As filed with the Securities and Exchange Commission on
February 27, 1997
Registration No. 33-50705
=================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------------
Post-Effective
Amendment No. 1 to
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------
RESOURCE MORTGAGE CAPITAL, INC.
(Exact name of registrant as specified in its charter)
VIRGINIA
52-1549373
(State or other jurisdiction (I.R.S. Employer of in corporation or organization)
Identification No.)
10900 Nuckols Road
Glen Allen, Virginia 23060
(804) 217-5800
(Address, including zip code, and telephone number, including area code, or
registrant's principal executive offices)
Thomas H. Potts
President
Resource Mortgage Capital, Inc.
10900 Nuckols Road
Glen Allen, Virginia 23060
(804) 217-5800
(Name and address, including zip code, and telephone number,
including
area code, of agent for service)
Copy to:
Elizabeth R. Hughes, Esq.
Venable, Baetjer and Howard, LLP
1800 Mercantile Bank & Trust Bldg.
2 Hopkins Plaza
Baltimore, Maryland 21201
(410) 244-7400
Approximate date of commencement of proposed sale to the
public: As soon as practicable on or after the effective date
of this Post-Effective Amendment.
<PAGE>
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED ____________, 1997)
2,000,000 SHARES
[GRAPHIC OMITTED]
RESOURCE MORTGAGE CAPITAL, INC.
SHARES OF COMMON STOCK
(PAR VALUE $.01 PER SHARE)
Pursuant to the terms of a Sales Agency Agreement (the Sales Agency
Agreement) between Resource Mortgage Capital, Inc., a Virginia corporation (the
Company), and PaineWebber Incorporated (PaineWebber or the Agent), a form of
which has been filed as an exhibit to the Registration Statement of which this
Prospectus Supplement is a part and is incorporated herein by reference, the
Company may issue and sell up to 2,000,000 shares (the Maximum Amount) of its
common stock, par value $.01 per share (Common Stock), from time to time through
PaineWebber, as sales agent for the Company, which shares are being offered
under this Prospectus Supplement. Such sales, if any, will be made by means of
ordinary brokers' transactions on the New York Stock Exchange (the NYSE). Such
sales will be effected during a series of one or more pricing periods (each, a
Pricing Period), each consisting of five consecutive calendar days in duration,
unless a shorter period has otherwise been agreed to by the Company and
PaineWebber. During any Pricing Period, the Company and PaineWebber will
designate the number of shares of stock to be sold as Average Market Price
Shares which shares shall not exceed 4% of the average daily trading volume of
the Common Stock over the preceding 60 consecutive calendar days. For such
Pricing Period, an Average Market Price (as hereinafter defined) will be
computed. With respect to any Pricing Period, Average Market Price shall equal
the average of the arithmetic mean of the high and low sales prices of the
Common Stock of the Company reported on the NYSE for each trading day of such
Pricing Period.
The net proceeds to the Company with respect to sales of Average Market Price
Shares will equal a percentage of the Average Market Price (the Company's
Percent) for each share of Common Stock sold during the Pricing Period plus
Excess Proceeds (as defined below), if any, plus Alternative Proceeds (as
defined below), if any. The Company's Percent will be 97% with respect to the
first 600,000 shares that may be sold under the Sales Agency Agreement, 97.5%
for the next 600,000 shares that may be sold thereunder, and 98% for the
remaining 800,000 shares that may be sold thereunder. The compensation to
PaineWebber for such sales in any Pricing Period will equal the difference
between the aggregate gross sales prices at which such sales are actually
effected and the net proceeds to the Company for such sales, but in no case will
exceed the maximum amount permitted pursuant to any applicable requirements of
the National Association of Securities Dealers, Inc., as determined in good
faith by PaineWebber (the Maximum Commission). In the event that
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON
OR ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO
THE CONTRARY IS UNLAWFUL.
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS ____________, 1997.
<PAGE>
the average gross sales price for all Average Market Price Shares sold in any
Pricing Period is equal to or less than the Company's Percent of the Average
Market Price, all of the proceeds from such sales would be for the account of
the Company and no compensation would be payable to the Agent. To the extent
that PaineWebber's compensation under the foregoing formula would otherwise
exceed the Maximum Commission, the excess will constitute additional net
proceeds to the Company (the Excess Proceeds).
During any Pricing Period, the Company may designate a minimum price and
instruct PaineWebber not to transact any sales below such price. If such an
instruction is given and as a result thereof PaineWebber is unable to sell, on a
daily basis, shares of Common Stock in any amount greater than or equal to the
daily pro rata portion of Average Market Price Shares to be sold during such
Pricing Period, then the prices reported on the NYSE for that day shall not be
computed in calculating the Average Market Price for such Pricing Period and the
net proceeds payable to the Company (the Alternative Proceeds) in respect of any
sales of Average Market Price Shares effected that day (the Alternative Shares)
by PaineWebber shall be equal to the Company's Percent times the weighted
average gross sales prices at which PaineWebber has actually effected sales
during that day. The compensation payable to PaineWebber for the sale of
Alternative Shares shall be equal to the difference between the gross sales
proceeds and the net proceeds to the Company for such sales. The Alternative
Shares shall be excluded from determining the net proceeds to the Company for
sales of Average Market Price Shares for such Pricing Period.
During any Pricing Period, the Company and PaineWebber may agree upon the
sale of shares (the Additional Shares) of Common Stock in addition to the
Average Market Price Shares, such Additional Shares to be included in the
computation of the Maximum Amount. The compensation to PaineWebber with respect
to each one of the Additional Shares sold in any Pricing Period shall be a fixed
percentage (PaineWebber's Percent) of the gross sales price per share.
PaineWebber's Percent shall equal 3% with respect to the first 600,000 shares
that may be sold under the Sales Agency Agreement, 2.5% for the next 600,000
shares that may be sold thereunder and 2% for the remaining 800,000 shares that
may be sold thereunder. Unless otherwise indicated in a further Prospectus
Supplement, PaineWebber as sales agent will act on a reasonable efforts basis.
Settlements of sales of Additional Shares and Average Market Shares will
occur on the third business day following the date on which any such sales are
made. Purchases of Common Stock from PaineWebber as sales agent for the Company
will settle the regular way on the NYSE. Compensation to PaineWebber with
respect to sales of Average Market Price Shares will be paid out of the proceeds
of the Average Market Price Shares that settle the third business day following
the last day of a Pricing Period. There is no arrangement for funds to be
received in an escrow, trust or similar arrangement.
At the end of each Pricing Period, the Company will file an additional
Prospectus Supplement under the applicable paragraph of Rule 424(b) promulgated
under the Securities Act of 1933, as amended (the Act), which Prospectus
Supplement will set forth the dates included in such Pricing Period, the number
of such shares of Common Stock sold through PaineWebber as sales agent
(identifying separately the number of Average Market Price Shares), the high and
low prices at which Average Market Price Shares were sold during such Pricing
Period, the net proceeds to the Company and the compensation payable by the
Company to PaineWebber with respect to such sales pursuant to the formulas set
forth above.
In connection with the sale of the Common Stock on behalf of the Company,
PaineWebber may be deemed to be an underwriter within the meaning of the Act,
and the compensation of PaineWebber may be deemed to be underwriting commissions
or discounts. The Company has agreed to provide indemnification and contribution
to PaineWebber against certain civil liabilities, including liabilities under
the Act, as amended. PaineWebber may engage in transactions with, or perform
services for, the Company in the ordinary course of business.
The offering of Common Stock pursuant to the Sales Agency Agreement will
terminate upon the earlier of (i) the sale of all shares of Common Stock subject
thereto, or (ii) termination of the Sales Agency Agreement. The Sales Agency
Agreement may be terminated by the Company in its sole discretion after giving
ten days written notice. PaineWebber has the right to terminate the Sales Agency
Agreement after giving ten days written notice, and in certain other
circumstances specified in the Sales Agency Agreement.
S-2
<PAGE>
PROSPECTUS
[GRAPHIC OMITTED]
Resource Mortgage Capital, Inc.
Common Stock, Preferred Stock, Debt Securities Warrants
to Purchase Common Stock, Warrants to Purchase
Preferred Stock and Warrants to
Purchase Debt Securities
----------------
Resource Mortgage Capital, a Virginia corporation (the Company), directly or
through agents, dealers or underwriters designated from time to time, may issue
and sell from time to time one or more of the following types of its securities
(the "Securities"): (i) shares of its common stock, par value $0.01 per share
("Common Stock"); (ii) shares of its preferred stock, par value $0.01 per share,
in one or more series ("Preferred Stock"), (iii) debt securities, in one or more
series, any series of which may be either senior debt securities or subordinated
debt securities (collectively, "Debt Securities" and, as appropriate, "Senior
Debt Securities" or "Subordinated Debt Securities"), (iv) warrants to purchase
shares of Common Stock ("Common Stock Warrants"); (v) warrants to purchase
Preferred Stock ("Preferred Stock Warrants"); (vi) warrants to purchase debt
securities ("Debt Warrants) and (vii) any combination of the foregoing, either
individually or as units consisting of one or more of the foregoing types of
Securities. The Securities offered pursuant to this Prospectus may be issued in
one or more series, in amounts, at prices and on terms to be determined at the
time of the offering of each such series. The Securities offered by the Company
pursuant to this Prospectus will be limited to $200,000,000 aggregate initial
public offering price, including the exercise price of any Common Stock
Warrants, Preferred Stock Warrants and Debt Warrants (collectively, "Securities
Warrants"). As of the date of this Prospectus, the Company has issued 1,552,500
shares of its Series A 9.75% Cumulative Convertible Preferred Stock, 2,196,824
shares of its Series B 9.55% Cumulative Convertible Preferred Stock and
1,840,000 shares of its Series C 9.73% Cumulative Convertible Preferred Stock.
The specific terms of each offering of Securities in
respect of which this Prospectus is being delivered are set
forth in an accompanying Prospectus Supplement (each, a
"Prospectus Supplement") relating to such offering of
Securities. Such specific terms include, without
limitation, to the extent applicable (1) in the case of any
series of Preferred Stock, the specific designations,
rights, preferences, privileges and restrictions of such
series of Preferred Stock, including the dividend rate or
rates or the method for calculating same, dividend payment
dates, voting rights, liquidation preferences, and any
conversion, exchange, redemption or sinking fund provisions;
(2) in the case of any series of Debt Securities, the
specific designations, rights and restrictions of such
series of Debt Securities, including without limitation
whether the Debt Securities are Senior Debt Securities or
Subordinated Debt Securities, the currency in which such
Debt Securities are denominated and payable, the aggregate
principal amount, stated maturity, method of calculating and
dates for payment of interest and premium, if any, and any
conversion, exchange, redemption or sinking fund provisions;
(3) in the case of the Securities Warrants, the Debt
Securities, Preferred Stock or Common Stock, as applicable,
for which each such warrant is exercisable, and the exercise
price, duration, detachability and call provisions of each
such warrant; and (4) in the case of any offering of
Securities, to the extent applicable, the initial public
offering price or prices, listing on any securities
exchange, certain federal income tax consequences and the
agents, dealers or underwriters, if any, participating in
the offering and sale of the Securities. If so specified in
the applicable Prospectus Supplement, any series of
Securities may be issued in whole or in part in the form of
one or more temporary or permanent Global Securities, as
defined herein.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED
ON OR
ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION
TO THE CONTRARY IS UNLAWFUL.
----------------
The Company may sell all or a portion of any offering of its Securities
through agents, to or through underwriters or dealers, or directly to other
purchasers. See "Plan of Distribution." The related Prospectus Supplement for
each offering of Securities sets forth the name of any agents, underwriters or
dealers involved in the sale of such Securities and any applicable fee,
commission, discount or indemnification arrangement with any such party. See
"Use of Proceeds."
This Prospectus may not be used to consummate sales of Securities unless
accompanied by a Prospectus Supplement. The delivery in any jurisdiction of this
Prospectus together with a Prospectus Supplement relating to specific Securities
shall not constitute an offer in such jurisdiction of any other Securities
covered by this Prospectus but not described in such Prospectus Supplement.
----------------
The date of this Prospectus is ___________, 1997.
<PAGE>
20
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS OR THE ACCOMPANYING PROSPECTUS
SUPPLEMENT AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER,
AGENT OR DEALER. NEITHER THE DELIVERY OF THIS PROSPECTUS OR THE ACCOMPANYING
PROSPECTUS SUPPLEMENT NOR ANY DISTRIBUTION OF SECURITIES BEING OFFERED PURSUANT
TO THIS PROSPECTUS AND AN ACCOMPANYING PROSPECTUS SUPPLEMENT SHALL UNDER ANY
CIRCUMSTANCES CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS
OF THE COMPANY SINCE THE DATE HEREOF OR THEREOF OR THAT THE INFORMATION
CONTAINED HEREIN OR THEREIN IS CORRECT AT ANY TIME SUBSEQUENT TO THE DATE HEREOF
OR THEREOF. THIS PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT DO NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO PURCHASE
SECURITIES BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS
NOT AUTHORIZED OR IN WHICH THE PERSON MAKING THE OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company may be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and at
the Commission's following regional offices: Chicago Regional Office, Citicorp
Center 500 West Madison Street, Suite 1400, Chicago, Illinois 60661; and New
York Regional Office, 7 World Trade Center, New York, New York 10045. Copies of
such material can also be obtained at prescribed rates from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Judiciary Plaza,
Washington, D.C. 20549. The Common Stock of the Company is listed on the New
York Stock Exchange ("NYSE") and such reports, proxy statements and other
information concerning the Company may also be inspected at the offices of such
Exchange at 20 Broad Street, New York, New York 10005. The Commission maintains
a Web site that contains reports, proxy and information statements and other
information regarding the Company at http://www.sec.gov.
The Company has filed with the Commission a Registration Statement on Form
S-3 under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the Securities offered hereby. This Prospectus does not contain all
of the information set forth in the Registration Statement, certain parts of
which are omitted in accordance with the rules and regulations of the
Commission. For further information with respect to the Company and the
Securities offered hereby, reference is made to the Registration Statement and
the exhibits and schedules thereto. Statements contained in this Prospectus as
to the contents of any contract or other documents are not necessarily complete,
and in each instance, reference is made to the copy of such contract or
documents filed as an exhibit to the Registration Statement, each such statement
being qualified in all respects by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed with the Commission by the Company are
incorporated in this Prospectus by reference: Annual Report on Form 10-K for the
year ended December 31, 1995; Quarterly Report on Form 10-Q for the quarter
ended March 31,1996; Quarterly Report on Form 10-Q for the quarter ended June
30, 1996; Quarterly Report on Form 10-Q for the quarter ended September 30,
1996; current report on Form 8-K dated February 27, 1997; and the description of
the Company's Common Stock contained in the Company's Registration Statement on
Form 8-A under the Exchange Act, including any amendment or report filed to
update the description.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering of all Securities shall be deemed to be incorporated
by reference in this Prospectus and to be a part hereof from the date of filing
of such documents. Any statement contained in a document incorporated or deemed
to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any accompanying Prospectus Supplement relating to a
specific offering of Securities or in any other subsequently filed document
which also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus or any accompanying Prospectus Supplement. Subject to the foregoing,
all information appearing in this Prospectus is qualified in its entirety by the
information appearing in the documents incorporated herein by reference.
The Company will furnish without charge to each person to whom this
Prospectus is delivered, on the written or oral request of any such person, a
copy of any and all of the documents described above under "Incorporation of
Certain Documents by Reference," other than exhibits to such documents, unless
such exhibits are specifically incorporated by reference therein. Written
requests should be directed to: Resource Mortgage Capital, Inc., 10900 Nuckols
Road, Glen Allen, Virginia 23060, Attention: Investor Relations, Telephone:
(804) 217-5800.
<PAGE>
THE COMPANY
Resource Mortgage Capital, Inc. (the Company) is a mortgage and consumer
finance company which uses its production operations to create investments for
its portfolio. Currently, the Company's primary production operations include
the origination of loans secured by multi-family properties and the origination
of loans secured by manufactured homes. Since its inception in 1987 through May
13, 1996, the Company's principal production operations included the purchase or
origination of single-family loans. The Company sold such operations on May 13,
1996 to Dominion Mortgage Services, Inc., a wholly-owned subsidiary of Dominion
Resources, Inc. (NYSE: D).
The Company will generally securitize loans funded as collateral for
collateralized bonds, limiting its credit risk and providing long-term financing
for its portfolio. The majority of the Company's current investment portfolio is
comprised of loans or securities that have coupon rates which adjust over time
(subject to certain limitations) in conjunction with changes in short-term
interest rates. The Company intends to expand its production sources in the
future to include other financial products, such as commercial real estate
loans.
The Company's principal source of earnings is the net interest income on its
investment portfolio. The Company's investment portfolio consists principally of
collateral for collateralized bonds, adjustable-rate mortgage (ARM) securities
and loans held for securitization. The Company funds its portfolio investments
with both borrowings and cash raised from the issuance of equity capital. For
the portion of portfolio investments funded with borrowings, the Company
generates net interest income to the extent that there is a positive spread
between the yield on the earning assets and the cost of borrowed funds. For that
portion of the balance sheet that is funded with equity capital, net interest
income is primarily a function of the yield generated from the interest earning
asset. The cost of the Company's borrowings may be increased or decreased by
interest rate swap, cap, or floor agreements.
Generally, during a period of rising interest rates, the Company's net
interest spread earned on its investment portfolio will decrease. The decrease
of the net interest spread results from (i) the lag in resets of the ARM loans
underlying the ARM securities and collateral for collateralized bonds relative
to the rate resets on the associated borrowings and (ii) rate resets on the ARM
loans which are generally limited to 1% every six months, while the associated
borrowings have no such limitation. As interest rates stabilize and the ARM
loans reset, the net interest margin may be restored to its former level as the
yields on the ARM loans adjust to market conditions. Conversely, net interest
margin may increase following a fall in short-term interest rates. This increase
may be temporary as the yields on the ARM loans adjust to the new market
conditions after a lag period. In each case, however, the Company expects that
the increase or decrease in the net interest spread due to changes in the
short-term interest rates is temporary. The net interest spread may also be
increased or decreased by the cost or proceeds of the interest rate swap, cap or
floor agreements.
The Company seeks to generate growth in earnings and dividends per share in a
variety of ways, including (i) adding investments to its portfolio when
opportunities in the market are favorable; (ii) developing production
capabilities to originate and acquire financial assets in order to create
attractively priced investments for its portfolio, as well as control the
underwriting and servicing of such financial assets; and (iii) increasing the
efficiency with which the Company utilizes its equity capital over time.
The Company elects to be taxed as a real estate investment trust (a REIT)
and, as a result, is required to distribute substantially all of its earnings
annually to its shareholders. In order to grow its equity base, the Company may
issue additional preferred or common stock. Management strives to issue such
additional shares when it believes existing shareholders are likely to benefit
from such offerings through higher earnings and dividends per share than as
compared to the level of earnings and dividends the Company would likely
generate without such offerings.
<PAGE>
Other Information
The Company, and its qualified real estate investment trust ("REIT")
subsidiaries, have elected to be treated as a REIT for federal income tax
purposes. A REIT must distribute annually substantially all of its income to
shareholders. The Company and its qualified REIT subsidiaries (collectively,
"Resource REIT") generally will not be subject to federal income tax to the
extent that certain REIT qualifications are met. Certain other affiliated
entities which are consolidated with the Company for financial reporting
purposes, are not consolidated for federal income tax purposes because such
entities are not qualified REIT subsidiaries. All taxable income of these
affiliated entities are subject to federal and state income taxes, where
applicable. See "Federal Income Tax Considerations."
The principal executive office of the Company is located at 10900 Nuckols
Road, Glen Allen, Virginia 23060, telephone number: (804) 217-5800.
USE OF PROCEEDS
Unless otherwise specified in the applicable Prospectus Supplement for any
offering of Securities, the net proceeds from the sale of Securities offered by
the Company will be available for the general corporate purposes of the Company.
These general corporate purposes may include, without limitation, repayment of
maturing obligations, redemption of outstanding indebtedness, financing future
acquisitions (including acquisitions of loans, mortgage loans and other
mortgage-related products), capital expenditures and working capital. Pending
any such uses, the Company may invest the net proceeds from the sale of any
Securities or may use them to reduce short-term indebtedness. If the Company
intends to use the net proceeds from a sale of Securities to finance a
significant acquisition, the related Prospectus Supplements will describe the
material terms of such acquisition.
If Debt Securities are issued to one or more persons in exchange for the
Company's outstanding debt securities, the accompanying Prospectus Supplement
related to such offering of Debt Securities will set forth the aggregate
principal amount of the outstanding debt securities which the Company will
receive in such exchange and which will cease to be outstanding, the residual
cash payment, if any, which the Company may receive from such persons or which
such persons may receive from the Company, as appropriate, the dates from which
the Company will pay interest accrued on the outstanding debt securities to be
exchanged for the offered Debt Securities and an estimate of the Company's
expenses in respect of such offering of the Debt Securities.
RATIO OF AVAILABLE EARNINGS TO FIXED CHARGES
The Company's ratio of available earnings to fixed charges was 1:1 or greater
in each of the last five fiscal years.
The ratios were as follows:
Year ended December 31,
1996 1995 1994 1993 1992
-------------------------------
Ratio of available
earnings to fixed 1.56:1.26:11.35:11.69:1 1.80:1
charges (1)
(1) For purposes of computing the ratios, "available earnings" consist of net
income before income taxes plus interest and debt expense and excludes fixed
charges related to Collateralized bonds issued by the Company which are
nonrecourse to the Company. This sum is divided by fixed charges, which consists
of total interest and debt expense, to determine the ratio of available earnings
to fixed charges.
These ratios represent a measure of the ability to meet debt service
obligations from funds generated from operations.
DESCRIPTION OF SECURITIES
The following is a brief description of the material terms of the Company's
capital stock. This description does not purport to be complete and is subject
in all respects to applicable Virginia law and to the provisions of the
Company's Articles of Incorporation and Bylaws, copies of which are on file with
the Commission as described under "Available Information" and are incorporated
by reference herein.
General
The Company may offer under this Prospectus one or more of the following
categories of its Securities: (i) shares of its Common Stock, par value $0.01
per share; (ii) shares of its Preferred Stock, par value $0.01 per share, in one
or more series; (iii) Debt Securities, in one or more series, any series of
which may be either Senior Debt Securities or Subordinated Debt Securities; (iv)
Common Stock Warrants; (v) Preferred Stock Warrants; (vi) Debt Warrants; and
(vii) any combination of the foregoing, either individually or as units
consisting of one or more of the types of Securities described in clauses (i)
through (vi). The terms of any specific offering of Securities, including the
terms of any units offered, will be set forth in a Prospectus Supplement
relating to such offering.
The Company's authorized equity capitalization consists of 50 million shares
of Common Stock, par value $0.01 per share and 50 million shares of preferred
stock, par value $0.01 per share. Neither the holders of the Common Stock nor of
any preferred stock, now or hereafter authorized, will be entitled to any
preemptive or other subscription rights. The Common Stock is listed on the New
York Stock Exchange. The Company intends to list any additional shares of its
Common Stock which are issued and sold hereunder. The Company may list any
series of its Preferred Stock which are offered and sold hereunder, as described
in the Prospectus Supplement relating to such series of Preferred Stock.
Common Stock
As of December 31, 1996, there were 20,653,593 outstanding shares of Common
Stock held by 3,416 holders of record. Holders of Common Stock are entitled to
receive dividends when, as and if declared by the Board of Directors, out of
funds legally available therefor. Dividends on any outstanding shares of
preferred stock must be paid in full before payment of any dividends on the
Common Stock. Upon liquidation, dissolution or winding up of the Company,
holders of Common Stock are entitled to share ratably in assets available for
distribution after payment of all debts and other liabilities and subject to the
prior rights of any holders of any preferred stock then outstanding.
Holders of Common Stock are entitled to one vote per share with respect to
all matters submitted to a vote of shareholders and do not have cumulative
voting rights. Accordingly, holders of a majority of the Common Stock entitled
to vote in any election of directors may elect all of the directors standing for
election, subject to the voting rights (if any) of any series of preferred stock
that may be outstanding from time to time. The Company's Articles of
Incorporation and Bylaws contain no restrictions on the repurchase by the
Company of shares of the Common Stock. All the outstanding shares of Common
Stock are validly issued, fully paid and nonassessable.
Preferred Stock
The Board of Directors is authorized to designate with respect to each series
of preferred stock the number of shares in each such series, the dividend rates
and dates of payment, voluntary and involuntary liquidation preferences,
redemption prices, whether or not dividends shall be cumulative and, if
cumulative, the date or dates from which the same shall be cumulative, the
sinking fund provisions, if any, for redemption or purchase of shares, the
rights, if any, and the terms and conditions on which shares can be converted
into or exchanged for shares of another class or series, and the voting rights,
if any. As of the date hereof, there were 1,552,500 shares of Series A 9.75%
Cumulative Convertible Preferred Stock, 2,196,824 shares of Series B 9.55%
Cumulative Convertible Preferred Stock and 1,840,000 shares of Series C 9.73%
Cumulative Convertible Preferred Stock (collectively, the Preferred Stock)
issued and outstanding.
Any preferred shares issued will rank prior to the Common Stock as to
dividends and as to distributions in the event of liquidation, dissolution or
winding up of the Company. The ability of the Board of Directors to issue
preferred stock, while providing flexibility in connection with possible
acquisitions and other corporate purposes, could, among other things, adversely
affect the voting powers of holders of Common Stock.
Securities Warrants
General
The Company may issue Securities Warrants for the Purchase of Common Stock,
Preferred Stock or Debt Securities. Such warrants are referred to herein as
Common Stock Warrants, Preferred Stock Warrants or Debt Warrants, as
appropriate. Securities Warrants may be issued independently or together with
any other Securities covered by the Registration Statement and offered by this
Prospectus and any accompanying Prospectus Supplement and may be attached to or
separate from such other Securities. Each series of Securities Warrants will be
issued under a separate agreement (each, a "Securities Warrant Agreement") to be
entered into between the Company and a bank or trust company, as agent (each, a
"Securities Warrant Agent"), all as set forth in the Prospectus Supplement
relating to the particular issue of offered Securities Warrants. Each issue of
Securities Warrants will be evidenced by warrant certificates (the "Securities
Warrant Certificates"). The Securities Warrant Agent will act solely as an agent
of the Company in connection with the Securities Warrant Certificates and will
not assume any obligation or relationship of agency or trust for or with any
holders of Securities Warrant Certificates or beneficial owners of Securities
Warrants. Copies of the definitive Securities Warrant Agreements and Securities
Warrant Certificates will be filed with the Commission by means of a Current
Report on Form 8-K in connection with the offering of such series of Securities
Warrants.
If Securities Warrants are offered, the applicable Prospectus Supplement will
describe the terms of such Securities Warrants, including in the case of
Securities Warrants for the purchase of Debt Securities, the following where
applicable: (i) the offering price; (ii) the currencies in which such Debt
Warrants are being offered; (iii) the designation, aggregate principal amount,
currencies, denominations and terms of the series of Debt Securities purchasable
upon exercise of such Debt Warrants; (iv) the designation and terms of any
Securities with which such Debt Warrants are being offered and the number of
such Debt Warrants being offered with each such Security; (v) the date on and
after which such Debt Warrants and the related Securities will be transferable
separately; (vi) the principal amount of the series of Debt Securities
purchasable upon exercise of each such Debt Warrant and the price at which the
currencies in which such principal amount of Debt Securities of such series may
be purchased upon such exercise; (vii) the date on which the right to exercise
such Debt Warrants shall commence and the date on which such right shall expire
(the "Expiration Date"); (viii) whether the Debt Warrant will be issued in
registered or bearer form; (ix) certain federal income tax consequences; and (x)
any other material terms of such Debt Warrants.
In the case of Securities Warrants for the purchase of Preferred Stock or
Common Stock, the applicable Prospectus Supplement will describe the terms of
such Securities Warrants, including the following where applicable: (i) the
offering price; (ii) the aggregate number of shares purchasable upon exercise of
such Securities Warrants, and in the case of Securities Warrants for Preferred
Stock, the designation, aggregate number and terms of the series of Preferred
Stock purchasable upon exercise of such Securities Warrants; (iii) the
designation and terms of the Securities with which such Securities Warrants are
being offered and the number of such Securities Warrants being offered with each
such Security; (iv) the date on and after which such Securities Warrants and the
related Securities will be transferable separately; (v) the number of shares of
Preferred Stock or shares of Common Stock purchasable upon exercise of each such
Securities Warrant and the price at which such number of shares of Preferred
Stock of such series or shares of Common Stock may be purchased upon such
exercise; (vi) the date on which the right to exercise such Securities Warrants
shall commence and the Expiration Date on which such right shall expire; (vii)
certain federal income tax consequences; and (viii) any other material terms of
such Securities Warrants.
Securities Warrant Certificates may be exchanged for new Securities Warrant
Certificates of different denominations, may (if in registered form) be
presented for registration of transfer, and may be exercised at the corporate
trust office of the appropriate Securities Warrant Agent or other office
indicated in the applicable Prospectus Supplement. Prior to the exercise of any
Securities Warrant to purchase Debt Securities, holders of such Debt Warrants
will not have any of the rights of Holders of the Debt Securities purchasable
upon such exercise, including the right to receive payments of principal,
premium, if any, or interest, if any, on the Debt Securities purchasable upon
such exercise or to enforce covenants in the applicable Indenture. Prior to the
exercise of any Securities Warrants to purchase Preferred Stock or Common Stock,
holders of such Preferred Stock Warrants or Common Stock Warrants will not have
any rights of holders of the respective Preferred Stock or Common Stock
purchasable upon such exercise, including the right to receive payments of
dividends, if any, on the Preferred Stock or Common Stock purchasable upon such
exercise or to exercise any applicable right to vote.
Exercise of Securities Warrants
Each Securities Warrant will entitle the holder thereof to purchase such
principal amount of Debt Securities or number of shares of Preferred Stock or
shares of Common Stock, as the case may be, at such exercise price as shall in
each case be set forth in, or calculable from, the Prospectus Supplement
relating to the offered Securities Warrants. After the close of business on the
Expiration Date (or such later date to which such Expiration Date may be
extended by the Company), unexercised Securities Warrants will become void.
Securities Warrants may be exercised by delivering to the Securities Warrant
Agent payment, as provided in the applicable Prospectus Supplement, of the
amount required to purchase the applicable Debt Securities, Preferred Stock or
Common Stock purchasable upon such exercise together with certain information
set forth on the reverse side of the Securities Warrant Certificate. Upon
receipt of such payment and the definitive Securities Warrant Certificates
properly completed and duly executed at the corporate trust office of the
Securities Warrant Agent or any other office indicated in the applicable
Prospectus Supplement, the Company will, as soon as practicable, issue and
deliver the applicable Debt Securities, Preferred Stock or Common Stock
purchasable upon such exercise. If fewer than all of the Securities Warrants
represented by such Securities Warrant Certificate are exercised, a new
Securities Warrant Certificate will be issued for the remaining amount of
Securities Warrants.
Amendments and Supplements to Securities Warrant Agreements
Each Securities Warrant Agreement may be amended or supplemented without the
consent of the holders of the Securities Warrants issued thereunder to effect
changes that are not inconsistent with the provisions of the Securities Warrants
and that do not adversely affect the interests of the holders of the Securities
Warrants.
Common Stock Warrant Adjustments
Unless otherwise indicated in the applicable Prospectus Supplement, the
exercise price of, and the number of shares of Common Stock covered by, a Common
Stock Warrant are subject to adjustment in certain events, including: (i) the
issuance of Common Stock as a dividend or distribution on the Common Stock; (ii)
subdivisions and combinations of the Common Stock; (iii) the issuance to all
holders of Common Stock of certain rights or warrants entitling them to
subscribe for or purchase Common Stock within the number of days, specified in
the applicable Prospectus Supplement, after the date fixed for the determination
of the stockholders entitled to receive such rights or warrants, at less than
the current market price (as defined in the Securities Warrant Agreement
governing such series of Common Stock Warrants); and (iv) the distribution to
all holders of Common Stock of evidences of indebtedness or assets of the
Company (excluding certain cash dividends and distributions described below).
The terms of any such adjustment will be specified in the related Prospectus
Supplement for such Common Stock Warrants.
No Rights as Stockholders
Holders of Common Stock Warrants will not be entitled by virtue of being such
holders, to vote, to consent, to receive dividends, to receive notice as
stockholders with respect to any meeting of stockholders for the election of
directors of the Company of any other matter, or to exercise any rights
whatsoever as stockholders of the Company.
Existing Securities Holders
The Company may issue, as a dividend at no cost, such Securities Warrants to
holders of record of the Company's Securities or any class thereof on the
applicable record date. If Securities Warrants are so issued to existing holders
of Securities, the applicable Prospectus Supplement will describe, in addition
to the terms of the Securities Warrants and the Securities issuable upon
exercise thereof, the provisions, if any, for a holder of such Securities
Warrants who validly exercises all Securities Warrants issued to such holder to
subscribe for unsubscribed Securities (issuable pursuant to unexercised
Securities Warrants issued to other holders) to the extent such Securities
Warrants have not been exercised.
Debt Securities
General
The Company may offer one or more series of its Debt Securities representing
general, unsecured obligations of the Company. Any series of Debt Securities may
either (1) rank prior to all subordinated indebtedness of the Company and pari
passu with all other unsecured indebtedness of the Company outstanding on the
date of the issuance of such Debt Securities ("Senior Debt Securities") or (2)
be subordinated in light of payments to certain other obligations of the Company
outstanding on the date of issuance ("Subordinated Debt Securities"). In this
Prospectus, any indenture relating to Subordinated Debt Securities is referred
to as a "Subordinated Indenture" and the term "Indenture" refers to Senior and
Subordinated Indentures, collectively.
The aggregate principal amount of Debt Securities which may be issued by the
Company will be set from time to time by the Board of Directors. Further, the
amount of Debt Securities which may be offered by this Prospectus will be
subject to the aggregate initial offering price of Securities specified in the
Registration Statement. Each Indenture will permit the issuance of an unlimited
amount of Debt Securities thereunder from time to time in one or more series.
Additional debt securities may be issued pursuant to another registration
statement for issuance under any Indenture. Any offering of Debt Securities may
be denominated in any currency composite designated by the Company.
The following description of the Debt Securities which may be offered by the
Company hereunder describes certain general terms and provisions of the Debt
Securities to which any Prospectus Supplement may relate. The particular terms
and provisions of the Debt Securities and the extent to which the following
general provisions may apply to such offering of Debt Securities will be
described in the accompanying Prospectus Supplement relating to such offering of
Debt Securities. The following descriptions of certain provisions of the
Indentures do not purport to be complete and are qualified in their entirety by
reference to the form of Senior Indenture or Subordinated Indenture, as
appropriate. The definitive Indenture relating to each offering of Debt
Securities will be filed with the Commission by means of a Current Report on
Form 8-K in connection with the offering of such Debt Securities. All article
and section references appearing herein are references to the articles and
sections of the appropriate Indenture and, unless defined herein, all
capitalized terms have the respective meanings specified in the appropriate
Indenture.
The Prospectus Supplement relating to any offering of Debt Securities will
set forth the following terms and other information to the extent applicable
with respect to the Debt Securities being offered thereby; (1) the designation,
aggregate principal amount, authorized denominations and priority of such Debt
Securities; (2) the price (expressed as a percentage of the aggregate principal
amount of such Debt Securities) at which such Debt Securities will be issued;
(3) the currency or currency units for which the Debt Securities may be
purchased and in which the principal of , and any interest on such Debt
Securities may be payable; (4) the stated maturity of such Debt Securities or
means by which a maturity date may be determined; (5) the rate at which such
Debt Securities will bear interest or the method by which such rate of interest
is to be calculated (which rate may be zero in the case of certain Debt
Securities issued at a price representing a discount from the principal amount
payable at maturity); (6) the periods during which such interest will accrue,
the dates on which such interest will be payable (or the method by which such
dates may be determined; including without limitation that such rate of interest
may bear an inverse relationship to some index or standard) and the
circumstances under which the Company may defer payment of interest; (7)
redemption provisions, including any optional redemption, required repayment or
mandatory sinking fund provisions; (8) any terms by which such Debt Securities
may be convertible into shares of the Company's Common Stock, Preferred Stock or
any other Securities of the Company, including a description of the Securities
into which any such Debt Securities are convertible; (9) any terms by which the
principal of such Debt Securities will be exchangeable for any other Securities
of the Company; (10) whether such Debt Securities are issuable as definitive
Fully-Registered Securities (as defined below) or Global Securities and, if
Global Securities are to be issued, the terms thereof, including the manner in
which interest thereon will be payable to the beneficial owners thereof and
other book-entry procedures, any terms for exchange of such Global Securities
into definitive Fully-Registered Securities (as defined below) and any
provisions relating to the issuance of a temporary Global Security; (11) any
additional restrictive covenants included for the benefit of the holders of such
Debt Securities; (12) any additional events of default provided with respect to
such Debt Securities; (13) the terms of any Securities being offered together
with such Debt Securities, (14) whether such Debt Securities represent general,
unsecured obligations of the Company and (15) any other material terms of such
Debt Securities.
If any of the Debt Securities are sold for foreign currency units, the
restrictions, elections, tax consequences, specific terms, and other information
with respect to such issue of Debt Securities and such currencies or currency
units will be set forth in the Prospectus Supplement relating to thereto.
Indenture Provisions
The Debt Securities may be issued in definitive, fully registered form
without coupons ("Fully Registered Securities"), or in a form registered as to
principal only with coupons or in bearer form with coupons. Unless otherwise
specified in the Prospectus Supplement, the Debt Securities will only be Fully
Registered Securities. In addition, Debt Securities of a series may be issuable
in the form of one or more Global Securities, which will be denominated in an
amount equal to all or a portion of the aggregate principal amount of such Debt
Securities. See "Global Securities" below.
One or more series of Debt Securities may be sold at a substantial discount
below their stated principal amount, bearing no interest or interest at a rate
that at the time of issuance is below market rates. Federal income tax
consequences and special considerations applicable to any such series will be
described in the Prospectus Supplement relating thereto.
Unless otherwise indicated in the related Prospectus Supplement for a series
of Debt Securities, there are no provisions contained in the Indentures that
would afford holders of Debt Securities protection in the event of a highly
leveraged transaction involving the Company.
Global Securities. Any series of Debt Securities may be issued in whole or in
part in the form of one or more Global Securities that will be deposited with,
or on behalf of, the Depository identified in the Prospectus Supplement relating
to such series. Unless and until it is exchanged in whole or in part for Debt
Securities in individually certificated form, a Global Security may not be
transferred except as a whole to a nominee of the Depository for such Global
Security, or by a nominee for the Depository to the Depository, or to a
successor of the Depository or a nominee of such successor.
The specific terms of the Depository arrangement with respect to any series
of Debt Securities and the rights of, and limitations on, owners of beneficial
interests in a Global Security representing all or a portion of a series of Debt
Securities will be described in the Prospectus Supplement relating to such
series.
Modification of Indentures. Unless otherwise specified in the related
Prospectus Supplement, each Indenture, the rights and obligations of the
Company, and the rights of the Holders may be modified with respect to one or
more series of Debt Securities issued under such Indenture with the consent of
the Holders of not less than a majority in principal amount of the outstanding
Debt Securities of each such series affected by the modification or amendment.
No modification of the terms of payment of principal or interest, and no
modification reducing the percentage required for modification, is effective
against any Holder without his consent.
Events of Default. Unless otherwise specified in the related Prospectus
Supplement, each Indenture, will provide that the following are Events of
Default with respect to any series of Debt Securities issued thereunder: (1)
default in the payment of the principal of any Debt Security of such series when
and as the same shall be due and payable; (2) default in making a sinking fund
payment, if any, when and as the same shall be due and payable by the terms of
the Debt Securities of such series; (3) default for 30 days in payment of any
installment of interest on any Debt Securities of such series; (4) default for a
specified number of days after notice in the performance of any other covenants
in respect of the Debt Securities of such series contained in the Indenture; (5)
certain events of bankruptcy, insolvency or reorganization, or court appointment
of a receiver, liquidator, or trustee of the Company or its property; and (6)
any other Event of Default provided in the applicable supplemental indenture
under which such series of Debt Securities is issued. An Event of Default with
respect to a particular series of Debt Securities issued under an Indenture will
not necessarily constitute an Event of Default with respect to any other series
of Debt Securities issued under such Indenture. The trustee under an Indenture
may withhold notice to the Holders of any series of Debt Securities of any
default with respect to such series (except in the payment of principal or
interest) if it considers such withholding in the interests of such Holders.
If an Event of Default with respect to any series of Debt Securities shall
have occurred and be continuing, the appropriate trustee under the Indenture or
the Holders of not less than 25% in the aggregate principal amount of the Debt
Securities of such series may declare the principal, or in the case of
discounted Debt Securities, such portion thereof as may be described in the
Prospectus Supplement, of all the Debt Securities of such series to be due and
payable immediately.
Within four months after the close of each fiscal year, the Company will file
with each trustee under the indentures a certificate, signed by specified
officers, stating whether or not such officers have knowledge of any default,
and, if so, specifying each such default and the nature thereof.
Subject to provisions relating to its duties in case of default, a trustee
under the Indentures shall be under no obligation to exercise any of its rights
or powers under the applicable Indenture at the request, order, or direction of
any Holder, unless such Holders shall have offered to such trustee reasonable
indemnity. Subject to such provisions for indemnification, the Holders of a
majority in principal amount of the Debt Securities of any series may direct the
time, method, and place of conducting any proceeding for any remedy available to
the appropriate trustee, or exercising any trust or power conferred upon such
trustee, with respect to the Debt Securities of such series.
Payment and Transfer. Principal of, and premium and interest, if any, on,
fully Registered Securities will be payable at the Place of Payment as specified
in the applicable Prospectus Supplement, provided that payment of interest, if
any, may be made, unless otherwise provided in the applicable Prospectus
Supplement, by check mailed to the person in whose names such Debt Securities
are registered at the close of business on the day or days specified in the
Prospectus Supplement or transfer to an account maintained by the payee located
inside the United States. The principal of, and premium and interest, if any,
on, Debt Securities in other forms will be payable in the manner and at the
place or places as designated by the Company and specified in the applicable
Prospectus Supplement. Unless otherwise provided in the Prospectus Supplement,
payment of interest may be made, in the case of Bearer Security by transfer to
an account maintained by the payee with a bank outside the United States.
Fully Registered Securities may be transferred or exchanged at the corporate
trust office of the trustee or any other office or agency maintained by the
Company for such purposes, subject to the limitations in the applicable
Indenture, without the payment of any service charge except for any tax or
governmental charge incidental thereto. Provisions with respect to the transfer
and exchange of Debt Securities in other forms will be set forth in the
applicable Prospectus Supplement.
Defeasance. The Indentures provide that each will cease to be of further
effect with respect to a certain series of Debt Securities (except for certain
obligations to register the transfer or exchange of Securities) if (a) the
Company delivers to the Trustee for the Securities of such series for
cancellation of all Securities of all series and the coupons, if any,
appertaining thereto, or (b) if the Company deposits into trust with the Trustee
money or United States government obligations, that, through the payment of
interest thereon and principal thereof in accordance with their terms, will
provide money in an amount sufficient to pay all of the principal of, and
interest on, the Securities of such series on the dates such payments are due or
redeemable in accordance with the terms of such Securities.
Certain Charter and Virginia Law Provisions
Unless the amendment effects an extraordinary transaction, the Articles of
Incorporation of the Company may be amended with the approval of the holders of
a majority of the outstanding shares of Common Stock, subject to the voting
rights (if any) of any series of preferred stock that may be outstanding from
time to time. Amendments that effect extraordinary transactions, which include
mergers, share exchanges, a sale of substantially all the assets of the Company,
the dissolution of the Company or the share ownership restrictions described
below, require the approval of the holders of more than two-thirds of the
outstanding shares of Common Stock (subject to any voting rights of any series
of preferred stock outstanding).
Special meetings of the shareholders of the Company may be called by a
majority of the Board of Directors, a majority of the unaffiliated directors,
the Chairman of the Board, the President or generally by shareholders holding at
least 25% of the outstanding shares of Common Stock entitled to be voted at the
meeting.
Virginia law and the Articles of Incorporation of the Company provide that
the directors and officers of the Company shall have no liability to the Company
or its shareholders in certain actions brought by or on behalf of shareholders
of the Company unless such officer or director has engaged in willful misconduct
or violations of federal or state securities laws and certain other activities.
Repurchase of Shares and Restrictions on Transfer
Two of the requirements for qualification for the tax benefits accorded a
REIT under the Internal Revenue Code of 1986, as amended ("the Code"), are that
(i) during the last half of each taxable year not more than 50% of the
outstanding shares may be owned directly or indirectly by five or fewer
individuals and (ii) there must be at least 100 shareholders for at least 335
days in each taxable year. Those requirements apply for all taxable years after
the year in which a REIT elects REIT status.
The Articles of Incorporation prohibit any person or group of persons from
acquiring or holding, directly or indirectly, ownership of a number of shares of
capital stock in excess of 9.8% of the outstanding shares. Shares of capital
stock owned by a person or group of persons in excess of such amounts are
referred to as "Excess Shares." For this purpose the term "ownership" is defined
in accordance with the Code, the constructive ownership provisions of Section
544 of the Code and Rule 13d-3 promulgated under the Exchange Act, and the term
"group" is defined to have the same meaning as that term has for purposes of
Section 13(d)(3) of the Exchange Act. Accordingly, shares of capital stock owned
or deemed to be owned by a person who individually owns less than 9.8% of the
shares outstanding may nevertheless be Excess Shares.
For purposes of determining whether a person holds Excess Shares, a person or
group will be treated as owning not only shares of capital stock actually or
beneficially owned, but also any shares of capital stock attributed to such
person or group under the constructive ownership provisions contained in Section
544 of the Code.
The Articles of Incorporation provide that in the event any person acquires
Excess Shares, each Excess Share may be redeemed at any time by the Company at
the closing price of a share of capital stock on the New York Stock Exchange on
the last business day prior to the redemption date. From and after the date
fixed for redemption of Excess Shares, such shares shall cease to be entitled to
any distribution and other benefits, except only the right to payment of the
redemption price for such shares.
Under the Articles of Incorporation any acquisition of shares that would
result in failure to qualify as a REIT under the Code is void to the fullest
extent permitted by law, and the Board of Directors is authorized to refuse to
transfer shares to a person if, as a result of the transfer, that person would
own Excess Shares. Prior to any transfer or transaction which, if consummated,
would cause a shareholder to own Excess Shares, and in any event upon demand by
the Board of Directors, a shareholder is required to file with the Company an
affidavit setting forth, as to that shareholder, the information required to be
reported in returns filed by shareholders under Treasury Regulation Section
1.857-9 under the Code and in reports filed under Section 13(d) of the Exchange
Act. Additionally, each proposed transferee of shares of capital stock, upon
demand of the Board of Directors, also may be required to file a statement or
affidavit with the Company setting forth the number of shares already owned by
the transferee and any related person.
The Common Stock may not be purchased by nonresident aliens or foreign
entities. In addition, the Common Stock may not be held by "disqualified
organizations" within the meaning of Section 860E(e)(5) of the Code, which
generally includes governmental entities and other tax-exempt persons not
subject to the tax on unrelated business taxable income.
Transfer Agent and Registrar
The transfer agent and the registrar for the Company's
Common Stock is First Union National Bank of North Carolina,
Charlotte, North Carolina.
PLAN OF DISTRIBUTION
The Company may sell Securities (1) through underwriters or dealers, (2)
directly to one or more purchasers, or (3) through agents. A Prospectus
Supplement will set forth the terms of the offering of the Securities offered
thereby, including the name or names of any underwriters, the purchase price of
the Securities, and the proceeds to the Company from the sale, any underwriting
discounts and other items constituting underwriters' compensation, any initial
public offering price, any discounts or concessions allowed or reallowed or paid
to dealers, and any securities exchange on which the Securities may be listed.
Only underwriters so named in the Prospectus Supplement are deemed to be
underwriters in connection with the Securities offered thereby.
If underwriters are used in the sale in a firm commitment underwriting, the
Securities will be acquired by the underwriters for their own account and may be
resold from time to time in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices determined
at the time of sale. The obligations of the underwriters to purchase the
Securities will be subject to certain conditions precedent, and the underwriters
will be obligated to purchase all the Securities of the series offered by the
Company's Prospectus Supplement if any of the Securities are purchased. Any
initial public offering price and any discounts or concessions allowed or
reallowed or paid to dealers may be changed from time to time.
Only underwriters named in the Prospectus Supplement are deemed to be
underwriting in connection with the Securities in respect of which such
Prospectus Supplement and this Prospectus are delivered and any firms not named
therein are not parties to the underwriting agreement in respect of such
Securities and will have no direct or indirect participation in the underwriting
thereof, although they may participate in the distribution of such Securities
under circumstances where they may be entitled to a dealer's commission.
Securities may also be sold directly by the Company or through agents
designated by the Company from time to time. The Securities offered hereby may
also be sold from time to time through agents for the Company by means of (i)
ordinary broker's transactions, (ii) block transactions (which may involve
crosses) in accordance with the rules of the Exchanges, in which such agents may
attempt to sell Securities as agent but may purchase and resell all or a portion
of the blocks as principal, (iii) "fixed price offerings" in accordance with the
rules of the Exchanges, or (iv) a combination of any such methods of sale. In
connection therewith, distributors' or sellers' commissions may be paid or
allowed which will not exceed those customary in the types of transactions
involved. A Prospectus Supplement sets forth the terms of any such "fixed price
offering," "exchange distributions" and "special offerings." If the agent
purchases Securities as principal, it may sell such Securities by any of the
methods described above. Any agent involved in the offering and sale of
Securities in respect of which this Prospectus is delivered is named, and any
commissions payable by the Company to such agent are set forth, in the
Prospectus Supplement. Unless otherwise indicated herein or in the Prospectus
Supplement, any such agent is acting on a best-efforts basis for the period of
its appointment.
If so indicated in the Prospectus Supplement, the Company will authorize
agents, underwriters, or dealers to solicit offers by certain institutional
investors to purchase Securities providing for payment and delivery on a future
date specified in the Prospectus Supplement. There may be limitations on the
minimum amount which may be purchased by any such institutional investor or on
the portion of the aggregate principal amount of the particular Securities which
may be sold pursuant to such arrangements. Institutional investors to which such
offers may be made, when authorized, include commercial and savings banks,
insurance companies, pension funds, investment companies, educational and
charitable institutions, and such other institutions as may be approved by the
Company. The obligations of any such purchasers pursuant to such delayed
delivery and payment arrangements will not be subject to any conditions except
(1) the purchase by an institution of the particular Securities shall not at the
time of delivery be prohibited under the laws of any jurisdiction in the United
States to which such institution is subject, and (2) if the particular
Securities are being sold to underwriters, the Company shall have sold to such
underwriters the total principal amount of such Securities less the principal
amount thereof covered by such arrangements. Underwriters will not have any
responsibility in respect of the validity of such arrangements or the
performance of the Company or such institutional investors thereunder.
Agents and underwriters may be entitled under agreements entered into with
the Company to indemnification by the Company against certain civil liabilities,
including liabilities under the Securities Act of 1933, or to contribution with
respect to payments which the agents or underwriters may be required to make in
respect thereof. Agents and underwriters may engage in transactions with, or
perform services for, the Company in the ordinary course of business.
If an agent or agents are utilized in the sale, such persons may be deemed to
be "underwriters", and any documents, commissions or concessions received by
them from the Company or any profit on the resale of Securities by them may be
deemed to be underwriting discounts and commissions under the Securities Act.
Any such person who may be deemed to be an underwriter and any such compensation
received from the Company will be described in the Prospectus Supplement.
<PAGE>
FEDERAL INCOME TAX CONSIDERATIONS
Federal Income Taxation of Shareholders
The following section is a general summary of certain federal income tax
aspects of an investment in the Company that should be considered by prospective
shareholders. The discussion in this section is based on existing provisions of
the Code, existing and proposed Treasury regulations, existing court decisions,
and existing rulings and other administrative interpretations. There can be no
assurance that future Code provisions or other legal authorities will not alter
significantly the tax consequences described below. No rulings have been
obtained from the Internal Revenue Service concerning any of the matters
discussed in this section.
The Company and its qualified REIT subsidiaries (collectively "Resource
REIT") believes it has complied, and intends to comply in the future, with the
requirements for qualification as a REIT under the Code. The federal income tax
provisions governing REITs and their shareholders are extremely complicated, and
what follows is only a very brief and general summary of the most important
considerations for shareholders. ACCORDINGLY, PROSPECTIVE INVESTORS ARE URGED TO
CONSULT THEIR OWN TAX ADVISORS CONCERNING THE FEDERAL, STATE AND LOCAL TAX
CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF SHARES OF THE
COMPANY.
General Considerations
Resource REIT believes it has complied, and intends to comply in the future,
with the requirements for qualification as a REIT under the Code. Venable,
Baetjer and Howard, LLP, counsel to the Company, has given the Company its
opinion to the effect that, as of the date hereof and based on the various
representations made to it by the Company with respect to its income, assets,
and activities since its inception, and subject to certain assumptions and
qualifications stated in such opinion, (i) Resource REIT qualifies for treatment
as a REIT under the Code and (ii) the organization and contemplated method of
operation of Resource REIT are such as to enable it to continue so to qualify in
subsequent years, provided the various operational requirements of REIT status
are satisfied in those years. However, investors should be aware that opinions
of counsel are not binding on the courts or the Internal Revenue Service. To the
extent that Resource REIT qualifies as a REIT for federal income tax purposes,
it generally will not be subject to federal income tax on the amount of its
income or gain that is distributed to shareholders. However, certain
nonqualified REIT subsidiaries of the Company, which operate the Company's
production operations and are included in the Company's consolidated GAAP
financial statements, are not qualified REIT subsidiaries. Consequently, all of
the nonqualified REIT subsidiary's taxable income is subject to federal and
state income taxes.
The REIT rules generally require that a REIT invest primarily in real
estate-related assets, its activities be passive rather than active, and it
distribute annually to its shareholders a high percentage of its taxable income.
The Company could be subject to a number of taxes if it failed to satisfy those
rules or if it acquired certain types of income-producing real property through
foreclosure. Although no complete assurances can be given, the Company does not
expect that it will be subject to material amounts of such taxes.
Resource REIT's failure to satisfy certain Code requirements could cause the
Company to lose its status as a REIT. If Resource REIT failed to qualify as a
REIT for any taxable year, it would be subject to federal income tax (including
any applicable minimum tax) at regular corporate rates and would not receive
deductions for dividends paid to shareholders. As a result, the amount of
after-tax earnings available for distribution to shareholders would decrease
substantially. While the Board of Directors intends to cause Resource REIT to
operate in a manner that will enable it to qualify as a REIT in all future
taxable years, there can be no certainty that such intention will be realized
because, among other things, qualification hinges on the conduct of the business
of Resource REIT.
Taxation of Distributions by the Company
Assuming that Resource REIT maintains its status as a REIT, any distributions
that are properly designated as "capital gain dividends" generally will be taxed
to shareholders as long-term capital gains, regardless of how long a shareholder
has owned his shares. Any other distributions out of Resource REIT current or
accumulated earnings and profits will be dividends taxable as ordinary income.
Shareholders will not be entitled to dividends-received deductions with respect
to any dividends paid by Resource REIT. Distributions in excess of Resource
REIT's current or accumulated earnings and profits will be treated as tax-free
returns of capital, to the extent of the shareholder's basis in his shares of
capital stock, and as gain from the disposition of shares, to the extent they
exceed such basis. Shareholders may not include on their own returns any of
Resource REIT ordinary or capital losses. Distributions to shareholders
attributable to "excess inclusion income" of Resource REIT will be characterized
as excess inclusion income in the hands of the shareholders. Excess inclusion
income can arise from Resource REIT's holdings of residual interests in real
estate mortgage investment conduits and in certain other types of
mortgage-backed security structures created after 1991. Excess inclusion income
constitutes unrelated business taxable income ("UBTI") for tax-exempt entities
(including employee benefit plans and individual retirement accounts), and it
may not be offset by current deductions or net operating loss carryovers. In the
unlikely event that the Company's excess inclusion income is greater than its
taxable income, the Company's distribution would be based on the Company's
excess inclusion income. Although Resource REIT itself would be subject to a tax
on any excess inclusion income that would be allocable to a "disqualified
organization" holding its shares, Resource REIT's by-laws provide that
disqualified organizations are ineligible to hold Resource REIT's shares.
Dividends paid by Resource REIT to organizations that generally are exempt
from federal income tax under Section 501(a) of the Code should not be taxable
to them as UBTI except to the extent that (i) purchase of shares of Resource
REIT was financed by "acquisition indebtedness," (ii) such dividends constitute
excess inclusion income or (iii) with respect to the trusts owning more than 10%
of the shares of Resource REIT, under certain circumstances a portion of such
dividend is attributable to UBTI. Because an investment in Resource REIT may
give rise to UBTI or trigger the filing of an income tax return that otherwise
would not be required, tax-exempt organizations should give careful
consideration to whether an investment in Resource REIT is prudent.
Taxation of Dispositions of Shares of the Common Stock
In general, any gain or loss realized upon a taxable disposition of shares
will be treated as long-term capital gain or loss if the shares have been held
for more than twelve months and otherwise as short-term capital gain or loss.
However, any loss realized upon a taxable disposition of shares held for six
months or less will be treated as long-term capital loss to the extent of any
capital gain dividends received with respect to such shares. All or a portion of
any loss realized upon a taxable disposition of Shares of Resource REIT may be
disallowed if other shares of Resource REIT are purchased (under a dividend
reinvestment plan or otherwise) within 30 days before or after the disposition.
Backup Withholding
Resource REIT generally is required to withhold and remit to the United
States Treasury 31% of the dividends or certain gross proceeds paid to any
shareholder who (i) fails to furnish Resource REIT with a correct taxpayer
identification number, (ii) is the subject of a notification received by
Resource REIT that such shareholder has underreported dividend or interest
income to the Internal Revenue Service, or (iii) under certain circumstances,
fails to certify to Resource REIT that he is not subject to backup withholding.
An individual's taxpayer identification number is his social security number.
<PAGE>
Debt Securities
The Debt Securities will be taxable as indebtedness. Interest and original
issue discount, if any, on a Debt Security will be treated as ordinary income to
a holder. Any special tax considerations applicable to a Debt Security will be
described in the related Prospectus Supplement.
Exercise of Securities Warrants
Upon a holder's exercise of a Securities Warrant, the holder will, in
general, (i) not recognize any income, gain or loss for federal income tax
purposes, (ii) receive an initial tax basis in the Security received equal to
the sum of the holder's tax basis in the exercised Securities Warrant and the
exercise price paid for such Security and (iii) have a holding period for the
Security received beginning on the date of exercise.
Sale or Expiration of Securities Warrants
If a holder of a Securities Warrant sells or otherwise disposes of such
Securities Warrant (other than by its exercise), the holder generally will
recognize capital gain or loss (long term capital gain or loss if the holder's
holding period for the Securities Warrant exceeds twelve months on the date of
disposition; otherwise, short term capital gain or loss) equal to the difference
between (i) the cash and fair market value of other property received and (ii)
the holder's tax basis (on the date of disposition) in the Securities Warrant
sold. Such a holder generally will recognize a capital loss upon the expiration
of an unexercised Securities Warrant equal to the holder's tax basis in the
Securities Warrant on the expiration date.
State and Local Tax Considerations
State and local tax laws may not correspond to the federal income tax
principles discussed in this section. Accordingly, prospective investors should
consult their tax advisers concerning the state and local tax consequences of an
investment in Resource REIT.
LEGAL OPINIONS
The validity of the shares will be passed upon for the Company by Venable,
Baetjer and Howard, LLP, Baltimore, Maryland.
EXPERTS
The consolidated financial statements and schedules of the Company
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1995, and the consolidated financial statements of the Company for the year
ended December 31, 1996 included in the Company's Form 8-K dated February 27,
1997, have been audited by KPMG Peat Marwick LLP, independent auditors, as set
forth in their reports included therein, and incorporated herein by reference.
Such financial statements and schedules have been incorporated by reference
herein in reliance upon the reports of that firm and upon the authority of that
firm as experts in auditing and accounting.
<PAGE>
Part II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The estimated expenses, other than sales agency compensation, in connection with
the offering of up to 2,000,000 shares of Common Stock are:
Registration Fee $18,750
Legal Fees and Expenses 65,000
Accounting Fees and Expenses 10,000
Blue Sky Qualification and Expenses 5,000
including Counsel Fees
New York Stock Exchange Listing Fee 7,000
Miscellaneous 5,000
--------
TOTAL $110,750
========
Item 16. Exhibits
1.1 Form of Sales Agency Agreement with PaineWebber
Incorporated.
5.1 Legal Opinion of Venable, Baetjer and Howard, LLP.
8.1 Tax opinion of Venable, Baetjer and
Howard, LLP.
12.2 Ratio of Available Earnings to Fixed Charges.
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of Venable, Baetjer and Howard,
LLP (contained in Exhibits 5.1 and 8.1).
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has caused this Amendment to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the city of Richmond and the State of Virginia on February
27, 1997.
RESOURCE MORTGAGE
CAPITAL, INC.
Thomas H.
Potts____________________
Thomas H. Potts,
President
(Principal Executive
Officer)
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities indicated on February 27, 1997.
Signature Capacity
Thomas H. Potts President and Director
- - -------------------
Thomas H. Potts (Principal Executive
Officer)
Lynn K. Geurin Executive Vice President,
Chief Financial Officer
- - -------------------
Lynn K. Geurin (Principal Financial and
Accounting Officer)
*
- - -------------------
J. Sydney Director
Davenport, IV
*
- - -------------------
Richard C. Leone Director
*
- - -------------------
Paul S. Reid Director
*
- - -------------------
Donald B. Vaden Director
*By Thomas H. Potts
-------------------
Attorney-in-fact
<PAGE>
EXHIBIT INDEX
EXHIBIT
1.1 Form of Sales Agency Agreement with PaineWebber
Incorporated.
5.1 Legal Opinion of Venable, Baetjer and Howard, LLP.
8.1 Tax opinion of Venable, Baetjer and Howard, LLP.
12.1 Ratio of Available Earnings to Fixed Charges.
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of Venable, Baetjer and Howard, LLP (contained in Exhibits 5.1
and 8.1).
<PAGE>
1
Exhibit 1.1
RESOURCE MORTGAGE CAPITAL, INC.
2,000,000 Shares of Common Stock
(par value $.01 per share)
SALES AGENCY AGREEMENT
[ ] [ ], 1997
PAINEWEBBER INCORPORATED
1285 Avenue of the Americas
New York, New York 10019
Gentlemen:
Resource Mortgage Capital, Inc., a Virginia corporation (the "Company"),
confirms its agreement with PaineWebber Incorporated (the "Agent"), as follows:
SECTION 1. Description of Securities. The Company proposes to issue and
sell through the Agent, as sales agent, up to 2,000,000 shares (the "Maximum
Amount") of Common Stock, par value $.01 per share (the "Stock"), on the terms
set forth in Section 3 hereof.
SECTION 2. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, the Agent that:
(a) The Company meets the requirements for use of Form S-3 under the
Securities Act of 1933 (the "Act") and the rules and regulations thereunder
("Rules and Regulations"). A registration statement on Form S-3 (Registration
No. 33-50705) with respect to the Stock, including a form of prospectus, has
been prepared by the Company in conformity with the requirements of the Act and
the Rules and Regulations and filed with the Securities and Exchange Commission
(the "Commission") and has become effective. Such registration statement and
prospectus may have been amended or supplemented prior to the date of this
Agreement. Any such amendment or supplement was so prepared and filed, and any
such amendment or supplement filed after the effective date of such registration
statement has become effective. No stop order suspending the effectiveness of
the registration statement has been issued, and no proceeding for that purpose
has been instituted or threatened by the Commission. Copies of such registration
statement and prospectus, any such amendment or supplement and all documents
incorporated by reference therein that were filed with the Commission on or
prior to the date of this Agreement have been delivered to the Agent. Such
registration statement, as it may have heretofore been amended, is referred to
herein as the "Registration Statement," and the final form of prospectus
included in the Registration Statement, as amended or supplemented from time to
time, is referred to herein as the "Prospectus." Any reference herein to the
Registration Statement, the Prospectus, or any amendment or supplement thereto
shall be deemed to refer to and include the documents incorporated (or deemed to
be incorporated) by reference therein, and any reference herein to the terms
"amend," "amendment" or "supplement" with respect to the Registration Statement
or Prospectus shall be deemed to refer to and include the filing after the
execution hereof of any document with the Commission deemed to be incorporated
by reference therein.
(b) Each part of the Registration Statement, when such part became or
becomes effective, and the Prospectus and any amendment or supplement thereto,
on the date of filing thereof with the Commission and at each Closing Date (as
hereinafter defined), conformed or will conform in all material respects with
the requirements of the Act and the Rules and Regulations; each part of the
Registration Statement, when such part became or becomes effective, did not or
will not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading; and the Prospectus and any amendment or supplement
thereto, on the date of filing thereof with the Commission and at each Closing
Date, did not or will not include an untrue statement of a material fact or omit
to state a material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading; except that the
foregoing shall not apply to statements in or omissions from any such document
in reliance upon, and in conformity with, written information furnished to the
Company by or on behalf of the Agent, specifically for use in the Registration
Statement, the Prospectus or any amendment or supplement thereto.
(c) The documents incorporated by reference in the Registration Statement
or the Prospectus, or any amendment or supplement thereto, when they became or
become effective under the Act or were or are filed with the Commission under
the Securities Exchange Act of 1934, as amended ("Exchange Act"), as the case
may be, conformed or will conform in all material respects with the requirements
of the Act or the Exchange Act, as applicable, and the rules and regulations of
the Commission thereunder.
(d) The financial statements of the Company and its subsidiaries, together
with the related notes and schedules, set forth or incorporated by reference in
the Registration Statement and Prospectus fairly present the financial condition
and the results of operations and cash flows of the Company and its subsidiaries
as of the dates indicated or for the periods therein specified and were prepared
in conformity with generally accepted accounting principles consistently applied
throughout the periods involved (except as otherwise stated therein).
(e) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the state of its incorporation
with power and authority (corporate and other) to own, lease and operate its
properties and to conduct its business as described in the Registration
Statement and Prospectus; and the Company is duly qualified as a foreign
corporation to transact business and is in good standing in each jurisdiction in
which such qualification is required, whether by reason of the ownership or
leasing of property or the conduct of business, except where the failure to so
qualify and be in good standing, considering all such cases in the aggregate,
would not have a material adverse effect on the condition, financial or
otherwise, or the earnings, business affairs or business prospects of the
Company and its subsidiaries considered as one enterprise.
(f) Each "significant subsidiary" (as defined in Section 1-02 of
Regulation S-X) of the Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the jurisdiction of
its incorporation, has corporate power and authority to own, lease and operate
its properties and conduct its business as described in the Registration
Statement and Prospectus and is duly qualified as a foreign corporation to
transact business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure to so qualify and
be in good standing would not have a material adverse effect on the condition,
financial or otherwise, or the earnings, business affairs or business prospects
of the Company and its subsidiaries considered as one enterprise; and all of the
issued and outstanding capital stock of each subsidiary has been duly authorized
and validly issued, is fully paid and nonassessable and the outstanding capital
stock of each significant subsidiary is owned by the Company, directly or
through subsidiaries, free and clear of any security interest, mortgage, pledge,
lien, encumbrance, claim or equity. The significant subsidiaries (as defined in
Section 1-02 of Regulation S-X) of the Company are [ ], [ ] and [ ].
(g) The outstanding shares of capital stock of the Company and the Stock
have been duly authorized and are, or when issued as contemplated hereby will
be, validly issued, fully paid and nonassessable and conform, or when so issued
will conform, to the description thereof in the Prospectus. The shareholders of
the Company have no preemptive rights with respect to the Stock.
(h) Except as contemplated in the Prospectus, subsequent to the respective
dates as of which information is given in the Registration Statement and the
Prospectus, neither the Company nor any of its subsidiaries has incurred any
liabilities or obligations, direct or contingent, or entered into any
transactions, not in the ordinary course of business, that are material to the
Company and its subsidiaries considered as a whole, and there has not been any
material change in the capital stock, short-term debt or long-term debt of the
Company and its subsidiaries, or any material change, or any development
involving a prospective material change, in the condition, financial or
otherwise, or the earnings, business affairs or business prospects of the
Company and its subsidiaries considered as one enterprise.
(i) Except as set forth in the Prospectus, there is not pending or, to the
knowledge of the Company, threatened any action, suit or proceeding to which the
Company or any of its subsidiaries is a party, before or by any court or
governmental agency or body, that could reasonably be expected to result in any
material adverse change in the condition, financial or otherwise, or the
earnings, business affairs or business prospects of the Company and its
subsidiaries considered as one enterprise, or that could reasonably be expected
to materially and adversely affect the properties or assets thereof considered
as a whole.
(j) There are no contracts or documents of the Company or any of its
subsidiaries that are required to be filed as exhibits to the Registration
Statement or to any of the documents incorporated by reference therein by the
Act or the Exchange Act or by the rules and regulations of the Commission
thereunder that have not been so filed.
(k) All necessary action has been duly and validly taken by the Company to
authorize the execution, delivery and performance of this Agreement. This
Agreement has been duly and validly authorized, executed and delivered by the
Company and constitutes the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors' rights
generally and by general equitable principles.
(l) The performance of this Agreement and the consummation of the
transactions contemplated herein will not result in a breach or violation of any
of the terms and provisions of, or constitute a default under, any agreement or
instrument to which the Company or any of its subsidiaries is a party or by
which it is bound or to which any of the property of the Company or any of its
subsidiaries is subject except for such breaches or defaults that would not in
the aggregate have a material adverse effect on the Company's ability to perform
its obligations under this Agreement or on the condition, financial or
otherwise, or the earnings, business affairs or business prospects of the
Company and its subsidiaries considered as one enterprise, nor will such action
result in the violation of the Company's charter or by-laws, or any statute or
any order, rule or regulation of any court or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries or any of its
properties; no consent, approval, authorization or order of, or filing with, any
court or governmental agency or body is required for the consummation by the
Company of the transactions contemplated by this Agreement, except such as may
be required by state securities or blue sky laws.
(m) Each of the Company and its subsidiaries has (i) good and indefeasible
title to all of the properties and assets described in the Prospectus as owned
by it, free and clear of all liens, charges, encumbrances or restrictions,
except such as are described in the Prospectus or are not material to the
business, condition, financial or otherwise, or the earnings, business affairs
or business prospects of the Company and its subsidiaries considered as one
enterprise, (ii) peaceful and undisturbed possession under all material leases
to which it is party as lessee, (iii) all governmental or regulatory licenses,
certificates, permits, authorizations, approvals, franchises or other rights
necessary to engage in the business currently conducted by it, except such as
are not material to the business, condition, financial or otherwise, or the
earnings, business affairs or business prospects of the Company and its
subsidiaries considered as one enterprise, (iv) no reason to believe that any
governmental body or agency is considering limiting, suspending or revoking any
such license, certificate, permit, authorization, approval, franchise or right
and (v) not received any notice of and has no reason to believe that any
governmental body or agency is considering enacting, amending or repealing any
statute, law, ordinance or regulation required to be described in the
Registration Statement and Prospectus that is not so described as required. All
material leases to which the Company or any of its subsidiaries is a party are
valid and binding and no default has occurred and is continuing thereunder, and,
to the best knowledge of the Company, no material defaults by the landlord are
existing under any such leases.
(n) Each of the Company and its subsidiaries owns or possesses all of the
patents, patent rights, licenses, inventions, copyrights, know-how (including
trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures), trademarks, service marks and
trade names presently employed by them in connection with the business now
operated by them, and neither the Company nor any of its subsidiaries has
received any notice of infringement of or conflict with asserted rights of
others with respect to any of the foregoing which, if singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding, would
result in any material adverse change in the condition, financial or otherwise,
or in the earnings, business affairs or business prospects of the Company and
its subsidiaries considered as one enterprise.
(o) The Company and its subsidiaries have not violated and are in
compliance in all material respects with all material laws, statutes,
ordinances, regulations, rules and orders of any foreign, federal, state or
local government and any other governmental department or agency, and any
judgment, decision, decree or order of any court or governmental agency,
department or authority, including, without limitation, environmental laws.
Neither the Company nor any of its subsidiaries has received any notice to the
effect that, or otherwise been advised that, it is not in compliance with any
such statutes, regulations, rules, judgments, decrees, orders, ordinances or
other laws, and the Company is not aware of any existing circumstances which are
likely to result in material violations of any of the foregoing.
(p) The Company and its qualified real estate investment trust
subsidiaries are organized in conformity with the requirements for qualification
as, and operate in a manner that qualifies them as, a real estate investment
trust under the Internal Revenue Code of 1986, as amended (the "Code"), and the
rules and regulations thereunder and will be so qualified after consummation of
the transactions contemplated by this Agreement.
SECTION 3. Sale and Delivery of Securities. On the basis of the
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the Company agrees to issue and sell
through the Agent, as exclusive sales agent, and the Agent agrees to sell, as
sales agent for the Company, on a reasonable efforts basis, up to the Maximum
Amount of Stock during a maximum of 52 Pricing Periods (as hereinafter defined)
in any one year on the terms set forth herein; provided, however, that the
Company shall not be obligated to issue and sell, and the Agent shall not be
obligated to use its best efforts to sell, Stock if the Stock is at a price
lower than the Minimum Price (as defined below). "Minimum Price" means a price
of $25.00 per share or such other amount determined by the Board of Directors of
the Company and set forth in a certificate of the Company delivered to the
Agent.
The Stock, up to the Maximum Amount, is to be sold during one or more
pricing periods (each a "Pricing Period"), each Pricing Period consisting of
five consecutive calendar days or such lesser number of days as shall be agreed
to by the Company and the Agent. The Company and the Agent from time to time
will designate Pricing Period(s) and the number of shares of Stock (not to
exceed 4% of the average daily trading volume of the Stock calculated over the
preceding 60 consecutive calendar days) to be sold by the Agent during each such
Pricing Period (the "Average Market Price Shares"). If the Company does not meet
the exemptive provisions set forth in Rule 101(c)(1) of Regulation M of the
Exchange Act, the number of Average Market Price Shares and any Additional
Shares sold in any Pricing Period shall not exceed 10% of the average daily
trading volume of the Stock for that Pricing Period. Subject to the terms and
conditions hereof, the Agent shall use its reasonable efforts to (i) sell all of
the designated Average Market Price Shares during each such Pricing Period, and
(ii) sell the entire Maximum Amount. The Agent shall sell the shares of Stock
only by means of ordinary brokers' transactions on the New York Stock Exchange
(the "NYSE"). The Agent shall not solicit or arrange for the solicitation of
customer's orders in anticipation of or in connection with such transactions,
nor shall it sell short as principal shares of Stock of the Company except in
connection with customary market making activities in the Company's outstanding
securities. The Agent shall not engage in any special selling efforts or selling
methods relating to the Stock within the meaning of Rule 100 of Regulation M of
the Exchange Act. The Agent shall calculate on a weekly basis whether the
Company meets the exemptive provisions set forth in Rule 101(c)(1) under
Regulation M of the Exchange Act in respect of the Company's average daily
trading volume [and value of the Company's shares owned by non-affiliates]. If
the Company fails to meet such provisions, the Agent will promptly notify the
Company by telephone, confirmed by facsimile transmission. The Company or the
Agent may, upon notice to the other party hereto by telephone (confirmed
promptly by telecopy), suspend the offering of Stock; provided, however, that
such suspension or termination shall not affect or impair the parties'
respective obligations with respect to shares of Stock sold hereunder prior to
the giving of such notice.
The net proceeds (the "Net Proceeds") to the Company for the Average
Market Price Shares sold by the Agent during a Pricing Period will equal the sum
of (i) the product of (x) the Company's Percent (as defined below) times (y) the
average of the arithmetic mean of the high and low sales prices of the Company's
Common Stock, (the "Common Stock") reported on the NYSE for each trading day of
such Pricing Period (the "Average Market Price"), times (z) the number of
Average Market Price Shares sold during such Pricing Period plus (ii)
Alternative Proceeds (defined below), if any, plus (iii) Excess Proceeds
(defined below), if any. Subject to adjustment as set forth in the following two
paragraphs, the compensation to the Agent with respect to the sale of Average
Market Price Shares sold hereunder shall equal the difference between the
aggregate gross sales prices at which such sales are actually effected by the
Agent and the Net Proceeds. The "Company's Percent" shall be (i) 97.00% for the
first 600,000 shares of Stock that may be sold pursuant to this Agreement, (ii)
97.50% for the second 600,000 shares of Stock that may be sold pursuant to the
Agreement and (iii) 98.00% for all remaining shares of Stock that may be sold
pursuant to the Agreement. The "Agent's Percent" with respect to any shares of
Stock to be sold pursuant to this Agreement shall equal 100% minus the
applicable Company's Percent.
To the extent that the compensation payable to the Agent hereunder would
otherwise exceed the maximum amount permitted to be received pursuant to the
rules and interpretations of the National Association of Securities Dealers,
Inc. ("NASD"), as determined in good faith by the Agent, such excess over such
amount shall constitute "Excess Proceeds" payable to the Company. In the event
that the average gross sales price in any Pricing Period is equal to or less
than the Company's Percent of the Average Market Price, all of the proceeds from
such sales would be for the account of the Company and no compensation would be
payable to the Agent.
During any Pricing Period, the Company may instruct the Agent by telephone
(confirmed promptly by telecopy) not to sell shares of Stock if such sales
cannot be effected at or above the price designated by the Company in any such
instruction. If such an instruction is given and as a result thereof the Agent
is unable to sell shares of Stock in an amount greater than or equal to the
daily pro rata portion of Average Market Price Shares to be sold during such
Pricing Period, then (i) that day's highest and lowest executed sales price of
Common Stock reported on the NYSE shall not be included in the calculation of
Average Market Price and (ii) the net proceeds payable to the Company (the
"Alternative Proceeds") and the compensation payable to the Agent in respect of
any sales of Average Market Price Shares effected that day (the "Alternative
Shares") by the Agent shall be equal to the Company's Percent and the Agent's
Percent, respectively, of the weighted average sales prices at which the Agent
has actually effected sales of Stock during that day and the Alternative Shares
shall be excluded from the number used in clause (i)(z) in the second preceding
paragraph.
During any Pricing Period, the Company and the Agent may agree upon the
sale of shares ("Additional Shares") of Stock in addition to the sale of Average
Market Price Shares (such Additional Shares to be included in the Maximum
Amount). The compensation to the Agent for sales of Additional Shares shall be,
with respect to any Pricing Period, the Agent's Percent of the gross sales price
per share in connection with the number of Additional Shares sold in any Pricing
Period. The sale of Additional Shares during any day shall be confirmed in
writing by the Agent to the Company following the end of the Pricing Period. All
other shares sold during a Pricing Period not so confirmed shall be deemed
Average Market Price Shares.
The Agent shall provide written confirmation to the Company following the
close of business on the final day of each Pricing Period setting forth, with
regard to such Pricing Period, the dates included in the Pricing Period, the
number of Average Market Price Shares and Additional Shares, if any, sold, the
gross proceeds from the sale of such shares, the highest and lowest executed
sales price at which such shares were sold, the Net Proceeds to the Company, the
amount of Excess Proceeds, if any, the amount of Alternative Proceeds, if any,
the compensation payable by the Company to the Agent with respect to such sales
and the Average Market Price for such Pricing Period.
Settlement for sales of Additional Shares will occur on the third business
day following the date on which such sales are made. The amount of proceeds for
such sales to be delivered to the Company against the receipt of the Additional
Shares sold shall be equal to the aggregate sales prices at which such
Additional Shares were sold, net of the Agent's compensation for such sales and
after deduction for any transaction fees imposed by any governmental or
self-regulatory organization in respect of such sales. Settlement for sales of
Average Market Price Shares will also occur on the third business day following
the date on which such sales are made. On the third business day following the
end of a Pricing Period (each a "Closing Date"), the Average Market Price Shares
sold through the Agent on the last business day of such Pricing Period will be
delivered by the Company to the Agent against payment of the proceeds for the
sale of such Average Market Price Shares less the total compensation to the
Agent for the sale of Average Market Price Shares for such Pricing Period;
provided that all or a portion of the compensation to the Agent for the sale of
the Average Market Price Shares may be paid from the proceeds from the sale of
Average Market Price Shares settling on an earlier day in the event that the
amount of proceeds from the sale of Average Market Price Shares settling on the
Closing Date is less than the total compensation due to the Agent in respect of
such Pricing Period. Settlement for all shares shall be effected by free
delivery of shares to the Agent's account at The Depository Trust Corporation in
return for payments in same day funds delivered to the account designated by the
Company.
At the time of each settlement of securities hereunder, the Company shall
be deemed to have affirmed each representation, warranty, covenant and other
agreement contained in the Agreement and on each Closing Date, the Company shall
affirm in writing each representation, warranty, covenant and other agreement
contained in this Agreement. The Company covenants and agrees with the Agent
that on or prior to the second business day after the termination of each
Pricing Period, the Company will file a prospectus supplement under the
applicable paragraph of Rule 424(b) of the Rules and Regulations, which
prospectus supplement will set forth, with regard to such Pricing Period, the
dates included within the Pricing Period, the number of shares of Stock sold
through the Agent (separately identifying the number of Average Market Price
Shares), the highest and lowest executed sales price at which Average Market
Price Shares were sold, the Net Proceeds to the Company and the compensation
payable by the Company to the Agent with respect to sales of Average Market
Price Sales. Any obligation of the Agent to use its reasonable efforts to sell
the Stock shall be subject to the continuing accuracy of the representations and
warranties of the Company herein, to the performance by the Company of its
obligations hereunder and to the continuing satisfaction of the additional
conditions specified in Section 5 of this Agreement.
SECTION 4. Covenants of the Company. The Company
covenants and agrees with the Agent that:
(a) During the period in which a prospectus relating to the Stock is
required to be delivered under the Act, the Company will notify the Agent
promptly of the time when any subsequent amendment to the Registration Statement
has become effective or any subsequent supplement to the Prospectus has been
filed and of any request by the Commission for any amendment or supplement to
the Registration Statement or Prospectus or for additional information; it will
prepare and file with the Commission, promptly upon the Agent's request, any
amendments or supplements to the Registration Statement or Prospectus that, in
the Agent's reasonable opinion, may be necessary or advisable in connection with
the distribution of the Stock by the Agent; the Company will not file any
amendment or supplement to the Registration Statement or Prospectus unless a
copy thereof has been submitted to the Agent a reasonable period of time before
the filing and the Agent has not reasonably objected thereto; and it will
furnish to the Agent at the time of filing thereof a copy of any document that
upon filing is deemed to be incorporated by reference in the Registration
Statement or Prospectus; and the Company will cause each amendment or supplement
to the Prospectus to be filed with the Commission as required pursuant to the
applicable paragraph of Rule 424(b) of the Rules and Regulations or, in the case
of any document to be incorporated therein by reference, to be filed with the
Commission as required pursuant to the Exchange Act, within the time period
prescribed.
(b) The Company will advise the Agent, promptly after it shall receive
notice or obtain knowledge thereof, of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement, of the
suspension of the qualification of the Stock for offering or sale in any
jurisdiction, or of the initiation or threatening of any proceeding for any such
purpose; and it will promptly use its best efforts to prevent the issuance of
any stop order or to obtain its withdrawal if such a stop order should be
issued.
(c) Within the time during which a prospectus relating to the Stock is
required to be delivered under the Act, the Company will comply as far as it is
able with all requirements imposed upon it by the Act and by the Rules and
Regulations, as from time to time in force, so far as necessary to permit the
continuance of sales of or dealings in the Stock as contemplated by the
provisions hereof and the Prospectus. If during such period any event occurs as
a result of which the Prospectus as then amended or supplemented would include
an untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the circumstances then
existing, not misleading, or if during such period it is necessary to amend or
supplement the Registration Statement or Prospectus to comply with the Act, the
Company will promptly notify the Agent to suspend the offering of Stock during
such period and the Company will amend or supplement the Registration Statement
or Prospectus so as to correct such statement or omission or effect such
compliance.
(d) The Company will use its best efforts to qualify the Stock for sale
under the securities laws of such jurisdictions as the Agent designates and to
continue such qualifications in effect so long as required for the distribution
of the Stock, except that the Company shall not be required in connection
therewith to qualify as a foreign corporation or to execute a general consent to
service of process in any jurisdiction.
(e) The Company will furnish to the Agent and its counsel (at the expense
of the Company) copies of the Registration Statement, the Prospectus (including
all documents incorporated by reference therein) and all amendments and
supplements to the Registration Statement or Prospectus that are filed with the
Commission during the period in which a prospectus relating to the Stock is
required to be delivered under the Act (including all documents filed with the
Commission during such period that are deemed to be incorporated by reference
therein), in each case as soon as available and in such quantities as the Agent
may from time to time reasonably request and will also furnish copies of the
Prospectus to the NYSE in accordance with Rule 153 of the Rules and Regulations.
(f) The Company will make generally available to its security holders as
soon as practicable, but in any event not later than 15 months after the end of
the Company's current fiscal quarter, an earnings statement (which need not be
audited) covering a 12-month period that satisfies the provisions of Section
11(a) of the Act and Rule 158 of the Rules and Regulations.
(g) The Company, whether or not the transactions contemplated hereunder
are consummated or this Agreement is terminated, will pay all of its expenses
incident to the performance of its obligations hereunder (including, but not
limited to, any transaction fees imposed by any governmental or self-regulatory
organization with respect to transactions contemplated by this Agreement and any
blue sky fees) and will pay the expenses of printing all documents relating to
the offering. The Agent will pay its own out-of-pocket costs and expenses
incurred in connection with the entering into of this Agreement and the
transactions contemplated by this Agreement, including, without limitation,
travel, reproduction, printing and similar expenses; provided, however, that the
Company will promptly, upon the request of the Agent, reimburse the Agent for up
to $40,000 of fees and disbursements of the Agent's legal counsel incurred in
connection with the entering into of this Agreement and the matters contemplated
hereby.
(h) The Company will apply the net proceeds from the sale of the Stock as
set forth in the Prospectus.
(i) The Company will not, directly or indirectly, offer or sell any shares
of Common Stock (other than the Stock offered pursuant to the provisions of this
Agreement) or securities convertible into or exchangeable for, or any rights to
purchase or acquire, Common Stock during the period from the date of this
Agreement through the final Closing Date for the sale of Stock hereunder without
(a) giving the Agent at least five business days' prior written notice
specifying the nature of the proposed sale and the date of such proposed sale
and (b) suspending activity under this program for such period of time as may
reasonably be determined by agreement of the Company and the Agent; provided,
however, that no such notice and suspension shall be required in connection with
the Company's issuance or sale of (i) shares of Common Stock pursuant to any
employee or director stock option or benefits plan, stock ownership plan,
dividend reinvestment plan or Stockholder Investment Program of the Company now
in effect as such plans may be amended from time to time, and (ii) Common Stock
issuable upon conversion of securities or the exercise of warrants, options or
other rights in effect or outstanding on the date hereof.
(j) The Company will, at any time during the term of this Agreement, as
supplemented from time to time, advise the Agent immediately after it shall have
received notice or obtain knowledge thereof, of any information or fact that
would alter or affect any opinion, certificate, letter and other document
provided to the Agent pursuant to Section 5 herein.
(k) Each time that (i) the Registration Statement or the Prospectus shall
be amended or supplemented (other than a supplement filed pursuant to Rule
424(b) under the Act that contains solely the information set forth in the final
paragraph of Section 3 of this Agreement) or (ii) there is filed with the
Commission any document incorporated by reference into the Prospectus (other
than any Quarterly Report on Form 10-Q or a Current Report on Form 8-K, unless
the Agent shall otherwise reasonably request), the Company shall furnish or
cause to be furnished to the Agent forthwith a certificate dated the date of
filing with the Commission of such amendment, supplement or other document, the
date of effectiveness of amendment, as the case may be, in form satisfactory to
the Agent to the effect that the statements contained in the certificate
referred to in Section 5(f) hereof which were last furnished to the Agent are
true and correct at the time of such amendment, supplement, filing, as the case
may be, as though made at and as of such time (except that such statements shall
be deemed to relate to the Registration Statement and the Prospectus as amended
and supplemented to such time) or, in lieu of such certificate, a certificate of
the same tenor as the certificate referred to in said Section 5(f), modified as
necessary to relate to the Registration Statement and the Prospectus as amended
and supplemented to the time of delivery of such certificate.
(l) Each time that (i) the Registration Statement or the Prospectus is
amended or supplemented (other than a supplement filed pursuant to Rule 424(b)
under the Act that contains solely the information set forth in the final
paragraph of Section 3 of this Agreement) or (ii) there is filed with the
Commission any document incorporated by reference into the Prospectus (other
than any Quarterly Report on Form 10-Q or a Current Report on Form 8-K, unless
the Agent shall otherwise reasonably request), the Company shall furnish or
cause to be furnished forthwith to the Agent and to counsel to the Agent a
written opinion of Venable, Baetjer and Howard, LLP, counsel to the Company
("Company Counsel"), or other counsel satisfactory to the Agent, dated the date
of filing with the Commission of such amendment, supplement or other document
and the date of effectiveness of such amendment, as the case may be, in form and
substance satisfactory to the Agent, of the same tenor as the opinion referred
to in Section 5(d) hereof, but modified as necessary to relate to the
Registration Statement and the Prospectus as amended and supplemented to the
time of delivery of such opinion.
(m) Each time that the Registration Statement or the Prospectus shall be
amended or supplemented to include additional amended financial information or
there is filed with the Commission any document incorporated by reference into
the Prospectus which contains additional amended financial information, the
Company shall cause KPMG Peat Marwick LLP, or other independent accountants
satisfactory to the Agent, forthwith to furnish the Agent a letter, dated the
date of effectiveness of such amendment, or the date of filing of such
supplement or other document with the Commission, as the case may be, in form
satisfactory to the Agent, of the same tenor as the letter referred to in
Section 5(e) hereof but modified to relate to the Registration Statement and the
Prospectus, as amended and supplemented to the date of such letter.
(n) The Company hereby consents to the Agent trading in the Company's
Common Stock for the Agent's own account and at the same time as the Company's
sales pursuant to this Agreement.
SECTION 5. Conditions of Agent's Obligations. The obligations of the Agent
to sell the Stock as provided herein shall be subject to the accuracy, as of the
date hereof, and as of each Closing Date for any Pricing Period contemplated
under this Agreement, of the representations and warranties of the Company
herein, to the performance by the Company of its obligations hereunder and to
the following additional conditions:
(a) No stop order suspending the effectiveness of the Registration
Statement shall have been issued and no proceeding for that purpose shall have
been instituted or, to the knowledge of the Company or the Agent, threatened by
the Commission, and any request of the Commission for additional information (to
be included in the Registration Statement or the Prospectus or otherwise) shall
have been complied with to the Agent's satisfaction.
(b) The Agent shall not have advised the Company that the Registration
Statement or Prospectus, or any amendment or supplement thereto, contains an
untrue statement of fact that in the Agent's opinion is material, or omits to
state a fact that in the Agent's opinion is material and is required to be
stated therein or is necessary to make the statements therein not misleading.
(c) Except as contemplated in the Prospectus, subsequent to the respective
dates as of which information is given in the Registration Statement and the
Prospectus, there shall not have been any material change, on a consolidated
basis, in the capital stock of the Company and its subsidiaries, or any material
adverse change, or any development that may reasonably be expected to cause a
material adverse change, in the condition (financial or other), business,
prospects, net worth or results of operations of the Company and its
subsidiaries, or any change in the rating assigned to any securities of the
Company.
(d) The Agent shall have received at the date of the commencement of the
first Pricing Period hereunder (the "Commencement Date") and at every other date
specified in Section 4(l) hereof, opinions of Company Counsel, dated as of the
Commencement Date and dated as of such other date, respectively, to the effect
that:
(i) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of its jurisdiction of
incorporation, has full corporate power and authority to conduct its
business as described in the Registration Statement and Prospectus and is
duly qualified to do business in each jurisdiction where such
qualification is required, except where the failure to so qualify would
not have a material adverse effect on the condition, financial or
otherwise, or the earnings, business affairs or business prospects of the
Company and its subsidiaries considered as one enterprise;
(ii) Each "significant subsidiary" (as such term is defined in Rule
1-02 of Regulation S-X under the Act) of the Company has been duly
incorporated (or formed, in the case of a partnership) and has corporate
(or partnership) power and authority to own, lease and operate its
properties and conduct its business as described in the Registration
Statement and Prospectus; each of the Company's significant subsidiaries
is validly existing as a corporation (or partnership, as the case may be)
in good standing under the laws of the jurisdiction of its incorporation;
and all of the issued outstanding capital stock (or other equity
interests) of each subsidiary of the Company has been duly authorized and
validly issued, is fully paid and nonassessable, is owned by the Company,
directly or indirectly, free and clear of any mortgage, pledge, lien,
encumbrance, claim or equity;
(iii) The shares of Stock have been duly and validly authorized, and,
when issued and delivered to and paid for by the purchasers thereof
pursuant to this Agreement, will be fully paid and nonassessable and
conform to the description thereof in the Prospectus and the shareholders
of the Company have no preemptive rights with respect to the Stock; all
corporate action required to be taken for the authorization, issue and
sale of the Stock has been validly and sufficiently taken; and the shares
of Stock are the subject of an effective registration statement permitting
their sale in the manner contemplated by this Agreement;
(iv) The Registration Statement has become effective under the Act;
to the knowledge of such counsel no stop order suspending the
effectiveness of the Registration Statement has been issued and no
proceeding for that purpose has been instituted or threatened by the
Commission;
(v) The Registration Statement, when it became effective, and the
Prospectus and any amendment or supplement thereto, on the date of filing
thereof with the Commission (and at each Closing Date on or prior to the
date of the opinion), complied as to form in all material respects with
the requirements of the Act and the Rules and Regulations; and the
documents incorporated by reference in the Registration Statement or
Prospectus or any amendment or supplement thereto, when filed with the
Commission under the Exchange Act, complied as to form in all material
respects with the requirements of the Act or the Exchange Act, as
applicable, and the rules and regulations of the Commission thereunder;
(vi) The description in the Registration Statement and Prospectus of
statutes, legal and governmental proceedings, contracts and other
documents are accurate in all material respects and fairly present the
information required to be shown; and such counsel do not know of any
statutes or legal or governmental proceedings required to be described in
the Prospectus that are not described as required, or of any contracts or
documents of a character required to be described in the Registration
Statement or Prospectus (or required to be filed under the Exchange Act if
upon such filing they would be incorporated by reference therein) or to be
filed as exhibits to the Registration Statement that are not described and
filed as required;
(vii) This Agreement has been duly authorized,
executed and delivered by the Company;
(viii) The execution, delivery and performance of this Agreement by
the Company and the consummation of the transactions contemplated herein
by the Company do not and will not result in a breach or violation of any
of the terms and provisions of, or constitute a default under, any
agreement or instrument known to such counsel to which the Company or any
of its subsidiaries is a party or by which it is bound or to which any of
the property of the Company or any of its subsidiaries is subject except
for such breaches or defaults that would not in the aggregate have a
material adverse effect on the Company's ability to perform its
obligations under this Agreement or on the condition, financial or
otherwise, or the earnings, business affairs or business prospects of the
Company and its subsidiaries considered as one enterprise, nor will such
action result in the violation of the Company's charter or by-laws, or any
statute or any order, rule or regulation known to such counsel of any
court or governmental agency or body having jurisdiction over the Company
or any of its subsidiaries or any of its properties; and no consent,
approval, authorization or order of, or filing with, any court or
governmental agency or body is required for the consummation of the
transactions contemplated by this Agreement in connection with the
issuance or sale of the Stock by the Company, except such as have been
obtained under the Act and such as may be required under state securities
or blue sky laws in connection with the sale and distribution of the Stock
by the Agent;
(ix) Except for permits and similar authorizations required under the
securities or blue sky laws of certain states, no consent, waiver,
approval, authorization or other order of any regulatory body,
administrative agency or other governmental body is legally required for
the sale and issuance of shares of Stock as contemplated hereby and by the
Prospectus;
(x) Except as may be disclosed in the Prospectus, such counsel knows
of no actions, suits or proceedings pending or threatened against or
affecting the Company or any of its subsidiaries or the business,
properties, business prospects, condition (financial or otherwise) or
results of operations of the Company or any of its subsidiaries, or any of
their respective officers in their capacities as such, before or by any
Federal or state or foreign court, commission, regulatory body, wherein an
unfavorable ruling, decision or finding might materially and adversely
affect the Company or any of its subsidiaries or its business, properties,
business prospects, condition (financial or otherwise) or results of
operations; and
(xi) For all taxable years beginning [ ] (the date of the Company's
initial public offering of Common Stock) and ending [ ], Resource REIT (as
defined below) has met the requirements for qualification as a REIT under
the Code. Resource REIT will be able to qualify as a REIT for the taxable
year beginning [ ], 199[ ], provided that after the date hereof, Resource
REIT continues to be organized and operated as described in the
Registration Statement and according to representations made to us in a
certificate of an officer of the Company and therefore continues to
satisfy the income tests, and distribution, shareholder, recordkeeping and
other applicable REIT requirements under the Code. "Resource REIT" means
the Company, as aggregated with such wholly-owned subsidiaries as were in
existence during the period for which reference is made. The information
presented in the Registration Statement under the caption "Taxation," to
the extent it constitutes matters of law or legal conclusions, is accurate
in all material respects.
In addition, such counsel shall state that such counsel has no reason to
believe that either the Registration Statement, at the time it (including each
Post-Effective Amendment thereto) became effective, contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading or
that the Prospectus and any amendments or supplements thereto, on the date of
filing thereof with the Commission and at the Commencement Date and at each
Closing Date on or prior to the date of the opinion, included an untrue
statement of a material fact or omitted to state a material fact necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading; it being understood that such counsel need express no
opinion as to the financial statements or other financial and statistical data
included in any of the documents mentioned in this paragraph.
(e) At the Commencement Date and at such other dates specified in Section
4(m) hereof, the Agent shall have received a letter from KPMG Peat Marwick LLP,
independent public accountants for the Company, or other independent accountants
satisfactory to the Agent, dated the date of delivery thereof, substantially in
the form attached hereto as Annex I and otherwise in form and substance
satisfactory to Agent.
(f) The Agent shall have received from the Company a certificate, or
certificates, signed by the Chairman of the Board, the President or a Vice
President and by the principal financial or accounting officer of the Company,
dated as of the Commencement Date and dated as of each Closing Date contemplated
by this Agreement, to the effect that, to the best of their knowledge based upon
reasonable investigation:
(i) The representations and warranties of the Company in this
Agreement are true and correct, as if made at and as of the Commencement
Date or the Closing Date for such Pricing Period (as the case may be), and
the Company has complied with all the agreements and satisfied all the
conditions on its part to be performed or satisfied at or prior to the
Commencement Date and each such Closing Date (as the case may be);
(ii) No stop order suspending the effectiveness of the Registration
Statement has been issued, and no proceeding for that purpose has been
instituted or, to the knowledge of such officer after due inquiry, is
threatened, by the Commission;
(iii) Since the date of this Agreement there has occurred no event
required to be set forth in an amendment or supplement to the Registration
Statement or Prospectus that has not been so set forth and there has been
no document required to be filed under the Exchange Act and the rules and
regulations of the Commission thereunder that upon such filing would be
deemed to be incorporated by reference in the Prospectus that has not been
so filed; and
(iv) Since the date of this Agreement, there has not been any
material adverse change, on a consolidated basis, in the business,
financial condition or results of operations of the Company and its
subsidiaries considered as one enterprise which has not been described in
an amendment or supplement to the Registration Statement or Prospectus.
In addition, on each Closing Date the certificate shall also state that
the shares of Stock to be sold on that date have been duly and validly
authorized by the Company and that all corporate action required to be taken for
the authorization, issuance and sale of the Stock on that date has been validly
and sufficiently taken.
(g) At the Commencement Date and on each Closing Date, the Company shall
have furnished to the Agent such appropriate further information, certificates
and documents as the Agent may reasonably request.
All such opinions, certificates, letters and other documents will be in
compliance with the provisions hereof only if they are satisfactory in form and
substance to the Agent. The Company will furnish the Agent with such conformed
copies of such opinions, certificates, letters and other documents as the Agent
shall reasonably request.
SECTION 6. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless the Agent and each
person, if any, who controls the Agent within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act, as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged
untrue statement of a material fact contained in the Registration
Statement (or any amendment thereto), or the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to
make the statements therein not misleading or arising out of any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto) or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, if such settlement is effected with
the written consent of the Company; and
(iii) against any and all expense whatsoever, as incurred (including,
subject to Section 6(c) hereof, the reasonable fees and disbursements of
counsel chosen by the Agent), reasonably incurred in investigating,
preparing or defending against any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened, or
any claim whatsoever based upon any such untrue statement or omission, or
any such alleged untrue statement or omission, to the extent that any such
expense is not paid under (i) or (ii) above;
provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by the
Agent expressly for use in the Registration Statement (or any amendment thereto)
or any preliminary prospectus or the Prospectus (or any amendment or supplement
thereto).
(b) The Agent agrees to indemnify and hold harmless the Company and its
directors and each officer of the Company who signed the Registration Statement,
and each person, if any, who controls the Company within the meaning of Section
15 of the Act or Section 20 of the Exchange Act against any and all loss,
liability, claim, damage and expense described in the indemnity contained in
subsection (a) of this Section, as incurred, but only with respect to untrue
statements or omissions, or alleged untrue statements or omissions, made in the
Registration Statement (or any amendments thereto) or any preliminary prospectus
or the Prospectus (or any amendment or supplement thereto) in reliance upon and
in conformity with written information furnished to the Company by the Agent
expressly for use in the Registration Statement (or any amendment thereto) or
such preliminary prospectus or the Prospectus (or any amendment or supplement
thereto).
(c) Any indemnified party that proposes to assert the right to be
indemnified under this Section 6 will, promptly after receipt of notice of
commencement of any action against such party in respect of which a claim is to
be made against an indemnifying party or parties under this Section 6, notify
each such indemnifying party of the commencement of such action, enclosing a
copy of all papers served, but the omission so to notify such indemnifying party
will not relieve the indemnifying party from (i) any liability that it might
have to any indemnified party otherwise than under this Section 6 and (ii) any
liability that it may have to any indemnified party under the foregoing
provision of this Section 6 unless, and only to the extent that, such omission
results in the forfeiture of substantive rights or defenses by the indemnifying
party. If any such action is brought against any indemnified party and it
notifies the indemnifying party of its commencement, the indemnifying party will
be entitled to participate in and, to the extent that it elects by delivering
written notice to the indemnified party promptly after receiving notice of the
commencement of the action from the indemnified party, jointly with any other
indemnifying party similarly notified, to assume the defense of the action, with
counsel satisfactory to the indemnified party, and after notice from the
indemnifying party to the indemnified party of its election to assume the
defense, the indemnifying party will not be liable to the indemnified party for
any legal or other expenses except as provided below and except for the
reasonable costs of investigation subsequently incurred by the indemnified party
in connection with the defense. The indemnified party will have the right to
employ its own counsel in any such action, but the fees, expenses and other
charges of such counsel will be at the expense of such indemnified party unless
(1) the employment of counsel by the indemnified party has been authorized in
writing by the indemnifying party, (2) the indemnified party has reasonably
concluded (based on advice of counsel) that there may be legal defenses
available to it or other indemnified parties that are different from or in
addition to those available to the indemnifying party, (3) a conflict or
potential conflict exists (based on advice of counsel to the indemnified party)
between the indemnified party and the indemnifying party (in which case the
indemnifying party will not have the right to direct the defense of such action
on behalf of the indemnified party) or (4) the indemnifying party has not in
fact employed counsel to assume the defense of such action within a reasonable
time after receiving notice of the commencement of the action, in each of which
cases the reasonable fees, disbursements and other charges of counsel will be at
the expense of the indemnifying party or parties. It is understood that the
indemnifying party or parties shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the reasonable fees,
disbursements and other charges of more than one separate firm admitted to
practice in such jurisdiction at any one time for all such indemnified party or
parties. All such fees, disbursements and other charges will be reimbursed by
the indemnifying party promptly as they are incurred. An indemnifying party will
not be liable for any settlement of any action or claim effected without its
written consent (which consent will not be unreasonably withheld).
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in the foregoing
paragraphs of this Section 6 is applicable in accordance with its terms but for
any reason is held to be unavailable from the Company or the Agent, the Company
and the Agent will contribute to the total losses, claims, liabilities, expenses
and damages (including any investigative, legal and other expenses reasonably
incurred in connection with, and any amount paid in settlement of, any action,
suit or proceeding or any claim asserted, but after deducting any contribution
received by the Company from persons other than the Agent, such as persons who
control the Company within the meaning of the Act, officers of the Company who
signed the Registration Statement and directors of the Company, who also may be
liable for contribution) to which the Company and any one or more of the Agent
may be subject in such proportion as shall be appropriate to reflect the
relative benefits received by the Company on the one hand and the Agent on the
other. The relative benefits received by the Company on the one hand and the
Agent on the other hand shall be deemed to be in the same proportion as the
total net proceeds from the offering (before deducting expenses) received by the
Company bear to the total compensation (before deducting expenses) received by
the Agent from the sale of Stock on behalf of the Company. If, but only if, the
allocation provided by the foregoing sentence is not permitted by applicable
law, the allocation of contribution shall be made in such proportion as is
appropriate to reflect not only the relative benefits referred to in the
foregoing sentence but also the relative fault of the Company, on the one hand,
and the Agent, on the other, with respect to the statements or omission which
resulted in such loss, claim, liability, expense or damage, or action in respect
thereof, as well as any other relevant equitable considerations with respect to
such offering. Such relative fault shall be determined by reference to whether
the untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact relates to information supplied by the Company
or the Agent, the intent of the parties and their relative knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Agent agree that it would not be just and equitable if
contributions pursuant to this Section 6(d) were to be determined by pro rata
allocation or by any other method of allocation which does not take into account
the equitable considerations referred to herein. The amount paid or payable by
an indemnified party as a result of the loss, claim, liability, expense or
damage, or action in respect thereof, referred to above in this Section 6(d)
shall be deemed to include, for the purpose of this Section 6(d), any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
foregoing provisions of this Section 6(d), the Agent shall not be required to
contribute any amount in excess of the amount by which the total actual sales
price at which Stock sold by the Agent exceeds the amount of any damages that
the Agent has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission and no person found guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
will be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 6(d), any person who
controls a party to this Agreement within the meaning of the Act will have the
same rights to contribution as that party, and each officer of the Company who
signed the Registration Statement will have the same rights to contribution as
the Company, subject in each case to the provisions hereof. Any party entitled
to contribution, promptly after receipt of notice of commencement of any action
against such party in respect of which a claim for contribution may be made
under this Section 6(d), will notify any such party or parties from whom
contribution may be sought, but the omission so to notify will not relieve that
party or parties from whom contribution may be sought from any other obligation
it or they may have under this Section 6(d). No party will be liable for
contribution with respect to any action or claim settled without its written
consent (which consent will not be unreasonably withheld).
(e) The indemnity and contribution provided by this Section 6 shall not
relieve the Company and the Agent from any liability the Company and the Agent
may otherwise have (including, without limitation, any liability the Agent may
have for a breach of its obligations under Section 3 hereof).
SECTION 7. Representations and Agreements to Survive Delivery. All
representations, warranties and agreements of the Company herein or in
certificates delivered pursuant hereto, and the agreements of the Agent
contained in Section 6 hereof, shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of the Agent or any
controlling persons, or the Company (or any of their officers, directors or
controlling persons), and shall survive delivery of and payment for the Stock.
SECTION 8. Termination.
(a) The Agent shall have the right by giving notice as hereinafter
specified at any time at or prior to any Closing Date, to terminate this
Agreement if (i) any material adverse change, or any development has occurred
that is reasonably expected to cause material adverse change, in the business,
financial condition or results of operations of the Company and its subsidiaries
has occurred which, in the judgment of such Agent, materially impairs the
investment quality of the Stock, (ii) the Company shall have failed, refused or
been unable, at or prior to the Closing Date, to perform any agreement on its
part to be performed hereunder, (iii) any other condition of the Agent's
obligations hereunder is not fulfilled, (iv) any suspension or limitation of
trading in the Stock on the NYSE, or any setting of minimum prices for trading
of the Stock on such exchange, shall have occurred, (v) any banking moratorium
shall have been declared by Federal or New York authorities or (vi) an outbreak
or material escalation of major hostilities in which the United States is
involved, a declaration of war by Congress, any other substantial national or
international calamity or any other event or occurrence of a similar character
shall have occurred since the execution of this Agreement that, in the judgment
of the Agent, makes it impractical or inadvisable to proceed with the completion
of the sale of and payment for the Stock to be sold by the Agent on behalf of
the Company. Any such termination shall be without liability of any party to any
other party except that the provisions of Section 4(g), Section 6 and Section 7
hereof shall remain in full force and effect notwithstanding such termination.
(b) The Company shall have the right, by giving notice as hereinafter
specified, to terminate this Agreement in its sole discretion on the first
anniversary of the date of this Agreement. Any such termination shall be without
liability of any party to any other party except that the provisions of Section
4(g), Section 6 and Section 7 hereof shall remain in full force and effect
notwithstanding such termination.
(c) The Agent shall have the right, by giving notice as hereinafter
specified, to terminate this Agreement in its sole discretion at any time after
the first anniversary of the date of this Agreement. Any such termination shall
be without liability of any party to any other party except that the provisions
of Section 4(g), Section 6 and Section 7 hereof shall remain in full force and
effect notwithstanding such termination.
(d) This Agreement shall remain in full force and effect unless terminated
pursuant to Sections 8(a), (b) or (c) above or otherwise by mutual agreement of
the parties; provided that any such termination by mutual agreement shall in all
cases be deemed to provide that Section 4(g), Section 6 and Section 7 shall
remain in full force and effect.
(e) Any termination of this Agreement shall be effective on the date
specified in such notice of termination; provided that such termination shall
not be effective until the close of business on the date of receipt of such
notice by the Agent or the Company, as the case may be. If such termination
shall occur during a Pricing Period, any Additional Shares and Average Market
Price Shares shall settle in accordance with the provisions of the second to
last paragraph of Section 3 hereof.
SECTION 9. Notices. All notices or communications hereunder shall be in
writing and if sent to the Agent shall be mailed, delivered, telexed or
telecopied and confirmed to the Agent at PaineWebber Incorporated, 1285 Avenue
of the Americas, New York, New York 10019, telecopy no. (212) 713-4205,
attention: [ ], or if sent to the Company, shall be mailed, delivered, telexed
or telecopied and confirmed to the Company at 10900 Nuckols Road, Glen Allen,
Virginia 23060, telecopy no. (804) 217-5860, attention: [ ]. Each party to this
Agreement may change such address for notices by sending to the parties to this
Agreement written notice of a new address for such purpose.
SECTION 10. Parties. This Agreement shall inure to the benefit of and be
binding upon the Company and the Agent and their respective successors and the
controlling persons, officers and directors referred to in Section 6 hereof, and
no other person will have any right or obligation hereunder.
SECTION 11. Adjustments for Stock Splits. The parties acknowledge and
agree that all share related numbers contained in this Agreement (including,
without limitation, the Maximum Amount and the Minimum Price) shall be adjusted
to take into account any stock split effected with respect to the Stock.
SECTION 12. Entire Agreement. This Agreement constitutes the entire
agreement and supersedes all other prior and contemporaneous agreements and
undertakings, both written and oral, among the parties hereto with regard to the
subject matter hereof.
SECTION 13. APPLICABLE LAW. THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL
LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICTS OF LAWS.
SECTION 14. Counterparts. This Agreement may be
executed in two or more counterparts, each of which shall be
deemed an original, but all of which together shall
constitute one and the same instrument.
If the foregoing correctly sets forth the understanding between the
Company and the Agent, please so indicate in the space provided below for that
purpose, whereupon this letter shall constitute a binding agreement between the
Company and the Agent. Alternatively, the execution of this Agreement by the
Company and its acceptance by or on behalf of the Agent may be evidenced by an
exchange of telegraphic or other written communications.
Very truly yours,
RESOURCE MORTGAGE CAPITAL,
INC.
By:
Name:
Title:
ACCEPTED as of the date
first above written
PAINEWEBBER INCORPORATED
By:
Name:
Title:
<PAGE>
ANNEX I
[Form of Letter from Accountants]
<PAGE>
Exhibit
5.1
VENABLE, BAETJER AND HOWARD, LLP.
Including professional corporations
1800 Mercantile Bank & Trust Building
Two Hopkins Plaza
Baltimore, Maryland 21201-2978
(410) 244-7400, Fax (410) 244-7742
February 27, 1997
Resource Mortgage Capital, Inc.
10900 Nuckols Road
Glen Allen, Virginia 23060
Re: Registration Statement on Form S-3
(Reg. No. 33-50705)
Ladies and Gentlemen:
We have acted as counsel to Resource Mortgage Capital, Inc., a
Virginia corporation (the "Company"), in connection with its proposed public
offering of up to 2,000,000 shares of its Common Stock , $0.01 par value (the
"Common Stock"), pursuant to a Registration Statement filed on Form S-3
(Registration No. 33-50705) ("Registration Statement"). On February 27, 1997,
the Company filed with the Securities and Exchange Commission a Post-effective
Amendment No. 1 (the "Amendment") to the Registration Statement containing a
Prospectus Supplement and a Prospectus.
In that connection, we have examined originals or copies of such
documents, corporate records and other instruments as we have deemed necessary
or appropriate for purposes of this opinion including the Articles of
Incorporation, as amended and the By-laws of the Company. We have assumed,
without independent verification, the genuineness of signatures, the
authenticity of documents and the conformity with originals of copies.
Based on the foregoing, we are of the opinion that the shares of
Common Stock being sold by the Company, when issued and sold in accordance with
the terms of the Sales Agency Agreement in substantially the same form filed as
Exhibit 1.1 to the Amendment, will be validly issued, fully paid and
non-assessable.
We hereby consent to the use of this opinion as an exhibit to the
Amendment and the reference to our firm under "Legal Opinions" in the
Prospectus.
By giving the foregoing consent, we do not admit that we come within
the category of persons whose consent is required under Section 7 of the
Securities Act of 1933.
Very truly yours,
VENABLE, BAETJER AND HOWARD, LLP
<PAGE>
Exhibit
12.1
RATIO OF AVAILABLE EARNINGS TO FIXED CHARGES AND RATIO OF
EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK
DIVIDENDS
Year Ended
-----------------------------------
1996 1995 1994 1993 1992
-----------------------------------
Net income before $71,731$41,933$49,680$57,291$45,217
income taxes
Fixed charges (interest
expense, net of
non-recourse interest
expense, other CMO 128,309162,762143,27882,586 56,341
expenses and
provision for losses)
-----------------------------------
Total Available $200,04$204,69$192,95$139,87$101,588
Earnings (as defined)
===================================
Preferred Stock
Dividend $10,009$2,746 - - -
Requirements
Ratio of Available
Earnings 1.56:1 1.26:1 1.35:1 1.69:1 1.80:1
to Fixed Charges
===================================
Ratio of Available
Earnings to
Combined Fixed 1.52:1 1.25:1 1.35:1 1.69:1 1.80:1
Charges and Preferred
Stock Dividends
===================================
<PAGE>
Exhibit
8.1
February 27, 1997
Resource Mortgage Capital, Inc.
10900 Nuckols Road
Glen Allen, Virginia 23060
Re: Tax Opinion
Ladies and Gentlemen:
We have acted as counsel to Resource Mortgage Capital, Inc. ("RMC") in
connection with the preparation of a registration statement (the "Registration
Statement") to be filed with the Securities and Exchange Commission with respect
to an offering of shares of RMC's common stock. You have requested our opinion
regarding RMC's qualification as a real estate investment trust ("REIT")
pursuant to sections 856 through 860 of the Internal Revenue Code of 1986, as
amended (the "Code"), for its 1996 taxable year. Unless otherwise stated, all
section references herein are to the Code. In addition, you have requested our
opinion with respect to whether RMC's organization and contemplated method of
operations are such as to enable it to continue to qualify as a REIT for its
1997 taxable year and subsequent taxable years.
RMC has a number of wholly-owned subsidiaries ("qualified REIT
subsidiaries"), the income, liabilities, and assets of which are consolidated
with those of RMC for federal income tax purposes. This letter refers to RMC,
together with such subsidiaries, as "Consolidated RMC." In connection with the
opinions rendered below, we have examined the following:
1. The Articles of Incorporation of RMC, as amended;
2. The bylaws of RMC as restated on June 22, 1992;
3. Consolidated RMC's federal income tax returns for
its taxable years 1994 and 1995; and
4. The prospectus included in the registration
statement with which this letter has been filed.
In connection with the opinions rendered below, we have assumed that:
1. Each of the documents referred to above has been
duly authorized, executed, and delivered, is authentic, if an
original, or accurate, if a copy, and has not been amended;
2. During Consolidated RMC's 1997 taxable year and subsequent taxable
years, it will continue to conduct its affairs in a manner that will make the
representations set forth below true for such years;
3. Neither RMC nor any subsidiary of RMC will make any amendments to
its organizational documents after the date of this opinion that would affect
Consolidated RMC's qualification as a REIT for any taxable year; and
4. No actions will be taken by Consolidated RMC or any subsidiary of
RMC after the date hereof that would have the effect of altering the facts upon
which the opinions set forth below are based.
Furthermore, we have relied upon the correctness of the following
representations of Consolidated RMC and its authorized representatives that, at
all times relevant hereto:
1. Neither RMC nor any subsidiary thereof has ever been subject by law
to the supervision or examination by state, or federal authorities having
supervision over banking institutions.
2. Neither RMC nor any subsidiary thereof has ever been a savings
institution chartered or supervised as a savings and loan or similar association
under federal or state law.
3. Neither RMC nor any subsidiary thereof has ever been a small
business investment company operating under the Small Business Investment Act of
1958.
4. Neither RMC nor any subsidiary thereof was created by or pursuant
to an act of a state legislature for purposes of promoting, maintaining, and
assisting the economy and industry within a state on a regional or state-wide
basis by making loans to be used in trades or businesses which would generally
not be made by banks within such region or state in the ordinary course of
business.
5. Neither RMC nor any subsidiary thereof was an
insurance company to which Subchapter L of the Code applies.
6. Beneficial ownership of the shares of RMC (the
"Shares") was held by 100 or more persons.
7. At no time during the last half of any taxable year was more than
50% in value of the outstanding stock of RMC owned, directly or indirectly, by
or for five or fewer individuals. For this purpose, the Shares are treated as
owned indirectly by or for an individual if such individual would be treated as
owning such Shares under section 544 as modified by section 856(h)(1)(B).
8. Consolidated RMC's election to be treated as a
REIT was properly made and has not been terminated or revoked.
9. At the close of each quarter of each taxable year seventy-five
percent (75%) or more of the value of Consolidated RMC's total assets consisted
of cash and cash items (including receivables arising in the ordinary course of
Consolidated RMC's operations), government securities, and real estate assets
(including interests in real property, interests in mortgages on real property,
and interests in REMICs to the extent provided in section 856(c)(6)(E)), and
shares or transferable certificates of beneficial interest in other qualified
REITs) (the "75% test").
10. With respect to any consumer installment loans on manufactured
housing, which are assets of Consolidated RMC as described in paragraph 9
immediately above, that the associated manufactured housing units are secured to
a site and are inherently permanent structures.
11. Not more than five percent (5%) of the value of Consolidated RMC's
total assets consisted of securities of any one issuer (if such securities are
not includable under the 75% test), and Consolidated RMC owned not more than ten
percent (10%) of the outstanding voting securities of any one issuer (if such
securities are not includable under the 75% test).
12. Consolidated RMC did not receive or accrue any
rents from either real or personal property.
13. Consolidated RMC did not receive or accrue as income, directly or
indirectly, any interest or other amount determined in whole or in part with
reference to the income or profits derived by any person (excluding interest (A)
based solely on a fixed percentage or percentages of receipts or sales or (B) to
the extent described in section 856(f)(2) of the Code).
14. Consolidated RMC did not own any mortgage whose terms entitled it
to receive a specified portion of any gain realized on the sale or exchange of
the real property securing the mortgage or any gain that would be realized if
such property were sold on a specified date.
15. At least seventy-five percent (75%) of Consolidated RMC's gross
income (excluding gross income from prohibited transactions) for any taxable
year was derived from:
(a) interest on obligations secured by mortgages (including
consumer installment loans on manufactured housing) on real property or on
interests in real property,
(b) gain from the sale or other disposition of real property
(including interests in real property and interests in mortgages on real
property) which was not held as inventory or primarily for sale to customers in
the ordinary course of its trade or business,
(c) dividends or other distributions on, and gain (other than
gain from prohibited transactions) from the sale or other disposition of,
transferable shares (or transferable certificates of beneficial interest) in
other REITs,
(d) abatements and refunds of taxes on real
property,
(e) income and gain derived from foreclosure
property,
(f) amounts (other than amounts the determination of which
depends in whole or in part on the income or profits of any person) received or
accrued as consideration for entering into agreements (i) to make loans secured
by mortgages on real property or on interests in real property, or (ii) to
purchase or lease real property (including interests in real property and
interests in mortgages on real property),
(g) gain from the sale or other disposition of real estate assets
which is not a prohibited transaction solely by reason of section 857(b)(6), and
(h) income which was attributable to stock or debt instruments
acquired through the temporary investment of new capital and received or accrued
during the one year period beginning on the date on which Consolidated RMC
received such capital.
16. At least ninety-five percent (95%) of Consolidated RMC's gross
income (excluding gross income from prohibited transactions) for any taxable
year was derived from:
(a) sources which satisfy the seventy-five
percent (75%) income test described in paragraph 15 above,
(b) dividends,
(c) interest,
(d) payments with respect to bona fide interest rate swap, cap,
or floor agreements entered into to hedge any variable interest rate
indebtedness incurred or to be incurred to acquire or carry real estate assets
("interest rate agreements"), and
(e) gain from the sale or other disposition of stocks and
securities (including interest rate agreements).
17. Less than thirty percent (30%) of Consolidated RMC's gross income
for any taxable year was derived from the sale or other disposition of:
(a) stock or securities (including interest rate
agreements) held for less than one year,
(b) property in a transaction which is a
prohibited transaction, and
(c) real property (including interests in real property and
interests in mortgages on real property) held for less than four years other
than (i) property compulsorily or involuntarily converted within the meaning of
section 1033, and (ii) property which is foreclosure property.
18. For each taxable year, the deduction for dividends paid during the
taxable year (determined without regard to capital gains dividends) equaled or
exceeded (i) the sum of ninety-five percent (95%) of Consolidated RMC's real
estate investment trust taxable income for the taxable year (determined without
regard to the deduction for dividends paid and excluding any net capital gains),
and ninety-five percent (95%) of the excess of the net income from foreclosure
property over the tax imposed on such income by section 857(b)(4)(A), minus (ii)
any excess noncash income as determined under section 857(e).
19. All distributions paid by Consolidated RMC with respect to its
Shares were pro rata with no preference to any share of stock as compared to any
other shares of the same class and with no preference (other than as required
under the Amended Articles of Incorporation of RMC between its common and
preferred stock) to one class of stock as compared to another class.
20. As of the close of any taxable year, Consolidated
RMC had no earnings and profits accumulated in any non-REIT year.
21. During its taxable year 1996, RMC has had at least 2000
shareholders of record of its Shares on any dividend record date. In prior
taxable years, RMC had at least 201 shareholders of record of its Shares in any
dividend record date.
22. Within thirty (30) days after the end of each taxable year, RMC
demanded written statements from shareholders of record who at any time during
the last six (6) months of RMC's taxable year owned 5% (or 1%, as the case may
be), or more of the Shares disclosing (i) the actual owners of the Shares (those
persons required to include RMC's dividends in gross income), (ii) and the
maximum number of Shares (including the number and face value of securities
convertible into Shares) that were considered owned, directly or indirectly
(within the meaning of section 544 as modified by section 856(h)(1)(B)) by each
of the actual owners of the Shares.
23. RMC maintained the information received with respect to such
written demands in its filing district available for inspection by the Internal
Revenue Service at any time.
24. RMC maintained sufficient records to show that it complied with
the 75% test described at paragraph 9 above for all taxable years in its filing
district available for inspection by the Internal Revenue Service at any time.
25. RMC and the plan administrator under RMC's
Dividend Reinvestment and Stock Purchase Plan (the "Plan") have
administered the Plan in accordance with the terms of the
prospectus describing the Plan.
26. RMC has owned all the stock of each qualified REIT subsidiary at
all times during the period of such corporation's existence.
27. During its 1997 taxable year and subsequent taxable years,
Consolidated RMC expects to continue to satisfy all of the representations
described in paragraphs 1 through 25 above.
As used herein, the term "prohibited transaction" means the sale or
other disposition of property held as inventory or primarily for sale to
customers in the ordinary course of Consolidated RMC's trade or business. The
term "foreclosure property" means any real property (including interests in real
property) and any personal property incident to such real property, acquired by
Consolidated RMC as the result of its having bid in such property at
foreclosure, or having otherwise reduced such property to ownership or
possession by agreement or process of law after there was a default (or default
was imminent) on a lease of such property or on an indebtedness which such
property secured. Such term does not include property acquired by Consolidated
RMC as a result of indebtedness arising from the sale or other disposition of
property held as inventory or for sale in the ordinary course of Consolidated
RMC's trade or business which was not originally acquired as foreclosure
property.
Based solely on the documents, assumptions, and representations set
forth above, and without further investigation, we are of the opinion that
Consolidated RMC qualified as a REIT in its 1996 taxable year and that its
organization and contemplated method of operation are such that it will continue
to so qualify for its 1997 taxable year and subsequent taxable years. Except as
described herein we have performed no further due diligence and have made no
efforts to verify the accuracy or genuineness of the documents, assumptions, and
representations set forth above.
The foregoing opinion is based on current provisions of the Code and
Treasury Regulations, published administrative interpretations thereof, and
published court decisions. The Internal Revenue Service has not yet issued
Regulations or administrative interpretations with respect to various provisions
of the Code relating to REIT qualification. No assurance can be given that the
law will not change in a way that will prevent Consolidated RMC from qualifying
as a REIT or that the Internal Revenue Service will not disagree with this
opinion.
The foregoing opinion is limited to federal income tax matters
addressed herein, and no other opinions are rendered with respect to other
federal tax matters or any issues arising under the tax laws of any state or
locality. We undertake no obligation to update this opinion after the date of
this letter. This opinion letter is solely for the information and use of the
addressee and may not be relied upon, quoted, or otherwise used for any purpose
by any other person without our express written consent.
We consent to the references to this firm in the prospectus filed with
the Registration Statement and to the filing of this opinion as an exhibit to
the Registration Statement in which the prospectus is included. We do not
thereby admit that we are within the category of persons whose consent is
required under Section 7 of the Securities Act of 1933, as amended, or the rules
and regulations of the Securities and Exchange Commission thereunder.
Very truly yours,
VENABLE, BAETJER, AND HOWARD, LLP
<PAGE>
Exhibit 23.1
Consent of Independent Auditors
The Board of Directors
Resource Mortgage Capital, Inc.
We consent to the use of our reports incorporated by reference
in the registration statement on Form S-3 of Resource Mortgage
Capital, Inc. (No. 33-50705) and to the reference to our firm
under the heading "Experts" in the prospectus.
KPMG PEAT MARWICK LLP
Richmond, Virginia
February 27, 1997
