EXECUTION VERSION
CHIMERA INVESTMENT CORPORATION
235,000,000 Shares
Common Stock
($0.01 Par Value)
UNDERWRITING AGREEMENT
April 15, 2009
Exhibit 1.1
UNDERWRITING AGREEMENT
April 15, 2009
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
CREDIT SUISSE SECURITIES (USA) LLC
DEUTSCHE BANK SECURITIES INC.
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:
Chimera
Investment Corporation, 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 ”), Credit Suisse Securities (USA) LLC
and Deutsche Bank Securities Inc. are acting as representatives, an
aggregate of 235,000,000 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 35,250,000 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 ”) a registration statement on Form S-3
(File No. 333-156455), as amended, 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 ”). Promptly after execution
and delivery of this Agreement, the Company will prepare and file a
prospectus supplement (the “Prospectus Supplement”) to
the base prospectus in accordance with the provisions of Rule 430A
(“ Rule 430A ”) of the rules and regulations of
the Commission under the Securities Act (the “ Securities
Act Regulations ”) and paragraph (b) of Rule 424 (“
Rule 424(b) ”) of the Securities Act Regulations. 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 paragraph (b) of Rule 430A is
referred to as “ Rule 430A Information .” Each
prospectus used before such registration statement became
effective, and any prospectus that omitted the Rule 430A
Information, that was used after such effectiveness and prior to
the execution and delivery of this Underwriting Agreement (the
“ Agreement ”), is herein called a “
Preliminary Prospectus .” 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,
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 the Rule 430A
Information, collectively, are herein called the “
Registration Statement .” Any registration statement
filed pursuant to Rule 462(b) of the Securities Act Regulations is
herein referred to as the “ Rule 462(b) Registration
Statement ,” and after such filing the term
“Registration Statement” shall include the Rule 462(b)
Registration Statement. The base prospectus, including all
documents incorporated by reference therein, 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 430A under the Securities Act on
or before the second Business Day (as defined below) following the
date of this Agreement (or on such other day as the parties may
mutually agree), is herein called the “ Prospectus
.” 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 to any of
the foregoing 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.
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 $2.8725 per
Share. The Company is advised by Merrill Lynch 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 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.
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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 (any 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 April 21, 2009
(unless another time shall be agreed to by Merrill Lynch and the
Company or unless postponed in accordance with the provisions of
Section 10 hereof). The time at which any 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. 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.
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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)
The Company meets the requirements for use of Form S-3 under the
Securities Act. Each of the Registration Statement, any Rule 462(b)
Registration Statement and any post-effective amendment thereto has
become 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, any
Rule 462(b) Registration Statement or any post-effective amendment
thereto, 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 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, of any Rule 462(b) 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 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.
(b)
Each part of the Registration Statement, any Rule 462(b)
Registration Statement and any post-effective amendment thereto,
when such part became or becomes effective 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, any Rule 462(b) Registration Statement and
any post-effective amendment thereto, 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, any
Preliminary Prospectus and any amendment or supplement thereto, at
their respective times of issuance 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.
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(c)
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 7:30AM (Eastern time) on April
16, 2009 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).
“
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, 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.
(d)
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
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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 required to be
set forth or to be incorporated by reference in the Registration
Statement or the Prospectus under the Securities Act.
(e)
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.
(f)
The Company has been duly formed and incorporated and is 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.
(g)
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, except for the equity of Chimera
Securities Holdings, LLC, 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. 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.
(h)
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
6
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 this 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 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.
(i)
As of December 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,” 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.
(j)
This Agreement has been duly authorized, executed and delivered by
the Company.
(k)
The management agreement (the “ Management Agreement
”), entered into between the Company and Fixed Income
Discount Advisory Company (the “ Manager ”) on
November 21, 2007, as amended on October 13, 2008 and October 19,
2008, has been duly authorized by the Company, and constitutes a
valid and binding agreement of the Company enforceable in
accordance with its terms, except to the extent that enforcement
thereof may be limited by bankruptcy, insolvency, reorganization or
other laws affecting enforcement of creditors’ rights or by
general equitable principles.
(l)
The stock purchase agreement (the “ Stock Purchase
Agreement ”), to be entered into prior to the time of
purchase between the Company and Annaly Capital Management, Inc.
(“ Annaly ”) relating to the sale of the
Company’s Common Stock to Annaly (the “ Annaly
Sale ”) has been duly authorized by the Company, and when
executed and delivered, will constitute a valid and binding
agreement of the Company enforceable in accordance with its terms,
except to the extent that enforcement thereof may be limited by
bankruptcy, insolvency, reorganization or other laws affecting
enforcement of creditors’ rights or by general equitable
principles.
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(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 the
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 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 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 except as such as could not
have a Material Adverse Effect. 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
8
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, 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) other than the
Annaly Sale, 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) other than the
Annaly Sale, any change in the capital stock or, except in the
ordinary course of business, outstanding indebtedness of the
Company, or (v) 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 (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.
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(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) except pursuant to the Annaly Sale 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 Financial Industry Regulatory Authority (“
FINRA ”)) any member firm of the FINRA.
(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 Company has no plan or
intention to materially alter its capital investment policy or
investment allocation strategy, both as described in the
Prospectus. 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
10
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.
(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.
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(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 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, and the regulations and published
interpretations thereunder (collectively, the “ Code
”), for all taxable years commencing with its taxable year
ended December 31, 2007. 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 FINRA 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.
12
(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 of a pending
proceeding under Section 8A of the Securities Act in connection
with the offering of the Shares.
4. Representations and Warranties of the Manager .
The Manager represents and warrants to each of the Underwriters as
of the date hereof, the Applicable Time, as of the time of purchase
and, if applicable, at each additional time of purchase
that:
(a)
The information regarding the Manager set forth under the headings
(i) “Prospectus Supplement Summary – Our
Manager,” “Prospectus Summary – Our
Manager”, and “Risk Factors – Risks Associated
With our Management and Relationship With our Manager” in the
Prospectus, and (ii) “Business – Our Manager”,
“Business – The Management Agreement”,
“Risk Factors – Risks Associated With our Management
and Relationship With our Manager”, and
“Management’s Discussion and Analysis of Financial
Condition and Results of Operations – Management Agreement
and Related Party Transactions – Management Agreement”
in the Company’s annual report on Form 10-K for the year
ended December 31, 2008, incorporated by reference in the
Registration Statement (collectively, the “ Manager
Package ”) is true and correct in all material
respects.
(b)
The Manager has been duly formed and incorporated and is existing
as a corporation in good standing under the laws of the State of
Delaware, 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, 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 the Management
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.
(c)
This Agreement and the transactions contemplated to be consummated
by the Manager in this Agreement and the Prospectus have been duly
and validly authorized by the Manager and this Agreement has been
duly and validly executed and delivered by the Manager.
(d)
The Management Agreement has been duly authorized, executed and
delivered by the Manager and constitutes a valid and binding
agreement of the Manager enforceable in accordance with its terms,
except to the extent that enforcement thereof may be limited by
bankruptcy, insolvency, reorganization or other laws affecting
enforcement of creditors’ rights or by general equitable
principles.
13
(e)
The Manager 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
certificate 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 Manager 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 this clause (ii) could have a
Material Adverse Effect. The execution, delivery and performance of
this Agreement and the consummation of the transactions
contemplated hereby will not conflict with, or result in any breach
of or constitute a default under (nor constitute any event which
with notice, lapse of time, or both would result in any breach of
or constitute a default under), (i) any provision of the
certificate of incorporation or bylaws of the Manager, (ii) any
provision of 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 Manager is a
party or by which the Manager 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 Manager.
(f)
(A) No filing with, or authorization, approval, consent, license,
order, registration, qualification or decree of, any court or
governmental authority or agency, domestic or foreign, (B) no
authorization, approval, vote or other consent of any stockholder
or creditor of the Manager and (C) no waiver or consent under 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 Manager is a party or by which the
Manager or any of its assets or properties may be bound or
affected, and (D) no authorization, approval, vote or other consent
of any other person or entity, is necessary or required for the
performance by the Manager of its obligations under this Agreement
or the Management Agreement and the transactions contemplated
thereby, in each case on the terms contemplated by the Prospectus,
except such as have been already obtained.
(g)
The Manager 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 Manager 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 except as such as could not
have a Material Adverse Effect. The Manager 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 Manager, the effect of which could have a Material Adverse
Effect.
(h)
There are no actions, suits, claims, investigations, inquiries or
proceedings pending or, to the best of the Manager’s
knowledge, threatened to which the Manager or any of its officers
or directors is a party or of which any of its properties or other
assets is subject at law
14
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.
(i)
The Manager is not prohibited by the Investment Advisers Act of
1940, as amended, or the rules and regulations thereunder, from
performing under the Management Agreement as contemplated by the
Management Agreement and the Prospectus.
5. 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 qualifica
