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EXHIBIT 1.1
EXECUTION COPY
ANNALY CAPITAL MANAGEMENT,
INC.
60,000,000 Shares
Common Stock
($0.01 Par Value)
UNDERWRITING
AGREEMENT
May 13, 2008
UNDERWRITING
AGREEMENT
May 13, 2008
MORGAN STANLEY & CO. INCORPORATED
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
As Representatives of the several Underwriters,
c/o Morgan Stanley & Co. Incorporated
1585 Broadway, Floor 4
New York, NY 10036
Ladies and Gentlemen:
Annaly
Capital Management, Inc., a Maryland corporation (the “
Company ”), proposes to issue and sell to the
underwriters named in Schedule A annexed hereto (the “
Underwriters ”), for whom Morgan Stanley & Co.
Incorporated (“ Morgan Stanley ”) and Merrill
Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated are acting as representatives, an aggregate of
60,000,000 shares (the “ Firm Shares ”) of
common stock, $0.01 par value (the “ Common Stock
”), of the Company. In addition, solely for the purpose of
covering over-allotments, the Company proposes to grant to the
Underwriters the option to purchase from the Company up to an
additional 9,000,000 shares of Common Stock (the “
Additional Shares ”). The Firm Shares and the
Additional Shares are hereinafter collectively sometimes referred
to as the “ Shares .” The Shares are described
in the Prospectus which is referred to below.
The
Company has filed, in accordance with the provisions of the
Securities Act of 1933, as amended, and the rules and regulations
thereunder (collectively, the “ Securities Act
”), with the Securities and Exchange Commission (the “
Commission ”) an automatic shelf registration
statement on Form S-3 (File No. 333-134404), including a base
prospectus, with respect to the Shares, and which incorporates by
reference documents which the Company has filed or will file in
accordance with the provisions of the Securities Exchange Act of
1934, as amended, and the rules and regulations thereunder
(collectively, the “ Exchange Act ”), which
registration statement became effective upon filing under Rule
462(e) of the Securities Act. The Company has prepared a prospectus
supplement (the “ Prospectus Supplement ”) to
the base prospectus included as part of such registration statement
setting forth the terms of the offering, sale and plan of
distribution of the Shares and additional information concerning
the Company and its business. The Company has furnished to Morgan
Stanley, for use by the Underwriters and by dealers, copies of one
or more preliminary prospectuses, containing the base prospectus
included as part of such registration statement, as supplemented by
a preliminary Prospectus Supplement, and including the documents
incorporated in such base prospectus by reference (each, a “
Preliminary Prospectus ”), relating to the Shares.
Except where the context otherwise requires, such registration
statement, as amended when it became effective, including all
documents filed as part thereof or incorporated by reference
therein, and including any
information contained in a Prospectus (as defined
below) subsequently filed with the Commission pursuant to Rule
424(b) under the Securities Act, collectively, are herein called
the “ Registration Statement ,” and the base
prospectus, including all documents incorporated therein by
reference, included in the Registration Statement, as supplemented
by the Prospectus Supplement, in the form filed by the Company with
the Commission pursuant to Rule 424(b) and Rule 430(B) under the
Securities Act on or before the second Business Day (as defined
below) following the date of this Underwriting Agreement (the
“ Agreement ”) (or on such other day as the
parties may mutually agree), is herein called the “
Prospectus .” The Registration Statement at the time
it originally became effective is herein called the “
Original Registration Statement .” The information
included in such prospectus that was omitted from such registration
statement at the time it became effective but that is deemed to be
part of such registration statement at the time it became effective
pursuant to Rule 430B is referred to as “ Rule 430B
Information .” Any reference herein to the Registration
Statement, the Prospectus, any Preliminary Prospectus or any
amendment or supplement thereto shall be deemed to refer to and
include the documents incorporated by reference therein, and any
reference herein to the terms “amend,”
“amendment” or “supplement” with respect to
the Registration Statement, the Prospectus or any Preliminary
Prospectus shall be deemed to refer to and include the filing after
the execution hereof of any document with the Commission deemed to
be incorporated by reference therein. For purposes of this
Agreement, all references to the Registration Statement, the
Prospectus, any Preliminary Prospectus or to any amendment or
supplement thereto shall be deemed to include any copy filed with
the Commission pursuant to its Electronic Data Gathering Analysis
and Retrieval System (“ EDGAR ”), and such copy
shall be identical in content to any Prospectus or Preliminary
Prospectus delivered to the Underwriters for use in connection with
the offering of the Shares.
All
references in this Agreement to financial statements and schedules
and other information which is “contained,”
“included” or “stated” in the Registration
Statement, any Preliminary Prospectus or the Prospectus (or other
references of like import) shall be deemed to mean and include all
such financial statements and schedules and other information which
is incorporated by reference in or otherwise deemed by Securities
Act Regulations to be a part of or included in the Registration
Statement, any Preliminary Prospectus or the Prospectus, as the
case may be; and all references in this Agreement to amendments or
supplements to the Registration Statement, any preliminary
prospectus or the Prospectus shall be deemed to mean and include
the filing of any document under the Exchange Act which is
incorporated by reference in the Registration Statement, such
Preliminary Prospectus or the Prospectus, as the case may
be.
The
Company and the Underwriters agree as follows:
1. Sale and Purchase . Upon the basis of the
warranties and representations and subject to the terms and
conditions herein set forth, the Company agrees to issue and sell
the Firm Shares to the several Underwriters, and each of the
Underwriters, severally and not jointly, agrees to purchase from
the Company the respective number of Firm Shares (subject to such
adjustment as Morgan Stanley may determine to avoid fractional
shares) set forth opposite the name of such Underwriter in
Schedule A annexed hereto at a purchase price of $15.4636
per Share. The Company is advised by Morgan Stanley that the
Underwriters intend (i) to make a public offering of the Shares as
soon as the Underwriters deem advisable after this Agreement has
been executed and delivered and (ii) initially to offer the Firm
Shares upon the terms set
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forth in the Prospectus. The Underwriters may
from time to time increase or decrease the public offering price
after the initial public offering to such extent as they may
determine.
In
addition, the Company hereby grants to the several Underwriters the
option to purchase, and upon the basis of the warranties and
representations and subject to the terms and conditions herein set
forth, the Underwriters shall have the right to purchase, severally
and not jointly, from the Company ratably in accordance with the
number of Firm Shares to be purchased by each of them (subject to
such adjustment as Morgan Stanley shall determine to avoid
fractional shares), all or a portion of the Additional Shares as
may be necessary to cover over-allotments made in connection with
the offering of the Firm Shares, at the same purchase price per
share to be paid by the Underwriters to the Company for the Firm
Shares. This option may be exercised by Morgan Stanley on behalf of
the several Underwriters at any time and from time to time on or
before the thirtieth day following the date hereof, by written
notice to the Company. Each such notice shall set forth the
aggregate number of Additional Shares as to which the option is
being exercised and the date and time when Additional Shares are to
be delivered (such date and time being herein referred to as an
“ additional time of purchase ”); provided,
however , that an additional time of purchase shall not be (i)
earlier than the time of purchase (as defined below) or (ii) later
than the tenth Business Day after the date on which the option
shall have been exercised. The number of Additional Shares to be
sold to each Underwriter shall be the number which bears the same
proportion to the aggregate number of Additional Shares being
purchased as the number of Firm Shares set forth opposite the name
of such Underwriter on Schedule A hereto bears to the
aggregate number of Firm Shares (subject, in each case, to such
adjustment as Morgan Stanley may determine to eliminate fractional
shares). As used herein “ Business Day ” shall
mean a day on which the New York Stock Exchange (the “
NYSE ”) is open for trading and commercial banks in
the City of New York are open for business.
2.
Payment and Delivery . Payment of the purchase price for
the Firm Shares shall be made to the Company by federal funds wire
transfer against delivery of the certificates for the Firm Shares
to Morgan Stanley through the facilities of the Depository Trust
Company (“ DTC ”) for the respective accounts of
the Underwriters. Such payment and delivery shall be made at 10:00
A.M., New York City time, on May 19, 2008 (unless another time
shall be agreed to by Morgan Stanley and the Company or unless
postponed in accordance with the provisions of Section 8 hereof).
The time at which such payment and delivery are actually made is
herein sometimes called the “ time of purchase
.” Certificates for the Firm Shares shall be delivered to
Morgan Stanley, through the facilities of DTC, in definitive form
in such names and in such denominations as Morgan Stanley shall
specify no later than the second Business Day preceding the time of
purchase. For the purpose of expediting the checking of the
certificates for the Firm Shares by Morgan Stanley, the Company
agrees to make such certificates available to Morgan Stanley for
such purpose at least one full Business Day preceding the time of
purchase.
Payment
of the purchase price for Additional Shares shall be made at each
additional time of purchase in the same manner and at the same
office as the payment for the Firm Shares. Certificates for
Additional Shares shall be delivered to Morgan Stanley, through the
facilities of DTC, in definitive form in such names and in such
denominations as Morgan Stanley shall specify no later than the
second Business Day preceding each additional time of purchase. For
the purpose of expediting the checking of the certificates for
Additional Shares by
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Morgan Stanley, the Company agrees to make such
certificates available to Morgan Stanley for such purpose at least
one full Business Day preceding each additional time of
purchase.
3.
Representations and Warranties of the Company . The
Company represents and warrants to each of the Underwriters as of
the date hereof, the Applicable Time referred to in Section 3(c),
as of the time of purchase and, if applicable, at each additional
time of purchase that:
(a)
(1) At the time of filing the Original Registration Statement, (2)
at the time of the most recent amendment thereto for the purposes
of complying with Section 10(a)(3) of the Securities Act or
otherwise (whether such amendment was by post-effective amendment,
incorporated report filed pursuant to Section 13 or 15(d) of the
Exchange Act or form of prospectus), (3) at the time the Company or
any person acting on its behalf (within the meaning, for this
clause only, of Rule 163(c) of the Securities Act) made any offer
relating to the Shares in reliance on the exemption of Rule 163 of
the Securities Act and (4) at the date hereof, the Company was and
is a “well-known seasoned issuer” as defined in Rule
405 of the Securities Act (“ Rule 405 ”),
including not having been and not being an “ineligible
issuer” as defined in Rule 405. The Registration Statement is
an “automatic shelf registration statement,” as defined
in Rule 405, and the Shares, since their registration on the
Registration Statement, have been and remain eligible for
registration by the Company on a Rule 405 “automatic shelf
registration statement”. The Company has not received from
the Commission any notice pursuant to Rule 401(g)(2) of the
Securities Act objecting to the use of the automatic shelf
registration statement form.
At
the time of filing the Original Registration Statement, at the
earliest time thereafter that the Company or another offering
participant made a bona fide offer (within the meaning of Rule
164(h)(2) of the Securities Act) of the Shares and at the date
hereof, the Company was not and is not an “ineligible
issuer,” as defined in Rule 405.
(b)
The Original Registration Statement became effective upon filing
under Rule 462(e) of the Securities Act on May 23, 2006 and any
post-effective amendment thereto and also became effective upon
filing under Rule 462(e). The Registration Statement has been filed
with the Commission and has been deemed effective under the
Securities Act. The Company has not received, and has no notice of,
any order of the Commission preventing or suspending the use of the
Registration Statement, or threatening or instituting proceedings
for that purpose. Any statutes, regulations, contracts or other
documents that are required to be described in the Registration
Statement or the Prospectus or to be filed as exhibits to the
Registration Statement have been so described or filed. The
Prospectus Supplement has been or will be so prepared and will be
filed pursuant to Rule 424(b) of the Securities Act on or before
the second Business Day following the date of this Agreement or on
such other day as the parties may mutually agree. The Preliminary
Prospectus, at the time of filing thereof, conformed in all
material respects to the requirements of the Securities Act. Copies
of the Registration Statement, the Preliminary Prospectus and the
Prospectus, any such amendments or supplements and all documents
incorporated by reference therein that were filed with the
Commission on or prior to the date of this Agreement (including one
fully executed copy of each of the Registration Statement and of
each amendment thereto for the Underwriters) have been delivered to
the Underwriters and their counsel. The Company has not distributed
any offering material in
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connection with the offering or sale of the
Shares other than the Registration Statement, the Preliminary
Prospectus, the Prospectus, Issuer General Use Free Writing
Prospectuses (as defined below) or any other materials, if any,
permitted by the Securities Act.
(c)
Each part of the Registration Statement, when such part became
effective and at each deemed effective date with respect to the
Underwriters pursuant to Rule 430B(f)(2) of the Securities Act or
was or is filed with the Commission, and the Prospectus and any
amendment or supplement thereto, on the date of filing thereof with
the Commission and at the time of purchase and, if applicable, at
each additional time of purchase, conformed or will conform in all
material respects with the requirements of the Securities Act. Each
part of the Registration Statement, when such part became or
becomes effective or was or is filed with the Commission, did not
or will not contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary
to make the statements therein not misleading. The Prospectus and
any amendment or supplement thereto, on the date of filing thereof
with the Commission and at the time of purchase and, if applicable,
at each additional time of purchase, did not or will not include an
untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except
that the foregoing shall not apply to statements in, or omissions
from, any such document in reliance upon, and in conformity with,
written information concerning the Underwriters that was furnished
in writing to the Company by Morgan Stanley, on behalf of the
several Underwriters, specifically for use in the preparation
thereof.
(d)
As of the Applicable Time neither (x) the Issuer General Use Free
Writing Prospectus(es) (as defined below) issued at or prior to the
Applicable Time, the information included on Schedule C
hereto and the Statutory Prospectus (as defined below) as of the
Applicable Time, all considered together (collectively, the “
General Disclosure Package ”), nor (y) any individual
Issuer Limited Use Free Writing Prospectus, when considered
together with the General Disclosure Package, included any untrue
statement of a material fact or omitted to state any material fact
necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not
misleading.
As
used in this subsection and elsewhere in this Agreement:
“
Applicable Time ” means 6:00 pm (Eastern time) on May
13, 2008 or such other time as agreed by the Company and Morgan
Stanley.
“
Issuer Free Writing Prospectus ” means any
“issuer free writing prospectus,” as defined in Rule
433 of the Securities Act (“ Rule 433 ”),
relating to the Shares that (i) is required to be filed with the
Commission by the Company, (ii) is a “road show that is a
written communication” within the meaning of Rule
433(d)(8)(i) whether or not required to be filed with the
Commission or (iii) is exempt from filing pursuant to Rule
433(d)(5)(i) because it contains a description of the Shares or of
the offering that does not reflect the final terms, in each case in
the form filed or required to be filed with the Commission or, if
not required to be filed, in the form retained in the
Company’s records pursuant to Rule 433(g).
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“
Issuer General Use Free Writing Prospectus ” means any
Issuer Free Writing Prospectus that is intended for general
distribution to prospective investors, as evidenced by it being
specified in Schedule B hereto.
“
Issuer Limited Use Free Writing Prospectus ” means any
Issuer Free Writing prospectus that is not an Issuer General Use
Free Writing Prospectus.
“
Statutory Prospectus ” as of any time means the
prospectus relating to the Shares that is included in the
Registration Statement immediately prior to that time, including
any document incorporated by reference therein.
Each
Issuer Free Writing Prospectus, as of its issue date and at all
subsequent times through the completion of the public offer and
sale of the Shares or until any earlier date that the Company
notified or notifies Morgan Stanley as described in the next
sentence, did not, does not and will not include any information
that conflicted, conflicts or will conflict with the information
contained in the Registration Statement or the Prospectus,
including any document incorporated by reference therein, and any
preliminary or other prospectus deemed to be a part thereof that
has not been superseded or modified.
The
representations and warranties in this subsection shall not apply
to statements in or omissions from the Registration Statement, the
Prospectus or any Issuer Free Writing Prospectus made in reliance
upon and in conformity with written information furnished to the
Company by any Underwriter through Morgan Stanley expressly for use
therein.
(e)
The documents incorporated by reference in the Registration
Statement, the Prospectus or any amendment or supplement thereto,
when they were or are filed with the Commission under the
Securities Act or the Exchange Act, as the case may be, conformed
or will conform in all material respects with the requirements of
the Securities Act and the Exchange Act, as applicable and, when
read together with the other information in the Prospectus, (a) at
the time the Original Registration Statement became effective, (b)
at the earlier of time the Prospectus was first used and the date
and time of the first contract of sale of Shares in this offering
and (c) at the Applicable Time, did not and will not contain an
untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the
statements therein not misleading.
(f)
The consolidated financial statements of the Company, together with
the related schedules and notes thereto, set forth or included or
incorporated by reference in the Registration Statement, the
General Disclosure Package, and the Prospectus are accurate in all
material respects and fairly present the financial condition of the
Company as of the dates indicated and the results of operations,
changes in financial position, stockholders’ equity and cash
flows for the periods therein specified are in conformity with
generally accepted accounting principles consistently applied
throughout the periods involved (except as otherwise stated
therein). The selected financial and statistical data included or
incorporated by reference in the Registration Statement, and the
Prospectus present fairly the information shown therein and, to the
extent based upon or derived from the financial statements, have
been compiled on a basis consistent with the financial statements
presented therein. No other financial statements are
6
required to be set forth or to be incorporated by
reference in the Registration Statement or the Prospectus under the
Securities Act.
(g)
The Preliminary Prospectus was, and the Prospectus and the General
Disclosure Package delivered to the Underwriters for use in
connection with this offering will be, identical to the versions of
the Preliminary Prospectus, Prospectus and the General Disclosure
Package, respectively, created to be transmitted to the Commission
for filing via EDGAR, except to the extent permitted by Regulation
S-T.
(h)
The Company has been duly formed and incorporated and is validly
existing as a corporation in good standing under the laws of the
State of Maryland, is duly qualified to do business and is in good
standing as a foreign corporation in each jurisdiction in which its
ownership or lease of property or assets or the conduct of its
business requires such qualification, except where the failure to
so qualify would not have a material adverse effect on the
business, assets, properties, prospects, financial condition or
results of operation of the Company taken as a whole (a “
Material Adverse Effect ”), and has full corporate
power and authority necessary to own, hold, lease and/or operate
its assets and properties, to conduct the business in which it is
engaged and as described in the Prospectus and to enter into and
perform its obligations under this Agreement and to consummate the
transactions contemplated hereby, and the Company is in compliance
in all material respects with the laws, orders, rules, regulations
and directives issued or administered by such
jurisdictions.
(i)
The Company has no “significant subsidiaries” (as such
term is defined in Rule 1-02 of Regulation S-X promulgated under
the Securities Act) and does not own, directly or indirectly, any
shares of stock or any other equity or long-term debt securities of
any corporation or have any equity interest in any firm,
partnership, joint venture, association or other entity, except for
Fixed Income Discount Advisory Company (“ FIDAC
”), Chimera Investment Corporation and FIDAC Housing Cycle
Fund LLC. Complete and correct copies of the articles of
incorporation and of the bylaws of the Company and all amendments
thereto have been delivered to Morgan Stanley and, except as set
forth in the exhibits to, or incorporated by reference into, the
Registration Statement, no changes therein will be made subsequent
to the date hereof and prior to the time of purchase or, if
applicable, each additional time of purchase.
(j)
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
result in any breach of, or constitute a default under), (i) its
articles of incorporation or bylaws or (ii) any obligation,
agreement, covenant or condition contained in any contract,
license, repurchase agreement, indenture, mortgage, deed of trust,
bank loan or credit agreement, note, lease or other evidence of
indebtedness, or any lease, contract or other agreement or
instrument to which the Company is a party or by which it or any of
its assets or properties may be bound or affected, the effect of
which breach or default under clause (ii) could have a Material
Adverse Effect. The execution, delivery and performance of this
Agreement, the issuance and sale of the Shares and the consummation
of the transactions contemplated hereby will not conflict with, or
result in any breach of, constitute a default under or a Repayment
Event (as defined below) under (nor constitute any event which with
notice, lapse of time, or both would result in any breach of,
constitute a default under or a Repayment Event under), (i) any
provision of the articles of incorporation or bylaws of the
Company, (ii) any provision of any contract, license,
repurchase
7
agreement, indenture, mortgage, deed of trust,
bank loan or credit agreement, note, lease or other evidence of
indebtedness, or any lease, contract or other agreement or
instrument to which the Company is a party or by which the Company
or any of its assets or properties may be bound or affected, the
effect of which could have a Material Adverse Effect, or (iii)
under any federal, state, local or foreign law, regulation or rule
or any decree, judgment or order applicable to the Company. As used
herein, a “ Repayment Event ” means any event or
condition which gives the holder of any note, debenture or other
evidence of indebtedness (or any person acting on such
holder’s behalf) the right to require the repurchase,
redemption or repayment of all or a portion of such indebtedness by
the Company or any subsidiary.
(k)
As of March 31, 2008, as of the date of this Agreement and as of
the time of purchase, the Company had, has or will have an
authorized, issued and outstanding capitalization as set forth
under the headings “Actual,” and “As Adjusted for
this offering” respectively, in the section of the Prospectus
Supplement entitled “Capitalization.” All of the issued
and outstanding shares of capital stock, including the Common Stock
of the Company, have been duly and validly authorized and issued
and are fully paid and non-assessable, have been issued in
compliance with all federal and state securities laws and were not
issued in violation of any preemptive right, resale right, right of
first refusal or similar right.
(l)
This Agreement has been duly authorized, executed and delivered by
the Company.
(m)
The capital stock of the Company, including the Shares, conforms
and will conform in all material respects to the description
thereof contained in the Registration Statement, General Disclosure
Package and the Prospectus and such description conforms to the
rights set forth in the instruments defining the same. The
certificates for the Shares are in due and proper form and the
holders of the Shares will not be subject to personal liability by
reason of being such holders.
(n)
The Shares have been duly and validly authorized by the Company for
issuance and sale pursuant to this Agreement and, when issued and
delivered against payment therefor as provided herein, will be duly
and validly issued and fully paid and non-assessable, free and
clear of any pledge, lien, encumbrance, security interest or other
claim, and will be registered pursuant to Section 12 of the
Exchange Act.
(o)
No approval, authorization, consent or order of or filing with any
national, state or local governmental or regulatory commission,
board, body, authority or agency is required in connection with the
issuance and sale of the Shares or the consummation by the Company
of the transaction contemplated hereby other than (i) registration
of the Shares under the Securities Act, (ii) any necessary
qualification under the securities or blue sky laws of the various
jurisdictions in which the Shares are being offered by the
Underwriters, or (iii) such approvals as have been obtained in
connection with the approval of the listing of the Shares on
NYSE.
(p)
No person, as such term is defined in Rule 1-02 of Regulation S-X
promulgated under the Securities Act (each, a “ Person
”), has the right, contractual or otherwise, to cause the
Company to issue to it any shares of capital stock or other
securities of the Company
8
upon the issue and sale of the Shares to the
Underwriters hereunder, nor does any Person have preemptive rights,
co-sale rights, rights of first refusal or other rights to purchase
or subscribe for any of the Shares or any securities or obligations
convertible into or exchangeable for, or any contracts or
commitments to issue or sell any of, the Shares or any options,
rights or convertible securities or obligations, other than those
that have been expressly waived prior to the date
hereof.
(q)
Deloitte & Touche LLP (the “ Accountants ”),
whose report on the consolidated financial statements of the
Company is filed with the Commission as part of the Registration
Statement and the Prospectus, are and, during the periods covered
by their reports, were independent public accountants as required
by the Securities Act.
(r)
The Company has all necessary licenses, authorizations, consents
and approvals and has made all necessary filings required under any
federal, state, local or foreign law, regulation or rule, and has
obtained all necessary permits, authorizations, consents and
approvals from other Persons, in order to conduct its business as
described in the Prospectus, except as such as could not have a
Material Adverse Effect. The Company is not required by any
applicable law to obtain accreditation or certification from any
governmental agency or authority in order to provide the products
and services which it currently provides or which it proposes to
provide as set forth in the Prospectus. The Company is not in
violation of, or in default under, any such license, permit,
authorization, consent or approval or any federal, state, local or
foreign law, regulation or rule or any decree, order or judgment
applicable to the Company, the effect of which could have a
Material Adverse Effect.
(s)
The descriptions in the Registration Statement, the General
Disclosure Package and the Prospectus of the legal or governmental
proceedings, contracts, leases and other legal documents therein
described present fairly the information required to be shown, and
there are no legal or governmental proceedings, contracts, leases,
or other documents of a character required to be described in the
Registration Statement, the General Disclosure Package or the
Prospectus or to be filed as exhibits to the Registration Statement
which are not described or filed as required. All agreements
between the Company and third parties expressly referenced in the
General Disclosure Package and Prospectus are legal, valid and
binding obligations of the Company enforceable in accordance with
their respective terms, except to the extent enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors’ rights generally and by
general equitable principles.
(t)
There are no actions, suits, claims, investigations, inquiries or
proceedings pending or, to the best of the Company’s
knowledge, threatened to which the Company or any of its officers
or directors is a party or of which any of its properties or other
assets is subject at law or in equity, or before or by any federal,
state, local or foreign governmental or regulatory commission,
board, body, authority or agency which could result in a judgment,
decree or order having a Material Adverse Effect.
(u)
Subsequent to the respective dates as of which information is given
in the Registration Statement, the General Disclosure Package
(including as of the Applicable Time), and the Prospectus, there
has not been (i) any material adverse change, or any development
which would reasonably be expected to cause a material adverse
change, in the business,
9
properties or assets described or referred to in
the Registration Statement, the General Disclosure Package, or the
Prospectus, or the results of operations, condition (financial or
otherwise), net worth, business, prospects or operations of the
Company taken as a whole, (ii) any transaction which is material to
the Company, except transactions in the ordinary course of
business, (iii) any obligation, direct or contingent, which is
material to the Company taken as a whole, incurred by the Company,
except obligations incurred in the ordinary course of business,
(iv) any change in the capital stock or, except in the ordinary
course of business, outstanding indebtedness of the Company, or (v)
except for regular quarterly dividends on the shares of Series A
cumulative redeemable preferred stock and the Series B cumulative
convertible preferred stock, (collectively, the “
Preferred Stock ”) and Common Stock in amounts per
share that are consistent with past practice, any dividend or
distribution of any kind declared, paid or made by the Company on
any class of its capital stock. The Company has no material
contingent obligation which is not disclosed in the Registration
Statement, the General Disclosure Package, or the
Prospectus.
(v)
There are no Persons with registration or other similar rights to
have any equity or debt securities, including securities which are
convertible into or exchangeable for equity securities, registered
pursuant to the Registration Statement or otherwise registered by
the Company under the Securities Act.
(w)
The Company (i) does not have any issued or outstanding preferred
stock, or other than the Preferred Stock, or (ii) has not defaulted
on any installment on indebtedness for borrowed money or on any
rental on one or more long term leases, which defaults would have a
Material Adverse Effect on the financial position of the Company.
The Company has not filed a report pursuant to Section 13(a) or
15(d) of the Exchange Act since the filing of its last Annual
Report on Form 10-K, indicating that it (i) has failed to pay any
dividend or sinking fund installment on preferred stock or (ii) has
defaulted on any installment on indebtedness for borrowed money or
on any rental on one or more long term leases, which defaults would
have a Material Adverse Effect on the financial position of the
Company.
(x)
Each of the Company and its officers, directors and controlling
Persons has not, directly or indirectly, (i) taken any action
designed to cause or to result in, or that has constituted or which
might reasonably be expected to constitute, the stabilization or
manipulation of the price of the Common Stock to facilitate the
sale of the Shares, or (ii) since May 9, 2008 (except pursuant to
the Company’s dividend reinvestment and share purchase plan
(the “ DRSPP ”) and pursuant to this Agreement)
(A) sold, bid for, purchased, or paid anyone any compensation for
soliciting purchases of, the Shares or (B) paid or agreed to pay to
any Person any compensation for soliciting another to purchase any
other securities of the Company.
(y)
The shares have been approved for listing on the NYSE, subject only
to official notice of issuance.
(z)
Neither the Company nor any of its affiliates (i) is required to
register as a “broker” or “dealer” in
accordance with the provisions of the Exchange Act or (ii) directly
or indirectly through one or more intermediaries, controls or has
any other association with (within the meaning of Article I of the
Bylaws of the National Association of Securities Dealers (“
NASD ”)) any member firm of the NASD.
10
(aa)
Any certificate signed by any officer of the Company delivered to
Morgan Stanley or to counsel for the Underwriters pursuant to or in
connection with this Agreement shall be deemed a representation and
warranty by the Company to each Underwriter as to the matters
covered thereby.
(bb)
As of the date of this Agreement, the investment portfolio of the
Company (i) consists entirely of (a) mortgage-backed securities
guaranteed, as to payments of principal and interest, by either the
Federal Home Loan Mortgage Corporation, the Federal National
Mortgage Association or the Government National Mortgage
Association, (b) Federal Home Loan Bank, Federal Home Loan Mortgage
Corporation, or Federal National Mortgage Association debentures
(c) membership interests in FIDAC Housing Cycle Fund LLC and (d)
stock ownership in Chimera Investment Corporation and (ii) all of
the mortgage-backed securities described in clause (i)(a) above are
REIT (as defined below) eligible assets. As of the date of this
Agreement, the Company has no plan or intention to materially alter
(i) its capital investment policy or (ii) except in accordance with
its capital investment policy, the percentage of its investment
portfolio that is invested in mortgage-backed securities which are
guaranteed, as to payments of principal and interest, by either the
Federal Home Loan Mortgage Corporation, the Federal National
Mortgage Association or the Government National Mortgage
Association. The Company has good and marketable title to all of
the properties and assets owned by it, in each case free and clear
of any security interests, liens, encumbrances, equities, claims
and other defects (except for any security interest, lien,
encumbrance or claim that may otherwise exist under any applicable
repurchase agreement), except such as do not have a Material
Adverse Effect and do not interfere with the use made or proposed
to be made of such property or asset by the Company, and except as
described in or contemplated by the Prospectus and the General
Disclosure Package. The Company owns no real property. Any real
property and buildings held under lease by the Company are held
under valid, existing and enforceable leases, with such exceptions
as are disclosed in the Prospectus or are not material and do not
interfere with the use made or proposed to be made of such property
and buildings by the Company.
(cc)
The Company has filed all federal, state and foreign income and
franchise tax returns required to be filed on or prior to the date
hereof and has paid taxes shown as due thereon (or that are
otherwise due and payable), other than taxes which are being
contested in good faith and for which adequate reserves have been
established in accordance with generally accepted accounting
principles. The Company has no knowledge, after due inquiry, of any
tax deficiency which has been asserted or threatened against the
Company. To the knowledge of the Company, there are no tax returns
of the Company that are currently being audited by federal, state
or local taxing authorities or agencies which would have a Material
Adverse Effect.
(dd)
The Company owns or possesses adequate license or other rights to
use all patents, trademarks, service marks, trade names,
copyrights, software and design licenses, trade secrets,
manufacturing processes, other intangible property rights and
know-how (collectively, “ Intangibles ”)
necessary to entitle the Company to conduct its business as
described in the Prospectus, and the Company has not received
notice of infringement of or conflict with (and the Company knows
of no such infringement of or conflict with) asserted rights of
others with respect to any Intangibles which could have a Material
Adverse Effect.
11
(ee)
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 as applied
in the United States and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with
management’s general or specific authorization, and (iv) the
recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(ff)
The Company has established and maintains disclosure controls and
procedures (as such term is defined in Rule 13a-14 and 15d-14 under
the Exchange Act); such disclosure controls and procedures are
designed to ensure that material information relating to the
Company is made known to the Company’s Chief Executive
Officer and its Chief Financial Officer, and such disclosure
controls and procedures are effective to perform the functions for
which they were established; any significant material weaknesses in
internal controls have been identified for the Company’s
Chief Executive Officer and its Chief Financial Officer; and since
the date of the most recent evaluation of such disclosure controls
and procedures, there have been no significant changes in internal
controls or in other factors that could significantly affect
internal controls.
(gg)
The Company is insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as
are prudent and customary in the business in which it is engaged.
The Company has no reason to believe that it will not be able to
renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may
be necessary to continue its business at a cost that would not have
a Material Adverse Effect.
(hh)
The Company is not in violation, and has not received notice of any
violation with respect to, any applicable environmental, safety or
similar law applicable to the business of the Company. The Company
has received all permits, licenses or other approvals required of
them under applicable federal and state occupational safety and
health and environmental laws and regulations to conduct its
business, and the Company is in compliance with all terms and
conditions of any such permit, license or approval, except any such
violation of law or regulation, failure to receive required
permits, licenses or other approvals or failure to comply with the
terms and conditions of such permits, licenses or approvals which
could not, singly or in the aggregate, have a Material Adverse
Effect.
(ii)
The Company has not incurred any liability for any finder’s
fees or similar payments in connection with the transactions herein
contemplated, except as may otherwise exist with respect to the
Underwriters pursuant to this Agreement.
(jj)
There are no existing or threatened labor disputes with the
employees of the Company which are likely to have individually or
in the aggregate a Material Adverse Effect.
(kk)
Neither the Company nor, to the knowledge of the Company, any
employee or agent of the Company, has made any payment of funds of
the Company or received or retained any funds in violation of any
law, rule or regulation or of a character required to be
12
disclosed in the Prospectus. No relationship,
direct or indirect, exists between or among the Company, on the one
hand, and the directors, officers and stockholders of the Company,
on the other hand, which is required by the Securities Act to be
described in the Registration Statement and the Prospectus that is
not so described.
(ll)
The Company, since its date of inception, has been, and upon the
sale of the Shares will continue to be, organized and operated in
conformity with the requirements for qualification and taxation as
a “real estate investment trust” (a “ REIT
”) under Sections 856 through 860 of the Internal Revenue
Code of 1986, as amended (the “ Code ”), for all
taxable years commencing with its taxable year ended December 31,
1997. The proposed method of operation of the Company as described
in the Prospectus will enable the Company 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 cause such qualification to be
lost. The Company intends to continue to operate in a manner which
would permit it to qualify as a REIT under the Code. The Company
has no intention of changing its operations or engaging in
activities which would cause it to fail to qualify, or make
economically undesirable its continued qualification, as a
REIT.
(mm)
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 terms are defined in the Investment Company
Act of 1940, as amended (the “ Investment Company Act
”).
(nn)
No relationship, direct or indirect, exists between or among the
Company, on the one hand, and the directors, officers, stockholders
or directors of the Company, on the other hand, which is required
by the rules of the NASD to be described in the Registration
Statement and the Prospectus which is not so described.
(oo)
The Company has not, directly or indirectly, including through any
subsidiary, extended credit, arranged to extend credit, or renewed
any extension of credit, in the form of a personal loan, to or for
any director or executive officer of the Company, or to or for any
family member or affiliate of any director or executive officer of
the Company.
(pp)
Neither the Company nor any of the subsidiaries nor, to the
Company’s knowledge, any employee or agent of the Company or
the subsidiaries has made any payment of funds of the Company or
the subsidiaries or received or retained any funds in violation of
any law, rule or regulation, which payment, receipt or retention of
funds is of a character required to be disclosed in the
Registration Statement or the Prospectus.
(qq)
The Company is in compliance with all presently applicable
provisions of the Sarbanes-Oxley Act of 2002 and the rules and
regulations promulgated thereunder (the “ Sarbanes-Oxley
Act ”) and is actively taking steps to ensure that it
will be in compliance with other applicable provisions of the
Sarbanes-Oxley Act upon the effectiveness of such
provisions.
(rr)
The Registration Statement is not the subject of a pending
proceeding or examination under Section 8(d) or 8(e) of the
Securities Act, and the Company is not the subject
13
of a pending proceeding under Section 8A of the
Securities Act in connection with the offering of the
Shares.
4. Certain Covenants of the Company . The Company
hereby covenants and agrees with each of the Underwriters
that:
(a)
The Company will furnish such information as may be required and
otherwise will cooperate in qualifying the Shares for offering and
sale under the securities or blue sky laws of such jurisdictions
(both domestic and foreign) as Morgan Stanley may designate and to
maintain such qualifications in effect so long as required for the
distribution of the Shares, provided that the Company shall not be
required to qualify as a foreign corporation or to consent to the
service of process under the laws of any such jurisdiction (except
service of process with respect to the offering and sale of the
Shares). The Company will promptly advise Morgan Stanley of the
receipt by the Company of any notification with respect to the
suspension o
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