<PAGE> 1
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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
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 Rule 14a-11(c) or Rule 14a-12
</TABLE>
CAPSTEAD MORTGAGE CORPORATION
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the 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)(1) 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:
- -------------------------------------------------------------------------------
(3) Filing party:
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(4) Date Filed:
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<PAGE> 2
CAPSTEAD
---------------------------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 27, 1999
---------------------------------------------------------
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, May 27, 1999 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 March 12, 1999 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,
/s/ ANDREW F. JACOBS
ANDREW F. JACOBS
Secretary
2711 North Haskell Avenue, Suite 900
Dallas, Texas 75204-2915
April 7, 1999
<PAGE> 3
CAPSTEAD MORTGAGE CORPORATION
2711 North Haskell Avenue, Suite 900
Dallas, Texas 75204-2915
----------------------------------------------------------
ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 27, 1999
----------------------------------------------------------
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 May 27, 1999 (the "Annual Meeting"). This Proxy
Statement and accompanying proxy will first be mailed to stockholders on or
about April 7, 1999.
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, 1998, 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 March 12, 1999 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 March 12, 1999, there were 59,866,520 shares of Common Stock
outstanding and entitled to vote. Only stockholders of record at the close of
business on March 12, 1999 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 March 12, 1999, 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> <C>
BEVIS LONGSTRETH Mr. Longstreth retired in 1998 from the New York law
Of Counsel, firm of Debevoise & Plimpton where he had been a
Debevoise & Plimpton partner since 1970. He is currently an Adjunct
Professor of Law at Columbia University School of Law.
He served as Commissioner of the Securities and
Member: Audit and Compensation Committees Exchange Commission from 1981 to 1984. He is a member
of the Board of AMVESCAP plc and of the College
Retirement Equities Fund and serves as Chairman of the
Director since 1994 Finance Committee of the Rockefeller Family Fund and
Shares beneficially owned 48,703 Chairman of the Investment Committee of The Nathan
Age 65 Cummings Foundation.
- -----------------------------------------------------------------------------------------------------------------------------
PAUL M. LOW Mr. Low has been Chief Executive Officer of Laureate
Chief Executive Officer, Inc., a privately-held software company, since 1998.
Laureate Inc. He was the founder of and was Chairman of the Board of
New America Financial L.P., a mortgage banking firm,
from 1992 to 1994, when he retired. He was President
Chairman: Executive and Nominating Committees 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
Director since November 1990; prior to 1987. Mr. Low served as Senior Executive Vice
and April 1985 to March 1990 President of the Company from April 1985 to January
Shares beneficially owned 83,264 1988.
Age 68
- -----------------------------------------------------------------------------------------------------------------------------
RONN K. LYTLE Mr. Lytle has been Chairman and Chief Executive Officer
Chairman of the Board, of the Company since August 1992 and President and Chief
Chief Executive Officer and Operating Officer since January 1989. Prior thereto, he
President, served in various positions with the Company since its
Capstead Mortgage Corporation 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
Member: Executive and Nominating Committees March 1992 until its merger into the Company in December
1992; and, prior thereto, from Tyler Cabot's
Director since 1988 organization in August 1988 until March 1992, as a
Shares beneficially owned 1,201,064 director, President and Chief Operating Officer.
Age 58
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE> 6
--------------------------------
Nominees for Director
--------------------------------
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
HARRIET E. MIERS Ms. Miers has served as Co-Managing Partner of the
Co-Managing Partner, Dallas law firm of Locke Liddell & Sapp LLP since
Locke Liddell & Sapp LLP January 1999; prior thereto, as President of the
Dallas law firm of Locke Purnell Rain Harrell from March
1996 to January 1999 and had been a shareholder in the
firm since 1978. She served as a member of the Dallas
Chair: Audit Committee City Council from 1989 to 1991 and President of the
Member: Nominating Committee State Bar of Texas from 1992 to 1993. Ms. Miers is
also Chair of the Texas Lottery Commission and serves
on the Executive Board of the Southern Methodist
Director since 1993 University Law School.
Shares beneficially owned 40,370
Age 53
- -----------------------------------------------------------------------------------------------------------------------------
WILLIAM R. SMITH Mr. Smith has been Chairman and Chief Executive
Chairman of the Board and Officer of Smith Capital Management, Inc., an asset
Chief Executive Officer, management firm, for more than the previous five
Smith Capital Management, Inc. years. He is on the Finance Committee of the Winthrop
Rockefeller Foundation, the Investment Committee of
the Navigators and is director and Chairman of the
Chairman: Compensation Committee Investment Committee of the New Horizons Foundation.
Member: Audit Committee
Director since 1993
Shares beneficially owned 68,120
Age 59
- -----------------------------------------------------------------------------------------------------------------------------
JOHN C. TOLLESON
Chief Executive Officer, Mr. Tolleson is the Chief Executive Officer of The
The Tolleson Group Tolleson Group, a Dallas-based private investment
firm, and a General Partner in Arena Capital Partners,
LLC, a private equity fund. He is former Chairman and
Chief Executive Officer of First USA, Inc., which he
Member: Compensation and Executive Committees founded in 1985. He is also a director of Banc One
Corporation, First National Bank of Chicago, Haggar
Corporation, Paymentech, Inc. and Viad Corporation.
Director since 1994 Mr. Tolleson also serves on the Executive Board of the
Shares beneficially owned 25,982 Edwin L. Cox School of Business at Southern Methodist
Age 50 University.
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE> 7
BOARD OF DIRECTORS
During the year ended December 31, 1998, the Board of Directors held
four regular meetings and eight special meetings. No director attended fewer
than 90 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, 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,
1998 and 1999, 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 on January
1, 1998 Dividend Equivalent Rights ("DERs") entitling them to receive
additional shares of Common Stock at no cost upon exercise of outstanding
options. No DERs were earned during 1998. 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 once
during 1998. 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 eight times during 1998. 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 1998. 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
1998. 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 chosen for the year ending December 31, 1999. 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............... 58 Chairman, Chief Executive Officer and President
Andrew F. Jacobs............ 39 Executive Vice President--Finance, Treasurer and Secretary
Phillip A. Reinsch.......... 38 Senior Vice President--Control
Robert R. Spears, Jr........ 37 Senior Vice President--Asset and Liability Management
</TABLE>
For a description of Mr. Lytle's business experience, see the
"Election of Directors" section of this Proxy Statement.
Mr. Jacobs has served as Executive Vice President--Finance, Treasurer
and Secretary of the Company since August 1998. From March 1998 to August 1998,
he served as Senior Vice President--Asset and Liability Management of the
Company. Prior thereto, he was Senior Vice President--Control and Treasurer of
the Company from October 1991 to March 1998 and Secretary of the Company from
August 1992 to March 1998. 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.
Mr. Reinsch has served as Senior Vice President--Control of the
Company since July 1998. From March 1993 to June 1998, he served as Vice
President--Control of the Company. Prior thereto, he was employed by Ernst &
Young L.L.P. from July 1984 to March 1993, last serving as Audit Senior
Manager.
Mr. Spears has served as Senior Vice President--Asset and Liability
Management of the Company since February 1999. From April 1994 to February
1999, he served as Vice President--Asset and Liability Management of the
Company. Prior thereto, he was employed by NationsBanc Mortgage Corporation
from 1990 to April 1994, last serving as Vice President--Secondary Marketing
Manager.
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, 1998, 1997 and 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation
-------------------------------------------------------
Other Total
Annual Annual
Name and Salary Bonus Compensation(a) Compensation
principal position Year ($) ($) ($) ($)
- ------------------------------- ------ --------- ---------- --------------- --------------
<S> <C> <C> <C> <C> <C>
Ronn K. Lytle.................. 1998 622,500 0 167,945 790,445
Chairman, Chief Executive 1997 620,000 749,500 148,159 1,517,659
Officer and President 1996 546,000 688,000 130,965 1,364,965
Christopher T. Gilson(d)....... 1998 442,500 40,000 86,805 569,305
President and Chief Executive 1997 365,000 332,000 57,894 754,894
Officer of Capstead Inc. 1996 330,000 237,500 48,392 615,892
Andrew F. Jacobs............... 1998 247,708 112,000 45,092 404,800
Executive Vice President-- 1997 190,000 176,500 41,095 407,595
Finance, Treasurer and 1996 168,000 158,500 36,992 363,492
Secretary
William H. Rudluff(d).......... 1998 200,000 22,000 46,506 268,506
Executive Vice President-- 1997 196,000 169,140 40,859 405,999
Servicing Administration 1996 174,000 141,500 34,447 349,947
of Capstead Inc.
Phillip A. Reinsch............. 1998 135,000 42,360 14,170 191,530
Senior Vice President-- 1997 -- -- -- --
Control 1996 -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
Long-Term
Compensation
-----------------------------
Restricted
Stock All Other
Name and Awards Options Compensation
principal position ($) (#) ($)
- ------------------------------- ----------- --------- --------------
<S> <C> <C> <C>
Ronn K. Lytle.................. 0 400,000 116,479(b)
Chairman, Chief Executive 2,445,900(c) 205,107 134,176(b)
Officer and President 946,520(c) 81,034 124,279(b)
Christopher T. Gilson(d)....... 0 200,000 51,844(b)
President and Chief Executive 1,311,200(c) 95,977 72,416(b)
Officer of Capstead Inc. 273,155(c)(e) 67,120 59,588(b)
Andrew F. Jacobs.............. 0 135,000 17,150(b)
Executive Vice President-- 629,940(c) 63,652 17,255(b)
Finance, Treasurer and 273,155(c)(e) 64,419 14,130(b)
Secretary
William H. Rudluff(d)......... 0 135,000 26,250(b)
Executive Vice President-- 644,720(c)(e) 62,740 39,962(b)
Servicing Administration 226,904(c)(e) 52,204 34,920(b)
of Capstead Inc.
Phillip A. Reinsch............ 0 22,000 10,671(b)
Senior Vice President-- -- -- --
Control -- -- --
</TABLE>
--------------
(a) Includes dividends paid on unvested shares of restricted stock. See
footnotes (c) and (e), as applicable. None of the dividends paid were
deemed preferential.
(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 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.
(c) 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 were scheduled
to 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 was previously reported as a 1997 transaction. The
shares were scheduled to 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 would revert
to the Company in the event the officer or employee left the Company. As a
result of the sale of the mortgage banking operations, which constituted a
Change in Control according to the terms of the Company's 1994 Flexible
Long-Term Incentive Plan, all unvested shares vested in full on December
31, 1998.
(d) Messrs. Gilson and Rudluff resigned as officers of Capstead Inc. to accept
positions with the purchaser of the mortgage banking operations when the
sale was completed on December 31, 1998.
(e) 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
were scheduled to 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 would revert to Capstead Holdings, Inc. in the event the officer
left the Company for any reason, including death or disability, and
Capstead Holdings, Inc. would purchase the vested
7
<PAGE> 10
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. As a result of the sale of the mortgage banking
operations, which constituted a Change in Control according to the terms of
the Capstead Holdings, Inc. 1997 Restricted Stock Plan, all unvested shares
vested in full on December 31, 1998.
OPTION GRANTS
The table below shows information regarding grants of stock options
made to the Named Executives under the Company's 1994 Flexible Long-Term
Incentive Plan and 1997 Flexible Long-Term Incentive Plan (the "Flexible
Long-Term Incentive Plans") during the fiscal year ended December 31, 1998. 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 5 percent and 10 percent over the full term of the options from the exercise
price.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants
----------------------------------------------------------
Potential Realizable Value
at Assumed Annual
Number of Percent of Rates of Stock Price
Securities Total Options Appreciation for Option Term**
Underlying Granted to Exercise -----------------------------
Options Employees in Price Expiration 5% 10%
Name Granted* Fiscal Year ($/SH) Date ($) ($)
- ------------------------ ---------------- --------------- --------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Ronn K. Lytle......... 400,000 22.2 20.00 1-2-08 5,031,157 12,749,940
Christopher T. Gilson. 200,000 11.1 20.00 1-2-08 2,515,578 6,374,970
Andrew F. Jacobs...... 135,000 7.5 20.00 1-2-08 1,698,015 4,303,105
William H. Rudluff.... 135,000 7.5 20.00 1-2-08 1,698,015 4,303,105
Phillip A. Reinsch.... 22,000 1.2 20.00 1-2-08 276,714 701,247
</TABLE>
- --------------
* Stock options awarded at the fair market value of shares of Common Stock
at the date of award and were scheduled to become exercisable one-fourth
on each May 1, 1998, 1999, 2000 and 2001. 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. As a result of the sale of the mortgage banking operations,
which constituted a Change of Control according to the terms of the
Company's Flexible Long-Term Incentive Plans, all unvested options vested
in full on December 31, 1998.
** Based on the price of the Common Stock on March 12, 1999, of $5.0625, the
Potential Realizable Value of the options assuming a 5 percent or 10
percent annualized rate of appreciation for the remainder of the term of
the option would be zero.
OPTION EXERCISES AND FISCAL YEAR END OPTION VALUES
The following table shows stock option exercises by the Named
Executives during 1998 including the net gain realized on the date of exercise.
The columns for "Value of Unexercised In-the-Money Options at Fiscal Year
End-Exercisable and Unexercisable" have been omitted from the table since the
various exercise prices exceed the fair market value of the underlying stock on
December 31, 1998, which was $4.125 per share, for both exercisable and
unexercisable options.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Options
Shares at Fiscal Year End
Acquired on Value -------------------------------
Name Exercise Realized* Exercisable Unexercisable
- -------------------------------------- ------------- ------------ --------------- --------------
<S> <C> <C> <C> <C>
Ronn K. Lytle ........................ 125,000 $ 938,038 849,125 0
Christopher T Gilson.................. 0 0 515,000 0
Andrew F. Jacobs ..................... 0 0 308,000 0
William H. Rudluff ................... 33,296 199,431 272,446 0
Phillip A. Reinsch ................... 0 0 65,936 0
</TABLE>
* Represents the difference between the fair market value of securities
acquired and the exercise price of the option.
8
<PAGE> 11
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. Consistent
with the disclosures in the Company's proxy statement last year, the
restructuring has been reflected as a 1997 transaction. 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 were scheduled to vest over five
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 were granted annually
based on a formula of total dividends paid during the previous year in excess
of a benchmark rate of return, entitled the holder to receive additional shares
of Common Stock at no cost to the holder. Accordingly, the Company annually
charged 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 would 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
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.
As a result of the sale of the mortgage banking operations, which
constituted a Change in Control according to the terms of the Company's
Flexible Long-Term Incentive Plans, all unvested shares of restricted common
stock issued pursuant to the Restructuring vested in full on December 31, 1998,
which resulted in a charge of $8,347,000 to eliminate all deferred compensation
related to the Restructuring.
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, 1998, the 1992 Employment Agreement
was automatically extended one additional year and will now expire on December
31, 2002. 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, 1998 Mr. Lytle's base salary was
9
<PAGE> 12
increased to $650,000 for 1998. Notwithstanding such provision, Mr. Lytle
voluntarily reduced his 1998 salary on July 15, 1998, to an annualized rate of
$590,000 for the remainder of the year and further recommended that his salary
for 1999 be reduced to $520,000. 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.
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 1998 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 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. Any interim
modifications to salaries are also based on the above factors and
recommendations are made 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 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 Committee has approved the creation of an incentive pool (the
"Incentive Pool") equal to a percentage of net income (the "Participation
Percentage") above an 8 percent return on stockholders' equity ("ROE") from
which both Base Incentive Compensation and Incentive Bonuses are paid. The
Participation Percentage for the Incentive Pool is currently set at 7.5 percent
of net income above an 8 percent ROE. In 1998 the maximum pay-out from such
Incentive Pool to each Named Executive was based on a predetermined percentage
of base salary depending upon the attainment of ROE over a range from 8 percent
to 22 percent (the "Predetermined Percentage"), and was subject to a downward
adjustment of up to 25 percent at the discretion of the Committee. Incentive
bonuses were paid for the first quarter from the Incentive Pool based on
earnings projected for the year and no further incentive bonus payments were
made in 1998. 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 Committee has not established a Predetermined Percentage
for the Named Executives for 1999.
The Profit Sharing Plan also creates a profit pool ("Profit Sharing
Pool") equal to a percentage of net income above certain levels of ROE. There
were no accruals for the Profit Sharing Pool in 1998 and payments made in 1998
were paid from amounts carried forward from previous years and were 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.
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 Chief Executive Officer periodically recommends long-term
incentive grants for executive officers to the Committee under the Company's
Flexible Long-Term Incentive Plans. The same factors that are used in
determining other elements of compensation are used in determining long-term
incentive grants. During 1998 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 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.
As a result of the sale of the mortgage banking operations, which
constituted a Change of Control according to the terms of the Company's
Flexible Long-Term Incentive Plans, all unvested restricted stock grants and
unvested stock options vested in full on December 31, 1998.
12
<PAGE> 15
Sale of Mortgage Banking Operations
In December 1998, the Compensation Committee approved merit bonuses
for those who put in extraordinary efforts with respect to the sale of the
mortgage banking operations. These merit bonuses were made to eleven employees
for an aggregate total of $148,000.
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. Consistent with the
disclosures in the Company's proxy statement last year, the restructuring has
been reflected as a 1997 transaction. 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 for each DER
outstanding on January 2, 1998. The restricted stock was scheduled to vest over
five years. These changes to existing and future stock options should result in
a substantial cost savings for the Company, while still providing nearly equal
value in long-term incentive compensation to the executive officers.
As a result of the sale of the mortgage banking operations, which
constituted a Change in Control according to the terms of the Company's
Flexible Long-Term Incentive Plans, all unvested shares of restricted common
stock issued pursuant to the Restructuring vested in full on December 31, 1998.
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.
1998 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 on January 1, 1998 as approved by the Board
was $650,000. On July 15, 1998, at the request of Mr. Lytle, the Committee
recommended and the Board agreed to reduce his 1998 salary to an annualized
rate of $590,000. At the request of Mr. Lytle, the Committee recommended and
the Board agreed to further reduce his salary for 1999 to $520,000.
Annual Incentives
The Company did not meet the performance goals as established by the
Committee for determining incentive compensation for Mr. Lytle in 1998. As a
result, Mr. Lytle did not receive any incentive compensation for the year ended
1998. A first quarter bonus based on earnings projected for the year was
returned by Mr. Lytle to the Company. Mr. Lytle also declined any award under
the Profit Sharing Plan. The Committee has not established a Predetermined
Percentage performance goal for Mr. Lytle in 1999.
13
<PAGE> 16
Long-Term Incentives
The Committee granted Mr. Lytle 400,000 nonqualified stock options
(subject to certain vesting requirements) in January 1998. 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.
Pursuant to the restructuring of long-term incentive compensation as
discussed above, Mr. Lytle received the grant of 121,095 shares of restricted
stock on January 2, 1998, which was reported as a 1997 transaction in the
Company's proxy statement last year.
As a result of the sale of the mortgage banking operations, which
constituted a Change in Control according to the terms of the Company's 1994
Flexible Long-Term Incentive Plan, all 400,000 nonqualified stock options and
121,095 shares of restricted stock vested in full on December 31, 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,
dividends on unvested shares of restricted stock and taxable income from the
vesting of his shares of restricted stock do not meet the definition of
qualified performance based compensation under Section 162(m) of the Code and
will not be tax deductible to the extent it exceeds $1 million, but does not
consider the amount 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
14
<PAGE> 17
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, 1998, assuming the investment
of $100 on December 31, 1993 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>
- -------------------------------------------------------------------------------------------------------------
12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Capstead $100.00 $ 40.85 $104.63 $183.05 $168.98 $ 37.97
- -------------------------------------------------------------------------------------------------------------
S&P 500 $100.00 $101.36 $139.31 $171.21 $228.26 $293.36
- -------------------------------------------------------------------------------------------------------------
Russell 2000 $100.00 $ 96.82 $122.19 $140.23 $169.00 $163.18
- -------------------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE> 18
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 March 12, 1999 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*
- ------ -------------------------------------------------- ------------------------ ------------------
<S> <C> <C> <C>
Common Bevis Longstreth..................................... 48,703(b) *
Stock Paul M. Low.......................................... 83,264(c) *
Ronn K. Lytle........................................ 1,201,064(d) 2.0
Harriet E. Miers..................................... 40,370(e) *
William R. Smith..................................... 68,120 *
John C. Tolleson..................................... 25,982 *
Christopher T. Gilson(f)............................. 595,321 1.0
Andrew F. Jacobs..................................... 358,111 *
William H. Rudluff(f)................................ 351,382 *
Phillip A. Reinsch................................... 79,288 *
All nominees for Director and Executive Officers
as a group (11 persons)........................ 2,930,526 4.8
</TABLE>
- -----------------------
* Denotes less than 1 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........... - - 25,982
Paul M. Low................ 27,000 20,349 11,113
Ronn K. Lytle.............. - - 849,125
Harriet E. Miers........... - - 29,440
William R. Smith........... - - 29,440
John C. Tolleson........... - - 25,982
Christopher T. Gilson(f)... - - 515,000
Andrew F. Jacobs........... - - 308,000
William H. Rudluff(f)...... - - 272,446
Phillip A. Reinsch......... - - 65,936
All nominees for Director
and Executive Officers
as a group (11 persons). 27,000 20,349 2,930,526
</TABLE>
(b) Includes 11,569 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.
(c) Includes 20,679 shares of Common Stock and 1,507 shares of Common Stock
that would be received upon conversion of 2,000 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.
(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 1,125 shares of Common Stock held by Ms. Miers' mother. Ms. Miers'
holds her mother's power of attorney but expressly disclaims beneficial
ownership.
(f) Messrs. Gilson and Rudluff resigned as officers of Capstead Inc. to accept
positions with the purchaser of the mortgage banking operations when the
sale was completed on December 31, 1998. As a result, all options will
expire on June 30, 1999.
16
<PAGE> 19
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 March 12, 1999 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 Amount of Nature of Percent of
Class Name and Address of Beneficial Owner Beneficial Ownership* Class
- --------------------- ------------------------------------------- ------------------------------ --------------
<S> <C> <C> <C>
Common Stock Lehman Brothers Holdings Inc.
3 World Financial Center
New York, New York 10285................ 3,550,345 5.8
</TABLE>
- ---------------------
* Based on a statement on Schedule 13G filed with the Securities and Exchange
Commission February 16, 1999. Lehman Brothers Holdings Inc. is a parent
holding company for Lehman Brothers Inc., a registered broker/dealer, which
acquired the securities.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
To the Company's knowledge, based soled 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, 1998, all Section
16(a) filing requirements were complied with, with the exception of one
transaction which was filed by amended Form 4 for Ms. Miers, a director of the
Company, and a Form 3 for Mr. Spears, an executive officer of the Company, was
filed late.
INDEPENDENT AUDITORS
During the year ended 1998, 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 2000 annual
meeting of stockholders must be received at the Company's principal executive
offices no later than November 15, 1999 to be included in the proxy statement
and form of proxy for such meeting.
By order of the Board of Directors,
/s/ ANDREW F. JACOBS
ANDREW F. JACOBS
Secretary
April 7, 1999
17
<PAGE> 20
[MAP] CAPSTEAD MORTGAGE CORPORATION
ANNUAL MEETING OF STOCKHOLDERS
Thursday, MAY 27, 1999
9:00 a.m.
CityPlace Center East
2711 North Haskell Avenue
Dallas, Texas 75204
Capstead Mortgage Corporation
2711 North Haskell Avenue, Suite 900, Dallas, Texas 75204 PROXY
- -------------------------------------------------------------------------------
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY FOR ANNUAL
MEETING OF STOCKHOLDERS, MAY 27, 1999.
You are encouraged to specify your choices by marking the appropriate boxes, see
reverse for voting instructions, 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.
The undersigned hereby appoints Ronn K. Lytle, Jill Reed, and Tricia M.
Zimmerman, 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 Thursday, May 27,
1999, and at any adjournments thereof, on all matters coming before said
meeting.
See reverse for voting instructions.
<PAGE> 21
COMPANY #
CONTROL #
THERE ARE TWO WAYS TO VOTE YOUR PROXY
Your telephone vote authorizes the Named Proxies to vote your shares in the same
manner as if you marked, signed and returned your proxy card.
VOTE BY PHONE - TOLL FREE - 1-800-240-6326 - QUICK***EASY****IMMEDIATE
o Use any touch-tone telephone to vote your proxy 24 hours a day, 7 days a
week.
o You will be prompted to enter your 3-digit Company Number and your 7-digit
Control Number which is located above.
o Follow the simple instructions the Voice provides you.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope
we've provided or return it to Capstead Mortgage Corporation, c/o Shareowner
Services(SM), P.O. Box 64873, St. Paul, MN 55164-9397.
If you vote by Phone, Please do not mail your Proxy Card
Please detach here
The Board of Directors Recommends a Vote FOR Items 1 and 2.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1. Election of directors: 01 Bevis Longstreth 04 Harriet E. Miers [ ] Vote FOR [ ] Vote WITHHELD
02 Paul M. Low 05 William R. Smith all nominees from all nominees
03 Ronn K. Lytle 06 John C. Tolleson
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE(S),
WRITE THE NUMBER(S) OF THE NOMINEE(S) IN THE BOX PROVIDED TO THE RIGHT.) ___________________________________
2. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting. [ ] For [ ] Against [ ] Abstain
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN, WILL BE VOTED
FOR EACH PROPOSAL.
Address Change? Mark Box [ ]
Indicate changes below: Date
----------------------------------------
-----------------------------------------------
Signature(s) in Box
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.
</TABLE>
