ANNALY MORTGAGE MANAGEMENT, INC.
2,750,000 Shares
7.875% Series A Cumulative Redeemable Preferred Stock
Liquidation Preference $25.00 per share
UNDERWRITING AGREEMENT
October 14, 2004
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UNDERWRITING AGREEMENT
October 14, 2004
BEAR, STEARNS & CO. INC.
As Representative of the several underwriters,
c/o Bear, Stearns & Co. Inc.
383 Madison Avenue
New York, NY 10179
Ladies and Gentlemen:
Annaly Mortgage 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 Bear, Stearns & Co. Inc. ("Bear
Stearns") is acting as representative, an aggregate of 2,750,000 shares (the
"Firm Shares") of 7.875% Series A cumulative redeemable preferred stock, $0.01
par value (liquidation preference $25.00 per share) (the "Series A Preferred
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 412,500 shares of Series A
Preferred 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.
333-105987), 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"). 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 Bear Stearns, 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 and also including any other registration statement
filed pursuant to Rule 462(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) 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." 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.
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
Bear Stearns may determine to avoid fractional shares) set forth opposite the
name of such Underwriter in SCHEDULE A annexed hereto at a purchase price of
$23.5668 per Share. The Company is advised by Bear Stearns 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.
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 Bear Stearns 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 Bear Stearns on behalf of the
several Underwriters at any time (but not more than once) on or before the
thirtieth day following the date hereof, by written notice to the Company. 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 the Additional Shares are
to be delivered (such date and time being herein referred to as the "additional
time of purchase"); PROVIDED, HOWEVER, that the 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
Bear Stearns 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 Bear Stearns 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 October 19, 2004 (unless another time shall be agreed to by
Bear Stearns 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
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Shares shall be delivered to Bear Stearns, through the facilities of DTC, in
definitive form in such names and in such denominations as Bear Stearns 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 Bear Stearns, the Company agrees to make such certificates available
to Bear Stearns for such purpose at least one full Business Day preceding the
time of purchase.
Payment of the purchase price for the Additional Shares shall be made
at the additional time of purchase in the same manner and at the same office as
the payment for the Firm Shares. Certificates for the Additional Shares shall be
delivered to Bear Stearns, through the facilities of DTC, in definitive form in
such names and in such denominations as Bear Stearns shall specify no later than
the second Business Day preceding the additional time of purchase. For the
purpose of expediting the checking of the certificates for the Additional Shares
by Bear Stearns, the Company agrees to make such certificates available to Bear
Stearns for such purpose at least one full Business Day preceding the additional
time of purchase.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to each of the Underwriters that:
(a) The Company meets the requirements for use of Form S-3 under the
Securities Act. The Registration Statement has been filed with the Commission
and has been declared effective under the Securities Act. The Company has not
received, and has no notice of, any order of the Commission preventing or
suspending the use of the Registration Statement, or threatening or instituting
proceedings for that purpose. Any statutes, regulations, contracts or other
documents that are required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits to the Registration Statement have been so
described or filed. The Prospectus Supplement has been or will be so prepared
and will be filed pursuant to Rule 424(b) of the Securities Act on or before the
second Business Day following the date of this Agreement or on such other day as
the parties may mutually agree. The Preliminary Prospectus, at the time of
filing thereof, conformed in all material respects to the requirements of the
Securities Act. Copies of the Registration Statement, the Preliminary Prospectus
and the Prospectus, any such amendments or supplements and all documents
incorporated by reference therein that were filed with the Commission on or
prior to the date of this Agreement (including one fully executed copy of each
of the Registration Statement and of each amendment thereto for the
Underwriters) have been delivered to the Underwriters and their counsel. The
Company has not distributed any offering material in connection with the
offering or sale of the Shares other than the Registration Statement, the
Preliminary Prospectus, the Prospectus or any other materials, if any, permitted
by the Securities Act.
(b) Each part of the Registration Statement, 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 the 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 the 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 Bear Stearns, on
behalf of the several Underwriters, specifically for use in the preparation
thereof.
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(c) The documents incorporated by reference in the Registration
Statement, the Prospectus or any amendment or supplement thereto, when they
became or become effective under the Securities Act or 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, except that with respect to
the Form S-4 registration statement filed by the Company on March 10, 2004, this
representation is limited to the proxy statement information contained therein.
(d) The 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 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 delivered to the
Underwriters for use in connection with this offering will be, identical to the
versions of the Preliminary Prospectus and Prospectus, 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 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.
(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
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").
(h) Complete and correct copies of the articles of amendment and
restatement and of the bylaws of the Company and all amendments and supplements
thereto have been delivered to Bear Stearns. On or prior to the time of
delivery, the Company will have executed and filed with the State Department of
Assessments and Taxation of Maryland (the "SDAT") Articles Supplementary
("Articles Supplementary") to the articles of amendment and restatement, as
amended of the Company establishing the terms of the Shares offered hereby. The
Series A Preferred Stock will conform to all statements relating thereto
contained in the Prospectus and such description will conform to the rights set
forth in the Articles Supplementary.
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(i) 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 amendment and
restatement, as amended and supplemented 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 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 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.
(j) 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.
(k) This Agreement has been duly authorized, executed and delivered by
the Company and is a legal, valid and binding agreement of the Company
enforceable in accordance with its terms, except to the extent that (i)
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights generally and by general
equitable principles and (ii) the indemnification and contribution provisions of
Sections 9 and 10 hereof may be limited by federal or state securities laws and
public policy considerations in respect thereof.
(l) The capital stock of the Company, including the Shares, conforms in
all material respects to the description thereof contained in the Registration
Statement 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.
(m) 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.
(n) 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 to be obtained in connection with the approval of the
listing of the Shares on NYSE.
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(o) 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.
(p) 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.
(q) 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.
(r) The descriptions in the Registration Statement 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
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 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.
(s) 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.
(t) During the period of at least the last 24 calendar months prior to
the date of this Agreement, the Company has timely filed with the Commission all
documents and other material required to be filed pursuant to Sections 13, 14
and 15(d) under the Exchange Act. During the period of at least the last 36
calendar months preceding the filing of the Registration Statement, the Company
has filed all reports required to be filed pursuant to Sections 13, 14 and 15(d)
under the Exchange Act. As of the date of this Agreement, the aggregate market
value of the Company's voting stock held by nonaffiliates of the Company was
equal to or greater than $150 million.
(u) Subsequent to the respective dates as of which information is given
in the Registration Statement and the Prospectus, there has not been (i) any
material adverse change, or any development
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which, in the Company's reasonable judgment, is likely to cause a material
adverse change, in the business, properties or assets described or referred to
in the Registration Statement or the Prospectus, or the results of operations,
condition (financial or otherwise), net worth, business 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 outstanding indebtedness of
the Company, or (v) except for regular quarterly dividends on the Company's
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 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, except with respect to any shares to be issued and registered in
connection with the Company's acquisition of FIDAC.
(w) The Company (i) does not have any issued or outstanding preferred
stock (other than the 4,250,000 shares of Series A Preferred Stock and the
Shares) 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 Series A
Preferred Stock to facilitate the sale of the Shares, or (ii)(A) sold, bid for,
purchased, or paid anyone any compensation for soliciting purchases of, the
Shares or (B) except for the public offerings completed in the first and second
quarters of 2004, since the filing of the Registration Statement (except
pursuant to the Company's dividend reinvestment and share purchase plan (the
"DRSPP") and in accordance with the Amended and Restated Sales Agency Agreement,
dated August 12, 2003, between the Company and UBS Securities LLC) paid or
agreed to pay to any Person any compensation for soliciting another to purchase
any other securities of the Company.
(y) The Company has applied to list the Shares 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, Inc. ("NASD")) any
member firm of the NASD.
(aa) The Company has not relied upon Bear Stearns or legal counsel for
the Underwriters for any legal, tax or accounting advice in connection with the
offering and sale of the Shares.
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(bb) Any certificate signed by any officer of the Company delivered to
Bear Stearns 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.
(cc) 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 and (b) Federal Home Loan Bank, Federal Home Loan
Mortgage Corporation, or Federal National Mortgage Association debentures and
(ii) all of such mortgage-backed securities 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 (A) 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 and (B) debentures which are issued by
the Federal Home Loan Bank, Federal Home Loan Mortgage Corporation or Federal
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. 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.
(dd) The Company has filed all federal and state 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.
(ee) 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.
(ff) 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.
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(gg) 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.
(hh) 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.
(ii) 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.
(jj) 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.
(kk) There are no existing or, to the knowledge of the Company,
threatened labor disputes with the employees of the Company which are likely to
have individually or in the aggregate a Material Adverse Effect.
(ll) 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.
(mm) 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.
9
(nn) 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").
(oo) 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.
(pp) 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.
(qq) 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.
(rr) 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.
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 Bear Stearns 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 Bear Stearns 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 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 respect to the initial delivery of such Prospectus, 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)
to the Underwriters copies of the Prospectus (or of the Prospectus as amended or
supplemented if the Company shall have made any amendments or supplements
thereto after the effective date of the Registration Statement) in such
quantities and at such locations as the Underwriters may reasonably request for
the purposes contemplated by the Securities Act, which the Prospectus and any
amendments or supplements thereto furnished to the Underwriters will be
identical to the version created to be transmitted to the Commission for filing
via EDGAR, except to the extent permitted by Regulation S-T.
10
(c) The Company will advise Bear Stearns immediately, confirming such
advice in writing, of (i) the receipt of any comments from the Commission
relating to any filing of the Company under the Securities Act or the Exchange
Act, (ii) any request by the Commission for amendments or supplements to the
Registration Statement or the Prospectus or for additional information with
respect thereto, (iii) the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or of any order
preventing or suspending the use of any Preliminary Prospectus or the
Prospectus, (iv) the suspension of the qualification of the Shares for offering
or sale in any jurisdiction, (v) the initiation, threatening or contemplation of
any proceedings for any of such purposes and, if the Commission or any other
governmental agency or authority should issue any such order, the Company will
make every reasonable effort to obtain the lifting or removal of such order as
soon as possible. The Company will advise Bear Stearns promptly of any proposal
to amend or supplement the Registration Statement or the Prospectus including by
filing any documents that would be incorporated therein by reference and to file
no such amendment or supplement to which Bear Stearns shall object to in
writing.
(d) The Company will advise Bear Stearns promptly and, if requested by
Bear Stearns, will confirm such advice in writing when any post-effective
amendment to the Registration Statement becomes effective under the Securities
Act.
(e) The Company will furnish to Bear Stearns and, upon request, to each
of the other Underwriters for a period of five years from the date of this
Agreement (i) copies of any reports or other communications which the Company
shall send to its stockholders or shall from time to time publish or publicly
disseminate, (ii) copies of all annual, quarterly and current reports filed with
the Commission on Forms 10-K, 10-Q and 8-K, or such other similar form as may be
designated by the Commission, (iii) copies of documents or reports filed with
any national securities exchange on which any class of securities of the Company
is listed, and (iv) such other information as Bear Stearns may reasonably
request regarding the Company, in each case as soon as such communications,
documents or information become available.
(f) The Company will advise the Underwriters promptly of the happening
of any event known to the Company within the time during which a Prospectus
relating to the Shares is required to be delivered under the Securities Act
which would require the making of any change in the Prospectus then being used,
or in the information incorporated by reference therein, so that the Prospectus
would not include an untrue statement of material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, or if it is necessary at any time to amend or supplement the
Prospectus to comply with any law. If within the time during which a Prospectus
relating to the Shares is required to be delivered under the Securities Act any
event shall occur or condition shall exist which, in the reasonable opinion of
the Company, Bear Stearns or their respective counsel, would require the making
of any change in the Prospectus then being used, or in the information
incorporated by reference therein, so that the Prospectus would not include an
untrue statement of material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading, or if it is
necessary at any time to amend or supplement the Prospectus to comply with any
law, the Company will promptly prepare and furnish to the Underwriters copies of
the proposed amendment or supplement before filing any such amendment or
supplement with the Commission and thereafter promptly furnish, at the Company's
own expense, to the Underwriters and to dealers copies in such quantities and at
such locations as Bear Stearns may from time to time reasonably request of an
appropriate amendment to the Registration Statement or supplement to the
Prospectus so that the Prospectus as so amended or supplemented will not, in the
circumstances when it is so delivered, be misleading or so that the Prospectus
will comply with the law.
11
(g) The Company will make generally available to its stockholders as
soon as practicable, and in the manner contemplated by Rule 158 of the
Securities Act but in any event not later than 15 months after the end of the
Company's current fiscal quarter, an earnings statement (which need not be
audited) covering a 12-month period beginning after the date upon which the
Prospectus Supplement is filed pursuant to Rule 424(b) under the Securities Act
that shall satisfy the provisions of Section 11(a) of the Securities Act and
Rule 158 thereunder and will advise the Underwriters in writing when such
statement has been made available.
(h) The Company will furnish to Bear Stearns a signed copy of the
Registration Statement, as initially filed with the Commission, and of all
amendments thereto (including all exhibits thereto and documents incorporated by
reference therein) and such number of conformed copies of the foregoing (other
than exhibits) as Bear Stearns may reasonably request.
(i) The Company will apply the net proceeds from the sale of the Shares
in the manner set forth under the caption "Use of Proceeds" in the Prospectus.
(j) The Company will furnish to Bear Stearns, not less than two
Business Days before a filing with the Commission during the period referred to
in paragraph (f) above, a copy of any document proposed to be filed pursuant to
Section 13, 14 or 15(d) of the Exchange Act and during such period will file all
such documents in a manner and within the time periods required by the Exchange
Act.
(k) The Company will not sell, offer, contract to sell, pledge,
register, grant any option to purchase or otherwise dispose of, directly or
indirectly, any shares of capital stock, or any securities convertible into, or
exercisable, exchangeable or redeemable for shares of capital stock, except for
the registration of the Shares and the sales to the Underwriters pursuant to
this Agreement and except for issuances of common stock upon the exercise of
outstanding options, for a period of 30 days after the date hereof, without the
prior written consent of Bear Stearns. The foregoing sentence shall not apply to
(i) the Shares to be sold hereunder, (ii) any shares of common stock issued by
the Company upon the exercise of an option outstanding on the date hereof and
referred to in the Prospectus, (iii) shares of common stock issued pursuant to
the DRSPP, (iv) the grant of awards pursuant to the Company's Long-Term Stock
Incentive Plan or issuances pursuant to the exercise of employee stock options
or other awards, (v) the filing of any registration statement with the
Commission following the expiration of a period of 31 days after the date
hereof, (vi) with respect to any shares to be issued and registered in
connection with the Company's acquisition of FIDAC or (vii) any shares of the
Company's common stock under its Amended and Restated Sales Agency Agreement,
dated August 12, 2003, between the Company and UBS Securities LLC.
(l) The Company will use its best efforts to cause the Shares to be
listed on the NYSE and to maintain such listing and to file with the NYSE all
documents and notices required by the NYSE of companies that have securities
that are listed on the NYSE.
(m) The Company will maintain and keep accurate books and records
reflecting their assets and maintain internal accounting controls which provide
reasonable assurance that (i) transactions are executed in accordance with
management's authorization, (ii) transactions are recorded as necessary to
permit the preparation of the Company's financial statements and to maintain
accountability for the assets of the Company, (iii) access to the assets of the
Company is permitted only in accordance with management's authorization and (iv)
the recorded accounts of the assets of the Company are compared with existing
assets at reasonable intervals.
(n) The Company will engage and maintain, at its expense, a registrar
and transfer agent for the Shares.
12
(o) The Company will pay all expenses, fees and taxes (other than any
transfer taxes and fees and disbursements of counsel for the Underwriters,
except as set forth under Section 5 hereof or (iii) or (iv) below) in connection
with (i) the preparation and filing of the Registration Statement, each
Preliminary Prospectus, the Prospectus, and any amendments or supplements
thereto, and the printing and furnishing of copies of each thereof to the
Underwriters and to dealers (including costs of mailing and shipment), (ii) the
issuance, sale and delivery of the Shares by the Company, (iii) the word
processing and/or printing of this Agreement, any Agreement among the
Underwriters, any dealer agreements, and the reproduction and/or printing and
furnishing of copies of each thereof to the Underwriters and to dealers
(including costs of mailing and shipment), (iv) the qualification of the Shares
for offering and sale under state laws and the determination of their
eligibility for investment under state law as aforesaid (including the legal
fees and filing fees and other disbursements of counsel to the Underwriters) and
the printing and furnishing of copies of any blue sky surveys or legal
investment surveys to the Underwriters and to dealers, (v) any listing of the
Shares on the NYSE and any registration thereof under the Exchange Act, (vi) the
filing, if any, for review of the public offering of the Shares by the NASD, and
(vii) the performance of the Company's other obligations hereunder.
(p) The Company will not (i) take, directly or indirectly, prior to
termination of the underwriting syndicate contemplated by this Agreement, any
action designed to stabilize or manipulate the price of any security of the
Company, or which may cause or result in, or which might in the future
reasonably be expected to cause or result in, the stabilization or manipulation
of the price of any security of the Company, to facilitate the sale or resale of
any of the Shares, (ii) sell, bid for, purchase or pay any Person (other than as
contemplated by the provisions hereof) any compensation for soliciting purchases
of the Shares, or (iii) pay or agree to pay to any Person any compensation for
soliciting any order to purchase any other securities of the Company.
(q) The Company will not invest in futures contracts, options on
futures contracts or options on commodities unless the Company is exempt from
the registration requirements of the Commodity Exchange Act, as amended, or
otherwise complies with the Commodity Exchange Act, as amended. In addition, the
Company will not engage in any activities which might be subject to the
Commodity Exchange Act, as amended, unless such activities are exempt from that
Act or otherwise comply with that Act or with an applicable no-action letter to
the Company from the Commodities Futures Trading Commission.
(r) The Company will comply with all of the provisions of any
undertakings in the Registration Statement.
(s) The Company has been organized and operated in conformity with the
requirements for qualification and taxation of the Company as a REIT under the
Code, and the Company's proposed methods of operation will enable the Company to
continue to meet the requirements for qualification and taxation as a REIT under
the Code for subsequent taxable years.
(t) The Company will not be or become, at any time prior to the
expiration of three years after the date of the Agreement, an "investment
company," as such term is defined in the Investment Company Act.
(u) The Company has retained the Accountants as its qualified
accountants and qualified tax experts (i) to test procedures and conduct annual
compliance reviews designed to determine compliance with the REIT provisions of
the Code and the Company's exempt status under the Investment Company Act and
(ii) to otherwise assist the Company in monitoring appropriate accounting
systems and procedures designed to determine compliance with the REIT provisions
of the Code and the Company's exempt status under the Investment Company Act.
13
(v) The Company will comply with all requirements imposed upon it by
the Securities Act and the Exchange Act as from time to time in force, so far as
necessary to permit the continuance of sales of, or dealings in, the Shares as
contemplated by the provisions hereof and the Prospectus.
(w) The Company will maintain such controls and other procedures,
including, without limitation, those required by Sections 302 and 906 of the
Sarbanes-Oxley Act, and the applicable regulations thereunder that are designed
to ensure that information required to be disclosed by the Company in the
reports that it files or submits under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the Commission's
rules and forms, including, without limitation, controls and procedures designed
to ensure that information required to be disclosed by the Company in the
reports that it files or submits under the Exchange Act is accumulated and
communicated to the Company's management, including its chief executive officer
and chief financial officer, or persons performing similar functions, as
appropriate to allow timely decisions regarding required disclosure and to
ensure that material information relating to the Company is made known to them
by others within those entities, particularly during the period in which such
periodic reports are being prepared.
(x) The Company will comply with all effective applicable provisions of
the Sarbanes-Oxley Act.
(y) Prior to the time of purchase, the Company will file the Articles
Supplementary with the SDAT establishing and fixing the rights and preferences
of the Shares. The Company shall first provide the form of Articles
Supplementary to counsel to the Underwriters and shall not file any form of
Articles Supplementary to which Bear Stearns has objected in good faith.
5. REIMBURSEMENT OF UNDERWRITERS' EXPENSES. If the Shares are not
delivered for any reason other than the termination of this Agreement pursuant
to the default by one or more of the Underwriters in its or their respective
obligations hereunder, the Company shall, in addition to paying the amounts
described in Section 4(o) hereof, reimburse the Underwriters for all of their
out-of-pocket expenses, including the fees and disbursements of their counsel.
6. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The several obligations of
the Underwriters hereunder are subject to the accuracy of the representations
and warranties on the part of the Company on the date hereof and at the time of
purchase (and the several obligations of the Underwriters at the additional time
of purchase are subject to the accuracy of the representations and warranties on
the part of the Company on the date hereof, at the time of purchase (unless
previously waived) and at the additional time of purchase, as the case may be),
the performance by the Company of its obligations hereunder and to the following
additional conditions precedent:
(a) The Company shall furnish to Bear Stearns at the time of purchase
and at the additional time of purchase, as the case may be, an opinion of McKee
Nelson LLP, counsel for the Company, addressed to the Underwriters, and dated
the time of purchase or the additional time of purchase, as the case may be,
with reproduced copies for each of the other Underwriters and in form
satisfactory to Clifford Chance US LLP, counsel for the Underwriters,
substantially in the form of EXHIBIT A attached hereto.
(b) Bear Stearns shall have received from the Accountants, letters
dated, respectively, the date of this Agreement and the time of purchase and the
additional time of purchase, as the case may be, and addressed to the
Underwriters (with reproduced copies for each of the Underwriters) in the forms
heretofore approved by Bear Stearns relating to the financial statements of the
Company and such other matters customarily covered by comfort letters issued in
connection with a registered public offering.
14
In the event that the letters referred to above set forth any
such changes, decreases or increases, it shall be a further condition to the
obligations of the Underwriters that (i) such letters shall be accompanied by a
written explanation of the Company as to the significance thereof, unless Bear
Stearns deem such explanation unnecessary, and (ii) such changes, decreases or
increases do not, in the sole judgment of Bear Stearns, make it impractical or
inadvisable to proceed with the purchase and delivery of the Shares as
contemplated by the Registration Statement and the Prospectus.
(c) Bear Stearns shall have received at the time of purchase and at the
additional time of purchase, as the case may be, the favorable opinion of
Clifford Chance US LLP, counsel for the Underwriters, dated the time of purchase
or the additional time of purchase, as the case may be, substantially in the
form of EXHIBIT B hereto.
(d) No amendment or supplement to the Registration Statement or the
Prospectus, including documents deemed to be incorporated by reference therein,
shall be filed to which the Underwriters object in writing.
(e) Prior to the time of purchase or the additional time of purchase,
as the case may be, (i) no stop order with respect to the effectiveness of any
one of the Registration Statement shall have been issued under the Securities
Act or proceedings initiated under Section 8(d) or 8(e) of the Securities Act;
(ii) the Registration Statement and all amendments thereto, or modifications
thereof, if any, shall not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein not misleading; and (iii) the Prospectus and all
amendments or supplements thereto, or modifications thereof, if any, shall not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they are made, not misleading.
(f) All filings with the Commission required by Rule 424 under the
Securities Act to have been filed by the time of purchase or the additional time
of purchase, as the case may be, shall have been made within the applicable time
period prescribed for such filing by Rule 424.
(g) Between the time of execution of this Agreement and the time of
purchase or the additional time of purchase, as the case may be, (i) no material
and unfavorable change, financial or otherwise (other than as referred to in the
Registration Statement and the Prospectus), in the business, condition, net
worth or prospects of the Company shall occur or become known and (ii) no
transaction which is material and unfavorable to the Company shall have been
entered into by the Company.
(h) The Company will, at the time of purchase or additional time of
purchase, as the case may be, deliver to Bear Stearns a certificate of two of
its executive officers to the effect that the representations and warranties of
the Company as set forth in this Agreement are true and correct as of each such
date, that the Company shall perform such of its obligations under this
Agreement as are to be performed at or before the time of purchase and at or
before the additional time of purchase, as the case may be, and that the
conditions set forth in paragraphs (e) and (g) of this Section 6 have been met.
(i) The Company shall have furnished to Bear Stearns such other
documents and certificates as to the accuracy and completeness of any statement
in the Registration Statement and the Prospectus as of the time of purchase and
the additional time of purchase, as the case may be, as Bear Stearns may
reasonably request.
(j) The Shares shall have been approved for listing on the NYSE,
subject only to notice of issuance at or prior to the time of purchase or the
additional time of purchase, as the case may be.
15
(k) The NASD shall not have raised any objection with respect to the
fairness and reasonableness of the underwriting terms and arrangements.
(l) Between the time of execution of this Agreement and the time of
purchase or additional time of purchase, as the case may be, there shall not
have occurred any downgrading, nor shall any notice or announcement have been
given or made of (i) any intended or potential downgrading or (ii) any review or
possible change that does not indicate an improvement, in the rating accorded
any securities of or guaranteed by the Company by any "nationally recognized
statistical rating organization," as that term is defined in Rule 436(g)(2)
under the Securities Act.
7. TERMINATION. The obligations of the several Underwriters hereunder
shall be subject to termination in the absolute discretion of Bear Stearns, at
any time prior to the time of purchase or, if applicable, the additional time of
purchase, (i) if any of the conditions specified in Section 6 shall not have
been fulfilled when and as required by this Agreement to be fulfilled, (ii) if
any material adverse and unfavorable change occurs (financial or otherwise), or
any development involving a material adverse and unfavorable change occurs
(financial or otherwise) (in each case, other than as disclosed in, or
incorporated by reference into, the Registration Statement and the Prospectus
(exclusive of any supplement thereto)), in the operations, business, net worth,
condition or prospects of the Company, or a material change in management of the
Company occurs, whether or not arising in the ordinary course of business, which
would, in the sole judgment of Bear Stearns, make it impracticable to market the
Shares, (iii) if the United States shall have declared war in accordance with
its constitutional processes or there has occurred an outbreak or escalation of
hostilities or other national or international calamity or crisis or change in
economic, political or other conditions the effect of which on the financial
markets of the United States is such as to make it, in the sole judgment of Bear
Stearns, impracticable or inadvisable to market the Shares or enforce contracts
for the sale of the Shares, (iv) if trading in any securities of the Company has
been suspended by the Commission or by the NYSE, or if trading generally on the
NYSE has been suspended (including an automatic halt in trading pursuant to
market-decline triggers other than those in which solely program trading is
temporarily halted), or limitations on or minimum prices for trading (other than
limitations on hours or numbers of days of trading) shall have been fixed, or
maximum ranges for prices for securities have been required, by such exchange or
the NASD or Nasdaq or by order of the Commission or any other governmental
authority, (v) if a banking moratorium shall have been declared by New York or
United States authorities or a material disruption has occurred in commercial
banking or securities settlement or clearance services in the United States,
(vi) if there shall have occurred any downgrading, or any notice or announcement
shall have been given or made of (a) any intended or potential downgrading or
(b) any review or possible change that does not indicate an improvement, in the
rating accorded any securities of or guaranteed by the Company by any
"nationally recognized statistical rating organization," as that term is defined
in Rule 436(g)(2) under the Securities Act, (vii) if any federal or state
statute, regulation, rule or order of any court or other governmental authority
has been enacted, published, decreed or otherwise promulgated which, in the
reasonable opinion of Bear Stearns, materially adversely affects or will
materially adversely affect the business or operations of the Company, or (viii)
if any action has been taken by any federal, state or local government or agency
in respect of its monetary or fiscal affairs which, in the reasonable opinion of
Bear Stearns, has a material adverse effect on the securities markets in the
United States.
If Bear Stearns elects to terminate this Agreement as provided in this
Section 7, the Company and each other Underwriter shall be notified promptly by
telephone, which shall be promptly confirmed by facsimile.
If the sale to the Underwriters of the Shares, as contemplated by this
Agreement, is not carried out by the Underwriters for any reason permitted under
this Agreement or if such sale is not carried out because the Company shall be
unable to comply with any of the terms of this Agreement, the Company
16
shall not be under any obligation or liability under this Agreement (except to
the extent provided in Sections 4(o), 5, 9 and 10 hereof), and the Underwriters
shall be under no obligation or liability to the Company under this Agreement
(except to the extent provided in Sections 9 and 10 hereof) or to one another
hereunder.
8. INCREASE IN UNDERWRITERS' COMMITMENTS. If any Underwriter shall
default in its obligation under this Agreement to take up and pay for the Shares
to be purchased by it under this Agreement (otherwise than for reasons
sufficient to justify the termination of this Agreement under the provisions of
Section 7 hereof), Bear Stearns shall have the right, within 36 hours after such
default, to make arrangements for one or more of the non-defaulting
Underwriters, or any other underwriters, to purchase all, but not less than all,
of the Shares which such Underwriter shall have agreed but failed to take up and
pay for (the "Defaulted Shares"). Absent the completion of such arrangements
within such 36 hour period, (i) if the total number of Defaulted Shares does not
exceed 10% of the total number of Shares to be purchased at the time of purchase
or the additional time of purchase, as the case may be, each non-defaulting
Underwriter shall take up and pay for (in addition to the number of Shares which
it is otherwise obligated to purchase on such date pursuant to this Agreement)
the number of Shares agreed to be purchased by all such defaulting Underwriters
in such amount or amounts as Bear Stearns may designate with the consent of each
Underwriter so designated or, in the event no such designation is made, such
Shares shall be taken up and paid for by all non-defaulting Underwriters pro
rata in proportion to the aggregate number of Firm Shares set opposite the names
of such non-defaulting Underwriters in SCHEDULE A; and (ii) if the total number
of Defaulted Shares exceeds 10% of such total number of Shares to be purchased
at the time of purchase or the additional time of purchase, as the case may be,
and if neither the non-defaulting Underwriters nor the Company shall make
arrangements within the five Business Day period from the date of default for
the purchase of such Defaulted Shares, Bear Stearns may terminate this Agreement
by notice to the Company, without liability of any party to any other party
except that the provisions of Sections 4(o), 5, 9 and 10 shall at all times be
effective and shall survive such termination. Nothing in this paragraph, and no
action taken hereunder, shall relieve any defaulting Underwriter from liability
in respect of any default of such Underwriter under this Agreement.
Without relieving any defaulting Underwriter from its obligations
hereunder, the Company agrees with the non-defaulting Underwriters that they
will not sell any Shares hereunder unless all of the Shares are purchased by the
Underwriters (or by substituted Underwriters selected by Bear Stearns with the
approval of the Company or selected by the Company with Bear Stearns' approval).
If a new Underwriter or Underwriters are substituted for a defaulting
Underwriter or Underwriters in accordance with the foregoing provisions, the
Company or Bear Stearns shall have the right to postpone the time of purchase or
the additional time of purchase, as the case may be, for a period not exceeding
five Business Days from the date of substitution in order that any necessary
changes in the Registration Statement and the Prospectus and other documents may
be effected.
The term Underwriter as used in this Agreement shall refer to and
include any Underwriter substituted under this Section 8 with like effect as if
such substituted Underwriter had originally been named in SCHEDULE A.
9. INDEMNIFICATION.
(a) The Company shall indemnify and hold harmless each Underwriter and
each person, if any, who controls any Underwriter within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act, (i) against any and
all losses, liabilities, claims, damages and expenses whatsoever as incurred
(including but not limited to attorneys' fees and any and all expenses
whatsoever incurred in investigating, preparing or defending against any
litigation, commenced or threatened, or any claim
17
whatsoever, and any and all amounts paid in settlement of any claim or
litigation), joint or several, to which they or any of them may become subject
under the Securities Act, the Exchange Act or otherwise, insofar as such losses,
liabilities, claims, damages or expenses (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement, as originally filed or
any amendment thereof, or any related Preliminary Prospectus or the Prospectus,
or in any supplement thereto or amendment thereof, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein, in the case of
any Preliminary Prospectus or the Prospectus, in the light of the circumstances
under which such statements were made, not misleading or (ii) against any and
all losses, liabilities, claims, damages and expenses whatsoever as incurred
(including but not limited to attorneys' fees and any and all expenses
whatsoever incurred in investigating, preparing or defending against any
litigation, commenced or threatened, or any claim whatsoever, and any and all
amounts paid in settlement of any claim or litigation) arising out of a breach
by the Company of the representations and warranties contained in Section 3 of
this Agreement; provided, however, that the Company will not be liable in any
such case to the extent but only to the extent that any such loss, liability,
claim, damage or expense arises out of or is based upon any such untrue
statement or alleged untrue statement or omission or alleged omission made
therein in reliance upon and in conformity with written information furnished to
the Company by or on behalf of any Underwriter through Bear Stearns expressly
for use therein. This indemnity agreement will be in addition to any liability
which the Company may otherwise have, including but not limited to other
liability under this Agreement.
(b) Each Underwriter severally agrees to indemnify and hold harmless
the Company, each of the directors of the Company, each of the officers of the
Company who shall have signed the Registration Statement, and each other person,
if any, who controls the Company within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, against any losses,
liabilities, claims, damages and expenses whatsoever as incurred (including but
not limited to attorneys' fees and any and all expenses whatsoever incurred in
investigating, preparing or defending against any litigation, commenced or
threatened, or any claim whatsoever, and any and all amounts paid in settlement
of any claim or litigation), joint or several, to which they or any of them may
become subject under the Exchange Act, the Securities Act or otherwise, insofar
as such losses, liabilities, claims, damages or expenses (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement, as
originally filed or any amendment thereof, or any related Preliminary Prospectus
or the Prospectus, or in any amendment thereof or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent, that
any such loss, liability, claim, damage or expense arises out of or is based
upon any such untrue statement or alleged untrue statement or omission or
alleged omission made therein in reliance upon and in conformity with
information furnished in writing to the Company by or on behalf of any
Underwriter through Bear Stearns specifically for use therein; provided,
however, that in no case shall any Underwriter be liable or responsible for any
amount in excess of the underwriting discount applicable to the Shares to be
purchased by such Underwriter hereunder. This indemnity will be in addition to
any liability which the Underwriters may otherwise have, including but not
limited to other liability under this Agreement.
(c) Promptly after receipt by an indemnified party under subsection (a)
or (b) above of notice of any claims or the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify each party against whom
indemnification is to be sought in writing of the claim or the commencement
thereof (but the failure so to notify an indemnifying party shall not relieve
the indemnifying party from any liability which it may have under this Section 9
to the extent that it is not materially prejudiced as a result thereof and in
any event shall not relieve it from any liability that such indemnifying party
may have otherwise than on
18
account of the indemnity agreement hereunder). In case any such claim or action
is brought against any indemnified party, and it notifies an indemnifying party
of the commencement thereof, the indemnifying party will be entitled to
participate, at its own expense in the defense of such action, and to the extent
it may elect by written notice delivered to the indemnified party promptly after
receiving the aforesaid notice from such indemnified party, to assume the
defense thereof with counsel reasonably satisfactory to such indemnified party;
provided however, that counsel to the indemnifying party shall not (except with
the written consent of the indemnified party) also be counsel to the indemnified
party. Notwithstanding the foregoing, the indemnified party or parties shall
have the right to employ its or their own counsel in any such case, but the fees
and expenses of such counsel shall be at the expense of such indemnified party
or parties unless (i) the employment of such counsel shall have been authorized
in writing by one of the indemnifying parties in connection with the defense of
such action, (ii) the indemnifying parties shall not have employed counsel to
have charge of the defense of such action within a reasonable time after notice
of commencement of the action, (iii) the indemnifying party does not diligently
defend the action after assumption of the defense, or (iv) such indemnified
party or parties shall have reasonably concluded that there may be defenses
available to it or them which are different from or additional to those
available to one or all of the indemnifying parties (in which case the
indemnifying parties shall not have the right to direct the defense of such
action on behalf of the indemnified party or parties), in any of which events
such fees and expenses shall be borne by the indemnifying parties. In no event
shall the indemnifying party be liable for fees and expenses of more than one
counsel (in addition to any local counsel) separate from its own counsel for all
indemnified parties in connection with any one action or separate but similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances. No indemnifying party shall, without the prior
written consent of the indemnified parties, effect any settlement or compromise
of, or consent to the entry of judgment with respect to, any pending or
threatened claim, investigation, action or proceeding in respect of which
indemnity or contribution may be or could have been sought by an indemnified
party under this Section 9 or Section 10 hereof (whether or not the indemnified
party is an actual or potential party thereto), unless (x) such settlement,
compromise or judgment (i) includes an unconditional release of the indemnified
party from all liability arising out of such claim, investigation, action or
proceeding and (ii) does not include a statement as to or an admission of fault,
culpability or any failure to act, by or on behalf of the indemnified party, and
(y) the indemnifying party confirms in writing its indemnification obligations
hereunder with respect to such settlement, compromise or judgment.
10. CONTRIBUTION. In order to provide for contribution in circumstances
in which the indemnification provided for in Section 9 hereof is for any reason
held to be unavailable from any indemnifying party or is insufficient to hold
harmless a party indemnified thereunder, the Company and each Underwriter shall
contribute to the aggregate losses, claims, damages, liabilities and expenses of
the nature contemplated by such indemnification provision (including any
investigation, legal and other expenses incurred in connection with, and any
amount paid in settlement of, any action, suit or proceeding or any claims
asserted, but after deducting in the case of losses, claims, damages,
liabilities and expenses suffered by the Company, any contribution received by
the Company from persons, other than the Underwriters, who may also be liable
for contribution, including persons who control the Company within the meaning
of Section 15 of the Securities Act or Section 20 of the Exchange Act, officers
of the Company who signed the Registration Statement and directors of the
Company) as incurred to which the Company and the Underwriters may be subject,
in such proportions as is appropriate to reflect the relative benefits received
by the Company and the Underwriters from the offering and sale of the Shares or,
if such allocation is not permitted by applicable law, in such proportions as
are appropriate to reflect not only the relative benefits referred to above but
also the relative fault of the Company and the Underwriters in connection with
the statements or omissions which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Company and the Underwriters shall be
deemed to be in the same proportion as (x) the total proceeds from the offering
and sale of the Shares (net of
19
underwriting discounts and commissions but before deducting expenses) received
by the Company bears to (y) the underwriting discount or commissions received by
the Underwriters, in each case as set forth in the Prospectus. The relative
fault of each of the Company and of the Underwriters shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or the Underwriters and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company and the Underwriters
agree that it would not be just and equitable if contribution pursuant to this
Section 10 were determined by pro rata allocation (even, if the Underwriters
were treated as one entity for such purpose) or by any other method of
allocation which does not take account of the equitable considerations referred
to above in this Section 10. The aggregate amount of losses, liabilities,
claims, damages and expenses incurred by an indemnified party and referred to
above in this Section 10 shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in investigating, preparing or
defending against any litigation, or any investigation or proceeding by any
judicial, regulatory or other legal or governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged untrue
statement or omission or alleged omission. Notwithstanding the provisions of
this Section 10, (i) no Underwriter shall be required to contribute any amount
in excess of the amount by which the discounts and commissions applicable to the
Shares underwritten by such Underwriter and distributed to the public exceeds
the amount of any damages which such Underwriter has otherwise been required to
pay by reason of such untrue or alleged untrue statement and (ii) no person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. For purposes of this Section
10, each person, if any, who controls any Underwriter within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act shall have
the same rights to contribution as such Underwriter, and each person, if any,
who controls the Company within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act, each officer of the Company who shall have
signed the Registration Statement and each director of the Company shall have
the same rights to contribution as the Company, subject in each case to clauses
(i) and (ii) of the immediately preceding sentence. Any party entitled to
contribution will, promptly after receipt of notice of commencement of any
action, suit or proceeding against such party in respect of which a claim for
contribution may be made against another party or parties, notify each party or
parties from whom contribution may be sought, but the omission to so notify such
party or parties shall not relieve the party or parties from whom contribution
may be sought from any obligation it or they may have under this Section 10 or
otherwise. The Underwriters' respective obligations to contribute pursuant to
this Section 10 are several in proportion to the number of Shares set forth
opposite their respective names in Schedule A hereto and not joint.
11. INFORMATION FURNISHED BY THE UNDERWRITERS. The statements set forth
in the last paragraph on the cover page of the Prospectus Supplement, the
statement set forth in the last sentence of the third paragraph under the
caption "Risk Factors", and the statements set forth in the sixth, ninth,
eleventh and twelfth paragraphs under the caption "Underwriting" in the
Prospectus Supplement constitute the only information furnished by or on behalf
of the Underwriters as such information is referred to in Sections 3 and 9
hereof.
12. NOTICES. Except as otherwise herein provided, all statements,
requests, notices and agreements shall be in writing or by telegram and, if to
the Underwriters, shall be sufficient in all respects if delivered or sent to
Bear, Stearns & Co. Inc., 383 Madison Avenue, New York, New York 10179,
Attention: Erik Friedman; and if to the Company, shall be sufficient in all
respects if delivered or sent to the Company at the offices of the Company at
1211 Avenue of the Americas, Suite 2902, New York, New York 10036, Attention:
Michael A.J. Farrell.
20
13. GOVERNING LAW; CONSTRUCTION. This Agreement and any claim,
counterclaim or dispute of any kind or nature whatsoever arising out of or in
any way relating to this Agreement (a "Claim"), directly or indirectly, shall be
governed by, and construed in accordance with, the laws of the State of New
York. The Section headings in this Agreement have been inserted as a matter of
convenience of reference and are not a part of this Agreement.
14. SUBMISSION TO JURISDICTION. Except as set forth below, no Claim may
be commenced, prosecuted or continued in any court other than the courts of the
State of New York located in the City and County of New York or in the United
States District Court for the Southern District of New York, which courts shall
have jurisdiction over the adjudication of such matters, and the Company
consents to the non-exclusive jurisdiction of such courts and personal service
with respect thereto. The Company hereby consents to personal jurisdiction,
service and venue in any court in which any Claim arising out of or in any way
relating to this Agreement is brought by any third party against Bear Stearns or
any indemnified party. Each of Bear Stearns and the Company (on its behalf and,
to the extent permitted by applicable law, on behalf of its stockholders and
affiliates) waives all right to trial by jury in any action, proceeding or
counterclaim (whether based upon contract, tort or otherwise) in any way arising
out of or relating to this Agreement. The Company agrees that a final judgment
in any such action, proceeding or counterclaim brought in any such court shall
be conclusive and binding upon the Company and may be enforced in any other
courts in the jurisdiction of which the Company is or may be subject, by suit
upon such judgment.
15. PARTIES AT INTEREST. The Agreement herein set forth has been and is
made solely for the benefit of the Underwriters, the Company and to the extent
provided in Sections 9 and 10 hereof the controlling Persons, directors and
officers referred to in such Sections, and their respective successors, assigns,
heirs, pursuant representatives and executors and administrators. No other
Person, partnership, association or corporation (including a purchaser, as such
purchaser, from any of the Underwriters) shall acquire or have any right under
or by virtue of this Agreement.
16. COUNTERPARTS. This Agreement may be signed by the parties in one or
more counterparts which together shall constitute one and the same agreement
among the parties.
17. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
Underwriters and the Company and their successors and assigns and any successor
or assign of any substantial portion of the Company's and any of the
Underwriters' respective businesses and/or assets.
21
If the foregoing correctly sets forth the understanding among the
Company and the Underwriters, please so indicate in the space provided below for
the purpose, whereupon this letter and your acceptance shall constitute a
binding agreement among the Company and the Underwriters, severally.
Very truly yours,
ANNALY MORTGAGE MANAGEMENT, INC.
By: /s/ Kathryn Fagan
---------------------------------
Name: Kathryn Fagan
Title: Chief Financial Officer
Accepted and agreed to as of the date first
above written, on behalf of itself and the other
several Underwriters named in SCHEDULE A
BEAR, STEARNS & CO. INC.
By: /s/ Chris O'Connor
--------------------------------------
Name: Chris O'Connor
Title: Managing Director
By:
---------------------------------------
Name:
Title:
22
SCHEDULE A
Number of
Underwriter Firm Shares
- ----------- -----------
Bear, Stearns & Co. Inc. 1,100,000
Stifel, Nicolaus & Company 825,000
Advest, Inc. 412,500
RBC Capital Markets 412,500
Total: 2,750,000
=========
Sch-A
EXHIBIT A
OPINION OF MCKEE NELSON LLP
1. The Company has been duly incorporated and is validly existing and
in good standing under the laws of the State of Maryland. The Company is duly
qualified or registered as a foreign corporation to transact business and is in
good standing in each jurisdiction in which such qualification or registration
is required, whether by reason of the ownership or leasing of property or the
conduct of business, except where the failure to so qualify or register or be in
good standing would not have a Material Adverse Effect.
2. The Company has the corporate power and authority to own, lease and
operate its properties and conduct its business as described in the Prospectus
and to enter into and perform its obligations under or as contemplated by the
Underwriting Agreement.
3. The Underwriting Agreement has been duly authorized, executed, and
delivered by the Company.
4. The Shares have been duly authorized by the Company for issuance and
sale to the Underwriters pursuant to the Underwriting Agreement and, when issued
and delivered by the Company pursuant to the Underwriting Agreement against
payment of the consideration set forth therein, will be validly issued, fully
paid and non-assessable and no holder of the Shares is or will be subject to
personal liability, under the General Corporation Law of the State of Maryland
(the "MGCL") or the charter or by-laws of the Company, by reason of being a
holder.
5. All issued and outstanding shares of capital stock of the Company
are validly issued, fully paid, and non-assessable, and conform in all material
respects with the description thereof contained in the Prospectus. The Shares
when issued and outstanding will conform in all material respects with the
description thereof contained in the Prospectus. The relative rights,
preferences, interests and powers of the Shares offered pursuant to the
Underwriting Agreement, as set forth in the Articles Supplementary relating
thereto, are valid under the MGCL.
6. The issuance of the Shares is not subject to preemptive or other
similar rights of any stockholder of the Company arising by operation of the
MGCL or under the charter or by-laws of the Company, or, to our knowledge, any
contractual preemptive rights, resale rights, rights of first refusal or similar
rights. Except as disclosed in the Registration Statement and the Prospectus,
there is no outstanding option, warrant or other right calling for the issuance
of, and, to the knowledge of such counsel, no commitment, plan or arrangement to
issue, any shares of capital stock of the Company or any security convertible
into, exercisable for, or exchangeable for shares of capital stock of the
Company. No holder of any security of the Company has the right to have any
security owned by such holder included for registration in the Registration
Statement.
7. The form of the certificate used to evidence the Series A Preferred
Stock of the Company complies in all material respects with all applicable
requirements of the MGCL and with the applicable requirements of the charter and
by-laws of the Company and complies with all the applicable requirements of
NYSE.
8. The information in the Prospectus under the caption "Description of
Stock" and in the Prospectus Supplement under the caption "Description of Series
A Preferred Stock," to the extent that
Ex. A-1
such information constitutes summaries of legal matters under the MGCL or of
provisions of the Company's charter or by-laws, have been reviewed by us and are
correct in all material respects. The information in the Prospectus under the
caption "Federal Income Tax Considerations," and in the Prospectus Supplement
under caption "Federal Income Tax Consequences," to the extent that such
information constitutes a summary of legal matters, documents or proceedings
referred to therein, have been reviewed by us and fairly present the information
called for with respect to such legal matters, documents and proceedings in all
material respects as required by the Securities Act of 1933 (the "1933 Act"),
the rules and regulations of the Securities and Exchange Commission (the
"Commission") under the 1933 Act (the "1933 Act Regulations"), the Securities
Exchange Act of 1934, as amended (the "1934 Act") and the rules and regulations
of the Commission under the 1934 Act (the "1934 Act Regulations").
9. The Company satisfies the registrant eligibility requirements for
the use of Form S-3 under the 1933 Act set forth in General Instruction I.A. to
such Form; the transactions contemplated by the Underwriting Agreement satisfy
the transaction eligibility requirements for the use of such Form set forth in
General Instruction I.B.1 to such Form; and the Shares have been registered
under the Registration Statement in compliance with such requirements.
10. The Registration Statement and the Prospectus (in each case other
than (A) the financial statements and supporting schedules and other financial
or statistical data included or incorporated by reference therein or omitted
therefrom as to which we express no opinion and (B) except as expressed in our
opinion in paragraph (11) below, the documents incorporated therein), as of
their respective effective dates, as the case may be, each complied, and as of
the date hereof each comply, as to form in all material respects to the
applicable requirements of the 1933 Act and the 1933 Act Regulations.
11. The annual report on Form 10-K for the year ended December 31, 2003
and the proxy statement contained in the Form S-4 filed with the Commission on
March 10, 2004, incorporated by reference in the Registration Statement (other
than the financial statements and supporting schedules and other financial data
included therein, as to which we express no opinion), when they were filed with
the Commission (or, if later, upon filing of an amendment thereto) complied as
to form in all material respects with the requirements of the 1934 Act and the
1934 Act Regulations.
12. The Registration Statement has been declared effective under the
1933 Act; the Prospectus has been filed pursuant to Rule 424(b) of the 1933 Act
Regulations in the manner and within the time period required by Rule 424(b);
and, to our knowledge, no stop order suspending the effectiveness of the
Registration Statement has been issued under the 1933 Act and no proceedings for
that purpose have been instituted or are pending or threatened by the
Commission.
13. To our knowledge, no consent, approval, authorization, or other
order of any federal regulatory body, federal administrative agency or other
federal governmental body of the United States of America or any state
regulatory body, state administrative agency or other state governmental body of
the State of Maryland is required under Applicable Laws for the issuance and
sale of the Shares to the Underwriters as contemplated by the Underwriting
Agreement or the public offering of the Shares as contemplated by the
Prospectus.
14. The issuance and sale of the Shares to the Underwriters as
contemplated by the Underwriting Agreement and consummation of the transactions
contemplated thereby do not and will not conflict with or result in a breach or
violation of any of the terms and provisions of, or constitute a default under
(A) any indenture, mortgage, deed of trust, lease, repurchase agreement or other
agreement, known to us, to which the Company is a party or is bound, except for
such for such violations, conflicts, breaches, defaults, liens, charges, or
encumbrances that would not result in a Material Adverse Effect, (B) the charter
or bylaws of the Company, (C) Applicable Laws, (D) the Investment Company Act of
Ex. A-2
1940, as amended (the "1940 Act"), or (E) or any judgment, decree, order, rule,
or regulation, known to us, of any court, other governmental authority, or
arbitrator having jurisdiction over the Company, except for such for such
violations, conflicts, breaches, defaults, liens, charges, or encumbrances that
would not result in a Material Adverse Effect.
15. The Company is not in violation of its charter or by-laws, and, to
our knowledge, no default by the Company exists in the due performance or
observance of any material obligation, agreement, covenant, or condition
contained in any contract, indenture, mortgage, loan agreement, note, lease,
repurchase agreement, other agreement, or instrument that is described or
referred to in the Registration Statement or the Prospectus or filed or
incorporated by reference as an exhibit to the Registration Statement, except,
in each case above, for such for such violations, conflicts, breaches, defaults,
liens, charges, or encumbrances that would not result in a Material Adverse
Effect.
16. To our knowledge, there are no legal or governmental proceedings
pending or threatened which are required to be disclosed in the Registration
Statement or the Prospectus but are not so disclosed.
17. The Company is not, and the transactions contemplated by the
Underwriting Agreement will not cause the Company to become an "investment
company" or an entity "controlled" by an "investment company" under the 1940
Act.
18. For all taxable years commencing with its taxable year ended
December 31, 1997, the Company has been, and upon the sale of 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
Section 856 through 860 of the Internal Revenue Code of 1986, as amended (the
"Code"). The Company's proposed method of operation 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 disclosure contained
in the Prospectus under the caption "Federal Income Tax Considerations," to the
extent such information constitutes a summary of the United States federal
income tax laws and legal conclusions referred to therein, is accurate in all
material respects and fairly summarizes the federal income tax laws referred to
therein.
In acting as counsel to the Company, we have participated in conferences with
officers and other representatives of the Company, the independent public
accountants for the Company, and your representatives, at which conferences the
contents of the Registration Statement and the Prospectus, and related matters
were discussed. Although we are not passing upon or assuming responsibility for
the accuracy, completeness or fairness of the statements included or
incorporated by reference in the Registration Statement, the Prospectus, or the
Incorporated Documents (as defined below) and have made no independent check or
verification thereof (except as set forth in paragraphs eight, ten and eighteen
above), nothing has come to our attention which has led us to believe that the
Registration Statement, at the time the Registration Statement became effective,
contained an untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading or that the Prospectus Supplement, as of its date or on the date
hereof, included or includes an untrue statement of a material fact or omitted
or omits to state a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except in each case that we express no belief and make no statement
with respect to financial statements and schedules and other financial or
statistical data included or incorporated by reference in or omitted from the
Registration Statement, the Prospectus, or the Incorporated Documents. As used
herein, the term "Incorporated Documents," when used with respect to the
Registration Statement or the Prospectus as of any date, means the documents
incorporated or deemed to be incorporated by reference in the
Ex. A-3
Registration Statement or the Prospectus, as the case may be, as of such date
pursuant to Item 12 of Form S-3.
Ex. A-4
EXHIBIT B
OPINION OF CLIFFORD CHANCE US LLP
1. The Underwriting Agreement has been duly authorized, executed and
delivered by the Underwriters.
2. The Shares have been duly authorized and, when issued and delivered
to and paid for by the Underwriters, will be duly and validly and issued and
will be fully paid and non-assessable.
3. The Shares conform to the description thereof contained in the
Registration Statement and the Prospectus.
4. The Registration Statement and the Prospectus (except as to the
financial statements and schedules and other financial and statistical data
contained or incorporated by reference therein, as to which we express no
opinion) comply as to form in all material respects with the requirements of the
Securities Act.
5. The Registration Statement has become effective under the Securities
Act and, to the best of our knowledge, no stop order proceedings with respect
thereto are pending or threatened under the Securities Act and any required
filings of the Prospectus and any supplement thereto pursuant to Rule 424 under
the Securities Act has been made in the manner and within the time period
required by such Rule 424.
In addition, we have reviewed the Registration Statement and the Prospectus and
participated in the preparation of the Prospectus Supplement and in conferences
with officers and other representatives of and counsel to the Company,
representatives of the independent public accountants for the Company and
representatives of the Underwriters at which the contents of the Registration
Statement and the Prospectus and related matters were discussed and, we have
reviewed certain corporate records, documents and proceedings, and on the basis
of the foregoing, nothing has come to our attention that leads us to believe
that the Registration Statement, at the time such Registration Statement became
effective, contained an untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary in order to make the
statements therein not misleading or that the Prospectus, as of the date of the
Underwriting Agreement or the date hereof, included or includes an untrue
statement of a material fact or omitted or omits to state a material fact
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading (it being understood that we express
no belief with respect to the financial statements, financial schedules and
other financial data included or incorporated by reference in the Registration
Statement or the Prospectus).
The limitations inherent in the independent verification of factual matters and
the character of determinations involved in the preparation of a disclosure
document are such, however, that we do not assume any responsibility for the
accuracy, completeness, or fairness of the statements contained in the
Registration Statement or the Prospectus or any amendments or supplements
thereto (including any of the documents incorporated by reference therein).
Ex. B-1