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EX-10.4 - EX-10.4 - CAPSTEAD MORTGAGE CORPd688003dex104.htm
EX-10.3 - EX-10.3 - CAPSTEAD MORTGAGE CORPd688003dex103.htm
EX-10.2 - EX-10.2 - CAPSTEAD MORTGAGE CORPd688003dex102.htm
EX-10.1 - EX-10.1 - CAPSTEAD MORTGAGE CORPd688003dex101.htm

 

 

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 (Date of earliest event reported):

January 3, 2019

 

 

CAPSTEAD MORTGAGE CORPORATION

(Exact Name of Registrant as Specified in its Charter)

 

 

 

MARYLAND

(State or other jurisdiction of

Incorporation)

  

001-08896

(Commission File Number)

  

75-2027937

(IRS Employer Identification

Number)

 

8401 North Central Expressway
Suite 800
Dallas, Texas

(Address of principal executive offices)

  

75225

(Zip Code)

Registrant’s 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 240.14a-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))

Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

 

 


ITEM 5.02

DEPARTURE OF DIRECTORS OR CERTAIN OFFICERS; ELECTION OF DIRECTORS; APPOINTMENT OF CERTAIN OFFICERS; COMPENSATORY ARRANGEMENTS OF CERTAIN OFFICERS.

Adjustments to 2019 Base Salaries

On January 3, 2019, 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 January 1, 2019, as follows:

 

Executive Officer

   2018 Annual Base Salary      Annual Base Salary
Effective January 1, 2019
 

Roy S. Kim, Senior Vice President – Asset and Liability Management

   $ 400,000      $ 420,000  

Lance J. Phillips, Senior Vice President and Chief Financial Officer

   $ 300,000      $ 330,000  

2019 Annual Incentive Compensation Program Awards

On January 3, 2019, the Committee also adopted the 2019 Annual Incentive Compensation Program applicable to the Company’s executive officers (the “2019 Annual Incentive Program”). The 2019 Annual Incentive Program is structurally similar to the 2018 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.

Changes for 2019 consisted of (a) increasing Mr. Phillips’ award opportunity (measured at Target performance levels) from 75% to 100% of his annual base salary on January 1, 2019 (b) reducing the two relative economic return performance metrics by five percentage points each to an aggregate participation level of 35% of the total award (measured at Target performance levels); (c) increasing the absolute economic return performance metric by ten percentage points to an aggregate participation level of 40%; and (d) reducing the absolute economic return Target and Maximum return levels to 8.0% and 10.0% from 9.0% and 12.0%, respectively.

The 2019 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 2018 totaling 600,000 expired December 31, 2018. On January 3, 2019 the Committee awarded 2019 DERs totaling 625,000 expiring December 31, 2019 as follows:

 

     2018      2019  

Executive Officer

   DER Grants      DER Grants  

Phillip A. Reinsch, President and Chief Executive Officer

     200,000        200,000  

Robert R. Spears, Jr., Executive Vice President and Chief Investment Officer

     200,000        200,000  

Roy S. Kim, Senior Vice President – Asset and Liability Management

     125,000        125,000  

Lance J. Phillips, Senior Vice President and Chief Financial Officer

     75,000        100,000  

2019 Long-Term Awards

Pursuant to the Amended and Restated 2014 Flexible Incentive Plan, on January 3, 2019, 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 January 2, 2019, consisting of (a) restricted common stock and (b) performance units (the “Performance Units”).

Changes for 2019 consisted of (a) increasing Mr. Phillips’ award opportunity from 75% from 100% of his base salary (b) reducing the Performance Units’ two relative economic return performance metrics by five percentage points each to an aggregate participation level of 40% of the total award (measured at Target performance levels); (c) increasing the Performance Units’ absolute economic return performance metric by ten percentage points to 40%; and (d) reducing this metric’s Target and Maximum return levels to 8.0% and 10.0% from 9.0% and 12.0%, respectively.


Restricted Stock Awards

The restricted common stock awards vest in full on January 2, 2022 and were granted in the following share amounts with a value equal to 75% of each grantee’s annual base salary on January 1, 2019 (except for Mr. Phillips, whose award equals to 50% of his salary):

 

Executive Officer

   Number of shares of
Restricted Common Stock
 

Phillip A. Reinsch, President and Chief Executive Officer

     69,341  

Robert R. Spears, Jr., Executive Vice President and Chief Investment Officer

     66,568  

Roy S. Kim, Senior Vice President – Asset and Liability Management

     46,597  

Lance J. Phillips, Senior Vice President and Chief Financial Officer

     24,408  

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 “2019 Long-Term Performance Unit Award Criteria”). The 2019 Long-Term Performance Unit Award Criteria are structurally similar to the long-term performance unit award criteria adopted by the Committee in 2018. The number of shares of common stock into which the Performance Units are convertible is dependent on the extent, if any, that defined relative economic return, absolute economic return and relative total stockholder return performance metrics are achieved during a three-year performance period ending December 31, 2021, as specifically outlined in the 2019 Long-Term Performance Unit Award Criteria.

For example, if defined Target performance levels for all metrics 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 all defined Maximum performance levels are achieved or exceeded, the Performance Units will convert into shares of common stock equal to twice the number of Performance Units granted. If only defined Threshold performance levels are achieved, 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 any of 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 factors for any metrics that perform above related Threshold but below the Maximum performance levels. 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 with a value equal to 75% of each grantee’s annual base salary on January 1, 2019 (except for Mr. Phillips, whose award equals to 50% of his salary). These units are convertible into the indicated number of shares of common stock:

 

Executive Officer

   Number of
Performance
Units
     Number of shares of Common Stock into which
the Performance Units are Convertible
 
            Below
Threshold
     Threshold      Target      Maximum  

Phillip A. Reinsch, President and Chief Executive Officer

     69,341        0        34,671        69,341        138,682  

Robert R. Spears, Jr., Executive Vice President and Chief Investment Officer

     66,568        0        33,284        66,568        133,136  

Roy S. Kim, Senior Vice President – Asset and Liability Management

     46,597        0        23,299        46,597        93,194  

Lance J. Phillips, Senior Vice President and Chief Financial Officer

     24,408        0        12,204        24,408        48,816  

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 March 15, 2022. 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 2019 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.

 

ITEM 9.01.

FINANCIAL STATEMENTS AND EXHIBITS

(d) Exhibits.

The following exhibits are 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
January 7, 2019     By:   /s/ Lance J. Phillips
      Lance J. Phillips
      Senior Vice President and Chief Financial Officer