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EXHIBIT 1.1
4,600,000 UNITS
HANOVER CAPITAL MORTGAGE HOLDINGS, INC.
EACH UNIT TO CONSIST OF
ONE SHARE OF COMMON STOCK AND
ONE STOCK PURCHASE WARRANT
UNDERWRITING AGREEMENT
DATED SEPTEMBER __, 1997
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & COMPANY, INCORPORATED
▇▇▇▇▇▇▇▇▇▇ SECURITIES
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TABLE OF CONTENTS
SECTION 1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY....................................... 3
(a) Compliance with Registration Requirements........................................ 3
(b) Offering Materials Furnished to Underwriters..................................... 3
(c) Distribution of Offering Material By the Company................................. 4
(d) The Underwriting Agreement....................................................... 4
(e) Formation Agreements............................................................. 4
(f) Authorization of the Units, Warrants, Unit Shares and Warrant Shares............. 4
(g) Reservation for Issuance of a Sufficient Number of Warrant Shares................ 4
(h) No Applicable Registration or Other Similar Rights............................... 4
(i) No Material Adverse Change....................................................... 4
(j) Independent Accountants.......................................................... 5
(k) Preparation of the Financial Statements.......................................... 5
(l) Incorporation and Good Standing of the Company and its Subsidiaries.............. 5
(m) [reserved]....................................................................... 6
(n) Capitalization and Other Capital Stock Matters................................... 6
(o) Stock Exchange Listing........................................................... 6
(p) No Current Material Defaults..................................................... 6
(q) Authorization and Non-Contravention of Existing Instruments...................... 7
(r) No Further Authorizations or Approvals Required.................................. 7
(s) Formation Transactions Not a Roll-Up; Partnership Interests and Stock of
HCP Exempt....................................................................... 7
(t) No Material Actions or Proceedings............................................... 8
(u) Intellectual Property Rights..................................................... 8
(v) Compliance with All Applicable Laws.............................................. 8
(w) All Necessary Permits, Licenses, etc............................................. 8
(x) Title to Properties.............................................................. 8
(y) Tax Law Compliance............................................................... 9
(z) REIT Status...................................................................... 9
(aa) Company Not an "Investment Company". ............................................ 9
(bb) Insurance........................................................................ 9
(cc) No Price Stabilization or Manipulation........................................... 10
(dd) No Broker or Finder Fees......................................................... 10
(ee) Related Party Transactions....................................................... 10
(ff) No Unlawful Contributions or Other Payments...................................... 10
(gg) Company's Accounting System...................................................... 10
(hh) Compliance with Environmental Laws............................................... 10
(ii) Periodic Review of Costs of Environmental Compliance............................. 11
(jj) ERISA Compliance................................................................. 11
(kk) Material Contracts............................................................... 12
SECTION 2. PURCHASE, SALE AND DELIVERY OF THE UNITS............................................ 12
(a) The Firm Units................................................................... 12
(b) The First Closing Date........................................................... 12
(c) The Optional Units; the Second Closing Date...................................... 12
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(d) Public Offering of the Units..................................................... 13
(e) Payment for the Units............................................................ 13
(f) Delivery of the Units............................................................ 13
(g) Time of the Essence.............................................................. 14
(h) Delivery of Prospectus to the Underwriters....................................... 14
SECTION 3. ADDITIONAL COVENANTS OF COMPANY..................................................... 14
(a) Representatives' Review of Proposed Amendments and Supplements................... 14
(b) Securities Act Compliance........................................................ 14
(c) Amendments and Supplements to the Prospectus and Other Securities Act
Matters.......................................................................... 15
(d) Copies of any Amendments and Supplements to the Prospectus....................... 15
(e) Press Releases................................................................... 15
(f) Blue Sky Compliance.............................................................. 16
(g) Uncertificated Shares............................................................ 16
(h) Consummation of Formation Transactions........................................... 16
(i) Use of Proceeds.................................................................. 16
(j) Transfer Agent................................................................... 16
(k) Continuing Listing on the American Stock Exchange................................ 16
(l) Earnings Statement............................................................... 16
(m) Periodic Reporting Obligations................................................... 17
(n) Agreement Not To Offer or Sell Additional Securities............................. 17
(o) Future Reports to the Representatives............................................ 17
(p) REIT Status...................................................................... 18
(q) Accounting and Tax Advice........................................................ 18
(r) Commodities Exchange Act......................................................... 18
(s) Investment Advisors Act.......................................................... 18
(t) Agreements with Management....................................................... 18
(u) SEC Compliance Program and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Compliance Policy..................... 18
SECTION 4. PAYMENT OF EXPENSES................................................................. 19
SECTION 5. CONDITIONS OF THE OBLIGATIONS OF THE UNDERWRITERS................................... 19
(a) Accountants' Comfort Letter...................................................... 19
(b) Compliance with Registration Requirements; No Stop Order; No Objection
from NASD........................................................................ 20
(c) No Material Adverse Change or Ratings Agency Change.............................. 20
(d) Opinion of Counsel for the Company............................................... 20
(e) Opinion of Counsel for the Underwriters.......................................... 20
(f) Officers' Certificates........................................................... 21
(g) Bring-down Comfort Letter........................................................ 21
(i) Written Consents................................................................. 21
(j) Additional Documents............................................................. 21
(k) American Stock Exchange Listing.................................................. 22
(l) Consummation of Formation Transactions and Charter Amendments.................... 22
(m) Employment Agreements............................................................ 22
(n) Representatives Warrants......................................................... 22
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SECTION 6. REIMBURSEMENT OF UNDERWRITERS' EXPENSES............................................. 22
SECTION 7. EFFECTIVENESS OF THIS AGREEMENT..................................................... 23
SECTION 8. INDEMNIFICATION..................................................................... 23
(a) Indemnification of the Underwriters by the Company............................... 23
(b) Indemnification of the Company, its Directors and Officers....................... 24
(c) Notifications and Other Indemnification Procedures............................... 25
(d) Settlements...................................................................... 26
SECTION 9. CONTRIBUTION........................................................................ 26
SECTION 10. DEFAULT OF ONE OR MORE OF THE SEVERAL UNDERWRITERS................................. 27
SECTION 11. TERMINATION OF THIS AGREEMENT...................................................... 28
SECTION 12. REPRESENTATIONS AND INDEMNITIES TO SURVIVE DELIVERY................................ 28
SECTION 13. NOTICES............................................................................ 29
SECTION 14. SUCCESSORS......................................................................... 30
SECTION 15. PARTIAL UNENFORCEABILITY........................................................... 30
SECTION 16. (a) Governing Law Provisions....................................................... 30
(b) Consent to Jurisdiction............................................................ 30
SECTION 17. GENERAL PROVISIONS................................................................. 31
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UNDERWRITING AGREEMENT
September __, 1997
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & COMPANY, INCORPORATED
▇▇▇▇▇▇▇▇▇▇ SECURITIES
As Representatives of the several Underwriters
▇/▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & COMPANY, INCORPORATED
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
INTRODUCTORY. Hanover Capital Mortgage Holdings, Inc. (the "Company"),
a Maryland corporation intending to qualify for federal income tax purposes as a
real estate investment trust ("REIT") pursuant to Sections 856 through 860 of
the Internal Revenue Code of 1986, as amended, and the rules and regulations
thereunder, as may be amended from time to time (the "Tax Code"), proposes to
issue and sell to the several underwriters named in Schedule 1 (the
"Underwriters") an aggregate of 4,600,000 Units (the "Firm Units"), each Unit to
consist of one share of the Company's Common Stock, par value $0.01 per share
(the "Common Stock"), and one Stock Purchase Warrant (a "Warrant"). In addition,
the Company has granted to the Underwriters an option to purchase up to an
additional 690,000 Units (the "Optional Units"), as provided in Section 2. The
Firm Units and, if and to the extent such option is exercised, the Optional
Units are collectively called the "Units." ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & Company,
Incorporated and ▇▇▇▇▇▇▇▇▇▇ Securities have agreed to act as representatives of
the several Underwriters (in such capacity, the "Representatives") in connection
with the offering and sale of the Units.
The terms of the Warrants shall be as set forth in the warrant
agreement (the "Warrant Agreement") to be entered into by the Company and the
warrant agent on the First Closing Date (as hereinafter defined) in
substantially the form filed as exhibit 4.2 to the Registration Statement (as
hereinafter defined). Each Warrant entitles the holders thereof for __________
Dollars ($________) to purchase one share (subject to antidilution provisions)
of the Company's Common Stock. The Warrants will become exercisable six months
after the First Closing Date and will remain exercisable until 5:00 p.m., New
York time, on the third anniversary of the date of the Prospectus (as
hereinafter defined).
The shares of Common Stock which in part comprise the Units are herein
referred to as the "Unit Shares." The shares of Common Stock issuable upon
exercise of the Warrants and the Representatives Warrants (as hereinafter
defined) are herein referred to as the "Warrant Shares." The Unit Shares and the
Warrant Shares are herein collectively referred to as the "Shares."
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The Company has prepared and filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-11 (File No.
333-29261), which contains a form of prospectus to be used in connection with
the public offering and sale of the Units. Such registration statement, as
amended, including the financial statements, exhibits and schedules thereto, in
the form in which it was declared effective by the Commission under the
Securities Act of 1933 and the rules and regulations promulgated thereunder
(collectively, the "Securities Act"), including any information deemed to be a
part thereof at the time of effectiveness pursuant to Rule 430A or Rule 434
under the Securities Act, is called the "Registration Statement." Any
registration statement filed by the Company pursuant to Rule 462(b) under the
Securities Act is called the "Rule 462(b) Registration Statement," and from and
after the date and time of filing of the Rule 462(b) Registration Statement the
term "Registration Statement" shall include the Rule 462(b) Registration
Statement. Such prospectus, in the form first used by the Underwriters to
confirm sales of the Units, is called the "Prospectus"; provided, however, if
the Company has, with the consent of ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & Company, Incorporated,
elected to rely upon Rule 434 under the Securities Act, the term "Prospectus"
shall mean the Company's prospectus subject to completion (each, a "preliminary
prospectus") dated [___] (such preliminary prospectus is called the "Rule 434
preliminary prospectus"), together with the applicable term sheet (the "Term
Sheet") prepared and filed by the Company with the Commission under Rules 434
and 424(b) under the Securities Act and all references in this Agreement to the
date of the Prospectus shall mean the date of the Term Sheet. All references in
this Agreement to the Registration Statement, the Rule 462(b) Registration
Statement, a preliminary prospectus, the Prospectus or the Term Sheet, or any
amendments or supplements to any of the foregoing, shall include any copy
thereof filed with the Commission pursuant to its Electronic Data Gathering,
Analysis and Retrieval System ("▇▇▇▇▇").
On or before the First Closing Date (as hereinafter defined), (a)
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, an individual ("▇▇▇▇▇▇▇▇"), ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, an individual
("▇▇▇▇▇▇▇"), ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, an individual ("▇▇▇▇▇▇▇▇▇"), and ▇▇▇▇ ▇.
▇▇▇▇▇▇▇, an individual ("▇▇▇▇▇▇▇"), (each a "Principal" and collectively, the
"Principals") will contribute all of the outstanding shares of preferred stock
(the "HCP Preferred Stock") in Hanover Capital Partners, Ltd., a New York
corporation ("HCP"), to the Company in exchange for Common Stock and (b) the
other transactions to be consummated on or before the First Closing Date as set
forth in the Prospectus under the caption "Structure and Formation
Transactions-- The Formation of HCHI--Formation Transactions" (all of the
foregoing, collectively, the "Formation Transactions") shall be consummated. The
documents required to be executed and delivered in order to consummate the
Formation Transactions, including, without limitation, the documents listed on
Schedule 2 hereto, are hereinafter collectively referred to as the "Formation
Documents," and each Formation Document constituting an agreement is hereinafter
referred to as a "Formation Agreement."
For purposes of this Agreement, "Subsidiary" means, with respect to the
Company, any corporation, partnership, association, limited liability company,
joint venture or other business entity of which more than 50% of the total
voting power of shares of stock or other ownership interest entitled (without
regard to the occurrence of any contingency) to vote in the election of the
person or persons (whether directors, managers, partners, trustees or other
persons performing similar functions) having the power to direct or cause the
direction of the management and policies thereof is at the time owned or
controlled, directly or indirectly, by the Company or one or more of the other
Subsidiaries of the Company or a combination thereof, including
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without limitation, each of HCP, Hanover Capital Mortgage Corporation, a
Missouri corporation ("HCMC"), and Hanover Capital Securities, Inc., a New York
corporation ("HCS").
The Company hereby confirms its agreements with the Underwriter as
follows:
SECTION 1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents, warrants and covenants to each
Underwriter as follows:
(a) Compliance with Registration Requirements. The Registration
Statement and any Rule 462(b) Registration Statement have been declared
effective by the Commission under the Securities Act. The Company has
complied to the Commission's satisfaction with all requests of the
Commission for additional or supplemental information. No stop order
suspending the effectiveness of the Registration Statement or any Rule
462(b) Registration Statement is in effect and no proceedings for such
purpose have been instituted or are pending or, to the best knowledge of
the Company, are contemplated or threatened by the Commission.
Each preliminary prospectus and the Prospectus when filed complied in
all material respects with the Securities Act and, if filed by electronic
transmission pursuant to ▇▇▇▇▇ (except as may be permitted by Regulation
S-T under the Securities Act), was identical to the copy thereof delivered
to the Underwriters for use in connection with the offer and sale of the
Units. Each of the Registration Statement, any Rule 462(b) Registration
Statement and any post-effective amendment thereto, at the time it became
effective and at all subsequent times, complied and will comply in all
material respects with the Securities Act and did not and will not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading. The Prospectus, as amended or supplemented, as of its date
and at all subsequent times, did not and will not contain any untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading. The representations and
warranties set forth in the two immediately preceding sentences do not
apply to statements in or omissions from the Registration Statement, any
Rule 462(b) Registration Statement, or any post-effective amendment
thereto, or the Prospectus, or any amendments or supplements thereto, made
in reliance upon and in conformity with information relating to any
Underwriter furnished to the Company in writing by the Representatives
expressly for use therein. There are no contracts or other documents
required to be described in the Prospectus or to be filed as exhibits to
the Registration Statement which have not been described or filed as
required.
(b) Offering Materials Furnished to Underwriters. The Company has
delivered to the Representatives two complete manually signed copy of the
Registration Statement and of each consent and certificate of experts filed
as a part thereof, and conformed copies of the Registration Statement
(without exhibits) and preliminary prospectuses and the Prospectus, as
amended or supplemented, in such quantities and at such places as the
Representatives have reasonably requested for each of the Underwriters.
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(c) Distribution of Offering Material By the Company. The Company has
not distributed and will not distribute, prior to the later of the Second
Closing Date (as hereinafter defined) and the completion of the
Underwriters' distribution of the Units, any offering material in
connection with the offering and sale of the Units other than a preliminary
prospectus, the Prospectus or the Registration Statement.
(d) The Underwriting Agreement. This Agreement has been duly
authorized, executed and delivered by, and is a valid and binding agreement
of the Company enforceable in accordance with its terms, except as rights
to indemnification hereunder may be limited by applicable law and except as
the enforcement hereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
the rights and remedies of creditors or by general equitable principles.
(e) Formation Agreements. Each Formation Agreement to which the Company
or any Subsidiary of the Company is a party has been, or will be upon
execution and delivery thereof, duly authorized, executed and delivered by
the Company and each Subsidiary of the Company party thereto. The Company,
each Subsidiary, and, to the knowledge of the Company, each other party to
each Formation Agreement has full legal right, power and authority to enter
into each such agreement and to consummate the transactions contemplated
therein. Each Formation Agreement does or will, as applicable, constitute a
valid and binding agreement of the Company and each Subsidiary of the
Company which is a party thereto enforceable in accordance with its terms,
except as the enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
the rights and remedies of creditors or by general equitable principles.
None of the Company, any Subsidiary or, to the knowledge of the Company,
any other party is or upon completion of the offering and all related
transactions will be in breach of or default under any Formation Agreement.
(f) Authorization of the Units, Warrants, Unit Shares and Warrant
Shares. The Units, the Warrants, the Representatives Warrants and the
Shares have been duly authorized for issuance and sale pursuant to this
Agreement, the Warrant Agreement or the Representatives Warrant Agreement
(as hereinafter defined), as applicable, and, when issued and delivered by
the Company pursuant to this Agreement, the Warrant Agreement or the
Representatives Warrant Agreement, as applicable, will be validly issued,
fully paid and nonassessable.
(g) Reservation for Issuance of a Sufficient Number of Warrant Shares.
The Company has reserved for issuance a sufficient number of shares of
Common Stock to permit the issuance of all Warrant Shares issuable in
accordance with the terms of the Warrants and the Warrant Agreement and the
Representatives Warrants and the Representatives Warrant Agreement.
(h) No Applicable Registration or Other Similar Rights. There are no
persons with registration or other similar rights to have any equity or
debt securities registered for sale under the Registration Statement or
included in the offering contemplated by this Agreement, except for such
rights as have been duly waived.
(i) No Material Adverse Change. Except as otherwise disclosed in the
Prospectus,
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subsequent to the respective dates as of which information is given in the
Prospectus: (i) there has been no material adverse change, or any
development that could reasonably be expected to result in a material
adverse change, in the condition, financial or otherwise, or in the
earnings, business, operations or prospects, whether or not arising from
transactions in the ordinary course of business, of the Company and its
Subsidiaries, considered as one entity (any such change is called a
"Material Adverse Change"); (ii) the Company and its Subsidiaries,
considered as one entity, have not incurred any material liability or
obligation, indirect, direct or contingent, not in the ordinary course of
business nor entered into any material transaction or agreement not in the
ordinary course of business; and (iii) there has been no dividend or
distribution of any kind declared, paid or made by the Company or, except
for dividends paid to the Company or other Subsidiaries, any of its
Subsidiaries on any class of capital stock or repurchase or redemption by
the Company or any of its Subsidiaries of any class of capital stock.
(j) Independent Accountants. Deloitte & Touche LLP, who have expressed
their opinion with respect to the financial statements (which term as used
in this Agreement includes the related notes thereto) and supporting
schedules filed with the Commission as a part of the Registration Statement
and included in the Prospectus, are independent public or certified public
accountants as required by the Securities Act.
(k) Preparation of the Financial Statements. The financial statements
filed with the Commission as a part of the Registration Statement and
included in the Prospectus present fairly the consolidated financial
position of the Company and its Subsidiaries as of and at the dates
indicated and the results of their operations and cash flows for the
periods specified. The supporting schedules included in the Registration
Statement present fairly the information required to be stated therein.
Such financial statements and supporting schedules have been prepared in
conformity with generally accepted accounting principles applied on a
consistent basis throughout the periods involved, except as may be
expressly stated in the related notes thereto. No other financial
statements or supporting schedules are required to be included in the
Registration Statement. The financial data set forth in the Prospectus
under the captions "Prospectus Summary--Summary Selected Financial Data,"
"Selected Financial Data" and "Capitalization" fairly present the
information set forth therein on a basis consistent with that of the
audited financial statements contained in the Registration Statement. The
pro forma consolidated financial statement of the Company and its
Subsidiaries and the related notes thereto included under the caption [to
come] and elsewhere in the Prospectus and in the Registration Statement
present fairly the information contained therein, have been prepared in
accordance with the Commission's rules and guidelines with respect to pro
forma financial statements and have been properly presented on the bases
described therein, and the assumptions used in the preparation thereof are
reasonable and the adjustments used therein are appropriate to give effect
to the transactions and circumstances referred to therein.
(l) Incorporation and Good Standing of the Company and its
Subsidiaries. Each of the Company and its Subsidiaries has been duly
incorporated or formed, as the case may be, and is validly existing and in
good standing under the laws of the jurisdiction of its incorporation or
formation and has all requisite power and authority to own, lease and
operate its properties and to conduct its business as described in the
Prospectus and, in the case of the Company, to enter into and perform its
obligations under this Agreement; and no proceeding has been
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instituted or, to the knowledge of the Company, threatened in any such
jurisdiction seeking to revoke, limit or curtail such power and authority.
Each of the Company and each Subsidiary is duly qualified as a foreign
corporation, partnership or limited liability company, as applicable, to
transact business and is in good standing in each other jurisdiction in
which such qualification is required, whether by reason of the ownership or
leasing of property or the conduct of business, except for such
jurisdictions where the failure to so qualify or to be in good standing
would not, individually or in the aggregate, result in a Material Adverse
Change; and no proceeding has been instituted or, to the knowledge of the
Company, threatened in any such jurisdiction seeking to revoke, limit or
curtail such qualification. Except as otherwise disclosed in the
Prospectus, all of the issued and outstanding capital stock, partnership
interests or membership interests of each Subsidiary have been duly
authorized and validly issued, are fully paid and nonassessable and are
owned by the Company, directly or through Subsidiaries, free and clear of
any security interest, mortgage, pledge, lien, encumbrance or claim. The
Company does not own or control, directly or indirectly, any corporation,
association or other entity other than the Subsidiaries listed in Exhibit
21 to the Registration Statement.
(m) [reserved]
(n) Capitalization and Other Capital Stock Matters. On the First
Closing Date, the authorized, issued and outstanding capital stock of the
Company will be as set forth in the Prospectus under the caption
"Capitalization" (other than for subsequent issuances, if any, pursuant to
employee benefit plans described in the Prospectus or upon exercise of
outstanding options or warrants described in the Prospectus). The Units
(including the Unit Shares, the Warrants and the Warrant Shares) conform in
all material respects to the description thereof contained in the
Prospectus. All of the issued and outstanding shares of Common Stock have
been duly authorized and validly issued, are fully paid and nonassessable
and have been issued in compliance with federal and state securities laws.
No further approval or authority of the shareholders or the Board of
Directors is required for the issuance and sale of the Units as
contemplated herein. Neither the issuance of the Units nor any Shares will
violate any preemptive rights, rights of first refusal or other similar
rights to subscribe for or purchase securities of the Company. There are no
authorized or outstanding options, warrants, preemptive rights, rights of
first refusal or other rights to purchase, or equity or debt securities
convertible into or exchangeable or exercisable for, any capital stock of
the Company or any of its Subsidiaries other than those accurately
described in the Prospectus. The description of the Company's stock option,
stock bonus and other stock plans or arrangements, and the options or other
rights granted thereunder, set forth in the Prospectus accurately and
fairly presents the information required to be shown with respect to such
plans, arrangements, options and rights.
(o) Stock Exchange Listing. Each of the Unit Shares and the Warrants
have been approved for listing on the American Stock Exchange, subject only
to official notice of issuance.
(p) No Current Material Defaults. Neither the Company nor any of its
Subsidiaries is (i) in violation of its charter, bylaws, partnership
agreement, certificate of partnership or other organizational documents, as
applicable, or (ii) is in default (or, with the giving of
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notice or lapse of time, would be in default) ("Default") under any
indenture, mortgage, loan or credit agreement, note, contract, franchise,
lease or other instrument to which the Company or any of its Subsidiaries
is a party or by which it or any of them may be bound, or to which any of
the property or assets of the Company or any of its Subsidiaries is subject
(each of the instruments or agreements listed in clauses (i) and (ii), an
"Existing Instrument"), including, without limitation, the Existing
Instruments listed in Schedule 3 hereto, except, in the case of clause
(ii), for such Defaults as would not, individually or in the aggregate,
result in a Material Adverse Change.
(q) Authorization and Non-Contravention of Existing Instruments. The
execution, delivery and performance by the Company and each Subsidiary, as
applicable, of this Agreement and each Formation Agreement and consummation
of the transactions contemplated hereby and thereby and by the Prospectus
(i) have been duly authorized by all necessary corporate or partnership or
member action, as applicable, and will not result in any violation of the
provisions of the charter, bylaws, partnership agreement, partnership
certificate or other organizational documents, as applicable, of the
Company or any Subsidiary, (ii) will not conflict with or constitute a
breach of, a Default or a Debt Repayment Triggering Event (as defined
below) under, or result in the creation or imposition of any lien, charge
or encumbrance upon any property or assets of the Company or any of its
Subsidiaries pursuant to, any Existing Instrument, except for such
conflicts, breaches, Defaults, liens, charges or encumbrances as would not,
individually or in the aggregate, result in a Material Adverse Change,
(iii) will not require the consent of any other party to any Existing
Instrument except for such consents which have been obtained in writing by
the Company or a Subsidiary, as applicable (the "Written Consents") and
except for such consents as the failure of which to obtain would not,
individually or in the aggregate, result in a Material Adverse Change, and
(iv) will not result in any violation of any law, administrative regulation
or administrative or court decree applicable to the Company or any
Subsidiary. As used herein, a "Debt Repayment Triggering Event" means any
event or condition which gives, or with the giving of notice or lapse of
time would give, the holder of any note, debenture or other evidence of
indebtedness (or any person acting on such holder's behalf) the right to
require the repurchase, redemption or repayment of all or a portion of such
indebtedness by the Company or any of its Subsidiaries.
(r) No Further Authorizations or Approvals Required. No consent,
approval, authorization or other order of, or registration or filing with,
any court or other governmental or regulatory authority or agency, is
required for the execution, delivery and performance by the Company and
each Subsidiary, as applicable, of this Agreement and each Formation
Agreement and for consummation of the transactions contemplated hereby and
thereby and by the Prospectus, except such as have been obtained or made
and are in full force and effect under the Securities Act, applicable state
securities or blue sky laws and from the National Association of Securities
Dealers, Inc. (the "NASD").
(s) Formation Transactions Not a Roll-Up; Partnership Interests and
Stock of HCP Exempt. The consummation of the Formation Transactions
constitutes neither a "roll-up transaction", as such term is defined in
Item 901(c) of Regulation S-K of the Securities Act, nor a "limited
partnership roll-up transaction", as such term is defined in Rule
2810(a)(10) of the Conduct Rule of the NASD. All of the capital stock of
HCP to issued in connection
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with the Formation Transactions is exempt from registration under the
Securities Act.
(t) No Material Actions or Proceedings. Except as otherwise disclosed
in the Prospectus, there is no legal or governmental action, suit or
proceeding pending or, to the best of the Company's knowledge, threatened
(i) against or affecting the Company or any of its Subsidiaries, (ii) which
has as the subject thereof any officer or director of, or property owned or
leased by, the Company or any of its Subsidiaries or (iii) relating to
environmental or discrimination matters, where in any such case (1) there
is a reasonable possibility that such action, suit or proceeding might be
determined adversely to the Company or such Subsidiary and (2) any such
action, suit or proceeding, if so determined adversely, would reasonably be
expected to result in a Material Adverse Change or adversely affect the
consummation of the transactions contemplated by this Agreement or the
Formation Agreements. No material labor dispute with the employees of the
Company or any of its Subsidiaries exists or, to the best knowledge of the
Company, is threatened or imminent.
(u) Intellectual Property Rights. The Company and its Subsidiaries own
or possess all material trademarks, trade names, patent rights, copyrights,
licenses, approvals, trade secrets, service marks and other similar rights
including, without limitation, rights to the names "Hanover Capital
Mortgage Holdings, Inc.," "Hanover Capital Mortgage Holdings, L.P.,"
"Hanover Capital Mortgage Corporation," "Hanover Capital Partners, Ltd."
and "Hanover Capital Securities, Inc." (collectively, "Intellectual
Property Rights") reasonably necessary to conduct their businesses as now
conducted; and the expected expiration of any of such Intellectual Property
Rights would not result in a Material Adverse Change. Neither the Company
nor any of its Subsidiaries has received any notice of infringement or
conflict with asserted Intellectual Property Rights of others, which
infringement or conflict, if the subject of an unfavorable decision, would
result in a Material Adverse Change. The Company has no knowledge of any
material infringement by it of any Intellectual Property Rights of others.
(v) Compliance with All Applicable Laws. Each of the Company and each
Subsidiary is conducting business in compliance with all applicable state,
federal and foreign laws, rules and regulations, except where failure to be
in compliance, if the subject of an unfavorable decision, ruling or
finding, would not singly or in the aggregate result in a Material Adverse
Change. The description of the laws and regulations affecting the Company's
and the Subsidiaries' investment operations in the Prospectus under the
caption "Business Regulation" is a true and accurate description thereof in
all material respects.
(w) All Necessary Permits, Licenses, etc. The Company and each
Subsidiary possess all certificates, authorizations, licenses or permits
issued by the appropriate state, federal or foreign regulatory agencies or
bodies necessary to conduct their respective businesses, and neither the
Company nor any Subsidiary has received any notice of proceedings relating
to the revocation or modification of, or non-compliance with, any such
certificate, authorization, license or permit which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding,
could result in a Material Adverse Change.
(x) Title to Properties. The Company and each of its Subsidiaries has
good and marketable title to all the properties and assets reflected as
owned in the financial statements referred to in Section 1(k) above (or
elsewhere in the Prospectus), in each case free and clear
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of any security interests, mortgages, liens, encumbrances, equities, claims
and other defects, except such as do not materially and adversely affect
the value of such property and do not materially interfere with the use
made or proposed to be made of such property by the Company or such
Subsidiary. The real property, improvements, equipment and personal
property held under lease by the Company or any Subsidiary are held under
valid and enforceable leases, with such exceptions as are not material and
do not materially interfere with the use made or proposed to be made of
such real property, improvements, equipment or personal property by the
Company or such Subsidiary. Each of the Company and its Subsidiaries owns
or leases all such real and personal property as is reasonably necessary to
its operations as now conducted and as proposed to be conducted.
(y) Tax Law Compliance. The Company and its Subsidiaries have filed all
material federal, state and foreign income and franchise tax returns and
have paid all taxes required to be paid by any of them and, if due and
payable, any related or similar assessment, fine or penalty levied against
any of them, except those being contested in good faith and for which
adequate reserves have been taken in conformity with generally accepted
accounting principles and the nonpayment of which will not in any way
jeopardize the Company's status as a REIT. The Company has made adequate
charges, accruals and reserves in the applicable financial statements
referred to in Section 1(k) above in respect of all federal, state and
foreign income and franchise taxes for all periods as to which the tax
liability of the Company or any of its Subsidiaries has not been finally
determined.
(z) REIT Status. The Company intends to operate and will operate in
such a manner as to qualify as a REIT under Sections 856 through 860 of the
Tax Code and pursuant to any applicable state tax laws; and the Company
intends to elect to and will elect to be taxed as a REIT under the Tax Code
and any applicable state tax laws beginning with its taxable year ending
December 31, 1997. The Company knows of no event or condition which would
cause or is likely to cause the Company to fail to qualify as a REIT at any
time.
(aa) Company Not an "Investment Company". The Company has been advised
of the rules and requirements under the Investment Company Act of 1940, as
amended (the "Investment Company Act"). Neither the Company nor any
Subsidiary is, or after receipt of payment for the Units and consummation
of the Formation Transactions will be, an "investment company" within the
meaning of Investment Company Act. The Company and each Subsidiary will
conduct its business in a manner so that it will not become subject to the
Investment Company Act.
(bb) Insurance. Except as otherwise disclosed in the Prospectus, each
of the Company and its Subsidiaries are insured by recognized, financially
sound and reputable institutions with policies in such amounts and with
such deductibles and covering such risks as are generally deemed adequate
and customary for their businesses including, but not limited to, policies
covering the Company and its Subsidiaries against business interruptions
and policies covering real and personal property owned or leased by the
Company and its Subsidiaries against theft, damage, destruction, acts of
vandalism and earthquakes. The Company has no reason to believe that it or
any Subsidiary will not be able (i) to renew its existing insurance
coverage as and when such policies expire or (ii) to obtain comparable
coverage from similar institutions as may be necessary or appropriate to
conduct its business as now conducted and
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at a cost that would not result in a Material Adverse Change. Neither of
the Company nor any Subsidiary has been denied any insurance coverage which
it has sought or for which it has applied.
(cc) No Price Stabilization or Manipulation. None of the Company or any
Subsidiary has taken or will take, directly or indirectly, any action
designed to or that might be reasonably expected to cause or result in
stabilization or manipulation of the price of any security of the Company
to facilitate the sale or resale of the Units, the Unit Shares, the
Warrants or the Warrant Shares.
(dd) No Broker or Finder Fees. Except as otherwise disclosed in the
Prospectus, neither the Company nor any affiliate of the Company has
incurred any liability for a fee, commission or other compensation on
account of the employment or engagement of a broker or finder in connection
with the transactions contemplated by this Agreement.
(ee) Related Party Transactions. There are no business relationships or
related-party transactions involving the Company or any Subsidiary or any
other person required to be described in the Prospectus which have not been
described as required.
(ff) No Unlawful Contributions or Other Payments. Neither the Company
nor any of its Subsidiaries nor, to the Company's knowledge, any employee
or agent of the Company or any Subsidiary, has (i) made any contribution or
other payment to any official of, or candidate for, any federal, state or
foreign office in violation of any law or of the character required to be
disclosed in the Prospectus or (ii) made any payment to any federal or
state governmental officer or official, or other person charged with
similar public or quasi-public duties, other than payments required or
permitted by the laws of the United States or any jurisdiction thereof.
(gg) Company's Accounting System. The Company and its Subsidiaries
maintain and will continue to maintain a system of accounting controls
sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management's general or specific authorization;
(ii) transactions are recorded as necessary to permit preparation of
financial statements in conformity with generally accepted accounting
principles and to maintain accountability for assets; (iii) access to
assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets is
compared with existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
(hh) Compliance with Environmental Laws. Except as would not,
individually or in the aggregate, result in a Material Adverse Change (i)
neither the Company nor any of its Subsidiaries is in violation of any
federal, state, local or foreign law or regulation relating to pollution or
protection of human health or the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or
subsurface strata) or wildlife, including without limitation, laws and
regulations relating to emissions, discharges, releases or threatened
releases of chemicals, pollutants, contaminants, wastes, toxic substances,
hazardous substances, petroleum and petroleum products (collectively,
"Materials of Environmental Concern"), or otherwise relating to the
manufacture, processing, distribution,
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use, treatment, storage, disposal, transport or handling of Materials of
Environment Concern (collectively, "Environmental Laws"), which violation
includes, but is not limited to, noncompliance with any permits or other
governmental authorizations required for the operation of the business of
the Company or its Subsidiaries under applicable Environmental Laws, or
noncompliance with the terms and conditions thereof, nor has the Company or
any of its Subsidiaries received any written communication, whether from a
governmental authority, citizens group, employee or otherwise, that alleges
that the Company or any of its Subsidiaries is in violation of any
Environmental Law; (ii) there is no claim, action or cause of action filed
with a court or governmental authority, no investigation with respect to
which the Company has received written notice, and no written notice by any
person or entity alleging potential liability for investigatory costs,
cleanup costs, governmental responses costs, natural resources damages,
property damages, personal injuries, attorneys' fees or penalties arising
out of, based on or resulting from the presence, or release into the
environment, of any Material of Environmental Concern at any location
owned, leased or operated by the Company or any of its Subsidiaries, now or
in the past (collectively, "Environmental Claims"), pending or, to the
Company's knowledge, threatened against the Company or any of its
Subsidiaries or any person or entity whose liability for any Environmental
Claim the Company or any of its Subsidiaries has retained or assumed either
contractually or by operation of law; and (iii) to the Company's knowledge,
there are no past or present actions, activities, circumstances,
conditions, events or incidents, including, without limitation, the
release, emission, discharge, presence or disposal of any Material of
Environmental Concern, that reasonably could result in a violation of any
Environmental Law or form the basis of a potential Environmental Claim
against the Company or any of its Subsidiaries or against any person or
entity whose liability for any Environmental Claim the Company or any of
its Subsidiaries has retained or assumed either contractually or by
operation of law.
(ii) Periodic Review of Costs of Environmental Compliance. Prior to
originating any commercial mortgage or foreclosing or taking a deed in lieu
with respect to any property, the Company conducts, or causes to be
conducted, a Phase I environmental site assessment and takes such actions
based upon the results of such assessment as it reasonable believes are
necessary to prevent the Company from suffering a Material Adverse Change
as a result of originating such commercial mortgage or foreclosing upon or
taking a deed in lieu with respect to such property.
(jj) ERISA Compliance. The Company and its Subsidiaries and any
"employee benefit plan" (as defined under the Employee Retirement Income
Security Act of 1974, as amended, and the regulations and published
interpretations thereunder (collectively, "ERISA")) established or
maintained by the Company, its Subsidiaries or their "ERISA Affiliates" (as
defined below) are in compliance in all material respects with ERISA.
"ERISA Affiliate" means, with respect to the Company or a Subsidiary, any
member of any group of organizations described in Sections 414(b),(c),(m)
or (o) of the Internal Revenue Code of 1986, as amended, and the
regulations and published interpretations thereunder (the "Code") of which
the Company or such Subsidiary is a member. No "reportable event" (as
defined under ERISA) has occurred or is reasonably expected to occur with
respect to any "employee benefit plan" established or maintained by the
Company, its Subsidiaries or any of their ERISA Affiliates. No "employee
benefit plan" established or maintained by the Company,
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its Subsidiaries or any of their ERISA Affiliates, if such "employee
benefit plan" were terminated, would have any "amount of unfunded benefit
liabilities" (as defined under ERISA). Neither the Company, its
Subsidiaries nor any of their ERISA Affiliates has incurred or reasonably
expects to incur any liability under (i) Title IV of ERISA with respect to
termination of, or withdrawal from, any "employee benefit plan" or (ii)
Sections 412, 4971, 4975 or 4980B of the Code. Each "employee benefit plan"
established or maintained by the Company, its Subsidiaries or any of their
ERISA Affiliates that is intended to be qualified under Section 401(a) of
the Code is so qualified and nothing has occurred, whether by action or
failure to act, which would cause the loss of such qualification.
(kk) Material Contracts. There are no contracts or other documents
required to be described in the Registration Statement or to be filed as
exhibits to the Registration Statement by the Securities Act which have not
been described or filed as required. Neither the Company nor any of its
Subsidiaries is subject to any collective bargaining agreements.
Any certificate signed by an officer of the Company and delivered to the
Representatives or to counsel for the Underwriters shall be deemed to be a
representation and warranty by the Company to each Underwriter as to the matters
set forth therein.
SECTION 2. PURCHASE, SALE AND DELIVERY OF THE UNITS.
(a) The Firm Units. The Company agrees to issue and sell to the several
Underwriters the Firm Units upon the terms herein set forth. On the basis of the
representations, warranties and agreements herein contained, and upon the terms
but subject to the conditions herein set forth, the Underwriters agree,
severally and not jointly, to purchase from the Company the respective number of
Firm Units set forth opposite their names on Schedule 1. The purchase price per
Firm Unit to be paid by the several Underwriters to the Company shall be $[___]
per Unit.
(b) The First Closing Date. Delivery of the Firm Units to be purchased
by the Underwriters and payment therefor shall be made at the offices of ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ & Company, Incorporated, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇. ▇▇▇▇▇,
▇▇▇▇▇▇▇▇ (or such other place as may be agreed to by the Company and the
Representatives) at 9:00 a.m. New York City time, on [___], or such other time
and date not later than 1:30 p.m. New York City time, as the Representatives
shall designate by notice to the Company (the time and date of such closing are
called the "First Closing Date"). The Company hereby acknowledges that
circumstances under which the Representatives may provide notice to postpone the
First Closing Date as originally scheduled include, but are in no way limited
to, any determination by the Company or the Representatives to recirculate to
the public copies of an amended or supplemented Prospectus or a delay as
contemplated by the provisions of Section 10.
(c) The Optional Units; the Second Closing Date. In addition, on the
basis of the representations, warranties and agreements herein contained, and
upon the terms but subject to the conditions herein set forth, the Company
hereby grants an option to the several Underwriters to purchase, severally and
not jointly, up to an aggregate of 690,000 Optional Units from the Company at
the purchase price per Unit to be paid by the Underwriters for the Firm Units.
The
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option granted hereunder is for use by the Underwriters solely in covering any
over-allotments in connection with the sale and distribution of the Firm Units.
The option granted hereunder may be exercised at any time (but not more than
once) upon notice by the Representatives to the Company, which notice may be
given at any time within 30 days from the date of this Agreement. Such notice
shall set forth (i) the aggregate number of Optional Units as to which the
Underwriters are exercising the option, (ii) the names and denominations in
which the Optional Units are to be registered and (iii) the time, date and place
at which such securities will be delivered (which time and date may be
simultaneous with, but not earlier than, the First Closing Date; and in such
case the term "First Closing Date" shall refer to the time and date of delivery
of the Firm Units and the Optional Units). Such time and date of delivery, if
subsequent to the First Closing Date, is called the "Second Closing Date" and
shall be determined by the Representatives and, unless the Company otherwise
consents, shall not be earlier than three nor later than five full business days
after delivery of such notice of exercise. If any Optional Units are to be
purchased, each Underwriter agrees, severally and not jointly, to purchase the
number of Optional Units (subject to such adjustments to eliminate fractional
Units as the Representatives may determine) that bears the same proportion to
the total number of Optional Units to be purchased as the number of Firm Units
set forth on Schedule 1 opposite the name of such Underwriter bears to the total
number of Firm Units. The Representatives may cancel the option at any time
prior to its expiration by giving written notice of such cancellation to the
Company.
(d) Public Offering of the Units. The Representatives hereby advise the
Company that the Underwriters intend to offer for sale to the public, as
described in the Prospectus, their respective portions of the Units as soon
after this Agreement has been executed and the Registration Statement has been
declared effective as the Representatives, in their sole judgment, has
determined is advisable and practicable.
(e) Payment for the Units. Payment for the Units shall be made at the
First Closing Date (and, if applicable, at the Second Closing Date) by wire
transfer of immediately available funds to the order of the Company or to such
account as the Company may designate.
It is understood that the Representatives have been authorized, for
their own account and the accounts of the several Underwriters, to accept
delivery of and receipt for, and make payment of the purchase price for, the
Firm Units and any Optional Units the Underwriters have agreed to purchase.
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & Company, Incorporated and ▇▇▇▇▇▇▇▇▇▇ Securities, individually
and not as the Representatives of the Underwriters, may (but shall not be
obligated to) make payment for any Units to be purchased by any Underwriter
whose funds shall not have been received by the Representatives by the First
Closing Date or the Second Closing Date, as the case may be, for the account of
such Underwriter, but any such payment shall not relieve such Underwriter from
any of its obligations under this Agreement.
(f) Delivery of the Units.
(i) The Company shall deliver, or cause to be delivered, to the
Representatives for the accounts of the several Underwriters certificates
for the Firm Units at the First Closing Date, against the irrevocable
release of a wire transfer of immediately available funds for the amount of
the purchase price therefor. The Company shall also deliver, or cause to be
delivered, to the Representatives for the accounts of the several
Underwriters, certificates for
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the Optional Units the Underwriters have agreed to purchase at the First
Closing Date or the Second Closing Date, as the case may be, against the
irrevocable release of a wire transfer of immediately available funds for
the amount of the purchase price therefor. The certificates for the Units
shall be in definitive form and registered in such names and denominations
as the Representatives shall have requested at least two full business days
prior to the First Closing Date (or the Second Closing Date, as the case
may be) and shall be made available for inspection on the business day
preceding the First Closing Date (or the Second Closing Date, as the case
may be) at a location in New York City as the Representatives may
designate.
(ii) Notwithstanding the terms of the preceding subsection 2(f)(i) or
elsewhere in this Agreement that contemplate physical certificates for the
Units, upon the Company's request but only with the consent of the
Representatives the Units may be issued without certificates and
constructive delivery of such uncertificated Units to the Underwriters may
be accomplished through the FAST system of The Depository Trust Company by
the Company causing the transfer agent and registrar of the Units, on the
applicable Closing Date, to issue one or more Depository Trust Company Book
Entry Positions, representing in the aggregate the number of Units to be
delivered to the Representatives on such Closing Date, to such account or
accounts as shall be specified by the Representatives in an instruction
letter or other communication to the Company or such transfer agent.
(g) Time of the Essence. Time shall be of the essence, and delivery at
the time and in the manner specified in this Agreement is a further condition to
the obligations of the Underwriters.
(h) Delivery of Prospectus to the Underwriters. Not later than 12:00
noon on the second business day following the date the Units are released by the
Underwriters for sale to the public, the Company shall deliver or cause to be
delivered copies of the Prospectus in such quantities and at such places as the
Representatives shall request.
SECTION 3. ADDITIONAL COVENANTS OF COMPANY.
The Company further covenants and agrees with each Underwriter as follows:
(a) Representatives' Review of Proposed Amendments and Supplements.
During such period beginning on the date hereof and ending on the later of
the First Closing Date or such date, as in the opinion of counsel for the
Underwriters, the Prospectus is no longer required by law to be delivered
in connection with sales by an Underwriter or dealer (the "Prospectus
Delivery Period"), prior to amending or supplementing the Registration
Statement (including any registration statement filed under Rule 462(b)
under the Securities Act) or the Prospectus, the Company shall furnish to
the Representatives for review a copy of each such proposed amendment or
supplement, and the Company shall not file any such proposed amendment or
supplement to which the Representatives reasonably object.
(b) Securities Act Compliance. After the date of this Agreement, the
Company shall promptly advise the Representatives in writing (i) of the
receipt of any comments of, or
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requests for additional or supplemental information from, the Commission,
(ii) of the time and date of any filing of any post-effective amendment to
the Registration Statement or any amendment or supplement to any
preliminary prospectus or the Prospectus, (iii) of the time and date that
any post-effective amendment to the Registration Statement becomes
effective and (iv) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or any
post-effective amendment thereto or of any order preventing or suspending
the use of any preliminary prospectus or the Prospectus, or of any
proceedings to remove, suspend or terminate from listing or quotation the
Units, Warrants or Common Stock from any securities exchange upon which any
of such securities is listed for trading or included or designated for
quotation, or of the threatening or initiation of any proceedings for any
of such purposes. If the Commission shall enter any such stop order at any
time, the Company will use its best efforts to obtain the lifting of such
order at the earliest possible moment. Additionally, the Company agrees
that it shall comply with the provisions of Rules 424(b), 430A and 434, as
applicable, under the Securities Act and will use its reasonable efforts to
confirm that any filings made by the Company under such Rule 424(b) were
received in a timely manner by the Commission.
(c) Amendments and Supplements to the Prospectus and Other Securities
Act Matters. If, during the Prospectus Delivery Period, any event shall
occur or condition exist as a result of which it is necessary to amend or
supplement the Prospectus in order to make the statements therein, in the
light of the circumstances when the Prospectus is delivered to a purchaser,
not misleading, or if in the opinion of the Representatives or counsel for
the Underwriters it is otherwise necessary to amend or supplement the
Prospectus to comply with law, the Company agrees promptly to prepare
(subject to Section 3(a) hereof), file with the Commission and furnish at
its own expense to the Underwriters and to dealers, amendments or
supplements to the Prospectus so that the statements in the Prospectus as
so amended or supplemented will not, in the light of the circumstances when
the Prospectus is delivered to a purchaser, be misleading or so that the
Prospectus, as amended or supplemented, will comply with law.
(d) Copies of any Amendments and Supplements to the Prospectus. The
Company agrees to furnish the Representatives, without charge, during the
Prospectus Delivery Period, as many copies of the Prospectus and any
amendments and supplements thereto as the Representatives may reasonably
request.
(e) Press Releases. If at any time during the ninety (90) day period
after the Registration Statement becomes effective, any rumor, publication
or event relating to or affecting the Company or its Subsidiaries shall
occur as a result of which in the Representatives' opinion the market price
of the Units has been or is likely materially to be affected (regardless of
whether such rumor, publication or event necessitates a supplement or
amendment to the Prospectus), the Company will, after written notice from
the Representatives advising the Company to the effect set forth above,
promptly prepare, consult with the Representatives concerning the content
of, and disseminate a press release or other public statement, reasonably
satisfactory to the Representatives, responding to or commenting on such
rumor, publication or event.
(f) Blue Sky Compliance. The Company shall cooperate with the
Representatives and
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counsel for the Underwriters to qualify or register the Units for sale
under (or obtain exemptions from the application of) the Blue Sky or state
or provincial or Canadian securities laws of those jurisdictions designated
by the Representatives, shall comply with such laws and shall continue such
qualifications, registrations and exemptions in effect so long as required
for the distribution of the Units. The Company shall not be required to
qualify as a foreign corporation or to take any action that would subject
it to general service of process in any such jurisdiction where it is not
presently qualified or where it would be subject to taxation as a foreign
corporation. The Company will advise the Representatives promptly of the
suspension of the qualification or registration of (or any such exemption
relating to) the Units for offering, sale or trading in any jurisdiction or
any initiation or threat of any proceeding for any such purpose, and in the
event of the issuance of any order suspending such qualification,
registration or exemption, the Company shall use its best efforts to obtain
the withdrawal thereof at the earliest possible moment.
(g) Uncertificated Shares. In the event that any portion of the Shares
is issued without certificates pursuant to section 2-210 of the Maryland
General Corporation Law (the "MGCL") and as may be permitted under Section
2(f) above, at the time of issue of such Shares and at the time of every
subsequent transfer of such Shares the Company shall send, or cause to be
sent, to the shareholder a written statement of the information required on
certificates by section 2-211 of the MGCL, and shall otherwise maintain
full compliance with sections 2-210 and 2-211 of the MGCL.
(h) Consummation of Formation Transactions. Each of the Company and its
Subsidiaries shall complete the Formation Transactions as described in the
Prospectus.
(i) Use of Proceeds. The Company and its Subsidiaries shall apply the
net proceeds from the sale of the Units sold by it in the manner described
under the caption "Use of Proceeds" in the Prospectus. The Company will not
use the proceeds of the sale of the Units in such a manner as to require
the Company or any Subsidiary to be registered under the Investment Company
Act.
(j) Transfer Agent. The Company shall engage and maintain, at its
expense, a transfer agent and registrar for the Units, Warrants and Common
Stock.
(k) Continuing Listing on the American Stock Exchange. The Company will
use its reasonable best efforts to continue the listing of the Units and,
when they are first detachable, to initiate and continue the listing of the
Unit Shares and the Warrants, on the American Stock Exchange and will
continue to comply in all material respects with all of the rules and
regulations thereof applicable to the Company and the listing of such
securities.
(l) Earnings Statement. As soon as practicable, the Company will make
generally available to its security holders and to the Representatives an
earnings statement (which need not be audited) covering the twelve-month
period ending on the final day of the Company's first quarter that ends at
least one year after "the effective date of the Registration Statement" (as
defined in Rule 158(c) under the Securities Act) that satisfies the
provisions of Section 11(a) of the Securities Act.
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(m) Periodic Reporting Obligations. During the Prospectus Delivery
Period the Company shall file, on a timely basis, with the Commission and
the Nasdaq National Market all reports and documents required to be filed
under the Securities Exchange Act of ▇▇▇▇ (▇▇▇ "▇▇▇▇▇▇▇▇ ▇▇▇").
Additionally, the Company shall file with the Commission all reports on
Form SR as may be required under Rule 463 under the Securities Act.
(n) Agreement Not To Offer or Sell Additional Securities. During the
period of 365 days following the date of the Prospectus, the Company will
not, without the prior written consent of ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & Company,
Incorporated (which consent may be withheld at the sole discretion of
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & Company, Incorporated), directly or indirectly, sell,
offer, contract or grant any option to sell, pledge, transfer or establish
an open "put equivalent position" within the meaning of Rule 16a-1(h) under
the Exchange Act, or otherwise dispose of or transfer, or announce the
offering of, or file any registration statement under the Securities Act in
respect of, any Units, shares of Common Stock, options or warrants to
acquire shares of the Common Stock or securities exchangeable or
exercisable for or convertible into shares of Common Stock (other than as
contemplated by this Agreement with respect to the Units and other than a
registration statement on Form S-8 with respect to any stock option plan,
stock bonus or other stock plan or arrangement described in the
Prospectus); provided, however, that the Company may issue the Warrant
Shares; and provided, further, that pursuant to any stock option, stock
bonus or other stock plan or arrangement described in the Prospectus, the
Company may issue shares of its Common Stock or options to purchase its
Common Stock, or Common Stock upon exercise of options, but only if the
holders of such shares, options, or shares issued upon exercise of such
options, agree in writing not to sell, offer, dispose of or otherwise
transfer any such shares or options during such 365 day period without the
prior written consent of ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & Company, Incorporated (which
consent may be withheld at the sole discretion of ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ &
Company, Incorporated).
(o) Future Reports to the Representatives. During the period of three
years hereafter the Company will furnish to the ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & Company,
Incorporated at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
Attention: ▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇, to ▇▇▇▇▇▇▇▇▇▇ Securities at ▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇ ▇▇▇▇▇▇▇ and to
O'Melveny & ▇▇▇▇▇ LLP at the address set forth in Section 13: (i) as soon
as practicable after the end of each fiscal year, copies of the Annual
Report of the Company containing the balance sheet of the Company as of the
close of such fiscal year and statements of income, shareholders' equity
and cash flows for the year then ended and the opinion thereon of the
Company's independent public or certified public accountants; (ii) as soon
as practicable after the filing thereof, copies of each proxy statement,
Annual Report on Form 10-K, Quarterly Report on Form 10-Q, Current Report
on Form 8-K or other report filed by the Company with the Commission, the
NASD or any securities exchange; and (iii) as soon as available, copies of
any report or communication of the Company mailed generally to holders of
its capital stock.
(p) REIT Status. The Company shall operate so as to qualify as a REIT
in accordance with the requirements of Sections 856-860 of the Tax Code and
any applicable state tax laws, and shall elect to be taxed as a REIT
beginning with the taxable year ending December 31, 1997. The Company shall
thereafter not revoke such REIT election and shall not conduct
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their business and operations in a manner that would cause them to fail to
qualify as a REIT. The Company will use its best efforts to comply with the
representations made as support for the opinion letter rendered by the
Company's tax counsel under the REIT provisions of the Code, the form of
which opinion is filed as exhibit 8.1 to the Registration Statement.
(q) Accounting and Tax Advice. The Company will engage and retain a
"Big 6" Accounting Firm as its qualified accountants and such tax experts
at such accounting firm with experience in advising REITs as are reasonably
acceptable to the Representatives for a period of not less than two years
beginning on the First Closing Date to assist the Company in developing
appropriate accounting systems and testing procedures and to conduct
quarterly compliance reviews designed to determine compliance with the REIT
provisions of the Tax Code and the maintenance of Company's exempt status
under the Investment Company Act. Any written reports of such compliance
reviews shall be made available to the Representatives.
(r) Commodities Exchange Act. The Company will not, and will not permit
any of its Subsidiaries to, invest in futures contracts, options on futures
contracts or options on commodities unless such entities are exempt from
the registration requirements of the Commodity Exchange Act, as amended, or
otherwise comply with the Commodity Exchange Act, as amended.
(s) Investment Advisors Act. The Company will not, and will not permit
any of its Subsidiaries to, engage in any activity which would cause or
require such entity to register as an investment advisor under the
Investment Advisors Act of 1940. Without limiting the generality of the
foregoing, the Company will not, and will not permit any Subsidiary to, (i)
render investment advice to more than fifteen clients, (ii) hold itself out
generally to the public as an investment advisor, or (iii) act as an
investment advisor to any investment company that is registered under the
Investment Company Act.
(t) Agreements with Management. The Company will, and will cause each
Subsidiary, in good faith to expend reasonable efforts to enforce the terms
of any of the Formation Agreements or any agreements with the Principals.
(u) SEC Compliance Program and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Compliance Policy.
Promptly after the First Closing Date, the Company shall adopt and
implement (i) a compliance program, reasonably acceptable to counsel for
the Underwriters, to ensure compliance with the reporting requirements
under the Exchange Act and the securities laws generally and (ii) an
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ compliance policy, reasonably acceptable to counsel for the
Underwriters, to govern their employees' and directors' trading in
securities of the Company and all Company affiliates in accordance with
federal law and all applicable state and Canadian blue sky laws.
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & Company, Incorporated, on behalf of the several
Underwriters, may, in its sole discretion, waive in writing the performance by
the Company of any one or more of the foregoing covenants or extend the time for
their performance.
SECTION 4. PAYMENT OF EXPENSES. Whether or not the transactions
contemplated herein are consummated or this Agreement becomes effective or is
terminated, the Company agrees to
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pay all costs, fees and expenses incurred in connection with the performance of
its obligations hereunder and in connection with the transactions contemplated
hereby, including without limitation (i) all expenses incident to the issuance
and delivery of the Units (including all printing and engraving costs), (ii) all
fees and expenses of the registrar and transfer agent, (iii) all necessary
issue, transfer and other stamp taxes in connection with the issuance and sale
of the Units to the Underwriters, (iv) all fees and expenses of the Company's
counsel, independent public or certified public accountants and other advisors,
(v) all costs and expenses incurred in connection with the preparation,
printing, filing, shipping and distribution of the Registration Statement
(including financial statements, exhibits, schedules, consents and certificates
of experts), each preliminary prospectus and the Prospectus, and all amendments
and supplements thereto, and this Agreement, (vi) all filing fees, attorneys'
fees and expenses incurred by the Company or the Underwriters in connection with
qualifying or registering (or obtaining exemptions from the qualification or
registration of) all or any part of the Units for offer and sale under the Blue
Sky laws, and, if requested by the Representatives, preparing and printing a
"Blue Sky Survey" or memorandum, and any supplements thereto, advising the
Underwriters of such qualifications, registrations and exemptions, (vii) the
filing fees incident to, and the reasonable fees and expenses of counsel for the
Underwriters in connection with, the NASD's review and approval of the
Underwriters' participation in the offering and distribution of the Units,
(viii) the fees and expenses associated with including the Units, Warrants and
Common Stock in the Nasdaq National Market, and (ix) all other fees, costs and
expenses referred to in Item 14 of Part II of the Registration Statement. Except
as provided in this Section 4, Section 6, Section 8 and Section 9 hereof, the
Underwriters shall pay their own expenses, including the fees and disbursements
of their counsel.
SECTION 5. CONDITIONS OF THE OBLIGATIONS OF THE UNDERWRITERS. The
obligations of the several Underwriters to purchase and pay for the Units as
provided herein on the First Closing Date and, with respect to the Optional
Units, the Second Closing Date, shall be subject to the accuracy of the
representations and warranties on the part of the Company set forth in Section 1
hereof as of the date hereof and as of the First Closing Date as though then
made and, with respect to the Optional Units, as of the Second Closing Date as
though then made, to the timely performance by the Company of the covenants and
other obligations hereunder, and to each of the following additional conditions:
(a) Accountants' Comfort Letter. On the date hereof, the
Representatives shall have received from Deloitte & Touch LLP, independent
public or certified public accountants for the Company, a letter dated the
date hereof addressed to the Underwriters, in form and substance
satisfactory to the Representatives, containing statements and information
of the type ordinarily included in accountant's "comfort letters" to
underwriters, delivered according to Statement of Auditing Standards No. 72
(or any successor bulletin), with respect to the audited and unaudited
financial statements and certain financial information contained in the
Registration Statement and the Prospectus (and the Representatives shall
have received such additional conformed copies of such accountants' letter
as Representatives' counsel shall reasonably request).
(b) Compliance with Registration Requirements; No Stop Order; No
Objection from NASD. For the period from and after effectiveness of this
Agreement and prior to the First Closing Date and, with respect to the
Optional Units, the Second Closing Date:
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(i) the Company shall have filed the Prospectus with the
Commission (including the information required by Rule 430A under the
Securities Act) in the manner and within the time period required by
Rule 424(b) under the Securities Act; or the Company shall have filed a
post-effective amendment to the Registration Statement containing the
information required by such Rule 430A, and such post-effective
amendment shall have become effective; or, if the Company elected to
rely upon Rule 434 under the Securities Act and obtained the
Representatives' consent thereto, the Company shall have filed a Term
Sheet with the Commission in the manner and within the time period
required by such Rule 424(b);
(ii) no stop order suspending the effectiveness of the
Registration Statement, any Rule 462(b) Registration Statement, or any
post-effective amendment to the Registration Statement, shall be in
effect and no proceedings for such purpose shall have been instituted
or threatened by the Commission; and
(iii) the NASD shall have raised no objection to the fairness and
reasonableness of the underwriting terms and arrangements.
(c) No Material Adverse Change or Ratings Agency Change. For the period
from and after the date of this Agreement and prior to the First Closing
Date and, with respect to the Optional Units, the Second Closing Date:
(i) in the judgment of the Representatives there shall not
have occurred any Material Adverse Change; and
(ii) there shall not have occurred any downgrading, nor shall any
notice have been given of any intended or potential downgrading or of
any review for a possible change that does not indicate the direction
of the possible change, in the rating accorded any securities of the
Company or any of its Subsidiaries by any "nationally recognized
statistical rating organization" as such term is defined for purposes
of Rule 436(g)(2) under the Securities Act.
(d) Opinion of Counsel for the Company. On each of the First Closing
Date and the Second Closing Date, the Representatives shall have received
the favorable opinion of ▇▇▇▇▇, ▇▇▇▇▇▇-▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, P.C., counsel for
the Company, dated as of such Closing Date, the form of which is attached
as Exhibit A, which opinion may rely, as to matters of Maryland corporate
law, on the opinion of Piper & Marbury L.L.P., a copy of which shall be
attached to such opinion (and the Representatives shall have received such
additional conformed copies of such counsel's legal opinions as
Representatives' counsel shall reasonably request).
(e) Opinion of Counsel for the Underwriters. On each of the First
Closing Date and the Second Closing Date, the Representatives shall have
received the favorable opinion of O'Melveny & ▇▇▇▇▇ LLP, counsel for the
Underwriters, dated as of such Closing Date, with respect to such matters
as the Representatives shall have reasonably requested.
(f) Officers' Certificates. On each of the First Closing Date and the
Second Closing
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Date, the Representatives shall have received written certificates executed
on behalf of the Company by its Chief Executive Officer or President and
its Chief Financial Officer or Chief Accounting Officer, dated as of such
Closing Date, certifying as to such matters as the Representatives shall
have reasonably requested, including, without limitation, the matters set
forth in subsections (b)(ii) and (c)(ii) of this Section 5, and further to
the effect that:
(i) for the period from and after the date of this Agreement and
prior to such Closing Date, there has not occurred any Material Adverse
Change;
(ii) the representations, warranties and covenants of the Company
set forth in Section 1 of this Agreement are true and correct with the
same force and effect as though expressly made on and as of such
Closing Date; and
(iii) the Company and its Subsidiaries have complied with all the
agreements and satisfied all the conditions on its part to be performed
or satisfied at or prior to such Closing Date under this Agreement and
all Formation Agreements.
(g) Bring-down Comfort Letter. On each of the First Closing Date and
the Second Closing Date, the Representatives shall have received from
Deloitte & Touche L.L.P., independent public or certified public
accountants for the Company, a letter dated as of such Closing Date, in
form and substance satisfactory to the Representatives, to the effect that
they reaffirm the statements made in the letter furnished by them pursuant
to subsection (a) of this Section 5, except that the specified date
referred to therein for the carrying out of procedures shall be no more
than three business days prior to the First Closing Date or Second Closing
Date, as the case may be (and the Representatives shall have received such
additional conformed copies of such accountants' letter as Representatives'
counsel shall reasonably request).
(h) Lock-Up Agreement from Certain Persons. On the date hereof, the
Company shall have furnished to the Representatives a lock-up for 365 days
following the date of the Prospectus in the form of Exhibit B hereto from
each Principal, director, officer and each beneficial owner of Units or
Common Stock (as defined and determined according to Rule 13d-3 under the
Exchange Act, except that a 365 day period shall be used rather than the
sixty day period set forth therein), and such agreement shall be in full
force and effect on each of the First Closing Date and the Second Closing
Date.
(i) Written Consents. On or before the First Closing Date, the Company
shall have furnished to the Representatives copies of the Written Consents
(referred to in Section 1(q)) under certain Existing Instruments.
(j) Additional Documents. On or before each of the First Closing Date
and the Second Closing Date, the Representatives and counsel for the
Underwriters shall have received such additional certificates, information,
documents and opinions as they may reasonably require for the purposes of
enabling them to pass upon the issuance and sale of the Units as
contemplated herein, or in order to evidence the accuracy of any of the
representations and warranties, or the satisfaction of any of the
conditions or agreements, herein contained.
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(k) American Stock Exchange Listing. The Unit Shares and the Warrants
shall have been approved for listing on the American Stock Exchange,
subject only to official notice of issuance.
(l) Consummation of Formation Transactions and Charter Amendments. The
Formation Transactions to be consummated on or prior to the First Closing
Date as set forth in the Prospectus shall have been consummated. The
certificates or articles of incorporation of each of the Company's
corporate Subsidiaries shall have been amended as set forth in the
Prospectus.
(m) Employment Agreements. On or before the First Closing Date, each of
the Principals shall have entered into an Employment Agreement with the
Company, in form filed as Exhibits 10.6, 10.7, 10.8, and 10.9 to the
Registration Statement.
(n) Representatives Warrants. On or before the First Closing Date, the
Company shall have executed and delivered to the Representatives a Warrant
Agreement (the "Representatives Warrant Agreement") pursuant to which the
Company shall issue to the Representatives (for their own account and not
as Representatives of the Underwriters) warrants (the "Representatives
Warrants") to purchase up to 138,000 shares (158,700 shares if all of the
Optional Units are purchased) of Common Stock at an exercise price per
share equal to the initial public offering price of the Units and upon the
terms and conditions set forth in the Representatives Warrant Agreement,
the form of which is filed as Exhibit 4.2 to the Registration Statement. On
the First Closing Date and Second Closing Date, respectively, the Company
shall have delivered to the Representatives, duly executed Warrant
Certificates countersigned by the Warrant Agent in accordance with the
Representatives Warrant Agreement representing warrants to purchase 138,000
shares of Common Stock on the First Closing Date and 20,700 shares of
Common Stock on the Second Closing Date (assuming full exercise of the
overallotment option), such Warrant Certificates to be in such
denominations and registered in such names as may be designated by the
Representatives.
If any condition specified in this Section 5 is not satisfied when and as
required to be satisfied, this Agreement may be terminated by the
Representatives by notice to the Company at any time on or prior to the First
Closing Date and, with respect to the Optional Units, at any time prior to the
Second Closing Date, which termination shall be without liability on the part of
any party to any other party, except that Section 4, Section 6, Section 8 and
Section 9 shall at all times be effective and shall survive such termination.
SECTION 6. REIMBURSEMENT OF UNDERWRITERS' EXPENSES. If this Agreement
is terminated by the Representatives pursuant to Section 5, Section 7, Section
10 or Section 11, or if the sale to the Underwriters of the Units on the First
Closing Date is not consummated because of any refusal, inability or failure on
the part of the Company to perform any agreement herein or to comply with any
provision hereof, the Company agrees to reimburse the Representatives and the
other Underwriters (or such Underwriters as have terminated this Agreement with
respect to themselves), severally, upon demand for all out-of-pocket expenses
that shall have been reasonably incurred by the Representatives and the
Underwriters in connection with the proposed purchase and the offering and sale
of the Units, including but not limited to fees and
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disbursements of counsel, printing expenses, travel expenses, postage, facsimile
and telephone charges.
SECTION 7. EFFECTIVENESS OF THIS AGREEMENT.
This Agreement shall not become effective until the later of (i) the
execution of this Agreement by the parties hereto and (ii) notification by the
Commission to the Company and the Representatives of the effectiveness of the
Registration Statement under the Securities Act.
Prior to such effectiveness, this Agreement may be terminated by any
party by notice to each of the other parties hereto, and any such termination
shall be without liability on the part (a) of the Company to any Underwriter,
except that the Company shall be obligated to reimburse the expenses of the
Representatives and the Underwriters pursuant to Sections 4 and 6 hereof, (b) of
any Underwriter to the Company, or (c) of any party hereto to any other party
except that the provisions of Section 8 and Section 9 shall at all times be
effective and shall survive such termination.
SECTION 8. INDEMNIFICATION.
(a) Indemnification of the Underwriters by the Company. The Company,
agrees to indemnify and hold harmless each Underwriter, its officers and
employees, and each person, if any, who controls any Underwriter within the
meaning of the Securities Act and the Exchange Act against any loss, claim,
damage, liability or expense, as incurred, to which such Underwriter or
such controlling person may become subject, under the Securities Act, the
Exchange Act or other federal, state or Canadian statutory law or
regulation, or at common law or otherwise (including in settlement of any
litigation, if such settlement is effected with the written consent of the
Company, insofar as such loss, claim, damage, liability or expense (or
actions in respect thereof as contemplated below) arises out of or is based
(i) upon any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement, or any amendment thereto,
including any information deemed to be a part thereof pursuant to Rule 430A
or Rule 434 under the Securities Act, or the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to
make the statements therein not misleading; or (ii) upon any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto), or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; or (iii) in whole
or in part upon any inaccuracy in the representations and warranties of the
Company contained herein; or (iv) in whole or in part upon any failure of
the Company to perform its obligations hereunder or under law; or (v) any
act or failure to act or any alleged act or failure to act by any
Underwriter in connection with, or relating in any manner to, the Units,
the Warrants, the Shares or the offering contemplated hereby, and which is
included as part of or referred to in any loss, claim, damage, liability or
action arising out of or based upon any matter covered by clause (i) or
(ii) above, provided that the Company shall not be liable under this clause
(v) to the extent that a court of competent jurisdiction shall have
determined by a final
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judgment that such loss, claim, damage, liability or action resulted
directly from any such acts or failures to act undertaken or omitted to be
taken by such Underwriter through its gross negligence or willful
misconduct; and to reimburse each Underwriter and each such controlling
person for any and all expenses (including the fees and disbursements of
counsel chosen by the Representatives) as such expenses are reasonably
incurred by such Underwriter or such controlling person in connection with
investigating, defending, settling, compromising or paying any such loss,
claim, damage, liability, expense or action; provided, however, that the
foregoing indemnity agreement shall not apply to any loss, claim, damage,
liability or expense to the extent, but only to the extent, arising out of
or based upon any untrue statement or alleged untrue statement or omission
or alleged omission made in reliance upon and in conformity with written
information furnished to the Company by the Representatives expressly for
use in the Registration Statement, any preliminary prospectus or the
Prospectus (or any amendment or supplement thereto); and provided, further,
that with respect to any preliminary prospectus, the foregoing indemnity
agreement shall not inure to the benefit of any Underwriter from whom the
person asserting any loss, claim, damage, liability or expense purchased
Units, or any person controlling such Underwriter, if copies of the
Prospectus were timely delivered to the Underwriter pursuant to Section 2
and a copy of the Prospectus (as then amended or supplemented if the
Company shall have furnished any amendments or supplements thereto) was not
sent or given by or on behalf of such Underwriter to such person, if
required by law so to have been delivered, at or prior to the written
confirmation of the sale of the Units to such person, and if the Prospectus
(as so amended or supplemented) would have cured the defect giving rise to
such loss, claim, damage, liability or expense. The indemnity agreement set
forth in this Section 8(a) shall be in addition to any liabilities that the
Company may otherwise have.
(b) Indemnification of the Company, its Directors and Officers. Each
Underwriter agrees, severally and not jointly, to indemnify and hold
harmless the Company, each of its directors, each of its officers who
signed the Registration Statement, and each person, if any, who controls
the Company, within the meaning of the Securities Act or the Exchange Act,
against any loss, claim, damage, liability or expense, as incurred, to
which the Company, any such director or officer, or any such controlling
person may become subject, under the Securities Act, the Exchange Act, or
other federal or state statutory law or regulation, or at common law or
otherwise (including in settlement of any litigation, if such settlement is
effected with the written consent of such Underwriter), insofar as such
loss, claim, damage, liability or expense (or actions in respect thereof as
contemplated below) arises out of or is based upon any untrue or alleged
untrue statement of a material fact contained in the Registration
Statement, any preliminary prospectus or the Prospectus (or any amendment
or supplement thereto), or arises out of or is based upon the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each
case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in the
Registration Statement, any preliminary prospectus, the Prospectus (or any
amendment or supplement thereto), in reliance upon and in conformity with
written information furnished to the Company by the Representatives
expressly for use therein; and to reimburse the Company, any such director
or officer, or any such controlling person for any legal and other expense
reasonably incurred by the Company, any such director or officer, or any
such controlling person in connection with investigating, defending,
settling, compromising or
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paying any such loss, claim, damage, liability, expense or action. The
Company hereby acknowledges that the only information that the Underwriters
have furnished to the Company expressly for use in the Registration
Statement, any preliminary prospectus or the Prospectus (or any amendment
or supplement thereto) are the statements set forth (1) as the last two
paragraphs on the inside front cover page of the Prospectus concerning
stabilization and passive market making by the Underwriters and (2) in the
table in the first paragraph and in the third paragraph under the caption
"Underwriting" in the Prospectus; and the Underwriters confirm that such
statements are correct. The indemnity agreement set forth in this Section
8(b) shall be in addition to any liabilities that each Underwriter may
otherwise have.
(c) Notifications and Other Indemnification Procedures. Promptly after
receipt by an indemnified party under this Section 8 of notice of the
commencement of any action, such indemnified party will, if a claim in
respect thereof is to be made against an indemnifying party under this
Section 8, notify the indemnifying party in writing of the commencement
thereof, but the omission so to notify the indemnifying party will not
relieve it from any liability which it may have to any indemnified party
for contribution or otherwise than under the indemnity agreement contained
in this Section 8 or to the extent it is not prejudiced as a proximate
result of such failure. In case any such action is brought against any
indemnified party and such indemnified party seeks or intends to seek
indemnity from an indemnifying party, the indemnifying party will be
entitled to participate in, and, to the extent that it shall elect, jointly
with all other indemnifying parties similarly notified, by written notice
delivered to the indemnified party promptly after receiving the aforesaid
notice from such indemnified party, to assume the defense thereof with
counsel reasonably satisfactory to such indemnified party; provided,
however, if the defendants in any such action include both the indemnified
party and the indemnifying party and the indemnified party shall have
reasonably concluded that a conflict may arise between the positions of the
indemnifying party and the indemnified party in conducting the defense of
any such action or that there may be legal defenses available to it and/or
other indemnified parties which are different from or additional to those
available to the indemnifying party, the indemnified party or parties shall
have the right to select separate counsel to assume such legal defenses and
to otherwise participate in the defense of such action on behalf of such
indemnified party or parties. Upon receipt of notice from the indemnifying
party to such indemnified party of such indemnifying party's election so to
assume the defense of such action and approval by the indemnified party of
counsel, the indemnifying party will not be liable to such indemnified
party under this Section 8 for any legal or other expenses subsequently
incurred by such indemnified party in connection with the defense thereof
unless (i) the indemnified party shall have employed separate counsel in
accordance with the proviso to the next preceding sentence (it being
understood, however, that the indemnifying party shall not be liable for
the expenses of more than one separate counsel (together with local
counsel), approved by the indemnifying party (▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & Company,
Incorporated in the case of Section 8(b) and Section 9), representing the
indemnified parties who are parties to such action) or (ii) the
indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable
time after notice of commencement of the action, in each of which cases the
fees and expenses of counsel shall be at the expense of the indemnifying
party.
(d) Settlements. The indemnifying party under this Section 8 shall not
be liable for any settlement of any proceeding effected without its written
consent, but if settled with such
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consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party against any loss, claim,
damage, liability or expense by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an indemnified party
shall have requested an indemnifying party to reimburse the indemnified
party for fees and expenses of counsel as contemplated by Section 8(c)
hereof, the indemnifying party agrees that it shall be liable for any
settlement of any proceeding effected without its written consent if (i)
such settlement is entered into more than 30 days after receipt by such
indemnifying party of the aforesaid request and (ii) such indemnifying
party shall not have reimbursed the indemnified party in accordance with
such request prior to the date of such settlement. No indemnifying party
shall, without the prior written consent of the indemnified party, effect
any settlement, compromise or consent to the entry of judgment in any
pending or threatened action, suit or proceeding in respect of which any
indemnified party is or could have been a party and indemnity was or could
have been sought hereunder by such indemnified party, unless such
settlement, compromise or consent includes an unconditional release of such
indemnified party from all liability on claims that are the subject matter
of such action, suit or proceeding.
SECTION 9. CONTRIBUTION.
If the indemnification provided for in Section 8 is for any reason held
to be unavailable to or otherwise insufficient to hold harmless an
indemnified party in respect of any losses, claims, damages, liabilities or
expenses referred to therein, then each indemnifying party shall contribute
to the aggregate amount paid or payable by such indemnified party, as
incurred, as a result of any losses, claims, damages, liabilities or
expenses referred to therein (i) in such proportion as is appropriate to
reflect the relative benefits received by the Company, on the one hand, and
the Underwriters, on the other hand, from the offering of the Units
pursuant to this Agreement or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause
(i) above but also the relative fault of the Company, on the one hand, and
the Underwriters, on the other hand, in connection with the statements or
omissions or inaccuracies in the representations and warranties herein
which resulted in such losses, claims, damages, liabilities or expenses, as
well as any other relevant equitable considerations. The relative benefits
received by the Company, on the one hand, and the Underwriters, on the
other hand, in connection with the offering of the Units pursuant to this
Agreement shall be deemed to be in the same respective proportions as the
total net proceeds from the offering of the Units pursuant to this
Agreement (before deducting expenses) received by the Company, and the
total underwriting discount received by the Underwriters, in each case as
set forth on the front cover page of the Prospectus (or, if Rule 434 under
the Securities Act is used, the corresponding location on the Term Sheet)
bear to the aggregate initial public offering price of the Units as set
forth on such cover. The relative fault of the Company, on the one hand,
and the Underwriters, on the other hand, shall be determined by reference
to, among other things, whether any such untrue or alleged untrue statement
of a material fact or omission or alleged omission to state a material fact
or any such inaccurate or alleged inaccurate representation or warranty
relates to information supplied by the Company, on the one hand, or the
Underwriters, on the other hand, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement
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or omission.
The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities and expenses referred to above shall be deemed
to include, subject to the limitations set forth in Section 8(c), any legal
or other fees or expenses reasonably incurred by such party in connection
with investigating or defending any action or claim. The provisions set
forth in Section 8(c) with respect to notice of commencement of any action
shall apply if a claim for contribution is to be made under this Section 9;
provided, however, that no additional notice shall be required with respect
to any action for which notice has been given under Section 8(c) for
purposes of indemnification.
The Company and the Underwriters agree that it would not be just
and equitable if contribution pursuant to this Section 9 were determined by
pro rata allocation (even if for such purpose the Underwriters were treated
as one entity or by any other method of allocation which does not take
account of the equitable considerations referred to in this Section 9.
Notwithstanding the provisions of this Section 9, no Underwriter shall
be required to contribute any amount in excess of the underwriting commissions
received by such Underwriter in connection with the Units underwritten by it and
distributed to the public. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations to contribute pursuant to this
Section 9 are several, and not joint, in proportion to their respective
underwriting commitments as set forth opposite their names in Schedule 1. For
purposes of this Section 9, each officer and employee of an Underwriter and each
person, if any, who controls an Underwriter within the meaning of the Securities
Act and the Exchange Act shall have the same rights to contribution as such
Underwriter; and each director of the Company, each officer of the Company who
signed the Registration Statement, and each person, if any, who controls the
Company within the meaning of the Securities Act and the Exchange Act shall have
the same rights to contribution as the Company.
SECTION 10. DEFAULT OF ONE OR MORE OF THE SEVERAL UNDERWRITERS. If, on
the First Closing Date or the Second Closing Date, as the case may be, any one
or more of the several Underwriters shall fail or refuse to purchase Units that
it or they have agreed to purchase hereunder on such date, and the aggregate
number of Units which such defaulting Underwriter or Underwriters agreed but
failed or refused to purchase does not exceed 10% of the aggregate number of the
Units to be purchased on such date, the other Underwriters shall be obligated,
severally, in the proportions that the number of Firm Units set forth opposite
their respective names on Schedule 1 bears to the aggregate number of Firm Units
set forth opposite the names of all such non-defaulting Underwriters, or in such
other proportions as may be specified by the Representatives with the consent of
the non-defaulting Underwriters, to purchase the Units which such defaulting
Underwriter or Underwriters agreed but failed or refused to purchase on such
date. If, on the First Closing Date or the Second Closing Date, as the case may
be, any one or more of the Underwriters shall fail or refuse to purchase Units
and the aggregate number of Units with respect to which such default occurs
exceeds 10% of the aggregate number of Units to be
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32
purchased on such date, and arrangements satisfactory to the Representatives and
the Company for the purchase of such Units are not made within 48 hours after
such default, this Agreement shall terminate without liability of any party to
any other party except that the provisions of Section 4, Section 6, Section 8
and Section 9 shall at all times be effective and shall survive such
termination. In any such case either the Representatives or the Company shall
have the right to postpone the First Closing Date or the Second Closing Date, as
the case may be, but in no event for longer than seven days in order that the
required changes, if any, to the Registration Statement and the Prospectus or
any other documents or arrangements may be effected.
As used in this Agreement, the term "Underwriter" shall be deemed to
include any person substituted for a defaulting Underwriter under this Section
10. Any action taken under this Section 10 shall not relieve any defaulting
Underwriter from liability in respect of any default of such Underwriter under
this Agreement.
SECTION 11. TERMINATION OF THIS AGREEMENT. Prior to the First Closing
Date this Agreement maybe terminated by the Representatives by notice given to
the Company if at any time (i) trading or quotation in any of the Company's
securities shall have been suspended or limited by the Commission or by the
American Stock Exchange, or trading in securities generally on either the
American Stock Exchange or the New York Stock Exchange shall have been suspended
or limited, or minimum or maximum prices shall have been generally established
on any of such stock exchanges by the Commission or the NASD; (ii) a general
banking moratorium shall have been declared by any of federal, California,
Missouri or New York authorities; (iii) there shall have occurred any outbreak
or escalation of national or international hostilities or any crisis or
calamity, or any change in the United States or international financial markets,
or any substantial change or development involving a prospective substantial
change in United States' or international political, financial or economic
conditions, in each case which in the judgment of the Representatives is
material and adverse and makes it impracticable to market the Units in the
manner and on the terms described in the Prospectus or to enforce contracts for
the sale of securities; (iv) in the judgment of the Representatives there shall
have occurred any Material Adverse Change; or (v) the Company or its
Subsidiaries shall have sustained a loss by strike, fire, flood, earthquake,
accident or other calamity of such character as in the judgment of the
Representatives may interfere materially with the conduct of the business and
operations of such entity regardless of whether or not such loss shall have been
insured. Any termination pursuant to this Section 11 shall be without liability
on the part of (a) the Company to any Underwriter, except that the Company shall
be obligated to reimburse the expenses of the Representatives and the
Underwriters pursuant to Sections 4 and 6 hereof, (b) any Underwriter to the
Company, or (c) of any party hereto to any other party except that the
provisions of Section 8 and Section 9 shall at all times be effective and shall
survive such termination.
SECTION 12. REPRESENTATIONS AND INDEMNITIES TO SURVIVE DELIVERY. The
respective indemnities, agreements, representations, warranties and other
statements of the Company and its officers and of the several Underwriters set
forth in or made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation made by or on behalf of any Underwriter
or the Company or any of its or their partners, officers or directors or any
controlling person, as the case may be, and will survive delivery of and payment
for the Units
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33
sold hereunder and any termination of this Agreement.
SECTION 13. NOTICES. All communications hereunder shall be in writing
and shall be mailed, hand delivered or telecopied and confirmed to the parties
hereto as follows:
If to the Representatives:
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & Company, Incorporated
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇
and
▇▇▇▇▇▇▇▇▇▇ Securities
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: ________________
Attention: ________________
with a copy to:
O'Melveny & ▇▇▇▇▇ LLP
Embarcadero Center West
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
If to the Company:
Hanover Capital Mortgage Holdings, Inc.
▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
with a copy to:
▇▇▇▇▇, ▇▇▇▇▇▇-▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, P.C.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇, ▇▇., Esq.
29
34
Any party hereto may change the address for receipt of communications by giving
written notice to the others.
SECTION 14. SUCCESSORS. This Agreement will inure to the benefit of and
be binding upon the parties hereto, including any substitute Underwriters
pursuant to Section 10 hereof, and to the benefit of the employees, officers and
directors and controlling persons referred to in Section 8 and Section 9, and in
each case their respective successors, and no other person will have any right
or obligation hereunder. The term "successors" shall not include any purchaser
of the Units as such from any of the Underwriters merely by reason of such
purchase.
SECTION 15. PARTIAL UNENFORCEABILITY. The invalidity or
unenforceability of any Section, paragraph or provision of this Agreement shall
not affect the validity or enforceability of any other Section, paragraph or
provision hereof. If any Section, paragraph or provision of this Agreement is
for any reason determined to be invalid or unenforceable, there shall be deemed
to be made such minor changes (and only such minor changes) as are necessary to
make it valid and enforceable.
SECTION 16. (a) GOVERNING LAW PROVISIONS. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN SUCH STATE.
(b) Consent to Jurisdiction. Any legal suit, action or proceeding
arising out of or based upon this Agreement or the transactions contemplated
hereby ("Related Proceedings") may be instituted in the federal courts of the
United States of America located in the City and County of New York or the
courts of the State of New York in each case located in the City and County of
New York (collectively, the "Specified Courts"), and each party irrevocably
submits to the exclusive jurisdiction (except for proceedings instituted in
regard to the enforcement of a judgment of any such court (a "Related
Judgment"), as to which such jurisdiction is non-exclusive) of such courts in
any such suit, action or proceeding. Service of any process, summons, notice or
document by mail to such party's address set forth above shall be effective
service of process for any suit, action or other proceeding brought in any such
court. The parties irrevocably and unconditionally waive any objection to the
laying of venue of any suit, action or other proceeding in the Specified Courts
and irrevocably and unconditionally waive and agree not to plead or claim in any
such court that any such suit, action or other proceeding brought in any such
court has been brought in an inconvenient forum.
SECTION 17. GENERAL PROVISIONS. This Agreement constitutes the entire
agreement of the parties to this Agreement and supersedes all prior written or
oral and all contemporaneous oral agreements, understandings and negotiations
with respect to the subject matter hereof. This Agreement may be executed in two
or more counterparts, each one of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This
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35
Agreement may not be amended or modified unless in writing by all of the parties
hereto, and no condition herein (express or implied) may be waived unless waived
in writing by each party whom the condition is meant to benefit. The Table of
Contents and the Section headings herein are for the convenience of the parties
only and shall not affect the construction or interpretation of this Agreement.
In this Agreement unless the context otherwise requires, (i) singular words
shall connote the plural number as well as the singular and vice versa, and the
masculine shall include the feminine and the neuter, and (ii) all references to
particular articles, sections, subsections, clauses or exhibits are references
to articles, sections, subsections, clauses or exhibits of this Agreement.
Each of the parties hereto acknowledges that it is a sophisticated
business person who was adequately represented by counsel during negotiations
regarding the provisions hereof, including, without limitation, the
indemnification provisions of Section 8 and the contribution provisions of
Section 9, and is fully informed regarding said provisions. Each of the parties
hereto further acknowledges that the provisions of Sections 8 and 9 hereto
fairly allocate the risks in light of the ability of the parties to investigate
the Company, its affairs and its business in order to assure that adequate
disclosure has been made in the Registration Statement, any preliminary
prospectus and the Prospectus (and any amendments and supplements thereto), as
required by the Securities Act and the Exchange Act.
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to the Company the enclosed copies hereof,
whereupon this instrument, along with all counterparts hereof, shall become a
binding agreement in accordance with its terms.
Very truly yours,
HANOVER CAPITAL MORTGAGE HOLDINGS, INC.
By: ________________________________________
Name:
Title:
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36
The foregoing Underwriting Agreement is hereby confirmed and accepted
by the Representatives in St. Louis, Missouri as of the date first above
written.
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & COMPANY, INCORPORATED
▇▇▇▇▇▇▇▇▇▇ SECURITIES
Acting as Representatives of the several
Underwriters named in the attached Schedule 1.
By: ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & COMPANY, INCORPORATED
By: _____________________________________
Name:
Title:
37
SCHEDULE 1
NUMBER OF
FIRM UNITS
UNDERWRITERS TO BE PURCHASED
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & Company, Incorporated ........................ [___]
▇▇▇▇▇▇▇▇▇▇ Securities............................................ [___]
[___]............................................................ [___]
[___]............................................................ [___]
[___]............................................................ [___]
Total .................................................. 4,600,000
=========
Schedule 1 - page 1
38
SCHEDULE 2
CERTAIN FORMATION DOCUMENTS
1. Certificate of Incorporation and Bylaws of Hanover Capital Partners, Ltd.
2. Amended and Restated Certificates of Incorporation of HCP (including
Certificate of Designation of Preferred Stock).
3. Employment Agreement by and between HCHI and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇.
4. Employment Agreement by and between HCHI and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇.
5. Employment Agreement by and between HCHI and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇.
6. Employment Agreement by and between HCHI and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇.
▇. Registration Rights Agreement by and among [HCHI] and the Principals.
8. Agreement and Plan of Recapitalization.
9. Shareholders Agreement.
[Completed Descriptions and Additional Documents to Come]
Schedule 2 - page 1
39
SCHEDULE 3
CERTAIN EXISTING INSTRUMENTS
[To be completed by HCHI and its counsel]
Schedule 3 - page 1
40
EXHIBIT A
OPINION OF COUNSEL FOR THE COMPANY
(TO BE DELIVERED PURSUANT TO SECTION 5(d))
The opinion of counsel for the Company (this "Opinion") shall be
addressed to ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & Company, Incorporated and ▇▇▇▇▇▇▇▇▇▇ Securities,
as representatives of the several underwriters listed in Schedule 1 to the
Underwriting Agreement, shall be dated as of the First Closing Date or the
Second Closing Date, as applicable, shall expressly authorize O'Melveny & ▇▇▇▇▇
LLP, as counsel for the Underwriters, to rely upon this Opinion in connection
with such firm's opinion to be rendered pursuant to Section 5(e) of the
Underwriting Agreement and shall include as an exhibit any representation
certificate(s) relied upon by counsel for the Company.
In rendering this Opinion, counsel for the Company may rely (1)
as to matters involving the application of laws of any jurisdiction other than
the General Corporation Law of the State of Delaware, the law of the State of
New York or the federal law of the United States, to the extent they deem proper
and specified in such opinion, upon the opinion (which shall be dated the First
Closing Date or the Second Closing Date, as the case may be, shall be attached
to the opinion, shall be satisfactory in form and substance to the Underwriters,
and shall expressly state that the Underwriters and O'Melveny & ▇▇▇▇▇ LLP, as
counsel for the Underwriters, may rely on such opinion) of Piper & Marbury
L.L.P.; provided, however, that such counsel shall further state that they
believe that they and the Underwriters and counsel for the Underwriters are
justified in relying upon such opinion of other counsel, and (2) as to matters
of fact, to the extent they deem proper, on certificates of responsible officers
of the Company and public officials.
All capitalized terms used herein without definitions shall have
the meaning given such terms in the Underwriting Agreement to which this Exhibit
A is attached (the "Underwriting Agreement").
* * * *
(a) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Maryland.
(b) The Company is duly qualified as a foreign corporation to transact
business and is in good standing in the State of New York and in each other
jurisdiction in which such qualification is required, whether by reason of the
ownership or leasing of property or the conduct of business, except for such
jurisdictions where the failure to so qualify or to be in good standing would
not, individually or in the aggregate, result in a Material Adverse Change.
(c) The Company has all requisite corporate power and authority (i) to
own, lease and operate its properties and to conduct its business as described
in the Prospectus both currently and after giving effect to the Formation
Transactions, (ii) to enter into and perform its obligations
A-2
41
under the Underwriting Agreement, the Warrant Agreement and the Representatives
Warrant Agreement, (iii) to issue, sell and deliver the Units to the
Underwriters pursuant to the Underwriting Agreement, (iv) to enter into each
Formation Agreement to which it is a party, to perform its obligations
thereunder and otherwise to consummate the transactions contemplated thereby,
and (v) to issue, sell and deliver the Representatives Warrants to the
Representatives.
(d) Each Subsidiary of the Company (which term, for purposes of this
Opinion, shall be deemed to include, without limitation, HCP, HCS and HCMC) is a
corporation, limited partnership or limited liability company, as the case may
be, duly organized or formed, as the case may be, validly existing and in good
standing under the laws of its jurisdiction of its incorporation or formation.
(e) Each Subsidiary is duly qualified as a foreign corporation to transact
business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except for such jurisdictions where the
failure to so qualify or to be in good standing would not, individually or in
the aggregate, result in a Material Adverse Change.
(f) Each Subsidiary has all requisite power and authority (i) to own,
lease and operate its properties and to conduct its business as described in the
Prospectus both currently and after giving effect to the Formation Transactions
and (ii) to enter into each Formation Agreement to which it is a party, to
perform its obligations thereunder and otherwise to consummate the transactions
contemplated thereby.
(g) To such counsel's knowledge, the Company does not own or control,
directly or indirectly, any corporation, association or other entity other than
the Subsidiaries listed in Exhibit 21 to the Registration Statement.
(h) The authorized, issued and outstanding capital stock of the Company is
as set forth in the Prospectus under the caption "Capitalization." The issued
and outstanding shares of Common Stock have been, and the Units (including the
Common Stock and Warrants comprising the Units) and the Representatives
Warrants, upon issuance and delivery against payment therefor in the manner
described in the Underwriting Agreement or Representatives Warrant Agreement, as
applicable, will be duly authorized and validly issued, fully paid and
nonassessable, and were not or, upon issuance, will not be, issued (i) in
violation of or subject to any preemptive rights, or other rights to subscribe
for or purchase any securities of the Company arising from the charter or bylaws
of the Company, the Maryland General Corporation Law or, to the best knowledge
of such counsel, otherwise or (ii) in violation of any federal or state
securities laws. The terms and provisions of the Units (including the Common
Stock and the Warrants comprising the Units) conform in all material respects to
the descriptions thereof contained in the Prospectus.
(i) No stockholder of the Company or any other person has any preemptive
right, right of first refusal or other similar right to subscribe for or
purchase securities of the Company arising by operation of the charter or bylaws
of the Company, the Maryland General Corporation Law or, to the best knowledge
of such counsel, otherwise. To the best knowledge of such counsel, there are no
persons with registration or other similar rights to have any equity or debt
securities registered for sale under the Registration Statement or included in
the offering
A-3
42
contemplated by the Underwriting Agreement, except for such rights as have been
duly waived.
(j) The forms of certificates used to evidence the Units, the Common Stock
and the Warrants are in due and proper form and comply with all applicable
requirements of the charter and bylaws of the Company and the Maryland General
Corporation Law. In connection with any sale of securities to the Underwriters
without certificates under the Underwriting Agreement, the Company has fully
complied with sections 2-210 and 2-211 of the Maryland General Corporation Law.
(k) The Company has reserved for issuance a sufficient number of shares of
Common Stock to permit the issuance of all shares of Common Stock issuable upon
the exercise of the Warrants in accordance with the terms of the Warrant
Agreement and the Representatives Warrants in accordance with the terms of the
Representatives Warrant Agreement. The shares of Common Stock to be issued upon
the exercise of the Warrants and the Representatives Warrants have been duly
authorized for issuance and sale pursuant to the Warrant Agreement or the
Representatives Warrant Agreement, as applicable, and, when issued and delivered
by the Company pursuant to such agreement, will be validly issued, fully paid
and nonassessable. No further approval or authority of the shareholders or the
Board of Directors of the Company is required for the issuance and sale of the
shares of Common Stock pursuant to the terms of the Warrant Agreement or the
Representatives Warrant Agreement.
(l) The description of the Company's stock option, stock bonus and other
stock plans or arrangements, and the options or other rights granted and
exercised thereunder, set forth in the Prospectus accurately and fairly presents
the information required to be shown with respect to such plans, arrangements,
options and rights.
(m) The authorized capital stock of HCP consists of 90,000,000 shares of
common stock (the "HCP Common") and 10,000,000 shares of preferred stock (the
"HCP Preferred"). After giving effect to the Formation Transactions to be
consummated on the First Closing Date, the HCP Common will be owned by the
Principals and the HCP Preferred will be owned by the Company in the manner and
in the percentage interests set forth in the Prospectus. All of the shares of
HCP Common and HCP Preferred issued to the Principals and the Company,
respectively, will upon issuance and payment therefor in accordance with the
Formation Agreements, be duly authorized and validly issued, fully paid and
nonassessable and will have been issued as a valid private placement exempt from
the registration requirements of the Securities Act and will not be integrated
with the public sale of the securities subject to the Registration Statement and
will otherwise have been issued in accordance with all state and federal
securities laws.
(n) All of the issued and outstanding capital stock, membership interests
or other equity interests of each other Subsidiary (exclusive of HCP) (i) has
been duly authorized and validly issued and is fully paid and non-assessable,
(ii) except as otherwise disclosed in the Prospectus, is owned by the Company,
directly or through Subsidiaries, free and clear of any security interest,
mortgage, pledge, lien, encumbrance or, to the best knowledge of such counsel,
any pending or threatened claim, and (iii) has been issued in compliance with
all state and federal securities laws.
A-4
43
(o) Each of the Underwriting Agreement, the Warrant Agreement, the
Representatives Warrant Agreement and each other Formation Agreement to which
the Company is a party (collectively, the "COMPANY DOCUMENTS") has been duly
authorized, executed and delivered by, and is a valid and binding agreement of,
the Company, enforceable in accordance with its terms, except as the enforcement
thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws related to or affecting creditors' rights generally or by
general equitable principles and, with respect to the Underwriting Agreement,
except as rights to indemnification thereunder may be limited by applicable law.
(p) Each Formation Agreement which any Subsidiary of the Company is a
party has been (i) duly authorized by all requisite partnership, corporate or
other action, (ii) duly executed and delivered by such Subsidiary and (iii)
constitutes a valid and binding agreement of such Subsidiary and, to such
Counsel's knowledge, each of the other parties thereto, and is enforceable in
accordance with its terms, except as the enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting the rights and remedies of creditors or by general
equitable principles.
(q) The execution, delivery and performance of each of the Company
Documents and the Formation Documents by the Company and its Subsidiaries and
the consummation of the transaction contemplated thereby will not (i) result in
any violation of the provisions of the charter, bylaws, partnership agreement or
other similar organization document of the Company or any of its Subsidiaries;
(ii) result in a breach of, or constitute, either immediately or upon notice or
the passage of time or both, a Default or a Debt Repayment Triggering Event
under, or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or any Subsidiary
pursuant to any Existing Instrument listed on Schedule 3 to the Underwriting
Agreement; (iii) not require the consent of any other party to any such Existing
Instrument, or, to such counsel's knowledge, any other agreement or relationship
by which any of the foregoing entities is bound except for such consents which
have been obtained in writing by such entity and except for such consents as the
failure of which to obtain would not, individually or in the aggregate, result
in a Material Adverse Change and (iv) result in any violation of any law,
administrative regulation or administrative or court decree applicable to the
Company or any of it Subsidiaries.
(r) Each of the Registration Statement and the Rule 462(b) Registration
Statement, if any, has been declared effective by the Commission under the
Securities Act. To the best knowledge of such counsel, no stop order suspending
the effectiveness of either of the Registration Statement or the Rule 462(b)
Registration Statement, if any, has been issued under the Securities Act and no
proceedings for such purpose have been instituted or are pending or are
contemplated or threatened by the Commission. Any required filing of the
Prospectus and any supplement thereto pursuant to Rule 424(b) under the
Securities Act has been made in the manner and within the time period required
by such Rule 424(b).
(s) The Registration Statement, including any Rule 462(b) Registration
Statement, the Prospectus, and each amendment or supplement to the Registration
Statement and the Prospectus, as of their respective effective or issue dates
(other than the financial statements and supporting schedules included therein
or in exhibits to the Registration Statement, as to which no opinion
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need be rendered) comply as to form in all material respects with the applicable
requirements of the Securities Act.
(t) The Units have been approved for listing on the American Stock
Exchange.
(u) The statements (i) in the Prospectus under the captions "Risk
Factors," "Description of Securities," "Management's Discussion and Analysis and
Results of Operations," "Business," "Certain Relationships and Related
Transactions," "Shares Eligible for Future Sale," "Certain Provisions of
Maryland Law and the Company's Charter and Bylaws," "Federal Income Tax
Considerations," "ERISA Investors" and "Underwriting" and (ii) in Item 33
(Recent Sales of Unregistered Securities) and Item 34 (Indemnification of
Directors and Officers) of the Registration Statement, insofar as such
statements constitute matters of law, summaries of legal matters, the Company's
charter or bylaw provisions, documents or legal proceedings, or legal
conclusions, has been reviewed by such counsel and fairly present and summarize,
in all material respects, the matters referred to therein.
(v) To the best knowledge of such counsel, there are no Existing
Instruments required to be described or referred to in the Registration
Statement or to be filed as exhibits thereto other than those described or
referred to therein or filed as exhibits thereto; and the descriptions thereof
and references thereto are correct in all material respects.
(w) No consent, approval, authorization or other order of, or registration
or filing with, any court or other governmental authority or agency, is required
for the execution, delivery and performance of the Company Documents and the
Formation Documents or the consummation of the transactions contemplated thereby
and by the Prospectus by the Company and its Subsidiaries, except, in the case
of the Company, as required under the Securities Act, applicable state
securities or blue sky laws and from the NASD.
(x) To the best knowledge of such counsel, neither the Company nor any of
its Subsidiaries (i) is in violation of its charter or bylaws, partnership
agreement, partnership certificate or other organization document, as
applicable, or any law, administrative regulation or administrative or court
decree applicable to such entity or (ii) is in Default in the performance or
observance of any obligation, agreement, covenant or condition contained in any
material agreement, except in the case of clause (ii) for such Defaults as would
not, individually or in the aggregate, result in a Material Adverse Change.
(y) The consummation of the Formation Transactions constitutes neither a
"roll-up transaction," as such term is defined in Item 901(c) of Regulation S-K
of the Securities Act, nor a "limited partnership roll-up transaction," as such
term is defined in Rule 2810(a)(10) of the Conduct Rules of the NASD.
(z) The Company is organized in conformity with the requirements for
qualification as a real estate investment trust ("REIT") under Sections 856
through 860 of the Tax Code and pursuant to any applicable state tax laws; and
the Company's method of operations enables it to meet the requirements for
qualification and taxation as a REIT under the Tax Code beginning with the
taxable year ending December 31, 1997. To the best of such counsel's knowledge,
there is no event or condition which would cause or is likely to cause the
Company to fail to qualify
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45
as a REIT at any time after the First Closing Date.
(aa) The descriptions of the law and the legal conclusions contained in
the Prospectus under the caption "Federal Income Tax Considerations" are correct
in all material respects, and the discussion thereunder fairly summarizes the
federal income tax considerations that are likely to be material to a holder of
the Units, Common Stock and Warrants.
(ab) The descriptions of the law and the legal conclusions contained in
the Prospectus under the caption "ERISA Investors" are correct in all material
respects, and the discussion thereunder fairly summarizes the considerations
that are likely to be material to a fiduciary of a Plan (as defined in the
Prospectus).
(ac) Each of the Company and each Company affiliate is not and, after
receipt of payment for the Units, use of the proceeds of the offering as
described in the Prospectus and consummation of the Formation Transactions, will
not be an "investment company" within the meaning of Investment Company Act of
1940 or otherwise subject to regulation under the Investment Company Act of
1940..
(ad) The proposed methods of operations of the Company and its
Subsidiaries, as described in the Prospectus, will not cause or require any such
entity to register as an investment advisor under the Investment Advisors Act of
1940.
(ae) The legal opinion of Piper & Marbury L.L.P. attached hereto as
Exhibit A is satisfactory in form to such counsel, and such counsel believes the
Underwriters and counsel for the Underwriters are justified in relying on it.
In addition, such counsel shall state that they have participated in
conferences with officers and other representatives of the Company,
representatives of the independent public or certified public accountants for
the Company and with representatives of the Underwriters at which the contents
of the Registration Statement and the Prospectus, and any supplements or
amendments thereto, and related matters were discussed and, although such
counsel is not passing upon and does not assume any responsibility for the
accuracy, completeness or fairness of the statements contained in the
Registration Statement or the Prospectus (other than as specified above), and
any supplements or amendments thereto, on the basis of the foregoing, nothing
has come to their attention which would lead them to believe that either the
Registration Statement or any amendments thereto, at the time the Registration
Statement or such amendments became effective, contained an untrue statement of
a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading or that the
Prospectus, as of its date or at the First Closing Date or the Second Closing
Date, as the case may be, contained an untrue statement of a material fact or
omitted to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading (it being understood that such counsel need express no belief as to
the financial statements or schedules or other financial or statistical data
derived therefrom, included in the Registration Statement or the Prospectus or
any amendments or supplements thereto).
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46
EXHIBIT B
FORM OF DIRECTORS' AND OFFICERS' LOCK-UP AGREEMENT
(TO BE DELIVERED PURSUANT TO SECTION 5(i))
[Pricing Date]
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & Company, Incorporated
▇▇▇▇▇▇▇▇▇▇ Securities
As Representatives of the Several Underwriters
▇/▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & Company, Incorporated
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
RE: Hanover Capital Mortgage Holdings, Inc. (the "Company")
Ladies & Gentlemen:
The undersigned is an owner of record or beneficially of certain shares of
Common Stock of the Company ("Common Stock") or securities convertible into or
exchangeable or exercisable for Common Stock. The Company proposes to carry out
a public offering of Units (the "Offering"), with each Unit to consist of one
share of Common Stock and one Stock Purchase Warrant, for which you will act as
the Representatives of the underwriters. The undersigned recognizes that the
Offering will be of benefit to the undersigned and will benefit the Company. The
undersigned acknowledges that you and the other underwriters are relying on the
representations and agreements of the undersigned contained in this letter in
carrying out the Offering and in entering into underwriting arrangements with
the Company with respect to the Offering.
In consideration of the foregoing, the undersigned hereby agrees that the
undersigned will not, without the prior written consent of ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ &
Company, Incorporated (which consent may be withheld in its sole discretion),
directly or indirectly, sell, offer, contract or grant any option to sell
(including without limitation any short sale), pledge, transfer, establish an
open "put equivalent position" within the meaning of Rule 16a-1(h) under the
Securities Exchange Act of 1934, or otherwise dispose of any shares of Common
Stock, options or warrants to acquire shares of Common Stock, or securities
exchangeable or exercisable for or convertible into shares of Common Stock
currently or hereafter owned either of record or beneficially (as defined in
Rule 13d-3 under Securities Exchange Act of 1934, as amended) by the
undersigned, or publicly announce the undersigned's intention to do any of the
foregoing, for a period commencing on the date hereof and continuing through the
close of trading on the date 365 days after the date of the Prospectus. The
undersigned also agrees and consents to the entry of stop transfer instructions
with the Company's transfer agent and registrar against the transfer of shares
of Common Stock or securities convertible into or exchangeable or exercisable
for Common Stock held by the undersigned except in compliance with the foregoing
restrictions.
With respect to the Offering only, the undersigned waives any registration
rights relating to registration under the Securities Act of any Common Stock
owned either of record or beneficially
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47
by the undersigned, including any rights to receive notice of the Offering.
This agreement is irrevocable and will be binding on the undersigned and the
respective successors, heirs, personal representatives, and assigns of the
undersigned.
------------------------------
Printed Name of Holder
By:
---------------------------
(Signature)
------------------------------
Printed Name of Person Signing
(and indicate capacity of person signing if
signing as custodian, trustee, or on behalf
of an entity)
B-2