Exhibit 2.1
ANWORTH MORTGAGE ASSET CORPORATION
PURCHASE AGREEMENT
This PURCHASE AGREEMENT (this "Agreement"), dated as of December 20, 2001,
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is made by and among Anworth Mortgage Asset Corporation, a Maryland corporation
(the "Company"), FBR Asset Investment Corporation, a Virginia corporation (the
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"Investor").
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RECITALS:
A. The Company desires to issue and sell 500,000 shares (the "Shares") of
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the Company's Common Stock to the Investor in a private placement (the
"Offering") at a price per share to the Investor of $7.78125, for an aggregate
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price of $3,890,625 (the "Purchase Price").
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B. The Investor desires, upon the terms and conditions stated in this
Agreement, to purchase shares of the Company's Common Stock in the Offering.
C. The Company and the Investor are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Section 4(2) of the Securities Act and Rule 506 under Regulation D.
D. The capitalized terms used herein and not otherwise defined have the
meanings given them in Article IX hereof.
In consideration of the premises and the mutual covenants contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Company and the Investor hereby agree as follows:
Article I
PURCHASE AND SALE OF SECURITIES
1.1 Purchase and Sale of Shares. At the Closing, the Investor will deliver
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to the Company the Purchase Price by bank check or wire transfer of immediately
available funds. Upon execution of this Agreement, the Company shall authorize
its transfer agent (the "Transfer Agent") to arrange delivery to the Investor of
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one or more stock certificates representing the number of Shares, each such
certificate to be registered in the name of the Investor or, if so indicated by
the Investor, in the name of a nominee designated by the Investor. If the
Company is eligible to conduct the Closing through the electronic book entry
facilities of the Depository Trust Corporation and the Transfer Agent, then the
Company shall use its best efforts to issue the Shares electronically to the
Investor.
1.2 Closing. Subject to the satisfaction or waiver of the conditions set
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forth in Articles VII and VIII hereof, the closing (the "Closing") will take
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place at 6:30 a.m. Pacific time on December 27, 2001 or at another date or time
agreed upon by the parties to this Agreement (the "Closing Date"). The Closing
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will be held at the offices of Morrison & Foerster LLP, 555 West
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Fifth Street, Suite 3500, Los Angeles, California, 90013, or at such other place
as the parties agree.
Article II
INVESTOR'S REPRESENTATIONS AND WARRANTIES
The Investor represents and warrants to the Company that:
2.1 Investment Purpose. The Investor is purchasing the Shares for its own
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account and not with a present view toward the public sale or distribution
thereof, except pursuant to sales registered or exempted from registration under
the Securities Act; provided, however, that by making the representation herein,
the Investor does not agree to hold any of the Shares for any minimum or other
specific term and reserves the right to dispose of the Shares at any time in
accordance with or pursuant to a registration statement or an exemption under
the Securities Act and the terms and conditions of this Agreement.
2.2 Accredited Investor Status. The Investor is an "accredited investor"
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as defined in Rule 501(a) of Regulation D. The Investor has sufficient knowledge
and experience in investing in companies similar to the Company so as to be able
to evaluate the risks and merits of its investment in the Company.
2.3 Reliance on Exemptions. The Investor understands that the Shares are
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being offered and sold to it in reliance upon specific exemptions from the
registration requirements of United States federal and state securities laws and
that the Company is relying upon the truth and accuracy of, and the Investor's
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of the Investor set forth herein in order to determine the
availability of such exemptions and the eligibility of the Investor to acquire
the Shares.
2.4 Information. The Investor and its advisors, if any, have been
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furnished with all materials relating to the business, finances and operations
of the Company, and materials relating to the offer and sale of the Shares, that
have been requested by the Investor or its advisors, if any. The Investor and
its advisors, if any, have been afforded the opportunity to ask questions of the
Company. Neither such inquiries nor any other due diligence investigation
conducted by the Investor or any of its advisors or representatives modifies,
amends or affects the Investor's right to rely on the Company's representations
and warranties contained in Article III below. The Investor acknowledges and
understands that its investment in the Shares involves a significant degree of
risk and the Investor's financial condition is such that it is able to bear the
risk of holding the Shares for an indefinite period of time and the risk of loss
of its entire investment.
2.5 Governmental Review. The Investor understands that no United States
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federal or state agency or any other government or governmental agency has
passed upon or made any recommendation or endorsement of the Shares or an
investment therein.
2.6 Transfer or Resale. The Investor understands that:
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(a) except as provided in Article V, the Shares have not been and are
not being registered under the Securities Act or any applicable state securities
laws and, consequently, the Investor may have to bear the risk of owning the
Shares for an indefinite period of time because
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the Shares may not be transferred unless (i) the resale of the Shares is
registered pursuant to an effective registration statement under the Securities
Act; (ii) the Investor has delivered to the Company an opinion of counsel (in
form, substance and scope customary for opinions of counsel in comparable
transactions) to the effect that the Shares to be sold or transferred may be
sold or transferred pursuant to an exemption from such registration or under
Rule 144 and, in the case of sales or transfers not under Rule 144, the Shares
are to be sold or transferred only to one or more "accredited investor" (as
defined in Rule 501(a) of Regulation D); or (iii) the Shares are sold or
transferred to an affiliate (as defined in Rule 144) of the Investor pursuant to
an exemption from registration under the Securities Act;
(b) any sale of the Shares made in reliance on Rule 144 may be made
only in accordance with the terms of Rule 144 and, if Rule 144 is not
applicable, any resale of the Shares under circumstances in which the seller (or
the person through whom the sale is made) may be deemed to be an underwriter (as
that term is defined in the Securities Act) may require compliance with some
other exemption under the Securities Act or the rules and regulations of the SEC
thereunder; and
(c) except as set forth in Article V, neither the Company nor any
other person is under any obligation to register the Shares under the Securities
Act or any state securities laws or to comply with the terms and conditions of
any exemption thereunder.
2.7 Legends. The Investor understands that until (a) the Shares may be
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sold by the Investor under Rule 144(k) and the Investor has delivered the
Company the legal opinion described in Section 2.6(a) above or (b) such time as
the resale of the Shares has been registered under the Securities Act as
contemplated by Article V, the certificates representing the Shares will bear a
restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of the certificates for such Shares):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY
STATE OF THE UNITED STATES. THE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR
ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER APPLICABLE SECURITIES LAWS, OR UNLESS OFFERED, SOLD OR
TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THOSE LAWS.
The legend set forth above will be removed and the Company will issue a
certificate without the legend to the holder of any certificate upon which it is
stamped, in accordance with the terms of Article VI hereof.
2.8 Authorization; Enforcement. This Agreement has been duly and validly
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authorized, executed and delivered on behalf of the Investor and is a valid and
binding agreement of the Investor enforceable in accordance with its terms,
subject to the effect of any applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the rights of
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creditors generally and the application of general principles of equity. The
Investor has all requisite power to enter into and perform its obligations under
the Agreement.
2.9 Residency. The Investor is a resident of the jurisdiction set forth
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immediately below such Investor's name on the signature pages hereto.
2.10 No Conflicts; No Violation.
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(a) The execution, delivery and performance of this Agreement by the
Investor and the consummation by the Investor of the transactions contemplated
hereby will not (i) conflict with or result in a violation of any provision of
the Investor's Certificate of Incorporation or other organizational document, or
(ii) violate or conflict with, or result in a breach of any provision of, or
constitute a default (or an event which with notice or lapse of time or both
could become a default) under, or give to others any rights of termination,
amendment (including without limitation the triggering of any anti-dilution
provision), acceleration or cancellation of, any agreement, indenture or other
instrument to which the Investor is a party, or (iii) result in a violation of
any law, rule, regulation, order, judgment or decree applicable to the Investor.
(b) The Investor is not required to obtain any consent, authorization
or order of, or make any filing or registration with, any court or governmental
agency or any regulatory or self-regulatory agency in order for it to execute,
deliver or perform any of its obligations under this Agreement in accordance
with the terms hereof, except for such consents, authorizations, orders, filings
or registrations which have already been obtained.
2.11 No Brokers. The Investor has taken no action which would give rise to
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any claim by any person for brokerage commissions, finder's fees or similar
payments relating to this Agreement or the transactions contemplated hereby.
Article III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents, warrants and covenants to the Investor that:
3.1 The Company has an authorized capitalization as set forth in its most
recent filings with the Securities and Exchange Commission under the Securities
Act and/or Exchange Act (collectively, the "Securities Filings"); all of the
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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 Securities Filings, 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.
3.2 The Company has no subsidiaries.
3.3 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
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its properties, to conduct its business as described in the Securities Filings
and to execute and deliver this Agreement and to consummate the transactions
contemplated hereby.
3.4 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 Thornburg
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.
3.5 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.
3.6 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.
3.7 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
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principles equity, and except to the extent that the indemnification and
contribution provisions of this Agreement may be limited by federal or state
securities laws and public policy considerations in respect thereof.
3.8 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 any necessary registration or qualification under federal or
state securities or blue sky laws.
3.9 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.
3.10 Other than a written claim dated October 29, 2001, by Pamela J. Watson
(the "Watson Claim") against Anworth Mortgage Advisory Corporation (the
"Manager"), a copy of which has been provided to the Investor, 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.
3.11 The financial statements, including the notes thereto, included in the
Securities Filings 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 SEC.
3.12 Subsequent to the dates as of which information is given in the latest
Securities Filings and except as may be otherwise stated in the Securities
Filings, 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 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.
3.13 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
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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.
3.14 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 Amex.
3.15 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 Securities Filings 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 Securities Filings or are not material and do not interfere with the use
made of such property and buildings by the Company.
3.16 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 Securities Filings, 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.
3.17 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.
3.18 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.
3.19 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,
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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.
3.20 Except with respect to the Watson 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.
3.21 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.
3.22 Except as otherwise disclosed in the Securities Filings, 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.
3.23 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 Amex.
3.24 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.
3.25 the Company has not incurred any liability for any finder's fees or
similar payments in connection with the transactions herein contemplated.
3.26 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.
3.27 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"
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(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 Securities Filings 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.
3.28 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.
3.29 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").
ARTICLE IV
COVENANTS
4.1 Securities Law Compliance. The Company will comply with all
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applicable laws relating to the sale of the Shares and with all applicable rules
and regulations of governmental authorities in connection therewith (including,
without limitation, the Securities Act, the Exchange Act and the rules and
regulations promulgated by the SEC).
4.2 Expenses. The Company and the Investor are each liable for, and
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will pay, their respective own expenses incurred in connection with the
negotiation, preparation, execution and delivery of this Agreement and the other
agreements to be executed in connection herewith, including, without limitation,
attorneys' and consultants' fees and expenses.
4.3 Listing. On or before the registration of the Shares for resale
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pursuant to Article V hereof, the Company will use its best efforts to secure
the listing of the Shares upon each national securities exchange or automated
quotation system, if any, upon which shares of Common Stock are then listed
(subject to official notice of issuance) and, so long as any Investor owns any
of the Shares, will use its best efforts to maintain such listing of the Shares.
The Company will use its best efforts to obtain and, so long as any Investor
owns any of the Shares, maintain the listing and trading of its Common Stock on
the Amex, the New York Stock Exchange or Nasdaq, and will use its best efforts
to comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the National Association of Shares
Dealers, Inc. and such exchanges, as applicable.
4.4 No Integration. The Company will not make any offers or sales of
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any security (other than the Shares) under circumstances that would cause the
offering of the Shares to be integrated with any other offering of securities by
the Company (a) for the purpose of any
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stockholder approval provision applicable to the Company or its securities or
(b) for purposes of any registration requirement under the Securities Act.
ARTICLE V
REGISTRATION OF THE SECURITIES
5.1 Registration Procedures and Expenses. The Company shall:
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(a) Subject to receipt of necessary information in writing from
the Investor, the Company shall prepare and file with the SEC, as soon as
practicable, but in no event later than February 4, 2002 (the "Filing Date"), a
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registration statement on Form S-3 (the "Registration Statement") to enable the
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resale of the Shares (together with any shares of capital stock issued or
issuable from time to time, with any adjustments, in exchange for or otherwise
with respect to the Shares) by the Investor from time to time through Amex (or
the facilities of any national securities exchange on which the Company's Common
Stock is then traded) or in privately-negotiated transactions. If Form S-3 is
not available at that time, then the Company will file a Registration Statement
on such form as is then available to effect a registration of the Shares,
subject to the consent of the Investor, which consent shall not be unreasonably
withheld. The Company shall not, and will not agree to, allow the holders of any
securities of the Company to include any of their securities in any Registration
Statement under this Section 5.1 without the consent of the holders of a
majority in interest of the Shares. In addition, the Company shall not register,
or agree to register, any of its securities for the account of stockholders
other than the holders of the Shares, without the consent of the holders of a
majority in interest of the Shares, until the Registration Statement with
respect to the Shares has been declared effective.
(b) Use its best efforts, subject to receipt of necessary
information from the Investor, to cause the Registration Statement to be
declared effective by the SEC as soon as practicable after filing, and in any
event no later than the sixtieth (60th) day after the Closing Date (the
"Required Effective Date"). However, so long as the Company filed the
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Registration Statement by the Filing Date, if the Registration Statement
receives SEC review, then the Required Effective Date will be the ninetieth
(90th) day after the Closing Date. The Company will promptly respond to all
comments received from the staff of the SEC. If the Company receives
notification from the SEC that the Registration Statement will receive no action
or review from the SEC, then the Company will, subject to its rights under
Section 5.2, use its best efforts to cause the Registration Statement to become
effective within five (5) business days after such SEC notification.
(c) Use its best efforts to prepare and file with the SEC such
amendments and supplements to the Registration Statement and the Prospectus used
in connection therewith as may be necessary to keep the Registration Statement
current and effective for a period not exceeding, with respect to the Shares
purchased hereunder, the earliest of (i) the second anniversary of the date of
effectiveness of the Registration Statement with respect to the Shares, (ii) the
date on which the Investor may sell all Shares then held by the Investor,
without registration or without regard to any volume limitations by reason of
Rule 144(k) of the Securities Act or (iii) such time as all Shares purchased by
such Investor in this Offering have been sold pursuant to a Registration
Statement (the "Registration Period").
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(d) Furnish to the Investor and to its legal counsel (i)
promptly after each document is prepared and publicly distributed, filed with
the SEC or received by the Company, one copy of any Registration Statement filed
pursuant to this Agreement and any amendments thereto, each Preliminary
Prospectus and final Prospectus and each amendment or supplement thereto; and
each letter written by or on behalf of the Company to the SEC and each item of
correspondence from the SEC or the staff of the SEC, in each case relating to
such Registration Statement (other than any portion of any item thereof which
contains information for which the Company has sought confidential treatment);
and (ii) such number of copies of the Registration Statement, Prospectuses and
Preliminary Prospectuses in conformity with the requirements of the Securities
Act and such other documents as the Investor may reasonably request, in order to
facilitate the public sale or other disposition of all or any of the Shares by
the Investor, provided, however, that the obligation of the Company to deliver
copies of Prospectuses or Preliminary Prospectuses to the Investor shall be
subject to the receipt by the Company of reasonable assurances from the Investor
that the Investor will comply with the applicable provisions of the Securities
Act and of such other securities or Blue Sky laws as may be applicable in
connection with any use of such Prospectuses or Preliminary Prospectuses. The
Company will promptly notify the Investor by facsimile of the effectiveness of
the Registration Statement and any post-effective amendment.
(e) Use its best efforts to (i) register and qualify the Shares
covered by a Registration Statement under such other securities or Blue Sky laws
of such jurisdictions as the Investor reasonably requests, (ii) prepare and file
in those jurisdictions any amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain their effectiveness during the Registration Period, (iii) take any
other actions necessary to maintain such registrations and qualifications in
effect at all times during the Registration Period, and (iv) take any other
actions reasonably necessary or advisable to qualify the Shares for sale in such
jurisdictions. Notwithstanding the foregoing, the Company is not required, in
connection with such obligations, to (A) qualify to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 5.1, (B) subject itself to general taxation in any such jurisdiction,
(C) file a general consent to service of process in any such jurisdiction, (D)
provide any undertakings that cause material expense or burden to the Company,
or (E) make any change in its Certificate of Incorporation or By-laws, which in
each case the Board of Directors of the Company determines to be contrary to the
best interests of the Company and its stockholders.
(f) During the period when copies of the Prospectus are
required to be delivered under the Securities Act or the Exchange Act, file all
documents required to be filed with the Commission pursuant to Section 13, 14 or
15 of the Exchange Act within the time periods required by the Exchange Act and
the rules and regulations promulgated thereunder.
(g) Bear all registration expenses in connection with the
procedures in paragraphs (a) through (f) of this Section 5.1 and the
registration of the Shares pursuant to the Registration Statement (excluding
underwriting, brokerage and other selling commissions and discounts and the fees
and expenses of counsel(s) to the Investor).
(h) Advise the Investor, promptly after it shall receive notice
or obtain knowledge of the issuance of any stop order by the SEC delaying or
suspending the effectiveness
11
of the Registration Statement or of the initiation of any proceeding for that
purpose; and it will promptly use its best efforts to prevent the issuance of
any stop order or to obtain its withdrawal at the earliest possible moment if
such stop order should be issued.
(i) The Investor shall furnish to the Company such information
regarding itself, the Shares to be sold by the Investor, and the intended method
of disposition of such Shares as shall be required to effect the registration of
the Shares.
(j) The Company understands that the Investor disclaims being
an underwriter, but the Investor being deemed an underwriter by the SEC shall
not relieve the Company of any obligations it has hereunder, provided, however,
that if the Company receives notification from the SEC that the Investor is
deemed an underwriter, then the period in which the Company is obligated to
submit an acceleration request to the SEC shall be extended to the earlier of
(i) the ninetieth (90th) day after such SEC notification, or (ii) one hundred
twenty (120) days after the initial filing of the Registration Statement with
the SEC. Notwithstanding the foregoing, the parties understand and agree that
the offer and sale of Shares pursuant to the Registration Statement shall not be
underwritten.
5.2 Transfer of Shares After Registration; Suspension. The Investor
-------------------------------------------------
agrees that it will not effect any disposition of the Shares except as
contemplated in the Registration Statement referred to in Section 5.1 or as
otherwise permitted by law and by this Agreement, and that it will promptly
notify the Company of any changes in the information set forth in the
Registration Statement regarding the Investor or its plan of distribution.
(a) The Company agrees that any Registration Statement
(including any amendments or supplements thereto and Prospectuses contained
therein) filed by the Company covering the Shares will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein, or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading; provided that the Company
makes no representation or warranty regarding information relating to any
Investor, the Shares sold by any Investor or the intended method of distribution
of such Shares that is contained in any Registration Statement and shall not be
responsible for the accuracy or completeness of any such information to any
Investor or Investor. Except in the event that Section 5.5 below applies, the
Company shall: (i) subject to the proviso in the preceding sentence of this
Section 5.2(a), prepare and file from time to time with the SEC a post-effective
amendment to the Registration Statement or a supplement to the related
Prospectus or a supplement or amendment to any document incorporated therein by
reference or file any other required document so that such Registration
Statement 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 not misleading, and so that, as thereafter delivered to the
Investor of the Shares being sold thereunder, such Prospectus 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 under which they were made, not misleading; (ii) provide the
Investor copies of any documents filed pursuant to Section 5.2(b)(i); and (iii)
inform the Investor that the Company has complied with its obligations in
Section 5.2(b)(i) (or that, if the Company has filed a post-effective amendment
to the Registration Statement which has not yet been declared effective, the
Company will notify the Investor to that effect, will use its best efforts to
secure the effectiveness of such post-effective amendment as
12
promptly as possible and will promptly notify the Investor pursuant to Section
5.2(b)(i) hereof when the amendment has become effective).
(b) In the event: (i) of any request by the SEC or any other
federal or state governmental authority during the period of effectiveness of
the Registration Statement for amendments or supplements to a Registration
Statement or a related Prospectus or for additional information; (ii) of the
issuance by the SEC or any other federal or state governmental authority of any
stop order suspending the effectiveness of a Registration Statement or the
initiation of any proceedings for that purpose; (iii) of the receipt by the
Company of any notification with respect to the suspension of the qualification
or exemption from qualification of any of the Shares for sale in any
jurisdiction or the initiation of any proceeding for such purpose; or (iv)
except for those events or circumstances that are the subject of Section 5.4
below, of any event or circumstance which necessitates the making of any changes
in the Registration Statement or Prospectus, or any document incorporated or
deemed to be incorporated therein by reference, so that, in the case of the
Registration Statement, it will not contain any untrue statement of a material
fact or any omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, and that in the case of
the Prospectus, it will not contain any untrue statement of a material fact or
any omission 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; then the Company shall deliver a certificate in
writing to the Investor (the "Suspension Notice") to the effect of the foregoing
-----------------
and, upon receipt of such Suspension Notice, the Investor will refrain from
selling any Shares pursuant to the Registration Statement (a "Suspension") until
----------
the Investor's receipt of copies of a supplemented or amended Prospectus
prepared and filed by the Company, or until it is advised in writing by the
Company that the current Prospectus may be used, and has received copies of any
additional or supplemental filings that are incorporated or deemed incorporated
by reference in any such Prospectus. In the event of any Suspension (except
pursuant to Section 5.4 below), the Company will use its best efforts to cause
the use of the Prospectus so suspended to be resumed as soon as reasonably
practicable within twenty (20) business days, in the case of clauses
(b)(i)-(iii) above, or five (5) business days, in the case of clause (b)(iv)
above, after delivery of a Suspension Notice to the Investor, will prepare a
supplement or amendment to the Registration Statement to correct such untrue
statement or omission, and will deliver a number of copies of such supplement or
amendment to the Investor as the Investor may reasonably request. In addition to
and without limiting any other remedies (including, without limitation, at law
or at equity) available to the Investor, the Investor shall be entitled to
specific performance of the Company's obligations in this Section 5.2(b) in the
event that the Company fails to comply with the provisions of this Section
5.2(b). Subject to the Company's rights under this Section 5.2(b), the Company
will use its best efforts to prevent the issuance of any stop order or other
suspension of effectiveness of a Registration Statement and, if such an order is
issued, will use its best efforts to obtain the withdrawal of such order at the
earliest possible time and to notify the Investor of the issuance of such order
and the resolution thereof. If the use of the Registration Statement is
suspended by the Company, the Company will promptly give notice of the
suspension to all Investor whose Shares are covered by the Registration
Statement, and will promptly notify each such Investor as soon as the use of the
Registration Statement may be resumed.
(c) Provided that a Suspension is not then in effect the
Investor may sell the Shares under the Registration Statement, provided that it
arranges for delivery of a current
13
Prospectus to the transferee of such Shares. Upon receipt of a request therefor,
the Company has agreed to provide an adequate number of current Prospectuses to
the Investor and to supply copies to any other parties requiring such
Prospectuses.
5.3 Review by the Investor. The Company will permit a single firm of
----------------------
legal counsel, designated by the Investor or their permitted transferees or
assignees who hold a majority in interest of the Shares being sold pursuant to a
Registration Statement (not including other shares that may be sold pursuant to
the Registration Statement), to review the Registration Statement and all
amendments and supplements thereto (as well as all requests for acceleration or
effectiveness thereof) for a reasonable period of time prior to its filing with
the SEC, and will not file any document in a form to which such counsel
reasonably objects, unless otherwise required by law in the opinion of the
Company's counsel; provided, that, any deadline imposed by this Agreement with
respect to the filing or effectiveness of such Registration Statement shall be
stayed pending resolution of such objection. The fees and expenses of such
counsel shall be paid by the Investor. The sections of any such Registration
Statement, including information with respect to the Investor, the Investor'
beneficial ownership of the Shares of the Company or the Investor' intended
method of disposition of the Shares, must conform to the information provided to
the Company by each of the Investor.
5.4 Deferral. Notwithstanding anything in this Agreement to the
--------
contrary and in addition to the rights set forth in Section 5.2(b) hereof, if
the Company shall furnish the Investor a certificate signed by the President or
Chief Executive Officer of the Company stating that the Board of Directors of
the Company has made a good faith determination (i) that continued use by the
Investor of the Registration Statement for purposes of effecting offers or sales
of Shares pursuant thereto would require, under the Securities Act, premature
disclosure in the Registration Statement (or the Prospectus relating thereto) of
material, nonpublic information concerning the Company, its business or
prospects or any proposed material transaction involving the Company, (ii) that
such premature disclosure would be materially adverse to the Company, its
business or prospects or any such proposed material transaction or would make
the successful consummation by the Company of any such material transaction less
likely and (iii) that it is therefore essential to suspend the use by the
Investor of such Registration Statement (and the Prospectus relating thereto)
for purposes of effecting offers or sales of Shares pursuant thereto, then the
right of the Investor to use the Registration Statement (and the Prospectus
relating thereto) for purposes of effecting offers or sales of Shares pursuant
thereto shall be suspended for a period of not more than sixty (60) days after
delivery by the Company of the certificate referred to in this Section 5.4 (the
"Suspension Period"). During the Suspension Period, none of the Investor shall
-----------------
offer or sell any Shares pursuant to, or in reliance upon, the Registration
Statement (or the Prospectus relating thereto).
5.5 Limit on Suspensions. Notwithstanding anything contained in
--------------------
Sections 5.2 or 5.4, the Investor shall not be prohibited from selling the
Shares under the Registration Statement as a result of suspensions specified in
Section 5.2(b)(iv) or 5.4 on more than two (2) occasions of not more than sixty
(60) days each in any twelve-month period.
5.6 Delay in Effectiveness of Registration. In the event that the
--------------------------------------
Registration Statement is not declared effective within one hundred and twenty
(120) days after the date of filing of the Registration Statement, the Company
shall pay to the Investor liquidated damages in an amount
14
equal to 0.5% (the "Penalty Percentage") of the number of the Shares purchased
------------------
by the Investor pursuant to this Agreement for each week or portion thereof
after one hundred and twenty (120) days after the filing date of the
Registration Statement that the Registration Statement is not declared
effective, provided, however, that (i) if the Company has filed the Registration
-------- -------
Statement with the SEC by the Filing Date, the amount of the Penalty Percentage
shall be equal to 0.3333% rather than 0.5%; (ii) no such payment shall be made
with respect to any period in which the Common Stock of the Company cannot be
traded generally on the Amex, New York Stock Exchange and Nasdaq; (iii) no such
payment shall be made with respect to any period in which the Investor may sell
all Shares then held by the Investor without registration or without regard to
any volume limitations by reason of Rule 144(k) of the Securities Act; and (iv)
no additional Shares shall be paid which would result in the aggregate shares
purchased by Investor under this Agreement plus the aggregate Shares paid to the
Investor pursuant to this Section 5.6 equaling or exceeding 10% of the Company's
outstanding shares of Common Stock, determined as of the date of this Agreement.
Such liquidated damages shall be paid through the issuance of additional Shares
at such time as the Registration Statement is declared effective. Such
additional Shares shall also be registered within thirty (30) days of issuance
under the terms and conditions described in Sections 5.1(a) - (h) hereof.
5.7 Indemnification.
---------------
(a) For the purpose of this Section 5.7:
(i) The term "Selling Stockholder" shall include the
-------------------
Investor and each person, if any, who controls the Investor within the meaning
of the Securities Act or any affiliate of such Investor within the meaning of
the Securities Act;
(ii) The term "Registration Statement" shall include any
----------------------
final Prospectus, exhibit, supplement or amendment included in or relating to
the Registration Statement referred to in Section 5.1; and
(iii) The term "untrue statement" shall include any untrue
----------------
statement or alleged untrue statement, or any omission or alleged omission to
state in the Registration Statement 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.
(b) The Company agrees to indemnify and hold harmless each
Selling Stockholder and its affiliates (as defined in Rule 405 under the
Securities Act) and their respective directors, officers, employees, agents and
controlling persons (each, an "Selling Indemnified Party") from and against any
-------------------------
losses, claims, damages, liabilities or expenses, joint or several, to which
such Selling Indemnified Party may become subject (under the Securities Act, the
Exchange Act or otherwise), including in settlement of any litigation, if such
settlement is effected with the written consent of the Company, which consent
shall not be unreasonably withheld, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof as contemplated below)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in the Registration Statement, including the
Prospectus, financial statements and schedules, and all other documents filed as
a part thereof, as amended at the time of effectiveness of the Registration
Statement, including any information deemed to be a
15
part thereof as of the time of effectiveness pursuant to paragraph (b) of Rule
430A or pursuant to Rule 434 of the rules and regulations of the SEC, or the
Prospectus, in the form first filed with the Commission pursuant to Rule 424(b)
of the Rules and Regulations, or filed as part of the Registration Statement at
the time of effectiveness if no Rule 424(b) filing is required (the
"Prospectus"), or any amendment or supplement thereto, or arise out of or are
----------
based upon the omission or alleged omission to state in any of them a material
fact required to be stated therein or necessary to make the statements in any of
them, in light of the circumstances under which they were made, not misleading
or arise out of or are based in whole or in part on any inaccuracy in the
representations and warranties of the Company contained in this Agreement, or
any failure of the Company to perform its obligations under this Agreement or
under law, and will reimburse each Investor and each such controlling person for
any legal and other expenses as such expenses are reasonably incurred by such
Investor or such controlling person in connection with investigating, defending,
settling, compromising or paying any such loss, claim, damage, liability,
expense or action. The Company shall reimburse such Selling Indemnified Party
for any reasonable legal or other expenses reasonably incurred in investigating,
defending or preparing to defend any such action, proceeding or claim, provided,
however, that the Company shall not be liable in any such case to the extent
that such loss, claim, damage or liability arises out of, or is based upon, an
untrue statement made in such Registration Statement in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
such Selling Indemnified Party specifically for use in preparation of the
Registration Statement or the failure of such Selling Stockholder to comply with
its covenants and agreements contained in Sections 5.2 or 5.4 hereof or any
statement or omission in any Prospectus that is corrected in any subsequent
Prospectus that was delivered to such Selling Indemnified Party prior to the
pertinent sale or sales by such Selling Indemnified Party.
(c) The Investor agrees to indemnify and hold harmless the
Company (and each person, if any, who controls the Company within the meaning of
Section 15 of the Securities Act, each officer of the Company who signs the
Registration Statement and each director of the Company) from and against any
losses, claims, damages or liabilities to which the Company (or any such
officer, director or controlling person) may become subject (under the
Securities Act or otherwise), insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise out of, or are
based upon, (i) any failure to comply with the covenants and agreements
contained in Sections 5.2 or 5.4 hereof, or (ii) any untrue statement of a
material fact contained in the Registration Statement or Prospectus, or in any
amendment or supplement to the Registration Statement or Prospectus, but only to
the extent that such untrue statement was made in reliance upon and in
conformity with written information furnished by or on behalf of such Investor
specifically for use in preparation of the Registration Statement, and such
Investor will reimburse the Company (or such officer, director or controlling
person) and each other Investor (and controlling person), as the case may be,
for any legal or other expenses reasonably incurred in investigating, defending
or preparing to defend any such action, proceeding or claim; provided, however,
that such Investor shall not be liable for any such untrue or alleged untrue
statement or omission or alleged omission of which such Investor has delivered
notice to the Company in writing pursuant to the requirements of Section 10.6
hereof of a correction before the occurrence of the transaction from which such
loss was incurred, and such Investor will reimburse the Company, each of its
directors, each of its officers who signed the Registration Statement or
controlling person and each other Investor (and controlling person) for any
legal and other expense reasonably incurred by the Company, each of its
directors, each of its officers who signed the
16
Registration Statement or controlling person or each other Investor or
controlling person in connection with investigating, defending, settling,
compromising or paying any such loss, claim, damage, liability, expense or
action.
(d) If any action is brought against an indemnified person in respect
of which indemnity may be sought against the indemnifying person pursuant to
this Section 5.7, such indemnified person shall promptly notify the indemnifying
person, as applicable, in writing of the institution of such action, and the
indemnifying person, as applicable, 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 Investor) and payment
of expenses, provided, however, that any failure or delay to so notify the
indemnifying person, as applicable, will not relieve the indemnifying person, 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 indemnifying person to such indemnified party of its
election so to assume the defense thereof, the indemnifying person will not be
liable to such indemnified person under this Section for any legal or other
expenses subsequently incurred by such indemnified person in connection with the
defense thereof other than reasonable costs of investigation. Such indemnified
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
indemnified person unless the employment of such counsel shall have been
authorized in writing by the indemnifying person, as applicable, in connection
with the defense of such action, or the indemnifying person, 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 person
or such indemnified person 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 indemnifying person and such indemnified person in
connection with such action (in which case the indemnifying person shall not
have the right to direct the defense of such action on behalf of the indemnified
person), in any of which events such fees and expenses shall be borne by the
indemnifying person, as applicable, and paid as incurred (it being understood,
however, that the indemnifying person shall not be liable for the expenses of
more than one separate firm of attorneys for all indemnified 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 persons who are
parties to such action). Anything in this paragraph to the contrary
notwithstanding, the indemnifying person shall not be liable for any settlement
of any such claim or action effected without its prior written consent.
(e) If the indemnification provided for in this Section 5.7 is
unavailable to an indemnified person under sections (b) and (c) of this Section
5.7 in respect of any losses, expenses, liabilities, damages or claims referred
to therein, then each applicable indemnifying person, in lieu of indemnifying
such indemnified person, shall contribute to the amount paid or payable by such
indemnified person as a result of such losses, expenses, liabilities, damages or
claims in such proportion as is appropriate to reflect the relative benefits
received by the indemnified person and indemnifying person from the sale of the
Shares, or if such allocation is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits but the
relative fault of the indemnified person and the indemnifying person in
connection with the statements or omissions that resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The respective relative benefits received by the
Company on the one hand and each indemnified person on the other shall be
17
deemed to be in the same proportion as the amount paid by such indemnified
person to the Company pursuant to this Agreement for the Shares purchased by
such indemnified person that were sold pursuant to the Registration Statement
bears to the difference (the "Difference") between the amount such indemnified
person paid for the Shares that were sold pursuant to the Registration Statement
and the amount received by such Investor from such sale. The relative fault
shall be determined by reference to, among other things, whether the untrue
statement or the omission or alleged omission to state a material fact relates
to information supplied by the Company on the one hand or the Indemnified Party
on the other and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such untrue statement. The Company and the
Investor agree that it would not be just and equitable if contribution pursuant
to this subsection (e) were determined by pro rata allocation (even if the
Investor were treated as one entity for such purpose) or by any other method of
allocation which does not take into account the equitable considerations
referred to above in this subsection (e). Notwithstanding the provisions of this
subsection (e), no Investor shall be required to contribute any amount in excess
of the amount by which the Difference exceeds the amount of any damages which
such Investor has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
(f) The parties to this Agreement hereby acknowledge that they are
sophisticated business persons who were represented by counsel during the
negotiations regarding the provisions hereof including, without limitation, the
provisions of this Section 5.7, and are fully informed regarding said
provisions. They further acknowledge that the provisions of this Section 5.7
fairly allocate the risks in light of the ability of the parties to investigate
the Company and its business in order to assure that adequate disclosure is made
in the Registration Statement as required by the Securities Act and the Exchange
Act. The parties are advised that federal or state public policy as interpreted
by the courts in certain jurisdictions may be contrary to certain of the
provisions of this Section 5.7, and the parties hereto hereby expressly waive
and relinquish any right or ability to assert such public policy as a defense to
a claim under this Section 5.7 and further agree not to attempt to assert any
such defense.
5.8 Termination of Conditions and Obligations. The conditions precedent
-----------------------------------------
imposed by Article II or this Article V upon the transferability of the Shares
shall cease and terminate as to any particular number of the Shares when such
Shares shall have been effectively registered under the Securities Act and sold
or otherwise disposed of in accordance with the intended method of disposition
set forth in the Registration Statement covering such Shares or at such time as
an opinion of counsel satisfactory to the Company shall have been rendered to
the effect that such conditions are not necessary in order to comply with the
Securities Act.
5.9 Information Available. So long as the Registration Statement is
---------------------
effective covering the resale of the Shares owned by an Investor, the Company
will furnish to the Investor:
(a) upon the request of the Investor, as soon as practicable after it
is available (but in the case of the Company's Annual Report to Stockholders,
within one hundred twenty (120) days after the end of each fiscal year of the
Company), one copy of (i) its Annual Report to Stockholders (which Annual Report
shall contain financial statements audited in accordance with
18
generally accepted accounting principles by a national firm of certified public
accountants); (ii) if not included in substance in the Annual Report to
Stockholders, its Annual Report on Form 10-K (the foregoing, in each case,
excluding exhibits); (iii) if not included in substance in its Quarterly Reports
to Stockholders, its quarterly reports on Form 10-Q; or (iv) a full copy of the
particular Registration Statement covering the Shares (the foregoing, in each
case, excluding exhibits);
(b) upon the reasonable request of the Investor, all exhibits excluded
by the parenthetical to subparagraphs (a)(ii), (iii) and (iv) of this Section
5.7 as filed with the SEC and all other information that is made available to
stockholders; and
(c) upon the reasonable request of the Investor, an adequate number of
copies of the Prospectuses to supply to any other party requiring such
Prospectuses; and the Company, upon the reasonable request of the Investor, will
meet with the Investor or a representative thereof at the Company's headquarters
to discuss all information relevant for disclosure in the Registration Statement
covering the Shares and will otherwise reasonably cooperate with any Investor
conducting an investigation for the purpose of reducing or eliminating such
Investor's exposure to liability under the Securities Act, including the
reasonable production of information at the Company's headquarters; provided,
that the Company shall not be required to disclose any confidential information
to or meet at its headquarters with any Investor until and unless the Investor
shall have entered into a confidentiality agreement with the Company in form and
substance reasonably satisfactory to the Company with respect thereto.
5.10 Rule 144 Information. In order to make available to the Investor the
--------------------
benefits of Rule 144 or any similar rule or regulation of the SEC that may at
any time permit the Investor to sell the Shares of the Company to the public
without registration, the Company will use its best efforts to:
(a) file with the SEC in a timely manner, and make and keep available,
all reports and other documents required of the Company under the Securities Act
and the Exchange Act so long as the Company remains subject to such requirements
(it being understood that nothing herein limits the Company's obligations under
Section 4.3 hereof) and the filing and availability of such reports and other
documents is required for the applicable provisions of Rule 144; and
(b) furnish to the Investor, so long as the Investor holds any Shares,
promptly upon the Investor's request, (i) a written statement by the Company
that it has complied with the reporting requirements of Rule 144, the Securities
Act and the Exchange Act, (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents filed by the Company
with the SEC and (iii) such other information as may be reasonably requested to
permit the Investor to sell such Shares pursuant to Rule 144 without
registration.
5.11 Assignment of Registration Rights. The rights of the Investor
---------------------------------
hereunder, including the right to have the Company register the Shares pursuant
to this Agreement, will be automatically assigned by the Investor to permitted
transferees or assignees of all or any portion of the Shares who receive Shares
in increments of no less than 50,000 Shares (except for transfers or assignments
to affiliates, which shall not be so limited in number of Shares), but only if
(a) the Investor agrees in writing with the transferee or assignee to assign
such rights, and a copy of such
19
agreement is furnished to the Company within a reasonable time after such
assignment, (b) the Company is, within a reasonable time after such transfer or
assignment, furnished with written notice of the name and address of such
transferee or assignee and the Shares with respect to which such registration
rights are being transferred or assigned, (c) after such transfer or assignment,
the further disposition of such Shares by the transferee or assignee is
restricted under the Securities Act and applicable state securities laws, (d) at
or before the time the Company received the written notice contemplated by
clause (b) of this sentence, the transferee or assignee agrees in writing with
the Company to be bound by all of the provisions contained herein, (e) the
transferee is an "accredited investor" as that term is defined in Rule 501 of
Regulation D and (f) the transfer of Shares is made in accordance with the
provisions of Section 2.6 hereof; provided, however, that if as a result of such
transfers or assignments an Investor transfers or assigns Shares purchased at
the Closing to ten or more separate persons or entities, then the Investor, and
not the subsequent transferees or assignees, shall have the right to enforce the
terms of, and receive notices under, Section 5.7 of this Agreement.
Article VI
TRANSFER AGENT INSTRUCTIONS; REMOVAL OF LEGENDS
6.1 Issuance of Certificates. At the Closing, the Company shall authorize
------------------------
its transfer agent (the "Transfer Agent") to arrange delivery to the Investor of
--------------
one or more stock certificates representing the number of Shares set forth on
the signature pages hereto, each such certificate to be registered in the name
of the Investor or, if so indicated by the Investor, in the name of a nominee
designated by the Investor, and the Transfer Agent shall deliver to the Investor
a certificate as to the issuance of the Shares in form and substance reasonably
acceptable to the Investor. All such stock certificates will bear the
restrictive legend described in Section 2.7, except as otherwise specified in
this Article VI. The Company will not give to the Transfer Agent any instruction
other than as described in this Article VI and stop-transfer instructions to
give effect to Section 2.7 hereof (prior to registration of the Shares under the
Securities Act). Nothing in this Section will affect in any way the Investor's
obligations and agreement set forth in Sections 2.6 and 2.7 hereof to include
the Shares in an effective registration statement or in compliance with an
exemption from the registration requirement of applicable securities laws.
6.2 Unrestricted Shares. If, unless otherwise required by applicable state
-------------------
securities laws, (a) the Shares represented by a certificate have been
registered under an effective registration statement filed under the Securities
Act, or (b) subject to compliance with Section 2.6(a) hereof, a holder of the
Shares provides the Company and the Transfer Agent with an opinion of counsel,
in form, substance and scope customary for opinions of counsel in comparable
transactions, to the effect that a public sale or transfer of such Shares may be
made without registration under the Securities Act and such sale either has
occurred or may occur without restriction on the manner of such sale or
transfer, the Company will permit the transfer of the Shares, and the Transfer
Agent will issue one or more certificates, free from any restrictive legend, in
such name and in such denominations as specified by such holder. In the event
that the restrictive legend is removed from any of the certificates for the
Shares and thereafter the effectiveness of a registration statement covering
such Shares is suspended or terminated or the Company determines that a
supplement or amendment thereto is required by applicable securities laws, then
upon a reasonable advance notice to the Investor the Company may require that
the restrictive legend be placed on any certificates for the Shares that cannot
be sold pursuant to an
20
effective registration statement, and the Investor shall cooperate in the
replacement of such legend. Such legend shall thereafter be removed when such
Shares may again be sold pursuant to an effective registration statement or Rule
144, subject to the receipt of an opinion of counsel as described in clause (b)
above.
Article VII
CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL
The obligation of the Company to issue and sell the Shares to the
Investor at the Closing is subject to the satisfaction by such Investor, on or
before the Closing Date, of each of the following conditions. These conditions
are for the Company's sole benefit and may be waived by the Company at any time
in its sole discretion:
7.1 The Investor will have executed and delivered this Agreement to the
Company.
7.2 The representations and warranties of the Investor must be true and
correct as of the Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date, which
representations and warranties must be correct as of such date), and the
Investor will have performed and complied in all material respects with the
covenants and conditions required by this Agreement to be performed or complied
with by the Investor at or prior to the Closing.
7.3 The Investor will have delivered the purchase price for the Shares
to the Company in accordance with this Agreement.
7.4 No proceeding challenging this Agreement or the transactions
contemplated hereby or seeking to prohibit alter, prevent or materially delay
the Closing shall have been instituted before any court, arbitrator or
governmental body, agency or official and shall be pending. In addition, the
sale of the Shares shall not be prohibited by any law or governmental order or
regulation.
Article VIII
CONDITIONS TO THE INVESTOR'S OBLIGATION TO PURCHASE
The obligation of the Investor hereunder to purchase the Shares from
the Company at the Closing is subject to the satisfaction, on or before the
Closing Date, of each of the following conditions. These conditions are for the
Investor's respective benefit and may be waived by the Investor at any time in
its sole discretion:
8.1 The Company will have executed and delivered this Agreement to the
Investor.
8.2 The representations and warranties of the Company must be true and
correct in all material respects as of the Closing as though made at that time
(except for representations and warranties that speak as of a specific date,
which representations and warranties must be true and correct as of such date)
and the Company must have performed and complied in all material respects with
the covenants and conditions required by this Agreement to be performed or
complied with by the Company at or prior to the Closing. The Investor must have
received a certificate or certificates dated as of the Closing Date and executed
by the Chief Executive Officer
21
or the Chief Financial Officer of the Company certifying as to such matters as
may be reasonably requested by the Investor, including, but not limited to, the
representations and warranties of the Company made herein, the Company's
Certificate of Incorporation, as amended, and Bylaws, as amended, Board of
Directors' resolutions relating to the transactions contemplated hereby and the
incumbency and signatures of each of the officers of the Company who may execute
on behalf of the Company any document delivered at the Closing.
8.3 Trading and listing of the Common Stock on Amex must not have been
suspended by the SEC or Amex.
8.4 The Investor will have received an opinion from Allen Matkins Leck
Gamble & Mallory LLP, counsel for the Company, dated as of the Closing Date and
addressed to the Investor, as to the matters addressed in Exhibit A attached
---------
hereto.
Article IX
DEFINITIONS
9.1 "Closing" means the closing of the purchase and sale of the Shares
-------
under this Agreement.
9.2 "Closing Date" has the meaning set forth in Section 1.3.
------------
9.3 "Common Stock" means the common stock, $0.01 par value per share, of
------------
the Company.
9.4 "Company" means Anworth Mortgage Asset Corporation, a Maryland
-------
corporation.
9.5 "Exchange Act" means the Securities Exchange Act of 1934, as amended.
------------
9.6 "Investor" means the Investor whose names are set forth on the
--------
signature pages of this Agreement.
9.7 "Material Adverse Effect" means a material adverse effect on (a) the
-----------------------
business, operations, assets or financial condition of the Company on a
consolidated basis or (b) the ability of the Company to perform its obligations
pursuant to the transactions contemplated by this Agreement. .
9.8 "Amex" means the American Stock Exchange.
----
9.9 "Regulation D" means Regulation D as promulgated under by the SEC under
------------
the Securities Act.
9.10 "Rule 144" and "Rule 144(k)" mean Rule 144 and Rule 144(k),
-------- -----------
respectively, promulgated under the Securities Act, or any successor rule.
9.11 "SEC" means the United States Securities and Exchange Commission.
---
9.12 "Securities Filings" has the meaning set forth in Section 3.1.
------------------
22
9.13 "Shares" means the Common Stock to be sold pursuant to this
------
Agreement.
9.14 "Securities Act" means the Securities Act of 1933, as amended,
--------------
and the rules and regulations thereunder, or any similar successor statute.
ARTICLE X
GOVERNING LAW; MISCELLANEOUS
10.1 Governing Law; Jurisdiction. This Agreement shall be governed by,
---------------------------
and construed in accordance with, the internal laws of the State of California
without giving effect to the principles of conflicts of law. Any legal suit,
action or proceeding arising out of or based upon this Agreement or the
transactions contemplated hereby ("Related Proceedings") may be instituted in
-------------------
the federal courts of the United States of America located in the County of Los
Angeles or the courts of the State of California in each case located in the
County of Los Angeles (collectively, the "Specified Courts"), and each party
----------------
irrevocably submits to the exclusive jurisdiction (except for proceedings
instituted in regard to the enforcement of a judgment of any such court (a
"Related Judgment"), as to which such jurisdiction is non-exclusive) of such
----------------
courts in any such suit, action or proceeding. Service of any process, summons,
notice or document by mail to such party's address set forth above shall be
effective service of process for any suit, action or other proceeding brought in
any such court. The parties irrevocably and unconditionally waive any objection
to the laying of venue of any suit, action or other proceeding in the Specified
Courts and irrevocably and unconditionally waive and agree not to plead or claim
in any such court that any such suit, action or other proceeding brought in any
such court has been brought in an inconvenient forum. With respect to any
Related Proceeding, each party irrevocably waives, to the fullest extent
permitted by applicable law, all immunity (whether on the basis of sovereignty
or otherwise) from jurisdiction, service of process, attachment (both before and
after judgment) and execution to which it might otherwise be entitled in the
Specified Courts or any other court of competent jurisdiction.
10.2 Counterparts; Signatures by Facsimile. This Agreement may be
-------------------------------------
executed in two or more counterparts, all of which are considered one and the
same agreement and will become effective when counterparts have been signed by
each party and delivered to the other parties. This Agreement, once executed by
a party, may be delivered to the other parties hereto by facsimile transmission
of a copy of this Agreement bearing the signature of the party so delivering
this Agreement. In the event any signature is delivered by facsimile
transmission, the party using such means of delivery shall cause the manually
executed pages to be physically delivered to the other parties within five
business days of the execution hereof.
10.3 Headings. The headings of this Agreement are for convenience of
--------
reference only, are not part of this Agreement and do not affect its
interpretation.
10.4 Severability. If any provision of this Agreement is invalid or
------------
unenforceable under any applicable statute or rule of law, then such provision
will be deemed modified in order to conform with such statute or rule of law.
Any provision hereof that may prove invalid or unenforceable under any law will
not affect the validity or enforceability of any other provision hereof.
23
10.5 Entire Agreement; Amendments. This Agreement (including all
----------------------------
schedules and exhibits hereto) constitutes the entire agreement among the
parties hereto with respect to the subject matter hereof. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof . No provision of this Agreement may be waived or amended other than by
an instrument in writing signed by the party to be charged with enforcement.
10.6 Notices. Any notices required or permitted to be given under the
-------
terms of this Agreement must be sent by certified or registered mail (return
receipt requested) or delivered personally or by courier (including a recognized
overnight delivery service) or by facsimile and will be effective five (5) days
after being placed in the mail, if mailed by regular U.S. mail, or upon receipt,
if delivered personally, by courier (including a recognized overnight delivery
service) or by facsimile, in each case addressed to a party. The addresses for
such communications are:
If to the Company: Anworth Mortgage Asset Corporation
1299 Ocean Ave., #200, Santa Monica, CA 90401
Attention: Lloyd McAdams
---------
Facsimile number: (310) 434-0100
----------------
With a copy to: Allen Matkins Leck Gamble & Mallory LLP
1901 Avenue of the Stars, 18/th/ Floor
Los Angeles, CA 90067
Attention: Mark Kelson, Esq.
---------
Facsimile number: (310) 788-2410
----------------
If to an Investor: To the address set forth immediately below such
Investor's name on the signature pages hereto.
Each party will provide written notice to the other parties of any
change in its address.
10.7 Successors and Assigns. This Agreement is binding upon and inures
----------------------
to the benefit of the parties and their successors and assigns. The Company may
assign this Agreement or any rights or obligations hereunder in connection with
a merger, consolidation, sale of all or substantially all of the Company's
assets or sale of 50% or more of the outstanding equity securities of the
Company without the prior written consent of the Investor, and no Investor may
assign this Agreement or any rights or obligations hereunder except as provided
in Section 5.9 hereof. Notwithstanding the foregoing, an Investor may assign its
rights and obligations under Article V hereunder to any of its "affiliates," as
that term is defined under the Securities Act, without the consent of the
Company so long as the affiliate is an "accredited investor" (within the meaning
of Regulation D under the Securities Act) and agrees in writing to be bound by
this Agreement (provided, however, that any transfer of Shares to such affiliate
complies with Section 2.6 hereof).
24
10.8 Third-Party Beneficiaries. This Agreement is intended for the benefit
-------------------------
of the parties hereto and their respective permitted successors and assigns, and
is not for the benefit of, nor may any provision hereof be enforced by, any
other person.
10.9 Survival. The representations and warranties of the Company and the
--------
Investor set forth herein will survive the Closing hereunder. The Company makes
no representations or warranties in any oral or written information provided to
Investor, other than the representations and warranties included herein. The
covenants of the Company in Article IV and V hereof shall terminate as to the
Investor at the expiration of the Registration Period, except that the covenants
in Section 5.7 shall survive such termination.
10.10 Further Assurances. Each party will do and perform, or cause to be
------------------
done and performed, all such further acts and things, and will execute and
deliver all other agreements, certificates, instruments and documents, as
another party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
10.11 No Strict Construction. The language used in this Agreement is deemed
----------------------
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.
[Signature page follows]
25
IN WITNESS WHEREOF, the undersigned Investor and the Company have caused
this Agreement to be duly executed as of the date first above written.
COMPANY:
ANWORTH MORTGAGE ASSET
CORPORATION
By: /s/ Lloyd McAdams
-------------------------------------
Lloyd McAdams,
Chairman of the Board, President and
Chief Executive Officer
INVESTOR:
By: /s/ Eric Billings
----------------------------------
(Signature)
Name: Eric Billings
-----------------------------
Title: Chairman and Chief Executive
Officer
-----------------------------
Shares of Common Stock: 500,000
-------------
Aggregate Purchase Amount: $3,890,625
Residence: NA
Mailing Address: 1001 19th Street
---------------------
North, Arlington, VA 22209
-------------------------------------
Facsimile No.: (703) 312-9559
E-mail Address: rhendrix@fbr.com
Attention: Rick Hendrix
26
SIGNATURE PAGE TO PURCHASE AGREEMENT
EXHIBIT A
---------
OPINION OF ALLEN MATKINS LECK GAMBLE & MALLORY, LLP
(1) 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 and to conduct its business
as described in the Prospectus and to execute this Agreement and to perform its
obligations under this Agreement;
(2) the authorized and outstanding capital stock of the Company consists
of: (i) __________ shares of Preferred Stock, par value $0.01 per share, none of
which are issued or are outstanding, and (ii) ________________ shares of Common
Stock, par value $0.01 per share, of which ____________ shares are issued and
outstanding;
(3) the outstanding shares of capital stock of the Company have been duly
authorized by all necessary corporate action on the part of the Company and are
validly issued, fully paid and non-assessable;
(4) none of the stockholders of the Company nor any other persons have any
preemptive rights with respect to the Shares under applicable law, the Company's
charter or by-laws, or to such counsel's knowledge, any other agreement to which
the Company is a party;
(5) the execution, delivery and performance of this Agreement have been
duly authorized by all necessary corporate action on the part of the Company and
this Agreement has been duly executed and delivered by the Company;
(6) the Shares have been duly authorized by all necessary corporate action
on the part of the Company and, upon payment for and deliver of the Shares in
accordance with this Agreement and the countersigning of the certificate or
certificates representing the Shares by a duly authorized officer of the
registrar for the Company's Common Stock, the Shares will be validly issued,
fully paid and nonassessable; and
(7) On the assumption that the representations of the Investor in the
Purchase Agreement are correct, the offer and sale of the Shares to the Investor
pursuant to the terms of the Purchase Agreement are exempt from the registration
requirements of Section 5 of the Securities Act of 1933, as amended, and from
the qualification requirements of the California Corporate Securities Law of
1968, as amended.
A-1