<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 22, 1998
REGISTRATION NO. 333-43169
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SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
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)
<TABLE>
<S> <C>
MARYLAND 75-2027937
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
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)
---------------------------------
JULIE A. MOORE
2711 NORTH HASKELL AVENUE
SUITE 900
DALLAS, TEXAS 75204
(214) 874-2501
(Name, address, including zip code, and telephone number
including area code, of agent for service)
---------------------------------
The Commission is requested to send copies of all communication to:
DAVID BARBOUR
ANDREWS & KURTH L.L.P.
1717 MAIN STREET
SUITE 3700
DALLAS, TEXAS 75201
(214) 659-4400
---------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From
time to time after the effective date of this Registration Statement pursuant
to Rule 415.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or reinvestment plans, please check the following box. [X]
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
====================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(2) PER UNIT(1) OFFERING PRICE(1) FEE(2)(3)
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<S> <C> <C> <C> <C>
Common Stock, $0.01 par value 5,200,000 shares $20.59375 $107,087,500 $31,590.82
====================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c), based upon the average of the high and low
sales prices of the Common Stock on December 18, 1997 as reported on
the New York Stock Exchange.
(2) Pursuant to Rule 429 under the Securities Act of 1933, 483,350 shares
of Common Stock and 1,452,700 shares of $1.26 Cumulative Convertible
Preferred Stock, Series B, are being carried forward from the
Registrant's Registration Statement No. 333-26865. Accordingly, the
registration of $10,559 associated with such securities was
previously paid upon the filing of said Registration Statement.
(3) Previously paid to the Commission on December 23, 1997 in connection
with the filing of the Registration Statement.
---------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
PURSUANT TO RULE 429 UNDER THE SECURITIES ACT, THE PROSPECTUS WHICH IS
A PART OF THIS REGISTRATION STATEMENT IS A COMBINED PROSPECTUS THAT ALSO RELATES
TO 483,350 SHARES OF COMMON STOCK AND 1,452,700 SHARES OF $1.26 CUMULATIVE
CONVERTIBLE PREFERRED STOCK, SERIES B, OF THE COMPANY, REGISTERED UNDER THE
COMPANY'S REGISTRATION STATEMENT NO. 333-26865 AND REMAINING UNISSUED AS OF THE
DATE HEREOF.
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<PAGE> 2
PROSPECTUS
CAPSTEAD MORTGAGE CORPORATION
5,683,350 SHARES
COMMON STOCK
(PAR VALUE $0.01)
1,452,700 SHARES
$1.26 CUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES B
(PAR VALUE $0.10)
---------------
Capstead Mortgage Corporation, a Maryland corporation (the "Company"),
directly or through agents, dealers or underwriters designated from time to
time, may issue and sell from time to time up to 5,683,350 shares of its common
stock, par value $0.01 per share ("Common Stock"), and up to 1,452,700 shares of
its $1.26 Cumulative Convertible Preferred Stock, Series B, par value $0.10 per
share ("Series B Preferred Stock") (such Common Stock and Series B Preferred
Stock, collectively, the "Securities"). The Securities offered pursuant to this
Prospectus may be issued in amounts, at prices and on terms to be determined at
the time of the offering of such Securities.
The Company may sell all or a portion of the Securities through agents
or to or through underwriters or dealers, and is a party to certain Sales
Agency Agreements relating to the sale of Common Stock and Series B Preferred
Stock. See "Description of Sales Agency Agreements" and "Plan of Distribution."
The specific terms of sales of shares of Common Stock and Series B
Preferred Stock pursuant hereto will be set forth, from time to time, in a
Prospectus Supplement filed under the applicable paragraph of Rule 424(b)
promulgated under the Securities Act of 1933, as amended (the "Securities
Act"). Such Prospectus Supplements will set forth the number of shares of
Common Stock and Series B Preferred Stock sold, pricing information with
respect to such sales, if applicable, net proceeds to the Company and the
amount of any compensation payable by the Company to any sales agent(s) with
respect thereto.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION AND NEITHER THE
COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
---------------
THE DATE OF THIS PROSPECTUS IS MAY __, 1998
<PAGE> 3
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS OR THE ACCOMPANYING PROSPECTUS
SUPPLEMENT AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER,
AGENT OR DEALER. NEITHER THE DELIVERY OF THIS PROSPECTUS OR THE ACCOMPANYING
PROSPECTUS SUPPLEMENT NOR ANY DISTRIBUTION OF SECURITIES BEING OFFERED PURSUANT
TO THIS PROSPECTUS AND AN ACCOMPANYING PROSPECTUS SUPPLEMENT SHALL UNDER ANY
CIRCUMSTANCES CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THEREOF OR THAT THE INFORMATION
CONTAINED HEREIN OR THEREIN IS CORRECT AT ANY TIME SUBSEQUENT TO THE DATE
HEREOF OR THEREOF. THIS PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT
DO NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO PURCHASE,
SECURITIES BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS
NOT AUTHORIZED OR IN WHICH THE PERSON MAKING THE OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION.
---------------
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and, in
accordance therewith, files reports and other information with the Securities
and Exchange Commission (the "Commission"). Reports and proxy and information
statements filed by the Company with the Commission pursuant to the
informational requirements of the Exchange Act may be inspected and copied at
the public reference facilities maintained by the Commission at Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the following
regional offices of the Commission: Northeast Regional Office, 7 World Trade
Center, 13th Floor, New York, New York 10048 and Midwest Regional Office,
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Copies of such material may be obtained from the Public Reference
Section of the Commission at its principal office in Washington, D.C., at
prescribed rates or may be examined without charge at such office of the
Commission. The Commission maintains a Web site that contains reports, proxy
and information statements and other information regarding registrants that
file electronically with the Commission at http://www.sec.gov. In addition,
reports, proxy statements and other information concerning the Company can be
inspected and copied at the offices of the New York Stock Exchange, Inc., 20
Broad Street, New York, New York 10005-2601, on which outstanding shares of the
Company's Common Stock, Series A Preferred Stock and Series B Preferred Stock
are listed.
The Company has filed with the Commission a registration statement on
Form S-3 (the "Registration Statement") under the Securities Act with respect
to the Securities offered hereby. For further information with respect to the
Company and the Securities offered hereby, reference is made to the
Registration Statement and exhibits thereto. Statements contained in this
Prospectus as to the contents of any contract or other documents are not
necessarily complete, and in each instance, reference is made to the copy of
such contract or documents filed as an exhibit to the Registration Statement,
each such statement being qualified in all respects by such reference.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents, heretofore filed by the Company with the
Commission pursuant to the Exchange Act, are hereby incorporated by reference,
except as superseded or modified herein:
1. The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997;
2. The Company's Quarterly Report on Form 10-Q filed with the Commission
on May 11, 1998 for the fiscal quarter ended March 31, 1998;
3. 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
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4. 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.
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<PAGE> 5
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,
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MARCH 31, 1998 1997 1996 1995 1994 1993
-------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Combined
Fixed Charges and Preferred
Stock Dividends (a) . . . . . 1.19 1.24:1 1.20:1 1.12:1 1.17:1 1.18:1
</TABLE>
(a) 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 1.32, 1.42:1, 1.40:1, 1.29:1, 1.48:1 and
1.79:1, respectively, for the periods indicated.
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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 an
Amended and Restated Sales Agency Agreement between the Company and PaineWebber
dated as of March 30, 1998 (the "PaineWebber Common Agreement"). The
PaineWebber Common Agreement amends and restates the Sales Agency Agreement
between the Company and PaineWebber dated December 6, 1995, as amended. With
respect to the sale of Series B Preferred Stock, the Company is a party to an
Amended and Restated Sales Agency Agreement between the Company and PaineWebber
dated as of March 30, 1998 (the "PaineWebber Preferred Agreement", and together
with the PaineWebber Common Agreement, the "PaineWebber Agreements"). The
PaineWebber Preferred Agreement amends and restates the Sales Agency Agreement
between the Company and PaineWebber dated September 17, 1996, as amended.
Pursuant to the terms of the PaineWebber Common Agreement, the Company
may issue and sell up to 10,625,000 shares of Common Stock from time to time
through PaineWebber, as sales agent for the Company; 7,691,650 of such shares
have been sold as of May 20, 1998, with up to all of the remaining 2,933,350
shares being offered under the Registration Statement of which this Prospectus
forms a part. Pursuant to the terms of the PaineWebber Preferred Agreement, the
Company may issue and sell up to 4,500,000 shares of the Company's Series B
Preferred Stock from time to time through PaineWebber, as sales agent for the
Company; 1,138,700 of such shares have been sold as of May 20, 1998, with up to
1,452,700 of the remaining 3,361,300 shares being offered under the Registration
Statement of which this Prospectus forms a part.
MERRILL LYNCH AGREEMENT
The Company is a party to a Sales Agency Agreement between the Company
and Merrill Lynch dated as of November 19, 1997 (the "Merrill Lynch
Agreement"). Offerings of Common Stock and Series B Preferred Stock pursuant to
the Merrill Lynch Agreement may occur concurrently with offerings under the
PaineWebber Agreements.
Pursuant to the terms of the Merrill Lynch Agreement, the Company
initially may issue and sell up to 5,000,000 shares of Common Stock and up to
2,000,000 shares of Series B Preferred Stock from time to time through Merrill
Lynch, as sales agent for the Company. Such amounts may be changed from time to
time by mutual agreement of the Company and Merrill Lynch. As of the close of
business on May 20, 1998, 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.
CERTAIN TERMS OF THE SALES AGENCY AGREEMENTS
Sales pursuant to the PaineWebber Agreements and the Merrill Lynch
Agreement (collectively, the "Sales Agency Agreements") 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 Sales Agency 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 compensation to PaineWebber or Merrill Lynch, as the case may be,
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, PaineWebber and Merrill
Lynch, as sales agents, will act on a reasonable efforts basis.
The offering of Common Stock and Series B Preferred Stock pursuant to
each respective Sales Agency 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)
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termination of such Sales Agency Agreement. The PaineWebber Agreements may be
terminated by the Company or by PaineWebber upon thirty days prior written
notice and in certain other circumstances specified therein. The Merrill Lynch
Agreement may be terminated upon thirty days prior written notice by the
Company or Merrill Lynch on or after the first anniversary of the Merrill Lynch
Agreement, and in certain other circumstances specified therein.
DESCRIPTION OF SECURITIES
GENERAL
The Company may offer under this Prospectus up to 5,683,350 shares of
its Common Stock and up to 1,452,700 shares of its Series B Preferred Stock. The
terms of any specific offering of Securities will be set forth in a Prospectus
Supplement relating to such offering.
The authorized capital stock of the Company currently consists of
100,000,000 shares of Common Stock, par value $0.01 per share, and 100,000,000
shares of Preferred Stock, par value $0.10 per share. As of May 20, 1998 the
Company had 61,364,499 shares of its Common Stock, 381,441 shares of its $1.60
Cumulative Preferred Stock, Series A ("Series A Preferred Stock") and 17,274,580
shares of its Series B Preferred Stock issued and outstanding. The Common Stock,
Series A Preferred Stock and Series B Preferred Stock are listed on the New York
Stock Exchange. The Company intends to list any additional shares of its Common
Stock which are issued and sold hereunder.
REDEMPTION OR REPURCHASE OF CAPITAL STOCK TO MAINTAIN THE COMPANY'S STATUS AS A
REIT
The Company's charter provides that if the Board of Directors
determines in good faith that the direct or indirect ownership of stock of the
Company has or may become concentrated to an extent which would cause the
Company to fail to qualify or be qualified as a REIT under Sections 856(a)(5)
or (6) of the Internal Revenue Code of 1986, as amended (the "Code"), or
similar provisions of successor statutes, the Company may redeem or repurchase
any number of shares of Common Stock and/or Preferred Stock sufficient to
maintain or bring such ownership into conformity with the Code and may refuse
to transfer or issue shares of Common Stock and/or Preferred Stock to any
person whose acquisition would result in the Company being unable to conform
with the requirements of the Code. In general, Code Sections 856(a)(5) and (6)
provide that, as a REIT, the Company must have at least 100 beneficial owners
for 335 days of each taxable year and that the Company cannot qualify as a REIT
if, at any time during the last half of the Company's taxable year, more than
50% in value of its outstanding stock is owned, directly or indirectly, by or
for not more than five individuals. In addition, the charter provides that the
Company may redeem or refuse to transfer any shares of capital stock of the
Company necessary to prevent the imposition of a penalty tax as a result of
ownership of such shares by certain disqualified organizations, including
governmental bodies and tax-exempt entities that are not subject to tax on
unrelated business taxable income. The redemption or purchase price for any
such shares shall be equal to the fair market value of such shares as reflected
in the closing sales price for the shares if then listed on a national
securities exchange, or the average of the closing sales prices for the shares
if then listed on more than one national securities exchange, or if the shares
are not then listed on a national securities exchange, the latest bid quotation
for the shares if then traded over-the-counter on the last business day for
which closing prices are available immediately preceding the day on which
notices of such acquisitions are sent or, if no such closing sales prices or
quotations are available, then the net asset value of such stock as determined
by the Board of Directors in accordance with the provisions of applicable law.
SPECIAL STATUTORY REQUIREMENTS FOR CERTAIN TRANSACTIONS
Business Combination Statute. The Maryland General Corporation Law
establishes special requirements with respect to "business combinations"
between Maryland corporations and "interested stockholders" unless exemptions
are applicable. Among other things, the law prohibits for a period of five
years a merger and other specified or similar transactions between a Maryland
corporation and an interested stockholder and requires a super-majority vote
for such transactions after the end of such five-year period.
"Interested stockholders" are all persons owning beneficially,
directly or indirectly, 10% or more of the outstanding voting stock of a
Maryland corporation after the date on which the corporation had 100 or more
beneficial owners of its stock, or is an affiliate or associate of the
corporation and was the beneficial owner, directly or indirectly, of 10% or
more of the voting power of the then outstanding stock of the corporation at
any 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,
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<PAGE> 8
transactions of these types may not be consummated between a Maryland
corporation and an interested stockholder or its affiliates for a period of
five years after the date on which the stockholder first became an interested
stockholder and thereafter may not be consummated unless recommended by the
board of directors of the Maryland corporation and approved by the affirmative
vote of at least 80% of the votes entitled to be cast by all holders of
outstanding shares of voting stock and 66 2/3% of the votes entitled to be cast
by all holders of outstanding shares of voting stock other than the interested
stockholder. A business combination with an interested stockholder which is
approved by the board of directors of a Maryland corporation at any time before
an interested stockholder first becomes an interested stockholder is not
subject to the 5-year moratorium or the special voting requirements. An
amendment to a Maryland corporation's charter electing not to be subject to the
foregoing requirements must be approved by the affirmative vote of at least 80%
of the votes entitled to be cast by all holders of outstanding shares of voting
stock and 66 2/3% of the votes entitled to be cast by holders of outstanding
shares of voting stock who are not interested stockholders. Any such amendment
is not effective until 18 months after the vote of stockholders and does not
apply to any business combination of a corporation with a stockholder who was
an interested stockholder on the date of the stockholder vote. The Company has
not adopted any such amendment to its charter.
Control Share Acquisition Statute. The Maryland General Corporation
Law imposes limitations on the voting rights of shares acquired in a "control
shares acquisition." The Maryland statute defines a "control share acquisition"
at the 20%, 33 1/3% and 50% acquisition levels, and requires a two-thirds
stockholder vote (excluding shares owned by the acquiring person and certain
members of management) to accord voting rights to stock acquired in a control
share acquisition. The statute also requires Maryland corporations to hold a
special meeting at the request of an actual or proposed control share acquiror
generally within 50 days after a request is made with the submission of an
"acquiring person statement," but only if the acquiring person (a) posts a bond
for the cost of the meeting and (b) submits a definitive financing agreement to
the extent that financing is not provided by the acquiring person. In addition,
unless the charter or bylaws provide otherwise, the statute gives the Maryland
corporation, within certain time limitations, various redemption rights if
there is a stockholder vote on the issue and the grant of voting rights is not
approved, or if an "acquiring person statement" is not delivered to the target
within 10 days following a control share acquisition. Moreover, unless the
charter or bylaws provide otherwise, the statute provides that if, before a
control share acquisition occurs, voting rights are accorded to control shares
which results in the acquiring person having majority voting power, then
minority stockholders have appraisal rights. An acquisition of shares may be
exempted from the control share statute provided that a charter or bylaw
provision is adopted for such purpose prior to the control share acquisition.
There are no such provisions in the charter or bylaws of the Company.
Reference is made to the full text of the foregoing statutes for their
entire terms, and the partial summary contained in this Prospectus is not
intended to be complete.
COMMON STOCK
GENERAL
Each share of Common Stock, par value $0.01 per share, is entitled to
one vote. The outstanding shares of Common Stock are fully paid and
non-assessable. Holders of shares of Common Stock do not have cumulative voting
rights or preference, conversion, exchange, subscription or preemptive rights.
Subject to the Company's obligations to pay dividends on all shares of its
outstanding Preferred Stock, including the Series A Preferred Stock and Series
B Preferred Stock, each share of Common Stock is entitled to participate
equally in dividends on the Common Stock when and as declared by the Board of
Directors of the Company and in the distribution of assets of the Company upon
liquidation after payment of liabilities and liquidation preferences with
regard to the Preferred Stock, including the Series A and Series B Preferred
Stock. The foregoing summary does not purport to be a complete description of
the Common Stock and is subject to, and qualified in its entirety by reference
to, the Company's charter and bylaws, in each case as amended and supplemented
to date and filed as exhibits to the Registration Statement.
As of the date of this Prospectus, the charter of the Company
authorizes the issuance of 100,000,000 shares of Common Stock. As of May 20,
1998, 61,364,499 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
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<PAGE> 9
shares of Preferred Stock. As of May 20, 1998, 17,274,580 shares of Series B
Preferred Stock were issued and outstanding, as described hereafter.
SERIES A PREFERRED STOCK AND SERIES B PREFERRED STOCK
General. In November, 1989, a wholly-owned subsidiary of the Company
was merged with and into Strategic Mortgage Investments, Inc., a Maryland
corporation ("Strategic"), and each outstanding share of Strategic common stock
was converted into one share of Series A Preferred Stock of the Company. In
December, 1992, Tyler Cabot Mortgage Securities Fund, Inc., a Maryland
corporation ("Tyler Cabot"), was merged with and into the Company, and each
outstanding share of Tyler Cabot common stock was converted into one share of
Series B Preferred Stock of the Company. The Series A Preferred Stock and
Series B Preferred Stock are fully paid and non-assessable and neither has
preemptive rights. The Series A Preferred Stock ranks on a parity with the
Series B Preferred Stock, and each rank on a parity with any other series of
the Company's Preferred Stock which is not by its terms made junior or senior
to the Series A Preferred Stock or Series B Preferred Stock with respect to the
payment of dividends and distribution of assets in liquidation.
Dividends. Holders of the Series B Preferred Stock are entitled to
receive, when, as and if declared by the Board of Directors of the Company out
of funds legally available therefore, cumulative preferential cash dividends at
the annual rate of $1.26 per share, and no more, payable in equal monthly
installments on each monthly dividend payment date. Holders of the Series A
Preferred Stock are entitled to receive, when, as and if declared by the Board
of Directors of the Company out of funds legally available therefor, cumulative
preferential cash dividends at the rate of $1.60 per annum per share, and no
more, payable in equal quarterly installments on each March 31, June 30,
September 30 and December 31. Whenever dividends are in arrears and until all
accrued and unpaid dividends on shares of Series A and Series B Preferred Stock
outstanding have been paid in full and the then current dividend on each such
series shall have been paid or declared and sufficient funds set aside for
payment thereof, the Company may not declare or pay dividends on the Common
Stock or any other class or series of capital stock ranking junior to the
Series A Preferred Stock and the Series B Preferred Stock in respect of
dividends ("Junior Stock") or redeem, purchase or otherwise acquire for
consideration any shares of Common Stock or Junior Stock.
Liquidation Rights. In the event of any liquidation, dissolution or
winding up of the Company, whether voluntary or involuntary, the holders of the
Series A Preferred Stock and the Series B Preferred Stock will be entitled to
receive out of the assets of the Company available for distribution to
stockholders, whether from capital, surplus or earnings, before any
distribution is made to holders of shares of Common Stock or Junior Stock (1)
in the case of the Series A Preferred Stock, an amount equal to $16.40 per
share of Series A Preferred Stock and (2) in the case of Series B Preferred
Stock, an amount per share of Series B Preferred Stock equal to $11.38 per
share of Series B Preferred Stock, in each case, plus dividends accumulated and
unpaid to the date of final distribution. A consolidation or merger of the
Company with or into any other corporation or transfer of all or any part of
the Company's assets for cash, property or securities will not be considered a
liquidation, dissolution or winding-up of the Company.
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
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<PAGE> 10
after such consolidation or merger no class of shares either authorized or
outstanding ranking prior to or on a parity with the Series B Preferred Stock
except the same number of shares ranking prior to or on a parity with the
Series B Preferred Stock and having the same rights and preferences as the
shares of the Company authorized and outstanding immediately preceding such
consolidation or merger, and each holder of Series B Preferred Stock
immediately preceding such consolidation or merger shall receive the same
number of shares, with the same rights and preferences, of the resulting
corporation.
Except as described herein or otherwise required by law, no consent of
the holders of Series B Preferred Stock will be required for (i) the creation
of any indebtedness of any kind of the Company, (ii) the creation, or increase
or decrease in the amount, of any class or series of stock of the Company
ranking on a parity with, or not ranking prior to, the Series B Preferred Stock
as to dividends or as to amounts distributable upon liquidation or (iii) any
increase or decrease in the amount of authorized Common Stock or any increase,
decrease or change in the par value thereof.
Redemption. Neither the Series A Preferred Stock nor the Series B
Preferred Stock is subject to mandatory redemption and neither is entitled to
the benefit of a sinking fund. The Company at its option may redeem the Series
A Preferred Stock, in whole or in part, for cash in an amount per share equal
to $16.40 plus accumulated and unpaid dividends to the date of redemption,
whether or not earned or declared. At any time after December 2, 1997, the
Company may at its option redeem the Series B Preferred Stock, in whole or in
part, for cash in an amount per share equal to $12.50 plus accumulated and
unpaid dividends to the date of redemption, whether or not earned or declared.
Conversion Rights. Holders of the Series A Preferred Stock may, at
their option, convert shares of Series A Preferred Stock into shares of Common
Stock at the rate (the "Series A Conversion Rate") of 2.0421 shares of Common
Stock for each share of Series A Preferred Stock converted. Holders of Series B
Preferred Stock may, at their option, convert shares of Series B Preferred
Stock into shares of the Company's Common Stock at the rate (the "Series B
Conversion Rate") of .7246 shares of the Company's Common Stock for each share
of Series B Preferred Stock converted. The Series A and Series B Conversion
Rates are subject to adjustment in certain circumstances.
PLAN OF DISTRIBUTION
The Company may sell Common Stock and Series B Preferred Stock (1)
through arrangements with underwriters or dealers, (2) directly to one or more
purchasers, or (3) through agents. The Company is a party to the 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 Securities
Act. PaineWebber and Merrill Lynch may engage in transactions with, or perform
services for, the Company in the ordinary course of business.
SALES PURSUANT TO THE SALES AGENCY AGREEMENTS
Sales pursuant to the Sales Agency Agreements may be effected on a
daily basis, and may occur concurrently under the PaineWebber Agreements and
the Merrill Lynch Agreement. 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 Sales Agency 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 compensation to PaineWebber or Merrill Lynch, as the case may be,
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, PaineWebber and Merrill
Lynch, as sales agents, will act on a reasonable efforts basis.
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<PAGE> 11
Settlements of sales of shares of Common Stock and Series B Preferred
Stock will occur on the third business day following the date on which any such
sales are made. Purchases of Common Stock or Series B Preferred Stock from
PaineWebber or Merrill Lynch, as the case may be, 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 calendar week
during which sales of Common Stock or Series B Preferred Stock are made
pursuant to a Sales Agency Agreement (each such week a "Reporting 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, 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 PaineWebber or Merrill Lynch, as
the case may be, as sales agent, the net proceeds to the Company and the
compensation payable by the Company to PaineWebber or Merrill Lynch, as the
case may be, with respect to sales of Common Stock and Series B Preferred
Stock, respectively.
The offering of Common Stock and Series B Preferred Stock pursuant to
each respective Sales Agency Agreement will terminate upon the earlier of (i)
the sale of all shares of Common Stock and/or Series B Preferred Stock subject
thereto or (ii) termination of such Sales Agency Agreement. The PaineWebber
Agreements may be terminated by the Company or by PaineWebber upon thirty days
prior written notice and in certain other circumstances specified therein. The
Merrill Lynch Agreement may be terminated upon thirty days prior written notice
by the Company or Merrill Lynch on or after the first anniversary of the
Merrill Lynch Agreement, and in certain other circumstances specified therein.
TAXATION
The applicable provisions of the Code are highly technical and
complex. This summary is not intended as a detailed discussion of all
applicable provisions of the Code, the rules and regulations promulgated
thereunder, or the administrative and judicial interpretations thereof. For the
particular provisions that govern the federal income tax treatment of the
Company and its stockholders, reference is made generally to Sections 856 and
860 of the Code and the treasury regulations promulgated thereunder. The
Company has not obtained rulings from the Internal Revenue Service with respect
to any tax considerations relevant to its organization or operations or to an
investment in its securities. This summary is not intended to substitute for
prudent tax planning and stockholders are urged to consult their own tax
advisors with respect to these and other federal, state and local tax
consequences of the ownership and disposition of any of the Company's
Securities and any potential changes in applicable law. Nonresident aliens,
foreign corporations, tax-exempt organizations, life insurance companies,
cooperatives and certain other categories of investors may be subject to
special tax rules that are not discussed below and that could affect an
investment in any of the Company's Securities.
FEDERAL INCOME TAXATION OF CAPSTEAD MORTGAGE CORPORATION
As used herein, "Capstead REIT" refers to Capstead Mortgage
Corporation and the entities that are effectively consolidated with Capstead
Mortgage Corporation for federal income tax purposes. Certain of the Company's
subsidiaries (the "Non-REIT subsidiaries") are consolidated with the Company
for financial reporting purposes but are not consolidated for federal income
tax purposes. All of the Non-REIT subsidiaries' taxable income is subject to
federal and state income taxes. The Company may form additional Non-REIT
subsidiaries.
Capstead REIT believes that it has operated, and Capstead REIT intends
to continue to operate, in such a manner so as to qualify as a REIT under the
Code, but no assurance can be given that it will at all times so qualify.
So long as a company such as Capstead REIT qualifies as a REIT and
distributes at least 95% of its REIT taxable income to stockholders, it will
not be subject to federal corporate income taxes on such income distributed to
stockholders, with limited exceptions discussed below. Under certain
circumstances, such a company may be subject to the corporate minimum tax or
certain other special taxes. However, Capstead REIT does not anticipate
generating material items of income or deductions that would cause it to be
subject to the minimum tax or any such special tax.
To qualify for treatment as a REIT for a taxable year, a company must
have elected to be so treated (which Capstead REIT has done) and must meet
certain organizational, asset, income, distribution and record-keeping
requirements.
TAXATION OF STOCKHOLDERS
So long as a corporation qualifies as a REIT, distributions to
stockholders (other than dividends properly designated as "capital gain
dividends") will constitute ordinary income to the extent of current and
accumulated earnings and profits of the REIT.
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<PAGE> 12
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.
1997 TAX LEGISLATION
The recently enacted Tax Relief Act of 1997 (the "1997 Tax Act")
reduces the maximum rate of tax on net capital gains for individuals on sales
of certain assets (including stocks and securities) and increases the time
period for which an asset must be held for the gain from its sale to be
eligible for the lowest rate. The holding period is increased from 12 to 18
months with a further rate reduction scheduled to take effect after the year
2000 for the sale of certain assets that have been held at least five years.
The Treasury Department is to issue regulations coordinating the capital gain
provisions with other rules involving the treatment of sales and exchanges by
pass-through entities such as REITs.
With regard to the taxation of REITs, effective for taxable years
beginning after the enactment the 1997 Tax Act, the requirement that the REIT
derive less than 30% of its gross income from gain on the sale or other
disposition of stock or securities held for less than one year, certain real
property held less than four years and property sold or disposed of in a
"prohibited transaction" is repealed. In addition, a REIT may elect to retain
and pay income tax on net long term capital gains it received during a tax
year. If a REIT makes such election, its stockholders would include in their
income as long term capital gains their proportionate share of the
undistributed long term capital gains as designated by the REIT. A stockholder
would be deemed to have paid the stockholder's share of tax, which would be
credited or refunded to the stockholder. Also, the basis of the stockholder's
shares in the REIT would be increased by the amount of the undistributed long
term capital gains (less the amount of capital gains tax paid by the REIT)
included in the stockholder's long term capital gains.
SPECIAL CONSIDERATIONS--TAX-EXEMPT AND CERTAIN OTHER INVESTORS
For CMOs issued after December 31, 1991, pursuant to regulations not
yet published, the portion of any dividend paid to stockholders attributable to
"excess inclusion income" on the retained residual interests in such CMOs would
be subject to certain rules. Such rules include (i) the characterization of
excess inclusion income as unrelated business income for tax-exempt
stockholders (including employee benefit plans and individual retirement
accounts) and (ii) the inability of a stockholder to offset excess inclusion
income with net operating losses (subject to certain exceptions applicable to
thrift institutions). Generally, tax-exempt entities are subject to federal
income tax on excess inclusion income and other unrelated business income in
excess of $1,000 per year. Excess inclusion income is generally taxable income
with respect to a residual interest in excess of a specified return on
investment in the residual interest. In some cases, all taxable income with
respect to a residual interest may be considered excess inclusion income. Until
regulations or other guidance is issued, Capstead REIT will use methods it
believes are appropriate for calculating the amount of excess inclusion income,
if any, it recognizes from CMOs issued after December 31, 1991, and
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<PAGE> 13
allocating any excess inclusion income to its stockholders. Excess inclusion
rules will most likely not apply to any CMO issued by any subsidiary of the
Company on or before December 31, 1991.
In addition, the Company will be taxable on the portion of any excess
inclusion income allocable to any stockholder which is a "disqualified
organization." If the ownership of any shares by a disqualified organization
would subject the Company to tax, such shares shall be immediately redeemable
at the option of the Company. See "Description of Securities--Redemption or
Repurchase of Capital Stock to Maintain the Company's Status as a REIT."
Tax-exempt and other investors are urged to consult their own tax
advisors with respect to the tax consequences arising under federal law and the
law of any state, municipality or other taxing jurisdiction. Final regulations
dealing with withholding tax on income paid to foreign persons and related
matters (the "New Withholding Regulations") were issued by the Treasury
Department on October 6, 1997. The New Withholding Regulations will generally
be effective for payments made after December 31, 1999, subject to certain
transition rules. Foreign investors should consult their own tax advisors
concerning the tax consequences of an investment in the Company, including the
possibility of United States withholding tax on Company dividends.
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
53,994 shares of Common Stock of the Company and 10,509 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, 1997, 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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<PAGE> 14
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 . . . . . . . . . . . . . . . . . . . . . . . .$31,590.82
Printing and Engraving Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000.00
Accounting Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000.00
Legal Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000.00
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $45,590.82
==========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Articles of Incorporation provide for information of
directors to the full extent permitted by Maryland law, indemnification of
officers who are also directors to the extent the Company shall indemnify its
directors, and indemnification of officers who are not directors to such
further extent as shall be authorized by the Board of Directors and be
consistent with law.
Section 2-418 of the Maryland General Corporation Law generally
permits a Maryland corporation to indemnify any director made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative, or investigative, by reason of service in his
capacity as a director, unless it is established that (i) the act or omission
of the director was material to the matter giving rise to the proceeding and
(a) was committed in bad faith or (b) was the result of active and deliberate
dishonesty; or (ii) the director actually received an improper personal benefit
in money, property, or services; or (iii) in the case of any criminal
proceeding, the director had reasonable cause to believe that the act or
omission was unlawful. Indemnification may be against judgments, penalties,
fines, settlements, and reasonable expenses actually incurred by the director
in connection with the proceeding. If the proceeding was one by or in the
right of the corporation, indemnification may not be made in respect of any
proceeding in which the director shall have been adjudged to be liable to the
corporation. In addition, a director may not be indemnified in respect of any
proceeding charging improper personal benefit to the director, whether or not
involving action in the director's official capacity, in which the director was
adjudged to be liable on the basis that personal benefit was improperly
received. The termination of any proceeding by conviction, a plea or nolo
contendere or its equivalent, or any entry of an order of probation prior to
judgment, creates a rebuttable presumption that the director did not meet the
requisite standard of conduct.
Section 2-418 also provides that a court of appropriate jurisdiction
may, upon application of a director and such notice as the court shall require,
order indemnification if it determines that a director is entitled to
reimbursement because the director has been successful on the merits or
otherwise, in any such proceeding, in which case the director shall be entitled
to recover the expenses of securing such reimbursement, or if the court
determines that the director is fairly and reasonably entitled to
indemnification in view of all the relevant circumstances, whether or not the
director has met the applicable standards of conduct or has been adjudged
liable in a proceeding charging improper personal benefit to the director.
Indemnification with respect to any proceeding by or in the right of the
corporation or in which liability shall have been adjudged on the basis that
personal benefit was improperly received shall be limited to expenses. The
indemnification and advancement of indemnification or otherwise, to which a
director may be entitled under the charter, the bylaws, a resolution of the
stockholders or directors, an agreement or otherwise, both as to action in an
official capacity and as to action in another capacity while holding such
office. A corporation may indemnify and advance expenses to an officer,
employee, or agent of the corporation to the same extent that it may indemnify
directors under Section 2-418 and, in addition, may indemnify and advance
expenses to an officer, employee, or agent who is not a director to such
further extent, consistent with law, as may be provided by its charter, bylaws,
general or specific action of its board of directors or contract. Section
2-418 also provides that a corporation may purchase and maintain insurance
against liabilities for which indemnification is not expressly provided by
statute.
The Company provides insurance from commercial carriers against
certain liabilities incurred by the directors and officers of the Company.
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<PAGE> 15
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -----------
<S> <C>
1.1 --Intentionally omitted.
1.2 --Intentionally omitted.
1.3 --Intentionally omitted.
1.4 --Intentionally omitted.
1.5 --Intentionally omitted.
1.6 --Intentionally omitted.
1.7 --Form of Merrill Lynch Sales Agency Agreement (2)
1.8 --Amended and Restated Sales Agency Agreement (Common Stock) between PaineWebber
and the Company (1)
1.9 --Amended and Restated Sales Agency Agreement (Series B Preferred Stock) between
PaineWebber and the Company (1)
3.1 --Articles of Incorporation of the Company (4)
3.2 --Amended and Restated Bylaws of the Company (5)
4.1 --Specimen of Common Stock certificate (4)
4.2 --Specimen of Series B Preferred Stock Certificate (4)
4.3 --Articles Supplementary authorizing the Series B Preferred Stock (6)
4.4 --Articles Supplementary authorizing additional shares of Series B Preferred Stock (7)
4.5 --Articles Supplementary authorizing additional shares of Series B Preferred Stock (3)
5.1 --Opinion of Andrews & Kurth L.L.P. as to the legality of the Securities being offered (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 (8)
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 (2)
</TABLE>
(1) Filed herewith.
(2) Previously filed with the Commission on December 23, 1997 as an
exhibit to the original filing of this Registration Statement..
(3) Previously filed with the Commission on May 9, 1997 as an exhibit to
the Company's Registration Statement on Form S-3 (No. 333-26865), and
incorporated herein by reference.
(4) Previously filed with the Commission on May 6, 1993 as an exhibit to
the Company's Registration Statement on Form S-3 (No. 33-62212), and
incorporated herein by reference.
(5) 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> 16
(6) 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.
(7) 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.
(8) Previously filed with the Commission on May 11, 1998 as an exhibit to
the Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998, 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)(i)(ii) do not
apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed
by the Registrant pursuant to Section 13 or Section 15(d) of the
Exchange Act that are incorporated by reference in this Registration
Statement.
(2) that, for the purpose of determining any liability
under the Securities Act, each such post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant
pursuant to Section 13 or Section 15(d) of the Exchange Act that are
incorporated by reference in this Registration Statement.
(3) to remove from registration by means of a
post-effective amendment any of the securities being registered which
remain unsold at the termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act, each filing of
the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of
the Exchange Act that is incorporated by reference in this Registration
Statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of
whether such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
II-3
<PAGE> 17
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
AMENDMENT NO. 1 TO REGISTRATION STATEMENT NO. 333-43169 TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF DALLAS,
STATE OF TEXAS, ON THE 22ND DAY OF MAY, 1998.
CAPSTEAD MORTGAGE CORPORATION
By: /s/ JULIE A. MOORE
-------------------------------------
Julie A. Moore
Senior Vice President - Control and
Treasurer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
AMENDMENT NO. 1 TO REGISTRATION STATEMENT NO. 333-43169 HAS BEEN SIGNED BY THE
FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ RONN K. LYTLE* Chairman, Chief Executive May 22, 1998
- -------------------------------------- Officer, President and
RONN K. LYTLE Director (Principal
Executive Director)
/s/ JULIE A. MOORE Senior Vice President - May 22, 1998
- -------------------------------------- Control and Treasurer
JULIE A. MOORE (Principal Financial and
Accounting Officer)
/s/ BEVIS LONGSTRETH* Director May 22, 1998
- --------------------------------------
BEVIS LONGSTRETH
May 22, 1998
/s/ PAUL M. LOW* Director
- --------------------------------------
PAUL M. LOW
May 22, 1998
/s/ HARRIET E. MIERS* Director
- --------------------------------------
HARRIET E. MIERS
May 22, 1998
/s/ WILLIAM R. SMITH* Director
- --------------------------------------
WILLIAM R. SMITH
May 22, 1998
/s/ JOHN C. TOLLESON* Director
- --------------------------------------
JOHN C. TOLLESON
*By: /s/ JULIE A. MOORE
----------------------------------
JULIE A. MOORE
ATTORNEY-IN-FACT
</TABLE>
II-4
<PAGE> 18
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- -----------
<S> <C>
1.1 --Intentionally omitted.
1.2 --Intentionally omitted.
1.3 --Intentionally omitted.
1.4 --Intentionally omitted.
1.5 --Intentionally omitted.
1.6 --Intentionally omitted.
1.7 --Form of Merrill Lynch Sales Agency Agreement (2)
1.8 --Amended and Restated Sales Agency Agreement (Common Stock)
between PaineWebber and the Company (1)
1.9 --Amended and Restated Sales Agency Agreement (Series B
Preferred Stock) between PaineWebber and the Company (1)
3.1 --Articles of Incorporation of the Company (4)
3.2 --Amended and Restated Bylaws of the Company (5)
4.1 --Specimen of Common Stock certificate (4)
4.2 --Specimen of Series B Preferred Stock Certificate (4)
4.3 --Articles Supplementary authorizing the Series B Preferred
Stock (6)
4.4 --Articles Supplementary authorizing additional shares of
Series B Preferred Stock (7)
4.5 --Articles Supplementary authorizing additional shares of
Series B Preferred Stock (3)
5.1 --Opinion of Andrews & Kurth L.L.P. as to the legality of the
Securities being offered (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 (8)
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 (2)
</TABLE>
(1) Filed herewith.
(2) Previously filed with the Commission on December 23, 1997 as an
exhibit to the original filing of this Registration Statement..
(3) Previously filed with the Commission on May 9, 1997 as an exhibit to
the Company's Registration Statement on Form S-3 (No. 333-26865), and
incorporated herein by reference.
(4) Previously filed with the Commission on May 6, 1993 as an exhibit to
the Company's Registration Statement on Form S-3 (No. 33-62212), and
incorporated herein by reference.
(5) 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.
(6) 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.
(7) 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.
(8) Previously filed with the Commission on May 11, 1998 as an exhibit to
the Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998, and incorporated herein by reference.
<PAGE> 1
EXHIBIT 1.8
CAPSTEAD MORTGAGE CORPORATION
10,625,000 Shares
(Common Stock, $0.01 par value)
AMENDED AND RESTATED SALES AGENCY AGREEMENT
March 30, 1998
PAINEWEBBER INCORPORATED
1285 Avenue of the Americas
New York, New York 10019
Gentlemen:
Capstead Mortgage Corporation, a Maryland corporation (the "Company"),
confirms its agreement with PaineWebber Incorporated (the "Agent"), originally
set forth in a Sales Agency Agreement dated December 6, 1995, which agreement is
hereby amended and restated as follows:
SECTION 1. Description of Securities. The Company proposes to issue and
sell through the Agent, as sales agent, up to 10,625,000 shares (the "Maximum
Amount") of common stock, par value $0.01 per share (the "Stock"), on the terms
set forth in Section 3 hereof.
SECTION 2. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, the Agent that:
(a) 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 on Form S-3 (Registration
No. 333-26865) with respect to, among other securities, the Stock, including a
form of prospectus, has been prepared by the Company in conformity with the
requirements of the Act and the Rules and Regulations and filed with the
Securities and Exchange Commission (the "Commission") and has become effective.
Such registration statement and prospectus may have been amended or supplemented
prior to the date of this Agreement. Any such amendment or supplement was so
prepared and filed, and any such amendment or supplement filed after the
effective date of such registration statement has become effective. No stop
order suspending the effectiveness of the registration statement has been
issued, and no proceeding for that purpose has been instituted or threatened by
the Commission. 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 it may
<PAGE> 2
have heretofore been amended, 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. As
of the close of business on March 27, 1998, 1,147,350 shares of Stock were
available for issuance pursuant to the Registration Statement, which permits
their sale in the manner contemplated by this Agreement. To the extent the
Company desires to sell more than 1,147,350 shares of Stock pursuant to this
Agreement or to the extent the amount of Stock registered under the Registration
Statement is otherwise depleted, the Company shall file a new registration
statement with respect to such shares and shall cause such registration
statement to become effective. After the effectiveness of said registration
statement, all references to "Registration Statement" included in this Agreement
shall be deemed to include such new registration statement.
(b) Each part of the Registration Statement, when such part became or
becomes effective, and the Prospectus and any amendment or supplement thereto,
on each Filing Date (as hereinafter defined), 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, 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 and any
amendment or supplement thereto, on each Filing Date, did not or will not
include an untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; except that the foregoing shall not
apply to statements in or omissions from any such document in reliance upon, and
in conformity with, written information relating to the Agent and 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.
(c) The documents incorporated by reference in the Registration
Statement or the Prospectus, or any amendment or supplement thereto, when they
became or become effective under the Act or were or are filed with the
Commission under the Securities Exchange Act of 1934, as amended ("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
2
<PAGE> 3
applicable, and the rules and regulations of the Commission thereunder.
(d) 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).
(e) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the state of its incorporation
with power and authority (corporate and other) to own, lease and operate its
properties and to conduct its business as described in the Registration
Statement and Prospectus; and 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 or
leasing of property or the conduct of business, except where the failure to so
qualify and be in good standing, considering all such cases in the aggregate,
would not have a material adverse effect on the condition, financial or
otherwise, or the earnings, business affairs or business prospects of the
Company and its subsidiaries considered as one enterprise.
(f) Each significant subsidiary (as defined in Section 1-02 of
Regulation S-X) 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 condition,
financial or otherwise, or the earnings, business affairs or business prospects
of the Company and its subsidiaries considered as one enterprise; 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 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.
(g) The outstanding shares of common 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
3
<PAGE> 4
description thereof in the Prospectus. The shareholders of the Company have no
preemptive rights with respect to the Stock.
(h) Except as contemplated in the Prospectus, subsequent to the
respective dates as of which information is given in the Registration Statement
and the Prospectus, neither the Company nor any of its subsidiaries has incurred
any liabilities or obligations, direct or contingent, or entered into any
transactions, not in the ordinary course of business, that are material to the
Company and its subsidiaries considered as a whole, and there has not been any
material change in the capital stock, short-term debt or long-term debt of the
Company and its subsidiaries, or any material change, or any development
involving a prospective material change, in the condition, financial or
otherwise, or the earnings, business affairs or business prospects of the
Company and its subsidiaries considered as one enterprise.
(i) Except as set forth in 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 any
material adverse change in the condition, financial or otherwise, or the
earnings, business affairs or business prospects of the Company and its
subsidiaries considered as one enterprise, or that could reasonably be expected
to materially and adversely affect the properties or assets thereof considered
as a whole.
(j) 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 the
Act or the Exchange Act or by the rules and regulations of the Commission
thereunder that have not been so filed.
(k) 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 and constitutes the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors' rights
generally and by general equitable principles.
(l) 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 is bound or to which any of the property of the Company or any of
4
<PAGE> 5
its subsidiaries is subject except for such breaches or defaults that would not
in the aggregate have a material adverse effect on the Company's ability to
perform its obligations under this Agreement or on the condition, financial or
otherwise, or the earnings, business affairs or business prospects of the
Company and its subsidiaries considered as one enterprise, 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.
(m) 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.
(n) 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
5
<PAGE> 6
the foregoing which, if singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would result in 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.
(o) 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.
(p) 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.
SECTION 3. 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 sales agent, and the Agent agrees to sell, as sales agent
for the Company, on a reasonable efforts basis, up to the Maximum Amount of
Stock 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 Company will
designate the maximum amount of Stock to be sold by the Agent daily as
reasonably agreed to by the Agent and in any event not in excess of the amount
available for issuance under the currently effective Registration Statement.
Subject to the terms and conditions hereof, the Agent shall use its reasonable
efforts to sell all of the designated Stock up to the Maximum Amount.
Notwithstanding the foregoing the Company may instruct the Agent by
telephone (confirmed promptly by telecopy) not to sell Stock if such sales
cannot be effected at or above the price designated by the Company in any such
instruction; furthermore, the Company shall not authorize the issuance and sale
of, and the Agent shall not be obligated to use its reasonable efforts to sell,
any Stock at a price lower than the minimum price therefor
6
<PAGE> 7
designated from time to time by the Company's Board of Directors and notified to
the Agent in writing. 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 Stock; provided, however, that such suspension or
termination shall not affect or impair the parties' respective obligations with
respect to the Stock 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 the Stock, the
amount of Stock that may be sold on any day pursuant to this Agreement and any
other sales agency agreement shall not exceed 10% of the average daily trading
volume of the Stock for the sixty days prior to such day (provided, that any
Stock purchased by the Agent as principal during such period shall not be
included in the calculation of trading volume). Unless otherwise agreed by the
Company and the Agent, the Agent shall sell the Stock 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 Stock 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 the Stock.
The compensation to the Agent for sales of Stock shall be 1.375% of the
gross sales price of the Stock 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 Stock (the "Net Proceeds").
The Agent shall provide written confirmation to the Company following
the close of trading on the NYSE each day in which Stock is sold under this
Agreement setting forth the amount of Stock 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 Stock 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 Stock sold through the Agent for settlement
on such date shall be delivered by the Company to the Agent against payment of
the Net Proceeds for the sale of such Stock. Settlement for all
7
<PAGE> 8
Stock shall be effected by free delivery of Stock 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 Stock 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 Stock
delivered by the Company, the Agent will pay the Company interest based on the
effective overnight Federal Funds rate.
At each Settlement Date, 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 during
which sales of Stock were made by the Agent (each such week a "Reporting
Period"), the Company will (i) file a prospectus supplement with the Commission
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 amount of Stock 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 Stock pursuant to this Agreement
(all as provided in writing by the Agent for inclusion in each such prospectus
supplement) and (ii) deliver such number of copies of each such prospectus
supplement to the New York Stock Exchange as are required by such Exchange. Any
obligation of the Agent to use its best efforts to sell the Stock 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
Section 5 of this Agreement.
SECTION 4. Covenants of the Company. The Company covenants and agrees
with the Agent and the Company that:
(a) During the period in which a prospectus relating to the Stock 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 Stock by the Agent; the Company will
8
<PAGE> 9
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) 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 Stock 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 its best efforts to prevent the issuance of
any stop order or to obtain its withdrawal if such a stop order should be
issued.
(c) Within the time during which a prospectus relating to the Stock 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 Stock 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 Stock 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
the expense of the Agent) so as to correct such statement or omission or effect
such compliance.
(d) The Company will use its best efforts to qualify the Stock 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 Stock,
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<PAGE> 10
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) 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 Stock 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) 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) 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. 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, as well as the fees and
disbursements of its legal counsel.
(h) The Company will apply the net proceeds from the sale of the Stock
as set forth in the Prospectus.
(i) The Company will not, directly or indirectly, offer or sell any
shares of common stock (other than the Stock) or securities convertible into or
exchangeable for, or any rights to purchase or acquire, common stock during the
period from the date of this Agreement through the final Settlement Date for the
sale of Stock 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
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<PAGE> 11
shall be required in connection with the Company's issuance or sale of (i)
shares of common stock or $1.26 Cumulative Convertible Preferred Stock, Series
B, $0.10 par value ("Preferred Stock"), of the Company, pursuant to the Sales
Agency Agreement dated as of November 19, 1997, by and between the Company and
Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated
("Merrill Lynch"), as the same has or may be amended, (ii) shares of common
stock or Preferred 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 (iii) 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) 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) 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 3 of this Agreement) or (ii) there is filed with the
Commission any document incorporated by reference into the Prospectus (other
than any Quarterly Report on Form 10-Q or 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(f) 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 certificate referred to in said Section 5(f), modified as
necessary to relate to the Registration Statement and the Prospectus as amended
and supplemented to the time of delivery of such certificate.
(l) 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 3 of this Agreement) or (ii) there is filed with the
Commission any document incorporated by reference into the Prospectus (other
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<PAGE> 12
than any Quarterly Report on Form 10-Q or 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 ("Company
Counsel"), 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, Maryland counsel
to the Company ("Maryland Counsel"), 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(g) 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.
(m) 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 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(e) hereof but modified to relate to the Registration Statement and the
Prospectus, as amended and supplemented to the date of such letter.
(n) The Company hereby consents to the Agent trading in the Company's
common 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 Stock as provided herein shall be subject to the accuracy, as
of the date hereof, and as of each Settlement Date, of the representations and
warranties of the Company herein, to the performance by the Company of its
obligations hereunder and to the following additional conditions:
(a) 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
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<PAGE> 13
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) 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 is material and is
required to be stated therein or is necessary to make the statements therein not
misleading.
(c) Except as contemplated in 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 material adverse change, or any development that may reasonably be expected
to cause a material adverse change, in the condition (financial or other),
business, prospects, net worth or results of operations of the Company and its
subsidiaries, or any change in the rating assigned to any securities of the
Company.
(d) The Agent shall have received at every date specified in Section
4(l) hereof, opinions of Company Counsel, dated as of such date, to the effect
that:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of its
jurisdiction of incorporation, has full corporate power and authority
to conduct its business as described in the Registration Statement and
Prospectus and is duly qualified to do business in each jurisdiction
set forth on a schedule thereto; to their knowledge, such jurisdictions
are the only jurisdictions in which the Company's ownership or leasing
of real property or conduct of its business requires such
qualification;
(ii) Each subsidiary of the Company has been duly incorporated
and is validly existing as a corporation (or partnership, as the case
may be) in good standing under the laws of the jurisdiction of its
incorporation, has corporate (or partnership) 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 (or partnership) to transact
business and is in good standing in each jurisdiction set forth on a
schedule thereto; to their knowledge, such jurisdictions are the only
jurisdictions in which such qualification is required, whether by
reason of the ownership or leasing of property or the conduct of
business; all of the issued outstanding capital stock (or other equity
interests) of each such subsidiary has been
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<PAGE> 14
duly authorized and validly issued, is fully paid and nonassessable
(except for the general partner interests in CMC Investment
Partnership, which are assessable in accordance with its partnership
agreement and applicable law), and, except for (A) a 1% general partner
interest in CMC Investment Partnership held by Capstead Holdings, Inc.
and (B) shares of Capstead Holdings, Inc. which are owned by parties
other than the Company (which will be set forth in a schedule to the
opinion), is owned by the Company, directly or indirectly, free and
clear of any mortgage, pledge, lien, encumbrance, claim or equity;
(iii) The shares of Stock have been duly and validly
authorized, and, when issued and delivered to and paid for by the
purchasers thereof pursuant to this Agreement, will be fully paid and
nonassessable and conform to the description thereof in the Prospectus;
and the shareholders of the Company have no preemptive rights with
respect to the Stock; all corporate action required to be taken for the
authorization, issue and sale of the Stock has been validly and
sufficiently taken; and the shares of Stock are the subject of an
effective registration statement permitting their sale in the manner
contemplated by this Agreement;
(iv) The Registration Statement has become effective under the
Act; (if applicable, the filing of the Prospectus Supplements pursuant
to Rule 424(b) have been made in the manner and within the time period
required by Rule 424(b)); to the knowledge of such counsel no stop
order suspending the effectiveness of the Registration Statement has
been issued and no proceeding for that purpose has been instituted or
threatened by the Commission;
(v) The Registration Statement, when it became effective, and
the Prospectus and any amendment or supplement thereto, on the date of
filing thereof with the Commission (and at each Filing Date on or prior
to the date of the opinion), complied as to form in all material
respects with the requirements of the Act and the Rules and
Regulations; and the documents incorporated by reference in the
Registration Statement or Prospectus or any amendment or supplement
thereto, when filed with the Commission under the Exchange Act,
complied as to form 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;
(vi) The description in the Registration Statement and
Prospectus of statutes, legal and governmental proceedings, contracts
and other documents are accurate in all material respects and fairly
present the information required to be shown; and such counsel do not
know of any statutes or legal or governmental proceedings required to
be described in the Prospectus that are not described as required, or
of any
14
<PAGE> 15
contracts or documents of a character required to be described in the
Registration Statement or Prospectus (or required to be filed under the
Exchange Act if upon such filing they would be incorporated by
reference therein) or to be filed as exhibits to the Registration
Statement that are not described and filed as required;
(vii) This Agreement has been duly authorized, executed and
delivered by the Company;
(viii) The execution, delivery and performance of this
Agreement by the Company and the consummation of the transactions
contemplated herein by the Company do not and 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 known to such
counsel to which the Company or any of its subsidiaries is a party or
by which it 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 in the aggregate have a material adverse effect on the
Company's ability to perform its obligations under this Agreement or on
the condition, financial or otherwise, or the earnings business affairs
or business prospects of the Company and its subsidiaries considered as
one enterprise, 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 known to such counsel of any court or governmental agency or
body having jurisdiction over the Company or any of its subsidiaries or
any of its properties; and no consent, approval, authorization or order
of, or filing with, any court or governmental agency or body is
required for the consummation of the transactions contemplated by this
Agreement in connection with the issuance or sale of the Stock by the
Company, except such as have been obtained under the Act and such as
may be required under state securities or blue sky laws in connection
with the sale and distribution of the Stock by the Agent;
(ix) Except for permits and similar authorizations required
under the securities or blue sky laws of certain states, no consent,
waiver, approval, authorization or other order of any regulatory body,
administrative agency or other governmental body is legally required
for the sale of the Stock by the Agent as contemplated hereby and by
the Prospectus;
(x) Such counsel knows of no actions, suits or proceedings
pending or threatened against or affecting the Company or any of its
subsidiaries or the business, properties, business prospects, condition
(financial or otherwise) or results of operations of the Company or any
of its subsidiaries, or any of their respective officers in their
capacities as such, before or by any Federal or state
15
<PAGE> 16
or foreign court, commission, regulatory body, wherein an unfavorable
ruling, decision or finding might materially and adversely affect the
Company or any of its subsidiaries or its business, properties,
business prospects, condition (financial or otherwise) or results of
operations; and
(xi) For all taxable years beginning September 5, 1985 (the
date of the Company's initial public offering of common stock) and
ending December 31, 1994, Capstead REIT (as defined below) has met the
requirements for qualification as a REIT under the Code. Capstead REIT
will be able to qualify as a REIT for the taxable year beginning
January 1, 1995, provided that after the date hereof, Capstead REIT
continues to be organized and operated as described in the Registration
Statement and according to representations made to us in a certificate
of an officer of the Company and therefore continues to satisfy the
income tests, and distribution, shareholder, recordkeeping and other
applicable REIT requirements under the Code. "Capstead REIT" means the
Company, as aggregated with such wholly-owned subsidiaries as were in
existence during the period for which reference is made. The
information presented in the Registration Statement under the caption
"Taxation," to the extent it constitutes matters of law or legal
conclusions, is accurate in all material respects.
In addition, such counsel shall state that such counsel has no reason
to believe that either the Registration Statement, at the time it (including
each Post-Effective Amendment thereto) became effective, contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading or
that the Prospectus and any amendments or supplements thereto, on the date of
filing thereof with the Commission and at each Filing Date on or prior to the
date of the opinion, included an untrue statement of a material fact or omitted
to state a material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading; it being
understood that such counsel need express no opinion as to the financial
statements or other financial and statistical data included in any of the
documents mentioned in this paragraph.
(e) At the dates specified in Section 4(m) hereof, the Agent shall have
received a letter from Ernst & Young LLP, independent public accountants for the
Company, or other independent accountants satisfactory to the Agent, dated the
date of delivery thereof, substantially in the form attached hereto as Annex I
and otherwise in form and substance satisfactory to Agent.
(f) 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
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<PAGE> 17
financial or accounting officer of the Company, dated as of the next business
day following each Filing Date (each, a "Certificate Date"), to the effect that,
to the best of their knowledge based upon reasonable investigation:
(i) The representations and warranties of the Company in this
Agreement are true and correct, as if made at and as of the Certificate
Date, 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 each such Certificate Date;
(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 officer after
due inquiry, is threatened, by the Commission;
(iii) 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
(iv) Since the date of this Agreement, there has not been any
material adverse change, on a consolidated basis, in the business,
financial condition or results of operations of the Company and its
subsidiaries considered as one enterprise which has not been described
in an amendment or supplement to the Registration Statement or
Prospectus (directly or by incorporation).
In addition, on each Certificate Date the certificate shall also state
that the shares of Stock to be sold on that date have been duly and validly
authorized by the Company and that all corporate action required to be taken for
the authorization, issuance and sale of the Stock on that date has been validly
and sufficiently taken.
(g) The Agent shall have received at every date specified in Section
4(l) hereof, opinions of Maryland Counsel, dated as of such date, in form and
substance satisfactory to the Agent.
(h) On each Filing Date, the Company shall have furnished to the Agent
such appropriate further information, certificates and documents as the Agent
may reasonably request.
All such opinions, certificates, letters and other documents will be in
compliance with the provisions hereof only if they are satisfactory in form and
substance to the Agent. The Company will furnish the Agent with such conformed
copies of such
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<PAGE> 18
opinions, certificates, letters and other documents as the Agent shall
reasonably request.
SECTION 6. Indemnification and Contribution.
(a) 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 any untrue statement or
alleged untrue statement of a material fact contained in the
Registration Statement (or any amendment thereto), or the omission or
alleged omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein not misleading or
arising out of any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus or the Prospectus
(or any amendment or supplement thereto) or the omission or alleged
omission therefrom of a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened,
or of any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission, if such
settlement is effected with the written consent of the Company; and
(iii) against any and all expense whatsoever, as incurred
(including, subject to Section 6(c) hereof, the reasonable 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 (i) or
(ii) above;
provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by the
Agent expressly for use in the Registration Statement (or any amendment thereto)
or any preliminary prospectus or the Prospectus (or any amendment or supplement
thereto).
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<PAGE> 19
(b) The Agent agrees to indemnify and hold harmless the Company and its
directors and 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 against any and all loss,
liability, claim, damage and expense described in the indemnity contained in
subsection (a) of this Section, as incurred, but only with respect to untrue
statements or omissions, or alleged untrue statements or omissions, made in the
Registration Statement (or any amendments thereto) or any preliminary prospectus
or the Prospectus (or any amendment or supplement thereto) 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 amendment thereto) or
such preliminary prospectus or the Prospectus (or any amendment or supplement
thereto).
(c) Any indemnified party that proposes to assert the right to be
indemnified under this Section 6 will, promptly after receipt of notice of
commencement of any action against such party in respect of which a claim is to
be made against an indemnifying party or parties under this Section 6, notify
each such indemnifying party of the commencement of such action, enclosing a
copy of all papers served, but the omission so to notify such indemnifying party
will not relieve the indemnifying party from (i) any liability that it might
have to any indemnified party otherwise than under this Section 6 and (ii) any
liability that it may have to any indemnified party under the foregoing
provision of this Section 6 unless, and only to the extent that, such omission
results in the forfeiture of substantive rights or defenses by the indemnifying
party. If any such action is brought against any indemnified party and it
notifies the indemnifying party of its commencement, the indemnifying party will
be entitled to participate in and, to the extent that it elects by delivering
written notice to the indemnified party promptly after receiving notice of the
commencement of the action from the indemnified party, jointly with any other
indemnifying party similarly notified, to assume the defense of the action, with
counsel satisfactory to the indemnified party, and after notice from the
indemnifying party to the indemnified party of its election to assume the
defense, the indemnifying party will not be liable to the indemnified party for
any legal or other expenses except as provided below and except for the
reasonable costs of investigation subsequently incurred by the indemnified party
in connection with the defense. The indemnified party will have the right to
employ its own counsel in any such action, but the fees, expenses and other
charges of such counsel will be at the expense of such indemnified party unless
(1) the employment of counsel by the indemnified party has been authorized in
writing by the indemnifying party, (2) the indemnified party has reasonably
concluded (based on advice of counsel) that there may be legal defenses
available to it or other indemnified parties that are
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<PAGE> 20
different from or in addition to those available to the indemnifying party, (3)
a conflict or potential conflict exists (based on advice of counsel to the
indemnified party) between the indemnified party and the indemnifying party (in
which case the indemnifying party will not have the right to direct the defense
of such action on behalf of the indemnified party) or (4) the indemnifying party
has not in fact employed counsel to assume the defense of such action within a
reasonable time after receiving notice of the commencement of the action, in
each of which cases the reasonable fees, disbursements and other charges of
counsel will be at the expense of the indemnifying party or parties. It is
understood that the indemnifying party or parties shall not, in connection with
any proceeding or related proceedings in the same jurisdiction, be liable for
the reasonable fees, disbursements and other charges of more than one separate
firm admitted to practice in such jurisdiction at any one time for all such
indemnified party or parties. All such fees, disbursements and other charges
will be reimbursed by the indemnifying party promptly as they are incurred. An
indemnifying party will not be liable for any settlement of any action or claim
effected without its written consent (which consent will not be unreasonably
withheld).
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in the foregoing
paragraphs of this Section 6 is applicable in accordance with its terms but for
any reason is held to be unavailable from the Company or the Agent, the Company
and the Agent will contribute to the total losses, claims, liabilities, expenses
and damages (including any investigative, legal and other expenses reasonably
incurred in connection with, and any amount paid in settlement of, any action,
suit or proceeding or any claim asserted, but after deducting any contribution
received by the Company from persons other than the Agent, such as persons who
control the Company within the meaning of the Act, officers of the Company who
signed the Registration Statement and directors of the Company, who also may be
liable for contribution) to which the Company and any one or more of the Agent
may be subject in such proportion as shall be appropriate to reflect the
relative benefits received by the Company on the one hand and the Agent on the
other. The relative benefits received by the Company on the one hand and the
Agent on the other hand shall be deemed to be in the same proportion as the
total net proceeds from the offering (before deducting expenses) received by the
Company bear to the total compensation (before deducting expenses) received by
the Agent from the sale of Stock on behalf of the Company. If, but only if, the
allocation provided by the foregoing sentence is not permitted by applicable
law, the allocation of contribution shall be made in such proportion as is
appropriate to reflect not only the relative benefits referred to in the
foregoing sentence but also the relative fault of the Company, on the one hand,
and the Agent, on the other, with respect to the statements or omission which
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<PAGE> 21
resulted in such loss, claim, liability, expense or damage, or action in respect
thereof, as well as any other relevant equitable considerations with respect to
such offering. Such relative fault shall be determined by reference to whether
the 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 the Agent, the intent of the parties and their relative 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
contributions pursuant to this Section 6(d) were to be determined by pro rata
allocation or by any other method of allocation which does not take into account
the equitable considerations referred to herein. The amount paid or payable by
an indemnified party as a result of the loss, claim, liability, expense or
damage, or action in respect thereof, referred to above in this Section 6(d)
shall be deemed to include, for the purpose of this Section 6(d), any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
foregoing provisions of this Section 6(d), the Agent shall not be required to
contribute any amount in excess of the amount by which the total actual sales
price at which Stock sold by the Agent exceeds the amount of any damages that
the Agent has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission and no person found guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
will be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 6(d), any person who
controls a party to this Agreement within the meaning of the Act will have the
same rights to contribution as that party, and each officer of the Company who
signed the Registration Statement will have the same rights to contribution as
the Company, subject in each case to the provisions hereof. Any party entitled
to contribution, promptly after receipt of notice of commencement of any action
against such party in respect of which a claim for contribution may be made
under this Section 6(d), will notify any such party or parties from whom
contribution may be sought, but the omission so to notify will not relieve that
party or parties from whom contribution may be sought from any other obligation
it or they may have under this Section 6(d). No party will be liable for
contribution with respect to any action or claim settled without its written
consent (which consent will not be unreasonably withheld).
(e) The indemnity and contribution provided by this Section 6 shall not
relieve the Company and the Agent from any liability the Company and the Agent
may otherwise have (including, without limitation, any liability the Agent may
have for a breach of its obligations under Section 3 hereof).
21
<PAGE> 22
SECTION 7. Representations and Agreements to Survive Delivery. All
representations, warranties and agreements of the Company herein or in
certificates delivered pursuant hereto, and the agreements of the Agent
contained in Section 6 hereof, shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of the Agent or any
controlling persons, or the Company (or any of their officers, directors or
controlling persons), and shall survive delivery of and payment for the Stock.
SECTION 8. Termination.
(a) The Agent shall have the right by giving notice as hereinafter
specified at any time at or prior to any Filing Date, to terminate this
Agreement if (i) any material adverse change, or any development that has
actually occurred and that is reasonably expected to cause material adverse
change, in the business, financial condition or results of operations of the
Company and its subsidiaries has occurred which, in the judgment of such Agent,
materially impairs the investment quality of the Stock, (ii) the Company shall
have failed, refused or been unable, at or prior to the Filing 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, (v) any banking
moratorium shall have been declared by Federal or New York authorities or (vi)
an outbreak or material escalation of major hostilities in which the United
States is involved, a declaration of war by Congress, any other substantial
national or international calamity or any other event or occurrence of a similar
character shall have occurred since the execution of this Agreement that, in the
judgment of the Agent, makes it impractical or inadvisable to proceed with the
completion of the sale of and payment for the Stock to be sold by the Agent on
behalf of 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 6
and Section 7 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 thirty (30) days prior
written notice as hereinafter specified in Section 9, to terminate this
Agreement in its sole discretion at any time. Any such termination shall be
without liability of any party to any other party except that the provisions of
Section 4(g), Section 6 and Section 7 hereof shall remain in full force and
effect notwithstanding such termination.
(c) The Agent shall have the right, by giving thirty (30) days prior
written notice as hereinafter specified in Section 9, to terminate this
Agreement in its sole discretion at any time.
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<PAGE> 23
Any such termination shall be without liability of any party to any other party
except that the provisions of Section 4(g), Section 6 and Section 7 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 8(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 6 and Section
7 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 sale of Stock, such sale shall
settle in accordance with the provisions of the second-to-last paragraph of
Section 3 hereof.
SECTION 9. 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 PaineWebber Incorporated, 1285 Avenue
of the Americas, New York, New York 10019, telecopy no. (212) 713-1374, c/o
David A. Dami, 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.
SECTION 10. 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 referred to in Section 6 hereof,
and no other person will have any right or obligation hereunder.
SECTION 11. 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 12. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT
REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS.
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<PAGE> 24
SECTION 13. 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.
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. Alternatively, the execution of this Agreement by the
Company and its acceptance by or on behalf of the Agent may be evidenced by an
exchange of telegraphic or other written communications.
Very truly yours,
CAPSTEAD MORTGAGE CORPORATION
By: /s/ ANDREW F. JACOBS
-------------------------------
Title: Senior Vice President and
----------------------------
Treasurer
----------------------------
ACCEPTED as of the date
first above written
PAINEWEBBER INCORPORATED
By: /s/ HALLE J. BENETT
-------------------------------
Title: Vice President
----------------------------
24
<PAGE> 1
EXHIBIT 1.9
CAPSTEAD MORTGAGE CORPORATION
4,500,000 Shares
$1.26 Cumulative Convertible Preferred Stock, Series B
($0.10 par value)
AMENDED AND RESTATED SALES AGENCY AGREEMENT
March 30, 1998
PAINEWEBBER INCORPORATED
1285 Avenue of the Americas
New York, New York 10019
Gentlemen:
Capstead Mortgage Corporation, a Maryland corporation (the "Company"),
confirms its agreement with PaineWebber Incorporated (the "Agent"), originally
set forth in a Sales Agency Agreement dated September 17, 1996, which agreement
is hereby amended and restated as follows:
SECTION 1. Description of Securities. The Company proposes to issue and
sell through the Agent, as sales agent, up to 4,500,000 shares (the "Maximum
Amount") of $1.26 Cumulative Convertible Preferred Stock, Series B, par value
$0.10 per share (the "Stock"), on the terms set forth in Section 3 hereof.
SECTION 2. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, the Agent that:
(a) 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 on Form S-3 (Registration
No. 33-62212) with respect to, among other securities, the Stock, including a
form of prospectus, has been prepared by the Company in conformity with the
requirements of the Act and the Rules and Regulations and filed with the
Securities and Exchange Commission (the "Commission") and has become effective.
Such registration statement and prospectus may have been amended or supplemented
prior to the date of this Agreement. Any such amendment or supplement was so
prepared and filed, and any such amendment or supplement filed after the
effective date of such registration statement has become effective. No stop
order suspending the effectiveness of the registration statement has been
issued, and no proceeding for that purpose has been instituted or threatened by
the Commission. Copies of such registration statement and prospectus, any such
amendment or supplement and all documents
<PAGE> 2
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 it may have heretofore been amended, 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.
(b) Each part of the Registration Statement, when such part became or
becomes effective, and the Prospectus and any amendment or supplement thereto,
on each Filing Date (as hereinafter defined), 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, 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 and any
amendment or supplement thereto, on each Filing Date, did not or will not
include an untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; except that the foregoing shall not
apply to statements in or omissions from any such document in reliance upon, and
in conformity with, written information relating to the Agent and 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.
(c) The documents incorporated by reference in the Registration
Statement or the Prospectus, or any amendment or supplement thereto, when they
became or become effective under the Act or were or are filed with the
Commission under the Securities Exchange Act of 1934, as amended ("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.
(d) 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
2
<PAGE> 3
accounting principles consistently applied throughout the periods involved
(except as otherwise stated therein).
(e) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the state of its incorporation
with power and authority (corporate and other) to own, lease and operate its
properties and to conduct its business as described in the Registration
Statement and Prospectus; and 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 or
leasing of property or the conduct of business, except where the failure to so
qualify and be in good standing, considering all such cases in the aggregate,
would not have a material adverse effect on the condition, financial or
otherwise, or the earnings, business affairs or business prospects of the
Company and its subsidiaries considered as one enterprise.
(f) Each significant subsidiary (as defined in Section 1-02 of
Regulation S-X) 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 condition,
financial or otherwise, or the earnings, business affairs or business prospects
of the Company and its subsidiaries considered as one enterprise; 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 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 (as defined in
Section 1-02 of Regulation S-X) of the Company are CMC Securities Corporation
III, Capstead Securities Corporation IV and Capstead Inc.
(g) 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 Stock as contemplated by this Agreement, the Stock will be
convertible at the option of the holder thereof for shares of common stock, par
value $0.01 per share ("Common Stock"), of the Company in accordance with the
terms of the Articles Supplementary relating to the Stock; the shares of Common
Stock issuable upon conversion of the Stock have been duly
3
<PAGE> 4
authorized and reserved for issuance upon such conversion by all necessary
corporate action and such shares, when issued upon such conversion, will be
validly issued and will be fully paid and non-assessable. The shareholders of
the Company have no preemptive rights with respect to the Stock or the shares of
Common Stock issuable upon conversion of the Stock.
(h) Except as contemplated in the Prospectus, subsequent to the
respective dates as of which information is given in the Registration Statement
and the Prospectus, neither the Company nor any of its subsidiaries has incurred
any liabilities or obligations, direct or contingent, or entered into any
transactions, not in the ordinary course of business, that are material to the
Company and its subsidiaries considered as a whole, and there has not been any
material change in the capital stock, short-term debt or long-term debt of the
Company and its subsidiaries, or any material change, or any development
involving a prospective material change, in the condition, financial or
otherwise, or the earnings, business affairs or business prospects of the
Company and its subsidiaries considered as one enterprise.
(i) Except as set forth in 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 any
material adverse change in the condition, financial or otherwise, or the
earnings, business affairs or business prospects of the Company and its
subsidiaries considered as one enterprise, or that could reasonably be expected
to materially and adversely affect the properties or assets thereof considered
as a whole.
(j) 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 the
Act or the Exchange Act or by the rules and regulations of the Commission
thereunder that have not been so filed.
(k) 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 and constitutes the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors' rights
generally and by general equitable principles.
(l) The performance of this Agreement and the consummation of the
transactions contemplated herein will not result in a
4
<PAGE> 5
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 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 in the aggregate have a material adverse effect on the
Company's ability to perform its obligations under this Agreement or on the
condition, financial or otherwise, or the earnings, business affairs or business
prospects of the Company and its subsidiaries considered as one enterprise, 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.
(m) 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.
(n) 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
5
<PAGE> 6
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 in 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.
(o) 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.
(p) 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.
SECTION 3. 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 sales agent for the Company, on a reasonable efforts basis, up to the Maximum
Amount of Stock 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 Company will
designate the maximum amount of Stock to be sold by the Agent daily as
reasonably agreed to by the Agent and in any event not in excess of the amount
available for issuance under the currently effective Registration Statement.
Subject to the terms and conditions hereof, the Agent shall use its reasonable
efforts to sell all of the designated Stock up to the Maximum Amount.
Notwithstanding the foregoing the Company may instruct the Agent by
telephone (confirmed promptly by telecopy) not to sell Stock if such sales
cannot be effected at or above the price
6
<PAGE> 7
designated by the Company in any such instruction; furthermore, the Company
shall not authorize the issuance and sale of, and the Agent shall not be
obligated to use its reasonable efforts to sell, any Stock at a price lower than
the minimum price therefor designated from time to time by the Company's Board
of Directors and notified to the Agent in writing. 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 Stock; provided, however,
that such suspension or termination shall not affect or impair the parties'
respective obligations with respect to the Stock 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 the Stock, the
amount of Stock that may be sold on any day pursuant to this Agreement and any
other sales agency agreement shall not exceed 10% of the average daily trading
volume of the Stock for the sixty days prior to such day (provided, that any
Stock purchased by the Agent as principal during such period shall not be
included in the calculation of trading volume). Unless otherwise agreed by the
Company and the Agent, the Agent shall sell the Stock 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 Stock 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 the Stock.
The compensation to the Agent for sales of Stock shall be 1.375% of the
gross sales price of the Stock 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 Stock (the "Net Proceeds").
The Agent shall provide written confirmation to the Company following
the close of trading on the NYSE each day in which Stock is sold under this
Agreement setting forth the amount of Stock 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 Stock will occur on the third business day
following the date on which such sales are made
7
<PAGE> 8
(each such day, a "Settlement Date"). On each Settlement Date, the Stock sold
through the Agent for settlement on such date shall be delivered by the Company
to the Agent against payment of the Net Proceeds for the sale of such Stock.
Settlement for all Stock shall be effected by free delivery of Stock 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 Stock 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 Stock delivered by the Company, the Agent will pay the
Company interest based on the effective overnight Federal Funds rate.
At each Settlement Date, 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 during
which sales of Stock were made by the Agent (each such week a "Reporting
Period"), the Company will (i) file a prospectus supplement with the Commission
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 amount of Stock 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 Stock pursuant to this Agreement
(all as provided in writing by the Agent for inclusion in each such prospectus
supplement) and (ii) deliver such number of copies of each such prospectus
supplement to the New York Stock Exchange as are required by such Exchange. Any
obligation of the Agent to use its best efforts to sell the Stock 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
Section 5 of this Agreement."
SECTION 4. Covenants of the Company. The Company covenants and agrees
with the Agent that:
(a) During the period in which a prospectus relating to the Stock 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,
8
<PAGE> 9
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 Stock
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) 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 Stock 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 its best efforts to prevent the issuance of
any stop order or to obtain its withdrawal if such a stop order should be
issued.
(c) Within the time during which a prospectus relating to the Stock 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 Stock 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 Stock 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
the expense of the Agent) so as to correct such statement or omission or effect
such compliance.
9
<PAGE> 10
(d) The Company will use its best efforts to qualify the Stock and the
shares of Common Stock issuable upon conversion of Stock 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
Stock, 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) 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 Stock 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) 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) 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. 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; provided, however, that the
Company will promptly, upon the request of the Agent, reimburse the Agent for
the reasonable fees and disbursements of the Agent's legal counsel incurred in
connection with the establishment of the structured equity shelf program
established by this Agreement.
(h) The Company will apply the net proceeds from the sale of the Stock
as set forth in the Prospectus.
(i) The Company will not, directly or indirectly, offer or sell any
shares of Common Stock (other than (i) the shares of
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Common Stock issuable upon conversion of the Stock, or (ii) the shares of Common
Stock offered by the Agent under the Company's structured equity shelf programs
relating to the Common Stock that commenced on December 6, 1995 and November 19,
1997) or securities convertible into (other than the Stock) or exchangeable for,
or any rights to purchase or acquire, Common Stock during the period from the
date of this Agreement through the final Filing Date for the sale of Stock
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 Stock or 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
(ii) 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) 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) 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 3 of this Agreement) or (ii) there is filed with the
Commission any document incorporated by reference into the Prospectus (other
than any Quarterly Report on Form 10-Q or 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(f) 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 certificate referred to in said Section 5(f), modified as
necessary to relate to the Registration Statement and the Prospectus as amended
and supplemented to the time of delivery of such certificate.
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<PAGE> 12
(l) 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 3 of this Agreement) or (ii) there is filed with the
Commission any document incorporated by reference into the Prospectus (other
than any Quarterly Report on Form 10-Q or 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 ("Company
Counsel"), 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 ("Maryland Counsel"), 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(g) 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.
(m) 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 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(e) hereof but modified to relate to the Registration Statement and the
Prospectus, as amended and supplemented to the date of such letter.
(n) The Company hereby consents to the Agent trading in the Company's
Series B Preferred Stock and the Common 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 Stock as provided herein shall be subject to the accuracy, as
of the date hereof, and as
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<PAGE> 13
of each Settlement Date, of the representations and warranties of the Company
herein, to the performance by the Company of its obligations hereunder and to
the following additional conditions:
(a) 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) 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 is material and is
required to be stated therein or is necessary to make the statements therein not
misleading.
(c) Except as contemplated in 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 material adverse change, or any development that may reasonably be expected
to cause a material adverse change, in the condition (financial or other),
business, prospects, net worth or results of operations of the Company and its
subsidiaries, or any change in the rating assigned to any securities of the
Company.
(d) The Agent shall have received at every date specified in Section
4(l) hereof, opinions of Company Counsel, dated as of such date, to the effect
that:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of its
jurisdiction of incorporation, has full corporate power and authority
to conduct its business as described in the Registration Statement and
Prospectus and is duly qualified to do business in each jurisdiction
set forth on a schedule thereto; to their knowledge, such jurisdictions
are the only jurisdictions in which the Company's ownership or leasing
of real property or conduct of its business requires such
qualification;
(ii) Each subsidiary of the Company has been duly incorporated
(or formed, in the case of a partnership) and has corporate (or
partnership) power and authority to own, lease and operate its
properties and conduct its business as described in the Registration
Statement and Prospectus; each of Capstead Inc. and the Company's other
"significant subsidiaries" (as such term is defined in Rule 1-02 of
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<PAGE> 14
Regulation S-X under the Act) is validly existing as a corporation (or
partnership, as the case may be) in good standing under the laws of the
jurisdiction of its incorporation; and all of the issued outstanding
capital stock (or other equity interests) of each subsidiary of the
Company has been duly authorized and validly issued, is fully paid and
nonassessable (except for the general partner interests in CMC
Investment Partnership, which are assessable in accordance with its
partnership agreement and applicable law), and, except for (A) a 1%
general partner interest in CMC Investment Partnership held by Capstead
Holdings, Inc. and (B) shares of Capstead Holdings, Inc. which are
owned by parties other than the Company (which will be set forth in a
schedule to the opinion), is owned by the Company, directly or
indirectly, free and clear of any mortgage, pledge, lien, encumbrance,
claim or equity;
(iii) The shares of Stock have been duly and validly
authorized, and, when issued and delivered to and paid for by the
purchasers thereof pursuant to this Agreement, will be fully paid and
nonassessable and conform to the description thereof in the Prospectus;
upon issuance and delivery of the Stock as contemplated by the Sales
Agency Agreement, the Stock will be convertible at the option of the
holder thereof for shares of Common Stock in accordance with the terms
of the Article Supplementary governing the Stock; the shares of Common
Stock issuable upon conversion of the Stock have been duly authorized
and reserved for issuance upon such conversion by all necessary
corporate action; such shares, when issued upon such conversion, will
be validly issued and will be fully paid and non-assessable; and the
shareholders of the Company have no preemptive rights with respect to
the Stock or the shares of Common Stock issuable upon conversion of the
Stock; all corporate action required to be taken for the authorization,
issue and sale of the Stock has been validly and sufficiently taken;
and the shares of Stock are the subject of an effective registration
statement permitting their sale in the manner contemplated by this
Agreement;
(iv) The Registration Statement has become effective under the
Act; to the knowledge of such counsel no stop order suspending the
effectiveness of the Registration Statement has been issued and no
proceeding for that purpose has been instituted or threatened by the
Commission;
(v) The Registration Statement, when it became effective, and
the Prospectus and any amendment or supplement thereto, on the date of
filing thereof with the Commission (and at each Filing Date on or prior
to the date of the opinion), complied as to form in all material
respects with the requirements of the Act and the Rules and
Regulations; and the documents incorporated by reference in the
Registration Statement or Prospectus or any amendment or
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<PAGE> 15
supplement thereto, when filed with the Commission under the Exchange
Act, complied as to form 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;
(vi) The description in the Registration Statement and
Prospectus of statutes, legal and governmental proceedings, contracts
and other documents are accurate in all material respects and fairly
present the information required to be shown; and such counsel do not
know of any statutes or legal or governmental proceedings required to
be described in the Prospectus that are not described as required, or
of any contracts or documents of a character required to be described
in the Registration Statement or Prospectus (or required to be filed
under the Exchange Act if upon such filing they would be incorporated
by reference therein) or to be filed as exhibits to the Registration
Statement that are not described and filed as required;
(vii) This Agreement has been duly authorized, executed and
delivered by the Company;
(viii) The execution, delivery and performance of this
Agreement by the Company and the consummation of the transactions
contemplated herein by the Company do not and 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 known to such
counsel to which the Company or any of its subsidiaries is a party or
by which it 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 in the aggregate have a material adverse effect on the
Company's ability to perform its obligations under this Agreement or on
the condition, financial or otherwise, or the earnings, business
affairs or business prospects of the Company and its subsidiaries
considered as one enterprise, 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 known to such counsel of any court or
governmental agency or body having jurisdiction over the Company or any
of its subsidiaries or any of its properties; and no consent, approval,
authorization or order of, or filing with, any court or governmental
agency or body is required for the consummation of the transactions
contemplated by this Agreement in connection with the issuance or sale
of the Stock by the Company, except such as have been obtained under
the Act and such as may be required under state securities or blue sky
laws in connection with the sale and distribution of the Stock by the
Agent;
(ix) Except for permits and similar authorizations required
under the securities or blue sky laws of certain
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<PAGE> 16
states, no consent, waiver, approval, authorization or other order of
any regulatory body, administrative agency or other governmental body
is legally required for the sale of the Stock by the Agent and the
issuance of shares of Common Stock upon conversion of Stock as
contemplated hereby and by the Prospectus;
(x) Such counsel knows of no actions, suits or proceedings
pending or threatened against or affecting the Company or any of its
subsidiaries or the business, properties, business prospects, condition
(financial or otherwise) or results of operations of the Company or any
of its subsidiaries, or any of their respective officers in their
capacities as such, before or by any Federal or state or foreign court,
commission, regulatory body, wherein an unfavorable ruling, decision or
finding might materially and adversely affect the Company or any of its
subsidiaries or its business, properties, business prospects, condition
(financial or otherwise) or results of operations; and
(xi) For all taxable years beginning September 5, 1985 (the
date of the Company's initial public offering of Common Stock) and
ending December 31, 1995, Capstead REIT (as defined below) has met the
requirements for qualification as a REIT under the Code. Capstead REIT
will be able to qualify as a REIT for the taxable year beginning
January 1, 1996, provided that after the date hereof, Capstead REIT
continues to be organized and operated as described in the Registration
Statement and according to representations made to us in a certificate
of an officer of the Company and therefore continues to satisfy the
income tests, and distribution, shareholder, recordkeeping and other
applicable REIT requirements under the Code. "Capstead REIT" means the
Company, as aggregated with such wholly-owned subsidiaries as were in
existence during the period for which reference is made. The
information presented in the Registration Statement under the caption
"Taxation," to the extent it constitutes matters of law or legal
conclusions, is accurate in all material respects.
In addition, such counsel shall state that such counsel has no reason
to believe that either the Registration Statement, at the time it (including
each Post-Effective Amendment thereto) became effective, contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading or
that the Prospectus and any amendments or supplements thereto, on the date of
filing thereof with the Commission and at each Filing Date on or prior to the
date of the opinion, included an untrue statement of a material fact or omitted
to state a material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading; it being
understood that such counsel need express no opinion as to the financial
statements or other
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<PAGE> 17
financial and statistical data included in any of the documents mentioned in
this paragraph.
(e) At the dates specified in Section 4(m) hereof, the Agent shall have
received a letter from Ernst & Young LLP, independent public accountants for the
Company, or other independent accountants satisfactory to the Agent, dated the
date of delivery thereof, substantially in the form attached hereto as Annex I
and otherwise in form and substance satisfactory to Agent.
(f) 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 next business day following each Filing Date (each, a
"Certificate Date"), to the effect that, to the best of their knowledge based
upon reasonable investigation:
(i) The representations and warranties of the Company in this
Agreement are true and correct, as if made at and as of the Certificate
Date, 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 each such Certificate Date;
(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 officer after
due inquiry, is threatened, by the Commission;
(iii) 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
(iv) Since the date of this Agreement, there has not been any
material adverse change, on a consolidated basis, in the business,
financial condition or results of operations of the Company and its
subsidiaries considered as one enterprise which has not been described
in an amendment or supplement to the Registration Statement or
Prospectus (directly or by incorporation).
In addition, on each Certificate Date the certificate shall also state
that the shares of Stock to be sold on that date have been duly and validly
authorized by the Company and that all corporate action required to be taken for
the authorization,
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<PAGE> 18
issuance and sale of the Stock on that date has been validly and sufficiently
taken.
(g) The Agent shall have received at every date specified in Section
4(l) hereof, opinions of Maryland Counsel, dated as of such date, in form and
substance satisfactory to the Agent.
(h) On each Filing Date, the Company shall have furnished to the Agent
such appropriate further information, certificates and documents as the Agent
may reasonably request.
All such opinions, certificates, letters and other documents will be in
compliance with the provisions hereof only if they are satisfactory in form and
substance to the Agent. The Company will furnish the Agent with such conformed
copies of such opinions, certificates, letters and other documents as the Agent
shall reasonably request.
SECTION 6. Indemnification and Contribution.
(a) 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 any untrue statement or
alleged untrue statement of a material fact contained in the
Registration Statement (or any amendment thereto), or the omission or
alleged omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein not misleading or
arising out of any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus or the Prospectus
(or any amendment or supplement thereto) or the omission or alleged
omission therefrom of a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened,
or of any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission, if such
settlement is effected with the written consent of the Company; and
(iii) against any and all expense whatsoever, as incurred
(including, subject to Section 6(c) hereof, the reasonable fees and
disbursements of counsel chosen by the Agent), reasonably incurred in
investigating, preparing or
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<PAGE> 19
defending against any litigation, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission, to the extent that any such
expense is not paid under (i) or (ii) above;
provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by the
Agent expressly for use in the Registration Statement (or any amendment thereto)
or any preliminary prospectus or the Prospectus (or any amendment or supplement
thereto).
(b) The Agent agrees to indemnify and hold harmless the Company and its
directors and 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 against any and all loss,
liability, claim, damage and expense described in the indemnity contained in
subsection (a) of this Section, as incurred, but only with respect to untrue
statements or omissions, or alleged untrue statements or omissions, made in the
Registration Statement (or any amendments thereto) or any preliminary prospectus
or the Prospectus (or any amendment or supplement thereto) 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 amendment thereto) or
such preliminary prospectus or the Prospectus (or any amendment or supplement
thereto).
(c) Any indemnified party that proposes to assert the right to be
indemnified under this Section 6 will, promptly after receipt of notice of
commencement of any action against such party in respect of which a claim is to
be made against an indemnifying party or parties under this Section 6, notify
each such indemnifying party of the commencement of such action, enclosing a
copy of all papers served, but the omission so to notify such indemnifying party
will not relieve the indemnifying party from (i) any liability that it might
have to any indemnified party otherwise than under this Section 6 and (ii) any
liability that it may have to any indemnified party under the foregoing
provision of this Section 6 unless, and only to the extent that, such omission
results in the forfeiture of substantive rights or defenses by the indemnifying
party. If any such action is brought against any indemnified party and it
notifies the indemnifying party of its commencement, the indemnifying party will
be entitled to participate in and, to the extent that it elects by delivering
written notice to the indemnified party promptly after receiving notice of the
commencement of the action from the indemnified party, jointly
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<PAGE> 20
with any other indemnifying party similarly notified, to assume the defense of
the action, with counsel satisfactory to the indemnified party, and after notice
from the indemnifying party to the indemnified party of its election to assume
the defense, the indemnifying party will not be liable to the indemnified party
for any legal or other expenses except as provided below and except for the
reasonable costs of investigation subsequently incurred by the indemnified party
in connection with the defense. The indemnified party will have the right to
employ its own counsel in any such action, but the fees, expenses and other
charges of such counsel will be at the expense of such indemnified party unless
(1) the employment of counsel by the indemnified party has been authorized in
writing by the indemnifying party, (2) the indemnified party has reasonably
concluded (based on advice of counsel) that there may be legal defenses
available to it or other indemnified parties that are different from or in
addition to those available to the indemnifying party, (3) a conflict or
potential conflict exists (based on advice of counsel to the indemnified party)
between the indemnified party and the indemnifying party (in which case the
indemnifying party will not have the right to direct the defense of such action
on behalf of the indemnified party) or (4) the indemnifying party has not in
fact employed counsel to assume the defense of such action within a reasonable
time after receiving notice of the commencement of the action, in each of which
cases the reasonable fees, disbursements and other charges of counsel will be at
the expense of the indemnifying party or parties. It is understood that the
indemnifying party or parties shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the reasonable fees,
disbursements and other charges of more than one separate firm admitted to
practice in such jurisdiction at any one time for all such indemnified party or
parties. All such fees, disbursements and other charges will be reimbursed by
the indemnifying party promptly as they are incurred. An indemnifying party will
not be liable for any settlement of any action or claim effected without its
written consent (which consent will not be unreasonably withheld).
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in the foregoing
paragraphs of this Section 6 is applicable in accordance with its terms but for
any reason is held to be unavailable from the Company or the Agent, the Company
and the Agent will contribute to the total losses, claims, liabilities, expenses
and damages (including any investigative, legal and other expenses reasonably
incurred in connection with, and any amount paid in settlement of, any action,
suit or proceeding or any claim asserted, but after deducting any contribution
received by the Company from persons other than the Agent, such as persons who
control the Company within the meaning of the Act, officers of the Company who
signed the Registration Statement and directors of the Company, who also may be
liable for contribution) to which the Company and any one or more of the
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<PAGE> 21
Agent may be subject in such proportion as shall be appropriate to reflect the
relative benefits received by the Company on the one hand and the Agent on the
other. The relative benefits received by the Company on the one hand and the
Agent on the other hand shall be deemed to be in the same proportion as the
total net proceeds from the offering (before deducting expenses) received by the
Company bear to the total compensation (before deducting expenses) received by
the Agent from the sale of Stock on behalf of the Company. If, but only if, the
allocation provided by the foregoing sentence is not permitted by applicable
law, the allocation of contribution shall be made in such proportion as is
appropriate to reflect not only the relative benefits referred to in the
foregoing sentence but also the relative fault of the Company, on the one hand,
and the Agent, on the other, with respect to the statements or omission which
resulted in such loss, claim, liability, expense or damage, or action in respect
thereof, as well as any other relevant equitable considerations with respect to
such offering. Such relative fault shall be determined by reference to whether
the 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 the Agent, the intent of the parties and their relative 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
contributions pursuant to this Section 6(d) were to be determined by pro rata
allocation or by any other method of allocation which does not take into account
the equitable considerations referred to herein. The amount paid or payable by
an indemnified party as a result of the loss, claim, liability, expense or
damage, or action in respect thereof, referred to above in this Section 6(d)
shall be deemed to include, for the purpose of this Section 6(d), any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
foregoing provisions of this Section 6(d), the Agent shall not be required to
contribute any amount in excess of the amount by which the total actual sales
price at which Stock sold by the Agent exceeds the amount of any damages that
the Agent has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission and no person found guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
will be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 6(d), any person who
controls a party to this Agreement within the meaning of the Act will have the
same rights to contribution as that party, and each officer of the Company who
signed the Registration Statement will have the same rights to contribution as
the Company, subject in each case to the provisions hereof. Any party entitled
to contribution, promptly after receipt of notice of commencement of any action
against such party in respect of which a claim for contribution may be made
under this Section 6(d), will notify any such party or
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<PAGE> 22
parties from whom contribution may be sought, but the omission so to notify
will not relieve that party or parties from whom contribution may be sought from
any other obligation it or they may have under this Section 6(d). No party will
be liable for contribution with respect to any action or claim settled without
its written consent (which consent will not be unreasonably withheld).
(e) The indemnity and contribution provided by this Section 6 shall not
relieve the Company and the Agent from any liability the Company and the Agent
may otherwise have (including, without limitation, any liability the Agent may
have for a breach of its obligations under Section 3 hereof).
SECTION 7. Representations and Agreements to Survive Delivery. All
representations, warranties and agreements of the Company herein or in
certificates delivered pursuant hereto, and the agreements of the Agent
contained in Section 6 hereof, shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of the Agent or any
controlling persons, or the Company (or any of their officers, directors or
controlling persons), and shall survive delivery of and payment for the Stock.
SECTION 8. Termination.
(a) The Agent shall have the right by giving notice as hereinafter
specified in Section 9 at any time at or prior to any Filing Date, to terminate
this Agreement if (i) any material adverse change, or any development that has
actually occurred and that is reasonably expected to cause material adverse
change, in the business, financial condition or results of operations of the
Company and its subsidiaries has occurred which, in the judgment of such Agent,
materially impairs the investment quality of the Stock, (ii) the Company shall
have failed, refused or been unable, at or prior to the Filing 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, (v) any banking
moratorium shall have been declared by Federal or New York authorities or (vi)
an outbreak or material escalation of major hostilities in which the United
States is involved, a declaration of war by Congress, any other substantial
national or international calamity or any other event or occurrence of a similar
character shall have occurred since the execution of this Agreement that, in the
judgment of the Agent, makes it impractical or inadvisable to proceed with the
completion of the sale of and payment for the Stock to be sold by the Agent on
behalf of 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 6
and Section 7 hereof shall remain in full force and effect notwithstanding such
termination. If the Agent elects to terminate this Agreement as
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provided in this Section, the Agent shall provide the required notice as
specified herein.
(b) The Company shall have the right, by giving thirty (30) days prior
written notice as hereinafter specified in Section 9, to terminate this
Agreement in its sole discretion at any time. Any such termination shall be
without liability of any party to any other party except that the provisions of
Section 4(g), Section 6 and Section 7 hereof shall remain in full force and
effect notwithstanding such termination.
(c) The Agent shall have the right, by giving thirty (30) days prior
written notice as hereinafter specified in Section 9, to terminate this
Agreement in its sole discretion at any time. Any such termination shall be
without liability of any party to any other party except that the provisions of
Section 4(g), Section 6 and Section 7 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 8(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 6 and Section
7 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 sale of Stock, such sale shall
settle in accordance with the provisions of the second-to-last paragraph of
Section 3 hereof.
SECTION 9. 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 PaineWebber Incorporated, 1285 Avenue
of the Americas, New York, New York 10019, telecopy no. (212) 713-4205, c/o
Steven P. Fleisig, 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.
SECTION 10. 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 referred to in Section 6 hereof,
and no other person will have any right or obligation hereunder.
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SECTION 11. 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 12. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT
REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS.
SECTION 13. 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. Alternatively, the execution of this Agreement by the
Company and its acceptance by or on behalf of the Agent may be evidenced by an
exchange of telegraphic or other written communications.
Very truly yours,
CAPSTEAD MORTGAGE CORPORATION
By: /s/ ANDREW F. JACOBS
---------------------------------------
Title: Senior Vice President and Treasurer
------------------------------------
ACCEPTED as of the date
first above written
PAINEWEBBER INCORPORATED
By: /s/ HALLE J. BENETT
-----------------------------------
Title: Vice President
-----------------------------
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EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
Amendment No. 1 to Registration Statement No. 333-43169 (Form S-3) to be filed
on or about May 21, 1998 and the related Prospectus of Capstead Mortgage
Corporation for the registration of 5,200,000 shares of common stock and to the
incorporation by reference therein of our reports dated January 21, 1998, with
respect to the consolidated financial statements of Capstead Mortgage
Corporation incorporated by reference in its Annual Report (Form 10-K) for the
year ended December 31, 1997, and the related financial statement schedule
included therein, filed with the Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
----------------------------------------
Ernst & Young LLP
Dallas, Texas
May 21, 1998
