EXHIBIT 1.3
CAPSTEAD MORTGAGE CORPORATION
3,750,000 Shares
(Common Stock, $0.01 par value)
SALES AGENCY AGREEMENT
December 6, 1995
PAINEWEBBER INCORPORATED
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Gentlemen:
Capstead Mortgage Corporation, a Maryland corporation (the "Company"),
confirms its agreement with PaineWebber Incorporated (the "Agent"), as follows:
SECTION 1. Description of Securities. The Company proposes to issue and
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sell through the Agent, as sales agent, up to 3,750,000 shares (the "Maximum
Amount") of common stock, par value $0.01 per share (the "Stock"), on the terms
set forth in Section 3 hereof.
SECTION 2. Representations and Warranties of the Company. The Company
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represents and warrants to, and agrees with, the Agent that:
(a) The Company meets the requirements for use of Form S-3 under the
Securities Act of 1933 (the "Act") and the rules and regulations thereunder
("Rules and Regulations"). A registration statement on Form S-3 (Registration
No. 33-62212) with respect to, among other securities, the Stock, including a
form of prospectus, has been prepared by the Company in conformity with the
requirements of the Act and the Rules and Regulations and filed with the
Securities and Exchange Commission (the "Commission") and has become effective.
Such registration statement and prospectus may have been amended or supplemented
prior to the date of this Agreement. Any such amendment or supplement was so
prepared and filed, and any such amendment or supplement filed after the
effective date of such registration statement has become effective. No stop
order suspending the effectiveness of the registration statement has been
issued, and no proceeding for that purpose has been instituted or threatened by
the Commission. Copies of such registration statement and prospectus, any such
amendment or supplement and all documents 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. The Company may sell 2,250,000 shares of Stock in at the
market offerings pursuant to the Registration Statement. To the extent the
Company desires to sell more than 2,250,000 shares of Stock pursuant to this
Agreement, the Company shall file a new registration statement with respect to
such shares and shall cause such registration statement to become effective.
After the effectiveness of said registration statement, all references to
"Registration Statement" included in this Agreement shall be deemed to include
such new registration statement.
(b) Each part of the Registration Statement, when such part became or
becomes effective, and the Prospectus and any amendment or supplement thereto,
on 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
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results of operations and cash flows of the Company and its subsidiaries as of
the dates indicated or for the periods therein specified and were prepared in
conformity with generally accepted accounting principles consistently applied
throughout the periods involved (except as otherwise stated therein).
(e) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the state of its incorporation
with power and authority (corporate and other) to own, lease and operate its
properties and to conduct its business as described in the Registration
Statement and Prospectus; and the Company is duly qualified as a foreign
corporation to transact business and is in good standing in each jurisdiction in
which such qualification is required, whether by reason of the ownership or
leasing of property or the conduct of business, except where the failure to so
qualify and be in good standing, considering all such cases in the aggregate,
would not have a material adverse effect on the condition, financial or
otherwise, or the earnings, business affairs or business prospects of the
Company and its subsidiaries considered as one enterprise.
(f) Each significant subsidiary (as defined in Section 1-02 of Regulation
S-X) of the Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, has corporate power and authority to own, lease and operate its
properties and conduct its business as described in the Registration Statement
and Prospectus and is duly qualified as a foreign corporation to transact
business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure to so qualify and
be in good standing would not have a material adverse effect on the condition,
financial or otherwise, or the earnings, business affairs or business prospects
of the Company and its subsidiaries considered as one enterprise; and all of the
issued and outstanding capital stock of each subsidiary has been duly authorized
and validly issued, is fully paid and nonassessable and (except as otherwise
stated in the Registration Statement) is owned by the Company, directly or
through subsidiaries, free and clear of any security interest, mortgage, pledge,
lien, encumbrance, claim or equity.
(g) The outstanding shares of common stock of the Company and the Stock
have been duly authorized and are, or when issued as contemplated hereby will
be, validly issued, fully paid and nonassessable and conform, or when so issued
will conform, to the 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
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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-
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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.
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(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
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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, subject to Section 4(h), as exclusive sales agent, and the
Agent agrees to sell, as sales agent for the Company, on a best efforts basis,
up to the Maximum Amount of Stock during a maximum of 52 Pricing Periods (as
hereinafter defined) 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 $21.33 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 40,000 shares) to be sold by the Agent during each such Pricing Period
(the "Average Market Price Shares"). Subject to the terms and conditions
hereof, the Agent shall use its best 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 customers' orders
in anticipation of or in connection with such transactions, nor shall they sell
short
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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 10b-6(c)(5) under the Exchange Act. The
Company or the Agent may, upon notice to the other party hereto by telephone
(confirmed promptly by telecopy), suspend the offering of Stock during any
Pricing Period; provided, however, that such suspension or termination shall not
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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 common
stock of the Company 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) 96.5% for the first 750,000
shares of Stock that may be sold pursuant to this Agreement, (ii) 97.0% for the
second 750,000 shares that may be sold pursuant to this Agreement, (iii) 97.5%
for the next 750,000 shares and (iv) 97.75% for the remaining 1,500,000 shares
that may be sold pursuant to this 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
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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 of the Company 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
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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. Settlement for all shares shall
be effected by free delivery of shares to the Agent's account at The Depository
Trust Corporation in return for payments in same day funds delivered to the
account designated by the Company. If the Agent breaches this Agreement by
failing to deliver proceeds on the settlement day for shares delivered by the
Company, the Agent will pay the Company interest based on the effective
overnight Federal Funds rate.
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), 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 (all as provided in writing
by the Agent for inclusion in each such prospectus supplement). Any obligation
of the Agent to use its best efforts to sell the Stock shall be subject to the
continuing accuracy of the representations and warranties of the Company herein,
to the performance by the Company of its obligations hereunder and to the
continuing satisfaction of the additional conditions specified in Section 5 of
this Agreement.
SECTION 4. Covenants of the Company. The Company covenants and agrees
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with the Agent and the Company that:
(a) During the period in which a prospectus relating to the Stock is
required to be delivered under the Act, the Company will notify the Agent
promptly of the time when any subsequent amendment to the Registration Statement
has become effective or any subsequent supplement to the Prospectus has been
filed and of any request by the Commission for any amendment or supplement to
the Registration Statement or Prospectus or for additional information; it will
prepare and file with the Commission, promptly upon the Agent's request, any
amendments or supplements
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to the Registration Statement or Prospectus that, in the Agent's reasonable
opinion, may be necessary or advisable in connection with the distribution of
the Stock by the Agent; the Company will not file any amendment or supplement to
the Registration Statement or Prospectus (other than any prospectus supplement
relating to the offering of other securities (including, without limitation,
common stock not included in an Ordinary Brokerage Program, as defined below)
registered under the Registration Statement) unless a copy thereof has been
submitted to the Agent a reasonable period of time before the filing and the
Agent has not reasonably objected thereto; and it will furnish to the Agent at
the time of filing thereof a copy of any document that upon filing is deemed to
be incorporated by reference in the Registration Statement or Prospectus; and
the Company will cause each amendment or supplement to the Prospectus to be
filed with the Commission as required pursuant to the applicable paragraph of
Rule 424(b) of the Rules and Regulations or, in the case of any document to be
incorporated therein by reference, to be filed with the Commission as required
pursuant to the Exchange Act, within the time period prescribed.
(b) The Company will advise the Agent, promptly after it shall receive
notice or obtain knowledge thereof, of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement, of the
suspension of the qualification of the Stock for offering or sale in any
jurisdiction, or of the initiation or threatening of any proceeding for any such
purpose; and it will promptly use its best efforts to prevent the issuance of
any stop order or to obtain its withdrawal if such a stop order should be
issued.
(c) Within the time during which a prospectus relating to the Stock is
required to be delivered under the Act, the Company will comply as far as it is
able with all requirements imposed upon it by the Act and by the Rules and
Regulations, as from time to time in force, so far as necessary to permit the
continuance of sales of or dealings in the Stock as contemplated by the
provisions hereof and the Prospectus. If during such period any event occurs as
a result of which the Prospectus as then amended or supplemented would include
an untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the circumstances then
existing, not misleading, or if during such period it is necessary to amend or
supplement the Registration Statement or Prospectus to comply with the Act, the
Company will promptly notify the Agent to suspend the offering of Stock during
such period and the Company will amend or supplement the Registration Statement
or Prospectus (at the expense of the Company, unless the misstatements or
omissions in question were made solely in reliance on written information
furnished to the Company by the Agent expressly for use in the Registration
Statement or Prospectus in which case such amendment or supplement shall be at
the expense of the Agent) so as to correct such statement or omission or effect
such compliance.
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(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, as well as the fees and
disbursements of its legal counsel; provided, however, that if 750,000 shares of
Stock are not sold by the Agent pursuant to the terms of this Agreement within
one year of the date of this Agreement, then the Company will promptly, upon the
request of the Agent, reimburse the Agent for the fees and disbursements of the
Agent's legal counsel incurred in connection with the establishment of the
structured equity shelf program established by this Agreement.
(h) The Company agrees not to engage any other party to provide advice in
respect of or otherwise act as sales agent or underwriter for any offering of
securities involving a program
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substantially similar to the Agent's structured equity shelf program
contemplated by this Agreement (collectively, an "Ordinary Brokerage Program")
until the earlier date to occur (the "Non-Exclusivity Date") of (i) the sale by
the Agent of an aggregate of 750,000 shares of Stock under this Agreement and
(ii) the date six months from the date of this Agreement. If, following the
Non-Exclusivity Date, the Company desires to engage another party with respect
to an Ordinary Brokerage Program, the Company shall deliver to the Agent a
written summary of the material terms and conditions of such Ordinary Brokerage
Program. If, within 15 days of delivery of such written summary, the Agent
modifies its program such that, in the reasonable determination of the Company,
the Agent's program is at least as beneficial to the Company as is the other
Ordinary Brokerage Program (based on the number of shares to be sold, the
commission payable to such other party and the timeliness of such sales), then
the Company shall maintain its exclusive arrangement with the Agent (subject to
submissions, from time to time, of other Ordinary Brokerage Programs and the
Company's and the Agent's respective rights to terminate this Agreement pursuant
to Section 8 hereof); if the Agent does not so modify its program, the Company
shall be able to engage such other party in connection with such Ordinary
Brokerage Program.
(i) The Company will apply the net proceeds from the sale of the Stock as
set forth in the Prospectus.
(j) The Company will not, directly or indirectly, offer or sell any shares
of common stock (other than the Stock) or securities convertible into or
exchangeable for, or any rights to purchase or acquire, common stock during the
period from the date of this Agreement through the final Closing Date for the
sale of Stock hereunder without (a) giving the Agent at least three business
days' prior written notice specifying the nature of the proposed sale and the
date of such proposed sale and (b) suspending activity under this program for
such period of time as may reasonably be determined by agreement of the Company
and the Agent; provided, however, that no such notice and suspension shall be
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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 (including shares of common stock issuable under the option granted
by the Stock Option Agreement, dated January 16, 1992 (the "Stock Option
Agreement"), between the Company and Lomas Financial Corporation); provided,
--------
further, however, that, if any shares of common stock issuable under the Stock
------- -------
Option Agreement are to be sold either (A) pursuant to an underwritten public
offering or (B) in an amount to exceed 100,000 shares, the Company shall give
12
the notice and suspend activity under this program as specified above.
(k) 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.
(l) 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.
(m) Each time that (i) the Registration Statement or the Prospectus is
amended or supplemented (other than a supplement filed pursuant to Rule 424(b)
under the Act that contains solely the information set forth in the final
paragraph of Section 3 of this Agreement) or (ii) there is filed with the
Commission any document incorporated by reference into the Prospectus (other
than any Quarterly Report on Form 10-Q or a Current Report on Form 8-K, unless
the Agent shall otherwise reasonably request), the Company shall furnish or
cause to be furnished forthwith to the Agent and to counsel to the Agent (1) a
written opinion of Xxxxxxx & Xxxxx L.L.P., counsel to the Company ("Company
Counsel"), or other counsel satisfactory to the Agent, dated the date of filing
with the Commission of such amendment, supplement or other document and the date
of effectiveness of such amendment, as the case may be, in form and substance
satisfactory to the Agent, of the same tenor as the opinion referred to in
Section 5(d) hereof, but modified as necessary to relate to the Registration
Statement and the Prospectus as amended and supplemented to the time of delivery
of such opinion and (2) a
13
written opinion of Piper & Marbury, Maryland counsel to the Company ("Maryland
Counsel"), or other counsel satisfactory to the Agent, dated the date of filing
with the Commission of such amendment, supplement or other document and the date
of effectiveness of such amendment, as the case may be, in form and substance
satisfactory to the Agent, of the same tenor as the opinion referred to in
Section 5(g) hereof, but modified as necessary to relate to the Registration
Statement and the Prospectus as amended and supplemented to the time of delivery
of such opinion.
(n) Each time that the Registration Statement or the Prospectus shall be
amended or supplemented to include additional amended financial information or
there is filed with the Commission any document incorporated by reference into
the Prospectus which contains additional amended financial information, the
Company shall cause Ernst & Young LLP, or other independent accountants
satisfactory to the Agent, forthwith to furnish the Agent a letter, dated the
date of effectiveness of such amendment, or the date of filing of such
supplement or other document with the Commission, as the case may be, in form
satisfactory to the Agent, of the same tenor as the letter referred to in
Section 5(e) hereof but modified to relate to the Registration Statement and the
Prospectus, as amended and supplemented to the date of such letter.
(o) The Company hereby consents to the Agent trading in the Company's
common stock for its own account on the same side of the market and at the same
time as the Company's sales pursuant to this Agreement.
SECTION 5. Conditions of Agent's Obligations. The obligations of the
---------------------------------
Agent to sell the Stock as provided herein shall be subject to the accuracy, as
of the date hereof, and as of each 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 reasonable opinion is material, or
omits to state a fact that in the Agent's reasonable opinion is material and is
14
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(m) 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 set forth on a schedule
thereto; to their knowledge, such jurisdictions are the only jurisdictions
in which the Company's ownership or leasing of real property or conduct of
its business requires such qualification;
(ii) Each subsidiary of the Company has been duly incorporated and is
validly existing as a corporation (or partnership, as the case may be) in
good standing under the laws of the jurisdiction of its incorporation, has
corporate (or partnership) power and authority to own, lease and operate
its properties and conduct its business as described in the Registration
Statement and Prospectus, and is duly qualified as a foreign corporation
(or partnership) to transact business and is in good standing in each
jurisdiction set forth on a schedule thereto; to their knowledge, such
jurisdictions are the only jurisdictions in which such qualification is
required, whether by reason of the ownership or leasing of property or the
conduct of business; all of the issued outstanding capital stock (or other
equity interests) of each such subsidiary has been duly authorized and
validly issued, is fully paid and nonassessable (except for the general
partner interests in CMC Investment Partnership, which are assessable in
accordance with its partnership agreement and applicable law), and, except
for (A) a 1% general partner interest in CMC Investment Partnership held by
Capstead Inc. and (B) shares of Capstead Inc. which are owned by parties
other
15
than the Company (which will be set forth in a schedule to the opinion), is
owned by the Company, directly or indirectly, free and clear of any
mortgage, pledge, lien, encumbrance, claim or equity;
(iii) The shares of Stock have been duly and validly authorized, and,
when issued and delivered to and paid for by the purchasers thereof
pursuant to this Agreement, will be fully paid and nonassessable and
conform to the description thereof in the Prospectus; and the shareholders
of the Company have no preemptive rights with respect to the Stock; all
corporate action required to be taken for the authorization, issue and sale
of the Stock has been validly and sufficiently taken; and the shares of
Stock are the subject of an effective registration statement permitting
their sale in the manner contemplated by this Agreement;
(iv) The Registration Statement has become effective under the Act;
(if applicable, the filing of the Prospectus Supplements pursuant to Rule
424(b) have been made in the manner and within the time period required by
Rule 424(b)); to the knowledge of such counsel no stop order suspending the
effectiveness of the Registration Statement has been issued and no
proceeding for that purpose has been instituted or threatened by the
Commission;
(v) The Registration Statement, when it became effective, and the
Prospectus and any amendment or supplement thereto, on the date of filing
thereof with the Commission (and at each 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;
16
(vii) This Agreement has been duly authorized, executed and delivered
by the Company;
(viii) The execution, delivery and performance of this Agreement by
the Company and the consummation of the transactions contemplated herein by
the Company do not and will not result in a breach or violation of any of
the terms and provisions of, or constitute a default under, any agreement
or instrument known to such counsel to which the Company or any of its
subsidiaries is a party or by which it is bound or to which any of the
property of the Company or any of its subsidiaries is subject except for
such breaches or defaults that would not in the aggregate have a material
adverse effect on the Company's ability to perform its obligations under
this Agreement or on the condition, financial or otherwise, or the earnings
business affairs or business prospects of the Company and its subsidiaries
considered as one enterprise, nor will such action result in the violation
of the Company's charter or by-laws, or any statute or any order, rule or
regulation known to such counsel of any court or governmental agency or
body having jurisdiction over the Company or any of its subsidiaries or any
of its properties; and no consent, approval, authorization or order of, or
filing with, any court or governmental agency or body is required for the
consummation of the transactions contemplated by this Agreement in
connection with the issuance or sale of the Stock by the Company, except
such as have been obtained under the Act and such as may be required under
state securities or blue sky laws in connection with the sale and
distribution of the Stock by the Agent;
(ix) Except for permits and similar authorizations required under the
securities or blue sky laws of certain states, no consent, waiver,
approval, authorization or other order of any regulatory body,
administrative agency or other governmental body is legally required for
the sale of the Stock by the Agent as contemplated hereby and by the
Prospectus;
(x) Such counsel knows of no actions, suits or proceedings pending or
threatened against or affecting the Company or any of its subsidiaries or
the business, properties, business prospects, condition (financial or
otherwise) or results of operations of the Company or any of its
subsidiaries, or any of their respective officers in their capacities as
such, before or by any Federal or state 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
17
(xi) For all taxable years beginning September 5, 1985 (the date of
the Company's initial public offering of common stock) and ending December
31, 1994, Capstead REIT (as defined below) has met the requirements for
qualification as a REIT under the Code. Capstead REIT will be able to
qualify as a REIT for the taxable year beginning January 1, 1995, provided
that after the date hereof, Capstead REIT continues to be organized and
operated as described in the Registration Statement and according to
representations made to us in a certificate of an officer of the Company
and therefore continues to satisfy the income tests, and distribution,
shareholder, recordkeeping and other applicable REIT requirements under the
Code. "Capstead REIT" means the Company, as aggregated with such wholly-
owned subsidiaries as were in existence during the period for which
reference is made. The information presented in the Registration Statement
under the caption "Taxation," to the extent it constitutes matters of law
or legal conclusions, is accurate in all material respects.
In addition, such counsel shall state that such counsel has no reason to
believe that either the Registration Statement, at the time it (including each
Post-Effective Amendment thereto) became effective, contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading or
that the Prospectus and any amendments or supplements thereto, on the date of
filing thereof with the Commission and at 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(n) hereof, the Agent shall have received a letter from Ernst & Young LLP,
independent public accountants for the Company, or other independent accountants
satisfactory to the Agent, dated the date of delivery thereof, substantially in
the form attached hereto as Annex I and otherwise in form and substance
satisfactory to Agent.
(f) The Agent shall have received from the Company a certificate, or
certificates, signed by the Chairman of the Board, the President or a Vice
President and by the principal financial or accounting officer of the Company,
dated as of the 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:
18
(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
(directly or by incorporation).
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) The Agent shall have received at the Commencement Date and at every
other date specified in Section 4(m) hereof, opinions of Maryland Counsel, dated
as of the Commencement Date and dated as of such other date, in form and
substance satisfactory to the Agent.
(h) 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
19
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).
20
(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
21
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
22
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
23
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 that has
actually occurred and that is reasonably expected to cause material adverse
change, in the business, financial condition or results of operations of the
Company and its subsidiaries has occurred which, in the judgment of such Agent,
materially impairs the investment quality of the Stock, (ii) the Company shall
have failed, refused or been unable, at or prior to the 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. If the Agent elects to terminate this Agreement as provided in
this Section, the Agent shall provide the required notice as specified herein.
(b) Notwithstanding the provisions of Section 4(h) hereof, 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 earlier of (i) the first anniversary of the date of this Agreement and (ii)
the Company's engagement of another party to act as sales agent or underwriter
24
pursuant to Section 4(h) hereof in connection with an Ordinary Brokerage
Program. 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
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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, 0000 Xxxxxx
xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000, telecopy no. (000) 000-0000, c/o
Xxxxx X. Xxxx, or if sent to the Company, shall be mailed, delivered, telexed or
telecopied and confirmed to the Company at 0000 Xxxxx Xxxxxxx Xxxxxx, Xxxxx 000,
Xxxxxx, Xxxxx 00000, telecopy no. (000) 000-0000, Attention: Xxxxxx X. Xxxxxx.
Each party to this Agreement may change such address for notices by sending to
the parties to this Agreement written notice of a new address for such purpose.
SECTION 10. Parties. This Agreement shall inure to the benefit of and be
-------
binding upon the Company and the Agent and their respective successors and the
controlling persons, officers and directors referred to in Section 6 hereof, and
no other person will have any right or obligation hereunder.
SECTION 11. Entire Agreement. This Agreement constitutes the entire
----------------
agreement and supersedes all other prior and contemporaneous agreements and
undertakings, both written and oral, among the parties hereto with regard to the
subject matter hereof.
SECTION 12. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
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CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT
REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS.
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SECTION 13. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
If the foregoing correctly sets forth the understanding between the Company
and the Agent, please so indicate in the space provided below for that purpose,
whereupon this letter shall constitute a binding agreement between the Company
and the Agent. Alternatively, the execution of this Agreement by the Company
and its acceptance by or on behalf of the Agent may be evidenced by an exchange
of telegraphic or other written communications.
Very truly yours,
CAPSTEAD MORTGAGE CORPORATION
By: /s/ XXXXXX X. XXXXXX
-------------------------------------
Title: Senior Vice President - Control
and Treasurer
ACCEPTED as of the date
first above written
PAINEWEBBER INCORPORATED
By: /s/ XXXXX X. XXXXXX
---------------------------------
Title: First Vice President
26
