EXHIBIT 1.1
EXECUTION COPY
FBR ASSET INVESTMENT CORPORATION
4,800,000 Shares of Common Stock
UNDERWRITING AGREEMENT
January 28, 2002
FRIEDMAN, BILLINGS, XXXXXX & CO., INC.
XXXXXX, XXXXXXXX & COMPANY, INCORPORATED
BB&T CAPITAL MARKETS, a division of Xxxxx & Xxxxxxxxxxxx, Inc.
J.J.B. XXXXXXXX, X.X. XXXXX, INC., A PNC Company
c/o Friedman, Billings, Xxxxxx & Co., Inc.
0000 00xx Xxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxx 00000
as Representatives of the several Underwriters
listed in Schedule I hereto
Dear Sirs:
FBR Asset Investment Corporation, a Virginia corporation that has
elected to be taxed as a real estate investment trust (the "Company"), confirms
its agreement with each of the Underwriters listed in Schedule I hereto
(collectively, the "Underwriters"), for whom Friedman, Billings, Xxxxxx & Co.,
Inc., Xxxxxx, Xxxxxxxx & Company, Incorporated, BB&T Capital Markets, a division
of Xxxxx & Xxxxxxxxxxxx, Inc., and J.J.B. Xxxxxxxx, X.X. Xxxxx, Inc., A PNC
Company, are each acting as a representative (in such capacity, the
"Representatives"), with respect to (i) the sale by the Company and the purchase
by the Underwriters, of 4,800,000 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 720,000 additional Common Shares to
cover over-allotments, if any. The 4,800,000 Common Shares to be purchased by
the Underwriters (the "Initial Shares") and all or any part of the 720,000
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"), a shelf registration statement on Form S-3 (No. 333-75408)
relating to $100,000,000 of the Company's securities and a shelf registration
statement on Form S-3 (No. 333-76906) relating to $250,000,000 of the Company's
securities, each of which include a base prospectus, for the registration of,
inter alia, 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
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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.
Subsequent to effectiveness of the Registration Statement, the Company
has filed, under Rule 429 of the Securities Act Regulations, a combined base
prospectus and a preliminary prospectus supplement thereto, relating
specifically to the offering of the Shares, and will hereafter file amendments,
revisions or supplements to such combined base prospectus or preliminary
prospectus supplement as may hereafter be required. The term "Prospectus" means
the final base prospectus and prospectus supplement, 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 $25.175, 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 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
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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. Such payment and delivery shall be made at 9:30
a.m., New York City time, on the third (or fourth, if pricing occurs after 4:30
p.m., New York City time) business day after the day hereof (unless another
time, not later than ten business days after such date, shall be agreed to by
the Representatives and the Company). The time at which such payment and
delivery are actually made is hereinafter sometimes called the "Closing Time."
Unless the Representatives elect to take delivery of the Initial Shares by
credit through full FAST transfer to the accounts at The Depository Trust
Company designated by the Representatives, certificates for the Initial Shares
shall be delivered to the Representatives in definitive form registered in such
names and in such denominations as the Representatives shall specify. For the
purpose of expediting the checking of the certificates for the Initial Shares by
the Representatives, the Company agrees to make such certificates available to
the Representatives for such purpose at least one full business day preceding
the Closing Time.
(b) Option Shares. In addition, payment of the purchase price for the
Option Shares shall be made to the Company by wire transfer of immediately
available funds to an account designated by the Company against delivery of the
certificates for the Option Shares to the Representatives for the respective
accounts of the Underwriters. 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.
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) each of the Company, each Subsidiary of the Company
set forth on Exhibit A hereto (each a "Subsidiary"
and, collectively, the "Subsidiaries") and FBR 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 and FBR, to authorize, execute
and deliver this Agreement and to consummate the
transactions contemplated hereby;
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(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 hereby
will not conflict with, or result in any breach of, or
constitute a default under (nor constitute any event which
with notice, lapse of time, or both would constitute a
breach of, or default under), (i) any provision of the
articles of incorporation or charter or by-laws of the
Company or any of the Subsidiaries, (ii) any provision of
any license, indenture, mortgage, deed of trust, loan or
credit agreement or other agreement or instrument to which
the Company or any of the Subsidiaries is a party or by
which any of them or their respective properties may be
bound or affected, or (iii) any federal, state, local or
foreign law, regulation or rule or any decree, judgment or
order 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,
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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 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 certificates
evidencing the Shares complies with all applicable legal
requirements and, in all material respects, with all
applicable requirements of the charter and bylaws of the
Company and the requirements of the American Stock
Exchange;
(h) no approval, authorization, consent or order of or filing
with any federal, state or local governmental or
regulatory commission, board, body, authority or agency is
required in connection with the execution, delivery and
performance by the Company of this Agreement, the
consummation of the transactions contemplated hereby, and
the sale and delivery of the Shares, other than (x) such
as have been obtained, or will have been obtained at the
Closing Time or the relevant Date of Delivery, as the case
may be, under the Securities Act or the Securities
Exchange Act of 1934 as amended (the "Exchange Act"), (y)
such approvals as have been obtained in connection with
the approval of the listing of the Shares on the American
Stock Exchange and (z) any necessary qualification under
the securities or blue sky laws of the various
jurisdictions in which the Shares are being offered by the
Underwriters;
(i) each of the Company and the Subsidiaries has all necessary
licenses, authorizations, consents and approvals and has
made all necessary filings required under any federal,
state or local law, regulation or rule, and has obtained
all necessary authorizations, consents and approvals from
other persons required in order to conduct their
respective businesses as described in the Registration
Statement and Prospectus, except to the extent that any
failure to have any such licenses, authorizations,
consents or approvals, to make any such filings or to
obtain any such authorizations, consents or approvals
would not, individually or in the aggregate, have a
Material Adverse Effect; neither the Company nor any of
the Subsidiaries is required by any applicable law to
obtain accreditation or certification from any
governmental agency or authority or self-regulatory
organization in order to provide the products or services
that it currently provides or which it proposes to
provide, as set forth in the Prospectus; neither the
Company nor any of the Subsidiaries is in violation of, in
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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 thereto will
comply, when they have become effective or are filed with
the Commission, 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 filing date and at the Closing Time and on each
Date of Delivery (if any), contain any untrue statement of
a material fact or omit to state a material fact required
to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances
under which they were made, not misleading; provided,
however, that the Company makes no warranty or
representation with respect to Underwriters' Information
(as defined in Section 9(a) of this Agreement);
(l) the Preliminary Prospectus and the Prospectus in paper
format delivered to the Underwriters for use in connection
with this offering will be identical in all material
respects to the versions of the Preliminary Prospectus and
Prospectus created to be transmitted to the Commission for
filing via the Electronic Data Gathering Analysis and
Retrieval System ("XXXXX"), except to the extent permitted
by Regulation S-T of the Securities Act Regulations;
(m) all legal or governmental proceedings, contracts or
documents that are material and of a character required to
be filed as exhibits to the Registration Statement or to
be summarized or described in the Prospectus have been so
filed, summarized or described as required;
(n) there are no actions, suits, proceedings, inquiries
or investigations pending or, to the Company's
knowledge, threatened against the Company or any of
the Subsidiaries or any of their respective officers
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and directors or to which the properties, assets or rights
of any such entity is subject, at law or in equity, before
or by any federal, state, local or foreign governmental or
regulatory commission, board, body, authority, arbitral
panel or agency which could result in a judgment, decree,
award or order that could have a Material Adverse Effect,
or which could adversely affect the consummation of the
transactions contemplated by this Agreement in any
material respect;
(o) the financial statements, including the notes thereto,
included or incorporated by reference in the Registration
Statement and the Prospectus present fairly the financial
position of the Company as of the dates indicated and the
statements of income and changes in shareholders' equity
and cash flows of the Company for the periods specified;
such financial statements have been prepared in conformity
with generally accepted accounting principles as applied
in the United States and on a consistent basis during the
periods involved (except as indicated in the notes
thereto) and in accordance with Regulation S-X promulgated
by the Commission; the financial statement schedules, if
any, included or incorporated by reference in the
Registration Statement and the Prospectus fairly present
the information required to be shown therein; no other
financial statements or schedules are required by Form S-3
or otherwise to be included or incorporated by reference
in the Registration Statement or Prospectus;
(p) the Company has filed in a timely manner all reports
required to be filed pursuant to sections 13, 14, 15(d) of
the Exchange Act during the preceding twelve calendar
months and if during such period the Company has relied on
Rule 12b-25(b) under the Exchange Act ("Rule 12b-25(b)")
with respect to a report or a portion of a report, that
report or portion of a report has actually been filed
within the time period prescribed by Rule 12b-25(b);
(q) Xxxxxx Xxxxxxxx LLP, whose reports on the audited
financial statements of the Company are incorporated
by reference in the Registration Statement and
Prospectus are and at all times during the periods
covered by their reports were independent public
accountants as required by the Securities Act and the
Securities Act Regulations;
(r) subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus,
and except as may be otherwise stated in the Registration
Statement or Prospectus, there has not been (i) any
material adverse change in the assets, liabilities,
business, results of operations, earnings, prospects,
properties or condition (financial or otherwise), present
or prospective, of the Company and the Subsidiaries taken
as a whole, whether or not arising in the ordinary course
of business, (ii) any transaction, which is material to
the Company and the Subsidiaries 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;
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(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 American Stock Exchange;
(z) there are no statutes or regulations applicable to
the Company or any of the Subsidiaries or
certificates, permits or other authorizations from
governmental regulatory officials or bodies required
to be obtained or maintained by the Company or any of
the Subsidiaries of a character required to be
disclosed in the Registration Statement or the
Prospectus which have not been so disclosed and
properly described;
(aa) all agreements between the Company or any of the
Subsidiaries and third parties expressly referenced
in the Prospectus are legal, valid and binding
obligations of the Company or one or more of the
Subsidiaries, enforceable in accordance with their
respective terms, except to the extent enforceability
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may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights
generally and by general principles of equity;
(bb) no relationship, direct or indirect, exists between
or among the Company or any of the Subsidiaries, on
the one hand, and the directors, officers,
shareholders, customers or suppliers of the Company,
the Subsidiary or FBR, 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;
(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;
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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 applicable
state and other regulatory authorities and is in
compliance in all material respects with all applicable
laws, rules, regulations, orders, and similar requirements
in connection therewith;
(mm) the Shares have been approved for listing, upon official
notice of issuance, on the American Stock Exchange;
10
(nn) in connection with this offering, the Company has not
offered and will not offer its Common Shares or any other
securities convertible into or exchangeable or exercisable
for Common Shares in a manner in violation of the
Securities Act or the Securities Act Regulations; the
Company has not distributed and will not distribute any
Prospectus or other offering material in connection with
the offer and sale of the Shares;
(oo) neither the Company nor any of the Subsidiaries or their
respective affiliates does business with the government of
Cuba or with any person or affiliate located in Cuba;
(pp) there are no existing or, to the knowledge of the Company,
threatened labor disputes with the employees of the
Company or any of its Subsidiaries which are likely to
have individually or in the aggregate a Material Adverse
Effect;
(qq) neither the Company nor any of the Subsidiaries is, or
solely as a result of transactions contemplated hereby and
the application of the proceeds from the sale of the
Shares, will become, an "investment company" or a company
"controlled" by an "investment company" within the meaning
of the Investment Company Act of 1940, as amended (the
"1940 Act");
(rr) the Company has not incurred any liability for any
finder's fees or similar payments in connection with the
transactions herein contemplated;
(ss) each of the Company and its Subsidiaries maintain
insurance (issued by insurers of recognized financial
responsibility) of the types and in the amounts generally
deemed adequate for their respective businesses and
consistent with insurance coverage maintained by similar
companies in similar businesses, including, but not
limited to, insurance covering real and personal property
owned or leased by the Company and its Subsidiaries
against theft, damage, destruction, acts of vandalism and
all other risks customarily insured against, all of which
insurance is in full force and effect; and
(tt) neither the Company nor any of its Subsidiaries has
violated, or received notice of any violation with respect
to, any applicable environmental, safety or similar law
applicable to the business of the Company or any of its
Subsidiaries, nor any federal or state law relating to
discrimination in the hiring, promotion or pay of
employees, nor any applicable federal or state wages and
hours law, nor any provisions of the Employee Retirement
Income Security Act or the rules and regulations
promulgated thereunder, nor any state law precluding the
denial of credit due to the neighborhood in which a
property is situated, the violation of any of which could
have a Material Adverse Effect.
4. Certain Covenants of the Company. The Company hereby covenants and
agrees with the Underwriters:
(a) to furnish such information as may be requested and
otherwise to cooperate in qualifying the Shares for
offering and sale under the securities or blue sky laws of
such states as the Representatives may designate and to
maintain such qualifications in effect as long as
11
requested by the Representatives for the distribution of
the Shares, provided that the Company shall not be
required to maintain such qualification for more than 90
days from the date hereof (except that, upon the written
request of the Representatives and at the expense of the
Underwriters, the Company shall maintain such
qualification for an additional period, not to exceed 180
days), or to qualify as a foreign corporation or to
consent to the 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
12
amendment or supplement to which the Representatives shall
reasonably object in writing;
(f) before amending or supplementing the Registration
Statement or the Prospectus, or, during any period of
time in which a Prospectus relating to the Shares is
required to be delivered under the Securities Act
Regulations, to furnish to the Representatives a copy
of each such proposed amendment or supplement before
filing any such amendment or supplement with the
Commission;
(g) to furnish to the Underwriters, for a period of three
years from the date of this Agreement and only to the
extent unavailable through XXXXX (i) as soon as
available, copies of all annual, quarterly and
current reports or other communications supplied to
holders of Common Shares, (ii) as soon as practicable
after the filing thereof, copies of all reports filed
by the Company with the Commission, the NASD,
American Stock Exchange or any securities exchange or
the Nasdaq National Market and (iii) such other
information as the Underwriters may reasonably
request regarding the Company and its Subsidiaries;
(h) to advise the Underwriters promptly of the happening of
any event known to the Company within the time during
which a prospectus relating to the Shares is required to
be delivered under the Securities Act Regulations which,
in the judgment of the Company, would require the making
of any change in the Prospectus then being used so that
the Prospectus would not include any untrue statement of a
material fact or omit to state a material fact required to
be stated therein or necessary to make the statements
therein, in the light of the circumstances under which
they were made, not misleading, and, during such time,
promptly to prepare and furnish, at the Company's expense,
to the Underwriters promptly such copies of the proposed
amendments or supplements to the Prospectus as may be
necessary to reflect any such change before filing any
such amendment or supplement with the Commission, and
thereafter promptly to furnish at the Company's own
expense to the Underwriters, copies in such quantities and
at such locations as the Underwriters may from time to
time reasonably request;
(i) to furnish promptly to the Representatives a signed copy
of the Registration Statement, as initially filed with the
Commission, and of all amendments or supplements thereto
(including all exhibits filed therewith or incorporated
therein) and such number of conformed copies of the
foregoing as the Representatives may reasonably request;
(j) to furnish to each Representative, not less than two
business days before filing with the Commission subsequent
to the effective date of the 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;
13
(l) to make generally available to its security holders and to
deliver to the Representatives as soon as practicable, but
in any event not later than the end of the fiscal quarter
first occurring after the first anniversary of the
effective date of the Registration Statement, an earnings
statement complying with the provisions of Section 11(a)
of the Securities Act (in form, at the option of the
Company, complying with the provisions of Rule 158 of the
Securities Act Regulations) covering a period of 12 months
beginning on the effective date of the Registration
Statement;
(m) to use its best efforts to effect and maintain the
listing, quotation or inclusion of the Shares on the
American Stock Exchange or the New York Stock Exchange, or
in the Nasdaq National Market (each an "Exchange") and to
file with such Exchange all documents and notices required
by the Exchange of companies that have securities that are
listed on or included in such Exchange;
(n) to refrain during a period of 90 days from the date of the
Prospectus, without the prior written consent of the
Representatives, from (i) offering, pledging, selling,
contracting to sell, selling any option or contract to
purchase, purchasing any option or contract to sell,
granting any option for the sale of, or otherwise
disposing of or transferring, directly or indirectly, any
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, (B) any Common Shares
issued by the Company upon the exercise of an options
outstanding on the date hereof and referred to in the
Prospectus;
(o) to not, and to use its best efforts to cause its officers,
directors and affiliates (including without limitation,
FBR) not to, (i) take, directly or indirectly prior to
termination of the underwriting syndicate contemplated 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;
14
(r) the Company will comply with all of the provisions of any
undertakings in the Registration Statement;
(s) the Company and the Subsidiaries will conduct their
affairs in such a manner so as to ensure that neither the
Company nor any Subsidiary will be an "investment company"
or an entity subject to regulation as an investment
company within the meaning of the 1940 Act;
(t) if at any time during the 30-day period after the
Registration Statement becomes effective, any rumor,
publication or event relating to or affecting the Company
shall occur as a result of which in the Representatives'
reasonable opinion the market price of the Common Shares
has been or is likely to be materially affected
(regardless of whether such rumor, publication or event
necessitates a supplement to or amendment of the
Prospectus) and after written notice from the
Representatives advising the Company to the effect set
forth above, to forthwith prepare, consult with the
Representatives concerning the substance of, and
disseminate a press release or other public statement,
reasonably satisfactory to the Representatives, responding
to or commenting on such rumor, publication or event;
(u) to maintain a system of internal accounting controls
sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's
general or specific authorizations; (ii) transactions are
recorded as necessary to permit preparation of financial
statements in conformity with generally accepted
accounting principles as applied in the United States and
to maintain asset accountability; (iii) access to assets
is permitted only in accordance with management's general
or specific authorization; and (iv) the recorded
accountability for assets is compared 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,
15
issuance and delivery of the certificates for the Shares to the Underwriters,
including any stock or other transfer taxes or duties payable upon the sale of
the Shares to the Underwriters, (iii) the printing of this Agreement and any
dealer agreements and furnishing of copies of each to the Underwriters and to
dealers (including costs of mailing and shipment), (iv) the qualification of the
Shares for offering and sale under state laws that the Company and the
Representatives have mutually agreed are appropriate and the determination of
their eligibility for investment under state law as aforesaid (including the
legal fees and filing fees and other disbursements of counsel for the
Underwriters relating thereto and the printing and furnishing of copies of any
blue sky surveys or legal investment surveys to the Underwriters and to dealers,
(v) filing for review of the public offering of the Shares by the NASD
(including the legal fees and filing fees and other disbursements of counsel for
the Underwriters relating thereto), (vi) the fees and expenses of any transfer
agent or registrar for the Shares and miscellaneous expenses referred to in the
Registration Statement, (vii) the fees and expenses incurred in connection with
the listing of the Shares on the American Stock Exchange, (viii) making road
show presentations with respect to the offering of the Shares, (ix) preparing
and distributing bound volumes of transaction documents for the Representatives
and their legal counsel and (x) the performance of the Company's other
obligations hereunder (including, without limitation, costs incurred in closing
the purchase of the Option Shares, if any). Upon the request of the
Representatives, the Company will provide funds in advance for filing fees.
(b) The Company agrees to reimburse the Representatives for their
reasonable out-of-pocket expenses in connection with the performance of their
activities under this Agreement, including, but not limited to, costs such as
printing, facsimile, courier service, direct computer expenses, accommodations
and travel, and the fees and expenses of the Representatives' outside legal
counsel and any other advisors, accountants, appraisers, etc., but only if the
Initial Shares are purchased by the Underwriters as provided in Section 2(a) of
this Agreement.
6. Conditions of the Underwriters' Obligations. The obligations of the
Underwriters hereunder are subject to (i) the accuracy of the representations
and warranties on the part of the Company in all material respects on the date
hereof and at the Closing Time and on each Date of Delivery, as applicable (ii)
the performance by the Company of its obligations hereunder, and (iii) the
satisfaction of the following further conditions:
(a) If, at the time this Agreement is executed and delivered, it is
necessary for a post-effective amendment to the Registration Statement to be
declared effective before the offering of the Shares may commence, such
post-effective amendment shall have become effective not later than 5:30 p.m.,
New York City time, on the date hereof, or at such later date and time as shall
be consented to in writing by the Representatives.
(b) The Company shall furnish to the Underwriters at the Closing Time
and on each Date of Delivery an opinion of Hunton & Xxxxxxxx, counsel for the
Company, addressed to the Underwriters and dated the Closing Time and each Date
of Delivery, in substantially the form of Annex A.
In addition, Hunton & Xxxxxxxx shall state that they have
participated in conferences with officers and other representatives of the
Company, independent public accountants of the Company and Underwriters at which
the contents of the Registration Statement and Prospectus were discussed and,
although such counsel is not passing upon and does not assume responsibility for
the accuracy, completeness or fairness of the statements contained in the
Registration Statement or Prospectus, nothing has caused them to believe that
the Registration Statement, the Prospectus, as of their respective effective or
issue dates and as of the date of such counsel's opinion, contained or contains
any untrue statement of a material fact or omitted or omits to state a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading (it
16
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 Xxxxxx Xxxxxxxx LLP,
"comfort letters" dated, respectively, 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 Company
(which shall be inclusive of its subsidiaries for purposes of this Section
6(g)), within the meaning of the Securities Act and the Securities Act
Regulations, and stating that:
(i) In their opinion, the consolidated financial
statements of the Company audited by them and incorporated by reference
in the Registration Statement comply as to form in all material
respects with the applicable accounting requirements of the Securities
Act, the Securities Act Regulations, the Exchange Act and the Exchange
Act Regulations.
(ii) On the basis of the procedures specified by the
American Institute of Certified Public Accountants as described in SAS
No. 71, "Interim Financial Information," inquiries of officials of the
Company responsible for financial and accounting matters, and such
other inquiries and procedures as may be specified in such letter,
which procedures do not constitute an audit in accordance with
generally accepted auditing standards as applied in the United States,
nothing came to their attention that caused them to believe that, if
applicable, the unaudited interim consolidated financial statements of
the Company incorporated by reference in the Registration Statement do
not comply as to form in all material respects with the applicable
accounting requirements of the Securities Act, Securities Act
Regulations, Exchange Act and Exchange Act Regulations, including
without limitation, Regulation S-K, or are not in conformity with
generally accepted accounting principles as applied in the United
States applied on a basis substantially consistent, except as noted in
the Registration Statement, with the basis for the audited consolidated
financial statements of the Company incorporated by reference in the
Registration Statement.
(iii) On the basis of limited procedures, not
constituting an audit in accordance with generally accepted auditing
standards as applied in the United States, consisting of a reading of
the unaudited interim financial statements and other information
referred to below, a reading of the latest available unaudited
condensed consolidated financial statements of the Company, inspection
of the minute books of the Company since the date of the latest audited
financial statements of the Company included or incorporated by
reference in the Registration Statement, inquiries of officials of the
Company responsible for financial and accounting matters and such other
inquiries and procedures as may be specified in such letter, nothing
came to their attention that caused them to believe that:
(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
17
(B) for the period from the date of the
latest unaudited interim consolidated financial statements of
the Company incorporated by reference in the Registration
Statement to the specified date referred to in clause
(iii)(A), there were any decreases in the consolidated
interest income, net interest income, or net income of the
Company or in the per share amount of net income of the
Company, or any changes, decreases or increases in any other
items specified by the Representatives, in each case as
compared with the comparable period of the preceding year and
with any other period of corresponding length specified by the
Representatives, except in each case for increases or
decreases which the Registration Statement discloses have
occurred or may occur, or which are described in such letter.
(iv) In addition to the audit referred to in their
report included in the Registration Statement and the limited
procedures, inspection of minute books, inquiries and other procedures
referred to in paragraphs (ii) and (iii) above, they have carried out
certain specified procedures, not constituting an audit in accordance
with generally accepted auditing standards as applied in the United
States, with respect to certain amounts, percentages and financial
information specified by the Representatives which are derived from the
general accounting records and consolidated financial statements of the
Company which are incorporated by reference in the Registration
Statement, and have compared such amounts, percentages and financial
information with the accounting records and the material derived from
such records and consolidated financial statements of the Company have
found them to be in agreement.
In the event that the letters to be delivered referred to above set
forth any such changes, decreases or increases as specified in clauses (iii)(A)
or (iii)(B) above, or any exceptions from such agreement specified in clause
(iv) above, it shall be a further condition to the obligations of the
Underwriters that the Representatives shall have determined, after discussions
with officers of the Company responsible for financial and accounting matters,
that such changes, decreases, increases or exceptions as are set forth in such
letters do not (x) reflect a material adverse change in the items specified in
clause (iii)(A) above as compared with the amounts shown in the latest unaudited
consolidated statement of financial condition of the Company incorporated by
reference in the Registration Statement, (y) reflect a material adverse 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 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.
(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
18
state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(h) Between the time of execution of this Agreement and the Closing
Time or the relevant Date of Delivery (i) no material and unfavorable change in
the assets, business, results of operations, earnings, prospects, properties or
condition (financial or otherwise) of the Company and its Subsidiaries taken as
a whole shall occur or become known (whether or not arising in the ordinary
course of business), or (ii) no transaction which is material and unfavorable to
the Company shall have been entered into by the Company or any of the
Subsidiaries.
(i) At the Closing Time, the NASD shall not have raised any objection
with respect to the fairness and reasonableness of the underwriting terms and
arrangements.
(j) At the Closing Time, the Shares shall have been approved for
listing on the American Stock Exchange.
(k) The Representatives shall have received letters (each, a "Lock-up
Agreement") from each person listed on Schedule II hereto, in form and substance
satisfactory to the Representatives, confirming that for a period of 90 days
after the Closing Time (the "Lock-Up Period"), such persons will not directly or
indirectly (i) offer, pledge to secure any obligation due on or within the
Lock-Up Period, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option for the sale of, or
otherwise dispose of or transfer, directly or indirectly, any Common Shares
(other than by participating as selling shareholders in a registered offering of
Common Shares offered by the Company with the consent of the Representatives) 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 its sole discretion. The
forgoing restrictions shall not apply to securities disposed of privately
through bona fide gifts or to others approved by Friedman, Billings, Xxxxxx &
Co., Inc. and Xxxxxx, Xxxxxxxx & Company, Incorporated, so long as the
recipients first agree in writing to be bound by the same restrictions set forth
above during the Lock-Up Period.
(l) The Company will, at the Closing Time and on each Date of Delivery,
deliver to the Representatives a certificate of its Chief Executive Officer and
its Chief Financial Officer, to the effect that, to each of such officer's
knowledge, the representations and warranties of the Company set forth in this
Agreement are true and correct and the conditions set forth in this Section 6
have been met, and are true and correct as of such date.
(m) The Company shall have furnished to the Representatives such other
documents and certificates as to the accuracy and completeness of any statement
in the Registration Statement and the Prospectus, the representations,
warranties and statements of the Company contained herein, and the performance
by the Company of its covenants contained herein, and the fulfillment of any
conditions contained herein, as of the Closing Time or any Date of Delivery as
the Representatives may reasonably request.
(n) All filings with the Commission required by Rule 424 or Rule 429
under the Securities Act to have been filed by the Closing Date shall have been
made within the applicable time period prescribed for such filing by such Rule.
19
(o) [Reserved].
(p) The Company shall perform such of its obligations under this
Agreement as are to be performed by the terms hereof and thereof at or before
the Closing Time or the relevant Date of Delivery.
7. Termination. The obligations of the Underwriters hereunder shall be
subject to termination in the absolute discretion of the Representatives, at any
time prior to the Closing Time or any Date of Delivery, (i) if any of the
conditions specified in Section 6 shall not have been fulfilled when and as
required by this Agreement to be fulfilled, or (ii) if there has been since the
respective dates as of which information is given in the Registration Statement,
any material adverse change, or any development involving a prospective material
adverse change, in or affecting the assets, business, results of operations,
earnings, prospects, properties or condition (financial or otherwise) of the
Company, whether or not arising in the ordinary course of business, or (iii) if
there has occurred outbreak or escalation of hostilities 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 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)
20
the portion of the total number of Shares agreed to be purchased by the
defaulting Underwriter on such date in the proportion that its underwriting
obligations hereunder bears to the underwriting obligations of all
non-defaulting Underwriters; and (ii) if the total number of Defaulted Shares
exceeds 10% of such total, the Representative 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 and FBR jointly and severally agree 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 and FBR shall not be liable in any such case
to the extent, but only to the extent, that any such losses, claims, damages,
liabilities and expenses arise out of or are based upon any untrue statement or
omission or allegation thereof that has been made therein or omitted therefrom
in reliance upon and in conformity with the information provided by the
Underwriters (other than by FBR) in writing expressly for use in the
Registration Statement ("Underwriters' Information"); provided, that the
indemnification contained in
21
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
results 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 or
FBR 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 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.
22
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 the 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 and FBR 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 and FBR 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 and/or FBR 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, FBR and the Underwriters agree that
it would not be just and equitable if contribution pursuant to this paragraph
(d) were determined by pro rata allocation or by any other method of allocation
that does not take into account the equitable considerations referred to herein.
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities and expenses referred to in the first sentence of
this paragraph (d) shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this paragraph (d), no Underwriter in its
capacity as an Underwriter shall be required to contribute any amount in excess
of the amount by which the total price at which the Initial Shares underwritten
by such Underwriter and distributed to the public were offered to the public
exceeds the amount of any damages that such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
For purposes of this paragraph (d), each person who controls an
Underwriter within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act shall have the same rights to contribution as such
Underwriter, and each person who controls the Company within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act, each officer
23
and trustee 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 and FBR under this paragraph (d) shall be in addition to any liability
which the Company and FBR 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, trustees
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,
trustees 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, the
Subsidiaries and FBR 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, FBR or the directors
and officers or any of them or any person who controls the Company, any
Subsidiary or FBR 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 and FBR,
against any of the officers and directors of either of them, in connection with
the sale and delivery of the Shares, or in connection with the Registration
Statement or Prospectus.
11. Merger. This Agreement constitutes the entire agreement between the
Company, FBR 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 Xxxxxxxxxx Xxxxxx Xxxxx, Xxxxxxxxx, Xxxxxxxx 00000.
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.
24
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.
[The remainder of this page has been left blank intentionally]
25
If the foregoing correctly sets forth the understanding among the
Company, FBR 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, FBR and the Underwriters.
Very truly yours,
FBR ASSET INVESTMENT CORPORATION
By: /s/ Xxxxxxx X. Xxxxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Chief Operating Officer
Accepted and agreed to as of the date first above written:
FRIEDMAN, BILLINGS, XXXXXX & CO., INC.
By: /s/ Xxxxx X. Xxxxxxxxx
------------------------------------
Name: Xxxxx X. Xxxxxxxxx
Title: Managing Director, Syndicate
Acting for itself and on behalf of the several
Underwriters listed in Schedule I hereto
26
Schedule I
Underwriter Number of Initial Shares
----------- ------------------------
Friedman, Billings, Xxxxxx & Co., Inc. 2,150,000
Xxxxxx, Xxxxxxxx & Company, Incorporated 1,075,000
BB&T Capital Markets, a division of Xxxxx &
Xxxxxxxxxxxx, Inc. 860,000
J.J.B. Xxxxxxxx, X.X. Xxxxx, Inc., A PNC Company 215,000
Advest, Inc. 50,000
Xxxxxxx, Xxxxxx & Co. 50,000
Xxxxxxxxxx & Co. Inc. 50,000
Xxxxxx, Xxxxx Xxxxx, Incorporated 50,000
Flagstone Securities, LLC 50,000
Xxxxxx Xxxxxxxxxx Xxxxx LLC 50,000
Xxxxxx/Hunter Incorporated 50,000
Xxxxxxx Xxxxxx Xxxxxx 50,000
Wedbush Xxxxxx Securities 50,000
Xxxxx Fargo Securities, LLC 50,000
---------
4,800,000
=========
27
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 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.
28
EXHIBIT A
Subsidiaries of the Company
---------------------------
Pegasus Capital Corporation
FB TRS Holdings, Inc.
FB TRS I, Inc.
29
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. The Company is duly qualified or registered to transact
business as a foreign corporation and is in good standing under the laws of each
jurisdiction where the ownership or leasing of its properties or the conduct of
its business requires such qualification or registration, 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;
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 Statements 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 preemptive rights or 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, 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 and,
assuming due authorization, execution and delivery by the Underwriters, is the
30
valid and binding agreement of the Company, enforceable against the Company in
accordance with its terms, except as such enforceability may be limited by the
effect of bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally or by general principles of equity, and
except as to those provisions relating to indemnity or contribution for
liabilities arising under the Securities Act or state securities laws, as to
which we express no opinion;
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 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
Statements 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 Statements or
the Prospectus or to be filed as an exhibit to the Registration Statements 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 Statements 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 FBR, on the
other hand, which is required to be described in the Registration Statements 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 known
to us 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
31
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; to our knowledge, 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 decree, order or judgment applicable to the Company
or any of the Subsidiaries;
x) the Registration Statements originally filed and each amendment thereto
and the Prospectus (in each case, other than the financial statements and other
financial and statistical information contained therein, as to which we express
no opinion) comply 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 American Stock Exchange 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 or 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; and, to our knowledge, the
Company and the Subsidiaries are in compliance with all laws, rules,
regulations, judgments, decrees, orders and statutes of any court or
jurisdiction to which it is subject, except where such noncompliance 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.
32
