-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OBdLX/+sX17wLnoI8ZOQ6wO3xpCIue25KpKRvurAtFuFcyt2iy0p1sxfdwRR8rTl /wyY8Iy72TUJUs2mw3M97A== 0000950134-01-001550.txt : 20010224 0000950134-01-001550.hdr.sgml : 20010224 ACCESSION NUMBER: 0000950134-01-001550 CONFORMED SUBMISSION TYPE: SC TO-I PUBLIC DOCUMENT COUNT: 9 FILED AS OF DATE: 20010216 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: CAPSTEAD MORTGAGE CORP CENTRAL INDEX KEY: 0000766701 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 752027937 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC TO-I SEC ACT: SEC FILE NUMBER: 005-37849 FILM NUMBER: 1549076 BUSINESS ADDRESS: STREET 1: 8401 NORTH CENTRAL EXPRESSWAY STREET 2: STE 800 CITY: DALLAS STATE: TX ZIP: 75225 BUSINESS PHONE: 2148742323 MAIL ADDRESS: STREET 1: 8401 NORTH CENTRAL EXPRESSWAY STREET 2: STE 800 CITY: DALLAS STATE: TX ZIP: 75225 FORMER COMPANY: FORMER CONFORMED NAME: LOMAS MORTGAGE CORP DATE OF NAME CHANGE: 19891105 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: CAPSTEAD MORTGAGE CORP CENTRAL INDEX KEY: 0000766701 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 752027937 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC TO-I BUSINESS ADDRESS: STREET 1: 8401 NORTH CENTRAL EXPRESSWAY STREET 2: STE 800 CITY: DALLAS STATE: TX ZIP: 75225 BUSINESS PHONE: 2148742323 MAIL ADDRESS: STREET 1: 8401 NORTH CENTRAL EXPRESSWAY STREET 2: STE 800 CITY: DALLAS STATE: TX ZIP: 75225 FORMER COMPANY: FORMER CONFORMED NAME: LOMAS MORTGAGE CORP DATE OF NAME CHANGE: 19891105 SC TO-I 1 d84292scto-i.txt TENDER OFFER STATEMENT BY ISSUER 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20459 SCHEDULE TO TENDER OFFER STATEMENT UNDER SECTION 14(d)(1) OR 13(e)(1) OF THE SECURITIES EXCHANGE ACT OF 1934 CAPSTEAD MORTGAGE CORPORATION (NAME OF SUBJECT COMPANY (ISSUER)) CAPSTEAD MORTGAGE CORPORATION (ISSUER) (NAME OF FILING PERSON (IDENTIFYING STATUS AS OFFEROR, ISSUER OR OTHER PERSON)) COMMON STOCK, PAR VALUE $0.01 PER SHARE (TITLE OF CLASS OF SECURITIES) (14067E 40 7) (CUSIP NUMBER OF CLASS OF SECURITIES) ANDREW F. JACOBS EXECUTIVE VICE PRESIDENT - FINANCE CAPSTEAD MORTGAGE CORPORATION 8401 NORTH CENTRAL EXPRESSWAY, SUITE 800 DALLAS, TEXAS 75225 (214) 874-2323 (NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF FILING PERSON FILING THE STATEMENT) COPY TO: DAVID BARBOUR ANDREWS & KURTH L.L.P. 1717 MAIN STREET, SUITE 3700 DALLAS, TEXAS 75201 (214) 659-4400 CALCULATION OF FILING FEE TRANSACTION VALUATION: *$63,750,000 AMOUNT OF FILING FEE: $12,750 *FOR PURPOSES OF CALCULATING FEE ONLY. ASSUMES THE PURCHASE OF 5,000,000 SHARES AT $12.75 PER SHARE. 2 [ ] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing. Amount Previously Paid: Not applicable Form or Registration No.: Not applicable Filing Party: Not applicable Date Filed: Not applicable [ ] Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer. Check the appropriate boxes below to designate any transactions to which the statement relates: [ ] third-party tender offer subject to Rule14d-1. [X] issuer tender offer subject to Rule 13e-4. [ ] going-private transaction subject to Rule13e-3. [ ] amendment to Schedule 13D under Rule 13d-2. Check the following box if the filing is a final amendment reporting the results of the tender offer: [ ] 3 This Issuer Tender Offer Statement on Schedule TO (this "Schedule TO") relates to the offer by Capstead Mortgage Corporation, a Maryland corporation ("Capstead"), to purchase up to 5,000,000 shares (or such lesser number of shares as are properly tendered) of its common stock, par value $0.01 per share (the "Common Stock") at a purchase price of $12.75 per share, net to the seller in cash, without interest thereon, all upon the terms and subject to the conditions set forth in the Offer to Purchase, dated February 16, 2001 (the "Offer to Purchase"), and the related Letter of Transmittal (which, as amended or supplemented from time to time, together constitute the "Offer"), copies of which are attached as Exhibits (a)(1) and (a)(2). This Schedule TO is intended to satisfy the reporting requirements of Rule 13e-4(c)(2) of the Securities Exchange Act of 1934, as amended. Pursuant to Rule 13e-4(f)(1)(ii), the total number of shares purchased may be increased to 5,505,649 shares of Common Stock. All information in the Offer to Purchase filed as Exhibit (a)(1) is incorporated by reference in answer to all of the items in this Schedule TO except those items as to which information is specifically provided herein. ITEM 1. SUMMARY TERM SHEET. ITEM 2. SUBJECT COMPANY INFORMATION. ITEM 3. IDENTITY AND BACKGROUND OF FILING PERSON. (b) and (c) are not applicable. ITEM 4. TERMS OF THE TRANSACTION. ITEM 5. PAST CONTACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS. ITEM 6. PURPOSES OF THE TRANSACTIONS AND PROPOSALS. ITEM 7. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. (c) is not applicable. ITEM 8. INTEREST IN SECURITIES OF THE SUBJECT COMPANY. ITEM 9. PERSONS/ASSETS, RETAINED, EMPLOYED, COMPENSATED, OR USED. ITEM 10. FINANCIAL STATEMENTS. (a) and (b) are not applicable. ITEM 11. ADDITIONAL INFORMATION. ITEM 12. EXHIBITS. EXHIBIT NUMBER DESCRIPTION - ------- ----------- (a)(1) Form of Offer to Purchase dated February 16, 2001. (a)(2)(A) Form of Letter of Transmittal. (a)(2)(B) Form of Supplemental Letter. (a)(3) Form of Notice of Guaranteed Delivery. (a)(4) Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees dated February 16, 2001. (a)(5) Form of Letter to Clients from Brokers, Dealers, Commercial Banks, Trust Companies and other Nominees dated February 16, 2001. 4 (a)(6) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (a)(7) Form of Press Release. (a)(8) Not applicable. (b) Not applicable (d)(1) Supplemental Agreement, dated as of December 9, 1999, by and among Capstead Mortgage Corporation and Fortress Investment Corp., incorporated herein by reference to the Current Report on Form 8-K, dated December 15, 1999 filed by Capstead Mortgage Corporation on December 16, 1999. (d)(2) Form of Amendment No. 1 dated as of January 21, 2000 to the Supplemental Agreement to the Stock Purchase agreement by and among Capstead Mortgage Corporation and Fortress Cap LLC, incorporated herein by reference to the Current Report on Form 8-K, dated February 2, 2000, filed by Capstead Mortgage Corporation on February 3, 2000. (g) Not applicable. (h) Not applicable. 5 SIGNATURE After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: February 16, 2001 CAPSTEAD MORTGAGE CORPORATION By: /s/ ANDREW F. JACOBS ---------------------------------------------- Andrew F. Jacobs Executive Vice President - Finance 6 INDEX TO EXHIBITS EXHIBIT NUMBER DESCRIPTION - ------- ----------- (a)(1) Form of Offer to Purchase dated February 16, 2001. (a)(2)(A) Form of Letter of Transmittal. (a)(2)(B) Form of Supplemental Letter. (a)(3) Form of Notice of Guaranteed Delivery. (a)(4) Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees dated February 16, 2001. (a)(5) Form of Letter to Clients from Brokers, Dealers, Commercial Banks, Trust Companies and other Nominees dated February 16, 2001. (a)(6) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (a)(7) Form of Press Release. (a)(8) Not applicable. (b) Not applicable (d)(1) Supplemental Agreement, dated as of December 9, 1999, by and among Capstead Mortgage Corporation and Fortress Investment Corp., incorporated herein by reference to the Current Report on Form 8-K, dated December 15, 1999 filed by Capstead Mortgage Corporation on December 16, 1999. (d)(2) Form of Amendment No. 1 dated as of January 21, 2000 to the Supplemental Agreement to the Stock Purchase agreement by and among Capstead Mortgage Corporation and Fortress Cap LLC, incorporated herein by reference to the Current Report on Form 8-K, dated February 2, 2000, filed by Capstead Mortgage Corporation on February 3, 2000. (g) Not applicable. (h) Not applicable. EX-99.(A)(1) 2 d84292ex99-a1.txt FORM OF OFFER TO PURCHASE DATED 2-16-01 1 Exhibit (a)(1) [CAPSTEAD LOGO] OFFER TO PURCHASE FOR CASH UP TO 5,000,000 SHARES OF COMMON STOCK OF CAPSTEAD MORTGAGE CORPORATION AT A PURCHASE PRICE OF $12.75 PER SHARE - -------------------------------------------------------------------------------- THE OFFER, WITHDRAWAL RIGHTS AND PRORATION PERIOD WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, MARCH 16, 2001, UNLESS THE OFFER IS EXTENDED. - -------------------------------------------------------------------------------- Capstead Mortgage Corporation, a Maryland corporation, invites its stockholders to tender up to 5,000,000 shares of its common stock, par value $0.01 per share. Shares must be tendered upon the terms and subject to the conditions set forth in this document and in the related letter of transmittal. All shares properly tendered and not properly withdrawn will be purchased at the purchase price of $12.75 per share, upon the terms and subject to the conditions of the offer, including the proration provisions. Capstead reserves the right, in its sole discretion, to purchase more than 5,000,000 shares pursuant to the offer. Shares not purchased because of the proration provisions will be returned. See Section 4. THE OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF SHARES BEING TENDERED. THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE SECTION 7. Tendering holders of common stock will not be obligated to pay brokerage commissions, solicitation fees, or, upon the terms and subject to the conditions of the offer, stock transfer taxes on the purchase of shares of common stock by Capstead. However, any tendering stockholder or other payee required to complete a letter of transmittal who fails to complete fully and sign the box captioned "Substitute Form W-9" included in the letter of transmittal or, in the case of a non-U.S. holder, who fails to certify its non-U.S. status, may be subject to a required tax withholding of 31% of the gross proceeds paid to the stockholder or other payee pursuant to the offer. Capstead will pay all charges and expenses of Wells Fargo Shareowner Services, the depositary, Merrill Lynch & Co., the dealer manager, and Corporate Investor Communications, Inc., the information agent, incurred in connection with the offer. Tenders pursuant to the offer may be withdrawn at any time prior to 12:00 Midnight on Friday, March 16, 2001, the expiration date of the offer, or such later expiration date if the offer is extended by Capstead, and, if not yet accepted for payment, after April 13, 2001. The common stock is listed for trading on the New York Stock Exchange under the symbol "CMO". On February 15, 2001, the most recent practicable date prior to the commencement of the offer, the closing per share sales price of the common stock, as reported on the NYSE, was $12.76. STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE SHARES. SEE SECTION 8. ----------------------- The dealer manager for this offer is: MERRILL LYNCH & CO. ----------------------- THE DATE OF THIS OFFER TO PURCHASE IS FEBRUARY 16, 2001 2 THE BOARD OF DIRECTORS OF CAPSTEAD HAS APPROVED THE MAKING OF THE OFFER. YOU MUST, HOWEVER, MAKE YOUR OWN DECISION WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER. NONE OF CAPSTEAD, ITS BOARD OF DIRECTORS OR THE DEALER MANAGER MAKES ANY RECOMMENDATION TO YOU WITH RESPECT TO THE OFFER, AND NO PERSON HAS BEEN AUTHORIZED BY CAPSTEAD OR ITS BOARD OF DIRECTORS TO MAKE ANY SUCH RECOMMENDATION. THE DIRECTORS AND EXECUTIVE OFFICERS OF CAPSTEAD HAVE AGREED NOT TO PARTICIPATE IN THE OFFER. FORTRESS INVESTMENT GROUP LLC, WHICH CONTROLLED 33% OF CAPSTEAD AS OF DECEMBER 31, 2000, HAS ALSO AGREED NOT TO PARTICIPATE IN THE OFFER. YOU SHOULD EVALUATE CAREFULLY ALL OF THE INFORMATION CONTAINED OR REFERRED TO IN THIS DOCUMENT AND MAKE YOUR OWN DECISION WHETHER TO TENDER SHARES PURSUANT TO THE OFFER. YOU ARE URGED TO CONSULT A TAX ADVISOR CONCERNING ANY FEDERAL, STATE, LOCAL, OR FOREIGN TAX CONSEQUENCES OF A SALE OF COMMON STOCK PURSUANT TO THE OFFER. IMPORTANT Any stockholder of record desiring to tender all or any portion of his or her shares should complete and sign the letter of transmittal or a facsimile thereof in accordance with the instructions in the letter of transmittal, mail or deliver it with any required signature guarantee and any other required documents to the depositary and either mail or deliver the stock certificates for such shares to the depositary with any other required documents or comply with the book-entry transfer facility's automated tender offer program procedures described in Section 4 to the extent it is available. A stockholder having shares registered in the name of a broker or a dealer, commercial bank, trust company or other nominee must contact those persons if such stockholder desires to tender such shares. Stockholders who desire to tender shares and whose certificates for such shares are not immediately available or whose other required documentation cannot be delivered to the depositary by the expiration of the offer should tender such shares by following the procedures for guaranteed delivery described in Section 4. Questions and requests for assistance may be directed to the dealer manager or the information agent at their respective addresses and telephone numbers set forth on the back cover of this offer to purchase. Requests for additional copies of this offer to purchase and all related documents may be directed to the information agent. 3 SUMMARY TERM SHEET We are providing this summary term sheet for your convenience. It highlights the most material information in this document, but you should realize that it does not describe all of the details of the offer. We urge you to read the entire document and the related letter of transmittal because they contain the full details of the offer. We have included references to the sections of this document where you will find a more complete discussion. Who is offering to purchase my shares?.............. Capstead is offering to purchase your shares of Capstead common stock. See Introduction. How many shares will Capstead purchase and at what price?............... Capstead will purchase up to 5,000,000 shares (or such lesser number as are properly tendered) at a purchase price of $12.75 per share. The offer is not conditioned on any minimum number of shares being tendered. How will Capstead pay for the shares?.............. Capstead expects to fund the purchase of the shares under the offer and the payment of related fees and expenses from available cash. What is the purpose of the offer?.................... The board of directors believes that, given Capstead's financial condition and the current market environment, the purchase of its shares at this time is a prudent use of its financial resources. See Section 2. How long do I have to tender my shares?............. You may tender your shares until the offer expires. The offer will expire on Friday, March 16, 2001 at 12:00 Midnight, New York City time, unless Capstead extends it. See Section 1. Capstead may choose to extend the offer for any reason. How will I be notified if Capstead extends the offer?............... Capstead will issue a press release by 9:00 a.m., New York City time, on the business day after the previous scheduled expiration date if Capstead decides to extend the offer. See Section 15. Are there any conditions to the offer?......... The offer is subject to conditions such as the absence of court and government actions prohibiting the offer, general market conditions and the condition of Capstead's business. See Section 7. -i- 4 How do I tender my shares?.......................... To tender your shares: o you must deliver your share certificate(s)and a properly completed and duly executed letter of transmittal to the depositary at the address appearing on the back cover of this offer to purchase prior to 12:00 Midnight, New York City time, on Friday, March 16, 2001; o the depositary must receive a confirmation of receipt of your shares by book-entry transfer and a properly completed and duly executed letter of transmittal; o comply with The Depository Trust Company's Automated Tender Offer Program; or o if your share certificates are not immediately available for delivery to the depositary, you must comply with the guaranteed delivery procedure. Contact the information agent or the dealer manager for assistance. See Section 4 for more information. Has Capstead or its board of directors adopted a position on the tender offer?............. The board of directors of Capstead has approved the offer. However, neither Capstead nor its directors makes any recommendation as to whether you should tender shares pursuant to this offer. You must make the decision whether to tender shares and, if so, how many shares to tender. Directors and executive officers of Capstead have agreed not to participate in the offer. Fortress Investment Group LLC, which controlled 33% of Capstead as of December 31, 2000, has also agreed not to participate in the offer. If I own less than 100 shares, and I tender all of my shares, will it be subject to proration?....................... If you own beneficially or own of record less than 100 shares, and you tender all of your shares before the tender offer expires and complete the section entitled "Odd Lots" in the related letter of transmittal, Capstead will purchase all of your shares without subjecting them to the proration procedure. See Section 3. -ii- 5 Will I have to pay brokerage commissions if tender my shares?............. If you are a registered stockholder and you tender your shares directly to the depositary, you will not incur any brokerage commissions. If you hold shares through a broker or bank, Capstead urges you to consult your broker or bank to determine whether any transaction costs are applicable. What are the United States federal income tax consequences if I tender my shares?................ Generally, you will be subject to United States federal income taxation upon the receipt of cash from Capstead in exchange for your shares under the tender offer. In addition, such receipt of cash for your tendered shares will be generally treated either as (1) a sale or exchange eligible for capital gains treatment or (2) a dividend subject to ordinary income tax rates. Special rules may apply to non-U.S. stockholders. See Section 13. Will I have to pay a stock transfer tax if I tender my shares?................ If you instruct the depositary in the related letter of transmittal to make the payment for the shares to the registered holder, you will not incur any stock transfer tax. When will Capstead pay for the shares I tender?........................ Capstead will pay the purchase price net in cash, without interest, for the shares it purchases promptly after the expiration date of the offer. Once I have tendered my shares in the offer, can I withdraw my tender?....................... You may withdraw any shares you have tendered at any time before 12:00 Midnight, New York City time, on Friday, March 16, 2001, unless Capstead has extended the offer. Unless the shares you have tendered have been previously purchased by Capstead, you may also withdraw your shares after April 13, 2001. Who can I talk to if I have questions?................ The information agent and the dealer manager can help you answer your questions. The information agent is Corporate Investor Communications, Inc. and the dealer manager is Merrill Lynch & Co. Their contact information is set forth on the back cover page of this offer to purchase. (iii) 6 TABLE OF CONTENTS
Page ---- SUMMARY TERM SHEET ................................................................................. i INTRODUCTION ....................................................................................... 2 THE OFFER .......................................................................................... 3 1. Number of Shares; Proration; Extension of the Offer ..................................... 3 2. Purpose and Certain Effects of the Offer ................................................ 5 3. Tenders by Holders of Fewer than 100 Shares -- "Odd Lots" ............................... 7 4. Procedures for Tendering Shares ......................................................... 7 5. Withdrawal Rights ....................................................................... 11 6. Purchase of Shares and Payment of Purchase Price ........................................ 12 7. Certain Conditions of the Offer ......................................................... 12 8. Price Range of Common Stock; Dividends .................................................. 14 9. Effects of the Offer .................................................................... 15 10. Source and Amount of Funds .............................................................. 16 11. Certain Information about Capstead; General Information ................................. 16 12. Interest of Directors and Executive Officers and Principal Stockholders; Transactions and Arrangements Concerning the Common Stock ............................................ 21 13. Federal Income Tax Consequences ......................................................... 24 14. Certain Legal Matters; Regulatory Approvals ............................................. 27 15. Extension of the Offer Period; Termination; Amendments .................................. 28 16. Fees and Expenses ....................................................................... 29 17. Miscellaneous ........................................................................... 29 18. Additional Information .................................................................. 30
This offer to purchase, including the Summary Term Sheet, the Introduction and Sections 2,6,7,8,9,10,11, and 13 contains statements that are not historical facts and constitute projections, forecasts or forward-looking statements. These statements may be identified by the use of forward-looking words or phrases including, but not limited to, "anticipate", "believe", "expect", "intend", "may", "planned", "potential", "should", "will" and "would". Such forward-looking statements are inherently subject to known and unknown risks and uncertainties. Capstead's actual actions or results may differ material from those expected or anticipated to the forward-looking statements. 7 To the Holders of Common Stock of Capstead Mortgage Corporation INTRODUCTION Capstead Mortgage Corporation ("Capstead"), a Maryland corporation, invites its stockholders to tender shares of its common stock, par value $0.01 per share ("Common Stock"), to Capstead at a purchase price of $12.75 per share (the "Purchase Price"), net to the seller in cash, without interest. Shares must be tendered on the terms and subject to the conditions set forth in this Offer to Purchase (the "Offer to Purchase") and in the related Letter of Transmittal included herewith (which, as amended or supplemented from time to time, together constitute the "Offer"). THE OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF SHARES BEING TENDERED. THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE SECTION 7. Stockholders tendering Common Stock will not be obligated to pay brokerage commissions, solicitation fees, or, upon the terms and subject to the conditions of the Offer, stock transfer taxes on the purchase of shares of Common Stock by Capstead. However, any tendering stockholder or other payee required to complete a Letter of Transmittal who fails to complete fully and sign the box captioned "Substitute Form W-9" included in the Letter of Transmittal may be subject to a required federal backup withholding tax of 31% of the gross proceeds paid to the stockholder or other payee pursuant to the Offer. Capstead will pay all charges and expenses of Wells Fargo Shareowner Services (the "Depositary"), Merrill Lynch & Co. (the "Dealer Manager") and Corporate Investor Communications, Inc. (the "Information Agent") incurred in connection with the Offer. Tenders pursuant to the Offer may be withdrawn at any time prior to Friday, March 16, 2001, at 12:00 Midnight, New York City time, the expiration date of the Offer (including any extensions, the "Expiration Date"), and, if not yet accepted for payment, after April 13, 2001. THE BOARD OF DIRECTORS OF CAPSTEAD HAS APPROVED THE MAKING OF THE OFFER. YOU MUST, HOWEVER, MAKE YOUR OWN DECISION WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER. NONE OF CAPSTEAD, ITS BOARD OF DIRECTORS OR THE DEALER MANAGER MAKES ANY RECOMMENDATION TO YOU WITH RESPECT TO THE OFFER, AND NO PERSON HAS BEEN AUTHORIZED BY CAPSTEAD OR ITS BOARD OF DIRECTORS TO MAKE ANY SUCH RECOMMENDATION. THE DIRECTORS AND EXECUTIVE OFFICERS OF CAPSTEAD HAVE AGREED NOT TO PARTICIPATE IN THE OFFER. FORTRESS INVESTMENT GROUP LLC ("FORTRESS"), WHICH CONTROLLED 33% OF CAPSTEAD AS OF DECEMBER 31, 2000, HAS ALSO AGREED NOT TO PARTICIPATE IN THE OFFER. YOU SHOULD EVALUATE CAREFULLY ALL OF THE INFORMATION CONTAINED OR REFERRED TO IN THIS DOCUMENT AND MAKE YOUR OWN DECISION WHETHER TO TENDER SHARES PURSUANT TO THE OFFER. YOU ARE URGED TO CONSULT A TAX ADVISOR CONCERNING ANY FEDERAL, STATE, LOCAL OR FOREIGN TAX CONSEQUENCES OF A SALE OF COMMON STOCK PURSUANT TO THE OFFER. Any stockholder of record desiring to tender all or any portion of his or her shares should complete and sign the Letter of Transmittal or a facsimile thereof in accordance with the instructions in the Letter of Transmittal, mail or deliver it with any required signature guarantee and any other required documents to the Depositary and either mail or deliver the stock certificates for such shares of Common Stock to the Depositary (with all such other documents). A stockholder having shares registered in the name of a broker -1- 8 or a dealer, commercial bank, trust company or other nominee (each, a "Nominee") must contact that Nominee if such stockholder desires to tender such shares. Nominees may also tender shares in accordance with the Automated Tender Offer Program procedures of The Depository Trust Company. Stockholders who desire to tender shares of Common Stock and whose certificates for such shares are not immediately available or whose other required documentation cannot be delivered to the Depositary by the Expiration Date should tender such shares by following the procedures for guaranteed delivery set forth in Section 4. The Common Stock is listed for trading on the New York Stock Exchange (the "NYSE") under the symbol "CMO". On February 15, 2001, the most recent practicable date prior to the commencement of the Offer, the closing per share sales price of the Common Stock, as reported on the NYSE, was $12.76. STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE SHARES. SEE SECTION 8. Capstead Mortgage Corporation was incorporated on April 15, 1985 in Maryland and commenced operations in September 1985. Capstead, a mortgage investment firm operating as a real estate investment trust, earns income from investing in mortgage assets on a leveraged basis and from other investment strategies. With the election of a new Board of Directors in April 2000, Capstead modified its investment strategy to focus on adjustable-rate and short-maturity assets, including, but not limited to, adjustable-rate, single-family residential mortgage-backed securities issued by government-sponsored entities, either Fannie Mae, Freddie Mac and Ginnie Mae ("Agency Securities") and credit-sensitive commercial and residential mortgage assets. By focusing on investments that adjust to a more current interest rate within 1- to 12-months, this investment strategy is intended to help preserve capital and improve earnings prospects over the long term. THE OFFER 1. NUMBER OF SHARES; PRORATION; EXTENSION OF THE OFFER Number of Shares to be Purchased. Upon the terms and subject to the conditions of the Offer, Capstead will purchase up to 5,000,000 shares of Common Stock, or such lesser number of shares as are properly tendered (and not properly withdrawn as provided in Section 5) prior to the Expiration Date at the Purchase Price, net to the seller in cash, without interest. No fees or commissions will be payable by Capstead to brokers, dealers or other persons (other than fees to the Dealer Manager and the Information Agent as described in Section 16) for soliciting tenders of shares pursuant to the Offer. A stockholder holding shares through a Nominee is urged to consult such Nominee to determine whether transaction costs are applicable if such stockholder tenders shares through such Nominee and not directly to the Depositary. Expiration Date. The term "Expiration Date" means 12:00 Midnight, New York City time, on Friday, March 16, 2001, unless and until Capstead, in its sole discretion, shall have extended the period of time during which the Offer will remain open, in which event the term "Expiration Date" shall refer to the latest time and date at which the Offer, as so extended by Capstead, shall expire. See Section 15 for a description of Capstead's right to extend, delay, terminate or amend the Offer. In the event of an over-subscription of the Offer as described below, shares properly tendered (and not properly withdrawn) prior to the Expiration Date will be subject to proration, except Odd Lots (as defined below). If (i) Capstead (a) increases or decreases the Purchase Price, (b) materially increases the Dealer Manager's fees, or (c) increases by more than 2% of the issued and outstanding shares of Common Stock or decreases the number of shares being sought, and (ii) the Offer is scheduled to expire at any time earlier than the expiration of a period ending on the tenth business day from, and including, the date that notice of the change is first published, sent or given to stockholders, the Offer will be extended until the expiration of such period of ten business days. Any such -2- 9 change will be disseminated promptly to the stockholders in a manner reasonably designed to inform stockholders of such change. See Section 15. Priority of Purchase; Proration. If the number of shares validly tendered and not properly withdrawn prior to the Expiration Date is less than or equal to 5,000,000 shares (or such greater number of shares as Capstead may elect to purchase in accordance with the Offer), Capstead will, upon the terms and subject to the conditions of the Offer, purchase all shares so tendered. In the event of an over-subscription of the Offer, shares validly tendered and not properly withdrawn prior to the Expiration Date shall be purchased on a pro-rata basis, disregarding fractions that arise as a result of such prorationing, according to the number of shares tendered by each holder of Common Stock prior to the Expiration Date; provided, however, that: (a) all shares tendered prior to the Expiration Date by any holder of Common Stock who owned of record or beneficially as of the close of business on February 15, 2001 and who continues to own, of record or beneficially as of the Expiration Date, an aggregate of fewer than 100 shares of Common Stock (each, an "Odd Lot Holder" and, collectively, the "Odd Lot Holders") and who tenders all of such shares (partial tenders will not qualify for this preference) and completes the box captioned "Odd Lots" in the Letter of Transmittal shall be purchased in full, prior to the proration of shares tendered by any other holder of Common Stock; and (b) Capstead reserves the right, in its sole discretion, to elect to purchase any and all of the excess shares tendered; and so long as the excess number accepted by Capstead does not exceed two percent (2%) of the issued and outstanding shares of Common Stock, no extension of the Offer period and no further notice to the stockholders will be required or given. If Capstead elects to purchase excess tendered shares, but less than all of the tendered shares, then the shares tendered shall be purchased on a pro-rata basis, as described above (subject to the Odd Lot exception noted in paragraph (a) above). If proration of tendered shares is required, Capstead will determine the proration factor as soon as practicable following the Expiration Date. Proration for each stockholder tendering shares, other than Odd Lot Holders, shall be based on the ratio of the number of shares properly tendered and not properly withdrawn by such stockholder to the total number of shares properly tendered and not properly withdrawn by all stockholders other than Odd Lot Holders. Because of the difficulty in quickly determining the number of shares properly tendered and not properly withdrawn, and because of the Odd Lot procedure and the procedures for guaranteed delivery, Capstead expects that it will not be able to announce the final proration factor or commence payment for any shares purchased pursuant to the Offer until approximately five business days after the Expiration Date. As described under "Federal Income Tax Consequences," the number of shares that Capstead will purchase from a stockholder pursuant to the Offer may affect the United Sates federal income tax consequences to the tendering stockholder and, therefore may be relevant to a stockholder's decision whether or not to tender shares. The Letter of Transmittal affords each tendering stockholder of record the opportunity to designate the order of priority in which shares tendered are to be purchased in the event of proration. A stockholder whose shares are registered in the name of a Nominee must contact such Nominee to determine whether such holder can designate the order of priority in which shares tendered are to be purchased in the event of proration and, if so, how such priority may be designated. Information Regarding Common Stock. The Common Stock is listed and traded on the NYSE under the symbol "CMO". On February 15, 2001, the most recent practicable date prior to the commencement of -3- 10 the Offer, the closing per share sales price of the Common Stock, as reported on the NYSE, was $12.76. Stockholders are encouraged to obtain current market quotations of the Common Stock. See Section 8. As of the close of business on February 15, 2001, 25,282,472 shares of Common Stock were issued and outstanding and 488,726 shares of Common Stock were subject to stock option grants. The 5,000,000 shares of Common Stock that Capstead is offering to purchase in this Offer represented approximately 20% of the outstanding Common Stock as of February 15, 2001, the most recent practicable date prior to the commencement of the Offer. Mailing Offer. This Offer to Purchase and the related Letter of Transmittal will be mailed to record holders of shares and will be furnished to brokers, dealers, commercial banks and trust companies whose names, or the names of whose nominees, appear on Capstead's stockholder list or, if applicable, who are listed as participants in a clearing agency's security position listing for subsequent transmittal to beneficial owners of shares. 2. PURPOSE AND CERTAIN EFFECTS OF THE OFFER The Board of Directors of Capstead (the "Board") believes that Capstead's financial condition and current market conditions (including the current market price of the Common Stock) make this an attractive time to repurchase a portion of its outstanding Common Stock in order to enhance stockholder value. During the year ended December 31, 2000, Capstead acquired, through open market purchases, 376,950 shares of Common Stock at an average price of $7.77 (including transaction costs) and 826,900 shares of its Series B Preferred Stock at an average price of $9.61 (including transaction costs). On January 25, 2000, Capstead purchased 5,568,500 shares of Common Stock at a price of $9.27 per share (including transaction costs) pursuant to a tender offer that expired on January 14, 2000. Since share repurchases began in December 1998 through September 30, 2000, Capstead has repurchased 26.9% of its outstanding shares of Common Stock and 8.4% of its Series B preferred shares. The Offer is not expected to have a significant immediate impact on the book value per share of the Common Stock, although remaining outstanding shares of Common Stock will participate to a greater extent in future earnings and changes in the market value of Capstead's mortgage assets. The Offer provides to stockholders who are considering a sale of all or a portion of their Common Stock the opportunity to sell those shares without the usual transaction costs associated with open market sales, where those shares are tendered by the stockholder of record directly to the Depositary. A stockholder whose shares are held through a Nominee should contact such Nominee to determine whether any transaction costs apply to any sales of Common Stock pursuant to the Offer. In addition, the Offer may give stockholders the opportunity to sell their Common Stock at prices greater than market prices prevailing prior to the announcement of the Offer. Stockholders are urged to obtain current market quotations for their shares. See Section 8. The Offer also allows stockholders to sell a portion of their shares while retaining a continued equity interest in Capstead. Stockholders who determine not to accept the Offer will realize a proportionate increase in their relative equity interest in Capstead, and thus in Capstead's future earnings and assets (subject to Capstead's right to issue additional equity securities in the future). In determining whether to tender shares pursuant to the Offer, stockholders should consider the possibility that they may be able to sell their shares in the future on the NYSE or otherwise, including in connection with any subsequent sale, merger or liquidation of Capstead (none of which is currently contemplated), at a net price higher than the Purchase Price. See Section 8. Capstead can give no assurance, however, as to the price at which a stockholder may be able to sell non-tendered shares in the future. -4- 11 THE BOARD HAS APPROVED THE OFFER AND BELIEVES THAT IT PROVIDES HOLDERS OF COMMON STOCK DESIRING TO SELL SOME OR ALL OF THEIR SHARES A REASONABLE OPPORTUNITY TO DO SO AT A PREMIUM TO THE CLOSING PRICE OF THE COMMON STOCK ON FEBRUARY 12, 2001. YOU MUST, HOWEVER, MAKE YOUR OWN DECISION WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER. NONE OF CAPSTEAD, ITS BOARD OR THE DEALER MANAGER MAKES ANY RECOMMENDATION TO YOU WITH RESPECT TO THE OFFER, AND NO PERSON HAS BEEN AUTHORIZED BY CAPSTEAD OR ITS BOARD TO MAKE ANY SUCH RECOMMENDATIONS. THE DIRECTORS AND EXECUTIVE OFFICERS OF CAPSTEAD HAVE AGREED NOT TO PARTICIPATE IN THE OFFER. FORTRESS HAS ALSO AGREED NOT TO PARTICIPATE IN THE OFFER. ALTHOUGH FORTRESS, WHICH CONTROLLED 33% OF CAPSTEAD AS OF DECEMBER 31, 2000, AND THE DIRECTORS AND EXECUTIVE OFFICERS OF CAPSTEAD HAVE AGREED NOT TO PURCHASE ANY SHARES IN THE OFFER, THEIR OWNERSHIP INTEREST IN CAPSTEAD WILL INCREASE ON A PERCENTAGE BASIS TO THE EXTENT THE OFFER IS SUBSCRIBED. Shares Capstead acquires under the Offer will be cancelled. At the present time, Capstead has no plans for the issuance of additional shares of Common Stock. Except as otherwise disclosed in this document, Capstead has no plans, proposals or negotiations that relate to or would result in: o any extraordinary transaction, such as a merger, reorganization or liquidation, involving Capstead or any of its subsidiaries; o any purchase, sale or transfer of a material amount of assets of Capstead or any of its subsidiaries; o any material change in the present dividend rate or policy, or indebtedness or capitalization of Capstead; o any class of equity securities of Capstead being delisted from a national securities exchange; o any class of equity securities of Capstead becoming eligible for termination of registration under Section 12(g)(4) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"); o any change in the present board of directors or management of Capstead, including, but not limited to, any plans or proposals to change the number or the term of directors or to fill any existing vacancies on the board of directors or to change any material term of the employment contract of any executive officer; o any other material change in Capstead's corporate structure or business; o the suspension of Capstead's obligation to file reports under the Exchange Act; o the acquisition by any person of additional securities of Capstead or the disposition of securities of Capstead; or o any change in Capstead's articles of incorporation and bylaws or other governing instruments or other actions which could impede the acquisition of control of Capstead. -5- 12 3. TENDERS BY HOLDERS OF FEWER THAN 100 SHARES -- "ODD LOTS" Upon the terms and subject to the conditions of the Offer, all shares properly tendered and not withdrawn prior to the Expiration Date by persons who own of record or beneficially as of the close of business on February 15, 2001 and who continue to own, of record or beneficially as of the Expiration Date, an aggregate of fewer than 100 shares of Common Stock ("Odd Lots"), will be accepted before proration, if any, of the purchase of other tendered shares. Partial tenders will not qualify for this preference, and it is not available to any holder who owns of record or beneficially 100 or more shares on the Expiration Date, even though such holder has separate stock certificates for fewer than 100 shares. Any holder of Common Stock who owns of record or beneficially as of the close of business on February 15, 2001 and who continues to own, of record or beneficially as of the Expiration Date, an aggregate of fewer than 100 shares of Common Stock and who wishes to tender all such shares must complete the box captioned "Odd Lots" in the Letter of Transmittal. See Section 1. ODD LOT HOLDERS WHO TENDER ALL SHARES MUST COMPLETE THE SECTION CAPTIONED "ODD LOTS" IN THE LETTER OF TRANSMITTAL AND, IF APPLICABLE, IN THE NOTICE OF GUARANTEED DELIVERY, TO QUALIFY FOR THE PREFERENTIAL TREATMENT AVAILABLE TO ODD LOT HOLDERS AS SET FORTH IN SECTION 1. 4. PROCEDURES FOR TENDERING SHARES A STOCKHOLDER WHOSE SHARES ARE REGISTERED IN THE NAME OF A NOMINEE MUST CONTACT THAT NOMINEE FOR INFORMATION ON HOW TO TENDER SHARES. ALL OTHER STOCKHOLDERS MUST COMPLY WITH THE PROCEDURES SET FORTH BELOW. Tender Procedures for Stockholders of Record. A Letter of Transmittal is provided for use by stockholders of record tendering shares. To properly tender shares pursuant to the Offer, a stockholder of record must (i) complete and duly execute the Letter of Transmittal (or facsimile thereof), in accordance with the instructions included within the Letter of Transmittal (together with a signature guarantee, if required, as well as any other documents required by the Letter of Transmittal) and deliver the same to the Depositary at its address set forth on the back cover of this Offer to Purchase which material must be received by the Depositary prior to 12:00 Midnight, New York City time, on the Expiration Date, and (ii) either (A) deliver the stock certificate or certificates evidencing the tendered shares to the Depositary at its address set forth on the back cover of this Offer to Purchase, which certificate(s) must also be received by the Depositary prior to 12:00 Midnight, New York City time, on the Expiration Date, or (B) comply with the guaranteed delivery procedures described below. Tender Procedures for Nominees. The Depositary will establish an account with respect to the shares subject to this Offer, for purposes of the Offer, at The Depository Trust Company (the "Book-Entry Transfer Facility") within two business days after the date of this Offer to Purchase. Any Nominee that is a participant in the Book-Entry Transfer Facility's system may tender shares in accordance with the Book-Entry Transfer Facility's Automated Tender Offer Program ("ATOP") to the extent it is available to such participants for the shares they wish to tender by making book-entry delivery of the shares by causing the Book-Entry Transfer Facility to transfer shares into the Depositary's account in accordance with the Book-Entry Transfer Facility's procedures for transfer. A stockholder tendering through ATOP must expressly acknowledge that the stockholder has received and agreed to be bound by the Letter of Transmittal and that the Letter of Transmittal may be enforced against such stockholder. In order to tender shares by means of ATOP, the procedures for ATOP delivery must be duly and timely completed prior to 12:00 Midnight, New -6- 13 York City time, on the Expiration Date. Alternatively, Nominees may also complete the Letter of Transmittal and deliver shares as provided under "Tender Procedures for Stockholders of Record" above. DELIVERY OF THE LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. Signature Guarantees and Method of Delivery. No signature guarantee on the Letter of Transmittal is required: (i) if the Letter of Transmittal is signed by the stockholder(s) of record of the shares (which term, for purposes of this Section, shall include any participant in the Book-Entry Transfer Facility) whose name appears on a security position listing as the owner of the shares tendered therewith and such holder has not completed either the box entitled "Special Delivery Instructions" or the box entitled "Special Payment Instructions" on the Letter of Transmittal; or (ii) if shares are tendered for the account of a bank, broker, dealer, credit union, savings association or other entity which is a member in good standing of the Securities Transfer Agents Medallion Program or a bank, broker, dealer, credit union, savings association or other entity which is an "eligible guarantor institution," as such term is defined in Rule 17Ad-15 under the Exchange Act (each of the foregoing constituting an "Eligible Institution"). See Instruction 1 of the Letter of Transmittal. If a certificate is registered in the name of a person other than the person executing a Letter of Transmittal, or if payment is to be made to a person other than the stockholder of record, then the certificate must be endorsed or accompanied by an appropriate stock power, in either case, signed exactly as the name of the stockholder of record appears on the certificate, with the signature guaranteed by an Eligible Institution. In all cases, payment for shares tendered and accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of certificates for such shares (or a timely confirmation of the book-entry transfer of the shares into the Depositary's account at the Book-Entry Transfer Facility), a properly completed and duly executed Letter of Transmittal (or a manually signed facsimile thereof) (unless such tender is made through ATOP) and any other documents required by the Letter of Transmittal or ATOP. THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING CERTIFICATES FOR SHARES, THE LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS, IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. IF DELIVERY IS BY MAIL, THEN REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. Guaranteed Delivery. If a stockholder desires to tender shares of Common Stock pursuant to the Offer and the stockholder's share certificates are not immediately available or cannot be delivered to the Depositary prior to the Expiration Date (or the procedure for book-entry transfer cannot be completed on a timely basis) or if time will not permit all required documents to reach the Depositary prior to the Expiration Date, the shares may nevertheless be tendered, provided that all of the following conditions are satisfied: (a) the tender is made by or through an Eligible Institution; (b) the Depositary receives by hand, mail, overnight courier, telegram or facsimile transmission, on or prior to the Expiration Date, a properly completed and duly executed Notice of Guaranteed Delivery substantially in the form Capstead has provided with this Offer to Purchase, including (where required) a signature guarantee by an Eligible Institution in the form set forth in such Notice of Guaranteed Delivery; and (c) the certificates for all tendered shares of Common Stock, in proper form for transfer (or confirmation of book-entry transfer of such shares into the Depositary's account at the Book-Entry -7- 14 Transfer Facility), together with a properly completed and duly executed Letter of Transmittal (or a manually signed facsimile thereof) and any required signature guarantees or other documents required by the Letter of Transmittal, are received by the Depositary within three NYSE trading days after the date of receipt by the Depositary of the Notice of Guaranteed Delivery. United States Federal Income Tax Backup Withholding. Under the United States federal income tax backup withholding rules, 31% of the gross proceeds payable to a stockholder or other payee pursuant to the Offer must be withheld and remitted to the Internal Revenue Service ("IRS"), unless the stockholder or other payee provides its taxpayer identification number (employer identification number or social security number) to the Depositary (as payor) and certifies under penalties of perjury that such number is correct, or otherwise establishes that it is eligible for exemption from backup withholding. Therefore, each tendering stockholder of record should complete and sign the Substitute Form W-9 included as part of the Letter of Transmittal so as to provide the information and certification necessary to prevent backup withholding, or otherwise establish to the satisfaction of the Depositary that such stockholder is not subject to backup withholding. If the Depositary is not provided with the correct taxpayer identification number, a U.S. Holder (as defined below in Section 13) also may be subject to penalties imposed by the IRS. If backup withholding results in an overpayment of taxes, a refund may be obtained from the IRS. Certain categories of stockholders (including, among others, all corporations, and certain Non-U.S. Holders (as defined below)) are exempt from backup withholding. In order for a holder who is not a U.S. Holder (a "Non-U.S. Holder") to be eligible for exemption, that stockholder must submit an IRS Form W-8BEN, IRS Form W-8ECI, IRS Form W-8EXP, IRS Form W-8IMY or an appropriate substitute form, signed under penalties of perjury, attesting to that stockholder's exempt status. Such forms may be obtained from the Depositary. See Instruction 12 to the Letter of Transmittal. Withholding for Holders Who Are Non-U.S. Holders. Even if a Non-U.S. Holder provides the required certification so that backup withholding does not apply, the Depositary will nonetheless withhold United States federal income taxes equal to 30% of the gross proceeds payable to the Non-U.S. Holder or his agent unless it is established to the satisfaction of the Depositary and Capstead that: (a) a reduced rate of withholding is available pursuant to a tax treaty, (b) an exemption from withholding is applicable because the gross proceeds are effectively connected with the conduct of a trade or business within the United States by the Non-U.S. Holder, or (c) the sale is properly treated as a sale or exchange, and not as a distribution, for United States federal income tax purposes, and that the sale or exchange is not subject to United States tax pursuant to the Foreign Investment in Real Property Tax Act of 1980, as amended ("FIRPTA"). See "Federal Income Tax Consequences -- Taxation of Holders Who are Non-U.S. Holders" below, for further details. In order to obtain a reduced rate of withholding pursuant to a tax treaty, a Non-U.S. Holder must deliver to the Depositary before payment a properly completed and executed IRS Form W-8BEN. In order to obtain an exemption from withholding on the grounds that the gross proceeds paid pursuant to the Offer are effectively connected with the conduct of a trade or business within the United States, a Non-U.S. Holder must deliver to the Depositary a properly completed and executed IRS Form W-8ECI. The Depositary will determine a stockholder's status as a Non-U.S. Holder and eligibility for a reduced rate of, or exemption from, withholding by reference to any outstanding certificates or statements concerning eligibility for a reduced rate of, or exemption from, withholding (e.g., IRS Form W-8BEN or IRS Form W-8ECI) unless facts and circumstances indicate that such reliance is not warranted. See Instruction 13 to the Letter of Transmittal. A Non-U.S. Holder may be eligible to obtain a refund from the IRS of all or a portion of any tax withheld if such Non-U.S. Holder is able to establish to the IRS that no tax, or a reduced amount of tax, is due. -8- 15 NON-U.S. HOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS REGARDING THE APPLICATION OF UNITED STATES FEDERAL INCOME TAX WITHHOLDING, INCLUDING ELIGIBILITY FOR A WITHHOLDING TAX REDUCTION OR EXEMPTION, AND THE REFUND PROCEDURE. Return of Tendered and Unpurchased Shares. If any tendered shares of Common Stock are not purchased, or if less than all shares evidenced by a stockholder's certificates are tendered, certificates for unpurchased shares will be returned promptly after the expiration or termination of the Offer or, in the case of shares tendered by book-entry transfer at the Book-Entry Transfer Facility, the shares will be credited to the appropriate account maintained by the tendering stockholder at the Book-Entry Transfer Facility, in each case without expense to the stockholder. Determination of Validity; Rejection of Shares; Waiver of Defects; No Obligation to Give Notice of Defects. All questions as to the number of shares of Common Stock to be accepted and the validity, form, eligibility (including time of receipt) and acceptance for payment of any tender of shares will be determined by Capstead, in its sole discretion, and its determination shall be final and binding on all parties. Capstead reserves the absolute right to reject any or all tenders of any shares that it determines are not in proper form or the acceptance for payment of or payment for which may, in the opinion of Capstead's counsel, be unlawful. Capstead also reserves the absolute right to waive any of the conditions of the Offer or any defect or irregularity in any tender with respect to any particular shares or any particular stockholder and Capstead's interpretation of the terms of the Offer will be final and binding on all parties. No tender of shares will be deemed to have been properly made until all defects or irregularities have been cured by the tendering stockholder or waived by Capstead. None of Capstead, the Depositary, the Dealer Manager, the Information Agent or any other person will be obligated to give notice of any defects or irregularities in tenders, nor will any of them incur any liability for failure to give any notice. Tendering Stockholder's Representation and Warranty; Capstead's Acceptance Constitutes an Agreement. A tender of shares pursuant to any of the procedures described above will constitute the tendering stockholder's acceptance of the terms and conditions of the Offer, as well as the tendering stockholder's representation and warranty to Capstead that (a) the stockholder has a net long position in the shares of Common Stock tendered or equivalent securities at least equal to the number of shares tendered, within the meaning of Rule 14e-4 promulgated by the Securities and Exchange Commission (the "Commission") under the Exchange Act and (b) such tender of shares complies with Rule 14e-4. It is a violation of Rule 14e-4 for a person, directly or indirectly, to tender shares for that person's own account unless, at the time of tender and at the end of the proration period (including any extensions thereof), the person so tendering (i) has a net long position equal to or greater than the amount of (x) shares of Common Stock tendered or (y) other securities convertible into or exchangeable or exercisable for the shares tendered and will acquire the shares of Common Stock for tender by conversion, exchange or exercise and (ii) will deliver or cause to be delivered the shares tendered in accordance with the terms of the Offer. Rule 14e-4 provides a similar restriction applicable to the tender or guarantee of a tender on behalf of another person. Capstead's acceptance for payment of shares tendered pursuant to the Offer will constitute a binding agreement between the tendering stockholder and Capstead upon the terms and conditions of the Offer. Lost or Destroyed Certificates. Stockholders whose certificates for part or all of their shares have been lost, stolen, misplaced or destroyed may contact the Depositary at (800) 468-9716, for instructions as to the documents which will be required to be submitted together with the Letter of Transmittal in order to receive certificate(s) representing the shares. A bond may be required to be posted by the stockholder to secure against the risk that the certificates may be subsequently recirculated. Stockholders are urged to contact the Depositary immediately in order to permit timely processing of this documentation and to determine if the posting of a bond is required. -9- 16 CERTIFICATES FOR SHARES, TOGETHER WITH A PROPERLY COMPLETED LETTER OF TRANSMITTAL AND ANY OTHER DOCUMENTS REQUIRED BY THE LETTER OF TRANSMITTAL, MUST BE DELIVERED TO THE DEPOSITARY AND NOT TO CAPSTEAD. ANY SUCH DOCUMENTS DELIVERED TO CAPSTEAD WILL NOT BE FORWARDED TO THE DEPOSITARY AND THEREFORE WILL NOT BE DEEMED TO BE PROPERLY TENDERED. 5. WITHDRAWAL RIGHTS Except as otherwise provided in this Section, tenders made pursuant to the Offer are irrevocable. Shares tendered pursuant to this Offer may be withdrawn: o at any time prior to 12:00 Midnight, New York City time, on the Expiration Date; or o if not yet accepted for payment, after April 13, 2001. For a withdrawal to be effective, the Depositary must receive a notice of withdrawal in written, telegraphic or facsimile form in a timely manner at the appropriate address set forth on the back cover of this Offer to Purchase. Any such notice of withdrawal must specify the name of the person having tendered the shares to be withdrawn, the number of shares tendered, the number of shares to be withdrawn, and, if certificates representing such shares have been delivered to the Depositary, the name of the stockholder of record of such shares, as set forth in such certificates. If the certificates have been delivered to the Depositary, the tendering holder of Common Stock must also submit the serial numbers of the particular certificates for the shares to be withdrawn, and the signature on the stockholder's notice of withdrawal must be guaranteed by an Eligible Institution, as described previously (except in the case of shares tendered for the account of an Eligible Institution). If shares have been tendered pursuant to the ATOP (book-entry transfer) procedures set forth in Section 4, the notice of withdrawal also must specify the name and the number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn shares and must otherwise comply with such Book-Entry Transfer Facility's procedures. All questions as to the form and validity (including the time of receipt) of notices of withdrawal will be determined by Capstead in its sole discretion, and its determination shall be final and binding on all parties. None of Capstead, the Dealer Manager, the Information Agent or the Depositary or any other person is or will be obligated to give notice of any defects or irregularities in any notice of withdrawal, and none of them will incur any liability for failure to give any such notice. Withdrawals may not be rescinded, and shares properly withdrawn shall not be deemed to be duly tendered for purposes of the Offer. Withdrawn shares, however, may be re-tendered before the Expiration Date by again following the procedures described in Section 4. If Capstead extends the Offer, is delayed in its purchase of Common Stock or is unable to purchase shares pursuant to the Offer for any reason, then, without prejudice to Capstead's rights under the Offer, the Depositary may, subject to applicable law, retain tendered shares on behalf of Capstead, and such shares may not be withdrawn except to the extent tendering stockholders are entitled to withdrawal rights as described herein. -10- 17 6. PURCHASE OF SHARES AND PAYMENT OF PURCHASE PRICE Upon the terms and subject to the conditions of the Offer, promptly following the Expiration Date, Capstead will accept for payment and pay for (and thereby purchase) shares properly tendered prior to the Expiration Date. Capstead shall be deemed to have accepted for payment (and therefore purchased) shares of Common Stock that are properly tendered and not properly withdrawn (subject to the proration provisions and the other terms and conditions of the Offer) only when, as and if it gives oral or written notice to the Depositary of its acceptance of shares for payment pursuant to the Offer. That notice, subject to the provisions of the Offer, may be given at any time after the Expiration Date. Upon the terms and subject to the conditions of the Offer, promptly following the Expiration Date, Capstead will accept for payment and pay for up to 5,000,000 shares of Common Stock (subject to increase or decrease as provided in Sections 1 and 15) properly tendered or such lesser number of shares as are properly tendered and not properly withdrawn. Capstead will pay for shares purchased pursuant to the Offer by depositing the aggregate Purchase Price with the Depositary, which will act as agent for the tendering stockholders for the purpose of receiving payment from Capstead and transmitting payment to the tendering stockholders. The Depositary will pay the tendering stockholders (other than The Depository Trust Company, which will be paid by wire transfer) for all purchased shares by check promptly after the Expiration Date. However, in the event of proration, Capstead does not expect to be able to determine the final proration factor and pay for tendered shares until approximately five business days after the Expiration Date. UNDER NO CIRCUMSTANCES WILL INTEREST ON THE PURCHASE PRICE BE PAID BY CAPSTEAD BY REASON OF ANY DELAY IN MAKING PAYMENT. Certificates for all tendered shares not purchased, including shares not purchased due to proration, will be returned promptly after the Expiration Date or termination of the Offer to the tendering stockholder (or, in the case of shares tendered by book-entry transfer, will be credited to the account maintained with the Book-Entry Transfer Facility by the participant who so delivered the shares), without expense to the tendering stockholder. In addition, if certain events occur, Capstead may not be obligated to purchase any shares in the Offer. See Section 7. Capstead will pay all stock transfer taxes, if any, payable on the transfer to it of shares purchased pursuant to the Offer by stockholders of record. However, if purchased shares are to be registered in the name of any person other than the stockholder of record, or if tendered certificates are registered in the name of any person other than the person signing the Letter of Transmittal, the amount of any stock transfer taxes (whether imposed on the stockholder of record or such other person) payable on account of the transfer to such person will be deducted from the Purchase Price, unless satisfactory evidence of the payment of such taxes or exemption therefrom is submitted. See Instruction 6 of the Letter of Transmittal. ANY TENDERING STOCKHOLDER OF RECORD (OR OTHER PAYEE) WHO FAILS TO COMPLETE FULLY AND SIGN THE "SUBSTITUTE FORM W-9" INCLUDED AS PART OF THE LETTER OF TRANSMITTAL MAY BE SUBJECT TO REQUIRED BACK-UP FEDERAL INCOME TAX WITHHOLDING OF 31% OF THE GROSS PROCEEDS PAID TO SUCH STOCKHOLDER OR OTHER PAYEE PURSUANT TO THE OFFER. SEE SECTIONS 4 AND 13. 7. CERTAIN CONDITIONS OF THE OFFER Notwithstanding any term of the Offer, prior to the Expiration Date, Capstead may, at its option, terminate or amend the Offer or may postpone the acceptance for payment of, or the purchase of and the payment for, shares tendered pursuant to the Offer, subject to Rule 13e-4(f) promulgated under the Exchange Act, if at any time prior to the Expiration Date any of the following events has occurred (or shall have been determined by Capstead to have occurred) and, in Capstead's judgement and in any such case and regardless -11- 18 of the circumstances giving rise thereto (including any action or omission to act by Capstead) makes it inadvisable to proceed with the Offer or with such acceptance for payment: (a) there shall have been threatened, instituted or pending any action or proceeding by any government or governmental, regulatory or administrative agency, authority or tribunal or any other person, domestic or foreign, before any court, authority, agency or tribunal that directly or indirectly (i) challenges the making of the Offer, the acquisition of some or all of the shares pursuant to the Offer or otherwise relates in any manner to the Offer, or (ii) in Capstead's reasonable judgment, could (A) materially and adversely affect the business, condition (financial or otherwise), assets, income, operations or prospects of Capstead and its subsidiaries, taken as a whole, or otherwise materially impair in any way the contemplated future conduct of the business of Capstead or any of its subsidiaries or materially impair the contemplated benefits of the Offer to Capstead, (B) make the acceptance for payment of, or payment for, some or all of the tendered shares illegal or otherwise restrict or prohibit consummation of the Offer or (C) delay or restrict the ability of Capstead, or render Capstead unable, to accept for payment or pay for some or all of the tendered shares; (b) there shall have been any action threatened, pending or taken, or approval withheld, or any statute, rule, regulation, judgment, order or injunction threatened, proposed, sought, promulgated, enacted, entered, amended, enforced or deemed to be applicable to the Offer or Capstead or any of its subsidiaries, by any court or any authority, agency or tribunal that, in Capstead's reasonable judgment, would or might directly or indirectly result in any of the consequences referred to in clauses (i) or (ii) of paragraph (a) above; (c) there shall have occurred (i) any general suspension of trading in, or limitation on prices for, securities on any national securities exchange or in the over-the-counter market, (ii) the declaration of a banking moratorium or any suspension of payments in respect of banks in the United States, (iii) the commencement of a war, armed hostilities or other international or national calamity directly or indirectly involving the United States, (iv) any limitation (whether or not mandatory) by any government or governmental, regulatory or administrative agency, authority or tribunal on, or any event that, in Capstead's reasonable judgment, might affect, the extension of credit by banks or other lending institutions in the United States, (v) any significant decrease in the market price of the Common Stock or any change in the general political, market, economic or financial conditions in the United States or abroad that could, in the reasonable judgment of Capstead, have a material adverse effect on Capstead's business, condition (financial or otherwise), assets, income, operations or prospects or the trading in the Common Stock, (vi) in the case of any of the foregoing existing at the time of the commencement of the Offer, a material acceleration or worsening thereof, or (vii) any decline in either the Dow Jones Industrial Average or the Standard and Poor's Index of 500 Industrial Companies by an amount in excess of 10% measured from the close of business on February 15, 2001; (d) a tender or exchange offer for any or all of the shares of Common Stock of Capstead (other than the Offer), or any merger, business combination or other similar transaction with or involving Capstead or any subsidiary, shall have been proposed, announced or made by any person; (e) (i) any person, entity or "group" (as that term is used in Section 13(d)(3) of the Exchange Act) shall have acquired or proposed to acquire beneficial ownership of more than 5% of the outstanding shares of any class of Common Stock of Capstead (other than (A) any such person, entity or group who has a Schedule 13G on file with the Commission as of February 15, 2001 relating to share ownership in Capstead and does not effect a change in filing status to Schedule 13D, or (B) the acquisition of additional Common Stock by Capstead) or (ii) any person, entity or group shall have -12- 19 filed a Notification and Report Form under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, or shall have made a public announcement reflecting an intent to acquire Capstead or any of its subsidiaries or any of their respective assets or securities otherwise than in connection with a transaction authorized by the Board; (f) any change or changes shall have occurred in the business, condition (financial or otherwise), assets, income, operations, prospects or stock ownership of Capstead or its subsidiaries that, in Capstead's reasonable judgment, is or may be material to Capstead or its subsidiaries; or (g) Capstead determines that the consummation of the Offer and the purchase of shares of Common Stock may cause the Common Stock to be delisted from the NYSE or to be eligible for deregistration under the Exchange Act or adversely affects Capstead's ability to qualify as a real estate investment trust. Any determination by Capstead concerning any events described in this section and any related judgment or decision by Capstead regarding the inadvisability of proceeding with the purchase of or the payment for any shares tendered shall be final and binding upon all parties. The foregoing conditions are for the sole benefit of Capstead and may be asserted by Capstead in circumstances giving rise to those conditions or may be waived by Capstead in whole or in part. Capstead's failure at any time to exercise any of the foregoing shall not be deemed a waiver of any such right, and each such right shall be deemed an ongoing right that may be asserted at any time and from time to time. 8. PRICE RANGE OF COMMON STOCK; DIVIDENDS The shares of Common Stock are listed for trading on the New York Stock Exchange under the symbol "CMO." The following table sets forth the range of the high and low sale prices of the Common Stock on the NYSE during the past two years. The following table sets forth, for the fiscal quarters indicated, the high and low sales prices per share in each of such fiscal quarters. [remainder of page intentionally left blank] -13- 20
STOCK PRICES HIGH LOW 1999 1st Quarter....................................... $ 12.0000 $ 8.0000 2nd Quarter....................................... 12.3750 10.2500 3rd Quarter....................................... 11.5000 7.7500 4th Quarter....................................... 8.7500 7.3750 2000 1st Quarter....................................... $ 9.1250 $ 7.2500 2nd Quarter....................................... 8.8750 6.0000 3rd Quarter....................................... 9.6875 7.8750 4th Quarter....................................... 12.0000 8.9375 2001 1st Quarter (through February 15, 2001) $ 13.4500 $ 11.0000
On February 15, 2001, the last practicable date prior to the commencement of the Offer, the closing per share sales price of the Common Stock, as reported on the NYSE, was $12.76. YOU SHOULD OBTAIN CURRENT QUOTATIONS OF THE MARKET PRICE OF THE SHARES AND CONSULT AN INDEPENDENT FINANCIAL ADVISOR. 9. EFFECTS OF THE OFFER The Offer provides to stockholders who are considering a sale of all or a portion of their Common Stock the opportunity to sell those shares without the usual transaction costs associated with open market sales, where those shares are tendered by the stockholder of record directly to the Depositary. A stockholder whose shares are held through a Nominee should contact such Nominee to determine whether transaction costs apply to any sales of Common Stock pursuant to the Offer. In addition, the Offer may give stockholders the opportunity to sell their Common Stock at prices greater than market prices prevailing prior to the announcement of the Offer. Stockholders are urged to obtain current market quotations for their shares. See Section 8. The Offer also allows stockholders to sell a portion of their shares while retaining a continuing equity interest in Capstead. Stockholders who determine not to accept the Offer will realize a proportionate increase in their relative equity interest in Capstead, and thus in Capstead's future earnings and assets (subject to Capstead's right to issue additional equity securities in the future). For holders of Common Stock who do not tender shares, there is no assurance that the price of the Common Stock will not trade below the price currently being offered by Capstead pursuant to the Offer. For holders of Common Stock who do tender, there is no assurance that the trading price of the Common Stock will not increase as a result of the Offer and at some point exceed the Purchase Price. Capstead believes that there will still be a sufficient number of shares outstanding and publicly traded following the Offer to ensure a continued trading market in the shares. -14- 21 The Board has authorized Capstead to purchase additional shares in the open market, as described below, following completion of the Offer, in privately negotiated transactions or otherwise. Any such purchases may be on the same terms or on terms which are more or less favorable to the holder of Common Stock than the terms of the Offer. Rule 13e-4 of the Exchange Act prohibits Capstead from purchasing any shares of Common Stock, other than pursuant to the Offer, until at least ten business days after the Expiration Date of this Offer. Any possible future purchases by Capstead will depend on many factors, including the market price of the Common Stock, the results of the Offer, Capstead's business and financial position, and general economic and market conditions. The shares are registered under the Exchange Act, which requires, among other things, that Capstead furnish certain information to its holders of Common Stock and to the Commission and comply with the Commission's proxy rules in connection with meetings of holders of the Common Stock. 10. SOURCE AND AMOUNT OF FUNDS Assuming that Capstead purchases 5,000,000 shares in this Offer at a price of $12.75 per share, the total amount required to purchase the shares would equal $63,750,000 plus all fees and expenses applicable to this Offer. Capstead intends to pay for validly tendered shares of Common Stock, as well as for the costs and expenses of this Offer, from cash on hand, or funds generated in the ordinary course of business. 11. CERTAIN INFORMATION ABOUT CAPSTEAD; GENERAL INFORMATION This document contains "forward-looking statements" that inherently involve risks and uncertainties. Capstead's actual results and liquidity can differ materially from those anticipated in these forward-looking statements because of changes in the level and composition of Capstead's investments and unforeseen factors. These factors may include, but are not limited to, changes in general economic conditions, the availability of suitable investments, fluctuations in, and market expectations for fluctuations in, interest rates and levels of mortgage prepayments, deterioration in credit quality and ratings, the effectiveness of risk management strategies, the impact of leverage, liquidity of secondary markets and credit markets, increases in costs and other general competitive factors. HISTORY AND BUSINESS General. Capstead was incorporated on April 5, 1985 in Maryland and commenced operations in September 1985. Capstead's principal offices are located at 8401 North Central Expressway, Suite 800, Dallas, Texas 75225, and its telephone number is (214) 874-2323. Initially, Capstead structured and managed residential mortgage investments. From 1992 through 1998, Capstead also operated a residential mortgage servicing operation that was sold in December 1998. Recently, Capstead's primary business consisted of managing a leveraged portfolio of Agency Securities. With the investment in Capstead by Fortress, the April 2000 election of the new members of Capstead's board of directors and the appointment of Wesley R. Edens as Chairman and Chief Executive Officer of Capstead, Capstead modified its investment strategy to focus on short maturity and adjustable-rate assets including, but not limited to, credit-sensitive commercial and residential mortgage assets and adjustable-rate Agency Securities. Credit-sensitive mortgage assets generally earn higher yields than those typically earned on Capstead's existing mortgage assets, due largely to a higher risk of default by the underlying borrowers and, to a lesser extent, reduced liquidity. In connection with modifying its investment strategy, Capstead sold $1.4 billion of fixed-rate and medium-term mortgage investments and designated for sale nearly $700 million of primarily medium-term -15- 22 securities, incurring a second quarter 2000 charge to operating results of $90.0 million. During the third quarter, another $100 million of fixed-rate private mortgage pass-through securities were sold, further reducing holdings of fixed-rate securities. With capital made available from these sales and from $1.0 billion of portfolio runoff, Capstead acquired $2.4 billion of adjustable-rate mortgage ("ARM") Agency Securities and $105 million of ARM private mortgage pass-through securities (through the redemption of 4 series of off-balance sheet collateralized mortgage obligations previously issued by Capstead). Commercial mortgage-backed securities ("CMBS") acquisitions have been relatively modest because the pricing for these securities has been less attractive on a risk-adjusted return basis than other suitable investments. Including the sale shortly after year-end of $442 million of medium-term securities, Capstead's mortgage investment portfolio stood at just under $5 billion entering 2001 consisting primarily of ARM Agency Securities. The future size and composition of Capstead's mortgage-related investments will depend on market conditions, including levels of mortgage prepayments and the availability of suitable investments at attractive pricing. See "--Effects of Interest Rate Changes". Election of New Leadership and Relationship with Fortress Investment Group LLC. Through an affiliate's December 1999 acquisition of 10.8 million Series C and Series D voting preferred shares and subsequent acquisitions of 3.9 million common shares, Fortress Investment Group LLC (together with its affiliates, "Fortress") controlled 33% of the voting shares of Capstead as of December 31, 2000. In December 2000, Fortress converted 5.4 million of its preferred holdings into 2.7 million common shares. At Capstead's April 2000 annual meeting, stockholders elected a new seven member Board of Directors, including four members designated by Fortress. Wesley R. Edens, chairman of the board of Fortress, was elected Capstead's Chairman of the Board and Chief Executive Officer. Capstead compensates Fortress for the services of Mr. Edens and, as needed, other individuals employed by Fortress pursuant to a management contract. In connection with the sale of Series C and Series D Preferred Stock to Fortress, Capstead and Fortress entered into an agreement (the "Supplemental Agreement") which provides, among other things, that at any time prior to December 9, 2004, in the event of a "change in control" of Capstead, except for certain business combinations approved by Fortress, Fortress can cause Capstead to purchase from Fortress all, but not less than all of these shares of preferred stock outstanding at such time (the "Change in Control Put") for $4.76 per share, plus accrued and unpaid dividends thereon. Under the Supplemental Agreement, a "change of control" is deemed to have occurred if (i) a person acquires 25% of the voting power of Capstead, (ii) directors elected and qualified at Capstead's annual meeting cease to constitute at least a majority of the Board of Directors, or (iii) Capstead is a party to a business combination not approved by certain Fortress representatives on the Board of Directors. Financial Information. On February 7, 2001 Capstead reported net income of $11,329,000, or $0.21 per diluted common share for the quarter ended December 31, 2000, compared to $12,797,000, or $0.25 per diluted common share in the same quarter in 1999. Capstead earned $9,767,000, or $0.15 per diluted common share, for the third quarter of 2000. Including second quarter charges associated with restructuring its investment portfolio to focus on adjustable-rate and short maturity mortgage assets, Capstead reported a net loss of $(51,486,000), or $(3.30) per common share, for the year ended December 31, 2000. These results compare to net income of $57,909,000, or $1.21 per diluted common share earned in 1999. Operating income, defined as income before gain or loss on sale of mortgage securities, for the fourth quarter increased to $11,329,000, from $9,020,000 in the third quarter, primarily because of higher yields on mortgage investments. In addition, average invested assets were higher with the acquisition of $451 million of ARM securities during the fourth quarter. Current quarter operating income was less than the -16- 23 $12,797,000 reported in the fourth quarter of 1999 primarily because of lower average invested assets. Overall financing spreads (the difference between the yield earned on mortgage investments and the rate charged on related borrowings) improved to 52 basis points during the current quarter from 32 basis points during the third quarter as the yield on Capstead's mortgage investment portfolio benefited from increases in yields on holdings of ARM securities while borrowing rates remained unchanged at 6.57%. The overall yield earned on the mortgage investment portfolio averaged 7.09% during the fourth quarter, compared to 6.89% during the third quarter and 6.03% during the fourth quarter of 1999. Yields on ARM securities continued to improve in the fourth quarter as coupon interest rates on the underlying mortgage loans reset higher, reflecting a trend of increasing interest rates that has been evident since the Federal Reserve began raising short-term interest rates in June 1999 in response to inflation concerns. However, it now appears that this trend may have reversed. The Federal Reserve announced consecutive 50 basis point reductions in short-term interest rates on January 3 and again on January 31, 2001 due to concerns over economic weakness. Consequently, yields on ARM securities are expected to peak in the first quarter and then begin declining. For example, if interest rates stabilize at current levels, yields on Capstead's current holdings of ARM securities could decline a total of 55 basis points by year-end. Actual yields on the ARM securities will depend on fluctuations in, and market expectations for fluctuations in, interest rates and levels of mortgage prepayments. Average borrowing rates are anticipated to decline 65 basis points during the first quarter of 2001 because of the January Federal Reserve rate cuts. The full benefit of these rate cuts should be realized in the second quarter. Any further changes in Capstead's borrowing rates will depend on future actions by the Federal Reserve to change short-term interest rates, market expectations of future changes in short-term interest rates and the extent of any financial market liquidity concerns. Although only slightly higher during the fourth quarter, the rate of principal prepayments on holdings of ARM securities is expected to accelerate in future quarters, particularly if mortgage interest rates continue to decline. Currently, coupon interest rates on most of the mortgage loans underlying these ARM securities are above prevailing fixed-rate mortgage interest rates, which is expected to prompt higher levels of prepayments until such time as these loans reset to lower levels as discussed above. While lower prepayment levels improve mortgage investment yields by allowing related purchase premiums to be recognized in operating results over a longer period, higher prepayment levels shorten the period over which the premiums are amortized thus reducing investment yields. Annualized prepayments on Fannie Mae and Freddie Mac ARM securities averaged 23.5% for the fourth quarter of 2000, slightly higher than the 22.4% annualized rate for the third quarter but similar to the 23.4% level experienced in the fourth quarter of 1999. Annualized prepayments on Ginnie Mae ARM securities averaged 18.4% in the fourth quarter of 2000, compared to 16.9% during the prior quarter and 18.0% for the same period of 1999. To summarize, Capstead anticipates improvement in financing spreads in early 2001, with the potential for satisfactory net margins over the course of the year, subject to the impact of fluctuations in, and market expectations for fluctuations in, interest rates and levels of mortgage prepayments as well as other factors including portfolio size and composition. See "--Effects of Interest Rate Changes". Effect of Changes in Interest Rates. Capstead performs earnings sensitivity analysis using an income simulation model to estimate the effects that specific interest rate changes will have on future earnings. All mortgage assets and derivatives held, if any, are included in this analysis. The sensitivity of CMO administration fee income to market interest rate levels is included as well. The model incorporates management assumptions regarding the level of prepayments on mortgage assets for a given level of market rate changes using industry estimates of prepayment speeds for various coupon segments. These assumptions are developed through a combination of historical analysis and future expected pricing behavior. Because -17- 24 Capstead modified its investment strategy during 2000 to focus on short maturity and adjustable-rate mortgage assets, earnings are less sensitive to changes in interest rates at December 31, 2000 than at December 31, 1999, as indicated in the following table:
10-YEAR 30-DAY U.S. LIBOR TREASURY IMMEDIATE CHANGE IN:* RATE RATE (RATES IN BASIS POINTS, DOLLARS IN THOUSANDS) ------ -------- --------------------------------------------- 30-day LIBOR rate Down 100 Down 100 Flat Up 100 10-year U.S. Treasury rate Down 100 Flat Up 100 Up 100 Projected 12-month earnings change:** As of December 31, 2000 6.56% 5.12% $ 18,344 $ 23,447 $ 4,145 $ (22,665) As of December 31, 1999 5.82% 6.44% $ 31,160 $ 36,190 $ 5,044 $ (37,821)
* Sensitivity of earnings to changes in interest rates is determined relative to the actual rates at the applicable date. ** Note that the projected 12-month earnings change is predicated on acquisitions of similar assets sufficient to replace portfolio runoff only. There can be no guarantee that suitable investments will be available for purchase at attractive prices or if investments made will behave in the same fashion as assets currently held. This projection excludes $442 million of medium-term securities sold in early 2001. Income simulation modeling is a primary tool used to assess the direction and magnitude of changes in net margins on mortgage assets resulting from changes in interest rates. Key assumptions in the model include prepayment rates on mortgage assets, changes in market conditions, and management's financial capital plans. These assumptions are inherently uncertain and, as a result, the model cannot precisely estimate net margins or precisely predict the impact of higher or lower interest rates on net margins. Actual results will differ from simulated results due to timing, magnitude and frequency of interest rate changes and other changes in market conditions, management strategies and other factors. Changes in interest rates may affect Capstead's earnings in various ways. Capstead's earnings currently depend, in part, on the difference between the interest received on mortgage securities and other investments, and the interest paid on related borrowings, which are generally based on 30-day LIBOR. The resulting spread may be reduced or even turn negative in a rising short-term interest rate environment. Because a substantial portion of Capstead's mortgage investments are ARM mortgage securities, the risk of rising short-term interest rates is generally offset to some extent by increases in the rates of interest earned on the underlying ARM loans, which reset periodically based on underlying indices (generally 1-year CMT rates). Since ARM loans generally limit the amount of such increases during any single interest rate adjustment period and over the life of the loan, interest rates on borrowings can rise to levels that may exceed the interest rates on the underlying loans contributing to lower or even negative financing spreads. At other times, as seen in 1998, declines in these indices may be greater than declines in Capstead's borrowing rates, contributing to lower or even negative financing spreads. Capstead may invest in derivatives from time to time as a hedge against rising interest rates on a portion of its short-term borrowings. At December 31, 2000, Capstead did not own any derivatives as a hedge against rising interest rates. Another effect of changes in interest rates is that as long-term interest rates decrease, the rate of principal prepayments on mortgage loans underlying mortgage investments generally increases. To the extent the proceeds of prepayments on mortgage investments cannot be reinvested at a rate of interest at least equal to the rate previously earned on such investments, earnings may be adversely affected. As seen in 1998, prolonged periods of high prepayments can significantly reduce the expected life of mortgage investments; therefore, the actual yields realized can be lower due to faster amortization of premiums. In -18- 25 addition, the rates of interest earned on ARM investments generally will decline during periods of falling short-term interest rates as the underlying ARM loans reset at lower rates. Changes in interest rates also impact earnings recognized from CMO investments, which currently consist primarily of fixed-rate CMO residuals. As seen in 1998, if mortgage interest rates fall, prepayments on the underlying mortgage loans generally will be higher, accelerating the amortization of collateral premiums and bond discounts. Conversely, if mortgage interest rates rise significantly above interest rates on the collateral, principal prepayments will typically diminish, improving the overall return on an investment in a fixed-rate CMO residual because of an increase in time over which Capstead receives positive net cash flows and can amortize remaining collateral premiums and bond discounts. Capstead periodically sells mortgage assets, which may increase income volatility because of the recognition of transactional gains or losses. Such sales may become attractive as values of mortgage assets fluctuate with changes in interest rates. At other times, such as in the second quarter of 2000, it may become prudent to shift Capstead's investment focus. Risks Associated with Credit-sensitive Investments. CMBS are generally viewed as exposing an investor to greater risk of loss than residential mortgage-backed securities since such securities are typically secured by larger loans to fewer obligors than residential mortgage-backed securities. Commercial property values and net operating income are subject to volatility, and net operating income may be sufficient or insufficient to cover debt service on the related mortgage loan at any given time. The repayment of loans secured by income-producing properties is typically dependent upon the successful operation of the related real estate project and the ability of the applicable property to produce net operating income rather than upon the liquidation value of the underlying real estate. Even when the current net operating income is sufficient to cover debt service, there can be no assurance that this will continue to be the case in the future. Additionally, commercial properties may not readily be convertible to alternative uses if such properties were to become unprofitable due to competition, age of improvements, decreased demand, regulatory changes or other factors. The conversion of commercial properties to alternate uses generally requires substantial capital expenditures, which may or may not be available. The availability of credit for commercial mortgage loans is significantly dependent upon economic conditions in the markets where such properties are located, as well as the willingness and ability of lenders to make such loans. The availability of funds in the credit markets fluctuates and there can be no assurance that the availability of such funds will increase above, or will not contract below current levels. In addition, the availability of similar commercial properties, and the competition for available credit, may affect the ability of potential purchasers to obtain financing for the acquisition of properties. This could effect the repayment of commercial mortgages pledged to secure CMBS. Credit-sensitive residential mortgage-backed securities differ from CMBS in several important ways, yet can still carry substantial credit risk. Residential mortgage securities typically are secured by smaller loans to more obligors than CMBS, thus spreading the risk of mortgagor default. However, most of the mortgages supporting these securities are made to homeowners that do not qualify for Agency loan programs for reasons including loan size, financial condition, or work or credit history that may be indicative of higher risk of default than loans qualifying for such programs. As with CMBS, in instances of default Capstead may incur losses if proceeds from sales of the underlying collateral are less than the unpaid principal balances of the mortgage loans and related foreclosure costs. However, with residential mortgage-backed securities, this risk may be mitigated by various forms of credit enhancements including, but not limited to, primary mortgage insurance. -19- 26 Through the process of securitizing both commercial and residential mortgages, credit risk can be heightened or minimized. Senior classes in multi-class securitizations generally have first priority over cash flows from a pool of mortgages and, as a result, carry the least risk, highest investment ratings and the lowest yields. Typically a securitization will also have mezzanine classes and subordinated classes. Mezzanine classes will generally have somewhat lower credit ratings and may have average lives that are longer than the senior classes. Subordinate classes are junior in the right to receive cash flow from the underlying mortgages, thus providing credit enhancement to the senior and mezzanine classes. As a result, subordinated securities will have lower credit ratings because of the elevated risk of credit loss inherent in these securities. The availability of capital from external sources to finance investments in credit-sensitive CMBS and residential mortgage-backed securities that are not financed to maturity at acquisition may be diminished during periods of mortgage finance market illiquidity, such as was experienced in 1998. Additionally, if market conditions deteriorate resulting in substantial declines in value of these securities, sufficient capital may not be available to support the continued ownership of such investments, requiring these securities to be sold at a loss. IF CAPSTEAD'S EARNINGS OR THE VALUE OF ITS MORTGAGE ASSETS ARE ADVERSELY AFFECTED BY A CHANGE IN INTEREST RATES OR CHANGE IN THE CREDIT QUALITY OF THE INVESTMENT PORTFOLIO, THE BOOK VALUE OF THE COMMON STOCK MAY DECLINE. Stockholder Litigation. During 1998 twenty-four purported class action lawsuits were filed against Capstead and certain of its officers alleging, among other things, that the defendants violated federal securities laws by publicly issuing false and misleading statements and omitting disclosure of material adverse information regarding Capstead's business during various periods between January 28, 1997 and July 24, 1998. The complaints claim that as a result of such alleged improper actions, the market price of Capstead's equity securities were artificially inflated during that time period. The complaints seek monetary damages in an undetermined amount. In March 1999 these actions were consolidated and in July 2000 a lead plaintiff group was appointed by the court. An amended complaint was filed October 20, 2000. Capstead expects to respond to this amended complaint by February 20, 2001. Capstead believes it has meritorious defenses to the claims and intends to vigorously defend the actions. Based on available information, management believes the resolution of these suits will not have a material adverse effect on the financial position of Capstead. 12. INTEREST OF DIRECTORS AND EXECUTIVE OFFICERS AND PRINCIPAL STOCKHOLDERS; TRANSACTIONS AND ARRANGEMENTS CONCERNING THE COMMON STOCK Security Ownership of Directors and Executive Officers of Capstead. Listed in the following table and the notes thereto is certain information with respect to the beneficial ownership of Common shares as of February 15, 2001, by each director and executive officer of Capstead and by all directors and executive officers as a group. Unless otherwise specified in the table, the business address for each of the following persons is 8401 N. Central Expressway, Suite 800, Dallas, Texas 75225. [remainder of page intentionally left blank] -20- 27
NUMBER OF COMMON SHARES NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED (A) PERCENT OF CLASS - ------------------------------------ ---------------------- ---------------- Wesley R. Edens.................................................... 9,298,717(b) 33.24 1301 Avenue of the Americas 42nd Floor New York, New York 10019 Robert I. Kauffman................................................. 9,298,717(b) 33.24 1301 Avenue of the Americas 42nd Floor New York, New York 10019 Paul M. Low........................................................ 76,087(c) * Ronn K. Lytle...................................................... 165,445 * Michael G. O'Neil.................................................. 8,263 * Howard Rubin....................................................... 351,250(d) 1.39 Mark S. Whiting.................................................... 130,350 * Andrew F. Jacobs................................................... 212,607(e) * Amar R. Patel...................................................... 26,421(e) * Phillip A. Reinsch................................................. 59,785(e) * Robert R. Spears, Jr............................................... 61,370(e) * All Directors and Executive Officers as a group (11 persons)........................................ 10,390,305 36.74
- -------------------- * Denotes less than 1 percent (a) Amounts include shares of Common shares issuable as follows:
RIGHT TO ACQUIRE ------------------------------------------------------------ SERIES B SERIES C CONVERTED TO EXERCISABLE SHARES SHARES COMMON SHARES OPTIONS -------- -------- ------------- ----------- Wesley R. Edens.................................... - 5,378,000 2,689,000 - Robert I. Kauffman................................. - 5,378,000 2,689,000 - Paul M. Low........................................ 47,000 - 18,066 8,028 Ronn K. Lytle...................................... - - - 1,125 Michael G. O'Neil.................................. - - - 6,750 Howard Rubin....................................... - - - 6,750 Mark S. Whiting.................................... - - - 6,750 Andrew F. Jacobs................................... - - - 166,500 Amar R. Patel...................................... - - - 12,895 Phillip A. Reinsch................................. - - - 41,600 Robert R. Spears, Jr............................... - - - 38,369 All Directors & Executive Officers as a group (11 persons)............... 47,000 5,378,000 2,707,066 288,767
-21- 28 (b) Neither Mr. Edens nor Mr. Kauffman directly owns any Capstead securities. However, by reason of their status as directors and officers of Fortress, they may be deemed to be the beneficial owners of the 6,609,717 shares of Common Stock and the 2,689,000 shares of Common Stock issuable upon the conversion of the Series C Preferred Stock. Mr. Edens and Mr. Kauffman expressly disclaim beneficial ownership of any Common Stock and Series C Preferred Stock. (c) Includes 768 shares of Common Stock that would be received upon conversion of 2,000 shares of Series B Preferred Stock held in trust for Mr. Low's son. Mr. Low is settlor and trustee of his son's trust and has voting and dispositive power over the shares but expressly disclaims beneficial ownership. (d) Includes 50,200 shares of Common Stock held by the Rubin-Henry Family Foundation of which Mr. Rubin is co-trustee. As co-trustee, Mr. Rubin has voting and dispositive power over the shares. (e) Includes restricted shares of Common Stock granted April 20,2000, which vest 20 percent on each of April 20, 2001, 2002, 2003, 2004 and 2005 as follows: Andrew F. Jacobs, 21,052 shares; Amar R. Patel, 10,526 shares; Phillip A. Reinsch; 11,509 shares; and Robert R. Spears, Jr., 12,491 shares. Security Ownership of Certain Beneficial Owners of Capstead. The following table sets forth the ownership of Common Stock and Series C Preferred Stock, both beneficially and of record, for the persons known by us to be beneficial owners of more than 5% of each such class of shares outstanding, as of the close of business on February 15, 2001.
NUMBER OF NUMBER OF NAME AND ADDRESS OF COMMON SHARES PERCENT OF SERIES C SHARES PERCENT OF BENEFICIAL OWNER BENEFICIALLY OWNED CLASS BENEFICIALLY OWNED CLASS - ---------------- ------------------ ----- ------------------ ----- Fortress Cap LLC.................... 9,298,717(2) 33.24% 5,378,000 100.0% 1301 Avenue of the Americas 42nd Floor New York, New York 10019(1) James and Nancy Grosfeld............ 1,330,400 5.89% - - 20500 Civic Center Drive Suite 3000 Southfield, Michigan 48076(3)
- ----------------- (1) Such information is derived solely from a Schedule 13D filed with the Securities and Exchange Commission on December 28, 2000 by Fortress Cap LLC (the owner of record of the Common Stock and Series C Preferred Stock), Fortress Registered Investment Trust, Fortress Investment Fund LLC, Fortress Investment Group LLC and Fortress Principal Investment Holdings LLC. Fortress Cap LLC is wholly-owned by its sole member, Fortress Registered Investment Trust. Certain additional person and entities named in the Schedule 13D, including Messrs. Edens and Kauffman, may also be deemed to be beneficial owners of the Common Stock and Series C Preferred Stock (and the Common Stock issuable upon the conversion of the Series C Preferred Stock). All such persons and entities disclaim beneficial ownership of such shares. (2) Includes 2,689,000 shares of Common Stock issuable upon conversion of the Series C Preferred Stock. -22- 29 (3) Such information is derived solely from a Schedule 13D filed with the Securities and Exchange Commission on October 16, 2000 by James and Nancy Grosfeld. The current directors and executive officers of Fortress Investment Group LLC, the manager of Fortress Cap LLC, are Wesley R. Edens, Randal A. Nardone, Robert I. Kauffman, Erik P. Nygaard and Gregory F. Hughs. The current business address of each of these persons is 1301 Avenue of the Americas, 42nd Floor, New York, New York 10019. The following table describes transactions by the executive officers, directors and/or affiliates of Capstead in the Common Stock during the past 60 days. The Common Stock acquisitions described below were open market purchases pursuant to transactions executed by registered broker dealers.
NUMBER OF TRANSACTION PURCHASE OR NAME TRANSACTION DESCRIPTION SHARES DATE STRIKE PRICE ---- ----------------------- ------ ---- ------------ Fortress Cap LLC Common Stock Acquisition 5,000 12/21/00 $10.7500 Fortress Cap LLC Common Stock Acquisition 4,500 01/02/01 $10.7500 Howard Rubin Director Stock Option Grant 1,125 01/01/01 $10.8750 Paul M. Low Director Stock Option Grant 1,125 01/01/01 $10.8750 Ronn K. Lytle Director Stock Option Grant 1,125 01/01/01 $10.8750 Michael G. O'Neil Director Stock Option Grant 1,125 01/01/01 $10.8750 Mark Whiting Director Stock Option Grant 1,125 01/01/01 $10.8750 Howard Rubin Common Stock Acquisition 10,000 01/04/01 $11.3750
Except as described in the above table, none of Capstead or its affiliates or, to the best knowledge of Capstead, Fortress or any of its affiliates has effected any transaction in the Common Stock during the past 60 days. 13. FEDERAL INCOME TAX CONSEQUENCES The following discussion is a summary of certain anticipated United States federal income tax consequences of the Offer. This discussion is for general information only and does not address the federal income tax consequences that may be relevant to particular holders of Common Stock in light of their personal circumstances or to certain types of holders of Common Stock such as dealers in securities, insurance companies, foreign persons (except as specifically noted below under "-- Taxation of Holders Who are Non-U.S. Holders"), financial institutions and tax-exempt entities who may be subject to special treatment under the federal income tax laws. Further, this summary assumes that shares of Common Stock are held as capital assets -- generally, property held for investment -- within the meaning of the Internal Revenue Code of 1986, as amended (the "Code"). This discussion does not address any tax consequences under state, local or foreign laws. For purposes of this discussion, a "U.S. Holder" means a person who is (a) a citizen or resident of the United States, (b) a corporation or partnership, including an entity treated as a corporation or partnership for U.S. federal income tax purposes, created in the United States or organized under the laws of the United States or any state thereof or the District of Columbia (except, in the case of a partnership, as otherwise provided by applicable Treasury regulations), (c) an estate, the income of which is includable in gross income for United States federal income tax purposes regardless of its source, or (d) -23- 30 a trust whose administration is subject to the primary supervision of a United States court and which has one or more United States persons who have the authority to control all substantial decisions of the trust. The discussion is based upon the Code, the Treasury regulations thereunder, judicial decisions and current administrative rulings and practices in effect on the date hereof. Any of these authorities could be repealed, overruled or modified at any time. Any such change could be retroactive and, accordingly, could modify the tax consequences of this Offer. No ruling from the IRS with respect to the matters discussed herein has been requested, and there is no assurance that the IRS would agree with the conclusions set forth in this discussion. General Consequences. The tender of shares of Common Stock pursuant to the Offer will be a taxable transaction for federal income tax purposes and may be a taxable transaction under state, local or foreign tax laws as well. Under the Code, a holder of Common Stock whose shares are purchased pursuant to the Offer will generally recognize gain or loss in an amount equal to the difference between the cash received and such stockholder's adjusted tax basis for his shares redeemed, if: (i) as a result of the sale, his stock interest in Capstead is completely terminated; (ii) the redemption is "substantially disproportionate" with respect to the selling stockholder; or (iii) the redemption is otherwise deemed to be not essentially equivalent to a dividend. These tests (the "Section 302 Tests") are discussed in greater detail below. If any one of the Section 302 Tests is met, as discussed under "-- Treatment as a Sale or Exchange," such gain or loss generally will be treated as a long-term capital gain or loss if the stockholder's holding period for such shares is more than one year. If none of the Section 302 Tests is satisfied, the cash received pursuant to the Offer will be treated in the manner discussed under "-- Treatment as a Dividend or Otherwise as a Distribution" as a dividend taxable as ordinary income to the extent of the current and accumulated earnings and profits of Capstead, if any. To determine whether the Section 302 Tests are met, there must be taken into account both (a) any shares actually owned by such holder of Common Stock and (b) any shares considered owned by such holder of Common Stock by reason of certain constructive ownership rules set forth in the Code. A holder of Common Stock generally will be treated as owning shares which he has the right to acquire under options, or by the conversion or exchange of a security, and shares owned (and, in some cases, constructively owned) by members of the stockholder's family and by related entities such as corporations, partnerships, trusts and estates in which such stockholder, a member of his family or a related entity has an interest. o Complete Termination of Interest Test. A holder of Common Stock who meets the requirements of the "complete termination of interest" test generally will receive sale or exchange treatment. A complete termination of stock interest of a tendering holder of Common Stock will have occurred if Capstead purchases all of his Common Stock pursuant to the Offer, and the holder of Common Stock does not own directly and is not deemed to own, under the constructive ownership rules described above, any other stock of Capstead. If the Offer is prorated, the shares that are not purchased by reason of such proration must be taken into account in determining whether a holder of Common Stock has achieved a complete termination of his interest in Capstead. If a holder of Common Stock would otherwise satisfy the complete termination requirement, but for his constructive ownership of shares held by family members, under certain circumstances the holder of Common Stock may be entitled to disregard such -24- 31 constructive ownership. o Substantially Disproportionate Test. A sale of Common Stock pursuant to the Offer will, in general, be "substantially disproportionate" as to a holder if, among other things, the percentage of the outstanding Common Stock actually and constructively owned by the holder immediately after the completion of the Offer is less than 80% of the percentage of Common Stock actually and constructively owned by the holder immediately before the Offer. o Not Essentially Equivalent to a Dividend Test. A holder of Common Stock who meets the requirements of the "not essentially equivalent to a dividend" test generally will receive sale or exchange treatment. A redemption will be treated as "not essentially equivalent to a dividend" if, as result of the sale of Common Stock pursuant to the Offer, a holder of Common Stock has realized a "meaningful reduction" in his proportionate interest in Capstead, taking into account the constructive ownership rules. This determination depends on the facts and circumstances of each case. A redemption of Common Stock for cash that results in some reduction in the proportionate interest in Capstead, taking into account any constructive ownership, of a holder whose relative stock interest in Capstead is minimal and who exercises no control over corporate affairs will generally be regarded as a "meaningful reduction" in the holder's stock interest in Capstead. Stockholders tendering shares pursuant to the Offer should note that the change in their relative stock interest in Capstead may be affected by a proration of the Offer. For example, a stockholder who tenders a smaller percentage of his shares than the percentage of outstanding shares repurchased by Capstead in the transaction would experience an increase in his proportionate interest in Capstead, and would generally be required to treat the sales proceeds received as a distribution rather than as a sale or exchange. See discussion below under "-- Treatment as a Dividend or Otherwise as a Distribution." Any stockholder seeking to rely on the "not essentially equivalent to a dividend" test should consult with his own tax advisor as to its application in his particular situation. Treatment as a Sale or Exchange. If any of the Section 302 Tests described above are satisfied, the redemption will be treated as a sale or exchange. The tendering holder of Common Stock will recognize capital gain or loss in an amount equal to the difference between the amount of cash received pursuant to the Offer (other than amounts which represent declared and unpaid dividends) and his adjusted tax basis in the redeemed shares. Generally, the basis of shares is equal to their cost. However, if the shares were inherited or received by gift, special tax rules may apply. Amounts of cash received upon redemption of the Common Stock which represent declared and unpaid dividends will be subject to taxation in the manner discussed under "-- Treatment as a Dividend or Otherwise as a Distribution" below. Such gain or loss would be long-term capital gain or loss if the holding period for the Common Stock exceeded one year. Capital gains of individuals derived in respect of capital assets held for more than one year are eligible for reduced rates of taxation. The maximum capital gains tax rate applicable to individuals is generally 20% under current law. The deductibility of capital losses is restricted and, in general, such losses may only be used to reduce capital gains to the extent thereof. However, taxpayers who are individuals generally may deduct annually $3,000 of capital losses in excess of their capital gains. Treatment as a Dividend or Otherwise as a Distribution. If none of the Section 302 Tests described above is satisfied, then the holder of Common Stock generally will be treated as having received a distribution in an amount equal to the gross proceeds payable to the holder. Such a deemed distribution will be taxable as a dividend (i.e., ordinary income) to the extent of the current and accumulated earnings and profits of Capstead, if any, as calculated for U.S. federal income tax purposes. In the case of a holder of the Common Stock that is a corporation, distributions will not be eligible for the dividends received deduction. -25- 32 The amount taxable will not be reduced by the holder's basis in the Common Stock exchanged pursuant to the Offer, and the holder's adjusted tax basis in the shares sold will be transferred to any remaining shares of Capstead stock retained by the holder. If none of the Section 302 Tests is satisfied and a sale pursuant to the Offer is therefore treated as a distribution, any cash received for Common Stock pursuant to the Offer in excess of Capstead's current and accumulated earnings and profits will be treated, first, as a non-taxable return of capital to the extent of, and in reduction of, the holder's tax basis in his Common Stock, and thereafter, as a capital gain to the extent that it exceeds the holder's tax basis. Gain recognized by a holder on Common Stock held for 12 months or less will be taxable at ordinary income rates, while Common Stock held more than 12 months will be taxable at the long-term capital gains rate. Backup Withholding Requirements. Under Federal backup withholding rules, except in the case of certain exempt taxpayers, the Depositary will withhold 31% of the gross proceeds paid to a holder of Common Stock or other payee pursuant to the Offer unless the holder of Common Stock provides his taxpayer identification number (employer identification number or social security number), certifies that such number is correct, and certifies that he has not been notified that he is subject to backup withholding. See "Procedures for Tendering Shares -- United States Federal Income Tax Backup Withholding" above, for further details. Taxation of Holders Who Are Non-U.S. Holders. To the extent that a sale of Common Stock by a Non-U.S. Holder pursuant to the Offer does not satisfy one of the Section 302 Tests, and is therefore treated for U.S. federal income tax purposes as a distribution, the gross proceeds payable to the Non-U.S. Holder will generally be subject to United States withholding tax at a rate of 30%. Special rules apply to the extent that an income tax treaty applies, or where the shares of Common Stock are held by the Non-U.S. Holder in connection with the conduct, by it, of a trade or business in the United States. See "Procedures for Tendering Shares -- Withholding for Holders Who are Non-U.S. Holders" above, for further details. Where a sale of Common Stock by a Non-U.S. Holder pursuant to the Offer satisfies one or more of the Section 302 Tests described above and is therefore treated for U.S. federal income tax purposes as a sale or exchange rather than a distribution, it will generally not be subject to United States federal income tax, unless the Foreign Investment in Real Property Tax Act ("FIRPTA") were to apply. FIRPTA imposes tax on non-U.S. persons on certain sales of U.S. real estate and stock of a United States Real Property Holding Corporation (a "USRPHC"). Capstead believes that it is not, and is not likely to become, a USRPHC. Moreover, even if Capstead were a USRPHC, in general FIRPTA would not apply if the selling Non-U.S. Holder holds, and has held, directly and constructively, in the five years prior to the tendering of Common Stock, less than 5% of the outstanding Common Stock of Capstead. THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY. EACH STOCKHOLDER IS URGED TO CONSULT HIS OWN TAX ADVISOR TO DETERMINE THE PARTICULAR TAX CONSEQUENCES TO HIM OF THE SALE OF HIS COMMON STOCK PURSUANT TO THE OFFER, INCLUDING THE APPLICABILITY OF CONSTRUCTIVE OWNERSHIP RULES, THE APPLICABILITY OF ANY STATE, LOCAL OR FOREIGN INCOME OR OTHER TAX LAWS, CHANGES IN APPLICABLE TAX LAWS, AND ANY PENDING OR PROPOSED LEGISLATION. 14. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS Capstead is not aware of any license or regulatory permit material to Capstead's business that is reasonably likely to be adversely affected by Capstead's acquisition of shares of Common Stock as contemplated herein or of any approval or other action by any government or governmental, administrative or regulatory authority, agency, or tribunal, domestic or foreign, that would be required for the acquisition -26- 33 or ownership of shares by Capstead as contemplated herein. Should any such approval or other action be required, Capstead presently contemplates that such approval or other action will be sought or taken. Capstead is unable to predict whether it will be required to delay the acceptance for payment of or payment for shares tendered pursuant to the Offer pending the outcome of any such matter. There can be no assurance that any such approval or other action, if needed, would be obtained or would be obtained without substantial conditions or that the failure to obtain any such approval or other action might not result in adverse consequences to Capstead's business. Capstead's obligations under the Offer to accept for payment and pay for shares are subject to certain conditions. See Section 7. For a description of pending litigation matters affecting Capstead, see "Stockholder Litigation" under Section 11. 15. EXTENSION OF THE OFFER PERIOD; TERMINATION; AMENDMENTS Capstead expressly reserves the right, in its sole discretion, at any time and from time to time, and regardless of whether or not any of the events set forth in Section 7 shall have occurred or shall be deemed by Capstead to have occurred, to extend the period of time during which the Offer is open and thereby delay acceptance for payment of, and payment for, any shares by giving oral or written notice of such extension to the Depositary and making a public announcement thereof. Capstead also expressly reserves the right, in its sole discretion, to terminate the Offer and not accept for payment or pay for any shares not previously accepted for payment or paid for or, subject to applicable law, to postpone payment for shares upon the occurrence of any of the conditions specified in Section 7 by giving oral or written notice of such termination or postponement to the Depositary and making a public announcement thereof. Capstead's reservation of the right to delay payment for shares which it has accepted for payment is limited by Rule 13e-4(f)(5) promulgated under the Exchange Act, which requires that Capstead must pay the consideration offered or return the shares tendered promptly after termination or withdrawal of a Offer. Subject to compliance with applicable law, Capstead further reserves the right, in its sole discretion, and regardless of whether any of the events set forth in Section 7 shall have occurred or shall be deemed by Capstead to have occurred, to amend the Offer in any respect (including, without limitation, by decreasing or increasing the consideration offered in the Offer to holders of shares or by decreasing or increasing the number of shares being sought in the Offer). Amendments to the Offer may be made at any time and from time to time by public announcement thereof. In the case of an extension, such announcement will be issued no later than 9:00 a.m., New York City time, on the next business day after the last previously scheduled or announced Expiration Date. Any material change to the terms of the Offer will be disseminated promptly to stockholders in a manner reasonably designed to inform stockholders of such change. Without limiting the manner in which Capstead may choose to inform stockholders, except as required by applicable law, Capstead shall have no obligation to publish, advertise or otherwise communicate any such change other than by making a release to the Dow Jones News Service. If Capstead materially changes the terms of the Offer or the information concerning the Offer, or if it waives a material condition of the Offer, Capstead will extend the Offer to the extent required by Rules 13e-4(d)(2) and 13e-4(e)(2) promulgated under the Exchange Act. Under these rules, the minimum period during which an offer must remain open following material changes in the terms of the Offer or information concerning the Offer will depend on the facts and circumstances, including the relative materiality of such terms or information. If (i) Capstead increases or decreases the price to be paid for shares, increases the Dealer Manager fees or increases or decreases the number of shares being sought in the Offer or, in the event of an increase in the number of shares being sought, such increase exceeds 2% of the number of outstanding shares of Common Stock, and (ii) the Offer is scheduled to expire at any time earlier than the expiration of a period ending on the tenth business day from, and including, the date that such notice of an increase or decrease is first published, sent or given in the manner specified herein, the Offer will be extended until the expiration of such period of ten business -27- 34 days. For the purposes of the Offer, a "business day" means any day other than a Saturday, Sunday or Federal holiday and consists of the time period from 12:01 a.m. through 12:00 Midnight, New York City time. 16. FEES AND EXPENSES Capstead has retained Merrill Lynch & Co. to act as its financial advisor, as well as Dealer Manager, in connection with the Offer. In connection with the Offer, Merrill Lynch & Co. will receive a usual and customary transaction fee upon completion of the Offer, as well as reimbursement of their out-of-pocket expenses incurred in connection with the Offer, including the costs and expenses of their legal counsel, and Capstead has agreed to indemnify the Dealer Manager against certain liabilities in connection with the Offer, including liabilities under the Federal securities laws. Capstead has retained Corporate Investor Communications, Inc. to act as Information Agent and Wells Fargo Shareowner Services to act as Depositary in connection with the Offer. The Information Agent may contact holders of shares by mail, telephone, facsimile, telex, telegraph and personal interviews and may request Nominees to forward materials relating to the Offer to beneficial owners. The Information Agent and the Depositary will each receive reasonable and customary compensation for their respective services. No fees or commissions will be payable by Capstead to brokers, dealers or other persons (other than fees to the Dealer Manager and Information Agent as described above) for soliciting tenders of shares pursuant to the Offer. A Stockholder holding shares through a Nominee is urged to consult such Nominee to determine whether transaction costs are applicable if such stockholder tenders shares through such Nominee and not directly to the Depositary. Capstead will, however, upon request, reimburse Nominees for customary mailing and handling expenses incurred by them in forwarding the Offer and related materials to the beneficial owners of shares held by them as a nominee or in a fiduciary capacity. No Nominee has been authorized to act as the agent of Capstead, the Dealer Manager, the Information Agent or the Depositary for purposes of the Offer. Capstead will pay or cause to be paid all stock transfer taxes, if any, on its purchase of shares except as otherwise provided under Section 6 or Instruction 6 in the Letter of Transmittal. 17. MISCELLANEOUS Capstead is not aware of any jurisdiction in which the making of the Offer is not in compliance with applicable law. If Capstead becomes aware of any jurisdiction where the making of the Offer or the acceptance or purchase of the shares is not in compliance with any valid applicable law, Capstead will make a good faith effort to comply with such law. If, after such good faith effort, Capstead cannot comply with such law, the Offer will not be made to (nor will tenders be accepted from or on behalf of) the holders of shares residing in such jurisdiction. In any jurisdiction where the securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on Capstead's behalf by the Dealer Manager or one or more registered broker or dealers licensed under the laws of the jurisdiction. Pursuant to Rule 13e-4 promulgated under the Exchange Act, Capstead has filed with the Commission an Issuer Tender Offer Statement on Schedule TO which contains additional information with respect to the Offer. The Schedule TO, including the Exhibits and any amendments thereto, may be examined, and copies may be obtained at the same places and in the same manner as is set forth in Section 18 with respect to information concerning Capstead. -28- 35 18. ADDITIONAL INFORMATION Capstead files annual, quarterly and special reports, proxy statements and other information with the Commission. You may read and copy any reports, statements or other information filed by Capstead at the Commission's public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549, or at the Commission's public reference rooms in New York, New York and Chicago, Illinois. Please call the Securities and Exchange Commission at 1-800-SEC-0330 for further information on the public reference rooms. The filings of Capstead with the Commission are also available to the public from commercial document retrieval services and at the web site maintained by the Commission at http://www.sec.gov. Such filings and other information concerning Capstead also can be inspected and copied at the offices of the NYSE, 20 Broad Street, New York, New York 10005. THE BOARD HAS APPROVED THE MAKING OF THE OFFER. YOU MUST, HOWEVER, MAKE YOUR OWN DECISION WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER. NONE OF CAPSTEAD, THE BOARD OR THE DEALER MANAGER MAKES ANY RECOMMENDATION TO YOU WITH RESPECT TO THE OFFER, AND NO PERSON HAS BEEN AUTHORIZED BY CAPSTEAD OR THE BOARD TO MAKE ANY SUCH RECOMMENDATIONS. THE DELIVERY OF THIS DOCUMENT SHALL NOT CREATE AN IMPLICATION THAT THERE HAS BEEN ANY CHANGE IN THE AFFAIRS OF CAPSTEAD SINCE THE DATE OF THIS DOCUMENT OR THAT THE INFORMATION IN THIS DOCUMENT IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF THIS DOCUMENT. This Offer to Purchase and the related Letter of Transmittal are being mailed to stockholders, and will be furnished to Nominees whose names, or the names of whose nominees, appear on our list of stockholders, or, if applicable, who are listed as participants in a clearing agency's security position listing. -29- 36 The Depositary for the Offer is: WELLS FARGO SHAREOWNER SERVICES By Hand Delivery By overnight delivery or express By mail to: in New York to: mail to: The Depository Trust Company Wells Fargo Shareowner Services Wells Fargo Shareowner Services Transfer Agent Drop Reorganization Department Reorganization Department 55 Water Street, 1st Floor 161 North Concord Exchange P.O. Box 64858 New York, NY 10041 South St. Paul, MN 55075 St. Paul, MN 55164-0858
Telephone Number: (800) 468-9716 Facsimile Number: (651) 450-4163 Confirm Receipt of Facsimile by Telephone: (651) 450-4110 Any questions or requests for additional copies of this Offer to Purchase, the Letter of Transmittal or the Notice of Guaranteed Delivery should be directed to the Information Agent at the following address and telephone numbers: The Information Agent for the Offer is: CORPORATE INVESTOR COMMUNICATIONS, INC., a Georgeson Shareholder Communications Company 111 Commerce Road Carlstadt, NJ 07072-2586 Banks and Brokerage Firms call: (201) 896-1900 Stockholders please call: (866) 241-2782 (toll free) Any questions or requests for assistance may be directed to the Dealer Manager at the address and telephone number set forth below. You may also contact your broker, dealer, commercial bank or trust company or any other nominee for assistance concerning this Offer. The Dealer Manager for the Offer is: MERRILL LYNCH & CO. World Financial Center - South Tower New York, NY 10281-1326 (212) 236-3790 (call collect) EX-99.(A)(2)(A) 3 d84292ex99-a2a.txt FORM OF LETTER OF TRANSMITTAL 1 Exhibit (a)(2)(A) LETTER OF TRANSMITTAL To Tender Shares of Common Stock, Par Value $0.01 per Share CAPSTEAD MORTGAGE CORPORATION PURSUANT TO THE OFFER TO PURCHASE DATED FEBRUARY 16, 2001 THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, MARCH 16, 2001, UNLESS THE OFFER IS EXTENDED. The Depositary for the offer is: Wells Fargo Shareowner Services By Mail: By Hand-Delivery in New York: By Overnight Delivery or Express Mail: Wells Fargo Shareowner Services The Depository Trust Company Wells Fargo Shareowner Services Reorganization Department Transfer Agent Drop Reorganization Department P. O. Box 64858 55 Water Street, 1st Floor 161 North Concord Exchange St. Paul, MN 55164-0858 New York, NY 10041 South St. Paul, MN 55075
This Letter of Transmittal, including the accompanying instructions, should be read carefully before this Letter of Transmittal is completed. Delivery of this Letter of Transmittal to an address other than one of those shown above does not constitute a valid delivery. Delivery to Capstead, Merrill Lynch & Co., the Dealer Manager for the offer, or Corporate Investor Communications, Inc., the Information Agent for the offer, will not be forwarded to the Depositary and therefore will not constitute valid delivery to the Depositary. Deliveries to the Book-Entry Transfer Facility will not constitute valid delivery to the Depositary. 2 DESCRIPTION OF SHARES TENDERED (SEE INSTRUCTIONS 3 AND 4)
Name(s) and Address(es) of Registered Holder(s) Certificate(s) Tendered (Please Fill in Exactly as Appears on Certificate(s)) (Attach Additional Signed List if Necessary) - -------------------------------------------------------- ------------------------------------------------------ [ ] Indicates permanent address change. Certificate Number of Shares Number of Shares Number(s)(1) Represented by Tendered(1)(3) Certificate(s)(2) ------------ ----------------- ---------------- Total Number of Shares Tendered (1)
Indicate in this box the order (by certificate number) in which Shares are to be purchased in event of proration (Attach additional signed list if necessary).(4) See Instruction 8. 1st: 2nd: 3rd: 4th: 5th: 6th: (1) Need not be completed if shares are delivered by book-entry transfer. (2) May indicate share amounts on a pre-reverse stock split basis if the stockholders has not yet exchanged shares pursuant to the reverse stock split effected on May 8, 2000. (3) If you desire to tender fewer than all shares evidenced by any certificates listed above, please indicate in this column the number of shares you wish to tender. Otherwise, all shares evidenced by such certificates will be deemed to have been tendered. See Instruction 4. (4) If you do not designate an order, in the event less than all shares tendered are purchased due to proration, shares will be selected for purchase by the Depositary. See Instruction 8. [ ] Check here if any certificates representing shares tendered hereby have been lost, stolen, destroyed or mutilated. You must complete an affidavit of loss and return it with your Letter of Transmittal. A bond may be required to be posted by the stockholder to secure against the risk that the certificates may be subsequently recirculated. Please call (800) 468-9716 to obtain an affidavit of loss and for further instructions and as to the determination of the requirement for posting of a bond. See Instruction 14. This Letter of Transmittal is to be used only if (1) certificates for shares are to be forwarded with it, or such certificates will be delivered under a notice of guaranteed delivery previously sent to the Depositary or (2) a tender of shares is to be made by book-entry transfer to the account maintained by the Depositary at The Depository Trust Company, referred to as the "Book-Entry Transfer Facility," under Section 4 of the Offer to Purchase. Stockholders who desire to tender shares under the Offer and who cannot deliver the certificates for their shares, or who are unable to comply with the procedures for book-entry transfer before the "Expiration Date" (as defined in Section 1 of the Offer to Purchase), and who cannot deliver all other documents required by this Letter of Transmittal to the Depositary before the Expiration Date may tender their shares according to the guaranteed delivery procedures set forth in Section 4 of the Offer to Purchase. See Instruction 2. Delivery of documents to the Book-Entry Transfer Facility does not constitute delivery to the Depositary. -2- 3 [ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO AN ACCOUNT MAINTAINED BY THE DEPOSITARY AT THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING: Name of tendering institution: ------------------------------------------ Account number: --------------------------------------------------------- Transaction code number: ------------------------------------------------ [ ] CHECK HERE IF CERTIFICATES FOR TENDERED SHARES ARE BEING DELIVERED UNDER A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING: Name(s) of registered holder(s): ---------------------------------------- Date of execution of Notice of Guaranteed Delivery: -------------------- Name of institution which guaranteed delivery: ------------------------- Account number: --------------------------------------------------------- ODD LOTS (SEE INSTRUCTION 7) - ------------------------------------------------------------------------------- To be completed ONLY if shares are being tendered by or on behalf of a person who owned of record or beneficially as of the close of business on February 15, 2001 and who continues to own, of record or beneficially, as of the Expiration Date, an aggregate of fewer than 100 shares of Common Stock. The registered stockholder either (check one box): [ ] was the beneficial or record owner of, as of the close of business on February 15, 2001, and continues to own of record or beneficially as of the Expiration Date, an aggregate of fewer than 100 shares of Common Stock, all of which are being tendered; or [ ] is a broker, dealer, commercial bank, trust company or other nominee that (a) is tendering, for the beneficial owners thereof, shares with respect to which it is the record owner, and (b) believes, based upon representations made to it by such beneficial owners, that each such person was the beneficial owner of, as of the close of business on February 15, 2001, and continues to own of record or beneficially as of the Expiration Date, an aggregate of fewer than 100 shares of Common Stock, all of which are being tendered. -3- 4 To Capstead Mortgage Corporation: The undersigned hereby tenders to Capstead Mortgage Corporation, a Maryland corporation ("Capstead"), the above-described shares of Capstead's common stock, par value $0.01 per share, at the price per share of $12.75, net to the seller in cash, without interest, upon the terms and subject to the conditions set forth in Capstead's Offer to Purchase, dated February 16, 2001, receipt of which is hereby acknowledged, and in this Letter of Transmittal which, as amended and supplemented from time to time, together constitute the "Offer." Subject to and effective upon acceptance for payment of the shares tendered hereby in accordance with the terms and subject to the conditions of the Offer, including, if the Offer is extended or amended, the terms or conditions of any such extension or amendment, the undersigned hereby sells, assigns and transfers to or upon the order of Capstead all right, title and interest in and to all shares tendered hereby or orders the registration of such shares tendered by book-entry transfer that are purchased under the Offer to or upon the order of Capstead and hereby irrevocably constitutes and appoints the Depositary as attorney-in-fact of the undersigned with respect to such shares, with the full knowledge that the Depositary also acts as the agent of Capstead, with full power of substitution, such power of attorney being an irrevocable power coupled with an interest, to: (a) deliver certificates for shares, or transfer ownership of such shares on the account books maintained by the Book-Entry Transfer Facility, together in either such case with all accompanying evidences of transfer and authenticity, to or upon the order of Capstead, upon receipt by the Depositary, as the undersigned's agent, of the purchase price with respect to such shares; (b) present certificates for such shares for cancellation and transfer on Capstead's books; and (c) receive all benefits and otherwise exercise all rights of beneficial ownership of such shares, subject to the next paragraph, all in accordance with the terms of the Offer. The undersigned hereby covenants, represents and warrants to Capstead that: (a) the undersigned understands that tendering of shares under any one of the procedures described in Section 4 of the Offer to Purchase and in the instructions hereto will constitute the undersigned's acceptance of the terms and conditions of the Offer, including the undersigned's representation and warranty that (i) the undersigned has a "net long position" in shares or equivalent securities at least equal to the shares tendered within the meaning of Rule 14e-4 under the Securities Exchange Act of 1934, as amended, and (ii) such tender of shares complies with Rule 14e-4 under the Exchange Act; (b) the undersigned has full power and authority to tender, sell, assign and transfer the shares tendered hereby and when and to the extent Capstead accepts the shares for purchase, Capstead will acquire good, marketable and unencumbered title to them, free and clear of all security interests, liens, charges, encumbrances, conditional sales agreements or other obligations relating to their sale or transfer, and not subject to any adverse claim; (c) on request, the undersigned will execute and deliver any additional documents the Depositary or Capstead deems necessary or desirable to complete the assignment, transfer and purchase of the shares tendered hereby; and (d) the undersigned has read and agrees to all of the terms of the Offer. -4- 5 The names and addresses of the registered holders should be printed, if they are not already printed above, exactly as they appear on the certificates representing shares tendered hereby. The certificate numbers, the number of shares represented by such certificates, and the number of shares that the undersigned wishes to tender, should be set forth in the appropriate boxes above. The undersigned understands that Capstead will, upon the terms and subject to the conditions of the Offer, purchase the shares at a purchase price of $12.75 per share, net to the seller in cash, without interest. The undersigned understands that all shares properly tendered will be purchased at the purchase price, net to the seller in cash, without interest, upon the terms and subject to the conditions of the Offer, including its Odd Lot preferences and proration provisions, and that Capstead will return all other shares, including shares not purchased because of proration promptly following the Expiration Date. The undersigned recognizes that under certain circumstances set forth in the Offer to Purchase, Capstead may terminate or amend the Offer or may postpone the acceptance for payment of, or the payment for, shares tendered or may accept for payment fewer than all of the shares tendered hereby. In either event, the undersigned understands that certificate(s) for any shares not tendered or not purchased will be promptly returned to the undersigned at the address indicated above, unless otherwise indicated under the "Special Payment Instructions" or "Special Delivery Instructions" below. The undersigned recognizes that Capstead has no obligation, under the Special Payment Instructions, to transfer any certificate for shares from the name of its registered holder, or to order the registration or transfer of shares tendered by book-entry transfer, if Capstead purchases none of the shares represented by such certificate or tendered by such book-entry transfer. The undersigned understands that acceptance of shares by Capstead for payment will constitute a binding agreement between the undersigned and Capstead upon the terms and subject to the conditions of the Offer. The check for the aggregate net purchase price for such of the tendered shares as are purchased by Capstead will be issued to the order of the undersigned and mailed to the address indicated above unless otherwise indicated under either of the "Special Payment Instructions" or the "Special Delivery Instructions" boxes below. The undersigned acknowledges that Capstead has no obligation, under the "Special Payment Instructions," to transfer any shares tendered by book-entry transfer if Capstead does not purchase any of such shares. All authority conferred or agreed to be conferred in this Letter of Transmittal shall survive the death or incapacity of the undersigned and any obligations or duties of the undersigned under this Letter of Transmittal shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned. Except as stated in the Offer to Purchase, this tender is irrevocable. NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY. -5- 6 SPECIAL PAYMENT INSTRUCTIONS (See Instructions 1, 4, 5, 6 and 9) To be completed ONLY if certificates for shares not tendered or not purchased and/or any check for the purchase price of shares purchased are to be issued in the name of someone other than the undersigned or if shares tendered hereby and delivered by book-entry transfer which are not purchased are to be returned by credit to an account at the Book-Entry Transfer Facility other than that designated above. Issue: [ ] Check [ ] Certificate(s) to: Name: ------------------------------------------------------------------------- (Please Print or Type) Address: ----------------------------------------------------------------------- ------------------------------------------------------------------------------ (Including Zip Code) - ------------------------------------------------------------------------------- (Tax Identification or Social Security Number) (See Substitute Form W-9 Included Herewith) [ ] Credit shares delivered by book-entry transfer and not purchased to the account set forth below: ------------------------------------------------ (Account No.) SPECIAL DELIVERY INSTRUCTIONS (See Instructions 1, 4, 5 and 9) To be completed ONLY if certificates for shares not tendered or not purchased, and/or any check for the purchase price of shares purchased are to be sent to someone other than the undersigned or to the undersigned at an address other than that shown above. Deliver: [ ] Check [ ] Certificate(s) to: Name: ------------------------------------------------------------------------- (Please Print or Type) Address: ----------------------------------------------------------------------- ------------------------------------------------------------------------------ (Including Zip Code) -6- 7 STOCKHOLDER(S) SIGN HERE (See Instructions 1 and 5) (PLEASE COMPLETE SUBSTITUTE FORM W-9 ON REVERSE SIDE) Must be signed by the registered holder(s) exactly as name(s) appear(s) on certificate(s) or on a security position listing or by person(s) authorized to become registered holder(s) by certificate(s) and documents transmitted with the Letter of Transmittal. If signature is by attorney-in-fact, executor, administrator, trustee, guardian, officer of a corporation or another acting in a fiduciary or representative capacity, please set forth the full title. See Instruction 5. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- (SIGNATURE(S)) Name(s): ----------------------------------------------------------------------- (PLEASE PRINT) Capacity (full title): --------------------------------------------------------- Address: ----------------------------------------------------------------------- - ------------------------------------------------------------------------------- (INCLUDING ZIP CODE) Area code and telephone number: ----------------------------------------------- Dated: , 2001 --------------------- Tax Identification or Social Security Number: ---------------------------------- GUARANTEE OF SIGNATURE(S) (SEE INSTRUCTIONS 1 AND 5) Authorized signature: ---------------------------------------------------------- Name(s): ----------------------------------------------------------------------- (PLEASE PRINT) Title: ------------------------------------------------------------------------- Name of Firm: ------------------------------------------------------------------ Address: ----------------------------------------------------------------------- (INCLUDING ZIP CODE) Area code and telephone number: ----------------------------------------------- Dated: , 2001 --------------------- Tax Identification or Social Security Number: ----------------------------------- -7- 8 INSTRUCTIONS TO LETTER OF TRANSMITTAL FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER 1. Guarantee of Signatures. No signature guarantee is required if either: (a) this Letter of Transmittal is signed by the registered holder of the shares exactly as the name of the registered holder appears on the certificate, which term, for purposes of this document, shall include any participant in a book-entry transfer facility whose name appears on a security position listing as the owner of shares, tendered with this Letter of Transmittal, and payment and delivery are to be made directly to such registered holder unless such registered holder has completed either the box entitled "Special Payment Instructions" or "Special Delivery Instructions" above; or (b) such shares are tendered for the account of a bank, broker, dealer, credit union, savings association or other entity which is a member in good standing of the Securities Transfer Agents Medallion Program or a bank, broker, dealer, credit union, savings association or other entity which is an "Eligible Guarantor Institution," as such term is defined in Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended, each such entity, referred to as an "eligible guarantor institution." In all other cases, signatures must be guaranteed by an eligible guarantor institution. See Instruction 5. 2. Delivery of Letter of Transmittal and Certificates; Guaranteed Delivery Procedures. This Letter of Transmittal is to be used only if certificates are delivered with it to the Depositary, or such certificates will be delivered under a Notice of Guaranteed Delivery previously sent to the Depositary, or if tenders are to be made under the procedure for tender by book-entry transfer set forth in Section 4 of the Offer to Purchase. Certificates for all physically tendered shares, or confirmation of a book-entry transfer into the Depositary's account at the Book-Entry Transfer Facility of shares tendered electronically, together in each case with a properly completed and duly executed Letter of Transmittal or manually signed facsimile of it, or an agent's message, and any other documents required by this Letter of Transmittal, should be mailed or delivered to the Depositary at the appropriate address set forth herein and must be delivered to the Depositary before the Expiration Date. The term "agent's message" means a message transmitted by the Book-Entry Transfer Facility to, and received by, the Depositary, which states that the Book-Entry Transfer Facility has received an express acknowledgment from the participant in the Book-Entry Transfer Facility tendering the shares, that such participant has received and agrees to be bound by the terms of the Letter of Transmittal, and that Capstead may enforce such agreement against such participant. Stockholders whose certificates are not immediately available or who cannot deliver certificates for their shares and all other required documents to the Depositary before the Expiration Date, or whose shares cannot be delivered before the Expiration Date under the procedures for book-entry transfer, may tender their shares by or through any eligible guarantor institution by properly completing and duly executing and delivering a Notice of Guaranteed Delivery, or facsimile of it, and by otherwise complying with the guaranteed delivery procedure set forth in Section 4 of the Offer to Purchase. Under such procedure, the certificates for all physically tendered shares or book-entry confirmation, as the case may be, as well as a properly completed and duly executed Letter of Transmittal, or manually signed facsimile of it, or an agent's message, and all other documents required by this Letter of Transmittal, must be received by the Depositary within three New York Stock Exchange trading days after receipt by the Depositary of such Notice of Guaranteed Delivery, all as provided in Section 4 of the Offer to Purchase. -8- 9 The Notice of Guaranteed Delivery may be delivered by hand or transmittal by telegram, facsimile transmission or mail to the Depositary and must include, if necessary, a guarantee by an eligible guarantor institution in the form set forth in such notice. For shares to be tendered validly under the guaranteed delivery procedure, the Depositary must receive the Notice of Guaranteed Delivery before the Expiration Date. THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING CERTIFICATES FOR SHARES, IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY. Capstead will not accept any alternative, conditional or contingent tenders, nor will it purchase any fractional shares, except as expressly provided in the Offer to Purchase. All tendering stockholders, by execution of this Letter of Transmittal, or a facsimile of it, waive any right to receive any notice of the acceptance of their tender. 3. Inadequate Space. If the space provided in the box captioned "Description of Shares Tendered" is inadequate, the certificate numbers and/or the number of shares should be listed on a separate signed schedule and attached to this letter of transmittal. 4. Partial Tenders and Unpurchased Shares. (Not applicable to stockholders who tender by book-entry transfer.) If fewer than all of the shares evidenced by any certificate are to be tendered, fill in the number of shares which are to be tendered in the column entitled "Number of Shares Tendered" in the box captioned "Description of Shares Tendered." In such case, if any tendered shares are purchased, a new certificate for the remainder of the shares evidenced by the old certificates will be issued and sent to the registered holder(s), unless otherwise specified in either the "Special Payment Instructions" box or "Special Delivery Instructions" box in this Letter of Transmittal, promptly after the Expiration Date. Unless otherwise indicated, all shares represented by the certificates listed and delivered to the Depositary will be deemed to have been tendered. 5. Signatures on Letter of Transmittal, Stock Powers and Endorsements. (a) If this Letter of Transmittal is signed by the registered holder(s) of the shares tendered hereby, the signature(s) must correspond exactly with the name(s) as written on the face of the certificate(s) without any change whatsoever. (b) If the shares are registered in the names of two or more joint holders, each such holder must sign this Letter of Transmittal. (c) If any tendered shares are registered in different names on several certificates, it will be necessary to complete, sign and submit as many separate letters of transmittal, or photocopies of it, as there are different registrations of certificates. (d) When this Letter of Transmittal is signed by the registered holder(s) of the shares listed and transmitted hereby, no endorsements of certificate(s) representing such shares or separate stock powers are required unless payment is to be made or the certificates for shares not tendered or not purchased are to be issued to a person other than the registered holder(s). SIGNATURE(S) ON SUCH CERTIFICATE(S) MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION. If this Letter of Transmittal is signed by a person other than the registered holder(s) of the certificate(s) listed, or if payment is to be made or certificate(s) for shares not tendered or not -9- 10 purchased are to be issued to a person other than the registered holder(s), the certificate(s) must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name(s) of the registered holder(s) appear(s) on the certificate(s), and the signature(s) on such certificates or stock power(s) must be guaranteed by an eligible guarantor institution. See Instruction 1. (e) If this Letter of Transmittal or any certificates or stock powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing and must submit proper evidence to the Depositary that is satisfactory to Capstead of their authority so to act. 6. Stock Transfer Taxes. Except as provided in this Instruction 6, no stock transfer tax stamps or funds to cover such stamps need to accompany this Letter of Transmittal. When payment is to be made to the registered holder(s), Capstead will pay or cause to be paid any stock transfer taxes payable on the transfer to it of shares purchased under the Offer. If, however: (a) payment of the purchase price is to be made to any person other than the registered holder(s); (b) shares not tendered or not accepted for purchase are to be registered in the name(s) of any person(s) other than the registered holder(s); or (c) tendered certificates are registered in the name of any person(s) other than the person(s) signing this Letter of Transmittal; then the Depositary will deduct from the purchase price the amount of any stock transfer taxes, whether imposed on the registered holder(s), such other person(s) or otherwise, payable on account thereof, unless satisfactory evidence of the payment of such taxes or an exemption from them is submitted. 7. Odd Lots. As described in Section 1 of the Offer to Purchase, if Capstead is to purchase fewer than all shares tendered before the Expiration Date and not properly withdrawn, the shares purchased first will consist of all shares tendered by any stockholder who owned beneficially or of record an aggregate of fewer than 100 shares. This preference will not be available unless the box captioned "Odd Lots" is completed. 8. Order of Purchase in Event of Proration. As described in Section 1 of the Offer to Purchase, stockholders may designate the order in which their shares are to be purchased in the event of proration. The order of purchase may have an effect on the Federal income tax classification of any gain or loss on the shares purchased. See Sections 1 and 13 of the Offer to Purchase. 9. Special Payment and Delivery Instructions. If certificate(s) for shares not tendered or not purchased and/or check(s) are to be issued in the name of a person other than the signer of the Letter of Transmittal or if such certificates and/or checks are to be sent to someone other than the person signing the Letter of Transmittal or to the signer at a different address, the boxes captioned "Special Payment Instructions" and/or "Special Delivery Instructions" on this Letter of Transmittal should be completed as applicable and signatures must be guaranteed as described in Instructions 1 and 5. 10. Irregularities. All questions as to the number of shares to be accepted and the validity, form, eligibility, including time of receipt, and acceptance for payment of any tender of shares will be determined by Capstead in its sole discretion, which determinations shall be final and binding on all parties. Capstead reserves the absolute right to reject any or all tenders of shares it determines not be in proper form or the acceptance of which or payment for which may, in the opinion of Capstead's counsel, be unlawful. Capstead also reserves the absolute right to waive any of the conditions of the Offer and any defect or irregularity in -10- 11 the tender of any particular shares, and Capstead's interpretation of the terms of the Offer, including these instructions, will be final and binding on all parties. No tender of shares will be deemed to be properly made until all defects and irregularities have been cured or waived. Unless waived, any defects or irregularities in connection with tenders must be cured within such time as Capstead shall determine. None of Capstead, the Dealer Manager (as defined in the Offer to Purchase), the Depositary, the Information Agent (as defined in the Offer to Purchase) or any other person is or will be obligated to give notice of any defects or irregularities in tenders and none of them will incur any liability for failure to give any such notice. 11. Questions and Requests for Assistance and Additional Copies. Any questions or requests for assistance or for additional copies of the Offer to Purchase, the Letter of Transmittal or the Notice of Guaranteed Delivery may be directed to the Information Agent at the telephone number and address set forth on the back cover of this Letter of Transmittal. You may also contact the Dealer Manager or your broker, dealer, commercial bank or trust company for assistance concerning the Offer. To confirm delivery of your shares, you are directed to contact the Depositary. 12. Tax Identification Number and Backup Withholding. Federal income tax law generally requires that a stockholder whose tendered shares are accepted for purchase, or such stockholder's assignee, in either case, referred to as the "payee," provide the Depositary with such payee's correct taxpayer identification number, which, in the case of a payee who is an individual, is such payee's social security number. If the Depositary is not provided with the correct taxpayer identification number or an adequate basis for an exemption, such payee may be subject to penalties imposed by the Internal Revenue Service and backup withholding in an amount equal to 31% of the gross proceeds received under the Offer. If withholding results in an overpayment of taxes, a refund may be obtained. To prevent backup withholding, each payee must provide such payee's correct taxpayer identification number by completing the Substitute Form W-9 included herewith, certifying that the taxpayer identification number provided is correct, or that such payee is awaiting a taxpayer identification number, and that (i) the payee is exempt from backup withholding, (ii) the payee has not been notified by the IRS that such payee is subject to backup withholding as a result of a failure to report all interest or dividends, or (iii) the IRS has notified the payee that such payee is no longer subject to backup withholding. If the payee does not have a taxpayer identification number, such payee should (i) consult the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for instructions on applying for a taxpayer identification number, (ii) write "Applied For" in the space provided in Part 1(A) of the Substitute Form W-9 and check the appropriate box in Part 1(B), and (iii) sign and date the Substitute Form W-9 and the Certificate of Awaiting Taxpayer Identification Number included herewith. If the payee does not provide such payee's taxpayer identification number to the Depositary prior to the payment of the purchase for shares pursuant to the Offer, backup withholding will apply and will reduce the net amount paid to the selling stockholder. Note that writing "Applied For" on the Substitute Form W-9 means that the payee has already applied for a taxpayer identification number or that such payee intends to apply for one in the near future. If shares are held in more than one name or are not in the name of the actual owner, consult the W-9 Guidelines for information on which taxpayer identification number to report. Exempt payees, including, among others, all corporations and certain foreign individuals, are not subject to backup withholding and reporting requirements. To prevent possible erroneous backup withholding, an exempt payee should write "Exempt" in Part 2 of Substitute Form W-9, and should sign and date the form. See the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional instructions. In order for a nonresident alien or foreign entity to qualify as an exempt payee, such person must submit a completed IRS Form W-8 BEN or a Substitute Form W-8 (or similar form), signed under penalties of perjury attesting to such exempt status. Such form may be obtained from the Depositary. 13. Withholding on Foreign Holder. The following discussion applies to any "foreign stockholder," that is a stockholder that, for United States federal income tax purposes, is a non-resident alien individual, a foreign corporation, a foreign partnership, a foreign estate or a foreign trust. A foreign stockholder who -11- 12 has provided the necessary certification to the Depositary as described in Instruction 12 above will not be subject to backup withholding. However, foreign stockholders generally are subject to withholding under Internal Revenue Code sections 1441 or 1442 at a rate of 30% of the gross payments. The general 30% withholding rate may be reduced under a tax treaty, if appropriate certification is furnished to the Depositary. A foreign stockholder may also obtain exemption from withholding by delivering to the Depositary appropriate certification that the gross proceeds are effectively connected with the conduct of a trade or business within the United States, or establishing to the satisfaction of the Depositary that such stockholder meets those tests described in Section 13 of the Offer to Purchase that would characterize the exchange as a sale (as opposed to a dividend). A foreign stockholder may be eligible to obtain a refund of all or a portion of any tax withheld if such holder is able to establish to the IRS no tax, or a reduced amount of tax, is due. FOREIGN STOCKHOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS REGARDING THE APPLICATION OF UNITED STATES FEDERAL INCOME TAX WITHHOLDING, INCLUDING ELIGIBILITY FOR A WITHHOLDING TAX REDUCTION OR EXEMPTION, AND THE REFUND PROCEDURE. 14. Lost, Stolen, Destroyed or Mutilated Certificates. If any certificate representing shares has been lost, stolen, destroyed or mutilated, the stockholder should promptly notify the Depositary by checking the box set forth above in the box captioned "Description of Shares Tendered" and indicating the number of shares so lost, stolen, destroyed or mutilated. Such stockholder will then be instructed by the Depositary as to the steps that must be taken in order to replace the certificate. A bond may be required to be posted by the stockholder to secure against the risk that the certificate may be subsequently recirculated. This Letter of Transmittal and related documents cannot be processed until the procedures for replacing lost, stolen, destroyed or mutilated certificates have been followed. Stockholders may contact the Depositary at (800) 468-9716 to expedite such process and to determine the requirements for posting of a bond. IMPORTANT: THIS LETTER OF TRANSMITTAL OR A MANUALLY SIGNED PHOTOCOPY OF IT (TOGETHER WITH CERTIFICATE(S) FOR SHARES OR CONFIRMATION OF BOOK- ENTRY TRANSFER AND ALL OTHER REQUIRED DOCUMENTS) OR, IF APPLICABLE, THE NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE DEPOSITARY BEFORE THE EXPIRATION DATE. -12- 13 TAXPAYER IDENTIFICATION NUMBER PAYOR'S NAME: WELLS FARGO SHAREOWNER SERVICES SUBSTITUTE Name: FORM W-9 ---------------------------------------------------------------------------------------------- Address: ------------------------------------------------------------------------------------------- (Number and Street) ---------------------------------------------------------------------------------------------------- (City) (State) (Zip Code) Department of the Part 1(A) - PLEASE PROVIDE YOUR TAXPAYER IDEN- TIN: Treasury, Internal TIFICATION NUMBER IN THE BOX AT THE RIGHT ---------------------- Revenue Service AND CERTIFY BY SIGNING AND DATING BELOW. Social Security Number or Employer Identification Number PAYER'S REQUEST FOR Part 1(B) - PLEASE CHECK THE BOX AT THE RIGHT IF YOU HAVE APPLIED FOR TAXPAYER IDENTIFICATION AND ARE AWAITING RECEIPT OF YOUR TAXPAYER IDENTIFICATION NUMBER NUMBER AND OR INTEND TO APPLY FOR A TAXPAYER IDENTIFICATION NUMBER IN THE CERTIFICATION NEAR FUTURE[ ] Part 2 - FOR PAYEES EXEMPT FROM BACKUP WITHHOLDING PLEASE WRITE "EXEMPT" HERE (SEE INSTRUCTIONS) ---------------------------------------------------------------------------------- Part 3 - CERTIFICATION - UNDER PENALTIES OF PERJURY, I CERTIFY THAT (1) THE NUMBER SHOWN ON THIS FORM IS MY CORRECT TAXPAYER IDENTIFICATION NUMBER (OR I AM WAITING FOR A NUMBER TO BE ISSUED TO ME), AND (2) I AM NOT SUBJECT TO BACKUP WITHHOLDING BECAUSE (A) I AM EXEMPT FROM BACKUP WITHHOLDING, OR (B) I HAVE NOT BEEN NOTIFIED BY THE INTERNAL REVENUE SERVICE THAT I AM SUBJECT TO BACKUP WITHHOLDING AS A RESULT OF A FAILURE TO REPORT ALL INTEREST OR DIVIDENDS OR (C) THE INTERNAL REVENUE SERVICE HAS NOTIFIED ME THAT I AM NO LONGER SUBJECT TO BACKUP WITHHOLDING. SIGNATURE: DATE , 2001 --------------------------------------------------- --------------------------
You must cross out Item (2) of Part 3 above if you have been notified by the Internal Revenue Service that you are currently subject to backup withholding because of under reporting interest or dividends on your tax return. However, if after being notified by the Internal Revenue Service that you were subject to backup withholding you received another notification from the Internal Revenue Service that you are no longer subject to backup withholding, do not cross out Item (2) of Part 3 above. (Also see certification under instructions in the enclosed guidelines.) FAILURE TO COMPLETE AND RETURN THE FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. Important: This Letter of Transmittal, properly completed and duly executed, together with certificates representing shares being tendered or confirmation of book-entry transfer and all other required documents, or a Notice of Guaranteed Delivery must be received prior to the expiration of the Offer. STOCKHOLDERS ARE ENCOURAGED TO RETURN A COMPLETED SUBSTITUTE FORM W-9 AS PART OF THEIR LETTER OF TRANSMITTAL. YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 2 OF SUBSTITUTE FORM W-9 CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (a) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administrative Office or (b) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number prior to the purchase of my shares pursuant to the Offer, 31% will be withheld from the purchase price of my shares. -13- 14 The Information Agent for the Offer is: CORPORATE INVESTOR COMMUNICATIONS, INC., a Georgeson Shareholder Communications Company 111 Commerce Road Carlstadt, NJ 07072-2586 Banks and Brokerage Firms call: (201) 896-1900 Stockholders please call: (866) 241-2782 (toll free) Any questions or requests for assistance may be directed to the Dealer Manager at the address and telephone number set forth below. You may also contact your broker, dealer, commercial bank or trust company or any other nominee for assistance concerning this Offer. The Dealer Manager for the Offer is: MERRILL LYNCH & CO. World Financial Center - South Tower New York, NY 10281-1326 (212) 236-3790 (call collect) -14- EX-99.(A)(2)(B) 4 d84292ex99-a2b.txt FORM OF SUPPLEMENTAL LETTER 1 Exhibit (a)(2)(B) LETTER OF TRANSMITTAL INSTRUCTIONS FOR CAPSTEAD MORTGAGE CORPORATION STOCKHOLDERS WHO ARE TENDERING COMMON STOCK PURSUANT TO THE OFFER AND HAVE NOT EXCHANGED THEIR COMMON STOCK PURSUANT TO THE ONE-FOR-TWO REVERSE STOCK SPLIT PURPOSE OF TRANSMITTAL: The enclosed Letter of Transmittal is being provided to you if you wish to tender your shares pursuant to the Offer. If you received a PINK Letter of Transmittal, this means you have not yet exchange your shares pursuant to the one-for-two reverse stock split, which took place on May 8, 2000. If you hold a PINK Letter of Transmittal, it will serve to (i) exchange your old common stock into new common stock pursuant to the reverse stock split, AND (ii) tender the new common stock pursuant to the Offer. Upon receipt of your properly completed PINK Letter of Transmittal, the Depositary will accept the old certificate(s) and dividend reinvestment shares, if any, for exchange into the new shares of Capstead common stock. Once the Depositary completes the reverse split exchange, the new shares, including fractions, which you have indicated on the PINK Letter of Transmittal you wish to tender, will be held in book entry at the Depositary until the Offer expires. Shortly following expiration of the Offer, those shares held in book entry at the Depositary will be tendered in accordance with the Offer. A certificate will be mailed to you following the exchange of shares pursuant to the reverse stock split for any shares you held out of the Offer, as indicated by you on the PINK Letter of Transmittal. SHARE BALANCE ON THE TRANSMITTAL: Printed on the enclosed PINK Letter of Transmittal ON A PRE-REVERSE STOCK SPLIT BASIS are (i) your certificated share balance, (ii) your dividend reinvestment share balance, if any, and (iii) your aggregate share balance. To show you the total share balance eligible for the Offer, we have also printed on the PINK Letter of Transmittal your reverse split-adjusted aggregate balance. When completing the "Description of Shares Tendered" box, indicate the shares you wish to tender on a PRE-SPLIT BASIS, and the Depositary will adjust for the reverse stock split accordingly. When submitting the PINK Letter of Transmittal, you need only provide a certificate(s) for those shares indicated as "Cert." USE THE PINK LETTER OF TRANSMITTAL ONLY IF YOU WISH TO TENDER YOUR SHARES. DO NOT USE THE PINK LETTER OF TRANSMITTAL IF YOU INTEND TO SOLEY EXCHANGE YOUR SHARES FOR THE REVERSE STOCK SPLIT. THE LETTER OF TRANSMITTAL FOR THE SOLE PURPOSE OF EXCHANGING YOUR SHARES PURSUANT TO THE ONE-FOR-TWO REVERSE STOCK SPLIT WAS MAILED TO YOU UNDER SEPARATE COVER. IF YOU REQUIRE A DUPLICATE OF THE LETTER OF TRANSMITTAL FOR THE EXCHANGE OF SHARES, PLEASE CALL THE DEPOSITARY AT (800) 468-9716. EX-99.(A)(3) 5 d84292ex99-a3.txt FORM OF NOTICE OF GUARANTEED DELIVERY 1 Exhibit (a)(3) NOTICE OF GUARANTEED DELIVERY FOR CAPSTEAD MORTGAGE CORPORATION OFFER TO PURCHASE FOR CASH UP TO 5,000,000 SHARES OF ITS COMMON STOCK, PAR VALUE $0.01 PER SHARE AT A PURCHASE PRICE OF $12.75 PER SHARE As set forth in Section 4 of the Offer to Purchase, dated February 16, 2001, (the "Offer to Purchase"), this Notice of Guaranteed Delivery, or one substantially in the form hereof, must be used to accept the offer by Capstead to purchase the shares (the "Offer") if: i. certificates representing shares of Common Stock, par value $0.01 per share, of Capstead, a Maryland corporation, are not immediately available or cannot be delivered to Wells Fargo Shareowner Services (the "Depositary"); or ii the procedure for book-entry transfer cannot be completed on a timely basis; or iii. time will not permit all of the required documents to reach the Depositary before 12:00 Midnight, New York City time, on Friday, March 16, 2001. This form, or a facsimile of it, signed and properly completed, may be delivered by hand or transmitted by facsimile transmission or mailed to the Depositary so that it is received by the Depositary before the Expiration Date as defined in Section 1 of the Offer to Purchase. See Section 4 of the Offer to Purchase. THE METHOD OF DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY AND ANY OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. IF DELIVERY IS BY MAIL, THEN REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY. THE DEPOSITARY FOR THE OFFER IS: WELLS FARGO SHAREOWNER SERVICES By Mail: By Facsimile Transmission Wells Fargo Shareowner Services (eligible guarantor institutions only): Reorganization Department (651) 450-4163 P. O. Box 64858 Confirm by Telephone: (651) 450-4110 St. Paul, MN 55164-0858 By Hand-Delivery in New York: By Overnight Delivery or Express Mail: The Depository Trust Company Wells Fargo Shareowner Services Transfer Agent Drop Reorganization Department 55 Water Street, 1st Floor 161 North Concord Exchange New York, NY 10041 South St. Paul, MN 55075
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN THOSE SHOWN ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE LISTED ABOVE DOES NOT CONSTITUTE A VALID DELIVERY. DELIVERIES TO 2 CAPSTEAD, THE DEALER MANAGER OR THE INFORMATION AGENT (EACH AS DEFINED IN THE OFFER TO PURCHASE) WILL NOT BE FORWARDED TO THE DEPOSITARY AND THEREFORE WILL NOT CONSTITUTE VALID DELIVERY. DELIVERIES TO THE BOOK-ENTRY TRANSFER FACILITY (AS DEFINED IN THE OFFER TO PURCHASE) WILL NOT CONSTITUTE VALID DELIVERY TO THE DEPOSITARY. This Notice of Guaranteed Delivery is not to be used to guarantee signatures. If a signature on the Letter of Transmittal is required to be guaranteed by an "eligible institution" (as defined in Section 4 of the Offer to Purchase) under the instructions thereto, such signature must appear in the applicable space provided in the signature box on the Letter of Transmittal. Ladies and Gentlemen: The undersigned hereby tenders the below described shares to Capstead at a purchase price of $12.75 per share, net to the seller in cash, without interest, upon the terms and subject to the conditions set forth in the Offer to Purchase, and the related Letter of Transmittal, which, as may be amended and supplemented from time to time, together constitute the "Offer," receipt of which is hereby acknowledged. DESCRIPTION OF SHARES TENDERED (ATTACH ADDITIONAL SIGNED LIST, IF NECESSARY) - -------------------------------------------------------------------------------
CERTIFICATE NUMBER(S)* TOTAL NUMBER OF SHARES NUMBER OF SHARES REPRESENTED BY TENDERED** CERTIFICATES Total shares tendered:
Indicate in this box the order (by certificate number) in which shares are to be purchased in event of proration. ***See Instruction 8 of the Letter of Transmittal. 1st: 2nd: 3rd: 4th: 5th: 6th: ------ ------ ------ ------ ------ ------ * If available. DOES NOT need to be completed by stockholders tendering shares by book-entry transfer. ** Unless otherwise indicated, it will be assumed that all shares evidenced by each certificate delivered to the Depositary are being tendered hereby. See Instruction 4 of the Letter of Transmittal. *** If you do not designate an order, in the event less than all shares tendered are purchased due to proration, shares will be selected for purchase by the Depositary. -2- 3 ODD LOTS (SEE INSTRUCTION 7 OF LETTER OF TRANSMITTAL) To be completed ONLY if shares are being tendered by or on behalf of a person owning beneficially or of record an aggregate of fewer than 100 shares. As of the close of business on February 15, 2001, the undersigned either (check one): [ ] was the beneficial or record owner of an aggregate of fewer than 100 shares, all of which are being tendered; or [ ] is a broker, dealer, commercial bank, trust company or other nominee that (a) is tendering, for the beneficial owner(s) thereof, shares with respect to which it is the record holder; and (b) believes, based upon representations made to it by each such beneficial owner, that each such person was the beneficial owner of an aggregate of fewer than 100 shares, and is tendering all of such shares. If shares of Common Stock will be delivered by book-entry transfer, provided the following information: Account Number: -------------------------------- Date: , 2001 --------------------- Signature(s): ------------------------------------ Name(s) of Stockholder(s) of Record: ------------------------------------ ------------------------------------ Please Type or Print Address: ------------------------------------ ------------------------------------ Zip Code Telephone No. (including area code): ------------------------- E-mail address: -------------------- -3- 4 GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEE) THE UNDERSIGNED, A BANK, BROKER, DEALER, CREDIT UNION, SAVINGS ASSOCIATION OR OTHER ENTITY WHICH IS A MEMBER IN GOOD STANDING OF THE SECURITIES TRANSFER AGENTS MEDALLION PROGRAM OR A BANK, BROKER, DEALER, CREDIT UNION, SAVINGS ASSOCIATION OR OTHER ENTITY WHICH IS AN "ELIGIBLE GUARANTOR INSTITUTION," AS SUCH TERM IS DEFINED IN RULE 17Ad-15 UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, EACH OF THE FOREGOING CONSTITUTING AN "ELIGIBLE GUARANTOR INSTITUTION," GUARANTEES THE DELIVERY TO THE DEPOSITARY OF THE SHARES TENDERED HEREBY, IN PROPER FORM FOR TRANSFER, OR A CONFIRMATION THAT THE SHARES TENDERED HEREBY HAVE BEEN DELIVERED UNDER THE PROCEDURE FOR BOOK-ENTRY TRANSFER SET FORTH IN THE OFFER TO PURCHASE INTO THE DEPOSITARY'S ACCOUNT AT THE BOOK-ENTRY TRANSFER FACILITY, TOGETHER WITH A PROPERLY COMPLETED AND DULY EXECUTED LETTER OF TRANSMITTAL, OR A MANUALLY SIGNED FACSIMILE THEREOF AND ANY OTHER REQUIRED DOCUMENTS, ALL WITHIN THREE NEW YORK STOCK EXCHANGE TRADING DAYS OF THE DATE HEREOF. Name of Firm: --------------------------------------- Address: --------------------------------------- --------------------------------------- Zip Code Telephone No. (Including area code): --------------------------------------- Authorized Signature: --------------------------------------- Name: --------------------------------------- Please Print Title: --------------------------------------- Date: , 2001 --------------------------- NOTE: DO NOT SEND SHARES CERTIFICATES WITH THIS FORM. CERTIFICATES FOR SHARES OF COMMON STOCK SHOULD BE SENT WITH THE LETTER OF TRANSMITTAL. -4- EX-99.(A)(4) 6 d84292ex99-a4.txt FORM OF LETTER TO CLIENTS DATED 02-16-2001 1 MERRILL LYNCH & CO. Exhibit (a)(4) World Financial Center South Tower New York, New York 10281-1326 CAPSTEAD MORTGAGE CORPORATION OFFER TO PURCHASE FOR CASH UP TO 5,000,000 SHARES OF COMMON STOCK AT A PURCHASE PRICE OF $12.75 PER SHARE THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, MARCH 16, 2001 UNLESS THE OFFER IS EXTENDED. To Brokers, Dealers, Commercial Banks, February 16, 2001 Trust Companies and Other Nominees: Capstead Mortgage Corporation, a Maryland corporation ("Capstead"), has appointed us to act as the Dealer Manager in connection with its offer to purchase for cash up to 5,000,000 shares of its common stock, par value $0.01 per share, at a purchase price of $12.75 per share, net to the seller in cash, without interest, upon the terms and subject to the conditions set forth in its Offer to Purchase, dated February 16, 2001, (the "Offer to Purchase"), and in the related Letter of Transmittal which, as amended and supplemented from time to time, together constitute the "Offer." All shares properly tendered at or before the "Expiration Date" (as defined in Section 1 of the Offer to Purchase), and not properly withdrawn, will be purchased by Capstead, net to the seller in cash, without interest, upon the terms and subject to the conditions of the Offer, including the Odd Lot and proration provisions thereof. See Section 1 of the Offer to Purchase. Shares not purchased because of proration will be returned at Capstead's expense to the stockholders who tendered such shares promptly after the Expiration Date. Capstead reserves the right, in its sole discretion, to purchase more than 5,000,000 shares under the Offer, subject to applicable law. If, at the Expiration Date, more than 5,000,000 shares, or such greater number of shares as Capstead may elect to purchase, are properly tendered and not withdrawn, Capstead will, upon the terms and subject to the conditions of the Offer, accept shares for purchase first from "Odd Lot Holders" (as defined in Section 1 of the Offer to Purchase) who properly tender all of their shares on a pro rata basis from all other stockholders whose shares are properly tendered and not properly withdrawn. THE OFFER IS NOT CONDITIONED ON ANY MINIMUM NUMBER OF SHARES BEING TENDERED. THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE SECTION 7 OF THE OFFER TO PURCHASE. For your information and for forwarding to those of your clients for whom you hold shares registered in your name or in the name of your nominee, we are enclosing the following documents: 1. The Offer to Purchase dated February 16, 2001; 2. Letter to Clients which may be sent to your clients for whose accounts you hold shares registered in your name or in the name of your nominee, with space provided for obtaining such clients' instructions with regard to the Offer; 3. Letter of Transmittal for your use and for the information of your clients (together with accompanying instructions and Substitute Form W-9); 4. Notice of Guaranteed Delivery to be used to accept the Offer if the share certificates and all other required documents cannot be delivered to the Depositary before the Expiration Date or if the procedure for book-entry transfer cannot be completed on a timely basis or time will not permit all the required documents to reach the Depositary before 12:00 Midnight on Friday, March 16, 2001; and 2 5. Guidelines of the Internal Revenue Service for Certification of Taxpayer Identification Number on Substitute Form W-9. YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON, FRIDAY, MARCH 16, 2001, UNLESS THE OFFER IS EXTENDED. No fees or commissions will be payable to brokers, dealers, commercial banks, trust companies or any person for soliciting tenders of shares under the Offer other than fees paid to the Dealer Manager and the Information Agent, as described in the Offer to Purchase. Capstead will, however, upon request, reimburse you for customary mailing and handling expenses incurred by you in forwarding any of the enclosed materials to the beneficial owners of shares held by you as a nominee or in a fiduciary capacity. Capstead will pay or cause to be paid any stock transfer taxes applicable to its purchase of shares, except as otherwise provided in the Offer to Purchase and Letter of Transmittal. In order to take advantage of the Offer, a properly completed and duly executed Letter of Transmittal, or a manually signed facsimile thereof, including any required signature guarantees and any other required documents should be sent to the Depositary with either a certificate or certificates representing the tendered shares or confirmation of their book-entry transfer all in accordance with the instructions set forth in the Letter of Transmittal and the Offer to Purchase. Holders of shares whose certificate(s) for such shares are not immediately available or who cannot deliver such certificate(s) and all other required documents to the Depositary or who cannot complete the procedures for book-entry transfer before the Expiration Date must tender their shares according to the procedure for guaranteed delivery set forth in Section 4 of the Offer to Purchase. Any inquiries you may have with respect to the Offer should be addressed to Corporate Investor Communications, Inc. or Merrill Lynch & Co. at their respective addresses and telephone numbers set forth on the back cover page of the Offer to Purchase. Additional copies of the enclosed material may be obtained from Corporate Investor Communications, Inc., telephone number: (866) 241-2782. Very truly yours, MERRILL LYNCH & CO. NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY OTHER PERSON AS AN AGENT OF CAPSTEAD, THE DEALER MANAGER, THE INFORMATION AGENT OR THE DEPOSITARY OR ANY AFFILIATE OF THE FOREGOING, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH AND THE STATEMENTS CONTAINED THEREIN. -2- EX-99.(A)(5) 7 d84292ex99-a5.txt FORM OF LETTER TO CLIENTS DATED 2-16-2001 1 Exhibit (a)(5) CAPSTEAD MORTGAGE CORPORATION OFFER TO PURCHASE FOR CASH UP TO 5,000,000 SHARES OF COMMON STOCK AT A PURCHASE PRICE OF $12.75 PER SHARE THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, MARCH 16, 2001, UNLESS THE OFFER IS EXTENDED. February 16, 2001 To Our Clients: Enclosed for your consideration are the Offer to Purchase, dated February 16, 2001, and the related Letter of Transmittal, which, as amended and supplemented from time to time, together constitute the "Offer," in connection with the Offer by Capstead Mortgage Corporation, a Maryland corporation ("Capstead"), to purchase up to 5,000,000 shares of its common stock, par value $0.01 per share, at $12.75 per share (the "Purchase Price"), net to the seller in cash, without interest and subject to the conditions set forth in the Offer. All shares properly tendered at or prior to the "Expiration Date" (as defined in Section 1 of the Offer to Purchase) and not properly withdrawn will be purchased at the Purchase Price, net to the seller in cash, without interest, upon the terms and subject to the conditions of the Offer, including the Odd Lot and proration provisions. Capstead will return as promptly as practicable after the Expiration Date, all shares not purchased because of proration. Capstead reserves the right, in its sole discretion, to purchase more than 5,000,000 shares under the Offer, subject to applicable law. If, at the Expiration Date, more than 5,000,000 shares, or such greater number of shares as Capstead may elect to purchase, are properly tendered and not withdrawn, Capstead will, upon the terms and subject to the conditions of the Offer, accept shares for purchase first from "Odd Lot Holders" (as defined in Section 1 of the Offer to Purchase) who properly tender their shares and then on a pro rata basis from all other stockholders whose shares are not properly withdrawn. We are the owner of record of shares held for your account. As such, we are the only ones who can tender your shares, and then only pursuant to your instructions. A TENDER OF YOUR SHARES CAN BE MADE ONLY BY US AS THE STOCKHOLDER OF RECORD THEREOF AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER YOUR SHARES HELD BY US FOR YOUR ACCOUNT. Accordingly, we request instructions as to whether you wish to tender any or all of the shares held by us for your account, upon the terms and subject to the conditions of the Offer. Please note the following: 1. The Offer is not conditioned upon any minimum number of shares being tendered. The Offer is, however, subject to certain other conditions set forth in Section 7 of the Offer to Purchase. 2. The Offer, proration period and withdrawal rights will expire at 12:00 Midnight, New York City time, on March 16, 2001., unless the Offer is extended. 3. The Offer is for 5,000,000 shares, constituting in the aggregate approximately 20% of the shares outstanding as of February 15, 2001. 4. Tendering stockholders who are registered stockholders or who tender their shares directly to Wells Fargo Shareowner Services will not be obligated to pay any brokerage commissions or fees, solicitation fees, or, 2 except as set forth in the Offer to Purchase and the Letter of Transmittal, stock transfer taxes on Capstead's purchase of shares under the Offer. 5. If, as of the close of business on February 15, 2001, you owned beneficially or of record an aggregate of fewer than 100 shares, and you instruct us to tender on your behalf all such shares before the Expiration Date and check the box captioned "Odd Lots" on the attached Instruction Form, Capstead, upon the terms and subject to the conditions of the Offer, will accept all such shares for purchase before proration, if any, of the purchase of other shares properly tendered and not properly withdrawn. 6. The board of directors of Capstead has approved the Offer. However, neither Capstead nor its board of directors makes any recommendation to stockholders as to whether to tender or refrain from tendering their shares or as to the price or prices at which stockholders may choose to tender their shares. Stockholders must make their own decision as to whether to tender their shares and, if so, how many shares to tender and the price or prices at which such shares should be tendered. Capstead's directors and executive officers have agreed not to participate in the Offer. Fortress Investment Group L.L.C., which controlled 33% of Capstead as of December 11, 2000, has also agreed not to participate in the Offer. If you wish to have us tender any or all of your shares, please so instruct us by completing, executing, detaching and returning to us the attached Instruction Form. An envelope to return your Instruction Form to us is enclosed. If you authorize us to tender your shares, all such shares will be tendered unless otherwise indicated on the attached Instruction Form. YOUR INSTRUCTION FORM SHOULD BE FORWARDED TO US IN AMPLE TIME TO PERMIT US TO SUBMIT A TENDER ON YOUR BEHALF BEFORE THE EXPIRATION DATE OF THE OFFER. THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, MARCH 16, 2001, UNLESS THE OFFER IS EXTENDED. As described in the Offer to Purchase, if more than 5,000,000 shares, or such greater number of shares as Capstead may elect to purchase, subject to applicable law, are properly tendered at or below the Purchase Price and not properly withdrawn before the Expiration Date, Capstead will accept shares for purchase at the Purchase Price in the following order of priority: 1. all shares properly tendered and not properly withdrawn before the Expiration Date by any Odd Lot Holder who: (a) tenders all shares owned beneficially or of record by such Odd Lot Holder (partial tenders will not qualify for this preference); and (b) completes the section captioned "Odd Lots" on the Letter of Transmittal and, if applicable, on the Notice of Guaranteed Delivery; and 2. after purchase of all of the foregoing shares, all other shares properly tendered and not properly withdrawn before the Expiration Date on a pro rata basis, if necessary, with adjustments to avoid purchases of fractional shares, as provided in the Offer to Purchase. The Offer is being made solely under the Offer to Purchase and the related Letter of Transmittal and is being made to all holders of shares. The Offer is not being made to, nor will tenders be accepted from or on behalf of, holders of shares residing in any jurisdiction in which the making of the Offer or acceptance thereof would not be in compliance with the securities, blue sky or other laws of such jurisdiction. -2- 3 INSTRUCTION FORM WITH RESPECT TO THE OFFER TO PURCHASE FOR CASH UP TO 5,000,000 SHARES OF COMMON STOCK OF CAPSTEAD MORTGAGE CORPORATION AT A PURCHASE PRICE OF $12.75 PER SHARE The undersigned acknowledge(s) receipt of your letter and the enclosed Offer to Purchase dated February 16, 2001 and the related Letter of Transmittal (which, as amended or supplemented from time to time, together constitute the "Offer"), in connection with the offer by Capstead Mortgage Corporation, a Maryland corporation ("Capstead"), to purchase up to 5,000,000 shares of its common stock at a cash purchase price of $12.75 per share. This will instruct you to tender to Capstead the number of shares indicated below held by you for the account or benefit of the undersigned (or, if no amount is indicated below, for all of the shares held by you for the account of the undersigned) upon the terms and subject to the conditions set forth in the Offer, including the Odd Lot and proration provisions described in the Offer to Purchase. [ ] By checking this box, the undersigned represents that, as of the close of business on February 15, 2001, the undersigned owns beneficially or of record an aggregate of fewer than 100 shares and is instructing you to tender all such shares. THE METHOD OF DELIVERY OF THIS DOCUMENT IS AT THE ELECTION AND RISK OF THE UNDERSIGNED. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY. Aggregate Number of Shares of Common Stock to be Tendered by you for the account of the undersigned: * - ------------------------------- SIGN HERE ------------------------------------- ------------------------------------- Please type or print name(s) Date: , 2001 ------------------------- Area Code and Telephone Number: ------------------------------------- Taxpayer Identification or Social Security Number: ------------------------------------- _________________ * Unless otherwise indicated, it will be assumed that we should tender all of the shares held by us for your account. -3- EX-99.(A)(6) 8 d84292ex99-a6.txt GUIDELINES FOR CERTIFICATION OF TAXPAYER ID NO 1 EXHIBIT(a)(6) GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER.--Social Security numbers have nine digits separated by two hyphens: i.e. 000-00-0000. Employer identification numbers have nine digits separated by only one hyphen: i.e. 00-0000000. The table below will help determine the number to give the payer. - ------------------------------------------------------------ GIVE THE FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY NUMBER OF-- - ------------------------------------------------------------ 1. An individual's account The individual 2. Two or more individuals (joint The actual owner of account) the account or, if combined funds, any one of the individuals(1) 3. Husband and wife (joint account) The actual owner of the account or, if joint funds, either person(1) 4. Custodian account of a minor The minor(2) (Uniform Gift to Minors Act) 5. Adult and minor (joint account) The adult or, if the minor is the only contributor, the minor(1) 6. Account in the name of guardian or The ward, minor, or committee for a designated ward, incompetent minor, or incompetent person person(3) 7. a. The usual revocable savings The grantor- trust account (grantor is also trustee(1) trustee) b. So-called trust account that is The actual owner(1) not a legal or valid trust under State law 8. Sole proprietorship account The Owner(4) - ------------------------------------------------------------ - ------------------------------------------------------------ GIVE THE EMPLOYER FOR THIS TYPE OF ACCOUNT: IDENTIFICATION NUMBER OF-- - ------------------------------------------------------------ 9. A valid trust, estate, or pension Legal entity (Do trust not furnish the identifying number of the personal representative or trustee unless the legal entity itself is not designated in the account title.)(5) 10. Corporate account The corporation 11. Religious, charitable, or The organization educational organization account 12. Partnership account held in the The partnership name of the business 13. Association, club, or other tax- The organization exempt organization 14. A broker or registered nominee The broker or nominee 15. Account with the Department of The public entity Agriculture in the name of a public entity (such as a State or local government, school district, or prison) that receives agricultural program payments - ------------------------------------------------------------
(1) List first and circle the name of the person whose number you furnish. (2) Circle the minor's name and furnish the minor's social security number. (3) Circle the ward's, minor's or incompetent person's name and furnish such person's social security number. (4) Show the name of the owner. (5) List first and circle the name of the legal trust, estate, or pension trust. NOTE: If no name is circled when there is more than one name, the number will be considered to be that of the first name listed. 2 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 PAGE 2 OBTAINING A NUMBER If you don't have a taxpayer identification number or you don't know your number, obtain Form SS-5, Application for a Social Security Number Card, or Form SS-4, Application for Employer Identification Number, at the local office of the Social Security Administration or the Internal Revenue Service and apply for a number. PAYEES EXEMPT FROM BACKUP WITHHOLDING Payees specifically exempted from backup withholding on ALL payments include the following: - A corporation. - A financial institution. - An organization exempt from tax under section 501(a), or an individual retirement plan. - The United States or any agency or instrumentality thereof. - A State, the District of Columbia, a possession of the United States, or any subdivision or instrumentality thereof. - A foreign government, a political subdivision of a foreign government, or any agency or instrumentality thereof. - An international organization or any agency, or instrumentality thereof. - A registered dealer in securities or commodities registered in the U.S. or a possession of the U.S. - A real estate investment trust. - A common trust fund operated by a bank under section 584(a). - An exempt charitable remainder trust, or a non-exempt trust described in section 4947(a)(1). - An entity registered at all times under the Investment Company Act of 1940. - A foreign central bank of issue. Payments of dividends and patronage dividends not generally subject to backup withholding include the following: - Payments to nonresident aliens subject to withholding under section 1441. - Payments to partnerships not engaged in a trade or business in the U.S. and which have at least one nonresident partner. - Payments of patronage dividends where the amount received is not paid in money. - Payments made by certain foreign organizations. - Payments made to a nominee. Payments of interest not generally subject to backup withholding include the following: - Payments of interest on obligations issued by individuals. Note: You may be subject to backup withholding if this interest is $600 or more and is paid in the course of the payer's trade or business and you have not provided your correct taxpayer identification number to the payer. - Payments of tax-exempt interest (including exempt-interest dividends under section 852). - Payments described in section 6049(b)(5) to nonresident aliens. - Payments on tax-free covenant bonds under section 1451. - Payments made by certain foreign organizations. - Payments made to a nominee. Exempt payees described above should file Form W-9 to avoid possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER. FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO THE PAYER, IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE FORM. Certain payments other than interest, dividends, and patronage dividends, that are not subject to information reporting are also not subject to backup withholding. For details, see the regulations under sections 6041, 6041A(a), 6045, and 6050A. PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend, interest, or other payments to give taxpayer identification numbers to payers who must report the payments to IRS. IRS uses the numbers for identification purposes. Payers must be given the numbers whether or not recipients are required to file tax returns. Beginning January 1, 1993, payers must generally withhold 31% of taxable interest, dividend, and certain other payments to a payee who does not furnish a taxpayer identification number to a payer. Certain penalties may also apply. PENALTIES (1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail to furnish your taxpayer identification number to a payer, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. (2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS.--If you fail to include any portion of an includible payment for interest, dividends, or patronage dividends in gross income, such failure will be treated as being due to negligence and will be subject to a penalty of 5% on any portion of an under-payment attributable to that failure unless there is clear and convincing evidence to the contrary. (3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you make a false statement with no reasonable basis which results in no imposition of backup withholding, you are subject to a penalty of $500. (4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE EX-99.(A)(7) 9 d84292ex99-a7.txt FORM OF PRESS RELEASE 1 Exhibit (a)(7) CONTACT: Stockholder Relations FOR IMMEDIATE RELEASE 214/874-2354 CAPSTEAD MORTGAGE CORPORATION COMMENCES $12.75 PER SHARE CASH TENDER OFFER FOR UP TO 5,000,000 SHARES OF ITS COMMON STOCK DALLAS - February 16, 2001 - Capstead Mortgage Corporation ("Capstead" or the "Company") (NYSE: CMO) today announced that it has commenced the tender offer announced on February 12, 2001 to purchase up to 5,000,000 shares of its common stock for a cash purchase price of $12.75. The tender offer will only be made pursuant to offering materials being distributed February 16, 2001 and will expire on Friday, March 16, 2001 at 12:00 Midnight, New York time, unless extended. The Company's Board of Directors is not making any recommendation to the stockholders as to whether or not they should tender any shares pursuant to the offer. Members of the Board of Directors and Executive Officers, as well as Fortress Cap LLC, Capstead's principal stockholder, have agreed not to participate in the tender offer. Merrill Lynch and Co. is acting as Dealer Manager for the tender offer. * * * * * Capstead Mortgage Corporation, a mortgage investment firm with assets of over $8 billion, earns income from investing in mortgage assets and other investment strategies. This document contains "forward-looking statements" (within the meaning of the Private Securities Litigation Reform Act of 1995) that inherently involve risks and uncertainties. The Company's actual results and liquidity can differ materially from those anticipated in these forward- looking statements because of changes in the level and composition of the Company's investments and unforeseen factors. As discussed in the Company's filings with the Securities and Exchange Commission, these factors may include, but are not limited to, changes in general economic conditions, the availability of suitable investments, fluctuations in and market expectations for fluctuations in interest rates and levels of mortgage prepayments, deterioration in credit quality and ratings, the effectiveness of risk management strategies, the impact of leverage, the liquidity of secondary markets and credit markets, increases in costs and other general competitive factors. THE TENDER OFFER STATEMENT (INCLUDING AN OFFER TO PURCHASE, A RELATED LETTER OF TRANSMITTAL AND OTHER OFFER DOCUMENTS) WILL CONTAIN IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER. The Offer to Purchase, the related Letter of Transmittal and certain other offer documents will be made available to all stockholders of Capstead, at no expense to them. The Tender Offer Statement (including the Offer to Purchase, the related Letter of Transmittal and all other offer documents filed with the Commission) are also available for free at the Commissions Web site at www.sec.gov. -----END PRIVACY-ENHANCED MESSAGE-----