Item 5.02. Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain
Officers.
Officer Appointments
On December 10, 2020, AGNC Investment Corp. (the "Company") announced the
following changes to its management that will be effective July 1, 2021. The
Board will appoint Peter Federico as President and Chief Executive Officer and
Christopher Kuehl as Executive Vice President and Chief Investment Officer.
Following the appointment of Mr. Federico as President and Chief Executive
Officer, Gary Kain, who presently serves as Chief Executive Officer and Chief
Investment Officer, will serve as Executive Chairman of the Company. In this
role, Mr. Kain is expected to serve as Chair of the Board, participate in
investment decisions, risk management activities, and capital management
strategies and perform other duties typically assigned to such role and as
designated by the Board and will facilitate the orderly transition of the roles
and duties of the Chief Executive Officer and Chief Investment Officer.
Mr. Federico, 54, currently serves as President and Chief Operating Officer of
the Company. Mr. Federico has served as President and Chief Operating Officer
since March 2018, and, from July 2016 until March 2018, he was the Company's
Executive Vice President and Chief Financial Officer. Mr. Federico was the
Company's Senior Vice President and Chief Risk Officer from June 2011 until July
2016. The terms of Mr. Federico's employment agreement with the Company are
amended and restated effective July 1, 2021 as described below.
Mr. Kuehl, 47, has served as the Company's Executive Vice President, Agency
Portfolio Investments since November 2016, and effective July 1, 2021, he will
become Executive Vice President and Chief Investment Officer of the Company.
Mr. Kuehl previously served as Senior Vice President of the Company from March
2012 until October 2016. The terms of Mr. Kuehl's employment agreement with the
Company are amended and restated effective July 1, 2021 as described below.
Mr. Kain, 55, currently serves as Chief Executive Officer and Chief Investment
Officer of the Company. Mr. Kain has served as Chief Executive Officer since
March 2016 and Chief Investment Officer since January 2009. The terms of
Mr. Kain's employment agreement with the Company are amended and restated
effective July 1, 2021 as described below.
Employment Agreements
On December 10, 2020, AGNC Mortgage Management, LLC ("AMM") entered into amended
and restated employment agreements with Mr. Kain, Mr. Federico, and Mr. Kuehl.
The amended and restated employment agreements adjust the positions,
compensation, and other terms of employment for the executives to reflect the
changes in positions described above.
The material terms of these employment agreements, effective July 1, 2021 (with
the exception of annual cash bonus and annual long-term incentive award
provisions which are to be effective for the 2021 awards as noted below), are as
follows:
Term: Mr. Kain's employment agreement has an initial term of 18 months,
beginning on July 1, 2021 and ending on December 31, 2022 (the "Initial Term"),
which automatically renews for successive one-year terms beginning on January 1,
2023 and on each anniversary thereafter unless Mr. Kain or the Board gives
written notice to the other party at least 90 days prior to any such renewal
that the employment period will not be extended. Each of the employment
agreements for Mr. Federico and Mr. Kuehl has a two-year term, which continues
to extend on a day-to-day basis and expires two years after delivery of notice
from either the executive or the Board that he or it no longer wishes to extend
the term.
Annual Base Salary: Effective July 1, 2021, Mr. Kain will have an annual base
salary of $500,000, and each of Messrs. Federico and Kuehl will continue to have
an annual base salary of $900,000.
Annual Cash Bonus: Each of the executives is eligible to earn an annual cash
bonus, which may range from 0% to 150% of a target value, based on the level of
achievement of specified performance measures set by the Compensation and
Corporate Governance Committee of the Board (the "Compensation Committee"). For
each calendar year beginning in 2022 and thereafter, the target value of
Mr. Kain's annual bonus will be $3,600,000, the target value of Mr. Federico's
annual bonus will be $3,600,000, and the target value of Mr. Kuehl's annual
bonus will be $2,000,000. The target bonus payable to the executives for
calendar year 2021 performance will reflect a pro ration of the rate of the
target bonus to which they are currently entitled for their current positions,
and the rate of the target bonus for their new positions. In 2021, Mr. Kain's
target bonus will be $4,500,000, Mr. Federico's target bonus will be $2,700,000
and Mr. Kuehl's target bonus will be $1,800,000.
Annual Long-Term Incentive Award: Subject to approval by the Board, each of
Messrs. Kain, Federico, and Kuehl is entitled to receive annual long-term
incentive awards with respect to shares of common stock of the Company. For the
2021 calendar year, the fair market value (on the date of grant) of such annual
long-term incentive awards will be $6,150,000, $3,400,000, and
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$2,125,000 for Messrs. Kain, Federico, and Kuehl, respectively. Such amounts
reflect a pro ration of the rate of the annual long-term incentive award to
which they are currently entitled for their current positions, and the rate of
the annual long-term incentive award for their new positions. Beginning in 2022
and for each year thereafter, subject to approval by the Board, the fair market
value (on the date of grant) of such annual long-term incentive awards for each
of Messrs. Kain, Federico, and Kuehl will be $4,200,000, $4,500,000, and
$2,600,000, respectively. 67% of the executives' long-term incentive awards for
each year will vest based upon the achievement of certain specified performance
metrics (as determined by the Compensation Committee) measured over a three-year
performance period (provided that if the performance-based metrics are exceeded,
each of the executives may earn up to 200% of the target number of shares
underlying the performance-based portion of the award). The remaining 33% of
such awards for each year will vest annually over a three-year period. In the
event that the Company cannot grant any such long-term incentive award to any of
the executives, the Company will instead provide a cash award with an equivalent
fair value and equivalent vesting terms.
Termination/Severance:
If the employment of Messrs. Kain, Federico, or Kuehl terminates by reason of a
Termination Without Cause or Termination For Good Reason, and such termination
does not occur during the 21-month period following a Change of Control (as each
such term is defined in the executive's employment agreement) and, for Mr. Kain,
if such termination occurs during the Initial Term, each such executive would be
entitled to the following (as applicable): (a) an amount equal to the product of
(i) 1.5, multiplied by (ii) the sum of (A) the executive's annual base salary at
the time of such termination, plus (B) the target value of the executive's
annual cash bonus for the year in which such termination occurs, paid over 18
months; (b) a pro rata portion of the annual cash bonus the executive would have
been entitled to receive if he had remained employed through December 31 of the
year in which such termination occurs (as determined by the Compensation
Committee but assuming that he achieved all qualitative and subjective
performance metrics at their target level) (the "Assumed Pro-Rata Bonus"); (c)
COBRA reimbursements (or substitute payments) for him and his eligible
dependents for up to 18 months; and (d) acceleration of any outstanding unvested
equity awards; provided, however that with respect to Mr. Kain, the amounts in
(a) and (c) shall be proportionally reduced for each month of the Initial Term
during which he remains employed by AMM.
If the employment of Messrs. Kain, Federico or Kuehl terminates by reason of a
Termination Without Cause or Termination For Good Reason, and such termination
occurs during the 21-month period following a Change of Control and, for
Mr. Kain, also occurs during the Initial Term, each such executive would be
entitled to the same amounts as set forth in the preceding paragraph, except:
for Messrs. Federico and Kuehl, the severance multiple in (a)(i) above will be
2.0 instead of 1.5; and the amounts in (a) above for all the executives will be
payable in a lump sum after the 60th day following such termination.
If Mr. Kain's employment terminates on or after July 1, 2021 but before
January 1, 2022 by reason of a Voluntary Termination (with at least 90 days
prior notice to the Board), the unvested portion of any time-based long-term
incentive awards granted to Mr. Kain in 2020 or earlier, as well as the unvested
portion of the time-based long-term incentive award granted to Mr. Kain in 2021
that is attributable to the portion of 2021 during which he served as Chief
Executive Officer and Chief Investment Officer, in each case that are
outstanding at the time of the termination, shall vest in full upon such
Voluntary Termination. His performance-based incentive awards granted in 2020 or
earlier, as well as the performance-based award granted to him in 2021 that is
attributable to the portion of 2021 during which he served as Chief Executive
Officer and Chief Investment Officer shall vest on the same terms as though
Mr. Kain had remained employed by AMM for the remainder of the vesting period
applicable to such awards, provided that he continues to comply with certain
covenants contained in the agreement.
If Mr. Kain's employment terminates on or after January 1, 2022 but before
December 31, 2022 by reason of a Voluntary Termination, in addition to the
vesting terms described above, the unvested portion of any time-based long-term
incentive awards granted to Mr. Kain in 2021 and the portion of the
performance-based incentive awards granted to him in 2021, in each case that are
attributable to the portion of 2021 during which he served as Executive Chair
will (i) with respect to the time-based award, vest in full, and (ii) with
respect to the performance-based award, vest on the same terms as though
Mr. Kain had remained employed by AMM for the remainder of the vesting period
applicable to such award, provided that he continues to comply with certain
covenants contained in the agreement.
If Mr. Kain's employment terminates after December 31, 2022 by reason of a
Voluntary Termination, Termination Without Cause, or Termination For Good
Reason, in addition to the vesting terms described above, the unvested portion
of any time-based long-term incentive awards and the performance-based incentive
awards, in each case that are granted to Mr. Kain following the 2021 calendar
year will (i) with respect to the time-based award, vest in full, and (ii) with
respect to the performance-based award, vest on the same terms as though
Mr. Kain had remained employed by AMM for the remainder of the vesting period
applicable to such award, provided that he continues to comply with certain
covenants contained in the agreement; provided further, that vesting of any
long-term incentive awards granted to Mr. Kain in the year of such termination
will apply only to a pro rata portion of the awards based on the number of full
calendar months Mr. Kain was employed in such year. In addition, Mr. Kain will
also receive the Assumed Pro-Rata Bonus upon such termination.
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Restrictive Covenants: Pursuant to their employment agreements, Messrs. Kain,
Federico, and Kuehl are subject to 18-month post-employment non-compete and
non-solicit covenants.
The description above is qualified in its entirety by reference to the
executives' amended and restated employment agreements, which are attached as
Exhibits 10.1, 10.2 and 10.3 hereto and incorporated into this Item 5.02 by
reference.
AGNC Investment Corp. issued a press release announcing the matters outlined
herein on December 10, 2020. The text of the press release is included as
exhibit 99.1 to this Form 8-K. Pursuant to the rules and regulations of the
Securities and Exchange Commission, such exhibit and the information set forth
therein shall not be deemed to be filed for purposes of Section 18 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and shall not
be deemed to be incorporated by reference in any filing under the Securities Act
of 1933, as amended, or the Exchange Act, except as shall be expressly set forth
by specific reference in such a filing.
(d) Exhibits.
Exhibit
No. Description
10.1 Employment Agreement, dated as of December 10, 2020, by and between
AGNC Mortgage Management, LLC and Gary Kain
10.2 Employment Agreement, dated as of December 10, 2020, by and between
AGNC Mortgage Management, LLC and Peter Federico
10.3 Employment Agreement, dated as of December 10, 2020, by and between
AGNC Mortgage Management, LLC and Christopher Kuehl
99.1 Press Release dated December 10, 2020
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