Exhibit 10.04

 

CAPSTEAD MORTGAGE CORPORATION

THIRD AMENDED AND RESTATED INCENTIVE BONUS PLAN

 

 

1. Purposes.

 

The purposes of the Company’s Third Amended and Restated Incentive Bonus Plan
(the “Plan”) are to attract and retain highly-qualified employees by providing
appropriate performance-based incentive awards and to align employee and
stockholder interests by creating a direct link between employee compensation
and the success of the Company.  An additional purpose of the Plan is to serve
as a qualified performance-based compensation program under Section 162(m) of
the Code, in order to maximize the Company’s tax deduction for compensation paid
under the Plan to Covered Employees (defined below).

 

2. Definitions.

 

The following terms, as used herein, shall have the following meanings:

 

(a) “Affiliate” shall mean (i) any corporation, partnership or other entity
that, directly or indirectly, is controlled by the Company, (ii) any entity in
which the Company has a significant equity interest, and (iii) any entity that
provides substantial management advisory services for the Company, in each case
as determined by the Committee.

 

(b) “Annual Base Salary” shall mean the annual rate of base salary of a
Participant in effect on the first day of the Plan Year, without regard to any
optional or mandatory deferral of base salary pursuant to a salary deferral
arrangement.

 

(c) “Board” shall mean the Board of Directors of the Company.

 

(d) “Bonus” shall mean any annual incentive bonus award granted pursuant to the
Plan; the payment of any such award shall be contingent upon the attainment of
Performance Goals with respect to a Plan Year.

 

(e) “Change in Control” shall mean the occurrence of an event described in
Section 5(e) hereof.

 

(f) “Code” shall mean the Internal Revenue Code of 1986, as amended.

 

(g) “Committee” shall mean the Compensation Committee of the Board.

 

(h) “Company” shall mean Capstead Mortgage Corporation, a Maryland corporation.

 

(i) “Covered Employee” shall have the meaning set forth in Section 162(m) of the
Code (or any successor provision).

DAL:284785.7

--------------------------------------------------------------------------------

 

 

 

(j) “Participant” shall mean an employee of the Company or one of its Affiliates
who is eligible to participate herein pursuant to Section 3 of the Plan and for
whom a target Bonus is established with respect to the relevant Plan Year.

 

(k) “Performance Goal(s)” shall mean the criteria and objectives which must be
met during the Plan Year as a condition of the Participant’s receipt of payment
with respect to a Bonus, as described in Section 4 hereof.

 

(l) “Plan” shall mean this Second Amended and Restated Incentive Bonus Plan of
Capstead Mortgage Corporation.

 

(m)“Plan Year” shall mean each fiscal year of the Company, commencing with the
Company’s fiscal year beginning on January 1, 1996.

 

3. Eligibility.

 

Certain key employees of the Company and its Affiliates, as determined by
Committee, shall be eligible to participate in the Plan.

 

4. Performance Goals.

 

The Committee shall establish Performance Goals expressed in terms of the
achievement of any of one or more of the following performance measures:

 

•

earnings,

 

•

earnings per share,

 

•

earnings from operations,

 

•

return on stockholders’ equity,

 

•

total return (change in stock price plus dividends),

 

•

modified total return (change in net asset or book value plus dividends),

 

•

return on assets,

 

•

operating efficiency,

 

•

the extent of increase of any one or more of the foregoing over a specified
period,

 

•

or the Company’s ranking against a peer group of companies with respect to any
one or more of the foregoing.  

To the extent applicable, such Performance Goals shall be determined in
accordance with generally accepted accounting principles and reported upon by
the Company’s independent accountants.  Performance Goals shall include a
threshold level of performance below which no Bonus payment shall be made, and
may include levels of performance at which specified percentages of the target
Bonus shall be paid and a maximum level of performance above which no additional
Bonus shall be paid.  The performance measure or measures and the Performance
Goals established by the Committee with respect thereto may be (but need not be)
different each Plan Year and different goals may be applicable to different
Participants.

 

 

5. Bonuses.

DAL:284785.7

--------------------------------------------------------------------------------

 

 

 

(a) In General.  For each Plan Year, the Committee shall specify the Performance
Goals applicable to each Participant for such Plan Year and the amount of, or
the formula for determining, the target Bonus for each Participant with respect
to such Plan Year.  A Participant’s target Bonus for each Plan Year shall be
expressed as a percentage of the Participant’s Annual Base Salary.  Except as
set forth in Section 5(e) hereof, payment of a Bonus for a particular Plan Year
shall be made only if and to the extent the Performance Goals with respect to
such Plan Year are attained and only if the Participant is employed by the
Company on the last day of the Plan Year.  The actual amount of Bonus payable
under the Plan shall be determined as a percentage of the Participant’s target
Bonus, which percentage shall vary depending upon the extent to which the
Performance Goals have been attained.  The Committee may, in its discretion,
reduce or eliminate the amount payable to any Participant (including a Covered
Employee), in each case based upon such factors as the Committee may deem
relevant, but shall not increase the amount payable to any Covered Employee.

 

(b) Special Limitation on Certain Bonuses.   Notwithstanding anything to the
contrary contained in this Section 5, the Bonus for each Covered Employee under
the Plan in any Plan Year may not exceed $2,000,000.

 

(c) Time of Payment.  Unless otherwise determined by the Committee at the time
of grant, or except as provided herein, all payments in respect of Bonuses
granted under this Section 5 shall be made within a reasonable period after the
end of the Plan Year.  In the case of Participants who are Covered Employees,
except as provided in Section 5(e) hereof, such payments shall be made only
after achievement of the Performance Goals has been certified by the Committee.

 

(d) Form of Payment.  Payment of a Participant’s Bonus for any Plan Year shall
be made in cash.

 

(e) Change in Control.  Notwithstanding any other provision of the Plan to the
contrary, (i) if a “Change in Control” of the Company (as defined in this
Section 5(e)) shall occur following a Plan Year as to which the Committee has
determined the actual Bonuses to be paid (but such Bonuses have not yet been
paid), such Bonuses shall be paid immediately in cash, (ii) if a Change in
Control shall occur following a Plan Year as to which the Committee has not yet
determined the actual Bonuses to be paid, such Bonuses shall be immediately
determined and paid in cash, and (iii) if a Change in Control shall occur during
a Plan Year as to which target Bonuses have been established (but the actual
Bonuses to be paid have not yet been determined), such Plan Year shall be deemed
to have been completed, the target levels of performance set forth under the
respective Performance Goals shall be deemed to have been attained and a pro
rata portion of the Bonus so determined for each Participant for such partial
Plan Year (based on the number of full and partial months which have elapsed
with respect to such Plan Year) shall be paid immediately in cash to each
Participant for whom a target Bonus for such Plan Year was established.

 

 

 

3

DAL:284785.7

--------------------------------------------------------------------------------

 

For the purposes of this Section 5, a Change in Control of the Company shall
occur upon the first to occur of the following:

 

 

(i) the occurrence of an event of a nature that would be required to be reported
in response to Item 1 or Item 2 of a Form 8-K Current Report of the Company
promulgated pursuant to Sections 13 and 15(d) of the Securities Exchange Act of
1934, as amended; provided that, without limitation, such a Change in Control
shall be deemed to have occurred if (a) any “person,” as such term is used in
Sections 13(d) and 14(d) of the Exchange Act (other than the Company, any
trustee or other fiduciary holding securities under any employee benefit plan of
the Company, or any company owned, directly or indirectly, by the stockholders
of the Company in substantially the same proportions as their ownership of stock
of the Company), is or becomes the “beneficial owner” (as defined in Rule 13d-3
under the Exchange Act) directly or indirectly, of securities of the Company
representing twenty-five percent (25%) or more of the combined voting power of
the Company’s then outstanding securities or (b) during any period of two
consecutive years, individuals who at the beginning of such period constitute
the Board cease for any reason to constitute at least a majority thereof, unless
the election by the Board or the nomination for election by the Company’s
stockholders was approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors at the beginning of the
two-year period or whose election or nomination for election was previously so
approved;

 

(ii) the stockholders of the Company approve a merger or consolidation of the
Company with any other corporation, other than a merger or consolidation that
would result in the voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity) more than eighty
percent (80%) of the combined voting power of the voting securities of the
Company or such surviving entity outstanding immediately after such merger or
consolidation; provided, however, that a merger or consolidation effected to
implement a reorganization or recapitalization of the Company, or a similar
transaction (collectively, a “Reorganization”), in which no “person” acquires
more than twenty percent (20%) of the combined voting power of the Company’s
then outstanding securities shall not constitute a Change in Control of the
Company; or

 

(iii) the stockholders of the Company approve a plan of complete liquidation of
the Company or an agreement for the sale or disposition by the Company of all or
substantially all of the Company’s assets.

 

6. Administration.

 

The Plan shall be administered by the Committee.  The Committee shall have the
authority in its sole discretion, subject to and not inconsistent with the
express provisions of the Plan, to administer the Plan and to exercise all the
powers and authorities either specifically granted

 

 

4

DAL:284785.7

--------------------------------------------------------------------------------

 

to it under the Plan or necessary or advisable in the administration of the
Plan, including without limitation, the authority to grant Bonuses; to determine
the persons to whom and the time or times at which Bonuses shall be granted; to
determine the terms, conditions, restrictions and performance criteria relating
to any Bonus; to make adjustments in the Performance Goals in response to
changes in applicable law, regulations, or accounting principles, except as
otherwise provided herein; to reduce or eliminate compensation payable upon
attainment of Performance Goals; to construe and interpret the Plan and any
Bonus; to prescribe, amend and rescind rules and regulations relating to the
Plan; and to make all other determinations deemed necessary or advisable for the
administration of the Plan.

 

 

The Committee shall consist of two or more persons each of whom is an “outside
director” within the meaning of Section 162(m) of the Code.  The Committee may
appoint a chairperson and a secretary and may make such rules and regulations
for the conduct of its business as it shall deem advisable, and shall keep
minutes of its meetings.  All determinations of the Committee shall be made by a
majority of its members either present in person or participating by conference
telephone at a meeting or by unanimous written consent.  The Committee may
delegate to one or more of its members or to one or more agents such ministerial
duties as it may deem advisable, and the Committee or any person to whom it has
delegated duties as aforesaid may employ one or more persons to render advice
with respect to any responsibility the Committee or such person may have under
the Plan.  All decisions, determinations and interpretations of the Committee
shall be final and binding on all persons, including the Company, the
Participant (or any person claiming any rights under the Plan from or through
any Participant) and any stockholder.

 

No member of the Board or the Committee shall be liable for any action taken or
determination made in good faith with respect to the Plan or any Bonus granted
hereunder.

 

7. General Provisions.

 

(a) Compliance with Legal Requirements. The Plan and the granting of Bonuses,
and the other obligations of the Company under the Plan shall be subject to all
applicable federal and state laws, rules and regulations, and to such approvals
by any regulatory or governmental agency as may be required.

 

(b) No Right To Continued Employment.  Nothing in the Plan or in any Bonus
granted shall confer upon any Participant the right to continue in the employ of
the Company or an Affiliate or to be entitled to any remuneration or benefits
not set forth in the Plan or to interfere with or limit in any way the right of
the Company or an Affiliate to terminate such Participant’s employment.

 

(c) Withholding Taxes.  The Company or its Affiliate shall deduct from all
payments and distributions under the Plan any taxes required to be withheld by
federal, state or local governments.

 

 

 

5

DAL:284785.7

--------------------------------------------------------------------------------

 

(d) Amendment and Termination of the Plan.   The Board may at any time and from
time to time alter, amend, suspend, or terminate the Plan in whole or in part;
provided, however, that no amendment which requires stockholder approval in
order for the Plan to continue to comply with Section 162(m) of the Code shall
be effective unless the same shall be approved by the requisite vote of the
stockholders of the Company.  Additionally, the Committee may make such
amendments as it deems necessary to comply with other applicable laws, rules and
regulations.  Notwithstanding the foregoing, no amendment shall affect adversely
any of the rights of any Participant, without such Participant’s consent, under
any Bonus theretofore granted under the Plan.

 

(e) Participant Rights.  No Participant shall have any claim to be granted any
Bonus under the Plan, and there is no obligation for uniformity of treatment for
Participants.

 

(f) Unfunded Status of Bonuses.  The Plan is intended to constitute an
“unfunded” plan for incentive compensation.  With respect to any payments which
at any time are not yet made to a Participant pursuant to a Bonus, nothing
contained in the Plan or any Bonus shall give any such Participant any rights
that are greater than those of a general unsecured creditor of the Company or an
Affiliate.

 

 

(g) Governing Law.  The Plan and the rights of all persons claiming hereunder
shall be construed and determined in accordance with the laws of the State of
Maryland without giving effect to the choice of law principles thereof, except
to the extent that such law is preempted by federal law.

 

(h) Effective Date.  The original Incentive Bonus Plan became effective upon its
adoption by the Board on February 27, 1996 and was approved by the Company’s
stockholders on April 19, 1996.  Pursuant to Section 162(m) of the Internal
Revenue Code of 1986, as amended, to remain effective, the Plan must be
submitted to the Company’s stockholders for approval every five
years.  Accordingly, for so long as the Company submits the Plan to its
shareholders for approval every five years for approval and the Company’s
stockholders approve such submission, the Plan shall remain effective.

 

(i) Interpretation.  The Plan is designed and intended to comply with Section
162(m) of the Code, to the extent applicable, and all provisions hereof shall be
construed in a manner to so comply.

 

 

 

6

DAL:284785.7