<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 6, 1997
REGISTRATION NO. 333-26865
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
POST-EFFECTIVE
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
CAPSTEAD MORTGAGE CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MARYLAND 75-2027937
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
2711 NORTH HASKELL AVENUE
SUITE 900
DALLAS, TEXAS 75204
(214) 874-2323
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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ANDREW F. JACOBS
2711 NORTH HASKELL AVENUE
SUITE 900
DALLAS, TEXAS 75204
(214) 874-2350
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
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THE COMMISSION IS REQUESTED TO SEND COPIES OF ALL COMMUNICATIONS TO:
DAVID BARBOUR
ANDREWS & KURTH L.L.P.
1717 MAIN STREET
SUITE 3700
DALLAS, TEXAS 75201
(214) 659-4400
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this Registration Statement pursuant to
Rule 415.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
reinvestment plans, please check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
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<PAGE>
PROSPECTUS
CAPSTEAD MORTGAGE CORPORATION
3,880,550 SHARES
COMMON STOCK
(PAR VALUE $0.01)
1,873,200 SHARES
$1.26 CUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES B
(PAR VALUE $0.10)
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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 3,880,550 shares of its
common stock, par value $0.01 per share ("Common Stock"), and up to 1,873,200
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.
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THE DATE OF THIS PROSPECTUS IS AUGUST , 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.
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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
<PAGE>
2. The Company's Current Report on Form 8-K filed with the Commission on
March 26, 1997;
3. The Company's Quarterly Report on Form 10-Q filed with the Commission
on May 9, 1997 for the fiscal quarter ended March 31, 1997;
4. The description of the Common Stock contained in the Company's
Registration Statement on Form 8-A as filed with the Commission on May 14,
1985, and all amendments and reports filed for the purpose of updating that
description; and
5. The description of the Series B Preferred Stock contained in the
Company's Registration Statement on Form 8-A as filed with the Commission
on October 27, 1992, and all amendments and reports filed for the purpose
of updating that description.
Each document filed subsequent to the date of this Prospectus pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act and prior to termination
of the offering of all Securities to which this Prospectus relates shall be
deemed to be incorporated by reference in this Prospectus and shall be part
hereof from the date of filing of such document.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement herein, in any
accompanying Prospectus Supplement relating to a specific offering of
Securities or in any other subsequently filed document that is also
incorporated or deemed to be incorporated by reference herein, modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
this Prospectus or any accompanying Prospectus Supplement. Subject to the
foregoing, all information appearing in this Prospectus and each accompanying
Prospectus Supplement is qualified in its entirety by the information
appearing in the documents incorporated herein by reference.
The Company will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus and an accompanying
Prospectus Supplement is delivered, upon the written or oral request of any
such person, a copy of any document described above (other than exhibits).
Written requests for such copies should be directed to Capstead Mortgage
Corporation, 2711 North Haskell, Suite 900, Dallas, Texas 75204, Attention:
Investor Relations. The Company's telephone number is (214) 874-2323.
3
<PAGE>
THE COMPANY
The Company was incorporated on April 15, 1985 in the state of Maryland and
commenced operations in September 1985. The Company generates earnings from
investing in mortgage-backed securities, servicing mortgage loans and other
investment strategies. The Company's mortgage investment portfolio consists
primarily of adjustable-rate mortgage-backed securities issued by various
government-sponsored entities ("Agencies") and also includes investments in
AAA-rated private mortgage pass-through securities. The Company's
collateralized mortgage obligation ("CMO") collateral and investments includes
Agency-issued interest-only mortgage securities. Mortgage loan servicing
includes collection activities, accounting for principal and interest
payments, escrow administration and other responsibilities relating to the
administration of the mortgage loans. In exchange for providing this service,
the Company receives periodically a servicing fee representing an annualized
percentage of the outstanding principal balance of each such mortgage loan.
The Company, and its qualified real estate investment trust ("REIT")
subsidiaries, have elected to be taxed as a REIT under the Internal Revenue
Code of 1986, as amended (the "Code"), and intend to continue to do so. As a
result of this election, the Company and such subsidiaries are not taxed at
the corporate level on taxable income distributed to stockholders, provided
that certain REIT qualification tests are met. Certain other affiliated
entities which are consolidated with the Company for financial reporting
purposes, are not consolidated for federal income tax purposes. All taxable
income of these affiliated entities are subject to federal and state income
taxes, where applicable.
USE OF PROCEEDS
Unless otherwise specified in the applicable Prospectus Supplement for any
offering of Securities, the net proceeds from the sale of Securities offered
by the Company will be available for the general corporate purposes of the
Company. These general corporate purposes may include, without limitation,
repayment of maturing obligations, redemption of outstanding indebtedness,
financing (in whole or part) future acquisitions (including acquisitions of
companies and/or assets and of mortgage securities, servicing rights and other
mortgage-related products), capital expenditures and working capital. Pending
any such uses, the Company may invest the net proceeds from the sale of any
Securities or may use them to reduce short-term indebtedness.
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND
PREFERRED STOCK DIVIDENDS
The following table sets forth the historical ratios of earnings to combined
fixed charges and preferred stock dividends of the Company for the periods
indicated:
<TABLE>
<CAPTION>
THREE MONTHS ENDING YEAR ENDING DECEMBER 31,
------------------- -----------------------------------
MARCH 31, 1997 1996 1995 1994 1993 1992(A)
------------------- ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to
Combined Fixed Charges
and Preferred Stock
Dividends(b).......... 1.24:1 1.20:1 1.12:1 1.17:1 1.18:1 1.13:1
</TABLE>
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(a) This financial information reflects the effects of a merger between the
Company and Tyler Cabot Mortgage Securities Fund, subsequent to the
merger's consummation in December 1992.
(b) Includes fixed charges related to CMO's issued by the Company's finance
subsidiaries. Excluding interest expense on CMO debt, the ratio of
earnings to combined fixed charges and preferred stock dividends would
have been 1.45:1, 1.40:1, 1.29:1, 1.48:1, 1.79:1 and 1.80:1, respectively,
for the periods indicated.
4
<PAGE>
DESCRIPTION OF SALES AGENCY AGREEMENTS
The Company may sell 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 and Second Amendment to Sales Agency Agreement dated as of
March 4, 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 5,625,000 shares of the Common Stock from time to time
through PaineWebber, as sales agent for the Company; 4,214,450 of such shares
have been sold as of July 30, 1997, with up to all of the remaining 1,410,550
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; 704,100 of such shares have been sold as of July 30, 1997, with
up to 1,873,200 of the remaining 3,795,900 shares being offered under the
Registration Statement of which this Prospectus forms a part. Such sales, if
any, will be made by means of ordinary brokers' transactions on the NYSE.
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").
5
<PAGE>
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.
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 will enter into a Sales Agency Agreement between the Company and
Merrill Lynch in connection with the sale of both Common Stock and Series B
Preferred Stock (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 date of this
Prospectus, 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.
6
<PAGE>
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 3,880,550 shares of its
Common Stock and up to 1,873,200 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 July 30, 1997 the
Company had 52,245,515 shares of its Common Stock, 425,709 shares of its $1.60
Cumulative Preferred Stock, Series A ("Series A Preferred Stock") and
19,823,122 shares of its Series B Preferred Stock issued and outstanding. The
Common Stock, Series A Preferred Stock and Series B Preferred Stock are listed
on the New York Stock Exchange. The Company intends to list any additional
shares of its Common Stock which are issued and sold hereunder.
REDEMPTION OR REPURCHASE OF CAPITAL STOCK TO MAINTAIN THE COMPANY'S STATUS AS
A REIT
The Company's charter provides that if the Board of Directors determines in
good faith that the direct or indirect ownership of stock of the Company has
or may become concentrated to an extent which would cause the Company to fail
to qualify or be qualified as a REIT under Sections 856(a)(5) or (6) of the
Internal Revenue Code of 1986, as amended (the "Code"), or similar provisions
of successor statutes, the Company may redeem or repurchase any number of
shares of Common Stock and/or Preferred Stock sufficient to maintain or bring
such ownership into conformity with the Code and may refuse to transfer or
issue shares of Common Stock and/or Preferred Stock to any person whose
acquisition would result in the Company being unable to conform with the
requirements of the Code. In general, Code Sections 856(a)(5) and (6) provide
that, as a REIT, the Company must have at least 100 beneficial owners for 335
days of each taxable year and that the Company cannot qualify as a REIT if, at
any time during the last half of the Company's taxable year, more than 50% in
value of its outstanding stock is owned, directly or indirectly, by or for not
more than five individuals. In addition, the charter provides that the Company
may redeem or refuse to transfer any shares of capital stock of the Company
necessary to prevent the imposition of a penalty tax as a result of ownership
of such shares by certain disqualified organizations, including governmental
bodies and tax-exempt entities that are not subject to tax on unrelated
business taxable income. The redemption or purchase price for any such shares
shall be equal to the fair market value of such shares as reflected in the
closing sales price for the shares if then listed on a national securities
exchange, or the average of the closing sales prices for the shares if then
listed on more than one national securities exchange, or if the shares are not
then listed on a national securities exchange, the latest bid quotation for
the shares if then traded over-the-counter on the last business day for which
closing prices are available immediately preceding the day on which notices of
such acquisitions are sent or, if no such closing sales prices or quotations
are available, then the net asset value of such stock as determined by the
Board of Directors in accordance with the provisions of applicable law.
SPECIAL STATUTORY REQUIREMENTS FOR CERTAIN TRANSACTIONS
Business Combination Statute. The Maryland General Corporation Law
establishes special requirements with respect to "business combinations"
between Maryland corporations and "interested stockholders" unless exemptions
are applicable. Among other things, the law prohibits for a period of five
years a merger and other specified or similar transactions between a Maryland
corporation and an interested stockholder and requires a super-majority vote
for such transactions after the end of such five-year period.
7
<PAGE>
"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 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
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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 July 30, 1997,
52,245,515 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 July 30, 1997, 19,823,122 shares of Series B Preferred
Stock were issued and outstanding, as described hereafter.
SERIES A PREFERRED STOCK AND SERIES B PREFERRED STOCK
General. In November, 1989, a wholly-owned subsidiary of the Company was
merged with and into Strategic Mortgage Investments, Inc., a Maryland
corporation ("Strategic"), and each outstanding share of Strategic common
stock was converted into one share of Series A Preferred Stock of the Company.
In December, 1992, Tyler Cabot Mortgage Securities Fund, Inc., a Maryland
corporation ("Tyler Cabot"), was merged with and into the Company, and each
outstanding share of Tyler Cabot common stock was converted into one share of
Series B Preferred Stock of the Company. The Series A Preferred Stock and
Series B Preferred Stock are fully paid and non-assessable and neither has
preemptive rights. The Series A Preferred Stock ranks on a parity with the
Series B Preferred Stock, and each rank on a parity with any other series of
the Company's Preferred Stock which is not by its terms made junior or senior
to the Series A Preferred Stock or Series B Preferred Stock with respect to
the payment of dividends and distribution of assets in liquidation.
Dividends. Holders of the Series B Preferred Stock are entitled to receive,
when, as and if declared by the Board of Directors of the Company out of funds
legally available therefore, cumulative preferential cash dividends at the
annual rate of $1.26 per share, and no more, payable in equal monthly
installments on each monthly dividend payment date. Holders of the Series A
Preferred Stock are entitled to receive, when, as and if declared by the Board
of Directors of the Company out of funds legally available therefor,
cumulative preferential cash dividends at the rate of $1.60 per annum per
share, and no more, payable in equal quarterly installments on each March 31,
June 30, September 30 and December 31. Whenever dividends are in arrears and
until all accrued and unpaid dividends on shares of Series A and Series B
Preferred Stock outstanding have been paid in full and the then current
dividend on each such series shall have been paid or declared and sufficient
funds set aside for payment thereof, the Company may not declare or pay
dividends on the Common Stock or any other class or series of capital stock
ranking junior to the Series A Preferred Stock and the Series B Preferred
Stock in respect of dividends ("Junior Stock") or redeem, purchase or
otherwise acquire for consideration any shares of Common Stock or Junior
Stock.
Liquidation Rights. In the event of any liquidation, dissolution or winding
up of the Company, whether voluntary or involuntary, the holders of the Series
A Preferred Stock and the Series B Preferred Stock will be entitled to receive
out of the assets of the Company available for distribution to stockholders,
whether from
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<PAGE>
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.
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<PAGE>
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 each of PaineWebber and Merrill Lynch
against certain civil liabilities, including liabilities under the 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
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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 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.
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.
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
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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.
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TAXATION OF STOCKHOLDERS
So long as a corporation qualifies as a REIT, distributions to stockholders
(other than dividends properly designated as "capital gain dividends") will
constitute ordinary income to the extent of current and accumulated earnings
and profits of the REIT. Capital gain dividends will be taxable as long-term
capital gains. Distributions in excess of the REIT's current and accumulated
earnings and profits will constitute a non-taxable return of capital, except
to the extent that the amount of such distributions received by any
stockholder exceeds the basis of the stockholder's shares, in which case such
excess will be taxable as capital gain, provided such shares are held as a
capital asset. Dividends received from a REIT are ineligible for the 70%
dividends received deduction. If a capital gain dividend is received with
respect to shares which are sold for a loss before being held for a period of
six months, such loss will be characterized as long term capital loss to the
extent of the capital gain dividend. Potential Capstead Mortgage Corporation
stockholders should be aware that for federal income tax purposes any dividend
paid by a REIT in January of any given calendar year will be deemed to have
been paid during the preceding calendar year if it was declared by the REIT in
October, November or December of such preceding year and was payable to the
shareholders of record on a specified date in the month in which it was
declared.
Under the Code and the related regulations, a change in the conversion ratio
for convertible preferred stock may be treated as a taxable distribution of
the stock of such corporation with respect to any shareholder whose
proportionate interest in the earnings and profits or assets of the
corporation is increased by such change. A change in a conversion ratio or
conversion price of convertible preferred stock pursuant to a bonafide,
reasonable adjustment formula which has the effect of preventing dilution of
the interest of the holders of such stock will not be considered to result in
a deemed distribution of stock. However, generally an adjustment in the
conversion ratio to compensate for a taxable cash distribution to other
shareholders will not be considered as made pursuant to a bonafide adjustment
formula. For example, in the case of the Series B Preferred Stock, the
conversion rate may be adjusted if the Company distributes to holders of its
Common Stock cash or other assets (excluding regular quarterly cash dividends
payable out of consolidated earnings or earned surplus or dividends payable in
shares of Common Stock). Under the above described federal income tax
provisions, such an adjustment may result in a taxable distribution to the
Series B Preferred stockholders.
Specific tax rules of a complex nature not summarized herein apply to
foreign investors in REITs. Accordingly, foreign stockholders should consult
their own tax advisers concerning the federal income and withholding tax
consequences and the state, local and foreign tax consequences of an
investment in Capstead REIT.
SPECIAL CONSIDERATIONS--TAX-EXEMPT AND CERTAIN OTHER INVESTORS
For CMOs issued after December 31, 1991, pursuant to regulations not yet
published, the portion of any dividend paid to stockholders attributable to
"excess inclusion income" on the retained residual interests in such 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
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would subject the Company to tax, such shares shall be immediately redeemable
at the option of the Company. See "Description of Securities--Redemption or
Repurchase of Capital Stock to Maintain the Company's Status as a REIT."
Tax-exempt and other investors are urged to consult their own tax advisors
with respect to the tax consequences arising under federal law and the law of
any state, municipality or other taxing jurisdiction. Foreign investors should
consult their own tax advisors concerning the tax consequences of an
investment in the Company, including the possibility of United States
withholding tax on Company dividends.
FAILURE TO QUALIFY AS A REAL ESTATE INVESTMENT TRUST
If Capstead REIT fails to qualify for taxation as a REIT in any taxable
year, distributions to its stockholders for such year and future years would
not be deductible by Capstead REIT and Capstead REIT would be subject to tax
on its income at regular corporate rates. In such event, all distributions to
stockholders would be taxable as ordinary income to the extent of current and
accumulated earnings and profits and would be eligible for the 70% dividends
received deduction for corporations. If Capstead REIT fails to qualify as a
REIT for even one year, it could be required to incur substantial indebtedness
(to the extent borrowings are feasible) or liquidate substantial investments
in order to pay the resulting taxes. Thus, if Capstead REIT fails to qualify
for taxation as a REIT, there can be no assurance that any distribution to its
stockholders could be made. Unless entitled to relief under specific statutory
provisions, such company would also be disqualified from treatment as a REIT
for the next four taxable years. It is not possible to state whether in all
circumstances such company would be entitled to statutory relief. While the
Board of Directors of the Company presently intends to cause Capstead REIT to
operate in a manner that will enable it to qualify as a REIT in all future
taxable years, there can be no certainty that such intention will be realized
because, among other things, qualification hinges on the conduct of the
business of Capstead REIT.
STATE AND LOCAL TAXES
State or local income tax treatment of Capstead REIT or holders of any of
its Securities may differ from the federal income tax treatment described
above. As a result, prospective stockholders should consult their own tax
advisers for an explanation of how state and local tax laws may affect their
investment in Capstead REIT.
LEGAL MATTERS
Certain legal matters with respect to the securities offered hereby will be
passed on for the Company and the Selling Stockholders by Andrews & Kurth
L.L.P., Dallas, Texas, and for the underwriters or agents by counsel to be
identified in the Prospectus Supplement. Andrews & Kurth L.L.P. will rely as
to all matters of Maryland law on Piper & Marbury L.L.P., Baltimore, Maryland.
Attorneys at Andrews & Kurth L.L.P. beneficially own approximately 45,600
shares of Common Stock of the Company and 9,700 shares of Series B Preferred
Stock of the Company.
EXPERTS
The consolidated financial statements and schedule of Capstead Mortgage
Corporation and subsidiaries incorporated by reference or appearing in
Capstead Mortgage Corporation's Annual Report on Form 10-K for the year ended
December 31, 1996, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their reports thereon included 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.
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PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
<S> <C>
Registration Fee--Securities and Exchange Commission............. $43,196.97
Printing and Engraving Expenses.................................. 7,500.00
Accounting Fees and Expenses..................................... 1,000.00
Legal Fees and Expenses.......................................... 40,000.00
Blue Sky Fees and Expenses....................................... 1,000.00
----------
Total.......................................................... 92,696.97
==========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Articles of Incorporation provide for indemnification of
directors to the full extent permitted by Maryland law, indemnification of
officers who are also directors to the extent the Company shall indemnify its
directors, and indemnification of officers who are not directors to such
further extent as shall be authorized by the Board of Directors and be
consistent with law.
Section 2-418 of the Maryland General Corporation Law generally permits a
Maryland corporation to indemnify any director made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative, or investigative, by reason of service in his capacity as a
director, unless it is established that (i) the act or omission of the
director was material to the matter giving rise to the proceeding and (a) was
committed in bad faith or (b) was the result of active and deliberate
dishonesty; or (ii) the director actually received an improper personal
benefit in money, property, or services; or (iii) in the case of any criminal
proceeding, the director had reasonable cause to believe that the act or
omission was unlawful. Indemnification may be against judgments, penalties,
fines, settlements, and reasonable expenses actually incurred by the director
in connection with the proceeding. If the proceeding was one by or in the
right of the corporation, indemnification may not be made in respect of any
proceeding in which the director shall have been adjudged to be liable to the
corporation. In addition, a director may not be indemnified in respect of any
proceeding charging improper personal benefit to the director, whether or not
involving action in the director's official capacity, in which the director
was adjudged to be liable on the basis that personal benefit was improperly
received. The termination of any proceeding by conviction, a plea of nolo
contendere or its equivalent, or an entry of an order of probation prior to
judgment, creates a rebuttable presumption that the director did not meet the
requisite standard of conduct.
Section 2-418 also provides that a court of appropriate jurisdiction may,
upon application of a director and such notice as the court shall require,
order indemnification if it determines that a director is entitled to
reimbursement because the director has been successful on the merits or
otherwise, in any such proceeding, in which case the director shall be
entitled to recover the expenses of securing such reimbursement, or if the
court determines that the director is fairly and reasonably entitled to
indemnification in view of all the relevant circumstances, whether or not the
director has met the applicable standards of conduct or has been adjudged
liable in a proceeding charging improper personal benefit to the director.
Indemnification with respect to any proceeding by or in the right of the
corporation or in which liability shall have been adjudged on the basis that
personal benefit was improperly received shall be limited to expenses. The
indemnification and advancement of expenses provided or authorized by Section
2-418 may not be deemed exclusive of any other rights, by indemnification or
otherwise, to which a director may be entitled under the charter, the bylaws,
a resolution of the stockholders or directors, an agreement or otherwise, both
as to action in an official capacity and as to action in another capacity
while holding such office. A corporation may indemnify and advance expenses to
an officer, employee, or agent of the corporation to the same extent that it
may indemnify directors under Section 2-418 and, in addition, may indemnify
and advance expenses to an officer, employee, or agent who is not a director
to
II-1
<PAGE>
such further extent, consistent with law, as may be provided by its charter,
bylaws, general or specific action of its board of directors or contract.
Section 2-418 also provides that a corporation may purchase and maintain
insurance against liabilities for which indemnification is not expressly
provided by statute.
The Company provides insurance from commercial carriers against certain
liabilities incurred by the directors and officers of the Company.
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -----------
<C> <S>
1.1 --PaineWebber Common Stock Sales Agency Agreement(3)
1.2 --Amendment No. 1 to PaineWebber Common Stock Sales Agency
Agreement.(4)
1.3 --Amendment No. 2 to PaineWebber Common Stock Sales Agency
Agreement.(5)
1.4 --PaineWebber Preferred Stock Sales Agency Agreement.(4)
1.5 --Amendment No. 1 to PaineWebber Preferred Stock Sales Agency
Agreement.(5)
1.6 --Form of Merrill Lynch Sales Agency Agreement.(1)
3.1 --Articles of Incorporation of the Company.(6)
3.2 --Amended and Restated Bylaws of the Company.(7)
4.1 --Specimen of Common Stock certificate.(6)
4.2 --Specimen of Series B Preferred Stock Certificate.(6)
4.3 --Articles Supplementary authorizing the Series B Preferred
Stock.(8)
4.4 --Articles Supplementary authorizing additional shares of Series B
Preferred Stock.(9)
4.5 --Articles Supplementary authorizing additional shares of Series B
Preferred Stock.(2)
5.1 --Opinion of Andrews & Kurth L.L.P. as to the legality of the
Securities being offered.(2)
5.2 --Opinion of Piper & Marbury L.L.P. as to the legality of the
Securities being offered.(2)
12.1 --Statement regarding computation of ratios of earnings to fixed
charges and preferred stock dividends.(2)
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).(2)
23.3 --Consent of Piper & Marbury L.L.P. (included in its opinion filed
as Exhibit 5.2 hereto).(2)
24.1 --Power of Attorney (set forth on page II-4 of the original
Registration Statement filed on May 9, 1997).(2)
</TABLE>
(1) Filed herewith.
(2) 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.
(3) 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.
(4) 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.
(5) 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.
(6) 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.
(7) 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.
II-2
<PAGE>
(8) 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.
(9) 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.
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of this Registration Statement (or the most recent
post-effective amendment hereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this Registration Statement;
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in this Registration Statement or
any material change to such information in this Registration Statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed by the Registrant
pursuant to Section 13 or Section 15(d) of the Exchange Act that are
incorporated by reference in this Registration Statement.
(2) that, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) to remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act that is incorporated by reference in this Registration Statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of
whether such indemnification by it is against public policy as expressed in
the Securities Act and will be governed by the final adjudication of such
issue.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS POST-EFFECTIVE
AMENDMENT NO. 1 TO REGISTRATION STATEMENT NO. 333-26865 TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF DALLAS,
STATE OF TEXAS, ON THE 6TH DAY OF AUGUST, 1997.
Capstead Mortgage Corporation
/s/ Andrew F. Jacobs
By___________________________________
Andrew F. Jacobs
Senior Vice President--Control and
Treasurer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS POST-
EFFECTIVE AMENDMENT NO. 1 TO REGISTRATION STATEMENT NO. 333-26865 HAS BEEN
SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
Chairman, Chief
* Executive Officer, August 6, 1997
- ------------------------------------- President and
RONN K. LYTLE Director (Principal
Executive Officer)
/s/ Andrew F. Jacobs Senior Vice
- ------------------------------------- President--Control August 6, 1997
ANDREW F. JACOBS and Treasurer
(Principal
Financial and
Accounting Officer)
Director
* August 6, 1997
- -------------------------------------
BEVIS LONGSTRETH
Director
* August 6, 1997
- -------------------------------------
PAUL M. LOW
Director
* August 6, 1997
- -------------------------------------
HARRIET E. MIERS
Director
* August 6, 1997
- -------------------------------------
WILLIAM R. SMITH
Director
* August 6, 1997
- -------------------------------------
JOHN C. TOLLESON
*By/s/ Andrew F. Jacobs
----------------------------------
ANDREW F. JACOBS
Attorney-in-Fact
II-4
<PAGE>
EXHIBIT 1.6
______________________________________________________________________________
______________________________________________________________________________
CAPSTEAD MORTGAGE CORPORATION
(a Maryland corporation)
5,000,000 Shares
(Common Stock, $0.01 par value)
and
2,000,000 Shares
($1.26 Cumulative Convertible Preferred Stock, Series B, $0.10 par value)
SALES AGENCY AGREEMENT
----------------------
______________________________________________________________________________
______________________________________________________________________________
Dated: August __, 1997
<PAGE>
TABLE OF CONTENTS
SECTION 1. Description of Securities..................................... 1
SECTION 2. Sale and Delivery of Securities............................... 1
SECTION 3. Representations and Warranties of the Company................. 3
(i) Compliance with Registration Requirements..................... 3
(ii) Conformity with Securities Act................................ 4
(iii) Documents Incorporated by Reference........................... 5
(iv) Financial Statements.......................................... 5
(v) No Material Adverse Change in Business........................ 5
(vi) Good Standing and Due Qualification........................... 5
(vii) Good Standing of Subsidiaries................................. 6
(viii) Capitalization................................................ 6
(ix) Absence of Proceedings........................................ 6
(x) Accuracy of Exhibits.......................................... 6
(xi) Due Authorization............................................. 7
(xii) Absence of Breach or Violation................................ 7
(xiii) Title to Properties and Assets................................ 7
(xiv) Possession of Intellectual Property........................... 8
(xv) Absence of Violations......................................... 8
(xvi) Qualification as a REIT....................................... 8
(xvii) Investment Company Act........................................ 8
(b) Additional Certification...................................... 8
SECTION 4. Covenants of the Company...................................... 8
(a) Compliance with Securities Regulations and Commission Requests 9
(b) Prompt Notice of Stop Order................................... 9
(c) Continued Compliance with Securities Laws..................... 9
(d) Blue Sky Qualification........................................ 10
(e) Delivery of Registration Statement............................ 10
(f) Availability of Earnings Statement............................ 10
(g) Payment of Expenses........................................... 10
(h) Application of Net Proceeds................................... 10
(i) Notice and Suspension of Program.............................. 10
(j) Continuing Obligation to Advise Agent......................... 11
(k) Consent to Agent's Trading.................................... 11
SECTION 5. Conditions of Agent's Obligations............................. 11
(a) Effectiveness of Registration Statement....................... 11
(b) Absence of Untrue Statement or Omission of Material Fact...... 11
(c) Absence of Material Adverse Change............................ 12
(d) Receipt of Opinion of Company Counsel......................... 12
(e) Opinion of Maryland Counsel................................... 12
<PAGE>
(f) Opinion of Counsel to the Agent............................... 12
(g) Receipt of Auditors' Letter................................... 12
(h) Receipt of Company Certificate................................ 12
(i) Further Information, Certificates and Documents............... 13
SECTION 6. Additional Covenants of the Company........................... 13
(a) Reaffirmation of Representations and Warranties............... 13
(b) Subsequent Delivery of Certificates........................... 13
(c) Subsequent Delivery of Opinions............................... 14
(d) Subsequent Delivery of Auditor's Letter....................... 14
SECTION 7. Indemnification............................................... 15
(a) Indemnification of the Agent.................................. 15
(b) Indemnification of Company, Directors and Officers............ 16
(c) Actions Against Parties; Notification......................... 16
(d) Settlement without Consent if Failure to Reimburse............ 16
SECTION 8. Contribution.................................................. 17
SECTION 9. Representations and Agreements to Survive Delivery............ 18
SECTION 10. Termination................................................... 18
SECTION 11. Notices....................................................... 19
SECTION 12. Parties....................................................... 20
SECTION 13. Entire Agreement.............................................. 20
SECTION 14. Effect of Headings............................................ 20
SECTION 15. GOVERNING LAW; FORUM.......................................... 20
SECTION 16. Counterparts.................................................. 20
Exhibit A-Form of Opinion of Counsel....................................A-1
Exhibit B-Form of Opinion of Maryland Counsel...........................B-1
Schedule 3.7
ii
<PAGE>
CAPSTEAD MORTGAGE CORPORATION
5,000,000 SHARES
(COMMON STOCK, $0.01 PAR VALUE)
AND
2,000,000 SHARES
($1.26 CUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES B, $0.10 PAR VALUE)
SALES AGENCY AGREEMENT
August__, 1997
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
Ladies and Gentlemen:
Capstead Mortgage Corporation, a Maryland corporation (the "Company"),
confirms its agreement with Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner &
Smith Incorporated (the "Agent"), with respect to the issue and sale by the
Company of its securities as follows:
SECTION 1. Description of Securities. The Company proposes to issue and
-------------------------
sell through the Agent, as non-exclusive sales agent, up to 5,000,000 shares
(the "Common Stock Maximum Amount") of common stock, par value $0.01 per share
(the "Common Stock") and 2,000,000 shares (the "Preferred Stock Maximum Amount"
and, together with the Common Stock Maximum Amount, the "Maximum Amount") of
$1.26 Cumulative Convertible Preferred Stock, Series B, par value $0.10 per
share (the "Preferred Stock" and together with the Common Stock, the "Stock"),
on the terms set forth in Section 2 hereof. [The Maximum Amount may be changed
from time to time by mutual agreement of the parties hereto.]
SECTION 2. Sale and Delivery of Securities. On the basis of the
-------------------------------
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the Company agrees to issue and sell
through the Agent, as non-exclusive sales agent, and the Agent agrees to sell,
as non-exclusive sales agent for the Company, on a reasonable efforts basis, up
to the Common Stock Maximum Amount and the Preferred Stock Maximum Amount on the
terms set forth herein. The Stock, up to the Maximum Amount, is to be sold on a
daily basis or otherwise as shall be agreed to by the Company and the Agent.
The
<PAGE>
Company will designate the maximum number of shares of Common Stock and
Preferred Stock to be sold by the Agent daily (collectively, the Common Stock
and Preferred Stock so designated are referred to herein as the "Shares").
Subject to the terms and conditions hereof, the Agent shall use its reasonable
efforts to sell all of the designated Shares up to the Maximum Amount.
Notwithstanding the foregoing the Company may instruct the Agent by
telephone (confirmed promptly by telecopy) not to sell Shares if such sales
cannot be effected at or above the price designated by the Company in any such
instruction. In addition, the Company or the Agent may, upon notice to the
other party hereto by telephone (confirmed promptly by telecopy), suspend the
offering of the Shares; provided, however, that such suspension or termination
-------- -------
shall not affect or impair the parties' respective obligations with respect to
the Shares sold hereunder prior to the giving of such notice.
If either party has reason to believe that the exemptive provisions set
forth in Rule 101(c)(1) of Regulation M under the Securities Exchange Act of
1934 (the "Exchange Act"), are not satisfied with respect to either the Common
Stock or the Preferred Stock, the number of Shares of Common Stock and Preferred
Stock, respectively, that may be sold on any day shall not exceed 10% of the
average daily trading volume of the Common Stock or Preferred Stock, as the case
may be, for the sixty days prior to such day. Unless otherwise agreed by the
Company and the Agent, the Agent shall sell the Shares only by means of ordinary
brokers' transactions on the New York Stock Exchange (the "NYSE"). Unless
otherwise agreed to by the Company and the Agent, the Agent shall not solicit or
arrange for the solicitation of customer's orders in anticipation of or in
connection with such transactions, nor shall it sell short as principal shares
of Stock of the Company, except in connection with customary market making
activities in the Company's outstanding securities. The Agent shall not engage
in any special selling efforts or selling methods relating to the Shares within
the meaning of Rule 100 of Regulation M under the Exchange Act. The Agent shall
calculate on a weekly basis the average daily trading volume of each of the
Common Stock and Preferred Stock.
The compensation to the Agent for sales of Shares shall be __% of the gross
sales price of the Shares sold, in the form of a commission. The remaining
proceeds, after further deduction for 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 such Shares (the "Net Proceeds").
The Agent shall provide written confirmation to the Company following the
close of trading on the NYSE each day setting forth the number of shares of
Common Stock and Preferred Stock, respectively, sold on such day, the Net
Proceeds to the Company, and the compensation payable by the Company to the
Agent with respect to such sales.
Settlement for sales of Shares will occur on the third business day
following the date on which such sales are made (each such day, a "Settlement
Date"). On each Settlement Date, the Shares sold through the Agent for
settlement on such date shall be delivered by the
2
<PAGE>
Company to the Agent against payment of the Net Proceeds for the sale of such
Shares. Settlement for all Shares shall be effected by free delivery of Shares
to the Agent's account at The Depository Trust Corporation in return for
payments in same day funds delivered to the account designated by the Company.
If the Company shall default on its obligation to deliver Shares on any
Settlement Date, the Company shall (i) hold the Agent harmless against any loss,
claim or damage arising from or as a result of such default by the Company and
(ii) pay the Agent any commission to which it would otherwise be entitled absent
such default. If the Agent breaches this Agreement by failing to deliver
proceeds on any Settlement Date for Shares delivered by the Company, the Agent
will pay the Company interest based on the effective overnight Federal Funds
rate.
At each Representation Date (as defined below), the Company shall be deemed
to have affirmed each representation, warranty, covenant and other agreement
contained in this Agreement, and on each Filing Date (as defined below), the
Company shall affirm in writing each representation, warranty, covenant and
other agreement contained in this Agreement. The Company covenants and agrees
with the Agent that on or prior to the second business day after the end of each
calendar week (each such week a "Reporting Period"), the Company will file a
prospectus supplement under the applicable paragraph of Rule 424(b) (each a
"Filing Date"), 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 Preferred Stock, respectively, sold through the
Agent, the Net Proceeds to the Company and the compensation payable by the
Company to the Agent with respect to sales of Common Stock and Preferred Stock,
respectively (all as provided in writing by the Agent for inclusion in each such
prospectus supplement). Any obligation of the Agent to use its reasonable
efforts to sell the Shares shall be subject to the continuing accuracy of the
representations and warranties of the Company herein, to the performance by the
Company of its obligations hereunder and to the continuing satisfaction of the
additional conditions specified in this Agreement.
SECTION 3. Representations and Warranties of the Company. (a) The
---------------------------------------------
Company represents and warrants to, and agrees with, the Agent that as of the
date hereof, as of each date of sale of Shares and as of each Settlement Date
and Filing Date, and as of any time that the Registration Statement or the
Prospectus shall be amended or supplemented (each of the times referenced above
is referred to herein as a "Representation Date"), as follows:
(i) Compliance with Registration Requirements. The Company meets the
-----------------------------------------
requirements for use of Form S-3 under the Securities Act of 1933 (the
"Act") and the rules and regulations thereunder ("Rules and Regulations").
A registration statement (as amended through the date hereof) on Form S-3
(Registration No. 333-26865) with respect to, among other securities, the
Stock, including a form of prospectus (as amended and supplemented through
the date hereof), has been prepared by the Company in conformity with the
requirements of the Act and the Rules and Regulations and filed under the
Act and has become effective and no stop order suspending the effectiveness
of the Registration Statement has been issued under the Act, and any
request on the part of the Securities and Exchange Commission (the
3
<PAGE>
"Commission") for additional information has been complied with. Copies of
such registration statement and prospectus, any such amendment or
supplement and all documents incorporated by reference therein that were
filed with the Commission on or prior to the date of this Agreement have
been delivered to the Agent. Such registration statement, as amended by
each post-effective amendment thereto, if any, is referred to herein as the
"Registration Statement" and the final form of prospectus included in the
Registration Statement, as amended or supplemented from time to time, is
referred to herein as the "Prospectus." Any reference herein to the
Registration Statement, the Prospectus, or any amendment or supplement
thereto shall be deemed to refer to and include the documents incorporated
(or deemed to be incorporated) by reference therein, and any reference
herein to the terms "amend," "amendment" or "supplement" with respect to
the Registration Statement or Prospectus shall be deemed to refer to and
include the filing after the execution hereof of any document with the
Commission deemed to be incorporated by reference therein. For purposes of
this Agreement, all references to the Registration Statement, Prospectus or
preliminary prospectus or to any amendment or supplement thereto shall be
deemed to include any copy filed with the Commission pursuant to its
Electronic Data Gathering, Analysis and Retrieval system ("EDGAR").
(ii) Conformity with Securities Act. Each part of the Registration
------------------------------
Statement, when such part became or becomes effective and at each
Representation Date, and the Prospectus, on the date of filing thereof with
the Commission and at each Representation Date, conformed or will conform
in all material respects with the requirements of the Act and the Rules and
Regulations; each part of the Registration Statement, when such part became
or becomes effective and at each Representation Date, did not or will not
contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein, not misleading; and the Prospectus, on the date of filing thereof
with the Commission and at each Representation Date, did not or will not
include an untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; except that the
foregoing shall not apply to statements in or omissions from any such
document in reliance upon, and in conformity with, written information
furnished to the Company by or on behalf of the Agent, specifically for use
in the Registration Statement, the Prospectus or any amendment or
supplement thereto.
Each preliminary prospectus and the prospectus filed as part of the
Registration Statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 under the Act, complied when so
filed in all material respects with the Rules and Regulations, and the
Registration Statement, each preliminary prospectus, the Prospectus and
each amendment or supplement thereto delivered to the Agent for use in
connection with this offering was or will be identical to the
electronically transmitted copies thereof filed with the Commission
pursuant to EDGAR, except to the extent permitted by Regulation S-T.
4
<PAGE>
(iii) Documents Incorporated by Reference. The documents
-----------------------------------
incorporated by reference in the Registration Statement and the Prospectus,
when they became or become effective under the Act or were or are filed
with the Commission under the Exchange Act, as the case may be, conformed
or will conform in all material respects with the requirements of the Act
or the Exchange Act, as applicable, and the rules and regulations of the
Commission thereunder and, when read together with the other information in
the Registration Statement and the Prospectus, at the time the Registration
Statement became effective, at the time the Prospectus was issued and at
each Representation Date, did not and will not contain an untrue statement
of a material fact or omit a material fact required to be stated therein or
necessary to make the statements therein not misleading.
(iv) Financial Statements. The financial statements of the Company
--------------------
and its subsidiaries, together with the related notes and schedules, set
forth or incorporated by reference in the Registration Statement and
Prospectus fairly present the financial condition and the results of
operations and cash flows of the Company and its subsidiaries as of the
dates indicated or for the periods therein specified and were prepared in
conformity with generally accepted accounting principles consistently
applied throughout the periods involved (except as otherwise stated
therein). The accountants who certified the financial statements and
supporting schedules included in the Registration Statement are independent
public accountants as required by the Act and the Rules and Regulations.
(v) No Material Adverse Change in Business. Since the respective
--------------------------------------
dates as of which information is given in the Registration Statement and
the Prospectus, except as otherwise stated therein or contemplated thereby,
(A) there has been no material adverse change in the condition, financial
or otherwise, or in the earnings, business affairs or business prospects of
the Company and its subsidiaries considered as one enterprise, whether or
not arising in the ordinary course of business (a "Material Adverse
Effect"), (B) there have been no transactions entered into by the Company
or any of its subsidiaries, other than those in the ordinary course of
business, which are material with respect to the Company and its
subsidiaries, considered as one enterprise, and (C) there has been no
dividend or distribution of any kind declared, paid or made by the Company
on any class of its capital stock.
(vi) Good Standing and Due Qualification. The Company has been duly
-----------------------------------
incorporated and is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation and has corporate
power and authority to own, lease and operate its properties and to conduct
its business as described in the Registration Statement and the Prospectus,
to enter into and perform its obligations under this Agreement and to
consummate the transactions contemplated in this Agreement, the
Registration Statement and the Prospectus; the Company is duly qualified as
a foreign corporation to transact business and is in good standing in each
jurisdiction in which such qualification is required, whether by reason of
the ownership
5
<PAGE>
or leasing of property or the conduct of business, except where the failure
to so qualify or be in good standing would not result in a Material Adverse
Effect.
(vii) Good Standing of Subsidiaries. Each significant subsidiary (as
-----------------------------
defined in Section 1-02 of Regulation S-X) (each, a "Significant
Subsidiary") of the Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has corporate power and authority to
own, lease and operate its properties and conduct its business as described
in the Registration Statement and Prospectus and is duly qualified as a
foreign corporation to transact business and is in good standing in each
jurisdiction in which such qualification is required, whether by reason of
the ownership or leasing of property or the conduct of business, except
where the failure to so qualify and be in good standing would not have a
Material Adverse Effect on the Company; and all of the issued and
outstanding capital stock of each subsidiary has been duly authorized and
validly issued, is fully paid and nonassessable and (except as set forth in
Schedule 3.7 hereto or as otherwise stated in the Registration Statement)
is owned by the Company, directly or through subsidiaries, free and clear
of any security interest, mortgage, pledge, lien, encumbrance, claim or
equity. The Significant Subsidiaries of the Company are set forth in
Schedule 3.7.
(viii) Capitalization. The outstanding shares of capital stock of
--------------
the Company and the Stock have been duly authorized and are, or when issued
as contemplated hereby will be, validly issued, fully paid and
nonassessable and conform, or when so issued will conform, to the
description thereof in the Prospectus. Upon issuance and delivery of the
Preferred Stock as contemplated by this Agreement, the Preferred Stock will
be convertible, at the option of the holder thereof, into Common Stock.
The shares of Common Stock issuable upon conversion have been duly
authorized and reserved for issuance upon such conversion by all necessary
corporate action and such shares of Common Stock, when issued upon such
conversion will be validly issued, fully paid and non assessable. The
stockholders of the Company have no preemptive rights with respect to the
Stock or the shares of Common Stock issuable upon conversion of the
Preferred Stock.
(ix) Absence of Proceedings. Except as set forth in the Registration
----------------------
Statement and the Prospectus, there is not pending or, to the knowledge of
the Company, threatened any action, suit or proceeding to which the Company
or any of its subsidiaries is a party, before or by any court or
governmental agency or body, that could reasonably be expected to result in
a Material Adverse Effect, or which might reasonably be expected to
materially and adversely affect the properties or assets thereof considered
as a whole.
(x) Accuracy of Exhibits. There are no contracts or documents of the
--------------------
Company or any of its subsidiaries that are required to be filed as
exhibits to the Registration Statement or to any of the documents
incorporated by reference therein by
6
<PAGE>
the Act or the Exchange Act or by the rules and regulations of the
Commission thereunder that have not been so filed.
(xi) Due Authorization. All necessary action has been duly and
-----------------
validly taken by the Company to authorize the execution, delivery and
performance of this Agreement. This Agreement has been duly and validly
authorized, executed and delivered by the Company.
(xii) Absence of Breach or Violation. The performance of this
------------------------------
Agreement and the consummation of the transactions contemplated herein will
not result in a breach or violation of any of the terms and provisions of,
or constitute a default under, any agreement or instrument to which the
Company or any of its subsidiaries is a party or by which it or any of its
subsidiaries is bound or to which any of the property of the Company or any
of its subsidiaries is subject, except for such breaches or defaults that
would not, singly or in the aggregate, result in a Material Adverse Effect,
or materially affect the Company's ability to perform its obligations under
this Agreement, nor will such action result in the violation of the
Company's charter or by-laws, or any statute or any order, rule or
regulation of any court or governmental agency or body having jurisdiction
over the Company or any of its subsidiaries or any of its properties; no
consent, approval, authorization or order of, or filing with, any court or
governmental agency or body is required for the consummation by the Company
of the transactions contemplated by this Agreement, except such as may be
required by state securities or blue sky laws.
(xiii) Title to Properties and Assets. Each of the Company and its
------------------------------
subsidiaries has (i) good and indefeasible title to all of the properties
and assets described in the Prospectus as owned by it, free and clear of
all liens, charges, encumbrances or restrictions, except such as are
described in the Prospectus or are not material to the business, condition,
financial or otherwise, or the earnings, business affairs or business
prospects of the Company and its subsidiaries considered as one enterprise,
(ii) peaceful and undisturbed possession under all material leases to which
it is party as lessee, (iii) all governmental or regulatory licenses,
certificates, permits, authorizations, approvals, franchises or other
rights necessary to engage in the business currently conducted by it,
except such as are not material to the business, condition, financial or
otherwise, or the earnings, business affairs or business prospects of the
Company and its subsidiaries considered as one enterprise, (iv) no reason
to believe that any governmental body or agency is considering limiting,
suspending or revoking any such license, certificate, permit,
authorization, approval, franchise or right and (v) not received any notice
of and has no reason to believe that any governmental body or agency is
considering enacting, amending or repealing any statute, law, ordinance or
regulation required to be described in the Registration Statement and
Prospectus that is not so described as required. All material leases to
which the Company or any of its subsidiaries is a party are valid and
binding and no default has occurred and is continuing thereunder, and, to
the best knowledge of the Company, no material defaults by the landlord are
existing under any such leases.
7
<PAGE>
(xiv) Possession of Intellectual Property. Each of the Company and
-----------------------------------
its subsidiaries owns or possesses all of the patents, patent rights,
licenses, inventions, copyrights, know-how (including trade secrets and
other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures), trademarks, service marks and trade
names presently employed by them in connection with the business now
operated by them, and neither the Company nor any of its subsidiaries has
received any notice of infringement of or conflict with asserted rights of
others with respect to any of the foregoing which, if singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding,
would result a Material Effect.
(xv) Absence of Violations. The Company and its subsidiaries have not
---------------------
violated and are in compliance in all material respects with all material
laws, statutes, ordinances, regulations, rules and orders of any foreign,
federal, state or local government and any other governmental department or
agency, and any judgment, decision, decree or order of any court or
governmental agency, department or authority, including, without
limitation, environmental laws. Neither the Company nor any of its
subsidiaries has received any notice to the effect that, or otherwise been
advised that, it is not in compliance with any such statutes, regulations,
rules, judgments, decrees, orders, ordinances or other laws, and the
Company is not aware of any existing circumstances which are likely to
result in material violations of any of the foregoing.
(xvi) Qualification as a REIT. The Company and its qualified real
-----------------------
estate investment trust subsidiaries are organized in conformity with the
requirements for qualification as, and operate in a manner that qualifies
them as, a real estate investment trust under the Internal Revenue Code of
1986, as amended (the "Code"), and the rules and regulations thereunder and
will be so qualified after consummation of the transactions contemplated by
this Agreement.
(xvii) Investment Company Act. The Company is not, and upon the
----------------------
issuance and sale of the Stock as herein contemplated and the application
of the net proceeds therefrom as described in the Prospectus will not be,
an "investment company" or an entity "controlled" by an "investment
company" as such terms are defined in the Investment Company Act of 1940,
as amended (the "1940 Act").
(b) Additional Certification. Any certificate signed by any officer
------------------------
of the Company or any of its subsidiaries and delivered to the Agent or to
counsel for the Agent in connection with an offering of Shares shall be deemed a
representation and warranty by the Company to such Agent as to the matters
covered thereby on the date of such certificate and, unless subsequently amended
or supplemented, at each Representation Date subsequent thereto.
SECTION 4. Covenants of the Company. The Company covenants and
------------------------
agrees with the Agent that:
8
<PAGE>
(a) Compliance with Securities Regulations and Commission Requests.
--------------------------------------------------------------
During the period in which a prospectus relating to the Shares is required to be
delivered under the Act, the Company will notify the Agent promptly of the time
when any subsequent amendment to the Registration Statement has become effective
or any subsequent supplement to the Prospectus has been filed and of any request
by the Commission for any amendment or supplement to the Registration Statement
or Prospectus or for additional information; it will prepare and file with the
Commission, promptly upon the Agent's request, any amendments or supplements to
the Registration Statement or Prospectus that, in the Agent's reasonable
opinion, may be necessary or advisable in connection with the distribution of
the Shares by the Agent; the Company will not file any amendment or supplement
to the Registration Statement or Prospectus (other than any prospectus
supplement relating to the offering of other securities registered under the
Registration Statement) unless a copy thereof has been submitted to the Agent a
reasonable period of time before the filing and the Agent has not reasonably
objected thereto; and it will furnish to the Agent at the time of filing thereof
a copy of any document that upon filing is deemed to be incorporated by
reference in the Registration Statement or Prospectus; and the Company will
cause each amendment or supplement to the Prospectus to be filed with the
Commission as required pursuant to the applicable paragraph of Rule 424(b) of
the Rules and Regulations or, in the case of any document to be incorporated
therein by reference, to be filed with the Commission as required pursuant to
the Exchange Act, within the time period prescribed.
(b) Prompt Notice of Stop Order. The Company will advise the Agent,
---------------------------
promptly after it shall receive notice or obtain knowledge thereof, of the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement, of the suspension of the qualification of the Shares for
offering or sale in any jurisdiction, or of the initiation or threatening of any
proceeding for any such purpose; and it will promptly use every reasonable
effort to prevent the issuance of any stop order or to obtain its withdrawal if
such a stop order should be issued.
(c) Continued Compliance with Securities Laws. Within the time during
-----------------------------------------
which a prospectus relating to the Shares is required to be delivered under the
Act, the Company will comply as far as it is able with all requirements imposed
upon it by the Act and by the Rules and Regulations, as from time to time in
force, so far as necessary to permit the continuance of sales of or dealings in
the Shares as contemplated by the provisions hereof and the Prospectus. If
during such period any event occurs as a result of which the Prospectus as then
amended or supplemented would include an untrue statement of a material fact or
omit to state a material fact necessary to make the statements therein, in the
light of the circumstances then existing, not misleading, or if during such
period it is necessary to amend or supplement the Registration Statement or
Prospectus to comply with the Act, the Company will promptly notify the Agent to
suspend the offering of Shares during such period and the Company will amend or
supplement the Registration Statement or Prospectus (at the expense of the
Company, unless the misstatements or omissions in question were made solely in
reliance on written information furnished to the Company by the Agent expressly
for use in the Registration Statement or Prospectus in which case such amendment
or supplement shall be at
9
<PAGE>
the expense of the Agent) so as to correct such statement or omission or effect
such compliance.
(d) Blue Sky Qualification. The Company will use its best efforts to
----------------------
qualify the Shares for sale under the securities laws of such jurisdictions as
the Agent designates and to continue such qualifications in effect so long as
required for the distribution of the Shares, except that the Company shall not
be required in connection therewith to qualify as a foreign corporation or to
execute a general consent to service of process in any jurisdiction.
(e) Delivery of Registration Statement. The Company will furnish to
----------------------------------
the Agent and its counsel (at the expense of the Company) copies of the
Registration Statement, the Prospectus (including all documents incorporated by
reference therein) and all amendments and supplements to the Registration
Statement or Prospectus that are filed with the Commission during the period in
which a prospectus relating to the Shares is required to be delivered under the
Act (including all documents filed with the Commission during such period that
are deemed to be incorporated by reference therein), in each case as soon as
available and in such quantities as the Agent may from time to time reasonably
request and will also furnish copies of the Prospectus to the NYSE in accordance
with Rule 153 of the Rules and Regulations.
(f) Availability of Earnings Statement. The Company will make
----------------------------------
generally available to its security holders as soon as practicable, but in any
event not later than 15 months after the end of the Company's current fiscal
quarter, an earnings statement (which need not be audited) covering a 12-month
period that satisfies the provisions of Section 11(a) of the Act and Rule 158 of
the Rules and Regulations.
(g) Payment of Expenses. The Company, whether or not the transactions
-------------------
contemplated hereunder are consummated or this Agreement is terminated, will pay
all of its expenses incident to the performance of its obligations hereunder
(including, but not limited to, any transaction fees imposed by any governmental
or self-regulatory organization with respect to transactions contemplated by
this Agreement and any blue sky fees) and will pay the expenses of printing all
documents relating to the offering and the fees and disbursements of counsel to
the Agent incurred in connection with the establishment of the structured equity
shelf program established by this Agreement. The Agent will pay its own out-of-
pocket costs and expenses incurred in connection with the entering into of this
Agreement and the transactions contemplated by this Agreement, including,
without limitation, travel, reproduction, printing and similar expenses, other
than the fees and disbursements of its legal counsel being paid by the Company
as provided above.
(h) Application of Net Proceeds. The Company will apply the net
---------------------------
proceeds from the sale of the Shares as set forth in the Prospectus.
(i) Notice and Suspension of Program. The Company will not, directly
--------------------------------
or indirectly, offer or sell any shares of Common Stock or Preferred Stock
(other than the Shares) or securities convertible into or exchangeable for, or
any rights to purchase or acquire,
10
<PAGE>
Common Stock or Preferred Stock during the period from the date of this
Agreement through the final Settlement Date for the sale of Shares hereunder
without (a) giving the Agent at least three business days' prior written notice
specifying the nature of the proposed sale and the date of such proposed sale
and (b) suspending activity under this program for such period of time as may
reasonably be determined by agreement of the Company and the Agent; provided,
--------
however, that no such notice and suspension shall be required in connection
- --------
with the Company's issuance or sale of (i) shares of Common Stock pursuant to
the Sales Agency Agreement dated as of December 6, 1995, by and between the
Company and PaineWebber Incorporated ("PaineWebber"), as the same has been or
may be amended, (ii) shares of Preferred Stock pursuant to the Sales Agency
Agreement dated as of September 17, 1996, by and between the Company and
PaineWebber, as the same has been or may be amended, (iii) shares of Common
Stock pursuant to any employee or director stock option or benefits plan, stock
ownership plan, dividend reinvestment plan or Stockholder Investment Program of
the Company now in effect as such plans may be amended from time to time, and
(iv) Common Stock issuable upon conversion of securities or the exercise of
warrants, options or other rights in effect or outstanding on the date hereof.
(j) Continuing Obligation to Advise Agent. The Company will, at any
-------------------------------------
time during the term of this Agreement, as supplemented from time to time,
advise the Agent immediately after it shall have received notice or obtain
knowledge thereof, of any information or fact that would alter or affect any
opinion, certificate, letter and other document provided to the Agent pursuant
to Section 5 herein.
(k) Consent to Agent's Trading. The Agent may trade in the Company's
--------------------------
Stock for its own account on the same side of the market and at the same time as
the Company's sales pursuant to this Agreement.
SECTION 5. Conditions of Agent's Obligations. The obligations of the
---------------------------------
Agent to sell the Shares as provided herein shall be subject to the accuracy, as
of each Representation Date, of the representations and warranties of the
Company herein contained or in any certificate of an officer of the Company or
any of its subsidiaries delivered pursuant to the provisions hereof, to the
performance by the Company of its obligations hereunder and to the following
additional conditions:
(a) Effectiveness of Registration Statement. No stop order suspending
---------------------------------------
the effectiveness of the Registration Statement shall have been issued and no
proceeding for that purpose shall have been instituted or, to the knowledge of
the Company or the Agent, threatened by the Commission, and any request of the
Commission for additional information (to be included in the Registration
Statement or the Prospectus or otherwise) shall have been complied with to the
Agent's satisfaction.
(b) Absence of Untrue Statement or Omission of Material Fact. The
--------------------------------------------------------
Agent shall not have advised the Company that the Registration Statement or
Prospectus, or any amendment or supplement thereto, contains an untrue statement
of fact that in the Agent's reasonable opinion is material, or omits to state a
fact that in the Agent's reasonable opinion
<PAGE>
is material and is required to be stated therein or is necessary to make the
statements therein not misleading.
(c) Absence of Material Adverse Change. Except as contemplated in the
----------------------------------
Registration Statement and the Prospectus, subsequent to the respective dates as
of which information is given in the Registration Statement and the Prospectus,
there shall not have been any material change, on a consolidated basis, in the
capital stock of the Company and its subsidiaries, or any development that may
be reasonably expected to result in a Material Adverse Effect or any change in
the rating assigned to any securities of the Company.
(d) Receipt of Opinion of Company Counsel. On the date hereof, the
-------------------------------------
Agent shall have received the favorable opinion of Andrews & Kurth L.L.P., or
other counsel satisfactory to the Agent, dated as of the date hereof, in form
and substance satisfactory to counsel for the Agent, to the effect set forth in
Exhibit A hereto and to such further effect as counsel to the Agent may
reasonably request.
(e) Opinion of Maryland Counsel. On the date hereof, the Agent shall
---------------------------
have received the favorable opinion of Piper & Marbury L.L.P., Maryland counsel,
or other counsel satisfactory to the Agent, dated as of the date hereof, in form
and substance satisfactory to the Agent to the effect set forth in Exhibit B
hereto and to such further effect as counsel to the Agent may reasonably
request.
(f) Opinion of Counsel to the Agent. On the date hereof, the Agent
-------------------------------
shall have received the favorable opinion, dated as of the date hereof, of Brown
& Wood llp, counsel for the Agent. In giving such opinion, such counsel may
rely, as to all matters of Maryland law, upon the opinion of Piper & Marbury
L.L.P.
(g) Receipt of Auditors' Letter. On the date hereof, the Agent shall
---------------------------
have received from Ernst & Young LLP, independent public accountants for the
Company, or other independent accountants satisfactory to the Agent, a letter
dated the date hereof, in form and substance satisfactory to the Agent, and to
such further effect as counsel to the Agent may reasonably request, and
containing statements and information of the type ordinarily included in
accountants' "comfort letters" to agents with respect to the financial
statements and certain financial information contained in the Registration
Statement and the Prospectus.
(h) Receipt of Company Certificate. The Agent shall have received
------------------------------
from the Company a certificate, or certificates, signed by the Chairman of the
Board, the President or a Vice President and by the principal financial or
accounting officer of the Company, dated as of the date hereof, to the effect
that:
(i) The representations and warranties of the Company in this
Agreement are true and correct, and the Company has complied with all
the agreements and satisfied all the conditions on its part to be
performed or satisfied at or prior to the date hereof.
12
<PAGE>
(ii) No stop order suspending the effectiveness of the
Registration Statement has been issued, and no proceeding for that
purpose has been instituted or, to the knowledge of such officers
after due inquiry, is threatened, by the Commission;
(iii) Since the respective dates as of which information is given
in the Prospectus, there has not been any material adverse change, on
a consolidated basis, in the condition, financial or otherwise, or in
the earnings, business affairs or business prospects of the Company
and its subsidiaries considered as one enterprise, whether or not
arising in the ordinary course of business.
(i) Further Information, Certificates and Documents. As of the date
-----------------------------------------------
hereof, counsel for the Agent shall have been furnished with such documents and
opinions as they may require for the purpose of enabling them to pass upon the
issuance and sale of the Stock as herein contemplated, or in order to evidence
the accuracy of any of the representations or warranties, or the fulfillment of
any of the conditions, herein contained; and all proceedings taken by the
Company in connection with the issuance and sale of the Shares as herein
contemplated shall be satisfactory in form and substance to the Agent and
counsel for the Agent. The Company will furnish the Agent with such conformed
copies of opinions, certificates, letters and other documents as the Agent shall
reasonably request.
SECTION 6. Additional Covenants of the Company. The Company further
-----------------------------------
covenants and agrees with the Agent that:
(a) Reaffirmation of Representations and Warranties. Each acceptance by
-----------------------------------------------
the Company of an offer for the purchase of Shares, and each delivery of Shares,
shall be deemed to be an affirmation that the representations and warranties of
the Company herein contained and contained in any certificate theretofore
delivered to the Agent pursuant hereto are true and correct at the time of such
acceptance or sale, as the case may be, and an undertaking that such
representations and warranties will be true and correct at the time of delivery
to such Agent of the Shares relating to such acceptance as though made at and as
of each such time.
(b) Subsequent Delivery of Certificates. Each time that (i) the
-----------------------------------
Registration Statement or the Prospectus shall be amended or supplemented (other
than a supplement filed pursuant to Rule 424(b) under the Act that contains
solely the information set forth in the final paragraph of Section 2 of this
Agreement) or (ii) there is filed with the Commission any document incorporated
by reference into the Prospectus (other than a Current Report on Form 8-K,
unless the Agent shall otherwise reasonably request), the Company shall furnish
or cause to be furnished to the Agent forthwith a certificate dated the date of
filing with the Commission of such amendment, supplement or other document, the
date of effectiveness of amendment, as the case may be, in form satisfactory to
the Agent to the effect that the statements contained in the certificate
referred to in Section 5(h) hereof which were last furnished to the Agent are
true and correct at the time of such amendment, supplement, filing, as the case
may be, as though made at and as of such time (except that such statements shall
be deemed to relate to the Registration Statement and the Prospectus as amended
and supplemented to such time) or, in lieu of such certificate, a certificate of
the same tenor as the
13
<PAGE>
certificate referred to in said Section 5(h), modified as necessary to relate to
the Registration Statement and the Prospectus as amended and supplemented to the
time of delivery of such certificate.
In addition, on each Filing Date, the Company shall furnish or cause to be
furnished to the Agent a certificate dated such date, of the same tenor as the
certificate referred to in Section 5(h) hereof, modified as necessary to relate
to the Registration Statement and Prospectus as amended and supplemented to such
date, and to the further effect that:
(i) Since the date of this Agreement there has occurred no event
required to be set forth in an amendment or supplement to the Registration
Statement or Prospectus that has not been so set forth and there has been
no document required to be filed under the Exchange Act and the rules and
regulations of the Commission thereunder that upon such filing would be
deemed to be incorporated by reference in the Prospectus that has not been
so filed; and
(ii) The Shares to be sold on that date have been duly and validly
authorized by the Company and all corporate action required to be taken for
the authorization, issuance and sale of the Shares on that date has been
validly and sufficiently taken.
(c) Subsequent Delivery of Opinions. Each time that (i) the Registration
-------------------------------
Statement or the Prospectus is amended or supplemented (other than a supplement
filed pursuant to Rule 424(b) under the Act that contains solely the information
set forth in the final paragraph of Section 2 of this Agreement) or (ii) there
is filed with the Commission any document incorporated by reference into the
Prospectus (other than a Current Report on Form 8-K, unless the Agent shall
otherwise reasonably request), the Company shall furnish or cause to be
furnished forthwith to the Agent and to counsel to the Agent (1) a written
opinion of Andrews & Kurth L.L.P., counsel to the Company, or other counsel
satisfactory to the Agent, dated the date of filing with the Commission of such
amendment, supplement or other document and the date of effectiveness of such
amendment, as the case may be, in form and substance satisfactory to the Agent,
of the same tenor as the opinion referred to in Section 5(d) hereof, but
modified as necessary to relate to the Registration Statement and the Prospectus
as amended and supplemented to the time of delivery of such opinion and (2) a
written opinion of Piper & Marbury L.L.P., Maryland counsel to the Company, or
other counsel satisfactory to the Agent, dated the date of filing with the
Commission of such amendment, supplement or other document and the date of
effectiveness of such amendment, as the case may be, in form and substance
satisfactory to the Agent, of the same tenor as the opinion referred to in
Section 5(e) hereof, but modified as necessary to relate to the Registration
Statement and the Prospectus as amended and supplemented to the time of delivery
of such opinion.
(d) Subsequent Delivery of Auditor's Letter. Each time that the
---------------------------------------
Registration Statement or the Prospectus shall be amended or supplemented to
include additional amended financial information or there is filed with the
Commission any document incorporated by reference into the Prospectus which
contains additional amended financial information, the Company shall cause Ernst
& Young LLP, or other independent accountants satisfactory to
14
<PAGE>
the Agent, forthwith to furnish the Agent a letter, dated the date of
effectiveness of such amendment, or the date of filing of such supplement or
other document with the Commission, as the case may be, in form satisfactory to
the Agent, of the same tenor as the letter referred to in Section 5(g) hereof
but modified to relate to the Registration Statement and the Prospectus, as
amended and supplemented to the date of such letter.
SECTION 7. Indemnification.
---------------
(a) Indemnification of the Agent. The Company agrees to indemnify and hold
----------------------------
harmless the Agent and each person, if any, who controls the Agent within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of an untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement
or the omission or alleged omission therefrom of a material fact required
to be stated therein or necessary to make the statements therein not
misleading, or arising out of an untrue statement or alleged untrue
statement of a material fact included in any preliminary prospectus or the
Prospectus, or the omission or alleged omission therefrom of a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, provided that (subject to Section
7(d) hereof) any such settlement is effected with the written consent of
the Company; and
(iii) against any and all expense whatsoever, as incurred (including
the fees and disbursements of counsel chosen by the Agent), reasonably
incurred in investigating, preparing or defending against any litigation,
or any investigation or proceeding by any governmental agency or body,
commenced or threatened, or any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or omission, to
the extent that any such expense is not paid under subparagraph (i) or (ii)
above;
provided, however, that this indemnity does not apply to any loss, liability,
- -------- -------
claim, damage or expense to the extent arising out of an untrue statement or
omission or alleged untrue state ment or omission made in reliance upon and in
conformity with written information furnished to the Company by the Agent
expressly for use in the Registration Statement or any preliminary prospectus or
the Prospectus.
15
<PAGE>
(b) Indemnification of Company, Directors and Officers. The Agent agrees
--------------------------------------------------
to indemnify and hold harmless the Company, its directors, each of its officers
who signed the Registration Statement and each person, if any, who controls the
Company within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act against any and all loss, liability, claim, damage and expense
described in the indemnity contained in Section 7(a) hereof, as incurred, but
only with respect to untrue statements or omissions, or alleged untrue
statements or omissions, made in the Registration Statement or any preliminary
prospectus or the Prospectus in reliance upon and in conformity with written
information furnished to the Company by the Agent expressly for use in the
Registration Statement or such preliminary prospectus or the Prospectus.
(c) Actions Against Parties; Notification. Each indemnified party shall
-------------------------------------
give notice as promptly as reasonably practicable to each indemnifying party of
any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of this indemnity
agreement. In the case of parties indemnified pursuant to Section 7(a) hereof,
counsel to the indemnified parties shall be selected by the Agent and, in the
case of parties indemnified pursuant to Section 7(b) hereof, counsel to the
indemnified parties shall be selected by the Company. An indemnifying party may
participate at its own expense in the defense of any such action; provided,
--------
however, that counsel to the indemnifying party shall not (except with the
- -------
consent of the indemnified party) also be counsel to the indemnified party. In
no event shall the indemnifying parties be liable for fees and expenses of more
than one counsel (in addition to any local counsel) separate from their own
counsel for all indemnified parties in connection with any one action or
separate but similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances.
No indemnifying party shall, without the prior written consent of the
indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any litigation, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, or any claim
whatsoever in respect of which indemnification or contribution could be sought
under this Section 7 or Section 8 hereof (whether or not the indemnified parties
are actual or potential parties thereto), unless such settlement, compromise or
consent (i) includes an unconditional release of each indemnified party from all
liability arising out of such litigation, investigation, proceeding or claim and
(ii) does not include a statement as to or an admission of fault, culpability or
a failure to act by or on behalf of any indemnified party.
(d) Settlement without Consent if Failure to Reimburse. If at any time an
--------------------------------------------------
indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any settlement of the nature contemplated by
Section 7(a)(ii) effected without its written consent if (i) such settlement is
entered into more than sixty (60) days after receipt by such indemnifying party
of the aforesaid request, (ii) such indemnifying party shall have received
16
<PAGE>
notice of the terms of such settlement at least forty-five (45) days prior to
such settlement being entered into and (iii) such indemnifying party shall not
have reimbursed such indemnified party in accordance with such request prior to
the date of such settlement.
SECTION 8. Contribution.
------------
If the indemnification provided for in Section 7 hereof is for any reason
unavailable to or insufficient to hold harmless an indemnified party in respect
of any losses, liabilities, claims, damages or expenses referred to therein,
then each indemnifying party shall contribute to the aggregate amount of such
losses, liabilities, claims, damages and expenses incurred by such indemnified
party, as incurred, (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company, on the one hand, and the Agent, on
the other hand, from the offering of the Shares that was the subject of the
claim for indemnification or (ii) if the allocation provided by clause (i) is
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of the Company on the one hand and the Agent on the other hand in
connection with the statements or omissions which resulted in such losses,
liabilities, claims, damages or expenses, as well as any other relevant
equitable considerations.
The relative benefits received by the Company on the one hand and the Agent
on the other hand in connection with the offering of the Shares that was the
subject of the claim for indemnification shall be deemed to be in the same
respective proportions as the total net proceeds from the offering of such
Shares (before deducting expenses) received by the Company and the total
compensation (before deducting expenses) received by the Agent from the sale of
Shares on behalf of the Company bears to the aggregate initial offering price of
such Shares.
The relative fault of the Company, on the one hand, and the Agent, on the
other hand, shall be determined by reference to, among other things, whether any
untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact relates to information supplied by the Company
or by the Agent and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Agent agree that it would not be just and equitable if
contribution pursuant to this Section 8 were determined by pro rata allocation
or by any other method of allocation which does not take account of the
equitable considerations referred to above in this Section 8. The aggregate
amount of losses, liabilities, claims, damages and expenses incurred by an
indemnified party and referred to above in this Section 8 shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any applicable untrue or alleged
untrue statement or omission or alleged omission.
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Notwithstanding the provisions of this Section 8, the Agent shall not be
required to contribute any amount in excess of the amount by which the total
[discount or] commission received in connection with the offering of the Shares
that was the subject of the claim for indemnification exceeds the amount of any
damages which the Agent has otherwise been required to pay by reason of any
applicable untrue or alleged untrue statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation.
For purposes of this Section 8, each person, if any, who controls the Agent
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act
shall have the same rights to contribution as the Agent, and each director of
the Company, each officer of the Company who signed the Registration Statement,
and each person, if any, who controls the Company within the meaning of Section
15 of the Act or Section 20 of the Exchange Act shall have the same rights to
contribution as the Company.
SECTION 9. Representations and Agreements to Survive Delivery. All
--------------------------------------------------
representations, warranties and agreements contained in this Agreement or in
certificates of officers of the Company submitted pursuant hereto, shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of the Agent or any controlling person of the Agent, or by or on
behalf of the Company, and shall survive delivery of and payment for the Shares.
SECTION 10. Termination. (a) The Agent shall have the right by giving
-----------
notice as hereinafter specified at any time at or prior to any Settlement Date,
to terminate this Agreement if (i) there has been, since the respective dates as
of which information is given in the Prospectus, any material adverse change, in
the condition, financial or otherwise, or in the earnings, business affairs, or
business prospects of the Company and its subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business, (ii) the
Company shall have failed, refused or been unable, at or prior to the Settlement
Date, to perform any agreement on its part to be performed hereunder, (iii) any
other condition of the Agent's obligations hereunder is not fulfilled, (iv) any
suspension or limitation of trading in the Stock on the NYSE, or any setting of
minimum prices for trading of the Stock on such exchange, shall have occurred,
or if trading generally on the NYSE has been suspended or materially limited, or
minimum or maximum prices for trading have been fixed, or maximum ranges for
prices have been required, by the NYSE or by order of the Commission or any
other governmental authority, (v) any banking moratorium shall have been
declared by Federal or New York authorities or (vi) there has occurred any
material adverse change in the financial markets in the United States, an
outbreak or escalation of hostilities or other calamity or crisis or any change
or development involving a prospective change in national or international
political, financial or economic conditions, in each case the effect of which is
such as to make it, in the judgment of the Agent, impractical or inadvisable to
proceed with the completion of the sale of and payment for the Shares to be sold
by the Agent on behalf of
18
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the Company. Any such termination shall be without liability of any party to
any other party except that the provisions of Section 4(g), Section 7, Section 8
and Section 9 hereof shall remain in full force and effect notwithstanding such
termination. If the Agent elects to terminate this Agreement as provided in
this Section, the Agent shall provide the required notice as specified herein.
(b) The Company shall have the right, by giving notice as hereinafter
specified, to terminate this Agreement in its sole discretion on the first
anniversary of the date of this Agreement. At any time after the first
anniversary of the date of this Agreement, the Company shall have the right, by
giving thirty (30) days prior written notice as hereinafter specified, to
terminate this Agreement in its sole discretion. Any such termination shall be
without liability of any party to any other party except that the provisions of
Section 4(g), Section 7, Section 8 and Section 9 hereof shall remain in full
force and effect notwithstanding such termination.
(c) The Agent shall have the right, by giving notice as hereinafter
specified, to terminate this Agreement in its sole discretion at any time after
the first anniversary of the date of this Agreement by giving thirty (30) days
prior written notice as hereinafter specified. Any such termination shall be
without liability of any party to any other party except that the provisions of
Section 4(g), Section 7, Section 8 and Section 9 hereof shall remain in full
force and effect notwithstanding such termination.
(d) This Agreement shall remain in full force and effect unless terminated
pursuant to Sections 10(a), (b) or (c) above or otherwise by mutual agreement of
the parties; provided that any such termination by mutual agreement shall in all
cases be deemed to provide that Section 4(g), Section 7, Section 8 and Section 9
shall remain in full force and effect.
(e) Any termination of this Agreement shall be effective on the date
specified in such notice of termination; provided that such termination shall
--------
not be effective until the close of business on the date of receipt of such
notice by the Agent or the Company, as the case may be. If such termination
shall occur prior to the Settlement Date for any Shares, subject to Section
10(a) above, such Shares shall settle in accordance with the provisions of
Section 2 hereof.
SECTION 11. Notices. All notices or communications hereunder shall be in
-------
writing and if sent to the Agent shall be mailed, delivered, telexed or
telecopied and confirmed to the Agent at Merrill Lynch, Pierce, Fenner & Smith
Incorporated, World Financial Center, North Tower, New York, New York,
Attention: _____________, telecopy No. [212-449-2234] or if sent to the Company,
shall be mailed, delivered, telexed or telecopied and confirmed to the Company
at 2711 North Haskell Avenue, Suite 900, Dallas, Texas 75204, telecopy no. (214)
874-2398, Attention: Andrew F. Jacobs. Each party to this Agreement may change
such address for notices by sending to the parties to this Agreement written
notice of a new address for such purpose.
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SECTION 12. Parties. This Agreement shall inure to the benefit of and be
-------
binding upon the Company and the Agent and their respective successors and the
controlling persons, officers and directors. Nothing expressed or mentioned in
this Agreement is intended or shall be construed to give any person, firm or
corporation, other than the parties hereto and their respective successors and
the controlling persons, officers and directors referred to in Section 7 hereof
and their heirs and legal representatives, any legal or equitable right, remedy
or claim under or in respect of this Agreement or any provision herein
contained. This Agreement and all conditions and provisions hereof are intended
to be for the sole and exclusive benefit of the parties hereto and their
respective successors, and said controlling persons, officers and directors and
their heirs and legal representatives, and for the benefit of no other person,
firm or corporation.
SECTION 13. Entire Agreement. This Agreement constitutes the entire
----------------
agreement and supersedes all other prior and contemporaneous agreements and
undertakings, both written and oral, among the parties hereto with regard to the
subject matter hereof.
SECTION 14. Effect of Headings. The Article and Section headings herein
------------------
are for convenience only and shall not affect the construction hereof.
SECTION 15. GOVERNING LAW; FORUM. THIS AGREEMENT AND ALL THE RIGHTS AND
--------------------
OBLIGATIONS OF THE PARTIES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK. SPECIFIED TIMES OF DAY REFER TO NEW YORK
CITY TIME.
SECTION 16. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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If the foregoing correctly sets forth the understanding between the Company
and the Agent, please so indicate in the space provided below for that purpose,
whereupon this letter shall constitute a binding agreement between the Company
and the Agent.
Very truly yours,
CAPSTEAD MORTGAGE CORPORATION
By:
----------------------------------
Name:
Title:
CONFIRMED AND ACCEPTED as of
the date first above written
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By:
--------------------------------------
Authorized Signatory
21
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EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Post-Effective Amendment No. 1 to Registration Statement (Form S-3 No. 333-
26865) and related Prospectus of Capstead Mortgage Corporation to be filed on
or about August 6, 1997, and to the incorporation by reference therein of our
reports dated January 22, 1997, with respect to the consolidated financial
statements and schedule of Capstead Mortgage Corporation included and/or
incorporated by reference in its Annual Report (Form 10-K) for the year ended
December 31, 1996, filed with the Securities and Exchange Commission.
Ernst & Young LLP
Dallas, Texas
July 31, 1997
