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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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On March 5, 2015, the Company entered into an Annual
Incentive Agreement with Ivan Kaufman, which generally sets forth the agreement of the Company and Mr. Kaufman with respect to Mr. Kaufman’s
annual base salary and incentive compensation from the Company commencing in 2015 and continuing during his service as Chief Executive
Officer. That agreement was amended on March 31, 2017 (the “2017 Agreement”), primarily to provide for certain incentive compensation
dependent on the Company’s successful integration of the acquisition of our manager’s, Arbor Commercial Mortgage, LLC, agency
business (the “Acquisition”). On April 22, 2021, the Company and Mr. Kaufman entered into a Second Amended and Restated Annual
Incentive Agreement (the “2021 Agreement”), with a term of five-years and which generally follows the structure of the 2017
Agreement.
Under the terms of the 2021 Agreement, Mr. Kaufman
has: (i) an annual base salary of $1,200,000; (ii) an annual cash payment of $800,000; and (iii) annual performance cash bonus target
opportunities of $2,928,200 at target performance, $1,464,100 at threshold performance and $4,392,300 at maximum performance, with the
opportunity to earn an additional $732,050 annually in the event of extraordinary performance with respect to corporate capital growth
goals. The goals applicable to the annual performance cash bonus relate to our distributable earnings per share, corporate capital growth,
balance sheet-management, efficiency and the relative risk of our portfolio. These goals (and the other goals contemplated by the 2021
Agreement) are set by the Compensation Committee of our Board of Directors.
The agreement further provides for: (i) a grant
with a value of $3,000,000 to be made in July 2021, dependent on reaching certain goals relating to the Company’s integration of
the Acquisition, including originations, growth in the servicing portfolio and the weighted average servicing fee (“Acquisition
Related Grant”); and (ii) at Mr. Kaufman’s option, to be exercised annually for the remainder of the term of the 2021 Agreement,
either (x) a grant with a value of $3,000,000, which will vest in full three years from the date of the grant (“Time Based Vesting
Equity Award”) or (y) performance based award of restricted stock (“Performance-Based TSR Equity Award”) with an annual
value at grant of $12,000,000, relating to our total shareholder return objectives. The Acquisition Related Grant will vest in full on
the third anniversary of the grant date. The Performance-Based TSR Equity Award will vest, in whole or in part, based on the attainment
of total shareholder return goals over a five-year period. In addition, the 2021 Agreement provides for immediate vesting of all time-vesting
restricted stock issued under the 2017 Agreement.
The 2021 Agreement also provides for the treatment
of the various incentive awards upon a termination of Mr. Kaufman’s employment. Among other things, the 2021 Agreement provides
that in the event of a termination of employment by the Company without cause or by Mr. Kaufman for good reason (as such terms are defined
in the 2021 Agreement), then (i) Mr. Kaufman would receive a lump sum payment equal to the remaining amount of his annual salary that
would be payable for the balance of the term of the 2021 Agreement, (ii) the annual cash bonus for the year of termination will be paid
out at the target level of performance, (iii) all unvested Acquisition Related Grants issued pursuant to the 2017 Agreement or the 2021
Agreement will vest in full, (iv) all performance-vesting restricted stock units issued under the 2017 Agreement will become vested, to
the extent earned, based on the total shareholder return calculated to the date of termination of employment, (v) all Performance-Based
TSR Equity Awards issued under the 2021 Agreement will vest pro-rata based on the elapsed portion of the performance period (based upon
actual performance) and (vi) for the number of full years remaining under the 2021 Agreement, all Time Based Vesting Equity Awards will
be accelerated and vested.
The foregoing description of the 2021 Agreement
is qualified in all respects by the terms of the 2021 Agreement.