SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of the
Securities
Exchange Act of 1934
Filed
by
the Registrant x
Filed
by
a Party other than the Registrant ¨
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appropriate box:
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¨
Preliminary
Proxy Statement
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| ¨ Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
| x Definitive Proxy Statement | |
| ¨ Definitive Additional Materials | |
| ¨ Soliciting Material Under Rule 14a-12 |
DYNEX
CAPITAL, INC.
(Name
of
Registrant as Specified in Its Charter)
________________________
(Name
of
Person(s) Filing Proxy Statement, if other than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
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required.
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computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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of each class of securities to which transaction applies:
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(2)
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Aggregate
number of securities to which transaction applies: ____________________
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unit price or other underlying value of transaction computed pursuant
to
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fee is
calculated and state how it was determined):
__________________________________________________________
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(4)
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Proposed
maximum aggregate value of transaction: ___________________________
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fee paid: _________________________________________________________
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Dynex
Capital, Inc.
Notice
of
Annual Meeting of Shareholders
and
Proxy
Statement
Annual
Meeting of Shareholders
June
15,
2006
DYNEX
CAPITAL, INC.
May
5,
2006
To
Our
Shareholders:
You
are
cordially invited to attend the Annual Meeting of Shareholders of Dynex Capital,
Inc. (the “Company”) to be held at the Park Central Hotel located at 870 Seventh
Avenue at 56th
Street,
New York, New York on Thursday, June 15, 2006, at 9:00 a.m. Eastern
Time.
The
business of the meeting is to consider and act upon the election of directors
of
the Company.
While
shareholders may exercise their right to vote their shares in person, we
recognize that many shareholders may not be able to attend the Annual Meeting.
Accordingly, we have enclosed a proxy which will enable you to vote your shares
on the issues to be considered at the Annual Meeting even if you are unable
to
attend. All you need to do is mark the proxy to indicate your vote, date and
sign the proxy, and return it in the enclosed postage-paid envelope as soon
as
conveniently possible. If you are a common shareholder and desire to vote your
shares of common stock in accordance with management’s recommendations, you need
not mark your votes on the proxy but need only sign, date and return the common
proxy card in the enclosed postage-paid envelope in order to record your vote.
If you are a preferred shareholder and desire to vote your shares of Series
D
preferred stock for one or both of the preferred nominees, you must mark your
votes on the preferred proxy card and return such proxy card in the enclosed
postage-paid envelope in order to record your vote.
Sincerely,
Thomas
B.
Akin
Chairman
of the Board
Stephen
J. Benedetti
Executive
Vice President and
Chief
Operating Officer
DYNEX
CAPITAL, INC.
4551
Cox Road, Suite 300
Glen
Allen, Virginia 23060
(804)
217-5800
____________________________
NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS
To
Our
Shareholders:
The
Annual Meeting of Dynex Capital, Inc. (the “Company”) will be held at the Park
Central Hotel located at 870 Seventh Avenue at 56th
Street,
New York, New York on Thursday, June 15, 2006, at 9:00 a.m.
Eastern
Time, to consider and act upon the following matters:
| 1. |
Holders
of our common stock will:
|
|
A.
|
Elect
three (3) directors of the Company, to hold office until the next
annual
meeting and until their successors are elected and duly qualified;
and
|
|
B.
|
Transact
such other business as may properly come before the meeting or any
adjournment or adjournments
thereof.
|
| 2. |
Holders
of our Series D preferred stock
will:
|
|
A.
|
Elect
two (2) directors of the Company, to hold office until the next annual
meeting and until their successors are elected and duly qualified,
or as
otherwise provided in the Company’s Articles of
Incorporation.
|
Only
shareholders of record at the close of business on April 28, 2006, the record
date, will be entitled to vote at the Annual Meeting.
Management
desires to have maximum representation at the Annual Meeting and respectfully
requests that you date, execute and promptly mail the enclosed proxy in the
accompanying postage-paid envelope. A proxy may be revoked by a shareholder
by
notice in writing to the Secretary of the Company at any time prior to its
use,
by presentation of a later-dated proxy or by attending the Annual Meeting and
voting in person.
By
Order
of the Board of Directors
Stephen
J. Benedetti
Secretary
Dated:
May 5, 2006
DYNEX
CAPITAL, INC.
4551
Cox Road, Suite 300
Glen
Allen, Virginia 23060
(804)
217-5800
____________________________
PROXY
STATEMENT
ANNUAL
MEETING OF SHAREHOLDERS
June
15, 2006
To
Our
Shareholders:
This
Proxy Statement is furnished to the holders of the common stock (“Common Stock”)
and Series D 9.50% Cumulative Convertible Preferred Stock (“Series D Preferred
Stock”) of Dynex Capital, Inc. (the “Company”) in connection with the
solicitation by the Company’s Board of Directors of proxies to be used at the
Annual Meeting of Shareholders of the Company to be held at the Park Central
Hotel located at 870 Seventh Avenue at 56th
Street,
New York, New York on Thursday, June 15, 2006, at 9:00 a.m. Eastern Time. The
Annual Meeting is being held for the purposes set forth in the accompanying
notice of Annual Meeting of Shareholders. This Proxy Statement, the accompanying
proxy card and the notice of Annual Meeting are being provided to shareholders
beginning on or about May 5, 2006.
GENERAL
INFORMATION
Solicitation
The
enclosed proxy is solicited by the Board of Directors of the Company. The costs
of this solicitation will be borne by the Company. Proxy solicitations will
be
made by mail, and also may be made by personal interview, telephone and telegram
by directors and officers of the Company. Brokerage houses and nominees will
be
requested to forward the proxy soliciting material to the beneficial owners
of
shares of Common Stock and Series D Preferred Stock and to obtain authorization
for the execution of proxies. The Company will, upon request, reimburse such
parties for their reasonable expenses in forwarding these proxy materials to
such beneficial owners.
Voting
Rights
Common
Stock.
Holders
of shares of Common Stock at the close of business on April 28, 2006, the record
date, are entitled to notice of, and to vote at, the Annual Meeting. On that
date, 12,163,391 shares of Common Stock were outstanding. Each share of Common
Stock outstanding on the record date is entitled to one vote for each of four
directors to be elected by the holders of shares of Common Stock and one vote
on
any other matter presented to such holders at the Annual Meeting. The presence,
in person or by proxy, of holders of shares of Common Stock entitled to cast
a
majority of all the votes entitled to be cast constitutes a quorum for the
transaction of business at the Annual Meeting.
Series
D Preferred Stock. Holders
of shares of Series D Preferred Stock at the close of business on April 28,
2006, the record date, are entitled to notice of, and to vote at, the Annual
Meeting, voting as a single class to elect two directors to the Company’s Board
of Directors. The holders of Series D Preferred Stock are not entitled to vote
on any other matter. There were 4,221,539 shares of Series D Preferred Stock
outstanding as of April 28, 2006.
Voting
of Proxies - Common Stock
A
proxy
card, indicating COMMON STOCK shares, is being sent to the holders of shares
of
Common Stock (the “common proxy”). Shares of Common Stock represented by a
properly executed common proxy received in time for the Annual Meeting will
be
voted in accordance with the choices specified in such common proxy. If no
instructions are indicated on the common proxy, the shares of Common Stock
will
be voted FOR the election of the nominees named in this Proxy Statement as
common shareholder directors.
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Voting
of
Proxies—Series D Preferred Stock
A
proxy
card, indicating SERIES D PREFERRED STOCK shares, is being sent to holders
of
shares of Series D Preferred Stock (the “preferred proxy”). Shares of
Series D Preferred Stock represented by a properly completed and executed
preferred proxy received in time for the Annual Meeting will be voted in
accordance with the choices specified in such preferred proxy. If a preferred
proxy is not completed in accordance with its instructions or no choices are
specified on the preferred proxy, the shares of Series D Preferred Stock
represented by such preferred proxy will not be voted.
Revocability
of Proxy
The
giving of the enclosed proxy does not preclude the right to vote in person
should the shareholder giving the proxy so desire. A proxy may be revoked at
any
time prior to its exercise by delivering a written statement to the Secretary
of
the Company that the proxy is revoked, by presenting to the Company a
later-dated proxy executed by the person executing the prior proxy, or by
attending the Annual Meeting and voting in person.
Quorum
The
following principles of Virginia law apply to the voting of shares of capital
stock at the Annual Meeting. The presence in person or by proxy of shareholders
entitled to vote a majority of the outstanding shares of Common Stock will
constitute a quorum for all matters upon which holders of shares of Common
Stock
are entitled to vote. The presence in person or by proxy of shareholders
entitled to vote a majority of the outstanding shares of Series D Preferred
Stock will constitute a quorum for the matter upon which holders of shares
of
Series D Preferred Stock are entitled to vote. Shares represented by proxy
or in
person at the Annual Meeting, including shares represented by proxies that
reflect abstentions, will be counted as present in the determination of a
quorum. An abstention as to any particular matter, however, does not constitute
a vote “for” or “against” such matter. “Broker non-votes” (i.e.,
where a
broker or nominee submits a proxy specifically indicating the lack of
discretionary authority to vote on a matter) will be treated in the same manner
as abstentions.
Other
Matters
The
management and the Board of Directors of the Company know of no other matters
to
come before the Annual Meeting other than those stated in the notice of the
Annual Meeting. However, if any other matters are properly presented to the
shareholders for action, it is the intention of the proxy holders named in
the
enclosed proxy to vote in their discretion on all matters on which the shares
represented by such proxy are entitled to vote.
Annual
Report on Form 10-K
The
Company’s Annual Report on Form 10-K, including financial statements for the
year ended December 31, 2005, which is being mailed to shareholders together
with this Proxy Statement, contains financial and other information about the
activities of the Company, but is not incorporated into this Proxy Statement
and
is not to be considered a part of these proxy soliciting
materials.
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PROPOSAL
ONE
ELECTION
OF DIRECTORS
General
Common
Stock Directors.
Three
directors of the Company are to be elected by the holders of shares of Common
Stock at the Annual Meeting to serve until the next annual meeting and until
their successors are elected and duly qualified. On the recommendation of the
Nominating & Corporate Governance Committee, the Board of Directors has
nominated Thomas B. Akin, Daniel K. Osborne and Eric P. Von der Porten for
election by the holders of shares of Common Stock to the Board of Directors
at
the Annual Meeting. Unless otherwise indicated, a common proxy representing
shares of Common Stock will be voted FOR the election of Messrs. Akin, Osborne
and Von der Porten to the Board of Directors. Each common stock director nominee
has agreed to serve if elected. In the event any common stock director nominee
shall unexpectedly be unable to serve, each common proxy will be voted for
such
other person as the Board of Directors may designate. Selected biographical
information regarding each common stock director nominee is set forth below.
Series
D Preferred Stock Directors.
Pursuant
to Section 10 of Article IIID of the Company’s Articles of Incorporation, as
amended, the holders of shares of Series D Preferred Stock are entitled to
elect
two directors to the Board of Directors of the Company. Except as otherwise
provided in the Company’s Articles of Incorporation, each such director will
serve until the next annual meeting of the shareholders of the Company and
until
their successors are elected and duly qualified. Leon A. Felman and Barry
Igdaloff have been nominated for election by holders of shares of Series D
Preferred Stock to the Board of Directors at the Annual Meeting. Each preferred
stock director nominee has agreed to serve if elected. Selected biographical
information regarding each preferred stock director nominee is set forth
below.
Vote
Required
Common
Stock Directors.
The
three directors to be elected by the holders of shares of Common Stock will
be
elected by a favorable vote of a plurality of the shares of Common Stock
represented and entitled to vote with respect to each common stock director,
in
person or by proxy, at the Annual Meeting. Accordingly, abstentions or broker
non-votes as to the election of the common stock directors will not affect
the
election of candidates receiving the plurality of votes. Unless instructed
to
the contrary, the shares represented by each common proxy will be voted FOR
the
election of each of the three common stock director nominees named below.
Although it is anticipated that each common stock director nominee will be
able
to serve as a director, should any nominee become unavailable to serve, the
shares represented by each common proxy will be voted for another person or
persons designated by the Company’s Board of Directors. In no event will a
common proxy be voted for more than three common stock directors.
Series
D Preferred Stock Directors.
The two
directors to be elected by the holders of shares of Series D Preferred Stock
will be elected by a favorable vote of a plurality of the shares of Series
D
Preferred Stock represented and entitled to vote with respect to each preferred
stock director, in person or by proxy, at the Annual Meeting. Accordingly,
abstentions or broker non-votes as to the election of the preferred stock
directors will not affect the election of candidates receiving the plurality
of
votes. If a preferred proxy is not completed in accordance with its instructions
or no choices are specified on the preferred proxy, the shares of Series D
Preferred Stock represented by such preferred proxy will not be voted. Although
it is anticipated that each preferred stock director nominee will be able to
serve as a director, should any nominee become unavailable to serve, the shares
represented by each preferred proxy will not be voted for another person or
persons. In no event will a preferred proxy be voted for more than two
directors.
Common
Stock Director Nominees
The
following information sets forth as of April 21, 2006, the names, ages,
principal occupations and business experience for the Company’s common stock
director nominees. Unless otherwise indicated, the business experience and
principal occupations shown for each director has extended five or more years.
As previously reported, J. Sydney Davenport will not stand for reelection to
the
Board of Directors. Mr. Davenport has been a director since the Company’s
organization in December 1987, and his service to the Company is greatly
appreciated.
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3 -
Thomas
B. Akin (54),
has
been a director of the Company since May 2003, and Chairman since May 30, 2003.
He has served as the managing general partner of Talkot Capital, LLC located
in
Sausalito, California since 1995. Talkot Capital is the general partner for
various limited partnerships investing in both private and public
companies.1
From
1981 to 1994, Mr. Akin worked for Merrill Lynch Institutional Services as
regional director for both the San Francisco and Los Angeles areas, followed
by
managing director of the Western United States. Prior to Merrill Lynch, Mr.
Akin
was an employee of Salomon Brothers from 1978 to 1981. He is currently on the
board of directors of Acacia Research Inc., Combi Matrix, and Advance Data
Exchange. Mr. Akin holds a B.A. from the University of California at Santa
Cruz,
and an MBA in finance from the UCLA Anderson School of Management.
Daniel
K. Osborne (41),
has
been a director of the Company since 2005. Mr. Osborne has been Managing Member
of Vantage Pointe Capital, LLC, an investment advisory firm that serves as
the
general partner of Vantage Pointe Capital Partners LP, since February 2003.
Prior to founding Vantage Pointe Capital, LLC in 2003, Mr. Osborne was a private
investor and co-founder of Apex Mortgage Capital, Inc. He was the company’s
Chief Operating Officer and Chief Financial Officer from September 1997 to
September 2001. Mr. Osborne was also a Managing Director of Trust Company of
The
West from July 1994 to December 2001. Mr. Osborne began his career with Deloitte
& Touche, LLP. He holds a B.S. degree in accounting from Arizona State
University.
Eric
P. Von der Porten (48),
has
been a director of the Company since May 2002. Since 1997, Mr. Von der Porten
has served as the managing member of Leeward Investments, LLC, the general
partner of Leeward Capital, L.P. Mr. Von der Porten earned an A.B. from the
University of Chicago and an M.B.A. from the Stanford Graduate School of
Business.
Series
D Preferred Stock Director Nominees
The
following information sets forth as of April 21, 2006, the names, ages,
principal occupations and business experience for the Company’s preferred stock
director nominees. Unless otherwise indicated, the business experience and
principal occupations shown for each director has extended five or more
years.
Leon
A. Felman (71),
has
been a director of the Company since November 2000. Mr. Felman was a director
of
Allegiant Bancorp, Inc., a St. Louis, Missouri based bank holding company,
from
1992 to 2004, and of Allegiant Bank & Trust Company, Inc., from 2001 to
2004. Allegiant Bancorp was sold in 2004 and Mr. Felman no longer serves on
either board. Mr. Felman also served on the Audit Committee and the Real Estate
Committee and chaired both the Nominating & Corporate Governance Committee
and the Ethics Committee while on the Board of Allegiant Bancorp. From 1968
to
1999, Mr. Felman was the President and Chief Executive Officer of Sage Systems,
Inc., which operated twenty-eight Arby’s restaurants in the St. Louis, Missouri
metropolitan area. Mr. Felman currently serves as the trustee and investing
authority for The Leon A. Felman Family Trust. In June 2004, Mr. Felman was
appointed to the Board of Directors of Pulaski Financial Corporation. He is
presently Chairman of the Nominating & Corporate Governance Committee, a
member of the Audit Committee, a member of the Loan Committee, and a member
of
the Real Estate Committee of Pulaski Financial Corporation. Additionally, Mr.
Felman serves as a member of the Chancellor’s Council for the University of
Missouri-St. Louis and on the Board of Directors of the Barnes-Jewish Hospital
Foundation. Mr. Felman has been a private investor in financial institutions
since 1980. Mr. Felman graduated from Carnegie Institute of Technology with
a
B.S. in Industrial Administration.
Barry
Igdaloff (51), has
been
a director of the Company since November 2000. Mr. Igdaloff has been a
registered investment advisor and the sole proprietor of Rose Capital, Inc.
in
Columbus, Ohio, since 1995. Mr. Igdaloff graduated from Indiana University
in
1976 with a B.S.B. in accounting and from The Ohio State University in 1978,
with a Juris Doctorate degree. Mr. Igdaloff is a non-practicing certified public
accountant and a non-practicing attorney.
1 Mr.
Akin
is the managing general partner of Talkot Capital, LLC. During 1999, Talkot
Capital and several other investors invested in Infotec Commercial Systems,
Inc.
(“Infotec”), a privately held company that provided training in computer
technology to businesses throughout the United States. In 2001, Mr. Akin served
as Chairman of the Board of Directors of Infotec, which filed for relief under
Chapter VII of the United States Bankruptcy Code resulting in the liquidation
of
the company’s assets. The investors of Infotec, including Talkot Capital, did
not receive any return on capital.
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CORPORATE
GOVERNANCE
AND
THE BOARD OF DIRECTORS
General
The
business and affairs of the Company are managed under the direction of the
Board
of Directors in accordance with the Virginia Stock Corporation Act and the
Company’s Articles of Incorporation and Bylaws. Members of the Board are kept
informed of the Company’s business through discussions with the Chairman of the
Board and chief executive officer (or, in his absence, the principal executive
officer) and other officers, by reviewing materials provided to them and by
participating in meetings of the Board and its committees. The corporate
governance practices followed by the Company are summarized below.
Corporate
Governance Guidelines
The
Board
of Directors has adopted Corporate Governance Guidelines that set forth the
practices of the Board with respect to its size,
criteria for membership and selection to the Board, committees of the Board,
meetings and access to management, director compensation, director orientation
and continuing education, an annual performance evaluation of the Board,
director responsibilities, an annual
review of performance of the president and chief executive officer (or, in
his
absence, the principal executive officer) and management succession and
ethics
and conduct. The
Guidelines are available on the Company’s web page at www.dynexcapital.com.
A
printed copy is available to any shareholder upon written request to the
Secretary of the Company, 4551 Cox Road, Suite 300, Glen Allen, Virginia
23060.
The
Board
of Directors in its business judgment has determined that all of its members
are
independent as defined by New York Stock Exchange listing standards. In reaching
this conclusion, the Board considered whether the Company and its subsidiaries
conduct business and have other relationships with organizations of which
certain members of the Board or members of their immediate families are or
were
directors or officers. Consistent with the New York Stock Exchange listing
standards, the Company’s Corporate Governance Guidelines establish categorical
standards under which a director will not be considered to have a material
relationship with the Company if:
| · |
during
each of the current fiscal year and three most recent fiscal years,
neither the director nor any immediate family member of the director
received more than $100,000 per year in direct compensation from
the
Company, other than director and committee fees and pension or other
forms
of deferred compensation for prior service (provided that such
compensation is not contingent on continued service);
|
| · |
during
each of the current fiscal year and three most recent fiscal years,
the
director is not, and was not, an executive officer or an employee,
or
whose immediate family member is not, or was not, an executive officer
of
another company that made payments to, or received payments from,
the
Company for property or services in an amount which, in any single
fiscal
year, exceeded the greater of $1,000,000 or 2% of such other company’s
consolidated gross revenues; or
|
| · |
the
director serves as an executive officer of a charitable organization
to
which during each of the three preceding fiscal years the Company
made
charitable contributions that did not exceed the greater of $1,000,000
or
2% of such charitable organization’s consolidated gross revenues.
|
None
of
the Company’s directors, their immediate family members, or organizations in
which they are a partner, shareholder or officer, are engaged in relationships
with the Company not meeting the criteria set forth above.
Code
of Ethics
The
Board
of Directors has approved a Code of Business Conduct and Ethics for directors,
officers and employees of the Company and each of its subsidiaries, including
the Company’s chief executive officer (or, in his absence, the principal
executive officer) and principal financial officers. The Code addresses such
topics as compliance with applicable laws, conflicts of interest, use and
protection of Company assets, confidentiality, dealings with the press and
communications with the public, accounting and financial reporting matters,
fair
dealing, discrimination and harassment and health and safety. It is available
on
the Company’s web page at
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5 -
www.dynexcapital.com.
A
printed copy of the Code is available to any shareholder upon written request
to
the Secretary of the Company at the address set forth above.
Board
and Committee Meeting Attendance
In
2005,
there were five meetings of the Board of Directors. Each director attended
75%
or more of the total aggregate number of meetings of the Board and of the
committees on which he served.
Executive
Sessions
Executive
sessions where non-employee directors meet on an informal basis are scheduled
either before or after regularly scheduled Board meetings. At least once a
year
the Board schedules an executive session including only independent directors.
Thomas B. Akin, the Chairman of the Board, serves as chairman for executive
sessions.
Communications
with Directors
Any
director may be contacted by writing to him c/o the Secretary of the Company
at
the address set forth above. Communications to the non-management directors
as a
group may be sent to the Chairman of the Board c/o the Secretary of the Company
at the same address. The Company promptly forwards, without screening, all
such
correspondence to the indicated director(s).
Committees
of the Board
The
Board
of Directors has a standing Audit Committee, Compensation Committee and
Nominating & Corporate Governance Committee.
Audit
Committee
The
Audit
Committee assists the Board of Directors in fulfilling the Board’s oversight
responsibility to the shareholders relating to the integrity of the Company’s
financial statements, the Company’s compliance with legal and regulatory
requirements, the qualifications, independence and performance of the Company’s
independent auditor and the performance of the internal audit function. The
Committee is directly responsible for the appointment, compensation, retention
and oversight of the work of the independent auditor engaged for the purpose
of
preparing or issuing an audit report or performing other audit, review or
attestation services for the Company. The Committee operates under a written
charter last amended by the Board in June 2004. The Audit Committee Charter
is
available on the Company’s web page at www.dynexcapital.com.
The
members of the Audit Committee are Messrs. Von der Porten (Chairman), Felman,
Igdaloff and Osborne, all of whom the Board in its business judgment has
determined are independent as defined by regulations of the Securities and
Exchange Commission and the New York Stock Exchange listing standards. The
Board
of Directors also has determined that all of the Committee members are
financially literate as defined by the New York Stock Exchange listing standards
and that Mr. Igdaloff qualifies as an audit committee financial expert as
defined by regulations of the Securities and Exchange Commission.
The
Audit
Committee met ten
times in
2005.
For additional information regarding the Committee, see “Audit Information -
Audit Committee Report” on page 18 of this Proxy Statement.
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6 -
Compensation
Committee
The
Compensation Committee performs the responsibilities of the Board of Directors
relating to compensation of the Company’s executives. The Committee’s
responsibilities include reviewing and approving corporate goals and objectives
relevant to compensation of the Company’s chief executive officer (or, in his
absence, the principal executive officer), evaluating the chief executive
officer’s performance in light of those goals and objectives and determining and
approving the chief executive officer’s compensation level based on this
evaluation; reviewing and approving the compensation for senior executive
officers, including their corporate goals and objectives; producing a report
on
executive compensation as required by the rules of the Securities and Exchange
Commission to be included in the Company’s annual proxy statement; reviewing and
approving any employment-related agreement, other compensation arrangement,
or
transaction with senior management; making recommendations to the Board with
respect to annual and long-term incentive compensation and equity-based plans;
administering the Company’s equity-based, deferral and other compensation plans
approved by the Board from time to time; reviewing any significant changes
in
the Company’s tax-qualified employee benefit plans; and reviewing annually with
the chief executive officer succession planning and management development
activities and strategies. The Committee operates under a written charter last
amended by the Board in June 2004. The Charter of the Compensation Committee
is
available on the Company’s web page at www.dynexcapital.com.
A
printed copy is available to any shareholder upon written request to the
Secretary of the Company at the address set forth above.
The
members of the Compensation Committee are Messrs. Davenport (Chairman), Akin
and
Felman, all of whom the Board in its business judgment has determined are
independent as defined by the New York Stock Exchange listing standards. The
Committee met two times in 2005. For additional information regarding the
Committee, see “Management of the Company and Executive
Compensation—Compensation Committee Report” on page 12 of this Proxy
Statement.
Nominating
& Corporate Governance Committee
The
Nominating & Corporate Governance Committee develops qualifications for
director candidates, recommends to the Board of Directors persons to serve
as
directors of the Company and monitors developments in, and makes recommendations
to the Board concerning corporate governance practices. The Committee acts
as
the Company’s nominating committee. The Committee operates under a written
charter last amended by the Board in June 2004. The Charter of the Nominating
& Corporate Governance Committee is available on the Company’s web page at
www.dynexcapital.com.
A
printed copy is available to any shareholder upon written request to the
Secretary of the Company at the address set forth above.
The
members of the Nominating & Corporate Governance Committee are Messrs.
Felman (Chairman), Davenport, and Von der Porten, all of whom the Board in
its
business judgment has determined are independent as defined by the New York
Stock Exchange listing standards. The Committee met two times in
2005.
The
Nominating & Corporate Governance Committee considers candidates for the
Board based upon several criteria, including but not limited to their
broad-based business and professional skills and experience, concern for the
long-term interest of the Company’s shareholders, personal integrity and
judgment, and knowledge and experience in the Company’s industry. The Committee
further considers each candidate’s independence, as defined by the New York
Stock Exchange listing standards. All candidates must have time available to
devote to Board duties and responsibilities.
The
Nominating & Corporate Governance Committee utilizes a variety of methods
for identifying and evaluating nominees for director. The Committee will
regularly assess the appropriate size of the Board and whether any vacancies
on
the Board are expected due to retirement or otherwise. In the event that
vacancies are anticipated, or otherwise arise, the Committee will consider
various potential candidates for director. Candidates may come to the attention
of the Committee through current Board members, professional search firms,
shareholders or other persons. These candidates are evaluated at regular or
special meetings of the Committee and may be considered at any point during
the
year.
Shareholders
entitled to vote for the election of directors may submit candidates for
consideration by the Nominating & Corporate Governance Committee if the
Company receives timely written notice, in proper form, for each such
recommended director nominee. If the notice is not timely and in proper form,
the nominee will not be considered by the Committee. Under the regulations
of
the Securities and Exchange Commission, any shareholder
-
7 -
desiring
to recommend a nominee to be acted upon at the 2007 annual meeting of
shareholders must cause such nominee to be received, in proper form, by the
Secretary of the Company no later than January 12, 2007 in order for the
nominee
to be considered for inclusion in the Company’s Proxy Statement for that
meeting. Any nominees that are received after that date may be considered
by the
Nominating & Corporate Governance Committee outside of the proxy statement
process.
In
evaluating nominations, the Nominating & Corporate Governance Committee
seeks to achieve a balance of knowledge, experience and capability on the Board.
Annual
Meeting Attendance
The
Company encourages members of the Board of Directors to attend the annual
meeting of shareholders. All of the directors attended the 2005 annual meeting
of shareholders.
Directors’
Compensation
Each
director receives an annual fee of $25,000, plus $1,000 for each meeting of
the
Board of Directors and Audit Committee he attends and $750 for each meeting
of
all other committees he attends. The Chairman of the Board receives an
additional annual fee of $15,000, so long as he is not an employee of the
Company, and the Chairman of the Audit Committee receives an additional fee
of
$3,000.
Directors
are reimbursed expenses related to their attendance at Board of Director or
committee meetings.
In
addition, the independent directors will receive annually a grant of stock
options for 5,000 shares of common stock, under the Company’s 2004 Stock
Incentive Plan. The stock options will be fully-vested at the grant date, will
have a five-year term and will be granted at a strike price at 10% above the
market price on the date of grant. The grant date will be the first Friday
following each year’s Annual Meeting of Shareholders.
-
8 -
OWNERSHIP
OF STOCK
Management
and Certain Beneficial Owners
The
following table sets forth information regarding the beneficial ownership of
each of shares of Common Stock and shares of Series D Preferred Stock as of
April 26, 2006, by: (a) each director of the Company, (b) the Named Officer
(c)
all directors and the executive officer of the Company as a group, and (d)
all
other shareholders known by the Company to be beneficial owners of more than
5%
of the outstanding shares of any class of the Company’s stock.
|
Common
Stock
|
Series
D Preferred Stock
|
|||
|
Name
|
Shares
(1)
|
Percentage
(2)
|
Shares
|
Percentage
(3)
|
|
Thomas
B. Akin (4)
4551
Cox Road, Suite 300
Glen
Allen, Virginia 23060
|
1,777,770
|
13.95%
|
576,645
|
13.66%
|
|
Stephen
J. Benedetti
|
21,163
|
*
|
--
|
--
|
|
J.
Sidney Davenport
|
25,356
|
*
|
--
|
--
|
|
Leon
A. Felman (5)
|
147,190
|
1.20%
|
67,086
|
1.59%
|
|
Barry
Igdaloff (6)
4551
Cox Road, Suite 300
Glen
Allen, Virginia 23060
|
556,671
|
4.43%
|
415,118
|
9.82%
|
|
Daniel
K. Osborne (7)
|
16,869
|
*
|
5,008
|
*
|
|
Eric
P. Von der Porten (8)
|
165,621
|
1.36%
|
11,813
|
*
|
|
All
directors and executive officers as a group (7 persons)
|
2,710,591
|
20.47%
|
1,075,670
|
25.48%
|
|
Rockwood
Partners, L.P. (9)
Rockwood
Asset Man-age-ment, Inc.
Demeter
Asset Management, Inc.
Jay
Buck
35
Mason Street
Greenwich,
Connecticut 06830
|
967,805
|
7.86%
|
141,983
|
3.36%
|
|
Wellington
Management (10)
Company,
LLP
75
State Street
Boston,
Massachusetts 02109
|
671,500
|
5.52%
|
--
|
--
|
_______________
* Percentage
of ownership is less than one percent of the outstanding shares of the
applicable class.
(1) All
amounts include both shares of Common Stock and shares of Series D Preferred
Stock, which are convertible into shares of Common Stock at the option of its
holder.
(2) Each
percentage is based on 12,163,391 shares of Common Stock issued and outstanding
and is calculated based on the assumption that the beneficial owner has
converted all shares of Series D Preferred Stock into shares of Common
Stock.
-
9 -
(3) Each
Percentage is based on 4,221,539 shares of Series D Preferred Stock issued
and
outstanding.
(4) Amount
includes 602,038 shares of Common Stock and 350,064 shares of Series D Preferred
Stock owned by Talkot Crossover Fund, L.P., of which Mr. Akin is the managing
general partner.
(5) Amount
reflects 6,589 shares of Common Stock and 10,848 shares of Series D Preferred
Stock owned by the Leon A. Felman IRA Rollover, 43,447 shares of Common Stock
and 30,826 shares of Series D Preferred Stock owned by the Homebaker Brand
Profit Sharing Plan, 7,537 shares of Common Stock and 9,614 shares of Series
D
Preferred Stock owned by the Leon A. Felman Keogh Profit Sharing Plan, 19,778
shares of Common Stock and 11,840 shares of Series D Preferred Stock owned
by
the Leon A. Felman Family Trust, 2,120 shares of Common Stock and 2,555 shares
of Series D Preferred Stock owned by HLF Corporation, 278 shares of Common
Stock
and 626 shares of Series D Preferred Stock owned by the Harriet Felman IRA
and
355 shares of Common Stock and 777 shares of Series D Preferred Stock owned
by
the Leon A. Felman IRA.
(6) Amount
includes 77,663 shares of Common Stock and 205,802 shares of Series D Preferred
Stock owned by clients of Rose Capital, Inc., of which Mr. Igdaloff is the
sole
proprietor. Mr. Igdaloff shares the power to vote and dispose of such
shares.
(7) Amount
reflects 11,322 shares of Common Stock and 4,225 shares of Series D Preferred
Stock owned by Vantage Pointe Capital Partners LP, of which Mr. Osborne is
the
managing member of its general partner, and 539 shares of Common Stock and
783
shares of Series D Preferred Stock held in Mr. Osborne’s spouse’s IRA
account.
(8) Amount
reflects 153,808 shares of Common Stock and 11,813 shares of Series D Preferred
Stock owned by Leeward Capital, L.P. Mr. Von der Porten is the managing member
of Leeward Investments, LLC, which is the general partner of Leeward Capital,
L.P.
(9) Based
on
a Company inquiry, as of December 31, 2005 each of Rockwood Partners, L.P.,
Rockwood Asset Man-age-ment, Inc., Demeter Asset Management, Inc. and Jay Buck
has shared power to vote and dispose of 778,367 shares of Common Stock and
189,438 shares of Series D Preferred Stock. Rockwood Asset Management, Inc.
is
the general partner of Rockwood Partners, L.P., an investment limited
partnership that owns all of the shares reported. Demeter Asset Management,
Inc.
provides investment management services to Rockwood Partners, L.P., and Mr.
Buck
is the owner of both Rockwood Asset Management, Inc. and Demeter Asset
Management, Inc.
(10) Wellington
Management Company, LLP indicated on a Schedule 13G filed with the Securities
and Exchange Commission on February 14, 2006 that, in its capacity as investment
adviser, it may be deemed to beneficially own shares of Common Stock held of
record by its clients.
Section
16(a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Securities Exchange Act of 1934, as amended, requires the Company’s
directors and executive officers, and any persons who own more than 10% of
the
outstanding shares of Common Stock or Series D Preferred Stock, to file with
the
Securities and Exchange Commission (“SEC”) reports of ownership and changes in
ownership of Common Stock and Series D Preferred Stock. Directors and executive
officers are required by SEC regulations to furnish the Company with copies
of
all Section 16(a) reports that they file. Based solely on review of the
copies of such reports furnished to the Company or written representation that
no other reports were required, the Company believes that, during the 2005
year,
all filing requirements applicable to its officers and directors were complied
with, except for the following: Mr. Osborne inadvertently filed late his initial
statement of beneficial ownership on Form 3, Mr. Benedetti inadvertently filed
late a Form 4 that reported the grant of stock appreciation rights in January
2005, and each of Messrs. Akin, Davenport, Felman, Igdaloff, Osborne and Von
der
Porten inadvertently filed late a Form 4 that reported the grant of stock
options in June 2005.
-
10 -
MANAGEMENT
OF THE COMPANY AND EXECUTIVE COMPENSATION
Executive
Officer
The
executive officer of the Company and his position is as follows:
|
Name
|
Age
|
Positions
Held
|
|
Stephen
J. Benedetti
|
43
|
Executive
Vice President, Chief Operating Officer, Secretary and
Treasurer
|
The
executive officer serves at the discretion of the Company’s Board of Directors.
Biographical information regarding Mr. Benedetti is set forth
below.
Stephen
J. Benedetti
has
served as Executive Vice President, Chief Operating Officer since November
2005.
Prior to serving as Chief Operating Officer, Mr. Benedetti served as Executive
Vice President, Chief Financial Officer from September 2001 to November 2005.
As
Executive Vice President, Mr. Benedetti serves as the principal executive
officer of the Company. From May 2000 to September 2001, Mr. Benedetti had
been
the Acting Chief Financial Officer and Acting Secretary. From October 1997
until
August 2001, Mr. Benedetti served as Vice President and Treasurer of the
Company; and from September 1994 until December 1998, he served as Vice
President and Controller. From March 1992 until September 1994, he served as
Director of Accounting and Financial Reporting for National Housing
Partnerships, a national multifamily housing syndicator and property management
company. Mr. Benedetti also served as audit manager for Deloitte & Touche
from 1985 to 1992, where he provided audit and consulting services to various
clients primarily in the financial services and real estate industries. Mr.
Benedetti is a Certified Public Accountant.
Compensation
Committee Report
The
Compensation Committee of the Company’s Board of Directors, which is comprised
exclusively of the independent directors listed below, administers the Company’s
executive compensation program. All issues pertaining to executive compensation
are reviewed and approved by the Compensation Committee.
The
Compensation Committee has designed the executive compensation structure to
reward long-term value that is created for shareholders and to reflect the
business strategies and long-range plans of the Company. The guiding principles
in regard to compensation are (i) to attract and retain key high caliber
executives, (ii) to provide levels of compensation that are competitive with
those levels offered by the Company’s competitors, (iii) to motivate executives
to enhance long-term shareholder value by linking stock performance (on a total
return basis) with long-term incentive compensation, and (iv) to design a
long-term compensation program that leads to management retention.
The
components of executive officer compensation are base annual salary, annual
bonus and stock options.
The
Company’s only executive officer is Stephen J. Benedetti, who is the Company’s
Executive Vice President, Chief Operating Officer, Secretary and Treasurer.
For
2005, Mr. Benedetti’s annual base salary was $200,000. The Company and Mr.
Benedetti entered into a Severance Agreement in 2004 which is more fully
described below.
During
2005, pursuant to the Company’s 2004 Stock Incentive Plan 121,915 stock
appreciation rights were awarded on January 2, 2005, at a strike price of
$7.86. The stock appreciation rights vest over a four-year period and have
a
term of seven years. Of the 121,915 stock appreciation rights awarded, Mr.
Benedetti received a grant of 60,000. During 2006, pursuant to the Company’s
2004 Stock Incentive Plan, a total of 77,000 stock appreciation rights were
awarded effective January 12, 2006, at a strike price of $6.61. The stock
appreciation rights vest over a four-year period and have a term of seven years.
Of the 77,000 stock appreciation rights awarded, Mr. Benedetti received a grant
of 25,000.
-
11 -
Compensation
Committee
J.
Sidney
Davenport, Chairman
Thomas
B.
Akin
Daniel
K.
Osborne
Compensation
Committee Interlocks and Insider Participation
During
2005, no interlocking relationship existed between any member of the
Compensation Committee and the Company.
Executive
Compensation
The
Summary Compensation Table below includes individual compensation information
for 2005, 2004 and 2003 on the most highly compensated executive officer whose
salary and bonus exceeded $100,000 (the “Named Officer”).
Summary
Compensation Table
|
Annual
Compensation
|
Long-Term
Compen-sa-tion Awards
|
|||||
|
Name
and Principal Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Other
Annual Compensation ($)
|
SARs
|
All
Other Compensation ($)(2)
|
|
Stephen
J. Benedetti
Executive
Vice President, Chief Operating Officer, Secretary and
Treasurer
|
2005
2004
2003
|
200,000
189,600
183,960
|
105,000
128,000
102,000
|
(1)
(1)
(1)
|
60,000
-
-
|
14,180
13,160
12,160
|
_______________
(1) All
benefits in the form of perquisites and other personal benefits, securities
or
property did not exceed is the lesser of either $50,000 or 10% of annual salary
and bonus.
(2) Amount
for 2005, 2004, and 2003 consisted of matching contributions to the Company’s
401(k) Plan in the amount of $14,000, $13,000, $12,000, respectively, and Group
Term Life Insurance in the amount of $180, $160, and $160,
respectively.
-
12 -
Stock
Appreciation Rights
The
table
below presents information with respect to grants of Stock Appreciation Rights
(SARs) to the Named Officer in 2005.
SAR
Grants in Last Fiscal Year
|
Number
of SARS
|
Percent
of Total
SARs
Granted to
Employees
in 2005
|
Exercise
or Base Price
|
Expiration
|
Potential
Realizable
Value
at Assumed Annual Rates of Stock Price Appreciation for
Term
|
||
|
Name
|
Granted
|
(%)
|
($/Share)
|
Date
|
5%
($)
|
10%
($)
|
|
Stephen
J. Benedetti
|
60,000
|
48
|
7.81
|
12-31-2011
|
86,400
|
265,200
|
The
table
below presents information with respect to the total number of Stock
Appreciation Rights (SARs) exercised by the Named Officer in 2005 and held
by
the Named Officer at December 31, 2005.
Aggregated
SAR Exercises in Last Fiscal Year
and
Fiscal Year-End SAR Value Table
|
Number
of Unexercised
SARs
at 12-31-05
|
Value
of Unexercised In-the-Money
SARS at 12-31-05
|
|||||
|
Name
|
Number
of
SARs
|
Value
Realized
|
Exercisable
|
Unexercisable
|
Exercisable
|
Unexercisable
|
|
Stephen
J. Benedetti
|
60,000
|
$
-
|
-
|
60,000
|
$
-
|
$103,721
|
Equity
Compensation Plan Information
The
following table sets forth information as of December 31, 2005, with respect
to
the Company’s equity compensation plans, under which shares of Common Stock are
authorized for issuance.
Equity
Compensation Plan Information
|
Plan
Category
|
Number
of Securities to Be Issued upon Exercise of Outstanding Options,
Warrants
and Rights
|
Weighted
Average
Exercise
Price of Outstanding Options, Warrants
and Rights
|
Number
of Securities Remaining Available
for
Future Issuance
Under
Equity
Compensation
Plans (2)
|
|
Equity
Compensation Plans Approved by Shareholders:
|
|||
|
2004
Stock Incentive Plan
|
166,297(1)
|
$7.97
|
1,333,703
|
|
Equity
Compensation Plans Not Approved by Shareholders(2)
|
-
|
-
|
-
|
|
Total
|
166,297
|
$7.97
|
1,333,703
|
(1)
Amount
includes all SAR awards to employees and Stock Option Awards to
Directors
(2)
The
Company does not have any equity compensation plans that have not been approved
by shareholders.
-
13 -
Employment
Agreements
The
Company and Mr. Benedetti are parties to a Severance Agreement that is effective
as of June 11, 2004 and that will stay in effect for the duration of Mr.
Benedetti’s employment with the Company. The severance agreement provides
generally that a lump sum payment will be made to Mr. Benedetti under certain
circumstances upon his termination of employment with the Company. Such
circumstances include the termination of employment by Mr. Benedetti for “good
reason” (as defined in the agreement), such as the occurrence of a change in
control of the Company, or the termination of his employment by the Company
without “cause” (as defined in the agreement). In such events, Mr. Benedetti
will have the right to receive a lump sum payment equal to the sum of (i) Mr.
Benedetti’s base salary and bonus that has accrued but has not been paid, (ii)
the equivalent of Mr. Benedetti’s annual base salary of one year for every
fifty months that Mr. Benedetti has been employed by the Company prorated for
any period of less than fifty months and (iii) any other amounts or benefits
Mr. Benedetti is entitled to receive under any plan, program, policy or
practice or contract or agreement of the Company. Mr. Benedetti also will
become fully vested in any options, stock appreciation rights or other forms
of
incentive stock compensation granted to Mr. Benedetti under the 2004 Stock
Incentive Plan if he terminates his employment for good reason or if he is
terminated without cause. If a termination under the severance agreement had
occurred as of April 24, 2006, the payments due to Mr. Benedetti would have
been
approximately $630,000.
Certain
Relationships and Related Transactions
The
Company and Dynex Commercial, Inc., now known as DCI Commercial, Inc. (“DCI”),
have been jointly named in litigation regarding the activities of DCI while
it
was an operating subsidiary of a previous affiliate of the Company, Dynex
Holding, Inc. The Company and DCI entered into a Litigation Cost Sharing
Agreement whereby the parties set forth how the costs of defending against
litigation would be shared, and whereby the Company agreed to fund all costs
of
such litigation, including DCI’s portion. DCI’s cumulative portion of costs
associated with the litigation and funded by the Company is approximately
$3.3 million and is secured by the proceeds of any counterclaims that DCI
may receive in the litigation. DCI costs funded by the Company are considered
loans and bear simple interest at the rate of Prime plus 8.0% per annum. At
December 31, 2005, the total amount due the Company under the Litigation Cost
Sharing Agreement, including interest, was approximately $4.6 million, which
has
been fully reserved by the Company. DCI is currently wholly-owned by ICD
Holding, Inc. Stephen J. Benedetti is currently the sole shareholder of ICD
Holding. For more information on this litigation, see “Item 3. Legal
Proceedings” of the Company’s Annual Report on Form 10-K for the year ended
December 31, 2005, which accompanies this Proxy Statement.
-
14 -
Stock
Performance Graph
The
following graph demonstrates a five year comparison of cumulative total returns
for shares of Common Stock, the Standard & Poor’s 500 Stock Index (“S&P
500”), and the Bloomberg Mortgage REIT Index. The table below assumes $100 was
invested at the close of trading on December 31, 2000 in the shares of
Common Stock, S&P 500, and the Bloomberg Mortgage REIT Index.
Comparative
Five-Year Total Returns *
Dynex
Capital, Inc., S&P 500, and Bloomberg Mortgage REIT Index
(Performance
Results through December 31, 2005)
|
Period
Ending
|
||||||
|
Index
|
12/31/00
|
12/31/01
|
12/31/02
|
12/31/03
|
12/31/04
|
12/31/05
|
|
Dynex
Capital Inc.
|
100.00
|
210.00
|
484.00
|
610.00
|
782.00
|
690.00
|
|
S&P
500*
|
100.00
|
88.12
|
68.66
|
88.34
|
97.94
|
102.74
|
|
Bloomberg
Mortgage REIT Index*
|
100.00
|
195.00
|
242.00
|
324.00
|
416.00
|
347.00
|
*
Cumulative total return assumes reinvestment of dividends. The source of this
information is Bloomberg. The factual material is obtained from sources believed
to be reliable.
-
15 -
APPOINTMENT
OF AUDITORS
The
Board
of Directors has not yet appointed an independent registered public accounting
firm to examine the financial statements of the Company for the year ending
December 31, 2006. The Board of Directors expects to appoint BDO Siedman LLP
as
the Company's independent registered public accounting firm at a meeting of
the
Board of Directors after the Annual Meeting, consistent with the process for
the
year ended December 31, 2005. A representative of BDO Seidman LLP is expected
to
be present at the Annual Meeting and will be provided with an opportunity to
make a statement and to respond to appropriate questions from
shareholders.
The
Board
of Directors appointed BDO Seidman LLP as its independent registered public
accounting firm during 2005, and BDO Seidman LLP performed the audit of the
Company’s consolidated financial statements for the year ended December 31,
2005. Deloitte & Touche LLP audited the consolidated financial statements of
the Company for the fiscal year ended December 31, 2004.
AUDIT
INFORMATION
Independent
Registered Public Accounting Firm Fees
The
following information is furnished with respect to fees billed for professional
services rendered to the Company by BDO Seidman LLP, the Company’s independent
registered public accounting firm since October 12, 2005, and Deloitte &
Touche LLP, the Company’s independent registered public accounting firm prior to
October 12, 2005, for the fiscal years ended December 31, 2005 and 2004,
respectively.
|
Fiscal
Year Ended December 31,
|
|||||||
|
2005
|
2004
|
||||||
|
Audit
Fees:
(1)
|
|||||||
|
BDO
Seidman LLP
|
$
|
186,790
|
$
|
-
|
|||
|
Deloitte
&
Touche LLP
|
142,190
|
294,755
|
|||||
|
Total
Audit Fees
|
328,980
|
294,755
|
|||||
|
Audit-Related
Fees: (2)
|
|||||||
|
BDO
Seidman LLP
|
7,700
|
-
|
|||||
|
Deloitte
&
Touche LLP
|
-
|
20,700
|
|||||
|
Total
Audit-Related Fees
|
7,700
|
20,700
|
|||||
|
Tax
Fees (3)
|
-
|
-
|
|||||
|
All
Other Fees (4)
|
|||||||
|
BDO
Seidman LLP
|
16,400
|
-
|
|||||
|
Deloitte
&
Touche LLP
|
-
|
-
|
|||||
|
Total
Audit-Related Fees
|
16,400
|
-
|
|||||
|
Total
|
$
|
353,080
|
$
|
315,455
|
|||
| (1) |
Both
2005 and 2004 Audit Fees include: (i) the audit of the Company’s
consolidated financial statements included in its annual report
on Form
10-K and services attended to, or required by, statute or regulation;
(ii)
reviews of the interim consolidated financial statements included
in the
Company’s quarterly
reports on Form 10-Q; (iii) comfort letters, consents and other
services
related to Securities and Exchange Commission (“SEC”) and other regulatory
filings. Fees for 2005 for Deloitte & Touche LLP include fees incurred
for the reviews on the quarterly reports on Form 10-Q for the first
and
second quarter of 2005. The Company expects to receive additional
billings
from BDO Seidman LLP related to the completion of its 2005
audit.
|
-
16 -
| (2) |
Audit-Related
Fees represent professional services for assurance and related services
that are reasonably related to the performance of the audit or review
of
the Company’s consolidated financial statements and not reported under the
heading “Audit Fees.” During 2005, these amounts include the professional
services provided in connection with the audit of the Company’s 401(k)
Plan. During 2004, these services included professional services
rendered
in connection with the Company’s recapitalization and the audit of its
401(k) Plan.
|
| (3) |
Tax
Fees include tax compliance, tax planning, tax advisory and related
services.
|
| (4) |
During
2005, BDO Seidman performed certain agreed upon procedures related
to the
Company’s master servicing responsibilities on certain securitization
financing issuances.
|
Pre-Approval
Policies and Procedures
All
services not related to the annual audit and quarterly review of the Company’s
financial statements, as described above, were pre-approved by the Audit
Committee, which concluded that the provision of such services by the Company’s
independent registered public accounting firm was compatible with the
maintenance of that firm’s independence in the conduct of its auditing
functions. The Audit Committee’s Charter provides for pre-approval of audit and
permitted non-audit services. The Charter authorizes the Audit Committee to
delegate to one or more of its members pre-approval authority with respect
to
permitted services.
The
decisions of any Audit Committee member to whom pre-approval authority is
delegated must be presented to the full Audit Committee at its next scheduled
meeting.
Audit
Committee Report
The
following Audit Committee Report shall not be deemed to be soliciting material
or to be incorporated by reference by any general statement incorporating by
reference this proxy statement into any filing under the Securities Act of
1933
or the Securities Exchange Act of 1934, as amended, except to the extent the
Company specifically incorporates this Report therein, and shall not otherwise
be deemed filed under such Acts.
The
Audit
Committee makes recommendations concerning the engagement of independent public
accountants, reviews with the independent public accountants the plans and
results of any audits, reviews other professional services provided by the
independent public accountants, reviews the independence of the independent
public accountants, considers the range of audit and non-audit fees and reviews
the adequacy of internal accounting controls. The Audit Committee is composed
of
four directors, each of whom is independent as defined by the New York Stock
Exchange listing standards.
The
Audit
Committee has reviewed and discussed with management and the independent
accountants the Company’s audited financial statements for fiscal year 2005. In
addition, the Committee has communicated with the independent accountants the
matters required to be communicated by Statement of Auditing Standards No.
61,
“Communication with Audit Committees,” as amended.
The
Audit
Committee has received from the independent accountants written disclosures
and
a letter concerning the independent accountants’ independence from the Company,
as required by Independence Standards Board Standard No. 1, “Independence
Discussions with Audit Committees.” These disclosures have been reviewed by the
Committee, and the Committee has discussed with the independent accountant
the
independent accountant’s independence.
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Based
on
these reviews and discussions, the Committee recommended to the Board that
the
audited financial statements be included in the Company’s Annual Report on Form
10-K for fiscal year 2005 for filing with the Securities and Exchange
Commission.
Audit
Committee
Eric
P.
Von der Porten, Chairman
Leon
A.
Felman
Barry
Igdaloff
Daniel
K.
Osborne
SHAREHOLDER
PROPOSALS
Under
the
regulations of the Securities and Exchange Commission, any shareholder desiring
to make a proposal to be acted upon at the 2007 annual meeting of shareholders
must cause such proposal to be received, in proper form, by the Secretary of
the
Company no later than January 12, 2007 in order for the proposal to be
considered for inclusion in the Company’s Proxy Statement for that meeting. Any
proposals that are received after that date may be considered by the Company
outside of the proxy statement process. Proposals that are received after March
28, 2007 may be voted on by the proxy holders designated for that meeting in
their discretion.
By
the
order of the Board of Directors
Stephen
J. Benedetti
Executive
Vice President and
Chief
Financial Officer
May
5,
2006
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