REDWOOD TRUST, INC. (NYSE:RWT) Files An 8-K Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers
Item 5.02. Compensatory Arrangements of Certain Officers.
(e) At a meeting held on December 14, 2016, the Compensation
Committee of the Board of Directors of Redwood Trust, Inc. (the
Company) considered and approved the following compensation
matters for the officers of the Company noted below. Further
disclosure regarding these and other compensation matters will be
included (i) in the Compensation Discussion and Analysis section
of the Companys 2017 Annual Proxy Statement to be filed with the
Securities and Exchange Commission (SEC) in advance of the
Companys 2017 Annual Meeting of Stockholders, which meeting is
currently scheduled to take place on May 18, 2017 or (ii) in
other reports filed with the Securities and Exchange Commission.
2016 Year-End Long-Term Equity Compensation Awards. On
December 14, 2016, the Compensation Committee made 2016 year-end
long-term equity compensation awards to certain officers of the
Company. Two different types of equity awards were granted:
Deferred Stock Units (DSUs) and Performance Stock Units (PSUs).
The terms of each of these two types of awards are summarized
below.
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The DSUs granted on December 14, 2016 will vest over four years, with 25% of each award vesting on January 31, 2018, and an additional 6.25% vesting on the last day of each subsequent quarter (beginning with the quarter ending March 31, 2018), with full vesting of the final 6.25% on December 13, 2020. Shares of Company common stock underlying these DSUs will be distributed to the recipients in shares of common stock not later than December 31, 2020, unless distribution is electively deferred by a recipient under the terms of the Companys Executive Deferred Compensation Plan. The number of DSUs granted to each officer was determined based on a dollar amount for each award divided by the closing price of the Companys common stock on the New York Stock Exchange (NYSE) on the grant date. |
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Each DSU granted on December 14, 2016 had a grant date fair value of $15.28, which was determined in accordance with FASB Accounting Standards Codification Topic 718 at the time the grant was made. The terms of the DSUs granted on December 14, 2016 are generally consistent with the terms of the 2015 year-end long-term equity compensation awards made to Named Executive Officers. The terms of these DSUs are set forth in the Form of Deferred Stock Unit Award Agreement (which is included as Exhibit 10.2 to the Companys Quarterly Report on Form 10-Q for the quarter ended June 30, 2014, filed on August 8, 2014) and the 2014 Redwood Trust, Inc. Incentive Award Plan (which is included as Exhibit 10.1 to the Companys Quarterly Report on Form 10-Q for the quarter ended June 30, 2014, filed on August 8, 2014) (the 2014 Incentive Plan). The terms of the DSUs include, without limitation, provisions relating to dividend equivalent rights, forfeiture, mandatory net settlement for income tax withholding purposes, and change-in-control that are set forth in the above-referenced Form of Deferred Stock Unit Award Agreement and 2014 Incentive Plan, but which are not summarized above. |
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The PSUs granted on December 14, 2016 are performance-based equity awards under which the number of underlying shares of Company common stock that vest and that the recipient becomes entitled to receive at the time of vesting will generally range from 0% to 200% of the target number of PSUs granted, with the target number of PSUs granted being adjusted to reflect the value of any dividends declared on Company common stock during the vesting period (as further described below). Vesting of these PSUs will generally occur at the end of three years (on December 13, 2019) based on four different two-year performance measurement periods and continued employment through December 13, 2019. The PSUs will be divided into four tranches with staggered two-year performance measurement periods beginning on: the grant date; the three month anniversary of the grant date; the six month anniversary of the grant date; and the nine month anniversary of the grant date, respectively. While the three-year vesting period for the PSUs is consistent with the vesting period for performance stock units granted in previous years, the use of four tranches with staggered two-year performance measurement periods is a change from the structure of performance stock units granted in previous years.This change was implemented by the Compensation Committee for this December 14, 2016 grant of PSUs to seek to better align the performance-based vesting of the PSUs with shareholder returns over the three-year vesting period for the PSUs. |
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Performance-based vesting of each tranche is based on total stockholder return (TSR) over the respective two-year performance measurement period, as follows: |
| o | If two-year TSR is negative, then 0% of the PSUs will vest; |
| o | If two-year TSR is 16.00%, then 100% of the PSUs will vest; |
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If two-year TSR is between 0% and 16.00%, then between 0% and 100% of the PSUs will vest determined based on a straight-line, mathematical interpolation between the applicable vesting percentages; |
| o |
If two-year TSR is greater than or equal to 71.75%, then 200% of the PSUs will vest; and |
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If two-year TSR is between 16.00% and 71.75%, then between 100% and 200% of the PSUs will vest determined based on a straight-line, mathematical interpolation between the applicable vesting percentages. |
Under the terms of the PSUs, two-year TSR for a performance
measurement period is defined as the percentage by which the Per
Share Price (defined below) as of the last day of such
performance measurement period has increased or decreased, as
applicable, relative to the Per Share Price as of the first day
of such performance measurement period, adjusted to include the
impact on such increase or decrease that would be realized if all
cash dividends declared on a share of Company common stock during
such two-year performance measurement period were reinvested in
Company common stock.
Per Share Price shall mean as of any date, the average of the
closing prices of a share of Company common stock on the NYSE
during the sixty (60) consecutive trading days ending on the
trading day prior to such date.
Subject to vesting, shares of Company common stock underlying
these PSUs will be distributed to the recipients not later than
December 31, 2019, unless distribution is electively deferred by
a recipient under the terms of the Companys Executive Deferred
Compensation Plan. At the time of vesting, the value of any
dividends declared during the vesting period will be reflected in
the PSUs by increasing the target number of PSUs granted by an
amount corresponding to the incremental number of shares of
Company common stock that a stockholder would have acquired
during the three-year vesting period had all dividends during
that period been reinvested in Company common stock. Between the
vesting of these PSUs and the delivery of the underlying shares
of Company common stock, the underlying vested award shares will
have attached dividend equivalent rights, resulting in the
payment of dividend equivalents each time the Company declares a
common stock dividend during that period.
Each PSU granted on December 14, 2016 had a grant date fair value
of $13.24, which was determined in accordance with FASB
Accounting Standards Codification Topic 718 at the time the grant
was made. The terms of these PSUs are set forth in the Form of
Performance Stock Unit Award Agreement (which is included as
Exhibit 10.2 hereto) and the 2014 Incentive Plan. The terms of
the PSUs include, without limitation, provisions relating to
forfeiture, retirement, mandatory net settlement for income tax
withholding purposes, and change-in-control that are set forth in
the above-referenced Form of Performance Stock Unit Award
Agreement and 2014 Incentive Plan, but which are not summarized
above.
In accordance with the requirements of Item 5.02(e) of Form 8-K,
the 2016 year-end long-term equity compensation awards granted on
December 14, 2016 to the following officers of the Company are
set forth in the table below:
| DeferredStockUnits(DSUs) | PerformanceStockUnits(PSUs) | |||||||||||||||
| # |
AggregateGrant DateFairValue(1)(2) |
# |
AggregateGrant DateFairValue(1)(2) |
|||||||||||||
| Martin S. Hughes, Chief Executive Officer | 81,807 | $ | 1,250,000 | 94,410 | $ | 1,250,000 | ||||||||||
| Christopher J. Abate, President and Chief Financial Officer | 44,176 | $ | 675,000 | 50,981 | $ | 675,000 | ||||||||||
| Shoshone (Bo) Stern, Chief Investment Officer | 16,361 | $ | 250,000 | 18,882 | $ | 250,000 | ||||||||||
| Andrew P. Stone, Executive Vice President and General Counsel | 26,178 | $ | 400,000 | 30,211 | $ | 400,000 | ||||||||||
| (1) |
Determined in accordance with FASB Accounting Standards Codification Topic 718 at the time the grant was made. |
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| (2) |
Rounded to nearest $100.00 increment. |
2017 Base Salaries.On December 14, 2016, the Compensation
Committee made determinations regarding the 2017 base salaries of
certain officers of the Company.In accordance with the
requirements of Item 5.02(e) of Form 8-K, the 2017 base salaries
of the following officers of the Company are set forth in the
table below, together with the percentage increase from their
2016 base salaries:
| %Changefrom | ||||||||
| 2017 BaseSalary | 2016BaseSalary | |||||||
| Martin S. Hughes, Chief Executive Officer | $ | 750,000 | % | |||||
| Christopher J. Abate, President and Chief Financial Officer | $ | 550,000 | % | |||||
| Shoshone (Bo) Stern, Chief Investment Officer | $ | 375,000 | % | |||||
| Andrew P. Stone, Executive Vice President and General Counsel | $ | 400,000 | 6.7 | % | ||||
| (1) |
Percent change is calculated from the base salary in effect at December 31, 2016. |
2017 Target Annual Bonuses.On December 14, 2016, the
Compensation Committee made determinations regarding the 2017
target annual bonuses of certain officers of the Company.As in
past years, target annual bonuses for these officers for 2017
will continue to be weighted 75% on the achievement of overall
Company financial performance (which portion of the annual bonus
is also referred to as the Company performance bonus) and 25% on
the achievement of pre-established individual goals performance
(which portion of the annual bonus is also referred to as the
individual performance bonus).In accordance with the requirements
of Item 5.02(e) of Form 8-K, the 2017 target annual bonuses of
the following officers of the Company are set forth in the table
below, together with a comparison to their target annual bonuses
for 2016.
| 2017 Target AnnualBonus (asa%of 2017BaseSalary) | %Changefrom 2016Target AnnualBonus Percentage (%) | 2017Target AnnualBonus($) | ||||||||||
| Martin S. Hughes, Chief Executive Officer | % | % | $ | 1,312,500 | ||||||||
| Christopher J. Abate, President and Chief Financial Officer | % | % | $ | 825,000 | ||||||||
| Shoshone (Bo) Stern, Chief Investment Officer | % | % | $ | 468,750 | ||||||||
| Andrew P. Stone, Executive Vice President and General Counsel | % | % | $ | 440,000 | ||||||||
| (1) |
Percent change is calculated from the target annual bonus in effect at December 31, 2016. |
Subsequent Compensation Matter Determinations.At one or
more subsequent meetings of the Compensation Committee,
additional determinations regarding compensation matters for
executive officers and other employees of the Company will be
made.These matters will include, without limitation,
determinations regarding 2016 annual Company performance bonuses,
2016 annual individual performance bonuses, and the 2017 Company
performance bonus formula.As required by SEC regulations,
determinations relating to these matters will be disclosed on
Form 8-K (or Form 10-K) and/or within the Companys 2017 Annual
Proxy Statement.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
Exhibit 10.1Form of Performance Stock Unit Award Agreement under
2014 Incentive Plan
About REDWOOD TRUST, INC. (NYSE:RWT)
Redwood Trust, Inc., together with its subsidiaries, focuses on investing in mortgage- and other real estate-related assets. The Company operates through three segments: residential mortgage banking, residential investments, and commercial mortgage banking and investments. Its residential mortgage banking segment consists of operating a mortgage loan conduit that acquires residential whole loans from third-party originators for subsequent sale, securitization or transfer to its investment portfolio. Its residential investments segment includes a portfolio of investments in residential mortgage-backed securities retained from its Sequoia securitizations, as well as residential mortgage-backed securities issued by third parties. Its commercial mortgage banking and investments segment consists of a mortgage loan conduit that originated senior commercial loans for subsequent sale to third-party commercial mortgage backed securities (CMBS) sponsors or other investors. REDWOOD TRUST, INC. (NYSE:RWT) Recent Trading Information
REDWOOD TRUST, INC. (NYSE:RWT) closed its last trading session up +0.27 at 15.54 with 345,830 shares trading hands.