We have a policy that directors attend the Annual Meeting of Stockholders. Each member of our Board of Directors who was a director of the Company at the time of our 2017virtual 2020 Annual Meeting of Stockholders attended the 2017virtual 2020 Annual Meeting of Stockholders.
The following table presents information relating to the total compensation of our directors for the fiscal year ended December 31, 2017.2020.
Our Board of Directors believes that significant ownership of our common stock by our directors helps to align the interests of our directors with those of our stockholders and is consistent with our commitment to sound corporate governance. Pursuant to our Director Stock Ownership Guidelines approved by our Board of Directors, non-employee directors are required to hold our common stock with a value equivalent to three times their annual cash retainer, or $360,000,$360,000. The value of qualifying shares held by a director is calculated as the sum of the gross purchase price (in the case of open market purchases) and grant date fair value (in the case of equity awards) of qualifying shares. Our non-employee directors have from the later of five years from the adoption of the Director Stock Ownership Guidelines or the fifth anniversary of the date of the director’s commencement of service on our Board of Directors to comply. At any time that a director is not in compliance with these guidelines, such director will not be permitted to sell or dispose of any shares of our common stock except to the extent that such sale or disposal relates to payment of taxes associated with the vesting of restricted shares or an award of common stock. As of the date of this proxy statement, all non-employee directors have either exceeded their ownership requirement or remain within the five-year compliance period. For more information on the share ownership of our non-employee directors, see “Share Ownership of Certain Beneficial Owners and Our Directors and Executive Officers” herein.
The following table and biographies contain information regarding our executive officers. These officers are appointed annually by our Board of Directors and serve at the Board’sBoard of Directors’ discretion.
This CD&A explains the overall objectives, elements and policies underlying our named executive officer compensation program for 2017.2020. This discussion contains forward-looking statements that are based on our current plans, considerations, expectations and determinations regarding future compensation programs. Future compensation programs that we adopt may differ materially from current programs.
The Compensation Committee of our Board of Directors is responsible for establishing and administering policy, on an annual basis, with respect to the compensation of our NEOs. We are committed to providing an executive compensation program that supports the following goals and philosophies:
The Compensation Committee recognizes that it is essential to receive objective advice from its compensation advisors. To that end, the Compensation Committee has assessed the independence of FPL pursuant to the Compensation Committee’s Charter and SEC rules and concluded that FPL was independent and that its work for the Compensation Committee did not raise any conflicts of interest.
Executive Compensation Program Components for 2020
Our 2020 executive compensation program was comprised of three separate and primary elements, including base salary, annual incentive compensation (in the form of the 2020 Annual Incentive Plan) and long-term equity awards (in the form of the 2020 Long-Term EIP). In developing our executive compensation program for 2020, the Compensation Committee considered (i) market practices among our peer group, (ii) our existing compensation structure and its effectiveness, (iii) internal pay equity, (iv) the retention of key employees of our Company and (v) the recommendations of Pearl Meyer. The following provides an overview of our approach to each primary element of our NEO compensation program and an analysis of the compensation paid under each of these elements.
Base Salary
Base salary, which represents the fixed element of our executive compensation program, provides for basic economic security at a level that allows us to retain the executive’s services. The Compensation Committee generally establishes annual base salaries for our NEOs commensurate with the level of experience that the executive brings to the position, the nature of the responsibilities required of the executive, such as whether the executive is performing in multiple roles, how successful the executive is in achieving goals established by the Compensation Committee and the executive’s contributions to the Company and internal pay equity considerations, but does not assign any specific weights to these factors. As discussed in other parts of this CD&A, the Compensation Committee also gives significant consideration to the size of the Company and our budgeted operating expenses in setting annual base salaries and has not historically targeted base salaries for our NEOs to any specific level within the range of base salaries paid by our peer group. Base salaries are reviewed annually and may be adjusted to better match competitive market levels or to recognize an executive’s professional growth and development, increased responsibility or other discretionary factors.
In February 2017,December 2019, the Compensation Committee elected to increase base salaries from 2016 levelssalary for each of Messrs. Mumma and Donlon and Ms. NarioNario-Eng for fiscal year 2017, with Mr. Mumma’s set at $800,000, Mr. Donlon's at $650,000, and Ms. Nario’s at $325,000.2020, while holding other NEOs flat to 2019. The determination to increase base salariessalary in 20172020 for these NEOsMs. Nario-Eng was driven primarily by internal pay equity considerations and by our desire to establish a base salary and drivethat drives total compensation towards levels that are more competitive with the base salaries and total compensation paid by our peer group for these roles. Mr. Reese's annual base salary was unchanged at $350,000.
this role.
Annual Incentive Compensation
IncentiveAnnual incentive compensation, in the form of annual cash incentive compensation and equity incentiverestricted stock awards, subject to time-based vesting conditions (payable in the form of restricted stock), is available to each of the NEOs under the ICP.2020 Annual Incentive Plan. Annual incentive compensation serves as a means of linking annual compensation both to our overall performance and to objective and subjective performance criteria that are within the control of the NEOs.
In part, to better align our NEOs' interests with those of our stockholders and to cause them to increase their ownership of common stock, the Compensation Committee has structured the ICP to require the NEOs to receive, subject to the amount of incentive compensation earned, a portion of their incentive compensation as equity incentive awards subject to time-based vesting conditions. The Compensation Committee believes that equitypaying a portion of annual incentive compensation in the form of restricted stock awards subject to time-based vesting conditions are important to motivate and reward the NEOs for maximizing stockholder value, and also help create an incentive for talented employees to remain with us on a longer-term basis, while the cash incentive compensation payable under the ICP2020 Annual Incentive Plan provides NEOs with current income for achieving performance criteria during 2017. Equity incentive awards under2020.
Pursuant to the ICP are provided by grants of restricted stock issued under the 2017 Stock Plan which vest ratably on the first, second and third anniversaries of the grant date.
20172020 Annual Incentive Plan,
Pursuant to the 2017 Annual Incentive Plan, we provided our NEOs withhad the opportunity to earn annual incentive compensation forupon achieving certain corporate financial and non-financial goals. The 20172020 Annual Incentive Plan, which provided for no minimum award or guaranteed payment, was comprised of two parts: a quantitative component and a qualitative component. Pursuant to the 20172020 Annual Incentive Plan, Mr. Mumma’seach NEO’s annual incentive compensation was weighted such that 80%75% was based on performance under the quantitative component and 20% under the qualitative component, while Mr. Reese’s incentive compensation was weighted such that 65% was based on performance under the quantitative component and 35% under the qualitative component. The Compensation Committee set Ms. Nario’s incentive compensation under the 2017 Annual Incentive Plan to be weighted such that 25% was based on performance under the quantitative component and 75% was based on performance under the qualitative component. BecauseFor 2019, Mr. Mumma isReese’s annual incentive compensation was weighted 60% under the quantitative component while Ms. Nario-Eng’s was weighted 50% under the quantitative component. The increased role of the quantitative measure for Mr. Reese and Ms. Nario-Eng was based in large part on the recommendation of Pearl Meyer, which found that most of our mostpeer group capped the weighting of their applicable qualitative components at 25% of the total annual incentive award opportunity for similarly situated employees.As a result, because these senior executive and hasexecutives have the ultimate responsibility over our investment portfolio and other business decisions,for our success or failure is highly dependentand to more closely align our compensation practices on him. Asthis point with those of our peer group, the Compensation Committee adopted the recommendation of its compensation consultant.
Quantitative Component
For the 2020 Annual Incentive Plan, the Compensation Committee determined that the quantitative component would be based on a result,single performance measure, total economic return (“TER”). At Pearl Meyer’s suggestion, the Compensation Committee considered adding additional quantitative metrics and the use of both absolute and relative metrics under the 2020 Annual Incentive Plan.The Compensation Committee reached the determination to use TER as the sole measure after assessing (i) the effectiveness of the 2019 Annual Incentive Plan in rewarding management for absolute performance on an annual basis and (ii) management's ability to effectively influence the outcomes under such criteria on an annual basis. In selecting TER as the sole performance measure under the quantitative component for 2020, the Compensation Committee concluded that Mr. Mumma’s incentive compensation should be weighted more heavilyTER has historically been the most optimal method for measuring management's absolute performance on our achievement of the performance criteria under the quantitative componentan annual basis and that management is better able to influence TER on an annual basis as compared to the weighting of components for Mr. Reese and Ms. Nario. In addition, because Ms. Nario does not have management responsibility for investment strategy, asset selection or portfolio management, unlike Mr. Reese,total stockholder return (“TSR”), which the Compensation Committee concluded that Ms. Nario’s performance under the quantitative component should be weighted at 25%.
Quantitative Component. The amount of the incentive compensation payable under the quantitative component wasbelieves is better suited to awards based on the average of threea multi-year performance measures, adjusted return on equity (“AROE”), total economic return (“TER”) and total common stockholder return (“TSR” and together with AROE and TER, the “Quantitative Company Performance Measure”).period. The ultimate amount of the payout under the quantitative component of the 20172020 Annual Incentive Plan was contingent on the Company exceeding a specified return hurdles under the hurdle for TER ("Quantitative Company PerformanceComponent Measure Hurdle") for the 20172020 fiscal year.
For purposes of the 20172020 Annual Incentive Plan:
AROE was defined as (A) GAAP net income, as reported in the Company’s annual financial statements for the 2017 fiscal year, excluding unrealized gains and losses related to the consolidated multi-family loans held in securitization trusts, divided by (B) the Company’s annual average GAAP common stockholders’ equity for the 2017 fiscal year, as adjusted to exclude the impact of unrealized gains and losses reported in other comprehensive income on GAAP common stockholders’ equity and cumulative unrealized gains and losses from acquisition date related to the consolidated multi-family loans held in securitization trusts (“Adjusted Stockholders’ Equity”). The Company’s annual average Adjusted Stockholders’ Equity was calculated by averaging our Adjusted Stockholders’ Equity for each of the four quarters in the year, with the respective quarterly amounts calculated by averaging (1) Adjusted Stockholders’ Equity for the previous quarter end and (2) Adjusted Stockholders’ Equity for the current quarter end. In its discretion, the Compensation Committee may elect to adjust the average Adjusted Stockholders’ Equity for capital raises that occurred during the measurement period to properly reflect the weighted average amount outstanding during the period. The Compensation Committee did not make any adjustments to the average Adjusted Stockholders’ Equity for capital raises by the Company during fiscal year 2017.
Plan, TER was defined as (A) the sum of (i) the Company’s book value per common share at December 31, 20172020 minus the Company's book value per common share at December 31, 2019 and (ii) the aggregate dividends per common share declared by the Company during 2017,2020, divided by (B) the Company’s book value per common share at December 31, 2016.2019.
TSR was defined as (A)The Compensation Committee generally reviews performance hurdle levels annually towards the sum of (i) the closing per share sales pricebeginning of the Company’s common stock on December 29, 2017new fiscal year to ensure that established hurdles are appropriate to award management’s absolute performance and (ii)are market competitive. The examination often includes a review of the aggregate dividends per common share declaredactual performance-level achieved by the Company, during 2017, dividedchanging market conditions, particularly as it relates to interest rates and credit markets, and the hurdle levels employed by (B)other internally-managed mortgage REITs. Most recently, in 2019, the closing per share sales priceCompensation Committee modified the TER hurdles after concluding that the Quantitative Component Measure Hurdles were too high in light of then-current market conditions, market practices and the current return environment for new investments. At the end of 2019, amidst what was a stable market backdrop for 2020, the Compensation Committee determined to leave the Quantitative Component Measure Hurdles unchanged from 2019.
As part of Pearl Meyer’s engagement in the fall of 2019, Pearl Meyer analyzed the (i) directional alignment of our average overall corporate performance based on select metrics and (ii) total compensation of our top four employees as compared to similar metrics among our internally-managed mortgage REIT peers over both a one- and three-year performance period. The analysis indicated that, in each of a one-year performance period looking at total annual compensation and three-year performance period looking at total direct compensation, our average overall performance rankings were more favorable than the ranking of the Company’stotal annual and total direct compensation of our top four highest compensated employees, thereby suggesting a “high performance/low pay” outcome relative to our internally-managed mortgage REIT peer group. Pearl Meyer also noted that our peer group generally caps maximum short-term incentive awards opportunities between one and one-half and two and one-half times target payouts, with two times target the most common stock on December 30, 2016.approach. To address this dichotomy, Pearl Meyer recommended that the Compensation Committee consider increasing the maximum payout for outperformance (i.e., achievement in excess of the maximum Quantitative Component Measure Hurdle) to two times the target payout under the 2020 Annual Incentive Plan. On the recommendation of Pearl Meyer, the Compensation Committee approved an increase in the maximum payout under the 2020 Annual Incentive Plan as a percentage of base salary to two times target from one and one-half times target for each of the NEOs. In addition, Pearl Meyer’s analysis revealed that target payouts under our annual incentive plan for each of Mr. Reese and Ms. Nario-Eng were below those of our peer group at the 50th percentile. As a result, the Compensation Committee decided to increase the minimum, target and maximum payouts under the 2020 Annual Incentive Plan to 63%, 125% and 250%, respectively, as compared to 50%, 100% and 150% under the 2019 Annual Incentive Plan.
The following table sets forth the Quantitative Company PerformanceComponent Measure hurdlesHurdle and corresponding incentive compensation payouts for each of the NEOs under the quantitative component of the 20172020 Annual Incentive Plan:
| | | | | | | | | | | | | | | |
Named Executive Officer | | Quantitative Component Measure Hurdle (1) | | Payout as a % of Base Salary Upon Achievement of Hurdle (2) | |
Steven R. Mumma and Jason T. Serrano | | Less than 5% | | — | | |
| | 5% | | 100% | |
| | 9% | | 200% | |
| | 14% | | 400% | |
Nathan R. Reese and Kristine R. Nario-Eng | | Less than 5% | | — | | |
| | 5% | | 63% | |
| | 9% | | 125% | |
| | 14% | | 250% | |
|
| | | | | |
Named Executive Officer(1) | | Quantitative Company Performance Hurdle(2) | | Payout as a % of Base Salary Upon Achievement of Hurdle (2) | |
Steven R. Mumma | | Less than 8% | | — | |
| | 8% | | 100% | |
| | 11% | | 200% | |
| | 14% | | 300% | |
| | Greater than 14% | | 300% | (3) |
Nathan R. Reese | | Less than 8% | | — | |
| | 8% | | 50% | |
| | 11% | | 100% | |
| | 14% | | 150% | |
| | Greater than 14% | | 150% | (3) |
Kristine R. Nario | | Less than 8% | | — | |
| | 8% | | 50% | |
| | 11% | | 75% | |
| | 14% | | 125% | |
| | Greater than 14% | | 125% | (3) |
| |
(1) | Hurdles and corresponding potential incentive compensation payouts for Mr. Donlon and the basis for these determinations were consistent with those set forth in this table for Mr. Mumma. |
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(2) | For fiscal year 2017, the payout percentages were pro-rated based on achievement of the Quantitative Company Performance Measure between specified hurdles. For example, attainment of a Quantitative Company Performance Measure of 9.5% for the 2017 fiscal year would entitle Mr. Mumma to a percentage payout under the quantitative component equal to 150%. Actual incentive compensation earned under the quantitative component was calculated by multiplying, (i) in the case of each of Mr. Mumma, 80% by the product of the applicable payout percentage and the base salary paid to such person in 2017, (ii) in the case of Mr. Reese, 65% by the product of the applicable payout percentage and Mr. Reese’s base salary, and (iii) in the case of Ms. Nario, 25% by the product of the applicable payout percentage and Ms. Nario’s base salary. |
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(3) | At the discretion of the Compensation Committee, payout percentages may exceed the stated payout percentage for achievement of the Quantitative Company Performance Measure in excess of 14%. |
(1) At the discretion of the Compensation Committee, payout percentages may exceed the stated payout percentage for achievement of the Quantitative Component Measure Hurdle in excess of 14%.
(2) For fiscal year 2020, if performance was between the threshold (5%) and target (9%) or between the target (9%) and maximum (14%), the performance level achieved was determined by applying linear interpolation to the performance interval. Actual incentive compensation earned under the quantitative component was calculated by multiplying 75% by the product of the applicable payout percentage and base salary.
For 2017,2020, the Compensation Committee concluded that we failed to achieve the minimum Quantitative Component Measure Hurdle under the 2020 Annual Incentive Plan and thus, no incentive compensation was earned by our NEOs under the Quantitative Company Performance Measure achieved was 9.1% under the 2017 Annual Incentive Plan. Set forth in the table below is the payout calculation for each of our NEOs based on achievement of the Quantitative Company Performance Measure at 9.1%.Component.
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Named Executive Officer | | Base Salary | | Payout as a % of Base Salary | | Weighted Percentage | | Quantitative Incentive Payout Amount | |
Steven R. Mumma | | $ | 800,000 |
| | 137% | | 80% | | $ | 877,312 |
| |
Nathan R. Reese | | $ | 350,000 |
| | 69% | | 65% | | $ | 155,929 |
| |
Kristine R. Nario | | $ | 325,000 |
| | 59% | | 25% | | $ | 48,157 |
| |
Notwithstanding the tables above, the Compensation Committee, in its sole discretion was authorized under the 20172020 Annual Incentive Plan to increase or decrease the percentage payout under the quantitative component based on our performance relative to our peer group. TheNevertheless, the Compensation Committee diddecided not to make any adjustments to the percentage payout under the quantitative component for any of our NEOs for fiscal year 2017.
2020.
Qualitative Component
.
Under the qualitative component, aan NEO was eligible to receive annual incentive compensation equal to, in the case of Mr.Messrs. Mumma and Serrano, between zero and threefour times Mr. Mumma'shis base salary multiplied by 20%25%, and, in the case of Mr. Reese and Ms. Nario-Eng, between zero and onetwo and one-half times Mr. Reese’shis or her base salary multiplied by 35%, and in the case of Ms. Nario, between zero and one and one-fourth times Ms. Nario’s base salary multiplied by 75%25%. Under the qualitative component, the Compensation Committee considered the following performance factors, in addition to any other factors that the Compensation Committee deemed to be appropriate, when determining the payout amount under this component: (i) in the case of Mr.Messrs. Mumma and Serrano, (A) leadership of the Company, (B) investor relations, shareholder communications and capital raising, (C) our performance relative to budget and (D) risk management and capital preservation and (ii) in the case of our other NEOs, qualitative performance objectives determined annually by the Chief Executive Officer and our Board of Directors, which included criteria such as (A) business unit or functional area performance and (B) leadership and organizational development.
The following table sets forth the hurdles and corresponding annual incentive compensation payouts for each of the NEOs under the qualitative component of the 20172020 Annual Incentive Plan:
|
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Named Executive Officer(1) | | Qualitative CompanyComponent Performance Hurdle | | Payout as a % of Base Salary Upon Achievement of Hurdle |
Steven R. Mumma and Jason T. Serrano | | MinimumThreshold | | 100 | % |
| | Target | | 200 | % |
| | Maximum | | 300400 | % |
Nathan R. Reese and Kristine R. Nario-Eng | | MinimumThreshold | | 5063 | % |
| | Target | | 100125 | % |
| | Maximum | | 150 | % |
Kristine R. Nario | | Minimum | | 50 | % |
| | Target | | 75 | % |
| | Maximum | | 125250 | % |
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(1) | Hurdles and corresponding potential incentive compensation payouts for Mr. Donlon were consistent with those set forth in this table for Mr. Mumma. |
The Compensation Committee had the discretion to determine the qualitative component at levels between the performance levels identified in the table above. Set forth in the table below is the payout calculation for each of our NEOs based on the Compensation Committee's determination of the qualitative component of the 20172020 annual incentive compensation.
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Named Executive Officer | | Base Salary | | Payout as a % of Base Salary | | Weighted Percentage | | Qualitative Incentive Payout Amount | |
Steven R. Mumma (1) | | $ | 900,000 | | | 400% | | 25% | | $ | 900,000 | | |
Jason T. Serrano (1) | | $ | 750,000 | | | 400% | | 25% | | $ | 750,000 | | |
Nathan R. Reese (2) | | $ | 400,000 | | | 250% | | 25% | | $ | 250,000 | | |
Kristine R. Nario-Eng (3) | | $ | 450,000 | | | 250% | | 25% | | $ | 281,250 | | |
(1) In the case of Messrs. Mumma and Serrano, the Compensation Committee considered their navigation of an extremely challenging year in 2020, which included successfully leading the Company through unprecedented market and operational dislocations as a result of the COVID-19 pandemic and the volatile political environment while also transitioning to and leading the Company through a remote-work environment. Their efforts helped the Company recover from a challenging start to 2020, improving to a -14.6% total economic return for fiscal year 2020, which the Compensation Committee considered to be a fair performance relative to its hybrid mortgage REIT peers and their leadership in repositioning our investment portfolio and stabilizing our balance sheet. As a result, the Compensation Committee determined that each of Messrs. Mumma and Serrano achieved the maximum performance under the qualitative component (i.e., 400%).
(2) In the case of Mr. Reese, the Compensation Committee, with the input of our Chief Executive Officer, determined that, among other things, Mr. Reese was actively involved in the successful implementation of the investment and financing strategies of the Company and played a key role in implementing workplace policies and procedures for our remote-work environment. As a result, the Compensation Committee determined that Mr. Reese achieved the maximum performance under this component (i.e., 250%).
(3) In the case of Ms. Nario-Eng, the Compensation Committee, with the input of our Chief Executive Officer, determined that, among other things, Ms. Nario-Eng was successful in directing the activities performed by our finance and accounting staff in support of our business activities, including her significant role in providing timely and informative disclosure for investors during the height of the market turmoil and her oversight of the accounting function throughout the transition to a fully remote workforce. As a result, the Compensation Committee determined that Ms. Nario-Eng achieved the maximum performance under this component (i.e., 250%).
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Named Executive Officer | | Base Salary | | Payout as a % of Base Salary | | Weighted Percentage | | Qualitative Incentive Payout Amount | |
Steven R. Mumma (1) | | $ | 800,000 |
| | 300% | | 20% | | $ | 480,000 |
| |
Nathan R. Reese (2) | | $ | 350,000 |
| | 150% | | 35% | | $ | 183,750 |
| |
Kristine R. Nario (3) | | $ | 325,000 |
| | 100% | | 75% | | $ | 243,750 |
| |
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(1) | In the case of Mr. Mumma, the Compensation Committee considered his navigation of a challenging environment in 2017 for new investment, which helped produce a 10.9% total economic return for the Company, which the Compensation Committee considered to be a solid performance relative to other hybrid mortgage REITs (including internally- and externally-managed hybrid mortgage REITs), the successful integration of the RiverBanc platform into our business, the successful completion of two public capital raises that generated gross proceeds of approximately $273 million, and that he continued to provide the Company with a strong culture of risk management and a disciplined approach to capital preservation. As a result, the Compensation Committee determined that Mr. Mumma achieved the maximum performance under the qualitative component (i.e., 300%). |
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(2) | In the case of Mr. Reese, the Compensation Committee, with the input of our Chief Executive Officer, determined that, among other things, Mr. Reese was actively involved in the successful implementation of the investment and financing strategies of the Company, played a key role in the growth of the second lien business and was instrumental in successfully executing our 2017 business plan. As a result, the Compensation Committee determined that Mr. Reese achieved the maximum performance under this component (i.e., 150%). |
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(3) | In the case of Ms. Nario, the Compensation Committee, with the input of our Chief Executive Officer, determined that, among other things, Ms. Nario was successful in directing the activities performed by our finance and accounting staff in support of our business activities, specifically including the consolidation of two multi-family properties for accounting purposes. As a result, the Compensation Committee determined that Ms. Nario achieved above target performance under this component (i.e., 100%). |
Compensation Paid Pursuant to Exercise of Positive Discretion
As discussed above, we do not target the compensation of our NEOs to any specific level within the range of total compensation paid by our peer group, although we seek to provide fair and appropriate compensation outcomes that are market competitive. Moreover, the Compensation Committee has long preferred the use of a transparent and straight-forward performance-based short-term incentive plan to drive performance and properly incentivize employees. As discussed above, the global pandemic associated with COVID-19 and related economic conditions created an extraordinarily challenging operating environment for many mortgage REITs and other industries across the world. Our company was not immune to these conditions, incurring sizable losses in March 2020 that, in our view, were largely market-driven, as evidenced by the significant price recovery we observed in our portfolio over the following several months. While the Compensation Committee values the formulaic and absolute return framework under our 2020 Annual Incentive Plan, it also recognizes that originally established performance goals were set prior to the start of the COVID-19 pandemic and did not reflect the significant market disruption that began in March 2020. The Compensation Committee believes resulting award funding levels did not adequately recognize the extraordinary efforts of the senior leadership team in safeguarding employees, seamlessly maintaining business operations throughout the pandemic, protecting and strengthening our balance sheet and investment portfolio, and positioning the Company for future long-term value creation. As referenced above, we generated a -14.6% TER on absolute basis; however, on a relative basis, our TER performance ranked third out of a group of ten hybrid mortgage REIT peers (including us) and in the top half of our identified performance peer group. In reviewing the short-term incentive compensation outcomes that were generated by the Quantitative and Qualitative Components under our 2020 Annual Incentive Plan, the Compensation Committee observed that exclusive use of the formulaic output under our 2020 Annual Incentive Plan with no exercise of positive or negative discretion by the Compensation Committee would result in a 50% decrease in total annual compensation (i.e., base salary plus annual incentive compensation) payable to each of Messrs. Mumma and Serrano for 2020. In light of this potential outcome, the Compensation Committee determined to consider whether the exercise of positive discretion under our 2020 Annual Incentive Plan to increase the overall compensation provided to our NEOs thereunder would be appropriate under these circumstances, without specifically modifying the amount payable pursuant to the quantitative or qualitative performance goals under our 2020 Annual Incentive Plan. The Compensation Committee considered, among other things, the decisive action taken by management during the market crisis to reposition our portfolio and leverage its relationships with our financing counterparties to avoid the need for forbearance agreements, which helped us avoid the need to access expensive and/or dilutive strategic capital alternatives and significantly mitigated potential losses, the year-over-year decline in management’s bonus and total annual compensation relative to the declines in TER and TSR, our relative performance against our hybrid mortgage REIT peers, our overall performance since March 31, 2020 and our strong liquidity position at year-end, the percentage of performance-based compensation paid to management as compared to total compensation and the impact of the decline in the Company’s stock price on the value of existing equity awards, management’s efforts to transition our employees and operations to a remote-work environment and the contributions of certain members of management to each of the foregoing.
After concluding that the exercise of positive discretion under our 2020 Annual Incentive Plan was appropriate, the Compensation Committee discussed the amount of positive discretion to be exercised and the form of compensation to be used. The Compensation Committee ultimately concluded that Mr. Mumma, Mr. Serrano and Ms. Nario-Eng should receive an additional $450,000, $375,000 and $140,625, respectively, of compensation for performance under our 2020 Annual Incentive Plan, which amounts would be payable in the form of restricted stock that vests ratably over three years so that our NEOs are still required to earn such compensation. In determining the amount of positive discretion, the Compensation Committee considered that the use of such amounts of discretion for each of Messrs. Mumma and Serrano would cause their short-term incentive compensation to fall at the midpoint between the minimum and target payouts under our 2020 Annual Incentive Plan, that their total annual incentive plan payout would be down 50% year-over-year and that their total annual compensation would be down 38%, exceeding the decline in TSR and showing a directional alignment between TSR outcomes and pay levels. The Compensation Committee also concluded that the foregoing amounts would be paid solely in shares of restricted stock, further strengthening the retention features of this compensation and management’s alignment with our stockholders. In choosing to exercise discretion, the Compensation Committee gave careful consideration to the pandemic's impact on our performance and stakeholders and the extraordinary efforts of our NEOs during a time of unprecedented market disruption and uncertainty and believes the actions taken are fair and appropriate, aligned with revised strategic priorities, and consistent with the objectives of our executive compensation program.
Total Incentive Compensation Earned and Paid Under the 2017Annual Incentive Plan. In accordance with the 20172020 Annual Incentive Plan our
Our NEOs earned the following amounts of total incentive compensation in 2017:2020 under the 2020 Annual Incentive Plan:
| | Named Executive Officer | | Incentive Compensation Earned Under Quantitative Component | | Incentive Compensation Earned Under Qualitative Component | | Total Incentive Compensation Earned in 2017 | | % of Incentive Compensation Paid in Cash | | % of Incentive Compensation Paid in Restricted Stock | Named Executive Officer | | Incentive Compensation Earned Under Quantitative Component | | Incentive Compensation Earned Under Qualitative Component | | Discretionary Incentive Compensation Paid in Restricted Stock | | Total Incentive Compensation Earned in 2020 | | % of Incentive Compensation Paid in Cash | | % of Incentive Compensation Paid in Restricted Stock |
Steven R. Mumma | | $ | 877,312 |
| | $ | 480,000 |
| | $ | 1,357,312 |
| | 69% | | 31% | Steven R. Mumma | | $ | — | | | $ | 900,000 | | | $ | 450,000 | | | $ | 1,350,000 | | | 60% | | 40% |
Jason T. Serrano | | Jason T. Serrano | | $ | — | | | $ | 750,000 | | | $ | 375,000 | | | $ | 1,125,000 | | | 60% | | 40% |
Nathan R. Reese | | $ | 155,929 |
| | $ | 183,750 |
| | $ | 339,679 |
| | 75% | | 25% | Nathan R. Reese | | $ | — | | | $ | 250,000 | | | $ | — | | | $ | 250,000 | | | 90% | | 10% |
Kristine R. Nario | | $ | 48,157 |
| | $ | 243,750 |
| | $ | 291,907 |
| | 75% | | 25% | |
Kristine R. Nario-Eng | | Kristine R. Nario-Eng | | $ | — | | | $ | 281,250 | | | $ | 140,625 | | | $ | 421,875 | | | 60% | | 40% |
Equity Incentive
Compensation Under the 20172020 Annual Incentive Plan Paid in Restricted Stock
.
As noted above, NEOs were eligible to earna portion of annual incentive compensation earned under the 20172020 Annual Incentive Plan that is payable, in cash, or depending on the size of the total award earned under the 20172020 Annual Incentive Plan, a combination of cash andin shares of restricted stock, subject, in each case, to the discretion of the Compensation Committee, which was utilized in 2020 as described above, and the terms of the 2017 Stock Plan (or any future successor plan)plan adopted by us). SharesIn reviewing our executive compensation programs in 2019 as compared to those of our peer group, Pearl Meyer noted that we tend to pay a larger percentage of our annual incentive awards in equity relative to our peer group, many of whom primarily rely on cash to settle their short-term incentive award payouts. In light of this and our approach to paying 100% of awards under our long-term equity incentive plans in equity, the Compensation Committee elected to reduce the weighting of equity in the pay mix under our 2020 Annual Incentive Plan. As such, for incentive compensation earned up to 1.0 times the base salary of the NEO, 10% of that amount will be paid in shares of our restricted stock, while a greater percentage of restricted stock issued as part(as compared to cash) would be payable on incentive compensation amounts earned in excess of 1.0 times the compensation earned under the 2017 Annual Incentive Plan were issued from the 2017 Stock Plan and vest ratably on an annual basis over a three-year period. The following table sets forth the percentage of aggregate compensation earned under the 2017 Annual Incentive Plan at various payout levels for fiscal year 2017 that are required to be paid in restricted common stock:NEO’s base salary.
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| | | | | | |
Named Executive Officer | | Minimum | | Target | | Maximum |
Steven R. Mumma | | 25% | | 38% | | 50% |
Nathan R. Reese | | 25% | | 25% | | 25% |
Kristine R. Nario | | 25% | | 25% | | 25% |
For 2017,2020, the Compensation Committee awarded, in accordance with the terms of the 20172020 Annual Incentive Plan, a total of 75,042141,361 shares of restricted stock to Mr. Mumma (having a grant date fair value of approximately $417,984,$540,000, which is based on the closing sale price of our common stock on February 13, 2018,January 27, 2021, the date the stock award was approved by our Compensation Committee), 15,246117,801 shares of restricted stock to Mr. Serrano (having a grant date fair value of approximately $450,000), 6,544 shares of restricted stock to Mr. Reese (having a grant date fair value of approximately $84,920)$25,000) and 13,10244,175 shares of restricted stock to Ms. NarioNario-Eng (having a grant date fair value of approximately $72,977)$168,750). The shares of restricted stock issued as part of the compensation earned under the 2020 Annual Incentive Plan were granted under the 2017 Stock Plan and vest ratably on an annual basis over the three-year period from the date of grant. The formulaic approach of having equity incentive awards subject to time-based vesting conditions tied directly to incentive compensation earned under the 20172020 Annual Incentive Plan was influenced by (i) our desire to increase the executive’s ownership stake in the Company and better align the executive’s interests with those of our stockholders, (ii) our desire to tie total incentive compensation (including equity incentive awards) to a single incentive performance plan weighted, in the case of two of our NEOs, more heavily upon quantitative performance measures, (iii) our desire to increase the amount of non-cash, equity incentive compensation earned by our Chief Executive Officer as a percentage of his total compensation, (iv) our desire to provide our NEOs with a competitive balance of current cash compensation and equity compensation subject to time-based vesting conditions that rewards performance and increases the executive’s incentive to remain with the Company over the longer-term and (v)(iii) our desire to create an incentive compensation plan that spreads the expense of a portion of the incentive compensation program over a three-year period.
Restricted stock awards are most frequently utilized by the Compensation Committee as a form of equity incentive award due, in part, to the distribution policies and requirements of REITs and the effect that those distribution requirements tend to have on our common stock price, which tends to make stock options a less desirable form of equity incentive award.
Long-Term Equity Incentive Compensation
Following a review of our compensation programs in 2017, the Compensation Committee and our Board of Directors determined to add a long-term equity incentive component to our executive compensation program commencing in 2018. As part of its deliberations in determining whether to add a long-term equity incentive element, the Compensation Committee considered (i) market practices among our peer group, (ii) our existing compensation structure and its effectiveness, (iii) internal pay equity and (iv) the retention of key employees of our Company. The Compensation Committee again approved the inclusion of a long-term equity incentive element in the Company’s 2019 executive compensation program, which is substantially in the form of the 2018 Long-Term EIP. In late 2019, upon the recommendation of Pearl Meyer, the Compensation Committee elected to modify the long-term equity incentive plan to make the minimum, target and maximum award opportunities under the program consistent with similar award opportunities under our 2020 Annual Incentive Plan and to introduce a new retention feature under the plan in the form of time-based RSUs. The determination to modify the long-term equity incentive plan was based on similar rationale for modifying our 2020 Annual Incentive Plan and a general sense that our long-term equity incentive plan could benefit from additional retention features.The Compensation Committee has concluded that the inclusion of a long-term equity award program in our overall compensation structure is necessary to help us create and maintain a market competitive executive compensation program that promotes the recruitment and retention of key employees and rewards employees for outperformance relative to a peer group over the longer-term.
In December 2019, the Compensation Committee and our Board of Directors approved grants of PSUs (“2020 PSUs”) and RSUs (“2020 RSUs”) to our executive officers and certain other employees as part of our 2020 Long-Term EIP. Under the 2020 Long-Term EIP, total compensation at target performance, which is generally intended to provide equity incentive compensation, in the case of Messrs. Mumma and Serrano, equal to two times the NEO’s base salary and, in the case of Mr. Reese and Ms. Nario-Eng, equal to one and one-quarter times the NEO’s base salary, and is comprised 67% of 2020 PSUs and 33% of 2020 RSUs. The awards were issued pursuant to and are consistent with the terms and conditions of the 2017 Stock Plan.
The 2020 PSU awards are subject to performance-based vesting under the 2017 Stock Plan pursuant to a form of PSU award agreement approved by the Compensation Committee and our Board of Directors (the “PSU Agreement”) in December 2019. The 2020 RSU awards are subject to time-based vesting under the 2017 Stock Plan pursuant to the form of RSU award agreement approved by the Compensation Committee and our Board of Directors (the “RSU Agreement”) in December 2019. The target number of 2020 PSUs and the number of 2020 RSUs subject to the awards granted to our NEOs are as follows:
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Named Executive Officer | | Target Number of 2020 PSUs | | 2020 RSUs |
Steven R. Mumma | | 192,616 | | 96,308 |
Jason T. Serrano | | 160,514 | | 80,257 |
Nathan R. Reese | | 53,505 | | 26,752 |
Kristine R. Nario-Eng | | 60,193 | | 30,096 |
The Compensation Committee, with the input of Pearl Meyer, determined to set the payouts under the 2020 PSUs consistent with the minimum, target and maximum payouts under the 2020 Annual Incentive Plan, such that each of the NEOs could earn between 0% and 200% of his or her target award opportunity upon achievement of the respective performance hurdles in the PSU Agreement. In determining the target amounts for the 2020 PSUs, the Compensation Committee considered the value in providing generally equally-sized incentive payouts between both the Company's short-term and longer-term incentive programs, as well as the amount, assuming achievement of the target performance hurdles, that would, in most cases, bring the NEOs total direct compensation in line with the 50th percentile of total direct compensation of similarly situated executives of our peer group at target levels. The NEO’s right to receive settlement of the 2020 PSUs in amounts ranging from 0% to 200% of the target number of 2020 PSUs will vest and become earned and non-forfeitable based on the attainment of relative TSR hurdles, which include both share price appreciation and reinvestment of common dividends paid during the performance period that commenced on January 1, 2020 and runs through December 31, 2022 as measured against an identified performance peer group of 20 mortgage REITs. The Compensation Committee determined that TSR is the most appropriate method to measure management’s longer-term performance relative to our peers and helps to further align our management team's interests with those of our stockholders. Pursuant to the PSU Agreement, an awardee will be entitled to 50%, 100% and 200% of the target 2020 PSUs upon achievement of relative TSR at the 30th, 50th and 80th, respectively, percentile ranking among the identified performance peer group. TSR for the Company and each member of the identified performance peer group will be determined by dividing (i) the sum of the cumulative amount of such entity’s dividends per share for the performance period and the arithmetic average per share volume weighted average price (the “VWAP”) of such entity’s common stock for the last thirty (30) consecutive trading days of the performance period minus the arithmetic average per share VWAP of such entity’s common stock for the last thirty (30) consecutive trading days immediately prior to the performance period by (ii) the arithmetic average per share VWAP of such entity’s common stock for the last thirty (30) consecutive trading days immediately prior to the performance period. Each 2020 PSU represents an unfunded promise to receive one share of our common stock once the performance condition has been satisfied. In addition, each 2020 PSU includes a corresponding DER, which DER will remain outstanding from the date of grant until the earlier of the settlement or forfeiture of the 2020 PSU to which the DER corresponds. Each vested DER entitles the NEO to receive payments, subject to and in accordance with the 2017 Stock Plan and the PSU Agreement for such award, in an amount equal to any dividends paid by us in respect of the shares of common stock underlying the 2020 PSUs.
The grant date fair value of the PSUs was determined, in accordance with FASB ASC Topic 718 at the time the grants were made, through a Monte-Carlo simulation of our common stock TSR and the common stock TSR of our identified performance peer companies to determine the relative TSR of our common stock over a future period of three years. For the PSUs granted in 2020, the inputs used by the model to determine the fair value are (i) historical stock price volatilities of our and our identified performance peer companies over the most recent three year period and correlation between each company's stock and the identified performance peer group over the same time series and (ii) a risk free rate for the period interpolated from the U.S. Treasury yield curve on grant date.
Each 2020 RSU represents the right to receive one share of our common stock, subject to the terms of the RSU Agreement for the 2020 RSUs and the 2017 Stock Plan. The 2020 RSUs vest ratably on an annual basis over the three-year period from the date of grant. Unless and until the 2020 RSUs vest, the NEO will have no right to receive any shares or other payments in respect of the 2020 RSUs, except as otherwise specifically provided for in the 2017 Stock Plan or the RSU Agreement. In addition, each 2020 RSU includes a DER, which DER will remain outstanding from the date of grant until the earlier of the settlement or forfeiture of the 2020 RSU. Each vested DER entitles the NEO to receive payments, subject to and in accordance with the 2017 Stock Plan and the RSU Agreement for such award, in an amount equal to any dividends paid by us in respect of the shares of common stock underlying the 2020 RSUs.
For purposes of the 2020 PSUs , the "identified performance peer group" means AG Mortgage Investment Trust, Inc., AGNC Investment Corp, Annaly Capital Management Inc., Anworth Mortgage Asset Corporation, ARMOUR Residential REIT, Inc., Capstead Mortgage Corporation, Cherry Hill Mortgage Investment Corporation, Chimera Investment Corporation, Dynex Capital, Inc., Ellington Residential Mortgage REIT, Great Ajax Corp., Invesco Mortgage Capital Inc., MFA Financial, Inc., New Residential Investment Corp., Orchid Island Capital, Inc., PennyMac Mortgage Investment Trust, Ready Capital Corp., Redwood Trust, Inc., Two Harbors Investment Corp. and Western Asset Mortgage Capital Corporation.
For information regarding the various forfeiture and vesting provisions under the form of PSU Agreement governing the 2020 PSUs and the form of RSU Agreement governing the 2020 RSUs, see “—Executive Compensation Information—Other Compensation Arrangements.”
Other Executive Compensation Program Features for 2020
Benefits
Benefits are also established based upon a determination of what is needed to aid in attracting and retaining executive talent, as well as providing long-term financial security to our employees and their families. The NEOs are eligible to participate in our health, dental and vision plans, and various insurance plans, including disability and life insurance, and in our 401(k) plan. The primary benefits for the NEOs are as follows:
•receipt of dividends on all unvested restricted stock awards; and
•with respect to Mr. Mumma only, a life insurance policy and a supplemental long-term disability insurance policy purchased by Mr. Mumma in his name and reimbursed by us.
Effective beginning in April 2018, we will no longer reimburse Mr. Mumma for premiums associated with a life insurance policy purchased by Mr. Mumma in his name.
Severance Benefits Payable Upon Termination of Employment or a Change in Control
In order to achieve our compensation objective of attracting, retaining and motivating qualified senior executives, we believe that we need to provide our Chief Executive Officer with severance protections that are consistent with the severance protections offered by companies similar to us. Consistent with this philosophy, we believe that severance should be payable to Mr. Mumma in the event his employment is terminated under certain circumstances. As such,we are a party to an employment agreement with Mr. Mumma. For more information regarding the terms of Mr. Mumma’s employment agreement, see “—Other Compensation Arrangements—Employment Agreement.” The terms of Mr. Mumma’s employment agreement is considered annually by the Compensation Committee. Prior to Mr. Donlon's resignation in September 2017, we were also party to an employment agreement with Mr. Donlon that provided severance protections similar to those provided to our Chief Executive Officer. See “—Compensation Developments During 2017.” We have not entered into employment agreements with our other NEOs.
Elements of Cash Compensation Paid to and Equity Awards Vested in NEOs During 2020
The following table summarizes the various elements of cash compensation paid to our NEOs and equity awards in which our NEOs vested during 2020, some of which were granted in prior years. Due to the SEC’s reporting requirements, the information set forth in the table below may not correspond with the amounts included in the table under the caption “Summary Compensation Table” below. However, because we utilize PSUs that may or may not be earned in the future and other equity awards that vest, in most cases, ratably over a three year period and thus remain subject to forfeiture, we believe the following summary may be a more accurate reflection of the actual annual compensation received by our NEOs (or that is no longer subject to forfeiture restrictions) over time.
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NEO | | Base Salary | | 2020 Annual Incentive Plan (Cash) 1 | | 2018 Annual Incentive Plan (Restricted Stock Vested) 2 | | 2017 Annual Incentive Plan (Restricted Stock Vested) 2 | | 2016 Annual Incentive Plan (Restricted Stock Vested) 2 | | 2018 Long-Term EIP (PSUs Earned) 3 | | All Other Compensation 4 | | Total Cash Compensation Paid and Equity Vested 5 |
Steven R. Mumma | | $900,000 | | $ | 810,000 | | | $ | 194,979 | | | $ | 157,088 | | | $ | 305,366 | | | $ | 1,100,424 | | | $ | 96,682 | | | $ | 3,564,539 | |
Jason T. Serrano | | $750,000 | | $ | 675,000 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 96,965 | | | $ | 1,521,965 | |
Nathan R. Reese | | $400,000 | | $ | 225,000 | | | $ | 29,714 | | | $ | 31,915 | | | $ | 37,463 | | | $ | 275,108 | | | $ | 15,454 | | | $ | 1,014,654 | |
Kristine R. Nario-Eng | | $450,000 | | $ | 253,125 | | | $ | 27,545 | | | $ | 27,425 | | | $ | 25,747 | | | $ | 275,108 | | | $ | 14,349 | | | $ | 1,073,299 | |
(1)Amounts represent annual cash incentive compensation earned under the annual incentive compensation plan for 2020, which was paid during the first quarter of 2021, which we include because it was earned in 2020. For a description of the formula used to calculate the amounts payable under the annual incentive compensation plan for each applicable fiscal year, see “—Compensation Discussion and Analysis—Executive Compensation Program Components for 2020 — Annual Incentive Compensation.”
(2)Amounts represent the product of (i) the number of shares of restricted stock issued under the applicable annual incentive plan that vested during 2020 and (ii) the closing sale price of our common stock on Nasdaq on the applicable vesting date.
(3)Amounts represent the product of (i) the number of shares of our common stock issued in settlement of the PSUs earned and vested in 2020 under the applicable Long-Term EIP and (ii) the closing sale price of our common stock on Nasdaq on the applicable vesting date.
(4)Amounts represent dividends paid on unvested restricted common stock.
(5)Excludes the value of the first tranche of RSUs under the 2020 Long-Term EIP that vested on January 1, 2021.
Overview of NEO Compensation Determinations for 20182021
Following a review of our compensation programs and upon FPL’s recommendation, the Compensation Committee and our Board of Directors have determined to modify our 2018 executive compensation program so that it is comprised of three separate elements, including base salary, annual incentive compensation and long-term equity awards (2018 Long-Term EIP). In developing our executive compensation program for 2018, the Compensation Committee considered (i) market practices among our peer group, (ii) our existing compensation structure and its effectiveness, (iii) internal pay equity and (iv) the retention of key employees of our Company. The following provides an overview of each of the primary elements that comprise our 20182021 NEO compensation program.
Base Salary
The Compensation Committee and our Board of Directors have approved the following 20182021 base salaries for our NEOs:NEOs, which are unchanged from 2020 levels:
| | | | | | | | | | | |
Named Executive Officer | | Base Salary | |
Steven R. Mumma | | $ | 900,000 | | |
Jason T. Serrano | | $ | 750,000 | | |
Nathan R. Reese | | $ | 400,000 | | |
Kristine R. Nario-Eng | | $ | 450,000 | | |
|
| | | | | |
Named Executive Officer | | Base Salary | |
Steven R. Mumma | | $ | 800,000 |
| |
Nathan R. Reese | | $ | 400,000 |
| |
Kristine R. Nario | | $ | 400,000 |
| |
20182021 Annual Incentive Plan
In February 2018, ourOur Board of Directors, upon the recommendation of the Compensation Committee, has adopted and approved certain changes to the 20172021 Annual Incentive Plan for fiscal year 2018. Consistent with2021, which plan design and framework is substantially in the 2017form of the 2020 Annual Incentive Plan, except that the 2018minimum hurdle under the Quantitative Component was reduced from 5% to 4%. Each of Messrs. Mumma, Serrano and Reese and Ms. Nario-Eng will be positioned under the 2021 Annual Incentive Plan is divided into two components,in a quantitative component and a qualitative component. However,manner similar to each such executive's positioning for the purposes of the 2018 Annual Incentive Plan, the quantitative component will be based on a single performance measure, TER (as defined under the 2017 Annual Incentive Plan). The Compensation Committee reached this determination after assessing, with the assistance of FPL, (i) the effectiveness of the ICP and its three quantitative performance measures in rewarding management for absolute performance on an annual basis and (ii) management’s ability to effectively influence the outcomes under such criteria on an annual basis. In selecting TER as the sole performance measure under the quantitative component for 2018, the Compensation Committee concluded that TER is the most optimal method for measuring management’s absolute performance on an annual basis and that management is better able to influence TER on an annual basis as compared to TSR, which the Compensation Committee believes is better suited to awards based on a multi-year performance period. Pursuant to the 2018 Annual Incentive Plan, incentive compensation for each NEO will be weighted between the two components as follows:
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| | | | |
Named Executive Officer | | Quantitative Component | | Qualitative Component |
Steven R. Mumma | | 80% | | 20% |
Nathan R. Reese | | 60% | | 40% |
Kristine R. Nario | | 50% | | 50% |
Similar to the 2017 Annual Incentive Plan, the size of the quantitative component will be contingent on the Company achieving certain performance levels. The following table sets forth the performance measure hurdles and corresponding incentive compensation payouts of each of the NEOs under the quantitative component of the 2018 Annual Incentive Plan:
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Named Executive Officer | | Quantitative Component Measure Hurdle(1) | | Payout as a Percentage of Base Salary Upon Achievement of Hurdle |
Steven R. Mumma | | Less than 6% | | — |
| | 6% | | 100% |
| | 11% | | 200% |
| | 16% | | 300% |
Nathan R. Reese | | Less than 6% | | — |
| | 6% | | 50% |
| | 11% | | 100% |
| | 16% | | 150% |
Kristine R. Nario | | Less than 6% | | — |
| | 6% | | 50% |
| | 11% | | 100% |
| | 16% | | 150% |
| |
(1) | At the discretion of the Compensation Committee, payout percentages may exceed the stated payout percentage for achievement of the quantitative component in excess of 16%. |
If performance is between the threshold (6%) and target (11%) or between the target (11%) and maximum (16%), the performance level achieved will be determined by applying linear interpolation to the performance interval.
Under the 2018 Annual Incentive Plan, the qualitative component, which is separate and distinct from the quantitative component, for each NEO can range from (i) in the case of our Chief Executive Officer, zero to three times our Chief Executive Officer’s base salary multiplied by the qualitative component percentage and (ii) in the case of all other NEOs, zero to one and one-half times such NEO’s base salary, multiplied by the qualitative component percentage.
Incentive compensation earned under the 2018 Annual Incentive Plan will continue to be settled in a combination of cash and shares of restricted stock. Shares of restricted stock granted as payment of all or a portion of incentive compensation earned will vest ratably on an annual basis over a three-year period or such other period as may be determined by the Compensation Committee. The following table sets forth the percentage of the incentive compensation earned under the 2018 Annual Incentive Plan that will be payable in restricted stock for each NEO:
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| | |
Annual Incentive Award Payout Calculation | | Percentage of Incentive Award Payable as Restricted Stock(1)
|
Incentive Award Amounts up to 1X of Base Salary | | 25% |
Incentive Award Amounts Exceeding 1X of Base Salary
| | 75% |
| |
(1) | The portion paid in restricted stock will increase in a manner determined by the Compensation Committee as the amount of the payment with respect to each incentive award increases. For example, if a NEO were to achieve an incentive award equal to one and one-fourth times the NEO’s base salary, it is anticipated that 35% of such incentive award would be payable in restricted stock. |
The NEOs may elect, subject to the approval of the Compensation Committee, to have a greater percentage of the incentive compensation earned to be paid in restricted stock. The balance of any incentive compensation not paid in restricted stock will be paid to the NEO in cash.
Except as set forth above, the terms of the 2018 Annual Incentive Plan are substantially consistent with the terms of the 20172020 Annual Incentive Plan. The awards issued under the 2018 Annual Incentive Plan will be issued pursuant to the 2017 Stock Plan.
20182021 Long-Term EIP
Subsequent to December 31, 2017,In January 2021, the Compensation Committee and our Board of Directors approved the grantgrants of performance stock unitsPSUs (“PSU”2021 PSUs”) and RSUs (“2021 RSUs”) to the NEOsour executive officers and certain other employees as part of our 20182021 Long-Term EIP. The design and framework of the 2021 Long-Term EIP is substantially in the form of the 2020 Long-Term EIP except for minor modifications to the identified performance peer group. The awards were issued pursuant to and are consistent with the terms and conditions of the 2017 Stock Plan. In establishing the 2018 Long-Term EIP, the Compensation Committee concluded that the inclusion of a long-term equity award program in our overall compensation structure was necessary to help us create and maintain a market competitive executive compensation program that will promote recruitment and retention of key employees and will reward employees for outperformance relative to our peers over the longer-term.
The PSU awards are subject to performance-based vesting under the 2017 Stock Plan pursuant to a form of PSU award agreement approved by the Compensation Committee and our Board of Directors (the “PSU Agreement”) in February 2018.
The target number of 2021 PSUs and the number of 2021 RSUs subject to the awards granted to our NEOs isare as follows:
| | | | | | | | | | | | | | |
Named Executive Officer | | Target Number of 2021 PSUs | | 2021 RSUs |
Steven R. Mumma | | 325,203 | | 162,602 |
Jason T. Serrano | | 271,003 | | 135,501 |
Nathan R. Reese | | 90,334 | | 45,167 |
Kristine R. Nario-Eng | | 101,626 | | 50,813 |
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| | |
Named Executive Officer | | Target Number of PSUs |
Steven R. Mumma | | 259,320 |
Nathan R. Reese | | 64,830 |
Kristine R. Nario | | 64,830 |
Other MattersThe named executive officer’s right to receive settlement of the PSUs in amounts ranging from 0% to 150% of the target number of PSUs shall vest and become earned and non-forfeitable based on the attainment of relative total shareholder return hurdles, which include both share price appreciation and reinvestment of common dividends paid during the performance period that commenced on January 1, 2018 and runs through December 31, 2020 as measured against a performance peer group of 23 mortgage REITs. The Compensation Committee determined that total shareholder return is the most appropriate method to measure management’s longer-term performance relative to our peers and helps to further align our management team's interests with those of our stockholders. Pursuant to the PSU Agreement, an awardee will be entitled to 50%, 100% and 150% of the target PSUs upon achievement of relative total shareholder return at the 30th, 50th and 80th, respectively, percentile ranking among the peer group. Total shareholder return for the Company and each member of the peer group will be determined by dividing (i) the sum of the cumulative amount of such entity’s dividends per share for the performance period and the arithmetic average per share volume weighted average price (the “VWAP”) of such entity’s common stock for the last thirty (30) consecutive trading days of the performance period minus the arithmetic average per share VWAP of such entity’s common stock for the last thirty (30) consecutive trading days immediately prior to the performance period by (ii) the arithmetic average per share VWAP of such entity’s common stock for the last thirty (30) consecutive trading days immediately prior to the performance period. Each PSU represents an unfunded promise to receive one share of our common stock once the performance condition has been satisfied.
Upon any termination of an awardee’s employment or service relationship with us or our affiliates for any reason prior to the end of the performance period, any unearned PSUs will terminate automatically without any further action by us except as otherwise provided in any employment agreement between the awardee and us.
Upon the occurrence of a “Change in Control” (as defined in the 2017 Stock Plan) prior to the end of the performance period, the performance period will end and the number of PSUs earned, if any, will be determined based solely on the extent that the applicable performance goal has been achieved according to actual performance as of the date of the Change in Control.
Executive Stock Ownership Guidelines
Our Board of Directors believes that significant ownership of our common stock by our Chief Executive Officer helps to align the interests of our Chief Executive Officer with those of our stockholders and is consistent with our commitment to sound corporate governance. Pursuant to our Executive Stock Ownership Guidelines approved by our Board of Directors, our Chief Executive Officer is required to own shares of our common stock having a value equal to at least five times his base salary, or $4.0 million, and has from the later of five years from the adoption of the Executive Stock Ownership Guidelines or the fifth anniversary of the Chief Executive Officer’s promotion to such position to comply. At any time that our Chief Executive Officer is not in compliance with these guidelines, he will not be permitted to sell or dispose of any shares of our common stock except to the extent that such sale or disposal relates to payment of taxes associated with the vesting of restricted shares of common stock or other equity awards. As of the date of this proxy statement, Mr. Mumma’s stock ownership complies with our Executive Stock Ownership Guidelines.
Our other NEOs are not currently required to achieve or maintain any particular level of stock ownership in us, although we encourage stock ownership through the structure of our executive compensation programs. For more information on the share ownership of our executive officers, see “Share Ownership of Certain Beneficial Owners and Our Directors and Executive Officers” herein.
Tax Deductibility of Executive Compensation
During 2017, Section 162(m) of the Internal Revenue Code of 1986, as amended, disallowed public companiesgenerally disallows a tax deduction for federal income tax purposes of remunerationdeduction to public companies for compensation in excess of $1 million paid in any fiscal year to their chief executive officer and each of the three other most highly-compensated executive officers (other than the chief financial officer) whose compensation is required to be disclosed to our stockholders under the Exchange Act in any taxable year. Remuneration in excess of $1 million was deductible if it was "performance-based compensation" within“covered employees” (within the meaning of Section 162(m) or qualified for one of the other exemptions from the deduction limit. In making compensation recommendations, the Compensation Committee considers the potential effects of Section 162(m) on the compensation of our NEOs.
). The exemption from Section 162(m)'s deduction limitlimitation for “performance-based compensation”certain qualified performance-based compensation was eliminated under the Tax Cuts and Jobs Act of 2017, effective for taxable years beginning after December 31, 2017, suchexcept for limited transition relief applicable to certain grandfathered arrangements that were in place as of November 2, 2017. Although the potential effects of Section 162(m) are considered in making compensation decisions, the Compensation Committee has not adopted a policy requiring that all compensation paid to our named executive officers in excessmust be deductible.
Adjustment or Recovery of Awards
Under Section 304 of the Sarbanes-Oxley Act, if we are required to restate our financial results due to material noncompliance with any financial reporting requirement as a result of misconduct, our Chief Executive Officer and Chief Financial Officer must reimburse us for (i) any bonus or other incentive-based or equity-based compensation received during the twelve months following the public issuance of the non-compliant document and (ii) any profits realized from the sale of our securities during those twelve months. Following the SEC’s adoption of final rules regarding executive compensation recoupment policies pursuant to the Dodd-Frank Act, we will consider and adopt a separate executive compensation recoupment policy in accordance with the final rules.
Relationship of Compensation Practices to Risk Management
When structuring our overall compensation practices for our employees generally, consideration is given as to whether the structure creates incentives for risk-taking behavior and therefore impacts our risk management practices. Attention is given to the elements, the performance conditions and the mix of pay as well as ensuring that employees’ awards align with stockholders’ value.
The Compensation Committee has assessed the compensation policies and practices for our employees, including our NEOs, and concluded that they do not create risks that are reasonably likely to have a material adverse effect on us. The Compensation Committee generally considers whether our compensation programs encourage excessive risk taking during its annual review of such programs, which typicallygenerally occurs duringaround year end.
Anti-Hedging and Anti-Pledging Policies
Our officers, directors and employees are prohibited from hedging transactions that involve our equity securities under our Anti-Hedging and Anti-Pledging Policy, which also prohibits short sales and trading in the first quarterCompany’s securities on a short-term basis, among other transactions. Pursuant to our Anti-Hedging and Anti-Pledging Policy, Company securities purchased in the open market should be held for a minimum of each year.
Compensation Committee Report
six months. Directors and executive officers of the Company are subject to “short-swing profit recovery” for any profit realized on the purchase and sale or sale and purchase of the Company’s securities within any six-month period. For more information on our Anti-Hedging and Anti-Pledging Policy, see “Information on Our Board of Directors — Hedging, Pledging and Certain Other Transactions.”
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis section
Compensation Committee
Steven G. Norcutt (Chairman)
David R. Bock
Michael B. Clement
Alan L. Hainey
April 20, 2018Contents
The foregoing report shall not be deemed incorporated by reference by any general statement incorporating by reference this proxy statement into any filing under the Securities Act of 1933, as amended, or under the Securities Exchange Act of 1934, as amended, except to the extent we specifically incorporate this information by reference, and shall not otherwise be deemed filed under such acts.
Executive Compensation Information
Summary Compensation Table
The following tables should be read in conjunction with the related footnotes set forth below, the information under the caption “Compensation Discussion and Analysis” beginning on page 2139 and the information under the caption “—Other Compensation Arrangements.” We summarize below the compensation information for the fiscal years ended December 31, 2017, 20162020, 2019 and 20152018 for each of Messrs. Mumma and Reese and Ms. NarioNario-Eng and for the fiscal years ended December 31, 20172020 and 20162019 for Mr. Donlon.Serrano.
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Name and Principal Position | | Year | | Salary | | Cash Bonus | | Non-Equity Incentive Plan Compensation(1) | | Stock Awards(1)(2) (3) | | All Other Compensation(4) | | Total |
Steven R. Mumma | | 2020 | | $ | 900,000 | | | $ | — | | | $ | 810,000 | | | $ | 2,511,426 | | | $ | 99,448 | | | $ | 4,320,874 | |
Chief Executive Officer | | 2019 | | $ | 900,000 | | | $ | — | | | $ | 1,125,000 | | | $ | 2,777,717 | | | $ | 166,153 | | | $ | 4,968,870 | |
| | 2018 | | $ | 800,000 | | | $ | — | | | $ | 728,000 | | | $ | 1,618,687 | | | $ | 199,041 | | | $ | 3,345,728 | |
Jason T. Serrano | | 2020 | | $ | 750,000 | | | $ | — | | | $ | 675,000 | | | $ | 2,092,860 | | | $ | 96,965 | | | $ | 3,614,825 | |
President | | 2019 | | $ | 738,865 | | (5) | $ | — | | | $ | 937,500 | | | $ | 3,374,470 | | | $ | 97,087 | | | $ | 5,147,922 | |
Nathan R. Reese | | 2020 | | $ | 400,000 | | | $ | — | | | $ | 225,000 | | | $ | 572,623 | | | $ | 15,454 | | | $ | 1,213,077 | |
Chief Operating Officer | | 2019 | | $ | 400,000 | | | $ | — | | | $ | 350,000 | | | $ | 514,857 | | | $ | 24,150 | | | $ | 1,289,007 | |
and Secretary | | 2018 | | $ | 400,000 | | | $ | — | | | $ | 267,000 | | | $ | 347,672 | | | $ | 24,038 | | | $ | 1,038,710 | |
Kristine R. Nario-Eng | | 2020 | | $ | 450,000 | | | $ | — | | | $ | 253,125 | | | $ | 784,824 | | | $ | 14,349 | | | $ | 1,502,298 | |
Chief Financial Officer | | 2019 | | $ | 400,000 | | | $ | — | | | $ | 350,000 | | | $ | 514,857 | | | $ | 20,337 | | | $ | 1,285,194 | |
| | 2018 | | $ | 400,000 | | | $ | — | | | $ | 247,500 | | | $ | 341,172 | | | $ | 18,777 | | | $ | 1,007,449 | |
(1)Amounts represent annual cash incentive compensation earned under the annual incentive compensation plan for each applicable fiscal year. For a description of the formula used to calculate the amounts payable under the annual incentive compensation plan for each applicable fiscal year, see “—Compensation Discussion and Analysis—Executive Compensation Program Components for 2020 — Annual Incentive Compensation.” The terms of the annual incentive compensation plan for 2019 and 2018 are substantially similar to the terms of the 2020 Annual Incentive Plan, except as described in “—Compensation Discussion and Analysis—Executive Compensation Program Components for 2020 — Annual Incentive Compensation.” In accordance with the 2020 Annual Incentive Plan, for fiscal year 2020, Mr. Donlon resigned from his position with us on September 18, 2017.
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Name and Principal Position | | Year | | Salary | | Cash Bonus | | Non-Equity Incentive Plan Compensation(1) | | Stock Awards(1)(2) | | All Other Compensation(3) | | Total |
Steven R. Mumma | | 2017 | | $ | 800,000 |
| | $ | — |
| | $ | 939,328 |
| | $ | 417,984 |
| | $ | 246,659 |
| | $ | 2,403,971 |
|
Chief Executive Officer | | 2016 | | $ | 700,000 |
| | $ | — |
| | $ | 1,015,000 |
| | $ | 1,514,000 |
| | $ | 239,577 |
| | $ | 3,468,577 |
|
| | 2015 | | $ | 700,000 |
| | $ | — |
| | $ | 315,000 |
| | $ | 105,000 |
| | $ | 256,719 |
| | $ | 1,376,719 |
|
Nathan R. Reese | | 2017 | | $ | 350,000 |
| | $ | — |
| | $ | 254,759 |
| | $ | 84,920 |
| | $ | 22,143 |
| | $ | 711,822 |
|
Managing Director and | | 2016 | | $ | 350,000 |
| | $ | — |
| | $ | 347,812 |
| | $ | 115,938 |
| | $ | 26,922 |
| | $ | 840,672 |
|
Secretary | | 2015 | | $ | 325,000 |
| | $ | — |
| | $ | 127,969 |
| | $ | 42,656 |
| | $ | 35,517 |
| | $ | 531,142 |
|
Kristine R. Nario | | 2017 | | $ | 325,000 |
| | $ | — |
| | $ | 218,930 |
| | $ | 72,977 |
| | $ | 16,335 |
| | $ | 633,242 |
|
Chief Financial Officer | | 2016 | | $ | 300,000 |
| | $ | — |
| | $ | 239,062 |
| | $ | 79,688 |
| | $ | 21,806 |
| | $ | 640,556 |
|
| | 2015 | | $ | 275,000 |
| | $ | — |
| | $ | 116,016 |
| | $ | 38,672 |
| | $ | 28,340 |
| | $ | 458,028 |
|
Kevin M. Donlon | | 2017 | | $ | 460,417 |
| (4) | $ | — |
| | $ | — |
| | $ | — |
| | $ | 31,537 |
| | $ | 491,954 |
|
President | | 2016 | | $ | 343,750 |
| (5) | $ | — |
| | $ | 515,625 |
| | $ | 515,625 |
| | $ | — |
| | $ | 1,375,000 |
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(1) | Amounts represent annual cash incentive compensation earned under the ICP for each applicable fiscal year. For a description of the formula used to calculate the amounts payable under the ICP for each applicable fiscal year, see “—Compensation Discussion and Analysis—Executive Compensation Program Components—2017 Annual Incentive Plan.” The terms of the ICP for 2016 and 2015 are identical to the terms of the 2017 Annual Incentive Plan. In accordance with the 2017 Annual Incentive Plan, for fiscal year 2017, Mr. Mumma received total incentive compensation of $1,357,312, $939,328 of which was paid in cash and $417,984 of which was paid in shares of restricted stock (and thus reported in the “Stock Awards” column in the table above). Mr. Reese received total incentive compensation of $339,679, $254,759 of which was paid in cash and $84,920 of which was paid in shares of restricted stock (and thus reported in the “Stock Awards” column in the table above) for fiscal year 2017 and Ms. Nario received total incentive compensation |
of $291,907, $218,930$1,350,000, $810,000 of which was paid in cash and $72,977$540,000 of which was paid in shares of restricted stock (and thus reported in the “Stock Awards” column in the table above). Mr. Serrano received total annual incentive compensation of $1,125,000, $675,000 of which was paid in cash and $450,000 of which was paid in shares of restricted stock (and thus reported in the “Stock Awards” column in the table above) for fiscal year 2017.2020, Mr. Reese received total annual incentive compensation of $250,000, $225,000 of which was paid in cash and $25,000 of which was paid in shares of restricted stock (and thus reported in the “Stock Awards” column in the table above) for fiscal year 2020 and Ms. Nario-Eng received total annual incentive compensation of $421,875, $253,125 of which was paid in cash and $168,750 of which was paid in shares of restricted stock (and thus reported in the “Stock Awards” column in the table above) for fiscal year 2020. The value of the shares of restricted stock referenced in this footnote reflect the grant date fair value of such shares computed in accordance with FASB ASC Topic 718.
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(2) |
(2)The amounts in this column includes the grant date fair value of the restricted stock awards, RSU awards and PSU awards computed in accordance with FASB ASC Topic 718, including the following: (1) 2020 PSUs having a grant date fair value of $1,371,426 (Mr. Mumma), $1,142,860 (Mr. Serrano), $380,956 (Mr. Reese) and $428,574 (Ms. Nario-Eng), and (2) 2020 RSUs having a grant date fair value of $600,000 (Mr. Mumma), $500,000 (Mr. Serrano), $166,667 (Mr. Reese) and $187,500 (Ms. Nario-Eng). PSUs awarded as part of 2019 compensation of $1,202,717 (Mr. Mumma), $1,061,970 (Mr. Serrano), $264,857 (Mr. Reese) and $264,857 (Ms. Nario-Eng). PSUs awarded as part of 2018 compensation have a grant date fair value for purposes of 2018 compensation of $1,034,687 (Mr. Mumma), $258,672 (Mr. Reese) and $258,672 (Ms. Nario-Eng). The grant date fair value of the PSUs are based on a Monte Carlo simulation value as of the applicable grant date. See “—Compensation Discussion and Analysis—Executive Compensation Program Components for 2020—Long-Term Equity Incentive Compensation” for additional information about the PSUs. The amounts in this column reflect the grant date fair value of the awards computed in accordance with FASB ASC Topic 718. On February 13, 2018, Mr. Mumma, Mr. Reese and Ms. Nario received 75,042, 15,246, and 13,102 shares of restricted stock, respectively, in accordance with the awards payable to each officer under the 2017 Annual Incentive Plan for their individual performance and our performance in 2017. Similarly, on February 8, 2017, Mr. Mumma, Mr. Donlon, Mr. Reese and Ms. Nario received 138,237, 78,842, 17,727 and 12,185 shares of restricted stock, respectively, in accordance with the awards payable to each officer under the 2016 Annual Incentive Plan for their individual performance and our performance in 2016. Mr. Mumma also received 6,258 shares of restricted stock in May 2017 as part of the remaining balance of restricted shares due to him under the 2016 Annual Incentive Plan for his performance and our performance in 2016. On May 16, 2016, Mr. Mumma received 100,000 shares pursuant to a restricted stock award granted to him in May 2016, which amount is included as 2016 compensation. Finally, on February 25, 2016, Mr. Mumma, Mr. Reese and Ms. Nario received 25,240, 10,254 and 9,296 shares of restricted stock, respectively, in accordance with the awards payable to each officer under the 2015 Annual Incentive Plan for their individual performance and our performance in 2015. For a description of the formula used to calculate the amounts payable under the ICP for each applicable fiscal year, in cash and restricted stock, see “—Compensation Discussion and Analysis—Executive Compensation Program Components—2017 Annual Incentive Plan.” Because, in the case of the restricted stock issued pursuant to the ICP, the size of the awards were determined by the Compensation Committee as part of the NEOs' compensation for each person’s individual performance and our performance in the respective years set forth in the table above, we have included these restricted stock awards in our NEOs' compensation for such year even though they were issued in February of the subsequent year. Pursuant to the terms of the restricted stock award agreements, one-third of the shares awarded as part of the grants will vest and become non-forfeitable on each of the first three anniversaries of the date of grant. All shares issued to the NEOs through February 2017 were issued under the 2010 Stock Plan. All shares issued to the NEOs subsequent to February 2017 were issued under the 2017 Stock Plan. |
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(3) | Dividends paid on unvested restricted common stock, which are included in “All Other Compensation,” are based on the same dividend rate per share as the dividends on our common stock. All other compensation includes: |
2017 for Mr. Mumma: Includes $235,735Serrano also include the grant date fair value of an award of 161,812 shares of restricted stock granted on January 7, 2019 in connection with Mr. Serrano joining our Company. These restricted shares vest in full on January 7, 2022, subject to continued employment and certain other conditions.
See table below for shares of restricted stock granted to each NEO in accordance with the annual incentive plans in effect for the years ended December 31, 2020 (January 27, 2021 grant date), December 31, 2019 (February 4, 2020 grant date), and December 31, 2018 (February 5, 2019 grant date).
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| | Number of Shares of Restricted Stock on Grant Date (a) |
Named Executive Officer | | January 27, 2021 | | February 4, 2020 | | February 5, 2019 | |
Steven R. Mumma | | 141,361 | | | 248,815 | | | 91,969 | | |
Jason T. Serrano | | 117,801 | | | 207,346 | | | — | | |
Nathan R. Reese | | 6,544 | | | 39,494 | | | 14,016 | | |
Kristine R. Nario-Eng | | 44,175 | | | 39,494 | | | 12,992 | | |
(a) For a description of the formula used and other considerations taken into account by the Compensation Committee to calculate the amounts payable under the annual incentive plan for each applicable fiscal year, in cash and restricted stock, see “—Compensation Discussion and Analysis—Executive Compensation Program Components for 2020—Annual Incentive Compensation.” Because, in the case of the restricted stock issued pursuant to the annual incentive plan for the applicable year, the size of the awards were determined by the Compensation Committee as part of the NEOs' compensation for each person’s individual performance and our performance in the respective years ended December 31, 2020, 2019 and 2018, we have included these restricted stock awards in our NEOs' compensation for such year even though they were issued in February of the subsequent year. Pursuant to the terms of the restricted stock award agreements, one-third of the shares awarded as part of the grants will vest and become non-forfeitable on each of the first three anniversaries of the date of grant. All shares issued to the NEOs through February 2017 were issued under the 2010 Stock Plan. All shares issued to the NEOs subsequent to February 2017 were issued under the 2017 Stock Plan.
(3)See table below for the target number of PSUs and the number of RSUs granted to each NEO in the year ended December 31, 2020 in accordance with the 2020 Long-Term EIP and the target number of PSUs in the years ended December 31, 2019 and 2018 in accordance with the 2019 Long-Term EIP and 2018 Long-Term EIP, respectively:
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Named Executive Officer | | Target Number of 2020 PSUs | | 2020 RSUs | | Target Number of 2019 PSUs | | Target Number of 2018 PSUs |
Steven R. Mumma | | 192,616 | | 96,308 | | 305,603 | | 259,320 |
Jason T. Serrano | | 160,514 | | 80,257 | | 254,669 | | — |
Nathan R. Reese | | 53,505 | | 26,752 | | 67,912 | | 64,830 |
Kristine R. Nario-Eng | | 60,193 | | 30,096 | | 67,912 | | 64,830 |
(4)Dividends paid on unvested restricted common stock, which are included in “All Other Compensation,” are based on the same dividend rate per share as the dividends on outstanding and unvested restricted stock, $2,415 in premiumsour common stock. All other compensation includes:
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| | 2020 |
Named Executive Officer | | Dividends on Outstanding and Unvested Restricted Stock | | Life Insurance Policy Premium | | Supplemental Disability Insurance Policy Premium | | 401(k) Employer Contribution | | Total All Other Compensation |
Steven R. Mumma | | $ | 96,682 | | | $ | — | | | $ | 2,766 | | | $ | — | | | $ | 99,448 | |
Jason T. Serrano | | $ | 96,965 | | | $ | — | | | $ | — | | | $ | — | | | $ | 96,965 | |
Nathan R. Reese | | $ | 15,454 | | | $ | — | | | $ | — | | | $ | — | | | $ | 15,454 | |
Kristine R. Nario-Eng | | $ | 14,349 | | | $ | — | | | $ | — | | | $ | — | | | $ | 14,349 | |
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| | 2019 |
Named Executive Officer | | Dividends on Outstanding and Unvested Restricted Stock | | Life Insurance Policy Premium | | Supplemental Disability Insurance Policy Premium | | 401(k) Employer Contribution | | Total All Other Compensation |
Steven R. Mumma | | $ | 163,387 | | | $ | — | | | $ | 2,766 | | | $ | — | | | $ | 166,153 | |
Jason T. Serrano | | $ | 97,087 | | | $ | — | | | $ | — | | | $ | — | | | $ | 97,087 | |
Nathan R. Reese | | $ | 20,337 | | | $ | — | | | $ | — | | | $ | — | | | $ | 20,337 | |
Kristine R. Nario-Eng | | $ | 24,150 | | | $ | — | | | $ | — | | | $ | — | | | $ | 24,150 | |
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| | 2018 |
Named Executive Officer | | Dividends on Outstanding and Unvested Restricted Stock | | Life Insurance Policy Premium | | Supplemental Disability Insurance Policy Premium | | 401(k) Employer Contribution | | Total All Other Compensation |
Steven R. Mumma | | $ | 190,532 | | | $ | — | | | $ | 8,509 | | | $ | — | | | $ | 199,041 | |
Nathan R. Reese | | $ | 24,038 | | | $ | — | | | $ | — | | | $ | — | | | $ | 24,038 | |
Kristine R. Nario-Eng | | $ | 18,777 | | | $ | — | | | $ | — | | | $ | — | | | $ | 18,777 | |
(5)Represents the pro-rated amount of Mr. Serrano's annual base salary that was paid to him for life insurance policies, and $8,509 in premiums paid for supplemental disability insurance policies.the period January 7, 2019 to December 31, 2019.
2016 for Mr. Mumma: Includes $220,703 in dividends on outstanding and unvested restricted stock, $2,415 in premiums paid for life insurance policies, $8,509 in premiums paid for supplemental disability insurance policies and $7,950 in 401k employer contribution.
2015 for Mr. Mumma: Includes $226,720 in dividends on outstanding and unvested restricted stock, $2,415 in premiums paid for life insurance policies, $8,509 in premiums paid for supplemental disability insurance policies and $19,075 in 401k employer contribution.
2017 for Mr. Reese: Includes $22,143 in dividends on outstanding and unvested restricted stock.
2016 for Mr. Reese: Includes $18,972 in dividends on outstanding and unvested restricted stock and $7,950 in 401k employer contribution.
2015 for Mr. Reese: Includes $16,442 in dividends on outstanding and unvested restricted stock and $19,075 in 401k employer contribution.
2017 for Ms. Nario: Includes $16,335 in dividends on outstanding and unvested restricted stock.
2016 for Ms. Nario: Includes $13,856 in dividends on outstanding and unvested restricted stock and $7,950 in 401k employer contribution.
2015 for Ms. Nario: Includes $9,265 in dividends on outstanding and unvested restricted stock and $19,075 in 401k employer contribution.
2017 for Mr. Donlon: Includes $31,537 in dividends on outstanding and unvested restricted stock.
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(4) | Represents the pro-rated amount of Mr. Donlon's annual base salary that was paid to him for the period January 1, 2017 to September 18, 2017. Mr. Donlon only received compensation for his service as our President and received no additional compensation for his service as a director. |
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(5) | Represents the pro-rated amount of Mr. Donlon's annual base salary that was paid to him for the period May 16, 2016 to December 31, 2016. |
Discussion of Summary Compensation Table
Cash Bonus. In connection with the adoption of the ICP,our annual incentive plans, cash incentive amounts paid under the ICPthese plans for each of 2017, 20162020, 2019 and 2015, the terms of which are identical to one another,2018, are deemed to be grants of non-equity incentive compensation. See “—Compensation Discussion and Analysis—Executive Compensation Program Components—2017Components for 2020— Annual Incentive Plan.Compensation.”
Stock Awards. As discussed in footnote 1(1) to the “Summary Compensation Table” above and except as set forth in footnote (2) to the immediately following sentence,“Summary Compensation Table” as it relates to Mr. Serrano’s restricted stock award on January 7, 2019, we include restricted stock awards granted each year as compensation in the prior year because the size of the annual restricted stock awards are determined and awarded by the Compensation Committee in consideration of the amount deemed earned under the ICPannual incentive compensation plan for each of 2017, 20162020, 2019 and 2015 during those respective years2018 and each person’s individual performance and our performance during those years. In May 2016, we granted a separate restricted stock award to Mr. Mumma, which was comprised of 100,000 shares of restricted stock and which is included as 2016 compensation in the table above, since the award was granted, in part, based on certain achievements in 2016. Each restricted stock award granted to the NEOs under our annual incentive plans vests ratably on each of the first, second and third anniversaries of the date of grant.
Grants of Plan-Based Awards
The following table presents information regarding plan-based awards to the NEOs during the fiscal year ended December 31, 2017.2020. See the information under the caption “—Other Compensation Arrangements” for information regarding the acceleration of vesting and payment of these awards in certain circumstances.
| | Name | | Type of Award (1) | | Grant Date | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | | Estimated Future Payouts Under Equity Incentive Plan Awards | | All Other Stock Awards: Number of Shares of Stock or Units (2) | | Grant Date Fair Value of Stock and Option Awards (3) | Name | | Type of Award (1) | | Grant Date | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | | Estimated Future Payouts Under Equity Incentive Plan Awards | | All Other Stock Awards: Number of Shares of Stock or Units (2) | | Grant Date Fair Value of Stock and Option Awards (3) | |
| | | | Threshold ($) | | Target ($) | | Maximum ($) | | Threshold (#) | | Target (#) | | Maximum (#) | | (#) | | ($) | | | | | | | Threshold ($) | | Target ($) | | Maximum ($) | | Threshold (#) | | Target (#) | | Maximum (#) | | (#) | | ($) | |
Steven R. Mumma | | RSA | | 2/8/2017 | | — | | — | | — | | — | | — | | — | | 144,495 | | $ | 944,997 |
| Steven R. Mumma | | RSA | | 2/4/2020 | | — | | — | | — | | — | | — | | — | | 248,815 | | $ | 1,575,000 | | |
| | RSA | | 2/8/2017(4) | | — | | — | | $ | 2,400,000 |
| (5) | — | | — | | — | | — | | $ | — |
| | AIP | | 2/4/2020 | (4) | — | | — | | $ | 3,600,000 | | (5) | — | | — | | — | | — | | — | | |
Kevin M. Donlon | | RSA | | 2/8/2017 | | — | | — | | — |
| | — | | — | | — | | 78,842 | | $ | 515,625 |
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| | | PSU | | 1/1/2020 | | — | | — | | — | | | 96,308 | | 192,616 | | 385,233 | | — | | $ | 1,371,426 | | (6) |
| | | RSU | | 1/1/2020 | | — | | — | | — | | | — | | — | | — | | 96,308 | | $ | 600,000 | | |
Jason T. Serrano | | Jason T. Serrano | | RSA | | 2/4/2020 | | — | | — | | — | | | — | | — | | — | | 207,346 | | $ | 1,312,500 | | |
| | | AIP | | 2/4/2020 | (4) | — | | — | | $ | 3,000,000 | | (5) | — | | — | | — | | — | | — | | |
| | | PSU | | 1/1/2020 | | — | | — | | — | | | 80,257 | | 160,514 | | 321,027 | | — | | $ | 1,142,860 | | (6) |
| | RSA | | 2/8/2017 | | — | | — | | $ | 1,950,000 |
| (5) | — | | — | | — | | — | | $ | — |
| | RSU | | 1/1/2020 | | — | | — | | — | | | — | | — | | — | | 80,257 | | $ | 500,000 | | |
Nathan R. Reese | | RSA | | 2/8/2017 | | — | | — | | — |
| | — | | — | | — | | 17,727 | | $ | 115,938 |
| Nathan R. Reese | | RSA | | 2/4/2020 | | — | | — | | — | | | — | | — | | — | | 39,494 | | $ | 250,000 | | |
| | RSA | | 2/8/2017(4) | | — | | — | | $ | 525,000 |
| (6) | — | | — | | — | | — | | $ | — |
| | AIP | | 2/4/2020 | (4) | — | | — | | $ | 1,000,000 | | (5) | — | | — | | — | | — | | — | | |
Kristine R. Nario | | RSA | | 2/8/2017 | | — | | — | | — |
| | — | | — | | — | | 12,185 | | $ | 79,688 |
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| | RSA | | 2/8/2017(4) | | — | | — | | $ | 406,250 |
| (7) | — | | — | | — | | — | | $ | — |
| | PSU | | 1/1/2020 | | — | | — | | — | | | 26,752 | | 53,505 | | 107,009 | | — | | $ | 380,956 | | (6) |
| | | RSU | | 1/1/2020 | | — | | — | | — | | | — | | — | | — | | 26,752 | | $ | 166,667 | | |
Kristine R. Nario-Eng | | Kristine R. Nario-Eng | | RSA | | 2/4/2020 | | — | | — | | — | | | — | | — | | — | | 39,494 | | $ | 250,000 | | |
| | | AIP | | 2/4/2020 | (4) | — | | — | | $ | 1,125,000 | | (5) | — | | — | | — | | — | | — | | |
| | | PSU | | 1/1/2020 | | — | | — | | — | | | 30,096 | | 60,193 | | 120,385 | | — | | $ | 428,574 | | (6) |
| | | RSU | | 1/1/2020 | | — | | — | | — | | | — | | — | | — | | 30,096 | | $ | 187,500 | | |
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(1) | RSA refers to restricted stock awards. |
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(2) | The February 8, 2017 awards represent restricted share awards issued as part of the NEOs’ 2016 compensation package under the ICP for 2016, which vest as follows: one third vested on February 8, 2018, one third will vest on February 8, 2019 and the final one-third will vest on February 8, 2020. The grant date fair value of these awards are included in 2016 compensation in the “Summary Compensation Table” and are computed in accordance with FASB ASC Topic 718. With respect to Mr. Mumma, the number of shares includes 6,258 shares that were granted on February 8, 2017 and were issued in May 2017 under the 2017 Stock Plan. |
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(3) | Amounts represent the value of restricted share awards based on the closing sale price for shares of our common stock on the date of grant. |
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(4) | Represents the non-equity incentive plan awards granted under the 2017 Annual Incentive Plan. See “—Compensation Discussion and Analysis—Executive Compensation Program Components—2017 Annual Incentive Plan” above. The 2017 Annual Incentive Plan is comprised of two parts: a quantitative component and a qualitative component. The 2017 Annual Incentive Plan provides for no minimum award or guaranteed payment, nor does the 2017 Annual Incentive Plan provide one specific “target” rate, but rather, rewards participants if (i) the average of three company performance measures, AROE, TER and TSR, exceeds various hurdles between 8% and 14% and (ii) the participants qualitative component exceeds zero. The Compensation Committee has the discretion to award non-equity incentive compensation in the event the participant fails to exceed the minimum performance thresholds under the 2017 Annual Incentive Plan and similarly, has the discretion to award more or less than the participant’s minimum, target and maximum incentive compensation opportunities in light of the Company’s and the participant’s performance. Incentive compensation under the 2017 Annual Incentive Plan may be paid in cash, or depending on the size of the award earned, a combination of cash and shares of restricted stock. |
(1)RSA refers to restricted stock awards. PSU refers to performance stock units. RSU refers to restricted stock units. AIP refers to 2020 Annual Incentive Plan awards.
(2)RSA awards represent restricted stock awards issued as part of the NEOs’ 2019 compensation package under the 2019 Annual Incentive Plan on February 4, 2020, which vest as follows: one third vested on February 4, 2021, one third will vest on February 4, 2022 and the final one-third will vest on February 4, 2023. RSU represents awards of restricted stock units granted under the 2020 Long-Term EIP, which vest as follows: one third vested on January 1, 2021, one third will vest on January 1, 2022 and the final one-third will vest on January 1, 2023.
(3)See footnote(2) under the “Summary Compensation Table” for information on how the grant date fair value for RSA, RSU and PSU grants made in 2020 are determined.
(4)Represents the non-equity incentive plan awards granted under the 2020 Annual Incentive Plan. See “—Compensation Discussion and Analysis—Executive Compensation Program Components for 2020—Annual Incentive Compensation” above. The 2020 Annual Incentive Plan is comprised of two parts: a quantitative component and a qualitative component. The 2020 Annual Incentive Plan provides for no minimum award or guaranteed payment and rewards participants if (i) TER exceeds various hurdles between 5% and 14% and (ii) the participant's qualitative component exceeds zero. The Compensation Committee has the discretion to award non-equity incentive compensation in the event the participant fails to exceed the minimum performance thresholds under the 2020 Annual Incentive Plan and similarly, has the discretion to award more or less than the participant’s minimum, target and maximum annual incentive compensation opportunities in light of the Company’s and the participant’s performance. Incentive compensation under the 2020 Annual Incentive Plan is paid in a combination of cash and shares of restricted stock. We have included 100% of the maximum award payable under the 20172020 Annual Incentive Plan in the “Estimated Future Payouts Under Non-Equity Incentive Plan Awards” column above. In the event the maximum award had been earned in 2017, Mr. Mumma would have received $1,200,000 of his non-equity incentive compensation plan award in the form of shares of restricted common stock, Mr. Donlon would have received $975,000 of his non-equity incentive compensation plan award in the form of shares of restricted common stock, Mr. Reese would have received $131,250 of his non-equity incentive compensation plan award in the form of shares of restricted common stock, and Ms. Nario would have received $101,563 of her non-equity incentive compensation plan award in the form of shares of restricted common stock. The restricted stock vests ratably over three yearson the first, second and third anniversary from the date of grant.
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(5) | Each of Mr. Mumma’s and Mr. Donlon's incentive compensation under the 2017 Annual Incentive Plan was weighted 80% based on performance under the quantitative component and 20% under the qualitative component. See “—Compensation Discussion and Analysis—Executive Compensation Program Components—2017 Annual Incentive Plan” above for a description of the hurdles and payout amounts applicable to these individuals under the 2017 Annual Incentive Plan. |
(5)Each of our NEOs' compensation under the 2020 Annual Incentive Plan was weighted 75% based on performance under the quantitative component and 25% under the qualitative component. See “—Compensation Discussion and Analysis—Executive Compensation Program Components for 2020— Annual Incentive Compensation” above for a description of the hurdles and payout amounts applicable to these individuals under the 2020 Annual Incentive Plan.
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(6) | Mr. Reese’s incentive compensation under the 2017 Annual Incentive Plan was weighted 65% based on performance under the quantitative component and 35% under the qualitative component. See “—Compensation Discussion and Analysis—Executive Compensation Program Components—2017 Annual Incentive Plan” above for a description of the hurdles and payout amounts applicable to Mr. Reese under the 2017 Annual Incentive Plan. |
(6)The PSU awards granted during the year ended December 31, 2020, may be earned (or not) based upon our three-year TSR performance as measured against the identified performance peer group of comparable companies for a performance period that commenced on January 1, 2020 and ends on December 31, 2022. Pursuant to these PSU awards, our NEOs are eligible to receive threshold, target and maximum payouts of 50%, 100% and 200%, respectively, of the respective target amount of PSUs awarded. In order to achieve threshold, target and maximum payouts under the PSUs, our TSR performance relative to the identified performance peer group over the performance period must rank at or above the 30th percentile, 50th percentile or 80th percentile, respectively. If our TSR over the performance period ranks below the threshold performance level, all of the PSUs will be forfeited.
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(7) | Ms. Nario’s incentive compensation under the 2017 Annual Incentive Plan was weighted such that 25% was based on performance under the quantitative component and 75% was based on performance under the qualitative component. See “—Compensation Discussion and Analysis—Executive Compensation Program Components—2017 Annual Incentive Plan” above for a description of the hurdles and payout amounts applicable to Ms. Nario under the 2017 Annual Incentive Plan. |
Outstanding Equity Awards at Fiscal Year End
The following table listsprovides information about outstanding equity awards of our NEOs as of December 31, 2020.
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Named Executive Officer | | Number of Shares or Units of Stock That Have Not Vested | | Market Value of Shares or Units of Stock That Have Not Vested (1) | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (2) | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested (1) |
Steven R. Mumma (3) | | 431,449 | | | $ | 1,592,047 | | | 249,109 | | | $ | 919,212 | |
Jason T. Serrano (4) | | 449,415 | | | $ | 1,658,341 | | | 207,591 | | | $ | 766,011 | |
Nathan R. Reese (5) | | 80,672 | | | $ | 297,680 | | | 60,708 | | | $ | 224,013 | |
Kristine R. Nario-Eng (6) | | 82,619 | | | $ | 304,864 | | | 64,052 | | | $ | 236,352 | |
(1)Value is determined by multiplying the number of unvested shares of restricted stock or shares of common stock awardedunderlying RSUs, as the case may be, by $3.69, the closing sale price for our common stock on December 31, 2020.
(2)Represents, as of December 31, 2020, shares of common stock underlying the unearned PSUs granted to our NEOs that areon January 1, 2019, January 7, 2019, April 22, 2019 and January 1, 2020 at threshold performance levels. See "—Other Compensation Arrangements" for information regarding the various forfeiture and vesting provisions under the form of award agreements for our equity awards.
(3)Mr. Mumma received a restricted stock grant of 75,042 shares on February 13, 2018 as part of his 2017 compensation package, of which 25,014 were unvested and outstanding as of December 31, 2017. No discount has been taken2020 (although such unvested shares subsequently vested on February 13, 2021). Mr. Mumma received a restricted stock grant totaling 91,969 shares on February 5, 2019 as part of his 2018 compensation package, of which 61,312 were unvested and outstanding as of December 31, 2020 (with 30,656 shares having vested on February 5, 2021 and the remaining 30,656 will vest on February 5, 2022, provided the NEO remains employed by us as of such date). Mr. Mumma received a restricted stock grant totaling 248,815 shares on February 4, 2020 as part of his 2019 compensation package, all of which were unvested and outstanding as of December 31, 2020 (with 82,939 shares having vested on February 4, 2021, while an additional 82,938 shares will vest on each of February 4, 2022 and February 4, 2023, provided the NEO remains employed by us as of such date). Mr. Mumma received an RSU grant totaling 96,308 RSUs on January 1, 2020, all of which were unvested and outstanding as of December 31, 2020 (with 32,103 RSUs having vested on January 1, 2021, while 32,103 will vest on January 1, 2022 and the remaining 32,102 will vest on January 1, 2023, provided the NEO remains employed by us as of such dates). The shares issued as part of the January 2021 grant are not included in the table above because they were not outstanding at December 31, 2020. Vesting of all of these shares may be accelerated in the event of the NEO’s death, disability, termination without cause or resignation for good reason. See “—Other Compensation Arrangements—Restricted Stock Award Agreements” and “Other Compensation Arrangements—Employment Agreement.”
(4)Mr. Serrano received a restricted stock grant of 161,812 shares on January 7, 2019 in connection with his joining the Company on January 7, 2019. The shares of restricted stock issued on January 7, 2019 will vest in full on January 7, 2022 (subject to reflect riskcontinued employment and certain other conditions). Of this amount, 161,812 shares were unvested as of forfeiture or restrictionsDecember 31, 2020. Mr. Serrano received an RSU grant totaling 80,257 RSUs on transferability.January 1, 2020, all of which were unvested and outstanding as of December 31, 2020 (with 26,753 RSUs having vested on January 1, 2021, while the remaining 53,504 will vest in two equal installments on each of January 1, 2022 and January 1, 2023, provided the NEO remains employed by us as of such dates). Mr. Serrano received a restricted stock grant totaling 207,346 shares on February 4, 2020 as part of his 2019 compensation package, all of which were unvested and outstanding as of December 31, 2020 (with 69,116 shares having vested on February 4, 2021, while an additional 69,115 shares will vest on each of February 4, 2022 and February 4, 2023, provided the NEO remains employed by us as of such dates). The shares issued as part of the January 2021 grant to Mr. Serrano are not included in the table above because they were not outstanding at December 31, 2020. See the information under the caption “—Other Compensation Arrangements” for information regarding the acceleration of vesting and payment of these shares in certain circumstances.
(5)Mr. Reese received a restricted stock grant of 15,246 shares on February 13, 2018 as part of his 2017 compensation package, of which 5,082 were unvested and outstanding as of December 31, 2020 (although such unvested shares subsequently vested on February 13, 2021). Mr. Reese received a restricted stock grant totaling 14,016 shares on February 5, 2019 as part of his 2018 compensation package, of which 9,344 were unvested and outstanding as of December 31, 2020 (with 4,672 shares having vested on February 5, 2021 and the remaining 4,672 will vest on February 5, 2022, provided the NEO remains employed by us as of such date). Mr. Reese received an RSU grant totaling 26,752 RSUs on January 1, 2020, all of which were unvested and outstanding as of December 31, 2020 (with 8,918 RSUs having vested on January 1, 2021, while the remaining 17,834 will vest in two equal installments on each of January 1, 2022 and January 1, 2023, provided the NEO remains employed by us as of such dates). Mr. Reese received a restricted stock grant totaling 39,494 shares on February 4, 2020 as part of his 2019 compensation package, all of which were unvested and outstanding as of December 31, 2020 (with 13,165 shares having vested on February 4, 2021, while the additional 13,165 shares and the remaining the 13,164 shares will vest on February 4, 2022 and February 4, 2023, respectively, provided the NEO remains employed by us as of such dates). The shares issued as part of the January 2021 grant are not included in the table above because they were not outstanding at December 31, 2020. See the information under the caption “—Other Compensation Arrangements” for information regarding the acceleration of vesting and payment of these shares in certain circumstances.
(6)Ms. Nario-Eng received a restricted stock grant of 13,102 shares on February 13, 2018 as part of her 2017 compensation package, of which 4,368 were unvested and outstanding as of December 31, 2020 (although such unvested shares subsequently vested on February 13, 2021). Ms. Nario-Eng received a restricted stock grant totaling 12,992 shares on February 5, 2019 as part of her 2018 compensation package, of which 8,661 were unvested and outstanding as of December 31, 2020 (with 4,331 shares having vested on February 5, 2021 and the remaining 4,330 will vest on February 5, 2022, provided the NEO remains employed by us as of such date). Ms. Nario-Eng received an RSU grant totaling 30,096 RSUs on January 1, 2020, all of which were unvested and outstanding as of December 31, 2020 (with 10,032 RSUs having vested on January 1, 2021, while the remaining 20,064 will vest in two equal installments on each of January 1, 2022 and January 1, 2023, provided the NEO remains employed by us as of such dates). Ms. Nario-Eng received a restricted stock grant totaling 39,494 shares on February 4, 2020 as part of her 2019 compensation package, all of which were unvested and outstanding as of December 31, 2020 (with 13,165 shares having vested on February 4, 2021, while the additional 13,165 shares and the remaining the 13,164 shares will vest on February 4, 2022 and February 4, 2023, respectively, provided the NEO remains employed by us as of such dates). The shares issued as part of the January 2021 grant are not included in the table above because they were not outstanding at December 31, 2020. See the information under the caption “—Other Compensation Arrangements” for information regarding the acceleration of vesting and payment of these shares in certain circumstances.
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Named Executive Officer | | Number of Shares or Units or Stock That Have Not Vested | | Market Value of Shares or Units of Stock That Have Not Vested (1) | | Equity Incentive Plan Awards: Number of Unearned Shares That Have Not Vested(2) | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares That Have Not Vested(1) |
Steven R. Mumma (3) | | 279,972 |
| | $ | 1,727,427 |
| | 94,043 |
| | $ | 580,245 |
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Nathan R. Reese (4) | | 28,745 |
| | $ | 177,357 |
| | — |
| | — |
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Kristine R. Nario (5) | | 20,917 |
| | $ | 129,058 |
| | — |
| | — |
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Vested Equity Awards
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(1) | Value is determined by multiplying the number of unvested restricted shares by $6.17, the closing sale price for our common stock on December 29, 2017. |
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(2) | Represents unearned shares of common stock underlying the performance share award (“PSA”) granted to Mr. Mumma on May 28, 2015, as of December 31, 2017. The PSA is a performance-based equity award under which the number of underlying shares of common stock that vest and that the award recipient becomes entitled to receive at the time of vesting will generally range from 0% to 200% based on TSR over the three-year performance period. The PSA was granted in May 2015 and vests, if at all, on April 30, 2018. The maximum number of shares which may be issued pursuant to the PSA is limited to 94,043 shares. The Compensation Committee has determined that in the event the PSA is earned at a level in excess of 94,043 shares, the dollar value of the PSA earned in excess of 94,043 shares will be paid in cash, subject to the terms of the 2010 Stock Plan. |
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(3) | Mr. Mumma received a restricted stock grant of 155,957 shares on February 18, 2015 as part of his 2014 compensation package. Of this amount, 51,985 shares were unvested as of December 31, 2017 (although such unvested shares subsequently vested on February 18, 2018). Mr. Mumma received a restricted stock grant of 25,240 shares on February 25, 2016 as part of his 2015 compensation package. Of this amount, 16,826 shares were unvested as of December 31, 2017 (with 8,413 shares having vested on February 25, 2018, while an additional 8,413 shares will vest on February 25, 2019, provided the NEO remains employed with the Company as of such date). Mr. Mumma received a restricted stock grant of 100,000 shares on May 16, 2016. Of this amount, 66,666 shares were unvested and outstanding as of December 31, 2017 (33,333 shares of which will vest on May 16, 2018 and an additional 33,333 shares will vest on May 16, 2019, provided the NEO remains employed with the Company as of such date). Mr. Mumma received a restricted stock grant totaling 144,495 shares on February 8, 2017 as part of his 2016 compensation package, all of which were unvested and outstanding as of December 31, 2017 (with 48,165 shares having vested on February 8, 2018, while an additional 48,165 shares will vest on each of February 8, 2019 and February 8, 2020, provided the NEO remains employed with the Company as of such dates). The shares issued as part of the February 2018 grant are not included in the table above because they were not outstanding at December 31, 2017. Vesting of all of these shares may be accelerated in the event of the NEO’s death, disability, termination without cause or resignation for good reason. See “—Other Compensation Arrangements—Restricted Stock Award Agreements” and “Other Compensation Arrangements—Employment and Other Agreements.” |
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(4) | Mr. Reese received a restricted stock grant of 12,546 shares on February 18, 2015 as part of his 2014 compensation package. Of this amount, 4,182 shares were unvested as of December 31, 2017 (although such unvested shares subsequently vested on February 18, 2018). Mr. Reese received a restricted stock grant of 10,254 shares on February 25, 2016 as part of his 2015 compensation package. Of this amount, 6,836 shares were unvested as of December 31, 2017 (with 3,418 shares having vested on February 25, 2018, while an additional 3,418 shares will vest on February 25, 2019, provided the NEO remains employed with the Company as of such date). Mr. Reese received a restricted stock grant of 17,727 on February 8, 2017 as part of his 2016 compensation, all of which were unvested and outstanding on December 31, 2017 (with 5,909 shares having vested on February 8, 2018, while an additional 5,909 shares will vest on each of February 8, 2019 and February 8, 2020, provided the NEO remains employed with the Company as of such dates). The shares issued as part of the February 2018 grant are not included in the table above because they were not outstanding at December 31, 2017. See the information under the caption “—Other Compensation Arrangements” for information regarding the acceleration of vesting and payment of these shares in certain circumstances. |
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(5) | Ms. Nario received a restricted stock grant of 7,605 shares on February 18, 2015 as part of her 2014 compensation package. Of this amount, 2,535 shares were unvested as of December 31, 2017 (although such unvested shares subsequently vested on February 18, 2018). Ms. Nario received a restricted stock grant of 9,296 shares on February 25, 2016 as part of her 2015 compensation package. Of this amount, 6,197 shares were unvested as of December 31, 2017 (with 3,099 shares having vested on February 25, 2018, while an additional 3,098 shares will vest on February 25, 2019, provided the NEO remains employed with the Company as of such date). Ms. Nario received a restricted stock grant of 12,185 shares on February 8, 2017, all of which were unvested and outstanding as of December 31, 2017 (with 4,062 shares having vested on February 8, 2018, while an additional 4,062 shares will vest on February 8, 2019 and an additional 4,061 shares will vest on February 8, 2020, provided the NEO remains employed with the Company as of such dates). The shares issued as part of the February 2018 grant are not included in the table above because they were not outstanding at December 31, 2017. See the information under the caption “—Other Compensation Arrangements” for information regarding the acceleration of vesting and payment of these shares in certain circumstances. |
Stock Vested
The following table presents information concerning the vesting of restricted stock and PSUs for the NEOs during the fiscal year ended December 31, 2017.2020.
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Name | | Number of Shares Acquired on Vesting | | Value Realized on Vesting(1) |
Steven R. Mumma | | 402,054 | | | $ | 1,757,857 | |
Jason T. Serrano | | — | | | $ | — | |
Nathan R. Reese | | 90,218 | | | $ | 374,200 | |
Kristine R. Nario-Eng | | 87,314 | | | $ | 355,825 | |
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Name | | Number of Shares Acquired on Vesting | | Value Realized on Vesting(1) |
Steven R. Mumma | | 124,260 |
| | $ | 800,442 |
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Kevin M. Donlon (2) | | 78,842 |
| | $ | 504,589 |
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Nathan R. Reese | | 9,380 |
| | $ | 61,134 |
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Kristine R. Nario | | 7,040 |
| | $ | 45,850 |
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(1)Value is determined by multiplying the number of shares by the closing sale price on the Nasdaq Global Select Market on the date on which such shares vested.
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(1) | Value is determined by multiplying the number of shares by the closing sale price on the Nasdaq Global Select Market on the date on which such shares vested. |
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(2) | Mr. Donlon resigned from his position with the Company on September 18, 2017. In connection with Mr. Donlon's resignation, we entered into the Separation Agreement, pursuant to which all of the 78,842 unvested and outstanding shares of restricted stock held by Mr. Donlon became fully vested on such date. |
CEO Compensation Pay Ratio
We believe our executive compensation program must be internally consistent and equitable to motivate our employees to create stockholder value. As such, we annually monitor the relationship between the compensation of our executive officers and the compensation of our non-managerial employees. For 2017,2020, the annual total compensation of Mr. Mumma, our Chief Executive Officer, of $2,403,971,$4,320,874, as shown in the Summary Compensation Table (the “CEO Compensation”), was approximately 10.2420.27 times the annual total compensation of our median employee calculated in the same manner of $234,836.$213,194.
To identify the median of the annual total compensation of all our employees, as well as to determine the annual total compensation of our median employee and the CEO Compensation, we took the following steps:
•We determined that, as of December 31, 2017,2020, our employee population, excluding our Chief Executive Officer, consisted of 1857 individuals. This population consisted of our 56 full-time employees as weand 1 part-time employee. We did not have part-time, temporary or seasonal employees as of December 31, 2017.2020. If any permanent employee was employed for less than the full fiscal year, we annualized such employee's total compensation.
•We used a consistently applied compensation measure to identify our median employee of comparing the annual base salary, incentive award (including restricted shares earned as part of an incentive award), bonus and any dividends paid on restricted shares for the year ended December 31, 2017.2020.
•We identified our median employee by consistently applying this compensation measure to all of our employees, excluding our Chief Executive Officer. Since all of our employees, including our Chief Executive Officer, are located in the United States, we did not make any cost of living adjustments in identifying the median employee. If such median employee’s total compensation was not comparable to the CEO Compensation, for example, because such median employee was hired at the end of the year and thus did not receive long term incentive stock awards in 2017, we used the next lower employee who was comparable as the median employee.
•After we identified our median employee, we combined all of the elements of such employee’s compensation for the 20172020 year in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K, resulting in annual total compensation of $234,836.$213,194.
•With respect to the annual total compensation of our Chief Executive Officer, we used the amount calculated in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K and reported in the “Total” column of the Summary Compensation Table included in this proxy statement and incorporated by reference in Item 11 of Part III of our 20172020 Annual Report.
Pension Benefits
We do not currently sponsor or maintain any plans that provide for specified retirement payments or benefits, such as tax-qualified defined benefit plans or supplemental executive retirement plans, for our NEOs.
Nonqualified Deferred Compensation
We do not currently sponsor or maintain any plans that provide for defined contribution or other deferrals of compensation on a basis that is not tax-qualified for our NEOs.
Other Compensation Arrangements
Restricted Stock Award Agreements
The restricted stock award agreements we entered into with our NEOs contain certain vesting and acceleration provisions with respect to a termination of employment as a result of death or disability or, in the case of our NEOs other(other than Mr. Mumma,Mumma) with respect to awards made prior to 2020, in the event of a change in control. Under the restricted stock award agreements, if the NEO’s employment with us is terminated due to death, the restricted shares issued under the agreement will become fully vested and non-forfeitable upon the date of death. If the NEO’s employment with us is terminated due to disability, the restricted shares issued under the agreement will become fully vested and non-forfeitable upon the date of the termination of the NEO’s employment. IfWith respect to restricted stock awards made prior to 2020, if we experience a change in control, the restricted shares issued under the agreement to our NEOs other(other than Mr. MummaMumma) will become fully vested and non-forfeitable immediately upon the occurrence of the event causing the change in control. With respect to the 2020 restricted stock awards, if we experience a change in control, the unvested restricted shares issued under the agreement to our NEOs will not accelerate or vest solely due to a change in control, but would instead require that the NEO’s employment with us be terminated within 24 months of our change in control by us without Cause (as defined in the 2020 restricted stock award agreement for all NEOs other than Mr. Mumma) or by the NEO for Good Reason (as defined in the 2020 restricted stock award agreement for all NEOs other than Mr. Mumma). Pursuant to Mr. Mumma's employment agreement with us, unvested restricted shares held by Mr. Mumma will not accelerate or vest solely due to a change in control, but instead would require that Mr. Mumma's employment with us is terminated by us without Cause or by Mr. Mumma for Good Reason. For purposes of the definition of Cause and Good Reason as it relates to Mr. Mumma, such definitions contained in Mr. Mumma’s employment agreement will control.
Restricted stock award agreements entered into by us with the NEOs providesgenerally provide for the grant of shares of restricted common stock, one-third of which will vest and become non-forfeitable on each of the first, second and third anniversaries of the date of grant subject to certain conditions.conditions, although under some circumstance the restricted stock award agreements may provide for other vesting periods. The holders of these restricted shares of common stock issued by us are entitled to (i) the payment of dividends on their unvested shares based on the same dividend rate per share as the dividends on our unrestricted common stock and (ii) vote their unvested shares. The restricted stock award agreements we have entered into with our NEOs for awards made in 2021 are substantially in the form of our 2020 restricted stock award agreement.
Performance Share AwardStock Unit Agreements
The Compensation Committee and the Board of Directors have previously approved the form of PSU Agreement pursuant to which we have made PSU Awards under the 2018 Long-Term EIP, 2019 Long-Term EIP, the 2020 Long-Term EIP and the 2021 Long-Term EIP. The PSU Agreements contain certain forfeiture, vesting and acceleration provisions as described under “Long-Term Equity Incentive Compensation” set forth herein.
On May 28, 2015,During the fourth quarter of 2018, the Compensation Committee and the Board of Directors approved a PSAthe form of PSU Agreement pursuant to Mr. Mumma, at which time we entered into a performance share award agreement with Mr. Mumma.have made PSU Awards under the 2019 Long-Term EIP (the “2019 PSU Agreement”). The PSA2019 PSU Agreement is a performance-based equity awardsubstantially in the form of PSU Agreement pursuant to which PSU Awards were granted under which the number2018 Long-Term EIP.
Similar to the 2020 PSUs, the NEO’s right to receive settlement of underlying shares of our common stock, cash or a combination thereof that can be earned will generally rangethe 2019 PSUs in amounts ranging from 0% to 200%150% of the target number of PSA granted, with2019 PSUs vests and becomes earned and non-forfeitable based on the attainment of relative TSR hurdles during the performance period (January 1, 2019 through December 31, 2021) as measured against an identified performance peer group. Pursuant to the 2019 PSU Agreement, an awardee will be entitled to 50%, 100% and 150% of the target number2019 PSUs upon achievement of PSA granted increasedrelative total shareholder return at the 30th, 50th and 80th, respectively, percentile ranking among the identified performance peer group for the performance period.
Upon any termination of an awardee’s employment or service relationship with us or our affiliates for any reason prior to reflect the value of the reinvestment of any dividends declared on our common stock during the measurement period (as further described below). The PSA generally will be earned at the end of three years (on April 30, 2018)the performance period, any unearned 2019 PSUs will terminate automatically without any further action by us, except as otherwise provided in any employment agreement between the awardee and us or as otherwise determined by the Compensation Committee. Additionally, upon the occurrence of a “Change in Control” (as defined in the 2017 Stock Plan) prior to the end of the performance period, the performance period will end and the number of 2019 PSUs earned, if any, will be determined based solely on three-year total TSR,the extent that the applicable performance goal has been achieved according to actual performance as of the date of the Change in Control.
During the fourth quarter of 2019, the Compensation Committee and the Board of Directors approved the form of PSU Agreement pursuant to which we have made PSU Awards under the 2020 Long-Term EIP (the “2020 PSU Agreement”). In January 2021, the Compensation Committee and the Board of Directors approved the form of PSU Agreement pursuant to which we have made PSU Awards under the 2021 Long-Term EIP (the “2021 PSU Agreement”). The 2021 PSU Agreement is substantially in the form of the 2020 PSU Agreement, except for minor modifications to the identified performance peer group. The 2020 and 2021 PSU Agreements are substantially in the form of the PSU Agreement used in connection with the 2019 PSUs, except as described in “Overview of NEO Compensation Determinations for 2021 — 2021 Long-Term EIP” and as follows:
(i) the 2020 and 2021 PSU Agreements provide that if three-year TSRthe NEO’s employment with the Company is less than 33%, then 0%terminated due to the NEO’s Retirement (as defined in such PSU Agreements) prior to the end of the performance period, the target PSUs will be reduced on a pro-rata basis to reflect (x) the number of PSAdays in which the NEO was employed from the date of grant through the date of the NEO’s retirement, divided by (y) the number of days in the performance period. In this case, the prorated number of target PSUs will vest;remain outstanding and eligible to vest and become earned PSUs to the extent to which the Company satisfies the performance goal set forth in the applicable PSU Agreement, which will be determined by the Compensation Committee in its sole discretion following the end of the performance period (while any PSUs under these agreements that do not become earned PSUs shall be automatically forfeited);
if three-year TSR is greater than or equal to 33%(ii) the 2020 and 2021 PSU Agreements provide that, upon a change in control of our Company, the performance period will end on the date of the change in control and the TSR is not inCompensation Committee will determine the bottom quartilenumber of PSUs under those agreements that are eligible to be earned to the extent that the performance goal has been satisfied through the date of the identified peer group, then 100%change in control (the “Eligible CIC PSUs”). In this case, the number of Eligible CIC PSUs will vest and become earned if the NEO remains employed through the requisite service period for the award. If the NEO’s employment with us is terminated within 24 months of the target number of PSA will vest;
if three-year TSR is greater than or equal to 33% and the TSR is in the top quartiledate of the identified peer group then 200%change in control without Cause (as defined in such PSU Agreements for all NEOs other than Mr. Mumma) or by the NEO for Good Reason (as defined in such PSU Agreements for all NEOs other than Mr. Mumma) and prior to the end of the target numberrequisite service period, the Eligible CIC PSUs will be deemed vested. Appropriate amounts of PSAshares will vest; and
be issued to the holders (including zero if three-year TSR is greater than or equal to 33% and the TSR is in the bottom quartile of an identified peer group then 50% of the target number of PSA will vest.
performance goal was not satisfied). For purposes of the PSA,definitions of Cause and Good Reason in the “peer group” means Arlington Asset Investment Corp., Chimera Investment Corporation, Dynex Capital, Inc., Ellington Financial LLC, Invesco Mortgage Capital Inc., MFA Financial, Inc., AG Mortgage Investment Trust, Inc., American Capital Mortgage Investment Corp., Five Oaks Investment Corp., Two Harbors Investment Corp. and Western Asset Mortgage Capital Corporation. The Compensation Committee determined to use the above peer group to determine the PSA earned bycase of Mr. Mumma because each of these companies have a comparable strategy and investMumma’s PSUs, such definitions contained in similar types of assets as to thosehis employment agreement will control. In accordance with Mr. Mumma's employment agreement, any Eligible CIC PSUs will be deemed vested if Mr. Mumma's employment with us is terminated without Cause or for Good Reason during any portion of the Company. Inrequisite service period; and
(iii) the event2020 and 2021 PSU Agreements provide for a DER that will be paid when the commonapplicable PSUs are earned and vest. The DERs may be settled in cash or stock of any of these companies ceases to be publicly-traded before April 30, 2018, such company shall be excluded fromat the calculationdiscretion of the peer group's TSR.Compensation Committee.
Subject to vesting, shares of our common stock, cash or a combination thereof, equivalent in value toFollowing the productCompensation Committee’s certification of the applicable percentage (0%, 50%, 100% or 200%) times the target number of PSA, will generally be distributed or paid to Mr. Mumma notperformance goal attainment level, but in no event later than May 15, 2018. The value of any dividends declared during60 days following the measurementdate the relevant performance period ends, the NEO will be reflected in the target number of PSA by increasing the target number of PSA granted by an amount corresponding to the incrementalreceive a number of shares of common stock that a stockholder wouldequal to the number of earned PSUs.
Restricted Stock Unit Award Agreements
During the fourth quarter of 2019, the Compensation Committee and the Board of Directors approved the form of RSU Agreement pursuant to which we have acquired duringmade RSU Awards under the three-year TSR measurement period had all dividends during that period been reinvested2020 Long-Term EIP (the “RSU Agreement”). In January 2021, the Compensation Committee and the Board of Directors approved the form of RSU Agreement pursuant to which we have made RSU Awards under the 2021 Long-Term EIP, which agreement is substantially in the form of the RSU Agreement. To the extent vested, each RSU represents the right to receive one share of our common stock.stock, subject to the terms and conditions set forth in the applicable RSU Agreement and the 2017 Stock Plan. Subject to certain exceptions, unless and until the RSUs vest, the NEO will have no right to receive any shares or other payments in respect of such RSUs. In addition, each RSU includes a corresponding DER, which DER will remain outstanding from the date of grant until the earlier of the settlement or forfeiture of the RSU to which the DER corresponds. Each vested DER entitles the NEO to receive payments, subject to and in accordance with the applicable RSU Agreement, in an amount equal to any dividends paid by us in respect of the common share underlying the RSU. Upon the date that the RSU becomes vested, the DER with respect to such vested RSU will become vested. Similarly, upon the forfeiture of an RSU, the DER with respect to such forfeited RSU will also be forfeited. Settlement of vested RSUs and payments with respect to vested DERs will be made as soon as practicable, and within 60 days, after the date that such RSU and DER vests. The RSUs will vest ratably over 3 years at the beginning of each fiscal year following the grant date.
IfThe RSU Agreements contain certain vesting and acceleration provisions with respect to a Changetermination of employment as a result of death or disability or in Controlthe event of a change in control and subsequent termination of employment without Cause (as defined in the 2010 Stock Plan) occurs before April 30, 2018,applicable RSU Agreement) or for Good Reason (as defined in the performance periodapplicable RSU Agreement). Under the applicable RSU Agreement, if the NEO’s employment with us is terminated due to death, the unvested RSUs under that agreement will endbecome fully vested and Mr. Mummanon-forfeitable upon the date of death. If the NEO’s employment with us is terminated due to disability, the unvested RSUs under that agreement will earn a number of PSA, if any, based on actual performance achievement of the TSR objectives set forth above (measured from May 1, 2015 untilbecome fully vested and non-forfeitable upon the date of the Changetermination of the NEO’s employment. In addition, unvested RSUs issued to our NEOs will not accelerate or vest solely due to a change in Control), pro-rated based oncontrol, but would instead require that the truncated period.
Mr. Mumma generally will vestNEO’s employment with us be terminated within 24 months of our change in control by us without Cause (as defined in the earned PSA if employment continues until April 30, 2018applicable RSU Agreement for all NEOs other than Mr. Mumma) or if earlier,by the dateNEO for Good Reason (as defined in the applicable RSU Agreement for all NEOs other than Mr. Mumma). For purposes of a Changethe definitions of Cause and Good Reason in Control. In the eventcase of Mr. Mumma’s RSUs, such definitions contained in his employment ends before April 30, 2018 and before a Change in Control,agreement will control. In accordance with Mr. Mumma's employment agreement, any unvested RSUs will be deemed vested if Mr. Mumma's employment with us is terminated without Cause or for a reason other than death, disability, a termination without cause or a resignation with good reason, Mr. Mumma will forfeit allGood Reason during any portion of the PSA. If Mr. Mumma’s employment ends before April 30, 2018 and before a Change in Control, on account of death or disability, the PSA will remain outstanding and Mr. Mumma (or his beneficiary) will receive the number of shares of our common stock, cash or a combination thereof issuable or payable on account of the TSR performance during the three-year measurement period or until a Change in Control, as applicable. If Mr. Mumma’s employment ends before April 30, 2018 and before a Change in Control, on account of a termination without cause or a resignation with good reason, the PSA will remain outstanding and Mr. Mumma will receive the number of shares of common stock, cash or a combination thereof issuable or payable on account of the TSR performance during the three-year measurement period or a Change in Control, as applicable, but pro-rated for the period of employment on and after May 1, 2015 (or the date of the Change in Control).requisite service period.
The PSA granted to Mr. Mumma on May 28, 2015 consisted of a target number of 89,629 shares of common stock and had a grant date fair value of $372,000, which was determined in accordance with FASB Accounting Standards Codification Topic 718 at the time the grant was made and based on the closing sale price of the Company’s common stock on May 28, 2015. The terms of the PSA include, without limitation, provisions relating to a Change in Control and forfeiture and mandatory net settlement for income tax withholding purposes. The maximum number of shares which may be issued pursuant to the PSA is limited to 94,043 shares. The Compensation Committee has determined that in the event the PSA is earned at a level in excess of 94,043 shares, the dollar value of the PSA earned in excess of 94,043 shares will be paid in cash, subject to the terms of the 2010 Stock Plan.
Employment Agreement
On April 19, 2018, we entered into a Third Amended and Restated Employment Agreement with Steven R. Mumma (the “Executive”), the Company’s Chief Executive Officer (the “Employment Agreement”). The initial term of the Employment Agreement expiresexpired on December 31, 2019 and is now subject to automatic annual one-year renewals thereafter.renewals. Pursuant to the Employment Agreement, in the event we fail to provide Mr. Mumma with written notice of our determination to not extend the term of his Employment Agreement at least 90 days prior to the expiration date of the initial or any applicable renewal term, the Employment Agreement will be automatically extended for an additional one-year period following the end of such term.
Pursuant to the Employment Agreement, Mr. Mumma is entitled to an initial base salary of $800,000, subject to future increases at the discretion of the Compensation Committee. Mr. Mumma's current salary is $900,000. Under the terms of the Employment Agreement, Mr. Mumma is also eligible to participate in our annual incentive plan to be established by the Compensation Committee. In the event we or Mr. Mumma, as the case may be, satisfies the performance criteria for our annual incentive plan to be established by the Compensation Committee, Mr. Mumma will be entitled to receive the incentive award amount provided for in our annual incentive plan and shall be paid no later than March 14 of the year immediately following the year for which the applicable annual incentive plan was adopted. Under the terms of the Employment Agreement, in the event the performance criteria under our annual incentive plan is not satisfied, the Compensation Committee may grant a discretionary incentive award.
In addition, under the terms of the Employment Agreement, any restricted stock granted to Mr. Mumma under the 2017 Stock Plan (or any predecessor or successor plan thereto) will be subject to forfeiture restrictions that will lapse one-third on the first anniversary of the date of grant, one-third on the second anniversary of the date of grant and the final one-third on the third anniversary of the date of grant. Notwithstanding the foregoing, thesethe forfeiture restrictions and vesting provisions on these restricted stock awards and any other equity awards granted by us to Mr. Mumma will lapse upon (i) a termination by the Company without Cause (as defined below), (ii) a termination by Mr. Mumma for Good Reason (as defined below), or (iii) Mr. Mumma’s death or (iv) Mr. Mumma’sand disability, and Mr. Mumma will forfeit all unvested shares if he is terminated for Cause or he terminates his employment with the Company for other than Good Reason. In addition, notwithstanding any equity incentive plans or award agreements to the contrary, in no event shall Mr. Mumma become vested in any shares of restricted stock granted to him solely upon the occurrence of a change in control. Any common stock issued to Mr. Mumma as restricted stock will have voting and dividend rights prior to and following vesting.
The Employment Agreement permits us to terminate Mr. Mumma’s employment with appropriate notice for or without Cause, and permits Mr. Mumma to resign for Good Reason or other than for Good Reason. If Mr. Mumma’s employment is terminated for Cause or he resigns other than for Good Reason, we will pay his full base salary through to the date of termination and reimburse him for all reasonable and customary expenses incurred by him through the date of termination in the performance of his duties. If however, we terminate Mr. Mumma without Cause (other than for death or disability) or Mr. Mumma terminates his employment for Good Reason, we have agreed to pay Mr. Mumma (i) any earned and accrued but unpaid installment of base salary through the date of termination and all other unpaid and pro-rata amounts to which he was entitled as of the date of termination under any compensation plan or program of the Company; (ii) liquidated damages in an amount equal to the greater of (1) $1,000,000 or (2) one and one-half (1 ½) multiplied by the sum of Mr. Mumma’s base salary in effect at the date of termination and the average annual cash incentive award earned by Mr. Mumma during the two most recently completed fiscal years prior to the year in which a termination event occurs; (iii) the payment of premiums for group health coverage for 18 months following the date of termination; and (iv) other benefits as provided for in the Employment Agreement.
Under the Employment Agreement, we will have Cause to terminate Mr. Mumma’s employment upon a determination by at least a majority of the Board of Directors (excluding Mr. Mumma) that Mr. Mumma has:
•committed fraud or misappropriated, stolen or embezzled funds or property from us or our affiliates, or secured or attempted to secure personally any profit in connection with any transaction entered into on our behalf or on behalf of our affiliates;
•been convicted of, or entered a plea of guilty or “nolo contendere” to, a felony which in the reasonable opinion of the Board of Directors brings Mr. Mumma into disrepute or is likely to cause material harm to our business, financial condition or prospects;
•failed to perform his material duties under the Employment Agreement, which failure continues for a period of at least 30 days after written notice to Mr. Mumma;
•violated or breached any material law or regulation to the material detriment of the Company or our affiliates; or
•breached any of his duties or obligations under the Employment Agreement that causes or is reasonably likely to cause material harm to the Company.
Pursuant to the Employment Agreement, Good Reason means (i) a failure by us or our successors or assigns to comply with any material provision of the Employment Agreement which is not cured within 30 days after written notice of such non-compliance; (ii) the assignment to Mr. Mumma of any material duties inconsistent with his position with the Company or a substantial adverse alteration in the nature or status of his responsibilities without his consent; (iii) without Mr. Mumma’s consent, a material reduction in employee benefits other than a reduction generally applicable to our other similarly situated executives; (iv) without Mr. Mumma’s consent, relocation of our principal places of business; (v) any failure by us to pay Mr. Mumma's base salary or any cash incentive award to which he is entitled under an annual incentive plan, which failure has not been cured within the applicable cure period, or any failure of the Compensation Committee to approve an annual incentive plan for any fiscal year; or (vi) delivery to Mr. Mumma from us of a notice of non-renewal in accordance with the notice requirement described above; provided, however, that Mr. Mumma shall only have the right to resign for Good Reason in the case of clause (vi) above if he provides us with notice of termination prior to the expiration date of the initial or any applicable renewal term.
The Employment Agreement also provides that if any amount payable to, or other benefit receivable by Mr. Mumma pursuant to his Employment Agreement or under other agreements or plans is deemed to constitute a “parachute payment” as defined in Section 280G of the Internal Revenue Code, then such payments or benefits shall be reduced in accordance with, and to the extent required by, the provisions of the 2017 Stock Plan. In addition, the Employment Agreement contains certain covenants against competition, with Mr. Mumma not to engage or participate in a “Competing Business” (as defined in the Employment Agreement) for a period of one year following his date of termination, except that the non-compete period shall be for 180 days following the date of termination in the event of Mr. Mumma’s termination for Cause.
As of the date of this proxy statement, Mr.Messrs. Serrano and Reese and Ms. NarioNario-Eng were not party to an employment, severance or change in control agreement with us.
Potential Payments Upon Change in Control, Death or Disability, Termination Without Cause or Resignation for Good Reason
The following tables represent the payments due to Mr. Mumma in the event of termination due to death or disability, his termination without Cause or resignation for Good Reason, or a change in control, assuming such event occurred on December 31, 2017,2020, that would have been triggered under the 2017 Stock Plan (or any predecessor or successor plan thereto), the restricted stock award and PSU agreements for Mr. Mumma and Mr. Mumma’s Employment Agreement (assuming that such Employment Agreement was in effect on December 31, 2017),and (ii) Mr.each of Messrs. Serrano and Reese and Ms. Nario-Eng in the event of termination due to death or disability or in connection with a change in control under the 2017 Stock Plan (or any predecessor or successor plan thereto) and the restricted stock award and PSU agreements for Mr.Messrs. Serrano and Reese and (iii) Ms. Nario in the event of termination due to death or disability or in connection with a change in control under the 2017 Stock Plan (or any predecessor or successor plan thereto) and the restricted stock award agreement for Ms. Nario.Nario-Eng. Because neither Mr.of Messrs. Serrano or Reese nor Ms. NarioNario-Eng is a party to an employment or severance agreement with us, neither of these NEOs were eligible to receive any payments upon the occurrence of a termination without Cause or for resignation for Good Reason as of December 31, 2020 and as such, we have not included these NEOs in such table below. The PSA granted to Mr. Mumma in May 2015 is not included in the calculations in the tables below because the pro-rated TSR objectives, pro-rated based on the period from May 2, 2015 to December 31, 2017, were not achieved and therefore, would not vest under the conditions described in the tables below.
Payments Due Upon Termination Without Cause or Resignation With Good Reason(1)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Name | | Salary | | Bonus | | Stock Awards | | Option Awards | | Non-Equity Incentive Plan Compensation | | All Other Compensation | | Benefits(4) | | Total |
Steven R. Mumma | | $ | — |
| | $ | — |
| | $ | 2,145,411 |
| (2) | $ | — |
| | $ | — |
| | $ | 2,665,746 |
| (3) | $ | 33,453 |
| | $ | 4,844,610 |
|
| |
(1) | See “—Other Compensation Arrangements—Employment Agreement” above for definitions of Cause and Good Reason. |
| |
(2) | Represents the value, based on the closing sale price of our common stock on December 29, 2017, of the sum of (i) 279,972 shares of unvested outstanding restricted stock held by Mr. Mumma that would have vested in full at December 31, 2017 pursuant to such event and (ii) 67,745 shares of restricted stock earned under the 2017 Annual Incentive Plan but not yet issued as of December 31, 2017. The 67,745 shares is based on $417,984 of aggregate value in common stock payable under the 2017 Annual Incentive Plan divided by the closing sale price of $6.17 for our common stock on December 29, 2017. |
| |
(3) | Equals the product of (a) 1.5 and (b) the sum of Mr. Mumma’s base salary and the average annual cash incentive award earned by Mr. Mumma during 2017 and 2016. |
| |
(4) | Represents the value of the health care benefits that are payable by the Company on Mr. Mumma's behalf pursuant to his employment agreement with us. |
Payments Due Upon Termination Due to Disability | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Name | | Salary | | Bonus | | Stock Awards | | Option Awards | | Non-Equity Incentive Plan Compensation | | All Other Compensation | | Benefits(4) | | Total |
Steven R. Mumma | | $ | — | | | $ | — | | | $ | 3,970,474 | | (2) | $ | — | | | $ | — | | | $ | 2,801,250 | | (3) | $ | 27,254 | | | $ | 6,798,978 | |
(1)See “—Other Compensation Arrangements—Employment Agreement” above for definitions of Cause and Good Reason. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Name | | Salary(1) | | Bonus | | Stock Awards(2) | | Option Awards | | Non-Equity Incentive Plan Compensation | | All Other Compensation | | Benefits(3) | | Total |
Steven R. Mumma | | $ | 800,000 |
| | $ | — |
| | $ | 2,145,411 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 33,453 |
| | $ | 2,978,864 |
|
Nathan R. Reese | | $ | — |
| | $ | — |
| | $ | 262,277 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 262,277 |
|
Kristine R. Nario | | $ | — |
| | $ | — |
| | $ | 202,035 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 202,035 |
|
| |
(1) | Assumes that Mr. Mumma is paid his base salary then in effect. Pursuant to the Employment Agreement, the Company is obligated to maintain a long-term disability plan that provides for payment(2)Represents the value, based on the closing sale price of our common stock on December 31, 2020, of not less than $240,000. |
| |
(2) | Represents the value, based on the closing sale price of our common stock on December 29, 2017, of: |
in the case of Mr. Mumma, the sum of (i) 279,972335,141 shares of unvested outstanding restricted stock held by Mr. Mumma that would have vested in full at December 31, 20172020 pursuant to such event, and (ii) 67,745146,341 shares of restricted stock earned under the 20172020 Annual Incentive Plan but not yet issued as of December 31, 2017.2020, (iii) the value of Mr. Mumma’s 2019 PSU awards and 2020 PSU awards, determined by multiplying the number of shares of common stock underlying the target number of 2019 PSUs and 2020 PSUs by $3.69, the closing sale price for our common stock on December 31, 2020 and (iv) the value of Mr. Mumma's 2020 RSU awards, determined by multiplying the number of shares of common stock underlying the 2020 RSUs by $3.69, the closing sale price for our common stock on December 31, 2020. The 67,745146,341 shares is based on $417,984$540,000 of aggregate value in common stock payable under the 20172020 Annual Incentive Plan divided by the closing sale price of $6.17$3.69 for our common stock on December 29, 2017.
in31, 2020. As contemplated by Mr. Mumma's employment agreement with us, the casetable above reflects vesting of the target amount of Mr. Reese,Mumma's 2019 PSU and 2020 PSU awards.
(3)Equals the product of (a) 1.5 and (b) the sum of (i) 28,745 sharesMr. Mumma’s base salary and the average annual cash incentive award earned by Mr. Mumma during 2020 and 2019.
(4)Represents the value of unvested outstanding restricted stockthe health care benefits that would have vested in full at December 31, 2017are payable by the Company on Mr. Mumma's behalf pursuant to such event and (ii) 13,763 shareshis employment agreement with us.
in the case of Ms. Nario, the sum of (i) 20,917 shares of unvested outstanding restricted stock that would have vested in full at December 31, 2017 pursuant to such event and (ii) 11,828 shares of restricted stock earned under the 2017 Annual Incentive Plan but not yet issued as of December 31, 2017. The 11,828 shares is based on $72,977 of aggregate value in common stock payable under the 2017 Annual Incentive Plan divided by the closing sale price of $6.17 for our common stock on December 29, 2017.
| |
(3) | Represents the value of the health care benefits that are payable by the Company on Mr. Mumma's behalf pursuant to his employment agreement with us. |
Payments Due Upon Termination Due to DeathDisability
| | Name | | Salary | | Bonus | | Stock Awards(1) | | Option Awards | | Non-Equity Incentive Plan Compensation (2) | | All Other Compensation | | Benefits(3) | | Total | Name | | Salary(1) | | Bonus | | Stock Awards(2) | | Option Awards | | Non-Equity Incentive Plan Compensation | | All Other Compensation | | Benefits(3) | | Total |
Steven R. Mumma | | $ | 800,000 |
| | $ | — |
| | $ | 2,145,411 |
| | $ | — |
| | $ | 939,328 |
| | $ | — |
| | $ | 33,453 |
| | $ | 3,918,192 |
| Steven R. Mumma | | $ | 900,000 | | | $ | — | | | $ | 3,970,474 | | | $ | — | | | $ | — | | | $ | — | | | $ | 27,254 | | | $ | 4,897,728 | |
Jason T. Serrano | | Jason T. Serrano | | $ | — | | | $ | — | | | $ | 2,108,341 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 2,108,341 | |
Nathan R. Reese | | $ | — |
| | $ | — |
| | $ | 262,277 |
| | $ | — |
| | $ | 254,759 |
| | $ | — |
| | $ | — |
| | $ | 517,036 |
| Nathan R. Reese | | $ | — | | | $ | — | | | $ | 322,680 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 322,680 | |
Kristine R. Nario | | $ | — |
| | $ | — |
| | $ | 202,035 |
| | $ | — |
| | $ | 218,930 |
| | $ | — |
| | $ | — |
| | $ | 420,965 |
| |
Kristine R. Nario-Eng | | Kristine R. Nario-Eng | | $ | — | | | $ | — | | | $ | 473,614 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 473,614 | |
| |
(1) | Represents the value, based on the closing sale price of our common stock on December 29, 2017, of: |
(1)Assumes that Mr. Mumma is paid his base salary then in effect. Pursuant to the Employment Agreement, the Company is obligated to maintain a long-term disability plan for Mr. Mumma that provides for payment of not less than $240,000.
(2)Represents the value, based on the closing sale price of our common stock on December 31, 2020, of:
•in the case of Mr. Mumma, the sum of (i) 279,972335,141 shares of unvested outstanding restricted stock held by Mr. Mumma that would have vested in full at December 31, 20172020 pursuant to such event, and (ii) 67,745146,341 shares of restricted stock earned under the 20172020 Annual Incentive Plan but not yet issued as of December 31, 2017.2020, (iii) the value of Mr. Mumma’s 2019 PSU awards and 2020 PSU awards, determined by multiplying the number of shares of common stock underlying the target number of 2019 PSUs and 2020 PSUs by $3.69, the closing sale price for our common stock on December 31, 2020 and (iv) the value of Mr. Mumma's 2020 RSU awards, determined by multiplying the number of shares of common stock underlying the 2020 RSUs by $3.69, the closing sale price for our common stock on December 31, 2020. The 67,745146,341 shares is based on $417,984$540,000 of aggregate value in common stock payable under the 20172020 Annual Incentive Plan divided by the closing sale price of $6.17$3.69 for our common stock on December 29, 2017.31, 2020. As contemplated by Mr. Mumma's employment agreement with us, the table above reflects vesting of the target amount of Mr. Mumma's 2019 PSU and 2020 PSU awards.
•in the case of Mr. Reese,Serrano, the sum of (i) 28,745369,158 shares of unvested outstanding restricted stock that would have vested in full at December 31, 20172020 pursuant to such event, and (ii) 13,763121,951 shares of restricted stock earned under the 20172020 Annual Incentive Plan but not yet issued as of December 31, 2017.2020 and (iii) the value of Mr. Serrano's 2020 RSU awards, determined by multiplying the number of shares of common stock underlying the 2020 RSUs by $3.69, the closing sale price for our common stock on December 31, 2020. The 13,763121,951 shares is based on $84,920$450,000 of aggregate value in common stock payable under the 20172020 Annual Incentive Plan divided by the closing sale price of $6.17$3.69 for our common stock on December 29, 2017. 31, 2020.
•in the case of Ms. Nario,Mr. Reese, the sum of (i) 20,91753,920 shares of unvested outstanding restricted stock that would have vested in full at December 31, 20172020 pursuant to such event, and (ii) 11,8286,775 shares of restricted stock earned under the 20172020 Annual Incentive Plan but not yet issued as of December 31, 2017.2020 and (iii) the value of Mr. Reese's 2020 RSU awards, determined by multiplying the number of shares of common stock underlying the 2020 RSUs by $3.69, the closing sale price for our common stock on December 31, 2020. The 11,8286,775 shares is based on $72,977$25,000 of aggregate value in common stock payable under the 20172020 Annual Incentive Plan divided by the closing sale price of $6.17$3.69 for our common stock on December 29, 2017.31, 2020.
| |
(2) | Represents annual cash incentive compensation earned for performance by each of Mr. Mumma, Mr. Reese and Ms. Nario in 2017 under the 2017 Annual Incentive Plan. Pursuant to the 2017 Annual Incentive Plan, the NEO must be actively employed on the date the cash incentive compensation is paid. However, the Compensation Committee has the discretion to award non-equity incentive compensation in the event that the NEO is terminated due to death in light of the Company’s and the participant’s performance in 2017. |
| |
(3) | Represents the value of the health care benefits that are payable by us on Mr. Mumma's behalf pursuant to his employment agreement with us. |
Payments Due Upon Change In Control
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Name | | Salary | | Bonus | | Stock Awards(1) | | Option Awards | | Non-Equity Incentive Plan Compensation | | All Other Compensation | | Benefits | | Total |
Steven R. Mumma | | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
Nathan R. Reese | | $ | — |
| | $ | — |
| | $ | 262,277 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 262,277 |
|
Kristine R. Nario | | $ | — |
| | $ | — |
| | $ | 202,035 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 202,035 |
|
| |
(1) | For Mr. Mumma, pursuant to the Employment Agreement, Mr. Mumma's unvested outstanding restricted stock will not vest solely upon a change in control. Under Mr. Mumma's prior employment agreement with us, which was effective on December 31, 2017, the amount set forth opposite Mr. Mumma's name under this column would have been $2,145,411. For Mr. Reese and Ms. Nario, represents the value, based on the closing sale price of our common stock on December 29, 2017, of: |
•in the case of Mr. Reese,Ms. Nario-Eng, the sum of (i) 28,74552,523 shares of unvested outstanding restricted stock that would have vested in full at December 31, 20172020 pursuant to such event, and (ii) 13,76345,732 shares of restricted stock earned under the 20172020 Annual Incentive Plan but not yet issued as of December 31, 2017.2020 and (iii) the value of Ms. Nario-Eng's 2020 RSU awards, determined by multiplying the number of shares of common stock underlying the 2020 RSUs by $3.69, the closing sale price for our common stock on December 31, 2020. The 13,76345,732 shares is based on $84,920$168,750 of aggregate value in common stock payable under the 20172020 Annual Incentive Plan divided by the closing sale price of $6.17$3.69 for our common stock on December 29, 2017. 31, 2020.
(3)Represents the value of the health care benefits that are payable by the Company on Mr. Mumma's behalf pursuant to his employment agreement with us.
Payments Due Upon Termination Due to Death
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Name | | Salary | | Bonus | | Stock Awards(1) | | Option Awards | | Non-Equity Incentive Plan Compensation (2) | | All Other Compensation | | Benefits(3) | | Total |
Steven R. Mumma | | $ | 900,000 | | | $ | — | | | $ | 3,835,474 | | | $ | — | | | $ | 1,395,000 | | | $ | — | | | $ | 27,254 | | | $ | 6,157,728 | |
Jason T. Serrano | | $ | — | | | $ | — | | | $ | 2,108,341 | | | $ | — | | | $ | 675,000 | | | $ | — | | | $ | — | | | $ | 2,783,341 | |
Nathan R. Reese | | $ | — | | | $ | — | | | $ | 322,680 | | | $ | — | | | $ | 225,000 | | | $ | — | | | $ | — | | | $ | 547,680 | |
Kristine R. Nario-Eng | | $ | — | | | $ | — | | | $ | 473,614 | | | $ | — | | | $ | 253,125 | | | $ | — | | | $ | — | | | $ | 726,739 | |
(1)Represents the value, based on the closing sale price of our common stock on December 31, 2020, of:
•in the case of Ms. Nario,Mr. Mumma, the sum of (i) 20,917335,141 shares of unvested outstanding restricted stock held by Mr. Mumma that would have vested in full at December 31, 2020 pursuant to such event, (ii) 109,756 shares of restricted stock payable under the 2020 Annual Incentive Plan in accordance with Mr. Mumma's employment agreement with us, (iii) the value of Mr. Mumma’s 2019 PSU awards and 2020 PSU awards, determined by multiplying the number of shares of common stock underlying the target number of 2019 PSUs and 2020 PSUs by $3.69, the closing sale price for our common stock on December 31, 2020 and (iv) the value of Mr. Mumma's 2020 RSU awards, determined by multiplying the number of shares of common stock underlying the 2020 RSUs by $3.69, the closing sale price for our common stock on December 31, 2020. The 109,756 shares is based on $405,000 of aggregate value in common stock divided by the closing sale price of $3.69 for our common stock on December 31, 2020. As contemplated by Mr. Mumma's employment agreement with us, the table above reflects payment of Mr. Mumma's target bonus under the 2020 Annual Incentive Plan and vesting of the target amount of his 2018 PSU and 2019 PSU awards.
•in the case of Mr. Serrano, the sum of (i) 369,158 shares of unvested outstanding restricted stock that would have vested in full at December 31, 20172020 pursuant to such event, and (ii) 11,828121,951 shares of restricted stock earned under the 20172020 Annual Incentive Plan but not yet issued as of December 31, 2017.2020 and (iii) the value of Mr. Serrano's 2020 RSU awards, determined by multiplying the number of shares of common stock underlying the 2020 RSUs by $3.69, the closing sale price for our common stock on December 31, 2020. The 11,828121,951 shares is based on $72,977$450,000 of aggregate value in common stock payable under the 20172020 Annual Incentive Plan divided by the closing sale price of $6.17$3.69 for our common stock on December 29, 2017.31, 2020.
•in the case of Mr. Reese, the sum of (i) 53,920 shares of unvested outstanding restricted stock that would have vested in full at December 31, 2020 pursuant to such event, (ii) 6,775 shares of restricted stock earned under the 2020 Annual Incentive Plan but not yet issued as of December 31, 2020 and (iii) the value of Mr. Reese's 2020 RSU awards, determined by multiplying the number of shares of common stock underlying the 2020 RSUs by $3.69, the closing sale price for our common stock on December 31, 2020. The 6,775 shares is based on $25,000 of aggregate value in common stock payable under the 2020 Annual Incentive Plan divided by the closing sale price of $3.69 for our common stock on December 31, 2020.
•in the case of Ms. Nario-Eng, the sum of (i) 52,523 shares of unvested outstanding restricted stock that would have vested in full at December 31, 2020 pursuant to such event, (ii) 45,732 shares of restricted stock earned under the 2020 Annual Incentive Plan but not yet issued as of December 31, 2020 and (iii) the value of Ms. Nario-Eng's 2020 RSU awards, determined by multiplying the number of shares of common stock underlying the 2020 RSUs by $3.69, the closing sale price for our common stock on December 31, 2020. The 45,732 shares is based on $168,750 of aggregate value in common stock payable under the 2020 Annual Incentive Plan divided by the closing sale price of $3.69 for our common stock on December 31, 2020.
(2)Represents annual cash incentive compensation earned for performance by each of Messrs. Serrano and Reese and Ms. Nario-Eng in 2020 under the 2020 Annual Incentive Plan. Pursuant to the 2020 Annual Incentive Plan, the NEO must be actively employed on the date the cash incentive compensation is paid. However, the Compensation Committee has the discretion to award non-equity incentive compensation in the event that the NEO is terminated due to death in light of the Company’s and the participant’s performance in 2020. Mr. Mumma's employment agreement with us provides that he is entitled to receive the target bonus for the year in which his death takes place.
(3)Represents the value of the health care benefits that are payable by us on Mr. Mumma's behalf pursuant to his employment agreement with us.
Payments Due Upon Change In Control
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Name | | Salary | | Bonus | | Stock Awards(1) | | Option Awards | | Non-Equity Incentive Plan Compensation | | All Other Compensation | | Benefits | | Total |
Steven R. Mumma | | $ | — | | | $ | — | | | $ | 1,165,258 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 1,165,258 | |
Jason T. Serrano | | $ | — | | | $ | — | | | $ | 1,568,135 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 1,568,135 | |
Nathan R. Reese | | $ | — | | | $ | — | | | $ | 312,178 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 312,178 | |
Kristine R. Nario-Eng | | $ | — | | | $ | — | | | $ | 307,023 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 307,023 | |
(1)For Mr. Mumma, pursuant to the Employment Agreement, Mr. Mumma's unvested outstanding restricted stock will not vest solely upon a change in control. For Messrs. Mumma, Serrano and Reese and Ms. Nario-Eng with respect to unvested outstanding restricted stock awards made prior to 2020, represents the value, based on the closing sale price of our common stock on December 31, 2020, of:
•in the case of Mr. Mumma, 315,788 PSUs earned under the 2019 Long-Term EIP, to the extent that the applicable performance goal has been achieved according to actual performance as of the date of the Change in Control. The 315,788 PSUs, which represents the number of PSUs earned if a Change in Control occurred on December 31, 2020, is multiplied by the closing sale price of $3.69 for our common stock on December 31, 2020.
•in the case of Mr. Serrano, the sum of (i) 161,812 shares of unvested outstanding restricted stock that would have vested in full at December 31, 2020 pursuant to such event and (ii) 263,157 PSUs earned under the 2019 Long-Term EIP, to the extent that the applicable performance goal has been achieved according to actual performance as of the date of the Change in Control (assumed to have occurred on December 31, 2020), multiplied by the closing sale price of $3.69 for our common stock on December 31, 2020. The restricted stock award, PSU and RSU agreements for awards issued in 2020 do not provide for accelerated vesting solely upon a change in control and are not included above.
•in the case of Mr. Reese, the sum of (i) 14,426 shares of unvested outstanding restricted stock that would have vested in full at December 31, 2020 pursuant to such event and (ii) 70,175 PSUs earned under the 2019 Long-Term EIP, to the extent that the applicable performance goal has been achieved according to actual performance as of the date of the Change in Control (assumed to have occurred on December 31, 2020), multiplied by the closing sale price of $3.69 for our common stock on December 31, 2020. The restricted stock award, PSU and RSU agreements for awards issued in 2020 do not provide for accelerated vesting solely upon a change in control and are not included above.
•in the case of Ms. Nario-Eng, the sum of (i) 13,029 shares of unvested outstanding restricted stock that would have vested in full at December 31, 2020 pursuant to such event and (ii) 70,175 PSUs earned under the 2019 Long-Term EIP, to the extent that the applicable performance goal has been achieved according to actual performance as of the date of the Change in Control (assumed to have occurred on December 31, 2020), multiplied by the closing sale price of $3.69 for our common stock on December 31, 2020. The restricted stock award, PSU and RSU agreements for awards issued in 2020 do not provide for accelerated vesting solely upon a change in control and are not included above.
Limitation on Liability and Indemnification
Maryland law permits a corporation to include in its charter a provision limiting the liability of its directors and officers to the corporation and its stockholders for money damages, except for liability resulting from:
•actual receipt of an improper benefit or profit in money, property or services; or
•a final judgment based upon a finding of active and deliberate dishonesty by the director or officer that was material to the cause of action adjudicated.
Our charter contains such a provision which eliminates such liability to the maximum extent permitted by Maryland law.
Our charter authorizes us to obligate ourselves, and our bylaws obligate us, to the maximum extent permitted by Maryland law, to indemnify, and to pay or reimburse reasonable expenses in advance of final disposition of a final proceeding to, any of our present or former directors or officers or any individual who, while a director or officer and at our request, serves or has served another corporation, real estate investment trust, partnership, joint venture, trust, employee benefit plan or any other enterprise as a director, officer, partner or trustee. The indemnification covers any claim or liability arising from such status against the person.
Maryland law requires a corporation (unless its charter provides otherwise, which our charter does not) to indemnify a director or officer who has been successful in the defense of any proceeding to which he is made a party by reason of his service in that capacity.
Maryland law permits us to indemnify our present and former directors and officers against judgments, penalties, fines, settlements and reasonable expenses actually incurred by them in any proceeding to which they may be made a party by reason of their service in those or other capacities unless it is established that:
•the act or omission of the director or officer was material to the matter giving rise to the proceeding and (i) was committed in bad faith or (ii) was the result of active and deliberate dishonesty;
•the director or officer actually received an improper personal benefit of money, property or services; or
•in the case of a criminal proceeding, the director or officer had reasonable cause to believe that the act or omission was unlawful.
However, Maryland law prohibits us from indemnifying our present and former directors and officers for an adverse judgment in a suit by or in the right of the corporation or for a judgment of liability on the basis that personal benefit was improperly received unless in either case a court orders indemnification and then only for expenses. Maryland law permits a corporation to advance reasonable expenses to a director or officer upon the corporation’s receipt of:
•a written affirmation by the director or officer of his or her good faith belief that he or she has met the standard of conduct necessary for indemnification; and
•a written undertaking by him or her, or on his or her behalf, to repay the amount paid or reimbursed by us if it is ultimately determined that the standard of conduct is not met.
Our charter and bylaws also permit us to indemnify and advance expenses to any person who served a predecessor of ours in any capacity described above and to any of our or our predecessors’ employees or agents.
In addition, indemnification could reduce the legal remedies available to us and our stockholders against our officers and directors. The SEC takes the position that indemnification against liabilities arising under the Securities Act of 1933 is against public policy and unenforceable. Indemnification of our directors and officers may not be allowed for liabilities arising from or out of a violation of state or federal securities laws, unless one or more of the following conditions are met:
•there has been aan adjudication on the merits in favor of the director or officer on each count involving alleged securities law violations;
•all claims against the director or officer have been dismissed with prejudice on the merits by a court of competent jurisdiction; or
•a court of competent jurisdiction approves a settlement of the claims against the director or officer and finds that indemnification with respect to the settlement and the related costs should be allowed after being advised of the position of the SEC and of the published position of any state securities regulatory authority in which the securities were offered as to indemnification for violations of securities laws.
COMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis section of this proxy statement with management and, based on such review and discussion, the Committee recommends that it be included in this proxy statement.
Compensation Committee
Lisa A. Pendergast (Chair)
David R. Bock
Michael B. Clement
April 28, 2021
The foregoing report shall not be deemed incorporated by reference by any general statement incorporating by reference this proxy statement into any filing under the Securities Act of 1933, as amended, or under the Securities Exchange Act of 1934, as amended, except to the extent we specifically incorporate this information by reference, and shall not otherwise be deemed filed under such acts.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Each of Lisa A. Pendergast, David R. Bock and Michael B. Clement Alan L. Hainey and Steven G. Norcutt served as a member of the Compensation Committee during 2017.2020. No member of the Compensation Committee was an employee of the Company during the 20172020 fiscal year or an officer of the Company during any prior period. During 2017,2020, no interlocking relationship existed between any member of our Board of Directors and any member of the compensation committee of any other company.
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors of New York Mortgage Trust, Inc. is composed of Michael B. Clement (Chairman)(Chair), David R. Bock Alan L. Hainey and Steven G. Norcutt, each of which is independent under the enhanced independence requirements for audit committee members set forth in the rules of the SEC and in accordance with our independent criteria discussed under the caption “Information on Our Board of Directors and its Committees—Independence of Our Board of Directors.” The Audit Committee operates under a written charter.
The Audit Committee oversees New York Mortgage Trust, Inc.’s financial reporting process on behalf of the Board of Directors. Management has the primary responsibility for the financial statements and the reporting process including the systems of internal controls. In this context, the Audit Committee has reviewed and discussed with management the audited financial statements for the year ended December 31, 20172020 included in ourthe Annual Report on Form 10-K for the year ended December 31, 2017.2020 of New York Mortgage Trust, Inc.
The Audit Committee has discussed with Grant Thornton LLP, the Company’s independent registered public accounting firm, the matters required to be discussed by the statement on Auditing Standards No. 61, as amended (AICPA Professional Standards, Vol. 1 AU Section 380), as adopted byapplicable requirements of the Public Company Accounting Oversight Board in Rule 3200T,(“PCAOB”) and the SEC, including the overall scope and plan for their audit, the auditor’s judgment as to the quality, not just the acceptability, of the accounting principles, the consistency of their application and the clarity and completeness of the audited financial statements.
The Audit Committee has received the written disclosures and the letter from the independent registered public accounting firm required by applicable requirements of the Public Company Accounting Oversight BoardPCAOB regarding the independent registered public accounting firm’s communications with the Audit Committee concerning independence and has discussed with the independent registered public accounting firm its independence from the Company.
Based on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors (and the Board of Directors agreed) that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 20172020 for filing with the SEC. The Audit Committee also recommended that Grant Thornton LLP be retained as the Company’s independent registered public accounting firm for the 20182021 fiscal year.
Audit Committee
Michael B. Clement (Chairman)(Chair)
David R. Bock
Alan L. Hainey
Steven G. Norcutt
April 20, 201828, 2021
The foregoing report shall not be deemed incorporated by reference by any general statement incorporating by reference this proxy statement into any filing under the Securities Act of 1933, as amended, or under the Securities Exchange Act of 1934, as amended, except to the extent we specifically incorporate this information by reference, and shall not otherwise be deemed filed under such acts.
RELATIONSHIP WITH INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Principal Accountant Fees and Services
Aggregate fees for professional services rendered for us for the years ended December 31, 20172020 and December 31, 20162019 by Grant Thornton LLP were as follows:
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Fee Type | | 2020 | | 2019 |
Audit Fees(1) | | $ | 1,551,254 | | | $ | 1,724,804 | |
Audit-Related Fees | | — | | | — | |
Tax Fees | | — | | | — | |
All Other Fees | | — | | | — | |
Total Fees | | $ | 1,551,254 | | | $ | 1,724,804 | |
|
| | | | | | | | |
Fee Type | | 2017 | | 2016 |
Audit Fees(1) | | $ | 1,339,241 |
| | $ | 1,163,650 |
|
Tax Fees | | — |
| | — |
|
All Other Fees | | — |
| | — |
|
Total Fees | | $ | 1,339,241 |
| | $ | 1,163,650 |
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(1) | Audit Fees represent the aggregate fees billed for professional services rendered to us and our subsidiaries with respect to the audit of our consolidated financial statements included in our annual reports and the reviews of the financial statements included in our quarterly reports. Additionally, Audit Fees also represent the aggregate fees billed for professional services for the issuance of comfort letters, consents and related services in connection with public offerings of securities and registration statements filed on Form S-3 and on Form S-8 under the Securities Act of 1933, as amended. |
(1)Audit Fees represent the aggregate fees billed for professional services rendered to us and our subsidiaries with respect to the audit of our consolidated financial statements included in our annual reports and the reviews of the financial statements included in our quarterly reports. Additionally, Audit Fees also include the aggregate fees billed for professional services for the issuance of comfort letters, consents and related services in connection with public offerings of securities and registration statements filed on Form S-3 and on Form S-8 under the Securities Act of 1933, as amended, amounting to approximately $0.1 million and $0.5 million for the years ended December 31, 2020 and December 31, 2019, respectively.
Policies and Procedures
The Audit Committee has adopted procedures for pre-approving audit and non-audit services provided by the independent registered public accounting firm. These procedures include reviewing a budget for audit and permitted non-audit services. The budget includes a description of, and a budgeted amount for, particular categories of non-audit services that are recurring in nature and therefore anticipated at the time the budget is submitted. Audit Committee approval is required for payment of fees that exceed the budget amount for a particular category of non-audit services and to engage the independent registered public accounting firm for any non-audit services not included in the budget. For both types of pre-approval, the Audit Committee considers whether such services are consistent with the SEC’s rules on auditor independence. The Audit Committee also considers whether the independent registered public accounting firm is best positioned to provide the most effective and efficient service, for reasons such as its familiarity with our business, employees, culture, accounting systems, risk profile, and whether the services enhance our ability to manage or control risks and improve audit quality. The Audit Committee may delegate pre-approval authority to one or more members of the Audit Committee. The Audit Committee periodically monitors the services rendered and actual fees paid to the independent registered public accounting firm to ensure that such services are within the parameters approved by the Audit Committee.
The Audit Committee has determined that the provision of non-audit services performed by Grant Thornton LLP during 20172020 is compatible with maintaining its independence from the Company as an independent registered public accounting firm. For the year ended December 31, 2017,2020, the Audit Committee pre-approved all services rendered by Grant Thornton LLP.
OTHER MATTERS
As of the date of this proxy statement, the Board of Directors does not know of any matters to be presented at the virtual Annual Meeting other than those specifically set forth in the Notice of Annual Meeting of Stockholders. If other proper matters, however, should come before the virtual Annual Meeting or any adjournment thereof, the persons named in the proxy being made available to stockholders intend to vote the shares represented by them in accordance with their best judgment in respect to any such matters.
ANNUAL REPORT
A copy of our 20172020 Annual Report, including the financial statements and financial statement schedules, is being furnished to stockholders along with this proxy statement. These materials are available at http://www.proxyvote.com. Paper copies may be requested in accordance with the instructions included in the Notice that was sent to stockholders of record beginning on or about April 20, 2018.28, 2021. A copy of the 20172020 Annual Report is also available online at http://www.nymtrust.com.
“HOUSEHOLDING” OF PROXY STATEMENT AND ANNUAL REPORTS
The SEC rules allow for the delivery of a single copy of the Notice or set of proxy materials to any household at which two or more stockholders reside, if it is believed the stockholders are members of the same family. This delivery method, known as “householding,” will save us printing and mailing costs. Duplicate account mailings will be eliminated by allowing stockholders to consent to such elimination, or through implied consent, if a stockholder does not request continuation of duplicate mailings. Brokers, dealers, banks or other nominees or fiduciaries that hold shares of our common stock in “street” name for beneficial owners of our common stock and that distribute proxy materials and the Notice they receive to beneficial owners may be householding. Depending upon the practices of your broker, bank or other nominee or fiduciary, you may need to contact them directly to discontinue duplicate mailings to your household. If you wish to revoke your consent to householding, you must contact your broker, bank or other nominee or fiduciary.
If you hold shares of our common stock in your own name as a holder of record, householding will not apply to your shares. Also, if you own shares of our common stock in more than one account, such as individually and also jointly with your spouse, you may receive more than one set of our proxy statements and annual reports to stockholders. To assist us in saving money and to provide you with better stockholder services, we encourage registered holders of our common stock to have all of your accounts registered in the same name and address. You may do this by contacting the Company’s transfer agent, American Stock Transfer & Trust Company, LLC, by telephone at (800) 937-5449 or in writing at American Stock Transfer & Trust Company, LLC, 6201 15th Avenue, Brooklyn, New York 11219.
If you wish to request extra copies free of charge of any annual report to stockholders or proxy statement, please send your request to New York Mortgage Trust, Inc., 275 Madison90 Park Avenue, New York, New York, 10016, Attention: Investor Relations, or contact our Investor Relations via telephone at (646) 216-2360.795-4066. You can also refer to our website at www.nymtrust.com. Information at, or connected to, our website is not and should not be considered part of this proxy statement.
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| By order of the Board of Directors, |
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| Nathan R. Reese |
| Managing DirectorChief Operating Officer and Secretary |
April 20, 201828, 2021
New York, New York
Appendix A
SECOND AMENDMENT TO THE
NEW YORK MORTGAGE TRUST, INC.
2017 EQUITY INCENTIVE PLAN
This Second Amendment to the New York Mortgage Trust, Inc. 2017 Equity Incentive Plan (as amended from time to time, the “2017 Equity Incentive Plan”), is made and adopted by New York Mortgage Trust, Inc., a Maryland corporation (the “Company”).
W I T N E S S E T H:
WHEREAS, the Company previously adopted the 2017 Equity Incentive Plan, under which the Company is authorized to grant equity-based incentive awards to certain employees and other service providers of the Company and its affiliates;
WHEREAS, Article XVIII of the 2017 Equity Incentive Plan provides that the Company’s board of directors (the “Board”) may amend the 2017 Equity Incentive Plan from time to time, except that any amendment to materially increase the number of shares of common stock of the Company (the “Shares”) that may be issued under the 2017 Equity Incentive Plan must be approved by the stockholders of the Company; and
WHEREAS, the Board now desires to amend the 2017 Equity Incentive Plan to increase the number of Shares available for awards under the 2017 Equity Incentive Plan by 30,000,000 Shares, subject to approval by the stockholders of the Company.
NOW, THEREFORE, BE IT RESOLVED, that, the 2017 Equity Incentive Plan shall be amended, effective as of April 19, 2021, subject to approval by the Company’s stockholders, as set forth below:
1. Section 5.02 of the 2017 Equity Incentive Plan is hereby deleted and replaced in its entirety with the following:
Aggregate Limit.
Subject to adjustment as provided under Article XIV, the maximum aggregate number of shares of Common Stock that may be delivered with respect to Awards under the Plan (and the maximum aggregate number of shares of Common Stock that may be issued under the Plan through incentive stock options granted under the Plan) is equal to 43,170,000 shares.
FURTHER RESOLVED, that, except as amended hereby, the 2017 Equity Incentive Plan shall continue to read in the current state and is specifically ratified and reaffirmed.
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