EXECUTION VERSION

                         ANNALY CAPITAL MANAGEMENT, INC.

                                50,000,000 SHARES
                                  COMMON STOCK
                                ($0.01 PAR VALUE)

                             UNDERWRITING AGREEMENT

                                  MARCH 7, 2007



                             UNDERWRITING AGREEMENT

                                                                   March 7, 2007

MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Citigroup Global Markets Inc.
UBS Securities LLC
As Representatives of the several Underwriters,
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
4 World Financial Center
New York, New York 10080

Ladies and Gentlemen:

          Annaly Capital Management, Inc., a Maryland corporation (the
"Company"), proposes to issue and sell to the underwriters named in Schedule A
annexed hereto (the "Underwriters"), for whom Merrill Lynch & Co., Merrill
Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), Citigroup Global
Markets Inc. and UBS Securities LLC are acting as representatives, an aggregate
of 50,000,000 shares (the "Firm Shares") of common stock, $0.01 par value (the
"Common Stock"), of the Company. In addition, solely for the purpose of covering
over-allotments, the Company proposes to grant to the Underwriters the option to
purchase from the Company up to an additional 7,500,000 shares of Common Stock
(the "Additional Shares"). The Firm Shares and the Additional Shares are
hereinafter collectively sometimes referred to as the "Shares." The Shares are
described in the Prospectus which is referred to below.

          The Company has filed, in accordance with the provisions of the
Securities Act of 1933, as amended, and the rules and regulations thereunder
(collectively, the "Securities Act"), with the Securities and Exchange
Commission (the "Commission") an automatic shelf registration statement on Form
S-3 (File No. 333-134404), including a base prospectus, with respect to the
Shares, and which incorporates by reference documents which the Company has
filed or will file in accordance with the provisions of the Securities Exchange
Act of 1934, as amended, and the rules and regulations thereunder (collectively,
the "Exchange Act"), which registration statement became effective upon filing
under Rule 462(e) of the Securities Act. The Company has prepared a prospectus
supplement (the "Prospectus Supplement") to the base prospectus included as part
of such registration statement setting forth the terms of the offering, sale and
plan of distribution of the Shares and additional information concerning the
Company and its business. The Company has furnished to Merrill Lynch, for use by
the Underwriters and by dealers, copies of one or more preliminary
prospectuses, containing the base prospectus included as part of such
registration statement, as supplemented by a preliminary Prospectus Supplement,
and including the documents incorporated in such base prospectus by reference



(each, a "Preliminary Prospectus"), relating to the Shares. Except where the
context otherwise requires, such registration statement, as amended when it
became effective, including all documents filed as part thereof or incorporated
by reference therein, and including any information contained in a Prospectus
(as defined below) subsequently filed with the Commission pursuant to Rule
424(b) under the Securities Act, collectively, are herein called the
"Registration Statement," and the base prospectus, including all documents
incorporated therein by reference, included in the Registration Statement, as
supplemented by the Prospectus Supplement, in the form filed by the Company with
the Commission pursuant to Rule 424(b) and Rule 430(B) under the Securities Act
on or before the second Business Day (as defined below) following the date of
this Underwriting Agreement (the "Agreement") (or on such other day as the
parties may mutually agree), is herein called the "Prospectus." The Registration
Statement at the time it originally became effective is herein called the
"Original Registration Statement." The information included in such prospectus
that was omitted from such registration statement at the time it became
effective but that is deemed to be part of such registration statement at the
time it became effective pursuant to Rule 430B is referred to as "Rule 430B
Information." Any reference herein to the Registration Statement, the
Prospectus, any Preliminary Prospectus or any amendment or supplement thereto
shall be deemed to refer to and include the documents incorporated by reference
therein, and any reference herein to the terms "amend," "amendment" or
"supplement" with respect to the Registration Statement, the Prospectus or any
Preliminary Prospectus shall be deemed to refer to and include the filing after
the execution hereof of any document with the Commission deemed to be
incorporated by reference therein. For purposes of this Agreement, all
references to the Registration Statement, the Prospectus, any Preliminary
Prospectus or to any amendment or supplement thereto shall be deemed to include
any copy filed with the Commission pursuant to its Electronic Data Gathering
Analysis and Retrieval System ("EDGAR"), and such copy shall be identical in
content to any Prospectus or Preliminary Prospectus delivered to the
Underwriters for use in connection with the offering of the Shares.

          All references in this Agreement to financial statements and schedules
and other information which is "contained," "included" or "stated" in the
Registration Statement, any Preliminary Prospectus or the Prospectus (or other
references of like import) shall be deemed to mean and include all such
financial statements and schedules and other information which is incorporated
by reference in or otherwise deemed by Securities Act Regulations to be a part
of or included in the Registration Statement, any Preliminary Prospectus or the
Prospectus, as the case may be; and all references in this Agreement to
amendments or supplements to the Registration Statement, any preliminary
prospectus or the Prospectus shall be deemed to mean and include the filing of
any document under the Exchange Act which is incorporated by reference in the
Registration Statement, such Preliminary Prospectus or the Prospectus, as the
case may be.

          The Company and the Underwriters agree as follows:

          1. SALE AND PURCHASE. Upon the basis of the warranties and
representations and subject to the terms and conditions herein set forth, the
Company agrees to issue and sell the Firm Shares to the several Underwriters,
and each of the Underwriters, severally and not jointly, agrees to purchase from
the Company the respective number of Firm Shares (subject to such adjustment as
Merrill Lynch may determine to avoid fractional shares) set forth opposite the
name of such Underwriter in Schedule A annexed hereto at a purchase price of
$12.825 per Share. The Company is advised by Merrill Lynch that the Underwriters
intend (i) to make a



public offering of the Shares as soon as the Underwriters deem advisable after
this Agreement has been executed and delivered and (ii) initially to offer the
Firm Shares upon the terms set forth in the Prospectus. The Underwriters may
from time to time increase or decrease the public offering price after the
initial public offering to such extent as they may determine.

          In addition, the Company hereby grants to the several Underwriters the
option to purchase, and upon the basis of the warranties and representations and
subject to the terms and conditions herein set forth, the Underwriters shall
have the right to purchase, severally and not jointly, from the Company ratably
in accordance with the number of Firm Shares to be purchased by each of them
(subject to such adjustment as Merrill Lynch shall determine to avoid fractional
shares), all or a portion of the Additional Shares as may be necessary to cover
over-allotments made in connection with the offering of the Firm Shares, at the
same purchase price per share to be paid by the Underwriters to the Company for
the Firm Shares. This option may be exercised by Merrill Lynch on behalf of the
several Underwriters at any time and from time to time on or before the
thirtieth day following the date hereof, by written notice to the Company. Each
such notice shall set forth the aggregate number of Additional Shares as to
which the option is being exercised and the date and time when Additional Shares
are to be delivered (such date and time being herein referred to as an
"additional time of purchase"); provided, however, that an additional time of
purchase shall not be (i) earlier than the time of purchase (as defined below)
or (ii) later than the tenth Business Day after the date on which the option
shall have been exercised. The number of Additional Shares to be sold to each
Underwriter shall be the number which bears the same proportion to the aggregate
number of Additional Shares being purchased as the number of Firm Shares set
forth opposite the name of such Underwriter on Schedule A hereto bears to the
aggregate number of Firm Shares (subject, in each case, to such adjustment as
Merrill Lynch may determine to eliminate fractional shares). As used herein
"Business Day" shall mean a day on which the New York Stock Exchange (the
"NYSE") is open for trading and commercial banks in the City of New York are
open for business.

          2. PAYMENT AND DELIVERY. Payment of the purchase price for the Firm
Shares shall be made to the Company by federal funds wire transfer against
delivery of the certificates for the Firm Shares to Merrill Lynch through the
facilities of the Depository Trust Company ("DTC") for the respective accounts
of the Underwriters. Such payment and delivery shall be made at 10:00 A.M., New
York City time, on March 13, 2007 (unless another time shall be agreed to by
Merrill Lynch and the Company or unless postponed in accordance with the
provisions of Section 8 hereof). The time at which such payment and delivery are
actually made is herein sometimes called the "time of purchase." Certificates
for the Firm Shares shall be delivered to Merrill Lynch, through the facilities
of DTC, in definitive form in such names and in such denominations as Merrill
Lynch shall specify no later than the second Business Day preceding the time of
purchase. For the purpose of expediting the checking of the certificates for the
Firm Shares by Merrill Lynch, the Company agrees to make such certificates
available to Merrill Lynch for such purpose at least one full Business Day
preceding the time of purchase.

          Payment of the purchase price for Additional Shares shall be made at
each additional time of purchase in the same manner and at the same office as
the payment for the Firm Shares. Certificates for Additional Shares shall be
delivered to Merrill Lynch, through the facilities of DTC, in definitive form in
such names and in such denominations as Merrill Lynch shall specify no later
than the second Business Day preceding each additional time of purchase.



For the purpose of expediting the checking of the certificates for Additional
Shares by Merrill Lynch, the Company agrees to make such certificates available
to Merrill Lynch for such purpose at least one full Business Day preceding each
additional time of purchase.

          3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to each of the Underwriters as of the date hereof, the
Applicable Time referred to in Section 3(c), as of the time of purchase and, if
applicable, at each additional time of purchase that:

          (a) (1) At the time of filing the Original Registration Statement, (2)
at the time of the most recent amendment thereto for the purposes of complying
with Section 10(a)(3) of the Securities Act or otherwise (whether such amendment
was by post-effective amendment, incorporated report filed pursuant to Section
13 or 15(d) of the Exchange Act or form of prospectus), (3) at the time the
Company or any person acting on its behalf (within the meaning, for this clause
only, of Rule 163(c) of the Securities Act) made any offer relating to the
Shares in reliance on the exemption of Rule 163 of the Securities Act and (4) at
the date hereof, the Company was and is a "well-known seasoned issuer" as
defined in Rule 405 of the Securities Act ("Rule 405"), including not having
been and not being an "ineligible issuer" as defined in Rule 405. The
Registration Statement is an "automatic shelf registration statement," as
defined in Rule 405, and the Shares, since their registration on the
Registration Statement, have been and remain eligible for registration by the
Company on a Rule 405 "automatic shelf registration statement". The Company has
not received from the Commission any notice pursuant to Rule 401(g)(2) of the
Securities Act objecting to the use of the automatic shelf registration
statement form.

          At the time of filing the Original Registration Statement, at the
earliest time thereafter that the Company or another offering participant made a
bona fide offer (within the meaning of Rule 164(h)(2) of the Securities Act) of
the Shares and at the date hereof, the Company was not and is not an "ineligible
issuer," as defined in Rule 405.

          (b) The Original Registration Statement became effective upon filing
under Rule 462(e) of the Securities Act on May 23, 2006 and any post-effective
amendment thereto and also became effective upon filing under Rule 462(e). The
Registration Statement has been filed with the Commission and has been deemed
effective under the Securities Act. The Company has not received, and has no
notice of, any order of the Commission preventing or suspending the use of the
Registration Statement, or threatening or instituting proceedings for that
purpose. Any statutes, regulations, contracts or other documents that are
required to be described in the Registration Statement or the Prospectus or to
be filed as exhibits to the Registration Statement have been so described or
filed. The Prospectus Supplement has been or will be so prepared and will be
filed pursuant to Rule 424(b) of the Securities Act on or before the second
Business Day following the date of this Agreement or on such other day as the
parties may mutually agree. The Preliminary Prospectus, at the time of filing
thereof, conformed in all material respects to the requirements of the
Securities Act. Copies of the Registration Statement, the Preliminary Prospectus
and the Prospectus, any such amendments or supplements and all documents
incorporated by reference therein that were filed with the Commission on or
prior to the date of this Agreement (including one fully executed copy of each
of the Registration Statement and of each amendment thereto for the
Underwriters) have been delivered to the



Underwriters and their counsel. The Company has not distributed any offering
material in connection with the offering or sale of the Shares other than the
Registration Statement, the Preliminary Prospectus, the Prospectus, Issuer
General Use Free Writing Prospectuses (as defined below) or any other materials,
if any, permitted by the Securities Act.

          (c) Each part of the Registration Statement, when such part became
effective and at each deemed effective date with respect to the Underwriters
pursuant to Rule 430B(f)(2) of the Securities Act or was or is filed with the
Commission, and the Prospectus and any amendment or supplement thereto, on the
date of filing thereof with the Commission and at the time of purchase and, if
applicable, at each additional time of purchase, conformed or will conform in
all material respects with the requirements of the Securities Act. Each part of
the Registration Statement, when such part became or becomes effective or was or
is filed with the Commission, did not or will not contain an untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading. The Prospectus and
any amendment or supplement thereto, on the date of filing thereof with the
Commission and at the time of purchase and, if applicable, at each additional
time of purchase, did not or will not include an untrue statement of a material
fact or omit to state a material fact necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading,
except that the foregoing shall not apply to statements in, or omissions from,
any such document in reliance upon, and in conformity with, written information
concerning the Underwriters that was furnished in writing to the Company by
Merrill Lynch, on behalf of the several Underwriters, specifically for use in
the preparation thereof.

          (d) As of the Applicable Time neither (x) the Issuer General Use Free
Writing Prospectus(es) (as defined below) issued at or prior to the Applicable
Time, the information included on Schedule C hereto and the Statutory Prospectus
(as defined below) as of the Applicable Time, all considered together
(collectively, the "General Disclosure Package"), nor (y) any individual Issuer
Limited Use Free Writing Prospectus, when considered together with the General
Disclosure Package, included any untrue statement of a material fact or omitted
to state any material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading.

          As used in this subsection and elsewhere in this Agreement:

          "Applicable Time" means 8:00 am (Eastern time) on March 8, 2007 or
such other time as agreed by the Company and Merrill Lynch.

          "Issuer Free Writing Prospectus" means any "issuer free writing
prospectus," as defined in Rule 433 of the Securities Act ("Rule 433"), relating
to the Shares that (i) is required to be filed with the Commission by the
Company, (ii) is a "road show that is a written communication" within the
meaning of Rule 433(d)(8)(i) whether or not required to be filed with the
Commission or (iii) is exempt from filing pursuant to Rule 433(d)(5)(i) because
it contains a description of the Shares or of the offering that does not reflect
the final terms, in each case in the form filed or required to be filed with the
Commission or, if not required to be filed, in the form retained in the
Company's records pursuant to Rule 433(g).



          "Issuer General Use Free Writing Prospectus" means any Issuer Free
Writing Prospectus that is intended for general distribution to prospective
investors, as evidenced by it being specified in Schedule B hereto.

          "Issuer Limited Use Free Writing Prospectus" means any Issuer Free
Writing prospectus that is not an Issuer General Use Free Writing Prospectus.

          "Statutory Prospectus" as of any time means the prospectus relating to
the Shares that is included in the Registration Statement immediately prior to
that time, including any document incorporated by reference therein.

          Each Issuer Free Writing Prospectus, as of its issue date and at all
subsequent times through the completion of the public offer and sale of the
Shares or until any earlier date that the Company notified or notifies Merrill
Lynch as described in the next sentence, did not, does not and will not include
any information that conflicted, conflicts or will conflict with the information
contained in the Registration Statement or the Prospectus, including any
document incorporated by reference therein, and any preliminary or other
prospectus deemed to be a part thereof that has not been superseded or modified.

          The representations and warranties in this subsection shall not apply
to statements in or omissions from the Registration Statement, the Prospectus or
any Issuer Free Writing Prospectus made in reliance upon and in conformity with
written information furnished to the Company by any Underwriter through Merrill
Lynch expressly for use therein.

          (e) The documents incorporated by reference in the Registration
Statement, the Prospectus or any amendment or supplement thereto, when they were
or are filed with the Commission under the Securities Act or the Exchange Act,
as the case may be, conformed or will conform in all material respects with the
requirements of the Securities Act and the Exchange Act, as applicable and, when
read together with the other information in the Prospectus, (a) at the time the
Original Registration Statement became effective, (b) at the earlier of time the
Prospectus was first used and the date and time of the first contract of sale of
Shares in this offering and (c) at the Applicable Time, did not and will not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading.

          (f) The consolidated financial statements of the Company, together
with the related schedules and notes thereto, set forth or included or
incorporated by reference in the Registration Statement, the General Disclosure
Package, and the Prospectus are accurate in all material respects and fairly
present the financial condition of the Company as of the dates indicated and the
results of operations, changes in financial position, stockholders' equity and
cash flows for the periods therein specified are in conformity with generally
accepted accounting principles consistently applied throughout the periods
involved (except as otherwise stated therein). The selected financial and
statistical data included or incorporated by reference in the Registration
Statement, and the Prospectus present fairly the information shown therein and,
to the extent based upon or derived from the financial statements, have been
compiled on a basis consistent with the financial statements presented therein.
No other financial statements are



required to be set forth or to be incorporated by reference in the Registration
Statement or the Prospectus under the Securities Act.

          (g) The Preliminary Prospectus was, and the Prospectus and the General
Disclosure Package delivered to the Underwriters for use in connection with this
offering will be, identical to the versions of the Preliminary Prospectus,
Prospectus and the General Disclosure Package, respectively, created to be
transmitted to the Commission for filing via EDGAR, except to the extent
permitted by Regulation S-T.

          (h) The Company has been duly formed and incorporated and is validly
existing as a corporation in good standing under the laws of the State of
Maryland, is duly qualified to do business and is in good standing as a foreign
corporation in each jurisdiction in which its ownership or lease of property or
assets or the conduct of its business requires such qualification, except where
the failure to so qualify would not have a material adverse effect on the
business, assets, properties, prospects, financial condition or results of
operation of the Company taken as a whole (a "Material Adverse Effect"), and has
full corporate power and authority necessary to own, hold, lease and/or operate
its assets and properties, to conduct the business in which it is engaged and as
described in the Prospectus and to enter into and perform its obligations under
this Agreement and to consummate the transactions contemplated hereby, and the
Company is in compliance in all material respects with the laws, orders, rules,
regulations and directives issued or administered by such jurisdictions.

          (i) The Company has no "significant subsidiaries" (as such term is
defined in Rule 1-02 of Regulation S-X promulgated under the Securities Act) and
does not own, directly or indirectly, any shares of stock or any other equity or
long-term debt securities of any corporation or have any equity interest in any
firm, partnership, joint venture, association or other entity, except for Fixed
Income Discount Advisory Company ("FIDAC") and FIDAC Housing Cycle Fund LLC.
Complete and correct copies of the articles of incorporation and of the bylaws
of the Company and all amendments thereto have been delivered to Merrill Lynch
and, except as set forth in the exhibits to, or incorporated by reference into,
the Registration Statement, no changes therein will be made subsequent to the
date hereof and prior to the time of purchase or, if applicable, each additional
time of purchase.

          (j) The Company is not in breach of, or in default under (nor has any
event occurred which with notice, lapse of time, or both would result in any
breach of, or constitute a default under), (i) its articles of incorporation or
bylaws or (ii) any obligation, agreement, covenant or condition contained in any
contract, license, repurchase agreement, indenture, mortgage, deed of trust,
bank loan or credit agreement, note, lease or other evidence of indebtedness, or
any lease, contract or other agreement or instrument to which the Company is a
party or by which it or any of its assets or properties may be bound or
affected, the effect of which breach or default under clause (ii) could have a
Material Adverse Effect. The execution, delivery and performance of this
Agreement, the issuance and sale of the Shares and the consummation of the
transactions contemplated hereby will not conflict with, or result in any breach
of, constitute a default under or a Repayment Event (as defined below) under
(nor constitute any event which with notice, lapse of time, or both would result
in any breach of, constitute a default under or a Repayment Event under), (i)
any provision of the articles of incorporation or bylaws of the Company, (ii)
any provision of any contract, license, repurchase



agreement, indenture, mortgage, deed of trust, bank loan or credit agreement,
note, lease or other evidence of indebtedness, or any lease, contract or other
agreement or instrument to which the Company is a party or by which the Company
or any of its assets or properties may be bound or affected, the effect of which
could have a Material Adverse Effect, or (iii) under any federal, state, local
or foreign law, regulation or rule or any decree, judgment or order applicable
to the Company. As used herein, a "Repayment Event" means any event or condition
which gives the holder of any note, debenture or other evidence of indebtedness
(or any person acting on such holder's behalf) the right to require the
repurchase, redemption or repayment of all or a portion of such indebtedness by
the Company or any subsidiary.

          (k) As of December 31, 2006, as of the date of this Agreement and as
of the time of purchase, the Company had, has or will have an authorized, issued
and outstanding capitalization as set forth under the headings "Historical" and
"As Adjusted for this offering," respectively, in the section of the Prospectus
Supplement entitled "Capitalization." All of the issued and outstanding shares
of capital stock, including the Common Stock of the Company, have been duly and
validly authorized and issued and are fully paid and non-assessable, have been
issued in compliance with all federal and state securities laws and were not
issued in violation of any preemptive right, resale right, right of first
refusal or similar right.

          (l) This Agreement has been duly authorized, executed and delivered by
the Company.

          (m) The capital stock of the Company, including the Shares, conforms
and will conform in all material respects to the description thereof contained
in the Registration Statement, General Disclosure Package and the Prospectus and
such description conforms to the rights set forth in the instruments defining
the same. The certificates for the Shares are in due and proper form and the
holders of the Shares will not be subject to personal liability by reason of
being such holders.

          (n) The Shares have been duly and validly authorized by the Company
for issuance and sale pursuant to this Agreement and, when issued and delivered
against payment therefor as provided herein, will be duly and validly issued and
fully paid and non-assessable, free and clear of any pledge, lien, encumbrance,
security interest or other claim, and will be registered pursuant to Section 12
of the Exchange Act.

          (o) No approval, authorization, consent or order of or filing with any
national, state or local governmental or regulatory commission, board, body,
authority or agency is required in connection with the issuance and sale of the
Shares or the consummation by the Company of the transaction contemplated hereby
other than (i) registration of the Shares under the Securities Act, (ii) any
necessary qualification under the securities or blue sky laws of the various
jurisdictions in which the Shares are being offered by the Underwriters, or
(iii) such approvals as have been obtained in connection with the approval of
the listing of the Shares on NYSE.

          (p) No person, as such term is defined in Rule 1-02 of Regulation S-X
promulgated under the Securities Act (each, a "Person"), has the right,
contractual or otherwise, to cause the Company to issue to it any shares of
capital stock or other securities of the Company



upon the issue and sale of the Shares to the Underwriters hereunder, nor does
any Person have preemptive rights, co-sale rights, rights of first refusal or
other rights to purchase or subscribe for any of the Shares or any securities or
obligations convertible into or exchangeable for, or any contracts or
commitments to issue or sell any of, the Shares or any options, rights or
convertible securities or obligations, other than those that have been expressly
waived prior to the date hereof.

          (q) Deloitte & Touche LLP (the "Accountants"), whose report on the
consolidated financial statements of the Company is filed with the Commission as
part of the Registration Statement and the Prospectus, are and, during the
periods covered by their reports, were independent public accountants as
required by the Securities Act.

          (r) The Company has all necessary licenses, authorizations, consents
and approvals and has made all necessary filings required under any federal,
state, local or foreign law, regulation or rule, and has obtained all necessary
permits, authorizations, consents and approvals from other Persons, in order to
conduct its business as described in the Prospectus, except as such as could not
have a Material Adverse Effect. The Company is not required by any applicable
law to obtain accreditation or certification from any governmental agency or
authority in order to provide the products and services which it currently
provides or which it proposes to provide as set forth in the Prospectus. The
Company is not in violation of, or in default under, any such license, permit,
authorization, consent or approval or any federal, state, local or foreign law,
regulation or rule or any decree, order or judgment applicable to the Company,
the effect of which could have a Material Adverse Effect.

          (s) The descriptions in the Registration Statement, the General
Disclosure Package and the Prospectus of the legal or governmental proceedings,
contracts, leases and other legal documents therein described present fairly the
information required to be shown, and there are no legal or governmental
proceedings, contracts, leases, or other documents of a character required to be
described in the Registration Statement, the General Disclosure Package or the
Prospectus or to be filed as exhibits to the Registration Statement which are
not described or filed as required. All agreements between the Company and third
parties expressly referenced in the General Disclosure Package and Prospectus
are legal, valid and binding obligations of the Company enforceable in
accordance with their respective terms, except to the extent enforceability may
be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally and by general equitable principles.

          (t) There are no actions, suits, claims, investigations, inquiries or
proceedings pending or, to the best of the Company's knowledge, threatened to
which the Company or any of its officers or directors is a party or of which any
of its properties or other assets is subject at law or in equity, or before or
by any federal, state, local or foreign governmental or regulatory commission,
board, body, authority or agency which could result in a judgment, decree or
order having a Material Adverse Effect.

          (u) Subsequent to the respective dates as of which information is
given in the Registration Statement, the General Disclosure Package (including
as of the Applicable Time), and the Prospectus, there has not been (i) any
material adverse change, or any development which would reasonably be expected
to cause a material adverse change, in the business,



properties or assets described or referred to in the Registration Statement, the
General Disclosure Package, or the Prospectus, or the results of operations,
condition (financial or otherwise), net worth, business, prospects or operations
of the Company taken as a whole, (ii) any transaction which is material to the
Company, except transactions in the ordinary course of business, (iii) any
obligation, direct or contingent, which is material to the Company taken as a
whole, incurred by the Company, except obligations incurred in the ordinary
course of business, (iv) any change in the capital stock or outstanding
indebtedness of the Company, or (v) except for regular quarterly dividends on
the shares of Series A cumulative redeemable preferred stock and the Series B
cumulative convertible preferred stock, (collectively, the "Preferred Stock")
and Common Stock in amounts per share that are consistent with past practice,
any dividend or distribution of any kind declared, paid or made by the Company
on any class of its capital stock. The Company has no material contingent
obligation which is not disclosed in the Registration Statement, the General
Disclosure Package, or the Prospectus.

          (v) There are no Persons with registration or other similar rights to
have any equity or debt securities, including securities which are convertible
into or exchangeable for equity securities, registered pursuant to the
Registration Statement or otherwise registered by the Company under the
Securities Act.

          (w) The Company (i) does not have any issued or outstanding preferred
stock, or other than the Preferred Stock, or (ii) has not defaulted on any
installment on indebtedness for borrowed money or on any rental on one or more
long term leases, which defaults would have a Material Adverse Effect on the
financial position of the Company. The Company has not filed a report pursuant
to Section 13(a) or 15(d) of the Exchange Act since the filing of its last
Annual Report on Form 10-K, indicating that it (i) has failed to pay any
dividend or sinking fund installment on preferred stock or (ii) has defaulted on
any installment on indebtedness for borrowed money or on any rental on one or
more long term leases, which defaults would have a Material Adverse Effect on
the financial position of the Company.

          (x) Each of the Company and its officers, directors and controlling
Persons has not, directly or indirectly, (i) taken any action designed to cause
or to result in, or that has constituted or which might reasonably be expected
to constitute, the stabilization or manipulation of the price of the Common
Stock to facilitate the sale of the Shares, or (ii) since March 5, 2007 (except
pursuant to the Company's dividend reinvestment and share purchase plan (the
"DRSPP")) (A) sold, bid for, purchased, or paid anyone any compensation for
soliciting purchases of, the Shares or (B) paid or agreed to pay to any Person
any compensation for soliciting another to purchase any other securities of the
Company.

          (y) The shares have been approved for listing on the NYSE, subject
only to official notice of issuance.

          (z) Neither the Company nor any of its affiliates (i) is required to
register as a "broker" or "dealer" in accordance with the provisions of the
Exchange Act or (ii) directly or indirectly through one or more intermediaries,
controls or has any other association with (within the meaning of Article I of
the Bylaws of the National Association of Securities Dealers ("NASD")) any
member firm of the NASD.



          (aa) Any certificate signed by any officer of the Company delivered to
Merrill Lynch or to counsel for the Underwriters pursuant to or in connection
with this Agreement shall be deemed a representation and warranty by the Company
to each Underwriter as to the matters covered thereby.

          (bb) As of the date of this Agreement, the investment portfolio of the
Company (i) consists entirely of (a) mortgage-backed securities guaranteed, as
to payments of principal and interest, by either the Federal Home Loan Mortgage
Corporation, the Federal National Mortgage Association or the Government
National Mortgage Association and (b) Federal Home Loan Bank, Federal Home Loan
Mortgage Corporation, or Federal National Mortgage Association debentures and
(ii) all of such mortgage-backed securities are REIT (as defined below) eligible
assets. As of the date of this Agreement, the Company has no plan or intention
to materially alter (i) its capital investment policy or (ii) except in
accordance with its capital investment policy, the percentage of its investment
portfolio that is invested in mortgage-backed securities which are guaranteed,
as to payments of principal and interest, by either the Federal Home Loan
Mortgage Corporation, the Federal National Mortgage Association or the
Government National Mortgage Association. The Company has good and marketable
title to all of the properties and assets owned by it, in each case free and
clear of any security interests, liens, encumbrances, equities, claims and other
defects (except for any security interest, lien, encumbrance or claim that may
otherwise exist under any applicable repurchase agreement), except such as do
not have a Material Adverse Effect and do not interfere with the use made or
proposed to be made of such property or asset by the Company, and except as
described in or contemplated by the Prospectus and the General Disclosure
Package. The Company owns no real property. Any real property and buildings held
under lease by the Company are held under valid, existing and enforceable
leases, with such exceptions as are disclosed in the Prospectus or are not
material and do not interfere with the use made or proposed to be made of such
property and buildings by the Company.

          (cc) The Company has filed all federal, state and foreign income and
franchise tax returns required to be filed on or prior to the date hereof and
has paid taxes shown as due thereon (or that are otherwise due and payable),
other than taxes which are being contested in good faith and for which adequate
reserves have been established in accordance with generally accepted accounting
principles. The Company has no knowledge, after due inquiry, of any tax
deficiency which has been asserted or threatened against the Company. To the
knowledge of the Company, there are no tax returns of the Company that are
currently being audited by federal, state or local taxing authorities or
agencies which would have a Material Adverse Effect.

          (dd) The Company owns or possesses adequate license or other rights to
use all patents, trademarks, service marks, trade names, copyrights, software
and design licenses, trade secrets, manufacturing processes, other intangible
property rights and know-how (collectively, "Intangibles") necessary to entitle
the Company to conduct its business as described in the Prospectus, and the
Company has not received notice of infringement of or conflict with (and the
Company knows of no such infringement of or conflict with) asserted rights of
others with respect to any Intangibles which could have a Material Adverse
Effect.

          (ee) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are executed in
accordance with



management's general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles as applied in the United States and to
maintain asset accountability, (iii) access to assets is permitted only in
accordance with management's general or specific authorization, and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.

          (ff) The Company has established and maintains disclosure controls and
procedures (as such term is defined in Rule 13a-14 and 15d-14 under the Exchange
Act); such disclosure controls and procedures are designed to ensure that
material information relating to the Company is made known to the Company's
Chief Executive Officer and its Chief Financial Officer, and such disclosure
controls and procedures are effective to perform the functions for which they
were established; any significant material weaknesses in internal controls have
been identified for the Company's Chief Executive Officer and its Chief
Financial Officer; and since the date of the most recent evaluation of such
disclosure controls and procedures, there have been no significant changes in
internal controls or in other factors that could significantly affect internal
controls.

          (gg) The Company is insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are prudent
and customary in the business in which it is engaged. The Company has no reason
to believe that it will not be able to renew its existing insurance coverage as
and when such coverage expires or to obtain similar coverage from similar
insurers as may be necessary to continue its business at a cost that would not
have a Material Adverse Effect.

          (hh) The Company is not in violation, and has not received notice of
any violation with respect to, any applicable environmental, safety or similar
law applicable to the business of the Company. The Company has received all
permits, licenses or other approvals required of them under applicable federal
and state occupational safety and health and environmental laws and regulations
to conduct its business, and the Company is in compliance with all terms and
conditions of any such permit, license or approval, except any such violation of
law or regulation, failure to receive required permits, licenses or other
approvals or failure to comply with the terms and conditions of such permits,
licenses or approvals which could not, singly or in the aggregate, have a
Material Adverse Effect.

          (ii) The Company has not incurred any liability for any finder's fees
or similar payments in connection with the transactions herein contemplated,
except as may otherwise exist with respect to the Underwriters pursuant to this
Agreement.

          (jj) There are no existing or threatened labor disputes with the
employees of the Company which are likely to have individually or in the
aggregate a Material Adverse Effect.

          (kk) Neither the Company nor, to the knowledge of the Company, any
employee or agent of the Company, has made any payment of funds of the Company
or received or retained any funds in violation of any law, rule or regulation or
of a character required to be disclosed in the Prospectus. No relationship,
direct or indirect, exists between or among the Company, on the one hand, and
the directors, officers and stockholders of the Company, on the



other hand, which is required by the Securities Act to be described in the
Registration Statement and the Prospectus that is not so described.

          (ll) The Company, since its date of inception, has been, and upon the
sale of the Shares will continue to be, organized and operated in conformity
with the requirements for qualification and taxation as a "real estate
investment trust" (a "REIT") under Sections 856 through 860 of the Internal
Revenue Code of 1986, as amended (the "Code"), for all taxable years commencing
with its taxable year ended December 31, 1997. The proposed method of operation
of the Company as described in the Prospectus will enable the Company to
continue to meet the requirements for qualification and taxation as a REIT under
the Code, and no actions have been taken (or not taken which are required to be
taken) which would cause such qualification to be lost. The Company intends to
continue to operate in a manner which would permit it to qualify as a REIT under
the Code. The Company has no intention of changing its operations or engaging in
activities which would cause it to fail to qualify, or make economically
undesirable its continued qualification, as a REIT.

          (mm) The Company is not and, after giving effect to the offering and
sale of the Shares, will not be an "investment company" or an entity
"controlled" by an "investment company," as such terms are defined in the
Investment Company Act of 1940, as amended (the "Investment Company Act").

          (nn) No relationship, direct or indirect, exists between or among the
Company, on the one hand, and the directors, officers, stockholders or directors
of the Company, on the other hand, which is required by the rules of the NASD to
be described in the Registration Statement and the Prospectus which is not so
described.

          (oo) The Company has not, directly or indirectly, including through
any subsidiary, extended credit, arranged to extend credit, or renewed any
extension of credit, in the form of a personal loan, to or for any director or
executive officer of the Company, or to or for any family member or affiliate of
any director or executive officer of the Company.

          (pp) Neither the Company nor any of the subsidiaries nor, to the
Company's knowledge, any employee or agent of the Company or the subsidiaries
has made any payment of funds of the Company or the subsidiaries or received or
retained any funds in violation of any law, rule or regulation, which payment,
receipt or retention of funds is of a character required to be disclosed in the
Registration Statement or the Prospectus.

          (qq) The Company is in compliance with all presently applicable
provisions of the Sarbanes-Oxley Act of 2002 and the rules and regulations
promulgated thereunder (the "Sarbanes-Oxley Act") and is actively taking steps
to ensure that it will be in compliance with other applicable provisions of the
Sarbanes-Oxley Act upon the effectiveness of such provisions.

          (rr) The Registration Statement is not the subject of a pending
proceeding or examination under Section 8(d) or 8(e) of the Securities Act, and
the Company is not the subject of a pending proceeding under Section 8A of the
Securities Act in connection with the offering of the Shares.



          4. CERTAIN COVENANTS OF THE COMPANY. The Company hereby covenants and
agrees with each of the Underwriters that:

          (a) The Company will furnish such information as may be required and
otherwise will cooperate in qualifying the Shares for offering and sale under
the securities or blue sky laws of such jurisdictions (both domestic and
foreign) as Merrill Lynch may designate and to maintain such qualifications in
effect so long as required for the distribution of the Shares, provided that the
Company shall not be required to qualify as a foreign corporation or to consent
to the service of process under the laws of any such jurisdiction (except
service of process with respect to the offering and sale of the Shares). The
Company will promptly advise Merrill Lynch of the receipt by the Company of any
notification with respect to the suspension of the qualification of the Shares
for sale in any jurisdiction or the initiation or threatening of any proceeding
for such purpose.

          (b) The Company will prepare the Prospectus in a form in compliance
with Rule 430(B) or Rule 430(C) and approved by the Underwriters and file such
Prospectus with the Commission pursuant to Rule 424(b) under the Securities Act
not later than 10:00 A.M. (New York City time), on or before the second Business
Day following the date of this Agreement or on such other day as the parties may
mutually agree and to furnish promptly (and with respect to the initial delivery
of such Prospectus, not later than 10:00 A.M. (New York City time) on or before
the second Business Day following the date of this Agreement or on such other
day as the parties may mutually agree) to the Underwriters copies of the
Prospectus (or of the Prospectus as amended or supplemented if the Company shall
have made any amendments or supplements thereto after the effective date of the
Registration Statement) in such quantities and at such locations as the
Underwriters may reasonably request for the purposes contemplated by the
Securities Act, which the Prospectus and any amendments or supplements thereto
furnished to the Underwriters will be identical to the version created to be
transmitted to the Commission for filing via EDGAR, except to the extent
permitted by Regulation S-T.

          (c) The Company will advise Merrill Lynch immediately, confirming such
advice in writing, of (i) the receipt of any comments from the Commission
relating to any filing of the Company under the Securities Act or the Exchange
Act, (ii) any request by the Commission for amendments or supplements to the
Registration Statement or the Prospectus or for additional information with
respect thereto, (iii) the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or of any order
preventing or suspending the use of any Preliminary Prospectus or the Prospectus
or of any examination pursuant to Section 8(e) of the Securities Act concerning
the Registration Statement, (iv) the suspension of the qualification of the
Shares for offering or sale in any jurisdiction, (v) the initiation, threatening
or contemplation of any proceedings for any of such purposes and, if the
Commission or any other governmental agency or authority should issue any such
order, the Company will make every reasonable effort to obtain the lifting or
removal of such order as soon as possible. The Company will advise Merrill Lynch
promptly of any proposal to amend or supplement the Registration Statement or
the Prospectus including by filing any documents that would be incorporated
therein by reference, and will furnish Merrill Lynch with copies of any such
documents a reasonable amount of time prior to such proposed filing or use, as
the case may be, and will not file or use any such document to which Merrill
Lynch or counsel for the Underwriters shall object in writing. The Company has
given Merrill Lynch notice of any filings



made pursuant to the Exchange Act within 48 hours prior to the Applicable Time;
the Company will give Merrill Lynch notice of its intention to make any such
filing from the Applicable Time to the time of purchase and, if applicable, each
additional time of purchase, and will furnish the Merrill Lynch with copies of
any such documents a reasonable amount of time prior to such proposed filing, as
the case may be, and will not file or use any such document to which the Merrill
Lynch or counsel for the Underwriters shall object in writing.

          (d) The Company will advise Merrill Lynch promptly and, if requested
by Merrill Lynch, will confirm such advice in writing when any post-effective
amendment to the Registration Statement becomes effective under the Securities
Act.

          (e) The Company will furnish to Merrill Lynch and, upon request, to
each of the other Underwriters for a period of five years from the date of this
Agreement (i) copies of any reports or other communications which the Company
shall send to its stockholders or shall from time to time publish or publicly
disseminate, (ii) copies of all annual, quarterly and current reports filed with
the Commission on Forms 10-K, 10-Q and 8-K, or such other similar form as may be
designated by the Commission, (iii) copies of documents or reports filed with
any national securities exchange on which any class of securities of the Company
is listed, and (iv) such other information as Merrill Lynch may reasonably
request regarding the Company, in each case as soon as such communications,
documents or information become available.

          (f) The Company will advise the Underwriters promptly of the happening
of any event known to the Company within the time during which a Prospectus
relating to the Shares is required to be delivered under the Securities Act
which would require the making of any change in the Prospectus then being used,
or in the information incorporated by reference therein, so that the Prospectus
would not include an untrue statement of material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, or if it is necessary at any time to amend or supplement the
Prospectus to comply with any law. If within the time during which a Prospectus
relating to the Shares is required to be delivered under the Securities Act any
event shall occur or condition shall exist which, in the reasonable opinion of
the Company, Merrill Lynch or their respective counsel, would require the making
of any change in the Prospectus then being used, or in the information
incorporated by reference therein, so that the Prospectus would not include an
untrue statement of material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading, or if it is
necessary at any time to amend or supplement the Prospectus to comply with any
law, the Company will promptly prepare and furnish to the Underwriters copies of
the proposed amendment or supplement before filing any such amendment or
supplement with the Commission and thereafter promptly furnish, at the Company's
own expense, to the Underwriters and to dealers copies in such quantities and at
such locations as Merrill Lynch may from time to time reasonably request of an
appropriate amendment to the Registration Statement or supplement to the
Prospectus so that the Prospectus as so amended or supplemented will not, in the
circumstances when it is so delivered, be misleading or so that the Prospectus
will comply with the law. If at any time following issuance of an Issuer Free
Writing Prospectus there occurred or occurs an event or development as a result
of which such Issuer Free Writing Prospectus conflicted or would conflict with
the information contained in the Registration Statement relating to the Shares
or the Statutory Prospectus or any



preliminary prospectus or included or would include an untrue statement of a
material fact or omitted or would omit to state a material fact necessary in
order to make the statements therein, in the light of the circumstances,
prevailing at that subsequent time, not misleading, the Company will promptly
notify Merrill Lynch and will promptly amend or supplement, at its own expense,
such Issuer Free Writing Prospectus to eliminate or correct such conflict,
untrue statement or omission.

          (g) The Company will make generally available to its stockholders as
soon as practicable, and in the manner contemplated by Rule 158 of the
Securities Act but in any event not later than 15 months after the end of the
Company's current fiscal quarter, an earnings statement (which need not be
audited) covering a 12-month period beginning after the date upon which the
Prospectus Supplement is filed pursuant to Rule 424(b) under the Securities Act
that shall satisfy the provisions of Section 11(a) of the Securities Act and
Rule 158 thereunder and will advise the Underwriters in writing when such
statement has been made available.

          (h) The Company will furnish to Merrill Lynch a signed copy of the
Registration Statement, as initially filed with the Commission, and of all
amendments thereto (including all exhibits thereto and documents incorporated by
reference therein) and such number of conformed copies of the foregoing (other
than exhibits) as Merrill Lynch may reasonably request.

          (i) The Company will apply the net proceeds from the sale of the
Shares in the manner set forth under the caption "Use of Proceeds" in the
Prospectus.

          (j) The Company will furnish to Merrill Lynch, not less than two
Business Days before a filing with the Commission during the period referred to
in paragraph (f) above, a copy of any document proposed to be filed pursuant to
Section 13, 14 or 15(d) of the Exchange Act and during such period will file all
such documents in a manner and within the time periods required by the Exchange
Act.

          (k) The Company will not sell, offer, contract to sell, pledge,
register, grant any option to purchase or otherwise dispose of, directly or
indirectly, any shares of capital stock, or any securities convertible into, or
exercisable, exchangeable or redeemable for shares of capital stock, except for
the sales to the Underwriters pursuant to this Agreement and except for
issuances of Common Stock upon the exercise of outstanding options, for a period
of 90 days after the date hereof, without the prior written consent of Merrill
Lynch. The foregoing sentence shall not apply to (i) the Shares to be sold
hereunder, (ii) any shares of Common Stock issued by the Company upon the
exercise of an option outstanding on the date hereof and referred to in the
Prospectus, (iii) shares of Common Stock issued pursuant to the DRSPP, or (iv)
the grant of awards pursuant to the Company's Long-Term Stock Incentive Plan or
issuances pursuant to the exercise of employee stock options or other awards.
Notwithstanding the foregoing, if (1) during the last 17 days of the 90-day
restricted period the Company issues an earnings release or material news or a
material event relating to the Company occurs or (2) prior to the expiration of
the 90-day restricted period, the Company announces that it will release
earnings results or becomes aware that material news or a material event will
occur during the 16-day period beginning on the last day of the 90-day
restricted period, the restrictions imposed in this



paragraph (k) shall continue to apply until the expiration of the 18-day period
beginning on the issuance of the earnings release or the occurrence of the
material news or material event.

          (l) The Company will use its best efforts to cause each officer and
director of the Company to furnish to Merrill Lynch, prior to the time of
purchase, a letter or letters, substantially in the form of Exhibit C hereto,
pursuant to which each such person shall agree, subject to certain exceptions
set forth therein, not to sell, offer, contract to sell, pledge, grant any
option to purchase or otherwise dispose of, directly or indirectly, any shares
of capital stock, or any securities convertible into, or exercisable,
exchangeable or redeemable for shares of capital stock of the Company for a
period of 90 days after the date hereof, without the prior written consent of
Merrill Lynch.

          (m) The Company will use its best efforts to cause the Shares to be
listed on the NYSE and to maintain such listing and to file with the NYSE all
documents and notices required by the NYSE of companies that have securities
that are listed on the NYSE.

          (n) The Company will maintain and keep accurate books and records
reflecting their assets and maintain internal accounting controls which provide
reasonable assurance that (i) transactions are executed in accordance with
management's authorization, (ii) transactions are recorded as necessary to
permit the preparation of the Company's consolidated financial statements and to
maintain accountability for the assets of the Company, (iii) access to the
assets of the Company is permitted only in accordance with management's
authorization and (iv) the recorded accounts of the assets of the Company are
compared with existing assets at reasonable intervals.

          (o) The Company will engage and maintain, at its expense, a registrar
and transfer agent for the Shares.

          (p) The Company will pay all expenses, fees and taxes (other than any
transfer taxes and fees and disbursements of counsel for the Underwriters,
except as set forth under Section 5 hereof or (iii) or (iv) below) in connection
with (i) the preparation and filing of the Registration Statement, each
Preliminary Prospectus, the Prospectus, any Permitted Free Writing Prospectus
and any amendments or supplements thereto, and the printing and furnishing of
copies of each thereof to the Underwriters and to dealers (including costs of
mailing and shipment), (ii) the issuance, sale and delivery of the Shares by the
Company, (iii) the word processing and/or printing of this Agreement, any
Agreement among the Underwriters, any dealer agreements, and the reproduction
and/or printing and furnishing of copies of each thereof to the Underwriters and
to dealers (including costs of mailing and shipment), (iv) the costs and
expenses of the Company relating to investor presentations on any "road show"
undertaken in connection with the marketing of the Shares, including without
limitation, expenses associated with the production of road show slides and
graphics, fees and expenses of any consultants engaged in connection with the
road show presentations, travel and lodging expenses of the representatives and
officers of the Company and any such consultants, and the cost of aircraft and
other transportation chartered in connection with the road show, except that the
lodging, airfare (except if the Company charters a flight in which case
employees of the Underwriters ride on such charter without charge), and
incidental expenses of employees of the Underwriters shall be the responsibility
of the Underwriters, (v) the qualification of the Shares for offering and sale



under state laws and the determination of their eligibility for investment under
state law as aforesaid (including the legal fees and filing fees and other
disbursements of counsel to the Underwriters) and the preparation, printing and
furnishing of copies of any blue sky surveys or legal investment surveys to the
Underwriters and to dealers, (vi) any listing of the Shares on the NYSE and any
registration thereof under the Exchange Act, (vii) the filing, if any, for
review of the public offering of the Shares by the NASD, (viii) the performance
of the Company's other obligations hereunder, and (ix) the costs and expenses
(including without limitation any damages or other amounts payable in connection
with legal or contractual liability) associated with the reforming of any
contracts for sale of the Shares made by the Underwriters caused by a breach of
the representation contained in the first paragraph of Section 3(d).

          (q) The Company will not (i) take, directly or indirectly, prior to
termination of the underwriting syndicate contemplated by this Agreement, any
action designed to stabilize or manipulate the price of any security of the
Company, or which may cause or result in, or which might in the future
reasonably be expected to cause or result in, the stabilization or manipulation
of the price of any security of the Company, to facilitate the sale or resale of
any of the Shares, (ii) sell, bid for, purchase or pay any Person (other than as
contemplated by the provisions hereof) any compensation for soliciting purchases
of the Shares, or (iii) pay or agree to pay to any Person any compensation for
soliciting any order to purchase any other securities of the Company.

          (r) The Company will not invest in futures contracts, options on
futures contracts or options on commodities unless the Company is exempt from
the registration requirements of the Commodity Exchange Act, as amended, or
otherwise complies with the Commodity Exchange Act, as amended. In addition, the
Company will not engage in any activities which might be subject to the
Commodity Exchange Act, as amended, unless such activities are exempt from that
Act or otherwise comply with that Act or with an applicable no-action letter to
the Company from the Commodities Futures Trading Commission.

          (s) The Company will comply with all of the provisions of any
undertakings in the Registration Statement.

          (t) The Company has been organized and operated in conformity with the
requirements for qualification and taxation of the Company as a REIT under the
Code, and the Company's proposed methods of operation will enable the Company to
continue to meet the requirements for qualification and taxation as a REIT under
the Code for subsequent taxable years.

          (u) The Company will not be or become, at any time prior to the
expiration of three years after the date of the Agreement, an "investment
company," as such term is defined in the Investment Company Act.

          (v) The Company has retained the Accountants as its qualified
accountants and qualified tax experts (i) to test procedures and conduct annual
compliance reviews designed to determine compliance with the REIT provisions of
the Code and the Company's exempt status under the Investment Company Act and
(ii) to otherwise assist the Company in monitoring



appropriate accounting systems and procedures designed to determine compliance
with the REIT provisions of the Code and the Company's exempt status under the
Investment Company Act.

          (w) The Company will comply with all requirements imposed upon it by
the Securities Act and the Exchange Act as from time to time in force, so far as
necessary to permit the continuance of sales of, or dealings in, the Shares as
contemplated by the provisions hereof and the Prospectus.

          (x) The Company will maintain such controls and other procedures,
including, without limitation, those required by Sections 302 and 906 of the
Sarbanes-Oxley Act, and the applicable regulations thereunder that are designed
to ensure that information required to be disclosed by the Company in the
reports that it files or submits under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the Commission's
rules and forms, including, without limitation, controls and procedures designed
to ensure that information required to be disclosed by the Company in the
reports that it files or submits under the Exchange Act is accumulated and
communicated to the Company's management, including its chief executive officer
and chief financial officer, or persons performing similar functions, as
appropriate to allow timely decisions regarding required disclosure and to
ensure that material information relating to the Company is made known to them
by others within those entities, particularly during the period in which such
periodic reports are being prepared.

          (y) The Company will comply with all effective applicable provisions
of the Sarbanes-Oxley Act.

          (z) The Company represents and agrees that, unless it obtains the
prior consent of Merrill Lynch, and each Underwriter represents and agrees that,
unless it obtains the prior consent of the Company and Merrill Lynch, it has not
made and will not make any offer relating to the Shares that would constitute an
"issuer free writing prospectus," as defined in Rule 433, or that would
otherwise constitute a "free writing prospectus," as defined in Rule 405,
required to be filed with the Commission or, in the case of the Company, whether
or not required to be filed with the Commission; provided, however, that prior
to the preparation of the Final Term Sheet in accordance with Section 4(b), the
Underwriters are authorized to use the information with respect to the final
terms of the Shares in communications conveying information relating to the
offering to investors. Any such free writing prospectus consented to by the
Company and Merrill Lynch is hereinafter referred to as a "Permitted Free
Writing Prospectus." The Company represents that it has treated or agrees that
it will treat each Permitted Free Writing Prospectus as an "issuer free writing
prospectus," as defined in Rule 433, and has complied and will comply with the
requirements of Rule 433 applicable to any Permitted Free Writing Prospectus,
including timely filing with the Commission where required, legending and record
keeping.

          5. REIMBURSEMENT OF UNDERWRITERS' EXPENSES. If the Shares are not
delivered for any reason other than the termination of this Agreement pursuant
to the default by one or more of the Underwriters in its or their respective
obligations hereunder, the Company shall, in addition to paying the amounts
described in Section 4(p) hereof, reimburse the



Underwriters for all of their out-of-pocket expenses, including the fees and
disbursements of their counsel.

          6. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The several obligations of
the Underwriters hereunder are subject to the accuracy of the representations
and warranties on the part of the Company on the date hereof, at the Applicable
Time and at the time of purchase (and the several obligations of the
Underwriters at each additional time of purchase are subject to the accuracy of
the representations and warranties on the part of the Company on the date
hereof, at the Applicable Time and at the time of purchase (unless previously
waived) and at each additional time of purchase, as the case may be), the
performance by the Company of its obligations hereunder and to the following
additional conditions precedent:

          (a) The Company shall furnish to Merrill Lynch at the time of purchase
and at each additional time of purchase, as the case may be, opinions of
Kirkpatrick & Lockhart Preston Gates Ellis LLP and McKee Nelson LLP, each
counsel for the Company, addressed to the Underwriters, and dated the time of
purchase or each additional time of purchase, as the case may be, with
reproduced copies for each of the other Underwriters and in form satisfactory to
Fried Frank Harris Shriver & Jacobson LLP, counsel for the Underwriters,
substantially in the form of Exhibit A and Exhibit B, respectively attached
hereto.

          (b) Merrill Lynch shall have received from the Accountants, letters
dated, respectively, the date of this Agreement and the time of purchase and
each additional time of purchase, as the case may be, and addressed to the
Underwriters (with reproduced copies for each of the Underwriters) in the forms
heretofore approved by Merrill Lynch relating to the financial statements,
including any pro forma financial statements of the Company and such other
matters customarily covered by comfort letters issued in connection with a
registered public offering.

          In the event that the letters referred to above set forth any such
changes, decreases or increases, it shall be a further condition to the
obligations of the Underwriters that (i) such letters shall be accompanied by a
written explanation of the Company as to the significance thereof, unless
Merrill Lynch deem such explanation unnecessary, and (ii) such changes,
decreases or increases do not, in the sole judgment of Merrill Lynch, make it
impractical or inadvisable to proceed with the purchase and delivery of the
Shares as contemplated by the Registration Statement and the Prospectus.

          (c) Merrill Lynch shall have received at the time of purchase and at
each additional time of purchase, as the case may be, the favorable opinion of
Fried Frank Harris Shriver & Jacobson LLP, counsel for the Underwriters, dated
the time of purchase or each additional time of purchase, as the case may be.

          (d) No amendment or supplement to the Registration Statement or the
Prospectus, including documents deemed to be incorporated by reference therein,
or Issuer Free Writing Prospectus shall be filed to which the Underwriters
object in writing.

          (e) Prior to the time of purchase or each additional time of purchase,
as the case may be, (i) no stop order with respect to the effectiveness of any
one of the Registration



Statement shall have been issued under the Securities Act or proceedings
initiated under Section 8(d) or 8(e) of the Securities Act; (ii) the
Registration Statement and all amendments thereto, or modifications thereof, if
any, shall not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading; and (iii) the Prospectus and all amendments or
supplements thereto, or modifications thereof, if any, and the General
Disclosure Package shall not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they are
made, not misleading.

          (f) All filings with the Commission required by Rule 424 under the
Securities Act to have been filed by the time of purchase or each additional
time of purchase, as the case may be, shall have been made within the applicable
time period prescribed for such filing by Rule 424 (without reliance on Rule
424(b)(8)). A prospectus containing the Rule 430(B) information shall have been
filed with the Commission in accordance with Rule 424(b) (or a post effective
amendment providing such information shall have been filed and declared
effective in accordance with the requirements of Rule 430(B)).

          (g) Between the time of execution of this Agreement and the time of
purchase or each additional time of purchase, as the case may be, (i) no
material and unfavorable change, financial or otherwise (other than as referred
to in the Registration Statement, and the Prospectus and the General Disclosure
Package, in each case as of the Applicable Time), in the business, condition,
net worth or prospects of the Company shall occur or become known and (ii) no
transaction which is material and unfavorable to the Company shall have been
entered into by the Company.

          (h) The Company will, at the time of purchase or each additional time
of purchase, as the case may be, deliver to Merrill Lynch a certificate of two
of its executive officers to the effect that the representations and warranties
of the Company as set forth in this Agreement are true and correct as of each
such date, that the Company shall perform such of its obligations under this
Agreement as are to be performed at or before the time of purchase and at or
before each additional time of purchase, as the case may be, and that the
conditions set forth in paragraphs (e) and (g) of this Section 6 have been met.

          (i) The Company shall have furnished to Merrill Lynch such other
documents and certificates as to the accuracy and completeness of any statement
in the Registration Statement and the Prospectus as of the time of purchase and
each additional time of purchase, as the case may be, as Merrill Lynch may
reasonably request.

          (j) The Shares shall have been approved for listing on the NYSE,
subject only to notice of issuance at or prior to the time of purchase or each
additional time of purchase, as the case may be.

          (k) The NASD shall not have raised any objection with respect to the
fairness and reasonableness of the underwriting terms and arrangements.



          (l) Merrill Lynch shall have received lock-up agreements from the
Company and its officers and directors, in the form of Exhibit C attached
hereto, and such letter agreements shall be in full force and effect.

          (m) Between the time of execution of this Agreement and the time of
purchase or each additional time of purchase, as the case may be, there shall
not have occurred any downgrading, nor shall any notice or announcement have
been given or made of (i) any intended or potential downgrading or (ii) any
review or possible change that does not indicate an improvement, in the rating
accorded any securities of or guaranteed by the Company by any "nationally
recognized statistical rating organization," as that term is defined in Rule
436(g)(2) under the Securities Act.

          7. TERMINATION. The obligations of the several Underwriters hereunder
shall be subject to termination in the absolute discretion of Merrill Lynch, at
any time prior to the time of purchase or, if applicable, each additional time
of purchase, (i) if any of the conditions specified in Section 6 shall not have
been fulfilled when and as required by this Agreement to be fulfilled, (ii) if
any material adverse and unfavorable change occurs (financial or otherwise), or
any development involving a material adverse and unfavorable change occurs
(financial or otherwise) (in each case, other than as disclosed in, or
incorporated by reference into, the Registration Statement, the General
Disclosure Package, and the Prospectus as of the Applicable Time (exclusive of
any supplement thereto)), in the operations, business, net worth, condition or
prospects of the Company, or a material change in management of the Company
occurs, whether or not arising in the ordinary course of business, which would,
in the sole judgment of Merrill Lynch, make it impracticable to market the
Shares, (iii) if (a) the United States shall have declared war in accordance
with its constitutional processes or there has occurred an outbreak or
escalation of hostilities or other national or international calamity or crisis
or change or development in economic, political or other conditions the effect
of which on, or (b) any material adverse change in the financial markets of the
United States or the international financial markets is such as to make it, in
the sole judgment of Merrill Lynch, impracticable or inadvisable to market the
Shares or enforce contracts for the sale of the Shares, (iv) if trading in any
securities of the Company has been suspended or materially limited by the
Commission or by the NYSE, or if trading generally on the NYSE, American Stock
Exchange or in the Nasdaq National Market has been suspended, materially
limited, (including an automatic halt in trading pursuant to market-decline
triggers other than those in which solely program trading is temporarily
halted), or limitations on or minimum prices for trading (other than limitations
on hours or numbers of days of trading) shall have been fixed, or maximum ranges
for prices for securities have been required, by such exchange or the NASD or
Nasdaq or by order of the Commission or any other governmental authority, (v) if
a banking moratorium shall have been declared by New York or United States
authorities or a material disruption has occurred in commercial banking or
securities settlement or clearance services in the United States, (vi) if there
shall have occurred any downgrading, or any notice or announcement shall have
been given or made of (a) any intended or potential downgrading or (b) any
review or possible change that does not indicate an improvement, in the rating
accorded any securities of or guaranteed by the Company by any "nationally
recognized statistical rating organization," as that term is defined in Rule
436(g)(2) under the Securities Act, (vii) if any federal or state statute,
regulation, rule or order of any court or other governmental authority has been
enacted, published, decreed or otherwise promulgated which, in the reasonable
opinion of Merrill Lynch, materially adversely affects or will materially



adversely affect the business or operations of the Company, or (viii) if any
action has been taken by any federal, state or local government or agency in
respect of its monetary or fiscal affairs which, in the reasonable opinion of
Merrill Lynch, has a material adverse effect on the securities markets in the
United States.

          If Merrill Lynch elects to terminate this Agreement as provided in
this Section 7, the Company and each other Underwriter shall be notified
promptly by telephone, which shall be promptly confirmed by facsimile.

          If the sale to the Underwriters of the Shares, as contemplated by this
Agreement, is not carried out by the Underwriters for any reason permitted under
this Agreement or if such sale is not carried out because the Company shall be
unable to comply with any of the terms of this Agreement, the Company shall not
be under any obligation or liability under this Agreement (except to the extent
provided in Sections 3, 4(p), 5, 9 and 10 hereof), and the Underwriters shall be
under no obligation or liability to the Company under this Agreement (except to
the extent provided in Sections 9 and 10 hereof) or to one another hereunder.

          8. INCREASE IN UNDERWRITERS' COMMITMENTS. If any Underwriter shall
default in its obligation under this Agreement to take up and pay for the Shares
to be purchased by it under this Agreement (otherwise than for reasons
sufficient to justify the termination of this Agreement under the provisions of
Section 7 hereof), Merrill Lynch shall have the right, within 36 hours after
such default, to make arrangements for one or more of the non-defaulting
Underwriters, or any other underwriters, to purchase all, but not less than all,
of the Shares which such Underwriter shall have agreed but failed to take up and
pay for (the "Defaulted Shares"). Absent the completion of such arrangements
within such 36 hour period, (i) if the total number of Defaulted Shares does not
exceed 10% of the total number of Shares to be purchased at the time of purchase
or each additional time of purchase, as the case may be, each non-defaulting
Underwriter shall take up and pay for (in addition to the number of Shares which
it is otherwise obligated to purchase on such date pursuant to this Agreement)
the number of Shares agreed to be purchased by all such defaulting Underwriters
in such amount or amounts as Merrill Lynch may designate with the consent of
each Underwriter so designated or, in the event no such designation is made,
such Shares shall be taken up and paid for by all non-defaulting Underwriters
pro rata in proportion to the aggregate number of Firm Shares set opposite the
names of such non-defaulting Underwriters in Schedule A; and (ii) if the total
number of Defaulted Shares exceeds 10% of such total number of Shares to be
purchased at the time of purchase or each additional time of purchase, as the
case may be, and if neither the non-defaulting Underwriters nor the Company
shall make arrangements within the five Business Day period from the date of
default for the purchase of such Defaulted Shares, Merrill Lynch may terminate
this Agreement by notice to the Company, without liability of any party to any
other party except that the provisions of Sections 3 4(p), 5, 9 and 10 shall at
all times be effective and shall survive such termination. Nothing in this
paragraph, and no action taken hereunder, shall relieve any defaulting
Underwriter from liability in respect of any default of such Underwriter under
this Agreement.

          Without relieving any defaulting Underwriter from its obligations
hereunder, the Company agrees with the non-defaulting Underwriters that they
will not sell any Shares hereunder unless all of the Shares are purchased by the
Underwriters (or by substituted



Underwriters selected by Merrill Lynch with the approval of the Company or
selected by the Company with Merrill Lynch' approval).

          If a new Underwriter or Underwriters are substituted for a defaulting
Underwriter or Underwriters in accordance with the foregoing provisions, the
Company or Merrill Lynch shall have the right to postpone the time of purchase
or each additional time of purchase, as the case may be, for a period not
exceeding seven Business Days from the date of substitution in order that any
necessary changes in the Registration Statement and the Prospectus and other
documents may be effected.

          The term Underwriter as used in this Agreement shall refer to and
include any Underwriter substituted under this Section 8 with like effect as if
such substituted Underwriter had originally been named in Schedule A.

          9. INDEMNIFICATION.

          (a) Indemnification of Underwriters. The Company agrees to indemnify
and hold harmless the Underwriters, their affiliates, as such term is defined in
Rule 501(b) under the Securities Act (each, an "Affiliate") and the person, if
any, who controls each Underwriter within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act as follows:

          (i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement (or any
amendment thereto), including the Rule 430B Information, or the omission or
alleged omission therefrom of a material fact required to be stated therein or
necessary to make the statements therein not misleading or arising out of any
untrue statement or alleged untrue statement of a material fact contained in any
preliminary prospectus, any Issuer Free Writing Prospectus or the Prospectus (or
any amendment or supplement thereto), or the omission or alleged omission
therefrom of a material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not misleading;

          (ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim whatsoever
based upon any such untrue statement or omission, or any such alleged untrue
statement or omission; provided that (subject to Section 10 below) any such
settlement is effected with the written consent of the Company; and

          (iii) against any and all expense whatsoever, as incurred (including
the fees and disbursements of counsel chosen by Merrill Lynch), reasonably
incurred in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission, to the extent that
any such expense is not paid under (i) or (ii) above;

provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue



statement or omission made in reliance upon and in conformity with written
information furnished to the Company by any Underwriter through Merrill Lynch
expressly for use in the Registration Statement (or any amendment thereto),
including the Rule 430B Information or any preliminary prospectus, any Issuer
Free Writing Prospectus or the Prospectus (or any amendment or supplement
thereto).

          (b) Indemnification of Company, Directors and Officers. Each
Underwriter severally agrees to indemnify and hold harmless the Company, its
directors, each of its officers who signed the Registration Statement, and each
person, if any, who controls the Company within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act against any and all loss,
liability, claim, damage and expense described in the indemnity contained in
subsection (a) of this Section, as incurred, but only with respect to untrue
statements or omissions, or alleged untrue statements or omissions, made in the
Registration Statement (or any amendment thereto), including the Rule 430B
Information or any preliminary prospectus, any Issuer Free Writing Prospectus or
the Prospectus (or any amendment or supplement thereto) in reliance upon and in
conformity with written information furnished to the Company by such Underwriter
through Merrill Lynch expressly for use therein.

          (c) Actions against Parties; Notification. Each indemnified party
shall give notice as promptly as reasonably practicable to each indemnifying
party of any action commenced against it in respect of which indemnity may be
sought hereunder, but failure to so notify an indemnifying party shall not
relieve such indemnifying party from any liability hereunder to the extent it is
not materially prejudiced as a result thereof and in any event shall not relieve
it from any liability which it may have otherwise than on account of this
indemnity agreement. In the case of parties indemnified pursuant to Section 9(a)
above, counsel to the indemnified parties shall be selected by the Merrill
Lynch, and, in the case of parties indemnified pursuant to Section 9(b) above,
counsel to the indemnified parties shall be selected by the Company. An
indemnifying party may participate at its own expense in the defense of any such
action; provided, however, that counsel to the indemnifying party shall not
(except with the consent of the indemnified party) also be counsel to the
indemnified party. In no event shall the indemnifying parties be liable for fees
and expenses of more than one counsel (in addition to any local counsel)
separate from their own counsel for all indemnified parties in connection with
any one action or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances. No
indemnifying party shall, without the prior written consent of the indemnified
parties, settle or compromise or consent to the entry of any judgment with
respect to any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim whatsoever in
respect of which indemnification or contribution could be sought under this
Section 9 or Section 10 hereof (whether or not the indemnified parties are
actual or potential parties thereto), unless such settlement, compromise or
consent (i) includes an unconditional release of each indemnified party from all
liability arising out of such litigation, investigation, proceeding or claim and
(ii) does not include a statement as to or an admission of fault, culpability or
a failure to act by or on behalf of any indemnified party.

          (d) Settlement without Consent if Failure to Reimburse. If at any time
an indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any



settlement of the nature contemplated by Section 9(a)(ii) effected without its
written consent if (i) such settlement is entered into more than 45 days after
receipt by such indemnifying party of the aforesaid request, (ii) such
indemnifying party shall have received notice of the terms of such settlement at
least 30 days prior to such settlement being entered into and (iii) such
indemnifying party shall not have reimbursed such indemnified party in
accordance with such request prior to the date of such settlement.

          10. CONTRIBUTION. If the indemnification provided for in Section 9
hereof is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, liabilities, claims, damages or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred, (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company on the one
hand and the Underwriters on the other hand from the offering of the Shares
pursuant to this Agreement or (ii) if the allocation provided by clause (i) is
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of the Company on the one hand and of the Underwriters on the
other hand in connection with the statements or omissions which resulted in such
losses, liabilities, claims, damages or expenses, as well as any other relevant
equitable considerations.

     The relative benefits received by the Company on the one hand and the
Underwriters on the other hand in connection with the offering of the Shares
pursuant to this Agreement shall be deemed to be in the same respective
proportions as the Net Proceeds from the offering of the Shares pursuant to this
Agreement (before deducting expenses) received by the Company, relative to the
total compensation received by the Underwriters from the sale of Shares on
behalf of the Underwriters.

     The relative fault of the Company on the one hand and the Underwriters on
the other hand shall be determined by reference to, among other things, whether
any such untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by the
Company or by the Underwriters and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission.

     The Company and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 10 were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this Section 10. The aggregate
amount of losses, liabilities, claims, damages and expenses incurred by an
indemnified party and referred to above in this Section 10 shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged untrue
statement or omission or alleged omission.

     Notwithstanding the provisions of this Section 10, the Underwriters shall
not be required to contribute any amount in excess of the amount by which the
total price at which the Shares



underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages which such Underwriter has otherwise been
required to pay by reason of any such untrue or alleged untrue statement or
omission or alleged omission.

     No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from any
Person who was not guilty of such fraudulent misrepresentation.

     For purposes of this Section 10, the person, if any, who controls any
Underwriter within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act and the Underwriters' Affiliates shall have the same rights
to contribution as such Underwriter, and each director of the Company, each
officer of the Company who signed the Registration Statement, and each person,
if any, who controls the Company within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act shall have the same rights to
contribution as the Company.

          11. NOTICES. Except as otherwise herein provided, all statements,
requests, notices and agreements shall be in writing or by telegram and, if to
the Underwriters, shall be sufficient in all respects if delivered or sent to
Merrill Lynch & Co., 4 World Financial Center, New York, New York 10080,
Attention: Lee Shavel, with a copy for information purposes to Valerie Ford
Jacob, Esq. at Fried, Frank, Harris, Shriver & Jacobson LLP, One New York Plaza,
New York, New York 10004 and if to the Company, shall be sufficient in all
respects if delivered or sent to the Company at the offices of the Company at
1211 Avenue of the Americas, Suite 2902, New York, New York 10036, Attention:
Michael A.J. Farrell with a copy for information purposes to Phillip Kardis,
Esq. at Kirkpatrick & Lockhart Preston Gates Ellis LLP, 1601 K Street NW,
Washington, D.C. 20006.

          12. GOVERNING LAW; CONSTRUCTION. This Agreement and any claim,
counterclaim or dispute of any kind or nature whatsoever arising out of or in
any way relating to this Agreement (a "Claim"), directly or indirectly, shall be
governed by, and construed in accordance with, the laws of the State of New
York. The Section headings in this Agreement have been inserted as a matter of
convenience of reference and are not a part of this Agreement.

          13. SUBMISSION TO JURISDICTION. Except as set forth below, no Claim
may be commenced, prosecuted or continued in any court other than the courts of
the State of New York located in the City and County of New York or in the
United States District Court for the Southern District of New York, which courts
shall have jurisdiction over the adjudication of such matters, and the Company
consents to the non-exclusive jurisdiction of such courts and personal service
with respect thereto. The Company hereby consents to personal jurisdiction,
service and venue in any court in which any Claim arising out of or in any way
relating to this Agreement is brought by any third party against Merrill Lynch
or any indemnified party. Each of Merrill Lynch and the Company (on its behalf
and, to the extent permitted by applicable law, on behalf of its stockholders
and affiliates) waives all right to trial by jury in any action, proceeding or
counterclaim (whether based upon contract, tort or otherwise) in any way arising
out of or relating to this Agreement. The Company agrees that a final judgment
in any such action, proceeding or counterclaim brought in any such court shall
be conclusive and binding upon the



Company and may be enforced in any other courts in the jurisdiction of which the
Company is or may be subject, by suit upon such judgment.

          14. PARTIES AT INTEREST. The Agreement herein set forth has been and
is made solely for the benefit of the Underwriters, the Company and to the
extent provided in Section 9 and 10 hereof the controlling Persons, directors
and officers referred to in such Section, and their respective successors,
assigns, heirs, pursuant representatives and executors and administrators. No
other Person, partnership, association or corporation (including a purchaser, as
such purchaser, from any of the Underwriters) shall acquire or have any right
under or by virtue of this Agreement.

          15. NO ADVISORY OR FIDUCIARY RELATIONSHIP. The Company acknowledges
and agrees that (a) the purchase and sale of the Shares pursuant to this
Agreement, including the determination of the public offering price of the
Shares and any related discounts and commissions, is an arm's-length commercial
transaction between the Company, on the one hand, and the several Underwriters,
on the other hand, (b) in connection with the offering contemplated hereby and
the process leading to such transaction each Underwriter is and has been acting
solely as a principal and is not the agent or fiduciary of the Company, or its
respective stockholders, creditors, employees or any other party, (c) no
Underwriter has assumed or will assume an advisory or fiduciary responsibility
in favor of the Company with respect to the offering contemplated hereby or the
process leading thereto (irrespective of whether such Underwriter has advised or
is currently advising the Company on other matters) and no Underwriter has any
obligation to the Company with respect to the offering contemplated hereby
except the obligations expressly set forth in this Agreement, (d) the
Underwriters and their respective affiliates may be engaged in a broad range of
transactions that involve interests that differ from those of each of the
Company, and (e) the Underwriters have not provided any legal, accounting,
regulatory or tax advice with respect to the offering contemplated hereby and
the Company has consulted its own respective legal, accounting, regulatory and
tax advisors to the extent it deemed appropriate.

          16. TAX DISCLOSURE. Notwithstanding any other provision of this
Agreement, immediately upon commencement of discussions with respect to the
transactions contemplated hereby, the Company (and each employee, representative
or other agent of the Company) may disclose to any and all persons, without
limitation of any kind, the tax treatment and tax structure of the transactions
contemplated by this Agreement and all materials of any kind (including opinions
or other tax analyses) that are provided to the Company relating to such tax
treatment and tax structure. For purposes of the foregoing, the term "tax
treatment" is the purported or claimed federal income tax treatment of the
transactions contemplated hereby, and the term "tax structure" includes any fact
that may be relevant to understanding the purported or claimed federal income
tax treatment of the transactions contemplated hereby.

          17. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE. All
representations, warranties and agreements contained in this Agreement or in
certificates of officers of the Company or any of its subsidiaries submitted
pursuant hereto, shall remain operative and in full force and effect regardless
of (i) any investigation made by or on behalf of any Underwriter or its
Affiliates or selling agents, any person controlling any Underwriter, its



officers or directors or any person controlling the Company, and (ii) delivery
of and payment for the Shares.

          18. INTEGRATION. This Agreement supersedes all prior agreements and
understandings (whether written or oral) between the Company and the
Underwriters, or any of them, with respect to the subject matter hereof.

          19. COUNTERPARTS. This Agreement may be signed by the parties in one
or more counterparts which together shall constitute one and the same agreement
among the parties.

          20. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
Underwriters and the Company and their successors and assigns and any successor
or assign of any substantial portion of the Company's and any of the
Underwriters' respective businesses and/or assets.

          21. TIME. TIME SHALL BE OF THE ESSENCE OF THIS AGREEMENT. EXCEPT AS
OTHERWISE SET FORTH HEREIN, SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME.



          If the foregoing correctly sets forth the understanding among the
Company and the Underwriters, please so indicate in the space provided below for
the purpose, whereupon this letter and your acceptance shall constitute a
binding agreement among the Company and the Underwriters, severally.

                                        Very truly yours,

                                        ANNALY CAPITAL MANAGEMENT, INC.


                                        By: /s/ Kathryn Fagan
                                            ------------------------------------
                                            Name: Kathryn Fagan
                                            Title: Chief Financial Officer



Accepted and agreed to as of the date
first above written, on behalf of itself
and the other several Underwriters named
in Schedule A

MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
                 INCORPORATED
CITIGROUP GLOBAL MARKETS INC.
UBS SECURITIES LLC

BY: MERRILL LYNCH, PIERCE, FENNER & SMITH
                 INCORPORATED


                      By /s/ Lee Shavel
                         ------------------------------------
                         Authorized Signatory

For themselves and as Representative(s) of the other Underwriters named in
Schedule A hereto.



                                   SCHEDULE A

UNDERWRITER                                              NUMBER OF FIRM SHARES
------------------------------------------------------   ---------------------
Merrill Lynch, Pierce, Fenner & Smith Incorporated....        22,500,000
Citigroup Global Markets Inc. ........................         7,500,000
UBS Securities LLC ...................................         7,500,000
Bear, Stearns, & Co. Inc. ............................         3,750,000
Credit Suisse Securities (USA) LLC....................         3,750,000
Keefe, Bruyette & Woods, Inc..........................         2,500,000
RBC Capital Markets Corporation ......................         2,500,000
                                                              ----------
   Total..............................................        50,000,000
                                                              ==========


                                      Sch-A



                                   SCHEDULE B

                   Issuer General Use Free Writing Prospectus

None


                                      Sch-B



                                   SCHEDULE C


                                   Information

Number of Firm Shares:                      50,000,000

Initial public offering price per Share:    $13.50


                                      Sch-C



                                    EXHIBIT A

            OPINION OF KIRKPATRICK & LOCKHART PRESTON GATES ELLIS LLP

     1. The Company is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Maryland, with the corporate power
and authority to own, lease and operate its properties and conduct its business
as described in the Prospectus and to enter into and perform its obligations
under or as contemplated by the Underwriting Agreement.

     2. The Company is duly qualified to do business as a foreign corporation
and is in good standing in each jurisdiction where the ownership or leasing of
its properties or the conduct of its business requires such qualification,
except where the failure to be so qualified and in good standing would not have
a Material Adverse Effect (with your permission, we have relied in respect of
matters of fact related to the opinion in this paragraph upon a certificate of
an officer of the Company).

     3. The Underwriting Agreement has been duly authorized, executed, and
delivered by the Company.

     4. The Shares have been duly authorized by the Company for issuance and
sale to the Underwriters pursuant to the Underwriting Agreement and, when issued
and delivered by the Company pursuant to the Underwriting Agreement against
payment of the consideration set forth therein, will be validly issued, fully
paid and non-assessable and no holder of the Shares is or will be subject to
personal liability, under the General Corporation Law of the State of Maryland
(the "MGCL") or the Charter or By-laws of the Company, by reason of being a
holder.

     5. The Company has an authorized capitalization as of December 31, 2006 as
set forth in the Prospectus Supplement under the caption "Capitalization." All
issued and outstanding shares of capital stock of the Company are validly
issued, fully paid, and non-assessable, and conform in all material respects
with the description thereof contained in the Prospectus. The Shares when issued
and outstanding will conform in all material respects with the description
thereof contained in the Prospectus.

     6. The issuance of the Shares is not subject to preemptive or other similar
rights of any stockholder of the Company arising by operation of the MGCL or
under the Charter or By-laws of the Company, or, to our knowledge, any
contractual preemptive rights, resale rights, rights of first refusal or similar
rights. To our knowledge, except as disclosed in the Registration Statement and
the Prospectus, there is no outstanding option, warrant or other right calling
for the issuance of, and no commitment, plan or arrangement to issue, any shares
of capital stock of the Company or any security convertible into, exercisable
for, or exchangeable for shares of capital stock of the Company. To our
knowledge, no holder of any security of the Company has the right to have any
security owned by such holder included for registration in the Registration
Statement.


                                     Exh-A-1



     7. The forms of certificate used by the Company to represent shares of
Common Stock comply in all material respects with any applicable requirement of
the MGCL, the Company's Charter and By-laws, and the New York Stock Exchange.

     8. The information incorporated by reference into the Prospectus from the
Company's Form 10-K for the Company's fiscal year ending December 31, 2006 under
the captions "Risk Factors - Risks of Ownership of Our Common Stock - Maryland
Business Combination Act", "Risk Factors - Risks of Ownership of Our Common
Stock - Maryland Control Share Acquisition Act", and the information in the
Prospectus under the caption "Description of Common Stock and Preferred Stock"
and in the Prospectus Supplement under the caption "Risk Factors - Our
operations may be adversely affected if we are subject to the Investment Company
Act" to the extent that such information constitutes a summary of legal matters
under the MGCL or of provisions of the Company's Charter or By-laws or the 1940
Act (as defined below), has been reviewed by us and is correct in all material
respects.

     9. The Registration Statement and the Prospectus (in each case other than
(A) the financial statements and supporting schedules and other financial and
accounting data included or incorporated by reference therein or omitted
therefrom as to which we express no opinion and (B) except as expressed in our
opinion in paragraph 10 below, the documents incorporated therein), as of their
respective effective dates, as the case may be, each complied, and as of the
date hereof each comply, as to form in all material respects to the applicable
requirements of the Securities Act.

     10. The annual report on Form 10-K for the year ended December 31, 2006,
incorporated by reference in the Registration Statement (other than the
financial statements and supporting schedules and other financial and accounting
data included therein, as to which we express no opinion), when they were filed
with the Commission (or, if later, upon filing of an amendment thereto) complied
as to form in all material respects with the requirements of the Securities
Exchange Act of 1934, as amended, and the rules and regulations of the
Commission promulgated thereunder (collectively, the "1934 Act").

     11. The Registration Statement has been declared effective under the 1933
Act; the Prospectus has been filed pursuant to Rule 424(b) of the 1933 Act
Regulations in the manner and within the time period required by Rule 424(b);
and, to our knowledge, based solely on a telephone conversation with a member of
the staff of the Commission, no stop order suspending the effectiveness of the
Registration Statement has been issued under the 1933 Act and no proceedings for
that purpose have been initiated or threatened by the Commission.

     12. To our knowledge, no consent, approval, authorization, or other order
of any federal regulatory body, federal administrative agency or other federal
governmental body of the United States of America or any state regulatory body,
state administrative agency or other state governmental body of the State of
Maryland is required under the Applicable Laws for the Company to issue and sell
the Shares to the Underwriters as contemplated by the Underwriting Agreement and
to consummate the transactions contemplated thereby.

     13. The execution, delivery and performance of the Underwriting Agreement
by the Company, the issuance and sale of the Shares to the Underwriters as
contemplated by the


                                     Exh-A-2



Underwriting Agreement and consummation of the transactions contemplated thereby
do not and will not conflict with or result in a breach or violation of any of
the terms and provisions of, constitute a default under, or cause a Repayment
Event under (A) any indenture, mortgage, deed of trust, lease, repurchase
agreement or other agreement, known to us, to which the Company is a party or is
bound, except for such for such violations, conflicts, breaches, defaults,
liens, charges, or encumbrances that would not result in a Material Adverse
Effect, (B) the Charter or By-laws of the Company, (C) Applicable Laws, (D) the
Investment Company Act of 1940, as amended (the "1940 Act"), or (E) or, to our
knowledge, any judgment, decree, order, rule, or regulation, of any court, other
governmental authority, or arbitrator having jurisdiction over the Company,
except for such for such violations, conflicts, breaches, defaults, liens,
charges, or encumbrances that would not result in a Material Adverse Effect. As
used herein, a "Repayment Event" means any event or condition which gives the
holder of any note, debenture or other evidence of indebtedness (or any person
acting on such holder's behalf) the right to require the repurchase, redemption
or repayment of all or a portion of such indebtedness by the Company or any
subsidiary.

     14. The Company is not in violation of its Charter or By-laws, and, to our
knowledge, no default by the Company exists in the due performance or observance
of any material obligation, agreement, covenant, or condition contained in any
contract, indenture, mortgage, loan agreement, note, lease, repurchase
agreement, other agreement, or instrument that is described or referred to in
the Registration Statement or the Prospectus or filed or incorporated by
reference as an exhibit to the Registration Statement, except, in each case
above, for such for such violations, conflicts, breaches, defaults, liens,
charges, or encumbrances that would not result in a Material Adverse Effect.

     15. To our knowledge, there are no actions, suits, claims, investigations
or proceedings pending or threatened to which the Company is or would be a party
or to which any of their respective properties is subject which are required to
be described in the Registration Statement or Prospectus but are not so
described.

     16. The Company is not, and the transactions contemplated by the
Underwriting Agreement will not cause the Company to become an "investment
company" or an entity "controlled" by an "investment company" under the 1940
Act.

In acting as counsel to the Company, we have participated in conferences with
officers and other representatives of the Company, the independent public
accountants for the Company, and your representatives, at which conferences the
contents of the Registration Statement and the Prospectus, and related matters
were discussed. Although we are not passing upon or assuming responsibility for
the accuracy, completeness or fairness of the statements included or
incorporated by reference in the Registration Statement, the Prospectus, the
General Disclosure Package, or the Incorporated Documents (as defined below) and
have made no independent check or verification thereof (except as set forth in
paragraph eight above), on the basis of the foregoing, nothing has come to our
attention which has led us to believe that (i) the Registration Statement, at
the time the Registration Statement became effective, contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, (ii)
the documents included in the General Disclosure Package, as of the Applicable
Time, contained any untrue statement of a


                                     Exh-A-3



material fact or omitted to state any material fact necessary in order to make
the statements therein, in the light of circumstances under which they were
made, not misleading, or (iii) the Prospectus Supplement, as of its date or on
the date hereof, included or includes an untrue statement of a material fact or
omitted or omits to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading, except in each case that we express no belief and make no
statement with respect to financial statements and supporting schedules and
other financial and accounting data included or incorporated by reference in or
omitted from the Registration Statement, the Prospectus, the General Disclosure
Package, or the Incorporated Documents. With respect to statements contained in
the General Disclosure Package, any statement contained in any of the
constituent documents shall be deemed to be modified or superseded to the extent
that any information contained in subsequent constituent documents modifies or
replaces such statement. As used herein, the term "Incorporated Documents," when
used with respect to the Registration Statement or the Prospectus as of any
date, means the documents incorporated or deemed to be incorporated by reference
in the Registration Statement or the Prospectus, as the case may be, as of such
date pursuant to Item 12 of Form S-3.


                                     Exh-A-4



                                    EXHIBIT B

                           OPINION OF MCKEE NELSON LLP

          For all taxable years commencing with its taxable year ended December
31, 1997, the Company has been, and upon the sale of Shares will continue to be,
organized and operated in conformity with the requirements for qualification and
taxation as a "real estate investment trust" (a "REIT") under Section 856
through 860 of the Internal Revenue Code of 1986, as amended (the "Code"). The
Company's proposed method of operation will enable the Company to continue to
meet the requirements for qualification and taxation as a REIT under the Code,
and no actions have been taken (or not taken which are required to be taken)
which would cause such qualification to be lost. The disclosure contained in the
Prospectus under the captions "Material Federal Income Tax Considerations" and
the information incorporated by reference into the Prospectus from the Company's
Form 10-K for the Company's fiscal year ending December 31, 2006 under the
captions, "Risk Factors - We and Our Shareholders Are Subject To Certain Tax
Risks" to the extent such information constitutes a summary of the United States
federal income tax laws and legal conclusions referred to therein, is accurate
in all material respects and fairly summarizes the federal income tax laws
referred to therein.


                                    Ex. B-1



                                    EXHIBIT C
March 7, 2007

MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED,
   As representative of the several Underwriters,
4 World Financial Center
New York, New York 10080

Ladies and Gentlemen:

          In consideration of the agreement of Merrill Lynch & Co., Merrill
Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), and certain other
underwriters to underwrite a proposed public offering (the "Offering") of Common
Stock, par value $0.01 per share (the "Common Stock"), of Annaly Capital
Management, Inc., a Maryland corporation (the "Company"), as contemplated by a
shelf registration statement on Form S-3 (File No. 333-134404), as amended,
including a prospectus (the "Registration Statement"), the undersigned hereby
agrees that the undersigned will not, for a period of 90 days after the
commencement of the Offering, without the prior written consent of Merrill
Lynch, offer, sell, contract to sell, pledge, grant any option to purchase or
otherwise dispose of, directly or indirectly, any shares of capital stock, or
any securities convertible into, or exercisable, exchangeable or redeemable for,
shares of capital stock.

          Notwithstanding the foregoing, if (1) during the last 17 days of the
90-day restricted period the Company issues an earnings release or material news
or a material event relating to the Company occurs or (2) prior to the
expiration of the 90-day restricted period, the Company announces that it will
release earnings results or becomes aware that material news or a material event
will occur during the 16-day period beginning on the last day of the 90-day
restricted period, the restrictions imposed in this agreement shall continue to
apply until the expiration of the 18-day period beginning on the issuance of the
earnings release or the occurrence of the material news or material event.

          The undersigned hereby acknowledges and agrees that written notice of
any extension of the lock-up period pursuant to the previous paragraph will be
delivered by Merrill Lynch, to the Company and that any such notice properly
delivered will be deemed to have been given to, and received by, the
undersigned. The undersigned further agrees that, prior to engaging in any
transaction or taking any other action that is subject to the terms of this
lock-up agreement during the period from the date of this lock-up agreement to
and including the 34th day following the expiration of the initial lock-up
period, it will give notice thereof to the Company and will not consummate such
transaction or take any such action unless it has received written confirmation
from the Company that the lock-up period (as may have been extended pursuant to
the previous paragraph) has expired.


                                    Ex. C-1



                                           Very truly yours,


                                           By:
                                               ---------------------------------
                                               Name:
                                               Title:


                                    Ex. C-2