Exhibit 1.1
WILSHIRE REAL ESTATE INVESTMENT TRUST INC.
10,000,000 Shares of Common Stock
UNDERWRITING AGREEMENT
March __, 1998
FRIEDMAN, BILLINGS, ▇▇▇▇▇▇ & CO., INC.
PRUDENTIAL SECURITIES INCORPORATED
BLACK & COMPANY, INC.
as Representatives of the several Underwriters
c/o Friedman, Billings, ▇▇▇▇▇▇ & Co., Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Dear Sirs:
Wilshire Real Estate Investment Trust Inc. (the "Company"), Wilshire Real
Estate Partnership L.P. (the "Operating Partnership") and Wilshire Financial
Services Group Inc. ("WFSG") each confirms its agreement (and in the case of
WFSG only as to Sections 9 and 10 hereof) with Friedman, Billings, ▇▇▇▇▇▇ & Co.,
Inc., Prudential Securities Incorporated and Black & Company, Inc. and each of
the other Underwriters listed in Schedule I hereto (collectively, the
"Underwriters"), for whom Friedman, Billings, ▇▇▇▇▇▇ & Co., Inc., Prudential
Securities Incorporated and Black & Company, Inc. are acting as Representatives
(in such capacity, the "Representatives"), with respect to (i) the sale by the
Company, and the purchase by the Underwriters, acting severally and not jointly,
of the respective numbers of shares of Common Stock, par value $0.0001 per
share, of the Company ("Common Stock"), totaling 10,000,000, set forth in
Schedule I hereto and (ii) the grant by the Company to the Underwriters, acting
severally and not jointly, of the option described in Section 1(b) hereof to
purchase all or any part of 1,500,000 additional shares of Common Stock to cover
over-allotments, if any. The 10,000,000 shares of Common Stock (the "Initial
Shares") to be purchased by the Underwriters and all or any part of the
1,500,000 shares of Common Stock subject to the option described in Section 1(b)
hereof that the Underwriters elect to purchase (the "Option Shares") are
hereinafter called, collectively, the "Shares." The Company acknowledges that
at its request, the Underwriters have reserved up to 200,000 of the Initial
Shares for sale to directors, officers and employees of WFSG and its
subsidiaries and members of their immediate families at the initial public
offering price of the Shares net of any underwriting discounts or commissions.
1
The Company has filed with the Securities and Exchange Commission (the
"Commission"), a registration statement on Form S-11 (No. 333-39035) and a
related preliminary prospectus for the registration of the Shares under the
Securities Act of 1933, as amended (the "Securities Act"), and the rules and
regulations thereunder (the "Securities Act Regulations"). The Company has
prepared and filed such amendments thereto, if any, and such amended preliminary
prospectuses, if any, as may have been required to the date hereof, and will
file such additional amendments thereto and such amended prospectuses as may
hereafter be required. The registration statement has been declared effective
under the Securities Act by the Commission. The registration statement as
amended at the time it became effective (including all information deemed to be
a part of the registration statement at the time it became effective pursuant to
Rule 430A(b) of the Securities Act Regulations) is hereinafter called the
"Registration Statement," except that, if the Company files a post-effective
amendment to such registration statement that becomes effective prior to the
Closing Time (as defined below), "Registration Statement" shall refer to such
registration statement as so amended. Any registration statement filed by the
Company pursuant to Rule 462(b) of the Securities Act Regulations is hereinafter
called the "Rule 462(b) Registration Statement," and after such filing the term
"Registration Statement" shall include the 462(b) Registration Statement. Each
prospectus included in the registration statement, or amendments thereof, before
it became effective under the Securities Act and any prospectus filed with the
Commission by the Company with the consent of the Underwriters pursuant to Rule
424(a) of the Securities Act Regulations is hereinafter called the "Preliminary
Prospectus." The term "Prospectus" means the final prospectus, as first filed
with the Commission pursuant to paragraph (1) or (4) of Rule 424(b) of the
Securities Act Regulations.
The Company understands that the Underwriters propose to make a public
offering of the Shares at the initial public offering price (or the initial
public offering price net any underwriting discounts or commissions for certain
purchasers described above) set forth in the Prospectus as soon as the
Representatives deem advisable after this Agreement has been executed and
delivered.
The Company and the Underwriters agree as follows:
1. Sale and Purchase:
-----------------
(a) Initial Shares. Upon the basis of the warranties and representations
and other terms and conditions herein set forth, the Company agrees to sell to
each Underwriter, severally and not jointly, and each Underwriter agrees,
severally and not jointly, to purchase from the Company, at the purchase price
per share of $____, that number of Initial Shares set forth opposite such
Underwriter's name in Schedule I, plus any additional number of Initial Shares
that such Underwriter may become obligated to purchase pursuant to the
provisions of Section 8 hereof, subject to such adjustments among the
Underwriters as the Representatives in their sole discretion shall make to
eliminate any sales or purchases of fractional shares. The Underwriters may
from time to time increase or decrease the public offering price of the Initial
Shares after the initial public offering to such extent as the Underwriters may
determine in accordance with applicable law.
2
(b) Option Shares. In addition, upon the basis of the warranties and
representations and other terms and conditions herein set forth, the Company
hereby grants an option to the Underwriters, severally and not jointly, to
purchase from the Company up to an aggregate of 1,500,000 Option Shares of
Common Stock at the purchase price per share set forth in paragraph (a) above
plus any additional number of Option Shares that such Underwriter may become
obligated to purchase pursuant to the provisions of Section 8 hereof. The
option hereby granted will expire 30 days after the date hereof and may be
exercised in whole or in part from time to time only for the purpose of covering
over-allotments which may be made in connection with the offering and
distribution of the Initial Shares upon notice by the Representatives to the
Company setting forth the number of Option Shares as to which the several
Underwriters are then exercising the option and the time and date of payment and
delivery for such Option Shares. Any such time and date of delivery (a "Date of
Delivery") shall be determined by the Representatives, but shall not be later
than seven full business days nor earlier than two full business days after the
exercise of said option, nor in any event prior to the Closing Time, as
hereinafter defined, unless otherwise agreed by the Representatives and the
Company. If the option is exercised as to all or any portion of the Option
Shares, each of the Underwriters, acting severally and not jointly, will
purchase that proportion of the total number of Option Shares then being
purchased which the number of Initial Shares set forth in Schedule I opposite
the name of such Underwriter bears to the total number of Initial Shares,
subject in each case to such adjustments as the Representatives in their
discretion shall make to eliminate any sales or purchases of fractional shares.
2. Payment and Delivery:
--------------------
(a) Initial Shares. Payment of the purchase price for the Initial Shares
shall be made to the Company by wire transfer or certified or official bank
check payable in federal (same-day) funds at the office of ▇▇▇▇▇▇, ▇▇▇▇ &
▇▇▇▇▇▇▇▇ LLP, ▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (unless another place shall
be agreed upon by the Representatives and the Company) against delivery of the
certificates for the Initial Shares to the Representatives for the respective
accounts of the Underwriters. Unless postponed pursuant to Section 8, such
payment and delivery shall be made at 10:00 a.m., New York City time, on the
third (fourth, if this Agreement is executed and delivered after 4:30 p.m. (New
York City time) on the date hereof) business day after the date hereof;
provided, however, that if the Company has not made available to the
Representatives copies of the Prospectus by not later than 10:00 a.m. (New York
City time) on the second business day following execution and delivery of this
Agreement, the Representatives may, in their sole discretion, postpone such
payment and delivery until no later than two (2) full business days following
delivery of copies of the Prospectus to the Representatives; provided further,
however, that the Underwriters shall cooperate with the Company to meet such
deadline for delivery of copies of the Prospectus. The time at which such
payment and delivery are actually made is hereinafter sometimes called the
"Closing Time." Unless the Representatives elect by notice to the Company and
the Depository Trust Corporation at least two full business days prior to the
Closing Time to take delivery of the Initial Shares by credit through full fast
transfer to the accounts at The Depository Trust Company designated by the
Representatives, certificates for the Initial Shares shall be delivered to the
Representatives in definitive form registered in such
3
names and in such denominations as the Representatives shall specify. For the
purpose of expediting the checking of the certificates for the Initial Shares by
the Representatives, the Company agrees to make such certificates available to
the Representatives for such purpose at least one full business day preceding
the Closing Time.
(b) Option Shares. In addition, payment of the purchase price for the
Option Shares shall be made to the Company by wire transfer or certified or
official bank check payable in federal (same-day) funds at the office of ▇▇▇▇▇▇,
▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, ▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (unless another
place shall be agreed upon by the Representatives and the Company) against
delivery of the certificates for the Option Shares to the Representatives for
the respective accounts of the Underwriters. Such payment and delivery shall be
made at 10:00 a.m., New York City time, on each Date of Delivery. Unless the
Representatives elect by notice to the Company and the Depository Trust
Corporation at least two full business days prior to the Closing Time to take
delivery of the Option Shares by credit through full fast transfer to the
accounts at The Depository Trust Company designated by the Representatives,
certificates for the Option Shares shall be delivered to the Representatives in
definitive form registered in such names and in such denominations as the
Representatives shall specify. For the purpose of expediting the checking of
the certificates for the Option Shares by the Representatives, the Company
agrees to make such certificates available to the Representatives for such
purpose at least one full business day preceding the applicable Date of
Delivery.
3. Representations and Warranties of the Company: The Company and the
---------------------------------------------
Operating Partnership jointly and severally represent and warrant to the
Underwriters as of the date hereof, the Closing Time and each Date of Delivery,
that:
(a) each of the Registration Statement and any Rule 462(b) Registration
Statement has become effective under the Securities Act and no stop order
suspending the effectiveness of the Registration Statement or any Rule 462(b)
Registration Statement has been issued under the Securities Act and no
proceedings for that purpose have been instituted or are pending or, to the
knowledge of the Company, are threatened by the Commission; any request on the
part of the Commission for additional information has been complied with; and
the Commission has not issued any order preventing or suspending the use of any
Preliminary Prospectus.
(b) the Company and the transactions contemplated by this Agreement meet
the requirements and conditions for using a registration statement on Form S-11
under the Securities Act set forth in the General Instructions to Form S-11; the
Preliminary Prospectus and the Registration Statement comply and the Prospectus
and any further amendments or supplements thereto will, when they become
effective or are filed with the Commission, as the case may be, comply in all
material respects with the requirements of the Securities Act and the Securities
Act Regulations and, in each case present, or will present, fairly the
information required to be shown; the Registration Statement did not, and any
amendment thereto will not, in each case as of the applicable effective date,
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading; the each of the Preliminary Prospectuses did not, as of its date,
contain an untrue statement of material fact or omit to state a material fact
necessary in order to make the
4
statements therein, in light of the circumstances under which they were made,
not misleading; and the Prospectus and any amendment or supplement thereto will
not, as of its date, the date of the filing of the Prospectus with the
Commission pursuant to Rule 424(b), at Closing Time and on each Date of Delivery
(if any), contain an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading; provided, however,
that this representation and warranty shall not apply to any statement in or
omission from the Registration Statement or the Prospectus made in reliance upon
and in conformity with information furnished to the Company in writing by any
Underwriter through the Representatives expressly for use in the Registration
Statement or the Prospectus (that information being limited to that described in
the last sentence of the first paragraph of Section 9(b) hereof); provided
further, however, that this representation and warranty insofar as it applies to
the Preliminary Prospectuses shall not inure to the benefit of any Underwriter
(or to the benefit of any person controlling such Underwriter) to the extent
that any omission or alleged untrue statement was corrected in the Prospectus.
(c) each Preliminary Prospectus in paper format was and the Prospectus in
paper format delivered to the Underwriters for use in connection with this
offering will be identical to the electronic submission thereof transmitted to
the Commission pursuant to Regulation S-T of the Securities Act Regulations,
except to the extent permitted by such Regulation S-T.
(d) the Company is a corporation duly organized and validly existing and in
good standing under the laws of the State of Maryland, with full corporate power
and authority to own, lease or operate its respective properties and conduct its
business as described in the Registration Statement and the Prospectus, and to
execute and deliver this Agreement, the management agreement (the "Management
Agreement"), to be entered into at or prior to the Closing Time between the
Company and Wilshire Realty Services Corporation (the "Manager"), in
substantially the form filed as an exhibit to the Registration Statement, the
services agreement (the "Services Agreement"), to be entered into at or prior to
the Closing Time among the Company (as to certain provisions only), WFSG and the
Manager, in substantially the form filed as an exhibit to the Registration
Statement, the servicing agreement to be entered into at or prior to the Closing
Time between the Company and Wilshire Credit Corporation ("WCC"), (the "WCC
Servicing Agreement"), in substantially the form filed as an exhibit to the
Registration Statement, the servicing agreement to be entered into at or prior
to the Closing Time between the Company and Wilshire Servicing Company UK
Limited ("Wilshire UK"), in substantially the form filed as an exhibit to the
Registration Statement (the "European Servicing Agreement," and, together with
the WCC Servicing Agreement, the "Servicing Agreements"), in substantially the
form filed as an exhibit to the Registration Statement, the agreement of limited
partnership (the "Partnership Agreement"), to be entered into at or prior to the
Closing Time between the Company and Small Cap Investors, LLC ("Small Cap"), in
substantially the form filed as an exhibit to the Registration Statement, the
[four] agreements for the acquisition of the Initial Investments, as defined in
the Prospectus, entered into at or prior to Closing Time among the Company, the
Operating Partnership and either Wilshire Properties 1 Inc. ("Wilshire 1"),
Wilshire Properties 2 Inc. ("Wilshire 2"), or Wilshire Funding Corporation, WMFC
1997-1 Inc., and [Wilshire Funding Company UK Limited] (together, the "Selling
WFSG Entities"), as the
5
case may be (collectively, the "Acquisition Agreements"), and the other
agreements described in the Prospectus and listed on Schedule II attached hereto
(the "Other Transaction Documents") and to consummate the transactions described
in each such agreement. The Manager has been duly organized and is validly
existing and in good standing under the laws of the State of Delaware, with full
corporate power and authority to own, lease or operate its properties and
conduct its business as described in the Registration Statement and the
Prospectus and to execute and deliver the Management Agreement and the Services
Agreement and to consummate the transactions described in each such agreement.
The Operating Partnership has been duly formed and is validly existing as a
limited partnership in good standing under the Delaware Revised Uniform Limited
Partnership Act (the "Delaware Act") with full partnership power and authority
to own, lease or operate its properties and conduct its business as described in
the Registration Statement and the Prospectus and to execute and deliver this
Agreement, the Management Agreement, and the Acquisition Agreements in
substantially the form filed as exhibits to the Registration Statement and to
consummate the transactions described in each such agreement. The Operating
Partnership is the only subsidiary of the Company required to be identified in
the Registration Statement.
(e) the authorized and outstanding capital stock of the Company was as of
January 31, 1998, as set forth in the Prospectus under the column entitled
"Actual" under the caption "Capitalization" and conforms in all material
respects to the statements relating thereto contained in the Registration
Statement and the Prospectus. The Initial Shares and the Option Shares, if any,
have been duly authorized for issuance and sale to the Underwriters pursuant to
this Agreement and, when issued and delivered by the Company against payment
therefor in accordance with the terms of this Agreement, will be duly and
validly issued and fully paid and nonassessable; and no preemptive right, co-
sale right, registration right, right of first refusal or other similar right of
shareholders exists with respect to any of the Initial Shares or Option Shares
or the issuance and sale thereof, other than provided for in the Registration
Rights Agreement filed as an exhibit to the Registration Statement. All units
of the Operating Partnership ("Units") to be issued in connection with the
transactions contemplated in the Registration Statement, including, without
limitation, the Units to be issued to the Company, have been duly authorized for
issuance by the Operating Partnership to prospective holders thereof and, when
issued and delivered by the Operating Partnership against payment therefor, will
be validly issued and fully paid and nonassessable (except as provided under the
Delaware Act). Immediately after the Closing Time and assuming no exercise of
the Underwriters' over-allotment option, 10,001,875 Units (9,901,875 Units of
limited partner interest ("LP Units") and 100,000 units of general partner
interest ("GP Units") will be issued and outstanding. Assuming the
Underwriters' over-allotment option is not exercised, the Company will be the
holder of 9,900,000 LP Units, will be the sole general partner of the Operating
Partnership and will be the holder of 100,000 GP Units representing 1% of the
outstanding Units of the Operating Partnership. Immediately after the Closing
Time, Small Cap will be the holder of 1,875 Units. The Units have been and will
be offered and sold at the Closing Time in compliance with all applicable laws,
including, without limitation, federal and state securities laws. The terms of
the Units are accurately described in all material respects in the Registration
Statement and the Prospectus. Except as disclosed in the Registration Statement
and the Prospectus and the
6
financial statements of the Company and the related notes thereto included in
the Registration Statement and the Prospectus, neither the Company nor the
Operating Partnership has outstanding any options to purchase, or any preemptive
rights or other rights to subscribe for or to purchase, any securities or
obligations convertible into, or any contracts or commitments to issue or sell,
shares of its capital stock or its Units, as the case may be, or any such
options, rights, convertible securities or obligations.
(f) the Company, the Operating Partnership and the Manager are duly
qualified or licensed by and in good standing in each jurisdiction in which they
conduct their respective businesses or own or lease property and in which such
qualification is necessary and in which the failure, individually or in the
aggregate, to be so licensed or qualified could have a material adverse effect
on the operations, business, prospects or condition (financial and other) of the
Company and the Operating Partnership, taken as a whole, or the Manager, as the
case may be; and each of the Company, the Operating Partnership and the Manager
is in compliance in all material respects with the laws, rules and regulations
enacted or promulgated by such jurisdictions, except where the failure to comply
would not have a material adverse effect on the operations, business, prospects
or condition (financial or otherwise) of the Company and the Operating
Partnership, taken as a whole, or the Manager, as the case may be.
(g) except as disclosed in the Prospectus, the Operating Partnership is not
currently prohibited, directly or indirectly, from paying any dividends or
distributions to the Company to the extent permitted by applicable law, from
making any other distribution on the Operating Partnership's Units, from
repaying to the Company any loans or advances to the Operating Partnership from
the Company or from transferring any of the property or assets of the Operating
Partnership to the Company.
(h) none of the Company, the Operating Partnership or the Manager is in
breach of, or in default under (nor has any event occurred that with notice,
lapse of time, or both would constitute a breach of, or default under), its
respective articles of incorporation, by-laws, certificate of limited
partnership, partnership agreement or other constituent documents or in the
performance or observance of any obligation, agreement, covenant or condition
contained in any contract, indenture, mortgage, loan agreement, note, lease or
other agreement or instrument to which the Company, the Operating Partnership or
the Manager is a party or by which it is bound, except for such breaches or
defaults as would not have a material adverse effect on the operations,
business, prospects or condition (financial and other) of the Company and the
Operating Partnership, taken as a whole, or the Manager, as the case may be; and
the issuance, sale and delivery by the Company of the Shares, execution,
delivery and performance of this Agreement, the Management Agreement, the
Services Agreement, the Servicing Agreements, the Partnership Agreement, the
Acquisition Agreements and the Other Transaction Documents by the Company, the
Operating Partnership and the Manager, as the case may be, and consummation of
the transactions contemplated hereby and thereby will not conflict with, or
result in any breach of or constitute a default under (nor constitute any event
which with notice, lapse of time, or both would constitute a breach of, or
default under), (i) any provision of the articles of incorporation, by-laws,
certificate of limited partnership, partnership agreement or
7
other constituent documents of the Company, the Operating Partnership or the
Manager, or (ii) any provision of any license, indenture, mortgage, deed of
trust, bank loan or credit agreement or other agreement or instrument to which
the Company, the Operating Partnership or the Manager is a party or by which the
Company or the Operating Partnership or any of their respective properties may
be bound or affected, or (iii) under any federal, state or local law, regulation
or rule or any decree, judgment or order applicable to the Company, the
Operating Partnership or the Manager, except, in the case of clauses (i), (ii)
and (iii), for such breaches or defaults which would not have a material adverse
effect on the operations, business, prospects or condition (financial and
other), of the Company and the Operating Partnership, taken as a whole, or the
Manager, as the case may be.
(i) this Agreement has been duly authorized, executed and delivered by the
Company, the Operating Partnership and WFSG and is a legal, valid and binding
agreement of the Company, the Operating Partnership and WFSG enforceable in
accordance with its terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally, and by general principles of equity, and except to the extent that
the enforceability of the indemnification provisions of Section 9 hereof may be
limited by federal or state securities laws or public policy considerations in
other federal or state laws. The Management Agreement has been duly authorized
by the Company, the Operating Partnership and the Manager and at the Closing
Time will have been duly executed and delivered by the Company, the Operating
Partnership and the Manager and will constitute a valid and binding agreement of
the Company, the Operating Partnership and the Manager, enforceable in
accordance with its terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally, and by general principles of equity, whether considered at law or in
equity. The Services Agreement has been duly authorized by the Company, WFSG
and the Manager and at the Closing Time will have been duly executed and
delivered by the Company, WFSG and the Manager and will constitute a valid and
binding agreement of the Company enforceable in accordance with its terms,
except as may be limited by bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting creditors' rights generally, and by general principles
of equity whether considered at law or in equity. The WCC Servicing Agreement
has been duly authorized by the Company and WCC and at the Closing Time will
have been duly executed and delivered by the Company and WCC and will constitute
a valid and binding agreement of the Company and WCC enforceable in accordance
with its terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally, and by general principles of equity, whether considered at law or in
equity. The European Servicing Agreement has been duly authorized by the
Company and Wilshire UK, and at the Closing Time will have been duly executed
and delivered by the Company and Wilshire UK, and will constitute a valid and
binding agreement of the Company and Wilshire UK, enforceable in accordance with
its terms, except as may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights generally, and by general
principles of equity, whether considered at law or in equity. The Partnership
Agreement has been duly authorized by the Company and Small Cap and at Closing
Time will have been duly executed and delivered by the Company and Small Cap and
will constitute a valid and binding agreement of the Company and Small Cap,
enforceable in
8
accordance with its terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally, and by general principles of equity, whether considered at law or in
equity. Each of the Acquisition Agreements has been duly authorized by the
Company, the Operating Partnership and the other party or parties thereto and at
the Closing Time will have been duly executed and delivered by the Company, the
Operating Partnership and the other party or parties thereto and will constitute
a valid and binding agreement of the Company, the Operating Partnership and the
party or parties thereto, enforceable in accordance with their terms, except as
may be limited by bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting creditors' rights generally, and by general principles of equity,
whether considered at law or in equity. The Other Transaction Documents have
been duly authorized by the Company, WFSG and/or the Manager, as the case may
be, and at Closing Time will have been duly executed and delivered by the
Company, WFSG and/or the Manager, as the case may be, and will constitute a
valid and binding agreement of the Company, WFSG and/or the Manager, as the case
may be, enforceable in accordance with its terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally, and by general principles of equity, whether
considered at law or in equity.
(j) no approval, authorization, consent or order of or filing with any
federal, state or local governmental or regulatory commission, board, body,
authority or agency is required in connection with (i) the execution, delivery
and performance by the Company of this Agreement, the Management Agreement, the
Services Agreement, the Servicing Agreements, the Partnership Agreement, the
Acquisition Agreements and the Other Transaction Documents to which it is a
party, or the consummation of the transactions contemplated hereby and thereby,
(ii) the execution, delivery and performance by the Operating Partnership of
this Agreement and the Acquisition Agreements or the consummation of the
transactions contemplated hereby and thereby, (iii) the execution, delivery and
performance by WFSG of this Agreement, the Services Agreement and the Other
Transaction Documents to which it is a party or the consummation of the
transactions contemplated hereby and thereby, (iv) the execution, delivery and
performance by the Manager of the Management Agreement, the Services Agreement
and the Other Transaction Documents to which it is a party or the consummation
of the transaction contemplated hereby or thereby, or (v) the sale of the Shares
as contemplated hereby other than (x) such as have been obtained, or will be
obtained at the Closing Time or the relevant Date of Delivery, as the case may
be, under the Securities Act and registration of the Shares under the Exchange
Act, (y) such approvals as have been obtained in connection with the approval of
the inclusion of the Shares on the Nasdaq National Market, and (z) any necessary
qualification under the securities or blue sky laws of the various jurisdictions
in which the Shares are being offered by the Underwriters.
(k) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, whose report on the balance sheet of the Company
is included in the Registration Statement and the Prospectus, are and at the
time of their report were, independent public accountants as required by the
Securities Act and the Securities Act Regulations.
9
(l) each of the Company, the Operating Partnership and the Manager has all
necessary licenses, authorizations, consents and approvals and has made all
necessary filings required under any federal, state or local law, regulation or
rule, and has obtained all necessary authorizations, consents and approvals from
other persons, required in order to conduct its respective businesses as
described in the Registration Statement and Prospectus, except to the extent
that any failure to have any such licenses, authorizations, consents or
approvals, to make any such filings or to obtain any such authorizations,
consents or approvals would not, alone or in the aggregate, have a material
adverse effect on the operations, business or condition (financial and other) of
the Company and the Operating Partnership, taken as a whole, or the Manager, as
the case may be. None of the Company, the Operating Partnership, or the Manager
is in violation of, or in default under, any such license, authorization,
consent or approval or any federal, state or local law, regulation or rule or
any decree, order or judgment applicable to the Company, the Operating
Partnership or the Manager, the effect of which could be material and adverse to
the operations, business, prospects or condition (financial and other) of the
Company and the Operating Partnership, taken as a whole, or the Manager, as the
case may be.
(m) all legal or governmental proceedings, contracts or documents of a
character required to be summarized or described in the Registration Statement
or the Prospectus or to be filed as an exhibit to the Registration Statement
have been so summarized, described or filed as required.
(n) there are no actions, suits, proceedings, inquiries or investigations
pending or, to the knowledge of the Company or the Operating Partnership,
threatened against the Company or the Operating Partnership, or any of their
respective properties, at law or in equity, or before or by any federal, state,
local or foreign governmental or regulatory commission, board, body, authority
or agency which reasonably could be expected to result in a judgment, decree or
order having a material adverse effect on the operations, business, prospects or
condition (financial and other) of the Company and the Operating Partnership,
taken as a whole, or which could adversely affect the consummation of
transactions contemplated by this Agreement in any material respect.
(o) the balance sheet of the Company, including the notes thereto, included
in the Registration Statement and the Prospectus presents fairly the financial
position of the Company as of the date thereof and has been prepared in
conformity with U.S. generally accepted accounting principles applied on a
consistent basis.
(p) subsequent to the respective dates as of which information is given in
the Registration Statement and the Prospectus, and except as may be otherwise
stated in the Registration Statement or Prospectus, there has not been (i) any
material and unfavorable change, financial or otherwise, in the operations,
business, prospects or condition (financial and other) of the Company and the
Operating Partnership, taken as a whole, (ii) any transaction, other than in the
ordinary course of business, which is material to the Company and the Operating
Partnership, taken as a whole, entered into by the Company or the Operating
Partnership, (iii) any obligation, contingent or otherwise, directly or
indirectly incurred by the Company or the Operating Partnership, other than in
the ordinary course of business, which is material to the Company and
10
the Operating Partnership, taken as a whole or (iv) any dividend or distribution
of any kind declared, paid or made with respect to the capital stock of the
Company.
(q) (i) upon consummation of the transactions contemplated by the
Prospectus and Registration Statement, the Operating Partnership will have, good
and marketable title [(in the case of any real property, in fee simple)] to the
Initial Investments and good and marketable title to any improvements thereon
and all other assets that are required for the effective operation of any real
property being acquired as an Initial Investment ("Property") in the manner in
which they currently are operated; (ii) all liens, charges, encumbrances,
claims, or restrictions on or affecting any of the Initial Investments or the
assets of the Company or the Operating Partnership which are required to be
disclosed in the Prospectus are disclosed therein; (iii) no tenant of any of the
Properties being acquired from Wilshire 1 or Wilshire 2 pursuant to an
Acquisition Agreement is in default under any of the leases pursuant to which
the Operating Partnership, as lessor, will lease its Property (and none of the
Company or the Operating Partnership knows of any event which, but for the
passage of time or the giving of notice, or both, would constitute a default
under any of such leases) other than such defaults that would not have a
material adverse effect on the operations, business, prospects or condition
(financial or other) of the Company and the Operating Partnership, taken as a
whole; (iv) any real property and buildings held under lease by the Company and
the Operating Partnership are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings by the
Company and the Operating Partnership, in each case except as described in or
contemplated by the Prospectus; (v) no person has an option or right of first
refusal to purchase all or part of any Initial Investment or any interest
therein; (vi) each of the Properties will comply with all applicable codes, laws
and regulations (including, without limitation, building and zoning codes, laws
and regulations and laws relating to access to the Properties), except if and to
the extent disclosed in the Prospectus and except for such failures to comply
that would not individually or in the aggregate result in a material adverse
effect on the operations, business, prospects or condition (financial or other)
of the Company and the Operating Partnership, taken as a whole; and (vii)
neither the Company nor the Operating Partnership has knowledge of any pending
or threatened condemnation proceedings, zoning change, or other similar
proceeding or action that will in any manner affect the size of, use of,
improvements on, construction on or access to the Properties, except such
proceedings or actions that would not have a material adverse effect on the
operations, business, prospects or condition (financial or other) of the Company
and Operating Partnership, taken as a whole.
(r) each of the Company and the Operating Partnership carry, or are covered
by, insurance (issued by insurers of recognized financial responsibility to the
best knowledge of the Company and the Operating Partnership) in such amounts and
covering such risks as is adequate for the conduct of their respective
businesses and the value of the Initial Investments held or contemplated in the
Prospectus to be held by them upon the consummation of the transactions
contemplated by the Prospectus and Registration Statement and as is customary
for companies engaged in similar businesses in similar industries, all of which
insurance is in full force and effect.
11
(s) except as disclosed in the Prospectus: (i) each Property, including,
without limitation, the Environment (as defined below) associated with such
Property, is free of any Hazardous Substance (as defined below) in violation of
any Environmental Law (as defined below) applicable to such Property; (ii) none
of the Company or the Operating Partnership has caused or suffered to occur any
Release (as defined below) of any Hazardous Substance into the Environment on,
in, under or from any Property in violation of any Environmental Law applicable
to such Property, and no condition exists on, in, under or, to the knowledge of
the Company, the Operating Partnership or WFSG, adjacent to any Property that
could result in the incurrence of material liabilities or any material
violations of any Environmental Law applicable to such Property, give rise to
the imposition of any Lien (as defined below) under any Environmental Law, or
cause or constitute a health, safety or environmental hazard to any property,
person or entity; (iii) none of the Company, the Operating Partnership, or WFSG
is engaged in or intends to engage in any manufacturing or any other similar
operations at the Properties that (1) require the use, handling, transportation,
storage, treatment or disposal of any Hazardous Substance (other than cleaning
solvents and similar materials and other than insecticides and herbicides that
are used in the ordinary course of operating the Properties and in compliance
with all applicable Environmental Laws) or (2) require permits or are otherwise
regulated pursuant to any Environmental Law; (iv) neither the Company nor the
Operating Partnership has received any notice of a claim under or pursuant to
any Environmental Law applicable to a Property or under common law pertaining to
Hazardous Substances on or originating from any Property; (v) neither the
Company nor the Operating Partnership has received any notice from any
Governmental Authority (as defined below) claiming any violation of any
Environmental Law applicable to a Property that is uncured or unremediated as of
the date hereof; (vi) no Property is included or, to the knowledge of the
Company, proposed for inclusion on the National Priorities List issued pursuant
to CERCLA (as defined below) by the United States Environmental Protection
Agency (the "EPA") or on the Comprehensive Environmental Response, Compensation,
and Liability Information System database maintained by the EPA, and has not
otherwise been identified by the EPA as a potential CERCLA removal, remedial or
response site or included or, to the knowledge of the Company, proposed for
inclusion on, any similar list of potentially contaminated sites pursuant to any
other applicable Environmental Law nor has the Company or the Operating
Partnership received any written notice from the EPA or any other Governmental
Authority proposing the inclusion of any Property on such list; and (vii) there
are no underground storage tanks located on or in any Property which have not
been disclosed to the Representatives; except in each case that would not have a
material adverse effect on the operations, business, prospects or condition
(financial or other) of the Company and the Operating Partnership, taken as a
whole.
As used herein: "Hazardous Substance" shall include, without limitation,
any hazardous substance, hazardous waste, toxic or dangerous substance,
pollutant, solid waste or similarly designated materials, including, without
limitation, oil, petroleum or any petroleum-derived substance or waste, asbestos
or asbestos-containing materials, PCBs, pesticides, explosives, radioactive
materials, dioxins, urea formaldehyde insulation or any constituent of any such
substance, pollutant or waste, including any such substance, pollutant or waste
identified or regulated under any Environmental Law (including, without
limitation, materials listed in the
12
United States Department of Transportation Optional Hazardous Material Table, 49
C.F.R. Section 172.101, as heretofore amended, or in the EPA's List of Hazardous
Substances and Reportable Quantities, 40 C.F.R. Part 302, as heretofore
amended); "Environment" shall mean any surface water, drinking water, ground
water, land surface, subsurface strata, river sediment, buildings, structures,
and ambient, workplace and indoor air; "Environmental Law" shall mean the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended (42 U.S.C. Section 9601 et seq.) ("CERCLA"), the Resource Conservation
and Recovery Act of 1976, as amended (42 U.S.C. Section 6901, et seq.), the
Clean Air Act, as amended (42 U.S.C. Section 7401, et seq.), the Clean Water
Act, as amended (33 U.S.C. Section 1251, et seq.), the Toxic Substances Control
Act, as amended (15 U.S.C. Section 2601, et seq.), the Occupational Safety and
Health Act of 1970, as amended (29 U.S.C. Section 651, et seq.), the Hazardous
Materials Transportation Act, as amended (49 U.S.C. Section 1801, et seq.), and
all other federal, state and local laws, ordinances, regulations, rules, orders,
decisions and permits relating to the protection of the environment or of human
health from environmental effects; "Governmental Authority" shall mean any
federal, state or local governmental office, agency or authority having the duty
or authority to promulgate, implement or enforce any Environmental Law; "Lien"
shall mean, with respect to any Property, any mortgage, deed of trust, pledge,
security interest, lien, encumbrance, penalty, fine, charge, assessment,
judgment or other liability in, on or affecting such Property; and "Release"
shall mean any spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, leaching, dumping, emanating or disposing of
any Hazardous Substance into the Environment, including, without limitation, the
abandonment or discard of barrels, containers, tanks (including, without
limitation, underground storage tanks) or other receptacles containing or
previously containing any Hazardous Substance or any release, emission,
discharge or similar term, as those terms are defined or used in any
Environmental Law.
(t) the Company and the Operating Partnership (1) are in compliance with
any and all applicable foreign, federal, state and local laws and regulations
relating to the protection of occupational health and safety and all
Environmental Laws, (2) have received all permits, licenses or other approvals
required of them under applicable federal and state occupational safety and
health laws and regulations and Environmental Laws to conduct their respective
businesses and (3) are in compliance with all terms and conditions of any such
permit, license or approval, except where such noncompliance, failure to receive
required permits, licenses or other approvals or failure to comply with the
terms and conditions of such permits, licenses or approvals would not, singly or
in the aggregate, have a material adverse effect on the operations, business,
prospects or condition (financial or other) of the Company and Operating
Partnership, taken as a whole.
(u) there are no costs or liabilities associated with Environmental Laws
(including, without limitation, any capital or operating expenditures required
for clean-up, closure of properties or compliance with Environmental Laws or any
permit, license or approval, any related constraints on operating activities and
any potential liabilities to third parties) which would, singly or in the
aggregate, have a material adverse effect on the operations, business,
13
prospects or condition (financial or other) of the Company and Operating
Partnership, taken as a whole.
(v) neither the purchase of the loans that are Initial Investments, nor the
execution and delivery of, or performance by the borrowers thereunder of, any
mortgage, deed of trust, deed, indenture, note, loan or credit agreement or any
other agreement or instrument in connection therewith, has resulted in or, with
notice and an opportunity to cure, would result in a breach of or default under
any mortgage, deed of trust, indenture, note, loan or credit agreement or any
other agreement or instrument relating to any mortgage or other loan that may
have priority over any such Initial Investment with respect to the assets of the
borrower thereunder and that is in existence at the time the Company or the
Operating Partnership purchases any such Initial Investment that would singly or
in the aggregate, have a material adverse effect on the operations, business,
prospects or condition (financial or other) of the Company and Operating
Partnership, taken as a whole.
(w) to the knowledge of the Company or the Operating Partnership, there are
no statutes or regulations applicable to the Company or the Operating
Partnership or certificates, permits or other authorizations from governmental
regulatory officials or bodies required to be obtained or maintained by the
Company or the Operating Partnership of a character required to be disclosed in
the Registration Statement or the Prospectus which have not been so disclosed
and properly described therein.
(x) neither of the Company nor the Operating Partnership is, and upon the
sale of the Shares as herein contemplated, will not be, an "investment company"
or an entity "controlled" by an "investment company" as such terms are defined
in the Investment Company Act of 1940, as amended (the "Investment Company
Act"); the Company's use of proceeds as contemplated in the Prospectus,
including, without limitation, the acquisition of the Initial Investments by the
Operating Partnership, will not cause the Company or the Operating Partnership
to become an "investment company" subject to registration under the Investment
Company Act.
(y) neither the Company nor the Operating Partnership, to the knowledge of
the Company or the Operating Partnership, or any person acting on their behalf
has (i) used any corporate funds for unlawful contributions, gifts,
entertainment, or other unlawful expenses relating to political activity, (ii)
made any unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns from
corporate funds, (iii) violated any provision of the Foreign Corrupt Practices
Act of 1977, as amended, or (iv) made any other unlawful bribe, rebate, payoff,
influence payment or kickback.
(z) each of the Company and the Operating Partnership, and each of their
respective officers, directors and controlling persons has not taken, directly
or indirectly, any action which is designed to or which has constituted or which
might reasonably be expected to cause or result in stabilization or manipulation
of the price of any security of the Company to facilitate the sale or resale of
the Shares.
14
(aa) neither the Company nor any of its affiliates (i) is required to
register as a "broker" or "dealer" in accordance with the provisions of the
Securities Exchange Act of 1934 or the rules and regulations thereunder, or (ii)
directly, or indirectly through one or more intermediaries, controls or has any
other association with (within the meaning of Article 1 of the By-Laws of the
National Association of Securities Dealers, Inc. (the "NASD")) any member firm
of the NASD, other than Wilshire Securities Corporation.
(bb) the Company has not relied upon the Representatives or legal counsel
for the Representatives for any legal, tax or accounting advice in connection
with the offering and sale of the Shares.
(cc) each of the Independent Directors named in the Registration Statement
and Prospectus has not within the last two years (i) been employed by WFSG or
any of its Affiliates (as defined in the Prospectus), (ii) been an officer or
director of WFSG or any of its Affiliates, (iii) or whose business or employer
within the last two years has not performed services for WFSG or any of its
Affiliates that annually exceeded the lesser of (a) the dollar amount provided
in Item 404(a) of Regulation S-K or (b) 10% of the gross revenue of the entity
that provided such services, or (iv) had any material business or professional
relationship with WFSG or any of its Affiliates.
(dd) the Guidelines (as defined in the Prospectus) and the acquisition of
the Initial Investments have been approved by the Independent Directors.
(ee) except as otherwise disclosed in the Prospectus, there are no material
outstanding loans or advances or material guarantees of indebtedness by the
Company or the Operating Partnership to or for the benefit of any of the
officers or directors of the Company, the Operating Partnership, WFSG or any of
its Affiliates or any of the members of the families of any of them.
(ff) in connection with the offering of the Shares, the Company has not
offered its Common Stock or any other securities convertible into or
exchangeable or exercisable for Common Stock in a manner in violation of the
Securities Act or the Securities Act Regulations; the Company has not
distributed and will not distribute any Prospectus or other offering material in
connection with the offer and sale of the Shares, except as contemplated herein.
(gg) there are no persons with registration or other similar rights to have
any equity securities of the Company registered under the Securities Act.
4. Certain Covenants of the Company: Each of the Company and the
--------------------------------
Operating Partnership, jointly and severally, hereby agrees with each
Underwriter as follows:
(a) to prepare the Prospectus in a form approved by the Representatives
and to file such Prospectus with the Commission pursuant to Rule 424(b) of the
Securities Act Regulations not later than 10:00 a.m. (New York City time), on
the second business day following the execution and delivery of this Agreement
and to furnish promptly to the Underwriters as many copies of the Prospectus (or
of the Prospectus as amended or supplemented if the Company shall
15
have made any amendments or supplements thereto after the effective date of the
Registration Statement) as the Underwriters may reasonably request for the
purposes contemplated by the Securities Act Regulations.
(b) to advise the Representatives promptly and (if requested by the
Representatives) to confirm such advice in writing, when the Company learns that
the Registration Statement has become effective and when the Company learns that
any post-effective amendment thereto becomes effective under the Securities Act
Regulations.
(c) to advise the Representatives promptly, and (if requested by the
Representatives) to confirm such advice in writing, of (i) any request by the
Commission for amendments or supplements to the Registration Statement or
Prospectus or for additional information with respect thereto, or (ii) the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement or of any order preventing or suspending the use of any
Preliminary Prospectus or the Prospectus, or of the suspension of the
qualification of the Shares for offering or sale in any jurisdiction, or of the
initiation or threatening of any proceedings for any of such purposes and, if
the Commission or any other government agency or authority should issue any such
order, to make every reasonable effort to obtain the lifting or removal of such
order as soon as possible; to advise the Representatives promptly of any
proposal to amend or supplement the Registration Statement or Prospectus and to
file no such amendment or supplement to which the Representatives shall
reasonably object in writing.
(d) for a period of five years from the date of this Agreement, to furnish
to any Underwriter on written request, (i) copies of all annual, quarterly,
current and other reports or notices, definitive proxy materials and other
documents furnished to holders the Common Stock or filed by the Company with the
Commission, and (ii) such other information of a public nature (and generally
available to holders of the Common Stock) regarding the Company as the
Representatives or such Underwriter may reasonably request in writing.
(e) to advise the Underwriters promptly of the happening of any event known
to the Company within the time during which a Prospectus relating to the Shares
is required to be delivered under the Securities Act Regulations which, in the
judgment of the Company, would require the making of any change in the
Prospectus then being used so that the Prospectus would not include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading, and, during such time,
at the Company's expense, to prepare and furnish to the Underwriters promptly
such amendments or supplements to the Prospectus as may be necessary to reflect
any such change and to furnish to the Representatives a copy of such proposed
amendment or supplement before filing any such amendment or supplement with the
Commission.
(f) to furnish promptly to the Representatives a signed copy of the
Registration Statement, as initially filed with the Commission and of each
amendment thereto (including all exhibits) and such number of conformed copies
of the foregoing as the Representatives may reasonably request.
16
(g) to use the net proceeds from the sale of the Shares in the manner
described under the caption "Use of Proceeds" in the Prospectus.
(h) to make generally available to its security holders as soon as
practicable, but not later than 90 days after the close of the period covered
thereby, an earnings statement (in form complying with the provisions of Rule
158 of the Securities Act Regulations) covering a period of 12 months beginning
not later than the first day of the first fiscal quarter of the Company
beginning after the "effective date" (as defined in such Rule 158) of the
Registration Statement.
(i) to use its best efforts to effect and maintain inclusion of the Shares
in the Nasdaq National Market and to file with The Nasdaq Stock Market Inc. all
documents and notices required of companies having securities included in the
Nasdaq National Market.
(j) except as described in the Prospectus, the Company shall refrain during
a period of 180 days from the date of the Prospectus, without the prior written
consent of Friedman, Billings, ▇▇▇▇▇▇ & Co., Inc., from (i) offering, pledging,
selling, contracting to sell, selling any option or contract to purchase,
purchasing any option or contract to sell, granting any option for the sale of,
or otherwise disposing of or transferring, directly or indirectly, any shares of
Common Stock or any securities convertible into or exchangeable for Common
Stock, or filing any registration statement under the Securities Act with
respect to any of the foregoing, and (ii) entering into any swap or any other
agreement or any transaction that transfers, in whole or in part, directly or
indirectly, the economic consequence of ownership of Common Stock, whether any
such swap or transaction described in clause (i) or (ii) above is to be settled
by delivery of Common Stock or securities convertible into or exchangeable for
Common Stock, in cash or otherwise. The foregoing sentence shall not apply to
(a) the Shares to be sold hereunder or (b) any shares of Common Stock issued or
options to purchase common Stock granted pursuant to the Company's 1998 Employee
Stock Plan filed as an exhibit to the Registration Statement.
(k) from and after the Closing Time of this Offering, each of the Company
and the Operating Partnership shall have in place and maintain a system of
internal accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management's general or specific
authorization, (iv) the recorded accountability for assets is compared with the
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences, and (v) the Company is complying with the real
estate investment trust (a "REIT") requirements of the Internal Revenue Code of
1986, as amended (the "Code").
(l) the Company will qualify to be taxed as a REIT under the Code, and the
Company will conduct its operations in a manner that will enable the Company to
continue to meet the requirements for qualification and taxation as a REIT under
the Code.
17
(m) the Company and the Operating Partnership will conduct their affairs in
such a manner so as to ensure that neither the Company nor the Operating
Partnership will be an "investment company" or an entity "controlled" by an
investment company within the meaning of the Investment Company Act.
(n) the Company shall not, and shall use its best efforts to cause its
officers, directors and subsidiaries not to, (i) take, directly or indirectly
prior to termination of the underwriting syndicate contemplated by this
Agreement, as to which Friedman, Billings, ▇▇▇▇▇▇ & Co., Inc. will notify the
Company orally and in writing that the syndicate is broken, any action designed
to stabilize or manipulate the price of any security of the Company, the
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of any of the Shares, (ii) sell, bid for, purchase
or pay anyone any compensation for soliciting purchases of the Shares or (iii)
pay or agree to pay to any person any compensation for soliciting any order to
purchase any other securities of the Company prior to termination of the
underwriting syndicate.
(o) the Company will not offer its Common Stock or any other securities
convertible into or exchangeable or exercisable for Common Stock in a manner
which will result in the integration of the Shares with such other offering.
5. Payment of Expenses
-------------------
(a) The Company agrees to pay all costs and expenses incident to the
performance of its obligations under this Agreement, whether or not the
transactions contemplated hereunder are consummated or this Agreement is
terminated (except if the Representatives are unable to complete the offering
contemplated hereby due to the Representatives' willful misconduct or bad
faith), including all expenses, out-of-pocket fees and taxes in connection with
(i) the preparation and filing of the Registration Statement, each Preliminary
Prospectus, the Prospectus, and any amendments or supplements thereto, and the
printing and furnishing of copies of each thereof to the Underwriters and to
dealers (including costs of mailing and shipment), (ii) the preparation,
issuance and delivery of the certificates for the Shares to the Underwriters,
including any stock or other transfer taxes or duties payable upon the sale of
the Shares to the Underwriters, (iii) the word processing and/or printing of
this Agreement, the agreement among underwriters, any dealer agreements and any
blue sky surveys, and the reproduction and/or printing and furnishing of copies
of each thereof to the Underwriters and to dealers (including costs of mailing
and shipment), (iv) the qualification of the Shares for offering and sale under
state securities and blue sky laws, including filing fees and disbursements of
counsel for the Underwriters relating thereto, (v) any filing for review of the
underwriting terms of the offering of the Shares by the NASD, (vi) the fees and
expenses of any transfer agent or registrar for the Shares, (vii) the fees and
expenses incurred in connection with the inclusion of the Shares in the Nasdaq
National Market and (viii) the performance of the Company's other obligations
hereunder. Upon the Representatives' request, the Company will provide funds in
advance for filing fees.
(b) In addition to discounts and commissions received in connection with
the purchase of the Shares, the Company agrees to reimburse the Underwriters for
all of their reasonable and documented out-of-pocket expenses relating to the
transactions contemplated
18
hereby, whether or not the transactions are contemplated hereunder are
consummated or this Agreement is terminated, including, but not limited to,
costs such as printing, facsimile, courier service, direct computer expenses,
accommodations, travel and the fees, expenses and disbursements of the
Representatives' outside legal counsel and any other advisors, accountants,
appraisers, etc., and costs in connection with making road show presentations
with respect to the offering of the Shares.
6. Conditions of the Underwriters' Obligations:
-------------------------------------------
The obligations of the Underwriters hereunder are subject to (i) the
accuracy of the representations and warranties of the Company and the Operating
Partnership herein contained in all material respects, as of the date hereof,
the Closing Time and each Date of Delivery; (ii) the accuracy of the statements
of the Company's officers made in any certificate pursuant to the provisions
hereof in all material respects, as of the date of such certificate, (iii) the
performance by the Company and the Operating Partnership of all of its covenants
and other obligations hereunder in all material respects, and (iv) the following
further conditions:
(a) No amendment or supplement to the Registration Statement or Prospectus
shall have been filed to which the Representatives shall have objected in
writing.
(b) At the Closing Time, the Shares shall have been approved for inclusion
on the Nasdaq National Market.
(c) At the Closing Time, the NASD shall not have raised any objection with
respect to the fairness and reasonableness of the underwriting terms and
arrangements hereunder.
(d) At the Closing Time and prior to each Date of Delivery, no stop order
suspending the effectiveness of the Registration Statement shall have been
issued under the Securities Act or proceedings therefor initiated or threatened
by the Commission nor shall any order preventing or suspending the use of any
Preliminary Prospectus or the Prospectus have been issued by the Commission, and
no suspension of the qualification of the Shares for offering or sale in any
jurisdiction, or of the initiation or threatening of any proceedings for any of
such purposes, shall have occurred; and the Registration Statement and all
amendments thereto, or modifications thereof, if any, and the Prospectus and all
amendments or supplements thereto, or modifications thereof, if any, shall not
contain an untrue statement of material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they are made, not misleading.
(e) At the Closing Time, the Company and the Manager shall have executed
and delivered the Management Agreement, WFSG, the Manager and the Company shall
have executed and delivered the Services Agreement, the Company and WCC shall
have executed and delivered the WCC Servicing Agreement, the Company and
Wilshire UK shall have executed and delivered the European Servicing Agreement,
the Company and Small Cap shall have executed and delivered the Partnership
Agreement, each of the Company and the Operating Partnership and the other party
or parties thereto shall have executed and delivered the
19
Acquisition Agreements and the Company, WFSG and/or the Manager, as the case may
be, shall have executed and delivered the Other Transaction Documents each
(including the Management Agreement, the Servicing Agreements, the Partnership
Agreement, the Acquisition Agreements, and certain of the Other Transaction
Documents) in substantially the form filed as an exhibit to the Registration
Statement.
(f) At the Closing Time, the Representatives shall have received:
(i) the opinion, dated as of the Closing Time, of Proskauer Rose LLP,
counsel for the Company, in form and substance reasonably satisfactory to
counsel for the Underwriters, to the effect that:
(A) the Operating Partnership has been duly formed and is validly
existing as a limited partnership in good standing under the Delaware Act,
with full partnership power and authority to own its properties and conduct
its business as described in the Registration Statement and the Prospectus,
to execute and deliver this Agreement, the Management Agreement and the
Acquisition Agreements and to consummate the transactions described in each
such agreement.
(B) WFSG is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Delaware with full
corporate power and authority to conduct its business as described in the
Registration Statement and Prospectus, to execute and deliver this
Agreement, the Services Agreement and the Other Transaction Documents to
which it is a party and to consummate the transactions described in each
such agreement.
(C) the Manager is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware, with
full corporate power and authority to conduct its business as described in
the Registration Statement and the Prospectus, to execute and deliver the
Management Agreement, the Services Agreement and the Other Transaction
Documents to which it is a party and to consummate the transactions
described in each such agreement. All of the issued and outstanding
capital stock of the Manager is held of record and, to the knowledge of
such counsel, beneficially, by WFSG.
(D) the Company, the Operating Partnership and the Manager are
duly qualified or licensed by and in good standing in each jurisdiction in
which they conduct their respective businesses or own or lease property and
in such jurisdictions as counsel to the Underwriters shall reasonably
request, and in which the failure, individually or in the aggregate, to be
so licensed or qualified could have a material adverse effect on the
operations, business, prospects or condition (financial and other) of the
Company and the Operating Partnership, taken as a whole, or the Manager, as
the case may be; and, to the best of such counsel's knowledge, each of the
Company, the Operating Partnership and the Manager is in compliance with
the laws, orders, rules, regulations and directives issued or administered
by such jurisdictions, except where the failure to so comply would
20
not have a material adverse effect on the operations, business, prospects
and condition (financial and other) of the Company and the Operating
Partnership, taken as a whole, or the Manager, as the case may be.
(E) except as disclosed in the Prospectus, the Operating
Partnership is not prohibited or restricted by its certificate of limited
partnership or partnership agreement, or, to the knowledge of such counsel,
otherwise, directly or indirectly, from paying dividends to the Company, or
from making any other distribution with respect to the Operating
Partnership's interests or from paying the Company, any loans or advances
to the Operating Partnership from the Company, or from transferring any
such Operating Partnership's property or assets to the Company.
(F) the outstanding interests or the outstanding shares of
capital stock, as the case may be, of the Operating Partnership and the
Manager, have been duly and validly authorized and will be validly issued
and fully paid and non-assessable (except as provided under the General
Corporation Law of the State of Delaware and the Delaware Act); immediately
following the Closing, all of the authorized and validly issued interests
in the Operating Partnership will be directly held of record and, to the
knowledge of such counsel, owned beneficially by the Company or Small Cap;
except as disclosed in the Prospectus, there are no authorized and validly
issued (1) securities or obligations of the Company or the Operating
Partnership convertible into or exchangeable for any shares of capital
stock of the Company or interests in the Operating Partnership or (2)
warrants, rights or options to subscribe for or purchase from the Company
or the Operating Partnership any such shares of beneficial interest,
capital stock, interests or any such convertible or exchangeable securities
or obligations; except as set forth in the Prospectus or contemplated by
this Agreement, there are no outstanding obligations of the Company or the
Operating Partnership to issue any shares of capital stock or interests,
any such convertible or exchangeable securities or obligation, or any such
rights or options.
(G) the issuance and sale of the Shares by the Company are not
subject to preemptive or other similar rights arising under any agreement
known to such counsel to which the Company is a party or, to such counsel's
knowledge, otherwise.
(H) this Agreement has been duly authorized, executed and
delivered by the Operating Partnership and WFSG.
(I) the Management Agreement has been duly authorized, executed
and delivered by the Manager and constitutes the valid and binding
agreement of each of the Company and the Manager, enforceable in accordance
with its terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally, and by general principles of equity, whether considered in a
proceeding at law or in equity; such counsel may assume due authorization,
execution and delivery of the Management Agreement by the Company.
21
(J) the Services Agreement has been duly authorized, executed and
delivered by WFSG and the Manager and constitutes the valid and binding
agreement of each of the Company, WFSG and the Manager, enforceable in
accordance with its terms, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally, and by general principles of equity, whether considered
in a proceeding at law or in equity; such counsel may assume due
authorization, execution and delivery of the Services Agreement by the
Company.
(K) the WCC Servicing Agreement constitutes the valid and binding
agreement of the Company and WCC, enforceable in accordance with its terms,
except as may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights generally, and by
general principles of equity, whether considered in a proceeding at law or
in equity; such counsel may assume due authorization, execution and
delivery of the WCC Servicing Agreement by the Company and WCC.
(L) the European Servicing Agreement constitutes the valid and
binding agreement of the Company and Wilshire UK, enforceable in accordance
with its terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally, and by general principles of equity, whether considered in a
proceeding at law or in equity; such counsel may assume due authorization,
execution and delivery of the European Servicing Agreement by the Company
and Wilshire UK.
(M) The Partnership Agreement constitutes the valid and binding
agreement of the Company and Small Cap, enforceable in accordance with its
terms, except as may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights generally, and by
general principles of equity, whether considered in a proceeding at law or
in equity; such counsel may assume due authorization, execution and
delivery of the Partnership Agreement by the Company and Small Cap.
(N) each of the Acquisition Agreements has been duly authorized,
executed and delivered by the Operating Partnership.
(O) each of the Other Transaction Documents to which WFSG and/or
the Manager is a party has been duly authorized, executed and delivered by
WFSG and/or the Manager, as the case may be, and each of the Other
Transaction Documents constitutes the valid and binding agreement of the
Company, WFSG and/or the Manager, as the case may be, enforceable in
accordance with its terms, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally, and by general principles of equity, whether considered
in a proceeding at law or in equity; such counsel may assume the due
authorization, execution and delivery of the Other Transaction Documents to
which the Company is a party by the Company.
22
(P) the Registration Statement is effective under the Securities
Act and, to the best of such counsel's knowledge, no stop order suspending
the effectiveness of the Registration Statement has been issued under the
Securities Act or proceedings therefor initiated or threatened by the
Commission.
(Q) the Registration Statement and the Prospectus, as of their
respective effective or issue dates, comply as to form in all material
respects with the requirements of the Securities Act and the Securities Act
Regulations; it being understood, however, that no opinion need be rendered
with respect to the financial statements, schedules and other financial and
statistical data included in the Registration Statement or the Prospectus
or state securities or blue sky laws.
(R) to such counsel's knowledge, no authorization, approval or
consent of any court or governmental authority or agency is required that
has not been obtained in connection with the execution, delivery and
performance of the Management Agreement, the Servicing Agreements, the
Partnership Agreement, the Acquisition Agreements or the Other Transaction
Documents or the consummation by the Company, the Operating Partnership,
WFSG or the Manager, as the case may be, of the transactions contemplated
hereby and thereby, the sale and delivery of Shares by the Company as
contemplated hereby other than such as have been obtained or made under the
Securities Act; it being understood, however, that no opinion need be
rendered with respect to state securities or blue sky laws or approval of
underwriting terms by the NASD.
(S) the execution, delivery and performance of this Agreement by
the Company, the Operating Partnership and WFSG, the execution, delivery
and performance of the Management Agreement by the Company and the Manager,
the execution, delivery and performance of the Services Agreement by WFSG,
the Manager and the Company, the execution, delivery and performance of the
WCC Servicing Agreement by the Company, the execution, delivery and
performance of the UK Servicing Agreement by the Company, the execution and
delivery of the Partnership Agreement by the Company, the execution and
delivery of any of the Acquisition Agreements by the Operating Partnership
and the Company, and the execution and delivery of the Other Transaction
Documents by the Company, WFSG and/or the Manager, and the consummation of
the transactions contemplated herein and therein, and compliance by the
Company, the Operating Partnership, the Manager or WFSG, with its
obligations hereunder and thereunder will not conflict with or constitute a
breach of, or default under or result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of the Company, the
Operating Partnership, the Manager or WFSG, pursuant to any contract,
indenture, mortgage, loan agreement, note, lease or other instrument known
to such counsel to which the Company, the Operating Partnership, the
Manager or WFSG, is a party or by which either of them may be bound or to
which any of the property or assets of the Company, the Operating
Partnership, the Manager or WFSG, is subject, nor will such action result
in violation of the provisions of the charter or bylaws of the Manager or
WFSG, the provisions of the certificate of limited partnership or
partnership
23
agreement of the Operating Partnership, or any law, administrative
regulation or court decree known to such counsel.
(T) to such counsel's knowledge, except as disclosed on the
Registration Statement and the Prospectus, none of the Company, the
Operating Partnership or the Manager is in material breach of, or in
material default under (nor has any event occurred which with notice, lapse
of time, or both would constitute a material breach of, or material default
under) its respective charter, bylaws, certificate of limited partnership
or partnership agreement, as the case may be, or in the performance or
observation of any obligation, agreement, covenant, or condition contained
in any license, indenture, mortgage, deed of trust, loan or credit
agreement or any other agreement or instrument known to such counsel to
which the Company, the Operating Partnership or the Manager is a party or
by which any of them or their respective properties may be bound or
affected, except such breaches or defaults which would not have a material
adverse effect on the assets, operations, business, prospects or condition
(financial or otherwise) of the Company and the Operating Partnership,
taken as a whole, or the Manager, as the case may be; such counsel may
assume that the Company is not in material breach of, or in material
default under (nor has any event occurred which with notice, lapse of time,
or both would constitute a material breach of, or material default under)
its charter and bylaws.
(U) the statements under the captions "Risk Factors" (excluding
any statements that describe Maryland law), "Distribution Policy," "Common
Stock Available for Future Sale," "Operating Partnership Agreement,"
"Federal Income Tax Consequences" and "ERISA Considerations" in the
Registration Statement and Prospectus, insofar as such statements describe
legal documents or statutes, rules or regulations, constitute fair
summaries thereof.
(V) to such counsel's knowledge, there are no actions, suits or
proceedings, inquiries, or investigations pending or threatened against the
Company or Operating Partnership or any of their respective officers and
directors or to which the properties, assets or rights of any such entity
are subject, at law or in equity, before or by any federal, state, local or
foreign government or regulatory commission, board, body, authority,
arbitral panel or agency that are required to be described in the
Prospectus but are not so described.
(W) to such counsel's knowledge, there are no contracts or
documents of a character that are required to be filed as exhibits to the
Registration Statement or to be described or summarized in the Prospectus
which have not been so filed, summarized or described.
(X) neither the Company nor the Operating Partnership is now nor
after the sale of the Shares to be sold hereunder and application of the
net proceeds from such sale as described in the Prospectus under the
caption "Use of Proceeds," will be, an "investment company", or an entity
"controlled" by an "investment company" as such
24
terms are defined in the Investment Company Act of 1940, as amended.
Section 3(c)(5)(c) of the Investment Company Act provides an exception from
the definition of "investment company" for "any person . . . who is
primarily engaged in . . . purchasing or otherwise acquiring mortgages and
other liens on and interests in real estate." Rules and regulations of the
Commission and staff no-action letters provide that a person is "primarily
engaged" if at least 55% of its assets consist of "mortgages and other
liens and interests in real estate" and at least 25% of its total assets
are invested in real estate-related interests. The Company's acquisition,
either directly or through wholly-owned subsidiaries, of real property that
is located inside or outside the United States or leased to a third-party,
will qualify as an "interest in real estate" as will the acquisition or
origination of the entire interest in a mortgage loan secured by real
property or the entire interest in a pool of such mortgages loans. The
Company's acquisition, either directly or through wholly-owned
subsidiaries, of various subordinated interests or other classes of
mortgage-backed securities, will not qualify for the 55% test (unless the
Company has a substantial interest and the unilateral right to direct
foreclosure actions with respect to the mortgage loans underlying the
mortgage-backed securities), but will qualify for the 25% test.
(Y) the form of certificate evidencing the Common Stock filed as
an exhibit to the Registration Statement complies with all applicable
statutory law and all requirements of the Nasdaq National Market.
Proskauer Rose LLP is permitted to state that such counsel expresses no
opinion as to the laws of any jurisdiction other than the States of New York and
California, the General Corporation Law of the State of Delaware, the Delaware
Act and Federal law. The opinion of Proskauer Rose, LLP described in this
Section 6(f)(i) shall state that it is being rendered to the Underwriters at the
request of the Company.
In addition to giving the opinions set forth in Section 6(f)(i), Proskauer
Rose LLP shall deliver a separate letter containing a statement to the effect
that nothing has come to their attention that would lead them to believe that
the Registration Statement (excluding the financial statements, schedules and
other financial and statistical data included therein, as to which such counsel
need make no statement), at the time it 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 (excluding the financial statements, schedules and other
financial and statistical data included therein, as to which such counsel need
make no statement), at such time or at the Closing Time, contained or contains
an untrue statement of a material fact or omitted or omits 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.
(ii) the opinion, dated as of the Closing Time, Stoel Rives LLP, local
counsel for the Company, in form and substance reasonably satisfactory to
counsel for the Underwriters, to the effect that:
25
(A) Wilshire Funding Corporation is a corporation duly
incorporated, validly existing and in good standing under the laws of the
State of Delaware with full corporate power and authority to conduct its
business as described in the Registration Statement and Prospectus, to
execute and deliver the Acquisition Agreement to which it is a party and to
consummate the transactions described in such agreement. All of the issued
and outstanding capital stock of Wilshire Funding Corporation is held of
record and, to the knowledge of such counsel, beneficially, by WFSG.
(B) WMFC 1997-1 Inc. is a corporation duly incorporated, validly
existing and in good standing with the State of Delaware with full
corporate power and authority to conduct its business as described in the
Registration Statement and Prospectus, to execute and deliver the
Acquisition Agreement to which it is a party and to consummate the
transactions described in such agreement. All of the issued and
outstanding capital stock of WMFC 1997-1 Inc. is held of record and, to the
knowledge of such counsel, beneficially, by Wilshire Funding Corporation.
(C) Small Cap is a limited liability company duly organized,
validly existing [and in good standing] under the laws of the State of
Oregon with full power and authority to conduct its business as described
in the Registration Statement and Prospectus, to execute and deliver the
Partnership Agreement and to consummate the transactions described in such
agreement. All of the issued and outstanding membership interests of Small
Cap are owned by ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, as Trustees of ▇▇▇▇▇▇▇ and
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ Revocable Trust and the ▇▇▇▇▇▇▇▇▇▇ Family Limited
Partnership.
(D) Wilshire 1 is a corporation duly incorporated, validly
existing [and in good standing] under the laws of the State of Oregon with
full corporate power and authority to conduct its business as described in
the Registration Statement and Prospectus, to execute and deliver the
Acquisition Agreement to which it is a party and to consummate the
transactions described in such agreement. All of the issued and
outstanding capital stock of Wilshire 1 is held of record and, to the
knowledge of such counsel, beneficially, by ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ and
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇.
(E) Wilshire 2 is a corporation duly incorporated, validly
existing [and in good standing] under the laws of the State of Oregon with
full corporate power and authority to conduct its business as described in
the Registration Statement and Prospectus, and to execute and deliver the
Acquisition Agreement to which it is a party and to consummate the
transactions described in such agreement. All of the issued and
outstanding capital stock of Wilshire 2 is held of record and, to the
knowledge of such counsel, beneficially, by ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ and
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇.
(F) the Company, the Operating Partnership and the Manager are
duly qualified [and in good standing] to do business as foreign
corporations or limited partnerships, as the case may be, in Oregon; and,
to the best of such counsel's knowledge, each of the Company, the Operating
Partnership and the Manager is in compliance with
26
the laws, orders, rules, regulations and directives issued or administered
by Oregon, except where the failure to so comply would not have a material
adverse effect on the operations, business, prospects and condition
(financial and other) of the Company and the Operating Partnership, taken
as a whole, or the Manager, as the case may be;
(G) all real property and buildings to be held under lease by the
Company or the Operating Partnership that will be acquired from Wilshire 1
and Wilshire 2 pursuant to the Acquisition Agreements will be held by them
under valid, subsisting and enforceable leases, with such exceptions as are
not material and do not interfere with the use made and proposed to be made
of such property and buildings by the Company or the Operating Partnership;
and neither the purchase of all loans that are Initial Investments nor the
execution of, or performance by the borrowers thereunder of any mortgage,
deed of trust, indenture, note, loan, or credit agreement or any other
agreement or instrument in connection therewith, has resulted in or, with
notice and an opportunity to cure, would result in a breach of or default
under any mortgage, deed of trust, indenture, note, loan or credit
agreement or any other agreement or instrument relating to any mortgage or
other loan (collectively, "Senior Indebtedness") that may have priority
over such Initial Investment with respect to the assets of the borrower
thereunder and that is in existence at the time the Company or the
Operating Partnership purchases any such Initial Investment; no party to
any mortgage, deed of trust, indenture, note, loan or credit agreement or
any other agreement or instrument relating to any Senior Indebtedness of
which such counsel has knowledge has the right to limit, hinder, delay or
otherwise interfere with the exercise of any remedies that the Company or
the Operating Partnership may have under any mortgage, deed of trust,
indenture, note loan or credit agreement or any other agreement or
instrument relating to any of the Initial Investments, including, without
limitation, the possession of a deed-in-lieu of foreclosure and a power of
attorney granting the right to record any such deed-in-lieu of foreclosure
by the Company or the Operating Partnership pursuant to any documents
evidencing such Initial Investments.
(H) the WCC Servicing Agreement has been duly authorized,
executed and delivered by WCC.
(I) the Partnership Agreement has been duly authorized, executed
and delivered by Small Cap.
(J) each of the Acquisition Agreements has been duly authorized,
executed and delivered by either (i) each of the Selling WFSG Entities,
(ii) Wilshire 1 or (iii) Wilshire 2, as the case may be, and constitutes a
valid and enforceable binding agreement of the Company, the Operating
Partnership and of either (i) each of the Selling WFSG Entities, (ii)
Wilshire 1 or (iii) Wilshire 2, as the case may be, enforceable in
accordance with its terms, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally, and by general principles of equity, whether considered
in a proceeding at law or in equity; such counsel may assume due
authorization, execution and delivery of the Acquisition
27
Agreements by the Company and the Operating Partnership; each of the
instruments of conveyance being used to transfer each of the Initial
Investments (other than real property) to the Operating Partnership from
the transferor thereunder pursuant to the Acquisition Agreements is in form
and substance sufficient and effective to convey all right, title and
interest of such transferor to such Initial Investments to the Operating
Partnership.
(K) the execution, delivery and performance of the WCC Servicing
Agreement by WCC, the execution, delivery and performance of the
Partnership Agreement by Small Cap, the execution and delivery of each of
the Acquisition Agreements by the Company and either the Selling Wilshire
Entities, Wilshire 1 or Wilshire 2, and the consummation of the
transactions contemplated herein and therein and compliance by WCC, Small
Cap, the Selling Wilshire Entities, Wilshire 1 or Wilshire 2 with its
obligations hereunder and thereunder will not conflict with or constitute a
breach of, or default under or result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of WCC, Small Cap,
the Selling Wilshire Entities, Wilshire 1 or Wilshire 2 pursuant to any
contract, indenture, mortgage, loan agreement, note, lease or other
instrument known to such counsel to which WCC, Small Cap, the Selling
Wilshire Entities, Wilshire 1 or Wilshire 2 is a party or by which either
of them may be bound or to which any of the property or assets of WCC,
Small Cap, the Selling Wilshire Entities, Wilshire 1 or Wilshire 2 is
subject, nor will such action result in violation of the provisions of the
charter or bylaws of WCC, Small Cap, the Selling WFSG Entities, Wilshire 1
or Wilshire 2, the provisions of the certificate or organization or the
limited liability company agreement of Small Cap, or any law,
administrative regulation or court decree known to such counsel;
Stoel Rives LLP is permitted to state that such counsel expresses no
opinion as to the laws of any jurisdiction other than the states of Oregon,
Nevada, Delaware and Federal law. The opinion of Stoel Rives, LLP as described
in this Section 6(f)(ii) shall state that it is being rendered to the
Underwriters at the request of the Company.
(iii) the opinion, dated as of the Closing Time, of Piper & Marbury
LLP, Maryland counsel to the Company, in form and substance reasonably
satisfactory to counsel for the Underwriters, to the effect that:
(A) the Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Maryland, with full
corporate power and authority to own its properties and conduct its
business as described in the Registration Statement and the Prospectus, to
execute and deliver this Agreement, the Management Agreement, the Services
Agreement, the Servicing Agreements, the Partnership Agreement, the
Acquisition Agreements and the Other Transaction Documents and to
consummate the transactions described in each such agreement.
(B) the Company has authorized and outstanding capital stock as
set forth in the Prospectus under "Capitalization" (except for subsequent
issuances, if any,
28
pursuant to transactions referred to in the Prospectus including, without
limitation, granting of stock options); the Initial Shares and the Option
Shares (if any) of the Company have been duly and validly authorized and
will be validly issued and fully paid and non-assessable;
(C) the Shares have been duly and validly authorized by all
necessary corporate action and, when issued and delivered pursuant to this
Agreement against payment of the consideration therefor, the Shares will be
validly issued, fully paid and nonassessable.
(D) the issuance and sale of the Shares by the Company are not
subject to preemptive or other similar rights arising by operation of law,
under the articles of incorporation or by-laws of the Company or under any
agreement known to such counsel to which the Company is a party or, to such
counsel's knowledge, otherwise.
(E) this Agreement has been duly authorized, executed and
delivered by the Company.
(F) the Management Agreement has been duly authorized, executed
and delivered by the Company and constitutes the valid and binding
agreement of the Company.
(G) the Services Agreement has been duly authorized, executed and
delivered by the Company and constitutes the valid and binding agreement of
the Company.
(H) the WCC Servicing Agreement has been duly authorized,
executed and delivered by the Company and constitutes the valid and binding
agreement of the Company.
(I) the European Servicing Agreement has been duly authorized,
executed and delivered by the Company.
(I) the Partnership Agreement has been duly authorized, executed
and delivered by the Company.
(J) each of the Acquisition Agreements has been duly authorized,
executed and delivered by the Company.
(K) each of the Other Transaction Documents to which the Company
is a party has been duly authorized, executed and delivered by the Company.
(L) the execution, delivery and performance of each of this
Agreement, the Management Agreement, the Services Agreement, the WCC
Servicing Agreement, the UK Servicing Agreement, the Partnership Agreement,
the Acquisition Agreements and the Other Transaction Documents (to which
the Company is a party) by the
29
Company, and the consummation of the transactions contemplated herein and
therein and compliance by the Company, with its obligations hereunder and
thereunder will not result in violation of the provisions of the charter or
bylaws of the Company, or any law, administrative regulation or court
decree known to such counsel.
(M) to such counsel's knowledge, except as disclosed on the
Registration Statement and the Prospectus, the Company is not in material
breach of, or in material default under (nor has any event occurred which
with notice, lapse of time, or both would constitute a material breach of,
or material default under) its charter or bylaws.
(N) the statements under the captions "Risk Factors" (insofar as
such statements describe matters of Maryland law) "Description of Capital
Stock," and "Certain Provisions of Maryland Law and of WREIT's Charter and
Bylaws," in the Registration Statement and Prospectus, insofar as such
statements describe legal documents or statutes, rules or regulations,
constitute fair summaries thereof.
Piper & Marbury LLP, Maryland counsel to the Company, is permitted to state
that such counsel expresses no opinion as to laws of any jurisdiction other than
the State of Maryland and Federal law. The opinion of Piper & Marbury LLP
described in this Section 6(f)(iii) shall state that it is being rendered to the
Underwriters at the request of the Company.
(iv) a letter, dated as of the Closing Time, of Proskauer Rose LLP,
addressed to the Representatives stating that such Representatives are
entitled to rely on the opinion filed with the Registration Statement as
Exhibit 8.1, in form and substance satisfactory to Friedman, Billings,
▇▇▇▇▇▇ & Co., Inc.
(v) the opinion, dated as of the Closing Time, of ▇▇▇▇▇▇, ▇▇▇▇ &
▇▇▇▇▇▇▇▇ LLP, counsel for the Underwriters, with respect to such matters as
the Underwriters may request.
(g) At the Closing Time, the Representatives shall have received a
certificate of the Chief Executive Officer and the President of the Company,
dated as of the Closing Time, to the effect that the representations and
warranties in Section 3 are true and correct with the same force and effect as
though made at the date of such certificate, subject to any exceptions that, in
the reasonable judgment of the Representatives, are not material.
(h) All Initial Investments shall be acquired pursuant to the Acquisition
Agreements in form and substance satisfactory to Friedman, Billings, ▇▇▇▇▇▇ &
Co., Inc.
(i) At the Closing Time or the relevant Date of Delivery, there shall not
have been, since the date hereof or since the respective dates as of which
information is given in the Prospectus, any material adverse change in the
operations, business, prospects or condition, financial and other, of the
Company and the Operating Partnership, taken as a whole; and no transaction
which is material and unfavorable to the Company shall have been entered into by
the
30
Company or the Operating Partnership, the effect of which, in the reasonable
opinion of the Representatives, is so material and adverse as to make it
impractical or inadvisable to proceed with the public offering or delivery of
the Shares being delivered at the Closing Time or Date of Delivery.
(j) At the time of execution and delivery of this Agreement, the
Representatives shall have received from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP a letter dated such
date, in form and substance satisfactory to the Representatives, to the effect
that (i) they are independent accountants with respect to the Company within the
meaning of the Securities Act and the Securities Act Regulations; (ii) it is
their opinion that the balance sheet of the Company included in the Registration
Statement and the Prospectus and covered by their opinion therein complies in
form in all material respects with the applicable accounting requirements of the
Securities Act and the Securities Act Regulations; (iii) based upon limited
procedures set forth in detail in such letter, nothing came to their attention
that caused them to believe that, at a specified date not more than five days
prior to the date of this Agreement, there has been any change in the assets,
liabilities or stockholders' equity of the Company, as compared with the amounts
shown in the balance sheet included in the Registration Statement and the
Prospectus; and (iv) in addition to the audit referred to in their opinion and
the limited procedures referred to in clause (iii) above, they have carried out
certain specified procedures, not constituting an audit, with respect to certain
amounts, percentages and financial information included in the Registration
Statement and the Prospectus and specified by the Representatives, and have
found such amounts, percentages and financial information to be in agreement
with the relevant accounting, financial and other records of the Company
identified in such letter.
(k) At the Closing Time, the Representatives shall have received from
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP a letter dated as of the Closing Time to the effect that
they reaffirm the statements made in the letter furnished pursuant to subsection
(k) of this Section, except that the "specified date" referred to shall be a
date not more than five days prior to the Closing Time.
(l) At the time of execution and delivery of this Agreement, the Company
shall have received from each of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
a written agreement (a "Lock-up Agreement") to the effect that such person will
not, for a period of 180 days from the date of the Prospectus, offer to sell,
contract to sell, or otherwise sell, dispose of, loan, or grant any rights with
respect to (collectively, a "Disposition") any shares of Common Stock, any
options or warrants to purchase any shares of Common Stock or any securities
convertible into exercisable for or exchangeable for shares of Common Stock
(collectively, "Securities") now owned or hereafter acquired directly by such
person or any affiliate or with respect to which such person has or hereafter
acquires the power of Disposition, otherwise than (i) as a bona fide gift or
gifts, provided the donee or donees thereof agree in writing to be bound by this
restriction, (ii) with respect to up to 85% of such Securities in connection
with pledges to secure obligations for borrowed money, or (iii) with the prior
written consent of the Representatives; and copies of such Lock-up Agreements
shall have been provided to the Representatives.
(m) At the time of execution and delivery of this Agreement, the Company
shall have received a Lock-Up Agreement to the effect that WFSG will refrain
during a period of two years
31
from the date of the Prospectus, without the prior written consent of the
Representatives, from (i) offering, pledging, selling, contracting to sell,
selling any option or contract to purchase, purchasing any option or contract to
sell, granting any option for the sale of, or otherwise disposing of or
transferring, directly or indirectly, any shares of Common Stock or any
securities convertible into or exchangeable for Common Stock, or filing any
registration statement under the Securities Act with respect to any of the
foregoing , and (ii) entering into any swap or any other agreement or any
transaction that transfers, in whole or in part, directly or indirectly, the
economic consequence of ownership of Common Stock, whether any such swap or
transaction described in clause (i) or (ii) above is to be settled by delivery
of Common Stock or securities convertible into or exchangeable for Common Stock,
in cash or otherwise, provided that the Manager continues to serve as the
manager of the Company pursuant to the Management Agreement during such period.
(n) In the event the Underwriters exercise their option to purchase all or
any portion of the Option Shares, the representations and warranties of the
Company and the Operating Partnership contained herein and the statements in any
certificates furnished by the Company hereunder shall be true and correct as of
each Date of Delivery, and the Representatives shall have received:
(i) a certificate, dated such Date of Delivery, of the Chief Executive
Officer and the President of the Company, in their capacities as such,
confirming that the certificate delivered at Closing Time pursuant to
subsection (g) of this Section remains true and correct as of such Date of
Delivery; subject to any exceptions that, in the reasonable judgment of the
Representatives, are not material.
(ii) the opinions of Proskauer Rose LLP, Stoel Rives LLP and Piper &
Marbury LLP, the separate letter of Proskauer Rose LLP referenced in
subsection (f)(i), and the reliance letter of Proskauer Rose LLP referenced
in subsection (f)(iv), in form and substance reasonably satisfactory to
counsel for the Underwriters, dated such Date of Delivery, relating to the
Option Shares and otherwise substantially to the same effect as the
opinions and letters required or permitted by subsections (f)(i), (f)(ii),
(f)(iii) and (f)(iv) of this Section.
(iii) the opinion of ▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, dated such Date of
Delivery, relating to the Option Securities and otherwise to the same
effect as the opinion required by subsection (f)(v) of this Section.
(iv) a letter from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, in form and substance
satisfactory to the Representatives and dated such Date of Delivery,
substantially the same in scope and substance as the letter furnished to
the Representatives pursuant to subsection (i) of this Section, except that
the "specified date" in the letter furnished pursuant to this subsection
(n)(iv) shall be a date not more than five days prior to such Date of
Delivery.
(o) The Company shall have furnished counsel for the Underwriters with such
documents and (as they relate to Delaware, New York, Maryland, Oregon and
Federal law)
32
opinions as they may reasonably request for the purpose of enabling them to pass
upon the issuance and sale of the Shares as herein contemplated and related
proceedings, or in order to evidence the accuracy of any of the representations
or warranties, or the fulfillment of any of the conditions, herein contained as
of the Closing Time or any Date of Delivery.
(p) The Company, the Operating Partnership and the Manager shall have
furnished to the Representatives such other documents, certificates and opinions
as to (i) the accuracy and completeness of any statement in the Registration
Statement and the Prospectus or any amendment or supplement thereto, (ii) the
representations, warranties and the statements of the Company contained herein
and in the Management Agreement, and the (iii) performance by the Company, the
Operating Partnership, WFSG and the Manager of its covenants contained herein or
therein, as of the Closing Time or any Date of Delivery as the Underwriters may
reasonably request.
(q) Each of the Selling WFSG Entities, Wilshire 1 and Wilshire 2 shall have
furnished to the Underwriters such documents and certificates as to any
representations, warranties and covenants of the Selling WFSG Entities, Wilshire
1 or Wilshire 2, as the case may be, contained in the Acquisition Agreements and
the performance by the Selling WFSG Entities, Wilshire 1 or Wilshire 2, as the
case may be, of any covenants therein and the fulfillment of any conditions
contained therein as the Underwriter's may reasonably request.
7. Termination:
-----------
(a) If the sale to the Underwriters of the Shares, as contemplated by this
Agreement, is not carried out by the Underwriters for any reason permitted under
this Agreement or if such sale is not carried out because the Company is unable
to comply with any of the terms of the Agreement, then the Company shall not be
under any obligation or liability under this Agreement (except to the extent
provided in Sections 5 and 9 hereof) and the Underwriters shall be under no
obligation or liability to the Company under this Agreement (except to the
extent provided under Sections 5 and 9 hereunder) or to one another hereunder.
(b) The obligations of the several Underwriters hereunder shall be subject
to termination in the absolute discretion of the Representatives, at any time
prior to the Closing Time or any Date of Delivery, if trading in securities on
the New York Stock Exchange shall have been suspended (including automatic halts
in trading pursuant to market decline triggers other than those in which solely
program trading is temporarily halted) or minimum prices or other material
limitation in trading in securities generally shall have been established on the
New York Stock Exchange or Nasdaq National Market, or if a banking moratorium
shall have been declared either by the United States or New York state or
authorities, or if the United States shall have declared war in accordance with
its constitutional processes or there shall have occurred any material outbreak
or escalation of hostilities or other national or international calamity or
crisis of such magnitude in its effect on the financial markets of the United
States as, in the judgment of the Representatives, make it impractical or
inadvisable to proceed with the public offering or the delivery of the Shares on
the terms and in the manner contemplated in the Prospectus.
33
(c) If the Representatives elect to terminate this Agreement as provided in
this Section 7, the Company and the Underwriters shall be notified promptly by
telephone, promptly confirmed by facsimile.
8. Increase in Underwriters' Commitments:
-------------------------------------
If any Underwriter shall default at Closing Time or on a Date of Delivery
in its obligation to take up and pay for the Shares to be purchased by it under
this Agreement on such date (the "Defaulted Shares"), then:
(a) if the total number of Defaulted Shares does not exceed 10% of the
total number of Shares to be purchased by such Underwriter on such date, each
non-defaulting Underwriter shall take up and pay for (in addition to the number
of Shares which it is obligated to purchase on such date pursuant to this
Agreement) the portion of the total number of Shares agreed to be purchased by
the defaulting Underwriter on such date in the proportion that its underwriting
obligations hereunder bears to the underwriting obligations of all non-
defaulting Underwriters.
(b) if the total number of Defaulted Shares exceeds 10% of the total number
of Shares to be purchased by such Underwriter on such date, this Agreement shall
terminate without liability on the part of any non-defaulting Underwriter.
Without relieving any defaulting Underwriter from its obligations
hereunder, the Company agrees with the non-defaulting Underwriters that it will
not sell any Shares hereunder on such date unless all of the Shares to be
purchased on such date are purchased on such date by the Underwriters (or by
substituted Underwriters selected by the Representatives with the approval of
the Company or selected by the Company with the approval of the
Representatives).
If a new Underwriter or Underwriters are substituted for a defaulting
Underwriter in accordance with the foregoing provision, the Company or the non-
defaulting Underwriters shall have the right to postpone the Closing Time or the
relevant Date of Delivery for a period not exceeding five business days in order
that any necessary changes in the Registration Statement and Prospectus and
other documents may be effected.
The term "Underwriter" as used in this Agreement shall refer to and include
any Underwriter substituted under this Section 8 with the like effect as if such
substituted Underwriter had originally been named in this Agreement.
9. Indemnification and Contribution.
--------------------------------
(a) Each of the Company, the Operating Partnership and WFSG agrees jointly
and severally, to indemnify, defend and hold harmless each Underwriter and any
person who controls any Underwriter within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, from and against any loss,
expense, liability or claim (including the reasonable cost of investigation)
which, jointly or severally, any such Underwriter or controlling person may
incur under the Securities Act, the Exchange Act or otherwise, insofar as such
loss, expense,
34
liability or claim arises out of or is based upon any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement (or in the Registration Statement as amended by any post-effective
amendment thereof by the Company) or in a Prospectus (the term Prospectus for
the purpose of this Section 9 being deemed to include any Preliminary
Prospectus, the Prospectus and the Prospectus as amended or supplemented by the
Company), or arises out of or is based upon any omission or alleged omission to
state a material fact required to be stated in such Registration Statement or
necessary to make the statements made in the Registration Statement not
misleading or arises out of or is based on an omission or alleged omission to
state a material fact required to be stated in the Prospectus or necessary to
make the statements therein, in light of circumstances under which they were
made, not misleading, except insofar as any such loss, expense, liability or
claim arises out of or is based upon any untrue statement or alleged untrue
statement of a material fact contained in and in conformity with information
furnished in writing by the Underwriters through the Representatives to the
Company expressly for use in such Registration Statement or such Prospectus, or
arises out of or is based upon any omission or alleged omission to state a
material fact in connection with such information required to be stated in
either such Registration Statement or Prospectus or necessary to make such
information not misleading, provided, however, that the indemnity agreement
contained in this subsection (a) with respect to any Preliminary Prospectus or
the Prospectus shall not inure to the benefit of any Underwriter (or to the
benefit of any person controlling such Underwriter) with respect to any person
asserting any such loss, expense, liability or claim which is the subject
thereof if any subsequent Preliminary Prospectus or the Prospectus corrected any
such alleged untrue statement or omission and if such Underwriter failed to send
or give a copy of such subsequent Preliminary Prospectus or the Prospectus, as
the case may be, to such person at or prior to the written confirmation of the
sale of Shares to such person, unless such failure resulted from non-compliance
by the Company with Section 4(e). The obligations of WFSG under this Agreement
shall terminate at Closing Time.
If any action is brought against an Underwriter or controlling person in
respect of which indemnity may be sought against the Company, the Operating
Partnership or WFSG pursuant to the preceding paragraph, such Underwriter shall
promptly notify the Company, the Operating Partnership or WFSG, as the case may
be, in writing of the institution of such action and the indemnifying party
shall assume the defense of such action, including the employment of counsel and
payment of expenses. Such Underwriter or controlling person shall have the
right to employ its or their own counsel in any such case, but the fees and
expenses of such counsel shall be at the expense of such Underwriter or such
controlling person unless the employment of such counsel shall have been
authorized in writing by the indemnifying party in connection with the defense
of such action or the indemnifying party shall not have employed counsel to have
charge of the defense of such action within a reasonable time or such
indemnified party or parties shall have reasonably concluded (based on the
advice of counsel) that there may be defenses available to it or them which are
different from or additional to those available to the indemnifying party and
which counsel to the indemnified party believes may present a conflict of
interest for one counsel to represent both the indemnified party and
indemnifying party (in which case the indemnifying party shall not have the
right to direct the defense of such action on behalf of the indemnified party or
parties), in any of which events such reasonable fees and expenses shall be
35
borne by the indemnifying party and paid as incurred (it being understood,
however, that the indemnifying party shall not be liable for the expenses of
more than one separate counsel for the Underwriters or controlling persons in
any one action or series of related actions in the same jurisdiction
representing the indemnified parties who are parties to such action). Anything
in this paragraph to the contrary notwithstanding, the indemnifying party shall
not be liable for any settlement of any such claim or action effected without
the written consent of the indemnifying party.
(b) Each Underwriter agrees, severally and not jointly, to indemnify,
defend and hold harmless the Company and the Operating Partnership, directors
and officers of the Company, and any person who controls the Company and the
Operating Partnership within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act, from and against any loss, expense, liability or
claim (including the reasonable cost of investigation) which, jointly or
severally, the Company and the Operating Partnership or any such person may
incur under the Securities Act, the Exchange Act or otherwise, insofar as such
loss, expense, liability or claim arises out of or is based upon any untrue
statement or alleged untrue statement of a material fact contained in and in
conformity with information furnished in writing by such Underwriter through the
Representatives to the Company expressly for use in the Registration Statement
(or in the Registration Statement as amended by any post-effective amendment
thereof by the Company) or in a Prospectus, or arises out of or is based upon
any omission or alleged omission to state a material fact in connection with
such information required to be stated either in such Registration Statement or
Prospectus or necessary to make such information not misleading. The statements
set forth in the last paragraph on the cover page and under the caption
"Underwriting" in the Prospectus (to the extent such statements relate to the
Underwriters) constitute the only information furnished by or on behalf of any
Underwriter through the Representatives to the Company for purposes of this
Section 9.
If any action is brought against the Company, any such person in respect of
which indemnity may be sought against any Underwriter pursuant to the foregoing
paragraph, the Company or such person shall promptly notify the Representatives
in writing of the institution of such action and the Representatives, on behalf
of the Underwriters, shall assume the defense of such action, including the
employment of counsel and payment of expenses. The Company or such person shall
have the right to employ its own counsel in any such case, but the fees and
expenses of such counsel shall be at the expense of the Company or such person
unless the employment of such counsel shall have been authorized in writing by
the Representatives in connection with the defense of such action or the
Representatives shall not have employed counsel to have charge of the defense of
such action within a reasonable time or such indemnified party or parties shall
have reasonably concluded (based on the advice of counsel) that there may be
defenses available to it or them which are different from or additional to those
available to the Underwriters and which counsel to the indemnified party
believes may present a conflict of interest for one counsel to represent both
the indemnified party and indemnifying party (in which case the Representatives
shall not have the right to direct the defense of such action on behalf of the
indemnified party or parties), in any of which events such fees and expenses
shall be borne by such Underwriter and paid as incurred (it being understood,
however,
36
that the Underwriters shall not be liable for the expenses of more than one
separate counsel in any one action or series of related actions in the same
jurisdiction representing the indemnified parties who are parties to such
action). Anything in this paragraph to the contrary notwithstanding, no
Underwriter shall be liable for any settlement of any such claim or action
effected without the written consent of such Underwriter.
(c) If the indemnification provided for in this Section 9 is unavailable to
an indemnified party under subsections (a) and (b) of this Section 9 in respect
of any losses, expenses, liabilities or claims referred to therein, then each
applicable indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, expenses, liabilities or claims (i) in such proportion as
is appropriate to reflect the relative benefits received by the Company, the
Operating Partnership or WFSG on the one hand and the Underwriters on the other
hand from the offering of the Shares 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, the Operating Partnership or
WFSG on the one hand and of the Underwriters on the other in connection with the
statements or omissions which resulted in such losses, expenses, liabilities or
claims, as well as any other relevant equitable considerations. The relative
benefits received by the Company, the Operating Partnership or WFSG on the one
hand and the Underwriters on the other shall be deemed to be in the same
proportion as the total proceeds from the offering (net of underwriting
discounts and commissions but before deducting expenses) received by the
Company, the Operating Partnership or WFSG bear to the underwriting discounts
and commissions received by the Underwriters. The relative fault of the
Company, the Operating Partnership or WFSG on the one hand and of the
Underwriters on the other shall be determined by reference to, among other
things, whether the untrue statement or alleged untrue statement of a material
fact or omission or alleged omission relates to information supplied by the
Company, the Operating Partnership, WFSG or by the Underwriters and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The amount paid or payable by a party as a
result of the losses, claims, damages and liabilities referred to above shall be
deemed to include any legal or other fees or expenses reasonably incurred by
such party in connection with investigating or defending any claim or action.
(d) The Company, the Operating Partnership, WFSG and the Underwriters agree
that it would not be just and equitable if contribution pursuant to this Section
9 were determined by pro rata allocation (even if the Underwriters were treated
as one entity for such purpose) or by any other method of allocation which does
not take account of the equitable considerations referred to in subsection (c)
above. Notwithstanding the provisions of this Section 9, no Underwriter shall
be required to contribute any amount in excess of the amount by which the total
price at which the Shares underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages which such Underwriter
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
37
fraudulent misrepresentation. The Underwriters' obligations to contribute
pursuant to this Section 9 are several in proportion to their respective
underwriting commitments and not joint.
10. Survival. The indemnity and contribution agreements contained in
--------
Section 9 and the covenants, warranties and representations of the Company and
the Operating Partnership contained in Sections 3, 4 and 5 of this Agreement
shall remain in full force and effect regardless of any investigation made by or
on behalf of any Underwriter, or any person who controls any Underwriter within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act, or by or on behalf of the Company, the Operating Partnership, WFSG,
directors and officers of the Company or WFSG or any person who controls the
Company, the Operating Partnership or WFSG within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act and shall survive the sale
and delivery of the Shares. The indemnity and contribution agreements contained
in Section 9 and the covenants and agreements contained in Section 5 of this
Agreement shall survive any termination of this Agreement. The Company, the
Operating Partnership, WFSG and each Underwriter agree promptly to notify the
others of the commencement of any litigation or proceeding against it and, in
the case of the Company or WFSG, against any of the officers and directors of
the Company or WFSG, in connection with the sale and delivery of the Shares, or
in connection with the Registration Statement or Prospectus.
11. Notices:
-------
Except as otherwise herein provided, all statements, requests, notices and
agreements shall be in writing or by telegram and, if to the Underwriters, shall
be sufficient in all respects if delivered or sent to Friedman, Billings, ▇▇▇▇▇▇
& Co., Inc., ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention:
Syndicate Department; and if to the Company, the Operating Partnership or WFSG,
shall be sufficient in all respects if delivered to the Company, the Operating
Partnership, or WFSG at the offices of the Company at ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇.
12. Governing Law: This Agreement shall be governed by, and construed in
-------------
accordance with, the internal laws of the State of New York as applied to
contracts made and performed entirely within the State of New York, excluding
(to the greatest extent permissible by law) any rule of law that would cause the
application of the laws of any jurisdiction other than the State of New York.
The Company, the Operating Partnership and WFSG hereby irrevocably submit to the
exclusive jurisdiction of any State of New York court or any federal court
sitting in the City of New York, New York in respect of any suit, action or
proceeding related to this Agreement or any of the matters contemplated hereby,
irrevocably waives any defense of lack of personal jurisdiction and irrevocably
agrees that all claims in respect of any suit, action or proceeding may be heard
and determined in any such court. The Company, the Operating Partnership and
WFSG irrevocably waive, to the fullest extent they may effectively do so under
applicable law, any objection that they may now or hereafter have to the laying
of venue of any such suit, action or proceeding brought in any such court and
any claim that any such suit, action or proceeding brought in any such court has
been brought in an inconvenient forum.
38
13. Headings:
--------
The section headings in this Agreement have been inserted as a matter of
convenience of reference and are not a part of this Agreement.
14. Parties in Interest:
-------------------
The Agreement herein set forth has been and is made solely for the benefit
of the Underwriters, the Company, the Operating Partnership, WFSG and the
controlling persons, directors and officers referred to in Section 9 hereof, and
their respective successors, assigns, executors and administrators. No other
person, partnership, association or corporation (including a purchaser, as such
purchaser, from any of the Underwriters) shall acquire or have any right under
or by virtue of this Agreement.
15. Counterparts:
------------
This Agreement may be signed by the parties in counterparts which together
shall constitute one and the same agreement among the parties.
If the foregoing correctly sets forth the understanding among the Company,
the Operating Partnership, WFSG and the Underwriters, please so indicate in the
space provided below for the purpose, whereupon this letter shall constitute a
binding agreement among the Company, the Operating Partnership, WFSG and the
Underwriters.
39
Very truly yours,
WILSHIRE REAL ESTATE INVESTMENT TRUST INC.
By:
----------------------------------------------
Name:
--------------------------------------------
Title:
-------------------------------------------
WILSHIRE REAL ESTATE PARTNERSHIP L.P.
By: Wilshire Real Estate Investment Trust Inc.,
its general partner
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
WILSHIRE FINANCIAL SERVICES GROUP INC.
By:
----------------------------------------------
Name:
--------------------------------------------
Title:
-------------------------------------------
40
Accepted and agreed to as
of the date first above written:
FRIEDMAN, BILLINGS, ▇▇▇▇▇▇ & CO., INC.
PRUDENTIAL SECURITIES INCORPORATED
BLACK & COMPANY, INC.
By: FRIEDMAN, BILLINGS, ▇▇▇▇▇▇ & CO., INC.,
for itself and on behalf of the Representatives
and Underwriters named on Schedule I hereto.
By:
--------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Managing Director
41
SCHEDULE I
Schedule of Underwriters
Number of Initial
Underwriter Shares to be Purchased
----------- ----------------------
Friedman, Billings, ▇▇▇▇▇▇ & Co., Inc.
Prudential Securities Incorporated
Black & Company, Inc.
Total......................................
======================
1
SCHEDULE II
Other Transaction Documents
Lock-Up Agreements
1998 Employee Stock Plan
Option Agreement from WFSG to the Operating Partnership for certain
International Investments
Registration Rights Agreement
1
