12,210,840 SHARES
MORGANS HOTEL GROUP CO.
COMMON STOCK ($.01 PAR VALUE PER SHARE)
UNDERWRITING AGREEMENT
July 19, 2007
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July 19, 2007
▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇ Incorporated
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated
As representatives of the several Underwriters
Named in Schedule I hereto
c/o Merrill Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇ Incorporated
4 World Financial Center, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Dear Sirs and Mesdames:
Morgans Hotel Group Co., a Delaware corporation (the "COMPANY")
confirms its agreement with each of the several Underwriters named in Schedule I
hereto (the "UNDERWRITERS"), for whom ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated and
▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇ Incorporated are acting as representatives
(the "REPRESENTATIVES"), whereby the Company and certain shareholders of the
Company (the "SELLING SHAREHOLDERS") named on Schedule II hereto severally
propose to sell to the several Underwriters an aggregate of 12,210,840 shares of
the common stock, $.01 par value per share, of the Company (the "FIRM SHARES"),
of which 2,777,495 shares are to be issued and sold by the Company and an
aggregate of 9,433,345 shares are to be sold by the Selling Shareholders, each
Selling Shareholder selling the amount set forth opposite such Selling
Shareholder's name in Schedule II hereto. The Company also proposes to issue and
sell to the several Underwriters not more than an additional 1,831,600 shares of
its common stock, $.01 par value per share (the "ADDITIONAL SHARES"), if and to
the extent that you, as Representatives, shall have determined to exercise, on
behalf of the Underwriters, the right to purchase such shares of common stock
granted to the Underwriters in Section 3 hereof. The Firm Shares and the
Additional Shares are hereinafter collectively referred to as the "SHARES." The
shares of common stock, $.01 par value per share, of the Company to be
outstanding after giving effect to the sales contemplated hereby are hereinafter
referred to as the "COMMON STOCK." The Company and the Selling Shareholders are
hereinafter sometimes collectively referred to as the "SELLERS."
The Company has filed with the Securities and Exchange Commission (the
"COMMISSION") a registration statement on Form S-3 (No. 333-144150), including a
prospectus, relating to the registration of certain shares of Common Stock (the
"SHELF SECURITIES"), to be sold from time to time by the Selling Shareholders
and the Company. The registration statement, as it relates to the Shares being
sold in this offering, as amended to the date of this Agreement, including the
information (if any) deemed to be part of such registration statement at the
time of effectiveness pursuant to Rule 430A or Rule 430B under the Securities
Act of 1933, as amended (the "SECURITIES ACT"), is hereinafter referred
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to as the "REGISTRATION STATEMENT"; and the related prospectus covering the
Shelf Securities dated July 9, 2007 and in the form first used to confirm sales
of the Shelf Securities (or in the form first made available to the Underwriters
by the Company to meet requests of purchasers pursuant to Rule 173 under the
Securities Act) is hereinafter referred to as the "BASIC PROSPECTUS." If the
Company has filed an abbreviated registration statement to register additional
shares of Common Stock pursuant to Rule 462(b) under the Securities Act (the
"RULE 462 REGISTRATION STATEMENT"), then any reference herein to the term
"REGISTRATION STATEMENT" shall be deemed to include such Rule 462 Registration
Statement. The Basic Prospectus, as supplemented by the prospectus supplement
specifically relating to the Shares in the form first used to confirm sales of
the Shares (or in the form first made available to the Underwriters by the
Company to meet requests of purchasers pursuant to Rule 173 under the Securities
Act) is hereinafter referred to as the "PROSPECTUS," and the term "preliminary
prospectus" means any preliminary form of the Prospectus.
For purposes of this Agreement, "FREE WRITING PROSPECTUS" has the
meaning set forth in Rule 405 under the Securities Act, "TIME OF SALE
PROSPECTUS" means the preliminary prospectus identified on Schedule III hereto,
together with the free writing prospectuses, if any, identified on Schedule III
hereto and any other information identified in Schedule III hereto, and "BROADLY
AVAILABLE ROAD SHOW" means a "BONA FIDE ELECTRONIC ROAD SHOW" as defined in Rule
433(h)(5) under the Securities Act that has been made available without
restriction to any person. As used herein, the terms "Registration Statement,"
"Basic Prospectus," "preliminary prospectus," "Time of Sale Prospectus" and
"Prospectus" shall include the documents, if any, incorporated by reference
therein. The terms "SUPPLEMENT," "AMENDMENT," and "AMEND" as used herein with
respect to the Registration Statement, the Basic Prospectus, the Time of Sale
Prospectus, any preliminary prospectus or any free writing prospectus shall
include all documents subsequently filed by the Company with the Commission
pursuant to the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT"), that are incorporated by reference therein.
1. Representations and Warranties of the Company. The Company
represents and warrants to and agrees with each of the Underwriters that:
(a) The Company meets the requirements for use of Form S-3 under the
Securities Act; the Registration Statement has become effective; no stop order
suspending the effectiveness of the Registration Statement is in effect, and no
proceedings for such purpose are pending before or, to the knowledge of the
Company, threatened by the Commission.
(b) (i) Each document, if any, filed or to be filed pursuant to the
Exchange Act and incorporated by reference in the Time of Sale Prospectus or the
Prospectus complied or will comply when so filed in all material respects with
the Exchange Act and the applicable rules and regulations of the Commission
thereunder, (ii) each part of the Registration Statement, when such part became
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effective, did not contain, and each such part, as amended or supplemented, if
applicable, will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, (iii) the Registration Statement as of the
date hereof does not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, (iv) the Registration Statement complies, and
the Prospectus, as of its date, will comply and the Registration Statement and
the Prospectus, as amended or supplemented, if applicable, as of the Closing
Date (as defined in Section 5), will comply, in all material respects with the
Securities Act and the applicable rules and regulations of the Commission
thereunder, (v) the Time of Sale Prospectus, at the time of the communication of
the public offering price and other information referred to in Schedule III
hereto and at the Closing Date (as defined in Section 6), will not, and the Time
of Sale Prospectus, as then amended or supplemented by the Company, if
applicable, will not, contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading, (vi) each broadly
available road show, if any, and any issuer free writing prospectus as defined
in Rule 433(h) under the Securities Act, when considered together as a whole
with the Time of Sale Prospectus, does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading and (vii) the Prospectus does not contain and, as amended or
supplemented, if applicable, will not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading,
except that the representations and warranties set forth in this paragraph do
not apply to statements or omissions in the Registration Statement, the Time of
Sale Prospectus, any issuer free writing prospectus as defined in Rule 433(h)
under the Securities Act (and to which the Underwriters have not objected in
accordance with the provisions of Section 7(c) of this Agreement), or the
Prospectus based upon information furnished to the Company in writing by such
Underwriter through you expressly for use therein.
(c) Any statistical and market-related data included in the
Registration Statement, the Time of Sale Prospectus or the Prospectus are in all
material respects based on or derived from sources that the Company believes to
be reliable and accurate.
(d) The Company is not an "ineligible issuer" in connection with the
offering pursuant to Rules 164, 405 and 433 under the Securities Act. Any free
writing prospectus that the Company is required to file pursuant to Rule 433(d)
under the Securities Act has been, or will be, filed with the Commission in
accordance with the requirements of the Securities Act and the applicable rules
and regulations of the Commission thereunder. Each free writing prospectus that
the Company has filed, or is required to file, pursuant to Rule 433(d) under the
Securities Act or that was prepared by or on behalf of or used or referred to by
the
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Company complies or will comply in all material respects with the requirements
of the Securities Act and the applicable rules and regulations of the Commission
thereunder. Except for the free writing prospectuses, if any, identified in
Schedule III hereto forming part of the Time of Sale Prospectus, and electronic
road shows, if any, each furnished to you before first use, the Company has not
prepared, used or referred to, and will not, without your prior consent,
prepare, use or refer to, any free writing prospectus.
(e) The Company has been duly incorporated, is validly existing as a
corporation in good standing under the laws of the State of Delaware and has the
necessary corporate power and authority to own its property and to conduct its
business as described in the Time of Sale Prospectus. The Company is duly
qualified to do business as a foreign corporation in good standing in each
jurisdiction in which, the conduct of its business or its ownership or leasing
of property requires such qualification, except to the extent that the failure
to be so qualified or be in good standing would not reasonably be expected to
have, individually or in the aggregate, a material adverse effect on the
financial condition, business or results of operations of the Company and its
subsidiaries, taken as a whole (a "MATERIAL ADVERSE EFFECT").
(f) Morgans Group LLC, a Delaware limited liability company (the
"OPERATING COMPANY") has been duly organized, is validly existing as a limited
liability company in good standing under the laws of the State of Delaware and
has the necessary power and authority to own its property and to conduct its
business as described in the Time of Sale Prospectus. The Operating Company is
duly qualified to do business as a foreign corporation in good standing in each
jurisdiction in which the conduct of its business or its ownership or leasing of
property requires such qualification, except to the extent that the failure to
be so qualified or be in good standing would not reasonably be expected to have
a Material Adverse Effect; and the Company is the managing member of the
Operating Company and the holder of membership units in the Operating Company
("OC UNITS") representing an aggregate ownership interest in the Operating
Company of approximately 97.1%.
(g) Each entity set forth on Schedule IV hereto (each an "MHG BUSINESS
ENTITY") has been duly organized, is validly existing as a corporation, limited
liability company or limited partnership in good standing under the laws of the
jurisdiction of its organization, has the power and authority to own its
property and to conduct its business as currently conducted and is duly
qualified to transact business and is in good standing in each jurisdiction in
which the conduct of its business or its ownership or leasing of property
requires such qualification, except to the extent that a failure to be so
qualified or be in good standing would not reasonably be expected to have a
Material Adverse Effect; all of the issued shares of capital stock, membership
interests or partnership interests of each MHG Business Entity have been duly
and validly authorized and issued, are fully paid and non-assessable and are
owned by the Company and by the Operating Company, directly or indirectly, free
and clear of all liens, encumbrances, security
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interests or similar claims. The Operating Company and the MHG Business Entities
are collectively referred to herein as the "SUBSIDIARIES".
(h) The authorized capital stock of the Company conforms as to legal
matters in all material respects to the description thereof contained in each of
the Time of Sale Prospectus and the Prospectus.
(i) The shares of Common Stock outstanding prior to the issuance of the
Shares to be sold by the Company (including the Shares to be sold by the Selling
Shareholders) have been duly authorized and are validly issued, fully paid and
non-assessable.
(j) The Shares to be issued and sold by the Company to the Underwriters
hereunder have been duly authorized and, when issued and delivered against
payment therefor as provided herein, will be validly issued, fully paid and
non-assessable, and the issuance of such Shares will not be subject to any
preemptive or similar rights.
(k) The Company has the power and authority to execute and deliver this
Agreement and to consummate the transactions described herein.
(l) This Agreement has been duly authorized, executed and delivered by
the Company.
(m) Except for restrictions imposed by agreements disclosed in the Time
of Sale Prospectus, the Operating Company is not prohibited or restricted from
making distributions with respect to the OC Units or from repaying to the
Company or any other subsidiary of the Company any amounts which may from time
to time become due under any loans or advances to the Operating Company.
(n) Neither the Company nor any Subsidiary 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 it is a party or by which it or any of its properties or assets may be
bound, except for such breaches and defaults which would not, individually or in
the aggregate, reasonably be expected to result in a Material Adverse Effect.
(o) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated herein and therein 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: (1) any provision of the
organizational documents of the Company or any Subsidiary, (2) 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
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their assets or properties may be bound or affected, (3) any law or regulation
binding upon or applicable to the Company or any Subsidiary or any of their
respective properties or assets or (4) any decree, judgment or order applicable
to the Company or any Subsidiary; or (B) result in the creation or imposition of
any lien, security interest or similar claim upon any property or assets of the
Company or any Subsidiary, except in each case described in clauses (A)(2)
through (4) of this sentence for such conflicts, breaches, defaults and
violations as would not, individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect, and in the case described in
clause (B) of this sentence for liens, security interests or similar claims in
connection with certain indebtedness described in the Time of Sale Prospectus.
(p) No consent, approval, authorization or order of or filing,
registration or qualification with, any governmental body or agency is required
in connection with the Company's execution, delivery and performance of this
Agreement, the consummation of the transactions contemplated herein by the
Company, including the Company's issuance of up to 4,609,095 shares in
connection with this offering, other than (A) such as have been obtained and
made or will have been obtained and made on or prior to the Closing Date, (B)
any necessary qualification under the securities or "blue sky" laws of the
various jurisdictions in which the Shares are being offered by the Underwriters,
or (C) the absence of which would not reasonably be expected to have a Material
Adverse Effect.
(q) 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, local or foreign 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 Time of Sale 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 would not,
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect; neither the Company nor any of the Subsidiaries 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, other than any
such violations, defaults, or revocations that would not, individually or in the
aggregate, reasonably be expected to result in a Material Adverse Effect.
(r) The Company and its subsidiaries have good and marketable title in
fee simple to, or a valid leasehold interest in, all real property described in
the Time of Sale Prospectus as owned by them (the "COMPANY PROPERTIES"), and
ownership of all material personal property described in the Time of Sale
Prospectus as owned by them, in each case free and clear of all liens,
encumbrances, security interests, similar claims and defects in such title
(collectively, the "ENCUMBRANCES"), except such Encumbrances that are
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disclosed in the Time of Sale Prospectus or would not reasonably be expected to
materially and adversely affect the value of such property or materially
interfere with the use made or proposed to be made of such property by the
Company and the Subsidiaries; and any real or personal property held under lease
by the Company and the Subsidiaries are held by them under valid, subsisting and
enforceable leases (such leases, the "COMPANY LEASES") with such exceptions as
are not material and do not materially interfere with the use made and proposed
to be made of such property. Neither the Company nor any of its subsidiaries is
in default under any of the Company Leases, relating to, or any agreement
evidencing an Encumbrance on, any Company Property that would, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect, and
neither the Company nor any of the Subsidiaries knows of any event, which but
for the passage of time or the giving of notice, or both, would constitute a
default under any of such documents or agreements that would reasonably be
expected to have a Material Adverse Effect.
(s) Each parcel of real property leased or owned by the Company or the
Subsidiaries complies with all applicable zoning laws, ordinances, regulations
and deed restrictions or other covenants in all material respects, except such
failure to comply, which does not materially and adversely affect the value of
any such property and will not result in a forfeiture or reversion of title;
neither the Company nor any Subsidiary has received from any governmental
authority any written notice of any condemnation of or zoning change affecting
any such property or any part thereof, and the Company does not know of any such
condemnation or zoning change which is threatened and which, individually or in
the aggregate, if consummated would reasonably be expected to have a Material
Adverse Effect.
(t) There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the financial
condition, or in the earnings, business or operations of the Company from that
set forth in the Time of Sale Prospectus.
(u) There are no legal or governmental proceedings pending or, to the
Company's knowledge, threatened to which the Company or any Subsidiary is a
party or to which any of the properties of the Company or any of its
subsidiaries is subject (i) other than (A) proceedings accurately described in
all material respects in the Time of Sale Prospectus or (B) proceedings that
would not reasonably be expected to have a Material Adverse Effect, (ii) that
would have a material adverse effect on the power or ability of the Company to
perform its obligations under this Agreement, or (iii) that are required to be
described in the Registration Statement or the Time of Sale Prospectus and are
not so described; and there are no statutes, regulations, contracts or other
documents that are required to be described in the Registration Statement or the
Time of Sale Prospectus or to be filed as exhibits to the Registration Statement
that are not so described in all material respects or filed as required.
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(v) Each preliminary prospectus filed as part of the registration
statement as originally filed or as part of any amendment thereto, or filed
pursuant to Rule 424 under the Securities Act, complied when so filed in all
material respects with the Securities Act and the applicable rules and
regulations of the Commission thereunder.
(w) The Company is not, and after giving effect to the offering and
sale of the Shares and the application of the Company's net proceeds thereof as
described in the Prospectus will not be, required to register as an "investment
company" as such term is defined in the Investment Company Act of 1940, as
amended.
(x) Except as would not be reasonably expected to have a Material
Adverse Effect, (i) none of the Company, the Subsidiaries or, to the knowledge
of the Company and the Subsidiaries, any director, officer, agent, employee or
other person (in each case, while acting on behalf of the Company or the
Subsidiaries) is aware of or has taken any action, directly or indirectly, that
would result in a violation by such persons of the Foreign Corrupt Practices Act
of 1977, as amended, and the rules and regulations thereunder (the "FCPA"), (ii)
the Company and the Subsidiaries have conducted their businesses in compliance
with the FCPA, and (iii) the Company and the Subsidiaries have instituted and
maintain policies and procedures designed to ensure, and which are reasonably
expected to continue to ensure, continued compliance therewith.
(y) Except as would not be reasonably expected to have a Material
Adverse Effect, (i) the operations of the Company and the Subsidiaries are and
have been conducted at all times in compliance with applicable financial
recordkeeping and reporting requirements of the Currency and Foreign
Transactions Reporting Act of 1970, as amended, the money laundering statutes of
all applicable jurisdictions, the rules and regulations thereunder and any
related or similar rules, regulations or guidelines, issued, administered or
enforced by any governmental agency (collectively, the "MONEY LAUNDERING LAWS")
and (ii) no action, suit or proceeding by or before any court or governmental
agency, authority or body or any arbitrator involving the Company or the
Subsidiaries with respect to the Money Laundering Laws is pending or, to the
best knowledge of the Company, threatened.
(z) The Company and the Subsidiaries (i) are in compliance with any and
all applicable foreign, federal, state and local laws and regulations relating
to the protection of human health and safety, the environment or hazardous or
toxic substances or wastes, pollutants or contaminants ("ENVIRONMENTAL LAWS"),
(ii) have received all permits, licenses or other approvals required of them
under applicable Environmental Laws to conduct their respective businesses and
(iii) are in compliance with all terms and conditions of any such permit,
license or approval, except where such noncompliance with Environmental Laws,
failure to receive required permits, licenses or other approvals or failure to
comply with the terms and conditions of such permits, licenses or approvals
would not, singly or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
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(aa) There are no costs or liabilities associated with Environmental
Laws (including, without limitation, any capital or operating expenditures
required for clean-up, closure of properties or compliance with Environmental
Laws or any permit, license or approval, any related constraints on operating
activities and any potential liabilities to third parties) which would, singly
or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(bb) All U.S. federal, state and other income tax returns of the
Company and its subsidiaries required by law to be filed have been filed and all
taxes shown by such returns or otherwise assessed, which are due and payable,
have been paid or provision has been made for their payment, except for any such
tax or other assessment that (i) is currently being contested in good faith, or
(ii) would not have, or reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.
(cc) Except as disclosed in the Time of Sale Prospectus, 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.
(dd) Subsequent to the respective dates as of which information is
given in each of the Registration Statement, the Time of Sale Prospectus and the
Prospectus, (i) the Company and the Subsidiaries have not incurred any material
liability or obligation, direct or contingent, nor entered into any material
transaction; (ii) the Company has not purchased any of its outstanding capital
stock, nor declared, paid or otherwise made any dividend or distribution of any
kind on its capital stock other than ordinary and customary dividends; and (iii)
there has not been any material change in the capital stock, short-term debt or
long-term debt of the Company and the Subsidiaries, except in each case as
described in each of the Registration Statement, the Time of Sale Prospectus and
the Prospectus, respectively.
(ee) The Company and the Subsidiaries own or possess, or can acquire on
reasonable terms, all material licenses, inventions, copyrights, know-how
(including trade secrets and other confidential information, systems or
procedures), trademarks, service marks and trade names currently employed by
them in connection with the business now operated by them, except such as the
failure to own, possess or be able to acquire on reasonable terms would not
reasonably be expected to have a Material Adverse Effect, and neither the
Company nor any of the Subsidiaries has received any notice of infringement of
or conflict with asserted rights of others with respect to any of the foregoing
which, singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would reasonably be expected to have a Material Adverse
Effect.
(ff) Except as listed on Schedule VI hereto, (i) no material labor
dispute with the employees of the Company or any of the Subsidiaries exists, or,
to the
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knowledge of the Company is imminent; and (ii) the Company is not aware
of any existing, threatened or imminent labor disturbance by the employees of
any of its principal suppliers, manufacturers or contractors which would
reasonably be expected to have a Material Adverse Effect.
(gg) The Company and each of the Subsidiaries are insured by insurers
of recognized financial responsibility against such losses and risks and in such
amounts as the Company believes are prudent and customary in the businesses in
which they are engaged; and neither the Company nor any of the Subsidiaries has
any reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business at a cost that
would not reasonably be expected to have a Material Adverse Effect, except as
described in the Time of Sale Prospectus.
(hh) Each of the Company and the Subsidiaries maintains a system of
internal controls over financial reporting 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 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. Except as described in the Time of
Sale Prospectus, since the end of the Company's most recent audited fiscal year,
there has been no material weakness in the Company's internal control over
financial reporting (whether or not remediated).
(ii) The Company is in compliance with all provisions of the
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 and all rules and regulations promulgated thereunder
or implementing the provisions thereof (the "▇▇▇▇▇▇▇▇-▇▇▇▇▇ ACT").
(jj) Except as described in the Time of Sale Prospectus, the Company
has not sold, issued or distributed any shares of Common Stock during the
six-month period preceding the date hereof, including any sales pursuant to Rule
144A under, or Regulation D or S of, the Securities Act, other than shares
issued pursuant to employee benefit plans, qualified stock option plans or other
employee compensation plans or pursuant to outstanding options, rights or
warrants.
2. Representations and Warranties of the Selling Shareholders. Each
Selling Shareholder, severally and not jointly, represents and warrants to and
agrees with each of the Underwriters that:
(a) This Agreement has been duly authorized, executed and delivered by
or on behalf of such Selling Shareholder.
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(b) The execution and delivery by such Selling Shareholder of, and the
performance by such Selling Shareholder of its obligations under, this Agreement
will not contravene (A) any provision of applicable law, (B) the certificate of
incorporation or by-laws or other organizational documents of such Selling
Shareholder, (C) any agreement or other instrument binding upon such Selling
Shareholder or (D) any judgment, order or decree of any governmental body,
agency or court having jurisdiction over such Selling Shareholder, except in
each case described in clauses (A), (C) and (D) of this sentence, such as would
not, individually or in the aggregate, materially impair such Selling
Shareholder from consummating the transactions contemplated hereby.
(c) No consent, approval, authorization or order of, or qualification
with, any governmental body or agency is required for the performance by such
Selling Shareholder of its obligations under this Agreement, except such as (A)
would not, individually or in the aggregate, materially impair such Selling
Shareholder from consummating the transactions contemplated hereby or (B) may be
required by the securities or "blue sky" laws of the various states in
connection with the offer and sale of the Shares.
(d) Such Selling Shareholder has, and on the Closing Date will have the
legal right and power, and all authorization and approval required by law, to
sell, transfer and deliver the Shares to be sold by such Selling Shareholder or
a security entitlement in respect of such Shares.
(e) Upon payment of the purchase price by the Underwriters for the
Shares being sold by such Selling Shareholder and the delivery by such Selling
Shareholder to Cede & Co. ("CEDE") or such other nominee as may be designated by
The Depository Trust Company ("DTC") of the Shares being sold by such Selling
Shareholder registered in the name of Cede or such other nominee designated by
DTC, both as provided for in this Agreement, and the crediting of such Shares to
the account of the Underwriters with DTC, Cede or such other nominee designated
by DTC will be a "protected purchaser" (as defined in Section 8-303 of the New
York Uniform Commercial Code (the "CODE")) of such Shares, the Underwriters will
acquire a valid "security entitlement" (within the meaning of Section 8-501 of
the Code) to such Shares, and no action based on an "adverse claim" (as defined
in Section 8-102 of the Code) may be asserted against the Underwriters with
respect to such security entitlement (assuming that the Underwriters are without
notice of any such adverse claim); for purposes of this representation, such
Selling Shareholder may assume that when such payment, delivery and crediting
occur, (x) such Shares will have been registered in the name of Cede or another
nominee designated by DTC, in each case on the Company's share registry in
accordance with its certificate of incorporation, bylaws and applicable law, (y)
DTC will be registered as a "clearing corporation" within the meaning of Section
8-102 of the Code and (z) appropriate entries to the accounts of the several
Underwriters on the records of DTC will have been made pursuant to the Code.
12
(f) Such Selling Shareholder (or in the case of NCIC MHG Subsidiary LLC
or NorthStar Partnership, L.P., the committee of directors not affiliated with
management of NorthStar Capital Investment Corp., in recommending the sale of
its Shares to the board of directors of NorthStar Capital Investment Corp.) was
not prompted by any material information concerning the business operations or
strategy of the Company and its subsidiaries that is not either (a) publicly
disclosed or (b) set forth in the Time of Sale Prospectus.
(g) The name and address of such Selling Shareholder, the number of
shares of Common Stock beneficially owned by such Selling Shareholder after
giving effect to the sale of the Shares being sold by such Selling Shareholder
and the number of Shares made available for sale by such Selling Shareholder
(collectively, the "SELLING SHAREHOLDER INFORMATION") does not, and at the
Closing Date (as defined in Section 5) will not, contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
3. Agreements to Sell and Purchase. Each Seller, severally and not
jointly, hereby agrees to sell to the several Underwriters, and each
Underwriter, upon the basis of the representations and warranties herein
contained, but subject to the conditions hereinafter stated, agrees, severally
and not jointly, to purchase from such Seller at $21.5157 a share (the "PURCHASE
PRICE") the number of Firm Shares (subject to such adjustments to eliminate
fractional shares as you may determine) that bears the same proportion to the
number of Firm Shares to be sold by such Seller as the number of Firm Shares set
forth in Schedule I hereto opposite the name of such Underwriter bears to the
total number of Firm Shares.
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Company agrees to sell
to the Underwriters the Additional Shares, and the Underwriters shall have the
right to purchase, severally and not jointly, up to 1,831,600 Additional Shares
at the Purchase Price. You may exercise this right on behalf of the Underwriters
in whole or from time to time in part by giving written notice not later than 30
days after the date of this Agreement. Any exercise notice shall specify the
number of Additional Shares to be purchased by the Underwriters and the date on
which such shares are to be purchased. Each purchase date must be at least two
business days after the written notice is given and may not be earlier than the
closing date for the Firm Shares nor later than ten business days after the date
of such notice. Additional Shares may be purchased as provided in Section 5
hereof solely for the purpose of covering over-allotments made in connection
with the offering of the Firm Shares. On each day, if any, that Additional
Shares are to be purchased (an "OPTION CLOSING DATE"), each Underwriter agrees,
severally and not jointly, to purchase the number of Additional Shares (subject
to such adjustments to eliminate fractional shares as you may determine) that
bears the same proportion to the total number of Additional Shares to be
13
purchased on such Option Closing Date as the number of Firm Shares set forth in
Schedule I hereto opposite the name of such Underwriter bears to the total
number of Firm Shares.
The Company hereby agrees that, without the prior written consent of
the Representatives on behalf of the Underwriters, it will not, during the
period ending 90 days after the date of the Prospectus, (1) offer, pledge, sell,
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, lend, or
otherwise transfer or dispose of, directly or indirectly, any shares of Common
Stock or any securities convertible into or exercisable or exchangeable for
Common Stock (such shares of Common Stock and such securities convertible into
or exercisable or exchangeable for common stock, together the "MHG CO.
SECURITIES") 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, whether any such transaction described in clause (1) or (2)
above is to be settled by delivery of MHG Co. Securities, in cash or otherwise
or (3) file any registration statement with the Commission relating to the
offering of any MHG Co. Securities.
The restrictions contained in the preceding paragraph shall not apply
to (A) the Shares to be sold hereunder and (B) the issuance by the Company of
shares of Common Stock upon the exercise of an option or warrant or the
conversion of a security outstanding on the date hereof of which the
Underwriters have been advised in writing, (C) the issuance by the Company of
MHG Co. Securities under the Company's 2007 Omnibus Stock Incentive Plan
described in the Time of Sale Prospectus, (D) the issuance by the Company of
shares of Common Stock, or by the Operating Company of OC Units, as
consideration for one or more acquisitions, provided that (i) the aggregate
market value of all such shares of Common Stock, including shares of Common
Stock issuable upon conversion of any such OC Units, does not exceed 15% of the
market capitalization of the Company as of 4:30 p.m. (New York City time) on the
Closing Date, and (ii) the recipients of any such shares of Common Stock or OC
Units shall enter into a written agreement agreeing to the restrictions set
forth in the preceding paragraph and this paragraph, and (E) the filing of any
registration statement on Form S-8 in respect of any employee benefit plan.
4. Terms of Public Offering. The Sellers are advised by you that the
Underwriters propose to make a public offering of their respective portions of
the Shares on the terms set forth in the Time of Sale Prospectus as soon after
this Agreement has become effective as in your judgment is advisable. The
Sellers are further advised by you that the Shares are to be offered to the
public initially at $22.50 a share (the "PUBLIC OFFERING PRICE") and to certain
dealers selected by you at a price that represents a concession not in excess of
$0.59 per share under the Public Offering Price.
5. Payment and Delivery. Payment for the Firm Shares to be sold by each
Seller shall be made to such Seller in Federal or other funds immediately
14
available in New York City against delivery of such Firm Shares for the
respective accounts of the several Underwriters at 10:00 a.m., New York City
time, on July 25, 2007, or at such other time on the same or such other date,
not later than August 1, 2007, as shall be designated in writing by you. The
time and date of such payment are hereinafter referred to as the "CLOSING DATE."
Payment for any Additional Shares shall be made to the Company in
Federal or other funds immediately available in New York City against delivery
of such Additional Shares for the respective accounts of the several
Underwriters at 10:00 a.m., New York City time, on the date specified in the
corresponding notice described in Section 3 or at such other time on the same or
on such other date, in any event not later than August 31, 2007, as shall be
designated in writing by you.
The Firm Shares and Additional Shares shall be registered in such names
and in such denominations as you shall request in writing not later than one
full business day prior to the Closing Date or the applicable Option Closing
Date, as the case may be. The Firm Shares and Additional Shares shall be
delivered to you on the Closing Date or an Option Closing Date, as the case may
be, for the respective accounts of the several Underwriters, with any transfer
taxes payable in connection with the transfer of the Shares to the Underwriters
duly paid, against payment of the Purchase Price therefor.
6. Conditions to the Underwriters' Obligations. The obligations of the Sellers
to sell the Shares to the Underwriters and the several obligations of the
Underwriters to purchase and pay for the Shares on the Closing Date are
subject to the condition that the Prospectus, as amended or supplemented, in
relation to the Shares, shall have been filed with the Commission pursuant to
Rule 424(b) within the applicable time period prescribed for such filing by
the rules and regulations under the Securities Act; as of the Closing Date, no
stop order suspending the effectiveness of the Registration Statement shall be
in effect or shall be pending or, to the knowledge of the Company, threatened
by the Commission.
The several obligations of the Underwriters are subject to the
following further conditions:
(a) Subsequent to the execution and delivery of this Agreement and
prior to the Closing Date:
(i) there shall not have occurred any downgrading, nor shall any
notice have been given of any intended or potential downgrading or of
any review for a possible change that does not indicate the direction
of the possible change, in the rating accorded any of the securities of
the Company or the Operating Company by any "nationally recognized
statistical rating organization," as such term is defined for purposes
of Rule 436(g)(2) under the Securities Act; and
15
(ii) there shall not have occurred any change, or any development
involving a prospective change, in the financial condition, or in the
earnings, business or operations of the Company and the Subsidiaries,
taken as a whole, from that set forth in the Time of Sale Prospectus
that, in your judgment, is material and adverse and that makes it, in
your judgment, impracticable to market the Shares on the terms and in
the manner contemplated in the Time of Sale Prospectus.
(b) The Underwriters shall have received on the Closing Date a
certificate, dated the Closing Date and signed by an executive officer (i) of
the Company, to the effect set forth in Section 6(a)(i) above and to the effect
that the representations and warranties of the Company contained in this
Agreement are true and correct as of the Closing Date and that the Company has
complied in all material respects with all of the agreements and satisfied all
of the conditions on its part to be performed or satisfied hereunder on or
before the Closing Date.
Each officer signing and delivering such certificates may rely upon the
best of his or her knowledge as to proceedings threatened.
(c) The Underwriters shall have received on the Closing Date an opinion
of ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, counsel for the Company, dated the Closing Date,
substantially in the form attached hereto as Exhibit A.
(d) The Underwriters shall have received on the Closing Date an opinion
of counsel for each Selling Shareholder, dated the Closing Date, substantially
in the form attached hereto as Exhibit B.
(e) The Underwriters shall have received on the Closing Date an
opinion, in form and substance satisfactory to the Underwriters, of Cravath,
Swaine & ▇▇▇▇▇ LLP, counsel for the Underwriters, dated the Closing Date.
The opinion of ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP described in Section 6(c) above (and
any opinions of counsel for any Selling Shareholder referred to above) shall be
rendered to the Underwriters at the request of the Company or one or more of the
Selling Shareholders, as the case may be, and shall so state therein.
(f) The Underwriters shall have received, on the date hereof a letter
dated the date hereof from BDO ▇▇▇▇▇▇▇, LLP, independent public accountants,
substantially in the form attached hereto as Exhibit C.
(g) The Underwriters shall have received, on the Closing Date, a
"bring-down" letter dated the Closing Date of BDO ▇▇▇▇▇▇▇, LLP that shall use a
"cut-off date" not earlier than the date hereof.
(h) The "lock-up" agreements, each substantially in the form attached
as Exhibit D hereto, between you and the executive officers and directors of the
Company listed on Schedule V hereto relating to sales and certain other
dispositions of shares of Common Stock or certain other securities, delivered to
16
you on or before the date hereof, shall be in full force and effect on the
Closing Date.
The several obligations of the Underwriters to purchase Additional
Shares hereunder are subject to the delivery to you on the applicable Option
Closing Date of such documents as you may reasonably request with respect to the
good standing of the Company, the due authorization and issuance of the
Additional Shares to be sold on such Option Closing Date and other matters
related to the issuance of such Additional Shares.
7. Covenants of the Company. In further consideration of the agreements
of the Underwriters herein contained, the Company covenants with each
Underwriter as follows:
(a) To furnish to each Representative, without charge, a conformed copy
of the Registration Statement (including exhibits thereto and documents
incorporated by reference) and for delivery to each other Underwriter if
requested by any such Underwriter a conformed copy of the Registration Statement
(without exhibits thereto but including documents incorporated by reference,
except for such documents that are publicly available on ▇▇▇▇▇) and to furnish
to you in New York City, without charge, prior to 2:00 p.m. New York City time
on the business day next succeeding the date of this Agreement and during the
period mentioned in Section 7(e) or 7(f) below, as many copies of the Time of
Sale Prospectus, the Prospectus, any documents incorporated by reference
therein, except for such documents that are publicly available on ▇▇▇▇▇, and any
supplements and amendments thereto or to the Registration Statement as you may
reasonably request.
(b) Before amending or supplementing the Registration Statement, the
Time of Sale Prospectus or the Prospectus prior to the completion of this
offering, to furnish to you a copy of each such proposed amendment or supplement
and not to file any such proposed amendment or supplement to which you
reasonably object, and to file with the Commission within the applicable period
specified in Rule 424(b) under the Securities Act any prospectus required to be
filed pursuant to such Rule.
(c) To furnish to you a copy of each proposed free writing prospectus
to be prepared by or on behalf of, used by, or referred to by the Company in
connection with this offering of Shares and not to use or refer to any proposed
free writing prospectus to which you reasonably object.
(d) Without the consent of the Representatives, not to take any action
that would result in an Underwriter or the Company being required to file with
the Commission pursuant to Rule 433(d) under the Securities Act a free writing
prospectus prepared by or on behalf of the Underwriter that the Underwriter
otherwise would not have been required to file thereunder.
17
(e) If the Time of Sale Prospectus is being used to solicit offers to
buy the Shares at a time when the Prospectus is not yet available to prospective
purchasers and any event shall occur or condition exist as a result of which it
is necessary to amend or supplement the Time of Sale Prospectus in order to make
the statements therein, in the light of the circumstances, not misleading, or if
any event shall occur or condition exist as a result of which the Time of Sale
Prospectus conflicts with the information contained in the Registration
Statement then on file, or if, in the reasonable opinion of counsel for the
Underwriters, it is necessary to amend or supplement the Time of Sale Prospectus
to comply with applicable law, forthwith to prepare, file with the Commission
and furnish, at its own expense, to the Underwriters and to any dealer upon
request, either amendments or supplements to the Time of Sale Prospectus so that
the statements in the Time of Sale Prospectus as so amended or supplemented will
not, in the light of the circumstances when the Time of Sale Prospectus
delivered to a prospective purchaser, be misleading or so that the Time of Sale
Prospectus, as amended or supplemented, will no longer conflict with the
Registration Statement, or so that the Time of Sale Prospectus, as amended or
supplemented, will comply with applicable law.
(f) If, during such period after the first date of the public offering
of the Shares as in the reasonable opinion of counsel for the Underwriters the
Prospectus (or in lieu thereof the notice referred to in Rule 173(a) under the
Securities Act) is required by law to be delivered in connection with sales by
an Underwriter or dealer, any event shall occur or condition exist as a result
of which it is necessary to amend or supplement the Prospectus in order to make
the statements therein, in the light of the circumstances when the Prospectus
(or in lieu thereof the notice referred to in Rule 173(a) under the Securities
Act) is delivered to a purchaser, not misleading, or if, in the reasonable
opinion of counsel for the Underwriters, it is necessary to amend or supplement
the Prospectus to comply with applicable law, forthwith to prepare, file with
the Commission and furnish, at its own expense, to the Underwriters and to the
dealers (whose names and addresses you will furnish to the Company) to which
Shares may have been sold by you on behalf of the Underwriters and to any other
dealers upon request, either amendments or supplements to the Prospectus so that
the statements in the Prospectus as so amended or supplemented will not, in the
light of the circumstances when the Prospectus (or in lieu thereof the notice
referred to in Rule 173(a) under the Securities Act) is delivered to a
purchaser, be misleading or so that the Prospectus, as amended or supplemented,
will comply with law.
(g) To endeavor to qualify the Shares for offer and sale under the
securities or "blue sky" laws of such jurisdictions as you shall reasonably
request.
(h) To make generally available to the Company's security holders and
to you as soon as practicable an earning statement covering the twelve-month
period ending September 30, 2008 that satisfies the provisions of Section 11(a)
of the Securities Act and the rules and regulations of the Commission
thereunder.
18
8. Expenses. Whether or not the transactions contemplated in this
Agreement are consummated or this Agreement is terminated, (a) the Company
agrees to pay or cause to be paid all expenses incident to the performance of
its obligations under this Agreement, including: (i) the fees, disbursements and
expenses of the Company's counsel and the Company's accountants in connection
with the registration and delivery of the Shares under the Securities Act and
all other fees or expenses in connection with the preparation and filing of the
Registration Statement, any preliminary prospectus, the Time of Sale Prospectus,
the Prospectus, any free writing prospectus prepared by or on behalf of, used
by, or referred to by the Company and amendments and supplements to any of the
foregoing, including all printing costs associated therewith, and the mailing
and delivering of copies thereof to the Underwriters and dealers, in the
quantities hereinabove specified, (ii) all costs and expenses related to the
transfer and delivery of the Shares sold by the Company to the Underwriters,
including any transfer or other taxes payable thereon, (iii) the cost of
printing or producing any Blue Sky or Legal Investment memorandum in connection
with the offer and sale of the Shares under state securities laws and all
expenses in connection with the qualification of the Shares for offer and sale
under state securities laws as provided in Section 7(g) hereof, including filing
fees and the reasonable fees and disbursements of counsel for the Underwriters
in connection with such qualification and in connection with the Blue Sky or
Legal Investment memorandum, (iv) all filing fees and the reasonable fees and
disbursements of counsel to the Underwriters incurred in connection with the
review and qualification of the offering of the Shares by the National
Association of Securities Dealers, Inc., (v) all costs and expenses incident to
listing the Shares on the Nasdaq Global Market, (vi) the cost of printing
certificates representing the Shares, (vii) the costs and charges of any
transfer agent, registrar or depositary, (viii) the costs and expenses of the
Company relating to investor presentations on any "road show" undertaken in
connection with the marketing of the offering of the Shares, including, without
limitation, expenses associated with the preparation or dissemination of any
electronic roadshow, expenses associated with the production of road show slides
and graphics, fees and expenses of any consultants engaged in connection with
the road show presentations with the prior approval of the Company, travel and
lodging expenses of the representatives and officers of the Company and any such
consultants (but excluding the cost of any aircraft chartered in connection with
the road show), (ix) the document production charges and expenses associated
with printing this Agreement and (x) all other costs and expenses incident to
the performance of the obligations of the Company hereunder for which provision
is not otherwise made in this Section, and (b) whether or not the transactions
contemplated in this Agreement are consummated or this Agreement is terminated,
each Selling Shareholder severally agrees with the Underwriters to pay or cause
to be paid all fees and expenses incident to the performance of such Selling
Shareholder's obligations under this Agreement which are otherwise specifically
provided for herein, including, but not limited to (i) fees and expenses of
counsel and other advisors for such Selling Shareholder and (ii)
19
taxes incident to the sale and delivery of the Shares to be sold by such Selling
Shareholder to the Underwriters hereunder. It is understood, however, that
except as provided in this Section, Section 11 entitled "Indemnity and
Contribution" and the last paragraph of Section 13 below, the Underwriters will
pay all of their costs and expenses, including fees and disbursements of their
counsel, stock transfer taxes payable on resale of any of the Shares by them and
any advertising expenses connected with any offers they may make.
The provisions of this Section shall not supersede or otherwise affect
any agreement that the Company and the Selling Shareholders may otherwise have
for the allocation of such expenses among themselves.
9. Covenants of the Selling Shareholders. Each Selling Shareholder
severally covenants with the Company and the Underwriters not to create, use or
refer to any proposed free writing prospectus without the consent of the Company
and the Representatives.
10. Covenants of the Underwriters. Each Underwriter severally covenants
with the Company not to take any action that would result in the Company being
required to create, use or refer to any proposed free writing prospectus without
the consent of the Company and the Representatives.
11. Indemnity and Contribution. (a) The Company agrees to indemnify and
hold harmless each Underwriter, each person, if any, who controls any
Underwriter within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act, and each affiliate of any Underwriter within the
meaning of Rule 405 under the Securities 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) caused by any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement or any amendment thereof, any preliminary prospectus, the Time of Sale
Prospectus, any issuer free writing prospectus as defined in Rule 433(h) under
the Securities Act, any Company information that the Company has filed, or is
required to file, pursuant to Rule 433(d) of the Securities Act or the
Prospectus or any amendment or supplement thereto, 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, except insofar as
such losses, claims, damages or liabilities are caused by any such untrue
statement or omission or alleged untrue statement or omission based upon
information furnished to the Company in writing by such Underwriter through you
expressly for use therein.
(b) The Company agrees to indemnify and hold harmless each Selling
Shareholder and each person, if any, who controls any Selling Shareholder 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
20
(including, without limitation, any legal or other expenses
reasonably incurred in connection with defending or investigating any such
action or claim) caused by any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or any amendment thereof,
any preliminary prospectus, the Time of Sale Prospectus, any issuer free writing
prospectus as defined in Rule 433(h) under the Securities Act, any Company
information that the Company has filed, or is required to file, pursuant to Rule
433(d) of the Securities Act or the Prospectus or any amendment or supplement
thereto, 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, except insofar as such losses, claims, damages or
liabilities are caused by any such untrue statement or omission or alleged
untrue statement or omission based upon the Selling Shareholder Information of
such Selling Shareholder.
(c) Each Selling Shareholder agrees, severally and not jointly, to
indemnify and hold harmless the Underwriters and the Company, each person, if
any, who controls any Underwriter or the Company within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act, and each
affiliate of any Underwriter within the meaning of Rule 405 under the Securities
Act to the same extent as the foregoing indemnity from the Company to such
Selling Shareholder, but only with reference to the Selling Shareholder
Information. The liability of each Selling Shareholder under the indemnity
agreement contained in this paragraph, and under the contribution agreement
contained in paragraph (f) of this Section 11, shall be limited to an amount
equal to the aggregate Public Offering Price of the Shares sold by such Selling
Shareholder under this Agreement.
(d) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company, each Selling Shareholder, the directors of the
Company, the officers of the Company who sign the Registration Statement and
each person, if any, who controls the Company or any Selling Shareholder within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act, to the same extent as the foregoing indemnity from the Company to
such Underwriter, but only with reference to information furnished to the
Company in writing by such Underwriter through you expressly for use in the
Registration Statement, any preliminary prospectus, the Time of Sale Prospectus,
any issuer free writing prospectus or the Prospectus or any amendment or
supplement thereto.
(e) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to Section 11(a), 11(b), 11(c) or 11(d), such person (the
"INDEMNIFIED PARTY") shall promptly notify the person against whom such
indemnity may be sought (the "INDEMNIFYING PARTY") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding and
shall
21
pay the reasonably incurred fees and disbursements of such counsel related
to such proceeding. In any such proceeding, any indemnified party shall have the
right to retain its own counsel, but the fees and expenses of such counsel shall
be at the expense of such indemnified party unless (i) the indemnifying party
and the indemnified party shall have mutually agreed to the retention of such
counsel or (ii) the named parties to any such proceeding (including any
impleaded parties) include both the indemnifying party and the indemnified party
and representation of both parties by the same counsel would be inappropriate
due to actual or potential differing interests between them. It is understood
that the indemnifying party shall not, in respect of the legal expenses of any
indemnified party in connection with any proceeding or related proceedings in
the same jurisdiction, be liable for (i) the reasonably incurred fees and
expenses of more than one separate firm (in addition to any local counsel) for
all Underwriters and all persons, if any, who control any Underwriter within the
meaning of either Section 15 of the Securities Act or Section 20 of the Exchange
Act or who are affiliates of any Underwriter within the meaning of Rule 405
under the Securities Act, (ii) the reasonably incurred fees and expenses of more
than one separate firm (in addition to any local counsel) for the Company, its
directors, its officers who sign the Registration Statement and each person, if
any, who controls the Company within the meaning of either such Section and
(iii) the reasonably incurred fees and expenses of more than one separate firm
(in addition to any local counsel) for all Selling Shareholders and all persons,
if any, who control any Selling Shareholder within the meaning of either such
Section, and that all such fees and expenses shall be reimbursed as they are
incurred. In the case of any such separate firm for the Underwriters and such
control persons and affiliates of any Underwriters, such firm shall be
designated in writing by the Representatives. In the case of any such separate
firm for the Company, and such directors, officers and control persons of the
Company, such firm shall be designated in writing by the Company. In the case of
any separate firm for the Selling Shareholders and such control persons of any
Selling Shareholders, such firm shall be designated in writing by the Selling
Shareholders. The indemnifying party shall not be liable for any settlement of
any proceeding effected without its written consent, but if settled with such
consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party from and against any loss or
liability by reason of such settlement or judgment. No indemnifying party shall,
without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.
(f) To the extent the indemnification provided for in Section 11(a),
11(b), 11(c) or 11(d) is unavailable to an indemnified party or insufficient in
respect of any losses, claims, damages or liabilities referred to therein, then
each indemnifying party under such paragraph, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
22
such indemnified party as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the indemnifying party or parties on the one hand and the
indemnified party or parties on the other hand from the offering of the Shares
or (ii) if the allocation provided by clause 11(f)(i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause 11(f)(i) above but also the relative
fault of the indemnifying party or parties on the one hand and of the
indemnified party or parties on the other hand in connection with the statements
or omissions that resulted in such losses, claims, damages or liabilities, as
well as any other relevant equitable considerations. The relative benefits
received by the Company and the Selling Shareholders on the one hand and the
Underwriters on the other hand in connection with the offering of the Shares
shall be deemed to be equal to the total net proceeds from the offering of the
Shares (before deducting expenses) received by each Seller and the total
underwriting discounts and commissions received by the Underwriters, in each
case as set forth in the table on the cover of the Prospectus, bear to the
aggregate Public Offering Price of the Shares. The relative fault of the Company
and the Selling Shareholders on the one hand and the Underwriters on the other
hand shall be determined by reference to, among other things, whether the untrue
or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact 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 Underwriters' respective obligations to contribute pursuant to this Section
11 are several in proportion to the respective number of Shares they have
purchased hereunder, and not joint.
(g) The Company, each Selling Shareholder and the Underwriters agree
that it would not be just or equitable if contribution pursuant to this Section
11 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 that does
not take account of the equitable considerations referred to in Section 11(f).
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages and liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 11, no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Shares underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages that such Underwriter
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. 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 remedies provided for in this Section 11 are
not exclusive and shall not limit any rights or
23
remedies which may otherwise be available to any indemnified party at law or in
equity.
(h) The indemnity and contribution provisions contained in this Section
11 and the representations, warranties and other statements of the Company and
the Selling Shareholders contained in this Agreement shall remain operative and
in full force and effect in accordance with their specified terms and duration
regardless of (i) any termination of this Agreement, (ii) any investigation made
by or on behalf of any Underwriter, any person controlling any Underwriter or
any affiliate of any Underwriter, any Selling Shareholder or any person
controlling any Selling Shareholder, or by or on behalf of the Company, their
officers or directors or any person controlling the Company and (iii) acceptance
of and payment for any of the Shares.
12. Termination. The Underwriters may terminate this Agreement by
notice given by you to the Company, if after the execution and delivery of this
Agreement and prior to the Closing Date (i) trading generally shall have been
suspended or materially limited on, or by, as the case may be, any of the New
York Stock Exchange, the American Stock Exchange, the Nasdaq Global Market or
the Nasdaq Global Select Market, (ii) trading of any securities of the Company
shall have been suspended on any exchange or in any over-the-counter market,
(iii) a material disruption in securities settlement, payment or clearance
services in the United States shall have occurred, (iv) any moratorium on
commercial banking activities shall have been declared by Federal or New York
State authorities or (v) there shall have occurred any outbreak or escalation of
hostilities, or any change in financial markets or any calamity or crisis that,
in your judgment, is material and adverse and which, singly or together with any
other event specified in this clause (v), makes it, in your judgment,
impracticable or inadvisable to proceed with the offer, sale or delivery of the
Shares on the terms and in the manner contemplated in the Time of Sale
Prospectus or the Prospectus.
13. Effectiveness; Defaulting Underwriters. This Agreement shall become
effective upon the execution and delivery hereof by the parties hereto.
If, on the Closing Date or an Option Closing Date, as the case may be,
any one or more of the Underwriters shall fail or refuse to purchase Shares that
it has or they have agreed to purchase hereunder on such date, and the aggregate
number of Shares which such defaulting Underwriter or Underwriters agreed but
failed or refused to purchase is not more than one-tenth of the aggregate number
of the Shares to be purchased on such date, the other Underwriters shall be
obligated severally in the proportions that the number of Firm Shares set forth
opposite their respective names in Schedule I bears to the aggregate number of
Firm Shares set forth opposite the names of all such non-defaulting
Underwriters, or in such other proportions as you may specify, to purchase the
Shares which such defaulting Underwriter or Underwriters agreed but failed or
refused to purchase on such date; provided that in no event shall the number of
Shares that
24
any Underwriter has agreed to purchase pursuant to this Agreement be increased
pursuant to this Section 13 by an amount in excess of one-ninth of such number
of Shares without the written consent of such Underwriter. If, on the Closing
Date, any Underwriter or Underwriters shall fail or refuse to purchase Firm
Shares and the aggregate number of Firm Shares with respect to which such
default occurs is more than one-tenth of the aggregate number of Firm Shares to
be purchased on such date, and arrangements satisfactory to you, the Company and
the Selling Shareholders for the purchase of such Firm Shares are not made
within 36 hours after such default, this Agreement shall terminate without
liability on the part of any non-defaulting Underwriter, the Company or the
Selling Shareholders. In any such case either you or the relevant Sellers shall
have the right to postpone the Closing Date, but in no event for longer than
seven days, in order that the required changes, if any, in the Registration
Statement, in the Time of Sale Prospectus, in the Prospectus or in any other
documents or arrangements may be effected. If, on an Option Closing Date, any
Underwriter or Underwriters shall fail or refuse to purchase Additional Shares
and the aggregate number of Additional Shares with respect to which such default
occurs is more than one-tenth of the aggregate number of Additional Shares to be
purchased on such Option Closing Date, the non-defaulting Underwriters shall
have the option to (i) terminate their obligation hereunder to purchase the
Additional Shares to be sold on such Option Closing Date or (ii) purchase not
less than the number of Additional Shares that such non-defaulting Underwriters
would have been obligated to purchase in the absence of such default. Any action
taken under this paragraph shall not relieve any defaulting Underwriter from
liability in respect of any default of such Underwriter under this Agreement.
If this Agreement shall be terminated by the Underwriters, or any of
them, because of any failure or refusal on the part of the Company or any
Selling Shareholder to comply with the terms or to fulfill any of the conditions
of this Agreement, or if for any reason the Company or any Selling Shareholder
shall be unable to perform its respective obligations under this Agreement, the
Company and any defaulting Selling Shareholder (severally and not jointly) agree
to promptly reimburse the Underwriters or such Underwriters as have so
terminated this Agreement with respect to themselves, severally, for all
out-of-pocket expenses (including the fees and disbursements of their counsel)
reasonably incurred by such Underwriters in connection with this Agreement or
the offering contemplated hereunder.
14. Counterparts. This Agreement may be signed in two or more
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
15. Applicable Law. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of New York.
25
16. Headings. The headings of the sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed a part of
this Agreement.
17. Notices. All communications hereunder shall be in writing and
effective only upon receipt and if to the Underwriters shall be delivered,
mailed or sent to you in care of ▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇
Incorporated shall be delivered, mailed or sent to 4 World Financial Center,
North Tower, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: Equity
Syndicate Desk, with a copy to the Office of General Counsel and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
& Co. Incorporated, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: Equity
Syndicate Desk, with a copy to the Legal Department; if to the Company shall be
delivered, mailed or sent to ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
Attention: Chief Legal Officer; and if to a Selling Shareholder shall be
delivered, mailed or sent to NorthStar Capital Investment Corp., ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: Chief Operating Officer
and SORCO Interfund LLC, c/▇ ▇▇▇▇▇ Fund Management LLC, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇, with a copy
to Akin, Gump, Strauss, ▇▇▇▇▇ & ▇▇▇▇, LLP, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇.
18. No Fiduciary Duty. The Company acknowledges that in connection with
the offering of the Shares: (i) the Underwriters have acted at arms length, are
not agents of, and owe no fiduciary duties to, the Company or any other person,
(ii) the Underwriters owe the Company only those duties and obligations set
forth in this Agreement and prior written agreements (to the extent not
superseded by this Agreement), if any, and (iii) the Underwriters may have
interests that differ from those of the Company. The Company waives to the full
extent permitted by applicable law any claims it may have against the
Underwriters arising from an alleged breach of fiduciary duty in connection with
the offering of the Shares.
26
Very truly yours,
MORGANS HOTEL GROUP CO.,
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: Executive Vice President
and Chief Legal Officer
27
NCIC MHG SUBSIDIARY LLC,
By: NORTHSTAR CAPITAL INVESTMENT
CORP., its managing member
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President
NORTHSTAR PARTNERSHIP L.P.,
By: NORTHSTAR CAPITAL INVESTMENT
CORP., its general partner
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President
28
SORCO INTERFUND LLC,
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇
Title: Attorney-in-Fact
29
Accepted as of the date hereof
▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇ Incorporated
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated
Acting severally on behalf of themselves and
the several Underwriters named in
Schedule I hereto
By: ▇▇▇▇▇▇▇ LYNCH, PIERCE,
▇▇▇▇▇▇ & ▇▇▇▇▇
INCORPORATED
By: /s/ ALEXANDER VIRTUE
---------------------------------------------
Name: Alexander Virtue
Title: Director, Investment Banking
By: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & CO.
INCORPORATED
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President
30
SCHEDULE I
NUMBER OF FIRM SHARES
UNDERWRITER TO BE PURCHASED
--------------------------------------------------------- ---------------------
▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇
Incorporated............................................. 4,273,795
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated........................ 4,273,795
Citigroup Global Markets, Inc. .......................... 732,650
CIBC World Markets Corp.................................. 732,650
JMP Securities LLC....................................... 732,650
▇▇▇▇▇▇ ▇▇▇▇▇▇ Partners LLC............................... 732,650
Wachovia Capital Markets, LLC............................ 732,650
---------------------
Total:.......................................... 12,210,840
---------------------
31
SCHEDULE II
NUMBER OF
FIRM SHARES TO
SELLING SHAREHOLDERS BE SOLD
--------------------------------------------------------- ---------------------
NCIC MHG Subsidiary LLC.................................. 8,250,706
NorthStar Partnership, L.P. ............................. 126,970
SORCO Interfund LLC...................................... 1,055,669
---------------------
Total:.......................................... 9,433,345
---------------------
32
SCHEDULE III
TIME OF SALE PROSPECTUS
1. Preliminary Prospectus issued July 11, 2007.
2. Free Writing Prospectus dated July 19, 2007.
33
EXHIBIT D
FORM OF LOCK-UP LETTER
_____________, 2007
▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇ Incorporated
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated
c/o Merrill Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇ Incorporated
4 World Financial Center, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Dear Sirs and Mesdames:
The undersigned understands that ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated
("▇▇▇▇▇▇ ▇▇▇▇▇▇▇") and ▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇ Incorporated
("▇▇▇▇▇▇▇ ▇▇▇▇▇"), as representatives of the several underwriters (the
"UNDERWRITERS") named in the Underwriting Agreement, propose to enter into an
Underwriting Agreement (the "UNDERWRITING AGREEMENT") with Morgans Hotel Group
Co., a Delaware corporation (the "COMPANY") providing for the public offering
(the "PUBLIC OFFERING") by the Underwriters of the common stock, $.01 par value
per share, of the Company (the "COMMON STOCK").
To induce the Underwriters that may participate in the Public Offering
to participate in the Public Offering, the undersigned hereby agrees that,
without the prior written consent of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇ on behalf
of the Underwriters, the undersigned will not, during the period commencing on
the date hereof and ending 90 days after the date of the final prospectus
relating to the Public Offering (the "PROSPECTUS"), (1) offer, pledge, sell,
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, lend, or
otherwise transfer or dispose of, directly or indirectly, any shares of Common
Stock or any securities convertible into or exercisable or exchangeable for
Common Stock (such shares of Common Stock and such securities convertible into
or exercisable or exchangeable for Common Stock, together the "MHG CO.
SECURITIES"), 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, whether any such transaction described in clause (1) or (2)
above is to be settled by delivery of MHG Co. Securities, in cash or otherwise.
The foregoing paragraph shall not apply to (a) transactions relating to
MHG Co. Securities acquired in open market transactions after the completion of
the Public Offering, provided that no filing under Section 16(a) of the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT") shall be
required or
34
shall be voluntarily made in connection with subsequent sales of MHG Co.
Securities acquired in such open market transactions, (b) transfers of MHG Co.
Securities as a bona fide gift, (c) distributions or transfers of MHG Co.
Securities; provided that in the case of any transfer or distribution pursuant
to clause (b) or (c), (i) each donee, distributee or transferee shall agree to
be bound by the lock-up restrictions set forth in this letter as if a party
hereto and (ii) no filing under Section 16(a) of the Exchange Act, reporting a
reduction in beneficial ownership of shares of Common Stock, shall be required
or shall be voluntarily made during the restricted period referred to in the
foregoing paragraph, (d) any disposition not effected in the public trading
markets in response to a tender offer for MHG Co. Securities or otherwise in
connection with a proposed business combination transaction involving the
Company, (e) pledges permitted pursuant to, and subject to the provisions set
forth in, the lock-up agreement signed by NorthStar Partnership L.P. in
connection with the Public Offering or (f) any direct or indirect pledge, sale,
transfer, disposition, or other transaction relating to the transactions
contemplated by that certain Agreement and Plan of Merger dated as of or about
July 19, 2007, by and among W. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Northstar
Capital Investment Corp. and Northstar Partnership L.P. (the "Merger
Agreement"), including, without limitation, with respect to the financing of the
transactions contemplated by the Merger Agreement. In addition, the undersigned
agrees that, without the prior written consent of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇
▇▇▇▇▇ on behalf of the Underwriters, it will not, during the period commencing
on the date hereof and ending 90 days after the date of the Prospectus, make any
demand for or exercise any right with respect to, the registration of any MHG
Co. Securities. The undersigned also agrees and consents to the entry of stop
transfer instructions with the Company's transfer agent and registrar against
the transfer of the undersigned's shares of Common Stock except in compliance
with the foregoing restrictions. Notwithstanding the foregoing, the undersigned
may enter into a trading plan designed to comply with SEC Rule 10b5-1, provided
that no sales or other dispositions of any of the undersigned's Common Stock
occurs during the 90-day restricted period.
The undersigned understands that the Company and the Underwriters are
relying upon this agreement in proceeding toward consummation of the Public
Offering. The undersigned further understands that this agreement is irrevocable
and shall be binding upon the undersigned's heirs, legal representatives,
successors and assigns.
35
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
negotiation between the Company and the Underwriters. This agreement shall
expire and be of no further force and effect if the Public Offering is not
completed by August 10, 2007.
Very truly yours,
--------------------------------------------
(Name)
--------------------------------------------
(Address)