NLY Annaly Capital Management Inc

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.     )

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Annaly Management, Inc.

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Message from our Chief Executive Officer & Chief Investment Officer

Dear Fellow Shareholders,

These are challenging times as individuals, businesses and governments around the world grapple with the COVID-19 pandemic. While the human toll is at the forefront of our mind, and our thoughts are with those infected by the virus, we understand that the resultant market volatility has intensified the uncertainty of the current environment. It is my privilege to lead Annaly at this critical juncture, having been named as Annaly’s CEO and a member of the Board in March 2020. As I joined the Company in 2013 and have served as Chief Investment Officer since 2016, I am keenly aware of Annaly’s legacy of strong financial performance, which has endured through significant market and economic upheaval for over 20 years. While delivering industry-leading returns has always been, and will always be, a driving force at Annaly, I am equally proud of the relationships the Firm has cultivated – with our shareholders, our employees, our business partners and our communities. These relationships have never been as important as they are now.

Annaly’s Board and management team are deeply committed to listening and responding to the feedback and priorities of all stakeholders. Every year, we invite our employees to participate in an anonymous engagement survey, with the aim of creating an open and honest forum that allows the Company to identify strengths, key themes and targeted areas for improvement. Annaly’s highly engaged employees are the Company’s greatest asset. Like many of you, our employees are working from home to best protect our families and communities. The collaboration, ingenuity and drive of our team as we navigate the new normal inspires me daily. Our Board is similarly committed to the future of this Company, and while we haven’t been able to gather together in person in recent weeks, we stay in close communication.

Despite the challenges of recent events, Annaly is focused on continuing to engage with shareholders through a wide range of virtual mediums. The views and concerns of our shareholders have contributed to the adoption of a number of best-in-class practices over the last few years, including amending our bylaws to declassify the Board to provide shareholders with an annual vote on Director elections. Annaly’s commitment to accountability and transparency to our shareholders is perhaps best exemplified by our recently announced decision to internalize the Company’s management function and transition from an externally-managed REIT to an internally-managed REIT. The Internalization, which is expected to close in the second quarter of 2020, will further align incentives between management and shareholders and provide an opportunity for incremental cost control and operating flexibility.

The decision to internalize reflects the shared commitment of the Board and management to the long-term interests of our Company and our shareholders. I am incredibly grateful to Annaly’s outstanding management team, particularly to Glenn Votek, the Company’s former Chief Financial Officer who served as Interim Chief Executive Officer prior to my appointment and now serves as a Senior Advisor to the Company and a continuing member of our Board. I am equally indebted to the Company’s other Directors for their insight, guidance and support, including Jonathan Green, who is stepping down from the Board following the Annual Meeting after many years of exemplary service, Thomas Hamilton, who served as the Company’s Independent Board Chair during the CEO transition period, and Michael Haylon, who has agreed to serve as Independent Board Chair at this historic time. The Board’s unwavering confidence in Annaly’s management team and our strategy has enabled the Company to achieve compelling results in challenging operating environments – which is a tradition we take seriously.

I would also like to thank each of the 180+ Annaly employees whose unique and diverse expertise and perspectives have powered the Company’s success and created our indelible culture. We believe that culture begins with mission and at Annaly being a responsible steward of capital is an important part of that mission. Through our investment strategy, Annaly finances housing across the country, supports the vitality of local communities and strengthens the long-term growth of the economy. This commitment abides through all market and economic cycles.

While much has changed since our last Annual Meeting of Shareholders, our focus on delivering strong results and sustainable, long-term growth for our shareholders has not. We hope that you’ll join us for this year’s Annual Meeting, which will be conducted via an inclusive and interactive virtual meeting format. We invite you to submit any questions you may have through our pre-meeting shareholder forum or at the Annual Meeting and to communicate with us at any time through the avenues outlined in the Investors section of our website. We know that it is with your continued partnership and support that we will emerge as a stronger and more resilient Company than before.

Sincerely,

David L. Finkelstein

Chief Executive Officer & Chief Investment Officer

April 8, 2020

Notice of Annual Meeting of Stockholders

To the Stockholders of Annaly Capital Management, Inc.:

Annaly Capital Management, Inc., a Maryland corporation (“Annaly” or the “Company”), will hold its annual meeting of stockholders (the “Annual Meeting”) on May 20, 2020, at 9:00 a.m. (Eastern Time) online at www.virtualshareholdermeeting.com/NLY2020:

The Company will also transact any other business as may properly come before the Annual Meeting or any postponement or adjournment thereof. Only common stockholders of record at the close of business on March 23, 2020, the record date for the Annual Meeting, may vote at the Annual Meeting and any postponements or adjournments thereof.

Your vote is very important. Please exercise your right to vote.

The Company’s Board of Directors (“Board”) is soliciting proxies in connection with the Annual Meeting. The Company is sending the Notice of Internet Availability of Proxy Materials (“Notice”), or a printed copy of the proxy materials, as applicable, commencing on or about April 8, 2020.

To view the Proxy Statement and other materials about the Annual Meeting, go to www.proxydocs.com/NLY or www.proxyvote.com.

All stockholders are cordially invited to attend the Annual Meeting, which will be conducted via a live webcast. The Company believes that the virtual meeting format allows enhanced participation of, and interaction with, our global stockholder base, while also being sensitive to the public health and travel concerns that our stockholders may have in light of the COVID-19 pandemic. During the upcoming virtual meeting, you may ask questions and will be able to vote your shares electronically from your home or any remote location with Internet connectivity. You may also submit questions in advance of the Annual Meeting by visiting www.proxyvote.com. The Company will respond to as many inquiries at the Annual Meeting as time allows.

An audio broadcast of the Annual Meeting will also be available to stockholders by telephone toll-free at 1-877-328-2502. If you plan to attend the Annual Meeting online or listen to the telephonic audio broadcast, you will need the 16-digit control number included in your Notice, on your proxy card or on the instructions that accompany your proxy materials. Please note that listening to the audio broadcast will not be deemed to be attending the Annual Meeting, and you cannot ask questions or vote from such audio broadcast. The Annual Meeting will begin promptly at 9:00 a.m. (Eastern Time). Online check-in will begin at 8:30 a.m. (Eastern Time), and you should allow ample time for the online check-in procedures.

By Order of the Board of Directors,

Anthony C. Green

Chief Corporate Officer, Chief Legal Officer and Secretary

April 8, 2020

Proxy Summary

This summary contains highlights about the Company and the Annual Meeting. This summary does not contain all of the information that you should consider in advance of the Annual Meeting, and the Company encourages you to read the entire Proxy Statement and the Company’s 2019 Annual Report on Form 10-K carefully before voting.

VOTING Stockholders may vote by

INTERNET www.proxyvote.com

TELEPHONE 1-800-690-6903

MAIL completing and returning their proxy card

ONLINE at the Annual Meeting   INFORMATION www.proxydocs.com/NLY

 

 

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ANNALY AT A GLANCE

INTERNALIZATION

The Company has been externally-managed by Annaly Management Company LLC (the “Manager”) since July 2013. On February 12, 2020, the Company announced the signing of a definitive agreement pursuant to which it will acquire the Manager, and transition from an externally-managed REIT to an internally-managed REIT (the “Internalization”).⁽²⁾ Pursuant to the agreement (the “Internalization Agreement”), the Company will acquire the equity interests of the Manager and its affiliates, which are owned by certain of the Company’s current executive officers, for a nominal cash purchase price ($1.00). The Internalization underscores the Company’s commitment to further align the interests of management and stockholders and demonstrates the Company’s continued efforts toward enhanced governance practices that incorporate the views of long-term stockholders. The Internalization is expected to close during the second quarter of 2020.

RECENT OPERATING ACHIEVEMENTS

Note: For footnoted information, please refer to “Annaly at a Glance, Internalization & Recent Operating Achievements” in Endnotes section.

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ANNALY’S DIVERSIFIED SHARED CAPITAL MODEL

Diversification is a key component of the Annaly strategy, which has four distinct investment groups. The Company’s diversification strategy is designed to achieve stable risk-adjusted returns and book value performance over various interest rate and economic cycles by pairing shorter duration floating-rate credit loans and securities with the Company’s longer duration, fixed-rate agency portfolio.

The Company has 38 investment options across its four investment groups, which is nearly three times more than in 2013. While managing investment decisions, the Company combines a robust capital allocation process with careful risk management. This process enables Annaly to take advantage of market fluctuations and inefficiencies and rotate into credit markets when dislocations occur and pricing is attractive on a risk-adjusted, relative value basis.

Note: For footnoted information, please refer to “Annaly’s Diversified Shared Capital Model” in Endnotes section.

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DELIVERING SIGNIFICANT VALUE FOR STOCKHOLDERS

Since inception, Annaly has declared $20 billion in cumulative common and preferred dividends to stockholders, returning significant value to stockholders.

THE MANAGER’S 2019 EXECUTIVE COMPENSATION PROGRAM

Until the closing of the Internalization, as during all of 2019, the Company will continue to be externally-managed by the Manager through the authority delegated to it in the Management Agreement. Pursuant to the Management Agreement, the Company pays the Manager a management fee, the purpose of which is not to provide compensation to the Manager’s employees (including the named executive officers or “NEOs”), but rather to compensate the Manager for the services it provides for the day-to-day management of the Company. In 2019, the Manager used a portion of the proceeds from its management fees to pay compensation to the NEOs other than the Company’s former Chairman, Chief Executive Officer and President (who did not receive any compensation for serving in these roles, but had an ownership interest in the management fees until his departure from the Company and the Manager in November 2019).

Upon closing of the Internalization, all employees of the Manager will become employees of the Company, the Company will no longer pay a management fee to the Manager, and the Company going forward will pay the compensation of all employees, including the NEOs. While the Compensation Committee of the Board will review and approve the Company’s executive compensation program following the closing of the Internalization, the Manager made all compensation determinations for the NEOs in 2019 without any direction by the Compensation Committee or the Board and without reference to any specific policies or programs under their oversight. As an internally-managed company, the Company will provide detailed disclosure about its executive compensation program, including compensation tables and related narrative disclosure, in future proxy statements.

Note: For footnoted information, please refer to “Delivering Significant Value for Stockholders” in Endnotes section.

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For 2019, the Manager has provided the following information about its executive compensation program to enable the Company’s stockholders to make an informed Say-on-Pay vote:

For additional information about the Manager, the management agreement and executive compensation, see “Certain Relationships and Related Party Transactions,” “Compensation Paid by the Manager to the Named Executive Officers” and “Compensation Discussion and Analysis.”

THE COMPANY’S 2020 EQUITY INCENTIVE PLAN

Stockholders are being asked to vote on a proposal to approve the adoption of the Company’s 2020 Equity Incentive Plan (the “2020 Plan”). As no new awards were permitted to be made under the Company’s 2010 Equity Incentive Plan (the “2010 Plan”) after March 22, 2020, the tenth anniversary of the 2010 Plan’s adoption by the Board, the Company desires a new vehicle for making equity compensation awards. Following the closing of the Internalization, the Board expects that the 2020 Plan will be a critical part of the internally-managed Company’s compensation program for executive officers and employees as it believes that equity awards align employee and stockholder interests, link employee compensation to Company performance and support the Company’s ownership culture.

Highlights of the 2020 Plan include:

Note: For footnoted information, please refer to “The Manager’s 2019 Executive Compensation Program” in Endnotes section.

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STOCKHOLDER OUTREACH AND RESULTS OF 2019 SAY-ON-PAY VOTE

The Company is committed to ongoing engagement with both retail and institutional stockholders through a wide range of mediums, including: in-person meetings, conferences, phone calls and electronic communication. Following the results of Annaly’s 2019 advisory resolution on executive compensation (commonly known as a “Say-on-Pay” vote), which received support from over 83% of votes cast, the Company has continued its multi-pronged stockholder outreach campaign to solicit feedback on a number of issues, including (i) the Company’s management structure and compensation disclosure, (ii) the leadership structure of the Board, (iii) the Company’s stockholder rights framework, and (iv) the Company’s corporate responsibility and environmental, social and governance (“ESG”) initiatives.

Annaly’s stockholder engagement efforts generated significant feedback for both the Board and management and have resulted in a number of enhancements to the Company’s management structure and its corporate governance, corporate responsibility and compensation practices and disclosures over the last few years. Annaly’s stockholders have been extremely instrumental to, and supportive of, these governance and disclosure enhancements and the Company looks forward to continuing to find innovative ways to engage over the course of 2020 and beyond.

2019-2020 STOCKHOLDER ENGAGEMENT EFFORTS

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BOARD COMPOSITION, STRUCTURE AND REFRESHMENT

Over the last few years, the Board had adopted a number of enhancements that are intended to result in regular Board refreshment. In December 2018, the Company announced that the Board had amended the Company’s bylaws to declassify the Board beginning with the 2019 annual meeting of stockholders (“2019 Annual Meeting”) with all Directors standing for annual election commencing with the 2021 annual meeting of stockholders (“2021

Note: For footnoted information, please refer to “Board Composition, Structure and Refreshment” in Endnotes section

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Annual Meeting”). At the same time, the Company disclosed that the Board had adopted an enhanced refreshment policy requiring that Independent Directors may not stand for re-election following the earlier of their 12^th anniversary of Board service or their 73^rd birthday. In extraordinary circumstances, the Board may determine that an Independent Director may stand for re-election after having reached such age or term limit for up to three additional one-year terms.

ENVIRNOMENTAL, SOCIAL AND GOVERNANCE (“ESG”)

As a responsible steward of capital, Annaly takes into account ESG factors that contribute to the Company’s ability to drive positive impacts and deliver attractive risk-adjusted returns over the long term. The Company integrates ESG considerations into its overall strategy and provides information in six key areas: corporate governance, human capital, responsible investments, risk management, ethics and integrity and the environment.

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Table of Contents

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Corporate Governance at Annaly

The Company is committed to maintaining a strong ethical culture and robust governance practices that benefit the long-term interests of stockholders, which include:

Note: For footnoted information, please refer to “Corporate Governance at Annaly” in Endnotes section.

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“NCG” refers to the Nominating/Corporate Governance Committee and “CR” refers to the Corporate Responsibility Committee.

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DIRECTOR NOMINEES STANDING FOR ONE-YEAR TERMS

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DIRECTORS WHOSE CURRENT TERMS EXPIRE IN 2021

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RECENT CORPORATE GOVERNANCE AND CORPORATE RESPONSIBILITY HIGHLIGHTS

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GOVERNING DOCUMENTS

Code of Business Conduct and Ethics

The Board has adopted a Code of Business Conduct and Ethics (the “Code of Conduct”), 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 business. This Code of Conduct is applicable to Annaly’s Directors, executive officers and employees, and is also a “code of ethics” as defined in Item 406(b) of Regulation S-K. The Company will make any legally required disclosures regarding amendments to, or waivers of, provisions of the Code of Conduct on the Company’s website.

Corporate Governance Guidelines

The Board has adopted Corporate Governance Guidelines that, in conjunction with the charters of the Board Committees, provide the framework for governance of the Company.

Other Governance Policies

Annaly’s Directors, executive officers and employees are also subject to the Company’s other governance policies, including a Foreign Corrupt Practices Act and Anti-Bribery Compliance Policy, an Insider Trading Policy, and a Regulation FD Policy.

Where You Can Find the Code of Conduct, Corporate Governance Guidelines and Committee Charters

The Code of Conduct, Corporate Governance Guidelines, Compensation Committee Charter, Audit Committee Charter, NCG Committee Charter, Corporate Responsibility Committee Charter and Risk Committee Charter are available on Annaly’s website (www.annaly.com). The Company will provide copies of these documents free of charge to any stockholder who sends a written request to Investor Relations, Annaly Capital Management, Inc., 1211 Avenue of the Americas, New York, NY 10036.

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Board Committees

The Board has five standing Committees: the Audit Committee, the Compensation Committee, the NCG Committee, the Risk Committee and the Corporate Responsibility (“CR”) Committee.

The table below shows the membership as of the date of this Proxy Statement of each Board Committee and number of Committee meetings held in 2019.

Director		Audit Committee		Compensation Committee		NCG Committee		CR Committee		Risk Committee
Francine J. Bovich								•
Wellington J. Denahan†								•		•
Katie Beirne Fallon						•		•
David L. Finkelstein
Jonathan D. Green†(1)				•						•
Thomas Hamilton		•								•
Kathy Hopinkah Hannan		E				•
Michael Haylon*		• E								•
John H. Schaefer		•		•
Donnell A. Segalas						•		•
Glenn A. Votek
Vicki Williams		•		•
% of Independent Members:		100%		100%		100%		80%		80%
2019 Meetings:		14		9		4		2		3

•

Member

Chair

E

Financial Expert

†

Vice Chair of the Board            * Independent Chair of the Board

Committee Membership Determinations

The Board annually reviews the membership and chairship of each Board Committee as part of its broader Board and Committee refreshment and succession planning. This review, which is led by the NCG Committee, takes into account, among other factors, the needs of the Committees, the experience, availability and projected tenure of Directors and the desire to balance Committee continuity with fresh insights. For additional detail, see the “Board Effectiveness, Self-Evaluations and Refreshment” section of this Proxy Statement.

Note: For footnoted information, please refer to “Board Committees” in Endnotes section.

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Note: For footnoted information, please refer to “Audit Committee & Compensation Committee” in Endnotes section.

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Note: For footnoted information, please refer to “Corporate Responsibility Committee, NCG Committee & Risk Committee” in Endnotes section.

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Board Structure and Processes

Over the last few years, the Board has focused on enhancing its structure, composition and effectiveness. Recent enhancements, including declassifying the Board and separating the roles of the Chair of the Board and CEO, have been informed by the Board’s annual self-evaluation and succession planning processes, its review of evolving best practices and feedback from the Company’s long-term stockholders.

BOARD LEADERSHIP STRUCTURE

In November 2019, the Board separated the roles of Chair of the Board and CEO. While the Board believes that whether to have the same person occupy the offices of Chair of the Board and CEO should be decided by the Board from time to time in its business judgment, the Board has determined that having strong independent Board leadership in the form of an Independent Chair is in the best interests of the Company at this time. In addition to the Chair, the Board may elect one or more Vice Chairs to assist the Chair from among its members. Currently, Mr. Haylon serves as Independent Chair of the Board and Ms. Denahan and Mr. J. Green serve as Vice Chairs. After the Annual Meeting, Mr. J. Green will step down from the Board and Ms. Denahan will continue as Vice Chair.

The separation of the CEO and Chair roles allows Mr. Finkelstein to focus on the Company’s overall business and strategy, while allowing Mr. Haylon to focus his attention on governance of the Board and oversight of management. Ms. Denahan will support Mr. Haylon in carrying out certain of his responsibilities. The Board believes that its independent oversight function is further enhanced by its policy to hold regular executive sessions of the Independent Directors without management present and the fact that a majority of the Company’s Directors (and every member of the Audit Committee, Compensation Committee and NCG Committee) is independent.

INDEPENDENCE OF DIRECTORS

Annaly’s Corporate Governance Guidelines and NYSE rules require that at least a majority of Board members are Independent Directors. The Board has adopted the definition of “independent director” set forth in Section 303A of the NYSE rules and has affirmatively determined that each Director (other than Ms. Denahan and Messrs. Finkelstein and Votek) has no relationships with the Company other than as a Director (either directly or as partner, stockholder or officer of an organization that has a relationship with the Company) and is therefore independent under all applicable criteria for independence in accordance with the standards set forth in the NYSE rules and Annaly’s Corporate Governance Guidelines.

EXECUTIVE SESSIONS OF INDEPENDENT DIRECTORS

The Corporate Governance Guidelines require that the Board have at least two regularly scheduled executive sessions of Independent Directors each year. These executive sessions, which are designed to promote unfettered discussions among the Independent Directors, are presided over by the Independent Chair of the Board. During 2019, the Independent Directors, without the participation of Board members who are members of management, held five executive sessions.

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BOARD OVERSIGHT OF RISK

As part of their risk oversight responsibilities, the Audit Committee and Risk Committee held two joint meetings in 2019. In addition to the risk oversight processes outlined above, the Board annually reviews its risk assessment of the Company’s compensation policies and practices applicable to the Company’s equity incentive plans. For additional information on this review, please see the “Risks Related to Compensation Policies and Practices” section of this Proxy Statement.

CEO PERFORMANCE REVIEWS AND MANAGEMENT SUCCESSION PLANNING

The Independent Chair of the Board and the Chair of the Compensation Committee jointly coordinate and lead the Board’s annual performance evaluation of the CEO, which reflects input from all Non-Employee Directors. The Board oversees and maintains a succession plan for the CEO and other senior executives. Executive succession and talent development are a regular agenda item for the Board and, at least once per year, the Board has a fulsome discussion of talent at each business and functional leadership level across the Company. In carrying out this function, the Board endeavors to ensure that the Company’s management has the capabilities to cause the Company to operate in an efficient and business-like fashion in the event of a vacancy in senior management, whether anticipated or sudden.

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As a result of the Board’s CEO succession planning process, the Board appointed Mr. Votek as the Company’s Interim CEO and President upon the departure of the Company’s former Chairman, CEO and President in November 2019. At the same time, the Board formed a CEO Search Committee to identify a permanent CEO. Following evaluation of both internal and external CEO candidates, the Board, upon the unanimous recommendation of the CEO Search Committee, elected Mr. Finkelstein to serve as the Company’s permanent CEO in March 2020.

BOARD EFFECTIVENESS, SELF-EVALUATIONS AND REFRESHMENT

The Company’s comprehensive Board and Committee refreshment and succession planning process is designed to ensure that the Board and each Committee is comprised of highly qualified Directors, with the independence, diversity, skills and perspectives to provide strong and effective oversight. The Board, led by the NCG Committee, annually evaluates the composition of the Board and each Committee, and rigorously evaluates individual Directors to ensure a continued match of their skill sets and tenure against the needs of the Company.

DIRECTOR CRITERIA AND QUALIFICATIONS

The NCG Committee seeks to achieve a balance of knowledge, experience and capability on the Board and considers a wide range of factors when assessing potential Director nominees, including a candidate’s background, skills, expertise, diversity, accessibility and availability to serve effectively on the Board. All candidates should (i) possess the highest personal and professional ethics, integrity and values, exercise good business judgment and be committed to representing the long-term interests of the Company and its stockholders, and (ii) have an inquisitive and objective perspective, practical wisdom and mature judgment. It is expected that all Directors will have an understanding of the Company’s business and be willing to devote sufficient time and effort to carrying out their duties and responsibilities effectively.

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CONSIDERATION OF BOARD DIVERSITY

The Company endeavors to have a Board representing diverse backgrounds and a wide range of professional experiences. In 2020, the Board formalized its existing practice by amending the Company’s Corporate Governance Guidelines to reflect the Board’s commitment to seeking out highly qualified women and minority candidates, as well as taking into account other factors that promote principles of diversity, including diversity of a candidate’s perspective, background, nationality, age and other demographics. The NCG Committee instructs any search firm it engages to include women and minority candidates in every director candidate pool presented to the Committee.

DIRECTOR NOMINATION PROCESS

The NCG Committee is responsible for identifying and screening nominees for Director and for recommending to the Board candidates for nomination for election or re-election to the Board and to fill Board vacancies. The NCG Committee also seeks to maintain an ongoing list of potential Board candidates. Nominees may be suggested by Directors, members of management, stockholders or professional search firms. In evaluating a Director nomination, the NCG Committee may review materials provided by the nominator, a professional search firm or any other party.

STOCKHOLDER RECOMMENDATION OF DIRECTOR CANDIDATES

Stockholders who wish the NCG Committee to consider their recommendations for Director candidates should submit their recommendations in writing to Anthony C. Green, the Chief Corporate Officer, Chief Legal Officer and Secretary at the Company’s principal executive offices. Following verification of the stockholder status of persons proposing candidates, recommendations are aggregated and considered by the NCG 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 the NCG Committee. Properly submitted recommendations by stockholders will receive the same consideration by the NCG Committee as other suggested nominees.

COMMUNICATIONS WITH THE BOARD

Stockholders and other persons interested in communicating with an individual Director (including the Independent Chair of the Board), the Independent Directors as a group, any committee of the Board or the Board as a whole, may do so by submitting such communication to:

Annaly Capital Management, Inc.

[Addressee]

1211 Avenue of the Americas

New York, NY 10036

Phone: 1-888-8 ANNALY

Facsimile: (212) 696-9809

Email: investor@annaly.com

The Legal Department reviews all communications to the Directors and forwards those communications related to the duties and responsibilities of the Board to the appropriate parties. Certain items such as business solicitation or advertisements, product-related inquiries, junk mail or mass mailings, resumes or other job-related inquiries, spam and unduly hostile, threatening, potentially illegal or similarly unsuitable communications will not be forwarded.

DIRECTOR ATTENDANCE

During 2019, the Board held 12 meetings. All Directors attended at least 75% of the aggregate number of meetings of the full Board and the Committees on which they served, during the period in which they served, in 2019.

The Company expects each member of the Board to attend the Annual Meeting. All Directors attended the 2019 Annual Meeting.

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BOARD COMMITMENT AND OVER-BOARDING POLICY

In response to revised policies and commentary from leading institutional investors and the considerable time commitment and responsibilities associated with Board and Committee service, in 2020 the Board refined its Director “over-boarding” policy to provide that:

All Directors are currently in compliance with this policy. Directors are required to notify the Independent Chair of the Board and the Chair of the NCG Committee in advance of accepting an invitation to serve on another public company board.

DIRECTOR ORIENTATION AND CONTINUING EDUCATION

The Board believes that Director orientation and continuing education is critical to the Board’s ability to fulfill its responsibilities in a dynamic and constantly evolving business environment. New Directors participate in a robust onboarding process, which includes extensive training materials and personal briefings by senior management on the Company’s strategic plans, financial statements, and key policies and practices. In addition, the Company encourages Directors to participate in external continuing Director education programs, and the Company provides reimbursement for related expenses. Continuing Director education is also provided during Board meetings and as stand-alone information sessions outside of meetings. In line with the Company’s commitment to continuing Board education, the Board is a Full Board Member of the NACD, which gives Directors access to an extensive menu of Board education programs, along with research on governance trends and Board practices.

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Approval of Related Party Transactions

The Board recognizes the fact that transactions with related persons present a heightened risk of conflicts of interests and/or improper valuation (or the perception thereof). The Board has adopted a written policy on transactions with related persons in conformity with NYSE listing standards.

Under this policy any related person transaction, and any material amendment or modification to a related person transaction, must be reviewed and approved or ratified by any standing or ad hoc Committee of the Board composed solely of Independent Directors who are disinterested or by the disinterested members of the full Board.

In connection with the review and approval or ratification of a related person transaction, management must:

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In addition, the related person transaction policy provides that the Committee or disinterested Directors, as applicable, in connection with any approval or ratification of a related person transaction involving a non-employee Director or Director nominee, should consider whether such transaction would compromise the Director or Director nominee’s status as an “independent,” or “non-employee” Director, as applicable, under the rules and regulations of the SEC, the NYSE and the Code of Business Conduct and Ethics.

Internalization Agreement

On February 12, 2020, the Company entered into the Internalization Agreement with the Manager and certain affiliates of the Manager. Pursuant to the Internalization Agreement, the Company agreed to acquire all of the outstanding equity interests of the Manager and the Manager’s direct and indirect parent companies from their respective owners (the “Internalization”). As a result of the Internalization, the Manager will cease to perform any outside management services for the Company and the Company will transition from an externally-managed REIT to an internally-managed REIT. The Internalization is expected to close in the second quarter of 2020.

In addition, the Amended and Restated Management Agreement, dated as of August 1, 2018, between the Company and the Manager (as amended by Amendment No. 1 thereto, dated as of March 27, 2019, the “Management Agreement”) will be terminated at the closing of the Internalization, and the Manager has agreed to waive any Acceleration Fee (as defined below) solely as related to the closing of the Internalization. Upon closing of the Internalization, all employees of the Manager will become employees of the Company, the Company will no longer pay a management fee to the Manager, and the Company going forward will pay the compensation of all employees.

Management Agreement

Until the closing of the Internalization, management of the Company will continue to be conducted by the Manager through the authority delegated to it in the Management Agreement and pursuant to the policies established by the Board. If the closing does not occur, the Management Agreement will remain in place on the terms and conditions described below.

The Management Agreement’s current term ends on December 31, 2021 and, if the closing of the Internalization does not occur, will automatically renew for successive two-year terms unless at least two-thirds of the Independent Directors or the holders of a majority of the outstanding shares of the Company’s common stock in their sole discretion elect to terminate the agreement for any or no reason upon 365 days prior written notice (such notice, a “Termination Notice”).

If the Company elects to terminate the Management Agreement as described above, it may elect to accelerate the Termination Date to a date that is between seven and 90 days after the date it delivers a Termination Notice (the “Notice Delivery Date”). If the Company does not elect to accelerate the Termination Date, then the Manager may elect to accelerate the Termination Date to the date that is 90 days after the Notice Delivery Date. If the Termination Date is accelerated (such date, the “Accelerated Termination Date”) by either the Company or the Manager, in addition to any amounts accrued for the period prior to the Accelerated Termination Date, the Company shall pay the Manager an acceleration fee (the “Acceleration Fee”) in an amount equal to the average annual management fee earned by the Manager during the 24-month period immediately preceding such Accelerated Termination Date multiplied by a fraction with a numerator of 365 minus the number of days from the Notice Delivery Date to the Accelerated Termination Date, and a denominator of 365.

Prior to the March 27, 2019 amendment to the Management Agreement, the Company paid the Manager a flat monthly management fee equal to 1/12th of 1.05% of Stockholders’ Equity (as defined in the Management Agreement) for management services. Pursuant to the March 27, 2019 amendment, the Company pays the Manager a monthly management fee for management services in an amount equal to 1/12th of the sum of (i) 1.05% of Stockholders’ Equity (as defined in the Management Agreement) up to $17.28 billion, and (ii) 0.75% of Stockholders’ Equity (as defined in the Management Agreement) in excess of $17.28 billion. In addition to the management fee, the Company reimburses the Manager for the cost of certain legal, tax, accounting and other support and advisory services provided by employees of the Manager to the Company. During the year ended

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December 31, 2019, the Company incurred $170.6 million in management fees and $21.4 million in permitted reimbursement payments under the Management Agreement. None of the reimbursement payments were attributable to compensation of the Company’s NEOs.

Pursuant to the Management Agreement, the Company is entitled to receive reimbursement from the Manager if the Board determines that a computation error (regardless of the reason for or amount of such error) resulted in the overpayment of a management fee to the Manager.

The Management Agreement provides that during its term and, in the event of termination of the Management Agreement by the Manager without cause, for a period of one year following such termination, the Manager will not manage, operate, join, control, participate in, or advise any person other than the Company without the prior written consent of the Risk Committee of the Board.

The Manager

The Manager is a Delaware limited liability company and, until the closing of the Internalization, is indirectly owned by certain members of the Company’s current management. The Company will acquire the Manager in connection with the Internalization, which is expected to close in the second quarter of 2020. For additional information about the Manager, please see the “Proxy Summary,” “Compensation Paid by the Manager to the Named Executive Officers” and “Compensation Discussion and Analysis.”

COMPENSATION OF DIRECTORS

The Company compensates the Non-Employee Directors. Any Director who is also an executive officer or employee does not receive compensation for serving on the Board. The Compensation Committee is responsible for reviewing, and recommending to the Board, the form and amount of compensation paid to the Non-Employee Directors.

The annual compensation elements paid to the Non-Employee Directors for service on the Board and its standing Committees for 2019 are set forth below:

Each DSU is equivalent in value to one share of the Company’s common stock. DSUs are granted on the date of the annual stockholder meeting and vest immediately. DSUs convert to shares of the Company’s common stock one year after the date of grant unless the Director elects to defer the settlement of the DSUs to a later date. DSUs do not have voting rights. DSUs pay dividend equivalents in either cash or additional DSUs at the election of the Director. The Independent Directors are also eligible to receive other stock-based awards under the Company’s equity incentive plan. The 2020 Plan as proposed includes certain limits on awards to Non-Employee Directors.

The Company reimburses the Directors for their reasonable out-of-pocket travel expenses incurred in connection with their attendance at full Board and Committee meetings.

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Director Stock Ownership Guideline

The stock ownership guidelines for Independent Directors provides that each Independent Director should strive to own an amount of the Company’s common stock equal to five times the annual cash retainer. Shares counting toward the guideline include shares that are owned outright, DSUs and any other shares held in deferral accounts. To facilitate achievement of the guideline, the Board has adopted and implemented a “retention ratio” that requires Independent Directors to retain and hold 50% of the net profit shares from DSUs until the specified ownership level is achieved. As of December 31, 2019, all of the Independent Directors had met or were on their way to meeting their stock ownership guideline.

Role of the Independent Compensation Consultant

During 2019, the Compensation Committee retained an independent compensation consultant, Frederic W. Cook & Co. (“F. W. Cook”), to assist the Compensation Committee in its review of the compensation provided to the Non-Employee Directors. F.W. Cook provides market research and analyses on Director compensation programs and proposals, including reviews of competitive market trends and design practices and relevant peer and market benchmarking. The Compensation Committee considered F. W. Cook’s independence in light of SEC regulations and NYSE listing standards. The Compensation Committee discussed all relevant factors and concluded that no conflict of interest exists that would prevent F. W. Cook from independently representing the Compensation Committee.

Director Compensation

The table below summarizes the compensation paid by the Company to the Non-Employee Directors for the fiscal year ended December 31, 2019.

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Executive Officers

The following table sets forth certain information with respect to the Company’s executive officers:

Biographical information on Messrs. Finkelstein and Votek is provided above under the heading “Election of Directors.” Certain biographical information for Ms. Wolfe and Messrs. Coffey and Green is set forth below.

Serena Wolfe has served as Chief Financial Officer of the Company since December 2019. Prior to joining the Company in 2019, Ms. Wolfe served as a Partner at Ernst & Young LLP (“EY”) since 2011 and as its Central Region Real Estate Hospitality & Construction (“RHC”) leader from 2017 to November 2019, managing the go-to-market efforts and client relationships across the sector. Ms. Wolfe was previously also EY’s Global RHC Assurance Leader. Ms. Wolfe practiced with EY for over 20 years, including six years with EY Australia and 16 years with the U.S. practice. Ms. Wolfe graduated from the University of Queensland with a Bachelor of Commerce in Accounting. She is a Certified Public Accountant in the states of New York, California, Illinois and Pennsylvania.

Timothy P. Coffey has served as Chief Credit Officer of the Company since January 2016. Mr. Coffey served as the Company’s Head of Middle Market Lending from 2010 until January 2016. Mr. Coffey has over 20 years of experience in leveraged finance and has held a variety of origination, execution, structuring and distribution positions. Prior to joining the Company in 2010, Mr. Coffey served as Managing Director and Head of Debt Capital Markets in the Leverage Finance Group at Bank of Ireland. Previously, Mr. Coffey held positions at Scotia Capital, the holding company of Saul Steinberg’s Reliance Group Holdings and SC Johnson International. Mr. Coffey received his B.A. in Finance from Marquette University

Anthony C. Green has served as Chief Corporate Officer of the Company since January 2019 and as Chief Legal Officer and Secretary of the Company since March 2017. Mr. Green previously served as the Company’s Deputy General Counsel from 2009 until February 2017. Prior to joining the Company, Mr. Green was a partner in the Corporate, Securities, Mergers & Acquisitions Group at the law firm K&L Gates LLP. Mr. Green has over 20 years of experience in corporate and securities law. Mr. Green holds a B.A. in Economics and Political Science from the University of Pennsylvania and a J.D. and LL.M. in International and Comparative Law from Cornell Law School.

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Compensation Paid by the Manager to the Named Executive Officers

NAMED EXECUTIVE OFFICERS

The NEOs for 2019 are:

INTRODUCTION

As discussed above in the “Proxy Summary” and “Certain Relationships and Related Party Transactions, ” the Company will continue to be externally-managed by the Manager until the closing of the Internalization, which is expected to occur in the second quarter of 2020. Until the closing, the Company will pay the Manager a monthly management fee, the purpose of which is not to provide compensation to the Manager’s employees (including the NEOs), but rather to compensate the Manager for the services it provides for the day-to-day management of the Company. In 2019, the Manager used a portion of the proceeds of its management fees to pay compensation to the NEOs other than the Company’s former Chairman, CEO and President (who did not receive any compensation for serving in these roles, but had an ownership interest in the management fees until his departure from the Company and the Manager in November 2019). While the Compensation Committee will review and approve the Company’s executive compensation program following the closing of the Internalization, the Manager made all 2019 compensation determinations for the NEOs based on the factors, including individual and Company performance, it determined to be appropriate and subject to any employment agreements entered into between the Manager and individual NEOs. For 2019, the Company did not determine the compensation paid by the Manager to the NEOs, did not allocate any specific portion of the management fee it paid to the compensation of the NEOs, and did not reimburse the Manager for the cost of such compensation.

THE MANAGER’S 2019 EXECUTIVE COMPENSATION PROGRAM

In order to enable the Company’s stockholders to make an informed Say-on-Pay vote, the Manager has provided the following information about the compensation it paid to the NEOs for 2019:

Summary of 2019 NEO Compensation

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Components of the NEOs’ Compensation for 2019

The Manager’s executive compensation program for 2019 included both a base salary and a performance-based incentive bonus. As the management fee the Company pays to the Manager is paid entirely in cash, the Manager had no independent ability to provide awards of Company stock as part of the NEOs’ compensation for 2019. To address this limitation, the Manager structured the NEOs’ performance-based incentive bonuses for 2019 with a mix of both rigorous Company performance metrics and group and individual performance objectives to align the interests of the NEOs with the interests of the Company’s stockholders.

The table below describes the objectives supported by each of the Manager’s primary compensation elements for 2019, along with an overview of the key design features of each element.

Following the closing of the Internalization, which is expected to occur in the second quarter of 2020, the Board intends that equity will be a critical part of the internally-managed Company’s executive compensation program as it believes that equity awards align employee and stockholder interests, link employee compensation to Company performance and support the Company’s ownership culture.

NEO Pay Mix for 2019

The Manager’s executive compensation program for 2019 was designed so that the majority of compensation was performance-based and “at-risk” to promote alignment of the NEOs’ interests with those of stockholders. In determining payout of the NEOs’ performance-based incentive bonuses for 2019 (which represented the variable portion of their compensation packages), the Manager considered achievement of both rigorous performance metrics, including core return on equity, core return on assets and operating expenses as a percentage of average equity and as a percentage of average assets, along with group and individual performance objectives. During 2019, the Manager paid Ms. Wolfe and Messrs. Finkelstein, Coffey, Green and Votek aggregate performance-based incentive bonuses of $28.5 million and aggregate base salaries of $3.0 million. On an aggregated basis, Ms. Wolfe and Messrs. Finkelstein, Coffey, Green and Votek received 9.5% of their total compensation in the form of base salaries and the remaining 90.5% in the form of performance-based incentive bonuses.

Note: For footnoted information, please refer to “Summary of 2019 NEO Compensation” in Endnotes section.

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Role of the Manager’s Compensation Consultant

During 2019, the Manager retained a third-party compensation consultant for advice and perspectives regarding market trends that may impact decisions about the Manager’s executive compensation program and practices.

Company Market Data

The Manager considered compensation data and practices of a group of peer companies (the “Peer Group”), as well as current market trends and practices generally, in developing appropriate compensation packages for the NEOs in 2019.

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Executive Compensation

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COMPENSATION DISCUSSION AND ANALYSIS

As discussed above, the Manager paid all of the compensation, including benefits, to the NEOs in 2019. While the Compensation Committee will review and approve the Company’s executive compensation program following the closing of the Internalization, the Manager made all compensation determinations for the NEOs for 2019 without any direction by the Compensation Committee or the Board and without reference to any specific policies or programs under their oversight. In 2019, the Manager compensated the NEOs for a variety of services performed for the benefit of the Manager. Thus, the 2019 compensation paid by the Manager to its employees who served as the Company’s NEOs is not considered to be part of the Company’s executive compensation program.

Prior to the March 27, 2019 amendment to the Management Agreement, the Company paid the Manager a flat monthly management fee equal to 1/12th of 1.05% of Stockholders’ Equity (as defined in the Management Agreement) for management services. Pursuant to the March 27, 2019 amendment, the Company pays the Manager a monthly management fee for management services in an amount equal to 1/12th of the sum of (i) 1.05% of Stockholders’ Equity (as defined in the Management Agreement) up to $17.28 billion, and (ii) 0.75% of Stockholders’ Equity (as defined in the Management Agreement) in excess of $17.28 billion. In addition to the management fee, the Company reimburses the Manager for the cost of certain legal, tax, accounting and other support and advisory services provided by employees of the Manager to the Company. During the year ended December 31, 2019, the Company incurred $170.6 million in management fees and $21.4 million in permitted reimbursement payments under the Management Agreement. None of the reimbursement payments were attributable to compensation of the Company’s NEOs.

In 2019, the Manager used a portion of the proceeds of its management fees to pay compensation to the NEOs other than the Company’s former Chairman, CEO and President Mr. Keyes (who did not receive any compensation for serving in these roles, but had an ownership interest in the management fees until his departure from the Company and the Manager in November 2019). In 2019, the Company did not determine the compensation that the Manager paid to the NEOs, the Company did not allocate any specific portion of the management fee that the Company paid to the compensation of the NEOs, and the Company did not reimburse the Manager for the cost of such compensation.

Accordingly, the Company did not pay any cash compensation to the NEOs, nor did the Company grant them any plan-based awards, for 2019. The Company did not provide the NEOs with pension benefits, perquisites or other personal benefits in 2019. As a result, no compensation is includable in the Summary Compensation Table.

The Company is not party to any employment agreements entered into between the Manager and individual NEOs, and was not party to any employment or severance agreement with any NEO as of December 31, 2019. The Company did not pay any severance benefits to Mr. Keyes in connection with his departure from the Company in November 2019.

Consideration of “Say-on-Pay” Voting Results

At the Company’s 2019 Annual Meeting, over 83% of the votes cast supported the Company’s Say-on-Pay vote. Upon consideration of the percentage of votes cast in support of the Say-on-Pay vote, along with additional feedback from engagement with stockholders, the Compensation Committee determined it was appropriate to provide detailed quantitative information about the Manager’s 2019 executive compensation program in this Proxy Statement. Following the closing of the Internalization, the Company will be able to provide detailed disclosure about its executive compensation program, including compensation tables and related narrative disclosure, in future proxy statements. For additional details, please see the “Proxy Summary” and “Compensation Paid by the Manager to the Named Executive Officers” above.

The Company and the Board will continue to consider the outcome of future Say-on-Pay votes, as well as stockholder feedback received throughout the year, and invite stockholders to express their views to the Board as described under “Communications with the Board.”

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EXECUTIVE COMPENSATION POLICIES

Stock Ownership Guidelines

The Company believes that stock ownership guidelines align the interests of the Company’s executive officers with those of its stockholders by promoting a long-term focus and long-term share ownerships. All of the executive officers are subject to stock ownership guidelines expressed as a multiple of base salary.

Stock Retention

Executive officers are required to hold shares received under awards (after taxes) until the later of (i) one year after the shares were acquired upon exercise or vesting, or (ii) the date their applicable stock ownership guidelines are met.

Clawback Policy

The Board has adopted a policy requiring the recoupment of certain annual cash incentive compensation and equity compensation paid to executive officers within three years preceding certain accounting restatements, if the executive officer engaged in fraud or misconduct, or recklessly or negligently failed to prevent the fraud or misconduct, that caused or significantly contributed to the need for the accounting restatement.

Prohibition on Hedging Company Securities

Employees, officers and Directors are prohibited from engaging in any hedging transactions with respect to Company securities held by them, including shares acquired in open market transactions or through the Company’s equity compensation program. Such prohibited transactions include the purchase of any financial instrument (including forward contracts and zero cost collars) designed to hedge or offset any decrease in the market value of Company securities.

Prohibition on Pledging Company Securities

The Company has a policy prohibiting employees, officers and Directors from holding Company securities in a margin account or pledging Company securities as collateral for a loan.

Risks Related to Compensation Policies and Practices

As discussed above in “Compensation Paid by the Manager to the Named Executive Officers,” the Compensation Committee did not approve compensation decisions made by the Manager in 2019 and the Manager did not consult with the Compensation Committee prior to making any such decisions. Therefore, the Compensation Committee had no compensation policies or practices applicable to, or decision-making role regarding, the manner in which the Manager used the management fee to compensate the NEOs in 2019. However, in connection with the Compensation Committee’s administration of the Company’s equity incentive plan, the Compensation Committee conducted an annual risk assessment of the Company’s applicable compensation policies and practices. In 2019, the Compensation Committee determined that these compensation policies and practices did not create risks that are reasonably likely to have a material adverse effect on the Company.

REPORT OF THE COMPENSATION COMMITTEE

The 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 that the Compensation Discussion and Analysis be included in this Proxy Statement.

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EXECUTIVE COMPENSATION TABLES AND RELATED NARRATIVE

Summary Compensation Table

The Company did not pay any compensation to the NEOs, and did not reimburse the Manager for any compensation paid to the NEOs, with respect to the years ended December 31, 2019, December 31, 2018 or December 31, 2017.

Grants of Plan-Based Awards

The Company did not grant the NEOs any plan based awards in 2019.

Outstanding Equity Awards at Fiscal Year-End

None of the NEOs had outstanding equity awards at December 31, 2019.

Options Exercised and Stock Vested

No options were exercised by and no stock vested for the NEOs during 2019.

Pension Benefits and Nonqualified Deferred Compensation

The Company did not provide the NEOs with any benefits pursuant to defined benefit plans and nonqualified deferred compensation plans during 2019.

Potential Payments upon Termination or Change in Control

As of December 31, 2019, the Company was not responsible for any amounts payable or any additional vesting of outstanding equity awards for any termination of service by any of the NEOs, and no amounts would have been payable by the Company to any of the NEOs upon a change in control as of such date.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Compensation Committee is comprised solely of the following Independent Directors: Messrs. Segalas (Chair), J. Green and Schaefer and Ms. Williams. None of them is serving or has served as an officer or employee of the Company or any affiliate or has any other business relationship or affiliation with the Company, except service as a Director. During 2019, none of the Company’s executive officers served on the compensation committee (or other committee serving an equivalent function) of another entity whose executive officers served on the Compensation Committee or Board.

CEO PAY RATIO

Until the closing of the Internalization, the Manager will continue to directly employ 95% of the individuals who provide services to the Company. The remaining employees are employed by subsidiaries of the Company for regulatory or corporate efficiency reasons. At December 31, 2019, the Company’s measurement date for identifying the median employee, the Company’s subsidiaries had nine full-time employees. The Company chose total compensation in accordance with the requirements of the Summary Compensation Table as its consistently applied compensation measure to identify the median employee. The Company’s median employee compensation as calculated using the Summary Compensation Table requirements was $472,500 in 2019. The Company did not provide any compensation to any of the Company’s NEOs, including the individuals who served as CEO, during 2019. As a result, the CEO to median employee pay ratio required to be disclosed under Item 402(u) of Regulation S-K is not applicable.

This information is being provided for compliance purposes. Neither the Compensation Committee nor the Manager used the pay ratio measure in making any compensation decisions.

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GENERAL

On March 18, 2020, the Board approved the 2020 Plan subject to stockholder approval at the 2020 Annual Meeting. The 2020 Plan permits the Company to provide equity-based compensation in the form of stock options, SARs, dividend equivalent rights, restricted shares, restricted share units (“RSUs”), and other share-based awards. The 2020 Plan is intended to replace the 2010 Plan, under which no further awards can be made. Currently outstanding awards granted under the 2010 Plan will remain effective in accordance with their terms. If the 2020 Plan is not approved by stockholders, the 2020 Plan will not become effective.

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PURPOSE AND IMPORTANCE OF THE 2020 PLAN

In 2013, the Company entered into a Management Agreement with the Manager, pursuant to which it externalized its management function. Following the externalization transaction, the Company primarily utilized the 2010 Plan to provide equity compensation to the Company’s Non-Employee Directors. In February 2020, the Company announced that it had entered into an Internalization Agreement, pursuant to which it will acquire the Manager and transition from an externally-managed REIT back to an internally-managed REIT. The Internalization is expected to close in the second quarter of 2020. Following the closing of the Internalization, the Board intends that the 2020 Plan will be a critical part of the internally-managed Company’s executive compensation program as it believes that equity awards align employee and stockholder interests, link employee compensation to Company performance and support the Company’s ownership culture.

The Board believes that the 2020 Plan will provide the Company with the ability to offer a variety of incentive and compensatory awards designed to advance the Company’s interests and long-term success by encouraging stock ownership among officers, Directors and other key employees and consultants. The 2020 Plan is intended to provide these individuals with additional incentives to exert their best efforts on behalf of the Company and its stockholders, to increase their proprietary interest in the Company’s success, to award outstanding performance, and to attract and retain executive personnel of outstanding ability.

DESCRIPTION OF THE 2020 PLAN

The following is a summary of the principal features of the 2020 Plan. The summary, however, does not purport to be a complete description of all provisions of the 2020 Plan. A copy of the 2020 Plan is attached as Annex A to this Proxy Statement and stockholders should refer to Annex A for a more complete description of the 2020 Plan.

The 2020 Plan authorizes the Company to provide equity-based compensation in the form of stock options, SARs, dividend equivalent rights, restricted shares, RSUs, and other share-based awards. These awards are intended to serve as an incentive for officers and employees to provide the Company with effective service and high levels of performance.

Authorized Shares and Share Counting

The total number of shares that may be issued or transferred in connection with awards under the 2020 Plan is 125,000,000 common shares. This represents 8.7% of the fully diluted common shares outstanding as of March 23, 2020.

In addition, any shares subject to outstanding awards under the 2010 Plan that expire, terminate, or are surrendered or forfeited for any reason without issuance of shares after the effective date of the 2020 Plan will automatically become available for issuance under the 2020 Plan. Up to 125,000,000 common shares may be granted as incentive stock options under Section 422 of the Internal Revenue Code of 1986, as amended and regulations promulgated thereunder (the “Code”). The common shares issuable under the 2020 Plan will consist of authorized and unissued shares or previously issued shares that have been reacquired by the Company.

If any award is canceled, terminates, expires, or lapses for any reason, the shares subject to the award will again be available for grant under the 2020 Plan. In addition, the following items will not count against the aggregate number of common shares available for grant under the 2020 Plan:

There is no “liberal share counting” under the 2020 Plan. Shares tendered or withheld to pay the option exercise price or tax withholding obligation for any award will continue to count against the aggregate number of common shares available for grant under the 2020 Plan. In addition, the total number of shares covering share-settled SARs or net-settled stock options will be counted against the pool of available shares, not just the net shares issued upon exercise. Any common shares repurchased by the Company with proceeds from the exercise of stock options will not be added back to the pool of shares available to grant under the 2020 Plan.

Limits on Awards to Non-Employee Directors

The 2020 Plan includes annual limits on the awards that may be granted to any Non-Employee Director. The maximum value of awards granted during any calendar year to any Non-Employee Director, taken together with

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any cash fees paid to that Non-Employee Director during the calendar year and the value of awards granted to the Non-Employee Director under any other equity compensation plan of the Company during the calendar year, shall not exceed the following in total value (based on the fair market value of the shares underlying the award as of the grant date for awards other than options and SARs, and based on the grant date fair value for options and SARs): (1) $900,000 for the non-employee Chair of the Board, if applicable, and (2) $600,000 for each Non-Employee Director other than the Chair of the Board; provided, however, that awards granted to Non-Employee Directors upon their initial election to the Board shall not count towards these limits. The Board may make exceptions to this limit in extraordinary circumstances to individual Directors, provided the Director receiving any additional compensation does not participate in that decision.

Adjustments upon Changes in Common Shares

If there is any change in the Company’s outstanding common stock because of a share dividend or split, reorganization, recapitalization, merger, consolidation, spin-off or combination transaction or exchange of shares or other corporate exchange, or any distribution to stockholders other than regular cash dividends or any transaction similar to the foregoing, the Compensation Committee shall make such substitution or adjustment, if any, as it deems to be equitable, as to the number or kind of shares or other securities available for issuance, issued or reserved for issuance pursuant to the 2020 Plan and pursuant to outstanding awards. Additionally, the Compensation Committee shall make equitable adjustments to the exercise price for stock options, the base price for SARs, and any other affected terms of any award.

Administration

The Compensation Committee is generally responsible for the administration of the 2020 Plan. However, the Compensation Committee may delegate its duties and powers under the 2020 Plan, in whole or in part, to a subcommittee consisting of two or more members of the Board who are intended to qualify as “non-employee directors” under Rule 16b-3 under the Exchange Act. With respect to awards granted to participants who are not subject to Section 16 of the Exchange Act, the Compensation Committee also may delegate its duties and powers under the 2020 Plan, in whole or in part, to one or more of the Company’s officers. Notwithstanding the preceding sentences, with respect to awards granted to Non-Employee Directors, the 2020 Plan will be administered by the Board. This summary of the 2020 Plan uses the term “Administrator” to refer to the Compensation Committee, any delegate of the Compensation Committee and the Board, as applicable.

The Administrator will determine the individuals who are eligible to participate in the 2020 Plan; the type, size, and terms of awards; the time or times at which awards will be exercisable or at which restrictions, conditions, and contingencies will lapse; and the terms and provisions of the instruments by which awards will be evidenced. Additionally, the Administrator will establish other restrictions, conditions, and contingencies on awards in addition to those prescribed by the 2020 Plan, will interpret the 2020 Plan and will make all determinations, in its sole discretion, necessary for the administration of the 2020 Plan. All determinations made by the Administrator will be binding on all parties, including participants.

Eligibility

The Administrator may grant awards under the 2020 Plan only to the Board, the Company’s employees, employees of the Company’s subsidiaries and any person who performs services for the Company, its subsidiaries, or its affiliates (whether as a consultant, advisor or otherwise). Prior to the Internalization, employees of the Manager are also eligible to receive awards. As of March 23, 2020, approximately 190 individuals were eligible to receive awards under the 2020 Plan, including 5 executive officers and 9 Non-Employee Directors.

Stock Options

Participants may be granted stock options under the 2020 Plan. Stock options granted under the 2020 Plan may be incentive stock options (“ISOs”) or non-qualified stock options. These stock options entitle the participant to purchase common shares at the exercise price. The exercise price per share will be specified by the Administrator but cannot be less than the fair market value of a common share on the date of grant (generally the closing price of a common share on the New York Stock Exchange on the date of grant); provided, however, that the exercise price cannot be less than 110% of the fair market value on the date of grant in the case of an ISO granted to an individual who owns, or is deemed to own, more than ten percent of the voting power of all classes of the Company’s stock. (The fair market value of a common share as of March 23, 2020 was $4.75.) The exercise price of an option that is a

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substitute award, however, will be the exercise price of the original option as adjusted in accordance with regulations under the Code.

The exercise price of a stock option may be paid in cash or such other form of consideration as the Administrator determines in its sole discretion. Such consideration may include the surrender of common shares. Payment of the exercise price also may be satisfied by a “net settlement” (by reducing the shares delivered upon exercise of the option) or by a broker-assisted “cashless exercise.”

Subject to the provisions of the 2020 Plan, stock options will become exercisable as prescribed by the Administrator and in the award agreement evidencing the stock option. A stock option will expire at the time set forth in the stock option agreement, but the expiration date will not be later than ten years after the grant date (or five years in the case of ISO granted to a ten percent stockholder). No dividends or dividend equivalents will be paid on stock options under the 2020 Plan.

A participant will not have any rights as a stockholder with respect to the common shares covered by an option until the date that the option is exercised and then only to the extent that shares are issued to the participant.

Stock Appreciation Rights

The Administrator may grant SARs to participants under the 2020 Plan, either as a separate award or in tandem or combination with a stock option. A SAR represents the right to receive an amount equal to the excess of the fair market value of a common share on the date of exercise over the base price of the SAR. The base price will be specified by the Administrator but cannot be less than the fair market value per share on the date of grant (or 110% of the grant date fair market value in the case of a SAR granted in tandem with an ISO granted to a ten percent stockholder). The base price of a SAR that is a substitute award, however, will be the base price of the original SAR as adjusted in accordance with regulations under the Code.

The amount payable upon the exercise of a SAR will be settled with a single cash payment, by the issuance of common shares or a combination of cash and common shares, as determined by the Administrator in its discretion.

Subject to the provisions of the 2020 Plan, SARs will become exercisable as prescribed by the Administrator and the award agreement evidencing the SAR. A SAR will expire at the time set forth in the award agreement, but the expiration date will not be later than ten years after the grant date (or five years in the case of a SAR granted in tandem with an ISO granted to a ten percent stockholder).

No participant will have any rights as a stockholder with respect to the common shares subject to a SAR until the date the SAR is exercised and then only to the extent that it is settled by the issuance of shares.

Restricted Shares

The Administrator may grant participants restricted shares, which is an award of common shares that is subject to a transfer restriction and risk of forfeiture. Subject to the provisions of the 2020 Plan, the restricted shares will be subject to such restrictions and vesting schedule as the Administrator may provide in the award agreement. Any restricted shares granted under the 2020 Plan may be subject to the restriction that the participant not sell, transfer, otherwise dispose of, or pledge or otherwise hypothecate the restricted shares during a specified period and such other restrictions and conditions as the Administrator may impose. A participant who receives a restricted shares award will have all of the rights of a stockholder with respect to the common shares covered by the award. However, dividends paid on the common shares covered by the restricted shares award will be accumulated and paid when, and to the extent that, the restricted shares award becomes vested.

RSUs

The Administrator may grant RSUs to participants. RSUs represent the right to receive common shares, cash, or a combination of common shares and cash. Subject to the provisions of the 2020 Plan, RSUs will be subject to such restrictions and vesting schedule as the Administrator may provide in the award agreement.

A participant holding RSUs will have no right to transfer any rights under his or her award and will not have any rights as a stockholder until, and then only to the extent that, the RSUs become vested and are settled by the issuance of common shares. However, the Administrator may grant dividend equivalents on the common shares underlying the RSUs, subject to the limitations on dividend equivalent rights described below.

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Dividend Equivalent Rights

The Administrator may grant dividend equivalent rights to participants. A dividend equivalent right represents the right to receive a payment equal to the dividend distributions that are paid on a specified number of common shares. Dividend equivalent rights may be granted as separate awards or in conjunction with RSUs and other share-based awards, but may not be granted in connection with stock options or SARs. Dividend equivalent rights may be paid in common shares, cash or a combination of common shares and cash. No amount will be payable under dividend equivalent rights until, and then only to the extent that, the dividend equivalent right becomes vested.

Dividend equivalent rights that are granted in conjunction with another award will vest subject to the same terms and conditions as the related award. Dividend equivalent rights that are granted as separate awards will vest in accordance with the terms and conditions prescribed by the Administrator, subject to the provisions of the 2020 Plan.

A participant will not have any rights as a stockholder on account of the grant of dividend equivalent rights until, and then only to the extent that, the rights become vested and are settled by the issuance of common shares.

Other Share-Based Awards

The Administrator may grant other share-based awards to participants. These awards are grants of common shares or other securities or rights that are valued with reference to common shares. Subject to the provisions of the 2020 Plan, the other share-based award will be subject to such restrictions and vesting schedule as the Administrator may provide in the award agreement. Other share-based awards granted under the 2020 Plan may be subject to the restriction that during a specified period the participant not sell, transfer or otherwise dispose of, or pledge or otherwise hypothecate, the common share or other security subject to the award.

If the other share-based award results in the issuance of common shares on the date of grant, the participant will have all of the rights of a stockholder with respect to the common shares covered by the award. However, dividends paid on the common shares will be accumulated and paid when, and to the extent that, the other share-based award becomes vested. If the other share-based award does not result in the issuance of common shares on the date of grant, the participant will not have any rights as a stockholder on account of the award until, and then only to the extent that, the other share-based award vests and is settled by the issuance of common shares. If the other share-based award does not result in the issuance of common shares on the date of grant, the Administrator may grant dividend equivalent rights in conjunction with the grant of the other share-based award, subject to the limitations on dividend equivalent rights described above.

Change in Control

The 2020 Plan includes special provisions that apply in the event the Company consummates a change in control (as defined in the 2020 Plan). Awards granted to Non-Employee Directors will fully vest on an accelerated basis, and any performance goals will be deemed to be satisfied at target. For awards granted to all other participants, vesting of awards will depend on whether the awards are assumed, converted or replaced by the resulting entity:

Sections 280G and 4999 of the Code may trigger excise taxes for certain employees related to compensation that is payable on account of a change in control (often referred to as “parachute payments”). In some cases, accelerated vesting of 2020 Plan awards may be considered parachute payments that trigger these excise taxes. The Company does not provide tax gross-ups to employees for any such excise taxes. Instead, the 2020 Plan includes provisions

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that require a cut-back in parachute payments in order to avoid triggering these excise taxes if the impacted employee would be made better off on an after-tax basis by a cut-back.

Recoupment or Clawback

Each award granted under the 2020 Plan is subject to any written recoupment or “clawback” policy adopted by the Board, including the Company’s Compensation Recovery (Clawback) Policy described in the Compensation Discussion and Analysis section of this Proxy Statement. Any such policy may subject awards and amounts paid or realized under awards to reduction, cancellation, forfeiture or recoupment if certain specified events or wrongful conduct occur, including but not limited to, an accounting restatement due to the Company’s material noncompliance with financial reporting regulations or other events of wrongful conduct specified in any such policy adopted to conform to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and rules promulgated thereunder.

Stock Ownership and Retention Policy

Awards to executive officers are also subject to the Company’s Stock Ownership and Retention Policy described in the Compensation Discussion and Analysis section of this Proxy Statement. Under that policy, shares received under awards (after taxes) must be held by the executive officer until the later of (i) one year after the shares were acquired upon exercise or vesting, or (ii) the date the stock ownership requirement under the policy has been met.

Amendment and Termination

The Board may terminate the 2020 Plan, in whole or in part, at any time. The Board also may amend the 2020 Plan, but the amendment must be approved by stockholders, if the amendment (i) increases the number of shares that may be issued under the 2020 Plan (other than increases in connection with a stock split, stock dividend or other change in capitalization), (ii) changes the requirements for eligibility to receive awards under the 2020 Plan or (iii) must be approved by stockholders under applicable law or regulations, including the rules of the NYSE.

No Repricing

Without stockholder approval, the Board is not authorized to (i) lower the exercise or base price of a stock option or SAR after it is granted, except in connection with certain adjustments to our corporate or capital structure permitted by the 2020 Plan, such as stock splits, (ii) take any other action that is treated as a repricing under generally accepted accounting principles, or (iii) cancel a stock option or SAR at a time when its exercise or grant price exceeds the fair market value of the underlying stock, in exchange for cash, another stock option or SAR, restricted shares, RSUs, or other share-based award unless the cancellation and exchange occur in connection with a change in capitalization or other similar change.

New Plan Benefits

A new plan benefits table for the 2020 Plan and the benefits or amounts that would have been received by or allocated to participants for the last completed fiscal year under the 2020 Plan if the 2020 Plan was then in effect, as described in the federal proxy rules, are not provided because all awards made under the 2020 Plan will be made at the Administrator’s discretion, subject to the terms of the 2020 Plan. Therefore, the benefits and amounts that will be received or allocated under the 2020 Plan are not determinable at this time.

FEDERAL INCOME TAX CONSEQUENCES

The following is a brief summary of certain United States federal income tax consequences generally arising with respect to awards under the 2020 Plan. This discussion does not address all aspects of the United States federal income tax consequences of participating in the 2020 Plan that may be relevant to participants in light of their personal investment or tax circumstances and does not discuss any state, local or non-United States tax consequences of participating in the 2020 Plan.

Section 162(m) of the Internal Revenue Code

Section 162(m) of the Code generally limits to $1 million the amount that a publicly held corporation is allowed to deduct each year for the compensation paid to certain employees (“Covered Employees”). Covered Employees include any individual who served as the chief executive officer or chief financial officer at any time during the taxable year and the three other most highly compensated officers for the taxable year. Any individual who is a

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Covered Employee in any tax year beginning after December 31, 2016 will remain a Covered Employee for all future years. Section 162(m) may affect the deduction otherwise available to the Company for awards under the 2020 Plan. The Compensation Committee considers the deductibility of compensation as one factor when designing the Company’s executive compensation practices, including awards under the 2020 Plan, and retains the flexibility to award compensation that is consistent with the Company’s executive compensation program even if the awards are not deductible for tax purposes.

Stock Options

A participant will not recognize taxable income at the time an option is granted and the Company will not be entitled to a tax deduction at that time. A participant will recognize compensation taxable as ordinary income (and subject to income tax withholding) upon exercise of a non-qualified stock option equal to the excess of the fair market value of the shares purchased over their exercise price, and the Company will be entitled to a corresponding deduction. A participant will not recognize income upon exercise of an ISO. If the shares acquired by exercise of an ISO are held for the longer of two years from the date the option was granted and one year from the date it was exercised, any gain or loss arising from a subsequent disposition of those shares will be taxed as long-term capital gain or loss, and the Company will not be entitled to any deduction. If, however, those shares are disposed of within the above-described period, then in the year of that disposition the participant will recognize compensation taxable as ordinary income equal to the excess of the lesser of (1) the amount realized upon that disposition and (2) the excess of the fair market value of those shares on the date of exercise over the exercise price, and the Company will be entitled to a corresponding deduction.

Stock Appreciation Rights

A participant will not recognize taxable income at the time a SAR is granted and the Company will not be entitled to a tax deduction at that time. Upon exercise, the participant will recognize compensation taxable as ordinary income (and subject to income tax withholding) in an amount equal to the fair market value of any shares delivered and the amount of any cash paid by us. This amount is deductible by the Company as compensation expense.

Restricted Shares and RSUs

A participant generally will not have taxable income upon the grant of restricted shares or RSUs. Instead, the participant will recognize ordinary income at the time of vesting or payout equal to the fair market value (on the vesting or payout date) of the shares or cash received minus any amount paid. For restricted shares only, a participant may instead elect to be taxed at the time of grant. The amount of ordinary income recognized by the participant is deductible by the Company as compensation expense.

Other Share-Based Awards

The U.S. federal income tax consequences of other share-based awards will depend upon the specific terms of each award. The amount of ordinary income recognized is deductible by the Company as compensation expense.

Dividend Equivalent Rights

A participant will not recognize taxable income at the time dividend equivalent rights are granted and the Company will not be entitled to a tax deduction at that time. The participant will recognize compensation taxable as ordinary income (and subject to income tax withholding) in an amount equal to the fair market value of any shares delivered and the amount of any cash paid by the Company under the dividend equivalent rights. This amount is deductible by the Company as compensation expense.

REGISTRATION WITH THE SEC

The Company intends to file a Registration Statement on Form S-8 relating to the issuance of common shares under the 2020 Plan with the Securities and Exchange Commission pursuant to the Securities Act as soon as is practicable after approval of the 2020 Plan by the stockholders.

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Equity Compensation Plan Information

On May 27, 2010, at the Company’s 2010 Annual Meeting of Stockholders, stockholders approved the 2010 Plan. The 2010 Plan authorized the Compensation Committee to grant options, stock appreciation rights, dividend equivalent rights, or other share-based awards, including restricted shares up to an aggregate of 25,000,000 shares, subject to adjustments as provided in the 2010 Plan.

The Company had previously adopted a long-term stock incentive plan for executive officers, key employees and Non-Employee Directors (the “Prior Incentive Plan”). Since the adoption of the 2010 Plan, no further awards were made under the Prior Incentive Plan, although existing awards remain effective. All stock options issued under the 2010 Plan and the Prior Incentive Plan (collectively the “Incentive Plans”) were issued at the current market price on the date of grant, subject to an immediate or four year vesting in four equal installments with a contractual term of five or ten years. The grant date fair value is calculated using the Black-Scholes option valuation model.

The following table provides information as of December 31, 2019 concerning shares of the Company’s common stock authorized for issuance under the Incentive Plans.

UPDATED EQUITY COMPENSATION PLAN INFORMATION AS OF MARCH 23, 2020

As of March 23, 2020, there were zero shares available for issuance under the Incentive Plans, zero outstanding option awards and 493,880 shares subject to outstanding unvested full value awards.

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Audit Committee Matters

REPORT OF THE AUDIT COMMITTEE

The Audit Committee operates pursuant to a charter which it reviews annually, and a brief description of the Audit Committee’s primary responsibilities is included under the heading “Board Committees – Audit Committee” in this Proxy Statement. Under the Audit Committee’s charter, management is responsible for the preparation of the Company’s financial statements and the independent registered public accounting firm is responsible for auditing those financial statements and expressing an opinion as to their conformity with U.S. generally accepted accounting principles. In addition, the independent registered public accounting firm is responsible for auditing and expressing an opinion on the Company’s internal controls over financial reporting.

The Audit Committee has reviewed and discussed Annaly’s audited financial statements with management and with EY, the Company’s independent auditor for 2019.

The Audit Committee has discussed with EY the matters required to be discussed by applicable standards adopted by the Public Company Accounting Oversight Board (“PCAOB”), including the critical audit matters set forth in EY’s audit report and matters concerning EY’s independence. EY has also provided to the Audit Committee the written disclosures and letter required by the applicable requirements of the PCAOB regarding EY’s communications with the Audit Committee concerning independence. The Audit Committee also discussed with EY their independence from the Company and management, and considered whether non-audit services provided by EY to the Company are compatible with maintaining EY’s independence. In determining whether to appoint EY as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2020, the Audit Committee took into consideration a number of factors, including historical and recent performance on the Company’s audit, including service level and quality of staff and overall work; EY’s tenure, independence and objectivity; EY’s capability and expertise, including its understanding of the Company’s business and operations and overall industry knowledge; legal and regulatory considerations; data related to audit quality and performance, including recent PCAOB inspection reports on the firm; the appropriateness of EY’s fees; and the results of a management survey of EY’s overall performance.

In reliance on these reviews and discussions, and the report of the independent registered public accounting firm, the Audit Committee has recommended to the Board, and the Board has approved, that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC.

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RELATIONSHIP WITH INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The aggregate fees billed for 2019 and 2018 by EY for each of the following categories of services are set forth below:

The Audit Committee has also adopted policies and procedures for pre-approving all non-audit work performed by the independent registered public accounting firm. The Audit Committee retained EY to provide certain non-audit services in 2019, consisting of tax compliance and consultations, all of which were pre-approved by the Audit Committee.

The Audit Committee determined that the provision by EY of these non-audit services is compatible with EY maintaining its independence.

In addition to the non-audit services described above, the Audit Committee also pre-approved certain audit services, including comfort letters and consents related to SEC registration statements and review of SEC comment letters.

The Company understands the need for EY to maintain objectivity and independence as the auditor of its financial statements and internal control over financial reporting. In accordance with SEC rules, the Audit Committee requires the lead EY partner assigned to Annaly’s audit to be rotated at least every five years, and the Audit Committee and its Chair is involved in selecting each new lead audit partner. The Audit Committee approved the hiring of EY to provide all of the services detailed above prior to such independent registered public accounting firm’s 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 applicable rules of the SEC.

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STOCKHOLDER PROPOSAL

Proposal 5—Adopt a Mainstream Shareholder Right—Written Consent

Shareholders request that our board of directors take the steps necessary to permit written consent by shareholders entitled to cast the minimum number of votes that would be necessary to authorize the action at a meeting at which all shareholders entitled to vote thereon were present and voting. This written consent is to give shareholders the fullest power to act by written consent consistent with applicable law. This includes shareholder ability to initiate any appropriate topic for written consent.

Hundreds of major companies enable shareholder action by written consent. This proposal topic won majority shareholder support at 13 large companies in a single year. This included 67% -support at both Allstate and Sprint. This proposal topic also won 63%-support at Cigna Corp. (CI) in 2019. This proposal topic would have received higher votes than 63% to 67% at these companies if more shareholders had access to independent proxy voting advice.

The right for shareholders to act by written consent is gaining acceptance as a more important right than the right to call a special meeting. This also seems to be the conclusion of the Intel Corporation (INTC) shareholder vote at the 2019 Intel annual meeting.

The directors at Intel apparently thought they could divert shareholder attention away from written consent by making it less difficult for shareholders to call a special meeting. However Intel shareholders responded with greater support for written consent in 2019 compared to 2018.

After a 45%-vote (less than a majority vote) for a written consent shareholder proposal The Bank of New York Mellon Corporation (BK) said it adopted written consent in 2019.

Perhaps BK is starting a new trend in recognizing that a 45%-vote represents a majority vote from the shares that have access to independent proxy voting advice.

And a proxy advisor set certain minimum requirements for a company adopting written consent in case the directors of a company are tempted to adopt a “fig leaf’ version of written consent.

This proposal is another step to improve our corporate governance. In 2019 our directors stood for election for one-year terms for the first time instead of 3-year terms. One-year terms for directors and a shareholder right to act by written consent can both have a favorable impact on our struggling stock price which is down from the $12-range of 2017.

Annual election or each director may be an incentive for our Chairman and CEO, Kevin Keyes, to improve upon his 2019 performance. Mr. Keyes received the most negative votes of any director. Under our old system Mr. Keyes would not have had to answer to a shareholder vote until 2022.

Please vote yes:

Adopt a Mainstream Shareholder Right—Written Consent—Proposal 5

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BOARD OF DIRECTORS’ STATEMENT

The Company is very committed to strong corporate governance practices that empower stockholders and promote Board accountability. These practices include:

The evolution of the Company’s corporate governance and stockholder rights frameworks has been informed by ongoing dialogue with its stockholders. As detailed in this Proxy Statement, stockholders have multiple avenues for raising matters with the Board and members of management. The Company conducts year-round engagement with both retail and institutional stockholders, encourages stockholders to communicate in writing with Directors, seriously considers potential Board candidates submitted by stockholders and provides the ability for stockholders to call special meetings outside of the annual meeting process.

The Board has determined not to recommend a vote either for or against the stockholder proposal. Although the proposal is non-binding and advisory in nature, the Board values stockholders’ opinions and will take the results of the vote into consideration, together with any other input from stockholders and other relevant factors, in making a decision regarding whether any changes should be made to the Company’s corporate governance and stockholder rights frameworks.

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Stock Ownership Information

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information as of March 23, 2020 relating to the beneficial ownership, as defined in SEC rules, of the Company’s common stock by (i) each NEO, (ii) each Director and nominee for Director, (iii) all executive officers and Directors as a group, and (iv) all persons that the Company knows beneficially own more than 5% of its outstanding common stock. Under SEC rules, a person is deemed to be a “beneficial owner” of a security if that person has or shares voting power or investment power, which includes the power to dispose of or to direct the disposition of such security.

Knowledge of the beneficial ownership of the Company’s common stock as shown below is drawn from statements filed with the SEC pursuant to Section 13(d) or 13(g) of the Exchange Act.