<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 23, 1997
REGISTRATION NO. 333-
=============================================================================
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)
______________________
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)
______________________
The Commission is requested to send copies of all communication to:
DAVID BARBOUR
ANDREWS & KURTH L.L.P.
1717 MAIN STREET
SUITE 3700
DALLAS, TEXAS 75201
(214) 659-4400
______________________
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 for the same
offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
====================================================================================================================
TITLE OF EACH CLASS OF SECURITIES TO AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
BE REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE(1) REGISTRATION FEE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $0.01 par value 5,200,000 shares $20.59375 $107,087,500 $31,590.82
====================================================================================================================
</TABLE>
(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 December 18, 1997 as reported on the New York
Stock Exchange.
---------------------------------
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.
<PAGE>
*******************************************************************************
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY STATE.
********************************************************************************
SUBJECT TO COMPLETION, DATED DECEMBER 23, 1997
PROSPECTUS
CAPSTEAD MORTGAGE CORPORATION
5,200,000 SHARES
COMMON STOCK
(PAR VALUE $0.01)
1,643,700 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 5,200,000 shares of its common
stock, par value $0.01 per share ("Common Stock"), and up to 1,643,700 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 of 1933, as amended (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, if applicable, 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.
______________
THE DATE OF THIS PROSPECTUS IS DECEMBER __, 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 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. 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 Company's Quarterly Report on Form 10-Q filed with the Commission on
August 11, 1997 for the fiscal quarter ended June 30, 1997;
-2-
<PAGE>
5. The Company's Current Report on Form 8-K filed with the Commission on
August 18, 1997;
6. The Company's Quarterly Report on Form 10-Q filed with the Commission on
November 5, 1997 for the fiscal quarter ended September 30, 1997;
7. The Company's Current Report on Form 8-K filed with the Commission on
December 22, 1997;
8. 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
9. 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>
NINE MONTHS ENDING YEAR ENDING DECEMBER 31,
------------------ -----------------------------------------
SEPTEMBER 30, 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)............ 1.25:1 1.20:1 1.12:1 1.17:1 1.18:1 1.13:1
</TABLE>
(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
1.44:1, 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 Common Stock and Series B Preferred Stock (1) through
arrangements with underwriters or dealers, (2) directly to one or more
purchasers, or (3) through agents. The Company has entered into separate sales
agreements with each of PaineWebber Incorporated ("PaineWebber") and Merrill
Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") with respect to
sales of Common Stock and Series B Preferred Stock, and may, in the future,
enter into other sales agreements with other sales agents or underwriters.
PAINEWEBBER AGREEMENTS
With respect to the sale of Common Stock, the Company is a party to a Sales
Agency Agreement between the Company and PaineWebber dated as of December 6,
1995, as amended by Amendment No. 1 to Sales Agency Agreement dated as of
September 10, 1996, Second Amendment to Sales Agency Agreement dated as of March
4, 1997, and Third Amendment to Sales Agency Agreement dated as of November 17,
1997 (as amended, the "PaineWebber Common Agreement"). With respect to the sale
of Series B Preferred Stock, the Company is a party to a Sales Agency Agreement
between the Company and PaineWebber dated as of September 17, 1996, as amended
by First Amendment to Sales Agency Agreement dated as of March 4, 1997 (as
amended, the "PaineWebber Preferred Agreement," and together with the
PaineWebber Common Agreement, the "PaineWebber Agreements").
Pursuant to the terms of the PaineWebber Common Agreement, the Company may
issue and sell up to 10,625,000 shares of the Common Stock from time to time
through PaineWebber, as sales agent for the Company; 6,069,650 of such shares
have been sold as of December 18, 1997, with up to all of the remaining
4,555,350 shares being offered under the Registration Statement of which this
Prospectus forms a part. Pursuant to the terms of the PaineWebber Preferred
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; 947,700 of such shares have been sold as of
December 18, 1997, with up to 1,643,700 of the remaining 3,552,300 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. Sales pursuant to the PaineWebber 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 Exchange
Act, the number of Average Market Price Shares and Additional Shares (as defined
below) sold on any day in any Pricing Period, plus the number of shares sold
pursuant to the Merrill Lynch Agreement (described below) and any other sales
agreements on such day, 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 a fixed percentage, as will be set forth in the
applicable Prospectus Supplement, 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 will 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 a
fixed percentage of the share price per share for the number of Additional
Shares sold in a Pricing Period, as will be set forth in the applicable
Prospectus Supplement. 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.
The offering of Common Stock pursuant to the PaineWebber Common Agreement
will terminate upon the earlier of (i) the sale of all shares of Common Stock
subject thereto or (ii) termination of the PaineWebber Common Agreement.
PaineWebber has the right to terminate the PaineWebber Common Agreement if the
Company engages another agent to sell shares under a program substantially
similar to the program covered by the PaineWebber Common Agreement, or in
certain other circumstances specified therein. PaineWebber has consented to the
sale of shares pursuant to the Merrill Lynch Agreement discussed below.
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<PAGE>
The offering of Series B Preferred Stock pursuant to the PaineWebber
Preferred 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
PaineWebber Preferred Agreement. The PaineWebber Preferred Agreement may be
terminated by the Company in its sole discretion on September 17, 1997 and may
be terminated by PaineWebber after September 17, 1997 and in certain other
circumstances specified therein.
MERRILL LYNCH AGREEMENT
The Company is a party to a Sales Agency Agreement between the Company and
Merrill Lynch dated as of November 19, 1997, (the "Merrill Lynch Agreement").
Offerings of Common Stock and Series B Preferred Stock pursuant to the Merrill
Lynch Agreement may occur concurrently with offerings under the PaineWebber
Agreements.
Pursuant to the terms of the Merrill Lynch Agreement, the Company initially
may issue and sell up to 5,000,000 shares of Common Stock and up to 2,000,000
shares of Series B Preferred Stock from time to time through Merrill Lynch, as
sales agent for the Company. Such amounts may be changed from time to time by
mutual agreement of the Company and Merrill Lynch. As of the close of business
on December 18, 1997, no shares have been sold under the Merrill Lynch
Agreement, and the Company anticipates that sales thereunder will begin as soon
as practicable and mutually agreed to by the Company and Merrill Lynch. Sales
pursuant to the Merrill Lynch Agreement may be effected on a daily basis. If the
Company fails to meet the exemptive provisions set forth in Rule 101(c)(1) of
Regulation M of the Exchange Act, with respect to the Common Stock or the Series
B Preferred Stock, the number of shares of Common Stock or Series B Preferred
Stock, respectively, that may be sold on any day, including shares sold pursuant
to the PaineWebber Agreements and any other sales agreements on such day, shall
not exceed 10% of the average daily trading volume of the Common Stock or the
Series B Preferred Stock, as the case may be, for the 60 days prior to such
date. The Merrill Lynch Agreement does not incorporate the concept of Pricing
Periods or Average Market Price Shares present in the PaineWebber Agreements,
but (except as set forth below) is substantially the same in other material
respects.
The compensation to Merrill Lynch for sales of Common Stock and Series B
Preferred Stock will equal a fixed percentage of the gross sales price of any
shares sold, in the form of a commission, as will be set forth in the applicable
Prospectus Supplement. The remaining sales proceeds, after deducting any
transaction fees imposed by any governmental or self-regulatory organization in
respect of such sales, shall constitute the net proceeds to the Company for the
sale of such shares. Unless otherwise indicated in a further Prospectus
Supplement, Merrill Lynch as sales agent will act on a reasonable efforts basis.
The offering of Common Stock and Series B Preferred Stock pursuant to the
Merrill Lynch Agreement will terminate upon the earlier of (i) the sale of all
shares of Common Stock and Series B Preferred Stock subject thereto or (ii)
termination of the Merrill Lynch Agreement. The Merrill Lynch Agreement may be
terminated by the Company in its sole discretion on or after the first
anniversary of the Merrill Lynch Agreement (the "First Anniversary Date"), and
may be terminated by Merrill Lynch after the First Anniversary Date and in
certain other circumstances specified therein.
DESCRIPTION OF SECURITIES
GENERAL
The Company may offer under this Prospectus up to 5,200,000 shares of its
Common Stock and up to 1,643,700 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 December 18, 1997
the Company had 58,204,649 shares of its Common Stock, 411,767 shares of its
$1.60 Cumulative Preferred Stock, Series A ("Series A Preferred Stock") and
17,125,184 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.
-6-
<PAGE>
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 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
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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 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 December 18, 1997,
58,204,649 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 December 18, 1997, 17,125,184 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.
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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.
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.
PLAN OF DISTRIBUTION
The Company may sell Common Stock and Series B Preferred Stock (1) through
arrangements with underwriters or dealers, (2) directly to one or more
purchasers, or (3) through agents. The Company is a party to the PaineWebber
Agreements and the Merrill Lynch Agreement (collectively, the "Sales Agency
Agreements"), and may from time to time enter into sales agreements with sales
agents or underwriters other than PaineWebber or Merrill Lynch. The Company
expects the sales methods under such agreements to be substantially similar to
those under the Sales Agency Agreements.
In connection with the sale of the Common Stock and the Series B Preferred
Stock on behalf of the Company, PaineWebber and Merrill Lynch may each be deemed
to be an "underwriter" within the meaning of the Act, and the compensation of
PaineWebber or Merrill Lynch may be deemed to be underwriting commissions or
discounts. The Company has separately agreed to provide indemnification and
contribution to
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each of PaineWebber and Merrill Lynch against certain civil liabilities,
including liabilities under the Securities Act. PaineWebber and Merrill Lynch
may engage in transactions with, or perform services for, the Company in the
ordinary course of business.
SALES PURSUANT TO THE PAINEWEBBER AGREEMENTS
Sales made pursuant to the PaineWebber Agreements will be effected during a
series of one or more Pricing Periods, 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, 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
Exchange Act, the number of Average Market Price Shares and Additional Shares
(as defined above under "Description of Sales Agency Agreements") sold on any
day in any Pricing Period, plus the number of shares sold pursuant to the
Merrill Lynch Agreement and any other sales agreements on such day, 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 will be computed. With
respect to any Pricing Period, the 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 a fixed percentage, as will be set forth in the
applicable Prospectus Supplement, of the Average Market Price for each share of
Common Stock or Series B Preferred Stock sold during a Pricing Period, plus
Excess Proceeds, 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 Commission. To
the extent that such aggregate gross sales prices are less than the Average
Market Price, the compensation to PaineWebber will 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 Excess Proceeds to the Company.
Any Additional Shares sold by PaineWebber during the Pricing Period on
behalf of the Company will be at a fixed commission rate equal to a fixed
percentage of the share price per share for the number of Additional Shares sold
in a Pricing Period, as will be set forth in the applicable Prospectus
Supplement. 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 with respect to such sales pursuant to the formula
set forth above therein.
The offering of Common Stock pursuant to the PaineWebber Agreement will
terminate upon the earlier of (i) the sale of all shares of Common Stock subject
thereto or (ii) termination of the PaineWebber Common Agreement. PaineWebber has
the right to terminate the PaineWebber Common Agreement if the Company engages
another agent to sell shares under a program substantially similar to the
program covered by the PaineWebber Common Agreement, or in certain other
circumstances specified. PaineWebber has consented to the sale of shares
pursuant to the Merrill Lynch Agreement discussed below.
The offering of Series B Preferred Stock pursuant to the PaineWebber
Preferred 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
PaineWebber Preferred Agreement. The PaineWebber Preferred Agreement may be
terminated by PaineWebber at any time, and in certain other circumstances
specified therein.
SALES PURSUANT TO THE MERRILL LYNCH AGREEMENT
Sales pursuant to the Merrill Lynch Agreement may be effected on a daily
basis, and may occur concurrently with sales under the PaineWebber Agreements.
If the Company fails to meet the exemptive provisions set forth in Rule
101(c)(1) of Regulation M of the Exchange Act, with respect to the Common Stock
or the Series B Preferred Stock, the number of shares of Common Stock or Series
B Preferred Stock, respectively, that may be sold on any day, including shares
sold pursuant to the PaineWebber Agreements and any other sales agreements on
such day, shall not exceed 10% of the average daily trading volume of the Common
Stock or the Series B Preferred Stock, as the case may be, for the 60 days prior
to such date. The Merrill Lynch Agreement does not incorporate the concept of
Pricing Periods or Average Market Price Shares present in the PaineWebber
Agreements, but (except as set forth below) is substantially the same in other
material respects.
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The compensation to Merrill Lynch for sales of Common Stock and Series B
Preferred Stock will equal a fixed percentage of the gross sales price of any
shares sold, in the form of a commission, as will be set forth in the applicable
Prospectus Supplement. The remaining sales proceeds, after deducting any
transaction fees imposed by any governmental or self-regulatory organization in
respect of such sales, shall constitute the net proceeds to the Company for the
sale of such shares. Unless otherwise indicated in a further Prospectus
Supplement, Merrill Lynch as sales agent will act on a reasonable efforts basis.
Settlements of sales of shares of Common Stock and Series B Preferred Stock
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 Merrill
Lynch as sales agent for the Company will settle the regular way on the national
securities exchange where such purchases were executed.
On or prior to the second business day after the end of each Reporting
Period (defined below), 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, with regard to such Reporting Period, the
dates included within the Reporting Period, the number of shares of Common Stock
and Series B Preferred Stock, respectively, sold through Merrill Lynch as sales
agent, the net proceeds to the Company and the compensation payable by the
Company to Merrill Lynch with respect to sales of Common Stock and Series B
Preferred Stock, respectively. Unless otherwise agreed by the Company and
Merrill Lynch and set forth in the applicable Prospectus Supplement, a
"Reporting Period" consists of five consecutive calendar days.
The offering of Common Stock and Series B Preferred Stock pursuant to the
Merrill Lynch Agreement will terminate upon the earlier of (i) the sale of all
shares of Common Stock and Series B Preferred Stock subject thereto or (ii)
termination of the Merrill Lynch Agreement. The Merrill Lynch Agreement may be
terminated by the Company in its sole discretion on or after the First
Anniversary Date, and may be terminated by Merrill Lynch after the First
Anniversary Date and in certain other circumstances specified therein.
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.
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
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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.
1997 TAX LEGISLATION
The recently enacted Tax Relief Act of 1997 (the "1997 Tax Act") reduces
the maximum rate of tax on net capital gains for individuals on sales of certain
assets (including stocks and securities) and increases the time period for which
an asset must be held for the gain from its sale to be eligible for the lowest
rate. The holding period is increased from 12 to 18 months with a further rate
reduction scheduled to take effect after the year 2000 for the sale of certain
assets that have been held at least five years. The Treasury Department is to
issue regulations coordinating the capital gain provisions with other rules
involving the treatment of sales and exchanges by pass-through entities such as
REITs.
With regard to the taxation of REITs, effective for taxable years beginning
after the enactment the 1997 Tax Act, the requirement that the REIT derive less
than 30% of its gross income from gain on the sale or other disposition of stock
or securities held for less than one year, certain real property held less than
four years and property sold or disposed of in a "prohibited transaction" is
repealed. In addition, a REIT may elect to retain and pay income tax on net long
term capital gains it received during a tax year. If a REIT makes such election,
its stockholders would include in their income as long term capital gains their
proportionate share of the undistributed long term capital gains as designated
by the REIT. A stockholder would be deemed to have paid the stockholder's share
of tax, which would be credited or refunded to the stockholder. Also, the basis
of the stockholder's shares in the REIT would be increased by the amount of the
undistributed long term capital gains (less the amount of capital gains tax paid
by the REIT) included in the stockholder's long term capital gains.
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 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. Final regulators dealing
with withholding tax on income paid to foriegn persons and related matters (the
"New Withholding Regulators") were issued by the Treasury Department on
October 6, 1997. The New Withholding Regulators will generally be effective
for payments made after December 31, 1998, subject to certain transition rules.
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.
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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.
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 46,467
shares of Common Stock of the Company and 18,691 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 or incorporated by reference 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.
-13-
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
<CAPTION>
<S> <C>
Registration Fee - Securities and Exchange Commission.... $31,590.82
Printing and Engraving Expenses.......................... 3,000.00
Accounting Fees and Expenses............................. 1,000.00
Legal Fees and Expenses.................................. 10,000.00
Total............................................... $45,590.82
==========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Articles of Incorporation provide for information 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 or nolo contendere or its equivalent, or any
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 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 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.
EXHIBIT DESCRIPTION
- ------- -----------
1.1 --PaineWebber Common Stock Sales Agency Agreement (4)
1.2 --Amendment No. 1 to PaineWebber Common Stock Sales Agency Agreement
(5)
1.3 --Amendment No. 2 to PaineWebber Common Stock Sales Agency Agreement
(6)
1.4 --Amendment No. 3 to Paine Webber Common Stock Sales Agency Agreement
(12)
1.5 --PaineWebber Preferred Stock Sales Agency Agreement (5)
1.6 --Amendment No. 1 to PaineWebber Preferred Stock Sales Agency Agreement
(6)
II-1
<PAGE>
1.7 --Form of Merrill Lynch Sales Agency Agreement (2)
3.1 --Articles of Incorporation of the Company (7)
3.2 --Amended and Restated Bylaws of the Company (8)
4.1 --Specimen of Common Stock certificate (7)
4.2 --Specimen of Series B Preferred Stock Certificate (7)
4.3 --Articles Supplementary authorizing the Series B Preferred Stock (9)
4.4 --Articles Supplementary authorizing additional shares of Series B
Preferred Stock (10)
4.5 --Articles Supplementary authorizing additional shares of Series B
Preferred Stock (3)
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 (11)
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)
(1) Filed herewith.
(2) To be filed by amendment.
(3) Previously filed with the Commission on May 9, 1997 as an exhibit to the
Company's Registration Statement on Form S-3 (No. 333-26865), and
incorporated herein by reference.
(4) 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.
(5) 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.
(6) 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.
(7) 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.
(8) 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.
(9) 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.
(10) 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.
(11) Previously filed with the Commission on November 5, 1997 as an exhibit to
the Company's Quarterly Report on Form 10-Q for the quarter ended September
30, 1997, and incorporated herein by reference.
(12) Previously filed with the Commission on December 22, 1997 as an exhibit to
the Company's Current Report on Form 8-K dated as of December 22, 1997, and
incorporated herein by reference.
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;
II-2
<PAGE>
(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)(i)(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 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.
(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 23RD DAY OF DECEMBER,
1997.
CAPSTEAD MORTGAGE CORPORATION
By: /s/ Andrew F. Jacobs
-------------------------------------
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 Executive December 23, 1997
- ---------------------- Officer, President and
RONN K. LYTLE Director (Principal
Executive Director)
/s/ Andrew F. Jacobs Senior Vice President - December 23, 1997
- ---------------------- Control and Treasurer
ANDREW F. JACOBS (Principal Financial and
Accounting Officer)
/s/ Bevis Longstreth Director December 17, 1997
- ----------------------
BEVIS LONGSTRETH
December 23, 1997
/s/ Paul M. Low Director
- ----------------------
PAUL M. LOW
December 17, 1997
/s/ Harriet E. Miers Director
- ----------------------
HARRIET E. MIERS
December 17, 1997
/s/ William R. Smith Director
- ----------------------
WILLIAM R. SMITH
December 16, 1997
/s/ John C. Tolleson Director
- ----------------------
JOHN C. TOLLESON
II-4
<PAGE>
[LETTERHEAD OF ANDREWS & KURTH APPEARS HERE]
EXHIBIT 5.1
December 23, 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 5,200,000 shares of Common Stock, par value $.01 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 that 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>
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 December 23, 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>
[LETTERHEAD OF PIPER & MARBURY APPEARS HERE]
December 23, 1997
EXHIBIT 5.2
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 5,200,000 shares
of Common Stock, par value $.01 per share (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 resolutions 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 that 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.
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 the issuance
of the Shares has been duly authorized, and such Shares, when issued and
delivered as contemplated by the Registration Statement, will be validly issued,
fully paid, and non-assessable.
<PAGE>
Capstead Mortgage Corporation
December 23, 1997
Page 2
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 hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the heading "Legal
Matters" in the Prospectus included in the Registration Statement. In giving our
consent, we do not thereby admit that we are within the category of persons
whose consent is required under Section 7 of the Securities Act of 1933, as
amended, or the rules and regulations of the Securities and Exchange Commission
promulgated thereunder.
Very truly yours,
/s/ PIPER & MARBURY L.L.P.
<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 December 22, 1997 and
related Prospectus of Capstead Mortgage Corporation for the registration of
5,200,000 shares of common stock 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.
/s/ ERNST & YOUNG LLP
--------------------------------
Ernst & Young LLP
Dallas, Texas
December 19, 1997
