SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement. [ ] Confidential, for use of the
Commission only (as permitted by
Rule 14a-6(e)(2)).
[X] Definitive proxy statement.
[ ] Definitive additional materials.
[ ] Soliciting material pursuant to Section 240.14a-12
Capstead Mortgage Corporation
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
Payment of filing fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
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[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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(CAPSTEAD LOGO)
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held April 24, 2003
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To the stockholders of
CAPSTEAD MORTGAGE CORPORATION:
The annual meeting of stockholders of Capstead Mortgage Corporation, a
Maryland corporation, will be held at the DoubleTree Hotel, 8250 North Central
Expressway, Dallas, Texas on Thursday, April 24, 2003 beginning at 9:00 a.m.,
Central time, for the following purposes:
(i) To elect six directors to hold office until the next annual meeting of
stockholders and until their successors are elected and qualified; and
(ii) To transact any other business that may properly come before the
annual meeting of stockholders or any adjournment of the annual
meeting.
Stockholders of record at the close of business on February 20, 2003 will
be entitled to notice of and to vote at the annual meeting. IT IS IMPORTANT THAT
YOUR SHARES BE REPRESENTED AT THE ANNUAL MEETING REGARDLESS OF THE SIZE OF YOUR
HOLDINGS. Whether or not you plan to attend the annual meeting in person, please
vote your shares by phone, via the Internet, or by signing, dating and returning
the enclosed proxy card as promptly as possible. A postage-paid envelope is
enclosed if you wish to vote your shares by mail. If you hold shares in your own
name as a holder of record and vote your shares by one of the three methods
prior to the annual meeting, you may, of course, revoke your proxy by any one of
the methods described herein if you choose to vote in person at the annual
meeting. Voting by the Internet or telephone is fast and convenient, and it
helps reduce postage and proxy tabulation costs.
PLEASE DO NOT MAIL YOUR PROXY CARD IF YOU VOTE BY INTERNET OR TELEPHONE.
By order of the board of directors,
Andrew F. Jacobs
Secretary
8401 North Central Expressway, Suite 800
Dallas, Texas 75225-4410
March 10, 2003
CAPSTEAD MORTGAGE CORPORATION
8401 North Central Expressway, Suite 800
Dallas, Texas 75225-4410
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PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
To Be Held April 24, 2003
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This proxy statement, together with the enclosed proxy, is solicited by and
on behalf of the board of directors of Capstead Mortgage Corporation, a Maryland
corporation, for use at the annual meeting of stockholders to be held on April
24, 2003. The board of directors is requesting that you allow your shares to be
represented and voted at the annual meeting by the proxies named on the enclosed
proxy card. "We," "our," "us," and "Capstead" each refers to Capstead Mortgage
Corporation. This proxy statement and accompanying proxy will first be mailed to
stockholders on or about March 10, 2003.
At the annual meeting, action will be taken to elect six directors to hold
office until the next annual meeting of stockholders and until their successors
are elected and qualified.
FORWARD-LOOKING STATEMENTS
This document contains "forward-looking statements" (within the meaning of
the Private Securities Litigation Reform Act of 1995) that inherently involve
risks and uncertainties. Our actual results and liquidity can differ materially
from those anticipated in these forward-looking statements because of changes in
the level and composition of our investments and unforeseen factors. These
factors may include, but are not limited to, changes in general economic
conditions, the availability of suitable investments, fluctuations in, and
market expectations for fluctuations in, interest rates and levels of mortgage
prepayments, deterioration in credit quality and ratings, the effectiveness of
risk management strategies, the impact of leverage, liquidity of secondary
markets and credit markets, increases in costs and other general competitive
factors. Relative to direct investments in real estate, these factors may
include, but are not limited to, lessee performance under lease agreements,
changes in general as well as local economic conditions and real estate markets,
increases in competition and inflationary pressures, changes in the tax and
regulatory environment including zoning and environmental laws, uninsured losses
or losses in excess of insurance limits and the availability of adequate
insurance coverage at reasonable costs.
GENERAL INFORMATION ABOUT VOTING
SOLICITATION OF PROXIES
The enclosed proxy is solicited by and on behalf of our board of directors.
The expense of soliciting proxies for the annual meeting, including the cost of
mailing, will be borne by us. In addition to solicitation by mail, our officers
may solicit proxies from stockholders by telephone, facsimile or personal
interview. Such persons will receive no compensation for such services. We also
intend to request persons holding Common shares in their name or custody, or in
the name of a nominee, to send proxy materials to their principals and request
authority for the execution of the proxies, and we will reimburse such persons
for their expense in doing so. We will also use the proxy solicitation services
of Georgeson Shareholder Communications Inc. For such services, we will pay a
fee that is not expected to exceed $5,000 plus out-of-pocket expenses.
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VOTING SECURITIES
Our only outstanding voting equity securities are our Common shares. Each
Common share entitles the holder to one vote. As of February 20, 2003 there were
outstanding and entitled to vote 13,965,489 Common shares. Fortress Cap LLC
("Fortress Cap"), an affiliate of Fortress Investment Group LLC, ("Fortress
Group"), holds 3,649,359 of the Common shares, which represent 26 percent of our
voting securities. Only stockholders of record at the close of business on
February 20, 2003 are entitled to vote at the annual meeting or any adjournment
of the annual meeting.
VOTING
If you hold your Common shares in your own name as a holder of record, you
may instruct the proxies to vote your Common shares through any of the following
methods:
o sign, date and mail the proxy card in the postage-paid envelope
provided;
o using a touch-tone telephone, call Wells Fargo at 1-800-240-6326 and
follow the prompts to enter a company number and a control number,
both of which are found on your proxy card, as well as the last four
digits of your U.S. Social Security Number or Tax Identification
Number to authorize the proxies to vote your Common shares. If you do
not have a U.S. Social Security Number or Tax Identification Number,
please enter four zeros; or
o using the Internet, as prompted by the menu found at
www.eproxy.com/cmo/, enter a company number and control number, both
of which are found on your proxy card, as well as the last four digits
of your U.S. Social Security Number or Tax Identification Number to
gain access to the voting site maintained by Wells Fargo to authorize
the proxies to vote your Common shares. If you do not have a U.S.
Social Security Number or Tax Identification Number, please leave
blank.
Our counsel has advised us that these three voting methods are permitted
under the corporate law of Maryland, the state in which we are incorporated.
The deadline for Internet voting is 12:00 p.m., Central time, and the
deadline for telephone voting is 11:00 a.m., Central time, on April 23, 2003. In
addition, you may vote your Common shares in person at the annual meeting.
If your Common shares are held on your behalf by a broker, bank or other
nominee, you will receive instructions from them that you must follow to have
your Common shares voted at the annual meeting.
COUNTING OF VOTES
A quorum will be present if the holders of a majority of the outstanding
shares entitled to vote are present, in person or by proxy, at the annual
meeting. If you have returned valid proxy instructions or if you hold your
shares in your own name as a holder of record and attend the annual meeting in
person, your shares will be counted for the purpose of determining whether there
is a quorum. If a quorum is not present, the annual meeting may be adjourned by
the vote of a majority of the shares represented at the annual meeting until a
quorum has been obtained.
The affirmative vote of a plurality of the Common shares, voting together
as one class, cast at the annual meeting is required to elect each nominee to
our board of directors. For any other matter, unless otherwise required by
Maryland or other applicable law, the affirmative vote of a majority of the
Common shares, voting together as one class, cast at the annual meeting is
required to approve the matter.
Abstentions will have no effect on the outcome in the election of our board
of directors or any other matter for which the required vote is a majority of
the votes cast.
If you sign and return your proxy card without giving specific voting
instructions, your shares will be voted FOR the nominees to our board of
directors.
2
Broker non-votes occur when a broker, bank or other nominee holding Common
shares in street name votes the Common shares on some matters but not others. We
will treat broker non-votes as (i) Common shares that are present and entitled
to vote for quorum purposes, and (ii) votes not cast in the election of
directors. Accordingly, broker non-votes will have no effect on the outcome in
the election of our board of directors.
RIGHT TO REVOKE PROXY
If you hold Common shares in your own name as a holder of record, you may
revoke your proxy instructions through any of the following methods:
o notify our Secretary in writing before your Common shares have been
voted at the annual meeting;
o sign, date and mail a new proxy card to Wells Fargo;
o using a touch-tone telephone, call Wells Fargo at 1-800-240-6326 and
follow the prompts previously described in the "Voting" section of
this proxy statement;
o using the Internet, log on to www.eproxy.com/cmo/ and follow the
prompts previously described in the "Voting" section of this proxy
statement; or
o attend the annual meeting and vote your Common shares in person.
You must meet the same deadline when revoking your proxy as when voting
your proxy. See the "Voting" section of this proxy statement for more
information.
If Common shares are held on your behalf by a broker, bank or other
nominee, you must contact them to receive instructions as to how you may revoke
your proxy instructions.
MULTIPLE SHAREHOLDERS SHARING THE SAME ADDRESS
The Securities and Exchange Commission rules allow for the delivery of a
single copy of an annual report and proxy statement to any household at which
two or more stockholders reside, if it is believed the stockholders are members
of the same family. Duplicate account mailings will be eliminated by allowing
stockholders to consent to such elimination, or through implied consent if a
stockholder does not request continuation of duplicate mailings. Depending upon
the practices of your broker, bank or other nominee, you may need to contact
them directly to discontinue duplicate mailings to your household. If you wish
to revoke your consent to householding, you must contact your broker, bank or
other nominee.
If you hold Common shares in your own name as a holder of record,
householding will not apply to your shares.
If you wish to request extra copies free of charge of any annual report,
proxy statement or information statement, please send your request to Capstead
Mortgage Corporation, Attention: Stockholder Relations, 8401 North Central
Expressway, Suite 800, Dallas, Texas, 75225-4410. You can also refer to our web
site at www.capstead.com.
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ELECTION OF DIRECTORS
One of the purposes of the annual meeting is to elect directors to hold
office until the next annual meeting of stockholders and until their successors
have been elected and qualified. Set forth below are the names, principal
occupations, committee memberships, ages, directorships held with other public
companies, and other biographical data for the nominees for director, as well as
the month and year each nominee was first elected as one of our directors. Also
set forth below is the beneficial ownership of our Common shares as of February
20, 2003 for each nominee. This beneficial ownership figure does not necessarily
demonstrate the nominee's individual ownership. For discussion of beneficial
ownership, see the "Security Ownership of Management and Certain Beneficial
Owners" section of this proxy statement. If any nominee becomes unable to stand
for election as a director, an event that our board of directors does not
presently expect, the proxy will be voted for a replacement nominee if one is
designated by our board of directors. The board of directors recommends a vote
FOR all nominees.
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Nominees for Director
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WESLEY R. EDENS Mr. Edens has served as our Chairman, Chief Executive
Chairman, Chief Executive Officer Officer and President since April 2000. Mr. Edens has
and President, served since April 1998 as chief executive officer of
Capstead Mortgage Corporation Fortress Group, a private investment management company
that indirectly manages the investments of Fortress
Chief Executive Officer, Investment Fund LLC ("Fortress Fund"), a private equity
Fortress Investment Group LLC fund whose assets include Fortress Cap. Mr. Edens has
served as chairman and chief executive officer of
Chairman: Executive Committee Newcastle Investment Corp. ("Newcastle"), a
publicly-held real estate investment trust that is also
managed by Fortress Group since June 2002. Mr. Edens
was the chairman and chief executive officer of Impac
Commercial Holdings, Inc., a commercial mortgage real
estate investment trust, from May 1999 until its merger
into Newcastle Investment Holdings Corp., a
privately-held real estate investment trust, in
November 2000. Previously, Mr. Edens was head of the
Global Principal Finance group at Union Bank of
Switzerland ("UBS"), as well as a managing director of
UBS between May 1997 and May 1998. Prior to joining
UBS, Mr. Edens was a partner and managing director of
BlackRock Financial Management, Inc., an asset
management company, and the chief operating officer of
BlackRock Asset Investors, a real estate investment
fund from October 1993 to May 1997. In addition, Mr.
Edens was formerly a partner and managing director of
Director since December 1999 Lehman Brothers, an investment banking firm.
Common shares beneficially owned 3,649,359
Age 41
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Nominees for Director
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ROBERT I. KAUFFMAN Mr. Kauffman has served as president of Fortress Group
President, since its formation in April 1998. Mr. Kauffman was a
Fortress Investment Group LLC director and president of Impac Commercial Holdings,
Inc. from May 1999 until its merger into Newcastle
Investment Holdings Corp. in November 2000.
Chairman: Nominating Committee Previously, Mr. Kauffman was the head of the
Member: Executive Committee acquisitions and risk management department of the
Global Principal Finance group and managing director at
UBS between May 1997 and May 1998. Prior to joining
UBS, Mr. Kauffman was a principal of BlackRock
Financial Management, Inc. and a managing director of
BlackRock Asset Investors from April 1994 to May 1997.
Prior to joining BlackRock, Mr. Kauffman was an
executive director of Lehman Brothers International, an
investment banking firm.
Director since December 1999
Common shares beneficially owned 3,649,359
Age 39
PAUL M. LOW Mr. Low was chief executive officer of Laureate Inc., a
Private Investments privately-held software company, from March 1997 to his
retirement in February 2001. He was the founder of and
was chairman of the board of New America Financial
Member: Audit and Nominating Committees L.P., a mortgage banking firm, from January 1992 to
September 1994, when he retired. He was president of
Lomas Mortgage USA, a mortgage banking firm, from July
1987 to December 1990, serving in various executive
positions with Lomas Mortgage USA for more than five
Director since November 1990; years prior to 1987. Mr. Low served as our Senior
and April 1985 to March 1990 Executive Vice President from April 1985 to January
Common shares beneficially owned 60,957 1988.
Age 72
MICHAEL G. O'NEIL Until his retirement in May 2001, Mr. O'Neil was a
Private Investments director in the Investment Banking Division of the
Corporate and Institutional Client Group at Merrill
Lynch, Pierce, Fenner & Smith Incorporated, an
Member: Audit and Nominating Committees investment banking firm, with whom he had been since
1972.
Director since April 2000
Common shares beneficially owned 13,055
Age 60
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Nominees for Director
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HOWARD RUBIN Until his retirement in September 1999, Mr. Rubin was a
Private Investments senior managing director at Bear, Stearns & Co., Inc.,
an investment banking firm, for more than 5 years.
Chairman: Audit Committee
Member: Compensation and Executive Committees
Director since April 2000
Common shares beneficially owned 66,962
Age 47
MARK S. WHITING Mr. Whiting has been the managing partner of Drawbridge
Managing Partner, Partners, LLC, a real estate investment firm, since
Drawbridge Partners, LLC September 1998. Mr. Whiting served as chief executive
officer and a director of TriNet Corporate Realty Trust,
Inc., a commercial real estate investment trust, from
Chairman: Compensation Committee May 1996 through September 1998. From May 1993 to May
1996, Mr. Whiting served as president and a director of
TriNet.
Director since April 2000
Common shares beneficially owned 2,800
Age 46
6
BOARD OF DIRECTORS
During the year ended December 31, 2002, our board of directors held four
regular meetings and one special meeting. No director attended fewer than 75
percent of all meetings of our board of directors and the committees on which
such director served, except for Mr. Kauffman who attended 66 percent of all
such meetings.
Non-employee directors receive compensation for their representation on our
board of directors at an annualized rate of $30,000, paid in cash or options on
our Common shares and fees of $2,500 per meeting of the directors or of a
committee meeting attended and $1,000 for participation in telephonic meetings
to declare dividends or other specific agenda or committee matters. Any options
granted would have a fair value equal to the cash equivalent price of the
representation fee determined using an option pricing model and a strike price
equal to the market price of our Common shares on the date of grant. On April
17, 2002, Mr. Rubin accepted stock options in lieu of the cash representation
fee, and as a result of the return of capital dividend to common stockholders on
January 21, 2003, these options were adjusted to 18,446 options outstanding with
a strike price of $13.202. In addition, non-employee directors are reimbursed
for their expenses related to attending board or committee meetings. Mr. Edens
does not receive the foregoing compensation or reimbursement. Instead, Mr.
Edens' services as an officer and director are provided pursuant to a management
contract with an affiliate of Fortress Group. For a discussion of the management
contract, see the "Certain Relationships and Related Transactions" section of
this proxy statement.
In accordance with the terms of our 1990 Directors' Stock Option Plan, each
non-employee director holding outstanding stock options granted from the 1990
Directors' Stock Option Plan was automatically awarded dividend equivalent
rights on January 1, 2003, which were earned in 2002, entitling them to receive
additional Common shares at no cost upon exercise of outstanding options.
Messrs. Edens and Kauffman do not participate in the foregoing compensation
programs. Directors who are not one of our employees or executive officers do
not receive any other salaries, fees, commissions or bonuses from us, nor do
they receive any separate compensation from any of our affiliates for their
services on our board of directors or on committees of our board of directors.
COMMITTEES OF THE BOARD
Our board of directors has established standing committees to assist it in
the discharge of its responsibilities. The principal responsibilities of each
committee are described below. Actions taken by any committee of our board are
reported to the board of directors, usually at its next meeting. Respective
memberships on the various standing committees are identified in the "Election
of Directors" section of this proxy statement.
The Audit Committee, composed of three non-employee directors, met five
times during 2002. The primary duties and responsibilities of the audit
committee are to:
o monitor the integrity of our financial reporting process and systems
of internal controls regarding finance, accounting and legal
compliance;
o monitor the independence and performance of our outside auditors;
o provide an avenue of communication among the outside auditors,
management and our board of directors;
o encourage adherence to, and continuous improvement of, our financial
reporting and internal control policies, procedures and practices; and
o monitor compliance with legal and regulatory requirements.
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The Compensation Committee, composed of two non-employee directors, met
once during 2002. The primary duties and responsibilities of the compensation
committee are to:
o oversee our overall compensation philosophy and structure to determine
its appropriateness;
o oversee the management contract with an affiliate of Fortress Group,
which provides for the services of our Chief Executive Officer. See
the "Certain Relationships and Related Transactions" section of this
proxy statement;
o review and approve proposed amendments to our benefits plans; and
o review and recommend compensation arrangements for our board members.
The Executive Committee, composed of three directors, did not meet during
2002. During the intervals between meetings of our board of directors, the
executive committee has all of the powers and authority of the board of
directors in the management of our business and affairs, except those powers
that by law cannot be delegated by our board of directors.
The Nominating Committee, composed of three non-employee directors, met
once during 2002. The primary duties and responsibilities of the nominating
committee are to:
o recommend to our board of directors a slate of directors for election
by stockholders at each annual meeting;
o recommend the overall criteria and qualifications for our board of
directors, its members and for our Chief Executive Officer; and
o when necessary, seek out, interview and screen potential candidates
for the post of director and Chief Executive Officer.
You can recommend candidates for consideration by the nominating committee
for our 2004 annual meeting by writing to our Secretary on or by November 10,
2003 at our offices in Dallas, Texas. Your recommendation should give the
candidate's name, biographical data and qualifications and should be accompanied
by a written statement from the candidate of his or her consent to be named as a
candidate and, if nominated and elected, to serve as a director.
8
EXECUTIVE OFFICERS
The following table shows the names and ages of our current executive
officers and the positions held by each individual. A description of the
business experience of each for at least the past five years follows the table.
Name Age Title
---- --- -----
Wesley R. Edens .............. 41 Chairman, Chief Executive Officer and President
Andrew F. Jacobs ............. 43 Executive Vice President--Finance and Secretary
Amar R. Patel ................ 31 Senior Vice President--Asset and Liability Management
Phillip A. Reinsch ........... 42 Senior Vice President--Control
Robert R. Spears, Jr.......... 41 Senior Vice President--Asset and Liability Management
For a description of Mr. Edens' business experience, see the "Election of
Directors" section of this proxy statement.
Mr. Jacobs has served as our Executive Vice President--Finance since August
1998 and Secretary since April 2000. From August 1998 to May 1999, he served as
Executive Vice President--Finance, Treasurer and Secretary. From March 1998 to
August 1998, he served as Senior Vice President--Asset and Liability Management.
Prior thereto, he was our Senior Vice President--Control and Treasurer from
October 1991 to March 1998 and Secretary from August 1992 to March 1998. From
July 1989 to September 1991, Mr. Jacobs served as our Vice President--Control
and Treasurer. Mr. Jacobs also served as Senior Vice President--Control of Tyler
Cabot Mortgage Securities Fund from October 1991 until its merger with Capstead
in December 1992, and as Vice President--Control of Tyler Cabot from February
1989 to September 1991.
Mr. Patel has served as our Senior Vice President--Asset and Liability
Management since April 2000. From December 1997 to April 2000, he served as our
Vice President--Asset and Liability Management. Mr. Patel has been associated
with us since June 1993.
Mr. Reinsch has served as our Senior Vice President--Control since July
1998. From March 1993 to June 1998, he served as our Vice President--Control.
Prior thereto, Mr. Reinsch was employed by Ernst & Young LLP, a national public
accounting firm, from July 1984 to March 1993, last serving as Audit Senior
Manager.
Mr. Spears has served as our Senior Vice President--Asset and Liability
Management since February 1999. From April 1994 to February 1999, he served as
our Vice President--Asset and Liability Management. Prior thereto, he was
employed by NationsBanc Mortgage Corporation from 1990 to April 1994, last
serving as Vice President--Secondary Marketing Manager.
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EXECUTIVE COMPENSATION
Our direction and policies are established by our board of directors and
implemented by our Chief Executive Officer. The Summary Compensation Table below
shows certain compensation information for our four most highly compensated
executive officers, other than our Chief Executive Officer, for services
rendered in all capacities during the years ended December 31, 2002, 2001 and
2000. For information regarding our Chief Executive Officer, see the "Certain
Relationships and Related Transactions" section of this proxy statement.
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation Compensation
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Other Total Restricted
Annual Annual Stock All Other
Name and Salary Bonus Compensation Compensation Awards Options Compensation
Principal Position Year ($) ($) ($) ($) ($) (#) ($)
------------------ ---- ------ ----- ------------ ------------ ---------- ------- ------------
Wesley R. Edens.............. 2002 -- -- -- -- -- -- --
Chairman, Chief Executive 2001 -- -- -- -- -- -- --
Officer and President(a) 2000 -- -- -- -- -- -- --
Andrew F. Jacobs............. 2002 300,000 235,000 80,516(b) 615,516 -- -- 26,200(d)
Executive Vice President-- 2001 300,000 300,000 169,587(b) 769,587 -- -- 15,450(d)
Finance and Secretary 2000 300,000 100,000 14,947(b) 414,947 149,996(c) 42,380 18,900(d)
Amar R. Patel................ 2002 173,000 150,000 40,252(b) 363,252 -- -- 17,063(d)
Senior Vice President-- 2001 173,000 200,000 84,789(b) 457,789 -- -- 10,463(d)
Asset and Liability 2000 144,896 37,500 7,474(b) 189,870 74,998(c) 26,766 10,200(d)
Management
Phillip A. Reinsch........... 2002 183,000 115,000 44,013(b) 342,013 -- -- 16,126(d)
Senior Vice President-- 2001 183,000 125,000 92,712(b) 400,712 -- -- 11,413(d)
Control 2000 164,000 41,000 8,171(b) 213,171 82,002(c) 29,263 12,173(d)
Robert R. Spears, Jr......... 2002 187,000 220,000 47,774(b) 454,774 -- -- 21,439(d)
Senior Vice President-- 2001 187,000 275,000 100,619(b) 562,619 -- -- 11,551(d)
Asset and Liability 2000 178,000 133,500 8,869(b) 320,369 88,998(c) 31,761 15,847(d)
Management
(a) Mr. Edens does not receive any compensation from us. Instead Mr. Edens'
services are provided pursuant to a management contract with an affiliate
of Fortress Group. See the "Certain Relationships and Related Transactions"
section of this proxy statement.
(b) Amount includes dividends paid on unvested shares of our restricted stock.
None of the dividends were preferential.
(c) Fair market value at the time of grant of shares of our restricted stock
awarded pursuant to the 1994 Flexible Long-Term Incentive Plan. Each
officer is considered the owner of and is entitled to vote the shares and
is entitled to receive all dividends and any other distributions declared
on the shares. The shares vest over a five-year period with an initial
vesting date of April 20, 2001. Any unvested interest in the shares will
revert to us in the event the officer leaves us for any reason, including
death or disability. The unvested shares cannot be sold, transferred or
otherwise disposed of for any purpose whatsoever other than to us. In the
event of a change in control according to the terms of the 1994 Flexible
Long-Term Incentive Plan, all outstanding unvested shares will
automatically vest in full. As of December 31, 2002 the number and value of
unvested restricted stock holdings of our Common shares by each of our
executive officers were as follows:
Name Number Value
---- ------ --------
Andrew F. Jacobs ........... 6,315 $155,665
Amar R. Patel .............. 3,157 77,820
Phillip A. Reinsch ......... 3,452 85,092
Robert R. Spears, Jr. ...... 3,747 92,364
(d) Amount includes matching contribution by us of 50 percent of a
participant's voluntary contribution of up to a maximum of 6 percent of a
participant's compensation pursuant to the 401(k) plan adopted October
1993. Amount also includes matching contribution by us of a portion of the
participant's voluntary contribution to a nonqualified deferred
compensation plan adopted July 1994. Additionally, the amount includes a
discretionary contribution made to all employees into the qualified and
nonqualified plans of 3 percent of a participant's compensation regardless
of participation in the above noted plans.
10
OPTION GRANTS
There were no grants of stock options made to the executive officers named
herein during the fiscal year ended December 31, 2002.
OPTION EXERCISES AND FISCAL YEAR END OPTION VALUES
The following table summarizes the total number of securities underlying
stock options, both exercisable and unexercisable, held by our executive
officers as of December 31, 2002.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
Number of Securities
Underlying Unexercised Options Value of Unexercised In-the-Money
at Fiscal Year End Options at Fiscal Year End
Shares Value ------------------------------ ---------------------------------
Acquired on Realized* Exercisable Unexercisable
Name Exercise ($) Exercisable Unexercisable ($) ($)
---- ----------- --------- ----------- ------------- ----------- -------------
Andrew F. Jacobs ......... 10,595 129,195 130,532 10,595 -- 172,105
Amar R. Patel ............ 6,692 91,439 4,238 6,691 -- 108,689
Phillip A. Reinsch ....... 7,316 90,309 27,942 7,315 -- 118,825
Robert R. Spears, Jr. .... 7,940 108,492 24,580 7,940 -- 128,977
* Represents the difference between the fair market value of securities
acquired and the exercise prices of the options.
SEVERANCE PAYMENT AGREEMENTS
We entered into a severance payment agreement with each of our employees on
December 9, 1999. Pursuant to these agreements, in the event that an
individual's employment with us is terminated by us for any reason other than
those described below, that employee will receive a severance payment based upon
his or her title and the number of years of service with us at the time of
termination. The severance payment will be calculated as set forth below:
TITLE YEARS OF SERVICE SEVERANCE PAY
----- ---------------- -------------
Executive Vice President Five or more Two year's base annual salary
Senior Vice President and Five or more One and one-half year's base
Vice President annual salary
Assistant Vice President and Five or more One year's base annual salary
all other employees
All officers and Fewer than five years Six-month's base annual salary
all employees
An employee will not be entitled to any severance payment under the severance
payment agreement if:
o the employee voluntarily terminates his or her employment, other than
because of a reduction in that employee's base salary or a relocation of
that employee that requires travel from his or her primary residence to
such new location, an additional 50 or more miles each way;
o the employee fails to return to work following an approved leave of
absence; or
o we terminate the employee for cause.
11
EQUITY COMPENSATION PLANS
The following table summarizes the total number of outstanding securities
in each of our equity compensation plans and the number of securities remaining
for future issuance, as well as the weighted-average exercise price of all
outstanding securities as of December 31, 2002.
Number of securities
remaining available for
Number of securities to Weighted-average future issuance under
be issued upon exercise exercise price of equity compensation plans
of outstanding options, outstanding options, (excluding securities
Plan Category warrants and rights(1) warrants and rights(1) reflected in first column)(1)
------------- ----------------------- ---------------------- -----------------------------
Equity compensation plans approved by
security holders:
1990 Directors' Stock Option Plan 20,599 $15.771 55,725
1994 Flexible Long-Term Incentive Plan 233,725 34.876 917,640
Equity compensation plans not approved by
security holders:
1997 Flexible Long Term Incentive Plan(2) 46,034 36.970 310,053
------- ------- ---------
300,358 $33.887 1,283,418
======= ======= =========
(1) This table does not reflect adjustments made to outstanding stock options
on January 21, 2003 to maintain the economic position of the options held
immediately prior to a recapitalization on January 21 in which all holders
of our Common shares received a special dividend of $7.19 per share
representing a return of capital. As a result of the January 21, 2003
recapitalization and additional cancellations of expired options and
rights, the total number of securities to be issued upon the exercise of
outstanding options and rights was adjusted to 473,051 at a
weighted-average exercise price of $21.432, leaving 1,154,047 securities
available for future issuance.
(2) The purposes of the Capstead Mortgage Corporation 1997 Flexible Long Term
Incentive Plan are to enable us to attract, motivate, reward and retain
employees and to encourage the holding of our proprietary interests by our
employees or employees of our affiliates by enabling us to make awards that
recognize the creation of long-term value for our stockholders and promote
our continued growth and success. To achieve this purpose, employees may
receive stock options, stock appreciation rights, restricted stock,
performance awards, performance stock, dividend equivalent rights and any
combination thereof.
12
COMPENSATION COMMITTEE
Compensation for our executive officers is administered under the direction
of the compensation committee of our board of directors (the "Committee"). In
their role as our administrator of compensation programs, the Committee approves
the compensation arrangements of all executives, including compensation paid
pursuant to the management contract with an affiliate of Fortress Group.
The following is the Committee's report in its role as reviewer of our
executive pay programs on 2002 compensation practices for our executive
officers. The report and the performance graph that appears immediately after
such report shall not be deemed to be soliciting material or to be filed with
the Securities and Exchange Commission under the Securities Act of 1933 or the
Securities Exchange Act of 1934 or incorporated by reference in any document so
filed.
COMPENSATION COMMITTEE REPORT
EXECUTIVE COMPENSATION PROGRAM PHILOSOPHY
The philosophy behind Capstead's executive compensation programs is to
attract, motivate and retain the executives needed in order to maximize the
creation of long-term stockholder value. The Committee believes that the
uniqueness of Capstead's business, its strategic direction and the required
caliber of employees needed to execute its strategy require that compensation be
determined based on the following factors:
o Responsibilities within Capstead.
o Completion of individual business objectives established at the
beginning of the year (which objectives may vary greatly from person
to person).
o Overall performance of Capstead.
o Amount and form of prior compensation.
o Contributions toward executing the business strategy of Capstead.
The Committee believes that each of the above factors is important when
determining compensation levels. No specific weighting or formula regarding such
factors is used in determining compensation.
For 2002, the primary components of Capstead's executive's compensation
consist of: (i) base salaries; (ii) annual incentives; and (iii) other executive
programs and benefits. Each element is described in more detail below.
Base Salaries
The Chief Executive Officer, utilizing the above factors, reviews base
salaries annually and makes recommendations to the Committee. Any interim
modifications to salaries are also based on the above factors and
recommendations are made to the Committee.
Annual Incentives
Members of the board of directors that are independent of Fortress Group
(the "Independent Directors") approved an incentive compensation program for
2002, which provided for the creation of an incentive pool (the "Incentive
Pool") equal to a 10 percent participation in the modified total return of
Capstead in excess of a 10 percent benchmark return, multiplied by the beginning
modified common book value of Capstead. For purposes of the calculation,
modified total return is measured as the change in modified common book value
per share from the beginning of the year, together with common dividends per
share, divided by the beginning modified common book value per share, expressed
as a percentage. Modified common book value is determined by deducting from
total equity the recorded value of preferred equity and unrealized losses on
assets classified as held-to-maturity and adding back incentive fee accruals.
Accordingly, an Incentive Pool of $5,982,000 was established for 2002 based on a
modified total return of 37.7% per common share. All of the
13
Incentive Pool was used to pay incentive bonuses to Capstead's executive
officers and other employees and to an affiliate of Fortress Group under the
management contract discussed below. For 2002, the Chief Executive Officer
recommended and the Committee approved the distribution of $1,000,000 to the
executive officers and other employees, other than the affiliate of Fortress
Group.
The Independent Directors have adopted the same basic formula for the
incentive compensation program for 2003, except that definition for modified
common book value is expanded to include unrealized gains or losses on
investments not included in accumulated other comprehensive income on the
balance sheet. The prior definition included only certain of the items not
reflected in accumulated other comprehensive income. It is the intention of the
Independent Directors that any amounts added to the Incentive Pool during the
year will be paid to Capstead's executive officers and other employees and the
affiliate of Fortress Group for 2003 performance.
Long-Term Incentives
The Committee believes that Capstead's key employees should have an ongoing
stake in the long-term success of the business. The Committee also believes that
key employees should have a considerable portion of their total compensation
paid in the form of stock. This element of the total compensation program is
intended to align the executive's interest to that of Capstead stockholders
through the granting of stock options, restricted stock and other
incentive-based awards.
The Chief Executive Officer periodically recommends long-term incentive
grants for the executive officers to the Committee under Capstead's 1994
Flexible Long-Term Incentive Plan. The same factors that are used in determining
other elements of compensation are used in determining long-term incentive
grants. No such grants were made during 2002.
Other Executive Programs and Benefits
Capstead maintains employee benefit plans in which the executive officers,
other than the Chief Executive Officer, participate. Capstead sponsors a 401(k)
plan and nonqualified deferred compensation plan (together the "Plans") whereby
Capstead matches employee contributions up to a preset percentage of the
participant's compensation. Capstead may also make discretionary contributions
into the Plans regardless of an employee's participation. Capstead believes its
Plans are competitive with those of other companies in the Dallas market of
comparable size and scope of business.
2002 COMPENSATION FOR THE CHIEF EXECUTIVE OFFICER
The services of Mr. Edens, Capstead's Chairman, Chief Executive Officer and
President, are provided pursuant to a management contract effective April 20,
2000 between Capstead and a wholly-owned subsidiary of Fortress Fund (such
subsidiary, "Fortress Trust"), an affiliate of Fortress Group, as amended on
January 30, 2002, to provide Capstead an individual to perform the services and
duties of Chairman and Chief Executive Officer.
The Management Contract
Under the management contract, Fortress Trust not only provides the
services of Capstead's Chairman, Chief Executive Officer and President, but also
such other individuals as necessary to perform support services for Capstead, to
the extent Capstead does not have employees available to perform such services.
The management contract provides for the payment of (i) an annual fee, (ii)
incentive compensation payable out of the Incentive Pool, if any, and (iii)
long-term non-cash incentive compensation in the form of options and/or stock
grants. The management contract will be automatically renewed on an annual basis
unless terminated by Fortress Trust or the Independent Directors.
14
Annual Fee
Pursuant to the terms of the management contract, Fortress Trust received
an annual fee of $375,000 during 2002.
Annual Incentives
For 2002, the Committee approved the payment to Fortress Trust of incentive
compensation totaling $4,982,000, representing the payment of the remainder of
the Incentive Pool after payment to executive officers and other employees.
Long-Term Incentives
No long-term incentive compensation was granted to Fortress Trust during
2002.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION PURSUANT TO SECTION 162(m)
Section 162(m) of the Code generally precludes a publicly-held corporation
from a federal income tax deduction for a taxable year for compensation in
excess of $1 million paid to the Chief Executive Officer or any of the four
other most highly compensated executive officers. Exceptions are made for, among
other things, qualified performance-based compensation. Qualified
performance-based compensation means compensation paid solely on account of
attainment of objective performance goals, provided that (i) performance goals
are established by a compensation committee consisting solely of two or more
outside directors, (ii) the material terms of the performance-based compensation
are disclosed to and approved by a separate stockholder vote prior to payment,
and (iii) prior to payment, the compensation committee certifies that the
performance goals were attained and other material terms were satisfied. The
Committee's policy on deductibility is generally to develop compensation plans
which provide for the payment of compensation that is tax deductible to
Capstead, while recognizing that the legitimate interest of Capstead and its
stockholders may at times be better served by compensation arrangements that are
not tax deductible.
CONCLUSION
Executive compensation at Capstead is subject to considerable focus by the
Committee, the board of directors and senior management. The Committee believes
that Capstead's compensation programs and other benefits produce a strong
attraction and motivation for Capstead's executive officers and help align their
interests with the interests of Capstead's stockholders.
COMPENSATION COMMITTEE
Mark S. Whiting, Chairman
Howard Rubin
15
PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly percentage change in
the cumulative total stockholder return on our Common shares, with the
cumulative total return of the S&P 500 Stock Index and the Russell 2000 Stock
Index for the five years ended December 31, 2002, assuming the investment of
$100 on December 31, 1997 and the reinvestment of dividends. The stock price
performance shown on the graph is not necessarily indicative of future price
performance.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
CAPSTEAD MORTGAGE CORPORATION COMMON STOCK AND
S&P 500 AND RUSSELL 2000 STOCK INDEX
(PERFORMANCE GRAPH)
12/31/97 12/31/98 12/31/99 12/31/00 12/31/01 12/31/02
-------- -------- -------- -------- -------- --------
Capstead $ 100.00 $ 22.47 $ 25.82 $ 36.28 $ 73.84 $ 95.86
S&P 500 $ 100.00 $ 128.58 $ 155.63 $ 141.46 $ 124.66 $ 97.12
Russell 2000 $ 100.00 $ 97.76 $ 118.64 $ 115.19 $ 118.21 $ 94.01
16
AUDIT COMMITTEE
The audit committee is governed by a written charter adopted by our board
of directors and is composed of three non-employee directors, each of whom has
been determined by our board of directors to be independent in accordance with
the rules of the New York Stock Exchange.
The following is the audit committee's report in its role as the overseer
of our financial reporting process and our independent auditor's performance. In
carrying out its oversight responsibilities, the audit committee is not
providing any expert or special assurance as to our financial statements or any
professional certification as to the outside auditor's work. This report shall
not be deemed to be soliciting material or to be filed with the Securities and
Exchange Commission under the Securities Act of 1933 or the Securities Exchange
Act of 1934 or incorporated by reference in any document so filed.
AUDIT COMMITTEE REPORT
The audit committee oversees Capstead's financial reporting process on
behalf of the board of directors. Management has the primary responsibility for
the financial statements and the reporting process including the systems of
internal controls. In this context, the audit committee has reviewed and
discussed with management the audited financial statements in the annual report
to stockholders.
The audit committee has discussed with the independent auditors the matters
required to be discussed by Statement of Auditing Standards 61, as modified or
supplemented, including the auditor's judgment as to the quality, not just the
acceptability, of the accounting principles, the consistency of their
application and the clarity and completeness of the audited financial
statements.
The audit committee has received the written disclosures and the letter
from the independent auditors required by Independent Standards Board Standard
No. 1, as modified or supplemented, and has discussed with the independent
auditors their independence.
In reliance on the reviews and discussions referred to above, the audit
committee recommended to the board of directors (and the board agreed) that the
audited financial statements be included in the annual report on Form 10-K for
the year ended December 31, 2002 for filing with the Securities and Exchange
Commission.
AUDIT COMMITTEE
Howard Rubin, Chairman
Paul M. Low
Michael G. O'Neil
17
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
For purposes of this proxy statement a "beneficial owner" means any person
who, directly or indirectly, through any contract, arrangement, understanding,
relationship, or otherwise has or shares:
(i) Voting power which includes the power to vote, or to direct the voting
of, Common shares; and/or
(ii) Investment power which includes the power to dispose, or to direct the
disposition of, Common shares.
A person is also deemed to be the beneficial owner of a security if that
person has the right to acquire beneficial ownership of such security at any
time within 60 days. Thus, the beneficial ownership below includes those options
vesting on April 20, 2003 for our executive officers.
SECURITY OWNERSHIP OF MANAGEMENT
Listed in the following table and the notes thereto is certain information
with respect to the beneficial ownership of Common shares as of February 20,
2003, by each director nominee, our executive officers listed in the Summary
Compensation Table and by all nominees for director and executive officers as a
group.
Number of
Common Shares
Name of Beneficial Owner Beneficially Owned(a) Percent of Class
------------------------ --------------------- ----------------
Wesley R. Edens ..................................... 3,649,359(b) 26.13
Robert I. Kauffman .................................. 3,649,359(b) 26.13
Paul M. Low ......................................... 60,957 *
Michael G. O'Neil ................................... 13,055 *
Howard Rubin ........................................ 66,962 *
Mark S. Whiting ..................................... 2,800 *
Andrew F. Jacobs .................................... 250,731(c) 1.77
Amar R. Patel ....................................... 31,008(c) *
Phillip A. Reinsch .................................. 71,875(c) *
Robert R. Spears, Jr. ............................... 57,543(c) *
All nominees for Director and Executive Officers
as a group (10 persons) ......................... 4,204,290 29.17
* Denotes less than 1 percent.
(a) Amounts include Common shares issuable as follows, including options
issued on January 21, 2003 to maintain the economic position of the
options held immediately prior to a recapitalization on January 21 in
which all holders of our Common shares received a special dividend of
$7.19 per share representing a return of capital:
Security
Ownership Right to Acquire
--------------- -----------------------------
Common Shares
Issuable Upon
Conversion of Exercisable
Series B Shares Series B Shares Options
--------------- --------------- -----------
Wesley R. Edens ............... -- -- --
Robert I. Kauffman ............ -- -- --
Paul M. Low ................... 55,000 30,976 5,625
Michael G. O'Neil ............. 750 422 12,018
Howard Rubin .................. -- -- 54,962
Mark S. Whiting ............... -- -- --
Andrew F. Jacobs .............. -- -- 221,275
Amar R. Patel ................. -- -- 17,135
Phillip A. Reinsch ............ -- -- 55,278
Robert R. Spears, Jr. ......... -- -- 50,987
All nominees for Director
and Executive Officers
as a group (10 persons) ... 55,750 31,398 417,280
18
(b) Neither Mr. Edens nor Mr. Kauffman directly owns any of our
securities. However, by reason of their status as directors and
officers of Fortress Group and its affiliates, they may be deemed to
be the beneficial owners of Fortress Cap's 3,649,359 Common shares.
Mr. Edens and Mr. Kauffman expressly disclaim beneficial ownership of
any Common shares. Subsequent to February 20, 2003, Fortress Cap sold
a portion of its holdings but remains our largest stockholder.
(c) Includes restricted Common shares granted April 20, 2000, with
remaining scheduled vesting on each of April 20, 2003, 2004 and 2005
as follows: Andrew F. Jacobs, 6,315 shares; Amar R. Patel, 3,157
shares; Phillip A. Reinsch, 3,452 shares and Robert R. Spears, Jr.,
3,747 shares.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth the ownership of Common shares, both
beneficially and of record, for the persons known by us to be beneficial owners
of more than 5 percent of each such class of shares outstanding, as of the close
of business on February 20, 2003.
Number of
Common
Shares Percent
Beneficially of
Name of Beneficial Owner Owned Class
------------------------ ------------- -------
Fortress Cap LLC(1)........................ 3,649,359 26.13%
1301 Avenue of the Americas
New York, New York 10019
(1) Such information is derived from a Schedule 13D filed with the
Securities and Exchange Commission on November 29, 2001 by Fortress
Cap (the owner of record of the Common shares), Fortress Trust,
Fortress Fund, Fortress Group and Fortress Principal Investment
Holdings LLC. Fortress Cap is wholly-owned by its sole member,
Fortress Trust. Certain additional persons and entities named in the
Schedule 13D may also be deemed to be beneficial owners of the Common
shares. All such persons and entities disclaim beneficial ownership of
such shares. "Percent of Class" has been updated using Common shares
outstanding as of February 20, 2003. Subsequent to February 20, 2003,
Fortress Cap sold a portion of its holdings but remains our largest
stockholder.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
To our knowledge, based solely on review of the copies of such reports
furnished to us and written representations that no other reports were required,
during the year ended December 31, 2002, all of our directors, executive
officers and greater-than-ten-percent owners were in compliance with the Section
16(a) filing requirements.
19
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In addition to being our Chairman, Chief Executive Officer and President,
Mr. Edens is chief executive officer of Fortress Group, which is an affiliate of
Newcastle, Fortress Fund, Fortress Trust and Fortress Cap.
We have entered into a management contract with Fortress Trust, effective
April 20, 2000, under which Fortress Trust is to provide us an individual,
currently Mr. Edens, to perform the services and duties of our Chairman and
Chief Executive Officer. The contract provides for the payment of an annual fee
and cash incentive compensation based on our performance during the year. The
contract also provides that at the sole discretion of the Independent Directors,
Fortress Trust may be awarded long-term, non-cash incentive compensation in the
form of stock options and/or restricted stock grants. For the year ended
December 31, 2002, Fortress Trust received an annual fee of $375,000 and
incentive compensation of $4,982,000. The contract automatically renews on an
annual basis unless terminated by the Independent Directors or Fortress Trust.
The contract has been renewed and will now expire December 31, 2003. The
Independent Directors initially approved the contract on February 7, 2001. On
January 30, 2002 the Independent Directors agreed to amend the contract to
delegate certain responsibilities of the compensation provisions of the contract
to the compensation committee of the board of directors.
On May 1, 2002 we acquired six "independent" senior living facilities
(wherein the operator of the facility provides the tenants little, if any,
medical care) and one skilled nursing facility which was subsequently sold
(collectively, the "Properties"). The Properties were acquired pursuant to
purchase agreements initially negotiated and executed by subsidiaries of
Brookdale Living Communities, Inc. with an affiliate of Apartment Investment
Management Company ("AIMCO") and subsequently assigned to us. Concurrent with
the acquisition we entered into a long-term "net-lease" arrangement with
Brookdale, under which Brookdale is responsible for the ongoing operation and
management of the Properties. Brookdale, an owner, operator, developer and
manager of senior living facilities, is a majority-owned affiliate of Fortress.
The lease agreements consist of a master lease covering all of the
Properties and individual property-level leases (referred to collectively as the
"Lease"). The Lease has an initial term of 20 years and provides for two 10-year
renewal periods. Beginning at the end of five years, Brookdale will have the
option of purchasing all of the Properties from us at the greater of fair value
or our original cost, after certain adjustments. Under the terms of the Lease,
Brookdale is responsible for paying all expenses associated with the operation
of the Properties, including real estate taxes, other governmental charges,
insurance, utilities and maintenance, and an amount representing an attractive
cash return on our equity in the Properties after payment of monthly debt
service. Because under the terms of the Lease, Brookdale is responsible for
changes in related debt service requirements, earnings from our investment in
the Properties are generally not affected by changes in interest rates. After
the initial three-month rent concession period, the cash return on our equity is
expected to exceed 15% on an annualized basis and is subject to annual increases
based upon increases (capped at 3%) in the Consumer Price Index.
Concurrent with executing the purchase agreements for the Properties,
Brookdale also entered into an agreement with AIMCO to acquire from AIMCO $71.4
million of the tax-exempt bonds held by a tax-exempt bond fund (the "TEB Fund
Bonds") for a purchase price of $60.7 million. With our May 1, 2002 acquisition
of the Properties and assumption of the bonds, Brookdale agreed to release AIMCO
from its obligation to deliver the TEB Fund Bonds pursuant to the bond purchase
agreement in exchange for which AIMCO paid Brookdale $4.6 million and Brookdale
simultaneously entered into a two-year total return swap agreement with respect
to the TEB Fund Bonds with a notional swap strike price of $65.4 million. The
swap was terminated in November when the bonds were refunded resulting in a net
payment to Brookdale of $6.0 million. The swap counterparty was a financial
institution affiliated with the tax-exempt bond fund.
20
INDEPENDENT AUDITORS
During the year ended 2002, we engaged Ernst & Young LLP to provide us with
audit and tax services. Services provided included the examination of annual
financial statements, limited review of unaudited quarterly financial
information, review and consultation regarding filings with the Securities and
Exchange Commission and the Internal Revenue Service, assistance with
management's evaluation of internal accounting controls, consultation on
financial and tax accounting and reporting matters, and verification procedures
as required by collateralized mortgage securities indentures. Fees for 2002 were
as follows:
Audit-related Tax-related
Year Audit Fees Fees Fees All Other Fees
---- ---------- ------------- ----------- --------------
2002 $155,500 $ 29,675 $92,655 --
2001 135,500 108,704 47,509 --
The audit committee has considered all fees provided by the independent
auditors to us and concluded this involvement is compatible with maintaining the
auditors' independence.
Representatives of Ernst & Young will be present at the annual meeting,
will have the opportunity to make a statement if they desire to do so, and will
be available to respond to appropriate questions.
OTHER MATTERS
The proxies intend to exercise their discretionary authority to vote on any
stockholder proposals submitted at the 2003 annual meeting as permitted by Rule
14a-4(c) promulgated under the Securities Exchange Act of 1934, as amended. Any
stockholder proposal to be presented at the 2004 annual meeting of stockholders
must have been received at our principal office no later than November 10, 2003
in order to be included in the proxy statement and form of proxy for such
meeting. As to any proposal that a stockholder intends to present to
stockholders other than by inclusion in our proxy statement for the 2004 annual
meeting of stockholders, the proxies named in management's proxy for that annual
meeting will be entitled to exercise their discretionary authority on that
proposal unless we receive notice of the matter to be proposed not later than
January 26, 2004. Even if the proper notice is received on or prior to January
26, 2004, the proxies named in management's proxy for that annual meeting may
nevertheless exercise their discretionary authority with respect to such matter
by advising stockholders of such proposal and how they intend to exercise their
discretion to vote on such matter, unless the stockholder making the proposal
solicits proxies with respect to the proposal to the extent required by Rule
14a-4(c)(2) under the Securities Exchange Act of 1934, as amended.
21
ADDITIONAL INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission ("SEC") at 450 Fifth
Street NW, Washington, DC 20549. You may read and copy any reports, statements
or other information we file at the SEC's public reference rooms in Washington,
D.C., New York, New York and Chicago, Illinois. Please call the SEC at (800)
SEC-0330 for further information on the public reference rooms. Our SEC filings
are also available to the public from commercial document retrieval services and
on the web site maintained by the SEC at www.sec.gov. We make available on our
website at www.capstead.com, free of charge, our annual report on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K, press releases and
other company information, including amendments to such documents as soon as
reasonably practicable after such materials are electronically filed or
furnished to the SEC or otherwise publicly released. Such information will also
be furnished upon written request to Capstead Mortgage Corporation, Attention:
Stockholder Relations, 8401 North Central Expressway, Suite 800, Dallas, Texas
75225-4410.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROXY STATEMENT
TO VOTE ON THE ELECTION OF DIRECTORS. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE
YOU WITH INFORMATION THAT IS DIFFERENT FROM WHAT IS CONTAINED IN THIS PROXY
STATEMENT. THIS PROXY STATEMENT IS DATED MARCH 10, 2003. YOU SHOULD NOT ASSUME
THAT THE INFORMATION CONTAINED IN THIS PROXY STATEMENT IS ACCURATE AS OF ANY
DATE OTHER THAN SUCH DATE, AND NEITHER THE MAILING OF THIS PROXY STATEMENT TO
STOCKHOLDERS NOR THE ELECTION OF THE NOMINEES DESCRIBED HEREIN WILL CREATE ANY
IMPLICATION TO THE CONTRARY.
By order of the board of directors,
Andrew F. Jacobs
Secretary
March 10, 2003
22
[MAP]
CAPSTEAD MORTGAGE CORPORATION
ANNUAL MEETING OF STOCKHOLDERS
THURSDAY, APRIL 24, 2003
9:00 A.M.
DOUBLETREE HOTEL
8250 N. CENTRAL EXPRESSWAY
DALLAS, TEXAS 75206
The DoubleTree Hotel is accessible only by traveling
north on the service road from Caruth Haven Lane.
--------------------------------------------------------------------------------
(CAPSTEAD LOGO) CAPSTEAD MORTGAGE CORPORATION
8401 N. CENTRAL EXPRESSWAY, SUITE 800
DALLAS, TEXAS 75225 PROXY
--------------------------------------------------------------------------------
THIS PROXY IS SOLICITED BY AND ON BEHALF OF THE BOARD OF DIRECTORS
OF CAPSTEAD MORTGAGE CORPORATION
Proxy for Annual Meeting of Stockholders to be held April 24, 2003
The undersigned, a stockholder of Capstead Mortgage Corporation, a Maryland
corporation, hereby appoints Andrew F. Jacobs and Bethany L. Lee, as proxies,
each with the power of substitution to vote the shares of common stock, which
the undersigned would be entitled to vote if personally present at the annual
meeting of stockholders to be held at 9:00 a.m., Dallas time, on April 24, 2003
at 8250 North Central Expressway, Dallas, Texas and at any adjournment of the
meeting. I hereby acknowledge receipt of the notice of annual meeting and proxy
statement dated March 10, 2003.
This proxy, when properly completed and returned, will be voted in the manner
directed herein by the undersigned stockholder. IF NO DIRECTION IS GIVEN, THIS
PROXY WILL BE VOTED "FOR" THE NOMINEES FOR DIRECTOR NAMED HEREIN AND, IN THE
DISCRETION OF THE PROXYHOLDER, ON SUCH OTHER BUSINESS AS MAY PROPERLY COME
BEFORE THE ANNUAL MEETING, OR ANY ADJOURNMENT OF THE MEETING.
DO NOT FOLD, STAPLE OR MUTILATE
PLEASE RETURN PROMPTLY IN THE ENCLOSED ENVELOPE,
WHICH REQUIRES NO POSTAGE IF MAILED IN THE U.S.A.
PLEASE VOTE YOUR PROXY PROMPTLY
(continued and to be signed and dated on reverse side)
COMPANY #
CONTROL #
THERE ARE THREE WAYS TO VOTE YOUR PROXY
NOTE -- IF VOTING BY TELEPHONE OR INTERNET
YOUR TELEPHONE OR INTERNET VOTE AUTHORIZES THE NAMED PROXIES TO VOTE YOUR
SHARES IN THE SAME MANNER AS IF YOU MARKED, SIGNED AND RETURNED THE PROXY CARD.
VOTE BY TELEPHONE -- TOLL FREE -- 1-800-240-6326 -- QUICK *** EASY ***
IMMEDIATE
o Use any touch-tone telephone to vote your proxy 24 hours a day, 7 days a
week, until 11:00 a.m. (CT) on April 23, 2003.
o Have your proxy card in hand when you call.
o You will be prompted to enter your 3-digit Company Number, your 7-digit
Control Number (which are located in the upper right hand corner of this
card) and the last four digits of the U.S. Social Security Number or Tax
Identification Number for this account. If you do not have a U.S. SSN or
TIN, please enter four zeros.
o Follow the simple instructions given over the telephone.
VOTE BY INTERNET -- HTTP://WWW.EPROXY.COM/CMO/ -- QUICK *** EASY *** IMMEDIATE
o Use the Internet to vote your proxy 24 hours a day, 7 days a week, until
12:00 p.m. (CT) on April 23, 2003.
o Have your proxy card in hand when you access the web site.
o You will be prompted to enter your 3-digit Company Number, 7-digit Control
Number (which are located in the upper right hand corner of this card) and
the last four digits of the U.S. Social Security Number or Tax
Identification Number for this account to obtain your records and create an
electronic ballot. If you do not have a U.S. SSN or TIN, please leave
blank.
VOTE BY MAIL -- POSTAGE-PAID ENVELOPE PROVIDED
Mark, sign and date your proxy card and return it in the postage-paid envelope
we have provided.
(CAPSTEAD LOGO)
IF YOU VOTE BY TELEPHONE OR INTERNET, PLEASE DO NOT MAIL YOUR PROXY CARD
o Please detach here o
1. The election of 01 Wesley R. Edens 04 Michael G. O'Neil [ ] FOR [ ] WITHHOLD AUTHORITY
02 Robert I. Kauffman 05 Howard Rubin all nominees listed for all nominees listed
03 Paul M. Low 06 Mark S. Whiting (except as marked)
to the board of directors, to serve until the next annual meeting of
stockholders and until their respective successors are elected and qualified.
TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE OR NOMINEES, WRITE [ ]
THE APPROPRIATE NUMBER OR NUMBERS IN THE SPACE PROVIDED HERE.
In the discretion of such proxies, upon such other business as may properly come before the annual meeting or any adjournment of the
meeting, including any matter of which we did not receive timely notice as provided by Rule 14a-4(c) promulgated under the
Securities Exchange Act of 1934, as amended.
WE BELIEVE VOTING "FOR" EACH OF THE ABOVE-NAMED NOMINEES IS IN THE BEST INTEREST OF OUR STOCKHOLDERS AND RECOMMEND THAT YOU VOTE
"FOR" EACH OF THE ABOVE-NAMED NOMINEES.
Address Change? Mark Box [ ] [ ] I plan to attend the meeting.
Indicate changes below: Dated , 2003
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(Signature of Stockholder(s))
(NOTE: If voting by mail, please sign exactly as
your name(s) appear on the label. If more than one
name appears, all persons so designated should sign.
When signing in a representative capacity, please
give your full title.)