EMPLOYMENT AGREEMENT
This
EMPLOYMENT AGREEMENT (this “Agreement”) is
entered into as of this 31st day of March, 2008 by and between Dynex Capital,
Inc., a Virginia corporation (the “Company”), and Xxxxxx
X. Xxxx (“Executive”).
W1TNESSETH:
WHEREAS,
Executive commenced employment with the Company on February 4,
2008;
WHEREAS,
the Company desires to continue to employ and secure the exclusive services of
Executive on the terms and conditions set forth in this Agreement;
and
WHEREAS,
Executive desires to accept such employment on such terms and
conditions.
NOW,
THEREFORE, in consideration of the premises and the mutual covenants and
promises contained herein and for other good and valuable consideration, the
Company and Executive hereby agree as follows:
2. Term: Position and
Responsibilities; Location.
(a) Term of Employment.
Unless Executive’s employment shall sooner terminate pursuant to Section 7, the
Company shall continue to employ Executive on the terms and subject to the
conditions of this Agreement from the date first written above through February
5, 2009 (the “Employment Period”).
(b) Position and
Responsibilities. During the Employment Period, Executive
shall serve as Chief Executive Officer (“CEO”) and shall have
such duties and responsibilities as are customarily assigned to individuals
serving in such position and such other duties consistent with Executive’s title
and position as the Board of Directors (or any committee thereof) of the Company
(the Board or such committee referred to as the “Board”) specifies
from time to time (it being understood by the parties that, notwithstanding the
foregoing, the Company is free, at any time and from time to time, to reorganize
its business operations, and that Executive’s duties and scope of responsibility
may change in connection with such reorganization). Executive agrees
that during his employment with the Company, Executive shall devote as much of
his skill, knowledge, commercial efforts and business time as the Board shall
reasonably require to the conscientious and good faith performance of his duties
and responsibilities to the Company to the best of his ability.
(c) Location. During
the Employment Period, Executive’s services shall be performed primarily in the
San Francisco, California metropolitan area. However, Executive may be required
to travel in and outside of such area as the needs of the Company’s business
dictate. Executive will also work from time-to-time out of the
Company’s office in Richmond, Virginia.
3. Base Salary. During
the Employment Period, the Company shall pay Executive a base salary at an
annualized rate of $300,000, payable in installments on the Company’s regular
payroll dates. The Board shall review Executive’s base salary annually during
the Employment Period and may increase (but not decrease) such base salary from
time to time, based on its periodic review of Executive’s performance in
accordance with the Company’s regular policies and procedures. The annual base
salary payable to Executive from time to time under this Section 4 shall
hereinafter be referred to as the “Base
Salary.”
4. Annual Incentive
Compensation. The Company has established an annual bonus based on the
return on adjusted equity of the Company (the “ROAE Bonus”). The
Company has also established a bonus pool for 2008 related to capital raising
activities of the Company (the “Capital Bonus Pool”). The Executive
is eligible for the ROAE Bonus and to participate in the Capital Bonus
Pool. Attached hereto as Exhibit A, and incorporated by reference
herein, are the terms of the ROAE Bonus for the Executive. Attached
hereto as Exhibit B, and incorporated by reference herein, are the terms of the
Capital Bonus Pool in which the Executive will participate. For the
duration of this Agreement, the Executive will be eligible for the ROAE
Bonus. After 2008, the Executive’s participation in the Capital Bonus
Pool shall be determined in the sole discretion of the Board. The amount of the
Capital Bonus Pool allocated to the Executive will be determined by the
Compensation Committee of the Board of Directors on each Determination
Date. Such amounts will be paid in restricted stock of the Company
vesting on the second anniversary date of the grant as set forth on Exhibit
B.
5. Employee
Benefits.
(a) General. During the
Employment Period, Executive will be eligible to participate in the employee and
executive benefit plans and programs maintained by the Company from time to time
in which executives of the Company at Executive’s grade level are eligible to
participate, including to the extent maintained by the Company, life, medical,
dental, accidental and disability insurance plans and retirement, deferred
compensation and savings plans, in accordance with the terms and conditions
thereof as in effect from time to time.
(b) Vacation. During the
Employment Period, Executive shall be entitled to vacation on an annualized
basis of four (4) weeks per year, without carry-over accumulation. Executive
shall also be entitled to Company-designated holidays.
6. Expenses.
(a) Business Travel,
Lodging. During the Employment Period, the Company will reimburse
Executive for reasonable travel, lodging, meal and other reasonable expenses
incurred by him in connection with the performance of his duties and
responsibilities
hereunder
upon submission of evidence satisfactory to the Company of the incurrence and
purpose of each such expense, provided that such
expenses are permitted under the terms and conditions of the Company’s business
expense reimbursement policy. Such expenses shall be reimbursed in
accordance with the Company’s business expense reimbursement policy but in no
event later than December 31 of the year following the year in which the
Executive incurs the related expense.
7. Termination of
Employment.
(a) Termination for Any
Reason. Executive’s employment may be terminated by the Company or the
Executive for any reason. In the event that Executive’s employment is
terminated, no termination benefits shall be payable to or in respect of
Executive except as provided in Section 7(c).
(b)
Notice of Termination;
Date of Termination.
(i) Notice of
Termination. Any termination of Executive’s employment by the Company or
by Executive (other than as a result of Executive’s death) shall be communicated
by a written Notice of Termination addressed to the other party to this
Agreement. A “Notice
of Termination” shall mean a notice stating that Executive or the
Company, as the case may be, is electing to terminate Executive’s employment
with the Company (and thereby terminating the Employment Period), stating the
proposed effective date of such termination, indicating the specific provision
of this Section 8 under which such termination is being effected and, if
applicable, setting forth in reasonable detail the circumstances claimed to
provide the basis for such termination.
(ii) Date of Termination.
The term “Date of
Termination” shall mean (i) if Executive’s employment is terminated by
his death, the date of his death, (ii) if Executive’s employment is terminated
by Executive, a date which is at least 30 days following the issuance of the
Notice of Termination and (iv) if Executive’s employment is terminated for any
other reason, the effective date of termination specified in such Notice of
Termination. The Employment Period shall expire on the Date of
Termination.
(c) Payments
Upon Certain Terminations.
(i) In
the event of a termination of Executive’s employment, the Company shall pay to
Executive, within thirty (30) days of the Date of Termination, his Base Salary
through the Date of Termination, to the extent not previously paid,
reimbursement for any unreimbursed business expenses incurred by Executive prior
to the Date of Termination that are subject to reimbursement pursuant to Section
7(a) and payment for vacation time accrued as of the Date of Termination but
unused (the “Accrued
Obligations”). In addition, in the event of any such termination of
Executive’s employment unless such termination was for Cause (as defined in
Section 7(e) below), if Executive executes and delivers to the Company a
Separation Agreement and General Release substantially in the form approved by
the Company, Executive shall be entitled to the following payments and
benefits:
(A) the
portion of the ROAE Bonus for the fiscal year of the Company during which
Executive was employed that includes the Date of Termination, such portion to
equal the product (such product, the “Pro-Rata ROAE Bonus”)
of the ROAE Bonus that would have been payable to Executive for such fiscal year
had Executive remained employed for the entire fiscal year, determined based on
the extent to which the Company actually achieves the performance goals for such
year, multiplied by a fraction, the numerator of which is equal to the number of
days in such fiscal year that precede the Date of Termination and the
denominator of which is equal to 365, such amount to be payable to Executive on
the date such bonus would otherwise have been paid if the Executive was still
employed (the “Bonus
Payment Date”);
(B) to
the extent not already paid, the portion of the Capital Bonus Pool due the
Executive pursuant to Section 4 above for a Determination Date that precedes the
Date of Termination (the “Unpaid Capital
Bonus”) payable in cash on the Bonus Payment Date;
(C) to
the extent any incentive stock awards such as stock options, stock appreciation
rights, restricted stock, or similar which were awarded to Executive during the
Employment Period and which have not vested as of the Date of Termination, such
incentive stock awards will immediately become 100% vested and
exercisable; and
Executive
shall not have a duty to mitigate the costs to the Company under this Section
7(c)(i), nor shall any payments from the Company to Executive under items (A),
(B) or (C) of this Section 7(c)(i) be reduced, offset or canceled by any
compensation or fees earned by (whether or not paid currently) or offered to
Executive during the Severance Period by a subsequent employer or other Person
(as defined in below) for which Executive performs services, including but not
limited to consulting services. The foregoing notwithstanding, should Executive
receive or be offered health or medical benefits coverage during the Severance
Period by a subsequent employer or Person for whom Executive performs services,
Executive shall notify the Company of this within seven (7) business days of
such receipt or offer, as applicable, and all similar health and medical
benefits coverage provided by the Company to Executive shall terminate as of the
effective date of such new coverage.
(ii) Except
as specifically set forth in this Section 7(c), no termination benefits shall be
payable to or in respect of Executive’s employment with the
Company.
(d) The
payments under Section 7 are intended to be exempt from or comply with Internal
Revenue Code Section 409A and applicable guidance issued thereunder
(collectively, “Code
Section 409A”). If it should be determined that any payment or
benefit under this Agreement constitutes a “deferral of compensation” subject to
Code Section 409A, then, notwithstanding anything in this Agreement to the
contrary, if the Executive is a “specified employee” (within the meaning of Code
Section 409A and as determined by the Company in accordance with Code Section
409A) at the time of the Executive’s separation from service (as
defined
in Code Section 409A), the distribution of any payment or benefit under this
Agreement on account of the Executive’s termination of employment shall be made
no earlier than the date which is six months after the date of Executive’s
separation from service (or, if earlier than the end of such six month period,
the date of the Executive’s death). To the extent any payment or
benefit hereunder is subject to the six month delay, such payment or benefit
shall be paid immediately after the end of such six month period (or the date of
death, if earlier). The provisions of this Agreement governing any
payment or benefit constituting a “deferral of compensation” shall be
interpreted and operated consistently with the requirements of Code Section
409A.
(e) For
purposes of this Agreement, “Cause” means (i) a material breach by Executive of
any provision of this Agreement; (ii) a material and willful violation by
Executive of any of the Company Policies; (iii) the failure by Executive to
reasonably and substantially perform the duties of his position (other than as a
result of physical or mental illness or injury); (iv) Executive’s willful
misconduct or gross negligence that has caused or is reasonably expected to
result in material injury to the business, reputation or prospects of the
Company; (v) Executive’s fraud or misappropriation of funds; or (vi) the
commission by Executive of a felony or other serious crime involving moral
turpitude; provided that in the case of any breach of clauses (i), (ii) or (iii)
that is curable, no termination there under shall be effective unless the
Company shall have given Executive notice of the event or events constituting
Cause and Executive shall have failed to cure such event or events within thirty
(30) business days after receipt of such notice.
8. Restrictive
Covenants. Each of the Company and Executive agrees that the Executive
will have a prominent role in the management of the business, and the
development of the goodwill, of the Company, and will establish and develop
relations and contacts with customers and counterparties of the Company, all of
which constitute valuable goodwill of, and could be used by Executive to compete
unfairly with, the Company. In addition, Executive recognizes that he will have
access to and become familiar with or exposed to Confidential Information (as
such term is defined below), in particular, trade secrets, proprietary
information, customer lists, counterparty lists and other valuable business
information of the Company pertaining or related to the speciality finance
industry, specifically as it relates to being a mortgage real estate investment
trust (the “Business
of the Company”). Executive agrees that Executive could cause grave harm
to the Company if he, among other things, worked for the Company’s competitors,
solicited the Company’s employees away from the Company, solicited the Company’s
customers or business counterparties upon the termination of Executive’s
employment with the Company, or misappropriated or divulged the Company’s
Confidential Information; and that as such, the Company has legitimate business
interests in protecting its goodwill and Confidential Information; and, as such,
these legitimate business interests justify the following restrictive
covenants:
(a) Confidentiality and
Non-Disclosure Covenant.
(i) Executive
acknowledges and agrees that the terms of this Agreement, including all
addendums and attachments hereto, are confidential. Except as required by law or
the requirements of any stock exchange, Executive agrees not to disclose any
information contained in this Agreement to anyone, other than to Executive’s
lawyer, financial
advisor
or immediate family members. If Executive discloses any Information contained in
this Agreement to his lawyer, financial advisor or immediate family members as
permitted herein, Executive agrees to immediately tell each such individual that
he or she must abide by the confidentiality restrictions contained herein and
keep such information confidential as well.
(ii) Executive
agrees that during his employment with the Company and thereafter, Executive
will not, directly or indirectly (A) disclose any Confidential Information to
any Person (other than, only with respect to the period that Executive is
employed by the Company, to an employee or outside advisor of the Company who
requires such information to perform his or her duties for the Company), or (B)
use any Confidential Information for Executive’s own benefit or the benefit of
any third party. “Confidential
Information” means confidential, proprietary or commercially sensitive
information relating to (i) the Company or members of its management or boards
or (ii) any third parties who do business with the Company. Confidential
Information includes, without limitation, marketing plans, business plans,
financial information and records, operation methods, personnel information,
drawings, designs, information regarding product development, customer lists, or
other commercial or business information and any other information not available
to the public generally. The foregoing obligation shall not apply to any
Confidential Information that has been previously disclosed to the public or is
in the public domain (other than by reason of a breach of Executive’s
obligations to hold such Confidential Information confidential). If Executive is
required or requested by a court or governmental agency to disclose Confidential
Information, Executive must notify the Chief Operating Officer of the Company of
such disclosure obligation or request no later than three (3) business days
after Executive learns of such obligation or request, and permit the Company to
take all lawful steps it deems appropriate to prevent or limit the required
disclosure.
(b) Non-Competition
Covenant. Executive agrees that during his employment with the Company,
Executive shall devote as much of his skill, knowledge, commercial efforts and
business time as the Board shall reasonably require to the conscientious and
good faith performance of his duties and responsibilities to the Company to the
best of his ability. The Company acknowledges that Executive is the
managing general partner of Talkot Capital LLC and shall continue to function in
that regard during his employment with the Company. Except for Talkot
Capital, Executive shall not, directly or indirectly, be employed by, render
services for, engage in business with or serve as an agent or consultant to any
Person other than the Company. Executive further agrees that during his
employment with the Company and for the period of one (1) year following any
termination of his employment with the Company, Executive shall not, directly or
indirectly, become employed by, render services for, engage in business with,
serve as an agent or consultant to, or become a partner, member, principal,
stockholder or other owner, or Board member of, any Person or entity that
engages in the Business of the Company, provided that
Executive shall be permitted to hold a ten percent (10%) or less interest in the
equity or debt securities of any publicly traded company.
(c) Non-Solicitation of
Employees. During the period of Executive’s employment with the Company
and for the one (1)-year period following the termination of his employment,
Executive shall not, directly or indirectly, by himself or through any third
party, whether on Executive’s own behalf or on behalf of any other Person or
entity, (i) solicit or induce or endeavor to solicit or induce, divert, employ
or retain, (ii) interfere with the
relationship
of the Company with, or (iii) attempt to establish a business relationship of a
nature that is competitive with the business of the Company with, any Person
that is or was (during the last twelve (12) months of Executive’s employment
with the Company) an employee of the Company or engaged to provide services to
it.
9. Work Product.
Executive agrees that all of Executive’s work product (created solely or jointly
with others, and including any intellectual property or moral rights in such
work product), given, disclosed, created, developed or prepared in connection
with Executive’s employment with the Company, whether ensuing during or after
Executive’s employment with the Company (“Work Product”) shall
exclusively vest in and be the sole and exclusive property of the Company and
shall constitute “work made for hire” (as that term is defined under Section 101
of the U.S. Copyright Act, 17 U.S.C. § 101) with the Company being the person
for whom the work was prepared. In the event that any such Work Product is
deemed not to be a “work made for hire” or does not vest by operation of law in
the Company, Executive hereby irrevocably assigns, transfers and conveys to the
Company, exclusively and perpetually, all right, title and interest which
Executive may have or acquire in and to such Work Product throughout the world,
including without limitation any copyrights and patents, and the right to secure
registrations, renewals, reissues, and extensions thereof. The Company or its
designees shall have the exclusive right to make full and complete use of, and
make changes to all Work Product without restrictions or liabilities of any
kind, and Executive shall not have the right to use any such materials, other
than within the legitimate scope and purpose of Executive’s employment with the
Company. Executive shall promptly disclose to the Company the creation or
existence of any Work Product and shall take whatever additional lawful action
may be necessary, and sign whatever documents the Company may require, in order
to secure and vest in the Company or its designee all right, title and interest
in and to all Work Product and any intellectual property rights therein
(including full cooperation in support of any Company applications for patents
and copyright or trademark registrations).
10. Return of Company
Property. In the event of termination of Executive’s employment for any
reason, Executive shall return to the Company all of the property of the Company
and its Affiliates, including without limitation all materials or documents
containing or pertaining to Confidential Information, and including without
limitation, all computers (including laptops), cell phones, keys, PDAs,
Blackberries, credit cards, facsimile machines, televisions, card access to any
Company building, customer lists, computer disks, reports, files, e-mails, work
papers, Work Product, documents, memoranda, records and software, computer
access codes or disks and instructional manuals, internal policies, and other
similar materials or documents which Executive used, received or prepared,
helped prepare or supervised the preparation of in connection with Executive’s
employment with the Company. Executive agrees not to retain any copies,
duplicates, reproductions or excerpts of such material or
documents.
11. Compliance With Company
Policies. During Executive’s employment with the Company, Executive shall
be governed by and be subject to, and Executive hereby agrees to comply with,
all Company policies, procedures, codes, rules and regulations applicable to all
employees and to executive officers of the Company, as they may be amended from
time to time in the Company’s sole discretion (collectively, the “Policies”).
12. Injunctive Relief with
Respect to Covenants: Forum, Venue and Jurisdiction. Executive
acknowledges and agrees that a breach by Executive of any of Section of the
Agreement is a material breach of this Agreement and that remedies at law may be
inadequate to protect the Company in the event of such breach, and, without prejudice to any
other legal or equitable rights and remedies otherwise available to the
Company, Executive agrees to the granting of injunctive relief in the
Company’s favor in connection with any such breach or violation without proof of
irreparable harm. Executive further agrees that if the Company is
entitled to receive from Executive its attorneys’ fees and costs to enforce the
provisions of this Agreement. Executive further acknowledges and agrees that the
Company’s obligations to pay Executive any amount or provide Executive with any
benefit or right pursuant to Section 7 is subject to Executive’s compliance with
Executive’s obligations under Sections 8 through 10 inclusive, and that in the
event of a breach by Executive of any of Section 8 through 10, the Company shall
immediately cease paying such benefits and Executive shall be obligated to
immediately repay to the Company all amounts theretofore paid to Executive
pursuant to Section 7. In addition, if not repaid, the Company shall have the
right to set off from any amounts otherwise due to Executive any amounts
previously paid pursuant to Section 7(c) (other than the Accrued Obligations).
Executive further agrees that the foregoing is appropriate for any such breach
inasmuch as actual damages cannot be readily calculated, the amount is fair and
reasonable under the circumstances, and the Company would suffer irreparable
harm if any of these Sections were breached.
13. Assumption of
Agreement. The Company shall require any Successor thereto, by agreement
in form and substance reasonably satisfactory to Executive, to expressly assume
and agree to perform this Agreement in the same manner and to the same extent
that the Company would be required to perform it if no such succession had taken
place. Failure of the Company to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement and
shall entitle Executive to compensation from the Company in the same amount and
on the same terms as Executive would be entitled hereunder if the Company had
terminated Executive’s employment Without Cause as described in Section 7,
except that for purposes of implementing the foregoing, the date on which any
such succession becomes effective shall be deemed the Date of
Termination.
14. Indemnification. The
Company agrees both during and after the Employment Period to indemnify
Executive to the fullest extent permitted by its Certificate of Incorporation
(including payment of expenses in advance of final disposition of a proceeding)
against actions or inactions of Executive during the Employment Period as an
officer, director or employee of the Company or any of its Subsidiaries or
Affiliates or as a fiduciary of any benefit plan of any of the foregoing. The
Company also agrees to provide Executive with Directors and Officers insurance
coverage both during and, with regard to matters occurring during the Employment
Period, after the Employment Period. Such coverage shall be at a level at least
equal to the level being maintained at such time for the then current officers
and directors or, if then being maintained at a higher level with regard to any
prior period activities for officers or directors during such prior period, such
higher amount with regard to Executive’s activities during such prior
period.
15. Entire Agreement.
This Agreement constitutes the entire agreement among the parties hereto with
respect to the subject matter hereof. All prior correspondence and proposals
(including but not limited to summaries of proposed terms) and all prior
promises, representations, understandings, arrangements and agreements relating
to such subject matter (including but not limited to those made to or with
Executive by any other Person and those contained in any prior employment,
consulting or similar agreement, including the Original Agreement, entered into
by Executive and the Company or any predecessor thereto or Affiliate thereof)
are merged herein and superseded hereby.
16. Survival. The
following Sections shall survive the termination of Executive’s employment with
the Company and of this Agreement.
17. Miscellaneous.
(a) Binding Effect:
Assignment. This Agreement shall be binding on and inure to the benefit
of the Company and its Successors and permitted assigns. This Agreement shall
also be binding on and inure to the benefit of Executive and his heirs,
executors, administrators and legal representatives. This Agreement shall not be
assignable by any party hereto without the prior written consent of the other
parties hereto, provided, however,
that the Company may effect such an assignment without prior written approval of
Executive upon the transfer of all or substantially all of its business and/or
assets (by whatever means), provided that the
Successor to the Company shall expressly assume and agree to perform this
Agreement in accordance with the provisions of Section 13.
(b) Choice of Forum and
Governing Law. The parties agree that: (i) any
litigation involving any noncompliance with or breach of the Agreement, or
regarding the interpretation, validity and/or enforceability of the Agreement,
shall be filed and conducted in the state or federal courts in Richmond,
Virginia; and (ii) the Agreement shall be interpreted in accordance with and
governed by the laws of the Commonwealth of Virginia, without regard for any
conflict of law principles.
(c) Taxes. The Company
may withhold from any payments made under this Agreement all applicable taxes,
including but not limited to income, employment and social insurance taxes, as
shall be required by law.
(d) Amendments. No
provision of this Agreement may be modified, waived or discharged unless such
modification, waiver or discharge is approved in writing by the Board or a
Person authorized thereby and is agreed to in writing by Executive. No waiver by
any party hereto at any time of any breach by any other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No waiver of any
provision of this Agreement shall be implied from any course of dealing between
or among the parties hereto or from any failure by any party hereto to assert
its rights hereunder on any occasion or series of occasions.
(e) Severability. In the
event that any one or more of the provisions of this Agreement shall be or
become invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions contained herein shall not be
affected thereby. In the event that one or more terms or provisions of this
Agreement are deemed invalid or unenforceable by the laws of Virginia or any
other state or jurisdiction in which it is to be enforced, by reason of being
vague or unreasonable as to duration or geographic scope of activities
restricted, or for any other reason, the provision in question shall be
immediately amended or reformed to the extent necessary to make it valid and
enforceable by the court of such jurisdiction charged with interpreting and/or
enforcing such provision. Executive agrees and acknowledges that the provision
in question, as so amended or reformed, shall be valid and enforceable as though
the invalid or unenforceable portion had never been included
herein.
(f) Notices. Any notice
or other communication required or permitted to be delivered under this
Agreement shall be (i) in writing, (ii) delivered personally, by courier service
or by certified or registered mail, first-class postage prepaid and return
receipt requested, (iii) deemed to have been received on the date of delivery
or, if mailed, on the third business day after the mailing thereof, and (iv)
addressed as follows (or to such other address as the party entitled to notice
shall hereafter designate in accordance with the terms hereof):
(A) If
to the Company, to it at:
Chief
Operating Officer
Dynex
Capital, Inc.
0000 Xxx
Xxxx, Xxxxx 000
Xxxx
Xxxxx, XX 00000
(B) If
to Executive, to his residential address as currently on file with the
Company.
(g) Voluntary Agreement: No
Conflicts. Executive represents that he is entering into this Agreement
voluntarily and that Executive’s employment hereunder and compliance with the
terms and conditions of this Agreement will not conflict with or result in the
breach by Executive of any agreement to which he is a party or by which he or
his properties or assets may be bound.
(h) Counterparts/Facsimile.
This Agreement may be executed in counterparts (including by facsimile), each of
which shall be deemed an original and all of which together shall constitute one
and the same instrument.
(i) Headings. The section
and other headings contained in this Agreement are for the convenience of the
parties only and are not intended to be a part hereof or to affect the meaning
or interpretation hereof.
(j) Certain
other Definitions.
“Affiliate”: with
respect to any Person, means any other Person that, directly or indirectly
through one or more intermediaries, Controls, is Controlled by, or is under
common Control with the first Person, including but not limited to a Subsidiary
of any such Person.
“Control” (including,
with correlative meanings, the terms “Controlling”, “Controlled by” and “under
common Control with”): with respect to any Person, shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of voting
securities, by contract or otherwise.
“Person”: any natural
person, firm, partnership, limited liability company, association, corporation,
company, trust, business trust, governmental authority or other
entity.
“Subsidiary”: with
respect to any Person, each corporation or other Person in which the first
Person owns or Controls, directly or indirectly, capital stock or other
ownership interests
representing fifty percent (50%) or more of the combined voting power of the
outstanding voting stock or other ownership interests of such corporation or
other Person.
“Successor”: of a
Person means a Person that succeeds to the first Person’s assets and liabilities
by merger, liquidation, dissolution or otherwise by operation of law, or a
Person to which all or substantially all the assets and/or business of the first
Person are transferred.
IN
WITNESS WHEREOF, the Company has duly executed this Agreement by its authorized
representatives, and Executive has hereunto set his hand, in each case effective
as of the date first above written.
DYNEX
CAPITAL, INC.
By: /s/
Xxxxxxx X. Xxxxxxxxx
Its:
Executive Vice President and Chief Operating Officer
Xxxxxx X.
Xxxx:
/s/ Xxxxxx X.
Xxxx
SIGNATURE
EXHIBIT
A
PERFORMANCE
BONUS FOR RETURN ON ADJUSTED EQUITY
Certain
members of senior management (the “Participants”) will be eligible for a bonus
based on the annual return on adjusted equity of the Company (the “ROAE
Bonus”).
Determination
of the Bonus Amount
The bonus
amount shall be determined individually, and shall equal the product of the
Participant’s respective actual base salary paid for 2008 times the sum of (x)
the product of 50% times the Reference Rate as calculated below and (y) the
product of 50% times the percentage determined by the Compensation Committee of
the Board of Directors earned by the respective Participant relative to certain
objectives set for the Participant by the Compensation Committee.
Payment
of the Bonus Amount
Amounts
due to the Participants for the ROAE Bonus will be paid in cash concurrently
with the filing of the Company’s Annual Report on Form 10-K for the year ended
December 31, 2008, or March 15, 2009, whichever is earlier.
Determination
of Reference Rate
The
Reference Rate will be determined based on the Return on Average Equity (ROAE).
ROAE will be determined as the Company’s net income for the period April 1, 2008
to December 31, 2008 determined in accordance with generally accepted accounting
principles, adjusted for any non-recurring extraordinary items as determined by
the Compensation Committee, divided by average common shareholder equity
excluding unrealized gains and losses and adjusted for any equity capital that
is raised until such time the capital is deployed. The ROAE
will then be annualized for purposes of determining the Reference Rate
below.
|
Reference
Rate
|
||||
|
ROAE
less than 6%
|
-
%
|
|||
|
ROAE
6% or greater and less than 8%
|
25%
|
|||
|
ROAE
8% or greater and less than 10%
|
50%
|
|||
|
ROAE
10% or greater and less than 12%
|
75%
|
|||
|
ROAE
12% or greater
|
100%
|
EXHIBIT
B
PERFORMANCE
BONUS POOL FOR CAPITAL RAISING ACTIVITIES
A
performance bonus pool for capital raising activities for calendar 2008 (the
“Capital Bonus Pool”) will be created to compensate eligible participants (the
“Participants”) for equity capital raising activities.
Determination
of the Capital Bonus Pool
The
amount available in the Capital Bonus Pool will be equal to 1% of the gross
amount of equity capital raised by the Company in 2008 provided that the
aggregate amount for 2008 equals or exceeds $100 million. The equity
capital raised will exclude any amounts raised, if any, via a dividend
reinvestment program, continuous offering program, or
similar. The amount available for the Capital Bonus Pool will
be made on the closing date of each respective offering (the “Determination
Date’). The initial Determination Date will be on the closing date of
the first equity offering in 2008 that cumulatively exceeds $100
million.
Allocation
of the Capital Bonus Pool
The
Capital Bonus Pool will be allocated by the Compensation Committee of the Board
of Directors to the individual Participants based on recommendations made by the
Chief Executive Officer of the Company and the assessment by the Compensation
Committee of the Board of Directors of each Participant's performance with
respect to the equity capital raising activities of the Company. Such
allocations will be made as eligible equity capital is raised but no less than
quarterly.
Payment
of the Capital Bonus Pool
Payment
of amounts due to the Participants will be made in the form of restricted common
stock of the Company during 2008, which shall vest 100% on the second
anniversary of the Determination Date. The vesting provision will be
the only restriction with respect to the common stock issued to the
Participant. The stock price used to calculate the number of shares
granted to each Participant shall be equal to the weighted average price per
share of that capital raised.
