-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RLuSNDEeOPnNV3cmamT9tCl/C/VU8xQR1xl+Irq/D0jLxRU//0zEZX+mJD4KNK+8 KwrqxJGM7IEOSyet7DjGjw== 0000950136-00-000426.txt : 20000411 0000950136-00-000426.hdr.sgml : 20000411 ACCESSION NUMBER: 0000950136-00-000426 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20000515 FILED AS OF DATE: 20000329 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ANNALY MORTGAGE MANAGEMENT INC CENTRAL INDEX KEY: 0001043219 STANDARD INDUSTRIAL CLASSIFICATION: ASSET-BACKED SECURITIES [6189] IRS NUMBER: 223479661 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: SEC FILE NUMBER: 001-13447 FILM NUMBER: 582284 BUSINESS ADDRESS: STREET 1: 1500 HARBOR ST CITY: WEEHAWKEN STATE: NJ ZIP: 07087 BUSINESS PHONE: 2012231900 MAIL ADDRESS: STREET 1: 1500 HARBOR BLVD CITY: WEEHAWKEN STATE: NJ ZIP: 07087 DEF 14A 1 DEFINITIVE PROXY SCHEDULE 14A INFORMATION PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934 Filed by the Registrant [X] Filed by a Party other than the Registrant [ ] Check the appropriate box: [ ] Preliminary Proxy Statement [ ] Confidential, For Use of the Commission [X] Definitive Proxy Statement Only (as permitted by Rule 14a-6(e)(2)) [ ] Definitive Additional Materials [ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12 ANNALY MORTGAGE MANAGEMENT, INC. (Name of Registrant as Specified In Its Charter) (Name of Person(s) Filing Proxy Statement, if Other Than the Registrant) Payment of Filing Fee (Check the appropriate box): [X] No fee required. [ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. 1) Title of each class of securities to which transaction applies: ....................................................................... 2) Aggregate number of securities to which transaction applies: ....................................................................... 3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): ....................................................................... 4) Proposed maximum aggregate value of transaction: ....................................................................... 5) Total Fee paid: ....................................................................... [ ] Fee paid previously with preliminary materials. [ ] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. 1) Amount Previously Paid: ....................................................................... 2) Form, Schedule or Registration Statement no.: ....................................................................... 3) Filing Party: ....................................................................... 4) Date Filed: ....................................................................... ANNALY MORTGAGE MANAGEMENT, INC. 12 EAST 41ST STREET, SUITE 700 NEW YORK, NEW YORK 10017 ------------------------ NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 15, 2000 ------------------------ To the Stockholders of ANNALY MORTGAGE MANAGEMENT, INC.: The 2000 Annual Meeting of Stockholders of Annaly Mortgage Management, Inc. ("we" or "us") will be held at the offices of Morgan, Lewis & Bockius LLP, 101 Park Avenue, New York, New York 10178, on the 39th floor, on Monday, May 15, 2000 at 9:00 a.m., New York time, for the following purposes: (1) To elect two Class I directors for a term of three years. (2) To ratify the selection of Deloitte & Touche LLP as our independent auditors for the current fiscal year. (3) To transact such other business as may properly come before the meeting or any adjournments or postponements. Provision is made on the enclosed proxy card for your direction as to the matters set forth as Items (1) and (2) above. Further information concerning these matters is set forth in the accompanying proxy statement. Holders of record of our common stock at the close of business on March 15, 2000 are entitled to receive notice of and to vote at our 2000 annual meeting of stockholders and at any adjournment or postponement. IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT OUR ANNUAL MEETING WHETHER OR NOT YOU ARE PERSONALLY ABLE TO ATTEND. IF YOU DO NOT EXPECT TO ATTEND THE MEETING IN PERSON, WE URGE YOU TO PLEASE SIGN AND DATE THE ACCOMPANYING PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE. THIS WILL ENSURE THAT YOUR SHARES ARE VOTED IN ACCORDANCE WITH YOUR WISHES AND THAT A QUORUM WILL BE PRESENT AT THE ANNUAL MEETING. By order of the Board of Directors MICHAEL A. J. FARRELL Chairman of the Board and Chief Executive Officer New York, New York March 31, 2000 ANNALY MORTGAGE MANAGEMENT, INC. 12 EAST 41ST STREET, SUITE 700 NEW YORK, NEW YORK 10017 ----------------------- 2000 ANNUAL MEETING OF STOCKHOLDERS ----------------------- PROXY STATEMENT SOLICITATION Annaly Mortgage Management, Inc. ("we" or "us") is furnishing this proxy statement in connection with our solicitation of proxies to be voted at our 2000 annual meeting of stockholders. We will hold the annual meeting at the offices of Morgan, Lewis & Bockius LLP, 101 Park Avenue, New York 10178, on the 39th floor, on , May 15, 2000, at 9:00 a.m., New York time, and any postponements or adjournments thereof. We are sending this proxy statement and the enclosed proxy to our stockholders commencing on or about March 31, 2000. Our principal executive offices are located at 12 East 41st Street, Suite 700, New York, New York 10017. We will solicit proxies primarily by mail but may also solicit proxies in person, by telephone or facsimile or through our internet website (www.annaly.com), in each case, by our officers and employees who will not be additionally compensated for these activities. We will request brokers, nominees, fiduciaries and other persons holding stock in their names for others, or holding stock for others who have the right to give voting instructions, to forward proxy material to their principals and request authority for the execution of the proxy. We will bear the total cost of soliciting proxies. VOTING You will only be entitled to vote at the meeting if you were a holder of record of our common stock at the close of business on the record date, March 15, 2000. There were 13,743,363 shares of common stock outstanding on the record date, and each stockholder will be entitled to one vote at the meeting for each share registered in the stockholder's name on the record date. Holders of common stock are not entitled to cumulate their votes on any matter to be considered at the meeting. The presence at the meeting, in person or by proxy, of the holders of a majority of the total number of shares of common stock outstanding on the record date constitutes a quorum for the transaction of business at the meeting. All properly executed proxies delivered pursuant to this solicitation and not revoked will be voted at the annual meeting in accordance with the directions given. Regarding the election of directors to serve until the 2003 annual meeting of stockholders, in voting by proxy, you may vote in favor of all nominees, withhold your vote as to all nominees or withhold your vote as to specific nominees. With respect to the proposal to ratify Deloitte & Touche LLP as our independent auditors for the current fiscal year, you may vote in favor of the proposal or against the proposal, or you may abstain from voting. You should specify your choices on the enclosed form of proxy. If you do not provide specific instructions on all the matters to be acted upon, the shares represented by a signed proxy will be voted FOR the election of all nominees and FOR the proposal to ratify the selection of Deloitte & Touche LLP as our independent auditors for the current fiscal year. Directors will be elected by a plurality of the votes cast by the holders of the shares of common stock voting in person or by proxy at the annual meeting. Ratification of the selection of our independent auditors will require the affirmative vote of the holders of a majority of the votes cast. Abstentions will have no effect on any of the foregoing votes. Broker non-votes will not be included in vote totals and will have no effect on the outcome of the vote. If you submit a proxy, you may revoke it at any time prior to the voting of the proxy by written notice to our Secretary or by attending the meeting and voting your shares in person. After the initial mailing of this proxy statement, our officers and employees may solicited proxies in person, by mail, telephone or facsimile or through our website, but they will not receive any additional compensation for this activity. We will pay all expenses with respect to this solicitation of proxies, including printing and postage costs. Our agents and we will make arrangements with brokers and other custodians, nominees and fiduciaries to send proxies and the proxy material to their principals and, upon request, we will reimburse them for their reasonable expenses in doing so. We may engage an outside proxy soliciting firm to assist in the solicitation of proxies. We will pay reasonable fees and out-of-pocket costs and expenses if we elect to engage such a firm. PROPOSAL I ELECTION OF DIRECTORS At the annual meeting, the stockholders will vote to elect two Class I directors, whose terms will expire at our annual meeting of stockholders in 2003, subject to the election and qualification of their successors or to their earlier death, resignation or removal. The persons named in the enclosed proxy will vote to elect Spencer I. Browne and Wellington J. St. Claire as Class I directors, unless you withhold the authority of these persons to vote for the election of any or all of the nominees by marking the proxy to that effect. Both of these individuals currently are directors. RECOMMENDATION OF OUR BOARD OF DIRECTORS CONCERNING THE ELECTION OF DIRECTORS Our board of directors recommends a vote FOR Spencer I. Browne and Wellington J. St. Claire as directors to hold office until our annual meeting of stockholders in 2003 and until their respective successors are duly elected and qualified. The persons named in the enclosed proxy will vote your proxy in favor of these nominees unless you specify a contrary choice in your proxy. DIRECTORS We have three classes of directors. Our class I directors serve until our annual meeting of stockholders in 2000; our class II directors serve until our annual meeting of stockholders in 2001; and our class III directors serve until our annual meeting of stockholders in 2002. Set forth below are the names and certain information on each of our directors. -2- CLASS I DIRECTORS Spencer I. Browne, age 50, was elected on January 28, 1997 to serve as a director of Annaly. Mr. Browne has held various executive and management positions with several publicly traded companies engaged in businesses related to the residential and commercial mortgage loan industry. From August 1988 until September 1996, Mr. Browne served as President, Chief Executive Officer and a director of Asset Investors Corporation (AIC), a New York Stock Exchange traded company he co-founded in 1986. He also served as President, Chief Executive Officer and a director of Commercial Assets, Inc., an American Stock Exchange traded company affiliated with AIC, from its formation in October 1993 until September 1996. In addition, from June 1990 until March 1996, Mr. Browne served as President and a director of M.D.C. Holdings, Inc., a New York Stock Exchange traded company and the parent company of a major homebuilder in Colorado. Mr. Browne also has served as a director of Altiva Financial Corporation since November 1996 and Convergent Communications, Inc. since December 1999. Wellington J. St. Claire, age 36, was elected on December 5, 1996 to serve as Vice Chairman of the Board and a director of Annaly with responsibility for managing our portfolio. She has been Senior Vice President of Fixed Income Discount Advisory Company, a registered investment advisor (FIDAC), from March 1995 to the present, Treasurer since July 1994 and Chief Investment Officer since February 1997. From July 1994 through March 1995 she was a Vice President of FIDAC. Ms. St. Claire has been the portfolio manager for the Floating Rate Fund since its inception in August 1994. Prior to joining FIDAC, from March 1992 to July 1994, Ms. St. Claire had been Vice President responsible for asset selection and financing at Citadel Funding Corporation. Prior to joining Citadel she had been a trader on the mortgage-backed securities desk at Schroder Wertheim and Co., Inc. She has attended the New York Institute of Finance for intense mortgage-backed securities studies. CLASS II DIRECTORS Kevin P. Brady, age 44, was elected on January 28, 1997 to serve as a director. Mr. Brady is the principal of KPB Associates Inc., an accounting firm that specializes in corporate taxation, finance and software consulting. Mr. Brady founded KPB Associates Inc. in December 1993. From July 1986 through November 1993, Mr. Brady worked for PriceWaterhouseCoopers in New York City where he concentrated on international tax planning for multinational corporations and held a number of senior management positions. Prior to joining PriceWaterhouseCoopers, Mr. Brady worked in the corporate tax department of Merck & Co. Mr. Brady is a Certified Public Accountant. Timothy J. Guba, age 42, was elected on December 5, 1996 to serve as President, Chief Operating Officer and a director of Annaly. Mr. Guba joined FIDAC in March 1995 as a Senior Vice President to assist FIDAC's financial institutional clients with securities financing management. From April 1991 to December 1994, Mr. Guba worked as a Vice President at Paine Webber Inc. in its Taxable Fixed Income Department specializing in mortgage-backed securities. Mr. Guba was President of JPC Brokers Inc., a subsidiary of Fundamental Brokers, from 1988 through 1991. He was responsible for a staff of 35 employees and a daily transactional volume of over $300 million in mortgage-backed securities. Mr. Guba was a Senior Vice President at L.F. Rothschild Mortgage Capital from 1986 to 1988, specializing in trading of mortgage pass-through certificates, where he established L.F. Rothschild as a member in the FNMA and FHLMC selling groups. Mr. Guba began his career in 1980 at Morgan Guaranty Trust Company in the Treasurer's Department trading various money market instruments. Mr. Guba has a BS in Finance and Business Management from Cornell University. -3- Donnell A. Segalas, age 42, was elected on January 28, 1997 to serve as a director of Annaly. Mr. Segalas is a Principal of Maplewood Partners, L.L.C., a private equity investment fund. Prior to his joining Maplewood Partners, Mr. Segalas was a Managing Director at Rodman & Renshaw, Inc. in the mortgage-backed securities department from 1994 to June 1997. In December 1995, Mr. Segalas was also given the additional responsibility to manage Rodman & Renshaw's Structured Finance Group. From 1990 to 1994, Mr. Segalas served as Senior Vice President in the mortgage-backed securities department at Tucker Anthony, Inc., where he co-managed the firm's structured finance group. Prior to that time, Mr. Segalas had been a Senior Vice President at Smith Barney, Inc. and Corporate Vice President at Drexel Burnham Lambert. CLASS III DIRECTORS Michael A. J. Farrell, age 48, was elected on December 5, 1996 to serve as Chairman of the Board and Chief Executive Officer of Annaly. Since November 1994, he has been the President and CEO of FIDAC. He is a member of the boards of directors of the U.S. Dollar Floating Rate Fund and the Tellus Asia Recovery Fund. Prior to founding FIDAC, from February 1992 to July 1994, Mr. Farrell served as President of Citadel Funding Corporation. From April 1990 to January 1992, Mr. Farrell was a managing director for Schroder Wertheim & Co. Inc. in the fixed income department. In addition to being the former Chairman of the Primary Dealers Operations Committee of the Public Securities Association (from 1981 through 1985) and its mortgage-backed securities division, he is a former member of the Executive Committee of its Primary Dealers Division. Prior to his employment with Schroder Wertheim, Mr. Farrell had been President of L.F. Rothschild Mortgage Capital, Inc., Vice President of Trading at Morgan Stanley and Co., Inc., and Senior Vice President of Merrill Lynch and Co., Inc. Mr. Farrell began his career at E.F. Hutton and Company in 1971. Mr. Farrell has 25 years of experience in fixed income trading, management and operations. Jonathan D. Green, age 53, was elected on January 28, 1997 to serve as a director of Annaly. Mr. Green has been the President and Chief Executive Officer of Rockefeller Center Management Corporation ("RCMC") and Rockefeller Center Development Corporation ("RCDC"), subsidiaries of The Rockefeller Group ("RGI"), from July 1995 to the present. Mr. Green joined RGI in 1980 as Assistant Vice President and Real Estate Counsel, was appointed Vice President, Secretary and General Counsel in 1983, and was elected Chief Corporate Officer in 1991. As President of RCMC, Mr. Green is responsible for all aspects of RGI's real estate ownership and management interests in Rockefeller Center in midtown Manhattan. As President of RCDC, Mr. Green oversees RGI's real estate development projects including the International Trade Center in Morris County, New Jersey and Rockefeller Plaza West in midtown Manhattan. Before joining RGI, Mr. Green was affiliated with the New York City law firm of Thacher, Proffitt & Wood. John A. Lambiase, age 60, was elected on January 28, 1997 to serve as a director of Annaly. Mr. Lambiase was managing director in global operations at Salomon Brothers from 1985 through his retirement in 1991. Mr. Lambiase joined Salomon in 1979 as director of internal audit. Mr. Lambiase has served as Chairman of the Mortgage-Backed Securities Clearance Corporation, a member of the board of directors of Prudential Home Mortgage and a member of the Board of the National Securities Clearance Corporation, and was a founding director and Chairman of the Participation Trust Company. Mr. Lambiase also served on Salomon's Credit Committee. Prior to joining Salomon, from 1972 through 1979, Mr. Lambiase was President of Loeb Rhodes Wall Street Settlement Corporation with responsibility for securities clearance of over 130 member firms. Prior to Loeb Rhodes, Mr. Lambiase had been the Chief Financial Officer and a General Partner of W.E. Hutton. Mr. Lambiase is a Certified Public Accountant. -4- MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS The members of our compensation committee are Spencer Browne, John Lambiase and Donnell Segalas. The compensation committee administers our Long-Term Stock Incentive Plan and recommends changes to that Plan to our board when appropriate. The compensation committee also approves compensation for our officers. The members of our audit committee are Kevin Brady, Jonathan Green and John Lambiase. The audit committee recommends to our board the engagement or discharge of independent public accountants, reviews the plan and results of the auditing engagement with our Chief Financial Officer and our independent public accountants, and reviews with our Chief Financial Officer the scope and nature of our internal auditing system. The members of our nominating committee are Kevin Brady, Michael Farrell and Timothy Guba. The nominating committee recommends to the board persons to be nominated as directors or to be elected to fill vacancies on the board. The nominating committee will consider nominees recommended by our stockholders. These recommendations should be submitted in writing to our Secretary. During our fiscal year ended December 31, 1999, our Board of Directors held six meetings. During 1999, the compensation committee held two meetings, the audit committee held two meetings and the nominating committee held one meeting. Each director attended at least 75% of the aggregate number of meetings held by the Board and 75% of the aggregate number of meetings of each committee on which he served. COMPENSATION OF DIRECTORS We pay an annual director's fee to each director who is not an officer or employee (an "independent director") equal to $10,000, a fee of $500 for each meeting of the Board or any committee attended by each independent director (or $250 for any meeting at which the director participates by conference telephone call) and reimbursement of costs and expenses of all directors for attending these meetings. Directors who are officers or employees do not receive an annual director's fee or a fee for attending Board or committee meetings. Our Long-Term Stock Incentive Plan (the "Incentive Plan") provides that each independent director, upon appointment to the Board, receives a non-discretionary automatic grant of non-qualified stock options for the purchase of 5,000 shares of common stock; these options vest in four equal installments over a period of four years form the date of grant. In addition, each independent director is entitled to receive on June 26 of each year that he or she serves as a director options to purchase an additional 1,250 shares of common stock; these options vest on the date of grant. The exercise price for each option is the fair market value of our common stock as of the date on which the option is granted. Independent directors also are entitled to receive discretionary awards under the Incentive Plan. On November 18, 1999, we granted to each independent director options to purchase 20,000 shares of common stock at an exercise price of $8.63, the closing price of our common stock as of the date of grant; these options vest in four equal installments on November 18, 2000, 2001, 2002 and 2003. -5- MANAGEMENT Name Position - ---- -------- Michael A. J. Farrell Chairman of the Board and Chief Executive Officer Timothy J. Guba President and Chief Operating Officer Wellington J. St. Claire Vice Chairman of the Board and Chief Investment Officer Kathryn F. Fagan Chief Financial Officer and Treasurer Biographical information on Mr. Farrell, Mr. Guba and Ms. St. Claire is provided above. Certain biographical information for Ms. Fagan is set forth below. Kathryn F. Fagan, age 33, was employed by Annaly on April 1, 1997 in the positions of Chief Financial Officer and Treasurer. From June 1, 1991 to February 28, 1997, Ms. Fagan was Chief Financial Officer and Controller of First Federal Savings & Loan Association of Opelousas, Louisiana. First Federal is a publicly owned savings and loan that converted to the stock form of ownership during her employment period. Ms. Fagan's responsibilities at First Federal included all financial reporting, including reports for internal use and reports required by the SEC and the Office of Thrift Supervision. Her duties also included asset/liability management, internal control compliance and the management of First Federal's investment portfolio. During the period from September 1988 to May 1992, Ms. Fagan was employed as a bank and savings and loan auditor by John S. Dowling & Company, a corporation of Certified Public Accountants. Ms. Fagan is a Certified Public Accountant and has a Masters Degree in Business Administration. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth certain information as of March 10, 2000 relating to the beneficial ownership of our common stock by (i) all persons that we know beneficially own more than 5% of our outstanding common stock, (ii) each of our executive officers and directors and (iii) all of our officers and directors as a group. Except as otherwise indicated, to our knowledge, each stockholder listed below has sole voting and investment power with respect to the shares beneficially owned by the stockholder.
SHARES BENEFICIALLY OWNED BENEFICIAL OWNER NUMBER PERCENT - ---------------- ------ ------- Michael A.J. Farrell .............................. 124,269(1) * Timothy J. Guba.................................... 94,837(2) * Wellington J. St. Claire........................... 98,835(3) * Kathryn F. Fagan................................... 10,931(4) * Kevin P. Brady..................................... 10,625(5)(6) * Spencer I. Browne.................................. 16,625(5) * Jonathan D. Green.................................. 11,625(5) * -6- SHARES BENEFICIALLY OWNED ------------------------- BENEFICIAL OWNER NUMBER PERCENT - ---------------- -------- --------- John A. Lambiase................................... 31,625(5) * Donnell A. Segalas................................. 18,025(5) * DePrince, Race & Zollo, Inc........................ 201 South Orange Avenue, Suite 800 Orlando, FL 32801 951,700 6.9% Thomson Horstmann & Bryant, Inc.................... Park 80 West, Plaza Two Saddle Brook, NJ 07663 761,000 5.5% All Executive Officers and Directors as a Group (10 persons).................................. 477,397(1)(2) (3)(4)(5)(6) 3.4%
- -------------- * Represents beneficial ownership of less than one percent of the common stock. (1) Includes 27,108 shares of common stock subject to options granted under the Incentive Plan to Mr. Farrell that were exercisable as of March 10, 2000 or have or will first become exercisable within 60 days after such date. (2) Includes 34,837 shares of common stock subject to options granted under the Incentive Plan to Mr. Guba that were exercisable as of March 10, 2000 or have or will first become exercisable within 60 days after such date. (3) Includes 47,510 shares of common stock subject to vested options granted under the Incentive Plan to Ms. St. Claire that were exercisable as of March 10, 2000 or have or will first become exercisable within 60 days after such date. (4) Includes 7,731 shares of common stock subject to vested options granted under the Incentive Plan to Ms. Fagan that were exercisable as of March 10, 2000 or have or will first become exercisable within 60 days after such date. (5) Includes 9,125 shares of common stock subject to options granted under the Incentive Plan to each of Kevin P. Brady, Spencer I. Browne, Jonathan D. Green and Donnell A. Segalas that were exercisable as of March 10, 2000 or have or will first become exercisable within 60 days after such date and 6,625 shares of common stock subject to options granted under the Incentive Plan to John A. Lambiase that were exercisable as of March 10, 2000 or have or will first become exercisable within 60 days after such date. (6) Includes 1,500 shares of common stock held by certain members of Mr. Brady's immediate family. -7- EXECUTIVE COMPENSATION SUMMARY COMPENSATION TABLE The table below sets forth the aggregate compensation we paid or accrued during our fiscal years ended December 31, 1999, 1998 and 1997 to our Chief Executive Officer and our other executive officers at March 10, 2000.
SUMMARY COMPENSATION TABLE LONG-TERM ANNUAL COMPENSATION(1) COMPENSATION(2) ---------------------- ---------------------------- AWARDS ---------------------------- SECURITIES RESTRICTED UNDERLYING SALARY BONUS STOCK AWARDS OPTIONS NAME AND PRINCIPAL POSITION YEAR ($) ($) ($)(3) (#) - --------------------------- ------ -------- -------- ------------ ---------- Michael A.J. Farrell............ 1999 $250,000 $100,000 $0 60,000 Chairman of the Board and 1998 $250,000 $75,534 $2,734(3) 70,413 Chief Executive Officer(1) 1997 $103,750 $0 $0 78,750 Timothy J. Guba................. 1999 $200,000 $25,000 $0 27,000 President and Chief 1998 $200,000 $20,427 $1,091(3) 35,085 Operating Officer 1997 $85,062 $0 $0 78,750 Wellington J. St. Claire........ 1999 $200,000 $50,000 $0 40,000 Vice Chairman and 1998 $200,000 $40,427 $1,091(3) 60,985 Portfolio Manager 1997 $85,212 $0 $0 78,750 Kathryn F. Fagan................ 1999 $125,000 $25,000 $0 27,000 Chief Financial Officer 1998 $125,000 $20,267 $551(3) 34,843 1997 $63,745 $0 $0 0
- -------------- (1) None of the executive officers received perquisites or benefits that totaled the lesser of $50,000 or 10% of his or her salary plus bonus payments. (2) At December 31, 1999, Mr. Farrell, Mr. Guba, Ms. St. Claire and Ms. Fagan held 80,474, 60,000, 51,325 and 3,200 shares of restricted stock, respectively, with values (based on the closing market price of our common stock on December 31, 1999, which was $8.75 per share) of $704,148, $525,060, $449,094 and $28,000, respectively. We pay dividends on the restricted stock when and as paid on our common stock. (3) Based on the closing market price of our common stock on March 6, 1998, the date of grant, which was $11.25 per share. OPTIONS GRANTED The following table sets forth information relating to grants of stock options to our executive officers during our fiscal year ended December 31, 1999. We granted all of these options pursuant to our Incentive Plan. -8-
OPTION GRANTS IN LAST FISCAL YEAR INDIVIDUAL GRANTS ---------------------------------------------------- PERCENT OF POTENTIAL REALIZABLE VALUE NUMBER OF TOTAL OPTIONS AT ASSUMED ANNUAL RATES OF SECURITIES GRANTED TO EXERCISE STOCK PRICE APPRECIATION FOR UNDERLYING EMPLOYEES OR BASE OPTION TERM OPTIONS IN FISCAL PRICE EXPIRATION ----------------------- NAME GRANTED (#) YEAR ($/SH) DATE 5%($) 10%($) - ---- ----------- ---- ------ ---- ----- ------ Michael A.J. Farrell........ 60,000(1) 30.0% $8.63 11/18/2009 $325,642 $825,240 Timothy J. Guba............. 27,000(1) 13.5% $8.63 11/18/2009 $146,539 $371,358 Wellington J. St. Claire.... 40,000(1) 20.0% $8.63 11/18/2009 $217,094 $550,160 Kathryn F. Fagan............ 27,000(1) 13.5% $8.63 11/18/2009 $146,539 $371,358
- -------------- (1) On November 18, 1999, we granted to Mr. Farrell, Mr. Guba, Ms. St. Claire and Ms. Fagan, respectively, incentive stock options to purchase 60,000, 27,000, 40,000 and 27,000 shares of our common stock, respectively, at an exercise price of $8.63 per share. These options vest in four equal installments on November 18, 2000, November 18, 2001, November 18, 2002 and November 18, 2003. We granted these options pursuant to our Incentive Plan. EXERCISES AND VALUES OF OPTIONS The following table sets forth certain information regarding options exercised during the calendar year 1999, and held at year end, by our executive officers. AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED UNDERLYING UNEXERCISED IN-THE-MONEY SHARES VALUE OPTIONS AT FY-END OPTIONS AT FY-END ACQUIRED ON REALIZED (#) ($)(1) NAME EXERCISE (#) ($)(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE - ---- ------------ ------ ------------------------- ------------------------- Michael A.J. Farrell.......... 16,687 $79,263 23,704/152,085 $10,726/$197,914 Timothy J. Guba............... 16,687 $79,263 14,988/92,473 $5,472/$177,756 Wellington J. St. Claire...... 19,500 $92,625 27,661/125,074 $39,654/$191,469 Kathryn F. Fagan.............. 1,000 $620 7,731/53,112 $4,743/$19,329
- -------------- (1) Based on the closing sale price of our common stock on the New York Stock Exchange on December 31, 1999 ($8.75 per share). EMPLOYMENT AGREEMENTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL ARRANGEMENTS We have entered into employment agreements with Mr. Farrell, Mr. Guba, Ms. St. Claire and Ms. Fagan. Each employment agreement provides for a term through December 31, 2000 and is automatically extended for an additional year at the end of each year of the employment agreement, unless the officer or we provides a prior written notice to the contrary. Each employment agreement provides for annual salaries to Mr. Farrell, Mr. Guba, Ms. St. Claire and Ms. Fagan based upon our book value. Mr. Farrell's employment agreement provides for an annual salary equal to 0.20% of our book -9- value, subject to a maximum per annum amount of $250,000; Mr. Guba's and Ms. St. Claire's employment agreements provide for annual salaries equal to 0.17% of our book value, subject to a maximum per annum amount of $200,000; and Ms. Fagan's employment agreement provides for an annual salary equal to 0.10% of our book value, subject to a maximum per annum amount of $125,000. Our "book value" is defined in the employment agreements as the aggregate amounts reported on our balance sheet as "Stockholders' Equity," excluding any adjustments for valuation reserves (i.e., changes in the value of our portfolio of investments as a result of mark-to-market valuation changes). Our Board and the compensation committee evaluate base salary quarterly and upon the raising of additional equity and they may, at their discretion, raise the salary caps for our executive officers. Base salary can also be lowered at management's discretion based upon our cash flow needs. To date, the Board has not revised the salary caps set forth in the employment agreements. Pursuant to the employment agreements, the executive officers are entitled to participate in our benefit plans, including the Incentive Plan. In addition, the Board has established a bonus incentive compensation plan for our executive officers. This program permits the Board, in its discretion, to award cash bonuses annually to our executive officers. Each employment agreement provides for the officer to receive his or her base salary and bonus compensation to the date of the termination of employment by reason of death, disability or resignation and to receive base compensation to the date of the termination of employment by reason of a termination of employment for cause as defined in the employment agreement. Each employment agreement also provides for the subject officer to receive, in the event that we terminate the officer's employment without cause, or if the officer resigns for "good reason" (as defined in the employment agreement), an amount, 50% payable immediately and 50% payable in monthly installments over the succeeding twelve months, equal to three times the greater of the officer's combined maximum salary base and actual bonus compensation for the preceding fiscal year or the average for the three preceding years of the officer's combined actual base salary and bonus compensation, subject in each case to a maximum amount of 1% of our book equity value (exclusive of valuation adjustments) and a minimum amount of $250,000. Section 280G of the Code may limit our ability to deduct these payments for Federal income tax purposes. Each employment agreement also contains a "non-compete" provision prohibiting the officer from managing, controlling, participating in or operating a competing REIT for a period of one year following termination of employment following our termination of the officer without cause or resignation of the subject officer for "good reason." Providing services to Fixed Income Discount Advisory Company (an affiliate) and its customers is expressly excluded from operation of the "non-compete" provision. In addition, all outstanding options and other awards granted to an officer under our Incentive Plan immediately vest upon his or her termination without cause or termination for "good reason." "Good reason" under the employment agreements includes certain events resulting in a change of control of Annaly. "Change of Control" includes a merger or consolidation of Annaly, a sale of all or substantially all of our assets, changes in the identity of a majority of the members of our board (other than due to the death, disability or age of a director) or acquisitions of more than 9.8% of the combined voting power of our capital stock, subject to certain limitations. Each agreement requires that the officer act in accordance with provisions of Maryland law relating to corporate opportunities. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION Our compensation committee is comprised solely of the following outside directors: Spencer I. Browne, John A. Lambiase and Donnell A. Segalas. None of them has served as an officer or employee of Annaly or any affiliate or has any other business relationship or affiliation with Annaly, except his service as a director. -10- REPORT OF THE COMPENSATION COMMITTEE The compensation structure for Annaly's executive officers and directors has been developed with consideration for the following objectives: 1.Incentives for Management to Maximize Performance. Annaly has designed its compensation policy to provide the proper incentives to management to maximize Annaly's performance in order to serve the best interests of our stockholders. Annaly has sought to achieve this objective through the granting of stock options under the Incentive Plan, the award of compensation pursuant to Annaly's bonus incentive compensation program, and employment agreements with its executive officers where compensation is dependent upon Annaly's book value. To date, Annaly's executive officers, pursuant to the Incentive Plan, have been granted options to purchase, in the aggregate, 591,576 shares of common stock with exercise prices ranging from $4.00 to $11.25. Over 99% of these options vest in equal installments over a three, four or five-year period from the date of grant. During 1999, Annaly granted 154,000 stock options to its executive officers. All of these options were granted with an exercise price equal to the closing price of Annaly's common stock as of the date of the grant. Annaly's Board also has adopted a bonus incentive compensation program for executive officers. This program permits the compensation committee, in its discretion, to award bonuses to our officers and employees based upon individual performance, company performance, or such other factors as the compensation committee determines to be appropriate. Bonuses may be paid in the form of cash, stock options or other forms of compensation as determined appropriate by the compensation committee. In 1999, bonuses were paid in the form of stock options under the Plan and cash. All of the stock options granted during 1999 vest over a four-year period. Awards during 1999 were based upon guidelines established by the compensation committee with the assistance of Performance Management, LLC, an outside compensation consultant engaged by Annaly. One important factor considered in these awards was Annaly's performance relative to its competitors and in the context of adverse market conditions during 1999. Pursuant to employment agreements entered into between Annaly and its executive officers, base compensation for the officers is calculated as a percentage of Annaly's "book value." This arrangement was established based upon Annaly's view at the time that successful performance by Annaly would result in the Annaly's ability to raise additional capital. In the short term, as a result of various factors, including the relatively weak performance of Annaly's industry segment, this has not occurred. However, the committee believes that, in the long term, Annaly's ability to raise additional capital will correlate with its performance. 2.Long-Term Commitment of Management. The committee believes that the long-term commitment of its current management team is a crucial factor in Annaly's future performance. This team includes Messrs. Farrell and Guba, and Ms. St. Claire, who have worked together at FIDAC since March 1995 and at Annaly since its incorporation in November 1996 and its commencement of operations in February 1997, and Ms. Fagan, who has worked at Annaly since April 1997. To ensure the long-term commitment of its management team, Annaly, with the approval of the Board, has entered into employment agreements with Messrs. Farrell and Guba and Mss. St. Claire and Fagan. Each of these agreements provides for a term through December 31, 2000 with automatic one-year extensions unless Annaly or the officer provides written notice to the contrary. Consistent with the foregoing, Annaly has structured its executive compensation policies to promote the long-term commitment of management. A significant portion of management compensation -11- is in the form of stock options. In addition, as indicated above, over 99% of the stock options granted by Annaly since inception have been options with vesting periods of three, four or five years. 3.Comparability with Competitors' Compensation Structures. In assisting Annaly to develop guidelines for its compensation structure, including the bonus incentive program, the compensation consultant engaged by Annaly looked to the compensation structures of other publicly held mortgage REITS and other publicly held companies in the financial services industry. Annaly believes its management compensation structure, is consistent, generally, with the management compensation structure of comparable companies. Annaly will continue to monitor whether its compensation structure is consistent with the compensation structure of its competitors. 4.Compensation of Non-Employee Directors. Upon the recommendation of Annaly's compensation consultant, Annaly granted to each of its non-employee directors during 1999 options to purchase 1,250 shares vesting immediately and options to purchase 20,000 shares of common stock vesting in equal installment over a four-year period. The four-year vesting period for these options is intended to promote the long-term commitment of these directors. The compensation consultant has informed the committee that its compensation structure for non-employee directors is consistent, generally, with the compensation structure for non-employee directors of comparable companies. The foregoing report has been furnished by the current members of the compensation committee: Spencer I. Browne John A. Lambiase Donnell A. Segalas PERFORMANCE ANALYSIS The following graph provides a comparison of our cumulative total stockholder return and the cumulative stockholder return of the Standard & Poor's Composite-500 Stock Index ("S&P 500") and the BBG REIT Mortgage Index (the "BBG Index"), an industry index of 11 tax-qualified mortgage REITs. The comparison is for the period from October 8, 1997 (the date on which our common stock commenced trading on the New York Stock Exchange) to December 31, 1999 and assumes the reinvestment of any dividends. The initial price of our common stock shown in the graph below is based upon the price to public of $12.00 in our initial public offering on October 8, 1997. The closing price of our common stock quoted on the New York Stock Exchange at the close of business on October 8, 1997 was $12.63 per share. Upon written request, we will provide stockholders with a list of the REITs included in the BBG Index. The historical information set forth below is not necessarily indicative of future performance. -12- [LINE CHART] 10/8/97 12/31/97 12/31/98 12/31/99 ------- -------- -------- -------- Annaly 100 89 77 92 S&P 500 Index 100 98 126 151 BBG REIT Mortgage 100 78 59 47 PROPOSAL II RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS The accounting firm of Deloitte & Touche LLP (D&T) has served as our independent auditors since our formation in November 1996. During this time, it has performed accounting and auditing services for us. We expect that representatives of D&T will be present at the meeting, will have the opportunity to make a statement and will be available to respond to appropriate questions. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE SELECTION OF DELOITTE & TOUCHE LLP AS OUR INDEPENDENT AUDITORS FOR THE YEAR 2000. -13- OTHER BUSINESS As of the date of this proxy statement, we are not aware of any other matters that will be presented by management for consideration at the annual meeting. If any other matters properly come before the meeting, the persons named as proxies in the enclosed form of proxy intend to vote in accordance with their judgment on the matters presented. PROPOSALS OF STOCKHOLDERS Proposals, if any, of our stockholders intended to be presented at the 2001 annual meeting of stockholders must be received by us for inclusion in the appropriate proxy materials no later than December 1, 2000. SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE The Company believes that, during the fiscal year ended December 31, 1999, all filing requirements under Section 16(a) of the Securities Exchange Act of 1934, as amended, applicable to its officers, directors and greater than ten percent stockholders were complied with on a timely basis. OTHER MATTERS On written request, we will provide without charge to each record or beneficial holder of our common stock as of March 15, 2000 a copy of our annual report on Form 10-K for the year ended December 31, 1999, as filed with the Securities and Exchange Commission. You should address your request to Mr. Timothy J. Guba, President, Annaly Mortgage Management, Inc., 12 East 41st Street, Suite 700, New York, New York 10017. By Order of the Board of Directors, Michael A. J. Farrell Chairman of the Board and Chief Executive Officer March 31, 2000 ANNALY MORTGAGE MANAGEMENT, INC. ANNUAL MEETING OF STOCKHOLDERS - MAY 15, 2000 Revoking all prior proxies, the undersigned hereby appoints Michael A. J. Farrell, Timothy J. Guba and Wellington J. St. Claire, 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 $.01 per share, of Annaly Mortgage Management, Inc. (the "Company") that the undersigned is entitled to vote at the Annual Meeting of Stockholders of the Company to be held at the offices of Morgan, Lewis & Bockius LLP, 101 Park Avenue, New York, New York 10178, on the 39th floor, commencing at 9:00 a.m., New York time, on May 15, 2000, and at any 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. WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE LISTED NOMINEES AS DIRECTORS AND FOR THE PROPOSAL TO RATIFY THE SELECTION OF DELOITTE & TOUCHE LLP AS INDEPENDENT AUDITORS FOR THE COMPANY FOR THE CURRENT FISCAL YEAR. THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS (Continued and to be signed on reverse side) PLEASE MARK YOUR VOTE AS INDICATED IN THIS EXAMPLE: [X] 1. Election of Directors: [ ] FOR all nominees [ ] WITHHOLD AUTHORITY to [ ] EXCEPTIONS listed to the right vote for all nominees listed below Nominees: SPENCER I. BROWNE, WELLINGTON J. ST. CLAIRE (Instructions: To withhold authority to vote for any nominee, mark the "Exceptions" box and write that nominee's name in the space provided below.) - ------------------------------------------------------ 2. Ratification of the selection of Deloitte & Touche LLP as independent auditors for the Company for the current fiscal year. [ ] FOR [ ] AGAINST [ ] ABSTAIN IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING AND ANY ADJOURNMENT THEREOF. Please sign, date and return the proxy card using the enclosed envelope. PLEASE CHECK HERE IF YOU PLAN TO ATTEND THE ANNUAL MEETING [ ] ----------------------------------------- Signature ----------------------------------------- Signature ----------------------------------------- Date PLEASE SIGN EXACTLY AS YOUR NAME APPEARS ON THE LEFT. WHEN SIGNING AS AN ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE YOUR FULL TITLE. IF SHARES ARE HELD JOINTLY, EACH HOLDER SHOULD SIGN. -----END PRIVACY-ENHANCED MESSAGE-----