EXHIBIT 10.25.1
AMENDMENT NO. 1 TO CONTRIBUTION AGREEMENT
THIS AMENDMENT NO. 1 TO CONTRIBUTION AGREEMENT ("Amendment") is entered
into as of the 1st day of July, 2002 (the "Effective Date"), by and between
Hanover Capital Mortgage Holdings, Inc., a Maryland corporation ("HCHI"), and
Xxxx X. Xxxxxxxx ("Xxxxxxxx"), Xxxxx X. Xxxxxxx ("Xxxxxxx"), Xxxxxx X. Xxxxxxxxx
("Xxxxxxxxx") and Xxxx X. Xxxxxxx ("Xxxxxxx"). Burchett, Mizerak, Xxxxxxxxx and
Xxxxxxx are collectively referred to as the "Principals."
RECITALS
WHEREAS, HCHI and the Principals entered into that certain Contribution
Agreement dated as of September 19, 1997 (the "Contribution Agreement") which
provides for the transfer of shares of HCHI common stock to the Principals and
forgiveness of certain indebtedness of the Principals to HCHI upon the
satisfaction of certain conditions related to the financial performance of HCHI
measured as of specified "earn-out measuring dates."
WHEREAS, Section 6.1 of the Contribution Agreement provides that such
agreement may be amended by a written agreement signed by the parties thereto.
WHEREAS, HCHI and the Principals each have determined that it is
desirable and in their best interests to amend the Contribution Agreement to
modify the earn-out measuring dates and the conditions that must be satisfied
thereon in order for the transfer of HCHI shares and forgiveness of indebtedness
to occur as set forth below.
AMENDMENT
In consideration of the mutual promises and covenants contained in this
Amendment and those certain amended and restated employment agreements between
HCHI and the Principals entered into on even date herewith, HCHI and the
Principals, intending to be legally bound, agree as follows effective as of the
Effective Date:
1. The definition of "Average Spread" under Section 1 of the
Contribution Agreement is deleted in its entirety and replaced with the
following definition:
AVERAGE SPREAD. "Average Spread" means, on any Earn-Out
Measuring Date, (i) the average Fair Market Value of a share
of HCHI Common minus (ii) the Base Stock Price.
2. The definition of "Earn-Out Measuring Date" under Section 1 of the
Contribution Agreement is deleted in its entirety and replaced with the
following definition:
EARN-OUT MEASURING DATE. "Earn-Out Measuring Date" means each
July 1, beginning with July 1, 2003 and ending with July 1,
2007.
3. The first sentence of the definition of "Fair Market Value" under
Section 1 of the Contribution Agreement is deleted in its entirety and replaced
with the following sentence:
"Fair Market Value" means, with respect to any share of
capital stock of HCHI, the average of the daily market price
for the twenty (20) consecutive trading days immediately
preceding the date with respect to which "Fair Market Value"
must be determined hereunder or, if such date is not a
Business Day, the immediately preceding Business Day.
4. The definition of "Total Return per Unit" under Section 1 of the
Contribution Agreement is deleted in its entirety and replaced with the
following definition:
TOTAL RETURN PER UNIT. "Total Return per Unit" means, as of
any Earn-Out Measuring Date, (i) the Average Spread, plus (ii)
the sum of all distributions that have been made by HCHI with
respect to a share of HCHI Common during the period measured
from the Effective Date of Amendment No. 1 to this
Contribution Agreement through and including such Earn-Out
Measuring Date.
5. The definition of "Base Stock Price" is added to Section 1 of the
Contribution Agreement to read as follows:
BASE STOCK PRICE. "Base Stock Price" means the Fair Market
Value of a share of HCHI Common on the Effective Date of
Amendment No. 1 to this Contribution Agreement.
6. Section 2.2.3 of the Contribution Agreement is deleted in its
entirety and replaced with the following:
2.2.3 EARN-OUT. The parties hereto acknowledge that the value
of the HCP Preferred is not determinable as of the Closing
with absolute certainty and was arrived at based upon
discussions between the Principals and the underwriters of
HCHI's initial underwritten public offering. To account for
the possibility that the HCP Preferred may have a value that
is greater than the value of the HCHI Common to be delivered
to the Principals at the Closing, the Principals shall be
entitled to receive the Earn-Out Shares, and to have the
outstanding balances of the loans made to them by HCHI
pursuant to Section 2.2.2 and their Loan Agreements forgiven,
as provided, and subject to the conditions set forth, in this
Section 2.2.3.
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(i) If the Total Return per Unit as of any Earn-Out
Measuring Date equals at least 15% annualized return on the
Base Stock Price through such Earn-Out Measuring Date, HCHI
shall (A) issue to each Principal his or her Pro Rata Portion
of the lesser of (1) one-third (1/3) of the total number of
Earn-Out Shares or (2) the number of Earn-Out Shares that have
not theretofore been issued pursuant to this Section 2.2.3,
and (B) forgive, and discharge such Principal from liability
for, an amount of indebtedness of such Principal to HCHI under
such Principal's Loan Agreement equal to one-third (1/3) of
the principal amount loaned by HCHI to such Principal pursuant
to such Loan Agreement.
(ii) If the Total Return per Unit as of any Earn-Out
Measuring Date is equal to or greater than $17.9705, HCHI
shall (A) issue to each Principal his or her Pro Rata Portion
of the number of Earn-Out Shares that have not theretofore
been issued pursuant to this Section 2.2.3 and (B) forgive,
and discharge such Principal from liability for, an amount of
indebtedness of such Principal to HCHI under such Principal's
Loan Agreement equal to the principal amount loaned by HCHI to
such Principal pursuant to such Loan Agreement.
7. All other provisions of the Contribution Agreement remain unchanged.
8. This Amendment may be executed in one or more counterparts, each of
which shall be deemed to be an original, but all of which shall be one and the
same document.
[Signature page to follow]
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The parties hereto have caused this Amendment to be executed as of the date
first written above.
HANOVER CAPITAL MORTGAGE HOLDINGS, INC.
By: /s/ Xxxx X. Xxxxxxxx
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Name: XXXX X. XXXXXXXX
Its: Chief Executive Officer And President
/s/ Xxxx X. Xxxxxxxx
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XXXX X. XXXXXXXX
/s/ Xxxxx X. Xxxxxxx
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XXXXX X. XXXXXXX
/s/ Xxxxxx X. Xxxxxxxxx
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XXXXXX X. XXXXXXXXX
/s/ Xxxx X. Xxxxxxx
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XXXX X. XXXXXXX
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