<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Act of 1934
Date of Report (Date of earliest event reported): July 14, 1997
-------------
THORNBURG MORTGAGE ASSET CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
MARYLAND 011-11914 85-0404134
(State or other (Commission (I.R.S. Employer
jurisdiction File Number) Identification No.)
of incorporation)
119 EAST MARCY STREET
SANTA FE, NEW MEXICO 87501
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (505) 989-1900
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report.)
================================================================================
<PAGE> 2
ITEM 5. OTHER EVENTS.
On July 14, 1997, in connection with the Company's registration
statement, No. 333-16799 the ("Registration Statement") that was declared
effective by the Securities and Exchange Commission (the "SEC") on December 13,
1996, the Company entered into an underwriting agreement (the "Underwriting
Agreement") with PaineWebber Incorporated acting as representative (the
"Underwriter"). The Underwriting Agreement provides for the purchase by the
Underwriter from the Company, subject to the terms and conditions set forth
therein, of an aggregate of 2,100,000 shares of Common Stock. The Company has
also agreed to grant to the Underwriters an option to purchase an additional
315,000 shares of Common Stock on the terms and for the purposes set forth
therein.
A form of the Underwriting Agreement has been filed as an exhibit to
this report and is incorporated by reference herein. This report, including the
Underwriting Agreement filed as an exhibit hereto, is incorporated by reference
into the Registration Statement.
ITEM 7(C). EXHIBITS.
The following exhibits are filed as part of this report in accordance
with the provisions of Item 601 of Regulation S-K:
Exhibit Name of Exhibit
- ------- ---------------
1.4 Underwriting Agreement
<PAGE> 3
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
THORNBURG MORTGAGE ASSET CORPORATION
Date: July 14, 1997 By: /s/ MICHAEL B. JEFFERS
--------------------------
Michael B. Jeffers
Secretary
<PAGE> 4
EXHIBIT INDEX
EXHIBIT NAME OF
NUMBER EXHIBIT
- ------ -------
1.4 Underwriting Agreement
<PAGE> 1
2,100,000 Shares
THORNBURG MORTGAGE ASSET CORPORATION
Common Stock
UNDERWRITING AGREEMENT
July 14, 1997
PAINEWEBBER INCORPORATED
FRIEDMAN, BILLINGS, RAMSEY & CO., INC.
c/o PaineWebber Incorporated
1285 Avenue of the Americas, 12th Floor
New York, New York 10019
Ladies and Gentlemen:
Thornburg Mortgage Asset Corporation, a Maryland corporation
(the "Company") proposes to sell an aggregate of 2,100,000 shares (the "Firm
Shares") of the Company's Common Stock, $0.01 par value per share (the "Common
Stock"), to you (hereinafter, the "Underwriters"). The Company has also agreed
to grant to the Underwriters an option (the "Option") to purchase up to an
additional 315,000 shares of Common Stock (the "Option Shares") on the terms and
for the purposes set forth in Section 1(b). The Firm Shares and the Option
Shares are hereinafter collectively referred to as the "Shares."
The initial public offering price per share for the Shares and
the purchase price per share for the Shares to be paid by the Underwriters shall
be agreed upon by the Company and the Underwriters, and such agreement shall be
set forth in a separate written instrument substantially in the form of Exhibit
A hereto (the "Price Determination Agreement"). The Price Determination
Agreement may take the form of an exchange of any standard form of written
telecommunication among the Company and the Underwriters and shall specify such
applicable information as is indicated in Exhibit A hereto. The offering of the
Shares will be governed by this Agreement, as supplemented by the Price
Determination Agreement. From and after the date of the execution and delivery
of the Price Determination Agreement, this Agreement shall be deemed to
incorporate, and, unless the context otherwise indicates, all references
contained herein to "this Agreement" and to the phrase "herein" shall be deemed
to include the Price Determination Agreement.
<PAGE> 2
The Company confirms its agreement with the Underwriters as
follows:
1. Agreement to Sell and Purchase.
(a) On the basis of the representations, warranties and
agreements of the Company herein contained and subject to all the terms and
conditions of this Agreement, (i) the Company agrees to sell to the Underwriters
and (ii) each of the Underwriters, severally and not jointly, agrees to purchase
from the Company, at the purchase price per share for the Firm Shares to be
agreed upon by the Underwriters and the Company in accordance with Section 1(c)
and set forth in the Price Determination Agreement, the number of Firm Shares
set forth opposite the name of such Underwriter in Schedule I. Schedule I may be
attached to the Price Determination Agreement.
(b) Subject to all the terms and conditions of this
Agreement, the Company grants the Option to the Underwriters to purchase,
severally and not jointly, up to 315,000 Option Shares from the Company at the
same price per share as the Underwriters shall pay for the Firm Shares. The
option may be exercised only to cover overallotments in the sale of the Firm
Shares by the Underwriters and may be exercised in whole or in part at any time
(but not more than once) on or before the 30th day after the date of this
Agreement (or, if the Company has elected to rely on Rule 430A, on or before the
30th day after the date of the Price Determination Agreement), upon written or
telegraphic notice (the "Option Shares Notice") by the Underwriters to the
Company no later than 12:00 noon, New York City time, at least two and no more
than five business days before the date specified for closing in the Option
Shares Notice (the "Option Closing Date") setting forth the aggregate number of
Option Shares to be purchased and the time and date for such purchase. On the
Option Closing Date, the Company will issue and sell to the Underwriters the
number of Option Shares set forth in the Option Shares Notice, and each
Underwriter will purchase such percentage of the Option Shares as is equal to
the percentage of the Firm Shares that such Underwriter is purchasing, as
adjusted by the Underwriters in such manner as they deem advisable to avoid
fractional shares.
(c) The initial public offering price per share for the
Firm Shares and the purchase price per share for the Firm Shares to be paid by
the Underwriters shall be agreed upon and set forth in the Price Determination
Agreement. In the event such price has not been agreed upon and the Price
Determination Agreement has not been executed by the close of business on the
fourteenth business day following the date of this Agreement, this Agreement
shall terminate forthwith, without liability of any party to any other party
except that Section 6 shall remain in effect.
2
<PAGE> 3
2. Delivery and Payment.
Delivery of the Firm Shares shall be made to the Underwriters
against payment of the purchase price by federal wire transfer to the Company.
Such payments shall be made on the third business day (or, if the Firm Shares
are priced as contemplated by Rule 15c6-1(c) of the Securities Exchange Act of
1934 (the "Exchange Act") after 4:30 p.m., New York City time, the fourth
business day) following the date of this Agreement or, if the Company has
elected to rely on Rule 430A, the third or fourth business day, as applicable,
after the date on which the first bona fide offering of the Shares to the public
is made by the Underwriters or at such time on such other date as may be agreed
upon by the Company and the Underwriters, but in no event later than 10 days
after such date (such date is hereinafter referred to as the "Closing Date").
To the extent the Option is exercised, delivery of the Option
Shares against payment by the Underwriters (in the manner specified above) will
take place at the offices specified above for the Closing Date at the time and
date (which may be the Closing Date) specified in the Option Shares Notice.
If the Underwriters request that the Shares be delivered in
certificated form, then certificates representing the Shares shall be in
definitive form and shall be registered in such names and in such denominations
as the Underwriters shall request at least two business days prior to the
Closing Date or the Option Closing Date, as the case may be, by written notice
to the Company. For the purpose of expediting the checking and packaging of
certificates for the Shares, the Company agrees to make such certificates
available for inspection at least 24 hours prior to the Closing Date or the
Option Closing Date, as the case may be.
The cost of original issue tax stamps, if any, in connection
with the issuance and delivery of the Firm Shares and Option Shares by the
Company to the Underwriters shall be borne by the Company. The Company will pay
and save the Underwriters and any subsequent holder of the Shares harmless from
any and all liabilities with respect to or resulting from any failure or delay
in paying Federal and state stamp and other transfer taxes, if any, which may be
payable or determined to be payable in connection with the original issuance or
sale to the Underwriters of the Firm Shares and Option Shares.
3. Representations and Warranties of the Company and the
Manager.
The Company and, where applicable, the Manager, represents,
warrants and covenants to each Underwriter that:
3
<PAGE> 4
(a) The Company meets the requirements for use of Form S-3
and a registration statement (Registration No. 333-16799) on Form S-3 relating
to the Shares, including a prospectus (as amended, the "Base Prospectus"), and
such amendments to such registration statement as may have been required to the
date of this Agreement, have been prepared by the Company under the provisions
of the Securities Act of 1933, as amended (the "Act"), and the rules and
regulations (collectively referred to as the "Rules and Regulations") of the
Securities and Exchange Commission (the "Commission") thereunder, and have been
filed with the Commission and have become effective. No stop order suspending
the effectiveness of the registration statement has been issued, and no
proceeding for that purpose has been instituted or, to the Company's knowledge,
threatened by the Commission. The Company has prepared and filed with the
Commission pursuant to Rule 424(b) of the Rules and Regulations a preliminary
prospectus supplement subject to completion dated July 3, 1997 to be used in
connection with the offering of the Shares (the "Preliminary Prospectus
Supplement"). A final prospectus supplement pertaining to the Shares (the
"Prospectus Supplement") containing information permitted to be omitted at the
time of effectiveness by Rule 430A of the Rules and Regulations has been or will
be prepared and filed with the Commission pursuant to Rule 424(b) of the Rules
and Regulations on or before the second business day after the date hereof (or
such other time as may be required by the Rules and Regulations). Copies of such
registration statement and amendments and the related Base Prospectus and
Preliminary Prospectus Supplement have been delivered to the Underwriters. The
term "Registration Statement" means the registration statement as amended at the
time it became effective (the "Effective Date"), including financial statements
and all exhibits and any information deemed to be included by Rule 430 or Rule
430A of the Rules and Regulations ("Rule 430A") or Rule 434 of the Rules and
Regulations. The term "Prospectus" means, collectively, the Base Prospectus
together with the Preliminary Prospectus Supplement and the Prospectus
Supplement, in each case as filed with the Commission pursuant to Rule 424(b) of
the Rules and Regulations. Any reference herein to the Registration Statement,
the Base Prospectus, the Preliminary Prospectus Supplement or the Prospectus
Supplement shall be deemed to refer to and include the documents incorporated by
reference therein pursuant to Item 12 of Form S-3 which were filed under the
Exchange Act on or before the Effective Date or the date of such Base
Prospectus, the Preliminary Prospectus Supplement or the Prospectus Supplement,
as the case may be. Any reference herein to the terms "amend," "amendment" or
"supplement" with respect to the Registration Statement, the Base Prospectus,
the Preliminary Prospectus Supplement or the Prospectus Supplement shall be
deemed to refer to and include the filing of any document under the Exchange Act
after the Effective Date, or the date of the Base Prospectus, the Preliminary
Prospectus Supplement or the Prospectus Supplement, as the case may be, and
deemed to be incorporated therein by reference.
4
<PAGE> 5
(b) On the Effective Date, the date the Prospectus is first
filed with the Commission pursuant to Rule 424(b) (if required), at all times
subsequent to and including the Closing Date and, if later, the Option Closing
Date and when any post-effective amendment to the Registration Statement becomes
effective or any amendment or supplement to the Prospectus is filed with the
Commission, the Registration Statement and the Prospectus (as amended or as
supplemented if the Company shall have filed with the Commission any amendment
or supplement thereto), including the financial statements included or
incorporated by reference in the Prospectus, did or will comply with all
applicable provisions of the Act, the Exchange Act, the rules and regulations
thereunder (the "Exchange Act Rules and Regulations") and the Rules and
Regulations and will contain all statements required to be stated therein in
accordance with the Act, the Exchange Act, the Exchange Act Rules and
Regulations and the Rules and Regulations. On the Effective Date and when any
post-effective amendment to the Registration Statement becomes effective, no
part of the Registration Statement or any such amendment did or will contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein not
misleading. At the Effective Date, the date the Prospectus or any amendment or
supplement to the Prospectus is filed with the Commission and at the Closing
Date and, if later, the Option Closing Date, the Prospectus did not or will not
contain any 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. The foregoing representations and
warranties in this Section 3(b) do not apply to any statements or omissions made
in reliance on and in conformity with information relating to any Underwriter
furnished in writing to the Company by the Underwriters specifically for
inclusion in the Registration Statement or Prospectus or any amendment or
supplement thereto. For all purposes of this Agreement, the amounts of the
selling concession and reallowance set forth in the Prospectus constitute the
only information relating to any Underwriter furnished in writing to the Company
by the Underwriters specifically for inclusion in the Prospectus Supplement or
the Registration Statement. The Company has not distributed any offering
material in connection with the offering or sale of the Shares other than the
Registration Statement and the Prospectus or any other materials, if any,
permitted by the Act.
(c) The documents which are incorporated by reference in
the Prospectus or from which information is so incorporated by reference, when
they become effective or were filed with the Commission, as the case may be,
complied in all material respects with the requirements of the Act or the
Exchange Act, as applicable, the Exchange Act Rules and Regulations and the
Rules and Regulations; and any documents so
5
<PAGE> 6
filed and incorporated by reference subsequent to the Effective Date shall, when
they are filed with the Commission, conform in all material respects with the
requirements of the Act and the Exchange Act, as applicable, the Exchange Act
Rules and Regulations and the Rules and Regulations.
(d) The Company and Thornburg Mortgage Advisory Corporation
(the "Manager") are, and at the Closing Date will be, corporations duly
organized, validly existing and in good standing under the laws of their
jurisdiction of incorporation. The Company and the Manager have, and at the
Closing Date will have, full power and authority to conduct all the activities
conducted by them, to own or lease all the assets owned or leased by them and to
conduct their businesses as described in the Registration Statement and the
Prospectus. The Company and the Manager are, and at the Closing Date will be,
duly licensed or qualified to do business and in good standing as foreign
corporations in all jurisdictions in which the nature of the activities
conducted by them or the character of the assets owned or leased by them make
such licensing or qualification necessary. Except as disclosed in the
Registration Statement, the Company and the Manager have no subsidiaries and do
not own, and at the Closing Date will not own, directly or indirectly, any
shares of stock or any other equity or long-term debt securities of any
corporation or have any equity interest in any firm, partnership, joint venture,
association or other entity. Complete and correct copies of the certificates of
incorporation and of the by-laws of the Company and the Manager and all
amendments thereto have been delivered to the Underwriters, and no changes
therein will be made subsequent to the date hereof and prior to the Closing Date
or, if later, the Option Closing Date.
(e) The Company has authorized and outstanding Capital
Stock as set forth under the heading "Capitalization" in the Prospectus. The
outstanding shares of Common Stock and preferred stock have been, and the Shares
to be issued and sold by the Company upon such issuance will be, duly
authorized, validly issued, fully paid and nonassessable and will not be subject
to any preemptive or similar right. The description of the Common Stock in the
Registration Statement and the Prospectus is, and at the Closing Date will be,
complete and accurate in all respects. Except as set forth in the Prospectus,
the Company does not have outstanding, and at the Closing Date will not have
outstanding, any options to purchase, or any rights or warrants to subscribe
for, or any securities or obligations convertible into, or any contracts or
commitments to issue or sell, any shares of Common Stock or preferred stock, any
shares of capital stock of any Subsidiary or any such warrants, convertible
securities or obligations. No shareholder of the Company has any right which has
not been waived to require the Company to register the sale of any shares owned
by such shareholder under the Act in the public offering contemplated by this
Agreement. No further approval or authority of the shareholders or the Board
6
<PAGE> 7
of Directors of the Company will be required for the issuance and sale of the
Shares to be sold by the Company as contemplated herein. The description of the
Company's share option, share bonus and other share plans or arrangements and
the options or other rights granted and exercised thereunder, set forth in the
Prospectus accurately and fairly presents the information required to be shown
with respect to such plans, arrangements, options and rights.
(f) The financial statements and schedules included or
incorporated by reference in the Registration Statement or the Prospectus
present fairly the financial condition of the Company as of the respective dates
thereof and the results of operations and cash flows of the Company for the
respective periods covered thereby, all in conformity with generally accepted
accounting principles applied on a consistent basis throughout the entire period
involved, except as otherwise disclosed in the Prospectus. Any pro forma
financial statements and any other pro forma financial information included in
the Registration Statement or the Prospectus (i) present fairly in all material
respects the information shown therein, (ii) have been prepared in accordance
with the Commission's rules and guidelines with respect to pro forma financial
statements and (iii) have been properly computed on the bases described therein.
The assumptions used in the preparation of the pro forma financial statements
and other pro forma financial information incorporated by reference in the
Registration Statement or the Prospectus are reasonable and the adjustments used
therein are appropriate to give effect to the transactions or circumstances
referred to therein. No other financial statements or schedules of the Company
are required by the Act, the Exchange Act or the Rules and Regulations to be
incorporated by reference in the Registration Statement or the Prospectus.
McGladrey & Pullen, LLP (the "Accountants) who have reported on such financial
statements and schedules, are independent accountants with respect to the
Company as required by the Act and the Rules and Regulations. The statements
included in the Registration Statement with respect to the Accountants pursuant
to Rule 509 of Regulation S-K of the Rules and Regulations are true and correct
in all material respects. The selected financial data set forth in the
Prospectus under the captions "Capitalization," and "Selected Financial Data"
fairly present the information set forth therein on the basis stated in the
Registration Statement.
(g) The Company and the Manager maintain a system of
internal accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorization; (ii) transactions are recorded as necessary to permit preparation
of financial statements in conformity with generally accepted accounting
principles and to maintain accountability for assets; (iii) access to assets is
permitted only in accordance with management's general or specific
authorization; and (iv) the
7
<PAGE> 8
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(h) Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus and prior
to the Closing Date, except as set forth in or contemplated by the Registration
Statement and the Prospectus: (i) there has not been and will not have been any
change in the capitalization of the Company or the Manager, or in the business,
properties, business prospects, condition (financial or otherwise) or results of
operations of the Company or the Manager, arising for any reason whatsoever;
(ii) the Company and the Manager have not incurred nor will they incur any
material liabilities or obligations, direct or contingent, nor have they entered
into nor will they enter into any material verbal or written agreements or other
transactions other than pursuant to this Agreement and the transactions referred
to herein; (iii) the Company and the Manager have not and will not have paid or
declared any dividends or other distributions of any kind on any class of
capital stock, and the Company and the Manager are not in default in the payment
of principal or interest on any outstanding debt obligations; (iv) the Company
and the Manager have not sustained any material loss or interference with its
business or properties from fire, flood, windstorm, accident or other calamity,
whether or not covered by insurance; and (v) there has not been any material
adverse change in the condition (financial or otherwise), business, properties,
results of operations or prospects of the Company or the Manager.
(i) The Company is not an "investment company" or an
"affiliated person" of, or "promoter" or "principal underwriter" for, an
"investment company," as such terms are defined in the Investment Company Act of
1940, as amended.
(j) Except as set forth in the Registration Statement and
the Prospectus, there are no legal or governmental actions, suits or proceedings
pending or threatened against or affecting the Company, the Manager or the
officers of the Company or the Manager in their capacity as such, or of which
property owned or leased by the Company or the Manager is or may be the subject,
or related to environmental or discrimination matters, which actions, suits or
proceedings might, individually or in the aggregate, prevent or adversely affect
the transactions contemplated by this Agreement or result in a material adverse
change in the condition (financial or otherwise), properties, business, results
of operations or prospects of the Company or the Manager; and no labor
disturbance by the employees of the Company or the Manager exists or is imminent
which might be expected to affect adversely such condition, properties,
business, results of operations or prospects. The Company and the Manager are
not a party or subject to the provisions of any material injunction, judgment,
decree or order of any court, regulatory body, administrative agency or other
governmental body.
8
<PAGE> 9
(k) The Company and the Manager have, and at the Closing
Date will have, (i) all governmental licenses, permits, consents, orders,
approvals and other authorizations necessary to carry on their business as
contemplated in the Prospectus, (ii) complied in all respects with all laws,
regulations and orders applicable to it or its business and (iii) performed all
the obligations required to be performed by them, and are not, and at the
Closing Date will not be, in default, under any indenture, mortgage, deed of
trust, voting trust agreement, loan agreement, bond, debenture, note agreement,
lease, contract or other agreement or instrument (collectively, a "contract or
other agreement") to which they are a party or by which their property is bound
or affected. To the best knowledge of the Company and the Manager, no other
party under any contract or other agreement to which they are a party is in
default in any respect thereunder. The Company and the Manager are not, nor at
the Closing Date will be, in violation of any provision of their certificate of
incorporation or by-laws.
(l) The Company and the Manager are in compliance with all
applicable laws, rules and regulations of the jurisdictions in which they are
conducting business, including, without limitation, all applicable local, state
and federal environmental laws and regulations; except where failure to be so in
compliance would not materially adversely affect the condition (financial or
otherwise), business, results of operations or prospects of the Company or the
Manager.
(m) No consent, approval, authorization or order of, or any
filing or declaration with, any court or governmental agency or body is required
in connection with the authorization, issuance, transfer, sale or delivery of
the Shares by the Company, in connection with the execution, delivery and
performance of this Agreement by the Company or in connection with the taking by
the Company of any action contemplated hereby, except such as have been obtained
under the Act or the Rules and Regulations and such as may be required under
state securities or Blue Sky laws or the bylaws and rules of the National
Association of Securities Dealers, Inc. (the "NASD") in connection with the
purchase and distribution by the Underwriters of the Shares to be sold by the
Company.
(n) The Company has full corporate power and authority to
enter into this Agreement. This Agreement has been duly authorized, executed and
delivered by the Company and constitutes a valid and binding agreement of the
Company and is enforceable against the Company in accordance with the terms
hereof. The performance of this Agreement and the consummation of the
transactions contemplated hereby and the application of the net proceeds from
the offering and sale of the Shares to be
9
<PAGE> 10
sold by the Company in the manner set forth in the Prospectus under "Use of
Proceeds" will not result in the creation or imposition of any lien, charge or
encumbrance upon any of the assets of the Company pursuant to the terms or
provisions of, or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, or give any other party a right to
terminate any of its obligations under, or result in the acceleration of any
obligation under, the certificate of incorporation or by-laws of the Company,
any contract or other agreement to which the Company is a party or by which the
Company or any of its properties is bound or affected, or violate or conflict
with any judgment, ruling, decree, order, statute, rule or regulation of any
court or other governmental agency or body applicable to the business or
properties of the Company.
(o) The Company owns no real property. The Company has good
and marketable title to all the properties and assets reflected as owned in the
financial statements hereinafter described (or elsewhere in the Prospectus),
subject to no lien, mortgage, pledge, charge or encumbrance of any kind except
(i) those, if any, reflected in such financial statements (or elsewhere in the
Prospectus), or (ii) those which are not material in amount and do not adversely
affect the use made and proposed to be made of such property by the Company. The
Company holds its leased properties under valid and binding leases, with such
exceptions as are not materially significant in relation to the business of the
Company. Except as disclosed in the Prospectus, the Company owns or leases all
such properties as are necessary to its operations as now conducted or as
proposed to be conducted.
(p) There is no document or contract of a character
required to be described or incorporated by reference in the Registration
Statement or the Prospectus or to be filed as an exhibit to the Registration
Statement which is not described, filed or incorporated by reference as
required. All such contracts to which the Company or the Manager is a party have
been duly authorized, executed and delivered by the Company or the Manager,
constitute valid and binding agreements of the Company or the Manager and are
enforceable against the Company or the Manager in accordance with the terms
thereof.
(q) No statement, representation, warranty or covenant made
by the Company in this Agreement or made in any certificate or document required
by this Agreement to be delivered to the Representatives was or will be, when
made, inaccurate, untrue or incorrect.
(r) Neither the Company, the Manager nor any of their
directors, officers or controlling persons have taken, directly or indirectly,
any action intended, or which might reasonably be expected, to cause or result,
under the Act or otherwise, in, or which has constituted, stabilization or
10
<PAGE> 11
manipulation of the price of any security of the Company to facilitate the sale
or resale of the Shares.
(s) No holder of securities of the Company has rights to
the registration of any securities of the Company because of the filing of the
Registration Statement.
(t) Prior to the Closing Date, the Shares will be duly
authorized for listing, subject to official notice of issuance, on the New York
Stock Exchange.
(u) The Company has all necessary trademarks, trade names,
patent rights, mask works, copyrights, licenses, approvals and governmental
authorizations to conduct its business as now conducted or proposed to be
conducted; the expiration of any trademarks, trade names, patent rights, mask
works, copyrights, licenses, approvals or governmental authorizations would not
have a material adverse effect on the condition (financial or otherwise),
business, results of operations or prospects of the Company; and the Company has
no knowledge of any material infringement by it of trademark, trade name rights,
patent rights, mask works, copyrights, licenses, trade secret or other similar
rights of others, and there is no claim being made against the Company regarding
trademark, trade name, patent, mask work, copyright, license, trade secret or
other infringement which could have a material adverse effect on the condition
(financial or otherwise), business, results of operations or prospects of the
Company.
(v) Neither the Company, the Manager nor, to the Company's
or Manager's knowledge, any employee or agent of the Company or Manager have
made any payment of funds of the Company or Manager 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.
(w) Neither the Company nor its officers, directors,
employees and agents have distributed or will distribute prior to the Closing
Date any offering material in connection with the offering and sale of the
Shares other than the Prospectus, the Registration Statement or other materials
permitted by the Act.
(x) The Company and the Manager have filed all necessary
federal, state and foreign income and franchise tax returns and has paid all
taxes shown as due thereon; and the Company and the Manager have no knowledge of
any tax deficiency which has been or might be asserted or threatened against the
Company or the Manager which could materially and adversely affect the business,
operations or properties of the Company or the Manager.
11
<PAGE> 12
(y) Neither the Company, the Manager nor to the knowledge
of the Company or the Manager any officers, directors, employees or agents
acting on behalf of the Company has at any time (i) made any contributions to
any candidate for political office in violation of law, or failed to disclose
fully any contributions to any candidate for political office in accordance with
any applicable statute, rule, regulation or ordinance requiring such disclosure,
(ii) made any payment to any local, state, federal or foreign governmental
officer or official, or other person charged with similar public or quasi-public
duties, other than payments required or allowed by applicable law, (iii) made
any payment outside the ordinary course of business to any purchasing or selling
agent or person charged with similar duties of any entity to which the Company
sells or from which the Company buys products for the purpose of influencing
such agent or person to buy products from or sell products to the Company, or
(iv) except as described in the Prospectus, engaged in any transaction,
maintained any bank account or used any corporate funds except for transactions,
bank accounts and funds which have been and are reflected in the normally
maintained books and records of the Company.
(z) As of the Closing Date and, if later, the Option
Closing Date, the Company and the Manager shall be 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 they propose to
engage as described in the Prospectus; the Company and the Manager have not been
refused any insurance coverage sought or applied for; and the Company and the
Manager have no reason to believe that they will not be able to renew their
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue their
proposed business at a cost that would not result in a material adverse effect.
(aa) As of the Closing Date and, if later, the Option
Closing Date, the Company shall be qualified as a real estate investment trust
("REIT") under Sections 856 through 860 of the Internal Revenue Code of 1986, as
amended (the "Code"), and intends to operate in a manner so as to continue to
remain so qualified.
(ab) Neither the Company nor the Manager will be a "broker"
within the meaning of Section 3(a)(4) of the Exchange Act or a "dealer" within
the meaning of Section 3(a)(5) of the Exchange Act or required to be registered
pursuant to Section 15(a) of the Exchange Act.
(ac) Neither the Company nor any affiliate has incurred any
liability for a fee, commission or other compensation on account of the
employment of a broker or finder in connection with the transactions
contemplated by this Agreement other than as disclosed in the Prospectus.
12
<PAGE> 13
(ad) The "ADTV" (average daily trading volume), as such
term is defined by Regulation M (17 C.F.R. Part 242) promulgated by the
Commission under the Exchange Act ("Regulation M"), value of the Common Stock
during a period of sixty consecutive calendar days ending within the ten
calendar days immediately preceding the date hereof was at least $1 million; and
the "public float value" (as determined under Regulation M) of the Common Stock
is at least $150 million on the date hereof.
4. Covenants and Agreements of the Company.
The Company covenants and agrees with the Underwriters as
follows:
(a) The Company will cause the Prospectus to be filed as
required by Section 3(a) hereof (but only if the Underwriters have not
reasonably objected thereto by notice to the Company after having been furnished
a copy a reasonable time prior to filing) and will notify the Underwriters
promptly of such filing; it will notify the Underwriters promptly of the time
when any subsequent amendment to the Registration Statement has become effective
or any supplement to the Prospectus has been filed and of any request by the
Commission for any amendment or supplement to the Registration Statement or
Prospectus or for additional information; it will prepare and file with the
Commission, promptly upon the Underwriters' request, any amendments or
supplements to the Registration Statement or Prospectus that, in the
Underwriters' opinion, may be necessary or advisable in connection with the
distribution of the Shares by the Underwriters; and it will file no amendment or
supplement to the Registration Statement or Prospectus to which the Underwriters
shall reasonably object by notice to the Company after having been furnished a
copy at a reasonable time prior to the filing.
(b) The Company will advise the Underwriters, promptly
after it shall receive notice or obtain knowledge thereof, of the issuance by
the Commission of any stop order suspending the effectiveness of the
Registration Statement, of the suspension of the qualification of the Shares for
offering or sale in any jurisdiction, or of the initiation or threatening of any
proceeding for any purpose; and it will promptly use its best efforts to prevent
the issuance of any stop order or to obtain its withdrawal if such a stop order
should be issued.
(c) Within the time during which a Prospectus relating to
the Shares is required to be delivered under the Act, the Company will comply
with all requirements imposed upon it by the Act and by the Rules and
Regulations, 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. If during such period any event occurs as
a result of which the Prospectus as then amended or
13
<PAGE> 14
supplemented would include an untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in light of the
circumstances then existing, not misleading, or if during such period it is
necessary to amend or supplement the Registration Statement or Prospectus to
comply with the Act, the Company will promptly notify the Underwriters and will
amend or supplement the Registration Statement or Prospectus (at the expense of
the Company) so as to correct such statement or omission or effect such
compliance.
(d) The Company will furnish to the Underwriters, without
charge, two signed copies of the Registration Statement and of any
post-effective amendment thereto, including financial statements and schedules,
and all exhibits thereto (including any document filed under the Exchange Act
and deemed to be incorporated by reference into the Prospectus).
(e) The Company will comply with all the provisions of any
undertakings contained in the Registration Statement.
(f) As soon after the execution and delivery of this
Agreement as possible and thereafter from time to time, the Company will deliver
to each of the Underwriters, without charge, as many copies of the Prospectus or
any amendment or supplement thereto as the Underwriters may reasonably request.
The Company consents to the use of the Prospectus or any amendment or supplement
thereto by the Underwriters and by all dealers to whom the Shares may be sold,
both in connection with the offering or sale of the Shares and for any period of
time thereafter during which the Prospectus is required by law to be delivered
in connection therewith. If at any time within the nine-month period referred to
in Section 10(a)(3) of the Act during which a prospectus relating to the Shares
is required to be delivered under the Act any event shall occur which in the
judgment of the Company or counsel to the Underwriters should be set forth in
the Prospectus in order to make any statement therein, in the light of the
circumstances under which it was made, not misleading, or if it is necessary to
supplement or amend the Prospectus to comply with law, the Company will promptly
advise the Underwriters thereof and will forthwith prepare and duly file with
the Commission an appropriate supplement or amendment thereto, and will deliver
to each of the Underwriters, without charge, such number of copies thereof as
such Underwriter may reasonably request. In the event that any Underwriter is
required to deliver a Prospectus after such nine-month period, the Company upon
request, but at the expense of such Underwriter, will promptly prepare such
amendment or amendments to the Registration Statement and such Prospectus or
Prospectuses as may be necessary to permit compliance with the requirements of
Section 10(a)(3) of the Act. The Company shall not file any document under the
Exchange Act before the termination of the offering of the Shares by the
Underwriters if such document would
14
<PAGE> 15
be deemed to be incorporated by reference into the Prospectus which is not
approved by the Underwriters after reasonable notice thereof.
(g) Prior to any public offering of the Shares by the
Underwriters, the Company shall cooperate with the Underwriters and their
counsel in order to qualify or register the Shares for sale under (or obtain
exemptions from the application of) the Blue Sky laws of such jurisdictions as
the representatives designate, will comply with such laws and will continue such
qualifications, registrations and exemptions in effect so long as reasonably
required for the distribution of the Shares. The Company shall not be required
to qualify as a foreign corporation or to file a general consent to service of
process in any such jurisdiction where it is not presently qualified or where it
would be subject to taxation as a foreign corporation. The Company will advise
the Underwriters promptly of the suspension of the qualification or registration
of (or any such exemption relating to) the Shares for offering; sale or trading
in any jurisdiction or any initiation or threat of any proceeding for any such
purpose, and in the event of the issuance of any order suspending such
qualification, registration or exemption, the Company, with the cooperation of
the Underwriters, will use its best efforts to obtain the withdrawal thereof.
(h) During the period of five years hereafter, the Company
will furnish to each of the Underwriters: (i) as soon as practicable after the
end of each fiscal year, copies of the Annual Report of the Company containing
the balance sheet of the Company as of the close of such fiscal year and
statements of income, stockholders' equity and cash flows for the year then
ended and the opinion thereon of the Company's independent public accountants;
(ii) as soon as practicable after the filing thereof, copies of each proxy
statement, Annual Report on Form 10-K, Quarterly Report on Form 10-Q, Report on
Form 8-K or other report filed by the Company with the Commission, the NASD or
any securities exchange; and (iii) as soon as available, copies of any report or
communication of the Company mailed generally to holders of its Common Stock.
(i) The Company will make generally available to holders of
its securities as soon as may be practicable but in no event later than the last
day of the fifteenth full calendar month following the calendar quarter in which
the effective date falls, an earnings statement (which need not be audited but
shall be in reasonable detail) for a period of 12 months ended commencing after
the effective date, and satisfying the provisions of Section 11(a) of the Act
(including Rule 158 of the Rules and Regulations). "Effective date" for purposes
of this Section 4(i) shall be as defined in Section 158 of the Rules and
Regulations.
15
<PAGE> 16
(j) Whether or not the transactions contemplated by this
Agreement are consummated or this Agreement is terminated, the Company will pay,
or reimburse if paid by the Underwriters, all costs and expenses incident to the
performance of the obligations of the Company under this Agreement, including
but not limited to costs and expenses of or relating to (1) the preparation,
printing and filing of the Registration Statement and exhibits to it, each
preliminary prospectus, the Prospectus and any amendment or supplement to the
Registration Statement or the Prospectus, (2) the preparation and delivery of
certificates representing the Shares, (3) the printing of this Agreement, the
Agreement Among Underwriters, any Dealer Agreements and any Underwriters
Questionnaire, (4) furnishing (including costs of shipping, mailing and courier)
such copies of the Registration Statement, the Prospectus and any preliminary
prospectus, and all amendments and supplements thereto, as may be requested for
use in connection with the offering and sale of the Shares by the Underwriters
or by dealers to whom Shares may be sold, (5) the listing of the Shares on the
New York Stock Exchange, (6) any filings required to be made by the Underwriters
with the NASD, and the fees, disbursements and other charges of counsel for the
Underwriters in connection therewith, (7) the registration or qualification of
the Shares for offer and sale under the securities or Blue Sky laws of such
jurisdictions designated pursuant to Section 4(f), including the fees,
disbursements and other charges of counsel to the Underwriters in connection
therewith, and the preparation and printing of preliminary, supplemental and
final Blue Sky memoranda, (8) counsel to the Company, (9) the transfer agent for
the Shares and (10) the Accountants.
(k) If this Agreement shall be terminated by the Company
pursuant to any of the provisions hereof or if for any reason the Company shall
be unable to perform its obligations hereunder, the Company will reimburse the
Underwriters for all out-of-pocket expenses (including the fees, disbursements
and other charges of counsel to the Underwriters) reasonably incurred in
connection herewith.
(l) The Company will not at any time, directly or
indirectly, take any action intended, or which might reasonably be expected, to
cause or result in, or which will constitute, stabilization of the price of the
shares of Common Stock to facilitate the sale or resale of any of the Shares.
(m) The Company will apply the net proceeds from the
offering and sale of the Shares to be sold by the Company in the manner set
forth in the Prospectus under "Use of Proceeds". The Company will not use the
proceeds of the sale of the Shares in such a manner as to require the Company to
be registered under the Investment Company Act.
16
<PAGE> 17
(n) The Company will not, and will cause each of its
executive officers and directors to enter into agreements with the Underwriters
in the form set forth in Exhibit B hereto to the effect that they will not, for
a period of 120 days after the commencement of the public offering of the
Shares, without the prior written consent of PaineWebber Incorporated, sell,
contract to sell or otherwise dispose of any shares of Common Stock, convertible
preferred stock, or rights to acquire such securities (other than pursuant to
employee stock option plans or in connection with other employee incentive
compensation arrangements).
(o) The Company will use its best efforts to list, subject
to official notice of issuance, on the New York Stock Exchange, the Shares to be
issued and sold by the Company.
(p) The Company will continue to meet the requirements to
qualify as a REIT and will not revoke its election to be a REIT unless and until
the Board determines that such revocation is advantageous to the Company.
(q) The Company will not invest in futures contracts,
options on futures contracts or options on commodities unless the Company and
Manager (as defined in the Prospectus) are exempt from the registration
requirements of the Commodity Exchange Act, as amended, or otherwise comply with
the Commodity Exchange Act, as amended. Additionally, neither the Company nor
the Manager will engage in any activities bearing on the Commodity Exchange Act,
as amended, except as described in the Lord Day & Lord, Barrett Smith opinion
dated June 21, 1993, unless such activities are exempt from the Commodity
Exchange Act, as amended, or otherwise comply with the Commodity Exchange Act,
as amended.
(r) The Company will not permit Manager (for so long as it
is the Manager) to engage in any activity which would cause Manager to register
as an investment advisor under the Investment Advisors Act or 1940. Without
limitation, the Company will not permit Manager to (i) render investment advice
to more than fifteen clients, (ii) hold itself out generally to the public as an
investment advisor, or (iii) act as an investment advisor to any investment
company that is registered under the Investment Company Act.
The Underwriters may, in their sole discretion, waive in
writing the performance by the Company of any one or more of the foregoing
covenants or extend the time for their performance.
17
<PAGE> 18
5. Conditions of the Obligations of the Underwriters.
In addition to the execution and delivery of the Price
Determination Agreement, the obligations of each Underwriter hereunder are
subject to the following conditions:
(a) The Prospectus shall have been filed as required by
Section 3(a) hereof and (i) no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall be pending or threatened by the Commission, (ii) no order
suspending the effectiveness of the Registration Statement or the qualification
or registration of the Shares under the securities or Blue Sky laws of any
jurisdiction shall be in effect and no proceeding for such purpose shall be
pending before or threatened or contemplated by the Commission or the
authorities of any such jurisdiction, (iii) any request for additional
information on the part of the staff of the Commission or any such authorities
shall have been complied with to the satisfaction of the staff of the Commission
or such authorities and (iv) after the date hereof no amendment or supplement to
the Registration Statement or the Prospectus shall have been filed unless a copy
thereof was first submitted to PaineWebber Incorporated and PaineWebber
Incorporated did not object thereto in good faith, and the Underwriters shall
have received certificates dated the Closing Date and the Option Closing Date,
as the case may be, and signed by the Chairman of the Board of Directors or
President of the Company and the Chief Financial Officer of the Company (who
may, as to proceedings threatened, rely upon the best of their information and
belief), to the effect of clauses (i), (ii) and (iii).
(b) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, (i) there shall not have
been a material adverse change in the general affairs, business, business
prospects, properties, management, condition (financial or otherwise) or results
of operations of the Company, whether or not arising from transactions in the
ordinary course of business, in each case other than as set forth in or
contemplated by the Registration Statement and the Prospectus and (ii) the
Company has not sustained any material loss or interference with its business or
properties from fire, explosion, flood or other casualty, whether or not covered
by insurance, or from any labor dispute or any court or legislative or other
governmental action, order or decree, which is not set forth in the Registration
Statement and the Prospectus, if in the judgment of the PaineWebber Incorporated
any such development makes it impracticable or inadvisable to consummate the
sale and delivery of the Shares by the Underwriters at the initial public
offering price.
(c) Since the respective dates as of which information is
given in the Registration Statement and the
18
<PAGE> 19
Prospectus, there shall have been no litigation or other proceeding instituted
against the Company or any of its respective officers or directors in their
capacities as such, before or by any Federal, state or local court, commission,
regulatory body, administrative agency or other governmental body, domestic or
foreign, in which litigation or proceeding an unfavorable ruling, decision or
finding would materially and adversely affect the business, properties, business
prospects, condition (financial or otherwise) or results of operations of the
Company.
(d) Each of the representations and warranties of the
Company contained herein shall be true and correct in all material respects at
the Closing Date and, with respect to the Option Shares at the Option Closing
Date, as if made at the Closing Date and, with respect to the Option Shares, at
the Option Closing Date, and all covenants and agreements herein contained to be
performed on the part of the Company and all conditions herein contained to be
fulfilled or complied with by the Company at or prior to the Closing Date and,
with respect to the Option Shares, at or prior to the Option Closing Date, shall
have been duly performed, fulfilled or complied with.
(e) The Underwriters shall have received an opinion, dated
the Closing Date and the Option Closing Date, as the case may be, and
satisfactory in form and substance to counsel for the Underwriters, from
Jeffers, Wilson, Shaff & Falk, LLP, counsel to the Company, to the effect set
forth in Exhibit C hereto.
(f) The Underwriters shall have received an opinion of
O'Melveny & Myers LLP, counsel to the Underwriters, dated the Closing Date and
the Option Closing Date, as the case may be, with respect to the Registration
Statement, the Prospectus and this Agreement, which opinion shall be
satisfactory in all respects to the Underwriters.
(g) The Underwriters shall have received on the date before
this Agreement is executed and also on the Closing Date and the Option Closing
Date a letter from the Accountants, the first one to be dated the day before the
date of this Agreement, the second one to be dated the Closing Date and the
third one (in the event of an Option Closing) to be dated the Option Closing
Date, to the effect that:
(1) They are independent accountants with respect to
the Company within the meaning of the Act and the
applicable rules and regulations thereunder;
(2) In their opinion, the financial statements examined
by them and contained in the Registration Statement or
incorporated by
19
<PAGE> 20
reference therein and the Prospectus comply in form in all
material respects with the applicable accounting
requirements of the Act and the related published rules and
regulations;
(3) On the basis of a reading of the latest available
interim unaudited financial statement of the Company,
carrying out certain specified procedures (which do not
constitute an examination made in accordance with generally
accepted auditing standards) that would not necessarily
reveal matters of significance with respect to the comments
set forth in this paragraph (3), a reading of the minute
books of the stockholders, the board of directors and any
committees thereof of the Company, and inquiries of certain
officials of the Company who have responsibility for
financial and accounting matters, nothing came to their
attention that caused them to believe that as of a date not
more than five days prior to the date of such letter, there
were any changes in the capital stock or long-term debt of
the Company or any decreases in net current assets or
stockholders' equity of the Company in each case compared
with amounts shown on the balance sheet included in the
Registration Statement and the Prospectus; and
(4) they have carried out certain specified procedures,
not constituting an audit, with respect to any pro forma
financial information, amounts, percentages and other
financial information that are derived from the general
accounting records of the Company and are included in the
Registration Statement and the Prospectus as marked on the
copy of the Prospectus attached to such letter, and have
compared such amounts, percentages and financial
information with such records of the Company and with
information derived from such records and have found them
to be in agreement, excluding any questions of legal
interpretation.
(h) At the Closing Date and, as to the Option Shares, the
Option Closing Date, there shall be furnished to the Underwriters an accurate
certificate, dated the date of its delivery, signed by each of the Chairman of
the Board or President and the Chief Financial Officer of the Company, in form
and substance satisfactory to the Underwriters, to the effect that:
(1) Each of the respective signers of the certificate
has carefully examined the
20
<PAGE> 21
Registration Statement and the Prospectus (including any
documents filed under the Exchange Act and deemed to be
incorporated by reference into the Prospectus); in his
opinion and to the best of his knowledge, such documents
and any amendments or supplements thereto contain all
statements required to be stated therein regarding the
Company; and neither the Registration Statement nor the
Prospectus nor any amendment or supplement thereto includes
any untrue statement of a material fact or omits to state
any material fact required to be stated therein or
necessary to make the statements therein not misleading;
(2) Each of the representations and warranties of the
Company contained in this Agreement are true and correct as
of the date of this Agreement and as of the Closing Date or
the Option Closing Date, as the case may be;
(3) The Commission has not issued any order preventing
or suspending the use of the Prospectus or any preliminary
prospectus filed as a part of the Registration Statement or
any amendment thereto; no stop order suspending the
effectiveness of the Registration Statement has been
issued; and to the best of the knowledge of the respective
signers, no proceedings for that purpose have been
instituted or are pending or contemplated under the Act;
(4) Since the initial date on which the Registration
Statement was filed, no agreement, written or oral,
transaction or event has occurred which should have been
set forth in an amendment to the Registration Statement or
in a supplement to or amendment of any prospectus which has
not been disclosed in such a supplement or amendment;
(5) Since the respective dates as of which information
is given in the Registration Statement and the Prospectus,
and except as disclosed in or contemplated by the
Prospectus, there has not been any material adverse change
or a development involving a material adverse change in the
condition (financial or otherwise), business, properties,
results of operations, management or prospects of the
Company; and no legal or governmental action, suit or
proceeding is pending or threatened against the Company
which is material to the Company, whether or not arising
from transactions in the ordinary course of business, or
which may adversely affect the
21
<PAGE> 22
transactions contemplated by this Agreement; since such
dates and except as so disclosed, the Company has not
entered into any verbal or written agreement or other
transaction which is not in the ordinary course of business
or which could result in a material reduction in the future
earnings of the Company or incurred any material liability
or obligation, direct, contingent or indirect, made any
change in its capital stock, made any material change in
its short-term debt or funded debt or repurchased or
otherwise acquired any of the Company's capital stock; and
the Company has not declared or paid any dividend, or made
any other distribution, upon its outstanding capital stock
payable to stockholders of record on a date prior to the
Closing Date or the Option Closing Date; and
(6) Each of the covenants required herein to be
performed by the Company on or prior to the date of such
certificate has been duly, timely and fully performed and
each condition herein required to be complied with by the
Company on or prior to the delivery of such certificate has
been duly, timely and fully complied with.
(i) On or prior to the Closing Date, the Underwriters shall
have received the executed (lock-up) agreements referred to in Section 4(n)
hereof.
(j) The Shares shall be qualified for sale in such states
as the Underwriters may reasonably request, each such qualification shall be in
effect and not subject to any stop order or other proceeding on the Closing Date
and the Option Closing Date.
(k) Prior to the Closing Date, the Shares shall have been
duly authorized for listing by the New York Stock Exchange upon official notice
of issuance.
(l) Prior to the date hereof, the Company shall have
furnished to the Underwriters a copy of the executed written consent of Sutro &
Co. Incorporated, specifically referring to Section 4(n) of that certain
Underwriting Agreement dated May 14, 1997, by and between the Company and Sutro
& Co. Incorporated, and permitting the Company to contract to sell and to sell
and to otherwise dispose of shares of Common Stock and rights to acquire such
shares in connection with the sale to the Underwriters of the Firm Shares and
the Option Shares and the public offering contemplated hereby.
(m) The Company shall have furnished to the Underwriters
such certificates, in addition to those specifically
22
<PAGE> 23
mentioned herein, as the Underwriters, or counsel to the Underwriters, may have
reasonably requested as to the accuracy and completeness at the Closing Date and
the Option Closing Date of any statement in the Registration Statement or the
Prospectus or any documents filed under the Exchange Act and deemed to be
incorporated by reference into the Prospectus, as to the accuracy at the Closing
Date and the Option Closing Date of the representations and warranties of the
Company herein, as to the performance by the Company of its respective
obligations hereunder, as to the fulfillment of the conditions concurrent and
precedent to the obligations hereunder of the Underwriters, or as to any factual
matters reasonably necessary for counsel to the Underwriters to render the
opinion referred to in Section 5(f).
All such opinions, certificates, letters and documents
shall be in compliance with the provisions hereof only if they are satisfactory
to the Underwriters and to O'Melveny & Myers LLP, counsel to the Underwriters.
The Company shall furnish the Underwriters with such manually signed or
conformed copies of such opinions, certificates, letters and documents as
requested by the Underwriters. Any certificate signed by any officer of the
Company and delivered to the Underwriters or their counsel shall be deemed to be
a representation and warranty by the Company to the Underwriters as to the
statements made therein.
If any condition to the Underwriters' obligations under
this Agreement to be satisfied prior to or at the Closing Date is not so
satisfied, this Agreement will terminate at the election of and upon
notification by the Underwriters without liability on the part of any
Underwriter or the Company except for the expenses to be paid or reimbursed by
the Company pursuant to Sections 4(j) and 4(k) hereof and except to the extent
provided in Section 6 hereof.
6. Indemnification and Contribution.
(a) The Company will indemnify and hold harmless each
Underwriter, the directors, officers, employees and agents of each Underwriter
and each person, if any, who controls any Underwriter within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act from and against any and
all losses, claims, liabilities, expenses and damages (including, but not
limited to, any and all investigative, legal and other expenses reasonably
incurred in connection with, and any and all amounts paid in settlement of, any
action, suit or proceeding between any of the indemnified parties and any
indemnifying parties or between any indemnified party and any third party, or
otherwise, or any claim asserted), as and when incurred, to which any
Underwriter, or any such person may become subject under the Act, the Exchange
Act or other Federal or state statutory law or regulation, at common law or
otherwise, insofar as such losses, claims, liabilities, expenses or damages
arise out of or are
23
<PAGE> 24
based on (i) any untrue statement or alleged untrue statement of a material fact
contained in any preliminary prospectus, the Registration Statement or the
Prospectus or any amendment or supplement to the Registration Statement or the
Prospectus or in any documents filed under the Exchange Act and deemed to be
incorporated by reference into the Prospectus, or in any application or other
document executed by or on behalf of the Company or based on written information
furnished by or on behalf of the Company filed in any jurisdiction in order to
qualify the Shares under the securities laws thereof or filed with the
Commission, (ii) the omission or alleged omission to state in such document a
material fact required to be stated in it or necessary to make the statements in
it not misleading or (iii) any act or failure to act or any alleged act or
failure to act by any Underwriter in connection with, or relating in any manner
to, the Shares or the offering contemplated hereby, and which is included as
part of or referred to in any loss, claim, liability, expense or damage arising
out of or based upon matters covered by clause (i) or (ii) above (provided that
the Company shall not be liable under this clause (iii) to the extent it is
finally judicially determined by a court of competent jurisdiction that such
loss, claim, liability, expense or damage resulted directly from any such acts
or failures to act undertaken or omitted to be taken by such Underwriter through
its gross negligence or willful misconduct); provided that the Company will not
be liable to the extent that such loss, claim, liability, expense or damage
arises from the sale of the Shares in the public offering to any person by any
Underwriter and is based on an untrue statement or omission or alleged untrue
statement or omission made in reliance on and in conformity with information
relating to any Underwriter furnished in writing to the Company by such
Underwriter expressly for inclusion in the Registration Statement, any
preliminary prospectus or the Prospectus. This indemnity agreement will be in
addition to any liability that the Company might otherwise have.
(b) Each Underwriter will indemnify and hold harmless the
Company, each person, if any, who controls the Company within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act, each director of the
Company and each officer of the Company who signs the Registration Statement to
the same extent as the foregoing indemnity from the Company to each Underwriter,
but only insofar as losses, claims, liabilities, expenses or damages arise out
of or are based on any untrue statement or omission or alleged untrue statement
or omission made in reliance on and in conformity with information relating to
any Underwriter furnished in writing to the Company by such Underwriter
expressly for use in the Registration Statement, the Preliminary Prospectus or
the Prospectus. This indemnity will be in addition to any liability that each
Underwriter might otherwise have; provided, however, that in no case shall any
Underwriter be liable or responsible for any amount in excess of the
underwriting discounts and commissions received by such Underwriter.
24
<PAGE> 25
(c) Any party that proposes to assert the right to be
indemnified under this Section 6 will, promptly after receipt of notice of
commencement of any action against such party in respect of which a claim is to
be made against an indemnifying party or parties under this Section 6, notify
each such indemnifying party of the commencement of such action, enclosing a
copy of all papers served, but the omission so to notify such indemnifying party
will not relieve it from any liability that it may have to any indemnified party
under the foregoing provisions of this Section 6 unless, and only to the extent
that, such omission results in the forfeiture of substantive rights or defenses
by the indemnifying party. If any such action is brought against any indemnified
party and it notifies the indemnifying party of its commencement, the
indemnifying party will be entitled to participate in and, to the extent that it
elects by delivering written notice to the indemnified party promptly after
receiving notice of the commencement of the action from the indemnified party,
jointly with any other indemnifying party similarly notified, to assume the
defense of the action, with counsel satisfactory to the indemnified party, and
after notice from the indemnifying party to the indemnified party of its
election to assume the defense, the indemnifying party will not be liable to the
indemnified party for any legal or other expenses except as provided below and
except for the reasonable costs of investigation subsequently incurred by the
indemnified party in connection with the defense. The indemnified party will
have the right to employ its own counsel in any such action, but the fees,
expenses and other charges of such counsel will be at the expense of such
indemnified party unless (1) the employment of counsel by the indemnified party
has been authorized in writing by the indemnifying party, (2) the indemnified
party has reasonably concluded (based on advice of counsel) that there may be
legal defenses available to it or other indemnified parties that are different
from or in addition to those available to the indemnifying party, (3) a conflict
or potential conflict exists (based on advice of counsel to the indemnified
party) between the indemnified party and the indemnifying party (in which case
the indemnifying party will not have the right to direct the defense of such
action on behalf of the indemnified party) or (4) the indemnifying party has not
in fact employed counsel to assume the defense of such action within a
reasonable time after receiving notice of the commencement of the action, in
each of which cases the reasonable fees, disbursements and other charges of
counsel will be at the expense of the indemnifying party or parties. It is
understood that the indemnifying party or parties shall not, in connection with
any proceeding or related proceedings in the same jurisdiction, be liable for
the reasonable fees, disbursements and other charges of more than one separate
firm admitted to practice in such jurisdiction at any one time for all such
indemnified party or parties. All such fees, disbursements
25
<PAGE> 26
and other charges will be reimbursed by the indemnifying party promptly as they
are incurred. An indemnifying party will not be liable for any settlement of any
action or claim effected without its written consent (which consent will not be
unreasonably withheld). No indemnifying party shall, without the prior written
consent of each indemnified party, settle or compromise or consent to the entry
of any judgment in any pending or threatened claim, action or proceeding
relating to the matters contemplated by this Section 6 (whether or not any
indemnified party is a party thereto), unless such settlement, compromise or
consent includes an unconditional release of each indemnified party from all
liability arising or that may arise out of such claim, action or proceeding.
Notwithstanding any other provision of this Section 6(c), if at any time an
indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any settlement effected without its written
consent if (i) such settlement is entered into more than 45 days after receipt
by such indemnifying party of the aforesaid request, (ii) such indemnifying
party shall have received notice of the terms of such settlement at least 30
days prior to such settlement being entered into and (iii) such indemnifying
party shall not have reimbursed such indemnified party in accordance with such
request prior to the date of such settlement.
(d) In order to provide for just and equitable contribution
in circumstances in which the indemnification provided for in the foregoing
paragraphs of this Section 6 is applicable in accordance with its terms but for
any reason is held to be unavailable from the Company or the Underwriters, the
Company and the Underwriters will contribute to the total losses, claims,
liabilities, expenses and damages (including any investigative, legal and other
expenses reasonably incurred in connection with, and any amount paid in
settlement of, any action, suit or proceeding or any claim asserted, but after
deducting any contribution received by the Company from persons other than the
Underwriters, such as persons who control the Company within the meaning of the
Act, officers of the Company who signed the Registration Statement and directors
of the Company, who also may be liable for contribution) to which the Company
and any one or more of the Underwriters may be subject in such proportion as
shall be appropriate to reflect the relative benefits received by the Company on
the one hand and the Underwriters on the other. The relative benefits received
by the Company on the one hand and the Underwriters on the other shall be deemed
to be in the same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Company bear to the total underwriting
discounts and commissions received by the Underwriters, in each case as set
forth in the table on the cover page of the Prospectus. If, but only if, the
allocation provided by the foregoing sentence is not permitted by applicable
law, the allocation of contribution shall be made in
26
<PAGE> 27
such proportion as is appropriate to reflect not only the relative benefits
referred to in the foregoing sentence but also the relative fault of the
Company, on the one hand, and the Underwriters, on the other, with respect to
the statements or omissions which resulted in such loss, claim, liability,
expense or damage, or action in respect thereof, as well as any other relevant
equitable considerations with respect to such offering. Such relative fault
shall be determined by reference to whether the untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a material
fact relates to information supplied by the Company or the Underwriters, the
intent of the parties and their relative 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 contributions
pursuant to this Section 6(d) were to be determined by pro rata allocation (even
if the Underwriters were treated as one entity for such purposes) or by any
other method of allocation which does not take into account the equitable
considerations referred to herein. The amount paid or payable by an indemnified
party as a result of the loss, claim, liability, expense or damage, or action in
respect thereof, referred to above in this Section 6(d) shall be deemed to
include, for purpose of this Section 6(d), any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Section 6(d), no Underwriter shall be required to contribute any amount in
excess of the underwriting discounts and commissions received by it and no
person found guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) will be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation. The Underwriters'
obligations to contribute as provided in this Section 6(d) are several in
proportion to their respective underwriting obligations and not joint. For
purposes of this Section 6(d), any person who controls a party to this Agreement
within the meaning of the Act will have the same rights to contribution as that
party, and each officer of the Company who signed the Registration Statement
will have the same rights to contribution as the Company, subject in each case
to the provisions hereof. Any party entitled to contribution, promptly after
receipt of notice of commencement of any action against such party in respect of
which a claim for contribution may be made under this Section 6(d), will notify
any such party or parties from whom contribution may be sought, but the omission
so to notify will not relieve the party or parties from whom contribution may be
sought from any other obligation it or they may have under this Section 6(d).
Except for a settlement entered into pursuant to the last sentence of Section
6(c) hereof, no party will be liable for contribution with respect to any action
or claim settled without its written consent (which consent will not be
unreasonably withheld).
27
<PAGE> 28
(e) The indemnity and contribution agreements contained in
this Section 6 and the representations and warranties of the Company contained
in this Agreement shall remain operative and in full force and effect regardless
of (i) any investigation made by or on behalf of any Underwriter, (ii)
acceptance of the Shares and payment therefor or (iii) any termination of this
Agreement.
7. Termination.
Without limiting the right to terminate this Agreement
pursuant to any other provision hereof, the obligations of the Underwriters
under this Agreement may be terminated at any time prior to the Closing Date
(or, with respect to the Option Shares, on or prior to the Option Closing Date),
by notice to the Company from PaineWebber Incorporated, without liability on the
part of any Underwriter to the Company if, prior to delivery and payment for the
Shares (or the Option Shares, as the case may be), in the sole judgment of
PaineWebber Incorporated, (i) trading in any of the equity securities of the
Company shall have been suspended by the Commission, by any exchange or stock
market that lists or includes such securities, (ii) trading in securities
generally on the New York Stock Exchange shall have been suspended or limited or
minimum or maximum prices shall have been generally established on such
exchange, or additional material governmental restrictions, not in force on the
date of this Agreement, shall have been imposed upon trading in securities
generally by such exchange or by order of the Commission or any court or other
governmental authority, (iii) a general banking moratorium shall have been
declared by either Federal or New York State authorities or (iv) any material
adverse change in the financial or securities markets in the United States or in
political, financial or economic conditions in the United States or any outbreak
or material escalation of hostilities or declaration by the United States of a
national emergency or war or other calamity or crisis shall have occurred, the
effect of any of which is such as to make it, in the sole judgment of
PaineWebber Incorporated, impracticable or inadvisable to market the Shares on
the terms and in the manner contemplated by the Prospectus.
8. Representations of the Underwriters.
The Underwriters represent and warrant to the Company
that the information set forth (i) on the cover page of the Prospectus
Supplement with respect to price, underwriting discounts and commissions and
terms of offering, (ii) in the table that appears in the first paragraph under
"Underwriting" in the Prospectus Supplement, and (iii) in the third full
paragraph under "Underwriting" in the Prospectus Supplement with respect to
certain concessions and discounts, was furnished to the Company by and on behalf
of the Underwriters for use in connection with the preparation of the Prospectus
Supplement with respect to
28
<PAGE> 29
price, underwriting discounts and commissions and terms of offering and is
correct in all material respects.
9. Miscellaneous.
(a) Notice given pursuant to any of the provisions of
this Agreement shall be in writing and unless otherwise specified, shall be
mailed or delivered (a) if to the Company, at the office of the Company, 119
East Marcy Street, Suite 201, Santa Fe, New Mexico 87501, Attention: Larry A.
Goldstone, with a copy to Jeffers, Wilson, Shaff & Falk, LLP, 18881 Von Karman
Avenue, Suite 1400, Irvine, California 92715, Attention: Michael B. Jeffers,
Esq., or (b) if to the Underwriters, at the offices of PaineWebber Incorporated,
1285 Avenue of the Americas, 12th Floor, New York, New York 10019, Attention:
James W. Kilman, Jr., with a copy to O'Melveny & Myers LLP, 275 Battery Street,
Suite 2600, San Francisco, California 94111-3305, Attention: Peter T. Healy,
Esq. Any such notice shall be effective only upon receipt. Any notice under
Section 6 or 8 may be made by telex or telephone, but if so made shall be
subsequently confirmed in writing.
(b) This Agreement has been and is made solely for the
benefit of the Underwriters, the Company and of the controlling persons,
directors and officers referred to in Section 6 hereof, and their respective
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement. The term "successors and assigns" as used
in this Agreement shall not include a purchaser, as such purchaser, of Shares
from any of the Underwriters.
(c) The invalidity or unenforceability of any Section,
paragraph or provision of this Agreement shall not affect the validity or
enforceability of any other Section, paragraph or provision hereof. If any
Section, paragraph or provision of this Agreement is for any reason determined
to be invalid or unenforceable, there shall be deemed to be made such minor
changes (and only such minor changes) as are necessary to make it valid and
enforceable.
(d) Any action required or permitted to be taken by the
Underwriters under this Agreement may be taken by them jointly or by PaineWebber
Incorporated.
(e) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAWS PERTAINING TO CONFLICTS
OF LAWS) OF THE STATE OF NEW YORK.
(f) The Company and each of the Underwriters hereby
irrevocably waive any right they may have to a trial by jury in respect of any
claim based upon or arising out of this Agreement or the transactions
contemplated hereby.
29
<PAGE> 30
(g) This Agreement may not be amended or otherwise
modified or any provision hereof waived except by an instrument in writing
signed by PaineWebber Incorporated and the Company.
(h) This Agreement constitutes the entire agreement of
the parties to this Agreement and supersedes all prior written or oral and all
contemporaneous oral agreements, understandings and negotiations with respect to
the subject matter hereof. This Agreement may be executed in several
counterparts, each one of which shall be an original, and all of which shall
constitute one and the same document.
(i) In this Agreement, the masculine, feminine and
neuter genders and the singular and the plural include one another. The section
headings in this Agreement are for the convenience of the parties only and will
not affect the construction or interpretation of this Agreement.
If the foregoing is in accordance with your understanding of
our agreement, kindly sign and return to us the enclosed copies hereof,
whereupon it will become a binding agreement between the Company and you, the
Underwriters, all in accordance with its terms.
Very truly yours,
THORNBURG MORTGAGE ASSET CORPORATION
By: _______________________________
Larry A. Goldstone
President
Confirmed as of the date first above mentioned:
PAINEWEBBER INCORPORATED
FRIEDMAN, BILLINGS, RAMSEY & CO., INC.
By: PAINEWEBBER INCORPORATED
By: ____________________________
Name: __________________________
Its: ___________________________
30
<PAGE> 31
SCHEDULE I
UNDERWRITERS
<TABLE>
<CAPTION>
Number of
Firm Shares
Underwriter to be Purchased
<S> <C>
PaineWebber Incorporated 1,050,000
Friedman, Billings, Ramsey & Co., Inc. 1,050,000
----------
Total 2,100,000
==========
</TABLE>
Schedule I
<PAGE> 32
EXHIBIT A
THORNBURG MORTGAGE ASSET CORPORATION
PRICE DETERMINATION AGREEMENT
July 14, 1997
PAINEWEBBER INCORPORATED
FRIEDMAN, BILLINGS, RAMSEY & CO., INC.
c/o PaineWebber Incorporated
1285 Avenue of the Americas, 12th Floor
New York, New York 10019
Ladies and Gentlemen:
Reference is made to the Underwriting Agreement, dated July
14, 1997 (the "Underwriting Agreement"), between Thornburg Mortgage Asset
Corporation, a Maryland corporation (the "Company"), and you (hereinafter the
"Underwriters"). The Underwriting Agreement provides for the purchase by the
Underwriters from the Company, subject to the terms and conditions set forth
therein, of an aggregate of 2,100,000 shares (the "Firm Shares") of the
Company's common stock, par value $0.01 per share. This Agreement is the Price
Determination Agreement referred to in the Underwriting Agreement.
Pursuant to Section 1 of the Underwriting Agreement, the
undersigned agrees with the Underwriters as follows:
1. The initial public offering price per share for the Firm
Shares shall be $22.625.
2. The purchase price per share for the Firm Shares to be paid
by the Underwriters shall be $21.49375, representing an amount equal to the
initial public offering price set forth above, less $1.13125 (approximately 5%)
per share.
3. The Company represents and warrants to the Underwriters
that the representations and warranties of the Company set forth in Section 3 of
the Underwriting Agreement are accurate as though expressly made at and as of
the date hereof.
4. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAWS PERTAINING TO CONFLICTS OF
LAWS) OF THE STATE OF NEW YORK.
<PAGE> 33
If the foregoing is in accordance with your understanding of
the agreement between the Underwriters and the Company, please sign and return
to the Company a counterpart hereof, whereupon this instrument along with all
counterparts and together with the Underwriting Agreement shall be a binding
agreement among the Underwriters and the Company in accordance with its terms
and the terms of the Underwriting Agreement.
Very truly yours,
THORNBURG MORTGAGE ASSET CORPORATION
By: __________________________________
Larry A. Goldstone
President
Confirmed as of the date first above mentioned:
PAINEWEBBER INCORPORATED
FRIEDMAN, BILLINGS, RAMSEY & CO., INC.
By: PAINEWEBBER INCORPORATED
By: ____________________________
Name: __________________________
Its: ___________________________
A-2
<PAGE> 34
EXHIBIT B
July 14, 1997
LOCK-UP AGREEMENT
PAINEWEBBER INCORPORATED
FRIEDMAN, BILLINGS, RAMSEY & CO., INC.
c/o PaineWebber Incorporated
1285 Avenue of the Americas, 12th Floor
New York, New York 10019
Ladies and Gentlemen:
In consideration of the proposed public offering (the
"Offering") of up to 2,415,000 shares (including 315,000 option shares to cover
over-allotments) of Common Stock, par value $0.01 per share, (the "Common
Stock") of Thornburg Mortgage Asset Corporation, a Maryland corporation, as
contemplated by a registration statement with respect to such shares filed with
the Securities and Exchange Commission on Form S-3 (Registration No. 333-16799),
the undersigned hereby agrees that the undersigned will not, for a period of 120
days after the commencement of the public offering of such shares, without the
prior written consent of PaineWebber Incorporated, offer to sell, sell, contract
to sell, grant any option to sell, or otherwise dispose of, or require the
Company to file with the Securities and Exchange Commission a registration
statement under the Securities Act of 1933 to register, any shares of Common
Stock or securities convertible into or exchangeable for Common Stock or
warrants or other rights to acquire shares of Common Stock of which the
undersigned is now, or may in the future become, the beneficial owner (within
the meaning of Rule 13d-3 under the Securities and Exchange Act of 1934) (other
than pursuant to the Sales Agency Agreement dated October 9, 1995 by and between
PaineWebber Incorporated and the Company, employee stock option plans, or in
connection with other employee incentive compensation arrangements or the
Dividend Reinvestment and Stock Purchase Plan).
Very truly yours,
By:______________________________________
Name:____________________________________
<PAGE> 35
EXHIBIT C
Form of Opinion of
Jeffers, Wilson, Shaff & Falk, LLP
Counsel to the Company and the Manager
July 18, 1997
PAINEWEBBER INCORPORATED
FRIEDMAN, BILLINGS, RAMSEY & CO., INC.
c/o PaineWebber Incorporated
1285 Avenue of the Americas, 12th Floor
New York, New York 10019
Re: Public Offering of 2,100,000 Shares of Common
Stock of Thornburg Mortgage Asset Corporation
Ladies and Gentlemen:
We have acted as special corporate counsel to Thornburg
Mortgage Asset Corporation, a Maryland corporation (the "Company") and Thornburg
Mortgage Advisory Corporation, a Delaware corporation (the "Manager") in
connection with the issuance and sale by the Company of (i) 2,100,000 shares
(the "Firm Shares") of the Company's Common Stock, par value $0.01 per share
(the "Common Stock") and (ii) up to 315,000 additional shares of Common Stock
(the "Option Shares") pursuant to that certain Underwriting Agreement dated July
14, 1997 (the "Underwriting Agreement"), between the Company and you (the
"Underwriters"). All references in this opinion to the Underwriting Agreement
shall include the Price Determination Agreement, dated July 14, 1997, between
the Company and the Underwriters. The shares of Common Stock being issued and
sold pursuant to the Underwriting Agreement are hereinafter referred to as the
"Shares." This opinion is being rendered to you pursuant to Section 5(e) of the
Underwriting Agreement. Capitalized terms used herein without definition shall
have the meanings given such terms in the Underwriting Agreement.
In our capacity as special counsel to the Company and the
Manager, we have examined originals, or copies identified to our satisfaction as
being true copies, of such documents as we have deemed advisable or necessary
for the purpose of rendering this opinion, including among other things the
following:
C-1
<PAGE> 36
PaineWebber Incorporated
Friedman, Billings, Ramsey & Co., Inc.
July 18, 1997
Page 2
1. The Registration Statement on Form S-3 (File No.
333-16799), filed by the Company with the Securities and Exchange Commission
(the "Commission") on November 26, 1996 for the purpose of registering the
Shares under the Securities Act of 1933, as amended (the "Act"); the prospectus
dated May 15, 1997 (the "Base Prospectus") and the prospectus supplement subject
to completion dated July 3, 1997 (collectively, the "Preliminary Prospectus"),
each as filed by the Company with the Commission pursuant to Rule 424(b) on July
3, 1997; the final prospectus supplement dated July 14, 1997, as filed by the
Company with the Commission pursuant to Rule 424(b) on July ___, 1997 (the
"Final Prospectus Supplement"); and a representation from an authorized officer
of the Company, satisfactory to us, that it has not been advised of any stop
order suspending the effectiveness of the Registration Statement or that any
proceedings for that purpose have been instituted or are pending or contemplated
by the Commission under the Act. Such Registration Statement (including all
exhibits thereto and documents incorporated by reference therein) is hereinafter
referred to as the "Registration Statement," and the Base Prospectus and the
Final Prospectus Supplement (including all documents incorporated by reference
therein) are hereinafter referred to as the "Prospectus."
2. The Articles of Incorporation of the Company and the
Certificate of Incorporation of the Manager, as amended to date;
3. The Bylaws of the Company and the Manager, as amended to
date;
4. The resolution of the Board of Directors of the Company
adopted by written consent as of November 21, 1996, authorizing the preparation
of the Registration Statement; and the resolution of the Board of Directors
adopted on _________, 1997, authorizing the sale of the Shares, the execution
and delivery of the Underwriting Agreement and other actions with respect
thereto;
5. Executed counterparts of the Underwriting Agreement; and
6. The Certificates of the Company's President and Chief
Financial Officer and Treasurer, dated the date hereof, copies of which are
attached hereto.
C-2
<PAGE> 37
PaineWebber Incorporated
Friedman, Billings, Ramsey & Co., Inc.
July 18, 1997
Page 3
In addition to such examination, we have obtained and relied
upon, with your consent, such other certificates and assurances from public
officials (copies of which have been provided to you) as we consider necessary
for the purposes of this opinion. We have been furnished with, and with your
consent have relied upon, certificates of officers of the Company and the
Manager with respect to certain factual matters bearing on the opinions
expressed herein (copies of which are attached hereto). We have not
independently investigated any of such factual matters. We have assumed the
genuineness of all signatures (other than the signatures of the officers of the
Company and the Manager) and the authenticity of all documents submitted to us
as originals and the conformity with originals of all documents submitted to us
as copies. We have assumed that at the time of issuance or transfer of any of
the Shares issued without certificates, the Company will deliver to the holders
or transferees of such Shares a written statement of the information required to
be included on stock certificates by Section 2-211 of the Maryland General
Corporation Law.
On the basis of the foregoing and in reliance thereon, and
subject to the exceptions set forth herein, we are of the opinion that:
1. The Company and the Manager are corporations duly
organized, validly existing and in good standing under the laws of their
respective jurisdictions of incorporation, are duly licensed or qualified to do
business and in good standing as foreign corporations in all jurisdictions where
the nature and conduct of the Company's or the Manager's business makes such
qualification and licensing necessary, and have full corporate power and
authority to conduct all the activities conducted by them, to own or lease all
the assets owned or leased by them and to conduct their business as described in
the Registration Statement and the Prospectus.
2. All of the outstanding shares of Common Stock are, and the
Shares to be paid for by the Underwriters in accordance with the terms of the
Underwriting Agreement will be, duly authorized, validly issued, fully paid and
nonassessable and will not be subject to any preemptive or similar right under
(i) the statutes, judicial and administrative decisions and the rules and
regulations of the governmental agencies of the State of Maryland (ii) the
Company's certificate of incorporation or by-laws or (iii) any instrument,
document, contract or other agreement
C-3
<PAGE> 38
PaineWebber Incorporated
Friedman, Billings, Ramsey & Co., Inc.
July 18, 1997
Page 4
referred to in the Registration Statement or any instrument, document, contract
or agreement filed as an exhibit to, or incorporated as an exhibit by reference
in, the Registration Statement. Except as described in the Registration
Statement or the Prospectus, to the best of our knowledge, there is no
commitment or arrangement to issue, and there are no outstanding options,
warrants or other rights calling for the issuance of, any share of capital stock
of the Company to any person or any security or other instrument that by its
terms is convertible into, exercisable for or exchangeable for capital stock of
the Company.
3. No consent, approval, authorization or order of, or any
filing or declaration with, any court or governmental agency or body is required
in connection with the authorization, issuance, transfer, sale or delivery of
the Shares by the Company, in connection with the execution, delivery and
performance of each of the Underwriting Agreement and the Sales Agency Agreement
by the Company or in connection with the taking by the Company of any action
contemplated thereby have been obtained and are in full force and effect, except
such as have been obtained under the Act and the Rules and Regulations and such
as may be required under state securities or "Blue Sky," laws or by the by-laws
and rules of the NASD in connection with the purchase and distribution by the
Underwriters of the Shares to be sold by the Company.
4. The authorized, issued and outstanding capital stock of the
Company is as set forth in the Registration Statement and the Prospectus under
the caption "Capitalization." The description of the Common Stock contained in
the Prospectus is complete and accurate in all material respects. The form of
certificate used to evidence the Common Stock is in due and proper form and
complies with all applicable statutory requirements.
5. The Registration Statement and the Prospectus, including
any documents incorporated by reference into the Prospectus at the time they
were filed and on the Closing Date comply (or complied) in all material respects
as to form with the requirements of the Act, the Exchange Act, the Exchange Act
Rules and Regulations and the Rules and Regulations, including, without
limitation, Item 503 of Regulation S-K (except that we express no opinion as to
financial statements schedules and other financial
C-4
<PAGE> 39
PaineWebber Incorporated
Friedman, Billings, Ramsey & Co., Inc.
July 18, 1997
Page 5
data contained in the Registration Statement or the Prospectus or incorporated
by reference therein).
6. To the best of our knowledge, any instrument, document,
lease, license, contract or other agreement (collectively, "Documents") required
to be described or referred to in the Registration Statement or the Prospectus
has been properly described or referred to therein and any Document required to
be filed as an exhibit to the Registration Statement has been filed as an
exhibit thereto or has been incorporated as an exhibit it by reference in the
Registration Statement; and no default exists in the due performance or
observance of any material obligation, agreement, covenant or condition
contained in any Document filed or required to be filed as an exhibit to the
Registration Statement.
7. To the best of our knowledge, except as disclosed in the
Registration Statement or the Prospectus, no person or entity has the right to
require the registration under the Act of shares of Common Stock or other
securities of the Company by reason of the filing or effectiveness of the
Registration Statement.
8. To the best of our knowledge, neither the Company nor the
Manager is in violation of, or in default with respect to, any law, rule,
regulation, order, judgment or decree, except as may be described in the
Prospectus or such as in the aggregate do not now have and will not in the
future have a material adverse effect upon the operations, business or assets of
the Company or the Manager.
9. All descriptions in the Prospectus of statutes, regulations
or legal or governmental proceedings are accurate and fairly present the
information required to be shown, including those contained in the Prospectus
under the captions "Description of Securities," "Federal Income Tax
Considerations," and "ERISA Investors."
10. The Company has full corporate power and authority to
enter into the Underwriting Agreement and the Underwriting Agreement has been
duly authorized, executed and delivered by the Company, is a valid and binding
agreement of the Company and, except for the indemnification and contribution
provisions thereof, as to which we express no opinion, is enforceable against
the Company in accordance with the terms thereof.
C-5
<PAGE> 40
PaineWebber Incorporated
Friedman, Billings, Ramsey & Co., Inc.
July 18, 1997
Page 6
11. The execution and delivery by the Company of, and the
performance by the Company of its agreements in, the Underwriting Agreement do
not and will not (i) violate the certificate of incorporation or by-laws of the
Company, (ii) breach or result in a default under, cause the time for
performance of any obligation to be accelerated under, or result in the creation
or imposition of any lien, charge or encumbrance upon any of the assets of the
Company pursuant to the terms of, (x) any indenture, mortgage, deed of trust,
loan agreement, bond, debenture, note agreement, capital lease or other evidence
of indebtedness of which we have knowledge, (y) any voting trust arrangement or
any contract or other agreement to which the Company is a party that restricts
the ability of the Company to issue securities and of which we have knowledge or
(z) any Document filed as an exhibit to, or incorporated as an exhibit by
reference in, the Registration Statement, (iii) breach or otherwise violate any
existing obligation of the Company under any court or administrative order,
judgment or decree of which we have knowledge or (iv) violate applicable
provisions of any statute or regulation in the State of Maryland, State of New
Mexico or of the United States.
12. Delivery of certificates for the Shares and/or transfer of
the Shares through the "FAST" system of the Depository Trust Company for the
accounts of the Underwriters will transfer valid and marketable title thereto to
each Underwriter that has purchased such Shares in good faith and without any
notice of any adverse claim with respect thereto.
13. The Company is not an "investment company" or an
"affiliated person" of, or "promoter" or "principal underwriter" for, an
"investment company," as such terms are defined in the investment Company Act of
1940, as amended, or a "broker" within the meaning of Section 3(a)(4) of the
Exchange Act or a "dealer" within the meaning of Section 3(a)(5) of the Exchange
Act or required to be registered pursuant to Section 15(a) of the Exchange Act.
14. The Shares have been duly authorized for listing by the
New York Stock Exchange upon official notice of issuance.
15. The Company elected to be taxed as a REIT under the
Internal Revenue Code of 1986, as amended (the "Code"), commencing with its
taxable year ended December 31, 1993. That election continues in effect until
revoked or terminated. Based
C-6
<PAGE> 41
PaineWebber Incorporated
Friedman, Billings, Ramsey & Co., Inc.
July 18, 1997
Page 7
on existing law and certain representations made to us by the Company with
respect to the Company's income, assets and activities since its inception, (a)
the Company operated in a manner consistent with its qualifying as a REIT under
the Code since the beginning of its taxable year ended December 31, 1993, and
(b) the organization and contemplated method of operation of the Company are
such as to enable it to continue to so qualify in this and subsequent years,
provided the various operational requirements for REIT status are satisfied in
those years.
We hereby confirm to you that the Registration Statement has
become effective under the Act, that the Prospectus Supplement has been filed as
required by Section 3(a) of the Underwriting Agreement, and that no order
suspending the effectiveness of the Registration Statement has been issued and
no proceeding for that purpose has been instituted or is threatened, pending or
contemplated.
We hereby further confirm to you that there are no actions,
suits, proceedings or investigations pending or, to our knowledge, overtly
threatened in writing against the Company or any of their respective officers or
directors in their capacities as such, before or by any court, governmental
agency or arbitrator which (i) seek to challenge the legality or enforceability
of the Underwriting Agreement, (ii) seek to challenge the legality or
enforceability of any of the Documents filed, or required to be filed, or
incorporated by reference as exhibits to the Registration Statement, (iii) seek
damages or other remedies with respect to any of the Documents filed, or
required to be filed, as exhibits to the Registration Statement, (iv) except as
set forth in or contemplated by the Registration Statement and the Prospectus,
seek money damages or seek to impose criminal penalties upon the Company or any
of their respective officers or directors in their capacities as such and of
which we have knowledge or (v) seek to enjoin any of the business activities of
the Company or the transactions described in the Prospectus and of which we have
knowledge.
We have participated in the preparation of the Registration
Statement and the Prospectus and, without assuming any responsibility for the
accuracy, completeness or fairness of the statements contained in the
Registration Statement or the Prospectus or in any amendment or supplement
thereto or in any document incorporated by reference into the Prospectus,
nothing has come to our attention that causes us to believe that, as of
C-7
<PAGE> 42
PaineWebber Incorporated
Friedman, Billings, Ramsey & Co., Inc.
July 18, 1997
Page 8
the Effective Date or the Closing Date [or the Option Closing Date], the
Registration Statement, or any amendment thereto contained or contains any
untrue statement of a material fact or omitted or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading or that the Base Prospectus or any amendment or supplement thereto,
including any documents incorporated by reference therein, at the time such
prospectus was issued, at the time any such amended or supplemented prospectus
was issued, or at the Closing Date [or the Option Closing Date], contained or
contains any untrue statement of a material fact or omitted or omits to state a
material fact necessary in order to make the statements therein, in the light of
the circumstances in which they were made, not misleading (except that we
express no opinion as to financial statements, schedules and other financial
data contained in the Registration Statement or the Prospectus or incorporated
by reference therein).
The foregoing opinion is subject to the qualification that the
enforceability of the Underwriting Agreement may be: (i) subject to bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally; and (ii) subject to general principles of equity (regardless
of whether such enforceability is considered in a proceeding at law or in
equity), including principles of commercial reasonableness or conscionability
and an implied covenant of good faith and fair dealing.
With respect to our opinions herein based on our knowledge, we
have, with your consent, advised you only as to knowledge obtained by us (i)
from such certificates of officers of the Company as we have deemed appropriate
(copies of which are attached hereto) and (ii) in connection with matters to
which we have given substantive attention as counsel for the Company in the form
of legal consultation and, where appropriate, legal representation, and which
knowledge we have recognized as pertinent to the matters set forth herein, it
being understood that we have not made any independent investigation of such
matters.
We are licensed to practice law only in the State of
California. Accordingly, the foregoing opinions apply only with respect to the
laws of the State of New York, as such laws affect the enforceability of the
Underwriting Agreement, the general corporate laws of the States of Maryland and
Delaware and the
C-8
<PAGE> 43
PaineWebber Incorporated
Friedman, Billings, Ramsey & Co., Inc.
July 18, 1997
Page 9
federal laws of the United States of America and we express no opinion with
respect to the laws of any other jurisdiction.
This letter is furnished by us solely for your benefit in
connection with the transactions referred to in the Underwriting Agreement and
may not be circulated to, or relied upon by, any other person, except that this
letter may be relied upon by your counsel, O'Melveny & Myers LLP, in connection
with the opinion letter to be delivered to you pursuant to Section 5(f) of the
Underwriting Agreement. This opinion may not be relied upon by you for any other
purpose, or relied upon by or delivered to any other person, firm or corporation
for any purpose without our prior written consent.
Very truly yours,
____________________________________
cc: O'Melveny & Myers LLP
[In rendering the foregoing opinion, counsel may rely, to the
extent they deem such reliance proper, on the opinions (in form and substance
reasonably satisfactory to Underwriters' counsel) of other counsel reasonably
acceptable to Underwriters' counsel as to matters governed by the laws of
jurisdictions other than the United States and the States of California,
Maryland and Delaware, and as to matters of fact, upon certificates of officers
of the Company and of government officials; provided that such counsel shall
state that the opinion of any other counsel is in form satisfactory to such
counsel. Copies of all such opinions and certificates shall be furnished to
counsel to the Underwriters on the Closing Date or the Option Closing Date, as
the case may be.]
C-9
