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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: DECEMBER 15, 1999
(Date of Earliest Event Reported)
CAPSTEAD MORTGAGE CORPORATION
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(Exact Name of Registrant as Specified in its Charter)
MARYLAND 1-8896 75-2027937
(State of Incorporation) (Commission File No.) I.R.S. Employer
Identification No.)
8401 NORTH CENTRAL EXPRESSWAY
SUITE 800
DALLAS, TEXAS 75225
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (214) 874-2323
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ITEM 5. OTHER EVENTS
CAPSTEAD MORTGAGE CORPORATION
ANNOUNCES ISSUANCE OF PREFERRED STOCK
TO FORTRESS AND RELATED AGREEMENTS
AND PROPOSED MODIFICATION OF INVESTMENT STRATEGY
Capstead Mortgage Corporation ("Capstead" or the "Company") announced
December 9, 1999 that an affiliate of Fortress Investment Group LLC, a real
estate investment and asset management company ("Fortress"), has made an
aggregate investment of $51,200,000 in the Company through the purchase of
5,378,000 shares of Capstead's newly created $0.56 Cumulative Convertible
Preferred Stock, Series C (the "Series C Preferred Stock") and 5,378,000 shares
of Capstead's newly created $0.40 Cumulative Convertible Preferred Stock, Series
D (the "Series D Preferred Stock") (together, the "Preferred Stock") for $4.76
per share. Each share of the Series C Preferred Stock is convertible into one
share of common stock and has a liquidation preference of $6.89. Each share of
the Series D Preferred Stock is convertible into one share of common stock and
has a liquidation preference of $4.76. This investment by Fortress represents an
ownership interest in Capstead of approximately 16 percent, assuming the
conversion of the Preferred Stock. Further assuming the successful completion of
a 10,000,000 share tender offer, also announced on December 9, 1999, this
investment will represent an ownership interest in Capstead of approximately 19
percent.
In connection with this investment by Fortress, Capstead's Board of
Directors (i) approved an immediate increase in the number of Directors serving
on Capstead's Board from six to eight and appointed Mr. Wesley R. Edens, Chief
Executive Officer and Chairman of Fortress, and Mr. Robert I. Kauffman,
President of Fortress, to fill the newly created vacancies on the Board and (ii)
authorized the Company to enter into a Supplemental Agreement to the Stock
Purchase Agreement (the "Supplemental Agreement") with Fortress. The
Supplemental Agreement provides that upon Capstead's stockholders' ratification
of certain matters contained in the Supplemental Agreement at a special meeting
of stockholders to be held by April 30, 2000, (i) the Board of Directors will be
reconstituted to consist of four directors appointed by Fortress and three
directors appointed by Capstead, with Mr. Edens serving as Chairman and Chief
Executive Officer and Mr. Ronn K. Lytle serving as Vice Chairman and (ii)
Fortress will acquire 5,000,000 shares of Capstead common stock by means of
either open-market purchases, the conversion of some portion of the Preferred
Stocks, or some combination thereof, within six months of the special meeting.
If this requirement to acquire the common shares is fulfilled through
open-market purchases, then the total investment by Fortress will represent an
ownership interest in Capstead of approximately 23 percent before and 27 percent
assuming, the successful completion of the 10,000,000 share tender offer,
calculated assuming conversion of the Preferred Stock.
Capstead will hold the above mentioned special meeting of stockholders
for the purpose of voting on (i) ratification of certain matters contained in
the Supplemental Agreement, which will have the effect of approving a new Board
of Directors for Capstead and (ii) approval of a 1-for-2 reverse stock split of
the Company's common stock. A detailed description of the proposals will be
provided in a proxy statement expected to be distributed to stockholders by
mid-February 2000.
Capstead is currently considering modifying its investment strategy to
replace a portion of its existing mortgage investments with a diversified
portfolio of credit sensitive commercial and residential mortgage-backed
securities, most of which are expected to be "investment grade" at the time of
purchase as determined by national rating agencies. This proposed strategy is
intended to improve the Company's earnings prospects while providing more
stability during periods of increased interest rate volatility. The sale or
other disposition of some of the Company's mortgage investments in order to
implement this proposed strategy could result in the recognition of a portion of
the losses currently reflected in the Company's balance sheet.
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Fortress is a real estate investment and asset management company
headquartered in New York. Fortress manages approximately $760 million of
private equity and focuses on undervalued and distressed real estate, both
domestic and international.
If Capstead decides to modify its investment strategy by investing in
commercial mortgage-backed securities ("CMBSs"), it may be exposed to additional
risks and uncertainties. CMBSs are generally viewed as exposing an investor to
greater risk of loss than residential mortgage-backed securities since such
securities are typically secured by larger loans to fewer obligors than
residential mortgage-backed securities. Further, the repayment of loans secured
by income producing properties is typically dependent upon the successful
operation of the related real estate project. If the cash flow from this project
is reduced (for example, if leases are not obtained or renewed), the borrower's
ability to repay the loan may be impaired.
Commercial property values and net operating income are subject to
volatility, and net operating income may be sufficient or insufficient to cover
debt service on the related mortgage loan at any given time. The repayment of
loans secured by income-producing properties is typically dependent upon the
successful operation of the related real estate project and the ability of the
applicable property to produce net operating income rather than upon the
liquidation value of the underlying real estate. Even when the current net
operating income is sufficient to cover debt service, there can be no assurance
that this will continue to be the case in the future.
Additionally, some commercial mortgaged properties may not readily be
convertible to alternative uses if such mortgaged properties were to become
unprofitable due to competition, age of the improvements, decreased demand,
regulatory changes or other factors. The conversion of commercial properties to
alternate uses generally requires substantial capital expenditures, which may or
may not be available.
The availability of credit for borrowers to refinance commercial
mortgage loans or sell mortgaged properties will be significantly dependent upon
economic conditions in the markets where such commercial mortgaged properties
are located, as well as the willingness and ability of lenders to make such
loans. The availability of funds in the credit market fluctuates and there can
be no assurance that the availability of such funds will increase above, or will
not contract below, current levels. In addition the availability of assets
similar to the commercial mortgaged properties, and the competition for
available credit, may affect the ability of potential purchasers to obtain
financing for the acquisition of the commercial mortgaged properties.
There can be no assurance as to what extent, if any, this proposed
strategy to invest in CMBSs will be implemented and, if implemented, whether or
not it will be successful in meeting Capstead's goals. In addition, there can be
no assurance that Capstead will be able to successfully assess and monitor these
risks.
Capstead Mortgage Corporation, a mortgage investment firm with assets
of over $9 billion, earns income from investing in mortgage assets and other
investment strategies.
Note: This document contains "forward-looking statements" (within the
meaning of the Private Securities Litigation Reform Act of 1995) that inherently
involve risks and uncertainties. The Company's actual results and liquidity can
differ materially from those anticipated in these forward-looking statements
because of changes in the level and composition of the Company's investments and
unforeseen factors. As discussed in the Company's filings with the Securities
and Exchange Commission and this document, these factors may include, but are
not limited to, changes in general economic conditions, the availability of
suitable investments, fluctuations in and market expectations for fluctuations
in interest rates and levels of mortgage prepayments, deterioration in credit
quality and ratings, the effectiveness of risk management strategies, the impact
of leverage, liquidity of secondary markets and credit markets, year 2000
compliance failures, increases in costs and other general competitive factors.
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EXHIBITS:
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
FINANCIAL STATEMENTS: None
EXHIBIT
NUMBER
3.1(c) Articles Supplementary $0.56 Cumulative Convertible Preferred Stock,
Series C, of Capstead Mortgage Corporation.
3.1(d) Articles Supplementary $0.40 Cumulative Convertible Preferred Stock,
Series D, of Capstead Mortgage Corporation.
10.34 Series C and Series D Convertible Preferred Stock Asset Purchase
Agreement dated as of December 9, 1999 by and among Capstead Mortgage
Corporation and Fortress Investment Corp.
10.35 Supplemental Agreement dated as of December 9, 1999 by and among
Capstead Mortgage Corporation and Fortress Investment Corp.
10.36 Registration Rights Agreement dated as of December 9, 1999 by and
among Capstead Mortgage Corporation and Fortress Investment Corp.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
CAPSTEAD MORTGAGE CORPORATION
December 15, 1999 By: s/s Phillip A. Reinsch
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Phillip A. Reinsch - Senior Vice
President - Control
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INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
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3.1(c) Articles Supplementary $0.56 Cumulative Convertible Preferred Stock,
Series C, of Capstead Mortgage Corporation.
3.1(d) Articles Supplementary $0.40 Cumulative Convertible Preferred Stock,
Series D, of Capstead Mortgage Corporation.
10.34 Series C and Series D Convertible Preferred Stock Asset Purchase
Agreement dated as of December 9, 1999 by and among Capstead Mortgage
Corporation and Fortress Investment Corp.
10.35 Supplemental Agreement dated as of December 9, 1999 by and among
Capstead Mortgage Corporation and Fortress Investment Corp.
10.36 Registration Rights Agreement dated as of December 9, 1999 by and
among Capstead Mortgage Corporation and Fortress Investment Corp.
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EXHIBIT 3.1(c)
ARTICLES SUPPLEMENTARY
$0.56 CUMULATIVE CONVERTIBLE
PREFERRED STOCK, SERIES C
OF CAPSTEAD MORTGAGE CORPORATION
CAPSTEAD MORTGAGE CORPORATION, a Maryland corporation, having its
principal office in Baltimore City, Maryland (hereinafter called the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
Pursuant to authority conferred upon the Board of Directors by the
charter, as amended, of the Corporation (the "Charter"), the Board of Directors
on November 30, 1999 adopted a resolution, creating and authorizing the
issuance of a series of 5,378,000 shares of $0.56 Cumulative Convertible
Preferred Stock, Series C, and that the powers, designations, preferences and
relative, participating, optional or other special rights, and the
qualifications, limitations and restrictions thereof, of the shares of such
series are as follows:
1. Designation and Number of Shares. Five million three hundred
seventy-eight thousand (5,378,000) shares of Preferred Stock of the
Corporation, par value $.10 per share, are hereby designated as the "$0.56
Cumulative Convertible Preferred Stock, Series C" (hereinafter called the
"Series C Preferred Stock").
2. Dividends. Holders of shares of Series C Preferred Stock shall be
entitled to receive, when, as and if declared by the Board of Directors, out of
funds of the Corporation legally available for payment thereof, cumulative
preferential cash dividends at the annual rate of fifty-six cents ($0.56) per
share of Series C Preferred Stock (the "Preference Dividend"), payable in equal
quarterly installments of fourteen cents $0.14 per share of Series C Preferred
Stock in arrears on the last business day of each calendar quarter (each, a
"Dividend Payment Date"), to holders of record as they appear on the register
for the Series C Preferred Stock of the Corporation on such record dates, not
more than 10 days preceding the payment dates thereof (each, a "Preferred
Record Date"), as may be fixed by the Board of Directors. The amount of any
distribution payable for any distribution period greater or less than a full
calendar quarter shall be prorated and computed on the basis of a 360-day year
of twelve 30-day months. The first Preference Dividend payable per share of
Series C Preferred Stock (the "Initial Dividend") payable on December 31, 1999
shall be an amount calculated as $0.00156 times the number of days having
elapsed from and including the date of issuance of the Series C Preferred Stock
through and including December 30, 1999. Distributions shall accumulate from
the date of original issuance whether or not earned or declared and whether or
not there shall be funds legally available for the payment thereof.
So long as any Series C Preferred Stock shall remain outstanding, no dividend
shall be declared or paid upon or set apart for payment for the Common Stock of
the Corporation, par value $.01 per share (the "Common Stock"), or any other
class or series of stock of the Corporation ranking junior to the Series C
Preferred Stock in respect of dividends ("Junior Stock"), nor may any Common
Stock or any other Junior Stock be redeemed, purchased or otherwise acquired
for any consideration (or any payment made to or available for a sinking fund
for the redemption of any shares of such stock), unless in each instance full
Preference Dividends on all outstanding shares of Series C Preferred Stock for
all past dividend periods required to be paid shall have been paid at the rate
fixed therefor and the then current quarterly dividend shall have been paid or
declared and sufficient funds set aside
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for payment thereof. No dividends shall be declared on any other series or
class or classes of stock ranking on a parity with the Series C Preferred Stock
as to dividends (including, without limitation, outstanding shares of the
Corporation's $1.60 Cumulative Preferred Stock, Series A, the Corporation's
$1.26 Cumulative Convertible Preferred Stock, Series B and the Corporation's
$0.40 Cumulative Convertible Preferred Stock, Series D (collectively, the "Pari
Passu Stock")) in respect of any dividend period thereof unless there shall
likewise be or have been declared and sufficient funds set aside for payment
thereof on all shares of Series C Preferred Stock at the time outstanding
dividends for all quarterly periods coinciding with or ending before the end of
such other period, ratably in proportion to the respective annual dividend
rates per annum fixed therefor. Accumulated and unpaid Preference Dividends
required to be paid on any shares of Series C Preferred Stock shall not bear
interest. As used in these Articles Supplementary, "business day" shall mean a
day that is neither a Saturday nor a Sunday nor a day on which the New York
Stock Exchange is closed.
3. Liquidation. The shares of Series C Preferred Stock shall rank
prior to the shares of Common Stock and any other class of stock of the
Corporation ranking junior to the Series C Preferred Stock upon liquidation, so
that in the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the holders of the Series C
Preferred Stock shall be entitled to receive out of the assets of the
Corporation available for distribution to its stockholders, whether from
capital, surplus or earnings, before any distribution is made to holders of
shares of Common Stock or any other such Junior Stock, an amount equal to $6.89
per share (the "Liquidation Preference") of Series C Preferred Stock plus an
amount equal to the Preference Dividends (whether or not declared) accumulated
and unpaid on the shares of Series C Preferred Stock to the date of final
distribution. If upon any liquidation, dissolution or winding up of the
Corporation, the assets of the Corporation or proceeds thereof, distributable
among the holders of shares of Series C Preferred Stock and holders of any
other class or series of stock of the Corporation ranking on a parity with
shares of Series C Preferred Stock as to payments upon liquidation (including,
without limitation, the Pari Passu Stock), shall be insufficient to pay in full
the respective preferential amounts of shares of Series C Preferred Stock and
any other such class or series, then such assets, or the proceeds thereof,
shall be distributed among such holders ratably in accordance with the
respective amounts which would be payable on such shares if all amounts thereon
were paid in full. For the purposes hereof, neither a consolidation or merger
of the Corporation with or into any other entity, nor a transfer of all or any
part of the Corporation's assets for cash, property or securities shall be
considered a liquidation, dissolution or winding up of the Corporation.
4. Voting Rights. Without limiting the rights of the holders of the
Series C Preferred Stock to vote separately as a class as provided in Section 5
below, the holders of shares of Series C Preferred Stock shall be entitled to
vote, together as a single group with the holders of the Common Stock and the
holders of any other class or series of stock entitled to vote together with
the holders of the Common Stock, on all matters as to which the holders of the
Common Stock vote. When the Series C Preferred Stock votes together with the
Common Stock and any other such class or series of stock, each share of Series
C Preferred Stock shall entitle its holders to one vote for each share of
Common Stock into which such share of Series C Preferred Stock is convertible
immediately prior to the time of such vote.
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5. Limitations on Certain Actions. (A) The Corporation shall not,
without the affirmative vote of the holders of a majority of the shares of
Series C Preferred Stock then outstanding, given in person or by proxy at a
meeting called for the purpose of such vote at which the holders of Series C
Preferred Stock shall vote separately as a class, directly or indirectly:
(i) create any class or classes of stock ranking
prior to Series C Preferred Stock either as to dividends or
as to amounts distributable upon liquidation or increase the
authorized number of shares of any class or classes of stock
ranking prior to Series C Preferred Stock either as to
dividends or as to amounts distributable upon liquidation;
(ii) authorize any reclassification of Series C
Preferred Stock;
(iii) amend, alter or repeal any of the provisions
of the Charter of the Corporation (including the provisions
of this Section 5) so as to affect adversely the preferences,
special rights or voting powers of the Series C Preferred
Stock; or
(iv) merge or consolidate with or into any other
entity unless after such transaction the holders of the
Series C Preferred Stock either (A) continue to hold such
Series C Preferred Stock without any adverse change thereto
and there is no class of stock outstanding ranking prior to
the Series C Preferred Stock with respect to payment of
dividends or upon liquidation or (B) hold a substantially
identical security and there is no class of stock outstanding
ranking prior to such security with respect to payment of
dividends or upon liquidation.
(B) Except as otherwise provided herein or otherwise required by law,
no consent of the holders of Series C Preferred Stock shall be
required for (a) the creation of any indebtedness of any kind of the
Corporation, (b) the creation, or increase or decrease in the amount,
of any class or series of stock of the Corporation ranking on a parity
with the Series C Preferred Stock as to dividends or as to amounts
distributable upon liquidation, or any other class or series of stock
of the Corporation not ranking prior to the Series C Preferred Stock
as to dividends or as to amounts distributable upon liquidation, or
(c) any increase or decrease in the amount of authorized Common Stock
or any increase, decrease or change in the par value thereof.
6. Redemption. Shares of Series C Preferred Stock will be redeemable
at the option of the Corporation by resolution of its Board of Directors,
passed by at least a majority of the members of the Board, at any time after
December 9, 2004, in whole or in part, for cash in an amount per share so
redeemed equal to $6.56 per share plus all Preference Dividends on such shares
(whether or not earned or declared) accumulated and unpaid to the date of such
redemption (the "Redemption Price"). If less than all shares of Series C
Preferred Stock are to be redeemed, (i) all arrearages in Preference Dividends
on all outstanding shares of Series C Preferred Stock must be paid in full
prior to any such partial redemption and (ii) the shares of such series to be
redeemed shall be determined by lot or in such other equitable manner as the
Board of Directors may determine.
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The Corporation shall mail to each record holder of the Series C
Preferred Stock notice of any redemption not less than 30 nor more than 60 days
prior to the date fixed for such Redemption (the "Redemption Date"). Such
notice shall specify the Redemption Date, the place or places where
certificates for shares of Series C Preferred Stock are to be surrendered, the
serial number or numbers of the certificates for shares to be redeemed (if less
than all shares of Series C Preferred Stock are to be redeemed), the Redemption
Price, that shares of Series C Preferred Stock may be convertible into Common
Stock at any time prior to the close of business on the fifth business day
preceding the Redemption Date, and that dividends on Series C Preferred Stock
to be redeemed on the Redemption Date shall cease to accrue on the Redemption
Date. Upon surrender of Series C Preferred Stock in accordance with said notice
(properly endorsed or assigned for transfer if the Corporation shall so require
and the notice shall so state), such Series C Preferred Stock shall be redeemed
by the Corporation at the Redemption Price and in the manner as aforesaid. The
Corporation shall not be required to register a transfer of any shares of
Series C Preferred Stock that have been redeemed after the Redemption Date in
respect thereof.
If, at any time after the giving of notice of redemption but before
the Redemption Date specified therein, the Corporation shall deposit with a
bank or trust company in the United States, having a capital surplus of at
least $50,000,000, in trust to be applied to the redemption of the shares of
Series C Preferred Stock called for redemption the funds necessary for such
redemption, then from and after the date of such deposit all rights of the
holders of the shares of Series C Preferred Stock so called for redemption
shall cease and terminate, excepting only (i) the right to receive the
Redemption Price therefor, but without interest, and (ii) the right to exercise
on or before the fifth business day preceding the Redemption Date privileges of
conversion set forth in Section 7, and such shares shall not be deemed to be
outstanding. Any funds so deposited which shall not be required for such
redemption because of the exercise of any such right of conversion subsequent
to the date of such deposit shall be returned to the Corporation. In case the
holders of shares of Series C Preferred Stock that shall have been called for
redemption shall not, within five years after the date fixed for redemption,
claim the amount deposited with respect to the redemption thereof, any such
bank or trust company shall, upon demand, pay over to the Corporation such
unclaimed amounts and thereupon such bank or trust company shall be relieved of
all responsibility in respect thereof to such holder and such holder shall look
only to the Corporation for the payment thereof. Any interest accrued on funds
so deposited shall be paid to the Corporation from time to time.
7. Conversion. The holders of shares of Series C Preferred Stock shall
have conversion rights as follows:
(A) The shares of Series C Preferred Stock shall be
convertible, at the option of the respective holders thereof, at any
time into fully paid and non-assessable shares of Common Stock of the
Corporation, at the conversion rate, determined as hereinafter
provided, in effect at the time of conversion. In case of any call for
redemption of any shares of Series C Preferred Stock, such right of
conversion shall terminate, as to any shares designated for
redemption, at the close of business on the fifth business day
preceding the Redemption Date unless default is made in the payment of
the Redemption Price.
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(B) Before any holder of Series C Preferred Stock shall be
entitled to convert the same into shares of Common Stock, such holder
shall surrender (i) the certificate or certificates therefor, duly
endorsed or accompanied by proper instruments of transfer, and (ii) if
such surrender is made after a Preferred Record Date and on or before
the record date for the payment of quarterly dividends on the Common
Stock for the quarter in which such Preferred Record Date (or Dates)
falls (or fall) (any such Preferred Record Date, an "Intervening
Preferred Date"), a cashier's check or other guaranteed funds in an
amount equal to the aggregate amount of Preference Dividends declared
or received on the shares of Series C Preferred Stock on the Dividend
Payment Date or Dates to which such Intervening Preferred Date or
Dates related, at the office of the corporation, and shall give
written notice to the Corporation at such office that such holder
elects to convert the same. The Corporation, as soon as practicable
thereafter, shall issue and deliver to such holder, certificates for
the number of full shares of Common Stock to which such holder shall
be entitled as aforesaid, together with cash in lieu of any fraction
of a share as hereinafter provided. Such conversion shall be deemed to
have been made as of the date of such surrender of the certificate or
certificates representing the shares of Series C Preferred Stock to be
converted and, if applicable, the cashier's check or other guaranteed
funds, and the person or persons entitled to receive the shares of
Common Stock issuable upon such conversion shall be treated for all
purposes as the record holder or holders of such shares of Common
Stock on said date.
(C) Notwithstanding any of the foregoing, all shares of
Series C Preferred Stock outstanding on December 31, 2009 (the
"Conversion Date") shall automatically convert into fully paid and
non-assessable shares of Common Stock, at the conversion rate,
determined as hereinafter provided, in effect at the time of such
conversion; provided, however, that if funds are not legally available
for the payment (in whole or in part) of any accrued but unpaid
dividends as of the Conversion Date, the amount of such dividends
which cannot be legally paid by the Corporation as of the Conversion
Date ("Unpaid Dividends") shall be payable in shares of Common Stock.
The number of shares of Common Stock to be issued in payment of any
Unpaid Dividends on each share of Series C Preferred Stock outstanding
as of the Conversion Date shall be determined by dividing the Unpaid
Dividends payable on each outstanding share of Series C Preferred
Stock by the Fair Market Value of a share of Common Stock as of the
Conversion Date. For purposes of this Section 7(C), "Fair Market
Value" shall mean the average of the daily closing prices of the
Common Stock for the 30 consecutive business days commencing 45
business days prior to the Conversion Date. The Closing price per
share of Common Stock for each day shall be the last reported sale
price regular way, or, in case no such reported sale takes place on
such day, the average of the reported closing bid and asked prices
regular way in either case on the New York Stock Exchange, or, if the
Common Stock is not listed or admitted to business on such Exchange,
on the principal national securities exchange on which the Common
Stock is listed or admitted to business, or if not listed or admitted
to business on any national securities exchange, the average of the
closing bid and asked prices as furnished by the National Quotation
Bureau, Incorporated or similar organization if the National Quotation
Bureau, Incorporated is no longer reporting such information. The
aggregate number of shares of
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Common Stock to be issued to each holder of Series C Preferred Stock
shall be determined and any fractional shares issuable to such holder
after such aggregation shall be eliminated.
(D) The conversion rate shall be one (1) share of Common
Stock for each share of Series C Preferred Stock converted, such rate
being subject to adjustment from time to time as follows:
(i) If the Corporation shall at any time issue
additional shares of Common Stock as a dividend upon any
outstanding stock of the Corporation other than the Series C
Preferred Stock (which stock is convertible into Common
Stock) or subdivide the outstanding shares of Common Stock,
or combine the outstanding shares of Common Stock, the
conversion rate in effect immediately prior thereto shall be
adjusted so that each share of Series C Preferred Stock shall
thereafter be convertible into the total number of shares of
Common Stock which the holder of a share of Series C
Preferred Stock would have held immediately after the
happening of any of the aforesaid events had such share been
converted immediately prior to the happening of such event.
Such adjustment shall become effective immediately after the
opening of business on the record date for the determination
of stockholders entitled to such dividend, or on the
effective date of such subdivision or combination, as the
case may be.
(ii) If the Corporation shall at any time issue
rights or warrants to all holders of its outstanding Common
Stock entitling them to subscribe for or purchase shares of
Common Stock at a price per share less than the current
market price per share of the Common Stock on the record date
mentioned below, the conversion rate theretofore in effect
immediately prior to such record date shall be adjusted by
multiplying such conversion rate by a fraction, of which the
numerator shall be the number of shares of Common Stock
outstanding on the record date referred to below plus the
number of additional shares of Common Stock offered for
subscription or purchase, and of which the denominator shall
be the number of shares of Common Stock outstanding on such
record date plus the number of shares which the aggregate
offering price of the total number of shares of Common Stock
so offered would purchase at such current market price, such
adjustment to become effective immediately after the opening
of business on the record date for the determination of
stockholders entitled to receive such rights or warrants. For
the purpose of any computation under this subsection (ii) or
subsection (iii) below, the current market price per share of
Common Stock at any record date shall be deemed to be the
average of the daily closing prices for the 30 consecutive
business days commencing 45 business days prior to the day in
question. The closing price per share of Common Stock for
each day shall be the last reported sale price regular way,
or, in case no such reported sale takes place on such day,
the average of the reported closing bid and asked prices
regular way in either case on the New York Stock Exchange,
or, if the Common Stock is not listed or admitted to business
on such Exchange, on the principal national securities
exchange on which the Common Stock
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is listed or admitted to business, or if not listed or
admitted to business on any national securities exchange, the
average of the closing bid and asked prices as furnished by
the National Quotation Bureau, Incorporated or similar
organization if the National Quotation Bureau, Incorporated
is no longer reporting such information.
(iii) If the Corporation distributes to holders of
its Common Stock evidences of indebtedness or securities or
cash or other assets (excluding regular quarterly cash
dividends or dividends payable in shares of Common Stock),
the conversion rate in effect immediately prior to the record
date mentioned below shall be adjusted by multiplying such
conversion rate by a fraction, of which the numerator shall
be the current market price per share of Common Stock on such
record date and of which the denominator shall be such
current market price per share of the Common Stock, less the
cash or the then fair market value (as determined by the
Board of Directors, whose determination shall be conclusive)
of the portion of the assets or securities or evidences of
indebtedness so distributed applicable to one share of Common
Stock, such adjustment to become effective immediately on the
record date for the determination of stockholders entitled to
receive such distribution. The reclassification (including
any reclassification upon a merger in which the Corporation
is the continuing corporation) of Common Stock into
securities which include both Common Stock and other
securities shall be deemed to involve (i) a distribution of
such securities other than Common Stock to all holders of
Common Stock (and the effective date of such reclassification
shall be deemed to be "the record date for the determination"
above), and (ii) a subdivision or combination, as the case
may be, of the number of shares of Common Stock outstanding
immediately prior to such reclassification into the number of
shares of Common Stock outstanding immediately thereafter.
(iv) In the event of a declaration of a dividend by
the Corporation without the fixing of a record date for the
determination of stockholders entitled thereto, the first
business day during which the stock transfer books of the
Corporation shall be closed for the purpose of such
determination shall be deemed to be the record date.
(E) No fractional shares of Common Stock shall be issued upon
the conversion of shares of Series C Preferred Stock. If any
fractional interest in a share of Common Stock would, except for the
provisions of this Section 7(E), be deliverable upon the conversion of
any shares of Series C Preferred Stock, the Corporation, in lieu of
delivering a fractional share therefor, shall make a payment to the
holder of such surrendered share of Series C Preferred Stock of an
amount in cash equal (computed to the nearest cent) to such fraction
multiplied by the closing price per share of Common Stock (as such
term is defined in the final sentence of Section 7(D)(ii)) on the day
of conversion.
(F) Whenever the conversion rate is adjusted, as herein
provided, the Corporation shall forthwith deliver to each record
holder of the Series C Preferred Stock a statement signed by the
President or Vice President of the Corporation and by its Treasurer or
an
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<PAGE> 8
Assistant Treasurer, showing in detail the facts requiring such
adjustment and the conversion rate after such adjustment.
(G) In case of any capital reorganization or any
reclassification of the Common Stock or in case of a consolidation,
merger or statutory share exchange of the Corporation with or into
another corporation or the conveyance of all or substantially all of
the assets of the Corporation to another corporation, each share of
Series C Preferred Stock shall thereafter be convertible into the
number of shares of stock or other securities or property (including
cash) to which a holder of the number of shares of Common Stock
deliverable upon conversion of such shares of Series C Preferred Stock
would have been entitled upon such reorganization, reclassification,
consolidation, merger or conveyance; and, in any such case,
appropriate adjustment (as determined by the Board of Directors) shall
be made in the application of the provisions herein set forth with
respect to the rights and interests thereafter of the holders of the
shares of Series C Preferred Stock to the end that the provisions set
forth herein (including provisions with respect to changes in and
other adjustments of the conversion rate) shall thereafter be
applicable, as nearly as reasonably may be, in relation to any shares
of stock or other property thereafter deliverable upon the conversion
of the shares of Series C Preferred Stock.
(H) In the event that:
(i) the Corporation shall take a record of the
holders of shares of its Common Stock for the purpose of
entitling them to receive a dividend, or any other
distribution, other than regular quarterly cash dividends; or
(ii) the Corporation shall take a record of the
holders of shares of its Common Stock for the purpose of
entitling them to subscribe for or purchase any shares of
stock of any class or to receive any other rights or
warrants; or
(iii) there shall be any capital reorganization of
the Corporation, reclassification of the Common Stock (other
than a subdivision or combination thereof), consolidation or
merger of the Corporation with or into another corporation or
the conveyance of all or substantially all of the assets of
the Corporation to another corporation; or
(iv) there shall be any voluntary or involuntary
dissolution, liquidation or winding up of the Corporation;
then, and in any such case, the Corporation shall cause to be given to
each record holder of Series C Preferred Stock, at least fifteen (15)
days prior to the date hereinafter specified, or if notice is given to
holders of Common Stock, no later than the date such notice is given,
a notice stating the date on which (x) a record is to be taken for the
purpose of such dividend, distribution or rights, or (y) such
reclassification, reorganization, consolidation, merger, conveyance,
dissolution, liquidation or winding up is to take place and the date,
if any, that is to be fixed, as of which holders of shares of Common
Stock of record shall be entitled to
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<PAGE> 9
exchange their shares of Common Stock for securities or other property
deliverable upon such reclassification, reorganization, consolidation,
merger, conveyance, dissolution, liquidation or winding up.
(I) The Corporation shall obtain and keep in force such
permits or other authorizations as may be required by law in order to
enable the Corporation validly to issue and deliver such number of
shares of its Common Stock as shall from time to time be sufficient to
effect the conversion of all shares of Series C Preferred Stock from
time to time outstanding. The Corporation at all times shall reserve
and keep available, out of its authorized but unissued Common Stock,
solely for the purposes of effecting the conversion of the shares of
Series C Preferred Stock, the full number of shares of Common Stock
deliverable upon the conversion of all shares of Series C Preferred
Stock from time to time outstanding.
(J) The Corporation shall pay any and all issue and other
taxes that may be payable in respect of any issue or delivery of
shares of Common Stock on conversion of shares of Series C Preferred
Stock pursuant hereto.
8. Parity With Respect to Dividends and Distribution Upon Liquidation.
The Series C Preferred Stock shall rank on a parity with any other series of
Preferred Stock, including the Pari Passu Stock, not by its terms made junior
or senior to the Series C Preferred Stock, with respect to the payment of
dividends and shall rank on a parity with any other series of Preferred Stock,
including the Pari Passu Stock, not by its terms made junior or senior to the
Series C Preferred Stock, as to distribution of assets in liquidation.
9. Transfer of Series C Preferred Stock. The shares of the Series C
Preferred Stock shall not be transferable, either in whole or in part, unless
such shares have been publicly registered, subject to any agreement between any
holder of the Series C Preferred Stock and the Corporation to the contrary, or
the Corporation receives an opinion (or affirmatively waives its right to
receive such opinion) of transferee's or transferor's counsel stating that such
transfer is exempt from the registration and prospectus delivery requirements
of applicable securities laws.
10. Notice to Holders. Any notice required to be given to any holder
of Series C Preferred Stock shall be mailed, postage prepaid, to such holder at
such holder's address last shown on the records of the Corporation.
IN WITNESS WHEREOF, the undersigned has caused the Articles
Supplementary to be executed by its Executive Vice President - Finance and
witnessed by its Assistant Secretary this 9th day of December, 1999.
CAPSTEAD MORTGAGE CORPORATION
Witness
By: /s/ DAVID BARBOUR By: /s/ ANDREW F. JACOBS
---------------------------------- ----------------------------------
David Barbour, Assistant Secretary Executive Vice President - Finance
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<PAGE> 10
THE UNDERSIGNED, Executive Vice President - Finance of THE
CORPORATION, who executed on behalf of the Corporation Articles Supplementary
of which this Certificate is made a part, hereby acknowledges in the name and
on behalf of said Corporation the foregoing Articles Supplementary to be the
corporate act of said Corporation and hereby certifies that the matters and
facts set forth herein with respect to the authorization and approval therefor
are true in all material respects under the penalties of perjury.
/s/ ANDREW F. JACOBS
----------------------------------------
Executive Vice President - Finance
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<PAGE> 1
EXHIBIT 3.1(d)
ARTICLES SUPPLEMENTARY
$0.40 CUMULATIVE CONVERTIBLE
PREFERRED STOCK, SERIES D
OF CAPSTEAD MORTGAGE CORPORATION
CAPSTEAD MORTGAGE CORPORATION, a Maryland corporation, having its
principal office in Baltimore City, Maryland (hereinafter called the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
Pursuant to authority conferred upon the Board of Directors by the
charter, as amended, of the Corporation (the "Charter"), the Board of Directors
on November 30, 1999 adopted a resolution, creating and authorizing the issuance
of a series of 5,378,000 shares of $0.40 Cumulative Convertible Preferred Stock,
Series D, and that the powers, designations, preferences and relative,
participating, optional or other special rights, and the qualifications,
limitations and restrictions thereof, of the shares of such series are as
follows:
1. Designation and Number of Shares. Five million three hundred
seventy-eight thousand (5,378,000) shares of Preferred Stock of the Corporation,
par value $.10 per share, are hereby designated as the "$0.40 Cumulative
Convertible Preferred Stock, Series D" (hereinafter called the "Series D
Preferred Stock").
2. Dividends. Holders of shares of Series D Preferred Stock shall be
entitled to receive, when, as and if declared by the Board of Directors, out of
funds of the Corporation legally available for payment thereof, cumulative
preferential cash dividends at the annual rate of forty cents ($0.40) per share
of Series D Preferred Stock (the "Preference Dividend"), payable in equal
quarterly installments of ten cents ($0.10) per share of Series D Preferred
Stock in arrears on the last business day of each calendar quarter (each, a
"Dividend Payment Date"), to holders of record as they appear on the register
for the Series D Preferred Stock of the Corporation on such record dates, not
more than 10 days preceding the payment dates thereof (each, a "Preferred Record
Date"), as may be fixed by the Board of Directors. The amount of any
distribution payable for any distribution period greater or less than a full
calendar quarter shall be prorated and computed on the basis of a 360-day year
of twelve 30-day months. The first Preference Dividend payable per share of
Series D Preferred Stock (the "Initial Dividend") payable on December 31, 1999
shall be an amount calculated as $0.00111 times the number of days having
elapsed from and including the date of issuance of the Series D Preferred Stock
through and including December 30, 1999. Distributions shall accumulate from the
date of original issuance whether or not earned or declared and whether or not
there shall be funds legally available for the payment thereof.
So long as any Series D Preferred Stock shall remain outstanding, no dividend
shall be declared or paid upon or set apart for payment for the Common Stock of
the Corporation, par value $.01 per share (the "Common Stock"), or any other
class or series of stock of the Corporation ranking junior to the Series D
<PAGE> 2
Preferred Stock in respect of dividends ("Junior Stock"), nor may any Common
Stock or any other Junior Stock be redeemed, purchased or otherwise acquired for
any consideration (or any payment made to or available for a sinking fund for
the redemption of any shares of such stock), unless in each instance full
Preference Dividends on all outstanding shares of Series D Preferred Stock for
all past dividend periods required to be paid shall have been paid at the rate
fixed therefor and the then current quarterly dividend shall have been paid or
declared and sufficient funds set aside for payment thereof. No dividends shall
be declared on any other series or class or classes of stock ranking on a parity
with the Series D Preferred Stock as to dividends (including, without
limitation, outstanding shares of the Corporation's $1.60 Cumulative Preferred
Stock, Series A, the Corporation's $1.26 Cumulative Convertible Preferred Stock,
Series B and the Corporation's $0.56 Cumulative Convertible Preferred Stock,
Series C (collectively, the "Pari Passu Stock")) in respect of any dividend
period thereof unless there shall likewise be or have been declared and
sufficient funds set aside for payment thereof on all shares of Series D
Preferred Stock at the time outstanding dividends for all quarterly periods
coinciding with or ending before the end of such other period, ratably in
proportion to the respective annual dividend rates per annum fixed therefor.
Accumulated and unpaid Preference Dividends required to be paid on any shares of
Series D Preferred Stock shall not bear interest. As used in these Articles
Supplementary, "business day" shall mean a day that is neither a Saturday nor a
Sunday nor a day on which the New York Stock Exchange is closed.
3. Liquidation. The shares of Series D Preferred Stock shall rank prior
to the shares of Common Stock and any other class of stock of the Corporation
ranking junior to the Series D Preferred Stock upon liquidation, so that in the
event of any liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, the holders of the Series D Preferred Stock shall be
entitled to receive out of the assets of the Corporation available for
distribution to its stockholders, whether from capital, surplus or earnings,
before any distribution is made to holders of shares of Common Stock or any
other such Junior Stock, an amount equal to $4.76 per share (the "Liquidation
Preference") of Series D Preferred Stock plus an amount equal to the Preference
Dividends (whether or not declared) accumulated and unpaid on the shares of
Series D Preferred Stock to the date of final distribution. If upon any
liquidation, dissolution or winding up of the Corporation, the assets of the
Corporation or proceeds thereof, distributable among the holders of shares of
Series D Preferred Stock and holders of any other class or series of stock of
the Corporation ranking on a parity with shares of Series D Preferred Stock as
to payments upon liquidation (including, without limitation, the Pari Passu
Stock), shall be insufficient to pay in full the respective preferential amounts
of shares of Series D Preferred Stock and any other such class or series, then
such assets, or the proceeds thereof, shall be distributed among such holders
ratably in accordance with the respective amounts which would be payable on such
shares if all amounts thereon were paid in full. For the purposes hereof,
neither a consolidation or merger of the Corporation with or into any other
entity, nor a transfer of all or any part of the Corporation's assets for cash,
property or securities shall be considered a liquidation, dissolution or winding
up of the Corporation.
4. Voting Rights. Without limiting the rights of the holders of the
Series D Preferred Stock to vote separately as a class as provided in Section 5
below, the holders of shares of Series D Preferred Stock shall be entitled to
vote, together as a single group with the holders of the Common Stock and the
holders of any other class or series of stock entitled to vote together with the
holders of the Common Stock, on all matters as to which the holders of the
Common Stock vote. When the Series D Preferred Stock votes together with the
Common Stock and any other such class or series of stock, each share of Series D
Preferred Stock shall entitle its holder to one vote for each share of Common
Stock into which such share of Series D Preferred Stock is convertible
immediately prior to the time of such vote.
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<PAGE> 3
5. Limitations on Certain Actions. (A) The Corporation shall not,
without the affirmative vote of the holders of a majority of the shares of
Series D Preferred Stock then outstanding, given in person or by proxy at a
meeting called for the purpose of such vote at which the holders of Series D
Preferred Stock shall vote separately as a class, directly or indirectly:
(i) create any class or classes of stock ranking
prior to Series D Preferred Stock either as to dividends or as
to amounts distributable upon liquidation or increase the
authorized number of shares of any class or classes of stock
ranking prior to Series D Preferred Stock either as to
dividends or as to amounts distributable upon liquidation;
(ii) authorize any reclassification of Series D
Preferred Stock;
(iii) amend, alter or repeal any of the provisions of
the Charter of the Corporation (including the provisions of
this Section 5) so as to affect adversely the preferences,
special rights or voting powers of the Series D Preferred
Stock; or
(iv) merge or consolidate with or into any other
entity unless after such transaction the holders of the Series
D Preferred Stock either (A) continue to hold such Series D
Preferred Stock without any adverse change thereto and there
is no class of stock outstanding ranking prior to the Series D
Preferred Stock with respect to payment of dividends or upon
liquidation or (B) hold a substantially identical security and
there is no class of stock outstanding ranking prior to such
security with respect to payment of dividends or upon
liquidation.
(B) Except as otherwise provided herein or otherwise required by law,
no consent of the holders of Series D Preferred Stock shall be required
for (a) the creation of any indebtedness of any kind of the
Corporation, (b) the creation, or increase or decrease in the amount,
of any class or series of stock of the Corporation ranking on a parity
with the Series D Preferred Stock as to dividends or as to amounts
distributable upon liquidation, or any other class or series of stock
of the Corporation not ranking prior to the Series D Preferred Stock as
to dividends or as to amounts distributable upon liquidation, or (c)
any increase or decrease in the amount of authorized Common Stock or
any increase, decrease or change in the par value thereof.
6. Redemption. Shares of Series D Preferred Stock will be redeemable at
the option of the Corporation by resolution of its Board of Directors, passed by
at least a majority of the members of the Board, at any time after December 9,
2004, in whole or in part, for cash in an amount per share so redeemed equal to
$4.76 per share plus all Preference Dividends on such shares (whether or not
earned or declared) accumulated and unpaid to the date of such redemption (the
"Redemption Price"). If less than all shares of Series D Preferred Stock are to
be redeemed, (i) all arrearages in Preference Dividends on all outstanding
shares of Series D Preferred Stock must be paid in full prior to any such
partial redemption and (ii) the shares of such series to be redeemed shall be
determined by lot or in such other equitable manner as the Board of Directors
may determine.
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<PAGE> 4
The Corporation shall mail to each record holder of the Series D
Preferred Stock notice of any redemption not less than 30 nor more than 60 days
prior to the date fixed for such Redemption (the "Redemption Date"). Such notice
shall specify the Redemption Date, the place or places where certificates for
shares of Series D Preferred Stock are to be surrendered, the serial number or
numbers of the certificates for shares to be redeemed (if less than all shares
of Series D Preferred Stock are to be redeemed), the Redemption Price, that
shares of Series D Preferred Stock may be convertible into Common Stock at any
time prior to the close of business on the fifth business day preceding the
Redemption Date, and that dividends on Series D Preferred Stock to be redeemed
on the Redemption Date shall cease to accrue on the Redemption Date. Upon
surrender of Series D Preferred Stock in accordance with said notice (properly
endorsed or assigned for transfer if the Corporation shall so require and the
notice shall so state), such Series D Preferred Stock shall be redeemed by the
Corporation at the Redemption Price and in the manner as aforesaid. The
Corporation shall not be required to register a transfer of any shares of Series
D Preferred Stock that have been redeemed after the Redemption Date in respect
thereof.
If, at any time after the giving of notice of redemption but before the
Redemption Date specified therein, the Corporation shall deposit with a bank or
trust company in the United States, having a capital surplus of at least
$50,000,000, in trust to be applied to the redemption of the shares of Series D
Preferred Stock called for redemption the funds necessary for such redemption,
then from and after the date of such deposit all rights of the holders of the
shares of Series D Preferred Stock so called for redemption shall cease and
terminate, excepting only (i) the right to receive the Redemption Price
therefor, but without interest, and (ii) the right to exercise on or before the
fifth business day preceding the Redemption Date privileges of conversion set
forth in Section 7, and such shares shall not be deemed to be outstanding. Any
funds so deposited which shall not be required for such redemption because of
the exercise of any such right of conversion subsequent to the date of such
deposit shall be returned to the Corporation. In case the holders of shares of
Series D Preferred Stock that shall have been called for redemption shall not,
within five years after the date fixed for redemption, claim the amount
deposited with respect to the redemption thereof, any such bank or trust company
shall, upon demand, pay over to the Corporation such unclaimed amounts and
thereupon such bank or trust company shall be relieved of all responsibility in
respect thereof to such holder and such holder shall look only to the
Corporation for the payment thereof. Any interest accrued on funds so deposited
shall be paid to the Corporation from time to time.
7. Conversion. The holders of shares of Series D Preferred Stock shall
have conversion rights as follows:
(A) The shares of Series D Preferred Stock shall be
convertible, at the option of the respective holders thereof, at any
time into fully paid and non-assessable shares of Common Stock of the
Corporation, at the conversion rate, determined as hereinafter
provided, in effect at the time of conversion. In case of any call for
redemption of any shares of Series D Preferred Stock, such right of
conversion shall terminate, as to any shares designated for redemption,
at the close of business on the fifth business day preceding the
Redemption Date unless default is made in the payment of the Redemption
Price.
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<PAGE> 5
(B) Before any holder of Series D Preferred Stock shall be
entitled to convert the same into shares of Common Stock, such holder
shall surrender (i) the certificate or certificates therefor, duly
endorsed or accompanied by proper instruments of transfer, and (ii) if
such surrender is made after a Preferred Record Date and on or before
the record date for the payment of quarterly dividends on the Common
Stock for the quarter in which such Preferred Record Date (or Dates)
falls (or fall) (any such Preferred Record Date, an "Intervening
Preferred Date"), a cashier's check or other guaranteed funds in an
amount equal to the aggregate amount of Preference Dividends declared
or received on the shares of Series D Preferred Stock on the Dividend
Payment Date or Dates to which such Intervening Preferred Date or Dates
related, at the office of the corporation, and shall give written
notice to the Corporation at such office that such holder elects to
convert the same. The Corporation, as soon as practicable thereafter,
shall issue and deliver to such holder, certificates for the number of
full shares of Common Stock to which such holder shall be entitled as
aforesaid, together with cash in lieu of any fraction of a share as
hereinafter provided. Such conversion shall be deemed to have been made
as of the date of such surrender of the certificate or certificates
representing the shares of Series D Preferred Stock to be converted
and, if applicable, the cashier's check or other guaranteed funds, and
the person or persons entitled to receive the shares of Common Stock
issuable upon such conversion shall be treated for all purposes as the
record holder or holders of such shares of Common Stock on said date.
(C) Notwithstanding any of the foregoing, all shares of Series
D Preferred Stock outstanding on December 31, 2005 (the "Conversion
Date") shall automatically convert into fully paid and non-assessable
shares of Common Stock, at the conversion rate, determined as
hereinafter provided, in effect at the time of such conversion;
provided, however, that if funds are not legally available for the
payment (in whole or in part) of any accrued but unpaid dividends as of
the Conversion Date, the amount of such dividends which cannot be
legally paid by the Corporation as of the Conversion Date ("Unpaid
Dividends") shall be payable in shares of Common Stock. The number of
shares of Common Stock to be issued in payment of any Unpaid Dividends
on each share of Series D Preferred Stock outstanding as of the
Conversion Date shall be determined by dividing the Unpaid Dividends
payable on each outstanding share of Series D Preferred Stock by the
Fair Market Value of a share of Common Stock as of the Conversion Date.
For purposes of this Section 7(C), "Fair Market Value" shall mean the
average of the daily closing prices of the Common Stock for the 30
consecutive business days commencing 45 business days prior to the
Conversion Date. The Closing price per share of Common Stock for each
day shall be the last reported sale price regular way, or, in case no
such reported sale takes place on such day, the average of the reported
closing bid and asked prices regular way in either case on the New York
Stock Exchange, or, if the Common Stock is not listed or admitted to
business on such Exchange, on the principal national securities
exchange on which the Common Stock is listed or admitted to business,
or if not listed or admitted to business on any national securities
exchange, the average of the closing bid and asked prices as furnished
by the National Quotation Bureau, Incorporated or similar organization
if the National Quotation Bureau, Incorporated is no longer reporting
such information. The aggregate number of shares of
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<PAGE> 6
Common Stock to be issued to each holder of Series D Preferred Stock
shall be determined and any fractional shares issuable to such holder
after such aggregation shall be eliminated.
(D) The conversion rate shall be one (1) share of Common Stock
for each share of Series D Preferred Stock converted, such rate being
subject to adjustment from time to time as follows:
(i) If the Corporation shall at any time issue
additional shares of Common Stock as a dividend upon any
outstanding stock of the Corporation other than the Series D
Preferred Stock (which stock is convertible into Common Stock)
or subdivide the outstanding shares of Common Stock, or
combine the outstanding shares of Common Stock, the conversion
rate in effect immediately prior thereto shall be adjusted so
that each share of Series D Preferred Stock shall thereafter
be convertible into the total number of shares of Common Stock
which the holder of a share of Series D Preferred Stock would
have held immediately after the happening of any of the
aforesaid events had such share been converted immediately
prior to the happening of such event. Such adjustment shall
become effective immediately after the opening of business on
the record date for the determination of stockholders entitled
to such dividend, or on the effective date of such subdivision
or combination, as the case may be.
(ii) If the Corporation shall at any time issue
rights or warrants to all holders of its outstanding Common
Stock entitling them to subscribe for or purchase shares of
Common Stock at a price per share less than the current market
price per share of the Common Stock on the record date
mentioned below, the conversion rate theretofore in effect
immediately prior to such record date shall be adjusted by
multiplying such conversion rate by a fraction, of which the
numerator shall be the number of shares of Common Stock
outstanding on the record date referred to below plus the
number of additional shares of Common Stock offered for
subscription or purchase, and of which the denominator shall
be the number of shares of Common Stock outstanding on such
record date plus the number of shares which the aggregate
offering price of the total number of shares of Common Stock
so offered would purchase at such current market price, such
adjustment to become effective immediately after the opening
of business on the record date for the determination of
stockholders entitled to receive such rights or warrants. For
the purpose of any computation under this subsection (ii) or
subsection (iii) below, the current market price per share of
Common Stock at any record date shall be deemed to be the
average of the daily closing prices for the 30 consecutive
business days commencing 45 business days prior to the day in
question. The closing price per share of Common Stock for each
day shall be the last reported sale price regular way, or, in
case no such reported sale takes place on such day, the
average of the reported closing bid and asked prices regular
way in either case on the New York Stock Exchange, or, if the
Common Stock is not listed or admitted to business on such
Exchange, on the principal national securities exchange on
which the Common Stock is listed or admitted to business, or
if not listed or admitted to business on any
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<PAGE> 7
national securities exchange, the average of the closing bid
and asked prices as furnished by the National Quotation
Bureau, Incorporated or similar organization if the National
Quotation Bureau, Incorporated is no longer reporting such
information.
(iii) If the Corporation distributes to holders of
its Common Stock evidences of indebtedness or securities or
cash or other assets (excluding regular quarterly cash
dividends or dividends payable in shares of Common Stock), the
conversion rate in effect immediately prior to the record date
mentioned below shall be adjusted by multiplying such
conversion rate by a fraction, of which the numerator shall be
the current market price per share of Common Stock on such
record date and of which the denominator shall be such current
market price per share of the Common Stock, less the cash or
the then fair market value (as determined by the Board of
Directors, whose determination shall be conclusive) of the
portion of the assets or securities or evidences of
indebtedness so distributed applicable to one share of Common
Stock, such adjustment to become effective immediately on the
record date for the determination of stockholders entitled to
receive such distribution. The reclassification (including any
reclassification upon a merger in which the Corporation is the
continuing corporation) of Common Stock into securities which
include both Common Stock and other securities shall be deemed
to involve (i) a distribution of such securities other than
Common Stock to all holders of Common Stock (and the effective
date of such reclassification shall be deemed to be "the
record date for the determination" above), and (ii) a
subdivision or combination, as the case may be, of the number
of shares of Common Stock outstanding immediately prior to
such reclassification into the number of shares of Common
Stock outstanding immediately thereafter.
(iv) In the event of a declaration of a dividend by
the Corporation without the fixing of a record date for the
determination of stockholders entitled thereto, the first
business day during which the stock transfer books of the
Corporation shall be closed for the purpose of such
determination shall be deemed to be the record date.
(E) No fractional shares of Common Stock shall be issued upon
the conversion of shares of Series D Preferred Stock. If any fractional
interest in a share of Common Stock would, except for the provisions of
this Section 7(E), be deliverable upon the conversion of any shares of
Series D Preferred Stock, the Corporation, in lieu of delivering a
fractional share therefor, shall make a payment to the holder of such
surrendered share of Series D Preferred Stock of an amount in cash
equal (computed to the nearest cent) to such fraction multiplied by the
closing price per share of Common Stock (as such term is defined in the
final sentence of Section 7(D)(ii)) on the day of conversion.
(F) Whenever the conversion rate is adjusted, as herein
provided, the Corporation shall forthwith deliver to each record holder
of the Series D Preferred Stock a statement signed by the President or
Vice President of the Corporation and by its Treasurer or an Assistant
Treasurer, showing in detail the facts requiring such adjustment and
the conversion rate after such adjustment.
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<PAGE> 8
(G) In case of any capital reorganization or any
reclassification of the Common Stock or in case of a consolidation,
merger or statutory share exchange of the Corporation with or into
another corporation or the conveyance of all or substantially all of
the assets of the Corporation to another corporation, each share of
Series D Preferred Stock shall thereafter be convertible into the
number of shares of stock or other securities or property (including
cash) to which a holder of the number of shares of Common Stock
deliverable upon conversion of such shares of Series D Preferred Stock
would have been entitled upon such reorganization, reclassification,
consolidation, merger or conveyance; and, in any such case, appropriate
adjustment (as determined by the Board of Directors) shall be made in
the application of the provisions herein set forth with respect to the
rights and interests thereafter of the holders of the shares of Series
D Preferred Stock to the end that the provisions set forth herein
(including provisions with respect to changes in and other adjustments
of the conversion rate) shall thereafter be applicable, as nearly as
reasonably may be, in relation to any shares of stock or other property
thereafter deliverable upon the conversion of the shares of Series D
Preferred Stock.
(H) In the event that:
(i) the Corporation shall take a record of the
holders of shares of its Common Stock for the purpose of
entitling them to receive a dividend, or any other
distribution, other than regular quarterly cash dividends; or
(ii) the Corporation shall take a record of the
holders of shares of its Common Stock for the purpose of
entitling them to subscribe for or purchase any shares of
stock of any class or to receive any other rights or warrants;
or
(iii) there shall be any capital reorganization of
the Corporation, reclassification of the Common Stock (other
than a subdivision or combination thereof), consolidation or
merger of the Corporation with or into another corporation or
the conveyance of all or substantially all of the assets of
the Corporation to another corporation; or
(iv) there shall be any voluntary or involuntary
dissolution, liquidation or winding up of the Corporation;
then, and in any such case, the Corporation shall cause to be given to
each record holder of Series D Preferred Stock, at least fifteen (15)
days prior to the date hereinafter specified, or if notice is given to
holders of Common Stock, no later than the date such notice is given, a
notice stating the date on which (x) a record is to be taken for the
purpose of such dividend, distribution or rights, or (y) such
reclassification, reorganization, consolidation, merger, conveyance,
dissolution, liquidation or winding up is to take place and the date,
if any, that is to be fixed, as of which holders of shares of Common
Stock of record shall be entitled to exchange their shares of Common
Stock for securities or other property deliverable upon
-8-
<PAGE> 9
such reclassification, reorganization, consolidation, merger,
conveyance, dissolution, liquidation or winding up.
(I) The Corporation shall obtain and keep in force such
permits or other authorizations as may be required by law in order to
enable the Corporation validly to issue and deliver such number of
shares of its Common Stock as shall from time to time be sufficient to
effect the conversion of all shares of Series D Preferred Stock from
time to time outstanding. The Corporation at all times shall reserve
and keep available, out of its authorized but unissued Common Stock,
solely for the purposes of effecting the conversion of the shares of
Series D Preferred Stock, the full number of shares of Common Stock
deliverable upon the conversion of all shares of Series D Preferred
Stock from time to time outstanding.
(J) The Corporation shall pay any and all issue and other
taxes that may be payable in respect of any issue or delivery of shares
of Common Stock on conversion of shares of Series D Preferred Stock
pursuant hereto.
8. Parity With Respect to Dividends and Distribution Upon Liquidation.
The Series D Preferred Stock shall rank on a parity with any other series of
Preferred Stock, including the Pari Passu Stock, not by its terms made junior or
senior to the Series D Preferred Stock, with respect to the payment of dividends
and shall rank on a parity with any other series of Preferred Stock, including
the Pari Passu Stock, not by its terms made junior or senior to the Series D
Preferred Stock, as to distribution of assets in liquidation.
9. Transfer of Series D Preferred Stock. The shares of the Series D
Preferred Stock shall not be transferable, either in whole or in part, unless
such shares have been publicly registered, subject to any agreement between any
holder of the Series D Preferred Stock and the Corporation to the contrary, or
the Corporation receives an opinion (or affirmatively waives its right to
receive such opinion) of transferee's or transferor's counsel stating that such
transfer is exempt from the registration and prospectus delivery requirements of
applicable securities laws.
10. Notice to Holders. Any notice required to be given to any holder of
Series D Preferred Stock shall be mailed, postage prepaid, to such holder at
such holder's address last shown on the records of the Corporation.
IN WITNESS WHEREOF, the undersigned has caused the Articles
Supplementary to be executed by its Executive Vice President - Finance and
witnessed by its Assistant Secretary this 9th day of December, 1999.
CAPSTEAD MORTGAGE CORPORATION
Witness
By: /s/ DAVID S. BARBOUR By: /s/ ANDREW F. JACOBS
-------------------------------------- ----------------------------------
David S. Barbour, Assistant Secretary Executive Vice President - Finance
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<PAGE> 10
THE UNDERSIGNED, Executive Vice President - Finance of THE CORPORATION,
who executed on behalf of the Corporation Articles Supplementary of which this
Certificate is made a part, hereby acknowledges in the name and on behalf of
said Corporation the foregoing Articles Supplementary to be the corporate act of
said Corporation and hereby certifies that the matters and facts set forth
herein with respect to the authorization and approval therefor are true in all
material respects under the penalties of perjury.
/s/ ANDREW F. JACOBS
-----------------------------------
Executive Vice President - Finance
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<PAGE> 1
EXHIBIT 10.34
SERIES C AND SERIES D CONVERTIBLE PREFERRED
STOCK PURCHASE AGREEMENT
BY AND AMONG
CAPSTEAD MORTGAGE CORPORATION,
AND
FORTRESS INVESTMENT CORP.
DATED AS OF DECEMBER 9, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
INTRODUCTORY STATEMENTS.......................................................1
ARTICLE I
THE STOCK PURCHASE.......................................................1
SECTION 1.01 Purchase and Sale of Series C Preferred Shares...1
SECTION 1.02 Purchase and Sale of Series D Preferred Shares...2
SECTION 1.03 Date and Time of Closing.........................2
SECTION 1.04 Deliveries by Fortress...........................2
SECTION 1.05 Deliveries by Capstead. ........................2
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF FORTRESS..............................................................3
SECTION 2.01 Organization.....................................3
SECTION 2.02 Power and Capacity; Charter Documents............3
SECTION 2.03 No Conflicts.....................................3
SECTION 2.04 Consents and Approvals...........................3
SECTION 2.05 Accredited Investor..............................4
SECTION 2.06 Absence of Market................................4
SECTION 2.07 Investment Purposes..............................4
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF CAPSTEAD..............................................................4
SECTION 3.01 Organization and Qualification of Capstead.......5
SECTION 3.02 Power and Capacity; Charter Documents of
Capstead.........................................5
SECTION 3.03 Subsidiaries.....................................5
SECTION 3.04 Capitalization and Ownership; Authorization of
Preferred........................................7
SECTION 3.05 No Conflicts.....................................7
SECTION 3.06 Consents and Approvals...........................7
SECTION 3.07 Financial and Operating Statements and Reports...7
SECTION 3.08 No Undisclosed or Contingent Liabilities.........8
SECTION 3.09 Absence of Certain Changes.......................9
SECTION 3.10 Real Property...................................11
SECTION 3.11 Company Equipment...............................12
SECTION 3.12 Contracts and Commitments.......................12
SECTION 3.13 Intellectual Property...........................14
</TABLE>
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<TABLE>
<S> <C>
SECTION 3.14 Inventory.......................................14
SECTION 3.15 Pension and Other Employee Plans and
Agreements......................................14
SECTION 3.16 Litigation......................................15
SECTION 3.17 Insurance.......................................15
SECTION 3.18 Collective Bargaining Agreements; Compensation;
Employee Agreements.............................16
SECTION 3.19 Compliance with Law.............................16
SECTION 3.20 Permits.........................................16
SECTION 3.21 Tax Matters.....................................16
SECTION 3.22 Title to Assets.................................17
ARTICLE IV
OTHER OBLIGATIONS OF THE PARTIES........................................19
SECTION 4.01 Conduct of Company Business.....................19
SECTION 4.02 Access to Books and Records.....................19
SECTION 4.03 Consents........................................19
SECTION 4.04 Supplemental Disclosure by Capstead.............19
SECTION 4.05 Governmental Filings............................20
SECTION 4.06 Covenant to Satisfy Conditions..................20
SECTION 4.07 Employees.......................................20
SECTION 4.08 Public Announcements............................20
ARTICLE V
CONDITIONS PRECEDENT....................................................20
SECTION 5.01 Conditions Precedent to Obligations of
Fortress........................................20
SECTION 5.02 Conditions Precedent to Obligations of
Capstead........................................22
ARTICLE VI
INDEMNIFICATION.........................................................23
SECTION 6.01 Survival of Representations and Warranties......23
SECTION 6.02 Indemnification by Capstead.....................23
SECTION 6.03 Indemnification by Fortress.....................23
SECTION 6.04 Limitations Regarding Indemnification
Obligations of Capstead.....................24
SECTION 6.05 Limitations Regarding Indemnification
Obligations of Fortress.....................24
SECTION 6.06 Conditions of Indemnification...................24
SECTION 6.07 Claim Disputes..................................25
SECTION 6.08 Remedies Exclusive..............................26
ARTICLE VII
TERMINATION OF AGREEMENT................................................26
</TABLE>
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<TABLE>
<S> <C>
SECTION 7.01 Termination of Agreement........................26
SECTION 7.02 Procedure Upon Termination......................26
ARTICLE VIII
MISCELLANEOUS...........................................................26
SECTION 8.01 Commissions.....................................27
SECTION 8.02 Definition of Knowledge.........................27
SECTION 8.03 Definition of Material Adverse Effect and
Material Adverse Change.........................27
SECTION 8.04 Expenses, Taxes, Etc............................27
SECTION 8.05 Successors and Assigns..........................27
SECTION 8.06 No Third-Party Benefit..........................27
SECTION 8.07 Entire Agreement; Amendment.....................28
SECTION 8.08 Reformation and Severability....................28
SECTION 8.09 Notices.........................................28
SECTION 8.10 Governing Law...................................29
SECTION 8.11 Counterparts....................................29
</TABLE>
EXHIBIT "A" - Form of Articles Supplementary for Series C Convertible
Preferred Stock
EXHIBIT "B" - Form of Articles Supplementary for Series D Convertible
Preferred Stock
EXHIBIT "C" - Form of Registration Rights Agreement EXHIBIT "D" - Form of
Supplemental Agreement EXHIBIT "E" - Form of Opinion of Andrews & Kurth L.L.P.
EXHIBIT "F" - Form of Opinion of Hogan & Hartson L.L.P.
APPENDIX I - Year End Financial Statements
APPENDIX II - Third Quarter Financial Statements
-iii-
<PAGE> 5
SERIES C AND SERIES D CONVERTIBLE PREFERRED
STOCK PURCHASE AGREEMENT
THIS SERIES C AND SERIES D CONVERTIBLE PREFERRED STOCK
PURCHASE AGREEMENT (this "AGREEMENT"), dated as of December 9, 1999, is by and
among Capstead Mortgage Corporation, a Maryland corporation ("CAPSTEAD") and
Fortress Investment Corp., a Maryland corporation ("FORTRESS").
INTRODUCTORY STATEMENTS
Capstead desires to sell and issue, and Fortress desires to
purchase, 5,378,000 shares of a series of Capstead's preferred stock to be
designated as Series C Convertible Preferred Stock, $.10 par value per share
(the "SERIES C PREFERRED STOCK"). The form of Articles Supplementary for the
Series C Preferred Stock is attached hereto as Exhibit "A" (the "SERIES C
ARTICLES SUPPLEMENTARY"). The shares of Series C Preferred Stock to be acquired
by Fortress shall be termed the "SERIES C SHARES".
Capstead desires to sell and issue, and Fortress desires to
purchase, 5,378,000 shares of a series of preferred stock to be designated as
Series D Convertible Preferred Stock, $.10 par value per share (the "SERIES D
PREFERRED STOCK"). The form of Articles Supplementary for the Series D
Preferred Stock is attached hereto as Exhibit "B" (the "SERIES D ARTICLES
SUPPLEMENTARY"). The shares of Series D Preferred Stock to be acquired by
Fortress shall be termed the "SERIES D SHARES". The Series C Shares and the
Series D Shares shall be termed collectively the "SHARES".
Accordingly, for and in consideration of the foregoing and
the mutual agreements, representations, warranties, covenants and conditions
herein set forth, and other good, valid and binding consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto, intending
to be legally bound, hereby agree as follows:
ARTICLE I
THE STOCK PURCHASE
SECTION 1.01 Purchase and Sale of Series C Preferred Shares.
On and subject to the terms and conditions of this Agreement, Capstead
covenants and agrees that it will issue and sell to Fortress, and Fortress
covenants and agrees that it will purchase from Capstead, the Series C Shares.
The aggregate amount of consideration to be paid to Capstead for the Series C
Shares by Fortress shall be $25,600,000 (the "SERIES C PURCHASE PRICE"). The
Series C Purchase Price shall be paid to Capstead at the Closing by wire
transfer in immediately available funds.
<PAGE> 6
SECTION 1.02 Purchase and Sale of Series D Preferred Shares.
On and subject to the terms and conditions of this Agreement, Capstead
covenants and agrees that it will issue and sell to Fortress, and Fortress
covenants and agrees that it will purchase from Capstead, the Series D Shares.
The aggregate amount of consideration to be paid to Capstead for the Series D
Shares by Fortress shall be $25,600,000 ("SERIES D PURCHASE PRICE"). The Series
D Purchase Price shall be paid by Fortress to Capstead at the Closing by wire
transfer in immediately available funds.
SECTION 1.03 Date and Time of Closing. The sale and purchase
of the Shares provided for by this Article I shall be consummated, provided
that each of the conditions set forth in Article V hereto shall have been
satisfied or waived, at 10 a.m. on such date and at such place as may be
mutually agreed upon by the parties to this Agreement (the "CLOSING"). The date
on which the Closing actually occurs is referred to herein as the "CLOSING
DATE".
SECTION 1.04 Deliveries by Fortress. At the Closing, Fortress
shall deliver, or cause to be delivered, to Capstead (unless delivered
previously) the following:
(a) the Officers' Certificate referred to in Section 5.02(d)
hereof;
(b) the Secretary's Certificate referred to in Section
5.03(e) hereof;
(c) the Series C Purchase Price and the Series D Purchase
Price (collectively, the "PURCHASE PRICE"); and
(d) all other previously undelivered documents, instruments
and writings required to be delivered by Fortress to Capstead at or prior to
the Closing pursuant to this Agreement or otherwise required in connection
herewith.
SECTION 1.05 Deliveries by Capstead. At the Closing, Capstead
shall deliver, or cause to be delivered, to Fortress (unless delivered
previously) the following:
(a) certificates representing the Shares being purchased by
Fortress, which certificates shall be registered in the name of Fortress and
dated the Closing Date;
(b) the Officers' Certificate referred to in Section 5.01(d)
hereof;
(c) the Secretary's Certificates referred to in Section
5.01(e) hereof; and
(d) all other previously undelivered documents, instruments
and writings required to be delivered by Capstead to Fortress at or prior to
the Closing pursuant to this Agreement or otherwise required in connection
herewith.
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<PAGE> 7
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF FORTRESS
Fortress represents and warrants to Capstead as follows:
SECTION 2.01 Organization. Fortress is a business trust duly
organized, validly existing and in good standing under the laws of the State of
Delaware.
SECTION 2.02 Power and Capacity; Charter Documents.
(a) Fortress has all requisite power and authority to enter
into, execute and deliver this Agreement, the Registration Rights Agreement (as
defined below) and the Supplemental Agreement (as defined below) and perform
its obligations hereunder and thereunder. Each of this Agreement, the
Registration Rights Agreement and the Supplemental Agreement has been duly
executed and delivered by Fortress and is a valid and binding obligation of
Fortress, enforceable in accordance with its terms, subject in each case to
laws of general application relating to bankruptcy, insolvency and the relief
of debtors and rules of law governing specific performance, injunctive relief
or other equitable remedies.
(b) The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby by Fortress will
not result in a violation or breach of or constitute a default under any term
or provision of the Articles of Incorporation or Bylaws of Fortress.
SECTION 2.03 No Conflicts. The execution, delivery and
performance of this Agreement by Fortress and the consummation of the
transactions contemplated hereby will not violate any statute or law or any
judgment, decree, order, writ, injunction, regulation or rule of any court or
any local, state or federal governmental or regulatory authority, which
violation, conflict, acceleration, requirement, termination, modification or
default could reasonably be expected to result in a Material Adverse Effect on
the transactions contemplated by this Agreement.
SECTION 2.04 Consents and Approvals. Fortress is not required
to obtain, transfer or cause to be transferred any consent, approval, license,
permit or authorization of, or make any declaration, filing or registration
with, any third party or any public body or authority in connection with (a)
the execution and delivery by Fortress of this Agreement or (b) the
consummation of the transactions contemplated hereby, other than those that may
be required under applicable "blue sky" securities laws or that may be required
solely by reason of Capstead's (as opposed to any other third party's)
participation in the transactions contemplated hereby the failure of which to
obtain, transfer or cause to be transferred could reasonably be expected to
result in a Material Adverse Effect on the transactions contemplated by this
Agreement.
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<PAGE> 8
SECTION 2.05 Accredited Investor. Fortress is an "ACCREDITED
INVESTOR" as such term is defined in Rule 501(a) promulgated under the
Securities Act of 1933 as amended (the "SECURITIES ACT"). Fortress represents
and warrants that it has such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of its or
his investment in the Shares being issued to it pursuant to Article I hereof.
SECTION 2.06 Absence of Market. Fortress acknowledges that
the Shares lack liquidity as compared with other investments since there is
not, and there is not expected to be, any market therefor, and that the sale or
transfer of the Shares must comply with applicable federal and state securities
laws. Fortress acknowledges that it must bear the economic risk of its
investment in the Shares for an indefinite period of time since none of the
Shares have been registered under the Securities Act and therefore cannot be
sold unless such Shares are subsequently registered pursuant to the terms of
the registration rights agreement attached hereto as Exhibit "C" (the
"REGISTRATION RIGHTS AGREEMENT") or otherwise, or an exemption from
registration is available.
SECTION 2.07 Investment Purposes. Fortress hereby represents
and warrants that it is acquiring the Shares for investment purposes only, for
its own account, and not as nominee or agent for any other person or entity,
and not with a view to, or for resale in connection with, any distribution
thereof within the meaning of the Securities Act. Fortress further acknowledges
that representatives of Capstead have advised it that no state or federal
agency or instrumentality has made any finding or determination as to the
investment in the Shares, nor has any state or federal agency or
instrumentality made any recommendation with respect to any purchase or
investment in the Shares.
SECTION 2.08 Access and Information. Fortress hereby
represents and warrants that it has been given access to full and complete
information regarding the Company and, to the extent such access has been
given, Fortress has utilized that access to the satisfaction of Fortress for
the purpose of obtaining information concerning the Company. Fortress has
obtained, in its judgment, sufficient information to evaluate the merits and
risks of an investment in Capstead, understands the business in which the
Company is engaged, and is able to evaluate the merits and risks of an
investment in the Shares.
SECTION 2.09 REIT Status. Fortress has made a valid election
under applicable law to be treated as a real estate investment trust ("REIT")
as defined in Section 856 of the Internal Revenue Code of 1986, as amended (the
"Code") for its taxable year ending December 31, 1998 and has qualified as a
REIT for federal tax purposes for such year.
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<PAGE> 9
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF CAPSTEAD
Capstead hereby represents and warrants to Fortress as
follows, except as otherwise set forth in the relevant section of the
disclosure schedule of Capstead (the "CAPSTEAD DISCLOSURE SCHEDULE"):
SECTION 3.01 Organization and Qualification of Capstead.
Capstead is (a) a corporation duly organized, validly existing and in good
standing under the laws of the State of Maryland and (b) duly qualified to do
business as a foreign corporation and in good standing in each jurisdiction in
which the character of the properties and assets now owned or leased by it or
the nature of the business transacted by it requires it to be so qualified,
except where the failure to be so qualified, individually or in the aggregate,
would not have a Material Adverse Effect (as defined herein) upon the Company
(as defined herein) or the consummation of the transactions contemplated
hereby. Each jurisdiction in which Capstead is qualified to do business is
listed on Section 3.01 of the Capstead Disclosure Schedule. No jurisdiction in
which Capstead is not qualified or licensed has claimed, in writing or
otherwise, that Capstead is required to qualify or be licensed therein.
SECTION 3.02 Power and Capacity; Charter Documents of
Capstead.
(a) Capstead has all requisite power and authority (corporate
and otherwise) to enter into, execute and deliver this Agreement, the
Registration Rights Agreement and the Supplemental Agreement, to sell and issue
the Shares hereunder, to issue the shares of Capstead's common stock ("COMMON
STOCK") issuable upon conversion of the Shares, and to carry out and perform
its obligations hereunder and thereunder. Capstead has the corporate power and
authority to carry on its business as now being conducted and to own and lease
its properties. Each of this Agreement, the Registration Rights Agreement and
the Supplemental Agreement has been duly executed and delivered by Capstead and
is a valid and binding obligation of Capstead, enforceable in accordance with
its terms, subject in each case to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and rules of law governing
specific performance, injunctive relief or other equitable remedies.
(b) The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby by Capstead will
not result in a violation or breach of or constitute a default under any term
or provision of the Articles of Incorporation or Bylaws of Capstead. Complete
and correct copies of the Articles of Incorporation and Bylaws of Capstead, and
all amendments thereto, have been delivered to Fortress, and no changes therein
will be made subsequent to the date hereof and prior to the Closing without the
consent of Fortress, except that Articles Supplementary will be filed with the
State Department of Assessments and Taxation of Maryland in order to designate
and classify the Shares.
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<PAGE> 10
SECTION 3.03 Subsidiaries.
(a) Section 3.03(a) of the Capstead Disclosure Schedule sets
forth for each subsidiary, direct or indirect, of Capstead (each a
"SUBSIDIARY"), its capital structure, its place of organization and the other
jurisdictions in which it is qualified to do business. Each of the Subsidiaries
has been duly organized and is validly existing and in good standing under the
laws of its respective state of incorporation, has all requisite corporate
power and authority to own or lease and operate its properties and conduct its
business as now conducted and is duly qualified or licensed to do business as a
foreign corporation and is in good standing in each jurisdiction in which the
nature of the business conducted by it or the character or location of the
properties owned or leased by it makes such qualification or licensing
necessary, except where the failure to be so qualified or licensed,
individually or in the aggregate, would not have a Material Adverse Effect on
the Company or the consummation of the transactions contemplated hereby. No
jurisdiction in which any Subsidiary is not qualified or licensed has claimed,
in writing or otherwise, that such Subsidiary is required to qualify or be
licensed therein, except where the failure to be so qualified or licensed,
individually or in the aggregate, would not have a Material Adverse Effect on
the Company or the consummation of the transactions contemplated hereby.
(b) Capstead owns, free and clear of all mortgages, liens,
claims, charges, pledges, security interests or other encumbrances of any
nature whatsoever ("ENCUMBRANCES"), and has the unrestricted power to dispose
of and vote, all of the outstanding capital stock of each of the Subsidiaries.
There are no outstanding or authorized options, warrants, subscriptions, calls,
conversions or other rights, contracts, agreements, commitments or
understandings of any kind obligating any Subsidiary to issue, sell, purchase,
return or redeem any shares of its capital stock or any other securities
convertible into, exchangeable for or evidencing the right to subscribe for any
shares of capital stock of, or other ownership interest in, any Subsidiary. All
of the outstanding shares of the capital stock of each class of each Subsidiary
have been duly authorized and validly issued, are fully paid and nonassessable
and were not issued in violation of any preemptive rights or any applicable Law
(as defined herein).
(c) Except for its interest in any Subsidiary, Capstead does
not (i) own, beneficially or of record, any shares of any other corporation or
entity or any interests in any partnerships or limited liability companies or
(ii) participate in any manner in any joint ventures, corporate alliance
agreements or corporate partnering agreements. Except for Capstead's interest
in any Subsidiary, neither Capstead nor any Subsidiary has an interest in, or
is subject to, any agreement, obligation or commitment to make any equity
investment in or loan or advance to, any other Person (as defined herein).
(d) For purposes of this Agreement, Capstead and the
Subsidiaries shall collectively be termed the "COMPANY"; when such collective
term is used in connection with financial issues, it shall refer to Capstead
and the Subsidiaries as a consolidated whole. For example, when references are
made to officers, directors and employees of the Company, it shall mean all
officers, directors and stockholders of Capstead and the Subsidiaries.
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<PAGE> 11
SECTION 3.04 Capitalization and Ownership; Authorization of
Preferred.
(a) Section 3.04(a) of the Disclosure Schedule lists, for
Capstead, its authorized capitalization and the number of shares of its capital
stock (or other equity interests) issued and outstanding as of September 30,
1999. All of the outstanding shares of the capital stock of Capstead are
validly issued, fully paid and non-assessable. All such shares are owned free
and clear of any Encumbrance imposed by Capstead. There are no outstanding
options, warrants or other rights to acquire any share of capital stock of
Capstead, there are no outstanding securities authorized, granted or issued by
Capstead that are convertible into or exchangeable for shares of its capital
stock and there are no phantom stock rights, dividend equivalent rights, stock
appreciation rights or similar rights regarding Capstead or any Subsidiary.
(b) The issuance, sale and delivery of the Shares have been
duly authorized by all requisite corporate action of Capstead and when issued,
sold and delivered in accordance with the terms of this Agreement, the Shares
will be validly issued and outstanding, fully paid and nonassessable.
(c) Capstead has duly reserved the number of shares of its
common stock (the "RESERVED SHARES") necessary for issuance upon conversion in
full of the Series C Shares and the Series D Shares. When issued, sold and
delivered in accordance with the terms of the Series C Articles Supplementary
or the Series D Articles Supplementary, as the case may be, the Reserved Shares
will be validly issued and outstanding, fully paid and nonassessable.
SECTION 3.05 No Conflicts. The execution, delivery and
performance of this Agreement by Capstead and the consummation of the
transactions contemplated hereby will not:
(a) result in the creation or imposition of any security
interest, lien, charge or other encumbrance against the assets of the Company,
with or without the giving of notice and/or the passage of time, or
(b) violate, conflict with, affect acceleration of, or result
in termination, cancellation or modification of, or constitute a default under
or give rise to any predetermined rights to any third party under (i) any
contract, agreement or other instrument to which the Company is a party or by
which the Company or its assets is bound or (ii) any note, bond, mortgage,
indenture, deed of trust, license, lease, contract, commitment, understanding,
arrangement, agreement or restriction of any kind or character to which the
Company is a party or by which the Company may be bound or affected, or to
which any of the assets of the Company may be subject, or
(c) violate any statute or Law or any judgment, decree,
order, writ, injunction, regulation or rule of any court or any local, state or
federal governmental or regulatory authority, which violation, conflict,
acceleration, requirement, termination, modification or default described in
(a), (b), or (c) above could reasonably be expected to result in a Material
Adverse Effect on Capstead or the transactions contemplated by this Agreement.
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<PAGE> 12
SECTION 3.06 Consents and Approvals. The Company is not
required to obtain, transfer or cause to be transferred any consent, approval,
license, permit or authorization of, or make any declaration, filing or
registration with, any third party or any public body or authority in
connection with the execution and delivery by Capstead of this Agreement or the
consummation of the transactions contemplated hereby, the failure of which to
obtain, transfer or cause to be transferred could reasonably be expected to
result in a Material Adverse Effect on the transactions contemplated by this
Agreement.
SECTION 3.07 Financial and Operating Statements and Reports.
(a) Year End Financial Statements. Attached hereto as
Appendix I is a true and complete copy of audited consolidated financial
statements of the Company for the years ended December 31, 1998 and 1997 (the
"YEAR END FINANCIAL STATEMENTS"). The Year End Financial Statements include
audited balance sheets of the Company as of December 31, 1998 and 1997 (such
1998 balance sheet being termed the "1998 BALANCE SHEET"), together with
related statements of operations, equity and cash flows of the Company (and
notes thereto) for each of such periods. The Year End Financial Statements are
accurate and correct in all material respects, have been prepared on a
consistent basis from, and are in accordance with, the Company's books and
records, and fairly present the consolidated financial position and the results
of operations of the Company for the periods therein identified in conformity
with generally accepted accounting principles ("GAAP") consistently applied.
(b) Third Quarter Financial Statements. Attached hereto as
Appendix II is a true and complete copy of consolidated financial statements of
the Company for the three and nine months ended September 30, 1999 (the "THIRD
QUARTER FINANCIAL STATEMENTS"). The Third Quarter Financial Statements include
a balance sheet of the Company as of September 30, 1999 (such 1999 balance
sheet being termed the "1999 THIRD QUARTER BALANCE SHEET"), together with
related statements of operations and cash flows of the Company (and notes
thereto) for such period. The Third Quarter Financial Statements are accurate
and correct in all material respects, have been prepared on a consistent basis
from, and are in accordance with, the Company's books and records, and fairly
present the consolidated financial position and the results of operations of
the Company for the periods therein identified in conformity with GAAP for
interim financial information and with the instructions to Form 10-Q and Rule
10-01 of Regulation S-X under the Securities Act (except that the Third Quarter
Financial Statements do not include all of the information and footnotes that
may be required in the Year End Financial Statements or normal year-end
adjustments).
(c) Each report, schedule, registration statement and
definitive proxy statement filed by Capstead with the Securities and Exchange
Commission (the "SEC") since December 31, 1998 and through the date hereof
(collectively, the "SEC REPORTS"), at the time filed, and all forms, reports or
other documents filed by Capstead with the SEC after the date hereof, did not
and will not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
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(d) None of the Company or its respective employees or agents
have made any payment of funds of the Company, or received or retained any such
funds in violation of any law, rule or regulation where such actions are of a
character required to be disclosed in the SEC Reports.
SECTION 3.08 No Undisclosed or Contingent Liabilities. Except
for (a) liabilities or obligations incurred by the Company in the ordinary
course of business and not required by GAAP applied on a consistent basis to be
set forth on the 1999 Third Quarter Balance Sheet (all of which known items
exceeding $250,000 per item are described in Section 3.08 of the Capstead
Disclosure Schedule), and (b) liabilities and obligations incurred by the
Company in the ordinary course of business since the date of the 1999 Third
Quarter Balance Sheet, to the best knowledge of the Company, there is no basis
for the assertion against the Company of any liability or obligation of any
nature whatsoever (whether absolute, accrued, contingent or otherwise) that may
encumber or affect the Company or the transactions contemplated hereby which is
not fully reflected or reserved against on the 1999 Third Quarter Balance
Sheet.
SECTION 3.09 Absence of Certain Changes. Except as set forth
in Section 3.09 of the Capstead Disclosure Schedule, since September 30, 1999,
the Company has not:
(a) suffered any Material Adverse Effect and there has not
been any event (whether occurring before or after September 30, 1999) that
could reasonably be expected to have a Material Adverse Effect on the Company;
or
(b) experienced any material decrease in the book value of
the assets of the Company from the amounts reflected on the 1999 Third Quarter
Balance Sheet, other than decreases resulting from (i) depreciation or
amortization in accordance with accounting practices in effect at all times
since January 1, 1999 or (ii) changes in the market value of the Company's
mortgage investment portfolio due generally to economic changes in the industry
in which the Company conducts business; or
(c) incurred any liabilities or obligations of any nature
(whether absolute, accrued, contingent or otherwise and whether due or to
become due), except (i) liabilities or obligations for rent under the Leases
(as defined herein) and (ii) liabilities or obligations for other items
incurred in the ordinary course of business of the Company and consistent with
past practice, none of which other items exceeds $100,000 (considering
liabilities or obligations arising from one transaction or a series of similar
transactions, and all periodic installments or payments under any lease (other
than the Leases and other than repurchase obligations with respect to the
Company's agency security and non-agency security portfolio) or other agreement
providing for periodic installments or payments, as a single obligation or
liability); or
(d) increased (other than increases resulting from the
calculation of reserves in the ordinary course of business and in a manner
consistent with past practice), or experienced any change in any assumptions
underlying or methods of calculating, any bad debt, contingency or other
reserves; or
(e) paid, discharged or satisfied any claims, encumbrances,
liabilities or obligations (whether absolute, accrued, contingent or otherwise
and whether due or to become due)
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other than the payment, discharge or satisfaction in the ordinary course of
business and consistent with past practice of liabilities and obligations
reflected or reserved against in the 1999 Third Quarter Balance Sheet or
incurred in the ordinary course of business and consistent with past practice
since the date thereof; or
(f) permitted, allowed or suffered any of the material assets
of the Company, including, without limitation, real property, personal property
or any leasehold interest, to be subjected to any mortgage, pledge, lien,
encumbrance, restriction or charge of any kind (except for liens for Taxes (as
defined herein) not yet owing), other than repurchase obligations of the
Company incurred in the ordinary course of business; or
(g) written off as uncollectible any notes or accounts
receivable or any portion thereof, except for write-downs in the ordinary
course of business, consistent with past practice, in accordance with GAAP
consistently applied; or
(h) canceled any material amount of indebtedness or waived
any material claims or rights, except as reserved for in the 1999 Third Quarter
Financial Statements; or
(i) sold, transferred or otherwise disposed of any assets of
the Company except in the ordinary course of business and consistent with past
practice; or
(j) disposed of or permitted to lapse any right to the use of
any patent, trademark, assumed name, service mark, trade name, copyright,
license or application therefor or disposed of or disclosed to any corporation,
association, partnership, organization, business, individual, government or
political subdivision thereof or government agency (each, a "PERSON"), any
trade secret, formula, process or know-how not theretofore a matter of public
knowledge; or
(k) granted any increase in the salary, compensation, rate of
compensation, commissions or bonuses payable to or to become payable by the
Company to any officer or director of the Company (including, without
limitation, any increase or change pursuant to any bonus, pension,
profit-sharing, retirement or other plan or commitment); or
(l)granted any increase in the salary, compensation, rate of
compensation, commissions of bonuses payable to or to become payable by the
Company to any employee of the Company (including, without limitation, any
increase or change pursuant to any bonus, pension, profit-sharing, retirement
or other plan or commitment), except in the ordinary course of business and
consistent with past practice; or
(m) paid, loaned or advanced any amount to any officer,
director, employee or stockholder of the Company except for amounts advanced to
employees of the Company in the ordinary course of business consistent with
past practice (none of which advances were loans for personal purposes), or
sold, transferred or leased any assets of the Company to, or entered into any
agreement (other than this Agreement) or arrangement with, any officer,
director, employee or stockholder of the Company (except for agreements or
arrangements made in the ordinary course of business and consistent with past
practice); or
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<PAGE> 15
(n) entered into any collective bargaining or labor
agreement, or experienced any labor dispute or difficulty; or
(o) made any single capital expenditure or commitment in
excess of $50,000 for additions to property, plant, equipment or for any other
purpose or made aggregate capital expenditures or commitments in excess of
$100,000 for additions to property, plant, equipment or for any other purpose;
or
(p) made any change in any method of accounting or accounting
practice or policy; or
(q) suffered any casualty loss in excess of $50,000 (whether
or not insured against) or suffered aggregate casualty losses in excess of
$100,000 (whether or not insured against); or
(r)issued any additional shares of capital stock of Capstead
or the Subsidiaries or any option, warrant, right or other security exercisable
for, convertible into or exchangeable for shares of capital stock of Capstead
or the Subsidiaries other than shares of common stock issued upon conversion of
outstanding shares of Capstead's preferred stock; or
(s) paid dividends on or made other distributions or payments
in respect of the capital stock of Capstead or the Subsidiaries; or
(t) paid its suppliers and other vendors in a manner and time
not consistent with past practice other than items in dispute totaling not more
than $200,000; or
(u) taken any other action not either in the ordinary course
of business and consistent with past practice or provided for in this
Agreement; or
(v) entered into or agreed to any transaction not in the
ordinary course of business; or
(w) agreed, whether in writing or otherwise, to take any of
the actions set forth in this Section 3.09.
SECTION 3.10 Real Property.
(a) The Company does not currently own, and has not owned in
the past five years, any real property, other than (i) real estate that the
Company owns or has owned in the ordinary course of business incident to its
master servicing or former servicing operations and (ii) leasehold
improvements.
(b) Section 3.10 of the Capstead Disclosure Schedule contains
a complete and accurate list of all real property leases to which the Company
is a party in any capacity (including all amendments thereof and modifications
thereto) (the "LEASES"). The Company's interests in and to all Leases listed on
Section 3.10 of the Capstead Disclosure Schedule are free and clear of all
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Encumbrances including without limitation subleases, chattel mortgages,
mechanics' and materialmen's liens, conditional sales contracts, collateral
security arrangements and other interest retention arrangements. The Company
has not received notice of any default by the Company under any of the Leases,
and there are no facts or conditions that would, with notice or lapse of time
or both, constitute a default by the Company under any of the Leases. To the
best knowledge of the Company, none of the landlords under any of the Leases is
in default. Any Lease or proposed Lease for which Capstead or an affiliate
thereof or related party thereto is landlord are on terms that are no more
burdensome to the Company than terms for third party leases in the same
geographic area for similarly-situated properties.
(c) The buildings and improvements leased by the Company on
any Lease, and the operation and maintenance thereof as operated and
maintained, do not (i) contravene any zoning or building Law or ordinance or
other administrative regulation or (ii) violate any restrictive covenant or any
applicable Law. To the best knowledge of the Company, all of the plants,
buildings and structures located on any real property owned by the Company or
on any Lease are in a state of good maintenance and repair (normal wear and
tear excepted) suitable in all respects for the operation of the Company
Business.
(d) There is no pending or threatened condemnation, eminent
domain or similar proceeding with respect to, or that could affect, any real
property owned by the Company or any Lease.
SECTION 3.11 Company Equipment. The Company has good and
indefeasible title to all furniture, fixtures and equipment of the Company (the
"COMPANY EQUIPMENT"), free and clear of any Encumbrances. To the best knowledge
of the Company, the Company Equipment is in good and normal operating condition
and repair and adequate for the uses to which it is being put by the Company.
The Company has not received any notification from any governmental or
regulatory authority within the last two years that the Company is in violation
of any health, sanitation, fire, safety, zoning, building or other Law,
ordinance or regulation in respect of the Company Equipment or operations,
which violation has not been appropriately and completely resolved.
SECTION 3.12 Contracts and Commitments.
(a) Except as set forth in Section 3.12(a) of the Capstead
Disclosure Schedule, the Company is not a party to or bound by any agreements,
contracts or commitments which individually or when aggregated with all related
agreements, contracts or commitments, are material to the business, operations,
condition (financial or otherwise), liabilities, assets, earnings or working
capital of the Company or that provide for the grant of any preferential rights
to purchase or lease any of the assets of the Company.
(b) The enforceability of the agreements, contracts and
commitments referred to in this Section 3.12 will not be affected in any
respect by the execution and delivery of this Agreement or the consummation of
the transactions contemplated hereby.
(c) No purchase contracts or commitments of the Company are
in excess of the normal, ordinary and usual requirements of the Company, or to
the best knowledge of the Company,
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<PAGE> 17
were entered into at prices materially in excess of those available in the
industry in arm's length transactions on the respective dates thereof.
(d) The Company is not a party to or bound by any outstanding
agreements, arrangements or contracts with any of its directors, officers,
stockholders, employees, agents, consultants, advisors, salesmen or sales
representatives (or any of the affiliates of any of such Persons) that (A) are
not cancelable by it on notice of not longer than 30 days and without the
imposition of any liability, penalty or premium, (B) require non-cancelable
payment by the Company of over $25,000, or (C) provide for any bonus or other
payment based on the sale of the Company or any portion thereof.
(e) The Company is not a party to or bound by any employment
agreement, consulting agreement or any other agreements that contains any
provision for severance or termination pay liabilities or obligations.
(f) The Company is not a party to or bound by:
(i) other than repurchase agreements reflected on the 1999
Third Quarter Financial Statements and entered into in the
ordinary course of business, any mortgage, indenture, note,
installment obligation or other instrument, agreement or
arrangement for or relating to any borrowing of money by the
Company;
(ii) any guaranty, direct or indirect, by the Company of
any obligation for borrowings or otherwise, excluding
endorsements made for collection in the ordinary course of
business;
(iii) any obligation to make payments, contingent or
otherwise, of over $250,000 arising out of any prior
acquisition of the business, assets or stock of other
persons;
(iv) any collective bargaining agreement with any
labor union;
(v) any lease or similar arrangement for the use by the
Company of personal property requiring payments by the
Company, on an annual basis, of over $50,000;
(vi) any agreement containing noncompetition or other
limitations restricting the conduct of the business of the
Company; and
(vii) any partnership, joint venture or similar agreement.
(g) Neither the Company nor any of its officers, directors,
stockholders or affiliates is a party to or bound by any agreement (other than
this Agreement) or arrangement for the sale of any of the assets or capital
stock of Capstead or the Subsidiaries or for the grant of any preferential
rights to purchase any of the assets or capital stock of Capstead or the
Subsidiaries; and
(h) The Company is not bound by any agreement to redeem
shares of capital stock held by any stockholders.
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<PAGE> 18
(i) With respect to each contract and agreement listed in
Section 3.12 of the Capstead Disclosure Schedule, except as set forth therein,
(i) each of such contracts and agreements is valid, binding and in full force
and effect and is enforceable by the Company in accordance with its terms,
subject to bankruptcy, insolvency, reorganization and other Laws and judicial
decisions of general applicability relating to or affecting creditors' rights
and to general principles of equity; (ii) there have been no cancellations or
threatened cancellations thereof nor are there any outstanding disputes
thereunder; (iii) neither the Company, nor any other party is in breach of any
material provision thereof; and (iv) there does not exist any material default
under, or any event or condition which with the giving of notice or passage of
time or both would become a material breach or material default under, the
terms of any such contract or agreement on the part of the Company or on the
part of any other party thereto.
(j) The Company has delivered or made available to Fortress
true and complete copies of each written contract or agreement listed in
Section 3.12 of the Capstead Disclosure Schedule and true and accurate
summaries of any oral agreement listed thereon.
SECTION 3.13 Intellectual Property. Section 3.13 of the
Capstead Disclosure Schedule contains an accurate and complete list of (a) all
material patents, trademarks (registered or unregistered), trade names, assumed
names, copyrights, and all applications therefor, owned or filed by the Company
and used in or necessary for the conduct of the Company Business and, with
respect to registered trademarks, contains a list of all jurisdictions in which
such trademarks are registered and all registration numbers; (b) all material
licenses, permits and other agreements relating thereto; and (c) all material
agreements relating to technology, know-how or processes used in or necessary
for the conduct of the business of the Company Business which the Company is
licensed or authorized to use by others (including, without limitation,
licenses for the use of software of all types). Such patents, trademarks
(registered or unregistered), copyrights, licenses and permits are (i) valid,
subsisting and enforceable, and (ii) duly recorded in the names of the Persons
set forth in Section 3.13 of the Capstead Disclosure Schedule. The Persons set
forth in Section 3.13 of the Capstead Disclosure Schedule have the sole and
exclusive right, free from any liens, mortgages, security interests, charges or
encumbrances, to use the patents, trademarks (registered or unregistered),
copyrights and applications therefor set forth beside their names, and the
Company has the full right to use the trade names, assumed names, technology,
know-how, inventions, works and processes referred to in such lists and all
trade secrets required for or incident to the conduct of the Company Business
in the jurisdictions in which the Company Business is conducted, and the
consummation of the transactions contemplated hereby will not alter or impair
any such rights. No material claims have been asserted by any Person against
the Company with respect to the ownership, validity, enforceability,
misappropriation or use of any product or service of the Company Business or
such patents, trademarks (registered or unregistered, or of any confusingly
similar or dilative trademarks), trade names, assumed names, copyrights,
applications therefor, technology, know-how, processes or trade secrets or
challenging or questioning the validity or effectiveness of any such license,
permits or agreement and there is no valid basis for any such claim, and the
use or other exploitation of any such product or service of the Company
Business or patents, trademarks (registered or unregistered), trade names,
assumed names, copyrights, applications therefor, technology, know-how,
processes and trade secrets by the Company does not infringe on or dilute the
rights of any Person; and, to the best knowledge of the Company, no other
Person is
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infringing the rights of the Company with respect to such patents, trademarks
(registered or unregistered), trade names, assumed names, copyrights, and
applications therefor, technology, know-how, inventions, works, processes or
trade secrets.
SECTION 3.14 Inventory. The Company has no inventory, other
than with respect to office supplies that are stored in amounts necessary for
the reasonably foreseeable use of the Company.
SECTION 3.15 Pension and Other Employee Plans and Agreements.
(a) Section 3.15(a) of the Capstead Disclosure Schedule sets
forth, as of the date of this Agreement, all of the material pension, profit
sharing, stock option, stock purchase, stock bonus, employee stock ownership,
incentive, bonus, life, health, disability or accident plans, deferred
compensation plans, and other employee compensation or benefit plans,
agreements, practices, policies, customs, contracts, arrangements or
commitments, including, without limitation, changes in control or severance
agreements, holiday, vacation or other similar plans, programs or arrangements,
employee benefit plans (within the meaning of section 3(3) of ERISA), and labor
union agreements under or with respect to which the Company or any Person
("ERISA AFFILIATE") who would be treated as being a "single employer" with the
Company under section 414 of the Code, has any liability or obligation, whether
current, contingent, secondary or otherwise (collectively, the "PLANS" and
individually, a "PLAN"), and the Company has furnished to Fortress complete
copies of all of the foregoing as amended and in effect on the date hereof,
including, where applicable, any trust agreements, insurance contracts or other
funding mediums related to any Plan and Summary Plan Descriptions.
(b) Except for any events of noncompliance resulting in
aggregate payments of not greater than $150,000, each Plan is in compliance in
all material respects with its terms and applicable Law, including (without
limitation) ERISA and the Code.
(c) Seller has never been required to contribute to any
multiple employer plan (as defined in Section 412 of the Code) or multiemployer
plan (as defined under Section 3(37) of ERISA), and no Plan is subject to Title
IV of ERISA or Section 412 of the Code.
(d) No Plan provides (or has any commitment to provide)
health benefits with respect to any current or former employees or independent
contractors (or beneficiary thereof) of the Company or any ERISA Affiliate
beyond their retirement or other termination of service (other than coverage
mandated by COBRA). Each Plan can be unilaterally terminated at any time by the
Company without material liability.
SECTION 3.16 Litigation. Except as set forth in Section 3.16
of the Capstead Disclosure Schedule, there are no open and unresolved claims,
actions, suits, proceedings, investigations or inquiries that have been made or
served against the Company or, to the best knowledge of the Company, that are
pending against (without having been so served), threatened by or against, or
otherwise affecting or that, if adversely decided, would reasonably be expected
to have a Material Adverse Effect on the Company or the transactions
contemplated hereby (except as otherwise disclosed in the Disclosure Schedule).
The Company is not a party to or a recipient of
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service of process regarding (and has not otherwise been named and noticed in)
any judgment, order or decree entered in any lawsuit or proceeding which has
had or may have a Material Adverse Effect on the Company or on its ability to
acquire any property or conduct its business in any way.
SECTION 3.17 Insurance. (a) All policies of fire, liability,
workmen's compensation, health, D&O insurance and other forms of insurance
relating to the business of the Company (the "COMPANY BUSINESS") are in full
force and effect, (b) all billed premiums with respect thereto covering all
periods up to and including the Closing Date have been paid or will be paid
prior to the Closing Date, and (c) no notice of cancellation or termination has
been received with respect to any such policy. Capstead maintains insurance of
the types, and at least in the amounts, that to its knowledge are customary for
businesses similar to the Company Business. All information disclosed by
Capstead to Fortress regarding coverage under such insurance policies is true
and correct in all material respects.
SECTION 3.18 Collective Bargaining Agreements; Compensation;
Employee Agreements. The Company does not have in effect any collective
bargaining agreement. The Company is not currently engaged in any bargaining
with any labor union. To the best knowledge of the Company, no petition is on
file with the National Labor Relations Board submitted by a labor union seeking
to represent any of the employees of the Company and the Company is not aware
of any attempts to organize the employees of the Company by any labor union.
SECTION 3.19 Compliance with Law. The Company is in
compliance in all material respects with all federal, state, foreign and local
laws (whether statutory or otherwise), ordinances, rules, regulations, orders,
judgments, decrees, writs and injunctions of any governmental authority
(collectively, "LAWS") applicable to the Company Business. The Company has not
been notified by any governmental or regulatory authority that the Company is
in violation or alleged violation of any Law applicable to the Company Business
which violation has not been appropriately and completely resolved, or that any
governmental or regulatory authority contemplates any investigation or
proceeding with respect to any such violation or alleged violation which has
not been appropriately and completely resolved which, in either case, could
reasonably be expected to have a Material Adverse Effect.
SECTION 3.20 Permits. The Company has all material licenses,
permits and authorizations issued by any federal, state, local or governmental
authority ("PERMITS") necessary for the ownership or leasing of its properties
and the conduct of the Company Business as now being conducted. All such
Permits are in full force and effect. No violations exist or, to the best
knowledge of the Company, have been reported in respect of such Permits. No
notice of any proceeding has been served or otherwise given to the Company or,
to the best knowledge of the Company, is pending (without service or other
notice) or threatened seeking the revocation or limitation of any of such
Permits.
SECTION 3.21 Tax Matters.
(a) All Tax Returns required to be filed on or before the
Closing Date by the Company have been or will be filed within the time
prescribed by Law (including extensions of time approved by the appropriate
taxing authority). "TAX RETURN" means any report, statement, form,
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return or other document or information required to be supplied to a taxing
authority in connection with Taxes. "TAX" or "TAXES" means any United States or
foreign federal, state, or local tax, including without limitation income tax,
ad valorem tax, excise tax, sales tax, use tax, franchise tax, gross receipts
tax, withholding tax, social security tax, occupation tax, service tax, license
tax, payroll tax, transfer and recording tax, severance tax, customs tax,
import tax, export tax, employment tax, or any similar or other tax,
assessment, duty, fee, levy or other governmental charge, together with and
including, without limitation, any and all interest, fines, penalties,
assessments and additions to tax resulting from, relating to, or incurred in
connection with any such tax or any contest or dispute thereof.
(b) The Tax Returns so filed are complete, correct and
accurate representations of the Tax liabilities of the Company and such Tax
Returns accurately set forth or will accurately set forth all items to the
extent required to be reflected or included in such returns.
(c) The Company has timely paid or has made adequate
provision in the 1998 Balance Sheet for the payment of all Taxes due on such
Tax Returns that have been filed or will be filed for periods ending on or
before the date of the 1998 Balance Sheet.
(d) There is no action, suit, investigation, proceeding,
audit or claim that has been served against or otherwise properly noticed to
the Company, or, to the best knowledge of the Company, pending or proposed
against or with respect to the Company in respect of any Tax. There are no
material liens for Taxes upon any of the assets of the Company.
(e) The Company has withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid or owing to any
employee, creditor, independent contractor, or other Person.
(f) The Company has not waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(g) The Company does not have in effect a consent under
Section 341(f) of the Code concerning collapsible corporations.
(h) There has never been a Tax sharing or allocation
agreement in place between the Company and any other Person other than those,
if any, with respect to which the applicable statute of limitations has run.
(i) The Company is not liable for a Tax incurred by any other
corporation that was a member of a consolidated group of corporations (within
the meaning of Treasury regulation section 1.1502) that included the Company.
(j) The Company has delivered or made available to Fortress
correct and complete copies of all Tax Returns filed by the Company for 1996,
1997 and 1998, all examination reports, and any statements of deficiencies
assessed against or agreed to by the Company.
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(k) Capstead has made a valid election under applicable law
to be treated as a REIT as defined in Section 856 of the Code for each taxable
year ending from December 31, 1985 through December 31, 1998 and has qualified
as a REIT for federal tax purposes for such years.
SECTION 3.22 Title to Assets. The Company has good, valid and
indefeasible title to the assets of the Company, including without limitation
those assets set forth on the 1999 Third Quarter Balance Sheet (other than with
respect to those assets which are subject to repurchase obligations and
collateralized mortgage obligations of the Company), subject to the mortgages,
liens, claims, charges, pledges, security interests set forth in Section 3.22
of the Capstead Disclosure Schedule.
SECTION 3.23 Brokers or Finders; Other Offers. Except as set
forth in Section 3.23 of the Capstead Disclosure Schedule, the Company has not
incurred, and will not incur, directly or indirectly, as a result of any action
taken by the Company, any liability for brokerage or finders' fees or agents'
commissions or any similar charges in connection with this Agreement.
SECTION 3.24 Articles of Incorporation Exemptions and Other
Exclusions. The issuance of the Shares hereunder and the acquisition of shares
of the Common Stock, upon conversion or redemption of such Shares, are excluded
by resolutions of the Company's board of directors from the application of
Article VIII of Capstead's Articles of Incorporation and from the provisions of
Section 3-602 of the Maryland General Corporation Law (the "MARYLAND GCL")
prohibiting business combinations with Interested Stockholders (as such term is
defined in Section 3-601 of the Maryland GCL and the provisions of Sections
3-701 et seq. of the Maryland GCL). No "fair price," "moratorium," "control
share acquisition," or other similar anti-takeover statute or regulation to
which Capstead or its operations is subject is applicable to the sale of Shares
or the acquisition of Common Stock by Fortress upon conversion or redemption of
such Shares or to Fortress solely as a result of its acquisition of such Shares
or Common Stock.
SECTION 3.25 Investment Company. Capstead is not, and upon
the issuance and sale of the Shares as contemplated herein and the application
of the net proceeds therefrom will not be, an "investment company" as such term
is defined in the Investment Company Act of 1940, as amended (the "INVESTMENT
COMPANY ACT"), and is not required to be registered under the Investment
Company Act.
SECTION 3.26 Internal Controls. Capstead maintains a system
of internal accounting controls sufficient to provide reasonable assurance that
(i) transactions are executed in accordance with management's general or
specific authorization, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
accountability for assets, (iii) access to assets is permitted only in
accordance with management's general or specific authorization, and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable internals and appropriate action is taken with respect to any
differences.
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SECTION 3.27 Year 2000 Compliance.
(a) Capstead has completed a review and assessment of all
areas within its business and operations that could be reasonably expected to
be adversely affected by the "Year 2000 Problem" (that is, the risk that
computer applications used by Capstead may be unable to recognize and perform
properly date-sensitive functions involving certain dates prior to and any date
after December 31, 1999).
(b) All computer software, computer firmware and computer
hardware (whether general or special purpose) owned by Capstead that are
material to the conduct of Capstead's business is reasonably expected to, on a
timely basis, be able to perform properly date-sensitive functions for all
dates before and after January 1, 2000 (that is, be "YEAR 2000 COMPLIANT").
Capstead has also inquired as to the Year 2000 compliance of service
contractors and suppliers and other third parties with whom Capstead conducts a
material amount of business and, to the knowledge of Capstead, these third
parties are Year 2000 Compliant.
ARTICLE IV
OTHER OBLIGATIONS OF THE PARTIES
SECTION 4.01 Conduct of Company Business. From the date
hereof to the Closing, except as otherwise expressly set forth in this
Agreement, and except for costs and expenses reasonably incurred in connection
with the transactions contemplated by this Agreement, the Company shall conduct
the business, operations, activities and practices of the Company only in the
ordinary course, in accordance with prudent practice and consistent with past
practice since January 1, 1999.
SECTION 4.02 Access to Books and Records. In order that
Fortress may have a full opportunity to make investigations of Capstead in
connection with the actions contemplated by this Agreement, Capstead shall
permit Purchaser and its counsel, accountants, auditors, lenders, environmental
consultants and other representatives reasonable access, upon reasonable
notice, to all of the offices, properties, books and records, contracts and
commitments of Capstead from the date hereof through the Closing Date.
SECTION 4.03 Consents. Each of Capstead and Fortress agree to
use commercially reasonable best efforts to obtain prior to the Closing all
consents and approvals necessary, in the reasonable determination of Fortress,
to consummate the transactions contemplated hereby, including, without
limitation, the consents and approvals listed or referred to in Section 3.06 of
the Disclosure Schedule. All such consents shall be in writing and in form and
substance reasonably satisfactory to Fortress, and executed counterparts
thereof shall be delivered to Fortress promptly after receipt thereof by
Capstead but in no event later than the Closing.
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SECTION 4.04 Supplemental Disclosure by Capstead.
(a) The Capstead Disclosure Schedule shall be considered to
be part of the representations and warranties of Capstead.
(b) Following delivery of the Capstead Disclosure Schedule in
accordance with the provisions of Article III and continuing through the
Closing, Capstead shall have the continuing obligation to supplement or amend
the Capstead Disclosure Schedule with respect to any matter hereafter arising
or discovered which, if existing or known at the date of this Agreement, would
have been required to be set forth or described in such specific Sections of
the Capstead Disclosure Schedule ("CAPSTEAD SUPPLEMENTAL DISCLOSURES").
(c) Capstead acknowledges that the Capstead Disclosure
Schedule is an important and integral part of this Agreement. Fortress shall be
entitled to treat any Capstead Supplemental Disclosures as a breach of the
appropriate representation or warranty, whether or not the event or condition
giving rise to such Capstead Supplemental Disclosures occurred on or prior to
the date hereof, unless such supplementation or amendment is a result of any of
the activities not prohibited by Section 4.01 ("SECTION 4.01 ITEMS"); provided,
that as a result of the occurrence of the Closing despite such supplementation
or amendment of the Capstead Disclosure Schedule, Fortress shall be deemed to
have waived any breach arising from such supplementation or amendment.
SECTION 4.05 Governmental Filings. As soon as practicable,
Capstead and Fortress shall make any and all filings and submissions to any
governmental agency that are required to be made in connection with the
transactions contemplated hereby. Capstead shall furnish to Fortress, and
Fortress shall furnish to Capstead, such information and assistance as the
other party or parties may reasonably request in connection with the
preparation of any such filings or submissions.
SECTION 4.06 Covenant to Satisfy Conditions. Capstead and
Fortress shall each use their commercially reasonable best efforts to insure
that the conditions set forth in Article V hereof are satisfied, insofar as
such matters are within their respective control.
SECTION 4.07 Employees. From the date hereof Capstead shall
use its commercially reasonable best efforts to retain as employees of the
Company through the Closing Date the active employment of the Company's current
employees, except as may be otherwise agreed by the parties. Capstead agrees in
this regard to cooperate with Fortress by permitting Fortress throughout the
period prior to the Closing Date to meet with the employees of the Company
(especially the corporate officers of the Company) at such times as shall be
approved by Capstead (which approval shall not be unreasonably withheld).
SECTION 4.08 Public Announcements. Neither the Company nor
Fortress, nor any of their affiliates, shall make any public statement,
including, without limitation, any press release, with respect to this
Agreement and the transactions contemplated hereby, without the prior written
consent of the other party (which consent may not be unreasonably withheld),
except as may be required by law.
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ARTICLE V
CONDITIONS PRECEDENT
SECTION 5.01 Conditions Precedent to Obligations of Fortress.
The obligations of Fortress under this Agreement are subject to the
satisfaction or, unless prohibited by law, the waiver by Fortress, at or before
the Closing, of each of the following conditions:
(a) Representations and Warranties. The representations and
warranties of Capstead contained herein shall be true, complete and accurate in
all material respects as of the date when made and at and as of the Closing
Date as though such representations, warranties and statements were made at and
as of such date.
(b) Performance. Capstead shall have performed and complied
with all agreements, obligations and conditions required by this Agreement to
be so performed or complied with by it or them at or prior to the Closing.
(c) No Injunction. On the Closing Date, there shall be no
effective injunction, writ, preliminary restraining order or any order of any
nature issued by a court of competent jurisdiction restraining or prohibiting
the consummation of the transactions contemplated hereby.
(d) Compliance Certificates. Capstead shall have delivered to
Fortress a certificate, dated the Closing Date, executed by its Chief Executive
Officer and Chief Financial Officer certifying the fulfillment of the
conditions specified in Section 5.01(a) and (b) hereof with respect to its
representations, warranties, agreements, obligations and conditions hereunder.
(e) Secretary's Certificate. Capstead shall have delivered to
Fortress a certificate, dated the Closing Date, executed by its Secretary or
Assistant Secretary and certifying as to Capstead's articles of incorporation,
bylaws, enabling resolutions, incumbency of officers and other reasonably
related matters (including, without limitation, the certificate of
incorporation and bylaws of any Subsidiary).
(f)Consents and Approvals. All licenses, permits, consents,
approvals and authorizations of all third parties and governmental bodies and
agencies shall have been obtained which are necessary, in the reasonable
determination of counsel to Fortress, in connection with (a) the execution and
delivery by each of the parties, as appropriate, of this Agreement or (b) the
consummation by each of the parties of the transactions contemplated hereby or
thereby.
(g) Filings with Secretary of State. On or prior to the
Closing, Capstead shall have filed the Series C Articles Supplementary and
Series D Articles Supplementary with the Department of Assessments and Taxation
of the State of Maryland.
(h) Registration Rights Agreement. On or prior to the
Closing, Capstead shall execute and deliver to Fortress a registration rights
agreement in the form attached hereto as Exhibit "C" (the "REGISTRATION RIGHTS
AGREEMENT").
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(i) Supplemental Agreement. On or prior to the Closing,
Capstead and Fortress shall execute and deliver the supplemental agreement to
the stock purchase agreement in the form attached hereto as Exhibit "D" (the
"SUPPLEMENTAL AGREEMENT").
(j) No Material Adverse Change. Except as specifically
disclosed herein or in the Disclosure Schedule, the events occurring since
September 30, 1999, and the conditions arising since such date shall not, in
the aggregate, have resulted in a Material Adverse Change to the Company.
(k) Documents. All documents to be delivered by Capstead to
Fortress at the Closing shall be duly executed and in form and substance
reasonably satisfactory to Fortress.
(l) Blue Sky. The Company shall have obtained all necessary
blue sky law permits, if any, and qualifications, or secured exemptions
therefrom, required by any state for the offer and sale of the Shares and the
Common Stock issuable upon conversion of the Shares.
(m) Legal Matters. All material matters of a legal nature
that pertain to this Agreement and the transactions contemplated hereby shall
have been reasonably approved by counsel to Fortress.
(n) Opinion of Company's Counsel. At the Closing, Fortress
shall have received from Andrews & Kurth L.L.P., counsel to the Company, an
opinion addressed to them, dated the Closing Date, in the form attached hereto
as Exhibit "E".
(o) Opinion of Company's Maryland Counsel. At the Closing,
Fortress shall have received from Hogan & Hartson L.L.P., Maryland counsel to
the Company, an opinion addressed to them, dated the Closing Date, in the form
attached hereto as Exhibit "F".
(p) REIT Opinion. At the Closing, Fortress shall have
received an opinion from Andrews & Kurth L.L.P., tax counsel to the Company,
substantially to the effect that, for all of its taxable years beginning
September 5, 1985 and ending on December 31, 1998, Capstead has met the
requirements for qualification as a REIT under the Code and Capstead will
continue to qualify as a REIT for the taxable year beginning January 1, 1999,
provided that after the Closing Date, Capstead continues to be organized and
operated according to representations made by Capstead to Andrews & Kurth
L.L.P. and therefore continues to satisfy the income tests, asset tests and
distribution, shareholder, record keeping and other applicable REIT
requirements under the Code.
(q) Other. Fortress shall have received such other documents
or certificates as Fortress may reasonably have requested.
SECTION 5.02 Conditions Precedent to Obligations of Capstead.
The obligations of Capstead under this Agreement are subject to the
satisfaction or, unless prohibited by law, the waiver by Capstead at or before
the Closing, of each of the following conditions:
(a) Representations and Warranties. The representations and
warranties of Fortress contained herein shall be true, complete and accurate in
all material respects as of the date
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<PAGE> 27
when made and at and as of the Closing Date as though such representations and
warranties were made at and as of such date.
(b) Performance. Fortress shall have performed and complied
with all agreements, obligations and conditions required by this Agreement to
be so performed or complied with by them at or prior to the Closing.
(c) No Injunction. On the Closing Date, there shall be no
effective injunction, writ, preliminary restraining order or any order of any
nature issued by a court of competent jurisdiction restraining or prohibiting
consummation of the transactions contemplated hereby.
(d) Officers' Certificates. Fortress shall have delivered to
Capstead a certificate, dated the Closing Date and executed by its respective
Chief Executive Officer and Chief Financial Officer certifying the fulfillment
of the conditions specified in Sections 5.02(a) and (b) hereof.
(e) Secretary's Certificates. Fortress shall have delivered
to Capstead a certificate, dated the Closing Date, executed by its Secretary or
Assistant Secretary and certifying as to its organizational documents, enabling
resolutions, incumbency of officers and other related matters.
(f) Documents. All documents to be delivered by Fortress to
Capstead at the Closing shall be duly executed and in form and substance
reasonably satisfactory to Capstead.
(g) Supplemental Agreement. On or prior to the Closing,
Capstead and Fortress shall execute and deliver the Supplemental Agreement.
(h) Other. Capstead shall have received such other documents
or certificates as Capstead may reasonably have requested.
ARTICLE VI
INDEMNIFICATION
SECTION 6.01 Survival of Representations and Warranties. All
representations and warranties made hereunder shall survive any investigation
made by or on behalf of any party hereto and shall survive for a period of
twelve months following the Closing; provided, however, that the
representations and warranties contained in this Agreement relating to Taxes or
made pursuant to Sections 3.17 hereof shall survive until 90 days following the
expiration of the period of limitations for any matter relating thereto, plus
any extended period applicable thereto by reason of any waiver of the period of
limitations. Each covenant and agreement (but not representations and
warranties, since they are covered above) of the parties hereunder shall
survive any investigation made by or on behalf of any party hereto and shall
survive the Closing hereunder.
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<PAGE> 28
SECTION 6.02 Indemnification by Capstead. Subject to the
other terms and conditions of this Agreement, Capstead agrees to indemnify,
defend and hold harmless Fortress and any of its officers, directors,
employees, representatives, affiliates, subsidiaries, successors and assigns
(collectively, the "FORTRESS GROUP"), at any time after the Closing, from and
against all demands, claims, actions or causes of action, assessments, losses,
damages, liabilities, costs and expenses including, without limitation,
interest, penalties and reasonable attorneys' fees and expenses (collectively
"FORTRESS GROUP DAMAGES") asserted against, resulting to, imposed upon or
incurred by the Fortress Group or any member thereof, directly or indirectly,
by reason of or resulting from any misrepresentation or breach of any
representation, warranty or agreement of Capstead contained in or made pursuant
to this Agreement or any facts or circumstances constituting such a breach (the
"FORTRESS GROUP CLAIMS").
SECTION 6.03 Indemnification by Fortress. Subject to the
other terms and conditions of this Agreement, Fortress agrees to indemnify,
defend and hold harmless Capstead and any of its stockholders, officers,
directors, employees, representatives, affiliates, subsidiaries, successors and
assigns (collectively, the "CAPSTEAD GROUP"), at any time after the Closing,
from and against all demands, claims, actions or causes of action, assessments,
losses, damages, liabilities, costs and expenses including, without limitation,
interest, penalties and reasonable attorneys' fees and expenses, after
deducting any insurance proceeds received by Capstead in connection therewith,
(collectively "CAPSTEAD GROUP DAMAGES") asserted against, resulting to, imposed
upon or incurred by the Capstead Group or any member thereof, directly or
indirectly, by reason of or resulting from any misrepresentation or breach of
any representation, warranty or agreement of Fortress contained in or made
pursuant to this Agreement or any facts or circumstances constituting such a
breach (collectively, the "CAPSTEAD GROUP CLAIMS"; the Capstead Group Claims
and the Fortress Group Claims are hereinafter collectively referred to as the
"CLAIMS").
SECTION 6.04 Limitations Regarding Indemnification
Obligations of Capstead. Notwithstanding any other provision in this Agreement,
the liability of Capstead to indemnify the Fortress Group pursuant to Section
6.02 hereof against any Fortress Group Damages sustained by reason of any
Fortress Group Claim shall be limited to Fortress Group Claims as to which any
member of the Fortress Group has given to Capstead written notice thereof
within twelve months following the Closing, whether or not any Fortress Group
Damages have then actually been sustained; provided, however, that,
notwithstanding the foregoing, the liability of Capstead to indemnify the
Fortress Group against any Fortress Group Damages sustained by reason of any
Fortress Group Claim relating to a breach of any of the representations,
warranties or agreements relating to Taxes or made pursuant to Sections 3.17 of
this Agreement shall be limited to Fortress Group Claims as to which a member
of the Fortress Group has given to Capstead written notice thereof at or prior
to 90 days following the expiration of the period of limitations applicable to
the event giving rise to such Fortress Group Claim, plus any extended period
applicable thereto by reason of any waiver of the period of limitations;
provided further, that the provisions for indemnity contained in this Agreement
shall be effective against Capstead only after the aggregate amount of all
Fortress Claims for which Capstead is liable hereunder equals or exceeds the
amount of $500,000 (and then such indemnity shall cover such first $500,000 in
Fortress Group Damages), but in no event in excess of the sum of the Series C
Purchase Price and the Series D Purchase Price payable hereunder to Fortress.
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<PAGE> 29
SECTION 6.05 Limitations Regarding Indemnification
Obligations of Fortress. Notwithstanding any other provision in this Agreement,
the liability of Fortress to indemnify the Capstead Group pursuant to Section
6.03 hereof against any Capstead Group Damages sustained by reason of any
Capstead Group Claim shall be limited to Capstead Group Claims as to which any
member of the Capstead Group has given to Fortress written notice thereof
within twelve months following the Closing, whether or not any Capstead Group
Damages have then actually been sustained; provided, further, the provisions
for indemnity contained in this Agreement shall be effective against Fortress
only after the aggregate amount of all Capstead Claims for which Fortress is
liable hereunder equals or exceeds $500,000 (and then such indemnity shall
cover such first $500,000 in Capstead Group Damages), but in no event in excess
of the sum of the Series C Purchase Price and the Series D Purchase Price.
SECTION 6.06 Conditions of Indemnification. The obligations
and liabilities of the parties with respect to Claims shall be subject to the
following terms and conditions:
(a) The indemnified party shall give the indemnifying party
prompt notice of any such Claim, and the indemnifying party shall have the
right to undertake the defense thereof by representatives chosen by it;
(b) If the indemnifying party fails to defend the indemnified
party against such Claim within a reasonable time after being notified of the
Claim, then the indemnified party shall (upon further notice to the
indemnifying party) have the right to defend, compromise or settle such Claim
on behalf of and for the account and risk of the indemnifying party subject to
the right of the indemnifying party to assume the defense of such Claim at any
time prior to settlement, compromise or final determination thereof; provided,
that the indemnified party shall provide the indemnifying party with notice of
any proposed settlement or compromise of such Claim (as far in advance of the
actual settlement or compromise of the Claim as is reasonably practicable); and
(c) Anything in this Agreement to the contrary
notwithstanding, (i) if there is a reasonable probability that a Claim may
materially and adversely affect the indemnified party other than as a result of
money damages or other money payments, the indemnified party shall have the
right, at the cost and expense of the indemnifying party, to manage the
defense, compromise or settlement of such Claim; provided, however, that if
such Claim is settled without the indemnifying party's consent (which consent
shall not be unreasonably withheld), the indemnified party shall be deemed to
have waived all rights hereunder against the indemnifying party for money
damages arising out of such Claim; and (ii) the indemnifying party shall not,
without the written consent of the indemnified party, settle or compromise any
Claim or consent to the entry of any judgment which does not include as an
unconditional term thereof the giving by the claimant or the plaintiff to the
indemnified party a release from all liability in respect to such Claim.
SECTION 6.07 Claim Disputes.
(a) Within 30 days of its receipt from Fortress of written
notice under Section 6.06 above regarding a Fortress Group Claim and the amount
of Fortress Group Damages related thereto, Capstead shall deliver to Fortress
written notice containing specific objections (prepared in good faith) to the
nature of the Fortress Group Claim or the amount of Fortress Group Damages
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<PAGE> 30
specified in the original notice. In such event, Fortress and Capstead shall
work in good faith during the next 30 days toward resolving any such
objections. If a resolution is reached within such 30 days, the Fortress Group
shall be indemnified for the amount so agreed upon in accordance with the other
terms and conditions of this Agreement.
(b) Within 30 days of its receipt of written notice from
Capstead under Section 6.06 above regarding an Capstead Group Claim and the
amount of Capstead Group Damages related thereto, Fortress shall deliver to
Capstead written notice containing specific objections (prepared in good faith)
to the nature of the Capstead Group Claim or the amount of Capstead Group
Damages specified in the original notice. In such event, Fortress and Capstead
shall work in good faith during the next 30 days toward resolving any such
objections. If a resolution is reached within such 30 days, the Capstead Group
shall be indemnified for the amount so agreed upon in accordance with the other
terms and conditions of this Agreement.
(c) In the event no mutually agreeable resolution of an
indemnification matter is reached under the foregoing clauses (a) or (b) within
such 30 day period, such dispute shall be submitted to three arbitrators in
accordance with the Rules of Commercial Arbitration of the American Arbitration
Association. If there is a dispute as to whether all or any part of a Claim
arose after the Closing, this issue (as well as the resulting allocation of
damages) may, without limitation as to other matters, be among the matters
addressed by the arbitrators. The arbitrators shall be governed by and shall
apply the substantive law of the State of Texas in making their determination,
and their ruling shall be binding and conclusive upon Fortress and Capstead.
SECTION 6.08 Remedies Exclusive. The remedies provided to the
parties in this Agreement shall be exclusive and shall preclude assertion by
them of any other rights or the seeking of any other remedies against any other
party hereto.
ARTICLE VII
TERMINATION OF AGREEMENT
SECTION 7.01 Termination of Agreement. This Agreement may be
terminated at any time prior to the Closing:
(a) by mutual agreement of Capstead and Fortress;
(b) by Fortress, on or after December 15, 1999, if any of the
conditions provided in Section 5.01 hereof of this Agreement have not been met
or, to the extent permitted by applicable law, have not been waived in writing
by Fortress prior to such date; or
(c) by Capstead, on or after December 15, 1999, if any of the
conditions provided in Section 5.02 hereof have not been met or, to the extent
permitted by applicable law, have not been waived in writing by Capstead prior
to such date.
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SECTION 7.02 Procedure Upon Termination. In the event of
termination by Capstead or Fortress pursuant to Section 7.01 hereof, written
notice thereof shall promptly be given to the other parties and the
transactions contemplated by this Agreement shall be terminated, without
further action by any party. If the transactions contemplated by this Agreement
are terminated as provided herein:
(a) each of Capstead and Fortress shall return all documents,
work papers and other material of any other party relating to the transactions
contemplated hereby, whether so obtained before or after the execution hereof,
to the party furnishing the same; and
(b) all confidential information received by Capstead and
Fortress with respect to the business of any other party or its subsidiaries or
affiliates shall be treated confidentially.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01 Commissions. No party hereto has employed any
investment banker, broker, finder or similar agent in connection with any
transaction contemplated by this Agreement.
SECTION 8.02 Definition of Knowledge. For the purpose of this
Agreement, the Exhibits and Appendices to this Agreement and the Disclosure
Schedule, the phrases "to the best knowledge" of any party and "known" and
words of like effect shall mean to the knowledge of such party, which knowledge
shall also include information existing in the records and files of such party.
SECTION 8.03 Definition of Material Adverse Effect and
Material Adverse Change. "MATERIAL ADVERSE EFFECT" or "MATERIAL ADVERSE CHANGE"
means, with respect to any party, any direct or indirect change, occurrence or
effect (other than as a result of changes in general conditions, including
economical or political developments, applicable to the industry in which such
party operates) on the business, operations, properties (including tangible
properties), condition (financial or otherwise), assets, obligations or
liabilities (whether absolute, contingent or otherwise and whether due or to
become due) of such party and its subsidiaries taken as a whole that reasonably
could be expected to be materially adverse to such party.
SECTION 8.04 Expenses, Taxes, Etc. Except as otherwise
provided herein, in the event of the termination of this Agreement prior to
Closing, each of the parties hereto shall pay all fees and expenses incurred by
it or any of its affiliates in connection with the transactions contemplated by
this Agreement.
SECTION 8.05 Successors and Assigns. Except as set forth in
the next sentence, no party shall have the right to assign all or any part of
its interest in this Agreement without the prior written consent of the other
parties, and any attempted transfer without such consent shall be null and
void. Fortress' rights and obligations hereunder shall be assignable by and
among Fortress and its affiliates; provided, that (i) each such assignment
shall assign the full rights and obligations of Fortress or, as the case may
be, its affiliate (if Fortress has already assigned its full rights and
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<PAGE> 32
obligations hereunder to such affiliate), (ii) each such assignment shall be
made between Fortress or, as the case may be, such affiliate to only one of
Fortress' affiliates per assignment (i.e., Fortress may not distribute its
rights and obligations hereunder among more than one affiliate at any time),
(iii) Capstead shall receive prior notice of such proposed assignment and (iv)
Fortress shall remain primarily liable for its obligations hereunder unless its
assignee-affiliate (and any further assignee- affiliate) has a net worth that
is reasonably acceptable to Capstead (as evidenced by Capstead's prior written
consent, not to be unreasonably withheld).
SECTION 8.06 No Third-Party Benefit. Nothing in this
Agreement shall be deemed to create any right or obligation in any Person not a
party hereto and this Agreement shall not be construed in any respect to be a
contract or agreement in whole or in part for the benefit of or binding upon
any Person not a party hereto.
SECTION 8.07 Entire Agreement; Amendment. This Agreement, the
Exhibits, the Appendices, the Capstead Disclosure Schedule and the Fortress
Disclosure Schedule hereto constitute the entire agreement among the parties
hereto with respect to the transactions contemplated herein and supersede all
prior oral and written agreements, memoranda, understandings and undertakings
between the parties hereto relating to the subject matter hereof including,
without limitation, the summary of terms executed by Capstead and Fortress.
Neither this Agreement nor any term hereof may be modified, amended, waived,
altered or supplemented except by a written instrument executed and delivered
by each of the parties hereto.
SECTION 8.08 Reformation and Severability. If any provision
of this Agreement is held to be illegal, invalid or unenforceable under present
or future laws effective during the term hereof and such illegality, invalidity
or unenforceability does not result in a material failure of consideration,
then;
(a) in lieu of such illegal, invalid or unenforceable
provision, there shall be added automatically as a part of this Agreement a
provision as similar in terms to such illegal, invalid or unenforceable
provision as may be possible and be legal, valid and enforceable; and
(b) the legality, validity and enforceability of the
remaining provisions hereof shall not in any way be affected or impaired
thereby.
SECTION 8.09 Notices. All notices, claims, certificates,
requests, demands and other communications hereunder shall be in writing and
shall be deemed to have been duly given if delivered personally or telecopied
or five business days after being mailed (registered or certified mail, postage
prepaid, return receipt requested) as follows:
If to Capstead:
Capstead Mortgage Corporation
8401 N. Central Expressway
Suite 800
Dallas, Texas 75225-4401
Attention: Andrew F. Jacobs
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<PAGE> 33
Telecopier: (214) 874-2398
with a copy to:
Andrews & Kurth L.L.P.
1717 Main Street
Suite 3700
Dallas, Texas 75201
Attention: David Barbour
Telecopier: (214) 659-4401
If to Fortress:
Fortress Investment Corp.
1301 Avenue of the Americas
42nd Floor
New York, New York 10019
Attention: Wesley R. Edens
Telecopier: (212) 798-6122
with a copy to:
Skadden, Arps, Slate, Meagher & Flom L.L.P.
919 3rd Avenue
New York, New York 10022
Attention: J. Gregory Milmoe
Telecopier: (212) 735-3594
or to such other address as the person to whom notice is to be given may have
previously furnished to the other in writing in the manner set forth above,
provided that notice of a change of address shall be deemed given only upon
receipt.
SECTION 8.10 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK, WITHOUT REGARD TO ITS CONFLICTS OF LAW RULES.
SECTION 8.11 Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
The remainder of this page is intentionally left blank.
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<PAGE> 34
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by parties hereto on the date first above written.
CAPSTEAD MORTGAGE CORPORATION
By: /s/ ANDREW F. JACOBS
---------------------------------
Andrew F. Jacobs
Executive Vice President - Finance
FORTRESS INVESTMENT CORP.
By: /s/ RANDAL A. NARDONE
----------------------------------
Randal A. Nardone
Chief Operating Officer
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<PAGE> 1
EXHIBIT 10.35
SUPPLEMENTAL AGREEMENT
TO
THE STOCK PURCHASE AGREEMENT
THIS SUPPLEMENTAL AGREEMENT TO THE STOCK PURCHASE AGREEMENT (this
"Agreement"), dated as of December 9, 1999, is by and among FORTRESS INVESTMENT
CORP., a Maryland corporation ("Fortress"), and CAPSTEAD MORTGAGE CORPORATION, a
Maryland corporation ("Capstead").
WHEREAS, Fortress and Capstead are entering into a Series C and Series
D Convertible Preferred Stock Purchase Agreement, dated as of the date hereof
(the "Purchase Agreement"), pursuant to which Fortress is purchasing from
Capstead 5,378,000 shares of a series of Capstead's preferred stock to be
designated as Series C Convertible Preferred Stock, $0.10 par value per share
(the "Series C Preferred Stock"), and 5,378,000 shares of a series of Capstead's
preferred stock to be designated as Series D Convertible Preferred Stock, $0.10
par value per share (the "Series D Preferred Stock," and, together with the
Series C Preferred Stock, the "Preferred Stock") for total consideration of
$51,200,000 (the "Purchase Price");
WHEREAS, the execution and delivery of this Agreement by Capstead and
Fortress is a condition to closing under the Preferred Stock Purchase Agreement;
WHEREAS, the board of directors of Capstead (the "Board") has
determined to hold a special meeting (the "Special Meeting") of the holders of
Capstead's common stock, par value $0.01 per share (the "Common Stock"), at
which such holders will vote upon certain matters that may require their
approval (collectively, the "Proposal") and a reverse stock split of the Common
Stock; and
WHEREAS, Fortress and Capstead deem it in their best interests to enter
into this Agreement in order to set forth certain rights and obligations in
connection with the ongoing management of Capstead;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements, representations, warranties, covenants and conditions herein set
forth, and other good, valid and binding consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, hereby agree as follows:
<PAGE> 2
1. Conduct of Capstead's Business. From the date hereof until the
earlier to occur of (i) the approval of the Proposal at the Special Meeting and
the consummation of the actions contemplated thereby and (ii) Fortress' receipt
of the Put/Call Payment (defined below) or the termination of the rights and
obligations of Capstead and Fortress under Section 2 hereof as set forth in
subsection 2(c) (the "Transition Period"), except as otherwise expressly set
forth in this Agreement, and except for costs and expenses reasonably incurred
in connection with the transactions contemplated by this Agreement, Capstead
shall conduct the business, operations, activities and practices of Capstead and
its Subsidiaries only in the ordinary course, in accordance with prudent
practice and consistent with past practice established in 1999; provided that
(a) Capstead shall not enter into any new agreements or arrangements with
Persons that are Affiliates (other than its consolidated subsidiaries) or, as of
the date hereof, are executive officers or directors of Capstead or its
Subsidiaries and (b) Capstead may, in conjunction with Fortress, design and
implement certain policies with respect to mitigating interest rate risk and
repositioning Capstead's current portfolio.
2. Fortress Put/Capstead Call.
a. Fortress Put. In the event that one or more of the
following shall not have occurred as of the respective dates set forth
below:
i. Prior to or concurrently with the execution of this
Agreement, the Board shall have passed resolutions
pursuant to which the Board shall have (a) increased
the number of directors comprising the Board from six
to eight and appointed Wesley Edens and Robert
Kauffman to fill the vacancies created thereby to
serve on the Board until the next annual meeting of
stockholders and until their successors are elected
and qualified and (b) exempted Fortress' purchase of
the Preferred Stock and subsequent acquisition of
Common Stock pursuant to Section 6 hereof from (i)
the application of Article VIII of Capstead's
Articles of Incorporation, (ii) Section 3-602 of the
Maryland General Corporation Law ("MGCL") prohibiting
business combinations with Interested Stockholders
(as such term is defined in Section 3-601 of the
MGCL) and (iii) Section 3-701 et. seq. of the MGCL;
and
ii. The Proposal shall have been approved by Capstead's
stockholders at the Special Meeting, which Special
Meeting
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<PAGE> 3
shall be held as soon as practicable, but in no event
later than April 30, 2000;
iii. Effective as of the date of the Special Meeting,
Bevis Longstreth, Harriet E. Miers, William R. Smith,
and John C. Tolleson shall have resigned their
positions as directors on the Board and the Board
shall have adopted resolutions to (a) reduce the
number of Board members from eight to seven, (b)
appoint Wesley Edens Chairman of the Board and Chief
Executive Officer and Ronn Lytle Vice Chairman of the
Board; (c) appoint three individuals to fill the
vacancies on the Board created by such resignations,
provided, that (x) one of such individuals shall have
been nominated by Ronn Lytle and Paul Low and (y) two
of such individuals shall have been nominated by
Wesley Edens and Robert Kaufman, provided, that such
two individuals shall be "independent directors" for
purposes of the Securities Exchange Act of 1934, as
amended, Section 3-802 of the MGCL, Section 162(m) of
the Internal Revenue Code of 1986, and the rules of
the New York Stock Exchange; and
iv. During the Transition Period, Capstead shall have
conducted the business, operations, activities and
practices of Capstead and its Subsidiaries in
accordance with Section 1 hereof (except actions
taken outside such scope at the request or with the
approval of Fortress) and there shall not have been a
Material Adverse Change (other than a Material
Adverse Change directly resulting from any action
taken at the request or with the approval of
Fortress). "Material Adverse Change" means, with
respect to Capstead, any direct or indirect change,
occurrence or effect (other than as a result of
changes in general conditions, including economical
or political developments, applicable to the industry
in which Capstead operates) on the business,
operations, properties (including tangible
properties), condition (financial or otherwise),
assets, obligations or liabilities (whether absolute,
contingent or otherwise and whether due or to become
due) of Capstead and its subsidiaries taken as a
whole that reasonably could be expected to be
materially adverse to Capstead;
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<PAGE> 4
then Fortress shall have the right to cause Capstead to purchase from
Fortress all, but not less than all, of the Preferred Stock (the
"Fortress Put"), for a price equal to 103% of the Purchase Price plus
any and all accrued and unpaid dividends on the Preferred Stock (the
"Put/Call Payment").
b. Capstead Call. In the event that the Proposal is not
approved at the Special Meeting, then Capstead shall have the right to
cause Fortress to sell to Capstead all, but not less than all, of the
Preferred Stock (the "Capstead Call") for the Put/Call Payment.
c. The sale or purchase of Preferred Stock pursuant to this
Section 2 (the "Put/Call Closing") shall occur on such date as the
parties hereto may agree, which date shall be within one month after
delivery by the party exercising its rights under this Section 2 of
written notice to the other party hereto to the effect that it is
exercising its rights pursuant to this Section 2. Payment of the
Put/Call Payment shall be made by wire transfer in immediately
available funds unless some other form of consideration is agreed to by
the parties hereto. On or prior to the Put/Call Closing, Fortress shall
deliver to Capstead and Capstead shall deliver to Fortress all
documents reasonably required to be executed in connection with the
sale or purchase of Preferred Stock pursuant to this Section 2.
d. The rights and obligations, if any, of Capstead and
Fortress under this Section 2 shall terminate and be of no further
force and effect upon the later to occur of (i) the expiration of the
30 day period following the date of the Special Meeting and (ii) May
31, 2000.
3. Fortress Put Upon a Change in Control of Capstead.
a. At any time after the approval of the Proposal at the Special
Meeting and prior to the 5th anniversary of the date hereof, in the
event of a Change in Control of Capstead, Fortress shall have the right
to cause Capstead to purchase from Fortress all, but not less than all,
of the Preferred Stock then outstanding (the "Change in Control Put")
for the Purchase Price multiplied by a fraction, the numerator of which
shall be the number of shares of Preferred Stock then outstanding and
the denominator of which shall be 10,756,000, plus any and all accrued
and unpaid dividends on such Preferred Stock. For purposes hereof, a
"Change in Control" of Capstead shall be deemed to have occurred upon
any of the following events:
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<PAGE> 5
i. any "person," as such term is used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") (other than Fortress and
its affiliates) becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of Capstead
representing 25 percent or more of the voting power
of Capstead's then outstanding securities;
ii. at any time subsequent to the date the Board is
reconstituted in accordance with the provisions of
subsection 2(a)(iii) hereof and during any period of
two consecutive years thereafter, individuals (a) who
were elected to the Board by a vote of at least
two-thirds (2/3) of the Board at the beginning of
such period or (b) whose nomination for election by
Capstead's stockholders was approved by a vote of at
least two-thirds (2/3) of the Board at the beginning
of such period or (c) whose election or nomination
for election was previously so approved, cease for
any reason to constitute at least a majority of the
Board of Directors of Capstead; or
iii. Capstead shall be party to a merger, consolidation,
share exchange, tender offer or similar transaction
or a purchase or other acquisition of all or a
significant portion of the assets of Capstead (a
"Business Combination"), except a Business
Combination approved by Wesley Edens and Robert
Kauffman or their Fortress-approved successors.
b. The purchase of Preferred Stock pursuant to this Section 3
shall occur on such date as the parties hereto may agree, which date
shall be within one month after delivery by Fortress of written notice
to Capstead to the effect that it is exercising its rights pursuant to
this Section 3. Payment shall be made to Fortress by wire transfer in
immediately available funds unless some other form of consideration is
agreed to by the parties hereto. On or prior to the purchase of
Preferred Stock pursuant to this Section 3, Fortress shall deliver to
Capstead and Capstead shall deliver to Fortress all documents
reasonably required to be executed in connection with the purchase of
Preferred Stock pursuant to this Section 3.
4. Services Agreement. If (i) the Proposal is approved at the Special
Meeting and the actions contemplated thereby are consummated, (ii) the merger
(the
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<PAGE> 6
"Merger") of Impac Commercial Holdings, Inc., a Maryland corporation, with and
into AMRESCO Capital Trust, a Texas real estate investment trust ("AMRESCO"), is
consummated and (iii) Fortress has not exercised either the Fortress Put or the
Change in Control Put and Capstead has not exercised the Capstead Call, then
Fortress (or its designated Affiliate), the surviving entity of the Merger and
Capstead (or a subsidiary thereof) shall promptly enter into a Services
Agreement mutually satisfactory to the parties thereto for the provision of
services at fair market prices by Capstead to the surviving entity of the
Merger, including, but not limited, to (a) office space in Capstead's existing
offices at Lincoln Park, 8401 North Central Expressway, Dallas, Texas; (b)
office management, including payroll; (c) stockholder relations; (d) financial
reporting; (e) accounting and tax services; (f) mail room services; and (g)
receptionist services.
5. Employment Matters.
a. Subject to approval of the Proposal at the Special Meeting,
Capstead shall take all necessary action as soon as practicable
thereafter to:
i. Have an individual designated by Fortress appointed
to the position of Chief Investment Officer of
Capstead;
ii. Have Andrew F. Jacobs appointed to the positions of
Executive Vice President and Chief Financial Officer
of Capstead; and
b. Subject to approval of the Proposal at the Special Meeting,
Capstead will take all necessary action to, and Fortress will not take
any action to prevent Capstead from taking any action to:
i. For at least three years after the date of the
Special Meeting, maintain all of Capstead's
obligations, arrangements, policies or practices to
provide benefits, including officer grade, salary,
bonus and incentive compensation, as compensation for
services rendered by employees of Capstead at levels
that are no less favorable than those in place as of
the date hereof and set forth on a side letter
delivered to Fortress concurrently herewith,
provided, that this obligation shall cease to exist
upon a Change in Control of Capstead;
ii. For at least three years after the date of the
Special Meeting, provide coverage of medical, dental,
life insurance accidental
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<PAGE> 7
death and disability insurance, long term disability,
Flexible Spending Account, 401k, deferred
compensation plan and travel accident insurance at
levels that are no less favorable than those in place
as of the date hereof and set forth on a side letter
delivered to Fortress concurrently herewith,
provided, that this obligation shall cease to exist
upon a Change in Control of Capstead.
6. Common Stock Acquisition. Subject to approval of the Proposal at the
Special Meeting, Fortress or its designated Affiliate will, within the six-month
period following the date of the Special Meeting, acquire no less than five
million shares of Common Stock through, at Fortress' option, (i) open-market
purchases, (ii) the conversion of Preferred Stock or (iii) any combination
thereof; provided, that purchases by Fortress and/or its Affiliates of Common
Stock from and after the date hereof and to and including the date of the
Special Meeting (which shall not exceed 3,300,000 shares) shall be considered as
part of such five million shares of Common Stock; and provided, further, that
this Section 6 and Fortress' obligation hereunder shall terminate and be of no
further force and effect upon exercise of the Fortress Put, Change in Control
Put or Capstead Call.
7. Notices. All notices, requests, demands and other communications
required or permitted under this Agreement shall be in writing and mailed or
facsimiled or delivered by hand or courier service:
If to Fortress, to: Fortress Investment Corp.
1301 Avenue of the Americas, 42nd Street
New York, New York 10019
Attn: Randal Nardone
Facsimile No. (212) 798-6120
With a copy to: Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attn: J. Gregory Milmoe, Esq.
Facsimile No. (212) 735-2000
If to Capstead, to: Capstead Mortgage Corporation
8401 North Central Expressway, Suite 800
Dallas, TX 75225-4410
Attn: Andrew F. Jacobs
Facsimile No. (214) 874-2398
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<PAGE> 8
With a copy to: Andrews & Kurth L.L.P.
1717 Main Street, Suite 3700
Dallas, Texas 75201
Attn: David Barbour
Facsimile No. (214) 659-4401
8. Entire Agreement. This Agreement (including the attachments hereto)
constitutes the entire agreement among the parties with respect to the subject
matter hereof and supersedes all other prior or contemporary agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof.
9. Termination. This Agreement will automatically terminate and be of
no further force and effect at such time that (i) Fortress has received payment
of the applicable payment pursuant to exercise of the Fortress Put, Capstead
Call or Change in Control Put or (ii) Fortress no longer owns Preferred Stock or
Common Stock acquired pursuant to the Preferred Stock Purchase Agreement.
10. Validity. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, each of which shall remain in full force and
effect.
11. Assignment. This Agreement and the rights hereunder shall not be
assignable or transferable by either party (except (i) by Fortress to any of its
Affiliates and (ii) by operation of law in connection with a merger,
consolidation, or sale of all or substantially all the assets of either party)
without the prior written consent of the other party. This Agreement shall be
binding upon, inure to the benefit of, and be enforceable by, the parties and
their respective successors and permitted assigns.
12. Amendment and Modification. This Agreement may be amended,
modified, or supplemented at any time only by an instrument in writing signed on
behalf of the parties hereto.
13. Specific Performance. The parties hereto agree that if any of the
provisions of this Agreement were not performed in accordance with its specific
terms or were otherwise breached, irreparable damage would occur, no adequate
remedy at law would exist, and damages would be difficult to determine, and that
the parties shall be entitled to specific performance of the terms hereof, in
addition to any other remedy at law or equity.
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<PAGE> 9
14. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAWS.
15. Descriptive Headings. The descriptive headings herein are inserted
for convenience of reference only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement.
16. Certain Definitions.
a. An "Affiliate" of any Person means another Person that
directly or indirectly, through one or more intermediaries, controls,
is controlled by, or is under common control with, such first Person;
b. Capitalized terms used but not defined herein shall have
the meanings ascribed to them in the Purchase Agreement.
17. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
18. Third-Party Beneficiaries. Nothing contained in this Agreement
shall be construed to give any person other than Fortress and Capstead, and
their successors and assigns, any legal or equitable right, remedy, or claim
under or with respect to this Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first written above.
CAPSTEAD MORTGAGE CORPORATION
By: /s/ ANDREW F. JACOBS
-------------------------------------
Andrew F. Jacobs
Executive Vice President-Finance
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<PAGE> 10
FORTRESS INVESTMENT CORP.
By: /s/ RANDAL A. NARDONE
-------------------------------------
Randal A. Nardone
Chief Operating Officer
10
<PAGE> 1
EXHIBIT 10.36
CAPSTEAD MORTGAGE CORPORATION
and
FORTRESS INVESTMENT CORP.
---------------
REGISTRATION RIGHTS AGREEMENT
---------------
Dated as of December 9, 1999
<PAGE> 2
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated
as of December 9, 1999, is between CAPSTEAD MORTGAGE CORPORATION, a Maryland
corporation (the "Company"), and FORTRESS INVESTMENT CORP., a Maryland
Corporation ("Fortress").
1. Introduction. The Company and Fortress are each a party to
the separate Series C Convertible Preferred Stock and Series D Convertible
Preferred Stock Purchase Agreement (the "Stock Purchase Agreement"), dated as of
even date herewith between the Company and Fortress pursuant to which the
Company has agreed, among other things, to issue 5,378,000 shares of its $______
Series C Convertible Preferred Stock, par value $.10 per share (the "Series C
Preferred Stock"), and 5,378,000 shares of its $0.40 Series D Convertible
Preferred Stock, par value $.10 per share (the "Series D Preferred Stock"), to
Fortress. This Agreement shall become effective upon the issuance of such
securities to Fortress pursuant to the Stock Purchase Agreement. Certain
capitalized terms used in this Agreement are defined in section 3 hereof;
references to sections shall be to sections of this Agreement.
2. Registration under Securities Act, etc.
2.1 Registration on Request.
(a) Request. At any time after the first anniversary
of issuance of the Series C Preferred Stock and the Series D Preferred Stock
pursuant to the Stock Purchase Agreement, upon the written request of one or
more Initiating Holders, requesting that the Company effect the registration
under the Securities Act of at least a majority of the Registrable Securities
and specifying the intended method of disposition thereof, the Company will
promptly give written notice of such requested registration to all Holders of
Registrable Securities, and thereupon the Company will, subject to the terms of
this Agreement, use its best efforts to effect the registration under the
Securities Act of:
(i) the Registrable Securities which the
Company has been so requested to register by such Initiating
Holders for disposition in accordance with the intended method
of disposition stated in such request;
(ii) all other Registrable Securities the
Holders of which shall have made a written request to the
Company for registration thereof within 20 days after
<PAGE> 3
the giving of such written notice by the Company (which
request shall specify the intended method of disposition of
such Registrable Securities); and
(iii) all securities which the Company may
elect to register in connection with the offering of
Registrable Securities pursuant to this section 2.1;
all to the extent requisite to permit the disposition (in accordance with the
intended methods thereof as aforesaid) of the Registrable Securities and the
additional securities, if any, so to be registered. The Holders shall be
entitled to make a request to the Company to register Registered Securities
pursuant to this Section 2.1 on no more than two occasions.
(b) Registration Statement Form. Registrations under
this section 2.1 shall be on such appropriate registration form of the
Commission (i) as shall be selected by the Company and (ii) as shall permit the
disposition of such Registrable Securities in accordance with the intended
method or methods of disposition specified in the request for such registration.
(c) Expenses. Except as set forth in Section 2.1(d),
the Company will pay all Registration Expenses in connection with a registration
requested pursuant to this section 2.1.
(d) Effective Registration Statement. A registration
requested pursuant to this section 2.1 shall not be deemed to have been effected
(i) unless a registration statement with respect thereto has become effective,
provided that a registration which does not become effective after the Company
has filed a registration statement with respect thereto solely by reason of the
refusal to proceed of the Participating Holders (other than a refusal to proceed
based upon the advice of counsel relating to a matter with respect to the
Company) shall be deemed to have been effected by the Company at the request of
such Participating Holders unless the Participating Holders shall have elected
to pay all Registration Expenses in connection with such registration, (ii) if,
after it has become effective, such registration becomes subject to any stop
order, injunction or other order or requirement of the Commission or other
governmental agency or court for any reason, or (iii) the conditions to closing
specified in the purchase agreement or underwriting agreement entered into in
connection with such registration are not satisfied, other than by reason of
some act or omission by such Participating Holders.
(e) Selection of Underwriters. If a requested
registration pursuant to this section 2.1 involves an underwritten offering, the
underwriter or underwriters thereof shall be selected by the Company and shall
be reasonably acceptable to the holders of at least a majority (by number of
shares) of the Registrable Securities as to which registration has been
requested.
(f) Priority in Requested Registrations. If a
requested registration pursuant to this section 2.1 involves an underwritten
offering, and the managing underwriter shall
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<PAGE> 4
advise the Company in writing (with a copy to each Participating Holder) that,
in its opinion, the number of securities requested to be included in such
registration (including securities of the Company which are not Registrable
Securities) exceeds the number which can be sold in such offering within a price
range acceptable to the holders of a majority of the Registrable Securities so
requested to be included, the Company will include in such registration, to the
extent of the number which the Company is so advised can be sold in such
offering, (i) first, Registrable Securities requested to be included in such
registration by the Initiating Holders, pro rata among the Initiating Holders,
on the basis of the number of such securities requested to be included by the
Initiating Holders, (ii) second, Registrable Securities requested to be included
in such registration by the other Participating Holders, pro rata among such
Participating Holders, on the basis of the number of such securities requested
to be included by such Participating Holders, and (iii) third, securities the
Company proposes to sell and other securities of the Company included in such
registration by the holders thereof.
2.2 Incidental Registration.
(a) Right to Include Registrable Securities. If the
Company at any time after the first anniversary of the issuance of the Series C
Preferred Stock and the Series D Preferred Stock proposes to register any of its
securities under the Securities Act (other than by a registration on Form S-4 or
S-8, or any successor or similar forms and other than pursuant to section 2.1,
and except for at-the-market offerings under its Stockholder Investment Program
(Common Stock), its Dividend Reinvestment Program (Series B Preferred Stock) and
its shelf offerings of Common Stock and Series B Convertible Preferred Stock
pursuant to one or more Sales Agency Agreements or similar agreements)), whether
or not for sale for its own account, it will each such time give prompt written
notice to all Holders of Registrable Securities of its intention to do so and of
such Holders' rights under this section 2.2. Upon the written request of any
such Holder made within 20 days after the receipt of any such notice (which
request shall specify the Registrable Securities intended to be disposed of by
such Holder), the Company will, subject to the terms of this Agreement, use its
best efforts to effect the registration under the Securities Act of all
Registrable Securities which the Company has been so requested to register by
the Holders thereof, to the extent requisite to permit the disposition of the
Registrable Securities so to be registered, by inclusion of such Registrable
Securities in the registration statement which covers the securities which the
Company proposes to register, provided that if, at any time after giving written
notice of its intention to register any securities and prior to the effective
date of the registration statement filed in connection with such registration,
the Company shall determine for any reason either not to register or to delay
registration of such securities, the Company may, at its election, give written
notice of such determination to each Holder of Registrable Securities and,
thereupon, (i) in the case of a determination not to register, shall be relieved
of its obligation to register any Registrable Securities in connection with such
registration (but not from its obligation to pay the Registration Expenses in
connection therewith), without prejudice, however, to the rights of any Holder
or Holders of Registrable Securities entitled to do so to
3
<PAGE> 5
request that such registration be effected as a registration under section 2.1
(unless such registration has already been effected), and (ii) in the case of a
determination to delay registering, shall be permitted to delay registering any
Registrable Securities, for the same period as the delay in registering such
other securities. No registration effected under this section 2.2 shall relieve
the Company of its obligation to effect the registration upon request under
section 2.1, nor shall any such registration under this section 2.2 be deemed to
have been effected pursuant to section 2.1. The Company will pay all
Registration Expenses in connection with each registration of Registrable
Securities requested pursuant to this section 2.2.
(b) Priority in Incidental Registrations. If (i) a
registration pursuant to this Section 2.2 involves an underwritten offering of
the securities so being registered, whether or not for sale for the account of
the Company (the "Piggyback Securities"), to be distributed (on a firm
commitment basis) by or through one or more underwriters of recognized standing
under underwriting terms appropriate for such a transaction, and (ii) the
managing underwriter of such underwritten offering shall inform the Company and
Holders of the Registrable Securities requesting such registration in writing of
its belief that the distribution of all or a specified number of such
Registrable Securities concurrently with the securities being distributed by
such underwriters would interfere with the successful marketing of the
securities being distributed by such underwriters, then the Company may, upon
written notice to all Holders of such Registrable Securities include as many of
the Piggyback Securities as possible, and (before reducing the number of any
Piggyback Securities) reduce pro rata (if and to the extent stated by such
managing underwriter to be necessary to eliminate such effect) the number of
such Registrable Securities the registration of which shall have been requested
by each Holder of Registrable Securities so that the resultant aggregate number
of such Registrable Securities so included in such registration shall be equal
to the number of shares stated in such managing underwriter's letter.
(c) Expenses. The Company will pay all Registration
Expenses in connection with each registration of Registrable Securities
requested pursuant to this section 2.2.
2.3 Registration Procedures. If and whenever the Company is
required to use its best efforts to effect the registration of any Registrable
Securities under the Securities Act as provided in sections 2.1 and 2.2, the
Company shall, as expeditiously as possible:
(a) prepare and in the case of an incidental
registration under Section 2.2, within 60 days after the end of the period
within which requests for registration may be given to the Company hereunder or
in any event as soon thereafter as possible, or, in the case of a registration
pursuant to section 2.1, within 90 days after the initial request of one or more
Initiating Holders of Registrable Securities or in any event as soon thereafter
as possible, file with the Commission the requisite registration statement to
effect such registration (including such audited financial statements as may be
required by the Securities Act or the rules and regulations promulgated
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<PAGE> 6
thereunder) and thereafter use its best efforts to cause such registration
statement to become and remain effective, provided however that the Company may
discontinue any registration of its securities which are not Registrable
Securities (and, under the circumstances specified in section 2.2(a), its
securities which are Registrable Securities) at any time prior to the effective
date of the registration statement relating thereto, provided further that
before filing such registration statement or any amendments thereto, the Company
will furnish to the counsel selected by the Holders of a majority of the
Registrable Securities which are to be included in such registration copies of
all such documents proposed to be filed, which documents will be subject to the
reasonable review of such counsel;
(b) prepare and file with the Commission such
amendments and supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such registration
statement until the earlier of such time as all of such securities have been
disposed of in accordance with the intended methods of disposition by the seller
or sellers thereof set forth in such registration statement or (i) in the case
of a registration pursuant to section 2.1, the expiration of 180 days after such
registration statement becomes effective, or (ii) in the case of a registration
pursuant to section 2.2, the expiration of 90 days after such registration
statement becomes effective;
(c) furnish to each seller of Registrable Securities
covered by such registration statement and each underwriter, if any, of the
securities being sold by such seller such number of conformed copies of such
registration statement and of each such amendment and supplement thereto (in
each case including all exhibits), such number of copies of the prospectus
contained in such registration statement (including each preliminary prospectus
and any summary prospectus) and any other prospectus filed under Rule 424 under
the Securities Act, in conformity with the requirements of the Securities Act,
and such other documents, as such seller and under writer, if any, may
reasonably request in order to facilitate the public sale or other disposition
of the Registrable Securities owned by such seller;
(d) use its best efforts to register or qualify all
Registrable Securities and other securities covered by such registration
statement under such other securities laws or blue sky laws of such
jurisdictions as any seller thereof and any underwriter of the securities being
sold by such seller shall reasonably request, to keep such registrations or
qualifications in effect for so long as such registration statement remains in
effect, and take any other action which may be reasonably necessary or advisable
to enable such seller and underwriter to consummate the disposition in such
jurisdictions of the securities owned by such seller, except that the Company
shall not for any such purpose be required to qualify generally to do business
as a foreign corporation in any jurisdiction wherein it would not but for the
requirements of this paragraph (d) be obligated to be so qualified,
5
<PAGE> 7
o subject itself to taxation in any such jurisdiction or to consent to general
service of process in any such jurisdiction;
(e) use its best efforts to cause all Registrable
Securities covered by such registration statement to be registered with or
approved by such other governmental agencies or authorities as may be necessary
to enable the seller or sellers thereof to consummate the disposition of such
Registrable Securities;
(f) furnish to each seller of Registrable Securities
a signed counterpart, addressed to such seller and the underwriters, if any, of:
(i) an opinion of counsel for the Company,
dated the effective date of such registration statement (or,
if such registration includes an underwritten public offering,
an opinion dated the date of the closing under the
underwriting agreement), reasonably satisfactory in form and
substance to such seller, and
(ii) a "comfort" letter (or, in the case of
any such Person which does not satisfy the conditions for
receipt of a "comfort" letter specified in Statement on
Auditing Standards No. 72, an "agreed upon procedures"
letter), dated the effective date of such registration
statement (and, if such registration includes an under written
public offering, a letter of like kind dated the date of the
closing under the underwriting agreement), signed by the
independent public accountants who have certified the
Company's financial statements included in such registration
statement, covering substantially the same matters with
respect to such registration statement (and the prospectus
included therein) and, in the case of the accountants' letter,
with respect to events subsequent to the date of such
financial statements, as are customarily covered in opinions
of issuer's counsel and in accountants' letters delivered to
the underwriters in underwritten public offerings of
securities (with, in the case of an "agreed upon procedures"
letter, such modifications or deletions as may be required
under Statement on Auditing Standards No. 35) and, in the case
of the accountants' letter, such other financial matters, and,
in the case of the legal opinion, such other legal matters, as
such seller (or the underwriters, if any) may reasonably
request;
(g) notify the Holders of Registrable Securities and
the managing underwriter or underwriters, if any, promptly and confirm such
advice in writing promptly thereafter:
(i) when the registration statement, the
prospectus or any prospectus supplement related thereto or
post-effective amendment to the registration
statement has been filed, and, with respect to the
registration statement or any post-effective amendment
thereto, when the same has become effective;
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<PAGE> 8
(ii) of any request by the Commission for
amendments or supplements to the registration statement or the
prospectus or for additional information;
(iii) of the issuance by the Commission of
any stop order suspending the effectiveness of the
registration statement or the initiation of any proceedings by
any Person for that purpose;
(iv) if at any time the representations and
warranties of the Company made as contemplated by section 2.4
below cease to be true and correct; and
(v) of the receipt by the Company of any
notification with respect to the suspension of the
qualification of any Registrable Securities for sale under the
securities or blue sky laws of any jurisdiction or the
initiation or threat of any proceeding for such purpose;
(h) notify each seller of Registrable Securities
covered by such registration statement, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, upon the
Company's discovery that, or upon the happening of any event as a result of
which, the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances under which they were
made, and at the request of any such seller promptly prepare and furnish to such
seller and each underwriter, if any, a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such securities, such prospectus shall
not include 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 in the light of the circumstances under which they were made;
(i) make every reasonable effort to obtain the
withdrawal of any order suspending the effectiveness of the registration
statement at the earliest possible moment;
(j) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available to its
security holders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve months, but not more than eighteen
months, beginning with the first day of the Company's first full calendar
quarter after the effective date of such registration statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the Securities Act
and Rule 158 thereunder, and will furnish to each such seller at least five
business days prior to the filing thereof a copy of any amendment or supplement
to such
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<PAGE> 9
registration statement or prospectus (provided, however that a filing on Form
10-K, 10-Q or 8-K (or similar or successor form) shall not be deemed such an
amendment or supplement) and shall not file any thereof to which any such seller
shall have reasonably objected on the grounds that such amendment or supplement
does not comply in all material respects with the requirements of the Securities
Act or of the rules or regulations thereunder;
(k) make available for inspection by a representative
or representatives of the Holders of Registrable Securities, each such
representative representing the Holders of not less than a majority of the
Registrable Securities included in the registration, any underwriter partici-
pating in any disposition pursuant to the registration statement and any
attorney or accountant retained by such selling Holders or underwriter (each, an
"Inspector"), all financial and other records, pertinent corporate documents and
properties of the Company (the "Records"), and cause the Company's officers,
directors and employees to supply all information reasonably requested by any
such Inspector in connection with such registration in order to permit a
reasonable investigation within the meaning of Section 11 of the Securities Act,
provided that the Company shall not be required to comply with this paragraph
(k) if there is a reasonable likelihood, in the judgment of the Company, that
such delivery could result in the loss of any attorney-client privilege related
thereto;
(l) provide and cause to be maintained a transfer
agent and registrar for all Registrable Securities covered by such registration
statement from and after a date not later than the effective date of such
registration statement; and
(m) use its best efforts to list all Registrable
Securities covered by such registration statement on any securities exchange on
which any of the securities of the same class as the Registrable Securities are
then listed.
The Company may require each seller of Registrable Securities as to which any
registration is being effected to furnish the Company such information regarding
such seller and the distribution of such securities as the Company may from time
to time reasonably request in writing.
The Company will not file any registration statement or
amendment thereto or any prospectus or any supplement thereto (including such
documents incorporated by reference and proposed to be filed after the initial
filing of the registration statement) to which the Holders of at least a
majority of the Registrable Securities covered by such registration statement or
the underwriter or underwriters, if any, shall reasonably object, provided that
the Company may file such document in a form required by law or upon the advice
of its counsel.
Each Holder of Registrable Securities shall be deemed to have agreed by
acquisition of such Registrable Securities that, upon receipt of any notice from
the Company of the occurrence of any event of the kind described in paragraph
(h) of this section 2.3, such Holder will forthwith
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<PAGE> 10
discontinue such holder's disposition of Registrable Securities pursuant to the
registration statement relating to such Registrable Securities until such
Holder's receipt of the copies of the supplemented or amended prospectus
contemplated by paragraph (h) of this section 2.3 and, if so directed by the
Company, will deliver to the Company (at the Company's expense) all copies,
other than permanent file copies, then in such Holder's possession of the
prospectus relating to such Registrable Securities current at the time of
receipt of such notice. In the event the Company shall give any such notice, the
period mentioned in paragraph (b) of this section 2.3 shall be extended by the
length of the period from and including the date when each seller of any
Registrable Securities covered by such registration statement shall have
received such notice to the date on which each such seller has received the
copies of the supplemented or amended prospectus contemplated by paragraph (h)
of this section 2.3.
If any such registration statement refers to any Holder of Registrable
Securities by name or otherwise as the Holder of any securities of the Company,
then such Holder shall have the right to require (i) the insertion therein of
language, in form and substance satisfactory to such Holder, to the effect that
the holding by such Holder of such securities is not to be construed as a
recommendation by such Holder of the investment quality of the Company's
securities covered thereby and that such holding does not imply that such Holder
will assist in meeting any future financial requirements of the Company, or (ii)
in the event that such reference to such Holder by name or otherwise is not
required by the Securities Act or any similar federal statute then in force, the
deletion of the reference to such Holder.
2.4 Underwritten Offerings.
(a) Requested Underwritten Offerings. If requested by the underwriters for any
underwritten offering by holders of Registrable Securities pursuant to a
registration requested under section 2.1, the Company will enter into an
underwriting agreement with such underwriters for such offering, such agreement
to be satisfactory in substance and form to the Company and the underwriters,
and to contain such representations and warranties by the Company and such other
terms as are generally prevailing in agreements of this type, including, without
limitation, indemnities to the effect and to the extent provided in section 2.6.
The Holders of the Registrable Securities will cooperate with the Company in the
negotiation of the underwriting agreement and will give consideration to the
reasonable suggestions of the Company regarding the form thereof, provided that
nothing herein contained shall diminish the foregoing obligations of the
Company. The Holders of Registrable Securities to be distributed by such
underwriters shall be parties to such underwriting agreement and may, at their
option, require that any or all of the representations and warranties by, and
the other agreements on the part of, the Company to and for the benefit of such
underwriters shall also be made to and for the benefit of such Holders of
Registrable Securities and that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting agreement be conditions
precedent to the obligations of such Holders of Registrable
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<PAGE> 11
Securities. Any such Holder of Registrable Securities shall not be required to
make any representations or warranties to or agreements with the Company or the
underwriters other than representations and warranties contained in a writing
furnished by such holder expressly for use in such registration statement or
agreements regarding such Holder, such Holder's Registrable Securities and such
Holder's intended method of distribution and any other representation required
by law.
(b) Incidental Underwritten Offerings. If the Company
at any time proposes to register any of its securities under the Securities Act
as contemplated by section 2.2 and such securities are to be distributed by or
through one or more underwriters, the Holders of Registrable Securities to be
distributed by such underwriters shall be parties to the underwriting agreement
between the Company and such underwriters and may, at their option, require that
any or all of the representations and warranties by, and the other agreements on
the part of, the Company to and for the benefit of such underwriters shall also
be made to and for the benefit of such Holders of Registrable Securities and
that any or all of the conditions precedent to the obligations of such
underwriters under such underwriting agreement be conditions precedent to the
obligations of such Holders of Registrable Securities. Any such Holder of
Registrable Securities shall not be required to make any representations or
warranties to or agreements with the Company or the underwriters other than
representations, warranties or agreements regarding such Holder, such Holder's
Registrable Securities and such Holder's intended method of distribution and any
other representation required by law.
(c) Holdback Agreements.
(i) Each Holder of Registrable Securities
agrees by acquisition of such Registrable Securities, if so
required by the managing underwriter, not to sell, make any
short sale of, loan, grant any option for the purchase of,
effect any public sale or distribution of or otherwise dispose
of any equity securities of the Company, during such period as
the managing underwriter may request (not to exceed the two
days prior to and the 90 days after any underwritten
registration pursuant to section 2.1 or 2.2 has become
effective or such lesser period of time, prior to and/or after
the date of effectiveness, as may be requested by the managing
underwriter with respect to the disposition of equity
securities of the Company held by the Company and/or its
management stockholders) except as part of such underwritten
registration, whether or not such Holder participates in such
registration. Notwithstanding the foregoing sentence, each
Holder of Registrable Securities subject to the foregoing
sentence shall be entitled to sell during the foregoing period
securities in a private sale. Each Holder of Registrable
Securities agrees that the Company may instruct its transfer
agent to place stop transfer notations in its records to
enforce this section 2.4(c).
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<PAGE> 12
(ii) The Company agrees (x) if so required
by the managing underwriter, not to sell, make any short sale
of, loan, grant any option for the pur chase of, effect any
public sale or distribution of or otherwise dispose of its
equity securities or securities convertible into or
exchangeable or exercisable for any of such securities during
such period of time as the managing underwriter may request
(not to exceed the two days prior to and the 90 days after any
underwritten registration pursuant to section 2.1 or 2.2 has
become effective, except as part of such under written
registration and except pursuant to registrations on Form S-4,
S-8, or any successor or similar forms thereto and except for
at-the-market offerings under its Stockholder Investment
Program (Common Stock), its Dividend Reinvestment Program
(Series B Preferred Stock) and its shelf offerings of Common
Stock and Series B Convertible Preferred Stock pursuant to one
or more Sales Agency Agreements or similar agreements and (y)
to cause each holder of more than 1% of its equity securities
or any securities convertible into or exchangeable or
exercisable for any of such securities, in each case purchased
directly from the Company (or indirectly from the Company as
the first purchaser in a Rule 144A Offering) at any time after
the date of this Agreement (other than in a public offering)
to agree not to sell, make any short sale of, loan, grant any
option for the purchase of, effect any public sale or
distribution of or otherwise dispose of such securities during
such period except as part of such underwritten registration.
(d) Participation in Underwritten Offerings. No
Person may participate in any underwritten offering hereunder unless such Person
(i) agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved, subject to the terms and condi tions hereof,
by the Company and the Holders of a majority of Registrable Securities to be
included in such underwritten offering and (ii) completes and executes all
questionnaires, indemnities, underwriting agreements and other documents (other
than powers of attorney) required under the terms of such underwriting
arrangements. Notwithstanding the foregoing, no underwriting agreement (or other
agreement in connection with such offering) shall require any Holder of
Registrable Securities to make any representations or warranties to or
agreements with the Company or the underwriters other than representations and
warranties contained in a writing furnished by such Holder expressly for use in
the related registration statement or agreements regarding such Holder, such
Holder's Registrable Securities and such Holder's intended method of
distribution and any other representation required by law.
2.5 Preparation; Reasonable Investigation. In connection with
the preparation and filing of each registration statement under the Securities
Act pursuant to this Agreement, the Company will give the Holders of Registrable
Securities registered under such registration state ment, their underwriters, if
any, each Requesting Holder and their respective counsel and accountants, the
opportunity to participate in the preparation of such registration statement,
each prospectus included
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<PAGE> 13
therein or filed with the Commission, and each amendment thereof or supplement
thereto, and will give each of them such access to its books and records and
such opportunities to discuss the business of the Company with its officers and
the independent public accountants who have certified its financial statements
as shall be necessary, in the opinion of such Holders' and such underwriters'
respective counsel, to conduct a reasonable investigation within the meaning of
the Securities Act.
2.6 Indemnification.
(a) Indemnification by the Company. In the event of
any registration of any securities of the Company under the Securities Act, the
Company will, and hereby does agree to, indemnify and hold harmless (i) in the
case of any registration statement filed pursuant to section 2.1 or 2.2, the
Holder of any Registrable Securities covered by such registration statement, its
directors and officers, each other Person who participates as an underwriter in
the offering or sale of such securities and each other Person, if any, who
controls such Holder or any such underwriter within the meaning of the
Securities Act, against any losses, claims, damages or liabilities, joint or
several, to which such Holder or any such director or officer or underwriter or
controlling person may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which such
securities were registered under the Securities Act, any preliminary prospectus,
final prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and the Company will reimburse such Holder and each such
director, officer, underwriter and controlling person for any legal or any other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, liability, action or proceeding, provided that
the Company shall not be liable in any such case to the extent that any such
loss, claim, damage, liability (or action or proceeding in respect thereof) or
expense arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such registration statement,
any such preliminary prospectus, final prospectus, summary prospectus, amendment
or supplement in reliance upon and in conformity with written information
furnished to the Company through an instrument duly executed by such Holder
specifically stating that it is for use in the preparation thereof and, provided
further that the Company shall not be liable to any Person who participates as
an underwriter in the offering or sale of Registrable Securities or to any other
Person, if any, who controls such underwriter within the meaning of the
Securities Act, in any such case to the extent that any such loss, claim,
damage, liability (or action or proceeding in respect thereof) or expense arises
out of such Person's failure to send or give a copy of the final prospectus, as
the same may be then supplemented or amended, within the time required by the
Securities Act to the Person asserting the existence of an untrue statement or
alleged untrue statement or omission or alleged omission at or prior to the
written confirmation of the sale of Registrable Securities to such Person
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<PAGE> 14
if such statement or omission was corrected in such final prospectus. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of such Holder or any such director, officer, underwriter
or controlling person and shall survive the transfer of such securities by such
holder.
(b) Indemnification by the Sellers. The Company may
require, as a condition to including any Registrable Securities in any
registration statement filed pursuant to section 2.3, that the Company shall
have received an undertaking satisfactory to it from the prospective seller of
such Registrable Securities, to indemnify and hold harmless (in the same manner
and to the same extent as set forth in paragraph (a) of this section 2.6) the
Company, each director of the Company, each officer of the Company and each
other person, if any, who controls the Company within the meaning of the
Securities Act, with respect to any statement or alleged statement in or
omission or alleged omission from such registration statement, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, if such statement or alleged statement or
omission or alleged omission was made in reliance upon and in conformity with
written information furnished to the Company through an instrument duly executed
by such seller specifically stating that it is for use in the preparation of
such registration statement, preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement. Any such indemnity shall remain in full
force and effect, regardless of any investigation made by or on behalf of the
Company or any such director, officer or controlling person and shall survive
the transfer of such securities by such seller.
(c) Notices of Claims, etc. Promptly after receipt by
an indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in the preceding paragraphs of this section 2.6,
such indemnified party will, if a claim in respect thereof is to be made against
an indemnifying party, give written notice to the latter of the commencement of
such action, provided that the failure of any indemnified party to give notice
as provided herein shall not relieve the indemnifying party of its obligations
under the preceding paragraphs of this section 2.6, except to the extent that
the indemnifying party is actually prejudiced by such failure to give notice. In
case any such action is brought against an indemnified party, unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist in respect of such claim, the
indemnifying party shall be entitled to participate in and to assume the defense
thereof, jointly with any other indemnifying party similarly notified, to the
extent that the indemnifying party may wish, with counsel reasonably
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party shall not be liable to such indemnified party
for any legal or other expenses subsequently incurred by the latter in
connection with the defense thereof other than reasonable costs of
investigation. No indemnifying party shall, without the consent of the
indemnified party, consent to entry of any judgment or enter into any settlement
of any such action which does not include as an unconditional term thereof the
giving by
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<PAGE> 15
the claimant or plaintiff to such indemnified party of a release from all
liability, or a covenant not to sue, in respect to such claim or litigation. No
indemnified party shall consent to entry of any judgment or enter into any
settlement of any such action the defense of which has been assumed by an
indemnifying party without the consent of such indemnifying party.
(d) Other Indemnification. Indemnification similar to
that specified in the preceding paragraphs of this section 2.6 (with appropriate
modifications) shall be given by the Company and each seller of Registrable
Securities with respect to any required registration or other qualification of
securities under any Federal or state law or regulation of any governmental
authority, other than the Securities Act.
(e) Indemnification Payments. The indemnification
required by this section 2.6 shall be made by periodic payments of the amount
thereof during the course of the investigation or defense, as and when bills are
received or expense, loss, damage or liability is incurred.
(f) Contribution. If the indemnification provided for
in the preceding paragraphs of this section 2.6 is unavailable to an indemnified
party in respect of any expense, loss, claim, damage or liability referred to
therein, then each indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such expense, loss, claim, damage or liability (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and the Holder or underwriter, as the case may be, on
the other from the distribution of the Registrable Securities or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company on
the one hand and of the Holder or underwriter, as the case may be, on the other
in connection with the statements or omissions which resulted in such expense,
loss, damage or liability, as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and the Holder or underwriter, as the case may be, on the other in connection
with the distribution of the Registrable Securities shall be deemed to be in the
same proportion as the total net proceeds received by the Company from the
initial sale of the Registrable Securities by the Company to the purchasers
pursuant to the Purchase Agreement bear to the gain, if any, realized by the
selling Holder or the underwriting discounts and commissions received by the
underwriter, as the case may be. The relative fault of the Company on the one
hand and of the holder or underwriter, as the case may be, on the other shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or omission to state a material fact relates
to information supplied by the Company, by the Holder or by the underwriter and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission, provided that the foregoing
contribution agreement shall not inure to the benefit of any indemnified party
if indemnification would be unavailable to such
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<PAGE> 16
indemnified party by reason of the provisions contained in the first sentence of
paragraph (a) of this section 2.6, and in no event shall the obligation of any
indemnifying party to contribute under this paragraph (f) exceed the amount that
such indemnifying party would have been obligated to pay by way of
indemnification if the indemnification provided for under paragraphs (a) or (b)
of this sec tion 2.6 had been available under the circumstances.
The Company and the Holders of Registrable Securities agree
that it would not be just and equitable if contribution pursuant to this
paragraph (f) were determined by pro rata allocation (even if the Holders and
any underwriters were treated as one entity for such purpose) or by any other
method of allocation that does not take account of the equitable considerations
referred to in the immediately preceding paragraph. The amount paid or payable
by an indemnified party as a result of the losses, claims, damages and
liabilities referred to in the immediately preceding paragraph shall be deemed
to include, subject to the limitations set forth in the preceding sentence and
paragraph (c) of this section 2.6, any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or defending
any such action or claim.
Notwithstanding the provisions of this paragraph (f), no
Holder of Registrable Securities or underwriter shall be required to contribute
any amount in excess of the amount by which (i) in the case of any such holder,
the net proceeds received by such holder from the sale of Registrable Securities
or (ii) in the case of an underwriter, the total price at which the Registrable
Securities purchased by it and distributed to the public were offered to the
public exceeds, in any such case, the amount of any damages that such Holder or
underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
2.7 Restrictions on Transfer.
(a) Restrictive Legends. Except as otherwise
permitted by this section 2.7, each certificate or other instrument evidencing
any Registrable Securities (including each such certificate or other instrument
issued upon the transfer of any Registrable Securities) shall be stamped or
otherwise imprinted with a legend in substantially the following form:
"The shares of Series C Convertible Preferred Stock, Series D
Convertible Preferred Stock or Common Stock (as the case may be)
represented by this certificate have not been registered under the
Securities Act of 1933 and may not be transferred in the absence of
such registration or an exemption therefrom under such Act."
(b) Notice of Proposed Transfer; Opinions of Counsel.
Prior to any transfer of any Registrable Securities which are not registered
under an effective registration state-
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<PAGE> 17
ment under the Securities Act, the Holder thereof will give written notice to
the Company of such Holder's intention to effect such transfer and to comply in
all other respects with this section 2.7(b). Each such notice (i) shall describe
the manner and circumstances of the proposed transfer in sufficient detail to
enable counsel to render the opinions referred to below, and (ii) shall
designate counsel for the Holder giving such notice (who may be house counsel
for such Holder). The Holder giving such notice will submit a copy thereof to
the counsel designated in such notice and the Company will promptly submit a
copy thereof to its counsel. The following provisions shall then apply:
(x) If (A) in the opinion of such counsel for the Holder the
proposed transfer may be effected without registration of such
Registrable Securities under the Securities Act, and (B) counsel for
the Company shall not have rendered an opinion within 15 days after
receipt by the Company of such written notice that such registration is
required, such Holder shall thereupon be entitled to transfer such
Registrable Securities in accordance with the terms of the notice
delivered by such Holder to the Company.
(y) If in the opinion of either or both of such counsel the
proposed transfer may not legally be effected without registration of
such Registrable Securities under the Securities Act (such opinion or
opinions to state the basis of the legal conclusions reached therein),
the Company will promptly so notify the holder thereof and thereafter
such holder shall not be entitled to transfer such Registrable
Securities until receipt of a further notice from the Company under
clause (x) above or until registration of such Registrable Securities
under the Securities Act has become effective.
3. Definitions. As used herein, unless the context otherwise
requires, the following terms have the following respective meanings:
Commission: The Securities and Exchange Commission or any
other Federal agency at the time administering the Securities
Act.
Common Stock: The Common Stock, par value $.01, of the
Company.
Company: As defined in the introductory paragraph of this
Agreement.
Exchange Act: The Securities Exchange Act of 1934, or any
similar Federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at
the time. Reference to a particular section of the Securities
Exchange Act of 1934 shall include a reference to the
comparable section, if any, of any such similar Federal
statute.
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Initiating Holders: Any Holder or Holders of Registrable
Securities initiating a request pursuant to section 2.1 for
the registration of at least a majority of the Registrable
Securities.
Holders: As defined in Section 7.
Stock Purchase Agreement: As defined in section 1.
Person: A corporation, an association, a partnership, a
limited liability company, an organization, business, an
individual, a governmental or political paragraph thereof or a
governmental agency.
Participating Holders: Holders who have elected to have their
Registrable Securities registered in accordance with the
provisions of Section 2.1.
Piggyback Securities: As defined in Section 2.2(b).
Registrable Securities: Any of the shares of Common Stock into
which shares of Series C Preferred Stock and Series D
Preferred Stock issued to Fortress pursuant to the Stock
Purchase Agreement are convertible.
Registration Expenses: All expenses incident to the Company's
performance of or compliance with section 2.1 through 2.5,
including, without limitation, all registration, filing and
NASD fees, all stock exchange listing fees, all fees and ex
penses of complying with securities or blue sky laws, all word
processing, dupli cating and printing expenses, messenger and
delivery expenses, the fees and disbursements of counsel for
the Company and of its independent public accountants,
including the expenses of any special audits or "cold comfort"
letters required by or incident to such performance and
compliance, the fees and disbursements of a single counsel and
accountants retained by the Holders of the Registrable
Securities being registered, premiums and other costs of
policies of insurance against liabilities arising out of the
public offering of the Registrable Securities being registered
and any fees and disbursements of underwriters customarily
paid by issuers or sellers of securities, but excluding
underwriting discounts and commissions and transfer taxes, if
any, provided that, in any case where Registration Expenses
are not to be borne by the Company, such expenses shall not
include salaries of Company personnel or general overhead
expenses of the Company, auditing fees, premiums or other
expenses relating to liability insurance required by
underwriters of the Company or other expenses for the
preparation of financial statements or other data normally
prepared by the Company in the ordinary course of its business
or which the Company would have incurred in any event.
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Securities Act: The Securities Act of 1933, or any similar
Federal statute, and the rules and regulations of the
Commission thereunder, all as of the same shall be in effect
at the time. References to a particular section of the
Securities Act of 1933 shall include a reference to the
comparable section, if any, of any such similar Federal
statute.
4. Rules 144 and 144A. The Company shall file the reports
required to be filed by it under the Securities Act and the Exchange Act
(including but not limited to the reports under sections 13 and 15(d) of the
Exchange Act referred to in subparagraph (c) of Rule 144 adopted by the
Commission under the Securities Act) and the rules and regulations adopted by
the Commission thereunder (or, if the Company is not required to file such
reports, will, upon the request of any holder of Registrable Securities, make
publicly available other information) and will take such further action as any
holder of Registrable Securities may reasonably request, all to the extent
required from time to time to enable such holder to sell Registrable Securities
without registration under the Securities Act within the limitation of the
exemptions provided by (a) Rule 144 under the Securities Act, as such Rule may
be amended from time to time, or (b) any similar rule or regulation hereafter
adopted by the Commission. Upon the request of any Holder of Registrable
Securities, the Company will deliver to such Holder a written statement as to
whether it has complied with the requirements of this Section 4.
5. Amendments and Waivers. This Agreement may be amended and
the Company may take any action herein prohibited, or omit to perform any act
herein required to be performed by it, only if the Company shall agree and shall
have obtained the written consent to such amendment, action or omission to act,
of the Holder or Holders of 66 2/3 % or more of the shares of Registrable
Securities and, in the case of any such amendment, action or omission to act in
respect of the first sentence of Section 4, the written consent of each Holder
affected thereby. Each Holder of any Registrable Securities at the time or
thereafter outstanding shall be bound by any consent authorized by this section
5, whether or not such Registrable Securities shall have been marked to indicate
such consent.
6. Notices. Except as otherwise provided in this Agreement,
all notices, requests and other communications to any Person provided for
hereunder shall be in writing and shall be given to such Person (a) in the case
of Fortress, in the manner set forth in the Stock Purchase Agreement or at such
other address as Fortress shall have furnished to the Company in writing, or (b)
in the case of any other Holder of Registrable Securities, at the address that
such Holder shall have furnished to the Company in writing, or, until any such
other Holder so furnishes to the Company an address, then to and at the address
of the last Holder of such Registrable Securities who
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has furnished an address to the Company, or (c) in the case of the Company, at
8401 N. Central Expressway, Suite 800, Dallas, Texas 75225-4401 to the attention
of its Chairman, or at such other address, or to the attention of such other
officer, as the Company shall have furnished to each holder of Registrable
Securities at the time outstanding. Each such notice, request or other
communication shall be effective (i) if given by mail, 72 hours after such
communication is deposited in the mails with first class postage prepaid,
addressed as aforesaid or (ii) if given by any other means (including, without
limitation, by air courier), when delivered at the address specified above,
provided that any such notice, request or communication to any holder of
Registrable Securities shall not be effective until received.
7. Assignment. Except as set forth in the next sentence, this
Agreement shall not be assignable except in one or more cases by and among
Fortress and its affiliates (provided that each such assignment shall assign the
full rights and obligations of Fortress or, as the case may be, its affiliate
(if Fortress has already assigned its full rights and obligations hereunder to
such affiliate) and each such assignment shall be made between Fortress or, as
the case may be, such affiliate to only one of Fortress' affiliates per
assignment (i.e., Fortress may not distribute its rights and obligations
hereunder among more than one affiliate at any time)). The provisions of this
Agreement which are for the benefit of the parties hereto other than the Company
shall only be assignable to transferees of at least 25% of the Registrable
Securities (which transferees, together with Fortress or such affiliate (as long
as Fortress or such affiliate, as the case may be, holds any Registrable
Securities), shall be termed "Holders"), subject to the provisions respecting
the minimum numbers or percentages of shares of Registrable Securities required
in order to be entitled to certain rights, or take certain actions, contained
herein. Any attempt to assign any portion of this Agreement outside of the scope
set forth in this Section 7 shall be null and void.
8. Descriptive Headings. The descriptive headings of the
several sections and paragraphs of this Agreement are inserted for reference
only and shall not limit or otherwise affect the meaning hereof.
9. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY,
THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO THE PRINCIPLES OF
CONFLICTS OF LAWS.
10. Counterparts. This Agreement may be executed
simultaneously in any number of counterparts, each of which shall be deemed an
original, but all such counterparts shall together constitute one and the same
instrument.
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11. Entire Agreement. This Agreement embodies the entire
agreement and understanding between the Company and each other party hereto
relating to the subject matter hereof and supersedes all prior agreements and
understandings relating to such subject matter.
12. Severability. If any provision of this Agreement, or the
application of such provisions to any Person or circumstance, shall be held
invalid, the remainder of this Agreement, or the application of such provision
to Persons or circumstances other than those to which it is held invalid, shall
not be affected thereby.
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IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed and delivered by their respective officers thereunto duly authorized
as of the date first above written.
CAPSTEAD MORTGAGE CORPORATION
By: /s/ ANDREW F. JACOBS
------------------------------------
Andrew F. Jacobs
Executive Vice President - Finance
FORTRESS INVESTMENT CORP.
By: /s/ RANDAL A. NARDONE
------------------------------------
Randal A. Nardone
Chief Operating Officer
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