DEF 14A of Armour Residential REIT, Inc.
Filed Mar 19, 2026 · FY20250001428205-26-000040
PROPOSAL 1 - ELECTION OF DIRECTORS
PROPOSAL 1 - ELECTION OF DIRECTORS
Director Nominees
Director Nominees ARMOUR’s Board of Directors is currently comprised of eight (8) members. The eight (8) nominees are listed below. All eight nominees are presently directors of ARMOUR. If instructed, the proxies indicated in the voting form or proxy card will vote for the election of the nominees named below to serve for the ensuing year and until their successors are elected and qualified. If any nominee for director shall become unavailable (which management has no reason to believe will be the case), it is intended that the shares represented by the enclosed proxy card will be voted for any such replacement or substitute nominee as may be nominated by our Board.
Director Nominees
| Director Nominees | Age | Director Since | Current Positions | | Scott J. Ulm | 67 | 2009 | Chief Executive Officer and Vice Chairman | | Daniel C. Staton | 73 | 2009 | Non-Executive Chairman | | Marc H. Bell | 58 | 2009 | Director | | Z. Jamie Behar | 68 | 2019 | Independent Director | | Carolyn Downey | 76 | 2013 | Independent Director | | Robert C. Hain | 72 | 2009 | Independent Director | | John P. Hollihan, III | 76 | 2009 | Independent Director | | Stewart J. Paperin | 78 | 2009 | Independent Director |
Director Nominees
The following is a brief biographical statement for each director nominee: Scott J. Ulm is the Chief Executive Officer and Vice Chairman. Mr. Ulm was the Co-Chief Executive Officer, Co-Vice Chairman and Head of Risk Management of ARMOUR from November 2009 until March 2024. Mr. Ulm was the Chief Investment Officer until March 2018. Mr. Ulm has been involved in the management of our external manager since March 2008, as a managing member of one of the entities that acts as a general partner of ARMOUR Capital Management LP, our current external manager (“ACM”), since December 2014 and as a Co-Managing Member of ARMOUR Residential Management, LLC (“ARRM”), the predecessor to ACM, from March 2008 to December 2014. Mr. Ulm has also served as a Director, Co-Chief Executive Officer, Co-Vice Chairman, Chief Investment Officer and Head of Risk Management of JAVELIN Mortgage Investment Corp. (“JAVELIN" and former NYSE "JMI") from June 2012 through April 2016. Mr. Ulm also serves as Chairman of the Board and Head of Corporate Finance for BUCKLER Securities LLC (“BUCKLER”), an affiliate of ACM that operates as a broker-dealer registered with the Financial Industry Regulatory Authority ("FINRA") and provides trading and investment banking services to ARMOUR and other financial entities and since 2016, has directly or indirectly owned a minority equity interest in BUCKLER. From 2005 to 2009, Mr. Ulm was Chief Executive Officer of Litchfield Capital Holdings. From 1986 to 2005, he held a variety of senior positions at Credit Suisse both in New York and London, including Global Head of Asset-Backed Securities, Head of United States and European Debt Capital Markets and the Global Co-Head of Collateralized Debt Obligations, both cash and synthetic. At Credit Suisse, he was a member of the Fixed Income Operating Committee and the European Investment Banking Operating Committee. Mr. Ulm holds a B.A. summa cum laude from Amherst College, an M.B.A. from the Yale School of Management and a J.D. degree from Yale Law School. As a result of Mr. Ulm’s 30 plus years of experience in structured finance and debt capital markets, including mortgage-backed securities, he is able to provide valuable business, leadership, and management advice to our Board of Directors in many critical areas. Daniel C. Staton has been the Non-Executive Chairman of ARMOUR since November 2009 and was the President, Chief Executive Officer and Director of Enterprise Acquisition Corp., a blank check company formed for the purpose of acquiring an operating business (“Enterprise”), from its inception in 2007 until its merger with ARMOUR in November 2009. Mr. Staton was also the Non-Executive Chairman of JAVELIN from June 2012 until April 2016. Since January 2015, Mr. Staton has directly or indirectly owned a minority limited partnership interest in ACM and since 2016, has directly or indirectly owned a minority equity interest in BUCKLER. Mr. Staton has almost 20 years of experience sourcing private equity and venture capital investments. From October of 2018 to December 2023, Mr. Staton was on the board of Shurgard Self Storage Ltd., a publicly listed company on the Belgium Stock Exchange, headquartered in Guernsey with operations in seven European countries. Mr. Staton also served as Chairman of the Board of Storage Realty Trust from 1997 to 1999, when he led its merger with Public Storage (NYSE: PSA), where he served as a Director until he retired from the Board on December 31, 2020, and as Vice Chairman and Director of Terran Orbital Corporation (NYSE: LLAP), an aerospace company that designs and manufactures nanosatellites for the United States government and military (“Terran Orbital”), from July 2014 until October 2024 when Terran Orbital was acquired by Lockheed Martin. Since February 2003, Mr. Staton has been Managing Director of the private equity firm, Staton Capital LLC. Between 1997 and 2007, he was President of The Walnut Group, a private investment firm, where he served as initial investor and Director of Build-A-Bear Workshop, the initial investor in Deal$: Nothing Over a Dollar (until its sale to Supervalu Inc.), and Director of Skylight Financial. Prior to The Walnut Group, Mr. Staton was General Manager and Partner of Duke Associates from 1981 until its initial public offering in 1993, and then served as Chief Operating Officer and Director of Duke Realty Investments, Inc. (NYSE: DRE) until 1997. Mr. Staton supplements his professional network by co-producing and investing in numerous Broadway musicals as well as with relationships with not-for-profit organizations. Mr. Staton majored in Finance at the University of Missouri and holds a B.S. degree in Specialized Business from Ohio University and a B.S. degree in Business (Management) from California Coast University. Mr. Staton has extensive experience serving on the boards of directors of private and public companies and sourcing private equity and venture capital investments and brings significant corporate governance expertise to our Board of Directors. Marc H. Bell has been a director of ARMOUR since November 2009 and was the Chairman of the Board of Directors and Treasurer of Enterprise from its inception in 2007 until its merger with ARMOUR in November 2009. From November 2009 through August 2013, Mr. Bell served as ARMOUR’s Co-Founder, Co-Chairman of the Board of Directors, and Chief Strategy Officer. Mr. Bell was also a director of JAVELIN from June 2012 until April 2016. Since January 2015, Mr. Bell has directly or indirectly owned a minority limited partnership interest in ACM and since 2016, has directly or indirectly owned a minority equity interest in BUCKLER. He was a co-founder and served as the Chairman of Terran Orbital from July 2014 to October 2024 when Terran Orbital was acquired by Lockheed Martin. Mr. Bell also served as Terran Orbital’s Chief Executive Officer since March 2021 until its sale in October 2024. In September 2000, Mr. Bell founded and has since served as managing partner of Marc Bell Capital Partners, LLC, an investment firm. Mr. Bell was the founder and President of Globix Corporation, a full-service commercial Internet Service Provider. Mr. Bell served as Chairman of the Board of Globix Corporation from 1998 to 2003 and Chief Executive Officer from 1998 to 2001. Mr. Bell was also a member of the Board of Directors of EDGAR Online, Inc. (NASDAQ: EDGR), an Internet-based provider of filings made by public companies with the SEC, from 1998 to 2000. Mr. Bell has also produced Broadway shows, winning three Tony Awards (Jersey Boys, August: Osage County and Stereophonic) and two Drama Desk Awards. Mr. Bell is a member of the Board of Trustees of New York University. Mr. Bell holds a B.S. degree in Accounting from Babson College and an M.S. degree in Real Estate Development and Investment from New York University. Mr. Bell’s experience as managing director of an investment firm, as well as serving on the boards of directors of several public companies, allows him to provide valuable business, leadership, and management advice to our Board of Directors in many critical areas. Z. Jamie Behar has been a director of ARMOUR since July 2019. From 2005 to 2015, Ms. Behar was Managing Director, Real Estate & Alternative Investments, for GM Investment Management Corporation (GMIMCo), having previously served as Portfolio Manager at the company for 19 years. Ms. Behar was responsible for the management of approximately $12 billion at peak portfolio value of primarily private market and publicly traded real estate on behalf of both General Motors Company and other unaffiliated clients. She has served on numerous boards within the real estate sector and she brings this investment, real estate and financial expertise to
Director Nominees
the ARMOUR Board. Ms. Behar currently serves on the Boards of Directors of Shurgard Self Storage Ltd. (EBR: SHUR), Sila Realty Trust (NYSE: SILA) and Benefit Street Partners Multifamily Trust, a non-traded multifamily REIT, and as an independent member of the CBRE Investment Management - Indirect Investment Committee. Ms. Behar is a member of the Real Estate Investment Advisory Council of the National Association of Real Estate Investment Trusts (Nareit), and serves as co-chair of the PREA Governance Committee. Ms. Behar previously served on the boards of directors of Sunstone Hotel Investors, Gramercy Property Trust, Forest City Realty Trust, the Broadstone Real Estate Access Fund, Desarrolladora Homex, SAB de CV and Hospitality Europe, B.V. as well as on the Board of Directors of the Pension Real Estate Association (PREA), having held the position of Board Chair of PREA from March 2010 to March 2011. Ms. Behar holds a B.S. in Economics (magna cum laude) from The Wharton School, University of Pennsylvania, and an M.B.A. from Columbia University Graduate School of Business. Ms. Behar is a Chartered Financial Analyst (CFA) charterholder. In December 2018, Ms. Behar was the recipient of Nareit’s E. Lawrence Miller Industry Achievement Award for her contributions to the REIT industry. Ms. Behar’s pertinent experience, qualifications, attributes and skills include financial literacy and expertise, and allow her to provide significant expertise in accounting and financial matters and in analyzing and evaluating financial statements. Carolyn Downey has been a director of ARMOUR since September 2013. Ms. Downey has nearly 30 years of institutional capital markets experience working with leading institutions in global finance. From 1989 through 2007, Ms. Downey held various executive positions at, including as a Managing Director of, RBS Greenwich Capital, a fixed-income sales, trading and finance firm serving institutional clients, and a U.S. Government securities primary dealer. At RBS Greenwich Capital, Ms. Downey was responsible for relationships with real-estate investment trusts, financial institutions, hedge funds, investment managers and proprietary trading desks, participated in structuring and distribution of net interest margin securities, commercial mortgage securities and collateralized mortgage obligations, and advised on hedging strategies using derivative products and synthetic swaps. Prior to her time at RBS Greenwich Capital, Ms. Downey was a Vice President of Fixed Income Sales at Salomon, Inc. from 1981 through 1989, where she was for some time responsible for residual product placement and other equity tranches of structured debt and sourcing residuals from mortgage originators and security issuers. Ms. Downey also previously served as a mortgage product specialist in London and a thrift specialist in New York. Ms. Downey holds a B.A. degree from St. Mary’s College, a B.S. degree in Accounting from Boston University and an M.B.A. degree from the Stanford University Graduate School of Business. Through 2020, Ms. Downey served on the Advisory Board of St. Ann School, East Harlem, a partnership of patrons, the Archdiocese and school leaders. She previously served on the Board of Directors of the Student Sponsor Partners. As a result of Ms. Downey’s 30 plus years of experience in structured finance, investment banking and capital markets, she provides significant financial, leadership and management advice to our Board of Directors in many critical areas. Robert C. Hain has been a director of ARMOUR since November 2009. Mr. Hain was also a director of JAVELIN from June 2012 until April 2016. Mr. Hain became a director and the Chairman of City Financial Investment Company Limited (“City Financial”), a private manager of funds organized under the laws of the United Kingdom and authorized by the Financial Conduct Authority, in January 2006, and was the Chief Executive from February 2018 to March 2019. In March 2019 and during Mr. Hain’s service as a director and acting Chief Executive, the directors of City Financial voluntarily placed City Financial into administration pursuant to the insolvency laws of England and Wales. Investment funds managed by City Financial were transferred to other regulated investment managers. Mr. Hain was also director of Wittering Limited from 2008 to 2018, which was engaged in asset management in the United Kingdom, Europe, Hong Kong, Singapore, and the United States. Mr. Hain is currently a director of White Desert Limited, a luxury hotelier operating in Antarctica, President of Laurier Partners, a specialist consulting firm in Nova Scotia, and a director of Sapori Italian Street Food Limited, a restaurant group in Nova Scotia. Previously, Mr. Hain was a director, Chairman and Chief Executive of Sound Diplomacy Holdings Ltd., a London-based group of economics consultancies, from 2014 to 2024, a director and Vice Chairman of Chika’s Wholefoods Africa Limited, based in Nigeria and a major shareholder of Minois Limited, a British snack food distributor of which he was Chairman, from 2017 to 2023, and a director of HomeChoice International Plc (Mauritius), a retailer of home furnishings to South Africans listed on the Johannesburg Stock Exchange from 2014 to 2022. He was a partner at Shadbolt Partners LLP from 2005 to 2018, a director of Majorpoint Limited from 2006 to 2014 and Kingsway Consultancy Limited from 2007 to 2017, the Non-Executive Chairman of Dundee Wealth SA (Luxembourg) from 2007 to 2009, a director of Tailwind Financial Inc. (Canada) from 2006 to 2009 and the Vice Chairman of CSS Stellar Holdings Inc. from 2005 to 2006. Mr. Hain was also the Chief Executive Officer of Invesco UK (Invesco Perpetual), a prominent British asset manager, from 2002 to 2004, and Chief Executive Officer of Invesco Canada (AIM Trimark), a Canadian mutual fund company, from 1998 to 2002. Mr. Hain was a member of the Executive Management Committee of Amvescap Plc (now Invesco Ltd.), from 1998 to 2005. Mr. Hain holds degrees from the University of Toronto (Innis College) and the University of Oxford (Merton College). Mr. Hain’s extensive experience managing investments allows him to provide our Board of Directors with valuable knowledge regarding financial markets and investment opportunities. John “Jack” P. Hollihan, III has been a director of ARMOUR since November 2009. Mr. Hollihan was also a director of JAVELIN from June 2012 until April 2016. Mr. Hollihan has over 40 years of investment banking and investment experience. Mr. Hollihan has served as Executive Chairman of Litchfield Capital Holdings Inc. (Florida) since 2005, as a board member of several privately held companies in the United States and United Kingdom, and since 2019 as a partner of Good Housing Partnership LLC (Montana), for US affordable housing development. Mr. Hollihan was also a trustee of American Financial Realty Trust (NYSE: AFR) from 2005 until its sale in 2008. From 2000 to 2002, Mr. Hollihan was the Head of European Industry Investment Banking for Banc of America Securities (“BAS”), where he was a member of the BAS European Capital Committee and Board, and where he had responsibility for a loan book of approximately $8 billion. Prior to that, from 1986 to 2000, Mr. Hollihan was Head of Global Project and Asset Based Finance and Leasing at Morgan Stanley and was a member of the Morgan Stanley International Investment Banking Operating Committee. In that capacity, he managed approximately $45 billion in asset based and structured financings and leasing arrangements. Mr. Hollihan holds B.S. (Wharton) and B.A. degrees from the University of Pennsylvania, and a J.D. from the University of Virginia School of Law. Mr. Hollihan’s 40 plus years of investment banking and investment experience provide valuable insights and advice to our Board of Directors, particularly as it pertains to the capital markets and housing.
Director Nominees
Stewart J. Paperin has been a director of ARMOUR since November 2009. Mr. Paperin served as a member of Enterprise’s Board of Directors from its inception in July 2007 to its merger with ARMOUR in November 2009. Mr. Paperin was also a director of JAVELIN from June 2012 until April 2016. Mr. Paperin currently serves as the managing member of Leopard Rock Property Group and LionRock Partners LLC, real property development and investment firms located in Southern California. Mr. Paperin also served as a director of the Board of Directors of Thunder Bridge Acquisition, Ltd., a blank check company formed to acquire an operating business in the financial technology industry, until its acquisition of Hawk Parent Holdings LLC in July 2019, a full-service provider of electronic transaction processing services. He also served on the Board of Directors of Thunderbridge II, a blank check company which acquired Indie Semiconductor, Inc., a company serving the automotive industry, until June 2021. Mr. Paperin also served as a director of Thunderbridge IV, a blank check company organized to acquire emerging businesses until its acquisition in December 2024 of Coincheck Inc., the leading Japanese broker of cryptocurrencies. Mr. Paperin served as Executive Vice President of the Soros Foundation, a worldwide private philanthropic foundation, from 1996 to 2013, where he oversaw financial, administrative and economic development activities. From 1996 to July 2005, Mr. Paperin served as a Senior Advisor and portfolio manager for Soros Fund Management LLC, a financial services company, and from July 2005 to June 2014, he served as a consultant to Soros Fund Management LLC. From 1996 to 2007, Mr. Paperin served as a director of Penn Octane Corporation (NASDAQ: POCC), a company engaged in the purchase, transportation and sale of liquefied petroleum gas. Prior to joining the Soros organizations, Mr. Paperin served as President of Brooke Group International, an investment firm concentrated on the former Soviet Union, from 1990 to 1993, and as Senior Vice President and Chief Financial Officer of Western Union Corporation, a provider of money transfer and message services, which was controlled by Brooke Group, from 1988 to 1990. Prior to Western Union Corporation, Mr. Paperin served as Chief Financial Officer of Timeplex Corporation, a telecommunications equipment provider, from 1986 to 1988 and of Datapoint Corporation, a computer equipment manufacturer, from 1985 to 1986. Prior to Datapoint Corporation, Mr. Paperin served as a financial officer of Pepsico Corporation (NYSE: PEP) from 1980 to 1985 and as a management consultant at Cresap McCormick & Paget from 1975 to 1980. Mr. Paperin also served as a member of the Board of Directors of Community Bankers Acquisition Corp., a blank check company formed to acquire an operating business in the banking industry. Mr. Paperin also served on the Boards of Directors of several telecommunications firms including Svyazinvest, the national telecommunications firm of Russia and on the Boards of Directors of three banks in Eastern Europe. Mr. Paperin holds a B.A. degree and an M.S. degree from the State University of New York at Binghamton. He is a member of the Council on Foreign Relations and was awarded an honorary Doctor of Humane Letters by the State University of New York. Mr. Paperin’s pertinent experience, qualifications, attributes and skills include financial literacy and expertise, and allows him to provide significant expertise in accounting and financial matters and in analyzing and evaluating financial statements. ARMOUR’s Board of Directors unanimously recommends a vote “FOR” each of the eight nominees for director.
Director Compensation
Director Compensation Annual Cash and Equity Retainers. In 2025, we paid our non-management directors an annual retainer of $132,000; 50%, or $66,000 of this retainer, was payable in cash and 50%, or $66,000 of this retainer, was payable in common stock, cash, or a combination of stock and cash (e.g., to cover estimated income taxes) at the option of the director. Committee Annual Cash Retainers. In 2025, we paid our directors annual retainers for the additional Board responsibilities associated with the below roles.
Director Compensation
| | Daniel C. Staton | Z. Jamie Behar | Carolyn Downey | Robert C. Hain | John P. Hollihan, III | Stewart J. Paperin | | Lead Independent Director | $— | $— | $— | $— | $35,000 | $— | | Non-executive Chairman | 35,000 | — | — | — | — | — | | Audit Committee Chairman | — | — | — | — | — | 35,000 | | Compensation Committee Chairman | — | — | — | 25,000 | — | — | | Nominating and Corporate Governance Committee Co-chair | — | 12,500 | 12,500 | — | — | — | | Audit Committee Member | — | 35,000 | — | 35,000 | 35,000 | 35,000 | | Totals | $35,000 | $47,500 | $12,500 | $60,000 | $70,000 | $70,000 |
Director Compensation
Each non-management director could elect to have all or a portion of their annual cash retainer and committee annual cash retainer(s) payable in shares of common stock or fully vested restricted stock units, as described below under "Non-Management Director Compensation and Deferral Program" and set forth in the 2025 Director Compensation Table, as applicable. All per share amounts, common shares outstanding and stock-based compensation amounts for the periods presented reflect the one-for-five reverse stock split (the “Reverse Stock Split”), which was effective September 29, 2023. January 2021 Equity Grants. In January 2021, our Compensation Committee and Board of Directors approved grants to our non-management directors, totaling 2,500 shares of stock to each of our non-management directors under ARMOUR's Third Amended and Restated 2009 Stock Incentive Plan (the "Plan") pursuant to the time-based vesting schedules as follows: •All 2,500 shares of stock granted to Messrs. Paperin, Hollihan, Hain, Staton and Bell, and Mses. Behar and Downey have fully vested. In January 2021, our Compensation Committee and Board of Directors also approved grants, totaling 12,650 shares of stock to each of Messrs. Staton and Bell through ACM for services provided to and through ACM for the benefit of ARMOUR under the Plan pursuant to the time-based vesting schedules as follows: •the grants vest over 26 quarters as follows: 480 shares vested on February 20, 2021 with an additional 480 shares vesting on each following May 20, August 20, and February 20, through August 20, 2026. Additionally, 500 shares vested on November 20, 2021 with an additional 500 shares vesting on each following November 20, through November 20, 2026 and 500 shares vesting on February 20, 2027 and 510 shares vesting on May 20, 2027, at which time all shares shall have vested. February 2023 Equity Grants. In February 2023, our Compensation Committee and Board of Directors approved grants to our non-management directors, totaling 8,000 shares of stock to each of our non-management directors under the Plan pursuant to the time-based vesting schedules as follows: •the grants vest over a five year period as follows: 400 shares vested on February 20, 2023 with an additional 400 shares vesting on each following May 20, August 20, November 20, and February 20, through November 20, 2027, at which time all shares shall have vested. December 2025 Equity Grants. In December 2025, our Compensation Committee and Board of Directors approved grants to our non-management directors, totaling 12,857 shares of stock to each of our non-management directors under the Plan pursuant to the time-based vesting schedules as follows: •the grants vest over 20 quarters as follows: 643 shares vested on February 20, 2026 with an additional 643 shares vesting on each following May 20, August 20, November 20, and February 20, through February 20, 2030. Additionally, 642 shares will vest on May 20, 2030, August 20, 2030 and October 20, 2030, at which time all shares shall have vested. Directors may elect to receive a portion of their awards in cash solely to cover estimated income taxes due on vested stock. Non-Management Director Compensation and Deferral Program. In December 2019, the Compensation Committee recommended and the Board approved, the Non-Management Director Compensation and Deferral Program (the “Deferral Program”). The Deferral Program became effective on January 1, 2020. Under the Deferral Program, each non-management director may elect to receive his or her annual retainers, including committee annual retainers, either in cash, in shares of unrestricted stock, or in fully-vested restricted stock units (or a combination thereof). Non-management directors must make the election in writing in advance of the calendar year to which the election relates (or, when a non-management director joins the Board, within 30 days of joining the Board). The shares of unrestricted stock and/or the deferred restricted stock units, if chosen, will be issued to the non-management director at the end of each calendar quarter based on the cash retainer earned for that quarter and converted into a number of shares or units based on the closing price for the common stock on the NYSE on such date. If a non-management director chooses to receive fully-vested deferred stock units, the director’s election must also indicate (1) when the units will be settled, such as the director’s separation from service (including retirement), a specified future date, or January 1st of the year following a chosen anniversary of the grant date, and (2) whether the units will be settled in a lump sum or in annual installments (not to exceed 10 years). Notwithstanding a director’s election, the deferred stock units will be settled in a lump sum upon the director’s earlier death or disability or upon an earlier change of control of ARMOUR. In any event, the deferred stock units will be settled in shares of common stock. The Compensation Committee is committed to the ongoing review and evaluation of our non-executive director compensation levels and program. We have adopted a policy designed to ensure that non-executive directors and executive officers attain and maintain meaningful levels of stock ownership over time to better align their interests with the interests of ARMOUR’s stockholders. We have established stock ownership targets for non-executive directors to beneficially own ARMOUR common shares with a basis equal to a minimum of three times their annual base cash retainer (currently $66,000), or $198,000. The targets for our Chief Executive Officer, our Chief Financial Officer and Co-Chief Investment Officers are $2,000,000, $1,000,000 and $750,000, respectively. Target ownership levels are to be achieved within five years or less from the date the policy was adopted or within five years or less from the date the non-executive director or executive officer was appointed and, after achievement, are to be maintained. Such maintenance requirement will be deemed to be satisfied notwithstanding any subsequent change in the market value of common stock holdings. All ARMOUR shares received as compensation (on an after tax basis) are to be retained until the individual’s share ownership targets are met. As of the date of this proxy statement, all of our directors are in compliance with this policy. We do not have, and we do not currently intend to adopt, any plans or programs for our directors that provide for pension benefits. Any member of our Board of Directors who is also an officer of ARMOUR or an officer or employee of ARMOUR's affiliates does not receive any compensation from us for serving on our Board of Directors. All members of our Board are reimbursed for their costs and expenses of serving on the Board, including costs and expenses of attending all meetings of our Board and our committees. The following table summarizes the compensation that we paid to our non-executive directors in 2025.
2025 Director Compensation
2025 Director Compensation
2025 Director Compensation
| Name | Directors Retainer Earned or Paid in Cash (1) | Directors Retainer Earned or Paid in Stock (2) | Stock Awards (3) | Total | | Daniel C. Staton | $167,000 | $— | $216,898 | $383,898 | | Marc H. Bell | $132,000 | $— | $216,898 | $348,898 | | Z. Jamie Behar | $179,500 | $— | $216,898 | $396,398 | | Carolyn Downey | $78,500 | $66,000 | $216,898 | $361,398 | | Robert C. Hain | $192,000 | $— | $216,898 | $408,898 | | John P. Hollihan, III | $202,000 | $— | $216,898 | $418,898 | | Stewart J. Paperin | $136,000 | $66,000 | $216,898 | $418,898 |
2025 Director Compensation
(1)Represents annual directors retainers of $66,000 (plus any portion of the second $66,000 in annual retainer that a director elects to receive in cash) and committee annual cash retainers (which may be paid either in cash, in shares of unrestricted stock, or in fully-vested restricted stock units pursuant to the Non-Management Director Compensation and Deferral Program). (2)Represents annual directors retainers of $66,000, which may be paid in stock, cash or a combination of stock and cash (e.g., to cover estimated income taxes) at the option of the director. To the extent a director elects to receive directors fees in stock, shares are distributed quarterly with the actual number of shares being based on the reported closing trade price of ARMOUR common stock on the NYSE at the end of each quarter. (3)Represents the fair value of stock awards granted during the year as of the grant date. Each stock award was valued at the closing market price of our common stock on the date of grant, which reflects the value of future dividends. The amounts reflect the aggregate grant date fair value calculated in accordance with ASC 718. For additional information regarding assumptions underlying the valuation of equity awards and the calculation method, please refer to Note 9 to our Consolidated Financial Statements, which are contained in our Annual Report on Form 10-K for the year ended December 31, 2025. The aggregate number of stock awards remaining unvested at December 31, 2025 were as follows: for Messrs. Staton and Bell, 19,007 shares each. For Mses. Behar and Downey and for Messrs. Hain, Hollihan and Paperin, 16,057 shares each.
2025 Executive Compensation
2025 Executive Compensation Based upon the results of the advisory vote, our investor outreach and a review of our 2025 compensation policies, we believe that our 2025 compensation policies and decisions are consistent with the compensation philosophy and objectives discussed below and effectively align the interests of our named executive officers and other key professionals with the long-term goals of the Company. We are managed by ACM pursuant to a management agreement between ACM and ARMOUR (as amended from time to time, (the “Management Agreement”). We do not have any employees whom we compensate directly with salaries, bonuses or other compensation. Our named executive officers, who are employees of ACM, do not receive cash compensation directly from us for serving as executive officers, but are primarily compensated by ACM for services they perform for ACM and for us as our named executive officers. Pursuant to the terms of the Management Agreement, ACM provides us with executive personnel, including the individuals who act as our executive officers. We compensate ACM for these services and all other services performed by ACM pursuant to the Management Agreement through payments of management fees and reimbursements and awards under the Plan. We have limited our role in compensating our named executive officers to granting equity compensation. See the section in this proxy statement below titled, “Certain Relationships and Related Party Transactions” for a further description of the Management Agreement, the relationships between ACM and ARMOUR, the management fees that we pay to ACM, and how ACM compensates our named executive officers. The pay ratio disclosure rules of Item 402(u) of Regulation S-K requires an issuer to disclose the ratio of the total compensation of the median employee of the issuer and its consolidated subsidiaries, if any, to the total compensation of the issuer’s Chief Executive Officer. Because we are externally-managed and therefore have no employees, we do not believe such pay ratio disclosure would provide meaningful information to our stockholders and, therefore, do not provide this disclosure in the proxy statement. Mr. Ulm did not receive any cash compensation from ARMOUR for his services as an executive officer, and we did not specifically reimburse ACM for cash compensation paid to Mr. Ulm. He is, however, an employee and substantial equity holder of ACM and, accordingly, has an interest in the profits and losses of ACM from its past, present and future investments and businesses, including ARMOUR. Equity returns to the equity holders of ACM are not directly related to services rendered by Mr. Ulm to ACM or us and would be distributed to such equity holders even if they did not personally perform any services for ACM or us. Prior to July 1, 2020, payments made to Mr. Ulm by ACM were considered partnership distributions, and as such, fluctuated each year based on the net operating cash flow of ACM and ACM’s overall investment and financing decisions. Effective July 1, 2020, Mr. Ulm began receiving a salary at the rate of $150,000 per annum from ACM, in lieu of equivalent prior partnership distributions. ACM does not pay Mr. Ulm a bonus. Mr. Harper, Mr. Macauley and Mr. Losyev also did not receive cash compensation directly from us, and we also do not reimburse ACM for cash compensation paid to them. Mr. Harper, Mr. Macauley and Mr. Losyev did, however, receive compensation directly from ACM in the form of salaries and bonuses. Such compensation amounts are determined by ACM and not by us, our Board or the Compensation Committee. In determining such salaries and bonuses, ACM considers the general compensation practices in our industry, including anticipated compensation requirements of other candidates who could potentially fill the positions, as well as the relative and absolute financial performance of ARMOUR and each person's role in the achievement of that performance, and the nature and results of their contribution to ACM business activities unrelated to ARMOUR. During 2025, our named executive officers as a group received aggregate salaries of $1,550,000 and aggregate cash bonuses of $2,300,000 from ACM. Our named executive officers also received aggregate realized incentive compensation consisting of the value of vested shares and dividend equivalent payments on unvested shares of $1.3 million during 2025. For context, ARMOUR paid aggregate management fees to ACM of $38.9 million, net of fees waived, during 2025. Notwithstanding the fact that we do not pay cash compensation to our named executive officers, our Compensation Committee may award equity compensation directly to our executive officers, ACM employees or to ACM for awards to ACM employees serving us, in addition to the management fees we pay ACM. In making the determination of whether or not to award equity compensation, our Compensation Committee takes into account, among other things, the management fees we pay to ACM and individual and company performance, both on an absolute basis and relative to our peers. In January 2021, our Compensation Committee recommended, and Board of Directors approved, a grant totaling 35,850 shares of stock, previously disclosed in our SEC filings, to Mr. Ulm and 2,000 shares of stock to Mr. Harper, under the Plan pursuant to the time-based vesting schedules as follows: •with respect to Mr. Ulm, 1,380 shares vested on February 20, 2021 with an additional 1,380 shares vesting on each following May 20, August 20, November 20 and February 20, through February 20, 2027, and an additional 1,350 shares vesting on May 20, 2027, at which time all stock shall have vested; •with respect to Mr. Harper, 80 shares vested on February 20, 2021 with an additional 80 shares vesting on each following May 20, August 20, November 20 and February 20, through February 20, 2027, at which time all stock shall have vested. In February 2023, our Compensation Committee recommended, and Board of Directors approved, a grant totaling 56,000 shares of stock, previously disclosed in our SEC filings, to Mr. Ulm and 16,800 shares of stock to Mr. Harper,under the Plan pursuant to the time-based vesting schedules as follows: •with respect to Mr. Ulm, 2,000 shares vested on February 20, 2023 with an additional 2,000 shares vesting on each following May 20, August 20, November 20 and February 20, through November 20, 2029, at which time all stock shall have vested; •with respect to Mr. Harper, 600 shares vested on February 20, 2023 with an additional 600 shares vesting on each following May 20, August 20, November 20 and February 20, through November 20, 2029, at which time all stock shall have vested. On May 15, 2024, grants totaling 3,840 shares of stock, previously disclosed in our SEC filings, were reallocated to Mr. Harper, under the Plan pursuant to the time-based vesting schedules as follows: •320 shares vested on May 20, 2024 with an additional 320 shares vesting on each following August 20, November 20, February 20, and May 20, through February 20, 2027. In April 2025, our Compensation Committee recommended, and Board of Directors approved, a grant totaling 60,000 shares of stock to Mr. Harper and 30,000 shares of stock to each of Mr. Macauley and Mr. Losyev, under the Plan pursuant to the time-based vesting schedules as follows: •with respect to Mr. Harper, 3,000 shares vested on May 20, 2025 with an additional 3,000 shares vesting on each following August 20, November 20, February 20 and May 20, through February 20, 2030, at which time all stock shall have vested; •with respect to Messrs. Macauley and Losyev, 1,500 shares vested on May 20, 2025 with an additional 1,500 shares vesting on each following August 20, November 20 and February 20 and May 20, through February 20, 2030, at which time all stock shall have vested.
Compensation Philosophy
Compensation Philosophy Our success is dependent, in large part, on our ability through our Management Agreement with ACM and our equity incentive program to attract, motivate and retain high-performing executives who are committed to our core values of stockholder value, prudent risk-taking and integrity. The REIT and mortgage investment industry is highly competitive and attracting and retaining experienced professionals represents a comparative advantage. We compete with a large number of REIT companies, funds, financial institutions and specialty finance companies for executive talent which has significant career mobility. Many of those companies are privately owned and/or have significantly larger market capitalization than we do. Accordingly, they may have significantly more flexibility and resources as it relates to compensating their key professionals. We are a specialized company in a highly competitive industry and our ability to attract, retain and reward our executive officers and other key professionals is essential to maintaining our competitive position. We strongly believe that offering incentives in the form of equity awards is critical to our ability to do so and aligns the interests of our named executive officers and other key professionals with those of our stockholders. The Compensation Committee’s objectives in overseeing and administering our equity compensation program are to: •focus decision-making and behavior on goals that are consistent with our overall business strategy without threatening the long-term viability of our company; •attract, retain and motivate highly-skilled executive officers that will contribute to our successful performance; •align the interests of our named executive officers with the interests of our stockholders by motivating executives to increase long-term stockholder value while employing appropriate risk management; •provide compensation opportunities that are competitive within industry standards thereby reflecting the value of the position in the marketplace; •support a culture committed to paying for performance where compensation is commensurate with the level of performance achieved; and •maintain flexibility and discretion to allow us to recognize the unique characteristics of our operations and strategy, and our prevailing business environment, as well as changing labor market dynamics. We take a disciplined approach to the expense management of our compensation programs. The Compensation Committee has historically limited, and intends to continue to limit, the total equity awards granted in any given year to no more than 1.25% of the weighted-average shares of common stock outstanding for the year (see the table below for more information). Since 2021, our awards vest ratably over a period of 20 or more quarters for directors, and 25 or more quarters for executive officers. These vesting schedules are designed to both further the retention, incentive and goal alignment objectives of the awards as well as to appropriately apportion the expense of the awards.
Compensation Philosophy
(1)Total equity awards granted in a fiscal year divided by total weighted-average shares of common stock outstanding for the year. No grants were awarded in 2024, other than the reallocated grants to Mr. Harper, or in 2022. (2)Total equity awards granted in a fiscal year divided by total weighted-average shares of common stock outstanding for the year weighted by a factor of 2.5. (3)Total equity awards issued, net of withholdings, divided by total weighted-average shares of common stock outstanding for the year ended December 31, 2025. We have proactively managed the overall affordability of our equity compensation programs to limit dilutive effects to our stockholders and, in each year since our initial public offering, have consistently returned a significant amount of cash to our stockholders through dividends and share repurchases. Dividends paid on our common stock from 2010 through 2025 totaled approximately $2.4 billion, which has been comprised of returns of capital and earnings for a particular period, if any. Additionally, during 2025, we repurchased 1,350,702 common shares, capturing an estimated $19.9 million in incremental value for continuing stockholders. The ability to appropriately use our stock as part of our compensation program is also important to our continued success because it fosters a pay-for-performance culture, which is an important element of our overall compensation program. We believe that equity compensation motivates our named executive officers and other key professionals to create stockholder value because the value they realize from equity compensation is based on our common stock performance. The Compensation Committee will consider placing conditions on the granting and vesting of future awards based on meeting appropriate performance targets focused on our absolute and relative performance compared to comparable companies. The Compensation Committee is committed to overseeing the ongoing review and evaluation of our named executive officer compensation levels and program. It is the Compensation Committee’s view that compensation decisions are best made after a deliberate review of Company and individual performance, as well as mortgage REIT industry compensation levels, within the risk parameters established by management and the Board of Directors. See "ARMOUR’s Mortgage REIT Peer Group" on page 24 for a discussion of our peer group. Consistent with this view, the Compensation Committee periodically assesses our performance within the context of the mortgage REIT industry’s overall performance and internal performance standards and oversees and evaluates individual executive officer performance relative to the performance expectations for their respective position. The Compensation Committee makes all Company equity compensation decisions related to the named executive officers. When making equity compensation decisions for our named executive officers, the Compensation Committee seeks input from members of the Board of Directors and, with respect to our non-CEO executive officers, Scott J. Ulm, our Chief Executive Officer. The Compensation Committee engages in discussions and makes final determinations related to equity compensation paid to the named executive officers.
ARMOUR Third Amended and Restated 2009 Stock Incentive Plan
ARMOUR Third Amended and Restated 2009 Stock Incentive Plan In 2009, we adopted the Plan to attract, retain and reward directors, officers and other employees, and other persons who provide services to us (“Eligible Individuals”). The Plan allows us to grant a variety of stock-based and cash-based awards to Eligible Individuals. The Plan is administered by the Compensation Committee. The Plan provides for grants of common stock, restricted shares of common stock, stock options, performance shares, performance units, restricted stock units, stock appreciation rights and other equity-based and cash-based awards. The Compensation Committee has the full authority to administer and interpret the Plan, to authorize the granting of awards, to determine the eligibility to receive an award, to determine the number of shares of common stock to be covered by each award (subject to the limitations provided in the Plan), to determine the terms, provisions and conditions of each award (which may not be inconsistent with the terms of the Plan), to prescribe the form of instruments evidencing awards and to take any other actions and make all other determinations that it deems necessary or appropriate in connection with the Plan or the administration or interpretation thereof. In connection with this authority, the Compensation Committee may, among other things, establish required periods of service and/or performance goals that must be met in order for awards to be granted or to vest, or for the restrictions on any such awards to lapse. The Compensation Committee administering the Plan is composed exclusively of individuals intended to be, to the extent required by Rule 16b-3 of the Exchange Act, non-employee directors.
Available Shares
Available Shares The Plan provides for grants of common stock, restricted shares of common stock, stock options, performance shares, performance units, restricted stock units (“RSUs”), stock appreciation rights and other equity-based and cash-based awards. The total number of shares of common stock that may be issued under the Plan is 800,000 shares, of which 3,506 remained available for future issuance at December 31, 2025, and as of the date hereof. The Plan allows for the Compensation Committee or the Board to expand the types of awards available under the Plan. The number of shares that may underlie awards in any one year to any Eligible Person will be determined by the Compensation Committee or the Board, subject to a maximum of 750,000 shares under the Plan. If an award granted under the Plan expires or terminates, the shares subject to any portion of the award that expires or terminates without having been exercised or paid, as the case may be, will again become available for the issuance of additional awards. The following table provides information as of December 31, 2025 with respect to shares of common stock reserved for future issuance under our equity compensation plans:
Available Shares
(1)Consists of the Plan under which the Compensation Committee or Board of Directors generally grants common stock, restricted shares of common stock, stock options, performance units, RSUs and stock appreciation rights to officers and directors of ARMOUR and employees of our manager, ACM. (2)All outstanding awards represent unvested RSUs. No stock options, warrants or similar rights are outstanding.
Awards under the Plan
Awards under the Plan Restricted Shares of Common Stock. A restricted share award is an award of shares of common stock that is subject to restrictions on transferability and such other restrictions, if any, the Compensation Committee may impose at the date of grant. Grants of restricted shares of common stock will be subject to vesting schedules as determined by the Compensation Committee. The restrictions may lapse separately or in combination at such times, under such circumstances, including, without limitation, a specified period of employment or the satisfaction of pre-established criteria, in such installments or otherwise, as the Compensation Committee may determine. Except to the extent restricted under the award agreement relating to the restricted shares of common stock, a participant granted restricted shares of common stock has all of the rights of a stockholder, including, without limitation, the right to vote and the right to receive dividends or distributions on the restricted shares of common stock. Such dividends and distributions, however, may be held in escrow until all restrictions on the underlying shares have lapsed. Although dividends may be paid on restricted shares of common stock, whether or not vested, at the same rate and on the same date as on shares of our common stock, holders of restricted shares of common stock are generally prohibited from selling such shares until they vest. Stock Options and Stock Appreciation Rights. A stock option is a right to purchase a specified number of shares of our common stock at an exercise price established at the date of grant. Stock options granted may be either non-qualified stock options or incentive stock options (which are intended to qualify as “incentive stock options” within Section 422 of the Code). A stock appreciation right (“SAR”) entitles the recipient to receive, upon surrender of the SAR, an amount of cash or number of shares of our common stock having a fair market value equal to the positive difference, if any, between the fair market value of one share of common stock on the date of exercise and the exercise price of the SAR. The Compensation Committee will specify at the time an option or SAR is granted, when and in what proportions an option or SAR becomes vested and exercisable in accordance with the Plan. Performance-Based Awards. The Compensation Committee may grant performance awards, which may be cash or equity based, including performance units and performance shares. Generally, performance awards require satisfaction of pre-established performance goals, consisting of one or more business criteria and a targeted performance level with respect to such criteria as a condition of awards being granted or becoming exercisable, or as a condition to accelerating the timing of such events. The Compensation Committee will set the performance goals used to determine the amount payable pursuant to a performance award. Other Awards. The Compensation Committee may also award to certain eligible persons shares of our common stock, RSUs or phantom shares or other awards whose value is based, in whole or in part, on our common stock. Such awards may be in addition to any other awards made under the Plan, and subject to such other terms and restrictions as determined by the Compensation Committee in its discretion.
2025 Summary Compensation Table
2025 Summary Compensation Table The following table provides information regarding compensation earned by each of the Company’s named executive officers, including our principal executive officer ("PEO"), for the fiscal years ended December 31, 2025, December 31, 2024 and December 31, 2023. As described in the compensation discussion and analysis section included in this proxy statement, none of the named executive officers of the Company are employees of the Company and the Company did not directly pay any cash compensation to the named executive officers for or in such calendar years but did pay management fees to the Company's external manager, of which the NEOs are employees and certain of them are equity owners. See "Certain Relationships and Related Party Transactions" below for information about these management fees.
2025 Summary Compensation Table
| Name and Principal Positions (1) | Year | Stock Awards (2) | | Scott J. Ulm Chief Executive Officer and Vice Chairman | 2025 | $— | | | 2024 | $— | | | 2023 | $1,660,400 | | Gordon M. Harper Chief Financial Officer and Secretary | 2025 | $985,200 | | | 2024 | $418,139 | | | 2023 | $498,120 | | Desmond E. Macauley Co-Chief Investment Officer and Head of Risk Management | 2025 | $492,600 | | | 2024 | $— | | | 2023 | $— | | Sergey Losyev Co-Chief Investment Officer | 2025 | $492,600 | | | 2024 | $— | | | 2023 | $— |
2025 Summary Compensation Table
(1)Mr. Macauley and Mr. Losyev did not receive compensation from the Company in 2023 or 2024. Mr. Ulm did not receive compensation from the Company in 2024 or 2025. (2)Represents the fair value of stock awards granted during the year as of the respective grant date calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, “Compensation - Stock Compensation” ("ASC 718"). Each stock award was valued at the closing market price of our common stock on the date of respective grant, which reflects the value of future dividends. Accordingly, payments in lieu of dividends on unvested awards have been excluded. For additional information regarding assumptions underlying the valuation of equity awards and the calculation method, please refer to Note 10 to our Consolidated Financial Statements, which are contained in our Annual Report on Form 10-K for the year ended December 31, 2025.
2025 Pay Versus Performance Table
2025 Pay Versus Performance Table The following table provides information in accordance with rules adopted by the SEC pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and Item 402(v) of Regulation S-K promulgated under the Exchange Act.
2025 Pay Versus Performance Table
| | | | | | | | Value of Initial Fixed $100 Investment Based on: | | | | | Year | Summary Compensation Table Total for PEO 1 (1) | Summary Compensation Table Total for PEO 2 (2) | Compensation Actually paid to PEO 1 (1) | Compensation Actually paid to PEO 2 (2) | Average Summary Compensation Table Total for Non-PEO NEOs (3) | Average Compensation Actually Paid to Non-PEO NEOs (4) | Total Shareholder Return (5) | Peer Group Total Shareholder Return (6) | Net Income (Loss) | Total Economic Return (7) | | 2025 | $— | $— | $74,100 | $74,100 | $656,800 | $728,512 | $73.74 | $125.29 | $322,686,865 | 12.8% | | 2024 | $— | $— | $149,396 | $149,396 | $209,069 | $(184,960) | $66.09 | $92.31 | $(14,393,939) | (2.6)% | | 2023 | $1,660,400 | $1,660,400 | $706,293 | $706,293 | $830,200 | $402,134 | $58.40 | $85.16 | $(67,923,938) | (4.7)% | | 2022 | $— | $— | $(750,654) | $(750,654) | $— | $(142,055) | $69.02 | $79.97 | $(229,930,299) | (32.4)% | | 2021 | $1,986,090 | $1,986,090 | $1,823,636 | $1,823,636 | $184,667 | $170,850 | $101.18 | $102.70 | $15,362,714 | (6.4)% |
2025 Pay Versus Performance Table
(1)In the years 2021 through 2023 and until mid March 2024, Scott J. Ulm served as one of the Company's Co-Chief Executive Officers. From mid March 2024 to present, Scott J. Ulm serves as the Company's Chief Executive Officer. (2)In the years 2021 through 2023 and until mid March 2024, Jeffrey J. Zimmer served as one of the Company's Co-Chief Executive Officers. From mid March 2024 to present, he serves as an ex-officio, non-voting special advisor to the Board. (3)The following tables set forth the amounts subtracted from the Summary Compensation Table Total and the amounts added back during each year represented in the Pay versus Performance table to arrive at Compensation Actually Paid to each PEO and our Non PEO NEOs during the years presented. Equity values are calculated in accordance with ASC Topic 718. (4)In the years 2021 through 2023 the Non-PEO NEOs consisted of James R. Mountain, Mark R. Gruber and Gordon M. Harper. In 2024, the Non-PEO NEOs consisted of James R. Mountain and Gordon M. Harper. In 2025, the Non-PEO NEO's consisted of Gordon M. Harper, Desmond Macauley and Sergey Losyev. (5)Total Shareholder Return illustrates the value, as of the last day of the indicated fiscal year, of an investment of $100 in our common stock on December 31, 2020. See graphs below for the relationship between Total Shareholder Return and other metrics in this table. (6)Total Shareholder Return illustrates the value, as of the last day of the indicated fiscal year, of an investment of $100 in the six companies in the FTSE NAREIT Mortgage REIT Home Financing Index that constitute our peer group on December 31, 2020. The Peer Group Total Shareholder Return is weighted according to the respective companies’ stock market capitalization at the beginning of each period for which a return is indicated. ARMOUR’s Mortgage REIT Peer Group, which, along with the FTSE NAREIT Mortgage REIT Home Financing Index, is described on page 24, is composed of: AGNC Investment Corp. (weighted average contribution for the years indicated: 34.51, 25.53, 29.22, 34.63, 45.29), Dynex Capital, Inc. (weighted average contribution for the years indicated: 2.68, 2.54, 3.15, 4.26, 8.1), Invesco Mortgage Capital (weighted average contribution for the years indicated: 3.79, 1.94, 1.91, 2.08, 2.35), Annaly Capital Management (weighted average contribution for the years indicated: 49.57, 42.56, 42.99, 43.55, 60.16), Orchid Island Capital (weighted average contribution for the years indicated: 3.48, 1.51, 1.94, 2.59, 5.08), and Two Harbors Investment Corporation (weighted average contribution for the years indicated: 8.67, 5.88, 5.95, 5.21, 4.31). The Company has used this peer group for its pay versus performance calculations in each of its 2023, 2024 and 2025 proxy statements as well as this proxy statement. (7)Total Economic Return is calculated by adding the year-end book value per common share for the particular year plus dividends paid per common share for such year and then dividing the sum by book value per common share at the beginning of the year. Book value per common share is calculated as total stockholders' equity, less the liquidation preference on shares of our outstanding Series C Preferred Stock, divided by common shares outstanding.
2025 Pay Versus Performance Table
| Adjustments made to Determine Compensation Actually Paid | | 2025 | 2024 | 2023 | 2022 | 2021 | | Summary Compensation Table Total | PEO 1 | $— | $— | $1,660,400 | $— | $1,986,090 | | | PEO 2 | $— | $— | $1,660,400 | $— | $1,986,090 | | | Average Non PEO NEOs | $656,800 | $209,069 | $830,200 | $— | $184,667 | | Deduction for amounts reported under the “Stock Awards” column in the Summary Compensation Table | PEO 1 | $— | $— | $(1,660,400) | $— | $(1,986,090) | | | PEO 2 | $— | $— | $(1,660,400) | $— | $(1,986,090) | | | Average Non PEO NEOs | $(656,800) | $(209,069) | $(830,200) | $— | $(184,667) | | Increase for year-end fair value of awards granted during year that remain unvested as of year-end | PEO 1 | $— | $— | $927,360 | $— | $1,487,687 | | | PEO 2 | $— | $— | $927,360 | $— | $1,487,687 | | | Average Non PEO NEOs | $601,460 | $27,158 | $463,680 | $— | $137,340 | | Increase/deduction for change in fair value from prior year-end to current year-end of awards granted prior to that year that were outstanding and unvested as of year-end | PEO 1 | $(47,093) | $(24,734) | $(629,491) | $(685,729) | $(233,446) | | | PEO 2 | $(47,093) | $(24,734) | $(629,491) | $(685,729) | $(233,446) | | | Average Non PEO NEOs | $(44,304) | $(9,439) | $(240,176) | $(108,680) | $(43,407) | | Increase for fair value as of the vesting dates for awards granted during year that vest during the year | PEO 1 | $— | $— | $185,620 | $— | $308,016 | | | PEO 2 | $— | $— | $185,620 | $— | $308,016 | | | Average Non PEO NEOs | $95,680 | $32,396 | $92,810 | $— | $29,760 | | Increase/deduction for change in fair value from prior year-end to current year-end of awards granted prior to that year that vested during year | PEO 1 | $(15,818) | $(8,059) | $(154,702) | $(309,989) | $(72,677) | | | PEO 2 | $(15,818) | $(8,059) | $(154,702) | $(309,989) | $(72,677) | | | Average Non PEO NEOs | $(8,580) | $(2,102) | $(52,980) | $(76,466) | $(17,862) | | Deduction for fair value of awards granted prior to year that were forfeited during year | PEO 1 | $— | $— | $— | $— | $— | | | PEO 2 | $— | $— | $— | $— | $— | | | Average Non PEO NEOs | $— | $(266,616) | $— | $— | $— | | Increase based on dividends or other earnings Paid during year prior to vesting date of award | PEO 1 | $137,011 | $182,189 | $377,506 | $245,064 | $334,056 | | | PEO 2 | $137,011 | $182,189 | $377,506 | $245,064 | $334,056 | | | Average Non PEO NEOs | $84,256 | $33,643 | $138,800 | $43,091 | $65,019 | | Continued | | | | | | |
2025 Pay Versus Performance Table
| Total Adjustments | PEO 1 | $74,100 | $149,396 | $(954,107) | $(750,654) | $(162,454) | | | PEO 2 | $74,100 | $149,396 | $(954,107) | $(750,654) | $(162,454) | | | Average Non PEO NEOs | $71,712 | $(394,029) | $(428,066) | $(142,055) | $(13,817) | | Compensation Actually Paid | PEO 1 | $74,100 | $149,396 | $706,293 | $(750,654) | $1,823,636 | | | PEO 2 | $74,100 | $149,396 | $706,293 | $(750,654) | $1,823,636 | | | Average Non PEO NEOs | $728,512 | $(184,960) | $402,134 | $(142,055) | $170,850 |
Important Factors
Important Factors The following is a list of the most important factors used by the Company to link executive compensation actually paid to the PEOs and Non-PEO NEOs. The Compensation Committee reviews such factors periodically and, accordingly, such factors remain subject to revision and refinement. (1)Economic return. (2)Total shareholder return. (3)Common equity growth through efficient use of the Company's at-the-market common stock offering program. (4)Equity growth in percentage terms as compared to the peer group. (5)CEO open market purchases of Company common stock as compared to open market purchases of common stock by peer group CEOs. (6)Strategic implementation and sale of a preferred stock program as compared to the Company's peer group. (7)Total expenses of the Company as a percentage of its total stockholders' equity, relative to its peers.
Relationship Between Compensation Actually Paid and Financial Performance
Relationship Between Compensation Actually Paid and Financial Performance The charts below describe the relationship between compensation actually paid to each of our Co-PEOs and Non-PEO NEOs (as calculated above) and our financial and stock performance. The foregoing disclosures relating to Pay Versus Performance shall not be deemed incorporated by reference by any general statement incorporating by reference this Proxy Statement into any filing under the Securities Act or under the Exchange Act, except to the extent that we specifically incorporate this information by reference.
2025 Grants of Plan-Based Awards
2025 Grants of Plan-Based Awards The following table sets forth information on the holdings of equity awards by our named executive officers granted in 2025.
2025 Grants of Plan-Based Awards
| Name (1) | Date of Grant | Stock Awards: Number of Shares | Grant Date Fair Value of Stock Awards (2) | | Gordon M. Harper | 4/28/2025 | 60,000 | $985,200 | | Desmond Macauley | 4/28/2025 | 30,000 | $492,600 | | Sergey Losyev | 4/28/2025 | 30,000 | $492,600 |
2025 Grants of Plan-Based Awards
(1)Scott Ulm did not receive an equity award in 2025. (2)The value reported in this column represents the grant date fair value of these awards determined in accordance with ASC 718.
Outstanding Equity Awards at December 31, 2025
Outstanding Equity Awards at December 31, 2025 The following table sets forth information on the outstanding equity awards held by our named executive officers as of December 31, 2025:
Outstanding Equity Awards at December 31, 2025
| | Stock Awards | | | Name | Number of Shares or Units of Stock that Have Not Vested (1) | Market Value of Shares or Units of Stock That Have Not Vested (1) (2) | | Scott J. Ulm | 40,250 | $712,023 | | Gordon M. Harper | 62,600 | $1,107,394 | | Desmond Macauley | 25,500 | $451,095 | | Sergey Losyev | 25,500 | $451,095 |
Outstanding Equity Awards at December 31, 2025
(1)Represents the following time-based vesting rates that began: •February 20, 2021; with respect to Mr. Ulm, 1,380 shares vested on February 20, 2021 with an additional 1,380 shares vesting on each following May 20, August 20, November 20 and through February 20, 2027 with an additional 1,350 shares vesting on May 20, 2027, at which time all stock shall have vested; and with respect to Mr. Harper, 80 shares vested on February 20, 2021 with an additional 80 shares vesting on each following May 20, August 20, November 20 and February 20, through February 20, 2027, at which time all stock shall have vested. In addition for Mr. Harper, following forfeiture in connection with Mr. Mountain's departure as Chief Financial Officer and Mr. Gruber stepping down from his role as Chief Investment Officer, a reallocated grant totaling 3,840 shares began vesting with 320 shares vesting on May 20, 2024 with an additional 320 shares vesting on each following August 20, November 20, February 20, and May 20, through February 20, 2027. •February 20, 2023; with respect to Mr. Ulm, 2,000 shares vested on February 20, 2023 with an additional 2,000 shares vesting on each following May 20, August 20, November 20 and February 20, through November 20, 2029, at which time all stock shall have vested; and with respect to Mr. Harper, 600 shares vested on February 20, 2023 with an additional 600 shares vesting on each following May 20, August 20, November 20 and February 20, through November 20, 2029, at which time all stock shall have vested. •February 20, 2026; with respect to Mr. Harper, 3,000 shares vested on February 20, 2026 with an additional 3,000 shares vesting on each following May 20, August 20, November 20 and February 20, through November 20, 2030, at which time all stock shall have vested; and with respect to Messrs. Macauley and Losyev, 1,500 shares vested on February 20, 2026 with an additional 1,500 shares vesting on each following May 20, August 20, November 20 and February 20, through November 20, 2030, at which time all stock shall have vested. (2)Based on $17.69 per share, the closing trade price of ARMOUR common stock on the NYSE on December 31, 2025.
Stock Vested in 2025
Stock Vested in 2025 The following table sets forth information on the shares of stock held by our named executive officers that vested during the year ended December 31, 2025.
Stock Vested in 2025
| | Stock Awards | | | Name | Number of Shares Acquired on Vesting | Value Realized on Vesting (1) | | Scott J. Ulm | 13,520 | $225,716 | | Gordon M. Harper | 13,000 | $210,300 | | Desmond Macauley | 4,500 | $71,760 | | Sergey Losyev | 4,500 | $71,760 |
Stock Vested in 2025
(1)Reflects the aggregate value of all quarterly vesting of stock awards in 2025 based upon the closing price of our common stock on the NYSE on the applicable vesting date. See 2025 Executive Compensation and the footnotes to the table in “Outstanding Equity Awards at December 31, 2025” above for details on the time-based vesting grants.
Change in Control
Change in Control Upon a Change in Control, as defined in the Plan, the Compensation Committee may make certain adjustments which it, in its discretion, determines are necessary or appropriate in light of the Change in Control. These include, accelerating the vesting of some or all of the awards under the Plan, terminating all awards under the Plan (allowing for either the exercise of vested awards or a cash payment in lieu of vested awards), converting the awards to the right to receive proceeds in the event of liquidation, or a combination of any of the foregoing. In the event that the Compensation Committee does not terminate or convert an award upon a Change in Control, then the award shall be assumed, or substantially equivalent awards shall be substituted, by the acquiring, or succeeding corporation (or an affiliate thereof). Our Board may amend, alter or discontinue the Plan but cannot take any action that would impair the rights of a participant without such participant’s consent. To the extent necessary and desirable, the Board must obtain approval of our stockholders for any amendment that would: • other than through adjustment as provided in the Plan, increase the total number of shares of common stock reserved for issuance under the Plan; • change the class of persons eligible to participate in the Plan; • reprice any stock option awards under the Plan; or • otherwise require such approval. The Compensation Committee may amend the terms of any award granted under the Plan, prospectively or retroactively, but generally may not impair the rights of any participant without his or her consent.
Potential Payments Upon Termination or Change in Control
Potential Payments Upon Termination or Change in Control Pursuant to the terms of the individual executive officer's award and in accordance with the Plan, upon a Change in Control (as defined in the Plan) the 2025, 2023 and 2021 grants to the executive officers immediately vest, without regard to any limitation imposed pursuant to the Plan, and upon a termination of the Management Agreement by us without Cause (as defined in the Management Agreement and determined in accordance with it), all outstanding stock awards immediately vest. The following table sets forth estimates of the potential benefits to our named executive officers assuming immediate vesting of all outstanding awards in connection with a Change in Control or termination of the Management Agreement without Cause, assuming such event occurred on December 31, 2025. The actual payments due on terminations occurring on different dates could materially differ from the estimates in the table.
Potential Payments Upon Termination or Change in Control
| Name | Value of Vesting Stock Awards (1) | | Scott J. Ulm | $712,023 | | Gordon M. Harper | $1,107,394 | | Desmond Macauley | $451,095 | | Sergey Losyev | $451,095 |
Potential Payments Upon Termination or Change in Control
(1)Consists of all outstanding Plan-based stock awards held by such named executive officer that had not vested as of December 31, 2025. The values are based on $17.69 per share, the closing price of ARMOUR common stock on the NYSE on December 31, 2025.
PROPOSAL 5 -APPROVAL OF ARMOUR's FOURTH AMENDED AND RESTATED 2009 STOCK INCENTIVE PLAN
PROPOSAL 5 -APPROVAL OF ARMOUR's FOURTH AMENDED AND RESTATED 2009 STOCK INCENTIVE PLAN At the annual meeting, we are asking our stockholders to approve an amendment and restatement of the Plan (as amended and restated, the “Fourth Amended Plan”), which, among other changes, would have the effect of increasing the aggregate number of shares of common stock authorized for issuance pursuant to the Plan from 800,000 shares to 1,800,000 shares, an increase of 1,000,000 shares. As of the date hereof, we have 3,506 shares available for issuance under the Plan. Our compensation committee has confirmed the updates to the Plan stated above and recommended for approval, and our Board subsequently approved, the Fourth Amended Plan, subject to the approval of our stockholders at the annual meeting. If approved by our stockholders, the Fourth Amended Plan will be effective as of April 30, 2026. The proposed Fourth Amended Plan, as amended and restated, is attached to this proxy statement as Appendix A. The material substantive differences between the Fourth Amended Plan and the Plan are: •Name of the plan was changed to ARMOUR’s Fourth Amended and Restated 2009 Stock Incentive Plan; •Aggregate number of shares of ARMOUR’s common stock authorized for issuance pursuant to the Plan was increased by 1,000,000 shares to be, as of March 6, 2026, an aggregate of 1,003,506 shares available for issuance on and after stockholder approval of the Fourth Amended Plan; •The Fourth Amended Plan would also proportionally lower the maximum number of shares of common stock that may be subject to grants of certain awards to any one Eligible Individual (as defined below) in any fiscal year from 750,000 to 150,000 (to reflect the one-for-five reverse stock split of our common stock effected in September 2023, in accordance with the terms of the Plan); •Sets the effective date of the Fourth Amended Plan as April 30, 2026, the date of the annual meeting, subject to the approval of our stockholders at the annual meeting (the “Effective Date”), •Establishes a ten year term such that if approved by our stockholders, the Fourth Amended Plan will terminate on the day immediately preceding the tenth anniversary of the Effective Date, or April 29, 2036; •Adds a clawback provision to clarify that any Award granted under the Fourth Amended Plan may also provide for the cancellation or forfeiture of such Award and repayment to ARMOUR of any shares of common stock issued under and/or any other benefit related to an Award, consistent with the terms of our Clawback Policy; and •Eliminated outdated Internal Revenue Code Section 162(m) provisions. In addition, certain other administrative changes have been included in the Fourth Amended Plan. Other than as described in this proposal, the Plan would not be materially changed from its current state. The Fourth Amended Plan is intended to attract, retain and reward directors, officers and other employees, and other persons who provide services to us (“Eligible Individuals”). The Fourth Amended Plan allows us to grant a variety of stock-based and cash-based awards to approximately 13 Eligible Individuals. The Fourth Amended Plan will be administered by our compensation committee. The compensation committee, appointed by the Board, will have the full authority to administer and interpret the Fourth Amended Plan, to authorize the granting of awards, to determine the eligibility to receive an award, to determine the number of shares of common stock to be covered by each award (subject to the limitations provided in the Fourth Amended Plan), to determine the terms, provisions and conditions of each award (which may not be inconsistent with the terms of the Fourth Amended Plan), to prescribe the form of instruments evidencing awards and to take any other actions and make all other determinations that it deems necessary or appropriate in connection with the Fourth Amended Plan or the administration or interpretation thereof. In connection with this authority, the compensation committee may, among other things, establish required periods of employment and/or performance goals that must be met in order for awards to be granted or to vest, or for the restrictions on any such awards to lapse. The compensation committee consists of three non-employee directors, each of whom is intended to be, to the extent required by Rule 16b-3 under the Exchange Act, a non-employee director. Why our Board of Directors Believes our Stockholders Should Approve the Fourth Amended Plan. We have determined that the Fourth Amended Plan is necessary because our success is dependent, in large part, on our ability through the ARMOUR Management Agreement with ACM and our equity incentive program to attract, motivate and retain high-performing senior executives who are committed to our core values of stockholder value, prudent risk-taking and integrity. The REIT and mortgage investment industry is highly competitive and attracting and retaining experienced professionals represents a comparative advantage. We compete with a large number of REIT companies, funds, financial institutions and specialty finance companies for executive talent which has significant career mobility. Many of those companies are privately owned and/or have significantly larger market capitalization than we do. Accordingly, they may have significantly more flexibility and resources as it relates to compensating their key professionals. We are a specialized company in a highly competitive industry and our ability to attract, retain and reward our executive officers and other key professionals is essential to maintaining our competitive position. We strongly believe that offering incentives in the form of equity awards is critical to our ability to do so and aligns the interests of our executive officers and other key professionals with those of our stockholders. Since we began awarding equity compensation in 2011, the number of our executive officers has more than doubled, going from two to four and the number of our equity award recipients has increased from two to 13. We believe that if approved, the Fourth Amended Plan would be a significant factor in our continuing ability to motivate and retain our existing executive officers and other key professionals and to attract the additional personnel necessary for our future growth. We do not believe that having an “evergreen plan” (which sets the aggregate number of authorized plan shares equal to a fixed percentage of shares issued and outstanding from time to time) is necessary to achieve these goals. Accordingly, we are not requesting, and do not intend to request, that our stockholders approve an amendment to make our Plan an “evergreen plan.” Based on our prior experience and current expectations, we believe that the 1,000,000 additional shares will provide us an opportunity to grant equity awards for three to seven years, depending on the performance and growth of ARMOUR. For more information regarding our historical burn rate and dilutive impact of the Plan, see “Compensation Discussion and Analysis – Compensation Philosophy." The Compensation Committee’s objectives in developing and administering our equity compensation program are to: •focus decision-making and behavior on goals that are consistent with our overall business strategy without threatening the long-term viability of our Company; •attract, retain and motivate highly-skilled executive officers that will contribute to our successful performance; •align the interests of our executive officers with the interests of our stockholders by motivating executives to increase long-term stockholder value; •provide compensation opportunities that are competitive within industry standards thereby reflecting the value of the position in the marketplace; •support a culture committed to paying for performance where compensation is commensurate with the level of performance achieved; and
PROPOSAL 5 -APPROVAL OF ARMOUR's FOURTH AMENDED AND RESTATED 2009 STOCK INCENTIVE PLAN
•maintain flexibility and discretion to allow us to recognize the unique characteristics of our operations and strategy, and our prevailing business environment, as well as changing labor market dynamics. Because we have 3,506 shares remaining available for equity grants under the Plan, approval of the Fourth Amended Plan is critical to achieving these objectives and our continued success. We believe that equity compensation is an essential part of our compensation program to help us attract and retain talent in order to create stockholder value and the combination of the ARMOUR Management Agreement and our equity compensation provides the appropriate balance to encourage long-term performance without excessive risk taking. Failure to approve the Fourth Amended Plan would be disruptive because it would force our compensation committee to rely exclusively on cash to compensate and incentivize our executive officers and other key professionals, which would increase cash compensation expense and reduce cash flow available for distribution to our stockholders. Alternatively, if the Fourth Amended Plan is not approved, we may need to implement cash-based incentive plans in order to attempt to achieve these objectives. We believe that equity awards permitted by the Fourth Amended Plan represent the superior alternative, in terms of both efficiency and effectiveness. Not only would continuing the current approach avoid potential disruptions in our relationship with our executive officers and other key professionals, but it would reduce the likelihood that we would need to rely on cash incentive awards in the future and reduce cash flow available for distribution to our stockholders. The use of our stock as part of our compensation program is also important to our continued success because it fosters a pay-for-performance culture, which is an important element of our overall compensation program. We believe that equity compensation motivates our named executive officers and other key professionals to create stockholder value because the value they realize from equity compensation is based on our common stock performance. Finally, we believe that we have demonstrated our commitment to sound equity compensation practices. We recognize that equity compensation awards dilute stockholder equity and, therefore, we have carefully managed our equity incentive compensation. Our equity compensation practices are targeted to be consistent with market norms and we believe our historical share usage has been responsible and mindful of stockholder interests, as described further below.
Available Shares
Available Shares The Fourth Amended Plan provides for grants of common stock, restricted shares of common stock, stock options, performance shares, performance units, stock appreciation rights, phantom shares, restricted stock units, and other equity-based and cash-based awards. The Board initially allocated up to 6,250 shares to be available under the ARMOUR 2009 Stock Incentive Plan (the “Original Plan”). On July 18, 2011, the Original Plan was amended and restated (the "First Amended Plan") to allocate up to 50,000 shares to be available under the First Amended Plan. On May 8, 2014, at our annual meeting of stockholders, the First Amended Plan was amended and restated by the Plan to increase the aggregate number of shares available under the Plan from 50,000 shares to 375,000 shares. On May 13, 2021, at our annual meeting of stockholders, the Second Amended Plan was amended and restated by the Plan to increase the aggregate number of share available under the Plan from 375,000 shares to 800,000 shares. Our Board believes that the Plan has assisted in our recruitment and retention of key officers, directors and other personnel, and has helped align their interests with the interests of our stockholders. Our Board believes that the Fourth Amended Plan will allow us to continue to promote these interests and the best interests of the Company and its stockholders. The number of shares that may underlie awards in any one year to any eligible person will be determined by the Compensation Committee or the Board, subject to a maximum of 150,000 shares under the Fourth Amended Plan. If an award granted under the Fourth Amended Plan expires or terminates, the shares subject to any portion of the award that expires or terminates without having been exercised or paid, as the case may be, will again become available for the issuance of additional awards.
Awards Under the Fourth Amended Plan
Awards Under the Fourth Amended Plan Restricted Shares of Common Stock. A restricted share award is an award of shares of common stock that is subject to restrictions on transferability and such other restrictions, if any, the compensation committee may impose at the date of grant. Grants of restricted shares of common stock will be subject to vesting schedules as determined by the compensation committee. The restrictions may lapse separately or in combination at such times, under such circumstances, including, without limitation, a specified period of employment or the satisfaction of pre-established criteria, in such installments or otherwise, as the compensation committee may determine. Except to the extent restricted under the award agreement relating to the restricted shares of common stock, a participant granted restricted shares of common stock has all of the rights of a stockholder, including, without limitation, the right to vote and the right to receive dividends or distributions on the restricted shares of common stock. Such dividends and distributions, however, may be held in escrow until all restrictions on the underlying shares have lapsed. Although dividends may be paid on restricted shares of common stock, whether or not vested, at the same rate and on the same date as on shares of our common stock, holders of restricted shares of common stock are generally prohibited from selling such shares until they vest. Stock Options and Stock Appreciation Rights. A stock option is a right to purchase a specified number of shares of our common stock at an exercise price established at the date of grant. Stock options granted may be either non−qualified stock options or incentive stock options (which are intended to qualify as “incentive stock options” within Section 422 of the Code). A stock appreciation right (“SAR”) entitles the recipient to receive, upon surrender of the SAR, an amount of cash or number of shares of our common stock having a fair market value equal to the positive difference, if any, between the fair market value of one share of common stock on the date of exercise and the exercise price of the SAR. The compensation committee will specify at the time an option or SAR is granted when and in what proportions an option or SAR becomes vested and exercisable in accordance with the Fourth Amended Plan. Performance-Based Awards. The compensation committee may grant performance awards, which may be cash or equity based, including performance units and performance shares. Generally, performance awards require satisfaction of pre–established performance goals, consisting of one or more business criteria and a targeted performance level with respect to such criteria as a condition of awards being granted, becoming exercisable or settleable, or as a condition to accelerating the timing of such events. The compensation committee will set the performance goals used to determine the amount payable pursuant to a performance award. Other Awards. The compensation committee may also award to certain eligible persons shares of our common stock, RSUs, phantom shares or other awards whose value is based, in whole or in part, on our common stock. Such awards may be in addition to any other awards made under the Fourth Amended Plan, and subject to such other terms and restrictions as determined by the compensation committee in its discretion.
Change in Control
Change in Control Upon a change in control, as defined in the Fourth Amended Plan, the compensation committee may make certain adjustments which it, in its discretion, determines are necessary or appropriate in light of the change in control, including, accelerating the vesting of some or all of the awards under the Fourth Amended Plan, terminating all awards under the Fourth Amended Plan (allowing for either the exercise of vested awards or a cash payment in lieu of vested awards), converting the awards to the right to receive proceeds in the event of liquidation, or a combination of any of the foregoing. In the event that the compensation committee does not terminate or convert an award upon a change in control, then the award shall be assumed, or substantially equivalent awards shall be substituted, by the acquiring, or succeeding corporation (or an affiliate thereof).
Tax Consequences to Participants
Tax Consequences to Participants Nonqualified stock Options Generally, no income will be recognized by an option holder at the time a non-qualified option (an "NSO") is granted; at the time of exercise of a non-qualified stock option, ordinary income will be recognized by the option holder in an amount equal to the difference between the exercise price paid for the shares and the fair market value of the shares on the date of exercise; and at the time of sale of shares acquired pursuant to the exercise of a non-qualified stock option, appreciation (or depreciation) in value of the shares after the date of exercise will be treated as either short-term or long-term capital gain (or loss) depending on how long the shares have been held. Incentive Stock Options No income generally will be recognized by an option holder upon the grant or exercise of an incentive stock option (an "ISO"). If common shares are issued to the option holder on exercise of an incentive stock option, and if no disqualifying disposition of such shares is made by such optionholder within two years after the date of grant or within one year after the transfer of such shares to the option holder, then upon sale of such shares, any amount realized in excess of the exercise price will be taxed to the optionholder as a long-term capital gain and any loss sustained will be a long-term capital loss. If common shares acquired upon the exercise of an incentive stock option are disposed of prior to the expiration of either holding period described above, the option holder generally will recognize ordinary income in the year of disposition in an amount equal to the excess (if any) of the fair market value of such shares at the time of exercise (or, if less, the amount realized on the disposition of such shares if a sale or exchange) over the exercise price paid for such shares. Any further gain (or loss) realized by the option holder generally will be taxed as short-term or long-term capital gain (or loss) depending on the holding period. To the extent that the fair market value of Common Stock (determined at the time of ISO grant) is $100,000 or less at the first time that the ISO is exercisable, the exercise of the ISO should not be subject to regular federal income tax. The excess of the fair market value of Common Stock (determined at the time of ISO exercise) over the Exercise Price, however, is an add-back item for purposes of the federal alternative minimum tax (“AMT”). Accordingly, option holders may become subject to the AMT when they exercise ISOs. To the extent that the fair market value of Common Stock is more than $100,000 at the first time an ISO is exercisable, the exercise of the ISO will be taxed as though it were an NSO. SARs No income will be recognized by a recipient of a SAR in connection with the grant of a SAR. When the SAR is exercised, the holder thereof will be required to include as taxable ordinary income in the year of exercise an amount equal to the amount of cash received and the fair market value of any common shares received on the exercise.
2009 STOCK INCENTIVE PLAN
2009 STOCK INCENTIVE PLAN
5. SHARES OF COMMON STOCK SUBJECT TO PLAN
5. SHARES OF COMMON STOCK SUBJECT TO PLAN (a) Shares Available for Awards. The Common Stock that may be issued pursuant to Awards granted under the Plan shall be authorized but unissued shares of the Common Stock. The total number of shares of Common Stock that may be issued pursuant to Awards granted under the Plan shall be 1,800,000 shares of Common Stock. The maximum number of shares of Common Stock that may be issued pursuant to Incentive Stock Options is 1,800,000. (b) Certain Limitations on Specific Types of Awards. The granting of Awards under this Plan shall be subject to the following limitations: (i) With respect to the shares of Common Stock reserved pursuant to this Section, a maximum of one hundred percent (100%) of such shares may be issued in connection with Awards, other than Options and Stock Appreciation Rights, that are settled in Common Stock; (ii) With respect to the shares of Common Stock reserved pursuant to this Section, a maximum of one hundred fifty thousand (150,000) of such shares may be subject to grants of Options or Stock Appreciation Rights to any one Eligible Individual during any one fiscal year; (iii) With respect to the shares of Common Stock reserved pursuant to this Section, a maximum of one hundred fifty thousand (150,000) of such shares may be subject to grants of Performance Shares, Restricted Stock, and Awards of Common Stock to any one Eligible Individual during any one fiscal year; and (iv) The maximum value at Grant Date of grants of Performance Units which may be granted to any one Eligible Individual during any one fiscal year shall be one million dollars ($1,000,000). (c) Reduction of Shares Available for Awards. Upon the granting of an Award, the number of shares of Common Stock available under this Section hereof for the granting of further Awards shall be reduced as follows: (i) In connection with the granting of an Option or Stock Appreciation Right, the number of shares of Common Stock shall be reduced by the full number of shares of Common Stock subject to the Option or Stock Appreciation Right; and (ii) In connection with the granting of an Award that may be settled in Common Stock, other than the granting of an Option or Stock Appreciation Right, the number of shares of Common Stock shall be reduced by the full number of shares of Common Stock subject to the Award. (d) Cancelled, Forfeited, or Surrendered Awards. Notwithstanding anything to the contrary in this Plan, if any Award that may be settled in Common Stock is cancelled, forfeited, terminated or settled in cash for any reason, the shares of Common Stock that were subject to such Award shall, to the extent cancelled, forfeited, terminated or settled in cash, immediately become available for future Awards granted under the Plan as if said Award had never been granted; provided, however, that any shares of Common Stock subject to an Award which are tendered cancelled, forfeited, withheld or terminated in order to pay the Exercise Price, purchase price or any taxes or tax withholdings on an Award shall not be available for future Awards granted under the Plan. (e) Recapitalization. If the outstanding shares of Common Stock are increased or decreased or changed into or exchanged for a different number or kind of shares or other securities of ARMOUR by reason of any recapitalization, reclassification, reorganization, stock split, reverse split, combination of shares, exchange of shares, stock dividend or other distribution payable in capital stock of ARMOUR or other increase or decrease in such shares effected without receipt of consideration by ARMOUR occurring after the Effective Date, an appropriate and proportionate adjustment shall be made by the Committee to (i) the aggregate number and kind of shares of Common Stock available under the Plan, (ii) the aggregate limit of the number of shares of Common Stock that may be granted pursuant to an Incentive Stock Option, (iii) the aggregate limit of the number of shares of Common Stock that may be issued in connection with Awards, other than Stock Options and Stock Appreciation Rights, that are settled in Common Stock, (iv) the limits on the number of shares of Common Stock that may be granted to an Eligible Employee in any one fiscal year, (v) the calculation of the reduction or increase of shares of Common Stock available under the Plan, (vi) the number and kind of shares of Common Stock issuable upon exercise (or vesting) of outstanding Awards granted under the Plan; and/or (vii) the Exercise Price of outstanding Options granted under the Plan. No fractional shares of Common Stock or units of other securities shall be issued pursuant to any such adjustment under this Section 5(e), and any fractions resulting from any such adjustment shall be eliminated in each case by rounding downward to the nearest whole share or unit. Any adjustments made under this Section 5(e) with respect to any Incentive Stock Options must be made in accordance with Code Section 424.
6. OPTIONS
6. OPTIONS (a) Grant of Options. Subject to the terms and conditions of the Plan, the Committee may grant to such Eligible Individuals as the Committee may determine, Options to purchase such number of shares of Common Stock and on such terms and conditions as the Committee shall determine in its sole and absolute discretion. Each grant of an Option shall satisfy the requirements set forth in this Section. (b) Type of Options. Each Option granted under the Plan may be designated by the Committee, in its sole discretion, as either (i) an Incentive Stock Option, or (ii) a Non-Qualified Stock Option. Options designated as Incentive Stock Options that fail to continue to meet the requirements of Code Section 422 shall be re-designated as Non-Qualified Stock Options automatically on the date of such failure to continue to meet such requirements without further action by the Committee. In the absence of any designation, Options granted under the Plan will be deemed to be Non-Qualified Stock Options. (c) Exercise Price. Subject to the limitations set forth in the Plan relating to Incentive Stock Options, the Exercise Price of an Option shall be fixed by the Committee and stated in the respective Award Agreement, provided that the Exercise Price of the shares of Common Stock subject to such Option may not be less than Fair Market Value of such Common Stock on the Grant Date, or if greater, the par value of the Common Stock. (d) Limitation on Repricing. Unless such action is approved by ARMOUR’s stockholders in accordance with applicable law: (i) no outstanding Option granted under the Plan may be amended to provide an Exercise Price that is lower than the then-current Exercise Price of such outstanding Option (other than adjustments to the Exercise Price pursuant to Sections 5(e) and 11); (ii) the Committee may not cancel any outstanding Option and grant in substitution therefore new Awards under the Plan covering the same or a different number of shares of Common Stock and having an Exercise Price lower than the then-current Exercise Price of the cancelled Option (other than adjustments to the Exercise Price pursuant to Sections 5(e) and 11); (iii) the Committee may not authorize the repurchase of an outstanding Option which has an Exercise Price that is higher than the then-current fair market value of the Common Stock (other than adjustments to the Exercise Price pursuant to Sections 5(e) and 11); and (iv) the Committee may not cancel any outstanding Option and grant in substitution therefore new Awards as part of a strategy to materially enhance the position of the holder of such Options or Stock Appreciation Rights with respect to their value as of the time of such substitution (other than adjustments pursuant to Sections 5(e) and 11). (e) Limitation on Option Period. Subject to the limitations set forth in the Plan relating to Incentive Stock Options and unless otherwise provided by the Committee, Options granted under the Plan and all rights to purchase Common Stock thereunder shall terminate no later than the tenth anniversary of the Grant Date of such Options, or on such earlier date as may be stated in the Award Agreement relating to such Option. In the case of Options expiring prior to the tenth anniversary of the Grant Date, the Committee may in its discretion, at any time prior to the expiration or termination of said Options, extend the term of any such Options for such additional period as it may determine, but in no event beyond the tenth anniversary of the Grant Date thereof. (f) Limitations on Incentive Stock Options. Notwithstanding any other provisions of the Plan, the following provisions shall apply with respect to Incentive Stock Options granted pursuant to the Plan. (g) Limitation on Grants. Incentive Stock Options may only be granted to Section 424 Employees. The aggregate Fair Market Value (determined at the time such Incentive Stock Option is granted) of the shares of Common Stock for which any individual may have Incentive Stock Options which first become vested and exercisable in any calendar year (under all incentive stock option plans of the Company) shall not exceed $100,000. Options granted to such individual in excess of the $100,000 limitation, and any Options issued subsequently which first become vested and exercisable in the same calendar year, shall automatically be treated as Non-Qualified Stock Options. (i) Minimum Exercise Price. In no event may the Exercise Price of a share of Common Stock subject to an Incentive Stock Option be less than 100% of the Fair Market Value of such share of Common Stock on the Grant Date. (ii) Ten Percent Shareholder. Notwithstanding any other provision of the Plan to the contrary, in the case of Incentive Stock Options granted to a Section 424 Employee who, at the time the Option is granted, owns (after application of the rules set forth in Code Section 424(d)) stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of ARMOUR, such Incentive Stock Options (i) must have an Exercise Price per share of Common Stock that is at least 110% of the Fair Market Value as of the Grant Date of a share of Common Stock, and (ii) must not be exercisable after the fifth anniversary of the Grant Date. (h) Vesting Schedule and Conditions. No Options may be exercised prior to the satisfaction of the conditions and vesting schedule provided for in the Award Agreement relating thereto or in the Plan. (i) Exercise. When the conditions to the exercise of an Option have been satisfied, the Participant may exercise the Option only in accordance with the following provisions. The Participant shall deliver to ARMOUR a written notice stating that the Participant is exercising the Option and specifying the number of shares of Common Stock which are to be purchased pursuant to the Option, and such notice shall be accompanied by payment in full of the Exercise Price of the shares for which the Option is being exercised, by one or more of the methods provided for in the Plan. Unless otherwise provided by the Committee, said notice must be delivered to ARMOUR- at its principal office and addressed to the attention of the Chief Financial Officer or delivered to the Chief Financial Officer by e-mail. An attempt to exercise any Option granted hereunder other than as set forth in the Plan shall be invalid and of no force and effect. (j) Payment. Payment of the Exercise Price for the shares of Common Stock purchased pursuant to the exercise of an Option shall be made by one of the following methods: (i) by cash, certified or cashier’s check, bank draft or money order; (ii) through the delivery to ARMOUR of shares of Common Stock which have been previously owned by the Participant for the requisite period necessary to avoid a charge to ARMOUR’s earnings for financial reporting purposes; such shares shall be valued, for purposes of determining the extent to which the Exercise Price has been paid thereby, at their Fair Market Value on the date of exercise; without limiting the foregoing, the Committee may require the Participant to furnish an opinion of counsel acceptable to the Committee to the effect that such delivery would not result in ARMOUR incurring any liability under Section 16(b) of the Exchange Act;
8. RESTRICTED STOCK
8. RESTRICTED STOCK (a) Grant of Restricted Stock. Subject to the terms and conditions of the Plan, the Committee may grant to such Eligible Individuals as the Committee may determine, Restricted Stock, in such amounts and on such terms and conditions as the Committee shall determine in its sole and absolute discretion. Each grant of Restricted Stock shall satisfy the requirements as set forth in this Section. (b) Restrictions. The Committee shall impose such restrictions on any Restricted Stock granted pursuant to the Plan as it may deem advisable including, without limitation; time based vesting restrictions, or the attainment of Performance Goals. Shares of Restricted Stock subject to the attainment of Performance Goals will be released from restrictions only after the attainment of such Performance Goals has been certified by the Committee in accordance with Section 9(d). (c) Certificates and Certificate Legend. With respect to a grant of Restricted Stock, ARMOUR may issue a certificate evidencing such Restricted Stock to the Participant or issue and hold such shares of Restricted Stock for the benefit of the Participant until the applicable restrictions expire. ARMOUR may legend the certificate representing Restricted Stock to give appropriate notice of such restrictions. In addition to any such legends, each certificate representing shares of Restricted Stock granted pursuant to the Plan shall bear the following legend: “The sale or other transfer of the shares of stock represented by this certificate, whether voluntary, involuntary, or by operation of law, are subject to certain terms, conditions, and restrictions on transfer as set forth in the ARMOUR Residential REIT, Inc. Fourth Amended and Restated 2009 Stock Incentive Plan (the “Plan”) or any successor plan, and in an Agreement entered into by and between the registered owner of such shares and the ARMOUR Residential REIT, Inc. (the “Company”), dated _____________ (the “Award Agreement”). A copy of the Plan and the Award Agreement may be obtained from the Secretary of the Company.” (d) Removal of Restrictions. Except as otherwise provided in the Plan, shares of Restricted Stock shall become freely transferable by the Participant upon the lapse of the applicable restrictions. Once the shares of Restricted Stock are released from the restrictions, the Participant shall be entitled to have the legend required by paragraph (c) above removed from the share certificate evidencing such Restricted Stock and the Company shall pay or distribute to the Participant all dividends and distributions, if any, if held in escrow by the Company with respect to such Restricted Stock. (e) Stockholder Rights. Unless otherwise provided in an Award Agreement, until the expiration of all applicable restrictions, (i) the Restricted Stock shall be treated as outstanding, (ii) the Participant holding shares of Restricted Stock may exercise full voting rights with respect to such shares, and (iii) the Participant holding shares of Restricted Stock shall be entitled to receive all dividends and other distributions paid with respect to such shares while they are so held. If any such dividends or distributions are paid in shares of Common Stock, such shares shall be subject to the same restrictions on transferability and forfeitability as the shares of Restricted Stock with respect to which they were paid. Notwithstanding anything to the contrary, at the discretion of the Committee, all such dividends and distributions may be held in escrow by the Company (subject to the same restrictions on forfeitability) until all restrictions on the respective Restricted Stock have lapsed. (f) Termination of Service. Unless otherwise provided in an Award Agreement, if a Participant’s employment or other service with the Company terminates for any reason, all unvested shares of Restricted Stock held by the Participant and any dividends or distributions held in escrow by ARMOUR with respect to such Restricted Stock shall be forfeited immediately and returned to the Company. Notwithstanding this paragraph, all grants of Restricted Stock that vest solely upon the attainment of Performance Goals shall be treated pursuant to the terms and conditions that would have been applicable under Section 9(e) as if such grants of Restricted Stock were Awards of Performance Shares. Notwithstanding anything in this Plan to the contrary, the Committee may provide, in its sole and absolute discretion, that following the termination of employment or other service of a Participant with the Company for any reason, any unvested shares of Restricted Stock held by the Participant that vest solely upon a future service requirement shall vest in whole or in part, at any time subsequent to such termination of employment or other service.
9. PERFORMANCE SHARES AND PERFORMANCE UNITS
9. PERFORMANCE SHARES AND PERFORMANCE UNITS (a) Grant of Performance Shares and Performance Units. Subject to the terms and conditions of the Plan, the Committee may grant to such Eligible Individuals as the Committee may determine, Performance Shares and Performance Units, in such amounts and on such terms and conditions as the Committee shall determine in its sole and absolute discretion. Each grant of a Performance Share or a Performance Unit shall satisfy the requirements as set forth in this Section. (b) Performance Goals. Performance Goals will be based on one or more of the following criteria, as determined by the Committee in its absolute and sole discretion: (i) the attainment of certain target levels of, or a specified increase in, ARMOUR’s enterprise value, book value, or other value creation targets; (ii) the attainment of certain target levels of, or a percentage increase in, ARMOUR’s after-tax or pre-tax profits including, without limitation, that attributable to ARMOUR’s continuing and/or other operations; (iii) the attainment of certain target levels of, or a specified increase relating to, ARMOUR’s operational cash flow or working capital, or a component thereof; (iv) the attainment of certain target levels of, or a specified decrease relating to, ARMOUR’s operational costs, or a component thereof (v) the attainment of a certain level of reduction of, or other specified objectives with regard to limiting the level of increase in all or a portion of bank debt or other of ARMOUR’s long-term or short-term public or private debt or other similar financial obligations of ARMOUR, which may be calculated net of cash balances and/or other offsets and adjustments as may be established by the Committee; (vi) the attainment of a specified percentage increase in earnings per share or earnings per share from ARMOUR’s continuing operations; (vii) the attainment of certain target levels of, or a specified percentage increase in, ARMOUR’s revenues, net income or earnings before income tax or other exclusions; (viii) the attainment of certain target levels of, or a specified increase in, ARMOUR’s return on capital employed or return on invested capital; (ix) the attainment of certain target levels of, or a percentage increase in, ARMOUR’s after-tax or pre-tax return on stockholder equity; (x) the attainment of certain target levels in the fair market value of ARMOUR’s Common Stock; (xi) the growth in the value of an investment in the Common Stock assuming the reinvestment of dividends; (xii) successful mergers, acquisitions of other companies or assets and any cost savings or synergies associated therewith and/or (xiii) the attainment of certain target levels of, or a specified increase in, core income. In addition, Performance Goals may be based upon the attainment by a subsidiary, division or other operational unit of ARMOUR of specified levels of performance under one or more of the measures described above. Further, the Performance Goals may be based upon the attainment by ARMOUR (or a subsidiary, division, or other operational unit of ARMOUR) of specified levels of performance under one or more of the foregoing measures relative to the performance of other corporations. The Committee may, in its sole and absolute discretion: (i) designate additional business criteria upon which the Performance Goals may be based; (ii) modify, amend or adjust the business criteria described herein; or (iii) incorporate in the Performance Goals provisions regarding changes in accounting methods, corporate transactions (including, without limitation, dispositions or acquisitions) and similar events or circumstances. Performance Goals may include a threshold level of performance below which no Award will be earned, levels of performance at which an Award will become partially earned and a level at which an Award will be fully earned. (c) Terms and Conditions of Performance Shares and Performance Units. The applicable Award Agreement shall set forth (i) the number of Performance Shares or the dollar value of Performance Units granted to the Participant; (ii) the Performance Period and Performance Goals with respect to each such Award; (iii) the threshold, target and maximum shares of Common Stock or dollar values of each Performance Share or Performance Unit and corresponding Performance Goals, and (iv) any other terms and conditions as the Committee determines in its sole and absolute discretion. The Committee shall establish, in its sole and absolute discretion, the Performance Goals for the applicable Performance Period for each Performance Share or Performance Unit granted hereunder. Performance Goals for different Participants and for different grants of Performance Shares and Performance Units need not be identical. A holder of Performance Shares or Performance Units is not entitled to the rights of a holder of our Common Stock. No payments shall be made with respect to unvested Performance Shares and Performance Units. (d) Determination and Payment of Performance Units or Performance Shares Earned. As soon as practicable after the end of a Performance Period, the Committee shall determine the extent to which Performance Shares or Performance Units have been earned on the basis of the Company’s actual performance in relation to the established Performance Goals as set forth in the applicable Award Agreement and shall certify these results in writing. No later than the last day of the second month following the end of the calendar year in which the applicable Performance Period ends, the amounts payable or distributable with respect to Performance Shares or Performance Units shall be paid or distributed to the Participant or the Participant’s estate, devisee or heir at law (whichever is applicable). Unless otherwise provided in an Award Agreement, the Committee shall determine in its sole and absolute discretion whether payment with respect to the Performance Share or Performance Unit shall be made in cash, in shares of Common Stock, or in a combination thereof. For purposes of making payment or a distribution with respect to a Performance Share or Performance Unit, the cash equivalent of a share of Common Stock shall be determined by the Fair Market Value of the Common Stock on the day the Committee designates the Performance Shares or Performance Units to be payable. (e) Termination of Employment. Unless otherwise provided in an Award Agreement, if a Participant’s employment or other service with the Company terminates for any reason, all of the Participant’s outstanding Performance Shares and Performance Units shall be subject to the rules of this Section. (i) Termination for Reason Other Than Death or Disability. If a Participant’s employment or other service with the Company terminates prior to the expiration of a Performance Period with respect to any Performance Units or Performance Shares held by such Participant for any reason other than death or Disability, the outstanding Performance Units or Performance Shares held by such Participant for which the Performance Period has not yet expired shall terminate upon such termination and the Participant shall have no further rights pursuant to such Performance Units or Performance Shares. (ii) Termination of Employment for Death or Disability. If a Participant’s employment or other service with the Company terminates by reason of the Participant’s death or Disability prior to the end of a Performance Period, the Participant, or the Participant’s estate, devisee or heir at law (whichever is applicable) shall be entitled to a payment of the Participant’s outstanding Performance Units and Performance Share at the end of the applicable Performance Period, pursuant to the terms of the Plan and the Participant’s Award
9. PERFORMANCE SHARES AND PERFORMANCE UNITS
Agreement; provided, however , that the Participant shall be deemed to have earned only that proportion (to the nearest whole unit or share) of the Performance Units or Performance Shares granted to the Participant under such Award as the number of full months of the Performance Period which have elapsed since the first day of the Performance Period for which the Award was granted to the end of the month in which the Participant’s termination of employment or other service, bears to the total number of months in the Performance Period, subject to the attainment of the Performance Goals associated with the Award as certified by the Committee. The right to receive any remaining Performance Units or Performance Shares shall be canceled and forfeited.
10. OTHER AWARDS
10. OTHER AWARDS Awards of shares of Common Stock, phantom stock, restricted stock units and other awards that are valued in whole or in part by reference to, or otherwise based on, Common Stock, may also be made, from time to time, to Eligible Individuals as may be selected by the Committee. Such Common Stock may be issued in satisfaction of awards granted under any other plan sponsored by the Company or compensation payable to an Eligible Individual. In addition, such awards may be made alone or in addition to or in connection with any other Award granted hereunder. The Committee may determine the terms and conditions of any such award. Each such award shall be evidenced by an Award Agreement between the Eligible Individual and the Company which shall specify the number of shares of Common Stock subject to the award, any consideration therefore, any vesting or performance requirements and such other terms and conditions as the Committee shall determine in its sole and absolute discretion.
11. CHANGE IN CONTROL
11. CHANGE IN CONTROL Unless otherwise provided in an Award Agreement, upon the occurrence of a Change in Control of ARMOUR, the Committee may in its sole and absolute discretion, provide on a case by case basis that (i) some or all outstanding Awards may become immediately exercisable or vested, without regard to any limitation imposed pursuant to this Plan, (ii) that all Awards shall terminate, provided that Participants shall have the right, immediately prior to the occurrence of such Change in Control and during such reasonable period as the Committee in its sole discretion shall determine and designate, to exercise any vested Award in whole or in part, (iii) that all Awards shall terminate, provided that Participants shall be entitled to a cash payment equal to the Change in Control Price with respect to shares subject to the vested portion of the Award net of the Exercise Price thereof (if applicable), (iv) provide that, in connection with a liquidation or dissolution of ARMOUR, Awards shall convert into the right to receive liquidation proceeds net of the Exercise Price (if applicable) and (v) any combination of the foregoing. In the event that the Committee does not terminate or convert an Award upon a Change in Control of ARMOUR, then the Award shall be assumed, or substantially equivalent Awards shall be substituted, by the acquiring, or succeeding entity (or an affiliate thereof).
14. GENERAL PROVISIONS
14. GENERAL PROVISIONS (a) Award Agreements. All Awards granted pursuant to the Plan shall be evidenced by an Award Agreement. Each Award Agreement shall specify the terms and conditions of the Award granted and shall contain any additional provisions as the Committee shall deem appropriate, in its sole and absolute discretion (including, to the extent that the Committee deems appropriate, provisions relating to confidentiality, non-competition, non-solicitation and similar matters). The terms of each Award Agreement need not be identical for Eligible Individuals provided that all Award Agreements comply with the terms of the Plan. (b) Purchase Price. To the extent the purchase price of any Award granted hereunder is less than par value of a share of Common Stock and such purchase price is not permitted by applicable law, the per share purchase price shall be deemed to be equal to the par value of a share of Common Stock. (c) Dividends and Dividend Equivalents. Except as provided by the Committee in its sole and absolute discretion or as otherwise provided in Section 5(e) and subject to Section 8(e) and 9(c) of the Plan, a Participant shall not be entitled to receive, currently or on a deferred basis, cash or stock dividends, Dividend Equivalents, or cash payments in amounts equivalent to cash or stock dividends on shares of Common Stock covered by an Award which has not vested, or an Option. The Committee in its absolute and sole discretion may credit a Participant’s Award with Dividend Equivalents with respect to any Awards. To the extent that dividends and distributions relating to an Award are held in escrow by the Company, or Dividend Equivalents are credited to an Award, a Participant shall not be entitled to any interest on any such amounts. (d) Deferral of Awards. The Committee may from time to time establish procedures pursuant to which a Participant may elect to defer, until a time or times later than the vesting of an Award, receipt of all or a portion of the shares of Common Stock or cash subject to such Award and to receive Common Stock or cash at such later time or times, all on such terms and conditions as the Committee shall determine. The Committee shall not permit the deferral of an Award unless counsel for ARMOUR determines that such action will not result in adverse tax consequences to a Participant under Section 409A of the Code. If any such deferrals are permitted, then notwithstanding anything to the contrary herein, a Participant who elects to defer receipt of Common Stock shall not have any rights as a stockholder with respect to deferred shares of Common Stock unless and until shares of Common Stock are actually delivered to the Participant with respect thereto, except to the extent otherwise determined by the Committee. (e) Prospective Employees. Notwithstanding anything to the contrary, any Award granted to a Prospective Employee shall not become vested prior to the date the Prospective Employee first becomes an employee of the Company. (f) Issuance of Certificates; Stockholder Rights. ARMOUR shall deliver to the Participant a certificate evidencing the Participant’s ownership of shares of Common Stock issued in certificated form pursuant to the exercise of an Award as soon as administratively practicable after satisfaction of all conditions relating to the issuance of such shares. A Participant shall not have any of the rights of a stockholder with respect to such Common Stock prior to satisfaction of all conditions relating to the issuance of such Common Stock, and, except as expressly provided in the Plan, no adjustment shall be made for dividends, distributions or other rights of any kind for which the record date is prior to the date on which all such conditions have been satisfied. (g) Transferability of Awards. A Participant may not Transfer an Award other than by will or the laws of descent and distribution. Awards may be exercised during the Participant’s lifetime only by the Participant. No Award shall be liable for or subject to the debts, contracts, or liabilities of any Participant, nor shall any Award be subject to legal process or attachment for or against such person. Any purported Transfer of an Award in contravention of the provisions of the Plan shall have no force or effect and shall be null and void, and the purported transferee of such Award shall not acquire any rights with respect to such Award. Notwithstanding anything to the contrary, the Committee may in its sole and absolute discretion permit the Transfer of an Award to a Participant’s “family member” as such term is defined in the applicable Award Agreement or rule, law or regulation, under such terms and conditions as specified by the Committee. In such case, such Award shall be exercisable only by the transferee approved of by the Committee. To the extent that the Committee permits the Transfer of an Incentive Stock Option to a “family member”, so that such Option fails to continue to satisfy the requirements of an incentive stock option under the Code such Option shall automatically be re-designated as a Non-Qualified Stock Option. (h) Buyout and Settlement Provisions. Except as prohibited in Section 6(d) of the Plan, the Committee may at any time on behalf of ARMOUR offer to buy out any Awards previously granted based on such terms and conditions as the Committee shall determine which shall be communicated to the Participants at the time such offer is made. (i) Use of Proceeds. The proceeds received by ARMOUR from the sale of Common Stock pursuant to Awards granted under the Plan shall constitute general funds of ARMOUR. (j) Modification or Substitution of an Award. Subject to the terms and conditions of the Plan, the Committee may modify outstanding Awards. Notwithstanding the following, no modification of an Award shall adversely affect any rights or obligations of the Participant under the applicable Award Agreement without the Participant’s consent. The Committee in its sole and absolute discretion may rescind, modify, or waive any vesting requirements or other conditions applicable to an Award. Notwithstanding the foregoing, without the approval of the stockholders of ARMOUR in accordance with applicable law, an Award may not be modified to reduce the exercise price thereof nor may an Award at a lower price be substituted for a surrender of an Award, provided that the foregoing shall not apply to adjustments or substitutions in accordance with Section 5 or Section 12. (k) Amendment and Termination of Plan. The Board may, at any time and from time to time, amend, suspend or terminate the Plan as to any shares of Common Stock as to which Awards have not been granted; provided, however, that the approval of the stockholders of ARMOUR in accordance with applicable law and the Articles of Incorporation and Bylaws of ARMOUR shall be required for any amendment: (i) that changes the class of individuals eligible to receive Awards under the Plan: (ii) that increases the maximum number of shares of Common Stock in the aggregate that may be subject to Awards that are granted under the Plan (except as permitted under Section 5 or Section 12 hereof): (iii) the approval of which is necessary to comply with federal or state law (including without limitation Rule 16b-3 under the Exchange Act) or with the rules of any stock exchange or automated quotation system on which the Common Stock may be listed or traded; or (iv) that proposes to eliminate a requirement provided herein that the stockholders of ARMOUR must approve an action to be undertaken under the Plan. Except as permitted under Section 5 or Section 12 hereof, no amendment, suspension or termination of the Plan shall, without the consent of the holder of an Award, alter or impair rights or obligations under any Award theretofore granted under the Plan. Awards granted prior to the termination of the Plan may
DEFINITIONS
DEFINITIONS “ARMOUR” means ARMOUR Residential REIT, Inc., a Maryland Corporation, including any successor thereto by merger, consolidation, acquisition or otherwise. “Award” means any Common Stock, Option, Performance Share, Performance Unit, Restricted Stock, Stock Appreciation Right, phantom share, restricted stock unit or any other award granted pursuant to the Plan. “Award Agreement” means a written agreement entered into by ARMOUR and a Participant setting forth the terms and conditions of the grant of an Award to such Participant. “Board” means the board of directors of ARMOUR. “Cause” means, with respect to a termination of employment or other service with the Company, a termination of employment or other service due to a Participant’s dishonesty, fraud, insubordination, willful misconduct, refusal to perform services (for any reason other than illness or incapacity) or materially unsatisfactory performance of the Participant’s duties for the Company; provided, however, that if the Participant and the Company have entered into an employment agreement or consulting agreement which defines the term Cause, the term Cause shall be defined in accordance with such agreement with respect to any Award granted to the Participant on or after the effective date of the respective employment or consulting agreement. The Committee shall determine in its sole and absolute discretion whether Cause exists for purposes of the Plan. “Change in Control” shall be deemed to occur upon: (a) any “person” as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than ARMOUR, any trustee or other fiduciary holding securities under any employee benefit plan of the Company, or any company owned, directly or indirectly, by the stockholders of ARMOUR in substantially the same proportions as their ownership of common stock of ARMOUR), is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of ARMOUR representing thirty percent (30%) or more of the combined voting power of ARMOUR’s then outstanding securities; (b) during any period of two (2) consecutive years, individuals who at the beginning of such period constitute the Board, and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in paragraph (a), (c), or (d) of this Section) whose election by the Board or nomination for election by ARMOUR’s stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the two-year period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority of the Board; (c) a consummation of a merger, consolidation, reorganization, or other business combination of ARMOUR with any other entity, other than a merger or consolidation which would result in the voting securities of ARMOUR outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than fifty percent (50%) of the combined voting power of the voting securities of ARMOUR or such surviving entity outstanding immediately after such merger or consolidation; provided, however, that a merger or consolidation effected to implement a recapitalization of ARMOUR (or similar transaction) in which no person acquires thirty percent (30%) or more of the combined voting power of ARMOUR’s then outstanding securities shall not constitute a Change in Control; or (d) complete liquidation of ARMOUR or the consummation of the sale or disposition by ARMOUR of all or substantially all of ARMOUR’s assets other than (x) the sale or disposition of all or substantially all of the assets of ARMOUR to a person or persons who beneficially own, directly or indirectly, at least fifty percent (50%) or more of the combined voting power of the outstanding voting securities of ARMOUR at the time of the sale or (y) pursuant to a spin-off type transaction, directly or indirectly, of such assets to the shareholders of ARMOUR. However, to the extent that Section 409A of the Code would cause an adverse tax consequence to a Participant using the above definition, the term “Change in Control” shall have the meaning ascribed to the phrase “Change in the Ownership or Effective Control of a Corporation or in the Ownership of a Substantial Portion of the Assets of a Corporation” under Treasury Department Regulation 1.409A-3(i)(5), as revised from time to time, and in the event that such regulations are withdrawn or such phrase (or a substantially similar phrase) ceases to be defined, as determined by the Committee. “Change in Control Price” means the price per share of Common Stock paid in any transaction related to a Change in Control of ARMOUR. “Code” means the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder. “Committee” means a compensation committee or a committee or sub-committee of the Board consisting of two or more members of the Board, none of whom shall be an officer or other salaried employee of the Company, and each of whom shall qualify in all respects as a “non-employee director” as defined in Rule 16b-3 under the Exchange Act. If no Committee exists, the functions of the Committee will be exercised by the Board; provided, however, that a Committee shall be created prior to the grant of Awards to a Covered Employee and that grants of Awards to a Covered Employee shall be made only by such Committee. Notwithstanding the foregoing, with respect to the grant of Awards to non-employee directors, the Committee shall be the Board. “Common Stock” means the common stock, par value $0.001 per share, of ARMOUR. “Company” means ARMOUR, the subsidiaries of ARMOUR, and all other entities whose financial statements are required to be consolidated with the financial statements of ARMOUR pursuant to United States generally accepted accounting principles, and any other entity determined to be an affiliate of ARMOUR as determined by the Committee in its sole and absolute discretion. “Covered Employee” means “covered employee” as defined in Code Section 162(m)(3). “Covered Individual” means any current or former member of the Committee, any current or former officer or director of the Company, or any individual designated pursuant to Section 4(c). “Detrimental Activity” means any of the following: (i) the disclosure to anyone outside the Company, or the use in other than the Company’s business, without written authorization from the Company, of any confidential information or proprietary information, relating to the business of the Company, acquired by a Participant prior to a termination of the Participant’s employment or service with the Company; (ii) activity while employed or providing services that is classified by the Company as a basis for a termination for Cause; (iii) the Participant’s Disparagement, or inducement of others to do so, of the Company or its past or present officers, directors, employees or services; or (iv) any other conduct or act determined by the Committee, in its sole discretion, to be injurious, detrimental or prejudicial to the interests of the Company. For purposes of subparagraph (i) above, the Chief Executive Officer and any General Counsel of the Company shall each have authority to provide the Participant with written authorization to engage in the activities contemplated thereby and no other person shall have authority to provide the Participant with such authorization.
DEFINITIONS
“Disability” means a “permanent and total disability” within the meaning of Code Section 22(e)(3); provided, however , that if a Participant and the Company have entered into an employment or consulting agreement which defines the term Disability for purposes of such agreement, Disability shall be defined pursuant to the definition in such agreement with respect to any Award granted to the Participant on or after the effective date of the respective employment or consulting agreement. The Committee shall determine in its sole and absolute discretion whether a Disability exists for purposes of the Plan. “Disparagement” means making any comments or statements to the press, the Company’s employees, clients or any other individuals or entities with whom the Company has a business relationship, which could adversely affect in any manner: (i) the conduct of the business of the Company (including, without limitation, any products or business plans or prospects), or (ii) the business reputation of the Company or any of its products, or its past or present officers, directors or employees. “Dividend Equivalents” means an amount equal to the cash dividends paid by the Company upon one share of Common Stock subject to an Award granted to a Participant under the Plan. “Effective Date” shall mean the date that the Plan was approved by the stockholders of ARMOUR in accordance with the laws of the State of Maryland. “Eligible Individual” means any employee, officer, director (employee or non-employee director) or consultant of the Company and any Prospective Employee to whom Awards are granted in connection with an offer of future employment with the Company, provided, however, that for purposes of granting Options and Stock Appreciation Rights there shall be excluded from the definition of Eligible Individual any individual performing services for the Company, who does not perform services for ARMOUR or any other entity with respect which Common Stock is “service recipient stock” as such term is defined for purposes of the Treasury regulations promulgated under Section 409A of the Code. “Exchange Act” means the Securities Exchange Act of 1934, as amended. “Exercise Price” means the purchase price per share of each share of Common Stock subject to an Award. “Fair Market Value” means, unless otherwise required by the Code, as of any date, the last sales price reported for the Common Stock on the day immediately prior to such date (i) as reported by the national securities exchange in the United States on which it is then traded, or (ii) if not traded on any such national securities exchange, as quoted on an automated quotation system sponsored by the National Association of Securities Dealers, Inc., or if the Common Stock shall not have been reported or quoted on such date, on the first day prior thereto on which the Common Stock was reported or quoted; provided, however, that the Committee may modify the definition of Fair Market Value to reflect any changes in the trading practices of any exchange or automated system sponsored by the National Association of Securities Dealers, Inc. on which the Common Stock is listed or traded. If the Common Stock is not readily traded on a national securities exchange or any system sponsored by the National Association of Securities Dealers, Inc., the Fair Market Value shall be determined in good faith by the Committee. “Grant Date” means the date on which the Committee approves the grant of an Award or such later date as is specified by the Committee and set forth in the applicable Award Agreement. “Incentive Stock Option” means an “incentive stock option” within the meaning of Code Section 422. “Non-Qualified Stock Option” means an Option which is not an Incentive Stock Option. “Option” means an option to purchase Common Stock granted pursuant to Sections 6 of the Plan. “Participant” means any Eligible Individual who holds an Award under the Plan and any of such individual’s successors or permitted assigns. “Performance Goals” means the specified performance goals which have been established by the Committee in connection with an Award. “Performance Period” means the period during which Performance Goals must be achieved in connection with an Award granted under the Plan. “Performance Share” means a right to receive a fixed number of shares of Common Stock, or the cash equivalent, which is contingent on the achievement of certain Performance Goals during a Performance Period. “Performance Unit” means a right to receive a designated dollar value, or shares of Common Stock of the equivalent value, which is contingent on the achievement of Performance Goals during a Performance Period. “Person” shall mean any person, corporation, partnership, joint venture or other entity or any group (as such term is defined for purposes of Section 13(d) of the Exchange Act), other than a parent or subsidiary of ARMOUR. “Plan” means this ARMOUR Residential REIT, Inc. Fourth Amended and Restated 2009 Stock Incentive Plan. “Prospective Employee” means any individual who has committed to become an employee of the Company within sixty (60) days from the date an Award is granted to such individual, provided, however, that for purposes of granting Options and Stock Appreciation Rights there shall be excluded for the definition of Prospective Employee any individual who does commit to perform services for ARMOUR or any other entity with respect which Common Stock is “service recipient stock” as such term is defined for purposes of the Treasury regulations promulgated under Section 409A of the Code. “Restricted Stock” means Common Stock subject to certain restrictions, as determined by the Committee, and granted pursuant to Section 8 hereunder. “Section 424 Employee” means an employee of ARMOUR or any “subsidiary corporation” or “parent corporation” as such terms are defined in and in accordance with Code Section 424. The term “Section 424 Employee” also includes employees of a corporation issuing or assuming any Options in a transaction to which Code Section 424(a) applies. “Stock Appreciation Right” means the right to receive all or some portion of the increase in value of a fixed number of shares of Common Stock granted pursuant to Section 7 hereunder. “Transfer” means, as a noun, any direct or indirect, voluntary or involuntary, exchange, sale, bequeath, pledge, mortgage, hypothecation, encumbrance, distribution, transfer, gift, assignment or other disposition or attempted disposition of, and, as a verb, directly or indirectly, voluntarily or involuntarily, to exchange, sell, bequeath, pledge, mortgage, hypothecate, encumber, distribute, transfer, give, assign or in any other manner whatsoever dispose or attempt to dispose of.