EXECUTION COPY
EXHIBIT 1.1
FBR ASSET INVESTMENT CORPORATION
6,000,000 Shares of Common Stock
UNDERWRITING AGREEMENT
June 27, 2002
FRIEDMAN, BILLINGS, XXXXXX & CO., INC.
CREDIT SUISSE FIRST BOSTON CORPORATION
XXXXXX, XXXXXXXX & COMPANY, INCORPORATED
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., Credit Suisse First Boston Corporation, Xxxxxx, Xxxxxxxx & Company,
Incorporated, 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 6,000,000 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 900,000
additional Common Shares to cover over-allotments, if any. The 6,000,000 Common
Shares to be purchased by the Underwriters (the "Initial Shares") and all or any
part of the 900,000 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.
The Company has filed with the Securities and Exchange Commission (the
"Commission") shelf registration statements on Form S-3 (Nos. 333-76906 and
333-90572) 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 statements have been declared effective under the Securities Act by
the Commission. Such registration statements, 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 $31.6825, 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 date 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 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
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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 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 New York Stock Exchange, Inc. (the "NYSE");
(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 (i) 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"), (ii) such approvals as have been obtained in connection with the approval
of the listing of the Shares on the NYSE and (iii) any necessary qualification
under the securities or blue sky laws of the various jurisdictions in which the
Shares are being offered by the Underwriters;
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(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;
(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
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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 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 and 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) KPMG 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
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material to the Company and the Subsidiaries 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;
(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 NYSE;
(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
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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
Subsidiaries 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
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;
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(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;
(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
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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 NYSE;
(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) there are no existing or, to the knowledge of the
Company, threatened labor disputes with the employees of the Company or any of
its Subsidiaries which are likely to have individually or in the aggregate a
Material Adverse Effect;
(pp) 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");
(qq) the Company has not incurred any liability for any
finder's fees or similar payments in connection with the transactions herein
contemplated;
(rr) 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
(ss) 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
11
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 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 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;
12
(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 NYSE 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 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
13
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 NYSE, the American Stock
Exchange, Inc. 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 (excluding Friedman, Billings, Xxxxxx & Co.,
Inc.) not to, (i) take, directly or indirectly prior to termination of the
underwriting syndicate contemplated 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
14
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 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
15
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 NYSE, (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 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
16
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).
(c) [Reserved].
(d) The Representatives shall have received from KPMG 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
17
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:
(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
18
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 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 Shares shall have been approved
for listing on the NYSE.
(j) 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
19
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 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.
(k) 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.
(l) 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.
(m) 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.
(n) [Reserved].
(o) 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
20
course of business, or (iii) if there has occurred any outbreak or escalation of
hostilities, acts of terrorism or other national or international calamity or
crisis or change in economic, political or other conditions 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.
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
21
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 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
22
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 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
23
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 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
24
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.
(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
25
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.
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.
26
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/COO
Accepted and agreed to as of the date first above written:
FRIEDMAN, BILLINGS, XXXXXX & CO., INC.
CREDIT SUISSE FIRST BOSTON CORPORATION
XXXXXX, XXXXXXXX & COMPANY, INCORPORATED
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: Senior Managing Director
Acting for itself and on behalf of the several
Underwriters listed in Schedule I hereto
27
Schedule I
Underwriter Number of Initial Shares
----------- ------------------------
Friedman, Billings, Xxxxxx & Co., Inc................................... 2,550,000
Credit Suisse First Boston Corporation ................................. 2,550,000
Xxxxxx, Xxxxxxxx & Company, Incorporated................................ 480,000
BB&T Capital Markets, a division of Xxxxx & Xxxxxxxxxxxx, Inc........... 300,000
Flagstone Securities, LLC............................................... 120,000
------------------------
Total................................................................... 6,000,000
========================
28
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.
29
EXHIBIT A
Subsidiaries of the Company
Pegasus Capital Corporation
FB TRS Holdings, Inc.
FB TRS I, Inc.
ANNEX A
Form of Opinion of Hunton & Xxxxxxxx
Matters opined to by issuer's counsel:
i) each of the Company and the Subsidiaries has been duly incorporated and
is validly existing and in good standing under the laws of its respective state
of incorporation;
ii) each of the Company and the Subsidiaries has the corporate power and
authority to own, lease or operate its respective properties and to conduct its
respective business as described in the Registration Statement and the
Prospectus, and the Company has the corporate power to authorize, execute and
deliver the Underwriting Agreement and to carry out all the terms and provisions
thereof to be carried out by it;
iii) to our knowledge, all of the outstanding shares of capital stock of the
Subsidiaries are directly or indirectly owned of record and beneficially by the
Company;
iv) the Company has an authorized capitalization as set forth in the
Prospectus; to our knowledge, all of the issued and outstanding shares of
capital stock of the Company have been duly authorized and validly issued and
are fully paid and nonassessable, and were not issued in violation of or subject
to any statutory preemptive rights or, to our knowledge, other rights to
subscribe for or purchase securities; the issuance of the Shares has been duly
authorized by all necessary corporate action of the Company and, when issued and
delivered to and paid for by the Underwriters pursuant to the Underwriting
Agreement, will be validly issued, fully paid and nonassessable; no holders of
outstanding shares of capital stock of the Company are entitled as such to any
preemptive or other rights to subscribe for any of the Shares pursuant to the
Company's Articles of Incorporation or, to our knowledge, pursuant to any
agreement or other instrument; and, other than as described in the Prospectus,
no holders of securities of the Company are entitled to have such securities
registered under the Securities Act pursuant to the Company's Articles of
Incorporation or, to our knowledge, pursuant to any agreement or other
instrument;
v) the statements set forth under the headings "Description of Common Stock
and Preferred Stock," "Legal Ownership of Securities," "Common Stock Available
for Future Sale," and "Federal Income Tax Consequences of our Status as a REIT"
in the Base Prospectus and under the heading "Supplemental Federal Income Tax
Consequences of Our Status as a REIT" in the Prospectus Supplement, insofar as
such statements constitute matters of law, summaries of legal matters, documents
or proceedings, or legal conclusions, have been reviewed by us and are correct
in all material respects;
vi) the execution and delivery of the Underwriting Agreement have been duly
and validly authorized by all necessary corporate action of the Company, and the
Underwriting Agreement has been duly executed and delivered by the Company;
vii) to our knowledge and other than as set forth in the Prospectus, no
actions, suits, proceedings, inquiries, investigations, legal or governmental
proceedings are pending to which the Company or any of the Subsidiaries is a
party or to which the properties, assets or rights of
1
the Company or any of the Subsidiaries is subject, at law or in equity, before
any federal, state, local or foreign governmental or regulatory commission,
board, body, authority, arbitral panel or agency that are required to be
described in the Registration Statement or the Prospectus and are not described
therein; to our knowledge, no such proceedings have been threatened against the
Company or any of the Subsidiaries or with respect to the properties of either
of them and no contract or other document is required to be described in the
Registration Statement or the Prospectus or to be filed as an exhibit to the
Registration Statement that is not described therein or filed as required; to
our knowledge, there are no statutes or regulations applicable to the Company or
any of the Subsidiaries or certificates, permits from governmental regulatory
officials or bodies required to be obtained or maintained by the Company or any
of the Subsidiaries of a character that are required to be described in the
Registration Statement or the Prospectus and are not described therein; and, to
our knowledge, 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, any of the
Subsidiaries or Friedman, Billings, Xxxxxx Group, Inc., on the other hand, which
is required to be described in the Registration Statement or the Prospectus and
is not described therein;
viii) the issuance, offering and sale of the Shares to the Underwriters by the
Company pursuant to the Underwriting Agreement, the compliance by the Company
with the other provisions of the Underwriting Agreement and the consummation of
the other transactions therein contemplated do not (A) require the consent,
approval, authorization, registration, qualification, order or filing of or with
any governmental authority, except such as have been obtained and are in full
force and effect under the Securities Act and such as may be required under
state securities or blue sky laws and by the National Association of Securities
Dealers, Inc. (the "NASD"), (B) conflict with or result in a breach or violation
of any of the terms and provisions of, or constitute a default under (or
constitute any event which with notice, lapse of time or both would constitute a
breach or violation of or default under), any license, indenture, mortgage, deed
of trust, lease, loan or credit agreement or other agreement or instrument that
is filed or incorporated by reference as an exhibit to the Registration
Statement to which the Company or any of the Subsidiaries is a party or by which
the Company or any of the Subsidiaries or any of the properties of any of them
is bound, or the Articles of Incorporation or Bylaws of the Company, or any
statute or, to our knowledge, any judgment, decree, order, rule or regulation of
any court or other governmental authority or any arbitrator having jurisdiction
over the Company or (C) to our knowledge, result in the creation or imposition
of any lien, charge, claim or encumbrance upon any property or assets of the
Company or any of the Subsidiaries;
ix) except as otherwise described in the Prospectus, to our knowledge, each
of the Company and the Subsidiaries has all necessary licenses, authorizations,
consents, permits 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 Prospectus;
except as otherwise described in the Prospectus, to our knowledge, 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 proposes to provide, as set forth in the Prospectus;
2
x) the Registration Statements originally filed and each amendment thereto,
each at the time it became effective, and the Prospectus, as of its date and the
date hereof (in each case, other than the financial statements and other
financial and statistical information contained therein, as to which we express
no opinion), complied as to form in all material respects with the applicable
requirements of the Securities Act and the Rules and Regulations;
xi) neither the Company nor any of the Subsidiaries is, and the transactions
contemplated by the Underwriting Agreement and the application of the proceeds
therefrom as described in the Prospectus will not cause the Company or any of
the Subsidiaries to become, an "investment company" or a company "controlled" by
an "investment company" under the 1940 Act;
xii) the specimen stock certificate of the Company filed as an exhibit to the
Registration Statement is in due and proper form under Virginia law to evidence
shares of Common Stock, has been duly authorized and approved by the Board of
Directors of the Company and complies with all legal requirements and with those
of the New York Stock Exchange, Inc. for listing of the Shares thereon; and the
Common Stock conforms in all material respects to the description thereof
contained in the Registration Statement;
xiii) to our knowledge, neither the Company nor any of the Subsidiaries is in
breach of its respective charter or by-laws or in default under any provision of
any mortgage, deed of trust, lease, license, indenture, loan or credit agreement
or other agreement or instrument known to us to which the Company or any of the
Subsidiaries is a party or by which it or its properties may be bound or
affected, except where such breaches or defaults would not have a Material
Adverse Effect;
xiv) to our knowledge, based on the description of the Company's business in
the Prospectus, neither the Company nor any of the Subsidiaries is required to
be registered as a commodity pool operator under the Commodity Exchange Act, as
amended; and
xv) Commencing with its taxable year ended December 31, 1997, the Company
was organized and has been operated in conformity with the requirements for
qualification as a real estate investment trust under the Internal Revenue Code
of 1986, as amended (the "Code") and the proposed method of operation of the
Company, as described in the Prospectus and as represented by the Company, will
permit the Company to continue to qualify.
3
