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Item 5.02
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Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
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Effective as of April 26, 2017, Oaktree’s board of directors has approved the extension of the term of the employment agreement of Jay S. Wintrob, Oaktree’s Chief Executive Officer, to March 31, 2022 in recognition of Mr. Wintrob’s performance to date. In conjunction with this extension, the board of directors approved certain adjustments to the compensation arrangements of Mr. Wintrob by awarding him 225,000 limited partnership units vesting pro-rata over ten years (the “Granted OCGH Units”) in Oaktree Capital Group Holdings, L.P. (“OCGH”) in accordance with the terms of Oaktree’s 2011 Equity Incentive Plan and expanding his profit sharing arrangement to include a share of the net incentive income from certain funds that had their final close before Mr. Wintrob joined Oaktree (“pre-employment funds”). The incremental amounts Mr. Wintrob receives as a result of these changes will reduce the amount Mr. Wintrob would be entitled to, if any, with respect to his equity value units (“EVUs”) in OCGH. The board of directors believes these modifications more fully align Mr. Wintrob’s interests with Oaktree’s Class A unitholders and provide him with compensation that is competitive with the range of compensation paid to other CEOs (or executives serving in a similar capacity) in the asset management industry. The material terms of the new compensation arrangements are summarized below.
Employment Agreement Amendment
On April 26, 2017, the Company, Oaktree Capital Management, L.P. and Mr. Wintrob entered into a second amended and restated employment agreement, which extended the term of the agreement through March 31, 2022. Under the amended agreement, beginning in 2017, Mr. Wintrob’s profit sharing payments will now be calculated to include a portion of the net incentive income on pre-employment funds. For 2017-2019, the payments will be calculated taking into account 75% of the net incentive income earned by Oaktree that is derived from such funds, and for 2020 or later, such percentage will change to 50%. In addition, the amended agreement provides that Mr. Wintrob will now receive his quarterly profit sharing payments in arrears, rather than in advance, and that the value of the portion of such payments (if any) paid in Class A units will be determined based on the average daily closing price of the Class A units for the period commencing 20 trading days before the date such Class A units are issued (or such other period that Oaktree selects as applied consistently to other employees).
The employment agreement has also been modified to provide that if, after December 31, 2019, Mr. Wintrob’s employment is terminated by the Company without cause or by Mr. Wintrob for good reason (as such terms are defined in the agreement), Mr. Wintrob will receive a quarterly cash payment in each of the four fiscal quarters that follow the fiscal quarter in which he is terminated. Each payment will be 25% of the aggregate profit sharing payments he earned for the four full fiscal quarters that preceded his termination.
Equity Value Unit Amendment
On April 26, 2017, the Company and Mr. Wintrob entered into a second amended and restated grant agreement under Oaktree’s 2011 Equity Incentive Plan, which amended Mr. Wintrob’s existing EVU award. The amended agreement reduces the value received under the EVUs by (i) distributions on such Granted OCGH Units, (ii) the value of the portion of Mr. Wintrob’s profit sharing payments attributable to the net incentive income received from the pre-employment funds, and (iii) the full value of the Granted OCGH Units, calculated assuming the value per OCGH unit is the average daily closing price of a Class A unit over the 20 trading day period preceding the grant date of the Granted OCGH Units. To the extent that the reduction relates to the value of any Granted OCGH Units that are unvested at the time of the reduction, such Granted OCGH Units will vest at that time.