EXHIBIT 10.1
Confidential Treatment Requested.
Confidential portions of this document have
been redacted and have been separately filed
with the Commission

 

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ADVISORY AGREEMENT
     THIS ADVISORY AGREEMENT (“Agreement”) is made and entered as of the 1st day
of April, 2009 (the “Effective Date”), by and between CAPSTEAD MORTGAGE
CORPORATION, a Maryland corporation (the "Company”), and ANTHONY R. PAGE, an
individual resident of the State of Texas (“Advisor”). For purposes of this
Agreement, the Company shall include itself, its predecessors, successors,
affiliates, partial affiliates, shareholders, officers, directors, agents,
representatives, and employees, all individually and in their official
capacities.
     WHEREAS, the Company currently owns the following commercial real estate
notes (collectively, the “CRE Notes”):

                    •    
Four Seasons-Nevis, Series C & D Notes (“C/D Notes”)
  $ 19,600,000     •    
Four Seasons-Nevis, Series E Note (“E Note")
    18,840,000     •    
INCAP subordinate loan (“INCAP Note")
    5,080,000          
 
             
 
  $ 43,520,000          
 
     

     WHEREAS, the Company desires to retain Advisor as an independent contractor
to provide the services described on Exhibit A (the “Services”) to the Company;
and
     WHEREAS, Advisor desires to be retained by the Company upon the terms set
forth in this Agreement.
     NOW, THEREFORE, in consideration of the mutual promises, undertakings, and
other considerations recited herein, the Company and Advisor hereby agree as
follows:
     1. Term of Agreement. This Agreement is effective on the Effective Date and
will continue in effect until September 30, 2009, unless terminated earlier in
accordance with the terms hereof (the "Initial Termination Date”); provided,
however, that this Agreement shall be automatically extended for one additional
calendar month on the Initial Termination Date and at the end of each subsequent
calendar month following the Initial Termination Date, unless either the Company
or the Advisor elect not to extend the term of this Agreement by notifying the
other party in writing of such election not less than thirty (30) days prior to
the expiration of the then current term.
     2. Services to be Performed by Advisor.
          2.1 Services. The Company hereby retains Advisor to perform the
Services as an independent contractor. Except as set forth in this Agreement or
otherwise directed by the Company, Advisor shall supervise the performance of
the Services and shall have control of the manner and means by which the
Services are performed. Notwithstanding the foregoing, the Company retains sole
authority to make any and all decisions regarding the CRE Notes, and the Advisor
acknowledges that certain of his rights provided for in this Agreement,
including payments related to incentive compensation amounts may be limited or
reduced as a result of the Company exercising its authority to make decisions
regarding the CRE Notes, either individually or collectively.

 

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          2.2 Independent Contractor Status
          (a) Advisor represents and warrants that Advisor is and shall be an
independent contractor and not an employee, agent, partner, joint venturer,
covenantor, or representative of the Company and that the Company will not incur
any liability as the result of Advisor’s actions or inactions. The Advisor shall
only have the rights, authority or power granted pursuant to this Agreement.
          (b) Except as otherwise set forth in the Separation and Contractual
Confidentiality Agreement between Advisor and the Company, dated March 31, 2009,
which provides for payment of certain health, life and disability insurance
coverage for a limited time following Advisor’s separation of employment from
the Company, Advisor agrees that he is not entitled to the rights or benefits
afforded to the Company’s employees, including disability or unemployment
insurance, workers’ compensation, medical insurance, paid vacation, sick leave
or any other employment benefit.
          (c) Advisor shall be responsible for, and pay when due, all local,
municipal, state, provincial, federal and foreign income, sales, use, excise,
personal property taxes, duties, and all other governmental fees, taxes or other
governmental charges applicable to the Services. Compensation paid by the
Company for Services, as set forth in Section 3 hereof, shall be considered full
payment for Services rendered. The Company may withhold from any amounts payable
under this Agreement such amounts as shall be required to be withheld pursuant
to any applicable law or regulation.
          (d) Advisor acknowledges that he shall be responsible for ensuring
that the Services are rendered under this Agreement. The Services hereunder must
be performed by Advisor and may not be subcontracted or performed by another
party, except as authorized in writing by the Company.
          2.3 Non-Exclusivity. The Company expressly reserves the right to
contract with others for the purchase of services and deliverables comparable or
identical to the Services, and provided that the Agreement has not terminated,
the Company’s purchase of other services will not change either party’s rights
or obligations pursuant to this Agreement.
     3. Obligations and Agreements of the Company.
          3.1 Compensation. In exchange for providing the Services, Advisor
shall receive the following compensation:
          (a) Base Retainer. Advisor will be entitled to receive a monthly
payment in the amount of $30,000 (Thirty Thousand U. S. Dollars) (the “Base
Retainer”), payable at the end of each calendar month during the term of this
Agreement. For any partial month, the Base Retainer amount shall be prorated
based on the ratio of the number of business days worked during the month
divided by the actual number of business days for the month.
          (b) Payment on Initial Termination Date. On the Initial Termination
Date, Advisor will be entitled to receive a lump sum payment of $140,000 (One
Hundred Forty Thousand U. S. Dollars).

 

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          (c) Nevis Incentive.
     (i) If [Confidential material redacted and filed separately with the
Commission], Advisor shall be entitled to receive a lump sum payment equal to
one percent (1.0%) of the outstanding principal balance of the C/D Notes, if
any, and the E Note, if any, held by the Company at the time of [Confidential
material redacted and filed separately with the Commission]. Any such payment
will be paid within 45 (Forty-Five) calendar days following the Company’s
receipt of notice from the Servicer of such acknowledgement.
     (ii) Additionally, unless the Advisor terminates this Agreement, the
Advisor will be entitled to receive an additional contingency payment, the
amount of which will be dependent upon recovery of the Nevis Investment by the
Company. Any such contingency payment will be paid within 45 (Forty-Five)
calendar days following receipt of an aggregate principal amount sufficient to
trigger a contingency payment and such contingency payment amount shall be
calculated as follows:
     (A) If the aggregate amount of principal received by the Company, after
receipt of all interest due pursuant to the terms of the related loan documents
in effect on the date hereof, is at least $[Confidential material redacted and
filed separately with the Commission] million, but less than $[Confidential
material redacted and filed separately with the Commission] million, the
contingent payment shall be equal to 25 basis points (0.250%) of the aggregate
principal balance received, less any amounts previously received pursuant to
this Section 3.1(c)(ii);
     (B) If the aggregate amount of principal received by the Company, after
receipt of all interest due pursuant to the terms of the related loan documents
in effect on the date hereof, is at least $[Confidential material redacted and
filed separately with the Commission] million, but less than $[Confidential
material redacted and filed separately with the Commission] million, the
contingent payment shall be equal to 37.5 basis points (0.375%) of the aggregate
principal balance received, less any amounts previously received pursuant to
this Section 3.1(c)(ii); and
     (C) If the aggregate amount of principal received by the Company, after
receipt of all interest due pursuant to the terms of the related loan documents
in effect on the date hereof, is $[Confidential material redacted and filed
separately with the Commission] million or greater, the contingent payment shall
be equal to 50 basis points (0.500%) of the aggregate principal balance
received, less any amounts previously received pursuant to this
Section 3.1(c)(ii).
     If the aggregate amount of principal received by the Company, after receipt
of all interest due pursuant to the terms of the related loan documents in

 

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effect on the date hereof, is less than $[Confidential material redacted and
filed separately with the Commission] million, no contingency payment shall be
due to Advisor under this Section 3.1(c)(ii). If Advisor terminates this
Agreement, no contingency payment shall be due to Advisor.
          (d) INCAP Incentive. After receipt by the Company of all advances on
the INCAP Note subsequent to December 31, 2008, Advisor will be entitled to
receive a contingent payment equal to three percent (3.0%) of the principal and
interest recovered from the sale or disposition of the underlying collateral for
the INCAP Note at any time on or prior to the 90th day following the termination
of this Agreement, provided that the aggregate of all such contingent payments
shall not exceed $152,400 (One Hundred Fifty Two Thousand Four Hundred U.S.
Dollars). Any such INCAP incentive payments will be aggregated and paid within
30 (Thirty) calendar days following the end of the calendar month in which such
recovery was received.
          (e) Expenses. Advisor shall be entitled to receive from the Company
reimbursement for reasonable business-related expenses during the term of this
Agreement, provided that any such expenses incurred by Advisor in excess of
$2,500 are approved in advance by the chief executive officer or the chief
financial officer of the Company.
          3.2 Indemnification. The Company agrees to indemnify Advisor from,
save and hold Advisor harmless from and against and covenants to defend the
Advisor against, any and all losses, damages, claims, costs, penalties,
liabilities and expenses, including court costs and attorneys’ fees, howsoever
directly arising from or incurred because of, and incident to Advisor’s
performance of the Services, except with respect to any matter as to which
Advisor shall have been adjudicated not to have acted in good faith in the
reasonable belief that his action was in the best interests of Capstead and
furthermore, in the case of any criminal proceeding, so long as he had no
reasonable cause to believe that the conduct was unlawful.
     Capstead shall make advance payments in connection with the expenses of
defending any action with respect to which indemnification might be sought under
this Section 3.2 if Capstead receives a written affirmation of Advisor’s good
faith belief that the standard of conduct necessary for indemnification has been
met.
          3.3 Litigation Cooperation Fee. After the termination of this
Agreement, Advisor agrees to cooperate fully with the Company in connection with
the defense or prosecution of any claims, causes of action, investigations,
hearings, proceedings, arbitrations or other tribunals now in existence or which
may be brought in the future against or on behalf of the Company that relate to
events or occurrences that transpired while Advisor was employed by the Company
or during the term of this Agreement. Advisor’s full cooperation in connection
with this paragraph shall include, without limitation, making himself available
to meet with counsel to prepare for discovery or trial, to act as a witness on
behalf of the Company, and to provide true and accurate testimony regarding any
such matters. If Advisor is subpoenaed or contacted to cooperate in any manner
by a nongovernmental party concerning any matter related to the Company, he
shall immediately notify the Company, before responding or cooperating. Advisor
shall be compensated for such services at a rate of $3,000 per day or $1,500 per
half-day plus reimbursement of all out-of-pocket expenses.

 

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     4. Obligations and Agreements of Advisor.
          4.1 Payment of Income Taxes. Pursuant to Section 2.2(c), Advisor
acknowledges and agrees that the Company is not responsible for the payment of
any applicable taxes that may be necessary for Advisor to comply with foreign,
federal, state, and local requirements.
          4.2 Satisfactory Performance of Services. Advisor represents and
warrants that he will perform the Services in a professional, diligent and
workmanlike manner and in compliance with all applicable foreign, federal, state
and local laws and regulations and Company policies and procedures. The Company
shall have the right to terminate this Agreement with 30 (thirty) days’ notice
of Advisor’s gross negligence or willful misconduct. Upon such termination, any
and all rights to the compensation set forth in Section 3 hereof, including the
Nevis and INCAP incentive amounts shall lapse.
          4.3 Indemnification. Advisor agrees to indemnify the Company from,
save and hold the Company harmless from and against, and covenants to defend the
Company against, any and all losses, damages, claims, costs, penalties,
liabilities and expenses, including court costs and attorneys’ fees, howsoever
directly arising from or incurred because of, and incident to (i) the payment of
any withholding taxes or social security taxes, based upon or arising out of
Advisor’s association with the Company and (ii) any breach by Advisor of this
Agreement or any other agreement with the Company. Advisor shall defend,
indemnify, and hold harmless the Company from and against any and all damages,
costs, liability, and expense whatsoever (including attorneys’ fees and related
disbursements) incurred by reason of any breach by Advisor of any
representation, warranty, or covenant under this Agreement.
          4.4 Conflict of Interest. Advisor represents and warrants at the date
of this Agreement that there are no conflicts of interest or activities in which
he is otherwise engaged which could limit his satisfactory performance of
Services as required by Section 4.2. Further, the Advisor represents and
warrants that if a conflict arises during the term of this Agreement which could
limit his satisfactory performance of Services that Advisor will immediately
notify the Company of such conflict, in which case the Company shall have the
right to terminate this Agreement, if Advisor is unable to cure the conflict
within 30 (thirty) days.
          4.5 Confidentiality. Advisor acknowledges that in the course of
performing the Services that he may possess proprietary, non-public information
regarding the Company’s commercial real estate investments and that the Company
has a vital interest in protecting such information and property, and Advisor
agrees that he will not, directly or indirectly, disclose, use, make available,
or interfere with or release any claim the Company may have to the CRE Notes.
Advisor agrees that the Company, in its sole and unlimited right, will determine
when and if any such non-public information is to be publicly disclosed.
          4.6 Confidential Information. Upon termination of the Agreement,
Advisor will return to the Company all property belonging to the Company
including all confidential, proprietary, non-public financial or asset specific
information, including, but not limited to, monthly accounting reports, weekly
position reports, portfolio or asset analysis, materials presented to the
Company’s board of directors or its committees and access to all files;
documents, notes, correspondence, and other papers, all of which are the
exclusive property and

 

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valuable assets of the Company, which has a vital interest in and desire to
protect such information and property from disclosure; and that Advisor has not
and will not, directly or indirectly, disclose, use, make available, or
interfere with and that Advisor releases any claim he may have to, the Company’s
proprietary information, confidential information, computer information and
other restricted information learned during the term of the Agreement and that
Advisor has not and will not make a copy of any Company property; and that if
Advisor should find himself in possession of any property of the Company,
Advisor will return such property to the Company immediately. Advisor agrees
that he has read and will abide by the terms of all policies of and agreements
he has signed with the Company, including those concerning non-solicitation, and
non-disclosure or use of proprietary or confidential information. Advisor also
agrees not to challenge the enforceability of the policies of the Company and of
the agreements he has signed.
     5. Miscellaneous Provisions.
          5.1 Notices. Unless provided otherwise by this Agreement, any notices
required to be given under this Agreement by either party to the other may be
effected by personal delivery in writing or by mail, registered or certified,
postage prepaid with return receipt requested. Mailed notices must be addressed
to the parties at the addresses appearing at the end of this Agreement, but each
party may change the address by giving written notice in accordance with this
paragraph. Notices delivered personally will be deemed communicated as of actual
receipt; mailed notices will be deemed communicated as of the day of receipt or
the fifth day after mailing, whichever occurs first.
          5.2 Choice of Law. This Agreement shall be construed and interpreted
in accordance with the laws of the State of Texas, without reference to the
choice of law principles thereof.
          5.3 Entire Agreement. This Agreement, including the attached exhibits,
contains the entire agreement of the Company and Advisor with respect to the
subject matter hereof at the date of its execution.
          5.4 Waiver. No provision of this Agreement may be waived, except by an
agreement in writing signed by the waiving party. A waiver of any term or
provision in this Agreement will not be construed as a waiver of any other term
or provision.
          5.5 Waiver of Breach. Waiver by any party of a breach of this
Agreement by the other party shall not operate or be construed as a waiver of a
continuance of that breach or any subsequent breach.
          5.6 Injunctive Relief. In the event Advisor breaches, or threatens to
breach, any of the covenants expressed herein, the damages to the Company will
be great and irreparable and difficult to quantify; therefore, the Company may
apply to a court of competent jurisdiction for injunctive or other equitable
relief to restrain such breach or threat of breach, without posting bond and
without disentitling the Company from any other relief in either law or equity.

 

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          5.7 Attorney Fees. If either the Company or Advisor brings any action
to enforce their respective rights hereunder, the prevailing party in any such
action shall be entitled to recover its reasonable attorney’s fees and costs
incurred in connection with such action.
          5.8 Construction. Unless otherwise clearly implied by the context of
their use, the number of all words herein shall include the singular and plural;
the term “or” shall have its inclusive meaning, thus encompassing each connected
term individually, in any and every combination, and in both such senses; the
term “and” shall have its meaning encompassing the connected terms both jointly
and severally; and the term “including” or a similar term shall mean including
without limitation. All references to “herein,” “hereof,” “hereunder” and words
of similar import shall be references to the entire Agreement and not just the
section or subsection in which such words appear, unless otherwise specified.
The use of headings, sections and subsections in this Agreement is for
convenience only and shall not affect the construction or interpretation of this
Agreement.
          5.9 Amendment. No alteration, modification, amendment, or other change
of this Agreement shall be binding on the parties unless in writing, approved
and executed by Advisor and an authorized executive officer of the Company.
          5.10 Time. Time is of the essence in the performance of Advisor’s
duties under this Agreement.
          5.11 No Third-Party Beneficiary. Nothing in this Agreement shall be
deemed to grant rights to any third-party beneficiary or similar rights to any
person not a signatory to, or contemplated by, this Agreement.
          5.12 Assignment. Advisor may not assign, transfer or delegate any of
Advisor’s duties or obligations under this Agreement, and Advisor may not assign
or transfer any of Advisor’s rights hereunder without the written consent of the
Company. Any attempt to make an unpermitted assignment, transfer or delegation
shall be void and of no force or effect.
          5.13 Successors and Assigns. This Agreement is intended to inure to
the benefit of and be binding upon the heirs and personal representatives of
Advisor and the successors and assigns of the Company, including the surviving
entity of any merger, consolidation, share exchange or combination of the
Company with any other entity.
          5.14 Counterparts. This Agreement or any amendment hereto may be
executed in counterparts, each of which when executed and delivered shall be
deemed an original and all of which counterparts taken together shall constitute
but one and the same instrument. It shall not be necessary in making proof of
this Agreement or any counterpart hereof to produce or account for any of the
other counterparts provided that the counterpart produced bears the signature of
the party sought to be bound.
          5.15 Invalidity. Whenever possible, each provision of this Agreement
shall be interpreted in such a manner as to be effective and valid under
applicable law, and if any provision of this Agreement will be or becomes
prohibited or invalid in whole or in part for any reason whatsoever, that
provision shall be ineffective only to the extent of such prohibition or
invalidity without invalidating or impairing the remaining portion of that
provision, any other

 

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provision of this Agreement, or this Agreement itself, the parties intending
that if any such term, clause, or provision were held to be invalid prior to the
execution hereof, they would have executed an agreement containing all the
remaining terms, clauses, and provisions of this Agreement.
(Signature page follows)

 

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     IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered on the day and year first above written.

                      COMPANY:    
 
                    CAPSTEAD MORTGAGE CORPORATION    
 
               
 
  By:       /s/ ANDREW F. JACOBS    
 
               
 
          Andrew F. Jacobs    
 
          Capstead Mortgage Corporation    
 
          President and Chief Executive Officer    
 
               
 
  Address:       Capstead Mortgage Corporation
One Lincoln Park, Suite 800
8401 N. Central Expressway
Dallas, TX 75225-4410    
 
               
 
  ADVISOR:            
 
               
 
  By:       /s/ ANTHONY R. PAGE    
 
               
 
          Anthony R. Page    
 
               
 
  Address:       c/o Capstead Mortgage Corporation    
 
          One Lincoln Park, Suite 800    
 
          8401 N. Central Expressway    
 
          Dallas, TX 75225-4410    

 

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EXHIBIT A
SCOPE OF SERVICES
In compliance with all applicable laws and subject to the direction and control
of the Company’s chief executive officer or chief financial officer, Advisor
shall be responsible for the following services (the “Services”):

  •   Performing and/or coordinating the performance of advisory services
necessary to maximize the recovery of amounts invested in the CRE Notes;     •  
Monitoring the status of and recommending strategies to maximize the recovery of
amounts invested in the CRE Notes;     •   Providing the Company with
time-critical information necessary to maximize the recovery of amounts invested
in the CRE Notes;     •   Providing the Company with timely reports and other
information, as appropriate or reasonably requested, on the CRE Notes, including
cash flow, present value and impairment analyses;     •   Providing the Company
with information necessary to satisfy ongoing regulatory disclosure
requirements, provided that the Company shall be solely responsible for
determining the nature and timing of any disclosure to be made relating to the
CRE Notes; and     •   Attending meetings in person or as otherwise requested.