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EXHIBIT 10.3
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement ("Agreement") is entered into as of
the ___ day of ____________________, 1997, by and among Hanover Capital Mortgage
Holdings, Inc., a Maryland corporation (the "Company"), and the persons listed
on Exhibit A hereto who are signatories to this Agreement (individually, a
"Holder," and collectively, the "Holders").
Whereas, in connection with the formation and capitalization of the
Company, the Holders will contribute ownership and equity interests in certain
businesses in exchange for limited partnership interests in Hanover Capital
Mortgage Holdings, L.P., a limited partnership of which the Company will be the
general partner and the Holders will be the limited partners, all as set forth
in the Company's Registration Statement on Form S-11 (SEC File No. 333-29261);
Whereas, depending on the financial performance of the Company, the
Holders will be entitled to receive additional limited partnership interests in
Hanover Capital Mortgage Holdings, L.P. and/or Common Stock of the Company;
Whereas, the Company may, under certain circumstances, issue shares of
Common Stock to the Holders in exchange for their limited partnership interests
in Hanover Capital Mortgage Holdings, L.P.;
Whereas, the Common Stock of the Company that may be issued to the
Holders in exchange for their limited partnerships interests in Hanover Capital
Mortgage Holdings, L.P. or as performance shares will not be registered under
the Securities Act of 1933, as amended;
Whereas, the parties wish to set forth certain rights of the Holders
with respect to the Common Stock of the Company;
Now, therefore, for and in consideration of the mutual promises set
forth in this Agreement and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
Article I. DEFINITIONS.
1.1 "Agreement" means this Registration Rights Agreement, as amended,
modified, or supplemented from time to time.
1.2 "Closing" means the closing of the sale of the Company's Common
Stock pursuant to the Company's Registration Statement.
1.3 "Closing Date" means the date on which the Closing occurs.
1.4 "Common Stock" means (a) the Company's Common Stock, $.01 par
value, as authorized on the date of this Agreement, and (b) any other securities
into which or for which the
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securities described in (a) may be converted or exchanged pursuant to a plan of
recapitalization, reorganization, merger, sale of assets or otherwise.
1.5 "Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC thereunder, all as in effect
at the time.
1.6 "Holders" means the persons listed on Exhibit A hereto who are
signatories to this Agreement.
1.7 "Partnership" means Hanover Capital Mortgage Holdings, L.P., a
Delaware limited partnership.
1.8 "Registrable Shares" means shares of Common Stock acquired by a
Holder from the Company in exchange for all or any part of the Holder's limited
partnership interests in the Partnership or issued to a Holder by the Company
based on the financial performance of the Company, all as described in the
Registration Statement and the exhibits thereto. As of the Closing Date, each
Holder will own the number of Registrable Shares set forth after his or her name
in Exhibit A attached hereto. Registrable Shares shall cease to be Registrable
Shares upon any sale pursuant to an effective registration statement under the
Securities Act, Section 4(1) of the Securities Act or Securities Act Rule
144(k).
1.9 "Registration Expenses" means all expenses reasonably and actually
incurred by the Company in connection with the preparation, filing and
processing of any registration statement pursuant to Articles II or III below,
as well as the Company's obligations under Article IV below, including, without
limitation, all registration and filing fees, Nasdaq or exchange listing fees,
printing expenses, reasonable and actual fees and expenses of counsel for the
Company, state (and foreign, if applicable) Blue Sky fees and expenses, and any
special accounting and auditing expenses of the Company incident to any such
registration statement, but excluding underwriting discounts, selling
commissions and the fees and expenses of a Holder's own counsel.
1.10 "Registration Statement" means the Registration Statement of the
Company on Form S-11 (SEC File number 333-29261).
1.11 "SEC" means the United States Securities and Exchange Commission.
1.12 "Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations of the SEC thereunder, all as in effect
at the time.
Article II. Required Registration.
2.1 On two occasions, commencing at any time on or after one year after
the Closing Date and provided that the Company is then eligible to use SEC
Registration Statement Form S-3, upon the written request of Holders who would
own not less than 30% of the Registrable Shares that would then be outstanding
if all of the limited partnership interests in the Partnership held by the
Holders were exchanged for Registrable Shares (a "Registration Request"), the
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Company agrees to file with the SEC, no later than 30 days after receipt of the
Registration Request, a shelf registration statement on Form S-3 under
Securities Act Rule 415 or any successor rule (a "Shelf Registration") with
respect to the number of Registrable Shares indicated in the Registration
Request. If not all of the Holders have made the Registration Request, the
Company will notify in writing the other Holders of the Registration Request.
Upon written request by any other Holder given to the Company within 10 business
days after receipt by the Holder of the Company's notification, the Company will
include in the Shelf Registration the number of Registrable Shares requested by
such Holder. The Holders will notify the Company of the method or methods of
distribution they propose to use for the offer and sale of the Registrable
Shares to be included in the Shelf Registration, and such information shall be
included in the prospectus included in the Shelf Registration to the extent such
methods are permitted by applicable law. The Company will use commercially
reasonable efforts to cause any Shelf Registration to be declared effective
under the Securities Act as soon as reasonably practicable.
2.2 The Company will keep any Shelf Registration continuously effective
until the sooner of (i) the date on which all of the Registrable Shares covered
by the Shelf Registration have been sold thereunder, or (ii) 24 months after the
effective date of the Shelf Registration.
2.3 The Company will pay all Registration Expenses in connection with
the first Shelf Registration, and the Holders shall pay all Registration
Expenses in connection with the second Shelf Registration; provided, however,
that the Holders shall be responsible for the payment of (i) any underwriting
discounts or commissions to any broker-dealer attributable to the sale of the
Registrable Shares, (ii) any fees or expenses incurred by the Holders in
connection with any Shelf Registration which, according to the written
instructions of any regulatory authority, the Company is not permitted to pay,
or (iii) the fees and expenses of legal counsel for the Holders.
2.4 The Company shall not be required to effect more than two Shelf
Registrations pursuant to this Article II; provided, however, that a Shelf
Registration shall be deemed satisfied only when a Shelf Registration covering
the applicable Registrable Shares (i) shall have become effective and, if the
method of distribution is a firm commitment underwritten public offering, all
such Registrable Shares have been sold, or (ii) shall have been withdrawn at the
request of the Holders (other than as a result of information concerning the
business or financial condition of the Company which is made known to the
Holders after the Registration Request).
Article III. Incidental Registration.
3.1 If at any time on or after the date that is one year after the
Closing Date, the Company proposes to file a registration statement under the
Securities Act for an offering of securities, the Company shall give written
notice of such proposed registration statement as promptly as practicable (but
in any event not less than 30 days prior to the filing of such registration
statement) to the Holders. If, within 15 business days after receipt of such a
notice, a Holder requests the Company in writing to include any Registrable
Shares that are owned by the Holder, the Company shall include in the
registration statement such number of Registrable Shares as the Holder shall
request. The Company will use commercially reasonable efforts to
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cause all Registrable Shares, with respect to which the Holders have requested
registration, to be registered under the Securities Act to the extent necessary
to permit the distribution thereof in accordance with the intended methods of
distribution specified in the request of such Holders; provided, however, that
the Company shall have the right to postpone or withdraw any registration
effected pursuant to this Article II without obligation to any Holder. The
Company shall not be required to give notice of, or to include Registrable
Shares in, any registration statement if the proposed offering relates solely to
(i) securities to be offered to employees pursuant to an employee benefit plan,
(ii) securities proposed to be issued in exchange for securities or assets of,
or in connection with a merger or consolidation with, another entity, (iii) an
offering of convertible preferred stock of the Company, (iv) securities to be
offered by the Company to holders of any class or series of its then existing
securities, (v) securities issuable upon the conversion of securities which are
the subject of an underwritten redemption, or (vi) securities to be offered or
issued pursuant to a combination of transactions referred to in the preceding
clauses (i) through (v).
3.2 In connection with any registration statement under this Article
III involving an underwritten offering, the Company shall not be required to
include any Registrable Shares in such registration statement unless the Holders
accept the terms of the underwriting, including customary indemnification and
contribution provisions, as agreed between the Company and the underwriters
selected by it. If in the opinion of the managing underwriter(s) of the
offering, it is desirable because of marketing or other factors to limit the
number of Registrable Shares to be included in the offering, then the Company
shall be required to include in the registration only that number of Registrable
Shares, if any, which the managing underwriter believes should be included
therein; provided, however, that no persons or entities other than the Company,
the Holders and other persons or entities holding registration rights shall be
permitted to include securities in the offering. If the number of Registrable
Shares to be included in the offering in accordance with the foregoing is less
than the total number of shares which the Holders of Registrable Shares have
requested to be included, then the Holders of Registrable Shares who have
requested registration and other holders of securities entitled to include them
in the registration statement shall participate in the registration pro rata
based upon their total ownership of shares of Common Stock (giving effect to the
conversion into Common Stock of all securities convertible or exchangeable for
Common Stock). If as a result, any Holder would be entitled to include more
securities than such Holder requested to be registered, the excess shall be
allocated pro rata among the other Holders requesting registration, in the
manner described in the preceding sentence.
3.3 The Company will pay all Registration Expenses in connection with
any registration pursuant to this Article III.
3.4 The Company will keep any registration statement to which this
Article III applies continuously effective, in the case of a firm commitment
underwritten public offering, until each underwriter has completed the
distribution of all securities purchased by it and, in the case of any other
offering, until the earlier of the sale of all Registrable Shares covered
thereby or 180 days after the effective date thereof.
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Article IV. Obligations in connection with Registrations.
4.1 If and whenever the Company is required by the provisions of this
Agreement to use reasonable commercial efforts to effect the registration of any
of the Registrable Shares under the Securities Act, the Company shall:
(a) file with the SEC a registration statement with respect to
such Registrable Shares and use reasonable commercial efforts to cause the
registration statement to become and remain effective for the period set forth
in Article II or III above, as the case may be;
(b) as expeditiously as possible, prepare and file with the
Commission any amendments and supplements to the registration statement and the
prospectus included in the registration statement as may be necessary to keep
the registration statement compliant with the rules, regulations or instructions
applicable to the form of registration statement and the Securities Act
(c) as expeditiously as possible, furnish to each selling
Holder such reasonable numbers of copies of the prospectus, including any
preliminary prospectus, in conformity with the requirements of the Securities
Act, and such other documents as the Holder may reasonably request in order to
facilitate the distribution of the Registrable Shares by the Holder;
(d) as expeditiously as possible, use reasonable commercial
efforts to register or qualify the Registrable Shares covered by the
registration statement under the securities or Blue Sky laws of such states (or
foreign jurisdictions, as applicable) as the Holders shall reasonably request,
and do any and all other acts and things that may be necessary or desirable to
enable the Holders to consummate the distribution in such states of the
Registrable Shares; provided, however, that the Company shall not be required in
connection with this Subsection (d) to qualify as a foreign corporation or
execute a general consent to service of process in any jurisdiction;
(e) keep the Holders informed as to the preparation, filing
and progress of any registration statement; and
(f) give the Holders and their representatives the opportunity
to make such reasonable examination and inquiry into the financial condition and
business of the Company and its affiliates as counsel for the Holders may deem
necessary or prudent in connection with the preparation of the registration
statement or any other materials to be used in connection with the registration
statement.
4.2 If the Company has delivered preliminary or final prospectuses to
the Holders and, after having done so, the prospectus is amended to comply with
the requirements of the Securities Act, the Company shall promptly notify the
Holders and, if requested, the Holders shall immediately cease making offers of
Registrable Shares and return all prospectuses to the Company. The Company shall
promptly provide each Holder with revised prospectuses and,
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following receipt of the revised prospectuses, the Holder may resume making
offers of the Registrable Shares.
4.3 Each Holder with Registrable Shares included in an effective
registration statement will cease making offers or sales pursuant to the
registration statement during any period (not to exceed ten business days) in
which the Company determines that it is in possession of material non-public
information that, for valid business reasons, it wishes to keep confidential and
so notifies the Holders in writing.
4.4 If the Company shall list or maintain the listing of the Common
Stock on any securities exchange or national market system, it will, at its
expense and as necessary to permit the registration and sale of the Holder's
Registrable Shares hereunder, list and maintain such shares thereon.
Article V. Indemnification and Contribution.
5.1 (i) In the case of each registration pursuant to Article II or III
above, the Company agrees to indemnify and hold harmless the Holders (other than
a Holder who is required by the Securities Act to sign the registration
statement, whether or not the Holder actually signs (each a "Signing Holder"))
and each person (if any) who controls any Holder (other than a Signing Holder)
within the meaning of Section 15 of the Securities Act, and (ii) in the case of
each registration pursuant to Article II above, the Company agrees to indemnify
and hold harmless each underwriter, if any, of Registrable Shares and each
person (if any) who controls any such underwriter within the meaning of Section
15 of the Securities Act, against any and all losses, claims, damages, or
liabilities to which they or any of them may become subject under the Securities
Act or any other statute or common law, including any amount paid in settlement
of any litigation, commenced or threatened, if such settlement is effected with
the written consent of the Company, and to reimburse them for any legal or other
expenses incurred by them in connection with investigating any claims and
defending any actions, insofar as any such losses, claims, damages, liabilities,
or actions arise out of or are based upon (a) any untrue statement or alleged
untrue statement of a material fact contained in the registration statement
(including any other document incorporated in the registration statement) filed
to register the sale of the Registrable Shares or any post-effective amendment
thereto or in any filing made in connection with the qualification of the
offering under blue sky or other securities laws of jurisdictions in which the
Registrable Shares are offered (a "Blue Sky Filing"), or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, or (b) any untrue statement or
alleged untrue statement of a material fact contained in any preliminary
prospectus, if used prior to the effective date of such registration statement,
or contained in the final prospectus (as amended or supplemented if the Company
shall have filed with the SEC any amendment thereof or supplement thereto) if
used within the period during which the Company is required to keep current the
registration statement to which such prospectus relates, or the omission or
alleged omission to state therein (if so used) a material fact necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading; provided, however, that (i) a Holder shall not
be entitled to
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indemnification under this Section 5.1 for any losses, claims, damages,
liabilities, or actions arising out of, or based upon, any such untrue statement
or alleged untrue statement, or any such omission or alleged omission, if such
statement or omission was made in reliance upon and in conformity with written
information furnished to the Company by the Holder (acting solely in his or her
capacity as a selling stockholder and not as a director or officer of the
Company) or such underwriter specifically for use in connection with preparation
of the registration statement, any preliminary prospectus or final prospectus
contained in the registration statement, any such amendment or supplement
thereto or any Blue Sky Filing, and (ii) the provisions of this Section 5.1
shall not inure to the benefit of any such underwriter or any person controlling
such underwriter if such underwriter failed to send or give a copy of the final
prospectus to the person asserting the claim at or prior to the written
confirmation of the sale of such shares to such person (and the underwriter was
required to do so) and if the untrue statement or omission concerned has been
corrected in such final prospectus.
5.2 (i) In the case of each registration pursuant to Article II or III,
each Holder agrees, and (ii) in the case of each registration pursuant to
Article II, each underwriter, if any, of Registrable Shares shall agree, in the
same manner and to the same extent as set forth in Section 5.1, to indemnify and
hold harmless the Company, each person (if any) who controls the Company within
the meaning of Section 15 of the Securities Act, the directors of the Company
(other than Signing Holders), and those officers of the Company who shall have
signed any such registration statement (other than Signing Holders), with
respect to any untrue statement or alleged untrue statement in, or omission or
alleged omission from, such registration statement or any post-effective
amendment thereto or any preliminary prospectus or final prospectus (as amended
or supplemented if amended or supplemented as aforesaid) contained in such
registration statement or any Blue Sky Filing, if such statement or omission was
made in reliance upon and in conformity with written information furnished to
the Company by the Holder (acting solely in his or her capacity as a selling
stockholder and not as a director or officer of the Company) or such underwriter
specifically for use in connection with the preparation of the registration
statement, any preliminary prospectus or final prospectus contained in the
registration statement, any such amendment or supplement thereto, or any Blue
Sky Filing.
5.3 (a) Each indemnified party shall, with reasonable promptness after
its receipt of written notice of the commencement of any action against such
indemnified party in respect of which indemnity may be sought from an
indemnifying party under this Article V, notify the indemnifying party or
parties in writing of the commencement thereof.
(b) The omission to notify an indemnifying party shall not relieve it
from any liability which it may have to any indemnified party unless the failure
to give notice materially adversely affects the ability of the indemnifying
party to defend a claim which is the subject of indemnification (in which case
the indemnifying party shall be relieved of its obligation only to the extent of
offsetting any loss, damage, or liability it suffers as a consequence of the
failure against its monetary obligation to the indemnified party).
(c) In case any such action shall be brought against any indemnified
party and the indemnified party shall so notify an indemnifying party of the
commencement thereof, the
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indemnifying party shall be entitled to participate therein and to the extent it
may wish, jointly with any other indemnifying party similarly notified, to
assume the defense thereof with counsel reasonably satisfactory to the
indemnified party and, after notice from the indemnifying party to such
indemnified party of its election to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by such indemnified party in connection
with the defense thereof other than reasonable costs of investigation, except as
provided below.
(d) The indemnified party shall have the right to employ one firm of
separate counsel in each jurisdiction in any such action and participate in the
defense thereof, but the fees and expenses of such counsel shall be paid by the
indemnified party engaging such counsel unless (i) the indemnifying party agrees
to pay the same, (ii) the indemnifying party fails to assume the defense of such
action with counsel reasonably satisfactory to the indemnified party, or (iii)
the named parties to any such action (including any impleaded parties) have been
advised by such counsel that representation of such indemnified party and the
indemnifying party by the same counsel would be inappropriate under applicable
standards of professional conduct (in which case the indemnifying party shall
not have the right to assume the defense of such action on behalf of such
indemnified party). No indemnifying party shall be liable for any settlement
entered into without its consent.
(e) The indemnity agreements contained in this Article V shall be in
addition to any liabilities which the indemnifying party may have pursuant to
law.
5.5 (a) If for any reason the indemnification provisions of this
Article V are either unavailable or insufficient to hold harmless an indemnified
party in respect of any losses, claims, damages, or liabilities referred to
herein, then the party that otherwise would be required to provide
indemnification (for purposes of this Section 5.5, the "Indemnifying Party") in
respect of such losses, claims, damages, or liabilities, shall contribute to the
amount paid or payable by the party that would otherwise be entitled to
indemnification (for purposes of this Section, the "Indemnified Party") as a
result of such losses, claims, damages, liabilities, or expense, in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party and the Indemnified Party, as well as any other relevant equitable
considerations. The relative fault of the Indemnifying Party and Indemnified
Party shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact related to information supplied by the
Indemnifying Party or Indemnified Party, 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 any legal or other fees or expenses reasonably incurred by
such party. In no event shall any Holder of Registrable Shares covered by a
registration be required to contribute an amount greater than the dollar amount
of the proceeds received by the Holder from the sale of Registrable Shares
pursuant to the registration giving rise to the liability.
(b) The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5.5 were determined by pro rata allocation
or by any other method of
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allocation which does not take account of the equitable considerations referred
to in Section 5.5(a). No person or entity determined to have committed a
fraudulent misrepresentation (within the meaning of Section ll(f) of the
Securities Act) shall be entitled to contribution under this Section 5.5 from
any person or entity who was not guilty of such fraudulent misrepresentation.
Article VI. General Provisions.
6.1 The Company agrees to:
(a) contemporaneously with the effective date of the
Registration Statement, to cause its Common Stock to be registered with the SEC
under the Exchanges Act;
(b) comply with the requirements of Rule 144(c) under the
Securities Act with respect to current public information about the Company;
(c) use reasonable commercial efforts to file with the
Commission in a timely manner all reports and other documents required of the
Company under the Securities Act and the Exchange Act; and
(d) furnish to any holder of Registrable Shares upon request
(i) a written statement by the Company as to its compliance with the
requirements of said Rule 144(c), and the reporting requirements of the
Securities Act and the Exchange Act, (ii) a copy of the most recent annual or
quarterly report of the Company, and (iii) such other reports and documents of
the Company as such Holder may reasonably request to avail itself of any similar
rule or regulation of the Commission allowing it to sell any such securities
without registration.
6.2 This Agreement, and the rights of a Holder hereunder, may be
assigned by the Holders to any person or entity to which Registrable Shares or a
limited partnership interest in the Partnership are transferred by the Holder,
and such transferee shall be deemed a "Holder" for purposes of this Agreement;
provided that the transferee provides prior written notice of such assignment to
the Company.
6.3 All communications required or permitted under this Agreement shall
be in writing and shall be deemed to have been given when actually delivered to
the addressee, when deposited in the United States mail, certified, postage
prepaid, return receipt requested, or one business day after delivery to a
reputable overnight delivery service which provides evidence of delivery, to the
Company at its address set forth above and to a Holder at his address set forth
in Exhibit A.
6.4 This Agreement and Exhibit A hereto constitute the entire agreement
of the parties and supersede all prior written agreements and prior and
contemporaneous oral agreements, understandings and negotiations with respect to
the subject matter hereof.
6.5 In addition to any and all other remedies that may be available at
law in the event of any breach of this Agreement, the Holders shall be entitled
to specific performance of the
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agreements and obligations of the Company hereunder and to such other injunctive
or other equitable relief as may be granted by a court of competent
jurisdiction.
6.6 When the context in which words are used in this Agreement
indicates that such is the intent, words in the singular shall include the
plural, and the masculine gender shall include the neuter or female gender.
6.7 This Agreement may be executed in several counterparts, each of
which shall be deemed to be an original copy and all of which together shall
constitute one and the same instrument binding on all parties hereto,
notwithstanding that all parties shall not have signed the same counterpart.
6.8 This Agreement shall be governed by and construed in accordance
with the laws of the state of Maryland.
In witness whereof, each party hereto has duly executed this Agreement
as of the day and year first above written.
Company: Holders:
Hanover Capital Mortgage Holdings, Inc.
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By: Xxxx X. Xxxxxxxx
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Name:
Title:
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Xxxx X. Xxxxxxx
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Xxxxx X. Xxxxxxx
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Xxxxxx X. Xxxxxxxxx
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