ITEM 5.02  DEPARTURE OF DIRECTORS OR CERTAIN OFFICERS; ELECTION OF DIRECTORS;
           APPOINTMENT OF CERTAIN OFFICERS; COMPENSATORY ARRANGEMENTS OF CERTAIN
           OFFICERS.

2020 Annual Incentive Compensation Program Awards

On January 2, 2020, the Compensation Committee (the "Committee") of the Board of Directors of Capstead Mortgage Corporation (the "Company") adopted the 2020 Annual Incentive Compensation Program applicable to the Company's executive officers (the "2020 Annual Incentive Program"). The 2020 Annual Incentive Program is structurally similar to the 2019 Annual Incentive Compensation Program, except as described below. The 2020 Annual Incentive Program provides defined metrics against which the Company's performance is to be measured, specifically absolute economic return, relative operating efficiency as well as individual goals and objectives for each of the executive officers. Payouts are determined formulaically, defining threshold, target and maximum performance levels based on multiples of base salary, thereby limiting the maximum annual incentive payout for each executive officer.

Changes for 2020 consisted of (a) eliminating two relative economic return performance metrics; (b) increasing the absolute economic return performance metric by 30 percentage points to an aggregate participation level of 70%; (c) reducing the absolute economic return Threshold and Target return levels to 2.0% and 6.0% from 6.0% and 8.0%, respectively, while reducing the related award opportunity at the Threshold level to 0% from 50%, and (d) increasing the individual goals and objectives performance metric by five percentage points to an aggregate participation level of 20%. Each executive officer's total award opportunity as measured at Target performance levels is equal to 125% of annual base salary on January 1, 2020.

The 2020 Annual Incentive Program is filed with this Form 8-K as Exhibit 10.1 and is incorporated by reference herein. This summary does not purport to be complete and is qualified in its entirety by reference to Exhibit 10.1.

Award of Dividend Equivalent Rights ("DERs")

An additional performance-based short-term incentive compensation program for executives provides for quarterly cash payments equal to per share dividends declared on the Company's common stock multiplied by a notional amount of non-vesting or "phantom" shares of common stock, referred to as DERs. DERs are not attached to any stock or option awards. DERs outstanding during 2019 totaling 625,000 expired December 31, 2019. On January 2, 2020 the Committee awarded DERs totaling 655,000 expiring December 31, 2020 as follows:



                                    2019                2020
Executive Officer                DER Grants          DER Grants
Phillip A. Reinsch,             200,000          200,000
President and Chief
Executive Officer
Robert R. Spears, Jr.,          200,000          200,000
Executive Vice President
and Chief Investment
Officer
Roy S. Kim, Senior Vice         125,000          140,000
President - Asset and
Liability Management
Lance J. Phillips, Senior Vice    100,000        115,000
President and Chief Financial
Officer


2020 Long-Term Awards

Pursuant to the Amended and Restated 2014 Flexible Incentive Plan, on January 2, 2020, the Committee granted two forms of incentive compensation awards to the executive officers of the Company based on the closing price of the Company's common stock on January 2, 2020, consisting of (a) restricted common stock and (b) performance units (the "Performance Units").

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Restricted Stock Awards

The restricted common stock awards vest in full on January 2, 2023 and were granted in the following share amounts determined by reference to the closing stock price on the date of grant with a value equal to 75% of each grantee's annual base salary on January 1, 2020:



                                       Number of shares of
                                        Restricted Common
Executive Officer                             Stock
Phillip A. Reinsch, President                59,637
and Chief Executive Officer
Robert R. Spears, Jr., Executive             57,251
Vice President and Chief
Investment Officer
Roy S. Kim, Senior Vice                      41,030
President - Asset and Liability
Management
Lance J. Phillips, Senior Vice               33,396
President and Chief Financial
Officer

Each executive officer will enter into a Restricted Stock Agreement with the Company in the form filed with this Form 8-K as Exhibit 10.2.

Performance Units

Prior to granting Performance Units, the Committee adopted long-term performance unit award criteria (the "2020 Long-Term Performance Unit Award Criteria"). The 2020 Long-Term Performance Unit Award Criteria are structurally similar to the long-term performance unit award criteria adopted by the Committee in 2019, except as described below. The number of shares of common stock into which the Performance Units are convertible is dependent on the extent, if any, that defined relative economic return, absolute economic return and relative total stockholder return performance metrics are achieved during a three-year performance period ending December 31, 2022, as specifically outlined in the 2020 Long-Term Performance Unit Award Criteria.

Changes for 2020 consisted of (a) reducing the relative economic return performance metrics by a total of ten percentage points to a participation level of 30% of the total award (measured at Target performance levels); (b) eliminating the Agency mREIT peer group in favor of one peer mREIT group for purposes of measuring relative economic return performance, (c) increasing the total stockholder return performance metric by ten percentage points to 30%; and (d) reducing the absolute economic return Threshold and Target return levels to 2.0% and 6.0% from 6.0% and 8.0%, respectively, while reducing the related award opportunity at the Threshold level to 0% from 50%. As in the past, the conversion ratio will be adjusted to interpolate the appropriate conversion factors for any metrics that perform above related Threshold but below the Maximum performance levels. Accordingly, the Performance Units could expire without converting into any shares of common stock or could be convertible into as many as 200% of the number of Performance Units granted.

ITEM 9.01.FINANCIAL STATEMENTS AND EXHIBITS





  (d) Exhibits.




Exhibit No.                                 Description
   10.1       2020 Annual Incentive Compensation Program
   10.2       Form of Restricted Stock Agreement
   10.3       2020 Long-Term Performance Unit Award Criteria
   10.4       Form of Performance Unit Agreement
    104     Cover Page Interactive Data File (embedded within the Inline XBRL document)

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