|
|
|
|
Item 5.02
|
Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
|
(e) Compensation Arrangements of Certain Officers
Base Salary Increases
On March 3, 2020, the Compensation Committee (“Committee”) of the Board of Directors (“Board”) of the Federal Agricultural Mortgage Corporation (“Farmer Mac”) approved the following changes to the annual base salaries of the executive officers named below, to be effective retroactively to January 1, 2020:
|
|
|
|
•
|
Brian M. Brinch, Senior Vice President – Rural Infrastructure: increase from $300,000 per year to $310,000 per year.
|
|
|
|
|
•
|
Zachary N. Carpenter, Executive Vice President – Chief Business Officer: increase from $400,000 per year to $410,000 per year.
|
|
|
|
|
•
|
Stephen P. Mullery, Executive Vice President – General Counsel: increase from $425,000 per year to $435,000 per year.
|
Grants of Stock Appreciation Rights
On March 3, 2020 (“Grant Date”), the Committee approved grants of stock appreciation rights (“SARs”), as set forth below, to the following executive officers of Farmer Mac under Farmer Mac’s Amended and Restated 2008 Omnibus Incentive Plan (“2008 Plan”).
|
|
|
|
|
|
Name
|
Number of SARs Granted
|
|
Bradford T. Nordholm
|
12,915
|
|
Brian M. Brinch
|
1,845
|
|
Zachary N. Carpenter
|
5,811
|
|
Stephen P. Mullery
|
4,428
|
|
Aparna Ramesh
|
5,535
|
Each SAR granted represents the right to receive, upon exercise, an amount equal to the excess, if any, of the fair market value of a share of Farmer Mac’s Class C non-voting common stock (each, a “Share”) over the grant price on the applicable date of exercise. Any amount received upon exercise of SARs is payable in Shares. In accordance with a policy adopted by the Board (“Equity Grant Policy”), the grant price for the SARs listed above is the closing price of a Share on the New York Stock Exchange (“NYSE”) on the Grant Date ($75.16 per share). These SARs will vest in three equal annual installments on each of March 31, 2021, March 31, 2022, and March 31, 2023, and their expiration date is March 3, 2030 (“Expiration Date”), which is the tenth anniversary of the Grant Date.
For the SARs awarded on the Grant Date, upon a participant’s termination of employment for death or disability (as defined in the 2008 Plan), all unvested SARs will automatically vest and become exercisable and vested SARs will remain exercisable for one year or until the Expiration Date, whichever is earlier.
Upon a participant’s termination of employment for retirement, all unvested SARs will continue to vest as scheduled and vested SARs will remain exercisable for five years or until the Expiration Date, whichever is earlier. For these purposes, "retirement" is defined as the termination of employment without "cause" (as defined in the 2008 Plan, in Farmer Mac’s Amended and Restated Executive Officer Severance Plan, or in a participant’s employment agreement (if any), as applicable) after attaining age 55 and a combined age and years of employment at Farmer Mac of at least 65.
Upon a participant’s termination of employment for any reason other than death, disability, retirement, or for cause, all unvested SARs will be cancelled immediately and vested SARs will remain exercisable for one year or until the Expiration Date, whichever is earlier. Upon a participant’s termination for cause, any unexercised SARs, whether vested or unvested, will be cancelled immediately.
Under the Equity Grant Policy, the number of SARs awarded as equity-based compensation is based on a target long-term incentive value approved by the Committee for an individual divided by the Black-Scholes value as of the date that is seven calendar days before the date of grant based on assumptions consistent with the assumptions used by Farmer Mac for determining stock-based compensation expense under the Financial Accounting Standards Board’s Accounting Standards Codification (ASC) Topic 718.
The 2008 Plan was previously filed as Exhibit 10.2 to Farmer Mac’s Quarterly Report on Form 10-Q filed on August 9, 2018. The current form of award agreement for SARs awarded under the 2008 Plan on the Grant Date was previously filed as Exhibit 10.1 to Farmer Mac’s Current Report on Form 8-K filed on April 3, 2015. Both of those Exhibits are incorporated in this report by reference.
Grants of Restricted Stock
Also on the Grant Date, the Committee approved grants of restricted stock units of Farmer Mac’s Class C non-voting common stock (“Restricted Stock”) to the following executive officers and directors of Farmer Mac under the 2008 Plan:
|
|
|
|
|
|
|
Executive Officers
|
|
Name
|
Number of Restricted Stock Units Granted
(Time-Based Vesting)
|
Target Number of Restricted Stock Units Granted
(Performance-Based Vesting)
|
|
Bradford T. Nordholm
|
6,404
|
2,359
|
|
Brian M. Brinch
|
675
|
337
|
|
Zachary N. Carpenter
|
2,124
|
1,062
|
|
Stephen P. Mullery
|
1,620
|
809
|
|
Aparna Ramesh
|
2,022
|
1,011
|
|
|
|
|
|
|
|
Directors
|
|
|
Name
|
Number of Restricted Stock Units Granted
(Time-Based Vesting)
|
|
Dennis L. Brack
|
728
|
|
|
Richard H. Davidson
|
728
|
|
|
Everett M. Dobrinski
|
728
|
|
|
James R. Engebretsen
|
728
|
|
|
Sara L. Faivre
|
728
|
|
|
Thomas W. Hill
|
728
|
|
|
Mitchell A. Johnson
|
728
|
|
|
Lowell L. Junkins
|
728
|
|
|
Clark B. Maxwell
|
728
|
|
|
Robert G. Sexton
|
728
|
|
|
Daniel L. Shaw
|
728
|
|
|
Bruce J. Sherrick
|
728
|
|
|
Myles J. Watts
|
728
|
|
|
Todd P. Ware
|
728
|
|
|
LaJuana S. Wilcher
|
728
|
|
The Restricted Stock listed above granted to directors will vest in full on March 31, 2021 or proportionately to the date of any director’s death, disability, or cessation of service on the Board without cause, including due to removal or replacement as a director by the President of the United States.
1,685 shares of the Restricted Stock listed above granted to Bradford T. Nordholm as a time-based vesting award will vest on March 31, 2021. All other Restricted Stock listed above granted to the executive officers as time-based vesting awards will vest in three equal annual installments on each of March 31, 2021, March 31, 2022, and March 31, 2023.
The Restricted Stock listed above granted to the executive officers as performance-based vesting awards is the target number of performance-based Restricted Stock granted under the 2008 Plan and as specified in the related award agreement. The performance-based Restricted Stock will be eligible to vest on March 31, 2023 based on performance objectives related to business volume, subject to “gatekeeper” metrics related to capital and asset quality for the performance period of January 1, 2020 through December 31, 2022 (“Performance Period”). These “gatekeepers” require the Committee to determine that during the Performance Period: (1) Farmer Mac maintained compliance with all applicable regulatory capital requirements; and (2) Farmer Mac achieved (a) a three-year average ratio of net charge-offs to the average balance of total outstanding on- and off-balance sheet loans, guarantees, and commitments excluding any assets held in Farmer Mac's liquidity investment portfolio ("Net Outstanding Business Volume") less than 20 basis points, and (b) a three-year average percentage of total 90-day delinquencies to the average balance of Net Outstanding Business Volume of less than 1%. For purposes of performing these calculations, “net charge-offs” is defined as charge-offs to Farmer Mac’s allowance for losses net of actual recoveries plus any writedowns on real estate owned (REO) properties and any gains or losses realized upon disposition of REO properties. Average balances are determined by calculating a simple average of reported balances as of the end of each calendar quarter.
If at the end of the Performance Period the Committee determines that Farmer Mac has satisfied the above-listed “gatekeepers,” the performance-based Restricted Stock will be eligible to vest on March 31, 2023 in an amount determined by the Committee for each executive officer between 50% and 200% of the target number of Restricted Stock shares granted to that executive officer, based on Farmer Mac's Net Outstanding Business Volume as of December 31, 2022. Performance at the target Net Outstanding Business Volume of $25.323 billion will earn 100% of the target number of Restricted Stock shares granted. Performance at a Net Outstanding Business Volume of $21.239 billion is required for vesting of any performance-based Restricted Stock and will earn the threshold level of 50% of the target number of Restricted Stock shares granted. Performance at or above Net Outstanding Business Volume of $31.004 billion will earn the maximum award of 200% of the target number of Restricted Stock shares granted. Performance between the threshold Net Outstanding Business Volume and the target Net Outstanding Business Volume will earn shares of Restricted Stock in an interpolated amount between 50% and 100% of the target number of Restricted Stock shares granted. Performance between the target Net Outstanding Business Volume and Net Outstanding Business Volume of $31.004 billion will earn shares of Restricted Stock in an interpolated amount between 100% and 200% of the target number of Restricted stock shares granted.
Upon an executive officer’s termination of employment for any reason other than death, disability, or retirement, unvested Restricted Stock will be cancelled immediately. Upon an executive officer’s death or disability, unvested Restricted Stock will vest immediately. Upon retirement, unvested Restricted Stock will continue to vest as scheduled. For these purposes, retirement has the same meaning used in the SARs award agreements described above.
Under the Equity Grant Policy, the number of shares of Restricted Stock awarded as equity-based compensation is based on a target long-term incentive value approved by the Committee for an individual divided by the average closing price of Farmer Mac’s Class C non-voting common stock on NYSE over the previous 30 calendar days ending seven calendar days before the date of grant.
The form of award agreement for performance-based vesting Restricted Stock awarded to executive officers under the 2008 Plan on the Grant Date is filed as Exhibit 10.1 to this report. The form of award agreement for time-based vesting Restricted Stock awarded to executive officers under the 2008 Plan on the Grant Date was previously filed as Exhibit 10.3 to Farmer Mac’s Current Report on Form 8-K filed on April 3, 2015 and is incorporated in this report by reference. The form of award agreement for Restricted Stock awarded to directors under the 2008 Plan on the Grant Date was previously filed as Exhibit 10.3 to Farmer Mac’s Current Report on Form 8-K filed on April 6, 2012 and is incorporated in this report by reference.
Awards of Performance-Based Cash Bonuses
On March 3, 2020, the Committee approved the payment of the following performance-based cash bonuses to Farmer Mac’s executive officers. These bonuses were calculated based on targets for Farmer Mac’s core earnings, outstanding business volume, and asset quality, as well as the Committee’s evaluation of the achievement of Farmer Mac’s strategic objectives and the leadership demonstrated by each individual and as a group for the period from January 1, 2019 through December 31, 2019.
|
|
|
|
|
|
Name
|
Cash Bonus Awarded
|
|
Bradford T. Nordholm
|
$1,049,737.20
|
|
Brian M. Brinch
|
$193,147.44
|
|
Zachary N. Carpenter
|
$216,751.17
|
|
Stephen P. Mullery
|
$282,550.54
|
All of the equity and cash compensation awards to executive officers described above are subject to Farmer Mac’s clawback policy, which was last amended by the Board in August 2019. That policy will also be amended to reflect any final rules or regulations that may be issued in the future under the Dodd-Frank Wall Street Reform and Consumer Protection Act.