EXHIBIT 2.1
AMENDMENT NO. 1
TO
AGREEMENT OF MERGER
This AMENDMENT NO. 1 TO AGREEMENT OF
MERGER (this “ Amendment ”), dated as of
March 16, 2007 (the “ Amendment Effective Date
”), is by and among Credit-Based Asset Servicing and
Securitization LLC (“ Parent ”), a Delaware
limited liability company, Rock Acquisition Corp., a Maryland
corporation and a wholly-owned subsidiary of Parent (“
Merger Sub ”), and Fieldstone Investment Corporation,
a Maryland corporation (the “ Company ”).
Capitalized terms used but not defined herein shall have the same
meanings as set forth in the Merger Agreement (as defined
below).
RECITALS
WHEREAS, Parent, Merger Sub and the
Company entered into that certain Agreement of Merger, dated as of
February 15, 2007 (the “ Merger Agreement
”), pursuant to which, subject to the terms thereof, Merger
Sub is to merge with and into the Company and the Company Common
Stock is to be converted into the right to receive the Merger
Consideration;
WHEREAS, since the date of the Merger
Agreement, the Company has had concerns over its liquidity and has
requested Parent provide the Company with liquidity support, and
Parent is willing to provide certain liquidity prior to the Closing
in the form of the transactions described herein;
WHEREAS, in order for Parent to
provide the liquidity as described herein, Parent will be
committing its own resources in advance of any requirement to do
so, and in consideration for providing such liquidity prior to the
Closing, and as a condition thereto, the Company, Parent and Merger
Sub have agreed to a reduction in the Merger Consideration; and
WHEREAS, in accordance with
Section 7.3 of the Merger Agreement, the parties to the Merger
Agreement desire to amend certain provisions thereof as set forth
in this Amendment;
NOW, THEREFORE, in consideration of
the foregoing and the mutual covenants, representations, warranties
and agreements set forth herein, and intending to be legally bound,
the parties agree as follows:
1. Amendments .
(a) Merger
Consideration . Section 1.8(a) of the Merger Agreement is
hereby deleted in its entirety and replaced with the following:
“Each share of Company Common
Stock issued and outstanding immediately prior to the Effective
Time (other than shares cancelled pursuant to Section 1.8(c)
below, the “ Excluded Shares ”) shall be
cancelled and converted into the right to receive an amount in cash
equal to $4.00, without interest (the “ Merger
Consideration ”), payable to the holder thereof in
accordance with Sections 2.2 and 2.6.”
(b) Board
Approval . Section 3.7 of the Merger Agreement is hereby
deleted in its entirety and replaced with the following:
“Section 3.7. Board
Approval . The Board of Directors of the Company, by
resolutions duly adopted at a meeting duly called and held and not
subsequently rescinded or modified in any way through the date of
the Amendment No. 1 to the Agreement of Merger (the “
Amendment ”) (the “ Company Board
Approval ”), has (a) determined that this Agreement as
amended by this Amendment and the transactions contemplated hereby
, including, without limitation, the Merger, are advisable to the
Company and its stockholders, (b) approved and adopted this
Agreement as amended by the Amendment and the transactions
contemplated hereby, including, without limitation, the Merger, and
(c) resolved to recommend that the stockholders of the Company
approve this Agreement as amended by the Amendment and the
transactions contemplated hereby , including, without limitation,
the Merger, and directed that such matter be submitted to a vote by
the Company’s stockholders at the Company Stockholders
Meeting. In addition, the Company has taken all corporate action
required to be taken by it in order to exempt this Agreement as
amended by the Amendment, the Merger and the transactions
contemplated by this Agreement and the Amendment from, and this
Agreement, the Amendment, the Merger and the transactions
contemplated by this Agreement and the Amendment are exempt from,
the provisions of the Maryland Business Combinations Act that
relate to the Company.
(c) Conduct of Business .
Section 5.1(a)(i) of the Merger Agreement is hereby amended by
adding the following sentence at the end thereof:
“Any determination of what
constitutes “ordinary and usual course of business consistent
with past practices” solely for purposes of this
Section 5.1(a)(i) shall be made by reference to the conduct of
the Company’s and its Subsidiaries businesses as of the date
of the Amendment and shall take into account the recent disruption
in the subprime mortgage market.”
(d) No
Dispositions . Section 5.1(a)(ix) is hereby amended by
adding the following provisions at the end thereof:
“Notwithstanding the
foregoing, the Company shall be entitled, at its option, to:
(a) cause Parent to, and Parent
shall, purchase all of the unfinanced performing residential
mortgage loans and real estate owned assets of the Company or a
subsidiary thereof specifically identified in
Section 5.1(a)(ix)(a)-1 of the Company Disclosure Schedule
(collectively, the “ Unfinanced Loans and REO ”)
at the price set forth in Section 5.1(a)(ix)(a)-2 of the
Company Disclosure Schedule, pursuant to the terms of that certain
Master Asset Purchase Agreement, dated as of March 1, 2007, by
and between the Parent and the Company (the “ Company
MAPA ”), or pursuant to that certain Amended and Restated
Master Asset Purchase Agreement, dated as of March 1, 2007, by
and between the Parent and Fieldstone Mortgage Company (the “
FMC MAPA ,” and together with the Company MAPA, the
“ MAPAs ”), and subject to a 20% holdback of the
purchase price pending results of due diligence as further
described in the applicable MAPA;
(b) cause Parent to, and Parent
shall, purchase, free and clear of any Liens, all or any portion of
the “BBB” rated mortgage backed securities currently
financed pursuant to that certain Master Repurchase Agreement,
dated as of October 11, 2005, by and between the Company and
Liquid Funding, Ltd., a subsidiary of Bear, Sterns & Co. (the
“ Bear Repo Agreement ”), specifically
identified in Section 5.1(a)(ix)(b)-1 of the Company Disclosure
Schedule (the “ BBB Securities ”) on at least
one Business Day prior written notice at a price equal to the price
where such BBB Securities are marked under the Bear Repo Agreement
as of the close of business on March 15, 2007; provided
, however , that in the event of a margin call
pursuant to the Bear Repo Agreement, the Company shall have the
right to cause Parent to, and Parent shall, purchase on the same
Business Day, a pro rata portion of each of the BBB Securities as
may be necessary at the time of such margin call to sell at the
price set forth above for such pro rata portion in order to provide
the Company with sufficient liquidity to meet such margin call;
provided that the Company shall have given notice to the Parent of
its exercise of such put on or before 1:00 pm (Eastern Time);
(c) cause Parent to, and Parent
shall, purchase, on or after March 31, 2007, all of the
Company’s or Fieldstone Mortgage Company’s seasoned
mortgage loan assets identified in Section 5.1(a)(ix)(c)-1 of
the Company Disclosure Schedule (“ Seasoned Loans
”) at the price set forth in set forth in
Section 5.1(a)(ix)(c)-2 of the Company Disclosure Schedule,
pursuant to the terms of the applicable MAPA. Notwithstanding the
foregoing, at the Company’s request, Parent may agree, in its
sole discretion, to purchase only a portion of the Seasoned Loans
at a mutually agreeable price and otherwise pursuant to the terms
of the applicable MAPA;
(d) cause Parent to, and Parent
shall, purchase all of the Company’s or Fieldstone Mortgage
Company’s residential mortgage loan assets originated on or
after March 1, 2007 (“ Forward Flow Loans
”) at the price set forth in set forth in Section
5.1(a)(ix)(d)-1 of the Company Disclosure Schedule, pursuant to the
terms of the applicable MAPA. If the Company exercises its right
pursuant to this paragraph (d), the Company shall be required to
sell to Parent and Parent shall be required to purchase all Forward
Flow Loans on the 15 th day of each calendar month
(unless such 15 th day is not a Business Day, in which
case the purchase shall occur on the next succeeding business day)
and the last Business Day of each calendar month. Notwithstanding
the foregoing, in the event the Company wishes to sell a portion of
its Forward Flow Loans to a third party, (i) if the Company
has not elected to exercise its rights as set forth in this
paragraph (d), it may sell such Forward Flow Loans to a third party
only in accordance with the provisions of Article V of the
Merger Agreement, or (ii) if the Company has elected to
exercise its rights as set forth in this paragraph (d), it may sell
such Forward Flow Loans to a third party only with the prior
consent of Parent;
(e) cause
Parent to, and Parent shall, purchase all of the Company’s
residential mortgage loan assets identified in
Section 5.1(a)(ix)(e)-1 of the Company Disclosure Schedule
(the “ April Securitization Loans ”) at the
price set forth in Section 5.1(a)(ix)(e)-2 of the Company
Disclosure Schedule pursuant to the terms of the applicable MAPA;
provided however , that the Company shall only
be permitted to exercise its rights under this paragraph
(e) in the event the securitization transaction with respect
to such April Securitization Loans does not price on or before
April 1, 2007; and
(f) cause Parent to, and Parent
shall, purchase on or after April 8, 2007, all of Fieldstone
Mortgage Company’s residential mortgage loan assets
identified in Section 5.1(a)(ix)(f)-1 of the Company
Disclosure Schedule (the “ FMC New Origination Loans
”) at the price set forth in Section 5.1(a)(ix)(f)-2 of
the Company Disclosure Schedule pursuant to the terms of the
applicable MAPA. Notwithstanding the foregoing, at the
Company’s request, Parent may agree, in its sole discretion,
to purchase only a portion of the FMC New Origination Loans at a
mutually agreeable price and otherwise pursuant to the terms of the
applicable MLPA.
(e) Additional
Conditions to Obligations of Parent and Merger Sub – Existing
Financing Agreements . Section 6.2(i) of Company
Disclosure Schedule is hereby deleted in its entirety and replaced
with the Section 6.2(i) of the Company Disclosure Schedule
attached to the Amendment.
(f) Definition
of Material Adverse Effect on the Company .
Section 8.15(i) of the Merger Agreement is hereby amended by
adding the following clause to the definition of “
Material Adverse Effect on the Company ” after clause
(ix):
“or
(x) any breach of any representation, warranty, covenant or
agreement or the occurrence of any “default” or of any
“event of default” under any of the Existing Financing
Facilities”
(g) Effect of
Termination . Section 7.2(b) of the Merger Agreement is
hereby amended by replacing the amount of the Termination Fee of
“$10,000,000” with the following amount:
$7,400,000.”
(h) Working
Fee . Section 7.2(c) of the Merger Agreement is hereby
amended by replacing the amount of the working fee of
“1,250,000” with the following amount:
“$900,000.”
2. Representations and
Warranties .
(a) By the Company .
Company hereby represents and warrants to Parent and the Merger Sub
as follows:
(i)
Authorization . The Company has full corporate power and
authority to execute and deliver this Amendment, and to consummate
the transactions contemplated by the Merger Agreement, as amended
by this Amendment, subject, in the case of the consummation of the
Merger, the Company Requisite Shareholder Vote. The execution and
delivery of this Amendment by the Company and the consummation by
the Company of the transactions contemplated by the Merger
Agreement, as amended by this Amendment, have been duly au
