<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[X] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
Capstead Mortgage Corporation
(Name of Registrant as Specified In Its Charter)
Capstead Mortgage Corporation
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
(4) Proposed maximum aggregate value of transaction:
- --------
*Set forth the amount on which the filing is calculated and state how it was
determined.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
Notes:
<PAGE>
CAPSTEAD MORTGAGE CORPORATION
2001 BRYAN TOWER
SUITE 3300
DALLAS, TEXAS 75201
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 22, 1994
To the Stockholders of
CAPSTEAD MORTGAGE CORPORATION
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the "Annual
Meeting") of Capstead Mortgage Corporation (the "Company"), a Maryland
corporation, will be held at 2001 Bryan Tower, Suite 3500, Dallas, Texas, on
Friday, April 22, 1994, at 9:00 a.m. for the following purposes:
(i) To elect six directors to hold office until the next annual meeting
of stockholders and until their respective successors shall have been
elected and qualified;
(ii) To ratify the selection of Ernst & Young as independent auditors for
the Company for the year ending December 31, 1994;
(iii) To consider and vote upon a proposal to amend the Company's Bylaws
to allow for the amendment of the Bylaws by either the Board of Directors
or a majority of the stockholders of the Company;
(iv) To consider and vote upon a proposal concerning the adoption of the
1994 Flexible Long Term Incentive Plan; and
(v) To transact any and all other business that may properly come before
the Annual Meeting or any adjournment thereof.
Only holders of record of the Common Stock of the Company at the close of
business on February 18, 1994, will be entitled to notice of and to vote at the
Annual Meeting, notwithstanding any transfer of shares of Common Stock on the
books of the Company after such record date.
A copy of the Proxy Statement relating to the Annual Meeting and the Annual
Report outlining the Company's operations for the year ended December 31, 1993,
accompanies this Notice of Annual Meeting of Stockholders.
It is important that a majority of the outstanding shares of Common Stock of
the Company be represented at the Annual Meeting in person or by proxy.
Therefore, you are requested to forward your proxy in order that you will be
represented, whether or not you expect to attend in person. Stockholders who
attend the Annual Meeting may revoke their proxies and vote in person if they
desire.
By Order of the Board of Directors
/s/ Andrew F. Jacobs
Andrew F. Jacobs
Secretary
Dated: March 14, 1994
<PAGE>
CAPSTEAD MORTGAGE CORPORATION
2001 BRYAN TOWER
SUITE 3300
DALLAS, TEXAS 75201
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 22, 1994
This Proxy Statement, together with the enclosed proxy, is being sent on or
about March 14, 1994, to inform you of the matters that will be acted upon at
the Annual Meeting of Stockholders (the "Annual Meeting") of Capstead Mortgage
Corporation (the "Company"), a Maryland corporation, to be held at 2001 Bryan
Tower, Suite 3500, Dallas, Texas on Friday, April 22, 1994, at 9:00 a.m. The
Board of Directors of the Company solicits your proxy in the form enclosed.
BY WHOM AND THE MANNER IN WHICH THE
PROXY IS BEING SOLICITED
The enclosed proxy is solicited by and on behalf of the Board of Directors of
the Company. The expense of the solicitation of proxies for the Annual Meeting,
including the cost of mailing, will be borne by the Company.
In addition to solicitation by mail, officers of the Company may solicit
proxies from stockholders by telephone, telefax or personal interview. Such
persons will receive no compensation for such services. The Company also
intends to request persons holding Common Stock in their name or custody, or in
the name of a nominee, to send proxy materials to their principals and request
authority for the execution of the proxies, and the Company will reimburse such
persons for their expense in so doing. The Company will also use the services
of the proxy solicitation firm of Corporate Investor Communications, Inc. to
assist in the solicitation of its proxies. For such services the Company will
pay a fee that is not expected to exceed $5,000, plus out-of-pocket expenses.
PURPOSE OF MEETING
At the Annual Meeting, action will be taken (i) to elect six directors to
hold office until the next annual meeting of stockholders and until their
successors shall have been elected and qualified, (ii) to ratify the selection
of Ernst & Young as independent auditors for the Company for the year ending
December 31, 1994, (iii) to consider and vote upon a proposal to amend the
Company's Bylaws to allow for the amendment of the Bylaws by either the Board
of Directors or a majority of the stockholders of the Company, and (iv) to
consider and vote upon a proposal concerning the adoption of the 1994 Flexible
Long Term Incentive Plan. The Board of Directors does not know of any other
matter that is to come before the Annual Meeting. If any other matters are
properly presented for consideration, however, the persons named in the
enclosed proxy and acting thereunder will have discretion to vote on such
matters in accordance with their best judgment.
Stockholders are urged to sign the accompanying form of proxy, solicited on
behalf of the Board of Directors of the Company, and, immediately after
reviewing the information contained in this Proxy Statement and in the Annual
Report outlining the Company's operations for the year ended December 31, 1993,
return it in the envelope provided for that purpose. Valid proxies will be
voted at the Annual Meeting and at any adjournment or adjournments thereof in
the manner specified therein. If no directions are given but proxies are
executed in the manner set forth therein, such proxies will be voted FOR the
election of the nominees for director set forth in this Proxy Statement, FOR
the ratification of the selection of Ernst & Young as independent auditors for
the Company for the year ending December 31, 1994, FOR the amendment of the
Company's Bylaws and FOR the adoption of the 1994 Flexible Long Term Incentive
Plan.
<PAGE>
RIGHT TO REVOKE PROXY
Any stockholder giving the proxy enclosed with this Proxy Statement has the
power to revoke such proxy at any time prior to the exercise thereof by giving
notice of such revocation, or by delivering a later-dated proxy, to the
Secretary of the Company prior to the Annual Meeting. Stockholders will also
have an opportunity to revoke their proxies by attending the Annual Meeting and
voting in person (although attendance at the Annual Meeting will not in and of
itself constitute a revocation of a proxy).
VOTING SECURITIES
The only outstanding securities of the Company that shall have the right to
vote at the Annual Meeting are shares of Common Stock, $.01 par value per
share, each share of which entitles the holder thereof to one vote. Only
holders of record of the Common Stock at the close of business on February 18,
1994 (the "Record Date") are entitled to vote at the Annual Meeting or any
adjournments thereof. On the Record Date, there were outstanding and entitled
to vote 15,210,978 shares of Common Stock.
QUORUM AND VOTING REQUIREMENTS
The holders of record of a majority of the outstanding shares of Common Stock
of the Company at the Record Date will constitute a quorum for the transaction
of business at the Annual Meeting; however, if a quorum should not be present,
the Annual Meeting may be adjourned from time to time until a quorum is
obtained.
Each share of Common Stock may be voted for up to six individuals (the number
of directors to be elected) as directors of the Company. To be elected, each
nominee must receive a majority of all votes cast with respect to such position
as director. It is intended that, unless authorization to vote for one or more
nominees for director is withheld, proxies will be voted FOR the election of
all of the nominees set forth in this Proxy Statement.
Approval of a majority of the shares of Common Stock of the Company
represented and voting at the Annual Meeting will be necessary for (i)
ratification of the selection of Ernst & Young as independent auditors for the
Company for the year ended December 31, 1994, (ii) amendment of the Company's
Bylaws and (iii) adoption of the 1994 Flexible Long Term Incentive Plan.
Votes cast by proxy or in person will be counted by two persons appointed by
the Company to act as inspectors for the Annual Meeting. The election
inspectors will treat shares represented by proxies that reflect abstentions as
shares that are present and entitled to vote for the purpose of determining the
presence of a quorum and of determining the outcome of any matter submitted to
the stockholders for a vote. Insofar as the election of directors, ratification
of the selection of Ernst & Young as independent auditors, amendment of the
Company's Bylaws and the adoption of the 1994 Flexible Long Term Incentive Plan
require a majority of all votes cast on each such issue, abstentions will have
the same legal effect as a vote AGAINST the matter even though persons
analyzing the results of the voting may interpret such a vote differently.
The election inspectors will treat shares referred to as "broker non-votes"
(i.e., shares held by brokers or nominees as to which instructions have not
been received from the beneficial owners and as to which the broker or nominee
does not have discretionary voting power on a particular matter) as shares that
are present and entitled to vote for the purpose of determining the presence of
a quorum. However, for the purpose of determining the outcome of any matter as
to which the broker or nominee has indicated on the proxy that it does not have
discretionary authority to vote, those shares will be treated as not present
and not entitled to vote with respect to that matter (even though those shares
are considered entitled to vote for quorum purposes and may be entitled to vote
on other matters).
2
<PAGE>
ELECTION OF DIRECTORS
A board of six directors, to hold office until the next annual meeting of
stockholders and until their successors have been elected and qualified, is to
be elected at the Annual Meeting. Each of the nominees has consented to serve
as a director if elected. If any of the nominees shall become unable to stand
for election as a director at the Annual Meeting (an event not now anticipated
by the Board of Directors), proxies will be voted for such substitute as shall
be designated by the Board of Directors. The following table sets forth for
each nominee for election as a director of the Company his or her age,
principal occupation, position with the Company, if any, and certain other
information.
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL OCCUPATION DIRECTOR SINCE
---- --- -------------------- --------------
<S> <C> <C> <C>
J. Michael Cornwall 58 Mr. Cornwall has been President of Guaranty January 1993
Federal Bank since February 1989. For more
than five years prior to January 1989, he
served as Chairman and Chief Executive Of-
ficer of First Texas Savings Association.
Bevis Longstreth 60 Mr. Longstreth has been a partner in the January 1994
New York law firm of Debevoise & Plimpton
since 1970. He served as Commissioner of
the Securities and Exchange Commission
from 1981 to 1984. He is a member of the
Board of INVESCO plc, the Board of
Governors of the American Stock Exchange,
the Consultant Panel to the Comptroller
of the United States, the Pension Finance
Committee of The World Bank and as Chairman
of the Finance Committees of the Rockefeller
Family Fund and Nathan Cummings Foundation.
Paul M. Low 63 Mr. Low has been Chairman of the Board of April 1985 to March
New America Financial L.P., a mortgage 1990 and November
banking firm, since March 1992. From July 1990 to Present
1987 to his retirement in December 1990,
he was President of Lomas Mortgage USA,
Inc. ("LMUSA"). Prior thereto, he served
in various executive positions with LMUSA.
Mr. Low was Senior Executive Vice President
of the Company from April 1985 to January
1988.
Ronn K. Lytle 53 Mr. Lytle has been Chairman and Chief Exec- April 1988
utive Officer of the Company since August
1992, President and Chief Operating Officer
of the Company since January 1989 and Presi-
dent of Capstead Advisers, Inc. ("Capstead
Advisers") since July 1988. Prior thereto,
he served in various executive positions
with the Company. Mr. Lytle also served as
a director and Chairman and Chief Executive
Officer of Tyler Cabot Mortgage Securities
Fund, Inc. ("Tyler Cabot") from March 1992
until its merger into the Company in December
1992 and prior thereto from Tyler Cabot's
organization in August 1988 until March 1992
as a director, President and Chief Operating
Officer.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL OCCUPATION DIRECTOR SINCE
---- --- -------------------- --------------
<S> <C> <C> <C>
Harriet E. Miers 48 Ms. Miers has been a shareholder in the January 1993
Dallas law firm of Locke Purnell Rain
Harrell since 1978. She served as a member
of the Dallas City Council from 1989 to
1991 and is the Immediate Past President
of the State Bar of Texas.
William R. Smith 54 Mr. Smith has been Chairman and Chief Exec- January 1993
utive Office of Smith Capital Management,
Inc., an asset management firm, for more
than the previous five years.
</TABLE>
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the year ended December 31, 1993, the Board of Directors held four
regular meetings. Each director attended at least 75% of all meetings held by
the Board of Directors and all committees on which such director served during
such year.
The Board of Directors has an Audit Committee whose members are Mr. Lewis T.
Sweet, Jr. and Mr. David G. Fox, who are not standing for reelection, and Ms.
Miers. The function of the Audit Committee is to review with management and the
independent auditors the annual results of operations, the accounting and
reporting policies and the adequacy of internal controls. The Audit Committee
also recommends to the Board of Directors the independent auditors to serve for
the following year, approves the type and scope of services to be performed by
the auditors and reviews the related costs. The Audit Committee holds meetings
at such times as may be required for the performance of its functions and,
during the year ended December 31, 1993, held two meetings.
The Board of Directors has a Compensation Committee whose members are Dr.
Charles B. Mullins, who is not standing for reelection, and Messrs. Cornwall
and Smith. The functions of the Compensation Committee are to review the
overall compensation philosophy and compensation structure of the Company to
determine its appropriateness, to review and approve the compensation
arrangements of senior management of the Company, other than the Chief
Executive Officer, and report thereon to the Board of Directors, to determine
and evaluate the performance of the Chief Executive Officer and review the
compensation arrangements of the Chief Executive Officer and report and make
recommendations thereon to the Board of Directors, to review and approve
proposed amendments to the Company's benefit plans and report thereon to the
Board of Directors, to administer the 1990 Employee Stock Option Plan and the
1994 Flexible Long Term Incentive Plan, and to review the compensation
arrangements of the members of the Board of Directors and make recommendations
thereon to the Board. During the year ended December 31, 1993, the Compensation
Committee held three meetings.
The Board of Directors has an Executive Committee whose members are Mr.
Martin Tycher, who is not standing for reelection, and Messrs. Cornwall, Low
and Lytle. During the intervals between meetings of the Board of Directors, the
Executive Committee has all powers and authority of the Board of Directors in
the management of the business and affairs of the Company, except those powers
which, by law, cannot be delegated by the Board of Directors. The Executive
Committee is also designated to function as the Nominating Committee and, as
such, to propose a slate of directors for election by the stockholders at each
annual meeting. The Nominating Committee proposed the nominees for director who
will be voted upon at the Annual Meeting. Stockholders wishing to recommend
candidates for consideration by the Nominating Committee can do so by writing
to the Secretary of the Company at its offices in Dallas, Texas. Such
recommendation should give the candidate's name, biographical data and
qualifications and should be accompanied by a written statement from the
candidate of his or her consent to be named as a candidate and, if nominated
and elected, to serve as a director. During the year ended December 31, 1993,
the Executive Committee held six meetings.
4
<PAGE>
COMPENSATION OF DIRECTORS
During 1993 each non-employee member of the Board of Directors was paid
$30,000 plus $1,250 per meeting of the directors or of a committee attended,
except that non-employee members of the Executive Committee are paid an annual
fee of $10,000 in lieu of a fee per Executive Committee meeting attended. In
addition, directors are reimbursed by the Company for their expenses related to
attending directors' or committee meetings. In 1994 non-employee members of the
Board of Directors will also receive a $500 fee for participation in telephonic
meetings of the Board of Directors.
In accordance with the terms of the 1990 Directors' Stock Option Plan (the
"Directors' Plan") adopted by the Board of Directors on October 18, 1990 and
approved by the Company's stockholders on April 25, 1991, each non-employee
director was, on each of January 1, 1993 and January 1, 1994, automatically
awarded options (which were immediately exercisable) to purchase 1,000 shares
of the Company's Common Stock and was awarded Dividend Equivalent Rights
("DERs") entitling him to receive additional shares of the Company's Common
Stock upon exercise of outstanding options at no cost. The director who was
elected to the Board of Directors on January 22, 1994 was, upon such election,
automatically awarded options to purchase 5,000 shares of Common Stock.
Directors who are not employees of the Company do not receive any other
salaries, fees, commissions or bonuses from the Company, nor do they receive
any separate compensation from any of the Company's affiliates for their
services as directors of the Company.
CERTAIN TRANSACTIONS
During 1993, the Company retained the law firm of Debevoise & Plimpton, of
which Mr. Longstreth is a partner, to perform various legal services for the
Company.
5
<PAGE>
EXECUTIVE OFFICERS
The following table sets forth the names and ages of the executive officers
of the Company (each of whom serves at the pleasure of the Board of Directors),
all positions held with the Company by each individual, and a description of
the business experience of each individual for at least the past five years.
<TABLE>
<CAPTION>
NAME AGE TITLE
- ---- --- -----
<S> <C> <C>
Ronn K. Lytle........... 53 Chairman, Chief Executive Officer and President
Christopher T. Gilson... 52 President of Capstead Inc.
William H. Rudluff...... 50 Executive Vice President--Servicing Administration
Michael L. Brown........ 29 Senior Vice President--Marketing
Andrew F. Jacobs........ 34 Senior Vice President--Control, Treasurer and Secretary
Julie A. Moore.......... 32 Senior Vice President--Asset and Liability Management
</TABLE>
For a description of Mr. Lytle's business experience, see "Election of
Directors" above.
Mr. Gilson has served as President of Capstead Inc. since December 1993.
Prior thereto, he served as President of NationsBanc Mortgage Corporation from
January 1989 until his resignation in April 1993 to pursue other opportunities
in mortgage banking. From 1973 to January 1989, Mr. Gilson served in various
executive positions with Citicorp/Citibank, Inc., last serving as Executive
Vice President of Citicorp Mortgage, Inc.
Mr. Rudluff has served as Executive Vice President--Servicing Administration
of the Company and of Capstead Advisers since October 1992. Prior thereto, he
was Senior Vice President of LMUSA responsible for delinquencies and
foreclosure administration from 1987 to 1992, and Senior Vice President and
Division Controller of LMUSA responsible for marketing and product development
from 1983 to 1992.
Mr. Brown has served as Senior Vice President--Marketing of the Company and
of Capstead Advisers since October 1991. From July 1991 to September 1991 he
served as Vice President of Capstead Advisers. Mr. Brown previously served as
Vice President--Asset Management of Tyler Cabot from February 1991 to September
1991. Mr. Brown has been employed by Capstead Advisers since September 1987.
Mr. Jacobs has served as Senior Vice President--Control and Treasurer of the
Company and of Capstead Advisers since October 1991 and Secretary of the
Company since August 1992. He served as Senior Vice President--Control and
Treasurer of Tyler Cabot from October 1991 until its merger into the Company in
December 1992. From July 1989 to September 1991, he served as Vice President--
Control and Treasurer of the Company and from February 1989 to September 1991
as Vice President--Control of Tyler Cabot. He served as Vice President--Control
of Capstead Advisers from February 1988 to September 1991.
Ms. Moore has been Senior Vice President--Asset and Liability Management of
the Company and of Capstead Advisers since October 1991. From July 1990 to
September 1991 she served as Vice President--Asset Management of the Company
and of Capstead Advisers. Ms. Moore has been employed by Capstead Advisers
since August 1988.
6
<PAGE>
EXECUTIVE COMPENSATION
The Company's direction and policies are established by the Board of
Directors and implemented by the Chief Executive Officer. Prior to September
30, 1993, the Company had retained Capstead Advisers, formerly a wholly-owned
subsidiary of LMUSA, to perform various functions in connection with the
administration of the Company's business. On September 30, 1993, the Company
terminated the management agreement with Capstead Advisers, thus becoming
self-administered, and concurrently acquired Capstead Advisers.
ANNUAL AND LONG-TERM COMPENSATION
The following table sets forth certain information with respect to annual
and long-term compensation for services in all capacities for the years ended
December 31, 1993, 1992, and 1991 paid to Mr. Lytle, the Company's Chief
Executive Officer, and the other four most highly compensated executive
officers of the Company (the "Named Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
---------------------------------------------- ----------------------------
NUMBER OF
NAME AND OTHER TOTAL SECURITIES
PRINCIPAL ANNUAL ANNUAL UNDERLYING ALL OTHER
POSITION YEAR SALARY BONUS COMPENSATION(A) COMPENSATION RESTRICTED OPTIONS COMPENSATION
--------- ---- -------- -------- --------------- ------------ -------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ronn K. Lytle, Chairman, 1993 $490,000 $498,000 $65,317(b) $1,053,317 -- 5,026 --
Chief Executive Officer 1992 419,880 718,275 68,700(b) 1,206,855 $127,500(e) 4,459 $91,032(d)
and President 1991 348,000 228,700 46,000(b) 622,700 587,500(c)(d) 15,000 --
Julie A. Moore, Senior 1993 138,833 121,850 -- 260,683 -- 4,185 --
Vice President-Asset 1992 94,000 110,250 -- 204,250 -- 4,092 --
and Liability Management 1991 64,000 35,975 -- 99,975 -- 2,500 --
Andrew F. Jacobs, Senior 1993 129,500 117,850 5,538 252,888 -- 4,102 --
Vice President-Control, 1992 91,000 103,250 -- 194,250 -- 4,092 --
Treasurer and Secretary 1991 67,000 34,975 -- 101,975 -- 2,500 --
Michael L. Brown, Senior 1993 123,333 119,144 -- 242,477 -- 4,268 --
Vice President-Marketing 1992 82,500 78,737 -- 161,237 -- 4,092 --
1991 63,000 28,975 -- 91,975 -- 2,500 --
William H. Rudluff, 1993 150,000 74,000 -- 224,000 -- 4,000 --
Executive Vice President- 1992 37,500 10,000 -- 47,500 -- 4,000 --
Servicing Administration 1991 -- -- -- -- -- -- --
</TABLE>
- --------
(a) In 1991, 1992 and 1993, no employee of the Company received perquisites
and other personal benefits exceeding the lesser of $50,000 or 10% of such
employee's total annual salary and bonus for any such year.
(b) Amounts include dividends paid on unvested shares of restricted stock of
$59,300, $65,200 and $35,000 in 1993, 1992 and 1991, respectively.
(c) Pursuant to a Restricted Stock Grant Agreement between Mr. Lytle and LMUSA
dated effective December 31, 1991 (the "1991 Restricted Stock Grant
Agreement"), Mr. Lytle was granted 20,000 shares of Capstead Common Stock,
subject to certain restrictions contained in the 1991 Restricted Stock
Grant Agreement.
(d) Pursuant to a Transition Agreement between the Company, LMUSA and Mr.
Lytle dated July 31, 1992 (the "Transition Agreement"), LMUSA and Mr.
Lytle agreed to terminate Mr. Lytle's existing employment agreement dated
April 1, 1991, as amended by First Amendment dated as of December 31, 1991
(together, the "1991 Employment Agreement"), conditioned upon Mr. Lytle
having entered into a new employment agreement with the Company. Mr. Lytle
agreed to forfeit his rights in the 1991 Restricted Stock Grant Agreement,
including the 20,000 shares of Common Stock granted thereunder. In
connection with the termination of the 1991 Employment Agreement, Mr.
Lytle received his base salary and incentive compensation through July 31,
1992, and received a lump-sum payout of certain retirement benefits of
$91,032.
(e) Pursuant to a Restricted Stock Grant Agreement between the Company and Mr.
Lytle dated August 1, 1992 (the "1992 Restricted Stock Grant Agreement"),
Mr. Lytle was granted 20,000 shares of Capstead Common Stock (the
7
<PAGE>
"Shares"). Mr. Lytle is considered the record owner of and is entitled to
vote the Shares and is entitled to receive all dividends and any other
distributions declared on the Shares. Mr. Lytle may not sell, transfer, or
otherwise dispose of the Shares until certain vesting periods have
occurred. 5000 Shares vested on May 1, 1993 and 5,000 Shares will vest on
each of May 1, 1994, May 1, 1995 and May 1, 1996. The Shares will fully
vest in the event of Mr. Lytle's death, disability, involuntary termination
of employment by the Company without cause or otherwise in breach of the
1992 Employment Agreement, or voluntary termination of employment by Mr.
Lytle for cause. Ownership of all unvested Shares will revert to the
Company in the event of involuntary termination of employment by the
Company for cause or voluntary termination by Mr. Lytle without cause. The
value of the Shares has been recorded net of the initial value of the
20,000 shares granted to Mr. Lytle pursuant to the 1991 Restricted Stock
Grant Agreement (see footnote (c) above) and forfeited under the Transition
Agreement (see footnote (d) above). As of December 31, 1993, the number and
value of aggregate (unvested) restricted stock holdings of Mr. Lytle, based
on the closing market price of the Common Stock on that date, were 15,000
Shares and $615,000, respectively.
OPTION GRANTS
The following table sets forth certain information regarding options granted
to the Named Officers during the fiscal year ended December 31, 1993.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------
PERCENT OF POTENTIAL REALIZABLE VALUE AT
NUMBER OF TOTAL ASSUMED ANNUAL RATES OF STOCK
SECURITIES OPTIONS EXERCISE MARKET PRICE APPRECIATION FOR OPTION
UNDERLYING GRANTED TO PRICE PRICE ON TERM
OPTIONS EMPLOYEES IN PER DATE OF EXPIRATION ------------------------------
NAME GRANTED(A) FISCAL YEAR SHARE GRANT DATE 0% 5% 10%
---- ---------- ------------ -------- -------- ----------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ronn K. Lytle........... 4,000(b) 10.26% $38.88 $38.88 10/14/03 $ 0 $ 97,793 $ 247,827
1,026(c) 38.78 0.00(c) 39.25 Various (c) 40,721 60,780 90,070
Julie A. Moore.......... 4,000(b) 10.26 38.88 38.88 10/14/03 0 97,793 247,827
185(c) 6.99 0.00(c) 39.25 Various (c) 7,261 10,936 16,174
Andrew F. Jacobs........ 4,000(b) 10.26 38.88 38.88 10/14/03 0 97,793 247,827
102(c) 3.85 0.00(c) 39.25 Various (c) 4,004 6,161 9,297
Michael L. Brown........ 4,000(b) 10.26 38.88 38.88 10/14/03 0 97,793 247,827
268(c) 10.13 0.00(c) 39.25 Various (c) 10,519 15,711 23,052
William H. Rudluff...... 4,000(b) 10.26 38.88 38.88 10/14/03 0 97,793 247,827
</TABLE>
- --------
(a) The 1990 Employee Stock Option Plan (the "Employee Plan") was adopted by
the Board of Directors on October 18, 1990 and approved by the Company's
stockholders on April 25, 1991. The purpose of the Employee Plan is to
assist the Company in attracting and retaining qualified officers of the
Company. The Employee Plan is administered by the Compensation Committee
of the Board of Directors. The Employee Plan provides for the granting of
options to purchase up to 240,000 shares of the Company's Common Stock at
a price determined by the Compensation Committee in its sole discretion at
the time the option is granted. As of the date hereof, options to purchase
a total of 181,708 shares have been granted under the Employee Plan.
Options granted under the Employee Plan are immediately exercisable upon
grant. Under the Employee Plan, DERs are awarded annually to plan
participants pursuant to a formula based upon options previously granted
and total dividends paid during the previous year in excess of a benchmark
rate of return. The DERs entitle the holder to receive additional shares
of Common Stock at no cost to the holder.
(b) Grant of option pursuant to the Employee Plan.
(c) Grant of DERs pursuant to the Employee Plan. DERs are exercisable only in
conjunction with the exercise of the options on which they were earned.
The expiration date of the DERs is the same as the options on which they
were awarded.
8
<PAGE>
OPTION EXERCISES AND YEAR-END OPTION VALUES
The following table sets forth certain information with respect to options
exercised during the fiscal year ended December 31, 1993 by each of the Named
Officers and the value of unexercised options held by the Named Officers at
December 31, 1993.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
OPTIONS EXERCISED IN SECURITIES VALUE OF
FISCAL 1993 UNDERLYING UNEXERCISED
-------------------- UNEXERCISED IN-THE-MONEY
SHARES VALUE OPTIONS AT OPTIONS AT
ACQUIRED ON REALIZED DECEMBER 31, DECEMBER 31,
NAME EXERCISE (A) 1993 (B) 1993 (A)(B)
- ---- ----------- -------- ------------ ------------
<S> <C> <C> <C> <C>
Ronn K. Lytle.................... 26,256 $508,202 8,000 $34,500
Julie A. Moore................... 2,129 62,087 10,602 77,432
Andrew F. Jacobs................. -- -- 10,602 77,432
Michael L. Brown................. 6,860 168,083 8,000 34,500
William H. Rudluff............... -- -- 8,000 34,500
</TABLE>
- --------
(a) Market value of the underlying securities at exercise date or year-end, as
the case may be, minus the exercise price of "in-the-money" options.
(b) All options are currently exercisable.
EMPLOYMENT AGREEMENTS
Mr. Lytle is a party to an Employment Agreement with the Company executed as
of August 1, 1992 and initially expiring on December 31, 1995 (the "1992
Employment Agreement"), subject, however, to automatic one year extensions of
the then remaining term commencing on December 31, 1992 and on each December 31
thereafter through December 31, 2006 (age 65) unless, at least 180 days prior
to such December 31, the Company gives notice that it does not wish to extend.
Thus, on December 31, 1993, the 1992 Employment Agreement was automatically
extended one additional year and will now expire on December 31, 1997. During
the term of the 1992 Employment Agreement, Mr. Lytle will serve as Chairman,
Chief Executive Officer and President of the Company.
Pursuant to the 1992 Employment Agreement, Mr. Lytle received a base salary
at an annual rate of $490,000 through December 31, 1993. His base salary
increased to $520,000 on January 1, 1994 and will increase on January 1, 1995
by an amount at least equal to 6% of the base salary in effect for the
immediately preceding 12-month period. In addition to the base salary, Mr.
Lytle is entitled to receive incentive compensation as recommended by the
Compensation Committee and approved by the Board of Directors.
The 1992 Employment Agreement will terminate in the event of Mr. Lytle's
death and may be terminated by the Company in the event of Mr. Lytle's
disability or for Cause (as defined therein). Mr. Lytle may terminate his
employment for Good Reason, which includes (i) a defined Change in Control,
(ii) certain changes in Mr. Lytle's duties or compensation, and (iii) action by
the Company to prevent the automatic extension of the 1992 Employment
Agreement. If Mr. Lytle terminates his employment for Good Reason or if the
Company terminates Mr. Lytle's employment in breach of the 1992 Employment
Agreement, Mr. Lytle will be entitled to lump-sum severance pay equal to three
times the amount of his base salary, plus an amount equal to three times the
average of the two highest of his three most recent annual incentive
compensation payments. The 1992 Employment Agreement also provides for the
continuation of all retirement and other benefit programs (or the payment of
equivalent benefits) until three years after the date of termination, except in
case of termination for Cause.
9
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
Compensation for the executive officers of the Company is administered under
the direction of the Compensation Committee of the Board (the "Committee")
which currently consists of three independent directors. The Committee approves
the compensation arrangements of all executive officers other than the Chief
Executive Officer and submits its recommendations with respect to the
compensation of the Chief Executive Officer to the full Board of Directors.
The following is the Committee's report, in its role as reviewer of the
Company's executive pay programs, on 1993 compensation practices for the
executive officers of the Company. The report and the performance graph that
appears immediately after such report shall not be deemed to be soliciting
material or to be filed with the Securities and Exchange Commission under the
Securities Act of 1933 or the Securities Exchange Act of 1934 or incorporated
by reference in any document so filed.
COMPENSATION POLICIES ATTRIBUTABLE TO EXECUTIVE OFFICERS
The basic philosophy behind compensation at Capstead is to reward performance
at all levels of the organization that maximizes long-term stockholder value.
This pay-for-performance tenet is embedded in the Company's Executive
Compensation Program, which is designed to help the Company attract, motivate
and retain the executive resources that the Company needs in order to achieve
maximum stockholder value. To meet this overall objective, the Company's
Executive Compensation Program has been structured and implemented to provide
competitive compensation opportunities and various incentive award payments
based on Company and individual performance. In general, while the compensation
practices of the Company's peers are considered in establishing the
compensation of the Company's executive officers, the Company does not target
total compensation or any individual component of total compensation to a
specified level within a range of compensation paid by the Company's peers.
Rather, the Company strives to pay its employees, including its executive
officers, compensation that reflects the performance of the individual and the
Company, considering in particular, the Company's total return to stockholders
over a trailing five year period.
In particular, the Company maintains a series of executive compensation
programs which are designed to achieve the level of professional expertise and
commitment necessary to succeed in its challenging business environment. These
programs include:
. Base salaries that are consistent with competitive practices for
comparable positions in peer companies (competitive practices are
determined using independent industry surveys provided by compensation
consultants and publicly available compensation information from peer
companies) and reflect each executive officer's level of responsibility;
. Short-term (annual) incentives which are funded when return on
stockholders' equity goals are attained and which are distributed to key
executive officers based on the achievement of corporate performance goals
and assessments by the Chief Executive Officer of each individual's
contribution to the Company's business success in his or her area of
responsibility, managerial ability, executive development potential and
the compensation practices of the Company's peers; and
. Other incentive programs based on the achievement of corporate
performance goals that encourage stock ownership by management, reinforce
the importance of maximizing stockholder value, align management's
interests to stockholder interests and help assure the retention of key
executive officers.
The Compensation Committee adheres to a framework for managing the
compensation program for executive officers which includes the following
characteristics and guidelines:
10
<PAGE>
BASE SALARIES
While the total compensation paid to the Company's executive officers, other
than the Chief Executive Officer, is based primarily on the Company's
performance, the salary component of such compensation is based primarily upon
competitive market norms as determined by comparisons of the Company's
compensation practices to the compensation practices of a self-selected group
of companies consisting of companies that compete in the Company's primary
lines of business and companies of comparable size and scope located in Dallas,
Texas and through consultation with and consideration of studies prepared by
independent compensation consultants using broad-based salary surveys of
companies of comparable size and industry specialization to the Company. There
are currently six companies in the Company's self-selected comparison group,
which is subject to change as the members of the group merge or are acquired or
as new competitors emerge. The basic philosophy behind executive salaries at
Capstead is to pay executives salaries that are competitive with the salaries
being paid to executives in comparable positions of responsibility in peer
companies (i.e., companies with comparable net incomes, sales volumes and
market capitalizations). The Committee believes that it is desirable to provide
salaries within a competitive market range in order to attract and retain
managers who are highly talented. The Company does not target the annual base
salaries of the Named Officers to a specified level within a range of
compensation paid by the comparison group; however, the Company's independent
compensation consultants have advised the Company that the annual base salary
of the Chief Executive Officer is competitive with the base salaries of the
chief executive officers of the comparison group while the base salaries of the
other Named Officers are at the low end of the range of base salaries paid to
executive officers in the comparison group.
In March 1993, the annual base salaries of the Named Officers, other than the
Chief Executive Officer, were increased in the following amounts from the base
salaries in effect on December 31, 1992: Julie A. Moore, 34%; Andrew F. Jacobs,
32%; and Michael L. Brown, 44%.
ANNUAL INCENTIVES
The Company's short-term incentive program, which is available for all
employees of the Company, provides for annual cash incentive awards that are
funded from a pre-set portion of the Company's net income which exceeds a
threshold return on stockholders' equity. The percentage and threshold are
established near the beginning of the fiscal year. With respect to 1993, the
threshold return on stockholders' equity was established at 8% and the total
employee incentive pool was fixed at 5% of net income earned in excess of the
threshold level. Near the end of each year, Capstead's management presents an
annual performance report to the Committee and the Chief Executive Officer
submits to the Committee his recommendations regarding the annual incentive
awards to be paid to each executive officer. The Chief Executive Officer has
informed the Committee that in determining the amounts of the individual
incentive awards to recommend with respect to each individual executive
officer, he considers a number of factors, including the individual's
contribution to the Company's success in his or her area of responsibility, his
assessment of the executive's managerial ability and potential to make future
contributions to the Company's profitability and the compensation practices of
the Company's self-selected peer group for comparable positions, without any
specific weighting among these factors. However, the Chief Executive Officer
does not use any specific corporate and unit performance measures in making his
determinations. The Committee reviews the report and the CEO's recommendations
and, upon its approval, authorizes the payment of a portion of the aggregate
amount funded to the executive officers. Independent consultants assist the
Committee in the evaluation of this information. The incentive awards are paid
to the executive officers on a quarterly basis. If the threshold return on
stockholders' equity is not achieved, no amounts will accrue under the
incentive plan regardless of other performance considerations. Any amounts
accrued under the short-term incentive program in a given year that are not
paid to the Company's employees in that year may be carried over and paid to
the Company's employees in subsequent years. For 1993, the Company's return on
stockholders' equity equaled 14.65%.
OTHER INCENTIVE PROGRAMS
Under the Employee Plan and the Company's Profit Sharing Plan, the Company
utilizes cash, stock, stock options, dividend equivalent rights and other
equity-based awards to reinforce the importance of
11
<PAGE>
maximizing stockholder value, executive retention goals and to support
management ownership as an effective means of aligning management to
stockholder interests.
Under the Employee Plan, stock options are awarded based on the overall
performance of the Company, as determined by reference to the Company's return
on stockholders' equity, and the individual performance of the participant in
his or her area of responsibility, with no preestablished performance measures
used, without any specific weighting among these factors. Options granted to
the Named Officers and certain other key employees are granted at 100% of the
market value of the stock on the date of grant. Thus, for any compensation to
be realized pursuant to the options, the market price of Capstead Common Stock
must increase. Historically, the Company's awarding of stock options to its
executive officers has been considerably below that of its peers. Based on the
Company's return on stockholders' equity of 14.65% in 1993, and considering the
amount of stock options previously awarded to the Named Officers, the Committee
approved awards of 4,000 stock options to each Named Officer in 1993.
The Profit Sharing Plan is funded from pre-set portions of the Company's net
income (after the deduction of any short-term incentive plan compensation) in
excess of certain threshold return on stockholders' equity goals. Individual
awards, which are available to every employee of the Company, are based solely
upon such individual's tenure with the Company. In 1993, the two progressive
threshold levels of return on stockholders' equity were set at 12% and 15% and
the total incentive pool for each level was established at 3% of net income
earned in excess of the threshold level. If a particular return on
stockholders' equity threshold is not achieved, no amounts will accrue under
the Profit Sharing Plan with respect to such threshold. Because an executive's
status becomes that of an employee with one year's tenure upon the sale of any
shares previously awarded under the Profit Sharing Plan, the Profit Sharing
Plan has the effect of promoting the holding of proprietary interests in the
Company and of aligning the interests of all employees of the Company with the
interests of stockholders. Based on the Company's return on stockholders'
equity of 14.65% in 1993, the Committee approved awards to the Named Officers
in 1993 under the Profit Sharing Plan in the following amounts: Ronn K. Lytle,
Julie A. Moore, Andrew F. Jacobs and Michael L. Brown, $4,000 and 100 shares of
Capstead Common Stock; William H. Rudluff, $1,000 and 25 shares of Capstead
Common Stock.
PERIODIC EVALUATION OF COMPENSATION PROGRAM
The total compensation package is evaluated periodically relative to
companies of comparable size and industry specialization to the Company. This
evaluation includes not only a detailed assessment of total compensation levels
but also of program design and the measures used to evaluate performance. The
Committee uses this information to assess the competitiveness of the pay
package and to ensure that the pay components are appropriately calibrated in
light of competitive practices, the Company's compensation strategies
philosophy of rewarding outstanding performance and its performance results.
Recommendations from independent executive compensation consultants are a part
of this ongoing evaluation process.
CHIEF EXECUTIVE OFFICER COMPENSATION
As described above, the Company manages its pay for all executives, including
the Chief Executive Officer, considering both a pay-for-performance philosophy
and market rates of compensation for the job. Specific aspects of Mr. Lytle's
compensation, which the Committee recommended to the full Board of Directors
for its approval, are summarized below.
. The Chief Executive Officer's compensation is determined in part by the
terms of the 1992 Employment Agreement. With respect to 1993, the 1992
Employment Agreement established the Chief Executive Officer's salary at
$490,000. With respect to 1994, the Committee recommended and the Board of
Directors approved increasing the Chief Executive Officer's salary to
$520,000, considering, among other factors, the terms of the 1992
Employment Agreement. The 1992 Employment Agreement specifies that the
Chief Executive Officer's salary shall increase a minimum of 6% per year.
Any increases greater than 6% are at the discretion of the Board of
Directors.
. The annual incentive bonus earned by Mr. Lytle for 1993 performance was
$490,000. This incentive bonus was based primarily on competitive annual
incentive awards for chief executive officers in the Company's self-
constructed peer group of companies and was intended to reflect total
return,
12
<PAGE>
including dividends and price appreciation, on the Company's common stock
earned by the Company's stockholders for the trailing five year period as
compared to the S&P 500 Index, the S&P Financial Index and the peer group
of companies, and the Company's total return on stockholders' equity,
return on capital and profitability, without any specific weighting among
these factors but with particular emphasis placed on total return to the
Company's stockholders for the trailing five year period. With respect to
the five year period ending December 31, 1993, the Company met its target
return on stockholders' equity and out-performed both the S&P 500 Index
and the S&P Financial Index. The Committee also received recommendations
from and considered survey information prepared by its compensation
consultants relating to the incentive compensation paid to chief executive
officers in companies of comparable size and industry specialization to
Capstead. Because the basic philosophy behind executive compensation at
Capstead is to reward outstanding performance, the Company does not target
any aspect of the Chief Executive Officer's compensation to a specified
level within a range of compensation paid to chief executive officers of
the Company's peer group nor does the Company establish any target ratio
of total compensation to be represented by base salary, incentive
compensation of stock options.
. Based on the Company's performance in 1993, the Committee approved awards
to the Chief Executive Officer of 4,000 stock options under the Employee
Plan and of $4,000 and 100 shares of Capstead Common Stock under the
Profit Sharing Plan.
The Company currently has no policy for ensuring that, with respect to Named
Officers, certain items of compensation in excess of $1 million will meet the
criteria established under the Internal Revenue Code for performance-based
compensation, in order that the Company will receive a tax deduction for such
amounts; however, the Company is in the process of formulating such a policy.
The Company currently has no retirement plan for its executive officers;
however, the Company is in the process of implementing such a plan for 1994.
At its meeting on December 15, 1993, the Compensation Committee approved the
establishment of the 1994 Flexible Long Term Incentive Plan, as further
described on page 18 of this Proxy Statement, to support the above described
compensation principles and to continue the Compensation Committee's policy of
using performance-based incentives to motivate and retain the Company's key
executives. This new program provides for a coordinated, flexible approach
which will allow the Compensation Committee to design and tailor awards to
respond to changing circumstances and the Company's business strategy and
objectives. On January 24, 1994, the Board of Directors approved the 1994
Flexible Long Term Incentive Plan and authorized its submission to the
stockholders of the Company for their approval. The Compensation Committee
recommends all stockholders to vote FOR the approval of the 1994 Flexible Long
Term Incentive Plan which will be an integral and effective component of the
Company's future compensation program, and is designed to lead to increased
productivity, and, therefore, increased long term value for the Company's
stockholders.
Executive compensation at Capstead is taken seriously by the Committee, the
Board of Directors and senior management. The Committee believes that there has
been a strong link between the success of the stockholder and the rewards of
the executives. This is evidenced by the increase in stockholder value from
1989 to 1993, during which time a stockholder who invested in Capstead Common
Stock would have realized a compounded average annual return, including
dividends and price appreciation of the Company's Common Stock, of
approximately 34.60%. The Committee believes that with the present plan designs
and with the addition of the 1994 Flexible Long Term Incentive Plan, the
management rewards will continue to be linked to increases in stockholder
value.
MEMBERS OF THE COMPENSATION COMMITTEE 1993
William R. Smith--Chairman
Charles B. Mullins, M.D.
J. Michael Cornwall
January 24, 1994
13
<PAGE>
PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly percentage change in the
cumulative total stockholder return on the Company's Common Stock, with the
cumulative total return of the S&P 500 Stock Index and the S&P Financial Index
for the five years ended December 31, 1993, assuming the investment of $100 on
January 1, 1989 and the reinvestment of dividends. The Company believes that
this information demonstrates that the compensation earned by its executive
officers compares very favorably to the value created for the Company's
stockholders. The stock price performance shown on the graph is not necessarily
indicative of future price performance.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
CAPSTEAD COMMON STOCK AND S&P 500 AND S&P FINANCIAL INDEX
<TABLE>
[GRAPH APPEARS HERE]
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG CAPSTEAD COMMON STOCK AND, S&P 500 INDEX AND S&P FINANCIAL INDEX
<CAPTION> CAPSTEAD
Measurement period COMMON S&P 500 S&P FINANCIAL
(Fiscal year Covered) STOCK Index Index
- --------------------- -------- -------- --------
<S> <C> <C> <C>
Measurement PT -
01/01/89 $ 100.00 $ 100.00 $ 100.00
FYE 12/31/89 $ 107.04 $ 131.59 $ 132.61
FYE 12/31/90 $ 112.07 $ 127.49 $ 104.20
FYE 12/31/91 $ 263.21 $ 166.17 $ 156.80
FYE 12/31/92 $ 386.63 $ 178.81 $ 193.31
FYE 12/31/93 $ 441.77 $ 195.45 $ 213.32
</TABLE>
14
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
As of February 18, 1994, the only stockholder known to the management of the
Company to own beneficially more than 5% of the outstanding Common Stock of the
Company was as follows:
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME AND ADDRESS BENEFICIAL PERCENT
OF BENEFICIAL OWNER OWNERSHIP OF CLASS
------------------- ---------- --------
<S> <C> <C>
Howard Hughes Medical Institute..................... 925,780 (a) 6.0%
6701 Rockledge Drive
Bethesda, Maryland 20817
</TABLE>
- --------
(a) Based on a statement on Schedule 13G filed with the Securities and Exchange
Commission, as most recently amended on February 14, 1994. Includes 175,780
shares that would be received upon conversion of 550,000 shares of the
Company's $1.26 Cumulative Convertible Preferred Stock, Series B (the
"Series B Preferred Stock"). Howard Hughes Medical Institute is a Delaware
not-for-profit corporation.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth the number of outstanding shares of Common
Stock of the Company beneficially owned, directly or indirectly, by each
director and nominee for director, each Named Officer and all directors and
executive officers of the Company as a group, and the components of such
beneficial ownership, at February 18, 1994. Each director, nominee for director
or Named Officer had sole voting and investment power over the securities of
the Company indicated below as being beneficially owned by such person. No
director, nominee for director or Named Officer of the Company owns any shares
of $1.60 Cumulative Preferred Stock, Series A, of the Company.
<TABLE>
<CAPTION>
SERIES B PERCENT OF
COMMON PREFERRED COMMON
STOCK UNEXERCISED STOCK COMMON STOCK STOCK
BENEFICIALLY OWNED OPTIONS(A) OWNED(B) OWNED BENEFICIALLY(C) OWNED
------------ ------ ----------- --------- --------------------- ----------
<S> <C> <C> <C> <C> <C>
J. Michael Cornwall..... 200 6,238 0 6,438 *
Bevis Longstreth........ 600 5,000 0 5,600 *
Paul M. Low............. 21,031 2,048 21,890 30,075 *
Ronn K. Lytle........... 48,924 8,190 1,977 57,746 *
Harriet E. Miers........ 600 6,238 0 6,838 *
William R. Smith........ 500 6,238 0 6,738 *
Michael L. Brown........ 2,830 8,190 0 11,020 *
Christopher T. Gilson... 0 0 0 0 *
Andrew F. Jacobs........ 953 10,916 0 11,869 *
Julie A. Moore.......... 5,077 10,916 0 15,993 *
William H. Rudluff...... 25 8,190 0 8,215 *
Directors and executive
officers as a group (11
persons)............... 80,740 72,164 23,867 160,532 1.05%
</TABLE>
- --------
(a) All of such options are immediately exercisable.
(b) The Series B Preferred Stock is convertible at any time into the Company's
Common Stock at a conversion ratio of .3196 shares of Common Stock for each
share of Series B Preferred Stock converted.
(c) For purposes of determining the beneficial ownership of the Company's
Common Stock, the holdings of the Series B Preferred Stock are deemed to be
converted and all options are deemed to be exercised.
*Represents less than one percent of Common Stock outstanding.
15
<PAGE>
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
To the Company's knowledge, based solely on the review of the copies of such
reports filed with the Securities and Exchange Commission furnished to the
Company and written representations of its incumbent directors and officers
that no other reports were required, during the fiscal year ended December 31,
1993, all Section 16(a) filing requirements were complied with.
INDEPENDENT AUDITORS
Management recommends that stockholders ratify the Board of Directors'
selection of Ernst & Young as independent auditors of the Company for the year
ending December 31, 1994. Ernst & Young has examined the accounts of the
Company since its organization. Representatives of Ernst & Young are expected
to be present at the Annual Meeting and will have an opportunity to make a
statement if they desire to do so. In addition, such representatives are
expected to be available to respond to appropriate questions from stockholders.
During the fiscal year ended December 31, 1993, the Company engaged Ernst &
Young to provide it with audit services. Services provided included the
examination of annual financial statements, limited review of unaudited
quarterly financial information, review and consultation regarding filings with
the Securities and Exchange Commission, assistance with management's evaluation
of internal accounting controls, consultation on financial accounting and
reporting matters, and verification procedures as required by collateralized
mortgage securities indentures.
THE BOARD RECOMMENDS A VOTE FOR THE SELECTION OF ERNST & YOUNG AS INDEPENDENT
AUDITORS OF THE COMPANY.
AMENDMENT OF BYLAWS
GENERAL
On January 24, 1994, the Board of Directors of the Company approved, and
recommends to the Company's stockholders for their approval and adoption, the
resolution described below that would amend the Company's Bylaws (the "Bylaw
Amendment"), effective as of April 22, 1994, to allow for the amendment of the
Bylaws by either the Board of Directors or a majority of the stockholders as
permitted by the Maryland General Corporation Law (the "MGCL").
The Board of Directors is seeking stockholder approval of the following
resolution in order to effect the Bylaw Amendment:
RESOLVED, that the Bylaws of the Company are hereby amended by amending
Section 7.07 thereof to read in its entirety as follows:
(a) The Board of Directors shall have the power, at any annual or
regular meeting, or at any special meeting if notice thereof is
included in the notice of such special meeting, to alter or repeal any
Bylaws of the Corporation and to make new Bylaws.
(b) The stockholders, by affirmative vote of a majority of the shares
of common stock of the Corporation, shall have the power, at any annual
meeting (subject to the requirements of Section 1.01 of these Bylaws),
or at any special meeting if notice thereof is included in the notice
of such special meeting, to alter or repeal any Bylaws of the
Corporation and to make new Bylaws.
The Board of Directors is of the opinion that this change is necessary
because the Board of Directors has previously had to seek stockholder approval
to amend certain overly-restrictive Bylaws which, although appropriate when
originally adopted, have proved to be unnecessarily burdensome on the day-to-
day
16
<PAGE>
operations of the Company. The Board of Directors believes that this proposed
amendment is particularly important in light of the Company's recent assumption
of the responsibilities of self-management, which it did not possess at the
time of original adoption, and the need, based on such added responsibilities,
to be able to take future actions that may be in the best interests of the
Company's stockholders without the necessity of undertaking a time consuming
stockholder approval process.
If the proposed Bylaw Amendment is approved by the Company's stockholders,
the Board of Directors is considering making further amendments to the Bylaws
(the "Old Bylaws") which, the Board of Directors believes, contain provisions
which are unsuitable for a public company, are no longer required by statute
and unduly restrict the ability of the officers of the Company in the conduct
of the day-to-day operations of the Company. In addition, in the interests of
simplifying the Bylaws and reducing the necessity for future amendments
thereto, the Board of Directors is considering deleting provisions which merely
restate statutorily mandated stockholder rights in the Bylaws as further
amended (the "New Bylaws").
Set forth below is a description of certain of the provisions in the Old
Bylaws which the Board of Directors is contemplating changing in the New Bylaws
if the proposed Bylaw Amendment is approved by the Company's stockholders.
(1) Section 1.01 of the Old Bylaws requires the annual meeting of
stockholders to be held between April 15 and May 15 of each year. Under the New
Bylaws, the date of the annual meeting may be set at any time designated by the
Board of Directors.
(2) Section 1.02 of the Old Bylaws would be revised by the New Bylaws to
delete references to "Independent Directors," the independent authority of
which to call a special meeting is deemed by the Board of Directors to no
longer be necessary.
(3) Section 1.11 of the New Bylaws would replace the cumbersome vote
tabulation and judging procedures for meetings as set forth in the Old Bylaws
with a provision the Board of Directors believes is a more easily implemented
and regulated vote tabulation procedure.
(4) Section 2.02 of the Old Bylaws would be amended in the New Bylaws to
remove references to periods during which no stock is outstanding in
determining the minimum number of directors and to establish such minimum
number based upon the requirements of the MGCL.
(5) Section 2.04 of the Old Bylaws, requiring that a majority of the members
of the Board of Directors be persons who are not affiliated with any management
company retained by the Company, would be deleted in the New Bylaws.
(6) Section 2.14 of the Old Bylaws would be deleted in its entirety in the
New Bylaws. This Section restricts certain investment and borrowing activities
by the Company unless costly and time-consuming procedures are followed by
either the Board of Directors or management of the Company. By removing these
Sections, management will have greater flexibility to pursue opportunities
which it believes are in the best interests of the Company in a timely manner.
(7) Sections 2.15 and 2.16 of the Old Bylaws would be deleted in their
entirety in the New Bylaws. These Sections relate to the retention of a
management company by the Company, the activities that may be conducted by such
management company with and without approval of the Board of Directors and the
total expenses that may be incurred by the Company in retaining such management
company.
(8) Article III of the Old Bylaws, which generally provides for the
establishment of committees of the Board of Directors and procedures to be
followed at meetings of such committees, would be replaced in its entirety by a
new Article III in the New Bylaws updating the provisions contained in such
Article to comply with the MGCL and to more clearly define the powers delegable
to such committees by the Board of Directors.
THE BOARD RECOMMENDS A VOTE FOR THE AMENDMENT OF THE BYLAWS.
17
<PAGE>
ADOPTION OF 1994 FLEXIBLE LONG TERM INCENTIVE PLAN
On January 24, 1994, the Board approved the 1994 Flexible Long Term Incentive
Plan, as recommended by the Compensation Committee (the "Plan"), to become
effective on April 22, 1994, subject to the approval of stockholders. A copy of
the Plan is attached hereto as Appendix A. The description of the Plan
contained herein is not intended to be complete and is qualified in its
entirety by reference to Appendix A, which contains the complete text of the
Plan.
The purposes of the Plan are to enable the Company to attract, motivate,
reward and retain highly talented executive officers and other key employees
and to encourage the holding of proprietary interests in the Company by persons
who occupy key positions in the Company or its affiliates by enabling the
Company to make awards that recognize the creation of long-term value for the
Company's stockholders and promote the continued growth and success of the
Company. To accomplish this purpose, the Plan provides for the granting to
eligible persons of stock options, stock appreciation rights, restricted stock,
performance awards, performance stock, dividend equivalent rights and any
combination thereof.
AVAILABLE SHARES
The aggregate number of shares of Common Stock which may be issued under the
Plan (or with respect to which awards may be granted) shall not exceed
1,250,000 shares. The maximum number of shares with respect to which awards may
be granted in any fiscal year to any participant in the Plan shall not exceed
300,000. Shares issued under the Plan may be either authorized and unissued
Common Stock or Common Stock held in or acquired for the treasury of the
Company. Any shares of Common Stock subject to a stock option or stock
appreciation right that are not issued prior to the expiration of such awards,
or any restricted stock or performance shares that are forfeited, will again be
available for award under the Plan.
PERSONS ELIGIBLE TO PARTICIPATE
Other than with respect to stock options and stock appreciation rights, for
which all officers and employees of the Company are eligible, eligibility for
participation in the Plan is confined to a select number of persons who are
employed by the Company, or one or more of its affiliates, and who are senior
officers, senior management and key employees of the Company, or one or more of
its affiliates, as determined by the committee referenced below in its sole
discretion. Unless otherwise employed by the Company, directors will not be
entitled to participate in the Plan.
ADMINISTRATION
The Plan provides for administration by a committee (the "Committee")
comprised of two or more non-employee directors who are "disinterested persons"
within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). It is anticipated that the Compensation Committee
and the Committee will be identical. The Committee has broad powers under the
Plan to, among other things, administer and interpret the Plan, establish
guidelines for the Plan's operation, select persons to whom awards are to be
made under the Plan, determine the types, sizes and combinations of awards to
be granted under the Plan, and determine other terms and conditions of an
award. In addition, except as set forth below under "Amendment and
Termination," the Committee also has the power to modify or waive restrictions
or limitations on the exercisability of awards and to accelerate and extend
existing awards. The Committee may also determine whether, and to what extent
and under what conditions to provide loans to eligible participants to purchase
Common Stock under the Plan.
TYPES OF AWARDS
The Plan provides for the grant of any or all of the following types of
awards: (1) stock options, including incentive stock options and non-qualified
stock options; (2) stock appreciation rights, either in tandem with stock
options or freestanding; (3) restricted stock awards; (4) performance shares;
(5) performance units; (6) dividend equivalent rights; and (7) other stock-
based awards. Each of these types of awards is discussed in
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more detail below. Awards may be granted singly, in combination or in tandem,
as determined by the Committee. The specific amount of awards to be received by
or allocated to the Named Officers or any other participant under the Plan is
in the discretion of the Committee and is therefore not determinable for future
periods.
Stock Options. Under the Plan, the Committee may grant awards in the form of
options to purchase shares of the Company's Common Stock. Options may be in the
form of incentive stock options or non-qualified stock options. The Committee
will, with regard to each stock option, determine the number of shares subject
to the option, the term of the option (which for incentive stock options shall
not exceed ten years), the exercise price per share of stock subject to the
option, the vesting schedule (if any) and the other material terms of the
option. Any option granted in the form of an incentive stock option must have
an exercise price not less than the fair market value of the Common Stock at
the time of grant and must satisfy the other applicable requirements of Section
422 of the Internal Revenue Code of 1986, as amended. Non-qualified stock
options (other than such options which may be granted to the Chief Executive
Officer of the Company) may have an exercise price that is less than fair
market value (but not less than the par value of the Common Stock).
The option price upon exercise may, to the extent determined by the Committee
at or after the time of grant, be paid by a participant in cash, in shares of
Common Stock owned by the participant, in shares of stock awarded under the
Plan, including restricted stock, or by a reduction in the number of shares of
Common Stock issuable upon the exercise of the option. The Committee may offer
to buy an option previously granted on such terms and conditions as the
Committee shall establish. Options may, at the discretion of the Committee,
provide for "reloads," whereby a new option is granted for the same number of
shares as the number of shares of Common Stock or restricted stock used by the
participant to pay the option price upon exercise or to satisfy tax withholding
obligations.
Unless the Committee determines otherwise at the time of grant, the Plan
provides that upon termination of employment by reason of retirement, death or
disability or for any reason other than resignation or a discharge for cause,
stock options will become fully vested and generally will be exercisable for
two years (except for incentive stock options, which expire one year from the
termination of employment due to disability) or until the end of the option
term, whichever is shorter. Unless the Committee determines otherwise at the
time of grant or thereafter, the Plan provides for immediate termination of
stock options in the event of termination of employment for any reason other
than death, disability or retirement.
Stock Appreciation Rights ("SARs"). The Plan authorizes the Committee to
grant SARs either with a stock option ("Tandem SARs") or independent of a stock
option ("Non-Tandem SARs"). An SAR is a right to receive a payment either in
cash or Common Stock, as the Committee may determine, equal in value to the
excess of the fair market value of a share of Common Stock on the date of
exercise over the reference price per share of Common Stock established in
connection with the grant of the SAR. The reference price per share covered by
an SAR will be the per share exercise price of the related option in the case
of a Tandem SAR and will be a percentage designated by the Committee of the per
share fair market value of the Common Stock on the date of grant (or any other
date chosen by the Committee) in the case of a Non-Tandem SAR.
A Tandem SAR may be granted at the time of the grant of the related stock
option or, if the related stock option is a non-qualified stock option, at any
time thereafter during the term of the stock option. A Tandem SAR generally may
be exercised at and only at the times and to the extent the related stock
option is exercisable. A Tandem SAR is exercised by surrendering the same
portion of the related option. A Tandem SAR expires upon the termination of the
related stock option.
A Non-Tandem SAR will be exercisable as provided by the Committee and will
have such other terms and conditions as the Committee may determine. A Non-
Tandem SAR is subject to acceleration of vesting or immediate termination upon
termination of employment in certain circumstances, in the same manner as
discussed above in the case of stock options.
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The Committee is also authorized to grant "limited SARs," either as Tandem
SARs or Non-Tandem SARs. Limited SARs would become exercisable only upon the
occurrence of a "Change in Control" (as defined in the Plan) or such other
event as the Committee may designate at the time of grant or thereafter.
Restricted Stock Awards. The Plan authorizes the Committee to grant awards in
the form of restricted shares of Common Stock. These awards may be in such
amounts and subject to such terms and conditions as the Committee may
determine, including, but not limited to, the price (if any) to be paid by the
recipient, the time or times within which such awards may be subject to
forfeiture, the vesting schedule (which may be based on service, performance or
other factors) and rights to acceleration of vesting (including whether non-
vested shares are forfeited or vested upon termination of employment). The
Committee may award performance-based shares of restricted stock by
conditioning the grant, vesting or the release, expiration or lapse of
restrictions of such restricted stock, or the acceleration of any of such
conditions, upon the attainment of specified performance goals or such other
factors as the Committee may determine. The aggregate number of nonperformance-
based shares of restricted stock that may be awarded under the Plan is limited
to 3% percent of the aggregate number of outstanding shares of the Company'
Common Stock; otherwise the Committee is not limited in the number of shares of
restricted stock that may be awarded under the Plan.
Performance Shares. The Plan permits the granting of "performance shares,"
consisting of the right to receive Common Stock, restricted stock or cash of an
equivalent value, as the Committee may determine, at the end of a specified
performance period established by the Committee. These awards may be in such
number of shares and subject to such additional terms and conditions as the
Committee may determine, including, but not limited to, the criteria to be used
to determine the vesting of performance shares and whether performance shares
are forfeited or vest upon termination of employment during the performance
period. The Committee may condition the grant of performance shares upon the
attainment of specified performance goals, such as the Company's achievement of
certain earnings levels or the Company's performance (or the performance of its
stock) measured against the performance of its competition, or such other facts
as the Committee may determine.
Performance Units. The Plan permits the granting of "performance units,"
consisting of the right to receive a fixed dollar amount payable in cash,
Common Stock or restricted stock, or any combination thereof, as the Committee
may determine, at the end of a performance cycle established by the Committee.
Except for the fact that the award is denominated in dollars rather than
shares, the provisions of the Plan regarding performance units are
substantially similar to those regarding performance shares, as described
above.
Dividend Equivalent Rights. The Committee may, in its discretion, provide
that any stock option, restricted stock, performance shares or units or other
stock-based awards under the Plan may earn dividend equivalent rights. In
respect of any such award which is outstanding on a dividend record date for
Common Stock, the Committee may credit a participant with an amount equal to
the cash or stock dividends or other distributions that would have been paid on
the shares of Common Stock covered by such award had such covered shares been
issued and outstanding on such dividend record date. The rules and procedures
governing the crediting of dividend equivalent rights, including the timing,
form of payment and payment contingencies thereof, shall be established by the
Committee.
Other Stock-Based Awards. The Plan also permits other awards of Common Stock
and other awards that are valued in whole or in part by reference to, or are
payable in cash or Common Stock, or otherwise based on Common Stock. The terms
and conditions of any such awards will be determined by the Committee,
including, but not limited to, the price, if any, and the vesting schedule, if
any. The Committee may provide for the grant of Common Stock under such an
award upon the completion of a specified performance period.
PAYMENT FOR AWARDS
The purchase price of any shares of Common Stock purchased pursuant to the
exercise of an award granted under the Plan shall be payable in full on the
exercise date in cash or by check or by surrender to the Company of shares of
Common Stock of the Company registered in the name of the participant, or by a
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combination of the foregoing. Any such shares so surrendered shall be deemed to
have a value per share equal to the fair market value of a share of Common
Stock on such date.
FEDERAL TAX CONSEQUENCES
Under current United States federal tax law, the following are the United
States federal income tax consequences generally arising with respect to awards
under the Plan.
A participant who is granted a non-qualified stock option does not have
taxable income at the time of grant, but does have taxable income at the time
of exercise equal to the difference between the exercise price of the shares
and the market value of the shares on the date of exercise. The Company is
entitled to a corresponding tax deduction for the same amount.
A participant who is granted an incentive stock option does not realize any
taxable income at the time of the grant or exercise of the option. The Company
is not entitled to any tax deduction at the time of the grant or exercise of
the option. If the participant makes no disposition of the shares acquired
pursuant to an incentive stock option before the later of (i) two years from
the date of grant or (ii) one year from the exercise of the option, any gain or
loss realized on a subsequent disposition of the shares will be treated as long
term capital gain or loss. Under such circumstances, the Company will not be
entitled to any deduction for federal income tax purposes. If the participant
disposes of the shares before the later of such dates, then the participant
will have ordinary income equal to the difference between the exercise price of
the shares and the market value of the shares on the date of exercise, and the
Company will be entitled to a corresponding tax deduction.
The grant of a SAR will produce no federal income tax consequences for the
participant or the Company. The exercise of a SAR results in taxable income to
the participant equal to the difference between the reference price of the SAR
and the market price of the Common Stock on the date of exercise, and a
corresponding tax deduction to the Company.
A participant who has been granted an award of restricted stock will not
realize taxable income at the time of the award, and the Company will not be
entitled to a tax deduction at the time of the award, unless the participant
makes an election to be taxed at the time of the award. When the restrictions
lapse, the participant will receive taxable income in an amount equal to the
excess of the market value of the shares at such time over the amount, if any,
paid for such shares. The Company will be entitled to a corresponding tax
deduction.
A participant who has been granted performance shares or performance units
will not realize taxable income at the time of the grant, and the Company will
not be entitled to a tax deduction at such time. A participant will realize
ordinary income at the time the award is paid equal to the amount of cash paid
or the value of shares delivered, the Company will have a corresponding tax
deduction.
The grant of an award of unrestricted Common Stock (which could be granted as
an "other stock-based award" under the Plan) will produce immediate tax
consequences for both the participant and the Company. The participant will be
treated as having received ordinary income in an amount equal to the excess of
the then fair market value of the Common Stock awarded over the amount, if any,
paid for such shares. The Company will receive a corresponding tax deduction.
The tax consequences of other types of "other stock-based awards" will depend
upon the nature and terms of the awards.
CHANGE IN CONTROL
Upon the occurrence of a defined change in control of the Company, with
respect to certain of the Company's senior executive officers (which, for the
purposes of this provision only, shall include no more
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than 10 persons; provided that a limited number of additional senior executive
officers may also be included with respect to this provision if each such
additional person is approved by the Committee and the Board), all stock
options and SARs would become fully vested and immediately exercisable for such
senior executive officers, the restrictions applicable to all shares of
restricted stock would lapse for such senior executive officers, and the
vesting of performance shares or performance units would be determined as if
the performance period or performance cycle had ended upon such defined change
in control for such senior executive officers.
AMENDMENT AND TERMINATION
The Board may at any time, and from time to time, amend, in whole or in part,
any or all of the provisions of the Plan or suspend or terminate it entirely,
retroactively or otherwise; provided, however, that unless otherwise required
by law or specifically provided in the Plan, the rights of a participant with
respect to options or other awards granted prior to such amendment, suspension
or termination may not be impaired without the consent of such participants;
and, provided further, that without the approval of the stockholders of the
Company, no amendment may be made which would materially increase the aggregate
number of shares of Common Stock that may be issued under the Plan; materially
change the definition of employees eligible to receive awards under the Plan;
decrease the minimum option price permitted under the Plan; materially increase
the benefits available to participants under the Plan; or otherwise amend the
Plan in any way that could negatively affect or interfere with the exemption
for the grant of awards provided under Rule 16b-3 under the Exchange Act.
No award or grant may be made under the Plan on or after April 22, 2004 (the
tenth anniversary of the adoption of the Plan).
The Plan is not subject to any provision of ERISA and is not qualified under
Section 401(a) of the Internal Revenue Code of 1986. However, if approved, the
Plan will be in conformity with Rule 16b-3 under the Exchange Act so that the
grants of certain awards under the Plan will be exempt from the operation of
Section 16(b) of the Exchange Act, provided certain holding periods and other
applicable conditions are complied with.
THE BOARD RECOMMENDS A VOTE FOR THE APPROVAL OF THE 1994 FLEXIBLE LONG TERM
INCENTIVE PLAN.
OTHER MATTERS
The management of the Company is not aware of any other matters to be
presented for action at the Annual Meeting; however, if any such matters are
properly presented for action, it is the intention of the persons named in the
enclosed form of proxy to vote in accordance with their best judgment on such
matters.
Proposals of stockholders intended to be presented at the 1995 annual meeting
of stockholders of the Company must be received at the Company's principal
executive offices no later than November 15, 1994, in order to be included in
the proxy statement and form of proxy for such meeting.
It is important that proxies be returned promptly to avoid unnecessary
expense. Stockholders are urged, regardless of the number of shares of Common
Stock of the Company owned, to date, sign and return the enclosed proxy.
By Order of the Board of Directors
/s/ Andrew F. Jacobs
Andrew F. Jacobs
Secretary
Dated: March 14, 1994
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APPENDIX A
CAPSTEAD MORTGAGE CORPORATION
1994 FLEXIBLE LONG TERM INCENTIVE PLAN
________________________________________________
Section 1. PURPOSE OF THE PLAN
The purposes of the Capstead Mortgage Corporation 1994 Flexible Long Term
Incentive Plan (the "Plan") are to promote the interests of Capstead Mortgage
Corporation (together with any successor thereto, the "Company") and its
stockholders by enabling the Company to attract, motivate, reward and retain key
employees and to encourage the holding of proprietary interests in the Company
by persons who occupy key positions in the Company or its Affiliates by enabling
the Company to offer such key employees performance-based stock incentives and
other equity interests in the Company and other incentive awards that recognize
the creation of value for the stockholders of the Company and promote the
Company's long-term growth and success. To achieve this purpose, eligible
persons may receive stock options, Stock Appreciation Rights, Restricted Stock,
Performance Awards, performance stock, Dividend Equivalent Rights and any other
Awards, or any combination thereof.
Section 2. DEFINITIONS
As used in this Plan, the following terms shall have the meanings set forth
below unless the content otherwise requires:
2.1 "Affiliate" shall mean (i) any corporation, partnership or
other entity that, directly or indirectly, is controlled by the Company
(ii) any entity in which the Company has a significant equity interest and
(iii) any entity that provides substantial management advisory services
for the Company, in each case as determined by the Committee.
2.2 "Award" shall mean a stock option, Stock Appreciation Right,
Restricted Stock, Performance Award, performance stock, Dividend Equivalent
Right or any other Award under the Plan.
2.3 "Board" shall mean the Board of Directors of the Company, as
the same may be constituted from time to time.
2.4 "Change in Control" shall mean, after the effective date of
this Plan, (i) the occurrence of an event of a nature that would be
required to be reported in response to Item 1 or Item 2 of a Form 8-K
Current Report of the Company promulgated pursuant to Sections 13 and
15(d) of the Securities Exchange Act of 1934, as amended; provided that,
without limitation, such a Change in Control shall be deemed to have
occurred if (a) any "person," as such term is used in Sections 13(d) and
14(d) of the Exchange Act (other than the Company, any trustee or other
fiduciary holding securities under any employee benefit plan of the
Company, or any company owned, directly or indirectly, by the stockholders
of the Company in substantially the same proportions as their ownership
of stock of the Company), is or becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act, directly or indirectly, of
securities of the Company representing twenty-five percent (25%) or more
of the combined voting power of the Company's then outstanding securities
or (b) during any period of two consecutive years, individuals who at the
beginning of such period constitute the Board cease for any reason to
constitute at least a majority thereof, unless the election by the Board
or the nomination for election by the Company's stockholders was approved
by a vote of at least two-thirds (2/3) of the directors then still in
office who either were directors
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at the beginning of the two-year period or whose election or nomination for
election was previously so approved; (ii) the stockholders of the Company
approve a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation that would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) more than eighty
percent (80%) of the combined voting power of the voting securities of the
Company or such surviving entity outstanding immediately after such merger
or consolidation; provided, however, that a merger or consolidation
effected to implement a reorganization or recapitalization of the Company,
or a similar transaction (collectively, a "Reorganization"), in which no
"person" acquires more than twenty percent (20%) of the combined voting
power of the Company's then outstanding securities shall not constitute a
Change in Control of the Company; or (iii) the stockholders of the Company
approve a plan of complete liquidation of the Company or an agreement for
the sale or disposition by the Company of all or substantially all of the
Company's assets.
2.5 "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
2.6 "Committee" shall mean a committee of the Board, which shall
consist solely of not less than two (2) members of the Board who are
appointed by, and serve at the pleasure of, the Board and who are (i)
"disinterested" within the meaning of Rule 16b-3 of the General Rules and
Regulations of the Exchange Act and (ii) "outside directors," as required
under Section 162(m) of the Code and such Treasury Regulations as may be
promulgated thereunder. The Plan shall be administered and interpreted by
the Committee, which Committee meets the requirements for "disinterested
administration" within the requirements of Rule 16b-3 and any future rule
promulgated therefor during the duration of the Plan. The Board may amend
the Plan to modify the definition of Committee within the limits of Rule
16b-3 to assure that the Plan is administered by "disinterested" directors.
2.7 "Common Stock" shall mean the Common Stock, par value $.01 per
share, of the Company.
2.8 "Disability" shall mean permanent and total inability to engage
in any substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result in death or
which has lasted or can be expected to last for a continuous period of not
less than twelve (12) months, as determined in the sole and absolute
discretion of the Committee.
2.9 "Dividend Equivalent Right" shall mean the right of the holder
thereof to receive credits based on the cash dividends that would have been
paid on the Shares specified in the Award if the Shares were held by the
holder to whom the Award is made.
2.10 "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended from time to time.
2.11 "Fair Market Value" shall mean with respect to the Shares, as of
any date, (i) the last reported sales price regular way on the New York
Stock Exchange or, if not reported for the New York Stock Exchange, on the
Composite Tape, or, in case no such sale takes place on such day, the
average of the reported closing bid and asked quotations on the New York
Stock Exchange; (ii) if the Shares are not listed on the New York Stock
Exchange or no such quotations are available, the closing price of the
Shares as reported by the National Market System, or similar organization,
or, if no such quotations are available, the average of the high bid and
low asked quotations in the over-the-counter market as reported by the
National Quotation Bureau Incorporated, or similar organization; or (iii)
in the event that there shall be no public market for the Shares, the fair
market value of the Shares as determined (which determination shall
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be conclusive) in good faith by the Committee, based upon the value of the
Company as a going concern, as if such Shares were publicly owned stock,
but without any discount with respect to minority ownership.
2.12 "Incentive Stock Option" shall meany any stock option awarded
under this Plan intended to be and designated as an "Incentive Stock
Option" under Section 422 of the Code or any successor provision.
2.13 "Non-Tandem Stock Appreciation Right" shall mean any Stock
Appreciation Right granted alone and not in connection with an Award which
is a stock option.
2.14 "Non-Qualified Stock Option" shall mean any stock option awarded
under this Plan that is not an Incentive Stock Option.
2.15 "Optionee" shall mean any person who has been granted a stock
option under this Plan and who has executed a written stock option
agreement with the Company reflecting the terms of such grant.
2.16 "Plan" shall mean the Capstead Mortgage Corporation 1994
Flexible Long Term Incentive Plan set forth herein.
2.17 "Performance Award" shall mean any Award hereunder of Shares,
units or rights based upon, payable in, or otherwise related to, Shares
(including Restricted Stock), or cash of an equivalent value, as the
Committee may determine, at the end of a specified performance period
established by the Committee.
2.18 "Reload Option" shall mean a stock option as defined in
subsection 6.7(b) herein.
2.19 "Restricted Stock" shall mean any Award of Shares under this
Plan that are subject to restrictions or risk of forfeiture.
2.20 "Retirement" shall mean termination of employment, other than
discharge for cause, after age 65 or on or before age 65 if pursuant to the
terms of any retirement plan maintained by the Company or any of its
Affiliates in which such person participates.
2.21 "Senior Officers" shall mean the Senior Officers of the Company
as set forth in subsection 6.5(e) herein.
2.22 "Shares" shall mean shares of the Company's Common Stock and any
shares of capital stock or other securities of the Company hereafter issued
or issuable upon, in respect of or in substitution or exchange for such
Shares.
2.23 "Stock Appreciation Right" shall mean the right of the holder
thereof to receive an amount in cash or Shares equal to the excess of the
Fair Market Value of a Share on the date of exercise over the Fair Market
Value of a Share on the date of the grant (or such other value as may be
specified in the agreement granting the Stock Appreciation Right).
2.24 "Tandem Stock Appreciation Right" shall mean a Stock
Appreciation Right granted in connection with an Award which is a stock
option.
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Section 3. ADMINISTRATION OF THE PLAN
3.1 Committee. The Plan shall be administered and interpreted by
the Committee.
3.2 Awards. Subject to the provisions of the Plan and directions
from the Board, the Committee is authorized to:
(a) determine the persons to whom Awards are to be granted;
(b) determine the types and combinations of Awards to be
granted, the number of Shares to be covered by the Award, the pricing
of the Award, the time or times when the Award shall be granted and
may be exercised, the terms, performance criteria or other conditions,
vesting periods or any restrictions for an Award, any restrictions on
Shares acquired pursuant to the exercise of an Award and any other
terms and conditions of an Award;
(c) conclusively interpret the Plan provisions;
(d) prescribe, amend and rescind rules and regulations
relatin to the Plan or make individual decisions as questions arise,
or both;
(e) determine whether, to what extent and under what
circumstances to provide loans from the Company to participants in
order to purchase Shares subject to Awards under the Plan, and the
terms and conditions of such loans;
(f) rely upon employees of the Company for such clerical and
record-keeping duties as may be necessary in connection with the
administration of the Plan; and
(g) make all other determinations and take all other actions
necessary or advisable for the administration of the Plan.
3.3 Procedures. A majority of the Committee members shall
constitute a quorum. All determinations of the Committee shall be made by
a majority of its members. All questions of interpretation and
application of the Plan or pertaining to any question of fact or Award
granted hereunder shall be decided by the Committee, whose decision shall
be final, conclusive and binding upon the Company and each other affected
party.
Section 4. SHARES SUBJECT TO PLAN
4.1 Limitations. The maximum number of Shares that may be issued
with respect to Awards under the Plan shall not exceed 1,250,000 unless
such maximum shall be increased or decreased by reason of changes in
capitalization of the Company as hereinafter provided. The maximum number
of Shares with respect to which Awards may be granted in any fiscal year to
any participant in the Plan shall not exceed 300,000. The Shares issued
pursuant to the Plan may be authorized but unissued Shares, or may be
issued Shares which have been reacquired by the Company.
4.2 Changes. To the extent that any Award under the Plan, or any
stock option or performance award granted under any prior incentive plan of
the Company, shall be forfeited, shall expire or shall be cancelled, in
whole or in part, then the number of Shares covered by the Award or stock
option so forfeited, expired or cancelled may again be awarded pursuant to
the provisions of this Plan. In the event that Shares are delivered to the
Company in full or partial payment of the exercise price for the exercise
of a stock option granted under the Plan or any prior incentive plan of the
Company, the number
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of Shares available for future Awards under the Plan shall be reduced only
by the net number of Shares issued upon the exercise of the option. Awards
that may be satisfied either by the issuance of Shares or by cash or other
consideration shall be counted against the maximum number of Shares that
may be issued under the Plan, even though the Award is ultimately satisfied
by the payment of consideration other than Shares, as, for example, a stock
option granted in tandem with a Stock Appreciation Right that is settled
by a cash payment of the stock appreciation. However, Awards will not
reduce the number of Shares that may be issued pursuant to the Plan if the
settlement of the Award will not require the issuance of Shares, as, for
example, a Stock Appreciation Right that can be satisfied only by the
payment of cash.
Section 5. ELIGIBILITY
Except with respect to stock options and Stock Appreciation Rights,
eligibility for participation in the Plan shall be confined to a select number
of persons who are employed by the Company, or one or more of its Affiliates,
and who are officers of the Company or one or more of its Affiliates, or who are
in managerial or other key positions in the Company or one or more of its
Affiliates. In making any determination as to persons to whom Awards shall be
granted, the type of Award, and/or the number of Shares to be covered by the
Award, the Committee shall consider the position and responsibilities of the
person, his or her importance to the Company and its Affiliates, the duties of
such person, his or her past, present and potential contributions to the growth
and success of the Company and its Affiliates, and such other factors as the
Committee shall deem relevant in connection with accomplishing the purposes of
the Plan. With respect to stock options and Stock Appreciation Rights, all
officers and employees of the Company are eligible for participation in the
Plan.
Section 6. STOCK OPTIONS
6.1 Grants. The Committee may grant stock options alone or in
addition to other Awards granted under this Plan to any eligible officer or
employee. Each person so selected shall be offered an option to purchase
the number of Shares determined by the Committee; provided, however, that
the maximum number of shares for which stock options may be granted during
any calendar year may not exceed 300,000 Shares for any eligible officer or
employee. The Committee shall specify whether such option is an Incentive
Stock Option or Non-Qualified Stock Option and any other terms or
conditions relating to such Award. To the extent that any stock option
does not qualify as an Incentive Stock Option (whether because of its
provisions or the time or manner of its exercise or otherwise), such stock
option or the portion thereof which does not qualify, shall constitute a
separate Non-Qualified Stock Option. Each such person so selected shall
have a reasonable period of time within which to accept or reject the
offered option. Failure to accept within the period so fixed by the
Committee may be treated as a rejection. Each person who accepts an option
shall enter into a written agreement with the Company, in such form as the
Committee may prescribe, setting forth the terms and conditions of the
option, consistent with the provisions of the Plan. The Optionee and the
Company shall enter into option agreements for Incentive Stock Options and
Non-Qualified Stock Options. At any time and from time to time, the
Optionee and the Company may agree to modify an option agreement in order
that an Incentive Stock Option may be converted to a Non-Qualified Stock
Option.
The Committee may require than an Optionee meet certain conditions
before the option or a portion thereof may vest or be exercised, as, for
example, that the Optionee remain in the employ of the Company or one of
its Affiliates for a stated period or periods of time before the option, or
stated portions thereof, may vest or be exercised; provided, however, that
nothing in the Plan or in any option agreement shall confer upon any
Optionee any right to remain in the employ of the Company or one of its
Affiliates, and nothing herein shall be construed in any manner to
interfere in any way with the right of the Company or its Affiliates to
terminate such Optionee's employment at any time.
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6.2 Option Price. The option exercise price of the Shares covered by
each stock option shall be determined by the Committee; provided, however,
that the option exercise price of an Incentive Stock Option or, with
respect to the Chief Executive Officer of the Company only, a Non-Qualified
Stock Option shall not be less than one hundred percent (100%) of the Fair
Market Value of Shares on the date of the grant of such Incentive Stock
Option.
6.3 Incentive Stock Options Limitations.
(a) In no event shall any person be granted Incentive Stock
Options so that the Shares covered by any Incentive Stock Options that
may be exercised for the first time by such person in any calendar
year have an aggregate Fair Market Value in excess of $100,000. For
this purpose, the Fair Market Value of the Shares shall be determined
as of the dates on which the Incentive Stock Options are granted. It
is intended that the limitation on Incentive Stock Options provided in
this paragraph be the maximum limitation on options which may be
considered Incentive Stock Options under the Code.
(b) Notwithstanding anything herein to the contrary, in no event
shall any employee owning more than ten percent (10%) of the total
combined voting power of the Company or any Affiliate corporation be
granted an Incentive Stock Option hereunder unless: the option
exercise price shall be at least one hundred ten percent (110%) of the
Fair Market Value of the Shares at the time that the option is granted
and the term of the option shall not exceed five (5) years.
6.4 Option Term. The term of a stock option shall be for such period
of months or years from the date of its grant as may be determined by the
Committee; provided, however, that no Incentive Stock Option shall be
exercisable later than ten (10) years from the date of its grant. Each
option shall be subject to earlier termination as hereinafter provided
(unless the Committee has provided otherwise):
(a) If the Optionee ceases to be an officer or employee of the
Company or any Affiliate by reason of the Optionee's discharge for
cause, as determined solely and exclusively by the Committee, all
rights of the Optionee to exercise an option shall terminate, lapse
and be forfeited immediately at the time of the Optionee's discharge
for cause.
(b) If the Optionee ceases to be an employee of the Company or
any Affiliate by reason of the Optionee's resignation, all rights of
the Optionee to exercise an option shall terminate, lapse and be
forfeited immediately upon the date of such resignation by the
Optionee.
(c) If the Optionee ceases to be an employee of the Company or
any Affiliate by reason of death, the personal representatives, heirs,
legatees or distributees of the Optionee, as appropriate, shall have
the right up to the earlier of (i) two (2) years from the Optionee's
death or (ii) the remaining term of the option to exercise any such
option.
(d) If the Optionee ceases to be an employee of the Company or
any Affiliate by reason of the Optionee's Retirement, Disability or
for any reason other than the Optionee's discharge for cause,
resignation or death, all rights of the Optionee to exercise an option
shall terminate, lapse, and be forfeited upon the earlier of (i) two
(2) years after the date of the Optionee's termination of employment
by reason of such employee's Retirement, Disability or such other
reason or (ii) the remaining term of the option, except that in case
the Optionee shall die within two (2) years after the date of
termination of employment by reason of such employee's Retirement,
Disability or such other reason, the personal representatives, heirs,
legatees or distributees of the Optionee, as appropriate, shall have
the right up to an additional twelve (12) months from the date of the
Optionee's death to exercise any such option.
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(e) Despite the provisions of paragraphs (b), (c) and (d) of
this subsection, no Incentive Stock Option shall be exercisable
after the expiration of the earlier of: (i) the ten (10) year period
beginning on the date of its grant, (ii)the three (3) month period
beginning on the date of the Optionee's termination of employment
for any reason other than death or Disability, or (iii) the one (1)
year period beginning on the date of the Optionee's termination of
employment by reason of Disability.
6.5 Vesting of Stock Options.
(a) Each stock option granted hereunder may only be exercised to
the extent that the Optionee is vested in such option. Each stock
option shall vest separately in accordance with the option vesting
schedule, if any, determined by the Committee in its sole discretion,
which will be incorporated in the stock option agreement entered into
between the Company and each Optionee. The option vesting schedule
will be accelerated in the event the provisions of paragraphs (b),
(c), (d) or (e) of this subsection apply; or if, in the sole
discretion of the Committee, the Committee determines that
acceleration of the option vesting schedule would be desirable for the
Company.
(b) If an Optionee ceases to be an employee of the Company or
any Affiliate by reason of death, Disability or Retirement or for any
reason other than the Optionee's resignation or discharge for cause,
the Optionee or the personal representatives, heirs, legatees or
distributees of the Optionee, as appropriate, shall become fully
vested in each stock option granted to the Optionee, effective on the
date of the Optionee's death or on the date that the Optionee ceases
to be an employee, as appropriate, and shall have the immediate right
to exercise any such option to the extent not previously exercised.
(c) In the event of the dissolution or liquidation of the
Company, each stock option granted under the Plan shall terminate as
of a date to be fixed by the Board; provided, however, that not less
than thirty (30) days' written notice of the date so fixed shall be
given to each Optionee and each such Optionee shall be fully vested in
and shall have the right during such period to exercise the option,
even though such option would not otherwise be exercisable under the
option vesting schedule. At the end of such period, any unexercised
option shall terminate and be of no further effect.
(d) In the event of a Reorganization:
(1) If there is no plan or agreement respecting the
Reorganization, or if such plan or agreement does not
specifically provide for the change, conversion or exchange of
the Shares under outstanding and unexercised stock options for
other securities then the provisions of the above paragraph (c)
of this subsection shall apply as if the Company had dissolved or
been liquidated on the effective date of the Reorganization; or
(2) If there is a plan or agreement respecting the
Reorganization, and if such plan or agreement specifically
provides for the change, conversion or exchange of the Shares
under outstanding and unexercised stock options for securities of
another corporation, then the Board shall adjust the Shares under
such outstanding and unexercised stock options (and shall adjust
the Shares remaining under the Plan which are then available to
be awarded under the Plan, if such plan or agreement makes no
specific provision therefor) in a manner not inconsistent with
the provisions of such plan or agreement for the adjustment,
change, conversion or exchange of such Shares and such options.
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(e) In the event of a Change in Control of the Company, with
respect to only certain senior executive officers of the Company (the
number of which shall include no more than ten (10) persons; provided,
that a limited number of additional senior executive officers shall
also be included if each such additional person is approved by the
Committee and the Board (collectively, the ten senior executive
officers plus any additional, approved senior executive officers shall
be referred to herein as the "Senior Officers")), all stock options
and any associated Stock Appreciation Rights shall become fully vested
and immediately exercisable and the vesting of all performance-based
stock options shall be determined as if the performance period or
cycle applicable to such stock options had ended immediately upon such
Change in Control.
6.6 Exercise of Stock Options.
(a) Stock options may be exercised as to Shares only in amounts
and at intervals of time specified in the written option agreement
between the Company and the Optionee. Each exercise of a stock
option, or any part thereof, shall be evidenced by a notice in writing
to the Company. The purchase price of the Shares as to which an
option shall be exercised shall be paid in full at the time of
exercise, and may be paid to the Company either:
(1) in cash (including check, bank draft or money order);
or
(2) by the delivery of Shares having a Fair Market Value
equal to the aggregate option price; or
(3) by a combination of cash and Shares.
(b) If an Optionee delivers Shares (including Shares of
Restricted Stock) already owned by him or her in full or partial
payment of the exercise price for any stock option granted under the
Plan or any prior incentive plan of the Company, or if the Optionee
elects to have the Company retain that number of Shares out of the
Shares being acquired through the exercise of the option having a
Fair Market Value equal to the exercise price of the stock option
being exercised, the Committee may authorize the automatic grant of a
new option (a "Reload Option") for that number of Shares as shall
equal the number of already owned Shares surrendered (including Shares
of Restricted Stock) or newly acquired Shares being retained in
payment of the option exercise price of the underlying stock option
being exercised. The grant of a Reload Option will become effective
upon the exercise of the underlying stock option. The option exercise
price of the Reload Option shall be the Fair Market Value of a Share
on the effective date of the grant of the Reload Option. Each Reload
Option shall be exercisable no earlier than six (6) months from the
date of its grant and no later than the time when the underlying stock
option being exercised could be last exercised. The Committee may
also specify additional terms, conditions and restrictions for the
Reload Option and the Shares to be acquired upon the exercise thereof.
(c) The amount, as determined by the Committee, of any federal,
state or local tax required to be withheld by the Company due to the
exercise of a stock option shall be satisfied, at the election of the
Optionee, either (a) by payment by the Optionee to the Company of the
amount of such withholding obligation in cash (the "Cash Method") or
(b) through either the retention by the Company of a number of Shares
out of the Shares being acquired through the exercise of the option or
the delivery of already owned Shares having a Fair Market Value equal
to the amount of the withholding obligation (the "Share Retention
Method"). If an Optionee elects to use the Share Retention Method in
full or partial satisfaction for any tax liability resulting from the
exercise of a stock option, the Committee may authorize the grant of a
Reload Option for that
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number of Shares as shall equal the number of Shares used to satisfy
the tax liabilities of the stock option being exercised on the price
and terms set forth in subsection (b) above. The cash payment or the
amount equal to the Fair Market Value of the Shares so withheld, as
the case may be, shall be remitted by the Company to the appropriate
taxing authorities. The Committee shall determine the time and manner
in which an Optionee may elect to satisfy a withholding obligation by
either the Cash Method or the Share Retention Method.
(d) An Optionee shall not have any of the rights of a
stockholder of the Company with respect to the Shares covered by a
stock option except to the extent that one or more certificates of
such Shares shall have been delivered to the Optionee, or the Optionee
has been determined to be a stockholder of record by the Company's
Transfer Agent, upon due exercise of the option.
6.7 Date of a Stock Option Grant. The granting of a stock option
shall take place only when the Committee approves the granting of such
option. Neither any action taken by the Board nor anything contained in
the Plan or in any resolution adopted or to be adopted by the Board or the
stockholders of the Company shall constitute the granting of a stock option
under the Plan.
Section 7. STOCK APPRECIATION RIGHTS
7.1 Grants. The Committee may grant to any eligible officer or
employee either Non-Tandem Stock Appreciation Rights or Tandem Stock
Appreciation Rights. Stock Appreciation Rights shall be subject to such
terms and conditions as the Committee shall impose; provided, however, that
the maximum number of shares (or cash equivalent value) with respect to
which Stock Appreciation Rights may be granted during any calendar year may
not exceed 300,000 Shares for any eligible officer or employee. The grant
of the Stock Appreciation Right may provide that the holder may be paid for
the value of the Stock Appreciation Right either in cash or in Shares, or a
combination thereof, at the discretion of the Committee. In the event of
the exercise of a Stock Appreciation Right payable in Shares, the holder of
the Stock Appreciation Right shall receive that number of whole Shares of
stock of the Company having an aggregate Fair Market Value on the date of
exercise equal to the value obtained by multiplying (i) either (a) in the
case of a Tandem Stock Appreciation Right, the difference between the Fair
Market Value of a Share on the date of exercise over the per share exercise
price of the related option, or (b) in the case of a Non-Tandem Stock
Appreciation Right, the difference between the Fair Market Value of a Share
on the date of exercise over the Fair Market Value on the date of the grant
by (ii) the number of Shares as to which the Stock Appreciation Right is
exercised. However, notwithstanding the foregoing, the Committee, in its
sole discretion, may place a ceiling on the amount payable upon exercise of
a Stock Appreciation Right, but any such limitation shall be specified at
the time that the Stock Appreciation Right is granted.
7.2 Exercisability. A Tandem Stock Appreciation Right may be granted
at the time of the grant of the related stock option or, if the related
stock option is a Non-Qualified Stock Option, at any time thereafter during
the term of the stock option. A Tandem Stock Appreciation Right granted in
connection with an Incentive Stock Option (i) generally may be exercised
at, and only at, the times and to the extent the related stock option is
exercisable, (ii) expires upon the termination of the related stock option,
(iii) may not exceed 100% of the difference between the exercise price of
the related stock option and the market price of the Shares subject to the
related stock option at the time the Tandem Stock Appreciation Right is
exercised and (iv) may be exercised at, and only at, such times as the
market price of the Shares subject to the related stock option exceeds the
exercise price of the related stock option. The Tandem Stock Appreciation
Right may be transferred at, and only at, the times and to the extent the
related stock option is transferable. If a Tandem Stock Appreciation
Right is granted, there shall be surrendered and cancelled from the option
at the time of exercise of the Tandem Stock Appreciation Right, in lieu of
exercise under
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the option, that number of Shares as shall equal the number of Shares as to
which the Tandem Stock Appreciation Right shall have been exercised.
7.3 Certain Limitations on Non-Tandem Stock Appreciation Rights. A
Non-Tandem Stock Appreciation Right will be exercisable as provided by the
Committee and will have such other terms and conditions as the Committee
may determine. A Non-Tandem Stock Appreciation Right is subject to
acceleration of vesting or immediate termination in certain circumstances
in the same manner as stock options pursuant to subsections 6.4 and 6.5 of
this Plan.
7.4 Limited Stock Appreciation Rights. The Committee is also
authorized to grant "limited stock appreciation rights," either as Tandem
Stock Appreciation Rights or Non-Tandem Stock Appreciation Rights. Limited
stock appreciation rights would become exercisable only upon the occurrence
of a Change in Control or such other event as the Committee may designate
at the time of grant or thereafter.
Section 8. RESTRICTED STOCK
8.1 Grants. The Committee may grant Awards of Restricted Stock for
no cash consideration, for such minimum consideration as may be required by
applicable law, or for such other consideration as may be specified by the
grant. The terms and conditions of the Restricted Stock shall be specified
by the grant agreement. The Committee, in its sole discretion, shall
determine what rights, if any, the person to whom an Award of Restricted
Stock is made shall have in the Restricted Stock during the restriction
period and the restrictions applicable to the particular Award, including,
without limitation, whether the holder of the Restricted Stock shall have
the right to vote the Shares and receive Dividend Equivalent Rights and
other distributions applicable to the Shares, the vesting schedule (which
may be based on service, performance or other factors) and rights to
acceleration of vesting (including, without limitation, whether non-vested
Shares are forfeited or vested upon termination of employment). Further,
the Committee may award performance-based Restricted Stock by conditioning
the grant, or vesting or such other factors, such as the release,
expiration or lapse of restrictions upon any such Award (including the
acceleration of any such conditions or terms) of such Restricted Stock upon
the attainment of specified performance goals or such other factors as the
Committee may determine; provided, however, that notwithstanding the
foregoing, and with respect to the Senior Officers only, upon a Change in
Control, the amount of granting or vesting, as the case may be, for all
performance-based Restricted Stock, shall be determined as if the
performance period or cycle applicable to such Restricted Stock had
terminated immediately upon such Change in Control; provided, however, that
to the extent that any such performance period or cycle is shortened
adversely to the Senior Officers by virtue of the Change in Control, such
Restricted Stock shall be prorated accordingly. The Committee shall also
determine when the restrictions shall lapse or expire and the conditions,
if any, under which the Restricted Stock will be forfeited or sold back to
the Company; provided, however, that notwithstanding the foregoing, and
with respect to the Senior Officers only, upon a Change in Control, all
restrictions applicable to Restricted Stock shall lapse and expire and
Shares of Restricted Stock with vesting provisions shall become fully
vested. Each Award of Restricted Stock may have different restrictions and
conditions. The Committee, in its discretion, may prospectively change the
restriction period and the restrictions applicable to any particular Award
of Restricted Stock. Unless otherwise set forth in the Plan, Restricted
Stock may not be disposed of by the recipient until the restrictions
specified in the Award expire. Subject to certain exceptions, the
aggregate number of nonperformance-based Shares of Restricted Stock that
may be awarded is limited to three percent (3%) of the aggregate number of
outstanding Shares of the Company's Common Stock; otherwise, the Committee
is not limited in the total number of Shares of Restricted Stock that may
be awarded under the Plan.
8.2 Awards and Certificates. Any Restricted Stock issued hereunder
may be evidenced in such manner as the Committee, in its sole discretion,
shall deem appropriate including, without limitation, book-entry
registration or issuance of a stock certificate or certificates. In the
event any stock certificate
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is issued in respect of Shares of Restricted Stock awarded hereunder, such
certificate shall bear an appropriate legend with respect to the
restrictions applicable to such Award. The Company may retain, at its
option, the physical custody of any stock certificate representing any
awards of Restricted Stock during the restriction period or require that
the Restricted Stock be placed in escrow or trust, along with a stock power
endorsed in blank, until all restrictions are removed or expire.
Section 9. PERFORMANCE AWARDS
9.1 Grants. A Performance Award may consist of either or both, as
the Committee may determine, of (i) "Performance Shares" or the right to
receive Shares, Restricted Stock or cash of an equivalent value, or any
combination thereof as the Committee may determine, or (ii) "Performance
Units," or the right to receive a fixed dollar amount payable in cash,
Common Stock, Restricted Stock or any combination thereof, as the Committee
may determine. The Committee may grant Performance Awards to any eligible
employee, for no cash consideration, for such minimum consideration as may
be required by applicable law or for such other consideration as may be
specified at the time of the grant. The terms and conditions of
Performance Awards shall be specified at the time of the grant and may
include provisions establishing the performance period, the performance
criteria to be achieved during a performance period, the criteria used to
determine vesting (including the acceleration thereof), whether Performance
Awards are forfeited or vest upon termination of employment during a
performance period and the maximum or minimum settlement values; provided,
however, that notwithstanding the foregoing, and with respect to the Senior
Officers only, upon a Change in Control, the vesting, if any, and the
determination of the amount earned of a Performance Award shall be
determined as if the performance period or cycle applicable to such
Performance Award had terminated immediately upon such Change in Control;
provided, however, that to the extent that any such performance period or
cycle is shortened adversely to the Senior Officers by virtue of the Change
in Control, such Performance Award shall be prorated accordingly. Each
Performance Award shall have its own terms and conditions, which shall be
determined in the discretion of the Committee. If the Committee
determines, in its sole discretion, that the established performance
measures or objectives are no longer suitable because of a change in the
Company's business, operations, corporate structure or for other reasons
that the Committee deems satisfactory, the Committee may modify the
performance measures or objectives and/or the performance period.
9.2 Terms and Conditions. Performance Awards may be valued by
reference to the Fair Market Value of a Share or according to any formula
or method deemed appropriate by the Committee, in its sole discretion,
including, but not limited to, achievement of specific financial,
production, sales, cost or earnings performance objectives that the
Committee believes to be relevant to the Company's business and for
remaining in the employ of the Company for a specified period of time, or
the Company's performance or the performance of its Common Stock measured
against the performance of the market, the Company's industry segment or
its direct competitors. Performance Awards may be paid in cash, Shares
(including Restricted Stock) or other consideration, or any combination
thereof. If payable in Shares, the consideration for the issuance of the
Shares may be the achievement of the performance objective established at
the time of the grant of the Performance Award. Performance Awards may be
payable in a single payment or in installments and may be payable at a
specified date or dates or upon attaining the performance objective, all at
the Committee's discretion. The extent to which any applicable performance
objective has been achieved shall be conclusively determined by the
Committee.
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Section 10. DIVIDEND EQUIVALENT RIGHTS
The Committee may grant a Dividend Equivalent Right, either as a component
of another Award or as a separate Award, and, in general, each such holder of a
Dividend Equivalent Right that is outstanding on a dividend record date for the
Company's Common Stock shall be credited with an amount equal to the cash or
stock dividends or other distributions that would have been received had the
Shares covered by the Award been issued and outstanding on the dividend record
date. The terms and conditions of the Dividend Equivalent Right shall be
specified by the grant. Dividend equivalents credited to the holder of a
Dividend Equivalent Right may be paid currently or may be deemed to be
reinvested in additional Shares (which may thereafter accrue additional Dividend
Equivalent Rights). Any such reinvestment shall be at the Fair Market Value at
the time thereof. Dividend Equivalent Rights may be settled in cash or Shares,
or a combination thereof, in a single payment or in installments. A Dividend
Equivalent Right granted as a component of another Award may provide that such
Dividend Equivalent Right shall be settled upon exercise, settlement or payment
for or lapse of restrictions on such other Award, and that such Dividend
Equivalent Right shall expire or be forfeited or annulled under the same
conditions as such other Award. A Dividend Equivalent Right granted as a
component of another Award may also contain terms and conditions different from
such other Award.
Section 11. OTHER AWARDS
The Committee may grant to any eligible employee other forms of Awards
based upon, payable in or otherwise related to, in whole or in part, Shares if
the Committee, in its sole discretion, determines that such other form of Award
is consistent with the purposes and restrictions of the Plan. The terms and
conditions of such other form of Award shall be specified by the grant,
including, but not limited to, the price, if any, and the vesting schedule, if
any. Such Awards may be granted for no cash consideration, for such minimum
consideration as may be required by applicable law or for such other
consideration as may be specified by the grant.
Section 12. NON-TRANSFERABILITY OF AWARDS.
A stock option shall not be transferable otherwise than by will or the laws
of descent and distribution, and a stock option may be exercised, during the
lifetime of the Optionee, only by the Optionee; provided, however, that with the
approval of the Committee, the agreement relating to any Award (including,
without limitation, a stock option) may provide that such Award may be
transferred to one or more members of the immediate family of the grantee of the
Award or to a trust for the benefit of such person or as directed under a
qualified domestic relations order. Any attempted assignment, transfer, pledge,
hypothecation or other disposition of a stock option or other Award contrary to
the provisions hereof, or the levy of any execution, attachment or similar
process upon a stock option or other Award shall be null and void and without
effect.
Section 13. COMPLIANCE WITH SECURITIES AND OTHER LAWS
In no event shall the Company be required to sell or issue Shares under any
Award if the sale or issuance thereof would constitute a violation of applicable
federal or state securities laws or regulations or a violation of any other law
or regulation of any governmental or regulatory agency or authority or any
national securities exchange. As a condition to any sale or issuance of Shares,
the Company may place legends on Shares, issue stop transfer orders and require
such agreements or undertakings as the Company may deem necessary or advisable
to assure compliance with any such laws or regulations, including, if the
Company or its counsel deems it appropriate, representations from the person to
whom an Award is granted that he or she is acquiring the Shares solely for
investment and not with a view to distribution and that no distribution of the
Shares will be made unless registered pursuant to applicable federal and state
securities laws, or in the opinion of counsel of the Company, such registration
is unnecessary.
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Section 14. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR REORGANIZATION
The value of an Award in Shares shall be adjusted from time to time as
follows:
(a) Subject to any required action by stockholders, the number of
Shares covered by each outstanding Award, and the exercise price, shall be
proportionately adjusted for any increase or decrease in the number of
issued Shares of the Company resulting from a subdivision or consolidation
of Shares or the payment of a stock dividend (but only in Shares) or any
other increase or decrease in the number of Shares effected without receipt
of consideration by the Company.
(b) Subject to any required action by stockholders, if the Company
shall be the surviving corporation in any Reorganization, merger or
consolidation, each outstanding Award shall pertain to and apply to the
securities to which a holder of the number of Shares subject to the Award
would have been entitled, and if a plan or agreement reflecting any such
event is in effect that specifically provides for the change, conversion or
exchange of Shares, then any adjustment to Shares relating to an Award
hereunder shall not be inconsistent with the terms of any such plan or
agreement.
(c) In the event of a change in the Shares of the Company as
presently constituted, which is limited to a change of par value into the
same number of Shares with a different par value or without par value, the
Shares resulting from any such change shall be deemed to be the Shares
within the meaning of the Plan.
To the extent that the foregoing adjustments relate to stock or
securities of the Company, such adjustments shall be made by the Board,
whose determination shall be final, binding and conclusive.
Except as hereinbefore expressly provided in the Plan, any person to
whom an Award is granted shall have no rights by reason of any subdivision
or consolidation of stock of any class or the payment of any stock dividend
or any other increase or decrease in the number of shares of stock of any
class or by reason of any dissolution, liquidation, reorganization, merger
or consolidation or spinoff of assets or stock of another corporation, and
any issue by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall not affect, and no
adjustment by reason thereof shall be made with respect to, the number or
exercise price of Shares subject to an Award.
The grant of an Award pursuant to the Plan shall not affect in any way
the right or power of the Company to make adjustments, reclassifications,
Reorganizations or changes of its capital or business structure or to merge
or to consolidate or to dissolve, liquidate or sell or transfer all or any
part of its business or assets.
Section 15. AMENDMENT OR TERMINATION OF THE PLAN
15.1 Amendment of the Plan. Notwithstanding anything contained in the
Plan to the contrary, all provisions of the Plan may at any time or from time
to time be modified or amended by the Board; provided, however, that no Award
at any time outstanding under the Plan may be modified, impaired or cancelled
adversely to the holder of the Award without the consent of such holder; and
provided, further, that the Plan may not be amended without approval by the
holders of a majority of the Shares of the Company represented and voted at a
meeting of the stockholders (a) to increase the maximum number of Shares
subject to the Plan, (b) to materially modify the requirements as to
eligibility for participation in the Plan, (c) to decrease the minimum
exercise price for options, (d) to otherwise materially increase the benefits
accruing to persons to whom Awards may be made under the Plan, as amended, or
(e) if such approval is otherwise necessary, to comply with Rule 16b-3
promulgated under the Exchange Act, as amended, or to comply with any other
applicable laws, regulations or listing requirements, or to qualify for an
exemption or characterization that is deemed desirable by the Board.
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<PAGE>
15.2 Termination of the Plan. The Board may suspend or terminate the Plan
at any time, and such suspension or termination may be retroactive or
prospective. However, no Award may be granted on or after April 22, 2004, the
tenth anniversary of the adoption of the Plan. Termination of the Plan shall
not impair or affect any Award previously granted hereunder and the rights of
the holder of the Award shall remain in effect until the Award has been
exercised in its entirety or has expired or otherwise has been terminated by the
terms of such Award.
Section 16. AMENDMENTS AND ADJUSTMENTS TO AWARDS
The Committee may amend, modify or terminate any outstanding Award with the
Participant's consent at any time prior to payment or exercise in any manner not
inconsistent with the terms of the Plan, including, without limitation, (i) to
change the date or dates as of which (A) an option becomes exercisable or (B) a
performance-based Award is deemed earned or (ii) to cancel an Award and grant a
new Award in substitution therefor under such different terms and conditions as
it determines in its sole and complete discretion to be appropriate. The
Committee is also authorized to make adjustments in the terms and conditions of,
and the criteria included in, Awards in recognition of unusual or nonrecurring
events (including, without limitation, the events described in Section 14
hereof) affecting the Company, or the financial statements of the Company or any
Affiliate, or of changes in applicable laws, regulations or accounting
principles, whenever the Committee determines that such adjustments are
appropriate in order to prevent reduction or enlargement of the benefits or
potential benefits intended to be made available under the Plan. Any provision
of the Plan or any agreement regarding an Award to the contrary notwithstanding,
the Committee may cause any Award granted to be cancelled in consideration of a
cash payment or alternative Award made to the holder of such cancelled Award
equal in value to the Fair Market Value of such cancelled Award. The
determinations of value under this Section 16 shall be made by the Committee in
its sole discretion.
Section 17. GENERAL PROVISIONS
17.1 No Limit on Other Compensation Arrangements. Nothing contained in
the Plan shall prevent the Company from adopting or continuing in effect other
compensation arrangements, and such arrangements may be either generally
applicable or applicable only in specific cases.
17.2 No Right to Employment. The grant of an Award shall not be construed
as giving the recipient thereof the right to be retained in the employ of the
Company. Further, the Company may at any time dismiss a participant in the Plan
from employment, free from any liability or any claim under the Plan, unless
otherwise expressly provided in the Plan or in any Award agreement. No
employee, participant or other person shall have any claim to be granted any
Award, and there is no obligation for uniformity or treatment of employees,
participants or holders or beneficiaries of Awards.
17.3 GOVERNING LAW. THE VALIDITY, CONSTRUCTION AND EFFECT OF THE PLAN AND
ANY RULES AND REGULATIONS RELATING TO THE PLAN SHALL BE DETERMINED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF MARYLAND.
17.4 Severability. If any provision of the Plan or any Award is or
becomes or is deemed to be invalid, illegal or unenforceable in any
jurisdiction or as to any person or Award, or would disqualify the Plan or any
Award under any law deemed applicable by the Committee, such provision shall
be construed or deemed amended to conform to applicable laws, or if it cannot
be construed or deemed amended without, in the sole determination of the
Committee, materially altering the intent of the Plan or the Award, such
provision shall be stricken as to such jurisdiction, person or Award and the
remainder of the Plan and any such Award shall remain in full force and
effect.
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<PAGE>
17.5 No Fractional Shares. No fractional Shares shall be issued or
delivered pursuant to the Plan or any Award, and the Committee shall determine
whether cash, other securities or other property shall be paid or transferred in
lieu of any fractional Shares or whether such fractional Shares or any rights
thereto shall be cancelled, terminated or otherwise eliminated.
17.6 Headings. Headings are given to the subsections of the Plan solely
as a convenience to facilitate reference. Such headings shall not be deemed in
any way material or relevant to the construction or interpretation of the Plan
or any provision thereof.
17.7 Effective Date. The Plan shall be effective as of April 22, 1994,
the date of its approval by the holders of a majority of the Shares of the
Company represented and voting at the 1994 Annual Meeting of Stockholders. If
the Plan is not approved by the stockholders at the 1994 Annual Meeting, after
such date, the Plan and all Awards granted hereunder, if any, shall be void.
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<PAGE>
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CAPSTEAD MORTGAGE CORPORATION
P PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
THE COMPANY FOR AN ANNUAL MEETING APRIL 22, 1994
R
The undersigned hereby appoints Ronn K. Lytle, Andrew F. Jacobs and Julie A.
O Moore, and each of them, his true and lawful agents and proxies with full
power of substitution in each, to represent the undersigned at the annual
X meeting of stockholders of Capstead Mortgage Corporation to be held at 2001
Bryan Tower, Suite 3500, Dallas, Texas, on Friday, April 22, 1994, and at
Y any adjournments thereof, on all matters coming before said meeting.
Election of Directors, Nominees:
J. Michael Cornwall, Bevis Longstreth, Paul M. Low, Ronn K. Lytle,
Harriet E. Miers and William R. Smith.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES,
SEE REVERSE SIDE, BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN
ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. THE PROXY COMMITTEE
CANNOT VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD.
-----------
SEE REVERSE
SIDE
-----------
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[X] PLEASE MARK YOUR SHARES IN YOUR NAME REINVESTMENT SHARES
VOTES AS IN THIS +
EXAMPLE. +
+
+++++
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of 2. Proposal to ratify the
Directors [_] [_] selection of Ernst & [_] [_] [_]
(see reverse). Young as independent
auditors for the Company.
3. Proposal to amend the [_] [_] [_]
Company's Bylaws.
4. Proposal to adopt the [_] [_] [_]
1994 Flexible Long Term
Incentive Plan.
5. In their discretion, [_] [_] [_]
the Proxies are
authorized to vote upon
For, except vote withheld such other business as
from the following nominee(s): may properly come before
the meeting.
- ------------------------------
SIGNATURE(S) ______________________________________ DATE _______
SIGNATURE(S) ______________________________________ DATE _______
NOTE: PLEASE SIGN EXACTLY AS NAME APPEARS HEREON. JOINT OWNERS
SHOULD EACH SIGN. WHEN SIGNING AS ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE
AS SUCH.
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