|
EXHIBIT 1.1
ANWORTH MORTGAGE ASSET
CORPORATION
CONTROLLED EQUITY OFFERING SM
SALES
AGREEMENT
May 14, 2008
CANTOR FITZGERALD &
CO.
110 East 59th Street
New York, NY 10022
Ladies and Gentlemen:
ANWORTH MORTGAGE ASSET CORPORATION, a
Maryland real estate investment trust (the “
Company ”), confirms its agreement (this
“ Agreement ”) with Cantor
Fitzgerald & Co. (“ CF&Co
”), as follows:
1. Issuance and Sale
of Shares . The Company agrees that, from time to time during
the term of this Agreement, on the terms and subject to the
conditions set forth herein, it may issue and sell through
CF&Co, acting as agent and/or principal, (a) up to
15,000,000 shares (the “ Common Placement
Shares ”) of the Company’s shares of common
stock, par value $0.01 per share (the “ Common
Stock ” and together with the Preferred Stock, as
hereinafter defined, the “ Shares ”), and
(b) (i) up to 1,250,000 shares of the Company’s
8.625% Series A Cumulative Preferred Stock (“ Series A
Preferred Stock ”), and (ii) up to 2,000,000
shares of the Company’s 6.25% Series B Cumulative Convertible
Preferred Stock (“ Series B Preferred Stock
” and together with the Series A Preferred Stock, the “
Preferred Stock ”or the “ Preferred
Placement Shares ” and together with the Common
Placement Shares, the “ Placement Shares
”). Notwithstanding anything to the contrary contained
herein, the parties hereto agree that compliance with the
limitation set forth in this Section 1 on the number of
Shares issued and sold under this Agreement shall be the sole
responsibility of the Company, and CF&Co shall have no
obligation in connection with such compliance. The issuance and
sale of Shares through CF&Co will be effected pursuant to the
Registration Statement (as defined below) filed by the Company with
the Securities and Exchange Commission (the “
SEC ”), although nothing in this Agreement
shall be construed as requiring the Company to use the Registration
Statement to issue the Shares.
The Company has filed, in
accordance with the provisions of the Securities Act of 1933, as
amended, and the rules and regulations thereunder (collectively,
the “ Securities Act ”), with the SEC a
registration statement on Form S-3 (File No. 333-143173), including
a base prospectus, relating to certain securities, including the
Shares to be issued from time to time by the Company, and which
incorporates by reference documents that the Company has filed or
will file in accordance with the provisions of the Securities
Exchange Act of 1934, as amended, and the rules and regulations
thereunder (collectively, the “ Exchange Act
”). The Company has prepared a prospectus supplement
specifically relating to the Shares (the “ Prospectus
Supplement ”) to the base prospectus included as part
of such registration statement. The Company has furnished to
CF&Co, for use by CF&Co, copies of the prospectus included
as part of such registration statement, as supplemented by the
Prospectus Supplement, relating to the Shares. Except where the
context otherwise requires, such registration statement, as amended
when it became effective, including all documents filed as part
thereof or incorporated by reference therein, and including any
information contained in a Prospectus (as defined below)
subsequently filed with the SEC pursuant to Rule 424(b) under the
Securities Act or deemed to be a part of such registration
statement pursuant to Rule 430B of the Securities Act, is herein
called the “ Registration Statement .”
The base prospectus, including all documents incorporated therein
by reference, included in the Registration Statement, as it may be
supplemented by the Prospectus Supplement, in the form in which
such prospectus and/or Prospectus Supplement have most recently
been filed by the Company with the SEC pursuant to Rule 424(b)
under the Securities Act, together with any “issuer free
writing prospectus,” as defined in Rule 433 of the Securities
Act Regulations (“ Rule 433
”),
1
relating to the Shares that (i) is
required to be filed with the SEC by the Company or (ii) is
exempt from filing pursuant to Rule 433(d)(5)(i), in each case in
the form filed or required to be filed with the SEC or, if not
required to be filed, in the form retained in the Company’s
records pursuant to Rule 433(g), is herein called the “
Prospectus .” Any reference herein to the
Registration Statement, the Prospectus or any amendment or
supplement thereto shall be deemed to refer to and include the
documents incorporated by reference therein, and any reference
herein to the terms “amend,” “amendment” or
“supplement” with respect to the Registration Statement
or the Prospectus shall be deemed to refer to and include the
filing after the execution hereof of any document with the SEC
deemed to be incorporated by reference therein. For purposes of
this Agreement, all references to the Registration Statement, the
Prospectus or to any amendment or supplement thereto shall be
deemed to include any copy filed with the SEC pursuant to its
Electronic Data Gathering Analysis and Retrieval System (“
EDGAR ”).
2. Placements .
Each time that the Company wishes to issue and sell Shares
hereunder (each, a “ Placement ”), it
will notify CF&Co by email notice (or other method mutually
agreed to in writing by the parties) containing the parameters in
accordance with which it desires the Shares to be sold, which shall
at a minimum include the number of Placement Shares to be issued,
the time period during which sales are requested to be made, any
limitation on the number of Shares that may be sold in any one day
and any minimum price below which sales may not be made (a “
Placement Notice ”), a form of which containing
such minimum sales parameters necessary is attached hereto as
Schedule 1 . The Placement Notice shall originate
from any of the individuals from the Company set forth on
Schedule 2 (with a copy to each of the other
individuals from the Company listed on such schedule), and shall be
addressed to each of the individuals from CF&Co set forth on
Schedule 2 , as such Schedule 2 may be
amended from time to time. The Placement Notice shall be effective
upon receipt by CF&Co unless and until (i) in accordance
with the notice requirements set forth in Section 4 ,
CF&Co declines to accept the terms contained therein for any
reason, in its sole discretion, (ii) the entire amount of the
Placement Shares have been sold, (iii) in accordance with the
notice requirements set forth in Section 4 , the
Company suspends or terminates the Placement Notice, (iv) the
Company issues a subsequent Placement Notice with parameters
superseding those on the earlier dated Placement Notice, or
(v) the Agreement has been terminated under the provisions of
Section 11 . The amount of any discount, commission or
other compensation to be paid by the Company to CF&Co in
connection with the sale of the Placement Shares shall be
calculated in accordance with the terms set forth in Schedule
3 . It is expressly acknowledged and agreed that
neither the Company nor CF&Co will have any obligation
whatsoever with respect to a Placement or any Placement Shares
unless and until the Company delivers a Placement Notice to
CF&Co and CF&Co does not decline such Placement Notice
pursuant to the terms set forth above, and then only upon the terms
specified therein and herein. In the event of a conflict between
the terms of this Agreement and the terms of a Placement Notice,
the terms of the Placement Notice will control.
3. Sale of Placement
Shares by CF&Co Subject to the terms and conditions herein
set forth, upon the Company’s issuance of a Placement Notice,
and unless the sale of the Placement Shares described therein has
been declined, suspended, or otherwise terminated in accordance
with the terms of this Agreement, CF&Co, for the period
specified in the Placement Notice, will use its commercially
reasonable efforts consistent with its normal trading and sales
practices and applicable state and federal laws, rules and
regulations and the rules of the New York Stock Exchange (the
“ Exchange ”), to sell such Placement
Shares up to the amount specified, and otherwise in accordance with
the terms of such Placement Notice. CF&Co will provide written
confirmation to the Company no later than the opening of the
Trading Day (as defined below) immediately following the Trading
Day on which it has made sales of Placement Shares hereunder
setting forth the number of Placement Shares sold on such day, the
prices at which such Placement Shares were sold, the gross proceeds
from such sales, the compensation payable by the Company to
CF&Co pursuant to Section 2 with respect to such
sales, and the Net Proceeds (as defined below) payable to the
Company, with an itemization of the deductions made by CF&Co
(as set forth in Section 5(a) ) from the gross proceeds
that it receives from such sales. With the prior consent of the
Company and subject to the terms of the Placement Notice, CF&Co
may sell Placement Shares by any method permitted by law deemed to
be an “at the market” offering as defined in Rule 415
of the Securities Act, including without limitation sales made
directly on the Exchange, on any other existing trading market for
the Common
2
Shares or to or through a market maker.
After consultation with the Company and subject to the terms of the
Placement Notice, CF&Co may also sell Placement Shares in
privately negotiated transactions. The Company acknowledges and
agrees that (i) there can be no assurance that CF&Co will
be successful in selling Placement Shares, and (ii) CF&Co
will incur no liability or obligation to the Company or any other
person or entity if it does not sell Placement Shares for any
reason other than a failure by CF&Co to use its commercially
reasonable efforts consistent with its normal trading and sales
practices and applicable state and federal laws, rules and
regulations and the rules of the Exchange, to sell such Placement
Shares as required under this Section 3 . For the
purposes hereof, “ Trading Day ” means
any day on which the Common Shares are purchased and sold on the
principal market on which the Common Shares are listed or
quoted.
4. Suspension of
Sales . The Company or CF&Co may, upon notice to the other
party in writing (including by email correspondence to each of the
individuals of the other party set forth on Schedule
2 , if receipt of such correspondence is actually
acknowledged by any of the individuals to whom the notice is sent,
other than via auto-reply) or by telephone (confirmed immediately
by verifiable facsimile transmission or email correspondence to
each of the individuals of the other party set forth on
Schedule 2 ), suspend any sale of Placement Shares;
provided, however , that such suspension shall not affect or
impair either party’s obligations with respect to any
Placement Shares sold hereunder prior to the receipt of such
notice. Each of the parties agrees that no such notice under this
Section 4 shall be effective against the other unless
it is made to one of the individuals named on Schedule
2 hereto, as such Schedule may be amended in writing from
time to time.
5. Settlement
.
(a) Settlement of
Placement Shares . Unless otherwise specified in the applicable
Placement Notice, settlement for sales of Placement Shares will
occur on the third (3 rd ) Trading Day (or such earlier day as is industry practice
for regular-way trading) following the date on which such sales are
made (each, a “ Settlement Date ”). The
amount of proceeds to be delivered to the Company on a Settlement
Date against receipt of the Placement Shares sold (the “
Net Proceeds ”) will be equal to the aggregate
sales price received by CF&Co at which such Placement Shares
were sold, after deduction for (i) CF&Co’s
commission, discount or other compensation for such sales payable
by the Company pursuant to Section 2 hereof,
(ii) any other amounts due and payable by the Company to
CF&Co hereunder pursuant to Section 7(h) (Expenses)
hereof, and (iii) any transaction fees imposed by any
governmental or self-regulatory organization in respect of such
sales.
(b) Delivery of
Placement Shares . On or before each Settlement Date, the
Company will, or will cause its transfer agent to, electronically
transfer the Placement Shares being sold by crediting
CF&Co’s or its designee’s account (provided
CF&Co shall have given the Company written notice of such
designee prior to the Settlement Date) at The Depository Trust
Company through its Deposit and Withdrawal at Custodian System or
by such other means of delivery as may be mutually agreed upon by
the parties hereto which in all cases shall be freely tradeable,
transferable, registered shares in good deliverable form. On each
Settlement Date, CF&Co will deliver the related Net Proceeds in
same day funds to an account designated by the Company on, or prior
to, the Settlement Date. The Company agrees that if the Company, or
its transfer agent (if applicable), defaults in its obligation to
deliver Placement Shares on a Settlement Date, that in addition to
and in no way limiting the rights and obligations set forth in
Section 9(a) (Indemnification and Contribution) hereto,
it will hold CF&Co harmless against any loss, claim, damage, or
expense (including reasonable legal fees and expenses), as
incurred, arising out of or in connection with such default by the
Company; provided, that under no circumstances will CF&Co be
entitled to any commission, discount or other compensation to which
it would have been entitled absent such default.
6. Representations
and Warranties of the Company . The Company represents and
warrants to, and agrees with, CF&Co that as of the date of this
Agreement and as of each Representation Date (as defined in
Section 7(n) below) on which a certificate is required
to be delivered pursuant to Section 7(n) of this
Agreement and as of each Applicable Time, as the case may
be:
(a) The Common Stock is
currently listed and quoted on the Exchange under the trading
symbol “ANH”. The Preferred Stock is currently listed
and quoted on the Exchange under the trading symbols
“ANHPrA” and
3
“ANHPrB.” The Company meets
the requirements of Form S-3 under the Act and the rules and
regulations thereunder (“ Rules and Regulations
”) including but not limited to the transaction requirements
for a primary offering. The Registration Statement shall name
CF&Co as underwriter with respect to At The Market
transactions, including the Prospectus contained therein, was or
will be prepared by the Company in conformity with the requirements
of the Act and the Rules and Regulations at the time it was filed
with the SEC, and the Company will use its best efforts to cause it
to become effective as soon as reasonably practicable. Any
amendment or supplement to the Registration Statement or Prospectus
required by this Agreement will be so prepared and filed by the
Company, and the Company will use its best efforts to cause such
amendment or supplement to become effective as soon as reasonably
practicable. No stop order suspending the effectiveness of the
Registration Statement has been issued, and no proceeding for that
purpose has been instituted or threatened by the SEC. Any reference
herein to the Registration Statement, the Prospectus, or any
amendment or supplement thereto shall be deemed to refer to and
include the documents incorporated (or deemed to be incorporated)
by reference therein, and any reference herein to the terms
“amend,” “amendment” or
“supplement” with respect to the Registration Statement
or Prospectus shall be deemed to refer to and include the filing
after the execution hereof of any document with the SEC deemed to
be incorporated by reference therein. The Prospectus delivered to
CF&Co for use in connection with this Agreement will be
identical to the version of the Prospectus created to be
transmitted to the SEC for filing via EDGAR, except to the extent
permitted by Regulation S-T.
(b) Each part of the
Registration Statement, when such part became or becomes effective,
and the Prospectus, on the date of filing thereof with the SEC and
at each Settlement Date, conformed or will conform with the
requirements of the Act and the Rules and Regulations; each part of
the Registration Statement, when such part became or becomes
effective, did not or will not 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
light of the circumstances in which they were made, not misleading;
and the Prospectus, on the date of filing thereof with the SEC and
at each Settlement Date, did not or will not include an untrue
statement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided,
however, that the foregoing representations and warranties in this
Section 6(b) shall not apply to statements or omissions in any
such document made in reliance on information furnished to the
Company by CF&Co in writing for use in the Registration
Statement, the Prospectus, or any amendment or supplement
thereto.
(c) The documents
incorporated by reference in the Registration Statement or the
Prospectus, or any amendment or supplement thereto (the “
Disclosure Documents ”), when they became
effective under the Act or were filed with the SEC under the
Securities Exchange Act of 1934, as amended (the “
Exchange Act ”), as the case may be, conformed
in all material respects with the requirements of the Act or the
Exchange Act, as applicable, and the rules and regulations of the
SEC thereunder, and none of such documents contained an untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein, in the light of the circumstance in which they were made,
not misleading; and any further documents so filed and incorporated
by reference in the Prospectus or any further amendment or
supplement thereto, when such documents become effective or are
filed with the SEC, as the case may be, will conform in all
material respects with the requirements of the Act or the Exchange
Act, as applicable, and the rules and regulations of the SEC
thereunder and will not 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
circumstance in which they were made, not misleading; provided,
however, that the foregoing representations and warranties in this
Section 6(c) will not apply to statements or omissions in any
such document made in reliance on information furnished to the
Company by CF&Co in writing specifically stating that is
intended for use in any such document.
(d) The financial
statements and financial schedules of the Company together with the
related notes set forth or incorporated by reference in the
Registration Statement and Prospectus, have been and will be
prepared in accordance with Regulation S-X under the Act and with
GAAP consistently applied at the times and during the periods
involved (except (i) as may be otherwise indicated in such
financial statements or the notes thereto, or
4
(ii) in the case of unaudited
interim statements, to the extent they may exclude footnotes or may
be condensed or summary statements) and fairly present and will
fairly present the financial position of the Company as of the
dates thereof and the results of its operations and cash flows for
the periods then ended (subject, in the case of unaudited
statements, to normal year-end adjustments).
(e) 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, lease and operate its properties and to
conduct its business as described in the Registration Statement and
Prospectus; and the Company is duly qualified or licensed as a
foreign entity to transact business and is in good standing in each
jurisdiction in which such qualification is required, whether by
reason of the ownership or leasing of property or the conduct of
business, except where the failure, individually or in the
aggregate, to be so qualified and be in good standing would not
have a material adverse effect on the assets, business, operations,
earnings, properties, condition (financial or otherwise) of the
Company and its subsidiaries, taken as a whole (“Material
Adverse Effect”).
(f) (i) The Company has
no “subsidiaries” (as such term is defined in Rule 1-02
of Regulation S-X promulgated under the Act) other than Belvedere
Trust Mortgage Corporation (“ BTMC ”), BT
Management Company, L.L.C. (“ BT LLC ”),
BT Management Holding Corporation (“ BTMHC
”), Belvedere Trust Finance Corporation (“
BTFC ”), BT Residential Funding Corporation
(“ BT RFC ”), Belvedere Trust Secured
Assets Corporation (“ BTSAC ”), Bella
Vista Finance Corporation (“ BV Finance
”) and Bella Vista Funding Corporation (“ BV
Funding ”) (each a “ Subsidiary
” and, collectively, the “ Subsidiaries
”). Each Subsidiary has been duly formed and is validly
existing in good standing under the laws of the state of
jurisdiction, is duly qualified to do business and is in good
standing in each jurisdiction, in which its ownership or lease of
property or assets or the conduct of its business requires such
qualification, except where the failure to so qualify would not
have a Material Adverse Effect, and has full power and authority
necessary to own, hold, lease and/or operate its assets and
properties, to conduct the business in which it is engaged and as
described in the Prospectus. Except as would not have a Material
Adverse Effect, each of the Subsidiaries is in compliance in all
material respects with the laws, orders, rules, regulations and
directives applicable to it. (ii) Other than the Subsidiaries,
the Company does not own, directly or indirectly, any shares of
stock or any other equity or long-term debt securities of any
corporation or have any equity interest in any firm, partnership,
joint venture, association or other entity. All of the outstanding
equity of each of the Subsidiaries have been duly authorized and
validly issued, are fully paid and non-assessable, and are wholly
owned by the Company, free and clear of any security interest,
mortgage, pledge, lien, encumbrance, claim or other equity or
adverse claims. The Company directly owns 100% of each subsidiary,
except BTLLC, which is owned as set forth in the Prospectus. No
options, warrants or other rights to purchase, agreements or other
obligations to issue or other rights to convert any obligation into
shares of capital stock or ownership interests in the Subsidiaries
are outstanding.
(g) 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 the Disclosure Documents, 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 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.
(h) The Company will
have, as of the date of the Prospectus, an authorized
capitalization as set forth in the Prospectus; 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.
5
(i) The Placement
Shares, when issued and sold pursuant to a Placement Notice issued
in accordance with the terms of this Agreement, will be 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, except for liens or
encumbrances created under state or federal securities laws or by
the purchaser thereof, and the issuance and sale of the Placement
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. Other than the registration rights
granted to Lloyd McAdams and Heather U. Baines as Trustees of the
Heather U. Baines and Lloyd McAdams Living Trust dated
August 10, 2001 pursuant to the Registration Rights Agreement
dated June 13, 2002, there are no persons with registration or
other similar rights to have any equity securities, including
personal securities which are convertible into or exchangeable for
equity securities, registered pursuant to the Registration
Statement or otherwise registered by the Company under the
Act.
(j) 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, Prospectus or
Disclosure Documents, there has not been (i) any Material
Adverse Effect, 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 or
(iii) any obligation, contingent or otherwise, directly or
indirectly incurred by the Company, which is material to the
Company and which is outside the ordinary course of the
Company’s business.
(k) 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.
(l) 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.
(m) 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 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.
(n) 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.
(o) 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 by-laws of the
Company, or (B) any provision of any license,
6
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 conflicts, breaches, defaults, liens, charges,
claims or encumbrances which would not have a Material Adverse
Effect.
(p) The Company is in
compliance in all material respects with all governmental rules and
regulations necessary to conduct the business now operated by it
and has not received any notice of changes in existing governmental
rules or regulations that, if modified adversely to the Company,
would have a Material Adverse Effect.
(q) 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.
(r) 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 Placement Shares,
other than (i) such as have been obtained, or will have been
obtained at the applicable Settlement Date, as the case may be,
under the Act, (ii) such approvals as have been obtained, or
will have been obtained at the applicable Settlement Date, as the
case may be, in connection with the approval of the listing of the
Placement Shares on the Exchange, (iii) any necessary
qualification under the securities or blue sky laws of the various
jurisdictions in which the Placement Shares are being offered by
CF&Co and (iv) such approvals as may be required by the
rules of the Financial Industry Regulatory Authority
(“FINRA”).
(s) On the date hereof,
and after the date hereof other than as set forth in the
Prospectus, to the best of the Company’s knowledge, the
Company carries, or is covered by, insurance in such amounts and
covering such risks as is prudent, reasonable and customary for
companies engaged in similar businesses in similar industries, and
such insurance is in full force and effect.
(t) The Company has not,
to its knowledge, violated, or received written notice of any
violation with respect to, any applicable environmental law
applicable to the business of the Company, the violation of which
would have a Material Adverse Effect.
(u) BDO Seidman whose
reports on the audited financial statements of the Company are
filed with the SEC as part of the Registration Statement and
Prospectus, is and was, to the Company’s knowledge, during
the periods covered by its reports, independent public accountants
as required by the Act and the Rules and Regulations.
(v) 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 have a Material Adverse
Effect.
(w) The Placement Shares
conform in all material respects to the description thereof
contained in the Registration Statement and the
Prospectus.
7
(x) 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 Placement 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 taken which are required to be taken) by the Company
which would reasonably be expected to cause such qualification to
be lost.
(y) The Company is not,
and, after giving effect to the offering and sale of the Placement
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.
(z) 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
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 !FINRA) any member firm
of FINRA.
(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 have a Material Adverse
Effect.
(cc) 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 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.
(dd) 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.
(ee) On each Settlement
Date and each Filing Date (as defined in Section 7(m) below),
the Company shall be deemed to have confirmed (i) the accuracy
and completeness, as of such date, of each representation and
warranty made by it in this Agreement, as if each such
representation and warranty were made on and as of such date, and
(ii) that the Company has complied with all of the agreements
to be performed by it hereunder at or prior to such
date.
(ff) The execution and
filing of Articles Supplementary relating to the Preferred
Placement Shares have been duly authorized by the Company and the
Articles Supplementary have been executed in accordance with the
General Corporation Law of the State of Maryland and have been
filed with the Maryland State Department of Assessments and
Taxation.
8
(gg) There has been no
failure on the part of the Company or any of the Company’s
directors or officers, in their capacities as such, to comply with
any effective applicable provision of the Sarbanes-Oxley Act of
2002 and the rules and regulations promulgated
thereunder.
(hh) The Company has
established, maintained, and evaluated “disclosure controls
and procedures” (as such term is defined in Rule 13a-15 and
15d-15 under the Exchange Act). Such disclosure controls and
procedures are designed to ensure that material information
relating to the Company, including its Subsidiaries, is made known
to the Company’s Chief Executive Office and its Chief
Financial Officer by others within those entities, and such
disclosure controls and procedures are believed to be effective to
perform the functions for which they were established. The
Company’s auditors have been advised of (i) any
significant deficiencies and material weaknesses known to
management in the design or operation of internal controls over
financial reporting that are reasonable likely to adversely affect
the Company’s ability to record, process, summarize, and
report financial data; and (ii) any fraud, whether or not
material, known to management that involves management or other
employees who have a role in the Company’s internal controls
over financial reporting. Since the date of the most recent
evaluation of such disclosure controls and procedures, there have
been no changes in internal controls over financial reporting that
have materially affected or are reasonably likely to materially
affect internal controls over financial reporting, including any
corrective actions with regard to significant deficiencies and
material weaknesses.
7. Covenants of the
Company . The Company covenants and agrees with CF&Co
that:
(a) Registration
Statement Amendments; Payment of Fees . After the date of this
Agreement and during any period in which the Prospectus relating to
any Placement Shares is required to be delivered by CF&Co under
the Securities Act (including in circumstances where such
requirement may be satisfied pursuant to Rule 172 under the
Securities Act), (i) the Company will notify CF&Co
promptly of the time when any subsequent amendment to the
Registration Statement, other than documents incorporated by
reference, has been filed with the SEC and/or has become effective
or any subsequent supplement to the Prospectus has been filed and
of any comment letter from the SEC or any request by the SEC for
any amendment or supplement to the Registration Statement or
Prospectus or for additional information, (ii) the Company
will prepare and file with the SEC, promptly upon CF&Co’s
request, any amendments or supplements to the Registration
Statement or Prospectus that, in CF&Co’s reasonable
opinion, may be necessary or advisable in connection with the
distribution of the Placement Shares by CF&Co ( provided,
however , that the failure of CF&Co to make such request
shall not relieve the Company of any obligation or liability
hereunder, or affect CF&Co’s right to rely on the
representations and warranties made by the Company in this
Agreement); (iii) the Company will not file any amendment or
supplement to the Registration Statement or Prospectus, other than
documents incorporated by reference, relating to the P
|
