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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange
Act of 1934 (Amendment No. )
Filed by the Registrant
[X]
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Filed by a Party other than
the Registrant [ ]
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Check the appropriate
box:
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Preliminary Proxy
Statement
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Confidential, for Use of the
Commission Only (as permitted by Rule 14a-6(e)(2))
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[X]
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Definitive Proxy
Statement
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Definitive Additional
Materials
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Soliciting Material Pursuant to §240.14a-12
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Chimera Investment Corporation
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(Name of Registrant as
Specified In Its Charter)
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(Name
of Person(s) Filing Proxy Statement, if other than the
Registrant)
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Payment of Filing Fee (Check
the appropriate box):
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No fee required.
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Fee computed on
table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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Title of each class of
securities to which transaction applies:
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Aggregate number of securities to
which transaction applies:
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Per unit price or other underlying
value of transaction computed pursuant to Exchange Act Rule 0-11 (set
forth the amount on which the filing fee is calculated and state how it
was determined):
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Proposed maximum aggregate value of transaction:
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Fee paid previously
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or
Schedule and the date of its filing.
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Amount Previously
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Table of Contents
ANNUAL MEETING AND PROXY
STATEMENT
Annual Meeting To Be Held
June 1, 2017
To the Stockholders of
Chimera Investment Corporation:
It is my pleasure to invite
you to attend the 2017 Annual Meeting of Stockholders (the Annual Meeting) of
Chimera Investment Corporation, a Maryland corporation (Chimera or the
Company), that will be held on June 1, 2017, at 10:00 a.m. Eastern
Time.
This years Annual Meeting
will once again be a virtual meeting to be held over the Internet. We believe
that the use of the Internet to host the Annual Meeting enables expanded
stockholder participation. You will be able to attend the Annual Meeting, vote
your shares electronically and submit your questions during the live webcast of
the meeting by visiting www.virtualshareholdermeeting.com/CIM2017 and entering
your 16 digit control number.
The accompanying notice of
the Annual Meeting and Proxy Statement tell you more about the agenda and
procedures for the meeting. They also describe how the Companys Board of
Directors operates and provide information about our director candidates,
executive officer and director compensation and corporate governance matters. I
look forward to sharing more information with you about Chimera at the Annual
Meeting.
Your vote is very
important. Whether or not you plan to virtually attend the Annual Meeting, I
urge you to authorize your proxy as soon as possible. You may authorize your
proxy on the Internet, by telephone, or by mail. Your vote will ensure your
representation at the Annual Meeting regardless of whether you attend via
webcast on June 1, 2017.
Sincerely,
Matthew
Lambiase
Chief Executive Officer
and President
April 17, 2017
Table of Contents
NOTICE OF ANNUAL MEETING OF
STOCKHOLDERS OF CHIMERA INVESTMENT CORPORATION
Time:
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10:00 a.m. Eastern
Time
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Date:
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Thursday, June 1,
2017
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Place:
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Virtual meeting via webcast
at www.virtualshareholdermeeting.com/CIM2017
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Purpose:
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This years Annual Meeting
will be held for the following purposes:
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To elect three Class I Directors each to
serve until our annual meeting of stockholders in 2020 and until his
successor is duly elected and qualified;
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To consider and vote upon a non-binding
advisory resolution on our executive compensation;
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To consider and vote upon a non-binding
recommendation for the frequency of advisory votes on our executive
compensation;
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To consider and vote upon the ratification
of the appointment of Ernst & Young LLP as our independent registered
public accounting firm for 2017; and
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To transact such other business as may
properly come before the Annual Meeting or any adjournment or postponement
thereof.
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Other Important
Information:
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We utilize the notice and access model
rather than mailing full sets of proxy materials to stockholders, as we
think among other things the Company benefits from the reduced costs
associated with this method of delivery. Thus, on or about April 17, 2017,
we expect to commence mailing of a Notice of Internet Availability of
Proxy Materials, which contains information regarding access to our proxy
materials and voting information. However, we will mail hard copies of the
proxy materials to any stockholder who requests them. Our Proxy Statement
and 2016 Annual Report are available at
www.proxyvote.com
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Registered holders of our common stock at
the close of business on April 3, 2017 may attend and vote at the Annual
Meeting and any adjournments or postponements thereof.
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Your shares cannot be voted unless they are
represented by proxy or in person by the record holder attending the
Annual Meeting via webcast. Whether or not you plan to attend the Annual
Meeting via webcast, please vote your shares by proxy to ensure they are
represented at the Annual Meeting.
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If you wish to watch the webcast at a
location provided by the Company, the Companys Maryland counsel, Venable
LLP, will air the webcast at its offices located at 750 E. Pratt Street,
Suite 900, Baltimore, MD 21202. Please note that no members of management
or the Board will be in attendance at this location. If you wish to view
the Annual Meeting via webcast at Venable LLPs office, please follow the
directions for doing so set forth in the Annual Meeting Admission
section in this Proxy Statement.
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By order of the Board of
Directors,
Phillip J. Kardis
II
Chief Legal Officer and
Corporate Secretary
Important Notice Regarding the Availability of Proxy
Materials
for the Stockholder Meeting To Be Held June 1, 2017.
Our
Proxy Statement and 2016 Annual Report to Stockholders are available at
www.proxyvote.com.
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520 MADISON AVE, 32ND
FLOOR
NEW YORK, NEW YORK 10022
______________________
2017 ANNUAL MEETING OF
STOCKHOLDERS
______________________
PROXY
STATEMENT
INFORMATION ABOUT THE
MEETING
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General
Information
These materials are
intended to solicit proxies on behalf of the Board of Directors of Chimera
Investment Corporation, a Maryland corporation (which we refer to as Chimera,
the Company, we, or us), for the 2017 Annual Meeting of Stockholders
(Annual Meeting), including any adjournment or postponement thereof. This
year, the Annual Meeting will once again be a virtual meeting of stockholders.
This means you will be able to attend the Annual Meeting, vote and submit
questions during the Annual Meeting via a live webcast by visiting
www.virtualshareholdermeeting.com/CIM2017. The meeting will convene at
10:00 a.m.
Eastern Time on June 1, 2017.
Items to be Voted on at
the Annual Meeting
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(1)
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Election
of three Class I Directors, Paul Donlin, Mark Abrams and Gerard Creagh,
each to serve until our annual meeting of stockholders in 2020 and until
his successor is duly elected and qualified;
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(2)
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Consider
and vote upon a non-binding advisory resolution on our executive
compensation;
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(3)
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Consider
and vote upon a non-binding recommendation for the frequency of advisory
votes on our executive compensation; and
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(4)
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Ratification of the appointment of Ernst & Young LLP as our
independent registered public accounting firm for
2017.
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Other than these four
items, we know of no other business to be considered at the Annual Meeting. If
any other matters are properly presented at the Annual Meeting, your signed
proxy card authorizes your proxy to vote on those matters in his or her
discretion.
Board of Directors
Recommendation
Our Board of Directors
recommends that you vote:
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(1)
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FOR the
election of each of the nominees as Directors;
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(2)
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FOR the
approval of the non-binding advisory resolution on executive
compensation;
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(3)
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FOR EVERY
YEAR with regard to the frequency of the stockholder vote to approve our
executive compensation; and
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(4)
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FOR the
ratification of the appointment of Ernst & Young LLP as our
independent registered public accounting firm for
2017.
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Stockholders Entitled to
vote at the meeting
If you were a stockholder
of record at the close of business on the record date for the meeting, April 3,
2017 (the Record Date), you are entitled to vote at the meeting. There were
187,779,489 shares of common stock outstanding on the Record Date. You will
have one vote on each matter properly brought before the meeting for each share
of Chimera common stock you own.
How to Vote Your
Shares
Your vote is important.
Your shares can be voted at the Annual Meeting only if (i) you are present in
person by attending the virtual Annual Meeting via webcast, as described in this
Proxy Statement, or (ii) you are represented by proxy. Even if you plan to
attend the Annual Meeting via webcast, we urge you to authorize your proxy in
advance (i) electronically by going to the
www.proxyvote.com
website and following the instructions described
on the notice of access card previously mailed to you or on your proxy card,
(ii) by calling the toll-free number (for residents of the United States and
Canada) listed on your notice of access card or your proxy card or (iii) by
mail. Please have your proxy card in hand when going online or calling.
If you authorize your
proxy electronically through the website or by telephone, you do not need to
return your proxy card.
If
you choose to authorize your proxy by mail, simply mark your proxy card, and
then date, sign and return it in the postage-paid envelope provided so it is
received no later than May 31, 2017.
If you hold your shares beneficially in
street name, i.e., through a nominee (such as a bank or broker),
you may be able to authorize your proxy by telephone or the Internet as well as
by mail. You should follow the instructions you receive from your broker or
other nominee to vote these shares.
How to Revoke Your
Proxy
You may revoke your proxy
at any time before it is voted at the meeting by:
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authorizing your proxy again
on the Internet or by telephone (only the latest Internet or telephone proxy
will be counted), as described above;
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properly executing and
delivering a later-dated proxy card by mail;
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voting electronically at the
Annual Meeting via webcast; or
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sending a written notice of revocation to the
inspector of election in care of the Corporate Secretary of the Company at 520
Madison Avenue, 32nd Floor, New York, NY 10022 so it is received no later than
May 31, 2017.
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Voting at the Annual
Meeting
The method by which you
vote and authorize your proxy will in no way limit your right to vote at the
Annual Meeting if you later decide to vote electronically during the Annual
Meeting via webcast. If you hold your shares in street name, you must obtain a
proxy executed in your favor from your nominee (such as your bank or broker) to
be able to vote at the Annual Meeting.
Quorum for the Annual
Meeting
A quorum will be present at
the Annual Meeting if a majority of the votes entitled to be cast are present,
in person by attending the Annual Meeting via webcast or by proxy. Because there
were 187,779,489
outstanding shares of common stock as of the
Record Date, each share entitled to one vote per share, stockholders
representing at least 93,889,745 votes need to be present in person or
by proxy at the Annual Meeting for a quorum to exist. If a quorum is not present
at the Annual Meeting, we expect that the Annual Meeting will be adjourned to
solicit additional proxies.
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Votes Required to
Approve Each Item
The voting requirements are
as follows:
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Discretionary Voting
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Proposal
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Vote Required
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Allowed?
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(1)
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Election of directors
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Majority of
votes cast for or
against
such
nominee
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No
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(2)
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Approval of the advisory vote on our executive
compensation
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Majority of
votes cast
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No
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(3)
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Approval of advisory note for the frequency of
advisory votes on our executive compensation
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Option that
receives the
most
votes
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No
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(4)
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Ratification of the appointment of Ernst &
Young LLP
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Majority of
votes cast
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Yes
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Majority of votes cast
means a majority of the votes cast at the annual meeting on the
proposal.
Effect of Abstentions
and Broker Non-Votes
An abstention is the
voluntary act of not voting by a stockholder who is present at a meeting and
entitled to vote, including by directing a proxy to abstain. Abstentions will be
treated as shares that are present for purposes of determining the presence of a
quorum.
Discretionary voting occurs
when a bank, broker, or other holder of record does not receive voting
instructions from the beneficial owner and votes those shares in its discretion
on any proposal as to which the rules of the New York Stock Exchange (NYSE)
permit such bank, broker, or other holder of record to vote. When banks,
brokers, and other holders of record are not permitted under the NYSE rules to
vote the beneficial owners shares on a proposal, and there is at least one
other proposal on which discretionary voting is allowed, the affected shares are
referred to as broker non-votes. Broker non-votes will be treated as present
for purposes of determining the presence of a quorum at the Annual Meeting.
Abstentions and broker
non-votes, if any, will have no effect on the election of the directors
(Proposal No. 1), the advisory vote on our executive compensation (Proposal No.
2), the advisory vote for frequency of advisory vote on our executive
compensation (Proposal No. 3), or the ratification of the appointment of Ernst
& Young LLP (Proposal No. 4).
Annual Meeting Admission
You may attend the virtual
Annual Meeting if you are a stockholder of record, a proxy of a stockholder of
record, or a beneficial owner of our common stock with evidence of ownership. If
you wish to watch the webcast at a location provided by the Company, the
Companys Maryland counsel, Venable LLP, will air the webcast at its offices
located at 750 E. Pratt Street, Suite 900, Baltimore, MD 21202. Please note that
no members of management or the Board will be in attendance at this location. If
you wish to view the Annual Meeting via webcast at Venable LLPs office, please
complete the Reservation Request Form found at the end of this Proxy Statement.
Internet Availability of
Proxy Materials
We utilize a notice and
access model rather than mailing full sets of proxy materials to stockholders,
as we think among other things the Company benefits from the reduced costs
associated with this method of delivery. Thus, pursuant to rules of the
Securities and Exchange Commission (SEC), we are making our proxy materials
available to our stockholders electronically over the Internet rather than
mailing the proxy materials. Accordingly, we are sending a Notice of Internet
Availability of Proxy Materials to our
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stockholders. All stockholders will have
the ability to access the proxy materials, including this Proxy Statement and
our 2016 Annual Report to Stockholders, on the website referred to in the notice
or to request a printed set of the proxy materials. Instructions on how to
access the proxy materials over the Internet or to request a printed copy may be
found on the notice (as well as the proxy card). In addition, stockholders may
request to receive proxy materials in printed form by mail or electronically by
email on an ongoing basis.
Solicitation of Proxies
for the Annual Meeting
We are soliciting the proxy
accompanying this Proxy Statement. We are bearing all costs associated with the
solicitation of proxies for the virtual Annual Meeting. This solicitation is
being made primarily through the Internet and by mail, but may also be made by
our directors, executive officers, employees and representatives by telephone,
facsimile transmission, electronic transmission or in person. No compensation
will be given to our directors, executive officers or employees for this
solicitation. Arrangements also will be made with brokerage houses and other
custodians, nominees and fiduciaries for the forwarding of solicitation
materials to the beneficial owners of shares held of record by these persons,
and we will reimburse them for their reasonable out-of-pocket expenses. We will
bear the total cost of soliciting proxies.
We have retained Innisfree
M&A Incorporated, a proxy solicitation firm, to assist us in the
solicitation of proxies for the Annual Meeting. We will pay Innisfree a fee of
$12,500 for its services. In addition, we may pay Innisfree additional fees
depending on the extent of additional services requested by us and will
reimburse Innisfree for expenses Innisfree incurs in connection with its
engagement by us. In addition to the fees paid to Innisfree, we will pay all
other costs of soliciting proxies.
Stockholders have the
option to authorize their proxy over the Internet or by telephone. Please be
aware that if you authorize your proxy over the Internet or by telephone, you
may incur costs such as telephone and access charges for which you will be
responsible.
Householding
We have adopted a procedure
approved by the SEC called householding. Under this procedure, registered
stockholders who have the same address and last name and who receive either (i)
notice of availability or (ii) paper copies through the mail of the proxy
materials will receive only one copy of our proxy materials, or a single
envelope containing the notices for all shareholders at that address.
Shareholders who participate in householding will continue to receive separate
proxy cards or notices that will include each shareholders unique control
number to vote the shares held in each account. If a stockholder of record
residing at such an address wishes to receive separate proxy materials, he or
she may request it orally or in writing by contacting us at Chimera Investment
Corporation, 520 Madison Avenue, 32nd Floor, New York, New York 10022,
Attention: Investor Relations, by emailing us at investor@chimerareit.com, or by
calling us at (866) 315-9930, and we will promptly deliver to the stockholder
the requested proxy materials. If a stockholder of record residing at such an
address wishes to receive a separate annual report or proxy statement in the
future, he or she may contact us in the same manner. If you are an eligible
stockholder of record receiving multiple copies of our proxy materials, you can
request householding by contacting us in the same manner. If you own your shares
through a bank, broker or other nominee, you can contact the nominee.
Postponement or
Adjournment of the Annual Meeting
We may postpone the Annual
Meeting by making a public announcement of such postponement prior to the Annual
Meeting. Our bylaws permit the chairman of the meeting to recess or adjourn the
meeting, without notice other than an announcement at the Annual
Meeting.
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WHERE YOU CAN FIND MORE
INFORMATION
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We file annual, quarterly
and current reports, proxy statements and other information with the SEC. You
may read and copy any reports, statements or other information that we file with
the SEC at the SECs public reference room at Public Reference Room, 100 F
Street, N.E., Washington, D.C. 20549.
Please call the SEC at
1-800-SEC-0330 for further information on the Public Reference Room. These SEC
filings are also available to the public from commercial document retrieval
services and at the Internet site maintained by the SEC at http://www.sec.gov.
Reports, proxy statements and other information concerning us may also be
inspected at the offices of the NYSE, which is located at 20 Broad Street, New
York, New York 10005.
Our website is
www.chimerareit.com. We make available on this website under Investors
Filings & Reports SEC Filings, free of charge, our annual reports on Form
10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments
to those reports as soon as reasonably practicable after we electronically file
or furnish such materials to the SEC.
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PROPOSAL 1
ELECTION OF
DIRECTORS
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At the Annual Meeting, the
stockholders will vote to elect three Class I Directors, whose terms will expire
at our annual meeting of stockholders in 2020, subject to the election and
qualification of their successors or to their earlier death, resignation or
removal.
We have three classes of
Directors. Our Class I Directors elected at the Annual Meeting will serve until
our annual meeting of stockholders in 2020. Our Class II Directors serve until
our annual meeting of stockholders in 2018. Our Class III Directors serve until
our annual meeting of stockholders in 2019. Set forth below are the names and
certain biographical information on each of our directors.
OUR BOARD OF DIRECTORS
RECOMMENDS A VOTE FOR PAUL DONLIN, MARK ABRAMS AND GERARD CREAGH AS DIRECTORS
EACH TO HOLD OFFICE UNTIL OUR ANNUAL MEETING OF STOCKHOLDERS IN 2020 AND UNTIL
THEIR RESPECTIVE SUCCESSORS ARE DULY ELECTED AND QUALIFIED.
Set forth below are the
names and certain biographical information on each of our nominees for our Class
I Directors, as well as each of our Class II Directors and Class III
Directors.
Name
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Class
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Age*
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Independent
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Director Since
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Paul Donlin
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I
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55
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Yes
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November 2007
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Mark Abrams
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I
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68
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Yes
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November 2007
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Gerard Creagh
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I
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59
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Yes
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April 2010
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Paul A. Keenan
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II
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50
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Yes
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November 2007
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Dennis M. Mahoney
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II
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75
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Yes
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April 2010
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John P. Reilly
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III
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68
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Yes
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April 2010
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Matthew Lambiase
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III
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51
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No
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August 2007
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* as
of June 1, 2017
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Class I
Directors
Paul
Donlin
was appointed as one of
our Class I Directors and our Nonexecutive Chairman of the Board of Directors on
November 15, 2007. Mr. Donlin left Citigroup in 2007, after a career that
spanned 21 years. For the previous 10 years at Citigroup, Mr. Donlin was in the
securitization business, with his most recent position being the Head of Global
Securitization in the Global Securitized Markets Business within Fixed Income.
Earlier in his career at Citigroup, Mr. Donlin managed the Structured Finance
and Advisory Unit of Citigroups Private Bank. None of the corporations or
organizations that have employed Mr. Donlin during the past five years is a
parent, subsidiary or other affiliate of us. Mr. Donlin has an M.B.A. from
Harvard University and a Bachelors Degree from Georgetown University.
The Board believes that Mr.
Donlins qualifications include, among other things, his significant experience
in the residential mortgage-backed securities market from his years of
management and oversight of securitization activities and his expertise in
financial matters.
Mark Abrams
was appointed as one of our Class
I Directors on November 15, 2007. Mr. Abrams served as Chief Investment Officer
of the Presidential Life Insurance Company from November 2003 until January 2013
and as Executive Vice President from 2005 until January 2013. He was Senior Vice
President of the Presidential Life Insurance Company from 2001 to 2003, and
before that, Mr. Abrams served as Vice President of the Presidential Life
Insurance Company since October 1994. None of the corporations or organizations
that have employed Mr. Abrams during the past five years is a parent, subsidiary
or other affiliate of us. Mr. Abrams has a Bachelors Degree from Hobart
College.
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The Board believes that Mr. Abramss
qualifications include, among other things, his experience as a chief investment
officer and his prior executive management experience with other companies.
Gerard
Creagh
was appointed as one of
our Class I Directors effective as of April 1, 2010. Since May 2011, Mr. Creagh
has served as a Managing Partner at CVC Advisers LLC, a financial consulting
firm. From September 2005 through April 2010, Mr. Creagh served as the President
and a member of the Board of Directors of Duff & Phelps Corporation. From
September 2005 to September 2007, Mr. Creagh served as President of Duff &
Phelps Acquisitions, LLC. Prior to its merger with Duff & Phelps in
September 2005, Mr. Creagh served as executive managing director of Standard
& Poors Corporate Value Consulting practice. Mr. Creagh joined Standard
& Poors from PricewaterhouseCoopers, where he held the position of North
American Valuation Services practice leader. Mr. Creagh previously served as the
U.S. leader for the Valuation Practice of Coopers & Lybrand. None of the
corporations or organizations that have employed Mr. Creagh during the past five
years is a parent, subsidiary or other affiliate of us. Mr. Creagh has a
Bachelors Degree and Masters Degree in mechanical engineering from Manhattan
College and has an M.B.A. in finance from New York Universitys Leonard N. Stern
School of Business.
The Board believes that Mr.
Creaghs qualifications include, among other things, his experience in the
oversight of risk management policies and procedures, his significant background
as a lead corporate executive and his prior board experience with other
companies.
Class II
Directors
Paul A.
Keenan
was appointed as one of
our Class II Directors on November 15, 2007. Mr. Keenan has been a partner in
the law firm of Kelley Drye and Warren LLP since 2002 and specializes in real
estate finance. None of the corporations or organizations that have employed Mr.
Keenan during the past five years is a parent, subsidiary or other affiliate of
us. Mr. Keenan has a J.D. from Seton Hall University and a Bachelors Degree
from Rutgers, the State University of New Jersey.
The Board believes that Mr.
Keenans qualifications include, among other things, his experience as a law
firm partner specializing in real estate finance and his knowledge of the real
estate finance industry.
Dennis M.
Mahoney
was appointed as one of
our Class II Directors effective as of April 1, 2010. Before retiring in 2007,
Mr. Mahoney was Senior Vice President of Columbia Bank and was responsible for
the development and expansion of alternative investment products. Prior to
joining Columbia Bank in 1994, Mr. Mahoney was Executive Vice President and
Chief Operating Officer of First Atlantic Savings. Mr. Mahoney joined First
Atlantic Savings in 1988 from Carteret Savings Bank where he was Executive Vice
President, Treasurer. Mr. Mahoney has not been employed by a parent, subsidiary
or other affiliate of us during the past five years. Mr. Mahoney received a
Bachelors Degree in Economics and Business Administration from Roanoke
College.
The Board believes that Mr.
Mahoneys qualifications include, among other things, his significant knowledge
of the banking and investment industry and his experience as an executive in the
financial services industry.
Class III
Directors
Matthew
Lambiase
has served as our
President and Chief Executive Officer, and one of our directors since August
2007. Prior to becoming our Chief Executive Officer and President, Mr. Lambiase
was a Managing Director and Head of Business Development for Annaly Capital
Management, Inc. (Annaly). Before that, Mr. Lambiase was a Director in Fixed
Income Sales at Nomura Securities International, Inc. Over his 11 year
employment at Nomura, Mr. Lambiase was responsible for the distribution of
commercial and residential mortgage-backed securities to a wide variety of
institutional investors. Mr. Lambiase also held positions at Bear, Stearns &
Company as Vice President in Institutional Fixed Income Sales and as
a mortgage analyst in the
Financial Analytics and Structured Transaction Group. Mr. Lambiase has a
Bachelors Degree in Economics from the University of Dayton.
7
Table of Contents
The Board believes that Mr.
Lambiases qualifications include, among other things, his significant industry
knowledge and experience and his current position as our Chief Executive Officer
and President provides him with knowledge of our long-term strategy and
operations.
John P.
Reilly
was appointed as one of
our Class III Directors effective as of April 1, 2010. Mr. Reilly co-founded
and, until June 2014, was President and Chief Executive Officer of Keltic
Financial Services, LLC (Keltic), a finance company providing asset based
loans to medium size companies. Upon the acquisition of Keltic by Ares
Management, L.P. (Ares) in June 2014, Mr. Reilly became a Partner in the
Direct Lending Group of Ares until July 2016 when he retired from Ares. Prior to
founding Keltic Financial Services, LLC in 1999, Mr. Reilly spent 22 years at
Citicorp in various senior executive positions in the Leverage Lending, Capital
Markets, Corporate Finance and Private Banking Businesses. Since 2001, Mr.
Reilly has served as a director of Scan Source, Inc. None of the corporations or
organizations that have employed Mr. Reilly during the past five years is a
parent, subsidiary or other affiliate of us. Mr. Reilly has an M.B.A. from
Fairleigh Dickinson University, Teaneck, New Jersey, and a Bachelors Degree
from Kings College, Wilkes-Barre, Pennsylvania.
The Board believes that Mr.
Reillys qualifications include, among other things, his knowledge of the
finance industry and prior experience as a director of another
company.
8
Table of Contents
CORPORATE GOVERNANCE,
DIRECTOR INDEPENDENCE,
BOARD MEETINGS AND
COMMITTEES
|
Corporate Governance
We believe that we have
implemented appropriate corporate governance policies and observe good corporate
governance procedures and practices. We have adopted a number of written
policies, including Corporate Governance Guidelines, a Code of Business Conduct
and Ethics, and charters for our audit committee, risk committee, compensation
committee and nominating and corporate governance committee.
Board Oversight of
Risk
The Board of Directors is
responsible for overseeing our risk management practices, and committees of the
Board of Directors assist it in fulfilling this responsibility. The Board of
Directors established a risk committee, which is comprised solely of independent
Directors, to assist the Board of Directors in the oversight of our risk
governance structure; our risk management and risk assessment guidelines and
policies regarding market, credit and liquidity and funding, operational,
regulatory, tax and legal risk; and our risk tolerance, including risk tolerance
levels and capital targets and limits.
As required by its charter,
the audit committee routinely discusses with management our significant risk
exposures and the actions management has taken to limit, monitor or control such
exposures, including guidelines and policies with respect to our assessment of
risk and risk management. At least annually, the audit committee reviews with
management our risk management program, which identifies and quantifies a broad
spectrum of enterprise-wide risks, and related action plans. In 2016, our full
Board of Directors participated in this review and discussion, and it expects to
continue this practice as part of its role in the oversight of our risk
management practices. At their discretion, members of the Board of Directors may
also directly contact management to review and discuss any risk-related or other
concerns that may arise between regular meetings.
In connection with the
internalization of our management in August 2015, we entered into employment
agreements with each of our named executive officers and our non-executive
employees, pursuant to which we pay cash compensation to each of the named
executive officers and the non-executive employees. Pursuant to our existing
equity incentive plan and as determined by the Board of Directors, we may also
grant equity awards to the named executive officers and the non-executive
employees. Our Board of Directors considers that such grants align the interests
of the officers and employees with our interests and do not create risks that
are reasonably likely to have a material adverse effect on us. As part of its
risk assessment and management activities going forward, our compensation
committee undertakes an annual review of our compensation policies and practices
as they relate to risk, the results of which will be shared with our full Board
of Directors. For a discussion of the governance of our executive compensation
following the internalization, see Executive Compensation Compensation
Discussion and Analysis.
Board Leadership
Structure
We have separated the roles
of principal executive officer and chairman of the board. Our principal
executive officer is Matthew Lambiase, who is our Chief Executive Officer,
President and a director. Our chairman of the Board of Directors is Paul Donlin,
who is an independent director. The Board of Directors believes this allocation
of responsibilities between these two positions provides for dynamic board
leadership while maintaining strong independence and is therefore an effective
and appropriate leadership structure.
Independence of Our
Directors
NYSE rules require that at
least a majority of our directors be independent of our company and management.
The rules also require that our Board of Directors affirmatively determine that
there are no material relationships between
a director and us (either directly or as a partner, stockholder or officer of an
9
Table of Contents
organization that has a relationship with us) before such director can be deemed
independent. We have adopted independence standards consistent with NYSE rules.
Our Board of Directors has reviewed both direct and indirect transactions and
relationships that each of our directors had or maintained with us and our
management. Our Board of Directors, based upon the fact that none of our
independent directors have any material relationships with us other than as
directors and holders of our common stock, affirmatively determined that six of
our directors are independent directors under NYSE rules. Our independent
directors are Mark Abrams, Gerard Creagh, Paul Donlin, Paul A. Keenan, Dennis M.
Mahoney and John P. Reilly. Matthew Lambiase is not considered independent
because he is an employee of the Company.
Additional Governance
Features
Stock Ownership
Guidelines
We believe that each
director should have a substantial personal investment in our company. In
October 2015, we adopted stock ownership requirements whereby all non-employee
directors are required to own, hold and maintain shares of our companys common
stock worth five times the cash portion of their annual cash retainer. This
requirement must be met within five years of becoming a director or five years
of the adoption of the policy, whichever is later.
In addition, each of our
named executive officers is subject to a stock ownership and retention
requirement. Shares of our stock received from equity awards, after taxes, must
be held by the executive until a stated level of ownership is achieved, measured
as a multiple of salary5x for the CEO and 3x for the other named
executive officers. Once this required minimum ownership level has been
achieved, the named executive officer must continue to maintain that minimum
ownership level until six months after termination of employment.
Our Board of Directors
believes that these stock ownership and retention requirements will further
align the interests of our named executive officers with the long-term interests
of our stockholders by requiring a meaningful portion of the executives accrued
and earned compensation to be held as shares of our stock, not only during
employment but for a period after termination of employment.
Anti-Hedging
Policy
We have a policy
prohibiting all directors, employees and officers from engaging in any hedging
transactions with respect to shares of our common stock, including, without
limitation, options, short sales, puts, calls, derivative actions such as
forwards, futures or swaps.
Code of Business Conduct
and Ethics
We have adopted a Code of
Business Conduct and Ethics, which sets forth the basic principles and
guidelines for resolving various legal and ethical questions that may arise in
the workplace and in the conduct of our business. This code is applicable to all
our employees, named executive officers and directors.
This Code of Business
Conduct and Ethics was adopted within the meaning of Item 406(b) of Regulation
S-K, and applies to our principal executive officer, principal financial and
accounting officer and controller or persons performing similar functions. This
Code of Business Conduct and Ethics is publicly available on our website at
www.chimerareit.com. On December 22, 2016, we approved an amendment to the Code
of Business Conduct and Ethics to clarify that employees are not prohibited from
communicating with government agencies and personnel. If we make any substantive
amendments to this Code of Business Conduct and Ethics or grant any waiver,
including any implicit waiver, we intend to disclose these events on our
website.
Corporate Governance
Guidelines
We have adopted Corporate
Governance Guidelines, which, in conjunction with the charters and key practices
of our board committees, provide the framework for the governance of the
Company. On
10
Table of Contents
December 20, 2016, we approved an amendment to the Corporate
Governance Guidelines to clarify our commitment to have a diverse Board of
Directors and the Board of Directors will consider highly qualified candidates,
including women and minorities.
Where You Can Find These
Documents
Our Code of Business
Conduct and Ethics, Corporate Governance Guidelines, Compensation Committee
Charter, Audit Committee Charter, Risk Committee Charter and Nominating and
Corporate Governance Committee Charter are available on our website
(www.chimerareit.com). We will provide copies of these documents free of charge
to any stockholder who sends a written request to Investor Relations, Chimera
Investment Corporation, 520 Madison Avenue, 32nd Floor, New York, New York
10022.
Board Meetings and
Committees
Our Board of Directors
meets regularly throughout the year. During 2016, there were eleven meetings of
the Board of Directors. Our corporate governance guidelines require that the
board have at least two regularly scheduled meetings each year for our
independent directors. These meetings, which are designed to promote unfettered
discussions among our independent directors, are presided over by Paul Donlin or
Mark Abrams. During 2016, our independent directors had two meetings. In 2016,
all directors attended at least 75% of the aggregate meetings of the Board of
Directors and the committees of which they were members.
The Board of Directors has
the following four standing committees: a compensation committee, an audit
committee, a nominating and corporate governance committee and a risk committee.
The table below provides current membership and meeting information for 2016 for
each of these committees.
|
|
|
|
|
|
Nominating and
|
|
|
|
|
|
|
|
|
Corporate
|
|
|
|
|
Compensation
|
|
|
|
Governance
|
|
|
Name
|
|
Committee
|
|
Audit
Committee
|
|
Committee
|
|
Risk
Committee
|
Mark
Abrams
|
|
|
|
X
|
|
|
|
X*
|
Gerard Creagh
|
|
X
|
|
X
|
|
|
|
|
Paul
Donlin
(3)
|
|
|
|
|
|
X*
|
|
X
|
Paul
A. Keenan
|
|
X*
|
|
|
|
X
|
|
|
Dennis M. Mahoney
|
|
|
|
X*
|
|
|
|
X
|
John
P. Reilly
(4)
|
|
X
|
|
|
|
X
|
|
|
Total Meetings in
|
|
|
|
|
|
|
|
|
2016
|
|
5
|
|
6
|
|
2
|
|
5
|
____________________
The functions performed by
these standing committees are summarized below, and are set forth in more detail
in their charters. The complete text of the charters for each standing committee
can be found on our website at
www.chimerareit.com
under
Investors Corporate Governance Charter Documents.
Compensation Committee
Our Board of Directors has
established a compensation committee, which is composed of three of our
independent directors, Messrs. Creagh, Keenan, and Reilly. Mr. Keenan chairs the
compensation committee, whose principal functions are to:
●
|
evaluate
the performance of and determine the compensation for our executive
officers;
|
●
|
oversee the
type, design, implementation, administration, interpretation and amendment
of our compensation plans, policies and programs;
|
11
Table of Contents
●
|
recommend to the Board of Directors the
compensation for our independent directors;
|
●
|
administer the issuance of any securities under
our equity incentive plan to our executives; and
|
●
|
produce annual reports on compensation for
inclusion in our proxy statement and prepare any report relating to
compensation required by the SEC.
|
For a discussion of the
governance of our executive compensation, see Compensation Discussion and
Analysis Governance of Our Executive Compensation Program.
Our Board of Directors has
determined that all of the directors serving on the compensation committee are
independent members of the compensation committee under the current NYSE
independence requirements and SEC rules.
For additional information
on the compensation committee, please see Compensation Committee Report below.
Audit Committee
Our Board of Directors has
established an audit committee, which is composed of three of our independent
directors, Messrs. Abrams, Creagh, and Mahoney. Mr. Mahoney chairs the audit
committee as our Board of Directors has determined that Mr. Mahoney is an audit
committee financial expert, as that term is defined by the SEC. Each of the
members of the audit committee is financially literate under the rules of the
NYSE. The committee assists the board in overseeing:
●
|
the integrity of our
financial statements;
|
●
|
our
compliance with legal and regulatory requirements;
|
●
|
the independent registered public accounting
firms qualifications and independence;
|
●
|
the performance of our system of disclosure
controls and procedure, internal audit function and independent registered
public accounting firm; and
|
●
|
our overall risk profile and risk management
policies.
|
The audit committee is also
responsible for engaging our independent registered public accounting firm,
reviewing with the independent registered public accounting firm the plans and
results of the audit engagement, approving professional services provided by the
independent registered public accounting firm, reviewing the independence of the
independent registered public accounting firm, considering the range of audit
and non-audit fees and reviewing the adequacy of our internal accounting
controls.
Our Board of Directors has
determined that all of the directors serving on the audit committee are
independent members of the audit committee under the current NYSE independence
requirements and SEC rules. The activities of the audit committee are described
in greater detail below under the caption Report of the Audit
Committee.
Nominating and Corporate
Governance Committee
Our Board of Directors has
established a nominating and corporate governance committee, which is composed
of three of our independent directors, Messrs. Donlin, Keenan and Reilly. Mr.
Donlin chairs the nominating and corporate governance committee, which is
responsible for seeking, considering and recommending to the full Board of
Directors qualified candidates for election as directors and recommending a
slate of nominees for election as directors at the annual meeting of
stockholders. It also periodically prepares and submits to the board for
adoption the nominating and corporate governance committees selection criteria
for director nominees. It reviews and makes recommendations on matters involving
general operation of the board and our corporate governance, and it annually
recommends to the full Board of Directors nominees for each committee of the
Board of Directors. In addition, the nominating and corporate governance committee annually facilitates the assessment of
the Board of Directors performance as a whole and of the individual directors
and reports thereon to the board.
12
Table of Contents
Our Board of Directors has
determined that all of the directors serving on the nominating and corporate
governance committee are independent members of the nominating and corporate
governance committee under the current NYSE independence requirements and SEC
rules.
On December 20, 2016, we
approved an amendment to the Nominating Committee Charter to clarify our
commitment to have a diverse Board of Directors and the Board of Directors will
consider highly qualified candidates, including women and minorities. Our
nominating and corporate governance committee currently considers the following
factors in making its nominee recommendations to the Board of Directors:
background, skills, expertise, diversity, accessibility and availability to
serve effectively on the Board of Directors. In addition, the Company endeavors
to have a diverse Board of Directors representing a range of experiences in
areas that are relevant to the Companys business and the needs of the Board of
Directors from time-to-time, and, as part of the search process, our nominating
and corporate governance committee will consider highly qualified candidates,
including women and minorities. Our nominating and corporate governance
committee also conducts inquiries into the background and qualifications of
potential candidates. The nominating and corporate governance committee will
consider nominees recommended by our stockholders. These recommendations should
be submitted in writing to our Secretary in accordance with the procedures
described herein under Communications with the Board of Directors and
Additional MattersStockholder Proposals.
Our nominating and
corporate governance committee uses a variety of methods for identifying and
evaluating nominees for director. Our nominating and corporate governance
committee regularly assesses the appropriate size of the Board of Directors, and
whether any vacancies on the Board of Directors are expected due to retirement
or otherwise. In the event that vacancies are anticipated, or otherwise arise,
our nominating and corporate governance committee considers various potential
candidates for director. Candidates may come to the attention of our nominating
and corporate governance committee through current members of our Board of
Directors, professional search firms, stockholders or other persons. These
candidates are evaluated at regular or special meetings of our nominating and
corporate governance committee and may be considered at any point during the
year. As described above, our nominating and corporate governance committee
considers properly submitted stockholder recommendations for candidates for the
Board of Directors. Following verification of the stockholder status of persons
recommending candidates, recommendations are aggregated and considered by our
nominating and corporate governance committee at a regularly scheduled or
special meeting. If any materials are provided by a stockholder in connection
with the recommendation of a director candidate, such materials are forwarded to
our nominating and corporate governance committee. Our nominating and corporate
governance committee also reviews materials provided by professional search
firms or other parties in connection with a nominee who is not recommended by a
stockholder. In evaluating such nominations, our nominating and corporate
governance committee seeks to achieve a balance of knowledge, experience and
capability on the Board of Directors.
Risk Committee
Our Board of Directors has
established a risk committee, which is composed of three of our independent
directors, Messrs. Abrams, Donlin and Mahoney. Mr. Abrams chairs the risk
committee. The risk committee assists the Board in the oversight of our risk
governance structure; our risk management and risk assessment guidelines and
policies regarding market, credit and liquidity and funding risk; our risk
tolerance, including risk tolerance levels and capital targets and limits; and
our capital, liquidity, and funding, funding, operational, regulatory, tax and
legal risk.
Communications with the
Board of Directors
Interested persons may
communicate their complaints or concerns by sending written communications to
the Board of Directors, committees of the Board of Directors, the non-management
directors and individual directors by mailing those communications
to:
13
Table of Contents
Chimera Investment
Corporation
Applicable Addressee*
520 Madison Avenue, 32nd Floor
New
York, NY 10022
Phone: (866) 315-9930
Email:
investor@chimerareit.com
Attention: Investor Relations
*
|
|
Audit Committee of
the Board of Directors
|
*
|
|
Compensation Committee of the Board of Directors
|
*
|
|
Nominating and
Corporate Governance Committee of the Board of Directors
|
*
|
|
Risk Committee of the Board of Directors
|
*
|
|
Non-Management Directors
|
*
|
|
Name of Individual
Director
|
These communications are
sent by us directly to the specified addressee.
We require each member of
the Board of Directors to attend our annual meeting of stockholders except for
absences due to causes beyond the reasonable control of the director. All
directors then serving on our Board of Directors attended our 2016 Annual
Meeting.
14
Table of Contents
The following sets forth
certain information with respect to our executive officers:
Name
|
|
Age*
|
|
Title
|
Matthew Lambiase
|
|
51
|
|
Chief Executive Officer, President and
Director
|
Robert Colligan
|
|
46
|
|
Chief Financial Officer
|
Choudhary Yarlagadda
|
|
55
|
|
Chief Operating Officer
|
Mohit Marria
|
|
39
|
|
Chief Investment Officer
|
Phillip J. Kardis II
|
|
55
|
|
Chief Legal Officer and Secretary
|
* as
of June 1, 2017
|
|
|
|
|
Biographical information on
Mr. Lambiase is provided above under Proposal 1Election of Directors. Certain
biographical information for Mr. Colligan, Mr. Yarlagadda, Mr. Marria and Mr.
Kardis is set forth below.
Robert
Colligan
is our Chief Financial
Officer. Prior to becoming Chief Financial Officer in May 2013, Mr. Colligan was
a Managing Director at Annaly. Before joining Annaly as a Managing Director in
May 2013, Mr. Colligan was the Controller at Starwood Capital Group for the
previous five years. Prior to Starwood Capital Group, from 2002 to 2008, Mr.
Colligan was a Managing Director at Bear Stearns and, from 1999 to 2002, a Vice
President at Merrill Lynch in financial reporting, strategy and investor
relations roles. Mr. Colligan began his career at PricewaterhouseCoopers where,
from 1993 to 1999, he had roles in both audit and national tax. He has a
Bachelors Degree in Accounting from Villanova University, a Masters Degree in
Taxation from George Washington University and is a Certified Public
Accountant.
Choudhary
Yarlagadda
is our Chief Operating
Officer. Prior to becoming Chief Operating Officer in August 2015, Mr.
Yarlagadda was a Managing Director and Head of Structured Products for Annaly
since January 2008. Prior to joining Annaly, Mr. Yarlagadda was a Director in
Structured Credit Products at Credit Suisse and also a Vice President in the
Fixed Income Mortgage Group at Nomura Securities International, Inc. Mr.
Yarlagadda has an MS from the Florida Institute of Technology and BS from the
National Institute of Technology.
Mohit
Marria
is our Chief Investment
Officer. Prior to becoming Chief Investment Officer in December 2013, Mr. Marria
was an Executive Vice President of Annaly. While at Annaly, Mr. Marria had
responsibility for the development and implementation of Chimeras trading
strategies in residential mortgage-backed securities, residential mortgage loans
and its derivatives portfolio. He has been a member of the investment team since
Chimeras inception. Mr. Marria joined Annaly from American International Group
(AIG). Prior to working at AIG, Mr. Marria worked at Metropolitan Life Insurance
Company. Mr. Marria earned a Bachelors Degree in Finance and an M.B.A., each
from the Rutgers University.
Phillip J. Kardis
II
is our Chief Legal Officer and
Secretary. Prior to becoming Chief Legal Officer in September 2015, Mr. Kardis
was a partner with the law firm of K&L Gates LLP where he represented
mortgage REITs and other companies and funds that acquire, originate, service
and finance residential mortgage loans, mortgage servicing rights and mortgage
backed securities, including the Company. Prior to joining K&L Gates LLP in
2004, Mr. Kardis practiced corporate and securities law at several law firms. In
addition, Mr. Kardis has held positions at the U.S. Department of Commerce,
Rockwell International, the U.S. Senate Committee on the Budget and Analytic
Services, Inc. Mr. Kardis has a BA from George Washington University, an MA from
George Washington University, an MA from George Mason University, and a JD from
the Georgetown University Law Center.
15
Table of Contents
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL
OWNERS AND MANAGEMENT OF CHIMERA
|
The following table sets
forth certain information relating to the beneficial ownership of our common
stock by (i) each of our named executive officers and directors, (ii) all of our
executive officers and directors as a group, and (iii) all persons that we know
beneficially own more than 5% of our outstanding common stock. Knowledge of the
beneficial ownership of our common stock is drawn from statements filed with the
SEC pursuant to Section 13(d) or 13(g) of the Securities Exchange Act of 1934,
as amended (the Exchange Act). Except as otherwise indicated, the information
is as of March 31, 2017 and, to our knowledge, each stockholder listed below has
sole voting and investment power with respect to the shares beneficially owned
by the stockholder. Unless otherwise indicated, all shares are owned directly
and the indicated person has sole voting and investment power. Except as
otherwise indicated, the business address of the stockholders listed below is
the address of our principal executive office, 520 Madison Avenue, 32nd Floor,
New York, New York 10022.
|
|
Amount and Nature of
|
|
|
Name of Beneficial
Owner
|
|
Beneficial
Ownership
(1)
|
|
Percent of Class
|
Matthew Lambiase
(2)
|
|
197,556
|
|
*
|
Robert Colligan
|
|
46,093
|
|
*
|
Choudhary Yarlagadda
(3)
|
|
311,696
|
|
*
|
Mohit Marria
(4)
|
|
85,016
|
|
*
|
Phillip J. Kardis II
|
|
11,754
|
|
*
|
Mark
Abrams
|
|
43,602
|
|
*
|
Gerard Creagh
|
|
68,000
|
|
*
|
Paul
Donlin
(5)
|
|
288,149
|
|
*
|
Paul
A. Keenan
|
|
62,651
|
|
*
|
Dennis M. Mahoney
|
|
33,623
|
|
*
|
John
P. Reilly
|
|
40,100
|
|
*
|
All
Directors and Officers As a Group (11 persons)
|
|
1,225,491
|
|
*
|
Vanguard Group Inc.
(6)
|
|
13,897,408
|
|
7.40%
|
BlackRock, Inc.
(7)
|
|
11,017,172
|
|
5.9%
|
* Less than 1 percent.
|
(1)
|
|
For
officers and directors, does not included deferred stock units (DSUs)
credited to their accounts pursuant to deferrals made under the terms of
our Stock Award Deferral Program. These DSUs do not have voting rights and
are not considered beneficially owned under SEC rules. As of March 31,
2017, the following officers and directors have the following aggregate
amounts of DSUs credited to their respective
accounts:
|
Name
|
|
DSUs
|
Matthew Lambiase
|
|
24,794
|
Choudhary
Yarlagadda
|
|
15,592
|
Mohit Marria
|
|
11,087
|
Robert
Colligan
|
|
4,936
|
Gerard Creagh
|
|
4,897
|
Paul
Donlin
|
|
8,691
|
Paul A. Keenan
|
|
12,926
|
Dennis M.
Mahoney
|
|
4,897
|
John P. Reilly
|
|
4,897
|
(2)
|
|
Includes 450 shares
of restricted common stock that will vest within 60 days of March 31,
2017.
|
(3)
|
|
Includes 257,025
shares of common stock held by members of Mr. Yarlagaddas immediate
family.
|
(4)
|
|
Includes 100 shares
of restricted common stock that will vest within 60 days of March 31,
2017.
|
16
Table of Contents
(5)
|
|
Includes 4,000 shares
of common stock held by Mr. Donlin in a Family Trust and 135,000 shares of
common stock held by Donlin Financial LLC.
|
(6)
|
|
The address for the
stockholder is 100 Vanguard Blvd., Malvern, PA 19355. The shares shown as
beneficially owned by The Vanguard Group, Inc. reflect shares owned on its
own behalf and on behalf of the following entities: Vanguard Fiduciary
Trust Company and Vanguard Investments Australia, Ltd. The Vanguard Group,
Inc. reported having sole voting power over 107,814 shares, shared voting
power over 13,335 shares, sole dispositive power over 13,785,583 shares
and shared dispositive power over 111,825 shares. Based solely on
information contained in a Schedule 13G/A filed by The Vanguard Group Inc.
on February 10, 2017.
|
(7)
|
|
The address for this
stockholder is 55 East 52nd Street, New York, NY 10022. The shares shown
as beneficially owned by BlackRock, Inc. reflect shares owned on its own
behalf and on behalf of the following subsidiaries: BlackRock Advisors
(UK) Limited; BlackRock Advisors, LLC; BlackRock Asset Management Canada
Limited; BlackRock Fund Advisors; BlackRock Asset Management Ireland
Limited; BlackRock Institutional Trust Company, N.A.; BlackRock Investment
Management (Australia) Limited; BlackRock Investment Management (UK) Ltd;
BlackRock Investment Management, LLC. BlackRock, Inc. reported
beneficially owning 11,017,172 shares of common stock with sole voting
power over 10,308,749 shares, shared voting power over zero shares, sole
dispositive power over 11,017,172 shares and shared dispositive power over
zero shares. Based solely on information contained in a Schedule 13G/A
filed by BlackRock Inc. on January 23, 2017.
|
17
Table of Contents
EXECUTIVE COMPENSATION COMPENSATION DISCUSSION AND ANALYSIS
|
Compensation Discussion
and Analysis
Our Compensation Discussion
and Analysis describes the key features of our executive compensation program
and the compensation committees approach in deciding 2016 compensation for our
named executive officers.
Our named executive
officers for 2016 are the following:
Name
|
|
|
|
Title (as of last day of 2016)
|
Matthew Lambiase
|
|
51
|
|
Chief Executive Officer,
President and Director
|
Robert Colligan
|
|
46
|
|
Chief Financial Officer
|
Choudhary
Yarlagadda
|
|
55
|
|
Chief Operating
Officer
|
Mohit Marria
|
|
39
|
|
Chief Investment Officer
|
Phillip J. Kardis
II
|
|
55
|
|
Chief Legal Officer and
Secretary
|
We have divided this discussion into four parts:
1. Overview
2. Key Design Features and 2016 Actions
3. Governance
4. Other Features and Policies
Overview
Employment Agreements
We internalized our
management on August 5, 2015 (the Internalization). In connection with the
Internalization, we entered into employment agreements with each of our named
executive officers with initial terms running through December 31, 2018. These
employment agreements document the key elements of our executive compensation
program and reflect our pay-for-performance compensation philosophy. We believe
that use of employment agreements is critical to ensuring a stable,
appropriately incentivized management team as we transition from an externally
to internally managed company.
Certain stock awards included as 2016
compensation in the Summary Compensation Table were granted in early 2016 as
part of 2015 compensation per the terms of the employment agreements. The
discussion below focuses on the incentive compensation elements contemplated by
the employment agreements for performance in 2016 and going forward.
The employment agreements
specify the mix of salary and incentive compensation opportunities (what we
refer to as our total direct compensation). The mix includes a significant
focus on variable incentive compensation opportunities intended to directly link
the amount of total direct compensation received to Company performance over
one- and three-year periods. Beginning with 2016, the employment agreements
(other than for Mr. Kardis, whose arrangement is separately discussed below)
provide that the incentive compensation opportunity:
●
|
is variable,
potentially ranging from 0% to 150% of the target depending on actual
performance results,
|
●
|
is determined based on a balanced
combination of (i) our return on average equity (ROAE) measured against
annually-established goals, (ii) our total stockholder return performance
as compared against an index of comparator companies over a three-year
performance period (relative TSR), and (iii) a discretionary review of
individual performance, and
|
18
Table of Contents
●
|
to the extent earned, is delivered in a
balanced mix of cash and equity awards that include additional vesting
requirements, to further encourage executive retention and alignment of
interests with the long-term interests of our
stockholders.
|
2016 Performance
Highlights
We view 2016 as a
successful year for the Company. We have continued our focus on residential
mortgage credit, including acquiring and securitizing seasoned residential
mortgage loans. Consequently, we were able to deliver solid results in a
challenging economic environment.
●
|
GAAP net income for 2016 was $549 million.
|
○
|
Increased our
quarterly common stock dividend to $0.50 per share in the fourth quarter
of 2016.
|
○
|
Paid a special
dividend of $0.50 per share of common stock in March 2016.
|
●
|
Stock price to GAAP book value per share
ratio as of December 31, 2016 was 1.07.
|
●
|
Successfully issued $145 million of our
Series A Preferred stock.
|
●
|
Sponsored nearly $6 billion of residential
mortgage loan securitizations.
|
●
|
Return on Average Equity was 26.6%.
|
●
|
Total Shareholder Return during 2016 was
46%.
|
●
|
As of December 31, 2016, recourse leverage
ratio was 1.8x, down from 2.5x on December 31, 2015.
|
●
|
Enhanced Risk Oversight
|
○
|
Successfully
implemented new portfolio management system: Blackrocks Aladdin System.
|
○
|
Began implementing a
new loan management and collateral review system.
|
2016 Compensation
Highlights
Compensation decisions by
the compensation committee for 2016 demonstrate the direct link between the
compensation opportunities for our named executive officers and performance for
our stockholders, consistent with the design contemplated by the employment
agreements:
●
|
Our ROAE for 2016 was 26.6%, which was above
our target of 14% for 2016, resulting in the ROAE cash bonus being awarded
at 150% of the target.
|
●
|
The compensation committee reviewed the
performance of each named executive officer. The performance assessment
considered, among other factors, the successful securitization and
preferred stock offering transactions during 2016 noted above, dividends
declared, stock price to book value per share, and the Companys leverage
ratios. Based on this assessment, the named executive officers, other than
Mr. Kardis, received discretionary bonuses at 150% of target, payable two-thirds in
cash and one-third as a grant of restricted stock units (RSUs) vesting
over three years. Mr. Kardis received as discretionary bonus at 100%
target (the maximum under his employment agreement) payable in RSUs
vesting over three years.
|
19
Table of Contents
●
|
The named executive officers (other than Mr.
Kardis) received a grant of performance share units (PSUs) in early 2016
that become earned based on our relative TSR performance for
2016-2018.
|
Compensation Policies
The compensation committee
has established the following compensation policies that we believe are in the
best, long-term interests of our stockholders:
What We Do and How
We Do It
|
✓
Provide
a majority of compensation in performance-based compensation
|
|
For CEO, 84% of
target total direct compensation is performance-based
|
✓
Pay for
performance based on measurable goals for both annual and long-term awards
|
|
Use multiple,
balanced measures, focused on ROAE and TSR
|
✓
Balanced mix of cash and stock-based awards tied to annual and
long-term performance
|
|
50% of incentive
opportunity tied to annual ROAE, 25% tied to annual individual performance
and 25% tied to 3-year TSR; mix of cash (ROAE portion) and stock (TSR and
individual performance portion)
|
✓
Stock
ownership and retention policy
|
|
5x salary for CEO and
3x salary for all other named executive officers; 100% of shares must be
retained until minimum ownership level is met; applies until 6 months
after termination of employment
|
✓
Receive
advice from independent compensation consultant
|
|
Compensation
consultant (FPL Associates L.P.) provides no other services to the Company
|
What We Dont Do
and The Reasons Why
|
×
No supplemental executive retirement plans
for named executive officers
|
|
Consistent with focus
on performance-oriented environment
|
×
No change in control excise tax gross-ups
|
|
Consistent with focus
on performance-oriented environment and commitment to best practices
aligned to long-term stockholder interests
|
×
No excessive perquisites or severance benefits
|
|
Consistent with focus
on performance-oriented environment and commitment to best practices
aligned to long-term stockholder interests
|
×
No single-trigger vesting of equity compensation upon a change in
control
|
|
Per employment
agreements, vesting following a change in control requires involuntary
termination of employment (double-trigger)
|
×
No hedging transactions permitted
|
|
Policy prohibits
hedging transactions, including the purchase of financial instruments
designed to hedge/offset any decrease in the market value of our stock
|
20
Table of Contents
Key Design Features and
2016 Actions
Overview of Elements of
Compensation
Messrs. Lambiase, Colligan,
Marria and Yarlagadda, pursuant to their employment agreements, receive
compensation primarily in the form of salary plus an incentive award opportunity
determined each year that can range from 0% to 150% of the target amount. Mr.
Kardiss incentive compensation opportunity under his employment agreement
follows a different format related to his recruitment to the Company in 2015,
and is therefore discussed separately below.
Each executives base
salary is fixed for the term of the employment agreement and represents a
smaller portion of the total annual compensation allowing us to effectively
manage our fixed expenses. The compensation committee periodically reviews base
salary levels in light of market practices and changes in responsibilities. For
2016, the base salary amounts were as follows:
2016 Base Salary
|
Name
|
|
Amount
|
Matthew Lambiase
|
|
$750,000
|
Robert Colligan
|
|
$400,000
|
Choudhary Yarlagadda
|
|
$750,000
|
Mohit Marria
|
|
$500,000
|
Phillip J. Kardis II
|
|
$750,000
|
The incentive award
opportunity under these employment agreements, other than Mr. Kardis, is divided
into two components: (i) a portion payable in cash and (ii) a portion payable in
stock-based awards under our equity compensation plan, including RSUs and PSUs.
The following table provides an overview of the compensation program beginning
in 2016 under these employment agreements:
Overview of Compensation
Elements
Compensation
Element
|
Description
|
Objectives
|
Base Salary
|
●
Fixed cash compensation for the term of each
executives employment agreement.
|
●
Per employment agreement
●
Provides fixed level of cash compensation
|
Annual
Incentive
|
●
50% of the total incentive compensation
opportunity for the year, payable in cash
-
Ranges from 0% to 150% of target, based on
ROAE performance
|
●
Reward executives for efficiently generating
earnings
●
Creates a direct connection between business
success and financial reward
|
Long-Term
Incentives
|
●
25% of total incentive compensation
opportunity in the form of a discretionary RSU award
-
Based on annual achievement of individual
and company goals
-
Delivered as RSUs vesting over 3 years
-
For 2016 only, as a transitional matter,
delivered 2/3 cash and 1/3 as RSUs
●
25% of total incentive opportunity in the
form of a PSU award
|
●
RSUs reward achievement of individual annual
goals
●
PSUs provides multi-year focus on driving
stockholder returns
●
Both awards align named executive officers
with stockholder interests and encourage retention
|
21
Table of Contents
|
-
Ranges from 0% to 150% of target, based on
relative TSR performance
|
|
Post-Employment
Benefits
|
●
Employment agreements include severance
payments and benefits in case of involuntary termination (without cause or
with good reason)
●
Severance amounts are not excessive
(generally, 1x salary and incentive, even in connection with a termination
following a change in control)
●
No single-trigger vesting of equity awards
upon a change in control
●
No 280G or other tax gross-ups
|
●
Per negotiated employment agreements
●
Market-competitive practice to limit
executive risk of involuntary termination without cause, and encourages
stable management team
●
Change in control provisions ensure that
management will be able to fairly assess potential transactions
|
Other Benefits
|
●
401(k), health care and life insurance
programs, same as other non-executive employees
●
No executive perquisites
|
●
Competitive with peer companies
●
Assists with recruitment and retention
|
2016 Incentive
Compensation Decisions
General
. The compensation design reflected in the
employment agreements for 2016, other than for Mr. Kardis, weights the
compensation opportunities heavily towards variable, performance-based awards in
a mix of cash and stock, and balanced by annual and multi-year performance
goals. The compensation committee believes that the incentive compensation
design reflected in the employment agreements is appropriately tied to our
business strategy and will encourage our management team to pursue strategies
intended to deliver efficient earnings against our capital base and strong
stockholder returns. See above for a discussion about the compensation
arrangements for Mr. Kardis under his employment agreement.
The 2016 design for
Messrs. Lambiase, Colligan, Marria and Yarlagadda includes an incentive award
opportunity ranging from 0% to 150% of target and broken into three key
components:
●
|
an ROAE bonus
payable in cash,
|
●
|
a discretionary bonus, for 2016 payable in a mix if
cash and RSUs vesting ratably over three years, and
|
●
|
a TSR bonus payable as a PSU award that becomes
earned based on TSR results over a 3-year performance period
(2016-2018).
|
ROAE and TSR are key
financial measures for us because, as a mortgage REIT, we are focused on
generating earnings efficiently against our capital base and returning those
earnings to our stockholders, primarily in the form of dividends. The
compensation committee believes that the discretionary bonus allows the
compensation committee to take into account performance goals that may not be
easily quantifiable and that can be adjusted from year-to-year, thereby
preserving an element of flexibility. Providing RSUs and PSUs as part of the mix
should encourage retention and align the interests of the named executive
officers with the longer-term interests of our stockholders.
The employment agreements
provide a total target incentive award amount and the weighting among the three
components. The compensation committee believes the allocation of incentive
compensation opportunities reflected in the employment agreements represents an
appropriately balanced approach to providing incentive compensation
opportunities. The following chart summarizes the 2016 target incentive award
and the three components for Messrs. Lambiase, Colligan, Marria and Yarlagadda:
22
Table of Contents
2016 Incentive
Compensation Targets per Employment Agreements
|
|
ROAE Bonus
|
|
Discretionary Bonus
|
|
TSR Bonus
|
|
|
Total
target
|
Name
|
|
(cash)
|
|
(RSU award)*
|
|
(PSU award)
|
|
|
incentive award**
|
|
|
(50%)
|
|
(25%)
|
|
(25%)
|
|
|
|
Matthew Lambiase
|
|
|
$2,000,000
|
|
|
|
$1,000,000
|
|
|
|
$1,000,000
|
|
|
|
$4,000,000
|
Robert Colligan
|
|
|
$750,000
|
|
|
|
$375,000
|
|
|
|
$375,000
|
|
|
|
$1,500,000
|
Choudhary Yarlagadda
|
|
|
$1,350,000
|
|
|
|
$675,000
|
|
|
|
$675,000
|
|
|
|
$2,700,000
|
Mohit Marria
|
|
|
$800,000
|
|
|
|
$400,000
|
|
|
|
$400,000
|
|
|
|
$1,600,000
|
*For 2016 only, the
discretionary bonus will be awarded 2/3 in cash and 1/3 as an RSU award.
** The total target incentive
award is subject to review and potential adjustment by the compensation
committee for 2017 and later to take into account the completion of strategic
initiatives, such as capital raises and M&A transactions.
ROAE
Bonus
. The amount of the ROAE
bonus for 2016 was determined based on 2016 ROAE results against formulaic
targets set by the compensation committee during the first quarter of the year.
The ROAE bonus earned for a year is payable in cash by no later than March 15 of
the following year. Under the employment agreements, ROAE means the Companys
net income for the year divided by its average equity for the
year.
1
The following chart
summarizes the ROAE performance goals and results for 2016:
ROAE Achieved
|
Percentage of ROAE
Target
Payable
|
|
2016 ROAE
Result
26.6%
|
0% to 10%
|
0% to 50% by
linear
interpolation
|
12%
|
75%
|
14%
|
100%
|
16%
|
125%
|
18%
|
150%
|
|
|
____________________
1
For this purpose, the Companys net income is
determined in accordance with GAAP, but excluding non-cash, non-operating
expense items such as depreciation expense, amortization of goodwill and other
non-cash, non-operating expense items as determined by the compensation
committee in its sole discretion for the applicable performance period. If, for
any portion of any performance period, (i) the Company does not use hedge
accounting or (ii) its derivative hedging instruments or any portion thereof are
otherwise deemed ineffective, which in either case, results in changes in the
value of such hedging instruments being recorded in the Companys GAAP income
statement, then any gains or losses from such hedging instruments will also be
excluded. The Companys average equity under the employment agreements means the
stockholders equity of the Company as determined in accordance with GAAP, but
excluding accumulated other comprehensive income or loss (which, among other
things, reflects unrealized gains or losses in the Companys residential
mortgage-backed securities portfolio), stockholders equity attributable to
preferred stock and other items as determined by the compensation committee in
its sole discretion for the applicable performance period. For purposes of
calculating ROAE, Company Average Equity will be determined based on the average
of the Companys stockholders equity calculated as described in the preceding
sentence as of the last day of each quarter during the applicable performance
period. Notwithstanding the foregoing, stockholders equity attributable to an
issuance of common stock of the Company during the performance period shall be
excluded from the calculation of Company Average Equity for a period of six
months from such issuance.
23
Table of Contents
Based on this performance,
the 2016 ROAE bonus earned, which is included in the Summary Compensation Table
as 2016 compensation under the Non-Equity Incentive Plan column, was as
follows:
2016 ROAE Bonus
Amounts
|
|
|
ROAE
Bonus
|
ROAE
Bonus
|
Name
|
Target
|
Actual
|
|
|
|
|
(150% of
Target)
|
Matthew Lambiase
|
|
$2,000,000
|
|
$3,000,000
|
Robert Colligan
|
|
$750,000
|
|
$1,125,000
|
Choudhary Yarlagadda
|
|
$1,350,000
|
|
$2,025,000
|
Mohit Marria
|
|
$800,000
|
|
$1,200,000
|
Discretionary
Bonus
. The amount of the
discretionary bonus each year will be based on the compensation committees
discretionary assessment of the named executive officers performance during the
year, based on factors established by the compensation committee during the
first 90 days of the year and communicated to the executive. After the end of
the year, based on the performance assessment, the compensation committee may
make an award ranging from 0% to 150% of the target. Generally, this bonus
amount will be delivered as an RSU award granted by March 15 of the following
year, vesting ratably over three years subject to the executives continued
employment. The number of RSUs granted is based on the dollar value of the award
divided by the closing price of our common stock on the grant date.
For 2016, as a transitional
matter, the award was paid two-thirds in cash and one-third as an RSU award
granted in early 2017. The cash portion appears as 2016 compensation in the
Summary Compensation Table under the Bonus column, but under SEC rules the RSU
portion is considered 2017 compensation even though granted for 2016
performance. The following chart summarizes the discretionary bonus awards for
2016:
2016 Discretionary Bonus
Awards
Name
|
Discretionary
Bonus
(Target)
|
Discretionary
Bonus
(Actual)
(150% of
target)
|
Matthew Lambiase
|
|
$1,000,000
|
|
|
$1,500,000
|
|
Robert Colligan
|
|
$375,000
|
|
|
$562,500
|
|
Choudhary Yarlagadda
|
|
$675,000
|
|
|
$1,012,500
|
|
Mohit Marria
|
|
$400,000
|
|
|
$600,000
|
|
The key performance factors
considered by the compensation committee in determining the amount of the
discretionary bonus awards for 2016 included:
●
|
GAAP net income for 2016 was $549 million.
|
24
Table of Contents
○
|
Increased our quarterly common stock dividend
to $0.50 per share in the fourth quarter of 2016.
|
○
|
Paid a special dividend of $0.50 per share of
common stock in March 2016.
|
●
|
Stock price to GAAP book value per share ratio as
of December 31, 2016 was 1.07.
|
●
|
Successfully issued $145 million of our Series
A Preferred stock.
|
●
|
Sponsored nearly $6 billion or residential
mortgage loan securitizations.
|
●
|
Return on Average Equity was 26.6%.
|
●
|
Total Shareholder Return during 2016 was 46%.
|
●
|
As of December 31, 2016, recourse leverage
ratio was 1.8x, down from 2.5x on December 31, 2015.
|
●
|
Enhanced Risk Oversight
|
○
|
Successfully implemented new portfolio management
system: Blackrocks Aladdin System.
|
○
|
Began implementing a new loan management and
collateral review system.
|
TSR
Bonus
. The TSR bonus for 2016 was
provided as an award of PSUs under our equity compensation plan granted early in
2016, with TSR (including dividends) measured over a three-year performance
period (2016-2018). The target number of PSUs granted was based on the target
value of the award and our stock price on the first business day of the
performance period. On this basis, the target number of PSUs granted for the PSU
bonus for 2016 was as follows:
TSR Bonus Target PSUs
2016-2018
Award
Name
|
|
Target PSUs
(#)
|
Matthew Lambiase
|
|
73,314
|
Robert Colligan
|
|
27,493
|
Choudhary Yarlagadda
|
|
49,487
|
Mohit Marria
|
|
29,326
|
The grant date fair value
of this award for accounting purposes (which is different than the target dollar
amount used to determine the target number of PSUs shown above) is included in
the Summary Compensation Table as 2016 compensation under the Stock Awards
column.
The actual number of PSUs
earned is based on our TSR performance for the performance period, 2016-2018,
relative to the TSR performance of the companies included in the NAREIT FTSE
Mortgage Home Financing index, as follows:
25
Table of Contents
Relative TSR
Performance Goals
|
Relative TSR
Performance
|
|
% of
Target
Earned
|
Below Threshold: Below 25th
percentile
|
|
|
0%
|
|
Threshold: 25th percentile
|
|
|
50%
|
|
Target: 50th percentile
|
|
|
100%
|
|
Max:
75th percentile or above
|
|
|
150%
|
|
Performance between
threshold and target or target and maximum will result in a percentage earned
that is interpolated on a straight-line basis.
PSUs, to the extent earned,
are payable by delivery of one share of our common stock for each PSU earned,
payable by March 15 following the end of the performance period. The named
executive officer generally must remain employed with us for the full
performance period to earn the PSU, also encouraging retention.
During the first year of
performance (2016), relative TSR performed at the top quartile, but actual
results cannot be determined until the end of 2018.
Dividend Equivalents on
RSUs and PSUs
. Awards of RSUs and
PSUs will accrue dividend equivalents as if the awards were outstanding shares
of our common stock, but the dividend equivalents will be paid only if and to
the extent the underlying award becomes earned and vested. Because we are a
mortgage REIT, dividends are a key component of our total stockholder return.
The compensation committee believes that allowing dividend equivalents to accrue
on outstanding awards will further focus our named executive officers on
achieving net income goals and returning earnings to our stockholders through
dividends.
Employment Agreement and
2016 Compensation for Mr. Kardis
Mr. Kardis, our Chief Legal
Officer, was recruited from an outside law firm during 2015. Our Board of
Directors thought it was important to recruit Mr. Kardis as the Company
transitioned to an internally managed corporation given his broad experience
ranging from mortgage finance and securitization to public and private capital
raising, and his long relationship representing the Company. To induce Mr.
Kardis to resign his partnership and relocate to New York, the compensation
committee designed a transition compensation structure that differs from the
other named executive officers. Under his employment agreement, for the first
three full calendar years of his employment (2016 to 2018), Mr. Kardis receives
compensation in the form of:
●
|
salary,
|
●
|
an annual cash bonus equal to 200% of his
salary,
|
●
|
a discretionary bonus payable as an RSU
award of up to $250,000, and
|
●
|
a long-term incentive equity award in the
form of time-vesting RSUs equal to
$500,000.
|
After 2018, Mr. Kardiss
incentive compensation will be determined at the discretion of the compensation
committee. The compensation committee believes that this structure was necessary
to recruit Mr. Kardis. It also provides a degree of independence for Mr. Kardis
from financial performance metrics to better enable him to serve in his legal
oversight function during the Companys transition to an internally managed
corporation. Providing a significant portion of the compensation in the form of
RSUs aligns his interests with our stockholders. Furthermore, the structure is
limited in term and provides for a transition
26
Table of Contents
to a structure that has an
appropriate mix of cash, equity and performance metrics that meets the Companys
needs after 2018.
For 2016, the compensation
committee determined to pay Mr. Kardis the discretionary bonus at the maximum
amount, $250,000, based on the same performance considerations applicable to the
other named executive officers discussed above. In accordance with his
employment agreement, this award was made all in the form of RSUs granted in
early 2017 and vesting over three years. This RSU award, together with the
$500,000 long-term incentive equity award for 2016 that was granted in early
2017, are considered 2017 compensation under SEC rules and therefore do not
appear as 2016 compensation in the Summary Compensation Table.
Governance
Compensation Committee Provides Oversight
The compensation committee,
comprised entirely of independent members of our board of directors, is
responsible for establishing and implementing our executive compensation
philosophy and for ensuring that the total compensation paid to our named
executive officers and other executives is fair, competitive and motivates high
performance. The terms of the employment agreements, and actions on compensation
under the employment agreements, are under the primary direction of the
compensation committee. Under our executive compensation philosophy, we provide
compensation in the forms and at levels that we believe will permit us to retain
and motivate our existing executives and to attract new executives with the
skills and attributes that we need. The compensation program reflected in the
employment agreements is intended to provide appropriate and balanced incentives
toward achieving our annual and long-term strategic objectives, to support a
performance-oriented environment based on the attainment of goals and objectives
intended to benefit our company and our stockholders, and to create an alignment
of interests between our executives and our stockholders. The compensation
program is designed to place a greater weight on rewarding the achievement of
longer term objectives and financial performance of the Company.
Independent Compensation Consultant Used by the Compensation Committee
The compensation committee
engaged FPL Associates L.P. (FPL) to advise the compensation committee on
alternatives for the post-Internalization executive compensation design. As part
of this assignment, FPL reviewed the executive compensation levels, mix and
design at our peer companies (discussed below), modeled alternative incentive
compensation designs and advised the compensation committee on other competitive
market practices more generally. FPL provides no other services to the Company.
In addition, in 2016, we engaged Willis Towers Watson (Willis) to evaluate the
structure of the executive incentive program. As part of this process, the
compensation committee reviewed market information on peer company practices,
analyses and design recommendations provided by Willis and had FPL review the
design recommendations. Willis was retained by us, not by the compensation
committee.
CEO and Management Have Limited Roles in Compensation Determinations
The compensation committee
is solely responsible for compensation decisions regarding our CEO subject to
ratification and confirmation by the independent members of our Board. When
making compensation recommendations for named executive officers other than the
CEO, the compensation committee expects to seek and consider the advice and
counsel of the CEO, given his direct day-to-day working relationship with those
executives. Taking this feedback into consideration, the compensation committee
will engage in discussions and makes final determinations related to
compensation paid to the named executive officers, consistent with the
requirements of each employment agreement.
27
Table of Contents
Use of Peer Group Data
In connection with
establishing the post-Internalization executive compensation design, the
compensation committee (with the assistance of
FPL
)
reviewed compensation levels and practices at the following group of internally
managed publicly traded companies with a comparable focus on real estate-related
debt investments:
|
American Capital, Ltd.
|
|
New York Mortgage Trust, Inc.
|
|
Arlington Asset Investment Corp.
|
|
NewStar Financial, Inc.
|
|
Capstead Mortgage Corporation
|
|
Ocwen Financial Corporation
|
|
CYS Investments, Inc.
|
|
PennyMac Financial Services, Inc.
|
|
Dynex Capital, Inc.
|
|
Radian Group, Inc.
|
|
iStar Financial, Inc.
|
|
RAIT Financial Trust
|
|
MFA Financial, Inc.
|
|
Redwood Trust, Inc.
|
|
MGIC Investment Corp.
|
|
Walker & Dunlop, Inc.
|
|
Nationstar Mortgage Holdings, Inc.
|
|
Walter Investment Management Corp.
|
In selecting this peer group,
the compensation committee considered the relative size of our company compared
to the peer companies, based on both equity market capitalization and total
capitalization. On these bases measured in 2016, the company is in the top
quartile of the peer group in size. The compensation committee has not currently
adopted a policy to formally benchmark compensation levels against the peer
group. Instead, the compensation committee used peer group information solely to
better understand general market practices, alternative approaches to incentive
compensation designs and executive compensation trends.
Consideration of 2016
Say-on-Pay Vote
At our 2016 annual meeting,
our stockholders voted approximately 84.27% in favor of our executive
compensation program. The compensation committee has considered the results of
the 2016 say-on-pay vote and believes that the support of our stockholders in
this vote reflects support for our approach to executive compensation. The
compensation committee will continue to consider the outcome of future
Say-on-Pay votes and other stockholder input, as well as available market data,
in making future decisions regarding executive compensation.
Compensation Policies and
Practices as They Relate to Risk Management
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. We believe our design includes
appropriate features intended to limit the risk of excessive risk-taking by our
named executive officers, including, without limitation (i) incentive
compensation capped at 150% of target, (ii) use of multiple financial measures
over both annual and multi-year periods, (iii) elements of incentive
compensation tied to individual performance goals, and (iv) meaningful stock
ownership and retention requirements that apply until six months after
termination of employment.
Other Features and Policies
Share Ownership
Guidelines
Per the employment agreements,
each named executive officer is subject to a stock ownership and retention
requirement. Shares of our stock received from equity awards, after taxes, must
be held by the executive until a stated level of ownership is achieved, measured
as a multiple of salary5x for the CEO and 3x for the other named
executive officers. Once this required minimum ownership level has been
achieved, the named executive officer must continue to maintain that minimum
ownership level until six months after termination of employment.
28
Table of Contents
The compensation committee
believes that these stock ownership and retention requirements will further
align the interests of our named executive officers with the long-term interests
of our stockholders by requiring a meaningful portion of the executives accrued
and earned compensation to be held as shares of our stock, not only during
employment but for a period after termination of employment.
Savings and Health and
Welfare Benefits
Our named executive officers
participate in the broad-based 401(k) retirement savings plan generally
available to our employees, which includes an opportunity to receive employer
matching contributions. We do not currently provide for pension plans,
supplemental retirement plans or deferred compensation plans for our named
executive officers.
All of our named executive
officers also participate in the health, life insurance, disability benefits and
other welfare programs that are provided generally to our employees.
During 2016, we established a
Stock Award Deferral Program, described below under Nonqualified Deferred
Compensation Plans. Under this program, named executive officers can elect to
defer payment of RSU and PSU awards after vesting until termination of
employment or an earlier specified date. Amounts deferred are tracked as
deferred stock units, continue to receive dividend equivalents, and are paid in
actual shares. The compensation committee felt that this program assists our
executive officers with retirement savings, and further encourages their
long-term retention of stock awards earned under our compensation
program.
Perquisites and Other
Personal Benefits
We do not currently provide
our named executive officers with any perquisites or other personal
benefits.
Compensation Recovery
(Clawback) Policy
As required by the
Sarbanes-Oxley Act of 2002, upon restatement of our companys financial
statements, our CEO and CFO would be required to reimburse us for any (i)
bonuses, (ii) other incentive or equity-based compensation, and/or (iii) profits
from stock sales, received in the 12 month period following the filing of
financial statements that were later required to be restated due to the
misconduct. Our company will also implement the incentive compensation
clawback provisions mandated by the Dodd-Frank Wall Street Reform and Consumer
Protection Act of 2010 in accordance with the requirements of that Act once
final rules have been adopted.
Severance Protection under
the Employment Agreements
Each employment agreement
includes certain severance payments and benefits for the named executive officer
in case of involuntary termination during the term of the agreement, including
termination by us without cause or termination by the executive for certain
adverse changes in employment conditions (referred to as good reason). The
amount and form of the severance benefits depends on whether the involuntary
termination occurs within 24 months following a change in control or not. No
severance is provided for a voluntary termination (not for good reason) or
involuntary termination for cause. We do not believe that the severance benefits
provided are excessive. The following briefly summarizes the severance benefits
provided in case of a qualifying termination. More detail (including estimated
quantifiable amounts) is provided under Potential Payments upon Termination or
Change in Control.
●
|
Termination without
cause / for good reason other than within 24 months following a change
in control
. If, during the term of the employment
agreement, the named executive officers employment is terminated by the
Company without cause or by the executive for good reason other than
within 24 months following a change in control of the Company, the
executive will be entitled to: (i) a severance payment equal to one times
the sum of his base salary and his three-year (or shorter) average annual
bonuses, payable in 12 equal monthly installments (the Severance
Amount); (ii) 12 months of Company-paid COBRA premiums; (iii) accelerated
|
29
Table of Contents
|
vesting of time-based equity awards; (iv) continued vesting potential of
the PSUs granted in connection with the TSR portion of his annual bonus;
(v) payment of any earned but unpaid annual bonus for the prior calendar
and (vi) a pro-rata portion of the ROAE and discretionary portions of the
annual bonus that he would have received for the year of termination.
|
|
|
●
|
Termination without cause / for good reason
within 24 months following a change in control
. If, during the term of the employment
agreement, the named executive officers employment is terminated by the
Company without cause or by the executive for good reason within 24 months
following a change in control of the Company, the executive will be
entitled to (i) a lump sum payment equal to the Severance Amount, (ii) 18
months of Company-paid COBRA premiums; (iii) accelerated vesting of
time-based equity awards (including the PSUs granted in connection with
the TSR portion of his annual bonus, which will be converted into
time-based RSUs upon a change in control based on the Companys TSR
through such change in control); (v) payment of any earned but unpaid
annual bonus for the prior calendar and (vi) a pro-rata portion of the
ROAE and discretionary portions of the annual bonus that he would have
received for the year of termination.
|
The employment agreements also
include a 90-day advanced notice requirement for the executive to resign and
certain post-employment covenants, including customary non-solicitation and
non-competition covenants for twelve-months post-employment, and
customary
non-disparagement and confidentiality
restrictions.
The compensation committee
believes that these severance provisions serve the interests of stockholders by
encouraging stability among our management team. The change in control
protections also help to ensure that management will be able to fairly review
any possible business combinations. The compensation committee believes that the
severance protections in the employment agreements reflect current best
practices, including (i) no 280G excise tax gross-ups, (ii) reasonable levels of
severance compensation (i.e., 1x salary and average bonus), (iii) no
single-trigger (or modified single trigger) rights to severance (including
equity vesting) and (iv) performance-based awards remain subject to performance
conditions.
Timing of Equity
Grants
RSU and PSU awards are granted
at a regularly-scheduled compensation committee meeting, generally during the
first quarter of each year. Awards are generally effective on the date of the
meeting at which they were approved. Dates for compensation committee meetings
are usually set during the prior year, and the timing of meetings and awards is
unrelated to the release of material non-public information.
Section 162(m)
Considerations
Section 162(m) of the Internal
Revenue Code generally prohibits any publicly held corporation from taking a
federal income tax deduction for compensation exceeding $1 million in any
taxable year to an executive officer who is named in the Summary Compensation
Table. Exceptions are made for qualified performance-based compensation, among
other things. In structuring our compensation programs, the compensation
committee considers this Section 162(m) exception; however, the compensation
committee does not believe that it is necessarily in our best interests and the
best interests of our shareholders for all compensation to meet the requirements
of Section 162(m) for deductibility. Therefore, the compensation committee has
determined that it is appropriate at times to make compensation awards that are
non-deductible under Section 162(m). Further, because of ambiguities and
uncertainties under Section 162(m), we cannot give any assurance that
compensation that we intend to satisfy the requirements for deductibility under
Section 162(m) will in fact be deductible.
30
Table of Contents
Compensation Committee
Report
Our compensation committee has
reviewed and discussed the Compensation Discussion and Analysis required by Item
402(b) of Regulation S-K with management and, based on such review and
discussions, the compensation committee recommended to the Board of Directors
that the Compensation Discussion and Analysis be included in this Proxy
Statement.
Paul A. Keenan, Chair
John
P. Reilly
31
Table of Contents
Summary Compensation Table
From our inception through
2014, we did not provide any of our executive officers with any cash
compensation or bonus, nor have we provided any executive officers with pension
benefits or nonqualified deferred compensation plans. We granted shares of
restricted stock to our named executive officers during the year ended December
31, 2008, but not again until February 2015 when we granted certain executive
officers restricted stock unit (RSU) awards. Prior to Internalization, we had
not entered into any employment agreements with any persons, nor were we
obligated to make any cash payments upon termination of employment or a change
in control of us. For a discussion of employment agreements that we entered into
with certain of our named executive officers in connection with the
Internalization, see
Compensation
Discussion and Analysis
.
We did
not pay any compensation to our named executive officers during the period ended
December 31, 2014.
The table below sets forth the
aggregate compensation we paid or accrued with respect to the fiscal years ended
December 31, 2016, 2015, and 2014, to our Chief Executive Officer and our Chief
Financial Officer, and our three highest paid other executive officers serving
in their positions at December 31, 2016.
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
Incentive Plan
|
|
All Other
|
|
|
Name and Principal
|
|
|
|
Salary
|
|
Bonus
|
|
Awards
|
|
Compensation
|
|
Compensation
|
|
Total
|
Position
(1)
|
|
Year
|
|
($)
(2)
|
|
($)
(3)
|
|
($)
(4)
|
|
($)
(5)
|
|
($)
(6)
|
|
($)
|
Matthew Lambiase
|
|
2016
|
|
$750,000
|
|
$1,000,000
|
|
$2,142,892
|
|
$3,000,000
|
|
$15,900
|
|
$6,908,792
|
Chief Executive Officer,
|
|
2015
|
|
$303,846
|
|
$3,105,250
|
|
$ -
|
|
$ -
|
|
$10,953
|
|
$3,420,049
|
President and Director
|
|
2014
|
|
$ -
|
|
$ -
|
|
$ -
|
|
$ -
|
|
$ -
|
|
$ -
|
|
Robert Colligan
|
|
2016
|
|
$400,000
|
|
$375,000
|
|
$827,160
|
|
$1,125,000
|
|
$15,900
|
|
$2,743,060
|
Chief Financial Officer
|
|
2015
|
|
$121,538
|
|
$1,237,750
|
|
$600,000
|
|
$ -
|
|
$17,899
|
|
$1,977,187
|
|
|
2014
|
|
$ -
|
|
$ -
|
|
$ -
|
|
$ -
|
|
$ -
|
|
$ -
|
|
Choudhary Yarlagadda
|
|
2016
|
|
$750,000
|
|
$675,000
|
|
$1,400,029
|
|
$2,025,000
|
|
$15,900
|
|
$4,865,879
|
Chief Operating Officer
|
|
2015
|
|
$303,846
|
|
$1,953,250
|
|
$ -
|
|
$ -
|
|
$21,372
|
|
$2,278,468
|
|
|
2014
|
|
$ -
|
|
$ -
|
|
$ -
|
|
$ -
|
|
$ -
|
|
$ -
|
|
Mohit Marria
|
|
2016
|
|
$500,000
|
|
$400,000
|
|
$904,721
|
|
$1,200,000
|
|
$15,900
|
|
$3,020,621
|
Chief Investment Officer
|
|
2015
|
|
$121,538
|
|
$1,388,250
|
|
$250,000
|
|
$ -
|
|
$13,801
|
|
$1,773,589
|
|
|
2014
|
|
$ -
|
|
$ -
|
|
$ -
|
|
$ -
|
|
$ -
|
|
$ -
|
|
Phillip J. Kardis II
|
|
2016
|
|
$750,000
|
|
$1,500,000
|
|
$750,008
|
|
$ -
|
|
$15,900
|
|
$3,015,908
|
Chief Legal Officer,
|
|
2015
|
|
$250,000
|
|
$500,000
|
|
$ -
|
|
$ -
|
|
$281,874
|
|
$1,031,874
|
Secretary
|
|
2014
|
|
N/A
|
|
N/A
|
|
N/A
|
|
N/A
|
|
N/A
|
|
N/A
|
(1)
|
All listed named
executive officer positions are those held as of December 31,
2016.
|
|
(2)
|
The base salary
amounts in this column represent actual base compensation paid or earned
through the end of the applicable fiscal year.
|
|
(3)
|
For 2016, the amounts
in this column represent the cash portion of bonuses awarded for 2016. See
Compensation Discussion and
Analysis -- Key Design Features and 2016 Actions
for additional
information.
|
|
|
(4)
|
The amounts in this
column represent the aggregate grant date fair value of the awards
detailed under
Grants of
Plan-Based Awards in 2016
in this Proxy Statement, for 2016 comprised of:
|
●
|
RSU awards granted in early 2016 for
performance in 2015, with a grant date fair value computed in
|
32
Table of Contents
|
accordance
with FASB ASC Topic 718 based on the closing price of our common stock on
the applicable grant date but excluding the effect of potential
forfeitures; and
|
●
|
PSUs awarded in early 2016 representing the
TSR bonus for 2016, to be earned based on the Companys relative TSR
performance for the period 2016-2018, with a grant date fair value
computed in accordance with FASB ASC Topic 718 based on a Monte Carlo
simulation value as of the applicable grant date of $13.59 per share. This
Monte Carlo simulation value is different than the value used by the
compensation committee to determine the target number of PSUs. See
Compensation Discussion and
Analysis -- Key Design Features and 2016 Actions
for additional information about the TSR
bonus.
|
|
SEC rules require the
Summary Compensation Table to include in each years amount the aggregate
grant date fair value of stock awards granted during the year. Certain of
our RSU awards are granted early in the year as part of the annual
discretionary bonus award for prior year performance. As a result, the
amounts for RSU awards generally appear in the Summary Compensation Table
for the year after the performance year upon which they were based, and
therefore the Summary Compensation Table does not fully reflect our
compensation committees view of its pay-for-performance executive
compensation program for a particular performance year. For example,
amounts shown as 2016 compensation in the Stock Awards column reflect
RSU awards granted in early 2016 for 2015 performance. See
Compensation Discussion and Analysis -- Key
Design Features and 2016 Actions
for a discussion about how the Committee viewed its 2016
compensation decisions for the named executive officers.
|
|
|
(5)
|
For 2016, the amounts
in this column represent the ROAE cash bonus earned for performance in
2016. See
Compensation
Discussion and Analysis -- Key Design Features and 2016
Actions
for additional
information.
|
|
(6)
|
The amounts in this
column for 2016 represent matching contributions of up to 6% of each named
executive officers base salary that were made by us with respect to each
of the named executive officers pursuant to our Section 401(k)
plan.
|
Grants of Plan Based Awards
in 2016
The following table summarizes
certain information regarding all plan-based awards granted to the named
executive officers during the year ended December 31, 2016.
|
|
|
|
|
|
Estimated Potential Payouts
under
|
|
Estimated Future Payouts
under
|
|
|
All Other
|
|
Grant Date
|
|
|
|
|
|
|
Non-Equity Incentive Plan Awards
(2)
|
|
Equity Incentive Plan Awards
(3)
|
|
|
Stock
|
|
Fair Value
|
|
|
Award
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards
|
|
of Stock
|
|
|
Type
|
|
Grant
|
|
Threshold
|
|
|
|
Maximum
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
(4)
|
|
and Option
|
Name
|
|
(1)
|
|
Date
|
|
($)
|
|
Target
($)
|
|
($)
|
|
(#)
|
|
(#)
|
|
(#)
|
|
(#)
|
|
Awards
(5)
|
Matthew
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lambiase
|
|
ROAE
|
|
1/1/2016
|
|
$0
|
|
$2,000,000
|
|
$3,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSU
|
|
2/16/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
82,682
|
|
$1,007,067
|
|
|
PSU
|
|
3/31/2016
|
|
|
|
|
|
|
|
36,657
|
|
73.314
|
|
|
109,971
|
|
|
|
|
$1,135,825
|
Robert
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Colligan
|
|
ROAE
|
|
1/1/2016
|
|
$0
|
|
$750,000
|
|
$1,125,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSU
|
|
2/16/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32,940
|
|
$401,209
|
|
|
PSU
|
|
3/31/2016
|
|
|
|
|
|
|
|
13,746
|
|
27,493
|
|
|
41,239
|
|
|
|
|
$425,951
|
Choudhary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yarlagadda
|
|
ROAE
|
|
1/1/2016
|
|
$0
|
|
$1,350,000
|
|
$2,025,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSU
|
|
2/16/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
51,998
|
|
$633,336
|
|
|
PSU
|
|
3/31/2016
|
|
|
|
|
|
|
|
24,743
|
|
49,487
|
|
|
74,230
|
|
|
|
|
$766,693
|
Mohit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marria
|
|
ROAE
|
|
1/1/2016
|
|
$0
|
|
$800,000
|
|
$1,200,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSU
|
|
2/16/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,977
|
|
$450,380
|
|
|
PSU
|
|
3/31/2016
|
|
|
|
|
|
|
|
14,663
|
|
29,326
|
|
|
43,988
|
|
|
|
|
$454,341
|
Phillip J.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kardis II
|
|
RSU
|
|
2/16/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
61,577
|
|
$750,008
|
33
Table of Contents
(1)
|
Type of
Award:
|
|
ROAE = ROAE cash bonus
for 2016
RSU = Time-vesting
RSU awards granted during 2016
PSU = Performance-vesting stock unit
awards granted in 2016
|
(2)
|
The ROAE cash bonus
awards were earned based on 2016 ROAE performance. See
Compensation Discussion and Analysis --
Key Design Features and 2016 Actions
for additional information on the 2016 goals and results. The
actuals amounts paid are included as 2016 compensation under the
Non-Equity Incentive Plan column in the Summary Compensation
Table.
|
(3)
|
The PSUs granted in
2016 represent the 2016 TSR bonus opportunity and will be earned based on
our relative TSR performance for 2016-2018. See
Compensation Discussion and Analysis -- Key
Design Features and 2016 Actions
for additional information on the 2016 TSR bonus goals. The
number of target PSUs was determined based on the applicable TSR bonus
dollar amount divided by our stock price on the first business day in
2016.
|
(4)
|
The RSUs granted in
2016 relate to 2015 compensation decisions. The number of RSUs granted was
based on the applicable dollar amount divided by the closing price of our
stock on the grant date, rounded up to the next whole share. These awards
vest in equal annual installments over three years following the grant
date, subject to continued employment.
|
(5)
|
See footnote (4)
under the Summary Compensation Table for information on how the grant date
fair value for RSUs and PSUs granted in 2016 was
determined.
|
Outstanding Equity Awards
at 2016 Fiscal Year-End
The following table provides
information about outstanding equity awards of our named executive officers as
of the end of 2016.
Stock Awards
|
|
|
|
|
|
|
Number
|
|
Market
|
|
|
|
|
|
|
|
|
|
|
of Shares
|
|
Value of
|
|
|
|
Equity Incentive Plan
|
|
|
|
|
|
|
or Units
|
|
Shares or
|
|
Equity Incentive Plan
|
|
Awards: Market or
|
|
|
|
|
|
|
of Stock
|
|
Units of
|
|
Awards: Number of
|
|
Payout Value of
|
|
|
|
|
|
|
That
|
|
Stock That
|
|
Unearned Shares,
|
|
Unearned Shares, Units
|
|
|
|
|
|
|
Have Not
|
|
Have Not
|
|
Units or Other Rights
|
|
or Other Rights That
|
|
|
|
|
|
|
Vested
|
|
Vested
|
|
That Have Not Vested
|
|
Have Not Vested
|
Name
|
|
Award Type
(1)
|
|
Grant
Date
|
|
(#)
|
|
($)
(2)
|
|
(#)
(3)
|
|
($)
(2)
|
Matthew
|
|
|
|
|
|
|
|
|
|
|
|
|
Lambiase
|
|
08RS
|
|
1/2/2008
|
|
1,800
|
|
$30,636
|
|
|
|
|
|
|
RSU
|
|
2/16/2016
|
|
18,970
|
|
$322,869
|
|
|
|
|
|
|
RSU
|
|
2/16/2016
|
|
63,712
|
|
$1,084,378
|
|
|
|
|
|
|
PSU
|
|
3/31/2016
|
|
|
|
|
|
109,971
|
|
$1,871,706
|
Robert
|
|
|
|
|
|
|
|
|
|
|
|
|
Colligan
|
|
RS
|
|
2/5/2015
|
|
13,290
|
|
$226,196
|
|
|
|
|
|
|
RSU
|
|
2/16/2016
|
|
7,570
|
|
$128,841
|
|
|
|
|
|
|
RSU
|
|
2/16/2016
|
|
25,370
|
|
$431,797
|
|
|
|
|
|
|
PSU
|
|
3/31/2016
|
|
|
|
|
|
41,240
|
|
$701,896
|
Choudhary
|
|
|
|
|
|
|
|
|
|
|
|
|
Yarlagadda
|
|
RSU
|
|
2/16/2016
|
|
11,932
|
|
$203,083
|
|
|
|
|
|
|
RSU
|
|
2/16/2016
|
|
40,066
|
|
$681,923
|
|
|
|
|
|
|
PSU
|
|
3/31/2016
|
|
|
|
|
|
74,231
|
|
$1,263,403
|
Mohit
|
|
|
|
|
|
|
|
|
|
|
|
|
Marria
|
|
08RS
|
|
1/2/2008
|
|
400
|
|
$6,808
|
|
|
|
|
|
|
RS
|
|
2/5/2015
|
|
5,537
|
|
$94,247
|
|
|
|
|
|
|
RSU
|
|
2/16/2016
|
|
8,487
|
|
$144,449
|
|
|
|
|
|
|
RSU
|
|
2/16/2016
|
|
28,490
|
|
$484,900
|
|
|
|
|
|
|
PSU
|
|
3/31/2016
|
|
|
|
|
|
43,989
|
|
$748,693
|
Phillip J.
|
|
|
|
|
|
|
|
|
|
|
|
|
Kardis II
|
|
RSU
|
|
2/16/2016
|
|
61,577
|
|
$1,048,041
|
|
|
|
|
Note: Market Value as of
Fiscal Year-Ended 2016 of $17.02 per share, unit or other right
34
Table of Contents
(1)
|
Award Type and Vesting are as follows:
|
|
Award Type
|
Description
|
Vesting
|
|
|
08RS
|
Restricted stock award granted in 2008
|
Vesting in equal installments on the first business day of each
fiscal quarter over a period of 10 years beginning January 2, 2008,
subject to continued employment*
|
|
|
RS/RSU
|
Restricted stock/RSU awards granted as
part of annual compensation for prior year performance
|
Vesting in equal annual installments
over three years starting on the first anniversary of the grant date,
subject to continued employment*
|
|
|
PSU
|
TSR bonus for the
year of grant
|
Performance vesting
based on relative TSR over the three year performance period beginning
with the year of grant, cliff vesting at end of the performance period,
subject to continued employment*
|
|
|
*See
Potential Payments Upon Termination of
Employment or Change in Control
for additional details on vesting in case of termination of
employment during the vesting period.
|
|
(2)
|
Reflects fair value
of unvested awards using December 31, 2016 closing price of
$17.02.
|
|
(3)
|
Based on performance
through the end of 2016, the number of PSUs shown in the table assumes
maximum payout (150% of target).
|
Stock Vested in 2016
The following table sets
forth certain information with respect to our named executive officers regarding
stock vested during the calendar year 2016.
Stock Awards
|
|
Number of Shares
|
|
Value Realized on
|
|
|
Acquired on Vesting
|
|
Vesting
|
Name
|
|
(#)
(1)
|
|
($)
(2)
|
Matthew Lambiase
|
|
1,800
|
|
$
|
22,181
|
Robert Colligan
|
|
12,900
|
|
$
|
156,606
|
Choudhary Yarlagadda
|
|
|
|
|
|
Mohit Marria
|
|
6,175
|
|
|
74,976
|
Phillip J. Kardis II
|
|
|
|
|
|
(1)
|
Reflects previously granted restricted stock/RSU awards
vesting during the fiscal year (before any taxes were withheld), without
regard to whether a deferral election applied under the Stock Award
Deferral Program.
|
|
|
(2)
|
Reflects fair value of vested shares using closing price on
date of vesting.
|
Pension Benefits
Our named executive officers
received no benefits in 2016 from us under defined pension plans. Our only
retirement plan in which the named executive officers were eligible to
participate is the 401(k) Plan.
35
Table of Contents
Nonqualified Deferred
Compensation
During 2016, we established a
Stock Award Deferral Program. Under the program, named executive officers and
directors can elect to defer payment of certain stock awards made pursuant to
Chimeras 2007 Equity Incentive Plan (the Equity Plan). Deferred awards are
credited as deferred stock units and are paid at the earlier of
separation from service or a date elected by the participant. Payments are
generally made in a lump sum or, if elected by the participant, in five annual
installments if paid upon separation from service. Deferred awards receive
dividend equivalents during the deferral period credited as additional deferred
stock units. Amounts are paid at the end of the deferral period by delivery of
shares from the 2007 Equity Incentive Plan (plus cash for any fractional
deferred stock units), less any applicable tax withholdings. Deferral elections
do not alter any vesting requirements applicable to the underlying stock award.
Amounts will not be considered deferred until after vested in accordance with
the applicable vested schedule for the award.
Potential Payments upon
Termination of Employment or Change in Control (CIC)
The tables below show certain
potential payments that would have been made to a named executive officer under
his respective current employment agreement assuming such persons employment
had terminated at the close of business on December 31, 2016, under various
scenarios, including a Change in Control. The table assumes that neither the
Company nor any of the named executive officers, as the case may be, gave notice
of its or his intention not to renew the executives respective employment
agreement with the Company for 2017.
The tables include only the
value of the incremental amounts payable to the named executive officer arising
from the applicable scenario and do not include the value of vested or earned,
but unpaid, amounts owed to the applicable named executive officer as of
December 31, 2016 (including, for example, any annual bonus earned but not yet
paid as of such date, dividend equivalents relating to dividends declared but
not paid as of such date, vested but not settled RSUs or PSUs, or the employer
401(k) matches for the named executive officers).
The footnotes to the tables
describe the assumptions used in estimating the amounts shown in the tables.
As used below, the terms
Annual Bonus, Average Bonus, Cause, Change in Control, Disability,
Good Reason, TSR Bonus and 2015 Equity Award shall have the respective
meanings set forth in the applicable employment agreement, each of which has
been filed with the SEC, or award agreement(s), forms of which have been filed
with the SEC.
Because the payments to be
made to a named executive officer depend on several factors, the actual amounts
to be paid out upon a named executive officers termination of employment can
only be determined at the time of the executives separation from the Company.
Potential Payments upon
Termination of Employment/CIC: Matthew Lambiase:
|
|
|
|
|
|
Termination Without
|
|
|
|
|
Incremental Benefits
|
|
|
|
|
|
Cause/Resignation
|
|
Termination For
|
|
Change in
|
due to
Termination
|
|
Death
|
|
Disability
|
|
for Good Reason
|
|
Cause/Voluntary
|
|
Control
|
Event
|
|
(a)
|
|
(a)
|
|
(b)
|
|
Resignation
|
|
(c)
|
Severance/Payment to
|
|
-
|
|
-
|
|
4,114,000
|
|
-
|
|
4,114,000
|
Representative or
|
|
|
|
|
|
|
|
|
|
|
Estate
|
|
|
|
|
|
|
|
|
|
|
Value of Accelerated
|
|
2,921,330
|
|
2,921,330
|
|
2,921,330
|
|
-
|
|
1,673,526
|
Equity Awards
|
|
|
|
|
|
|
|
|
|
|
Deferred Compensation
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
Other Benefits
|
|
15,701
|
|
15,701
|
|
10,467
|
|
-
|
|
15,701
|
Total Value of
|
|
|
|
|
|
|
|
|
|
|
Incremental
Benefits
|
|
2,937,031
|
|
2,937,031
|
|
7,045,797
|
|
-
|
|
5,803,227
|
36
Table of Contents
Potential Payments upon
Termination of Employment/CIC: Robert Colligan:
|
|
|
|
|
|
Termination Without
|
|
|
|
|
Incremental Benefits
|
|
|
|
|
|
Cause/Resignation
|
|
Termination For
|
|
Change in
|
due to
Termination
|
|
Death
|
|
Disability
|
|
for Good Reason
|
|
Cause/Voluntary
|
|
Control
|
Event
|
|
(a)
|
|
(a)
|
|
(b)
|
|
Resignation
|
|
(c)
|
Severance/Payment to
|
|
-
|
|
-
|
|
1,741,000
|
|
-
|
|
1,741,000
|
Representative or
|
|
|
|
|
|
|
|
|
|
|
Estate
|
|
|
|
|
|
|
|
|
|
|
Value of Accelerated
|
|
1,348,648
|
|
1,348,648
|
|
1,348,648
|
|
-
|
|
880,717
|
Equity Awards
|
|
|
|
|
|
|
|
|
|
|
Deferred Compensation
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
Other Benefits
|
|
47,907
|
|
47,907
|
|
31,938
|
|
-
|
|
47,907
|
Total Value of
|
|
|
|
|
|
|
|
|
|
|
Incremental
Benefits
|
|
1,396,555
|
|
1,396,555
|
|
3,127,586
|
|
-
|
|
2,669,624
|
Potential Payments upon
Termination of Employment/CIC: Choudhary Yarlagadda:
|
|
|
|
|
|
Termination Without
|
|
|
|
|
Incremental Benefits
|
|
|
|
|
|
Cause/Resignation
|
|
Termination For
|
|
Change in
|
due to
Termination
|
|
Death
|
|
Disability
|
|
for Good Reason
|
|
Cause/Voluntary
|
|
Control
|
Event
|
|
(a)
|
|
(a)
|
|
(b)
|
|
Resignation
|
|
(c)
|
Severance/Payment to
|
|
-
|
|
-
|
|
2,866,000
|
|
-
|
|
2,866,000
|
Representative or
|
|
|
|
|
|
|
|
|
|
|
Estate
|
|
|
|
|
|
|
|
|
|
|
Value of Accelerated
|
|
1,875,468
|
|
1,875,468
|
|
1,875,468
|
|
-
|
|
1,033,199
|
Equity Awards
|
|
|
|
|
|
|
|
|
|
|
Deferred Compensation
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
Other Benefits
|
|
47,907
|
|
47,907
|
|
31,938
|
|
-
|
|
47,907
|
Total Value of
|
|
|
|
|
|
|
|
|
|
|
Incremental
Benefits
|
|
1,923,375
|
|
1,923,375
|
|
4,773,406
|
|
-
|
|
3,947,106
|
Potential Payments upon
Termination of Employment/CIC: Mohit Marria:
|
|
|
|
|
|
Termination Without
|
|
|
|
|
Incremental Benefits
|
|
|
|
|
|
Cause/Resignation
|
|
Termination For
|
|
Change in
|
due to
Termination
|
|
Death
|
|
Disability
|
|
for Good Reason
|
|
Cause/Voluntary
|
|
Control
|
Event
|
|
(a)
|
|
(a)
|
|
(b)
|
|
Resignation
|
|
(c)
|
Severance/Payment to
|
|
-
|
|
-
|
|
2,004,000
|
|
-
|
|
2,004,000
|
Representative or
|
|
|
|
|
|
|
|
|
|
|
Estate
|
|
|
|
|
|
|
|
|
|
|
Value of Accelerated
|
|
1,334,913
|
|
1,334,913
|
|
1,334,913
|
|
-
|
|
835,784
|
Equity Awards
|
|
|
|
|
|
|
|
|
|
|
Deferred Compensation
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
Other Benefits
|
|
32,157
|
|
32,157
|
|
21,438
|
|
-
|
|
32,157
|
Total Value of
|
|
|
|
|
|
|
|
|
|
|
Incremental
Benefits
|
|
1,367,070
|
|
1,367,070
|
|
3,360,351
|
|
-
|
|
2,871,941
|
37
Table of Contents
Potential Payments upon
Termination of Employment/CIC: Phillip J. Kardis II:
|
|
|
|
|
|
Termination
Without
|
|
|
|
|
Incremental
Benefits
|
|
|
|
|
|
Cause/Resignation
|
|
Termination
For
|
|
Change
in
|
due to Termination
|
|
Death
|
|
Disability
|
|
for Good
Reason
|
|
Cause/Voluntary
|
|
Control
|
Event
|
|
(a)
|
|
(a)
|
|
(b)
|
|
Resignation
|
|
(c)
|
Severance/Payment
to
|
|
-
|
|
-
|
|
1,250,000
|
|
-
|
|
1,250,000
|
Representative
or
|
|
|
|
|
|
|
|
|
|
|
Estate
|
|
|
|
|
|
|
|
|
|
|
Value of Accelerated
|
|
1,223,534
|
|
1,223,534
|
|
1,223,534
|
|
-
|
|
1,223,534
|
Equity Awards
|
|
|
|
|
|
|
|
|
|
|
Deferred
Compensation
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
Other Benefits
|
|
47,907
|
|
47,907
|
|
31,938
|
|
-
|
|
47,907
|
Total Value of
|
|
|
|
|
|
|
|
|
|
|
Incremental
Benefits
|
|
1,271,441
|
|
1,271,441
|
|
2,505,472
|
|
-
|
|
2,521,441
|
* For purposes of these
tables, calculations of Value of Accelerated Equity Awards are based on $17.02
per share, the closing price of our stock on December 31, 2016. For purposes of
these tables, except for a change in control, we have assumed that the target
performance metrics with respect to the PSUs have been achieved and in the case
of a change of control, we have used the actual performance through December 31,
2016, but neither approach includes dividend equivalent rights.
**If the named executive officers service with
the Company is terminated by reason of the Participants Retirement, the
unvested RSUs and PSUs continue to vest in accordance with their terms (time and
performance requirements) as though such termination of service had not occurred
provided that the executive complies with any applicable post-employment
covenants. Retirement means the Participant's termination of service with the
Company after December 31, 2018 having attained a combined age and years of
service with the Company equal to at least 65 with at least five years of
service with the Company (including our prior manager), other than termination
due to death or Disability or under circumstances that would not otherwise
constitute Cause.
(a) Death and Disability
The following incremental
benefits would be paid to a named executive officer or his estate or legal
representative in the event of his death or Disability:
(i)
Value of Accelerated Equity Awards
: For each of Messrs. Lambiase, Colligan,
Yarlagadda and Marria, the amount represents the aggregate value resulting from
the (i) immediate full vesting of all outstanding equity-based compensation
previously granted in connection with an Annual Bonus other than the PSUs
granted in connection with the TSR Bonus; (ii) immediate full vesting of the
2015 Equity Award; and, (iii) continuing vesting of any outstanding PSUs
previously granted in connection with the TSR Bonus, subject to the achievement
by the Company of the applicable performance goals and the applicable award
agreement.
For Mr. Kardis, the amount
represents the aggregate value resulting from the immediate full vesting of any
outstanding equity-based compensation previously granted.
(iii)
Other Benefits
: For each of the named executive officers, 100%
of the COBRA premiums incurred by such named executive officer for him and his
eligible dependents under the Companys healthcare plan during the 18 month
period following the named executive officers termination of employment.
38
Table of Contents
(b) Termination Without
Cause/Resignation for Good Reason
The following incremental
benefits would be paid to a named executive officer in the event he is
terminated without Cause or by such named executive officer for Good Reason
other than within 24 months following a Change in Control:
(i)
Severance
: For each of the named executive officers, a payment equal to one times
the sum of (a) his then current base salary and (b) the average of the Annual
Bonuses paid to him by the Company for the three (or fewer) calendar years
preceding such termination.
(ii)
Value of Accelerated Equity Awards
: For each of Messrs. Lambiase, Colligan,
Yarlagadda and Marria, the amount represents the aggregate value resulting from
the (i) immediate full vesting of all outstanding equity-based compensation
previously granted in connection with his Annual Bonus other than the PSUs
granted in connection with the TSR Bonus; (ii) immediate full vesting of the
2015 Equity Award; and (iii) continuing vesting of outstanding PSUs previously
granted in connection with the TSR Bonus, subject to the achievement by the
Company of applicable performance goals and the applicable award agreement.
For Mr. Kardis, the amount
represents the aggregate value resulting from the immediate full vesting of any
outstanding equity award previously granted.
For purposes of these
tables, we have assumed that the performance metric with respect to the PSUs has
been achieved.
(iii)
Other Benefits
: For each of the named executive officers, 100%
of the COBRA premiums incurred by such named executive officer for him and his
eligible dependents under the Companys healthcare plan during the 12 month
period following the named executive officers termination of employment.
(c)
Termination/Resignation upon Change in Control
The following incremental
benefits would be paid to a named executive officer in the event of the
termination of such named executive officers employment by the Company other
than for Cause or such named executive officers resignation of his employment
for Good Reason (other than Disability) within 24 months following a Change in
Control:
(i)
Severance
: For each of the named executive officers, a payment equal to one times
the sum of (a) his then current base salary and (b) the average of the Annual
Bonuses paid to him by the Company for the three (or fewer) calendar years
preceding such termination.
(ii)
Value of Accelerated Equity Awards and Pro-Rata
Bonus
: For each of Messrs.
Lambiase, Colligan, Yarlagadda and Marria, the amount represents the aggregate
value resulting from the (i) immediate full vesting of all outstanding
equity-based compensation previously granted in connection with his Annual Bonus
other than the PSUs granted in connection with the TSR Bonus; (ii) immediate
full vesting of the 2015 Equity Award; (iii) the immediate full vesting of all
PSUs granted in connection with the TSR Bonus that are eligible to vest solely
on the basis of continued employment; and (iv) a pro-rata portion of the ROAE
Bonus and the Discretionary Bonus he would have earned for the year of
termination based on the Companys ROAE and other applicable performance metrics
for such year, payable at the time such ROAE Bonus and Discretionary Bonus would
have been paid to Executive for such year absent such termination but no later
than March 15 of the immediately following year.
For Mr. Kardis, the amount
represents the aggregate value resulting from the (i) immediate full vesting of
all outstanding restricted stock and RSUs previously granted and (ii) a pro-rata
portion of the Guaranteed
39
Table of Contents
Annual Bonus and Discretionary Annual Bonus payable
for the year of termination when the Company pays bonuses to its employees
generally, but no later than March 15 of the immediately following year.
(iii)
Other Benefits
: For each of the named executive officers, 100%
of the COBRA premiums incurred by such named executive officer for him and his
eligible dependents under the Companys healthcare plan during the 18 month
period following the named executive officers termination of employment.
For a discussion of
employment agreements that we executed with certain of our named executive
officers in connection with the Internalization in August 2015, including
provisions related to change of control payments, see Compensation Discussion
and Analysis.
To receive the severance
benefits discussed above, the named executive officers must not breach any of
the covenants in the employment agreements that include confidentiality and
non-disparagement provisions, and during-employment and 12-month post-employment
non-compete/non-solicitation restrictions.
EQUITY COMPENSATION PLAN
INFORMATION
|
We have adopted an equity
incentive plan to provide incentives to our independent directors, employees,
and other service providers to stimulate their efforts toward our continued
success, long-term growth and profitability and to attract, reward and retain
personnel.
The following table
provides information as of December 31, 2016 concerning shares of our common
stock authorized for issuance under our existing equity incentive
plan.
|
|
Number of Securities
|
|
Weighted Average
|
|
Number of Securities
|
|
|
to
be Issued Upon
|
|
Exercise Price of
|
|
Remaining Available
|
|
|
Exercise of
|
|
Outstanding
|
|
for
Future Issuance
|
|
|
Outstanding Options,
|
|
Options, Warrants,
|
|
Under Equity
|
Plan Category
|
|
Warrants, and Rights
|
|
and Rights
|
|
Compensation Plans
|
Equity Compensation Plans Approved
|
|
|
|
|
|
|
by
Stockholders
|
|
-
|
|
-
|
|
6,756,812
|
Equity Compensation Plans Not
|
|
|
|
|
|
|
Approved by Stockholders
(1)
|
|
-
|
|
-
|
|
-
|
Total
|
|
-
|
|
-
|
|
6,756,812
|
(1) We do not have any
equity plans that have not been approved by our stockholders.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION
|
Our compensation committee
is comprised solely of the following independent directors: Messrs. Keenan
(Chair), Reilly and Creagh. None of them is serving or has served as an officer
or employee of us or any affiliate or has any other business relationship or
affiliation with us, except his service as a director, and there are no other
Compensation Committee interlocks that are required to be reported under the
rules and regulations of the Securities Exchange Act of 1934, as amended.
COMPENSATION OF DIRECTORS
|
We compensate only those
directors who are independent under the NYSE listing standards. Any member of
our Board of Directors who is an employee of ours following the internalization,
is not considered independent under the NYSE listing standards and did not (nor
will not) receive additional compensation for serving on our Board of
Directors.
40
Table of Contents
Our compensation committee,
together with FPL Associates L.P., a nationally-recognized compensation
consulting firm (FPL), reviews the components of the compensation arrangements
offered to our independent directors. As part of this process, our compensation
committee considers, among other things, the duties and responsibilities
associated with the position of each director and emerging trends and best
practices in director compensation.
Based upon the
recommendations of FPL and our compensation committees review of FPLs
analysis, our compensation committee recommended to our full Board of Directors,
and our Board of Directors approved, the following compensation arrangements
offered to our independent directors, effective for the 2016 calendar year: (i)
a cash retainer of $100,000 (which the independent directors may elect to
receive in shares of our common stock in lieu of cash), the cash component is
payable quarterly in equal installments and the stock component, if any, is
granted annually, (ii) an annual equity grant of $100,000, (iii) a non-executive
Chairperson of the Board of Directors retainer of $50,000; (iv) an Audit
Committee Chairperson retainer of $25,000, (v) a Compensation Committee
Chairperson retainer of $20,000, (vi) a Nominating and Corporate Governance
Committee Chairperson retainer of $15,000, and (vii) a Risk Committee
Chairperson retainer of $15,000.
We also reimburse our
directors for their travel expenses incurred in connection with their attendance
at full Board of Director and committee meetings. Our independent directors are
eligible to receive restricted common stock, options and other stock-based
awards under our equity incentive plan.
During 2016, we established
a Stock Award Deferral Program, described above under Nonqualified Deferred
Compensation Plans. Under this program, our directors can elect to defer
payment of stock awards until termination of their directorship or an earlier
specified date. Amounts deferred are tracked as deferred stock units, continue
to receive dividend equivalents, and are paid in actual shares. The compensation
committee felt that this program encourages directors long-term retention of
stock awards earned under our director compensation program.
The compensation committee
will, on an ongoing basis, continue to examine and assess our director
compensation practices relative to our compensation philosophy and objectives,
as well as competitive market practices and total stockholder returns, and will
make modifications to the compensation programs, as deemed appropriate.
2016 Director
Compensation
The table below summarizes
the compensation paid by us to our independent directors for the year ended
December
31, 2016.
|
|
Fees Earned or
|
|
|
|
|
Name
|
|
Paid in
Cash($)
|
|
Stock
Awards($)
(3)
|
|
Total($)
|
Mark
Abrams
|
|
115,000.00
|
|
100,000.00
|
|
215,000.00
|
Gerard Creagh
|
|
100,000.00
|
|
100,000.00
|
|
200,000.00
|
Paul
Donlin
(1)
|
|
165,000.00
|
|
100,000.00
|
|
265,000.00
|
Paul
A. Keenan
(2)
|
|
120,000.00
|
|
100,000.00
|
|
220,000.00
|
Dennis M. Mahoney
|
|
125,000.00
|
|
100,000.00
|
|
225,000.00
|
John
P. Reilly
|
|
100,000.00
|
|
100,000.00
|
|
200,000.00
|
|
(1)
|
In
accordance with the design of the director compensation program described
above, Mr. Donlin elected to receive common stock in lieu of $64,583.33
the cash payment for Board of Director fees earned during
2016.
|
|
(2)
|
In
accordance with the design of the director compensation program described
above, Mr. Keenan, elected to receive common stock in lieu of all of the
cash payment for Board of Director fees earned during 2016.
|
|
(3)
|
For
amounts under the column Stock Awards, we disclose the expenses
associated with the award measured in dollars and calculated in accordance
with FASB ASC Topic 718
Compensation Stock Compensation
.
|
41
Table of Contents
CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS
|
This section discusses
certain direct and indirect relationships and transactions involving us and
certain persons related to us.
Approval of Related
Person Transactions
Our Code of Business
Conduct and Ethics (the Code) requires all of our personnel to be scrupulous
in avoiding a conflict of interest with regard to our interests. The Code
prohibits us from entering into a business relationship with an immediate family
member or with a company in which the employee or immediate family member has a
substantial financial interest unless such relationship is disclosed to and
approved in advance by our Board of Directors.
Each of our directors and
executive officers is required to complete an annual disclosure questionnaire
and report all transactions with us in which they and their immediate family
members had or will have a direct or indirect material interest with respect to
us. We review these questionnaires and, if we determine it is necessary, discuss
any reported transactions with the entire Board of Directors. We do not,
however, have a formal written policy for approval or ratification of such
transactions, and all such transactions are evaluated on a case-by-case basis.
If we believe a transaction is significant to us and raises particular conflict
of interest issues, we will discuss it with our legal counsel, and if necessary,
we will form an independent board committee that has the right to engage its own
legal and financial counsel to evaluate and approve the transaction.
REPORT OF THE AUDIT
COMMITTEE
|
Since our inception, we
have had an audit committee composed entirely of non-employee directors. The
members of the audit committee meet the independence and experience requirements
of the NYSE. The Board of Directors has determined that Mr. Mahoney is the audit
committee financial expert and is an independent director within the meaning of
the applicable rules of the SEC and the NYSE. In 2016, the Committee met 6
times. The audit committee has adopted a written charter outlining the practices
it follows. A full text of our audit committee charter is available for viewing
on our website at
www.chimerareit.com
. Any
changes in the charter or key practices will be reflected on our website.
In
performing all of its functions, the audit committee acts only in an oversight
capacity, and necessarily, in its oversight role, the audit committee relies on
the work and assurances of our management, which has the primary responsibility
for financial statements and reports, and of the independent registered public
accounting firm, who, in its report, expresses an opinion on the conformity of
our annual financial statements to generally accepted accounting principles and
on the effectiveness of our internal control over financial reporting as of
year-end.
The audit committee has
reviewed and discussed our audited financial statements with management and with
Ernst & Young LLP (Ernst and Young), our independent auditors for
2016.
The audit committee has
discussed with Ernst & Young 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.
42
Table of Contents
The audit committee has
received from Ernst & Young the written statements required by PCAOB Rule
No. 3526, Communications with Audit Committees Concerning Independence, and
has discussed Ernst & Youngs independence with Ernst & Young, and has
considered the compatibility of non-audit services with the auditors
independence.
In reliance on these
reviews and discussions, and the report of the independent registered public
accounting firm, the audit committee recommended to our Board of Directors, and
our Board of Directors approved, that the audited financial statements be
included in our Annual Report on Form 10-K for the year ended December 31, 2016
for filing with the SEC. The audit committee also recommends the selection of
Ernst & Young to serve as independent public accountants for the fiscal year
ending December 31, 2017.
The foregoing report has
been furnished by the current members of the audit committee:
Dennis M. Mahoney,
Chair
Mark Abrams
Gerard Creagh
43
Table of Contents
PROPOSAL 2
CONSIDER AND VOTE UPON A
NON-BINDING ADVISORY VOTE
APPROVING EXECUTIVE
COMPENSATION
|
Pursuant to Section 14A of
the Exchange Act, we are seeking an advisory vote on executive compensation
matters. We currently seek such an advisory vote on an annual basis. The
stockholder vote will not be binding on us or the Board of Directors, and it
will not be construed as overruling any decision by us or the Board of Directors
or creating or implying any change to, or additional, duties for us or the Board
of Directors.
While this vote is advisory
and not binding on us, it will provide information to us and the compensation
and nominating/corporate governance committees regarding stockholder sentiment
about our executive compensation philosophy, policies and practices, which the
compensation and governance committee will be able to consider when determining
the appropriateness of our executive compensation.
At our 2016 Annual Meeting
of Stockholders, 84.27% of the votes cast on the say on pay proposal voted in
favor of our executive compensation. The compensation committee believes the
results of the 2016 say on pay vote demonstrated that stockholders generally
agreed with our compensation program and policies and the compensation of our
named executive officers.
The Board of Directors
recommends that stockholders vote in favor of the following
resolution:
RESOLVED, that the
compensation paid to the companys named executive officers, as disclosed
pursuant to Item 402 of Regulation S-K, including the Compensation Discussion
and Analysis, compensation tables and narrative discussion, is hereby APPROVED.
THE BOARD OF DIRECTORS
RECOMMENDS A VOTE FOR THE APPROVAL OF THIS RESOLUTION.
44
Table of Contents
PROPOSAL 3
APPROVAL OF A NON-BINDING
ADVISORY RESOLUTION ON THE FREQUENCY OF
STOCKHOLDER VOTING ON OUR
EXECUTIVE COMPENSATION
|
Pursuant to Section 14A of
the Exchange Act, we are seeking an advisory vote from stockholders as to
whether an advisory vote on executive compensation should occur every one, two
or three years. The option (every one, two or three years) receiving the
greatest number of for votes will be considered the frequency recommended by
stockholders. The stockholder vote will not be binding on us or the board of
directors, and it will not be construed as overruling any decision by us or the
board of directors or creating or implying any change to, or additional,
fiduciary duties for us or the board of directors.
A vote that occurs every
year will permit stockholders to evaluate our executive compensation program
against our long-term performance. We believe that our compensation program is
directly linked to our principal business objective of generating income for our
stockholders.
We take a long-term view
towards our performance, and therefore believe it is most appropriate for
stockholders to express their views on our compensation program every year. In
determining to recommend that the stockholders select a frequency of once every
year, our board of directors considered how an advisory vote at such frequency
will provide our stockholders with sufficient time to evaluate the effectiveness
of our overall compensation philosophy, objectives and practices in the context
of our long-term business results for such period, while avoiding overemphasis
on short-term fluctuations in compensation and business results that could occur
over shorter periods of time. An advisory vote occurring once every year will
also permit our stockholders to fully observe and evaluate the impact of any
changes to our executive compensation philosophy and objectives which have
occurred since the last advisory vote on executive compensation, including any
changes in response to the outcome of a prior advisory vote on executive
compensation.
If a stockholder has a
concern about our compensation program and would like to contact us, our board
of directors and our Compensation Committee may be contacted either individually
or as a group at any time as noted under Board Meetings and
CommitteesCommunications with the board of directors in this Proxy Statement.
THE BOARD OF DIRECTORS
RECOMMENDS THAT YOU SELECT EVERY YEAR FOR THE FREQUENCY OF ADVISORY VOTES ON
EXECUTIVE COMPENSATION.
45
Table of Contents
PROPOSAL 4
RATIFICATION OF APPOINTMENT OF
INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
|
Our audit committee has
appointed Ernst & Young LLP, or Ernst & Young, to serve as our
independent registered public accounting firm for the fiscal year ending
December 31, 2017, and stockholders are asked to ratify the selection at the
Annual Meeting. We expect that representatives of Ernst & Young will be
present at the Annual Meeting, will have the opportunity to make a statement if
they desire to do so and will be available to respond to appropriate questions.
If the appointment of Ernst & Young is not ratified, our audit committee
will reconsider the appointment.
THE BOARD OF DIRECTORS
RECOMMENDS A VOTE FOR THE RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG
LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE YEAR 2017.
Relationship with
Independent Registered Public Accounting Firm
Expenses are generally
accrued when services are provided. The aggregate fees billed for 2016 and 2015
for each of the following categories of services are set forth below:
Audit Fees
: The aggregate fees incurred by Ernst & Young
for audits and reviews of our 2016 financial statements and the Companys
internal control over financial reporting were approximately $3 million. The
aggregate fees incurred by Ernst & Young for audits and reviews of our 2015
financial statements were approximately $3 million. The aggregate fees incurred
by Ernst & Young for the audit of the Companys internal control over
financial reporting were approximately $1 million for 2015.
Tax Fees
: The aggregate fees billed by Ernst & Young
for tax services, including tax compliance and tax advice for 2016 were $172
thousand. The aggregate fees billed by Ernst & Young for tax services for
2015 were $108 thousand.
All Other
Fees
: Other fees billed by Ernst
& Young during 2016 were $444,000 related to review of securitization deals
and other SEC filings. Other fees billed by Ernst & Young during 2015 were
$165,000 related to the review of a securitization deal.
The audit committee has
also adopted policies and procedures for pre-approving all non-audit work
performed by our independent registered public accounting firm. Specifically,
the audit committee pre-approved the use of Ernst & Young for the following
categories of non-audit services: merger and acquisition due diligence and audit
services; tax services; internal control reviews; employee benefit plan audits;
and reviews and procedures that we request Ernst & Young to undertake to
provide assurance on matters not required by laws or regulations. In each case,
the audit committee also set a specific annual limit on the amount of such
services that we would obtain from Ernst & Young, required management to
report the specific engagements to the audit committee on a quarterly basis and
also required management to obtain specific pre-approval from the audit
committee for any engagement over five percent of the total amount of revenues
estimated to be paid by us to Ernst & Young during the then current fiscal
year. Our audit committee approved the hiring of Ernst & Young to provide
all of the services detailed above prior to Ernst & Youngs engagement. None
of the services related to the audit-related fees described above was approved
by the audit committee pursuant to a waiver of pre-approval provisions set forth
in the applicable rules of the SEC.
46
Table of Contents
Section 16(A) Beneficial
Ownership Reporting Compliance
We believe that, based
solely upon our review of copies of forms we have received or written
representations from reporting persons, during the fiscal year ended December
31, 2016, all filing requirements under Section 16(a) of the Exchange Act,
applicable to our officers, directors and beneficial owners of more than ten
percent of our common stock were complied with on a timely basis.
Access to Form 10-K
On written request, we
will provide without charge to each record or beneficial holder of our common
stock as of April 3, 2017 a copy of our annual report on Form 10-K for the year
ended December 31, 2016, as filed with the SEC. You should address your request
to Investor Relations, Chimera Investment Corporation, 520 Madison Avenue, 32nd
Floor, New York, NY 10022 or email your request to us at
investor@chimerareit.com.
We make available on our
website,
www.chimerareit.com,
under
InvestorsFilings & ReportsSEC Filings, free of charge, our annual
reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form
8-K and amendments to those reports as soon as reasonably practicable after we
electronically file or furnish such materials to the SEC.
Stockholder Proposals
Any stockholder intending
to present a proposal pursuant to Rule 14a-8 of the Exchange Act at our 2018
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 20, 2017.
In addition, pursuant to
our current bylaws, any stockholder proposal for consideration at the 2018
annual meeting submitted outside the processes of Rule 14a-8 of the Exchange
Act, including any stockholder nominations for our Board of Directors, must be
received by us not earlier than 150 days nor later than 5:00 p.m. Eastern Time
120 days prior to the first anniversary of the date of the proxy statement for
the preceding years annual meeting (or between November 20, 2017 and 5:00 p.m.
Eastern Time on December 20, 2017, based on the date this years Proxy Statement
of April 17, 2017).
Any such nomination or
proposal should be sent to Secretary, Chimera Investment Corporation, 520
Madison Avenue, 32nd Floor, New York, NY 10022 and, to the extent applicable,
must include the information required by our current bylaws.
Other Matters
As of the date of this
Proxy Statement, the Board of Directors does not know of any matter that will be
presented for consideration at the annual meeting other than as described in
this Proxy Statement.
47
Table of
Contents
2017 ANNUAL MEETING OF
STOCKHOLDERS
RESERVATION REQUEST FORM
If you wish to
view
Chimera Investment Corporations
2017 Annual
Meeting of Stockholders webcast at the offices of
Venable LLP (located at 750 E. Pratt Street, Suite 900, Baltimore, MD 21202),
please complete the following information and return to Phillip J. Kardis II,
Chief Legal Officer and Corporate Secretary, Chimera Investment Corporation, 520
Madison Avenue, 32nd Floor, New York, NY 10022. Please note that no members of
management or of the Board of Directors will be present at Venable LLPs
offices.
Your
name and address:
|
|
|
|
|
|
|
|
Number of Shares of
CIM
|
|
Common Stock You
Hold:
|
|
If the shares
listed above are not registered in your name, please identify the name of the
registered stockholder below
and
include evidence that you beneficially own the shares
.
Registered Stockholder:
|
|
|
(Name of Your Bank, Broker or Other
Nominee)
|
Table of
Contents
CHIMERA INVESTMENT CORPORATION
ATTN: ROBERT COLLIGAN
520 MADISON
AVENUE
32ND
FLOOR
NEW YORK, NY
10022
VOTE BY INTERNET
Before The Meeting
- Go to
www.proxyvote.com
Use the Internet to
transmit your voting instructions and for electronic delivery of information up
until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date.
Have your proxy card in hand when you access the web site and follow the
instructions to obtain your records and to create an electronic voting
instruction form.
During The
Meeting
- Go to
www.virtualshareholdermeeting.com/CIM2017
You may attend the Meeting
via the Internet and vote during the Meeting. Have the information that is
printed in the box marked by the arrow available and follow the
instructions.
VOTE BY PHONE -
1-800-690-6903
Use any
touch-tone telephone to transmit your voting instructions up until 11:59 P.M.
Eastern Time the day before the cut-off date or meeting date. Have your proxy
card in hand when you call and then follow the instructions.
VOTE BY
MAIL
Mark, sign and date your
proxy card and return it in the postage-paid envelope we have provided or return
it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY
11717.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS
FOLLOWS:
|
|
|
E23772-P90066
|
|
KEEP THIS PORTION FOR YOUR
RECORDS
|
|
DETACH AND RETURN THIS PORTION ONLY
|
THIS PROXY CARD IS VALID ONLY WHEN SIGNED
AND DATED.
|
CHIMERA INVESTMENT
CORPORATION
|
|
The Board of
Directors recommends you vote FOR all nominees, FOR proposals 2 and 4 and
"EVERY YEAR" for proposal 3.
|
1.
|
|
Election of Directors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nominees:
|
|
For
|
|
Against
|
|
Abstain
|
|
|
|
|
|
|
|
|
|
|
|
1a.
|
|
Paul Donlin
|
|
☐
|
|
☐
|
|
☐
|
|
|
|
|
|
|
|
|
|
|
|
1b.
|
|
Mark Abrams
|
|
☐
|
|
☐
|
|
☐
|
|
|
|
|
|
|
|
|
|
|
|
1c.
|
|
Gerard Creagh
|
|
☐
|
|
☐
|
|
☐
|
|
|
|
|
For
|
|
Against
|
|
Abstain
|
2.
|
|
The proposal to
approve a non-binding advisory resolution on executive
compensation.
|
|
|
|
☐
|
|
☐
|
|
☐
|
|
|
|
|
Every
Year
|
|
Every
2 Years
|
|
Every
3 Years
|
|
Abstain
|
3.
|
|
The proposal to
approve a non-binding advisory resolution on the frequency of stockholder
voting on the Company's executive compensation.
|
|
☐
|
|
☐
|
|
☐
|
|
☐
|
|
|
|
|
For
|
|
Against
|
|
Abstain
|
4.
|
|
Ratification of the
appointment of Ernst & Young LLP as independent registered public
accounting firm for the Company for the 2017 fiscal year.
|
|
☐
|
|
☐
|
|
☐
|
NOTE:
The proxies are authorized
to vote in their discretion upon any other matter that may properly come
before the meeting or any adjournment(s) or postponement(s)
thereof.
|
|
|
|
|
|
|
|
|
Please sign exactly
as your name(s) appear(s) hereon. When signing as attorney, executor,
administrator, or other fiduciary, please give full title as such. Joint
owners should each sign personally. All holders must sign. If a
corporation or partnership, please sign in full corporate or partnership
name by authorized officer.
|
|
|
|
|
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Signature [PLEASE SIGN WITHIN BOX]
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Signature (Joint Owners)
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Table of
Contents
Important Notice
Regarding the Availability of Proxy Materials for the Annual Meeting:
The Notice and Proxy
Statement and Annual Report are available at
www.proxyvote.com.
CHIMERA INVESTMENT
CORPORATION
This proxy is solicited by the Board of Directors
Annual
Meeting of Stockholders
June 1, 2017
The undersigned hereby
authorizes and appoints Matthew Lambiase and Robert Colligan, and each of them,
proxies, with full power of substitution, to appear on behalf of the undersigned
and to vote all shares of common stock, par value $0.01 per share, of Chimera
Investment Corporation, a Maryland Corporation (the "Company"), that the
undersigned is entitled to vote at the Annual Meeting of Stockholders of the
Company to be held via a live webcast, commencing at 10:00 a.m., New York time,
on Thursday, June 1, 2017 and at any postponement or adjournment thereof, as
fully and effectively as the undersigned could do if personally present and
voting, hereby approving, ratifying and confirming all that said attorneys and
agents or their substitutes may lawfully do in place of the undersigned as
indicated below. The undersigned hereby acknowledges receipt of the Notice of
Annual Meeting of Stockholders and of the accompanying Proxy Statement, the
terms of each of which are incorporated by reference herein, and revokes any
proxy heretofore given with respect to such meeting.
When properly executed,
the votes entitled to be cast by the undersigned will be cast in the manner
directed herein. If the proxy is executed but no such direction is made, the
votes entitled to be cast by the undersigned will be cast "FOR" all director
nominees, "FOR" proposals 2 and 4 and "EVERY YEAR" for proposal 3 in
accordance with the Board of Directors' recommendations. The votes entitled to
be cast by the undersigned will be cast in the discretion of the proxy holder on
any other matters as may properly come before the Annual Meeting of
Stockholders.
Continued and to be
signed on reverse side
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