<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [_]
Filed by a Party other than the Registrant [X]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] 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, if other than the Registrant)
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(i)(2)
or Item 22(a)(2) of Schedule 14A.
[_] $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 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
----------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
---------------------------------------------------------------------------
(5) Total fee paid:
---------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] 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.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
LOGO
[LOGO OF CAPSTEAD APPEARS HERE]
----------------------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held April 20, 1995
----------------------------------------------------
To the Stockholders of
CAPSTEAD MORTGAGE CORPORATION:
The Annual Meeting of Stockholders of Capstead Mortgage Corporation, a
Maryland corporation (the "Company"), will be held at CityPlace Center East,
2711 North Haskell Avenue, Dallas, Texas on Thursday, April 20, 1995 beginning
at 9:00 a.m. for the following purposes:
(i) To elect six directors to hold office until the next Annual Meeting of
Stockholders or until their respective successors shall have been
elected and qualified;
(ii) To ratify the selection of Ernst & Young LLP as independent auditors
of the Company; and
(iii) To transact any other business that may properly come before the
meeting or any adjournment thereof.
Stockholders of record at the close of business on February 10, 1995 will be
entitled to notice of and to vote at the meeting. IT IS IMPORTANT THAT YOUR
SHARES BE REPRESENTED AT THE MEETING REGARDLESS OF THE SIZE OF YOUR HOLDINGS.
EVEN IF YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE AND RETURN YOUR PROXY
CARD AS PROMPTLY AS POSSIBLE. You may, of course, revoke your proxy if you
attend the meeting and choose to vote in person.
By order of the Board of Directors,
ANDREW F. JACOBS
Secretary
2711 North Haskell Avenue, Suite 900
Dallas, Texas 75204
March 15, 1995
<PAGE>
CAPSTEAD MORTGAGE CORPORATION
2711 North Haskell Avenue, Suite 900
Dallas, Texas 75204
----------------------------------------------------
ANNUAL MEETING OF STOCKHOLDERS
To Be Held April 20, 1995
----------------------------------------------------
PROXY STATEMENT
This Proxy Statement, together with the enclosed proxy, is solicited by and
on behalf of the Board of Directors of Capstead Mortgage Corporation, a
Maryland corporation (the "Company"), for use at the Annual Meeting of
Stockholders to be held on April 20, 1995 (the "Annual Meeting"). This Proxy
Statement and accompanying proxy will first be mailed to stockholders on or
about March 15, 1995.
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 and (ii) to ratify the
selection of Ernst & Young LLP as independent auditors for the Company for the
year ending December 31, 1995.
SOLICITATION OF PROXIES
The enclosed proxy is solicited by the Board of Directors of the Company. The
expense of soliciting 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 $4,500
plus out-of-pocket expenses.
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, 1994,
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.
VOTING
The accompanying proxy card is designed to permit each stockholder of record
at the close of business on February 10, 1995 to vote in the election of
directors and on the ratification of the selection of Ernst & Young as
independent auditors for the Company for the year ending December 31, 1995. The
proxy card provides space for a stockholder to vote in favor of or to withhold
voting for any or all nominees for the Board of Directors and to vote for,
against or abstain from voting on the ratification of the selection of Ernst &
Young as independent auditors if the stockholder chooses to do so. With respect
to the election of directors at the Annual Meeting, each share of the Company's
outstanding shares of Common Stock, $.01 par value (the "Common Stock"), may be
voted for up to six individuals. To be elected, each nominee must receive a
majority of all votes cast at the meeting with respect to such position as
director at the meeting. Ratification of the selection of Ernst & Young
requires the affirmative vote of a majority of the votes cast at the meeting.
1
<PAGE>
For purposes of determining the number of votes cast with respect to any
voting matter (except as noted herein), all votes cast for or against and
abstentions are included. Shares as to which authority to vote has been
withheld with respect to the election of any nominee for director will not be
counted as a vote for such nominee. Abstentions will have the same legal effect
as a vote against a proposal. Broker nonvotes, if any, will be treated as not
present and not entitled to vote for a proposal.
The holders of a majority of the outstanding shares of Common Stock will
constitute a quorum for the transaction of business at the Annual Meeting.
Abstentions and broker nonvotes will be counted as shares that are present and
entitled to vote for the purpose of determining whether a quorum is present at
the Annual Meeting. If a quorum should not be present, the Annual Meeting may
be adjourned from time to time until a quorum is obtained. Stockholders are
urged to sign the accompanying form of proxy and return it promptly.
When a signed proxy card is returned with choices specified with respect to
voting matters, the shares represented are voted by the Proxies designated on
the proxy card in accordance with the stockholder's instructions to the
tabulator. A stockholder wishing to name another person as his or her proxy may
do so by crossing out the names of the three designated Proxies and inserting
the name of such other person to act as his or her proxy. In that case, it will
be necessary for the stockholder to sign the proxy card and deliver it to the
person named as his or her proxy and for the person so named to be present and
to vote at the Annual Meeting. Proxy cards so marked should not be mailed
directly to the Company.
If a signed proxy card is returned and the stockholder has made no
specifications with respect to voting matters, the shares will be voted for the
election of all of the nominees for director and for the ratification of the
selection of Ernst & Young. Valid proxies will be voted at the Annual Meeting
and at any adjournment in the manner specified.
RIGHT TO REVOKE PROXY
Any stockholder who has returned a proxy may revoke it at any time before it
is voted at the Annual Meeting by executing and delivering to the Secretary of
the Company prior to the Annual Meeting a later dated proxy, voting by ballot
at the meeting, or filing with the Inspectors of Election an instrument of
revocation at the meeting.
VOTING SECURITIES
The only outstanding voting equity securities of the Company are its shares
of Common Stock. Each share of Common Stock entitles the holder to one vote. At
February 10, 1995 there were outstanding and entitled to vote 15,303,923 shares
of Common Stock. Only stockholders of record at the close of business on
February 10, 1995 are entitled to vote at the Annual Meeting or any adjournment
thereof.
2
<PAGE>
ELECTION OF DIRECTORS
One of the purposes of the Annual Meeting is to elect directors to hold
office until the next annual meeting of stockholders and until their respective
successors have been elected and qualified. Set forth below are the names,
principal occupations, committee memberships, ages, beneficial ownership of the
Company's Common Stock as of February 10, 1995, directorships held with other
public companies, and other biographical data for the nominees for election as
well as the year each nominee was first elected as a director of the Company.
If any nominee should become unable to stand for election as a director--an
event that the Board of Directors does not presently expect--the proxy will be
voted for a replacement nominee if one is designated by the Board of Directors.
-----------------------------
Nominees for Director
-----------------------------
- --------------------------------------------------------------------------------
BEVIS LONGSTRETH Mr. Longstreth has been a partner in
Partner, the New York law firm of Debevoise &
Debevoise & Plimpton 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 serves
as Chairman of the Finance Committees
of the Rockefeller Family Fund and The
Nathan Cummings Foundation.
Member: Audit and Compensation
Committees
Director since 1994
Shares beneficially owned 13,232
Age 61
- --------------------------------------------------------------------------------
PAUL M. LOW Mr. Low was Chairman of the Board of
Retired Chairman of the Board, New America Financial L.P., a mortgage
New America Financial L.P. banking firm, from 1992 to 1994, when
he retired. He was President of Lomas
Mortgage USA ("LMUSA")
from July 1987 to his retirement in
December 1990, serving in various
executive positions with LMUSA for
more than five years prior to 1987.
Mr. Low served as Senior Executive
Vice President of the Company from
April 1985 to January 1988.
Chairman: Executive and Nominating
Committees
Director since November 1990;
and April 1985 to March 1990
Shares beneficially owned 41,081
Age 64
- --------------------------------------------------------------------------------
RONN K. LYTLE Mr. Lytle has been Chairman and Chief
Chairman of the Board, Executive Officer of the Company since
Chief Executive Officer and August 1992 and President and Chief
President, Operating Officer since January 1989.
Capstead Mortgage Corporation Prior thereto, he served in various
positions with the Company since its
inception in 1985. Mr. Lytle also
served as a director, 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.
Member: Executive and Nominating Committees
Director since 1988
Shares beneficially owned 95,966
Age 54
- --------------------------------------------------------------------------------
3
<PAGE>
-----------------------------
Nominees for Director
-----------------------------
- --------------------------------------------------------------------------------
HARRIET E. MIERS Ms. Miers has been a shareholder in the
Shareholder, Dallas law firm of Locke Purnell Rain
Locke Purnell Rain Harrell Harrell since 1978. She served as a
(A Professional Corporation) member of the Dallas City Council from
1989 to 1991 and President of the State
Bar of Texas from 1992 to 1993. She is
also a director of Attorneys' Liability
Assurance Society, Inc. Ms. Miers also
serves on the Executive Board of the
Southern Methodist University Law
School and as Chair of the Board of
Editors for the American Bar Journal.
Chair: Audit Committee
Member: Nominating Committee
Director since 1993
Shares beneficially owned 9,827
Age 49
- --------------------------------------------------------------------------------
WILLIAM R. SMITH Mr. Smith has been Chairman and Chief
Chairman of the Board and Executive Officer of Smith Capital
Chief Executive Officer, Management, Inc., an asset management
Smith Capital Management, Inc. firm, for more than the previous five
years.
Chairman: Compensation Committee
Member: Audit Committee
Director since 1993
Shares beneficially owned 9,227
Age 55
- --------------------------------------------------------------------------------
JOHN C. TOLLESON Mr. Tolleson is the founder of and has
Chairman of the Board and been Chairman and Chief Executive
Chief Executive Officer, Officer of First USA, Inc., a financial
First USA, Inc. services company specializing in the
credit card business, since August 1985
and Chairman of First USA Bank and
First USA Merchant Services, Inc. since
1985. He is also a director of Visa
International, Visa USA, Inc. and
Jayhawk Acceptance Corporation. Mr.
Tolleson also serves on the Executive
Board of the Edwin L. Cox School of
Business at Southern Methodist
University.
Member: Compensation and Executive Committees
Director since 1994
Shares beneficially owned 26,392
Age 46
- --------------------------------------------------------------------------------
BOARD OF DIRECTORS
During the year ended December 31, 1994, the Board of Directors held four
regular meetings and four telephonic meetings to declare dividends. The average
attendance at the aggregate of the total number of Board and committee meetings
was 99 percent in 1994. No director attended fewer than 92 percent of all
meetings of the Board and the committees on which such director served.
4
<PAGE>
Directors who are not employees of the Company or its subsidiaries receive
compensation at the rate of $40,000 annually and fees of $1,250 per meeting of
the directors or of a committee attended and $500 for participation in
telephonic meetings to declare dividends. In addition, nonemployee directors
are reimbursed for their expenses related to attending Board or committee
meetings.
In accordance with the terms of the 1990 Directors' Stock Option Plan, each
nonemployee director was, on each of January 1, 1994 and 1995, automatically
awarded options (which were immediately exercisable) to purchase 1,000 shares
of Common Stock and Dividend Equivalent Rights ("DERs") entitling them to
receive additional shares of Common Stock upon exercise of outstanding options
at no cost. The two directors elected after January 1, 1994 were, upon
election, automatically awarded options to purchase 5,000 shares of Common
Stock in accordance with the terms of the 1990 Directors' Stock Option Plan.
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 or committees of the Board.
COMMITTEES OF THE BOARD
The Board has established standing committees to assist it in the discharge
of its responsibilities. The principal responsibilities of each committee are
described in the succeeding paragraphs. Actions taken by any committee of the
Board are reported to the Board of Directors, usually at its next meeting.
Respective memberships on the various standing committees are identified in the
"Election of Directors" section of this Proxy Statement.
The Audit Committee, composed of three nonemployee directors, met twice
during 1994. The functions of the Committee include reviewing with management
and the independent auditors the annual results of operations, the accounting
and reporting policies and the adequacy of internal controls. The Committee
also recommends to the Board 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 Compensation Committee, composed of three nonemployee directors, met four
times during 1994. The Board has delegated to this committee the review of the
overall compensation philosophy and compensation structure to determine its
appropriateness; to review and approve the compensation arrangements of senior
management, other than the Chief Executive Officer; to evaluate the performance
of the Chief Executive Officer and review the compensation arrangements of the
Chief Executive Officer; to review and approve proposed amendments to the
benefit plans; to administer short, intermediate and long term incentive plans;
and to review the compensation arrangements of the members of the Board.
The Executive Committee, composed of three directors, met once during 1994.
During the intervals between meetings of the Board of Directors, the Executive
Committee has all of the powers and authority of the Board in the management of
the business and affairs of the Company except those powers which by law cannot
be delegated by the Board.
The Nominating Committee, composed of three directors, met twice during 1994.
It recommends to the Board a slate of directors for election by the
stockholders at each 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.
5
<PAGE>
EXECUTIVE OFFICERS
The following table shows the names and ages of the executive officers of the
Company. A description of the business experience of each for at least the past
five years follows the table.
<TABLE>
<CAPTION>
Name Age Title
- ------------------------ --- -------------------------------------------------------------------
<S> <C> <C>
Ronn K. Lytle........... 54 Chairman, Chief Executive Officer and President
Christopher T. Gilson... 53 President and Chief Operating Officer of Capstead Inc.
William H. Rudluff ..... 52 Executive Vice President--Servicing Administration of Capstead Inc.
Michael L. Brown........ 30 Senior Vice President--Correspondent Production of Capstead Inc.
Andrew F. Jacobs........ 35 Senior Vice President--Control, Treasurer and Secretary
Julie A. Moore.......... 33 Senior Vice President--Asset and Liability Management
Larry G. Studinski...... 43 Senior Vice President--Control and Treasurer of Capstead Inc.
</TABLE>
For a description of Mr. Lytle's business experience, see the "Election of
Directors" section of this Proxy Statement.
Mr. Gilson has served as President and Chief Operating Officer 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 Capstead Inc. since March 1, 1994, and of the Company from October 1992 to
March 1994. Prior thereto, he was Senior Vice President of LMUSA responsible
for delinquency and foreclosure administration from 1987 to 1992. Mr. Rudluff
had been associated with LMUSA since 1963.
Mr. Brown has served as Senior Vice President--Correspondent Production of
Capstead Inc. since March 1, 1994, and of the Company from October 1991 to
March 1994. Mr. Brown has been associated with the Company since 1987. Mr.
Brown also served as Vice President--Asset Management of Tyler Cabot from
February 1991 to September 1991.
Mr. Jacobs has served as Senior Vice President--Control and Treasurer of the
Company since October 1991 and Secretary of the Company since August 1992. From
July 1989 to September 1991, he served as Vice President--Control and Treasurer
of the Company. Mr. Jacobs has been associated with the Company since 1988. Mr.
Jacobs also served as Senior Vice President--Control and Treasurer of Tyler
Cabot from October 1991 until its merger into the Company in December 1992 and
from February 1989 to September 1991 as Vice President--Control.
Ms. Moore has served as Senior Vice President--Asset and Liability Management
of the Company since October 1991. From July 1990 to September 1991, she served
as Vice President--Asset and Liability Management of the Company. Ms. Moore has
been associated with the Company since 1988.
Mr. Studinski has served as Senior Vice President--Control and Treasurer of
Capstead Inc. since January 1994. Prior thereto, he served as Senior Vice
President of NationsBanc Mortgage Corporation from April 1990 to January 1994.
From 1987 to April 1990, Mr. Studinski was the Chief Accounting Officer and
Treasurer of Foster Mortgage.
6
<PAGE>
EXECUTIVE COMPENSATION
The Company's direction and policies are established by the Board of
Directors and implemented by the Chief Executive Officer. The Summary
Compensation Table shows certain compensation information for the Chief
Executive Officer and the four other most highly compensated executive
officers (the "Named Executives") for services rendered in all capacities
during the years ended December 31, 1994, 1993 and 1992.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
----------------------------------------- --------------------
Other Total Restricted
Annual Annual Stock All Other
Name and Salary Bonus Compensation Compensation Awards Options Compensation
principal position Year ($) ($) ($) ($) ($) (#) ($)
- ------------------------ ---- ------- ------- ------------ ------------ ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ronn K. Lytle........... 1994 520,000 199,000 36,250(a) 755,250 -- 120,190 45,478(b)
Chairman, Chief
Executive 1993 490,000 498,000 65,317(a) 1,053,317 -- 5,026 3,675(b)
Officer and President 1992 419,880 718,275 68,700(a) 1,206,855 127,500(c) 4,459 91,032(b)
Christopher T. Gilson... 1994 300,000 85,375 -- 385,375 200,000(e) 80,000 27,756(b)
President and Chief
Operating 1993 19,270 1,000 -- 20,270 -- -- --
Officer of Capstead
Inc. 1992 -- -- -- -- -- -- --
Julie A. Moore.......... 1994 160,000 99,000 -- 259,000 50,000(e) 40,314 10,550(b)
Senior Vice President-- 1993 138,833 121,850 -- 260,683 -- 4,185 725(b)
Asset and Liability 1992 94,000 110,250 -- 204,250 -- 4,092 --
Management
William H. Rudluff...... 1994 160,000 97,000 -- 257,000 100,000(e) 40,190 17,420(b)
Executive Vice
President-- 1993 150,000 74,000 -- 224,000 -- 4,000 1,125(b)
Servicing
Administration 1992 37,500 10,000 -- 47,500 -- 4,000 --
of Capstead Inc.
Andrew F. Jacobs........ 1994 150,000 91,000 -- 241,000 50,000(e) 40,314 9,240(b)
Senior Vice President-- 1993 129,500 117,850 -- 247,350 -- 4,102 1,012(b)
Control, Treasurer and 1992 91,000 103,250 -- 194,250 -- 4,092 --
Secretary
</TABLE>
- -------
(a) Amount includes dividends paid on unvested shares of restricted stock of
$36,250, $59,300 and $65,200 in 1994, 1993 and 1992, respectively.
(b) Amount includes matching contribution by the Company of 50 percent of a
participant's voluntary contribution of up to a maximum of 6 percent of a
participant's compensation pursuant to the 401(k) plan adopted October
1993. Amount also includes matching contribution by the Company of a
portion of the participant's voluntary contribution to a nonqualified
deferred compensation plan adopted July 1994. Additionally, the amount
includes a discretionary contribution into the qualified and nonqualified
plans of 3 percent of a participant's compensation regardless of
participation in the above noted plans. All Company contributions are
subject to certain vesting requirements.
(c) 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 Common Stock (the "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. The
Shares vest as follows: 5,000 Shares vested on May 1, 1993 and 1994, and
5,000 Shares will vest on May 1, 1995 and 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 by the
Company 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 and forfeited under the Transition
Agreement (see footnote (d) below). As of December 31, 1994, 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
10,000 Shares and $167,500, respectively.
7
<PAGE>
(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, the value
of which was reported as long term compensation in 1991. 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 lump-sum payout of certain retirement benefits of $91,032.
(e) Fair market value at the time of grant of shares of Capstead Inc. awarded
on July 1, 1994 pursuant to the Capstead Inc. 1994 Restricted Stock Plan.
Each officer is considered the record owner of and is entitled to vote the
shares and is entitled to receive all dividends and any other
distributions declared on the shares. The shares vest as follows: 10
percent on each of July 1, 1994, 1995, 1996 and 1997 and 20 percent on
each of July 1, 1998, 1999 and 2000. Any unvested interest in the shares
will revert to Capstead Inc. in the event the officer leaves the Company
for any reason, including death or disability, and Capstead Inc. will
purchase the vested portion at Capstead Inc.'s book value. The shares
cannot be sold, transferred or otherwise disposed of for any purpose
whatsoever other than to the Company. In the event of a Change in Control
(as defined therein), all outstanding unvested shares will automatically
vest in full.
OPTION GRANTS
The table below shows information regarding grants of stock options and DERs
made to the Named Executives under the Company's 1994 Flexible Long Term
Incentive Plan and 1990 Employee Stock Option Plan during the fiscal year
ended December 31, 1994. The amounts shown for each of the Named Executives as
potential realizable values are based on arbitrarily assumed annualized rates
of stock price appreciation of five percent and ten percent over the full ten-
year term of the options.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants
-------------------------------------------
Potential Realizable Value
at Assumed Annual
Percent of Rates of Stock Price
Number of Total Market Appreciation for Option
Securities Options Price Term
Underlying Granted to Exercise on Date --------------------------
Options Employees in Price of Grant Expiration 0% 5% 10%
Name Granted Fiscal Year ($/SH) ($/SH) Date ($) ($) ($)
- ------------------------ ---------- ------------ -------- -------- ---------- ------ --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ronn K. Lytle........... 120,000(a) 21.1 28.875 28.875 4-22-04 0 2,179,120 5,522,318
190(b) * 0.000 41.000 10-14-02 7,790 12,085 18,368
Christopher T. Gilson... 80,000(a) 14.0 28.875 28.875 4-22-04 0 1,452,747 3,681,545
Julie A. Moore.......... 40,000(a) 7.0 28.875 28.875 4-22-04 0 726,373 1,840,773
314(b) * 0.000 41.000 Various(b) 12,874 19,596 29,266
William H. Rudluff...... 40,000(a) 7.0 28.875 28.875 4-22-04 0 726,373 1,840,773
190(b) * 0.000 41.000 10-14-02 7,790 12,085 18,368
Andrew F. Jacobs........ 40,000(a) 7.0 28.875 28.875 4-22-04 0 726,373 1,840,773
314(b) * 0.000 41.000 Various(b) 12,874 19,596 29,266
</TABLE>
- --------
* Denotes less than one percent.
(a) Stock options are awarded at the fair market value of shares of Common
Stock at the date of award and become exercisable one-third on the date of
grant, April 22, 1994, one-third on May 1, 1995 and one-third on May 1,
1996. Such options lapse at the earliest of ten years after award, two
years after the optionee's termination of employment by reason of death,
disability or retirement, or at the time of the optionee's termination of
employment for any other reason.
(b) 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. 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 FISCAL YEAR-END OPTION VALUES
The following table summarizes the total number of securities underlying
stock options, both exercisable and unexercisable, held by the Named
Executives at December 31, 1994.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES*
<TABLE>
<CAPTION>
Number of Securities Underlying Unexercised
Options at Fiscal Year-End
----------------------------------------------------------
Name Exercisable Unexercisable
- ------------------------------- ---------------------------- ----------------------------
<S> <C> <C>
Ronn K. Lytle ................. 48,190 80,000
Christopher T. Gilson.......... 26,667 53,333
Julie A. Moore ................ 24,250 26,666
William H. Rudluff ............ 21,524 26,666
Andrew F. Jacobs............... 24,250 26,666
</TABLE>
- --------
* The columns for "Number of Shares Acquired on Exercise" and "Value
Realized" have been omitted because there were no options exercised during
the year ended December 31, 1994 by the Named Executives. In-the-money
options are those where the fair market value of the underlying securities
exceeds the exercise price of the option. The "Value of Unexercised, In-
the-Money Options at Fiscal Year-End" column has been omitted from the
table since the various exercise prices exceed the fair market value of the
underlying stock on December 31, 1994, which was $16.75 per share, for both
exercisable and unexercisable options
EMPLOYMENT AGREEMENTS
Mr. Lytle is a party to an Employment Agreement with the Company executed as
of August 1, 1992 and 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, 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, 1994 the 1992 Employment Agreement was
automatically extended one additional year and will now expire on December 31,
1998. 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 $520,000 through December 31, 1994. The 1992 Employment
Agreement provides for annual increases of at least six percent in Mr. Lytle's
base salary over the prior 12-month period for each of 1995 and 1996.
Notwithstanding such provision, Mr. Lytle declined any increase for 1995. Mr.
Lytle's salary for 1996 is scheduled to increase six percent over 1995's
amount but may be increased by a larger percentage at the Compensation
Committee's discretion. In addition to 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 the case of termination for Cause.
9
<PAGE>
Mr. Gilson has an employment agreement for the duration of his employment
with the Company. Mr. Gilson is entitled to receive the agreed to base salary
(plus any merit increases) and incentive compensation as approved by the
Compensation Committee. In the event of involuntary termination of employment,
Mr. Gilson will be entitled to lump-sum severance pay equal to his base salary
at the time of termination plus the average of his last two year's incentive
compensation.
10
<PAGE>
COMPENSATION COMMITTEE REPORT 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 to 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 1994 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.
EXECUTIVE COMPENSATION PROGRAM PHILOSOPHY
The philosophy behind the Company's executive compensation programs is to
attract, motivate, and retain the executives needed in order to maximize the
creation of long term stockholder value. The Committee believes that the
uniqueness of the Company's business, its strategic direction and the required
caliber of employees needed to execute its strategy require that compensation
be determined based on the following factors:
. Responsibilities within the Company.
. Completion of individual business objectives established prior to the
beginning of the year (which objectives may vary greatly from person to
person).
. Business unit and overall Company performance.
. Amount, form and timing of prior compensation amounts.
. Contributions toward executing the business strategy of the Company.
. Compensation practices of a self-selected comparison group of six
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.
The Committee believes that each of the above factors is important when
determining compensation levels. No specific weighting or formula regarding
such factors is used in determining compensation.
The Committee considers the following four elements of compensation to be the
primary components that constitute an executive's total compensation program:
(i) base salaries; (ii) annual incentives; (iii) long term incentives and (iv)
other executive programs and benefits. Each element is described in more detail
below.
Base Salaries
The Chief Executive Officer reviews base salaries annually utilizing the
above factors and makes recommendations to the Committee.
Annual Incentives
The Company maintains two annual incentive plans, the Base Incentive
Compensation Plan and the Profit Sharing Plan. The purpose of the plans is to
focus employees on the attainment of superior return on stockholders' equity on
an annual basis. All Company employees participate in both incentive plans.
11
<PAGE>
The Base Incentive Compensation Plan creates an incentive pool (the
"Incentive Pool") equal to a percentage of net income above a certain return on
stockholders' equity ("ROE"). Prior to the beginning of the year, the CEO
recommends to the Committee a quarterly distribution (payable April, July and
October of the following year) of a portion of the Incentive Pool to the
executives, including the CEO. Prior to the end of the year, the CEO makes his
recommendation to the Committee for the fourth quarterly distribution from the
Incentive Pool (payable in January of the following year), which amount may or
may not exceed the previous quarterly award. Recommendations for distributions
from the Incentive Pool are based on the same factors that are used in
determining other elements of compensation as described above. Any amount
remaining in the Incentive Pool after all distributions are made is carried
over and may be used to pay short term incentive compensation in subsequent
years. The quarterly award can be terminated at any time by the Committee.
The Profit Sharing Plan creates a profit pool equal to a percentage of net
income above certain levels of ROE. Awards can be paid in cash and/or stock.
The Plan makes awards based only on tenure and the continued ownership of stock
previously awarded under the Plan. Awards do not vary by position. The CEO
recommends award levels to the Committee.
For 1994 the Company's ROE equaled 13.27 percent. As a result of exceeding
the 8 percent ROE threshold relating to the Base Incentive Compensation Plan
and the 12 percent ROE threshold relating to the Profit Sharing Plan, a pool
was created for each annual incentive plan.
Long Term Incentives
The Committee believes that the Company's key employees should have an
ongoing stake in the long term success of the business. The Committee also
believes that key employees should have a considerable portion of their total
compensation paid in the form of stock. This element of the total compensation
program is intended to tie the executive's interest to that of the Company's
stockholders through the granting of stock options, restricted stock and other
incentive based awards.
The CEO periodically recommends long term incentive grants for executive
officers to the Committee. The same factors that are used in determining other
elements of compensation are used in determining long term incentive grants.
During 1994 the Committee made stock option and restricted stock grants to
executive officers.
Other Executive Programs and Benefits
The Company maintains competitive employee benefit plans in which all
executive officers, including the CEO, participate. The Company also sponsors a
nonqualified savings plan for officers intended to restore the same pretax
savings opportunity available to other employees not affected by government
imposed limitations.
1994 COMPENSATION FOR THE CEO
The same philosophies described above for executive compensation were used by
the Committee to recommend to the Board the compensation of Mr. Ronn K. Lytle,
Chairman, Chief Executive Officer and President.
Base Salary
The base salary for Mr. Lytle increased from $490,000 in 1993 to $520,000 in
1994. This increase represented a change of approximately six percent, which
the Committee felt was appropriate and consistent with the minimum annual
increase provided in Mr. Lytle's employment agreement. At the suggestion of Mr.
Lytle, the Committee recommended and the Board agreed that given the current
economic environment it would be appropriate for Mr. Lytle to forego a base
salary increase for 1995.
12
<PAGE>
Annual Incentives
The Committee awarded $195,000 to the CEO under the Base Incentive
Compensation Plan and $4,000 under the Profit Sharing Plan. The Base Incentive
Compensation Plan award represents payments made during the first three
quarters of 1994. At the suggestion of Mr. Lytle, which was accepted by the
Committee and approved by the Board, a fourth quarter award was not made to him
under the Base Incentive Compensation Plan.
Long Term Incentives
The Committee awarded Mr. Lytle 120,000 nonqualified stock options (subject
to certain vesting requirements) in April 1994. These options were granted with
an exercise price equal to the fair market value of the Common Stock on the
date of grant. The Committee believes that this element of the total
compensation package will help tie Mr. Lytle's interest to that of the
Company's stockholders.
LIMITATION OF TAX DEDUCTION FOR EXECUTIVE COMPENSATION
The Omnibus Budget Reconciliation Act of 1993 (the "Act") prevents publicly-
traded companies from receiving a tax deduction on compensation paid to proxy-
named executive officers in excess of $1 million annually, effective for
compensation paid after 1993. Although the Committee has not adopted a policy
relating to the Act, the Committee believes that there will be no impact from
this limitation to the Company in 1995.
CONCLUSION
Executive compensation at Capstead is subject to considerable focus by the
Committee, the Board of Directors and senior management. The Committee believes
that the Company's mix of base salary, short and long term incentives and other
benefits produces a strong attraction and motivation for its executive officers
and helps align their interests with those of the Company's stockholders.
William R. Smith,
Chairman
Bevis Longstreth
John C. Tolleson
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, 1994, assuming the investment of $100 on
December 31, 1989 and the reinvestment of dividends. The stock price
performance shown on the graph is not necessarily indicative of future price
performance.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
CAPSTEAD MORTGAGE COMMON STOCK AND S&P 500 AND S&P FINANCIAL INDEX
[GRAPH APPEARS HERE]
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94
- --------------------------------------------------------------------------------
Capstead $100.00 $104.39 $246.54 $362.04 $414.31 $192.05
- --------------------------------------------------------------------------------
S&P 500 $100.00 $96.94 $126.37 $136.01 $149.68 $150.64
- --------------------------------------------------------------------------------
S&P Financial $100.00 $78.68 $118.43 $146.03 $162.26 $155.22
</TABLE>
14
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
SECURITY OWNERSHIP OF MANAGEMENT
Listed in the following table and the notes thereto is certain information
with respect to the beneficial ownership of shares of Common Stock as of
February 10, 1995 by each director nominee, the executive officers listed in
the Summary Compensation Table and by all nominees for director and executive
officers as a group.
<TABLE>
<CAPTION>
Title
of Amount and Nature of
Class Name of Beneficial Owner Beneficial Ownership (a) Percent of Class*
------ ---------------------------- ------------------------ -----------------
<C> <S> <C> <C>
Common Bevis Longstreth(b) ........ 13,232 *
Stock Paul M. Low................. 41,081(c) *
Ronn K. Lytle............... 95,966 *
Harriet E. Miers............ 9,827 *
William R. Smith............ 9,227 *
John C. Tolleson(b) ........ 26,392
Christopher T. Gilson....... 27,386 *
Julie A. Moore.............. 30,608 *
William H. Rudluff.......... 22,552 *
Andrew F. Jacobs............ 26,676 *
All nominees for Director
and Executive Officers
as a group (12 persons).... 333,344 2.2
</TABLE>
- --------
* Denotes less than one percent.
(a) Amounts include shares of Common Stock issuable as follows:
<TABLE>
<CAPTION>
Right to Acquire
--------------------------------------------------------------
Series B Preferred Stock
------------------------------------------
Number of Shares Converted to Common Stock Exercisable Options
---------------- ------------------------- -------------------
<S> <C> <C> <C>
Bevis Longstreth........ -- -- 6,392
Paul M. Low............. 26,290 8,402 3,208
Ronn K. Lytle........... 1,977 631 49,911
Harriet E. Miers........ -- -- 7,727
William R. Smith........ -- -- 7,727
John C. Tolleson........ -- -- 6,392
Christopher T. Gilson... -- -- 27,386
Julie A. Moore.......... -- -- 25,467
William H. Rudluff...... -- -- 22,527
Andrew F. Jacobs........ -- -- 25,467
All nominees for
Director
and Executive Officers
as a group (12
persons)............... 28,267 9,033 210,893
</TABLE>
(b) Effective May 1, 1992 the Securities and Exchange Commission adopted
revised rules for reporting ownership of securities by directors and
executive officers and increased proxy statement disclosure. For the year
ended December 31, 1994, the Company notes that Mr. Tolleson's Form 3 was
filed late and that two of Mr. Longstreth's Form 4s covering two
transactions were filed late.
(c) Includes 6,640 shares of Common Stock and 767 shares of Common Stock that
would be received upon conversion of 2,400 shares of the Company's $1.26
Cumulative Convertible Preferred Series B held in trust for Mr. Low's son.
Mr. Low is settlor and trustee of this trust and has voting and
dispositive power over the shares but expressly disclaims beneficial
ownership.
15
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Listed in the following table is certain information with respect to the
beneficial ownership of shares of Common Stock as of February 10, 1995 by each
person or group within the meaning of Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended, who is known to the management of the
Company to be the beneficial owner of more than five percent of the
outstanding Common Stock.
<TABLE>
<CAPTION>
Title of Name and Address of Beneficial Amount and Nature of Percent of
Class Owner Beneficial Ownership * Class
-------- -------------------------------- ---------------------- ----------
<C> <S> <C> <C>
Common Howard Hughes Medical Institute
Stock 6701 Rockledge Drive
Bethesda, Maryland 20817....... 1,175,780 7.6
</TABLE>
- --------
* Based on a statement on Schedule 13G filed with the Securities and Exchange
Commission, as most recently amended on February 14, 1995. Includes 175,780
shares of Common Stock that would be received upon conversion of 550,000
shares of the Company's $1.26 Cumulative Convertible Preferred Series B.
Howard Hughes Medical Institute is a Delaware not-for-profit corporation.
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, 1995. 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, 1994, 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.
OTHER MATTERS
Management 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 1996 annual
meeting of stockholders must be received at the Company's principal executive
offices no later than November 15, 1995 to be included in the proxy statement
and form of proxy for such meeting.
By order of the Board of Directors,
ANDREW F. JACOBS
Secretary
March 15, 1995
16
<PAGE>
CAPSTEAD MORTGAGE CORPORATION
P PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
THE COMPANY FOR AN ANNUAL MEETING APRIL 20, 1995
R
The undersigned hereby appoints Ronn K. Lytle, Andrew F. Jacobs and Julie
O A. 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
X annual meeting of stockholders of Capstead Mortgage Corporation to be held
at CityPlace Center East, 2711 North Haskell Avenue, Dallas, Texas, on
Y Thursday, April 20, 1995, and at any adjournments thereof, on all matters
coming before said meeting.
Election of Directors, Nominees:
Bevis Longstreth, Paul M. Low, Ronn K. Lytle,
Harriet E. Miers, William R. Smith and John C. Tolleson
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
- -------------------------------------------------------------------------------
[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 LLP as independent
auditors for the Company.
3. In their discretion, the [_] [_] [_]
Proxies are authorized to
For, except vote withheld from vote upon such other
the following nominee(s): business as 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.
