Document:

Exhibit 10.2

ORCHID ISLAND CAPITAL, INC.

2017 LONG-TERM EQUITY INCENTIVE COMPENSATION PLAN

This 2017 Long-Term Equity Incentive Compensation Plan (the "2017 Plan") sets forth terms and conditions on which equity awards may be made by Orchid Island Capital, Inc. (the "Company").

All employees of Bimini Advisors, LLC, which is the Company's external manager (the "Manager"), and employees of entities affiliated with the Manager (collectively, the "Employees") are eligible to participate in the 2017 Plan. Members of our Manager's and its affiliates' senior management team also serve as the Company's executive officers, including the Company's Chief Executive Officer and Chief Financial Officer. All of the Employees are referred to as "Participants." Being a Participant does not entitle the individual an award under the 2017 Plan. The Compensation Committee of the Board of Directors of the Company (the "Committee") will have absolute sole discretion over all aspects of the 2017 Plan, including the ability to reduce the amount of any bonus award or the size of the bonus pool even if the performance objectives and other terms of the 2017 Plan are satisfied.

Participants will be eligible to earn awards under the 2017 Plan for performance over the next one-year, three-year and five-year periods. A bonus pool will be established under the 2017 Plan for each of the one-, three- and five-year measurement periods. The amount credited to the bonus pool will be based on the Company's performance under each of the three performance criteria (which are described below) of the 2017 Plan for each of the three measurement periods. The Committee, in its discretion, will determine each Participant's award (i.e., the percentage of the bonus pool paid to each Participant).

The maximum amount that may be credited to the bonus pool for each measurement period will equal the average management fees paid by the Company to the Manager (pursuant to the terms of the management agreement between the Company and the Manager) for such period multiplied by the applicable percentage described in the table below. Under the 2017 Plan, the maximum bonus pool for awards to be issued for performance during (i) the one-year measurement period will equal 20% of the average monthly management fee earned during 2017 multiplied by 12, (ii) the three-year measurement period will equal 35% of the average annual management fee paid for 2017 through 2019 and (iii) for the five-year measurement period will equal 45% of the average annual management fee paid for 2017 through 2021.

As noted above, the amount credited to the bonus pool for each measurement period will reflect the Company's performance measured against the three performance criteria described below. The table below illustrates the maximum amount that may be credited to the bonus pool for each measurement period (as a percentage of the average management fees for the applicable period). The table also shows the amount that may be credited to the bonus pool for each measurement period (also as a percentage of the average management fees for the applicable period) for achievement of objectives with respect to each of the performance criteria. For example, the maximum amount that may be credited to the bonus pool for the three year measurement period based on Agency RMBS rate (as defined below) relative performance is 10.50% of the average management fees paid for 2017 through 2019.

	 	
1-year

	
3-year

	
5-year

	
Peer-relative financial performance

	
9.00%

	
15.75%

	
20.25%

	
Agency RMBS rate relative performance

	
6.00%

	
10.50%

	
13.50%

	
Peer-relative book value performance

	
5.00%

	
8.75%

	
11.25%

	
Total for Measurement Period

	
20.00%

	
35.00%

	
45.00%

The Committee established the following performance measures and the performance thresholds that must be satisfied for awards to be earned under the 2017 Plan.

Peer-Relative Financial Performance. No amount will be earned for this performance measure unless the Company's financial performance for the applicable measurement period exceeds the mean of the financial performance of the companies in the Peer Group (defined below) for the applicable measurement period. The financial performance of the Company and those in the Peer Group will equal the sum of total dividends paid during the measurement period and the change in book value during the measurement period divided by the book value on the first day of the applicable measurement period. The "Peer Group" consists of the following companies: AGNC Investment Corp., Annaly Capital Management, Inc., Anworth Mortgage Asset Corporation, ARMOUR Residential REIT, Inc., Capstead Mortgage Corporation, CYS Investments, Inc. and Western Asset Mortgage Capital Corporation.

Agency RMBS Rate Relative Performance. The Company's performance under this performance measure will equal the sum of the change in book value during the applicable measurement period and total dividends paid during the measurement period and multiplying that sum by the number of years in the measurement period. No amount will be earned for this performance measure unless the Company's performance as calculated in the preceding sentence for the applicable measurement period exceeds the Agency RMBS rate multiplied by the number of years in the measurement period. The "Agency RMBS rate" will equal the yield on the Fannie Mae 30-year fixed rate current coupon mortgage as of the beginning of 2017 of [3.00%] [ORC to confirm] (determined by averaging the rate as of the last business day of 2016 and the first business day of 2017) plus 400 bps, or [7.00]%.

Peer-Relative Book Value Performance. No amount will be earned for this performance measure unless the Company's change in book value for the applicable measurement period (calculated in accordance with the following sentence) exceeds the mean change in book value for the companies in the Peer Group. The change in book value for the Company and those in the Peer Group will be determined by subtracting the book value on the first day of the measurement period from the book value on the last day in the measurement period, with such amount divided by the book value on the first day of the measurement period.

If the Company's results for a performance measure equal or are less than the threshold for a measurement period, no amount will be added to the bonus pool for the measurement period with respect to that measurement criterion. The table below details the amounts by which the Company's performance must exceed the threshold performance measures described above for the maximum bonus award to be added to the bonus pool. Linear interpolation will be used for results falling between the threshold and the result that must be achieved to earn the maximum award.

	 	
1-year

	
3-year

	
5-year

	
Peer-relative financial performance

	
Threshold + 5.0%

	
Threshold + 10.0%

	
Threshold + 15.0%

	
Agency RMBS rate relative performance

	
Threshold + 5.0%

	
Threshold + 10.0%

	
Threshold + 15.0%

	
Peer-relative book value performance

	
Threshold + 2.0%

	
Threshold + 4.0%

	
Threshold + 6.0%

Awards for these three measurement periods will be paid no later than March 15 of the year following the end of the relevant measurement period. The Committee anticipates that 50% of earned bonuses will be paid in unrestricted shares of the Company's common stock and 50% will be paid in the form of "Performance Units," all of which will be issued under the 2012 Equity Incentive Plan (the "2012 Plan"). The number of unrestricted shares of the Company's common stock and Performance Units to be issued in satisfaction of the earned bonuses will be determined by dividing the amount of such bonus by the average closing price of the Company's common stock on the New York Stock Exchange for the 10 trading days preceding the grant date of the common stock and Performance Units rounded to the nearest whole number. The Performance Units will vest at the rate of 10% per quarter commencing with the first quarter after the one year anniversary of the end of the applicable measurement period, with the Participant receiving one share of the Company's common stock for each Performance Unit that vests. The Participant must continue to be employed by the Company as of the end of each such quarter in order to vest in the number of Performance Units scheduled to vest on that date. In the event of a Change in Control (as defined in the 2012 Plan) or the death or disability of the Participant, all of his or her Performance Units will be vested. When vested, each Performance Unit will be settled by the issuance of one share of the Company's common stock, at which time the Performance Unit shall be cancelled immediately, but in no case later than March 15 of the year after the year in which the Performance Units vest.

The Performance Units will contain dividend equivalent rights which entitle the Participants to receive distributions declared by the Company on common stock. One Performance Unit is equivalent to one share of common stock for purposes of the dividend equivalent rights. Other than dividend equivalent rights, the Performance Units do not entitle the Participants to any of the rights of a stockholder of the Company.

The number of outstanding Performance Units will be subject to the following adjustments prior to the date on which such Performance Unit vests:

Book Value Impairment.  A "Book Value Impairment" will occur if over any two consecutive quarters the following conditions are satisfied: (i) the Company's book value per share declines by 15% or more during the first of such two quarters and (ii) the Company's book value per share decline from the beginning of such two quarters to the end of such two quarters is at least 10%. If a Book Value Impairment occurs, then the number of Performance Units that are outstanding as of the last day of such two quarter period shall be reduced by 15%.

Extraordinary Book Value Preservation.  "Extraordinary Book Value Preservation" will occur in any quarter in which the following conditions are satisfied: (i) the median change in the book value per share of the companies in the Peer Group (the "Median Book Value Decline") is a decline of 6% or more and (ii) the Company's book value per share either (a) increases or (b) declines by a percentage that is less than 50% of the Median Book Value Decline. If an event of Extraordinary Book Value Preservation occurs, then the number of Performance Units that are outstanding as of the last day of the quarter in which the Extraordinary Book Value Preservation has occurred shall be increased by 5 basis points for every 1 basis point of difference between the Company's book value per share percentage change and the Median Book Value Decline during such quarter.

Outperform All Peer Companies.  The Company will "Outperform All Peer Companies" in any quarter in which the following conditions are satisfied: (i) the companies in the Peer Group all experience a decline in book value per share and (ii) the Company's book value per share either (a) increases or (b) declines by an amount that is less than the decline experienced by each company in the Peer Group. If the Company Outperforms All Peer Companies in any quarter, then the number of Performance Units that are outstanding as of the last day of such quarter shall increase by 10%.

 

The Committee anticipates adopting similar plans for future years with modifications to the performance measures and hurdle rates as the Committee deems appropriate. Due to the phase in of the 2017 Plan, past plans and the plan anticipated to be adopted in 2018, the Committee may make an additional award at the same time that the 2017 one year award and the three year award under the 2015 Long-Term Equity Incentive Compensation Plan are made in its sole discretion for the Company's performance since the Company's initial public offering that was completed on February 20, 2013.exhibit101

        Performance Share Unit Award Agreement    Your performance share unit award is subject, in all respects, to all the terms and provisions of the Knowles Corporation 2016 Equity and Cash Incentive Plan ("Plan"), which terms and provisions are expressly incorporated into and made a part of the award as if set forth in full herein.  A copy of the Plan can be found on the Merrill Lynch stock plan administration website.  In addition, your award is subject to the following:  1. Performance Share Units are a bookkeeping entry on the books of Knowles Corporation.  No shares of common stock, par value $0.01 per share (“Common Stock”), shall be issued to you in respect of the Performance Share Unit award unless the specified performance measures have been satisfied within the specified performance period.  Unless otherwise provided in Appendix A attached hereto, in the event that your employment shall terminate for any reason other than death, retirement or change in control prior to your vesting in the Performance Share Units, the Performance Share Units shall be forfeited.  Within 30 days following the end of the Performance Period set forth on the Award Statement, Knowles Corporation shall issue shares of Common Stock in your name equal to the number of Performance Share Units that have vested during the Performance Period, less applicable tax withholding.    2. You shall vest in the Performance Share Unit award per the dates on your Award Statement.  You must be an active employee of Knowles Corporation or an eligible affiliate at the end of the Performance Period and satisfy all applicable vesting conditions in order for your Performance Share Units to vest, with certain exceptions as provided in the Appendix A attached hereto and subject to Section 6.17 of the Plan.  3. During the Performance Period, you shall not have any rights of a stockholder (including voting rights) or the right to receive any dividends declared or other distributions paid with respect to the Performance Share Units.    4. As a condition precedent to the issuance or transfer of any shares of Common Stock upon the vesting of the Restricted Stock Units, you shall, upon request by Knowles Corporation, pay to Knowles Corporation such amount as Knowles Corporation may be required, under all applicable federal, state, local or other laws or regulations, to withhold and pay over as income or other withholding taxes (the “Required Tax Payments”) with respect to the issuance or transfer of such shares of Common Stock.  If you fail to advance the Required Tax Payments after request by Knowles Corporation, Knowles Corporation will, deduct any Required Tax Payments from any amount then or thereafter payable by Knowles Corporation to you.  You must elect how you intend to satisfy your obligation to advance the Required Tax Payments.  Your options to satisfy your tax obligation are as follows:  (1) delivery of a cash payment to Knowles Corporation, (2) delivery to Knowles Corporation (either actual delivery or by attestation procedures established by Knowles Corporation) of previously owned whole shares of Common Stock having an aggregate Fair Market Value, determined as of the date on which such withholding obligation arises (the “Tax Date”), equal to the Required Tax Payments, (3) authorizing Knowles Corporation to withhold whole shares of Common Stock which would otherwise be issued or transferred to you having an aggregate Fair Market Value, determined as of the Tax Date, equal to the Required Tax Payments or (4) any combination of (1), (2) and (3).  Shares of Common Stock to be delivered to Knowles Corporation or withheld may not have a Fair Market Value in excess of the minimum amount of the Required Tax Payments (or, to the extent consistent with applicable accounting requirements and IRS withholding rules, such higher withholding rate selected by you).  Any fraction of a share of Common Stock which would be required to satisfy any such obligation shall be disregarded and the remaining amount due shall be paid in cash by you.    5. As a condition of receiving your Performance Share Unit award, you agree to be bound by the terms and conditions of the Knowles Corporation Insider Trading and Confidentiality Policy, Anti-hedging and Anti-pledging Policy, and any Clawback Policy to be adopted by Knowles Corporation, as such policies may be modified from time to time.  The Anti-hedging and Anti-pledging Policy prohibits hedging or pledging any Knowles equity securities held by you or certain designees, whether such Knowles securities are, or have been, acquired under the Plan, another compensation plan sponsored by Knowles Corporation, or otherwise.  Please review the Anti-hedging and 

 

Page 2  Anti-pledging Policy to make sure that you are in compliance.  You may obtain a copy of the current version of the Anti-hedging, Anti-pledging policy to be adopted by Knowles Corporation, on the Merrill Lynch stock plan administration website.  6. For Non-US Employees and employees who transfer employment outside of the United States during the term of the Performance Share Units, your Performance Share Unit award is subject to the conditions of the attached Addendum for Non-US Employees.  7. Your award is not transferable by you other than in accordance with the applicable terms and conditions of the Plan or applicable law.  8. Knowles Corporation reserves the right to amend, modify, or terminate the Plan at any time in its discretion without notice.  9. You must accept this award by logging onto the Merrill Lynch stock plan administration website.  Acceptance of this Award shall also constitute an acknowledgement and acceptance of the provisions included in the Plan, Addendum (if applicable) and Appendix A (including, without limitation, the non-compete provisions set forth therein).  

 

      Appendix A Performance Share Unit Termination Provisions  Disability or Death: In the case of your termination due to Disability or death, you shall receive the number of Performance Share Units that would have been earned at target had you been employed at the end of the Performance Period multiplied by a fraction equal to the months employed during the Performance Period over the months in the Performance Period in the award and shall be settled within 30 days following the date of death or termination due to Disability; provided, however, if during the Performance Period you satisfy the age and service requirements for Retirement, then the Performance Share Units shall be settled within 30 days following each applicable vesting date.   Normal Retirement:  If your employment with the Company is terminated as a result of Retirement, subject to compliance with the non-competition provisions set forth below, then the Performance Share Units shall continue to vest as if the Participant’s employment had not terminated until such time as the remaining Performance Periods have lapsed, and the Performance Share Units shall be settled within 30 days following each applicable vesting date.  Change in Control Termination of Employment.  If your employment terminates in circumstances described under Section 6.9(a) of the Plan, then the Performance Share Units shall be settled within 30 days following such termination of employment; provided, however, if the Award is deemed “nonqualified deferred compensation” within the meaning of Section 409A of the Code, the Change in Control is not a “change in control event” within the meaning of Section 409A of the Code and you satisfy the age and service requirements for Retirement, then the Performance Share Units shall be settled within 30 days following each applicable vesting date.   Involuntary or Voluntary Termination of Employment.  If a Participant’s employment with the Company voluntarily or involuntarily terminates for any reason during the Performance Period other than as set forth above, the Performance Share Units shall be forfeited on the date of such termination of employment.  Definitions:  “Disability” or “Disabled” shall mean your permanent and total Disability within the meaning of Section 22(e)(3) and 409A(a)(2)(c)(i) of the Code. The determination of your Disability shall be made by the Committee in its sole discretion.  “Retirement” shall mean (i) the termination of your employment with the Company and its Affiliates if, at the time of such termination of employment, you have attained age sixty two (62) and completed five (5) years of service with the Company and its Affiliates or with Dover Corporation and its affiliates, and (ii) you comply with the non-competition restrictions set forth below. In the event that the stock or assets of a business unit of the Company or an Affiliate that employs you is sold, if you have attained age 62 and completed five (5) years of service with the Company and its Affiliates or with Dover Corporation and its affiliates and remain employed by such business unit in good standing through the date of such sale, you shall be treated as having terminated employment with the Company and its Affiliates due to Retirement on the date of such sale, provided that you comply with the non-compete restrictions set forth below. Non-Compete:  

 

2  Non-Competition. The enhanced benefits of Retirement provided to you hereunder shall be subject to the provisions set forth herein. If you terminate due to Retirement, you shall be deemed to have expressly agreed not to engage, directly or indirectly in any capacity, in any business in which the Company or any Affiliate at which you were employed at any time in the three (3) years immediately prior to termination of employment was engaged, as the case may be, in the geographic area in which the Company or such Affiliate actively carried on business at the end of your employment there, for the period remaining after your termination of employment until the end of the original Performance Period set forth in the Award Statement.  Breach.  In the event that you fail to comply with the non-compete provisions set forth herein, your shall forfeit the enhanced benefits realized upon a termination due to Retirement referred to above and shall return to the Company the economic value theretofore realized by reason of such benefits, as determined by the Committee. If the non-compete provisions of this Award shall be unenforceable, the Committee may rescind the benefits of Retirement set forth above.  Section 409A:  If the Company determines that the Award granted under this Plan constitutes “nonqualified deferred compensation” under Section 409A of the Code and you are a “specified employee” of the Company at the relevant date, as such term is defined in Section 409A(a)(2)(B)(i), then the Performance Share Units that are scheduled to be settled upon your “separation from service” will be delayed until the first day of the seventh month following your “separation from service” with the Company or its “affiliates” within the meaning of Section 409A (or following the date of participant’s death, if earlier).   Subject to Local Law:  For Non-U.S. employees and employees who transfer employment outside of the United States during the term of the Performance Share Units, this Appendix shall be subject to compliance with applicable local law.

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