Exhibit 1.1
3,000,000 Shares
NOVASTAR FINANCIAL, INC.
Common Stock
Underwriting Agreement
dated ____________, __, 1997
XXXXXX, XXXXXXXX & COMPANY, INCORPORATED
XXXXXXXXXX SECURITIES
Table of Contents
Section 1. Representations and Warranties of the Company.................................................... 2
(a) Compliance with Registration Requirements.................................................... 2
(b) Offering Materials Furnished to Underwriters................................................. 3
(c) Distribution of Offering Material By the Company............................................. 3
(d) The Underwriting Agreement................................................................... 3
(e) Formation Agreements......................................................................... 3
(f) Authorization of the Shares.................................................................. 3
(g) No Applicable Registration or Other Similar Rights........................................... 4
(h) No Material Adverse Change................................................................... 4
(i) Independent Accountants...................................................................... 4
(j) Preparation of the Financial Statements...................................................... 4
(k) Incorporation and Good Standing of the Company and its Subsidiaries.......................... 5
(l) Capitalization and Other Capital Stock Matters............................................... 5
(m) Stock Exchange Listing....................................................................... 5
(n) No Current Material Defaults................................................................. 6
(o) Authorization and Non-Contravention of Existing Instruments.................................. 6
(p) No Further Authorizations or Approvals Required.............................................. 6
(q) Formation Transactions Not a Roll-Up......................................................... 6
(r) No Material Actions or Proceedings........................................................... 7
(s) Intellectual Property Rights................................................................. 7
(t) Compliance with All Applicable Laws.......................................................... 7
(u) All Necessary Permits, Licenses, etc......................................................... 7
(v) Title to Properties.......................................................................... 7
(w) Tax Law Compliance........................................................................... 8
(x) REIT Status.................................................................................. 8
(aa) Company Not an "Investment Company".......................................................... 8
(bb) Insurance.................................................................................... 8
(cc) No Price Stabilization or Manipulation....................................................... 9
(dd) No Broker or Finder Fees..................................................................... 9
(ee) Related Party Transactions................................................................... 9
(ff) No Unlawful Contributions or Other Payments.................................................. 9
(gg) Company's Accounting System.................................................................. 9
(hh) Compliance with Environmental Laws........................................................... 9
(ii) Periodic Review of Costs of Environmental Compliance......................................... 10
(jj) ERISA Compliance............................................................................. 10
(kk) Material Contracts........................................................................... 11
Section 2. Purchase, Sale and Delivery of the Shares........................................................ 11
(a) The Firm Shares.............................................................................. 11
(b) The First Closing Date....................................................................... 11
(c) The Optional Shares; the Second Closing Date................................................. 12
(d) Public Offering of the Shares................................................................ 12
(e) Payment for the Shares....................................................................... 12
(f) Delivery of the Shares....................................................................... 12
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(g) Time of the Essence.......................................................................... 13
(h) Delivery of Prospectus to the Underwriters................................................... 13
Section 3. Additional Covenants of Company.................................................................. 13
(a) Representatives' Review of Proposed Amendments and Supplements............................... 13
(b) Securities Act Compliance.................................................................... 14
(c) Amendments and Supplements to the Prospectus and Other Securities Act Matters................ 14
(d) Copies of any Amendments and Supplements to the Prospectus................................... 14
(e) Press Releases............................................................................... 14
(f) Blue Sky Compliance.......................................................................... 15
(g) Uncertificated Shares........................................................................ 15
(h) Consummation of Formation Transactions....................................................... 15
(i) Use of Proceeds.............................................................................. 15
(j) Transfer Agent............................................................................... 15
(k) Continuing inclusion in the Nasdaq National Market........................................... 15
(l) Earnings Statement........................................................................... 15
(m) Periodic Reporting Obligations............................................................... 16
(n) Agreement Not To Offer or Sell Additional Securities......................................... 16
(o) Future Reports to the Representatives........................................................ 16
(p) REIT Status.................................................................................. 17
(q) Accounting and Tax Advice.................................................................... 17
(r) Commodities Exchange Act..................................................................... 17
(s) Investment Advisors Act...................................................................... 17
(t) Agreements with Management................................................................... 17
(u) SEC Compliance Program and Xxxxxxx Xxxxxxx Compliance Policy................................. 17
Section 4. Payment of Expenses............................................................................. 18
Section 5. Conditions of the Obligations of the Underwriters............................................... 18
(a) Accountants' Comfort Letter.................................................................. 18
(b) Compliance with Registration Requirements; No Stop Order; No Objection from NASD............. 19
(c) No Material Adverse Change or Ratings Agency Change.......................................... 19
(d) Opinion of Counsel for the Company........................................................... 19
(e) Opinion of Counsel for the Underwriters...................................................... 19
(f) Officers' Certificates....................................................................... 20
(g) Bring-down Comfort Letter.................................................................... 20
(i) Written Consents............................................................................. 21
(j) Additional Documents......................................................................... 21
(k) Nasdaq Inclusion............................................................................. 21
(l) Consummation of Formation Transactions and Charter Amendments................................ 21
(m) Employment Agreements........................................................................ 21
Section 6. Reimbursement of Underwriters' Expenses......................................................... 21
Section 7. Effectiveness of this Agreement................................................................. 22
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Section 8. Indemnification.................................................................................. 22
(a) Indemnification of the Underwriters by the Company........................................... 22
(b) Indemnification of the Company, its Directors and Officers................................... 23
(c) Notifications and Other Indemnification Procedures........................................... 24
(d) Settlements.................................................................................. 24
Section 9. Contribution..................................................................................... 25
Section 10. Default of One or More of the Several Underwriters.............................................. 26
Section 11. Termination of this Agreement................................................................... 27
Section 12. Representations and Indemnities to Survive Delivery............................................. 27
Section 13. Notices......................................................................................... 28
Section 14. Successors...................................................................................... 29
Section 15. Partial Unenforceability........................................................................ 29
Section 16. (a) Governing Law Provisions.................................................................... 29
(b) Consent to Jurisdiction..................................................................... 29
Section 17. General Provisions.............................................................................. 29
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Underwriting Agreement
_____________, 1997
XXXXXX, XXXXXXXX & COMPANY, INCORPORATED
XXXXXXXXXX SECURITIES
As Representatives of the several Underwriters
x/x XXXXXX, XXXXXXXX & COMPANY, INCORPORATED
000 Xxxxx Xxxxxxxx, Xxxxx 0000
Xx. Xxxxx, Xxxxxxxx 00000
Ladies and Gentlemen:
Introductory. Novastar Financial, Inc. (the "Company"), a Maryland
corporation qualifying for federal income tax purposes as a real estate
investment trust ("REIT") pursuant to Sections 856 through 860 of the Internal
Revenue Code of 1986, as amended, and the rules and regulations thereunder, as
may be amended from time to time (the "Tax Code"), proposes to issue and sell to
the several underwriters named in Schedule 1 (the "Underwriters") an aggregate
of 3,000,000 shares (the "Firm Shares") of the Company's Common Stock, par value
$0.01 per share (the "Common Stock"). In addition, the Company has granted to
the Underwriters an option to purchase up to an additional 450,000 shares (the
"Optional Shares"), as provided in Section 2. The Firm Shares and, if and to the
extent such option is exercised, the Optional Shares are collectively called the
"Shares." Xxxxxx, Xxxxxxxx & Company, Incorporated and Xxxxxxxxxx Securities
have agreed to act as representatives of the several Underwriters (in such
capacity, the "Representatives") in connection with the offering and sale of the
Shares.
The Company has prepared and filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-11 (File No.
333-32327), which contains a form of prospectus to be used in connection with
the public offering and sale of the Shares. Such registration statement, as
amended, including the financial statements, exhibits and schedules thereto, in
the form in which it was declared effective by the Commission under the
Securities Act of 1933 and the rules and regulations promulgated thereunder
(collectively, the "Securities Act"), including any information deemed to be a
part thereof at the time of effectiveness pursuant to Rule 430A or Rule 434
under the Securities Act, is called the "Registration Statement." Any
registration statement filed by the Company pursuant to Rule 462(b) under the
Securities Act is called the "Rule 462(b) Registration Statement," and from and
after the date and time of filing of the Rule 462(b) Registration Statement the
term "Registration Statement" shall include the Rule 462(b) Registration
Statement. Such prospectus, in the form first used by the Underwriters to
confirm sales of the Shares, is called the "Prospectus"; provided, however, if
the Company has, with the consent of Xxxxxx, Xxxxxxxx & Company, Incorporated,
elected to rely upon Rule 434 under the Securities Act, the term "Prospectus"
shall mean the Company's prospectus subject to completion (each, a "preliminary
prospectus") dated September __, 1997 (such preliminary prospectus is called the
"Rule 434 preliminary prospectus"), together with the applicable term
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sheet (the "Term Sheet") prepared and filed by the Company with the Commission
under Rules 434 and 424(b) under the Securities Act and all references in this
Agreement to the date of the Prospectus shall mean the date of the Term Sheet.
All references in this Agreement to the Registration Statement, the Rule 462(b)
Registration Statement, a preliminary prospectus, the Prospectus or the Term
Sheet, or any amendments or supplements to any of the foregoing, shall include
any copy thereof filed with the Commission pursuant to its Electronic Data
Gathering, Analysis and Retrieval System ("XXXXX").
For purposes of this Agreement, "Subsidiary" means, with respect to the
Company, any corporation, partnership, association, limited liability company,
joint venture or other business entity of which more than 50% of the total
voting power of shares of stock or other ownership interest entitled (without
regard to the occurrence of any contingency) to vote in the election of the
person or persons (whether directors, managers, partners, trustees or other
persons performing similar functions) having the power to direct or cause the
direction of the management and policies thereof is at the time owned or
controlled, directly or indirectly, by the Company or one or more of the other
Subsidiaries of the Company or a combination thereof, including without
limitation, each of NFI Holding Corporation, and Novastar Mortgage, Inc.,.
The Company hereby confirms its agreements with the Underwriter as
follows:
Section 1. Representations and Warranties of the Company.
The Company hereby represents, warrants and covenants to each Underwriter
as follows:
(a) Compliance with Registration Requirements. The Registration Statement
and any Rule 462(b) Registration Statement have been declared effective by the
Commission under the Securities Act. The Company has complied to the
Commission's satisfaction with all requests of the Commission for additional
or supplemental information. No stop order suspending the effectiveness of the
Registration Statement or any Rule 462(b) Registration Statement is in effect
and no proceedings for such purpose have been instituted or are pending or, to
the best knowledge of the Company, are contemplated or threatened by the
Commission.
Each preliminary prospectus and the Prospectus when filed complied in all
material respects with the Securities Act and, if filed by electronic
transmission pursuant to XXXXX (except as may be permitted by Regulation S-T
under the Securities Act), was identical to the copy thereof delivered to the
Underwriters for use in connection with the offer and sale of the Shares. Each
of the Registration Statement, any Rule 462(b) Registration Statement and any
post-effective amendment thereto, at the time it became effective and at all
subsequent times, complied and will comply in all material respects with the
Securities Act and did not and will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading. The Prospectus, as
amended or supplemented, as of its date and at all subsequent times, did not and
will not contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading. The
representations and warranties set forth in the
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two immediately preceding sentences do not apply to statements in or omissions
from the Registration Statement, any Rule 462(b) Registration Statement, or any
post-effective amendment thereto, or the Prospectus, or any amendments or
supplements thereto, made in reliance upon and in conformity with information
relating to any Underwriter furnished to the Company in writing by the
Representatives expressly for use therein. There are no contracts or other
documents required to be described in the Prospectus or to be filed as exhibits
to the Registration Statement which have not been described or filed as
required.
(b) Offering Materials Furnished to Underwriters. The Company has
delivered to the Representatives two complete manually signed copy of the
Registration Statement and of each consent and certificate of experts filed as
a part thereof, and conformed copies of the Registration Statement (without
exhibits) and preliminary prospectuses and the Prospectus, as amended or
supplemented, in such quantities and at such places as the Representatives
have reasonably requested for each of the Underwriters.
(c) Distribution of Offering Material By the Company. The Company has not
distributed and will not distribute, prior to the later of the Second Closing
Date (as hereinafter defined) and the completion of the Underwriters'
distribution of the Shares, any offering material in connection with the
offering and sale of the Shares other than a preliminary prospectus, the
Prospectus or the Registration Statement.
(d) The Underwriting Agreement. This Agreement has been duly authorized,
executed and delivered by, and is a valid and binding agreement of, each of
the Company enforceable in accordance with its terms, except as rights to
indemnification hereunder may be limited by applicable law and except as the
enforcement hereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting the rights and
remedies of creditors or by general equitable principles.
(e) Authorization of the Shares. The Shares have been duly authorized for
issuance and sale pursuant to this Agreement, and, when issued and delivered
by the Company pursuant to this Agreement, will be validly issued, fully paid
and nonassessable.
(f) No Applicable Registration or Other Similar Rights. There are no
persons with registration or other similar rights to have any equity or debt
securities registered for sale under the Registration Statement or included in
the offering contemplated by this Agreement, except for such rights as have
been duly waived.
(g) No Material Adverse Change. Except as otherwise disclosed in the
Prospectus, subsequent to the respective dates as of which information is
given in the Prospectus: (i) there has been no material adverse change, or any
development that could reasonably be expected to result in a material adverse
change, in the condition, financial or otherwise, or in the earnings,
business, operations or prospects, whether or not arising from transactions in
the ordinary course of business, of the Company and its Subsidiaries,
considered as one entity (any such change is called a "Material Adverse
Change"); (ii) the Company and its Subsidiaries, considered as one entity,
have not incurred any material liability or obligation, indirect, direct or
contingent, not in the ordinary course of business nor entered into any
material transaction or agreement not in the ordinary course of business; and
(iii) there has
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been no dividend or distribution of any kind declared, paid or made by the
Company or, except for dividends paid to the Company or other Subsidiaries,
any of its Subsidiaries on any class of capital stock or repurchase or
redemption by the Company or any of its Subsidiaries of any class of capital
stock.
(h) Independent Accountants. KPMG Peat Marwick LLP, who have expressed
their opinion with respect to the financial statements (which term as used in
this Agreement includes the related notes thereto) and supporting schedules
filed with the Commission as a part of the Registration Statement and included
in the Prospectus, are independent public or certified public accountants as
required by the Securities Act.
(i) Preparation of the Financial Statements. The financial statements
filed with the Commission as a part of the Registration Statement and included
in the Prospectus present fairly the consolidated financial position of the
Company and its Subsidiaries as of and at the dates indicated and the results
of their operations and cash flows for the periods specified. The supporting
schedules included in the Registration Statement present fairly the
information required to be stated therein. Such financial statements and
supporting schedules have been prepared in conformity with generally accepted
accounting principles applied on a consistent basis throughout the periods
involved, except as may be expressly stated in the related notes thereto. No
other financial statements or supporting schedules are required to be included
in the Registration Statement. The financial data set forth in the Prospectus
under the captions "Prospectus Summary--Summary Consolidated Selected
Financial and Other Data," "Selected Consolidated Financial and Other Data"
and "Capitalization" fairly present the information set forth therein on a
basis consistent with that of the audited financial statements contained in
the Registration Statement. The consolidated financial statement of the
Company and its Subsidiaries and the related notes thereto included "Selected
Consolidated Financial and Other Data" in the Prospectus and in the
Registration Statement present fairly the information contained therein, have
been prepared in accordance with the Commission's rules and guidelines, and
have been properly presented on the bases described therein, and the
assumptions used in the preparation thereof are reasonable and the adjustments
used therein are appropriate to give effect to the transactions and
circumstances referred to therein.
(j) Incorporation and Good Standing of the Company and its Subsidiaries.
Each of the Company and its Subsidiaries has been duly incorporated or formed,
as the case may be, and is validly existing and in good standing under the
laws of the jurisdiction of its incorporation or formation and has all
requisite power and authority to own, lease and operate its properties and to
conduct its business as described in the Prospectus and, in the case of the
Company, to enter into and perform its obligations under this Agreement; and
no proceeding has been instituted or, to the knowledge of the Company,
threatened in any such jurisdiction seeking to revoke, limit or curtail such
power and authority. Each of the Company and each Subsidiary is duly qualified
as a foreign corporation, partnership or limited liability company, as
applicable, to transact business and is in good standing in each other
jurisdiction in which such qualification is required, whether by reason of the
ownership or leasing of property or the conduct of business, except for such
jurisdictions where the failure to so qualify or to be in good standing would
not, individually or in the aggregate, result in a Material Adverse Change;
and no proceeding has been instituted or, to the knowledge of the Company,
threatened in any such jurisdiction seeking to revoke, limit or curtail such
qualification.
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Except as otherwise disclosed in the Prospectus, all of the issued and
outstanding capital stock, partnership interests or membership interests of
each Subsidiary have been duly authorized and validly issued, are fully paid
and nonassessable and are owned by the Company, directly or through
Subsidiaries, free and clear of any security interest, mortgage, pledge, lien,
encumbrance or claim. The Company does not own or control, directly or
indirectly, any corporation, association or other entity other than the
Subsidiaries listed in Exhibit 21 to the Registration Statement.
(k) Capitalization and Other Capital Stock Matters. On the First Closing
Date, the authorized, issued and outstanding capital stock of the Company will
be as set forth in the Prospectus under the caption "Capitalization" (other
than for subsequent issuances, if any, pursuant to employee benefit plans
described in the Prospectus or upon exercise of outstanding options or
warrants described in the Prospectus). The Shares conform in all material
respects to the description thereof contained in the Prospectus. All of the
issued and outstanding shares of Common Stock have been duly authorized and
validly issued, are fully paid and nonassessable and have been issued in
compliance with federal and state securities laws. No further approval or
authority of the shareholders or the Board of Directors is required for the
issuance and sale of the Shares as contemplated herein. The issuance of the
Shares will not violate any preemptive rights, rights of first refusal or
other similar rights to subscribe for or purchase securities of the Company.
There are no authorized or outstanding options, warrants, preemptive rights,
rights of first refusal or other rights to purchase, or equity or debt
securities convertible into or exchangeable or exercisable for, any capital
stock of the Company or any of its Subsidiaries other than those accurately
described in the Prospectus. The description of the Company's stock option,
stock bonus and other stock plans or arrangements, and the options or other
rights granted thereunder, set forth in the Prospectus accurately and fairly
presents the information required to be shown with respect to such plans,
arrangements, options and rights.
(l) Stock Exchange Listing. The Shares have been approved for inclusion
in the Nasdaq National Market, subject only to official notice of issuance.
(m) No Current Material Defaults. Neither the Company nor any of its
Subsidiaries is (i) in violation of its charter, bylaws, partnership
agreement, certificate of partnership or other organizational documents, as
applicable, or (ii) is in default (or, with the giving of notice or lapse of
time, would be in default) ("Default") under any indenture, mortgage, loan or
credit agreement, note, contract, franchise, lease or other instrument to
which the Company or any of its Subsidiaries is a party or by which it or any
of them may be bound, or to which any of the property or assets of the Company
or any of its Subsidiaries is subject (each of the instruments or agreements
listed in clauses (i) and (ii), an "Existing Instrument"), including, without
limitation, the Existing Instruments listed in Schedule 2 hereto, except, in
the case of clause (ii), for such Defaults as would not, individually or in
the aggregate, result in a Material Adverse Change.
(n) Authorization and Non-Contravention of Existing Instruments. The
execution, delivery and performance by the Company, of this Agreement and
consummation of the transactions contemplated hereby and by the Prospectus
(i) have been duly authorized by all necessary corporate, partnership or
member action, as applicable, on the part of the Company
5
and each Subsidiary and will not result in any violation of the provisions of
the charter, bylaws, partnership agreement, partnership certificate or other
organizational documents, as applicable, of the Company or any Subsidiary,
(ii) will not conflict with or constitute a breach of, a Default or a Debt
Repayment Triggering Event (as defined below) under, or result in the creation
or imposition of any lien, charge or encumbrance upon any property or assets
of the Company or any of its Subsidiaries pursuant to, any Existing
Instrument, except for such conflicts, breaches, Defaults, liens, charges or
encumbrances as would not, individually or in the aggregate, result in a
Material Adverse Change, (iii) will not require the consent of any other party
to any Existing Instrument except for such consents which have been obtained
in writing by the Company or a Subsidiary, as applicable (the "Written
Consents") and except for such consents as the failure of which to obtain
would not, individually or in the aggregate, result in a Material Adverse
Change, and (iv) will not result in any violation of any law, administrative
regulation or administrative or court decree applicable to the Company or any
Subsidiary. As used herein, a "Debt Repayment Triggering Event" means any
event or condition which gives, or with the giving of notice or lapse of time
would give, the holder of any note, debenture or other evidence of
indebtedness (or any person acting on such holder's behalf) the right to
require the repurchase, redemption or repayment of all or a portion of such
indebtedness by the Company or any of its Subsidiaries.
(o) No Further Authorizations or Approvals Required. No consent,
approval, authorization or other order of, or registration or filing with, any
court or other governmental or regulatory authority or agency, is required for
the execution, delivery and performance by the Company and each Subsidiary, as
applicable, of this Agreement and for consummation of the transactions
contemplated hereby and by the Prospectus, except such as have been obtained
or made and are in full force and effect under the Securities Act, applicable
state securities or blue sky laws and from the National Association of
Securities Dealers, Inc. (the "NASD").
(p) No Material Actions or Proceedings. Except as otherwise disclosed in
the Prospectus, there is no legal or governmental action, suit or proceeding
pending or, to the best of the Company's knowledge, threatened (i) against or
affecting the Company or any of its Subsidiaries, (ii) which has as the
subject thereof any officer or director of, or property owned or leased by,
the Company or any of its Subsidiaries or (iii) relating to environmental or
discrimination matters, where in any such case (1) there is a reasonable
possibility that such action, suit or proceeding might be determined adversely
to the Company or such Subsidiary and (2) any such action, suit or proceeding,
if so determined adversely, would reasonably be expected to result in a
Material Adverse Change or adversely affect the consummation of the
transactions contemplated by this Agreement. No material labor dispute with
the employees of the Company or any of its Subsidiaries exists or, to the best
knowledge of the Company, is threatened or imminent.
(q) Intellectual Property Rights. The Company and its Subsidiaries own or
possess all material trademarks, trade names, patent rights, copyrights,
licenses, approvals, trade secrets, service marks and other similar rights
including, without limitation, rights to the names "Novastar Financial, Inc.,"
"NFI Holding Corporation" and "Novastar Mortgage, Inc." (collectively,
"Intellectual Property Rights") reasonably necessary to conduct their
businesses
6
as now conducted; and the expected expiration of any of such Intellectual
Property Rights would not result in a Material Adverse Change. Neither the
Company nor any of its Subsidiaries has received any notice of infringement or
conflict with asserted Intellectual Property Rights of others, which
infringement or conflict, if the subject of an unfavorable decision, would
result in a Material Adverse Change. The Company has no knowledge of any
material infringement by it of any Intellectual Property Rights of others.
(r) Compliance with All Applicable Laws. Each of the Company and each
Subsidiary is conducting business in compliance with all applicable state,
federal and foreign laws, rules and regulations, except where failure to be in
compliance, if the subject of an unfavorable decision, ruling or finding,
would not singly or in the aggregate result in a Material Adverse Change.
Neither the Company nor any of its Subsidiaries is subject to any state,
federal or foreign regulations other than those expressly set forth in the
Prospectus under the caption "Business-Regulation."
(s) All Necessary Permits, Licenses, etc. The Company and each
Subsidiary possess all certificates, authorizations, licenses or permits
issued by the appropriate state, federal or foreign regulatory agencies or
bodies necessary to conduct their respective businesses, and neither the
Company nor any Subsidiary has received any notice of proceedings relating to
the revocation or modification of, or non-compliance with, any such
certificate, authorization, license or permit which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding, could
result in a Material Adverse Change.
(t) Title to Properties. The Company and each of its Subsidiaries has
good and marketable title to all the properties and assets reflected as owned
in the financial statements referred to in Section 1(k) above (or elsewhere in
the Prospectus), in each case free and clear of any security interests,
mortgages, liens, encumbrances, equities, claims and other defects, except
such as do not materially and adversely affect the value of such property and
do not materially interfere with the use made or proposed to be made of such
property by the Company or such Subsidiary. The real property, improvements,
equipment and personal property held under lease by the Company or any
Subsidiary are held under valid and enforceable leases, with such exceptions
as are not material and do not materially interfere with the use made or
proposed to be made of such real property, improvements, equipment or personal
property by the Company or such Subsidiary. Each of the Company and its
Subsidiaries owns or leases all such real and personal property as is
reasonably necessary to its operations as now conducted and as proposed to be
conducted.
(u) Tax Law Compliance. The Company and its Subsidiaries have filed all
material federal, state and foreign income and franchise tax returns and have
paid all taxes required to be paid by any of them and, if due and payable, any
related or similar assessment, fine or penalty levied against any of them,
except those being contested in good faith and for which adequate reserves
have been taken in conformity with generally accepted accounting principles
and the nonpayment of which does not in any way jeopardize the Company's
status as a REIT. The Company has made adequate charges, accruals and reserves
in the applicable financial statements referred to in Section 1(k) above in
respect of all federal, state and foreign income and franchise taxes for all
periods as to which the tax liability of the Company or any of its
Subsidiaries has not been finally determined.
7
(v) REIT Status. The Company is operating and will operate in such a
manner as to qualify as a REIT under Sections 856 through 860 of the Tax Code;
and the Company will not revoke its election to be taxed as a REIT under the
Tax Code. The Company does not know of any event or condition which would
cause or is likely to cause the Company to fail to qualify as a REIT at any
time.
(w) Company Not an "Investment Company". The Company has been advised of
the rules and requirements under the Investment Company Act of 1940, as
amended (the "Investment Company Act"). Neither the Company nor any Subsidiary
is, or after receipt of payment for the Shares will be, an "investment
company" within the meaning of Investment Company Act. The Company and each
Subsidiary and will conduct its business in a manner so that it will not
become subject to the Investment Company Act.
(x) Insurance. Except as otherwise disclosed in the Prospectus, each of
the Company and its Subsidiaries are insured by recognized, financially sound
and reputable institutions with policies in such amounts and with such
deductibles and covering such risks as are generally deemed adequate and
customary for their businesses including, but not limited to, policies
covering the Company and its Subsidiaries against business interruptions and
policies covering real and personal property owned or leased by the Company
and its Subsidiaries against theft, damage, destruction, acts of vandalism and
earthquakes. The Company has no reason to believe that it or any Subsidiary
will not be able (i) to renew its existing insurance coverage as and when such
policies expire or (ii) to obtain comparable coverage from similar
institutions as may be necessary or appropriate to conduct its business as now
conducted and at a cost that would not result in a Material Adverse Change.
Neither of the Company nor any Subsidiary has been denied any insurance
coverage which it has sought or for which it has applied.
(y) No Price Stabilization or Manipulation. None of the Company or any
Subsidiary has taken or will take, directly or indirectly, any action designed
to or that might be reasonably expected to cause or result in stabilization or
manipulation of the price of any security of the Company to facilitate the
sale or resale of the Shares.
(z) No Broker or Finder Fees. Except as otherwise disclosed in the
Prospectus, neither the Company nor any affiliate of the Company has incurred
any liability for a fee, commission or other compensation on account of the
employment or engagement of a broker or finder in connection with the
transactions contemplated by this Agreement.
(aa) Related Party Transactions. There are no business relationships or
related-party transactions involving the Company or any Subsidiary or any
other person required to be described in the Prospectus which have not been
described as required.
(ab) No Unlawful Contributions or Other Payments. Neither the Company nor
any of its Subsidiaries nor, to the Company's knowledge, any employee or agent
of the Company or any Subsidiary, has (i) made any contribution or other
payment to any official of, or candidate for, any federal, state or foreign
office in violation of any law or of the character required to be disclosed in
the Prospectus or (ii) made any payment to any federal or state
8
governmental officer or official, or other person charged with similar public
or quasi-public duties, other than payments required or permitted by the laws
of the Shared States or any jurisdiction thereof.
(ac) Company's Accounting System. The Company and its Subsidiaries
maintain and will continue to maintain a system of accounting controls
sufficient to provide reasonable assurances that (i) transactions are executed
in accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to assets is permitted only
in accordance with management's general or specific authorization; and (iv)
the recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(ad) Compliance with Environmental Laws. Except as would not,
individually or in the aggregate, result in a Material Adverse Change (i)
neither the Company nor any of its Subsidiaries is in violation of any
federal, state, local or foreign law or regulation relating to pollution or
protection of human health or the environment (including, without limitation,
ambient air, surface water, groundwater, land surface or subsurface strata) or
wildlife, including without limitation, laws and regulations relating to
emissions, discharges, releases or threatened releases of chemicals,
pollutants, contaminants, wastes, toxic substances, hazardous substances,
petroleum and petroleum products (collectively, "Materials of Environmental
Concern"), or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Materials of
Environment Concern (collectively, "Environmental Laws"), which violation
includes, but is not limited to, noncompliance with any permits or other
governmental authorizations required for the operation of the business of the
Company or its Subsidiaries under applicable Environmental Laws, or
noncompliance with the terms and conditions thereof, nor has the Company or
any of its Subsidiaries received any written communication, whether from a
governmental authority, citizens group, employee or otherwise, that alleges
that the Company or any of its Subsidiaries is in violation of any
Environmental Law; (ii) there is no claim, action or cause of action filed
with a court or governmental authority, no investigation with respect to which
the Company has received written notice, and no written notice by any person
or entity alleging potential liability for investigatory costs, cleanup costs,
governmental responses costs, natural resources damages, property damages,
personal injuries, attorneys' fees or penalties arising out of, based on or
resulting from the presence, or release into the environment, of any Material
of Environmental Concern at any location owned, leased or operated by the
Company or any of its Subsidiaries, now or in the past (collectively,
"Environmental Claims"), pending or, to the Company's knowledge, threatened
against the Company or any of its Subsidiaries or any person or entity whose
liability for any Environmental Claim the Company or any of its Subsidiaries
has retained or assumed either contractually or by operation of law; and (iii)
to the Company's knowledge, there are no past or present actions, activities,
circumstances, conditions, events or incidents, including, without limitation,
the release, emission, discharge, presence or disposal of any Material of
Environmental Concern, that reasonably could result in a violation of any
Environmental Law or form the basis of a potential Environmental Claim against
the Company or any of its Subsidiaries or against any person or entity whose
liability for any Environmental Claim the
9
Company or any of its Subsidiaries has retained or assumed either
contractually or by operation of law.
(ae) Periodic Review of Costs of Environmental Compliance. Prior to
originating any commercial mortgage or foreclosing or taking a deed in lieu
with respect to any property, the Company conducts a review of the effect of
Environmental Laws on such property and the operations conducted thereon, in
the course of which it identifies and evaluates associated costs and
liabilities (including, without limitation, any capital or operating
expenditures required for clean-up or compliance with Environmental Laws or
any permit, license or approval, any related constraints on operating
activities and any potential liabilities to third parties). On the basis of
such review and the amount of its established reserves, the Company has
reasonably concluded that to date such associated costs and liabilities with
respect to any such properties would not, individually or in the aggregate,
result in a Material Adverse Change.
(af) ERISA Compliance. The Company and its Subsidiaries and any "employee
benefit plan" (as defined under the Employee Retirement Income Security Act of
1974, as amended, and the regulations and published interpretations thereunder
(collectively, "ERISA")) established or maintained by the Company, its
Subsidiaries or their "ERISA Affiliates" (as defined below) are in compliance
in all material respects with ERISA. "ERISA Affiliate" means, with respect to
the Company or a Subsidiary, any member of any group of organizations
described in Sections 414(b),(c),(m) or (o) of the Internal Revenue Code of
1986, as amended, and the regulations and published interpretations thereunder
(the "Code") of which the Company or such Subsidiary is a member. No
"reportable event" (as defined under ERISA) has occurred or is reasonably
expected to occur with respect to any "employee benefit plan" established or
maintained by the Company, its Subsidiaries or any of their ERISA Affiliates.
No "employee benefit plan" established or maintained by the Company, its
Subsidiaries or any of their ERISA Affiliates, if such "employee benefit plan"
were terminated, would have any "amount of unfunded benefit liabilities" (as
defined under ERISA). Neither the Company, its Subsidiaries nor any of their
ERISA Affiliates has incurred or reasonably expects to incur any liability
under (i) Title IV of ERISA with respect to termination of, or withdrawal
from, any "employee benefit plan" or (ii) Sections 412, 4971, 4975 or 4980B of
the Code. Each "employee benefit plan" established or maintained by the
Company, its Subsidiaries or any of their ERISA Affiliates that is intended to
be qualified under Section 401(a) of the Code is so qualified and nothing has
occurred, whether by action or failure to act, which would cause the loss of
such qualification.
(ag) Material Contracts. There are no contracts or other documents
required to be described in the Registration Statement or to be filed as
exhibits to the Registration Statement by the Securities Act which have not
been described or filed as required. Neither the Company nor any of its
Subsidiaries is subject to any collective bargaining agreements.
Any certificate signed by an officer of the Company, and delivered to the
Representatives or to counsel for the Underwriters, shall be deemed to be a
representation and warranty by the Company to each Underwriter as to the matters
set forth therein.
10
Section 2. Purchase, Sale and Delivery of the Shares.
(a) The Firm Shares. The Company agrees to issue and sell to the several
Underwriters the Firm Shares upon the terms herein set forth. On the basis of
the representations, warranties and agreements herein contained, and upon the
terms but subject to the conditions herein set forth, the Underwriters agree,
severally and not jointly, to purchase from the Company the respective number of
Firm Shares set forth opposite their names on Schedule 1. The purchase price per
Firm Share to be paid by the several Underwriters to the Company shall be $[___]
per Share.
(b) The First Closing Date. Delivery of the Firm Shares to be purchased
by the Underwriters and payment therefor shall be made at the offices of Xxxxxx,
Xxxxxxxx & Company, Incorporated, 000 Xxxxx Xxxxxxxx, Xxxxx 0000, Xx. Xxxxx,
Xxxxxxxx (or such other place as may be agreed to by the Company and the
Representatives) at 9:00 a.m. New York City time, on [___], or such other time
and date not later than 1:30 p.m. New York City time, on [___] as the
Representatives shall designate by notice to the Company (the time and date of
such closing are called the "First Closing Date"). The Company hereby
acknowledges that circumstances under which the Representatives may provide
notice to postpone the First Closing Date as originally scheduled include, but
are in no way limited to, any determination by the Company or the
Representatives to recirculate to the public copies of an amended or
supplemented Prospectus or a delay as contemplated by the provisions of Section
10.
(c) The Optional Shares; the Second Closing Date. In addition, on the
basis of the representations, warranties and agreements herein contained, and
upon the terms but subject to the conditions herein set forth, the Company
hereby grants an option to the several Underwriters to purchase, severally and
not jointly, up to an aggregate of 450,000 Optional Shares from the Company at
the purchase price per Share to be paid by the Underwriters for the Firm Shares.
The option granted hereunder is for use by the Underwriters solely in covering
any over-allotments in connection with the sale and distribution of the Firm
Shares. The option granted hereunder may be exercised at any time (but not more
than once) upon notice by the Representatives to the Company, which notice may
be given at any time within 30 days from the date of this Agreement. Such notice
shall set forth (i) the aggregate number of Optional Shares as to which the
Underwriters are exercising the option, (ii) the names and denominations in
which the Optional Shares are to be registered and (iii) the time, date and
place at which such securities will be delivered (which time and date may be
simultaneous with, but not earlier than, the First Closing Date; and in such
case the term "First Closing Date" shall refer to the time and date of delivery
of the Firm Shares and the Optional Shares). Such time and date of delivery, if
subsequent to the First Closing Date, is called the "Second Closing Date" and
shall be determined by the Representatives and, unless the Company otherwise
consents, shall not be earlier than three nor later than five full business days
after delivery of such notice of exercise. If any Optional Shares are to be
purchased, each Underwriter agrees, severally and not jointly, to purchase the
number of Optional Shares (subject to such adjustments to eliminate fractional
Shares as the Representatives may determine) that bears the same proportion to
the total number of Optional Shares to be purchased as the number of Firm Shares
set forth on Schedule 1 opposite the name of such Underwriter bears to the total
number of Firm Shares. The Representatives may cancel the option at any time
prior to its expiration by giving written notice of such cancellation to the
Company.
11
(d) Public Offering of the Shares. The Representatives hereby advise the
Company that the Underwriters intend to offer for sale to the public, as
described in the Prospectus, their respective portions of the Shares as soon
after this Agreement has been executed and the Registration Statement has been
declared effective as the Representatives, in their sole judgment, has
determined is advisable and practicable.
(e) Payment for the Shares. Payment for the Shares shall be made at the
First Closing Date (and, if applicable, at the Second Closing Date) by wire
transfer of immediately available funds to the order of the Company or to such
account as the Company may designate.
It is understood that the Representatives have been authorized, for their
own account and the accounts of the several Underwriters, to accept delivery of
and receipt for, and make payment of the purchase price for, the Firm Shares and
any Optional Shares the Underwriters have agreed to purchase. Xxxxxx, Xxxxxxxx &
Company, Incorporated and Xxxxxxxxxx Securities, individually and not as the
Representatives of the Underwriters, may (but shall not be obligated to) make
payment for any Shares to be purchased by any Underwriter whose funds shall not
have been received by the Representatives by the First Closing Date or the
Second Closing Date, as the case may be, for the account of such Underwriter,
but any such payment shall not relieve such Underwriter from any of its
obligations under this Agreement.
(f) Delivery of the Shares.
(i) The Company shall deliver, or cause to be delivered, to the
Representatives for the accounts of the several Underwriters certificates for
the Firm Shares at the First Closing Date, against the irrevocable release of
a wire transfer of immediately available funds for the amount of the purchase
price therefor. The Company shall also deliver, or cause to be delivered, to
the Representatives for the accounts of the several Underwriters, certificates
for the Optional Shares the Underwriters have agreed to purchase at the First
Closing Date or the Second Closing Date, as the case may be, against the
irrevocable release of a wire transfer of immediately available funds for the
amount of the purchase price therefor. The certificates for the Shares shall
be in definitive form and registered in such names and denominations as the
Representatives shall have requested at least two full business days prior to
the First Closing Date (or the Second Closing Date, as the case may be) and
shall be made available for inspection on the business day preceding the First
Closing Date (or the Second Closing Date, as the case may be) at a location in
New York City as the Representatives may designate.
(ii) Notwithstanding the terms of the preceding subsection 2(f)(i) or
elsewhere in this Agreement that contemplate physical certificates for the
Shares, upon the Company's request but only with the consent of the
Representatives the Shares may be issued without certificates and constructive
delivery of such uncertificated Shares to the Underwriter may be accomplished
through the FAST system of The Depository Trust Company by the Company causing
the transfer agent and registrar of the Shares, on the applicable Closing
Date, to issue one or more Depository Trust Company Book Entry Positions,
representing in the aggregate the number of Shares to be delivered to the
Representatives on such Closing Date, to such account or accounts as shall be
specified by the Representatives in an instruction letter or other
communication to the Company or such transfer agent.
12
(g) Time of the Essence. Time shall be of the essence, and delivery at the
time and in the manner specified in this Agreement is a further condition to the
obligations of the Underwriters.
(h) Delivery of Prospectus to the Underwriters. Not later than 12:00 p.m.
on the second business day following the date the Shares are released by the
Underwriters for sale to the public, the Company shall deliver or cause to be
delivered copies of the Prospectus in such quantities and at such places as the
Representatives shall request.
Section 3. Additional Covenants of Company.
The Company further covenants and agrees with each Underwriter as follows:
(a) Representatives' Review of Proposed Amendments and Supplements. During
such period beginning on the date hereof and ending on the later of the First
Closing Date or such date, as in the opinion of counsel for the Underwriters,
the Prospectus is no longer required by law to be delivered in connection with
sales by an Underwriter or dealer (the "Prospectus Delivery Period"), prior to
amending or supplementing the Registration Statement (including any
registration statement filed under Rule 462(b) under the Securities Act) or
the Prospectus, the Company shall furnish to the Representatives for review a
copy of each such proposed amendment or supplement, and the Company shall not
file any such proposed amendment or supplement to which the Representatives
reasonably object.
(b) Securities Act Compliance. After the date of this Agreement, the
Company shall promptly advise the Representatives in writing (i) of the
receipt of any comments of, or requests for additional or supplemental
information from, the Commission, (ii) of the time and date of any filing of
any post-effective amendment to the Registration Statement or any amendment or
supplement to any preliminary prospectus or the Prospectus, (iii) of the time
and date that any post-effective amendment to the Registration Statement
becomes effective and (iv) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or any post-
effective amendment thereto or of any order preventing or suspending the use
of any preliminary prospectus or the Prospectus, or of any proceedings to
remove, suspend or terminate from listing or quotation the Shares or Common
Stock from any securities exchange upon which any of such securities is listed
for trading or included or designated for quotation, or of the threatening or
initiation of any proceedings for any of such purposes. If the Commission
shall enter any such stop order at any time, the Company will use its best
efforts to obtain the lifting of such order at the earliest possible moment.
Additionally, the Company agrees that it shall comply with the provisions of
Rules 424(b), 430A and 434, as applicable, under the Securities Act and will
use its reasonable efforts to confirm that any filings made by the Company
under such Rule 424(b) were received in a timely manner by the Commission.
(c) Amendments and Supplements to the Prospectus and Other Securities Act
Matters. If, during the Prospectus Delivery Period, any event shall occur or
condition exist as a result of which it is necessary to amend or supplement
the Prospectus in order to make the statements therein, in the light of the
circumstances when the Prospectus is delivered to a
13
purchaser, not misleading, or if in the opinion of the Representatives or
counsel for the Underwriters it is otherwise necessary to amend or supplement
the Prospectus to comply with law, the Company agrees promptly to prepare
(subject to Section 3(a) hereof), file with the Commission and furnish at its
own expense to the Underwriters and to dealers, amendments or supplements to
the Prospectus so that the statements in the Prospectus as so amended or
supplemented will not, in the light of the circumstances when the Prospectus
is delivered to a purchaser, be misleading or so that the Prospectus, as
amended or supplemented, will comply with law.
(d) Copies of any Amendments and Supplements to the Prospectus. The
Company agrees to furnish the Representatives, without charge, during the
Prospectus Delivery Period, as many copies of the Prospectus and any
amendments and supplements thereto as the Representatives may reasonably
request.
(e) Press Releases. If at any time during the ninety (90) day period
after the Registration Statement becomes effective, any rumor, publication or
event relating to or affecting the Company or its Subsidiaries shall occur as
a result of which in the Representatives' opinion the market price of the
Shares has been or is likely materially to be affected (regardless of whether
such rumor, publication or event necessitates a supplement or amendment to the
Prospectus), the Company will, after written notice from the Representatives
advising the Company to the effect set forth above, promptly prepare, consult
with the Representatives concerning the content of, and disseminate a press
release or other public statement, reasonably satisfactory to the
Representatives, responding to or commenting on such rumor, publication or
event.
(f) Blue Sky Compliance. The Company shall cooperate with the
Representatives and counsel for the Underwriters to qualify or register the
Shares for sale under (or obtain exemptions from the application of) the Blue
Sky or state or provincial or Canadian securities laws of those jurisdictions
designated by the Representatives, shall comply with such laws and shall
continue such qualifications, registrations and exemptions in effect so long
as required for the distribution of the Shares. The Company shall not be
required to qualify as a foreign corporation or to take any action that would
subject it to general service of process in any such jurisdiction where it is
not presently qualified or where it would be subject to taxation as a foreign
corporation. The Company will advise the Representatives promptly of the
suspension of the qualification or registration of (or any such exemption
relating to) the Shares for offering, sale or trading in any jurisdiction or
any initiation or threat of any proceeding for any such purpose, and in the
event of the issuance of any order suspending such qualification, registration
or exemption, the Company shall use its best efforts to obtain the withdrawal
thereof at the earliest possible moment.
(g) Uncertificated Shares. In the event that any portion of the Shares is
issued without certificates pursuant to section 2-210 of the Maryland General
Corporation Law (the "MGCL") and as may be permitted under Section 2(f) above,
at the time of issue of such Shares the Company shall send, or cause to be
sent, to the shareholder a written statement of the information required on
certificates by section 2-211 of the MGCL, and shall otherwise maintain full
compliance with sections 2-210 and 2-211 of the MGCL.
14
(h) Use of Proceeds. The Company and its Subsidiaries shall apply the net
proceeds from the sale of the Shares sold by it in the manner described under
the caption "Use of Proceeds" in the Prospectus. The Company will not use the
proceeds of the sale of the Shares in such a manner as to require the Company
or any Subsidiary to be registered under the Investment Company Act.
(i) Transfer Agent. The Company shall engage and maintain, at its
expense, a transfer agent and registrar for the Shares and Common Stock.
(j) Continuing inclusion in the Nasdaq National Market. The Company will
use its reasonable best efforts to continue the inclusion of the Shares in the
Nasdaq National Market and will continue to comply in all material respects
with all of the rules and regulations thereof applicable to the Company and
the trading of such securities.
(k) Earnings Statement. As soon as practicable, the Company will make
generally available to its security holders and to the Representatives an
earnings statement (which need not be audited) covering the twelve-month
period ending on the final day of the Company's first quarter that ends at
least one year after "the effective date of the Registration Statement" (as
defined in Rule 158(c) under the Securities Act) that satisfies the provisions
of Section 11(a) of the Securities Act.
(l) Periodic Reporting Obligations. During the Prospectus Delivery Period
the Company shall file, on a timely basis, with the Commission and the Nasdaq
National Market all reports and documents required to be filed under the
Securities Exchange Act of 0000 (xxx "Xxxxxxxx Xxx"). Additionally, the
Company shall file with the Commission all reports on Form SR as may be
required under Rule 463 under the Securities Act.
(m) Agreement Not To Offer or Sell Additional Securities. During the
period of 180 days following the date of the Prospectus, the Company will not,
without the prior written consent of Xxxxxx, Xxxxxxxx & Company, Incorporated
(which consent may be withheld at the sole discretion of Xxxxxx, Xxxxxxxx &
Company, Incorporated), directly or indirectly, sell, offer, contract or grant
any option to sell, pledge, transfer or establish an open "put equivalent
position" within the meaning of Rule 16a-1(h) under the Exchange Act, or
otherwise dispose of or transfer, or announce the offering of, or file any
registration statement under the Securities Act in respect of, any Shares,
shares of Common Stock, options or warrants to acquire shares of the Common
Stock or securities exchangeable or exercisable for or convertible into shares
of Common Stock (other than as contemplated by this Agreement with respect to
the Shares and other than a registration statement on Form S-8 with respect to
any stock option plan, stock bonus or other stock plan or arrangement
described in the Prospectus); provided, however, that the Company may issue
the Warrant Shares; and provided, further, that pursuant to any stock option,
stock bonus or other stock plan or arrangement described in the Prospectus,
the Company may issue shares of its Common Stock or options to purchase its
Common Stock, or Common Stock upon exercise of options, but only if the
holders of such shares, options, or shares issued upon exercise of such
options, agree in writing not to sell, offer, dispose of or otherwise transfer
any such shares or options during such 365 day period without the prior
written consent of Stifel,
15
Nicolaus & Company, Incorporated (which consent may be withheld at the sole
discretion of Xxxxxx, Xxxxxxxx & Company, Incorporated).
(n) Future Reports to the Representatives. During the period of three
years hereafter the Company will furnish to the Xxxxxx, Xxxxxxxx & Company,
Incorporated at 000 Xxxxx Xxxxxxxx, Xxxxx 0000, Xx. Xxxxx, Xxxxxxxx 00000,
Attention: Xx. Xxxx X. Xxxxxx, to Xxxxxxxxxx Securities at 000 Xxxxxxxxxx
Xxxxxx, Xxx Xxxxxxxxx, Xxxxxxxxxx 00000, Attention: Xx. Xxxxxxxx Xxxxxx, and
to O'Melveny & Xxxxx LLP at the address set forth in Section 13: (i) as soon
as practicable after the end of each fiscal year, copies of the Annual Report
of the Company containing the balance sheet of the Company as of the close of
such fiscal year and statements of income, shareholders' equity and cash flows
for the year then ended and the opinion thereon of the Company's independent
public or certified public accountants; (ii) as soon as practicable after the
filing thereof, copies of each proxy statement, Annual Report on Form 10-K,
Quarterly Report on Form 10-Q, Current Report on Form 8-K or other report
filed by the Company with the Commission, the NASD or any securities exchange;
and (iii) as soon as available, copies of any report or communication of the
Company mailed generally to holders of its capital stock.
(o) REIT Status. The Company shall operate so as to qualify as a REIT in
accordance with the requirements of Sections 856-860 of the Tax Code, and
shall not revoke its election to be taxed as a REIT. The Company will use its
best efforts to comply with the representations made as support for the
opinion letter rendered by the Company's tax counsel under the REIT provisions
of the Code, the form of which opinion is filed as exhibit 8.1 to the
Registration Statement.
(p) Accounting and Tax Advice. The Company will engage and retain a "Big
6" Accounting Firm as its qualified accountants and such tax experts at such
accounting firm with experience in advising REITs as are reasonably acceptable
to the Representatives for a period of not less than two years beginning on
the First Closing Date to assist the Company in developing appropriate
accounting systems and testing procedures and to conduct quarterly compliance
reviews designed to determine compliance with the REIT provisions of the Tax
Code and the maintenance of Company's exempt status under the Investment
Company Act. Any written reports of such compliance reviews shall be made
available to the Representatives.
(q) Commodities Exchange Act. The Company will not, and will not permit
any of its Subsidiaries to, invest in futures contracts, options on futures
contracts or options on commodities unless such entities are exempt from the
registration requirements of the Commodity Exchange Act, as amended, or
otherwise comply with the Commodity Exchange Act, as amended.
(r) Investment Advisors Act. The Company will not, and will not permit
any of its Subsidiaries to, engage in any activity which would cause or
require such entity to register as an investment advisor under the Investment
Advisors Act of 1940. Without limiting the generality of the foregoing, the
Company will not, and will not permit any Subsidiary to, (i) render investment
advice to more than fifteen clients, (ii) hold itself out generally to the
16
public as an investment advisor, or (iii) act as an investment advisor to
any investment company that is registered under the Investment Company Act.
(s) Agreements with Management. The Company will, and will cause each
Subsidiary to, in good faith expend reasonable efforts to enforce the terms of
any agreements with Xxxxx X. Xxxxxxx and W. Xxxxx Xxxxxxxx.
(t) SEC Compliance Program and Xxxxxxx Xxxxxxx Compliance Policy. Promptly
after the First Closing Date, the Company shall adopt and implement (i) a
compliance program, reasonably acceptable to counsel for the Underwriters, to
ensure compliance with the reporting requirements under the Exchange Act and
the securities laws generally and (ii) an xxxxxxx xxxxxxx compliance policy,
reasonably acceptable to counsel for the Underwriters, to govern their
employees' and directors' trading in securities of the Company and all Company
affiliates in accordance with federal law and all applicable state and
Canadian blue sky laws.
Xxxxxx, Xxxxxxxx & Company, Incorporated, on behalf of the several
Underwriters, may, in its sole discretion, waive in writing the performance by
the Company of any one or more of the foregoing covenants or extend the time for
their performance.
Section 4. Payment of Expenses. Whether or not the transactions
contemplated herein are consummated or this Agreement becomes effective or is
terminated, the Company agrees to pay all costs, fees and expenses incurred in
connection with the performance of its obligations hereunder and in connection
with the transactions contemplated hereby, including without limitation (i) all
expenses incident to the issuance and delivery of the Shares (including all
printing and engraving costs), (ii) all fees and expenses of the registrar and
transfer agent, (iii) all necessary issue, transfer and other stamp taxes in
connection with the issuance and sale of the Shares to the Underwriters, (iv)
all fees and expenses of the Company's counsel, independent public or certified
pubic accountants and other advisors, (v) all costs and expenses incurred in
connection with the preparation, printing, filing, shipping and distribution of
the Registration Statement (including financial statements, exhibits, schedules,
consents and certificates of experts), each preliminary prospectus and the
Prospectus, and all amendments and supplements thereto, and this Agreement, (vi)
all filing fees, attorneys' fees and expenses incurred by the Company or the
Underwriters in connection with qualifying or registering (or obtaining
exemptions from the qualification or registration of) all or any part of the
Shares for offer and sale under the Blue Sky laws, and, if requested by the
Representatives, preparing and printing a "Blue Sky Survey" or memorandum, and
any supplements thereto, advising the Underwriters of such qualifications,
registrations and exemptions, (vii) the filing fees incident to, and the
reasonable fees and expenses of counsel for the Underwriters in connection with,
the NASD's review and approval of the Underwriters' participation in the
offering and distribution of the Shares, (viii) the fees and expenses associated
with including the Shares and Common Stock in the Nasdaq National Market, and
(ix) all other fees, costs and expenses referred to in Item 14 of Part II of the
Registration Statement. Except as provided in this Section 4, Section 6, Section
8 and Section 9 hereof, the Underwriters shall pay their own expenses, including
the fees and disbursements of their counsel.
17
Section 5. Conditions of the Obligations of the Underwriters. The
obligations of the several Underwriters to purchase and pay for the Shares as
provided herein on the First Closing Date and, with respect to the Optional
Shares, the Second Closing Date, shall be subject to the accuracy of the
representations and warranties on the part of the Company set forth in Section 1
hereof as of the date hereof and as of the First Closing Date as though then
made and, with respect to the Optional Shares, as of the Second Closing Date as
though then made, to the timely performance by the Company of the covenants and
other obligations hereunder, and to each of the following additional conditions:
(a) Accountants' Comfort Letter. On the date hereof, the Representatives
shall have received from KPMG Peat Marwick LLP, independent public or
certified public accountants for the Company, a letter dated the date hereof
addressed to the Underwriters, in form and substance satisfactory to the
Representatives, containing statements and information of the type ordinarily
included in accountant's "comfort letters" to underwriters, delivered
according to Statement of Auditing Standards No. 72 (or any successor
bulletin), with respect to the audited and unaudited financial statements and
certain financial information contained in the Registration Statement and the
Prospectus (and the Representatives shall have received such additional
conformed copies of such accountants' letter as Representatives' counsel shall
reasonably request).
(b) Compliance with Registration Requirements; No Stop Order; No
Objection from NASD. For the period from and after effectiveness of this
Agreement and prior to the First Closing Date and, with respect to the
Optional Shares, the Second Closing Date:
(i) the Company shall have filed the Prospectus with the Commission
(including the information required by Rule 430A under the Securities Act)
in the manner and within the time period required by Rule 424(b) under the
Securities Act; or the Company shall have filed a post-effective amendment
to the Registration Statement containing the information required by such
Rule 430A, and such post-effective amendment shall have become effective;
or, if the Company elected to rely upon Rule 434 under the Securities Act
and obtained the Representatives' consent thereto, the Company shall have
filed a Term Sheet with the Commission in the manner and within the time
period required by such Rule 424(b);
(ii) no stop order suspending the effectiveness of the Registration
Statement, any Rule 462(b) Registration Statement, or any post-effective
amendment to the Registration Statement, shall be in effect and no
proceedings for such purpose shall have been instituted or threatened by
the Commission; and
(iii) the NASD shall have raised no objection to the fairness and
reasonableness of the underwriting terms and arrangements.
(c) No Material Adverse Change or Ratings Agency Change. For the period
from and after the date of this Agreement and prior to the First Closing Date
and, with respect to the Optional Shares, the Second Closing Date:
18
(i) in the judgment of the Representatives there shall not have
occurred any Material Adverse Change; and
(ii) there shall not have occurred any downgrading, nor shall any
notice have been given of any intended or potential downgrading or of any
review for a possible change that does not indicate the direction of the
possible change, in the rating accorded any securities of the Company or
any of its Subsidiaries by any "nationally recognized statistical rating
organization" as such term is defined for purposes of Rule 436(g)(2) under
the Securities Act.
(d) Opinion of Counsel for the Company. On each of the First Closing Date
and the Second Closing Date, the Representatives shall have received the
favorable opinion of Xxxxx & Xxxxx, counsel for the Company, dated as of such
Closing Date, the form of which is attached as Exhibit A, which opinion may
rely, as to matters of Maryland corporate law, on the opinion of Piper &
Marbury L.L.P., a copy of which shall be attached to such opinion (and the
Representatives shall have received such additional conformed copies of such
counsel's legal opinions as Representatives' counsel shall reasonably
request).
(e) Opinion of Special Tax Counsel for the Company. On each of the First
Closing Date and the Second Closing Date, the Representatives shall have
received the favorable opinion of Xxxxxxx Xxxxxx Xxxxx & Xxxx, special tax
counsel for the Company, dated as of such Closing Date, stating that in such
counsel's opinion the Company is organized in conformity with the requirements
for qualification as a real estate investment trust under Sections 856 through
860 of the Tax Code; and the Company's method of operations enables it to
continue to meet the requirements for qualification and taxation as a REIT
under the Tax Code. To the best of such counsel's knowledge, there is no event
or condition which would cause or is likely to cause the Company to fail to
qualify as a REIT at any time after the First Closing Date (and the
Representatives shall have received such additional conformed copies of such
counsel's legal opinions as Representatives' counsel shall reasonably
request).
(f) Opinion of Counsel for the Underwriters. On each of the First
Closing Date and the Second Closing Date, the Representatives shall have
received the favorable opinion of O'Melveny & Xxxxx LLP, counsel for the
Underwriters, dated as of such Closing Date, with respect to such matters as
the Representatives shall have reasonably requested.
(g) Officers' Certificates. On each of the First Closing Date and the
Second Closing Date, the Representatives shall have received written
certificates executed on behalf of the Company by its Chief Executive Officer
or President and its Chief Financial Officer or Chief Accounting Officer,
dated as of such Closing Date, certifying as to such matters as the
Representatives shall have reasonably requested, including, without
limitation, the matters set forth in subsections (b)(ii) and (c)(ii) of this
Section 5, and further to the effect that:
(i) for the period from and after the date of this Agreement and
prior to such Closing Date, there has not occurred any Material Adverse
Change;
19
(ii) the representations, warranties and covenants of the Company set
forth in Section 1 of this Agreement are true and correct with the same
force and effect as though expressly made on and as of such Closing Date;
and
(iii) the Company and its Subsidiaries have complied with all the
agreements and satisfied all the conditions on its part to be performed or
satisfied at or prior to such Closing Date under this Agreement.
(h) Bring-down Comfort Letter. On each of the First Closing Date and the
Second Closing Date, the Representatives shall have received from KPMG Peat
Marwick LLP, independent public or certified public accountants for the
Company, a letter dated as of such Closing Date, in form and substance
satisfactory to the Representatives, to the effect that they reaffirm the
statements made in the letter furnished by them pursuant to subsection (a) of
this Section 5, except that the specified date referred to therein for the
carrying out of procedures shall be no more than three business days prior to
the First Closing Date or Second Closing Date, as the case may be (and the
Representatives shall have received such additional conformed copies of such
accountants' letter as Representatives' counsel shall reasonably request).
(i) Lock-Up Agreement from Certain Persons. On the date hereof, the
Company shall have furnished to the Representatives a lock-up for 180 days
following the date of the Prospectus in the form of Exhibit B hereto from each
director, officer and each beneficial owner of Shares or Common Stock (as
defined and determined according to Rule 13d-3 under the Exchange Act, except
that a 365 day period shall be used rather than the sixty day period set forth
therein), and such agreement shall be in full force and effect on each of the
First Closing Date and the Second Closing Date.
(j) Written Consents. On or before the First Closing Date, the Company
shall have furnished to the Representatives copies of the Written Consents
(referred to in Section 1(q)) under certain Existing Instruments.
(k) Additional Documents. On or before each of the First Closing Date
and the Second Closing Date, the Representatives and counsel for the
Underwriters shall have received such additional certificates, information,
documents and opinions as they may reasonably require for the purposes of
enabling them to pass upon the issuance and sale of the Shares as contemplated
herein, or in order to evidence the accuracy of any of the representations and
warranties, or the satisfaction of any of the conditions or agreements, herein
contained.
(l) Nasdaq Inclusion. The Shares shall have been approved for inclusion
in the Nasdaq National Market, subject to official notice of issuance.
If any condition specified in this Section 5 is not satisfied when and as
required to be satisfied, this Agreement may be terminated by the
Representatives by notice to the Company at any time on or prior to the First
Closing Date and, with respect to the Optional Shares, at any time prior to the
Second Closing Date, which termination shall be without liability on the part of
any party to any other party, except that Section 4, Section 6, Section 8 and
Section 9 shall at all times be effective and shall survive such termination.
20
Section 6. Reimbursement of Underwriters' Expenses. If this Agreement is
terminated by the Representatives pursuant to Section 5, Section 7, Section 10
or Section 11, or if the sale to the Underwriters of the Shares on the First
Closing Date is not consummated because of any refusal, inability or failure on
the part of the Company to perform any agreement herein or to comply with any
provision hereof, the Company agrees to reimburse the Representatives and the
other Underwriters (or such Underwriters as have terminated this Agreement with
respect to themselves), severally, upon demand for all out-of-pocket expenses
that shall have been reasonably incurred by the Representatives and the
Underwriters in connection with the proposed purchase and the offering and sale
of the Shares, including but not limited to fees and disbursements of counsel,
printing expenses, travel expenses, postage, facsimile and telephone charges.
Section 7. Effectiveness of this Agreement.
This Agreement shall not become effective until the later of (i) the
execution of this Agreement by the parties hereto and (ii) notification by the
Commission to the Company and the Representatives of the effectiveness of the
Registration Statement under the Securities Act.
Prior to such effectiveness, this Agreement may be terminated by any party
by notice to each of the other parties hereto, and any such termination shall be
without liability on the part (a) of the Company to any Underwriter, except that
the Company shall be obligated to reimburse the expenses of the Representatives
and the Underwriters pursuant to Sections 4 and 6 hereof, (b) of any Underwriter
to the Company, or (c) of any party hereto to any other party except that the
provisions of Section 8 and Section 9 shall at all times be effective and shall
survive such termination.
Section 8. Indemnification.
(a) Indemnification of the Underwriters by the Company. The Company
agrees to indemnify and hold harmless each Underwriter, its officers and
employees, and each person, if any, who controls any Underwriter within the
meaning of the Securities Act and the Exchange Act against any loss, claim,
damage, liability or expense, as incurred, to which such Underwriter or such
controlling person may become subject, under the Securities Act, the Exchange
Act or other federal, state or Canadian statutory law or regulation, or at
common law or otherwise (including in settlement of any litigation, if such
settlement is effected with the written consent of the Company, insofar as
such loss, claim, damage, liability or expense (or actions in respect thereof
as contemplated below) arises out of or is based (i) upon any untrue statement
or alleged untrue statement of a material fact contained in the Registration
Statement, or any amendment thereto, including any information deemed to be a
part thereof pursuant to Rule 430A or Rule 434 under the Securities Act, or
the omission or alleged omission therefrom of a material fact required to be
stated therein or necessary to make the statements therein not misleading; or
(ii) upon any untrue statement or alleged untrue statement of a material fact
contained in any preliminary prospectus or the Prospectus (or any amendment or
supplement thereto), or the omission or alleged omission
21
therefrom of a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; or (iii) in whole or in part upon any inaccuracy in the
representations and warranties of the Company contained herein; or (iv) in
whole or in part upon any failure of the Company to perform its obligations
hereunder or under law; or (v) any act or failure to act or any alleged act or
failure to act by any Underwriter in connection with, or relating in any
manner to, the Shares or the offering contemplated hereby, and which is
included as part of or referred to in any loss, claim, damage, liability or
action arising out of or based upon any matter covered by clause (i) or (ii)
above, provided that the Company shall not be liable under this clause (v) to
the extent that a court of competent jurisdiction shall have determined by a
final judgment that such loss, claim, damage, liability or action resulted
directly from any such acts or failures to act undertaken or omitted to be
taken by such Underwriter through its gross negligence or willful misconduct;
and to reimburse each Underwriter and each such controlling person for any and
all expenses (including the fees and disbursements of counsel chosen by the
Representatives as such expenses are reasonably incurred by such Underwriter
or such controlling person in connection with investigating, defending,
settling, compromising or paying any such loss, claim, damage, liability,
expense or action; provided, however, that the foregoing indemnity agreement
shall not apply to any loss, claim, damage, liability or expense to the
extent, but only to the extent, arising out of or based upon any untrue
statement or alleged untrue statement or omission or alleged omission made in
reliance upon and in conformity with written information furnished to the
Company by the Representatives expressly for use in the Registration
Statement, any preliminary prospectus or the Prospectus (or any amendment or
supplement thereto); and provided, further, that with respect to any
preliminary prospectus, the foregoing indemnity agreement shall not inure to
the benefit of any Underwriter from whom the person asserting any loss, claim,
damage, liability or expense purchased Shares, or any person controlling such
Underwriter, if copies of the Prospectus were timely delivered to the
Underwriter pursuant to Section 2 and a copy of the Prospectus (as then
amended or supplemented if the Company shall have furnished any amendments or
supplements thereto) was not sent or given by or on behalf of such Underwriter
to such person, if required by law so to have been delivered, at or prior to
the written confirmation of the sale of the Shares to such person, and if the
Prospectus (as so amended or supplemented) would have cured the defect giving
rise to such loss, claim, damage, liability or expense. The indemnity
agreement set forth in this Section 8(a) shall be in addition to any
liabilities that the Company may otherwise have.
(b) Indemnification of the Company, its Directors and Officers. Each
Underwriter agrees, severally and not jointly, to indemnify and hold harmless
the Company, each of its directors, each of its officers who signed the
Registration Statement, and each person, if any, who controls the Company,
within the meaning of the Securities Act or the Exchange Act, against any
loss, claim, damage, liability or expense, as incurred, to which the Company,
any such director or officer, or any such controlling person may become
subject, under the Securities Act, the Exchange Act, or other federal or state
statutory law or regulation, or at common law or otherwise (including in
settlement of any litigation, if such settlement is effected with the written
consent of such Underwriter), insofar as such loss, claim, damage, liability
or expense (or actions in respect thereof as contemplated below) arises out of
or is based upon any untrue or alleged untrue statement of a material fact
contained in the Registration Statement, any preliminary prospectus or the
Prospectus (or any amendment or
22
supplement thereto), or arises out of or is based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in the Registration
Statement, any preliminary prospectus, the Prospectus (or any amendment or
supplement thereto), in reliance upon and in conformity with written
information furnished to the Company by the Representatives expressly for use
therein; and to reimburse the Company, any such director or officer, or any
such controlling person for any legal and other expense reasonably incurred by
the Company, any such director or officer, or any such controlling person in
connection with investigating, defending, settling, compromising or paying any
such loss, claim, damage, liability, expense or action. The Company hereby
acknowledges that the only information that the Underwriters have furnished to
the Company expressly for use in the Registration Statement, any preliminary
prospectus or the Prospectus (or any amendment or supplement thereto) are the
statements set forth (1) as the last two paragraphs on the inside front cover
page of the Prospectus concerning stabilization and passive market making by
the Underwriters and (2) in the table in the first paragraph and in the third
paragraph under the caption "Underwriting" in the Prospectus; and the
Underwriters confirm that such statements are correct. The indemnity agreement
set forth in this Section 8(b) shall be in addition to any liabilities that
each Underwriter may otherwise have.
(c) Notifications and Other Indemnification Procedures. Promptly after
receipt by an indemnified party under this Section 8 of notice of the
commencement of any action, such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party under this Section 8,
notify the indemnifying party in writing of the commencement thereof, but the
omission so to notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party for contribution or
otherwise than under the indemnity agreement contained in this Section 8 or to
the extent it is not prejudiced as a proximate result of such failure. In case
any such action is brought against any indemnified party and such indemnified
party seeks or intends to seek indemnity from an indemnifying party, the
indemnifying party will be entitled to participate in, and, to the extent that
it shall elect, jointly with all other indemnifying parties similarly
notified, by written notice delivered to the indemnified party promptly after
receiving the aforesaid notice from such indemnified party, to assume the
defense thereof with counsel reasonably satisfactory to such indemnified
party; provided, however, if the defendants in any such action include both
the indemnified party and the indemnifying party and the indemnified party
shall have reasonably concluded that a conflict may arise between the
positions of the indemnifying party and the indemnified party in conducting
the defense of any such action or that there may be legal defenses available
to it and/or other indemnified parties which are different from or additional
to those available to the indemnifying party, the indemnified party or parties
shall have the right to select separate counsel to assume such legal defenses
and to otherwise participate in the defense of such action on behalf of such
indemnified party or parties. Upon receipt of notice from the indemnifying
party to such indemnified party of such indemnifying party's election so to
assume the defense of such action and approval by the indemnified party of
counsel, the indemnifying party will not be liable to such indemnified party
under this Section 8 for any legal or other expenses subsequently incurred by
such indemnified party in connection with the defense thereof unless (i) the
indemnified party shall have employed separate counsel in accordance with the
proviso to the next preceding sentence (it being understood, however,
23
that the indemnifying party shall not be liable for the expenses of more than
one separate counsel (together with local counsel), approved by the
indemnifying party (Xxxxxx, Xxxxxxxx & Company, Incorporated in the case of
Section 8(b) and Section 9), representing the indemnified parties who are
parties to such action) or (ii) the indemnifying party shall not have employed
counsel satisfactory to the indemnified party to represent the indemnified
party within a reasonable time after notice of commencement of the action, in
each of which cases the fees and expenses of counsel shall be at the expense
of the indemnifying party.
(d) Settlements. The indemnifying party under this Section 8 shall not be
liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the indemnifying party agrees to indemnify the indemnified
party against any loss, claim, damage, liability or expense by reason of such
settlement or judgment. Notwithstanding the foregoing sentence, if at any time
an indemnified party shall have requested an indemnifying party to reimburse
the indemnified party for fees and expenses of counsel as contemplated by
Section 8(c) hereof, the indemnifying party agrees that it shall be liable for
any settlement of any proceeding effected without its written consent if (i)
such settlement is entered into more than 30 days after receipt by such
indemnifying party of the aforesaid request and (ii) such indemnifying party
shall not have reimbursed the indemnified party in accordance with such
request prior to the date of such settlement. No indemnifying party shall,
without the prior written consent of the indemnified party, effect any
settlement, compromise or consent to the entry of judgment in any pending or
threatened action, suit or proceeding in respect of which any indemnified
party is or could have been a party and indemnity was or could have been
sought hereunder by such indemnified party, unless such settlement, compromise
or consent includes an unconditional release of such indemnified party from
all liability on claims that are the subject matter of such action, suit or
proceeding.
Section 9. Contribution.
If the indemnification provided for in Section 8 is for any reason held to
be unavailable to or otherwise insufficient to hold harmless an indemnified
party in respect of any losses, claims, damages, liabilities or expenses
referred to therein, then each indemnifying party shall contribute to the
aggregate amount paid or payable by such indemnified party, as incurred, as a
result of any losses, claims, damages, liabilities or expenses referred to
therein (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company, on the one hand, and the Underwriters, on the
other hand, from the offering of the Shares pursuant to this Agreement or (ii)
if the allocation provided by clause (i) above is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative fault of the
Company, on the one hand, and the Underwriters, on the other hand, in connection
with the statements or omissions or inaccuracies in the representations and
warranties herein which resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The relative
benefits received by the Company, on the one hand, and the Underwriters, on the
other hand, in connection with the offering of the Shares pursuant to this
Agreement shall be deemed to be in the same respective proportions as the total
net proceeds from the offering of the Shares pursuant to this Agreement (before
deducting
24
expenses) received by the Company, and the total underwriting discount received
by the Underwriters, in each case as set forth on the front cover page of the
Prospectus (or, if Rule 434 under the Securities Act is used, the corresponding
location on the Term Sheet) bear to the aggregate initial public offering price
of the Shares as set forth on such cover. The relative fault of the Company, on
the one hand, and the Underwriters, on the other hand, shall be determined by
reference to, among other things, whether any such untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a material
fact or any such inaccurate or alleged inaccurate representation or warranty
relates to information supplied by the Company, on the one hand, or the
Underwriters, on the other hand, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission.
The amount paid or payable by a party as a result of the losses, claims,
damages, liabilities and expenses referred to above shall be deemed to include,
subject to the limitations set forth in Section 8(c), any legal or other fees or
expenses reasonably incurred by such party in connection with investigating or
defending any action or claim. The provisions set forth in Section 8(c) with
respect to notice of commencement of any action shall apply if a claim for
contribution is to be made under this Section 9; provided, however, that no
additional notice shall be required with respect to any action for which notice
has been given under Section 8(c) for purposes of indemnification.
The Company and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 9 were determined by pro rata
allocation (even if for such purpose the Underwriters were treated as one entity
or by any other method of allocation which does not take account of the
equitable considerations referred to in this Section 9.
Notwithstanding the provisions of this Section 9, no Underwriter shall be
required to contribute any amount in excess of the underwriting commissions
received by such Underwriter in connection with the Shares underwritten by it
and distributed to the public. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations to contribute pursuant to this
Section 9 are several, and not joint, in proportion to their respective
underwriting commitments as set forth opposite their names in Schedule 1. For
purposes of this Section 9, each officer and employee of an Underwriter and each
person, if any, who controls an Underwriter within the meaning of the Securities
Act and the Exchange Act shall have the same rights to contribution as such
Underwriter; and each director of the Company, each officer of the Company who
signed the Registration Statement, and each person, if any, who controls the
Company within the meaning of the Securities Act and the Exchange Act shall have
the same rights to contribution as the Company.
Section 10. Default of One or More of the Several Underwriters. If, on the
First Closing Date or the Second Closing Date, as the case may be, any one or
more of the several Underwriters shall fail or refuse to purchase Shares that it
or they have agreed to purchase hereunder on such date, and the aggregate number
of Shares which such defaulting Underwriter
25
or Underwriters agreed but failed or refused to purchase does not exceed 10% 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 on Schedule 1 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 may be specified by
the Representatives with the consent of the non-defaulting Underwriters, to
purchase the Shares which such defaulting Underwriter or Underwriters agreed but
failed or refused to purchase on such date. If, on the First Closing Date or the
Second Closing Date, as the case may be, any one or more of the Underwriters
shall fail or refuse to purchase Shares and the aggregate number of Shares with
respect to which such default occurs exceeds 10% of the aggregate number of
Shares to be purchased on such date, and arrangements satisfactory to the
Representatives and the Company for the purchase of such Shares are not made
within 48 hours after such default, this Agreement shall terminate without
liability of any party to any other party except that the provisions of Section
4, Section 6, Section 8 and Section 9 shall at all times be effective and shall
survive such termination. In any such case either the Representatives or the
Company shall have the right to postpone the First Closing Date or the Second
Closing Date, as the case may be, but in no event for longer than seven days in
order that the required changes, if any, to the Registration Statement and the
Prospectus or any other documents or arrangements may be effected.
As used in this Agreement, the term "Underwriter" shall be deemed to
include any person substituted for a defaulting Underwriter under this Section
10. Any action taken under this Section 10 shall not relieve any defaulting
Underwriter from liability in respect of any default of such Underwriter under
this Agreement.
Section 11. Termination of this Agreement. Prior to the First Closing Date
this Agreement maybe terminated by the Representatives by notice given to the
Company if at any time (i) trading or quotation in any of the Company's
securities shall have been suspended or limited by the Commission or by the
Nasdaq Stock Market, or trading in securities generally on either the Nasdaq
Stock Market or the New York Stock Exchange shall have been suspended or
limited, or minimum or maximum prices shall have been generally established on
any of such stock exchanges by the Commission or the NASD; (ii) a general
banking moratorium shall have been declared by any of federal, California,
Missouri or New York authorities; (iii) there shall have occurred any outbreak
or escalation of national or international hostilities or any crisis or
calamity, or any change in the Shared States or international financial markets,
or any substantial change or development involving a prospective substantial
change in Shared States' or international political, financial or economic
conditions, in each case which in the judgment of the Representatives is
material and adverse and makes it impracticable to market the Shares in the
manner and on the terms described in the Prospectus or to enforce contracts for
the sale of securities; (iv) in the judgment of the Representatives there shall
have occurred any Material Adverse Change; or (v) the Company or its
Subsidiaries shall have sustained a loss by strike, fire, flood, earthquake,
accident or other calamity of such character as in the judgment of the
Representatives may interfere materially with the conduct of the business and
operations of such entity regardless of whether or not such loss shall have been
insured. Any termination pursuant to this Section 11 shall be without liability
on the part of (a) the Company to any Underwriter, except that the Company shall
be obligated to reimburse the expenses of the Representatives and
26
the Underwriters pursuant to Sections 4 and 6 hereof, (b) any Underwriter to the
Company, or (c) of any party hereto to any other party except that the
provisions of Section 8 and Section 9 shall at all times be effective and shall
survive such termination.
Section 12. Representations and Indemnities to Survive Delivery. The
respective indemnities, agreements, representations, warranties and other
statements of the Company and its officers and of the several Underwriters set
forth in or made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation made by or on behalf of any Underwriter
or the Company or any of its or their partners, officers or directors or any
controlling person, as the case may be, and will survive delivery of and payment
for the Shares sold hereunder and any termination of this Agreement.
Section 13. Notices. All communications hereunder shall be in writing and
shall be mailed, hand delivered or telecopied and confirmed to the parties
hereto as follows:
If to the Representatives:
Xxxxxx, Xxxxxxxx & Company, Incorporated
000 Xxxxx Xxxxxxxx, Xxxxx 0000
Xx. Xxxxx, Xxxxxxxx 00000
Facsimile: 000-000-0000
Attention: Xx. Xxxx X. Xxxxxx
and
Xxxxxxxxxx Securities
000 Xxxxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Facsimile: ________________
Attention: ________________
with a copy to:
O'Melveny & Xxxxx LLP
Embarcadero Center West
000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000-0000
Facsimile: (000) 000-0000
Attention: Xxxxx X. Xxxxx, Esq.
27
If to the Company:
Novastar Financial, Inc.
0000 Xxxx 00xx Xxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxx 00000
Facsimile: ______________
Attention: Mr. W. Xxxxx Xxxxxxxx
with a copy to:
Xxxxx & Xxxxx
Xxx Xxxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Facsimile: ______________
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Any party hereto may change the address for receipt of communications by giving
written notice to the others.
Section 14. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto, including any substitute Underwriters pursuant
to Section 10 hereof, and to the benefit of the employees, officers and
directors and controlling persons referred to in Section 8 and Section 9, and in
each case their respective successors, and no other person will have any right
or obligation hereunder. The term "successors" shall not include any purchaser
of the Shares as such from any of the Underwriters merely by reason of such
purchase.
Section 15. Partial Unenforceability. The invalidity or unenforceability of
any Section, paragraph or provision of this Agreement shall not affect the
validity or enforceability of any other Section, paragraph or provision hereof.
If any Section, paragraph or provision of this Agreement is for any reason
determined to be invalid or unenforceable, there shall be deemed to be made such
minor changes (and only such minor changes) as are necessary to make it valid
and enforceable.
Section 16. (a) Governing Law Provisions. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN SUCH STATE.
(b) Consent to Jurisdiction. Any legal suit, action or proceeding arising
out of or based upon this Agreement or the transactions contemplated hereby
("Related Proceedings") may be instituted in the federal courts of the Shared
States of America located in the City and County of New York or the courts of
the State of New York in each case located in the City and County
28
of New York (collectively, the "Specified Courts"), and each party irrevocably
submits to the exclusive jurisdiction (except for proceedings instituted in
regard to the enforcement of a judgment of any such court (a "Related
Judgment"), as to which such jurisdiction is non-exclusive) of such courts in
any such suit, action or proceeding. Service of any process, summons, notice or
document by mail to such party's address set forth above shall be effective
service of process for any suit, action or other proceeding brought in any such
court. The parties irrevocably and unconditionally waive any objection to the
laying of venue of any suit, action or other proceeding in the Specified Courts
and irrevocably and unconditionally waive and agree not to plead or claim in any
such court that any such suit, action or other proceeding brought in any such
court has been brought in an inconvenient forum.
Section 17. General Provisions. This Agreement constitutes the entire
agreement of the parties to this Agreement and supersedes all prior written or
oral and all contemporaneous oral agreements, understandings and negotiations
with respect to the subject matter hereof. This Agreement may be executed in two
or more counterparts, each one of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement may not be amended or modified unless in writing by all of the
parties hereto, and no condition herein (express or implied) may be waived
unless waived in writing by each party whom the condition is meant to benefit.
The Table of Contents and the Section headings herein are for the convenience of
the parties only and shall not affect the construction or interpretation of this
Agreement. In this Agreement unless the context otherwise requires, (i) singular
words shall connote the plural number as well as the singular and vice versa,
and the masculine shall include the feminine and the neuter, and (ii) all
references to particular articles, sections, subsections, clauses or exhibits
are references to articles, sections, subsections, clauses or exhibits of this
Agreement.
Each of the parties hereto acknowledges that it is a sophisticated business
person who was adequately represented by counsel during negotiations regarding
the provisions hereof, including, without limitation, the indemnification
provisions of Section 8 and the contribution provisions of Section 9, and is
fully informed regarding said provisions. Each of the parties hereto further
acknowledges that the provisions of Sections 8 and 9 hereto fairly allocate the
risks in light of the ability of the parties to investigate the Company, its
affairs and its business in order to assure that adequate disclosure has been
made in the Registration Statement, any preliminary prospectus and the
Prospectus (and any amendments and supplements thereto), as required by the
Securities Act and the Exchange Act.
29
If the foregoing is in accordance with your understanding of our agreement,
kindly sign and return to the Company the enclosed copies hereof, whereupon this
instrument, along with all counterparts hereof, shall become a binding agreement
in accordance with its terms.
Very truly yours,
NOVASTAR FINANCIAL, INC.
By: __________________________
Name:
Title:
The foregoing Underwriting Agreement is hereby confirmed and accepted by
the Representatives in St. Louis, Missouri as of the date first above written.
XXXXXX, XXXXXXXX & COMPANY, INCORPORATED
XXXXXXXXXX SECURITIES
Acting as Representatives of the several
Underwriters named in the attached Schedule 1.
----------
By: XXXXXX, XXXXXXXX & COMPANY, INCORPORATED
By: __________________________
Name:
Title:
SCHEDULE 1
Number of
Firm Shares
Underwriters to be Purchased
Xxxxxx, Xxxxxxxx & Company, Incorporated................ [___]
[___] Xxxxxxxxxx Securities............................. [___]
[___]................................................... [___]
[___]................................................... [___]
[___]................................................... [___]
Total................................................ 3,000,000
Schedule 1 - page 1
SCHEDULE 2
Certain Existing Instruments
[To be completed by the Company and its counsel]
Schedule 1 - page 2
EXHIBIT A
Opinion of Counsel for the Company
(to be delivered pursuant to Section 5(d))
The opinion of counsel for the Company (this "Opinion") shall be
addressed to Xxxxxx, Xxxxxxxx & Company, Incorporated and Xxxxxxxxxx Securities,
as representatives of the several underwriters listed in Schedule 1 to the
Underwriting Agreement, shall be dated as of the First Closing Date or the
Second Closing Date, as applicable, shall expressly authorize O'Melveny & Xxxxx
LLP, as counsel for the Underwriters, to rely upon this Opinion in connection
with such firm's opinion to be rendered pursuant to Section 5(e) of the
Underwriting Agreement and shall include as an exhibit any representation
certificate(s) relied upon by counsel for the Company.
In rendering this Opinion, counsel for the Company may rely (1) as to
matters involving the application of laws of any jurisdiction other than the
General Corporation Law of the State of Delaware, the law of the State of New
York or the federal law of the Shared States, to the extent they deem proper and
specified in such opinion, upon the opinion (which shall be dated the First
Closing Date or the Second Closing Date, as the case may be, shall be attached
to the opinion, shall be satisfactory in form and substance to the Underwriters,
and shall expressly state that the Underwriters and O'Melveny & Xxxxx LLP, as
counsel for the Underwriters, may rely on such opinion) of Piper & Marbury
L.L.P.; provided, however, that such counsel shall further state that they
believe that they and the Underwriters and counsel for the Underwriters are
justified in relying upon such opinion of other counsel, and (2) as to matters
of fact, to the extent they deem proper, on certificates of responsible officers
of the Company and public officials.
All capitalized terms used herein without definitions shall have the
meaning given such terms in the Underwriting Agreement to which this Exhibit A
is attached (the "Underwriting Agreement").
* * * *
(a) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Maryland.
(b) The Company is duly qualified as a foreign corporation to transact
business and is in good standing in the State of Kansas and in each other
jurisdiction in which such qualification is required, whether by reason of the
ownership or leasing of property or the conduct of business, except for such
jurisdictions where the failure to so qualify or to be in good standing would
not, individually or in the aggregate, result in a Material Adverse Change.
(c) The Company has all requisite corporate power and authority (i) to own,
lease and operate its properties and to conduct its business as described in the
Prospectus, (ii) to enter into
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and perform its obligations under the Underwriting Agreement and (iii) to issue,
sell and deliver the Shares to the Underwriters pursuant to the Underwriting
Agreement.
(d) Each Subsidiary of the Company is a corporation, limited partnership or
limited liability company, as the case may be, duly organized or formed, as the
case may be, validly existing and in good standing under the laws of its
jurisdiction of its incorporation or formation.
(e) Each Subsidiary is duly qualified as a foreign corporation to transact
business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except for such jurisdictions where the
failure to so qualify or to be in good standing would not, individually or in
the aggregate, result in a Material Adverse Change.
(f) Each Subsidiary has all requisite corporate power and authority (i) to
own, lease and operate its properties and to conduct its business as described
in the Prospectus both currently and after giving effect to the Offering and use
of proceeds as described in the Prospectus.
(g) To such counsel's knowledge, the Company does not own or control,
directly or indirectly, any corporation, association or other entity other than
the Subsidiaries listed in Exhibit 21 to the Registration Statement.
(h) The authorized, issued and outstanding capital stock of the Company is
as set forth in the Prospectus under the caption "Capitalization." The issued
and outstanding shares of Common Stock have been, and the Shares, upon issuance
and delivery against payment therefor in the manner described in the
Underwriting Agreement, will be, duly authorized and validly issued, fully paid
and nonassessable, and were not or, upon issuance, will not be, issued (i) in
violation of or subject to any preemptive rights, or other rights to subscribe
for or purchase any securities of the Company arising from the charter or bylaws
of the Company, the Maryland General Corporation Law or, to the best knowledge
of such counsel, otherwise or (ii) in violation of any federal or state
securities laws. The terms and provisions of the Shares conform in all material
respects to the descriptions thereof contained in the Prospectus.
(i) Except as disclosed in the Prospectus, no stockholder of the Company or
any other person has any preemptive right, right of first refusal or other
similar right to subscribe for or purchase securities of the Company arising by
operation of the charter or bylaws of the Company, the Maryland General
Corporation Law or, to the best knowledge of such counsel, otherwise. Except as
disclosed in the Prospectus, to the best knowledge of such counsel, there are no
persons with registration or other similar rights to have any equity or debt
securities registered for sale under the Registration Statement or included in
the offering contemplated by the Underwriting Agreement, except for such rights
as have been duly waived.
(j) The forms of certificates used to evidence the Shares and the Common
Stock are in due and proper form and comply with all applicable requirements of
the charter and bylaws of the Company and the Maryland General Corporation Law.
In connection with any sale of securities to the Underwriters without
certificates under the Underwriting Agreement, the Company has fully complied
with sections 2-210 and 2-211 of the Maryland General Corporation Law.
A-2
(k) The description of the Company's dividend reinvestment plan, stock
option, stock bonus and other stock plans or arrangements, and the options or
other rights granted and exercised thereunder, set forth in the Prospectus
accurately and fairly presents the information required to be shown with respect
to such plans, arrangements, options and rights.
(l) All of the issued and outstanding capital stock, membership interests
or other equity interests of each Subsidiary (i) has been duly authorized and
validly issued and is fully paid and non-assessable, (ii) except as otherwise
disclosed in the Prospectus, is owned by the Company, directly or through
Subsidiaries, free and clear of any security interest, mortgage, pledge, lien,
encumbrance or, to the best knowledge of such counsel, any pending or threatened
claim, and (iii) has been issued in compliance with all state and federal
securities laws.
(m) The Underwriting Agreement has been duly authorized, executed and
delivered by, and is a valid and binding agreement of, the Company, enforceable
in accordance with its terms, except as the enforcement thereof may be limited
by bankruptcy, insolvency, reorganization, moratorium or other similar laws
related to or affecting creditors' rights generally or by general equitable
principles and, with respect to the Underwriting Agreement, except as rights to
indemnification thereunder may be limited by applicable law.
(n) The execution, delivery and performance of the Underwriting Agreement
by the Company and the consummation of the transaction contemplated thereby and
by the Prospectus by the Company and its Subsidiaries will not (i) result in any
violation of the provisions of the charter, bylaws, partnership agreement or
other similar organization document of the Company or any of its Subsidiaries;
(ii) result in a breach of, or constitute, either immediately or upon notice or
the passage of time or both, a Default or a Debt Repayment Triggering Event
under, or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or any Subsidiary
pursuant to any Existing Instrument listed on Schedule 2 to the Underwriting
Agreement; (iii) not require the consent of any other party to any such Existing
Instrument, or, to such counsel's knowledge, any other agreement or relationship
by which any of the foregoing entities is bound except for such consents which
have been obtained in writing by such entity and except for such consents as the
failure of which to obtain would not, individually or in the aggregate, result
in a Material Adverse Change and (iv) result in any violation of any law,
administrative regulation or administrative or court decree applicable to the
Company or any of it Subsidiaries.
(o) Each of the Registration Statement and the Rule 462(b) Registration
Statement, if any, has been declared effective by the Commission under the
Securities Act. To the best knowledge of such counsel, no stop order suspending
the effectiveness of either of the Registration Statement or the Rule 462(b)
Registration Statement, if any, has been issued under the Securities Act and no
proceedings for such purpose have been instituted or are pending or are
contemplated or threatened by the Commission. Any required filing of the
Prospectus and any supplement thereto pursuant to Rule 424(b) under the
Securities Act has been made in the manner and within the time period required
by such Rule 424(b).
(p) The Registration Statement, including any Rule 462(b) Registration
Statement, the Prospectus, and each amendment or supplement to the Registration
Statement and the Prospectus, as of their respective effective or issue dates
(other than the financial statements and supporting
A-3
schedules included therein or in exhibits to the Registration Statement, as to
which no opinion need be rendered) comply as to form in all material respects
with the applicable requirements of the Securities Act.
(q) The Shares have been approved for inclusion in the Nasdaq National
Market.
(r) The statements (i) in the Prospectus under the captions "Risk Factors,"
"Description of Securities," "Management's Discussion and Analysis and Results
of Operations," "Business," "Certain Relationships and Related Transactions,"
"Shares Eligible for Future Sale," "Certain Provisions of Maryland Law and the
Company's Charter and Bylaws," "Federal Income Tax Considerations," "ERISA
Investors" and "Underwriting" and (ii) in Item 33 (Recent Sales of Unregistered
Securities) and Item 34 (Indemnification of Directors and Officers) of the
Registration Statement, insofar as such statements constitute matters of law,
summaries of legal matters, the Company's charter or bylaw provisions, documents
or legal proceedings, or legal conclusions, has been reviewed by such counsel
and fairly present and summarize, in all material respects, the matters referred
to therein.
(s) To the best knowledge of such counsel, there are no Existing
Instruments required to be described or referred to in the Registration
Statement or to be filed as exhibits thereto other than those described or
referred to therein or filed as exhibits thereto; and the descriptions thereof
and references thereto are correct in all material respects.
(t) No consent, approval, authorization or other order of, or registration
or filing with, any court or other governmental authority or agency, is required
for the execution, delivery and performance of the Company Documents and the
Formation Documents or the consummation of the transactions contemplated thereby
and by the Prospectus by the Company and its Subsidiaries, except, in the case
of the Company, as required under the Securities Act, applicable state
securities or blue sky laws and from the NASD.
(u) To the best knowledge of such counsel, neither the Company nor any of
its Subsidiaries (i) is in violation of its charter or bylaws, partnership
agreement, partnership certificate or other organization document, as
applicable, or any law, administrative regulation or administrative or court
decree applicable to such entity or (ii) is in Default in the performance or
observance of any obligation, agreement, covenant or condition contained in any
material agreement, except in the case of clause (ii) for such Defaults as would
not, individually or in the aggregate, result in a Material Adverse Change.
(v) The descriptions of the law and the legal conclusions contained in the
Prospectus under the caption "Federal Income Tax Considerations" are correct in
all material respects, and the discussion thereunder fairly summarizes the
federal income tax considerations that are likely to be material to a holder of
the Shares.
(w) The descriptions of the law and the legal conclusions contained in the
Prospectus under the caption "ERISA Investors" are correct in all material
respects, and the discussion thereunder fairly summarizes the considerations
that are likely to be material to a fiduciary of a Plan (as defined in the
Prospectus).
A-4
(x) Each of the Company and each Company affiliate is not and, after
receipt of payment for the Shares, use of the proceeds of the offering as
described in the Prospectus, will not be an "investment company" within the
meaning of Investment Company Act of 1940 or otherwise subject to regulation
under the Investment Company Act of 1940.
(y) The proposed methods of operations of the Company and its Subsidiaries,
as described in the Prospectus, will not cause or require any such entity to
register as an investment advisor under the Investment Advisors Act of 1940.
(z) The legal opinion of Piper & Marbury L.L.P. attached hereto as Exhibit
A is satisfactory in form to such counsel, and such counsel believes the
Underwriters and counsel for the Underwriters are justified in relying on it.
In addition, such counsel shall state that they have participated in
conferences with officers and other representatives of the Company,
representatives of the independent public or certified public accountants for
the Company and with representatives of the Underwriters at which the contents
of the Registration Statement and the Prospectus, and any supplements or
amendments thereto, and related matters were discussed and, although such
counsel is not passing upon and does not assume any responsibility for the
accuracy, completeness or fairness of the statements contained in the
Registration Statement or the Prospectus (other than as specified above), and
any supplements or amendments thereto, on the basis of the foregoing, nothing
has come to their attention which would lead them to believe that either the
Registration Statement or any amendments thereto, at the time the Registration
Statement or such amendments became effective, contained an untrue statement of
a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading or that the
Prospectus, as of its date or at the First Closing Date or the Second Closing
Date, as the case may be, contained an untrue statement of a material fact or
omitted to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading (it being understood that such counsel need express no belief as to
the financial statements or schedules or other financial or statistical data
derived therefrom, included in the Registration Statement or the Prospectus or
any amendments or supplements thereto).
A-5
EXHIBIT B
Form of Directors' and Officers' Lock-Up Agreement
(to be delivered pursuant to Section 5(i))
[Pricing Date]
Xxxxxx, Xxxxxxxx & Company, Incorporated
Xxxxxxxxxx Securities
As Representatives of the Several Underwriters
x/x Xxxxxx, Xxxxxxxx & Company, Incorporated
000 Xxxxx Xxxxxxxx, Xxxxx 0000
Xx. Xxxxx, Xxxxxxxx 00000
RE: Novastar Financial, Inc. (the "Company")
Ladies & Gentlemen:
The undersigned is an owner of record or beneficially of certain shares of
Common Stock of the Company ("Common Stock") or securities convertible into or
exchangeable or exercisable for Common Stock. The Company proposes to carry out
a public offering of the Shares (the "Offering"), for which you will act as the
Representatives of the underwriters. The undersigned recognizes that the
Offering will be of benefit to the undersigned and will benefit the Company. The
undersigned acknowledges that you and the other underwriters are relying on the
representations and agreements of the undersigned contained in this letter in
carrying out the Offering and in entering into underwriting arrangements with
the Company with respect to the Offering.
In consideration of the foregoing, the undersigned hereby agrees that the
undersigned will not, without the prior written consent of Xxxxxx, Xxxxxxxx &
Company, Incorporated (which consent may be withheld in its sole discretion),
directly or indirectly, sell, offer, contract or grant any option to sell
(including without limitation any short sale), pledge, transfer, establish an
open "put equivalent position" within the meaning of Rule 16a-1(h) under the
Securities Exchange Act of 1934, or otherwise dispose of any shares of Common
Stock, options or warrants to acquire shares of Common Stock, or securities
exchangeable or exercisable for or convertible into shares of Common Stock
currently or hereafter owned either of record or beneficially (as defined in
Rule 13d-3 under Securities Exchange Act of 1934, as amended) by the
undersigned, or publicly announce the undersigned's intention to do any of the
foregoing, for a period commencing on the date hereof and continuing through the
close of trading on the date 180 days after the date of the Prospectus. The
undersigned also agrees and consents to the entry of stop transfer instructions
with the Company's transfer agent and registrar against the transfer of shares
of Common Stock or securities convertible into or exchangeable or exercisable
for Common Stock held by the undersigned except in compliance with the foregoing
restrictions.
B-1
With respect to the Offering only, the undersigned waives any registration
rights relating to registration under the Securities Act of any Common Stock
owned either of record or beneficially by the undersigned, including any rights
to receive notice of the Offering.
This agreement is irrevocable and will be binding on the undersigned and the
respective successors, heirs, personal representatives, and assigns of the
undersigned.
------------------------------
Printed Name of Holder
By:
--------------------------
Signature
------------------------------
Printed Name of Person Signing
(and indicate capacity of person signing if
signing as custodian, trustee, or on behalf
of an entity)
B-2
