UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report: December 18, 2013
(Date of Earliest Event Reported)
CAPSTEAD MORTGAGE CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Maryland | 001-08896 | 75-2027937 | ||
(State of Incorporation) | (Commission File No.) |
(I.R.S. Employer Identification No.) |
8401 North Central Expressway | ||
Suite 800 | ||
Dallas, Texas | 75225 | |
(Address of Principal Executive Offices) | (Zip Code) |
Registrants Telephone Number, Including Area Code: (214) 874-2323
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425). |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 230.14a-12). |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)). |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)). |
ITEM 5.02 | DEPARTURE OF DIRECTORS OR CERTAIN OFFICERS; ELECTION OF DIRECTORS; APPOINTMENT OF CERTAIN OFFICERS; COMPENSATORY ARRANGEMENTS OF CERTAIN OFFICERS. |
Grants of Performance Units
In response to a reduced percentage of our shareholders approving our executive compensation programs at our Annual Meeting of Stockholders held April 24, 2013 (Say on Pay Vote), the Compensation Committee (the Committee) of the Board of Directors of Capstead Mortgage Corporation (the Company), together with its outside independent compensation consultant, Pay Governance, has undertaken an extensive review of the Companys pay practices and programs. Also, following the Say on Pay Vote, the Committee engaged in discussions with a number of the Companys largest institutional investors for the purpose of soliciting feedback on its compensation programs. During this process, the Committee has given considerable attention to the Companys long-term incentive compensation, and on December 18, 2013, the Committee adopted long-term performance criteria for the 2014 incentive compensation awards (the 2014 Long-Term Award Criteria). In determining the structure and terms of the 2014 Long-Term Award Criteria, the Committee considered the extensive review of the Companys pay practices and programs performed by the Committee and its outside independent compensation consultant following the Say on Pay Vote, as well as the feedback from investors received in meetings with such entities. Immediately following the adoption of the 2014 Long-Term Award Criteria, the Committee granted performance units to the executive officers of the Company pursuant to the 2004 Flexible Long-Term Incentive Plan (the Performance Units).
The 2014 Long-Term Award Criteria provides specific metrics against which the Companys performance is to be measured, including relative economic return, absolute economic return and relative total stockholder return. The awards are in the form of Performance Units, which are convertible into shares of common stock of the Company following a three year performance period. The performance period will be January 1, 2014 through December 31, 2016. 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 2014 Long-Term Award Criteria during the performance period.
Specifically, if the Company achieves its target objectives, the Performance Units will convert into shares of common stock equal to the number of Performance Units granted. If the Company exceeds such target objectives and reaches its maximum threshold, 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 its target objectives but does achieve a minimum threshold, 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 even the minimum threshold of its performance objectives, 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 the Company achieves its performance objectives above the minimum threshold but below the maximum. 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 to each executive. The common stock, if any, into which the Performance Units are convertible will be issued by the Company following the end of the three year performance period on December 31, 2016 and on or prior to March 15, 2017.
The following Performance Units were awarded to the executive officers of the Company as of December 18, 2013:
Executive |
Number of Performance Units |
Number of shares of Common Stock into which the Performance Units are Convertible |
||||||
Andrew F. Jacobs, President and Chief Executive Officer |
91,167 | 0 182,334 | ||||||
Phillip A. Reinsch, Executive Vice President and Chief Financial Officer |
51,054 | 0 102,108 | ||||||
Robert R. Spears, Jr., Executive Vice President and Director of Residential Mortgage Investments |
63,817 | 0 127,634 | ||||||
Michael W. Brown, Senior Vice President - Asset and Liability Management |
36,467 | 0 72,934 |
The 2014 Long-Term Award Criteria 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 the actual 2014 Long-Term Award Criteria.
Each of the executive officers of the Company will enter into a Performance Unit Agreement with the Company in the form attached hereto as Exhibit 10.2.
Adjustments to Base Salaries
On December 18, 2013, the Committee also increased the base salaries for each of the executive officers, effective January 1, 2014, as follows:
Executive |
Current Annual Base Salary |
Annual Base Salary Effective January 1, 2014 |
||||||
Andrew F. Jacobs |
$ | 720,000 | $ | 750,000 | ||||
Phillip A. Reinsch |
$ | 400,000 | $ | 420,000 | ||||
Robert R. Spears, Jr. |
$ | 505,000 | $ | 525,000 | ||||
Michael W. Brown |
$ | 270,000 | $ | 300,000 |
ITEM 9.01. | FINANCIAL STATEMENTS AND EXHIBITS |
(d) Exhibits.
10.1* | 2014 Long-Term Award Criteria | |
10.2* | Form of Performance Unit Agreement |
* | Filed herewith |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
CAPSTEAD MORTGAGE CORPORATION | ||||||
December 23, 2013 | By: | /s/ Phillip A. Reinsch | ||||
Phillip A. Reinsch | ||||||
Executive Vice President, Chief Financial Officer and Secretary |
INDEX TO EXHIBITS
Exhibit No. |
Description | |
10.1* | 2014 Long-Term Award Criteria | |
10.2* | Form of Performance Unit Agreement |
* | Filed herewith |
Exhibit 10.1
CAPSTEAD MORTGAGE CORPORATION
2004 FLEXIBLE LONG-TERM INCENTIVE PLAN
LONG-TERM AWARD CRITERIA FOR 2014
Purpose: | Capstead Mortgage Corporation (the Company) has established the Amended and Restated 2004 Flexible Long-Term Incentive Plan (the 2004 Plan) to implement the Companys long-term incentive pay program, in an effort to: (i) align executive equity compensation with the long-term objectives of the Company and (ii) motivate executives to create sustained stockholder value. | |
Participants: | Executive officers of the Company designated by the Compensation Committee. | |
Payout Criteria: | This performance-based methodology for determining long-term equity incentive compensation is adopted effective January 1, 2014. The performance metrics will be assessed for a three-year period commencing January 1, 2014 and ending December 31, 2016. The award will be in the form of performance units that will be convertible, following the end of the performance period, into Shares of the Companys Common Stock. Provided some or all of the performance criteria are satisfied, the conversion will be automatic on a date determined by the compensation committee after the end of the performance period but no later than March 15, 2017. The target award under the 2014 plan for each executive officer will be a number of performance units that, if converted to common stock on the date of grant on a one-for-one basis, would have a value equal to 150% of such executive officers base salary at January 1, 2014. However, the actual number of shares into which the performance units convert will be a function of the payout factor described in each performance metric below. The 2014 long-term award criteria, under the 2004 Plan, and the weighting of such criteria is as follows: | |
Performance Metrics and Weighting | ||
50% of the economic value of the total 2014 award is calculated based on the Relative Economic Return metric
(30% measured against Peer Agency mREITs, as defined below)
(20% measured against Peer mREITs, as defined below)
30% of the economic value of the total 2014 award is calculated based on the Absolute Economic Return metric
20% of the economic value of the total 2014 award is calculated based on the Relative Total Stockholder Return metric | ||
Payout Factors: |
The payout factor for each metric is 0% - 200% of the target award, rounded to the nearest whole percentage, based on actual performance against approved objectives, as more fully described below. |
Relative Economic Return, as Measured against Peer Agency mREITs: | A portion of the payout of each participants total 2014 award will be based on the relative economic performance of the Company, as compared with the Companys peers which invest primarily in residential mortgage pass-through securities issued and guaranteed by government-sponsored entities, either Fannie Mae or Freddie Mac, or an agency of the federal government, Ginnie Mae, as selected by the Compensation Committee (Peer Agency mREITs). The economic performance for the Company and each of the Peer Agency mREITs will be calculated as the respective change in book value per share of common stock from January 1, 2014 to December 31, 2016, plus dividends declared per share of common stock during such three-year period, divided by beginning per share book value at January 1, 2014 for each such entity (Relative Economic Return). The Company will then be ranked against each of the Peer Agency mREITs and assigned a percentile of relative performance. The portion of each participants performance units attributable to Relative Economic Return as measured against Peer Agency mREITs will convert into a number of shares of common stock equal to 30% of the target award multiplied by the applicable payout factor. | |
The specific payout factor for Relative Economic Return, as measured against Peer Agency mREITs, will be calculated as follows: |
Threshold |
Relative Economic Return Percentile, as Measured Against Peer Agency mREITs |
Payout Factor, as a Percentage of Target |
||||
<40th Percentile | 0 | % | ||||
Minimum |
40th Percentile | 50 | % | |||
Target |
60th Percentile | 100 | % | |||
Maximum |
³80th Percentile | 200 | % |
If the Companys Relative Economic Return, as measured against Peer Agency mREITS, is between the 40th and 80th percentiles when ranked against the Peer Agency mREITs, the payout factor as a percentage of the target payout will be determined using a straight line interpolation between the minimum and target thresholds or the target and maximum thresholds, as the case may be, depending upon the actual percentile ranking of the Company relative to the Peer Agency mREIT peer group. By way of example, a ranking in the 50th percentile would result in a payout factor of 75% of the target award, and a ranking in the 70th percentile would result in a payout factor of 150% of the target award. | ||
Relative Economic Return, as Measured against Peer mREITs: | A portion of the payout of each participants total 2014 award will be based on the relative economic performance of the Company, as compared with each of the Companys peers which invest in a variety of mortgage instruments, not limited to Peer Agency mREITs, as selected by the Compensation Committee (the Peer mREITs). The relative economic performance of the Company and each of the Peer mREITs will be calculated consistent with the calculation for Relative Economic Return as measured against Peer Agency mREITs described above. The portion of each participants performance units attributable to Relative Economic Return as measured against Peer mREITs will convert into a number of shares of common stock equal to 20% of the target award multiplied by the applicable payout factor.
The specific payout factor for Relative Economic Return, as measured against Peer mREITs, will be calculated as follows: |
Threshold |
Relative Economic Return Percentile, as Measured Against Peer mREITs |
Payout Factor, as a Percentage of Target |
||||
<40th Percentile | 0 | % | ||||
Minimum |
40th Percentile | 50 | % | |||
Target |
60th Percentile | 100 | % | |||
Maximum |
³80th Percentile | 200 | % |
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If the Companys Relative Economic Return, as measured against Peer mREITS, is between the 40th and 80th percentiles when ranked against each of the Peer mREITs, the payout factor as a percentage of the target payout will be determined using a straight line interpolation between the minimum and target thresholds or the target and maximum thresholds, as the case may be, depending upon the actual percentile ranking of the Company relative to the Peer mREIT group. By way of example, a ranking in the 50th percentile would result in a payout factor of 75% of the target award, and a ranking in the 70th percentile would result in a payout factor of 150% of the target award. | ||
Absolute Economic Return: |
A portion of the payout of each participants total 2014 award will be based on absolute economic return of the Company. The absolute economic return for the Company will be calculated as the respective change in book value per share of common stock of the Company from January 1, 2014 to December 31, 2016, plus dividends declared per share of common stock during such three-year period, divided by beginning per share book value at January 1, 2014 and then divided by three (Absolute Economic Return). The portion of each participants performance units attributable to Absolute Economic Return will convert into a number of shares of common stock equal to 30% of the target award multiplied by the applicable payout factor. | |
The specific payout factor for Absolute Economic Return will be calculated as follows: |
Threshold |
Absolute Economic Return | Payout Factor, as a Percentage of Target |
||||
<10.0% | 0 | % | ||||
Minimum |
10.0% | 50 | % | |||
Target |
12.5% | 100 | % | |||
Maximum |
³15.0% | 200 | % |
If the Companys Absolute Economic Return, is between 10.0% and 15.0%, the payout factor as a percentage of the target payout will be determined using a straight line interpolation between the minimum and target thresholds or the target and maximum thresholds, as the case may be, depending upon the actual Absolute Economic Return of the Company. By way of example, an Absolute Economic Return of 11.25% would result in a payout factor of 75% of the target award, and an Absolute Economic Return or 13.75% would result in a payout factor of 150% of the target award. | ||
Relative Total Stockholder Return: |
A portion of the payout of each participants total 2014 award will be based on relative total stockholder return of the Company, as compared with the Peer mREITs. The total stockholder return for the Company and each of the Peer mREITS will be calculated based on the ratio of (x) the average stock price for the last 20 business days of 2016 to (y) the average stock price for the last 20 business days of 2013, assuming additional fractional shares accumulated as dividends are re-invested on the ex-dividend date with the resulting ratio expressed as an annual equivalent return (Relative Total Stockholder Return). The Company will then be ranked against each of the Peer mREITs and assigned a percentile of relative performance. The portion of each participants performance units attributable to Relative Total Stockholder Return will convert into a number of shares of common stock equal to 20% of the target award multiplied by the applicable payout factor. | |
The specific payout factor for Relative Total Stockholder Return will be calculated as follows: |
Threshold |
Relative Total Stockholder Return Percentile, as Measured Against Peer mREITs |
Payout Factor, as a Percentage of Target |
||||
<40th Percentile | 0 | % | ||||
Minimum |
40th Percentile | 50 | % | |||
Target |
60th Percentile | 100 | % | |||
Maximum |
³80th Percentile | 200 | % |
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If the Companys Relative Total Stockholder Return, as measured against Peer mREITS, is between the 40th and 80th percentiles when ranked against each of the Peer mREITs, the payout factor as a percentage of the target payout will be determined using a straight line interpolation between the minimum and target thresholds or the target and maximum thresholds, as the case may be, depending upon the actual percentile ranking of the Company relative to the Peer mREIT group. By way of example, a ranking in the 50th percentile would result in a payout factor of 75% of the target award, and a ranking in the 70th percentile would result in a payout factor of 150% of the target award. | ||
Dividends: | To the extent the Performance Units are ultimately convertible into Common Stock, the executive officer shall be entitled to receive all dividends and any other distributions declared during the performance period with respect to the shares Common Stock into which the Performance Units are ultimately converted, as if such Common Stock had been issued on the first day of the performance period (provided, however, that nothing contained herein shall cause the Company to declare any such dividends or to make any such distributions). If the Performance Units expire without converting into any Performance Units, the executive officer is not entitled to receive any such amounts representing accrued dividends or distributions. | |
2004 Plan: | Each participant who is eligible for awards pursuant to the Long-Term Award Criteria set forth herein shall agree and acknowledge that awards made pursuant to this criteria are governed by the terms and provisions of the 2004 Plan. |
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Exhibit 10.2
CAPSTEAD MORTGAGE CORPORATION
PERFORMANCE UNIT AGREEMENT
FOR EMPLOYEES
THIS PERFORMANCE UNIT AGREEMENT (this Agreement) made and entered into as of the 18th day of December, 2013, effective as of the date hereof (hereinafter called the Award Date), by and between Capstead Mortgage Corporation, a Maryland corporation (Capstead or the Company), and « Name» (the Grantee).
WHEREAS, the compensation committee of Capsteads board of directors (the Committee) believes employees of the Company should have an ongoing stake in the long-term success of the Company, and
WHEREAS, the Committee believes that providing a long-term equity-based award appropriately linked to the Companys performance over a multiple year period will better align the employees long-term interests with those of our stockholders.
THEREFORE, the Committee has awarded to the Grantee a performance unit award conditioned upon the execution by the Company and the Grantee of this Performance Unit Agreement that contains certain performance criteria set forth herein. In consideration of the mutual promise(s) and covenant(s) contained herein, the parties hereby agree as follows:
SECTION 1. GRANT.
1.1 Grant and Acceptance. Pursuant to the December 18, 2013 authorization to grant performance units to current executive officers, the Company does hereby grant and transfer to the Grantee, for no cash consideration from the Grantee, and the Grantee does hereby accept from the Company, an aggregate of «Target» performance units (the Performance Units), which are convertible into shares of Common Stock, $0.01 par value per share, of the Company (the Common Stock) according to the terms and conditions and subject to the restrictions, forfeiture risks and other terms and conditions hereinafter set forth.
1.2 Effect of Plan. The Performance Units shall constitute a Performance Award, as defined in the Companys Amended and Restated 2004 Flexible Long-Term Incentive Plan (the Plan). This Agreement is expressly subject to the terms and provisions of the Plan and in the event there is a conflict between the terms of the Plan and this Agreement, the terms of the Plan shall control. All undefined capitalized terms used herein shall have the meanings assigned in the Plan. The Award is subject to all laws, approvals, requirements and regulations of any governmental authority which may be applicable thereto.
SECTION 2. CONVERSION RIGHTS; DIVIDENDS. Provided the Performance Criteria are satisfied, each Performance Unit is automatically convertible into Common Stock following the end of the Performance Period, but no later than March 15, 2017, with the conversion factor determined formulaically based on the stated performance criteria, as set forth in the 2004 Flexible Long-Term Incentive Plan Long-Term Award Criteria attached hereto as Exhibit A (the Long-Term Award Criteria). The Grantee, for the duration of this Agreement shall not be entitled to vote
or receive dividends or any other distributions declared on the Common Stock into which the Performance Units are ultimately convertible. During the Performance Period, the Company shall accrue dividends and any other distributions declared with respect to its Common Stock, initially as if each Performance Unit were entitled to the same dividend as a single share of Common Stock. During the Performance Period, the Company shall have discretion to accrue additional or lesser amounts if management has a reasonable basis to believe that the conversion ratio will result in automatic conversion into Common Stock on something other than a one-to-one basis (based on the actual performance criteria during the Performance Period). To the extent the Performance Units are ultimately convertible into Common Stock, the Grantee shall be entitled to receive all dividends and any other distributions declared during the Performance Period with respect to the shares Common Stock into which the Performance Units are ultimately converted, as if such Common Stock had been issued on the first day of the Performance Period (provided, however, that nothing contained herein shall cause the Company to declare any such dividends or to make any such distributions). If Performance Units are forfeited pursuant to Section 3.3, 3.4 or 3.5, Grantee is not entitled to receive any such amounts representing accrued dividends or distributions.
SECTION 3. PERFORMANCE CRITERIA, PERFORMANCE PERIOD AND VESTING.
3.1 Performance Criteria. The Performance Criteria with respect to the Performance Units shall be comprised of the performance metrics, and each performance metric shall be weighted, as described in the Long-Term Award Criteria. Based on the Payout Factors and weighting described in the Long-Term Award Criteria, 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 to each Grantee.
3.2 Performance Period. Performance shall be measured for a single three-year period beginning January 1, 2014 and ending December 31, 2016.
3.3 Conversion Date.
(a) Pursuant to the Plan, after the end of the Performance Period, the Committee shall determine whether, and to what degree, the Performance Criteria were satisfied. If any of the Performance Criteria were satisfied at or above the Minimum level (as described in the Long-Term Award Criteria) with respect to the Performance Period, the Committee shall establish a Conversion Date with respect to such Performance Period. The determination by the Committee as to the satisfaction of the Performance Criteria with respect to the Performance Period shall be deemed to be final.
(b) Provided the Grantee remains continuously employed by the Company throughout the Performance Period and some or all of the Performance Criteria for the Performance Period have been satisfied and acknowledged by the Committee at or above the Minimum level, then on the Conversion Date, the Performance Units shall automatically convert into the number of shares of Common Stock calculated consistent with the Payout Factors shown on the Long-Term Award Criteria.
(c) Except as otherwise provided in Sections 3.4, 3.5 and 3.6 below, no Performance Units shall become convertible after:
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(i) termination of Grantees employment with the Company or any Affiliate for any reason other than death (including termination by reason of voluntary or involuntary discharge, Disability or Retirement) in which case the Grantee shall, at the time of termination, forfeit all right, title and interest in and to any Performance Units and the Common Stock into which such Performance Units may have been convertible following the Performance Period; or
(ii) a Grantee working full-time at the Award Date reduces his/her scheduled hours worked per week below a standard 40-hour work week, in which case the Grantee shall, at the time of such reduction and subject to managements discretion, forfeit all right, title and interest in and to any Performance Units and the Common Stock into which such Performance Units may have been convertible following the Performance Period; or
(iii) a Grantee working part-time at the Award Date reduces his/her scheduled hours worked per week below a standard 20-hour work week, in which case the Grantee shall, at the time of such reduction and subject to managements discretion, forfeit all right, title and interest in and to any Performance Units and the Common Stock into which such Performance Units may have been convertible following the Performance Period.
3.4 Effect of Grantees Death. If the Grantee ceases to be an employee of the Company or any Affiliate by reason of death prior to the end of a Performance Period, the personal representatives, heirs, legatees or distributees of the Grantee, as appropriate, shall be entitled to the Performance Units, which shall be convertible into the same number of shares of Common Stock that would have otherwise been applicable for the Performance Period multiplied by a fraction, the numerator of which is the number of years during the related Performance Period in which the Grantee was alive and employed by the Company for any portion of such year and the denominator of which is three. Such beneficiary shall have no further rights under this Agreement.
3.5 Effect of Dissolution or Liquidation. In the event of the dissolution or liquidation of the Company, any and all outstanding Performance Units that have not become convertible into shares of Common Stock shall automatically be forfeited.
3.6 Effect of Change of Control. If there is a Change in Control (as defined in the Plan) during the Performance Period, the Grantees employment is terminated at any time within 24 months of the Change of Control and such termination is by the Company without Cause or by the Grantee with Good Reason, all performance goals with respect to the Performance Units shall be deemed to have been met at the Targeted Amount set forth in the Long-Term Award Criteria for the entire Performance Period under the terms of the Long-Term Award Criteria and the Performance Period shall immediately end. In such an event, the Conversion Date shall be the date of the occurrence of the Change in Control. For purposes of this Agreement, Good Reason shall include (i) a reduction in Grantees base salary; (ii) a material diminution in Grantees duties and job responsibilities; or (iii) a relocation of Grantees primary place of work as of the date of this Agreement to a location that requires Grantee to travel from his or her primary residence to such new location an additional 50 or more miles each way.
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For purposes of this Agreement, Cause means:
(i) gross negligence in the performance of Grantees duties and responsibilities, which negligence results in material harm to the business, interests or reputation of the Company;
(ii) a violation of any material Company policy, including, without limitation, the theft, embezzlement or misappropriation or material misuse of any Company funds or property;
(iii) any criminal or civil conviction for a crime involving moral turpitude;
(iv) willful and continued failure by Grantee to perform his or her duties and responsibilities; or
(v) any misconduct that, in the Companys good faith determination, is materially harmful to the business, interests or reputation of the Company.
3.7 Effect of Forfeiture. Any Performance Units forfeited pursuant to Section 3.3, 3.4 and 3.5 shall revert to the Company.
SECTION 4. FORM OF PERFORMANCE UNITS. The Performance Units shall not be certificated. On the Conversion Date, the Company shall cause its Transfer Agent to record Grantees ownership of the Common Stock of the Company (into which the Performance Units are converted) in unrestricted book entry form or, at the request of the Grantee, issued in stock certificate form. Any such certificates shall be unencumbered by any of the restrictions enumerated herein other than such restrictions as may be imposed by applicable federal or state securities laws and regulations.
SECTION 5. TRANSFER OF PERFORMANCE UNITS.
5.1 Except as otherwise provided in the Plan, the Performance Units shall not be offered, sold, transferred, assigned, exchanged, pledged, encumbered or otherwise disposed of (each, a Transfer) for any purpose whatsoever, other than to the Company, and shall not be subject, in whole or in part, to execution, attachment, or similar process in all such cases until the Conversion Date. Any attempted Transfer of the Performance Units, other than in accordance with the terms set forth herein, shall be void and of no effect.
5.2 Grantee acknowledges that any sale, assignment, transfer or other disposition of Performance Units may be subject to restrictions contained in applicable federal or state securities laws and regulations and that any such sale, assignment, transfer or other disposition of Performance Units by him or her will be in compliance with such laws and regulations.
SECTION 6. WITHHOLDINGS. The Company and each Affiliate shall have the right to retain and withhold from any payment of Performance Units, Common Stock into which Performance Units are convertible (and any dividends on such Common Stock) any amounts required to be withheld or otherwise deducted and paid with respect to such payment. At its discretion, the Company and each Affiliate may require the Grantee receiving Performance Units or Common Stock into which Performance Units are convertible to reimburse the Company or any Affiliate for any such taxes required to be withheld by the Company or the Affiliate and withhold any distribution in whole or in part until the Company and each Affiliate is so reimbursed. In lieu thereof, the Company and each Affiliate shall have the right to withhold from any other cash
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amounts due or to become due from the Company or the Affiliate to the Grantee an amount equal to such taxes required to be withheld by the Company or the Affiliate as reimbursement for any such taxes or retain and withhold a number of shares having a market value not less than the amount of such taxes in order to reimburse the Company or the Affiliate for any such taxes.
SECTION 7. ADJUSTMENTS TO PERFORMANCE UNITS.
7.1 Stock Dividends and Splits and Similar Transactions. Subject to any required action by the Companys Board of Directors and stockholders, the number of Performance Units shall be proportionately adjusted for any increase or decrease in the number of issued Shares of the Company resulting from the payment of a Share dividend, a Share split, a Share reverse-split or any similar transaction.
7.2 Change in Par Value. In the event of a change in the Companys Shares, which is limited to a change of all of its authorized shares with par value into the same number of shares with a different par value or without par value, the shares resulting from any such change shall be deemed to be shares within the meaning of the Plan.
7.3 Other Capital Adjustments. Except as hereinbefore expressly provided in Section 7.1 and except for rights that all holders of Common Stock shall have, Grantee shall have no rights by reason of any subdivision or consolidation of Shares of any class or payment of any share dividend or any other increase or decrease in the number of shares of any class or by reason of any dissolution, liquidation, merger or consolidation or spin-off of assets or stock of another corporation; any issuance by the Company of Shares of any class, or securities convertible into Shares of any class, shall not affect the Award, and no adjustment by reason thereof shall be made with respect to the number or price of the Performance Units subject to the Award. An Award of Performance Units shall not affect in any way the right or power of the Company to make adjustments, reclassifications, reorganizations or changes of its capital or business structure or to merge or to consolidate or to dissolve, liquidate or sell or transfer all or any part of its business or assets.
SECTION 8. GRANTEES REPRESENTATIONS AND WARRANTIES. Grantee represents and warrants that:
(a) such Grantee has not and will not, directly or indirectly, Transfer any Performance Units except in accordance with the terms of this Agreement;
(b) such Grantee has, or such Grantee together with such Grantees advisors, if any, have such knowledge and experience in financial, business and tax matters that such Grantee is, or such Grantee together with such Grantees advisors, if any, are capable of evaluating the merits and risks relating to such Grantees investment in the Performance Units and making an investment decision with respect to the Company;
(c) such Grantee has been given the opportunity to obtain information and documents relating to the Company and to ask questions of and receive answers from representatives of the Company concerning the Company and such Grantees investment in the Performance Units; and
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(d) such Grantee realizes that there are substantial risks incident to an investment in the Performance Units.
SECTION 9. IMPACT ON OTHER BENEFITS. The value of the Performance Units (either on the Award Date or at the Conversion Date) shall not be includable as compensation or earnings for purposes of any other benefit plan offered by the Company.
SECTION 10. ADMINISTRATION. The Committee shall have full authority and discretion (subject only to the express provisions of the Plan) to decide all matters relating to the administration and interpretation of the Plan and this Agreement. All such Committee determinations shall be final, conclusive, and binding upon the Company, the Grantee, and any and all interested parties.
SECTION 11. NO AGREEMENT TO CONTINUE IN EMPLOYMENT. Nothing in the Plan or this Agreement shall confer on the Grantee any right to continue in the employ of the Company or any Affiliate or interfere in any way with the right of the Company and any Affiliate to terminate the Grantees employment at any time.
SECTION 12. AMENDMENT(S). This Agreement shall be subject to the terms of the Plan, as amended from time to time, except that the Award that is the subject of this Agreement may not in any way be restricted or limited by any amendment or termination approved after the Award Date without the Grantees written consent.
SECTION 13. FORCE AND EFFECT. The various provisions of this Agreement are severable in their entirety. Any determination of invalidity or unenforceability of any one provision shall have no effect on the continuing force and effect of the remaining provisions.
SECTION 14. GOVERNING LAWS. This Agreement shall be construed and enforced in accordance with and governed by the laws of the State of Maryland.
SECTION 15. MISCELLANEOUS.
15.1 Any notice necessary under this Agreement shall be in writing, signed by the party giving or making the same, and addressed (a) to the Company in the care of its President or Secretary at the principal executive office of the Company in Dallas, Texas, (b) to the Grantee at the address appearing in the personnel records of the Company for such Grantee or (c) to either party at such other address as either party hereto may hereafter designate in writing to the other. Except as otherwise provided herein, any such notice shall be deemed effective upon receipt thereof by the addressee.
15.2 This Agreement may be executed in counterparts, each of which shall be deemed an original for all purposes and both of which taken together shall constitute but one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date hereof. By execution of this Agreement, the Grantee acknowledges receipt of a copy of the Plan, the Companys Annual Report on Form 10-K for the year ended December 31, 2012 and the informational supplement required by Rule 428(b)(1) under the Securities Act of 1933.
CAPSTEAD MORTGAGE CORPORATION | ||
By: | ||
Phillip A. Reinsch | ||
Executive Vice President & Chief Financial Officer | ||
GRANTEE | ||
«Name» |