<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 9, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
CAPSTEAD MORTGAGE CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MARYLAND 75-2027937
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
2711 NORTH HASKELL AVENUE
SUITE 900
DALLAS, TEXAS 75204
(214) 874-2323
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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ANDREW F. JACOBS
2711 NORTH HASKELL AVENUE
SUITE 900
DALLAS, TEXAS 75204
(214) 874-2350
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
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THE COMMISSION IS REQUESTED TO SEND COPIES OF ALL COMMUNICATIONS TO:
DAVID BARBOUR
ANDREWS & KURTH L.L.P.
4400 THANKSGIVING TOWER
1601 ELM STREET
DALLAS, TEXAS 75201
(214) 979-4400
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this Registration Statement pursuant to
Rule 415.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
reinvestment plans, please check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
TITLE OF EACH CLASS OF PROPOSED MAXIMUM PROPOSED MAXIMUM
SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE(1) REGISTRATION FEE
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<S> <C> <C> <C> <C>
Common Stock, $0.01 par
value................. 4,800,000 shares $22.875 $109,800,000 $33,272.73
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$1.26 Cumulative
Convertible Preferred
Stock, Series B, $0.10
par value............. 2,000,000 shares $16.375 $32,750,000 $9,924.24
</TABLE>
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(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c), based upon the average of the high and low sales
prices of the Common Stock on May 7, 1997 as reported on the New York
Stock Exchange.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE>
PROSPECTUS
CAPSTEAD MORTGAGE CORPORATION
4,800,000 SHARES
COMMON STOCK
(PAR VALUE $0.01)
2,000,000 SHARES
$1.26 CUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES B
(PAR VALUE $0.10)
----------------
Capstead Mortgage Corporation, a Maryland corporation (the "Company"),
directly or through agents, dealers or underwriters designated from time to
time, may issue and sell from time to time up to 4,800,000 shares of its
common stock, par value $0.01 per share ("Common Stock"), and up to 2,000,000
shares of its $1.26 Cumulative Convertible Preferred Stock, Series B, par
value $0.10 per share ("Series B Preferred Stock") (such Common Stock and
Series B Preferred Stock, collectively, the "Securities"). The Securities
offered pursuant to this Prospectus may be issued in amounts, at prices and on
terms to be determined at the time of the offering of such Securities.
The Company may sell all or a portion of the Securities through agents or to
or through underwriters or dealers, and is a party to certain Sales Agency
Agreements relating to the sale of Common Stock and Series B Preferred Stock.
See "Description of Sales Agency Agreements" and "Plan of Distribution."
The specific terms of sales of shares of Common Stock and Series B Preferred
Stock pursuant hereto will be set forth, from time to time, in a Prospectus
Supplement filed under the applicable paragraph of Rule 424(b) promulgated
under the Securities Act. Such Prospectus Supplements will set forth the
number of shares of Common Stock and Series B Preferred Stock sold, pricing
information with respect to such sales, net proceeds to the Company and the
amount of any compensation payable by the Company to any sales agent(s) with
respect thereto.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION AND NEITHER THE
COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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THE DATE OF THIS PROSPECTUS IS MAY , 1997
<PAGE>
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS OR THE ACCOMPANYING PROSPECTUS
SUPPLEMENT AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER,
AGENT OR DEALER. NEITHER THE DELIVERY OF THIS PROSPECTUS OR THE ACCOMPANYING
PROSPECTUS SUPPLEMENT NOR ANY DISTRIBUTION OF SECURITIES BEING OFFERED
PURSUANT TO THIS PROSPECTUS AND AN ACCOMPANYING PROSPECTUS SUPPLEMENT SHALL
UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THEREOF OR THAT THE
INFORMATION CONTAINED HEREIN OR THEREIN IS CORRECT AT ANY TIME SUBSEQUENT TO
THE DATE HEREOF OR THEREOF. THIS PROSPECTUS AND THE ACCOMPANYING PROSPECTUS
SUPPLEMENT DO NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO PURCHASE, SECURITIES BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING THE OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION.
----------------
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and, in accordance
therewith, files reports and other information with the Securities and
Exchange Commission (the "Commission"). Reports and proxy and information
statements filed by the Company with the Commission pursuant to the
informational requirements of the Exchange Act may be inspected and copied at
the public reference facilities maintained by the Commission at Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the following
regional offices of the Commission: Northeast Regional Office, 7 World Trade
Center, 13th Floor, New York, New York 10048 and Midwest Regional Office,
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-
2511. Copies of such material may be obtained from the Public Reference
Section of the Commission at its principal office in Washington, D.C., at
prescribed rates or may be examined without charge at such office of the
Commission. The Commission maintains a Web site that contains reports, proxy
and information statements and other information regarding registrants that
file electronically with the Commission at http://www.sec.gov. In addition,
reports, proxy statements and other information concerning the Company can be
inspected and copied at the offices of the New York Stock Exchange, Inc., 20
Broad Street, New York, New York 10005-2601, on which outstanding shares of
the Company's Common Stock, Series A Preferred Stock and Series B Preferred
Stock are listed.
The Company has filed with the Commission a registration statement on Form
S-3 (the "Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the Securities offered hereby.
For further information with respect to the Company and the Securities offered
hereby, reference is made to the Registration Statement and exhibits thereto.
Statements contained in this Prospectus as to the contents of any contract or
other documents are not necessarily complete, and in each instance, reference
is made to the copy of such contract or documents filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents, heretofore filed by the Company with the Commission
pursuant to the Exchange Act, are hereby incorporated by reference, except as
superseded or modified herein:
1. The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996;
2
<PAGE>
2. The Company's Current Report on Form 8-K filed with the Commission on
March 26, 1997;
3. The Company's Quarterly Report on Form 10-Q filed with the Commission
on May 9, 1997 for the fiscal quarter ended March 31, 1997;
4. The description of the Common Stock contained in the Company's
Registration Statement on Form 8-A as filed with the Commission on May 14,
1985, and all amendments and reports filed for the purpose of updating that
description; and
5. The description of the Series B Preferred Stock contained in the
Company's Registration Statement on Form 8-A as filed with the Commission
on October 27, 1992, and all amendments and reports filed for the purpose
of updating that description.
Each document filed subsequent to the date of this Prospectus pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act and prior to termination
of the offering of all Securities to which this Prospectus relates shall be
deemed to be incorporated by reference in this Prospectus and shall be part
hereof from the date of filing of such document.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement herein, in any
accompanying Prospectus Supplement relating to a specific offering of
Securities or in any other subsequently filed document that is also
incorporated or deemed to be incorporated by reference herein, modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
this Prospectus or any accompanying Prospectus Supplement. Subject to the
foregoing, all information appearing in this Prospectus and each accompanying
Prospectus Supplement is qualified in its entirety by the information
appearing in the documents incorporated herein by reference.
The Company will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus and an accompanying
Prospectus Supplement is delivered, upon the written or oral request of any
such person, a copy of any document described above (other than exhibits).
Written requests for such copies should be directed to Capstead Mortgage
Corporation, 2711 North Haskell, Suite 900, Dallas, Texas 75204, Attention:
Investor Relations. The Company's telephone number is (214) 874-2323.
3
<PAGE>
THE COMPANY
The Company was incorporated on April 15, 1985 in the state of Maryland and
commenced operations in September 1985. The Company generates earnings from
investing in mortgage-backed securities, servicing mortgage loans and other
investment strategies. The Company's mortgage investment portfolio consists
primarily of adjustable-rate mortgage-backed securities issued by various
government-sponsored entities ("Agencies") and also includes investments in
AAA-rated private mortgage pass-through securities. The Company's
collateralized mortgage obligation ("CMO") collateral and investments includes
Agency-issued interest-only mortgage securities. Mortgage loan servicing
includes collection activities, accounting for principal and interest
payments, escrow administration and other responsibilities relating to the
administration of the mortgage loans. In exchange for providing this service,
the Company receives periodically a servicing fee representing an annualized
percentage of the outstanding principal balance of each such mortgage loan.
The Company, and its qualified real estate investment trust ("REIT")
subsidiaries, have elected to be taxed as a REIT under the Internal Revenue
Code of 1986, as amended (the "Code"), and intend to continue to do so. As a
result of this election, the Company and such subsidiaries are not taxed at
the corporate level on taxable income distributed to stockholders, provided
that certain REIT qualification tests are met. Certain other affiliated
entities which are consolidated with the Company for financial reporting
purposes, are not consolidated for federal income tax purposes. All taxable
income of these affiliated entities are subject to federal and state income
taxes, where applicable.
USE OF PROCEEDS
Unless otherwise specified in the applicable Prospectus Supplement for any
offering of Securities, the net proceeds from the sale of Securities offered
by the Company will be available for the general corporate purposes of the
Company. These general corporate purposes may include, without limitation,
repayment of maturing obligations, redemption of outstanding indebtedness,
financing (in whole or part) future acquisitions (including acquisitions of
companies and/or assets and of mortgage securities, servicing rights and other
mortgage-related products), capital expenditures and working capital. Pending
any such uses, the Company may invest the net proceeds from the sale of any
Securities or may use them to reduce short-term indebtedness.
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND
PREFERRED STOCK DIVIDENDS
The following table sets forth the historical ratios of earnings to combined
fixed charges and preferred stock dividends of the Company for the periods
indicated:
<TABLE>
<CAPTION>
THREE MONTHS ENDING YEAR ENDING DECEMBER 31,
------------------- -----------------------------------
MARCH 31, 1997 1996 1995 1994 1993 1992(A)
------------------- ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to
Combined Fixed Charges
and Preferred Stock
Dividends(b).......... 1.24:1 1.20:1 1.12:1 1.17:1 1.18:1 1.13:1
</TABLE>
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(a) This financial information reflects the effects of a merger between the
Company and Tyler Cabot Mortgage Securities Fund, subsequent to the
merger's consummation in December 1992.
(b) Includes fixed charges related to CMO's issued by the Company's finance
subsidiaries. Excluding interest expense on CMO debt, the ratio of
earnings to combined fixed charges and preferred stock dividends would
have been 1.45:1, 1.40:1, 1.29:1, 1.48:1, 1.79:1 and 1.80:1, respectively,
for the periods indicated.
4
<PAGE>
DESCRIPTION OF SALES AGENCY AGREEMENTS
The Company may sell the Securities through arrangements with underwriters
or dealers, directly to one or more purchasers, or through agents. With
respect to the Common Stock, the Company is a party to a Sales Agency
Agreement dated as of December 6, 1995 (the "Common Stock Sales Agency
Agreement") between the Company and PaineWebber Incorporated ("PaineWebber"),
as amended by Amendment No. 1 thereto dated as of September 10, 1996 and
Amendment No. 2 thereto dated as of March 4, 1997. With respect to the Series
B Preferred Stock, the Company is a party to a Sales Agency Agreement dated as
of September 17, 1996 (the "Preferred Stock Sales Agency Agreement") between
the Company and PaineWebber, as amended by Amendment No. 1 thereto dated as of
March 4, 1997. The Company may, in the future, enter into other sales
agreements covering the Common Stock and Series B Preferred Stock with other
sales agents or underwriters.
Pursuant to the terms of the Common Stock Sales Agency Agreement, the
Company may issue and sell up to 5,625,000 shares of the Common Stock from
time to time through PaineWebber, as sales agent for the Company; 3,217,650 of
such shares have been sold as of May 7, 1997, with up to all of the remaining
2,407,350 shares being offered under the Registration Statement of which this
Prospectus forms a part. Pursuant to the terms of the Preferred Stock Sales
Agency Agreement, the Company may issue and sell up to 4,500,000 shares of the
Company's Series B Preferred Stock from time to time through PaineWebber, as
sales agent for the Company; 563,100 of such shares have been sold as of May
7, 1997, with up to 2,000,000 of the remaining 3,936,900 shares being offered
under the Registration Statement of which this Prospectus forms a part. Such
sales, if any, will be made by means of ordinary brokers' transactions on the
NYSE. Such sales will be effected during a series of one or more pricing
periods (each, a "Pricing Period"), each consisting of five consecutive
calendar days, unless a shorter period has otherwise been agreed to by the
Company and PaineWebber. During any Pricing Period, no more than 60,000 shares
of the Common Stock and no more than 30,000 shares of the Series B Preferred
Stock will be sold, in the manner described below, as "Average Market Price
Shares". If the Company fails to meet the exemptive provisions set forth in
Rule 101(c)(1) of Regulation M of the Securities Exchange Act of 1934, as
amended, the number of Average Market Price Shares and Additional Shares (as
defined below) sold on any day in any Pricing Period shall not exceed 10% of
the average daily trading volume of the Common Stock or Series B Preferred
Stock as the case may be, for the 60 days prior to such Pricing Period. For
each Pricing Period, an Average Market Price (as hereinafter defined) will be
computed. With respect to any Pricing Period, "Average Market Price" shall
equal the average of the arithmetic mean of the high and low sales prices of
the Common Stock or the Series B Preferred Stock as the case may be, reported
on the NYSE for each trading day of such Pricing Period.
The net proceeds to the Company with respect to sales of Average Market
Price Shares will equal 98% of the Average Market Price for each share of
Common Stock or Series B Preferred Stock sold during a Pricing Period, plus
Excess Proceeds (as defined below), if any. The compensation to PaineWebber
for such sales in any Pricing Period will equal the difference between the
aggregate gross sales prices at which such sales are actually effected and the
net proceeds to the Company for such sales, but in no case will exceed the
maximum amount permitted pursuant to any applicable requirements of the
National Association of Securities Dealers, Inc., as determined in good faith
by PaineWebber (the "Maximum Commission"). To the extent that such aggregate
gross sales prices are less than the Average Market Price, the compensation to
PaineWebber would be correspondingly reduced; to the extent that such
aggregate gross sales prices are greater than the Average Market Price, the
compensation to PaineWebber will be correspondingly increased. To the extent
that PaineWebber's compensation under the foregoing formula would otherwise
exceed the Maximum Commission, the excess will constitute additional net
proceeds to the Company (the "Excess Proceeds").
Any shares of Common Stock or Series B Preferred Stock sold by PaineWebber
during the Pricing Period on behalf of the Company other than Average Market
Price Shares ("Additional Shares") will be at a fixed commission rate equal to
2% of the share price per share for the number of Additional Shares sold in a
Pricing Period. Unless otherwise indicated in a further Prospectus Supplement,
PaineWebber as sales agent will act on a best efforts basis.
5
<PAGE>
Settlements of sales of Additional Shares and Average Market Price Shares
will occur on the third business day following the date on which any such sales
are made. Purchases of Common Stock or Series B Preferred Stock from
PaineWebber as sales agent for the Company will settle the regular way on the
national securities exchange where such purchases were executed. Compensation
to PaineWebber with respect to sales of Average Market Price Shares will be
paid out of the proceeds of the Average Market Price Shares that settle the
third business day following the last day of a Pricing Period. There is no
arrangement for funds to be received in an escrow, trust or similar
arrangement.
The offering of Common Stock pursuant to the Common Stock Sales Agency
Agreement will terminate upon the earlier of (i) the sale of all shares of
Common Stock subject thereto or (ii) termination of the Common Stock Sales
Agency Agreement. PaineWebber has the right to terminate the Common Stock Sales
Agency Agreement if the Company engages another agent to sell shares under a
program substantially similar to the program covered by the Common Stock Sales
Agency Agreement, or in certain other circumstances specified in the Common
Stock Sales Agency Agreement.
The offering of Series B Preferred Stock pursuant to the Preferred Stock
Sales Agency Agreement will terminate upon the earlier of (i) the sale of all
shares of Series B Preferred Stock subject thereto or (ii) termination of the
Preferred Stock Sales Agency Agreement. The Preferred Stock Sales Agency
Agreement may be terminated by the Company in its sole discretion on September
17, 1997. PaineWebber has the right to terminate the Preferred Stock Sales
Agency Agreement after September 17, 1997 or in certain other circumstances
specified in the Preferred Stock Sales Agency Agreement.
6
<PAGE>
DESCRIPTION OF SECURITIES
GENERAL
The Company may offer under this Prospectus up to 4,800,000 shares of its
Common Stock and up to 2,000,000 shares of its Series B Preferred Stock. The
terms of any specific offering of Securities will be set forth in a Prospectus
Supplement relating to such offering.
The authorized capital stock of the Company currently consists of
100,000,000 shares of Common Stock, par value $0.01 per share, and 100,000,000
shares of Preferred Stock, par value $0.10 per share. As of May 7, 1997 the
Company had 48,700,148 shares of its Common Stock, 450,159 shares of its $1.60
Cumulative Preferred Stock, Series A ("Series A Preferred Stock") and
21,737,562 shares of its Series B Preferred Stock issued and outstanding. The
Common Stock, Series A Preferred Stock and Series B Preferred Stock are listed
on the New York Stock Exchange. The Company intends to list any additional
shares of its Common Stock which are issued and sold hereunder.
REDEMPTION OR REPURCHASE OF CAPITAL STOCK TO MAINTAIN THE COMPANY'S STATUS AS
A REIT
The Company's charter provides that if the Board of Directors determines in
good faith that the direct or indirect ownership of stock of the Company has
or may become concentrated to an extent which would cause the Company to fail
to qualify or be qualified as a REIT under Sections 856(a)(5) or (6) of the
Internal Revenue Code of 1986, as amended (the "Code"), or similar provisions
of successor statutes, the Company may redeem or repurchase any number of
shares of Common Stock and/or Preferred Stock sufficient to maintain or bring
such ownership into conformity with the Code and may refuse to transfer or
issue shares of Common Stock and/or Preferred Stock to any person whose
acquisition would result in the Company being unable to conform with the
requirements of the Code. In general, Code Sections 856(a)(5) and (6) provide
that, as a REIT, the Company must have at least 100 beneficial owners for 335
days of each taxable year and that the Company cannot qualify as a REIT if, at
any time during the last half of the Company's taxable year, more than 50% in
value of its outstanding stock is owned, directly or indirectly, by or for not
more than five individuals. In addition, the charter provides that the Company
may redeem or refuse to transfer any shares of capital stock of the Company
necessary to prevent the imposition of a penalty tax as a result of ownership
of such shares by certain disqualified organizations, including governmental
bodies and tax-exempt entities that are not subject to tax on unrelated
business taxable income. The redemption or purchase price for any such shares
shall be equal to the fair market value of such shares as reflected in the
closing sales price for the shares if then listed on a national securities
exchange, or the average of the closing sales prices for the shares if then
listed on more than one national securities exchange, or if the shares are not
then listed on a national securities exchange, the latest bid quotation for
the shares if then traded over-the-counter on the last business day for which
closing prices are available immediately preceding the day on which notices of
such acquisitions are sent or, if no such closing sales prices or quotations
are available, then the net asset value of such stock as determined by the
Board of Directors in accordance with the provisions of applicable law.
SPECIAL STATUTORY REQUIREMENTS FOR CERTAIN TRANSACTIONS
Business Combination Statute. The Maryland General Corporation Law
establishes special requirements with respect to "business combinations"
between Maryland corporations and "interested stockholders" unless exemptions
are applicable. Among other things, the law prohibits for a period of five
years a merger and other specified or similar transactions between a Maryland
corporation and an interested stockholder and requires a super-majority vote
for such transactions after the end of such five-year period.
"Interested stockholders" are all persons owning beneficially, directly or
indirectly, 10% or more of the outstanding voting stock of a Maryland
corporation after the date on which the corporation had 100 or more beneficial
owners of its stock, or is an affiliate or associate of the corporation and
was the beneficial owner, directly or indirectly, of 10% or more of the voting
power of the then outstanding stock of the corporation at any
7
<PAGE>
time within the two-year period immediately prior to the date in question and
after the date on which the corporation had 100 or more beneficial owners.
"Business combinations" include any merger or similar transaction subject to a
statutory vote and additional transactions involving transfers of assets or
securities in specified amounts (other than in the ordinary course of business
or pursuant to a dividend or any other method affording substantially
proportionate treatment to the holders of voting stock) to interested
stockholders or their affiliates. Unless an exemption is available,
transactions of these types may not be consummated between a Maryland
corporation and an interested stockholder or its affiliates for a period of
five years after the date on which the stockholder first became an interested
stockholder and thereafter may not be consummated unless recommended by the
board of directors of the Maryland corporation and approved by the affirmative
vote of at least 80% of the votes entitled to be cast by all holders of
outstanding shares of voting stock and 66 2/3% of the votes entitled to be
cast by all holders of outstanding shares of voting stock other than the
interested stockholder. A business combination with an interested stockholder
which is approved by the board of directors of a Maryland corporation at any
time before an interested stockholder first becomes an interested stockholder
is not subject to the 5-year moratorium or the special voting requirements. An
amendment to a Maryland corporation's charter electing not to be subject to
the foregoing requirements must be approved by the affirmative vote of at
least 80% of the votes entitled to be cast by all holders of outstanding
shares of voting stock and 66 2/3% of the votes entitled to be cast by holders
of outstanding shares of voting stock who are not interested stockholders. Any
such amendment is not effective until 18 months after the vote of stockholders
and does not apply to any business combination of a corporation with a
stockholder who was an interested stockholder on the date of the stockholder
vote. The Company has not adopted any such amendment to its charter.
Control Share Acquisition Statute. The Maryland General Corporation Law
imposes limitations on the voting rights of shares acquired in a "control
shares acquisition." The Maryland statute defines a "control share
acquisition" at the 20%, 33 1/3% and 50% acquisition levels, and requires a
two-thirds stockholder vote (excluding shares owned by the acquiring person
and certain members of management) to accord voting rights to stock acquired
in a control share acquisition. The statute also requires Maryland
corporations to hold a special meeting at the request of an actual or proposed
control share acquiror generally within 50 days after a request is made with
the submission of an "acquiring person statement," but only if the acquiring
person (a) posts a bond for the cost of the meeting and (b) submits a
definitive financing agreement to the extent that financing is not provided by
the acquiring person. In addition, unless the charter or bylaws provide
otherwise, the statute gives the Maryland corporation, within certain time
limitations, various redemption rights if there is a stockholder vote on the
issue and the grant of voting rights is not approved, or if an "acquiring
person statement" is not delivered to the target within 10 days following a
control share acquisition. Moreover, unless the charter or bylaws provide
otherwise, the statute provides that if, before a control share acquisition
occurs, voting rights are accorded to control shares which results in the
acquiring person having majority voting power, then minority stockholders have
appraisal rights. An acquisition of shares may be exempted from the control
share statute provided that a charter or bylaw provision is adopted for such
purpose prior to the control share acquisition. There are no such provisions
in the charter or bylaws of the Company.
Reference is made to the full text of the foregoing statutes for their
entire terms, and the partial summary contained in this Prospectus is not
intended to be complete.
COMMON STOCK
GENERAL
Each share of Common Stock, par value $0.01 per share, is entitled to one
vote. The outstanding shares of Common Stock are fully paid and non-
assessable. Holders of shares of Common Stock do not have cumulative voting
rights or preference, conversion, exchange, subscription or preemptive rights.
Subject to the Company's obligations to pay dividends on all shares of its
outstanding Preferred Stock, including the Series A Preferred Stock and Series
B Preferred Stock, each share of Common Stock is entitled to participate
equally in dividends on the Common Stock when and as declared by the Board of
Directors of the Company and in the distribution of assets of the Company upon
liquidation after payment of liabilities and liquidation preferences with
regard to
8
<PAGE>
the Preferred Stock, including the Series A and Series B Preferred Stock. The
foregoing summary does not purport to be a complete description of the Common
Stock and is subject to, and qualified in its entirety by reference to, the
Company's charter and bylaws, in each case as amended and supplemented to date
and filed as exhibits to the Registration Statement.
As of the date of this Prospectus, the charter of the Company authorizes the
issuance of 100,000,000 shares of Common Stock. As of May 7, 1997, 48,700,148
shares of Common Stock were issued and outstanding.
PREFERRED STOCK
GENERAL
The Board of Directors has authority to issue authorized but unissued shares
of Preferred Stock, par value $0.10 per share, without further approval of the
stockholders, subject to certain restrictions described below, and to fix the
preferences, limitations and relative rights thereof, including voting rights,
dividend rights, conversion rights, redemption rights and liquidation rights
of each series of Preferred Stock. As of the date of this Prospectus, the
charter of the Company authorizes the issuance of 100,000,000 shares of
Preferred Stock. As of May 7, 1997, 21,737,562 shares of Series B Preferred
Stock were issued and outstanding, as described hereafter.
SERIES A PREFERRED STOCK AND SERIES B PREFERRED STOCK
General. In November, 1989, a wholly-owned subsidiary of the Company was
merged with and into Strategic Mortgage Investments, Inc., a Maryland
corporation ("Strategic"), and each outstanding share of Strategic common
stock was converted into one share of Series A Preferred Stock of the Company.
In December, 1992, Tyler Cabot Mortgage Securities Fund, Inc., a Maryland
corporation ("Tyler Cabot"), was merged with and into the Company, and each
outstanding share of Tyler Cabot common stock was converted into one share of
Series B Preferred Stock of the Company. The Series A Preferred Stock and
Series B Preferred Stock are fully paid and non-assessable and neither has
preemptive rights. The Series A Preferred Stock ranks on a parity with the
Series B Preferred Stock, and each rank on a parity with any other series of
the Company's Preferred Stock which is not by its terms made junior or senior
to the Series A Preferred Stock or Series B Preferred Stock with respect to
the payment of dividends and distribution of assets in liquidation.
Dividends. Holders of the Series B Preferred Stock are entitled to receive,
when, as and if declared by the Board of Directors of the Company out of funds
legally available therefore, cumulative preferential cash dividends at the
annual rate of $1.26 per share, and no more, payable in equal monthly
installments on each monthly dividend payment date. Holders of the Series A
Preferred Stock are entitled to receive, when, as and if declared by the Board
of Directors of the Company out of funds legally available therefor,
cumulative preferential cash dividends at the rate of $1.60 per annum per
share, and no more, payable in equal quarterly installments on each March 31,
June 30, September 30 and December 31. Whenever dividends are in arrears and
until all accrued and unpaid dividends on shares of Series A and Series B
Preferred Stock outstanding have been paid in full and the then current
dividend on each such series shall have been paid or declared and sufficient
funds set aside for payment thereof, the Company may not declare or pay
dividends on the Common Stock or any other class or series of capital stock
ranking junior to the Series A Preferred Stock and the Series B Preferred
Stock in respect of dividends ("Junior Stock") or redeem, purchase or
otherwise acquire for consideration any shares of Common Stock or Junior
Stock.
Liquidation Rights. In the event of any liquidation, dissolution or winding
up of the Company, whether voluntary or involuntary, the holders of the Series
A Preferred Stock and the Series B Preferred Stock will be entitled to receive
out of the assets of the Company available for distribution to stockholders,
whether from capital, surplus or earnings, before any distribution is made to
holders of shares of Common Stock or Junior Stock (1) in the case of the
Series A Preferred Stock, an amount equal to $16.40 per share of Series A
Preferred Stock and (2) in the case of Series B Preferred Stock, an amount per
share of Series B Preferred Stock equal to $11.38 per share of Series B
Preferred Stock, in each case, plus dividends accumulated and unpaid to the
date of final distribution. A consolidation or merger of the Company with or
into any other corporation or transfer of all or any part of the Company's
assets for cash, property or securities will not be considered a liquidation,
dissolution or winding-up of the Company.
9
<PAGE>
Voting Rights. Except as indicated below, as otherwise provided in the
Company's charter or as required under the Maryland General Corporation Law,
neither the holders of shares of Series A Preferred Stock or Series B Preferred
Stock will have voting rights. If at any time all or any portion of the
dividends on the Series A Preferred Stock or Series B Preferred Stock shall be
in arrears and unpaid for any two or more dividend periods (whether or not
consecutive), then the number of directors constituting the Board of Directors
of the Company shall be increased by two in case of such arrearages on one of
the Series A Preferred Stock or Series B Preferred Stock and four in the case
of arrearages on both. The holders of Series A Preferred Stock and Series B
Preferred Stock, voting separately as a class, will each be entitled to elect
two directors to fill such newly created directorships. At such time as all
dividends in default have been paid in full and dividends for the current
quarterly period have been paid or declared and a sufficient sum for payment
has been set aside, the term of any director then in office solely as a result
of the voting rights described in this paragraph will terminate.
The affirmative vote of at least two-thirds of the outstanding shares of
Series A Preferred Stock and Series B Preferred Stock, in each case voting
separately as a class, will be required to (i) create or increase the number of
authorized shares of any class of stock ranking prior to the Series A Preferred
Stock or Series B Preferred Stock as to dividends or distributions upon
liquidation, (ii) authorize any reclassification of Series A Preferred Stock or
Series B Preferred Stock, or (iii) amend, alter or repeal any provisions of the
Company's charter which would adversely affect the rights, powers or
preferences of the Series A Preferred Stock or Series B Preferred Stock.
So long as 20% or more of the aggregate number of shares of Series B
Preferred Stock issued in connection with the Tyler Cabot merger remain
outstanding, the affirmative vote of at least a majority of the outstanding
shares of such Series B Preferred Stock will be required for the sale, lease or
conveyance by the Company of all or substantially all of its property or
business, or its consolidation or merger with any other corporation unless the
corporation resulting from such consolidation or merger will have after such
consolidation or merger no class of shares either authorized or outstanding
ranking prior to or on a parity with the Series B Preferred Stock except the
same number of shares ranking prior to or on a parity with the Series B
Preferred Stock and having the same rights and preferences as the shares of the
Company authorized and outstanding immediately preceding such consolidation or
merger, and each holder of Series B Preferred Stock immediately preceding such
consolidation or merger shall receive the same number of shares, with the same
rights and preferences, of the resulting corporation.
Except as described herein or otherwise required by law, no consent of the
holders of Series B Preferred Stock will be required for (i) the creation of
any indebtedness of any kind of the Company, (ii) the creation, or increase or
decrease in the amount, of any class or series of stock of the Company ranking
on a parity with, or not ranking prior to, the Series B Preferred Stock as to
dividends or as to amounts distributable upon liquidation or (iii) any increase
or decrease in the amount of authorized Common Stock or any increase, decrease
or change in the par value thereof.
Redemption. Neither the Series A Preferred Stock nor the Series B Preferred
Stock is subject to mandatory redemption and neither is entitled to the benefit
of a sinking fund. The Company at its option may redeem the Series A Preferred
Stock, in whole or in part, for cash in an amount per share equal to $16.40
plus accumulated and unpaid dividends to the date of redemption, whether or not
earned or declared. At any time after December 2, 1997, the Company may at its
option redeem the Series B Preferred Stock, in whole or in part, for cash in an
amount per share equal to $12.50 plus accumulated and unpaid dividends to the
date of redemption, whether or not earned or declared.
Conversion Rights. Holders of the Series A Preferred Stock may, at their
option, convert shares of Series A Preferred Stock into shares of Common Stock
at the rate (the "Series A Conversion Rate") of 2.0421 shares of Common Stock
for each share of Series A Preferred Stock converted. Holders of Series B
Preferred Stock may, at their option, convert shares of Series B Preferred
Stock into shares of the Company's Common Stock at the rate (the "Series B
Conversion Rate") of .7246 shares of the Company's Common Stock for each share
of Series B Preferred Stock converted. The Series A and Series B Conversion
Rates are subject to adjustment in certain circumstances.
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<PAGE>
PLAN OF DISTRIBUTION
Sales may be made pursuant to the Common Stock Sales Agreement or Preferred
Stock Sales Agency Agreement (the "Sales Agency Agreements"), as the case may
be, or similar agreements entered into with other sales agents or underwriters
from time to time. The Company may sell the Securities through arrangements
with underwriters or dealers, directly to one or more purchasers, or through
agents. Sales of the Common Stock under the Sales Agency Agreements and the
Series B Preferred Stock will be made by means of ordinary brokers'
transactions on the NYSE. Sales made pursuant to the terms of the Sales Agency
Agreements will be effected during a series of one or more pricing periods
(each, a "Pricing Period"), each consisting of five consecutive calendar days,
unless a shorter period has otherwise been agreed to by the Company and
PaineWebber. During any Pricing Period, no more than 60,000 shares of the
Common Stock and no more than 30,000 shares of the Series B Preferred Stock
will be sold, in the manner described below, as "Average Market Price Shares".
If the Company fails to meet the exemptive provisions set forth in Rule
101(c)(1) of Regulation M of the Securities Exchange Act of 1934, as amended,
the number of Average Market Price Shares and Additional Shares (as defined
below) sold on any day in any Pricing Period shall not exceed 10% of the
average daily trading volume of the Common Stock or Series B Preferred Stock
as the case may be, for the 60 days prior to such Pricing Period. For each
Pricing Period, an Average Market Price (as hereinafter defined) will be
computed. With respect to any Pricing Period, "Average Market Price" shall
equal the average of the arithmetic mean of the high and low sales prices of
the Common Stock or the Series B Preferred Stock as the case may be, reported
on the NYSE for each trading day of such Pricing Period.
The net proceeds to the Company with respect to sales of Average Market
Price Shares will equal 98% of the Average Market Price for each share of
Common Stock or Series B Preferred Stock sold during a Pricing Period, plus
Excess Proceeds (as defined below), if any. The compensation to PaineWebber
for such sales in any Pricing Period will equal the difference between the
aggregate gross sales prices at which such sales are actually effected and the
net proceeds to the Company for such sales, but in no case will exceed the
maximum amount permitted pursuant to any applicable requirements of the
National Association of Securities Dealers, Inc., as determined in good faith
by PaineWebber (the "Maximum Commission"). To the extent that such aggregate
gross sales prices are less than the Average Market Price, the compensation to
PaineWebber would be correspondingly reduced; to the extent that such
aggregate gross sales prices are greater than the Average Market Price, the
compensation to PaineWebber will be correspondingly increased. To the extent
that PaineWebber's compensation under the foregoing formula would otherwise
exceed the Maximum Commission, the excess will constitute additional net
proceeds to the Company (the "Excess Proceeds").
Any shares of Common Stock or Series B Preferred Stock sold by PaineWebber
during the Pricing Period on behalf of the Company other than Average Market
Price Shares ("Additional Shares") will be at a fixed commission rate equal to
2% of the share price per share for the number of Additional Shares sold in a
Pricing Period. Unless otherwise indicated in a further Prospectus Supplement,
PaineWebber as sales agent will act on a best efforts basis.
Settlements of sales of Additional Shares and Average Market Price Shares
will occur on the third business day following the date on which any such
sales are made. Purchases of Common Stock or Series B Preferred Stock from
PaineWebber as sales agent for the Company will settle the regular way on the
national securities exchange where such purchases were executed. Compensation
to PaineWebber with respect to sales of Average Market Price Shares will be
paid out of the proceeds of the Average Market Price Shares that settle the
third business day following the last day of a Pricing Period. There is no
arrangement for funds to be received in an escrow, trust or similar
arrangement.
At the end of each Pricing Period, the Company will file a Prospectus
Supplement under the applicable paragraph of Rule 424(b) promulgated under the
Securities Act, which Prospectus Supplement will set forth the dates included
in such Pricing Period, the number of such shares of Common Stock and Series B
Preferred Stock sold through PaineWebber as sales agent (identifying
separately the number of Average Market Price Shares and any Additional
Shares), the high and low prices at which Average Market Price Shares were
sold during such Pricing Period, the net proceeds to the Company and the
compensation payable by the Company to PaineWebber
11
<PAGE>
with respect to such sales pursuant to the formula set forth above.
Information regarding the Pricing Period for the Common Stock commencing April
21, 1997 and ending April 25, 1997 and the Pricing Period for the Series B
Preferred Stock commencing April 21, 1997 and ending April 25, 1997 is set
forth above.
The offering of Common Stock pursuant to the Common Stock Sales Agency
Agreement will terminate upon the earlier of (i) the sale of all shares of
Common Stock subject thereto or (ii) termination of the Common Stock Sales
Agency Agreement. PaineWebber has the right to terminate the Common Stock
Sales Agency Agreement if the Company engages another agent to sell shares
under a program substantially similar to the program covered by the Common
Stock Sales Agency Agreement, or in certain other circumstances specified in
the Common Stock Sales Agency Agreement.
The offering of Series B Preferred Stock pursuant to the Preferred Stock
Sales Agency Agreement will terminate upon the earlier of (i) the sale of all
shares of Series B Preferred Stock subject thereto or (ii) termination of the
Preferred Stock Sales Agency Agreement. The Preferred Stock Sales Agency
Agreement may be terminated by the Company in its sole discretion on September
17, 1997. PaineWebber has the right to terminate the Preferred Stock Sales
Agency Agreement after September 17, 1997 or in certain other circumstances
specified in the Preferred Stock Sales Agency Agreement.
With respect to the sale of Common Stock and Series B Preferred Stock, the
Company may enter into agreements with sales agents or underwriters other than
PaineWebber from time to time. The Company expects the sales methods under
such agreements to be substantially similar to those under the Sales Agency
Agreements described above.
In connection with the sale of the Common Stock and Series B Preferred Stock
on behalf of the Company, PaineWebber may be deemed to be an "underwriter"
within the meaning of the Act, and the compensation of PaineWebber may be
deemed to be underwriting commissions or discounts. The Company has agreed to
provide indemnification and contribution to PaineWebber against certain civil
liabilities, including liabilities under the Act. PaineWebber may engage in
transactions with, or perform services for, the Company in the ordinary course
of business.
TAXATION
The applicable provisions of the Code are highly technical and complex. This
summary is not intended as a detailed discussion of all applicable provisions
of the Code, the rules and regulations promulgated thereunder, or the
administrative and judicial interpretations thereof. For the particular
provisions that govern the federal income tax treatment of the Company and its
stockholders, reference is made generally to Sections 856 and 860 of the Code
and the treasury regulations promulgated thereunder. The Company has not
obtained rulings from the Internal Revenue Service with respect to any tax
considerations relevant to its organization or operations or to an investment
in its securities. This summary is not intended to substitute for prudent tax
planning and stockholders are urged to consult their own tax advisors with
respect to these and other federal, state and local tax consequences of the
ownership and disposition of any of the Company's Securities and any potential
changes in applicable law. Nonresident aliens, foreign corporations, tax-
exempt organizations, life insurance companies, cooperatives and certain other
categories of investors may be subject to special tax rules that are not
discussed below and that could affect an investment in any of the Company's
Securities.
FEDERAL INCOME TAXATION OF CAPSTEAD MORTGAGE CORPORATION
As used herein, "Capstead REIT" refers to Capstead Mortgage Corporation and
the entities that are effectively consolidated with Capstead Mortgage
Corporation for federal income tax purposes. Certain of the Company's
subsidiaries (the "Non-REIT subsidiaries") are consolidated with the Company
for financial reporting purposes but are not consolidated for federal income
tax purposes. All of the Non-REIT subsidiaries' taxable income is subject to
federal and state income taxes. The Company may form additional Non-REIT
subsidiaries.
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<PAGE>
Capstead REIT believes that it has operated, and Capstead REIT intends to
continue to operate, in such a manner so as to qualify as a REIT under the
Code, but no assurance can be given that it will at all times so qualify.
So long as a company such as Capstead REIT qualifies as a REIT and
distributes at least 95% of its REIT taxable income to stockholders, it will
not be subject to federal corporate income taxes on such income distributed to
stockholders, with limited exceptions discussed below. Under certain
circumstances, such a company may be subject to the corporate minimum tax or
certain other special taxes. However, Capstead REIT does not anticipate
generating material items of income or deductions that would cause it to be
subject to the minimum tax or any such special tax.
To qualify for treatment as a REIT for a taxable year, a company must have
elected to be so treated (which Capstead REIT has done) and must meet certain
organizational, asset, income, distribution and record-keeping requirements.
TAXATION OF STOCKHOLDERS
So long as a corporation qualifies as a REIT, distributions to stockholders
(other than dividends properly designated as "capital gain dividends") will
constitute ordinary income to the extent of current and accumulated earnings
and profits of the REIT. Capital gain dividends will be taxable as long-term
capital gains. Distributions in excess of the REIT's current and accumulated
earnings and profits will constitute a non-taxable return of capital, except to
the extent that the amount of such distributions received by any stockholder
exceeds the basis of the stockholder's shares, in which case such excess will
be taxable as capital gain, provided such shares are held as a capital asset.
Dividends received from a REIT are ineligible for the 70% dividends received
deduction. If a capital gain dividend is received with respect to shares which
are sold for a loss before being held for a period of six months, such loss
will be characterized as long term capital loss to the extent of the capital
gain dividend. Potential Capstead Mortgage Corporation stockholders should be
aware that for federal income tax purposes any dividend paid by a REIT in
January of any given calendar year will be deemed to have been paid during the
preceding calendar year if it was declared by the REIT in October, November or
December of such preceding year and was payable to the shareholders of record
on a specified date in the month in which it was declared.
Under the Code and the related regulations, a change in the conversion ratio
for convertible preferred stock may be treated as a taxable distribution of the
stock of such corporation with respect to any shareholder whose proportionate
interest in the earnings and profits or assets of the corporation is increased
by such change. A change in a conversion ratio or conversion price of
convertible preferred stock pursuant to a bonafide, reasonable adjustment
formula which has the effect of preventing dilution of the interest of the
holders of such stock will not be considered to result in a deemed distribution
of stock. However, generally an adjustment in the conversion ratio to
compensate for a taxable cash distribution to other shareholders will not be
considered as made pursuant to a bonafide adjustment formula. For example, in
the case of the Series B Preferred Stock, the conversion rate may be adjusted
if the Company distributes to holders of its Common Stock cash or other assets
(excluding regular quarterly cash dividends payable out of consolidated
earnings or earned surplus or dividends payable in shares of Common Stock).
Under the above described federal income tax provisions, such an adjustment may
result in a taxable distribution to the Series B Preferred stockholders.
Specific tax rules of a complex nature not summarized herein apply to foreign
investors in REITs. Accordingly, foreign stockholders should consult their own
tax advisers concerning the federal income and withholding tax consequences and
the state, local and foreign tax consequences of an investment in Capstead
REIT.
SPECIAL CONSIDERATIONS--TAX-EXEMPT AND CERTAIN OTHER INVESTORS
For CMOs issued after December 31, 1991, pursuant to regulations not yet
published, the portion of any dividend paid to stockholders attributable to
"excess inclusion income" on the retained residual interests in such
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<PAGE>
CMOs would be subject to certain rules. Such rules include (i) the
characterization of excess inclusion income as unrelated business income for
tax-exempt stockholders (including employee benefit plans and individual
retirement accounts) and (ii) the inability of a stockholder to offset excess
inclusion income with net operating losses (subject to certain exceptions
applicable to thrift institutions). Generally, tax-exempt entities are subject
to federal income tax on excess inclusion income and other unrelated business
income in excess of $1,000 per year. Excess inclusion income is generally
taxable income with respect to a residual interest in excess of a specified
return on investment in the residual interest. In some cases, all taxable
income with respect to a residual interest may be considered excess inclusion
income. Until regulations or other guidance is issued, Capstead REIT will use
methods it believes are appropriate for calculating the amount of excess
inclusion income, if any, it recognizes from CMOs issued after December 31,
1991, and allocating any excess inclusion income to its stockholders. Excess
inclusion rules will most likely not apply to any CMO issued by any subsidiary
of the Company on or before December 31, 1991.
In addition, the Company will be taxable on the portion of any excess
inclusion income allocable to any stockholder which is a "disqualified
organization." If the ownership of any shares by a disqualified organization
would subject the Company to tax, such shares shall be immediately redeemable
at the option of the Company. See "Description of Securities--Redemption or
Repurchase of Capital Stock to Maintain the Company's Status as a REIT."
Tax-exempt and other investors are urged to consult their own tax advisors
with respect to the tax consequences arising under federal law and the law of
any state, municipality or other taxing jurisdiction. Foreign investors should
consult their own tax advisors concerning the tax consequences of an investment
in the Company, including the possibility of United States withholding tax on
Company dividends.
FAILURE TO QUALIFY AS A REAL ESTATE INVESTMENT TRUST
If Capstead REIT fails to qualify for taxation as a REIT in any taxable year,
distributions to its stockholders for such year and future years would not be
deductible by Capstead REIT and Capstead REIT would be subject to tax on its
income at regular corporate rates. In such event, all distributions to
stockholders would be taxable as ordinary income to the extent of current and
accumulated earnings and profits and would be eligible for the 70% dividends
received deduction for corporations. If Capstead REIT fails to qualify as a
REIT for even one year, it could be required to incur substantial indebtedness
(to the extent borrowings are feasible) or liquidate substantial investments in
order to pay the resulting taxes. Thus, if Capstead REIT fails to qualify for
taxation as a REIT, there can be no assurance that any distribution to its
stockholders could be made. Unless entitled to relief under specific statutory
provisions, such company would also be disqualified from treatment as a REIT
for the next four taxable years. It is not possible to state whether in all
circumstances such company would be entitled to statutory relief. While the
Board of Directors of the Company presently intends to cause Capstead REIT to
operate in a manner that will enable it to qualify as a REIT in all future
taxable years, there can be no certainty that such intention will be realized
because, among other things, qualification hinges on the conduct of the
business of Capstead REIT.
STATE AND LOCAL TAXES
State or local income tax treatment of Capstead REIT or holders of any of its
Securities may differ from the federal income tax treatment described above. As
a result, prospective stockholders should consult their own tax advisers for an
explanation of how state and local tax laws may affect their investment in
Capstead REIT.
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LEGAL MATTERS
Certain legal matters with respect to the securities offered hereby will be
passed on for the Company and the Selling Stockholders by Andrews & Kurth
L.L.P., Dallas, Texas, and for the underwriters or agents by counsel to be
identified in the Prospectus Supplement. Andrews & Kurth L.L.P. will rely as to
all matters of Maryland law on Piper & Marbury L.L.P., Baltimore, Maryland.
Attorneys at Andrews & Kurth L.L.P. beneficially own approximately 45,600
shares of Common Stock of the Company and 9,700 shares of Series B Preferred
Stock of the Company.
EXPERTS
The consolidated financial statements and schedule of Capstead Mortgage
Corporation and subsidiaries incorporated by reference or appearing in Capstead
Mortgage Corporation's Annual Report on Form 10-K for the year ended December
31, 1996, have been audited by Ernst & Young LLP, independent auditors, as set
forth in their reports thereon included therein and incorporated herein by
reference. Such consolidated financial statements are incorporated herein by
reference in reliance upon such reports given upon the authority of such firm
as experts in accounting and auditing.
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PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
<S> <C>
Registration Fee--Securities and Exchange Commission............. $43,196.97
Printing and Engraving Expenses.................................. 7,500.00
Accounting Fees and Expenses..................................... 1,000.00
Legal Fees and Expenses.......................................... 8,000.00
Blue Sky Fees and Expenses....................................... 1,000.00
----------
Total.......................................................... 60,696.97
==========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Articles of Incorporation provide for indemnification of
directors to the full extent permitted by Maryland law, indemnification of
officers who are also directors to the extent the Company shall indemnify its
directors, and indemnification of officers who are not directors to such
further extent as shall be authorized by the Board of Directors and be
consistent with law.
Section 2-418 of the Maryland General Corporation Law generally permits a
Maryland corporation to indemnify any director made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative, or investigative, by reason of service in his capacity as a
director, unless it is established that (i) the act or omission of the
director was material to the matter giving rise to the proceeding and (a) was
committed in bad faith or (b) was the result of active and deliberate
dishonesty; or (ii) the director actually received an improper personal
benefit in money, property, or services; or (iii) in the case of any criminal
proceeding, the director had reasonable cause to believe that the act or
omission was unlawful. Indemnification may be against judgments, penalties,
fines, settlements, and reasonable expenses actually incurred by the director
in connection with the proceeding. If the proceeding was one by or in the
right of the corporation, indemnification may not be made in respect of any
proceeding in which the director shall have been adjudged to be liable to the
corporation. In addition, a director may not be indemnified in respect of any
proceeding charging improper personal benefit to the director, whether or not
involving action in the director's official capacity, in which the director
was adjudged to be liable on the basis that personal benefit was improperly
received. The termination of any proceeding by conviction, a plea of nolo
contendere or its equivalent, or an entry of an order of probation prior to
judgment, creates a rebuttable presumption that the director did not meet the
requisite standard of conduct.
Section 2-418 also provides that a court of appropriate jurisdiction may,
upon application of a director and such notice as the court shall require,
order indemnification if it determines that a director is entitled to
reimbursement because the director has been successful on the merits or
otherwise, in any such proceeding, in which case the director shall be
entitled to recover the expenses of securing such reimbursement, or if the
court determines that the director is fairly and reasonably entitled to
indemnification in view of all the relevant circumstances, whether or not the
director has met the applicable standards of conduct or has been adjudged
liable in a proceeding charging improper personal benefit to the director.
Indemnification with respect to any proceeding by or in the right of the
corporation or in which liability shall have been adjudged on the basis that
personal benefit was improperly received shall be limited to expenses. The
indemnification and advancement of expenses provided or authorized by Section
2-418 may not be deemed exclusive of any other rights, by indemnification or
otherwise, to which a director may be entitled under the charter, the bylaws,
a resolution of the stockholders or directors, an agreement or otherwise, both
as to action in an official capacity and as to action in another capacity
while holding such office. A corporation may indemnify and advance expenses to
an officer, employee, or agent of the corporation to the same extent that it
may indemnify directors under Section 2-418 and, in addition, may indemnify
and advance expenses to an officer, employee, or agent who is not a director
to
II-1
<PAGE>
such further extent, consistent with law, as may be provided by its charter,
bylaws, general or specific action of its board of directors or contract.
Section 2-418 also provides that a corporation may purchase and maintain
insurance against liabilities for which indemnification is not expressly
provided by statute.
The Company provides insurance from commercial carriers against certain
liabilities incurred by the directors and officers of the Company.
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -----------
<C> <S>
1.1 --Common Stock Sales Agency Agreement(2)
1.2 --Amendment No. 1 to Common Stock Sales Agency Agreement.(3)
1.3 --Amendment No. 2 to Common Stock Sales Agency Agreement.(4)
1.4 --Preferred Stock Sales Agency Agreement.(3)
1.5 --Amendment No. 1 to Preferred Stock Sales Agency Agreement.(4)
3.1 --Articles of Incorporation of the Company.(5)
3.2 --Amended and Restated Bylaws of the Company.(6)
4.1 --Specimen of Common Stock certificate.(5)
4.2 --Specimen of Series B Preferred Stock Certificate.(5)
4.3 --Articles Supplementary authorizing the Series B Preferred
Stock.(7)
4.4 --Articles Supplementary authorizing additional shares of Series B
Preferred Stock.(8)
4.5 --Articles Supplementary authorizing additional shares of Series B
Preferred Stock.(1)
5.1 --Opinion of Andrews & Kurth L.L.P. as to the legality of the
Securities being offered.(1)
5.2 --Opinion of Piper & Marbury L.L.P. as to the legality of the
Securities being offered.(1)
12.1 --Statement regarding computation of ratios of earnings to fixed
charges and preferred stock dividends.(1)
23.1 --Consent of Ernst & Young LLP.(1)
23.2 --Consent of Andrews & Kurth L.L.P. (included in its opinion filed
as Exhibit 5.1 hereto).(1)
23.3 --Consent of Piper & Marbury L.L.P. (included in its opinion filed
as Exhibit 5.2 hereto).(1)
24.1 --Power of Attorney (set forth on page II-4 of this Registration
Statement).(1)
</TABLE>
(1) Filed herewith.
(2) Previously filed with the Commission on December 6, 1995 as an exhibit to
the Company's Current Report on Form 8-K dated as of December 6, 1995, and
incorporated herein by reference.
(3) Previously filed with the Commission on September 20, 1996 as an exhibit
to the Company's Current Report on Form 8-K dated as of August 20, 1996,
and incorporated herein by reference.
(4) Previously filed with the Commission on March 26, 1997 as an exhibit to
the Company's Current Report on Form 8-K dated as of March 26, 1997, and
incorporated herein by reference.
(5) Previously filed with the Commission on May 6, 1993 as an exhibit to the
Company's Registration Statement on Form S-3 (No. 33-62212), and
incorporated herein by reference.
(6) Previously filed with the Commission on May 13, 1994 as an exhibit to the
Company's Quarterly Report on Form 10-Q for the quarter ended March 31,
1994, and incorporated herein by reference.
(7) Previously filed with the Commission on January 19, 1993 as an exhibit to
the Company's Registration Statement on Form S-3 (No. 33-57164), and
incorporated herein by reference.
(8) Previously filed with the Commission on May 6, 1996 as an exhibit to the
Company's Registration Statement on Form S-3 (No. 333-03187), and
incorporated herein by reference.
II-2
<PAGE>
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of this Registration Statement (or the most recent
post-effective amendment hereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this Registration Statement;
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in this Registration Statement or
any material change to such information in this Registration Statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed by the Registrant
pursuant to Section 13 or Section 15(d) of the Exchange Act that are
incorporated by reference in this Registration Statement.
(2) that, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) to remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act that is incorporated by reference in this Registration Statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of
whether such indemnification by it is against public policy as expressed in
the Securities Act and will be governed by the final adjudication of such
issue.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF DALLAS, STATE OF TEXAS, ON THE 9TH DAY OF MAY,
1997.
Capstead Mortgage Corporation
/s/ Andrew F. Jacobs
By__________________________________:
Andrew F. Jacobs
Senior Vice President--Control and
Treasurer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Ronn K.
Lytle, Andrew F. Jacobs and Julie A. Moore, and each and any of them, his or
her true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him or her in his or her name, place and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the
same, with all exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said attorneys-in-
fact and agents, and each and any of them, full power and authority to do and
perform each and every act and thing requisite and necessary to be done in and
about the premises, as fully as to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or all of them, or their or his or her substitute
or substitutes, may lawfully do or cause to be done by virtue thereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
/s/ Ronn K. Lytle Chairman, Chief May 9, 1997
- ------------------------------------- Executive Officer,
RONN K. LYTLE President and
Director (Principal
Executive Officer)
/s/ Andrew F. Jacobs Senior Vice May 9, 1997
- ------------------------------------- President--Control
ANDREW F. JACOBS and Treasurer
(Principal
Financial and
Accounting Officer)
/s/ Bevis Longstreth Director May 9, 1997
- -------------------------------------
BEVIS LONGSTRETH
/s/ Paul M. Low Director May 9, 1997
- -------------------------------------
PAUL M. LOW
/s/ Harriet E. Meirs Director May 9, 1997
- -------------------------------------
HARRIET E. MIERS
/s/ William R. Smith Director May 9, 1997
- -------------------------------------
WILLIAM R. SMITH
/s/ John C. Tolleson Director May 9, 1997
- -------------------------------------
JOHN C. TOLLESON
II-4
<PAGE>
EXHIBIT 4.5
ARTICLES SUPPLEMENTARY
$1.26 CUMULATIVE CONVERTIBLE
PREFERRED STOCK, SERIES B
OF CAPSTEAD MORTGAGE CORPORATION
CAPSTEAD MORTGAGE CORPORATION, a Maryland corporation, having its principal
office in Baltimore City, Maryland (hereinafter called the "Corporation"),
hereby certifies to the State Department of Assessments and Taxation of Maryland
(the "Maryland SDAT") that:
Pursuant to authority conferred upon the Board of Directors by the
Charter, as amended, of the Corporation, the Board of Directors on September 9,
1996 adopted a resolution, authorizing the classification and issuance of an
additional 4,500,000 shares of $1.26 Cumulative Convertible Preferred Stock,
Series B (the "Series B Preferred Stock") and that the powers, designations,
preferences and relative, participating, optional or other special rights, and
the qualifications, limitations and restrictions thereof, of the shares of such
series are the same as set forth in the Articles Supplementary creating the
Series B Preferred Stock (the "Original Articles Supplementary") (which Original
Articles Supplementary were filed by the Corporation with the Maryland SDAT on
December 2, 1992 and are hereby incorporated herein by reference).
1. Designation and Number of Shares. Four million five hundred thousand
(4,500,000) shares of Preferred Stock of the Corporation, par value $.10
per share, are hereby designated as the "$1.26 Cumulative Convertible Preferred
Stock, Series B."
2. Dividends. As set forth in the Original Articles Supplementary.
3. Liquidation. As set forth in the Original Articles Supplementary.
4. Voting Rights. As set forth in the Original Articles Supplementary.
5. Limitations on Certain Actions. As set forth in the Original Articles
Supplementary.
6. Redemption. As set forth in the Original Articles Supplementary.
7. Conversion. As set forth in the Original Articles Supplementary.
8. Parity With Respect to Dividends and Distribution Upon Liquidation. As
set forth in the Original Articles Supplementary.
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused these additional Articles
Supplementary to be executed this 9th day of September, 1996.
CAPSTEAD MORTGAGE CORPORATION
By: /s/ ANDREW F. JACOBS
---------------------------------------------
Andrew F. Jacobs
Senior Vice President - Control and Treasurer
ATTEST:
/s/ David Barbour
- -------------------------
David Barbour,
Assistant Secretary
THE UNDERSIGNED, Senior Vice President - Control and Treasurer of the
Corporation, who executed on behalf of the Corporation Articles Supplementary of
which this Certificate is made a part, hereby acknowledges in the name and on
behalf of the Corporation the foregoing Articles Supplementary to be the
corporate act of said Corporation and hereby certifies that the matters and
facts set forth herein with respect to the authorization and approval therefor
are true in all material respects under the penalties of perjury.
/s/ ANDREW F. JACOBS
--------------------------------------------
Andrew F. Jacobs
Senior Vice President - Control and Treasurer
<PAGE>
EXHIBIT 5.1
May 9, 1997
Capstead Mortgage Corporation
2711 N. Haskell
Suite 900
Dallas, Texas 75204
Re: Capstead Mortgage Corporation
Registration Statement on Form S-3
Ladies and Gentlemen:
We have acted as counsel for Capstead Mortgage Corporation, a Maryland
corporation (the "Company"), in connection with a Registration Statement on Form
S-3 filed by the Company under the Securities Act of 1933 (the "Registration
Statement") with respect to the contemplated issuance by the Company from time
to time of up to 4,800,000 shares of Common Stock, par value $.01 per share and
2,000,000 shares of $1.26 Cumulative Convertible Preferred Stock, Series B, par
value $.10 per share (collectively, the "Shares"), of the Company.
In this capacity, we have examined the Registration Statement, the
Prospectus, the Charter and By-Laws of the Company, the proceedings of the Board
of Directors of the Company or a committee thereof relating to the authorization
of the issuance of the Shares, an Officer's Certificate of the Company dated the
date hereof, and such other statutes, certificates, instruments, and documents
relating to the Company and matters of law as we have deemed necessary to the
issuance of this opinion. In such examination, we have assumed, without
independent investigation, the genuineness of all signatures, the legal capacity
of all individuals who have executed any of the aforesaid documents, the
authenticity of all documents submitted to us as originals, the conformity with
originals of all documents submitted to us as copies (and the authenticity of
the originals of such copies), and all public records reviewed are accurate and
complete. As to factual matters, we
<PAGE>
Capstead Mortgage Corporation
May 9, 1997
Page 2
have relied on the Officer's Certificate and have not independently verified the
matters stated therein.
Based upon the foregoing and having regard for such legal considerations as
we deem relevant, we are of the opinion and so advise you that upon issuance and
delivery of the Shares in accordance with the terms set forth in the Prospectus,
the Shares will have been duly and validly authorized and will be validly
issued, fully paid, and non-assessable.
To the extent that the opinion set forth herein is governed by the laws of
the State of Maryland, we have relied solely on, and our opinion is subject to
the limitations and assumptions set forth in, the opinion of Piper & Marbury
L.L.P., dated May 9, 1997 and addressed to the Company and upon which we are
authorized to rely. We have made no independent examination of the laws of the
State of Maryland.
This opinion is solely for the benefit of the addressee hereof, and,
without our prior written consent, may not be quoted in whole or in part or
otherwise referred to in any legal opinion, document, or other report, and may
not be furnished to any person or entity. We consent to the filing of this
opinion as an exhibit to the Registration Statement and to the reference to our
firm and to our opinion in the Registration Statement and Prospectus which is a
part thereof. This opinion is delivered as of the date hereof and we disclaim
any responsibility to update this opinion at any time following the date hereof.
Very truly yours,
ANDREWS & KURTH L.L.P.
By: /s/ DAVID BARBOUR
-------------------------------
David Barbour, Partner
<PAGE>
EXHIBIT 5.2
[LETTERHEAD OF PIPER & MARBURY L.L.P. APPEARS HERE]
May 9, 1997
Capstead Mortgage Corporation
2711 North Haskell Avenue
Suite 900
Dallas, Texas 75204
Ladies and Gentlemen:
We have acted as special Maryland counsel for Capstead Mortgage
Corporation, a Maryland corporation (the "Company"), in connection with a
Registration Statement on Form S-3 filed by the Company under the Securities Act
of 1933, as amended (the "Registration Statement"), with respect to the
contemplated issuance by the Company from time to time of up to 4,800,000 shares
of Common Stock, par value $.01 per share and 2,000,000 shares of $1.26
Cumulative Convertible Preferred Stock, Series B, par value $.10 per share
(collectively, the "Shares"), of the Company.
In this capacity, we have examined the Registration Statement, the
Prospectus, the Charter and By-Laws of the Company, the proceedings of the Board
of Directors of the Company or a committee thereof relating to the authorization
of the issuance of the Shares, an Officer's Certificate of the Company dated the
date hereof, and such other statutes, certificates, instruments, and documents
relating to the Company and matters of law as we have deemed necessary to the
issuance of this opinion. In such examination, we have assumed, without
independent investigation, the genuineness of all signatures, the legal capacity
of all individuals who have executed any of the aforesaid documents, the
authenticity of all documents submitted to us as originals, the conformity with
originals of all documents submitted to us as copies (and the authenticity of
the originals of such copies), and all public records reviewed are accurate and
complete. As to factual matters, we have relied on the Officer's Certificate
and have not independently verified the matters stated therein.
<PAGE>
Capstead Mortgage Corporation
May 9, 1997
Page 2
Based upon the foregoing and having regard for such legal considerations as
we deem relevant, we are of the opinion and so advise you that upon the issuance
and delivery of the Shares in accordance with the terms set forth in the
Prospectus, the Shares will have been duly and validly authorized and will be
validly issued, fully paid, and non-assessable.
The opinion herein is limited to the laws of the State of Maryland and we
express no opinion as to the laws of any other jurisdiction. This opinion is
solely for the benefit of the addressee hereof, and, without our prior written
consent, may not be quoted in whole or in part or otherwise referred to in any
legal opinion, document or other report, and may not be furnished to any person
or entity except that Andrews & Kurth L.L.P. is authorized to rely on this
opinion in rendering its opinion to be filed as an exhibit to the Registration
Statement. We consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm and to our opinion in
the Registration Statement and Prospectus which is a part thereof. This opinion
is delivered as of the date hereof and we disclaim any responsibility to update
this opinion at any time following the date hereof.
Very truly yours,
/s/ Piper & Marbury L.L.P.
<PAGE>
EXHIBIT 12.1
CAPSTEAD MORTGAGE CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO COMBINED
FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
(IN THOUSANDS, EXCEPT RATIOS)
(UNAUDITED)
(a) Computation of ratio of earnings to combined fixed charges and preferred
stock dividends (including CMO debt):
<TABLE>
<CAPTION>
1ST Q YEAR ENDED DECEMBER 31
-------- --------------------------------------------
1997 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Fixed charges............ $146,518 $598,312 $584,137 $474,844 $491,076 $415,433
Preferred stock divi-
dends................... 7,198 36,356 39,334 38,876 38,592 4,707
-------- -------- -------- -------- -------- --------
Combined fixed charges
and preferred stock
dividends............... 153,716 634,668 623,471 513,720 529,668 420,140
Net income............... 37,388 127,228 77,359 85,579 94,256 53,191
-------- -------- -------- -------- -------- --------
Total................... $191,104 $761,896 $700,830 $599,299 $623,924 $473,331
======== ======== ======== ======== ======== ========
Ratio of earnings to
combined fixed charges
and preferred stock
dividends............... 1.24:1 1.20:1 1.12:1 1.17:1 1.18:1 1.13:1
======== ======== ======== ======== ======== ========
</TABLE>
(b) Computation of ratio of earnings to combined fixed charges and preferred
stock dividends (excluding CMO debt):
<TABLE>
<CAPTION>
1ST Q YEAR ENDED DECEMBER 31
-------- --------------------------------------------
1997 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Fixed charges............ $ 76,019 $283,974 $223,751 $139,188 $ 80,923 $ 62,077
Preferred stock divi-
dends................... 7,198 36,356 39,334 38,876 38,592 4,707
-------- -------- -------- -------- -------- --------
Combined fixed charges
and preferred stock
dividends............... 83,217 320,330 263,085 178,064 119,515 66,784
Net income............... 37,388 127,228 77,359 85,579 94,256 53,191
-------- -------- -------- -------- -------- --------
Total................... $120,605 $447,558 $340,444 $263,643 $213,771 $119,975
======== ======== ======== ======== ======== ========
Ratio of earnings to
combined fixed charges
and preferred stock
dividends.............. 1.45:1 1.40:1 1.29:1 1.48:1 1.79:1 1.80:1
======== ======== ======== ======== ======== ========
</TABLE>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) to be filed on or about May 9, 1997 and
related Prospectus of Capstead Mortgage Corporation for the registration of
4,800,000 shares of its Common Stock and 2,000,000 shares of its $1.26
Cumulative Convertible Preferred Stock, Series B, and to the incorporation by
reference therein of our reports dated January 22, 1997, with respect to the
consolidated financial statements and schedule of Capstead Mortgage
Corporation included and/or incorporated by reference in its Annual Report
(Form 10-K) for the year ended December 31, 1996, filed with the Securities
and Exchange Commission.
Ernst & Young LLP
Dallas, Texas
May 6, 1997
