EXECUTION COPY
ANNALY CAPITAL MANAGEMENT, INC.
47,000,000 Shares
Common Stock
($0.01 Par Value)
UNDERWRITING AGREEMENT
July 12, 2007
UNDERWRITING AGREEMENT
July 12, 2007
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Citigroup Global Markets Inc.
UBS Securities LLC
As Representatives of the several Underwriters,
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
4 World Financial Center
New York, New York 10080
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 Merrill Lynch &
Co., Merrill
Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"),
Citigroup Global
Markets Inc. and UBS Securities LLC are acting as representatives,
an aggregate
of 47,000,000 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 7,050,000 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 Merrill
Lynch, 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
Merrill Lynch may determine to avoid fractional shares) set forth
opposite the
name of such Underwriter in Schedule A annexed hereto at a purchase
price of
$13.335 per Share. The Company is advised by Merrill Lynch that the
Underwriters
intend (i) to make a
2
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 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 Merrill Lynch 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 Merrill Lynch 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
Merrill Lynch 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 Merrill Lynch
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 July 18, 2007 (unless another time shall be
agreed to by
Merrill Lynch 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 Merrill Lynch, through
the facilities
of DTC, in definitive form in such names and in such denominations
as Merrill
Lynch 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 Merrill Lynch, the Company agrees to make such
certificates
available to Merrill Lynch 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 Merrill Lynch, through the facilities of DTC, in
definitive form in
such names and in such denominations as Merrill Lynch shall specify
no later
than the second Business Day preceding each additional time of
purchase.
3
For the purpose of expediting the checking of the certificates for
Additional
Shares by Merrill Lynch, the Company agrees to make such
certificates available
to Merrill Lynch 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
4
Underwriters and their counsel. The Company has not distributed any
offering
material in 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
Merrill Lynch, 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 8:00 am (Eastern time) on July 13,
2007 or such
other time as agreed by the Company and Merrill Lynch.
"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).
5
"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 Merrill Lynch 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 Merrill
Lynch 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") 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
Merrill Lynch
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, 2007, 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 July 9,
2007 (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
Merrill Lynch 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 and
(c) membership interests in FIDAC Housing Cycle Fund LLC 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 Merrill Lynch 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 Merrill Lynch of the receipt by the
Company of any
notification with respect to the suspension of the qualification of
the Shares
for sale in any jurisdiction or the initiation or threatening of
any proceeding
for such purpose.
(b) The Company will prepare the Prospectus in a form in
compliance
with Rule 430(B) or Rule 430(C) and approved by the Underwriters
and file such
Prospectus with the Commission pursuant to Rule 424(b) under the
Securities Act
not later than 10:00 A.M. (New York City time), on or before the
second Business
Day following the date of this Agreement or on such other day as
the parties may
mutually agree and to furnish promptly (and with
|
