<PAGE> 1
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:
<TABLE>
<S> <C>
[ ] 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 Section 240.14a-11(c) or Section 240.14a-2.
</TABLE>
Capstead Mortgage Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-12.
(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.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
[CAPSTEAD LOGO]
------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held April 22, 1998
------------------------------------------------------------
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 Wednesday, April 22, 1998 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 and
(ii) 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 16, 1998 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 75204-2915
March 6, 1998
<PAGE> 3
CAPSTEAD MORTGAGE CORPORATION
2711 North Haskell Avenue, Suite 900
Dallas, Texas 75204-2915
------------------------------------------------------------
ANNUAL MEETING OF STOCKHOLDERS
To Be Held April 22, 1998
------------------------------------------------------------
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 22, 1998 (the "Annual Meeting"). This Proxy
Statement and accompanying proxy will first be mailed to stockholders on or
about March 6, 1998.
At the Annual Meeting, action will be taken to elect six directors to hold
office until the next Annual Meeting of Stockholders and until their successors
shall have been elected and qualified.
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,
facsimile 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.
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, 1997, 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 16, 1998 to vote in the election of
directors. 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 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,
$0.01 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.
For purposes of determining the number of votes cast with respect to any
other voting matter that may properly come before the meeting (except as noted
herein), all votes cast for or against and abstentions are included. 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.
1
<PAGE> 4
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. 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. As of February 16, 1998, there were 59,469,559 shares of Common Stock
outstanding and entitled to vote. Only stockholders of record at the close of
business on February 16, 1998 are entitled to vote at the Annual Meeting or any
adjournment thereof.
2
<PAGE> 5
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 16, 1998, 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
------------------------------
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------------------------------------------
BEVIS LONGSTRETH Mr. Longstreth retired in 1998 from the New York
Of Counsel, law firm of Debevoise & Plimpton where he had
Debevoise & Plimpton been a partner since 1970. He is currently an
Adjunct Professor of Law at Columbia University
School of Law. He served as Commissioner of the
Member: Audit and Compensation Committees Securities and Exchange Commission from 1981
to 1984. He is a member of the Board of
AMVESCAP plc, College Retirement Equities
Director since 1994 Fund, and the American Stock Exchange and
Shares beneficially owned 44,661 serves as Chairman of the Finance Committee of
Age 64 the Rockefeller Family Fund and Chairman of the
Investment Committee of The Nathan Cummings
Foundation.
- -------------------------------------------------------------------------------------------------------------------------------
PAUL M. LOW Mr. Low is the founder of and was Chairman of the
Retired Chairman of the Board, Board of 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
Chairman: Executive and Nominating Committees December 1990, serving in various executive
positions with LMUSA for more than five years
prior to 1987. Mr. Low served as Senior Executive
Director since November 1990; Vice President of the Company from April 1985 to
and April 1985 to March 1990 January 1988.
Shares beneficially owned 63,851
Age 67
- -------------------------------------------------------------------------------------------------------------------------------
RONN K. LYTLE Mr. Lytle has been Chairman and Chief Executive
Chairman of the Board, Officer of the Company since August 1992 and
Chief Executive Officer and President and Chief Operating Officer since
President, January 1989. Prior thereto, he served in various
Capstead Mortgage Corporation positions with the Company since its inception in
1985. Mr. Lytle also served as a director,
Chairman and Chief Executive Officer of Tyler
Member: Executive and Nominating Committees Cabot Mortgage Securities Fund, Inc. ("Tyler
Cabot") from March 1992 until its merger into the
Director since 1988 Company in December 1992; and, prior thereto,
Shares beneficially owned 690,021 from Tyler Cabot's organization in August 1988
Age 57 until March 1992, as a director, President and
Chief Operating Officer.
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE> 6
------------------------------
Nominees for Director
------------------------------
<TABLE>
<S> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
HARRIET E. MIERS Ms. Miers has served as President of the Dallas
President and Shareholder, law firm of Locke Purnell Rain Harrell since
Locke Purnell Rain Harrell March 1996 and has been a shareholder in the
(A Professional Corporation) firm since 1978. She served as a member of the
Dallas City Council from 1989 to 1991 and President
of the State Bar of Texas from 1992 to
Chair: Audit Committee 1993. She is also a director of Attorneys'
Member: Nominating Committee Liability Assurance Society, Inc. Ms. Miers also
serves as Chair of the Texas Lottery
Commission and on the Executive Board of the
Director since 1993 Southern Methodist University Law School and
Shares beneficially owned 36,994 as Chair of the Board of Editors for the American
Age 52 Bar Journal.
- ---------------------------------------------------------------------------------------------------------------------------------
WILLIAM R. SMITH Mr. Smith has been Chairman and Chief
Chairman of the Board and Executive Officer of Smith Capital Management,
Chief Executive Officer, Inc., an asset management firm, for more than
Smith Capital Management, Inc. the previous five years. He is on the Finance
Committee of the Winthrop Rockefeller
Foundation, the Investment Committee of the
Chairman: Compensation Committee Navigators and is director and Chairman of the
Member: Audit Committee Investment Committee of the New Horizons
Foundation.
Director since 1993
Shares beneficially owned 48,369
Age 58
- ---------------------------------------------------------------------------------------------------------------------------------
JOHN C. TOLLESON Mr. Tolleson is founder and former Chairman
Former Chairman of the Board and and Chief Executive Officer of First USA, Inc., a
Chief Executive Officer, financial services company specializing in the
First USA, Inc. credit card business, a position he held from
1985 through 1997. He is also a director of
Banc One Corporation, Visa International, Visa
Member: Compensation and Executive Committees USA, Inc., Viad Corporation and Paymentech,
Inc. Mr. Tolleson also serves on the Executive
Board of the Edwin L. Cox School of Business at
Director since 1994 Southern Methodist University.
Shares beneficially owned 68,732
Age 49
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE> 7
BOARD OF DIRECTORS
During the year ended December 31, 1997, the Board of Directors held four
regular meetings and four dividend meetings. No director attended fewer than 84
percent of all meetings of the Board and the committees on which such director
served.
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 (the
"Directors Plan"), each nonemployee director was, on each of January 1, 1997 and
1998, automatically awarded options (which were immediately exercisable) to
purchase 2,250 shares of Common Stock at an exercise price equal to the market
price of the Common Stock on date of grant, and Dividend Equivalent Rights
("DERs") entitling them to receive additional shares of Common Stock at no cost
upon exercise of outstanding options. 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 1997. 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
five times during 1997. 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 and the Chief Executive Officer (other than for base salary); to
evaluate the performance of the Chief Executive Officer and make recommendations
with respect to base salary for the Chief Executive Officer to the full Board of
Directors; 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, did not meet during
1997. 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 once during
1997. 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> 8
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>
Capstead Mortgage Corporation
Ronn K. Lytle............... 57 Chairman, Chief Executive Officer and President
Andrew F. Jacobs............ 38 Senior Vice President--Control, Treasurer and Secretary
Julie A. Moore.............. 36 Senior Vice President--Asset and Liability Management
Capstead Inc.
Christopher T. Gilson....... 56 President and Chief Operating Officer
William H. Rudluff.......... 55 Executive Vice President--Servicing Administration
Larry G. Studinski.......... 46 Senior Vice President--Control and Treasurer
</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 of Capstead Inc. since December 1993.
Prior thereto, he served as President of NationsBanc Mortgage Corporation from
1989 to 1993. From 1973 to 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 1994, and of the Company from
October 1992 to February 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. 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> 9
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, 1997, 1996 and 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
-------------------------------------------- --------------------
Other Total Restricted
Annual Annual Stock All Other
Name and Salary Bonus Compensation(a) Compensation Awards Options Compensation
principal position Year ($) ($) ($) ($) ($) (#) ($)
- --------------------------------- -------- -------- --------- ----------- ---------- --------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ronn K. Lytle.................... 1997 620,000 749,500 148,159 1,517,659 2,445,900(b) 205,107 134,176(c)
Chairman, Chief Executive 1996 546,000 688,000 130,965 1,364,965 946,520(b) 81,034 124,279(c)
Officer and President 1995 520,000 524,000 14,100 1,058,100 -- 234,845 105,042(c)
Christopher T. Gilson............ 1997 365,000 332,000 57,894 754,894 1,311,200(b) 95,977 72,416(c)
President and Chief Operating 1996 330,000 237,500 48,392 615,892 273,155(b) 67,120 59,588(c)
Officer of Capstead Inc. 1995 315,000 79,750 17,908 412,658 7,800(d) 5,976 42,891(c)
Julie A. Moore................... 1997 210,000 226,000 41,095 477,095 641,480(b) 88,122 18,146(c)
Senior Vice President-- 1996 176,000 183,500 36,992 396,492 273,155(b) 64,419 15,474(c)
Asset and Liability 1995 168,000 104,000 4,840 276,840 7,800(d) 5,475 14,358(c)
Management
Andrew F. Jacobs................. 1997 190,000 176,500 41,095 407,595 629,940(b) 63,652 17,255(c)
Senior Vice President-- 1996 168,000 158,500 36,992 363,492 273,155(b) 64,419 14,130(c)
Control, Treasurer and 1995 157,500 100,000 4,840 262,340 7,800(d) 5,475 13,455(c)
Secretary
William H. Rudluff............... 1997 196,000 169,140 40,859 405,999 644,720(b) 62,740 39,962(c)
Executive Vice President-- 1996 174,000 141,500 34,447 349,947 226,904(b) 52,204 34,920(c)
Servicing Administration 1995 168,000 78,000 9,196 255,196 7,800(d) 4,994 33,165(c)
of Capstead Inc.
</TABLE>
--------------
(a) Includes dividends paid on unvested shares of restricted stock. See
footnotes (b) and (d), as applicable. None of the dividends paid were
deemed preferential.
(b) Amount includes the fair market value at the dates of grant of shares of
restricted stock of the Company awarded pursuant to the Company's 1994
Flexible Long-Term Incentive Plan. Each officer is considered the record
owner and is entitled to vote the shares and is entitled to receive all
dividends and any other distributions declared on the shares. On June 1,
1997, all full-time employees with one year of service as of April 18,
1997, were granted 1,000 shares of restricted stock, which vest 10 percent
annually for ten years with initial vesting on June 1, 1998. Amounts also
include the fair value of restricted stock issued by the Company pursuant
to the restructuring of long-term incentive compensation on January 2, 1998
(see "Restructuring of Long-Term Incentive Compensation"), which has been
reflected as a 1997 transaction. The shares will vest 20 percent on each
February 1, 1999, 2000, 2001, 2002 and 2003, provided the Company attains
certain performance goals. Any unvested interest in the shares of
restricted stock will revert to the Company in the event the officer or
employee leaves the Company. As of December 31, 1997 the number and value
of unvested restricted stock holdings of the Company's Common Stock by each
of the Named Executives, after giving effect to the January 2, 1998 grants,
were as follows:
<TABLE>
<CAPTION>
Number Value
-------------------- --------------------
<S> <C> <C>
Ronn K. Lytle 182,995 $3,648,463
Christopher T. Gilson 77,510 $1,545,356
Julie A. Moore 44,024 $877,729
Andrew F. Jacobs 43,447 $866,225
William H. Rudluff 41,936 $836,099
</TABLE>
(c) 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 made to all employees 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.
7
<PAGE> 10
(d) Amount includes the fair market value at the dates of grant of shares of
restricted stock of Capstead Holdings, Inc. awarded pursuant to the
Capstead Holdings, Inc. 1997 Restricted Stock Plan (formerly 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 over a seven-year period beginning in the year of grant as follows: 10
percent on each of July 1 for four years and 20 percent on each succeeding
July 1 for three years. Any unvested interest in the shares will revert to
Capstead Holdings, Inc. in the event the officer leaves the Company for any
reason, including death or disability, and Capstead Holdings, Inc. will
purchase the vested portion at Capstead Holdings, Inc.'s fair market 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. The number of restricted stock holdings of
Capstead Holdings, Inc., subject to fractional vesting as described above,
and the unvested value, as determined in good faith by management, as of
December 31, 1997 were as follows:
<TABLE>
<CAPTION>
Number Value
-------------------- --------------------
<S> <C> <C>
Christopher T. Gilson 43 $417,100
Julie A. Moore 13 $126,100
Andrew F. Jacobs 13 $126,100
William H. Rudluff 23 $223,100
</TABLE>
OPTION GRANTS
The table below shows information regarding grants of stock options and
Dividend Equivalent Rights ("DERs") made to the Named Executives under the
Company's 1994 Flexible Long-Term Incentive Plan and 1990 Employee Stock Option
Plan during the fiscal year ended December 31, 1997. The amounts shown for each
of the Named Executives as potential realizable values are based on arbitrarily
assumed annualized rates of stock price appreciation of 0 percent, 5 percent and
10 percent over the full term of the options.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants
Potential Realizable Value
at Assumed Annual
Number of Percent of Market Rates of Stock Price
Securities Total Options Price Appreciation for Option Term
Underlying Granted to Exercise on Date ---------------------------------
Options Employees in Price of Grant Expiration 0% 5% 10%
Name Granted Fiscal Year ($/SH) ($/SH) Date ($) ($) ($)
- ----------------------- --------------- -------------- --------- ------------ ---------- ------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ronn K. Lytle ......... 150,000(a) 14.6 23.50 23.50 1-2-07 0 2,216,854 5,617,942
55,107(b) 5.4 0.00 24.00 various 0(c) 0(c) 0(c)
58,854(b) 5.7 0.00 20.00 various 0(c) 0(c) 0(c)
Christopher T. Gilson.. 75,000(a) 7.3 23.50 23.50 1-2-07 0 1,108,427 2,808,971
20,977(b) 2.0 0.00 24.00 various 0(c) 0(c) 0(c)
31,412(b) 3.1 0.00 20.00 various 0(c) 0(c) 0(c)
Julie A. Moore......... 75,000(a) 7.3 23.50 23.50 1-2-07 0 1,108,427 2,808,971
13,122(b) 1.3 0.00 24.00 various 0(c) 0(c) 0(c)
16,999(b) 1.7 0.00 20.00 various 0(c) 0(c) 0(c)
Andrew F. Jacobs....... 50,000(a) 4.9 23.50 23.50 1-2-07 0 738,951 1,872,647
13,562(b) 1.3 0.00 24.00 various 0(c) 0(c) 0(c)
15,945(b) 1.6 0.00 20.00 various 0(c) 0(c) 0(c)
William H. Rudluff..... 50,000(a) 4.9 23.50 23.50 1-2-07 0 738,951 1,872,647
12,740(b) 1.2 0.00 24.00 various 0(c) 0(c) 0(c)
16,005(b) 1.6 0.00 20.00 various 0(c) 0(c) 0(c)
</TABLE>
- ---------------
* Denotes less than 1 percent.
(a) Stock options awarded at the fair market value of shares of Common Stock
at the date of award and become exercisable one-fourth on each May 1,
1997, 1998, 1999 and 2000. Such options lapse at the earliest of ten years
after award, six months after the optionee's termination of employment by
reason of resignation, death, disability or retirement, or at the time of
the optionee's termination of employment for cause.
(b) DERs awarded 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 entitled the holder to
receive additional shares of Common Stock at no cost to the holder (see
"Restructuring of Long-Term Incentive Compensation").
8
<PAGE> 11
(c) No potential realizable value is presented because such DERs were
repurchased by the Company pursuant to the restructuring of long-term
incentive compensation on January 2, 1998 (see "Restructuring of Long-Term
Incentive Compensation"), which has been reflected as a 1997 transaction.
OPTION EXERCISES AND FISCAL YEAR END OPTION VALUES
The following table shows stock option exercises by the Named Executive
during 1997 including the net gain realized on the date of exercise. In
addition, this table summarizes the total number of securities underlying stock
options, both exercisable and unexercisable, held by the Named Executives at
December 31, 1997. Also reported are the values for in-the-money options which
represents the positive spread between the exercise price of any such existing
stock options and the year end price of the Common Stock.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Underlying
Unexercised Options Value of Unexercised In-the-Money
Shares at Fiscal Year End Options at Fiscal Year End
Acquired on Value ---------------------------------- ------------------------------------
Name Exercise(a) Realized(a)(b) Exercisable Unexercisable Exercisable Unexercisable
- --------------------- -------------- --------------- ---------------- ---------------- --------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Ronn K. Lytle 294,142 $5,461,958 431,625 142,500 $2,835,948 $135,615
Christopher T. Gilson 64,360 $1,496,370 228,750 86,250 $1,414,425 $135,615
Julie A. Moore 84,627 $1,344,289 108,750 86,250 $561,885 $135,615
Andrew F. Jacobs 75,548 $1,232,330 105,500 67,500 $583,199 $135,615
William H. Rudluff 72,503 $1,241,864 109,242 61,500 $625,288 $108,492
</TABLE>
(a) Amounts include cash payments made by the Company for the repurchase of
DERs pursuant to the restructuring of long-term incentive compensation on
January 2, 1998 (see "Restructuring of Long-Term Incentive Compensation"),
which has been reflected as a 1997 transaction.
(b) Represents the difference between the fair market value of securities
acquired and the exercise price of the option.
RESTRUCTURING OF LONG-TERM INCENTIVE COMPENSATION
On January 2, 1998 the Company completed the restructuring of its
long-term incentive compensation program for 31 of its key officers. The
restructuring involved the repurchase by the Company of outstanding DERs granted
to key officers in exchange for the aggregate cash payment of $10,523,578 and
the elimination of the right to receive future DERs in exchange for the grant of
452,627 restricted shares of the Company's Common Stock (the "Restructuring").
For each DER held, participating officers received $23.25 and one restricted
share of the Company's Common Stock that vests over 5 years. No additional
compensation expense was necessary to consummate the cash payment portion of the
Restructuring as annual compensation accruals for the DER program from 1990 to
1997 were sufficient to fully provide for the repurchase of all outstanding
DERs.
The Company began reviewing DERs as a component of long-term incentive
compensation in the summer of 1997 as the annual DER expense accrual began
growing at levels previously unanticipated. DERs, which are granted annually
based on a formula of total dividends paid during the previous year in excess of
a benchmark rate of return, entitle the holder to receive additional shares of
Common Stock at no cost to the holder. Accordingly, the Company annually charges
to income the value of the DERs granted based on the market price of the Common
Stock on the date of grant. During 1997, the Company expensed $4,741,000 for
DERs and anticipated an accelerating expense accrual in 1998 and beyond, whereas
the Restructuring will limit annual compensation expense accruals over the next
five years to $1,811,000 and zero thereafter.
In October 1997 the Board of Directors, upon receiving an analysis from
Ernst & Young LLP comparing the existing long-term incentive compensation
program to a proposed program, requested that the Compensation Committee
consider alternatives to the current DER program, including its elimination and
9
<PAGE> 12
restructuring. On December 8, 1997, the Compensation Committee of the Board of
Directors, upon receiving a final analysis from Ernst & Young LLP and the
recommendation from the Company's management, approved the Restructuring. The
Compensation Committee believes that the Restructuring is in the best interest
of the stockholders. In particular, that the interests of the Company will be
better served with other forms of long-term incentive compensation that have
less impact on the net income of the Company while still providing nearly equal
value in long-term incentive compensation to key officers.
DERs were first introduced at Capstead in 1990 to enhance the Company's
stock option program. As a real estate investment trust, the Company pays out
virtually all of its earnings in dividends and thereby is not able to reinvest
earnings for future growth. As a result, dividends make up most of the Company's
total return to stockholders, whereas price appreciation of the Company's stock
makes up a smaller portion of the total return. By awarding grantees DERs for
dividends paid above a benchmark return, the previous plan was designed to
provide grantees with comparable benefits with those in corporations where stock
price appreciation alone is the major determinant of total stockholders return.
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, 1997, the 1992 Employment Agreement was automatically
extended one additional year and will now expire on December 31, 2001. During
the term of the 1992 Employment Agreement, Mr. Lytle will serve as Chairman,
Chief Executive Officer and President of the Company.
Mr. Lytle's 1992 Employment Agreement provides for annual increases of at
least 6 percent in base salary over the immediately preceding 12-month period.
On January 1, 1997 Mr. Lytle's base salary was increased to $620,000 for 1997.
In addition to base salary, Mr. Lytle is entitled to receive incentive
compensation as approved by the Compensation Committee.
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.
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> 13
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 and the Chief Executive
Officer (other than for base salary) (together, the "Named Executives") and
submits its recommendations with respect to base salary for 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 1997 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:
o Responsibilities within the Company.
o Completion of individual business objectives established prior to the
beginning of the year (which objectives may vary greatly from person to
person).
o Business unit and overall Company performance.
o Amount, form and timing of prior compensation amounts.
o Contributions toward executing the business strategy of the Company.
o A 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.
11
<PAGE> 14
Annual Incentives
The Company maintains three annual incentive plans. The Base Incentive
Compensation Plan and the Profit Sharing Plan are for all Company and Capstead
Inc. employees. The purpose of these plans is to focus employees on the
attainment of superior returns on stockholders' equity on an annual basis. The
Incentive Bonus Plan, as approved by the stockholders of the Company, is for
Named Executives and its purpose is to retain highly-qualified executives by
providing appropriate performance-based incentive awards to align executive and
stockholder long-term interests by creating a direct link between executive
compensation and the success of the Company. An additional purpose of the
Incentive Bonus Plan is to serve as a qualified performance-based compensation
program under Section 162(m) of the Code in order to preserve the Company's tax
deduction for compensation paid under the Incentive Bonus Plan to the Named
Executives.
The Compensation Committee has approved the creation of an incentive pool
(the "Incentive Pool"), from which both Base Incentive Compensation and
Incentive Bonuses are paid, equal to a percentage of net income (the
"Participation Percentage") above an 8 percent return on stockholders' equity
("ROE"). The Participation Percentage for the Incentive Pool is currently set at
7.5 percent of net income above an 8 percent ROE; however, the maximum pay-out
from such Incentive Pool to each Named Executives is based on a pre-determined
percentage of base salary depending upon the attainment of ROEs over a range
from 8 percent to 22 percent, but is subject to a downward adjustment of up to
25 percent at the discretion of the Committee. Prior to the beginning of the
year, the Chief Executive Officer 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 Chief Executive
Officer. Prior to the end of the year, the Chief Executive Officer makes his
recommendation to the Committee for the fourth quarterly distribution from the
Incentive Pool (payable in December of that year or in January of the following
year), which amount may or may not exceed the previous quarterly award and which
amount is designed to qualify as performance-based compensation for the Named
Executives under the Incentive Bonus Plan. 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 make awards in subsequent years. The quarterly award can be
terminated at any time by the Committee.
The Profit Sharing Plan also creates a profit pool ("Profit Sharing Pool")
equal to a percentage of net income above certain levels of ROE. The
Participation Percentage for the Profit Sharing Pool is currently set at 3
percent of net income above a 12 percent ROE and an additional 3 percent of net
income above a 15 percent ROE. Awards can be paid in cash and/or stock. The Plan
currently makes awards based only on tenure. Awards do not vary by position. Any
amount remaining in the Profit Sharing Pool after all distributions are made is
carried over and may be used to make awards in subsequent years. The Chief
Executive Officer recommends award levels to the Committee.
For 1997 the Company's ROE equaled 19.1 percent. As a result of exceeding
the 8 percent ROE threshold, additional amounts were added to the Incentive Pool
and Profit Sharing Pool.
Long-Term Incentives
The Committee believes that the Company and its affiliates' 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 Chief Executive Officer periodically recommends long-term incentive
grants for executive officers to the Committee under the Company's 1994 Flexible
Long-Term Incentive Plan and 1997 Flexible Long-Term Incentive Plan. The same
factors that are used in determining other elements of compensation are used in
determining long-term incentive grants. During 1997 the Committee made
nonqualified stock option and restricted stock grants to executive officers as
well as restricted stock grants to all employees, all of which were
12
<PAGE> 15
subject to certain vesting requirements. The nonqualified stock options were
granted with an exercise price equal to the fair market value of the Common
Stock on the date of grant.
13
<PAGE> 16
Restructuring of Long-Term Incentive Compensation
In December 1997, the Chief Executive Officer recommended, and the
Committee approved, the restructuring to the Company's long-term incentive
compensation for executive officers of the Company. The Committee determined
that the Company could significantly reduce certain accounting expenses of the
Company by (i) canceling outstanding dividend equivalent rights ("DERs"), (ii)
eliminating the right to receive future DERs, and (iii) not including the right
to DERs in future stock option grants. Accordingly, on January 2, 1998, each
executive officer of the Company holding DERs received a cash payment of $23.25
and a grant of one restricted share of the Company's Common Stock, based on the
number of DERs outstanding on January 2, 1998. The restricted stock will vest
over five years. These changes to existing and future stock options will result
in a substantial cost savings for the Company, while still providing nearly
equal value in long-term incentive compensation to the executive officers.
Other Executive Programs and Benefits
The Company maintains employee benefit plans in which all executive
officers, including the Chief Executive Officer, participate. The Company
sponsors a 401(k) plan and nonqualified deferred compensation plan (together the
"Plans") whereby the Company matches employee contributions up to a preset
percentage of the participant's compensation. The Company may also make
discretionary contributions into the Plans regardless of a participant's
participation. The Company believes its Plans are competitive with those of
other companies in the Dallas market of comparable size and scope of business.
1997 COMPENSATION FOR THE CHIEF EXECUTIVE OFFICER
The same philosophies described above for executive compensation were used
by the Committee to set, or in the case of base salary to recommend to the
Board, the compensation of Mr. Ronn K. Lytle, Chairman, Chief Executive Officer
and President.
Base Salary
Mr. Lytle's base salary in 1997 was $620,000. For 1998, the Committee
recommended and the Board approved a 4.8 percent base salary increase for Mr.
Lytle, which brings his base salary to $650,000.
Annual Incentives
The performance goals as established by the Committee for determining Mr.
Lytle's maximum annual incentive compensation for 1997 and as approved for 1998
are as follows:
<TABLE>
<CAPTION>
Target Return on Maximum Incentive
Average Compensation
Stockholders' as a Percentage
Equity of Base Salary(a)
----------------------------- -----------------------------
<S> <C>
Below 8% 0%
8% - 10% 20%
Over 10% - 12% 40%
Over 12% - 14% 60%
Over 14% - 16% 80%
Over 16% - 18% 100%
Over 18% - 20% 120%
Over 20% 140%
</TABLE>
(a) Subject to up to a 25% downward adjustment
at the discretion of the Committee.
14
<PAGE> 17
In January 1998, the Committee reviewed the Company's operating results
for 1997 and concluded that upon the Company achieving a ROE of 19.1 percent,
the performance goals had been met and awarded Mr. Lytle incentive compensation
at a level of 120 percent of base salary, after taking into consideration
previous incentive bonuses paid to Mr. Lytle earlier in the year. As a result,
Mr. Lytle's total incentive compensation for 1997 was $744,000. Mr. Lytle was
also awarded $5,500 under the Profit Sharing Plan.
Long-Term Incentives
The Committee granted Mr. Lytle 150,000 nonqualified stock options
(subject to certain vesting requirements) in January 1997. 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 further tie Mr. Lytle's interest to that of
the Company's stockholders. In addition, Mr. Lytle was granted 1,000 shares of
restricted stock pursuant to the grant to all employees of the same number of
restricted shares as discussed above.
Pursuant to the restructuring of long-term incentive compensation as
discussed above, Mr. Lytle received cash payment of $2,815,459 and the grant of
121,095 shares of restricted stock on January 2, 1998.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Section 162(m) of the Code generally precludes a publicly-held
corporation from a federal income tax deduction for a taxable year for
compensation in excess of $1 million paid to the chief executive officer or any
of the four most highly compensated other executive officers. Exceptions are
made for, among other things, qualified performance-based compensation.
Qualified performance-based compensation means compensation paid solely on
account of attainment of objective performance goals, provided that (i)
performance goals are established by a compensation committee consisting solely
of two or more outside directors, (ii) the material terms of the
performance-based compensation are disclosed to and approved by a separate
stockholder vote prior to payment and (iii) prior to payment, the compensation
committee certifies that the performance goals were attained and other material
terms were satisfied. The Committee's policy on deductibility is generally to
develop compensation plans which provide for the payment of compensation that is
tax deductible to the Company, while recognizing that the legitimate interest of
the Company and its stockholders may at times be better served by compensation
arrangements which are not tax deductible.
The Company recognizes that the aggregate of Mr. Lytle's base salary and
the portion of his incentive compensation that does not meet the definition of
qualified performance based compensation under Section 162(m) of the Code will
not be tax deductible to the extent it exceeds $1 million, but considers this
amount not to be significant to the Company.
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
15
<PAGE> 18
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 Russell 2000 Stock
Index for the five years ended December 31, 1997, assuming the investment of
$100 on December 31, 1992 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 CORPORATION COMMON STOCK AND
S&P 500 AND RUSSELL 2000 STOCK INDEX
[GRAPH]
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Capstead $ 100.00 $ 114.26 $ 53.77 $ 119.55 $ 209.15 $ 193.07
- ---------------------------------------------------------------------------------------------------------------
S&P 500 $ 100.00 $ 110.01 $ 111.51 $ 153.26 $ 188.36 $ 251.12
- ---------------------------------------------------------------------------------------------------------------
Russell $ 100.00 $ 117.00 $ 113.28 $ 142.97 $ 164.07 $ 197.74
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE> 19
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 16, 1998 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 Amount and Nature
of of Beneficial
Class Name of Beneficial Owner Ownership (a) Percent of Class*
-------- -------------------------------------------------------- ------------------ -----------------
<S> <C> <C>
Common Bevis Longstreth........................................ 44,661(b) *
Stock Paul M. Low............................................. 63,851(c) *
Ronn K. Lytle........................................... 690,021(d)(e) 1.2
Harriet E. Miers........................................ 36,994 *
William R. Smith........................................ 48,369 *
John C. Tolleson........................................ 68,732 *
Christopher T. Gilson................................... 311,871(d) *
Julie A. Moore.......................................... 169,375(d) *
Andrew F. Jacobs........................................ 155,611(d) *
William H. Rudluff...................................... 154,882(d) *
All nominees for Director and Executive Officers
as a group (11 persons)............................. 1,844,022(d) 3.1
</TABLE>
------------
* Denotes less than 1 percent.
(a) Amounts include shares of Common Stock issuable as follows:
<TABLE>
<CAPTION>
Right to Acquire
Exercisable Options
-------------------
<S> <C>
Bevis Longstreth ..................................... 23,732
Paul M. Low .......................................... 8,863
Ronn K. Lytle ........................................ 431,625
Harriet E. Miers ..................................... 27,189
William R. Smith ..................................... 27,189
John C. Tolleson ..................................... 23,732
Christopher T. Gilson ................................ 228,750
Julie A. Moore ....................................... 108,750
Andrew F. Jacobs ..................................... 105,500
William H. Rudluff ................................... 109,242
All nominees for Director
and Executive Officers
as a group (11 persons) ........................... 1,163,072
</TABLE>
(b) Includes 10,672 shares of Common Stock held in a limited partnership of
which he and his wife are the general partners and grantor trusts for his
children are the limited partners.
(a) Includes 16,679 shares of Common Stock 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.
(d) Includes 23,298 shares of Common Stock held in trust for Mr. Lytle's
children. Mr. Lytle is settlor and trustee of this trust and has voting
and dispositive power over the shares but expressly disclaims beneficial
ownership.
(e) Includes shares of restricted Common Stock granted January 2, 1998, which
vest 20 percent on each February 1, 1999, 2000, 2001, 2002 and 2003,
provided the Company attains certain performance goals, as follows: Ronn
K. Lytle, 121,095 shares; Christopher T. Gilson, 64,360 shares; Julie A.
Moore, 30,874 shares; Andrew F. Jacobs, 30,297 shares; William H. Rudluff,
31,036 shares; and all nominees for Director and Executive Officers as a
group (11 persons), 174,965 shares. In addition, includes 1,000 shares of
restricted Common Stock granted June 1, 1997, which vest 10 percent
annually on June 1 over ten years for each of the Named Executives and all
nominees for Director and Executive Officers as a group (11 persons),
6,000 shares.
17
<PAGE> 20
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
No person or group within the meaning of Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended, is known to the management of the
Company to be the beneficial owner of more than 5 percent of the outstanding
Common Stock.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the year ended December 31, 1997, all Section
16(a) filing requirements were complied with, with the exception of one Form 4
report covering two transactions, conversion and a purchase, which were filed
four days late by Mr. Low, a director of the Company, one Form 5 report covering
one gift transaction that was filed 21 days late by Mr. Smith, a director of the
Company, and two Form 5 reports covering three dividend reinvestment
transactions that were filed four months late by Messrs. Gilson and Studinski,
executive officers of the Company.
INDEPENDENT AUDITORS
During the year ended 1997, the Company engaged Ernst & Young LLP to
provide it with audit and tax 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 and the Internal Revenue Service,
assistance with management's evaluation of internal accounting controls,
consultation on financial and tax accounting and reporting matters, and
verification procedures as required by collateralized mortgage securities
indentures. Representatives of Ernst & Young LLP will be present at the meeting,
will have the opportunity to make a statement if they desire to do so, and will
be available to respond to appropriate questions.
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 1999 annual
meeting of stockholders must be received at the Company's principal executive
offices no later than November 15, 1998 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 6, 1998
18
<PAGE> 21
CAPSTEAD MORTGAGE CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY
FOR ANNUAL MEETING OF STOCKHOLDERS, APRIL 22, 1998
The undersigned hereby appoints Ronn K. Lytle, Andrew F. Jacobs and Julie
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 annual
meeting of stockholders of Capstead Mortgage Corporation to be held at CityPlace
Center East, 2711 North Haskell Avenue, Dallas, Texas, on Wednesday, April 22,
1998, and at any adjournments thereof, on all matters coming before said
meeting.
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)
- --------------------------------------------------------------------------------
<PAGE> 22
[CAPSTEAD LOGO]
- -------------------------------------------------------------------------------
CAPSTEAD MORTGAGE CORPORATION
ANNUAL MEETING
CityPlace Center East
2711 North Haskell Avenue
Dallas, Texas
APRIL 22, 1998
Please detach here
- -------------------------------------------------------------------------------
(Continued from other side)
1. ELECTION OF DIRECTORS:
[ ] FOR, except vote withheld from the following nominee(s) [ ] WITHHELD
Bevis Longstreth, Paul M. Low, Ronn K. Lytle, Harriet E. Miers,
William R. Smith and John C. Tolleson.
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name in the space provided below.)
- -------------------------------------------------------------------------------
2. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Dated:
---------------------------------
---------------------------------------
(Signature)
---------------------------------------
(Signature)
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.
PLEASE COMPLETE, SIGN AND MAIL THIS PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE
