ORANGE REIT, INC. 78 OKNER PARKWAY LIVINGSTON, NEW JERSEY, 07039 Common Shares Agency Agreement

Exhibit 1.1

 

ORANGE REIT, INC.

78 OKNER PARKWAY

LIVINGSTON, NEW JERSEY, 07039

 

Common Shares

Agency Agreement

 

January     , 2006

 

J.P. Turner & Company, LLC

One Buckhead Plaza

3060 Peachtree Road, 11^th Floor

Atlanta, Georgia 30305

 

Dear Sir:

 

The purpose of this agreement (the “Agreement”) is to confirm the appointment of J.P. Turner & Company, LLC (the “Managing Agent”) by Orange REIT, Inc., a Maryland corporation, (the “Company”) in connection with the Offering described herein on the above date (the “Engagement Date”) under the terms and conditions set forth herein. The Company and Managing Agent desire to, and hereby do, agree as follows:

 

The Company is a Maryland corporation that will elect to qualify as a real estate investment trust pursuant to Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Code”). Subject to the terms and conditions stated herein, the Company proposes to engage the Managing Agent to solicit offers to buy and obtain purchasers for shares of common stock, $.01 par value, of the Company (the “Shares”) in a “best efforts” public offering for a minimum of $12,000,000 up to a maximum of $100,000,000 worth of Shares (the “Offering”). The Managing Agent, shall coordinate the activities of the Agents with regard to investor participation in the Offering. The Shares will be registered for sale to the public under the Securities Act of 1933, as amended (the “Act”), and the regulations promulgated thereunder by the Securities and Exchange Commission (the “Commission”), on SEC Form S-11, but will not be listed for post-issuance trading on any exchange or included for quotation on any of the Nasdaq markets. The net proceeds of the Offering will be employed by the Company primarily for the purposes of acquiring hotel properties, including extended-stay, limited service hotels and other hotels, and to repay up to $800,000 of funds loaned to the Company by Briad Development West LLC, an affiliate of Brad Honigfeld, the President, Chief Executive Officer and a director of the Company.

 

By signature to this Agreement, the Company hereby engages the Managing Agent for the Offering, to solicit offers to buy and obtain purchasers for the Shares on a “best efforts” basis and otherwise in accordance with the terms and conditions set forth in this Agreement, and the Managing Agent agrees to be so engaged.

 

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1. Representations and Warranties.

 

(a) The Company represents and warrants to, and agrees with, the Managing Agent with effect from the date hereof, that:

 

(i) The Company has heretofore filed a registration statement on Form S-11 with the Commission (File No. 333-                ), and as a part thereof, a preliminary prospectus with respect to the registration of the Shares under the Act; any preliminary prospectus included in such registration statement or filed with the Commission pursuant to Rule 424 of the Commission under the Act is hereinafter called a “Preliminary Prospectus”; the registration statement, as amended at the time it becomes effective under the Act, and the prospectus filed as a part thereof pursuant to Rule 424(b) of the Act are hereinafter called the “Registration Statement” and “Prospectus,” respectively; except that: (A) if the Company files a post-effective amendment to the registration statement, then the term “Registration Statement” shall refer to the registration statement as amended by such post-effective amendment thereto and the term “Prospectus” shall refer to the amended prospectus then on file with the Commission, and (B) if the prospectus, including any sticker supplement thereto not theretofore consolidated into a post-effective amendment, filed by the Company pursuant to either Rule 424(b) or (c) of the rules and regulations of the Commission under the Act (the “Regulations”), shall differ from the prospectus on file at the time the Registration Statement or any post-effective amendment thereto shall have become effective, the term “Prospectus” shall refer to the prospectus, including any such sticker supplement, filed pursuant to either Rule 424(b) or (c), as the case may be, from and after the date on which it shall have been filed. The Company will not file any registration statement for Shares or any amendment to the registration statement or any amendment or supplement to the Prospectus to which the Managing Agent shall reasonably object in writing or which shall be reasonably disapproved by the Managing Agent and its counsel.

 

(ii) When the Registration Statement (including any exhibits thereto and the Prospectus contained therein) is declared effective by the Commission, the Registration Statement and the Prospectus and any amendments thereof and supplements or exhibits thereto will comply in all material respects with the applicable provisions of the Act, the Regulations and all other federal and state securities laws, rules and regulations, will not contain an untrue statement of a material fact and will not omit to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading under the circumstances under which they were made. No representation and warranty is made in this subsection (ii), however, with respect to any information contained in or omitted from the Registration Statement or the Prospectus or any related Preliminary Prospectus or any amendment thereof or supplement thereto in reliance upon and in conformity with information furnished in writing to the Company by or on behalf of the Managing Agent specifically for use therein.

 

The parties acknowledge and agree that such information provided by or on behalf of the Managing Agent consists solely of the section of the Prospectus captioned The Offering.

 

(iii) The Shares to be issued and sold by the Company pursuant to this Agreement have been duly and validly authorized and, when issued and delivered against payment therefor as provided herein, will be duly and validly issued and fully paid and non-assessable and will conform to the description of the Shares contained in the Prospectus.

 

(iv) As of the date of this Agreement, the Company has no direct or indirect subsidiaries (each, a “Subsidiary” and together, the “Subsidiaries”).

 

(v) The Company has the corporate power to enter into this Agreement, and the issuance and sale of the Shares by the Company and the performance of this Agreement and the Offering and the consummation by the Company of the Offering and the other

 

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transactions and actions contemplated herein will not result in a breach or violation of any terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company or any of its Subsidiaries or properties is subject, nor will such action result in any violation of the provisions of the Articles of Incorporation or Bylaws of the Company, or any statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Company or any of its Subsidiaries or properties; and no consent, approval, authorization, order, registration or qualification of or with any such court or governmental agency or body is required for the issue and sale of the Shares or the consummation by the Company of the transactions contemplated by this Agreement, except such consents, approvals, authorizations, registrations or qualifications as may be required under the Act and under state securities or Blue Sky laws in connection with the distribution of the Shares by the Managing Agent.

 

(vi) This Agreement has been duly authorized executed and delivered by the Company, and constitutes a valid and binding agreement of the Company, enforceable in accordance with its terms, except to the extent that enforceability may be limited by bankruptcy, insolvency or other laws affecting the enforcement of creditors’ rights generally or by general principles of equity, and except to the extent that the enforceability of the indemnity and contribution provisions contained in this Agreement may be limited under applicable laws;

 

(vii) There are no contracts or other documents (including, without limitation, any agreement with any affiliate of the Company or any option or other agreement relating to the purchase of real property) which are required to be described in the Registration Statement and the Prospectus or filed as exhibits to the Registration Statement by the Act or the Regulations and which have not been so described or filed.

 

(viii) To the best of the knowledge of the Company’s management, Grant Thornton, LLP, auditor of the financial statements of the Company, is an independent public accountant as required by the Act and the rules and regulations of the Commission thereunder.

 

(ix) The Company is not in violation of its Articles of Incorporation, By-laws or other organizational documents or in default in the performance or observance of any material obligation, covenant or condition contained in any indenture, mortgage, deed of trust, loan agreement, lease or other agreement or instrument to which it is a party or by which it or any of its properties may be bound.

 

(x) There are no legal or governmental proceedings pending to which the Company is a party or to which any property of the Company is the subject, which, individually or in the aggregate, would have a material adverse effect on the financial position, shareholders’ equity or results of operations of the Company and, to the best of the knowledge of the Company’s management, no such proceedings are threatened or contemplated by governmental authorities or threatened or contemplated by others.

 

(xi) The Company is not and, at all times up to and including consummation of the transactions contemplated by this Agreement, and after giving effect to application of the net proceeds of the Offering, will not be, subject to registration as an “investment company” under the Investment Company Act of 1940, as amended, and is not and will not be an entity “controlled” by an “investment company” within the meaning of such act.

 

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(xii) Except as disclosed in the Registration Statement and the Prospectus: (i) no person or entity has been engaged by the Company to act as a finder or investment adviser in connection with the transactions contemplated herein (ii) there are no contracts, agreements or understandings between the Company and any person or entity that would give rise to a valid claim against the Company or Managing Agent for a brokerage commission, finder’s fee or other like payment in connection with the transactions contemplated by this Agreement or (iii) there are no arrangements, agreements, understandings, payments or issuance with respect to the Company or any of its officers, directors, shareholders, partners, employees, Subsidiaries or affiliates that may affect the Managing Agents’ compensation as permitted by the National Association of Securities Dealers, Inc. (“NASD”). Except for Scott Lipkin, none of the Company’s officers, directors or shareholders is a member of NASD, an affiliate or an associated person of a member of NASD.

 

(xiii) Neither the Company nor any Subsidiary has any: (i) employment, severance or other similar arrangement or agreement, or (ii) plan, policy or other instrument of insurance (including any self-insured arrangements), in each such case, providing or providing for any of the following: workers’ compensation benefits, disability benefits, severance benefits, supplemental unemployment benefits, vacation benefits, retirement benefits, deferred compensation, profit-sharing, bonuses, fee sharing, stock options, stock appreciation or other forms of incentive compensation, or post-retirement insurance, compensation or similar benefits. In the event that the Company or any Subsidiary shall enter into, adopt or purchase, as the case may be, any such agreement, plan or policy, the Registration Statement and the Prospectus shall be appropriately amended or supplemented to disclose all material facts pertaining thereto.

 

(xiv) The Company has not promised or represented to any person or entity that any Shares will be directed or otherwise made available to them in connection with the Offering. The Company has not offered any shares of Common Stock to any person or entity with the intention of unlawfully influencing: (i) a business relationship with the Company or any Subsidiary or (ii) a journalist or publication to write or publish favorable information about the Company, any Subsidiary or their affiliates.

 

(xv) The conditions for use of Form S-11 to register the Offering under the Act, as set forth in the General Instructions to such Form, have been satisfied.

 

(xvi) Any certificate signed by any officer of the Company and delivered to the Managing Agent in connection with the Offering shall be deemed a representation and warranty by the Company to the Managing Agent, as to matters covered thereby.

 

(b) As a condition: (i) to the issuance by the Managing Agent to the Commission of its consent to the declaration of effectiveness of the Registration Statement and (ii) of the Managing Agent acting as agent in connection with the Offering as contemplated herein, the Company shall, by delivery to the Managing Agent of appropriate written documentation to such effect, restate and reiterate, subject to such modifications as may be necessary to account for changes in facts or circumstances, all of its representations and warranties contained in Section 1(a) hereof, and shall, as of the Initial Closing Date and as of each Subsequent Closing Date, further represent and warrant to, and agree with, the Managing Agent, in each case with effect from the date upon which the Registration Statement shall be declared effective (the “SEC Effective Date”) that:

 

(i) No stop order suspending the effectiveness of the Registration Statement or any part thereof has been issued and, to the knowledge of the Company, no proceeding for that purpose has been instituted or is contemplated by the Commission or by the state securities authority of any jurisdiction. No order preventing or suspending the use of the Prospectus has been issued and, to the knowledge of the Company, no proceeding for that purpose has been instituted or is contemplated by the Commission or by the state securities authority of any jurisdiction.

 

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(ii) The Company and each of its Subsidiaries has been duly incorporated or organized, is validly existing, is in good standing, under the laws of its state of organization, with power and authority (corporate or other) to own its properties and conduct its business, and has been duly qualified as a foreign entity for the transaction of business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership of property or the conduct of business, except such jurisdictions, if any, in which the failure to be so qualified will not have a material adverse effect on the respective company.

 

(iii) No permits, licenses, approvals, consents and other authorizations (collectively, the “Licenses”) must be issued by any federal, state, or local regulatory agencies or bodies or private entities in order for the Company or any Subsidiary to conduct, as of the date of this Agreement, the business of such entities in the manner described in the Registration Statement and Prospectus. In the event of a change of circumstances that shall require the Company or any Subsidiary to obtain any License in order for the Company or any Subsidiary to conduct, the business of such entities in the manner described in the Registration Statement and Prospectus, the Company and/or the relevant Subsidiary shall obtain all requisite Licenses.

 

(iv) The Company has an authorized capitalization as set forth in the Prospectus. All of the issued shares of capital stock of the Company have been duly and validly authorized and issued, are fully paid and non-assessable and conform to the description of the capital stock of the Company contained in the Prospectus. There are no preemptive or other rights to subscribe for or to purchase any shares of capital stock of the Company or of any of its Subsidiaries. Except as set forth in the Prospectus, there are no warrants or options to purchase any shares of capital stock of the Company or of any of its Subsidiaries. Neither the filing of the Registration Statement nor the offering or sale of the Shares as contemplated by this Agreement will give rise to any rights for or relating to the registration of any shares of the capital stock of the Company.

 

(v) Except as listed as shown on Exhibit A, neither the Company nor any Subsidiary: (i) owns or possesses any patents, patent applications, trademarks, service marks, trade names, trademark registrations, service mark registrations, copyrights, licenses (other than “shrink wrap,” non-fee generating and royalty free software licenses), formulae, customer lists, know-how or other intellectual property (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures, the “Intellectual Property”) which is used in the conduct of their respective businesses; or (ii) has knowledge or, has received any notice, that the conduct of their respective businesses conflicts with any Intellectual Property rights of others.

 

(vi) Neither the Company nor any of its affiliates has, prior to the date hereof, made any offer or sale of any securities which are required to be “integrated” pursuant to the Act or the Regulations with the offer and sale of the Shares pursuant to the Registration

 

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Statement. Except as disclosed in the Registration Statement or the Prospectus, neither Company nor any of its affiliates has sold or issued any Relevant Security during the six-month period preceding the date of the Prospectus, including but not limited to any sales Regulation D or S under the Act other than shares of Common Stock issued pursuant to employee benefit plans, qualified stock option plans or the employee compensation plans or pursuant to outstanding options, rights or warrants as described in the Registration Statement and the Prospectus.

 

(vii) The financial statements, including the notes thereto, included in the Registration Statement and the Prospectus present fairly the financial position as of the dates indicated and the cash flows and results of operations for the periods specified of the Company. Except as otherwise stated in the Registration Statement and the Prospectus, said financial statements have been prepared in conformity with United States generally accepted accounting principles applied on a consistent basis throughout the periods involved (“GAAP”). No other financial statements or supporting schedules are required to be included or incorporated by reference in the Registration Statement. The other financial and statistical information included in the Registration Statement and the Prospectus present fairly the information included therein and have been prepared on a basis consistent with that of the financial statements that are included in the Registration Statement and the Prospectus and the books and records of the respective entities presented therein.

 

(viii) There are no pro forma or as adjusted financial statements which are required to be included in the Registration Statement and the Prospectus in accordance with Regulation S-X which have not been included as so required.

 

(ix) Since the respective dates as of which information is given in the Registration Statement and the Prospectus, neither the Company nor any of its Subsidiaries has experienced any material adverse change or any development involving a prospective material adverse change in the general affairs, prospects, management, financial position, properties or results of operations of the Company or any of its Subsidiaries, otherwise than as set forth in the Prospectus; and neither the Company nor any of its Subsidiaries has entered into any material transactions other than as described in the Prospectus; and the capitalization, indebtedness, properties, material liabilities and business of the Company and its Subsidiaries conform to the descriptions thereof contained in the Prospectus.

 

(x) Neither the Company nor any of its Subsidiaries is in violation of its Articles of Incorporation, By-laws or other organizational documents or in default in the performance or observance of any material obligation, covenant or condition contained in any indenture, mortgage, deed of trust, loan agreement, lease or other agreement or instrument to which it is a party or by which it or any of its properties may be bound.

 

(xi) There are no legal or governmental proceedings pending to which the Company or any of its Subsidiaries is a party or to which any property of the Company or any of its Subsidiaries is the subject, which, individually or in the aggregate, would have a material adverse effect on the financial position, shareholders’ equity or results of operations of the Company or any of its Subsidiaries and, to the best of their knowledge, no such proceedings are threatened or contemplated by governmental authorities or threatened or contemplated by others.

 

(xii) Neither the Company nor any of its Subsidiaries has violated: (i) the Bank Secrecy Act, as amended, (ii) the Money Laundering Control Act of 1986, as amended, (iii)

 

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the Foreign Corrupt Practices Act, or (iv) the Uniting and Strengthening of America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT ACT) Act of 2001, and/or the rules and regulations promulgated under any such law, or any successor law.

 

(xiii) The Company is organized in conformity with the requirements for qualification as a real estate investment trust under Sections 856 through 860 of the Code and the rules and regulations thereunder. The contemplated method of operation of the Company’s business as described in the Prospectus will allow the Company to satisfy the operational requirements for qualification as a real estate investment trust under such Sections and such rules and regulations

 

(xiv) The Company has disclosed in the Prospectus all potential conflicts of interest involving the officers, directors, principal shareholders, and/or employees of the Company and any of its Subsidiaries required to be disclosed therein or the omission of which would render the Prospectus materially misleading. No relationship, direct or indirect, exists between or among any of the Company or any affiliate of the Company, on the one hand, and any director, officer, shareholder, customer or supplier of the Company or any affiliate of the Company, on the other hand, which is required by the Act or the Regulations to be described in the Registration Statement or the Prospectus which is not so described and described as required. There are no outstanding loans, advances (except normal advances for business expenses in the ordinary course of business) or guarantees of indebtedness by the Company to or for the benefit of any of the officers or directors of the Company or any of their respective family members, except as disclosed in the Registration Statement and the Prospectus. The Company has not, directly or indirectly, including through a Subsidiary, extended or maintained credit, arranged for the extension of credit, or renewed an extension of credit, in the form of a personal loan to or for any director or executive officer of the Company.

 

(xv) Neither the Company nor any of its directors, officers or controlling persons or affiliates, has taken or will take, directly or indirectly, any action resulting in a violation of Rule 102 of Regulation M under the Securities Exchange Act of 1934, as amended (together with the rules and regulations promulgated thereunder, the “Exchange Act”), or designed to cause or result in, or that has constituted or that reasonably might be expected to constitute, the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Shares.

 

(c) As used in this Agreement, the term “knowledge of the Company” (or similar language) shall mean the knowledge of the officers and directors of the Company, with the assumption that such officers and directors shall have made reasonable and diligent inquiry of the matters presented (with reference to what is customary and prudent for the applicable individuals in connection with the discharge by the applicable individuals of their duties as officers, directors or managers of the Company or the applicable Subsidiaries or affiliates).

 

2. Offering and Sale of Shares—Closing Dates.

 

(a) On the basis of the representations, warranties and covenants herein contained, but subject to the terms and conditions herein set forth, the Managing Agent is hereby appointed as the selling agent of the Company during the term herein specified (the “Offering Period”) for the purpose of finding subscribers for the Shares for the account and risk of the Company through a public offering beginning on the SEC Effective Date. The Offering Period shall continue as long

 

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as Shares are being offered through the Registration Statement, but not to exceed 30 months after the SEC Effective Date. The Company agrees to file a supplement to the Registration Statement whenever required by law or appropriate to fully inform participants in the Offering of material changes in the Company’s business or finances. Subject to the performance by the Company of all of its obligations to be performed hereunder, and to the completeness and accuracy of all the representations and warranties contained herein, the Managing Agent hereby accepts such agency and agrees on the terms and conditions herein set forth to use its reasonable best efforts during the Offering Period to find subscribers for the Shares at the current public offering price (each subscriber being required to invest at least $5,000, except for IRAs and Keogh and Pension Plans which shall be required to invest at least $2,000). The time for each issuance of and payment for Shares is herein referred to as a “Closing Date.” The initial Closing Date shall take place promptly after subscribers have been obtained for $12 million of Shares (the “Initial Closing Date”). The Offering shall terminate if the Initial Closing Date has not occurred on or before the first anniversary date of the SEC Effective Date.

 

(b) All subscription payments for the Shares shall be deposited into a qualified escrow account maintained by Deutsche Bank National Trust Company.

 

(c) If less than all the Shares shall have been subscribed and paid for at the Initial Closing Date, then, at periodic intervals to be mutually agreed upon by the Managing Agent and the Company during the Offering Period, there shall be subsequent closings for the payment to the Company of the purchase price of additional Shares sold by the Managing Agent (the “Subsequent Closing Date(s)”) as described in Section 2(d).

 

(d) Subsequent closing(s) will take place at such time(s), date(s) and place(s) as determined by the Company, with the concurrence of the Managing Agent. Shares will be issued to subscribers and compensation will be paid to the Managing Agent at each Subsequent Closing Date.

 

(e) Subscriptions for Shares may be solicited by certain dealers selected by the Managing Agent or by an agent that the Managing Agent appoints, in each case, with the Company’s approval of such selections which shall not be unreasonably withheld or delayed (the “Selected Dealers”). Each such Selected Dealer shall be a member in good standing of NASD.

 

(f) As compensation for the services of the Managing Agent under this Agreement, the Managing Agent will be paid in immediately available funds, on each Closing Date, a commission equal to 7.0% of the public offering price for each Share placed by or on behalf of the Managing Agent and subscribed and paid for at each Closing Date (other than Shares by directors, officer or affiliates of the Company not solicited by the Managing Agent). In addition, the Managing Agent will be paid in immediately available funds, on each Closing Date, a non-accountable expense allowance equal to 3.0% of the public offering price for each Share placed by or on behalf of the Managing Agent and subscribed and paid for on the applicable Closing Date (other than reinvestment Shares by directors, officers and affiliates of the Company not solicited by the Managing Agent). The Managing Agent may reallow some or all of the commission and fees payable to it by the Company to the Selected Dealers. The Managing Agent and each Selected Dealer will be paid, in immediately available funds and simultaneously with issuance, a commission and a non-accountable expense allowance in the amounts set forth above (subject to the adjustment described in the immediately preceding sentence) each time the Company issues Shares under the reinvestment plan covered by the Registration Statement to purchasers obtained by each such Selected Dealer engaged by the Managing Agent. The Managing Agent reserves the right (in its sole discretion) to reduce any item of compensation or

 

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adjust the terms thereof as specified herein in the event that a determination shall be made by the NASD to the effect that the Managing Agents’ aggregate compensation is in excess of NASD rules or that the terms thereof require adjustment.

 

(g) The Managing Agent shall enter into a financial advisory agreement with Orange Realty Group, LLC (“Orange Realty”) to provide services in connection with future sales of one or more of the Company’s properties (the “Orange Realty Advisory Agreement”). Such agreement shall provide that Orange Realty will pay to the Managing Agent, an amount which, in the aggregate, shall be equal to 15% of the fee Orange Realty receives or will receive from the Company upon the sale of such properties.

 

(h) The Managing Agent shall enter into a financial advisory agreement with Orange Advisors, LLC (“Orange Advisors”) to provide advisory services to Orange Advisors (the “Orange Advisors Advisory Agreement”). Such agreement shall provide that Orange Advisors will pay the Managing Agent, an amount which, in the aggregate, shall be equal to 15% of the following specific fees which Orange Advisors receives or will receive from the Company:

 

(i) deferred subordinated share of net sales proceeds upon liquidation of the Company (as described in the Prospectus),

 

(ii) subordinated incentive fee payable upon listing (as described in the Prospectus), and

 

(iii) performance fee (as described in the Prospectus).

 

(i) Neither the Company, nor the Managing Agent or any Selected Dealer participating in the Offering shall, directly or indirectly, pay or award any finder’s fees, commissions or other compensation to any person engaged by a potential investor for investment advice as an inducement to such adviser to advise the purchase of Shares; provided, however, that normal sales commissions payable to a registered broker-dealer or other properly licensed person for selling Shares shall not be prohibited hereby.

 

(j) The Managing Agent will retain and will require each Selected Dealer to retain, for a period of six (6) years, copies of all documents reflecting their respective determinations regarding the suitability of each investor and potential investor in the Offering solicited by each of them.

 

(k) The Company has advised the Managing Agent that it or one of its affiliates may desire to engage in wholesaling activities in the future. The Company agrees to consult with the Managing Agent concerning the scope and the cost of such activities and to obtain the approval of the Managing Agent, which shall not be unreasonably withheld, before it or one of its affiliates engages in such activities.

 

3. Certain Covenants. The Company hereby covenants and agrees to and with the Managing Agent that:

 

(a) All corporate proceedings undertaken by the Company and other legal matters which relate to the Offering and other related transactions shall be reasonably satisfactory in all material respects to the Managing Agent and its counsel.

 

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(b) The Company and its Subsidiaries shall maintain a system of internal accounting and other controls sufficient to provide reasonable assurances 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 GAAP and to maintain accountability for assets, (iii) access to assets is permitted only in accordance with management’s general or specific authorization, and (iv) the recorded accounting for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

 

(c) The Company will use its best efforts to cause the Registration Statement to become effective and will notify the Managing Agent immediately and confirm in writing: (i) when the Registration Statement and any amendments thereto shall have been filed or become effective, or any supplement to the Prospectus or any amended Prospectus shall have been filed, (ii) of any request by the Commission or any state securities authority for any amendment to the Registration Statement or any amendment or supplement to the Prospectus or for additional information, (iii) of the happening of any event which makes untrue any statement of a material fact made in the Registration Statement or the Prospectus, or which requires the making of a change in the Registration Statement or the Prospectus, in order to make any material statement therein not misleading and (iv) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or of the initiation of any proceedings for that purpose, or of the suspension of the qualification of the Shares for offering or sale in any jurisdiction, or of the institution of any proceedings for such purpose (it being understood that the Company shall proceed immediately upon the occurrence of any of the foregoing to remedy the same in consultation with the Managing Agent). The Company will use its best efforts to prevent the issuance by the Commission or any governmental agency pursuant to the securities laws of any jurisdiction of any stop order and, if such stop order shall at any