Exhibit 1.1
ANWORTH MORTGAGE ASSET CORPORATION
4,000,000 Shares of Common Stock
UNDERWRITING AGREEMENT
February , 2002
FRIEDMAN, BILLINGS, ▇▇▇▇▇▇ & CO., INC.
as Representative of the several Underwriters
c/o Friedman, Billings, ▇▇▇▇▇▇ & Co., Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Dear Sirs:
Anworth Mortgage Asset Corporation, a Maryland corporation (the "Company"),
confirms its agreement with each of the Underwriters listed on Schedule I hereto
(collectively, the "Underwriters"), for whom you are acting as representatives
(in such capacity, the "Representatives"), with respect to (i) the sale by the
Company of Four Million (4,000,000) shares (the "Initial Shares") of Common
Stock, par value $.01 per share, of the Company ("Common Stock") and the
purchase by the Underwriters, acting severally and not jointly, of the
respective number of shares of Common Stock set forth opposite the names of the
Underwriters in Schedule I hereto, and (ii) the grant of the option to the
Underwriters described in Section 1(b) hereof to purchase all or any part of Six
Hundred Thousand (600,000) additional shares of Common Stock to cover
over-allotments (the "Option Shares"), if any, as set forth in Schedule I
hereto. The 4,000,000 shares of Common Stock to be purchased by the Underwriters
and all or any part of the 600,000 shares of Common Stock subject to the option
described in Section l(b) hereof are hereinafter called, collectively, the
"Shares".
The Company understands that the Underwriters propose to offer the Shares
for sale to the public as set forth in the Prospectus (as defined below).
The Company has filed with the Securities and Exchange Commission (the
Commission"), a registration statement on Form S-2 (No. 333- ) and a related
preliminary prospectus for the registration of the Shares under the Securities
Act of 1933, as amended (the "Securities Act"), and the rules and regulations
thereunder (the "Securities Act Regulations"). The Company has prepared and
filed such amendments thereto, if any, and such amended preliminary
prospectuses, if any, as may have been required to the date hereof, and will
file such additional amendments thereto and such amended prospectuses as may
hereafter be required. The registration statement has been declared effective
under the Securities Act by the Commission. The registration statement as
amended at the time it became effective (including all information deemed
(whether by incorporation by reference or otherwise) to be a part of the
registration statement at the time it became effective pursuant to Rule 430A(b)
of the Securities Act Regulations) is hereinafter called the "Registration
Statement," except that, if the Company files a post-effective amendment to such
registration statement which 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
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Securities Act Regulations is hereinafter called the "Rule 462(b) Registration
Statement," and after such filing the term "Registration Statement" shall
include the 462(b) Registration Statement. Each prospectus included in the
registration statement, or amendments thereof or supplements thereto, before it
became effective under the Securities Act and any prospectus filed with the
Commission by the Company with the consent of the Underwriters pursuant to Rule
424(a) of the Securities Act Regulations is hereinafter called the "Preliminary
Prospectus." The term "Prospectus" means the final prospectus, as first filed
with the Commission pursuant to paragraph (1) or (4) of Rule 424(b) of the
Securities Act Regulations, and any amendments thereof or supplements thereto.
The Commission has not issued any order preventing or suspending the use of any
Preliminary Prospectus.
The Company and the Underwriters agree as follows:
1. Sale and Purchase:
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(a) Initial Shares. Upon the basis of the warranties and representations
and other terms and conditions herein set forth, at the purchase price per share
of $ for the Common Stock, the Company agrees to sell to each Underwriter the
number of Initial Shares set forth in Schedule I opposite its name, and each
Underwriter agrees, severally and not jointly, to purchase from the Company 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 among the Underwriters as the
Representatives in their sole discretion shall make to eliminate any sales or
purchases of fractional shares.
(b) Option Shares. In addition, upon the basis of the warranties and
representations and other terms and conditions herein set forth, at the purchase
price per share set forth in paragraph (a), the Company hereby grants an option
to purchase Six Hundred Thousand (600,000) shares of Common Stock to the
Underwriters, acting severally and not jointly, in the respective numbers of
shares of Common Stock set forth opposite the names of the Underwriters in
Schedule I hereto, plus any additional number of Option Shares which such
Underwriter may become obligated to purchase pursuant to the provisions of
Section 8 hereof. The option hereby granted will expire 30 days after the date
hereof and may be exercised in whole or in part from time to time only for the
purpose of covering over-allotments which may be made in connection with the
offering and distribution of the Initial Shares upon notice by the
Representatives to the Company setting forth the number of Option Shares as to
which the several Underwriters are then exercising the option and the time and
date of payment and delivery for such Option Shares. Any such time and date of
delivery (a "Date of Delivery") shall be determined by the Representatives, but
shall not be later than three full business days (or 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.
2. Payment and Delivery:
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(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 at
the offices of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP, Underwriters' Counsel located at ▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇,
▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ (unless another place shall be agreed upon by
the Representatives and the Company) against delivery of the certificates for
the Initial Shares to the Representatives for the respective accounts of the
Underwriters. Such payment and delivery shall be made at 9:30 a.m., New York
City time, on the third (fourth, if pricing occurs after 4:30 p.m., New York
City time) business day after the date hereof (unless another time, not later
than ten business days after such date, shall be agreed to by the
Representatives and the Company). The time at which such payment and delivery
are actually made is hereinafter sometimes called the "Closing Time."
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 at the offices of Underwriters' Counsel located at the location
indicated in Section 2(a) above (unless another place shall be agreed upon by
the Representatives and the Company) against delivery of the certificates for
the Option Shares to the Representatives for the respective accounts of the
Underwriters. Such payment and delivery shall be made at 9:30 a.m., New York
City time, on each Date of Delivery determined pursuant to Section 1(b) above.
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
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and warrants to the Underwriters that:
(a) the Company has an authorized capitalization as set forth in the
Prospectus under the caption "Capitalization"; all of the outstanding shares of
capital stock of the Company have been duly and validly authorized and issued
and are fully paid and non-assessable; except as disclosed in the Prospectus,
there are no outstanding (i) securities or obligations of the Company
convertible into or exchangeable for any capital stock of the Company, (ii)
warrants, rights or options to subscribe for or purchase from the Company any
such capital stock or any such convertible or exchangeable securities or
obligations, or (iii) obligations of the Company to issue any shares of capital
stock, any such convertible or exchangeable securities or obligation, or any
such warrants, rights or options;
(b) the Company has no subsidiaries;
(c) the Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Maryland with
corporate power and authority to own its properties, to conduct its business as
described in the Registration Statement and Prospectus and to execute and
deliver this Agreement and to consummate the transactions contemplated hereby;
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(d) the Company is duly qualified or licensed by each jurisdiction in which
it conducts its business and in which the failure to be so qualified or licensed
could reasonably be expected to have a material adverse effect on the assets,
business, operations, earnings, properties or condition (financial or otherwise)
of the Company, and the Company is duly qualified, and in good standing, in each
jurisdiction in which it owns or leases real property or maintains an office and
in which such qualification is necessary, except where the failure to be so
qualified and in good standing would not reasonably be expected to have a
material adverse effect on the assets, business, operations, earnings,
properties or condition (financial or otherwise) of the Company; other than its
ownership of 68,300 shares of the Class A Preferred Stock of ▇▇▇▇▇▇▇▇▇ Mortgage
Asset Corporation, the Company does not own, directly or indirectly, any capital
stock or other equity securities of any other corporation or any ownership
interest in any partnership, joint venture or other association;
(e) the Company is in material compliance with all governmental rules and
regulations necessary to conduct the business now operated by it and has not
received or any notice of changes in existing governmental rules or regulations
that, if modified adversely to the Company would have a material adverse effect
on the assets, business, operations, earnings, properties or condition
(financial or otherwise) of the Company;
(f) the Company is not 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 articles of incorporation 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 is a party or by
which it or its properties is bound, except for such breaches or defaults which
would not have a material adverse effect on the assets, business, operations,
earnings, prospects, properties or condition (financial or otherwise) of the
Company, the execution, delivery and performance of this Agreement, and
consummation of the transactions contemplated hereby will not: (i) 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), (A) any provision of the articles of incorporation or
bylaws of the Company, or (B) any provision of any license, indenture, mortgage,
deed of trust, loan or credit agreement or other agreement or instrument to
which the Company is a party or by which it or its properties may be bound or
affected, or under any federal, state, local or foreign law, regulation or rule
or any decree, judgment or order applicable to the Company or (ii) result in the
creation or imposition of any lien, charge, claim or encumbrance upon any
property or assets of the Company, except in the case of clause (i)(B) and this
clause (ii) for such breaches, defaults, liens, charges, claims or encumbrances
which would not have a material adverse effect on the assets, business,
operations, earnings, properties or condition (financial or otherwise) of the
Company;
(g) this Agreement has been duly authorized, executed and delivered by the
Company and constitutes a legal, valid and binding agreement of the Company
enforceable in accordance with its terms, except as may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
similar laws affecting creditors' rights generally, and by general principles
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;
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(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 Company's consummation of
the transactions contemplated by this Agreement, and its sale and delivery of
the Shares, other than (i) such as have been obtained, or will have been
obtained at the Closing Time or the relevant Date of Delivery, as the case may
be, under the Securities Act, (ii) such approvals as have been obtained in
connection with the approval of the quotation of the Shares on the American
Stock Exchange, (iii) any necessary qualification under the securities or blue
sky laws of the various jurisdictions in which the Shares are being offered by
the Underwriters and (iv) such approvals as may be required by the rules of the
National Association of Securities Dealers, Inc. ("NASD");
(i) the Company possesses all certificates, authorizations or permits
required to be issued by appropriate governmental agencies or bodies and has not
received any notice of proceedings relating to the revocation or modification of
any such certificate, authorization or permit that, if determined or modified
adversely to the Company, would, individually or in the aggregate, have a
material adverse effect on the assets, business, operations, earnings,
properties or condition (financial or otherwise) of the Company;
(j) the Registration Statement has become effective and any Rule 462(b)
Registration Statement will 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,
to the Company's knowledge, no proceedings for that purpose have been instituted
or are pending or are threatened by the Commission and any request on the part
of the Commission for additional information has been complied with;
(k) the Preliminary Prospectus and the Registration Statement comply and
the Prospectus and any further amendments or supplements thereto will, when they
have become effective or are filed with the Commission, as the case may be,
comply in all material respects with the requirements of the Securities Act and
the Securities Act Regulations; 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, in
the light of the circumstances under which they were made, not misleading; and
the Preliminary Prospectus does not, 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 an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in 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 any statement contained in
the Registration Statement or the Prospectus in reliance upon and in conformity
with the information concerning the Underwriters and furnished in writing by or
on behalf of the Underwriters through the Representatives to the Company
expressly for use in the Registration Statement or the Prospectus (that
information being limited to that described in the last sentence of the first
paragraph of Section 9(c) hereof);
(l) the Preliminary Prospectus was and the Prospectus delivered to the
Underwriters for use in connection with this offering will be identical to the
versions of the
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Preliminary Prospectus and Prospectus created to be transmitted to the
Commission for filing via the Electronic Data Gathering Analysis and Retrieval
System ("▇▇▇▇▇"), except to the extent permitted by Regulation S-T;
(m) all legal or governmental proceedings, contracts or documents 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, and such descriptions present fairly the information
required to be shown;
(n) other than a written claim dated October 29, 2001, by ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
(the "▇▇▇▇▇▇ Claim") against Anworth Mortgage Advisory Corporation (the
"Manager"), a copy of which has been provided to the Underwriters, there are no
actions, suits, proceedings, or, to the knowledge of the Company, inquiries or
investigations, pending or, to the knowledge of the Company, threatened against
the Company or to which the properties, assets or rights of the Company are
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 having a
material adverse effect on the assets, business, operations, earnings,
properties or condition (financial or otherwise) of the Company;
(o) the financial statements, including the notes thereto, included in the
Registration Statement and the Prospectus present fairly the financial position
of the Company as of the dates indicated and the results of operations and
changes in financial position and cash flows of the Company for the periods
specified; such financial statements have been prepared in conformity with
generally accepted accounting principles applied on a consistent basis during
the periods involved and in accordance with Regulations S-X promulgated by the
Commission; the financial statement schedules included in the Registration
Statement and the amounts in the Prospectus under the captions "Prospectus
Summary - Summary Financial Data" and "Selected Financial Data" fairly present
the information shown therein and have been compiled on a basis consistent with
the financial statements included in the Registration Statement and the
Prospectus; the unaudited pro forma financial information (including the related
notes) included in the Prospectus or any Preliminary Prospectus complies as to
form in all material respects to the applicable accounting requirements of the
Securities Act and the Securities Act Regulations;
(p) Each of PricewaterhouseCoopers LLP and McGladrey & ▇▇▇▇▇▇ LLP, whose
reports on the audited financial statements of the Company are filed with the
Commission as part of the Registration Statement and Prospectus, are and were,
to the Company's knowledge, during the periods covered by their reports
independent public accountants as required by the Securities Act and the
Securities Act Regulations;
(q) 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, business, operations, earnings,
properties or condition (financial or otherwise) of the Company, whether or not
arising in the ordinary course of business, (ii) any transaction, which is
material to the Company, contemplated or entered into by the Company which is
outside the ordinary course of the Company's business, (iii) any obligation,
contingent or otherwise, directly or indirectly incurred by the Company, which
is material to the Company and which is outside
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the ordinary course of the Company's business or (iv) any dividend or
distribution of any kind declared, paid or made by the Company on any class of
its capital stock;
(r) the Shares conform in all material respects to the description thereof
contained in the Registration Statement and the Prospectus;
(s) other than registration rights granted to FBR Asset Investment
Corporation pursuant to the Purchase Agreement, dated December 20, 2001, there
are no persons with registration or other similar rights to have any equity
securities, including securities which are convertible into or exchangeable for
equity securities, registered pursuant to the Registration Statement or
otherwise registered by the Company under the Securities Act;
(t) the Shares have been duly authorized and, when issued and duly
delivered against payment therefor as contemplated by this Agreement, will be
validly issued, fully paid and nonassessable, free and clear of any pledge,
lien, encumbrance, security interest or other claim, and the issuance and sale
of the Shares by the Company is not subject to preemptive or other similar
rights arising by operation of law, under the articles of incorporation or
by-laws of the Company, under any agreement to which the Company is a party;
(u) the Company has not taken, and will not take, 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;
(v) neither the Company nor any of its affiliates, except for affiliates of
the Company who are associated or affiliated with Syndicated Capital, Inc., (i)
is required to register as a "broker" or "dealer" in accordance with the
provisions of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), or the rules and regulations thereunder, or (ii) directly, or indirectly
through one or more intermediaries, controls or has any other association with
(within the meaning of Article I of the By-laws of the National Association of
Securities Dealers, Inc. (the "NASD")) any member firm of the NASD;
(w) any certificate signed by any officer of the Company delivered to the
Representatives or to counsel for the Underwriters 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;
(x) 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;
(y) the Company has good title to all personal property owned by it, 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
materially interfere with the use made of such property by the Company; and any
real property and buildings held under lease by the Company are held under
valid, existing and enforceable leases, with such exceptions as are disclosed in
the
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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;
(z) the Company owns, possesses or can acquire on reasonable terms adequate
licenses 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 to conduct its business as
described in the Prospectus, and the Company has not received written notice of
infringement of or conflict with asserted rights of others with respect to any
Intangibles which could materially and adversely affect the business,
properties, assets, results of operations or condition (financial or otherwise)
of the Company;
(aa) the Company 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 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;
(bb) the Company has 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 has paid or will pay on a timely basis all taxes shown as
due thereon; and no tax deficiency has been asserted against the Company, nor
does the Company know of any tax deficiency which is likely to be asserted
against it, which if determined adversely to it could materially adversely
affect its business, properties, assets, results of operations or condition
(financial or otherwise); all tax liabilities are adequately provided for on the
books of the Company;
(cc) the Company maintains insurance (issued by insurers of recognized
financial responsibility) of the types and in the amounts generally deemed
adequate for its business 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
against theft, damage, destruction, acts of vandalism and all other risks
customarily insured against, all of which insurance is in full force and effect;
(dd) except with respect to the ▇▇▇▇▇▇ Claim, the Company has not, to its
knowledge, violated, or received written notice of any violation with respect
to, any applicable environmental, safety or similar law applicable to the
business of the Company, 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, the violation
of any of which could have a material adverse effect on the business,
operations, earnings, properties or condition (financial or otherwise) of the
Company;
(ee) neither the Company nor any executive officer or director purporting
to act on behalf of the Company, has at any time; (i) made any unlawful
contributions to any
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candidate for political office, or failed to disclose fully any such
contributions, or (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;
(ff) except as otherwise disclosed in the Prospectus, there are no material
outstanding loans or advances or material guarantees of indebtedness by the
Company to or for the benefit of any of the officers or directors of the Company
or any of the members of the families of any of them;
(gg) all securities issued by the Company have been issued and sold in
material compliance with (i) all applicable federal and state securities laws,
(ii) the laws of the applicable jurisdiction of incorporation of the issuing
entity and, (iii) to the extent applicable to the issuing entity, the
requirements of the American Stock Exchange;
(hh) in connection with this offering, the Company has not offered and will
not offer its Common Stock or any other securities convertible into or
exchangeable or exercisable for Common Stock in a manner in violation of the
Securities Act. 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;
(ii) the Company has complied and will comply with all the provisions of
Florida Statutes, Section 517.075 (Chapter 92-198, Laws of Florida). Neither the
Company nor any of its affiliates does business with the government of Cuba or
with any person or affiliate located in Cuba;
(jj) the Company has not incurred any liability for any finder's fees or
similar payments in connection with the transactions herein contemplated, other
than pursuant to this Agreement;
(kk) the Company is not in breach of, or default under (nor has any event
occurred which with notice, lapse of time, or both would constitute a breach of,
or default under), the management agreement dated March 17, 1998 (the
"Management Agreement") between the Company and the Manager, except where such
breach or default would not have a material adverse effect on the assets,
business, operations, earnings, properties or condition (financial or otherwise)
of the Company;
(ll) except for the stockholder demand provisions of Section 857(f)(1) of
the Internal Revenue Code of 1986, as amended (the "Code"), the Company, since
its date of inception, has been, and upon the sale of the Shares will continue
to be, organized and operated in material conformity with the requirements for
qualification and taxation as a "real estate investment trust" (a "REIT") under
Sections 856 through 860 of the Code, for all taxable years commencing with its
taxable year ended December 31, 1998. The proposed method of operation of the
Company as described in the Prospectus would reasonably be expected to enable
the Company to continue to meet the requirements for qualification and taxation
as a REIT under the Code presently in effect, and, to the Company's knowledge,
no actions have been taken (or not
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taken which are required to be taken) by the Company which would reasonably
be expected to cause such qualification to be lost;
(mm) the Company has retained PricewaterhouseCoopers LLP as its qualified
accountants and qualified tax experts, and PricewaterhouseCoopers LLP (i)
periodically tests procedures and conduct annual compliance reviews designed to
determine compliance with the REIT provisions of the Code and (ii) assists the
Company in monitoring what it believes are appropriate accounting systems and
procedures designed to determine compliance with the REIT provisions of the
Code; and
(nn) the Company is not, and, after giving effect to the offering and sale
of the Shares, will not be an "investment company", or an entity "controlled" by
an "investment company", as such term is defined in the Investment Company Act
of 1940, as amended (the "Investment Company Act").
4. Certain Covenants: The Company hereby agrees with each Underwriter:
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(a) to furnish such information as may be required 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 required for the distribution
of the Shares, provided that the Company shall not be required 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) to prepare the Prospectus in a form approved by the Underwriters and
file such Prospectus with the Commission pursuant to Rule 424(b) not later than
10:00 a.m. (New York City time), on the second business day following the
execution and delivery of this Agreement and to furnish promptly (and with
respect to the initial delivery of such Prospectus, not later than 10:00 a.m.
(New York City time) on the second business 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) as the Underwriters may reasonably request for the
purposes contemplated by the Securities Act Regulations;
(c) 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 thereto
becomes effective under the Securities Act Regulations;
(d) to advise the Representatives promptly, 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 in writing of
any proceedings for any of such purposes and, if the
10
Commission or any other government agency or authority should issue any such
order, to make every reasonable effort to obtain the lifting or removal of such
order as soon as possible; to advise the Representatives promptly of any
proposal to amend or supplement the Registration Statement or Prospectus and to
file no such amendment or supplement to which the Representatives shall
reasonably object in writing;
(e) to furnish to the Underwriters at the request of any of the
Representatives, for a period of two years from the date of this Agreement (i)
as soon as reasonably practicable, copies of all annual, quarterly and current
reports or other communications supplied to holders of shares of Common Stock,
(ii) as soon as reasonably practicable after the filing thereof, copies of all
reports filed by the Company with the Commission, the NASD or any securities
exchange and (iii) such other information as the Underwriters may reasonably
request regarding the Company; provided, however, any information that is deemed
by the Company to be confidential will be subject to the execution and delivery
of non-disclosure agreements in favor of the Company.
(f) to advise the Underwriters promptly of the happening of any event known
to the Company within the time during which a Prospectus relating to the Shares
is required to be delivered under the Securities Act Regulations which, in the
judgment of the Company, would require the making of any change in the
Prospectus then being used so that the Prospectus would not include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, and, during such time,
to prepare and furnish, at the Company's expense, to the Underwriters promptly
such amendments or Supplements to such Prospectus as may be necessary to reflect
any such change and to furnish to the Underwriters a copy of such proposed
amendment or supplement before filing any such amendment or supplement with the
Commission;
(g) to furnish promptly to each Representative a signed copy of the
Registration Statement, as initially filed with the Commission, and all
amendments or supplements thereto (including all exhibits filed therewith or
incorporated by reference therein) and such number of conformed copies of the
foregoing as the Representatives may reasonably request;
(h) 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 (f) 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;
(i) to apply the net proceeds of the sale of the Shares in accordance with
its statements under the caption "Use of Proceeds" in the Prospectus;
(j) to make generally available to its security holders 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 after the effective date of the Registration Statement;
11
(k) to use its best efforts to effect and maintain the quotation of the
Shares on the American Stock Exchange and to file with the American Stock
Exchange all documents and notices required by the American Stock Exchange of
companies that have securities that are traded on the American Stock Exchange;
(l) to engage and maintain, at its expense, a registrar and transfer agent
for the Shares;
(m) to use its reasonable efforts to meet the requirements for
qualification as a real estate investment trust under Sections 856 through 860
of the Code;
(n) to conduct its affairs in such a manner so as to reasonably ensure that
the Company will not be an "investment company" or an entity "controlled" by an
investment company within the meaning of the Investment Company Act;
(o) to refrain during a period of 90 days from the date of the Prospectus,
without the prior written consent of Friedman, Billings, ▇▇▇▇▇▇ & Co., Inc.
("FBR"), 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 share of Common Stock or any securities convertible
into or exercisable or exchangeable for Common Stock, 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 Stock, whether any such swap or transaction described in
clause (i) or (ii) above is to be settled by delivery of Common Stock or such
other securities, in cash or otherwise. The foregoing sentence shall not apply
to (A) the Shares to be sold hereunder, (B) any shares of Common Stock issued by
the Company upon the exercise of an option or other instrument granted under the
Company's 1997 Stock Option and Awards Plan, as amended (the "Option Plan"), (C)
any shares of Common Stock issuable by the Company upon the conversion of
securities or the exercise of warrants outstanding on the date hereof and
referred to in the Prospectus, and (D) the grant of any option or other
instrument to purchase or acquire shares of Common Stock of the Company under
the Option Plan and Awards Plan;
(p) to not itself, and to use its best efforts to cause its officers,
directors and affiliates 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 of the Shares, (ii) sell, bid for, purchase or pay anyone any compensation
for soliciting purchases of the Shares or (iii) pay or agree to pay to any
person any compensation for soliciting any order to purchase any other
securities of the Company.
(q) 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 reasonable opinion
of the Representatives the market price of
12
the Common Stock 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, responding to or commenting on such
rumor, publication or event.
5. Payment of Expenses:
-------------------
(a) The Company agrees to pay all costs and expenses incident to the
performance of its obligations under this Agreement, whether or not the
transactions contemplated hereunder are consummated or this Agreement is
terminated, including expenses, fees and taxes in connection with (i) the
preparation and filing of the Registration Statement, each Preliminary
Prospectus, the Prospectus, and any amendments or supplements thereto, and the
printing and furnishing of copies of each thereof to the Underwriters and to
dealers (including costs of mailing and shipment), (ii) the preparation,
issuance and delivery of the certificates for the Shares to the Underwriters,
including any stock or other transfer taxes or duties payable upon the sale of
the Shares to the Underwriters, (iii) the printing of this Agreement and any
dealer agreements and furnishing of copies of each to the Underwriters and to
dealers (including costs of mailing and shipment), (iv) the qualification of the
Shares for offering and sale under state laws that the Company and the
Representatives have mutually agreed are appropriate and the determination of
their eligibility for investment under state law as aforesaid (including the
legal fees and filing fees and other disbursements of counsel for the
Underwriters) 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 inclusion
of the Shares in 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. 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 its
activities under this Agreement, including, but not limited to, costs such as
printing, facsimile, courier service, direct computer expenses, accommodations
and travel, but excluding the fees and expenses of the Underwriters' outside
legal counsel and any other advisors, accountants, appraisers, etc. (other than
the fees and expenses of counsel with respect to state securities or blue sky
laws (which shall not exceed $5,000) and obtaining the filing for review of the
public offering of the Shares by the NASD, all of which shall be reimbursed by
the Company pursuant to the provisions of subsection (a) above).
6. Conditions of the Underwriters' Obligations: The obligations of the
-------------------------------------------
Underwriters hereunder to purchase Shares at the Closing Time or on the Date of
Delivery, as applicable, are
13
subject to 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, the performance by the Company of
its obligations hereunder in all material respects and to the satisfaction of
the following further conditions at the Closing Time or on the Date of Delivery,
as applicable:
(a) The Representatives shall have received, dated as of the Closing Time
and on each Date of Delivery, an opinion of ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
LLP (which may rely upon the opinion of ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP to the
extent any opinion thereunder pertains to Maryland law) or ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
& ▇▇▇▇▇ LLP, as counsel for the Company, addressed to the Underwriters and
covering the matters described in Exhibit A hereto.
(b) The Representatives shall have received signed copies of opinions
addressed to the Company (i) from ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
substantially in the form of Exhibit 8.1 to the Registration Statement and (ii)
from ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP substantially in the form of Exhibit 5.1
to the Registration Statement.
(c) The Representatives shall have received from PricewaterhouseCoopers
LLP, 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 reasonably satisfactory to the
Representatives, relating to the financial statements, including any pro forma
financial statements, of the Company, and such other matters customarily covered
by comfort letters issued in connection with registered public offerings.
(d) No amendment or supplement to the Registration Statement or Prospectus
shall have been filed to which the Underwriters shall have objected in writing.
(e) Prior to the Closing Time and each Date of Delivery (i) no stop order
suspending the effectiveness of the Registration Statement or any order
preventing or suspending the use of any Preliminary Prospectus or Prospectus
shall have been issued, and no proceedings for such purpose shall have been
initiated or threatened, by the Commission, and no suspension of the
qualification of the Shares for offering or sale in any jurisdiction, or of the
initiation or threatening of any proceedings for any of such purposes, shall
have occurred and, in any such instance, not been waived by the Commission; and
(ii) the Registration Statement and the Prospectus shall not, contain an untrue
statement of material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(f) Between the time of execution of this Agreement and the Closing Time or
the relevant Date of Delivery (i) no material and adverse change in the assets,
business, operations, earnings, properties or condition (financial or otherwise)
of the Company shall occur or become known (whether or not arising in the
ordinary course of business), and (ii) no transaction which is material and
adverse to the Company shall have been entered into by the Company.
14
(g) The Shares shall have been approved for inclusion in the American Stock
Exchange.
(h) If the issuance and sale of the Initial Shares and/or Option Shares to
the Underwriters will result in the Underwriters individually or in the
aggregate exceeding the Aggregate Stock Ownership Limit (as defined in the
Amended Articles of Incorporation of the Company as of the date hereof) with
respect to the Company's capital stock, then, on or prior to the Closing Time,
the Underwriters shall have received from the Company's Board of Directors a
waiver or exemption from the Aggregate Stock Ownership Limit with respect to the
issuance and sale of such Shares, in form and substance reasonably satisfactory
to the Underwriters (and the Underwriters acknowledge having received such a
waiver with respect to ▇▇▇▇▇ ▇▇▇▇▇▇▇ and certain of his family members).
(i) The NASD shall not have raised any objection with respect to the
fairness and reasonableness of the underwriting terms and arrangements between
the date of this Agreement and the Closing Time or the Date of Delivery, as
applicable.
(j) The Representatives shall have received lock-up agreements from each
officer and director of the Company, in the form of Exhibit C attached hereto,
---------
and such letter agreements shall be in full force and effect.
(k) The Company will, at the Closing Time and on each Date of Delivery,
deliver to the Underwriters a certificate of its Chairman of the Board,
President and Chief Executive Officer and its Vice President and 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 in all material respects and the conditions set forth in
paragraphs (e), (f) and (g) have been satisfied, in each case as of such date.
(l) The Company shall have furnished to the Underwriters such other
documents and certificates as to the accuracy and completeness of any statement
in the Registration Statement and the Prospectus, and the performance by the
Company of its covenants contained herein and therein, as of the Closing Time or
any Date of Delivery as the Underwriters may reasonably request.
(m) The Company shall have performed 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 several Underwriters hereunder shall
-----------
be subject to termination in the absolute discretion of the Representatives, at
any time prior to the Closing Time or any Date of Delivery, (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 in or affecting the assets, business, operations,
earnings, properties, condition (financial or otherwise) or management of the
Company, whether or not arising in the ordinary course of business, or (iii) if
there has occurred an outbreak or escalation of hostilities or other national or
international calamity or crisis or change in economic, political or other
15
conditions the effect of which on the financial markets of the United States
is such as to make it, in the reasonable judgment of the Representatives,
impracticable to market 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 the American Stock Exchange, or if trading generally on
the New York Stock Exchange or on the Nasdaq Stock Market 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 the Nasdaq Stock Market or
by order of the Commission or any other governmental authority, or (v) 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 materially
adversely affects or will materially adversely affect the business or operations
of the Company which, in the case of a prospective effect, cannot reasonably be
expected to be remedied by the Company prior to the occurrence of such effect,
or (vi) 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. Increase in Underwriters' Commitments: 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 satisfactory to the Company, to purchase all, but not less
than all, of the Shares which such Underwriter shall have agreed but failed to
take up and pay for (the "Defaulted Shares"). Absent the completion of such
arrangements within such 36 hour period, (i) if the total number of Defaulted
Shares does not exceed 10% of the total number of Shares to be purchased on such
date, each non-defaulting Underwriter shall take up and pay for (in addition to
the number of Shares which it is otherwise obligated to purchase on such date
pursuant to this Agreement) the portion of the total number of Shares agreed to
be purchased by the defaulting Underwriter on such date in the proportion that
its underwriting obligations hereunder bears to the underwriting obligations of
all non-defaulting Underwriters; and (ii) if the total number of Defaulted
Shares exceeds 10% of such total, the Representatives may terminate this
Agreement by notice to the Company, without liability to any non-defaulting
Underwriter except as set forth in Section 9 (provided that if such default
occurs with respect to the Initial
16
Shares after the Closing Time, this Agreement will not terminate as to the
Initial Shares or any Option Shares purchased prior to such termination).
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. Indemnity and Contribution by the Company and the Underwriters:
--------------------------------------------------------------
(a) The Company agrees to indemnify, defend and hold harmless each
Underwriter and any person who controls any Underwriter within the meaning of
the Securities Act, from and against any loss, expense, liability, damage or
claim (including the reasonable cost of investigation) which, jointly or
severally, any such Underwriter or controlling person may incur under the
Securities Act, the Exchange Act or otherwise, insofar as such loss, expense,
liability, damage or claim arises out of or is based upon (i) any breach of any
representation, warranty or covenant of the Company contained herein, (ii) any
failure on the part of the Company to comply with any applicable law, rule or
regulation relating to the offering of securities being made pursuant to the
Prospectus, (iii) any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement (or in the Registration Statement
as amended by any post-effective amendment thereof by the Company) or in a
Prospectus (the term Prospectus for the purpose of this Section 9 being deemed
to include any Preliminary Prospectus, the Prospectus and the Prospectus as
amended or supplemented by the Company), or (iv) any omission or alleged
omission to state a material fact required to be stated in either such
Registration Statement or Prospectus or necessary to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading, except insofar as any such loss, expense, liability, damage or claim
arises out of or is based upon any untrue statement or alleged untrue statement
or omission or alleged omission of a material fact contained in and in
conformity with information furnished in writing by the Underwriters through the
Representatives to the Company expressly for use in such Registration Statement
or such Prospectus, provided, however, that the indemnity agreement contained in
this subsection (a) with respect to the Preliminary Prospectus or the Prospectus
shall not inure to the benefit of an Underwriter (or to the benefit of any
person controlling such Underwriter) with respect to any person asserting any
such loss, expense, liability, damage or claim which is the subject thereof if
the Prospectus or any supplement thereto prepared with the consent of the
Representatives and furnished to the Underwriters prior to the Closing Time
corrected any such alleged untrue
17
statement or omission and if such Underwriter failed to send or give a copy
of the Prospectus or supplement thereto to such person at or prior to the
written confirmation of the sale of Shares to such person, unless such failure
resulted from noncompliance by the Company with Section 4(b) above).
(b) If any action is brought against an Underwriter or controlling person
in respect of which indemnity may be sought against the Company pursuant to
subsection (a) above, such Underwriter shall promptly notify the Company, as
applicable, in writing of the institution of such action, and the Company, as
applicable, shall assume the defense of such action, including the employment of
counsel of its choosing and payment of expenses, provided, however, that any
failure or delay to so notify the Company, as applicable, will not relieve the
Company, as applicable, of any obligation hereunder, except to the extent that
its ability to defend is actually impaired or otherwise prejudiced by such
failure or delay, and after notice from the Company to such indemnified party of
its election so to assume the defense thereof, the Company will not be liable to
such indemnified party under this Section for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation. Such Underwriter or
controlling person shall have the right to employ its or their own counsel in
any such case, but the fees and expenses of such counsel shall be at the expense
of such Underwriter or such controlling person unless the employment of such
counsel shall have been authorized in writing by the Company, as applicable, in
connection with the defense of such action, or the Company, as applicable, shall
not have employed counsel to have charge of the defense of such action within a
reasonable time after notice of such action by such indemnified party or such
indemnified party or parties shall have reasonably concluded (based on the
advice of counsel) that there exists an actual and material conflict of interest
between the interests of the Company and such indemnified party in connection
with such action (in which case the Company shall not have the right to direct
the defense of such action on behalf of the indemnified party or parties), in
any of which events such fees and expenses shall be borne by the Company, as
applicable, and paid as incurred (it being understood, however, that the Company
shall not be liable for the expenses of more than one separate firm of attorneys
for the Underwriters or controlling persons in any one action or series of
related actions in the same jurisdiction (other than local counsel in any such
jurisdiction) representing the indemnified parties who are parties to such
action). Anything in this paragraph to the contrary notwithstanding, the Company
shall not be liable for any settlement of any such claim or action effected
without its prior written consent.
(c) Each Underwriter agrees, severally and not jointly, to indemnify,
defend and hold harmless the Company, the Company's directors and officers, and
any person who controls the Company within the meaning of the Securities Act,
from and against any loss, expense, liability, damage or claim (including the
reasonable cost of investigation) which, jointly or severally, the Company, or
any such person may incur under the Securities Act, the Exchange Act or
otherwise, but only insofar as such loss, expense, liability, damage or claim
arises out of or is based upon any untrue statement or alleged untrue statement
of a material fact contained in and in conformity with information furnished in
writing by such Underwriter through the Representatives to the Company expressly
for use in the Registration Statement (or in the Registration Statement as
amended by any post-effective amendment thereof by the Company) or in a
Prospectus, or arises out of or is based upon any omission or alleged omission
to state a material fact in connection with such information required to be
stated either in such Registration
18
Statement or Prospectus or necessary to make such information, in the light
of the circumstances under which made, not misleading. The statements set forth
(i) in the last paragraph on the cover page and (ii) under the caption
"Underwriting" in the Preliminary Prospectus and the Prospectus constitute the
only information furnished by or on behalf of any Underwriter through the
Representatives to the Company for purposes of Section 3(j) and this Section 9.
(d) If any action is brought against the Company or any such person in
respect of which indemnity may be sought against any Underwriter pursuant to the
foregoing paragraph, the Company or such person shall promptly notify the
Representatives in writing of the institution of such action and the
Representatives, on behalf of the Underwriters, shall assume the defense of such
action, including the employment of counsel of its choosing (who shall not,
except with the reasonable consent of the Company, be counsel to the
Representatives or the Underwriters) and payment of expenses; provided, however,
that any failure or delay to so notify the Representatives, as applicable, will
not relieve the Representatives or the Underwriters, as applicable, of any
obligation hereunder, except to the extent that their ability to defend is
actually impaired or otherwise prejudiced by such failure or delay, and after
notice from such Underwriter to such indemnified party of its election so to
assume the defense thereof, such Underwriter will not be liable to such
indemnified party under this Section for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation. The Company or such person
shall have the right to employ its own counsel in any such case, but the fees
and expenses of such counsel shall be at the expense of the Company or such
person unless the employment of such counsel shall have been authorized in
writing by the Representatives in connection with the defense of such action or
the Representatives shall not have employed counsel to have charge of the
defense of such action within a reasonable time after notice of such action by
such indemnified party or such indemnified party or parties shall have
reasonably concluded (based on the advice of counsel) that there exists an
actual and material conflict of interest between the interests of the Company
and such indemnified party in connection with such action (in which case the
Representatives shall not have the right to direct the defense of such action on
behalf of the indemnified party or parties), in any of which events such fees
and expenses shall be borne by such Underwriter and paid as incurred (it being
understood, however, that the Underwriters shall not be liable for the expenses
of more than one separate firm of attorneys in any one action or series of
related actions in the same jurisdiction (other than local counsel in any such
jurisdiction) representing the indemnified parties who are parties to such
action). Anything in this paragraph to the contrary notwithstanding, no
Underwriter shall be liable for any settlement of any such claim or action
effected without the prior written consent of the Representatives.
(e) If the indemnification provided for in this Section 9 is unavailable to
an indemnified party under subsections (a), (b), (c) and (d) of this Section 9
in respect of any losses, expenses, liabilities, damages or claims referred to
therein, then each applicable indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, expenses, liabilities, damages or
claims (i) in such proportion as is appropriate to reflect the relative benefits
received by the Company and the Underwriters from the offering of the Shares or
(ii) if (but only 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 of the Underwriters in connection with the statements
or
19
omissions which resulted in such losses, expenses, liabilities, damages or
claims, as well as any other relevant equitable considerations. The relative
benefits received by the Company and the Underwriters shall be deemed to be in
the same proportion as, the total proceeds from the offering (net of
underwriting discounts and commissions but before deducting expenses) received
by the Company, as applicable, bear to the total underwriting discounts and
commissions received by the Underwriters. The relative fault of the Company and
of the Underwriters shall be determined by reference to, among other things,
whether the untrue statement or alleged untrue statement of a material fact or
omission or alleged omission relates to information supplied by the Company or
by the Underwriters and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The amount paid or payable by a party as a result of the losses, claims, damages
and liabilities referred to in the first sentence of this subsection (e) shall
be deemed to include any legal or other fees or expenses reasonably incurred by
such party in connection with investigating or defending any claim or action
which is the subject of this subsection (e).
(f) Notwithstanding the provisions of this Section 9, no Underwriter shall
be required to contribute any amount in excess of underwriting discounts and
commissions applicable to the Shares purchased by such Underwriter. 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. The Underwriters' obligations
to contribute pursuant to this Section 9 are several in proportion to their
respective underwriting commitments and not joint.
10. Survival: The indemnity and contribution agreements contained in
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Section 9 and the covenants, warranties and representations of the Company
contained in Sections 3, 4 and 5 of this Agreement shall remain in full force
and effect regardless of any investigation made by or on behalf of any
Underwriter, or any person who controls any Underwriter within the meaning of
the Securities Act, or by or on behalf of the Company, its directors and
officers, or any person who controls the Company within the meaning of the
Securities Act, and shall survive the sale and delivery of the Shares. The
Company and each Underwriter agree promptly to notify the others of the
commencement of any litigation or proceeding against it and, in the case of the
Company, against any of the Company's officers and directors, in connection with
the sale and delivery of the Shares, or in connection with the Registration
Statement or Prospectus.
11. Notices: Except as otherwise herein provided, all statements, requests,
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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, ▇▇▇▇▇▇ & Co., Inc., ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
Attention: Syndicate Department; if to the Company, shall be sufficient in all
respects if delivered to Anworth Mortgage Asset Corporation, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
#▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇.
12. Governing Law; Headings: THIS AGREEMENT SHALL BE GOVERNED BY, AND
-----------------------
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, 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.
20
13. Parties at 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.
14. 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.
15. Successors. This Agreement will inure to the benefit of and be binding
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upon the parties hereto and their respective successors and the officers and
directors and controlling persons referred to in Sections 9 and 10.
[Signatures on following page]
21
If the foregoing correctly sets forth the understanding among the Company
and the Underwriters, please so indicate in the space provided below for the
purpose, whereupon this Agreement shall constitute a binding agreement among the
Company and the Underwriters.
Very truly yours,
ANWORTH MORTGAGE ASSET CORPORATION
By:
---------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Chairman of the Board,
President and Chief Executive
Officer
Accepted and agreed to as
of the date first above written:
FRIEDMAN, BILLINGS, ▇▇▇▇▇▇ & CO., INC.
For themselves and as Representatives of the several Underwriters named in
Schedule I hereto
By: FRIEDMAN, BILLINGS, ▇▇▇▇▇▇ & CO., INC.
By:
-----------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Managing Director
22
Schedule I
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ANWORTH MORTGAGE ASSET CORPORATION
Number of Initial Maximum Option Shares
Underwriter Shares to be Purchased to be Purchased
-------------------------------------- ---------------------- ---------------------
Friedman, Billings, ▇▇▇▇▇▇ & Co., Inc.
Total.............................. 4,000,000 600,000
Schedule I
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