EXHIBIT 1.1
FBR ASSET INVESTMENT CORPORATION
4,000,000 Shares of Common Stock
UNDERWRITING AGREEMENT
April 3, 2002
FRIEDMAN, BILLINGS, XXXXXX & CO., INC.
XXXXXX, XXXXXXXX & COMPANY, INCORPORATED
ADVEST, INC.
BB&T CAPITAL MARKETS, a division of Xxxxx & Xxxxxxxxxxxx, Inc.
FLAGSTONE SECURITIES, LLC
c/o Friedman, Billings, Xxxxxx & Co., Inc.
0000 00xx Xxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxx 00000
as Representatives of the several Underwriters
listed in Schedule I hereto
Dear Sirs:
FBR Asset Investment Corporation, a Virginia corporation that has
elected to be taxed as a real estate investment trust (the "Company"), confirms
its agreement with each of the Underwriters listed in Schedule I hereto
(collectively, the "Underwriters"), for whom Friedman, Billings, Xxxxxx & Co.,
Inc., Xxxxxx, Xxxxxxxx & Company, Incorporated, Advest, Inc., BB&T Capital
Markets, a division of Xxxxx & Xxxxxxxxxxxx, Inc., and Flagstone Securities,
LLC, are each acting as a representative (in such capacity, the
"Representatives"), with respect to (i) the sale by the Company and the purchase
by the Underwriters, of 4,000,000 shares of common stock of the Company, $0.01
par value per share (the "Common Shares"), and the purchase by the Underwriters,
acting severally and not jointly, of the respective number of Common Shares set
forth opposite the names of the Underwriters in Schedule I hereto and (ii) the
grant by the Company to the Underwriters, of the option described in Section
1(b) hereof to purchase all or any part of 600,000 additional Common Shares to
cover over-allotments, if any. The 4,000,000 Common Shares to be purchased by
the Underwriters (the "Initial Shares") and all or any part of the 600,000
Common Shares subject to the option described in Section 1(b) hereof (the
"Option Shares") are hereinafter called, collectively, the "Shares."
The Company understands that the Underwriters propose to make a public
offering of the Shares as soon as the Underwriters deem advisable after this
Agreement has been executed and delivered.
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The Company has filed with the Securities and Exchange Commission (the
"Commission"), a shelf registration statement on Form S-3 (No. 333-76906), and
pre-effective amendment no. 1 thereto, 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, as may have been required to
the date hereof, and will file such additional amendments thereto as may
hereafter be required. The registration statement has been declared effective
under the Securities Act by the Commission. Such registration statement,
including all exhibits, financial statements and other information incorporated
by reference, are hereinafter collectively called the "Registration Statement,"
except that, if the Company files a post-effective amendment to any 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 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.
The term "Prospectus" means the final base prospectus and prospectus
supplement, including all exhibits, financial statements and other information
incorporated by reference, as first filed after the date hereof pursuant to Rule
424(b) of the Securities Act Regulations or in the Rule 462(b) Registration
Statement, and any amendments thereof or supplements thereto. The term
"Preliminary Prospectus" means any base prospectus and prospectus supplement
filed under Rule 424(b) or Rule 429 of the Securities Act Regulations prior to
the Prospectus. The Commission has not issued any order preventing or suspending
the use of any Preliminary Prospectus, the Prospectus or the Registration
Statement.
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 $26.505, the number of Initial Shares set forth
in Schedule I opposite such Underwriter's name, plus any additional number of
Initial Shares which such Underwriter may become obligated to purchase pursuant
to the provisions of Section 8 hereof, subject, in each case, to such
adjustments 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 after the initial
public offering to such extent as the Underwriters may determine.
(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 all or any part of the Option Shares at the purchase
price 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
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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 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, without the consent of the
Company, than two full business days) after the exercise of said option, nor in
any event prior to the Closing Time, as hereinafter defined. 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 among Underwriters as the Representatives in their sole 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 of immediately available
funds to an account designated by the Company against delivery of the
certificates for the Initial Shares to the Representatives for the respective
accounts of the Underwriters at the offices of Sidley Xxxxxx Xxxxx & Xxxx LLP,
0000 X Xxxxxx, Xxxxxxxxxx, X.X 00000. Such payment and delivery shall be made at
9:30 a.m., New York City time, on the third (or fourth, if pricing occurs after
4:30 p.m., New York City time) business day after the day hereof (unless another
time, not later than ten business days after such date, shall be agreed to by
the Representatives and the Company). The time at which such payment and
delivery are actually made is hereinafter sometimes called the "Closing Time."
Unless the Representatives elect 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
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 of immediately
available funds to an account designated by the Company against delivery of the
certificates for the Option Shares to the Representatives for the respective
accounts of the Underwriters at the offices of Sidley Xxxxxx Xxxxx & Xxxx LLP,
0000 X Xxxxxx, Xxxxxxxxxx, X.X 00000. Such payment and delivery shall be made at
9:30 a.m., New York City time, on each Date of Delivery. Unless the
Representatives elect 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
relevant Date of Delivery.
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3. Representations and Warranties of the Company. The Company
represents and warrants to the Underwriters that:
(a) the Company has an authorized capitalization as set forth in the
Prospectus under the caption "Description of Common Stock and
Preferred Stock;" the outstanding shares of capital stock of the
Company and its subsidiaries have been duly and validly
authorized and issued and are fully paid and non-assessable, and
all of the outstanding shares of capital stock of the
subsidiaries are directly or indirectly owned of record and
beneficially by the Company;
(b) The Company and each Subsidiary of the Company set forth on
Exhibit A hereto (each a "Subsidiary" and, collectively, the
"Subsidiaries") has been duly incorporated and is validly
existing as a corporation and in good standing under the laws of
its respective jurisdiction of incorporation with all requisite
corporate power and authority to own, lease and operate its
respective properties and to conduct its respective business as
now conducted and as proposed to be conducted as described in
the Registration Statement and Prospectus and, in the case of
the Company, to authorize, execute and deliver this Agreement
and to consummate the transactions contemplated hereby;
(c) the Company and the Subsidiaries are duly qualified or
registered to transact business in each jurisdiction in which
they conduct their respective businesses as now conducted and as
proposed to be conducted as described in the Registration
Statement and the Prospectus, except where the failure,
individually or in the aggregate, to be so qualified or
registered could not reasonably be expected to have a material
adverse effect on the assets, business, results of operations,
earnings, prospects, properties or condition (financial or
otherwise) of the Company and the Subsidiaries taken as a whole
(a "Material Adverse Effect"); and the Company and the
Subsidiaries are duly qualified and in good standing in each
jurisdiction in which they own or lease real property or
maintain an office or in which the nature or conduct of their
respective businesses as now conducted or proposed to be
conducted as described in the Registration Statement and the
Prospectus requires such qualification, except where the failure
to be so qualified and in good standing would not have a
Material Adverse Effect;
(d) the Company and the Subsidiaries are in compliance with all
applicable laws, rules, regulations, orders, decrees and
judgments, including without limitation those relating to
transactions with affiliates, except where any noncompliance
would not have a Material Adverse Effect;
(e) neither the Company nor any of the Subsidiaries is in breach of,
or in default under (nor has any event occurred which with
notice, lapse of time, or both would constitute a breach of, or
default under), its respective
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charter or by-laws, or in the performance or observance of any
obligation, agreement, covenant or condition contained in any
license, indenture, mortgage, deed of trust, loan or credit
agreement or other agreement or instrument to which the Company
or any of the Subsidiaries is a party or by which any of them or
their respective properties is bound, except for such breaches
or defaults which would not have a Material Adverse Effect, and
the issuance, sale and delivery by the Company of the Shares,
the execution, delivery and performance of this Agreement by the
Company, and consummation of the transactions contemplated
herein 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 or charter or by-laws of the Company or any of the
Subsidiaries, (ii) any provision of any license, indenture,
mortgage, deed of trust, loan or credit agreement or other
agreement or instrument to which the Company or any of the
Subsidiaries is a party or by which any of them or their
respective properties may be bound or affected, or (iii) any
federal, state, local or foreign law, regulation or rule or any
decree, judgment or order applicable to the Company or any of
the Subsidiaries, except in the case of clauses (ii) and (iii)
for such breaches or defaults which would not have a Material
Adverse Effect or result in the creation or imposition of any
material lien, charge, claim or encumbrance upon any property or
asset of the Company or the Subsidiaries;
(f) the Company has full legal right, power and authority to enter
into and perform this Agreement and to consummate the
transactions contemplated hereby; this Agreement has been duly
authorized, executed and delivered by the Company and
constitutes a legal, 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, and except to the extent that the
indemnification and contribution provisions of Section 9 hereof
may be limited by federal or state securities laws and public
policy considerations in respect thereof;
(g) the issuance and sale of the Shares to the Underwriters
hereunder have been duly authorized by the Company; when issued
and delivered against payment therefor as provided in this
Agreement, the Shares will be validly issued, fully paid and
non-assessable and no holder of the Shares will be subject to
personal liability by reason of being such a holder; the
issuance of the Shares will not be subject to any preemptive or
similar rights; except as contemplated herein, no person or
entity holds a right to require or participate in the
registration under the Securities Act of the Shares pursuant to
the Registration Statement; no person or entity has a right of
participation or first refusal with respect to the sale of the
Shares by the Company; except as set forth in the Prospectus,
there are no contracts, agreements or understandings between the
Company and any person or
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entity granting such person or entity the right to require the
Company to file a registration statement under the Securities
Act with respect to any securities of the Company or to require
the Company to include such securities with the Shares
registered pursuant to the Registration Statement; the form of
certificate evidencing the Shares complies with all applicable
legal requirements and, in all material respects, with all
applicable requirements of the charter and bylaws of the Company
and the requirements of the American Stock Exchange;
(h) 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 the execution, delivery and performance by the
Company of this Agreement, the consummation of the transactions
contemplated hereby, and the sale and delivery of the Shares,
other than (x) such as have been obtained, or will have been
obtained at the Closing Time or the relevant Date of Delivery,
as the case may be, under the Securities Act or the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), (y) such
approvals as have been obtained in connection with the approval
of the listing of the Shares on the American Stock Exchange 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;
(i) each of the Company and the Subsidiaries 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 their 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, individually or in the aggregate, have a Material
Adverse Effect; neither the Company nor any of the Subsidiaries
is required by any applicable law to obtain accreditation or
certification from any governmental agency or authority or
self-regulatory organization in order to provide the products or
services that it currently provides or which it proposes to
provide, as set forth in the Prospectus; neither the Company nor
any of the Subsidiaries is in violation of, in default under, or
has received any notice regarding a possible violation, default
or revocation of any such license, authorization, consent or
approval or any federal, state, local or foreign law, regulation
or rule or any decree, order or judgment applicable to the
Company or any of the Subsidiaries, other than any such
violation, default or revocation, that would not have a Material
Adverse Effect; and no such license, authorization, consent or
approval contains a materially burdensome restriction that is
not adequately disclosed in the Registration Statement and the
Prospectus;
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(j) 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, and
the Company has complied with any request on the part of the
Commission for additional information;
(k) the Company and the transactions contemplated by this Agreement
meet the requirements and conditions for using a registration
statement on Form S-3 under the Securities Act, as set forth in
the General Instructions to Form S-3; the Registration Statement
complies, and the Prospectus and any further amendments or
supplements to the Registration Statement or the Prospectus will
comply, when they have become effective with the Commission or
on their issue date, as the case may be, 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; and the Prospectus or any
amendment or supplement thereto will not, as of the applicable
issue date and at the Closing Time and on each Date of Delivery
(if any), contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading;
provided, however, that the Company makes no warranty or
representation with respect to Underwriters' Information (as
defined in Section 9(a) of this Agreement);
(l) the Preliminary Prospectus and the Prospectus in paper format
delivered to the Underwriters for use in connection with this
offering will be identical in all material respects to the
versions of the Preliminary Prospectus and Prospectus created to
be transmitted to the Commission for filing via the Electronic
Data Gathering Analysis and Retrieval System ("XXXXX"), except
to the extent permitted by Regulation S-T of the Securities Act
Regulations;
(m) all legal or governmental proceedings, contracts or documents
that are material and of a character required to be filed as
exhibits to the Registration Statement or to be summarized or
described in the Prospectus have been so filed, summarized or
described as required;
(n) there are no actions, suits, proceedings, inquiries or
investigations pending or, to the Company's knowledge,
threatened against the Company or any
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of the Subsidiaries or any of their respective officers and
directors or to which the properties, assets or rights of any
such entity is subject, at law or in equity, before or by any
federal, state, local or foreign governmental or regulatory
commission, board, body, authority, arbitral panel or agency
which could result in a judgment, decree, award or order that
could have a Material Adverse Effect, or which could adversely
affect the consummation of the transactions contemplated by this
Agreement in any material respect;
(o) the financial statements, including the notes thereto, included
or incorporated by reference in the Registration Statement and
the Prospectus present fairly the financial position of the
Company as of the dates indicated and the statements of income
and changes in shareholders' equity and cash flows of the
Company for the periods specified; such financial statements
have been prepared in conformity with generally accepted
accounting principles as applied in the United States and on a
consistent basis during the periods involved (except as
indicated in the notes thereto) and in accordance with
Regulation S-X promulgated by the Commission; the financial
statement schedules, if any, included or incorporated by
reference in the Registration Statement and the Prospectus
fairly present the information required to be shown therein; no
other financial statements or schedules are required by Form S-3
or otherwise to be included or incorporated by reference in the
Registration Statement or Prospectus;
(p) the Company has filed in a timely manner all reports required to
be filed pursuant to sections 13, 14, 15(d) of the Exchange Act
during the preceding twelve calendar months and if during such
period the Company has relied on Rule 12b-25(b) under the
Exchange Act ("Rule 12b-25(b)") with respect to a report or a
portion of a report, that report or portion of a report has
actually been filed within the time period prescribed by Rule
12b-25(b);
(q) Xxxxxx Xxxxxxxx LLP, whose reports on the audited financial
statements of the Company are incorporated by reference in the
Registration Statement and Prospectus are, and at all times
during the periods covered by their reports were, independent
public accountants as required by the Securities Act and the
Securities Act Regulations;
(r) 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 adverse
change in the assets, liabilities, business, results of
operations, earnings, prospects, properties or condition
(financial or otherwise), present or prospective, of the Company
and the Subsidiaries taken as a whole, whether or not arising in
the ordinary course of business, (ii) any transaction, which is
material to the Company and the Subsidiaries
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taken as a whole, contemplated, planned or entered into by the
Company or any of the Subsidiaries, (iii) any obligation,
contingent or otherwise, directly or indirectly incurred by the
Company or any of the Subsidiaries, which is material to the
Company and the Subsidiaries taken as a whole or (iv) any
dividend or distribution of any kind declared, paid or made by
the Company with respect to any class of its capital stock;
(s) the Shares conform in all material respects to the description
thereof contained in the Registration Statement and the
Prospectus;
(t) except as disclosed in the Prospectus, there are no outstanding
(i) securities or obligations of the Company or any of its
Subsidiaries convertible into or exchangeable for any capital
stock of the Company or any such Subsidiary, (ii) warrants,
rights or options to subscribe for or purchase from the Company
or any such Subsidiary any such capital stock or any such
convertible or exchangeable securities or obligations, or (iii)
obligations of the Company or any such Subsidiary to issue any
shares of capital stock, any such convertible or exchangeable
securities or obligation, or any such warrants, rights or
options;
(u) each of the Company and the Subsidiaries 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, except for repurchases of the Company's Common
Shares effected pursuant to the Company's authorized repurchase
program in compliance with applicable securities laws;
(v) the Company (i) is not required to register as a "broker" or
"dealer" in accordance with the provisions of the Exchange Act
or the rules and regulations thereunder, and (ii) other than
Pegasus Capital Corporation, a Delaware corporation ("Pegasus"),
directly, or indirectly through one or more intermediaries, does
not control any member firm of the National Association of
Securities Dealers, Inc. (the "NASD");
(w) 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;
(x) any certificate signed by any officer of the Company or any
Subsidiary delivered to the Representatives or to counsel for
the Representatives pursuant to or in connection with this
Agreement shall be deemed a representation and warranty by the
Company to each Underwriter as to the matters covered thereby;
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(y) the form of certificate used to evidence the Common Stock
complies in all material respects with all applicable statutory
requirements, with any applicable requirements of the articles
of incorporation and by-laws of the Company and the requirements
of the American Stock Exchange;
(z) there are no statutes or regulations applicable to the Company
or any of the Subsidiaries or certificates, permits or other
authorizations from governmental regulatory officials or bodies
required to be obtained or maintained by the Company or any of
the Subsidiaries of a character required to be disclosed in the
Registration Statement or the Prospectus which have not been so
disclosed and properly described;
(aa) all agreements between the Company or any of the Subsidiaries
and third parties expressly referenced in the Prospectus are
legal, valid and binding obligations of the Company or one or
more of the Subsidiaries, enforceable in accordance with their
respective terms, except to the extent enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally and by
general principles of equity;
(bb) no relationship, direct or indirect, exists between or among the
Company or any of the Subsidiaries, on the one hand, and the
directors, officers, shareholders, customers or suppliers of the
Company, the Subsidiary or Friedman, Billings, Xxxxxx Group
Inc., on the other hand, which is required by the Securities Act
to be described in the Registration Statement and the Prospectus
that is not so described;
(cc) the Company and the Subsidiaries have good and marketable title
in fee simple to all real property, if any, and good title to
all personal property owned by them, in each case free and clear
of all liens, security interests, pledges, charges,
encumbrances, mortgages and defects, except such as are
disclosed in the Prospectus or such as do not materially and
adversely affect the value of such property and do not interfere
with the use made or proposed to be made of such property by the
Company and the Subsidiaries; and any real property and
buildings held under lease by the Company or any Subsidiary are
held under valid, existing and enforceable leases, with such
exceptions as are disclosed in the Prospectus or are not
material and do not interfere with the use made or proposed to
be made of such property and buildings by the Company or such
Subsidiary;
(dd) the Company and each Subsidiary owns or possesses adequate
license or other rights to use all patents, trademarks, service
marks, trade names, copyrights, software and design licenses,
trade secrets, manufacturing processes, other intangible
property rights and know-how (collectively "Intangibles")
necessary to entitle the Company and each Subsidiary to conduct
its business as described in the Prospectus, and neither the
Company, nor any Subsidiary, has received notice of infringement
of or
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conflict with (and the Company does not know of any such
infringement of or conflict with) asserted rights of others with
respect to any Intangibles which could have a Material Adverse
Effect;
(ee) the Company and each of its Subsidiaries maintains 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 as applied in the United States and to
maintain asset accountability; (iii) access to assets is
permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for
assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any
differences;
(ff) each of the Company and the Subsidiaries have filed on a timely
basis all necessary federal, state, local and foreign income and
franchise tax returns required to be filed through the date
hereof and have paid all taxes shown as due thereon; and no tax
deficiency has been asserted against any such entity, nor does
any such entity know of any tax deficiency which is likely to be
asserted against any such entity which if determined adversely
to any such entity, would materially adversely affect the
business, prospects, properties, assets, results of operations
or condition (financial or otherwise) of any such entity,
respectively; all tax liabilities are adequately provided for on
the respective books of such entities;
(gg) neither the Company nor any of the Subsidiaries nor any officer
or director purporting to act on behalf of the Company or any of
the Subsidiaries has at any time; (i) made any contributions to
any candidate for political office, or failed to disclose fully
any such contributions, in violation of law, (ii) made any
payment to any state, federal or foreign governmental officer or
official, or other person charged with similar public or
quasi-public duties, other than payments required or allowed by
applicable law, (iii) made any payment outside the ordinary
course of business to any investment officer or loan broker or
person charged with similar duties of any entity to which the
Company or any of the Subsidiaries sells or from which the
Company or any of the Subsidiaries buys loans or servicing
arrangements for the purpose of influencing such agent, officer,
broker or person to buy loans or servicing arrangements from or
sell loans to the Company or any of the Subsidiaries, or (iv)
engaged in any transactions, maintained any bank account or used
any corporate funds except for transactions, bank accounts and
funds which have been and are reflected in the normally
maintained books and records of the Company and the
Subsidiaries;
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(hh) except as otherwise disclosed in the Prospectus, there are no
material outstanding loans or advances or material guarantees of
indebtedness by the Company or any of the Subsidiaries to or for
the benefit of any of the officers or directors of the Company
or any of the Subsidiaries or any of the members of the families
of any of them;
(ii) neither the Company nor any of the Subsidiaries nor, to the
Company's knowledge, any agent of the Company or any of the
Subsidiaries, has made any payment of funds of the Company or of
any Subsidiary or received or retained any funds in violation of
any law, rule or regulation or of a character required to be
disclosed in the Prospectus;
(jj) all securities issued by the Company and any of its Subsidiaries
have been issued and sold in compliance with all applicable
federal and state securities laws;
(kk) (i) the Company is organized in conformity with the requirements
for qualification as a real estate investment trust ("REIT")
under Sections 856 and 857 of the Internal Revenue Code of 1986,
as amended (the "Code"), (ii) the Company qualified as a REIT
for all taxable years prior to 2002, and (iii) the Company's
method of operation will enable it to meet the requirements for
taxation as a REIT under the Code for 2002 and all subsequent
taxable years, and the Company intends to qualify as a REIT for
all such years;
(ll) Pegasus is registered as a broker-dealer with the Commission and
is a member of the NASD and the Securities Investor Protection
Corporation ("SIPC") and applicable state and other regulatory
authorities and is in compliance in all material respects with
all applicable laws, rules, regulations, orders, and similar
requirements in connection therewith;
(mm) the Shares have been approved for listing, upon official notice
of issuance, on the American Stock Exchange;
(nn) in connection with this offering, the Company has not offered
and will not offer its Common Shares or any other securities
convertible into or exchangeable or exercisable for Common
Shares 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;
(oo) neither the Company nor any of the Subsidiaries or their
respective affiliates does business with the government of Cuba
or with any person or affiliate located in Cuba;
(pp) there are no existing or, to the knowledge of the Company,
threatened labor disputes with the employees of the Company or
any of its
12
Subsidiaries which are likely to have individually or in the
aggregate a Material Adverse Effect;
(qq) neither the Company nor any of the Subsidiaries is, or solely as
a result of transactions contemplated hereby and the application
of the proceeds from the sale of the Shares, will become, an
"investment company" or a company "controlled" by an "investment
company" within the meaning of the Investment Company Act of
1940, as amended (the "1940 Act");
(rr) the Company has not incurred any liability for any finder's fees
or similar payments in connection with the transactions herein
contemplated;
(ss) each of the Company and its Subsidiaries maintain insurance
(issued by insurers of recognized financial responsibility) of
the types and in the amounts generally deemed adequate for their
respective businesses and consistent with insurance coverage
maintained by similar companies in similar businesses,
including, but not limited to, insurance covering real and
personal property owned or leased by the Company and its
Subsidiaries against theft, damage, destruction, acts of
vandalism and all other risks customarily insured against, all
of which insurance is in full force and effect; and
(tt) neither the Company nor any of its Subsidiaries has violated, or
received notice of any violation with respect to, any applicable
environmental, safety or similar law applicable to the business
of the Company or any of its Subsidiaries, nor any federal or
state law relating to discrimination in the hiring, promotion or
pay of employees, nor any applicable federal or state wages and
hours law, nor any provisions of the Employee Retirement Income
Security Act or the rules and regulations promulgated
thereunder, nor any state law precluding the denial of credit
due to the neighborhood in which a property is situated, the
violation of any of which could have a Material Adverse Effect.
4. Certain Covenants of the Company. The Company hereby covenants
and agrees with the Underwriters:
(a) to furnish such information as may be requested and otherwise to
cooperate in qualifying the Shares for offering and sale under
the securities or blue sky laws of such states as the
Representatives may designate and to maintain such
qualifications in effect as long as requested by the
Representatives for the distribution of the Shares, provided
that the Company shall not be required to maintain such
qualification for more than 90 days from the date hereof (except
that, upon the written request of the Representatives and at the
expense of the Underwriters, the Company shall maintain such
qualification for an additional period, not to exceed 180 days),
or to qualify as a foreign corporation or to consent to the
13
service of process under the laws of any such state (except
service of process with respect to the offering and sale of the
Shares);
(b) if, at the time this Agreement is executed and delivered, it is
necessary for a post-effective amendment to the Registration
Statement to be declared effective before the offering of the
Shares may commence, the Company will endeavor to cause such
post-effective amendment to become effective as soon as possible
and will advise the Representatives promptly and, if requested
by the Representatives, will confirm such advice in writing,
when such post-effective amendment has become effective;
(c) to prepare the Prospectus in a form approved by the
Representatives and to file such Prospectus (or a terms sheet as
permitted by Rule 434) with the Commission pursuant to Rule
424(b) not later than 10:00 a.m. (New York City time), on the
day following the execution and delivery of this Agreement, and
to furnish promptly (and with respect to the initial delivery of
the prospectus, not later than 10:00 a.m. (New York City time)
on the day following the execution and delivery of this
Agreement) to the Underwriters as many copies of the Prospectus
(or of the Prospectus as amended or supplemented if the Company
shall have made any amendments or supplements thereto after the
effective date of the Registration Statement) in such quantities
and at such locations as the Underwriters may reasonably request
for the purposes contemplated by the Securities Act Regulations,
which Prospectus and any amendments or supplements thereto
furnished to the Underwriters will be materially identical to
the version created to be transmitted to the Commission for
filing via XXXXX, except to the extent permitted by Regulation
S-T of the Securities Act Regulations;
(d) to advise the Representatives promptly and (if requested by the
Representatives) to confirm such advice in writing, when the
Registration Statement has become effective and when any
post-effective amendment to the Registration Statement becomes
effective under the Securities Act Regulations;
(e) to advise the Representatives immediately, confirming such
advice in writing, of (i) the receipt of any comments from, or
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
14
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;
(f) before amending or supplementing the Registration Statement or
the Prospectus, or, during any period of time in which a
Prospectus relating to the Shares is required to be delivered
under the Securities Act Regulations, to furnish to the
Representatives a copy of each such proposed amendment or
supplement before filing any such amendment or supplement with
the Commission;
(g) to furnish to the Underwriters, for a period of three years from
the date of this Agreement and only to the extent unavailable
through XXXXX (i) as soon as available, copies of all annual,
quarterly and current reports or other communications supplied
to holders of Common Shares, (ii) as soon as practicable after
the filing thereof, copies of all reports filed by the Company
with the Commission, the NASD, the American Stock Exchange or
any securities exchange or the Nasdaq National Market and (iii)
such other information as the Underwriters may reasonably
request regarding the Company and its Subsidiaries;
(h) 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 any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances
under which they were made, not misleading, and, during such
time, promptly to prepare and furnish, at the Company's expense,
to the Underwriters promptly such copies of the proposed
amendments or supplements to the Prospectus as may be necessary
to reflect any such change before filing any such amendment or
supplement with the Commission, and thereafter promptly to
furnish at the Company's own expense to the Underwriters, copies
in such quantities and at such locations as the Underwriters may
from time to time reasonably request;
(i) to furnish promptly to the Representatives a signed copy of the
Registration Statement, as initially filed with the Commission,
and of all amendments or supplements thereto (including all
exhibits filed therewith or incorporated therein) and such
number of conformed copies of the foregoing as the
Representatives may reasonably request;
(j) to furnish to each Representative, not less than two business
days before filing with the Commission subsequent to the
effective date of the
15
Prospectus and during the period referred to in paragraph (h)
above, a copy of any document proposed to be filed with the
Commission pursuant to Section 13, 14, or 15(d) of the Exchange
Act and during such period to file all such documents in a
manner and within the time periods required by the Exchange Act
and the Exchange Act Regulations;
(k) to apply the net proceeds of the sale of the Shares in
accordance with the statements under the caption "Use of
Proceeds" in the Prospectus;
(l) to make generally available to its security holders and to
deliver to the Representatives as soon as practicable, but in
any event not later than the end of the fiscal quarter first
occurring after the first anniversary of the effective date of
the Registration Statement, an earnings statement complying with
the provisions of Section 11(a) of the Securities Act (in form,
at the option of the Company, complying with the provisions of
Rule 158 of the Securities Act Regulations) covering a period of
12 months beginning on the effective date of the Registration
Statement;
(m) to use its best efforts to effect and maintain the listing,
quotation or inclusion of the Shares on the American Stock
Exchange or the New York Stock Exchange, or in the Nasdaq
National Market (each an "Exchange") and to file with such
Exchange all documents and notices required by the Exchange of
companies that have securities that are listed on or included in
such Exchange;
(n) to refrain during a period of 90 days from the date of the
Prospectus, without the prior written consent of Friedman,
Billings, Xxxxxx & Co., Inc. and Xxxxxx, Xxxxxxxx & Company
Incorporated, 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 Common Shares or any securities convertible into
or exercisable or exchangeable for Common Shares, or filing any
registration statement under the Securities Act with respect to
any of the foregoing or (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 the Common Shares, whether any such swap or
transaction described in clause (i) or (ii) above is to be
settled by delivery of Common Shares or such other securities,
in cash or otherwise. The foregoing sentence shall not apply to
(A) the Shares to be sold hereunder and (B) any Common Shares
issued by the Company upon the exercise of any options
outstanding on the date hereof and referred to in the
Prospectus;
(o) to not, and to use its best efforts to cause its officers,
directors and affiliates (including without limitation, FBR) not
to, (i) take, directly or indirectly prior to termination of the
underwriting syndicate contemplated
16
by this Agreement, any action designed to stabilize or
manipulate the price of any security of the Company, or which
may cause or result in, or which might in the future reasonably
be expected to cause or result in, the stabilization or
manipulation of the price of any security of the Company, to
facilitate the sale or resale of any security of the Company,
(ii) sell, bid for, purchase or pay anyone any compensation for
soliciting purchases of the Shares other than pursuant to this
Agreement or (iii) pay or agree to pay to any person any
compensation for soliciting any order to purchase any other
securities of the Company;
(p) the Company will maintain, at the Company's expense, a registrar
and transfer agent for the Common Shares;
(q) the Company will use its best efforts to continue to qualify as
a REIT under the Code and to cause Pegasus to continue to be
registered as a broker-dealer with the Commission, the NASD, the
SIPC and other applicable state and other regulatory
authorities;
(r) the Company will comply with all of the provisions of any
undertakings in the Registration Statement;
(s) the Company and the Subsidiaries will conduct their affairs in
such a manner so as to ensure that neither the Company nor any
Subsidiary will be an "investment company" or an entity subject
to regulation as an investment company within the meaning of the
1940 Act;
(t) if at any time during the 30-day period after the Registration
Statement becomes effective, any rumor, publication or event
relating to or affecting the Company shall occur as a result of
which in the Representatives' reasonable opinion the market
price of the Common Shares has been or is likely to be
materially affected (regardless of whether such rumor,
publication or event necessitates a supplement to or amendment
of the Prospectus) and after written notice from the
Representatives advising the Company to the effect set forth
above, to forthwith prepare, consult with the Representatives
concerning the substance of, and disseminate a press release or
other public statement, reasonably satisfactory to the
Representatives, responding to or commenting on such rumor,
publication or event;
(u) to 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 as applied in the
United States and to maintain asset accountability; (iii) access
to assets is permitted only in accordance with management's
general or specific authorization; and (iv) the recorded
accountability for assets is compared
17
with the existing assets at reasonable intervals and appropriate
action is taken with respect to any differences;
(v) not to invest in futures contracts, options on futures contracts
or options on commodities unless the Company is exempt from the
registration requirements of the Commodity Exchange Act of 1978,
as amended (the "CEA"), or otherwise complies with the CEA. In
addition, the Company will not engage in any activities which
might be subject to the CEA, unless such activities are exempt
from that Act or otherwise comply with that Act or with an
applicable no-action letter to the Company from the Commodities
Futures Trading Commission; and
(w) to file timely and accurate reports with the Commission in
accordance with Rule 463 of the Securities Act Regulations or
any successor provision.
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, including expenses, 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 printing of this Agreement and any
dealer agreements and furnishing of copies of each to the Underwriters and to
dealers (including costs of mailing and shipment), (iv) the qualification of the
Shares for offering and sale under state laws that the Company and the
Representatives have mutually agreed are appropriate and the determination of
their eligibility for investment under state law as aforesaid (including the
legal fees and filing fees and other disbursements of counsel for the
Underwriters relating thereto and the printing and furnishing of copies of any
blue sky surveys or legal investment surveys to the Underwriters and to
dealers), (v) filing for review of the public offering of the Shares by the NASD
(including the legal fees and filing fees and other disbursements of counsel for
the Underwriters relating thereto), (vi) the fees and expenses of any transfer
agent or registrar for the Shares and miscellaneous expenses referred to in the
Registration Statement, (vii) the fees and expenses incurred in connection with
the listing of the Shares on the American Stock Exchange, (viii) making road
show presentations with respect to the offering of the Shares, (ix) preparing
and distributing bound volumes of transaction documents for the Representatives
and their legal counsel and (x) the performance of the Company's other
obligations hereunder (including, without limitation, costs incurred in closing
the purchase of the Option Shares, if any). Upon the request of the
Representatives, the Company will provide funds in advance for filing fees.
(b) The Company agrees to reimburse the Representatives for their
reasonable out-of-pocket expenses in connection with the performance of their
activities under this
18
Agreement, including, but not limited to, costs such as printing, facsimile,
courier service, direct computer expenses, accommodations and travel, and the
fees and expenses of the Representatives' outside legal counsel and any other
advisors, accountants, appraisers, etc., but only if the Initial Shares are
purchased by the Underwriters as provided in Section 2(a) of this Agreement.
6. Conditions of the Underwriters' Obligations. The obligations of
the Underwriters hereunder are subject to (i) the accuracy of the
representations and warranties on the part of the Company in all material
respects on the date hereof and at the Closing Time and on each Date of
Delivery, as applicable (ii) the performance by the Company of its obligations
hereunder, and (iii) the satisfaction of the following further conditions:
(a) If, at the time this Agreement is executed and delivered, it is
necessary for a post-effective amendment to the Registration Statement to be
declared effective before the offering of the Shares may commence, such
post-effective amendment shall have become effective not later than 5:30 p.m.,
New York City time, on the date hereof, or at such later date and time as shall
be consented to in writing by the Representatives.
(b) The Company shall furnish to the Underwriters at the Closing
Time and on each Date of Delivery an opinion of Hunton & Xxxxxxxx, counsel for
the Company, addressed to the Underwriters and dated the Closing Time and each
Date of Delivery, in substantially the form of Annex A.
In addition, Hunton & Xxxxxxxx shall state that they have participated in
conferences with officers and other representatives of the Company, independent
public accountants of the Company and Underwriters at which the contents of the
Registration Statement and Prospectus were discussed and, although such counsel
is not passing upon and does not assume responsibility for the accuracy,
completeness or fairness of the statements contained in the Registration
Statement or Prospectus, nothing has caused them to believe that the
Registration Statement, the Prospectus, as of their respective effective or
issue dates and as of the date of such counsel's opinion, contained or contains
any untrue statement of a material fact or omitted or omits 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 were made, not misleading (it
being understood that, in each case, such counsel need express no view with
respect to the financial statements and other financial and statistical data
included in the Registration Statement or Prospectus).
19
(c) [Reserved].
(d) The Representatives shall have received from Xxxxxx Xxxxxxxx
LLP, "comfort letters" dated, as of the date of this Agreement, the Closing Time
and each Date of Delivery, as the case may be, addressed to the Representatives,
in form and substance satisfactory to the Representatives, confirming that they
are independent public accountants with respect to the Company (which shall be
inclusive of its subsidiaries for purposes of this Section 6(d)), within the
meaning of the Securities Act and the Securities Act Regulations, and stating
that:
(i) In their opinion, the consolidated financial
statements of the Company audited by them and incorporated by reference
in the Registration Statement comply as to form in all material respects
with the applicable accounting requirements of the Securities Act, the
Securities Act Regulations, the Exchange Act and the Exchange Act
Regulations.
(ii) On the basis of the procedures specified by the
American Institute of Certified Public Accountants as described in SAS
No. 71, "Interim Financial Information," inquiries of officials of the
Company responsible for financial and accounting matters, and such other
inquiries and procedures as may be specified in such letter, which
procedures do not constitute an audit in accordance with generally
accepted auditing standards as applied in the United States, nothing
came to their attention that caused them to believe that, if applicable,
the unaudited interim consolidated financial statements of the Company
incorporated by reference in the Registration Statement do not comply as
to form in all material respects with the applicable accounting
requirements of the Securities Act, Securities Act Regulations, Exchange
Act and Exchange Act Regulations, including without limitation,
Regulation S-K, or are not in conformity with generally accepted
accounting principles as applied in the United States applied on a basis
substantially consistent, except as noted in the Registration Statement,
with the basis for the audited consolidated financial statements of the
Company incorporated by reference in the Registration Statement.
(iii) On the basis of limited procedures, not
constituting an audit in accordance with generally accepted auditing
standards as applied in the United States, consisting of a reading of
the unaudited interim financial statements and other information
referred to below, a reading of the latest available unaudited condensed
consolidated financial statements of the Company, inspection of the
minute books of the Company since the date of the latest audited
financial statements of the Company included or incorporated by
reference in the Registration Statement, inquiries of officials of the
Company responsible for financial and accounting matters and such other
inquiries and procedures as may be specified in such letter, nothing
came to their attention that caused them to believe that:
20
(A) as of a specified date not more than
five days prior to the date of such letter, there have been any
changes in the consolidated capital stock of the Company, any
increase in the total liabilities of the Company, any decreases
in total assets or shareholders' equity of the Company, or any
changes, decreases or increases in other items specified by the
Representatives, in each case as compared with amounts shown in
the latest unaudited interim consolidated statement of financial
condition of the Company incorporated by reference in the
Registration Statement except in each case for changes,
increases or decreases which the Registration Statement
specifically discloses, have occurred or may occur or which are
described in such letter; and
(B) for the period from the date of the
latest unaudited interim consolidated financial statements of
the Company incorporated by reference in the Registration
Statement to the specified date referred to in clause (iii)(A),
there were any decreases in the consolidated interest income,
net interest income, or net income of the Company or in the per
share amount of net income of the Company, or any changes,
decreases or increases in any other items specified by the
Representatives, in each case as compared with the comparable
period of the preceding year and with any other period of
corresponding length specified by the Representatives, except in
each case for increases or decreases which the Registration
Statement discloses have occurred or may occur, or which are
described in such letter.
(iv) In addition to the audit referred to in their
report included in the Registration Statement and the limited
procedures, inspection of minute books, inquiries and other procedures
referred to in paragraphs (ii) and (iii) above, they have carried out
certain specified procedures, not constituting an audit in accordance
with generally accepted auditing standards as applied in the United
States, with respect to certain amounts, percentages and financial
information specified by the Representatives which are derived from the
general accounting records and consolidated financial statements of the
Company which are incorporated by reference in the Registration
Statement, and have compared such amounts, percentages and financial
information with the accounting records and the material derived from
such records and consolidated financial statements of the Company have
found them to be in agreement.
In the event that the letters to be delivered referred to above set
forth any such changes, decreases or increases as specified in clauses (iii)(A)
or (iii)(B) above, or any exceptions from such agreement specified in clause
(iv) above, it shall be a further condition to the obligations of the
Underwriters that the Representatives shall have determined, after discussions
with officers of the Company responsible for financial and accounting matters,
that such changes, decreases, increases or exceptions as are set forth in such
letters do not (x) reflect a material adverse change in the items specified in
clause (iii)(A) above as compared with the amounts shown in the latest unaudited
consolidated statement of financial condition of the Company incorporated by
reference in the Registration Statement, (y) reflect a material adverse
21
change in the items specified in clause (iii)(B) above as compared with the
corresponding periods of the prior year or other period specified by the
Representatives, or (z) reflect a material change in items specified in clause
(iv) above from the amounts shown in the Preliminary Prospectus distributed by
the Underwriters in connection with the offering contemplated hereby or from the
amounts shown in the Prospectus.
(e) The Representatives shall have received at the Closing Time and
on each Date of Delivery the favorable opinion of Sidley Xxxxxx Xxxxx & Xxxx
LLP, dated the Closing Time or such Date of Delivery, addressed to the
Representatives and in form and substance satisfactory to the Representatives.
In rendering their opinion, Sidley Xxxxxx Xxxxx & Xxxx LLP may rely as to
matters of Virginia law upon the opinion of Hunton & Xxxxxxxx.
(f) No amendment or supplement to the Registration Statement or
Prospectus shall have been filed to which the Underwriters shall have objected
in writing.
(g) Prior to the Closing Time and each Date of Delivery (i) no stop
order suspending the effectiveness of the Registration Statement or any
post-effective amendment thereto, and no order directed at any document
incorporated by reference therein and no order preventing or suspending the use
of any Preliminary Prospectus or Prospectus has 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, has occurred; and (ii) the Registration Statement and the
Prospectus 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 were
made, not misleading.
(h) Between the time of execution of this Agreement and the Closing
Time or the relevant Date of Delivery (i) no material and unfavorable change in
the assets, business, results of operations, earnings, prospects, properties or
condition (financial or otherwise) of the Company and its Subsidiaries taken as
a whole shall occur or become known (whether or not arising in the ordinary
course of business), or (ii) no transaction which is material and unfavorable to
the Company shall have been entered into by the Company or any of the
Subsidiaries.
(i) 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.
(j) At the Closing Time, the Shares shall have been approved for
listing on the American Stock Exchange.
(k) The Representatives shall have received letters (each, a
"Lock-up Agreement") from each person listed on Schedule II hereto, in form and
substance satisfactory to the Representatives, confirming that for a period of
90 days after the Closing Time (the "Lock-Up Period"), such persons will not
directly or indirectly (i) offer, pledge to secure any obligation due on or
within the Lock-Up Period, sell, contract to sell, sell any option or contract
to purchase, purchase any option or contract to sell, grant any option for the
sale of, or otherwise dispose of or transfer, directly or indirectly, any Common
Shares (other than by participating as
22
selling shareholders in a registered offering of Common Shares offered by the
Company with the consent of Friedman, Billings, Xxxxxx & Co., Inc. and Xxxxxx,
Xxxxxxxx & Company Incorporated) or any securities convertible into or
exercisable or exchangeable for Common Shares or (ii) enter 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 the Common Shares,
whether any such swap or transaction described in clause (i) or (ii) above is to
be settled by delivery of Common Shares or such other securities, in cash or
otherwise, without the prior written consent of Friedman, Billings, Xxxxxx &
Co., Inc. and Xxxxxx, Xxxxxxxx & Company, Incorporated which consent may be
withheld in their sole discretion. The forgoing restrictions shall not apply to
securities disposed of privately through bona fide gifts or to others approved
by Friedman, Billings, Xxxxxx & Co., Inc. and Xxxxxx, Xxxxxxxx & Company,
Incorporated, so long as the recipients first agree in writing to be bound by
the same restrictions set forth above during the Lock-Up Period.
(l) The Company will, at the Closing Time and on each Date of
Delivery, deliver to the Representatives a certificate of its Chief Executive
Officer and its Chief Financial Officer, to the effect that, to each of such
officer's knowledge, the representations and warranties of the Company set forth
in this Agreement are true and correct and the conditions set forth in this
Section 6 have been met, and are true and correct as of such date.
(m) The Company shall have furnished to the Representatives such
other documents and certificates as to the accuracy and completeness of any
statement in the Registration Statement and the Prospectus, the representations,
warranties and statements of the Company contained herein, and the performance
by the Company of its covenants contained herein, and the fulfillment of any
conditions contained herein, as of the Closing Time or any Date of Delivery as
the Representatives may reasonably request.
(n) All filings with the Commission required by Rule 424 or Rule 429
under the Securities Act to have been filed by the Closing Date shall have been
made within the applicable time period prescribed for such filing by such Rule.
(o) [Reserved].
(p) The Company shall perform such of its obligations under this
Agreement as are to be performed by the terms hereof and thereof at or before
the Closing Time or the relevant Date of Delivery.
7. Termination. The obligations of the 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, (i) if any of the
conditions specified in Section 6 shall not have been fulfilled when and as
required by this Agreement to be fulfilled, or (ii) if there has been since the
respective dates as of which information is given in the Registration Statement,
any material adverse change, or any development involving a prospective material
adverse change, in or affecting the assets, business, results of operations,
earnings, prospects, properties or condition (financial or otherwise) of the
Company, whether or not arising in the ordinary course of business, or (iii) if
there has occurred any outbreak or escalation of hostilities or other national
or international calamity or crisis or change in economic, political or other
conditions
23
the effect of which on the financial markets of the United States is such as to
make it, in the judgment of the Representatives, impracticable to market or
deliver the Shares or enforce contracts for the sale of the Shares, or (iv) if
trading in any securities of the Company has been suspended by the Commission or
by an Exchange or if trading generally on or in an applicable Exchange has been
suspended (including any automatic halt in trading pursuant to market-decline
triggers other than those in which solely program trading is temporarily
halted), or limitations on prices for trading (other than limitations on hours
or numbers of days of trading) have been fixed, or maximum ranges for prices for
securities have been required, by such Exchange or the NASD or by order of the
Commission or any other governmental authority, or (v) if there has been any
downgrading in the rating of any of the Company's debt securities or preferred
stock by any "nationally recognized statistical rating organization" (as defined
for purposes of Rule 436(g) under the Securities Act), or (vi) any federal or
state statute, regulation, rule or order of any court or other governmental
authority has been enacted, published, decreed or otherwise promulgated which in
the reasonable opinion of the Representatives has or will have a Material
Adverse Effect, (vii) any action has been taken by any federal, state or local
government or agency in respect of its monetary or fiscal affairs which in the
reasonable opinion of the Representatives has a material adverse effect on the
securities markets in the United States.
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.
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 shall be
unable to comply in all material respects with any of the terms of this
Agreement, 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 in Section 9 hereof) or to one another
hereunder.
24
8. Underwriter Default. If any Underwriter shall default at the
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
Representatives shall have the right, within 36 hours after such default, to
make arrangements for one or more of the non-defaulting Underwriters, or any
other underwriters, to purchase all, but not less than all, of the Shares which
such Underwriter shall have agreed but failed to take up and pay for (the
"Defaulted Shares"). Absent the completion of such arrangements within such 36
hour period, (i) if the total number of Defaulted Shares does not exceed 10% of
the total number of Shares to be purchased on such date, each non-defaulting
Underwriter shall take up and pay for (in addition to the number of Shares which
it is otherwise 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; and (ii) if the total number of Defaulted Shares
exceeds 10% of such total, the Representatives may terminate this Agreement by
notice to the Company, without liability to 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) The Company agrees to indemnify and hold harmless each
Underwriter, each of its directors, officers and agents, and each person, if
any, 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 and all
losses, claims, damages, liabilities and expenses (including reasonable costs of
investigation and attorneys' fees and expenses), joint or several, arising out
of or based upon: (i) any untrue statement, alleged untrue statement or breach
or alleged breach of any warranty or covenant of the Company contained in this
Agreement; (ii) 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); (iii) any
omission or alleged omission to state a material fact in the registration
statement as originally filed or the Registration Statement, the Preliminary
Prospectus or the Prospectus, or in any amendment or supplement thereto,
required to be stated therein or necessary to make the statements therein not
misleading; (iv) any untrue statement or alleged untrue statement of a
25
material fact contained in any Preliminary Prospectus or the Prospectus, or in
any amendment or supplement thereto, or arising out of or based upon any
omission or alleged omission to state therein a material fact necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading; or (v) the enforcement of this indemnification provision
or the contribution provisions herein; and shall reimburse each such indemnified
party for any legal or other expenses as incurred, but in no event less
frequently than 30 days after each invoice is submitted, incurred by them in
connection with investigating or defending against or appearing as a third-party
witness in connection with any such loss, claim, damage, liability or action,
notwithstanding the possibility that payments for such expenses might later be
held to be improper, in which case such payments shall be promptly refunded;
provided, however, that the Company shall not be liable in any such case to the
extent, but only to the extent, that any such losses, claims, damages,
liabilities and expenses arise out of or are based upon any untrue statement or
omission or allegation thereof that has been made therein or omitted therefrom
in reliance upon and in conformity with the information provided by the
Underwriters (other than by Friedman, Billings, Xxxxxx & Co., Inc.) in writing
expressly for use in the Registration Statement ("Underwriters' Information");
provided, that the indemnification contained in this paragraph with respect to
any Preliminary Prospectus shall not inure to the benefit of any Underwriter (or
of any person controlling any Underwriter) to the extent any such losses,
claims, damages, liabilities or expenses directly result from the fact that such
Underwriter sold Shares to a person to whom there was not sent or given, at or
prior to the written confirmation of such sale, a copy of the Prospectus (as
amended or supplemented if any amendments or supplements thereto shall have been
furnished to you in sufficient time to distribute same with or prior to the
written confirmation of the sale involved), if required by law, and if such
loss, claim, damage, liability or expense would not have arisen but for the
failure to give or send such person such document. The foregoing indemnity
agreement is in addition to any liability the Company may otherwise have to any
such indemnified party.
(b) Each Underwriter, severally and not jointly, agrees to indemnify
and hold harmless the Company, each of its directors, each of its officers who
signed the Registration Statement, and each person, if any, who controls the
Company within the meaning of Section 15 of the Securities Act and Section 20 of
the Exchange Act, to the same extent as required by the foregoing indemnity from
the Company to each Underwriter, but only with respect to the Underwriters'
Information that was provided by that Underwriter to the Representatives. The
foregoing indemnity agreement is in addition to any liability which any
Underwriter may otherwise have to any such indemnified party.
(c) If any action or claim shall be brought or asserted against any
indemnified party or any person controlling an indemnified party in respect of
which indemnity may be sought from the indemnifying party, such indemnified
party or controlling person shall promptly notify the indemnifying party in
writing, and the indemnifying party shall assume the defense thereof, including
the employment of counsel reasonably satisfactory to the indemnified party and
the payment of all expenses; provided, however, that the failure so to notify
the indemnifying party shall not relieve it from any liability which it may have
to an indemnified party otherwise than under such paragraph, and further, shall
only relieve it from liability under such paragraph to the extent prejudiced
thereby. Any indemnified party or any such controlling person shall have the
right to employ separate counsel in any such action and to participate in the
defense thereof, but the fees and expenses of such counsel shall be at the
expense of such
26
indemnified party or such controlling person unless (i) the employment thereof
has been specifically authorized by the indemnifying party in writing, (ii) the
indemnifying party has failed to assume the defense or to employ counsel
reasonably satisfactory to the indemnified party or (iii) the named parties to
any such action (including any impleaded parties) include both such indemnified
party or such controlling person and the indemnifying party and such indemnified
party or such controlling person shall have been advised by such counsel that
there may be one or more legal defenses available to it that are different from
or in addition to those available to the indemnifying party (in which case, if
such indemnified party or controlling person notifies the indemnifying party in
writing that it elects to employ separate counsel at the expense of the
indemnifying party, the indemnifying party shall not have the right to assume
the defense of such action on behalf of such indemnified party or such
controlling person) it being understood, however, that the indemnifying party
shall not, in connection with any one such action or separate but substantially
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the fees and expenses of
more than one separate firm of attorneys at any time and for all such
indemnified parties and controlling persons, which firm shall be designated in
writing by the indemnified party(ies) (and, if such indemnified parties are the
Underwriters, by Xxxxxx, Xxxxxxxx & Company, Incorporated). Each indemnified
party and each controlling person, as a condition of such indemnity, shall use
reasonable efforts to cooperate with the indemnifying party in the defense of
any such action or claim. The indemnifying party shall not be liable for any
settlement of any such action effected without its written consent, but if there
be a final judgment for the plaintiff in any such action, the indemnifying party
agrees to indemnify and hold harmless any indemnified party and any such
controlling person from and against any loss, claim, damage, liability or
expense by reason of such settlement or judgment.
An indemnifying party shall not, without the prior written consent of
each indemnified party, settle, compromise or consent to the entry of any
judgment in any pending or threatened claim, action, suit or proceeding in
respect of which indemnity may be sought hereunder (whether or not such
indemnified party or any person who controls such indemnified party within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act is
a party to such claim, action, suit or proceeding), unless such settlement,
compromise or consent includes a release of each such indemnified party
reasonably satisfactory to each such indemnified party and each such controlling
person from all liability arising out of such claim, action, suit or proceeding
or unless the indemnifying party shall confirm in a written agreement with each
indemnified party, that notwithstanding any federal, state or common law, such
settlement, compromise or consent shall not alter the right of any indemnified
party or controlling person to indemnification or contribution as provided in
this Agreement.
(d) If the indemnification provided for herein is unavailable or
insufficient to hold harmless an indemnified party under paragraphs (a), (b) or
(c) hereof in respect of any losses, claims, damages, liabilities or expenses
referred to therein, then each 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, claims, damages, liabilities or
expenses (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and the Underwriters on the
other 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
27
relative fault of the Company on the one hand and the Underwriters on the other
in connection with the statements or omissions that resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and the Underwriters on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering of the Shares (before
deducting expenses) received by the Company bear to the total underwriting
discounts, commissions and compensation received by the Underwriters, in each
case as set forth in the table on the cover page of the Prospectus. The relative
fault of the Company on the one hand and of the Underwriters on the other shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or by the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such untrue statement or omission. The
Company and the Underwriters agree that it would not be just and equitable if
contribution pursuant to this paragraph (d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to herein. The amount paid or payable by
an indemnified party as a result of the losses, claims, damages, liabilities and
expenses referred to in the first sentence of this paragraph (d) shall be deemed
to include, subject to the limitations set forth above, any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this paragraph (d), no Underwriter in its capacity as an
Underwriter shall be required to contribute any amount in excess of the amount
by which the total price at which the Initial Shares underwritten by such
Underwriter and distributed to the public were offered to the public exceeds the
amount of any damages that 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 fraudulent misrepresentation.
For purposes of this paragraph (d), each person who controls an
Underwriter within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act shall have the same rights to contribution as such
Underwriter, and each person who controls the Company within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act, each officer
of the Company who shall have signed the Registration Statement and each
director of the Company shall have the same rights to contribution as the
Company subject in each case to the preceding sentence. The obligations of the
Company under this paragraph (d) shall be in addition to any liability which the
Company may otherwise have, and the obligations of the Underwriters under this
paragraph (d) shall be in addition to any liability that the Underwriters may
otherwise have.
28
(e) The indemnity and contribution agreements contained herein shall
remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of any Underwriter (or any person controlling
an Underwriter) or by or on behalf of the Company, or such directors or officers
(or any person controlling the Company), (ii) acceptance of any Shares and
payment therefor under the Agreement and (iii) any termination of the Agreement.
A successor of any Underwriter or of the Company, such directors or officers (or
of any person controlling an Underwriter or the Company) shall be entitled to
the benefits of the indemnity, contribution and reimbursement agreements
contained herein.
10. Survival. The indemnity and contribution agreements contained in
Section 9 and the covenants, warranties and representations of the Company and
the Subsidiaries 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
the Underwriters, 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 Subsidiaries or the directors and officers or any
of them or any person who controls the Company or any Subsidiary within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act,
and shall survive any termination of this Agreement or the sale and delivery of
the Shares. The Company 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, against any of its officers and directors, in connection with
the sale and delivery of the Shares, or in connection with the Registration
Statement or Prospectus.
11. Merger. This Agreement constitutes the entire agreement between
the Company and the Underwriters and supersedes and cancels any and all prior
discussions, negotiations, undertakings, agreements in principle or other oral
or written agreements between the parties relating to the subject matter hereof,
including the offering of Shares hereby.
12. 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 to Friedman,
Billings, Xxxxxx & Co., Inc., 0000 00xx Xxxxxx Xxxxx, Xxxxxxxxx, Xxxxxxxx 00000,
Attention: Syndicate Department; if to the Company, shall be sufficient in all
respects if delivered to the Company at the offices of the Company at Potomac
Tower, 0000 00xx Xxxxxx Xxxxx, Xxxxxxxxx, Xxxxxxxx 00000, Attention: President.
13. Governing Law. Consent to Jurisdiction; Headings. THIS AGREEMENT
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
COMMONWEALTH OF VIRGINIA, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. 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 and the
controlling persons, directors and officers referred to in Sections 9 and 10
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.
29
15. Counterparts and Facsimile Signatures. This Agreement may be
signed by the parties in counterparts which together shall constitute one and
the same agreement among the parties. A facsimile signature shall constitute an
original signature for all purposes.
30
If the foregoing correctly sets forth the understanding among the
Company and the Underwriters, please so indicate in the space provided below for
the purpose, whereupon this Agreement shall constitute a binding agreement among
the Company and the Underwriters.
Very truly yours,
FBR ASSET INVESTMENT CORPORATION
By: /s/ Xxxxxxx X. Xxxxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: President
Accepted and agreed to as of the date first above written:
FRIEDMAN, BILLINGS, XXXXXX & CO., INC.
XXXXXX, XXXXXXXX & COMPANY, INCORPORATED
ADVEST, INC.
BB&T CAPITAL MARKETS, a division of Xxxxx & Xxxxxxxxxxxx, Inc.
FLAGSTONE SECURITIES, LLC
By: Friedman, Billings, Xxxxxx & Co., Inc.
By: /s/ Xxxxx X. Xxxxxxxxx
----------------------------------------
Name: Xxxxx X. Xxxxxxxxx
Title: Managing Director
Acting for itself and on behalf of the several
Underwriters listed in Schedule I hereto
31
Schedule I
Underwriter Number of Initial Shares
----------- ------------------------
Friedman, Billings, Xxxxxx & Co., Inc............................................ 1,610,000
Xxxxxx, Xxxxxxxx & Company, Incorporated......................................... 715,000
Advest, Inc...................................................................... 535,000
BB&T Capital Markets, a division of Xxxxx & Xxxxxxxxxxxx, Inc.................... 535,000
Flagstone Securities, LLC........................................................ 180,000
Xxxxxx, Xxxxx Xxxxx, Incorporated................................................ 85,000
Xxxxxx Xxxxxxxxxx Xxxxx LLC...................................................... 85,000
J.J.B. Xxxxxxxx, X.X. Xxxxx, Inc., a PNC Company................................. 85,000
Ladenburg Xxxxxxxx & Co. Inc..................................................... 85,000
Wedbush Xxxxxx Securities........................................................ 85,000
------------------------
Total............................................................................ 4,000,000
========================
32
Schedule II
Persons From Whom the Underwriters Have Received Lock-Up Agreements
Officers of the Company Titles
----------------------------------------------------- -----------------------------------------------
Xxxx X. Xxxxxxxx Chairman and Chief Executive Officer
Xxxxxxx X. Xxxxxxx President and Chief Operating Officer
Xxxx X. Xxxxxxxxxx Chief Financial Officer and Treasurer
Directors of the Company
Xxxxxxx X. Xxxxxxxx
Xxxxx X Xxxxxxxxx
Xxxxxxx X. Xxxxxx
Xxxxxxx X. Xxxxxxx
Affiliated Shareholders of the Company
Friedman, Billings, Xxxxxx Group, Inc.
FBR Weston, Limited Partnership
Friedman, Billings, Xxxxxx Investment Management, Inc.
33
EXHIBIT A
Subsidiaries of the Company
Pegasus Capital Corporation
FB TRS Holdings, Inc.
FB TRS I, Inc.
