Exhibit 1.1
HIGHLAND HOSPITALITY CORPORATION
Shares of Common Stock
UNDERWRITING AGREEMENT
December ___, 2003
FRIEDMAN, BILLINGS, ▇▇▇▇▇▇ & CO., INC.
as Representative of the several Underwriters
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Dear Sirs:
HIGHLAND HOSPITALITY CORPORATION, a Maryland corporation (the
"Company"), and Highland Hospitality, L.P., a Delaware limited partnership (the
"Operating Partnership"), each confirms its agreement with each of the
Underwriters listed on Schedule I hereto (collectively, the "Underwriters") for
whom Friedman, Billings, ▇▇▇▇▇▇ & Co., Inc. is acting as representative (the
"Representative") with respect to (i) the sale by the Company to the
Underwriters of [INSERT NUMBER OF INITIAL SHARES TO BE OFFERED] shares (the
"Initial Shares") of Common Stock, par value $0.01 per share, of the Company
("Common Stock") in the respective numbers of shares set forth opposite the
names of the Underwriters in Schedule I hereto, and the purchase by the
Underwriters, acting severally and not jointly, of the respective number of
shares of Common Stock set forth opposite their names in Schedule I hereto, and
(ii) the grant by the Company to the Underwriters, acting severally and not
jointly, of the option described in Section 1(b) hereof to purchase all or any
part of [INSERT NUMBER OF OVER-ALLOTMENT SHARES] additional shares of Common
Stock to cover over-allotments (the "Option Shares"), if any, in the respective
numbers of shares of Common Stock set forth opposite their names in Schedule I
hereto. The [INSERT NUMBER OF INITIAL SHARES] shares of Common Stock to be
purchased by the Underwriters and all or any part of the [INSERT NUMBER OF
OPTION SHARES] shares of Common Stock subject to the option described in Section
l(b) hereof are hereinafter called, collectively, the "Shares."
At Closing Time (as hereinafter defined) for the purchase and sale of
the Initial Shares, the Company and the Operating Partnership will complete a
series of transactions described in the Prospectus (as hereinafter defined)
under the captions "Summary - Formation Transactions" and "Our Business and
Properties - Formation Transactions" (such transactions, the "Formation
Transactions"). As part of the Formation Transactions, (i) the Company will
contribute the net proceeds from the public offering of the Shares, directly and
through a wholly-owned subsidiary of the Company, to the Operating Partnership
in exchange for units of partnership interest in the Operating Partnership ("OP
Units") and (ii) the Operating Partnership will issue OP Units to acquire
certain partnership interests and limited liability company interests from third
parties as described in the Prospectus.
The Company understands that the Underwriters propose to make a public
offering of the Shares as soon as the Underwriters deem advisable after this
Underwriting Agreement (the "Agreement") has been executed and delivered.
The Company has filed with the Securities and Exchange Commission (the
Commission"), a registration statement on Form S-11 (No. 333-108671) and a
related preliminary prospectus for the registration of the Shares under the
Securities Act of 1933, as amended (the "Securities Act"), and the
rules and regulations thereunder (the "Securities Act Regulations"). The Company
has prepared and filed such amendments thereto, if any, and such amended
preliminary prospectuses, if any, as may have been required to the date hereof,
and will file such additional amendments thereto and such amended prospectuses
as may hereafter be required. The registration statement has been declared
effective under the Securities Act by the Commission. The registration
statement, as amended at the time it became effective (including all information
deemed to be a part of the registration statement at the time it became
effective pursuant to Rule 430A of the Securities Act Regulations), is
hereinafter called the "Registration Statement," except that, if the Company
files a post-effective amendment to such registration statement which becomes
effective prior to the Closing Time (as defined below), "Registration Statement"
shall refer to such registration statement as so amended. Any registration
statement filed pursuant to Rule 462(b) of the Securities Act Regulations is
hereinafter called the "Rule 462(b) Registration Statement," and after such
filing the term "Registration Statement" shall include the 462(b) Registration
Statement. Any prospectus filed with the Commission by the Company pursuant to
Rule 424(b) of the Securities Act Regulations is hereinafter called the
"Preliminary Prospectus." The term "Prospectus" means the final prospectus, as
first filed with the Commission pursuant to paragraph (1) or (4) of Rule 424(b)
of the Securities Act Regulations, and any amendments thereof or supplements
thereto. The Commission has not issued any order preventing or suspending the
use of any Preliminary Prospectus.
The Company also will issue at Closing Time (as hereinafter defined) to
the Representative for its own account warrants (the "Warrants") to purchase at
an exercise price of $[__] per share (i) 138,488 shares of Common Stock and (ii)
a number of shares of Common Stock equal to 2.5% of the Initial Shares
(collectively, the "Warrant Shares"), pursuant to the terms and conditions of
the Warrant Agreement in the form filed as Exhibit 10.18 to the Registration
Statement (the "Warrant Agreement").
The Company and the Underwriters agree as follows:
1. Sale and Purchase:
(a) Initial Shares. Upon the basis of the warranties and representations
and other terms and conditions herein set forth, at the purchase price per share
of $[________], the Company agrees to sell to the Underwriters the number of
Initial Shares set forth in Schedule I opposite each Underwriter's name, and
each Underwriter agrees, severally and not jointly, to purchase from the Company
the number of Initial Shares set forth in Schedule I opposite such Underwriter's
name, plus any additional number of Initial Shares that such Underwriter may
become obligated to purchase pursuant to the provisions of Section 8 hereof,
subject in each case, to such adjustments among the Underwriters as the
Representative in its sole discretion shall make to eliminate any sales or
purchases of fractional shares.
(b) Option Shares. In addition, upon the basis of the warranties and
representations and other terms and conditions herein set forth, at the purchase
price per share set forth in subsection (a) above, the Company hereby grants an
option to the Underwriters, acting severally and not jointly, to purchase from
the Company, all or any part of the Option Shares, plus any additional number of
Option Shares that such Underwriter may become obligated to purchase pursuant to
the provisions of Section 8 hereof. The option hereby granted will expire 30
days after the date hereof and may be exercised in whole or in part only for the
purpose of covering over-allotments which may be made in connection with the
offering and distribution of the Initial Shares upon notice by the
Representative to the Company setting forth the number of Option Shares as to
which the several Underwriters are then exercising the option and the time and
date of payment and delivery for such Option Shares. Any such time and date of
delivery (a "Date of Delivery") shall be determined by the Representative, but
shall not be later than three full business days (or earlier, without the
consent of the Company, than two full business days) after the exercise of such
option, nor in any event prior to the Closing Time, as hereinafter defined. If
the option is exercised as to all or any portion of the Option Shares, the
Company will sell and each of the Underwriters, acting
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severally and not jointly, will purchase that proportion of the total number of
Option Shares then being purchased, which the number of Initial Shares set forth
in Schedule I opposite the name of such Underwriter bears to the total number of
Initial Shares, subject in each case to such adjustments among the Underwriters
as the Representative in its sole discretion shall make to eliminate any sales
or purchases of fractional shares.
2. Payment and Delivery:
(a) Initial Shares and Warrants. The Initial Shares to be purchased by
each Underwriter hereunder, in definitive form, and in such authorized
denominations and registered in such names as the Representative may request
upon at least 48 hours' prior notice to the Company shall be delivered by or on
behalf of the Company to the Representative, including, at the option of the
Representative, through the facilities of The Depository Trust Company ("DTC")
for the account of such Underwriter, against payment by or on behalf of such
Underwriter of the purchase price therefor by wire transfer of Federal
(same-day) funds to the account specified to the Representative by the Company
upon at least 48 hours' prior notice. The Company also agrees to execute the
Warrant Agreement at the Closing Time and pursuant thereto issue and deliver to
the Representative, in further consideration of the Representative's efforts in
connection with the sale and purchase of the Initial Shares and the Option
Shares, the Warrants to purchase the Warrant Shares at an exercise price of
$[__] per share. The Warrants, represented by one or more certificates as the
Representative may specify, shall be delivered by or on behalf of the Company to
the Representative at the time of delivery of the Initial Shares. The Company
will cause the certificates representing the Initial Shares to be made available
for checking and packaging at least 24 hours prior to the Closing Time (as
hereinafter defined) with respect thereto at the office of the Representative,
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or at the office of DTC or
its designated custodian, as the case may be (the "Designated Office"). The time
and date of such delivery and payment shall be 9:30 a.m., New York City time, on
the third (fourth, if pricing occurs after 4:30 p.m., New York City time)
business day after the date hereof (unless another time and date shall be agreed
to by the Representative and the Company). The time at which such payment and
delivery are actually made is hereinafter sometimes called the "Closing Time"
and the date of delivery of both Initial Shares and Warrants and, if applicable,
the Option Shares, is hereinafter sometimes called the "Date of Delivery."
(b) Option Shares. Any Option Shares to be purchased by each Underwriter
hereunder, in definitive form, and in such authorized denominations and
registered in such names as the Representative may request upon at least two
full business days' notice to the Company shall be delivered by or on behalf of
the Company to the Representative, including, at the option of the
Representative, through the facilities of DTC for the account of such
Underwriters, against payment by or on behalf of such Underwriters of the
purchase price therefor by wire transfer of Federal (same-day) funds to the
account specified in writing to the Representative by the Company upon at least
two full business days' prior notice. The Company will cause the certificates
representing the Option Shares to be made available for checking and packaging
at least 24 hours prior to the Date of Delivery with respect thereto at the
Designated Office. The time and date of such delivery and payment shall be 9:30
a.m., New York City time, on the date specified by the Representative in the
notice given by the Representative to the Company of the Underwriters' election
to purchase such Option Shares or on such other time and date as the Company and
the Representative may agree upon in writing.
(c) Directed Shares. It is understood that approximately 3% of the
Initial Shares ("Directed Shares") initially will be reserved by the
Underwriters for offer and sale to employees and persons having business
relationships with the Company ("Directed Share Participants") upon the terms
and conditions set forth in the Prospectus and in accordance with the rules and
regulations of the National Association of Securities Dealers, Inc. (the
"Directed Share Program"). Under no circumstances will the Representative
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or any Underwriter be liable to the Company or to any Directed Share Participant
for any action taken or omitted to be taken in good faith in connection with
such Directed Share Program. To the extent that any Directed Shares are not
affirmatively reconfirmed for purchase by any Directed Share Participant on or
immediately after the date of this Agreement, such Directed Shares may be
offered to the public as part of the public offering contemplated herein.
3. Representations and Warranties of the Company and the Operating
Partnership:
The Company and the Operating Partnership, jointly and severally,
represent and warrant to each Underwriter that:
(a) the Company has an authorized capitalization as set forth in the
Prospectus; the outstanding shares of capital stock, the partnership interests,
membership interests or other equity interests, as the case may be, of the
Company and each subsidiary of the Company, including the Operating Partnership
(each, a "Subsidiary") have been duly and validly authorized and issued and are
fully paid and nonassessable; all of the outstanding shares of capital stock of
or the partnership interests, membership interests or other equity interests in
the Subsidiaries (other than the Operating Partnership), as the case may be, are
directly or indirectly owned of record and beneficially by the Company; except
as disclosed in the Prospectus, there are no outstanding (i) securities or
obligations of the Company or any of the Subsidiaries convertible into or
exchangeable for any capital stock of or partnership interests, membership
interests or other equity interests, as the case may be, in the Company or any
such Subsidiary, (ii) warrants, rights or options to subscribe for or purchase
from the Company or any Subsidiary any such capital stock or any such
convertible or exchangeable securities or obligations, or (iii) obligations of
the Company or any Subsidiary to issue any securities or obligations, any such
convertible or exchangeable securities or obligations, or any such warrants,
rights or options;
(b) each of the Company and the Subsidiaries (all of which Subsidiaries
are named in Exhibit 21.1 to the Registration Statement) has been duly
incorporated or organized and is validly existing as a corporation, general or
limited partnership or limited liability company, as the case may be, in good
standing under the laws of its jurisdiction of incorporation or organization
with full corporate, partnership or limited liability company power and
authority to own its properties and to conduct its business as described in the
Registration Statement and Prospectus and in the case of the Company, to execute
and deliver this Agreement and the Warrant Agreement and in the case of the
Operating Partnership, to execute and deliver this Agreement, and to consummate
the transactions described in each such agreement;
(c) each of the Company and the Subsidiaries is duly qualified to
conduct business and is in good standing in each jurisdiction in which the
conduct of its business or the ownership of its real property requires such
qualification except for such jurisdictions in which the failure, individually
or in the aggregate, to be so qualified could not reasonably be expected to have
a material adverse effect on the assets, business, operations, earnings,
prospects, properties or condition (financial or otherwise), of the Company and
the Subsidiaries, taken as a whole (any such effect where the context so
requires, is hereinafter called a "Material Adverse Effect"); except as
disclosed in the Prospectus, no Subsidiary is prohibited or restricted, directly
or indirectly, from paying dividends to the Company, or from making any other
distribution with respect to such Subsidiary's capital stock, partnership
interests, membership interests or other equity interests, as the case may be,
from repaying to the Company or any other Subsidiary any amounts which may from
time to time become due under any loans or advances to such Subsidiary from the
Company or such other Subsidiary, or from transferring any such Subsidiary's
property or assets to the Company or to any other Subsidiary; except as
disclosed in the Prospectus, the Company does not own, directly or indirectly,
any capital stock or other equity securities of any other
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corporation or any ownership interest in any partnership, limited liability
company, joint venture or other entity;
(d) the Agreement of Limited Partnership of the Operating Partnership
(the "Partnership Agreement") has been duly and validly authorized, executed and
delivered by or on behalf of the partners of the Operating Partnership and
constitutes a valid and binding agreement of the parties thereto, enforceable in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally or by general principles of equity;
(e) upon completion of the offering of Shares, the Company and a wholly-
owned subsidiary of the Company will be the holder of OP Units representing an
ownership interest in the Operating Partnership in the amounts described in the
Prospectus, free and clear of any pledge, lien encumbrance, security interest or
other claim and a wholly-owned subsidiary of the Company will be the sole
general partner of the Operating Partnership;
(f) the Company and the Subsidiaries are in compliance in all material
respects with all applicable laws, rules, regulations, orders, decrees and
judgments, including those relating to transactions with affiliates except where
such failure to be in compliance would not have a Material Adverse Effect;
(g) neither the Company nor any of the Subsidiaries is in breach of or
in default under (nor has any event occurred which with notice, lapse of time,
or both would constitute a breach of, or default under), its respective
organizational documents, or in the performance or observance of any obligation,
agreement, covenant or condition contained in any license, indenture, mortgage,
deed of trust, loan or credit agreement or other agreement or instrument to
which the Company or any Subsidiary is a party or by which any of them or their
respective properties is bound, except for such breaches or defaults which could
not have a Material Adverse Effect;
(h) the execution, delivery and performance of this Agreement, the
Warrant Agreement and the other agreements listed as exhibits to the
Registration Statement (the "Other Transaction Documents") by the Company and
the Operating Partnership (to the extent a party thereto) and consummation by
the Company and the Operating Partnership (to the extent a party thereto) of the
transactions contemplated by this Agreement, the Warrant Agreement or the Other
Transaction Documents do not and will not (A) conflict with, or result in any
breach of, or constitute a default under (nor constitute any event which with
notice, lapse of time, or both would constitute a breach of, or default under)
(i) any provision of the organizational documents of the Company or any
Subsidiary, or (ii) any provision of any license, indenture, mortgage, deed of
trust, loan or credit agreement or other agreement or instrument to which the
Company or any Subsidiary is a party or by which any of them or their respective
properties may be bound or affected, or under any U.S. federal, state, local or
foreign law, regulation or rule or any decree, judgment or order applicable to
the Company or any Subsidiary, except in the case of this clause (ii) for such
breaches or defaults which could not have a Material Adverse Effect or (B)
result in the creation or imposition of any lien, charge, claim or encumbrance
upon any property or asset of the Company or the Subsidiaries, except such
conflicts, breaches or defaults that could not have a Material Adverse Effect;
(i) the execution, delivery and performance of the contribution
agreements with respect to the partnership interests and limited liability
company interests to be acquired by the Operating Partnership (collectively, the
"Contribution Agreements") and the consummation of the transactions contemplated
by the Contribution Agreements do not and will not (A) conflict with, or result
in any breach of, or constitute a default under (nor constitute any event which
with notice, lapse of time, or both would constitute a breach of or default
under), (i) any provisions of the charter or by-laws or other organizational
documents of Barcelo Crestline Corporation or any of its affiliates (each, a
"Transferor") pursuant to the Contribution
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Agreements, (ii) any provision of any license, indenture, mortgage, deed of
trust, loan, credit or other agreement or instrument to which a Transferor is a
party or by which any of such Transferor or its properties or assets may be
bound or affected, (iii) any law or regulation binding upon or applicable to a
Transferor or any of its properties or assets or (iv) any decree, judgment or
order applicable to a Transferor or (B) result in the creation or imposition of
any lien, charge, claim or encumbrance upon any property or assets of a
Transferor;
(j) this Agreement has been duly authorized, executed and delivered by
the Company and the Operating Partnership and is a legal, valid and binding
agreement of the Company and the Operating Partnership enforceable in accordance
with its terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally, and by general principles of equity, and except to the extent that
the indemnification and contribution provisions of Section 9 hereof may be
limited by U.S. federal or state securities laws and public policy
considerations in respect thereof;
(k) the Warrant Agreement and the Other Transaction Documents to which
the Company or the Operating Partnership is a party have been duly authorized,
executed and delivered by the Company and the Operating Partnership and are
legal, valid and binding agreements of the Company and the Operating Partnership
enforceable in accordance with their respective terms, except as may be limited
by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally, and by general equitable principles, and except to
the extent that the indemnification and contribution provisions of Section 9
hereof may be limited by U.S. federal or state securities laws and public policy
considerations in respect thereof;
(l) each Contribution Agreement has been duly authorized, executed and
delivered by the Transferors (to the extent a party thereto) and is a legal,
valid and binding agreement of the Transferors (to the extent a party thereto)
enforceable in accordance with its terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally, and by general principles of equity, and except
that enforceability of the indemnification and contribution provisions set forth
in Section 9 of this Agreement may be limited by U.S. federal or state
securities laws or public policy underlying such laws;
(m) no approval, authorization, consent or order of or filing with any
U.S. federal, state, local or foreign governmental or regulatory commission,
board, body, authority or agency having jurisdiction over the Company (each, a
"Governmental Authority") is required in connection with the execution, delivery
and performance of this Agreement, the Warrant Agreement or the Registration
Rights Agreement, the consummation of the transactions contemplated herein or
therein by the Company or the Operating Partnership (to the extent a party
thereto), and the Company's sale and delivery of the Shares and the Company's
issuance of the Warrants or the Warrant Shares as contemplated hereby or in the
Warrant Agreement, other than (A) such as have been obtained, or will have been
obtained at or prior to the Closing Time or the relevant Date of Delivery, as
the case may be, under the Securities Act and the Securities Exchange Act of
1934 (the "Exchange Act"), (B) such approvals as have been obtained in
connection with the approval of the quotation of the Shares on the New York
Stock Exchange and (C) any necessary qualification under the securities or "blue
sky" laws of the various jurisdictions in which the Shares are being offered by
the Underwriters;
(n) each of the Company and the Subsidiaries has all necessary licenses,
authorizations, consents and approvals and has made all necessary filings
required under any U.S. federal, state or local law, regulation or rule, and has
obtained all necessary authorizations, consents and approvals from other
persons, required in order to conduct its business as described in the
Prospectus, except to the extent that any failure to have any such licenses,
authorizations, consents or approvals, to make any such filings or to obtain any
such authorizations, consents or approvals could not, individually or in the
aggregate, have a
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Material Adverse Effect; neither the Company nor any Subsidiary is in violation
of, in default under, or has received any notice regarding a possible violation,
default or revocation of any such license, authorization, consent or approval or
any U.S. federal, state, local or foreign law, regulation or rule or any decree,
order or judgment applicable to the Company or any Subsidiary, which could have
a Material Adverse Effect;
(o) each of the Registration Statement and any Rule 462(b) Registration
Statement has become effective under the Securities Act and no stop order
suspending the effectiveness of the Registration Statement or any Rule 462(b)
Registration Statement has been issued under the Securities Act and no
proceedings for that purpose have been instituted or are pending or, to the
knowledge of the Company, are threatened by the Commission, and the Company has
complied to the Commission's satisfaction with any request on the part of the
Commission for additional information;
(p) the Preliminary Prospectus and the Registration Statement comply,
and the Prospectus and any further amendments or supplements thereto will, when
they have become effective or are filed with the Commission, as the case may be,
comply, in all material respects with the requirements of the Securities Act and
the Securities Act Regulations; the Registration Statement did not, and any
amendment thereto will not, in each case as of the applicable effective date,
contain an 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; and the Preliminary Prospectus does not, and the Prospectus or any
amendment or supplement thereto will not, as of the applicable filing date and
at the Closing Time and on each Date of Delivery (if any), contain an 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, in the light of the
circumstances under which they were made, not misleading; provided, however,
that the Company makes no warranty or representation with respect to any
statement contained in the Registration Statement or the Prospectus in reliance
upon and in conformity with the information concerning the Underwriters and
furnished in writing by or on behalf of the Underwriters through the
Representative to the Company expressly for use in the Registration Statement or
the Prospectus (that information being limited to that described in the
penultimate sentence of the first paragraph of Section 9(c) hereof);
(q) the Prospectus delivered to the Underwriters for use in connection
with this offering will be identical to the respective version of the Prospectus
created to be transmitted to the Commission for filing via the Electronic Data
Gathering Analysis and Retrieval System ("▇▇▇▇▇"), except to the extent
permitted by Regulation S-T;
(r) there are no actions, suits, proceedings, inquiries or
investigations pending or, to the knowledge of the Company, threatened against
the Company or any Subsidiary or any of their respective officers and directors
or to which the properties, assets or rights of any such entity are subject, at
law or in equity, before or by any Governmental Authority or arbitral panel
which could result in a judgment, decree, award or order having a Material
Adverse Effect;
(s) the financial statements, including the notes thereto, included in
the Registration Statement and the Prospectus present fairly the consolidated
financial position of the entities to which such financial statements relate
(the "Covered Entities") as of the dates indicated and the consolidated results
of operations and changes in financial position and cash flows of the Covered
Entities for the periods specified; such financial statements have been prepared
in conformity with generally accepted accounting principles as applied in the
United States and on a consistent basis during the periods involved and in
accordance with Regulation S-X promulgated by the Commission; the financial
statement schedules included in the Registration Statement and the amounts in
the Prospectus under the captions "Summary - Summary Capitalization Information"
and "Selected Consolidated Financial Data" fairly present the information shown
therein and have been compiled on a basis consistent with the financial
statements
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included in the Registration Statement and the Prospectus; no other financial
statements or supporting schedules are required to be included in the
Registration Statement; the unaudited pro forma financial information (including
the related notes) included in the Prospectus and any Preliminary Prospectus
complies as to form in all material respects with the applicable accounting
requirements of the Securities Act and the Securities Act Regulations, and
management of the Company believes that the assumptions underlying the pro forma
adjustments are reasonable; such pro forma adjustments have been properly
applied to the historical amounts in the compilation of the information and such
information fairly presents the financial position, results of operations and
other information purported to be shown therein at the respective dates and for
the respective periods specified; no other pro forma financial information is
required to be included in the Registration Statement;
(t) KPMG LLP, PricewaterhouseCoopers LLP and Deloitte & Touche LLP,
whose reports on the consolidated financial statements of the Company and the
Subsidiaries are filed with the Commission as part of the Registration Statement
and Prospectus and any other accounting firm that has certified Company
financial statements and delivered its reports with respect thereto, are, and
were during the periods covered by their reports, independent public accountants
as required by the Securities Act and the Securities Act Regulations;
(u) subsequent to the respective dates as of which information is given
in the Registration Statement and the Prospectus, and except as may be otherwise
stated in the Registration Statement or Prospectus, there has not been (A) any
development or transaction that could reasonably be expected to result in a
Material Adverse Effect, whether or not arising in the ordinary course of
business, (B) any obligation, contingent or otherwise, directly or indirectly
incurred by the Company or any Subsidiary that could be reasonably be expected
to result in a Material Adverse Effect (C) any transaction that is material to
the Company and the Subsidiaries, taken as a whole, contemplated or entered into
by the Company or any of the Subsidiaries, or (D) any dividend or distribution
of any kind declared, paid or made by the Company on any class of its capital
stock or any Subsidiary on any of its equity interests;
(v) the Shares, the OP Units and the Warrants conform in all material
respects to the descriptions thereof contained in the Registration Statement and
the Prospectus;
(w) except as disclosed in the Prospectus, there are no persons with
registration or other similar rights to have any equity or debt securities,
including securities which are convertible into or exchangeable for equity
securities, registered pursuant to the Registration Statement or otherwise
registered by the Company under the Securities Act;
(x) the issuance of the Shares has been duly authorized and, when issued
and duly delivered against payment therefor as contemplated by this Agreement,
the Shares will be validly issued, fully paid and nonassessable, free and clear
of any pledge, lien, encumbrance, security interest or other claim created by or
known to the Company, and the issuance and sale of the Shares by the Company is
not subject to preemptive or other similar rights arising by operation of law,
under the organizational documents of the Company or any Subsidiary or under any
agreement to which the Company or any Subsidiary is a party or otherwise;
(y) the issuance of the Warrants has been duly authorized and, when
issued and duly delivered to the Representative as contemplated by the Warrant
Agreement, the Warrants will constitute legal, valid and binding obligations of
the Company, enforceable in accordance with their terms, except to the extent
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights generally and by general
equitable principles; the Warrant Shares have been duly reserved for issuance
upon exercise of the Warrants in accordance with the terms of the Warrant
Agreement;
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(z) the issuance of the OP Units described in the Prospectus has been
duly authorized and upon issuance in accordance with the terms of the agreements
filed as exhibits to the Registration Statement, the OP Units will be validly
issued.
(aa) the Shares have been approved for listing on the New York Stock
Exchange, subject to official notice of issuance;
(bb) the Company has not taken, and will not take, directly or
indirectly, any action which is designed to or which has constituted or which
might reasonably be 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 Shares;
(cc) neither the Company nor any of its affiliates (i) is required to
register as a "broker" or "dealer" in accordance with the provisions of the
Exchange Act, or the rules and regulations thereunder (the "Exchange Act
Regulations"), or (ii) directly, or indirectly through one or more
intermediaries, controls or has any other association with (within the meaning
of Article I of the By-laws of the National Association of Securities Dealers,
Inc. (the "NASD")) any member firm of the NASD;
(dd) any certificate signed by any officer of the Company or any
Subsidiary delivered to counsel for the Representative or to counsel for the
Underwriters pursuant to or in connection with this Agreement shall be deemed a
representation and warranty by the Company to each Underwriter as to the matters
covered thereby;
(ee) the form of certificate used to represent the Common Stock complies
in all material respects with all applicable statutory requirements, with the
charter of the Company and the requirements of the New York Stock Exchange;
(ff) upon consummation of the Formation Transactions, the Subsidiaries
will have good and marketable title in fee simple to, or a valid leasehold
interest in, all real property described in the Prospectus, and good title to
all personal property owned (or to be owned upon the consummation of the
Formation Transactions) by them, in each case free and clear of all liens,
security interests, pledges, charges, encumbrances, mortgages and defects,
except such as are disclosed in the Prospectus or 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 Subsidiaries or such
as would not have a Material Adverse Effect; and any real property improvements,
equipment and personal property held under lease (or to be held under lease upon
completion of the Formation Transactions) by the Company or any Subsidiary are
held under valid, existing and enforceable leases, with such exceptions as are
disclosed in the Prospectus or are not material and do not interfere with the
use made or proposed to be made of such property improvements, equipment and
personal property by the Company or such Subsidiary or such as would not have a
Material Adverse Effect; upon completion of the Formation Transactions, the
Subsidiaries will have an owner's or leasehold title insurance policy, from a
title insurance company licensed to issue such policy, on any real property
owned in fee or leased (or to be so owned or leased upon the consummation of the
Formation Transactions), as the case may be, by the Subsidiary, that insures the
Subsidiary's fee or leasehold interest, as the case may be, in such real
property, which policies include only commercially reasonable exceptions, and
with coverages in amounts at least equal to amounts that are generally deemed in
the Company's industry to be commercially reasonable in the markets where the
Company's properties are located, or a lender's title insurance policy insuring
the lien of its mortgage securing the real property with coverage equal to the
maximum aggregate principal amount of indebtedness held by the Company or a
Subsidiary and secured by the real property;
9
(gg) to the Company's knowledge, all real property owned or leased by
the Company or a Subsidiary (or to be owned or leased upon consummation of the
Formation Transactions) is free of material structural defects and all building
systems contained therein are in good working order in all material respects,
subject to ordinary wear and tear or, in each instance, the Company or a
Subsidiary, as the case may be, has created an adequate reserve to effect
reasonably required repairs, maintenance and capital expenditures; to the
knowledge of the Company and such Subsidiary, water, storm water, sanitary
sewer, electricity and telephone service are all available at the property lines
of such property over duly dedicated streets or perpetual easements of record
benefiting such property; except as described in the Prospectus, to the
knowledge of the Company and such Subsidiary, there is no pending or threatened
special assessment, tax reduction proceeding or other action that could
reasonably be expected to increase the real property taxes or assessments of any
of such property, that, could have a Material Adverse Effect;
(hh) the descriptions in the Registration Statement and the Prospectus
of the legal or governmental proceedings, contracts, leases and other legal
documents therein described present fairly the information required to be shown,
and there are no legal or governmental proceedings, contracts, leases, or other
documents of a character required to be described in the Registration Statement
or the Prospectus or to be filed as exhibits to the Registration Statement which
are not described or filed as required; all agreements between the Company or
any of the Subsidiaries and third parties expressly referenced in the Prospectus
are legal, valid and binding obligations of the Company or one or more of the
Subsidiaries, and to the knowledge of the Company and such Subsidiaries, with
respect to third parties, enforceable in accordance with their respective terms,
except to the extent enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights generally
and by general equitable principles;
(ii) the Company and the Subsidiaries own or possess (or upon completion
of the Formation Transactions will own or possess) adequate licenses or other
rights to use all patents, trademarks, service marks, trade names, copyrights,
software and design licenses, trade secrets, manufacturing processes, other
intangible property rights and know-how (collectively "Intangibles") necessary
to entitle the Company and each Subsidiary to conduct its business as described
in the Prospectus, and neither the Company nor any Subsidiary has received
notice of infringement of or conflict with (and the Company and the Subsidiaries
know of no such infringement of or conflict with) asserted rights of others with
respect to any Intangibles which could have a Material Adverse Effect;
(jj) each of the Company and the Subsidiaries will maintain a system of
internal accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles as applied in the United States and to maintain asset
accountability; (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 the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences;
(kk) the Company and the Subsidiaries maintain, or upon completion of
the Formation Transactions will maintain, insurance (issued by insurers of
recognized financial responsibility) of the types and in the amounts generally
deemed adequate for their respective businesses and consistent with insurance
coverage maintained by similar companies in similar businesses, including, but
not limited to, insurance covering real and personal property owned or leased by
the Company and the Subsidiaries against theft, damage, destruction, acts of
vandalism and all other risks customarily insured against;
(ll) each of the Company and the Subsidiaries has filed on a timely
basis all necessary U.S. federal, state, local and foreign income and franchise
tax returns required to be filed through the date
10
hereof and has paid all taxes shown as due thereon; and no tax deficiency has
been asserted against any such entity, nor does any such entity know of any tax
deficiency which is likely to be asserted against any such entity which, if
determined adversely to any such entity, could have a Material Adverse Effect;
all tax liabilities are adequately provided for on the respective books of such
entities; the Company has duly and properly filed an election to be taxed as an
S corporation for U.S. federal and state income tax purposes (each an "S
Election"), and such S Election has been and will be in full force and effect
since inception of the Company without interruption through the day prior to the
Closing Time; and there has not been any termination of any such S Election
including any inadvertent termination which has been reinstated under Section
1362 of the Internal Revenue Code of 1986, as amended, including the regulations
and published interpretations thereunder (the "Code") and the rules and
regulations promulgated thereunder and the corresponding provisions of state
income tax laws;
(mm) neither the Company nor any Subsidiary is in violation of or has
received notice of any violation with respect to any U.S. federal or state law
relating to discrimination in the hiring, promotion or pay of employees, nor any
applicable U.S. federal or state wages and hours law, the violation of any of
which could have a Material Adverse Effect;
(nn) each of the Company and the Subsidiaries is in compliance in all
material respects with all presently applicable provisions of the Employee
Retirement Income Security Act of 1974, as amended, including the regulations
and published interpretations thereunder ("ERISA"); no "reportable event" (as
defined in ERISA) has occurred with respect to any "pension plan" (as defined in
ERISA) for which the Company or any of the Subsidiaries would have any
liability; each of the Company and the Subsidiaries has not incurred and does
not expect to incur liability under (i) Title IV of ERISA with respect to
termination of, or withdrawal from, any "pension plan" or (ii) Section 412 or
4971 of the Code; and each "pension plan" for which each of the Company and the
Subsidiaries would have any liability that is intended to be qualified under
Section 401(a) of the Code will be so qualified in all material respects and
nothing has occurred, whether by action or by failure to act, which would
prevent such qualification;
(oo) neither the Company nor any of the Subsidiaries nor any officer or
director purporting to act on behalf of the Company or any of the Subsidiaries
has at any time (i) made any contributions to any candidate for political
office, or failed to disclose fully any such contributions, in violation of law,
(ii) made any payment to any U.S. federal, state, local or foreign governmental
officer or official, or other person charged with similar public or quasi-public
duties, other than payments required or allowed by applicable law and the
Company's Code of Ethics, or (iii) engaged in any transactions, maintained any
bank account or used any corporate funds except for transactions, bank accounts
and funds which have been and are reflected in the normally maintained books and
records of the Company and the Subsidiaries;
(pp) except as described in the prospectus, there are no material
outstanding loans or advances or material guarantees of indebtedness by the
Company or any of the Subsidiaries to or for the benefit of any of the officers
or directors of the Company or any of the Subsidiaries or any of the members of
the families of any of them;
(qq) neither the Company nor any of the Subsidiaries nor, to the
knowledge of the Company or any of the Subsidiaries, any employee or agent of
the Company or any of the Subsidiaries, has made any payment of funds of the
Company or of any Subsidiary or received or retained any funds in violation of
any law, rule or regulation or of a character required to be disclosed in the
Prospectus;
(rr) all securities other than the Shares issued by the Company or any
of the Subsidiaries on or prior to the date hereof, have been issued and sold in
compliance with (i) all applicable U.S. federal and
11
state securities laws, (ii) the laws of the applicable jurisdiction of
organization of the issuing entity and (iii) to the extent applicable to the
issuing entity, the requirements of the New York Stock Exchange;
(ss) each Real Property (as hereinafter defined) complies with all
applicable zoning laws, ordinances, regulations and deed restrictions or other
covenants in all material respects and, if and to the extent there is a failure
to comply, such failure does not materially impair the value of any of the Real
Property (as hereinafter defined) and will not result in a forfeiture or
reversion of title. The Company has not received from any Governmental Authority
having or claiming jurisdiction over the Real Properties any written notice of
any condemnation of or zoning change affecting the Real Property or any part
thereof, and the Company does not know of any such condemnation or zoning change
which is threatened and which if consummated could have a Material Adverse
Effect;
(tt) the Company has obtained Phase I and Phase II Environmental Audits
with respect to the Real Property as described in the Prospectus and, except as
otherwise disclosed in the Prospectus or in the Phase I or Phase II
Environmental Audits previously delivered to the Underwriters (the "Audits"),
(i) neither the Company nor any Subsidiary nor, to the knowledge of the Company,
any other owners of the property at any time or any other party has at any time,
handled, stored, treated, transported, manufactured, spilled, leaked, or
discharged, dumped, transferred or otherwise disposed of or dealt with,
Hazardous Materials (as hereinafter defined) on, to or from any real property
owned or to be owned by the Company or a Subsidiary upon consummation of the
Formation Transactions (collectively, the "Real Property"), other than by any
such action taken in material compliance with all applicable Environmental
Statutes (as hereinafter defined) or by the Company, any of the Subsidiaries or
any other party in connection with the ordinary use of residential, retail or
commercial properties owned by the Company or any Subsidiary; (ii) the Company
and the Subsidiaries do not intend to use the Real Property or any subsequently
acquired properties for the purpose of handling, storing, treating,
transporting, manufacturing, spilling, leaking, discharging, dumping,
transferring or otherwise disposing of or dealing with Hazardous Materials other
than by any such action taken in compliance with all applicable Environmental
Statues or by the Company, any of the Subsidiaries or any other party in
connection with the ordinary use of residential, retail or commercial properties
owned by the Company or any Subsidiary; (iii) the Company does not know of any
seepage, leak, discharge, release, emission, spill, or dumping of Hazardous
Materials into waters on or adjacent to the Real Property or any other real
property owned or occupied by any such party, or onto lands from which Hazardous
Materials might seep, flow or drain into such waters; (iv) the Company has not
received any notice of, and or has no knowledge of, any occurrence or
circumstance which, with notice or passage of time or both, would give rise to a
claim under or pursuant to any U.S. federal, state or local environmental
statute or regulation or under common law, pertaining to Hazardous Materials on
or originating from any of the Real Property or arising out of the conduct of
any such party, including without limitation a claim under or pursuant to any
Environmental Statute (hereinafter defined); and (v) neither the Real Property
is included or, to the Company's knowledge, is proposed for inclusion on the
National Priorities List issued pursuant to CERCLA (as hereinafter defined) by
the United States Environmental Protection Agency (the "EPA") or, to the
Company's knowledge, proposed for inclusion on any similar list or inventory
issued pursuant to any other Environmental Statute or issued by any other
Governmental Authority;
As used herein, "Hazardous Material" shall include, without limitation,
any flammable explosives, radioactive materials, hazardous materials, hazardous
wastes, toxic substances, or related materials, asbestos or any hazardous
material as defined by any U.S. federal, state or local environmental law,
ordinance, rule or regulation including without limitation the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended, 42
U.S.C. Sections 9601-9675 ("CERCLA"), the Hazardous Materials Transportation
Act, as amended, 49 U.S.C. Sections 1801-1819, the Resource Conservation and
Recovery Act, as amended, 42 U.S.C. Sections 6901-6992K, the Emergency Planning
and Community Right-to-Know Act of 1986, 42 U.S.C. Sections 11001-11050, the
12
Toxic Substances Control Act, 15 U.S.C. Sections 2601-2671, the Federal
Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. Sections 136-136y, the
Clean Air Act, 42 U.S.C. Sections 7401-7642, the Clean Water Act (Federal Water
Pollution Control Act), 33 U.S.C. Sections 1251-1387, the Safe Drinking Water
Act, 42 U.S.C. Sections 300f-300j-26, and the Occupational Safety and Health
Act, 29 U.S.C. Sections 651-678, as any of the above statutes may be amended
from time to time, and in the regulations promulgated pursuant to each of the
foregoing (individually, an "Environmental Statute") or by any Governmental
Authority;
(uu) none of the entities that prepared Phase I or Phase II
Environmental Audits or other environmental assessments with respect to the Real
Property was employed for such purpose on a contingent basis or has any
substantial interest in the Company or any of the Subsidiaries, and none of the
directors, officers or employees is connected with the Company or any of the
Subsidiaries as a promoter, selling agent, trustee, officer, director or
employee;
(vv) the Company has not distributed and will not distribute any
Prospectus or other offering material in connection with the offer and sale of
the Shares;
(ww) except as disclosed in the Prospectus, the Company has not incurred
any liability for any finder's fees or similar payments in connection with the
transactions herein contemplated;
(xx) no relationship, direct or indirect, exists between or among the
Company or any of the Subsidiaries on the one hand, and the directors, officers,
stockholders, customers or suppliers of the Company or any of the Subsidiaries
on the other hand, which is required by the Securities Act and the Securities
Act Regulations to be described in the Registration Statement and the Prospectus
and which is not so described;
(yy) neither the Company nor any of the Subsidiaries is or, after giving
effect to the offering and sale of the Shares, will be, an "investment company"
or an entity "controlled" by an "investment company", as such terms are defined
in the Investment Company Act of 1940, as amended (the "Investment Company
Act");
(zz) there are no existing or, to the knowledge of the Company or any of
the Subsidiaries, threatened labor disputes with the employees of the Company or
any of the Subsidiaries which are likely to have a Material Adverse Effect;
(aaa) the Company has not offered, or caused the Underwriters to offer,
Shares to any person pursuant to the Directed Share Program with the specific
intent to unlawfully influence (i) a customer or supplier of the Company to
alter the customer's or supplier's level or type of business with the Company or
(ii) a trade journalist or publication to write or publish favorable information
about the Company or its products; and
(bbb) the Company will properly and timely elect to be taxed as a real
estate investment trust (a "REIT") under the Code commencing with the taxable
year ending December 31, 2003 and the Company will be organized and operated in
conformity with the requirements for qualification as a REIT under the Code and
the proposed method of operation of the Company and the Subsidiaries will enable
the Company to meet the requirements for taxation as a REIT under the Code; and
the Operating Partnership is treated as a partnership for U.S. federal income
tax purposes and not as a corporation or association taxable as a corporation;
the Company intends to continue to qualify as a REIT under the Code for all
subsequent years, and the Company does not know of any event that could
reasonably be expected to cause the Company to fail to qualify as a REIT under
the Code at any time.
13
4. Certain Covenants:
The Company and the Operating Partnership hereby, jointly and severally,
agree with each Underwriter:
(a) to furnish such information as may be required and otherwise to
cooperate in qualifying the Shares for offering and sale under the securities or
"blue sky" laws of such jurisdictions (both domestic and foreign) as the
Representative may designate and to maintain such qualifications in effect as
long as requested by the Representative for the distribution of the Shares,
provided that neither the Company nor any of the Subsidiaries shall be required
to qualify as a foreign corporation or other entity or to consent to the service
of process under the laws of any such state;
(b) if, at the time this Agreement is executed and delivered, it is
necessary for a post-effective amendment to the Registration Statement to be
declared effective before the offering of the Shares may commence, the Company
will endeavor to cause such post-effective amendment to become effective as soon
as possible and will advise the Representative promptly and, if requested by the
Representative, will confirm such advice in writing, when such post-effective
amendment has become effective;
(c) to prepare the Prospectus in a form approved by the Underwriters and
file such Prospectus (or a term sheet as permitted by Rule 434) with the
Commission pursuant to Rule 424(b) under the Securities Act within the time
period set forth in Rule 424(b) and to furnish promptly (and with respect to the
initial delivery of such Prospectus, not later than the second business day
following the execution and delivery of this Agreement or on such other day as
the parties may mutually agree) to the Underwriters copies of the Prospectus (or
of the Prospectus as amended or supplemented if the Company shall have made any
amendments or supplements thereto after the effective date of the Registration
Statement) in such quantities and at such locations as the Underwriters may
reasonably request for the purposes contemplated by the Securities Act
Regulations, which Prospectus and any amendments or supplements thereto
furnished to the Underwriters will be identical to the version created to be
transmitted to the Commission for filing via ▇▇▇▇▇, except to the extent
permitted by Regulation S-T;
(d) to advise the Representative promptly and (if requested by the
Representative) to confirm such advice in writing, when any post-effective
amendment to the Registration Statement becomes effective under the Securities
Act Regulations;
(e) to advise the Representative immediately, confirming such advice in
writing, of (i) the receipt of any comments from, or any request by, the
Commission for amendments or supplements to the Registration Statement or
Prospectus or for additional information with respect thereto, or (ii) the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement or of any order preventing or suspending the use of any
Preliminary Prospectus or the Prospectus, or of the suspension of the
qualification of the Shares for offering or sale in any jurisdiction, or of the
initiation or threatening of any proceedings for any of such purposes and, if
the Commission or any Governmental Authority should issue any such order, to
make every reasonable effort to obtain the lifting or removal of such order as
soon as possible and to advise the Representative promptly of the lifting or
removal of such order; to advise the Representative promptly of any proposal to
amend or supplement the Registration Statement or Prospectus and, unless
required by law, to file no such amendment or supplement to which the
Representative shall reasonably object in writing;
(f) to furnish to the Representative for a period of two years from the
date of this Agreement (i) copies of all annual, quarterly and current reports
or other communications supplied to holders of shares of Common Stock, (ii)
copies of all reports filed by the Company with the NASD or copies of any
14
material reports filed by the Company with any securities exchange, and (iii)
such other publicly available information as the Representative may reasonably
request regarding the Company and the Subsidiaries;
(g) if, within the time during which a Prospectus relating to the Shares
is required to be delivered under the Securities Act Regulations, it is
necessary to amend or supplement the Prospectus to comply with any law and,
during such time, to promptly prepare and furnish to the Underwriters copies of
the proposed amendment or supplement before filing any such amendment or
supplement with the Commission and thereafter promptly furnish at the Company's
own expense to the Underwriters and to dealers, copies in such quantities and at
such locations as the Representative may from time to time reasonably request of
an appropriate supplement to the Prospectus so that the Prospectus as so amended
or supplemented will not, in the light of the circumstances when it is so
delivered, be misleading, or so that the Prospectus will comply with the
Securities Act and the Securities Act Regulations;
(h) to file promptly with the Commission any amendment to the
Registration Statement or the Prospectus or any supplement to the Prospectus
that may, in the judgment of the Company or the Representative, be required by
the Securities Act or requested by the Commission;
(i) prior to filing with the Commission any amendment to the
Registration Statement or supplement to the Prospectus or any Prospectus
pursuant to Rule 424 under the Securities Act, to furnish a copy thereof to the
Underwriters and counsel for the Underwriters and obtain the consent of the
Representative to the filing, which consent will not be unreasonably withheld;
(j) to furnish promptly to the Representative a copy of the Registration
Statement, as initially filed with the Commission, and of all amendments or
supplements thereto (including all exhibits filed therewith or incorporated by
reference therein) and such number of conformed copies of the foregoing as the
Representative may reasonably request;
(k) to furnish to the Representative, not less than two full business
days before filing with the Commission subsequent to the effective date of the
Prospectus and during the period referred to in subsection (g) above, a copy of
any document proposed to be filed with the Commission pursuant to Section 13,
14, or 15(d) of the Exchange Act and during such period to file all such
documents in the manner and within the time periods required by the Exchange Act
and the Exchange Act Regulations;
(l) to apply the net proceeds of the sale of the Shares in accordance
with the statements under the caption "Use of Proceeds" in the Prospectus;
(m) to make generally available to its security holders as soon as
practicable, but in any event not later than the end of the fiscal quarter first
occurring after the first anniversary of the effective date of the Registration
Statement, an earnings statement complying with the provisions of Section 11(a)
of the Securities Act (in such form, at the option of the Company, as complies
with Rule 158 of the Securities Act Regulations,) covering a period of 12 months
beginning after the effective date of the Registration Statement;
(n) to use its best efforts to maintain the listing of the Shares on the
New York Stock Exchange and to file with the New York Stock Exchange all
documents and notices required by the New York Stock Exchange of companies that
have securities that are listed on the New York Stock Exchange;
(o) to engage and maintain, at its expense, a registrar and transfer
agent for the Shares;
(p) to refrain during a period of 180 days from the date of the
Prospectus, without the prior written consent of the Representative, from,
directly or indirectly, (i) offering, selling, contracting to sell,
15
selling any option or contract to purchase, purchasing any option or contract to
sell, granting any option for the sale of, or otherwise disposing of or
transferring (or entering into any transaction or device which is designed to,
or could be expected to, result in the disposition by any person at any time in
the future of) any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock, or filing any registration
statement under the Securities Act with respect to any of the foregoing, or (ii)
entering into any swap or any other agreement or any transaction that transfers,
in whole or in part, directly or indirectly, the economic consequence of
ownership of the Common Stock, whether any such swap or transaction described in
clause (i) or (ii) above is to be settled by delivery of Common Stock or such
other securities, in cash or otherwise. The foregoing sentence shall not apply
to (A) the Shares to be sold hereunder, (B) the Warrants or Warrant Shares or
(C) any shares of Common Stock issued by the Company pursuant to the Company's
2003 Omnibus Stock Incentive Plan or in connection with acquisitions of real
property or other investments;
(q) the Company will comply with the terms of the Warrant Agreement;
(r) not to, and to use its best efforts to cause its officers, directors
and affiliates not to, (i) take, directly or indirectly prior to termination of
the underwriting syndicate contemplated by this Agreement, any action designed
to stabilize or manipulate the price of any security of the Company, or which
may cause or result in, or which might in the future reasonably be expected to
cause or result in, the stabilization or manipulation of the price of any
security of the Company, to facilitate the sale or resale of any of the Shares,
(ii) except as provided herein or in the letter agreement dated July 30, 2003,
as amended on November 21, 2003, between the Company and the Representative (the
"Engagement Letter"), pay anyone any compensation for soliciting purchases of
the Shares or (iii) pay or agree to pay to any person any compensation for
soliciting any order to purchase any other securities of the Company;
(s) to cause each officer and director of the Company, Barcelo Crestline
Corporation, Brahman Capital Corporation and Libra Advisors LLC to furnish to
the Representative, prior to the first Date of Delivery, a letter agreement,
substantially in the form of Exhibit A hereto, pursuant to which each such
person shall agree not to, directly or indirectly, (1) offer for sale, sell,
pledge or otherwise dispose of (or enter into any transaction or device which is
designed to, or could be expected to, result in the disposition by any person at
any time in the future of) any shares of Common Stock or securities convertible
into or exchangeable for Common Stock or (2) enter into any swap or other
derivatives transaction that transfers to another, in whole or in part, any of
the economic benefits or risks of ownership of such shares of Common Stock,
whether any such transaction described in clause (1) or (2) above is to be
settled by delivery of Common Stock or other securities, in cash or otherwise,
in each case for a period of 180 days from the date of the Prospectus, without
the prior written consent of the Representative on behalf of the Underwriters;
(t) that the Company shall maintain directors and officers liability
insurance in the minimum amount of $5 million for a period of at least one year
following the offering;
(u) if at any time during the 30-day period after the Registration
Statement becomes effective, any rumor, publication or event relating to or
affecting the Company shall occur as a result of which, in the reasonable
opinion of the Representative, the market price of the Common Stock has been or
is likely to be materially affected (regardless of whether such rumor,
publication or event necessitates a supplement to or amendment of the
Prospectus) and after written notice from the Representative advising the
Company to the effect set forth above, to forthwith prepare, consult with the
Representative concerning the substance of, and disseminate a press release or
other public statement, reasonably satisfactory to the Representative,
responding to or commenting on such rumor, publication or event;
16
(v) that the Company will comply with all of the provisions of any
undertakings in the Registration Statement;
(w) the Company and the Operating Partnership will continue to use their
best efforts to meet the requirements to qualify as a REIT and a partnership,
respectively, under the Code, unless otherwise determined by the Company's Board
of Directors;
(x) that the Company (i) will comply with all applicable securities and
other applicable laws, rules and regulations, including without limitation, the
rules and regulations of the NASD, in each jurisdiction in which the Directed
Shares are offered in connection with the Directed Share Program and (ii) will
pay all reasonable fees and disbursements of counsel incurred by the
Underwriters in connection with the Directed Share Program and any stamp duties,
similar taxes or duties or other taxes, if any, incurred by the Underwriters in
connection with the Directed Share Program; and
(y) before acquisition of any Real Property described in the Prospectus,
to the extent the Company or any Subsidiary becomes aware of any condition that
could reasonably be expected to result in liability associated with the presence
or release of a Hazardous Material, or any violation or potential violation of
any Environmental Statute, the Company and the Subsidiary, as the case may be,
shall take all commercially reasonable action necessary or advisable (including
any capital improvements) for clean-up, closure or other compliance with such
Environmental Statute with respect to such Real Property.
5. Payment of Expenses:
The Company and the Operating Partnership agree to pay all costs and
expenses incident to the performance of their obligations under this Agreement
and the Warrant Agreement whether or not the transactions contemplated hereunder
or thereunder are consummated or this Agreement and the Warrant Agreement are
terminated, including expenses and fees in connection with (i) the preparation
and filing of the Registration Statement, each Preliminary Prospectus, the
Prospectus, and any amendments or supplements thereto, and the printing and
furnishing of copies of each thereof to the Underwriters and to dealers
(including costs of mailing and shipment), (ii) the preparation, issuance and
delivery of the certificates for the Shares to the Underwriters, including any
stock or other transfer taxes or duties payable upon the sale of the Shares to
the Underwriters (other than transfer taxes on resales by the Underwriters),
(iii) the printing of this Agreement and any dealer agreements and furnishing of
copies of each to the Underwriters and to dealers (including costs of mailing
and shipment), (iv) the qualification of the Shares for offering and sale under
state laws that the Company and the Representative have mutually agreed are
appropriate and the determination of their eligibility for investment under
state law as aforesaid (including the reasonable legal fees and filing fees and
other disbursements of counsel for the Underwriters and the printing and
furnishing of copies of any "blue sky" surveys or legal investment surveys to
the Underwriters and to dealers), (v) filing for review of the public offering
of the Shares by the NASD (including the legal fees and filing fees and other
disbursements of counsel for the Underwriters relating thereto), (vi) the fees
and expenses of any transfer agent or registrar for the Shares and miscellaneous
expenses referred to in the Registration Statement, (vii) the fees and expenses
incurred in connection with the inclusion of the Shares in the New York Stock
Exchange, (viii) making road show presentations with respect to the offering of
the Shares, (ix) preparing and distributing bound volumes of transaction
documents for the Representative and its legal counsel and (x) the performance
of the Company's and the Operating Partnership's other obligations hereunder.
Upon the request of the Representative, the Company will provide funds in
advance for filing fees.
17
6. Conditions of the Underwriters' Obligations:
(a) The obligations of the Underwriters hereunder to purchase Shares at
the Closing Time or on each Date of Delivery, as applicable, are subject to the
accuracy of the representations and warranties on the part of the Company and
the Operating Partnership hereunder on the date hereof and at the Closing Time
and on each Date of Delivery, as applicable, the performance by the Company and
the Operating Partnership of their respective obligations hereunder and to the
satisfaction of the following further conditions at the Closing Time or on each
Date of Delivery, as applicable:
(b) The Company shall furnish to the Underwriters at the Closing Time
and on each Date of Delivery an opinion of Hunton & ▇▇▇▇▇▇▇▇ LLP, counsel for
the Company, addressed to the Underwriters and dated the Closing Time and each
Date of Delivery and in form and substance satisfactory to ▇▇▇▇▇▇▇▇ Chance US
LLP, counsel for the Underwriters, to the effect that:
(i) to such counsel's knowledge, the outstanding shares of
capital stock of or partnership interests, membership interests or other
equity interests, as the case may be, in the Subsidiaries, other than
those formed in Maryland, have been duly and validly authorized and
issued and in the case of equity interests in Subsidiaries organized as
corporations, are fully paid and nonassessable, and all of the
outstanding shares of capital stock of or partnership interests,
membership interests or other equity interests, as the case may be, in
the Subsidiaries (other than the Operating Partnership) are owned of
record as set forth in an exhibit to such opinion; except as disclosed
in the Prospectus, to such counsel's knowledge, there are no outstanding
(i) securities or obligations of the Company or any of the Subsidiaries
convertible into or exchangeable for any capital stock, partnership
interests, membership interests or other equity interests, as the case
may be, in the Company or any Subsidiary, other than those formed in
Maryland, or (ii) obligations of the Company or any such Subsidiary,
other than those formed in Maryland, to issue any such securities or
obligations;
(ii) each of the Subsidiaries, other than those formed in
Maryland, has been duly incorporated or organized and is validly
existing as a corporation, general or limited partnership or limited
liability company, as the case may be, in good standing under the laws
of its jurisdiction of incorporation or organization with the corporate,
partnership or limited liability company power and authority to own its
properties and to conduct its respective businesses as described in the
Prospectus and in the case of the Operating Partnership, to execute and
deliver this Agreement and the Other Transaction Documents described on
a schedule to the opinion (to the extent a party thereto) and to
consummate the transactions described in each such agreement;
(iii) each of the Company and the Subsidiaries is duly qualified
and is in good standing in each jurisdiction set forth in an exhibit to
such opinion; except as disclosed in the Prospectus or the Registration
Statement, and as may be prohibited or restricted by applicable law, to
such counsel's knowledge, no Subsidiary is prohibited or restricted,
directly or indirectly, from paying dividends to, or from making any
other distribution with respect to such Subsidiary's capital stock,
partnership interests, membership interests or other equity interests,
as the case may be, or from repaying to the Company or any other
Subsidiary any amounts which may from time to time become due under any
loans or advances to such Subsidiary from the Company or such other
Subsidiary, or from transferring any such Subsidiary's property or
assets to the Company or to any other Subsidiary; to such counsel's
knowledge, other than as disclosed in the Registration Statement, the
Company does not own, directly or indirectly, any capital stock or other
equity securities of any other corporation or any ownership interest in
any partnership, limited liability company or other entity;
18
(iv) to such counsel's knowledge, the Company and the Operating
Partnership are in compliance with published laws relating to their
business as described in the Prospectus except for such non-compliance
as would not have a Material Adverse Effect;
(v) to such counsel's knowledge, (A) neither the Company nor any
of its Subsidiaries is in violation of its charter or by-laws, and (B)
no default by the Company or any of its Subsidiaries exists in the
Company's performance or observance of any obligation, agreement,
covenant or condition of the Company contained in the Other Transaction
Documents described on a schedule to the opinion, except in each case,
for such violations or defaults which would not have a Material Adverse
Effect;
(vi) the execution, delivery and performance of this Agreement,
and the Warrant Agreement and the Other Transaction Documents described
on a schedule to the opinion by the Company (to the extent a party
thereto) and the Operating Partnership (to the extent a party thereto)
and the consummation by the Company and the Operating Partnership (to
the extent a party thereto) of the transactions contemplated by this
Agreement and, the Warrant Agreement and the Other Transaction Documents
described in a schedule to the opinion do not and will not (A) conflict
with, or result in any breach of, or constitute a default under (nor
constitute any event which with notice, lapse of time, or both would
constitute a breach of or default under), (i) any provisions of the
articles of incorporation, or by-laws of the Company or the partnership
agreement or certificate of limited partnership of the Operating
Partnership, (ii) the Other Transaction Documents, described on a
schedule to the opinion, (iii) to such counsel's knowledge, any law or
regulation binding upon or applicable to the Company or the Operating
Partnership or (iv) to such counsel's knowledge, any decree, judgment or
order applicable to the Company or the Operating Partnership or (B) to
such counsel's knowledge, result in the creation or imposition of any
lien, charge, claim or encumbrance upon any property or assets of the
Company or the Operating Partnership, except such conflicts, breaches or
defaults that are described in the Prospectus or could not reasonably be
expected to have a Material Adverse Effect;
(vii) this Agreement has been duly authorized, executed and
delivered by the Company and the Operating Partnership and is a legal,
valid and binding agreement of the Company and the Operating Partnership
enforceable in accordance with its terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally, and by general principles of
equity, and except to the extent that the indemnification and
contribution provisions of Section 9 of this Agreement may be limited by
U.S. federal or state securities laws and public policy considerations
in respect thereof;
(viii) no approval, authorization, consent or order of or filing
with any Governmental Authority is required in connection with the
execution, delivery and performance of this Agreement and the Warrant
Agreement, the consummation of the transactions contemplated herein or
therein by the Company and the Operating Partnership (to the extent a
party thereto), and the sale and delivery of the Shares by the Company
as contemplated herein, other than such as have been obtained or made
under the Securities Act and the Securities Act Regulations and the
Exchange Act and Exchange Act Regulations, and except that such counsel
need express no opinion as to any necessary qualification under the
state securities or "blue sky" laws of the various jurisdictions in
which the Shares are being offered by the Underwriters or with the
National Association of Securities Dealers, Inc.;
19
(ix) the Company is not subject to registration as an investment
company under the Investment Company Act and the offering and sale of
the Shares will not cause the Company to become an investment company
subject to registration under the Investment Company Act;
(x) the issuance of the OP Units described in the Prospectus has
been duly authorized and upon issuance in accordance with the terms of
the Partnership Agreement the OP Units described in the Prospectus will
be validly issued;
(xi) except as disclosed in the Prospectus, to such counsel's
knowledge, there are no persons with registration or other similar
rights to have any equity or debt securities, including securities that
are convertible into or exchangeable for equity securities, registered
pursuant to the Registration Statement or otherwise registered by the
Company under the Securities Act;
(xii) such counsel shall state that it has been advised that the
Registration Statement has become effective under the Securities Act and
no stop order suspending the effectiveness of the Registration Statement
has been issued and, to such counsel's knowledge, no proceedings with
respect thereto have been commenced or threatened;
(xiii) as of the effective date of the Registration Statement,
the Registration Statement and the Prospectus (except as to the
financial statements and other financial and statistical data contained
therein or required to be contained therein, as to which such counsel
need express no opinion) complied as to form in all material respects
with the requirements of the Securities Act and the Securities Act
Regulations;
(xiv) the descriptions of law and legal conclusions under the
captions "Risk Factors-Risks Related to Our Organization and Structure -
Our Failure to Qualify as a REIT under the Federal Tax Laws Will Result
in Adverse Tax Consequences," and "Recent Legislative Change May
Adversely Affect the Market Price of REIT Common Stock," and "Material
Federal Income Tax Considerations" in the Prospectus, are correct in all
material respects, and the discussions fairly summarize the federal
income tax considerations that are likely to be material to a holder of
Shares;
(xv) the 8-A Registration Statement complied as to form in all
material respects with the requirements of the Exchange Act; the 8-A
Registration Statement has become effective under the Exchange Act;
(xvi) to such counsel's knowledge, there are no actions, suits
or proceedings, inquiries, or investigations pending or threatened
against the Company or any of the Subsidiaries or any of their
respective officers and directors which are required to be described in
the Prospectus but are not so described;
(xvii) to such counsel's knowledge, there are no contracts or
documents of a character required to be filed as exhibits to the
Registration Statement or required to be described or summarized in the
Prospectus which have not been so filed, summarized or described; and
(xviii) the Company's organization and proposed method of
operation will enable it to qualify as a REIT pursuant to sections 856
through 860 of the Code for its taxable year ending December 31, 2003,
and in the future.
In addition, such counsel shall state that they have participated in
conferences with officers and other representatives of the Company, independent
public accountants of the Company, and
20
representatives of the Underwriters, at which the contents of the Registration
Statement and Prospectus were discussed and, although such counsel is not
passing upon and does not assume responsibility for the accuracy, completeness
or fairness of the statements contained in the Registration Statement or
Prospectus (except as and to the extent stated in subparagraph (xiv) above),
they have no reason to believe that the Registration Statement, as of the
effective date, or the Prospectus, as of its date, contained an untrue statement
of a material fact or omitted to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading (it being understood that, in each case, such counsel need
express no view with respect to the financial statements, schedules and other
financial and statistical data included in, or omitted from, the Registration
Statement or Prospectus).
In rendering such opinions, such counsel may limit its opinions to the
Delaware Revised Uniform Limited Partnership Act and the Delaware Limited
Liability Company Act (which for the purposes of rendering such opinions
includes all applicable case law) and the federal laws of the United States of
America and may rely on certificates of public officials and officers of the
Company.
(c) The Company shall furnish to the Underwriters at the Closing Time
and on each Date of Delivery an opinion of ▇▇▇▇▇▇▇ LLP, special Maryland counsel
for the Company, addressed to the Underwriters and dated the Closing Time and
each Date of Delivery and in form and substance satisfactory to ▇▇▇▇▇▇▇▇ Chance
US LLP, counsel for the Underwriters, stating that:
(i) the statements under the captions "Description of Common
Stock," and "Certain Provisions of Maryland Law and of our Charter and
Bylaws" in the Prospectus, insofar as such statements constitute
summaries of Maryland corporation law, constitute accurate summaries
thereof in all material respects;
(ii) the Company has an authorized capitalization as set forth
in the Prospectus under the caption "Capitalization";
(iii) the issuance of the Shares has been duly authorized and
when the Shares have been issued and duly delivered against payment
therefor as contemplated by this Agreement, the Shares will be validly
issued, fully paid and nonassessable and the Underwriters will acquire
good and marketable title to the Shares, free and clear of any pledge,
lien, encumbrance, security interest or other claim arising under the
Maryland General Corporation Law in connection with the issuance of the
Shares;
(iv) the issuance of the Warrants has been duly authorized and,
when issued and duly delivered to the Representative as contemplated by
the Warrant Agreement, the Warrants will constitute legal, valid and
binding obligations of the Company, enforceable in accordance with their
terms, except to the extent enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally and by general equitable principles; the
Warrant Shares have been duly reserved for issuance upon exercise of the
Warrants in accordance with the terms of the Warrant Agreement;
(v) the issuance and sale of the Shares, Warrants and the
Warrant Shares by the Company are not subject to preemptive or other
similar rights arising by operation of law, under the organizational
documents of the Company;
(vi) the Shares, the Warrants and the Warrant Shares conform in
all material respects to the descriptions thereof contained in the
Registration Statement and Prospectus;
21
(vii) the form of certificate used to represent the Common Stock
complies in all material respects with all applicable statutory
requirements, and with any applicable requirements of the organizational
documents of the Company;
(viii) the Company and the Subsidiaries incorporated in Maryland
have been duly incorporated and are validly existing and in good
standing under the laws of the state of Maryland with the requisite
power to own their respective properties and conduct their respective
businesses as described in the Prospectus under the caption "Our
Business and Properties";
(ix) except as disclosed in the Prospectus or the Registration
Statement, and as may be prohibited or restricted by applicable law, so
far as is known to us, no Subsidiary incorporated in Maryland is
prohibited or restricted, directly or indirectly, from paying dividends
to the Company, or from making any other distribution with respect to
such Subsidiary's stock, or from repaying to the Company or any other
Subsidiary any amounts which may from time to time become due under any
loans or advances to such Subsidiary from the Company or such other
Subsidiary, or from transferring any such Subsidiary's property or
assets to the Company or any other Subsidiary;
(x) the Company has full corporate power to enter into and
perform this Agreement, the Warrant Agreement and the Other Transaction
Documents and to consummate the transactions contemplated herein or
therein; this Agreement, the Warrant Agreement and the Other Transaction
Documents have been duly authorized, executed and delivered by the
Company and are legal, valid and binding agreements of the Company
enforceable in accordance with their respective terms, except as may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting creditors' rights generally, and by general equitable
principles, and except to the extent that the indemnification and
contribution provisions of Section 9 hereof may be limited by U.S.
federal or state securities laws and public policy considerations in
respect thereof; and
(xi) the statements under the caption "Description of Common
Stock" in the Prospectus, insofar as such statements constitute a
summary of legal matters referred to therein, constitute an accurate
summary thereof in all material respects.
(d) The Company shall furnish to the Underwriters at the Closing Time
and on each Date of Delivery an opinion of ▇▇▇▇▇ ▇. ▇. ▇▇▇▇▇▇, General Counsel
of the Company, addressed to the Underwriters and dated the Closing Time and
each Date of Delivery and in the form and substance satisfactory to ▇▇▇▇▇▇▇▇
Chance US LLP, counsel for the Underwriters stating that:
(i) the execution, delivery and performance of the Contribution
Agreements and the consummation of the transactions contemplated by the
Contribution Agreements do not and will not (A) conflict with, or result
in any breach of, or constitute a default under (nor constitute any
event which with notice, lapse of time, or both would constitute a
breach of or default under), (i) any provisions of the charter or
by-laws or other organizational documents of the Transferors pursuant to
the Contribution Agreements, (ii) any provision of any license,
indenture, mortgage, deed of trust, loan, credit or other agreement or
instrument known to such counsel to which a Transferor is a party or by
which any of such Transferor or its properties or assets may be bound or
affected, (iii) to such counsel's knowledge any law or regulation
binding upon or applicable to a Transferor or any of its properties or
assets or (iv) any decree, judgment or order applicable to a Transferor
or (B) to such counsel's knowledge result in the creation or imposition
of any lien, charge, claim or encumbrance upon any property or assets of
a Transferor; and
(ii) each Contribution Agreement has been duly authorized,
executed and delivered by each Transferor that is a party thereto and is
a legal, valid and binding agreement of such
22
Transferor enforceable in accordance with its terms, except as may be
limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally, and by general
principles of equity, and except that enforceability of the
indemnification and contribution provisions set forth in Section 9 of
this Agreement may be limited by U.S. federal or state securities laws
or public policy considerations in respect thereof.
(e) the Representative shall have received from KPMG LLP,
PricewaterhouseCoopers LLP and Deloitte & Touche LLP, letters dated,
respectively, as of the date of this Agreement, the Closing Time and each Date
of Delivery, as the case may be, addressed to the Representative, in form and
substance satisfactory to the Underwriters, relating to the financial
statements, including any pro forma financial statements, of the Company and the
Subsidiaries, and such other matters customarily covered by comfort letters
issued in connection with registered public offerings.
(f) The Representative shall have received at the Closing Time and on
each Date of Delivery the favorable opinion of ▇▇▇▇▇▇▇▇ Chance US LLP, dated the
Closing Time or such Date of Delivery, addressed to the Representative and in
form and substance satisfactory to the Representative.
(g) No amendment or supplement to the Registration Statement or
Prospectus shall have been filed to which the Underwriters shall have objected
in writing.
(h) Prior to the Closing Time and each Date of Delivery, no stop order
suspending the effectiveness of the Registration Statement or any order
preventing or suspending the use of any Preliminary Prospectus or Prospectus
shall have been issued, and no proceedings for such purpose shall have been
initiated or threatened, by the Commission, and no suspension of the
qualification of the Shares for offering or sale in any jurisdiction, or the
initiation or threatening of any proceedings for any of such purposes, shall
have occurred.
(i) All filings with the Commission required by Rule 424 under the
Securities Act to have been filed by the Closing Time shall have been made
within the applicable time period prescribed for such filing by such Rule.
(j) Between the time of execution of this Agreement and the Closing Time
or the relevant Date of Delivery there shall not have been any event which has
had a Material Adverse Effect, which in the Representative's judgment, makes it
impracticable or inadvisable to proceed with the public offering of the Shares
as contemplated by the Registration Statement.
(k) At the Closing Time, the Warrant Agreement shall have been executed
and delivered by the Company.
(l) The Shares shall have been approved for inclusion in the New York
Stock Exchange.
(m) The NASD shall not have raised any objection with respect to the
fairness and reasonableness of the underwriting terms and arrangements.
(n) The Representative shall have received lock-up agreements from each
officer and director, Barcelo Crestline Corporation, Brahman Capital Corporation
and Libra Advisors LLC in the form of Exhibit A attached hereto, and such
lock-up agreements shall be in full force and effect.
(o) The Company will, at the Closing Time and on each Date of Delivery,
deliver to the Underwriters a certificate of its Chief Executive Officer and
President and Chief Financial Officer, to the effect that:
23
(i) with respect to the representations and warranties of the
Company and the Operating Partnership in this Agreement qualified by
materiality or Material Adverse Effect, such representations and
warranties are true and correct, as if made on and as of the date hereof
and with respect to the representations and warranties of the Company
and the Operating Partnership in this Agreement that are not qualified
by materiality or Material Adverse Effect, such representations and
warranties are true and correct in all material respects, as if made on
and as of the date hereof, and the Company has complied with all the
agreements and satisfied in all material respects the conditions on its
part to be performed or satisfied at or prior to the date hereof;
(ii) to such officers' knowledge, no stop order suspending the
effectiveness of the Registration Statement or any post-effective
amendment thereto has been issued and no proceedings for that purpose
have been instituted or are pending or threatened under the Securities
Act;
(iii) the Registration Statement when it became effective and
the Prospectus as of its date did 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, in the light of the
circumstances under which they were made, not misleading; and, since the
effective date of the Registration Statement, there has occurred no
event required to be set forth in an amendment or supplemented
Prospectus which has not been so set forth;
(iv) subsequent to the respective dates as of which information
is given in the Registration Statement and Prospectus, there has not
been (a) any event which has had a Material Adverse Effect, (b) any
transaction that is material to the Company and the Subsidiaries
considered as one enterprise, except transactions entered into in the
ordinary course of business, (c) any obligation, direct or contingent,
that is material to the Company and the Subsidiaries considered as one
enterprise, incurred by the Company or the Subsidiaries, except
obligations incurred in the ordinary course of business, (d) any change
in the capital stock or outstanding indebtedness of the Company or any
Subsidiary that is material to the Company and the Subsidiaries
considered as one enterprise, (e) any dividend or distribution of any
kind declared, paid or made on the capital stock of the Company, or (f)
any loss or damage (whether or not insured) to the property of the
Company or any subsidiary which has been sustained which has had a
Material Adverse Effect; and
(v) each of Hunton & ▇▇▇▇▇▇▇▇ LLP and ▇▇▇▇▇▇▇▇ Chance US LLP is
entitled to rely on the officer's certificate in connection with the
opinions that each firm is rendering pursuant to this Agreement.
7. Termination:
The obligations of the several Underwriters hereunder shall be subject
to termination in the absolute discretion of the Representative, at any time
prior to the Closing Time or any Date of Delivery, (i) if any of the conditions
specified in Section 6 shall not have been fulfilled when and as required by
this Agreement to be fulfilled, or (ii) if there has been since the respective
dates as of which information is given in the Registration Statement, any event
which has had a Material Adverse Effect, or material change in management of the
Company or any Subsidiary, whether or not arising in the ordinary course of
business, or (iii) if there has occurred any outbreak or escalation of
hostilities or other national or international calamity or crisis or change in
economic, political or other conditions the effect of which on the financial
markets of the United States is such as to make it, in the reasonable judgment
of the Underwriters, impracticable to market the Shares or enforce contracts for
the sale of the Shares, or (iv) if trading in any securities of the Company has
been suspended by the Commission or by New York Stock Exchange, or if trading
generally on the New York Stock Exchange has been suspended (including an
automatic halt in trading pursuant to market-decline triggers, other than those
in which solely program trading is temporarily halted), or limitations on prices
for trading (other than limitations on hours or
24
numbers of days of trading) have been fixed, or maximum ranges for prices for
securities have been required, by such exchange or by order of the Commission or
any other Governmental Authority, or (v) any U.S. federal, state, local or
foreign statute, regulation, rule or order of any court or Governmental
Authority has been enacted, published, decreed or otherwise promulgated which,
in the reasonable opinion of the Representative, materially adversely affects or
will materially adversely affect the business or operations of the Company or
(vi) any action has been taken by any Governmental Authority or agency in
respect of its monetary or fiscal affairs which, in the reasonable opinion of
the Underwriters, has a material adverse effect on the securities markets in the
United States.
If the Representative elects to terminate this Agreement as provided in
this Section 7, the Company, the Operating Partnership and the Underwriters
shall be notified promptly by telephone, promptly confirmed by facsimile.
If the sale to the Underwriters of the Shares, as contemplated by this
Agreement, is not carried out by the Underwriters for any reason permitted under
this Agreement or if such sale is not carried out because the Company shall be
unable to comply in all material respects with any of the terms of this
Agreement, the Company shall not be under any obligation or liability under this
Agreement (except to the extent provided in Sections 5 and 9 hereof) and the
Underwriters shall be under no obligation or liability to the Company under this
Agreement (except to the extent provided in Section 9 hereof) or to one another
hereunder.
8. Increase in Underwriters' Commitments:
If any Underwriter shall default at the Closing Time or on a Date of
Delivery in its obligation to take up and pay for the Shares to be purchased by
it under this Agreement on such date, the Representative shall have the right,
within 36 hours after such default, to make arrangements for one or more of the
non-defaulting Underwriters, or any other underwriters, to purchase all, but not
less than all, of the Shares which such Underwriter shall have agreed but failed
to take up and pay for (the "Defaulted Shares"). Absent the completion of such
arrangements within such 36-hour period, (i) if the total number of Defaulted
Shares does not exceed 10% of the total number of Shares to be purchased on such
date, each non-defaulting Underwriter shall take up and pay for (in addition to
the number of Shares which it is otherwise obligated to purchase on such date
pursuant to this Agreement) the portion of the total number of Shares agreed to
be purchased by the defaulting Underwriter on such date in the proportion that
its underwriting obligations hereunder bears to the underwriting obligations of
all non-defaulting Underwriters and (ii) if the total number of Defaulted Shares
exceeds 10% of such total, the Representative may terminate this Agreement by
notice to the Company, without liability of any party to any other party except
that the provisions of Sections 5 and 9 hereof shall at all times be effective
and shall survive such termination.
If a new Underwriter or Underwriters are substituted for a defaulting
Underwriter in accordance with the foregoing provision, the Company or the
non-defaulting Underwriters shall have the right to postpone the Closing Time or
the relevant Date of Delivery for a period not exceeding five business days in
order that any necessary changes in the Registration Statement and Prospectus
and other documents may be effected.
The term "Underwriter" as used in this Agreement shall refer to and
include any Underwriter substituted under this Section 8 with the same effect as
if such substituted Underwriter had originally been named in this Agreement.
Nothing herein will relieve a defaulting Underwriter from liability for its
default.
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9. Indemnity and Contribution by the Company and the Underwriters:
(a) The Company and the Operating Partnership, jointly and severally, agree
to indemnify, defend and hold harmless each Underwriter and any person who
controls any Underwriter within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act, from and against any loss, expense,
liability, damage or claim (including the reasonable cost of investigation)
which, jointly or severally, any such Underwriter or controlling person may
incur under the Securities Act, the Exchange Act or otherwise, insofar as such
loss, expense, liability, damage or claim arises out of or is based upon (A) any
breach of any representation, warranty or covenant of the Company or the
Operating Partnership contained herein, (B) any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement (or
in the Registration Statement as amended by any post-effective amendment thereof
by the Company) or the Prospectus as amended or supplemented by the Company), or
(C) any omission or alleged omission to state a material fact required to be
stated in the Registration Statement or the Prospectus or necessary to make the
statements made therein (with respect to the Prospectus only, in the light of
the circumstances under which they were made) not misleading; except insofar as
any such loss, expense, liability, damage or claim arises out of or is based
upon any untrue statement or alleged untrue statement or omission or alleged
omission of a material fact contained in and in conformity with information
furnished in writing by the Underwriters through the Representative to the
Company expressly for use in such Registration Statement, Prospectus or
Application. The indemnity agreement set forth in this Section 9(a) shall be in
addition to any liability which the Company or the Operating Partnership may
otherwise have.
(b) If any action is brought against an Underwriter or controlling
person in respect of which indemnity may be sought against the Company pursuant
to subsection (a) above, such Underwriter shall promptly notify the Company in
writing of the institution of such action, and the Company shall assume the
defense of such action, including the employment of counsel and payment of
expenses; provided, however, that any failure or delay to so notify the Company
will not relieve the Company of any obligation hereunder, except to the extent
that its ability to defend is actually impaired by such failure or delay. Such
Underwriter or controlling person shall have the right to employ its or their
own counsel in any such case, but the fees and expenses of such counsel shall be
at the expense of such Underwriter or such controlling person unless the
employment of such counsel shall have been authorized in writing by the Company
in connection with the defense of such action, or the Company shall not have
employed counsel reasonably satisfactory to the Underwriter or controlling
person, as the case may be, to have charge of the defense of such action within
a reasonable time or such indemnified party or parties shall have reasonably
concluded (based on the advice of counsel) that there may be defenses available
to it or them which are different from or additional to those available to the
Company (in which case the Company shall not have the right to direct the
defense of such action on behalf of the indemnified party or parties), in any of
which events such fees and expenses shall be borne by the Company and paid as
incurred (it being understood, however, that the Company shall not be liable for
the expenses of more than one separate firm of attorneys for the Underwriters or
controlling persons in any one action or series of related actions in the same
jurisdiction (other than local counsel in any such jurisdiction) representing
26
the indemnified parties who are parties to such action). Anything in this
paragraph to the contrary notwithstanding, the Company shall not be liable for
any settlement of any such claim or action effected without its consent.
(c) Each Underwriter agrees, severally and not jointly, to indemnify,
defend and hold harmless the Company, the Operating Partnership, the Company's
directors, the Company's officers that signed the Registration Statement, and
any person who controls the Company within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, from and against any loss,
expense, liability, damage or claim (including the reasonable cost of
investigation) which, jointly or severally, the Company, or any such person may
incur under the Securities Act, the Exchange Act or otherwise, but only insofar
as such loss, expense, liability, damage or claim arises out of or is based upon
(A) any untrue statement or alleged untrue statement of a material fact
contained in and in conformity with information furnished in writing by such
Underwriters through the Representative to the Company expressly for use in the
Registration Statement (or in the Registration Statement as amended by any
post-effective amendment thereof by the Company) or the Prospectus, or (B) any
omission or alleged omission to state a material fact in connection with such
information required to be stated either in such Registration Statement or the
Prospectus or necessary to make such information, in the light of the
circumstances under which made, not misleading. The statements set forth in the
paragraphs under the caption "Underwriting" in the Preliminary Prospectus and
the Prospectus (to the extent such statements relate to the Underwriters)
constitute the only information furnished by or on behalf of any Underwriter
through the Representative to the Company for purposes of Section 3(p) and this
Section 9. The indemnity agreement set forth in this Section 9(c) shall be in
addition to any liabilities that such Underwriter may otherwise have.
(d) If any action is brought against the Company, or any such person in
respect of which indemnity may be sought against any Underwriter pursuant to the
foregoing paragraph, the Company, or such person shall promptly notify the
Representative in writing of the institution of such action and the
Representative, on behalf of the Underwriters, shall assume the defense of such
action, including the employment of counsel and payment of expenses. The
Company, or such person shall have the right to employ its own counsel in any
such case, but the fees and expenses of such counsel shall be at the expense of
the Company, or such person unless the employment of such counsel shall have
been authorized in writing by the Representative, with respect to the Company,
or the Company, with respect to any such person, in connection with the defense
of such action or the Representative or the Company shall not have employed
counsel to have charge of the defense of such action within a reasonable time or
such indemnified party or parties shall have reasonably concluded (based on the
advice of counsel) that there may be defenses available to it or them which are
different from or additional to those available to the Underwriters (in which
case the Representative shall not have the right to direct the defense of such
action on behalf of the indemnified party or parties), in any of which events
such fees and expenses shall be borne by such Underwriter and paid as incurred
(it being understood, however, that the Underwriters shall not be liable for the
expenses of more than one separate firm of attorneys in any one action or series
of related actions in the same jurisdiction (other than local counsel in any
such jurisdiction) representing the indemnified parties who are parties to such
action). Anything in this paragraph to the contrary notwithstanding, no
Underwriter shall be liable for any settlement of any such claim or action
effected without the written consent of the Representative.
(e) If the indemnification provided for in this Section 9 is unavailable
or insufficient to hold harmless an indemnified party under subsections (a), (b)
and (c) of this Section 9 in respect of any losses, expenses, liabilities,
damages or claims referred to therein, then each applicable indemnifying party,
in lieu of indemnifying such indemnified party, shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, expenses,
liabilities, damages or claims (i) in such proportion as is appropriate to
reflect the relative benefits received by the Company, and the Underwriters from
the offering of the Shares or (ii) if (but only if) the allocation provided by
clause (i) above is not permitted by
27
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, and of the Underwriters in connection with the statements or
omissions which resulted in such losses, expenses, liabilities, damages or
claims, as well as any other relevant equitable considerations. The relative
benefits received by the Company, and the Underwriters shall be deemed to be in
the same proportion as the total proceeds from the offering (net of underwriting
discounts and commissions but before deducting expenses) received by the Company
bear to the underwriting discounts and commissions received by the Underwriters.
The relative fault of the Company, and of the Underwriters shall be determined
by reference to, among other things, whether the untrue statement or alleged
untrue statement of a material fact or omission or alleged omission relates to
information supplied by the Company, or by the Underwriters and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The amount paid or payable by a party as a
result of the losses, claims, damages and liabilities referred to above shall be
deemed to include any legal or other fees or expenses reasonably incurred by
such party in connection with investigating or defending any claim or action.
(f) The Company, the Operating Partnership 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 the Underwriters were treated
as one entity for such purpose) or by any other method of allocation which does
not take account of the equitable considerations referred to in subsection
(e)(i) and, if applicable (ii), above. Notwithstanding the provisions of this
Section 9, no Underwriters shall be required to contribute any amount in excess
of the underwriting discounts and commissions applicable to the Shares purchased
by such Underwriter. 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 in proportion to their respective underwriting commitments
and not joint.
(g) The Company and the Operating Partnership, jointly and severally,
agree to indemnify and hold harmless each Underwriter and its affiliates and
each person, if any, who controls each Underwriter and its affiliates within the
meaning of either Section 15 of the Securities Act or Section 20 of the Exchange
Act, from and against any and all losses, claims, damages and liabilities
(including, without limitation, any legal or other expenses reasonably incurred
in connection with defending or investigating any such action or claim) (i)
caused by any untrue statement or alleged untrue statement of a material fact
contained in any material prepared by or with the express consent of the Company
for distribution to participants in connection with the Directed Share Program,
or caused by any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading; (ii) as a result of the failure of any participant to pay for and
accept delivery of Directed Shares that the participant has agreed to purchase;
or (iii) related to, arising out of, or in connection with the Directed Share
Program.
10. Survival:
The indemnity and contribution agreements contained in Section 9 and the
covenants, warranties and representations of the Company and the Operating
Partnership contained in Sections 3, 4 and 5 of this Agreement shall remain in
full force and effect regardless of any investigation made by or on behalf of
any Underwriter, or any person who controls any Underwriter within the meaning
of Section 15 of the Securities Act or Section 20 of the Exchange Act, or by or
on behalf of the Company, its directors and officers, or any person who controls
the Company within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act, and shall survive any termination of this Agreement or the
sale and delivery of the Shares. The Engagement Letter shall survive the
execution, delivery, performance and termination of this Agreement (except as
otherwise provided therein) and the Company agrees to the appointment of the
Representative contained in Section 2 thereof. The Company, the Operating
28
Partnership and each Underwriter agree promptly to notify the others of the
commencement of any litigation or proceeding against it and, in the case of the
Company or the Operating Partnership, against any of their respective officers
or directors, in connection with the sale and delivery of the Shares, or in
connection with the Registration Statement or Prospectus.
11. Notices:
Except as otherwise herein provided, all statements, requests, notices
and agreements shall be in writing or by telegram and, if to the Underwriters,
shall be sufficient in all respects if delivered to Friedman, Billings, ▇▇▇▇▇▇ &
Co., Inc., ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention:
Syndicate Department; if to the Company, shall be sufficient in all respects if
delivered to the Company at the offices of the Company at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: President, with a copy to the
General Counsel.
12. Governing Law; Headings:
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE COMMONWEALTH OF VIRGINIA, WITHOUT REGARD TO CONFLICTS OF LAW
PRINCIPLES. The section headings in this Agreement have been inserted as a
matter of convenience of reference and are not a part of this Agreement.
13. Parties at Interest:
The Agreement herein set forth has been and is made solely for the
benefit of the Underwriters, the Company, the Operating Partnership and the
controlling persons, directors and officers referred to in Sections 9 and 10
hereof, and their respective successors, assigns, executors and administrators.
No other person, partnership, association or corporation (including a purchaser,
as such purchaser, from any of the Underwriters) shall acquire or have any right
under or by virtue of this Agreement.
14. Counterparts and Facsimile Signatures:
This Agreement may be signed by the parties in counterparts which
together shall constitute one and the same agreement among the parties. A
facsimile signature shall constitute an original signature for all purposes.
[Signature page follows.]
29
If the foregoing correctly sets forth the understanding among the
Company, the Operating Partnership and the Underwriters, please so indicate in
the space provided below for the purpose, whereupon this Agreement shall
constitute a binding agreement among the Company, the Operating Partnership and
the Underwriters.
Very truly yours,
HIGHLAND HOSPITALITY CORPORATION
By:
------------------------------------------------
Name:
Title: President and Chief Executive Officer
HIGHLAND HOSPITALITY, L.P.
By: HHC GP CORPORATION
Its General Partner
By:
---------------------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
Accepted and agreed to as
of the date first above written:
FRIEDMAN, BILLINGS, ▇▇▇▇▇▇ & CO., INC.
For itself and as Representative of the other
Underwriters named on Schedule I hereto
By:
-----------------------------------------
Name:
Title:
30
Schedule I
----------
Number of Initial
Underwriters Shares to be Purchased
Friedman, Billings, ▇▇▇▇▇▇ & Co., Inc. [ ]
Deutsche Bank Securities Inc. [ ]
▇▇▇▇▇▇▇ ▇▇▇▇▇ & Associates, Inc. [ ]
Total [ ]
S-1
Exhibit A
---------
December __, 2003
Friedman, Billings, ▇▇▇▇▇▇ & Co., Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Dear Sirs:
The undersigned understands that Friedman, Billings, ▇▇▇▇▇▇ & Co., Inc.
(the "Representative") proposes to enter into an Underwriting Agreement (the
"Underwriting Agreement"), as representative of several underwriters named on
Schedule I of the Underwriting Agreement (the "Underwriters"), with Highland
Hospitality Corporation, a Maryland corporation (the "Company"), providing for
the public offering (the "Public Offering") by (inter alia) the Underwriters of
shares (the "Shares") of Common Stock of the Company (the "Common Stock").
To induce the Underwriters to continue its efforts in connection with
the Public Offering, the undersigned hereby agrees that, without the prior
written consent of the Representative, it will not, during the period commencing
on the date hereof and ending on the 180-day anniversary of the date of the
final prospectus relating to the Public Offering (such period, the "Lock-Up
Period" and such prospectus, the "Prospectus"), (1) offer, pledge, sell, loan,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase, or
otherwise transfer or dispose of for value, directly or indirectly, any of the
following (whether now owned by the undersigned or hereafter acquired): (i)
Common Stock, (ii) any securities convertible into or exercisable or
exchangeable for any shares of Common Stock, including any limited partnership
units ("Units") issued by Highland Hospitality, L.P. (the "Operating
Partnership") or (iii) any rights to purchase or otherwise acquire Common Stock
held by the undersigned or acquired by the undersigned after the date hereof, or
that my be deemed to be beneficially owned by the undersigned; or (2) enter into
any swap or other arrangement that transfers to another, in whole or in part,
any of the economic consequences of ownership of the Common Stock or Units,
whether any such transaction described in clause (1) or (2) above is to be
settled by delivery of Common Stock or such other securities, in cash or
otherwise. The undersigned further agrees that it will not publicly disclose the
intention to make any such offer, sale, pledge, or disposition or to enter into
any transaction described in the preceding sentence during the Lock-Up Period
without, in each case, the prior written consent of the Representative. In
addition, the undersigned agrees that, without prior written consent of the
Representative, it will not, during the Lock-Up Period, make any demand for or
exercise any right with respect to, the registration under the Securities Act of
1933, as amended (the "Securities Act"), of any shares of Common Stock or any
security convertible into or exercisable or exchangeable for Common Stock.
Notwithstanding anything to the contrary herein, the undersigned may
transfer the Common Stock or Units (A) as a bona fide gift or gifts to a member
of his or her immediate family, including any grandchildren of the undersigned;
or (B) to any trust the beneficiaries of which are exclusively the undersigned
or a member of the immediate family of the undersigned, including grandchildren;
provided, however, that for any such case under either (A) or (B) above, it
shall be a condition to such transfer that the transferee execute an agreement
stating that the transferee is receiving and holding the Common Stock or Units
subject to, and the transferee agrees to be bound by, the provisions of this
agreement, and there shall be no further transfer of such Common Stock or Units
except in accordance with this agreement; and
A-2
provided further, that any such transfer under either (A) or (B) above shall not
involve a disposition for value.
In furtherance of the foregoing, the Company and its transfer agent and
registrar are hereby authorized to decline to make any transfer that would
constitute a violation or breach of this letter. This letter shall be binding on
the undersigned and the respective successors, heirs, personal representatives
and assigns of the undersigned.
Whether or not the Public Offering actually occurs depends on a number
of factors, including market conditions. Any Public Offering will only be made
pursuant to an Underwriting Agreement, the terms of which are subject to
agreement between the Company and the Representative. The terms of this lock-up
agreement shall expire in the event the Public Offering is not consummated on or
before March 31, 2003.
Very truly yours,
------------------------------------------------
(Printed or Typed Name)
By:
---------------------------------------------
------------------------------------------------
(SEAL)
Title:
------------------------------------------
A-3