Item 1.01. Entry into a Material Definitive Agreement.
On June 17, 2022, New Residential Investment Corp. (the "Company") entered into
definitive agreements with its external manager, FIG LLC (the "Manager"), to
internalize the Company's management function and operate as an internally
managed real estate investment trust (the "Internalization"), effective upon the
entry into the Internalization Agreement (as defined below) (such time, the
"Effective Time" and June 17, 2022, the "Effective Date"). Since the completion
of the spin-off of the Company from Drive Shack Inc. (formerly Newcastle
Investment Corp.) on May 15, 2013, the Manager has been responsible for managing
the Company's operations, subject to the supervision of the Company's board of
directors. As described in more detail below, on June 17, 2022, the Company
agreed with the Manager to terminate the Third Amended and Restated Management
and Advisory Agreement, dated as of May 7, 2015 (the "Management and Advisory
Agreement"), between the Company and the Manager, and arranged for the Manager
to continue to provide certain services for a transition period.
Each of the agreements described under this Item 1.01, and the transactions
contemplated thereby, were negotiated and unanimously approved by a special
committee (the "Special Committee") comprised solely of Kevin Finnerty, Patrice
Le Melle, Pamela Lenehan, Robert McGinnis, David Saltzman and Andrew Sloves,
each of whom are independent and disinterested members of the board of directors
of the Company. The Special Committee was advised by independent counsel and an
independent financial advisor.
Internalization Agreement
On June 17, 2022, the Company entered into an Internalization Agreement (the
"Internalization Agreement") with the Manager. Under the Internalization
Agreement, the Management and Advisory Agreement was terminated at the Effective
Time, except that certain indemnification and other obligations will survive. In
connection with the termination of the Management and Advisory Agreement, the
Company has agreed to pay $400 million to the Manager, with $200 million paid on
the Effective Date, $100 million payable on September 15, 2022 and $100 million
payable on December 15, 2022 (less an agreed amount payable by the Manager to
the Company related to the pre-Internalization portion of certain annual bonuses
for 2022). As described in the Internalization Agreement, the Company has made
or intends to extend offers of employment to certain employees of the Manager or
its affiliates who provide services to the Company, including the persons who
currently serve as the Chief Executive Officer & President (as described below
under Item 5.02) and the Chief Financial Officer and Chief Accounting Officer of
the Company. The terms of any offer letters or similar employment arrangements
that are entered into between the Company and the person who currently serves as
the Chief Financial Officer and Chief Accounting Officer of the Company will be
described in subsequent filings in accordance with applicable disclosure rules.
Under the Internalization Agreement, the Manager has agreed not to, without the
prior written consent of the Company, sell or otherwise transfer or dispose of
any shares of capital stock of the Company or any securities convertible into,
or exercisable or exchangeable for, shares of capital stock of the Company held
by the Manager immediately prior to the Effective Time for 90 days after the
Effective Date, subject to certain exceptions. The Manager has also agreed to be
subject to certain non-solicitation restrictions for a period of five years
following August 1, 2022 relating to the employees of the Manager who accept
employment with the Company pursuant to the terms of Internalization Agreement.
The information set forth herein with respect to the Internalization Agreement
is qualified in its entirety by the full text of the Internalization Agreement,
which is filed as Exhibit 10.1 hereto and incorporated into this Item 1.01 by
reference.
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Transition Services Agreement
On June 17, 2022, the Company also entered into a Transition Services Agreement
(the "Transition Services Agreement") with the Manager. Under the Transition
Services Agreement, the Manager is required to continue to provide the Company
with all of the services provided by the Manager to the Company and its
affiliates immediately prior to the Effective Date (the "Services") for a
transition period during which the Company will procure alternative providers.
The Services will be provided for a fee intended to be equal to the Manager's
cost of providing the Services, including the allocated cost of, among other
things, overhead, employee wages and compensation, rent and related real estate
expenses and actually incurred out-of-pocket expenses. The Company may elect to
terminate any individual Service at any time upon written notice to the Manager.
The Transition Services Agreement will terminate on the earliest to occur of (i)
the date on which no remaining Service is to be provided under the Transition
Services Agreement or (ii) December 31, 2022, unless terminated earlier (x) by
mutual agreement of the parties, (y) by either the Manager or the Company in the
event of a material breach by the non-terminating party that is not cured within
thirty (30) days following written notification thereof, or (z) by the Manager
if the Company fails to pay any sum overdue and payable for a period of at least
thirty (30) days.
The information set forth herein with respect to the Transition Services
Agreement is qualified in its entirety by the full text of the Transition
Services Agreement, which is filed as Exhibit 10.2 hereto and incorporated into
this Item 1.01 by reference.
Item 1.02. Termination of a Material Definitive Agreement.
The information set forth in Item 1.01 with respect to the termination of the
Management and Advisory Agreement is incorporated by reference into this Item
1.02.
Item 5.02. Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain
Officers.
In connection with the Internalization, on the Effective Date, the Company
entered into an employment agreement (the "Employment Agreement"), with Michael
Nierenberg, the Company's Chief Executive Officer. Pursuant to the terms of the
Employment Agreement, beginning as of the Effective Date, the initial employment
term will be for five years, subject to automatic annual renewals thereafter.
From the Effective Date through December 31, 2022, the Company will pay Mr.
Nierenberg a base salary at the annualized rate of $1,250,000. For 2022, Mr.
Nierenberg will also have a target cash bonus amount of $1,875,000, of which Mr.
Nierenberg will be eligible earn from 0% to 200%, as determined at the
discretion of the Compensation Committee of the board of directors of the
Company (the "Compensation Committee"). In addition, as soon as reasonably
practicable after the Effective Date, Mr. Nierenberg will receive an equity
grant of restricted common stock of the Company equal to $5,000,000 divided by
the closing price of such stock on the New York Stock Exchange on the grant
date, with such award vesting ratably over three years following the grant date.
Effective as of January 1, 2023, Mr. Nierenberg will be entitled to receive an
annual base salary of $1,250,000. Beginning in 2023, Mr. Nierenberg will also
have an annual target cash bonus amount of $5,000,000 during the employment
term, of which Mr. Nierenberg will be eligible to earn from 0% to 200% based on
various financial, strategic and individual performance metrics established by
the Compensation Committee each year. In addition, Mr. Nierenberg will receive
annual long-term incentive awards having a target grant date value of
$8,750,000, of which 50% will be in the form of performance-based awards and 50%
will be in the form of time-based awards. The annual performance-based awards
will be eligible to be earned from 0% of target (for performance below threshold
levels) up to 150% of target (for performance at or above maximum levels).
In the event of certain qualifying terminations of employment by the Company or
Mr. Nierenberg, Mr. Nierenberg will be entitled to (w) cash severance equal to
two times the sum of his base salary and target annual bonus, (x) a prorated
target bonus for the year of termination, (y) 18 months of health insurance
premiums, subject to adjustment, and (z) accelerated vesting of time-based
awards that would have become vested during the two-year period following the
qualifying termination and continuing eligibility to earn a pro rata portion of
any performance-based equity awards granted to him based on actual performance
through the end of the original performance period. If the qualifying
termination occurs in the twenty-four month period following a change in
control, outstanding time-based awards will instead become fully vested and Mr.
Nierenberg will be eligible to earn performance-based awards based on actual
performance during the applicable performance period.
Mr. Nierenberg will also be subject to certain post-employment non-competition
and non-solicitation covenants for a 24 month period following any termination
of employment, as well as a covenant not to disclose confidential information.
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The information set forth herein with respect to the Employment Agreement is
qualified in its entirety by the full text of the Employment Agreement, which
will be filed in a subsequent filing with the U.S. Securities and Exchange
Commission and incorporated into this Item 5.02 by reference.
Item 8.01. Other Events.
On June 17, 2022, the Company issued a press release describing the
Internalization, the plans to change the Company's name to Rithm Capital Corp.
(NYSE: RITM) and related matters. The name change is expected to take effect on
or about August 1, 2022 pursuant to customary notices. A copy of the press
release is included as Exhibit 99.1 to this report and incorporated by reference
herein.
Forward Looking Statements
Certain information in this Current Report on Form 8-K may constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995, including, but not limited to, statements
regarding the internalization of the Company's management and the potential
costs and benefits thereof, expected post-internalization employees and the
number of estimated weighted average diluted shares as of June 30, 2022. These
statements are not historical facts. They represent management's current
expectations regarding future events and are subject to a number of trends and
uncertainties, many of which are beyond the Company's control, which could cause
actual results to differ materially from those described in the forward-looking
statements. These risks and uncertainties include, but are not limited to, risks
and uncertainties relating to the Company's ability to successfully manage the
transition to self-management and the ability to achieve expected cost savings
or the timing thereof; unanticipated difficulties financing the Internalization;
unanticipated expenditures relating to or liabilities arising from the
Internalization; litigation or regulatory issues relating to the
Internalization; and the impact of the Internalization on relationships with,
and potential difficulties retaining, the Company's executive officers,
employees and directors on a go-forward basis. Accordingly, you should not place
undue reliance on any forward-looking statements contained herein. For a
discussion of some of the risks and important factors that could affect such
forward-looking statements, see the sections entitled "Cautionary Statements
Regarding Forward Looking Statements," "Risk Factors" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in the
Company's most recent annual and quarterly reports and other filings filed with
the U.S. Securities and Exchange Commission, which are available on the
Company's website (www.newresi.com). New risks and uncertainties emerge from
time to time, and it is not possible for the Company to predict or assess the
impact of every factor that may cause its actual results to differ from those
contained in any forward-looking statements. Forward-looking statements
contained herein speak only as of the date of this Current Report on Form 8-K,
and the Company expressly disclaims any obligation to release publicly any
updates or revisions to any forward-looking statements contained herein to
reflect any change in the Company's expectations with regard thereto or change
in events, conditions or circumstances on which any statement is based.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
Exhibit
Number Description
10.1* Internalization Agreement, dated June 17, 2022, by and between New
Residential Investment Corp. and FIG LLC
10.2 Transition Services Agreement, dated June 17, 2022, by and between New
Residential Investment Corp. and FIG LLC
99.1 Press Release, dated June 17, 2022
104 Cover Page Interactive Data File (embedded within the Inline XBRL
document)
* Certain schedules or similar attachments to this exhibit have been omitted in
accordance with Item 601(a)(5) of Regulation S-K. The Company agrees to furnish
supplementally a copy of all omitted schedules or similar attachments to the
Securities and Exchange Commission upon its request.
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