United
States
Securities
and Exchange Commission
Washington,
D.C. 20549
SCHEDULE
14A
(Rule
14a-101)
INFORMATION
REQUIRED IN PROXY STATEMENT
SCHEDULE
14A INFORMATION
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 ¨
Soliciting Material Under Rule 14a-12
¨
Confidential, For Use of the
Commission
Only (as permitted
by Rule
14a-6(e)(2))
x
Definitive Proxy Statement
¨
Definitive Additional Materials
MFA
Financial, Inc.
|
(Name
of Registrant as Specified In Its
Charter)
|
|
(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)(4) and
0-11.
1)
|
Title
of each class of securities to which transaction
applies:
|
|
|
|
|
2)
|
Aggregate
number of securities to which transaction
applies:
|
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):
|
4)
|
Proposed
maximum aggregate value of transaction:
|
|
|
|
|
|
¨
|
Fee
paid previously with preliminary
materials:
|
|
¨
|
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:
|
|
|
|
|
|
|
|
2)
|
Form,
Schedule or Registration Statement No.:
|
|
|
|
|
|
|
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
TO
BE HELD ON MAY 20, 2010
To the
Stockholders of MFA Financial, Inc.:
The 2010
Annual Meeting of Stockholders (the "Annual Meeting") of MFA Financial, Inc., a
Maryland corporation ("MFA" or the "Company"), will be held at The New York
Palace Hotel, 455 Madison Avenue, New York, New York, on Thursday, May 20,
2010, at 10:00 a.m., New York City time, for the following
purposes:
|
(1)
|
To
elect three directors to serve on MFA's Board of Directors (the "Board")
until MFA's 2013 Annual Meeting of Stockholders and until their successors
are duly elected and qualify;
|
|
(2)
|
To
amend and restate MFA's Amended and Restated 2004 Equity Compensation Plan
by replacing it with the 2010 Equity Compensation Plan, which will
increase the number of shares of common stock available for grant by MFA
under the plan to 20,000,000 and makes certain other changes as described
in the enclosed proxy statement;
|
|
(3)
|
To
ratify the appointment of Ernst & Young LLP as MFA's independent
registered public accounting firm for the fiscal year ending December 31,
2010; and
|
|
(4)
|
To
transact such other business as may properly come before the Annual
Meeting or any postponements or adjournments
thereof.
|
The close
of business on March 23, 2010 has been fixed by the Board as the record date for
the determination of the stockholders entitled to notice of, and to vote at, the
Annual Meeting or any postponements or adjournments thereof.
We hope
that all stockholders who can do so will attend the Annual Meeting in
person. Whether or not you plan to attend, in order to assure proper
representation of your shares at the Annual Meeting, we urge you to submit your
proxy voting instructions to MFA by using our dedicated internet voting website,
our toll-free telephone number or, if you prefer, the mail. By
submitting your proxy voting instructions promptly, either by internet,
telephone or mail, you can help MFA avoid the expense of follow-up mailings and
ensure the presence of a quorum at the Annual Meeting. If you attend
the Annual Meeting, you may, if so desired, revoke your prior proxy voting
instructions and vote your shares in person.
In
order to submit proxy voting instructions prior to the Annual Meeting, you have
the option of authorizing your proxy (a) through the internet at www.proxyvote.com and
following the instructions described on the notice of access card previously
mailed to you or on your proxy card, (b) by toll-free telephone at
1-800-690-6903 and following the instructions described on the notice of access
card previously mailed to you or on your proxy card or (c) by completing,
signing and dating your proxy card and returning it promptly in the
postage-prepaid envelope provided.
Your
proxy is being solicited by the Board. The Board recommends that you
vote in favor of the proposed items.
|
By
Order of the Board
|
|
|
|
|
|
|
|
Timothy
W. Korth
|
|
General Counsel, Senior Vice President and Corporate Secretary
|
New York,
New York
April 6,
2010
PROXY
STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO
BE HELD ON MAY 20, 2010
This
Proxy Statement is being furnished to stockholders in connection with the
solicitation of proxies by and on behalf of the Board of Directors (the "Board")
of MFA Financial, Inc., a Maryland corporation ("MFA," the "Company," "we,"
"our" or "us"), for use at MFA's 2010 Annual Meeting of Stockholders (the
"Annual Meeting") to be held at The New York Palace Hotel, 455 Madison
Avenue, New York, New York, on Thursday, May 20, 2010, at 10:00 a.m., New
York City time, or at any postponements or adjournments thereof.
In order
to submit proxy voting instructions prior to the Annual Meeting, stockholders
have the option to authorize their proxy by internet, telephone or
mail. Stockholders are requested to vote their shares of our common
stock, par value $0.01 per share (the "Common Stock"), by proxy at the Annual
Meeting by using the dedicated internet voting website or toll-free telephone
number provided for this purpose. Alternatively, stockholders may
authorize their proxy by completing, signing and dating their proxy card and
returning it in the postage-prepaid envelope provided. Specific
instructions regarding the internet and telephone voting options are described
on the notice of access card previously mailed to you and on your proxy
card. Stockholders who authorize their proxy by using the internet or
telephone voting options do not need to also return a proxy card.
Shares of
Common Stock represented by properly submitted proxies received by us prior to
the Annual Meeting will be voted according to the instructions specified on such
proxies. Any stockholder submitting a proxy retains the power to
revoke such proxy at any time prior to its exercise at the Annual Meeting by
(i) delivering prior to the Annual Meeting a written notice of revocation
to Timothy W. Korth, our General Counsel, Senior Vice President and Corporate
Secretary, at MFA Financial, Inc., 350 Park Avenue, 21st Floor, New
York, New York 10022, (ii) submitting a later dated proxy or
(iii) voting in person at the Annual Meeting. Attending the
Annual Meeting will not automatically revoke a stockholder's previously
submitted proxy unless such stockholder votes in person at the Annual
Meeting. If a proxy is properly completed, submitted without
specifying any instructions thereon and not revoked prior to the Annual Meeting,
the shares of Common Stock represented by such proxy will be voted FOR the election of the three
directors to serve on the Board until our 2013 Annual Meeting of Stockholders
and until their successors are duly elected and qualify, FOR the amendment and
restatement of our Amended and Restated 2004 Equity Compensation Plan (the "2004
Equity Compensation Plan") by replacing it with the 2010 Equity Compensation
Plan (the "2010 Equity Compensation Plan"), which will increase the number of
shares of Common Stock available for grant by us to 20,000,000 and makes certain
other changes as described in this Proxy Statement and FOR the ratification of the
appointment of Ernst & Young LLP as our independent registered public
accounting firm for 2010. As to any other business which may properly
come before the Annual Meeting, the persons named as proxy holders on your proxy
card will vote the shares of Common Stock represented by properly submitted
proxies in their discretion.
This
Proxy Statement, the Notice of Annual Meeting of Stockholders and the related
proxy card are first being sent and made available to stockholders on or about
April 6, 2010.
ANNUAL
REPORT
This
Proxy Statement is accompanied by our Annual Report to Stockholders for the year
ended December 31, 2009, including financial statements audited by Ernst
& Young LLP, our independent registered public accounting firm, and their
report thereon, dated February 11, 2010.
VOTING
SECURITIES AND RECORD DATE
Stockholders
will be entitled to one vote for each share of Common Stock held of record at
the close of business on March 23, 2010 (the "Record Date") with respect to
(i) the election of the three directors to serve on the Board until our
2013 Annual Meeting of Stockholders and until their successors are duly elected
and qualify, (ii) the amendment and restatement of the 2004 Equity
Compensation Plan by replacing it with the 2010 Equity Compensation
Plan,
(iii) the
ratification of the appointment of Ernst & Young LLP as our independent
registered public accounting firm for 2010 and (iv) any other proposal for
stockholder action that may properly come before the Annual Meeting or any
postponements or adjournments thereof. Abstentions and broker
non-votes are each included in the determination of the number of shares present
at the Annual Meeting for the purpose of determining whether a quorum is
present. A broker non-vote occurs when a nominee holding shares for a
beneficial owner (i.e., a broker) does not vote on a particular proposal because
such nominee does not have discretionary voting power for that particular matter
and has not received instructions from the beneficial owner. Under a
rule amendment adopted by the New York Stock Exchange (the "NYSE") for
stockholder meetings held on or after January 1, 2010, brokers are no longer
allowed to vote shares held in their clients' accounts on uncontested elections
of directors unless the client (as beneficial owner) has provided voting
instructions. Similarly, brokers do not have discretionary voting
authority with respect to the proposal to approve the 2010 Equity Compensation
Plan. The ratification of the appointment of our independent
registered public accounting firm is, however, a proposal for which brokers do
have discretionary voting authority. Abstentions and broker
non-votes, if any, will have no effect on the election of directors or the
ratification of the appointment of Ernst & Young LLP. For
purposes of the vote to approve the 2010 Equity Compensation Plan, which amends
and restates the 2004 Equity Compensation Plan, abstentions and broker non-votes
will have the same effect as votes against the proposal, unless holders of more
than 50% in interest of all securities entitled to vote on the proposal casts
votes, in which event broker non-votes will have no effect on the result of the
vote.
The
presence, in person or by proxy, of holders of Common Stock entitled to cast a
majority of all the votes entitled to be cast at the Annual Meeting shall
constitute a quorum. The disposition of business scheduled to come
before the Annual Meeting, assuming a quorum is present, will require the
following affirmative votes: (i) for the election of directors,
a plurality of all the votes cast at the Annual Meeting, (ii) for the
amendment and restatement of the 2004 Equity Compensation Plan by replacing it
with the 2010 Equity Compensation Plan, a majority of all the votes cast on the
proposal, provided that the total vote cast on the proposal represents over 50%
in interest of all securities entitled to vote on the proposal, and
(iii) for the ratification of the appointment of our independent
registered public accounting firm, a majority of all the votes cast on the
proposal.
As of the
Record Date, we had issued and outstanding 280,759,597 shares of Common
Stock.
1.
ELECTION OF DIRECTORS
Board
of Directors
In
accordance with our Charter and Bylaws, the Board is currently comprised of nine
directors, Stewart Zimmerman, Stephen R. Blank, James A. Brodsky, Edison C.
Buchanan, Michael L. Dahir, William S. Gorin, Alan L. Gosule, Robin Josephs
and George H. Krauss, and is divided into three classes, with
Messrs. Blank, Buchanan and Gorin constituting the Class I directors,
Messrs. Dahir and Krauss and Ms. Josephs constituting the Class II
directors and Messrs. Zimmerman, Brodsky and Gosule constituting the
Class III directors. One class of directors is elected at each
annual meeting of our stockholders for a term of three years. Each
director holds office until his successor has been duly elected and qualified or
the director's earlier resignation, death or removal. The term of the
Board's Class III directors expires at the Annual Meeting. The
terms of the other two classes of directors expire at MFA's 2011 Annual Meeting
of Stockholders (Class I directors) and MFA's 2012 Annual Meeting of
Stockholders (Class II directors).
Upon the
recommendation of the Nominating and Corporate Governance Committee of the
Board, Messrs. Zimmerman, Brodsky and Gosule have been nominated by the
Board to stand for re-election as Class III directors by the stockholders at the
Annual Meeting to serve until our 2013 Annual Meeting of Stockholders or until
their respective successors are duly elected and qualify. It is
intended that the shares of Common Stock represented by properly submitted
proxies will be voted by the persons named therein as proxy holders FOR the re-election of
Messrs. Zimmerman, Brodsky and Gosule as Class III directors, unless
otherwise instructed. If the candidacy of Messrs. Zimmerman,
Brodsky and Gosule should, for any reason, be withdrawn prior to the Annual
Meeting, the proxies will be voted by the proxy holders in favor of such
substituted candidates (if any) as shall be nominated by the
Board. The Board has no reason to believe that, if re-elected,
Messrs. Zimmerman, Brodsky and Gosule will be unable or unwilling to serve
as Class III directors.
The Board
has determined that all of our current directors are qualified to serve as
directors of the Company. The biographies of each of the Board's
nominees standing for re-election and our continuing directors set forth below
contain information regarding each person's service as a director, business
experience and education, director positions held currently or at any time
during the last five years, information regarding certain legal or
administrative proceedings, if applicable, and the experiences, qualifications,
attributes or skills that caused the Board and its Nominating and Corporate
Governance Committee to determine that the person should serve as a director on
the Board in 2010. In addition to the specific information set forth
in these biographies, each of our directors also possess the tangible and
intangible attributes and skills which we believe are necessary to be an
effective director on the Board, including experience at senior levels in areas
of expertise relevant and beneficial to our business and industry, a willingness
and commitment to assume the responsibilities required of a director of the
Company and the character and integrity we expect of directors of the
Company.
Nominees
for Re-Election as Class III Directors
The
following information is furnished regarding the nominees for re-election as
Class III directors by the holders of Common Stock.
Stewart Zimmerman, 65, has
served as our Chief Executive Officer and as a director since 1997 and was
appointed Chairman of the Board in 2003. From 1997 through June 2008,
Mr. Zimmerman also served as our President. From 1989 through
1997, he initially served as a consultant to The America First Companies and
became Executive Vice President of America First Companies, L.L.C. ("America
First"). During this time, he held the following
positions: President and Chief Operating Officer of America First
REIT, Inc. and President of several America First mortgage funds, including
America First Participating/Preferred Equity Mortgage Fund, America First PREP
Fund 2, America First PREP Fund II Pension Series Limited Partnership, Capital
Source L.P., Capital Source II L.P., America First Tax Exempt Mortgage Fund
Limited Partnership and America First Tax Exempt Fund 2 Limited
Partnership. Prior to 1989, Mr. Zimmerman held various positions
with other financial-related companies, including Security Pacific Merchant
Bank, EF Hutton & Company, Inc., Lehman Brothers, Bankers Trust Company and
Zenith Mortgage Company. Mr. Zimmerman is a graduate of Michigan
State University.
We
believe that Mr. Zimmerman's qualifications to serve on the Board include his
position as our Chief Executive Officer, including his responsibility for
day-to-day operations of the Company, his extensive knowledge of mortgage-backed
securities and the fixed income, mortgage banking and specialty finance
industries and his substantial knowledge of our business operations, corporate
culture and investment strategies.
James A. Brodsky, 64, has
served as a director of MFA since 2004. Mr. Brodsky is a partner
in, and a founding member of, the law firm of Weiner Brodsky Sidman Kider PC in
Washington, D.C. and has practiced law with that firm and its predecessor since
1977. Mr. Brodsky provides legal advice and business counsel to
publicly traded and privately held national and regional residential mortgage
lenders on secondary mortgage market transactions (including those involving
Fannie Mae, Freddie Mac and Ginnie Mae), mergers and acquisitions, asset
purchases and sales, mortgage compliance issues, and strategic business
initiatives. Prior to 1977, Mr. Brodsky was a Deputy Assistant
Secretary with the U.S. Department of Housing and Urban
Development. He currently serves as general counsel of the National
Reverse Mortgage Lenders Association and is Co-Founder and Chairman of the Open
Door Housing Fund (a revolving fund resource for the preservation and
re-development of affordable housing in the Washington, D.C.
area). Mr. Brodsky is a graduate of Cornell University and received a
Juris Doctorate degree from Georgetown University and a Masters of Science in
Electrical Engineering from Columbia University.
We
believe that Mr. Brodsky's qualifications to serve on the Board include his
significant experience as a lawyer and founding member of a national law firm
specializing in residential mortgage finance, his extensive knowledge of the
origination and servicing of, and the regulatory aspects relating to,
residential mortgage loans, his experience with the federal executive branch
agencies that regulate and directly affect the residential mortgage sector and
his general experience with corporate governance, finance and other related
matters.
Alan L. Gosule, 69, has served
as a director of MFA since 2001. Mr. Gosule is a partner in the
law firm of Clifford Chance US LLP ("Clifford Chance") in New York, New York and
has practiced law with such firm and its predecessor since 1991. From
2002 to August 2005, he served as the Regional Head of Clifford Chance's Real
Estate Department for the Americas and, prior to 2002, was the Regional Head of
such firm's Tax, Pension and Employment Department for the
Americas. Prior to 1991, Mr. Gosule practiced law with the firm
of Gaston & Snow, where he was a member of such firm's Management
Committee and the Chairman of the Tax Department. Mr. Gosule
currently serves as a member of the board of directors of Home Properties, Inc.,
where he is a member of the audit and corporate governance/nominating
committees, F.L. Putnam Investment Management Company and Pioneer Natural
Resources GP LLC, the general partner of Pioneer Southwest Energy Partners L.P.,
and as a member of the board of trustees of the Ursuline Academy. Mr.
Gosule is a graduate of Boston University and received a Juris Doctorate degree
from Boston University Law School and an LLM in Taxation from Georgetown Law
School.
We
believe that Mr. Gosule's qualifications to serve on the Board include his
significant experience as a lawyer and partner of a major international law
firm, his extensive knowledge of tax law and related matters, including real
estate investment trusts, and his considerable experience in advising, and his
service on the boards and committees of, other public and private
companies.
The
Board recommends a vote FOR the re-election of Messrs. Zimmerman, Brodsky
and Gosule as Class III directors. Proxies solicited by the Board
will be voted FOR Messrs. Zimmerman, Brodsky and Gosule, unless otherwise
instructed.
Continuing
Class I Directors
The
following information is furnished regarding our Class I directors (who will
continue to serve on the Board until our 2011 Annual Meeting of Stockholders or
until their respective successors are duly elected and qualify).
Stephen R. Blank, 64, has
served as a director of MFA since 2002. Since 1998, Mr. Blank
has been a Senior Resident Fellow, Finance, at the Urban Land Institute ("ULI"),
a non-profit education and research institute which studies land use and real
estate development policy. Prior to joining ULI, Mr. Blank
served from 1993 to 1998 as Managing Director – Real Estate Investment Banking
of CIBC Oppenheimer Corp. From 1989 to 1993, Mr. Blank was
Managing Director of the Real Estate Corporate Finance Department of Cushman
& Wakefield, Inc. From 1979 to 1989, Mr. Blank served as
Managing Director – Real Estate Investment Banking of Kidder, Peabody &
Co. From 1973 to 1979, Mr. Blank was employed by Bache &
Co., Incorporated as Vice President, Direct Investment
Group. Mr. Blank currently serves as a member of the board of
directors of Home Properties, Inc., where he is a member of the audit and
compensation committees, and as Chairman of the board of trustees of
Ramco-Gershenson Properties Trust, where he is Chairman of the audit committee
and a member of the compensation committee. From May 1999 to February
2007, Mr. Blank was a member of the board of directors of BNP Residential Trust,
Inc. Mr. Blank is a graduate of Syracuse University and received a
Masters of Business Administration degree in Finance from Adelphi
University.
We
believe that Mr. Blank's qualifications to serve on the Board include his
extensive knowledge of the real estate industry as evidenced by his position at
ULI, his experience in the investment banking industry, including his expertise
in public and private real estate finance, and his substantial service on the
boards and committees of other public and private companies.
Edison C. Buchanan, 55, has
served as a director of MFA since 2004. Since 2001, Mr. Buchanan
has been Corporate Advisor at The Trust for Public Land, a non-profit land
conservation organization. In 2000, Mr. Buchanan served as
Managing Director and Head of the Domestic Real Estate Investment Banking Group
of Credit Suisse First Boston. From 1997 to 2000, he was a Managing
Director in the Real Estate Investment Banking Group at Morgan
Stanley. From 1981 to 1997, Mr. Buchanan was a Managing Director
of various groups in the Investment Banking Division at Dean Witter Reynolds,
Inc. Mr. Buchanan currently serves as a member of the board of
directors of Pioneer Natural Resources Company, where he is Chairman of the
compensation and development committee and a member of the nominating and
corporate governance committee, and as Chairman of the board of directors of The
Commonweal Conservancy. Mr. Buchanan is a graduate of Tulane
University and received a Masters in Business Administration degree from
Columbia University.
We
believe that Mr. Buchanan's qualifications to serve on the Board include his
extensive experience in the investment banking industry, including his expertise
in public and private real estate finance, his considerable experience in
capital markets, financial and other related matters and his service on the
boards and committees of other public companies.
William S. Gorin, 51, has
served as a director of MFA since March 2010. Mr. Gorin has also
served as our President since June 2008 and as our Chief Financial Officer since
2001. From 1997 until June 2008, he also served as our Executive Vice
President. From 1998 to 2001, Mr. Gorin served as our Executive Vice
President and Secretary. From 1989 to 1997, he held various positions with
PaineWebber Incorporated/Kidder, Peabody & Co. Incorporated, serving as a
First Vice President in the Research Department. Prior to that position,
Mr. Gorin was Senior Vice President in the Special Products Group. From
1982 to 1988, Mr. Gorin was employed by Shearson Lehman Hutton, Inc./E.F. Hutton
& Company Inc. in various positions in corporate finance and direct
investments. Mr. Gorin is a graduate of Brandeis University and received a
Masters of Business Administration degree from Stanford University.
We
believe that Mr. Gorin's qualifications to serve on the Board include his
position as our President and Chief Financial Officer, his extensive knowledge
of mortgage-backed securities and capital markets, his substantial knowledge of
our business operations and investment strategies and his overall experience in
the investment banking industry, including his expertise in corporate
finance.
Continuing
Class II Directors
The
following information is furnished regarding our Class II directors (who will
continue to serve on the Board until our 2012 Annual Meeting of Stockholders or
until their respective successors are duly elected and qualify).
Michael L. Dahir, 61, has
served as a director of MFA since 1998. Since 1988, Mr. Dahir
has been the Chairman and Chief Executive Officer of Omaha State Bank in Omaha,
Nebraska. From 1974 to 1988, Mr. Dahir held various positions
with Omaha National Bank, including Senior Vice President and head of the
Commercial Banking Services division, and was also Senior Vice President and
Chief Financial Officer of the bank's parent company, FirsTier Holding
Company. Mr. Dahir is a non-practicing certified public
accountant. Mr. Dahir is Chairman of the Jesuit Partnership
Council of Omaha, serves on the board and executive committee of Catholic
Charities and is a member of the board of directors of Legatus
International. Mr. Dahir is a graduate of Creighton
University.
We
believe that Mr. Dahir's qualifications to serve on the Board include his
considerable experience in banking and financial matters, including his current
position as Chairman and Chief Executive Officer of Omaha State Bank and his
past position as Senior Vice President and Chief Financial Officer of a
publicly-traded bank, his experience as a certified public accountant and his
significant exposure to our business and industry through length of service on
the Board.
George H. Krauss, 68, has
served as a director of MFA since 1997. Mr. Krauss has been a
consultant to The Burlington Capital Group, LLC ("Burlington") since
1997. From 1972 to 1997, Mr. Krauss practiced law with Kutak
Rock LLP, serving as such firm's managing partner from 1983 to 1993, and, from
1997 to 2006, was Of Counsel to such firm. Mr. Krauss currently
serves as a member of the board of directors of infoGROUP, Inc., where he is
Chairman of the nominating and corporate governance committee and a member of
the compensation committee, and as a member of the board of managers of
Burlington, which is the general partner of America First Tax Exempt Investors,
LP. Mr. Krauss was a member of the boards of directors of Gateway,
Inc., from 1991 to October 2007, West Corporation, from January 2001 to October
2006, and America First Apartment Investors, Inc., from January 2003 to
September 2007. Mr. Krauss is a graduate of, and received a Juris
Doctorate degree and a Masters in Business Administration degree from, the
University of Nebraska.
We
believe that Mr. Krauss' qualifications to serve on the Board include his
significant experience as a managing partner of a major law firm, his
substantial service on the boards and committees of other public and private
companies, his considerable legal and business experience in corporate, mergers
and acquisitions and regulatory matters and his significant exposure to our
business and industry through length of service on the Board.
Robin Josephs, 50, has served as a director
of MFA since January 2010. From 2005 to 2007, Ms. Josephs was a
managing director of Starwood Capital Group L.P., a private equity firm
specializing in real estate investments. From 1986 to 1996, Ms.
Josephs was a senior executive with Goldman Sachs & Co. serving in the real
estate group of the investment banking division and, later, in the equity
capital markets division. Ms. Josephs currently serves as a member of
the board of directors of iStar Financial, where she is lead director and serves
as a member of the audit, compensation and nominating and governance committees,
and Plum Creek Timber Company, Inc., where she serves on the audit and
compensation committees. From January 2005 to December 2005, Ms.
Josephs was a member of the board of directors of Instinet Group
Incorporated. Ms. Josephs is a trustee of the University of Chicago
Cancer Research Foundation and the Tourette Syndrome Association. Ms.
Josephs is a graduate of The Wharton School of the University of Pennsylvania
and received a Masters in Business Administration degree from Columbia
University.
We
believe that Ms. Joseph's qualifications to serve on the Board include her
significant knowledge of the specialty finance and real estate industries, her
extensive experience in the investment banking industry, including her expertise
in public and private real estate finance and equity capital markets, her
substantial service on the boards and committees of other public and private
companies and her experience with corporate governance, finance and other
related matters.
In
accordance with our Charter, vacancies occurring on the Board as a result of
(i) the removal from office, resignation or death of a director and
(ii) an increase in the number of directors serving on the Board may be
filled only by a majority of the remaining directors in office.
There is
no familial relationship among any of the members of our Board or executive
officers, except that William S. Gorin, our President and Chief Financial
Officer and a director, and Ronald A. Freydberg, our Executive Vice President
and Chief Investment and Administrative Officer, are
brothers-in-law.
2.
APPROVAL OF THE 2010 EQUITY COMPENSATION PLAN
We are
asking our stockholders to approve the 2010 Equity Compensation Plan, which
amends and restates the 2004 Equity Compensation Plan to, among other things,
increase the number of authorized shares of Common Stock reserved for issuance
under the plan to 20,000,000 shares and extend the term of the plan to May 20,
2020. The 2010 Equity Compensation Plan is intended to promote our
long-term growth and profitability by providing us with the tools to remain
competitive in attracting, motivating and retaining highly qualified and skilled
employees that are essential to our long-term success.
The Board
strongly believes that it is essential to our continued success to increase the
number of shares of Common Stock reserved for issuance to 20,000,000 shares
under the 2010 Equity Compensation Plan. As compared to the 2004
Equity Compensation Plan, the 2010 Equity Compensation Plan increases the number
of shares of Common Stock available for grant by MFA from 3,500,000 shares to
20,000,000 shares in the aggregate, which increase of 16,500,000 shares
represents approximately 5.9% of our outstanding shares of Common Stock as of
the Record Date. The Board believes that equity compensation is a
very effective retention tool that provides incentive, rewards performance and
aligns the interests of our stockholders with those of our employees, officers
and directors. The Board believes that the increased number of shares
available for issuance under the 2010 Equity Compensation Plan will allow us to
continue awarding equity-based compensation, which is an increasingly important
component of our overall compensation program, and represents a reasonable
amount of potential equity dilution over the stated 10-year term of the
plan.
The 2010
Equity Compensation Plan was adopted by the Board, upon the recommendation of
the Compensation Committee of the Board, on March 4, 2010, subject to
stockholder approval at the Annual Meeting. Stockholder approval of
the 2010 Equity Compensation Plan will enable us to compete effectively in the
competitive market for talent. The closing sales price of our Common
Stock on March 23, 2010 as reported on the NYSE was $7.30. If the 2010
Equity Compensation Plan is not approved at the Annual Meeting by our
stockholders, no awards will be made under this plan.
The
following is a summary of the principal features of the 2010 Equity Compensation
Plan. The summary, however, does not purport to be a complete
description of all the provisions of the 2010 Equity Compensation Plan and is
subject in all respects to the actual plan document, a copy of which is attached
hereto as Appendix
A.
Summary
of the 2010 Equity Compensation Plan
Purpose. The 2010
Equity Compensation Plan is intended to provide incentives to key employees,
officers, directors and others expected to provide significant services to MFA
and any of its subsidiaries which, with the consent of the Board, participates
in the 2010 Equity Compensation Plan (the "Participating Companies"), including
the employees, officers and directors of the Participating Companies, to
encourage a proprietary interest in the Company, to encourage such key employees
to remain in the employ of the Participating Companies, to attract new employees
and to provide additional incentives to others to increase their efforts in
providing significant services to the Company and the other Participating
Companies.
Administration. The
2010 Equity Compensation Plan will be administered by the Compensation Committee
of the Board, which, in accordance with the terms thereunder, shall consist
solely of persons who are, at the time of their appointment, "non-employee
directors" under Rule 16b-3(b)(3)(i) under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and, to the extent that relief is sought under
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"),
"outside directors" under the rules under Section 162(m) of the Code, or, if no
such committee exists, by the Board. References below to the
Compensation Committee include a reference to the Board for any periods in which
the Board is administering the 2010 Equity Compensation Plan. The
acts of a majority of the members present at any meeting of the Compensation
Committee at which a quorum is present, or acts approved in writing by the
entire committee, shall be the acts of the Compensation Committee for purposes
of the 2010 Equity Compensation Plan.
The
Compensation Committee generally has the full authority to administer and
interpret the 2010 Equity Compensation Plan, to authorize the granting of
awards, to determine the eligibility of an employee, director or other eligible
person to receive an award, to determine the number of shares of Common Stock to
be covered by each award, to determine the terms, provisions and conditions of
each award and to take any other actions and make all other determinations that
it deems necessary or appropriate in connection with the 2010 Equity
Compensation Plan or the administration or interpretation thereof.
Eligibility and Types of Awards –
General. Eligibility for awards under the 2010 Equity
Compensation Plan will be determined by the Compensation
Committee. Directors, officers and employees of the Participating
Companies and other persons expected to provide significant services (of a type
expressly approved by the Compensation Committee as covered services for these
purposes) to the Participating Companies are eligible to be granted stock
options ("Options"), restricted stock, phantom shares (also referred to as
restricted stock units), dividend equivalent rights ("DERs") and other
stock-based awards under the 2010 Equity Compensation Plan.
Available
Shares. Subject to adjustment upon certain corporate
transactions or events, a maximum of 20,000,000 shares of Common Stock may be
granted under the 2010 Equity Compensation Plan (all of which may be issued as
Options). In addition, subject to adjustment upon certain corporate
transactions or events, a participant may not receive Options for more than
1,500,000 shares, or awards other than Options of more than 1,500,000 shares, of
Common Stock in any one year under the 2010 Equity Compensation
Plan. As of the date of this Proxy Statement, an aggregate of
2,462,273 shares of Common Stock have been issued or are subject to outstanding
awards under the 2010 Equity Compensation Plan by virtue of having been issued
or subject to outstanding awards under the 2004 Equity Compensation
Plan. Shares of Common Stock that have been the subject of grants of
restricted stock, phantom shares or Options that have been forfeited or that
expire or terminate without having been exercised or paid, as the case may be,
will not count towards the 20,000,000 share limitation and will be available for
issuance under the 2010 Equity Compensation Plan. In addition, no
award may be granted under the 2010 Equity Compensation Plan to any person who,
assuming exercise of all Options and payment of all awards held by such person,
would own or be deemed to own more than 9.8% of the outstanding shares of Common
Stock. Unless the 2010 Equity Compensation Plan is previously
terminated by the Board, new awards may be granted under the 2010 Equity
Compensation Plan until the tenth anniversary of the date that such plan was
approved by the Company's stockholders.
Stock Options. The
terms of specific Options, including whether Options shall constitute "incentive
stock options" for purposes of Section 422(b) of the Code ("ISOs"), shall be
determined by the Compensation Committee. The exercise price of an
Option shall be determined by the Compensation Committee and reflected in the
applicable
award
agreement. The exercise price of ISOs may not be lower than 100%
(110% in the case of an ISO granted to a 10% stockholder) of the fair market
value of the Common Stock on the date of grant. The exercise price
for any other Option so issued shall not be less than the fair market value on
the date of grant. Each Option will be exercisable after the period
or periods specified in the award agreement, which will generally not exceed
10 years from the date of grant (or five years in the case of an ISO
granted to a 10% stockholder). Options will be exercisable at such
times and subject to such terms as determined by the Compensation
Committee. Subject to the provisions of the applicable award
agreement, (i) upon a termination of a participant's employment or other service
by the Participating Company for any reason other than death, retirement or
disability, a participant shall have the right, subject to certain restrictions,
to exercise his or her Option at any time within three months after such
termination to the extent that such Option had vested at the date of
termination; provided, however, that if the participant dies while employed by
the Participating Company or within three months after such a termination, his
or her Option may be exercised, to the extent that it had vested at the date of
death, within 12 months after such death, (ii) upon a termination of employment
or other service by the Participating Company for cause or by the participant
for any reason other than death, retirement or disability, any Options that are
not exercised in full prior to such termination shall be cancelled and (iii)
upon a termination of employment or other service for disability or retirement,
a participant may exercise his or her Option within 24 months after such
termination to the extent that such Option had vested at the date of
termination.
Each
member of the Compensation Committee shall automatically be granted
non-qualified stock options ("NQSOs") to purchase shares of Common Stock and
DERs upon the date such person is initially appointed to the Compensation
Committee. This amount of NQSOs and DERs shall be determined under
the 2010 Equity Compensation Plan from time to time. Currently,
members of the Compensation Committee are granted NQSOs to purchase 5,000 shares
of Common Stock and 1,250 DERs upon appointment to the Compensation
Committee. Each Option granted to a Compensation Committee member
shall become exercisable commencing one year after the date of issuance (unless
otherwise provided in the applicable award agreement) and shall expire
10 years thereafter.
Restricted
Stock. The Compensation Committee shall have authority to
award shares of restricted stock to eligible persons. Restricted
stock will vest over such periods as the Compensation Committee shall determine
at the time of grant and provide in the applicable award
agreement. The Compensation Committee may impose other conditions on
the award of restricted stock. Restricted stock will be subject to
such restrictions as the Compensation Committee shall determine, including
restrictions on sale, transfer or other alienation.
Subject
to the provisions of the applicable award agreement, upon a termination of
employment or other service by reason of death, retirement, disability or by the
Participating Company for any reason other than cause during the applicable
restriction period, all restrictions on restricted stock granted to the
applicable participant will immediately lapse. Subject to the
provisions of the applicable award agreement, upon a termination of employment
or other service for all other reasons during the applicable restriction period,
all shares of restricted stock still subject to restrictions shall be forfeited
to the Company.
Phantom
Shares. The Compensation Committee shall have the authority to
award phantom shares to eligible persons. The Compensation Committee
may provide that any phantom share will expire at the end of a specified term
and may impose conditions on the award of phantom shares. Phantom
shares (also referred to as restricted share units) will vest over such periods
as the Compensation Committee shall determine at the time of grant and provide
in the applicable award agreement. Subject to the provisions of the
applicable award agreement, upon a termination of employment or other service by
the Participating Company for cause during the applicable vesting period, all
outstanding phantom shares granted to the applicable participant shall be
forfeited and cease to be outstanding. Subject to the provisions of
the applicable award agreement, upon a termination of employment or other
service by reason of death, retirement, disability or by the Participating
Company for any reason other than cause during the applicable vesting period,
all outstanding phantom shares granted to the applicable participant will
immediately become vested. Subject to the provisions of the
applicable award agreement, upon a termination of employment or other service
for all other reasons during the applicable vesting period, all outstanding
phantom shares granted to the applicable participant, to the extent that they
are not vested, shall be forfeited and cease to be outstanding. The
Compensation Committee may, in its discretion, permit a participant to elect to
receive as settlement of the phantom shares installments over a period not to
exceed 10 years. In addition, the Compensation Committee may
establish a program under which distributions with respect to
phantom
shares
may be deferred for additional periods as set forth in the preceding
sentence. Unless otherwise provided by the Compensation Committee, a
phantom share will generally be settled on vesting by the transfer by the
Company of a share of Common Stock to the participant.
Dividend Equivalent
Rights. A DER is a right to receive, as specified by the
Compensation Committee at the time of grant, an amount equal to the dividend
distributions paid on a share of Common Stock. DERs will be
exercisable separately or together with awards under the 2010 Equity
Compensation Plan, and paid in cash or other consideration at such times, and in
accordance with such rules, as the Compensation Committee shall determine in its
discretion.
Other Stock-Based
Awards. The 2010 Equity Compensation Plan authorizes the Board
to grant other awards based upon the Common Stock (including the grant of
securities convertible into Common Stock and the grant of shares based upon
certain conditions), subject to terms and conditions established by the Board at
the time of grant.
Performance-Based
Awards. The Compensation Committee may provide that the grant
or vesting of awards under the 2010 Equity Compensation Plan be made subject to
the achievement of performance goals set by the Compensation Committee in
accordance with the 2010 Equity Compensation Plan in a timely
fashion. In establishing the applicable goals, the Compensation
Committee is authorized to choose from the following business criteria: (i)
pre-tax income, (ii) after-tax income, (iii) net income, (iv) operating income,
(v) cash flow, (vi) earnings per share, (vii) return on equity, (viii) return on
invested capital or assets, (ix) cash and/or funds available for distribution,
(x) appreciation in the fair market value of the Common Stock, (xi) return on
investment, (xii) total return to the Company's stockholders, (xiii) net
earnings growth, (xiv) stock appreciation, (xv) related return ratios, (xvi)
increase in revenues, (xvii) the Company's published ranking against its peer
group of real estate investment trusts based on total stockholder return,
(xviii) net earnings, (xix) changes (or the absence of changes) in the per share
or aggregate market price of the Common Stock, (xx) number of securities sold,
(xxi) earnings before any one or more of the following items: interest, taxes,
depreciation or amortization for the applicable period, as reflected in the
Company's financial reports for the applicable period, and (xxii) total revenue
growth. To the extent permitted by Section 162(m) of the Code, unless
the Compensation Committee provides otherwise at the time of establishing the
performance goals, for each fiscal year of the Company, the Compensation
Committee may provide for objectively determinable adjustments, as determined in
accordance with U.S. Generally Accepted Accounting Principles ("GAAP"), to any
of the business criteria described above for one or more of the items of gain,
loss, profit or expense: (i) determined to be extraordinary or unusual in nature
or infrequent in occurrence, (ii) related to the disposal of a segment of a
business, (iii) related to a change in accounting principles under GAAP, (iv)
related to discontinued operations that do not qualify as a segment of a
business under GAAP, and (v) attributable to the business operations of any
entity acquired by the Company during the fiscal year.
Recapitalization and Changes of
Control. If the Company shall be involved in a merger,
consolidation, dissolution, liquidation, reorganization, exchange of shares,
sale of substantially all of the assets or stock of the Company or a similar
transaction, or upon certain changes in capital structure and other similar
events, the Compensation Committee shall make related adjustments in its
discretion to (i) outstanding awards to maintain the participants' rights under
the 2010 Equity Compensation Plan and (ii) various plan provisions (including,
without limitation, to the number and kind of shares available under the plan).
Upon the occurrence of a change in control of the Company, the Compensation
Committee may make such adjustments as it, in its discretion, determines are
necessary or appropriate, provided that such adjustments do not have a
substantial adverse economic impact on the participant.
Amendment and
Termination. The Board may, from time to time, with respect to
any shares at the time not issued, suspend, revise, amend or discontinue the
2010 Equity Compensation Plan. The Board may amend the 2010 Equity
Compensation Plan as it shall deem advisable, except that no amendment may
adversely affect a participant with respect to outstanding grants without the
participant's consent unless such amendments are in connection with compliance
with applicable laws. The Board may not make any amendment in the
2010 Equity Compensation Plan that would, if such amendment were not approved by
the Company's stockholders, cause the 2010 Equity Compensation Plan to fail to
comply with any requirement of applicable law or regulation, or of any
applicable exchange or similar rule, unless and until the requisite
stockholders' approval is obtained.
Material
U.S. Federal Income Tax Consequences of the 2010 Equity Compensation
Plan
The
following tax discussion is a general description of certain expected federal
income tax results under current law. No attempt has been made to
address state, local or other federal tax consequences, and such consequences
could differ from those discussed below. All affected individuals
should consult their own tax advisors if they wish any further details or have
other questions.
Non-Qualified Stock
Options. No income will be recognized by an Option holder at
the time of grant or vesting of an NQSO. Ordinary income will
generally be recognized by an Option holder at the time an NQSO is exercised in
an amount equal to the excess of the fair market value of the underlying Common
Stock on the exercise date over the exercise price. The Company will
generally be entitled to a deduction for federal income tax purposes in the same
amount as the amount included in ordinary income by the Option holder with
respect to the NQSO. Gain or loss on a subsequent sale or other
disposition of the shares acquired upon the exercise of an NQSO will be measured
by the difference between the amount realized on the disposition and the tax
basis of such shares, and will generally be long-term or short-term capital gain
depending on the holding period involved. The tax basis of the shares
acquired upon the exercise of any NQSO will be equal to the sum of the exercise
price of the NQSO and the amount included in income with respect to the
NQSO. Special tax rules may apply if exercise of the Option is
permitted other than by cash payment of the exercise price.
Incentive Stock
Options. In general, neither the grant, the vesting nor the
exercise of an ISO will result in taxable income to an Option holder or a
deduction for the Company. To receive special tax treatment as an ISO
under Section 422 of the Code for the shares acquired upon exercise of an ISO,
an Option holder must neither dispose of the shares within two years after the
ISO is granted nor within one year after the transfer of the shares to the
Option holder pursuant to exercise of the Option. In addition, the
Option holder must be an employee of the Company or a qualified subsidiary at
all times between the date of grant and the date three months (one year in the
case of disability) before exercise of the Option. Special rules
apply in the case of the death of the Option holder. ISO treatment
under the Code generally allows the sale of Common Stock received upon the
exercise of an ISO to result in any gain being treated as a capital gain to the
Option holder, but the Company will not be entitled to a tax
deduction. The exercise of an ISO (if the holding period rules
described in this paragraph are satisfied), however, will give rise to income
includable by the Option holder in his or her alternative minimum taxable income
for purposes of the alternative minimum tax in an amount equal to the excess of
the fair market value of the Common Stock acquired on the date of the exercise
of the Option over the exercise price.
If the
holding period rules noted above are not satisfied, gain recognized on the
disposition of the shares acquired upon the exercise of an ISO will be
characterized as ordinary income and included in the Option holder's taxable
income. This gain will be equal to the difference between the
exercise price and the fair market value of the shares at the time of
exercise. (Special rules may apply to disqualifying dispositions
where the amount realized is less than the value at exercise.) The
Company will generally be entitled to a deduction equal to the amount of such
gain included by an Option holder as ordinary income. Any excess of
the amount realized upon such disposition over the fair market value at exercise
will generally be long-term or short-term capital gain due to the fact that the
holding period rules noted above were not satisfied. Special tax
rules may apply if exercise of the Option is permitted other than by cash
payment of the exercise price.
Restricted
Stock. Unless a holder of restricted stock makes an "83(b)
election" (as discussed below), there generally will be no tax consequences as a
result of the grant of restricted stock. Restricted stock is subject
to tax at ordinary income tax rates when it is no longer subject to a
substantial risk of forfeiture or is transferable (free of the
risk). Generally, when the restrictions are lifted, the holder will
recognize ordinary income, and the Company will be entitled to a deduction,
equal to the difference between the fair market value of the Common Stock at
that time and the amount, if any, paid by the holder for the restricted
stock. Subsequently realized changes in the value of the Common Stock
generally will be treated as long-term or short-term capital gain or loss,
depending on the length of time the shares are held prior to disposition of the
shares. In general, if a holder makes an 83(b) election (under
Section 83(b) of the Code) within 30 days of the award of restricted stock, the
holder will recognize ordinary income on the date of the award of restricted
stock, and the Company will be entitled to a deduction, equal to (i) the fair
market value of the restricted stock as though the Common Stock were (A) not
subject to a substantial risk of forfeiture, or (B) transferable, minus (ii)
the
amount,
if any, paid for the restricted stock. If an 83(b) election is made,
(i) there will generally be no tax consequences to the holder upon the lifting
of restrictions, and all subsequent appreciation in the restricted stock
generally would be eligible for capital gains treatment and (ii) in the event of
a forfeiture, the holder will generally not be entitled to a deduction or other
tax loss in respect of amounts previously included in taxable income by virtue
of the election.
Phantom
Shares. The phantom shares have been designed with the
intention that there will be no ordinary income tax consequences as a result of
the granting of a phantom share until the actual transfer is made with respect
to the phantom share. When the actual stock is transferred, the
participant generally will recognize ordinary income, and the Company will
generally be entitled to a deduction, equal to the fair market value of the
Common Stock and cash, as applicable, received upon settlement.
Dividend Equivalent
Rights. There generally will be no tax consequences as a
result of the award of a DER. When payment is made, the holder of the
DER generally will recognize dividend income taxed at ordinary income rates, and
the Company will be entitled to a deduction, equal to the amount received in
respect of the DER.
Securities Exchange Act of
1934. Additional special tax rules may apply to participants
in the 2010 Equity Compensation Plan who are subject to the rules set forth in
Section 16 of the Exchange Act.
The Board recommends a vote FOR the
approval of the 2010 Equity Compensation Plan. Proxies solicited by the Board will
be voted FOR this approval, unless otherwise instructed.
3.
RATIFICATION OF APPOINTMENT OF INDEPENDENT
REGISTERED
PUBLIC ACCOUNTING FIRM
The Audit
Committee of the Board has appointed Ernst & Young LLP as our independent
registered public accounting firm for the fiscal year ending December 31,
2010. Ernst & Young LLP has audited our financial statements
since the 2003 fiscal year. The Board is requesting that our
stockholders ratify the appointment of Ernst & Young LLP.
Neither
our Bylaws nor other governing documents or law require stockholder ratification
of the Audit Committee's appointment of Ernst & Young LLP as our independent
registered public accounting firm. However, the Board is submitting
the appointment of Ernst & Young LLP to the stockholders for ratification as
a matter of good corporate practice. In the event that ratification
of this appointment of our independent registered public accounting firm is not
approved at the Annual Meeting, the Audit Committee will review its future
selection of our independent registered public accounting firm. Even
if the selection is ratified, the Audit Committee, in its discretion, may direct
the appointment of a different independent registered public accounting firm at
any time during the year if they determine that such a change would be in our
best interests.
Representatives
of Ernst & Young LLP are expected to be present at the Annual Meeting and
will be provided with an opportunity to make a statement if so desired and to
respond to appropriate inquiries from stockholders.
Independent
Registered Public Accounting Firm Fees
The
following table summarizes the aggregate fees (including related expenses)
billed to us for professional services provided by Ernst & Young LLP for the
fiscal years ended December 31, 2009 and 2008.
|
|
Fiscal Year Ended December 31,
|
|
|
|
|
|
|
|
|
Audit
Fees (1)
|
|
$ |
719,026 |
|
|
$ |
817,986 |
|
Audit-Related
Fees (2)
|
|
|
— |
|
|
|
— |
|
Tax
Fees (3)
|
|
|
12,700 |
|
|
|
23,400 |
|
All
Other Fees (4)
|
|
|
10,000 |
|
|
|
85,000 |
|
Total
|
|
$ |
741,726 |
|
|
$ |
926,386 |
|
(1)
|
2009
and 2008 Audit Fees include: (i) the audit of the
consolidated financial statements included in our annual report on Form
10-K and services attendant to, or required by, statute or regulation;
(ii) reviews of the interim consolidated financial statements
included in our quarterly reports on Form 10-Q; and (iii) comfort
letters, consents and other services related to Securities and Exchange
Commission ("SEC") and other regulatory filings and
communications. Audit Fees for 2009 and 2008 also include the
audit of the effectiveness of our internal control over financial
reporting, as required by Section 404 of the Sarbanes-Oxley Act of
2002.
|
(2)
|
There
were no Audit-Related Fees incurred in 2009 or
2008.
|
(3)
|
2009
and 2008 Tax Fees include tax compliance, tax planning, tax advisory and
related tax services.
|
(4)
|
2009
and 2008 All Other Fees include Ernst & Young LLP's audit and consents
and other services related to SEC and other regulatory filings for
MFResidential Investments, Inc., a wholly-owned subsidiary of
MFA. Except as described in the previous sentence, there were
no other professional services rendered by Ernst & Young LLP in 2009
or 2008.
|
All
audit, tax and other services provided to us were reviewed and pre-approved by
the Audit Committee, which concluded that the provision of such services by
Ernst & Young LLP was compatible with the maintenance of that firm's
independence in the conduct of its auditing functions.
The
Board recommends a vote FOR the ratification of the appointment of Ernst &
Young LLP as our independent registered public accounting firm for
2010. Proxies solicited by the Board will be voted FOR this
ratification, unless otherwise instructed.
BOARD
AND COMMITTEE MATTERS
Board
of Directors
The Board
is responsible for overseeing our affairs. The Board conducts its
business through meetings and actions taken by written consent in lieu of
meetings. During the year ended December 31, 2009, the Board
held five meetings and acted 10 times by written consent in lieu of a
meeting. Each of our directors attended at least 75% of the meetings
of the Board and of the Board's committees on which they served during
2009. All directors then serving on the Board attended our 2009
Annual Meeting of Stockholders. During 2010, the Board expanded its
size from seven to eight directors in January and then from eight to nine
directors in March and, in connection with these expansions, appointed Robin
Josephs as a Class II director, effective January 4, 2010, and William S. Gorin
as a Class I director, effective March 4, 2010, to fill the resulting
vacancies. The Board's policy, as set forth in our Corporate
Governance Guidelines (the "Guidelines"), is to encourage and promote the
attendance by each director at all scheduled meetings of the Board and all
meetings of our stockholders.
Committees
of the Board
The Board
has four standing committees: the Audit Committee, the Compensation
Committee, the Nominating and Corporate Governance Committee and the Capital
Advisory Committee.
Audit
Committee. Stephen R. Blank (Chairman), Edison C. Buchanan,
Michael L. Dahir and Robin Josephs are currently the members of the Audit
Committee. The Board has determined that all of the members of the
Audit Committee are independent as required by the NYSE listing standards, SEC
rules governing the qualifications of audit committee members, the Guidelines,
the Independence Standards (as defined below) and the written charter of the
Audit Committee. The Board has also determined, based upon its
qualitative assessment of their relevant levels of knowledge and business
experience (see "Election of Directors" in this Proxy Statement for a
description of their respective backgrounds and experience), that
Messrs. Blank and Dahir and Ms. Josephs qualify as "audit committee
financial experts" for purposes of, and as defined by, SEC rules and have the
requisite accounting or related financial management expertise required by the
NYSE listing standards. In addition, the Board has determined that
all of the members of the Audit Committee are financially literate as required
by the NYSE listing standards. The Audit Committee, which met eight
times during 2009, is responsible for, among other things, engaging our
independent registered public accounting firm, reviewing with the independent
registered public accounting firm the plans and results of their audit
engagement, approving professional services to be provided by the independent
registered public accounting firm, reviewing the independence of the auditors,
considering the range of audit and non-audit fees, reviewing the adequacy of our
internal controls, accounting and reporting practices and assessing the quality
and integrity of our consolidated financial statements. In accordance
with its written charter, the Audit Committee has a policy requiring that the
terms of all auditing and non-auditing services to be provided by our
independent registered public accounting firm be pre-approved by the Audit
Committee. The Audit Committee also reviews and evaluates the scope
of all non-auditing services to be provided by our independent registered public
accounting firm in order to confirm that such services are permitted by the
rules and/or regulations of the NYSE, the SEC, the Financial Accounting
Standards Board or other similar governing bodies. The specific
responsibilities of the Audit Committee are set forth in its written charter,
which is available for viewing on our website at www.mfa-reit.com.
Compensation
Committee. James A. Brodsky (Chairman), Stephen R. Blank and
George H. Krauss are currently the members of the Compensation
Committee. The Board has determined that all of the members of the
Compensation Committee are independent as required by the NYSE listing
standards, the Guidelines, the Independence Standards and the written charter of
the Compensation Committee. The Compensation Committee, which met
four times and acted twice by written consent during 2009, is responsible for,
among other things, overseeing the approval, administration and evaluation of
MFA's compensation plans, policies and programs and reviewing and establishing
the compensation of our directors and executive officers. The
specific responsibilities of the Compensation Committee are set forth in its
written charter, which is available for viewing on our website at www.mfa-reit.com.
Nominating and Corporate Governance
Committee. Michael L. Dahir (Chairman), James A. Brodsky and
George H. Krauss are currently the members of the Nominating and Corporate
Governance Committee. The Board has determined that all of the
members of the Nominating and Corporate Governance Committee are independent as
required by the NYSE listing standards, the Guidelines, the Independence
Standards and the written charter of the Nominating and Corporate Governance
Committee. The Nominating and Corporate Governance Committee, which
met four times during 2009, is responsible for, among other things, assisting
the Board in identifying individuals qualified to become Board members,
recommending to the Board the director nominees to stand for election by our
stockholders, recommending to the Board the directors to serve on each of the
Board's committees, developing and recommending to the Board the corporate
governance principles and guidelines applicable to us and directing the Board in
an annual review of its performance. The specific responsibilities of
the Nominating and Corporate Governance Committee are set forth in its written
charter, which is available for viewing on our website at www.mfa-reit.com.
Capital Advisory
Committee. Stewart Zimmerman (Chairman), Edison C. Buchanan,
Alan L. Gosule and George H. Krauss are currently the members of the Capital
Advisory Committee. The Capital Advisory Committee, which met once
during 2009, is responsible for, among other things, overseeing our compliance
with our investment strategy and other capital and financial operating
policies.
We will
provide the written charters of the Audit Committee, Compensation Committee
and/or Nominating and Corporate Governance Committee, free of charge, to
stockholders who request them. Requests should be directed to Timothy
W. Korth, our General Counsel, Senior Vice President and Corporate Secretary, at
MFA Financial, Inc., 350 Park Avenue, 21st floor, New York, New York
10022.
Report
of the Audit Committee
The Audit
Committee of the Board is responsible for monitoring, on behalf of the Board,
the integrity of our consolidated financial statements, our system of internal
controls, the performance, qualifications and independence of our independent
registered public accounting firm and our compliance with related legal and
regulatory requirements. The Audit Committee has the sole authority
and responsibility to select, determine the compensation of, evaluate the
performance of and, when appropriate, replace our independent registered public
accounting firm. The Audit Committee operates under a written charter
adopted by the Board.
Management
has the primary responsibility for our financial reporting process, including
the system of internal controls, for the preparation of consolidated financial
statements in accordance with accounting principles generally accepted in the
United States and for the report on our internal control over financial
reporting. Ernst & Young LLP, our independent registered public
accounting firm, is responsible for performing an independent audit of
(i) our annual consolidated financial statements and expressing an opinion
as to their conformity with accounting principles generally accepted in the
United States and (ii) the effectiveness of our internal control over
financial reporting and expressing an opinion with respect
thereto. The Audit Committee's responsibility is to oversee and
review the financial reporting process and to review and discuss management's
report on our internal control over financial reporting. The Audit
Committee is not, however, professionally engaged in the practice of accounting
or auditing and does not provide any expert or other special assurance as to
such financial statements concerning compliance with laws, regulations or
accounting principles generally accepted in the United States or as to auditor
independence. The Audit Committee relies, without independent
verification, on the information provided to it and on the representations made
by our management and our independent registered public accounting
firm.
The Audit
Committee held eight meetings during 2009. The meetings were
designed, among other things, to facilitate and encourage communication among
the Audit Committee, management, Ernst & Young LLP, our independent
registered public accounting firm, and Grant Thornton LLP, our internal auditing
firm.
The Audit
Committee reviewed and discussed the audited consolidated financial statements
for the fiscal year ended December 31, 2009, and the related report prepared by
Ernst & Young LLP, with management and Ernst & Young LLP. The
Audit Committee discussed with Ernst & Young LLP and Grant Thornton LLP the
overall scope and plans for their respective audits, including internal control
testing under Section 404 of the Sarbanes-Oxley Act of 2002. The
Audit Committee also reviewed and discussed with management, Ernst & Young
LLP and Grant Thornton LLP management's annual report on our internal control
over financial reporting and the reports and memoranda prepared by Ernst &
Young LLP and Grant Thornton LLP with respect to their respective audits of our
internal control over financial reporting. The Audit Committee met
with Ernst & Young LLP and Grant Thornton LLP, with and without management
present, to discuss the results of their examinations, their evaluations of our
internal controls and the overall quality of our financial
reporting.
The Audit
Committee reviewed and discussed with Ernst & Young LLP their 2009 audit
plan for MFA and their proposed implementation of this plan. The
Audit Committee also discussed with Ernst & Young LLP matters that
independent accounting firms must discuss with audit committees under generally
accepted auditing standards and standards of the Public Company Accounting
Oversight Board's ("PCAOB"), including, among other things, matters related to
the conduct of the audit of our consolidated financial statements and the
matters required to be discussed by Statement on Auditing Standards No. 61, as
amended (AICPA, Professional
Standards, Vol. 1. AU Section 380), as adopted by the PCAOB in Rule
3200T, which included a discussion of Ernst & Young LLP's judgments about
the quality (not just the acceptability) of our accounting principles as applied
to financial reporting.
The Audit
Committee also discussed with Ernst & Young LLP their independence from
us. Ernst & Young LLP provided to the Audit Committee the written
disclosures and the letter required by applicable requirements of the PCAOB
regarding the independent accountant's communications with the Audit Committee
concerning independence and represented that it is independent from
us. When considering the independence of Ernst & Young LLP, the
Audit Committee considered if services they provided to us, beyond those
rendered in connection with their audit of our consolidated financial
statements, their reviews of our interim condensed consolidated financial
statements included in our quarterly reports on Form 10-Q and their audit of the
effectiveness of our internal control over financial reporting, were compatible
with maintaining their independence. The Audit Committee reviewed and
approved the audit, tax and other professional services performed by, and the
amount of fees paid for such services to, Ernst & Young LLP. The
Audit Committee has adopted policies and procedures for the pre-approval of
audit and non-audit services for the purpose of maintaining the independence of
our independent registered public accounting firm. The Audit
Committee received regular updates on the amount of fees and scope of audit, tax
and other professional services provided.
Based on
the Audit Committee's review and the outcome of these meetings, discussions and
reports, and subject to the limitations on the Audit Committee's role and
responsibilities referred to above and in its written charter, the Audit
Committee recommended to the Board that our audited consolidated financial
statements for the fiscal year ended December 31, 2009 be included in our annual
report on Form 10-K filed with the SEC. The Audit Committee has also
selected and appointed Ernst & Young LLP as our independent registered
public accounting firm for the fiscal year ending December 31, 2010 and is
presenting this selection to our stockholders for ratification.
Stephen
R. Blank, Chairman
Edison C.
Buchanan
Michael
L. Dahir
Robin
Josephs*
*
|
Ms.
Josephs joined the Board as of January 4, 2010 and did not participate in
any of the foregoing reviews and discussions that occurred during
2009.
|
The
foregoing Report of the Audit Committee shall not be deemed under the Securities
Act of 1933, as amended (the "Securities Act"), or the Exchange Act, to be
(i) "soliciting material" or "filed" or (ii) incorporated by reference
by any general statement into any filing made by us with the SEC, except to the
extent that we specifically incorporate such report by reference.
COMPENSATION
OF NON-EMPLOYEE DIRECTORS
During
2009, we paid, on a semi-annual basis in 50% increments on the last business day
of May and November, (i) an annual board fee to our non-employee directors
of $60,000 per year; (ii) an annual chair fee to the non-employee director
acting as the Chairman of the Audit Committee of $12,500 per year; and
(iii) an annual chair fee to the non-employee directors acting as the
Chairmen of each of the Compensation Committee and the Nominating and Corporate
Governance Committee of $7,500 per year. In addition, under the 2004
Equity Compensation Plan, we made an annual award of equity compensation to each
of our non-employee directors consisting of 2,500 restricted shares of Common
Stock ("Restricted Shares"), which shares by their terms must be retained by the
non-employee directors and, subject to certain exceptions, may not be sold or
otherwise transferred until six months after termination of service with
us. In accordance with the stated terms of the Board's compensation
package, these Restricted Shares are granted to our non-employee directors on a
semi-annual basis in 50% increments on the last business day of May and November
in each year. Our non-employee directors may also participate in our
Second Amended and Restated 2003 Non-Employee Directors' Deferred Compensation
Plan (the "Non-Employee Directors Plan"), which allows participants to elect to
defer receipt of 50% or 100% of their annual board fee and, if applicable,
annual chair fees.
The
following table summarizes the annual compensation received by our non-employee
directors for the year ended December 31, 2009.
|
|
Fees Earned or
Paid in Cash
($)(1)
|
|
|
|
|
|
Non-Equity
Incentive Plan
Compensation
($)(3)
|
|
|
|
|
Stephen
R. Blank
|
|
$ |
72,500 |
|
|
$ |
17,288 |
|
|
$ |
1,163 |
|
|
$ |
90,951 |
|
James
A. Brodsky
|
|
|
67,500 |
|
|
|
17,288 |
|
|
|
1,163 |
|
|
|
85,951 |
|
Edison
C. Buchanan
|
|
|
60,000 |
|
|
|
17,288 |
|
|
|
1,163 |
|
|
|
78,451 |
|
Michael
L. Dahir
|
|
|
67,500 |
|
|
|
17,288 |
|
|
|
1,163 |
|
|
|
85,951 |
|
Alan
L. Gosule
|
|
|
60,000 |
|
|
|
17,288 |
|
|
|
1,163 |
|
|
|
78,451 |
|
Robin
Josephs(4)
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
George
H. Krauss
|
|
|
60,000 |
|
|
|
17,288 |
|
|
|
1,163 |
|
|
|
78,451 |
|
(1)
|
Amounts
in this column represent annual board fees and annual chair fees earned or
paid to each non-employee directors for service in
2009.
|
(2)
|
Amounts
in this column represent the aggregate grant date fair value of such
awards computed in accordance with FASB ASC Topic 718. During
2009, each non-employee director was granted (a) 1,250 Restricted Shares,
on May 29, 2009, which had a fair value of $6.26 (based upon the fair
market value of the Common Stock), and (b) 1,250 Restricted Shares, on
November 30, 2009, which had a fair value of $7.57 (based upon the fair
market value of the Common Stock).
|
(3)
|
Amounts
in this column represent aggregate distributions paid on DERs, which
represent the right to receive a distribution on each DER equal to the
cash dividend paid on a share of Common Stock, attached to outstanding
NQSOs held by our non-employee directors during
2009.
|
(4)
|
Ms.
Josephs joined the Board as of January 4,
2010.
|
Non-employee
directors are also eligible to receive grants of NQSOs, restricted stock,
phantom shares and DERs under the 2004 Equity Compensation Plan, and, if
approved by our stockholders at the Annual Meeting, under the 2010 Equity
Compensation Plan. We reimburse all non-employee directors for travel
and other expenses incurred in connection with attending Board, committee and
stockholder meetings and other Company-sponsored events and/or related to their
activities on our behalf. In addition, we provide all non-employee
directors with up to $500,000 of accidental death and dismemberment insurance
while traveling to or attending Board, committee and stockholder meetings and
other Company-sponsored events. Directors who are also our employees
are not entitled to receive additional compensation for serving on the
Board.
Effective
January 1, 2010, the Board modified the compensation package to be paid to our
non-employee directors. Pursuant to this modified compensation
package, the annual board fee paid to our non-employee directors and annual
chair fees paid to our non-employee directors acting as Chairmen to the Board's
Audit Committee, Compensation Committee and the Nominating and Corporate
Governance Committee will remain the same and shall continue to be paid on a
semi-annual basis in 50% increments on the last business day of May and
November; however, beginning
in 2010,
the annual award of equity compensation to each non-employee director will be
increased to 7,500 Restricted Shares. In addition, beginning in 2010,
we will pay, on a semi-annual basis in 50% increments, an annual fee of $7,500
per year to our Lead Director as well as provide our Lead Director with an
annual award of equity compensation consisting of 5,000 Restricted
Shares. As with all Restricted Shares awarded to non-employee
directors pursuant to this modified compensation package, these Restricted
Shares will be granted to our Lead Director on a semi-annual basis in 50%
increments on the last business day of May and November in each year and, by
their terms, must be retained and, subject to certain exceptions, may not be
sold or otherwise transferred until six months after termination of service with
us. In addition, pursuant to this modified compensation package, the
non-employee directors shall be subject to a share retention/alignment
requirement whereby each non-employee director shall be required to hold and
maintain equity in MFA, which shall include Common Stock, convertible (but not
perpetual) preferred stock, Restricted Shares and deferred stock units under the
Non-Employee Directors Plan (collectively, the "Equivalent Shares"), in an
amount equal to no less than 37,500 Equivalent Shares. This retention
requirement shall be applicable (i) to non-employee directors joining the Board
on or after January 1, 2010, five years after becoming a director and (ii) to
incumbent non-employee directors serving on the Board on December 31, 2009,
within five years of the implementation of this modified compensation
package.
CORPORATE
GOVERNANCE
Role
of the Board
Pursuant
to our Charter and Bylaws and the Maryland General Corporation Law, our business
and affairs are managed under the direction of the Board. The Board
has the responsibility for establishing broad corporate policies and for our
overall performance and direction, but is not involved in our day-to-day
operations. Members of the Board keep informed of our business by
participating in meetings of the Board and its committees, by reviewing
analyses, reports and other materials provided to them and through discussions
with our Chief Executive Officer and other executive officers.
Board
Leadership Structure
The
positions of our Chairman of the Board and our Chief Executive Officer are
currently held by Stewart Zimmerman. In 2010, the Board established
the function of Lead Director and the Board's independent directors appointed
James A. Brodsky to this position to serve until the 2011 annual meeting of the
Board. We believe that this Board leadership structure is appropriate
for MFA, in that the combined role of the Chairman of the Board and the Chief
Executive Officer promotes unified leadership and direction for MFA, allowing
for a single, clear focus for management to execute MFA's strategy and business
plan, while also providing for effective oversight by an independent Board
assisted by the Lead Director. We believe the Chief Executive Officer
is in the best position to focus the independent directors' attention on the
issues of greatest importance to MFA and its stockholders. We believe
that our overall corporate governance policies and practices combined with the
strength of our independent directors minimizes any potential conflicts that may
result from combining the roles of our Chairman of the Board and our Chief
Executive Officer. As part of its annual self-assessment, the Board
will consider whether the current leadership structure continues to be optimal
for MFA and its stockholders.
Lead
Director Position
The Board
established the Lead Director role to be fully independent of MFA's
management. James A. Brodsky, an independent director, currently
serves as the Lead Director. Among other things, the Lead Director:
(1) presides at all meetings of the Board at which the Chairman of the
Board is not present; (2) has the authority to call, and will lead, meetings and
executive sessions of our independent and non-management directors; (3) consults
with the Chairman of the Board in establishing the agenda for Board meetings;
(4) helps facilitate communication between Chairman of the Board/Chief Executive
Officer and the Board; (5) acts as a liaison between the Board and management;
(6) confirms the Board has a process of regularly assessing the effectiveness of
the Board, its committees and individual directors and management; and (7)
performs such other functions as may be designated from time to
time. The Lead Director shall be elected annually by a majority of
the non-management and independent directors then serving on the Board at each
annual meeting of the Board beginning in 2011.
Board's
Role in Risk Oversight
The Board
is responsible for the oversight of MFA's risk management. The Board
oversees and monitors MFA's risk management framework and actively reviews risks
that may be material to us. As part of this oversight process, the
Board regularly receives reports from management on areas of material risk to
MFA, including operational, financial, interest rate, liquidity, credit, market,
legal and regulatory, accounting and strategic risks. The Board
receives these reports from the appropriate sources within MFA to enable it to
understand our risk identification, risk management and risk mitigation
strategies. To the extent applicable, the Board and its committees
coordinate their risk oversight roles. As part of its written
charter, the Audit Committee discusses guidelines and policies to govern the
process by which risk assessment and risk management, including major financial
risk exposures, is undertaken by MFA and its management. The goal of
these processes is to achieve serious and thoughtful board-level attention to
our risk management process and framework, the nature of the material risks we
face and the adequacy of our risk management process and framework designed to
respond to and mitigate these risks.
Director
Independence
The
Guidelines provide that a majority of the directors serving on the Board must be
independent as determined by the Board in accordance with the rules and
standards established by the NYSE. In addition, as permitted under
the Guidelines, the Board has also adopted certain additional categorical
standards (the "Independence Standards") to assist it in making determinations
with respect to the independence of directors. Based upon its review
of all relevant facts and circumstances, the Board has affirmatively determined
that six of our nine current directors, Stephen R. Blank, James A. Brodsky,
Edison C. Buchanan, Michael L. Dahir, Robin Josephs and George H. Krauss,
qualify as independent directors under the NYSE listing standards and the
Independence Standards. In determining that Mr. Krauss qualifies
as an independent director under the NYSE listing standards and the Independence
Standards, the Board took into consideration in making its determination that,
during 2007, we paid property management fees of $38,485 to a property manager
that was a wholly-owned subsidiary of America First Apartment Investors, Inc.
("AFAI"), a company for which Mr. Krauss then served on the board of
directors and was a stockholder. In connection with making this
determination, the Board specifically noted that (a) the amount of
property management fees paid to the property manager in 2007 was not considered
to be material to us on a consolidated basis and (b) our property
management arrangement with AFAI was terminated in 2007. The
Independence Standards are available for viewing on our website at www.mfa-reit.com.
Code
of Business Conduct and Ethics
The Board
has adopted a Code of Business Conduct and Ethics (the "Code of Conduct") that
applies to our directors, officers and employees. The Code of Conduct
was designed to assist directors, officers and employees in complying with the
law, in resolving moral and ethical issues that may arise and in complying with
our policies and procedures. Among the areas addressed by the Code of
Conduct are compliance with applicable laws, conflicts of interest, use and
protection of our assets, confidentiality, communications with the public,
internal accounting controls, improper influence of audits, records retention,
fair dealing, discrimination and harassment, and health and
safety. The Board's Nominating and Corporate Governance Committee is
responsible for assessing and periodically reviewing the adequacy of the Code of
Conduct and will recommend, as appropriate, proposed changes to the
Board. The Code of Conduct is available for viewing on our website at
www.mfa-reit.com. We
will also provide the Code of Conduct, free of charge, to stockholders who
request it. Requests should be directed to Timothy W. Korth, our
General Counsel, Senior Vice President and Corporate Secretary, at MFA
Financial, Inc., 350 Park Avenue, 21st floor, New York, New York
10022.
Corporate
Governance Guidelines
The Board
has adopted Corporate Governance Guidelines that address significant issues of
corporate governance and set forth procedures by which the Board carries out its
responsibilities. Among the areas addressed by the Guidelines are
Board composition, Board functions and responsibilities, Board committees,
director qualification standards, access to management and independent advisors,
director compensation, management succession, director orientation and
continuing education and Board and committee performance
evaluations. The Board's Nominating and Corporate Governance
Committee is responsible for assessing and periodically reviewing the adequacy
of the Guidelines and will recommend, as appropriate, proposed changes to the
Board. The Guidelines are available for viewing on our
website
at www.mfa-reit.com. We
will also provide the Guidelines, free of charge, to stockholders who request
them. Requests should be directed to Timothy W. Korth, our General
Counsel, Senior Vice President and Corporate Secretary, at MFA Financial, Inc.,
350 Park Avenue, 21st floor, New York, New York 10022.
Review
and Approval of Transactions with Related Persons
The Board
has adopted written policies and procedures for review, approval and monitoring
of transactions involving us and "related persons" (directors and executive
officers, stockholders beneficially owning greater than 5% of our outstanding
capital stock or immediate family members of any of the
foregoing). The policy covers any related person transaction that
meets the minimum threshold for disclosure in the Proxy Statement under the
relevant SEC rules (generally, transactions involving amounts exceeding $120,000
in which a related person has a direct or indirect material
interest). A summary of these policies and procedures is set forth
below:
Policies
·
|
Any
covered related party transaction must be approved by the Board or by a
committee of the Board consisting solely of disinterested
directors. In considering the transaction, the Board or
committee will consider all relevant factors, including, as applicable,
(i) our business rationale for entering into the transaction;
(ii) the available alternatives; (iii) whether the transaction
is on terms comparable to those available to or from third parties;
(iv) the potential for the transaction to lead to an actual or
apparent conflict of interest; and (v) the overall fairness of the
transaction to us.
|
·
|
On
at least an annual basis, the Board or committee will monitor the
transaction to assess whether it is advisable for us to amend or terminate
the transaction.
|
Procedures
·
|
Management
or the affected director or executive officer will bring the matter to the
attention of the Chairman of the Audit Committee or, if the Chairman of
the Audit Committee is the affected director, to the attention of the
Chairman of the Nominating and Corporate Governance
Committee.
|
·
|
The
appropriate Chairman shall determine whether the matter should be
considered by the Board or by a committee of the Board consisting solely
of disinterested directors.
|
·
|
If
a director is involved in the transaction, he or she will be recused from
all discussions and decisions about the
transaction.
|
·
|
The
transaction must be approved in advance whenever practicable and, if not
practicable, must be ratified as promptly as
practicable.
|
Identification
of Director Candidates
In
accordance with the Guidelines and its written charter, the Nominating and
Corporate Governance Committee is responsible for identifying and evaluating
director candidates for the Board and for recommending director candidates to
the Board for consideration as nominees to stand for election at our annual
meetings of stockholders. Director candidates are nominated to stand
for election to the Board in accordance with the procedures set forth in the
written charter of the Nominating and Corporate Governance
Committee.
We seek
highly-qualified director candidates from diverse business, professional and
educational backgrounds who combine a broad spectrum of experience and expertise
with a reputation for the highest personal and professional ethics, integrity
and values. The Nominating and Corporate Governance Committee
periodically reviews the appropriate skills and characteristics required of our
directors in the context of the current composition of the Board, our operating
requirements and the interests of the Company. In accordance with the
Guidelines, director candidates should have experience in positions with a high
degree of responsibility and decision making, be able to exercise good business
judgment, be able to provide practical wisdom and mature judgment and be leaders
in the companies or institutions
with
which they are affiliated. The Nominating and Corporate Governance
Committee reviews director candidates with the objective of assembling a slate
of directors that can best fulfill and promote our goals, and recommends
director candidates based upon contributions they can make to the Board and
management and their ability to represent our long-term interests and those of
our stockholders.
Although
we do not have a formal written diversity policy, the Nominating and Corporate
Governance Committee considers diversity of race, ethnicity, gender, age,
cultural background, professional experiences and expertise and education in
evaluating director candidates for Board membership. We believe that
considerations of diversity are, and will continue to be, an important component
relating to the Board's composition as multiple and varied points of view
contribute to a more effective decision-making process.
The
Nominating and Corporate Governance Committee accepts stockholder
recommendations of director candidates and applies the same standards in
considering director candidates submitted by stockholders as it does in
evaluating director candidates recommended by members of the Board or
management. Upon determining the need for additional or replacement
Board members, the Nominating and Corporate Governance Committee identifies
director candidates and assesses such director candidates based upon information
it receives in connection with the recommendation or otherwise possesses, which
may be supplemented by certain inquiries. In conducting this
assessment, the Nominating and Corporate Governance Committee considers
knowledge, experience, skills, diversity and such other factors as it deems
appropriate in light of our current needs and those of the Board. If
the Nominating and Corporate Governance Committee determines, in consultation
with other directors, including the Chairman of the Board, that a more
comprehensive evaluation is warranted, the Nominating and Corporate Governance
Committee may then obtain additional information about a director candidate's
background and experience, including by means of personal
interviews. The Nominating and Corporate Governance Committee will
then re-evaluate the director candidate using its evaluation
criteria. The Nominating and Corporate Governance Committee receives
input on such director candidates from other directors, including the Chairman
of the Board, and recommends director candidates to the Board for
nomination. The Nominating and Corporate Governance Committee may, in
its sole discretion, engage one or more search firms and/or other consultants,
experts or professionals to assist in, among other things, identifying director
candidates or gathering information regarding the background and experience of
director candidates. If the Nominating and Corporate Governance
Committee engages any such third party, the Nominating and Corporate Governance
Committee will have sole authority to approve any fees or terms of retention
relating to these services.
Our
stockholders of record who comply with the notice procedures outlined under the
"Submission of Stockholder Proposals" section of this Proxy Statement may
recommend director candidates for evaluation and consideration by the Nominating
and Corporate Governance Committee. Stockholders may make
recommendations at any time, but recommendations of director candidates for
consideration as director nominees at our annual meeting of stockholders must be
received not less than 120 days before the first anniversary of the date on
which the proxy statement was released to stockholders in connection with the
previous year's annual meeting of stockholders. Accordingly, to
submit a director candidate for consideration for nomination at our 2011 Annual
Meeting of Stockholders, stockholders must submit the recommendation, in
writing, by no later than December 7, 2010. The written notice
must demonstrate that it is being submitted by a stockholder of record of MFA
and include information about each proposed director candidate, including name,
age, business address, principal occupation, principal qualifications and other
relevant biographical information. In addition, the stockholder must
provide confirmation of each director candidate's consent to serve as a director
and contact information for each director candidate so that his or her interest
can be verified and, if necessary, to gather further information.
Communications
with the Board
The Board
has established a process by which stockholders and/or other interested parties
may communicate in writing with our directors, a committee of the Board, the
Board's non-employee directors as a group or the Board generally. Any
such communications may be sent to the Board by U.S. mail or overnight delivery
and should be directed to Timothy W. Korth, our General Counsel, Senior Vice
President and Corporate Secretary, at MFA Financial, Inc., 350 Park Avenue, 21st
Floor, New York, New York 10022, who will forward them to the intended
recipient(s). Any such communications may be made
anonymously. Unsolicited advertisements, invitations to conferences
or promotional materials, in the discretion of the Corporate Secretary, are not
required, however, to be forwarded to the directors. The Board has
approved this communication process.
Executive
Sessions of Independent Directors
In
accordance with the Guidelines, the independent directors serving on the Board
meet in executive session at least four times per year at regularly scheduled
meetings of the Board. These executive sessions of the independent
directors are presided over by James A. Brodsky, in his capacity as the Lead
Director.
EXECUTIVE
COMPENSATION
Compensation
Discussion and Analysis
The
following Compensation Discussion and Analysis describes the material elements
of the compensation programs offered to our senior executive
officers. The Compensation Committee of the Board is responsible for
the administration of our compensation plans, policies and programs and for all
decisions relating to the compensation of our principal executive officer,
principal financial officer and three other executive officers (the "Named
Executive Officers"). The Compensation Committee endeavors to ensure
that the compensation paid to the Named Executive Officers is consistent with
our overall philosophy on compensation and market practices.
Compensation
Philosophy and Objectives. We, through our executive
compensation programs, seek to attract, motivate and retain top quality senior
executives who are committed to our core values of excellence and
integrity. The Compensation Committee's fundamental philosophy is to
closely align these compensation programs with the achievement of annual and
long-term performance goals tied to our financial success and the creation of
stockholder value.
The
Compensation Committee's objectives in developing and administering the
executive compensation programs are to:
|
·
|
Attract,
retain and motivate a highly-skilled senior executive team that will
contribute to the successful performance of
MFA;
|
|
·
|
Align
the interests of the senior executive team with the interests of our
stockholders by motivating executives to increase long-term stockholder
value;
|
|
·
|
Provide
compensation opportunities that are competitive within industry standards
thereby reflecting the value of the position in the
marketplace;
|
|
·
|
Support
a culture committed to paying for performance where compensation is
commensurate with the level of performance achieved;
and
|
|
·
|
Maintain
flexibility and discretion to allow us to recognize the unique
characteristics of our operations and strategy, and our prevailing
business environment, as well as changing labor market
dynamics.
|
The
Compensation Committee believes that it is important to create compensation
programs that appropriately balance short-term, cash-based compensation with
long-term, equity-based compensation. Our executive officer
compensation program includes the following primary components:
|
·
|
Base
salaries paid in cash which recognize the unique role and responsibilities
of a position, as well as an individual's performance in that
role;
|
|
·
|
Annual
cash awards which are meant to motivate and reward our short-term
financial and operational performance, as well as individual performance;
and
|
|
·
|
Long-term
equity-based awards, including our restricted stock unit program, which
are designed to support our objectives of aligning the interests of
executive officers with those of our stockholders, promoting our long-term
performance and value creation and retaining executive
officers.
|
In
addition to the primary components of the executive officer compensation
program, we maintain our Senior Officers Deferred Bonus Plan (the "Senior
Officers Plan"), a non-qualified deferred compensation program designed to
provide additional opportunities to align the interests of executive officers
with stockholders and provide limited perquisites and other benefits beyond that
are provided to all of our employees.
The
Compensation Committee is committed to the ongoing review and evaluation of the
executive officer compensation levels and program. It is the
Compensation Committee's view that compensation decisions are complex and best
made after a deliberate review of Company and individual performance, as well as
industry compensation levels. Consistent with this view, the
Compensation Committee annually assesses our performance within the context of
the industry's overall performance and internal performance standards and
evaluates individual executive officer performance relative to the performance
expectations for their respective position and role within MFA. In
addition, the Compensation Committee benchmarks from time to time the total
compensation provided to our executive officers to industry-based compensation
practices. While it is the Compensation Committee's goal to provide
compensation opportunities that reflect Company and individual performance and
that are competitive within industry standards, a specific target market
position for executive officer pay levels has not been established.
Setting Executive
Compensation. During 2005 and 2006, the Compensation
Committee conducted a comprehensive review of our senior executive compensation
practices in order to help assure that our senior executive compensation program
and policies remained aligned with the goal of enhancing stockholder value
through compensation practices that attract, motivate and retain key senior
executives. As a part of the process, the Compensation Committee
engaged FPL Associates Compensation, a nationally-recognized compensation
consulting firm specializing in the real estate industry ("FPL"), to provide
independent guidance and insight to the Compensation Committee on executive
compensation matters, both generally in the marketplace and within our industry,
and to provide recommendations regarding potential modifications to our senior
executive compensation programs and policies.
The focus
of the Compensation Committee's review was to (i) more directly align our
senior executive compensation programs and policies with our financial
performance and, accordingly, the creation of stockholder value and
(ii) competitively update the existing executive compensation programs and
policies, including existing employment agreements, to reflect current practices
in the marketplace. In conducting this review, the Compensation
Committee examined all components of our compensation programs offered to the
Named Executive Officers in office at that time, including, among other things,
base salary, annual incentive bonus, equity and long-term compensation,
accumulated (realized and unrealized) gains on Options and payments on DERs, the
dollar value to the senior executives (and the cost to us) of all perquisites
and other personal benefits, the earnings and accumulated payout obligations
under the Senior Officers Plan, and the actual projected payout obligations
under several potential severance and change-in-control scenarios. A
compensation tally sheet setting forth these components of our senior executive
compensation program provided to each Named Executive Officer was prepared and
reviewed by the Compensation Committee. As part of their review, the
Compensation Committee also evaluated a comprehensive benchmarking analysis
prepared by FPL, which compared our senior executive compensation practices to
the compensation practices employed by multiple distinct industry peer groups
representing various asset classes.
Based on
the analysis and findings of this comprehensive review and FPL's
recommendations, the Compensation Committee determined that it would be
beneficial to modify the compensation arrangements then offered to the Named
Executive Officers in order to more closely align these compensation programs
with the achievement of annual and long-term performance goals tied to our
financial success and the creation of stockholder value. As a result,
in 2006, the Compensation Committee directed the implementation and
documentation of these modifications in connection with the amendment and
restatement of the then-existing employment agreements of the Named Executive
Officers then in office. These initial modifications to our
compensation arrangements established the foundation for the Compensation
Committee's overall philosophy on our compensation practices. The
Compensation Committee believes that the basis for, and underlying objectives
relating to, these initial modifications to our compensation practices, which
were first initiated in 2006, continue to reflect the Compensation Committee's
overall compensation philosophy and are a fundamental component of our existing
and future senior executive compensation programs and policies.
During
2006, in connection with the initial modification of our compensation
arrangements, (i) Mr. Zimmerman entered into a five-year amended and
restated employment agreement, which became effective on April 16, 2006
and, in accordance with the automatic renewal provisions set forth therein, is
currently scheduled to expire on December 31, 2011, (ii) Messrs. Gorin
and Freydberg each entered into a three-year amended and restated employment
agreement, which became effective on April 16, 2006 and were scheduled to
expire on December 31, 2008, and (iii) Mr. Korth entered into a
two-year amended and restated employment agreement which became effective on
January 1, 2006 and expired on December 31, 2007. In
connection with the amendment and restatement of their employment agreements,
Messrs. Zimmerman, Gorin and Freydberg (the "Senior Executives") each
waived their rights under their then-existing employment agreements in order to
enter into the amended and restated employment agreements specifying the
modified compensation arrangements. The Compensation Committee
continues to believe that the terms and provisions of these amended and restated
employment agreements provided for compensation arrangements that reflect the
Compensation Committee's philosophy and objectives and help assure our future
stability and succession of leadership.
During
2007, in contemplation of the expiration of the employment agreement of
Mr. Korth on December 31, 2007, the Compensation Committee, together with
the FPL, reviewed the components of the compensation arrangements then offered
to Mr. Korth. As part of this process, the Compensation Committee
considered the terms and provisions set forth in Mr. Korth's employment
agreement and determined to modify the annual base salary paid to
him. Specifically, Mr. Korth's salary was increased
approximately 18% based on the results of this review and the Compensation
Committee's view that the salary was below competitive market practices and did
not appropriately reflect the broad set of responsibilities that Mr. Korth
carries out as a member of our senior executive team. As a result,
Mr. Korth entered into a new two-year amended and restated employment
agreement, which became effective on January 1, 2008 and was scheduled to
expire on December 31, 2009. In contemplation of the expiration
of this employment agreement, on December 31, 2009, the Company entered
into an amended and restated employment agreement with
Mr. Korth. The employment agreement was amended (i) to
extend the term of employment for an additional two-year period ending on
December 31, 2011, (ii) to increase the amount of the annual base
salary payable to Mr. Korth equal to $334,000 per annum and (iii) to make
certain amendments to the restrictive covenants set forth
therein. Except as provided above, all other material terms and
provisions of the amended and restated employment agreement, entered into by
Mr. Korth as of December 10, 2008 and expiring on December 31,
2009 remain the same.
During
2008, in connection with the promotion of Mr. Gorin to the office of our
President and Chief Financial Officer and Mr. Freydberg to the office of
our Chief Investment Officer and Executive Vice President, the Compensation
Committee, together with Christenson Advisors, LLC, a nationally-recognized
compensation consulting firm ("Christenson Advisors"), reviewed the components
of the compensation arrangements then offered to these Named Executive
Officers. As part of this process, the Compensation Committee
considered, among other things, the increased duties and responsibilities
associated with their new positions and determined to increase the annual base
salaries paid to, and to modify the annual performance-based bonus pool (the
"Bonus Pool") shared by, these executive officers. Specifically,
effective July 1, 2008, Mr. Gorin's annual base salary was increased from
$675,000 to $800,000 and Mr. Freydberg's annual base salary was increased
from $675,000 to $750,000. These increases in annual base salary were
based on the results of this review and the Compensation Committee's view that
these promotions (i.e., the additional responsibilities expected to be carried
out by Messrs. Gorin and Freydberg) warranted an increase in annual base
salary. Further, these increases provided additional and, in the view
of the Compensation Committee, appropriate incentives to these executives to
renew their employment with us for an additional term of three and one-half
years and, thereby, help assure the continuity and development of our senior
executive team. In addition, Messrs. Gorin and Freydberg also
received a one-time award of 100,000 Restricted Shares and 75,000 Restricted
Shares, respectively, which vest ratably on a quarterly basis over a four-year
period. As a result, each of Messrs. Gorin and Freydberg entered
into new amended and restated employment agreements, which became effective as
of July 1, 2008 and are scheduled to expire on December 31, 2011.
In
December 2008, the Compensation Committee, based upon the advice and counsel of
Christenson Advisors, agreed to amend and restate Mr. Zimmerman's
employment agreement in order to allow him, as a Senior Executive, to
participate in the revised Bonus Pool with Messrs. Gorin and
Freydberg. As a result of the 2008 modifications to the Bonus Pool,
the aggregate amount of the Bonus Pool available for distribution to all three
of the Senior Executives, combined, can range annually from $750,000 to $6.3
million or more (subject to adjustment upwards or downwards by as much as 30% at
the discretion of the Compensation Committee) based upon our attainment of
specified return on average equity ("ROAE") targets in any given
year. In addition, in December 2008, the employment agreements of all
of the Named Executive Officers then in office were amended to bring them into
compliance with Section 409A of the Code.
In July
2009, the Board appointed Craig L. Knutson to serve as Executive Vice
President. In connection with Mr. Knutson's appointment, the
Compensation Committee considered, among other things, the duties and
responsibilities associated with this position in order to determine the
appropriate compensation offered to Mr. Knutson. As a result, Mr.
Knutson entered into an employment agreement, which became effective as of
July 1, 2009 and is scheduled to expire on December 31,
2011. Under the terms of the employment agreement, Mr. Knutson
will receive an annual base salary equal to $425,000 per annum and an
opportunity to earn a discretionary annual performance bonus. Mr.
Knutson received a one-time award of 75,000 Restricted Shares concurrent
with entering into his employment agreement dated as of July 1,
2009.
The
Compensation Committee will, on an ongoing basis, continue to examine and assess
our executive compensation practices relative to our compensation philosophy and
objectives, as well as competitive market practices and total stockholder
returns, and will make modifications to the compensation programs, as deemed
appropriate.
Additional
information with respect to the current employment agreements of the Named
Executive Officers can be found under "Employment Contracts and Termination of
Employment and Change-in-Control Arrangements" of this Executive Compensation
section of the Proxy Statement.
Role of Executive
Officers in Compensation Decisions. The Compensation
Committee makes all compensation decisions related to the Named Executive
Officers and, in consultation with Mr. Zimmerman, our Chief Executive Officer,
and Mr. Gorin, our President and Chief Financial Officer, our other
employees. When making compensation decisions for the Named Executive
Officers (other than Mr. Zimmerman), the Compensation Committee seeks and
considers the advice and counsel of Messrs. Zimmerman and Gorin given their
direct day-to-day working relationship with these senior
executives. Taking this feedback into consideration, the Compensation
Committee engages in discussions and makes final determinations related to
compensation paid to the Named Executive Officers. All decisions
regarding Mr. Zimmerman's compensation are made independently by the
Compensation Committee.
Elements of
Executive Compensation. The key elements of our
executive compensation program include:
|
·
|
Incentive
compensation;
|
|
·
|
Deferred
compensation; and
|
|
·
|
Perquisites
and other benefits.
|
Base
Salary
Pursuant
to their employment agreements, we provide the Named Executive Officers with
annual base salaries to compensate them for services provided during the term of
their employment. The amount of the annual base salary paid to the
Named Executive Officers each year is established by, and set forth in, their
employment agreements. The Compensation Committee believes that the
annual base salary paid in 2009 to each of the Named Executive Officers
reflected the scope of the role and responsibilities of the applicable position,
individual performance and experience and competitive market
practices.
The
annual base salaries for each of the Named Executive Officers at December 31,
2009 were as follows:
|
|
|
|
|
|
|
|
|
|
|
Stewart
Zimmerman
|
|
$ |
900,000 |
|
|
$ |
100,000 |
|
William
S. Gorin
|
|
|
800,000 |
|
|
|
¾ |
|
Ronald
A. Freydberg
|
|
|
750,000 |
|
|
|
¾ |
|
Craig
L. Knutson
|
|
|
425,000 |
|
|
|
¾ |
|
Timothy
W. Korth
|
|
|
325,000 |
|
|
|
¾ |
|
Pursuant
to their employment agreements, the amount of annual compensation paid to each
of the Named Executive Officers may be increased during the term of employment
at the discretion of the Compensation Committee. During 2009, no
discretionary adjustments were made by the Compensation Committee to the stated
annual base salaries set forth in the Named Executive Officers' employment
agreements. The Compensation Committee intends to continue to
implement the terms of the employment agreements, including the annual base
salary provisions, while remaining open to future annual base salary adjustments
in the event the Compensation Committee concludes that the circumstances warrant
them. However, consistent with the Compensation Committee's overall
philosophy, the compensation programs for the Named Executive Officers (and, in
particular, the Senior Executives) will continue to emphasize incentive
compensation.
Incentive
Compensation
Under the
terms of their employment agreements, an incentive structure was established for
the Senior Executives. As a result, the Senior Executives are
eligible to participate annually in the performance-based Bonus Pool that is
funded based on MFA's ROAE. The Bonus Pool structure provides the
Compensation Committee with considerable discretion to establish incentive
compensation levels in a manner consistent with its overall compensation
philosophy and objectives. For purposes of the Bonus Pool, ROAE is
calculated for the 12-month period beginning on December 1st of the
prior year through November 30th of the
calculated year. ROAE is calculated for this period as the 12-month
GAAP net income excluding depreciation, merger expenses, gains/losses on asset
sales and impairment charges, divided by the average stockholder equity before
(i) goodwill and (ii) preferred stockholder equity. The
Compensation Committee evaluated various measures and factors of performance in
developing this structure and, in its view, ROAE was determined to be a strong
indicator of our overall performance and value creation for
stockholders. Further, ROAE is a metric of our performance that has
been calculated and reported on a consistent basis since our inception in
1998.
As
designed by the Compensation Committee and revised in 2008, the aggregate amount
of the Bonus Pool available for distribution to the Senior Executives can range
annually from $750,000 to $6.3 million or more based upon our attainment of
specified ROAE targets in any given year. The Compensation Committee
has the discretionary right to adjust upward or downward the amount available
for distribution from the Bonus Pool by as much as 30% in any given year (the
"Discretionary Adjustment") based upon its assessment of certain factors,
including, among other considerations, our leverage, our share price performance
relative to the S&P Financial Index or other relevant indices, our share
price performance relative to our peer group, our total stockholder return
(share price change plus dividends), and our other asset management activities,
as well as the individual performance of the Senior Executives. Of
the aggregate amount available for distribution from the Bonus Pool, the
Compensation Committee bases annual bonus allocations to each of the Senior
Executives on its assessment of each Senior Executive's performance and
contribution during the applicable period.
In
accordance with the terms of their employment agreements, the aggregate Bonus
Pool available for distribution to the Senior Executives (subject to the
Discretionary Adjustment of the Compensation Committee) is as
follows:
|
|
|
|
Less
than 4.5%
|
|
$ |
750,000 |
|
|
|
— |
|
4.5%
– 5%
|
|
|
750,000 |
|
|
$ |
950,000 |
|
5%
– 6%
|
|
|
950,000 |
|
|
|
1,150,000 |
|
6%
– 7%
|
|
|
1,150,000 |
|
|
|
1,350,000 |
|
7%
– 8%
|
|
|
1,350,000 |
|
|
|
1,800,000 |
|
8%
– 9%
|
|
|
1,800,000 |
|
|
|
2,250,000 |
|
9%
– 10%
|
|
|
2,250,000 |
|
|
|
2,700,000 |
|
10%
– 11%
|
|
|
2,700,000 |
|
|
|
3,150,000 |
|
11%
– 12%
|
|
|
3,150,000 |
|
|
|
3,600,000 |
|
12%
– 13%
|
|
|
3,600,000 |
|
|
|
4,050,000 |
|
13%
– 14%
|
|
|
4,050,000 |
|
|
|
4,500,000 |
|
14%
– 15%
|
|
|
4,500,000 |
|
|
|
4,950,000 |
|
15%
– 16%
|
|
|
4,950,000 |
|
|
|
5,400,000 |
|
16%
– 17%
|
|
|
5,400,000 |
|
|
|
5,850,000 |
|
17%
– 18%
|
|
|
5,850,000 |
|
|
|
6,300,000 |
|
18%
or more
|
|
Minimum
of $6,300,000 (subject to the Discretionary Adjustment of the Compensation
Committee)
|
|
In order
to further align the performance of the Senior Executives with our long-term
financial success and the creation of stockholder value, the Compensation
Committee also determined that amounts allocated to Senior Executives annually
from the Bonus Pool will be paid in a combination of cash and Restricted Shares
based on the total size of the Bonus Pool. Specifically,
(i) with respect to any Bonus Pool equal to or less than $2,700,000, 75% of
the amount allocated to a Senior Executive will be paid in cash and 25% will be
paid in Restricted Shares, (ii) with respect to the incremental total of
any Bonus Pool ranging from $2,700,000 to $4,050,000, 65% will be paid in cash
and 35% will be paid in Restricted Shares and (iii) with respect to the
incremental total of any Bonus Pool in excess of $4,050,000, 50% will be paid in
cash and 50% will be paid in Restricted Shares. In addition, no
Senior Executive will be permitted to sell or otherwise transfer any of these
Restricted Shares during the executive's employment or for a period of six
months following the termination of the executive's employment, unless the value
of the executive's stock holdings in us exceeds a specified multiple of the
executive's annual base compensation (five times in the case of
Mr. Zimmerman, four times in the case of Mr. Gorin and three times in
the case of Mr. Freydberg).
For 2009,
MFA's ROAE for purposes of determining the aggregate Bonus Pool available for
distribution to the Senior Executives was 15.76% and, in accordance with the
terms of their employment agreements, the 2009 Bonus Pool ranged from $4,950,000
to $5,400,000 (subject to the Discretionary Adjustment of the Compensation
Committee). Based upon their assessment and evaluation, the
Compensation Committee determined to apply the Discretionary Adjustment to the
2009 Bonus Pool and, as a result, adjusted the Bonus Pool upwards by 15% (out of
a possible maximum upward Discretionary Adjustment of 30% from the aggregate
Bonus Pool amount within the applicable ROAE target range) to
$6,084,040. As a result, in the exercise of its discretion, the
Compensation Committee increased the available aggregate 2009 Bonus Pool
available for distribution to the Senior Executives by $793,570.
In making
its determination to apply the Discretionary Adjustment, the Compensation
Committee took into consideration the relevant factors impacting MFA's 2009
financial performance, including MFA's leverage strategy, the execution of MFA's
asset allocation strategy, MFA's relative and absolute stockholder return, the
comparative financial performance of industry peers, the relative performance of
the Senior Executives (individually and collectively), and weighed such factors
accordingly in applying the upward adjustment to the 2009 Bonus
Pool. Ultimately, the Compensation Committee determined that the
upward adjustment to the aggregate available 2009 Bonus Pool amount, from the
targeted amount that otherwise could have been distributed to the Senior
Executives based upon MFA's 2009 ROAE, was appropriate given the 2009
stockholder return generated from share price appreciation and dividends and
MFA's successful execution of its asset allocation strategy.
Specifically,
in the judgment of the Compensation Committee, under the leadership of the
Senior Executives (individually and collectively), MFA performed well during
2009 relative to the financial performance, including stockholder returns, of a
distinct comparative industry peer group established by the Compensation
Committee, despite volatility in the financial markets during that
period. In comparing the 2009 financial performance of MFA and its
peers, the Compensation Committee used an industry peer group consisting of
Annaly Capital Management, Inc., Anworth Mortgage Asset Corporation, Capstead
Mortgage Corporation and Redwood Trust, Inc. In addition, during
2009, MFA generated its ROAE utilizing relatively low leverage and was able to
generate substantial stockholder returns over the year. The
Compensation Committee believes that such stockholder returns substantially
exceeded that reported for the companies covered by the Bloomberg REIT Index and
the S&P 500 Index. As a result of MFA's ROAE, the returns
generated for stockholders through a combination of share price appreciation and
dividend, and MFA's successful execution of its asset allocation strategy, as
well as the market knowledge, experience, advice and recommendations of
Christenson Advisors, the Compensation Committee determined that it was
appropriate, in the exercise of the discretion it had under MFA's compensation
policies and the employment agreements with the Senior Executives, to increase
the amount that otherwise could be available for distribution to the Senior
Executives under the Bonus Pool arrangement.
The
Compensation Committee, based upon its assessment of the individual performance
of each of the Senior Executives, allocated the Bonus Pool as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stewart
Zimmerman
|
|
$ |
1,607,003 |
|
|
|
117,856 |
|
|
$ |
887,453 |
|
|
$ |
2,494,456 |
|
William
S. Gorin
|
|
|
1,215,051 |
|
|
|
89,111 |
|
|
|
671,001 |
|
|
|
1,886,052 |
|
Ronald
A. Freydberg
|
|
|
1,097,466 |
|
|
|
80,487 |
|
|
|
606,066 |
|
|
|
1,703,532 |
|
Based
upon the subjective evaluation of the relative leadership and performance of the
Senior Executives (individually and collectively) and MFA's 2009 financial
performance, the Compensation Committee determined to allocate the Bonus Pool as
set forth in the table above. This allocation reflected the view of
the Compensation Committee that the Senior Executives functioned effectively as
a senior management team, under the overall leadership of Mr. Zimmerman, in
his capacity as Chief Executive Officer and Chairman of the Board, with
effective contributions by Mr. Gorin, in his capacity as President and
Chief Financial Officer, and Mr. Freydberg, in his capacity as Executive
Vice President and Chief Investment and Administrative Officer.
Annual
incentive compensation for Messrs. Knutson and Korth is determined at the
discretion of the Compensation Committee based upon its subjective assessment
and evaluation of MFA's annual performance and the annual performance of each
individual senior executive. Based upon consultations with
Mr. Zimmerman and advice and counsel of Christenson Advisors, the
Compensation Committee determined to award Messrs. Knutson and Korth annual
incentive compensation of $575,000 and $307,500, respectively, for
2009. Of these total incentive amounts, Mr. Knutson received payment
of $175,000 in the form of 23,241 Restricted Shares and Mr. Korth received
payment of $37,500 in the form of 4,981 Restricted Shares.
The cash
component of the incentive compensation for 2009, which was approved by the
Compensation Committee on December 16, 2009, was paid to the Named Executive
Officers on January 15, 2010. The restricted stock awards granted to
the Named Executive Officers were made on December 17, 2009 under the 2004
Equity Compensation Plan. With respect to Messrs. Zimmerman,
Gorin and Freydberg, the restriction period on these Restricted Shares shall
lapse ratably, with respect to approximately 6.25% of such shares, on the last
business day of each calendar quarter over a four-year period (beginning with
the quarter ended March 31, 2010 and ending with the quarter ending December 31,
2013) and dividends on these Restricted Shares are accrued during the
restriction period and are paid in full on the vesting date of the applicable
shares. With respect to Messrs. Knutson and Korth, 25% of these
Restricted Shares became fully vested upon grant, with the remaining 75% vesting
equally on each of the next three anniversaries of the date of grant, and
dividends are paid currently on all vested and unvested Restricted
Shares.
Equity
Grants
The
Compensation Committee believes that equity-based incentives are an effective
means of motivating and rewarding long-term Company performance and value
creation. In addition, equity-based incentives appropriately align
the interests of management with those of stockholders. During the
second quarter of 2004, we adopted the 2004 Equity Compensation Plan, as
approved by our stockholders, which amended and restated our Second Amended and
Restated 1997 Stock Option Plan. In accordance with the terms of the
2004 Equity Compensation Plan, directors, officers and employees of MFA and any
of our subsidiaries and other persons expected to provide significant services
(of a type expressly approved by the Compensation Committee of the Board as
covered services for these purposes) to us are eligible to be granted Options,
restricted stock, restricted stock units (or "RSUs"), DERs and other stock-based
awards under the 2004 Equity Compensation Plan.
As of
December 31, 2009, the Named Executive Officers held an aggregate of 289,353
RSUs and related DERs. With the adoption and implementation of a RSU
program in 2007, the Compensation Committee believes that a meaningful long-term
retention and equity-building component for our senior executives and other key
employees has been added to our comprehensive compensation
program. The Compensation Committee concluded that the grant of RSUs
served our retention goals, helped further to align the interests of the Named
Executive Officers with those of our stockholders and provided appropriate
additional compensation to the Named Executive Officers in the form of quarterly
DER distributions during the period in which these RSUs continue to be
outstanding for their continuing service. These RSUs are scheduled to
vest in full on December 31, 2010 (or earlier in the event of death or
disability or termination of service with us for any reason other than cause)
and, once vested, shall be settled on a one-for-one basis in shares of Common
Stock on the earlier of a termination of service with us (for any reason), a
change in control or on January 1, 2013. During the period from award
until settlement, the Named Executive Officers are entitled to receive DER
distributions on all unvested RSUs.
In
addition, as of December 31, 2009, the Named Executive Officers held an
aggregate of 435,000 Options and related DERs. With respect to these
DERs, the Named Executive Officers are only entitled to receive DER
distributions to the extent that related Options are vested.
The
following table sets forth certain information regarding the number of vested
and unvested DERs held by the Named Executive Officers on December 31, 2009, as
well as distributions with respect to these DERs paid to the Named Executive
Officers during fiscal year 2009. This information regarding
distributions paid on DERs during 2009 can also be found in the Summary
Compensation Table under the column entitled "Non-Equity Incentive Plan
Compensation."
|
|
Vested DERs at
12/31/2009
|
|
|
Unvested DERs at
12/31/2009
|
|
|
|
|
Stewart
Zimmerman
|
|
|
300,741 |
|
|
|
¾ |
|
|
$ |
279,689 |
|
William
S. Gorin
|
|
|
178,125 |
|
|
|
¾ |
|
|
|
165,656 |
|
Ronald
A. Freydberg
|
|
|
178,125 |
|
|
|
¾ |
|
|
|
165,656 |
|
Craig
L. Knutson
|
|
|
¾ |
|
|
|
¾ |
|
|
|
¾ |
|
Timothy
W. Korth
|
|
|
67,362 |
|
|
|
— |
|
|
|
62,647 |
|
Under the
terms of his employment agreement, Mr. Zimmerman is entitled to receive an
annual grant of Common Stock with an aggregate fair market value on the date of
grant of $100,000 on the first business day of each year during the remaining
term of his employment. These stock grants represent a payment of a
portion of Mr. Zimmerman's annual base salary compensation and are fully
vested and non-forfeitable upon the date of grant. Mr. Zimmerman
may not sell or otherwise transfer these shares during the term of his
employment unless his stock holdings in us exceed a multiple of five times his
annual base compensation and, once this threshold is met, only to the extent
that the value of his stock holdings exceeds that multiple. The
Compensation Committee believes that paying a portion of Mr. Zimmerman's
base salary in the form of Common Stock aligns his interests and compensation
with long-term stockholder value creation. During 2009, pursuant to
his employment agreement, Mr. Zimmerman received a grant of 16,978 shares
of Common Stock on January 2, 2009, which had a value of $100,000 based on the
closing stock price on the NYSE of $5.89 on December 31, 2008 (the last trading
day of the year).
On
August 26, 2009, in connection with the execution of his employment
agreement, Mr. Knutson received a one-time award of 75,000 Restricted
Shares. Dividends on these Restricted Shares are accrued during the
restriction period and are paid in full on the vesting date of the applicable
shares. Under the terms of his employment agreement, Mr. Knutson
is not permitted to sell or otherwise transfer any of these Restricted Shares
during the term of his employment or for a period of six months following the
termination of his employment, unless the value of his stock holdings in us
exceeds a multiple of three times his annual base compensation. The
Compensation Committee believes that the grant of these Restricted Shares to
Mr. Knutson (i) further aligned his interests and compensation with
long-term stockholder value creation and (ii) helped address the retention
goals of the Compensation Committee.
No other
equity grants were made to the Named Executive Officers during 2009 other than
those grants detailed above and those awarded in conjunction with the incentive
compensation. The Compensation Committee will continue to evaluate
the Named Executive Officer compensation programs and Company performance and
retains the right to make future equity-based grants.
Deferred
Compensation
On
December 19, 2002, the Board adopted the Senior Officers Plan which gives
executive officers the ability to elect to defer up to 100% of their annual cash
incentive compensation. Amounts deferred under this plan are subject
to a five-year deferral period and can be paid in a lump sum or in installment
payments at the termination of the deferral period. The Senior
Officers Plan is intended to provide executive officers with an opportunity to
defer certain compensation while at the same time aligning their interests with
the interests of stockholders. Amounts deferred under the plan are
considered to be converted into "stock units" of MFA, which do not represent our
capital stock, but rather the right to receive a cash payment equal to the fair
market value of an equivalent number of shares of Common
Stock. Deferred amounts, together with any cash dividend equivalents
credited to outstanding stock units, increase or decrease in value as would an
equivalent number of shares of Common Stock and are settled in cash at the
termination of the deferral period, based on the value of the stock units at
that time. Prior to the time that the deferred accounts are settled,
participants are unsecured creditors.
The Named
Executive Officers are also eligible to participate in our tax-qualified
retirement savings plan (the "401(k) Plan") under which all full-time employees
are able to contribute compensation up to the limit prescribed by the Internal
Revenue Service on a before-tax basis. We match 100% of the first 3%
of eligible compensation deferred by our employees and 50% of the next 2%,
subject to a maximum as provided by Section 401(k) of the
Code. Subject to certain restrictions, all of our employees are
eligible to participate in this plan. We have elected to operate this
plan under applicable safe harbor provisions of the Code, whereby, among other
things, we must make contributions for all participating employees, and all
matches contributed by us vest immediately.
Perquisites
and Other Benefits
In
general, it is the Compensation Committee's practice to provide limited
perquisites and other benefits to the Named Executive Officers. We do
not reimburse the Named Executive Officers for automobiles, clubs, financial
planning or items of a similar nature. The Compensation Committee
periodically reviews the levels of perquisites and other benefits provided to
Named Executive Officers in light of market practices and within the context of
the total compensation program.
The Named
Executive Officers are eligible to participate in our employee health and
welfare benefit programs. The attributed costs of these benefits for
the Named Executive Officers for the fiscal year ended December 31, 2009, are
included in the Summary Compensation Table under the column entitled "All Other
Compensation" and the related footnote. In addition, we provide all
of our employees, including the Named Executive Officers, with up to $500,000 of
accidental death and dismemberment insurance while traveling on business,
pleasure, or traveling to or attending Board, committee and stockholder meetings
and other Company-sponsored events. In accordance with our travel
accident policy, the spouse and the dependents of the primary insured are
provided with coverage up to $25,000 and $10,000,
respectively. Further, in accordance with the Code of Conduct, we do
not make any loans to, or guarantee any personal loans of, any of our employees,
including the Named Executive Officers.
As
discussed above in this Compensation Discussion and Analysis, we have entered
into employment agreements with each of the Named Executive
Officers. These employment agreements are designed to promote our
stability and continuity of senior leadership. Information with
respect to applicable severance payments under these agreements for the Named
Executive Officers is provided under the section "Employment Contracts and
Termination of Employment and Change-in-Control Arrangements" of this Executive
Compensation section of the Proxy Statement.
Deductibility of
Executive Compensation. Section 162(m) of the Code and
the regulations thereunder provide that compensation paid to a public company's
chief executive officer and to its other three most highly compensated officers,
excluding the financial officer, will be deductible for tax purposes up to
$1 million, unless the compensation is paid solely for attaining one or
more qualified performance goals and has satisfied the applicable stockholder
approval requirements. Specified compensation is excluded for this
purpose, including performance-based compensation, provided that certain
conditions are satisfied. In this regard, grants under our
2004 Equity Compensation Plan, or the 2010 Equity Compensation Plan
(if approved by stockholders) will generally be intended to be qualified
performance-based compensation and the Compensation Committee has the authority
to structure other awards thereunder as qualified performance-based compensation
for these purposes. The Compensation Committee may, however,
authorize payments to executives that may not be fully deductible if it believes
such payments are in our interests.
Other Tax and
Accounting Implications. The American Jobs Creation Act
of 2004 changed the tax rules applicable to nonqualified deferred compensation
arrangements. MFA believes that it is operating in good faith
compliance with these statutory provisions and all subsequent regulatory
authority. In December 2008, the employment agreements of all of the
Named Executive Officers, the 2004 Equity Compensation Plan and the Senior
Officers Plan were amended to bring them into compliance with Section 409A of
the Code.
Compensation
Risk Considerations
The
Compensation Committee monitors the risks and rewards associated with our
compensation programs and considers, in establishing our compensation programs,
whether these programs encourage unnecessary or excessive risk
taking. The Compensation Committee designs our compensation programs
with features that are intended to mitigate risk without diminishing the
incentive nature of the compensation. We believe our compensation
programs encourage and reward prudent business judgment and appropriate
risk-taking over the long term. With respect to the primary elements
of our compensation programs, we use a number of practices to help mitigate
unnecessary risk taking, including: (1) annual base salaries for all employees,
including the Named Executive Officers, are fixed in amount and determined or
approved in advance by the Compensation Committee; (2) annual incentive
compensation, which is discretionary and subjectively determined for all
employees (other than the Bonus Pool for the Senior Executives), is determined
or approved in advance by the Compensation Committee and is typically a balance
of cash and, depending on employment position, time-vesting equity compensation,
such as Restricted Shares, subject to forfeiture, in certain instances, upon
termination of service; and (3) long-term incentive compensation is determined
or approved in advance by the Compensation Committee and is typically
time-vesting equity compensation subject to forfeiture, in certain instances,
upon termination of service and, in certain cases, subject to retention
requirements. With respect to the performance-based Bonus Pool
established for the Senior Executives, mitigating factors included in this
compensation structure include (a) the Compensation Committee's right to apply,
in any given year, the Discretionary Adjustment to adjust the Bonus Pool
downward by 30% based upon its assessment of certain company-related,
market-related and individual performance factors; (b) the Bonus Pool is paid in
a combination of cash and Restricted Shares with the specific allocation between
cash and Restricted Shares based on the total size of the Bonus Pool (with more
Restricted Shares being allocated as the size of the Bonus Pool increases); (c)
these Restricted Shares are time vested and subject to forfeiture, in certain
instances, upon termination of service and specific retention requirements; and
(d) the allocation of the Bonus Pool amongst the Senior Executives is based on
the subjective evaluation of their leadership and performance by the
Compensation Committee. As a matter of good governance and oversight,
the Compensation Committee requested that Christenson Advisors, its compensation
consultant, review our compensation programs in light of recent regulatory
guidance on risk and executive compensation. Christenson Advisors
delivered its report, dated March 2, 2010, to the Compensation
Committee. After reviewing and discussing our compensation programs
and practices with the Compensation Committee and Christenson Advisors, we
believe that our compensation programs are balanced, do not motivate or
encourage unnecessary or excessive risk taking and do not create risks that are
reasonably likely to have a material adverse effect on us.
Compensation
Committee Report
The
Compensation Committee of the Board evaluates and establishes compensation for
all of our employees and administers our 2004 Equity Compensation Plan, Senior
Officers Plan, Non-Employee Directors Plan and other management incentive,
benefit and perquisite programs. While management has the primary
responsibility for our financial reporting process, including the disclosure of
executive compensation, the Compensation Committee has reviewed and discussed
with management the Compensation Discussion and Analysis set forth in this Proxy
Statement. The Compensation Committee is satisfied that the
Compensation Discussion and Analysis fairly represents the philosophy, intent
and actions of the Compensation Committee with regard to executive
compensation. The Compensation Committee recommended to the Board
that the Compensation Discussion and Analysis be included in this Proxy
Statement for filing with the SEC.
James A.
Brodsky, Chairman
Stephen
R. Blank
George H.
Krauss
The
foregoing Compensation Committee Report shall not be deemed under the Securities
Act or the Exchange Act to be (i) "soliciting material" or "filed" or
(ii) incorporated by reference by any general statement into any filing
made by us with the SEC, except to the extent that we specifically incorporate
such report by reference.
Compensation
of Executive Officers
The
following table summarizes the annual compensation received by the Named
Executive Officers for the years ended December 31, 2009, 2008 and
2007.
Summary
Compensation Table
Name and Principal Position
|
|
|
|
|
|
|
|
|
|
Stock
Awards
($)(1)(3)(4)
|
|
|
Non-Equity
Incentive Plan
Compensation
($)(5)
|
|
|
All Other
Compensation
($)(6)(7)(8)
|
|
|
|
|
Stewart
Zimmerman,
|
|
2009
|
|
$ |
900,000 |
|
|
$ |
1,607,003 |
|
|
$ |
984,888 |
|
|
$ |
279,689 |
|
|
$ |
36,214 |
|
|
$ |
3,807,794 |
|
Chairman
of the Board and
|
|
2008
|
|
|
900,000 |
|
|
|
1,029,375 |
|
|
|
458,315 |
|
|
|
238,552 |
|
|
|
35,377 |
|
|
|
2,661,619 |
|
Chief
Executive Officer
|
|
2007
|
|
|
900,000 |
|
|
|
370,000 |
|
|
|
1,174,303 |
|
|
|
94,050 |
|
|
|
29,947 |
|
|
|
2,568,300 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William
S. Gorin,
|
|
2009
|
|
|
800,000 |
|
|
|
1,215,051 |
|
|
|
672,788 |
|
|
|
165,656 |
|
|
|
38,134 |
|
|
|
2,891,629 |
|
President
and
|
|
2008
|
|
|
737,500 |
|
|
|
772,031 |
|
|
|
878,843 |
|
|
|
144,303 |
|
|
|
37,989 |
|
|
|
2,570,666 |
|
Chief
Financial Officer
|
|
2007
|
|
|
675,000 |
|
|
|
290,000 |
|
|
|
718,316 |
|
|
|
59,400 |
|
|
|
33,331 |
|
|
|
1,776,047 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ronald
A. Freydberg,
|
|
2009
|
|
|
750,000 |
|
|
|
1,097,466 |
|
|
|
607,676 |
|
|
|
165,656 |
|
|
|
37,162 |
|
|
|
2,657,960 |
|
Executive
Vice President and
|
|
2008
|
|
|
712,500 |
|
|
|
772,031 |
|
|
|
726,843 |
|
|
|
142,852 |
|
|
|
37,017 |
|
|
|
2,391,243 |
|
Chief
Investment and Administrative Officer
|
|
2007
|
|
|
675,000 |
|
|
|
290,000 |
|
|
|
718,316 |
|
|
|
56,100 |
|
|
|
33,331 |
|
|
|
1,772,747 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Craig
L. Knutson,
|
|
2009
|
|
|
406,250 |
|
|
|
400,000 |
|
|
|
762,719 |
|
|
|
— |
|
|
|
37,729 |
|
|
|
1,606,698 |
|
Executive
Vice President
|
|
2008(9)
|
|
|
237,500 |
|
|
|
165,000 |
|
|
|
102,350 |
|
|
|
— |
|
|
|
24,413 |
|
|
|
529,263 |
|
|
|
2007
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Timothy
W. Korth,
|
|
2009
|
|
|
325,000 |
|
|
|
270,000 |
|
|
|
37,606 |
|
|
|
62,647 |
|
|
|
36,902 |
|
|
|
732,154 |
|
Senior
Vice President,
|
|
2008
|
|
|
325,000 |
|
|
|
200,000 |
|
|
|
18,612 |
|
|
|
50,185 |
|
|
|
37,929 |
|
|
|
631,726 |
|
General
Counsel and Corporate Secretary
|
|
2007
|
|
|
275,000 |
|
|
|
180,000 |
|
|
|
165,775 |
|
|
|
15,750 |
|
|
|
32,650 |
|
|
|
669,175 |
|
(1)
|
Material
terms of the employment agreements of the Named Executive Officers are
provided under "Employment Contracts and Termination of Employment and
Change-in-Control Arrangements" of this Executive Compensation section of
the Proxy Statement.
|
(2)
|
Amounts
in this column represent (a) for 2009, the cash component of the 2009
bonus awards that were paid to the Named Executive Officers on
January 15, 2010, (b) for 2008, the cash component of the
2008 bonus awards that were paid to the Named Executive Officers on
January 15, 2009 and (c) for 2007, the cash component of the 2007
bonus awards that were paid to the Named Executive Officers on January 15,
2008.
|
(3)
|
Amounts
in this column represent the aggregate grant date fair value of such
awards computed in accordance with FASB ASC Topic 718. For a
discussion of the assumptions underlying the calculation of award values,
see notes 2(h) and 12 in the consolidated financial statements in our
annual report on Form 10-K for the year ended December 31,
2009. The 2007 and 2008 amounts were recalculated from amounts
shown in our prior proxy statements to reflect their aggregate grant date
fair values as required by SEC rules effective for
2010.
|
(4)
|
Amounts
in this column include the RSUs granted by us under the 2004 Equity
Compensation Plan on October 26, 2007, which are scheduled to vest in full
on December 31, 2010 (or earlier in the event of death or disability or
termination of service with us for any reason other than
cause). Once vested, these RSUs shall be settled on a
one-for-one basis in shares of Common Stock on the earlier of a
termination of service with us (for any reason), a change in control or on
January 1, 2013. At December 31, 2009, the total number of
unvested RSUs held by the Named Executive Officers was
289,353. See "Compensation Discussion and Analysis—Elements of
Executive Compensation—Equity Grants" of this Executive Compensation
section of the Proxy Statement.
|
(5)
|
Amounts
in this column represent aggregate distributions paid on DERs, which
represent the right to receive a distribution on each DER equal to the
cash dividend paid on a share of Common Stock, attached to outstanding
RSUs and vested Options.
|
(6)
|
Amounts
in this column represent all other compensation received by the Named
Executive Officers during 2009.
|
|
|
Health Insurance
|
|
|
401(k) Plan
Company Match
|
|
|
Disability and
Life
Insurance
|
|
|
Dental
Insurance
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stewart
Zimmerman
|
|
$ |
17,361 |
|
|
$ |
9,800 |
|
|
$ |
7,696 |
|
|
$ |
1,357 |
|
|
$ |
36,214 |
|
William
S. Gorin
|
|
|
23,721 |
|
|
|
9,800 |
|
|
|
2,682 |
|
|
|
1,931 |
|
|
|
38,134 |
|
Ronald
A. Freydberg
|
|
|
23,721 |
|
|
|
9,800 |
|
|
|
1,710 |
|
|
|
1,931 |
|
|
|
37,162 |
|
Craig
L. Knutson
|
|
|
23,721 |
|
|
|
9,800 |
|
|
|
2,277 |
|
|
|
1,931 |
|
|
|
37,729 |
|
Timothy
W. Korth
|
|
|
24,141 |
|
|
|
9,800 |
|
|
|
1,030 |
|
|
|
1,931 |
|
|
|
36,902 |
|
(7)
|
Amounts
in this column represent all other compensation received by the Named
Executive Officers during 2008.
|
|
|
Health Insurance
|
|
|
401(k) Plan
Company Match
|
|
|
Disability and
Life
Insurance
|
|
|
Dental
Insurance
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stewart
Zimmerman
|
|
$ |
19,097 |
|
|
$ |
9,200 |
|
|
$ |
5,788 |
|
|
$ |
1,292 |
|
|
$ |
35,377 |
|
William
S. Gorin
|
|
|
24,269 |
|
|
|
9,200 |
|
|
|
2,682 |
|
|
|
1,838 |
|
|
|
37,989 |
|
Ronald
A. Freydberg
|
|
|
24,269 |
|
|
|
9,200 |
|
|
|
1,710 |
|
|
|
1,838 |
|
|
|
37,017 |
|
Craig
L. Knutson
|
|
|
12,848 |
|
|
|
9,200 |
|
|
|
1,140 |
|
|
|
1,225 |
|
|
|
24,413 |
|
Timothy
W. Korth
|
|
|
25,861 |
|
|
|
9,200 |
|
|
|
1,030 |
|
|
|
1,838 |
|
|
|
37,929 |
|
(8)
|
Amounts
in this column represent all other compensation received by the Named
Executive Officers during 2007.
|
|
|
Health Insurance
|
|
|
401(k) Plan
Company Match
|
|
|
Disability and
Life
Insurance
|
|
|
Dental
Insurance
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stewart
Zimmerman
|
|
$ |
13,892 |
|
|
$ |
9,000 |
|
|
$ |
5,825 |
|
|
$ |
1,230 |
|
|
$ |
29,947 |
|
William
S. Gorin
|
|
|
20,870 |
|
|
|
9,000 |
|
|
|
1,710 |
|
|
|
1,751 |
|
|
|
33,331 |
|
Ronald
A. Freydberg
|
|
|
20,870 |
|
|
|
9,000 |
|
|
|
1,710 |
|
|
|
1,751 |
|
|
|
33,331 |
|
Craig
L. Knutson
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Timothy
W. Korth
|
|
|
20,870 |
|
|
|
9,000 |
|
|
|
1,029 |
|
|
|
1,751 |
|
|
|
32,650 |
|
(9)
|
Mr.
Knutson joined the Company on March 17, 2008. During 2009,
Mr. Knutson entered into an employment agreement that provided for,
amongst other things, an annual base salary increase to $425,000 per annum
effective July 1, 2009.
|
Grants
of Plan-Based Awards
The
following table summarizes certain information regarding all plan-based awards
granted to the Named Executive Officers during the year ended December 31,
2009.
Grants of Plan Based Awards for
2009
|
|
|
|
|
Date of Compensation
Committee Action
|
|
All Other Stock
Awards: Number of
Shares of Stock or
Units
(#)
|
|
|
Grant Date Fair Value
of Stock and Option
Awards(1)
($)
|
|
Stewart
Zimmerman
|
|
01/02/2009
|
|
04/24/2006(2)
|
|
|
16,978 |
(3) |
|
$ |
95,077 |
|
|
|
12/17/2009
|
|
12/16/2009
|
|
|
117,856 |
(4) |
|
|
889,812 |
|
William
S. Gorin
|
|
12/17/2009
|
|
12/16/2009
|
|
|
89,111 |
(4) |
|
|
672,788 |
|
Ronald
A. Freydberg
|
|
12/17/2009
|
|
12/16/2009
|
|
|
80,487 |
(4) |
|
|
607,677 |
|
Craig
L. Knutson
|
|
08/26/2009
|
|
08/26/2009
|
|
|
75,000 |
(5) |
|
|
587,250 |
|
|
|
12/17/2009
|
|
12/16/2009
|
|
|
23,241 |
(6) |
|
|
175,470 |
|
Timothy
W. Korth
|
|
12/17/2009
|
|
12/16/2009
|
|
|
4,981 |
(6) |
|
|
37,606 |
|
(1)
|
Amounts
in this column represent the aggregate grant date fair value of such
awards computed in accordance with FASB ASC Topic
718.
|
(2)
|
In
accordance with the terms of Mr. Zimmerman's employment agreement,
originally approved by the Compensation Committee on April 24, 2006 and
subsequently amended and restated on December 10, 2008, the date of his
annual stock grant in 2009 was contractually set as the first business day
of the year (January 2, 2009).
|
(3)
|
In
accordance with the terms of Mr. Zimmerman's employment agreement, such
shares of Common Stock became fully vested upon the date of grant;
however, unless there is a termination of service, Mr. Zimmerman is not
permitted to voluntarily or involuntarily sell, transfer, pledge,
anticipate, alienate, encumber or assign such shares (or have such shares
attached or garnished) until such time as the value of his stock holdings
in us exceeds a multiple of five times his annual base compensation and,
once this threshold is met, only in amounts having a value that exceeds
that multiple.
|
(4)
|
In
accordance with the terms of the applicable employment agreements and
related award agreements, the restriction period on such Restricted Shares
shall lapse ratably, with respect to approximately 6.25% of such shares,
on the last business day of each calendar quarter over a four-year period
(beginning with the quarter ended March 31, 2010 and ending with the
quarter ending December 31, 2013).
|
(5)
|
In
accordance with the terms of his employment agreement, Mr. Knutson
received a one-time award of 75,000 Restricted Shares. In
accordance with the terms of his employment agreement and the related
award agreement, the restriction period on such Restricted Shares shall
lapse ratably, with respect to approximately 6.25% of such shares, on the
last business day of each calendar quarter over a four-year period
(beginning with the quarter ended September 30, 2009 and ending with the
quarter ending June 30, 2013). With respect to those Restricted Shares
that are no longer subject to restriction, Mr. Knutson shall not be
permitted to sell or otherwise transfer any of these shares during the
term of his employment or for a period of six months following the
termination of his employment, unless the value of his stock holdings in
us exceeds a multiple of three times his annual base
compensation.
|
(6)
|
In
accordance with the terms of the applicable award agreements, 25% of such
shares of Common Stock became fully vested upon the date of grant and,
thereafter, with respect to the remaining 75%, restrictions will lapse on
one-quarter of such shares on each of the next three anniversaries of the
date of grant.
|
Outstanding
Equity Awards
The
following table summarizes all outstanding equity awards held by the Named
Executive Officers on December 31, 2009.
Outstanding Equity Awards at Fiscal 2009 Year End
|
|
|
|
|
|
|
|
|
|
|
Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#)
|
|
|
Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(#)
|
|
|
Option
Exercise Price
($)
|
|
|
|
|
|
Number of
Shares or
Units of Stock
That Have Not
Vested
(#)
|
|
|
Market Value
of Shares or
Units of Stock
That Have Not
Vested
($)(1)
|
|
Stewart
Zimmerman
|
|
|
185,000 |
|
|
|
— |
|
|
$ |
10.25 |
|
|
10/01/2013
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
—
|
|
|
|
1,996 |
(2) |
|
$ |
14,671 |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
—
|
|
|
|
50,626 |
(3) |
|
|
372,101 |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
—
|
|
|
|
117,856 |
(4) |
|
|
866,242 |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
—
|
|
|
|
115,741 |
(5) |
|
|
850,696 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William
S. Gorin
|
|
|
100,000 |
|
|
|
— |
|
|
|
10.25 |
|
|
10/01/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
—
|
|
|
|
1,141 |
(2) |
|
|
8,386 |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
—
|
|
|
|
62,500 |
(6) |
|
|
459,375 |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
—
|
|
|
|
37,969 |
(3) |
|
|
279,072 |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
—
|
|
|
|
89,111 |
(4) |
|
|
654,966 |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
—
|
|
|
|
78,125 |
(5) |
|
|
574,219 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ronald
A. Freydberg
|
|
|
100,000 |
|
|
|
— |
|
|
|
10.25 |
|
|
10/01/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
—
|
|
|
|
1,141 |
(2) |
|
|
8,386 |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
—
|
|
|
|
46,875 |
(6) |
|
|
344,531 |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
—
|
|
|
|
37,969 |
(3) |
|
|
279,072 |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
—
|
|
|
|
80,487 |
(4) |
|
|
591,579 |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
—
|
|
|
|
78,125 |
(5) |
|
|
574,219 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Craig
L. Knutson
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
—
|
|
|
|
9,566 |
(7) |
|
|
70,310 |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
—
|
|
|
|
65,626 |
(8) |
|
|
482,351 |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
—
|
|
|
|
17,431 |
(9) |
|
|
128,118 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Timothy
W. Korth
|
|
|
50,000 |
|
|
|
— |
|
|
|
10.23 |
|
|
02/02/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
—
|
|
|
|
428 |
(2) |
|
|
3,146 |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
—
|
|
|
|
1,740 |
(7) |
|
|
12,789 |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
—
|
|
|
|
3,736 |
(9) |
|
|
27,460 |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
—
|
|
|
|
17,362 |
(5) |
|
|
127,611 |
|
(1)
|
For
purposes of this table, the market value of the Common Stock, including
Common Stock reserved for issuance upon settlement of RSUs granted under
the 2004 Equity Compensation Plan, is deemed to be $7.35 per share, the
closing price of the Common Stock reported on the NYSE on December 31,
2009 (the last trading day of the
year).
|
(2)
|
These
stock awards were granted on December 17, 2007. Assuming
continued employment with us, the remaining unvested shares will vest on
December 17, 2010.
|
(3)
|
These
stock awards were granted on December 11, 2008. Assuming
continued employment with us, the restriction period on these shares shall
lapse ratably, with respect to approximately 6.25% of such shares, on the
last business day of each calendar quarter over a four-year period
(beginning with the quarter ended March 31, 2009 and ending with the
quarter ending December 31, 2012).
|
(4)
|
These
stock awards were granted on December 17, 2009. Assuming
continued employment with us, the restriction period on these shares shall
lapse ratably, with respect to approximately 6.25% of such shares, on the
last business day of each calendar quarter over a four-year period
(beginning with the quarter ended March 31, 2010 and ending with the
quarter ending December 31, 2013).
|
(5)
|
RSUs
awarded under the 2004 Equity Compensation Plan on October 26,
2007. Assuming continued employment with us, these RSUs will
vest in full on December 31, 2010. See "Compensation Discussion and
Analysis—Elements of Executive Compensation—Equity Grants" of this
Executive Compensation section of the Proxy
Statement.
|
(6)
|
These
stock awards were granted on August 13, 2008. Assuming
continued employment with us, the restriction period on these shares shall
lapse ratably, with respect to approximately 6.25% of such shares, on the
last business day of each calendar quarter over a four-year period
(beginning with the quarter ended September 30, 2008 and ending with the
quarter ending June 30, 2012).
|
(7)
|
These
stock awards were granted on December 11, 2008. Assuming
continued employment with us, one-half of these shares will vest on
December 11 of each of 2010 and
2011.
|
(8)
|
These
stock awards were granted on August 26, 2009. Assuming
continued employment with us, the restriction period on these shares shall
lapse ratably, with respect to approximately 6.25% of such shares, on the
last business day of each calendar quarter over a four-year period
(beginning with the quarter ended September 30, 2009 and ending with the
quarter ending June 30, 2013).
|
(9)
|
These
stock awards were granted on December 17, 2009. Assuming
continued employment with us, one-third of these shares will vest on
December 17 of each of 2010, 2011 and
2012.
|
Equity
Compensation Plan Information
The
following table summarizes certain information regarding the Common Stock
available for issuance under the 2004 Equity Compensation Plan as of December
31, 2009. The following table does not take into account the
additional shares of Common Stock available for issuance under the 2010 Equity
Compensation Plan, for which authorization is sought at the Annual
Meeting.
|
|
Number of Shares to be
Issued Upon Exercise of
Outstanding Options,
Warrants and Rights(1)
|
|
|
Weighted Average
Exercise
Price of
Outstanding
Options,
Warrants and
Rights
|
|
|
Number of Shares
Available
for Future
Issuance(1)
|
|
Equity
Compensation Plans Approved by Stockholders
|
|
|
532,000 |
|
|
$ |
10.14 |
|
|
|
1,123,974 |
|
Equity
Compensation Plans Not Approved by Stockholders(2)
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total
|
|
|
532,000 |
|
|
$ |
10.14 |
|
|
|
1,123,974 |
|
(1)
|
Amounts
in this column do not represent the RSUs granted by us under the 2004
Equity Compensation Plan on October 26, 2007, which are scheduled to vest
in full on December 31, 2010 (or earlier in the event of death or
disability or termination of service with us for any reason other than
cause). Once vested, these RSUs shall be settled on a
one-for-one basis in shares of Common Stock on the earlier of a
termination of service with us (for any reason), a change in control or on
January 1, 2013. At December 31, 2009, the total number of
outstanding RSUs still subject to forfeiture was 326,392. See
"Compensation Discussion and Analysis—Elements of Executive
Compensation—Equity Grants" of this Executive Compensation section of the
Proxy Statement.
|
(2)
|
We
have not adopted any "equity compensation plans" as defined in the
applicable SEC rules which have not been approved by our
stockholders.
|
Long-Term
Incentive Plans and Other Matters
2004 Equity Compensation
Plan. The following discussion does not take into account
changes that would be made pursuant to the 2010 Equity Compensation Plan, for
which authorization is sought at the Annual Meeting. For a
description of the 2010 Equity Compensation Plan, see "Approval of the 2010
Equity Compensation Plan—Summary of the 2010 Equity Compensation Plan" in this
Proxy Statement.
In
general, subject to certain exceptions, stock-based awards relating to a maximum
of 3.5 million shares of Common Stock may be granted under the 2004 Equity
Compensation Plan (forfeitures and/or awards that expire unexercised do not
count towards such limit). Subject to certain exceptions, a
participant may not receive stock-based awards in excess of 500,000 shares of
Common Stock in any one year and no award may be granted to any person who,
assuming exercise of all Options and payment of all awards held by such person,
would own or be deemed to own more than 9.8% of the outstanding shares of our
capital stock. Unless previously terminated by the Board, awards may
be granted under the 2004 Equity Compensation Plan until the tenth anniversary
of the date that our stockholders approved such plan.
Pursuant
to Section 422(b) of the Code, in order for Options granted under the 2004
Equity Compensation Plan and vesting in any one calendar year to qualify as ISOs
for tax purposes, the market value of the Common Stock, as determined on the
date of grant, to be received upon exercise of such Options shall not exceed
$100,000 during any such calendar year. The exercise price of an ISO
may not be lower than 100% (110% in the case of an ISO granted to a 10%
stockholder) of the fair market value of the Common Stock on the date of
grant. In addition, the exercise price for any other type of Option
issued under the 2004 Equity Compensation Plan may not be less than the fair
market value
on the
date of grant. Each Option is exercisable after the period or periods
specified in the award agreement, which will generally not exceed 10 years from
the date of grant. Options will be exercisable at such times and
subject to such terms as determined by the Compensation Committee and set forth
in the applicable award agreement.
A RSU is
a right to receive, subject to the satisfaction of conditions set by the
Compensation Committee at the time of grant, a payment of a specified value,
which may be a share of Common Stock, the fair market value of a share of Common
Stock or such fair market value to the extent in excess of an established base
value, on the applicable settlement date. A DER is a right to
receive, as specified by the Compensation Committee at the time of grant, a
distribution equal to the dividend distributions that would be paid on a share
of Common Stock. DERs may be granted separately or together with
other awards and are paid in cash or other consideration at such times and in
accordance with such rules as the Compensation Committee shall determine in its
discretion.
As of the
Record Date, under our 2004 Equity Compensation Plan, there were outstanding
(i) Options to acquire (a) a total of 452,000 shares of Common Stock
at a purchase price of $10.25 per share, (b) a total of 50,000 shares of
Common Stock at a purchase price of $10.23 per share, and (c) a total of
30,000 shares of Common Stock at a purchase price of $8.40 per share,
(ii) a total of 326,392 RSUs subject to forfeiture, (iii) a total of
736,442 Restricted Shares subject to forfeiture and (iv) a total of 835,892
vested DERs. During 2009, no Options were granted, 100,000 Options
were exercised and no outstanding Options for any of the Named Executive
Officers were repriced. As of the Record Date, 1,037,727 shares of
Common Stock remained available for grant to eligible participants under our
2004 Equity Compensation Plan.
The
following table summarizes certain information regarding Options exercised and
stock awards vested with respect to the Named Executive Officers during the year
ended December 31, 2009.
|
|
Option Exercises and Stock Vested in 2009
|
|
|
|
|
|
|
|
|
|
|
Number of Shares
Acquired on Exercise
(#)
|
|
|
Value Realized
Upon
Exercise
($)
|
|
|
Number of Shares
Acquired on Vesting
(#)
|
|
|
Value Realized
on
Vesting
($)
|
|
Stewart
Zimmerman
|
|
|
100,000 |
|
|
$ |
241,055 |
|
|
|
35,847 |
|
|
$ |
228,721 |
|
William
S. Gorin
|
|
|
— |
|
|
|
— |
|
|
|
39,998 |
|
|
|
282,610 |
|
Ronald
A. Freydberg
|
|
|
— |
|
|
|
— |
|
|
|
33,747 |
|
|
|
238,681 |
|
Craig
L. Knutson
|
|
|
— |
|
|
|
— |
|
|
|
19,967 |
|
|
|
152,166 |
|
Timothy
W. Korth
|
|
|
— |
|
|
|
— |
|
|
|
2,784 |
|
|
|
21,158 |
|
Deferred Plans. On
December 19, 2002, the Board adopted the Senior Officers Plan and the
Non-Employee Directors Plan (collectively, as amended, the "Deferred
Plans"). The Deferred Plans are intended to provide our non-employee
directors and executive officers with an opportunity to defer up to 100% of
certain compensation, as defined in the Deferred Plans, while at the same time
aligning their interests with the interests of stockholders. Under
the Deferred Plans, amounts deferred are considered to be converted into "stock
units," which do not represent our capital stock, but rather the right to
receive a cash payment equal to the fair market value of an equivalent number of
shares of Common Stock. Deferred amounts, together with any cash
dividend equivalents credited to outstanding stock units, increase or decrease
in value as would an equivalent number of shares of Common Stock and are settled
in cash at the termination of the deferral period, based on the value of the
stock units at that time. The Deferred Plans are non-qualified plans
under the Employee Retirement Income Security Act of 1974, as amended, and are
not funded. Prior to the time that the deferred accounts are settled,
participants are unsecured creditors.
The
following table summarizes certain information regarding amounts deferred by the
Named Executive Officers under the Senior Officers Plan as of December 31,
2009.
|
|
Nonqualified Deferred Compensation
|
|
|
|
Executive
Contributions in
Last Fiscal Year
($)
|
|
|
Registrant
Contributions in
Last Fiscal Year
($)
|
|
|
Aggregate
Earnings in Last
Fiscal Year
($)
|
|
|
Aggregate
Withdrawals/
Distributions
($)
|
|
|
Aggregate
Balance at Last
Fiscal Year End
($)
|
|
Stewart
Zimmerman
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
$ |
12,438 |
|
|
$ |
45,011 |
|
William
S. Gorin
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
69,964 |
|
|
|
— |
|
Ronald
A. Freydberg
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
34,982 |
|
|
|
— |
|
Craig
L. Knutson
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Timothy
W. Korth
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
The
following table summarizes certain additional information regarding amounts
deferred by our non-employee directors and Named Executive Officers
participating in the Deferred Plans as of December 31, 2009.
|
|
Total Amount
Deferred (1)
|
|
|
|
|
|
Remaining
Deferred
Amount (2)
|
|
|
Fair Market
Value of
Remaining
Amount (3)
|
|
Non-Employee
Directors
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen
R. Blank
|
|
$ |
74,957 |
|
|
$ |
3,663 |
|
|
$ |
71,294 |
|
|
$ |
88,143 |
|
James
A. Brodsky
|
|
|
42,012 |
|
|
|
18,306 |
|
|
|
23,707 |
|
|
|
29,309 |
|
Edison
C. Buchanan
|
|
|
148,390 |
|
|
|
41,553 |
|
|
|
106,836 |
|
|
|
132,085 |
|
Alan
L. Gosule
|
|
|
116,374 |
|
|
|
42,903 |
|
|
|
73,471 |
|
|
|
90,834 |
|
George
H. Krauss
|
|
|
239,306 |
|
|
|
50,290 |
|
|
|
189,016 |
|
|
|
233,687 |
|
Named
Executive Officers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stewart
Zimmerman
|
|
|
49,834 |
|
|
|
12,438 |
|
|
|
37,396 |
|
|
|
45,011 |
|
William
S. Gorin
|
|
|
69,964 |
|
|
|
69,964 |
|
|
|
— |
|
|
|
— |
|
Ronald
A. Freydberg
|
|
|
34,982 |
|
|
|
34,982 |
|
|
|
— |
|
|
|
— |
|
Total
|
|
$ |
775,819 |
|
|
$ |
274,099 |
|
|
$ |
501,720 |
|
|
$ |
619,069 |
|
(1)
|
Amounts
in this column represent total compensation deferred and cash dividend
equivalents credited to outstanding stock units from the inception of the
Deferred Plans, less any cash distributions made at the termination of any
elected deferral and payment
period.
|
(2)
|
Amounts
in this column represent total compensation deferred and cash dividend
equivalents credited to outstanding stock units under the Deferred Plans
after 2009 distributions.
|
(3)
|
Amounts
in this column represent fair market value of total compensation deferred
and cash dividend equivalents credited to outstanding stock units (based
upon the closing price of the Common Stock of $7.35 per share reported on
the NYSE on December 31, 2009 (the last trading day of the year)) under
the Deferred Plans at December 31,
2009.
|
Pension
Benefits
The Named
Executive Officers received no benefits in 2009 from us under defined pension or
defined contribution plans other than our tax-qualified 401(k)
Plan.
Employment
Contracts and Termination of Employment and Change-in-Control
Arrangements
We have
employment agreements with each of the Named Executive Officers. As
described below, these employment agreements provide the Named Executive
Officers with, among other things, base salary, bonus and certain payments at,
following and/or in connection with certain terminations of employment or a
change-in-control involving MFA. As used below, the terms "Cause,"
"Change In Control," "Disability," "Good Reason," "Pre-Change-In-Control Event"
and "Retirement" shall have the respective meanings set forth in the applicable
employment or award agreements.
Stewart
Zimmerman. The employment agreement for
Mr. Zimmerman provides for an annual base salary of not less than
$900,000. Pursuant to this agreement, Mr. Zimmerman is also
entitled to receive an annual grant of Common Stock, having an aggregate fair
market value of $100,000 on the date of grant, on the first business day of each
year during the five-year term of his employment. In addition,
Mr. Zimmerman is eligible to participate with Messrs. Gorin and
Freydberg in the Bonus Pool, ranging annually from $750,000 to $6.3 million or
more (subject to adjustment upwards or downwards by as much as 30% at the
discretion of the Compensation Committee), based upon our attainment of
specified ROAE targets. Specific information regarding the Bonus
Pool, including the applicable ROAE targets, is provided under "Compensation
Discussion and Analysis—Elements of Executive Compensation" of this Executive
Compensation section of the Proxy Statement. Amounts allocated to
Mr. Zimmerman annually from the Bonus Pool will be paid in a combination of
cash and Restricted Shares based on the total size of the Bonus
Pool. Specifically, (i) with respect to any Bonus Pool equal to
or less than $2,700,000, 75% of the amount allocated to Mr. Zimmerman will
be paid in cash and 25% will be paid in Restricted Shares, (ii) with
respect to the incremental total of any Bonus Pool ranging from $2,700,000 to
$4,050,000, 65% will be paid in cash and 35% will be paid in Restricted Shares
and (iii) with respect to the incremental total of any Bonus Pool in excess
of $4,050,000, 50% will be paid in cash and 50% will be paid in Restricted
Shares. In addition, in accordance with this agreement,
Mr. Zimmerman shall not be permitted to sell or otherwise transfer any of
these Restricted Shares during the term of his employment or for a period of six
months following the termination of his employment, unless the value of his
stock holdings in us exceeds a multiple of five times his annual base
compensation. Mr. Zimmerman's employment agreement, which became
effective on April 16, 2006, had an initial stated term of approximately five
years, subject to earlier termination in certain circumstances, and, in
accordance with the automatic renewal provisions set forth therein, is currently
scheduled to expire on December 31, 2011.
Pursuant
to the terms of his employment agreement, under certain specified scenarios
during the term of his employment, Mr. Zimmerman is entitled to receive, in
addition to earned and unpaid amounts then owed to him, certain payments upon
the termination of his employment or a Change In Control involving
MFA.
|
·
|
Without Cause or For Good
Reason. If Mr. Zimmerman's employment is terminated
by us without Cause (which would exclude our determination not to renew
his employment at the end of any applicable term) or by him for Good
Reason, he will be entitled to (i) a payment equal to three times the
greater of his combined annual base compensation and performance bonus for
the preceding fiscal year or the average of his combined annual base
compensation and performance bonus for the three preceding fiscal years,
(ii) the immediate full vesting of all of his outstanding Options,
with such Options and related DERs remaining outstanding until the earlier
of 90 days after such termination or the contractual expiration of such
instruments had such termination not occurred, (iii) the immediate
full vesting of all of his outstanding Restricted Shares and the payment
of all dividends on such Restricted Shares, and (iv) the immediate
full vesting and settlement of all of his outstanding RSUs and the payment
of all dividends on such RSUs. In the event that
Mr. Zimmerman's employment with us was terminated on December 31,
2009 under one of these two scenarios, he would have been entitled to
receive from us a payment estimated to be
$8,319,064.
|
|
·
|
Change In
Control. If Mr. Zimmerman's employment is
terminated (i) by us without Cause within two months before a Change
In Control and following the occurrence of a Pre-Change-In-Control Event,
(ii) by his resignation for any reason within six months following a
Change In Control, or (iii) by us other than for Cause or by his
resignation for Good Reason within 24 months following a Change In
Control, he will be entitled to (a) a payment equal to 300% of the
sum of his current annual base compensation and his performance bonus for
the immediately preceding year, (b) the immediate full vesting of all
of his outstanding Options, with such Options and related DERs remaining
outstanding until the earlier of 90 days after such termination or the
contractual expiration of such instruments had such termination not
occurred, (c) the immediate full vesting of all of his outstanding
Restricted Shares and the payment of all dividends on such Restricted
Shares, (d) the immediate full vesting and settlement of all of his
outstanding RSUs and the payment of all dividends on such RSUs and
(e) the continued participation, at our expense, in all of our health
insurance, life insurance, retirement and other benefit programs for the
balance of the term of his employment agreement. In the event
that Mr. Zimmerman's employment with us was terminated on December
31, 2009 under one of these three scenarios, he would have been entitled
to receive from us a payment estimated to be
$8,411,845.
|
|
·
|
Non-Renewal of
Employment. If Mr. Zimmerman's employment is
terminated following notice by us of our determination not to renew the
term of his employment at the end of any applicable term of his employment
agreement, he will be entitled to (i) a payment equal to his current
annual base compensation, (ii) the immediate full vesting of all of
his outstanding Options, with such Options and related DERs remaining
outstanding until the earlier of 90 days after such termination or the
contractual expiration of such instruments had such termination not
occurred, (iii) the immediate full vesting of all of his outstanding
Restricted Shares and the payment of all dividends on such Restricted
Shares and (iv) the immediate full vesting and settlement of all of
his outstanding RSUs and the payment of all dividends on such
RSUs. In the event that Mr. Zimmerman's employment with us
was terminated on December 31, 2009 under this scenario, he would have
been entitled to receive from us a payment estimated to be
$3,230,939.
|
|
·
|
Death or
Disability. If Mr. Zimmerman's employment is
terminated by reason of his death or Disability, he (or his legal
representative or estate) will be entitled to (i) a payment equal to
two times his current annual base compensation, (ii) the immediate
full vesting of all of his outstanding Options, with such Options and
related DERs remaining outstanding until the earlier of 90 days after such
termination or the contractual expiration of such instruments had such
termination not occurred, (iii) the immediate full vesting of all of
his outstanding Restricted Shares and the payment of all dividends on such
Restricted Shares, (iv) the immediate full vesting and settlement of
all of his outstanding RSUs and the payment of all dividends on such RSUs
and (v) in the event of his Disability only, the continued
participation, at our expense, in our health insurance for the balance of
the duration of the Disability (subject to certain
limitations). In the event that Mr. Zimmerman's employment
with us was terminated on December 31, 2009 (a) by reason of his
death, his estate would have been entitled to receive from us payments
estimated to be $4,230,939 or (b) by reason of his Disability, he or
his legal guardian would have been entitled to receive from us payments
estimated to be $4,702,146 (assuming payment of health insurance until age
70).
|
|
·
|
Cause, Voluntarily Without
Good Reason or Retirement. If Mr. Zimmerman's
employment is terminated (i) by us for Cause or (ii) at his own
volition other than for Good Reason or as a result of his Retirement, he
will not be entitled to any additional payments from us. If
Mr. Zimmerman's employment is terminated as a result of his
Retirement, all of his vested Options and related DERs will remain
outstanding for a 24-month period following his Retirement. In
the event that Mr. Zimmerman's employment with us was terminated on
December 31, 2009 as a result of his Retirement, he would have been
entitled to receive from us a payment estimated to be
$399,600.
|
In
addition to the foregoing amounts, in the event that Mr. Zimmerman's
employment with us was terminated on December 31, 2009 under any of the
scenarios identified above, he would have also been entitled to receive from us
a payment of all amounts deferred by him under the Senior Officers Plan equal to
$45,011.
William S.
Gorin. The employment agreement for Mr. Gorin
provides for an annual base salary of not less than $800,000. Upon
execution of this agreement, Mr. Gorin received a one-time award of 100,000
Restricted Shares. In addition, Mr. Gorin is eligible to
participate with Messrs. Zimmerman and Freydberg in the Bonus Pool, ranging
annually from $750,000 to $6.3 million or more (subject to adjustment upwards or
downwards by as much as 30% at the discretion of the Compensation Committee),
based upon our attainment of specified ROAE targets. Specific
information regarding the Bonus Pool, including the applicable ROAE targets, is
provided under "Compensation Discussion and Analysis—Elements of Executive
Compensation" of this Executive Compensation section of the Proxy
Statement. Amounts allocated to Mr. Gorin annually from the
Bonus Pool will be paid in a combination of cash and Restricted Shares based on
the total size of the Bonus Pool. Specifically, (i) with respect
to any Bonus Pool equal to or less than $2,700,000, 75% of the amount allocated
to Mr. Gorin will be paid in cash and 25% will be paid in Restricted
Shares, (ii) with respect to the incremental total of any Bonus Pool
ranging from $2,700,000 to $4,050,000, 65% will be paid in cash and 35% will be
paid in Restricted Shares and (iii) with respect to the incremental total
of any Bonus Pool in excess of $4,050,000, 50% will be paid in cash and 50% will
be paid in Restricted Shares. In addition, in accordance with this
agreement, Mr. Gorin shall not be permitted to sell or otherwise transfer
any of these Restricted Shares during the term of his employment or for a period
of six months following the termination of his employment, unless the value of
his stock holdings in us exceeds a multiple of four times his annual base
compensation. Mr. Gorin's employment agreement has a stated term
of approximately three and one-half years, subject to earlier termination in
certain circumstances, and is scheduled to expire on December 31,
2011.
Pursuant
to the terms of his employment agreement, under certain specified scenarios
during the term of his employment, Mr. Gorin is entitled to receive, in
addition to earned and unpaid amounts then owed to him, certain payments upon
the termination of his employment or a Change In Control involving
MFA.
|
·
|
Without Cause or For Good
Reason. If Mr. Gorin's employment is terminated by
us without Cause (which would include our determination not to renew his
employment at the end of any applicable term) or by him for Good Reason,
he will be entitled to (i) a payment equal to his current annual base
compensation that would be payable from the date of such termination
through the later of the contractual expiration of the stated term set
forth in his employment agreement or the first anniversary of such
termination, (ii) the immediate full vesting of all of his
outstanding Options, with such Options and related DERs remaining
outstanding until the earlier of 90 days after such termination or the
contractual expiration of such instruments had such termination not
occurred, (iii) the immediate full vesting of all of his outstanding
Restricted Shares and the payment of all dividends, including accrued
dividends, on such Restricted Shares, (iv) the immediate full vesting
and settlement of all of his outstanding RSUs and the payment of all
dividends on such RSUs and (v) the continued participation, at our
expense, in our health insurance until the later of the contractual
expiration of the stated term set forth in his employment agreement or the
first anniversary of such termination. In the event that
Mr. Gorin's employment with us was terminated on December 31, 2009
under one of these two scenarios, he would have been entitled to receive
from us a payment estimated to be
$4,583,681.
|
|
·
|
Change In
Control. If Mr. Gorin's employment is terminated
(i) by us without Cause within two months before a Change In Control
and following the occurrence of a Pre-Change-In-Control Event,
(ii) by his resignation for any reason within two and one-half months
following a Change In Control, or (iii) by us other than for Cause or
by his resignation for Good Reason within 12 months following a Change In
Control, he will be entitled to (a) a payment equal to 300% of the
sum of his current annual base compensation and his highest performance
bonus received during one of the two immediately preceding years,
(b) the immediate full vesting of all of his outstanding Options,
with such Options and related DERs remaining outstanding until the earlier
of 90 days after such termination or the contractual expiration of such
instruments had such termination not occurred, (c) the immediate full
vesting of all of his outstanding Restricted Shares and the payment of all
dividends, including accrued dividends, on such Restricted Shares,
(d) the immediate full vesting and settlement of all of his
outstanding RSUs and the payment of all dividends on such RSUs and
(e) the continued participation, at our expense, in all of our health
insurance, life insurance, retirement and other benefit programs for the
balance of the term of his employment agreement. In the event
that Mr. Gorin's employment with us was terminated on December 31,
2009 under one of these three scenarios, he would have been entitled to
receive from us a payment estimated to be
$6,943,418.
|
|
·
|
Death or
Disability. If Mr. Gorin's employment is terminated
by reason of his death or Disability, he (or his legal representative or
estate) will be entitled to (i) a payment equal to his current annual
base compensation, (ii) the immediate full vesting of all of his
outstanding Options, with such Options and related DERs remaining
outstanding until the earlier of 90 days after such termination or the
contractual expiration of such instruments had such termination not
occurred, (iii) the immediate full vesting of all of his outstanding
Restricted Shares and the payment of all dividends, including accrued
dividends, on such Restricted Shares, (iv) the immediate full vesting
and settlement of all of his outstanding RSUs and the payment of all
dividends on such RSUs and (v) in the event of his Disability only,
the continued participation, at our expense, in our health insurance for
the balance of the duration of the Disability (subject to certain
limitations). In the event that Mr. Gorin's employment
with us was terminated on December 31, 2009 (i) by reason of his
death, his estate would have been entitled to receive from us payments
estimated to be $2,875,607 or (ii) by reason of his Disability, he or
his legal guardian would have been entitled to receive from us payments
estimated to be $3,379,954 (assuming payment of health insurance until age
65).
|
|
·
|
Cause or Voluntarily Without
Good Reason. If Mr. Gorin's employment is
terminated (i) by us for Cause or (ii) at his own volition other
than for Good Reason, he will not be entitled to any additional payments
from us.
|
Ronald A.
Freydberg. The employment agreement for
Mr. Freydberg provides for an annual base salary of not less than
$750,000. Upon execution of this agreement, Mr. Freydberg
received a one-time award of 75,000 Restricted Shares. In addition,
Mr. Freydberg is eligible to participate with Messrs. Zimmerman and
Gorin in the Bonus Pool, ranging annually from $750,000 to $6.3 million or more
(subject to adjustment upwards or downwards by as much as 30% at the discretion
of the Compensation Committee), based upon our attainment of specified ROAE
targets. Specific information regarding the Bonus Pool, including the
applicable ROAE targets, is provided under "Compensation Discussion and
Analysis—Elements of Executive Compensation" of this Executive Compensation
section of the Proxy Statement. Amounts allocated to
Mr. Freydberg annually from the Bonus Pool will be paid in a combination of
cash and Restricted Shares based on the total size of the Bonus
Pool. Specifically, (i) with respect to any Bonus Pool equal to
or less than $2,700,000, 75% of the amount allocated to Mr. Freydberg will
be paid in cash and 25% will be paid in Restricted Shares, (ii) with
respect to the incremental total of any Bonus Pool ranging from $2,700,000 to
$4,050,000, 65% will be paid in cash and 35% will be paid in Restricted Shares
and (iii) with respect to the incremental total of any Bonus Pool in excess
of $4,050,000, 50% will be paid in cash and 50% will be paid in Restricted
Shares. In addition, in accordance with this agreement,
Mr. Freydberg shall not be permitted to sell or otherwise transfer any of
these Restricted Shares during the term of his employment or for a period of six
months following the termination of his employment, unless the value of his
stock holdings in us exceeds a multiple of three times his annual base
compensation. Mr. Freydberg's employment agreement has a stated
term of approximately three and one-half years, subject to earlier termination
in certain circumstances, and is scheduled to expire on December 31,
2011.
Pursuant
to the terms of his employment agreement, under certain specified scenarios
during the term of his employment, Mr. Freydberg is entitled to receive, in
addition to earned and unpaid amounts then owed to him, certain payments upon
the termination of his employment or a Change In Control involving
MFA.
|
·
|
Without Cause or For Good
Reason. If Mr. Freydberg's employment is terminated
by us without Cause (which would include our determination not to renew
his employment at the end of any applicable term) or by him for Good
Reason, he will be entitled to (i) a payment equal to his current
annual base compensation that would be payable from the date of such
termination through the later of the contractual expiration of the stated
term set forth in his employment agreement or the first anniversary of
such termination, (ii) the immediate full vesting of all of his
outstanding Options, with such Options and related DERs remaining
outstanding until the earlier of 90 days after such termination or the
contractual expiration of such instruments had such termination not
occurred, (iii) the immediate full vesting of all of his outstanding
Restricted Shares and the payment of all dividends, including accrued
dividends, on such Restricted Shares, (iv) the immediate full vesting
and settlement of all of his outstanding RSUs and the payment of all
dividends on such RSUs and (v) the continued participation, at our
expense, in our health insurance until the later of the contractual
expiration of the stated term set forth in his employment agreement or the
first anniversary of such termination. In the event that
Mr. Freydberg's employment with us was terminated on December 31,
2009 under one of these two scenarios, he would have been entitled to
receive from us a payment estimated to be
$4,248,904.
|
|
·
|
Change In
Control. If Mr. Freydberg's employment is
terminated (i) by us without Cause within two months before a Change
In Control and following the occurrence of a Pre-Change-In-Control Event,
(ii) by his resignation for any reason within two and one-half months
following a Change In Control, or (iii) by us other than for Cause or
by his resignation for Good Reason within 12 months following a Change In
Control, he will be entitled to (a) a payment equal to 300% of the
sum of his current annual base compensation and his highest performance
bonus received during one of the two immediately preceding years,
(b) the immediate full vesting of all of his outstanding Options,
with such Options and related DERs remaining outstanding until the earlier
of 90 days after such termination or the contractual expiration of such
instruments had such termination not occurred, (c) the immediate full
vesting of all of his outstanding Restricted Shares and the payment of all
dividends, including accrued dividends, on such Restricted Shares,
(d) the immediate full vesting and settlement of all of his
outstanding RSUs and the payment of all dividends on such RSUs and
(e) the continued participation, at our expense, in all of our health
insurance, life insurance, retirement and other benefit programs for the
balance of the term of his employment agreement. In the event
that Mr. Freydberg's employment with us was terminated on December
31, 2009 under one of these three scenarios, he would have been entitled
to receive from us a payment estimated to be
$6,605,725.
|
|
·
|
Death or
Disability. If Mr. Freydberg's employment is
terminated by reason of his death or Disability, he (or his legal
representative or estate) will be entitled to (i) a payment equal to
his current annual base compensation, (ii) the immediate full vesting
of all of his outstanding Options, with such Options and related DERs
remaining outstanding until the earlier of 90 days after such termination
or the contractual expiration of such instruments had such termination not
occurred, (iii) the immediate full vesting of all of his outstanding
Restricted Shares and the payment of all dividends, including accrued
dividends, on such Restricted Shares, (iv) the immediate full vesting
and settlement of all of his outstanding RSUs and the payment of all
dividends on such RSUs and (v) in the event of his Disability only,
the continued participation, at our expense, in our health insurance for
the balance of the duration of the Disability (subject to certain
limitations). In the event that Mr. Freydberg's employment
with us was terminated on December 31, 2009 (i) by reason of his
death, his estate would have been entitled to receive from us payments
estimated to be $2,640,829 or (ii) by reason of his Disability, he or
his legal guardian would have been entitled to receive from us payments
estimated to be $3,217,227 (assuming payment of health insurance until age
65).
|
|
·
|
Cause or Voluntarily Without
Good Reason. If Mr. Freydberg's employment is
terminated (i) by us for Cause or (ii) at his own volition other
than for Good Reason, he will not be entitled to any additional payments
from us.
|
Craig L.
Knutson. The employment agreement for Mr. Knutson
provides for an annual base salary equal to $425,000. Pursuant to
this agreement, Mr. Knutson is eligible to receive an annual performance bonus
as recommended by our Chief Executive Officer and approved by the Compensation
Committee or the Board, as the case may be. Mr. Knutson's employment
agreement has a term of 30 months, subject to earlier termination in certain
circumstances, and is scheduled to expire on December 31, 2011.
Pursuant
to the terms of his employment agreement, under certain specified scenarios
during the term of his employment, Mr. Knutson is entitled to receive, in
addition to earned and unpaid amounts then owed to him, certain payments upon
the termination of his employment or a Change In Control involving
MFA.
|
·
|
Without Cause or For Good
Reason. If Mr. Knutson 's employment is terminated by us
without Cause (which would exclude our determination not to renew his
employment at the end of any applicable term), he will be entitled to
(i) a payment equal to the sum of (A) his current annual base
compensation and (B) the average performance bonus payable to him with
respect to the three immediately preceding years; provided that, if Mr.
Knutson was not an employee of the Company during one or more of such
three preceding years, such year(s) shall not be taken into account,
(ii) the immediate full vesting of all of his outstanding Restricted
Shares and Options, with such Options and related DERs remaining
outstanding until the earlier of 90 days after such termination or the
contractual expiration of such instruments had such termination not
occurred, and (iii) the immediate full vesting and settlement of all
of his outstanding RSUs. In the event that Mr. Knutson's
employment with us was terminated on December 31, 2009 under one of these
two scenarios, he would have been entitled to receive from us a payment
estimated to be $1,130,787.
|
|
·
|
Change In
Control. If Mr. Knutson 's employment is terminated
(i) by us without Cause (which would include our determination not to
renew his employment at the end of any applicable term) within two months
before a Change In Control and following the occurrence of a
Pre-Change-In-Control Event, (ii) by his resignation for any reason
within two and one-half months following a Change In Control, or
(iii) by us other than for Cause (which would include our
determination not to renew his employment at the end of any applicable
term) or by his resignation for Good Reason within 12 months following a
Change In Control, he will be entitled to (a) a payment equal to the
sum of his current annual base compensation and the average performance
bonus payable to him with respect to the three immediately preceding
years; provided that, if Mr. Knutson was not an employee of the
Company during one or more of such three preceding years, such year(s)
shall not be taken into account, (b) the immediate full vesting of
all of his outstanding Restricted Shares and Options, with such Options
and related DERs remaining outstanding until the earlier of 90 days after
such termination or the contractual expiration of such instruments
had
|
|
|
such
termination not occurred, and (c) the immediate full vesting and
settlement of all of his outstanding RSUs. In the event that
Mr. Knutson's employment with us was terminated on December 31, 2009 under
one of these three scenarios, he would have been entitled to receive from
us a payment estimated to be
$1,405,787.
|
|
·
|
Death or
Disability. If Mr. Knutson's employment is terminated by
reason of his death or Disability, he (or his legal representative or
estate) will be entitled to (i) a payment equal to the sum of (A) his
current annual base compensation and (B) the average performance bonus
payable to him with respect to the three immediately preceding years;
provided that, if Mr. Knutson was not an employee of the Company during
one or more of such three preceding years, such year(s) shall not be taken
into account, (ii) the immediate full vesting of all of his
outstanding Restricted Shares and Options, with such Options and related
DERs remaining outstanding until the earlier of 90 days after such
termination or the contractual expiration of such instruments had such
termination not occurred, and (iii) the immediate full vesting and
settlement of all of his outstanding RSUs. In the event that
Mr. Knutson's employment with us was terminated on December 31, 2009
(i) by reason of his death, his estate would have been entitled to
receive from us payments estimated to be $1,405,787 or (ii) by reason
of his Disability, he or his legal guardian would have been entitled to
receive from us payments estimated to be
$1,405,787.
|
|
·
|
Cause or Voluntarily Without
Good Reason. If Mr. Knutson's employment is terminated
(i) by us for Cause or (ii) at his own volition other than for
Good Reason, he will not be entitled to any additional payments from
us.
|
Timothy W.
Korth. The employment agreement for Mr. Korth
provides for an annual base salary equal to $334,000. Pursuant to
this agreement, Mr. Korth is eligible to receive an annual performance
bonus as recommended by our Chief Executive Officer and approved by the
Compensation Committee or the Board, as the case may
be. Mr. Korth's employment agreement has a term of two years,
subject to earlier termination in certain circumstances, and is scheduled to
expire on December 31, 2011.
Pursuant
to the terms of his employment agreement, under certain specified scenarios
during the term of his employment, Mr. Korth is entitled to receive, in
addition to earned and unpaid amounts then owed to him, certain payments upon
the termination of his employment or a Change In Control involving
MFA.
|
·
|
Without Cause or For Good
Reason. If Mr. Korth's employment is terminated by
us without Cause (which would exclude our determination not to renew his
employment at the end of any applicable term) or by him for Good Reason,
he will be entitled to (i) a payment equal to the sum of (A) his
current annual base compensation that would be payable from the date of
such termination through the later of the contractual expiration of the
stated term set forth in his employment agreement or the first anniversary
of such termination and (B) the average performance bonus payable to him
with respect to the three immediately preceding years, (ii) the
immediate full vesting of all of his outstanding Restricted Shares and
Options, with such Options and related DERs remaining outstanding until
the earlier of 90 days after such termination or the contractual
expiration of such instruments had such termination not occurred,
(iii) the immediate full vesting and settlement of all of his
outstanding RSUs and (iv) the continued participation, at our
expense, in our health insurance until the later of the contractual
expiration of the stated term set forth in his employment agreement or the
first anniversary of such termination. In the event that
Mr. Korth's employment with us was terminated on December 31, 2009
under one of these two scenarios, he would have been entitled to receive
from us a payment estimated to be
$624,895.
|
|
·
|
Change In
Control. If Mr. Korth's employment is terminated
(i) by us without Cause (which would include our determination not to
renew his employment at the end of any applicable term) within two months
before a Change In Control and following the occurrence of a
Pre-Change-In-Control Event, (ii) by his resignation for any reason
within two and one-half months following a Change In Control, or
(iii) by us other than for Cause (which would include our
determination not to renew his employment at the end of any applicable
term) or by his resignation for Good Reason within 12 months following a
Change In Control, he will be entitled to (a) a payment equal to 250%
of the sum of his current annual base
compensation
|
|
|
and
the average performance bonus payable to him with respect to the three
immediately preceding years, (b) the immediate full vesting of all of
his outstanding Restricted Shares and Options, with such Options and
related DERs remaining outstanding until the earlier of 90 days after such
termination or the contractual expiration of such instruments had such
termination not occurred, (c) the immediate full vesting and
settlement of all of his outstanding RSUs and (d) the continued
participation, at our expense, in all of our health insurance, life
insurance, retirement and other benefit programs for the balance of the
term of his employment agreement. In the event that
Mr. Korth's employment with us was terminated on December 31, 2009
under one of these three scenarios, he would have been entitled to receive
from us a payment estimated to be
$1,612,189.
|
|
·
|
Death or
Disability. If Mr. Korth's employment is terminated
by reason of his death or Disability, he (or his legal representative or
estate) will be entitled to (i) a payment equal to the sum of (A) his
current annual base compensation and (B) the average performance bonus
payable to him with respect to the three immediately preceding years,
(ii) the immediate full vesting of all of his outstanding Restricted
Shares and Options, with such Options and related DERs remaining
outstanding until the earlier of 90 days after such termination or the
contractual expiration of such instruments had such termination not
occurred, (iii) the immediate full vesting and settlement of all of
his outstanding RSUs and (iv) in the event of his Disability only,
the continued participation, at our expense, in our health insurance for
the balance of the duration of the Disability (subject to certain
limitations). In the event that Mr. Korth's employment
with us was terminated on December 31, 2009 (i) by reason of his
death, his estate would have been entitled to receive from us payments
estimated to be $699,954 or (ii) by reason of his Disability, he or
his legal guardian would have been entitled to receive from us payments
estimated to be $1,463,708 (assuming payment of health insurance until age
65).
|
|
·
|
Cause or Voluntarily Without
Good Reason. If Mr. Korth's employment is
terminated (i) by us for Cause or (ii) at his own volition other
than for Good Reason, he will not be entitled to any additional payments
from us.
|
Each of
the employment agreements of Messrs. Zimmerman, Gorin and Freydberg
includes a prohibition on (a) providing services to, or acquiring certain
interests in, any other mortgage REIT and (b) soliciting our employees, in
either case without our consent, for a period of one year following a
termination of employment; provided that the non-compete obligation described in
clause (a) of this sentence will not be effective, in the event any such
individual elects not to renew the term of his employment upon expiration of the
initial or any renewal period. In addition, Mr. Knutson's employment
agreement generally includes a prohibition on (i) providing services to, or
acquiring certain interests in, without our consent, (A) any entity or person
engaged in acquiring mortgage-backed securities, for a period of five months
following a termination of employment, or (B) any other mortgage REIT for a
period of one year following a termination of employment, and
(ii) soliciting our employees, without our consent, for a period of one
year following a termination of employment; provided that the non-compete
obligations described in clause (i) of this sentence will not be effective in
the event either he or we elect not to renew the term of his employment upon the
expiration of the initial or any renewal period, and the non-compete obligations
described in clause (A) of this sentence will not be effective if certain
minimum bonus payments are not paid to Mr. Knutson. Further, Mr.
Korth's employment agreement includes a prohibition on soliciting our employees
without our consent, for a period of one year following a termination of
employment.
Compensation
Committee Interlocks and Insider Participation
There are
no compensation committee interlocks and no insider participation in
compensation decisions that are required to be reported under the rules and
regulations of the Exchange Act.
SECTION
16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section
16(a) of the Exchange Act requires our directors, executive officers and holders
of more than 10% of the outstanding shares of Common Stock ("10% Holders") to
file with the SEC and the NYSE initial reports of ownership and reports of
changes in ownership of Common Stock and other equity securities of
MFA. Directors, executive officers and 10% Holders are required by
the SEC's regulations to furnish us with copies of all Section 16(a) forms
and amendments thereto filed during any given year.
Based on
the review of copies of the Section 16(a) reports and amendments thereto
furnished to us and written representations from our directors, executive
officers and 10% Holders that no other reports were required to be filed, we
believe that for the year ended December 31, 2009 our directors, executive
officers and 10% Holders complied with all Section 16(a) filing requirements
applicable to them.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Since the
beginning of our last fiscal year, we have not been a party to any transaction
or proposed transaction with any related person who is (i) one of our
directors or executive officers, (ii) a director nominee, (iii) a
beneficial owner of more than 5% of the Common Stock or (iv) any member of
the immediate family of any of the foregoing persons that involves an amount
exceeding $120,000 and in which any such related person had or will have a
direct or indirect material interest.
Since
2001, we have retained the services of Clifford Chance as our outside legal
counsel for general, corporate, securities and other matters. Alan L.
Gosule, one of our directors, is a partner of Clifford Chance.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS
AND MANAGEMENT
The
following table sets forth information as of the Record Date regarding the
beneficial ownership of our Common Stock by (i) each person known to us to
be the beneficial owner of 5% or more of the Common Stock, (ii) the Named
Executive Officers, (iii) our directors and (iv) all of our directors
and executive officers as a group.
|
|
Common Stock Beneficially Owned
|
|
|
|
|
Name and Business Address(1)
|
|
|
|
|
Shares Subject
to Options(4)
|
|
|
|
|
|
|
|
Directors
and Officers
|
|
|
|
|
|
|
|
|
|
|
|
|
Stewart
Zimmerman
|
|
|
481,927 |
|
|
|
185,000 |
|
|
|
666,927 |
|
|
|
*
|
|
William
S. Gorin
|
|
|
417,482 |
|
|
|
100,000 |
|
|
|
517,482 |
|
|
|
* |
|
Ronald
A. Freydberg
|
|
|
333,935 |
|
|
|
100,000 |
|
|
|
433,935 |
|
|
|
* |
|
Craig
L. Knutson
|
|
|
124,372 |
|
|
|
— |
|
|
|
124,372 |
|
|
|
* |
|
Timothy
W. Korth
|
|
|
21,133 |
|
|
|
50,000 |
|
|
|
71,133 |
|
|
|
* |
|
Stephen
R. Blank
|
|
|
12,468 |
|
|
|
5,000 |
|
|
|
17,468 |
|
|
|
* |
|
James
A. Brodsky
|
|
|
17,750 |
|
|
|
5,000 |
|
|
|
22,750 |
|
|
|
* |
|
Edison
C. Buchanan
|
|
|
8,750 |
|
|
|
5,000 |
|
|
|
13,750 |
|
|
|
* |
|
Michael
L. Dahir
|
|
|
162,686 |
|
|
|
5,000 |
|
|
|
167,686 |
|
|
|
* |
|
Alan
L. Gosule
|
|
|
11,336 |
|
|
|
5,000 |
|
|
|
16,336 |
|
|
|
* |
|
Robin
Josephs
|
|
|
14,200 |
|
|
|
— |
|
|
|
14,200 |
|
|
|
* |
|
George
H. Krauss
|
|
|
30,973 |
|
|
|
5,000 |
|
|
|
35,973 |
|
|
|
* |
|
All
directors and executive officers as a group (14
persons)
|
|
|
1,665,410 |
|
|
|
515,000 |
|
|
|
2,180,410 |
|
|
|
* |
|
Blackrock, Inc.(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40
East 52nd Street
San
Francisco, California 94105
|
|
|
27,089,889 |
|
|
|
— |
|
|
|
27,089,889 |
|
|
|
9.66 |
% |
Wellington
Management Company, LLP(6)
75
State Street
Boston,
Massachusetts 02109
|
|
|
24,202,071 |
|
|
|
— |
|
|
|
24,202,071 |
|
|
|
8.63 |
% |
(*)
|
Represents
less than 1% of issued and outstanding shares of Common
Stock.
|
(1)
|
The
business address of each director and Named Executive Officer is c/o MFA
Financial, Inc., 350 Park Avenue, 21st Floor, New York, New York
10022.
|
(2)
|
Each
director and Named Executive Officer has sole voting and investment power
with respect to these shares, except that (i) Mr. Freydberg
jointly holds 76,000 shares with his spouse and
(ii) Mr. Krauss's spouse has sole voting and investment power
with respect to 22,223 shares.
|
(3)
|
Includes
unvested Restricted Shares granted to the Named Executive Officers
pursuant to our 2004 Equity Compensation Plan as
follows: Mr. Zimmerman – 170,478 Restricted Shares;
Mr. Gorin – 190,721 Restricted Shares; Mr. Freydberg – 166,472
Restricted Shares; Mr. Knutson – 92,623 Restricted Shares; and Mr.
Korth – 5,904 Restricted Shares.
|
(4)
|
For
purposes of this table, a person is deemed to be the beneficial owner of
shares of Common Stock if that person has the right to acquire such shares
within 60 days of the Record Date by the exercise of any
Options. Options held by a person are deemed to have been
exercised for the purpose of computing the percentage of outstanding
shares of Common Stock beneficially owned by such person, but shall not be
deemed to have been exchanged or exercised for the purpose of computing
the percentage of outstanding shares of Common Stock beneficially owned by
any other person.
|
(5)
|
On
its Schedule 13G filed with the SEC on January 29, 2010, Blackrock, Inc.
reported sole voting power with respect to 27,089,889 shares of Common
Stock beneficially owned by them and sole dispositive power with respect
to 27,089,889 shares of Common Stock beneficially owned by
them. The Schedule 13G reports a beneficial ownership
percentage of shares of Common Stock of 9.66%, which does not include any
shares issued or repurchased since such percentage was calculated for
purposes of the Schedule 13G.
|
(6)
|
On
its Schedule 13G (Amendment No. 3) filed with the SEC on February 12,
2010, Wellington Management Company, LLP reported shared voting power with
respect to 19,381,895 shares of Common Stock beneficially owned by them
and shared dispositive power with respect to 24,202,071 shares of Common
Stock beneficially owned by them. The Schedule 13G (Amendment
No. 3) reports a beneficial ownership percentage of shares of Common Stock
of 8.63%, which does not include any shares issued or repurchased since
such percentage was calculated for purposes of the Schedule 13G (Amendment
No. 3).
|
OTHER
MATTERS
The Board
knows of no other business to be presented at the Annual Meeting. The
proxies for the Annual Meeting confer discretionary authority on the persons
named therein as proxy holders to vote on any matter proposed by stockholders
for consideration at the Annual Meeting. As to any other business
which may properly come before the Annual Meeting, the persons named as proxy
holders on your proxy card will vote the shares of Common Stock represented by
properly submitted proxies in their discretion.
SUBMISSION
OF STOCKHOLDER PROPOSALS
Any
stockholder intending to present a proposal at our 2011 Annual Meeting of
Stockholders and have the proposal included in the proxy statement for such
meeting must, in addition to complying with the applicable laws and regulations
governing submissions of such proposals, submit the proposal in writing to us no
later than December 7, 2010.