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:  January 29, 2014
(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)

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:
 
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425).
 
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 230.14a-12).
 
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)).
 
o 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.

2014 Annual Incentive Compensation Program
 
On January 29, 2014, the Compensation Committee (the “ Committee ”) of the Board of Directors of Capstead Mortgage Corporation (the “ Company ”) adopted the 2014 Annual Incentive Compensation Program applicable to its executive officers (the “ 2014 Program ”).  The 2014 Program is similar to the 2013 Annual Incentive Compensation Plan adopted by the Committee in 2013 after an extensive review of the Company’s pay practices and programs undertaken by the Committee, together with its outside independent compensation consultant, Pay Governance.  The 2014 Program continues to provide specific metrics against which the Company’s performance is to be measured, including relative economic return, relative operating efficiency and individual objectives for each of the executive officers; however, an absolute economic return metric was added in the 2014 Program.  Payouts under the 2014 Program will continue to be determined formulaically, defining target and maximum payout percentages based on multiples of base salary, thereby limiting the maximum annual incentive payout for each of the Company’s executive officers.
 
The 2014 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 the actual 2014 Program filed as Exhibit 10.1 with this Form 8-K.
 
2014 Long Term Award Criteria
 
On January 29, 2014, the Committee also noted that a correction is necessary related to the 2014 Long-Term Award Criteria and the related Performance Unit Agreement, each filed with the SEC on December 24, 2013.  The Committee intended that, under the 2014 Long-Term Award Criteria, the executive officers would be entitled to receive all dividends and any other distributions declared from the date of grant through the end of the performance period, rather than from January 1, 2014, if and to the extent that the performance metrics are satisfied and the performance units are ultimately convertible into common stock.  The corrected Long-Term Award Criteria is filed with this Form 8-K as Exhibit 10.2 and is incorporated by reference herein, and the corrected form of Performance Unit Agreement is filed with this Form 8-K as Exhibit 10.3.
 
ITEM 5.03 AMENDMENTS TO ARTICLES OF INCORPORATION OR BYLAWS; CHANGE IN FISCAL YEAR.

Bylaw Amendment
 
On January 29, 2014, the Board of Directors of the Company amended the bylaws of the Company to change the latest date on which an annual meeting of its stockholders can occur from May 15 to July 15 of each year.
 
The Amended and Restated Bylaws are filed with this Form 8-K as Exhibit 3.1 and incorporated by reference herein.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS

(d) Exhibits.

3.1* Amended and Restated Bylaws
10.1* 2014 Annual Incentive Compensation Program
10.2* 2014 Long-Term Award Criteria, as corrected
10.3* Form of Performance Unit Agreement, as corrected
 
*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
       
February 3, 2014
By:
/s/ Phillip A. Reinsch
 
 
 
Phillip A. Reinsch
 
 
 
Executive Vice President, Chief Financial
 
 
 
Officer and Secretary
 
INDEX TO EXHIBITS

 
Exhibit No.
Description

3.1* Amended and Restated Bylaws
10.1* 2014 Annual Incentive Compensation Program
10.2* 2014 Long-Term Award Criteria, as corrected
10.3* Form of Performance Unit Agreement, as corrected

*Filed herewith


Exhibit 3.1
 
CAPSTEAD MORTGAGE CORPORATION
 
AMENDED AND RESTATED BYLAWS
 
As of January 29, 2014
TABLE OF CONTENTS
 
 
 
Page
 
 
ARTICLE I. STOCKHOLDERS
1
SECTION 1.1.
Annual Meeting
1
SECTION 1.2.
Special Meeting
1
SECTION 1.3.
Director Nomination by Stockholder
2
SECTION 1.4.
Place of Meetings
2
SECTION 1.5.
Fixing of Record Date
2
SECTION 1.6.
Notice of Meetings; Waiver of Notice
2
SECTION 1.7.
Quorum; Voting
2
SECTION 1.8.
Adjournments
3
SECTION 1.9.
General Right to Vote; Proxies
4
SECTION 1.10.
List of Stockholders
4
SECTION 1.11.
Organization and Order of Business
4
SECTION 1.12.
Conduct of Voting
5
 
 
 
ARTICLE II. BOARD OF DIRECTORS
5
SECTION 2.1.
Function of Directors
5
SECTION 2.2.
Number of Directors
5
SECTION 2.3.
Election and Tenure of Directors
5
SECTION 2.4.
Removal of Director
5
SECTION 2.5.
Vacancy on Board
6
SECTION 2.6.
Regular Meetings
6
SECTION 2.7.
Special Meetings
6
SECTION 2.8.
Meeting by Conference Telephone
6
SECTION 2.9.
Notice of Meeting
7
SECTION 2.10.
Quorum and Action by Directors
7
SECTION 2.11.
Organization
8
SECTION 2.12.
Action by Consent
8
SECTION 2.13.
Compensation
8
SECTION 2.14.
Interested Director Transactions
8
 
 
 
ARTICLE III. COMMITTEES
10
SECTION 3.1.
Number; Conduct
10
 
 
 
ARTICLE IV. OFFICERS
11
SECTION 4.1.
Enumeration
11
SECTION 4.2.
Election and Appointment
11
SECTION 4.3.
Chairman of the Board
11
SECTION 4.4.
Chief Executive Officer
12
SECTION 4.5.
President
12
SECTION 4.6.
Chief Financial Officer
12
SECTION 4.7.
Treasurer and Assistant Treasurers
12

i
SECTION 4.8.
Secretary and Assistant Secretaries
13
SECTION 4.9.
Chief Operating Officer, Chief Investment Officer, Chief Legal Officer, or Chief Accounting Officer
13
SECTION 4.10.
Vice Presidents and Assistant Vice Presidents
13
SECTION 4.11.
Compensation
13
SECTION 4.12.
Qualification
14
SECTION 4.13.
Tenure
14
SECTION 4.14.
Resignation
14
SECTION 4.15.
Removal
14
SECTION 4.16.
Absence or Disability
15
SECTION 4.17.
Vacancies
15
SECTION 4.18.
Other Powers and Duties
15
 
 
 
ARTICLE V. STOCK
15
SECTION 5.1.
Certificates for Stock
15
SECTION 5.2.
Transfers
16
SECTION 5.3.
Legends
16
SECTION 5.4.
Record Date and Closing of Transfer Books
16
SECTION 5.5.
Stock Ledger
16
SECTION 5.6.
Lost Stock Certificates
17
SECTION 5.7.
Transfer Agents and Registrars
17
SECTION 5.8.
Stockholders’ Addresses
17
SECTION 5.9.
Repurchase of Shares of Stock
17
 
 
 
ARTICLE VI. FINANCE
18
SECTION 6.1.
Annual Statement of Affairs
18
SECTION 6.2.
Dividends
18
SECTION 6.3.
Fiscal Year
18
 
 
 
ARTICLE VII. INDEMNITIES
18
SECTION 7.1.
Right to Indemnification
18
SECTION 7.2.
Indemnification of Employees and Agents of the Corporation
19
SECTION 7.3.
Right of Indemnitee to Bring Suit
19
SECTION 7.4.
Non-Exclusivity of Rights
20
SECTION 7.5.
Insurance
20
 
 
 
ARTICLE VIII. MISCELLANEOUS
21
SECTION 8.1.
Books and Records
21
SECTION 8.2.
Mail
21
SECTION 8.3.
Amendments
21

ii
CAPSTEAD MORTGAGE CORPORATION
 
AMENDED AND RESTATED BYLAWS
 
As of January 29, 2014
 
ARTICLE I.

STOCKHOLDERS
 
SECTION 1.1.             Annual Meeting .  The Corporation shall hold an annual meeting of its stockholders to elect directors and transact any other business as properly may come before such meeting, on such date and at such time as shall be designated annually by the Board of Directors and stated in the notice of the meeting, such meeting to occur no earlier than April 15 and no later than July 15 of each year. Failure to hold an annual meeting does not invalidate the Corporation’s existence or affect any otherwise valid corporate acts.
 
SECTION 1.2.             Special Meeting .  At any time in the interval between annual meetings, a special meeting of the stockholders may be called by the Chairman of the Board or the Chief Executive Officer or by a majority of the Board of Directors by vote at a meeting or in writing (addressed to the Secretary of the Corporation) with or without a meeting, and shall be called by any officer of the Corporation upon the written request of the holders of shares entitled to cast a majority of all votes entitled to be cast at such meeting for the purpose of removing a director or for any other lawful purpose or purposes.  If a special meeting is called at the request of stockholders, such request shall state the purpose or purposes of such meeting and the matters proposed to be acted on.  Upon receipt and validation of such written request, the Chief Executive Officer, President or other officer of the Corporation shall call a special meeting of stockholders for the purpose or purposes identified in such request.  Business of the Corporation transacted at any special meeting of stockholders by whomever called shall be limited to the purposes stated in the notice.
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SECTION 1.3.             Director Nomination by Stockholder .  If a stockholder wants to nominate a person for election to the Board of Directors, notice of the proposed nomination must be given not less than one hundred twenty (120) days prior to the first anniversary of the mailing date of the notice of the preceding year’s annual meeting.
 
SECTION 1.4.             Place of Meetings .  Meetings of stockholders shall be held at such place in the United States as is set from time to time by the Board of Directors.
 
SECTION 1.5.             Fixing of Record Date .  The Board of Directors may fix, in advance, a record date not more than ninety (90), nor less than ten (10) days before the date then fixed for the holding of any meeting of the stockholders.  All persons who were holders of record of shares at such time, and no others, shall be entitled to vote at such meeting and any adjournment thereof, except as provided in Section 1.8.
 
SECTION 1.6.             Notice of Meetings; Waiver of Notice .  Not more than ninety (90), nor less than ten (10) days before each stockholders’ meeting, unless a different period of notice is required by Maryland General Corporation Law, as amended (the “MGCL”), the Secretary shall give notice of the meeting.
 
SECTION 1.7.             Quorum; Voting .  Unless the MGCL, the Articles of Incorporation of the Corporation (the “Charter”), the listing standards of the New York Stock Exchange or any successor thereto, or this provision of the Bylaws provide otherwise, at a meeting of stockholders the presence in person or by proxy of stockholders entitled to cast a majority of all the votes entitled to be cast at the meeting constitutes a quorum and a majority of all the votes cast at a meeting at which a quorum is present is sufficient to approve any matter which properly comes before the meeting.
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A nominee for director shall be elected to the Board of Directors if the votes cast for such nominee’s election exceed the votes cast against such nominee’s election (with “abstentions” and “broker nonvotes” not counted as a vote cast either “for” or “against” that director’s election); provided however, that in the case of a contested election, directors shall be elected by a plurality of the votes cast.  For purposes of this Bylaw provision, a “contested election” shall mean any election of directors with respect to which (i) the Corporation receives notice that a stockholder has nominated an individual for election as a director in compliance with the requirements set forth in Article I, Section 1.3 of these Bylaws and (ii) such nomination has not been withdrawn by such stockholder on or prior to the date the Corporation first mails its notice of meeting for such meeting to the stockholders, and, as a result of which, there are more nominees than directorships.
 
SECTION 1.8.             Adjournments .  Whether or not a quorum is present, a meeting of stockholders convened on the date for which it was called may be adjourned from time to time by the stockholders present in person and by proxy by a majority vote. Any business which might have been transacted at the meeting as originally notified may be deferred and transacted at such adjourned meeting at which a quorum shall be present. No further notice is required of an adjourned meeting other than by announcement at the meeting; provided , however , that if the adjournment is to a date more than 120 days after the original record date, or if after the adjournment a new record date is fixed for the adjourned meeting, notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the original meeting.
3
SECTION 1.9.             General Right to Vote; Proxies .  Unless otherwise provided in the Charter, each outstanding share of capital stock, regardless of class, is entitled to one vote on each matter submitted to a vote at a meeting of stockholders. A stockholder may vote only the shares owned by him as shown on the record of stockholders of the Corporation as of the record date established pursuant to Section 1.5 and may vote the stock either in person or by proxy as permitted under the MGCL. Unless a proxy provides otherwise, it is not valid more than eleven (11) months after the date of its execution.  A proxy purporting to be executed by or on behalf of a stockholder shall be deemed valid unless challenged at or prior to its exercise, and the burden of proving invalidity shall rest on the challenger.
 
SECTION 1.10.          List of Stockholders . The Secretary shall make, or shall cause to be made, and administer, a complete list of the stockholders entitled to vote at the meeting as required by the MGCL.
 
SECTION 1.11.          Organization and Order of Business . At each meeting of the stockholders, the Chief Executive Officer, or in his or her absence or inability to act, the President, or in the absence or inability to act of the Chief Executive Officer and the President, the Chief Financial Officer or such other officer as designated by a majority of the Board of Directors, shall act as presiding officer of the meeting. The Secretary, or in his or her absence or inability to act, any person appointed by the presiding officer of the meeting, shall act as secretary of the meeting and keep the minutes thereof.  The order of business at all meetings of the stockholders shall be as determined by the presiding officer of the meeting.
4
SECTION 1.12.          Conduct of Voting .  The presiding officer may appoint one or more inspectors, which inspector or inspectors may include individuals who serve the Corporation in other capacities, including, without limitation, as officers, employees, agents or representatives, to act at a meeting of stockholders and make a written report thereof.  One or more persons may be designated as alternate inspectors to replace any inspector who fails to act.  Each inspector, before discharging his or her duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his or her ability.  The inspectors shall have the duties prescribed by the MGCL.  The presiding officer of the meeting shall fix and announce at the meeting the date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting.
 
ARTICLE II.

BOARD OF DIRECTORS
 
SECTION 2.1.             Function of Directors .  The business and affairs of the Corporation shall be managed under the direction of its Board of Directors. All powers of the Corporation may be exercised by or under authority of the Board of Directors, except as conferred on or reserved to the stockholders by the MGCL or by the Charter or these Bylaws.
 
SECTION 2.2.             Number of Directors . The Corporation shall have the number of directors provided in the Charter until changed as herein provided. A majority of the entire Board of Directors may alter the number of directors set by the Charter to not more than twenty-five (25) nor less than the number required by the MGCL.
 
SECTION 2.3.             Election and Tenure of Directors . At each annual meeting, the stockholders shall elect directors to hold office until the next annual meeting and until their successors are elected and qualified.
 
SECTION 2.4.             Removal of Director .  Unless the Charter provides otherwise, and subject to the MGCL, the stockholders may remove any director or directors from office at any time, with or without cause, by the affirmative vote at any meeting of stockholders, duly called and at which a quorum is present, of the holders of a majority of the outstanding shares of the Corporation entitled to be cast for the election of directors.
5
SECTION 2.5.             Vacancy on Board .  The stockholders may, as permitted by the MGCL, elect a successor to fill a vacancy on the Board of Directors which results from the removal of a director. A director elected by the stockholders to fill a vacancy which results from the removal of a director serves for the balance of the term of the removed director. A majority of the remaining directors, whether or not sufficient to constitute a quorum, may fill a vacancy on the Board of Directors which results from any cause except an increase in the number of directors, and a majority of the entire Board of Directors may fill a vacancy which results from an increase in the number of directors. A director elected by the Board of Directors to fill a vacancy serves until the next annual meeting of stockholders and until his or her successor is elected and qualified.
 
SECTION 2.6.            Regular Meetings .  Any regular meeting of the Board of Directors shall be held on such date and place as may be designated from time to time by the Board of Directors, which may include conference telephone as provided in Section 2.8.
 
SECTION 2.7.            Special Meetings .  Special meetings of the Board of Directors may be called at any time by the Chairman of the Board or the Chief Executive Officer or by a majority of the Board of Directors by vote at a meeting, or in writing with or without a meeting. A special meeting of the Board of Directors shall be held on such date and place as may be designated from time to time by the Board of Directors, which may include conference telephone as provided in Section 2.8.
 
SECTION 2.8.             Meeting by Conference Telephone .  Members of the Board of Directors may participate in a meeting by means of a conference telephone or similar communications equipment if all persons participating in the meeting can hear each other at the same time. Participation in a meeting by these means constitutes presence in person at a meeting.
6
SECTION 2.9.             Notice of Meeting .  The Secretary shall give notice to each director of each regular and special meeting of the Board of Directors. The notice shall state the time and place of the meeting. Notice is given to a director when it is delivered personally to him, left at his residence or usual place of business, or sent by electronic means or telephone, at least twenty-four (24) hours before the time of the meeting or, in the alternative by mail to his address as it appears on the records of the Corporation, at least seventy-two (72) hours before the time of the meeting. Unless the Bylaws or a resolution of the Board of Directors provides otherwise, the notice need not state the business to be transacted at or the purposes of any regular or special meeting. No notice of any meeting of the Board of Directors need be given to any director who attends, or to any director who, in writing executed and filed with the records of the meeting either before or after the holding thereof, waives such notice.  Any meeting of the Board of Directors, regular or special, may adjourn from time to time to reconvene at the same or some other place, and no notice need be given of any such adjourned meeting other than by announcement.
 
SECTION 2.10.          Quorum and Action by Directors .  At all meetings of the Board of Directors, a majority of the entire Board of Directors shall constitute a quorum for the transaction of business, and the action of a majority of the directors present at any meeting at which a quorum is present shall be the action of the Board of Directors unless the concurrence of a greater proportion is required for such action by the MGCL, the Charter or these Bylaws. If a quorum shall not be present at any meeting of directors, the directors present at the meeting may by a majority vote adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present.
7
SECTION 2.11.          Organization .  The Chairman of the Board shall preside at each meeting of the Board of Directors or, in his or her absence, inability or desire not to act, the Chief Executive Officer shall preside, or in the Chief Executive Officer’s absence, inability or desire not to act, such other director chosen by the Chairman of the Board or a majority of the directors present at such meeting. The Secretary (or, in his or her absence, inability or desire not to act, any person appointed by the chairman of the meeting) shall act as secretary of the meeting and keep the minutes thereof.
 
SECTION 2.12.          Action by Consent .  Any action required or permitted to be taken at a meeting of the Board of Directors may be taken without a meeting, if a unanimous written consent which sets forth the action is signed by each member of the Board of Directors and filed with the minutes of proceedings of the Board of Directors. Such consents may be signed by different members on separate counterparts.
 
SECTION 2.13.          Compensation . Directors shall receive compensation for their services as shall be determined by a majority of the Board of Directors, provided that a Director who is serving the Corporation as an officer or employee and who receives compensation for his or her services as such (“Employee Director”) shall not receive any salary or other compensation for his or her services as Director of the Corporation other than reasonable expenses incurred.
 
SECTION 2.14.          Interested Director Transactions .  As set forth in MGCL Sect. 2-419:
 
(a)              Taking into account compliance with the provisions of subsection (b) of this Section 2.14, a contract or other transaction between the Corporation and any of its directors or between the Corporation and any other corporation, firm or other entity in which any of the Corporation’s directors is a director or has a material financial interest (an “Interested Director Transaction”) is not void or voidable solely because of any one or more of the following:
8
(i)
the common directorship;
 
(ii)
the presence of the director at the meeting of the Board of Directors which authorizes, approves or ratifies the contract or transaction; or
 
(iii)
the counting of the vote of the director for the authorization, approval or ratification of the contract or transaction.
 
(b)              An Interested Director Transaction is not void or voidable solely because of any one or more of the factors set forth in subsection (a) above if:
 
(i)
the fact of the common directorship or interest is disclosed or known to:
 
1.
the Board of Directors of the Corporation, and the Board of Directors authorizes, approves or ratifies the contract or transaction by the affirmative vote of a majority of disinterested directors, even if the disinterested directors constitute less than a quorum; or
 
2.
the stockholders entitled to vote, and the contract or transaction is authorized, approved or ratified by a majority of the votes cast by the stockholders entitled to vote other than the votes of shares owned of record or beneficially by the interested director, or corporation, firm or other entity; or
 
(ii)
a contract or transaction is fair and reasonable to the Corporation.
 
(c)              Common or interested directors or the stock owned by them or by an interested corporation, firm or other entity may be counted in determining the presence of a quorum in a meeting of the Board of Directors of the Corporation or at a meeting of the stockholders, as the case may be, at which the contract or transaction is authorized, approved or ratified.
9
 
(d)               (i)
If a contract or transaction is not authorized, approved or ratified in any one of the ways provided for in subsection (b)(i) of this Section 2.14, the person asserting the validity of the contract or transaction bears the burden of proving that the contract or transaction was fair and reasonable to the Corporation at the time it was authorized, approved or ratified.
 
(ii)
This subsection (d) does not apply to the fixing by the Board of Directors of the Corporation of reasonable compensation, whether as a director or in any other capacity.
 
ARTICLE III.

COMMITTEES
 
SECTION 3.1.             Number; Conduct .  The Board of Directors, by the affirmative vote of a majority of the directors then in office may elect from its number directors to serve on one or more committees, including an Audit Committee, a Compensation Committee and a Governance & Nomination Committee, and may delegate thereto some or all of its powers except those which by the MGCL, by the Charter or by these Bylaws, may not be delegated.  Except as the Board of Directors may otherwise determine or as required by the MGCL, by the Charter or these Bylaws, any such committee may make rules for conduct of its business, but unless otherwise provided by the Board of Directors or in such rules, its business shall be conducted so far as possible in the same manner as is provided by the Charter and by these Bylaws for the Board of Directors.  Any committee to which the Board of Directors delegates any of its powers or duties shall keep records of its meetings and shall report its action to the Board of Directors.  The Chairman of the Board or the Chief Executive Officer may submit recommendations to the Board of Directors for the establishment of such other committees and the members thereof, as necessary.
10
ARTICLE IV.  
 
OFFICERS
 
SECTION 4.1.             Enumeration .  The officers of the Corporation shall consist of a Chief Executive Officer, a President, a Chief Financial Officer, a Secretary and a Treasurer and such other officers, including without limitation a Chief Operating Officer, a Chief Investment Officer, a Chief Legal Officer, a Chief Accounting Officer, one or more Vice Presidents (including Executive Vice Presidents or Senior Vice Presidents), Assistant Vice Presidents, Assistant Treasurers and Assistant Secretaries, as the Board of Directors may determine.  The Corporation shall have a Chairman of the Board who may serve as an officer of the Corporation.
 
SECTION 4.2.             Election and Appointment .  At the regular annual meeting of the Board of Directors following the annual meeting of stockholders, the Board of Directors shall elect the Chairman of the Board, the Chief Executive Officer, the President, the Chief Financial Officer, the Treasurer and the Secretary.  Other officers may be appointed by the Board of Directors at such regular annual meeting of the Board of Directors or at any other regular or special meeting, or other officers may be appointed by the Chief Executive Officer.
 
SECTION 4.3.             Chairman of the Board .  If the Chairman of the Board is not the Chief Executive Officer, the Board of Directors shall determine annually whether the Chairman of the Board shall serve in an officer or non-officer capacity.  The Chairman of the Board shall preside, when present, at meetings of the Board of Directors.  The Chairman of the Board shall have such other powers and shall perform such other duties as the Board of Directors may from time to time designate.
11
SECTION 4.4.             Chief Executive Officer .  The Chief Executive Officer shall be President, unless the Board of Directors elects another officer to be President.  The Chief Executive Officer shall have the general executive responsibilities for the conduct of the business and affairs of the Corporation, subject to the supervision of the Board of Directors.  The Chief Executive Officer shall preside, when present, at all meetings of stockholders, and in the absence, inability or desire not to preside of the Chairman of the Board, the Chief Executive Officer may preside at meetings of the Board.
 
SECTION 4.5.             President .  If the President is not the Chief Executive Officer, he shall have such powers and perform such duties as the Board of Directors or the Chief Executive Officer may from time to time designate.
 
SECTION 4.6.             Chief Financial Officer .  The Chief Financial Officer shall be the principal financial officer of the Corporation.  The Chief Financial Officer shall have such powers and perform such duties as the Board of Directors or the Chief Executive Officer may from time to time designate.  The Chief Financial Officer shall render such accounts, reports and certifications, as may be requested by the Board of Directors or the Chief Executive Officer.    The financial records, books and accounts of the Corporation shall be maintained subject to the direct or indirect supervision of the Chief Financial Officer.
 
SECTION 4.7.             Treasurer and Assistant Treasurers .  The Chief Financial Officer shall be the Treasurer, unless the Board of Directors shall elect another officer to be the Treasurer.    The Treasurer shall have such powers and perform such duties as the Board of Directors or the Chief Executive Officer may from time to time designate.  The Treasurer shall have direct or indirect custody of all funds and securities of the Corporation and shall perform all acts incident to the position of Treasurer.  In the absence of the Treasurer, an Assistant Treasurer may perform the duties and responsibilities of the Treasurer.
12
SECTION 4.8.            Secretary and Assistant Secretaries .  The Secretary shall have such powers and shall perform such duties as the Board of Directors or the Chief Executive Officer may from time to time designate.  The Secretary shall have charge of the stock ledger (which may, however, be kept by any transfer or other agent of the Corporation).  The Secretary shall also have custody of the seal of the Corporation and shall have authority to affix it to any instrument requiring it, and, when so affixed, may be attested by the signature of the Secretary as to the authenticity of such instrument.  In the absence of the Secretary, any Assistant Secretary may perform the duties and responsibilities of the Secretary.
 
SECTION 4.9.             Chief Operating Officer, Chief Investment Officer, Chief Legal Officer, or Chief Accounting Officer .  Any Chief Operating Officer, Chief Investment Officer, Chief Legal Officer, or Chief Accounting Officer shall have such powers and shall perform such duties as the Board of Directors or the Chief Executive Officer may from time to time designate.
 
SECTION 4.10.           Vice Presidents and Assistant Vice Presidents .  Any Vice President (including any Executive Vice President or Senior Vice President) and Assistant Vice President shall have such powers and shall perform such duties as the Board of Directors or the Chief Executive Officer may from time to time designate.
 
SECTION 4.11.          Compensation .  The Board of Directors shall oversee the compensation programs of the Corporation, which may be delegated to a committee of the Board of Directors or the Chief Executive Officer.
13
SECTION 4.12.          Qualification .  Any person may occupy more than one office of the Corporation at any time except the offices of President and Vice President.  Any officer may be required by the Board of Directors to give bond, at the Corporation’s expense, for the faithful performance of his duties in such amount and with such sureties as the Board of Directors may determine.
 
SECTION 4.13.          Tenure .  Except as otherwise provided by the Charter or by these Bylaws, each of the officers of the Corporation shall hold office until the regular annual meeting of the Board of Directors following the next annual meeting of stockholders and until his successor is elected and qualified or until his earlier resignation or removal.  Election or appointment of an officer, employee or agent shall not of itself create contract rights.  The Board of Directors, or committee thereof, may, however, authorize the Corporation to enter into an employment contract with any officer in accordance with the MGCL, but no such contract right shall prohibit the right of the Board of Directors to remove any officer at any time in accordance with Section 4.15.
 
SECTION 4.14.          Resignation .  Any officer may resign by delivering his written resignation to the Corporation addressed to the Chief Executive Officer, the President or the Secretary, and such resignation shall be effective upon receipt unless it is specified to be effective at some other time or upon the happening of some other event.
 
SECTION 4.15.          Removal .  If the Board of Directors in its judgment finds that the best interests of the Corporation will be served, the Board of Directors may remove any officer by the affirmative vote of a majority of the Directors then in office.  Such removal shall be without prejudice to the contract rights, if any, of the person so removed.  Any subordinate officer may be removed by any superior officer in the ordinary course of business of the Corporation.
14
SECTION 4.16.          Absence or Disability .  In the event of the absence or disability of any officer, the Board of Directors, or if the absent or disabled officer is not the Chief Executive Officer, the Chief Executive Officer, may designate another officer to act temporarily in place of such absent or disabled officer.
 
SECTION 4.17.          Vacancies .  Any vacancy in any office may be filled for the unexpired portion of the term by the Board of Directors, or if the vacancy is not that of the Chief Executive Officer, by the Chief Executive Officer.
 
SECTION 4.18.          Other Powers and Duties .  Subject to these Bylaws and to such limitations as the Board of Directors may from time to time prescribe, the officers of the Corporation shall each have such powers and duties as generally pertain to their respective offices, as well as such powers and duties as from time to time may be conferred by the Board of Directors or the Chief Executive Officer.
 
ARTICLE V.

STOCK
 
SECTION 5.1.            Certificates for Stock .  Shares of the Corporation’s stock may be certificated or uncertificated, as provided under the MGCL.  Each stock certificate shall be numbered, entered on the books of the Corporation as issued and include on its face the name of the Corporation, the name of the stockholder or other person to whom it is issued and the class of stock and number of shares it represents. It shall be in such form, not inconsistent with the MGCL or with the Charter, as shall be approved by the Board of Directors or any officer or officers designated for such purpose by resolution of the Board of Directors. Each stock certificate shall be signed by the Chairman of the Board, the Chief Executive Officer, the President or a Vice President, and countersigned by the Secretary, an Assistant Secretary, the Treasurer or an Assistant Treasurer. Each certificate may be sealed with the actual corporate seal or a facsimile of it or in any other form and the signatures may be either manual or facsimile signatures. A certificate is valid and may be issued whether or not an officer who signed it is still an officer when it is issued.
15
SECTION 5.2.             Transfers .  The Board of Directors shall have power and authority to make such rules and regulations as it may deem expedient concerning the issue, transfer and registration of certificates of stock; and may appoint transfer agents and registrars thereof. The duties of transfer agent and registrar may be combined.
 
SECTION 5.3.             Legends .  Every stock certificate representing shares of stock which are restricted as to transferability by the Corporation shall contain a full statement of the restriction or state that the Corporation will furnish information about the restriction to the stockholder on request and without charge.
 
SECTION 5.4.             Record Date and Closing of Transfer Books .  The Board of Directors may set a record date or direct that the stock transfer books be closed for a stated period for the purpose of making any proper determination with respect to stockholders, including which stockholders are entitled to notice of a meeting, vote at a meeting, receive a dividend, or be allotted other rights. The record date may not be more than ninety (90), nor less than ten (10) days before the date on which the action requiring the determination will be taken; the transfer books may be closed as permitted by the MGCL.
 
SECTION 5.5.             Stock Ledger .  The Corporation shall maintain a stock ledger which contains the name and address of each stockholder and the number of shares of stock of each class which the stockholder holds. The stock ledger may be in written form or in any other form which can be converted within a reasonable time into written form for visual inspection. The original or a duplicate of the stock ledger shall be kept at the offices of a transfer agent for the particular class of stock, within or without the State of Maryland, or, if none, at the principal office or the principal executive offices of the Corporation.
16
SECTION 5.6.            Lost Stock Certificates .  In case of the alleged loss, destruction or mutilation of a certificate of stock, a duplicate certificate may be issued in place thereof upon such terms as the Corporation or its transfer agent may prescribe.
 
SECTION 5.7.            Transfer Agents and Registrars .  The Corporation may serve as the transfer agent and registrar of the shares of stock, or the Board of Directors may, in its discretion, appoint one or more responsible banks, trust companies or other entity as the Board of Directors may deem advisable, from time to time, to act as transfer agents and registrars of shares of stock.  No certificate for shares of stock shall be valid until countersigned by the transfer agent and registered by the registrar.
 
SECTION 5.8.            Stockholders’ Addresses .  Every stockholder or transferee shall furnish the Secretary or a transfer agent with the address to which notice of meetings and all other notices may be served upon or mailed to such stockholder or transferee, and in default thereof, such stockholder or transferee shall not be entitled to service or mailing of any such notice.
 
SECTION 5.9.             Repurchase of Shares of Stock .  Subject to the provisions of the MGCL and the Charter, the Corporation may purchase its shares of stock and invest its assets in its own shares of stock.
17
ARTICLE VI.

FINANCE
 
SECTION 6.1.             Annual Statement of Affairs .   The Chairman of the Board, the Chief Executive Officer, the President, a Vice President or the Treasurer shall prepare or cause to be prepared annually a full and correct statement of the affairs of the Corporation, including a balance sheet and a financial statement of operations for the preceding fiscal year, which shall be certified by the Corporation’s independent registered public accounting firm and distributed to shareholders pursuant to the MGCL.  Such annual statement shall also be submitted at the annual meeting of stockholders and shall be placed on file within twenty (20) days thereafter at the principal office of the Corporation.
 
SECTION 6.2.             Dividends .  Dividends upon the capital stock of the Corporation, subject to the provisions of the Charter, if any, may be declared by the Board of Directors at any regular or special meeting, pursuant to the MGCL. Dividends may be paid in cash, in property or in its own shares, subject to the provisions of the MGCL and of the Charter.
 
SECTION 6.3.            Fiscal Year .   The fiscal year of the Corporation for purposes of preparing its tax returns shall be from January 1 to December 31 unless otherwise provided by the Board of Directors.
 
ARTICLE VII.

INDEMNITIES
 
SECTION 7.1.             Right to Indemnification .  The Corporation shall, to the maximum extent permitted by the MGCL in effect from time to time, indemnify, and, without a preliminary determination of the ultimate entitlement to indemnification, pay or reimburse reasonable expenses in advance of final disposition of a proceeding to (a) any individual who is a present or former director or officer of the Corporation or (b) any individual who, while a director or officer of the Corporation and at the request of the Corporation, serves or has served another corporation, real estate investment trust, partnership, joint venture, trust, employee benefit plan or any other enterprise as a director, officer, partner or trustee from and against any claim or liability to which such person may become subject or which such person may incur by reason of his or her status as a present or former director or officer of the Corporation or director, officer, partner or trustee of such other entity (each, an “Indemnitee”).  The Corporation shall, to the maximum extent permitted by the MGCL in effect from time to time, provide such indemnification and advancement of expenses to a person who served a predecessor of the Corporation in any of the capacities described above (any such person shall also be deemed to be an “Indemnitee”).
18
SECTION 7.2.            Indemnification of Employees and Agents of the Corporation .  With the approval of the Board of Directors, the Corporation shall, to the maximum extent permitted by the MGCL in effect from time to time, and to such further extent as it shall deem appropriate under the circumstances, provide such indemnification and advancement of expenses as described in Section 7.1 above, to any employee or agent of the Corporation or a predecessor of the Corporation (each such person shall also be deemed to be an “Indemnitee”).
 
SECTION 7.3.             Right of Indemnitee to Bring Suit .  If a claim under this Article VII is not paid in full by the Corporation within sixty days after a written claim has been received by the Corporation, except in the case of a claim for an advancement of expenses, in which case the applicable period shall be twenty days, the Indemnitee may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim.  If the Indemnitee is successful in whole or in part in any such suit, or in a suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the Indemnitee shall also be entitled to be paid the expense of prosecuting or defending such suit.  In any suit brought by an Indemnitee who is a present or former director to enforce a right to indemnification hereunder (but not in a suit brought by the Indemnitee to enforce a right to an advancement of expenses), it shall be a defense that such Indemnitee has not met the applicable standard of conduct set forth in the MGCL.  In addition, in any suit by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the Corporation shall be entitled to recover such expenses upon a final adjudication that the Indemnitee who is a present or former director has not met the applicable standard of conduct set forth in the MGCL.  Neither the failure of the Corporation (including its Board of Directors, independent legal counsel, or stockholders) to have made a determination prior to the commencement of such suit that indemnification of the Indemnitee is proper in the circumstances because the Indemnitee has met the applicable standard of conduct set forth in the MGCL, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel, or stockholders) that the Indemnitee has not met such applicable standard of conduct, shall create a presumption that the Indemnitee has not met the applicable standard of conduct.  In any suit brought by the Indemnitee to enforce a right to indemnification or to an advancement of expenses hereunder, or by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the burden of proving that the Indemnitee is not entitled to be indemnified, or to such advancement of expenses, under this Article VII or otherwise shall be on the Corporation.
19
SECTION 7.4.            Non-Exclusivity of Rights .  The rights to indemnification and to advancement of expenses conferred in this Article VII shall not be exclusive of any other right which any person may have or hereafter acquire under these Bylaws, the Charter or the MGCL, agreement, vote of stockholders or disinterested directors or otherwise.
 
SECTION 7.5.            Insurance .  The Corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or any director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the MGCL.
20
ARTICLE VIII.

MISCELLANEOUS
 
SECTION 8.1.            Books and Records .  The original or attested copies of the Charter, Bylaws and records of all meetings of the incorporators, stockholders and the Board of Directors and the stock transfer books, which shall contain the names of all stockholders, their record addresses and the amount of stock held by each, may be kept outside the State of Maryland and shall be kept at the principal office of the Corporation, at the office of its counsel or at an office of its transfer agent.
 
SECTION 8.2.             Mail .  Any notice or other document which is required by these Bylaws to be mailed shall be deposited in the United States mails, postage prepaid.
 
SECTION 8.3.             Amendments .
 
(a) The Board of Directors shall have the power, at any annual or regular meeting, or at any special meeting if notice thereof is included in the notice of such special meeting, to alter or repeal any Bylaws of the Corporation and to make new Bylaws.
 
(b) Subject to the MGCL, the stockholders, by affirmative vote of a majority of the shares of common stock of the Corporation, shall have the power, at any annual meeting called pursuant to Section 1.1, or at any special meeting if notice thereof is included in the notice of such special meeting, to alter or repeal any Bylaws of the Corporation and to make new Bylaws.
 
 
21
Exhibit 10.1

CAPSTEAD MORTGAGE CORPORATION
2014 ANNUAL INCENTIVE COMPENSATION PROGRAM
 
Purpose: Capstead Mortgage Corporation (the “ Company ”) has established the 2014 Annual Incentive Compensation Program (the “ 2014   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, (ii) motivate executives to create sustained stockholder value, and (iii) ensure retention of key executives by ensuring that cash compensation remains competitive.
 
Participants: Executive officers of the Company designated by the Compensation Committee.
 
Payout Criteria: The formula and performance-based methodology for determining annual incentive compensation is adopted effective January 1, 2014.  The “target” payment under the 2014 Program for each executive officer will be 125% of his or her base salary at January 1, 2014, with the award, if any, payable in cash.
 
The criteria for payment to participants under the 2014 Program and the weighting of such criteria is as follows:

Performance Metrics and Weighting
 
· 55% of the payout is calculated based on Relative Economic Return metrics (40% measured against Peer Agency mREITs, as defined below) (15% measured against Peer mREITs, as defined below)
 
· 15% of the payout is calculated based on a Relative Operating Efficiency metric, as measured against Peer mREITs
 
· 15% of the payout is calculated based on an Absolute Economic Return metric
 
· 15% of payout is calculated based on performance against Individual Objectives
 
Payout Factors: The payout factor for each of the Relative Economic Return and the Absolute Economic Return metrics is 0% - 200%, rounded to the nearest whole percentage, based on actual performance against approved objectives, as more fully described below.
 
The payout factor for the Relative Operating Efficiency metric is 0% - 150%, rounded to the nearest whole percentage, based on actual performance against approved objectives, as more fully described below.
 
The payout factor for the Individual Objectives metric is 0% - 100%, based on actual individual performance as measured against approved individual objectives.
 
Relative Economic
Return, as
Measured against
Peer Agency
mREITs :
A portion of the payout of each participant’s total award pursuant to the 2014 Program will be based on the relative economic performance of the Company, as compared with the Company’s 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 plus dividends declared per share of common stock during 2014, divided by beginning per share book value 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 participant’s total payout attributable to Relative Economic Return as measured against Peer Agency mREITs will equal 40% 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
 
<40 th Percentile
0%
Minimum
40 th Percentile
50%
Target
60 th Percentile
100%
Maximum
≥80 th Percentile
200%

If the Company’s Relative Economic Return, as measured against Peer Agency mREITS, equals or exceeds the 40 th percentile 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 50 th percentile would result in a payout factor of 75%, and a ranking in the 70 th percentile would result in a payout factor of 150%.

Relative Economic
Return, as
Measured against
Peer mREITs :
A portion of the payout of each participant’s total award pursuant to the 2014 Program will be based on the relative economic performance of the Company, as compared with each of the Company’s peers which invest in a variety of mortgage securities, 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 participant’s total payout attributable to Relative Economic Return as measured against Peer mREITs will equal 15% 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
 
<40 th Percentile
0%
Minimum
40 th Percentile
50%
Target
60 th Percentile
100%
Maximum
≥80 th Percentile
200%

If the Company’s Relative Economic Return, as measured against Peer mREITS, equals or exceeds the 40 th percentile 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 50 th percentile would result in a payout factor of 75%, and a ranking in the 70 th percentile would result in a payout factor of 150%.
2
Relative
Operating
Efficiency, as
measured against
Peer mREITs:
A portion of the payout of each participant’s total award pursuant to the 2014 Program will be based on relative operating efficiency of the Company, as compared with each of the Peer mREITs.  The operating efficiency will be calculated based on the ratio of total general and administrative costs, including management fees, to long-term investment capital (defined as average stockholders’ equity plus average long-term unsecured borrowings), calculated for the 2014 calendar year.  The portion of each participant’s total payout attributable to Relative Operating Efficiency as measured against Peer mREITs will equal 15% of the target award multiplied by the applicable payout factor.
 
The specific payout factor for Relative Operating Efficiency, as measured against Peer mREITs will be calculated as follows:

Threshold
Relative Operating Efficiency
Percentile, as Measured
Against Peer Agency mREITs
Payout Factor, as a
Percentage of Target
 
<85 th Percentile
0%
Minimum
85 th Percentile
50%
Target
90 th Percentile
100%
Maximum
≥95 th Percentile
150%

If the Company’s Relative Operating Efficiency, as measured against Peer mREITS, is between the 85 th and 95 th 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, based on the actual percentile ranking of the Company relative to the Peer mREIT group.  By way of example, a ranking in the 87 th percentile would result in a payout factor of 70%, and a ranking in the 92 th percentile would result in a payout factor of 120%.
 
Absolute
Economic
Return:
A portion of the payout of each participant’s total award pursuant to the 2014 Program 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 plus dividends declared per share of common stock during 2014, divided by beginning per share book value (“ Absolute Economic Return ”).  The portion of each participant’s total payout attributable to Absolute Economic Return will equal 15% 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
≥15.0%
200%

If the Company’s Absolute Economic Return equals or exceeds 10.0%, 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.

3
Individual
Objectives:
A portion of the payout of each participant’s total award pursuant to the 2014 Program will be based on attaining individual objectives set by the Compensation Committee.  The individual performance metric will be measured against the attainment of certain specified individual objectives.  The portion of each participant’s total payout attributable to Individual Objectives will equal 15% of the target award multiplied by the applicable payout factor.
 
The specific payout factor for the Individual Objective metric will range from 0% to 100%, based on the individual’s performance rating measured against specific individual objectives as determined by the Compensation Committee.
 
Plan Year: The 2014 Program will correspond with the Company’s 2014 fiscal year.
 
Eligibility: Eligibility is limited to the executive officers of the Company.  Participants must be actively employed by the Company on the last working day of the Plan Year to receive an incentive award, except as otherwise provided below or by regulatory provisions.  If a participant dies, becomes disabled, or retires prior to the payment of awards, or if a participant’s job is eliminated and such job elimination makes the participant eligible to receive benefits under a Company severance plan or policy, the participant may receive a payout, at the time other incentive awards are paid, based on actual time in the position and actual results of the Company. Eligibility and individual target amounts may be prorated. A participant’s year-end base salary will be used to calculate the incentive award in the case of those individuals actively employed by the Company on the last working day of the Plan Year. A participant’s base salary at the time of death, disability, retirement, or job elimination will be used to calculate the pro-rated incentive award in those specific circumstances. All proration of incentive awards will be calculated based on whole month participation.
 
Definitions: “Disability” is defined as permanent and total disability (within the meaning of Section 22(e)(3) of the Internal Revenue Service Code (“Code”).
 
“Retirement” is defined as (i) age fifty-five (55), so long as the participant has completed at least ten (10) years of continuous service immediately prior to retirement, or (ii) age sixty-five (65).
 
“Actively Employed” is defined as the participant must not have been terminated prior to the identified date.
 
Repayment
Provision:
The participant in this 2014 Program agrees and acknowledges that this 2014 Program is subject to any policies that the Compensation Committee of the Board of Directors may adopt from time to time with respect to the repayment to the Company of any benefit received pursuant to this 2014 Program, including “clawback” policies.
 

4
Exhibit 10.2
 
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 Company’s 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 Company’s 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 officer’s 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 participant’s total 2014 award will be based on the relative economic performance of the Company, as compared with the Company’s 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 participant’s 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
 
<40 th Percentile
0%
Minimum
40 th Percentile
50%
Target
60 th Percentile
100%
Maximum
≥80 th Percentile
200%

If the Company’s Relative Economic Return, as measured against Peer Agency mREITS, is between the 40 th and 80 th 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 50 th percentile would result in a payout factor of 75% of the target award, and a ranking in the 70 th 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 participant’s total 2014 award will be based on the relative economic performance of the Company, as compared with each of the Company’s 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 participant’s 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
 
<40 th Percentile
0%
Minimum
40 th Percentile
50%
Target
60 th Percentile
100%
Maximum
≥80 th Percentile
200%

2
If the Company’s Relative Economic Return, as measured against Peer mREITS, is between the 40 th and 80 th 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 50 th percentile would result in a payout factor of 75% of the target award, and a ranking in the 70 th percentile would result in a payout factor of 150% of the target award.
 
Absolute
Economic
Return:
A portion of the payout of each participant’s 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 participant’s 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
≥15.0%
200%

If the Company’s 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 participant’s 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 participant’s 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
 
<40 th Percentile
0%
Minimum
40 th Percentile
50%
Target
60 th Percentile
100%
Maximum
≥80 th Percentile
200%

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If the Company’s Relative Total Stockholder  Return, as measured against Peer mREITS, is between the 40 th and 80 th 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 50 th percentile would result in a payout factor of 75% of the target award, and a ranking in the 70 th 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 from the date of grant through the end of 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 date of grant (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 10.3
 
CAPSTEAD MORTGAGE CORPORATION
 
PERFORMANCE UNIT AGREEMENT
FOR EMPLOYEES

THIS PERFORMANCE UNIT AGREEMENT (this “ Agreement ”) made and entered into as of the 18 th 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 Capstead’s 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 Company’s 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 Company’s 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.
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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.  From the date of grant through the end of 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.  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 from the date of grant 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 date of grant (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 Grantee’s 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 management’s 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 management’s 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 Grantee’s 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 Grantee’s 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 Grantee’s base salary; (ii) a material diminution in Grantee’s duties and job responsibilities; or (iii) a relocation of Grantee’s 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 Grantee’s 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 Company’s 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 Grantee’s 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 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.
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SECTION 7.           ADJUSTMENTS TO PERFORMANCE UNITS .
 
7.1              Stock Dividends and Splits and Similar Transactions .  Subject to any required action by the Company’s 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 Company’s 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.           GRANTEE’S 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 Grantee’s advisors, if any, have such knowledge and experience in financial, business and tax matters that such Grantee is, or such Grantee together with such Grantee’s advisors, if any, are capable of evaluating the merits and risks relating to such Grantee’s 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 Grantee’s 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 Grantee’s 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 Grantee’s 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.

[Signature Page Follows]
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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 Company’s 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»