO CONDUCT OF BUSINESS PENDING THE FIRST MERGER

     40   

Section 5.1

 

Conduct of Business by the Company Pending the Closing

     40   

Section 5.2

 

Conduct of Business by Parent Pending the Closing

     44   

Section 5.3

 

Acquisition Proposals; Go-Shop Period

     45   

Section 5.4

 

Preparation of the Form S-4 and the Proxy Statement; Stockholders Meetings

     50   

ARTICLE VI ADDITIONAL AGREEMENTS

     53   

Section 6.1

 

Access; Confidentiality; Notice of Certain Events

     53   

Section 6.2

 

Consents and Approvals

     55   

Section 6.3

 

Publicity

     56   

Section 6.4

 

Directors’ and Officers’ Insurance and Indemnification

     56   

Section 6.5

 

Takeover Statutes

     58   

Section 6.6

 

Obligations of Merger Sub

     58   

Section 6.7

 

Rule 16b-3

     58   

 

ii


Section 6.8

 

Control of Operations

     58   

Section 6.9

 

Transaction Litigation

     58   

Section 6.10

 

Delisting

     58   

Section 6.11

 

Director and Officer Resignations

     59   

Section 6.12

 

Certain Tax Matters

     59   

Section 6.13

 

Tax Opinions and Tax Representation Letters

     59   

Section 6.14

 

Stock Exchange Listing

     59   

Section 6.15

 

Dividends

     60   

Section 6.16

 

Financing Cooperation

     60   

Section 6.17

 

Company Investment Activity

     61   

Section 6.18

 

Company Investment Guidelines

     62   

Section 6.19

 

Certain Financial Reporting

     63   

Section 6.20

 

Ownership Limit

     63   

ARTICLE VII CONDITIONS TO CONSUMMATION OF THE FIRST MERGER

     63   

Section 7.1

 

Conditions to Each Party’s Obligations to Effect the First Merger

     63   

Section 7.2

 

Conditions to Obligations of Parent and Merger Sub

     64   

Section 7.3

 

Conditions to Obligations of the Company

     65   

ARTICLE VIII TERMINATION

     66   

Section 8.1

 

Termination by Mutual Consent

     66   

Section 8.2

 

Termination by Either Parent or the Company

     66   

Section 8.3

 

Termination by the Company

     67   

Section 8.4

 

Termination by Parent

     68   

Section 8.5

 

Effect of Termination

     68   

ARTICLE IX MISCELLANEOUS

     71   

Section 9.1

 

Amendment and Modification; Waiver

     71   

Section 9.2

 

Non-Survival of Representations and Warranties

     72   

Section 9.3

 

Expenses

     72   

Section 9.4

 

Notices

     73   

Section 9.5

 

Certain Definitions

     74   

Section 9.6

 

Terms Defined Elsewhere

     83   

Section 9.7

 

Interpretation

     86   

Section 9.8

 

Counterparts

     87   

Section 9.9

 

Entire Agreement; Third-Party Beneficiaries

     87   

Section 9.10

 

Severability

     87   

Section 9.11

 

Governing Law; Jurisdiction

     88   

Section 9.12

 

Waiver of Jury Trial

     88   

Section 9.13

 

Assignment

     89   

Section 9.14

 

Enforcement; Remedies

     89   

Section 9.15

 

No Recourse

     90   

 

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Schedules:

 

Schedule A    -    Parent Knowledge Parties
Schedule B    -    Company Knowledge Parties
Schedule C    -    Company Book Value Methodology
Schedule 2.4(a)    -    Rollover Restricted Shares
Schedule 6.17(a)    -    Hedging Guidelines
Schedule 6.18    -    Company Investment Guidelines

Company Disclosure Letter

Parent Disclosure Letter

Exhibits:

 

Exhibit A    -    Articles Supplementary to Parent Charter
Exhibit B-1    -    First Merger Articles of Merger
Exhibit B-2    -    Second Merger Articles of Merger

 

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AGREEMENT AND PLAN OF MERGER

This AGREEMENT AND PLAN OF MERGER (hereinafter referred to as this “ Agreement ”), dated February 26, 2016, is by and among Apollo Commercial Real Estate Finance, Inc., a Maryland corporation (“ Parent ”), Arrow Merger Sub, Inc., a Maryland corporation and a wholly owned subsidiary of Parent (“ Merger Sub ”), and Apollo Residential Mortgage, Inc., a Maryland corporation (the “ Company ”). All capitalized terms used in this Agreement shall have the meaning ascribed to such terms in Section 9.5 or as otherwise defined elsewhere in this Agreement unless the context clearly provides otherwise. Parent, Merger Sub and the Company are each sometimes referred to herein as a “ Party ” and collectively as the “ Parties ”.

RECITALS

WHEREAS, the board of directors of Parent (the “ Parent Board ”) established a special committee thereof (the “ Parent Board Special Committee ”) to review, evaluate and, if desirable, pursue a potential business combination transaction with the Company which transaction (if any) is subject to the approval of the Parent Board;

WHEREAS, the board of directors of the Company (the “ Company Board ”) has established a special committee thereof (the “ Company Board Special Committee ”) to evaluate a proposal from the Parent Board Special Committee regarding a business combination transaction between Parent and the Company and to explore and evaluate other alternatives, including other strategic alternatives;

WHEREAS, the Parties wish to effect a business combination through (i) a merger of Merger Sub with and into the Company, with the Company as the surviving entity (the “ First Merger ”) and, promptly thereafter, a merger of the Company with and into Parent (the “ Second Merger ” and, together with the First Merger, the “ Mergers ”), in each case, on the terms and subject to the conditions set forth in this Agreement and in accordance with the Maryland General Corporation Law (the “ MGCL ”);

WHEREAS, upon the recommendation of the Company Board Special Committee, the Company Board has (a) approved this Agreement, the Mergers and the other transactions contemplated by this Agreement (collectively, the “ Transactions ”), (b) determined and declared that it is advisable and in the best interests of the Company and its stockholders to enter into this Agreement and to consummate the Mergers and the other Transactions on the terms and conditions set forth herein, (c) directed that the First Merger and the Transactions be submitted for consideration at a meeting of the Company’s stockholders and (d) resolved, subject to the terms and conditions of Section 5.3 of this Agreement, to recommend that the Company’s stockholders approve the First Merger and the Transactions (the “ Company Board Recommendation ”) and to include such recommendation in the Proxy Statement;

WHEREAS, upon the recommendation of the Parent Board Special Committee, the Parent Board has determined and declared that it is advisable and in the best interests of Parent and its Stockholders to enter into this Agreement, and to consummate the Mergers and the other Transactions on the terms and conditions set forth herein;


WHEREAS, (a) the board of directors of Merger Sub has (i) determined and declared that it is advisable and in the best interests of Merger Sub and its sole stockholder to enter into this Agreement and to consummate the Mergers and the other Transactions on the terms and conditions set forth herein and (ii) approved this Agreement and (b) Parent, in its capacity as the sole stockholder of Merger Sub, has approved this Agreement, the Mergers and the Transactions and taken all actions required for adoption, approval and due execution of this Agreement by Merger Sub and the consummation by Merger Sub of the First Merger and the other Transactions (to the extent Merger Sub is a party thereto); and

WHEREAS, Parent, Merger Sub and the Company desire to make certain representations, warranties, covenants and agreements in connection with the Mergers and also prescribe various conditions to the Mergers.

NOW, THEREFORE, in consideration of the mutual covenants and agreements contained in this Agreement and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Parties agree as follows:

ARTICLE I

THE MERGERS

Section 1.1 The Mergers .

(a) Upon the terms and subject to the satisfaction or waiver of the conditions set forth in this Agreement, and in accordance with the MGCL, at the First Merger Effective Time, Merger Sub shall be merged with and into the Company, whereupon the separate existence of Merger Sub will cease, with the Company surviving the First Merger (the Company, as the surviving corporation in the First Merger, sometimes being referred to herein as the “ First Merger Surviving Entity ”), such that following the First Merger, the First Merger Surviving Entity will be a Subsidiary of Parent. The First Merger shall have the effects provided in this Agreement and as specified in the MGCL.

(b) Promptly following the First Merger Effective Time, and in accordance with this Agreement and the MGCL, the First Merger Surviving Entity shall be merged with and into Parent, whereupon the separate existence of the First Merger Surviving Entity will cease, with Parent surviving the Second Merger (Parent, as the surviving corporation in the Second Merger, sometimes being referred to herein as the “ Second Merger Surviving Entity ”). The Second Merger shall have the effects provided in this Agreement and as specified in the MGCL.

Section 1.2 Closing . The closing of the Mergers (the “ Closing ”) will take place at 10:00 a.m., Eastern time, at the offices of Fried, Frank, Harris, Shriver & Jacobson LLP, One New York Plaza, New York, NY 10004 on the second (2nd) Business Day after the satisfaction or, to the extent permitted hereunder, waiver of the last of the conditions set forth in Article VII to be satisfied or waived by the Party entitled to the benefit of the same (other than any such conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or, to the extent permitted hereunder, waiver of such conditions at the Closing), unless another date or place is agreed to in writing by the Company and Parent; provided , however , that Parent may, in its discretion, elect to postpone the Closing for up to an additional five (5) Business Days

 

2


following such date; provided further that (i) if Parent elects to postpone the Closing beyond such second (2 nd ) Business Day in accordance with the preceding proviso, Parent shall have no right, after such second (2 nd ) Business Day, to assert or claim that a Company Material Adverse Effect (or Events giving rise thereto) has occurred or would occur, and (ii) Parent shall have no right to postpone the Closing beyond such second Business Day if, as a result of such postponement, the Closing would occur on or after the Outside Date. The date on which the Closing actually takes place is referred to as the “ Closing Date .”

Section 1.3 Effective Times . On the Closing Date, the Company, Parent and Merger Sub, as applicable, shall (i) cause articles of merger in substantially the form attached hereto as Exhibit B-1 (the “ First Merger Articles of Merger ”) with respect to the First Merger to be duly executed, filed with and accepted for record by the State Department of Assessments and Taxation of Maryland (the “ SDAT ”) in accordance with the MGCL, (ii) cause articles of merger in substantially the form attached hereto as Exhibit B-2 (the “ Second Merger Articles of Merger ” and together with the First Merger Articles of Merger, the “ Articles of Merger ”) with respect to the Second Merger to be duly executed, filed with and accepted for record by the SDAT in accordance with the MGCL and (iii) duly make any other filings, recordings or publications required to be made by Parent, the Company or Merger Sub under the MGCL in connection with the Mergers. The First Merger shall become effective at the latest of such time as the First Merger Articles of Merger have been accepted for record by the SDAT or on such other date and time (not to exceed thirty (30) days from the date that the First Merger Articles of Merger have been accepted for record by the SDAT) as shall be agreed to by the Company and Parent and specified in the First Merger Articles of Merger (such date and time of effectiveness of the First Merger Articles of Merger being hereinafter referred to as the “ First Merger Effective Time ”) and the Second Merger shall become effective promptly following the First Merger Effective Time and in any event on the same Business Day as the First Merger Effective Time (the “ Second Merger Effective Time ”).

Section 1.4 Effects of Mergers . The Mergers shall have the effects specified in the applicable provisions of the MGCL, this Agreement and the Articles of Merger. Without limiting the generality of the foregoing, and subject thereto, (i) from and after the First Merger Effective Time, the First Merger Surviving Entity shall possess all properties, rights, privileges, powers and franchises of the Company and Merger Sub, and all of the claims, obligations, liabilities, debts and duties of the Company and Merger Sub shall become the claims, obligations, liabilities, debts and duties of the First Merger Surviving Entity and (ii) from and after the Second Merger Effective Time, the Second Merger Surviving Entity shall possess all properties, rights, privileges, powers and franchises of Parent and the First Merger Surviving Entity, and all of the claims, obligations, liabilities, debts and duties of the Parent and the First Merger Surviving Entity shall become the claims, obligations, liabilities, debts and duties of the Second Merger Surviving Entity.

Section 1.5 Governing Documents .

(a) At the First Merger Effective Time, the charter of the First Merger Surviving Entity shall be the charter of the Company, as in effect immediately prior to the First Merger Effective Time, and the bylaws of the First Merger Surviving Entity shall be the bylaws of the Company, as in effect immediately prior to the First Merger Effective Time.

(b) At the Second Merger Effective Time, the charter of the Second Merger Surviving Entity shall be the charter of Parent, as in effect immediately prior to the Second Merger Effective Time, and the bylaws of the Second Merger Surviving Entity shall be the bylaws of Parent, as in effect immediately prior to the Second Merger Effective Time.

 

3


Section 1.6 Directors and Officers of each Surviving Entity .

(a) The directors of Merger Sub immediately prior to the First Merger Effective Time shall be and become the directors of the First Merger Surviving Entity as of the First Merger Effective Time, each to hold office in accordance with the charter and bylaws of the First Merger Surviving Entity and applicable law. The officers of Merger Sub immediately prior to the First Merger Effective Time shall be and become the officers of the First Merger Surviving Entity as of the First Merger Effective Time.

(b) The directors of Parent immediately prior to the Second Merger Effective Time shall continue to be the directors of the Second Merger Surviving Entity as of the Second Merger Effective Time, each to hold office in accordance with the charter and bylaws of the Second Merger Surviving Entity and applicable law. The officers of Parent immediately prior to the Second Merger Effective Time continue to be the officers of the Second Merger Surviving Entity as of the Second Merger Effective Time.

Section 1.7 Tax Consequences . It is intended that, for U.S. federal income tax purposes, (i) the First Merger shall be treated as a taxable purchase by Parent of the Company Common Stock and (ii) the Second Merger shall be treated as a liquidation of the First Merger Surviving Entity pursuant to Section 332 of the Code.

Section 1.8 Transaction Structure . In the event the Parent Board determines in good faith, after consultation with its outside legal counsel, to effect the transactions contemplated by this Agreement through an alternative structure (including without limitation a share exchange), then, subject to the prior written consent of the Company (which shall not be unreasonably withheld, conditioned or delayed), the Parties shall implement the alternative structure and make such modifications to this Agreement as necessary to effect such alternative structure.

Section 1.9 Further Assurances . At and after the First Merger Effective Time, the officers and directors of Parent, Merger Sub or the First Merger Surviving Entity, as applicable, shall be authorized to execute and deliver, in the name and on behalf of the First Merger Surviving Entity, Merger Sub, Parent or the Company, any deeds, bills of sale, assignments or assurances and to take and do, in the name and on behalf of the First Merger Surviving Entity, Merger Sub, Parent or the Company, any other actions and things necessary to vest, perfect or confirm of record or otherwise in the First Merger Surviving Entity, Merger Sub or Parent any and all right, title and interest in, to and under any of the rights, properties or assets acquired or to be acquired by the First Merger Surviving Entity, Merger Sub or Parent, as applicable, as a result of, or in connection with, the First Merger.

 

4


ARTICLE II

TREATMENT OF SECURITIES

Section 2.1 Treatment of Stock .

(a) At the First Merger Effective Time, by virtue of the First Merger and without any action on the part of the holders of any securities of the Company or of Merger Sub:

(i) Treatment of Company Common Stock . Each share of the Company’s common stock, par value $0.01 per share (the “ Company Common Stock ” or “ Company Common Shares ”) issued and outstanding immediately prior to the First Merger Effective Time (other than Company Common Shares to be cancelled in accordance with Section 2.1(a)(iii) ) shall automatically be converted, subject to the terms, conditions and procedures set forth in this Agreement, into the right to receive (i) the Per Share Common Stock Merger Consideration, (ii) the Per Share Common Cash Merger Consideration and (iii) the Per Share Adjustment Amount, if any, subject to adjustment as provided in Section 2.1(a)(v) (collectively, the “ Per Common Share Merger Consideration ”). From and after the First Merger Effective Time, all such Company Common Shares shall no longer be outstanding and shall automatically be cancelled and shall cease to exist, and each holder of a Company Common Share shall cease to have any rights with respect thereto, except the right to receive the Per Common Share Merger Consideration therefor upon the surrender of such Company Common Share in accordance with Section 2.2 , including the right to receive, pursuant to Section 2.6 , cash in lieu of fractional shares of Parent Common Stock, if any, into which such shares of Company Common Stock have been converted pursuant to this Section 2.1(a)(i)  (the “ Fractional Share Consideration ”), together with the amounts, if any, payable pursuant to Section 2.2(f) .

(ii) Treatment of Company Series A Preferred Stock . Each share of Company Series A Preferred Stock issued and outstanding immediately prior to the First Merger Effective Time shall remain issued and outstanding as a result of the First Merger.

(iii) Cancellation of Company Common Stock . All Company Common Shares or other securities representing stock in the Company owned, directly or indirectly, by any Company Subsidiary, Parent, Merger Sub or by any of their respective Subsidiaries immediately prior to the First Merger Effective Time shall automatically be cancelled and retired and shall cease to exist, and no consideration shall be delivered in exchange therefor.

(iv) Treatment of Merger Sub Stock . Each share of common stock, par value $0.01 per share, of Merger Sub issued and outstanding immediately prior to the First Merger Effective Time shall be converted into and become one (1) share of common stock, par value $0.01 per share, of the First Merger Surviving Entity.

(v) Adjustments . The Per Common Share Merger Consideration shall be adjusted appropriately and proportionately to reflect fully the effect of any stock split, reverse stock split, stock dividend (including any dividend or distribution of securities convertible into Company Common Stock), reorganization, recapitalization, reclassification, combination, exchange of shares or other similar transaction at any time during the period from the date hereof to the First Merger Effective Time which changes the number of shares of Company Common Stock issued and outstanding, in each case other than pursuant to the Transactions after the date hereof and prior to the First Merger Effective Time.

 

5


(b) At the Second Merger Effective Time, by virtue of the Second Merger and without any further action on the part of the holders of any securities of Parent or the First Merger Surviving Entity:

(i) Cancellation of First Merger Surviving Entity Common Stock . All shares of the common stock, par value $0.01 per share, of the First Merger Surviving Entity and any other securities representing stock in the First Merger Surviving Entity owned, directly or indirectly, by Parent or by any of its respective Subsidiaries immediately prior to the Second Merger Effective Time shall automatically be cancelled and retired and shall cease to exist, and no consideration shall be delivered in exchange therefor.

(ii) Treatment of Company Series A Preferred Stock . Each share of Company Series A Preferred Stock issued and outstanding immediately prior to the Second Merger Effective Time shall be automatically converted into and become the right to receive one newly issued share of Parent Series C Preferred Stock (the “ Per Preferred Share Merger Consideration ” and collectively, the “ Preferred Stock Merger Consideration ”). From and after the Second Merger Effective Time, all such shares of Company Series A Preferred Stock shall no longer be outstanding and shall automatically be cancelled and shall cease to exist, and each holder of a share of Company Series A Preferred Stock shall cease to have any rights with respect thereto, except the right to receive the Per Preferred Share Merger Consideration therefor upon the surrender of such share of Company Series A Preferred Stock in accordance with Section 2.2 .

Section 2.2 Payment for Securities; Surrender of Certificates .

(a) Exchange Fund . Prior to the Closing Date, Parent or Merger Sub shall designate an agent reasonably acceptable to the Company to act as the paying and exchange agent in connection with the Mergers (the “ Exchange Agent ”). On the Closing Date, Parent or Merger Sub shall deposit, or cause to be deposited, with the Exchange Agent (i) evidence of a number of shares of Parent Common Stock in book-entry form equal to the Stock Consideration, (ii) evidence of a number of shares of Parent Series C Preferred Stock in book-entry form issuable pursuant to Section 2.1(b)(ii)  sufficient in order for the Exchange Agent to distribute the Per Preferred Share Merger Consideration, and (iii) cash in immediately available funds in an amount sufficient for the Exchange Agent to distribute the Aggregate Cash Consideration and the Adjustment Amount (such evidence of book-entry shares of Parent Common Stock and Parent Series C Preferred Stock and cash deposited with the Exchange Agent, collectively, the “ Exchange Fund ”), in each case, for the sole benefit of the holders of shares of Company Common Stock or holders of shares of Company Series A Preferred Stock, as applicable. In addition, Parent shall deposit with the Exchange Agent, as necessary from time to time thereafter, any Fractional Share Consideration and any dividends or other distributions payable pursuant to Section 2.2(f) or Section 2.2(g) . In the event the cash portion of the Exchange Fund shall be insufficient to pay the Aggregate Cash Consideration and Adjustment Amount, Parent shall promptly deposit additional funds with the Exchange Agent in an amount which is equal to the deficiency in the amount required for the Exchange Agent to make such payments. Parent shall cause the Exchange Agent to make, and the Exchange Agent shall make delivery of the Aggregate Cash Consideration, Stock Consideration, the Adjustment Amount, the Preferred Stock Merger Consideration and payment of all other amounts required to be paid out of the Exchange Fund in accordance with this Agreement. In connection with the foregoing, Parent

 

6


shall enter into an Exchange Agent Agreement with the Exchange Agent, in a form reasonably acceptable to the Company, setting forth the procedures to be used in accomplishing the deliveries and other actions contemplated by this Section 2.2 . The Exchange Fund shall not be used for any purpose that is not expressly provided for in this Agreement. The cash portion of the Exchange Fund shall be invested by the Exchange Agent as reasonably directed by Parent in accordance with the Exchange Agent Agreement. Any interest and other income resulting from such investments shall be paid to Parent on the earlier of (i) six (6) months after the Closing Date or (ii) the full payment of the Aggregate Cash Consideration and Adjustment Amount, if any.

(b) Procedures for Surrender .

(i) Company Common Stock . Promptly after the First Merger Effective Time, Parent shall cause the Exchange Agent to mail (and make available for collection by hand) to each holder of record of a certificate or certificates which immediately prior to the First Merger Effective Time represented outstanding Company Common Shares (the “ Common Certificates ”) or non-certificated Company Common Shares represented by book-entry (“ Book-Entry Common Shares ”) and whose Company Common Shares were converted pursuant to Section 2.1(a)  into the right to receive the Per Common Share Merger Consideration (i) a letter of transmittal, which shall specify that delivery shall be effected, and risk of loss and title shall pass, only upon delivery of the Common Certificates (or affidavits of loss in lieu thereof) or transfer of the Book-Entry Common Shares to the Exchange Agent and which shall otherwise be in such form and have such other provisions as Parent may reasonably specify and (ii) instructions for use in effecting the surrender of the Common Certificates (or affidavits of loss in lieu thereof) or Book-Entry Common Shares in exchange for payment of the Per Common Share Merger Consideration, including any amount payable in respect of Fractional Share Consideration in accordance with Section 2.6 . Upon (i) surrender to the Exchange Agent or to such other agent or agents as may be appointed by Parent of a Common Certificate for cancellation (or an affidavit of loss in lieu thereof) or (ii) receipt of an “agent’s message” by the Exchange Agent (or such other evidence, if any, of transfer as the Exchange Agent may reasonably request) in the case of a book-entry transfer of a Book-Entry Common Share, together with a letter of transmittal duly completed and validly executed in accordance with the instructions thereto, and such other documents as may be required pursuant to such instructions, the holder of such Common Certificate or Book-Entry Common Share shall be entitled to receive in exchange therefor the Per Common Share Merger Consideration in respect of each share of Company Common Stock formerly represented by such Common Certificate or Book-Entry Common Share pursuant to the provisions of this Article II , including any Fractional Share Consideration that such holder has the right to receive pursuant to the provisions of Section 2.6 . The Parent Common Stock constituting part of the Per Common Share Merger Consideration shall be in uncertificated book-entry form, unless a physical certificate is requested by a holder of Company Common Stock or is otherwise required under applicable Law. The Exchange Agent shall accept such Common Certificates (or affidavits of loss in lieu thereof) or Book-Entry Common Shares upon compliance with such reasonable terms and conditions as the Exchange Agent may impose to effect an orderly exchange thereof in accordance with normal exchange practices. If payment of the Per Common Share Merger Consideration is to be made to a Person other than the Person in whose name the Company Common Stock surrendered in exchange therefor is registered, it shall be a condition precedent of payment that either the Common Certificate so surrendered shall be properly endorsed or such Common Certificate (or affidavit of

 

7


loss in lieu thereof) shall otherwise be in proper form for the transfer or such Book-Entry Common Share shall be properly transferred. Until surrendered as contemplated by this Section 2.2 , each Common Certificate and Book-Entry Common Share shall be deemed at any time after the First Merger Effective Time to represent only the right to receive the applicable Per Common Share Merger Consideration as contemplated by this Article II , including any amount payable in respect of Fractional Share Consideration in accordance with Section 2.6 , and any dividends or other distributions on shares of Parent Common Stock in accordance with Section 2.2(f) , without interest thereon. The issuance or payment of the Per Common Share Merger Consideration and the payment of any Fractional Share Consideration pursuant to Section 2.6 in respect of Parent Common Stock in accordance with this Agreement shall be deemed issued and paid in full satisfaction of all rights pertaining to such Company Common Stock (other than the right to receive dividends or other distributions, if any, in accordance with Section 2.2(f) ).

(ii) Company Series A Preferred Stock . Promptly after the Second Merger Effective Time, Parent shall cause the Exchange Agent to mail (and make available for collection by hand) to each holder of record of a certificate or certificates which immediately prior to the Second Merger Effective Time represented outstanding shares of Company Series A Preferred Stock (the “ Preferred Certificates ”) or non-certificated shares of Company Series A Preferred Stock represented by book-entry (“ Book-Entry Preferred Shares ”) and whose shares of Company Series A Preferred Stock were converted pursuant to Section 2.1(b)  into the right to receive the Per Preferred Share Merger Consideration (i) a letter of transmittal, which shall specify that delivery shall be effected, and risk of loss and title shall pass, only upon delivery of the Preferred Certificates (or affidavits of loss in lieu thereof) or transfer of the Book-Entry Preferred Shares to the Exchange Agent and which shall otherwise be in such form and have such other provisions as Parent may reasonably specify and (ii) instructions for use in effecting the surrender of the Preferred Certificates (or affidavits of loss in lieu thereof) or Book-Entry Preferred Shares in exchange for payment of the Per Preferred Share Merger Consideration. Upon (i) surrender to the Exchange Agent or to such other agent or agents as may be appointed by Parent of a Preferred Certificate for cancellation (or an affidavit of loss in lieu thereof) or (ii) receipt of an “agent’s message” by the Exchange Agent (or such other evidence, if any, of transfer as the Exchange Agent may reasonably request) in the case of a book-entry transfer of a Book-Entry Preferred Share, together with a letter of transmittal duly completed and validly executed in accordance with the instructions thereto, and such other documents as may be required pursuant to such instructions, the holder of such Preferred Certificate or Book-Entry Preferred Share shall be entitled to receive in exchange therefor the Per Preferred Share Merger Consideration in respect of each share of Company Series A Preferred Stock formerly represented by such Preferred Certificate or Book-Entry Preferred Share pursuant to the provisions of this Article II . The Parent Series C Preferred Stock constituting the Per Preferred Share Merger Consideration shall be in uncertificated book-entry form, unless a physical certificate is requested by a holder of Company Preferred Stock or is otherwise required under applicable Law. The Exchange Agent shall accept such Preferred Certificates (or affidavits of loss in lieu thereof) or Book-Entry Preferred Shares upon compliance with such reasonable terms and conditions as the Exchange Agent may impose to effect an orderly exchange thereof in accordance with normal exchange practices. If payment of the Per Preferred Share Merger Consideration is to be made to a Person other than the Person in whose name the Company Series A Preferred Stock surrendered in exchange therefor is registered, it shall be a condition precedent of payment that either the Preferred Certificate so surrendered shall be properly

 

8


endorsed or such Preferred Certificate (or affidavit of loss in lieu thereof) shall otherwise be in proper form for the transfer or such Book-Entry Preferred Share shall be properly transferred. Until surrendered as contemplated by this Section 2.2 , each Preferred Certificate and Book-Entry Preferred Share shall be deemed at any time after the Second Merger Effective Time to represent only the right to receive the applicable Per Preferred Share Merger Consideration as contemplated by this Article II , and any dividends or other distributions on shares of Parent Series C Preferred Stock in accordance with Section 2.2(g) , without interest thereon. The issuance or payment of the Per Preferred Share Merger Consideration in accordance with this Agreement shall be deemed issued and paid in full satisfaction of all rights pertaining to such Company Series A Preferred Stock (other than the right to receive dividends or other distributions, if any, in accordance with Section 2.2(g) ).

(c) Transfer Books; No Further Ownership Rights in Company Shares . At the First Merger Effective Time, the stock transfer books of the Company shall be closed and thereafter there shall be no further registration of transfers of Company Common Stock or Company Series A Preferred Stock on the records of the Company. From and after the First Merger Effective Time, with respect to the holders of shares of Company Common Stock outstanding immediately prior to the First Merger Effective Time and, from and after the Second Merger Effective Time, with respect to the holders of shares of Company Series A Preferred Stock outstanding immediately prior to the Second Merger Effective Time, such holders shall cease to have any rights with respect to such Company Common Stock or Company Series A Preferred Stock except as otherwise provided for herein or by applicable Law. If, after the Second Merger Effective Time, Common Certificates, Preferred Certificates, Book-Entry Common Shares or Book-Entry Preferred Shares are presented to the Second Merger Surviving Entity for any reason, they shall be cancelled and exchanged as provided in this Agreement.

(d) Termination of Exchange Fund; No Liability . At any time following twelve (12) months after the Closing Date, Parent shall be entitled to require the Exchange Agent to deliver to it any funds (including any interest received with respect thereto) remaining in the Exchange Fund that have not been disbursed, or for which disbursement is pending subject only to the Exchange Agent’s routine administrative procedures, to holders of Common Certificates, Preferred Certificates, Book-Entry Common Shares or Book-Entry Preferred Shares, and thereafter such holders shall be entitled to look only to Parent (subject to abandoned property, escheat or other similar Laws) as general creditor thereof with respect to the applicable Per Common Share Merger Consideration or Per Preferred Share Merger Consideration, including any amount payable in respect of Fractional Share Consideration in accordance with Section 2.6 , and any dividends or other distributions on shares of Parent Common Stock in accordance with Section 2.2(f) or on the Parent Series C Preferred Stock in accordance with Section 2.2(g),  payable upon due surrender of their Common Certificates, Preferred Certificates, Book-Entry Common Shares or Book-Entry Preferred Shares, as applicable, and compliance with the procedures in Section 2.2(b) , without any interest thereon. Notwithstanding the foregoing, neither Parent nor the Exchange Agent shall be liable to any holder of a Common Certificate, Preferred Certificate, Book-Entry Common Share or Book-Entry Preferred Share for any Per Common Share Merger Consideration, Per Preferred Share Merger Consideration or other amounts delivered to a public official pursuant to any applicable abandoned property, escheat or similar Law.

 

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(e) Lost, Stolen or Destroyed Certificates . In the event that any Common Certificates or Preferred Certificates shall have been lost, stolen or destroyed, upon (i) the making of an affidavit of that fact by the holder thereof, (ii) delivery for the benefit of Parent of a bond or indemnity in an amount and upon terms reasonably satisfactory to the Exchange Agent and (iii) execution and delivery by such Person of a letter of transmittal, the Exchange Agent shall issue in exchange for such lost, stolen or destroyed Common Certificates or Preferred Certificates, the applicable Per Common Share Merger Consideration or Per Preferred Share Merger Consideration payable in respect of the Company Common Stock or Company Series A Preferred Stock represented by such Common Certificates or Preferred Certificates, pursuant to Section 2.1 , including any amount payable in respect of Fractional Share Consideration in accordance with Section 2.6 , and any dividends or other distributions (x) on shares of Parent Common Stock in accordance with Section 2.2(f) or (y) on shares of Parent Series C Preferred Stock in accordance with Section 2.2(g) .

(f) Dividends with Respect to Parent Common Stock . No dividends or other distributions with respect to Parent Common Stock with a record date after the First Merger Effective Time shall be paid to the holder of any unsurrendered Common Certificate or Book-Entry Common Share with respect to the shares of Parent Common Stock issuable hereunder, and all such dividends and other distributions shall be paid by Parent to the Exchange Agent and shall be included in the Exchange Fund, in each case until the surrender of such Common Certificate (or affidavit of loss in lieu thereof) or Book-Entry Common Share in accordance with this Agreement. Subject to applicable Laws, following surrender of any such Common Certificate (or affidavit of loss in lieu thereof) or Book-Entry Common Share there shall be paid to the holder thereof, without interest, (i) the amount of dividends or other distributions with a record date after the First Merger Effective Time theretofore paid with respect to such shares of Parent Common Stock to which such holder is entitled pursuant to this Agreement and (ii) at the appropriate payment date, the amount of dividends or other distributions with a record date after the First Merger Effective Time but prior to such surrender and with a payment date subsequent to such surrender payable with respect to such shares of Parent Common Stock.

(g) Dividends with Respect to Parent Series C Preferred Stock . No dividends or other distributions with respect to Parent Series C Preferred Stock with a record date after the Second Merger Effective Time shall be paid to the holder of any unsurrendered Preferred Certificate or Book-Entry Preferred Share with respect to the shares of Parent Series C Preferred Stock issuable hereunder, and all such dividends and other distributions shall be paid by Parent to the Exchange Agent and shall be included in the Exchange Fund, in each case until the surrender of such Preferred Certificate (or affidavit of loss in lieu thereof) or Book-Entry Preferred Share in accordance with this Agreement. Subject to applicable Laws, following surrender of any such Preferred Certificate (or affidavit of loss in lieu thereof) or Book-Entry Preferred Share there shall be paid to the holder thereof, without interest, (i) the amount of dividends or other distributions with a record date after the Second Merger Effective Time theretofore paid with respect to such shares of Parent Series C Preferred Stock to which such holder is entitled pursuant to this Agreement and (ii) at the appropriate payment date, the amount of dividends or other distributions with a record date after the Second Merger Effective Time but prior to such surrender and with a payment date subsequent to such surrender payable with respect to such shares of Parent Series C Preferred Stock.

 

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Section 2.3 Dissenters’ Rights . No dissenters’ or appraisal rights shall be available with respect to the Mergers or the other Transactions.

Section 2.4 Treatment of Company Restricted Shares; and DRIP .

(a) Immediately prior to the First Merger Effective Time, with respect to each outstanding share of restricted stock or each outstanding restricted stock unit that settles in shares of Company Common Stock, in each case that vest upon continued service under the Company Equity Plan (each a “ Company Restricted Share ”), the restrictions and vesting conditions applicable to such Company Restricted Share shall lapse and each such Company Restricted Share shall, by virtue of the First Merger and without any action on the part of the holder thereof, be converted as of the First Merger Effective Time into the right to receive, with respect to the share of Company Common Stock underlying such Company Restricted Share, the Per Common Share Merger Consideration in accordance with Section 2.1 , less applicable Tax withholdings. Applicable Tax withholdings with respect to the converted Company Restricted Shares first shall reduce the Per Share Common Cash Merger Consideration received with respect to the Exchanged Restricted Shares held by an individual holder and then shall reduce the Per Share Common Stock Merger Consideration, with the value of any tax withholdings that reduce the Per Share Common Stock Merger Consideration to be based on the Parent Stock Price. For the purposes of this Section 2.4(a) , “ Parent Stock Price ” means the average of the volume weighted averages of the trading prices of Parent Common Stock on the NYSE (as reported by Bloomberg L.P.) on each of the five (5) consecutive trading days ending on the trading day prior to the Closing Date.

(b) Prior to the First Merger Effective Time, the Company shall adopt resolutions and take all necessary and appropriate actions to (i) effectuate the treatment of the Company Restricted Shares as contemplated by this Section 2.4 and (ii) provide that, as of the First Merger Effective Time, the Company Equity Plan shall terminate and all rights under any provision of any other plan, program or arrangement of the Company providing for the issuance or grant of any other interest in respect of the capital stock or other equity interests of the Company shall be cancelled without obligation (including any payment ) of the Company other than as expressly provided herein.

(c) The Company Board has, no later than the date hereof, taken all actions to either (i) suspend or terminate the DRIP, and following such suspension or termination, will not issue any shares of Company Common Stock under the DRIP or (ii) elect to satisfy the obligations to provide Company Common Stock pursuant to the DRIP through open market purchases rather than new share issuances.

Section 2.5 Withholding . Any payments made pursuant to this Agreement shall be net of all applicable withholding Taxes that Parent, Merger Sub, the First Merger Surviving Entity, the Second Merger Surviving Entity and the Exchange Agent, as the case may be, shall be required to deduct and withhold under applicable Law. To the extent that amounts are so deducted and withheld by the applicable payor and remitted to the appropriate Governmental Entity, such amounts shall be treated for all purposes of this Agreement as having been paid to the Person in respect of which such deduction and withholding was made.

 

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Section 2.6 Fractional Shares . No certificate or scrip or book-entry securities representing less than one (1) share of Parent Common Stock shall be issued in the First Merger upon the surrender for exchange of Common Certificates or Book-Entry Common Shares, and such fractional share interests shall not entitle the owner thereof to vote or to any other rights of a stockholder of Parent. Notwithstanding any other provision of this Agreement, each holder of shares of Company Common Stock converted pursuant to the First Merger who would otherwise have been entitled to receive a fraction of a share of Parent Common Stock shall receive, in lieu thereof, cash, without interest, representing such holder’s proportionate interest, if any, in the proceeds from the sale by the Exchange Agent (reduced by any fees of the Exchange Agent attributable to such sale) in one or more transactions of shares of Parent Common Stock equal to the excess of (i) the aggregate number of shares of Parent Common Stock to be delivered to the Exchange Agent by Parent pursuant to Section 2.2(a)(i) over (ii) the aggregate number of whole shares of Parent Common Stock to be distributed to holders of Company Common Stock pursuant to Sections 2.1 and 2.2(b)(i) (such excess being, the “ Excess Shares ”). The Parties acknowledge that payment of the cash consideration in lieu of issuing fractional shares was not separately bargained-for consideration but merely represents a mechanical rounding off for purposes of avoiding the expense and inconvenience to Parent that would otherwise be caused by the issuance of fractional shares. As soon as practicable after the Effective Time, the Exchange Agent, as agent for the holders of the certificates representing shares of Parent Common Stock that would otherwise receive fractional shares, shall sell the Excess Shares at then prevailing prices on the NYSE (or such other market in which the Parent Common Stock then trades).

ARTICLE III

REPRESENTATIONS AND

WARRANTIES OF THE COMPANY

The following representations and warranties by the Company are qualified in their entirety by reference to the disclosures (i) in the Company SEC Documents filed or furnished to the SEC as applicable, on or after January 1, 2015, except for the representations and warranties set forth in Section 3.3 , Section 3.5 , Section 3.8(b) and Section 3.19 , and prior to February 22, 2016 (excluding any risk factor disclosures contained in such documents under the heading “Risk Factors” and any disclosure of risks included in any “forward-looking statements” disclaimer or other statements that are cautionary, predictive or forward-looking in nature) and (ii) set forth in the disclosure letter delivered by the Company to Parent immediately prior to the execution of this Agreement (the “ Company Disclosure Letter ”). Each disclosure set forth in the Company Disclosure Letter shall qualify or modify the Section to which it corresponds and any other Section to the extent the applicability of the disclosure to such other Section is reasonably apparent on its face from the text of the disclosure made.

Section 3.1 Organization and Qualification; Subsidiaries .

(a) The Company is a corporation duly organized, validly existing and in good standing under the Laws of Maryland and has the requisite corporate power and authority to conduct its business as now being conducted. The Company is duly qualified or licensed to do business and is in good standing (with respect to jurisdictions which recognize such concept) in each jurisdiction in which the nature of its business or the ownership, leasing or operation of its properties makes such qualification or licensing necessary, except for those jurisdictions where

 

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the failure to be so qualified or licensed or to be in good standing would not have or reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. The Company is in compliance with the terms of the Company Governing Documents.

(b) Section 3.1(b)  of the Company Disclosure Letter sets forth a true and complete list of the Subsidiaries of the Company (each a “ Company Subsidiary ”), together with the jurisdiction of organization or incorporation, as the case may be, of each Company Subsidiary, and the type and percentage of interest held directly or indirectly, by the Company in each Company Subsidiary. Each Company Subsidiary is in compliance in all material respects with the terms of its constituent organizational or governing documents.

(c) Each Company Subsidiary is duly organized, validly existing and in good standing (to the extent applicable) under the Laws of the jurisdiction of its incorporation or organization, as the case may be, and has the requisite organizational power and authority to conduct its business as now being conducted, except for such failures as would not have or reasonably be expected to have a Company Material Adverse Effect. Each Company Subsidiary is duly qualified or licensed to do business and is in good standing (with respect to jurisdictions which recognize such concept) in each jurisdiction in which the nature of its business or the ownership, leasing or operation of its properties makes such qualification or licensing necessary, except for those jurisdictions where the failure to be so qualified or licensed or to be in good standing would not have or reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.

(d) Neither the Company nor any Company Subsidiary directly or indirectly owns any interest or investment (whether equity or debt) in any Person (other than (i) in the Company Subsidiaries and (ii) Company Investments).

(e) The Company has made available to Parent (i) complete and correct copies of the Company Governing Documents and (ii) complete and correct copies of the organizational documents or governing documents of each Company Subsidiary.

Section 3.2 Capitalization .

(a) The authorized stock of the Company consists of (i) 450,000,000 shares of Company Common Stock and (ii) 50,000,000 shares of preferred stock, par value $0.01 per share (the “ Company Preferred Stock ”), of which 6,900,000 shares are designated as 8.00% Series A Cumulative Redeemable Perpetual Preferred Stock (the “ Company Series A Preferred Stock ”). As of February 22, 2016, (A) 31,853,025 shares of Company Common Stock were issued and outstanding, including 178,669 Company Restricted Shares, (B) 6,900,000 shares of Company Series A Preferred Stock were issued and outstanding and no other shares of Company Preferred Stock were issued or outstanding, (C) 1,273,795 shares of Company Common Stock were reserved for issuance in connection with future grants of awards under any Company Equity Plan, and (D) 148,549 shares of Company Common Stock were reserved for issuance with respect to outstanding Company Restricted Shares. All of the outstanding shares of the Company’s stock are duly authorized, validly issued, fully paid and non-assessable, and have been issued in compliance with all applicable securities Laws, the MGCL and the Company Governing Documents. There are no bonds, debentures, notes or other Indebtedness having

 

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general voting rights (or convertible into securities having such rights) (“ Company Voting Debt ”) of the Company or any Company Subsidiary issued and outstanding. Except for the DRIP, the provisions of the Company Charter, the Company Restricted Shares and the Company Preferred Stock, there are no options, warrants, calls, pre-emptive rights, subscriptions or other rights, agreements, arrangements or commitments of any kind, including any “poison pill” or similar stockholder rights plan, relating to the issued or unissued stock of the Company, obligating the Company or any Company Subsidiary to issue, transfer or sell or cause to be issued, transferred or sold any shares of stock or Company Voting Debt of, or other equity interest in, the Company or any Company Subsidiary or securities convertible into or exchangeable for such shares or equity interests, or obligating the Company or any Company Subsidiary to grant, extend or enter into any such option, warrant, call, subscription or other right, agreement, arrangement or commitment (collectively, “ Company Equity Interests ”). Except as set forth in the Company Governing Documents, there are no outstanding contractual obligations of the Company or any Company Subsidiary to repurchase, redeem or otherwise acquire any Company Common Shares or any stock of, or other Company Equity Interests in, the Company or any Company Subsidiary, or to provide funds to make any investment (in the form of a loan, capital contribution or otherwise) in the Company or any Company Subsidiary.

(b) Section 3.2(b)  of the Company Disclosure Letter sets forth a list of all outstanding Company Restricted Shares as of February 22, 2016, including the name of the recipient and the applicable vesting schedule.

(c) There are no voting trusts or other agreements to which the Company or any Company Subsidiary is a party with respect to the voting of the Company Common Stock or any stock of, or other Company Equity Interest in, the Company or Company Subsidiary. Neither the Company nor any Company Subsidiary has granted any preemptive rights, anti-dilutive rights or rights of first refusal or similar rights with respect to any of its stock or other Company Equity Interests.

(d) The Company or another Company Subsidiary owns, directly or indirectly through ownership of another wholly-owned Company Subsidiary, all of the issued and outstanding shares of stock or other Company Equity Interests of each of the Company Subsidiaries, free and clear of any Liens (other than transfer and other restrictions under applicable federal and state securities Laws and other than, in the case of Company Subsidiaries that are immaterial to the Company, immaterial Liens), and all of such shares of stock or other Company Equity Interests have been duly authorized and validly issued and are fully paid, nonassessable and have been issued in compliance with all applicable securities Laws. There are no outstanding obligations to which the Company or any Company Subsidiary is a party (i) restricting the transfer of or (ii) limiting the exercise of voting rights with respect to any Company Equity Interests in any Company Subsidiary.

(e) Other than pursuant to the DRIP, neither the Company nor any Company Subsidiary is under any obligation, contingent or otherwise, by reason of any Contract to register the offer and sale or resale of any of their securities under the Securities Act.

(f) All dividends or distributions on the Company Common Stock and any material dividends or distributions on any securities of any Company Subsidiary which have been declared prior to the date hereof have been paid in full (except to the extent such dividends have been publicly announced and are not yet due and payable).

 

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Section 3.3 Authorization; Validity of Agreement; Company Action .

(a) The Company has all necessary corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the Transactions, including the Mergers. The execution, delivery and performance by the Company of this Agreement, and the consummation by it of the Transactions, have been duly and validly authorized by the Company Board and no other corporate action on the part of the Company, or vote, consent or approval of the Company’s stockholders, pursuant to the MGCL or otherwise, is necessary to authorize the execution and delivery by the Company of this Agreement, and the consummation by it of the Transactions, subject, in the case of the First Merger, to the receipt of the Company Stockholder Approval and the filing of the Articles of Merger with, and acceptance for record by, the SDAT.

(b) This Agreement has been duly and validly executed and delivered by the Company and, assuming due and valid authorization, execution and delivery hereof by Parent and Merger Sub, is a valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except that the enforcement hereof may be limited by (i) bankruptcy, insolvency, reorganization, moratorium or other similar Laws, now or hereafter in effect, relating to creditors’ rights generally and (ii) general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at Law).

Section 3.4 Board Approvals . On or prior to the date hereof, the Company Board at a duly held meeting has by unanimous vote (i) duly and validly authorized the execution and delivery of this Agreement and declared advisable the Mergers and the other Transactions, (ii) directed that the First Merger and the other Transactions be submitted for consideration at the Stockholders Meeting, and (iii) resolved to recommend that the Company’s stockholders vote in favor of the approval of the First Merger and the other Transactions and to include such Company Board Recommendation in the Proxy Statement, subject to Section 5.3 and Section 5.4 .

Section 3.5 Consents and Approvals; No Violations . None of the execution, delivery or performance of this Agreement by the Company, the consummation by the Company of the First Merger or any other Transaction or compliance by the Company with any of the provisions of this Agreement will (a) violate, conflict with or result in any breach of any provision of the Company Governing Documents or the comparable organizational or governing documents of any Company Subsidiary, (b) require any filing by the Company or any Company Subsidiary with, or the obtaining of any permit, authorization, consent or approval of, any court, arbitral tribunal, administrative agency or commission or other governmental or other regulatory authority or agency, whether foreign, federal, state, local or supernational (a “ Governmental Entity ”), other than any taxing authority (except for (i) compliance with any applicable requirements of the Exchange Act, (ii) any filings as may be required under the MGCL in connection with the Mergers, (iii) such filings with the Securities and Exchange Commission (the “ SEC ”) as may be required to be made by the Company in connection with this Agreement and the Mergers, including (A) a proxy statement in preliminary and definitive form relating to

 

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the Stockholders Meeting that will be sent to the stockholders of the Company in connection with the Stockholders Meeting (together with any amendments or supplements thereto or document incorporated by reference therein, the “ Proxy Statement ”) and (B) a registration statement on Form S-4 pursuant to which the offer and sale of shares of Parent Common Stock in the First Merger and Parent Series C Preferred Stock in the Second Merger will be registered pursuant to the Securities Act and in which the Proxy Statement will be included (together with any amendments or supplements thereto, the “ Form S-4 ”) and filings on Form 8-K or pursuant to Rule 14a-12 under the Exchange Act, or (iv) such filings as may be required under the rules and regulations of the NYSE in connection with this Agreement and the Mergers), (c) except as set forth on Section 3.5 of the Company Disclosure Letter, accelerate the performance required by, result in any termination, cancellation or modification of, or loss of benefit under, violation or breach of, or constitute (with or without notice or lapse of time or both) a default (or give rise to any right, including, but not limited to, any right of termination, amendment, cancellation or acceleration) under, any of the terms, conditions or provisions of any Contract to which the Company or any of the Company Subsidiaries is a party, (d) result in the creation of any Lien or other encumbrance (other than a Company Permitted Lien) upon any of the respective properties or assets of the Company, or (e) violate any order, writ, injunction, decree or Law applicable to the Company or any of its properties or assets; except in each of clauses (c) or (d), as would not have or reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.

Section 3.6 Company SEC Documents and Company Financial Statements .

(a) The Company has filed or furnished (as applicable) with the SEC on a timely basis all forms, reports, schedules, statements and other documents (including exhibits and all other information incorporated therein) required by it to be filed or furnished (as applicable) since and including January 1, 2013 under the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (the “ Exchange Act ”) or the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder (the “ Securities Act ”) (together with all certifications required pursuant to the Sarbanes-Oxley Act of 2002 (the “ Sarbanes-Oxley Act ”)) (such documents and any other documents filed by the Company with the SEC, collectively, the “ Company SEC Documents ”). As of their respective filing dates the Company SEC Documents (a) did not (or with respect to Company SEC Documents filed after the date hereof, will not) contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading and (b) complied (or with respect to Company SEC Documents filed after the date hereof, will comply) in all material respects with the applicable requirements of the Exchange Act or the Securities Act, as the case may be, the Sarbanes-Oxley Act and the applicable rules and regulations of the SEC thereunder. All of the consolidated audited financial statements and unaudited interim financial statements of the Company included in the Company SEC Documents or incorporated therein by reference, including the related notes and schedules (collectively, the “ Company Financial Statements ”), (i) complied or will comply, as the case may be, as to form in all material respects with the applicable accounting requirements and the published rules and regulations of the SEC with respect thereto; (ii) have been or will be, as the case may be, prepared from, are in accordance with, and accurately reflect the books and records of the Company and the Company Subsidiaries in all material respects; (iii) have been or will be,

 

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as the case may be, prepared in accordance with United States Generally Accepted Accounting Principles (“ GAAP ”) applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto or, in the case of interim financial statements, for normal and recurring year-end adjustments and as may be permitted by the SEC on Form 10-Q, Form 8-K or any successor or like form under the Exchange Act); and (iv) fairly present, in all material respects, the financial position and the results of operations and cash flows of the Company and the consolidated Company Subsidiaries as of the times and for the periods referred to therein. The Company does not have any outstanding and unresolved comments from the SEC with respect to the Company SEC Documents. To the knowledge of the Company, as of the date hereof, none of the Company SEC Documents is the subject of ongoing SEC review or outstanding SEC comments and there are no inquiries or investigations by the SEC or any internal investigations pending or threatened, in each case regarding any accounting practices of the Company.

(b) The Company has made available to Parent complete and correct copies of all material written correspondence between the SEC on one hand, and the Company, on the other hand, since January 1, 2013, other than as publicly filed as correspondence in the Electronic Data Gathering, Analysis and Retrieval Database of the SEC (“ EDGAR ”).

Section 3.7 Internal Controls; Sarbanes-Oxley Act .

(a) Since January 1, 2013, the Company has designed and maintained a system of internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) sufficient to provide reasonable assurances regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP, and includes those policies and procedures that: (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company and its consolidated Subsidiaries; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and that receipts and expenditures are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the assets that could have a material effect on the financial statements. The Company’s management has completed an assessment of the effectiveness of the Company’s system of internal controls over financial reporting in compliance with the requirements of Section 404 of the Sarbanes-Oxley Act for the fiscal year ended December 31, 2015, and, except as set forth in Company SEC Documents filed prior to the date of this Agreement, such assessment concluded that such controls were effective and the Company’s independent registered accountant has issued (and not subsequently withdrawn or qualified) an attestation report concluding that the Company maintained effective internal control over financial reporting as of December 31, 2015. Since January 1, 2013, the Company (i) has designed and maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) to ensure that material information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to the Company’s management as appropriate to allow timely decisions regarding required disclosure and (ii) has not had (A) any significant

 

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deficiencies and material weaknesses in the design or operation of internal controls over financial reporting that are reasonably likely to adversely affect in any material respect the Company’s ability to record, process, summarize and report financial information or (B) any fraud, whether or not material, that involving management or other employees who have a significant role in the Company’s internal controls over financial reporting.

(b) Neither the Company nor any of its Subsidiaries has entered into or is subject to (i) any “off balance sheet arrangement” (as defined in Item 303(a)(4)(ii) of Regulation S-K promulgated under the Securities Act) or (ii) any commitment to become party to any joint venture, off balance sheet partnership or any similar Contract or arrangement relating to any transaction or relationship between or among the Company or any of its Subsidiaries, on the one hand, and any unconsolidated Affiliate, including any structured finance, special purpose or limited purpose entity or Person, on the other hand, in each case where the results, purpose or effect of such commitment or arrangement is to avoid disclosure of any material transaction involving, or material liabilities of, the Company or any of its Subsidiaries in the Company’s or such Subsidiaries’ published financial statements or other Company SEC Documents.

Section 3.8 Absence of Certain Changes .

(a) Except as contemplated by this Agreement, since January 1, 2015, (i) the Company and each Company Subsidiary has conducted, in all material respects, its business in the ordinary course consistent with past practice and (ii) neither the Company nor any Company Subsidiary has taken any action that would require consent of Parent pursuant to clause (a), (b), (c), (i), (k), (l), (o), (p)(ii), (q) or (r), or clause (t) with respect to any of the foregoing, of Section 5.1 had such action occurred after the date of this Agreement and prior to the Closing.

(b) Since January 1, 2015, there has not been any Company Material Adverse Effect or any Events that have had or would reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.

Section 3.9 No Undisclosed Liabilities . Except (a) as reflected or adequately reserved against on the balance sheet of the Company dated September 30, 2015, (b) for liabilities and obligations incurred since September 30, 2015 in the ordinary course of business and in a manner consistent with past practice, subsequent to September 30, 2015 and (c) for liabilities and obligations contemplated by or under this Agreement or in connection with the Transactions, neither the Company nor any Company Subsidiary has any liabilities or obligations, contingent or otherwise, that would be required by GAAP to be reflected on, or disclosed in the notes to, the consolidated financial statements of the Company and its Subsidiaries, other than as have not had and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.

Section 3.10 Litigation . There is (a) no material claim, action, suit, arbitration, alternative dispute resolution action or any other judicial or administrative proceeding, in Law or equity (collectively, a “ Legal Proceeding ”), pending (in which service of process has been received by the Company) against (or to the Company’s knowledge, threatened against or naming as a party thereto), the Company, a Company Subsidiary, any of their respective properties or assets, or any executive officer or director of the Company (in their capacity as

 

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such) and (b) no material investigation of a Governmental Entity pending (in which notice has been received by the Company) or, to the knowledge of the Company, threatened against the Company or any Company Subsidiary, any of their respective properties or assets, or any executive officer or director of the Company (in their capacity as such). Neither the Company nor any Company Subsidiary is subject to any outstanding Order that is material to the Company or any Company Subsidiary.

Section 3.11 Company Employee Benefit Plans; ERISA .

(a) Neither the Company nor any of its Subsidiaries (i) currently employs or has ever employed any individual and (ii) has, or has ever had, any liabilities with respect to Benefit Plans, other than liabilities relating to the Company Equity Plan.

(b) The Company has provided or made available to Parent the amounts that have been allocated to the Company for calendar years 2014 and 2015 with respect to service credit with respect to applicable Benefit Plans, commission plans or current bonus target amounts (or portion thereof to be allocated to the Company), actual bonus and commission or incentive compensation for the individuals providing services to the Company (the “ Company Service Providers ”).

(c) No material liability, claim, action, audit, investigation, governmental proceeding or litigation is pending or, to the knowledge of the Company, threatened with respect to any individual who is currently providing or has ever provided services to the Company.

(d) Neither the execution of this Agreement nor the consummation of the Transactions will (individually or together with the occurrence of any other event): (i) accelerate the time of payment, vesting or funding or result in any payment of compensation or benefits under, or increase the amount or value of any payment to any director of the Company or any Company Service Provider, (ii) result in payments or benefits which would not be deductible under Section 280G of the Code, or (iii) result in a requirement to pay any tax “gross up” or similar “make whole” payment, whether paid directly or indirectly, to any director or Company Service Provider.

(e) Full payment has been made, or otherwise properly accrued on the books and records of the Company and the Company Subsidiaries, of all amounts that the Company and the Company Subsidiaries are required to have paid under the terms of any arrangement with respect to Company Service Providers.

(f) There are no proceedings pending or, to the knowledge of the Company, threatened against the Company or any of the Company Subsidiaries in any forum by or on behalf of any individual who currently provides or has ever provided services to the Company or any of the Company Subsidiaries alleging unpaid or overdue compensation due, breach of any express or implied employment contract, violation of any law or regulation governing employment or the termination thereof, or any other discriminatory, wrongful or tortious conduct on the part of the Company or any of the Company Subsidiaries in connection with the service relationship.

(g) Each individual who renders service to the Company or any Company Subsidiary who is classified by the Company or such Company Subsidiary, as applicable, as having the status of an independent contractor or other nonemployee status for any purpose is properly so classified and treated in accordance with applicable Laws.

 

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Section 3.12 Taxes .

(a) The Company and each Company Subsidiary has timely filed with the appropriate Governmental Entity all material Tax Returns required to be filed, taking into account any extensions of time within which to file such Tax Returns, and all such Tax Returns were true, complete and correct in all material respects. The Company and each Company Subsidiary has duly paid (or there has been paid on their behalf), or made adequate provisions for, all material Taxes required to be paid by them.

(b) The Company (i) for all taxable years commencing with the Company’s taxable year ended December 31, 2011 and through December 31, 2015 has been subject to taxation as a real estate investment trust within the meaning of Sections 856 through 860 of the Code (a “ REIT ”) and has satisfied all requirements to qualify as a REIT for such years; (ii) has operated since January 1, 2016 until the date hereof in a manner consistent with the requirements for qualification and taxation as a REIT; (iii) intends to continue to operate in such a manner as to qualify as a REIT through the First Merger Effective Time (determined as if the Company’s taxable year ended at the First Merger Effective Time and disregarding the distribution requirements set forth in Section 857(a)(1) of the Code); and (iv) has not to its knowledge taken or omitted to take any action that could reasonably be expected to result in a challenge by the IRS or any other Governmental Entity to its qualification as a REIT, and to the knowledge of the Company, no such challenge is pending or threatened.

(c) There are no current audits, examinations or other proceedings of a Governmental Entity pending with regard to any U.S. federal or other material Taxes of the Company or the Company Subsidiaries, and neither the Company nor any Company Subsidiary has received a written notice or announcement of any such audits, examinations or proceedings.

(d) Neither the Company nor any Company Subsidiary directly or indirectly holds any asset the disposition of which would be subject to (or to rules similar to) Section 1374 of the Code.

(e) The Company and the Company Subsidiaries have complied, in all material respects, with all applicable Laws, rules and regulations relating to the payment and withholding of Taxes (including withholding of Taxes pursuant to Sections 1441, 1442, 1445, 1446, 1471-1474 and 3402 of the Code or similar provisions under any state and foreign Laws) and have duly and timely withheld and, in each case, have paid over to the appropriate Governmental Entities all material amounts required to be so withheld and paid over on or prior to the due date thereof under all applicable Laws.

(f) There are no Tax Liens upon any property or assets of the Company or any Company Subsidiary except for Company Permitted Liens.

 

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(g) There are no Tax allocation or sharing agreements or similar arrangements with respect to or involving the Company or any Company Subsidiary, and after the Closing Date neither the Company nor any Company Subsidiary shall be bound by any such Tax allocation agreements or similar arrangements or have any liability thereunder for amounts due in respect of periods prior to the Closing Date, except as otherwise provided herein and except, in each case, for customary indemnification provisions contained in credit or other commercial agreements the primary purposes of which do not relate to Taxes.

(h) Neither the Company nor any Company Subsidiary is or has been a party to any “listed transaction” within the meaning of Treasury Regulations Section 1.6011-4(b)(2).

(i) Neither the Company nor any Company Subsidiary has distributed stock of another Person, or has had its stock distributed by another Person, in a transaction that was purported or intended to be governed in whole or in part by Section 355 of the Code or Section 361 of the Code.

(j) Neither the Company nor any Company Subsidiary has waived any statute of limitations in respect of any U.S. federal or other material Taxes or agreed to any extension of time with respect to a U.S. federal or other material Tax assessment or deficiency.

(k) Neither Parent nor any Parent Subsidiary will be required to include any material item of income in, or exclude any material item of deduction from, taxable income for any taxable period (or portion thereof) beginning after the Closing Date as a result of any (A) change in method of accounting of the Company or any Company Subsidiary for a taxable period ending on or prior to the Closing Date, (B) installment sale by the Company or any Company Subsidiary made on or prior to the Closing Date or (C) election by the Company or any Company Subsidiary under Section 108(i) of the Code made prior to the Closing Date.

(l) Section 3.12(l)  of the Company Disclosure Letter sets forth a true and complete list of each Company Subsidiary and each other entity in which the Company directly, indirectly or constructively owns an equity interest of ten percent (10%) or greater (by vote or value) and their respective classification for U.S. federal income tax purposes, jurisdiction of incorporation or organization, as the case may be, and the type of and percentage of interest held, directly or indirectly, by the Company in each Company Subsidiary, including in the case of any entity classified as a corporation for U.S. federal income tax purposes, whether such entity has elected to be treated as a “taxable REIT subsidiary” within the meaning of Section 856(l) of the Code (a “ Taxable REIT Subsidiary ”).

(m) Neither the Company nor any Company Subsidiary (i) has been a member of an affiliated group filing a consolidated U.S. federal income Tax Return or (ii) has any liability for the Taxes of any Person under Treasury Regulations Section 1.1502-6 (or any similar provision of state, local, or foreign law), as a transferee or successor, by contract, or otherwise.

(n) Neither the Company nor any of the Company Subsidiaries has entered into any “closing agreement” as described in Section 7121 of the Code (or any corresponding or similar provision of state, local or foreign income Tax Law).

 

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(o) Neither the Company nor any Company Subsidiary has requested, has received or is subject to any written ruling of a Governmental Entity or has entered into any written agreement with a Governmental Entity with respect to any Taxes.

(p) Neither the Company nor any Company Subsidiary has received a written claim by any Governmental Entity in a jurisdiction where the Company and the Company Subsidiaries do not file Tax Returns that they are or may be subject to income taxation by the jurisdiction.

(q) No deficiency for any U.S. federal or other material Tax has been asserted or assessed by a Governmental Entity in writing against the Company or any Company Subsidiary that has not been satisfied by payment, settled or withdrawn.

(r) Since January 1, 2015, neither the Company nor any of its Subsidiaries have rescinded or revoked any Tax election, settled or compromised any Tax liability or amended any Tax Return filed before the date hereof. No material Tax elections have been made following the filing of the Company’s 2014 U.S. federal income tax return.

(s) Neither the Company nor any Company Subsidiary (i) owns any “residual interests” (within the meaning of Section 860G(a)(2) of the Code) in a “REMIC” (within the meaning of Section 860D(a) of the Code) or (ii) has allocated “excess inclusion income” to their stockholders.

(t) To the knowledge of the Company, neither the Company nor any Company Subsidiary has engaged at any time in any “prohibited transactions” within the meaning of Section 856(b)(6) of the Code.

(u) This Section 3.12 and Section 3.11  contain the sole representations and warranties of the Company and the Company Subsidiaries with respect to Tax matters.

Section 3.13 Contracts .

(a) Section 3.13(a) of the Company Disclosure Letter sets forth a list of each Contract, including all amendments, supplements, exhibits and side letters to any such Contract, to which the Company or any Company Subsidiary is a party or by which any of its properties or assets are bound which, as of the date of this Agreement:

(i) is required to be filed as an exhibit to the Company’s Annual Report on Form 10-K pursuant to Item 601(b)(2), (4), (9) or (10) of Regulation S-K promulgated under the Securities Act or required to be disclosed under Item 404 of Regulation S-K under the Securities Act (provided, that the Company shall only be required to list in clause (i) of Section 3.13(a) those Contracts that have not been filed with the SEC on or after January 1, 2015);

(ii) involves aggregate payments by, or other consideration or expenditures from, the Company or any Company Subsidiary in excess of $500,000 over the remaining term of such Contract, and is not cancelable within sixty (60) days without material payment by or penalty to the Company or any Company Subsidiary;

 

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(iii) contains any non-compete or exclusivity provisions with respect to any line of business or geographic area with respect to the Company or any Company Subsidiary, or upon consummation of the Transactions, Parent or its Subsidiaries, or which restricts in any material respect the conduct of any line of business of the Company or any Company Subsidiary, or upon consummation of the Transactions, Parent or its Subsidiaries;

(iv) establishes a partnership, joint venture or similar arrangement;

(v) relates to the borrowing of money or extension of credit, in each case having a principal amount of Indebtedness in excess of $1,000,000 other than accounts receivables and payables incurred or arising in the ordinary course of business consistent with past practice;

(vi) requires the Company or any Company Subsidiary to dispose of or acquire assets or properties with a fair market value in excess of $1,000,000, or involves any pending or contemplated merger, consolidation or similar business combination;

(vii) is a Company Investment Contract;

(viii) requires any delivery of notice or prior consent in connection with the Transactions, where, if such notice or consent were not made or obtained, would give rise to any right of termination, cancellation, acceleration or amendment of, or trigger any payments or the creation of a Lien or other encumbrance, or result in any violation of or breach of or constitute a default under such Contract in connection with the consummation of the Mergers and the other Transactions;

(ix) is with a Governmental Entity;

(x) relates to a Related Party Transaction; or

(xi) contains any obligation, contingent or otherwise, on the part of the Company or any of its Subsidiaries to indemnify any other Person.

(b) Each Contract of the type described above in Section 3.13(a) , whether or not set forth in Section 3.13(a) of the Company Disclosure Letter, is referred to herein as a “ Company Material Contract .” Except as, individually or in the aggregate, would not have or reasonably be expected to have a Company Material Adverse Effect, each Company Material Contract is legal, valid, binding and enforceable in accordance with its terms on the Company and each Company Subsidiary that is a party thereto and, to the knowledge of the Company, each other party thereto, and is in full force and effect, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar Laws affecting creditors’ rights generally and by general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at Law). Except as, individually or in the aggregate, would not have or reasonably be expected to have a Company Material Adverse Effect, the Company and each Company Subsidiary has performed all obligations required to be performed by it under each Company Material Contract and, to the knowledge of the Company, each other party thereto has performed all obligations required to be performed by it under such Company Material Contract. None of the Company or any Company Subsidiary, nor, to the knowledge of the Company, any

 

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other party thereto, is in material breach or violation of, or default under, any Company Material Contract, and no event has occurred that with notice or lapse of time or both would constitute a violation, breach or default under any Company Material Contract, except where in each case such breach, violation or default, individually or in the aggregate, would not have or reasonably be expected to have a Company Material Adverse Effect. Neither the Company nor any Company Subsidiary has received written or, to the knowledge of the Company, other notice of any violation or default under any Company Material Contract.

(c) The Company has delivered or made available to Parent or provided to Parent for review, prior to the execution of this Agreement, true and complete copies of all of the Company Material Contracts.

Section 3.14 Investment Company Act . Neither the Company nor any Company Subsidiary is, or on the Closing Date will be, required to be registered as an investment company under the Investment Company Act.

Section 3.15 Intellectual Property . Except as, individually or in the aggregate, would not have or reasonably be expected to have a Company Material Adverse Effect, (i) the Company and the Company Subsidiaries own or are licensed or otherwise possess valid rights to use all Intellectual Property Rights necessary to conduct the business of the Company and the Company Subsidiaries as it is currently conducted, (ii) the conduct of the business of the Company and the Company Subsidiaries as it is currently conducted does not infringe, misappropriate or otherwise violate the Intellectual Property rights of any third party, (iii) there are no pending or, to the knowledge of the Company, threatened claims with respect to any of the Intellectual Property rights owned by the Company or any Company Subsidiary, (iv) to the knowledge of the Company, no third party is currently infringing or misappropriating Intellectual Property Rights owned by the Company or any Company Subsidiary, and (v) neither the Company or any Company Subsidiary has experienced any cybersecurity or other data breach or misappropriation. The Company and the Company Subsidiaries are taking all actions that they reasonably believe are necessary to maintain and protect each material item of Intellectual Property Rights that they own.

Section 3.16 Compliance with Laws; Permits .

(a) Each of the Company and the Company Subsidiaries has, since January 1, 2014, been in compliance, in all material respects, with all Laws which affect the business, properties or assets of the Company. Since January 1, 2014, no notice, charge or assertion has been received by the Company or any Company Subsidiary or, to the Company’s knowledge, threatened against the Company or any Company Subsidiary alleging any material non-compliance with any Laws affecting the business, properties or assets of the Company. Notwithstanding anything to the contrary in this Section 3.16(a) , the provisions of this Section 3.16(a)  shall not apply to matters discussed in Section 3.11 and Section 3.12 .

(b) The Company and the Company Subsidiaries are in possession of all authorizations, licenses, permits, certificates, approvals and clearances of any Governmental Entity necessary for the Company and the Company Subsidiaries to carry on its business in the manner described in the Company SEC Documents filed on or after January 1, 2014 and prior to

 

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the date hereof and as is being conducted as of the date of this Agreement (the “ Company Permits ”), and all such Company Permits are valid, and in full force and effect, except where the failure to possess and maintain such Company Permits in full force and effect have not had and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. All applications required to have been filed for the renewal of the Company Permits have been duly filed on a timely basis with the appropriate Governmental Entity, and all other filings required to have been made with respect to such Company Permits have been duly made on a timely basis with the appropriate Governmental Entity, except in each case for failures to file which, individually or in the aggregate, would not have or reasonably be expected to have a Company Material Adverse Effect. Neither the Company nor any Company Subsidiary is in violation or breach of, or default under, any Company Permit, nor has the Company or any Company Subsidiary received any claim or notice indicating that the Company or any Company Subsidiary is currently not in compliance with the terms of any Company Permits, except where the failure to be in compliance with the terms of any Company Permits, individually or in the aggregate, would not have or reasonably be expected to have a Company Material Adverse Effect.

Section 3.17 Assets and Properties .

(a) None of the Company or any Company Subsidiary own any equity interests in any real property.

(b) The Company and each of the Company Subsidiaries own or lease all tangible assets, if any, necessary for the conduct of their respective businesses as presently conducted. Each such tangible asset is free from material defects, has been maintained in accordance with normal industry practice and is in good operating condition and repaid, other than where such defects or the failure to have been so maintained or to be in such condition and repair would not, individually or in the aggregate, have or reasonably be expected to have a Company Material Adverse Effect.

Section 3.18 Investments . Section 3.18 of the Company Disclosure Letter sets forth an accurate and complete list of investments, including any securities, derivative instruments, currency hedging arrangements, repurchase agreements, options, forwards, futures, swaps, or hybrid securities, and all Contracts relating thereto (collectively, the “ Company Investments ” and such Contracts, the “ Company Investment Contracts ”) owned by the Company or any of the Company Subsidiaries as of the dates indicated therein, together with the cost basis, book or amortized value, as the case may be, as of the date indicated thereon, and investment rating (if any) of each such Company Investment.

Section 3.19 Information in the Proxy Statement . None of the information supplied or to be supplied in writing by or on behalf of the Company, any Company Subsidiary or the Company Manager for inclusion or incorporation by reference in (i) the Form S-4 will, at the time such document is filed with the SEC, at any time such document is amended or supplemented or at the time such document is declared effective by the SEC, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, or (ii) the Proxy Statement will, at the date it is first mailed to the stockholders of the Company, at the time of the Stockholders

 

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Meeting, at the time the Form S-4 is declared effective by the SEC or at the First Merger Effective Time, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading. All documents that the Company is responsible for filing with the SEC in connection with the Transactions, to the extent relating to the Company, any Company Subsidiary or the Company Manager or other information supplied by or on behalf of the Company, any Company Subsidiary or the Company Manager for inclusion therein, will comply as to form, in all material respects, with the provisions of the Securities Act or Exchange Act, as applicable, and the rules and regulations of the SEC thereunder and each such document required to be filed with any Governmental Entity (other than the SEC) will comply in all material respects with the provisions of any applicable Law as to the information required to be contained therein. The representations and warranties contained in this Section 3.19 will not apply to statements or omissions included in the Form S-4 or the Proxy Statement to the extent based upon information supplied to the Company by or on behalf of Parent, Merger Sub or the Parent Manager.

Section 3.20 Opinion of Company Financial Advisor . The Company Board has received the opinion of Morgan Stanley & Co. LLC (the “ Company Financial Advisor ”), to the effect that, as of the date of such opinion and based on and subject to the limitations, qualifications and assumptions set forth therein, the consideration to be received in the First Merger pursuant to this Agreement is fair, from a financial point of view, to holders of Company Common Stock (other than Parent, Merger Sub and their respective affiliates). The Company shall make available to Parent, solely for informational purposes, a complete and current copy of such written opinion promptly after receipt thereof by the Company Board. Parent and Merger Sub acknowledge that the opinion of the Company Financial Advisor is for the benefit of the Company Board and neither Parent nor Merger Sub shall be entitled to rely on such opinion for any purpose.

Section 3.21 Insurance . The Company and the Company Subsidiaries have policies of insurance covering the Company, the Company Subsidiaries and any of their respective directors, officers, agents, properties or assets, including policies of property, fire, products liability, directors’ and officers’ liability, and other casualty and liability insurance (“ Company Insurance Policies ”), and in each case in such amounts and with respect to such risks and losses, which the Company believes are adequate for the operation of its business. All such insurance policies are in full effect, no written notice of cancellation has been received by the Company or any Company Subsidiary under such policies, and there is no existing default or event which, with the giving of notice of lapse or time or both, has had or would reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. All premiums payable under the Company Insurance Policies have been paid in all material respects, and the Company and the Company Subsidiaries have otherwise complied in all material respects with the terms and conditions of the Company Insurance Policies. The Company will make available to Parent upon request copies of all material Company Insurance Policies.

Section 3.22 Related Party Transactions . Except as set forth in the Company SEC Documents (and excluding this Agreement and the Transactions), since January 1, 2013 there have been no transactions, agreements, arrangements or understandings between the Company or any Company Subsidiary, on the one hand, and the Company Manager or any officer, director or affiliate (including any officer or director of any affiliate) of the Company, any Company Subsidiary or the Company Manager, on the other hand (each, a “ Related Party Transaction ”).

 

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Section 3.23 Brokers; Expenses . No broker, investment banker, financial advisor or other Person (other than the Company Financial Advisor, whose fees and expenses shall be paid by the Company), is entitled to receive any broker’s, finder’s, financial advisor’s or other similar fee or commission in connection with this Agreement, the Mergers or the other Transactions based upon arrangements made by or on behalf of the Company.

Section 3.24 Takeover Statutes . The Company Board has taken all action necessary to render inapplicable to the First Merger and the other Transactions, the restrictions on business combinations contained in Subtitle 6 of Title 3 of the MGCL and Subtitle 7 of Title 3 of the MGCL. No other “business combination,” “control share acquisition,” “fair price,” “moratorium” or other takeover or anti-takeover statute or similar federal or state Law (collectively, “ Takeover Statutes ”) are applicable to this Agreement, the First Merger or the other Transactions.

Section 3.25 Vote Required . The affirmative vote, at a duly called and held meeting of stockholders, of the holders of at least a majority of the outstanding shares of Company Common Stock entitled to vote upon the First Merger (the “ Company Stockholder Approval ”) is the only vote of the holders of any class or series of shares of stock of the Company necessary under the MGCL or the Company Governing Documents to approve the Mergers or the other Transactions.

Section 3.26 No Other Representations or Warranties . Except for the representations and warranties set forth in this Article III , neither the Company nor any other Person makes any express or implied representation or warranty with respect to the Company or with respect to any other information provided to Parent or Merger Sub in connection with the Transactions.

Section 3.27 Acknowledgement by the Company . The Company acknowledges and agrees that it has conducted its own independent review and analysis of, and, based thereon, has formed an independent judgment concerning, the assets, condition, operations and prospects of Parent, Merger Sub and their respective Subsidiaries. In entering into this Agreement, the Company acknowledges that, other than as expressly set forth in this Agreement, the Parent Disclosure Letter or in any other document or certificate delivered by Parent or Merger Sub in connection herewith or incorporated by reference herein, none of Parent, Merger Sub, any of their respective Subsidiaries nor any of their respective Affiliates, agents or representatives (the “ Parent Parties ”) makes or has made any representation or warranty, either express or implied, including, without limitation, (i) as to the accuracy or completeness of any of the information provided or made available to the Company or its agents or representatives prior to the execution of this Agreement, or (ii) with respect to any projections, forecasts, estimates, plans or budgets of future revenues, expenses or expenditures, future results of operations (or any component thereof), future cash flows (or any component thereof) or future financial condition (or any component thereof) of Parent, Merger Sub or their respective Subsidiaries.

 

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ARTICLE IV

REPRESENTATIONS AND WARRANTIES

OF PARENT AND MERGER SUB

The following representations and warranties are given by Parent and Merger Sub jointly and severally and are qualified in their entirety by reference to the disclosures (i) in the Parent SEC Documents filed or furnished to the SEC as applicable, on or after January 1, 2015, except for the representations and warranties set forth in Section 4.3 , Section 4.5 , Section 4.8(b) and Section 4.15 , and prior to February 22, 2016 (excluding any risk factor disclosures contained in such documents under the heading “Risk Factors” and any disclosure of risks included in any “forward-looking statements” disclaimer or other statements that are cautionary, predictive or forward-looking in nature) and (ii) set forth in the disclosure letter delivered by Parent to the Company immediately prior to the execution of this Agreement (the “ Parent Disclosure Letter ”). Each disclosure set forth in the Parent Disclosure Letter shall qualify or modify the Section to which it corresponds and any other Section to the extent the applicability of the disclosure to such other Section is reasonably apparent on its face from the text of the disclosure made.

Section 4.1 Organization and Qualification .

(a) Parent is a corporation duly organized, validly existing and in good standing under the Laws of Maryland and has the requisite corporate power and authority to conduct its business as now being conducted. Parent is duly qualified or licensed to do business and is in good standing (with respect to jurisdictions which recognize such concept) in each jurisdiction in which the nature of its business or the ownership, leasing or operation of its properties makes such qualification or licensing necessary, except for those jurisdictions where the failure to be so qualified or licensed or to be in good standing would not have or reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect. Parent is in compliance with the terms of the Parent Governing Documents.

(b) Merger Sub is a corporation duly organized, validly existing and in good standing under the laws of the State of Maryland and has the requisite corporate power and authority conduct its business as now being conducted. Merger Sub is duly qualified or licensed to do business, and is in good standing (with respect to jurisdictions which recognize such concept) in each jurisdiction in which the nature of its business or the ownership, leasing or operation of its properties makes such qualification or licensing necessary, except for those jurisdictions where the failure to be so qualified or licensed or to be in good standing would not have or reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect. Merger Sub has delivered to or made available to the Company, prior to the execution of this Agreement, true and complete copies of any amendments to the Merger Sub Governing Documents not filed as of the date of this Agreement with the SEC. Merger Sub is in compliance with the terms of the Merger Sub Governing Documents, except as has not had and would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect.

(c) Section 4.1(c)  of the Parent Disclosure Letter sets forth a true and complete list of the Subsidiaries of Parent (each a “ Parent Subsidiary ”), together with the jurisdiction of organization or incorporation, as the case may be, of each Parent Subsidiary, and

 

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the type and percentage of interest held directly or indirectly, by the Parent in each Parent Subsidiary. Each Parent Subsidiary is in compliance in all material respects with the terms of its constituent organizational or governing documents.

(d) Each Parent Subsidiary is duly organized, validly existing and in good standing (to the extent applicable) under the Laws of the jurisdiction of its incorporation or organization, as the case may be, and has the requisite organizational power and authority to conduct its business as now being conducted, except for such failures as would not have or reasonably be expected to have a Parent Material Adverse Effect. Each Parent Subsidiary is duly qualified or licensed to do business and is in good standing (with respect to jurisdictions which recognize such concept) in each jurisdiction in which the nature of its business or the ownership, leasing or operation of its properties makes such qualification or licensing necessary, except for those jurisdictions where the failure to be so qualified or licensed or to be in good standing would not have or reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect.

(e) Neither Parent nor any Parent Subsidiary directly or indirectly owns any interest or investment (whether equity or debt) in any Person (other than in the Parent Subsidiaries and investments in short-term securities).

(f) Parent has made available to the Company complete and correct copies of the Parent Governing Documents.

Section 4.2 Capitalization .

(a) As of the date hereof, the authorized stock of Parent consists of (i) 450,000,000 shares of Parent Common Stock, (ii) 50,000,000 shares of preferred stock, par value $0.01 per share (the “ Parent Preferred Stock ”), of which (x) 3,450,000 shares are designated as 8.625% Series A Cumulative Redeemable Perpetual Preferred Stock (the “ Parent Series A Preferred Stock ”), and (y) 8,000,000 shares are designated as 8.00% Series B Cumulative Redeemable Perpetual Preferred Stock (the “ Parent Series B Preferred Stock ”). As of February 22, 2016, (A) 67,385,255 shares of Parent Common Stock were issued and outstanding, (B) 3,450,000 shares of Parent Series A Preferred Stock were issued and outstanding; (C) 8,000,000 shares of Parent Series B Preferred Stock were issued and outstanding and no other shares of Parent Preferred Stock were issued or outstanding, (D) 14,247,763 shares of Parent Common Stock were reserved for issuance in connection with potential future conversions of the Parent Convertible Notes, (E) 3,109,535 shares of Parent Common Stock were reserved for issuance in connection with future grants of awards under any Parent Equity Plan, and (F) 924,650 shares of Parent Common Stock were reserved for issuance with respect to outstanding grants made under any Parent Equity Plan (the “ Parent Equity Awards ”). All of the outstanding shares of Parent stock are duly authorized, validly issued, fully paid and non-assessable, and all shares of Parent Common Stock to be issued in connection with the First Merger and shares of Parent Series C Preferred Stock to be issued in connection with the Second Merger, when so issued in accordance with the terms of this Agreement, will be duly authorized, validly issued, fully paid and non-assessable, and have been issued in compliance with all applicable securities Laws, the MGCL and the Parent Governing Documents. There are no bonds, debentures, notes or other Indebtedness having general voting rights (or convertible into securities having such rights)

 

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(“ Parent Voting Debt ”) of Parent or any Parent Subsidiary issued and outstanding. Except for the Parent Equity Awards, there are no options, warrants, calls, pre-emptive rights, subscriptions or other rights, agreements, arrangements or commitments of any kind, including any “poison pill” or similar stockholder rights plan, relating to the issued or unissued stock of Parent, obligating Parent or any Parent Subsidiary to issue, transfer or sell or cause to be issued, transferred or sold any shares of stock or Parent Voting Debt of, or other equity interest in, Parent or any Parent Subsidiary or securities convertible into or exchangeable for such shares or equity interests, or obligating Parent or any Parent Subsidiary to grant, extend or enter into any such option, warrant, call, subscription or other right, agreement, arrangement or commitment (collectively, “ Parent Equity Interests ”). Except as set forth in the Parent Governing Documents, there are no outstanding contractual obligations of Parent or any Parent Subsidiary to repurchase, redeem or otherwise acquire any shares of Parent Common Stock or any stock of, or other Parent Equity Interests in, Parent or any Parent Subsidiary, or to provide funds to make any investment (in the form of a loan, capital contribution or otherwise) in Parent or any Parent Subsidiary.

(b) There are no voting trusts or other agreements to which Parent or any Parent Subsidiary is a party with respect to the voting of the Parent Common Stock or any stock of, or other Parent Equity Interest in, Parent or any Parent Subsidiary. Neither Parent nor any Parent Subsidiary has granted any preemptive rights, anti-dilutive rights or rights of first refusal or similar rights with respect to any of its stock or other Parent Equity Interests except as set forth in the governance documents of the Parent Subsidiaries.

(c) Parent owns beneficially and of record all of the outstanding stock of Merger Sub. Merger Sub was formed solely for the purpose of engaging in the Transactions, has engaged in no other business activities and has conducted its operations only as contemplated hereby.

(d) Parent or another Parent Subsidiary owns, directly or indirectly through ownership of another wholly-owned Parent Subsidiary, all of the issued and outstanding shares of stock or other Parent Equity Interests of each of the wholly-owned Parent Subsidiaries and its outstanding shares of stock or other Parent Equity Interests of each of the other Parent Subsidiaries, free and clear of any Liens (other than transfer and other restrictions under the governance documents of the Parent Subsidiaries and/or applicable federal and state securities Laws and other than, in the case of Parent Subsidiaries that are immaterial to Parent, immaterial Liens), and all of such shares of stock or other Parent Equity Interests have been duly authorized and validly issued and are fully paid, nonassessable, and have been issued in compliance with all applicable securities Laws. Except as set forth in the governance documents of the Parent Subsidiaries, there are no outstanding obligations to which Parent or any Parent Subsidiary is a party (i) restricting the transfer of or (ii) limiting the exercise of voting rights with respect to any Parent Equity Interests in any Parent Subsidiary.

(e) All dividends or distributions on the shares of Parent Common Stock and any material dividends or other distributions on any securities of any Parent Subsidiary which have been authorized or declared prior to the date hereof have been paid in full (except to the extent such dividends have been publicly announced and are not yet due and payable).

 

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Section 4.3 Authorization; Validity of Agreement; Parent Action . Each of Parent and Merger Sub has all necessary corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the Transactions, including the Mergers. The execution, delivery and performance by Parent and Merger Sub of this Agreement, and the consummation by each of them of the Mergers and the other Transactions, have been duly and validly authorized by the Parent Board, the board of directors of Merger Sub and the sole stockholder of Merger Sub and no other corporate action on the part of Parent or Merger Sub, or vote, consent or approval of Parent’s stockholders, pursuant to the MGCL or otherwise, is necessary to authorize the execution and delivery by Parent and Merger Sub of this Agreement, and the consummation by each of them of the Mergers and the other Transactions, subject, in the case of the Mergers, to the filing of the Articles of Merger with, and acceptance for record by, the SDAT. This Agreement has been duly and validly executed and delivered by Parent and Merger Sub and, assuming due and valid authorization, execution and delivery hereof by the Company, is a valid and binding obligation of Parent and Merger Sub enforceable against each of them in accordance with its terms, except that the enforcement hereof may be limited by (a) bankruptcy, insolvency, reorganization, moratorium or other similar Laws, now or hereafter in effect, relating to creditors’ rights generally and (b) general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at Law).

Section 4.4 Board Approvals . On or prior to the date hereof, (a) the Parent Board has at a duly held meeting, by unanimous vote, duly and validly authorized the execution and delivery of this Agreement and declared advisable the Mergers and the other Transactions and (b) the board of directors of Merger Sub has at a duly held meeting, by unanimous vote, duly and validly authorized the execution and delivery of this Agreement and declared advisable the First Merger.

Section 4.5 Consents and Approvals; No Violations . None of the execution, delivery or performance of this Agreement by Parent and Merger Sub, the consummation by Parent and Merger Sub of the Mergers or any other Transaction or compliance by Parent and Merger Sub with any of the provisions of this Agreement will (a) violate, conflict with or result in any breach of any provision of the Parent Governing Documents, the Merger Sub Governing Documents or the comparable organizational or governing documents of any Parent Subsidiary, (b) require any filing by Parent, Merger Sub or any Parent Subsidiary with, or the obtaining of any permit, authorization, consent or approval of, any Governmental Entity (except for (i) compliance with any applicable requirements of the Exchange Act, including with respect to the registration of Stock Consideration, (ii) any filings as may be required under the MGCL in connection with the Mergers and the other Transactions, (iii) such filings as may be required under the rules and regulations of the NYSE in connection with this Agreement and the Mergers, or (iv) such filings as may be required in connection with state and local transfer Taxes), (c) accelerate the performance required by, result in any termination, cancellation or modification of, or loss of benefit under, violation or breach of, or constitute (with or without notice or lapse of time or both) a default (or give rise to any right, including, but not limited to, any right of termination, amendment, cancellation or acceleration) under, any of the terms, conditions or provisions of any Contract to which Parent or any Parent Subsidiary is a party, (d) result in the creation of any Lien or other encumbrance (other than a Parent Permitted Lien) upon any of the respective properties or assets of Parent, or (e) violate any order, writ, injunction, decree or Law applicable to Parent or any of its properties or assets; except in each of clauses (c) or (d), as would not have or reasonably be expected to have individually or in the aggregate, a Parent Material Adverse Effect.

 

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Section 4.6 Parent SEC Documents and Parent Financial Statements .

(a) Parent has filed or furnished (as applicable) with the SEC on a timely basis all forms, reports, schedules, statements and other documents (including exhibits and all other information incorporated therein) required by it to be filed or furnished (as applicable) since and including January 1, 2013 under the Exchange Act or the Securities Act (together with all certifications required pursuant to the Sarbanes-Oxley Act) (such documents and any other documents filed by Parent with the SEC, collectively, the “ Parent SEC Documents ”). As of their respective filing dates the Parent SEC Documents (a) did not (or with respect to Parent SEC Documents filed after the date hereof, will not) contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading and (b) complied (or with respect to Parent SEC Documents filed after the date hereof, will comply) in all material respects with the applicable requirements of the Exchange Act or the Securities Act, as the case may be, the Sarbanes-Oxley Act and the applicable rules and regulations of the SEC thereunder. All of the consolidated audited financial statements and unaudited interim financial statements of Parent included in the Parent SEC Documents or incorporated therein by reference, including the related notes and schedules (collectively, the “ Parent Financial Statements ”), (i) complied or will comply, as the case may be, as to form in all material respects with the applicable accounting requirements and the published rules and regulations of the SEC with respect thereto; (ii) have been or will be, as the case may be, prepared from, are in accordance with, and accurately reflect the books and records of Parent and the Parent Subsidiaries in all material respects, (iii) have been or will be, as the case may be, prepared in accordance with GAAP applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto or, in the case of interim financial statements, for normal and recurring year-end adjustments and as may be permitted by the SEC on Form 10-Q, Form 8-K or any successor or like form under the Exchange Act); and (iv) fairly present, in all material respects, the financial position and the results of operations and cash flows of Parent and the consolidated Parent Subsidiaries as of the times and for the periods referred to therein. No financial statements of any Person are required by GAAP to be included in the consolidated financial statements of Parent. Parent does not have any outstanding and unresolved comments from the SEC with respect to the Parent SEC Documents. To the knowledge of Parent, as of the date hereof, none of the Parent SEC Documents is the subject of ongoing SEC review or outstanding SEC comments and there are no inquiries or investigations by the SEC or any internal investigations pending or threatened, in each case regarding any accounting practices of Parent.

(b) Parent has made available to the Company complete and correct copies of all written correspondence between the SEC on one hand, and Parent, on the other hand, since January 1, 2013, other than as publicly filed as correspondence in EDGAR.

 

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Section 4.7 Internal Controls; Sarbanes-Oxley Act .

(a) Since January 1, 2013, Parent has designed and maintained a system of internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) sufficient to provide reasonable assurances regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP, and includes those policies and procedures that: (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of Parent and its consolidated Subsidiaries; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and that receipts and expenditures are being made only in accordance with authorizations of management and directors of Parent; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the assets that could have a material effect on the financial statements. Parent’s management has completed an assessment of the effectiveness of Parent’s system of internal controls over financial reporting in compliance with the requirements of Section 404 of the Sarbanes-Oxley Act for the fiscal year ended December 31, 2015, and, except as set forth in Parent SEC Documents filed prior to the date of this Agreement, such assessment concluded that such controls were effective and Parent’s independent registered accountant has issued (and not subsequently withdrawn or qualified) an attestation report concluding that Parent maintained effective internal control over financial reporting as of December 31, 2015. Since January 1, 2013, Parent (i) has designed and maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) to ensure that material information required to be disclosed by Parent in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to Parent’s management as appropriate to allow timely decisions regarding required disclosure and (ii) has not had (A) any significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting that are reasonably likely to adversely affect in any material respect the Parent’s ability to record, process, summarize and report financial information and (B) any fraud, whether or not material, that involves management or other employees who have a significant role in Parent’s internal controls over financial reporting.

(b) Neither Parent nor any of its Subsidiaries has entered into or is subject to (i) any “off balance sheet arrangement” (as defined in Item 303(a)(4)(ii) of Regulation S-K promulgated under the Securities Act) or (ii) any commitment to become party to any joint venture, off balance sheet partnership or any similar Contract or arrangement relating to any transaction or relationship between or among Parent or any of its Subsidiaries, on the one hand, and any unconsolidated Affiliate, including any structured finance, special purpose or limited purpose entity or Person, on the other hand, in each case where the results, purpose or effect of such commitment or arrangement is to avoid disclosure of any material transaction involving, or material liabilities of, Parent or any of its Subsidiaries in Parent’s or such Subsidiaries’ published financial statements or other Parent SEC Documents.

Section 4.8 Absence of Certain Changes .

(a) Except as contemplated by this Agreement, since January 1, 2015, Parent and each Parent Subsidiary has conducted, in all material respects, its business in the ordinary course consistent with past practice.

(b) Since January 1, 2015, there has not been any Parent Material Adverse Effect or any Events that have had or would reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect.

 

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Section 4.9 No Undisclosed Liabilities . Except (a) as reflected or adequately reserved against on the balance sheet of Parent, dated September 30, 2015, (b) for liabilities and obligations incurred since September 30, 2015 in the ordinary course of business and in a manner consistent with past practice, subsequent to September 30, 2015, and (c) for liabilities and obligations contemplated by or under this Agreement or in connection with the Transactions, neither Parent nor any Parent Subsidiary has incurred any liabilities or obligations, contingent or otherwise, that would be required by GAAP to be reflected on, or disclosed in the notes to, the consolidated financial statements of Parent and its Subsidiaries, other than those liabilities that have not had and would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect.

Section 4.10 Litigation . There is no Legal Proceeding pending (in which service of process has been received by Parent) against (or to Parent’s knowledge, threatened against or naming as a party thereto), Parent, a Parent Subsidiary, any of their respective properties or assets, or any executive officer or director of Parent (in their capacity as such) except as would not have or reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect. There is no material investigation of a Governmental Entity pending (in which notice has been received by Parent) or, to the knowledge of Parent, threatened against the Parent or any Parent Subsidiary, any of their respective properties or assets, or any executive officer or director of Parent (in their capacity as such), that, if adversely determined, would have or reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect. Neither Parent nor any Parent Subsidiary is subject to any outstanding Order which has had or would reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect.

Section 4.11 Parent Employee Benefit Plans; ERISA .

(a) Neither Parent nor any Parent Subsidiaries (i) currently employs or has ever employed any individual and (ii) has, or has ever had, any liabilities with respect to Benefit Plans, other than liabilities relating to the Parent Equity Plan.

(b) No material liability, claim, action, audit, investigation, governmental proceeding or litigation is pending or, to the knowledge of Parent, threatened with respect to any individual who is currently providing or has ever provided services to Parent. Full payment has been made, or otherwise properly accrued on the books and records of Parent and the Parent Subsidiaries, of all material amounts that Parent and the Parent Subsidiaries are required under the terms of any arrangement with respect to Parent Service Providers.

Section 4.12 Taxes .

(a) Parent and each Parent Subsidiary has timely filed with the appropriate Governmental Entity all material Tax Returns required to be filed, taking into account any extensions of time within which to file such Tax Returns, and all such Tax Returns were true,

 

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complete and correct in all material respects. Parent and each Parent Subsidiary has duly paid (or there has been paid on their behalf), or made adequate provisions for, all material Taxes required to be paid by them.

(b) Parent (i) for all taxable years commencing with Parent’s taxable year ended December 31, 2009 and through December 31, 2015 has been subject to taxation as a REIT and has satisfied all requirements to qualify as a REIT for such years; (ii) has operated since January 1, 2016 until the date hereof in a manner consistent with the requirements for qualification and taxation as a REIT; (iii) intends to continue to operate in such a manner as to qualify as a REIT; and (iv) has not to its knowledge taken or omitted to take any action that could reasonably be expected to result in a challenge by the IRS or any other Governmental Entity to its qualification as a REIT, and to the knowledge of Parent, no such challenge is pending or threatened.

(c) There are no current audits, examinations or other proceedings of a Governmental Entity pending with regard to any U.S. federal or other material Taxes of Parent or the Parent Subsidiaries, and neither Parent nor any Parent Subsidiary has received a written notice or announcement of any such audits, examinations or proceedings.

(d) Merger Sub has been treated as a disregarded entity for U.S. federal income tax purposes at all times since its formation.

(e) Neither Parent nor any Parent Subsidiary directly or indirectly holds any asset the disposition of which would be subject to (or to rules similar to) Section 1374 of the Code.

(f) Parent and the Parent Subsidiaries have complied, in all material respects, with all applicable Laws, rules and regulations relating to the payment and withholding of Taxes (including withholding of Taxes pursuant to Sections 1441, 1442, 1445, 1446, 1471-1474 and 3402 of the Code or similar provisions under any state and foreign Laws) and have duly and timely withheld and, in each case, have paid over to the appropriate Governmental Entities all material amounts required to be so withheld and paid over on or prior to the due date thereof under all applicable Laws.

(g) There are no Tax Liens upon any property or assets of Parent or any Parent Subsidiary except for Parent Permitted Liens.

(h) There are no Tax allocation or sharing agreements or similar arrangements with respect to or involving Parent or any Parent Subsidiary, and after the Closing Date, neither Parent nor any Parent Subsidiary shall be bound by any such Tax allocation agreements or similar arrangements or have any liability thereunder for amounts due in respect of periods prior to the Closing Date, except as otherwise provided herein and except, in each case, for customary indemnification provisions contained in credit or other commercial agreements the primary purposes of which do not relate to Taxes.

(i) Neither Parent nor any Parent Subsidiary is or has been a party to any “listed transaction” within the meaning of Treasury Regulations Section 1.6011-4(b)(2).

 

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(j) Neither Parent nor any Parent Subsidiary has distributed stock of another Person, or has had its stock distributed by another Person, in a transaction that was purported or intended to be governed in whole or in part by Section 355 of the Code or Section 361 of the Code.

(k) Neither Parent nor any Parent Subsidiary has waived any statute of limitations in respect of any U.S. federal or other material Taxes or agreed to any extension of time with respect to a U.S. federal or other material Tax assessment or deficiency.

(l) Neither Parent nor any Parent Subsidiary will be required to include any material item of income in, or exclude any material item of deduction from, taxable income for any taxable period (or portion thereof) beginning after the Closing Date as a result of any (A) change in method of accounting of Parent or any Parent Subsidiary for a taxable period ending on or prior to the Closing Date, (B) installment sale or open transaction disposition made by Parent or any Parent Subsidiary on or prior to the Closing Date, (C) prepaid amount received by Parent or any Parent Subsidiary on or prior to the Closing Date, or (D) election made of Parent or any Parent Subsidiary prior to the Closing under Section 108(i) of the Code.

(m) Section 4.12(m)  of the Parent Disclosure Letter sets forth a true and complete list of each Parent Subsidiary and each other entity in which Parent directly, indirectly or constructively owns an equity interest of ten percent (10%) or greater (by vote or value) and their respective classification for U.S. federal income tax purposes, jurisdiction of incorporation or organization, as the case may be, and the type of and percentage of interest held, directly or indirectly, by Parent in each Parent Subsidiary, including in the case of any entity classified as a corporation for U.S. federal income tax purposes, whether such entity has made an election to be treated as a REIT or a Taxable REIT Subsidiary.

(n) Neither Parent nor any Parent Subsidiary (i) has been a member of an affiliated group filing a consolidated U.S. federal income Tax Return or (ii) has any liability for the Taxes of any Person under Treasury Regulations Section 1.1502-6 (or any similar provision of state, local, or foreign law), as a transferee or successor, by contract, or otherwise.

(o) None of Parent, Merger Sub or any Parent Subsidiary has entered into any “closing agreement” as described in Section 7121 of the Code (or any corresponding or similar provision of state, local or foreign income Tax Law).

(p) Neither Parent nor any Parent Subsidiary has requested, has received or is subject to any written ruling of a Governmental Entity or has entered into any written agreement with a Governmental Entity with respect to any Taxes.

(q) Neither Parent nor any Parent Subsidiary have received a written claim by any Governmental Entity in a jurisdiction where Parent and the Parent Subsidiaries do not file Tax Returns that they are or may be subject to income taxation by the jurisdiction.

(r) No deficiency for any U.S. federal or other material Tax has been asserted or assessed by a Governmental Entity in writing against Parent or any Parent Subsidiary that has not been satisfied by payment, settled or withdrawn.

 

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(s) Since January 1, 2015, neither Parent nor any of its Subsidiaries have rescinded or revoked any Tax election, settled or compromised any Tax liability or amended any Tax Return filed before the date hereof. No material Tax elections have been made following the filing of the Company’s 2014 U.S. federal income tax return.

(t) Neither Parent nor any Parent Subsidiary (i) owns any “residual interests” (within the meaning of Section 860G(a)(2) of the Code) in a “REMIC” (within the meaning of Section 860D(a) of the Code) or (ii) has allocated “excess inclusion income” to their stockholders.

(u) To the knowledge of Parent, neither Parent nor any Parent Subsidiary has engaged at any time in any “prohibited transactions” within the meaning of Section 856(b)(6) of the Code.

(v) This Section 4.12 contains the sole representations and warranties of Parent and the Parent Subsidiaries with respect to Tax matters.

Section 4.13 Investment Company Act . Neither Parent nor any Parent Subsidiary is, or on the Closing Date will be, required to be registered as an investment company under the Investment Company Act.

Section 4.14 Compliance with Laws; Permits .

(a) Each of Parent and the Parent Subsidiaries has, since January 1, 2014, been in compliance with all Laws which affect the business, properties or assets of Parent, except for such non-compliance that would not have or reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect. Since January 1, 2014, no notice, charge or assertion has been received by Parent or any Parent Subsidiary or, to Parent’s knowledge, threatened against Parent or any Parent Subsidiary alleging any non-compliance with any Laws affecting the business, properties or assets of Parent, except for any such alleged non-compliance that has not had and would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect. Notwithstanding anything to the contrary in this Section 4.14 , the provisions of this Section 4.14  shall not apply to matters discussed in Section 4.11 and Section 4.12 .

(b) Parent and the Parent Subsidiaries are in possession of all authorizations, licenses, permits, certificates, approvals and clearances of any Governmental Entity necessary for Parent and the Parent Subsidiaries to carry on its business in the manner described in the Parent SEC Documents filed on or after January 1, 2014 and prior to the date hereof and as is being conducted as of the date of this Agreement (the “ Parent Permits ”), and all such Parent Permits are valid, and in full force and effect, except where the failure to possess and maintain such Parent Permits in full force and effect have not had and would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect. All applications required to have been filed for the renewal of the Parent Permits have been duly filed on a timely basis with the appropriate Governmental Entity, and all other filings required to have been made with respect to such Parent Permits have been duly made on a timely basis with the appropriate Governmental Entity, except in each case for failures to file which, individually or in the

 

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aggregate, would not have or reasonably be expected to have a Parent Material Adverse Effect. Neither Parent nor any Parent Subsidiary is in violation or breach of, or default under, any Parent Permit, nor has Parent or any Parent Subsidiary received any claim or notice indicating that Parent or any Parent Subsidiary is currently not in compliance with the terms of any Parent Permits, except where the failure to be in compliance with the terms of any Parent Permits, individually or in the aggregate, would not have or reasonably be expected to have a Parent Material Adverse Effect.

Section 4.15 Information in the Proxy Statement . None of the information supplied or to be supplied in writing by or on behalf of Parent, any Parent Subsidiary or the Parent Manager for inclusion or incorporation by reference in (i) the Form S-4 will, at the time such document is filed with the SEC, at any time such document is amended or supplemented or at the time such document is declared effective by the SEC, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, or (ii) the Proxy Statement will, at the date it is first mailed to the stockholders of the Company, at the time of the Stockholders Meeting, at the time the Form S-4 is declared effective by the SEC or at the First Merger Effective Time, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading. All documents that Parent is responsible for filing with the SEC in connection with the Transactions, to the extent relating to Parent, any Parent Subsidiary or the Parent Manager or other information supplied by or on behalf of Parent, any Parent Subsidiary or the Parent Manager for inclusion therein, will comply as to form, in all material respects, with the provisions of the Securities Act or Exchange Act, as applicable, and the rules and regulations of the SEC thereunder and each such document required to be filed with any Governmental Entity (other than the SEC) will comply in all material respects with the provisions of any applicable Law as to the information required to be contained therein. The representations and warranties contained in this Section 4.16 will not apply to statements or omissions included in the Form S-4 or the Proxy Statement to the extent based upon information supplied to Parent by or on behalf of the Company or the Company Manager.

Section 4.16 Opinion of Parent Financial Advisor . The Parent Board Special Committee has received the opinion of Houlihan Lokey Capital, Inc. (the “ Parent Financial Advisor ”) to the effect that, as of the date of such opinion and subject to the assumptions, limitations, qualifications and other matters set forth in such opinion, the consideration to be paid by Parent in the First Merger is fair from a financial point of view to Parent. The Company acknowledges that the opinion of the Parent Financial Advisor is for the benefit of the Parent Board Special Committee and the Company shall not be entitled to rely on such opinion for any purpose.

Section 4.17 Brokers; Expenses . No broker, investment banker, financial advisor or other Person (other than the Parent Financial Advisors, whose fees and expenses shall be paid by Parent), is entitled to receive any broker’s, finder’s, financial advisor’s or other similar fee or commission in connection with this Agreement or the Mergers based upon arrangements made by or on behalf of Parent.

 

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Section 4.18 Sufficiency of Funds . Parent and Merger Sub have or, at Closing, shall have, sufficient funds to consummate the Transactions and to satisfy their respective obligations under this Agreement.

Section 4.19 Ownership of Company Common Stock . Except as set forth in Section 4.19 of the Parent Disclosure Letter, neither Parent nor any Parent Subsidiary nor any of their respective affiliates or associates (as defined in Rule 12b-2 of the Exchange Act) beneficially owns, directly or indirectly (other than investments made in the ordinary course of business in their investment portfolios that, in the aggregate, do not exceed 5% of the Company Common Stock), or has the right to acquire (whether such right is exercisable immediately or only after the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or the right to vote pursuant to any agreement, arrangement or understanding, any shares of Company Common Stock or other securities convertible into, exchangeable for or exercisable for shares of Company Common Stock or any securities of any Company Subsidiary and neither Parent nor any Parent Subsidiary has any rights to acquire any shares of Company Common Stock except pursuant to this Agreement. Neither Parent nor any of the Parent Subsidiaries is an affiliate or associate (as defined in Rule 12b-2 of the Exchange Act) of the Company. Neither Parent nor any of the Parent Subsidiaries has at any time been an assignee or has otherwise succeeded to the beneficial ownership of any shares of Company Common Stock during the last two (2) years.

Section 4.20 Related Party Transactions . Except as set forth in the Parent SEC Documents (and excluding this Agreement and the transactions contemplated hereby), since January 1, 2013 there have been no transactions, agreements, arrangements or understandings between the Parent or any Parent Subsidiary, on the one hand, and the Parent Manager or any officer, director or affiliate (including any officer or director of any affiliate) of the Parent, any Parent Subsidiary or the Parent Manager, on the other hand.

Section 4.21 Takeover Statutes . The Parent Board has taken all action necessary to render inapplicable to the Mergers and the other Transactions, the restrictions on business combinations contained in Subtitle 6 of Title 3 of the MGCL, Subtitle 7 of Title 3 of the MGCL and the limitations on transfer and ownership set forth in the Parent’s charter. No other Takeover Statutes are applicable to this Agreement, the Mergers or the other Transactions.

Section 4.22 Vote Required . No vote of the holders of Parent Common Stock or Parent Preferred Stock is required to approve the Mergers or the other Transactions.

Section 4.23 No Other Representations or Warranties . Except for the representations and warranties set forth in this Article IV , neither Parent, Merger Sub nor any other Person makes any express or implied representation or warranty with respect to Parent or Merger Sub or with respect to any other information provided to the Company in connection with the Transactions.

Section 4.24 Acknowledgement by Parent and Merger Sub . Each of Parent and Merger Sub acknowledges and agrees that it has conducted its own independent review and analysis of, and, based thereon, has formed an independent judgment concerning, the assets, condition, operations and prospects of the Company and its Subsidiaries. In entering into this Agreement,

 

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each of Parent and Merger Sub acknowledges that, other than as expressly set forth in this Agreement, the Company Disclosure Letter or in any other document or certificate delivered by the Company in connection herewith or incorporated by reference herein, none of the Company, any Subsidiary of the Company, nor any of their respective Affiliates, agents or representatives (the “ Company Parties ”) makes or has made any representation or warranty, either express or implied, including, without limitation, (i) as to the accuracy or completeness of any of the information provided or made available to Parent, Merger Sub or their respective agents or representatives prior to the execution of this Agreement or (ii) with respect to any projections, forecasts, estimates, plans or budgets of future revenues, expenses or expenditures, future results of operations (or any component thereof), future cash flows (or any component thereof) or future financial condition (or any component thereof) of the Company or its Subsidiaries.

ARTICLE V

COVENANTS RELATING TO CONDUCT OF

BUSINESS PENDING THE FIRST MERGER

Section 5.1 Conduct of Business by the Company   Pending the Closing . The Company agrees that between the date of this Agreement and the First Merger Effective Time or the date, if any, on which this Agreement is terminated in accordance with Article VIII , except (a) as set forth in Section 5.1 of the Company Disclosure Letter, (b) as expressly required or permitted pursuant to this Agreement, (c) to the extent otherwise required by Law or (d) as consented to in writing by Parent (which consent shall not be unreasonably withheld, conditioned or delayed), the Company shall and shall cause the Company Subsidiaries to (x) conduct its business in all material respects in the ordinary course of business and in a manner consistent with past practice, and (y) use its commercially reasonable efforts to (A) preserve intact in all material respects its current business organization, goodwill, ongoing businesses and significant relationships with third parties, (B) provided it does not require additional compensation, keep available the services of its present officers, (C) maintain all Company Insurance Policies and (D) maintain the qualification of the Company as a REIT. Without limiting the generality of the foregoing, the Company agrees that between the date of this Agreement and the First Merger Effective Time or the date, if any, on which this Agreement is terminated in accordance with Article VIII , except (a) as set forth in Section 5.1 of the Company Disclosure Letter, (b) as expressly required or permitted pursuant to this Agreement, (c) to the extent otherwise required by Law or (d) as consented to in writing by Parent (which consent shall not be unreasonably withheld, conditioned or delayed) the Company shall not, and shall not permit any Company Subsidiary to:

(a) amend or propose to amend (A) the Company Charter or Company Bylaws, or (B) such equivalent organizational or governing documents of any Company Subsidiary;

(b) issue, sell, pledge, dispose, encumber or grant any Company Equity Interests, except with respect to any issuance of Company Common Stock upon the settlement of Company Restricted Shares which have vested in accordance with the vesting schedule set forth on Section 3.2(b) of the Company Disclosure Letter;

(c) split, combine, subdivide or reclassify any shares of stock of the Company or any Company Subsidiary or any other Company Equity Interests or issue or authorize the issuance of any other securities in respect of, or in substitution for, outstanding shares of stock of the Company;

 

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(d) declare, set aside or pay any dividend on or make any other distributions (whether in cash, stock, property or otherwise) with respect to shares of stock of the Company or any Company Subsidiary or other equity securities or ownership interests in the Company or any Company Subsidiary, except for (A) the declaration and payment by the Company of regular quarterly dividends payable in respect of the Company Preferred Stock in accordance with past practice, (B) the declaration and payment of dividends or other distributions to the Company by any directly or indirectly wholly owned Company Subsidiary, (C) the declaration, prior to the Pricing Date, and payment by the Company of regular quarterly dividends payable in respect of the Company Common Stock in accordance with past practice, provided that any such dividend declared before the Pricing Date that is not paid prior to the Pricing Date shall be taken into account in calculating Company Book Value and (D) any dividend to the extent declared and paid in accordance with Section 6.15 ;

(e) redeem, purchase or otherwise acquire, or offer to redeem, purchase or otherwise acquire, any Company Equity Interests, except (i) from holders of Company Restricted Shares in amounts necessary to pay any applicable Taxes payable by such holders upon the lapse of restrictions on the Company Restricted Shares or (ii) as required by the Company Governing Documents;

(f) (i) acquire or agree to acquire (including by merging or consolidating with, by purchasing any assets or equity securities of, or by any other manner) any corporation, partnership, limited liability company, other business organization or other Person, including any division or material amount of assets thereof, or (ii) acquire or agree to acquire any assets or properties other than Company Investments in accordance with Section 6.17 and Section 6.18 ;

(g) sell, pledge, lease, assign, transfer, exclusively license, dispose of or encumber, any property or assets other than Company Investments in accordance with Section 6.17 and Section 6.18 ;

(h) incur, create, assume, refinance, replace or prepay any Indebtedness for borrowed money or issue or amend the terms of any debt securities (other than refinancing of Indebtedness in a manner contemplated by Section 6.17 and Section 6.18 ) or assume, guarantee or endorse, or otherwise become responsible (whether directly, contingently or otherwise) for the Indebtedness of any other Person (other than a wholly owned Company Subsidiary);

(i) other than ordinary course advances in connection with expense reimbursement to Company’s personnel (including to personnel of the Company Manager providing services to the Company), make any loans, advances or capital contributions to, or investments in, any other Person (including to any of its officers, directors, affiliates, agents or consultants), make any change in its existing borrowing or lending arrangements for or on behalf of such Persons, or enter into any “keep well” or similar agreement to maintain the financial condition of another entity, other than by the Company or a wholly owned Company Subsidiary to the Company or a wholly owned Company Subsidiary, in each case other than Company Investments in accordance with Section 6.17 and Section 6.18 ;

 

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(j) enter into, renew, modify, amend or terminate (or consent to the termination of the Company’s or any Company Subsidiary’s rights under), or waive, release, compromise or assign any rights or claims under, any Company Material Contract (or any contract that, if existing as of the date of this Agreement, would be a Company Material Contract), other than (A) any termination or renewal in accordance with the terms of any existing Company Material Contract that occurs automatically without any action by the Company or any Company Subsidiary, (B) subject to Section 6.2(c) , the entry into any modification or amendment of, or waiver or consent under, any mortgage or related agreement to which the Company or any Company Subsidiary is a party as required or necessitated by this Agreement or the Transactions; provided , that any such modification, amendment, waiver or consent does not increase the principal amount thereunder or otherwise materially adversely affect the Company, any Company Subsidiary or Parent or (C) subject to Section 6.2(c) , as may be contemplated by the arrangements established by the Parties under Section 6.17 and Section 6.18, or as reasonably necessary to comply with the express terms of this Agreement;

(k) make, change or revoke, any material Tax election, enter into any material closing agreement with a Tax authority, file any amended Tax Return with respect to any material Tax or change any material method of accounting for Tax purposes or annual Tax accounting period, except in each case (A) if required by Law, (B) in the ordinary course of business or (C) if necessary (x) to preserve the Company’s qualification as a REIT under the Code or (y) to qualify or preserve the status of any Company Subsidiary as a disregarded entity or partnership for U.S. federal income tax purposes or as a “qualified REIT subsidiary” within the meaning of Section 856(i)(2) of the Code (a “ Qualified REIT Subsidiary ”) or a Taxable REIT Subsidiary under the applicable provisions of Section 856 of the Code, as the case may be;

(l) take any action that could reasonably be expected to, or fail to take any action, the failure of which could reasonably be expected to, cause the Company to fail to qualify as a REIT (determined as if the Company’s taxable year ended at the First Merger Effective Time and disregarding the distribution requirements set forth in Section 857(a)(1) of the Code for such taxable year);

(m) make, authorize or incur any capital expenditures or any obligations or liabilities in respect thereof in excess of $500,000 individually, or $1,000,000 in the aggregate;

(n) except (i) as required by the terms of any Benefit Plan or other Contract in effect on the date hereof, (ii) in connection with retention or severance arrangements entered into in connection with the Transactions in accordance with the parameters set forth on Section 5.1(n) of the Company Disclosure Letter or (iii) in order to effectuate the actions contemplated by this Agreement, (A) increase the salary or bonus opportunity of any directors of the Company or any other individual providing services Company, (B) grant any officer or director of the Company any increase in severance or termination pay, (C) establish, adopt or enter into any collective bargaining agreement, (D) hire any officer (with a title of vice president or higher) of the Company or promote or appoint any Person to a position with a title of vice president or higher of the Company, (E) enter into, adopt, amend or terminate any employment, bonus, severance or retirement contract or other compensation or Benefit Plan, (F) accelerate the vesting or payment of any award under any Company Equity Plan or of any other compensation or benefits other than as set for on Section 5.1(n) of the Company Disclosure Letter, (G) grant any awards under

 

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any Company Equity Plan or any bonus, incentive, performance or other compensation plan or arrangement, or (H) grant any bonuses to individuals providing services to the Company, other than pursuant to the terms of the bonus plans set forth in Section 5.1(n) of the Company Disclosure Letter;

(o) change an annual accounting period or change in any material respect any of the accounting methods used by it materially affecting its assets, liabilities or business, except for such changes required by GAAP or applicable Laws;

(p) other than settlement of claims, liabilities or obligations in connection with any stockholder litigation against the Company and/or its officers, directors, employees and Representatives relating to this Agreement, the Mergers and/or the other Transactions in accordance with Section 6.9 , (i) settle or compromise any material claim or Legal Proceeding where the amount paid in settlement or compromise exceeds $500,000 individually or $1,000,000 in the aggregate or (ii) enter into any consent decree, injunction or similar restraint or form of equitable relief that would reasonably be expected to restrict the operations of the business of the Company and its Subsidiaries (or of Parent and its Subsidiaries after the Second Merger Effective Time);

(q) take any action that could, or fail to take any action, the failure of which could reasonably be expect to, result in the Company or any Company Subsidiary being required to be registered as an investment company under the Investment Company Act;

(r) adopt a plan of complete or partial liquidation, dissolution, restructuring, recapitalization or other reorganization of the Company (other than the Mergers);

(s) amend or modify the compensation terms or any other obligations of the Company contained in the engagement letter with the financial advisor referred to in Section 3.23 that would increase the liabilities, including, without limitation, any indemnification obligation of the Company or any Company Subsidiary in a manner materially adverse to the Company, any Company Subsidiary or Parent or engage other financial advisors in connection with the Mergers or the Transactions; or

(t) enter into any Contract with respect to, or agree to take or make any commitment to take, or cause the Company Board to adopt any resolutions approving, any of the actions prohibited by this Section 5.1 .

Notwithstanding anything to the contrary set forth in this Agreement, nothing in this Agreement shall prohibit the Company from taking any action, at any time or from time to time, that in the reasonable judgment of the Company, upon advice of counsel to the Company, is reasonably necessary for the Company to (i) maintain its qualification as a REIT under the Code for any period or portion thereof ending on or prior to the First Merger Effective Time, (ii) avoid incurring U.S. federal, state or local income or excise Taxes under the Code or applicable state or local Law, including making dividend or other distribution payments to stockholders of the Company in accordance with Section 6.15 or (iii) avoid being required to register as an investment company under the Investment Company Act.

 

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Section 5.2 Conduct of Business by Parent Pending the Closing . Parent agrees that between the date of this Agreement and the First Merger Effective Time or the date, if any, on which this Agreement is terminated in accordance with Article VIII , except (a) as set forth in Section 5.2  of the Parent Disclosure Letter, (b) as expressly required or permitted pursuant to this Agreement, (c) to the extent otherwise required by Law or (d) as consented to in writing by the Company (which consent shall not be unreasonably withheld, delayed or conditioned), Parent (x) shall and shall cause the Parent Subsidiaries to, conduct its business in all material respects in the ordinary course of business and in a manner consistent with past practice and (y) shall use its commercially reasonable efforts to (A) preserve intact in all material respects its current business organization, goodwill, ongoing businesses and significant relationships with third parties, and (B) maintain the qualification of Parent as a REIT. Without limiting the generality of the foregoing, Parent agrees that between the date of this Agreement and the First Merger Effective Time or the date, if any, on which this Agreement is terminated in accordance with Article VIII , except (a) as set forth in Section 5.2 of the Parent Disclosure Letter, (b) as expressly required or permitted pursuant to this Agreement, (c) to the extent otherwise required by Law or (d) as consented to in writing by the Company (which consent shall not be unreasonably withheld, conditioned or delayed) Parent shall not, and shall not permit any Parent Subsidiary to:

(a) amend or propose to amend the charter or bylaws of Parent in a manner adverse to the Company;

(b) issue or grant any Parent Equity Interests at a price below the per share value of the Parent’s net assets as of the date of such issuance or grant;

(c) split, combine, subdivide or reclassify any shares of stock of the Parent or any Parent Subsidiary or any other Parent Equity Interests or issue or authorize the issuance of any other securities in respect of, or in substitution for, outstanding shares of stock of Parent;

(d) declare, set aside or pay any dividend on or make any other distributions (whether in cash, stock, property or otherwise) with respect to shares of stock of Parent or any Parent Subsidiary or other equity securities or ownership interests in Parent or any Parent Subsidiary, except for (A) the declaration and payment by Parent of regular quarterly dividends payable in respect of the Parent Preferred Stock in accordance with past practice, (B) the declaration and payment of dividends or other distributions to Parent by any directly or indirectly wholly owned Parent Subsidiary, (C) the declaration and payment by Parent of regular quarterly dividends payable in respect of the Parent Common Stock in accordance with past practice; (D) the declaration and payment by Parent of a dividend in respect of the Parent Common Stock at or prior to Closing in an amount equal to a pro rata portion of its regularly quarterly dividend, based on the number of days elapsed in the quarter in which the Closing Date occurs to but not including the third (3 rd ) Business Day after the date on which the Company Stockholder Approval is obtained; and (E) any dividend which the Parent Board determines is or may be necessary to be authorized and declared to enable Parent to maintain its qualification as a REIT and avoid incurring U.S. federal, state or local income or excise taxes under the Code or applicable state or local law, including payment of dividends under Code Sections 858 or 860, with respect to 2016;

 

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(e) redeem, purchase or otherwise acquire, or offer to redeem, purchase or otherwise acquire, any Parent Equity Interests, except (i) in accordance with Parent’s share repurchase plan as in effect as of the date hereof, (ii) from holders of Parent Equity Awards in amounts necessary for such holders to pay any applicable Taxes payable by such holders upon the lapse of restrictions on the Parent Equity Awards or (iii) as required by the Parent Governing Documents;

(f) make, change or revoke, any material Tax election, enter into any material closing agreement with a Tax authority, file any amended Tax Return with respect to any material Tax or change any material method of accounting for Tax purposes or annual Tax accounting period, except in each case (A) if required by Law, (B) in the ordinary course of business or (C) if necessary (x) to preserve Parent’s qualification as a REIT under the Code or (y) to qualify or preserve the status of any Parent Subsidiary as a disregarded entity or partnership for U.S. federal income tax purposes or as a Qualified REIT Subsidiary or a Taxable REIT Subsidiary under the applicable provisions of Section 856 of the Code, as the case may be;

(g) take any action that could reasonably be expected to, or fail to take any action, the failure of which could reasonably be expected to, cause Parent to fail to qualify as a REIT;

(h) change an annual accounting period or change in any material respect any of the accounting methods used by it materially affecting its assets, liabilities or business, except for such changes required by GAAP or applicable Laws;

(i) take any action that could, or fail to take any action, the failure of which could reasonably be expected to, result in Parent or any Parent Subsidiary being required to be registered as an investment company under the Investment Company Act;

(j) adopt a plan of complete or partial liquidation, dissolution, restructuring, recapitalization or other reorganization of Parent (other than the Mergers); or

(k) enter into any Contract with respect to, or agree to take or make any commitment to take, or cause Parent Board to adopt any resolutions approving, any of the actions prohibited by this Section 5.2 .

Notwithstanding anything to the contrary set forth in this Agreement, nothing in this Agreement shall prohibit Parent from taking any action, at any time or from time to time, that in the reasonable judgment of Parent, upon advice of counsel to Parent, is reasonably necessary for Parent to (i) maintain its qualification as a REIT under the Code for any period or portion thereof ending on or prior to the First Merger Effective Time, (ii) avoid incurring U.S. federal, state or local income or excise Taxes under the Code or applicable state or local Law or (iii) avoid being required to register as an investment company under the Investment Company Act.

Section 5.3 Acquisition Proposals; Go-Shop Period .

(a) Notwithstanding anything to the contrary contained in this Agreement, during the period beginning on the date of this Agreement and continuing until 11:59 p.m. (Eastern time) on April 1, 2016 (the “ Go-Shop Period ”), the Company and its Subsidiaries and

 

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their respective Representatives shall have the right to: (i) initiate, solicit, facilitate and encourage (publicly or otherwise) any inquiry or the making of any proposals or offers that constitute, or may reasonably be expected to lead to, any Acquisition Proposal, including by way of providing access to non-public information to any Person and its Representatives, its affiliates and its prospective equity and debt financing sources, provided that prior to furnishing such information, the Company has entered into an Acceptable Confidentiality Agreement with such Person, and further , provided , that the Company shall promptly make available to Parent any non-public information concerning the Company or its Subsidiaries that the Company provides to any Person given such access if such information was not previously made available to Parent, and (ii) engage or enter into, continue or otherwise participate in any discussions or negotiations with any Persons or groups of Persons and their Representatives, their affiliates and their prospective equity and debt financing sources with respect to any Acquisition Proposals or otherwise cooperate with or assist or participate in, or facilitate any such inquiries, proposals, discussions or negotiations or any effort or attempt to make any Acquisition Proposals.

(b) Except as expressly permitted by this Section 5.3 (including Section 5.3(d) ) and except as may relate to any Excluded Party (for so long as such Person remains an Excluded Party), the Company and its Subsidiaries and their respective officers and directors shall, and the Company shall instruct and use its commercially reasonable efforts to cause, its and its Subsidiaries’ other Representatives (including by notifying them of the existence and terms of this Section 5.3(b) ) to (i) at 12:01 a.m. on April 2, 2016 (the “ No-Shop Period Start Date ”), immediately cease any solicitation activity with respect to an Acquisition Proposal or any discussions or negotiations with any Persons that may be ongoing with respect to an Acquisition Proposal and the Company shall request that each Person (other than an Excluded Party for so long as such Person is an Excluded Party, and except as otherwise permitted pursuant to the terms of an Acceptable Confidentiality Agreement) promptly return to the Company or destroy any non-public information previously furnished or made available to it or any of its Representatives by or on behalf of the Company or its Representatives, and immediately terminate access of any Person (other than an Excluded Party for so long as such Person is an Excluded Party) to any electronic data room maintained by the Company with respect to the transaction contemplated by this Agreement and (ii) from the No-Shop Period Start Date until the earlier of the First Merger Effective Time and the termination of this Agreement in accordance with Article VIII, not, directly or indirectly, (A) initiate, solicit, knowingly facilitate or knowingly encourage (publicly or otherwise) any inquiries regarding, or the making of any proposal or offer that constitutes, or would reasonably be expected to lead to an Acquisition Proposal, (B) furnish any non-public information regarding the Company to any Person, or (C) engage in, enter into, continue or otherwise participate in any discussions or negotiations regarding, or provide any information concerning the Company or its Subsidiaries or afford access to the Company’s or its Subsidiaries’ books, records, management, employees or properties to any Person (other than discussions in the ordinary course of business that are unrelated to an Acquisition Proposal).

(c) As promptly as reasonably practicable, and in any event within three (3) Business Days following the expiration of the Go-Shop Period, the Company will provide Parent with a written list identifying each Excluded Party.

 

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(d) Notwithstanding anything in this Agreement to the contrary, but subject to the last sentence of this Section 5.3(d) , at any time following the No-Shop Period Start Date and prior to the time, but not after, the conditions set forth in Section 7.1(a) have been satisfied, if the Company receives an Acquisition Proposal from any Person or group of Persons which has not resulted from a violation of this Section 5.3 , subject to compliance with this Section 5.3(d) , (i) the Company and its Subsidiaries and their Representatives may contact such Person or group of Persons solely to clarify the terms and conditions thereof, (ii) the Company and its Subsidiaries and their respective Representatives may provide non-public information and data concerning the Company and its Subsidiaries to such Person or group of Persons and their Representatives, their affiliates and their prospective equity and debt financing sources provided that prior to furnishing such information, the Company has entered into an Acceptable Confidentiality Agreement with such Person; provided , that the Company shall promptly (and in any event, within twenty-four (24) hours) make available to Parent any non-public information concerning the Company or its Subsidiaries that the Company made available to any Person given such access if such information was not previously made available to Parent, and (iii) the Company and its Representatives may engage or participate in any discussions or negotiations with such Person or group of Persons if and only to the extent that, the Company Board, or any committee thereof, has determined in good faith (after consultation with its outside legal counsel and a nationally recognized third party financial advisor) that such Acquisition Proposal either constitutes a Superior Proposal or would reasonably be likely to result in a Superior Proposal. The Company shall give written notice to Parent before taking any of the actions described in clauses (ii) and (iii) of the preceding sentence. In no event may the Company or any of its Subsidiaries or Representatives directly or indirectly reimburse or pay, or agree to reimburse or pay, the fees, costs or expenses of, or provide or agree to provide compensation to, any Person or Persons (or any of their Representatives or potential financing sources) who make an Acquisition Proposal. Notwithstanding the occurrence of the No-Shop Period Start Date, the Company and its Subsidiaries and their respective Representatives may continue to engage in the activities described in Section 5.3(a) with any Excluded Party (for so long as such party remains an Excluded Party), including with respect to any amended Acquisition Proposal submitted by such Excluded Party, following the No-Shop Period Start Date, and the restrictions in Section 5.3(b) shall not apply with respect thereto.

(e) No Change in Recommendation or Alternative Acquisition Agreement .

(i) Except as set forth in this Section 5.3(e) , or Section 5.3(f) or 8.3(a) , the Company Board and each committee thereof shall not:

(A) withhold, withdraw, qualify, amend or modify (or publicly propose or resolve to withhold, withdraw, qualify, amend or modify), in any manner adverse to Parent, the Company Board Recommendation or approve, authorize, adopt or recommend or otherwise declare advisable, or propose publicly to approve, authorize, adopt or recommend or otherwise declare advisable, any Acquisition Proposal or fail to include the Company Board Recommendation in the Proxy Statement when filed (each action set forth in this clause (A), a “ Change of Recommendation ”);

 

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(B) take any action to make the provisions of any “fair price”, “moratorium”, “control share acquisition”, “business combination” or other similar anti-takeover statute or regulation inapplicable to any transaction contemplated by an Acquisition Proposal;

(C) except as expressly permitted by Section 8.3(a) , authorize, adopt, approve, recommend or otherwise declare advisable, or propose publicly to approve or recommend, or cause or permit the Company or any of its Subsidiaries to execute or enter into any letter of intent, agreement in principle, memorandum of understanding or definitive merger, acquisition, purchase or joint venture agreement or other similar Contract (other than an Acceptable Confidentiality Agreement) in respect of or relating to any Acquisition Proposal.

(ii) Notwithstanding anything to the contrary set forth in this Agreement, if at any time after the date hereof but prior to the time the Company Stockholder Approval is obtained, the Company Board or an authorized committee thereof has received an Acquisition Proposal (which did result from a violation of this Section 5.3 ) that the Company Board, or an authorized committee thereof, determines in good faith (after consultation with outside legal counsel and a nationally recognized third party financial advisor) constitutes a Superior Proposal, the Company Board, and or such authorized committee thereof, prior to the time the Company Stockholder Approval is obtained, may effect a Change of Recommendation and may also terminate this Agreement pursuant to Section 8.3(a) (a “ Fiduciary Termination ”); provided , however , that the Company shall not effect a Change of Recommendation in connection with a Superior Proposal or effect a Fiduciary Termination pursuant to Section 8.3(a) with respect to a Superior Proposal unless: (w) the Company Board, or an authorized committee thereof, determines in good faith (after consultation with its outside legal counsel) that the failure to take such action would be inconsistent with the directors’ duties under applicable Law; (x) the Company notifies Parent in writing, at least five (5) Business Days in advance, that it intends to effect a Change of Recommendation in connection with a Superior Proposal or effect a Fiduciary Termination pursuant to Section 8.3(a) with respect to a Superior Proposal, which notice shall specify all material terms and conditions of such Superior Proposal, including the identity of the Person who made such Superior Proposal, the type and amount of consideration that the Company’s stockholders will receive and all other terms and conditions which the Company Board considered in making the determination that such Acquisition Proposal constituted a Superior Proposal, and any other information and material required to be delivered under Section 5.3(a) or 5.3(d) , as applicable, that has not yet been provided to Parent; (y) after providing such notice and prior to making such Change of Recommendation in connection with a Superior Proposal or effecting a Fiduciary Termination pursuant to Section 8.3(a) with respect to a Superior Proposal, if requested by Parent, the Company and its Representatives shall negotiate in good faith with Parent and Parent’s Representatives during such five (5) Business Day period to make such revisions to the terms of this Agreement so that such Acquisition Proposal ceases to constitute a Superior Proposal; and (z) the Company Board, or an authorized committee thereof, after taking into consideration any changes to this Agreement offered in writing by Parent in a manner that would form a binding contract if accepted by the Company, continues to believe in its good faith business judgment (after consultation with its outside legal counsel and a nationally recognized third party financial advisor) that the Acquisition Proposal continues to constitute a Superior Proposal and that, after consultation with outside legal counsel, the failure to effect a Change of Recommendation in connection with such Superior Proposal or effect a Fiduciary Termination pursuant to Section 8.3(a) with respect to such Superior Proposal would be

 

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inconsistent with the directors’ duties under applicable Law. Any amendment to the financial or other material terms of such Superior Proposal or an amendment to an Acquisition Proposal that the Company Board had determined no longer constitutes a Superior Proposal shall constitute a new Acquisition Proposal and shall require the Company to deliver a new notice pursuant to clause (x) above, and the Company shall again be required to comply with the requirements of this Section 5.3(e)(ii) , except that the references to five (5) Business Days shall be deemed to be references to three (3) Business Days. Except in accordance with the procedures set forth in this Section 5.3(e) , the Company shall have no right to terminate this Agreement pursuant to Section 8.3(a) .

(iii) Notwithstanding anything to the contrary set forth in this Agreement, at any time prior to the time the Company Stockholder Approval is obtained, the Company Board, and any authorized committee thereof, may effect a Change of Recommendation in the absence of a Superior Proposal if an Intervening Event shall have occurred and be continuing; provided , however , that the Company shall not be permitted to effect a Change of Recommendation in connection with an Intervening Event unless: (w) the Company Board, or an authorized committee thereof, determines in its good faith business judgment (after consultation with its outside legal counsel) that, in light of such Intervening Event, the failure to take such action would be inconsistent with the directors’ duties under applicable Law; (x) the Company notifies Parent in writing, at least five (5) Business Days in advance, which notice shall (1) state that an Intervening Event has occurred and that the Company Board, or such authorized committee thereof, has determined that in light of such Intervening Event, the failure to effect a Change of Recommendation would be inconsistent with the directors’ duties under applicable Law and that the Company intends to take such action and (2) describe the Intervening Event in reasonable detail and advise Parent that it intends to take such action and specify, in reasonable detail, the reasons for such action; (y) after providing such notice and prior to making such Change of Recommendation in connection with an Intervening Event, if requested by Parent, the Company shall negotiate in good faith with Parent during such five (5) Business Day period, making such revisions to the terms and conditions of this Agreement so that the failure to make such Change of Recommendation would no longer be inconsistent with the directors’ duties under applicable Law; and (z) the Company Board, or an authorized committee thereof, after taking into consideration any changes to this Agreement offered in writing by Parent in a manner that would form a binding contract if accepted by the Company, continues to believe in its good faith business judgment (after consultation with its outside legal counsel) that the failure to effect a Change of Recommendation with respect to such Intervening Event would still be inconsistent with the directors’ duties under applicable Law. For the avoidance of doubt, the provisions of this Section 5.3(e) shall also apply to any material change to the facts and circumstances relating to such Intervening Event and require a new notice, except that the references to five (5) Business Days shall be deemed to be references to three (3) Business Days.

(f) Nothing contained in this Section 5.3 shall be deemed to prohibit the Company or the Company Board, or any committee thereof, from (i) complying with its disclosure obligations under United States federal or state law with regard to an Acquisition Proposal, including taking and disclosing to its shareholders a position contemplated by Rule 14d–9 and Rule 14e–2(a) promulgated under the Exchange Act (or any similar communication to shareholders), or (ii) making any “stop–look–and–listen” communication to the shareholders

 

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of the Company pursuant to Rule 14d–9(f) promulgated under the Exchange Act (or any similar communications to the shareholders of the Company); provided , that any such disclosure or communication that constitutes or contains a Change of Recommendation shall be subject to the provisions of Section 5.3(e).

(g) From and after the No-Shop Period Start Date, the Company agrees that (i) it will promptly (and, in any event, within thirty-six (36) hours) notify Parent orally and in writing if any Acquisition Proposal is received by it indicating, in connection with such notice, the identity of the Person making the Acquisition Proposal and the material terms and conditions thereof (including, if applicable, copies of any written documentation or correspondence constituting the Acquisition Proposal, including proposed agreements) and (ii) in the event that any such Person modifies its Acquisition Proposal in any material respect, the Company shall notify Parent within one (1) Business Day after receipt of such modified Acquisition Proposal of the fact that such Acquisition Proposal has been modified and the terms of such modification (including, if applicable, copies of any written documentation or correspondence reflecting such modification); provided , however , that none of the requirements contemplated by the foregoing clauses (i) and (ii) shall apply (x) during the Go-Shop Period or (y) to any Acquisition Proposal submitted by an Excluded Party. The Company agrees that it shall not, and shall cause its Subsidiaries not to, enter into any confidentiality agreement subsequent to the date hereof which prohibits the Company from providing to Parent such material terms and conditions and other information contemplated by this Section 5.3 , and represents, as of the date hereof, that none of the Company or its Subsidiaries is bound by a confidentiality agreement which prohibits the Company from providing such information to Parent.

(h) The Company acknowledges and agrees that any actions taken by or at the direction of a Representative of the Company or any of the Company Subsidiaries that, if taken by the Company, would constitute a breach or violation of this Section 5.3 will be deemed to constitute a breach and violation of this Section 5.3 by the Company.

Section 5.4 Preparation of the Form S-4 and the Proxy Statement; Stockholders Meetings .

(a) As promptly as reasonably practicable following the date of this Agreement, (i) the Company shall prepare the Proxy Statement in preliminary form, and (ii) Parent shall prepare and cause to be filed with the SEC, the Form S-4 with respect to the Parent Common Stock issuable in the First Merger and the Parent Series C Preferred Stock issuable in the Second Merger, which will include the Proxy Statement and a prospectus of Parent; provided , however, that unless Parent and the Company otherwise agree in writing, in no event shall the Proxy Statement and the Form S-4 be filed prior to the No-Shop Period Start Date. Each of the Company and Parent shall use its commercially reasonable efforts to (x) have the Proxy Statement cleared by the SEC and the Form S-4 declared effective under the Securities Act as promptly as practicable after such filing, (y) ensure that the Proxy Statement and Form S-4 comply in all material respects with the applicable provisions of the Exchange Act or Securities Act and the rules and regulations thereunder, and (z) keep the Form S-4 effective for so long as necessary to complete the First Merger. Each of the Company and Parent shall promptly furnish all information concerning itself, its affiliates, its respective Manager and the holders of its stock to the other and provide such other assistance as may be reasonably requested in connection with

 

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the preparation, filing and distribution of the Form S-4 and Proxy Statement. Subject to Section 5.3(e) , the Form S-4 and Proxy Statement shall include all information reasonably requested by such other Party to be included therein. Each of the Company and Parent shall promptly notify the other upon the receipt of any comments from the SEC or any request from the SEC for amendments or supplements to the Form S-4 or Proxy Statement, and shall, as promptly as practicable after receipt thereof, provide the other with copies of all correspondence between it and its Representatives, on one hand, and the SEC, on the other hand, and all written comments with respect to the Proxy Statement or the Form S-4 received from the SEC and advise the other Party of any oral comments with respect to the Proxy Statement or the Form S-4 received from the SEC. Each of the Company and Parent shall use its commercially reasonable efforts to respond as promptly as practicable to any comments from the SEC with respect to the Proxy Statement, and Parent shall use its commercially reasonable efforts to respond as promptly as practicable to any comment from the SEC with respect to the Form S-4. Notwithstanding the foregoing, prior to filing the Form S-4 (or any amendment or supplement thereto) or mailing the Proxy Statement (or any amendment or supplement thereto) or responding to any comments of the SEC with respect thereto, each of the Company and Parent shall cooperate and provide the other a reasonable opportunity to review and comment on such document or response (including the proposed final version of such document or response) and shall, subject to Section 5.3(e) , give due consideration to including in such document or response any comments reasonably proposed by the other. Each of Parent and the Company shall advise the other, promptly after it receives notice thereof, of the time of effectiveness of the Form S-4, the issuance of any stop order relating thereto or the suspension of the qualification of the Parent Common Stock of Parent Series C Preferred Stock issuable in connection with the Mergers for offering or sale in any jurisdiction, and each of Parent and the Company shall use its commercially reasonable efforts to have any such stop order or suspension lifted, reversed or otherwise terminated. Parent and the Company shall also take any other action required to be taken under the Securities Act, the Exchange Act, any applicable foreign or state securities or “blue sky” Laws and the rules and regulations thereunder, the MGCL and the rules of the NYSE in connection with the filing and distribution of the Proxy Statement and the Form S-4, and the solicitation of proxies from Company stockholders thereunder.

(b) Each of Parent and the Company shall, upon request, furnish to the other all information concerning itself, its Subsidiaries, its Manager, its directors, officers and (to the extent reasonably available to the applicable party) stockholders and such other matters as may be reasonably necessary or advisable in connection with any statement, filing, notice or application made by or on behalf of Parent, the Company or any of their respective Subsidiaries to the NYSE or any Governmental Entity (including the Form S-4 and the Proxy Statement) in connection with the First Merger and the other Transactions. In addition, the Company will use its commercially reasonable efforts to (i) provide interim financial statements of the Company and the Company Subsidiaries (including footnotes) that are required by the Securities Act to be included in the Form S-4 that have been reviewed by the Company’s independent registered public accounting firm, (ii) provide management’s discussion and analysis of interim and annual consolidated financial statements, (iii) cause the Company’s independent registered public accounting firm to consent to the inclusion or incorporation by reference of the audit reports on the annual audited consolidated financial statements of the Company included in the Form S-4, and (iv) provide information concerning the Company necessary to enable Parent and the Company to prepare required pro forma financial statements and related footnotes, in each case,

 

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to the extent reasonably necessary to permit Parent to prepare the Form S-4. Notwithstanding the foregoing and except as required by applicable Law, neither party shall furnish any information that is the subject of any confidentiality agreement with any third party (provided that the withholding party shall use commercially reasonable efforts to obtain the required consent of such third party with respect to furnishing such information) or subject to any attorney client privilege (provided that the withholding party shall use commercially reasonable efforts to permit the furnishing of such information in a manner that does not result in loss or waiver of privilege).

(c) If, at any time prior to the receipt of the Company Stockholder Approval, any information relating to the Company or Parent, or any of their respective affiliates, should be discovered by the Company or Parent which, in the reasonable judgment of the Company or Parent, should be set forth in an amendment of, or a supplement to, any of the Form S-4 or the Proxy Statement, so that any of such documents would not include any misstatement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, the Party which discovers such information shall promptly notify the other Parties, and the Company and Parent shall cooperate in the prompt filing with the SEC of any necessary amendment of, or supplement to, the Proxy Statement or the Form S-4 and, to the extent required by Law, in disseminating the information contained in such amendment or supplement to stockholders of the Company and the stockholders of Parent. Nothing in this Section 5.4(c)  shall limit the obligations of any Party under Section 5.4(a) . For purposes of this Section 5.4 , any non-public information concerning or related to the Company, its affiliates or the Stockholders Meeting will be deemed to have been provided by the Company, and any non-public information concerning or related to Parent or its affiliates will be deemed to have been provided by Parent.

(d) As promptly as reasonably practicable following the effectiveness of the Form S-4, the Company, acting through the Company Board, or an authorized committee thereof, in accordance with applicable Law and its charter and bylaws, shall, in consultation with Parent, (i) establish a record date for and give notice of, a meeting of holders of Company Common Stock (the “ Stockholders Meeting ”) at which meeting the Company shall seek the Company Stockholder Approval, which record date shall be no later than ten (10) days after the later of (x) the date on which the Proxy Statement is cleared by the SEC and (y) the date of which the Form S-4 is declared effective (or such later time as may be required by applicable Law), (ii) cause the Proxy Statement to be mailed to the record holders as of the record date established for the Stockholders Meeting and (iii) within thirty (30) days of such record date, duly call, convene and hold the Stockholders Meeting; provided , that, the Company shall be permitted to postpone the Stockholders Meeting, or adjourn the Stockholders Meeting beyond the time that the Stockholders Meeting would otherwise be held, only (A) with the prior written consent of Parent (which consent shall not be unreasonably withheld, conditioned or delayed) and (B) if there are insufficient shares of Company Common Stock represented (either in person or by proxy) in order to approve the First Merger in accordance with the MGCL and this Agreement or to constitute a quorum necessary to conduct the business of the Stockholders Meeting, or (C) if required by applicable Law. In the event that the date of the Stockholders Meeting as originally called is for any reason adjourned, postponed or otherwise delayed, the Company agrees that unless Parent shall have otherwise approved in writing (which consent shall not be unreasonably withheld, conditioned or delayed), it shall use commercially reasonable

 

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efforts to implement such adjournment, postponement or other delay in such a way that the Company does not establish a new record date for the Stockholders Meeting, as so adjourned, postponed or delayed except for such new record date as required by applicable Law. Subject to Section 5.3 , the Company shall use its commercially reasonable efforts to take, or cause to be taken, all actions, and do or cause to be done all things, necessary, proper or advisable on its part to cause the Company Stockholder Approval to be received at the Stockholders Meeting or any adjournment or postponement thereof. Unless this Agreement has been terminated pursuant to Section 8.3 , the Company’s obligation to call, give notice of, convene and hold the Stockholders Meeting in accordance with the foregoing sentence of this Section 5.4(d) shall apply notwithstanding the commencement, disclosure, announcement or submission of any Acquisition Proposal to the Company, the Company Board, its Representatives or the Stockholders of the Company, or by any Change in Recommendation pursuant to Section 5.3 , and, prior to the termination of this Agreement in accordance with Section 8.3 , the Company shall not submit to the vote of its stockholders any Acquisition Proposal other than the First Merger. Unless the Company Board shall have made a Change in Recommendation in accordance with Section 5.3 , the Proxy Statement shall include the Company Board Recommendation.

ARTICLE VI

ADDITIONAL AGREEMENTS

Section 6.1 Access; Confidentiality; Notice of Certain Events .

(a) From the date of this Agreement until the First Merger Effective Time or the earlier date, if any, on which this Agreement is terminated in accordance with Article VIII , subject to applicable Laws relating to the exchange of information, each of the Company and Parent shall, and shall cause each of their respective Subsidiaries to, afford to the other Party and to the Representatives of such other Party reasonable access during normal business hours and upon reasonable advance notice to all of their respective properties, offices, books, Contracts, personnel and records and, during such period, each of the Company and Parent shall, and shall cause each of their respective Subsidiaries to, furnish reasonably promptly to the other Party all other information (financial or otherwise) concerning its business, properties and personnel as such other Party may reasonably request. Notwithstanding the foregoing, neither the Company nor Parent shall be required by this Section 6.1 to provide the other Party or the Representatives of such other Party with access to or to disclose information (x) that is subject to the terms of a confidentiality agreement with a third party entered into prior to the date of this Agreement ( provided , however , that the withholding Party shall use its commercially reasonable efforts to obtain the required consent of such third party to such access or disclosure), (y) the disclosure of which would violate or contravene any Law or duty ( provided , however , that the withholding Party shall use its commercially reasonable efforts to make appropriate substitute arrangements to permit reasonable disclosure not in violation of any Law or duty) or (z) that is subject to any attorney-client, attorney work product or other legal privilege of such Party or its Subsidiaries ( provided , however , that the withholding Party shall use its commercially reasonable efforts to allow for such access or disclosure to the maximum extent that does not result in a loss of any such attorney-client, attorney work product or other legal privilege). Each of the Company and Parent will use its commercially reasonable efforts to minimize any disruption to the businesses of the other Party that may result from the requests for access, data and information hereunder.

 

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(b) Each of the Company and Parent will hold, and will cause its Representatives and affiliates to hold, any nonpublic information, including any information exchanged pursuant to this Section 6.1 , in confidence to the extent required by and in accordance with, and will otherwise comply with, the terms of the Confidentiality Agreement.

(c) No investigation by either Parent, Merger Sub or their Representatives, on the one hand, or by the Company or its Representatives, on the other, shall affect the representations, warranties, covenants or agreements of the other, set forth in this Agreement.

(d) The Company shall give prompt notice to Parent, and Parent shall give prompt notice to the Company, (i) of any notice or other communication received by such Party from any Governmental Entity in connection with this Agreement, the Mergers or the other Transactions, or from any Person alleging that the consent of such person is or may be required in connection with the Mergers or the other Transactions, if the subject matter of such communication or the failure of such Party to obtain such consent could be material to the Company, the First Merger Surviving Entity or Parent, (ii) of any Legal Proceeding commenced or, to any Party’s knowledge, threatened in writing against, such Party or any of its Subsidiaries or affiliates or otherwise relating to, involving or affecting such Party or any of its Subsidiaries or affiliates, in each case in connection with, arising from or otherwise relating to the Mergers or any other Transaction, and (iii) if (A) any representation or warranty made by such Party contained in this Agreement becomes untrue or inaccurate such that it would be reasonable to expect that the applicable closing conditions would be incapable of being satisfied by the Outside Date or (B) such Party fails to comply with or satisfy in any material respect any covenant, condition or agreement to be complied with or satisfied by it under this Agreement such that it would be reasonable to expect that the applicable closing conditions would be incapable of being satisfied by the Outside Date; provided , however , that no such notification shall affect the representations, warranties, covenants or agreements of the Parties or the conditions to the obligations of the Parties under this Agreement. Without limiting the foregoing, the Company shall give prompt notice to Parent, and Parent shall give prompt notice to the Company, if, to the knowledge of such Party, the occurrence of any state of facts, change, development, event or condition would cause, or would reasonably be expected to cause, any of the conditions to Closing set forth herein not to be satisfied or satisfaction to be materially delayed, as the case may be, provided , however , that the delivery of any notice pursuant to this Section 6.1(d) shall not cure any breach of any representation or warranty requiring disclosure of such matter prior to the date of this Agreement or otherwise limit or affect the remedies available hereunder to any Party. The failure to deliver any such notice shall not affect any of the conditions set forth in Article VII .

(e) Each of Parent and Merger Sub acknowledges and agrees that it is not authorized to and shall not (and shall not permit any of its employees, agents, representatives or Affiliates to) contact any employees, customers, suppliers, distributors or other material business relations of the Company prior to the Closing without the prior consent of the Company; provided, however that Parent and its employees, agents, representatives or Affiliates shall not be prohibited from contacting customers, suppliers, distributors or other material business relations of Parent in the ordinary course of business and not related to the Company or the Transactions; provided , further , that Parent, Merger Sub and their respective Representatives shall be permitted to contact the employees, customers, suppliers, distributors or other business relations of the

 

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Company to the extent contemplated by the arrangements established by the Parties under Sections 6.16 and 6.17 , but only after prior notice to the Company, and consultation with the Company regarding the most appropriate means to contact such persons so as to preserve the Company’s relationships with such persons and not disrupt the business operations of either such persons or the Company.

Section 6.2 Consents and Approvals .

(a) Upon the terms and subject to the conditions set forth in this Agreement, each of the Company and Parent shall and shall cause their respective Subsidiaries, to use commercially reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other Party in doing, all things necessary, proper or advisable under applicable Law or pursuant to any contract or agreement to consummate and make effective, as promptly as practicable, the Mergers and the other Transactions, including (i) the taking of all actions necessary to cause the conditions to Closing set forth in Article VII  to be satisfied, (ii) the obtaining of all necessary actions or nonactions, waivers, consents and approvals from Governmental Entities or other Persons necessary in connection with the consummation of the Mergers and the other Transactions and the making of all necessary registrations and filings (including filings with Governmental Entities, if any) and the taking of all reasonable steps as may be necessary to obtain an approval or waiver from, or to avoid an action or proceeding by, any Governmental Entity or other Persons necessary in connection with the consummation of the Mergers and the other Transactions, (iii) the defending of any lawsuits or other legal proceedings, whether judicial or administrative, challenging this Agreement or the consummation of the Mergers or the other Transactions so as to enable the Closing to occur as soon as reasonably practicable, and (iv) the execution and delivery of any additional instruments necessary to consummate the Mergers and the other Transactions and to fully carry out the purposes of this Agreement.

(b) Each of the Parties will furnish to the other such necessary information and reasonable assistance as the other may request in connection with the preparation of any required governmental filings or submissions and will cooperate in responding to any inquiry from a Governmental Entity, including promptly informing the other Party of such inquiry, consulting in advance before making any presentations or submissions to a Governmental Entity, and supplying each other with copies of all material correspondence, filings or communications between either Party and any Governmental Entity with respect to this Agreement. The Parties or their Representatives shall have the right to review in advance, and each of the Parties will consult the others on, any proposed written or oral communications to, any Governmental Entity in connection with the Mergers and the other Transactions (other than Tax Returns), except that confidential competitively sensitive business information may be redacted from such exchanges, provided , however , that outside counsel to the receiving Party shall be permitted to review complete, unredacted materials. Neither the Company nor Parent shall, nor shall they permit their respective Representatives to, participate independently in any meeting or engage in any substantive conversation with any Governmental Entity in respect of any filing, investigation or other inquiry in connection with the Mergers and the other Transactions without giving the other Party prior notice of such meeting or conversation and, to the extent permitted by applicable Law and such Governmental Entity, giving the other Party the opportunity to attend or participate (whether by telephone or in person) in any such meeting.

(c) Notwithstanding anything to the contrary in this Agreement, in connection with obtaining any approval or consent from any Person (other than any Governmental Entity) with respect to the Mergers, the Company, the Company Subsidiaries and their respective Representatives shall not be obligated to, and shall not without the consent of Parent, pay or commit to pay to such Person whose approval or consent is being solicited any cash or other consideration , make any accommodation or commitment or incur any liability or other obligation to such Person. The Parties shall cooperate with respect to accommodations that may be requested or appropriate to obtain such consents.

 

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Section 6.3 Publicity . Concurrently with the execution of this Agreement, the Parties have agreed on the form of a joint press release announcing the Mergers. From and after the date hereof, so long as this Agreement is in effect, neither the Company nor Parent, nor any of their respective affiliates, shall issue or cause the publication of any press release or other announcement with respect to the Mergers or this Agreement without the prior consent of the other Party (which consent shall not be unreasonably withheld, conditioned or delayed), unless (a) such Party determines, after consultation with outside counsel, that it is required by applicable Law or by any listing agreement with or the rules for listed companies of the NYSE to issue or cause the publication of any press release or other announcement with respect to the Mergers or this Agreement, in which event such Party shall endeavor, on a basis reasonable under the circumstances, to provide a meaningful opportunity to the other Party to review and comment upon such press release or other announcement and shall give due consideration to all reasonable additions, deletions or changes suggested thereto or (b) in the case of the Company, it deems it necessary or appropriate to issue or cause the publication of any press release or other announcement with respect to the Mergers, this Agreement or the Transactions in connection with or following a Change of Recommendation; provided , however , each Party and their respective controlled affiliates may make statements that are not inconsistent with previous press releases, public disclosures or public statements made by Parent and the Company in compliance with this Section 6.3 .

Section 6.4 Directors and Officers Insurance and Indemnification .

(a) Parent shall honor and fulfill in all respects the obligations of the Company to the fullest extent permissible under applicable Law, under the Company Governing Documents in effect on the date hereof and under any indemnification or other similar agreements in effect on the date hereof (the “ Indemnification Agreements ”) to the individuals covered by such Company Governing Documents or Indemnification Agreements (the “ Covered Persons ”) arising out of or relating to actions or omissions in their capacity as such occurring at or prior to the First Merger Effective Time, including in connection with the approval of this Agreement and the Transactions.

(b) Without limiting the provisions of Section 6.4(a) , from the Closing Date until the tenth (10 th ) anniversary of the Closing Date, Parent shall: (i) indemnify and hold harmless each Covered Person against and from any costs or expenses (including attorneys’ fees), judgments, fines, losses, claims, damages, liabilities and amounts paid in settlement in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, to the extent such claim, action, suit, proceeding or investigation arises out of or pertains to: (A) any action or omission or alleged action or omission in such

 

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Covered Person’s capacity as such, or (B) this Agreement and any of the Transactions; and (ii) pay in advance of the final disposition of any such claim, action, suit, proceeding or investigation the expenses (including attorneys’ fees) of any Covered Person upon receipt of an undertaking by or on behalf of such Covered Person to repay such amount if it shall ultimately be determined that such Covered Person is not entitled to be indemnified. Notwithstanding anything to the contrary contained in this Section 6.4  or elsewhere in this Agreement, Parent shall not settle or compromise or consent to the entry of any judgment or otherwise seek termination with respect to any claim, action, suit, proceeding or investigation of a Covered Person for which indemnification may be sought under this Section 6.4(b)  unless such settlement, compromise, consent or termination includes an unconditional release of such Covered Person from all liability arising out of such claim, action, suit, proceeding or investigation. Notwithstanding anything to the contrary contained in this Section 6.4 or elsewhere in this Agreement, no Covered Person shall settle or compromise or consent to the entry of any judgment or otherwise seek termination with respect to any claim, action, suit, proceeding or investigation of a Covered Person for which indemnification may be sought under this Section 6.4(b) without the prior consent of Parent (which consent shall not be unreasonably withheld, delayed or conditioned).

(c) From the Closing Date until the tenth (10 th ) anniversary of the Closing Date, the charter and bylaws of Parent or any of its successors or assigns shall contain provisions no less favorable with respect to indemnification, advancement of expenses and exculpation of Covered Persons for periods prior to and including the First Merger Effective Time than are currently set forth in the Company Governing Documents. The Indemnification Agreements with Covered Persons that survive the Mergers shall continue in full force and effect in accordance with their terms.

(d) The Company may, prior to Closing, purchase a directors’ and officers’ liability insurance “tail” or “runoff” insurance program for a period of ten (10) years after the Closing Date with respect to wrongful acts and/or omissions committed or allegedly committed at or prior to the First Merger Effective Time (such coverage shall have an aggregate coverage limit over the term of such policy in an amount not to exceed the annual aggregate coverage limit under the Company’s existing directors’ and officers’ liability policy, and in all other respects shall be comparable to such existing coverage); provided , however , that the annual cost of such program may not exceed 250% of the annual premiums paid as of the date of this Agreement by the Company for directors’ and officers’ liability insurance (such 250% amount, the “ Base Premium ”); provided , further , if such insurance coverage cannot be obtained at all, or can only be obtained at an annual cost in excess of the Base Premium, the Company may purchase the most advantageous policies of “tail” or “run-off” directors’ and officers’ insurance obtainable for an annual cost equal to the Base Premium. If the Company obtains such insurance policy prior to the First Merger Effective Time, Parent shall cause such policy to be maintained in full force and effect, for its full term, and shall honor its obligations thereunder.

(e) In the event Parent or any of its 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 all or substantially all of its properties and assets to any Person, then and in each such case, proper provision shall be made so that such continuing or surviving corporation or entity or transferee of such assets, as the case may be, shall assume all of the applicable obligations set forth in this Section 6.4 .

(f) The Covered Persons (and their successors and heirs) are intended third party beneficiaries of this Section 6.4 , and this Section 6.4  shall not be amended in a manner that is adverse to the Covered Persons (including their successors and heirs) or terminated without the consent of the Covered Persons (including their successors and heirs) affected thereby. The exculpation and indemnification provided for by this Section 6.4 shall not be deemed to be exclusive of any other rights to which a Covered Person is entitled, whether pursuant to applicable Law, Contract or otherwise.

 

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Section 6.5 Takeover Statutes . The Parties shall use their respective reasonable best efforts (a) to take all action necessary so that no Takeover Statute is or becomes applicable to the Mergers or any of the other Transactions and (b) if any such Takeover Statute is or becomes applicable to any of the foregoing, to take all action necessary so that the Mergers and the other Transactions may be consummated as promptly as practicable on the terms contemplated by this Agreement and otherwise to eliminate or minimize the effect of such Takeover Statute on the Mergers and the other Transactions.

Section 6.6 Obligations of Merger Sub . Parent shall take all action necessary to cause Merger Sub and the First Merger Surviving Entity to perform their respective obligations under this Agreement and to consummate the Transactions, including the First Merger and the Second Merger, upon the terms and subject to the conditions set forth in this Agreement.

Section 6.7 Rule 16b-3 . Prior to the First Merger Effective Time, the Company shall be permitted to take such steps as may be reasonably necessary or advisable hereto to cause dispositions of Company equity securities (including derivative securities) pursuant to the Mergers by each individual who is a director or officer of the Company to be exempt under Rule 16b-3 promulgated under the Exchange Act.

Section 6.8 Control of Operations . Without in any way limiting any Party’s rights or obligations under this Agreement, the Parties understand and agree that (i) nothing contained in this Agreement shall give Parent, directly or indirectly, the right to control or direct the Company’s operations prior to the First Merger Effective Time, and (ii) prior to the First Merger Effective Time, the Company shall exercise, consistent with and subject to the terms and conditions of this Agreement, complete control and supervision over its operations.

Section 6.9 Transaction Litigation . In the event that any litigation related to this Agreement, the other transaction documents or any of the contemplated Transactions is brought against the Company and/or its directors or officers, the Company shall promptly notify Parent of such litigation and shall keep Parent informed on a current basis with respect to the status thereof. The Company shall give Parent the opportunity to participate, subject to a customary joint defense agreement, in, but not control, the defense and settlement of any such litigation against the Company and/or its directors or officers and no such settlement shall be agreed to by the Company or any Company Subsidiary without the Parent’s prior written consent (such consent not be unreasonably withheld, conditioned or delayed).

Section 6.10 Delisting . Each of the Parties agrees to cooperate with the other Parties in taking, or causing to be taken, all actions necessary to delist the Company Common Stock and the Company Series A Preferred Stock from the NYSE and terminate their registration under the Exchange Act, provided , that such delisting and termination shall not be effective until after the Closing Date.

 

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Section 6.11 Director and Officer Resignations . The Company shall use commercially reasonable efforts to cause to be delivered to Parent resignations executed by each director and officer of the Company and the Company Subsidiaries in office immediately prior to the Second Merger Effective Time.

Section 6.12 Certain Tax Matters .

(a) All Parties shall treat (i) the First Merger as taxable purchase by Parent of the Company Common Stock and (ii) the Second Merger as a liquidation of the First Merger Surviving Entity pursuant to Section 332 of the Code, in each case, for U.S. federal, state and local income tax purposes and no Party shall take any positions inconsistent therewith for U.S. federal, state or local income tax purposes.

(b) After the First Merger Effective Time through the end of the taxable year that includes the First Merger Effective Time, Parent shall not, and shall not permit any Parent Subsidiary to, (i) take any action that reasonably could be expected to, or (ii) fail to take any action, the failure of which could reasonably be expected to, cause the Company to fail to qualify as a REIT for such taxable year.

Section 6.13 Tax Opinions and Tax Representation Letters .

(a) Parent shall use its reasonable best efforts to (i) obtain the opinion of counsel referred to in Section 7.3(c) , and (ii) deliver to Clifford Chance LLP, counsel to Parent (or other nationally recognized REIT counsel to Parent, if applicable) a tax representation letter, dated as of the Closing Date and signed by an officer of Parent, in customary form and substance and approved by the Company, which approval shall not be unreasonably withheld, conditioned or delayed, containing representations of Parent as are reasonably determined by Clifford Chance LLP (or such other counsel) to be necessary or appropriate to enable Clifford Chance LLP (or such other counsel) to render the opinion described in Section 7.3(c) .

(b) The Company shall use its reasonable best efforts to (i) obtain the opinion of counsel referred to in Section 7.2(d) , and (ii) deliver to Clifford Chance LLP, counsel to the Company (or other nationally recognized REIT counsel to the Company, if applicable), a tax representation letter, dated as of the Closing Date and signed by an officer of the Company, in customary form and substance and approved by Parent, which approval shall not be unreasonably withheld, conditioned or delayed, containing representations of the Company as are reasonably determined by Clifford Chance LLP (or such other counsel) to be necessary or appropriate to enable Clifford Chance LLP (or such other counsel) to render the opinion described in Section 7.2(d) .

Section 6.14 Stock Exchange Listing . Parent shall use its commercially reasonable efforts to cause the shares of Parent Common Stock and Parent Series C Preferred Stock to be issued in the Mergers to be approved for listing on the NYSE, subject to official notice of issuance, prior to the First Merger Effective Time.

 

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Section 6.15 Dividends .

(a) From and after the Pricing Date until the earlier of the First Merger Effective Time and any termination of this Agreement in accordance with Article VIII , the Company shall not make, declare or set aside any dividend or other distribution to its stockholders without the prior written consent of Parent; provided , however , that the written consent of Parent shall not be required (but prior written notice shall be given) for the authorization and payment of dividends (i) expressly permitted by Section 5.1 , or (ii) to enable the Company to maintain its qualification as a REIT and avoid incurring U.S. federal, state or local income or excise taxes under the Code or applicable state or local law, including payment of dividends under Code Sections 858 or 860, as permitted in Article V (any such dividend, a “ REIT Dividend ”).

(b) The record date for any REIT Dividend payable with respect to the taxable year that includes the First Merger Effective Time shall be set in accordance with Maryland law, the rules of the NYSE and any other applicable rules and regulations such that the payment date shall be within three (3) Business Days before the First Merger Effective Time.

Section 6.16 Financing Cooperation .

(a) Prior to the Closing, the Company shall use commercially reasonable efforts to cooperate, and shall cause the Company Subsidiaries to use commercially reasonable efforts to cooperate, and shall use its commercially reasonable efforts to cause its and their Representatives, to provide, on a timely basis, all reasonable cooperation requested by Parent in connection with the documentation and arrangement of any debt financing, including repurchase agreements (the “ Debt Financing ”), including (i) providing customary financial and other pertinent information regarding the Company and the Company Subsidiaries, including the financial information required to be delivered in connection with the Debt Financing and such other information as may be reasonably requested by Parent in connection with the Debt Financing, (ii) assisting in the preparation of customary documents and materials, including confidential information memoranda, lender and investor presentations and similar documents and materials in connection with the Debt Financing, (iii) participating in a reasonable number of meetings, due diligence sessions and presentations, (iv) providing reasonable and customary assistance to Parent and its Financing Sources in (A) the preparation of all credit agreements (including review of schedules for completeness), currency or interest hedging agreements or other agreements, and reasonably requested customary certificates, opinions or documents, including customary certificates with respect to solvency matters, in connection with the Debt Financing and (B) the negotiation, preparation and delivery of amendments to or the termination of any of the Company’s or the Company Subsidiaries’ existing credit agreements, currency or interest hedging agreements, or other agreements, including repurchase agreements and related documentation in respect of the Company’s or the Company Subsidiaries’ borrowings collateralized by residential mortgage backed securities, securitized mortgage loans, other mortgage and mortgage related assets or other investment securities (including by negotiating amendments, waivers or supplements reasonably satisfactory to Parent with respect to any and all obligations of the Company and the Company Subsidiaries under such repurchase agreements and related documentation which are intended by Parent to be terminated in connection with the consummation of the Transactions), in each case, on terms reasonably satisfactory to Parent and

 

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that are reasonably requested by Parent in connection with the Debt Financing, (v) permitting any cash and marketable securities of the Company and the Company Subsidiaries to be made available to Parent and Merger Sub following the First Merger Effective Time, (vi) cooperating reasonably with the Financing Sources’ due diligence, to the extent customary and reasonable and (vii) furnishing Parent and the Financing Sources promptly with all documentation and other information required by any Governmental Entity with respect to the financing under applicable “know your customer” and anti-money laundering rules and regulations, including the PATRIOT Act; provided that (A) no obligation of the Company or any of the Company Subsidiaries under any such agreements, amendments. authorizations, resolutions, consents shall be effective until the actual occurrence of the First Merger Effective Time (other than amendments to or the termination of any of the Company’s or the Company Subsidiaries’ existing repurchase agreements and related documentation in respect of the Company’s or the Company Subsidiaries’ borrowings collateralized by residential mortgage backed securities, securitized mortgage loans, other mortgage and mortgage related assets or other investment securities which shall be effective prior to the Closing) and (B) none of the Company or any of the Company Subsidiaries or their respective Representatives shall be required to pay any commitment or other similar fee or incur any other cost or expense that is not promptly reimbursed by Parent in connection with the Debt Financing prior to the First Merger Effective Time and (C) no member of the Company Board shall be required to take any action with respect to the Debt Financing and neither the Company nor any of the Company Subsidiaries shall be obligated to take any action that requires action or approval by the Company Board prior to the First Merger Effective Time. All non-public or other confidential information provided by the Company or any of its Representatives pursuant to this Section 6.16 shall be kept confidential in accordance with the Confidentiality Agreement, except that Parent shall be permitted to disclose such information to potential Financing Sources subject to customary confidentiality undertakings by such potential Financing Sources.

(b) Parent shall (A) promptly, upon request by the Company, reimburse the Company for all reasonable and documented out-of-pocket costs (including reasonable and documented attorneys’ fees) incurred by the Company or any of the Company Subsidiaries in connection with the cooperation of the Company and the Company Subsidiaries contemplated by this Section 6.16 and Section 6.17 and (B) indemnify and hold harmless the Company, the Company Subsidiaries and their respective Representatives (collectively, the “ Cooperation Indemnitees ”) from and against any and all losses, damages, claims, costs or expenses suffered or incurred by any of them in connection with third party claims arising out of the arrangement of the Debt Financing or any of the actions or steps referred to in Section 6.17 , and any information used in connection therewith, except with respect to any information provided in writing by the Company or any of the Company Subsidiaries or contained in the Company SEC Documents or to the extent suffered or incurred as a result of the gross negligence, willful misconduct or bad faith of the Cooperation Indemnitees.

Section 6.17 Company Investment Activity .

(a) Schedule 6.17(a) contains the Company’s guidelines for hedging some or all of the risk associated with its liabilities (“ Hedging Guidelines ”). The Company agrees to comply with the Hedging Guidelines, except (i) with Parent’s prior written consent (not to be unreasonably withheld or delayed), (ii) as may be reasonably necessary or appropriate to

 

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maintain the Company’s qualification as a REIT, (iii) to the extent reasonably necessary or appropriate to avoid becoming required to register as an investment company under the Investment Company Act or (iv) prior to the Pricing Date as the Company reasonably believes may be commercially prudent under then current market conditions, after consultation with Parent. The Company shall promptly notify Parent in writing whenever, in reliance on any of clauses (i)-(iv) of the immediately preceding sentence, it fails to comply with the Hedging Guidelines.

(b) In managing its liabilities prior to the Closing, the Company shall take commercially reasonable steps to manage the maturity of, and execute new arrangements with respect to, the Company’s existing portfolio of repurchase agreements, hedging arrangements and other fixed term liabilities, in each case to the extent obtainable at commercially reasonable costs, such that the term or maturity of such liabilities ends on or before the reasonably anticipated Closing Date. From and after the Pricing Date, the Company shall take the actions reasonably requested by Parent to adjust the maturity of or otherwise modify the terms of any such liability that extends beyond the anticipated Closing Date such that such liability ends on such earlier maturity date requested by Parent. From and after the Pricing Date, the Company will consult with Parent in setting such maturities to more closely align with the anticipated Closing Date and will not extend such maturities beyond such anticipated Closing Date without the prior written consent of Parent. The Company shall promptly notify Parent in writing in the event that it determines, notwithstanding its compliance with its obligation set forth in the first sentence of this clause (b), that it is or will likely be unable to cause the term or maturity of the relevant liabilities to end on or before the reasonably anticipated Closing Date.

(c) Prior to the Closing, the Company shall use commercially reasonable efforts to cooperate, and shall cause the Company Subsidiaries to use commercially reasonable efforts to cooperate, and shall use its commercially reasonable efforts to cause its and their respective Representatives to provide, on a timely basis, all reasonable cooperation requested by Parent in connection with amending, terminating, rolling, novating and/or assigning or otherwise transferring to other counterparties any or all of the Company’s or the Company Subsidiaries’ (x) repurchase agreements (whether in effect on the date hereof or subsequently executed) and related documentation in respect of repurchase transactions in connection with residential mortgage backed securities, securitized mortgage loans, other mortgage and mortgage related assets or other investment securities (such transactions, “ repurchase borrowings ”) and (y) other Company Investments and related Company Investment Contracts (whether in effect on the date hereof or subsequently executed), in each case to avoid defaults under, early terminations of and refusals to extend the maturities of or roll such repurchase borrowings or Company Investments and related Company Investment Contracts caused by the Transactions or to facilitate the termination of such repurchase borrowings or Company Investments and related Company Investment Contracts at or about the First Merger Effective Time.

Section 6.18 Company Investment Guidelines . Except as set forth in Section 6.17 , the Company shall not enter into, renew, modify, amend or terminate any Company Investment Contract or acquire, sell, pledge, lease assign, transfer, exclusively license, dispose of or encumber any Company Investment, other than in accordance with the guidelines set forth on Schedule 6.18 hereto.

 

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Section 6.19 Certain Financial Reporting .

(a) From and after the date hereof until the Pricing Date, the Company shall provide Parent with a monthly report showing (i) the calculation of the Company Book Value as of the end of the prior month, together with reasonable supporting calculations for such value and reasonable documentation therefor and (ii) the pricing information with respect to each Company Investment as set forth on Schedule 6.19(a).

(b) From and after the date hereof until the Closing Date, the Company shall provide Parent with a weekly report specifying any acquisitions or dispositions of Company Investments, together with all documentation relating thereto reasonably requested by Parent, including any Company Investment Contract relating to any newly-acquired Company Investment.

Section 6.20 Ownership Limit . Prior to the First Merger Effective Time, the Company Board shall take all action necessary to provide an Excepted Holder Limit (as defined in the Company Charter) with respect to the Aggregate Stock Ownership Limit (as defined in the Company Charter) and the Common Stock Ownership Limit (as defined in the Company Charter) (collectively, the “ Parent Ownership Limit Waiver ”) that would permit Parent to acquire ownership of 100% of the Company Common Stock by virtue of the First Merger, effective immediately prior to, and subject to the consummation of, the First Merger, subject, in each case, to Parent executing, and the continued accuracy of the representations and warranties set forth in the Waiver Representation Letter and the other requirements set forth in the Waiver Board Resolutions.

ARTICLE VII

CONDITIONS TO CONSUMMATION OF THE FIRST MERGER

Section 7.1 Conditions to Each Party s Obligations to Effect the First Merger . The respective obligations of the Company, on the one hand, and Parent and Merger Sub, on the other hand, to effect the First Merger shall be subject to the satisfaction on or prior to the Closing Date of each of the following conditions, any and all of which may be waived in whole or in part by Parent, Merger Sub or the Company, as the case may be, to the extent permitted by applicable Law:

(a) Stockholder Approval . The Company Stockholder Approval shall have been obtained and the First Merger and the other Transactions shall also have been approved by the affirmative vote of at least a majority of the outstanding shares of Company Common Stock entitled to vote upon the First Merger that are beneficially owned by persons who are not affiliates of Apollo Global Management, LLC (the “ Company Unaffiliated Stockholder Approval ”).

(b) Registration Statement Effective . The SEC shall have declared the Form S-4 effective and no stop order suspending the effectiveness of the Form S-4 shall have been issued by the SEC and remain in effect and no proceeding to that effect shall have been commenced or threatened.

(c) Statutes; Court Orders . No court of competent jurisdiction or other Governmental Entity of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any Law, Order, stipulation or other legal restraint (whether temporary, preliminary or permanent) (an “ Injunction ”), in any case, which is in effect and which prevents, prohibits or makes illegal the consummation of the First Merger, the Second Merger or the other Transactions.

 

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Section 7.2 Conditions to Obligations of Parent and Merger Sub . The obligations of Parent and Merger Sub to effect the First Merger are also subject to the satisfaction on or prior to the Closing Date of each of the following conditions, any and all of which may be waived in whole or in part by Parent, to the extent permitted by applicable Law:

(a) Representations and Warranties . (i) The representations and warranties set forth in Section 3.3(a) (Authorization; Validity of Agreement; Company Action), Section 3.23 (Brokers; Expenses) and Section 3.25 (Vote Required), shall be true and correct in all respects as of the date of this Agreement and as of the First Merger Effective Time, as though made as of the First Merger Effective Time, (ii) the representations and warranties set forth in the second sentence of Section 3.2(a) (Capital Structure) shall be true and correct in all but de minimis respects as of the specific date set forth in such sentence, and (iii) each of the other representations and warranties of the Company contained in this Agreement shall be true and correct as of the date of this Agreement and as of the First Merger Effective Time, as though made as of the First Merger Effective Time, except (x) in each case, representations and warranties that are made as of a specific date shall be true and correct only on and as of such date, and (y) in the case of clause (iii) where the failure of such representations or warranties to be true and correct (without giving effect to any materiality or “Company Material Adverse Effect” qualifications set forth therein) would not have or reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, and Parent shall have received a certificate signed on behalf of the Company by a duly authorized executive officer of the Company to the foregoing effect.

(b) Performance of Obligations of the Company . The Company shall have performed or complied in all material respects with all obligations required to be performed or complied with by it under this Agreement at or prior to the First Merger Effective Time; and Parent shall have received a certificate signed on behalf of the Company by a duly authorized executive officer of the Company to such effect.

(c) No Material Adverse Effect . Since the date of this Agreement, no Events shall have occurred, individually or in the aggregate, that constitute or would (with the passage of time) constitute a Company Material Adverse Effect; and Parent shall have received a certificate signed on behalf of the Company by a duly authorized executive officer of the Company to such effect.

(d) REIT Opinion . Parent shall have received a written opinion of Clifford Chance LLP, or such other nationally recognized REIT counsel as may be reasonably acceptable to Parent, dated as of the Closing Date, and approved by Parent, which approval shall not be unreasonably withheld, conditioned or delayed, to the effect that, commencing with the Company’s taxable year ended December 31, 2011, the Company has been organized and

 

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operated in conformity with the requirements for qualification and taxation as a REIT under the Code and its method of operation has enabled the Company to meet, through the First Merger Effective Time (determined as if the Company’s taxable year ended at the First Merger Effective Time and disregarding the distribution requirements set forth in Section 857(a)(1) of the Code for such taxable year), the requirements for qualification and taxation as a REIT under the Code. Such opinion shall be in a form customary for transactions of this nature and shall be subject to customary exceptions, assumptions and qualifications and based on customary representations contained in the tax representation letter described in Section 6.13(b)(ii) .

(e) Good Standing Certificates . The Company shall have delivered to Parent a certificate in respect of the Company and each of its Subsidiaries, issued, in each case, by the appropriate Governmental Entity certifying that the Company or such Subsidiary, as applicable, is in good standing in the jurisdiction of its organization or formation as of a date no more than five (5) Business Days prior to the Closing Date.

Section 7.3 Conditions to Obligations of the Company . The obligations of the Company to effect the First Merger are also subject to the satisfaction on or prior to the Closing Date of each of the following conditions, any and all of which may be waived in whole or in part by the Company, to the extent permitted by applicable Law:

(a) Representations and Warranties . (i) The representations and warranties set forth in Section 4.3(a) (Authorization, Validity of Agreement; Parent Action) Section 4.17 (Brokers; Expenses) and Section 4.18 (Sufficiency of Funds), shall be true and correct in all respects as of the date of this Agreement and as of the First Merger Effective Time, as though made as of the First Merger Effective Time, (ii) the representations and warranties set forth in the second sentence of Section 4.2(a) (Capital Structure) shall be true and correct in all but de minimis respects as of the specific date set forth in such sentence, and (iii) each of the other representations and warranties of Parent and Merger Sub contained in this Agreement shall be true and correct as of the date of this Agreement and as of the First Merger Effective Time, as though made as of the First Merger Effective Time, except (x) in each case, representations and warranties that are made as of a specific date shall be true and correct only on and as of such date, and (y) in the case of clause (iii) where the failure of such representations or warranties to be true and correct (without giving effect to any materiality or “Parent Material Adverse Effect” qualifications set forth therein) would not have or reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect, and the Company shall have received a certificate signed on behalf of Parent by a duly authorized officer of Parent to the foregoing effect.

(b) Performance of Obligations of Parent and Merger Sub . Each of Parent and Merger Sub shall have performed or complied in all material respects with all obligations required to be performed or complied with by it under this Agreement at or prior to the First Merger Effective Time; and the Company shall have received a certificate signed on behalf of Parent and Merger Sub by a duly authorized executive officer of Parent to such effect.

(c) REIT Opinion . The Company shall have received a written opinion of Clifford Chance LLP, or such other nationally recognized REIT counsel as may be reasonably acceptable to the Company, dated as of the Closing Date, and approved by the Company, which

 

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approval shall not be unreasonably withheld, conditioned or delayed, to the effect that, commencing with Parent’s taxable year ended December 31, 2009, Parent has been organized and operated in conformity with the requirements for qualification and taxation as a REIT under the Code, and its proposed method of operation will enable Parent to continue to meet the requirements for qualification and taxation as a REIT under the Code. Such opinion shall be in a form customary for transactions of this nature and shall be subject to customary exceptions, assumptions and qualifications and based on customary representations contained in the tax representation letters described in Sections 6.13(a)(ii) and 6.13(b)(ii ).

(d) No Material Adverse Effect . Since the date of this Agreement, no Events shall have occurred, individually or in the aggregate, that constitute or would (with the passage of time) constitute a Parent Material Adverse Effect; and the Company shall have received a certificate signed on behalf of Parent by a duly authorized executive officer of Parent to such effect.

(e) Listing / Classification . The shares of Parent Common Stock and Parent Series C Preferred Stock to be issued in the Mergers shall have been approved for listing on the NYSE, subject to official notice of issuance, and the articles supplementary classifying the Parent Series C Preferred Stock attached hereto as Exhibit A shall be filed with and accepted for record by the SDAT.

(f) Second Merger . Other than the consummation of the First Merger, there are no conditions precedent to the respective obligations of the Company and Parent to effect the Second Merger.

ARTICLE VIII

TERMINATION

Section 8.1 Termination by Mutual Consent . This Agreement may be terminated and the Mergers may be abandoned at any time prior to the First Merger Effective Time, whether before or after the Company Stockholder Approval is obtained, by mutual written consent of the Company and Parent.

Section 8.2 Termination by Either Parent or the Company . This Agreement may be terminated and the Mergers may be abandoned at any time prior to the First Merger Effective Time by written notice of either Parent or the Company, if:

(a) the First Merger shall not have been consummated by 11:59 p.m. (Eastern time) on August 26, 2016, whether such date is before or after the date the Company Stockholder Approval is obtained (such date, the “ Initial Outside Date ”); provided , however, that if on the Initial Outside Date the conditions set forth in Section 7.1(c) shall not have been satisfied but all other conditions set forth in Article VII shall have been satisfied or waived or shall then be capable of being satisfied, then either Parent or the Company may, by written notice to the other Party prior to the Initial Outside Date, elect to extend the Initial Outside Date to October 26, 2016 (the “ Second Outside Date ”). As used in this Agreement, the term “ Outside Date ” shall mean the Initial Outside Date, unless extended pursuant to the foregoing sentence, in which case the term “Outside Date” shall mean the Second Outside Date. Notwithstanding the foregoing,

 

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the right to terminate this Agreement under this Section 8.2(a) shall not be available to any Party if the failure of the Closing to occur by such date shall be due primarily to the failure of such Party to perform any of the covenants or agreements to be performed by it under this Agreement;

(b) the Stockholders Meeting (including any adjournments and postponements thereof) shall have been held and completed and the Company Stockholder Approval or the Company Unaffiliated Stockholder Approval shall not have been obtained; or

(c) any Injunction permanently restraining, enjoining or otherwise prohibiting consummation of the First Merger or the Second Merger shall become final and non-appealable (whether before or after the Company Stockholder Approval has been obtained); provided , however , that the Party seeking to terminate this Agreement pursuant to this Section 8.2 shall have used commercially reasonable efforts to appeal, resolve or remove such Injunction.

Section 8.3 Termination by the Company . This Agreement may be terminated and the Mergers may be abandoned by written notice of the Company:

(a) at any time prior to the satisfaction of the conditions set forth in Section 7.1(a) if (A) the Company Board, or an authorized committee thereof, determines or authorizes the Company, subject to complying with the terms of this Agreement (including Section 5.3(e) ), to enter into definitive transaction documentation providing for a Superior Proposal (“ Alternative Acquisition Agreement ”), (B) substantially concurrent with or immediately following the termination of this Agreement, the Company enters into such Alternative Acquisition Agreement with respect to such Superior Proposal and (C) substantially concurrent with such termination the Company pays to Parent in immediately available funds any amounts required to be paid pursuant to Section 8.5 ;

(b) at any time prior to the First Merger Effective Time if there has been a breach of any covenant or agreement or there shall be any inaccuracy in the representations and warranties set forth in this Agreement on the part of Parent or Merger Sub which breach, either individually or in the aggregate, would result in, if occurring or continuing on the Closing Date, the failure of the conditions set forth in Section 7.3(a) or 7.3(b) and such breach cannot be or is not cured prior to the earlier of (i) thirty (30) days after written notice thereof is given by the Company to Parent and (ii) the Outside Date; provided , however , that the Company shall not have the right to terminate this Agreement pursuant to this Section 8.3(b) at any time when it is in breach of this Agreement and such breach would cause, or result in, the failure of any of the conditions set forth in Section 7.2(a) or 7.2(b ) to be satisfied; or

(c) if (i) all of the conditions set forth in Sections 7.1 and 7.2 have been and continue to be satisfied or waived (other than those conditions that by their nature cannot be satisfied other than at Closing), (ii) the Company has confirmed by written notice to Parent that it stands ready, willing and able to consummate the First Merger when required pursuant to Section 1.2 and (iii) Parent and Merger Sub fail to consummate the Mergers and other Transactions within four (4) Business Days of the date the Closing should have occurred pursuant to Section 1.2 (it being understood that during such four (4) Business Day period, Parent shall not be entitled to terminate this Agreement).

 

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Section 8.4 Termination by Parent . This Agreement may be terminated and the Mergers may be abandoned by written notice of Parent:

(a) at any time prior to the receipt of the Company Stockholder Approval if (i) a Change of Recommendation shall have occurred or the Company shall have failed to include in the Proxy Statement mailed to each holder of Company Common Shares the Company Board Recommendation; (ii) the Company shall have failed to reaffirm the Company Board Recommendation within ten (10) Business Days after both (x) an Acquisition Proposal shall have been made public and (y) receipt by the Company of a written request to do so from Parent; or (iii) there shall have been a material breach of the provisions of Section 5.3 or 5.4 which impairs, prevents or materially delays the consummation of the Transactions and, with respect to Section 5.4 , such breaches cannot be or are not cured reasonably promptly after written notice thereof; or

(b) at any time prior to the First Merger Effective Time if there has been a breach of any covenant or agreement or there shall be any inaccuracy in the representations or warranties set forth in this Agreement on the part of the Company, which breach, either individually or in the aggregate, would result in, if occurring or continuing on the Closing Date, the failure of the conditions set forth in Section 7.2(a) or 7.2(b) , and such breach cannot be or is not cured prior to the earlier of (i) thirty (30) days after written notice thereof is given by Parent to the Company and (ii) the Outside Date; provided , however , that Parent shall not have the right to terminate this Agreement pursuant to this Section 8.4(b) at any time when Parent or Merger Sub is in breach of this Agreement and such breach would cause, or result in, the failure of any of the conditions set forth in Section 7.3(a) or 7.3(b) to be satisfied.

Section 8.5 Effect of Termination .

(a) In the event of termination of this Agreement and the abandonment of the Mergers pursuant to this Article VIII , this Agreement shall become void and of no effect with no liability to any Person on the part of any Party hereto (or of any of its Representatives or affiliates); provided , however , and notwithstanding anything in the foregoing to the contrary, that (i) no such termination shall relieve the Company of any liability to pay the Termination Fee or Parent Expenses pursuant to this Section 8.5 , (ii) subject to the limitations set forth in Sections 8.5(e) and (f) , no such termination shall relieve or release any of the Parties from any liability or damages for willful and intentional breach or fraud, (iii) no such termination shall relieve or release Parent or Merger Sub from any liability or damages in the event that this Agreement is terminated (x) by the Company pursuant to Section 8.3(c) or (y) by Parent pursuant to Section 8.2(a) at any time the Company had the right to terminate this Agreement pursuant to Section 8.3(c) and (iv) the agreements of the parties contained in Section 6.1(b) , the provisions of this Section 8.5 and Article IX shall survive the termination of this Agreement. For the avoidance of doubt, nothing in this Section 8.5(a) shall limit or otherwise effect any Party’s rights under Section 9.14 , including any Party’s rights to specific performance and other injunctive and equitable relief as provided for therein.

(b) In the event that:

(i) (x) this Agreement is terminated by Parent or the Company pursuant to Section 8.2(a) or Section 8.2(b) , and (I) in the case of a termination pursuant to

 

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Section 8.2(b) , at or prior to the Stockholders Meeting a bona fide Acquisition Proposal shall have been publicly disclosed or announced, and such Acquisition Proposal shall not have been publicly withdrawn prior to the Stockholders Meeting, and (II) in the case of a termination pursuant to Section 8.2(a) , prior to such termination a bona fide Acquisition Proposal shall have been publicly disclosed or announced, and such Acquisition Proposal shall not have been publicly withdrawn, and provided that the Company Stockholder Approval shall not have been obtained at the Stockholders Meeting (including any adjournment or postponement thereof), and (y) within twelve (12) months after the date of such termination of this Agreement the Company shall have consummated any Acquisition Proposal or entered into a definitive agreement with respect to any Acquisition Proposal and such Acquisition Proposal is subsequently consummated (provided, that for purposes of this clause (y) the references to “20%” in the definition of “Acquisition Proposal” shall be deemed to be references to “50%”);

(ii) this Agreement is terminated by Parent pursuant to Section 8.4(a) ; or

(iii) this Agreement is terminated by the Company pursuant to Section 8.3(a) ; then the Company shall:

(A) in the case of clause (i) above, promptly, but in no event later than three (3) Business Days, after the date on which the Company consummates the Acquisition Proposal referred to in subclause (i)(y) above, pay Parent the Termination Fee by wire transfer of immediately available funds, less the amount of any Parent Expenses that shall have actually been paid as provided in Section 8.5(c) ;

(B) in the case of clause (ii) above, promptly but in no event later than three (3) Business Days after the date of such termination, pay Parent the Termination Fee by wire transfer of immediately available funds; and

(C) in the case of clause (iii) above, immediately prior to or substantially concurrently with such termination, pay Parent the Termination Fee by wire transfer of immediately available funds (it being understood that in no event shall the Company be required to pay the Termination Fee on more than one occasion).

(c) In the event that this Agreement is terminated by Parent or the Company pursuant to Section 8.2(b) and either (x) a bona fide Acquisition Proposal shall have been publicly disclosed or announced, and such Acquisition Proposal shall not have been publicly withdrawn prior to the Stockholders Meeting or (y) within twelve (12) months after the date of such termination of this Agreement the Company Board (or authorized committee thereof) shall have adopted (or resolved or authorized the Company to pursue) a (i) plan of bankruptcy or reorganization or (ii) a plan of liquidation or dissolution, then the Company shall pay to Parent or its designee(s), as the case may be (by wire transfer of immediately available funds), the reasonable and documented out-of-pocket fees and expenses incurred by Parent and Merger Sub in connection with this Agreement and the transactions contemplated by this Agreement including the fees and expenses of counsel, accountants, investment bankers, Financing Sources, experts and consultants in an aggregate amount not to exceed $6,000,000 (the “ Parent Expenses ”), which Parent Expenses shall be payable: (A) promptly but in no event later than

 

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three (3) Business Days after the date of any termination arising in the circumstances described in clause (x) above, (B) substantially concurrently with the filing of a plan of bankruptcy or reorganization in the case of clause (y)(i) above and (C) substantially concurrently with the distribution of the proceeds of any such liquidation or dissolution to the holders of Company Common Stock in the case of clause (y)(ii) above;

(d) Parent, Merger Sub and the Company acknowledge that the agreements contained in this Section 8.5 are an integral part of the transactions contemplated by this Agreement, and that, without these agreements, the parties would not enter into this Agreement. If the Company fails to pay the Termination Fee and/or Parent Expenses when due in accordance with Sections 8.5(b) and 8.5(c) , (i) the Company shall reimburse Parent for all of its costs and expenses incurred in connection with enforcement and collection of such amounts and (ii) the Termination Fee and Parent Expenses due shall accrue interest at a rate equal to the lower of the Prime Rate and the maximum rate permitted by applicable Law.

(e) Notwithstanding anything to the contrary in this Agreement, except for (i) an order of specific performance as and only to the extent expressly permitted by Section 9.14 and (ii) any willful and material breach by the Company of this Agreement, the parties hereto expressly acknowledge and agree that:

(i) Parent’s receipt of the Termination Fee and the Parent Expenses from the Company pursuant to Section 8.5(b) and Section 8.5(c) (together with any reimbursements due or interest thereon in accordance with Section 8.5(d) ), respectively, shall be the sole and exclusive remedy of Parent and Merger Sub and their respective affiliates against the Company, its Subsidiaries and any of their respective former, current, or future general or limited partners, stockholders, directors, officers, employees, managers, members, affiliates or agents (the “ Company Obligors ”) for any loss suffered with respect to this Agreement, the Transactions, the termination of this Agreement, the failure of the First Merger to be consummated or any breach of this Agreement by the Company.

(ii) In light of the difficulty of accurately determining actual damages with respect to the foregoing, upon any termination of this Agreement, (A) the payment of the Termination Fee pursuant to Section 8.5(b) , which constitutes a reasonable estimate of the monetary damages that will be suffered by Parent and Merger Sub by reason of breach or termination of this Agreement shall be in full and complete satisfaction of any and all monetary damages of Parent and Merger Sub arising out of or related to this Agreement, the transactions contemplated hereby and thereby (including, any breach by the Company that is not a willful and material breach), the termination of this Agreement, the failure to consummate the transactions contemplated by this Agreement, and any claims or actions under applicable Law arising out of any such breach, termination or failure against the Company Obligors and (B) after being paid such amounts in accordance with the terms of this Agreement (x) none of the Company Obligors shall have any further liability or obligation relating to or arising out of this Agreement or the transactions contemplated by this Agreement or any claims or actions under applicable Law arising out of any such breach, termination or failure and (y) in no event will Parent or Merger Sub be entitled to seek to recover or obtain against any of the Company Obligors any other damages, any recovery or judgment in excess of the Termination Fee, or any other remedy based on a claim in Law or in equity with respect thereto, including consequential, special, indirect or

 

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punitive damages for, or with respect to, this Agreement or the transactions contemplated hereby and thereby (including, any breach by the Company), the termination of this Agreement, the failure to consummate the transactions contemplated by this Agreement or any claims or actions under applicable Law arising out of any such breach, termination or failure.

(f) If the Company is required to make a payment to Parent pursuant to this Article VIII , then notwithstanding anything to the contrary in this Agreement, unless Parent shall have received, and notified the Company in writing of its receipt and directing that payment be made otherwise than into escrow as provided below, a tax opinion of counsel or a ruling from the IRS to the effect that Parent’s receipt of such payment will be treated as qualifying income with respect to Parent for purposes of Section 856(c)(2) and 856(c)(3) of the Code or shall be excluded from income for such purposes (a “ Positive Tax Opinion or Ruling ”), the aggregate amount of the payment to be paid to Parent pursuant to this Article VIII shall be placed into escrow as directed by Parent and the amounts payable to Parent shall be limited to the maximum amount (“ Allowed Fee ”) that can be paid without causing Parent’s receipt of its pro rata share of such funds to cause Parent to fail to meet the requirements of Sections 856(c)(2) and 856(c)(3) of the Code, determined as if the payment of such amount did not constitute qualifying income for such purposes, as determined by independent accountants to Parent. In the event that any payment to be made pursuant to this Article VIII exceeds the Allowed Fee, then such excess amount (the “ Escrowed Fee ”) shall be retained by the escrow agent in a separate interest-bearing, segregated account for the account of the Company. Parent shall pay all costs associated with obtaining any tax opinion of counsel or ruling from the IRS described above. The Escrowed Fee shall be fully disbursed (and therefore any unpaid portion of the payment pursuant to this Article VIII shall be paid to Parent) upon receipt of a Positive Tax Opinion or Ruling. To the extent not previously paid, upon any determination by independent accountants to Parent that any additional amount of the Escrowed Fee may be disbursed to Parent without causing Parent to fail to meet the requirements of Sections 856(c)(2) and 856(c)(3) of the Code, determined as if the payment of such amount did not constitute qualifying income for such purposes, the determination of such independent accountants shall be provided to the escrow agent and such additional amount shall be disbursed. At the end of the second calendar year beginning after the date on which the Escrowed Fee was first deposited with the escrow agent (or earlier if directed by Parent), any remainder of the Escrowed Fee (together with interest thereon) then being held by the escrow agent shall be disbursed to the Company and, in the event that the payment pursuant to this Article VIII has not by then been paid in full, such unpaid portion shall be deemed forgiven. Parent shall bear any and all expenses associated with the escrow of the Escrowed Fee. Parent is hereby granted the power of attorney on behalf of the Company to execute, acknowledge, swear to and deliver all such documents required in connection with the foregoing escrow account, such power to be irrevocable and coupled with an interest.

ARTICLE IX

MISCELLANEOUS

Section 9.1 Amendment and Modification; Waiver .

(a) Subject to applicable Law and Section 6.4(f) , this Agreement may be amended, modified and supplemented, whether before or after receipt of the Company Stockholder Approval, if applicable, by written agreement of Parent and the Company; provided ,

 

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however , that after the receipt of the Company Stockholder Approval, no amendment shall be made which by Law or in accordance with the rules of the NYSE requires further approval by the stockholders of the Company without obtaining such further approval. Notwithstanding anything to the contrary contained herein, this Section 9.1(a) , and Section 9.9(b) Section 9.11(a) and (c) , Section 9.12 , Section 9.13 and Section 9.15 (and any other provision of this Agreement to the extent a modification, waiver or termination of such provision would adversely modify the substance of any of the foregoing provisions in any manner that is materially adverse to any Financing Source) may not be modified, waived or terminated in a manner that is materially adverse in any respect to any Financing Source without the prior written consent of such Financing Source.

(b) At any time and from time to time prior to the First Merger Effective Time, any Party or Parties may, subject to applicable Law and except as otherwise set forth herein, (i) extend the time for the performance of any of the obligations or other acts of the other Party or Parties, as applicable, (ii) waive any inaccuracies in the representations and warranties made to such Party or Parties contained herein or in any document delivered pursuant hereto, and (iii) waive compliance with any of the agreements or conditions for the benefit of such Party or Parties contained herein. Any agreement on the part of a Party or Parties to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such Party or Parties, as applicable. The failure of a Party to assert any of its rights under this Agreement or otherwise shall not constitute a waiver of those rights. No single or partial exercise of any right, remedy, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. Any waiver shall be effective only in the specific instance and for the specific purpose for which given and shall not constitute a waiver to any subsequent or other exercise of any right, remedy, power or privilege hereunder.

Section 9.2 Non-Survival of Representations and Warranties . None of the representations, warranties, covenants and agreements in this Agreement or in any schedule, instrument or other document delivered pursuant to this Agreement, including any rights arising out of any breach of such representations, warranties, covenants, and agreements, shall survive the First Merger Effective Time; provided , that this Section 9.2 shall not limit any covenant or agreement of the Parties which by its terms contemplates performance after the First Merger Effective Time, which shall each survive. The Confidentiality Agreement will survive termination of this Agreement in accordance with its terms.

Section 9.3 Expenses . Except as otherwise expressly provided in this Agreement, all Expenses incurred in connection with this Agreement and the Transactions shall be paid by the Party incurring such Expenses, whether or not the Transactions are consummated. Notwithstanding the foregoing or anything to the contrary contained herein, each of Parent and the Company shall pay one-half (50%) (i) of the Expenses related to printing, filing and mailing the Proxy Statement and Form S-4 (and any amendments or supplements thereto) and (ii) of any documentary, sales, use, real property transfer, real property gains, registration, value-added, transfer, stamp, recording and other similar Taxes, fees, and costs together with any interest thereon, penalties, fines, costs, fees, additions to tax or additional amounts with respect thereto incurred in connection with this Agreement and the Transactions.

 

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Section 9.4 Notices . All notices, requests, claims, consents, demands and other communications hereunder shall be in writing and shall be deemed given if delivered to the applicable Party (i) personally (notice deemed given upon receipt), (ii) telecopied (notice deemed given upon confirmation of receipt), (iii) sent by a nationally recognized overnight courier service, such as Federal Express (notice deemed given upon receipt of proof of delivery) or (iv) electronic mail (provided, that any such transmission by electronic mail shall be followed by a copy delivered in accordance with the foregoing clauses (i) or (iii)) (notice deemed given on the date sent if sent during normal business hours of the recipient, and on the next Business Day, if sent after normal business hours of the recipient). All notices hereunder shall be delivered as set forth below, or pursuant to such other instructions as may be designated in writing by the Party to receive such notice, and a copy of each notice shall also be sent via e-mail.

if to Parent or Merger Sub, to:

 

Apollo Commercial Real Estate Finance, Inc.

c/o Apollo Global Management, LLC

9 W. 57 th Street, 43 rd Floor

New York, NY 10019

Attention: Stuart A. Rothstein

Facsimile: (646) 219-3826

Email:   srothstein@apollolp.com
with copies to (which shall not constitute notice):
Apollo Commercial Real Estate Finance, Inc. Special Committee
Apollo Commercial Real Estate Finance, Inc.

c/o Apollo Global Management, LLC

9 West 57 th Street, 43 rd Floor

New York, New York 10019

Attention: Jeffrey M. Gault, Chairman of Apollo Commercial Real Estate Finance, Inc. Special Committee

Email:

  jeff@gaultaia.com
and  

Fried, Frank, Harris, Shriver & Jacobson LLP

One New York Plaza

New York, NY 10004

Attention: Steven Epstein, Esq.
                  Abigail Bomba, Esq.
Facsimile: 212-859-4000
Email:   steven.epstein@friedfrank.com
  abigail.bomba@friedfrank.com

 

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and
if to the Company, to:

Apollo Residential Mortgage, Inc.

c/o Apollo Global Management, LLC

9 W. 57 th Street, 43 rd Floor

New York, NY 10019

Attention: Michael A. Commaroto

Email:   mcommaroto@apollolp.com
with copies to (which shall not constitute notice):

Apollo Residential Mortgage, Inc. Special Committee

c/o 54 Madison Partners, LLC

520 Madison Avenue

New York, NY 10022

Attention: Thomas Christopoul, Chairman of Apollo Residential Mortgage, Inc.

Special Committee

Email:   tchristopoul@54madison.com
and

Latham & Watkins LLP

885 Third Avenue

New York, NY 10022

Attention: Raymond Lin, Esq.

                  Thomas Christopher, Esq.

Facsimile: (212) 751-4864

Email:   raymond.lin@lw.com
  thomas.christopher@lw.com
and

Apollo Residential Mortgage, Inc.

c/o Apollo Global Management, LLC

9 W. 57 th Street, 43 rd Floor

New York, NY 10019

Attention: Jessica L. Lomm

Facsimile: (646) 607-0298

Email:

  jlomm@apollolp.com

Section 9.5 Certain Definitions . For the purposes of this Agreement, the term:

Acceptable Confidentiality Agreement ” means any confidentiality agreement that contains provisions that are not materially less favorable to the Company than those contained in

 

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the Confidentiality Agreement, provided, that such confidentiality agreement need not contain standstill provisions or prohibit the making or amendment of an Acquisition Proposal and further, provided, that such confidentiality agreement does not prohibit disclosure to Parent of the identity of the counterparty and any terms proposed by such counterparty pursuant to Section 5.3(a) .

Acquisition Proposal ” means any proposal or offer (other than an offer or proposal made or submitted by or on behalf of Parent) with respect to any transaction or series of related transactions with a Person or “group” (as defined in the Exchange Act and the rules promulgated thereunder) concerning any (i) merger, consolidation, business combination, joint venture or similar transaction, (ii) acquisition (whether by tender offer, share exchange or other manner), (iii) issuance or sale or other disposition of Company Equity Interests, (iv) sale, lease, license or other disposition directly or indirectly of assets of the Company , or (v) any combination of any of the foregoing, in each case, which if consummated would result in any Person or group of Persons acquiring beneficial ownership (or the right to acquire beneficial ownership), directly or indirectly, of equity securities of the Company or any of its respective Subsidiaries representing 20% or more of the issued and outstanding equity securities of the Company (by vote or value), or 20% or more of the consolidated total assets (including, equity securities of its Subsidiaries), revenues or net income of the Company and its Subsidiaries, taken as a whole.

Adjustment Amount ” means an amount in cash equal to the product of (x) the Company Book Value, multiplied by (y) a fraction, the numerator of which is 0.03 and the denominator of which is 365, multiplied by (z) the number of days in the period beginning on and including the forty-fifth (45 th ) day following the Pricing Date and ending on but excluding the last Business Day prior to the Closing Date, which may be zero (0).

Aggregate Cash Consideration ” means an amount in cash equal to (i) the Company Adjusted Book Value minus (ii) the Common Stock Consideration Value minus (iii) any REIT Dividend declared or paid by the Company after the Pricing Date.

Benefit Plan ” means any “employee benefit plan” (within the meaning of Section 3(3) of ERISA) and any employment, consulting, termination, severance, change in control, separation, retention, stock option, restricted stock, restricted stock unit, profits interest unit, equity, outperformance, stock purchase, deferred compensation, bonus, incentive compensation, fringe benefit, health, medical, dental, vision, disability, accident, life insurance, welfare benefit, cafeteria, vacation, paid time off, perquisite, retirement, pension, profit sharing or savings or any other compensation or employee benefit plan, agreement, program, policy or other arrangement, whether or not subject to ERISA, whether funded or unfunded, written or unwritten, for the benefit of any current or former director of the Company or Parent, as applicable, or any individual who currently provides or has provided services to the Company or Parent, as applicable.

Business Day means any day ending at 11:59 p.m. (New York local time) other than a Saturday or Sunday or a day on which commercial banks in the City of New York are required or authorized by Law or executive order to close.

Code means the Internal Revenue Code of 1986, as amended.

 

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Common Stock Consideration Value ” means an amount equal to (i) the Parent Common Stock Per Share Value multiplied by (ii) the number of shares of Parent Common Stock comprising the Stock Consideration.

Company Adjusted Book Value ” means the Company Book Value multiplied by 0.8925.

Company Book Value ” means the value of the Company’s common book value as of the Pricing Date, determined in accordance with the methodologies set forth on Schedule C .

Company Bylaws ” means the bylaws of the Company, as amended and restated as of the date of this Agreement.

Company Charter means the charter of the Company as amended, amended and restated and supplemented and in effect on the date hereof.

Company Equity Plan means the Company’s 2011 Equity Incentive Plan.

Company Governing Documents ” means the Company Bylaws and the Company Charter.

Company Manager ” means ARM Manager, LLC, a Delaware limited liability company.

Company Material Adverse Effect ” means any Event that, individually or in the aggregate, (A) prevents or materially delays the consummation of the Transactions or (B) has a material adverse effect on the financial condition, business, assets, properties, or results of operations of the Company and the Company Subsidiaries, taken as a whole; provided , however , that, for purposes of this clause (B) no Event resulting or arising from the following shall be deemed to constitute a Company Material Adverse Effect or shall be taken into account when determining whether a Company Material Adverse Effect has occurred or is reasonably likely to exist or occur: (i) any changes in general United States or global economic conditions or in the capital, financial, credit, mortgage or securities markets generally, including changes in interest or exchange rates, in each case to the extent that the Company and its Subsidiaries are not disproportionately affected thereby as compared to other companies operating in the same industry in which the Company operates, (ii) conditions (or changes therein) in the industry in which the Company operates, to the extent that the Company and its Subsidiaries are not disproportionately affected thereby as compared to other companies operating in the same industry in which the Company operates, (iii) any changes in Law, GAAP or interpretation thereof or in legal, political and/or regulatory conditions, in each case to the extent that the Company and its Subsidiaries are not disproportionately affected thereby as compared to other companies operating in the same industry in which the Company operates, (v) any actions expressly required by, or the failure to take any action expressly prohibited by, the terms of this Agreement or any actions taken at the request or with the consent of Parent or Merger Sub, (vi) except to the extent comprising a breach of the representations and warranties in Sections 3.5 and 3.6(a) or as would result in a failure of the condition set forth in Section 7.2(a) , any Event attributable to the announcement or pendency of this Agreement and the Transactions (including the Mergers) or the identity of Parent or the Parent Manager (or the identity of the Parent

 

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Manager’s direct or indirect parent entities), including any litigation arising therefrom (including any litigation arising from allegations of a breach of duty or violation of applicable Law), (vii) any failure by the Company to meet any internal or published projections, estimates or expectations of the Company’s revenue, earnings or other financial performance or results of operations for any period, or changes in the market price or trading volume of the Company Common Stock, in and of itself (it being understood that any Events giving rise or contributing to such failure or change that are not otherwise excluded from the definition of a “Company Material Adverse Effect” may be taken into account), (viii) Events arising out of changes in geopolitical conditions, acts of terrorism or sabotage, war (whether or not declared), the commencement, continuation or escalation of a war, acts of armed hostility, natural disasters or other force majeure events, including any material worsening of such conditions threatened or existing as of the date of this Agreement.

Company Permitted Liens ” means any (i) Liens relating to any Indebtedness incurred in the ordinary course of business consistent with past practice, (ii) Liens that result from any statutory or other Liens for Taxes or assessments that are not delinquent or the validity of which is being contested in good faith by appropriate proceedings and for which there are adequate reserves on the Company Financial Statements (if such reserves are required pursuant to GAAP), or that are otherwise not material, and (iii) any cashiers’, landlords’, workers’, mechanics’, carriers’, workmen’s, repairmen’s and materialmen’s Liens and other similar Liens imposed by Law and incurred in the ordinary course of business consistent with past practice that are not yet subject to penalty or the validity of which is being contested in good faith by appropriate proceedings and for which there are adequate reserves on the Company Financial Statements (if such reserves are required pursuant to GAAP), or that are otherwise not material.

Confidentiality Agreement ” means the Confidentiality Agreement, dated December 16, 2015, between Parent and the Company.

Contract ” means any legally binding contract, agreement, license, lease, commitment, understanding or other obligation, whether oral or written.

DRIP ” means the Company’s Direct Stock Purchase and Dividend Reinvestment Plan.

ERISA ” means the Employee Retirement Income Security Act of 1974, as amended, and the regulations promulgated and rulings issued thereunder.

Event means any change, effect, development, circumstance, condition, state of facts, event or occurrence.

Excluded Party ” means any Person, group of Persons or group that includes any Person or group of Persons, from whom the Company has received during the Go-Shop Period a bona fide written Acquisition Proposal, (i) that remains pending as of, and shall not have been irrevocably withdrawn prior to, the expiration of the Go-Shop Period, (ii) that the Company Board, or an authorized committee thereof, determines in good faith constitutes or would be reasonably expected to lead to a Superior Proposal and (iii) as of any date following the No-Shop Period Start Date, has not lapsed in accordance with its terms or been withdrawn.

 

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Expenses ” means all reasonable out-of-pocket expenses (including all fees and expenses of counsel, accountants, investment bankers, experts and consultants to a Party and its affiliates) incurred by a Party or on its behalf in connection with or related to the authorization, preparation, negotiation, execution and performance of this Agreement, the preparation, printing, filing and mailing of the Proxy Statement, and the Form S-4, the solicitation of stockholder approvals, any other filings with the SEC and all other matters related to the closing of the Mergers and the other Transactions.

Financing Sources ” means the Persons that commit, or have committed, to provide or otherwise enter into, or have entered into, agreements in connection with the Debt Financing in connection with the Transactions, and their officers, directors, managers, employees, controlling persons, advisors, attorneys and other representatives.

Indebtedness ” means with respect to any Person, (i) all indebtedness, notes payable, accrued interest payable or other obligations for borrowed money, whether secured or unsecured, (ii) all obligations under conditional sale or other title retention agreements, or incurred as financing, in either case with respect to property acquired by such Person, (iii) all obligations issued, undertaken or assumed as the deferred purchase price for any property or assets, (iv) all obligations under capital leases, (v) all obligations in respect of bankers acceptances or letters of credit, (vi) all obligations under interest rate cap or protection, swap, forward, collar or similar transaction or currency hedging transactions, (vii) all obligations to purchase, redeem, retire, defease or otherwise acquire for value any stock or Company Equity Interests or any warrants, rights or options to acquire such stock or Company Equity Interests, and (viii) any guarantee (other than customary non-recourse carve-out or “badboy” guarantees) of any of the foregoing, whether or not evidenced by a note, mortgage, bond, indenture or similar instrument.

Intellectual Property Rights ” means all rights in or to all U.S. or foreign: (i) inventions (whether or not patentable), patents and patent applications and any other governmental grant for the protection of inventions or industrial designs, (ii) trademarks, service marks, trade dress, logos, brand names, trade names and corporate names, whether registered or unregistered, and the goodwill associated therewith, together with any registrations and applications for registration thereof, (iii) copyrights, whether registered or unregistered, and any registrations and applications for registration thereof, (iv) trade secrets and confidential information, including know-how, concepts, methods, processes, designs, schematics, drawings, formulae, technical data, specifications, research and development information, technology, and business plans, (v) rights in databases and data collections (including knowledge databases, customer lists and customer databases), (vi) domain name registrations and (vii) all extensions, modifications, renewals, reissues, reexaminations, substitutions, restorations and reversions of any of the foregoing.

Intervening Event ” means an Event that first occurs after the date hereof, it being understood that in no event shall the receipt, existence or terms of an Acquisition Proposal or any matter relating thereto or consequence thereof constitute an Intervening Event.

Investment Company Act ” means the Investment Company Act of 1940, as amended, and the rules and regulations of the SEC promulgated thereunder.

 

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IRS ” means the U.S. Internal Revenue Service.

knowledge when used herein (A) with respect to Parent and Merger Sub means the actual knowledge, after reasonable due inquiry, of the persons named in Schedule A and (B) when used with respect to the Company means the actual knowledge, after reasonable due inquiry, of the persons named in Schedule B .

Law ” means any statute, code, rule, regulation, order, ordinance, judgment or decree or other pronouncement of any Governmental Entity having the effect of law.

Lien ” means any lien, pledge, hypothecation, mortgage, security interest, encumbrance, claim, infringement, interference, option, right of first refusal, preemptive right, community property interest or restriction of any nature (including any restriction on the voting of any security, any restriction on the transfer of any security or other asset, any restriction on the possession, exercise or transfer of any other attribute of ownership of any asset).

Manager ” means each of the Company Manager and the Parent Manager.

Merger Consideration Value ” means an amount equal to (i) the Preferred Stock Consideration Value plus (ii) the Common Stock Consideration Value plus (iii) the Aggregate Cash Consideration.

Merger Sub Governing Documents ” means (i) the charter of Merger Sub as in effect on the date hereof and (ii) the bylaws of Merger Sub as in effect on the date hereof.

NYSE ” means the New York Stock Exchange.

Order ” means an order, judgment, injunction, award, stipulation, decree, writ, ruling, subpoena, or verdict, entered, issued, made or rendered by a Governmental Entity.

Parent Common Stock ” means the common stock of Parent, par value $0.01 per share.

Parent Common Stock Per Share Value ” means $16.75; provided that such amount shall be adjusted inversely to any adjustment that is made to the number of shares of Parent Common Stock comprising the Stock Consideration in accordance with the definition thereof.

Parent Convertible Notes ” means Parent’s 5.5% Convertible Senior Notes due 2019 described in the First Supplemental Indenture, dated March 17, 2014 to the Indenture, dated as of March 17, 2014 between Parent, as issuer, and Wells Fargo Bank, National Association, as trustee.

Parent Equity Plan means Parent’s 2009 Equity Incentive Plan.

Parent Governing Documents ” means (i) the charter of Parent as amended and in effect on the date hereof and (ii) the bylaws of Parent, as amended and restated as of the date of this Agreement.

Parent Manager ” means ACREFI Manager, LLC, a Delaware limited liability company.

 

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Parent Material Adverse Effect ” means any Event that, individually or in the aggregate, (A) prevents or materially delays the consummation of the Transactions or (B) has a material adverse effect on the financial condition, business, assets, properties, or results of operations of Parent and the Parent Subsidiaries, taken as a whole; provided , however , that, for purposes of this clause (B) no Events resulting or arising from the following shall be deemed to constitute a Parent Material Adverse Effect or shall be taken into account when determining whether a Parent Material Adverse Effect has occurred or is reasonably likely to exist or occur: (i) any changes in general United States or global economic conditions or in the capital, financial, credit, mortgage or securities markets generally, including changes in interest or exchange rates, in each case to the extent that Parent and its Subsidiaries are not disproportionately affected thereby as compared to other companies operating in the same industry in which Parent operates, (ii) conditions (or changes therein) in the industry in which Parent operates, in each case to the extent that Parent and its Subsidiaries are not disproportionately affected thereby as compared to other companies operating in the same industry in which Parent operates (iii) any changes in Law, GAAP or interpretation thereof or in legal, political and/or regulatory conditions, in each case to the extent that Parent and its Subsidiaries are not disproportionately affected thereby as compared to other companies operating in the same industry in which Parent operates, (v) any actions expressly required by, or the failure to take any action expressly prohibited by, the terms of this Agreement or any actions taken at the request or with the consent of Parent or Merger Sub, (vi) except to the extent comprising a breach of the representations and warranties in Sections 4.5 and 4.6(a) or as would result in a failure of the condition set forth in Section 7.3(a) , any Event attributable to the announcement or pendency of this Agreement and the Transactions (including the Mergers), including any litigation arising therefrom (including any litigation arising from allegations of a breach of duty or violation of applicable Law), (vii) any failure by Parent to meet any internal or published projections, estimates or expectations of Parent’s revenue, earnings or other financial performance or results of operations for any period, or changes in the market price or trading volume of the Parent Common Stock, in and of itself (it being understood that any Events giving rise or contributing to such failure or change that are not otherwise excluded from the definition of a “Parent Material Adverse Effect” may be taken into account), (viii) Events arising out of changes in geopolitical conditions, acts of terrorism or sabotage, war (whether or not declared), the commencement, continuation or escalation of a war, acts of armed hostility, natural disasters or other force majeure events, including any material worsening of such conditions threatened or existing as of the date of this Agreement.

Parent Permitted Liens ” means any (i) Liens relating to any Indebtedness incurred in the ordinary course of business consistent with past practice, (ii) Liens that result from any statutory or other Liens for Taxes or assessments that are not delinquent or the validity of which is being contested in good faith by appropriate proceedings and for which there are adequate reserves on the Parent Financial Statements (if such reserves are required pursuant to GAAP), or that are otherwise not material, and (iii) any cashiers’, landlords’, workers’, mechanics’, carriers’, workmen’s, repairmen’s and materialmen’s Liens and other similar Liens imposed by Law and incurred in the ordinary course of business consistent with past practice that are not yet subject to penalty or the validity of which is being contested in good faith by appropriate proceedings and for which there are adequate reserves on the Parent Financial Statements (if such reserves are required pursuant to GAAP), or that are otherwise not material.

 

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Parent Series C Preferred Stock ” means the 8.00% Series C Cumulative Redeemable Perpetual Preferred Stock, par value $0.01 per share, of Parent, having the relative powers, preferences, rights, qualifications, limitations and restrictions attaching to such series of preferred stock as specified in the articles supplementary to the charter of Parent, in substantially the form attached hereto as Exhibit A .

Per Share Adjustment Amount ” means an amount equal to (i) the Adjustment Amount divided by (ii) the number of issued and outstanding shares of Company Common Stock as of the Pricing Date, on a fully diluted basis (calculated after giving effect to the vesting of all Company Restricted Shares as a result of the Transactions).

Per Share Common Cash Merger Consideration means an amount equal to (A) the Aggregate Cash Consideration divided by (B) the number of shares of Company Common Stock issued and outstanding as of the Pricing Date, on a fully diluted basis (calculated after giving effect to the vesting of all Company Restricted Shares as a result of the Transactions, including, for the avoidance of doubt, any Company Restricted Shares granted following the date hereof), rounded up to the nearest cent.

Per Share Common Stock Merger Consideration ” means a number of shares of Parent Common Stock equal to (i) the Stock Consideration divided by (ii) the number of issued and outstanding shares of Company Common Stock as of the Pricing Date, on a fully diluted basis (calculated after giving effect to the vesting of all Company Restricted Shares as a result of the Transactions).

Person ” or “ person ” means an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Entity, person (including a “person” as defined in Section 13(d)(3) of the Exchange Act) or other entity or organization.

Preferred Stock Consideration Value ” means an amount equal to (A) (x) twenty-five dollars ($25.00) multiplied by (y) the number of shares of Company Series A Preferred Stock outstanding as of the Pricing Date plus (B) all accumulated but unpaid dividends accrued on such shares of Company Series A Preferred Stock as of the Business Day prior to Closing.

Pricing Date ” means the date that is three (3) Business Days prior to the date on which the Proxy Statement and Form S-4 are mailed to the record holders of the Company in accordance with Section 5.4 .

Prime Rate ” means the rate of interest per annum publicly announced from time to time by JPMorgan Chase Bank as its prime rate in effect at its principal office in New York City.

Representatives means, when used with respect to Parent, Merger Sub or the Company, the directors, officers, employees, consultants, financial advisors, accountants, legal counsel, investment bankers, and other agents, advisors and representatives (including employees or representatives of the respective Managers) of Parent or the Company, as applicable, and its Subsidiaries.

 

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Stock Consideration ” means 13,400,000 validly issued, fully paid and nonassessable shares of Parent Common Stock, adjusted appropriately and proportionately to fully reflect the effect of any Parent stock split, reverse stock split, combination, exchange of shares or other similar transaction at any time during the period from the date hereof to the First Merger Effective Time.

Subsidiary ” or “ Subsidiaries ”, when used with respect to any Person, means any corporation, limited liability company, partnership or other organization, whether incorporated or unincorporated, that (x) is consolidated with such Person for financial reporting purposes under GAAP, or (y) of which (i) at least a majority of the outstanding shares of stock of, or other equity interests, having by their terms ordinary voting power to elect the board of directors or others governing body with respect to such corporation or other organization is, at the time of determination, directly or indirectly owned or controlled by such Person or by any one or more of its Subsidiaries, or by such Person and one or more of its Subsidiaries, (ii) with respect to a partnership, such Person or any other Subsidiary of such Person is a general partner of such partnership or (iii) with respect to a limited liability company that does not have a board of directors or governing body, such Person or any other Subsidiary of such Person that is a managing member of such limited liability company.

Superior Proposal ” means a bona fide written Acquisition Proposal made by a third party ( provided , that for purpose of this definition, the percentages in the definition of Acquisition Proposal shall be fifty percent (50%) rather than twenty percent (20%)) that did not result from a breach of Section 5.3 that the Company Board, or an authorized committee thereof, determines in its good faith business judgment (after consultation with its outside legal counsel and nationally recognized financial advisor), after taking into account all the terms of the Acquisition Proposal (including, without limitation, the Person making such proposal, all legal, financial and regulatory aspects of such proposal, the anticipated time of completion of the proposed transaction and the conditions for completion of such transaction), (A) is reasonably expected to be consummated in accordance with its terms, and (B) if consummated, would be more favorable from a financial point of view to the holders of Company Common Stock than the Mergers and the Transactions contemplated hereby (taking into account any offer by Parent to amend the terms of this Agreement or the other documents contemplated hereby).

Tax ” or “ Taxes ” means any and all taxes, levies, duties, tariffs, imposts and other similar charges and fees (together with any and all interest, penalties, additions to tax and additional amounts imposed with respect thereto) imposed by any Governmental Entity or domestic or foreign taxing authority, including, income, franchise, windfall or other profits, gross receipts, premiums, property, sales, use, net worth, capital stock, payroll, employment, social security, workers’ compensation, unemployment compensation, excise, withholding, ad valorem, stamp, transfer, value-added, gains tax and license, abandoned property, escheat, registration and documentation fees, severance, occupation, environmental, customs duties, disability, real property, personal property, registration, alternative or add-on minimum, or estimated tax, including any interest, penalty, or addition thereto, whether disputed or not.

Tax Return ” means any report, return, certificate, claim for refund, election, estimated tax filing or declaration filed or required to be filed with any Governmental Entity or domestic or foreign taxing authority with respect to Taxes, including any schedule or attachment thereto, and including any amendments thereof.

 

82


Termination Fee ” means (x) an amount equal to $7,500,000.00, if the Termination Fee becomes payable in connection with the termination of this Agreement (1) by the Company pursuant to Section 8.3(a) in connection with a Superior Proposal made by an Excluded Party or (2) by Parent pursuant to Section 8.4(a) in connection with a Change of Recommendation on account of a Superior Proposal made by an Excluded Party, and (y) an amount equal to $12,000,000.00, in all other circumstances.

Treasury Regulations ” means the income tax regulations, including any temporary or proposed regulations, promulgated under the Code, as such regulations may be amended from time to time.

Waiver Board Resolutions ” means resolutions of the Company Board granting the Parent Ownership Limit Waiver.

Waiver Representation Letter ” means a certificate containing representations and warranties of Parent with respect to its proposed acquisition and ownership of Common Stock provided by Parent to the Company in connection with the Parent Ownership Limit Waiver.

Section 9.6 Terms Defined Elsewhere . The following terms are defined elsewhere in this Agreement, as indicated below:

 

Agreement    Preamble
Allowed Fee    Section 8.5(f)
Alternative Acquisition Agreement    Section 8.3(a)
Articles of Merger    Section 1.3
Base Premium    Section 6.4(d)
Book-Entry Common Shares    Section 2.2(b)(i)
Book-Entry Preferred Shares    Section 2.2(b)(ii)
Change of Recommendation    Section 5.3(e)(i)(A)
Closing    Section 1.2
Closing Date    Section 1.2
Common Certificates    Section 2.2(b)(i)
Company    Preamble
Company Board Recommendation    Recitals
Company Board    Recitals
Company Common Shares    Section 2.1(a)(i)
Company Common Stock    Section 2.1(a)(i)

 

83


Company Disclosure Letter    Article III
Company Equity Interests    Section 3.2(a)
Company Financial Advisor    Section 3.20
Company Financial Statements    Section 3.6(a)
Company Insurance Policies    Section 3.21
Company Investments    Section 3.18
“Company Investment Contract”    Section 3.13(vi)
Company Material Contract    Section 3.13(b)
Company Parties    Section 4.24
Company Permits    Section 3.16(b)
Company Preferred Stock    Section 3.2(a)
Company Restricted Shares    Section 2.4(a)
Company SEC Documents    Section 3.6(a)
Company Service Provider    Section 3.11(d)
Company Stockholder Approval    Section 3.25
Company Subsidiary    Section 3.1(b)
Company Unaffiliated Stockholder Approval    Section 7.1(a)
Company Voting Debt    Section 3.2(a)
Cooperation Indemnitees    Section 6.16(b)
Covered Persons    Section 6.4(a)
Debt Financing    Section 6.16(d)
EDGAR    Section 3.6(b)
Excess Shares    Section 2.6
Exchange Act    Section 3.6(a)
Exchange Agent    Section 2.2(a)
Exchange Fund    Section 2.2(a)
Exchanged Restricted Share    Section 2.4(a)
Fiduciary Termination    Section 5.3(e)(ii)
First Merger    Recitals
First Merger Articles of Merger    Section 1.3
First Merger Effective Time    Section 1.3
First Merger Surviving Entity    Section 1.1(a)
Form S-4    Section 3.5
Fractional Share Consideration    Section 2.1(a)(i)
GAAP    Section 3.6(a)
Go-Shop Period    Section 5.3(a)
Governmental Entity    Section 3.5
Hedging Guidelines    Section 6.17(a)
Indemnification Agreements    Section 6.4(a)

 

84


Initial Outside Date    Section 8.2(a)
Injunction    Section 7.1(c)
Legal Proceeding    Section 3.10
Maryland Court    Section 9.11(b)
Merger Consideration    Section 2.1(a)(i)
Merger Sub    Preamble
Mergers    Recitals
MGCL    Recitals
No-Shop Period Start Date    Section 5.3(b)
Nonparty Affiliates    Section 9.15
Outside Date    Section 8.2(a)
Parent    Preamble
Parent Board    Recitals
Parent Disclosure Letter    Article IV
Parent Equity Awards    Section 4.2(a)
Parent Equity Interests    Section 4.2(a)
Parent Financial Advisor    Section 4.17
Parent Financial Statements    Section 4.6(a)
Parent Permits    Section 4.14(b)
Parent Preferred Stock    Section 4.2(a)
Parent SEC Documents    Section 4.6(a)
Parent Series A Preferred Stock    Section 4.2(a)
Parent Series B Preferred Stock    Section 4.2(a)
Parent Service Provider    Section 4.11(b)
Parent Subsidiary    Section 4.1(c)
Parent Voting Debt    Section 4.2(a)
Parties    Preamble
Party    Preamble
Parent Parties    Section 3.27
Per Common Share Merger Consideration    Section 2.1(a)(i)
Per Preferred Share Merger Consideration    Section 2.1(b)(ii)
Positive Tax Opinion or Ruling    Section 8.5(f)
Preferred Certificates    Section 2.2(b)(ii)
Preferred Stock Merger Consideration    Section 2.1(b)(ii)
Proxy Statement    Section 3.5
Qualified REIT Subsidiary    Section 5.1(k)
REIT    Section 3.12(b)
REIT Dividend    Section 6.15(a)
Related Party Transaction    Section 3.22
repurchase borrowings    Section 6.17(c)

 

85


Sarbanes-Oxley Act    Section 3.6(a)
SDAT    Section 1.3
SEC    Section 3.5
Second Merger    Recitals
Second Merger Articles of Merger    Section 1.3
Second Merger Effective Time    Section 1.3
Second Merger Surviving Entity    Section 1.1(b)
Second Outside Date    Section 8.2(a)
Securities Act    Section 3.6(a)
Stockholders Meeting    Section 5.4(c)
Stock Award Exchange Ratio    Section 2.4(b)
Takeover Statutes    Section 3.24
Taxable REIT Subsidiary    Section 3.12(l)
Transactions    Recitals

Section 9.7 Interpretation . When a reference is made in this Agreement to an Article, Section, Exhibit or Schedule, such reference is to an Article or Section of, or an Exhibit or Schedule to, this Agreement unless otherwise indicated. Whenever the words “include”, “includes” or “including” are used in this Agreement they shall be deemed to be followed by the words “without limitation,” unless the context expressly provides otherwise. As used in this Agreement, the term “affiliates” shall have the meaning set forth in Rule 12b-2 of the Exchange Act. The table of contents and headings set forth in this Agreement are for convenience of reference purposes only and shall not affect or be deemed to affect in any way the meaning or interpretation of this Agreement or any term or provision hereof. The words “hereof,” “herein” and “hereunder” and words of similar import, when used in this Agreement, refer to this Agreement as a whole and not to any particular provision of this Agreement, except to the extent otherwise specified. References in this Agreement to any item, document or information having been “delivered,” “made available” or any variation thereof means an item or document has been delivered or made available to the applicable recipient party by posting such item, document and information to, in the case of the Company, the “Project Apple – Target - DD” data room on watchdox.com, or in the case of Parent, the “Project Apple – Reverse Due Diligence” data room on watchdox.com, at least three (3) Business Days prior to the execution of this Agreement and not removed after it was posted. Any pronoun shall include the corresponding masculine, feminine and neuter forms, and the definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms. All terms defined in this Agreement have the defined meanings when used in any certificate or other document made or delivered pursuant hereto, unless otherwise defined therein. When reference is made herein to a Person, such reference shall be deemed to include all direct and indirect Subsidiaries of such Person unless otherwise indicated or the context otherwise requires. All references herein to the Subsidiaries of a Person shall be deemed to include all direct and indirect Subsidiaries of such Person unless otherwise indicated or the context otherwise requires. The Parties agree that they have been represented by counsel during the negotiation and execution of this Agreement and, therefore, waive the application of any Law, regulation, holding or rule of construction providing that ambiguities in an agreement or other document will be construed against the party drafting such agreement or document.

 

86


Section 9.8 Counterparts . This Agreement may be executed manually or by facsimile by the Parties, in any number of counterparts, each of which shall be considered one and the same agreement and shall become effective when a counterpart hereof shall have been signed by each of the Parties and delivered to the other Parties (including by means of electronic delivery), it being understood that the Parties need not sign the same counterpart. Signatures to this Agreement transmitted by facsimile transmission, by electronic mail in “portable document format” (“.pdf”), or by any other electronic means intended to preserve the original graphic and pictorial appearance of a document, will have the same effect as physical delivery of the paper document bearing the original signature.

Section 9.9 Entire Agreement; Third-Party Beneficiaries .

(a) This Agreement (including the Company Disclosure Letter, the Parent Disclosure Letter and the other documents and instruments referred to herein or delivered pursuant hereto) and the Confidentiality Agreement constitute the entire agreement among the Parties with respect to the subject matter hereof and thereof and supersede all other prior agreements (except that the Confidentiality Agreement shall be amended so that until the termination of this Agreement in accordance with Article VIII  hereof, Parent and Merger Sub shall be permitted to take the actions contemplated by this Agreement) and understandings, both written and oral, among the Parties or any of them with respect to the subject matter hereof and thereof.

(b) Except as provided in Section 6.4 , neither this Agreement (including the Company Disclosure Letter and the Parent Disclosure Letter and the other documents and instruments referred to herein) nor the Confidentiality Agreement are intended to confer upon any Person other than the Parties and, only with respect to Section 9.1(a) , this Section 9.9(b), Section 9.11(a) and (c) , Section 9.12 , Section 9.13 and Section 9.15 , the Financing Sources, any rights or remedies hereunder.

Section 9.10 Severability . If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by rule of Law or public policy in any jurisdiction, such term or other provision shall, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability and, unless the effect of such invalidity or unenforceability would prevent the Parties from realizing the major portion of the economic benefits of the Transactions that they currently anticipate obtaining therefrom, shall not render invalid or unenforceable the remaining terms and provisions of this Agreement or affect the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in an acceptable manner in order that the Transactions be consummated as originally contemplated to the fullest extent possible and the relevant provision may be given effect to the fullest extent possible consistent with applicable Law.

 

87


Section 9.11 Governing Law; Jurisdiction .

(a) This Agreement, and all claims or causes of actions (whether at Law, in equity, in contract or in tort) that may be based upon, arise out of, or are related to, this Agreement or the negotiation, execution or performance of this Agreement, shall be governed by, and construed in accordance with, the Laws of the State of Maryland applicable to agreements entered into and performed entirely therein by residents thereof, without giving effect to conflicts of laws principles (whether of the State of Maryland or any other jurisdiction that would cause the application of the Laws of any jurisdiction other than the State of Maryland).

(b) All Legal Proceedings and proceedings arising out of or relating to this Agreement shall be heard and determined exclusively in the Circuit Court for Baltimore City (Maryland) (the “ Maryland Court ”). Each of the Parties hereby irrevocably and unconditionally agrees to request and/or consent to the assignment of any such proceeding to the Maryland Court’s Business and Technology Case Management Program. Each of the Parties hereby irrevocably and unconditionally (a) consents and submits to the exclusive jurisdiction of the Maryland Court for the purpose of any Legal Proceeding brought by any Party arising out of or relating to this Agreement or any ancillary agreement, (b) agrees not to commence any such action or proceeding except in the Maryland Court, (c) agrees that any claim with respect to any such action or proceeding shall be heard and determined in the Maryland Court, (d) waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to venue of any such action or proceeding in the Maryland Court, and (e) waives, to the fullest extent permitted by Law, the defense of an inconvenient forum to the maintenance of such action or proceeding in the Maryland Court. Each of the Parties agrees that a final judgment in any such action or proceeding shall be conclusive, subject to any rights of appeal, and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Law. Nothing in this Agreement shall, however, limit or affect the rights of any Party to pursue appeals from any judgments or orders of the Maryland Court as provided by Law. Each Party irrevocably consents to service of process in the manner provided for notices in Section 9.4 . Nothing in this Agreement will affect the right of any Party to serve process in any other manner permitted by Law.

(c) Notwithstanding anything in preceding clause (b) to the contrary, and without limiting anything set forth in Section 9.15 , each of the Parties agrees that it will not bring or support any suit, action or other proceeding (whether at law, in equity, in contract, in tort or otherwise) against any Financing Source in any way relating to this Agreement or any of the transactions contemplated by this Agreement (including the Transactions and any related financing), or the performance thereof, in any forum other than any New York State court or federal court sitting in the County of New York and the Borough of Manhattan (and appellate courts thereof). The parties hereto further agree that all of the provisions of Section 9.12 relating to waiver of jury trial shall apply to any suit, action or other proceeding referenced in this Section 9.11(c) .

Section 9.12 Waiver of Jury Trial . EACH PARTY HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT

 

88


AND ANY OF THE AGREEMENTS DELIVERED IN CONNECTION HEREWITH OR THE MERGERS AND OTHER TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE EITHER OF SUCH WAIVERS, (B) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVERS, (C) IT MAKES SUCH WAIVERS VOLUNTARILY, AND (D) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.12 .

Section 9.13 Assignment . Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned, in whole or in part, by any of the Parties (whether by operation of Law or otherwise) without the prior written consent of the other Parties, except that (a) Merger Sub (and after the Closing, the Second Merger Surviving Entity) may assign, in its sole discretion and without the consent of any other Party, any or all of its rights, interests and obligations hereunder to Parent or one or more controlled affiliates of Parent and (b) Parent and Merger Sub may assign, in their sole discretion and without the consent of any other Party, any or all of their rights, interests and obligations hereunder to any of their Financing Sources from time to time as collateral security. Any attempt to make any such assignment without such consent shall be null and void. Subject to the preceding sentences, but without relieving any Party of any obligation hereunder, this Agreement will be binding upon, inure to the benefit of and be enforceable by the Parties and their respective successors and permitted assigns.

Section 9.14 Enforcement; Remedies .

(a) Except as otherwise provided herein, any and all remedies herein expressly conferred upon a Party will be deemed cumulative with and not exclusive of any other remedy conferred hereby, or by Law or equity upon such Party, and the exercise by a Party of any one remedy will not preclude the exercise of any other remedy.

(b) The Parties 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.

(c) The Parties’ right of specific enforcement is an integral part of the Transactions and each Party hereby waives any objections to the grant of the equitable remedy of specific performance to prevent or restrain breaches of this Agreement by any other Party (including any objection on the basis that there is an adequate remedy at Law or that an award of specific performance is not an appropriate remedy for any reason at Law or equity), and each Party shall be entitled to an injunction or injunctions and to specifically enforce the terms and provisions of this Agreement to prevent or restrain breaches or threatened breaches of, or to enforce compliance with, the covenants and obligations of such Party under this Agreement all in accordance with the terms of this Section 9.14 . In the event any Party seeks an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement, such Party shall not be required to provide any bond or other security in connection with such order or injunction all in accordance with the terms of this Section 9.14 .

 

89


Section 9.15 No Recourse . Without limiting any other provision in this Agreement (including the rights of the Financing Sources set forth in Section 9.9(b) ), this Agreement may only be enforced against, and any claims or causes of action that may be based upon, arise out of or relate to this Agreement, or the negotiation, execution or performance of this Agreement, may only be made against the Parties. No Person who is not a Party, including any current, former or future director, officer, employee, incorporator, member, partner, manager, stockholder, affiliate or assignee of, and any financial advisor, Financing Source or lender to any Party, or any current, former or future director, officer, employee, incorporator, member, partner, manager, stockholder, affiliate or assignee of the foregoing (collectively, the “ Nonparty Affiliates ”) shall have any liability for any obligations or liabilities of the parties hereto or for any claim (whether in tort, contract or otherwise), based on, in respect of, or by reason of, this Agreement or the Transactions or in respect of any oral representations made or alleged to be made in connection herewith and, to the maximum extent permitted by Law (other than as set forth in this Agreement and the other transaction documents), each Party hereby waives and releases all such liabilities, claims, causes of action and obligations against any such Nonparty Affiliates of another Party. In no event shall the Company or any of its affiliates, and the Company agrees not to, and to cause its affiliates not to, (A) seek to enforce this Agreement against, make any claims for breach of this Agreement against, or seek to recover monetary damages from, any Financing Source or (B) seek to enforce the commitments against, make any claims for breach of the Debt Financing commitments against, or seek to recover monetary damages from, or otherwise sue, the Financing Sources for any reason, including in connection with the Debt Financing commitments or the obligations of the Financing Sources thereunder. Nothing in this Section 9.15 shall in any way limit or qualify the obligations and liabilities of the parties to the Debt Financing commitments to each other or in connection therewith.

(Remainder of Page Intentionally Left Blank)

 

90


IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this Agreement to be signed by their respective officers thereunto duly authorized as of the date first written above.

 

APOLLO COMMERCIAL REAL ESTATE FINANCE, INC.
By:  

/s/ Stuart A. Rothstein

Name:   Stuart A. Rothstein
Title:   President and Chief Executive Officer
ARROW MERGER SUB, INC.
By:  

/s/ Stuart A. Rothstein

Name:   Stuart A. Rothstein
Title:   President

 

[Signature Page to Agreement and Plan of Merger]


APOLLO RESIDENTIAL MORTGAGE, INC.
By:  

/s/ Michael A. Commaroto

Name:   Michael A. Commaroto
Title:   President and Chief Executive

 

[Signature Page to Agreement and Plan of Merger]

Exhibit 2.2

Execution Version

ASSET PURCHASE AND SALE AGREEMENT

by and among

ATHENE ANNUITY AND LIFE COMPANY,

ATHENE ANNUITY & LIFE ASSURANCE COMPANY,

and

APOLLO COMMERCIAL REAL ESTATE FINANCE, INC.

Dated: February 26, 2016


Table of Contents

 

         Page  

ARTICLE I Definitions and Rules of Construction

     1   

1.1

 

Definitions

     1   

1.2

 

Rules of Construction

     6   

ARTICLE II Purchase and Sale

     7   

2.1

 

Closing

     7   

2.2

 

Sale and Purchase of the Assets

     7   

2.3

 

Nonassignable Assets

     8   

2.4

 

Excluded Assets and Excluded Liabilities

     9   

2.5

 

Payments at the Closing

     10   

2.6

 

Set-Off

     10   

2.7

 

Allocation of the Purchase Price

     10   

ARTICLE III Representations and Warranties of Seller

     11   

3.1

 

Organization and Power

     11   

3.2

 

Authorization and Enforceability

     11   

3.3

 

No Violation

     11   

3.4

 

Authorizations and Consents

     12   

3.5

 

Title to Assets; Assets in Book-Entry Form

     12   

3.6

 

No Brokers

     12   

3.7

 

Disclaimer

     12   

ARTICLE IV Representations and Warranties of Buyers

     13   

4.1

 

Organization and Power

     13   

4.2

 

Authorization and Enforceability

     13   

4.3

 

No Violation

     13   

4.4

 

Authorizations and Consents

     14   

4.5

 

Financial Capacity

     14   

4.6

 

No Brokers

     14   

4.7

 

No Inducement or Reliance; Independent Assessment

     14   

ARTICLE V Covenants

     14   

5.1

 

Conduct of Seller; Merger Agreement Rights; Cooperation; Repurchase Agreements

     14   

5.2

 

Access to Information Prior to the Closing

     16   


5.3

 

Consents and Approvals

     16   

5.4

 

Public Announcements and Disclosure

     17   

5.5

 

Exclusivity

     17   

5.6

 

Post-Transfer Remittances

     17   

ARTICLE VI Conditions to Closing

     18   

6.1

 

Conditions to All Parties’ Obligations

     18   

6.2

 

Conditions to Seller’s Obligations

     18   

6.3

 

Conditions to Buyers’ Obligations

     19   

ARTICLE VII Deliveries by Seller at Closing

     19   

7.1

 

Officer’s Certificate

     19   

7.2

 

Receipt

     19   

7.3

 

Further Instruments

     20   

ARTICLE VIII Deliveries by Buyer at Closing

     20   

8.1

 

Officer’s Certificate

     20   

8.2

 

Receipt

     20   

8.3

 

Closing Consideration Amount

     20   

ARTICLE IX Survival

     20   

9.1

 

Survival

     20   

ARTICLE X Termination

     21   

10.1

 

Termination

     21   

10.2

 

Procedure and Effect of Termination

     22   

ARTICLE XI Miscellaneous

     22   

11.1

 

Expenses

     22   

11.2

 

Notices

     22   

11.3

 

Governing Law

     25   

11.4

 

Entire Agreement

     25   

11.5

 

Severability

     25   

11.6

 

Amendment

     26   

11.7

 

Effect of Waiver or Consent

     26   

11.8

 

Parties in Interest; Limitation on Rights of Others

     26   

11.9

 

Assignability

     26   

11.10

 

Jurisdiction; Court Proceedings; Waiver of Jury Trial

     27   

11.11

 

No Other Duties

     27   

11.12

 

Reliance on Counsel and Other Advisors

     27   

 

- ii -


11.13  

Remedies

     27   
11.14  

Specific Performance

     27   
11.15  

Counterparts

     28   
11.16  

Further Assurance

     28   

 

EXHIBIT A:    Unallocated Assets
EXHIBIT A-1:    Athene Iowa Asset Schedule
EXHIBIT A-2:    Athene Delaware Asset Schedule
SCHEDULE 1:    Pricing Methodology
SCHEDULE 2.2:    Sale and Purchase of Assets Prior to Closing
SCHEDULE 3.3:    No Violation
SCHEDULE 3.4(a):    Authorization and Consents
SCHEDULE 3.4(b):    Repurchase Agreements

 

- iii -


ASSET PURCHASE AND SALE AGREEMENT

ASSET PURCHASE AND SALE AGREEMENT, dated as of February 26, 2016, by and among Athene Annuity and Life Company, an Iowa stock life insurance company (“ Athene Iowa ”), Athene Annuity & Life Assurance Company, a Delaware stock life insurance company (“ Athene Delaware ” and, together with Athene Iowa, “ Buyers ” and each, a “ Buyer ”), and Apollo Commercial Real Estate Finance, Inc., a Maryland corporation (“ Seller ”).

RECITALS

WHEREAS, Seller has entered into that certain Agreement and Plan of Merger, dated as of the date hereof (the “ Merger Agreement ”), with Apollo Residential Mortgage, Inc., a Maryland corporation (“ AMTG ”), and Arrow Merger Sub, Inc., a Maryland corporation and wholly-owned subsidiary of Seller (“ Merger Sub ”), pursuant to which AMTG will merge with Merger Sub (the “ First Merger ”), with AMTG surviving the First Merger as a subsidiary of Seller and, thereafter, AMTG will merge with and into Seller (the “ Second Merger ” and, together with the First Merger, the “ Mergers ”) with Seller surviving the Second Merger;

WHEREAS, immediately following, and subject to, the consummation of the First Merger, Seller will indirectly own 100% of the Assets;

WHEREAS, Buyers desire to purchase from Seller or its applicable Subsidiaries, and Seller desires to sell, or to cause its applicable Subsidiaries to sell, to Buyers, the Assets upon the terms and subject to the conditions hereinafter set forth;

WHEREAS, on the date hereof, Athene USA Corporation, an Iowa corporation (“ Athene USA ”), and Seller are entering into that certain stock purchase agreement, pursuant to which Athene USA agreed to purchase shares of Seller’s common stock following the consummation of the Mergers, upon the terms and subject to the conditions set forth therein (the “ Stock Purchase Agreement ”); and

WHEREAS, on the date hereof, Athene USA has delivered that certain debt commitment letter to Seller, pursuant to which, upon the terms and subject to the conditions set forth therein, Seller may draw up to $200,000,000 (subject to potential reduction pursuant to the terms thereof) under a term facility (the “ Loan Agreement ”) which would be provided pursuant to the debt commitment letter (the “ Debt Financing ”).

NOW THEREFORE, in consideration of the premises and the representations, warranties, covenants and agreements contained in this Agreement, and intending to be legally bound hereby, the parties hereto agree as follows:

ARTICLE I

Definitions and Rules of Construction

1.1 Definitions .

As used in this Agreement, the following terms shall have the meanings set forth below:

Affiliate ” means, as to any Person, any other Person that, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. For purposes of this definition, “control” of a Person means the power, directly or indirectly, either to (a) vote 10% or more of the securities having ordinary voting power for the election of directors of such Person or (b) direct or cause the direction of the management and policies of such Person, whether by contract or otherwise; provided that, for purposes of this Agreement, neither Seller nor any Subsidiary thereof shall constitute an Affiliate of any Buyer, and no Buyers nor any Subsidiary thereof shall constitute an Affiliate of Seller.


Agreement ” means this Asset Purchase and Sale Agreement, as it may be amended from time to time.

AMTG ” has the meaning set forth in the Recitals.

Ancillary Documents ” means the documents being executed and delivered in connection with this Agreement and the Contemplated Transactions, including the receipt for the Closing Consideration Amount (in each case as such documents may be supplemented, amended or modified from time to time).

Assets ” means, collectively, the assets listed on Exhibit A , the Athene Iowa Assets and the Athene Delaware Assets.

Athene Delaware Assets ” shall mean each of the assets set forth on Exhibit   A-2 attached hereto, including the gross amount (without deducting any related costs, including taxes, internal and external costs for any vendor or service provider and the costs of any repurchase or other financing of such asset) of any principal, interest or other proceeds paid to Seller, AMTG or any of their respective Subsidiaries with respect to such asset or otherwise paid on or in respect of such asset from and after the Pricing Date through and including the Closing Date (or a later Post-Closing Transfer Date, if applicable); provided , however , that Exhibit   A-2 may be amended in accordance with Section 2.2(b) to (i) add any asset not currently set forth thereon that is purchased by AMTG, which thereafter will constitute an Athene Delaware Asset, or (ii) remove any asset currently set forth thereon that is sold by AMTG, which thereafter will no longer constitute an Athene Delaware Asset.

Athene Delaware Consideration Amount ” has the meaning set forth in Section 2.5(a).

Athene Iowa Assets ” shall mean each of the assets set forth on Exhibit   A-1 attached hereto, including the gross amount (without deducting any related costs, including taxes, internal and external costs for any vendor or service provider and the costs of any repurchase or other financing of such asset) of any principal, interest or other proceeds paid to Seller, AMTG or any of their respective Subsidiaries with respect to such asset or otherwise paid on or in respect of such asset from and after the Pricing Date through and including the Closing Date (or a later Post-Closing Transfer Date, if applicable); provided , however , that Exhibit   A-1 may be amended in accordance with Section 2.2(b) to (i) add any asset not currently set forth thereon that is purchased by AMTG, which thereafter will constitute an Athene Iowa Asset, or (ii) remove any asset currently set forth thereon that is sold by AMTG, which thereafter will no longer constitute an Athene Iowa Asset.

 

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Athene Iowa Consideration Amount ” has the meaning set forth in Section 2.5(a).

Athene USA ” has the meaning set forth in the Recitals.

Business Day ” means any day other than a Saturday, Sunday or day on which banks are closed in New York, New York. If any period expires on a day which is not a Business Day or any event or condition is required by the terms of this Agreement to occur or be fulfilled on a day which is not a Business Day, such period shall expire or such event or condition shall occur or be fulfilled, as the case may be, on the next succeeding Business Day.

Buyer Material Adverse Effect ” means, with respect to a Buyer, any Event that would be reasonably likely to prevent or materially delay such Buyer’s ability to consummate the Contemplated Transactions.

Buyer Representative ” means Athene USA.

Buyers ” has the meaning set forth in the Preamble.

Closing ” has the meaning set forth in Section 2.1.

Closing Consideration Amount ” has the meaning set forth in Section 2.5(a).

Closing Date ” has the meaning set forth in Section 2.1.

Closing Date Calculation Notice ” has the meaning set forth in Section 2.5(b).

Code ” means the Internal Revenue Code of 1986, as amended from time to time, or corresponding provisions of subsequent superseding federal revenue Laws.

Consents ” has the meaning set forth in Section 3.4(a).

Contemplated Transactions ” means the purchase and sale of the Assets as contemplated by this Agreement and the Ancillary Documents.

Contract ” means any legally binding contract, agreement, license, lease, commitment, understanding or other obligation, whether oral or written.

Cross-Receipt ” has the meaning set forth in Section 7.2.

Debt Financing ” has the meaning set forth in the Recitals.

DTC ” means the Depository Trust & Clearing Corporation.

Event means any change, effect, development, circumstance, condition, state of facts, event or occurrence.

 

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Excluded Assets ” has the meaning set forth in Section 2.4.

First Merger ” has the meaning set forth in the Recitals.

GAAP ” means United States Generally Accepted Accounting Principles.

Governmental Entity ” means any court, arbitral tribunal, administrative agency or commission or other governmental or other regulatory authority or agency, whether foreign, federal, state, local or supernational.

Injunction ” has the meaning set forth in Section 6.1(a).

Joinder Agreement ” means the letter agreement between Seller and Athene Holding, Ltd. dated December 23, 2015.

Law ” means any statute, code, rule, regulation, order, ordinance, judgment or decree or other pronouncement of any Governmental Entity having the effect of law.

Lien ” means any charge, claim, community property interest, pledge, condition, equitable interest, lien (statutory or other), encumbrance, option, security interest, mortgage, right of first refusal, or restriction of any kind, including any restriction on use, voting, transfer, receipt of income or exercise of any other attribute of ownership.

Litigation ” means any claim, action, suit, arbitration, alternative dispute resolution action or any other judicial or administrative proceeding, in Law or equity.

Loan Agreement ” has the meaning set forth in the Recitals.

Mergers ” has the meaning set forth in the Recitals.

Merger Agreement ” has the meaning set forth in the Recitals.

Merger Sub ” has the meaning set forth in the Recitals.

Nonassignable Asset ” has the meaning set forth in Section 2.3(a).

Notice of Disagreement ” has the meaning set forth in Section 2.6(a).

Order ” means an order, judgment, injunction, award, stipulation, decree, writ, ruling, subpoena, or verdict, entered, issued, made or rendered by a Governmental Entity.

Outside Purchase Date ” has the meaning set forth in Section 2.3(b).

Person ” or “ person ” means an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Entity, person (including a “person” as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder) or other entity or organization.

 

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Post-Closing Transfer Date ” has the meaning set forth in Section 2.3(b).

Pricing Date ” has the meaning set forth in the Merger Agreement.

Proxy Statement ” has the meaning set forth in the Merger Agreement.

Regulatory Approval ” means (i) with respect to Athene Iowa, any Consent with respect to the Contemplated Transactions required by the Iowa Insurance Division and (ii) with respect to Athene Delaware, any Consent with respect to the Contemplated Transactions required by the Delaware Department of Insurance.

Repurchase Agreements ” means the repurchase agreements and related agreements in respect of borrowings (though documented as sales and subsequent repurchases) collateralized by the Assets.

Required Consent ” means each Consent set forth on Schedule 3.4(a).

Resolution Notice ” has the meaning set forth in the Section 2.6(a).

Second Merger ” has the meaning set forth in the Recitals.

Seller ” has the meaning set forth in the Preamble.

Seller Material Adverse Effect ” means any Event that, individually or in the aggregate, (A) would be reasonably likely to prevent or materially delay Seller’s ability to consummate the Contemplated Transactions or (B) is materially adverse to the value of the Assets, taken as a whole; provided , however , that, for purposes of this clause (B) no Event resulting or arising from the following shall be deemed to constitute a Seller Material Adverse Effect or shall be taken into account when determining whether a Seller Material Adverse Effect has occurred or is reasonably likely to exist or occur: (i) any change in general United States or global economic conditions or in the capital, financial, credit, mortgage or securities markets generally, including changes in interest or exchange rates, (ii) any condition (or change therein) in the industry in which Seller operates, (iii) any change in Law, GAAP or interpretation thereof or in legal, political and/or regulatory conditions, (iv) any action taken at the request of the Buyer Representative, (v) any Event attributable to the announcement or pendency of this Agreement and the Contemplated Transactions, including any litigation arising therefrom, (vi) any failure by Seller or AMTG to meet any internal or published projections, estimates or expectations of Seller’s or AMTG’s revenue, earnings or other financial performance or results of operations for any period in and of itself (it being understood that any Event giving rise or contributing to any such failure or change that is not otherwise excluded from the definition of a “Seller Material Adverse Effect” may be taken into account) or (vii) any Event arising out of changes in geopolitical conditions, acts of terrorism or sabotage, war (whether or not declared), the commencement, continuation or escalation of a war, acts of armed hostility, natural disasters or other force majeure events, including any material worsening of such conditions threatened or existing as of the date of this Agreement; provided that notwithstanding the foregoing, with respect to clauses (i), (ii), (iii) and (vii) above, any such effect shall be taken into account in determining whether a Seller Material Adverse Effect has occurred or is reasonably likely to exist or occur only to the extent that such effect disproportionately adversely affects Seller or the Assets as compared to other companies in same industry in which the Seller operates or other assets similar to the Assets.

 

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Stock Purchase Agreement ” has the meaning set forth in the Recitals.

Stockholders Meeting ” has the meaning set forth in the Merger Agreement.

Subsidiary ” or “ Subsidiaries ”, when used with respect to any Person, means any corporation, limited liability company, partnership or other organization, whether incorporated or unincorporated, that (x) is consolidated with such Person for financial reporting purposes under GAAP, or (y) of which (i) at least a majority of the outstanding shares of capital stock of, or other equity interests, having by their terms ordinary voting power to elect the board of directors or others governing body with respect to such corporation or other organization is, at the time of determination, directly or indirectly owned or controlled by such Person or by any one or more of its Subsidiaries, or by such Person and one or more of its Subsidiaries or (ii) with respect to a partnership, such Person or any other Subsidiary of such Person is a general partner of such partnership.

Tax ” or “ Taxes ” means any and all taxes, levies, duties, tariffs, imposts and other similar charges and fees (together with any and all interest, penalties, additions to tax and additional amounts imposed with respect thereto) imposed by any Governmental Entity or domestic or foreign taxing authority, including, income, franchise, windfall or other profits, gross receipts, premiums, property, sales, use, net worth, capital stock, payroll, employment, social security, workers’ compensation, unemployment compensation, excise, withholding, ad valorem, stamp, transfer, value-added, gains tax and license, abandoned property, escheat, registration and documentation fees, severance, occupation, environmental, customs duties, disability, real property, personal property, registration, alternative or add-on minimum, or estimated tax, including any interest, penalty, or addition thereto, whether disputed or not.

Treasury Regulations ” means the regulations promulgated under the Code, as amended from time to time (including any successor regulations).

1.2 Rules of Construction .

Unless the context otherwise requires:

(a) a capitalized term has the meaning assigned to it;

(b) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP;

(c) references in the singular or to “him,” “her,” “it,” “itself,” or other like references, and references in the plural or the feminine or masculine reference, as the case may be, shall also, when the context so requires, be deemed to include the plural or singular, or the masculine or feminine reference, as the case may be;

(d) references to Articles, Sections, Exhibits and Schedules shall refer to articles, sections, exhibits and schedules of this Agreement, unless otherwise specified;

 

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(e) references to any party to this Agreement or any other agreement or document shall be deemed to refer to any Person that becomes (or became, if applicable in the case of an agreement or document other than this Agreement) a successor or permitted assign of such party, upon the occurrence thereof;

(f) references to any agreement or other document shall be to such agreement or other document (together with the schedules, exhibits and other attachments thereto) as it may have been or may hereafter be amended, modified, supplemented, waived or restated from time to time in accordance with its terms and the terms hereof (if applicable thereto);

(g) the headings in this Agreement are for convenience and identification only and are not intended to describe, interpret, define or limit the scope, extent or intent of this Agreement or any provision thereof;

(h) this Agreement shall be construed without regard to any presumption or other rule requiring construction against the party that drafted and caused this Agreement to be drafted;

(i) all monetary figures shall be in U.S. dollars unless otherwise specified; and

(j) references to “including” in this Agreement shall mean “including, without limitation,” whether or not so specified.

ARTICLE II

Purchase and Sale

2.1 Closing .

The closing of the Contemplated Transactions (the “ Closing ”) will take place at the offices of Fried, Frank, Harris, Shriver & Jacobson LLP, One New York Plaza, New York, NY 10004, immediately following the consummation of the First Merger in accordance with the terms of the Merger Agreement; provided , that the conditions set forth in Article VI have been satisfied or waived in accordance with this Agreement (other than any such conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or, to the extent permitted hereunder, waiver of such conditions at the Closing), or on such other date as the Buyer Representative and Seller may otherwise agree. The day on which the Closing actually occurs is referred to herein as the “ Closing Date .”

2.2 Sale and Purchase of the Assets .

(a) Subject to the terms and conditions set forth in this Agreement, at the Closing, (i) Seller shall, and shall cause its applicable Subsidiaries to, sell, transfer, assign and deliver (or cause to be sold, transferred, assigned and delivered) to Athene Iowa, and Athene Iowa shall purchase and acquire, all of Seller’s and its applicable Subsidiaries’ right, title and interest in and to the Athene Iowa Assets (other than any Nonassignable Assets), free and clear of all Liens and (ii) Seller shall, and shall cause its applicable Subsidiaries to, sell, transfer, assign and deliver (or cause to be sold, transferred, assigned and delivered) to Athene Delaware,

 

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and Athene Delaware shall purchase and acquire, all of Seller’s and its applicable Subsidiaries’ right, title and interest in and to the Athene Delaware Assets (other than any Nonassignable Assets), free and clear of all Liens.

(b) Exhibit A lists all of the Assets as of the date hereof. On a weekly basis, from the date hereof until the date that is 10 days prior to the scheduled date of the Stockholders Meeting as set forth in the Proxy Statement, the Buyer Representative and Seller will update Exhibits A , A-1 and A-2 to reflect (i) the purchase or sale of any Asset that complies with Schedule 2.2(b), (ii) the allocation of the Assets listed on Exhibit A between Exhibit A-1 and Exhibit A-2 as specified by the Buyer Representative in its sole discretion and (iii) any change in the allocation of the Assets between Exhibit A-1 and Exhibit A-2 as the Buyer Representative may specify in its sole discretion; provided , however , that no such allocation or change in allocation will be permitted if it would delay or impair the ability of the applicable Buyer to purchase the Assets on the Closing Date pursuant to the terms and conditions of this Agreement. If, as of the tenth (10 th ) day prior to the scheduled date of the Stockholders Meeting as set forth in the Proxy Statement, any Asset listed on Exhibit A has not been allocated by the Buyer Representative to Exhibit A-1 or Exhibit A-2 , then such Asset shall be deemed to be allocated to Exhibit A-1 . Following the Closing Date, the Buyer Representative and Seller will update Exhibits A-1 and A-2 to reflect any change in the allocation of the Nonassignable Assets between Exhibits A-1 and A-2 as the Buyer Representative may specify in its sole discretion; provided , however , that no such change in allocation will be permitted if it would delay or impair the ability of the applicable Buyer to purchase the Nonassignable Assets on the applicable Post-Closing Transfer Date pursuant to the terms and conditions of this Agreement.

2.3 Nonassignable Assets .

(a) Notwithstanding anything in this Agreement to the contrary, but without limiting Section 5.1(c), this Agreement shall not obligate Seller to sell, transfer or assign any Asset at the Closing if the attempted sale, transfer or assignment thereof would (i) constitute a breach of any obligation of Seller or any of its Subsidiaries under any Contract (including any Repurchase Agreement) to which such Asset is subject, (ii) require Seller to pay a termination or transfer fee (however described) under any Contract, or (iii) require a Required Consent that has not been obtained as of the Closing Date (a “ Nonassignable Asset ”).

(b) Without limiting Section 5.1(c), if, on any date after the Closing Date and through to the date that is fifteen (15) Business Days after the Closing Date, or such later date as mutually agreed by the Buyer Representative and Seller (the “ Outside Purchase Date ”), (i) all Required Consents required to permit the sale, transfer or assignment of a Nonassignable Asset to the applicable Buyer have been obtained, (ii) the assignment of such Nonassignable Asset to the applicable Buyer would not require Seller to pay a termination or transfer fee (however described) under a Repurchase Agreement or other Contract (or such fee has, at the sole discretion of Seller or to the extent required to comply with Section 5.1(c), been paid) and (iii) the representations and warranties set forth in Section 3.5 with respect to such Nonassignable Asset are true and correct as of such date and through and as of the date on which such Nonassignable Asset is transferred, conveyed and delivered to the applicable Buyer as though made at and as of such date (or Buyer Representative waives such condition), then Seller shall deliver written notice to the Buyer Representative specifying each such Nonassignable Asset and

 

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a closing date at least two (2) Business Days and no more than five (5) Business Days after the date of such notice for the sale, transfer or assignment of each such Nonassignable Asset to the applicable Buyer (a “ Post-Closing Transfer Date ”). On each Post-Closing Transfer Date, (i) Seller shall, and shall cause its applicable Subsidiaries to, sell, transfer, assign and deliver (or cause to be sold, transferred, assigned and delivered) to each applicable Buyer all of Seller’s and its applicable Subsidiaries’ right, title and interest in and to each Nonassignable Asset to which such Post-Closing Transfer Date relates free and clear of all Liens, (ii) subject to Section 2.6, each applicable Buyer shall pay to Seller or its applicable Subsidiary (or its designee(s)) the purchase price with respect to each such Nonassignable Asset calculated in accordance with Schedule   1 , except to the extent such Nonassignable Asset was previously taken into account in the calculation of the Closing Consideration Amount, and (iii) each applicable Buyer and each of Seller or any of its applicable Subsidiaries shall deliver counterpart signature pages to a Cross-Receipt in respect of such sales, executed by a duly authorized representative of each such Buyer and Seller or its applicable Subsidiary.

(c) If each Buyer stands ready, willing and able to effect the purchase of the Assets at all times during the period from and including the Closing Date through and including the Outside Purchase Date, and Seller shall have failed to transfer to Buyers, at the Closing and all Post-Closing Transfer Dates, collectively, all of the Assets, then, from and after the Outside Purchase Date, it shall not sell, transfer, assign or deliver to any other Person or otherwise dispose of any of the Nonassignable Assets without first providing Buyers with a right of first offer and right of first refusal with respect to such Nonassignable Asset; provided , however , that at such time as Seller shall have transferred to Buyers, in the aggregate on and after the Closing Date, Assets with an aggregate market value of $1.0 billion, such right of first offer and right of first refusal shall expire with respect to all remaining Nonassignable Assets on the one-hundred eightieth (180 th ) day following the Outside Purchase Date. For the avoidance of doubt, Seller shall have no obligations under this Section 2.3(c) in the event (x) either Buyer shall have failed to purchase any Asset when obligated pursuant to Section 2.2(a) or Section 2.3(b) or (y) Athene USA shall have failed to provide the Debt Financing when obligated pursuant to the terms and conditions of the Loan Agreement.

(d) Each Buyer that is purchasing Nonassignable Assets shall provide Seller with a completed and executed U.S. Internal Revenue Service W-9.

2.4 Excluded Assets and Excluded Liabilities .

Notwithstanding anything to the contrary contained herein, (i) no assets other than those set forth on Exhibit A , Exhibit   A-1 and Exhibit   A-2 attached hereto (or as amended in accordance with Section 2.2(b)) shall be included in the purchase and sale hereunder, and all such other assets of Seller and its Subsidiaries (the “ Excluded Assets ”) shall remain the property of Seller or its applicable Subsidiary, and (ii) in no event shall Seller or any Subsidiary of Seller delegate (or be deemed to delegate) to any Buyer, and in no event shall any Buyer assume (or be deemed to assume), any liability or obligation of Seller, any Subsidiary of Seller or any other Person (whether relating to any period prior to, on or after the Closing) pursuant to this Agreement or any Ancillary Document. For the avoidance of doubt, no Buyer shall have any obligation to pay any termination fee or other amount under any Repurchase Agreement or other Contract to which any Asset is subject or bound.

 

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2.5 Payments at the Closing .

(a) Each of the purchase price to be paid by Athene Iowa for the Athene Iowa Assets (the “ Athene Iowa Consideration Amount ”) and the purchase price to be paid by Athene Delaware for the Athene Delaware Assets (the “ Athene Delaware Consideration Amount ” and, together with the Athene Iowa Consideration Amount, the “ Closing Consideration Amount ”) shall be calculated based on the value of such Assets as of the Pricing Date in accordance with the methodology set forth on Schedule   1 attached hereto. Seller shall, upon the reasonable written request of the Buyer Representative and subject to the terms and conditions of the Merger Agreement, exercise Seller’s right pursuant to Schedule C of the Merger Agreement to request that AMTG challenge the pricing methodologies used in determining the Company Book Value pursuant to the Merger Agreement.

(b) Within five (5) Business Days following the Pricing Date Seller shall prepare and deliver to the Buyer Representative its initial calculations of the Athene Iowa Consideration Amount and the Athene Delaware Consideration Amount. At least three (3) Business Days prior to the Closing Date, Seller shall deliver to the Buyer Representative a written notice setting forth the calculation of the Athene Iowa Consideration Amount and the Athene Delaware Consideration Amount, in each case, less any amount thereof attributable to a Nonassignable Asset (the “ Closing Date Calculation Notice ”).

(c) At the Closing, (i) subject to Section 2.6, Athene Iowa shall pay to Seller in consideration for all of the Athene Iowa Assets (other than any Nonassignable Asset) an amount in cash equal to the Athene Iowa Closing Consideration Amount less any amount thereof attributable to a Nonassignable Asset as set forth in the Closing Date Calculation Notice, by wire transfer of immediately available funds to an account or accounts designated by Seller no fewer than three (3) Business Days prior to the Closing Date, (ii) subject to Section 2.6, Athene Delaware shall pay to Seller in consideration for all of the Athene Delaware Assets (other than any Nonassignable Asset) an amount in cash equal to the Athene Delaware Closing Consideration Amount less any amount thereof attributable to a Nonassignable Asset as set forth in the Closing Date Calculation Notice, by wire transfer of immediately available funds to an account or accounts designated by Seller no fewer than three (3) Business Days prior to the Closing Date, and (iii) Seller shall deliver the Assets (other than any Nonassignable Asset), or cause such Assets to be delivered, to each applicable Buyer free and clear of all Liens.

2.6 Set-Off . To the extent that Athene USA sets off, pursuant to the second sentence of Section 2.2(b)(ii) of the Loan Agreement, any portion of the amount payable by a Buyer pursuant to clause (ii) of the last sentence of Section 2.3(b), or pursuant to clause (i) or (ii) of Section 2.5(c), such portion so set off shall be deemed for all purposes of this Agreement to have been paid in accordance with Section 2.3(b) or 2.5(c), as applicable.

2.7 Allocation of the Purchase Price . Seller and Buyers agree to allocate the purchase price among the Assets in a manner consistent with Schedule 1 for U.S. federal, state and local Tax purposes.

 

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ARTICLE III

Representations and Warranties of Seller

Seller hereby represents and warrants to each Buyer as of the date hereof and as of the Closing Date as follows:

3.1 Organization and Power .

Seller is a corporation duly incorporated, validly existing and in good standing under the Laws of its jurisdiction of organization. Seller has full power and authority to execute, deliver and perform this Agreement and the Ancillary Documents to which it is a party and to consummate the Contemplated Transactions. Seller has all power and authority, and possesses all governmental licenses and permits necessary to enable it to own or lease and to operate its properties and assets and carry on its business as currently conducted, except such power, authority, licenses and permits the absence of which do not have a Seller Material Adverse Effect.

3.2 Authorization and Enforceability .

The execution and delivery of this Agreement and the Ancillary Documents to which Seller is a party and the performance by Seller of the Contemplated Transactions that are required to be performed by Seller have been duly authorized by Seller and no other corporate proceedings on the part of Seller (including, without limitation, any shareholder vote or approval) are necessary to authorize the execution, delivery and performance of this Agreement and the Ancillary Documents to which Seller is a party or the consummation of the Contemplated Transactions. This Agreement and each of the Ancillary Documents to be executed and delivered at the Closing by Seller will be, at the Closing, duly authorized, executed and delivered by Seller. Assuming the due authorization, execution and delivery of this Agreement by Buyers, this Agreement constitutes, and assuming the due authorization, execution and delivery of each Ancillary Document to which Seller is a party by each other party thereto, such Ancillary Document will constitute, a valid and legally binding agreements of Seller enforceable against Seller in accordance with their terms, subject to bankruptcy, insolvency, reorganization and other Laws of general applicability relating to or affecting creditors’ rights and to general equity principles.

3.3 No Violation .

(a) The execution and delivery by Seller of this Agreement and the Ancillary Documents to which Seller is a party, the consummation of the Contemplated Transactions that are required to be performed by Seller and the compliance with the terms of this Agreement and the Ancillary Documents to which Seller is a party will not (i) conflict with or violate any provision of the certificate of incorporation or bylaws of Seller, (ii) assuming that all consents, approvals and authorizations contemplated by Section 3.4 have been obtained and all filings described therein have been made, conflict with or violate in any material respect any Law applicable to Seller or by which its properties are bound or affected, or (iii) result in the creation of, or require the creation of, any Lien upon any of the Assets.

 

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(b) Except as set forth on Schedule 3.3 attached hereto, none of the execution, delivery or performance of this Agreement by Seller, the consummation by Seller of the Contemplated Transactions or the compliance by Seller with any of the provisions of this Agreement will accelerate the performance required by, result in any termination, cancellation or modification of, or loss of benefit under, violation or breach of, or constitute (with or without notice or lapse of time or both) a default (or give rise to any right, including, but not limited to, any right of termination, amendment, cancellation or acceleration) under, any of the terms, conditions or provisions of any Contract to which Seller is a party or by which the Assets are bound.

(c) The Contemplated Transactions are not subject to any “bulk transfer” or similar Law.

3.4 Authorizations and Consents .

(a) Except as set forth on Schedule 3.4(a), no consents, licenses, approvals or authorizations of, or registrations, declarations or filings with, any Governmental Entity or other Person (“ Consents ”) are required to be obtained or made by Seller or any of its Subsidiaries (including any Person that has become a Subsidiary of Seller pursuant to the Mergers) in connection with the execution, delivery and performance of this Agreement or any Ancillary Documents to which Seller is, or is to be, a party or the consummation by Seller or its Subsidiaries (including any Person that has become a Subsidiary of Seller pursuant to the Mergers) of the Contemplated Transactions.

(b) Schedule 3.4(b) sets forth a true and complete list of all the Repurchase Agreements (and no other Contracts).

3.5 Title to Assets ; Assets in Book-Entry Form .

Immediately after the Closing (or with respect to each Nonassignable Asset, immediately after the transfer of such Asset to the applicable Buyer on the applicable Post-Closing Transfer Date), (i) the applicable Buyer will have good and valid title to all of the Assets transferred to such Buyer and (ii) such Assets will be free and clear of all Liens other than any Liens created by such Buyer. All Assets are held in book-entry form by DTC.

3.6 No Brokers .

Except for Houlihan Lokey Capital, Inc. (whose fees will be paid by Seller), no broker, investment banker, financial advisor or other Person is entitled to receive any broker’s, finder’s, financial advisor’s or other similar fee or commission in connection with this Agreement or the Contemplated Transactions based upon arrangements made by or on behalf of Seller.

3.7 Disclaimer .

Notwithstanding anything to the contrary contained in this Agreement, neither Seller nor any of its Affiliates, representatives or advisors has made, or shall be deemed to have made, to Buyers or any other Person any representation or warranty other than those expressly made by Seller in this Article III.

 

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ARTICLE IV

Representations and Warranties of Buyers

Each Buyer hereby, severally and not jointly, represents and warrants to Seller as of the date hereof and as of the Closing Date as follows:

4.1 Organization and Power .

Such Buyer is a stock life insurance company duly formed, validly existing and in good standing under the Laws of its jurisdiction of domicile and has full power and authority to execute and deliver this Agreement and the Ancillary Documents to which it is a party, to perform its obligations hereunder and thereunder and to consummate the Contemplated Transactions.

4.2 Authorization and Enforceability .

The execution and delivery of this Agreement and the Ancillary Documents to which such Buyer is a party and the performance by such Buyer of the Contemplated Transactions have been duly authorized by such Buyer and no other corporate proceedings on the part of such Buyer (including, without limitation, any shareholder vote or approval) are necessary to authorize the execution, delivery and performance of this Agreement and the Ancillary Documents to which such Buyer is a party or the consummation of the Contemplated Transactions. This Agreement is, and each of the Ancillary Documents to be executed and delivered at the Closing by such Buyer will be at the Closing, duly authorized, executed and delivered by such Buyer. Assuming the due authorization, execution and delivery of this Agreement by Seller and each other Buyer, this Agreement constitutes, and assuming the due authorization, execution and delivery of each Ancillary Document to which such Buyer is a party by each other party thereto, such Ancillary Document will constitute, a valid and legally binding agreements of such Buyer enforceable against such Buyer, in accordance with their terms, subject to bankruptcy, insolvency, reorganization and other Laws of general applicability relating to or affecting creditors’ rights and to general equity principles.

4.3 No Violation .

The execution and delivery by such Buyer of this Agreement and the Ancillary Documents to which such Buyer is a party, the consummation of the Contemplated Transactions and the compliance with the terms of this Agreement and the Ancillary Documents to which such Buyer is a party will not (a) conflict with or violate any provision of the certificate of incorporation, bylaws or similar organizational documents of such Buyer, or (b) assuming that all consents, approvals and authorizations contemplated by Section 4.4 have been obtained and all filings described therein have been made, conflict with or violate in any material respect any Law applicable to such Buyer or by which its respective properties are bound or affected. Neither such Buyer nor its Affiliates are subject to any Contract that would impair or delay such Buyer’s ability to consummate the Contemplated Transactions.

 

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4.4 Authorizations and Consents .

No Consents other than the Regulatory Approval applicable to such Buyer are required to be obtained or made by such Buyer in connection with the execution, delivery, performance, validity and enforceability of this Agreement or any Ancillary Documents to which such Buyer is, or is to be, a party or the consummation by such Buyer of the Contemplated Transactions.

4.5 Financial Capacity .

Such Buyer has and will have available on the Closing Date and each Post-Closing Transfer Date (if any), capital and liquidity in amounts that are sufficient to pay the Closing Consideration Amount as required by and in accordance with this Agreement.

4.6 No Brokers .

Except for Athene Asset Management, L.P. (whose fees will be paid by such Buyer), no broker, investment banker, financial advisor or other Person is entitled to receive any broker’s, finder’s, financial advisor’s or other similar fee or commission in connection with this Agreement or the Contemplated Transaction based upon arrangements made by or on behalf of such Buyer.

4.7 No Inducement or Reliance; Independent Assessment .

(a) Such Buyer has not been induced by and has not relied upon any representations, warranties or statements, whether express or implied, made by Seller (or its Affiliates, officers, directors, employees, agents or representatives) that are not expressly set forth in Article III hereof, whether or not any such representations, warranties or statements were made in writing or orally.

(b) Such Buyer acknowledges that Seller (or its Affiliates, officers, directors, employees, agents or representatives) does not make, will not make and has not made any representation or warranty, express or implied, as to the prospects of the Assets or their profitability for such Buyer, or with respect to any forecasts, projections or business plans made available to such Buyer (or its Affiliates, officers, directors, employees, agents or representatives) in connection with such Buyer’s review of the Assets.

ARTICLE V

Covenants

5.1 Conduct of Seller ; Merger Agreement Rights; Cooperation; Repurchase Agreements .

(a) During the period from the date hereof through the Closing Date or earlier termination of the Merger Agreement in accordance with its terms, Seller shall use its reasonable best efforts to comply with and perform its obligations under the Merger Agreement, subject to and in accordance with the terms thereof.

 

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(b) Seller shall not amend or waive, or consent to any amendment or waiver of, any provision of the Merger Agreement where such amendment, waiver or consent (i) would have, or would reasonably be expected to have, an adverse effect on any of the Assets, (ii) would, or would reasonably be expected to, materially delay, or prevent, the Closing or (iii) would alter any term in this Agreement, the Stock Purchase Agreement or the loan agreement governing the Debt Financing, that is defined by reference to the Merger Agreement, in each case, without the Buyer Representative’s prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed.

(c) Without limiting the immediately following sentence, Seller shall use reasonable best efforts to, and shall cause its Subsidiaries to use reasonable best efforts to, amend or terminate any Repurchase Agreement, or obtain counterparty waivers or consents with respect thereto, to the extent necessary to permit the sale, transfer, assignment and delivery of all of its and its applicable Subsidiaries’ right, title and interest in and to the Assets free and clear of all Liens to each applicable Buyer at the Closing pursuant to Section 2.2(a) and/or on one or more Post-Closing Transfer Dates pursuant to Section 2.3(b). Additionally, Seller shall cause all of its and its applicable Subsidiaries’ right, title and interest in and to the Nonassignable Assets (if any) to be sold, transferred, assigned and delivered to each applicable Buyer free and clear of all Liens (including by, to the extent necessary, paying any and all termination and transfer fees (however described) under any Repurchase Agreement or other Contract to which such Nonassignable Asset is subject) against payment for each such Nonassignable Asset in accordance with Section 2.3(b), such that (x) on or prior to the third (3 rd ) Business Day following the Closing Date, Seller and its Subsidiaries shall have sold, transferred, assigned and delivered (or caused to be sold, transferred, assigned and delivered) to Buyers, on the Closing Date and any Post-Closing Transfer Dates, collectively, Assets with an aggregate market value of at least $500 million, and (y) on or prior to the Outside Purchase Date, Seller and its Subsidiaries shall have sold, transferred, assigned and delivered (or caused to be sold, transferred, assigned and delivered) to Buyers, on the Closing Date and any Post-Closing Transfer Dates, collectively, Assets with an aggregate market value of at least $1.0 billion.

(d) Seller shall cooperate in good faith with Buyers and use its reasonable best efforts to ensure that AMTG materially complies with its obligations under Section 6.17(c) of the Merger Agreement.

(e) Seller shall promptly notify the Buyer Representative of any material communication, and provide the Buyer Representative with copies thereof if such communication is in writing, received from AMTG, any of AMTG’s Affiliates or Representatives or any Governmental Entity, relating to or affecting the status of the transactions contemplated by the Merger Agreement that have or would reasonably be expected to have any adverse effect on the Assets, the timing of the Mergers or the matters that are the subject of the Contemplated Transactions. On the same day that Seller receives any broker quote or BofA Price Delta (as defined in Schedule C of the Merger Agreement) from AMTG with respect to any Asset, Seller shall deliver the same to the Buyer Representative.

(f) From the date hereof through and including the Closing Date (or with respect to any Nonassignable Asset, the Post-Closing Transfer Date, if any, on which such Asset is transferred to the applicable Buyer), Seller shall provide the Buyer Representative with pricing information regarding the Assets on a monthly basis in the same form such information is provided by AMTG to Seller under the Merger Agreement.

 

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5.2 Access to Information Prior to the Closing .

During the period from the date hereof through the Closing Date, Seller shall use reasonable best efforts to cause AMTG to give the Buyer Representative and its authorized representatives reasonable access during regular business hours to all books and records (including Tax records) related to the Assets as such Buyer may reasonably request; provided , that such Buyer and its representatives shall take such action as is deemed necessary in the reasonable judgment of Seller or AMTG, as the case may be, to schedule such access through a designated officer of Seller or AMTG, as the case may be, and in such a way as to avoid disrupting in any material respect the normal operations of Seller or AMTG, as the case may be. Notwithstanding the foregoing, neither the Seller nor AMTG shall be required by this Section 5.2 to provide any Buyer or its representatives with access to or to disclose information (x) that is subject to the terms of a confidentiality agreement with a third party entered into prior to the date of this Agreement ( provided , however , that Seller shall use, and shall use reasonable best efforts to cause AMTG to use, its reasonable best efforts to obtain the required consent of such third party to such access or disclosure), (y) the disclosure of which would violate or contravene any Law ( provided , however , that Seller shall use, and shall use reasonable best efforts to cause AMTG to use, its reasonable best efforts to make appropriate substitute arrangements to permit reasonable disclosure not in violation of any Law) or (z) that is subject to any attorney-client, attorney work product or other legal privilege of such party or its Subsidiaries ( provided , however , that Seller shall use, and shall use reasonable best efforts to cause AMTG to use, its reasonable best efforts to allow for such access or disclosure to the maximum extent that does not result in a loss of any such attorney-client, attorney work product or other legal privilege).

5.3 Consents and Approvals .

(a) Upon the terms and subject to the conditions set forth in this Agreement, each Buyer and Seller shall and shall cause their respective Subsidiaries, to use reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other party in doing, all things necessary, proper or advisable under applicable Law or pursuant to any contract or agreement to consummate and make effective, as promptly as practicable, the Contemplated Transactions, including (i) the taking of all actions necessary to cause the conditions to Closing set forth in Article VI to be satisfied, (ii) the obtaining of all necessary actions or nonactions, waivers, consents and approvals from Governmental Entities or other Persons necessary in connection with the consummation of the Contemplated Transactions and the making of all necessary registrations and filings (including filings with Governmental Entities, if any) and the taking of all reasonable steps as may be necessary to obtain an approval or waiver from, or to avoid an action or proceeding by, any Governmental Entity or other Persons necessary in connection with the consummation of the Contemplated Transactions, (iii) the defending of any lawsuits or other legal proceedings, whether judicial or administrative, challenging this Agreement or the consummation of the Contemplated Transactions so as to enable the Closing to occur as soon as reasonably practicable, and (iv) the execution and delivery of any additional instruments necessary to consummate the Contemplated Transactions and to fully carry out the purposes of this Agreement.

(b) Without limiting Section 5.3(a), each Buyer shall, and shall cause its respective Subsidiaries to, use reasonable best efforts to obtain such Buyer’s applicable Regulatory Approval as promptly as practicable following the date hereof. Each Buyer shall keep Seller reasonably informed of any material communication received by such Buyer from, or given by such Buyer to, the applicable Governmental Entity responsible for granting such Buyer’s applicable Regulatory Approval.

 

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5.4 Public Announcements and Disclosure .

The initial press release regarding this Agreement and the Contemplated Transactions shall be made at such time and in such form as the Buyer Representative and Seller agree; provided that in the event the parties cannot agree, either party shall be permitted to make any disclosure required by Law. From and after the date hereof, so long as this Agreement is in effect, neither Buyers nor Seller will issue or make any subsequent press release, public statement or other disclosure to a third party with respect to this Agreement or the Contemplated Transactions without the prior consent of the other party (which consent shall not be unreasonably withheld, conditioned or delayed), unless such party determines, after consultation with outside counsel, that it is required by applicable Law or by any listing agreement with or the listing rules of the New York Stock Exchange or other exchange to issue or cause the publication of any press release or other announcement or disclosure with respect to the Mergers or this Agreement, in which event such party shall endeavor, on a basis reasonable under the circumstances, to provide a meaningful opportunity to the other party to review and comment upon such press release or other announcement or disclosure and shall give due consideration to all reasonable additions, deletions or changes suggested thereto.

5.5 Exclusivity .

Except as contemplated by this Agreement and the Ancillary Documents, prior to the Closing or until the date that is twelve (12) months following the termination of this Agreement in accordance with its terms, Buyers will not, and will cause their Affiliates, representatives and agents not to, directly or indirectly, solicit, continue inquiries, encourage, facilitate, initiate any contact, enter into discussions or negotiations, furnish any information with respect to or enter into any agreement or other instruments (whether or not binding) with any Person other than Seller or its Affiliates concerning the submission of any proposal or offer to AMTG or any of its Affiliates (other than Seller) relating to any of the following: (i) a liquidation, dissolution or recapitalization of, (ii) a merger or consolidation with or into, (iii) an acquisition or purchase of any assets of or any equity interest in, or (iv) any similar transaction or business combination involving, in each case, AMTG or any of its Subsidiaries or any asset owned by AMTG or any of its Subsidiaries, as applicable. Buyers and each of their Affiliates shall, and shall cause their respective representatives and agents to, discontinue immediately any negotiations or discussions with respect to any of the foregoing.

5.6 Post-Transfer Remittances .

From and after the date on which any Asset is sold to a Buyer pursuant to Section 2.2(a) or Section 2.3(b) of this Agreement, to the extent that Seller or any of its Subsidiaries (including any Person that has become a Subsidiary of Seller pursuant to the Mergers) receives

 

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any payment of principal, interest or other proceeds with respect to such Asset, Seller shall, or shall cause its applicable Subsidiary to, hold such amounts in trust for the account of such Buyer and pay such principal, interest or other proceeds to such Buyer as promptly as practicable.

ARTICLE VI

Conditions to Closing

6.1 Conditions to All Parties Obligations .

The obligations of the parties to consummate the Contemplated Transactions are subject to the fulfillment prior to or at the Closing of each of the following conditions (any or all of which may be waived by the parties to the extent permitted by applicable Law):

(a) Statutes; Court Orders . No court of competent jurisdiction or other Governmental Entity of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any Law, Order, stipulation or other legal restraint (whether temporary, preliminary or permanent) (an “ Injunction ”), in any case, which is in effect and which prevents, prohibits or makes illegal the consummation of the Contemplated Transactions.

(b) Consummation of the First Merger . The First Merger shall have been fully consummated, and in full force and effect, in accordance with the terms of the Merger Agreement.

6.2 Conditions to Seller s Obligations .

The obligations of Seller to consummate the Contemplated Transactions are subject to the fulfillment at or prior to the Closing of each of the following conditions (any or all of which may be waived in whole or in part by Seller to the extent permitted by applicable Law):

(a) Representations and Warranties . The representations and warranties of Buyers contained in Article IV hereof shall be true and correct (without regard to any materiality, Buyer Material Adverse Effect or other similar qualification contained in or otherwise applicable to such representation or warranty) as of the date hereof and as of the Closing Date (except for representations and warranties which address matters only as of a specific date, which representations and warranties shall be true and correct as of such specified date), except to the extent that the failure to be so true and correct, individually or in the aggregate, would not have a Buyer Material Adverse Effect.

(b) Performance . Each Buyer shall have performed and complied in all material respects with all agreements and covenants required by this Agreement to be so performed or complied with by such Buyer at or prior to the Closing.

(c) Stock Purchase Agreement and Debt Financing . Each of the Stock Purchase Agreement and the Debt Financing shall be in full force and effect and there shall have been no material default thereunder by Athene USA.

(d) Deliveries . Seller shall have received the deliveries contemplated by Article VIII.

 

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6.3 Conditions to Buyers’ Obligations .

The obligations of each Buyer to consummate the Contemplated Transactions are subject to the fulfillment at or prior to the Closing of each of the following conditions (any or all of which may be waived in whole or in part by such Buyer to the extent permitted by applicable Law):

(a) Representations and Warranties . The representations and warranties of Seller contained in Article III hereof shall be true and correct (without regard to any materiality, Seller Material Adverse Effect or other similar qualification contained in or otherwise applicable to such representation or warranty) as of the date hereof and as of the Closing Date (except for representations and warranties which address matters only as of a specific date, which representations and warranties shall be true and correct as of such specified date), except to the extent that the failure to be so true and correct, individually or in the aggregate, would not have a Seller Material Adverse Effect.

(b) Performance . Seller shall have performed and complied in all material respects with all agreements and covenants required by this Agreement to be so performed or complied with by Seller at or prior to the Closing.

(c) Regulatory Approval . Each Buyer shall have obtained its applicable Regulatory Approval.

(d) No Liens . Each Asset scheduled to be sold and assigned by Seller at the Closing shall be free and clear of all Liens.

(e) Deliveries . The Buyer Representative shall have received the deliveries contemplated by Article VII.

(f) Closing Date . The Closing shall occur on the same date as the date of the First Merger.

ARTICLE VII

Deliveries by Seller at Closing

On the Closing Date, Seller shall deliver or cause to be delivered to the Buyer Representative:

7.1 Officer s Certificate .

An officer’s certificate signed by a duly authorized executive officer of Seller to the effect set forth in Sections 6.3(a) and 6.3(b).

7.2 Receipt .

A counterpart signature page to the cross-receipt, in a form mutually agreed among the parties (the “ Cross-Receipt ”), executed by a duly authorized executive officer of Seller or its applicable Subsidiary confirming the receipt of the Closing Consideration Amount.

 

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7.3 Further Instruments .

Such documents of further assurance reasonably necessary and typical for transactions similar to the Contemplated Transactions in order to complete the Contemplated Transactions. Without limitation to the foregoing, each of Seller and AMTG shall provide the Buyer Representative with an executed “certification of non-foreign status” in the form and manner set forth in Treasury Regulations Section 1.1445-2(b)(2).

ARTICLE VIII

Deliveries by Buyer at Closing

On the Closing Date, Buyers shall deliver or cause to be delivered to Seller:

8.1 Officer s Certificate .

A certificate signed by a duly authorized executive officer of the Buyer Representative to the effect set forth in Sections 6.2(a) and 6.2(b).

8.2 Receipt .

A counterpart signature page to the Cross-Receipt executed by a duly authorized representative of each applicable Buyer confirming the receipt of such Buyer’s applicable Assets.

8.3 Closing Consideration Amount . The Closing Consideration Amount, by wire transfer of immediately available funds, to the account or accounts designated by Seller.

ARTICLE IX

Survival

9.1 Survival .

All of the representations and warranties of the parties set forth in this Agreement shall terminate and expire as of the Closing, and all liability and obligations of any nature with respect to such representations and warranties shall thereupon be extinguished; provided , however , that representations and warranties set forth in the first sentence of Section 3.5 shall, with respect to a particular Asset (including any Nonassignable Asset), survive the Closing (and, if applicable, the Post-Closing Transfer Date applicable thereto) and the transfer of such Asset to the applicable Buyer until the twelve month anniversary of the Closing (or, if applicable, the Post-Closing Transfer Date applicable to such Asset).

 

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ARTICLE X

Termination

10.1 Termination .

This Agreement may be terminated and the Contemplated Transactions may be abandoned prior to the Closing Date:

(a) at any time, by mutual written agreement of Seller and the Buyer Representative; or

(b) at any time, by either Seller or the Buyer Representative (i) if any Injunction having any of the effects set forth in Section 6.1(a) of this Agreement shall be in effect and have become final and nonappealable or (ii) at any time following the termination of the Merger Agreement in accordance with its terms; or

(c) by written notice from the Buyer Representative to Seller, if a breach of or failure to perform any representation, warranty, covenant or agreement on the part of Seller set forth herein shall have occurred, which breach or failure to perform (i) would give rise to the failure of a condition set forth in Section 6.3(a) or 6.3(b), and (ii) after receipt by Seller of written notice from the Buyer Representative of such breach or failure to perform, cannot be cured prior to the Closing Date, provided , that no Buyer is then in breach with respect to any of its representations, warranties, covenants or other agreements contained in this Agreement; or

(d) by written notice from Seller to the Buyer Representative, if a breach of or failure to perform any representation, warranty, covenant or agreement on the part of any Buyer set forth herein shall have occurred, which breach or failure to perform (i) would give rise to the failure of a condition set forth in Section 6.2(a) or 6.2(b), and (ii) after receipt by the Buyer Representative of written notice from Seller of such breach or failure to perform, cannot be cured prior to the Closing Date, provided , that Seller is not then in breach with respect to any of its representations, warranties, covenants or other agreements contained in this Agreement; or

(e) by written notice from Seller to the Buyer Representative, if (i) all of the conditions set forth in Sections 6.1 and 6.3 have been and continue to be satisfied or waived (other than those conditions that by their nature cannot be satisfied other than at Closing), (ii) Seller has confirmed by written notice to the Buyer Representative that it stands ready, willing and able to consummate the Contemplated Transactions when required pursuant to Section 2.1 and (iii) any Buyer fails to consummate the Contemplated Transactions within three (3) Business Days of the date the Closing should have occurred pursuant to Section 2.1 (it being understood that during such three (3) Business Day period, Seller shall not be entitled to terminate this Agreement); or

(f) by written notice from the Buyer Representative to Seller, if (i) all of the conditions set forth in Sections 6.1 and 6.2 have been and continue to be satisfied or waived (other than those conditions that by their nature cannot be satisfied other than at Closing), (ii) the Buyer Representative has confirmed by written notice to Seller that each Buyer stands ready, willing and able to consummate the Contemplated Transactions when required pursuant to Section 2.1 and (iii) Seller fails to consummate the Contemplated Transactions within three

 

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(3) Business Days of the date the Closing should have occurred pursuant to Section 2.1 (it being understood that during such three (3) Business Day period, the Buyer Representative shall not be entitled to terminate this Agreement); or

(g) by written notice from the Buyer Representative to Seller, if the Closing shall not have occurred by October 26, 2016.

10.2 Procedure and Effect of Termination .

In the event of the termination of this Agreement and the abandonment of the Contemplated Transactions, written notice thereof shall be given by a terminating party to the other parties, and this Agreement shall terminate and the Contemplated Transactions shall be abandoned without further action by any of the parties. If this Agreement is terminated pursuant to Section 10.1:

(a) At Seller’s request, each Buyer shall promptly cause to be returned to Seller or destroy all documents and information obtained in connection with this Agreement and the Contemplated Transactions and all documents and information obtained in connection with such Buyer’s investigation of the Assets from Seller or its representatives, including any copies made by or supplied to such Buyer or any of such Buyer’s agents of any such documents or information.

(b) No party hereto shall have any obligation or liability to the other parties hereto, except that the parties hereto shall remain bound by the provisions of this Section 10.2 and Section 5.4, Section 5.5 and Article XI and by the provisions of the Joinder Agreement; provided , that nothing herein shall relieve a defaulting or breaching party from any liability or damages arising out of its breach of any covenant or agreement in this Agreement.

ARTICLE XI

Miscellaneous

11.1 Expenses .

All fees and expenses incurred in connection with the Contemplated Transactions shall be paid by the party incurring such expenses, whether or not the Contemplated Transactions are consummated.

11.2 Notices .

All notices, requests, claims, consents, demands and other communications hereunder shall be in writing and shall be deemed given if delivered to the applicable party (i) personally (notice deemed given upon receipt), (ii) telecopied (notice deemed given upon confirmation of receipt), (iii) sent by a nationally recognized overnight courier service, such as Federal Express (notice deemed given upon receipt of proof of delivery) or (iv) electronic mail ( provided , that any such transmission by electronic mail shall be followed by a copy delivered in accordance with the foregoing clauses (i) or (iii)) (notice deemed given on the date sent if sent during normal business hours of the recipient, and on the next Business Day, if sent after normal business hours of the recipient). All notices hereunder shall be delivered as set forth below, or pursuant to such other instructions as may be designated in writing by the party to receive such notice, and a copy of each notice shall also be sent via e-mail.

 

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If to Seller:    Apollo Commercial Real Estate Finance, Inc.
   c/o Apollo Global Management, LLC
   9 W. 57th Street, 43rd Floor
   New York, NY 10019
   Attn: Stuart Rothstein
   Fax: (646) 219-3826
   Email: srothstein@apollolp.com
With a copy (which shall not constitute notice) to:
   Fried, Frank, Harris, Shriver & Jacobson LLP
   One New York Plaza
   New York, NY 10004
   Attn:     Steven Epstein, Esq.
                Abigail Bomba, Esq.
   Fax: (212) 859-4000
   Email:  steven.epstein@friedfrank.com
                abigail.bomba@friedfrank.com
If to the Buyer Representative:          Athene USA Corporation
   c/o Athene Asset Management, L.P.
   2121 Rosecrans Ave., Suite 5300
   El Segundo, CA 90245
   Attention: James Belardi
   Facsimile: (310) 698-4492
   Email: jbelardi@athene.com

 

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With a copies (which shall not constitute notice) to:

  

Athene USA Corporation

  

c/o Athene Asset Management, L.P.

  

2121 Rosecrans Ave., Suite 5300

  

El Segundo, CA 90245

  

Attention: Legal Department

  

Facsimile: (310) 698-4481

  

Email: legal@athene.com

  

Sidley Austin LLP

  

One South Dearborn

  

Chicago, IL 60603

  

Attn:     Perry J. Shwachman, Esq.

  

             Paul L. Choi, Esq.

  

Fax: (312) 853-7036

  

Email:  pshwachman@sidley.com

  

             pchoi@sidley.com

If to Athene Iowa:

  

Athene Annuity and Life Company

  

c/o Athene Asset Management, L.P.

  

2121 Rosecrans Ave., Suite 5300

  

El Segundo, CA 90245

  

Attention: James Belardi

  

Facsimile: 310-698-4492

  

Email: jbelardi@athene.com

With a copies (which shall not constitute notice) to:

  

Athene Annuity and Life Company

  

c/o Athene Asset Management, L.P.

  

2121 Rosecrans Ave., Suite 5300

  

El Segundo, CA 90245

  

Attention: Legal Department

  

Facsimile: (310) 698-4481

  

Email: legal@athene.com

  

Sidley Austin LLP

  

One South Dearborn

  

Chicago, IL 60603

  

Attn:     Perry J. Shwachman, Esq.

                Paul L. Choi, Esq.
   Fax: (312) 853-7036
   Email:  pshwachman@sidley.com
                pchoi@sidley.com

 

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If to Athene Delaware:    Athene Annuity & Life Assurance Company
   c/o Athene Asset Management, L.P.
   2121 Rosecrans Ave., Suite 5300
   El Segundo, CA 90245
   Attention: James Belardi
   Facsimile: 310-698-4492
   Email: jbelardi@athene.com
With a copies (which shall not constitute notice) to:
   Athene Annuity & Life Assurance Company
   c/o Athene Asset Management, L.P.
   2121 Rosecrans Ave., Suite 5300
   El Segundo, CA 90245
   Attention: Legal Department
   Facsimile: (310) 698-4481
   Email: legal@athene.com
   Sidley Austin LLP
   One South Dearborn
   Chicago, IL 60603
   Attn:    Perry J. Shwachman, Esq.
      Paul L. Choi, Esq.
   Fax: (312) 853-7036
   Email:    pshwachman@sidley.com
      pchoi@sidley.com

11.3 Governing Law .

This Agreement shall in all respects be governed by, and construed in accordance with, the Laws (excluding conflict of laws rules and principles) of the State of Delaware applicable to agreements made and to be performed entirely within such State, including all matters of construction, validity and performance.

11.4 Entire Agreement .

This Agreement, together with the Exhibits hereto, the Ancillary Documents and the Joinder Agreement, constitute the entire agreement of the parties relating to the subject matter hereof and supersede all prior contracts or agreements, whether oral or written.

11.5 Severability .

Should any provision of this Agreement or the application thereof to any Person or circumstance be held invalid or unenforceable to any extent: (a) such provision shall be ineffective to the extent, and only to the extent, of such unenforceability or prohibition and shall be enforced to the greatest extent permitted by Law, (b) such unenforceability or prohibition in any jurisdiction shall not invalidate or render unenforceable such provision as applied (i) to other Persons or circumstances or (ii) in any other jurisdiction, and (c) such unenforceability or prohibition shall not affect or invalidate any other provision of this Agreement.

 

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11.6 Amendment .

Neither this Agreement nor any of the terms hereof may be terminated, amended, supplemented or modified orally, but only by an instrument in writing signed by Buyers and Seller; provided , that the observance of any provision of this Agreement may be waived in writing by the party that will lose the benefit of such provision as a result of such waiver.

11.7 Effect of Waiver or Consent .

No waiver or consent, express or implied, by any party to or of any breach or default by any party in the performance by such party of its obligations hereunder shall be deemed or construed to be a consent or waiver to or of any other breach or default in the performance by such party of the same or any other obligations of such party hereunder. No single or partial exercise of any right or power, or any abandonment or discontinuance of steps to enforce any right or power, shall preclude any other or further exercise thereof or the exercise of any other right or power. Failure on the part of a party to complain of any act of any party or to declare any party in default, irrespective of how long such failure continues, shall not constitute a waiver by such party of its rights hereunder until the applicable statute of limitation period has run.

11.8 Parties in Interest; Limitation on Rights of Others .

The terms of this Agreement shall be binding upon, and inure to the benefit of, the parties hereto and their respective legal representatives, successors and assigns. Nothing in this Agreement, whether express or implied, shall be construed to give any Person (other than the parties hereto and their respective legal representatives, successors and assigns and as expressly provided herein) any legal or equitable right, remedy or claim under or in respect of this Agreement or any covenants, conditions or provisions contained herein, as a third party beneficiary or otherwise; provided that Athene USA, in its capacity as the Buyer Representative, shall constitute a third party beneficiary of this Agreement.

11.9 Assignability .

This Agreement shall not be assigned by any party without the prior written consent of the other parties hereto, except that (x) each Buyer shall be permitted to assign any of its rights or delegate any of its obligations under this Agreement, in each case in whole or in part, to one or more Persons without the consent of any other party (but in no event shall such assignment be permitted if it would delay or impair the ability of such Buyer (or its assignee) to purchase the Assets on the Closing Date or the Nonassignable Assets on any Post-Closing Transfer Date, as applicable, pursuant to the terms and conditions of this Agreement) and (y) Seller shall be permitted to assign any of its rights or delegate any of its obligations under this Agreement to one or more of its Subsidiaries with the consent of any other party, provided that no such assignment shall relieve the assigning party of its obligations under this Agreement.

 

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11.10 Jurisdiction; Court Proceedings; Waiver of Jury Trial .

Any Litigation against any party to this Agreement arising out of or in any way relating to this Agreement shall be brought in any federal or state court located in the State of Delaware in New Castle County and each of the parties hereby submits to the exclusive jurisdiction of such courts for the purpose of any such Litigation; provided , that a final judgment in any such Litigation shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Law.  Each party irrevocably and unconditionally agrees not to assert (a)   any objection which it may ever have to the laying of venue of any such Litigation in any federal or state court located in the State of Delaware in New Castle County, (b)   any claim that any such Litigation brought in any such court has been brought in an inconvenient forum and (c)   any claim that such court does not have jurisdiction with respect to such Litigation.   To the extent that service of process by mail is permitted by applicable Law, each party irrevocably consents to the service of process in any such Litigation in such courts by the mailing of such process by registered or certified mail, postage prepaid, at its address for notices provided for herein.  Each party irrevocably and unconditionally waives any right to a trial by jury and agrees that any of them may file a copy of this paragraph with any court as written evidence of the knowing, voluntary and bargained-for agreement among the parties irrevocably to waive its right to trial by jury in any Litigation.

11.11 No Other Duties .

The only duties and obligations of the parties under this Agreement are as specifically set forth in this Agreement, and no other duties or obligations shall be implied in fact, Law or equity, or under any principle of fiduciary obligation.

11.12 Reliance on Counsel and Other Advisors .

Each party has consulted such legal, financial, technical or other expert as it deems necessary or desirable before entering into this Agreement. Each party represents and warrants that it has read, knows, understands and agrees with the terms and conditions of this Agreement.

11.13 Remedies .

All remedies, either under this Agreement or by Law or otherwise afforded to the parties hereunder, shall be cumulative and not alternative, and any Person having any rights under any provision of this Agreement will be entitled to enforce such rights specifically, to recover damages by reason of any breach of this Agreement and to exercise all other rights granted by Law, equity or otherwise.

11.14 Specific Performance .

The parties 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. Accordingly, the parties agree that, in addition to any other remedies, each party shall be entitled to enforce the terms of this Agreement by a decree of specific performance

 

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without the necessity of proving the inadequacy of money damages as a remedy. Each party hereby waives any requirement for the securing or posting of any bond in connection with such remedy.

11.15 Counterparts .

This Agreement may be executed by facsimile signatures and in any number of counterparts with the same effect as if all signatory parties had signed the same document. All counterparts shall be construed together and shall constitute one and the same instrument. Signatures to this Agreement transmitted by facsimile transmission, by electronic mail in “portable document format” (“.pdf”), or by any other electronic means intended to preserve the original graphic and pictorial appearance of a document, will have the same effect as physical delivery of the paper document bearing the original signature.

11.16 Further Assurance .

If at any time after the Closing any further action is necessary or desirable to fully effect the Contemplated Transactions or any other of the Ancillary Documents, each of the parties shall take such further action (including the execution and delivery of such further instruments and documents) as any other party reasonably may request.

(signature pages follow)

 

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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be duly executed and delivered in its name and on its behalf, all as of the day and year first above written.

 

ATHENE ANNUITY AND LIFE COMPANY
By: Athene Asset Management, L.P., its investment advisor
By: AAM GP Ltd., its General Partner
By:  

/s/ James R. Belardi

Name:   James R. Belardi
Title:   Chief Executive Officer
ATHENE ANNUITY & LIFE ASSURANCE COMPANY
By: Athene Asset Management, L.P., its investment advisor
By: AAM GP Ltd., its General Partner
By:  

/s/ James R. Belardi

Name:   James R. Belardi
Title:   Chief Executive Officer

[Signature Page to Asset Purchase and Sale Agreement]


APOLLO COMMERCIAL REAL ESTATE FINANCE, INC.
By:  

/s/ Stuart A. Rothstein

Name:   Stuart A. Rothstein
Title:   President and Chief Executive Officer

[Signature Page to Asset Purchase and Sale Agreement]

Exhibit 3.1

AMENDMENT TO BYLAWS

OF APOLLO COMMERCIAL REAL ESTATE FINANCE, INC.

The Bylaws of Apollo Commercial Real Estate Finance, Inc. are amended by adding a new Article XV as follows:

ARTICLE XV

EXCLUSIVE FORUM FOR CERTAIN LITIGATION

Unless the Corporation consents in writing to the selection of an alternative forum, the Circuit Court for Baltimore City, Maryland, or, if that Court does not have jurisdiction because the action asserts a federal claim, the United States District Court for the District of Maryland, Baltimore Division, shall be the sole and exclusive forum for (a) any derivative action or proceeding brought in the right or on behalf of the Corporation, (b) any action asserting a claim of breach of any duty owed by any director, officer, other employee or agent of the Corporation to the Corporation or to the stockholders of the Corporation, (c) any action asserting a claim against the Corporation or any director, officer, other employee or agent of the Corporation arising pursuant to any provision of Maryland General Corporation Law (including, without limitation, Section 2-401 thereof), the Charter or these Bylaws, or (d) any action asserting a claim against the Corporation or any director, officer, other employee or agent of the Corporation that is governed by the internal affairs doctrine.

Exhibit 10.1

EXECUTION VERSION

STOCK PURCHASE AGREEMENT

This STOCK PURCHASE AGREEMENT, dated as of February 26, 2016 (this “ Agreement ”), by and between Athene USA Corporation, an Iowa corporation (“ Athene ”), and Apollo Commercial Real Estate Finance, Inc., a Maryland corporation (“ ARI ”).

RECITALS

WHEREAS, ARI has entered into that certain Agreement and Plan of Merger, dated as of the date hereof (the “ Merger Agreement ”), with Apollo Residential Mortgage, Inc., a Maryland corporation (“ AMTG ”), and Arrow Merger Sub, Inc., a Maryland corporation and wholly-owned Subsidiary (as defined below) of ARI (“ Merger Sub ”), pursuant to which AMTG will merge with Merger Sub (the “ First Merger ”), with AMTG surviving the First Merger as a Subsidiary of ARI and, immediately thereafter, AMTG will merge with and into ARI (the “ Second Merger ” and, together with the First Merger, the “ Mergers ”) with ARI surviving the Second Merger (the date on which the Mergers occur being referred to herein as the “ Merger Closing Date ”);

WHEREAS, ARI has entered into that certain Asset Purchase Agreement, dated as of the date hereof (the “ Asset Purchase Agreement ”), with one or more Subsidiaries of Athene, pursuant to which such one or more Subsidiaries will purchase from ARI or one or more of its Subsidiaries, and ARI and its Subsidiaries will sell to such one or more Subsidiaries of Athene, certain assets, upon the terms and subject to the conditions therein;

WHEREAS, on the date hereof, Athene has delivered that certain debt commitment letter to ARI, pursuant to which, upon the terms and subject to the conditions set forth therein, ARI may draw up to $200,000,000 (subject to potential reduction pursuant to the terms thereof) under a term facility (the “ Loan Agreement ”) which would be provided pursuant to the debt commitment letter; and

WHEREAS, in connection with the execution of the Asset Purchase Agreement and the commitment letter, Athene and ARI desire to enter into this Agreement to provide for the purchase of ARI Common Stock by Athene or one or more of its Subsidiaries, upon the terms and subject to the conditions hereinafter set forth.

NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements hereinafter contained and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto agree as follows:


ARTICLE I

Definitions and Rules of Construction

1.1     Definitions .

As used in this Agreement, the following terms shall have the meanings set forth below:

10b5-1 Plan ” means a purchase plan established for purposes of complying with Rule 10b5-1, substantially in the form attached as Exhibit A hereto (subject to such changes as may be reasonably requested by the applicable Agent or, upon ARI’s prior written consent (which is not to be unreasonably withheld, delayed or conditioned), Athene).

Affiliate ” means, as to any Person, any other Person that, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. For purposes of this definition, “control” of a Person means the power, directly or indirectly, either to (a) vote 10% or more of the securities having ordinary voting power for the election of directors of such Person or (b) direct or cause the direction of the management and policies of such Person, whether by contract or otherwise; provided, however, for purposes of this Agreement, neither ARI nor any Subsidiary thereof shall constitute an Affiliate of Athene and neither Athene nor any Subsidiary thereof shall constitute an Affiliate of ARI.

Agent ” has the meaning set forth in Section 3.2.

Agreement ” means this Stock Purchase Agreement, as it may be amended from time to time in accordance with Section 5.5 .

AMTG ” has the meaning set forth in the Preamble.

Ancillary Documents ” means the agreements and other documents contemplated by this Agreement, including each 10b5-1 Plan.

ARI ” has the meaning set forth in the Preamble.

ARI Common Stock ” means the common stock of ARI, par value $0.01 per share.

Asset Purchase Agreement ” has the meaning set forth in the Recitals.

Assets ” has the meaning set forth in the Asset Purchase Agreement.

Athene ” has the meaning set forth in the Preamble.

Business Day ” means any day other than a Saturday, Sunday or day on which banks are closed in New York, New York. If any period expires on a day which is not a Business Day or any event or condition is required by the terms of this Agreement to occur or be fulfilled on a day which is not a Business Day, such period shall expire or such event or condition shall occur or be fulfilled, as the case may be, on the next succeeding Business Day.

Buyers ” has the meaning set forth in the Asset Purchase Agreement and, for purposes of this Agreement, shall include any assignee thereof.

Conditional Amount ” means (i) from the Purchase Period Start Date through the third (3 rd ) Business Day after the Merger Closing Date, $5,000,000 and (ii) after the third (3 rd ) Business Day following the Merger Closing Date, $0; provided that if the Minimum Purchase occurs on or prior to the third (3 rd ) Business Day following the Merger Closing Date and Athene has delivered notice thereof to each Agent on the date that the Minimum Purchase occurs, then, from and after the date of the Minimum Purchase, the Conditional Amount shall be $20,000,000.

 

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Consent ” has the meaning set forth in Section 2.1(d)(i).

Contract ” means any legally binding contract, agreement, license, lease, commitment, understanding or other obligation, whether oral or written.

First Merger ” has the meaning set forth in the Recitals.

First Open Trading Day ” means the first Business Day occurring on or after the Proxy Mailing Date on which the directors and executive officers of ARI are permitted to purchase and sell ARI Common Stock.

Governmental Entity ” means any court, arbitral tribunal, administrative agency or commission or other governmental or other regulatory authority or agency, whether foreign, federal, state, local or supernational.

Law ” means any statute, code, rule, regulation, order, ordinance, judgment or decree or other pronouncement of any Governmental Entity having the effect of law.

Litigation ” means any claim, action, suit, arbitration, alternative dispute resolution action or other judicial or administrative proceeding, in Law or equity.

Loan Agreement ” has the meaning set forth in the Recitals.

Maximum Amount ” means an amount equal to the lesser of (i) $210,000,000 minus the amount outstanding under the Loan Agreement from time to time, and (ii) the Conditional Amount, excluding any amounts payable in respect of commissions.

Merger Agreement ” has the meaning set forth in the Recitals.

Merger Closing Date ” has the meaning set forth in the Recitals.

Mergers ” has the meaning set forth in the Recitals.

Minimum Purchase ” means the purchase by the Buyers of, or the Buyers’ failure to purchase when required by the Asset Purchase Agreement, Assets having an aggregate market value of at least $500,000,000 pursuant to the Asset Purchase Agreement.

Person ” or “ person ” means an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Entity, person (including a “person” as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder) or other entity or organization.

 

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Principal Market ” means the New York Stock Exchange or, if the ARI Common Stock is not quoted on the New York Stock Exchange, the principal national securities exchange on which the ARI Common Stock is listed.

Proxy Mailing Date ” means the date on which the Proxy Statement (as defined in the Merger Agreement) is first mailed to the stockholders of AMTG.

Purchase Period ” means the period commencing on the first day following the Purchase Period Start Date and continuing through the end of the thirtieth (30th) Trading Day following the Purchase Period Start Date.

Purchase Period Start Date ” means the date of the latest to occur of (i) the Merger Closing Date, (ii) the date on which the conditions set forth in the Asset Purchase Agreement to the obligation of the Buyers to consummate the transactions contemplated by the Asset Purchase Agreement have been satisfied, and (iii) the date on which the conditions set forth in the Loan Agreement to the obligation of Athene to extend the financing pursuant to the Loan Agreement have been satisfied.

Purchased Shares ” means those shares of ARI Common Stock purchased by Athene (or its Subsidiaries) pursuant to a 10b5-1 Plan adopted in accordance with this Agreement.

Rule 10b-18 ” means Rule 10b-18 as promulgated by the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended.

Rule 10b5-1 ” means Rule 10b5-1 as promulgated by the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended.

Second Merger ” has the meaning set forth in the Recitals.

Subsidiary ” or “ Subsidiaries ”, when used with respect to any Person, means any corporation, limited liability company, partnership or other organization, whether incorporated or unincorporated, that (x) is consolidated with such Person for financial reporting purposes under GAAP, or (y) of which (i) at least a majority of the outstanding shares of capital stock of, or other equity interests, having by their terms ordinary voting power to elect the board of directors or others governing body with respect to such corporation or other organization is, at the time of determination, directly or indirectly owned or controlled by such Person or by any one or more of its Subsidiaries, or by such Person and one or more of its Subsidiaries or (ii) with respect to a partnership, such Person or any other Subsidiary of such Person is a general partner of such partnership.

Trading Day ” means any day on which the Principal Market is open for business and the ARI Common Stock trades regular way on the Principal Market.

1.2 Rules of Construction .

Unless the context otherwise requires:

(a) a capitalized term has the meaning assigned to it;

 

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(b) an accounting term not otherwise defined has the meaning assigned to it in accordance with United States generally accepted accounting principles;

(c) references in the singular or to “him,” “her,” “it,” “itself,” or other like references, and references in the plural or the feminine or masculine reference, as the case may be, shall also, when the context so requires, be deemed to include the plural or singular, or the masculine or feminine reference, as the case may be;

(d) references to Articles, Sections, Exhibits and Schedules shall refer to articles, sections, exhibits and schedules of this Agreement, unless otherwise specified;

(e) a reference herein to any party to this Agreement or any other agreement or document shall be deemed to refer to any Person that becomes (or became, if applicable) a successor or permitted assign of such party, upon the occurrence thereof;

(f) a reference herein to any agreement (including this Agreement) or other document shall be to such agreement or other document (together with the schedules, exhibits and other attachments thereto) as it may have been or may hereafter be amended, modified, supplemented, waived or restated from time to time in accordance with its terms, the terms hereof (if applicable thereto) and the terms of the Asset Purchase Agreement (if applicable thereto);

(g) the headings in this Agreement are for convenience and identification only and are not intended to describe, interpret, define or limit the scope, extent or intent of this Agreement or any provision thereof;

(h) this Agreement shall be construed without regard to any presumption or other rule requiring construction against the party that drafted and caused this Agreement to be drafted;

(i) all monetary figures shall be in United States dollars unless otherwise specified; and

(j) references to “including” in this Agreement shall mean “including, without limitation,” whether or not so specified.

ARTICLE II

Representations and Warranties

2.1 Representations and Warranties of Athene . Athene hereby represents and warrants to ARI that:

(a) Organization and Power . Athene is a corporation duly incorporated, validly existing and in good standing under the Laws of its jurisdiction of organization. Athene has full power and authority to execute, deliver and perform this Agreement and the Ancillary Documents to which it is a party and to consummate the transactions contemplated hereby and

 

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thereby. Athene has all power and authority, and possesses all governmental licenses and permits, necessary to enable it to own or lease and to operate its properties and assets and carry on its business as currently conducted, except such power, authority, licenses and permits the absence of which do not and would not reasonably be expected to prevent or materially delay the consummation of the transactions contemplated hereby.

(b) Authorization and Enforceability . The execution and delivery of this Agreement and the Ancillary Documents to which Athene is a party and the performance by Athene of the transactions contemplated hereby and thereby that are required to be performed by Athene have been duly authorized by Athene and no other corporate proceedings on the part of Athene are necessary to authorize the execution, delivery and performance of this Agreement and the Ancillary Documents to which Athene is a party with respect to the consummation of the transactions contemplated hereby and thereby. This Agreement and each of the Ancillary Documents to be executed and delivered by Athene have been duly authorized, executed and delivered by Athene. Assuming the due authorization, execution and delivery of this Agreement by ARI, this Agreement constitutes, and assuming the due authorization, execution and delivery of each Ancillary Document to which Athene is a party by each other party thereto, such Ancillary Document constitutes, a valid and legally binding agreement of Athene enforceable against Athene in accordance with its terms, subject to bankruptcy, insolvency, reorganization and other Laws of general applicability relating to or affecting creditors’ rights and to general equity principles.

(c) No Violation . The execution and delivery by Athene of this Agreement and the Ancillary Documents to which Athene is a party, the consummation of the transactions contemplated hereby and thereby that are required to be performed by Athene and the compliance with the terms of this Agreement and the Ancillary Documents to which Athene is a party will not (a) conflict with or violate any provision of the certificate of incorporation, bylaws or equivalent organizational documents of Athene, or (b) conflict with or violate in any material respect any Law applicable to Athene or by which its properties are bound or affected. Neither Athene nor its Affiliates are subject to any Contract that would or would reasonably be expected to prevent or materially delay Athene’s ability to purchase the Purchased Shares or otherwise consummate the transactions contemplated hereby.

(d) Authorizations and Consents .

(i) No consents, licenses, approvals or authorizations of, or registrations, declarations or filings with, any Governmental Entity or other Person (“ Consents ”) are required to be obtained or made by Athene in connection with the execution, delivery and performance of this Agreement or any Ancillary Documents to which Athene is, or is to be, a party or the consummation by Athene of the transactions contemplated hereby or thereby, and except for those for which the failure to obtain such Consents would not and would not reasonably be expected to prevent or materially delay the consummation of the transactions contemplated hereby.

(ii) None of the execution, delivery or performance of this Agreement by Athene, the consummation by Athene of the transactions contemplated hereby or the compliance by Athene with any of the provisions of this Agreement will accelerate the

 

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performance required by, result in any termination, cancellation or modification of, or loss of benefit under, or violation or breach of, or constitute (with or without notice or lapse of time or both) a default (or give rise to any right, including, but not limited to, any right of termination, amendment, cancellation or acceleration) under, any of the terms, conditions or provisions of any Contract to which Athene is a party.

(e) Sufficiency of Funds . Athene has, and at all times during the Purchase Period, will have access to sufficient funds to consummate the transactions contemplated hereby and to satisfy its obligations under this Agreement.

(f) Disclaimer . Notwithstanding anything to the contrary contained in this Agreement, neither Athene nor any of its Affiliates, representatives or advisors has made, or shall be deemed to have made, to ARI or any other Person any representation or warranty other than those expressly made by Athene in this Section 2.1 .

2.2 Representations and Warranties of ARI . ARI hereby represents and warrants to Athene that:

(a) Organization and Power . ARI is a corporation duly incorporated, validly existing and in good standing under the Laws of its jurisdiction of organization. ARI has full power and authority to execute, deliver and perform this Agreement and the Ancillary Documents to which it is a party and to consummate the transactions contemplated hereby and thereby. ARI has all power and authority, and possesses all governmental licenses and permits, necessary to enable it to own or lease and to operate its properties and assets and carry on its business as currently conducted, except such power, authority, licenses and permits the absence of which do not and would not reasonably be expected to prevent or materially delay the consummation of the transactions contemplated hereby.

(b) Authorization and Enforceability . The execution and delivery of this Agreement and the Ancillary Documents to which ARI is a party and the performance by ARI of the transactions contemplated hereby and thereby that are required to be performed by ARI have been duly authorized by ARI and no other corporate proceedings on the part of ARI are necessary to authorize the execution, delivery and performance of this Agreement and the Ancillary Documents to which ARI is a party with respect to the consummation of the transactions contemplated hereby and thereby. This Agreement and each of the Ancillary Documents to be executed and delivered by ARI have been duly authorized, executed and delivered by ARI. Assuming the due authorization, execution and delivery of this Agreement by Athene, this Agreement constitutes, and assuming the due authorization, execution and delivery of each Ancillary Document to which ARI is a party by each other party thereto, such Ancillary Document constitutes, a valid and legally binding agreement of ARI enforceable against ARI in accordance with its terms, subject to bankruptcy, insolvency, reorganization and other Laws of general applicability relating to or affecting creditors’ rights and to general equity principles.

(c) Authorizations and Consents .

(i) No Consents are required to be obtained or made by ARI in connection with the execution, delivery and performance of this Agreement or any Ancillary

 

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Documents to which ARI is, or is to be, a party or the consummation by ARI of the transactions contemplated hereby or thereby, and except for those for which the failure to obtain such Consents would not and would not reasonably be expected to prevent or materially delay the consummation of the transactions contemplated hereby.

(ii) None of the execution, delivery or performance of this Agreement by ARI, the consummation by ARI of the transactions contemplated hereby or the compliance by ARI with any of the provisions of this Agreement will accelerate the performance required by, result in any termination, cancellation or modification of, or loss of benefit under, or violation or breach of, or constitute (with or without notice or lapse of time or both) a default (or give rise to any right, including, but not limited to, any right of termination, amendment, cancellation or acceleration) under, any of the terms, conditions or provisions of any Contract to which ARI is a party.

(d) No Violation . The execution and delivery by ARI of this Agreement and the Ancillary Documents to which ARI is a party, the consummation of the transactions contemplated hereby and thereby that are required to be performed by ARI and the compliance with the terms of this Agreement and the Ancillary Documents to which ARI is a party will not (a) conflict with or violate any provision of the charter or bylaws of ARI, or (b) conflict with or violate in any material respect any Law applicable to ARI or by which its properties are bound or affected.

(e) Other . The representations and warranties set forth in Sections 4.6, 4.7, 4.8, 4.9, 4.12, 4.13, 4.14 and 4.15 of the Merger Agreement are true and correct.

(f) Disclaimer . Notwithstanding anything to the contrary contained in this Agreement, neither ARI nor any of its Affiliates, representatives or advisors has made, or shall be deemed to have made, to Athene or any other Person any representation or warranty other than those expressly made by ARI in this Section 2.2.

ARTICLE III

Commitment to Purchase ARI Common Stock

3.1 Purchase of ARI Common Stock . Subject to the last sentence of this Section 3.1, Athene hereby agrees and irrevocably commits to purchase (or cause one or more of its Subsidiaries to purchase) shares of ARI Common Stock during the Purchase Period if, at any time and from time to time during the Purchase Period, the quoted price of the ARI Common Stock on the New York Stock Exchange (or, if the ARI Common Stock is not quoted on the New York Stock Exchange, the principal national securities exchange on which the ARI Common Stock is listed) is less than the Parent Common Stock Per Share Value (as defined in the Merger Agreement); provided , however , in no event shall Athene or its Subsidiaries, or any Agent acting on behalf of Athene or its Subsidiaries, be required to purchase any shares of ARI Common Stock pursuant to this Agreement if at any time the aggregate amount of ARI Common Stock purchased by Athene, its Subsidiaries and any Agent acting on behalf of Athene or any of its Subsidiaries under this Agreement is in excess of the Maximum Amount at such time; provided , further , that in no event shall Athene or any of its Subsidiaries or any Agent acting on behalf of Athene or any of its Subsidiaries be required to purchase shares of ARI Common Stock to the

 

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extent any such purchase would cause Athene or such Subsidiary or any Agent acting on behalf of Athene or any of its Subsidiaries to exceed the aggregate amount of ARI Common Stock that Athene is permitted to own pursuant to ARI’s charter and bylaws as in effect from time to time. All such purchases of ARI Common Stock shall be made in the open market at the then-current market price for shares of ARI Common Stock and shall be made only in accordance with the limitations and restrictions of Rule 10b-18 and any other restrictions imposed by either applicable Law or the terms of a 10b5-1 Plan. In no event shall Athene be required to purchase any ARI Common Stock pursuant to this Agreement if (i) the Merger Closing Date has not occurred by the Second Outside Date (as defined in the Merger Agreement), (ii) the conditions set forth in the Asset Purchase Agreement to the obligation of the Buyers (as defined in the Asset Purchase Agreement) to consummate the transactions contemplated by the Asset Purchase Agreement have not been satisfied or waived, or (iii) the conditions set forth in the Loan Agreement to the obligation of Athene to extend the financing pursuant to the Loan Agreement have not been satisfied or waived.

3.2 Stock Purchase Plan . In order to fulfill Athene’s purchase obligations described in Section 3.1, Athene shall, on or as promptly as practicable following the First Open Trading Day, adopt, enter into and not withdraw, terminate or take any action that would result in the termination of, a 10b5-1 Plan with one or more broker-dealers or other agents (any such broker-dealer, an “ Agent ”), except to the extent any such withdrawal, termination or action is required to comply with or avoid a violation of Rule 10b5-1. Prior to the date of the First Open Trading Day, ARI shall advise Athene in writing of the occurrence of the First Open Trading Day.

3.3 Certain Restrictions . Athene hereby agrees that, subject to the last sentence of this Section 3.3, for a period of 180 days following the purchase of any Purchased Share pursuant to this Agreement, it will not, and it will cause its Subsidiaries not to, directly or indirectly (alone or in concert with others) (i) offer, pledge, announce the intention to sell, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant for the sale of, or otherwise transfer or dispose of such Purchased Share or any securities convertible into or exchangeable or exercisable for such Purchased Share, or (ii) enter into any swap or any other agreement or any transaction that transfers, in whole or in part, directly or indirectly, any of the economic consequence of ownership of such Purchased Share, whether any such swap or transaction is to be settled by delivery of such Purchased Share or other securities, in cash or otherwise. The foregoing restrictions are expressly agreed to preclude Athene and its Subsidiaries from engaging in any hedging or other transaction which is designed to or reasonably expected to lead to or result in a sale or disposition of the Purchased Shares even if such securities would be disposed of by someone other than Athene or an Affiliate thereof. Such prohibited hedging or other transactions would include without limitation any short sale or any purchase, sale or grant of any right (including without limitation any put option or put equivalent position or call option or call equivalent position) with respect to any of the Purchased Shares or with respect to any security that includes, relates to, or derives any significant part of its value from such Purchased Shares. This Section 3.3 shall not restrict any sale or other transfer of any Purchased Share to any of Athene’s Subsidiaries or to the extent required by any Governmental Entity.

 

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ARTICLE IV

Additional Agreements

4.1 Consents and Approvals . Athene shall use its reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other party in doing, all things necessary, proper or advisable under applicable Law or pursuant to any Contract to consummate and make effective, as promptly as practicable, the transactions contemplated hereby, including (i) obtaining of all necessary actions or nonactions, waivers, consents and approvals from Governmental Entities necessary in connection with entering into this Agreement, any 10b5-1 Plan and the making of all necessary registrations and filings (including filings with Governmental Entities, if any) and the taking of all reasonable steps as may be necessary to obtain an approval or waiver from, or to avoid an action or proceeding by, any Governmental Entity necessary in connection with this Agreement, any 10b5-1 Plan and the consummation of the transactions contemplated hereby and thereby, and (ii) the execution and delivery of any additional instruments necessary to consummate the transactions contemplated hereby and to fully carry out the purposes of this Agreement.

4.2 Limitations on Purchases of ARI Common Stock . ARI shall not, and it shall cause each of its “affiliated purchasers” (as defined in Rule 10b-18) not to, directly or indirectly, purchase, offer to purchase or place any bid or limit order for the purchase of any ARI Common Stock or any securities convertible or exchangeable into or exercisable for, or the value of which is derived from, ARI Common Stock during the Purchase Period, except for any purchases made by Athene or a Subsidiary thereof pursuant to a 10b5-1 Plan contemplated hereby and otherwise pursuant to this Agreement.  

4.3 Disclosure . From and after the date hereof, so long as this Agreement is in effect, Athene will not issue any press release, public statement or other disclosure to a third party with respect to this Agreement without the prior consent of ARI (which consent shall not be unreasonably withheld, conditioned or delayed), and ARI will not issue, or consent to the issuance by AMTG or any other Person of, any press release, public statement or other disclosure to a third party, including the information supplied by or on behalf of ARI for inclusion or incorporation by reference in the Proxy Statement (as defined in the Merger Agreement), with respect to the Asset Purchase Agreement, the Loan Agreement, this Agreement or Athene or any Subsidiary thereof without the prior written consent of Athene (which consent shall not be unreasonably withheld, conditioned or delayed), unless such party determines, after consultation with outside counsel, that it is required by applicable Law or by any listing agreement with or the listing rules of the New York Stock Exchange or other exchange to issue or cause the publication of any press release or other announcement or disclosure with respect to the Mergers, this Agreement, the Asset Purchase Agreement or the Loan Agreement in which event such party shall endeavor, on a basis reasonable under the circumstances, to provide a meaningful opportunity to the other party to review and comment upon such press release or other announcement or disclosure (including the Proxy Statement) and shall accept all reasonable additions, deletions or changes suggested thereto. For the avoidance of doubt and subject to the preceding sentence, ARI and Athene agree that ARI will disclose in the Proxy Statement Athene’s intention to establish the 10b5-1 Plan for the acquisition of ARI Common Stock as contemplated hereby.

 

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4.4 Information to Agent . To the extent requested by Athene, ARI shall, prior to 8:00 a.m., New York City time on the first day of the Purchase Period, provide to Athene all information, other than publicly reported trading volumes, necessary for the Agent to calculate the maximum number of shares of ARI Common Stock that may be purchased as of the first day of the Purchase Period in accordance with the volume condition set forth in Rule 10b-18.

4.5 Notices to Agent .

(a) ARI shall notify each Agent in writing of the occurrence of the Purchase Period Start Date on, and in no event prior to, the Purchase Period Start Date.

(b) On any day in which the amount outstanding under the Loan Agreement is reduced, Athene shall notify each Agent in writing of such reduced outstanding amount; provided, that Athene shall not be required to deliver such notice if the amount outstanding under the Loan Agreement immediately prior to such reduction is less than or equal to $190,000,000.

(c) ARI shall notify each Agent in writing upon the occurrence of the Minimum Purchase on, and in no event prior to, the date on which the Minimum Purchase occurs.

(d) ARI shall notify each Agent in writing upon the occurrence of the Merger Closing Date on, and in no event prior to, the date on which the Merger Closing Date occurs.

ARTICLE V

Miscellaneous

5.1 Notices .

All notices, requests, claims, consents, demands and other communications hereunder shall be in writing and shall be deemed given if delivered to the applicable party (i) personally (notice deemed given upon receipt), (ii) telecopied (notice deemed given upon confirmation of receipt), (iii) sent by a nationally recognized overnight courier service, such as Federal Express (notice deemed given upon receipt of proof of delivery) or (iv) electronic mail (provided, that any such transmission by electronic mail shall be followed by a copy delivered in accordance with the foregoing clauses (i) or (iii)) (notice deemed given on the date sent if sent during normal business hours of the recipient, and on the next Business Day, if sent after normal business hours of the recipient). All notices hereunder shall be delivered as set forth below, or pursuant to such other instructions as may be designated in writing by the party to receive such notice, and a copy of each notice shall also be sent via e-mail.

 

If to ARI:    Apollo Commercial Real Estate Finance, Inc.
   c/o Apollo Global Management, LLC
   9 W. 57 th Street, 43 rd Floor
   New York, NY 10019
   Attn: Stuart A. Rothstein
   Fax: (646) 219-3826
   Email: srothstein@apollolp.com

 

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With a copy (which shall not constitute notice) to:

 

   Fried, Frank, Harris, Shriver & Jacobson LLP
   One New York Plaza
   New York, NY 10004
   Attn: Steven Epstein, Esq.
            Abigail Bomba, Esq.
   Fax:  (212) 859-4000
   Email: steven.epstein@friedfrank.com
               abigail.bomba@friedfrank.com
If to Athene:    Athene USA Corporation
   c/o Athene Asset Management, L.P.
   2121 Rosecrans Ave., Suite 5300
   El Segundo, CA 90245
   Attn: James Belardi
   Fax:  (310) 698-4481
   Email: jbelardi@athene.com

With a copy (which shall not constitute notice) to:

 

   Athene USA Corporation
   c/o Athene Asset Management, L.P.
   2121 Rosecrans Ave., Suite 5300
   El Segundo, CA 90245
   Attn: Legal Department
   Fax:  (310) 698-4481
   Email: legal@athene.com

5.2 Governing Law .

This Agreement shall in all respects be governed by, and construed in accordance with, the Laws (excluding conflict of laws rules and principles) of the State of Delaware applicable to agreements made and to be performed entirely within such State, including all matters of construction, validity and performance.

5.3 Entire Agreement .

This Agreement, together with the Ancillary Documents, constitute the entire agreement of the parties relating to the subject matter hereof and supersede all prior contracts or agreements, whether oral or written.

5.4 Severability .

Should any provision of this Agreement or the application thereof to any Person or circumstance be held invalid or unenforceable to any extent: (a) such provision shall be ineffective to the extent, and only to the extent, of such unenforceability or prohibition and shall

 

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be enforced to the greatest extent permitted by Law, (b) such unenforceability or prohibition in any jurisdiction shall not invalidate or render unenforceable such provision as applied (i) to other Persons or circumstances, or (ii) in any other jurisdiction, and (c) such unenforceability or prohibition shall not affect or invalidate any other provision of this Agreement.

5.5 Amendment .

Except as set forth in Section 5.16, neither this Agreement nor any of the terms hereof may be terminated, amended, supplemented or modified orally, but only by an instrument in writing signed by Athene and ARI; provided, that the observance of any provision of this Agreement may be waived in writing by the party that will lose the benefit of such provision as a result of such waiver.

5.6 Effect of Waiver or Consent .

No waiver or consent, express or implied, by any party to or of any breach or default by any party in the performance by such party of its obligations hereunder shall be deemed or construed to be a consent or waiver to or of any other breach or default in the performance by such party of the same or any other obligations of such party hereunder. No single or partial exercise of any right or power, or any abandonment or discontinuance of steps to enforce any right or power, shall preclude any other or further exercise thereof or the exercise of any other right or power. Failure on the part of a party to complain of any act of any party or to declare any party in default, irrespective of how long such failure continues, shall not constitute a waiver by such party of its rights hereunder until the applicable statute of limitation period has run.

5.7 Parties in Interest; Limitation on Rights of Others .

The terms of this Agreement shall be binding upon, and inure to the benefit of, the parties hereto and their respective legal representatives, successors and assigns. Nothing in this Agreement, whether express or implied, shall be construed to give any Person (other than the parties hereto and their respective legal representatives, successors and assigns and as expressly provided herein) any legal or equitable right, remedy or claim under or in respect of this Agreement or any covenants, conditions or provisions contained herein, as a third party beneficiary or otherwise.

5.8 Assignability .

This Agreement shall not be assigned by any party without the prior written consent of the other party hereto; provided, however, that Athene may assign this Agreement to any Subsidiary thereof without ARI’s consent, it being understood that any such assignment shall not release Athene from any of its obligations under this Agreement.

5.9 Jurisdiction; Court Proceedings; Waiver of Jury Trial .

Any Litigation against any party to this Agreement arising out of or in any way relating to this Agreement shall be brought in any federal or state court located in the State of Delaware in New Castle County and each of the parties hereby submits to the exclusive

 

13


jurisdiction of such courts for the purpose of any such Litigation; provided , that a final judgment in any such Litigation shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Law.  Each party irrevocably and unconditionally agrees not to assert (a) any objection which it may ever have to the laying of venue of any such Litigation in any federal or state court located in the State of Delaware in New Castle County, (b) any claim that any such Litigation brought in any such court has been brought in an inconvenient forum and (c) any claim that such court does not have jurisdiction with respect to such Litigation.  To the extent that service of process by mail is permitted by applicable Law, each party irrevocably consents to the service of process in any such Litigation in such courts by the mailing of such process by registered or certified mail, postage prepaid, at its address for notices provided for herein.  Each party irrevocably and unconditionally waives any right to a trial by jury and agrees that any of them may file a copy of this paragraph with any court as written evidence of the knowing, voluntary and bargained-for agreement among the parties irrevocably to waive its right to trial by jury in any Litigation.

5.10 No Other Duties .

The only duties and obligations of the parties under this Agreement are as specifically set forth in this Agreement, and no other duties or obligations shall be implied in fact, Law or equity, or under any principle of fiduciary obligation.

5.11 Reliance on Counsel and Other Advisors .

Each party has consulted such legal, financial, technical or other expert as it deems necessary or desirable before entering into this Agreement. Each party represents and warrants that it has read, knows, understands and agrees with the terms and conditions of this Agreement.

5.12 Remedies .

All remedies, either under this Agreement or by Law or otherwise afforded to the parties hereunder, shall be cumulative and not alternative, and any Person having any rights under any provision of this Agreement will be entitled to enforce such rights specifically, to recover damages by reason of any breach of this Agreement and to exercise all other rights granted by Law, equity or otherwise.

5.13 Specific Performance .

The parties 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. Accordingly, the parties agree that, in addition to any other remedies, each party shall be entitled to enforce the terms of this Agreement by a decree of specific performance. Each party hereby waives any requirement for the securing or posting of any bond in connection with such remedy.

 

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5.14 Counterparts .

This Agreement may be executed by facsimile signatures and in any number of counterparts with the same effect as if all signatory parties had signed the same document. All counterparts shall be construed together and shall constitute one and the same instrument. Signatures to this Agreement transmitted by facsimile transmission, by electronic mail in “portable document format” (“.pdf”), or by any other electronic means intended to preserve the original graphic and pictorial appearance of a document, will have the same effect as physical delivery of the paper document bearing the original signature.

5.15 Further Assurance .

If at any time after the date hereof any further action is necessary or desirable to fully effect the transactions contemplated hereby or any other of the Ancillary Documents, each of the parties shall take such further action (including the execution and delivery of such further instruments and documents) as any other party reasonably may request.

5.16 Termination .

This Agreement shall terminate automatically without any act or deed of either party upon the Asset Purchase Agreement or the Merger Agreement being terminated in accordance with its terms; provided , however , that this Agreement shall not terminate automatically upon the termination of the Asset Purchase Agreement by ARI pursuant to Section 10.1(d) or 10.1(e) of the Asset Purchase Agreement.

(signature pages follow)

 

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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be duly executed and delivered in its name and on its behalf, all as of the day and year first above written.

 

ATHENE USA CORPORATION
By: Athene Asset Management, L.P., its investment advisor
By: AAM GP Ltd., its General Partner
By:  

/s/ James R. Belardi

Name:   James R. Belardi
Title:   Chief Executive Officer


APOLLO COMMERCIAL REAL ESTATE FINANCE, INC.
By:  

/s/ Stuart A. Rothstein

Name:   Stuart A. Rothstein
Title:   President and Chief Executive Officer


EXHIBIT A

FORM OF

10b5-1 PURCHASE PLAN AGREEMENT

[            ], 2016

Purchaser:

This letter agreement (this “Letter Agreement”) confirms the terms and conditions under which Athene USA Corporation (the “Purchaser”) hereby establishes a plan (the “Plan”) to purchase shares of common stock, par value $0.01 (the “Securities”), of Apollo Commercial Real Estate Finance, Inc. (the “Issuer”), and under which [●] will act as its exclusive agent to execute the Plan.

 

1. Appointment of [●] . The Purchaser hereby appoints [●] as its exclusive agent to purchase Securities pursuant to the Plan. It is the Purchaser’s intention that such purchases benefit from the safe harbor provided by Rule 10b-18 (“Rule 10b-18”) and the affirmative defense provided by Rule 10b5-1 (“Rule 10b5-1”) each promulgated by the Securities and Exchange Commission (the “SEC”) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and that the Plan and the transactions contemplated hereby comply with the requirements of paragraph (c)(1)(i)(B) of Rule 10b5-1, and the Purchaser acknowledges that the Purchaser may be an “affiliated purchaser” of the Issuer, as such term is defined in Rule 10b-18. Accordingly, the Purchaser hereby agrees that the terms of this Letter Agreement and the Plan shall be interpreted to comply with the requirements of such paragraph (c)(1)(i)(B) and that it shall not take, nor permit any person or entity under its control to take, any action that could jeopardize the availability of Rule 10b-18 for purchases of Securities under the Plan or result in such purchases not so complying with the requirements of such paragraph (c)(1)(i)(B). [●] agrees that it shall use good faith efforts to execute all purchases of Securities under this Letter Agreement in accordance with the timing, price and volume restrictions contained in subparagraphs (2), (3) and (4) of paragraph (b) of Rule 10b -18, taking into account the rules and practices of the principal exchange on which the Securities are traded (the “Principal Market”), it being understood that [●] shall not be responsible for delays between the execution and reporting of a trade in the Securities, any reporting errors of the Principal Market or third party reporting systems or other circumstances beyond [●]’s control.

 

2. Term .

 

  (a) [●] is authorized to commence purchasing Securities on the first day following the Purchase Period Start Date (as defined in Annex A) provided that the Issuer delivers written notice of the Purchase Period Start Date to [●] on the Purchase Period Start Date (the “Start Date”), and this Letter Agreement and the Plan shall terminate upon the earliest of (the period from and including the Start Date to such termination, the “Plan Period”):

 

  (i) the expiration of the Purchase Period (as defined in Annex A);


  (ii) the completion of all purchases contemplated by the Plan;

 

  (iii) subject to Section 11 below, the receipt by either party from the other of written notice of termination;

 

  (iv) the existence of any legal or regulatory restriction that would prohibit any purchase pursuant to the Plan;

 

  (v) the public announcement (as defined in Rule 165(f) under the Securities Act of 1933, as amended) of any merger, acquisition, or similar transaction relating to the Issuer (other than any merger, acquisition, or similar transaction publicly announced prior to the Start Date) and any such transaction in which the Issuer is the acquiring party and the consideration consists solely of cash and there is no valuation period);

 

  (vi) the commencement of any voluntary or involuntary case or other proceeding seeking liquidation, reorganization or other relief with respect to the Issuer or the Purchaser under any bankruptcy, insolvency or similar law or seeking the appointment of a trustee, receiver or other similar official with respect to the Issuer or the Purchaser, or the taking of any corporate action by the Issuer or the Purchaser to authorize or commence any of the foregoing;

 

  (vii) the failure of the Purchaser to comply with Section 7 hereof;

 

  (viii) the failure of the Issuer to provide notice of the Purchase Period Start Date to [●] on the Purchase Period Start Date; and

 

  (ix) any delay of the Purchase Period Start Date caused by or within the sole control of the Purchaser or as a result of sole consent provided by the Purchaser or any amendment to any of the Merger Agreement, the Asset Purchase Agreement or the Loan Agreement (each as defined in Annex A) in the Purchaser’s discretion or sole control or with the Purchaser’s sole consent causing a delay with respect to the Purchase Period Start Date or the Asset Purchase (as defined in Annex A).

 

  (b) If, as contemplated by paragraph (a)(iv) of this Section 2, at any time during the term of this Letter Agreement, any legal or regulatory restriction that is applicable to the Issuer, the Purchaser or the affiliates of the Issuer or the Purchaser would prohibit any purchase pursuant to the Plan, the Purchaser shall give [●] notice of such restriction as soon as practicable (such notice, a “Required Termination Notice”). Such notice shall not include any information about the nature of the restriction or its applicability to the relevant entity.

 

  (c) The Purchaser shall be solely responsible for any purchases made by [●] as the Purchaser’s agent prior to the termination of the Plan. In addition, if [●] receives notice of termination (including any Required Termination Notice) or of any of the termination events listed above, [●] shall nevertheless be entitled to make, and the Purchaser shall be solely responsible for, a purchase hereunder pursuant to a bid made before such notice was received by [●].

 

  (d) Sections 7 and 10 of this Letter Agreement shall survive any termination hereof.

 

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3. Purchases Outside Plan . The Purchaser (a) agrees that it shall not and (b) represents and warrants that it has agreed with the Issuer that the Issuer shall not, and the Issuer shall cause each of its “affiliated purchasers” (as defined in Rule 10b-18) not to, directly or indirectly (including in any similar purchase plan or any derivative transaction) purchase, offer to purchase or place any bid or limit order for the purchase of any Securities or any securities convertible or exchangeable into or exercisable for, or the value of which is derived from, the Securities during the Plan Period except under the Plan pursuant to this Letter Agreement. If the Purchaser becomes aware that the Issuer or any other affiliated purchaser of the Issuer has taken any such action during the Plan Period, the Purchaser shall so notify [●] as soon as practicable.

 

4. Purchasing Procedures .

 

  (a) On each Trading Day during the Plan Period on which no Market Disruption Event (as defined below) occurs, [●] shall use commercially reasonable efforts to purchase as agent for the Purchaser and for the account of the Purchaser the lesser of (i) the maximum number of Securities that the Purchaser could purchase on such Trading Day in accordance with the volume condition set forth in Rule 10b-18 and (ii) the number of Securities, if any, that [●] is able, subject to market conditions and principles of best execution, to purchase as agent for the Purchaser and for the account of the Purchaser on such Trading Day using commercially reasonable means in accordance with the Plan guidelines set forth in Annex A hereto. [●] may purchase Securities on the Principal Market, any national securities exchange, in the over-the-counter market, on an automated trading system or otherwise. Any numbers of Securities to be purchased (and any corresponding purchase price limits or ranges) set forth in Annex A shall be adjusted automatically on a proportionate basis to take into account any stock split, reverse stock split or stock dividend with respect to the Securities or any change in capitalization with respect to the Issuer or any similar event that occurs during the term of this Letter Agreement, as determined by [●] in good faith and a commercially reasonable manner.

A “Trading Day” is any day that the Principal Market is open for business and the Securities trade regular way on the Principal Market.

“Market Disruption Event” means that (i) there occurs any material (as reasonably determined by [●]) suspension of or limitation on trading by the Principal Market, (ii) there occurs any event that materially (as reasonably determined by [●]) disrupts or impairs the ability of market participants in general to effect transactions in or obtain market values for the Securities or futures or options contracts on the Securities or (iii) the Principal Market closes prior to its scheduled closing time for such Trading Day.

 

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  (b) In the event that [●], in its discretion, determines that it is appropriate with regard to any legal, regulatory or self-regulatory requirements or related internal policies and procedures (whether or not such requirements, policies or procedures are imposed by law or have been voluntarily adopted by [●]) for [●] to refrain from purchasing Securities or to purchase fewer than the number of Securities otherwise specified in the instructions provided by the Purchaser on any day, then [●] may, in its sole discretion, elect that the number of Securities purchased shall be reduced for such day to an amount determined by [●] in its discretion.

 

  (c) Any Securities purchased pursuant to the Plan shall be purchased under ordinary principles of best execution at the then-prevailing market price. Subject to the terms of the Plan as set forth herein (including Annex A hereto), [●] shall have full discretion with respect to the execution of all purchases, and the Purchaser acknowledges and agrees that the Purchaser does not have, and shall not attempt to exercise, any influence over how, when or whether purchases of Securities are affected pursuant to the Plan. The Purchaser acknowledges and agrees that, in purchasing Securities pursuant to the Plan, [●] will be an independent contractor and will not be acting as the Purchaser’s trustee or fiduciary or in any similar capacity.

 

5. Payment for and Delivery of Purchased Securities . Payment for Securities purchased, together with any applicable fees, shall be made by the Purchaser within one standard settlement cycle after the purchase. Purchased Securities will be held or delivered in accordance with instructions to be furnished by the Purchaser. [●] shall provide to the Purchaser purchase information daily as well as other market data the Purchaser reasonably requests.

 

6. Compensation . For the services provided in this Letter Agreement, the Purchaser agrees to pay to [●] a fee of [●] for the Securities purchased pursuant to the terms of this Letter Agreement.

 

7. Representations, Warranties and Agreements . The Purchaser represents and warrants to, and agrees with, [●] as follows:

 

  (a) This Letter Agreement and the transactions contemplated herein have been duly authorized by the Purchaser; this Letter Agreement is the valid and binding agreement of the Purchaser, enforceable against the Purchaser in accordance with its terms; performance of the transactions contemplated herein will not violate any law, rule, regulation, order, judgment or decree applicable to the Purchaser or conflict with or result in a breach of or constitute a default under any agreement or instrument to which the Purchaser is a party or by which it or any of its property is bound or its certificate of incorporation or by-laws; and no governmental, administrative or official consent, approval, authorization, notice or filing is required for performance of the transactions contemplated herein.

 

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  (b) As of the date of this Letter Agreement, the Purchaser is not aware of any material nonpublic information concerning the Securities or the business, operations or prospects of the Issuer.

 

  (c) The Purchaser is engaging [●] and entering into this Letter Agreement and the Plan in good faith and not as part of a plan or scheme to evade compliance with the federal securities laws, including, without limitation, Rule 10b-5 under the Exchange Act. Until this Letter Agreement is terminated, the Purchaser agrees not to enter into or alter any corresponding or hedging transaction or position with respect to the Securities.

 

  (d) The Purchaser is not entering into this Letter Agreement to create actual or apparent trading activity in the Securities (or any security convertible into or exchangeable for the Securities) or to raise or depress the price of the Securities (or any security convertible into or exchangeable for the Securities) for the purpose of inducing others to buy or sell Securities, and will not engage in any other securities or derivative transaction to such ends.

 

  (e) During the term of this Letter Agreement, neither the Purchaser nor its officers or employees shall, directly or indirectly, disclose to any person at [●] effecting purchases under the Plan any material nonpublic information regarding the Issuer or the Securities or any information regarding the Issuer or the Securities that could reasonably be expected to influence the execution of the Plan.

 

  (f) The Purchaser acknowledges that [●] is a “financial institution” and “financial participant” within the meaning of Sections 101(22) and 101(22A), respectively, of Title 11 of the United States Code (the “Bankruptcy Code”). The parties hereto further agree and acknowledge that each transaction under this Letter Agreement is intended to be a “securities contract” as defined in Section 741(7) of the Bankruptcy Code and each payment or delivery of cash, Securities or other property or assets hereunder is a “settlement payment” within the meaning of Section 741(8) of the Bankruptcy Code, and the parties hereto are to be entitled to the protections afforded by, among other Sections, Sections 362(b)(6), 362(b)(27), 362(o), 546(e), 546(j), 555 and 561 of the Bankruptcy Code.

 

  (g) Prior to 8:00 a.m., New York City time on the Start Date, the Purchaser shall provide to [●] all information, other than publicly reported trading volumes, necessary for [●] to calculate the maximum number of Securities that may be purchased as of the Start Date in accordance with the volume condition set forth in Rule 10b-18, and [●] shall be entitled to rely on such information so provided.

 

  (h) None of the Purchaser, the Issuer nor any of their respective affiliates or agents shall take any action that would cause Regulation M under the Exchange Act (“Regulation M”) to be applicable to any purchases of Securities, or any security for which the Securities are a reference security (as defined in Regulation M), by the Purchaser, the Issuer or any other affiliated purchasers (as defined in Regulation M) of the Issuer during the Plan Period.

 

  (i) The Purchaser shall be solely responsible for compliance with all statutes, rules and regulations applicable to the Purchaser and the transactions contemplated hereby, including, without limitation, reporting and filing requirements. The Purchaser acknowledges and agrees that it is not relying, and has not relied, upon [●] or any affiliate of [●] with respect to the legal, accounting, tax or other implications of the Plan and the transactions contemplated thereby and that it has conducted its own analyses of the legal, accounting, tax and other implications hereof. [●] has made no representation and has no obligation with respect to whether the Plan or the transactions contemplated thereunder qualify for the safe harbor provided by Rule 10b-18 or the affirmative defense provided by Rule 10b5-1.

 

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8. Disclosure of Acquisition Program . The Purchaser represents and warrants that the Issuer has publicly disclosed the Purchaser’s intention to establish the Plan for the acquisition of the Securities.

 

9. Other Purchases by [●] . Nothing herein shall preclude the purchase by [●] of Securities for [●]’s own account, or the solicitation or execution of purchase or sale orders of Securities for the account of [●]’s clients.

 

10. Indemnification . The Purchaser shall indemnify [●] and its affiliates against any liabilities or expenses (including reasonable out-of-pocket attorney’s fees and disbursements), or actions in respect of any liabilities or expenses, arising from the services furnished pursuant to this Letter Agreement including, but not limited to, liabilities and expenses arising by reason of any violation or alleged violation of any state or federal securities laws, except to the extent such liabilities or expenses result from the gross negligence or bad faith of [●] or its affiliates. The Purchaser shall also promptly reimburse [●] and its affiliates for all expenditures (including attorney’s fees and disbursements) made to investigate, prepare or defend any action or claim in respect of any such liability or expense, regardless of whether any litigation is pending or threatened against [●] or its affiliates. In addition, neither [●] nor its affiliates shall be liable in respect of any liabilities or expenses incurred by the Purchaser arising from or in connection with [●]’s role or services under this Letter Agreement, except to the extent any such liabilities or expenses result from the gross negligence or bad faith of [●] or its affiliates.

 

11.

Amendment, Modification, Waiver or Termination . Any amendment, modification or waiver of this Letter Agreement or the Plan must be effected in accordance with the requirements for the amendment of a “plan” as defined in paragraph (c) of Rule 10b5-1. Without limiting the generality of the foregoing, any amendment, modification, waiver or termination shall be made in good faith and not as part of a plan or scheme to evade the prohibitions of Rule 10b-5 under the Exchange Act, and no such amendment or modification shall be made at any time at which the Purchaser is aware of any material nonpublic information concerning the Issuer or the Securities, it being understood that the

 

6


  Purchaser may terminate the Plan at a time when it is aware of material nonpublic information. The Purchaser acknowledges and agrees that any action taken by it that results in the termination of the Plan pursuant to Section 2 is subject to the principles set forth in this section.

 

12. Notices . Any written communication shall be sent to the address specified below: and shall become effective upon receipt:

 

  (a) if to [●], to it at

[●]

[●]

[●]

Attention: [●]

Telephone: [●]

Facsimile: [●]

Email: [●]

or at such other address as may from time to time be designated by notice to the Purchaser in writing; and

 

  (b) if to the Purchaser, to it at

Athene USA Corporation

c/o Athene Asset Management, L.P.

2121 Rosecrans Ave., Suite 5300

El Segundo, CA 90245

Attention: James Belardi

Facsimile: 310-698-4492

Email: jbelardi@athene.com

With a copy to:

Athene USA Corporation

c/o Athene Asset Management, L.P.

2121 Rosecrans Ave., Suite 5300

El Segundo, CA 90245

Attention: James Belardi

Facsimile: 310-698-4492

Email: legal@athene.com

or at such other address as may from time to time be designated by notice to [●] in writing.

 

13. Assignment . Neither party may assign its rights and obligations under this Letter Agreement to any other party; provided that [●] may assign its rights and obligations under this Letter Agreement to any subsidiary of [●].

 

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14. Governing Law . This Letter Agreement and any claim, controversy or dispute arising under or related to this Letter Agreement shall be governed by and construed in accordance with the law of the State of New York. The parties hereto irrevocably submit to the exclusive jurisdiction of the federal and state courts located in the Borough of Manhattan, in the City of New York in any suit or proceeding arising out of or relating to this Letter Agreement or the transactions contemplated hereby. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHTS TO TRIAL BY JURY WITH RESPECT TO ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS LETTER AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

 

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If the foregoing correctly sets forth our agreement, please sign the form of acceptance below.

 

[●]
By:  

 

  Name:
  Title:

Agreed to and accepted as of:

 

ATHENE USA CORPORATION
By:   Athene Asset Management, L.P., its investment manager
By:   AAM GP Ltd., its General Partner
  By:  

 

    Name:
    Title:


ANNEX A

Defined Terms

Asset Purchase ” means the purchase by the buyers under the Asset Purchase Agreement of, or the buyers’ failure to purchase when required by the Asset Purchase Agreement, assets having an aggregate market value of at least $500,000,000 pursuant to the Asset Purchase Agreement.

Asset Purchase Agreement ” means the Asset Purchase and Sale Agreement, dated as of February 26, 2016, by and among, Athene Annuity & Life Assurance Company, Athene Annuity and Life Company and the Issuer.

Business Day ” means any day other than a Saturday, Sunday or day on which banks are closed in New York, New York.

Conditional Amount ” means (i) from the Purchase Period Start Date through the third (3 rd ) Business Day after the Merger Closing Date, $5,000,000 and (ii) after the third (3 rd ) Business Day following the Merger Closing Date, $0; provided that if the Asset Purchase occurs on or prior to the third (3 rd ) Business Day following the Merger Closing Date and the Issuer has delivered notice thereof to [●] on the date of the Asset Purchase, then, from and after the date of the Asset Purchase, the Conditional Amount shall be $20,000,000.

Loan Agreement ” means the Loan Agreement, dated as of [●], by and among the Issuer, Arrow Merger Sub, Inc. and the Purchaser.

Maximum Amount ” means an amount equal to the lesser of (i) $210,000,000 minus the Outstanding Loan Amount and (ii) the Conditional Amount, excluding any amounts payable in respect of commissions (including any fee described in Section 6).

Merger Agreement ” means that certain Agreement and Plan of Merger, dated as of February 26, 2016, by and among the Issuer, Apollo Residential Mortgage, Inc., and Arrow Merger Sub, Inc.

Merger Closing Date ” means the closing date of the mergers contemplated by the Merger Agreement, as specified in a written notice provided by the Issuer to [●] on the Merger Closing Date.

Outstanding Loan Amount ” means the amount outstanding under the Loan Agreement, which shall be $200,000,000 or, if such amount is reduced at any time, such lesser amount as specified in a written notice provided by the Purchaser to [●].

Purchase Period ” means the period commencing on the first day following the Purchase Period Start Date and continuing through the end of the thirtieth (30th) Trading Day following such day.

Purchase Period Start Date ” means the date of the latest to occur of (i) the Merger Closing Date, (ii) the date on which the conditions set forth in the Asset Purchase Agreement to the obligation of the buyers thereunder to consummate the transactions contemplated by the Asset Purchase Agreement have been satisfied and (iii) the date on which the conditions set forth in the Loan Agreement to the obligation of the Purchaser to extend the financing pursuant to the Loan Agreement have been satisfied.


Plan Guidelines

Subject to the other restrictions set forth in this Letter Agreement, including without limitation Section 4(a) and the proviso at the end of this paragraph, [●] shall purchase as many shares of the Securities as possible during the Purchase Period on the Principal Market; provided that (i) the purchase price for the Securities is less than $[●] per share and (ii) no Securities will be purchased at any time that the aggregate amount of Securities purchased pursuant to the Plan is in excess of the Maximum Amount as of such time.

 

2

Exhibit 10.2

Execution Version

CONFIDENTIAL

ATHENE USA CORPORATION

7700 Mills Civic Parkway

West Des Moines, IA 50266

February 26, 2016

Project Apple

Commitment Letter

Apollo Commercial Real Estate Finance, Inc.

Arrow Merger Sub, Inc.

c/o Apollo Global Management

9 W 57th Street

New York, NY 10019

Attn: Stuart A. Rothstein

Ladies and Gentlemen:

You have advised Athene USA Corporation, an Iowa corporation (“ AUSA ”, “ us ” or “ we ”), that you intend to (i) acquire, directly or indirectly, all of the outstanding stock of Apollo Residential Mortgage, Inc., a Maryland corporation (the “ Company ”) in accordance with that certain Agreement and Plan of Merger dated as of February 26, 2016 (the “ Acquisition Agreement ”), by and among Arrow Merger Sub, Inc., a Maryland corporation (“ AcquisitionCo ”), Apollo Commercial Real Estate Finance, Inc. (“ ARI ”, and collectively with AcquisitionCo, the “ Borrowers ”) and the Company, pursuant to which (a) AcquisitionCo will merge with and into the Company, with the Company as the surviving entity and (b) promptly thereafter, the Company will merge with and into ARI, with ARI as the surviving entity (collectively, the “ Acquisition ”), (ii) sell the Athene-Acquired Assets (as defined in the Form Credit Agreement attached hereto as Exhibit A) pursuant to the Asset Purchase and Sale Agreement, dated as of February 26, 2016, by and among Athene Annuity & Life Assurance Company, Athene Annuity and Life Company and ARI (the “ Athene Purchase Agreement ”) and (iii) enter into that certain Stock Purchase Agreement, dated as of February 26, 2016, by and among AUSA and ARI (the “ Stock Purchase Agreement ”) (the transactions described in clauses (i), (ii) and (iii) above, collectively, the “ Transactions ”). For purposes of this Commitment Letter and the Fee Letter (defined below), “ Closing Date ” shall mean the date of the consummation of the Acquisition, the satisfaction or waiver of the relevant conditions set forth on Exhibit   B and the funding of the Term Loan Facility (as defined below). Capitalized terms used but not otherwise defined herein are used with the meanings assigned to such terms in this letter or the Exhibits hereto (this letter together with all Exhibits, including the annexes, collectively, this “ Commitment Letter ”).


1. Commitments .

In connection with the Transactions, AUSA (individually or collectively with one or more of its affiliates, the “ Lender ”) hereby commits to provide the Borrowers a term loan in an aggregate principal amount of up to $200,000,000 less 100% of the Net Cash Proceeds (as defined in the Form Credit Agreement) received by ARI or any of its subsidiaries as a result of the disposition of any Athene-Acquired Asset on or prior to the Closing Date (the “ Term Loan Facility ”) (i) upon the terms set forth or referred to in this letter and the Form Credit Agreement attached as Exhibit   A hereto (the “ Form Credit Agreement ”), as applicable and (ii) the initial funding of which is subject only to the conditions set forth on Exhibit   B hereto.

 

2. Information .

You hereby represent that, all factual information (taken as a whole) furnished by or on behalf of any Loan Party in writing to the Lender for purposes of or in connection with the Loan Documents or otherwise filed with any Governmental Authority and publicly available for purpose of or in connection with the transactions contemplated hereby or thereby (the “ Information ”), does not or will not, when furnished, contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein not materially misleading in light of the circumstances under which such statements are made (after giving effect to all supplements and updates thereto from time to time). You agree that if, at any time prior to the Closing Date, you become aware that any of the representations in the preceding sentence would be incorrect in any material respect if the Information were being furnished and such representations were being made at such time, you will promptly supplement the Information so that such representations remain true in all material respects under those circumstances (and such supplementation shall cure any breach of any such representation). Notwithstanding anything to the contrary contained in this Commitment Letter or the Fee Letter, none of the making of any representation under this Section 2 , the provision of any supplement thereto, nor the accuracy of any such representation or supplement shall constitute a condition precedent to the availability and initial funding of the Term Loan Facility on the Closing Date.

 

3. Fee Letter .

As consideration for the commitments and agreements of the Lender, you agree to pay or cause to be paid the fees described in the Fee Letter, dated as of the date hereof, by and among ARI, AcquisitionCo and AUSA (the “ Fee Letter ”) on the terms and subject to the conditions (including as to timing and amount) set forth therein.

 

4. Certain Funds Provision .

Notwithstanding anything in this Commitment Letter, the Fee Letter, the Loan Documents or any other letter agreement or other undertaking concerning the financing of the transactions contemplated hereby to the contrary:

 

  (a)

the only representations and warranties relating to the Borrowers, the Company and the Borrowers and the Company’s respective subsidiaries and respective businesses, the accuracy of which shall be a condition to the

 

2


  availability and initial funding of the Term Loan Facility on the Closing Date, shall be (i) such of the representations and warranties made by or with respect to the Company, its subsidiaries and their respective businesses in the Acquisition Agreement as are material to the interests of the Lender, but only to the extent that you have the right to terminate your obligations under the Acquisition Agreement or to decline to consummate the Acquisition as a result of a breach of such representations in the Acquisition Agreement (to such extent, the “ Specified Acquisition Agreement Representations ”) and (ii) the Specified Representations (as defined below),

 

  (b) the terms of the Loan Documents and any closing deliverables shall be in a form reasonably satisfactory to the Lender; it being understood that, the Credit Agreement shall be substantially in the form of the Form Credit Agreement, appropriately completed for the insertion of dates, administrative details and other items shown in blank, bullets or footnotes and all schedules thereto shall be reasonably acceptable to us, and

 

  (c) there are no other conditions (implied or otherwise) to the commitments hereunder, including compliance with the terms of this Commitment Letter, the Fee Letter or the Loan Documents, except those expressly set forth on Exhibit   B hereto, and such conditions shall be subject in all respects to the provisions of this Section 4 .

Upon the satisfaction (or waiver by the Lender) of the conditions set forth on Exhibit B hereto, the Lender will execute and deliver the Loan Documents to which it is a party and the initial funding of the Term Loan Facility shall occur.

For purposes hereof, “ Specified Representations ” means the representations and warranties set forth in the Loan Documents relating to: due organization and existence of the Loan Parties; organizational power and authority (as each relates to due authorization, execution, delivery and performance of the Loan Documents) of the Loan Parties; due authorization, execution and delivery of the relevant Loan Documents by the Loan Parties, and enforceability as it relates to the entering into and performance of the relevant Loan Documents against the Loan Parties; solvency as of the Closing Date (after giving effect to the Transactions) of the Loan Parties taken as a whole (in form and scope consistent with the solvency certificate to be delivered pursuant to paragraph   1(b) of Exhibit   B hereto); no conflicts of the Loan Documents with the charter documents of the Loan Parties; Federal Reserve margin regulations; the Investment Company Act; the PATRIOT Act, OFAC and the FCPA (as it relates to the use of the proceeds of the Term Loan Facility); REIT status; and the creation, validity, perfection and priority of security interests (subject in all respects to security interests and liens permitted under the Loan Documents and to the foregoing provisions of this paragraph). This Section   4 , and the provisions contained herein, shall be referred to as the “ Certain Funds Provision ”.

 

3


5. Indemnification; Expenses .

You agree (a) to indemnify, defend and hold harmless the Lender, its affiliates and controlling persons (and their permitted successors and assigns) and its and their directors, officers, employees, partners, agents and other representatives (each, an “ indemnified person ”) from and against any and all liabilities, obligations, losses, penalties, claims, demands, suits, actions, judgments investigations, proceedings and damages, and all attorneys’ fees and disbursements (which attorneys’ fees, in the case of counsel to the indemnified persons, shall be reasonable) and other fees, costs and expenses of any kind or nature whatsoever which may at any time be imposed upon, incurred by or asserted against such indemnified person in any way in connection with, as a result of, related to or arising under or out of this Commitment Letter, the Fee Letter, the Term Loan Facility, and the use of the proceeds thereof or any claim, litigation, investigation or proceeding relating to any of the foregoing, including but not limited to, any investigation, litigation or proceeding commenced by any shareholder, debt holder or other Person in connection with, as a result of, related to or arising under or out of the Acquisition or the Transactions (in such indemnified person’s role as the Lender or a director, officer, employee, partner, agent or other representative of the Lender, its affiliates or controlling persons) (a “ Proceeding ”), regardless of whether any indemnified person is a party thereto or whether such Proceeding is brought by you, any of your affiliates or any third party, and to reimburse each indemnified person promptly following written demand therefor for any legal or other out-of-pocket expenses incurred in connection with investigating or defending any Proceeding; provided , that the foregoing indemnity will not, as to any indemnified person, apply to liabilities, obligations, losses, penalties, claims, demands, suits, actions, judgments investigations, proceedings and damages or related expenses to the extent they arise from the bad faith, willful misconduct or gross negligence of such indemnified person as determined by a final, non-appealable judgment of a court of competent jurisdiction and (b) whether or not the Closing Date occurs, to reimburse the Lender for all (i) out-of-pocket costs or expenses paid or incurred by the Lender in connection with, as a result of, related to or arising under or out of the Term Loan Facility and any related documentation (including this Commitment Letter, the Fee Letter and the Loan Documents), (ii) reasonable out-of-pocket fees, expenses and disbursements of outside counsel for the Lender in connection with, related to or arising under or out of the Term Loan Facility and any related documentation (including this Commitment Letter, the Fee Letter and the Loan Documents), (iii) out-of-pocket costs and expenses of third-party claims or any other suit paid or incurred by the Lender in enforcing or defending the this Commitment Letter, the Fee Letter or any of the Loan Documents or in connection with the transactions contemplated by this Commitment Letter or the Loan Documents or the Lender’s relationship with the Borrowers or any of their subsidiaries (including any investigation, litigation or proceeding commenced by any shareholder, debt holder or other Person in connection with, as a result of, related to or arising under or out of the Acquisition or the Transactions (in its role as the Lender)) and (iv) the Lender’s third-party out-of-pocket costs and expenses (including reasonable attorneys’ fees) incurred in connection with this Commitment Letter or the Loan Documents.

No indemnified person shall be liable for any damages arising from the use by any person (other than such indemnified person) of Information or other materials obtained through electronic, telecommunications or other information transmission systems, except to the extent any such damages arise from the bad faith, gross negligence or willful misconduct of such indemnified

 

4


person, in each case as determined by a final non-appealable judgment of a court of competent jurisdiction. None of the indemnified persons, their affiliates or their directors, officers, employees, agents, or other representatives of any of the foregoing shall be liable for any special, indirect, consequential or punitive damages in connection with this Commitment Letter, the Fee Letter or the Term Loan Facility (including the use or intended use of the proceeds of the Term Loan Facility) or the transactions contemplated hereby or thereby.

You shall not be liable for any settlement of any Proceeding effected by any indemnified person without your consent (which consent shall not be unreasonably withheld or delayed), but if any Proceeding is settled with your written consent, you agree to indemnify and hold harmless such indemnified person in the manner set forth above. You shall not, without the prior written consent of the affected indemnified person (which consent shall not be unreasonably withheld or delayed), effect any settlement of any pending or threatened Proceeding against such indemnified person in respect of which indemnity could have been sought hereunder by such indemnified person unless such settlement (a) includes an unconditional release of such indemnified person from all liability or claims that are the subject matter of such Proceeding and (b) does not include any statement as to any admission of fault or culpability.

 

6. Sharing of Information, Absence of Fiduciary Relationship .

You acknowledge and agree that the Lender has no obligation to use in connection with the transactions contemplated hereby, or to furnish to you, confidential information obtained from other companies or other persons. The Lender may have economic interests that conflict with your economic interests and those of the Company. You acknowledge and agree that (a)(i) the arranging and other services described herein regarding the Term Loan Facility are arm’s-length commercial transactions between you and your affiliates, on the one hand, and the Lender, on the other hand, that do not directly or indirectly give rise to, nor do you rely on, any fiduciary duty on the part of the Lender, (ii) the Lender has not provided any legal, accounting, regulatory or tax advice with respect to any of the Transactions and you have consulted your own legal, accounting, regulatory and tax advisors to the extent you have deemed appropriate and (iii) you are capable of evaluating, and understand and accept, the terms, risks and conditions of the transactions contemplated hereby; and (b) in connection with the transactions contemplated hereby, (i) the Lender has been, is, and will be acting solely as a principal and, except as otherwise expressly agreed in writing by the relevant parties, has not been, is not, and will not be acting as an advisor, agent or fiduciary for you or any of your affiliates and (ii) the Lender does not have any obligation to you or your affiliates except those obligations expressly set forth in this Commitment Letter and any other agreement with you or any of your affiliates.

 

7. Confidentiality .

This Commitment Letter is entered into by the parties hereto on the understanding that neither this Commitment Letter nor the Fee Letter nor any of their terms or substance shall be disclosed by you to any other person except (a) to your subsidiaries, to the Company and its subsidiaries, and to your and their respective directors, officers, employees, affiliates, members, partners, stockholders, attorneys, accountants, independent auditors, agents and other advisors and the Company and its subsidiaries, in each case on a confidential basis ( provided , that any disclosure of

 

5


the Fee Letter or its contents, until the Closing Date, to the Company or its subsidiaries or their respective directors, officers, employees, affiliates, members, partners, stockholders, attorneys, accountants, independent auditors, agents or other advisors shall be, until the Closing Date, (i) redacted in respect of the amounts, percentages and basis points of compensation set forth therein or (ii) used for customary accounting purposes, including accounting for deferred financing costs), (b) in any legal, judicial or administrative proceeding or as otherwise required by applicable law, rule or regulation or as requested by a governmental regulatory or self-regulatory authority (in which case you agree, to the extent permitted by law, rule or regulation, to inform us promptly in advance thereof), (c) in connection with the exercise of any remedy or enforcement of any right under this Commitment Letter and/or the Fee Letter, and (d) this Commitment Letter, including the existence and contents of this Commitment Letter (but not the Fee Letter or the contents thereof, other than the existence thereof and the contents thereof as part of projections, pro forma information and a generic disclosure of aggregate sources and uses in marketing materials and other related disclosures), may be disclosed in any proxy statement, periodic report or similar public filing related to the Acquisition or in connection with any public filing requirement. The foregoing restrictions shall cease to apply in respect of the existence and contents of this Commitment Letter (but not in respect of the Fee Letter and its contents) on the earlier of the Closing Date and two year following the date of this Commitment Letter.

The Lender shall use all material, non-public information received by it in connection with the Acquisition and the related transactions solely for the purpose of providing the services that are the subject of this Commitment Letter and the Loan Documents, and entering into the Athene Purchase Agreement and the Stock Purchase Agreement and shall treat confidentially all such information and the terms and contents of this Commitment Letter, the Fee Letter and the Loan Documents and shall not publish, disclose or otherwise divulge such information; provided , however , that nothing herein shall prevent the Lender from disclosing any such information that it is permitted to disclose pursuant to Section 16.7 of the Form Credit Agreement attached hereto as Exhibit A. The provisions of this paragraph (other than with respect to the Fee Letter and its contents) shall automatically terminate on the date that is two years after the date hereof, unless earlier superseded by the relevant Loan Documents.

 

8. Miscellaneous .

This Commitment Letter shall not be assignable by any party hereto without the prior written consent of each other party hereto (and any purported assignment without such consent shall be null and void), is intended to be solely for the benefit of the parties hereto and is not intended to and does not confer any benefits upon, or create any rights in favor of, any person other than the parties hereto and, to the extent expressly set forth herein, the indemnified persons. This Commitment Letter may not be amended or waived except by an instrument in writing signed by you and the Lender. This Commitment Letter may be executed in any number of counterparts, each of which shall be deemed to be an original, and all of which, when taken together, shall constitute one agreement. Delivery of an executed signature page of this Commitment Letter by facsimile or other electronic transmission (including “.pdf”, “.tif” or similar format) shall be effective as delivery of a manually executed counterpart hereof. This Commitment Letter and the Fee Letter are the only agreements that have been entered into among us and you with respect to the Term Loan Facility and set forth the entire understanding of the parties with respect hereto and thereto, and supersede all prior agreements and understandings related to the subject matter hereof.

 

6


This Commitment Letter, and any claim, controversy or dispute arising under or related to this Commitment Letter, whether in tort, contract (at law or in equity) or otherwise, shall be governed by, and construed and interpreted in accordance with, the laws of the State of New York; provided , that, notwithstanding the preceding sentence and the governing law provisions of this Commitment Letter and the Fee Letter, it is understood and agreed that (a) the interpretation of the definition of “Material Adverse Effect” (and whether or not a Material Adverse Effect has occurred), (b) the determination of the accuracy of any Specified Acquisition Agreement Representation and whether as a result of any inaccuracy thereof you or your applicable affiliate has the right to terminate your or their obligations under the Acquisition Agreement or to decline to consummate the Acquisition and (c) the determination of whether the Acquisition has been consummated in accordance with the terms of the Acquisition Agreement and, in any case, claims or disputes arising out of any such interpretation or determination or any aspect thereof, in each case, shall be governed by, and construed and interpreted in accordance with, the laws of the State of Maryland, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof.

EACH OF THE PARTIES HERETO IRREVOCABLY AGREES TO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY SUIT, ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT OR OTHERWISE) RELATED TO OR ARISING OUT OF THE ACQUISITION, THIS COMMITMENT LETTER, THE FEE LETTER OR THE PERFORMANCE BY US OR ANY OF OUR AFFILIATES OF THE SERVICES CONTEMPLATED HEREBY.

Each of the parties hereto irrevocably and unconditionally (a) submits to the exclusive jurisdiction of any state or federal court sitting in the Borough of Manhattan in the City of New York (or any appellate court therefrom) over any suit, action or proceeding arising out of or relating to this Commitment Letter or the Fee Letter, (b) agrees that all claims in respect of any such suit, action or proceeding shall be heard and determined in such New York state or federal court and (c) agrees that a final, non-appealable judgment in any such suit, action or proceeding may be enforced in other jurisdictions in any manner provided by law; provided , that with respect to any suit, action or proceeding arising out of or relating to the Acquisition Agreement or the transactions contemplated thereby and which do not involve claims against us or any other Lender, this sentence shall not override any jurisdiction provision set forth in the Acquisition Agreement. You and we agree that service of any process, summons, notice or document by registered mail addressed to such person shall be effective service of process against such person for any suit, action or proceeding brought in any such court. Each of the parties hereto hereby irrevocably and unconditionally waives any objection to the laying of venue of any such suit, action or proceeding brought in any such court and any claim that any such suit, action or proceeding has been brought in an inconvenient forum. Each party hereto agrees to service of process for purposes of the submission to jurisdiction set forth above by the mailing of such process by registered or certified mail, postage prepaid, to its address specified on the first page of this Commitment Letter.

 

7


The Lender hereby notifies you that, pursuant to the requirements of the USA PATRIOT Act, Title III of Pub. L. 107-56 (signed into law on October 26, 2001) (the “ PATRIOT   Act ”), it is required to obtain, verify and record information that identifies each Loan Party, which information includes names, addresses, tax identification numbers and other information that will allow each Lender to identify each Loan Party in accordance with the PATRIOT Act. This notice is given in accordance with the requirements of the PATRIOT Act and is effective for the Lender.

The Fee Letter and the indemnification and expenses, confidentiality, jurisdiction, governing law, sharing of information, no agency or fiduciary duty, waiver of jury trial, service of process and venue provisions contained herein shall remain in full force and effect regardless of whether the Loan Documents are executed and delivered and notwithstanding the termination or expiration of this Commitment Letter or the commitments hereunder; provided , that your obligations under this Commitment Letter (other than confidentiality of the Fee Letter and the contents thereof) shall automatically terminate and be of no further force and effect (and be superseded by the Loan Documents) on the Closing Date and you shall automatically be released from all liability hereunder in connection therewith at such time. Subject to the preceding sentence, you may terminate this Commitment Letter upon written notice to the Lender at any time.

If the foregoing correctly sets forth our agreement, please indicate your acceptance of our offer as set forth in this Commitment Letter and the Fee Letter by returning to us executed counterparts of this Commitment Letter and of the Fee Letter and making payment of the fees due under the Fee Letter not later than 5:00 p.m., New York City time, on February 26, 2016. Such offer will remain available for acceptance until such time, but will automatically expire at such time if we have not received such executed counterparts and payment of the fees in the manner contemplated by the Fee Letter in accordance with the preceding sentence. In the event that the Closing Date does not occur on or before 11:59 p.m., New York City time, on the earliest of (a) the Initial Outside Date (as defined in the Acquisition Agreement) or if extended in accordance with the terms of the Acquisition Agreement as in effect on the date hereof, the Second Outside Date (as defined in the Acquisition Agreement), (b) the date of the termination of the Acquisition Agreement by you or with your written consent, in each case prior to the closing of the Acquisition, (c) the date of the closing of the Acquisition without the use of the Term Loan Facility, and (d) the date of the termination of the Athene Purchase Agreement by you or with your written consent, then this Commitment Letter and the commitments hereunder shall automatically terminate unless we, in our discretion, agree to an extension; provided that the termination of any commitment pursuant to this sentence shall not prejudice your rights and remedies in respect of any breach of this Commitment Letter that occurred prior to any such termination.

[The remainder of this page is intentionally left blank]

 

8


We are pleased to have been given the opportunity to assist you in connection with this important financing.

 

Very truly yours,
ATHENE USA CORPORATION
By: ATHENE ASSET MANAGEMENT, L.P., its investment advisor
By: AAM GP Ltd., its general partner
By:  

/s/ James R. Belardi

Name:   James R. Belardi
Title:   Chief Executive Officer

 

Signature Page to Commitment Letter


Accepted and agreed to as of

the date first above written:

 

APOLLO COMMERCIAL REAL ESTATE FINANCE, INC.
By:  

/s/ Stuart A. Rothstein

Name:   Stuart A. Rothstein
Title:   President and Chief Executive Officer
ARROW MERGER SUB, INC.
By:  

/s/ Stuart A. Rothstein

Name:   Stuart A. Rothstein
Title:   President

 

Signature Page to Commitment Letter


EXHIBIT A

Form of Credit Agreement

[Attached]


 

 

LOAN AGREEMENT

by and among

APOLLO COMMERCIAL REAL ESTATE FINANCE, INC.

and

ARROW MERGER SUB, INC.,

as the Borrowers,

and

ATHENE USA CORPORATION,

as the Lender

Dated as of [ ][ ], 2016

 

 

 


TABLE OF CONTENTS

 

                   Page  

1.

    

DEFINITIONS AND CONSTRUCTION.

     1   
     1.1     

Definitions

     1   
     1.2     

Accounting Terms

     17   
     1.3     

Construction

     17   
     1.4     

Schedules and Exhibits

     18   

2.

    

LOAN AND TERMS OF PAYMENT.

     18   
     2.1     

Term Loan

     18   
     2.2     

Prepayments

     19   
     2.3     

Interest Rates: Rates, Payments, and Calculations

     20   
     2.4     

Representations and Warranties of Lender

     20   
     2.5     

Concerning Joint and Several Liability of the Borrowers

     21   

3.

    

CONDITIONS; TERM OF AGREEMENT.

     22   
     3.1     

Conditions Precedent to Effectiveness

     22   
     3.2     

Term

     23   
     3.3     

Effect of Termination

     23   

4.

    

REPRESENTATIONS AND WARRANTIES.

     23   
     4.1     

No Encumbrances

     23   
     4.2     

[Reserved]

     23   
     4.3     

State of Organization; Location of Chief Executive Office; Organizational Identification Number

     24   
     4.4     

Due Organization and Qualification; Power and Authority; Subsidiaries

     24   
     4.5     

Due Authorization; No Conflict

     24   
     4.6     

Litigation

     25   
     4.7     

No Material Adverse Change

     25   
     4.8     

Solvency

     26   
     4.9     

Employee Benefits; ERISA Plan Assets

     26   
     4.10     

Environmental Condition

     26   
     4.11     

Brokerage Fees

     26   
     4.12     

Intellectual Property

     26   
     4.13     

[Reserved]

     27   

 

i


TABLE OF CONTENTS

(continued)

 

                   Page  
     4.14     

Complete Disclosure

     27   
     4.15     

[Reserved]

     27   
     4.16     

PATRIOT Act; Anticorruption

     27   
     4.17     

Sanctions

     27   
     4.18     

Investment Company

     28   
     4.19     

Insurance

     28   
     4.20     

Margin Stock

     28   
     4.21     

Taxes

     28   
     4.22     

Collateral Matters

     28   
     4.23     

REIT Status

     29   

5.

    

AFFIRMATIVE COVENANTS

     29   
     5.1     

Financial Statements, Reports, Certificates

     29   
     5.2     

Maintenance of Properties

     30   
     5.3     

Taxes

     31   
     5.4     

Insurance

     31   
     5.5     

Compliance with Laws

     31   
     5.6     

[Reserved]

     31   
     5.7     

Existence

     31   
     5.8     

Books and Records

     31   
     5.9     

Environmental

     32   
     5.10     

Obligations Relating to Athene Purchase Agreement

     32   
     5.11     

Maintenance of REIT Status

     33   
     5.12     

Certain Regulatory Matters

     33   
     5.13     

Further Assurances

     33   

6.

    

NEGATIVE COVENANTS

     34   
     6.1     

Indebtedness

     34   
     6.2     

Liens

     34   
     6.3     

Disposal of Assets

     34   
     6.4     

Restrictions on Fundamental Changes

     34   
     6.5     

Change Name

     35   
     6.6     

Change Nature of Business

     35   

 

ii


TABLE OF CONTENTS

(continued)

 

                   Page  
     6.7     

Employee Benefits; ERISA Plan Assets

     35   
     6.8     

Amendment to Permitted Indebtedness; Restrictive Agreements

     36   
     6.9     

Restricted Payments

     37   
     6.10     

Accounting Methods

     37   
     6.11     

Investments

     37   
     6.12     

Transactions with Affiliates

     37   
     6.13     

Use of Proceeds

     38   
     6.14     

Amendments or Waivers and Prepayments with respect to Certain Indebtedness

     38   

7.

    

EVENTS OF DEFAULT

     38   

8.

    

THE LENDERS’ RIGHTS AND REMEDIES

     40   
     8.1     

Acceleration

     40   
     8.2     

Other Remedies

     40   
     8.3     

Remedies Cumulative

     41   

9.

    

TAXES AND EXPENSES

     41   

10.

    

WAIVERS; INDEMNIFICATION

     41   
     10.1     

Demand; Protest; etc.

     41   
     10.2     

Indemnification

     41   
     10.3     

Expenses

     42   
     10.4     

Waiver

     42   

11.

    

NOTICES

     43   

12.

    

CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER

     44   

13.

    

ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS

     45   
     13.1     

Assignments and Participations

     45   
     13.2     

Successors

     48   

14.

    

AMENDMENTS; WAIVERS

     48   
     14.1     

Amendments and Waivers

     48   
     14.2     

No Waivers; Cumulative Remedies

     49   

15.

    

THE LENDERS

     49   
     15.1     

Lender in Individual Capacity

     49   
     15.2     

Withholding Taxes; Increased Costs

     49   

 

iii


TABLE OF CONTENTS

(continued)

 

                   Page  
     15.3     

Restrictions on Actions by Lenders; Sharing of Payments

     53   
     15.4     

Payments to the Lenders

     53   
     15.5     

Several Obligations; No Liability

     53   

16.

    

GENERAL PROVISIONS

     53   
     16.1     

Effectiveness

     53   
     16.2     

Section Headings

     53   
     16.3     

Interpretation

     54   
     16.4     

Severability of Provisions

     54   
     16.5     

Counterparts; Electronic Execution

     54   
     16.6     

Revival and Reinstatement of Obligations

     54   
     16.7     

Confidentiality

     54   
     16.8     

Integration

     55   
     16.9     

USA PATRIOT Act Notice

     55   
     16.10     

Recourse Against Certain Parties

     55