CAPSTEAD MORTGAGE
CORPORATION
40,000 Capital
Securities
Fixed/Floating Rate Capital
Securities
(Liquidation Amount $1,000.00 per Capital Security)
FTN Financial
Capital Markets
845 Crossover Lane, Suite 150
Memphis, Tennessee 38117
Keefe, Bruyette
& Woods, Inc.
787 7th Avenue
4th Floor
New York, New York 10019
Capstead Mortgage
Corporation, a Maryland corporation (the “Company”),
and its financing subsidiary, Capstead Mortgage Trust II, a
Delaware statutory trust (the “Trust,” and hereinafter
together with the Company, the “Offerors”), hereby
confirm their agreement (this “Agreement”) with you as
placement agents (the “Placement Agents”), as
follows:
Section 1. Issuance and Sale of
Securities.
1.1.
Introduction . The Offerors propose to issue and sell at
the Closing (as defined in Section 2.3.1 hereof) 40,000 of the
Trust’s Fixed/Floating Rate Capital Securities, with a
liquidation amount of $1,000.00 per capital security (the
“Capital Securities”), to First Tennessee Bank National
Association, a national banking association organized under the
laws of the United States of America and Preferred Term Securities
XX, Ltd., a company with limited liability established under the
laws of the Cayman Islands (the “Purchasers”) pursuant
to the terms of Subscription Agreements entered into, or to be
entered into on or prior to the Closing Date (as defined in
Section 2.3.1 hereof), between the Offerors and the Purchasers
(the “Subscription Agreements”), the forms of which are
attached hereto as Exhibit A-1 and
Exhibit A-2 and incorporated herein by this
reference.
1.2.
Operative Agreements . The entire proceeds from the sale
by the Trust to the holders of the Capital Securities shall be
combined with the entire proceeds from the sale by the Trust to the
Company of its common securities (the “Common
Securities”), and shall be used by the Trust to purchase
$41,238,000.00 in principal amount of the Fixed/Floating Rate
Junior Subordinated Debentures (the “Debentures”) of
the Company. The Capital Securities and the Common Securities for
the Trust shall be issued pursuant to an Amended and Restated
Declaration of Trust among WTC, as Delaware trustee (the
“Delaware Trustee”), WTC, as institutional trustee (the
“Institutional Trustee”), the Administrators
named
therein, and
the Company, to be dated as of the Closing Date and in
substantially the form heretofore delivered to the Placement Agents
(the “Trust Agreement”). The Debentures shall be issued
pursuant to an Indenture (the “Indenture”), to be dated
as of the Closing Date, between the Company and WTC, as indenture
trustee (the “Indenture Trustee”). The documents
identified in this Section 1.2 and in Section 1.1 are
referred to herein as the “Operative
Documents.”
1.3. Rights
of Purchasers . The Capital Securities shall be offered and
sold by the Trust directly to the Purchasers without registration
of any of the Capital Securities, the Debentures under the
Securities Act of 1933, as amended (the “Securities
Act”), or any other applicable securities laws in reliance
upon exemptions from the registration requirements of the
Securities Act and other applicable securities laws. The Offerors
agree that this Agreement shall be incorporated by reference into
the Subscription Agreements and the Purchasers shall be entitled to
each of the benefits of the Placement Agents and the Purchasers
under this Agreement and shall be entitled to enforce obligations
of the Offerors under this Agreement as fully as if the Purchasers
were parties to this Agreement. The Offerors and the Placement
Agents have entered into this Agreement to set forth their
understanding as to their relationship and their respective rights,
duties and obligations.
1.4.
Legends . Upon original issuance thereof, and until such
time as the same is no longer required under the applicable
requirements of the Securities Act, the Capital Securities and
Debentures certificates shall each contain a legend as required
pursuant to any of the Operative Documents.
Section 2. Purchase of Capital
Securities.
2.1.
Exclusive Rights; Purchase Price . From the date hereof
until the Closing Date (which date may be extended by mutual
agreement of the Offerors and the Placement Agents), the Offerors
hereby grant to the Placement Agents the exclusive right to arrange
for the sale of the Capital Securities to the Purchasers at a
purchase price of $1,000.00 per Capital Security.
2.2.
Subscription Agreements . The Offerors hereby agree to
evidence their acceptance of the subscription by countersigning a
copy of each of the Subscription Agreements and returning the same
to the Placement Agents.
2.3.
Closing and Delivery of Payment .
2.3.1. Closing; Closing Date . The sale and purchase
of the Capital Securities by the Offerors to the Purchasers shall
take place at a closing (the “Closing”) at the offices
of Lewis, Rice & Fingersh, L.C., at 10:00 a.m. (St. Louis
time) on December 15, 2005, or such other business day as may
be agreed upon by the Offerors and the Placement Agents (the
“Closing Date”); provided , however ,
that in no event shall the Closing Date occur later than
December 30, 2005 unless consented to by the Purchasers.
Payment by the Purchasers shall be payable in the manner set forth
in the Subscription Agreements and shall be made prior to or on the
Closing Date.
2.3.2. Delivery . The certificates for the Capital
Securities shall be in definitive form, each registered in the name
of the applicable Purchaser, or Purchaser designee, and in the
aggregate amount of the Capital Securities purchased by the
Purchaser.
2.3.3.
Transfer Agent . The Offerors shall deposit the
certificates representing the Capital Securities with the
Institutional Trustee or other appropriate party prior to the
Closing Date.
2.4.
Placement Agents’ Fees and Expenses .
2.4.1. Placement Agents’ Compensation . Because
the proceeds from the sale of the Capital Securities shall be used
to purchase the Debentures from the Company, the Company shall pay
an aggregate of $27.50 for each $1,000.00 of principal amount of
Debentures sold to the Trust (excluding the Debentures related to
the Common Securities purchased by the Company). Of this amount,
$13.75 for each $1,000.00 of principal amount of Debentures shall
be payable to FTN Financial Capital Markets and $13.75 for each
$1,000.00 of principal amount of Debentures shall be payable to
Keefe, Bruyette & Woods, Inc. Such amount shall be delivered to
WTC or such other person designated by the Placement Agents on the
Closing Date and shall be allocated between and paid to the
respective Placement Agents as directed by the Placement
Agents.
2.4.2. Costs and Expenses . Whether or not this
Agreement is terminated or the sale of the Capital Securities is
consummated, the Company hereby covenants and agrees that it shall
pay or cause to be paid (directly or by reimbursement) all
reasonable costs and expenses incident to the performance of the
obligations of the Offerors under this Agreement, including all
fees, expenses and disbursements of counsel and accountants for the
Offerors; all reasonable expenses incurred by the Offerors incident
to the preparation, execution and delivery of the Trust Agreement
and the Indenture; and all other reasonable costs and expenses
incurred by the Offerors incident to the performance of the
obligations of the Company hereunder and under the Trust Agreement.
The Placement Agents shall pay or cause to be paid all costs and
expenses incident to the performance of its obligations under this
Agreement, including all fees, expenses and disbursements of its
counsel and all other costs and expenses incurred by the Placement
Agents incident to the performance of its obligations
hereunder.
2.5.
Failure to Close . If any of the conditions to the
Closing specified in this Agreement shall not have been fulfilled
to the satisfaction of the Placement Agents or if the Closing shall
not have occurred on or before 10:00 a.m. (St. Louis time) on
December 30, 2005, then each party hereto, notwithstanding
anything to the contrary in this Agreement, shall be relieved of
all further obligations under this Agreement without thereby
waiving any rights it may have by reason of such nonfulfillment or
failure; provided , however , that the obligations of
the parties under Sections 2.4.2, 7.5 and 9 shall not be so
relieved and shall continue in full force and effect.
Section 3. Closing Conditions
. The obligations of the
Purchasers and the Placement Agents on the Closing Date shall be
subject to the accuracy, at and as of the Closing Date, of the
representations and warranties of the Offerors contained in this
Agreement, to the accuracy, at and as of the Closing Date, of the
statements of the Offerors made in any certificates pursuant to
this Agreement, to the performance by the Offerors of their
respective obligations under this Agreement, to compliance, at and
as of the Closing Date, by the Offerors with their respective
agreements herein contained, and to the following further
conditions:
3.1.
Opinions of Counsel . On the Closing Date, the Placement
Agents shall have received the following favorable opinions, each
dated as of the Closing Date: (a) from Andrews Kurth LLP,
counsel for the Company and addressed to the Purchasers, the
Placement Agents, the Offerors and WTC in substantially the form
set forth on Exhibit B-1 attached hereto and
incorporated herein by this reference, (b) from Hogan &
Hartson L.L.P., Maryland counsel for the Company and addressed to
the Purchasers, the Placement Agents, the Offerors and WTC in
substantially the form set forth on Exhibit B-2
attached hereto and incorporated herein by this reference,
(c) from Richards, Layton & Finger, P.A., special Delaware
counsel to the Trust and addressed to the Purchasers, the Placement
Agents and the Offerors, in substantially the form set forth on
Exhibit B-3 attached hereto and incorporated herein by
this reference and (d) from Lewis, Rice & Fingersh, L.C.,
special tax counsel to the Offerors, and addressed to the Placement
Agents and the Offerors, addressing the items set forth
on
Exhibit B-4 attached hereto and incorporated herein by this
reference, subject to the receipt by Lewis, Rice & Fingersh,
L.C. of a representation letter from the Company in the form set
forth in Exhibit B-4 completed in a manner reasonably
satisfactory to Lewis, Rice & Fingersh, L.C. (collectively, the
“Offerors’ Counsel Opinions”). In rendering the
Offerors’ Counsel Opinions, counsel to the Offerors may rely
as to factual matters upon certificates or other documents
furnished by officers, directors and trustees of the Offerors
(copies of which shall be delivered to the Placement Agents and the
Purchasers) and by government officials, and upon such other
documents as counsel to the Offerors may, in their reasonable
opinion, deem appropriate as a basis for the Offerors’
Counsel Opinions. Counsel to the Offerors may specify the
jurisdictions in which they are admitted to practice and that they
are not admitted to practice in any other jurisdiction and are not
experts in the law of any other jurisdiction. If the
Offerors’ counsel is not admitted to practice in the State of
New York, the opinion of Offerors’ counsel may assume, for
purposes of the opinion, that the laws of the State of New York are
substantively identical, in all respects material to the opinion,
to the internal laws of the state in which such counsel is admitted
to practice. Such Offerors’ Counsel Opinions shall not state
that they are to be governed or qualified by, or that they are
otherwise subject to, any treatise, written policy or other
document relating to legal opinions, including, without limitation,
the Legal Opinion Accord of the ABA Section of Business Law
(1991).
3.2.
Officer’s Certificate . At the Closing Date, the
Purchasers and the Placement Agents shall have received
certificates from an authorized officer of the Company, dated as of
the Closing Date, stating that (i) the representations and
warranties of the Offerors set forth in Section 5 hereof are
true and correct as of the Closing Date and that the Offerors have
complied with all agreements and satisfied all conditions on their
part to be performed or satisfied at or prior to the Closing Date,
(ii) since the date of this Agreement the Offerors have not
incurred any liability or obligation, direct or contingent, or
entered into any material transactions, other than in the ordinary
course of business, which is material to the Offerors, and
(iii) covering such other matters as the Placement Agents may
reasonably request.
3.3.
Administrator’s Certificate . At the Closing Date,
the Purchasers and the Placement Agents shall have received a
certificate of one or more Administrators of the Trust, dated as of
the Closing Date, stating that the representations and warranties
of the Trust set forth in Section 5 are true and correct as of
the Closing Date and that the Trust has complied with all
agreements and satisfied all conditions on its part to be performed
or satisfied at or prior to the Closing Date.
3.4.
Purchase Permitted by Applicable Laws; Legal Investment
. The purchase of and payment for the Capital Securities as
described in this Agreement and pursuant to the Subscription
Agreements shall (a) not be prohibited by any applicable law
or governmental regulation, (b) not subject the Purchasers or
the Placement Agents to any penalty or, in the reasonable judgment
of the Purchasers and the Placement Agents, other onerous
conditions under or pursuant to any applicable law or governmental
regulation, and (c) be permitted by the laws and regulations
of the jurisdictions to which the Purchasers and the Placement
Agents are subject.
3.5.
Consents and Permits . The Company and the Trust shall
have received all consents, permits and other authorizations, and
made all such filings and declarations, as may be required from any
person or entity pursuant to any law, statute, regulation or rule
(federal, state, local and foreign), or pursuant to any agreement,
order or decree to which the Company or the Trust is a party or to
which either is subject, in connection with the transactions
contemplated by this Agreement.
3.6. Sale
of Purchaser Securities . Preferred Term Securities XX,
Ltd. shall have sold securities issued by it in an amount such that
the net proceeds of such sale shall be (i) available on the
Closing Date and (ii) in an amount sufficient to purchase that
portion of the Capital Securities Preferred Term Securities XX,
Ltd. agrees to purchase pursuant to the Subscription Agreement to
be entered into by
it and all
other capital or similar securities contemplated to be purchased by
Preferred Term Securities XX, Ltd. in agreements similar to this
Agreement and the Subscription Agreement to be entered into by
it.
3.7.
Information . Prior to or on the Closing Date, the
Offerors shall have furnished to the Placement Agents such further
information, certificates, opinions and documents addressed to the
Purchasers and the Placement Agents, which the Placement Agents may
reasonably request, including, without limitation, a complete set
of the Operative Documents or any other documents or certificates
required by this Section 3; and all proceedings taken by the
Offerors in connection with the issuance, offer and sale of the
Capital Securities as herein contemplated shall be reasonably
satisfactory in form and substance to the Placement
Agents.
If any condition
specified in this Section 3 shall not have been fulfilled when
and as required in this Agreement, or if any of the opinions or
certificates mentioned above or elsewhere in this Agreement shall
not be reasonably satisfactory in form and substance to the
Placement Agents, this Agreement may be terminated by the Placement
Agents by notice to the Offerors at any time at or prior to the
Closing Date. Notice of such termination shall be given to the
Offerors in writing or by telephone or facsimile confirmed in
writing.
Section 4. Conditions to the
Offerors’ Obligations . The obligations of the Offerors to sell the
Capital Securities to the Purchasers and consummate the
transactions contemplated by this Agreement shall be subject to the
accuracy, at and as of the Closing Date, of the representations and
warranties of the Placement Agents contained in this Agreement and
to the following further conditions:
4.1.
Executed Agreement . The Offerors shall have received
from the Placement Agents an executed copy of this
Agreement.
4.2.
Fulfillment of Other Obligations . The Placement Agents
shall have fulfilled all of their other obligations and duties
required to be fulfilled under this Agreement prior to or at the
Closing.
Section 5. Representations and
Warranties of the Offerors . Except as set forth on the Disclosure Schedule
(as defined in Section 11.1) attached hereto, if any, the
Offerors jointly and severally represent and warrant to the
Placement Agents and the Purchasers as of the date hereof and as of
the Closing Date as follows:
5.1.
Securities Law Matters .
(a) Neither the Company nor the Trust, nor any of their
“Affiliates” (as defined in Rule 501(b) of
Regulation D under the Securities Act
(“Regulation D”)), nor any person acting on any of
their behalf has, directly or indirectly, made offers or sales of
any security, or solicited offers to buy any security, under
circumstances that would require the registration under the
Securities Act of any of the Capital Securities or the Debentures
(collectively, the “Securities”) or any other
securities to be issued, or which may be issued, by Preferred Term
Securities XX, Ltd.
(b) Neither the Company nor the Trust, nor any of their
Affiliates, nor any person acting on its or their behalf has
(i) other than the Placement Agents, offered for sale or
solicited offers to purchase the Securities, (ii) engaged in
any form of offering, general solicitation or general advertising
(within the meaning of Regulation D) in connection with any
offer or sale of any of the Securities, or (iii) engaged or
will engage in any “directed selling efforts” within
the meaning of Regulation S of the Securities Act
(“Regulation S”) with respect to the
Securities.
(c) The Securities satisfy the eligibility requirements of
Rule 144A(d)(3) under the Securities Act.
(d) Neither the Company nor the Trust is or, after giving
effect to the offering and sale of the Capital Securities and the
consummation of the transactions described in this Agreement, will
be an “investment company” or an entity
“controlled” by an “investment company,” in
each case within the meaning of Section 3(a) of the Investment
Company Act of 1940, as amended (the “Investment Company
Act”).
(e) Neither the Company nor the Trust has paid or agreed to
pay to any person or entity (other than the Placement Agents) any
compensation for soliciting another to purchase any of the
Securities.
(f) The Company is a “qualified purchaser”
within the meaning of section 2(a)(51) of the Investment Company
Act and will purchase the Common Securities for its own
account.
5.2.
Organization, Standing and Qualification of the Trust .
The Trust has been duly created and is validly existing in good
standing as a statutory trust under the Delaware Statutory Trust
Act (the “Statutory Trust Act”) with the power and
authority to own property and to conduct the business it transacts
and proposes to transact and to enter into and perform its
obligations under the Operative Documents. The Trust is duly
qualified to transact business as a foreign entity and is in good
standing in each jurisdiction in which such qualification is
necessary, except where the failure to so qualify or be in good
standing would not have a material adverse effect on the Trust. The
Trust is not a party to or otherwise bound by any agreement other
than the Operative Documents. The Trust is and will, under current
law, be classified for federal income tax purposes as a grantor
trust and not as an association taxable as a
corporation.
5.3. Trust
Agreement . The Trust Agreement has been duly authorized by
the Company and, on the Closing Date, will have been duly executed
and delivered by the Company and the Administrators of the Trust,
and, assuming due authorization, execution and delivery by the
Delaware Trustee and the Institutional Trustee, will be a valid and
binding obligation of the Company and such Administrators,
enforceable against them in accordance with its terms, subject to
(a) applicable bankruptcy, insolvency, moratorium,
receivership, reorganization, liquidation and other laws relating
to or affecting creditors’ rights generally, and
(b) general principles of equity (regardless of whether
considered and applied in a proceeding in equity or at law)
(“Bankruptcy and Equity”). Each of the Administrators
of the Trust is an employee or a director of the Company and has
been duly authorized by the Company to execute and deliver the
Trust Agreement.
5.4.
Indenture . The Indenture has been duly authorized by
the Company and, on the Closing Date, will have been duly executed
and delivered by the Company, and, assuming due authorization,
execution and delivery by the Indenture Trustee, will be a valid
and binding obligation of the Company enforceable against it in
accordance with its terms, subject to Bankruptcy and
Equity.
5.5.
Capital Securities and Common Securities . The Capital
Securities and the Common Securities have been duly authorized by
the Trust Agreement and, when issued and delivered against payment
therefor on the Closing Date to the Purchasers, in the case of the
Capital Securities, and to the Company, in the case of the Common
Securities, will be validly issued and represent undivided
beneficial interests in the assets of the Trust. None of the
Capital Securities or the Common Securities is subject to
preemptive or other similar rights. On the Closing Date, all of the
issued and outstanding Common Securities will be directly owned by
the Company free and clear of any pledge, security interest, claim,
lien or other encumbrance.
The Debentures
have been duly authorized by the Company and, at the Closing Date,
will have been duly executed and delivered to the Indenture Trustee
for authentication in accordance with the Indenture, and, when
authenticated in the manner provided for in the Indenture and
delivered against payment therefor by the Trust, will constitute
valid and binding obligations of the Company entitled to the
benefits of the Indenture enforceable against the Company in
accordance with their terms, subject to Bankruptcy and
Equity.
5.7. Power
and Authority . This Agreement has been duly authorized,
executed and delivered by the Company and the Trust and constitutes
the valid and binding obligation of the Company and the Trust,
enforceable against the Company and the Trust in accordance with
its terms, subject to Bankruptcy and Equity.
5.8. No
Defaults . The Trust is not in violation of the Trust
Agreement or, to the knowledge of the Administrators, any provision
of the Statutory Trust Act. The execution, delivery and performance
by the Company or the Trust of this Agreement or the Operative
Documents to which it is a party, and the consummation of the
transactions contemplated herein or therein and the use of the
proceeds therefrom, will not conflict with or constitute a breach
of, or a default under, or result in the creation or imposition of
any lien, charge or other encumbrance upon any property or assets
of the Trust, the Company or any of the Company’s
Subsidiaries (as defined in Section 5.11 hereof) pursuant to
any contract, indenture, mortgage, loan agreement, note, lease or
other instrument to which the Trust, the Company or any of its
Subsidiaries is a party or by which it or any of them may be bound,
or to which any of the property or assets of any of them is
subject, except for a conflict, breach, default, lien, charge or
encumbrance which could not, singly or in the aggregate, reasonably
be expected to have a Material Adverse Effect nor will such action
result in any violation of the Trust Agreement or the Statutory
Trust Act or require the consent, approval, authorization or order
of any court or governmental agency or body. As used herein, the
term “Material Adverse Effect” means any one or more
effects that individually or in the aggregate (i) are material
and adverse to the Offerors’ ability to consummate the
transactions contemplated herein or in the Operative Documents,
(ii) could cause the Company to fail to be organized or
operated in conformity with the requirements for qualification and
taxation as a real estate investment trust (“REIT”)
under Sections 856 through 860 of the Internal Revenue Code of
1986, as amended (the “Code”), or (iii) are
material and adverse to the financial condition, earnings,
business, liabilities and assets of the Company and its
Subsidiaries taken as whole, whether or not arising from
transactions occurring in the ordinary course of
business.
5.9.
Organization, Standing and Qualification of the Company
. The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of
Maryland, with all requisite corporate power and authority to own
its properties and conduct the business it transacts and proposes
to transact, and is duly qualified to transact business and is in
good standing as a foreign corporation in each jurisdiction where
the nature of its activities requires such qualification, except
where the failure of the Company to be so qualified would not,
singly or in the aggregate, have a Material Adverse
Effect.
5.10.
Capital Stock of the Company . All of the issued and
outstanding shares of capital stock of the Company are validly
issued, fully paid and non-assessable; and none of the issued and
outstanding capital stock of the Company was issued in violation of
any preemptive or similar rights arising by operation of law, under
the charter or by-laws of such entity or under any agreement to
which the Company is a party.
5.11.
Subsidiaries of the Company . The Company has no
“significant subsidiaries” (as defined in
Section 1-02(w) of Regulation S-X to the Securities
Act.
5.12.
Permits . The Company and each of its subsidiaries (as
defined in Section 1-02(x) of Regulation S-X to the Securities
Act) (the “Subsidiaries”) have all requisite power and
authority, and all necessary authorizations, approvals, orders,
licenses, certificates and permits of and from regulatory or
governmental officials, bodies and tribunals, to own or lease their
respective properties and to conduct their respective businesses as
now being conducted, except such authorizations, approvals, orders,
licenses, certificates and permits which, if not obtained and
maintained, would not, singly or in the aggregate, have a Material
Adverse Effect, and neither the Company nor any of its Subsidiaries
has received any notice of proceedings relating to the revocation
or modification of any such authorizations, approvals, orders,
licenses, certificates or permits which, singly or in the
aggregate, if the failure to be so licensed or approved is the
subject of an unfavorable decision, ruling or finding, would,
singly or in the aggregate, have a Material Adverse Effect; and the
Company and its Subsidiaries are in compliance with all applicable
laws, rules, regulations and orders and consents, the violation of
which would, singly or in the aggregate, have a Material Adverse
Effect.
5.13.
Conflicts, Authorizations and Approvals . Neither the
Company nor any of its Subsidiaries is in violation of its
respective articles or certificate of incorporation, charter or
by-laws or similar organizational documents or in default in the
performance or observance of any obligation, agreement, covenant or
condition contained in any contract, indenture, mortgage, loan
agreement, note, lease or other agreement or instrument to which
either the Company or any of its Subsidiaries is a party, or by
which it or any of them may be bound or to which any of the
property or assets of the Company or any of its Subsidiaries is
subject, the effect of which violation or default in performance or
observance would have, singly or in the aggregate, a Material
Adverse Effect.
5.14.
Financial Statements .
(a) The consolidated balance sheets of the Company and all
of its Subsidiaries as of December 31, 2004 and December 31,
2003 and related consolidated income statements and statements of
changes in shareholders’ equity for the three years ended
December 31, 2004 together with the notes thereto, and the
consolidated balance sheets of the Company and all of its
Subsidiaries as of September 30, 2005 and the related
consolidated income statements and statements of changes in
shareholders’ equity for the nine months then ended, copies
of each of which have been provided to the Placement Agents
(together, the “Financial Statements”), have been
prepared in accordance with generally accepted accounting
principles applied on a consistent basis (“GAAP”)
(except as may be disclosed therein) and fairly present in all
material respects the financial position and the results of
operations and changes in shareholders’ equity of the Company
and all of its Subsidiaries as of the dates and for the periods
indicated (subject, in the case of interim financial statements, to
normal recurring year-end adjustments, none of which shall be
material).
(b) Since the respective dates of the Financial Statements,
there has been (i) no material adverse change or development
with respect to the financial condition or earnings of the Company
and all of its Subsidiaries, taken as a whole, or (ii) any
dividend or distribution of any kind declared, paid or made by the
Company on any class of its capital stock other than regular
quarterly dividends on the Company’s common stock, regular
quarterly dividends on the Company’s Series A preferred
stock and regular monthly dividends on the Company’s
Series B preferred stock.
(c) The accountants of the Company who certified the
Financial Statements are independent public accountants of the
Company and its Subsidiaries within the meaning of the Securities
Act and the rules and regulations thereunder.
(d) The books, records and accounts of the Company
accurately and fairly reflect, in reasonable detail, the
transactions in, and dispositions of, the assets of, and the
results of operations of, the Company. The Company maintains a
system of internal accounting controls sufficient to
provide
reasonable
assurances 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 accordance with GAAP 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.
5.15.
Exchange Act Reporting . The reports filed with the
Securities and Exchange Commission (the “Commission”)
by the Company under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”) and the regulations
thereunder at the time they were filed with the Commission complied
as to form in all material respects with the requirements of the
Exchange Act and such reports did 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.
Other than such instruments, agreements, contracts and other
documents as are filed as exhibits to the Company’s Annual
Report on Form 10-K, Quarterly Reports on Form 10-Q or Current
Reports on Form 8-K, there are no instruments, agreements,
contracts or documents of a character described in Item 601 of
Regulation S-K promulgated by the Commission to which the
Company is a party, other than the Operative Documents.
5.16.
Governmental Matters. Neither the Company nor any of its
Subsidiaries is subject or is party to, or has received any notice
or advice that any of them may become subject or party to, any
investigation with respect to, any cease-and-desist order,
agreement, consent agreement, memorandum of understanding or other
regulatory enforcement action, proceeding or order with or by, or
is a party to any commitment letter or similar undertaking to, has
adopted any board resolutions at the request of, any government,
governmental authority, agency or instrumentality or court,
domestic or foreign, having jurisdiction over the Company or its
Subsidiaries or their respective property or assets (collectively,
the “Governmental Entities”) that currently restricts
in any material respect the conduct of their business or that in
any material manner relates to their capital adequacy, their
ability or authority to pay dividends or make distributions to
their shareholders or make payments of principal or interest on
their debt obligations, their management or their business. No
filing with, or authorization, approval, consent, license, order,
registration, qualification or decree of, any Governmental Entity,
other than those that have been made or obtained, is necessary or
required for the performance by the Trust or the Company of their
respective obligations under the Operative Documents, as
applicable, or the consummation by the Trust and the Company of the
transactions contemplated by the Operative Documents. Neither the
Company nor any of the Subsidiaries is currently unable to pay
dividends or make distributions to its shareholders with respect to
any class of its equity securities, or prohibited from paying
principal or interest on its debt obligations, due to a restriction
or limitation, whether by statute, contract or otherwise, and, in
the reasonable judgment of the Company’s management, neither
the Company nor any of the Subsidiaries will be unable in the
foreseeable future to pay dividends or make distributions with
respect to any class of equity securities, or be prohibited from
paying principal or interest on its debt obligations, due to a
restriction or limitation, whether by statute, contract or
otherwise.
5.17. No
Undisclosed Liabilities . Neither the Company nor any of
its Subsidiaries has any material liability, whether known or
unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or
unliquidated, and whether due or to become due, including any
liability for taxes (and there is no past or present fact,
situation, circumstance, condition or other basis for any present
or future action, suit, proceeding, hearing, charge, complaint,
claim or demand against the Company or its Subsidiaries giving rise
to any such liability) that, individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect,
except (i) for liabilities set forth in the Financial
Statements and (ii) normal fluctuation in the amount of
the
liabilities
referred to in clause (i) above occurring in the ordinary
course of business of the Company and all of its Subsidiaries since
the date of the most recent balance sheet included in the Financial
Statements.
5.18.
Litigation . No charge, investigation, action, suit or
proceeding is pending or, to the knowledge of the Offerors,
threatened, against or affecting the Company or its Subsidiaries or
any of their respective properties before or by any courts or any
regulatory, administrative or governmental official, commission,
board, agency or other authority or body, or any arbitrator,
wherein an unfavorable decision, ruling or finding could have,
singly or in the aggregate, a Material Adverse Effect.
5.19. Labor
Matters . No labor dispute with the employees of the Trust
or the Company exists or, to the knowledge of the executive
officers of the Trust or the Company, is imminent, except those
which would not, singly or in the aggregate, have a Material
Adverse Effect.
5.20.
Property . Except as disclosed in the Company’s
Exchange Act reports and for liens for (i) taxes and other
governmental charges and assessments which are not yet delinquent
or the amount of which is being contested in good faith by
appropriate proceedings; (ii) encumbrances in the nature of
zoning restrictions, easements, rights or restrictions of record on
the use of real property; (iii) statutory or common law liens
to secure landlords, lessors or renters under leases or rental
agreements confined to the premises rented; (iv) liens created
under or in connection with asset securitizations, repurchase
agreements, warehouse credit facilities or other loan facilities;
and (v) other liens incurred in the ordinary course of
business not material in amount, the Company and each Subsidiary
has good and marketable title to all of its respective real and
personal properties, in each case free and clear of all liens and
defects, except for those that would not, singly or in the
aggregate, have a Material Adverse Effect; and all of the leases
and subleases under which the Trust or any Subsidiary holds
properties are in full force and effect, except where the failure
of such leases and subleases to be in full force and effect would
not, singly or in the aggregate, have a Material Adverse Effect;
and neither the Company nor any Subsidiary has any notice of any
claim of any sort that has been asserted by anyone adverse to the
rights of a Subsidiary or the Company under any such leases or
subleases, or affecting or questioning the rights of such entity to
the continued possession of the leased or subleased premises under
any such lease or sublease, except for such claims that would not,
singly or in the aggregate, have a Material Adverse
Effect.
(a) Commencing with its taxable year ended December 31,
1985 the Company has been, and upon the completion of the
transactions contemplated hereby, the Company will continue to be,
organized and operated in conformity with the requirements for
qualification and taxation as a REIT under Sections 856
through 860 of the Code, and the Company’s proposed method of
operation will enable it to continue to meet the requirements for
qualification and taxation as a REIT under the Code, and no actions
have been taken (or not taken which are required to be taken) which
would reasonably be expected to cause such qualification to be
lost. The Company expects to continue to be organized and to
operate in a manner so as to qualify as a REIT in the taxable year
ending December 31, 2005 and succeeding taxable
years.
(b) The Company and each Subsidiary has timely and duly
filed all Tax Returns (as defined below) required to be filed by
them, and all such Tax Returns are true, correct and complete,
except for such failures to timely file or inaccuracies that would
not, singly or in the aggregate, have a Material Adverse Effect.
The Company and each Subsidiary has timely and duly paid in full
all material Taxes (as defined below) required to be paid by them
(whether or not such amounts are shown as due on any Tax Return)
and has timely and duly paid all required estimated Tax payments in
accordance with applicable law. There are no federal, state, or
other Tax audits or deficiency assessments proposed or pending with
respect to the Company or any Subsidiary, and, to the knowledge of
the Offerors, no such audits or assessments are threatened. As used
herein, the terms “Tax” or “Taxes” mean
(i) all federal,
state, local,
and foreign taxes, and other assessments of a similar nature
(whether imposed directly or through withholding), including any
interest, additions to tax, or penalties applicable thereto,
imposed by any Governmental Entity, and (ii) all liabilities
in respect of such amounts arising as a result of being a member of
any affiliated, consolidated, combined, unitary or similar group,
as a successor to another person or by contract. As used herein,
the term “Tax Returns” means all federal, state, local,
and foreign Tax returns, declarations, statements, reports,
schedules, forms, and information returns and any amendments
thereto filed or required to be filed with any Governmental
Entity.
(c) To the knowledge of the Offerors, there are no
rulemaking or similar proceedings before the United States Internal
Revenue Service or comparable federal, state, local or foreign
government bodies which involve or affect the Company or any
Subsidiary, which, if the subject of an action unfavorable to the
Company or any Subsidiary, could result in a Material Adverse
Effect.
5.22.
Insurance . The Company and each Subsidiary and their
respective assets and businesses are insured by insurers of
recognized financial responsibility against such losses and risks
and in such amounts in all material respects as are customary in
the businesses in which they are engaged or propose to engage after
giving effect to the transactions contemplated hereby. All policies
of insurance and fidelity or surety bonds insuring the Company and
each Subsidiary or their respective business, assets, employees,
officers and directors are in full force and effect. The Company
and each Subsidiary are in compliance with the terms of such
policies and instruments in all material respects. The Company does
not have reason to believe that it or any Subsidiary will not be
able to renew such existing insurance coverage as and when such
coverage expires or to obtain similar coverage from similar
insurers as may be necessary to continue their respective business
at a cost that would not have a Material Adverse Effect. Within the
past twelve months, neither the Company nor any Subsidiary has been
denied any insurance coverage which it has sought or for which it
has applied.
5.23.
Corporate Funds . The Company or, to the knowledge of
the Offerors, any person acting on behalf of the Company,
including, without limitation, any director, officer, agent or
employee of the Company, has not, directly or indirectly, while
acting on behalf of the Company (i) used any corporate funds for
unlawful contributions, gifts, entertainment or other unlawful
expenses relating to political activity; (ii) made any
unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns
from corporate funds; (iii) violated any provision of the
Foreign Corrupt Practices Act of 1977, as amended; or
(iv) made any other unlawful payment.
5.24.
Environmental Compliance .
(a) Except as would not, individually or in the aggregate,
have a Material Adverse Effect, (i) the Company and each Subsidiary
have been and are in compliance with applicable Environmental Laws
(as defined below), (ii) neither the Company nor any
Subsidiary nor, to the knowledge of the Offerors, any other owners
of any of the real properties currently or previously owned, leased
or operated by the Company or any Subsidiary (the
“Properties”) at any time or any other party, has at
any time released (as such term is defined in CERCLA (as defined
below)) or otherwise disposed of Hazardous Materials (as defined
below) on, to, in, under or from the Properties, (iii) neither
the Company nor any Subsidiary intends to use or will use the
Properties or any subsequently acquired properties, other than in
compliance with applicable Environmental Laws, (iv) neither
the Company nor any Subsidiary has received any notice of, or has
any knowledge of any occurrence or circumstance which, with notice
or passage of time or both, would give rise to a claim under or
pursuant to any Environmental Law with respect to the Properties,
or their respective assets or arising out of the conduct of the
Company or any Subsidiary, (v) none of the Properties are
included or, to the knowledge of the Offerors, proposed for
inclusion, on the National Priorities List issued pursuant to
CERCLA by the United States Environmental Protection Agency or, to
the knowledge of the Offerors, proposed for
inclusion on
any similar list or inventory issued pursuant to any other
Environmental Law or issued by any other Governmental Entity,
(vi) none of the Company, any Subsidiary, a
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