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 12, 2018, the Compensation Committee of the Board of Directors of Redwood Trust, Inc. (the “Company”) considered and approved the following compensation matters for the named executive officers of the Company noted below.
2018 Year-End Long-Term Equity Compensation Awards. On December 12, 2018, the Compensation Committee approved 2018 year-end long-term equity compensation awards to certain named executive officers of the Company. Two different types of equity awards were granted: Deferred Stock Units (“DSUs”) and Performance Stock Units (“PSUs”) to the Company’s Amended and Restated 2014 Incentive Award Plan (the “2014 Incentive Plan”). The terms of each of these two types of awards are summarized below.
| · | The DSUs granted on December 12, 2018 will vest over four years, with 25% of each award vesting on January 31, 2020, and an additional 6.25% vesting on the first day of each subsequent quarter (beginning April 1, 2020), with full vesting of the final 6.25% on December 11, 2022. The DSUs will vest in full upon a termination of service (i) either without “cause” or for “good reason”, in either case, on or within 24 months following a change in control, or (ii) due to the officer’s death or disability.In addition, the DSUs are subject to partial or full accelerated vesting upon a termination of service due to the officer’s “retirement”. Shares of Company common stock underlying these DSUs will be distributed to the recipients not later than December 31, 2022, unless distribution is electively deferred by a recipient under the terms of the Company’s Executive Deferred Compensation Plan. |
| · | Each DSU granted on December 12, 2018 had a grant date fair value of $16.18, which was determined in accordance with FASB Accounting Standards Codification Topic 718 at the time the grant was made. 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 Company’s common stock on the New York Stock Exchange (“NYSE”) on the grant date. The DSUs have attached dividend equivalent rights, resulting in the payment of dividend equivalents each time the Company declares a common stock dividend during the vesting period and until the underlying shares of common stock are distributed. The terms of these DSUs are set forth in the Form of Deferred Stock Unit Award Agreement (which is included as Exhibit 10.1 hereto and incorporated by reference herein). |
| · | The PSUs granted on December 12, 2018 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 250% of the target number of PSUs granted (for each executive, such target number, the “Target PSUs”), with the Target 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 as of January 1, 2022 based on a three-step process as described below. |
| First, baseline vesting would range from 0 – 200% of the Target PSUs granted based on the level of book value total stockholder return (“bvTSR”) attained over the three-year vesting period, with 50% of the Target PSUs vesting if three-year bvTSR is 25%. |
| Second, the vesting level would then be adjusted to increase or decrease by up to an additional 50 percentage points based on Redwood’s relative total stockholder return (“rTSR”) against a comparator group of companies measured over the three-year vesting period, with median rTSR performance correlating to no adjustment from the baseline level of vesting. |
| Third, if the vesting level after steps one and two is greater than 50% of the Target PSUs, but absolute total shareholder return (“TSR”) is negative over the three-year performance period, vesting would be capped at 50% of Target PSUs. |
In the event of a termination of employment due to the officer’s death or disability, by the Company without cause, by the officer for good reason or due to the officer’s retirement (each, a “qualifying termination”), in any event, during the performance period, the PSUs will remain outstanding and eligible to vest based on the achievement of performance goals during the performance period. The number of PSUs that ultimately vest (if any) will be pro-rated in connection with a retirement during 2019 or a termination of employment by the Company without cause; the pro-ration will be applied based on the number of days the officer was employed during 2019 and the performance period, respectively.
In addition, in the event of a change in control, PSUs will be earned based on the achievement of performance goals through the shortened performance period ending with the change in control (with the bvTSR goal being deemed achieved at target). The number of PSUs earned will remain outstanding and eligible to vest as time-vesting PSUs on January 1, 2022, subject to the officer’s continued employment. If the officer experiences a qualifying termination prior to January 1, 2022, the then-outstanding time-vesting PSUs will vest.
Subject to vesting, shares of Company common stock underlying these PSUs will be distributed to the recipients not later than March 31, 2022, unless distribution is electively deferred by a recipient under the terms of the Company’s 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 12, 2018 had a grant date fair value of $17.23, 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 incorporated by reference herein) and the 2014 Incentive Plan.
In accordance with the requirements of Item 5.02(e) of Form 8-K, the 2018 year-end long-term equity compensation awards granted on December 12, 2018 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) |
|||
|
Christopher J. Abate, Chief Executive Officer |
77,255 | $ | 1,250,000 | 72,547 | $ | 1,250,000 |
| Dashiell I. Robinson, President | 61,804 | $ | 1,000,000 | 58,038 | $ | 1,000,000 |
| Andrew P. Stone, Executive Vice President and General Counsel | 29,357 | $ | 475,000 | 27,568 | $ | 475,000 |
| Collin L. Cochrane, Chief Financial Officer | 24,721 | $ | 400,000 | 23,215 | $ | 400,000 |
| Garnet W. Kanouse, Managing Director – Head of Residential | 30,902 | $ | 500,000 | 29,019 | $ | 500,000 |
| (1) | Determined in accordance with FASB Accounting Standards Codification Topic 718 at the time the grant was made. |
| (2) | Rounded to nearest $100.00 increment. |
Amendments to Outstanding Long-Term Equity Compensation Awards. In addition, on December 12, 2018, the Company made certain amendments to outstanding equity awards under the 2014 Incentive Plan, including DSUs and PSUs outstanding to named executive officers of the Company. The amendments modify the terms of such DSUs and PSUs such that the awards will vest in full upon a termination of service either without “cause” or for “good reason”, in either case, on or within 24 months following a change in control, consistent with the change in control provisions contained in the 2018 equity awards granted on December 12, 2018. The amendment to these outstanding equity awards is set forth in the Form of Letter Agreement Amendment to Equity Awards under 2014 Incentive Plan (which is included as Exhibit 10.3 hereto and incorporated by reference herein).
2019 Base Salaries.On December 12, 2018, the Compensation Committee made determinations regarding the 2019 base salaries of certain named executive officers of the Company.In accordance with the requirements of Item 5.02(e) of Form 8-K, the 2019 base salaries of the following named executive officers of the Company are set forth in the table below, together with the percentage increase from their 2018 base salaries:
| %Changefrom | ||||
| 2019 BaseSalary | 2018BaseSalary | |||
| Christopher J. Abate, Chief Executive Officer | $ | 750,000 | % | |
| Dashiell I. Robinson, President | $ | 600,000 | % | |
| Andrew P. Stone, Executive Vice President and General Counsel | $ | 400,000 | % | |
| Collin L. Cochrane, Chief Financial Officer | $ | 375,000 | % | |
| Garnet W. Kanouse, Managing Director – Head of Residential | $ | 475,000 | % |
| (1) | Percent change is calculated from the base salary in effect at December 31, 2018. |
2019 Target Annual Bonuses.On December 12, 2018, the Compensation Committee made determinations regarding the 2019 target annual bonuses of certain named executive officers of the Company.Performance goals associated with earning target annual bonuses for these officers for 2019 will be based on one or more of the following: the achievement of a pre-established overall Company financial performance goal, the achievement of pre-established operational and/or segment financial performance goals, and the achievement of pre-established individual goals.In accordance with the requirements of Item 5.02(e) of Form 8-K, the 2019 target annual bonuses of the following named executive officers of the Company are set forth in the table below, together with a comparison to their target annual bonuses for 2018.
| 2019 Target AnnualBonus (asa%of 2019BaseSalary) | %Changefrom 2018Target AnnualBonus Percentage (%) | 2019Target AnnualBonus($) | ||||
| Christopher J. Abate, Chief Executive Officer | % | % | $ | 1,312,500 | ||
| Dashiell I. Robinson, President | % | % | $ | 990,000 | ||
| Andrew P. Stone, Executive Vice President and General Counsel | % | % | $ | 480,000 | ||
| Collin L. Cochrane, Chief Financial Officer | % | % | $ | 468,750 | ||
| Garnet W. Kanouse, Managing Director – Head of Residential | % | % | $ | 665,000 |
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
REDWOOD TRUST INC Exhibit
EX-10.1 2 tv509077_ex10-1.htm EXHIBIT 10.1 Exhibit 10.1 REDWOOD TRUST,…
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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.
