| Schedule of Stock Issued In Public Offerings |
Common Stock Offerings
The following table presents shares of common stock issued by Newcastle in
connection with public offerings since 2011:
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Price per Share
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Aggregate Shares Purchased by
Principals of Fortress
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Options Granted to Manager (A)
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Date
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Number
of Shares
Issued
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To
Public
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To Underwriters
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Net
Proceeds
(millions)
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Number
of Shares
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Price
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Number
of Shares
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Strike
Price
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Grant Date
Value (millions)
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March 2011
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17,250,000
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$
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6.00
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N/A
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$
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98.4
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—
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—
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1,725,000
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$
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6.00
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$
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7.0
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September 2011
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25,875,000
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$
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4.55
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N/A
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$
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112.3
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1,314,780
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(B)
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$
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4.55
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2,587,500
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$
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4.55
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$
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5.6
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April 2012
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18,975,000
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$
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6.22
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N/A
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$
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115.2
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—
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—
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1,897,500
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$
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6.22
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$
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5.6
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May 2012
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23,000,000
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$
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6.71
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N/A
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$
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152.0
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—
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—
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2,300,000
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$
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6.71
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$
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7.6
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July 2012
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25,300,000
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N/A
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$
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6.63
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$
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167.4
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450,000
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$
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6.70
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2,530,000
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$
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6.70
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$
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8.3
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January 2013
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57,500,000
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$
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9.35
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N/A
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$
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526.2
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213,900
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$
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9.35
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5,750,000
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$
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9.35
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$
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18.0
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February 2013
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23,000,000
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N/A
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$
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10.34
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$
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237.4
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191,000
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$
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10.48
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2,300,000
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$
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10.48
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$
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8.4
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June 2013
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40,250,000
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N/A
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$
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4.92
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$
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197.6
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750,000
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$
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4.97
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4,025,000
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$
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4.97
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$
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3.8
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November 2013
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57,950,952
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N/A
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$
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5.21
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$
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301.4
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450,952
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$
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5.25
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5,795,095
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$
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5.25
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$
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6.0
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(A)
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In connection with these offerings, Newcastle granted options to the
Manager for the purpose of compensating the Manager for its successful
efforts in raising capital for Newcastle.
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(B)
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This figure also includes shares purchased by officers of Newcastle.
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| Schedule of Outstanding Options |
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Newcastle’s outstanding options were summarized as follows:
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Year Ended December 31, 2013
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Year Ended December 31, 2012
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Issued Prior
to 2011
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Issued in 2011
and thereafter
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Total
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Issued Prior
to 2011
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Issued in 2011
and thereafter
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Total
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Held by the Manager
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1,496,555
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25,996,428
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27,492,983
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1,751,172
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7,934,166
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9,685,338
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Issued to the Manager and subsequently transferred to certain
Manager’s employees
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535,570
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2,510,000
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3,045,570
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701,937
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3,010,000
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3,711,937
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Issued to the independent directors
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2,000
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2,000
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4,000
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10,000
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2,000
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12,000
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Total
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2,034,125
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28,508,428
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30,542,553
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2,463,109
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10,946,166
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13,409,275
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| Summary of Newcastle's outstanding options |
The following table summarizes Newcastle’s outstanding options at December
31, 2013. Note that the last sales price on the New York Stock Exchange
for Newcastle’s common stock in the year ended December 31, 2013 was $5.74
per share.
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Intrinsic Value at
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Date of
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Options Exercisable at
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Weighted Average
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Fair Value At Grant
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December 31, 2013
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Recipient
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Grant/Exercise
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Number of Options
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December 31, 2013
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Strike Price (A)
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Date (millions) (B)
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(millions)
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Directors
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Various
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20,000
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4,000
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$
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8.06
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Not Material
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—
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Manager (C)
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2002 - 2007
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3,523,727
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2,032,125
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$
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12.66
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$
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6.4
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—
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Manager (C)
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Mar-11
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1,725,000
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1,580,166
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$
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2.72
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$
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7.0
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(G)
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$
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4.8
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Manager (C)
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Sep-11
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2,587,500
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2,165,361
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$
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2.07
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$
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5.6
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(H)
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$
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8.9
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Manager (C)
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Apr-12
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1,897,500
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1,244,778
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$
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2.82
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$
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5.6
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(I)
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$
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5.5
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Manager (C)
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May-12
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2,300,000
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1,421,667
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$
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3.05
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$
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7.6
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(J)
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$
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6.1
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Manager (C)
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Jul-12
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2,530,000
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1,416,195
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$
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3.04
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$
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8.3
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(K)
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$
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6.7
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Manager (C)
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Jan-13
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5,750,000
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2,108,333
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$
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4.24
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$
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18.0
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(L)
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$
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8.6
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Manager (C)
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Feb-13
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2,300,000
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766,667
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$
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4.75
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$
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8.4
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(M)
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$
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2.3
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Manager (C)
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Jun-13
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4,025,000
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805,000
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$
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4.97
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$
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3.8
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(N)
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$
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3.1
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Manager (C)
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Nov-13
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5,795,095
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193,170
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$
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5.25
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$
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6.0
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(O)
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$
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2.8
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Exercised (D)
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Prior to 2008
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(1,043,118
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N/A
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$
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15.70
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N/A
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N/A
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Exercised (E)
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Oct-12
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(95,834
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N/A
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$
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5.28
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N/A
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N/A
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Exercised (F)
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Sep-13
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(307,833
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N/A
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$
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2.56
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N/A
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N/A
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Expired unexercised
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2002-2003
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(464,484
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N/A
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N/A
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N/A
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N/A
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Outstanding
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30,542,553
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13,737,462
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(A)
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The strike prices are subject to adjustment in connection with return
of capital dividends and spin-offs. A portion of Newcastle’s 2008
dividends was deemed return of capital dividends. The effect on the
strike prices was not significant. The strike prices were adjusted for
the New Residential spin-off as described above. As of December 31,
2013, the weighted average strike price of the outstanding options
issued prior to 2011 was $12.66.
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(B)
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The fair value of the options was estimated using an option valuation
model. Since the Newcastle Option Plan and 2012 Plan have
characteristics significantly different from those of traded options,
and since the assumptions used in such model, particularly the
volatility assumption, are subject to significant judgment and
variability, the actual value of the options could vary materially
from management’s estimate. The volatility assumption for these
options was estimated based primarily on the historical volatility of
Newcastle’s common stock and management’s expectations regarding
future volatility. The expected life assumption for options issued
prior to 2011 was estimated based on the simplified term method. This
simplified method was used because Newcastle did not have sufficient
historical data to conclude on the appropriate expected life of its
options and because historical data to date was consistent with the
simplified term method. The expected life assumption for options
issued in 2011 and thereafter was estimated based primarily on the
historical expected life of applicable previously issued options.
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(C)
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The Manager assigned certain of its options to Fortress’s employees as
follows:
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Date of Grant
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Range of Strike Prices
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Total Unexercised Inception to Date
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2004
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$11.49-$14.05
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226,125
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2005
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$13.24
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89,925
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2006
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$13.16
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48,450
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2007
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$12.40-$14.01
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171,070
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2011
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$2.07-$2.72
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1,210,000
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2012
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$2.82-$3.05
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1,300,000
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Total
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3,045,570
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(D)
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670,620 of the total options exercised were by the Manager. 368,498 of
the total options exercised were by employees of Fortress subsequent
to their assignment. 4,000 of the total options exercised were by
directors.
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(E)
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Exercised by employees of Fortress subsequent to their assignment. The
options exercised had an intrinsic value of $0.2 million.
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(F)
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Exercised by employees of Fortress subsequent to their assignment. The
options exercised had an intrinsic value of $0.9 million.
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(G)
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The assumptions used in valuing the options were: a 1.7% risk-free
rate, 107.8% volatility and a 3.3 year expected term.
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(H)
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The assumptions used in valuing the options were: a 1.13% risk-free
rate, 13.2% dividend yield, 151.1% volatility and a 4.6 year expected
term.
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(I)
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The assumptions used in valuing the options were: a 1.3% risk-free
rate, 12.9% dividend yield, 149.4% volatility and a 4.7 year expected
term.
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(J)
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The assumptions used in valuing the options were: a 1.05% risk-free
rate, 11.9% dividend yield, 148.4% volatility and a 4.8 year expected
term.
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(K)
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The assumptions used in valuing the options were: a 0.75% risk-free
rate, 11.9% dividend yield, 147.5% volatility and a 4.8 year expected
term.
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(L)
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The assumptions used in valuing the options were: a 2.0% risk-free
rate, 8.8% dividend yield, 56.2% volatility and a 10 year term.
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(M)
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The assumptions used in valuing the options were: a 2.1% risk-free
rate, 7.8% dividend yield, 55.5% volatility and a 10 year term.
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(N)
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The assumptions used in valuing the options were: a 2.5% risk-free
rate, 8.8% dividend yield, 36.9% volatility and a 10 year term.
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(O)
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The assumptions used in valuing the options were: a 2.8% risk-free
rate, 6.7% dividend yield, 32.0% volatility and a 10 year term.
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