CAPSTEAD MORTGAGE CORPORATION (NYSE:CMO) Files An 8-K Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers
Item 5.02 DEPARTURE OF DIRECTORS OR CERTAIN OFFICERS; ELECTION OF DIRECTORS; APPOINTMENT OF CERTAIN OFFICERS; COMPENSATORY ARRANGEMENTS OF CERTAIN OFFICERS.

Adjustments to 2018 Base Salaries

On January3, 2018, the Compensation Committee (the “Committee”) of the Board of Directors of Capstead Mortgage Corporation (the “Company”) increased the base salary of certain executive officers of the Company, effective January1, 2018, as follows:

2018 Annual Incentive Compensation Program Awards

On January3, 2018, the Committee also adopted the 2018 Annual Incentive Compensation Program applicable to the Company’s executive officers (the “2018 Annual Incentive Program”). The 2018 Annual Incentive Program is structurally the same as the 2017 Annual Incentive Compensation Program, providing defined metrics against which the Company’s performance is to be measured, specifically relative economic return, absolute economic return, relative operating efficiency as well as individual goals and objectives for each of the executive officers. Payouts are determined formulaically, defining threshold, target and maximum performance levels based on multiples of base salary, thereby limiting the maximum annual incentive payout for each executive officer.

The 2018 Annual Incentive Program is filed with this Form 8-K as Exhibit 10.1 and is incorporated by reference herein. This summary does not purport to be complete and is qualified in its entirety by reference to Exhibit 10.1.

Award of Dividend Equivalent Rights (“DERs”)

In 2008 the Committee instituted an additional performance-based short-term incentive compensation program for executives that provides for quarterly cash payments equal to per share dividends declared on the Company’s common stock multiplied by a notional amount of non-vesting or “phantom” shares of common stock, referred to as DERs. DERs are not attached to any stock or option awards. DERs outstanding during 2017 totaling 600,000 expired December31, 2017. On January3, 2018 the Committee awarded DERs expiring December31, 2018 as follows:

2018 Long-Term Awards

to the Amended and Restated 2014 Flexible Incentive Plan, on January3, 2018, the Committee granted two forms of incentive compensation awards to the executive officers of the Company based on the closing price of the Company’s common stock on January2, 2018, consisting of (a)restricted common stock and (b)performance units (the “Performance Units”).

Restricted Stock Awards

The restricted common stock awards vest in full on January2, 2021 and were granted in the following share amounts determined by reference to the closing stock price on the date of grant with a value equal to 60% of each grantee’s effective salary (except for Mr.Phillips, whose award equals to 37.5% of his effective salary) on January1, 2018:

Each executive officer will enter into a Restricted Stock Agreement with the Company in the form filed with this Form 8-K as Exhibit 10.2.

Performance Units

Prior to granting Performance Units, the Committee adopted long-term performance unit award criteria (the “2018 Long-Term Performance UnitAward Criteria”).The 2018 Long-Term Performance Unit Award Criteria are the same as the long-term performance unit award criteria adopted by the Committee in 2017, providing specific metrics against which the Company’s performance is to be measured, specifically relative economic return, absolute economic return and relative total stockholder return.

The Performance Units are convertible into shares of common stock of the Company following a three-year performance period ending December31, 2020.The number of shares of common stock into which the Performance Units are convertible is dependent on satisfaction of the performance metrics outlined in the 2018 Long-Term Performance Unit Award Criteria during the performance period.

For example, if the targeted performance levels are achieved over the three-year period, the Performance Units will convert into shares of common stock equal to the number of Performance Units granted.If the Company exceeds the targeted performance levels and reaches maximum performance levels, the Performance Units will convert into shares of common stock equal to twice the number of Performance Units granted.If the Company does not achieve the targeted performance levels but does achieve exactly the threshold performance levels, the Performance Units will convert into shares of common stock equal to one-half the number of Performance Units granted.If the Company does not achieve the threshold performance levels, the Performance Units will expire without converting into any shares of common stock.The conversion ratio will be adjusted to interpolate the appropriate conversion factor if performance levels are above the thresholds but below the maximums.Accordingly, the Performance Units could expire without converting into any shares of common stock or could be convertible into as many as 200% of the number of Performance Units granted.

Each executive officer of the Company was granted the following Performance Units in amounts determined by reference to the closing stock price on the date of grant with a value equal to 90% of each grantee’s effective salary (except for Mr.Phillips, whose award equals to 37.5% of his effective salary) on January1, 2018. These units are convertible into the indicated number of shares of common stock:

The common stock into which the Performance Units are convertible will be issued by the Company following the end of the three-year performance period and on or prior to March15, 2021.Dividends accrue from the date of grant and will be paid in cash when and if the units convert into shares of common stock based on the number of shares ultimately issued.

The 2018 Long-Term Performance Unit Award Criteria is filed with this Form 8-K as Exhibit 10.3 and is incorporated by reference herein.This summary does not purport to be complete and is qualified in its entirety by reference to Exhibit 10.3.

Each executive officer will enter into a Performance Unit Agreement with the Company in the form filed with this Form 8-K as Exhibit 10.4.

The following exhibits are filed herewith:

CAPSTEAD MORTGAGE CORP Exhibit
EX-10.1 2 d511073dex101.htm EX-10.1 EX-10.1 Exhibit 10.1 CAPSTEAD MORTGAGE CORPORATION 2018 ANNUAL INCENTIVE COMPENSATION PROGRAM   Purpose:    Capstead Mortgage Corporation (the “Company”) has established the 2018 Annual Incentive Compensation Program (the “2018 Short Term Program”) to implement the Company’s short-term incentive pay program in an effort to: (i) align executive variable cash compensation with the annual objectives of the Company,…
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About CAPSTEAD MORTGAGE CORPORATION (NYSE:CMO)

Capstead Mortgage Corporation is a self-managed real estate investment trust (REIT). The Company invests in a leveraged portfolio of residential mortgage pass-through securities consisting exclusively of short-duration adjustable-rate mortgage (ARM) securities issued and guaranteed by government-sponsored enterprises (GSEs), either the Federal National Mortgage Association (Fannie Mae) or the Federal Home Loan Mortgage Corporation (Freddie Mac) (together, the GSEs), or by an agency of the federal Government, the Government National Mortgage Association (Ginnie Mae). The Company finances its residential mortgage investments primarily by borrowing under repurchase arrangements with commercial banks and other financial institutions supported by its long-term investment capital. The repurchase arrangements entered into by the Company involve the sale and a simultaneous agreement to repurchase the transferred assets at a future date.