SUPPLEMENTAL AGREEMENT
TO
THE STOCK PURCHASE AGREEMENT
THIS SUPPLEMENTAL AGREEMENT TO THE STOCK PURCHASE AGREEMENT (this
"Agreement"), dated as of December 9, 1999, is by and among FORTRESS
INVESTMENT CORP., a Maryland corporation ("Fortress"), and CAPSTEAD
MORTGAGE CORPORATION, a Maryland corporation ("Capstead").
WHEREAS, Fortress and Capstead are entering into a Series C and Series
D Convertible Preferred Stock Purchase Agreement, dated as of the date
hereof (the "Purchase Agreement"), pursuant to which Fortress is purchasing
from Capstead 5,378,000 shares of a series of Capstead's preferred stock to
be designated as Series C Convertible Preferred Stock, $0.10 par value per
share (the "Series C Preferred Stock"), and 5,378,000 shares of a series of
Capstead's preferred stock to be designated as Series D Convertible
Preferred Stock, $0.10 par value per share (the "Series D Preferred Stock,"
and, together with the Series C Preferred Stock, the "Preferred Stock") for
total consideration of $51,200,000 (the "Purchase Price");
WHEREAS, the execution and delivery of this Agreement by Capstead and
Fortress is a condition to closing under the Preferred Stock Purchase
Agreement;
WHEREAS, the board of directors of Capstead (the "Board") has
determined to hold a special meeting (the "Special Meeting") of the holders
of Capstead's common stock, par value $0.01 per share (the "Common Stock"),
at which such holders will vote upon certain matters that may require their
approval (collectively, the "Proposal") and a reverse stock split of the
Common Stock; and
WHEREAS, Fortress and Capstead deem it in their best interests to
enter into this Agreement in order to set forth certain rights and
obligations in connection with the ongoing management of Capstead;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements, representations, warranties, covenants and conditions herein
set forth, and other good, valid and binding consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending
to be legally bound, hereby agree as follows:
1. Conduct of Capstead's Business. From the date hereof until the
earlier to occur of (i) the approval of the Proposal at the Special Meeting
and the consummation of the actions contemplated thereby and (ii) Fortress'
receipt of the Put/Call Payment (defined below) or the termination of the
rights and obligations of Capstead and Fortress under Section 2 hereof as
set forth in subsection 2(c) (the "Transition Period"), except as
otherwise expressly set forth in this Agreement, and except for costs and
expenses reasonably incurred in connection with the transactions
contemplated by this Agreement, Capstead shall conduct the business,
operations, activities and practices of Capstead and its Subsidiaries only
in the ordinary course, in accordance with prudent practice and consistent
with past practice established in 1999; provided that (a) Capstead shall
not enter into any new agreements or arrangements with Persons that are
Affiliates (other than its consolidated subsidiaries) or, as of the date
hereof, are executive officers or directors of Capstead or its Subsidiaries
and (b) Capstead may, in conjunction with Fortress, design and implement
certain policies with respect to mitigating interest rate risk and
repositioning Capstead's current portfolio.
2. Fortress Put/Capstead Call.
a. Fortress Put. In the event that one or more of the
following shall not have occurred as of the respective dates set forth
below:
i. Prior to or concurrently with the execution of this
Agreement, the Board shall have passed resolutions pursuant
to which the Board shall have (a) increased the number of
directors comprising the Board from six to eight and
appointed ▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ to fill the
vacancies created thereby to serve on the Board until the
next annual meeting of stockholders and until their
successors are elected and qualified and (b) exempted
Fortress' purchase of the Preferred Stock and subsequent
acquisition of Common Stock pursuant to Section 6 hereof
from (i) the application of Article VIII of Capstead's
Articles of Incorporation, (ii) Section 3-602 of the
Maryland General Corporation Law ("MGCL") prohibiting
business combinations with Interested Stockholders (as such
term is defined in Section 3-601 of the MGCL) and (iii)
Section 3-701 et. seq. of the MGCL; and
ii. The Proposal shall have been approved by Capstead's
stockholders at the Special Meeting, which Special Meeting
shall be held as soon as practicable, but in no event later
than April 30, 2000;
iii. Effective as of the date of the Special Meeting, ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, and ▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇ shall have resigned their positions as directors on
the Board and the Board shall have adopted resolutions to
(a) reduce the number of Board members from eight to seven,
(b) appoint ▇▇▇▇▇▇ ▇▇▇▇▇ Chairman of the Board and Chief
Executive Officer and ▇▇▇▇ ▇▇▇▇▇ Vice Chairman of the Board;
(c) appoint three individuals to fill the vacancies on the
Board created by such resignations, provided, that (x) one
of such individuals shall have been nominated by ▇▇▇▇ ▇▇▇▇▇
and ▇▇▇▇ ▇▇▇ and (y) two of such individuals shall have
been nominated by ▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, provided,
that such two individuals shall be "independent directors"
for purposes of the Securities Exchange Act of 1934, as
amended, Section 3-802 of the MGCL, Section 162(m) of the
Internal Revenue Code of 1986, and the rules of the New York
Stock Exchange; and
iv. During the Transition Period, Capstead shall have conducted
the business, operations, activities and practices of
Capstead and its Subsidiaries in accordance with Section 1
hereof (except actions taken outside such scope at the
request or with the approval of Fortress) and there shall
not have been a Material Adverse Change (other than a
Material Adverse Change directly resulting from any action
taken at the request or with the approval of Fortress).
"Material Adverse Change" means, with respect to Capstead,
any direct or indirect change, occurrence or effect (other
than as a result of changes in general conditions, including
economical or political developments, applicable to the
industry in which Capstead operates) on the business,
operations, properties (including tangible properties),
condition (financial or otherwise), assets, obligations or
liabilities (whether absolute, contingent or otherwise and
whether due or to become due) of Capstead and its
subsidiaries taken as a whole that reasonably could be
expected to be materially adverse to Capstead;
then Fortress shall have the right to cause Capstead to purchase from
Fortress all, but not less than all, of the Preferred Stock (the
"Fortress Put"), for a price equal to 103% of the Purchase Price plus
any and all accrued and unpaid dividends on the Preferred Stock (the
"Put/Call Payment").
b. Capstead Call. In the event that the Proposal is not
approved at the Special Meeting, then Capstead shall have the right to
cause Fortress to sell to Capstead all, but not less than all, of the
Preferred Stock (the "Capstead Call") for the Put/Call Payment.
c. The sale or purchase of Preferred Stock pursuant to this
Section 2 (the "Put/Call Closing") shall occur on such date as the
parties hereto may agree, which date shall be within one month after
delivery by the party exercising its rights under this Section 2 of
written notice to the other party hereto to the effect that it is
exercising its rights pursuant to this Section 2. Payment of the
Put/Call Payment shall be made by wire transfer in immediately
available funds unless some other form of consideration is agreed to
by the parties hereto. On or prior to the Put/Call Closing, Fortress
shall deliver to Capstead and Capstead shall deliver to Fortress all
documents reasonably required to be executed in connection with the
sale or purchase of Preferred Stock pursuant to this Section 2.
d. The rights and obligations, if any, of Capstead and
Fortress under this Section 2 shall terminate and be of no further
force and effect upon the later to occur of (i) the expiration of the
30 day period following the date of the Special Meeting and (ii) May
31, 2000.
3. Fortress Put Upon a Change in Control of Capstead.
a. At any time after the approval of the Proposal at the
Special Meeting and prior to the 5th anniversary of the date hereof,
in the event of a Change in Control of Capstead, Fortress shall have
the right to cause Capstead to purchase from Fortress all, but not
less than all, of the Preferred Stock then outstanding (the "Change in
Control Put") for the Purchase Price multiplied by a fraction, the
numerator of which shall be the number of shares of Preferred Stock
then outstanding and the denominator of which shall be 10,756,000,
plus any and all accrued and unpaid dividends on such Preferred Stock.
For purposes hereof, a "Change in Control" of Capstead shall be deemed
to have occurred upon any of the following events:
i. any "person," as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") (other than Fortress and its
affiliates) becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly,
of securities of Capstead representing 25 percent or more of
the voting power of Capstead's then outstanding securities;
ii. at any time subsequent to the date the Board is
reconstituted in accordance with the provisions of
subsection 2(a)(iii) hereof and during any period of two
consecutive years thereafter, individuals (a) who were
elected to the Board by a vote of at least two-thirds (2/3)
of the Board at the beginning of such period or (b) whose
nomination for election by Capstead's stockholders was
approved by a vote of at least two-thirds (2/3) of the Board
at the beginning of such period or (c) whose election or
nomination for election was previously so approved, cease
for any reason to constitute at least a majority of the
Board of Directors of Capstead; or
iii. Capstead shall be party to a merger, consolidation, share
exchange, tender offer or similar transaction or a purchase
or other acquisition of all or a significant portion of the
assets of Capstead (a "Business Combination"), except a
Business Combination approved by ▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ or their Fortress-approved successors.
b. The purchase of Preferred Stock pursuant to this Section 3
shall occur on such date as the parties hereto may agree, which date
shall be within one month after delivery by Fortress of written notice
to Capstead to the effect that it is exercising its rights pursuant to
this Section 3. Payment shall be made to Fortress by wire transfer in
immediately available funds unless some other form of consideration is
agreed to by the parties hereto. On or prior to the purchase of
Preferred Stock pursuant to this Section 3, Fortress shall deliver to
Capstead and Capstead shall deliver to Fortress all documents
reasonably required to be executed in connection with the purchase of
Preferred Stock pursuant to this Section 3.
4. Services Agreement. If (i) the Proposal is approved at the
Special Meeting and the actions contemplated thereby are consummated, (ii)
the merger (the "Merger") of Impac Commercial Holdings, Inc., a Maryland
corporation, with and into AMRESCO Capital Trust, a Texas real estate
investment trust ("AMRESCO"), is consummated and (iii) Fortress has not
exercised either the Fortress Put or the Change in Control Put and Capstead
has not exercised the Capstead Call, then Fortress (or its designated
Affiliate), the surviving entity of the Merger and Capstead (or a
subsidiary thereof) shall promptly enter into a Services Agreement mutually
satisfactory to the parties thereto for the provision of services at fair
market prices by Capstead to the surviving entity of the Merger, including,
but not limited, to (a) office space in Capstead's existing offices at
Lincoln Park, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇; (b) office
management, including payroll; (c) stockholder relations; (d) financial
reporting; (e) accounting and tax services; (f) mail room services; and (g)
receptionist services.
5. Employment Matters.
a. Subject to approval of the Proposal at the Special Meeting,
Capstead shall take all necessary action as soon as practicable
thereafter to:
i. Have an individual designated by Fortress appointed to the
position of Chief Investment Officer of Capstead;
ii. Have ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ appointed to the positions of
Executive Vice President and Chief Financial Officer of
Capstead; and
b. Subject to approval of the Proposal at the Special Meeting,
Capstead will take all necessary action to, and Fortress will not take
any action to prevent Capstead from taking any action to:
i. For at least three years after the date of the Special
Meeting, maintain all of Capstead's obligations,
arrangements, policies or practices to provide benefits,
including officer grade, salary, bonus and incentive
compensation, as compensation for services rendered by
employees of Capstead at levels that are no less favorable
than those in place as of the date hereof and set forth on a
side letter delivered to Fortress concurrently herewith,
provided, that this obligation shall cease to exist upon a
Change in Control of Capstead;
ii. For at least three years after the date of the Special
Meeting, provide coverage of medical, dental, life insurance
accidental death and disability insurance, long term
disability, Flexible Spending Account, 401k, deferred
compensation plan and travel accident insurance at levels
that are no less favorable than those in place as of the
date hereof and set forth on a side letter delivered to
Fortress concurrently herewith, provided, that this
obligation shall cease to exist upon a Change in Control of
Capstead.
6. Common Stock Acquisition. Subject to approval of the Proposal at
the Special Meeting, Fortress or its designated Affiliate will, within the
six-month period following the date of the Special Meeting, acquire no less
than five million shares of Common Stock through, at Fortress' option, (i)
open-market purchases, (ii) the conversion of Preferred Stock or (iii) any
combination thereof; provided, that purchases by Fortress and/or its
Affiliates of Common Stock from and after the date hereof and to and
including the date of the Special Meeting (which shall not exceed 3,300,000
shares) shall be considered as part of such five million shares of Common
Stock; and provided, further, that this Section 6 and Fortress' obligation
hereunder shall terminate and be of no further force and effect upon
exercise of the Fortress Put, Change in Control Put or Capstead Call.
7. Notices. All notices, requests, demands and other communications
required or permitted under this Agreement shall be in writing and mailed
or facsimiled or delivered by hand or courier service:
If to Fortress, to: Fortress Investment Corp.
1301 Avenue of the Americas, ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
If to Capstead, to: Capstead Mortgage Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇▇ & ▇▇▇▇▇ L.L.P.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
8. Entire Agreement. This Agreement (including the attachments
hereto) constitutes the entire agreement among the parties with respect to
the subject matter hereof and supersedes all other prior or contemporary
agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof.
9. Termination. This Agreement will automatically terminate and be
of no further force and effect at such time that (i) Fortress has received
payment of the applicable payment pursuant to exercise of the Fortress
Put, Capstead Call or Change in Control Put or (ii) Fortress no longer
owns Preferred Stock or Common Stock acquired pursuant to the Preferred
Stock Purchase Agreement.
10. Validity. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, each of which shall remain in full force and
effect.
11. Assignment. This Agreement and the rights hereunder shall not be
assignable or transferable by either party (except (i) by Fortress to any
of its Affiliates and (ii) by operation of law in connection with a merger,
consolidation, or sale of all or substantially all the assets of either
party) without the prior written consent of the other party. This
Agreement shall be binding upon, inure to the benefit of, and be
enforceable by, the parties and their respective successors and permitted
assigns.
12. Amendment and Modification. This Agreement may be amended,
modified, or supplemented at any time only by an instrument in writing
signed on behalf of the parties hereto.
13. Specific Performance. The parties hereto agree that if any of
the provisions of this Agreement were not performed in accordance with its
specific terms or were otherwise breached, irreparable damage would occur,
no adequate remedy at law would exist, and damages would be difficult to
determine, and that the parties shall be entitled to specific performance
of the terms hereof, in addition to any other remedy at law or equity.
14. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS.
15. Descriptive Headings. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part
of or to affect the meaning or interpretation of this Agreement.
16. Certain Definitions.
a. An "Affiliate" of any Person means another Person that
directly or indirectly, through one or more intermediaries, controls,
is controlled by, or is under common control with, such first Person;
b. Capitalized terms used but not defined herein shall have the
meanings ascribed to them in the Purchase Agreement.
17. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement.
18. Third-Party Beneficiaries. Nothing contained in this Agreement
shall be construed to give any person other than Fortress and Capstead, and
their successors and assigns, any legal or equitable right, remedy, or
claim under or with respect to this Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first written above.
CAPSTEAD MORTGAGE CORPORATION
By:________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Executive Vice President-Finance
FORTRESS INVESTMENT CORP.
By: _______________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Chief Operating Officer