Exhibit 10.1

INTERNALIZATION AGREEMENT

by and among

Annaly Capital Management, Inc.,

AMCO Acquisition LLC,

AMCO Holding Management Company LLC,

the Persons named on Schedule 1 hereto,

AMCO OpCo Holding Company LLC,

AMCO LP Holding Company LP,

AMCO Manager Holdings LLC

and

Annaly Management Company LLC

dated as of

February 12, 2020

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TABLE OF CONTENTS

 

         Page  

ARTICLE 1 DEFINED TERMS

     2  

ARTICLE 2 CONTRIBUTION AND CLOSING

     2  

Section 2.1

 

Contribution

     2  

Section 2.2

 

Consideration

     2  

Section 2.3

 

Closing

     2  

Section 2.4

 

Intended Tax Treatment

     2  

ARTICLE 3 MANAGEMENT AGREEMENT MATTERS

     3  

Section 3.1

 

Provisional Amendments and Waivers

     3  

Section 3.2

 

Status of Management Agreement

     3  

Section 3.3

 

Termination of Management Agreement

     3  

ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE CONTRIBUTORS

     3  

Section 4.1

 

Organization

     4  

Section 4.2

 

Authority

     4  

Section 4.3

 

No Violation

     4  

Section 4.4

 

Consents and Approvals

     4  

Section 4.5

 

Ownership of Interests

     4  

Section 4.6

 

Proceedings

     5  

Section 4.7

 

No Breach of Management Agreement

     5  

Section 4.8

 

Taxes

     5  

Section 4.9

 

Ownership of Assets and Interests

     6  

Section 4.10

 

Contributed Equity Interests; Capitalization

     6  

ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF HOLDCO AND MANAGER ON BEHALF OF THE
MANAGER ENTITIES

     7  

Section 5.1

 

Organization

     7  

Section 5.2

 

Authority

     7  

Section 5.3

 

No Violations

     7  

Section 5.4

 

Consents and Approvals

     8  

Section 5.5

 

Brokers and Finders

     8  

Section 5.6

 

Subsidiaries

     8  

Section 5.7

 

Manager Financial Statements; No Undisclosed Liabilities

     8  

Section 5.8

 

Absence of Certain Changes

     9  

Section 5.9

 

Material Contracts

     9  

Section 5.10

 

Compliance

     9  

Section 5.11

 

Proceedings

     10  

Section 5.12

 

Employee Benefit Plans

     10  

Section 5.13

 

Employment Matters

     12  

Section 5.14

 

Intellectual Property

     13  

Section 5.15

 

Taxes

     14  

Section 5.16

 

Insurance

     15  

Section 5.17

 

Assets; Leases

     15  

Section 5.18

 

Ownership of Assets

     15  

 

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ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF THE ANNALY PARTIES

     16  

Section 6.1

 

Organization

     16  

Section 6.2

 

Authority

     16  

Section 6.3

 

No Violations

     16  

Section 6.4

 

Consents and Approvals

     16  

Section 6.5

 

Proceedings

     17  

Section 6.6

 

Brokers and Finders

     17  

Section 6.7

 

Purchase for Investment

     17  

Section 6.8

 

No Breach of Management Agreement

     17  

ARTICLE 7 COVENANTS

     17  

Section 7.1

 

Conduct of Business Pending the Closing

     17  

Section 7.2

 

New External CEO

     19  

Section 7.3

 

No Solicitation of Third-Party Management Proposals

     20  

Section 7.4

 

Access to Information; Interim Financial Statements; Confidentiality

     20  

Section 7.5

 

Regulatory Matters; Third Party Consents

     21  

Section 7.6

 

Further Assurances

     22  

Section 7.7

 

Notification of Certain Matters

     22  

Section 7.8

 

Public Announcements

     22  

Section 7.9

 

Contributor Transaction Expenses; No Liability

     22  

Section 7.10

 

Delivery of Company Records

     22  

Section 7.11

 

Contribution of Contributed Equity Interests

     22  

ARTICLE 8 CONDITIONS

     23  

Section 8.1

 

Conditions to Each Party’s Obligations

     23  

Section 8.2

 

Additional Conditions to Obligations of the Annaly Parties

     23  

Section 8.3

 

Additional Conditions to Obligations of the Contributors

     24  

ARTICLE 9 TERMINATION, AMENDMENT AND WAIVER

     25  

Section 9.1

 

Termination

     25  

Section 9.2

 

Effect of Termination

     26  

ARTICLE 10 TAX MATTERS

     26  

Section 10.1

 

Tax Allocation

     26  

Section 10.2

 

Returns and Payments

     26  

Section 10.3

 

Contests

     27  

Section 10.4

 

Cooperation and Exchange of Information

     27  

ARTICLE 11 MISCELLANEOUS

     27  

Section 11.1

 

Fees and Expenses

     27  

Section 11.2

 

Notices

     27  

Section 11.3

 

Amendment

     28  

Section 11.4

 

Waiver

     28  

Section 11.5

 

Severability

     29  

Section 11.6

 

Entire Agreement

     29  

Section 11.7

 

Assignment

     29  

Section 11.8

 

Parties in Interest

     29  

Section 11.9

 

Failure or Indulgence Not Waiver; Remedies Cumulative

     29  

 

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Section 11.10

 

Governing Law; Jurisdiction

     29  

Section 11.11

 

Enforcement of Agreement; Specific Performance

     30  

Section 11.12

 

Counterparts

     30  

Section 11.13

 

Due Diligence Materials

     30  

Section 11.14

 

Time is of the Essence

     31  

Section 11.15

 

Rules of Interpretation

     31  

 

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EXHIBITS AND SCHEDULES

 

Exhibit A

   Definitions

Exhibit B

   Terms and Conditions of Employment Offers

Schedule 1

   HoldCo Members

Schedule 2

   Employees Who Will Receive Employment Offers

 

iv

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INTERNALIZATION AGREEMENT

THIS INTERNALIZATION AGREEMENT (this “Agreement”), dated as of February 12,
2020, is entered into by and among (i) Annaly Capital Management, Inc., a
Maryland corporation (“Annaly”), (ii) AMCO Acquisition LLC, a Delaware limited
liability company and direct, wholly-owned subsidiary of Annaly (“Annaly Sub”
and, together with Annaly, the “Annaly Parties”), (iii) AMCO Holding Management
Company LLC, a Delaware limited liability company (“HoldCo”), (iv) the Persons
named on Schedule 1 hereto (the “HoldCo Members” and together with HoldCo, the
“Contributors”), (v) AMCO OpCo Holding Company LLC, a Delaware limited liability
company (“OpCo Holdings”), (vi) AMCO LP Holding Company LP, a Delaware limited
partnership (“ALP”), (vii) AMCO Manager Holdings LLC, a Delaware limited
liability company (“AMH”), and (viii) Annaly Management Company LLC, a Delaware
limited liability company (“Manager” and, together with OpCo Holdings, ALP and
AMH, the “Manager Entities”). Each of the foregoing is sometimes referred to
herein individually as a “Party” and collectively as the “Parties.”

WHEREAS, the HoldCo Members are the owners of all of the outstanding limited
liability company interests in HoldCo;

WHEREAS, HoldCo is the owner of all the outstanding general partnership
interests of, and the HoldCo Members are the owners, collectively, of all the
outstanding limited partnership interests, of ALP;

WHEREAS, HoldCo, as the managing member and only voting equity holder in OpCo
Holdings, controls all matters related to OpCo Holdings, including the ability
to cause all of the members in OpCo Holdings (the “OpCo Holdings Members”) to
transfer their respective outstanding limited liability company interests of
OpCo Holdings;

WHEREAS, ALP and OpCo Holdings are the owners, collectively, of all of the
outstanding limited liability company interests of AMH (the “AMH Equity
Interests”);

WHEREAS, AMH is the owner of all of the outstanding limited liability company
interests of Manager (the “Manager Equity Interests”);

WHEREAS, Manager, as controlled by HoldCo, is responsible for the management of
the business of Annaly and its subsidiaries (the “Business”) pursuant to, and
serves as “Manager” under, that certain Amended and Restated Management
Agreement, dated as of August 1, 2018, by and among Annaly, Manager and each
subsidiary of Annaly party thereto, as amended by Amendment No. 1 to the
Management Agreement, dated as of March 27, 2019 (collectively, the “Management
Agreement”);

WHEREAS, Annaly desires to internalize its management through, among other
things, the acquisition by Annaly Sub of (i) all of the outstanding limited
liability company interests of HoldCo (the “HoldCo Interests”), (ii) all of the
outstanding partnership interests of ALP (the “ALP Interests”) and (iii) all of
the outstanding limited liability company interests of OpCo Holdings (the “OpCo
Interests” and, together with the HoldCo Interests and the ALP Interests, the
“Contributed Equity Interests”); and

WHEREAS, the Contributors desire to contribute and assign, and Annaly Sub
desires to accept, all of the Contributed Equity Interests on the terms and
conditions set forth herein.

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NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements set forth herein, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, intending to be legally bound hereby, the Parties hereto
agree as follows:

ARTICLE 1

DEFINED TERMS

Capitalized terms used herein without definition shall have the respective
meanings assigned thereto in Exhibit A attached hereto and incorporated herein
for all purposes of this Agreement.

ARTICLE 2

CONTRIBUTION AND CLOSING

Section 2.1    Contribution. Upon and subject to all of the terms and conditions
of this Agreement and in exchange for the Consideration (as defined in
Section 2.2 herein), at the closing of the transactions contemplated hereby (the
“Closing”), the Contributors shall contribute, assign, sell, grant, transfer and
convey (collectively, a “Contribution”) to Annaly Sub all of the Contributed
Equity Interests free and clear of all Liens, and Annaly Sub shall accept such
Contribution upon and subject to all of the terms and conditions of this
Agreement (it being understood that, in the case of the OpCo Interests, HoldCo
shall cause the OpCo Holdings Members to contribute such interests without any
further approval required by such OpCo Holdings Members). At and after the
Closing, the Consideration shall be deemed to have been paid in full
satisfaction of all rights pertaining to the Contributed Equity Interests, and
neither the Contributors nor the OpCo Holdings Members shall have any further
ownership or other rights with respect to the Contributed Equity Interests.

Section 2.2    Consideration. The consideration (the “Consideration”) to be paid
in exchange for the Contributed Equity Interests is one dollar ($1.00).

Section 2.3    Closing. Subject to the provisions of this Agreement, the Closing
shall take place remotely via the exchange of executed documents and/or closing
deliverables at 11:59 p.m., local time, on (a) one Business Day after all of the
conditions set forth in Article 8 hereof (other than conditions which relate to
actions to be taken at the Closing, but subject to the satisfaction or waiver
thereof at the Closing) have been satisfied or waived by the Parties entitled to
the benefits thereto; provided, that the earliest the Closing may occur is
June 30, 2020, or (b) such other date, time and place as the Parties shall
mutually agree in writing (the date on which the Closing actually occurs is
hereinafter referred to as the “Closing Date”).

Section 2.4    Intended Tax Treatment. The Parties agree that solely with
respect to the Contributions of the Contributed Equity Interests, the
transactions contemplated by this Agreement (other than the termination of the
Management Agreement as described in Section 3.3 hereof) shall be treated by the
Contributors as a sale of their interests in HoldCo, ALP, and OpCo Holdings, as
applicable, pursuant to Section 741 of the Code and by Annaly as the acquisition
of the assets of the Manager pursuant to Revenue Ruling 99-6, situation 2, in
each case in exchange for the Consideration, plus the assumption of any
liabilities of HoldCo, ALP, OpCo Holdings, and the Manager Entities at the time
of the Closing including Liabilities disclosed or reserved against in the
projected balance sheet set forth in Section 5.7(b) of the HoldCo Disclosure
Letter (the “Projected Balance Sheet”).

 

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ARTICLE 3

MANAGEMENT AGREEMENT MATTERS

Section 3.1    Provisional Amendments and Waivers. Annaly and Manager each
hereby agree that the following amendments and waivers of the terms of the
Management Agreement shall be in full force and effect, shall, with respect only
to such amendments and waivers, expressly supersede the terms of the Management
Agreement to the contrary, and shall be effective amendments and waivers of the
terms of the Management Agreement without the need for separate, stand-alone
amendments or waivers, provided that the amendments and waivers set forth in
Sections 3.1(a) and (b) shall only apply during the period between the date
hereof and the earliest of (i) Closing and (ii) termination of this Agreement:

(a)    Manager hereby waives the Acceleration Fee (as defined in the Management
Agreement) solely to the extent it would be payable in connection with the
Closing and releases all claims thereto. For the avoidance of doubt, the Manager
is waiving the Acceleration Fee solely in connection with the Closing under this
Agreement, and is not waiving such Acceleration Fee under any other
circumstances, including, without limitation, in connection with any action
taken by the Annaly Board of Directors or any committee thereof with respect to
an External Management Proposal (as defined in Section 7.3 herein).

(b)    Notwithstanding anything to the contrary contained in Section 3 of the
Management Agreement, Annaly and the Manager hereby agree that Annaly may
discuss employment-related matters with employees of the Manager (the “Manager
Employees”) prior to Closing.

Section 3.2    Status of Management Agreement. Except as expressly set forth in
this Article 3, the Management Agreement has not been amended, revised or
modified and all terms and provisions of the Management Agreement shall remain
in full force and effect. From and after the date hereof, all references to the
Management Agreement shall refer to the Management Agreement as amended by this
Agreement. Unless otherwise defined herein, initially capitalized terms have the
meaning given them in the Management Agreement. In the event that this Agreement
is terminated as permitted herein, the foregoing amendments and waivers in
Sections 3.1(a) and 3.1(b) shall be void and of no further effect.

Section 3.3    Termination of Management Agreement. The Management Agreement
shall be terminated at, and subject to, the Closing. Except for Sections 8(f),
11 and 16 of the Management Agreement (which such sections shall survive the
termination of the Management Agreement), the Management Agreement shall be void
and of no further effect after the Closing and the consummation of the
transactions contemplated hereby.

ARTICLE 4

REPRESENTATIONS AND WARRANTIES OF

THE CONTRIBUTORS

Except as set forth in a correspondingly labeled section of the HoldCo
Disclosure Letter, it being agreed that any matter disclosed in any section or
subsection of the HoldCo Disclosure Letter shall be deemed disclosed in any
other section or subsection to the extent that such information is reasonably
apparent to be so applicable to such other section or subsection, as applicable,
(i) HoldCo hereby represents and warrants on behalf of itself and (ii) each
Contributor hereby severally, and not jointly, represents and

 

3

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warrants, solely as to itself, to the Annaly Parties, as of the date hereof and
as of the Closing (provided that any representation or warranty that addresses
matters as of a particular date shall be deemed to have been made only as of
such date), as follows:

Section 4.1    Organization. HoldCo is a limited liability company duly formed,
validly existing and in good standing under the laws of the State of Delaware.
HoldCo has the requisite limited liability company power and authority to carry
on its business as it is now being conducted and to own, lease and operate all
of its properties and assets.

Section 4.2    Authority. HoldCo has all requisite limited liability company,
power and authority to execute and deliver this Agreement, to perform its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby. The execution, delivery and performance by HoldCo of this
Agreement and the consummation by HoldCo of the transactions contemplated hereby
have been duly and validly authorized and approved by all required actions on
the part of HoldCo and the HoldCo Members. This Agreement has been duly and
validly executed and delivered by each Contributor and (assuming due
authorization, execution and delivery by each other party hereto) this Agreement
constitutes legal, valid and binding obligations of each Contributor enforceable
against each Contributor in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium, rehabilitation, liquidation,
fraudulent conveyance, preferential transfer or similar Applicable Laws now or
hereafter in effect affecting creditors’ rights and remedies generally and
except as the availability of equitable remedies may be limited by equitable
principles of general applicability. HoldCo has made available to the Annaly
Parties correct and complete copies of the resolutions of HoldCo’s board of
managers and the HoldCo Members, in each case, approving the execution and
delivery by HoldCo of this Agreement and the consummation by HoldCo of the
transactions contemplated hereby.

Section 4.3    No Violation. Except as set forth in Section 4.4, neither the
execution, delivery or performance of this Agreement, nor the consummation by
the Contributors of the transactions contemplated hereby, will, with or without
the giving of notice, the termination of any grace period or both: (a) violate,
conflict with, or result in a breach or default under any provision of the
Organizational Documents of HoldCo; (b) violate any Applicable Law; or
(c) result in a violation or breach by the Contributor, conflict with or
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, cancellation, payment or acceleration)
under any material Contract to which the Contributors are a party or by which
the Contributors or any of their properties or assets are bound.

Section 4.4    Consents and Approvals. Except (a) as set forth in Section 4.4 of
the HoldCo Disclosure Letter and (b) for any consent, approval or notice that
may be required solely by reason of the participation of Annaly Sub (as opposed
to any other third party purchaser) in the transactions contemplated hereby,
HoldCo is not required to obtain any consent, waiver or approval of, or make any
filing, notification or registration with, any Governmental Authority in
connection with the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby.

Section 4.5    Ownership of Interests. All of the Contributed Equity Interests
are owned, of record and beneficially, by the Contributors and the OpCo Holdings
Members, as applicable, and will at the Closing be free and clear of any Liens
(other than restrictions under Securities Laws). All of the AMH Equity Interests
are owned, of record and beneficially, by ALP and OpCo Holdings, as applicable,
and will at the Closing be free and clear of any Liens (other than restrictions
under Securities Laws). All of the Manager Equity Interests are owned, of record
and beneficially, by AMH and will at the Closing be free and clear of any Liens
(other than restrictions under Securities Laws).

 

4

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Section 4.6    Proceedings.

(a)    There are no legal, administrative, arbitral or other proceedings,
investigations, examinations, audits, complaints, charges, hearings, claims,
demands, suits or actions (collectively, “Proceedings”) that are pending or, to
the Knowledge of HoldCo, threatened, against any Contributor or any of their
respective Affiliates that (i) individually or in the aggregate, would
reasonably be expected to prevent or materially delay the ability of the
Contributor to perform obligations hereunder or (ii) challenge the validity of
the Agreement or the transactions contemplated hereby.

(b)    There is no injunction, order, judgment or decree imposed upon any
Contributor or any of their respective Affiliates that would reasonably be
expected to prevent or materially delay the ability of the Contributor to
perform its respective obligations under this Agreement.

Section 4.7    No Breach of Management Agreement. To HoldCo’s Knowledge (x) no
party is in breach or violation of the Management Agreement and (y) no facts
exist that could give rise to a termination event (other than Annaly’s ability
to terminate the Management Agreement at any time and for any reason),
including, without limitation a termination by either party for cause, or as a
result of Annaly failing to satisfy an exemption to registration under the
Investment Company Act of 1940, as amended, under the Management Agreement.

Section 4.8    Taxes.

(a)    HoldCo has (i) timely filed (or caused to be timely filed) all federal
and other material Tax Returns required to be filed by it (taking into account
any applicable extensions or waivers) with the appropriate taxing authority and
all such Tax Returns were and are complete and correct in all material respects
and (ii) timely paid (or caused to be timely paid) all Taxes which were required
to be paid by HoldCo on such Tax Returns other than any such Taxes that are
being contested in good faith by appropriate Proceedings.

(b)    There is currently no pending or proposed in writing audit of any Tax
Returns of HoldCo.

(c)    There are no outstanding waivers or extensions given by any of the HoldCo
Members regarding the application of the statute of limitations with respect to
any Taxes.

(d)    There are no Liens upon the assets or properties of any of the HoldCo
Members or the Business other than Permitted Liens.

(e)    HoldCo has no material liability of any kind for any unpaid Taxes.

(f)    HoldCo has withheld and paid each material Tax required to have been
withheld and paid by it in connection with amounts paid or owing to any
employee, independent contractor, service provider, creditor, customer,
shareholder or other party, and each such member has complied with all
information reporting and backup withholding provisions of Applicable Law.

(g)    At no time was HoldCo a member of any affiliated, combined, unitary, or
other similar group filing a consolidated, combined, unitary, or other Tax
Return for any taxable year for which the assessment of Taxes has not expired
pursuant to the relevant statute of limitations.

 

5

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(h)    HoldCo is not a party to, is not bound by, and does not have any
obligation under, any Tax sharing, Tax indemnity or Tax allocation agreement or
similar agreement or arrangement with respect to Taxes with any Person other
than obligations in customary agreements with third parties entered into in the
ordinary course of business consistent with past practice.

(i)    HoldCo is, and at all times since its formation has been, properly
treated and classified for all U.S. federal and applicable state Tax purposes as
a partnership (within the meaning of Section 301.7701-1 of the Treasury
Regulations).

Section 4.9    Ownership of Assets and Interests. HoldCo does not own any assets
that following Closing, and taking into account the termination of the
Management Agreement, would reasonably generate any income for U.S. federal Tax
purposes. HoldCo does not own any assets that are securities under the
Investment Company Act of 1940, as amended, except the Contributed Equity
Interests and treasury securities.

Section 4.10    Contributed Equity Interests; Capitalization.

(a)    Each of the Contributed Equity Interests, the AMH Equity Interests and
the Manager Equity Interests have been duly authorized and validly issued and
are fully paid and non-assessable. Other than the Contributed Equity Interests,
the AMH Equity Interests and the Manager Equity Interests, no limited liability
company interests or other equity interests in a Manager Entity are issued and
outstanding.

(b)    There are no outstanding securities, interests, options, warrants, calls,
rights, convertible or exchangeable securities or Contracts or obligations of
any kind (contingent or otherwise) to which a Manager Entity is a party or by
which it is bound obligating a Manager Entity to issue, deliver or sell, or
cause to be issued, delivered or sold, additional limited liability company
membership interests, equity interests or other securities of a Manager Entity
or obligating a Manager Entity to issue, grant, extend or enter into any such
security, interest, option, warrant, call, right or Contract. There are no
outstanding obligations (contingent or otherwise) of a Manager Entity to
repurchase, redeem or otherwise acquire any limited liability company interests,
equity interests or other securities (or options or warrants to acquire any such
interests) of a Manager Entity. There are no outstanding or authorized
appreciation rights, registration rights (including piggyback rights), rights of
first offer, performance units, “phantom” unit rights or other Contracts or
obligations of any character (contingent or otherwise) pursuant to which any
Person is or may be entitled to receive any payment or other value based on the
revenues, earnings or financial performance, or share price performance or other
attribute of a Manager Entity or its business or assets or calculated in
accordance therewith or to cause a Manager Entity to file a registration
statement under the Securities Act of 1933, as amended (the “Securities Act”),
or which otherwise relate to the registration of any securities of such Manager
Entity. There are no voting trusts, proxies, shareholder agreements or other
Contracts of similar character to which a Manager Entity is a party or by which
it is bound.

 

6

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ARTICLE 5

REPRESENTATIONS AND WARRANTIES OF

HOLDCO AND MANAGER ON BEHALF OF THE MANAGER ENTITIES

Except as set forth in a correspondingly labeled section of the HoldCo
Disclosure Letter, it being agreed that any matter disclosed in any section or
subsection of the HoldCo Disclosure Letter shall be deemed disclosed in any
other section or subsection to the extent that such information is reasonably
apparent to be so applicable to such other section or subsection, HoldCo and
Manager, on behalf of each Manager Entity, hereby represent and warrant to the
Annaly Parties, as of the date hereof and as of the Closing (provided that any
representation or warranty that addresses matters as of a particular date shall
be deemed to have been made only as of such date), as follows:

Section 5.1    Organization. Each Manager Entity is a limited liability company
or limited partnership duly formed, validly existing and in good standing under
the laws of the State of Delaware. Each Manager Entity has the requisite power
and authority necessary to carry on its business as it is now being conducted
and to own, lease and operate all of its material properties and assets. Each
Manager Entity is duly licensed or qualified to do business and in good standing
in each jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned, leased or operated by
it makes such qualification or licensing necessary under Applicable Law, except
where the failure to be so licensed, qualified or in good standing would not,
individually or in the aggregate, reasonably be expected to result in a Manager
Material Adverse Effect. HoldCo and/or Manager have made available to the Annaly
Parties complete and correct copies of the Organizational Documents of each
Manager Entity, as in effect on the date hereof.

Section 5.2    Authority. Each Manager Entity has all requisite limited
liability company, power and authority to execute and deliver this Agreement, to
perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby. The execution, delivery and performance by
each Manager Entity of this Agreement and the consummation by each Manager
Entity of the transactions contemplated hereby have been duly and validly
authorized and approved by all required actions by HoldCo on behalf of such
Manager Entity. This Agreement has been duly and validly executed and delivered
by such Manager Entity and (assuming due authorization, execution and delivery
by each other party hereto) this Agreement constitutes the legal, valid and
binding obligation of such Manager Entity enforceable against such Manager
Entity in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium, rehabilitation, liquidation, fraudulent
conveyance, preferential transfer or similar Applicable Laws now or hereafter in
effect affecting creditors’ rights and remedies generally and except as the
availability of equitable remedies may be limited by equitable principles of
general applicability. HoldCo and/or Manager have made available to the Annaly
Parties correct and complete copies of the resolutions of each Manager Entity’s
board of managers and/or member(s), as applicable, approving the execution and
delivery by such Manager Entity of this Agreement and the consummation by such
Manager Entity of the transactions contemplated hereby.

Section 5.3    No Violations. Except as set forth in Section 5.4, neither the
execution, delivery or performance of this Agreement, nor the consummation by
each Manager Entity of the transactions contemplated hereby, will, with or
without the giving of notice, the termination of any grace period or both:
(a) violate, conflict with, or result in a breach or default under any provision
of the Organizational Documents of such Manager Entity; (b) violate any
Applicable Law; or (c) result in a violation or breach by such Manager Entity,
conflict with or constitute (with or without due notice or lapse of time or
both) a default (or give rise to any right of termination, cancellation, payment
or acceleration) under any material Contract to which it is a party or by which
it or any of its properties or assets are bound.

 

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Section 5.4    Consents and Approvals. Except (a) as set forth in Section 5.4 of
the HoldCo Disclosure Letter and (b) for any consent, approval or notice that
may be required solely by reason of the participation of Annaly Sub (as opposed
to any other third party purchaser) in the transactions contemplated hereby, no
Manager Entity is required to obtain any consent, waiver or approval of, or make
any filing, notification or registration with, any Governmental Authority in
connection with the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby.

Section 5.5    Brokers and Finders.(a) Other than Wells Fargo Securities, LLC,
no broker, finder or similar intermediary has acted for or on behalf of, or is
entitled to any broker’s, finder’s or similar fee or other commission from, any
Manager Entity in connection with this Agreement or the transactions
contemplated hereby.

Section 5.6    Subsidiaries. Manager has never owned, nor does it currently own,
directly or indirectly, any Subsidiaries. Manager does not own any equity or
similar interest in, or any interest convertible into or exchangeable or
exercisable for, directly or indirectly, any equity or similar interest in, any
Person.

Section 5.7    Manager Financial Statements; No Undisclosed Liabilities.

(a)    HoldCo and/or Manager have made available to the Annaly Parties complete
and correct copies of the unaudited consolidated balance sheets of Manager as of
December 31, 2019 (the “Manager Balance Sheet”) and December 31, 2018 and the
related unaudited consolidated statements of operations for the fiscal years
ended December 31, 2019 and December 31, 2018. The balance sheets referred to in
this Section 5.7(a) present fairly in all material respects the financial
position of Manager as of the respective dates thereof, and the other financial
statements referred to in this Section 5.7(a) present fairly in all material
respects the results of the operations of Manager for the respective fiscal
periods therein set forth, in each case in accordance with GAAP consistently
applied, except that the financial statements do not contain all footnotes
required by GAAP and subject to normal and recurring year-end adjustments, the
effect of which will not amount to a Manager Material Adverse Effect.

(b)    No Manager Entity has any Liabilities (whether of a nature required by
GAAP to be accrued in the Manager Balance Sheet, a separate balance sheet or
otherwise), except (i) as of the date hereof, (A) Liabilities set forth in
Section 5.7(b) of the HoldCo Disclosure Letter, or (B) as and to the extent
disclosed or reserved against in the Manager Balance Sheet, and (ii) as of the
Closing Date, Liabilities disclosed or reserved against in the Projected Balance
Sheet. Manager’s internal control over financial reporting includes those
policies and procedures that (i) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and
dispositions of Manager’s assets; (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial
statements in accordance with GAAP, and that receipts and expenditures are being
made only in accordance with authorizations of management; and (iii) provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of Manager’s assets that could have a material
effect on the consolidated financial statements.

 

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Section 5.8    Absence of Certain Changes. Since the date of the Manager Balance
Sheet, except as described in Section 5.8 of the HoldCo Disclosure Letter,
(a) Manager has conducted its business, and the Business has been conducted, in
the ordinary course consistent with past practices in all material respects
(b) there has not been any Manager Material Adverse Effect or any development or
combination of developments that, individually or in the aggregate, has had or
would reasonably be expected to have a Manager Material Adverse Effect, and
(c) there has not been any event or occurrence that would cause the Projected
Balance Sheet to be incorrect or inaccurate in any material respect or fail to
reflect the best currently available estimates and good faith judgments of the
management of Manager. In addition, from the date of the Manager Balance Sheet
through the date hereof, neither the Contributors (in respect of the Business)
nor Manager has taken any action that, if proposed to be taken after the date
hereof, would require the consent of the Annaly Parties under Section 7.1.

Section 5.9    Material Contracts.

(a)    Section 5.9(a) of the HoldCo Disclosure Letter contains a complete and
correct list of all material Contracts of the Manager Entities (“Material
Contracts”) in existence on the date hereof. HoldCo and/or Manager have made
available to the Annaly Parties complete and correct copies of all such Material
Contracts.

(b)    Each Material Contract is valid, binding and in full force and effect,
and is enforceable against such Manager Entity, and, to the Knowledge of HoldCo,
each other party thereto, in accordance with its terms subject to applicable
bankruptcy, insolvency, reorganization, moratorium, rehabilitation, liquidation,
fraudulent conveyance, preferential transfer or similar Applicable Laws now or
hereafter in effect affecting creditors’ rights and remedies generally and
except that the availability of equitable remedies may be limited by equitable
principles of general applicability. Such Manager Entity is not in material
default under any Material Contract, nor, to the Knowledge of HoldCo, is any
other party to any Material Contract in material default thereunder.

Section 5.10    Compliance.

(a)    Such Manager Entity has been since January 1, 2018, and is now, in
compliance in all material respects with all Applicable Laws or by which any
property or asset of such Manager Entity is bound or affected. Such Manager
Entity has not (i) committed any act, omission or other practice for which a
Governmental Authority could have a reasonable basis for criminal prosecution or
civil enforcement under Applicable Law, or (ii) received any written or other
notice of, been charged with, or received any inquiry concerning, the possible
violation in any material respect of any Applicable Law. Such Manager Entity has
not received written, or to the Knowledge of HoldCo, oral notice that any
Manager Entity is under Governmental Investigation with respect to the violation
of any Applicable Law or Approval. Such Manager Entity has not, to the Knowledge
of HoldCo, been charged with or threatened to be charged with any violation of,
or received notice of any revocation or material modification of, any Approval
or any Applicable Law. Since January 1, 2018, no such Manager Entity has made,
or been ordered to make, any payment in respect of any Governmental Damages, and
HoldCo has no Knowledge of current or outstanding audits, recoupment efforts, or
appeals by any Governmental Authority pending.

(b)    Section 5.10(b) of the HoldCo Disclosure Letter sets forth a true,
complete and accurate list of all material Approvals issued to or held by such
Manager Entity. Such Approvals are the only Approvals required for such Manager
Entity to conduct its business, activities and operations as presently
conducted, except for those the absence of which has not resulted and would not
reasonably be expected to result, individually or in the aggregate, in a Manager
Material Adverse Effect. Each such Approval is valid and in full force and
effect. Each Manager Entity has been and is in material compliance with the
terms of each such Approval. To the Knowledge of HoldCo, no modification,

 

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revocation, suspension or cancellation of any such Approval is pending or
threatened. To the Knowledge of HoldCo, all material applications required to
have been filed for the renewal of such Approvals have been duly filed with the
appropriate Governmental Authority, and, to the Knowledge of HoldCo, all other
material filings required to have been made with respect to such Approvals and
Applicable Laws have been duly made on a timely basis with the appropriate
Governmental Authority.

Section 5.11    Proceedings.

(a)    There are no Proceedings that are pending or, to the Knowledge of HoldCo,
threatened, against a Manager Entity or any of its Affiliates that
(i) individually or in the aggregate, would reasonably be expected to prevent or
materially delay the ability of a Manager Entity to perform its obligations
hereunder or (ii) challenge the validity of the Agreement or the transactions
contemplated hereby.

(b)    There is no injunction, order, judgment or decree imposed upon a Manager
Entity or any of its Affiliates that would reasonably be expected to prevent or
materially delay the ability of a Manager Entity to perform its obligations
under this Agreement.

Section 5.12    Employee Benefit Plans.

(a)    Section 5.12(a) of the HoldCo Disclosure Letter sets forth a complete and
correct list, as of the date hereof, of (i) each “employee benefit plan,” as
such term is defined in Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended (“ERISA”), and (ii) each other employee benefit plan,
program, contract, fund or arrangement (whether written or oral, qualified or
nonqualified, funded or unfunded, foreign or domestic, whether or not subject to
ERISA and currently effective or terminated) and any trust, escrow or similar
agreement related thereto, whether or not funded, including any equity option,
equity purchase, equity appreciation right, equity-based incentive, employment,
cash bonus, incentive compensation, retirement, pension, deferred compensation,
profit-sharing, unemployment or severance compensation plan, program, contract,
fund or arrangement provided to any current or former employees, members,
directors, managers, officers, individual consultants or individual independent
contractors of any Manager Entity, that are sponsored or maintained by such
Manager Entity, or with respect to which any Manager Entity has made or is
required to make payments, transfers or contributions to or on behalf of such
individuals or with respect to which any Manager Entity has or could have any
Liability with respect to such individuals (all of the above items, whether
listed or required to be listed in Section 5.12(a) of the HoldCo Disclosure
Letter, being hereinafter individually or collectively referred to as a “Manager
Benefit Plan” or “Manager Benefit Plans,” respectively). Section 5.12(a) of the
HoldCo Disclosure Letter identifies each Manager Benefit Plan. No Manager Entity
has any current Liability with respect to any Manager Benefit Plan or any other
employee benefit plan, program or arrangement, other than the Manager Benefit
Plans or any employee benefit plan, program or arrangement that is mandated by
Applicable Laws. No Manager Benefit Plan is maintained outside of the United
States.

(b)    Copies of the following materials have been made available to the Annaly
Parties: (i) all current plan documents for each Manager Benefit Plan or, in the
case of an unwritten Manager Benefit Plan, an accurate written description of
all material terms thereof, (ii) all determination, advisory or opinion letters
from the United States Internal Revenue Service (the “IRS”) with respect to any
of the Manager Benefit Plans, (iii) all current summary plan descriptions,
summaries of material modifications, annual reports and summary annual reports
with respect to any of the Manager Benefit Plans, (iv) all current trust
agreements, insurance contracts and other documents relating to the funding or

 

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payment of benefits under any Manager Benefit Plan, and (v) all material
correspondence relating to any Manager Benefit Plan between Manager and any
Governmental Authority within three years preceding the date hereof.

(c)    Each of the Manager Benefit Plans has been maintained, operated and
administered in material compliance with its terms and Applicable Laws,
including ERISA and the Code. There have been no prohibited transactions or
breaches of any of the duties imposed on “fiduciaries” (within the meaning of
Section 3(21) of ERISA) by ERISA with respect to the Manager Benefit Plans that
could result in any Liability or excise Tax under ERISA or the Code being
imposed on Manager or any of the Annaly Parties.

(d)    (i) Each Manager Benefit Plan intended to be qualified under
Section 401(a) of the Code has either received a favorable determination letter
from the IRS with respect to such Manager Benefit Plan as to its qualified
status under the Code, or with respect to a prototype Manager Benefit Plan, the
prototype sponsor has received a favorable IRS opinion letter, or the Manager
Benefit Plan or prototype sponsor has remaining a period of time under
applicable Code regulations or pronouncements of the IRS in which to apply for
such a letter and make any amendments necessary to obtain a favorable
determination or opinion as to the qualified status of each such Manager Benefit
Plan and (ii) to the Knowledge of HoldCo, no event has occurred since the most
recent determination or opinion letter or application therefor relating to any
such Manager Benefit Plan that would reasonably be expected to adversely affect
such qualification or to result in the revocation of such letter.

(e)    Except as set forth in Section 5.12(e) of the HoldCo Disclosure Letter,
no Manager Entity or any of its ERISA Affiliates maintains, contributes to, or
sponsors (and has not ever maintained, contributed to, or sponsored) a
“multiemployer plan” (as defined in Section 3(37) of ERISA or Section 414(f) of
the Code), a “defined benefit plan” as defined in Section 3(35) of ERISA, a
pension plan subject to the funding standards of Section 302 of ERISA or
Section 412 of the Code or a “multiple employer plan” within the meaning of
Section 210(a) of ERISA or Section 413(c) of the Code. With respect to each
group health plan benefiting any current or former employee of a Manager Entity
that is subject to Section 4980B of the Code, except as would not result in
material Liability to such Manager Entity or any of the Annaly Parties, such
Manager Entity has complied with the continuation coverage requirements of
Section 4980B of the Code and Part 6 of Subtitle B of Title I of ERISA.

(f)    There are no pending or, to the Knowledge of HoldCo, threatened
Proceedings (other than routine Claims for benefits), against or affecting any
Manager Benefit Plan, by any current or former employee or beneficiary covered
under such Manager Benefit Plan (as applicable) or otherwise involving a Manager
Benefit Plan, nor, to the Knowledge of HoldCo, is there any basis for one.

(g)    Except as set forth in Section 5.12(g) of the HoldCo Disclosure Letter,
neither the execution or delivery of this Agreement nor the consummation of the
transactions contemplated by this Agreement will, either alone or in conjunction
with any other event, (i) entitle any current or former director, member or
employee of such Manager Entity (or the dependents of any such Persons) to any
payment (whether of severance pay or otherwise), (ii) increase the amount or
value of any benefit or compensation otherwise payable or required to be
provided to any such director, member or employee (or the dependents of any such
Persons) or (iii) accelerate the time of payment or vesting of amounts due any
such director, member or employee (or the dependents of any such Persons).

 

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(h)    No amount that could be received (whether in cash or property or the
vesting of property or the right to receive payment in cash) as a result of any
of the transactions contemplated by this Agreement by any employee, officer,
member or director of a Manager Entity who is a “disqualified individual” (as
such term is defined in Treasury Regulation Section 1.280G-1) under any
employment, severance or termination agreement, other compensation arrangement
or Manager Benefit Plan currently in effect would be characterized as an “excess
parachute payment” (as such term is defined in Section 280G(b)(1) of the Code).
Each Manager Benefit Plan and any other payment or arrangement for which a
Manager Entity has Liability that is subject to Section 409A of the Code is in
documentary compliance with, and has been operated in compliance with,
Section 409A of the Code, no Person has a right to any gross up or
indemnification from a Manager Entity with respect to any such Manager Benefit
Plan, payment or arrangement subject to the excise tax imposed by Section 4999
of the Code or with respect to Section 409A of the Code.

(i)    No Manager Benefit Plan provides payments or benefits, including
post-termination health or life insurance benefits, beyond termination of
service or retirement (other than for continuation coverage required to be
provided pursuant to Section 4980B of the Code).

(j)    No Manager Benefit Plan provides benefits to any individual who is not a
current or former employee or member of a Manager Entity, or the dependents or
other beneficiaries of any such current or former employee or member.

(k)    No Manager Benefit Plan is or at any time was funded through a “welfare
benefit fund” as defined in Section 419(e) of the Code, and no benefits under
any Manager Benefit Plan are or at any time have been provided through a
voluntary employees’ beneficiary association (within the meaning of subsection
501(c)(9) of the Code) or a supplemental unemployment benefit plan (within the
meaning of Section 501(c)(17) of the Code). All (i) insurance premiums required
to be paid with respect to, (ii) benefits, expenses and other amounts due and
payable under, and (iii) contributions, transfers or payments required to be
accrued or made to, any Manager Benefit Plan on or prior to the Closing Date
will have been paid, made or accrued on or prior to the Closing Date.

(l)    Other than as set forth on Section 5.12(l) of the HoldCo Disclosure
Letter, there are no participants who have retired and are entitled to future
benefit payments under the Second Amended and Restated Supplemental Retirement
Plan of ALP (the “AMCO Retirement Plan”).

Section 5.13    Employment Matters.

(a)    (i) No Manager Entity is a party to or bound by any union contract,
collective bargaining agreement or other similar type of Contract, (ii) (A) no
Manager Entity has agreed to recognize any union or other collective bargaining
representative, (B) no union or group of employees has made a pending demand for
recognition and (C) there are no representation Proceedings or petitions seeking
a representation Proceeding presently pending or, to the Knowledge of HoldCo,
threatened to be brought or filed with the National Labor Relations Board and
(iii) no union or collective bargaining representative has been certified as
representing any Manager Employees and, to the Knowledge of HoldCo, no
organizational attempt has been made or threatened by or on behalf of any labor
union or collective bargaining representative with respect to any Manager
Employees with respect to their employment with the Manager Entities. No Manager
Entity is a party to or bound by any independent contractor agreement,
consulting agreement or other similar type of Contract (with any natural Person)
that cannot be terminated upon a month or less notice without Liability of more
than $25,000 to any member of the Manager Entities.

 

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(b)    The Manager Entities have made available to the Annaly Parties a correct
and complete list that sets forth, as of the date hereof, base compensation,
bonus/commission and total compensation for the prior year and current annual
base salary or hourly wage rate (or other compensation) to date with respect to
each Manager Employee.

(c)    Other than as set forth on Section 5.13(c) of the HoldCo Disclosure
Letter, no Manager Entity employs any employee who cannot be dismissed
immediately, whether currently or immediately after the consummation of the
transactions contemplated hereby, without notice or cause and without further
Liability to such Manager Entity. To the Knowledge of HoldCo, no employee,
consultant or independent contractor who is employed by a Manager Entity or who
provides services to a Manager Entity intends to terminate his or her employment
relationship or engagement.

(d)    All Manager Employees who work in the United States have been, and all
former employees of the Manager or any of its Affiliates (who provided services
to a Manager Entity) who worked in the United States since January 1, 2015 whose
employment terminated, voluntarily or involuntarily, prior to the Closing Date
were, legally authorized to work in the United States. Each Manager Entity has
completed and retained the necessary employment verification paperwork under
IRCA for employees hired prior to the Closing Date. Further, since January 1,
2015, each Manager Entity has been in material compliance with both the
employment verification provisions (including the paperwork and documentation
requirements) and the anti-discrimination provisions of IRCA.

(e)    Since January 1, 2015, all individuals who perform services for a Manager
Entity have been classified correctly, in accordance with the terms of each
Manager Benefit Plan and ERISA, the Code, the Fair Labor Standards Act of 1938,
as amended, and all other Applicable Laws, as employees, independent contractors
or leased employees, and no Manager Entity or any of its Affiliates has received
notice to the contrary from any Person or Governmental Authority.

(f)    Since January 1, 2015, each Manager Entity has been in material
compliance with all Applicable Laws respecting labor and employment, including
termination of employment or failure to employ, employment practices, terms and
conditions of employment, immigration, wages and hours, working time, employment
standards, civil rights, discrimination and retaliation, occupational safety and
health, family or medical leave, exempt/non-exempt and contingent worker
classifications and workers’ compensation and the Worker Adjustment Retraining &
Notification Act of 1988, as amended, or any similar Applicable Law. There are
no labor or employment Proceedings pending, or to the Knowledge of HoldCo
threatened, between a Manager Entity and any employees, current or former, of a
Manager Entity.

Section 5.14    Intellectual Property.

(a)    Section 5.14(a) of the HoldCo Disclosure Letter sets forth a complete and
correct list, as of the date hereof, of all of the Intellectual Property of the
Manager (“Manager Intellectual Property”) that as of the date hereof is
registered or subject to an application for registration with any Governmental
Authority by the Manager or (collectively, whether listed or required to be
listed in Section 5.14(a) of the HoldCo Disclosure Letter, the “Registered IP”).
All Registered IP is in effect and subsisting.

(b)    Each Manager Entity owns, licenses or otherwise has the right to use all
Manager Intellectual Property necessary for the conduct of the Business as
currently conducted, provided that the foregoing is not a representation or
warranty with respect to infringement, misappropriation or other violation of
the Intellectual Property of another Person (which is addressed in
Section 5.14(c)).

 

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(c)    As of the date hereof (i) to HoldCo’s Knowledge, no Manager Entity’s use
of the owned Manager Intellectual Property infringes, misappropriates or
otherwise violates the Intellectual Property rights of any Person, (ii) to the
Knowledge of HoldCo, no Person is infringing, misappropriating or otherwise
violating the rights of a Manager Entity in any owned Manager Intellectual
Property, (iii) since January 1, 2018, no claims have been asserted in writing
by any Person against any member of a Manager Entity alleging that a Manager
Entity’s use of any Manager Intellectual Property infringes, misappropriates or
otherwise violates the rights of such Person, and (iv) since January 1, 2018, no
claims have been asserted in writing by such Manager Entity alleging that any
Person infringes, misappropriates or otherwise violates any Manager Intellectual
Property.

Section 5.15    Taxes.

(a)    Each Manager Entity has (i) timely filed (or caused to be timely filed)
all federal and other material Tax Returns required to be filed by it (taking
into account any applicable extensions or waivers) with the appropriate taxing
authority and all such Tax Returns were and are complete and correct in all
material respects and (ii) timely paid (or caused to be timely paid) all Taxes
which were required to be paid by such Manager Entity on such Tax Returns other
than any such Taxes that are being contested in good faith by appropriate
Proceedings.

(b)    There is currently no pending or proposed in writing audit of any Tax
Returns of any Manager Entity.

(c)    There are no outstanding waivers or extensions given by any member of any
Manager Entity regarding the application of the statute of limitations with
respect to any Taxes.

(d)    There are no Liens upon the assets or properties of any member of any
Manager Entity or the Business other than Permitted Liens.

(e)    Based on current estimates, the amount of the Liability of a Manager
Entity for unpaid Taxes for all periods ending on or before December 31, 2019
does not, in the aggregate, exceed the amount of accruals for Taxes (excluding
reserves for deferred Taxes) reflected on the Manager Balance Sheet. The amount
of the Liability of a Manager Entity for unpaid Taxes for all periods following
the end of the most recent period covered by the Manager Balance Sheet shall
not, in the aggregate, exceed the amount of accruals for Taxes (excluding
reserves for deferred Taxes) as adjusted for the passage of time in accordance
with the past custom and practice of such Manager Entity (and which accruals
shall not exceed comparable amounts incurred in similar periods in prior years).

(f)    Each Manager Entity has withheld and paid each material Tax required to
have been withheld and paid by it in connection with amounts paid or owing to
any employee, independent contractor, service provider, creditor, customer,
shareholder or other party, and each such member has complied with all
information reporting and backup withholding provisions of Applicable Law.

(g)    No Manager Entity was a member of any affiliated, combined, unitary, or
other similar group filing a consolidated, combined, unitary, or other Tax
Return for any taxable year for which the assessment of Taxes has not expired
pursuant to the relevant statute of limitations.

(h)    No Manager Entity is a party to, bound by, nor has any obligation under,
any Tax sharing, Tax indemnity or Tax allocation agreement or similar agreement
or arrangement with respect to Taxes with any Person other than obligations in
customary agreements with third parties entered into in the ordinary course of
business consistent with past practice.

 

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(i)    Each of ALP, OpCo Holdings, Manager and AMH is, and at all times since
its formation has been, properly treated and classified for all U.S. federal and
applicable state Tax purposes as either a partnership (within the meaning of
Section 301.7701-3 of the Treasury Regulations promulgated pursuant to the Code)
that is not a publicly traded partnership within the meaning of Section 7704 of
the Code or an entity disregarded as an entity separate from AMH (within the
meaning of Section 301.7701-3 of the Treasury Regulations promulgated pursuant
to the Code).

(j)    Each of ALP, OpCo Holdings, Manager and AMH does not own any assets that
are securities under the Investment Company Act of 1940, as amended, except the
Contributed Equity Interests, other interests in the Manager Entities and
treasury securities.

Section 5.16    Insurance. Each insurance policy and insurance bond covering a
Manager Entity is set forth in Section 5.16 of the HoldCo Disclosure Letter and
is in full force and effect and, in the 12 months prior to the date hereof, no
Manager Entity has received written notice from any insurer or agent of any
intent to cancel any such insurance policy or bond. There is no material claim
by any Manager Entity pending under any of such policies or bonds as to which
coverage has been denied or disputed by the underwriters of such policies or
bonds.

Section 5.17    Assets; Leases.

(a)    Each Manager Entity has good and marketable title to, a valid leasehold
interest in or valid license to use, all of its material personal properties
(whether owned or leased), rights and assets, free and clear of all Liens (other
than Permitted Liens). No Manager Entity currently owns nor has ever owned any
real property (“Real Property”) or interest therein.

(b)    There are no Real Property Leases, and no Manager Entity is obligated
under or bound by any option, right of first refusal, purchase Contract, or
other Contract to sell or otherwise dispose of any Real Property or any other
interest in any Real Property. The interest of a Manager Entity under each Real
Property Lease is (i) not subordinate to the holder of any Lien (other than any
Permitted Lien) on the interest of the landlord thereunder and (ii) subject to a
non-disturbance agreement.

(c)    The tangible personal property owned, leased or licensed by any Manager
Entity, together with all other assets of the Manager Entities represents all
assets and properties required to carry on the Business.

Section 5.18    Ownership of Assets. Each of ALP, OpCo Holdings and AMH does not
own any assets today that, following Closing and taking into account the
termination of the Management Agreement, would reasonably generate any income
for U.S. federal Tax purposes.

 

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ARTICLE 6

REPRESENTATIONS AND WARRANTIES OF THE ANNALY PARTIES

Except as set forth in a correspondingly labeled section of the Annaly
Disclosure Letter, it being agreed that any matter disclosed in any section or
subsection of the Annaly Disclosure Letter shall be deemed disclosed in any
other section or subsection to the extent that such information is reasonably
apparent to be so applicable to such other section or subsection, each Annaly
Party represents and warrants to the Contributors and the Manager Entities, as
of the date hereof and as of the Closing (provided that any representation or
warranty that addresses matters as of a particular date, shall be deemed to have
been made only as of such date), as follows:

Section 6.1    Organization. Annaly Sub is a limited liability company, duly
formed and validly existing and in good standing under the laws of the State of
Delaware. Annaly is a corporation, duly incorporated, validly existing and in
good standing under the laws of the State of Maryland. Each Annaly Party has the
requisite corporate power and authority to carry on its business as it is now
being conducted and to own, lease and operate all of its properties and assets.

Section 6.2    Authority. Each Annaly Party has all requisite corporate and
limited liability company power and authority, as applicable, to execute and
deliver this Agreement, to perform its obligations hereunder and thereunder and
to consummate the transactions contemplated hereby. The execution, delivery and
performance by each Annaly Party of this Agreement and the consummation by each
Annaly Party of the transactions contemplated hereby have been duly and validly
authorized and approved by all required actions on the part of each Annaly
Party. This Agreement has been duly and validly executed and delivered by each
Annaly Party and (assuming due authorization, execution and delivery by each
other party hereto) this Agreement constitutes the legal, valid and binding
obligation of each Annaly Party enforceable against each Annaly Party in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium, rehabilitation, liquidation, fraudulent conveyance,
preferential transfer or similar Applicable Laws now or hereafter in effect
affecting creditors’ rights and remedies generally and except as the
availability of equitable remedies may be limited by equitable principles of
general applicability. The Annaly Parties have made available to the
Contributors and Manager correct and complete copies of the resolutions of each
of Annaly Sub’s board of managers and/or sole member and the Annaly Board of
Directors, in each case, approving the execution and delivery by such Annaly
Party of this Agreement and the consummation by such Annaly Party of the
transactions contemplated hereby.

Section 6.3    No Violations. Except as set forth in Section 6.4 hereof, neither
the execution, delivery or performance of this Agreement, nor the consummation
by each Annaly Party and its Affiliates (as applicable) of the transactions
contemplated hereby, will, with or without the giving of notice, the termination
of any grace period or both: (a) violate, conflict with, or result in a breach
or default under any provision of the Organizational Documents of any Annaly
Party or any such Affiliate; (b) violate any Applicable Law; or (c) result in a
violation or breach by any Annaly Party or any such Affiliate of, conflict with
or constitute (with or without due notice or lapse of time or both) a default
(or give rise to any right of termination, cancellation, payment or
acceleration) under any material Contract to which it is a party or by which it
or any of its properties or assets are bound.

Section 6.4    Consents and Approvals. Except (a) as set forth in Section 6.4 of
the Annaly Disclosure Letter and (b) for any consent, approval or notice that
may be required solely by reason of the participation of an Annaly Party (as
opposed to any other third party purchaser) in the transactions contemplated
hereby, no Annaly Party is required to obtain any consent, waiver or approval
of, or make any filing, notification or registration with, any Governmental
Authority in connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby.

 

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Section 6.5    Proceedings.

(a)    Except as set forth in Section 6.5(a) of the Annaly Disclosure Letter,
there are no Proceedings that are pending against any Annaly Party or any of its
Affiliates that (i) individually or in the aggregate, would reasonably be
expected to prevent or materially delay the ability of any Annaly Party to
perform its obligations hereunder or (ii) challenge the validity of the
Agreement or the transactions contemplated hereby.

(b)    There is no injunction, order, judgment or decree imposed upon any Annaly
Party or any of its Affiliates that would reasonably be expected to prevent or
materially delay the ability of any Annaly Party to perform its obligations
under this Agreement.

Section 6.6    Brokers and Finders. Other than Evercore Group L.L.C., no broker,
finder or similar intermediary has acted or on behalf of, or is entitled to any
broker’s, finder’s or similar fee or other commission from, any Annaly Party or
any of its Affiliates in connection with this Agreement or the transactions
contemplated hereby.

Section 6.7    Purchase for Investment. Annaly Sub is acquiring the Contributed
Equity Interests solely for investment for its own account and not with the view
to, or for resale in connection with, any “distribution” (as such term is used
in Section 2(a)(11) of the Securities Act) thereof. Annaly Sub understands that
the Contributed Equity Interests have not been registered under the Securities
Act or any Applicable Laws by reason of specified exemptions therefrom that
depend upon, among other things, the bona fide nature of its investment intent
as expressed herein and as explicitly acknowledged hereby and that under such
Laws such securities may not be resold without registration under the Securities
Act or under Applicable Laws unless an applicable exemption from registration is
available. Annaly Sub is an “accredited investor” within the meaning of Rule 501
of Regulation D promulgated under the Securities Act.

Section 6.8    No Breach of Management Agreement. To the Knowledge of the Annaly
Parties (x) no Party is in breach or violation of the Management Agreement and
(y) no facts exist that could give rise to a termination event (other than
Annaly’s ability to terminate the Management Agreement at any time and for any
reason), including, without limitation a termination by either Party for cause,
or as a result of Annaly failing to satisfy an exemption to registration under
the Investment Company Act of 1940, as amended, under the Management Agreement.

ARTICLE 7

COVENANTS

Section 7.1    Conduct of Business Pending the Closing. HoldCo, on behalf of the
Manager Entities, covenants and agrees that, between the date hereof and the
earlier to occur of the Closing or the termination of this Agreement pursuant to
its terms, unless the chair of the Annaly Board of Directors shall otherwise
specifically consent in writing in advance (which consent shall not be
unreasonably withheld, conditioned or delayed), or unless otherwise expressly
provided for by this Agreement, the Manager Entities shall (i) conduct their
respective business in all material respects in the ordinary course consistent
with past practice; (ii) use their respective commercially reasonable efforts to
(A) preserve intact

 

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their business and, in the case of the Business, operate in a manner consistent
with the Management Agreement and (B) keep available the services of their
respective present officers and employees; (iii) maintain any insurance upon all
material assets of Manager and the Business in such amounts and of such kinds
comparable to that in effect on the date hereof; (iv) pay and discharge current
Liabilities of the Manager Entities as and when due and payable in accordance
with the Contracts governing such Liabilities, except for Liabilities of the
Manager Entities not material in amount that are disputed in good faith by
appropriate Proceedings and properly reserved for on the Manager Balance Sheet
and (v) comply in all material respects with all Applicable Laws and Material
Contracts. Subject to the last sentence of Section 7.1, HoldCo, on behalf of the
Manager Entities, covenants and agrees that between the date hereof and the
earlier to occur of the Closing or the termination of this Agreement pursuant to
its terms, none of the Manager Entities shall directly or indirectly do, or
propose to do, any of the following items with respect to themselves and their
respective business without the prior written consent of the chair of the Annaly
Board of Directors (which consent shall not be unreasonably withheld,
conditioned or delayed) unless otherwise expressly provided for by this
Agreement or otherwise expressly set forth in Section 7.1 of the HoldCo
Disclosure Letter:

(a)    amend, propose to amend or otherwise change its Organizational Documents
(except as may be needed to effect the transactions set forth in Section 7.11),
alter through merger, liquidation, reorganization, reclassification,
recapitalization, restructuring or in any other fashion its legal structure or
its capital structure or ownership, or commence any voluntary liquidation,
dissolution or winding up;

(b)    declare, set aside or make any dividend, payment or distribution of
property or assets with respect to its equity interests, including the
Contributed Equity Interests, the AMH Equity Interests and the Manager Equity
Interests;

(c)    (i) incur, on its behalf, any Indebtedness or guarantee the Indebtedness
of any other Person or (ii) make, on its behalf, any loans, advances of capital
contributions to, or investments in, or other advances to, any other Person, or
otherwise commit, on its behalf, to any such financial transaction, or pay,
repay, discharge, purchase, repurchase or satisfy any Indebtedness issued or
guaranteed by the Contributors or any of their Affiliates, in each case under
clause (i) or (ii), except in the ordinary course consistent with past practice
or as set forth in Section 7.1(c) of the HoldCo Disclosure Letter;

(d)    sell, transfer, lease or otherwise dispose of or pledge or otherwise
encumber (other than Permitted Liens) its material assets, except as set forth
in Section 7.1(d) of the HoldCo Disclosure Letter;

(e)    (i) make, revoke or change any election relating to its Taxes other than
in the ordinary course of business consistent with past practice, (ii) change or
revoke any of its Tax accounting methods other than in the ordinary course of
business consistent with past practice, (iii) change any of its Tax accounting
periods other than in the ordinary course of business consistent with past
practice, or (iv) settle or compromise any material Tax audit applicable to it
or surrender any right to claim a refund with respect to a material Liability
for Tax;

(f)    modify in any material respect, terminate or renew any of its Material
Contracts or enter into any new Contract, on its behalf, that had it been in
effect on the date hereof would have been a Material Contract (and if entry into
such Contract is permitted or consented to by the chair of the Annaly Board of
Directors, hereunder, modify in any material respect, terminate or renew such
Contract thereafter), provided, however, this Section 7.1(f) shall not apply to
modifications, terminations or renewals of the Management Agreement;

 

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(g)    cause or permit Manager to enter into new employment agreements, except
for offer letters sent to prospective employees in the ordinary course
consistent with past practice, or amend any existing employment agreements;

(h)    terminate the employment of any Senior Person other than (i) a
termination for Cause (as defined in the Second Amended and Restated Limited
Liability Company Agreement of HoldCo, dated November 29, 2019) or (ii) due to
role elimination without, in the case of this subsection (ii), prior approval of
the Annaly Board of Directors’ Compensation Committee;

(i)    alter the compensation payable to any Senior Person for the fiscal year
ending December 31, 2020 (which, for the avoidance of doubt, shall be consistent
with the information set forth in Section 7.1(i) of the HoldCo Disclosure
Letter);

(j)    except (w) as set forth in Section 7.1(i), (x) as required pursuant to
existing Manager Benefit Plans in effect as of the date hereof, (y) in
connection with the promotion of Manager Employees in the ordinary course of
business or (z) as otherwise required by Applicable Law, adopt, enter into or
become bound by any new Manager Benefit Plan or materially amend, modify or
terminate any Manager Benefit Plan;

(k)    cause or permit (i) Manager, on its behalf, to acquire any rights, assets
or properties other than in the ordinary course of business consistent with past
practice or (ii) Manager, on its behalf, to acquire (by merger, consolidation,
acquisition of stock or assets or otherwise) or organize or form any
corporation, limited liability company, partnership, joint venture, or other
Person or any business organization or division thereof;

(l)    enter into any new line of business on its behalf;

(m)    make any material change to its accounting or cash management policies,
procedures or practices (including with respect to reserves, revenue
recognition, timing for payments of accounts payable and collection of accounts
receivable) unless required by a change in Applicable Law or GAAP; or

(n)    settle any Proceeding on behalf any Manager Entity (i) in an amount in
excess of $250,000 or (ii) where such settlement would result in the imposition
of any material restrictions upon any of its operations or the Business or would
reasonably be expected to restrict the conduct or operations of the business of
the Annaly Parties; or

(o)    agree, whether in writing or otherwise, to do any of the foregoing.

Notwithstanding anything to the contrary herein and for the avoidance of doubt,
nothing in this Section 7.1, shall be construed to prevent Manager from causing
Annaly or any of its Subsidiaries (separate and distinct from the Manager
Entities) from taking actions in the course of Manager’s management of the
Business.

Section 7.2    New External CEO. In the event Annaly appoints a new chief
executive officer (the “New CEO”) prior to the Closing that is not a Manager
Employee, the New CEO shall be hired as an employee of Annaly or a subsidiary
thereof, rather than of Manager, and all compensation payable to

 

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the New CEO shall be paid by Annaly, rather than by the Manager (it being
understood that any compensation payable to the New CEO shall not be deducted
from the management fee paid to the Manager by Annaly pursuant to the Management
Agreement). Annaly and Manager agree that, upon the hiring of the New CEO, they
shall cooperate in good faith to amend or otherwise adjust Manager’s
responsibilities pursuant to the Management Agreement to reflect that the
customary functions of the chief executive officer role will be performed by the
New CEO.

Section 7.3    No Solicitation of Third-Party Management Proposals. Except as
otherwise permitted below, from the date hereof until the earlier of the Closing
Date or termination of this Agreement in accordance with its terms, the Annaly
Parties shall not, and shall cause their respective Subsidiaries and directors,
officers, consultants, advisors (including, without limitation, legal and
financial advisors), agents and other representatives (its “Representatives”)
not to (i) solicit, initiate, knowingly encourage, assist or respond to the
submission of any proposal or offer from any Person relating, with respect to
Annaly, to the provision of external management services to Annaly (an “External
Management Proposal”), (ii) participate in, continue or cooperate in any
discussions or negotiations regarding, or furnish to any other Person any
information with respect to, any effort or attempt by any Person to make an
External Management Proposal or (iii) enter into any agreement with respect to
an External Management Proposal. The Annaly Parties shall, and shall cause their
respective Subsidiaries to, and shall use their reasonable best efforts to cause
their Representatives to, immediately cease and cause to be terminated any and
all such existing activities, discussions or negotiations relating to any
External Management Proposal. The Annaly Parties hereby represent and warrant to
HoldCo that, as of the date of this Agreement, (x) the Annaly Parties are not
engaged in any discussions or negotiations with regard to a potential External
Management Proposal and (y) no External Management Proposal has been received by
the Annaly Parties prior to the date of this Agreement. Notwithstanding the
foregoing, the Annaly Parties and their respective Subsidiaries and
Representatives may respond to any inquiry or communication from any Person
concerning a potential External Management Proposal solely to acknowledge
receipt thereof and decline further engagement with such Person or its
Representatives with respect to such potential External Management Proposal, and
shall notify HoldCo of any such inquiry or communication.

Section 7.4    Access to Information; Interim Financial Statements;
Confidentiality.

(a)    From the date hereof until the earlier to occur of the Closing or the
termination of this Agreement pursuant to its terms, consistent with Applicable
Law, upon reasonable notice, HoldCo shall afford to the officers, employees,
accountants, counsel, advisors and other representatives and agents of Annaly
(the “Annaly Representatives”) reasonable access (with reasonable prior notice,
and during regular business hours) to all premises, records, databases, source
code, books, Contracts, commitments, reports of examination, documents and other
information (however stored) (including materials filed or furnished by HoldCo
with any Governmental Authority with respect to compliance with Applicable Law)
with respect to the Business as the Annaly Representatives may reasonably
request. HoldCo shall also make available to the Annaly Parties and the Annaly
Representatives the appropriate individuals for discussion of its business,
properties and personnel as the Annaly Parties and/or the Annaly Representatives
may reasonably request. No investigation by the Annaly Parties or the Annaly
Representatives prior to or after the date hereof shall diminish, obviate or
cure any breach of any representation, warranty, covenant or agreement contained
in this Agreement or otherwise affect Annaly Sub’s rights under Articles 8 and
9. Without limiting the foregoing, HoldCo shall promptly provide (i) all
financial and operating data and other information concerning HoldCo and the
Manager Entities as may be reasonably requested by the Annaly Parties or the
Annaly Representatives, including,

 

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to the extent prepared, promptly after their preparation, financial reports
prepared for Manager management, and interim financial statements of Manager,
and (ii) access for the Annaly Parties and Annaly’s accountants to all work
papers relating to HoldCo and the Manager Entities in connection with any of the
foregoing.

(b)    Between the date hereof and the Closing Date, HoldCo shall provide to the
Annaly Parties, no later than twenty (20) calendar days after the last day of
each calendar month, an unaudited balance sheet of Manager as of the last day of
such calendar month, the related unaudited statement of earnings, and the
general ledger account of Manager for such calendar month.

(c)    From and after the Closing Date, HoldCo shall, and shall cause their
Affiliates and their respective officers, managers, directors, employees and
agents to, keep confidential and not use in any manner, any and all Confidential
Information related to Manager and its assets (tangible and intangible),
employees, finances, business and operations. The foregoing shall not preclude
HoldCo or such persons from (i) disclosing such Confidential Information if
compelled to disclose the same by judicial or administrative process or by other
requirements of any Applicable Law (subject to the following provisions of this
Section 7.4(c)), (ii) discussing or using such Confidential Information if the
same hereafter is in the public domain (other than as a result of a breach of
this Agreement) or (iii) discussing or using such Confidential Information if
the same is acquired from a Person that is not known to HoldCo to be under an
obligation to keep such information confidential. If HoldCo or any Affiliate is
requested or required (by oral questions, interrogatories, requests for
information or documents in legal, administrative, arbitration or other formal
proceedings, subpoena, civil investigative demand or other similar process) to
disclose any such Confidential Information, HoldCo or such Affiliate thereof
shall promptly notify the Annaly Parties of any such request or requirement so
that the Annaly Parties may seek a protective order or other appropriate remedy
or waive compliance with the provisions of this Section 7.4(c). If, in the
absence of a protective order or other remedy or the receipt of a waiver by
Annaly or Annaly Sub, HoldCo or any Affiliate thereof is required to disclose
such information, HoldCo or such Affiliate, without Liability hereunder, may
disclose that portion of such information which HoldCo or such Affiliate is
legally required to disclose; provided, that HoldCo or such Affiliate shall
exercise their best efforts to obtain reliable assurance that confidential
treatment will be accorded any such information so disclosed.

Section 7.5    Regulatory Matters; Third Party Consents.

(a)    The Parties shall, and shall cause their respective Affiliates to,
cooperate with each other and use their reasonable best efforts to as promptly
as practicable after the date hereof prepare and file, or cause to be prepared
and filed, all necessary documentation to effect all applications, notices,
petitions and filings with, and to obtain as promptly as practicable after the
date hereof all permits, consents, approvals, waivers and authorizations of, all
third parties and Governmental Authorities that are necessary or advisable to
timely consummate the transactions contemplated hereby. All such third party
consents, waivers, approvals and notices shall be in writing and in form and
substance reasonably satisfactory to the Parties, and executed originals of such
consents, waivers and approvals shall be made available to each Party for
inspection promptly after receipt thereof, and copies of such notices shall be
made available to each Party promptly after the making thereof. The Parties
agree to take all reasonable steps necessary to satisfy any conditions or
requirements imposed by any Governmental Authority in connection with the
consummation of the transactions contemplated hereby. Each Party hereto (the
“Reviewing Party”) will have the right to review in advance, and the other Party
(the “Filing Party”) will consult with the Reviewing Party on, all the
information relating to the Reviewing Party and its Affiliates that appears in
any filing or written materials submitted by the Filing Party to any
Governmental Authority

 

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in connection with the transactions contemplated hereby. The Parties hereto
agree that they will keep the other Parties apprised in a timely manner of the
status of matters relating to completion of the transactions contemplated
hereby.

(b)    Each Party shall promptly advise the other Party upon receiving any
communication from any Governmental Authority relating to the transactions
contemplated hereby or otherwise materially affecting its ability to timely
consummate the transactions contemplated hereby.

Section 7.6    Further Assurances. Each Party shall, and shall cause its
Affiliates to, at the request of any other Party, execute and deliver to the
requesting Party such further customary instruments and take such other actions
as may be reasonably necessary or appropriate in order to confirm or carry out
the provisions of this Agreement.

Section 7.7    Notification of Certain Matters. Until the Closing, the
Contributors and the Annaly Parties shall promptly notify the other Party in
writing of the occurrence of any event of which it has knowledge that would
reasonably likely result in any of the conditions set forth in Article 8 of this
Agreement becoming incapable of being satisfied.

Section 7.8    Public Announcements. On or prior to the Closing, no Party or any
of its respective Affiliates will make any press release, public statement or
public announcement with respect to this Agreement or any of the transactions
contemplated hereby without the prior written consent of the chair of the Annaly
Board of Directors and HoldCo; provided, that Annaly and/or HoldCo may make any
press release, public statement or public announcement which the chair of the
Annaly Board of Directors and/or HoldCo, as applicable, determine is required by
Applicable Law, stock listing requirements or rating agency arrangements, in
which case Annaly and/or the Contributors, as applicable, shall use commercially
reasonable efforts to consult with Annaly and/or the Contributors, as the case
may be, regarding the contents thereof prior to issuing any such press release
or making any such public statement or public announcement.

Section 7.9    Contributor Transaction Expenses; No Liability. From and after
the Closing, none of Annaly, any Affiliate of Annaly (including Annaly Sub),
ALP, OpCo Holdings, AMH or Manager shall have any Liability as a result of or
arising out of any (a) Contributor Transaction Expenses or (b) existing
Indebtedness of the Contributors or their Affiliates. Notwithstanding the
forgoing, if the Parties mutually agree, the Annaly Parties shall be permitted
to satisfy the expenses or other obligations of ALP, OpCo Holdings, AMH or
Manager prior to Closing.

Section 7.10    Delivery of Company Records. At or before the Closing, HoldCo
shall deliver or cause to be delivered to Annaly or its designee true, correct
and complete copies of all minute books of all meetings of members, directors
and committees of the foregoing, unanimous or other consents, Manager seals,
ledgers, true, correct and complete copies of the Organizational Documents and
other similar records and items in HoldCo’s possession reasonably requested by
Annaly from the Contributors.

Section 7.11    Contribution of Contributed Equity Interests. At Closing, HoldCo
shall cause the OpCo Holdings Members to contribute and assign the Contributed
Equity Interests owned by the OpCo Holdings Members to Annaly Sub pursuant
appropriate instruments of transfer as contemplated in Section 8.2(g); provided
that, to the extent HoldCo has not obtained or effected the foregoing prior to
Closing after using reasonable best efforts, HoldCo may cause the Contributed
Equity Interests owned by the OpCo Holdings Members to be contributed and
assigned to Annaly Sub pursuant to an amendment or modification to the operating
agreement of HoldCo determined in good faith by HoldCo to be appropriate or
necessary to effect such contribution and assignment or through other means
permitted

 

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by law and available to HoldCo, in its capacity as “Manager” of OpCo Holdings,
without consent of any of the OpCo Holdings Members, in each case as may be
mutually agreed by Annaly and HoldCo acting in good faith.

ARTICLE 8

CONDITIONS

Section 8.1    Conditions to Each Party’s Obligations. The respective
obligations of each Party to consummate the transactions contemplated hereby
shall be subject to the satisfaction or waiver at or prior to the Closing of the
condition that no temporary restraining order, preliminary or permanent
injunction or other Order (whether temporary, preliminary or permanent) issued
by any Governmental Authority of competent jurisdiction or other legal restraint
or prohibition shall be in effect, and no Applicable Law shall be enacted,
entered or enforced, in each case that prevents the consummation of the
transactions contemplated hereunder on the same terms and conferring on the
Annaly Parties all the rights and benefits as contemplated herein.

Section 8.2    Additional Conditions to Obligations of the Annaly Parties. The
obligations of the Annaly Parties to consummate the transactions contemplated by
this Agreement shall also be subject to the satisfaction or waiver at or prior
to the Closing of the following conditions:

(a)    Representations and Warranties. (i) Each of the representations and
warranties made by HoldCo, both in its own capacity and on behalf of the Manager
Entities and the HoldCo Members, the Contributors and Manager in this Agreement,
other than the Manager Fundamental Representations, that are qualified as to
materiality (including the words “material” or “Manager Material Adverse
Effect”) shall be true and correct, and those not so qualified shall be true and
correct in all material respects, as of the date hereof and as of the Closing
Date as if made on and as of the Closing Date except, in each case, to the
extent that such representations and warranties refer specifically to an earlier
date, in which case they shall be true and correct as of such date, and
(ii) each of the Manager Fundamental Representations shall be true and correct
as of the date hereof and as of the Closing Date as if made on and as of the
Closing Date, except to the extent that such representations and warranties
refer specifically to an earlier date, in which case such representations and
warranties shall be true and correct as of such date.

(b)    Agreements and Covenants. HoldCo, both in its own capacity and on behalf
of the Manager Entities and the Contributors, shall have performed and complied
in all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by them on or prior to the Closing
Date.

(c)    Officer’s Certificate. Annaly shall have received a certificate, dated as
of the Closing Date, as to the fulfillment of the conditions in Sections 8.2(a)
and 8.2(b) signed by a duly authorized officer of HoldCo, which certificate
shall have the effect of HoldCo (both on behalf of itself and on behalf of the
other Contributors and the Manager Entities) making its representations and
warranties under this Agreement as of the Closing Date (other than such
representations that are made as of a specified date, which shall be remade at
the Closing Date as of such specified date).

(d)    No Governmental Restriction, Etc. There shall not be any pending or
threatened Claim asserted by any Governmental Authority (i) challenging or
seeking to restrain or prohibit the consummation of the transactions
contemplated by this Agreement or seeking to obtain from Annaly

 

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or any of its Subsidiaries or Affiliates any damages in connection with this
Agreement, or (ii) seeking to prohibit or limit the ownership, operation or
conduct by Annaly or any of its Subsidiaries or Affiliates of any significant
portion of the business or assets of Manager, Annaly or any of its Subsidiaries
or Affiliates, or challenging or seeking to dispose of or hold separate any
portion of the business or assets of Manager, Annaly or any of their respective
Subsidiaries or Affiliates, in each case, as a result of the transactions
contemplated by this Agreement.

(e)    Approvals, Consents, Etc. The Parties shall have delivered all notices,
and Annaly shall have received any and all approvals, consents, waivers or
confirmations, required or deemed advisable by Annaly from third parties
relating to the Agreement or any of the transactions contemplated hereby,
including but not limited to such approvals, consents, waivers or confirmations
that will allow the ongoing operations of Manager from and after the Closing
Date as such operations are conducted as of the date of this Agreement and the
Closing, in form and substance satisfactory to Annaly, and no approval, consent,
waiver, confirmation, or notices shall contain any terms or conditions that
would materially restrict or limit the ongoing operations of Manager from and
after the Closing Date as such operations are conducted as of the date of this
Agreement and the Closing.

(f)    No Manager Material Adverse Effect. There shall not have occurred any
fact, event, change, development, circumstance or effect which, individually or
in the aggregate, has had or would reasonably be expected to have a Manager
Material Adverse Effect.

(g)    Delivery of Assignments. The Annaly Parties shall have received duly
executed assignments or other appropriate instruments of transfer with respect
to the Contributed Equity Interests or other instruments of transfer reasonably
acceptable to the Annaly Parties sufficient to effect valid and effective
transfer the Contributed Equity Interests, duly executed by each Contributor and
each OpCo Holdings Member with respect to itself; provided that, to the extent
permitted by Section 7.11, this condition may be satisfied with respect to the
Contributed Equity Interests held by the OpCo Holdings Members by receipt of
duly executed and effective documentation evidencing the valid and effective
transfer of such Contributed Equity Interests pursuant to a method permitted by
Section 7.11.

(h)    AMCO Retirement Plan. The AMCO Retirement Plan shall have been terminated
without obligations for future payments and the Annaly Parties shall have
received confirmation of such termination.

Section 8.3    Additional Conditions to Obligations of the Contributors. The
obligation of the Contributors to consummate the transactions contemplated by
this Agreement shall also be subject to the satisfaction or waiver at or prior
to the Closing of the following conditions:

(a)    Representations and Warranties. (i) Each of the representations and
warranties made by the Annaly Parties in this Agreement, other than the Annaly
Fundamental Representations, that are qualified as to materiality (including the
words “materiality”) shall be true and correct, and those not so qualified shall
be true and correct in all materials respects, as of the date hereof and as of
the Closing Date as if made on and as of the Closing Date except, in each case,
to the extent that such representations and warranties refer specifically to an
earlier date, in which case they shall be true and correct as of such date and
(ii) each of the Annaly Fundamental Representations shall be true and correct as
of the date hereof and as of the Closing Date as if made on and as of the
Closing Date, except to the extent that any such representations and warranties
refer specifically to an earlier date, in which case such representations and
warranties shall be true and correct as of such date.

 

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(b)    Agreements and Covenants. The Annaly Parties shall have performed and
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it on or prior to the Closing
Date.

(c)    Officer’s Certificate. The Contributors shall have received a
certificate, dated as of the Closing Date, as to the fulfillment of the
conditions in Sections 8.3(a) and 8.3(b) signed by duly authorized officers of
Annaly and Annaly Sub, respectively, which certificate shall have the effect of
Annaly and Annaly Sub making their respective representations and warranties
under this Agreement as of the Closing Date (other than such representations
that are made as of a specified date, which shall be remade at the Closing Date
as of such specified date).

(d)    Continued Employment. Annaly shall have offered employment or continued
employment to all employees of the Manager and Annaly set forth on Schedule 2
(to the extent such employees are still employed by the Manager or Annaly at the
Closing) on terms and conditions as set forth on Exhibit B, it being understood
that Schedule 2 will be updated at Closing to include any such employees hired
by the Manager following the date hereof not in violation of Section 7.1.

(e)    Retention and Severance Policy. Annaly shall have adopted an employee
retention and severance policy as mutually agreed between the parties (the
“Employee Retention and Severance Policy”), pursuant to which Annaly will
provide certain standard benchmarked severance protections for all employees of
the Manager and Annaly set forth on Schedule 2 (excluding any person subject to
an individual severance agreement with Annaly) for termination without cause
following the Closing Date.

ARTICLE 9

TERMINATION, AMENDMENT AND WAIVER

Section 9.1    Termination. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Closing:

(a)    By mutual written consent of the Parties;

(b)    By either Annaly or HoldCo’s board of managers if the Closing shall not
have occurred by September 30, 2020 (the “Outside Date”) for any
reason; provided, however, that the right to terminate this Agreement under
this Section 9.1(b) shall not be available to any Party whose action or failure
to act has been the cause of or resulted in the failure of the Closing to occur
on or before the Outside Date and such action or failure to act constitutes a
breach of this Agreement;

(c)    By Annaly, if the Annaly Parties are not in breach of their respective
obligations under this Agreement, and if at any time there has been a breach on
the part of the Manager Entities or the Contributors such that one of the
conditions set forth in Section 8.2 would not be satisfied (treating such time
as if it were the Closing Date for purposes of this Section 9.1(c)), provided,
that if such breach is curable by any Manager Entity or any Contributor, then
Annaly may not terminate this Agreement under this Section 9.1(c) until the
earlier of the Outside Date and thirty (30) days after delivery of written
notice from Annaly to the Manager Entities and the Contributors of such breach,
provided that the Manager Entities and the Contributors continue to exercise
commercially reasonable efforts to cure such breach; or

 

25

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(d)    By HoldCo’s board of managers if the Contributors are not in breach of
their respective obligations under this Agreement, and if at any time there has
been a breach on the part of Annaly or Annaly Sub such that one of the
conditions set forth in Section 8.3 would not be satisfied (treating such time
as if it were the Closing Date for purposes of this Section 9.1(d)), provided,
that if such breach is curable by Annaly, then HoldCo’s board of managers may
not terminate this Agreement under this Section 9.1(d) until the earlier of the
Outside Date and thirty (30) days after delivery of written notice from the
Contributors to Annaly of such breach, provided that Annaly continues to
exercise commercially reasonable efforts to cure such breach.

Section 9.2    Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 9.1 (which termination will be effective
immediately upon the delivery of written notice of the terminating Party to the
other Parties hereto), (i) this Agreement (other than this Section 9.2 and
Sections 7.8, 11.1, 11.2, and 11.5 through 11.12, which shall survive such
termination) will forthwith become void and be of no further force and effect,
and there will be no Liability on the part of Annaly, Annaly Sub, the
Contributors, the Manager Entities or any of their respective Affiliates,
officers, managers or directors to the other and all rights and obligations of
any Party hereto will cease, except that nothing herein will relieve any Party
from Liability for any breach prior to termination of this Agreement in
accordance with its terms, of any representation, warranty, covenant or
agreement contained in this Agreement; and (ii) the Management Agreement shall
remain in full force and effect as if it had not been amended by Article 3
hereto.

ARTICLE 10

TAX MATTERS

Section 10.1    Tax Allocation. HoldCo Members (both in their capacity as
members of HoldCo and as limited partners in ALP) and OpCo Holdings Members
shall be responsible for all income Tax on income, gain, loss, credit or
deduction allocated to them by HoldCo and ALP or OpCo Holdings, as applicable,
for all taxable periods that end on or before the Closing Date, it being
understood that the last day of the taxable year of each of HoldCo, ALP and OpCo
Holdings shall end for income tax purposes on the Closing Date at the effective
time; provided that to the extent that any such taxable year does not end on the
Closing Date for any state or local income tax purposes, such income, gain,
loss, credit or deduction will be allocated to the period ending on the Closing
Date using a “closing of the books” method.

Section 10.2    Returns and Payments. The Contributors and the Manager Entities
shall prepare and cause the filing in a timely manner (taking into account
timely extensions) of all Tax Returns for HoldCo and the Manager Entities that
are due on or before the Closing Date in a manner consistent with past practices
employed without making or changing any accounting methods, elections and
conventions. Following the Closing, Annaly shall prepare and file or cause to be
prepared and filed in a timely manner all Tax Returns of HoldCo and the Manager
Entities that are due after the Closing Date with respect to Tax periods
beginning before the Closing Date (“Pre-Closing Date Tax Returns”). Pre-Closing
Date Tax Returns shall be prepared, and each item thereon treated, in a manner
consistent with past practices employed (except to the extent that Annaly’s
counsel or outside accounting firm determines that such treatment is not more
likely than not correct) without making or changing any accounting methods,
elections and conventions. A representative of the HoldCo Members and OpCo
Holdings Members, which shall initially be Anthony Green, shall have the right
to review any such Tax Return thirty (30) days prior to the filing of such Tax
Return, and the Annaly Parties and such representative shall use good faith
efforts to resolve reasonable comments to such Tax Return from such
representative. Annaly shall use

 

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commercially reasonable efforts to provide any IRS Forms K-1 of HoldCo or OpCo
Holdings to the HoldCo Members or OpCo Holdings Members, as applicable, within
sixty (60) days after the end of the calendar year in which the Closing occurs.

Section 10.3    Contests. In the case of an audit or administrative or judicial
proceeding of HoldCo or the Manager Entities that relates to taxable periods
ending on or before the Closing Date, the Contributors shall have the right, at
the Contributors’ expense, to participate in such audit or proceeding to the
extent that it could potentially result in an adjustment to any items of income,
loss, credit, deduction, or gain from such entity previously allocated to a
HoldCo Member or OpCo Holdings Member, and Annaly shall use commercially
reasonable efforts to obtain the prior written consent of HoldCo (which consent
shall not be unreasonably withheld or delayed) before entering into any
settlement of a claim or ceasing to defend such claim that results in an
adjustment to any item of income, loss, credit, deduction, or gain previously
allocated to a HoldCo Member or OpCo Holdings Member.

Section 10.4    Cooperation and Exchange of Information. The Parties shall each
provide the others with such cooperation and information as any of them
reasonably may request of the others in filing any Tax Return, amended Tax
Return or claim for refund, determining a Liability for Taxes or a right to a
refund of Taxes, participating in or conducting any audit or other proceeding in
respect of Taxes or making representations to or furnishing information to
parties subsequently desiring to purchase Manager or a part of the business
acquired from the Contributors by Annaly Sub. Such cooperation and information
shall include but is not limited to providing copies of relevant Tax Returns or
portions thereof, together with accompanying schedules, related work papers,
opinions, memorandums, analyses, records and other documents relating to rulings
or other determinations by Tax authorities. The Contributors and Annaly shall
(and Annaly after the Closing will cause the Manager Entities to) retain all Tax
Returns, schedules and work papers, opinions, memorandums, analyses, records and
other documents in their possession relating to Tax matters of Manager, if any,
for the taxable period that includes the Closing Date and for all prior taxable
periods until the later of (i) the expiration of the statute of limitations of
the taxable periods to which such Tax Returns and other documents relate, or
(ii) six (6) years following the due date (without extension) for such Tax
Returns. Any information obtained under this Section 10.4 shall be kept
confidential except as may be otherwise necessary in connection with the filing
of Tax Returns or claims for refund or in conducting an audit or other
proceeding.

ARTICLE 11

MISCELLANEOUS

Section 11.1    Fees and Expenses. Except as specifically provided to the
contrary in this Agreement, all costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
Party incurring such expenses, whether or not the Closing is consummated.

Section 11.2    Notices. All notices or other communications which are required
or permitted hereunder shall be in writing and sufficient if delivered
personally or sent by nationally recognized overnight courier or by registered
or certified mail, postage prepaid, return receipt requested, or by facsimile,
telecopier or e-mail, as follows:

 

(a)    If to Annaly, Annaly Sub, or, after the Closing, to the Manager Entities,
to:    Annaly Capital Management, Inc.    1211 Avenue of the Americas    New
York, NY 10036    Attention: Chief Legal Officer

 

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   with a copy (which shall not constitute notice) to:    Hogan Lovells US LLP
   Columbia Square    555 Thirteenth Street, N.W.    Washington, DC 20004   
Attention: Michael E. McTiernan (b)    If to the Contributors or the Manager
Entities (prior to the Closing), to:    Annaly Management Company LLC    1211
Avenue of the Americas    New York, NY 10036    Attention: Chief Executive
Officer    with a copy (which shall not constitute notice) to:    Hunton Andrews
Kurth LLP    2200 Pennsylvania Avenue NW    Washington, DC 20037    Attention:
Robert K. Smith

or to such other address as the Party to whom notice is to be given may have
furnished to the other Parties in writing in accordance herewith. All such
notices or communications shall be deemed to be received (i) in the case of
personal delivery, nationally recognized overnight courier or registered or
certified mail, on the date of such delivery, and (ii) in the case of facsimile
or telecopier or electronic mail, upon receipt of the appropriate facsimile or
telecopier confirmation.

Section 11.3    Amendment. This Agreement may be amended to the fullest extent
permitted by Applicable Law by the Parties at any time prior to the Closing.
This Agreement may not be amended except by an instrument in writing signed by
all of the Parties.

Section 11.4    Waiver. At any time prior to the Closing, Annaly, on the one
hand, and the Contributors and Manager Entities, on the other hand, may, to the
extent permitted by Law, extend the time for the performance of any of the
obligations or other acts required by the other Party hereunder, waive any
inaccuracies in the representations and warranties made to such Party and
contained in this Agreement or in any document delivered pursuant hereto or
waive compliance with any of the agreements or conditions for the benefit of
such Party contained in this Agreement. Any such extension or waiver shall be
valid only if set forth in an instrument in writing signed by the Party or
Parties to be bound thereby. The waiver of any condition based on the accuracy
of any representation or warranty, or on the performance of or compliance with
any covenant or obligation, or the waiver of the fulfillment of any such
condition, shall not affect the right to any remedy based on such
representation, warranty, covenant or obligation.

 

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Section 11.5    Severability. If any term or other provision of this Agreement,
or the application thereof, is invalid, illegal, void or incapable of being
enforced by any Applicable Law, or public policy, all other conditions and
provisions of this Agreement shall nevertheless remain in full force and effect
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner adverse to any Party. Upon such
determination that any term or other provision is invalid, illegal, void or
incapable of being enforced, the Parties shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the Parties as closely as
possible in an acceptable manner to the end that transactions contemplated
hereby are fulfilled to the extent possible.

Section 11.6    Entire Agreement. This Agreement (including all exhibits,
annexes and schedules hereto) and other documents and instruments delivered
pursuant hereto or thereto constitute the entire agreement and supersede all
prior representations, agreements, understandings and undertakings, both written
and oral, among the Parties, or any of them, with respect to the subject matter
hereof and thereof and no Party is relying on any prior oral or written
representations, agreements, understandings or undertakings with respect to the
subject matter hereof and thereof.

Section 11.7    Assignment. This Agreement shall not be assigned by operation of
Applicable Law or otherwise, except that (a) Annaly may assign all or any of its
rights hereunder to any Affiliate; provided, that no such assignment shall
relieve the assigning Party of its obligations hereunder, and (b) from and after
the Closing, Annaly may assign all of its rights and obligations hereunder to a
Person that directly or indirectly acquires all of the equity interests,
substantially all of the assets, or all or part of the business, of Annaly, so
long as such Person assumes this Agreement, in writing, and agrees to be bound
by and to comply with all of the terms and conditions hereof.

Section 11.8    Parties in Interest. Subject to Section 11.7 hereof, this
Agreement shall be binding upon and inure solely to the benefit of each Party
and each of their respective heirs, executors, personal representatives,
successors and permitted assigns, and nothing in this Agreement, express or
implied, is intended to or shall confer upon any other Person any right, benefit
or remedy of any nature whatsoever under or by reason of this Agreement.

Section 11.9    Failure or Indulgence Not Waiver; Remedies Cumulative. No
failure or delay on the part of any Party in the exercise of any right hereunder
will impair such right or be construed to be a waiver of, or acquiescence in,
any breach of any representation, warranty or agreement herein, nor will any
single or partial exercise of any such right preclude other or further exercise
thereof or of any other right. All rights and remedies existing under this
Agreement are cumulative to, and not exclusive of, any rights or remedies
otherwise available.

Section 11.10    Governing Law; Jurisdiction.

(a)    This Agreement and all disputes, controversies or claims relating to,
arising out of or under, or in connection with this Agreement and the
transactions contemplated hereby, including the negotiation, execution and
performance hereunder, shall be governed by, and construed in accordance with,
the internal substantive laws of the State of New York, excluding, to the
greatest extent a New York court would permit, the application of the laws of
any other jurisdiction. Each of the Parties irrevocably and unconditionally
submits to the sole and exclusive personal jurisdiction of (i) the courts of the
State of New York, and (ii) the United States District Court for the Southern
District of New York (together with appropriate appellate courts therefrom, the
“New York Courts”), for the purposes of any dispute, claim, controversy, suit,
action or other proceeding arising out of this Agreement or any transaction
contemplated hereby or thereby. Each of the Parties hereto further agrees and
covenants (A) to

 

29

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commence any such action, suit or proceeding either in the United States
District Court for the Southern District of New York or, if such suit, action or
other proceeding may not be brought in such court for jurisdictional reasons, in
the courts of the State of New York and (B) to not attempt to deny or defeat
such personal jurisdiction by motion or other request for leave from any such
court. Each of the Parties hereby irrevocably and unconditionally consents to
service of any process, summons, notice or document by U.S. prepaid certified or
registered mail to such Party’s respective address set forth above in
Section 11.2 and agrees that such service shall be effective service of process
for any action, suit or proceeding in the New York Courts with respect to any
matters to which it has submitted to jurisdiction in this Section 11.10. Nothing
herein shall be deemed to limit or prohibit service of process by any other
manner as may be permitted by Applicable Law. Each of the Parties irrevocably
and unconditionally waives any objection to the laying of venue of any action,
suit or proceeding arising out of this Agreement or the transactions
contemplated hereby in the New York Courts, and hereby further irrevocably and
unconditionally waives and agrees not to plead or claim in any such court that
any such action, suit or proceeding brought in any such court has been brought
in an inconvenient forum.

(b)    Each of the Parties hereto hereby agrees that a final judgment in any
dispute, claim, controversy, suit, action or other proceeding arising out of
this Agreement or any transaction contemplated hereby or thereby shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by Applicable Law.

(c)    EACH PARTY HEREBY IRREVOCABLY WAIVES TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE ACTIONS OF SUCH PARTY IN THE NEGOTIATION,
ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF. EACH OF THE PARTIES HERETO
(A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THAT FOREGOING WAIVER AND (B) ACKNOWLEDGES
THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY BY, AMONG OTHER THINGS, THE
MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 11.10(c).

Section 11.11    Enforcement of Agreement; Specific Performance. The Parties
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
Parties shall be entitled to an injunction to prevent breaches of this Agreement
and to enforce specifically the terms and provisions of this Agreement in the
New York Courts, this being in addition to any other remedy to which such Party
is entitled at law or in equity.

Section 11.12    Counterparts. This Agreement may be executed and delivered in
one or more counterparts, and by the different Parties hereto in separate
counterparts, each of which when executed and delivered shall be deemed to be an
original but all of which taken together shall constitute one and the same
agreement. Any facsimile or electronically transmitted copies (including using
portable document format (“.pdf”)) hereof or signatures hereon shall, for all
purposes, be deemed originals.

Section 11.13    Due Diligence Materials. For purposes of this Agreement, the
phrase “provided to Annaly” shall mean the delivery by the Manager Entities of
the various materials, documents and information produced by the Manager
Entities throughout Annaly’s due diligence review process to Annaly by e-mail
delivery, up until two (2) Business Days prior to the date hereof.

 

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Section 11.14    Time is of the Essence. Time is of the essence in this
Agreement. Whenever this Agreement refers to a number of days, such number shall
refer to calendar days unless Business Days are specified. Whenever any action
must be taken hereunder on or by a day that is not a Business Day, then such
action may be validly taken on or by the next day that is a Business Day.
Relative to the determination of any period of time, “from” means “including and
after,” “to” means “to but excluding” and “through” means “through and
including.”

Section 11.15    Rules of Interpretation. All terms defined in this Agreement
shall have the defined meanings when used in any certificate or other document
made or delivered pursuant hereto unless otherwise defined therein. All
accounting terms used herein and not expressly defined herein shall have the
meanings given to them under, and all accounting determinations hereunder shall
be made in accordance with, GAAP. Unless otherwise specified, all references
herein to “Articles,” “Sections,” “Exhibits,” “Annexes” or “Schedules” are to
Articles, Sections, Exhibits, Annexes or Schedules of this Agreement. The words
“include,” “includes” and “including” shall be deemed to be followed by the
phrase “without limitation.” The words “hereof,” “herein,” “hereunder” and
“herewith” and words of similar import shall, unless otherwise stated, be
construed to refer to this Agreement as a whole and not to any particular
provision of this Agreement. “Shall” and “will” mean “must,” and shall and will
have equal force and effect and express an obligation. “Writing,” “written” and
comparable terms refer to printing, typing, and other means of reproducing in a
visible form. The table of contents and headings, titles and captions contained
in this Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement. References herein to this
Agreement mean this Agreement as from time to time amended, modified or
supplemented, including by waiver or consent. Any agreement or instrument
defined or referred to herein or in any agreement or instrument that is referred
to herein means such agreement or instrument as from time to time amended,
modified or supplemented, including by waiver or consent. Any reference to an
Applicable Law herein shall include any amendment thereof or any successor
thereto and any Regulations promulgated thereunder. References to a Person are
also to its permitted successors and assigns. Each Party acknowledges that this
Agreement was negotiated by it with the benefit of representation by legal
counsel, and any rule of construction or interpretation otherwise requiring this
Agreement to be construed or interpreted against any Party shall not apply to
any construction or interpretation hereof. References in this Agreement to
“consistent with past practice” shall mean consistent with past practice
including as to time, frequency and amount.

[The remainder of this page is intentionally left blank.]g

 

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IN WITNESS WHEREOF, Annaly, Annaly Sub and the Contributors have executed and
delivered this Internalization Agreement or caused this Internalization
Agreement to be executed and delivered by their respective officers thereunto
duly authorized as of the date first written above.

 

ANNALY: Annaly Capital Management, Inc. By:  

/s/ Thomas Hamilton

Name:   Thomas Hamilton Title:   Chair of the Board of Directors ANNALY SUB:
AMCO Acquisition LLC By:   Annaly Capital Management, Inc., its sole member By:
 

/s/ Thomas Hamilton

Name:   Thomas Hamilton Title:   Chair of the Board of Directors

[Signature Page to Internalization Agreement]

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CONTRIBUTORS: AMCO Holding Management Company LLC By:  

/s/ Glenn A. Votek

Name:   Glenn A. Votek Title:   Authorized Officer HoldCo Members  

/s/ David Finkelstein

Name:   David Finkelstein  

/s/ Timothy Coffey

Name:   Timothy Coffey  

/s/ Anthony Green

Name:   Anthony Green  

/s/ Helen Walter Crossen

Name:   Helen Walter Crossen  

/s/ Glenn Votek

Name:   Glenn Votek

[Signature Page to Internalization Agreement]

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MANAGER ENTITIES: AMCO OpCo Holding Company LLC By:   AMCO Holding Management
Company LLC, its Manager By:  

/s/ Glenn A. Votek

Name:   Glenn A. Votek Title:   Authorized Officer AMCO LP Holding Company LP
By:   AMCO Holding Management Company LLC, its General Partner By:  

/s/ Glenn A. Votek

Name:   Glenn A. Votek Title:   Authorized Officer AMCO Manager Holdings LLC By:
  AMCO LP Holding Company LP, its Managing Member By:   AMCO Holding Management
Company LLC, its General Partner By:  

/s/ Glenn A. Votek

Name:   Glenn A. Votek Title:   Authorized Officer

[Signature Page to Internalization Agreement]

--------------------------------------------------------------------------------

Annaly Management Company LLC By:   AMCO Manager Holdings LLC, its sole Member
By:   AMCO LP Holding Company LP, its Managing Member By:   AMCO Holding
Management Company LLC, its General Partner By:  

/s/ Glenn A. Votek

Name:   Glenn A. Votek Title:   Authorized Officer

[Signature Page to Internalization Agreement]

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Exhibit A

DEFINITIONS

“Affiliate” means, with respect to any Person, any other Person that directly or
indirectly, through one or more intermediaries, Controls, is Controlled by or is
under common Control with such Person.

“Agreement” has the meaning set forth in the Preamble.

“ALP” has the meaning set forth in the Preamble.

“ALP Interests” has the meaning set forth in the Recitals.

“AMCO Retirement Plan” has the meaning set forth in Section 5.12(l).

“AMH” has the meaning set forth in the Recitals.

“AMH Equity Interests” has the meaning set forth in the Recitals.

“Applicable Law” means any domestic or foreign federal, state or local statute,
law (whether statutory or common law and including the Securities Laws),
ordinance, rule, administrative interpretation, regulation, order (including any
exemptive orders), writ, judgment or directive (including those of any
self-regulatory organization) applicable to or legally binding on any of the
Contributors, the Manager Entities, the Annaly Parties, or any of their
respective Affiliates, directors, employees or agents or other Person, as the
case may be.

“Annaly” has the meaning set forth in the Preamble.

“Annaly Board of Directors” means the members of the board of directors of
Annaly.

“Annaly Disclosure Letter” means the Annaly Disclosure Letter dated as of the
date hereof and delivered by the Annaly Parties to HoldCo simultaneously with
the signing of this Agreement.

“Annaly Fundamental Representations” means the representations and warranties
set forth in Sections 6.1, 6.2, and 6.3(a).

“Annaly Party” has the meaning set forth in the Preamble.

“Annaly Representatives” has the meaning set forth in Section 7.4(a).

“Annaly Sub” has the meaning set forth in the Preamble.

“Approvals” means all franchises, grants, authorizations, licenses,
registrations, permits, easements, consents, waivers, qualifications,
certificates, Orders, exemptions and other necessary approvals.

“Business” has the meaning set forth in the Preamble.

“Business Day” means any day other than a Saturday, Sunday or day on which banks
are permitted to close in the State of New York.

 

A-1

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“Claim” means any claim, suit, action, arbitration, mediation, cause of action,
complaint, charge, allegation, criminal prosecution, investigation, demand
letter, subpoena (or other formal request or demand), or proceeding, whether at
law or at equity, before or by any Governmental Authority, arbitrator, other
tribunal, or any other Person, and any information request from a Governmental
Authority.

“Closing” has the meaning set forth in Section 2.1.

“Closing Date” has the meaning set forth in Section 2.3.

“Code” means the U.S. Internal Revenue Code of 1986, as amended, from time to
time, and the Regulations promulgated and rulings issued thereunder.

“Compensation Committee” means the compensation committee of the Annaly Board of
Directors.

“Confidential Information” means any information (in whatever form, whether
written, oral, electronic or otherwise) concerning the businesses and affairs of
a Disclosing Party and all analyses, compilations, forecasts, studies or other
documents which contain or reflect any such information; provided, however, that
the term “Confidential Information” shall not include (a) information that is or
becomes publicly available other than as a direct or indirect result of
disclosure by a Receiving Party or its Representatives or (b) information that
becomes available to the Receiving Party on a non-confidential basis from a
source (other than such Disclosing Party or its Representatives) that, to the
knowledge of such Receiving Party, is not prohibited from disclosing such
information to such Receiving Party by any legal, contractual or fiduciary
obligation to such Disclosing Party.

“Consideration” has the meaning set forth in Section 2.2.

“Contract” means any contract, plan, undertaking, understanding, agreement,
purchase order, license, sublicense, consent, lease, note, mortgage or other
binding commitment, whether written or oral.

“Contributed Equity Interests” has the meaning set forth in the Recitals.

“Contribution” has the meaning set forth in Section 2.1.

“Contributor” has the meaning set forth in the Preamble.

“Contributor Transaction Expenses” means all out-of-pocket costs, fees and
expenses incurred at any time (whether or not invoiced) by or on behalf of the
Contributors in connection with this Agreement and the transactions contemplated
hereby, including fees and expenses of advisors and consultants (including
investment bankers, lawyers and accountants) arising out of, relating to or
incidental to the discussion, evaluation, negotiation and documentation of the
transactions contemplated hereby, and fees and costs related to the repayment of
any Indebtedness (including prepayment fees and penalties and any amounts
payable (including applicable Taxes) and any similar such amounts payable in
connection with this Agreement and the transactions contemplated hereby).

“Control” (including the terms “Controlled by” and “under common Control with”)
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management or policies of a Person, whether through the
ownership of stock or other equity or similar interests, as trustee or executor,
by Contract or credit arrangement or otherwise.

“Disclosing Party” means (i) with respect to Manager, the Manager or the
Contributors, and (ii) with respect to Annaly Sub, Annaly or Annaly Sub.

 

A-2

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“Employee Retention and Severance Policy” has the meaning set forth in
Section 8.3(e).

“ERISA” has the meaning set forth in Section 5.12(a).

“ERISA Affiliate” means, with respect to each Manager Entity, any trade or
business, whether or not incorporated, that together with such Manager Entity
is, or previously was, treated as a single employer under Section 414 of the
Code or Title IV of ERISA.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated by the SEC thereunder.

“External Management Proposal” has the meaning set forth in Section 7.3.

“Filing Party” has the meaning set forth in Section 7.5(a).

“GAAP” means generally accepted accounting principles in the United States.

“Governmental Authority” means any government or governmental or regulatory body
thereof, or political subdivision thereof, whether foreign, federal, state, or
local, or any agency, instrumentality or authority thereof, any multinational,
supra-national or quasi-governmental entity, body or authority, any regulatory
authority, any self-regulatory organization, any court, arbitration tribunal or
arbitrator (public or private) or any other entity exercising executive,
legislative, judicial, taxing, regulatory or policing powers or functions of or
pertaining to government (or any department, bureau or division thereof).

“Governmental Damages” means (i) any civil or criminal penalties or fines paid
or payable to a Governmental Authority, (ii) any restitution paid to a third
party, in each case, resulting from the (x) conviction (including as a result of
the entry of a guilty plea, a consent judgment or a plea of nolo contendere) of
Manager of a crime or (y) settlement with a Governmental Authority for the
purpose of closing a Governmental Investigation, or (iii) any injunctive relief
or requirement to alter business practices.

“Governmental Investigation” means an investigation by a Governmental Authority
the result of which may impose or demand Governmental Damages on or from
Manager.

“HoldCo” has the meaning set forth in the Preamble.

“HoldCo Disclosure Letter” means the HoldCo Disclosure Letter dated as of the
date hereof and delivered by HoldCo to the Annaly Parties simultaneously with
the signing of this Agreement.

“HoldCo Members” means the Persons named on Schedule 1.

“Indebtedness” of any Person means, without duplication, the following
obligations: (i) all obligations for borrowed money, including accrued but
unpaid interest thereon (ii) all obligations evidenced by bonds, debentures,
notes or other similar instruments (whether or not convertible), including
accrued but unpaid interest thereon, (iii) all obligations to pay the deferred
purchase price of property or services, (iv) all obligations as lessee that
would be required to be capitalized in accordance with GAAP, (v) all negative
balances in bank accounts and all overdrafts, (vi) all obligations under
indentures or arising out of any swap, option, derivative, hedging or similar
arrangement, (vii) all obligations in connection with any letter of credit,
banker’s acceptance, guarantee, surety, performance or appeal bond, or similar
credit transaction, (viii) all obligations under conditional sale or other title
retention agreements relating to any property purchased by such Person, (ix) all
underfunded or unfunded long-term Liability as of such time with respect to any
compensation plan and the long-term amount of any shortfall in payments to
unions for pension

 

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plans and medical plan contributions, (x) all obligations of others secured by a
Lien on property or assets owned or acquired by such Person, whether or not the
obligations secured thereby have been assumed, (xi) all obligations in respect
of prepayment premiums, penalties, breakage costs, “make whole amounts,” costs,
expenses and other payment obligations that would arise if all Indebtedness
referred to in clauses (i) through (x) above were prepaid (or, in the case of
any swap, option, derivative, hedging or similar arrangement, unwound and fully
settled) in full at such time and (xii) to the extent any item of such
Indebtedness referred to in clauses (i) through (xi) above cannot be repaid on
such time (e.g., as a result of an irrevocable advance notice requirement), all
interest on and other accretion of such Indebtedness that occurs between such
time and the earliest time that repayment may occur (e.g., if notice were
delivered on such time).

“Intellectual Property” means all U.S. and foreign patents, provisional and
non-provisional patent applications, invention disclosures, trademarks, trade
names, service marks, trade dress, copyrights and any applications therefor,
domain names, moral rights, mask works, schematics, technology, social media
accounts and platforms, including log-in credentials, associated content and
material, user data and analytics, and all other associated rights, know-how,
Trade Secrets, customer lists, technical information, technical data, databases,
data collections, process technology, plans, drawings and blue prints,
inventions, improvements thereto, ideas, algorithms, devices, systems,
processes, computer software programs and applications (source code and object
code form), tangible or intangible proprietary information, and any other types
of intellectual property.

“IRCA” means the Immigration Reform and Control Act of 1986.

“IRS” has the meaning set forth in Section 5.12(b).

“Knowledge” means, (i) in the case of HoldCo, the actual knowledge of a
particular fact or other matter of each of David Finkelstein, Timothy Coffey,
Anthony Green, Helen Walter Crossen and Glenn Votek, and (ii) in the case of the
Annaly Parties, the actual knowledge of a particular fact or other matter of the
Annaly Board of Directors.

“Liability” means any Indebtedness, liability or obligation (whether direct or
indirect, whether known or unknown, whether asserted or unasserted, whether
absolute or contingent, whether accrued or unaccrued, whether matured or
unmatured, whether determined or determinable, whether disputed or undisputed,
whether liquidated or unliquidated, whether due or to become due and whether in
contract, tort, strict liability or otherwise), including any liability for
Taxes.

“Lien” means any mortgage, pledge, security interest, encumbrance, lien
(statutory or otherwise), claim, conditional sale agreement, or charge of any
kind (including any agreement to give any of the foregoing); provided, however,
that the term “Lien” shall not include (i) statutory liens for Taxes, which are
not yet due and payable, (ii) statutory or common law liens to secure landlords,
lessors or renters under leases or rental agreements confined to the premises
rented, (iii) deposits or pledges made in connection with, or to secure payment
of, workers’ compensation, unemployment insurance, old age pension or other
social security programs mandated under Applicable Law, (iv) statutory or common
law liens in favor of carriers, warehousemen, mechanics and materialmen, to
secure claims for labor, materials or supplies and other like liens, and
(v) restrictions on transfer of securities imposed by applicable Securities
Laws.

“Management Agreement” has the meaning set forth in the Preamble.

“Manager” has the meaning set forth in the Preamble.

“Manager Balance Sheet” has the meaning set forth in Section 5.7(a).

 

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“Manager Benefit Plan” has the meaning set forth in Section 5.12(a).

“Manager Employees” has the meaning set forth in Section 3.1(b).

“Manager Entities” has the meaning set forth in the Preamble.

“Manager Equity Interests” has the meaning set forth in the Recitals.

“Manager Fundamental Representations” means the representations and warranties
set forth in Sections 4.1, 4.2, 4.3(a), 4.5, 4.10, 5.1, 5.2 and 5.3(a).

“Manager Material Adverse Effect” means any fact, event, change, development,
circumstance or effect that is, or would reasonably be expected to (a) be
materially adverse to the business, condition (financial or otherwise), assets,
liabilities, or results of operations of Manager, and/or (b) materially impair
or delay the ability of Manager to perform its obligations hereunder, except
that none of the following will be considered (either alone or in combination)
in determining whether a Manager Material Adverse Effect has occurred:
(i) general changes in the United States or global economic, financial market,
business or geopolitical conditions (except to the extent that such developments
have a disproportionate effect on the Manager), (ii) general changes in the
markets or industries in which the Manager conducts its business (except to the
extent that such changes have a disproportionate effect on the Manager), (iii)
any condition or event rising from or related to any former executive officers
of Annaly, (iv) any action or inaction by Manager that the chair of the Annaly
Board of Directors approves or consents to in writing or which is taken or not
taken in compliance with or in performance of this Agreement, (v) changes
arising from actions taken by Annaly including, without limitation, actions
taken at the request of the New CEO, (vi) changes in any generally applicable
Laws or generally applicable accounting regulations or principles or
interpretations thereof (except to the extent that such changes have a
disproportionate effect on the Manager), (vii) any change in the price or
trading volume of any of Annaly’s securities or other financial instruments, in
and of itself (provided that the facts or occurrences giving rise to or
contributing to such change that are not otherwise excluded from the definition
of “Manager Material Adverse Effect” may be taken into account in determining
whether there has been a Manager Material Adverse Effect), (viii) any outbreak
or escalation of hostilities or war or any act of terrorism, or any acts of God
or natural disasters (except to the extent that such changes have a
disproportionate effect on the Manager), (ix) the announcement of this Agreement
or (x) changes resulting from the execution of this Agreement and consummation
of the transactions contemplated hereby. Any fact, event, change, development,
circumstance, or effect shall not be deemed to have a Manager Material Adverse
Effect if such fact, event, change, development, circumstance or effect results
or arises from changes or conditions generally affecting the industry in which
Manager conducts its Business, except to the extent such fact, event, change,
development, circumstance or effect disproportionately affects (relative to
other participants in the industry in which Manager conducts its Business)
Manager.

“Manager Operating Committee” means the operating committee of Manager.

“Material Contracts” has the meaning set forth in Section 5.9(a).

“New CEO” has the meaning set forth in Section 7.2.

“New York Courts” has the meaning set forth in Section 11.10(a).

“Order” means any judgment, order, decision, writ, injunction, ruling or decree
of, or any settlement under the jurisdiction of, any Governmental Authority.

 

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“Organizational Documents” means the articles of incorporation or certificate of
formation, bylaws or operating agreement or other similar instruments of a
Person.

“OpCo Holdings” has the meaning set forth in the Preamble.

“OpCo Holdings Members” has the meaning set forth in the Preamble.

“OpCo Interests” has the meaning set forth in the Recitals.

“Outside Date” has the meaning set forth in Section 9.1(b).

“Parties” has the meaning set forth in the Preamble.

“Permitted Liens” means (a) Liens imposed by Applicable Law for Taxes not yet
due and payable or that are being properly contested, (b) statutory Liens of
landlords, (c) Liens of carriers, warehousemen, mechanics, materialmen,
landlords, repairmen, and other Liens imposed by Applicable Law or Contract
incurred in the ordinary course of business that are not overdue by more than
thirty (30) days or that are being properly contested, (d) pledges and deposits
made in the ordinary course of business in compliance with workers’
compensation, unemployment insurance and other social security laws or
regulations, (e) deposits to secure the performance of bids, trade contracts,
leases, statutory obligations, surety, indemnity and appeal bonds, performance
and return-of-money and fiduciary bonds and other obligations of a like nature,
in each case in the ordinary course of business, (f) easements, zoning
restrictions, rights-of-way, licenses, covenants, conditions, minor defects,
encroachments or irregularities in title and similar encumbrances on or
affecting any real property that do not secure any monetary obligations and do
not materially interfere with the ordinary conduct of the business at any real
property subject to such Liens, (g) any (i) interest or title of a lessor or
sublessor, or lessee or sublessee under any lease, (ii) restriction or
encumbrance that the interest or title of such lessor or sublessor, or lessee or
sublessee may be subject to or (iii) subordination of the interest of the lessee
or sublessee under such lease to any restriction or encumbrance referred to in
the preceding clause (ii), (h) Liens on goods held by suppliers arising in the
ordinary course of business for sums not yet delinquent or being contested in
good faith, if such reserve or other appropriate provision, if any, as shall be
required by GAAP shall have been made therefor and as long as such Lien remains
unperfected, (i) with respect to any real property in which either company owns
a leasehold estate, any defect or encumbrance caused by or arising out of the
failure to record the lease or a memorandum thereof in the applicable real
property records in the jurisdiction where such real property is located,
(j) the effect of any moratorium, eminent domain or condemnation proceedings and
(k) Liens as set forth in Exhibit A of the HoldCo Disclosure Letter.

“Person” means an individual, corporation, partnership, association, trust,
unincorporated organization, limited liability company, joint venture other
entity or group (as defined in Section 12(d)(3) of the Exchange Act).

“Pre-Closing Date Tax Returns” has the meaning set forth in Section 10.2.

“Proceedings” has the meaning set forth in Section 4.6(a).

“Projected Balance Sheet” has the meaning set forth in Section 2.4.

“Real Property” has the meaning set forth in Section 5.17(a).

 

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“Real Property Leases” means any leases, subleases, licenses, concessions or any
other Contracts to which Manager is a party granting to any Person any right to
possession, use occupancy or enjoyment of any of the Real Property or any
portion thereof.

“Receiving Party” means a Party or any Representative of such Party that
receives Confidential Information from a Disclosing Party.

“Registered IP” has the meaning set forth in Section 5.14(a).

“Regulation” means any rule, regulation, policy or interpretation of any
Governmental Authority having the effect of Law.

“Representatives” has the meaning set forth in Section 7.3.

“Reviewing Party” has the meaning set forth in Section 7.5(a).

“SEC” means the United States Securities and Exchange Commission and any
successor thereto.

“Securities Act” has the meaning set forth in Section 4.10(b).

“Securities Laws” means the Securities Act, the Exchange Act, state “blue sky”
securities Applicable Laws and all similar foreign securities Applicable Laws,
and the rules and regulations promulgated thereunder.

“Senior Persons” shall consist of HoldCo’s board of managers and members of the
Manager Operating Committee.

“Subsidiary” of any Person means any corporation, partnership, joint venture,
limited liability company, trust, unincorporated organization, association or
other legal entity of which such Person (i) owns, directly or indirectly,
greater than 50% of the stock or other equity interests the holder of which is
generally entitled to vote as a general partner or for the election of the board
of directors or managers or other governing body of a corporation, partnership,
joint venture, limited liability company, trust, unincorporated organization,
association or other legal entity or (ii) has any arrangement, understanding or
agreements entitling such Person to vote as a general partner or for the
election of a majority of the board of directors or managers or other governing
body of a corporation, partnership, joint venture, limited liability company,
trust, unincorporated organization, association or other legal entity.

“Tax” or “Taxes” means taxes, duties, fees, premiums, assessments, imposts,
levies and governmental impositions of any kind, payable to any federal, state,
county, local or foreign Governmental Authority, including, but not limited to,
those on or measured by or referred to as income, franchise, profits, gross
receipts, goods and services, capital, ad valorem, advance, corporation,
alternative or add-on minimum taxes, estimated, environmental, disability,
registration, value added, sales, use, service, real or personal property,
capital stock, license, payroll, withholding, employment, social security,
workers’ compensation, unemployment compensation, utility, severance,
production, excise, stamp, occupation, premiums, windfall profits, transfer and
gains taxes, custom duties, and interest, penalties and additions to tax imposed
with respect to any of the foregoing.

“Tax Return” means returns, reports, forms and information statements, including
any schedule or attachment thereto, with respect to Taxes required to be filed
with the IRS or any other Governmental Authority or taxing authority or agency,
domestic, state, local or foreign, including separate, consolidated, combined
and unitary tax returns.

 

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“Trade Secrets” means information, including but not limited to, know-how,
Confidential Information, customer lists, software (source code and object
code), technical information, data, process technology, plans, drawings and blue
prints, anywhere in the world that derives independent economic value, actual or
potential, from not generally being known to, and not being readily
ascertainable by proper means by, other persons who can obtain economic value
from its disclosure or use and that is the subject of efforts that are
reasonable under the circumstances to maintain its secrecy.

*                *                 *                *                *

 

 

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Exhibit B

Terms and Conditions of Employment Offers

Terms and conditions consistent with existing employment arrangements with the
Manager.

 

B-1