UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
the Securities Exchange Act of 1934 (Amendment No.
Filed by the Registrant ☑
Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to §240.14a-12
ARBOR REALTY TRUST, INC.
Payment of Filing Fee (Check the appropriate box):
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No fee required.
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Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and 0-11.
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Title of each class of securities to which transaction applies:
Aggregate number of securities to which transaction applies:
3)
Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
4)
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5)
Total fee paid:
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
1)
Amount Previously Paid:
2)
Form, Schedule or Registration Statement No.:
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Filing Party:
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Date Filed:
As filed with the Commission on April 14, 2020
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Arbor Realty Trust, Inc.
April 11, 2018
14, 2020
Dear Fellow Stockholders:
On behalf of the Board of Directors, I cordially invite you to attend the annual meeting of stockholders of Arbor Realty Trust, Inc. to be held at the Teleconference Center on the lower level of 333 Earle Ovington Boulevard, Uniondale, New York, on May 15, 2018,June 3, 2020, at 11:00 a.m., local time. The matters to be considered by the stockholders at the annual meeting are described in detail in the accompanying materials.
I am deeply saddened to inform you that Dr. William Helmreich, one of our longest tenured directors, and a dear personal friend and valued advisor to me passed away on March 28, 2020. Bill made many valuable contributions to our Company and his sage advice and guidance will be sorely missed by our Board and our management team and I will be forever grateful to him for his service to Arbor. His passing represents a sad and difficult loss for our Company.
We currently intend to hold our annual meeting in person. However, we are actively monitoring the coronavirus (COVID-19) pandemic and are sensitive to the public health and travel concerns our stockholders may have and the protocols that federal, state and local governments may impose. In the event it is not possible or advisable to hold our annual meeting in person on June 3, 2020, we will announce alternative arrangements for the meeting as promptly as practicable, which may include postponing the meeting date and/or holding the meeting solely by means of remote communication. Please monitor the “Investor Relations” section of our website at www.arbor.com for updated information. If you are planning to attend our meeting, please check the website one week prior to the meeting date. As always, we encourage you to vote your shares prior to the annual meeting.
It is important that you be represented at the annual meeting regardless of the number of shares you own or whether you are able to attend the annual meeting in person.
Let me urge you to mark, sign and date your proxy card today and return it in the envelope provided.
Sincerely,
![[MISSING IMAGE: sg_ivankaufman-bw.jpg]](https://capedge.com/proxy/DEF 14A/0001104659-20-046375/sg_ivankaufman-bw.jpg)
IVAN KAUFMAN
Chairman and Chief Executive Officer and President
Chairman and Chief Executive Officer and President
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June 3, 2020IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDERS MEETING TO BE HELD ON MAY 15, 2018THE PROXY STATEMENT AND ANNUAL REPORT TO SECURITY HOLDERS ARE
AVAILABLE AT:http://www.arbor.comNotice of Annual Meeting of Stockholders
To Be Held on May 15, 2018To the Stockholders of Arbor Realty Trust, Inc.:The annual meeting of stockholders of Arbor Realty Trust, Inc., a Maryland corporation (the "Company"“Company,” “Arbor,” “we,” “our,” and “us,”), will be held at the Teleconference Center on the lower level of 333 Earle Ovington Boulevard, Uniondale, New York, on May 15, 2018,June 3, 2020, beginning at 11:00 a.m., local time. Directions to attend the annual meeting and vote in person are available on our website www.arbor.com,(www.arbor.com) under the heading "Investor Relations"“Investor Relations” or can be obtained by calling our main telephone number, (516) 506-4200.We currently intend to hold our annual meeting in person. However, we are actively monitoring the coronavirus (COVID-19) pandemic and are sensitive to the public health and travel concerns our stockholders may have and the protocols that federal, state and local governments may impose. In the event it is not possible or advisable to hold our annual meeting in person on June 3, 2020, we will announce alternative arrangements for the meeting as promptly as practicable, which may include postponing the meeting date and/or holding the meeting solely by means of remote communication. Please monitor the “Investor Relations” section of our website at www.arbor.com for updated information. If you are planning to attend our meeting, please check the website one week prior to the meeting date. As always, we encourage you to vote your shares prior to the annual meeting.The matters to be considered and voted upon by stockholders at the annual meeting, which are described in detail in the accompanying materials, are:(1)The election of twothree Class IIIII directors, each to serve until the 20212023 annual meeting of stockholders and until their respective successors are duly elected and qualify and the election of one Class III director, to serve until the 2021 annual meeting of stockholders and until his successor is duly elected and qualify;(2)A proposal to amend and restate the Company’s 2017 Amended Omnibus Stock Incentive Plan (the “Stock Incentive Plan”) to authorize the issuance of an additional 5,000,000 shares of common stock as grants of restricted stock, restricted stock units or underlying stock options under the Stock Incentive Plan;(3)(2)The ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for fiscal year 2018;2020;(4)A non-binding advisory vote to approve the compensation of the Company’s named executive officers as disclosed in this proxy statement;
(5)
A non-binding advisory vote on the frequency of future advisory votes to approve the compensation of the Company’s named executive officers; and
(6)
(3)
The transaction of any other business that may properly come before the annual meeting or any adjournment or postponement of the annual meeting.
Stockholders of record at the close of business on April 2, 20186, 2020 will be entitled to receive notice of and to vote at the annual meeting.It is important that your shares be represented at the annual meeting regardless of the size of your securities holdings. A proxy statement, proxy card, self-addressed envelope and Annual Report to Stockholders for the fiscal year ended December 31, 20172019 accompany this notice. Whether or not you plan to attend the annual meeting in person, please complete, date and sign the proxy card. Please return it promptly in the envelope provided, which requires no postage if mailed in the United States. If you are the record holder of your shares and you attend the annual meeting, you may withdraw your proxy and vote in person, if you so choose.
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| | April Uniondale, New York | | | JOHN J. BISHAR, JR. | |
Corporate Secretary | |
Arbor Realty Trust, Inc.
333 Earle Ovington Boulevard
Suite 900
Uniondale, New York 11553
(516) 506-4200
FOR THE ANNUAL MEETING OF STOCKHOLDERS
To Be Held onMay 15, 2018
June 3, 2020
To Be Held on
June 3, 2020
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GENERAL INFORMATION CONCERNING SOLICITATION AND VOTING
This proxy statement, the accompanying proxy card and notice of annual meeting are provided in connection with the solicitation of proxies by and on behalf of the Board of Directors of Arbor Realty Trust, Inc., a Maryland corporation, for use at the annual meeting of stockholders to be held on May 15, 2018,June 3, 2020, at 11:00 a.m., local time, and any adjournments or postponements thereof.
"We," "our," "us," "Arbor" and "the Company" each refers to Arbor Realty Trust, Inc. We were previously externally managed and advised by Arbor Commercial Mortgage, LLC, which we refer to as "Arbor Commercial Mortgage," "our Former Manager" or "ACM." Effective May 31, 2017, we exercised our option to fully internalize our management team and terminate the existing management agreement.
The mailing address of our executive office is 333 Earle Ovington Boulevard, Suite 900, Uniondale, New York, 11553. This proxy statement, the accompanying proxy card and the notice of annual meeting are first being mailed on or about April 11, 201814, 2020 to holders of our common stock, par value $0.01 per share, and special voting preferred stock, par value $0.01 per share, of record at the close of business on April 2, 2018.6, 2020. The outstanding shares of common stock and special voting preferred stock are the only securities entitled to vote at the annual meeting, and we refer to these securities, collectively, as our voting securities. Along with this proxy statement, we are also sending our Annual Report to Stockholders for the fiscal year ended December 31, 2017.
2019.
A proxy may confer discretionary authority to vote with respect to any matter presented at the annual meeting. As of the date of this proxy statement, management has no knowledge of any business that will be presented for consideration at the annual meeting and that would be required to be set forth in this proxy statement or the related proxy card other than the matters set forth in the Notice of Annual Meeting of Stockholders. If any other matter is properly presented at the annual meeting for consideration, it is intended that the persons named in the enclosed proxy card and acting thereunder will vote in accordance with their discretion on any such matter.
Matters to be Considered at the Annual Meeting
At the annual meeting, our stockholders will consider and vote upon:
(1)
The election of twothree Class IIIII directors, each to serve until the 20212023 annual meeting of stockholders and until their respective successors are duly elected and qualify;qualify and the election of one Class III director, to serve until the 2021 annual meeting of stockholders and until his successor is duly elected and qualified;
(2)
A proposal to amend and restate our Stock Incentive Plan to authorize the issuance of an additional 5,000,000 shares of common stock as grants of restricted stock, restricted stock units or underlying stock options under the Stock Incentive Plan;
(3)
(2)
The ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for fiscal year 2018;2020;
(4)
A non-binding advisory vote to approve the compensation of our named executive officers as disclosed in this proxy statement;
(5)
A non-binding advisory vote on the frequency of future advisory votes to approve the compensation of our named executive officers; and
(6)
(3)
The transaction of any other business that may properly come before the annual meeting or any adjournment or postponement of the annual meeting.
This proxy statement, form of proxy and voting instructions are being mailed starting on or about April 11, 2018.
14, 2020.
Solicitation of Proxies
The enclosed proxy is solicited by and on behalf of our Board of Directors (the "Board"“Board” or the "Board“Board of Directors"Directors”). The expense of preparing, printing and mailing this proxy statement and the proxies solicited hereby will be borne by the Company. In addition to the use of the mail, proxies may be solicited by officers and directors, without additional remuneration, by personal interview, telephone or otherwise. We will also request brokerage firms, nominees, custodians and fiduciaries to forward proxy materials to the beneficial owners of voting securities held of record at the close of business on April 2, 20186, 2020 and will
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provide reimbursement for the cost of forwarding the material. In addition, we have engaged Alliance Advisors LLC to assist in soliciting proxies from brokers, banks and other
nominee holders of our common stock at a cost of approximately $6,500$7,000 plus reasonable out-of-pocket expenses.
Stockholders Entitled To Vote
As of the close of business on April 2, 2018,6, 2020, there were 62,469,535110,625,242 shares of our common stock and 21,230,76920,369,265 shares of our special voting preferred stock outstanding and entitled to vote. Each share of our common stock and special voting preferred stock entitles the holder to one vote. Stockholders of record at the close of business on April 2, 20186, 2020 are entitled to attend and vote at the annual meeting or any adjournment or postponement thereof.
Required Quorum/Vote
A quorum will be present if stockholders entitled to cast a majority of all the votes entitled to be cast at the annual meeting are present, in person or by proxy. If you have returned a valid proxy or if you hold your shares of our voting securities in your own name as holder of record and you attend the annual meeting in person, your shares will be counted for the purpose of determining whether there is a quorum. If a quorum is not present, the annual meeting may be adjourned by the chairman of the meeting or the stockholders entitled to vote at the annual meeting, present in person or by proxy, to a date not more than 120 days after the record date without notice other than announcement at the meeting.
Abstentions and broker non-votes will be counted in determining the presence of a quorum. "Broker non-votes"“Broker non-votes” occur when a bank, broker or other nominee holding shares for a beneficial owner returns a properly executed proxy but does not vote on a particular proposal because it does not have discretionary voting power for that particular item and has not received instructions from the beneficial owner. Under the rules of the New York Stock Exchange (the "NYSE"“NYSE”), banks, brokers and other nominees who hold shares in "street name"“street name” may have the authority to vote on certain matters when they do not receive instructions from beneficial owners. Banks, brokers and other nominees that do not receive instructions are not entitled to vote on (i) the election of directors contained in Proposal No. 1,1; (ii) the proposal to amend and restate the Company’s Stock Incentive Plan contained in Proposal No. 2; (iii) the advisory vote on executive compensation contained in Proposal No. 4; or (iv) the advisory vote on the frequency of future advisory votes on executive compensation contained in Proposal No. 5, but may vote on ratification of the appointment of the independent registered public accounting firm contained in Proposal No. 2.
3.
Election of each of the director nominees named in Proposal No. 1 requires the affirmative vote of a plurality of all the votes cast in the election of directors at the annual meeting by holders of our voting securities. The director nominees receiving the highest number of affirmative votes will be elected directors. Shares represented by properly executed and returned proxies will be voted, if authority to do so is not withheld, for the election of the Board of Directors'Directors’ nominees named in Proposal No. 1. Votes may be cast in favor of or withheld with respect to all of the director nominees, or any of them. Abstentions and broker non-votes, if any, will not be counted as votes cast and will have no effect on the outcome of the vote on the election of directors. Stockholders may not cumulate votes in the election of directors.
Approval of the amendment and restatement of the Company’s Stock Incentive Plan, as specified in Proposal No. 2, requires the affirmative vote of a majority of the votes cast on the proposal at the annual meeting by holders of our voting securities; provided that the total vote cast on the proposal represents over 50% in interest of all securities entitled to vote on the proposal. For purposes of the vote on the Stock Incentive Plan, abstentions and broker non-votes will have the same effect as votes against the proposal, unless holders of more than 50% in interest of all securities entitled to vote on the proposal cast votes, in which event broker non-votes will not have any effect on the result of the vote.
Ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for fiscal year 2018,2020, as specified in Proposal No. 2,3, requires the affirmative vote of a majority of the votes cast on the proposal at the annual meeting by holders of our voting securities. If this appointment is not ratified by holders of our voting securities, the Audit Committee and our Board of Directors may each reconsider its appointment and endorsement. Abstentions will not be counted as having been cast and will have no effect on the outcome of the vote for this proposal. Even if the appointment is ratified, the Audit
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Committee in its discretion may direct the appointment of a different independent registered public accounting firm at any time during the year if it determines that such a change would be in our best interest.
Approval, on an advisory basis, of the compensation of our named executive officers as disclosed in this proxy statement, as specified in Proposal No. 4, requires the affirmative vote of a majority of the votes cast on the proposal at the annual meeting by holders of our voting securities. Abstentions and broker non-votes will not be counted as having been cast and will have no effect on the outcome of the vote for this proposal. The vote on Proposal No. 4 is non-binding on the Board and the Compensation Committee and will not be construed as overruling any decision by the Board or the Compensation Committee. The Board and the Compensation Committee expect to take the results of this vote into consideration when making future compensation decisions with respect to the named executive officers, but are not required to do so.
We are seeking a vote, on an advisory basis, on the frequency of submission of future advisory votes on the approval of the compensation of our named executive officers. Stockholders will have the option of selecting one year, two years or three years as the frequency of submission, or of abstaining. Abstentions and broker non-votes will not be counted as having been cast and will have no effect on the outcome of the vote for this proposal. In the event that no option receives a majority of the votes cast, we will consider the option that receives the most votes to be the option selected by stockholders. In either case, the vote on Proposal No. 5 is advisory and non-binding on the Board, and will not be construed as overruling any decision by the Board. The Board expects to take the results of this vote into consideration when deciding upon the frequency of the non-binding advisory vote on the approval of the compensation of our named executive officers vote in the future, but it is not required to do so.
If the enclosed proxy is properly executed and returned to us in time to be voted at the annual meeting, it will be voted as specified on the proxy, unless it is properly revoked prior thereto. If no specification is made on the proxy as to any one or more of the proposals, the following action will be taken with respect to each share of our voting securities represented by the proxy:
(1)
A vote will be castFOR the election of the twothree Class IIIII directors, each to serve until the 20212023 annual meeting of stockholders and until their respective successors are duly elected and qualify;qualify, and FOR the election of one Class III director, to serve until the 2021 annual meeting of stockholders and until his successor is duly elected and qualified;
(2)
(2)
A vote will be castFOR the amendment and restatement of the Company’s Stock Incentive Plan to authorize the issuance of an additional 5,000,000 shares of common stock as grants of restricted stock, restricted stock units or underlying stock options under the Stock Incentive Plan;
(3)
A vote will be cast FOR the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for fiscal year 2018;2020;
(4)
A vote will be cast FOR the adoption of a non-binding advisory resolution to approve the compensation of our named executive officers as disclosed in this proxy statement;
(5)
A vote will be cast for the THREE YEAR option for the frequency of future advisory votes to approve the compensation of our named executive officers; and
(6)
(3)
A vote will be cast in the discretion of the proxy holder on any other business that properly comes before the annual meeting or any adjournment or postponement thereof.
As of the date of this proxy statement, we are not aware of any other matter to be presented at the annual meeting.
Voting
If you hold your shares of our voting securities in your own name as a holder of record, you may instruct the proxies to vote your shares by signing, dating and mailing the proxy card in the postage-paid envelope provided. In addition, you may vote your shares of our voting securities in person at the annual meeting.
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If your shares are held on your behalf by a broker, bank or other nominee, you will receive instructions from such individual or entity that you must follow in order to have your shares voted at the annual meeting.
Authorization of your proxy via telephone or the Internet may also be available depending on how you hold your shares. Please reference your proxy card for instructions on how to authorize your proxy by these methods.
Right to Revoke Proxy
If you hold shares of our voting securities in your own name as a holder of record, you may revoke your proxy instructions through any of the following methods:
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send written notice of revocation, prior to the annual meeting, to our Corporate Secretary, at 333 Earle Ovington Boulevard, Suite 900, Uniondale, New York 11553;
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sign and mail a new, later dated proxy card to our Corporate Secretary at the address specified above;
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authorize a later dated vote via the telephone or Internet at least 24 hours prior to the annual meeting; or
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•
attend the annual meeting and vote your shares in person.
If your shares are held on your behalf by a broker, bank or other nominee, you must contact it to receive instructions as to how you may revoke your proxy instructions.
Multiple Copies of Annual Report to Stockholders
A copy of our Annual Report to Stockholders for the fiscal year ended December 31, 20172019 will be mailed to stockholders entitled to vote at the annual meeting with this proxy statement and is also available without charge to stockholders upon written request to: Arbor Realty Trust, Inc., 333 Earle Ovington Boulevard, Suite 900, Uniondale, New York, 11553, Attn: Investor Relations. You may also
access our Annual Report on Form 10-K as filed with the Securities and Exchange Commission (the "SEC"“SEC”) under the "Investor Relations—“Investor Relations — SEC Filings"Filings” link on our website at www.arbor.com.
In order to reduce printing and postage costs, we have undertaken an initiative to deliver only one Annual Report and one proxy statement to multiple stockholders sharing an address. This delivery method, called "householding,"“householding,” will not be used, however, if we receive contrary instructions from one or more of the stockholders sharing an address. If your household has received only one Annual Report and one proxy statement, we will deliver promptly a separate copy of the Annual Report and the proxy statement to any stockholder who sends a written request to the Corporate Secretary, Arbor Realty Trust, Inc., 333 Earle Ovington Boulevard, Suite 900, Uniondale, New York, 11553. You may also contact our Corporate Secretary at (516) 506-4200. You may also notify us that you would like to receive separate copies of Arbor Realty Trust Inc.'s’s Annual Report and proxy statement in the future by writing to our Corporate Secretary. Even if your household has received only one Annual Report and one proxy statement, a separate proxy card has been provided for each stockholder account. If you are submitting a proxy by mail, each proxy card should be marked, signed, dated and returned in the enclosed self-addressed envelope.
If your household has received multiple copies of Arbor Realty Trust Inc.'sArbor’s Annual Report and proxy statement, you can request the delivery of a single copy in the future by marking the designated box on the enclosed proxy card.
If you own shares of common stock through a bank, broker or other nominee and receive more than one Annual Report and proxy statement, contact the holder of record to eliminate duplicate mailings.
Voting Results
American Stock Transfer & Trust Company, our independent tabulating agent, will have a representative present at the annual meeting and will tabulate the votes and act as the Inspector of Election. We will publish the voting results in a Current Report on Form 8-K, which will be filed within four business days of our annual meeting of stockholders.
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Confidentiality of Voting
We will keep all proxies, ballots and voting tabulations confidential. We will permit only our Inspector of Election, American Stock Transfer & Trust Company, and our outside legal counsel to examine these documents, except (i) as necessary to meet applicable legal requirements; (ii) if a stockholder writes comments on the proxy card directed to our Board of Directors or management; or (iii) in the event a proxy solicitation in opposition to the election of the nominees is initiated.
Recommendations of the Board of Directors
The Board of Directors recommends a vote:
(1)
FOR the election of Dr. William HelmreichMr. Ivan Kaufman, Mr. Melvin F. Lazar and Mr. William C. Green,George Tsunis, as Class IIIII directors, each to serve until the 20212023 annual meeting of stockholders and until their respective successors are duly elected and qualify;
(2)qualify, and FOR the election of Mr. Kenneth J. Bacon, as Class III director, to serve until the 2021 annual meeting of stockholders and until his successor is duly elected and qualified;
(2)
FOR the amendment and restatement of our Stock Incentive Plan to authorize the issuance of an additional 5,000,000 shares as grants of restricted stock, restricted stock units or underlying stock options under the Stock Incentive Plan;
(3)
FOR the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for fiscal year 2018;2020;
(4)
FOR the adoption of a non-binding advisory resolution to approve the compensation of our named executive officers as disclosed in this proxy statement;
(5)
for the THREE YEAR option for the frequency of future advisory votes to approve the compensation of our named executive officers; and
(6)
(3)
In the discretion of the proxy holder on any other business that properly comes before the annual meeting or any adjournment or postponement thereof.
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BOARD OF DIRECTORS
General
Our Board of Directors presently consists of eight members and will be reduced to seven members upon the election of two Class III directors at our 2018 annual meeting of stockholders.nine members. Pursuant to our charter, the Board of Directors is divided into three classes of directors, with each director serving for a term expiring at the annual meeting of stockholders held in the third year following the year of their election and until his or her successor istheir successors are duly elected and qualifies andqualified, with one class up for election at each annual meeting. At this year'syear’s annual meeting, the term of our Class IIIII directors will expire. Our Class I and Class IIother directors will remain in office for the remainder of their respective terms, as indicated below.
At the annual meeting, stockholders will vote on the election of Dr. William HelmreichMr. Ivan Kaufman, Mr. Melvin F. Lazar and Mr. William C. Green as Class III directors to serve forGeorge Tsunisfor a three-year term to serve until the 20212023 annual meeting of stockholders and until their successors are duly elected and qualify.
qualify, and Mr. Kenneth J. Bacon for a one-year term to serve until the 2021 annual meeting of stockholders and until his successor is duly elected and qualified.
The following table sets forth information concerning the sevennine directors (i) who are nominees for election at this year'syear’s annual meeting or (ii) whose terms are not expiring.
Directors Who are Nominees for Election
| Name | | | Class | | | Age | | | New Term to Expire at Annual Meeting in | | ||||||
| Ivan Kaufman | | | II | | | | | 59 | | | | | | 2023 | | |
| Melvin F. Lazar | | | II | | | | | 81 | | | | | | 2023 | | |
| George Tsunis | | | II | | | | | 52 | | | | | | 2023 | | |
| Kenneth J. Bacon | | | III | | | | | 65 | | | | | | 2021 | | |
Name | Class | Age | New Term to Expire at Annual Meeting in | ||||||
|---|---|---|---|---|---|---|---|---|---|
William Helmreich | III | 72 | 2021 | ||||||
William C. Green | III | 57 | 2021 | ||||||
| Name | | | Class | | | Age | | | Term Expires at Annual Meeting in | | ||||||
| William C. Green | | | III | | | | | 59 | | | | | | 2021 | | |
| Elliot Schwartz | | | III | | | | | 59 | | | | | | 2021 | | |
| Archie R. Dykes | | | I | | | | | 89 | | | | | | 2022 | | |
| Joseph Martello | | | I | | | | | 64 | | | | | | 2022 | | |
| Edward Farrell | | | I | | | | | 59 | | | | | | 2022 | | |
Nominees
Name | Class | Age | Term Expires at Annual Meeting in | ||||||
|---|---|---|---|---|---|---|---|---|---|
Archie R. Dykes | I | 87 | 2019 | ||||||
Joseph Martello | I | 62 | 2019 | ||||||
Ivan Kaufman | II | 57 | 2020 | ||||||
Melvin F. Lazar | II | 79 | 2020 | ||||||
George Tsunis | II | 50 | 2020 | ||||||
Nominees
William Helmreich. Dr. Helmreich has served as one of our directors since June 2003. Dr. Helmreich is the founder, and since 1980, owner and President of Byron Research and Consulting, a market research firm specializing in financial research, political polling, legal consulting, and issues relating to food products and real estate. He is a professor of Sociology at City College of New York and the CUNY Graduate Center, where he teaches sociology of marketing and consumer behavior. Since 2000, Dr. Helmreich has also been the Chairman for Academic Affairs for North Shore Hebrew Academy. He is a director of North Shore Hebrew Academy, North Shore Hebrew Academy High School and NSH Affordable Housing of Indiana, Inc., as well as other not-for-profit boards, and was a Senior Vice President of Good Earth Teas for many years.
As the owner and president of a market research firm specializing in financial research, legal consulting, and issues relating to real estate, Dr. Helmreich brings a unique perspective on real estate and finance, which led the Board of Directors to conclude that he should serve as our director.
William C. Green. Mr. Green has served as one of our directors since February 2012. Mr. Green currently serves as the Chief Financial Officer of Ginkgo Residential ("Ginkgo"), a multifamily
property operating company. Prior to Ginkgo, Mr. Green founded and sold Cazenovia Creek Investment Management, LLC, a registered investment advisor that managed a fund that invests in tax liens. Prior to that, Mr. Green held senior level positions within Starwood Capital, Wachovia Securities and Banc of America Securities where he focused exclusively on commercial real estate capital markets and commercial real estate asset management activities. In 2017, Mr. Green formed a registered investment advisory firm, 17 Pembroke Advisors LLC, which focuses on alternative investment strategies. Mr. Green holds a Bachelor of Arts degree in economics from Hobart College and holds a Masters in Business Administration with a finance concentration from the Stern School of Business at New York University. In March 2013, Mr. Green was appointed to serve as Lead Director. See "Corporate Governance Profile—Role of the Lead Director" for further information.
Mr. Green's leadership experience at several organizations provides him with insight and expertise on the real estate, banking and financial services industries in general, which led the Board of Directors to conclude that he should serve as our director.
Continuing Directors
Archie R. Dykes. Dr. Dykes has served as one of our directors since April 2006. Dr. Dykes was lead director and non-executive chairman of PepsiAmericas, Inc. until 2010. He has served as chairman of Capital City Holdings Inc., a venture capital organization, for more than the past five years. Dr. Dykes served as Chairman and Chief Executive Officer of the Security Benefit Group of Companies from 1980 through 1987. He served as chancellor of the University of Kansas from 1973 to 1980. Prior to that, he was chancellor of the University of Tennessee. Dr. Dykes was Chairman of the Board and Chief Executive Officer of Fleming Companies, Inc. until 2004. He assumed those roles at Fleming in 2003 following his service to Fleming as Non-executive Chairman of the Board. He also serves as a director of Raytech Corporation. Dr. Dykes is a member of the Board of Trustees of the Kansas University Endowment Association and the William Allen White Foundation. He formerly served as Vice Chairman of the Commission on the Operation of the United States Senate and as a member of the executive committee of the Association of American Universities.
The Board of Directors has concluded that Dr. Dykes should serve as our director due to his extensive business and leadership experience in a variety of sectors, including insurance, financial services, research and development, consumer goods, automotive, non-profit and government.
Joseph Martello. Mr. Martello has served as one of our directors since June 2003. Mr. Martello has been Chief Operating Officer of Arbor Management, LLC, which has been the managing member of Arbor Commercial Mortgage since 1999. He is responsible for management of the investment portfolio and overseeing the day-to-day operations within Arbor Management. Mr. Martello is also a member of the executive committee of Arbor Commercial Mortgage. From 1995 to 1999, Mr. Martello was Chief Financial Officer of Arbor Commercial Mortgage. From 1990 to 1995, Mr. Martello was the Chief Financial Officer of Arbor National Holdings, Inc. Prior to that, he was a senior manager with the international accounting and consulting firm of Ernst & Young for eleven years.
As a senior executive with significant financial services experience who has served within the Arbor Commercial Mortgage group of companies for more than 25 years, Mr. Martello brings a breadth of knowledge about real estate matters, as well as the business and operations of the Company and its Former Manager. This led the Board of Directors to conclude that Mr. Martello should serve as our director.
Ivan Kaufman. Mr. Kaufman has served as our Chairman, Chief Executive Officer and Presidentpresident since June 2003. Mr. Kaufman has been Chief Executive Officer and President of Arbor Commercial Mortgage our Former Manager,(“ACM”) since its inception in 1993. Arbor Commercial Mortgage is a nationalACM was our external manager from our inception through the middle of 2017. ACM remains active in the commercial real estate investment company which specializes in multifamily and commercial real estate.industry. In 1983, heMr. Kaufman co-founded a predecessor of the Former Manager, Arbor National Holdings Inc. and its
residential lending subsidiary, Arbor National Mortgage Inc., which became awent public company in 1992 and1992. In 1995, the company was sold to BankAmerica in 1995. Bank of America. In connection with the sale of Arbor National Holdings, Inc., ACM was formed with a focus on multifamily lending, eventually becoming a seller/servicer for Fannie Mae and Freddie Mac and thereby creating the eventual platform of Arbor Realty Trust, Inc. In 2016, ACM sold its agency business to us, creating one comprehensive real estate finance franchise.
Mr. Kaufman was named regional "Entrepreneurhas previously served as the Chair of the Year" by Inc. MagazineIndependent Judicial Election Qualification Commission for outstanding achievements in financial services in 1990. Mr. Kaufmanthe 10th Judicial District of New York. He has also served on the National and Regional Advisory Boards of Fannie Mae's regional advisoryMae and technology boards, as well ason the Board of Directors of the Empire State Mortgage Bankers Association.
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He was previously named regional “Entrepreneur of the Year” by Inc. Magazine for his outstanding achievements in financial services. Mr. Kaufman also served as a regional spokesperson for Global ReLeaf, a program of the American Forestry Association, which led to his appointment as a delegate of the International Arid Lands Consortium. He has guest lectured at Harvard Business School’s Real Estate Club and is a featured presenter at Columbia University and Wharton Business School.
Mr. Kaufman is also a memberdedicated community leader who founded the North Shore Hebrew Academy High School, a state-of-the-art, 11-acre academy now regarded as one of the Fannie Mae DUS® Advisory Council.
Aspremier college preparatory schools in the founder and principal executive of Arbor Commercial Mortgage and its predecessor entities since 1983, Mr. Kaufman brings exceptional knowledge about the real estate sector and our business and operations, which ledNortheast. In addition, he has served on the Board of Directors to conclude that he should serve as our director.
Trustees of The Birthright Israel Foundation.
Melvin F. Lazar.Lazar. Mr. Lazar has served as one of our directors from his appointment in November 2003 until May 2011 and since his re-appointment in December 2011. Mr. Lazar is the founder of Lazar Levine & Felix LLP, certified public accountants, was its managing partner from 1969 until 2002, and continued as an employee of the firm, now known as Baker Tilly, LLC, until his retirement in 2014. Mr. Lazar specializes in business valuations and merger and acquisition activities. Mr. Lazar serves on the Board of Directors of Active Media Services, Inc., a privately-held corporate trading company and is former Chairman of the Audit Committee of Enzo Biochem, Inc., a publicly-held biotechnology company.
As the managing partner of a certified public accounting firm for over 30 years and a former member of the audit committees of a large public biotechnology company and a private corporate trading company, Mr. Lazar has extensive accounting and financial expertise in a variety of industries, which led the Board of Directors to conclude that Mr. Lazarhe should serve as our director and as Chair of the Audit Committee.
George Tsunis. Mr. Tsunis has served as one of our directors from his appointment in August 2016. Mr. Tsunis is the Founder,founder, Chairman and Chief Executive Officer of Chartwell Hotels as well as an attorney, developer, philanthropist and public policy advisor with a strong interest at the intersection of economic and foreign affairs. Prior to founding Chartwell, Mr. Tsunis was a partner at the law firm of Rivkin Radler LLP, one of Long Island, NY'sNY’s largest law firms, representing both private clients and municipalities in the practice areas of land use and zoning, real estate corporate law, municipal law and commercial litigation. Mr. Tsunis'Tsunis’ public service includes time as a Legislative Attorney at the New York City Council, Special Counsel to the Town of Huntington (NY) Environmental Open Space Committee and Counsel to the Dix Hills (NY) Water District.
Mr. Tsunis is also a member of Hofstra University'sUniversity’s Board of Trustees and serves on its Academic Affairs and Development and Alumni Affairs Committees. He is a Director of the Don Monti Cancer Research Foundation, Trustee of the Hellenic Initiative and member of Friends Academy'sAcademy’s Board of Trustees, serving as its Building and Grounds Committee Chair as well as a member of its Finance and Investment Committees. Mr. Tsunis also serves as a Director of the New York Convention Center'sCenter’s (Jacob Javits Center) Operating Committee and Director of the New York Convention Center'sCenter’s Development Committee, Director of Spring Bank and Director of the Battery Park City Authority, where he serves as its Investment Committee Chair.
Committee.
Mr. Tsunis was a member of the Brookings Institution'sInstitution’s Foreign Policy Leadership Committee and its Metropolitan Studies Leadership Council as well as a member of the Business Executives for National Security'sSecurity’s Board of Trustees. He has also previously served on the Board of Trustees at Dowling College, the American Red Cross Suffolk County Chapter, the Huntington (NY) Chamber of Commerce/Committee on Good Government, the Education and Assistance Corporation and the Private Industry Council of Suffolk.
As a founder, principal, and member of various organizations, Mr. Tsunis has had ample experience leading and supporting the evolution and sustainability of various companies, which led the Board of Directors to conclude that he should serve as our director.
Kenneth J. Bacon. Mr. Bacon is Co-Founder and Managing Partner of RailField Partners, an investment management firm that invests in and operates multifamily properties on behalf of institutional investors. Prior to forming RailField, he spent 19 years at Fannie Mae, most recently as the Executive Vice President of the Multifamily Mortgage Business. While at Fannie Mae, Mr. Bacon was responsible for the management and marketing of Fannie Mae’s portfolio of multifamily loans and investments, and had roles serving single-family housing and directing investments in community development. During his tenure, Mr. Bacon grew the portfolio from $56 billion to over $195 billion, consisting primarily of multifamily mortgages and over $6 billion of conventional equity, tax credits and mezzanine debt. His organization
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realized net income in excess of $1.5 billion as of 2012. He also managed the American Communities Fund at Fannie Mae, which was established to provide loans and equity to for-sale and rental housing developments to increase the supply of affordable housing and to revitalize communities. Before joining Fannie Mae, Mr. Bacon was the Director of the Office of Securitization for the Resolution Trust Corporation and held office positions at Morgan Stanley and Kidder Peabody. Mr. Bacon serves on the Board of Directors of Comcast Corporation as Chair of the Nominating and Governance Committee, Ally Financial Inc. as Chair of the Risk Committee and Welltower Inc. as Chair of the Compensation Committee. Mr. Bacon also serves on the Board of Directors of a private company, Dominium Management, which is one of the nation’s largest and most innovative affordable housing development and management companies.
Mr. Bacon is active in several non-profit and trade groups, including the Board of the Real Estate Executive Council, the National Multifamily Housing Counsel and the Advisory Board of the Stanford Center on Longevity. Mr. Bacon also serves on the board of a DC based community non-profit, Martha’s Table, and a leading Washington think tank, Urban Institute.
Mr. Bacon’s significant experience in the financial and housing industries, government affairs and the non-profit, educational and philanthropic communities led the Board of Directors to conclude that he should serve as our director.
Continuing Directors
William C. Green. Mr. Green has served as one of our directors since February 2012. Mr. Green currently serves as the Chief Financial Officer and a principal of Ginkgo Investment Company and Ginkgo Residential (“Ginkgo”), a multifamily property investing and operating companies and their affiliates. Additionally, Mr. Green is the Co-Chief Executive Officer of Ginkgo REIT, Inc., a non-traded real estate investment trust. Prior to that, Mr. Green held senior level positions within Starwood Capital, Wachovia Securities and Banc of America Securities where he focused exclusively on commercial real estate capital markets and commercial real estate asset management activities. Mr. Green is also a director for Ginkgo REIT, Inc. and is a director of Royal Oak Realty Trust. In March 2013, Mr. Green was appointed to serve as Lead Director. See “Corporate Governance Profile — Role of the Lead Director” for further information.
Mr. Green’s leadership experience at several organizations provides him with insight and expertise on the real estate, banking and financial services industries in general, which led the Board of Directors to conclude that he should serve as our director.
Elliot Schwartz. Mr. Schwartz has served as one of our directors since June 2018. Mr. Schwartz is the co-founder, Chief Executive Officer and General Counsel of Debt Recovery Solutions, LLC, a national accounts receivable management agency. Founded in 2002, the organization purchases and manages distressed consumer receivables in the financial, education, telecommunication and medical sectors. Mr. Schwartz manages all aspects of the company’s operation as well as its compliance with city, state and federal rules and regulations that govern the industry. Prior to founding Debt Recovery Solutions, LLC, Mr. Schwartz served as Senior Vice President, General Counsel and Principal at Coldata, Inc., for more than a decade. The debt management company provided accounts receivable management services to various financial institutions as well as City, State and Federal governmental agencies throughout the United States. After Coldata was sold in 1999, Mr. Schwartz continued his responsibilities under the acquisition until 2002. Mr. Schwartz is a member of the Nassau County Bar Association, New York State Bar Association, Receivables Management Association and the American Collectors Association.
As the co-founder and Chief Executive Officer of an organization with a focus in distressed assets in various markets, Mr. Schwartz has a unique set of experience in debt management recovery services, which led the Board of Directors to conclude that he should serve as our director.
Archie R. Dykes. Dr. Dykes has served as one of our directors since April 2006. Dr. Dykes was lead director and non-executive chairman of PepsiAmericas, Inc. until 2010. He served as chairman of Capital City Holdings Inc., a venture capital organization, for more than ten years. Dr. Dykes served as Chairman and Chief Executive Officer of the Security Benefit Group of Companies from 1980 through 1987. He served as chancellor of the University of Kansas from 1973 to 1980. Prior to that, he was chancellor of the University of Tennessee. Dr. Dykes was Chairman of the Board and Chief Executive Officer of Fleming Companies,
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Inc. until 2004. He assumed those roles at Fleming in 2003 following his service to Fleming as Non-executive Chairman of the Board. He also served as a director of Raytech Corporation and Midas, Inc. Dr. Dykes is a member of the Board of Trustees of the Kansas University Endowment Association and the William Allen White Foundation. He formerly served as Vice Chairman of the Commission on the Operation of the United States Senate and as a member of the executive committee of the Association of American Universities.
The Board of Directors has concluded that Dr. Dykes should serve as our director due to his extensive business and leadership experience in a variety of sectors, including insurance, financial services, research and development, consumer goods, automotive, non-profit and government.
Joseph Martello. Mr. Martello has served as one of our directors since June 2003. Since 1999, Mr. Martello has been Chief Operating Officer of Arbor Management, LLC, which is the managing member of ACM. He is responsible for management of the investment portfolio and overseeing the day-to-day operations within Arbor Management. Mr. Martello is also a member of the executive committee of ACM. From 1995 to 1999, Mr. Martello was Chief Financial Officer of ACM. From 1990 to 1995, Mr. Martello was the Chief Financial Officer of Arbor National Holdings, Inc. Prior to that, he was a senior manager with the international accounting and consulting firm of Ernst & Young for eleven years.
As a senior executive with significant financial services experience who has served within the ACM group of companies for more than 25 years, Mr. Martello brings a breadth of knowledge about real estate matters, as well as the business and operations of the Company and ACM. This led the Board of Directors to conclude that Mr. Martello should serve as our director.
Edward Farrell. Mr. Farrell has served as one of our directors since June 2018. Mr. Farrell has more than 35 years of financial administration and leadership experience in the financial services industry. He has served as Senior Vice President, Chief Accounting Officer, Corporate Controller and Interim Chief Financial Officer of AllianceBernstein, L.P., a global investment management and research firm. In this capacity, Mr. Farrell oversaw all duties relating to corporate accounting, financial planning and analysis, tax and treasury, SEC and compliance reporting, as well as global real estate and facilities management. Previously, Mr. Farrell served nine years with Nomura Securities International, Inc., a global investment bank, and held several senior level positions, including Chief Financial Officer. Prior to that, he spent a decade at the investment bank, Salomon Brothers Inc. He began his career at PricewaterhouseCoopers. Mr. Farrell is a Certified Public Accountant and holds the FINRA series 27 license.
The Board of Directors has concluded that Mr. Farrell should serve as our director due to his extensive financial administration and leadership experience in the financial services industry.
Corporate Governance Profile
We are committed to good corporate governance practices and, as such, we have adopted formal corporate governance guidelines to enhance our effectiveness. The guidelines address, among other things, Board member qualifications, responsibilities, education and management succession. A copy of our corporate governance guidelines may be found at our corporate website at www.arbor.com under the heading "Investor Relations—“Investor Relations — Corporate Governance."
”
The Board of Directors met on eightfifteen occasions and acted by unanimous written consent on ninethirteen occasions during 2017.2019. No incumbent director attended fewer than 75 percent of all meetings of our Board of Directors and the committees on which such director served during 2017.
2019.
Senior Officer Code of Ethics and Code of Business Conduct and Ethics
We have adopted a senior officer code of ethics applicable to our Chief Executive Officer, Chief Financial Officer and Chief Credit Officer. This senior officer code also applies to persons performing similar functions to the aforementioned officers. We have also adoptedhave a code of business conduct and ethics applicable to all employees, officers and directors. Both codes are available on our website at www.arbor.com under the heading "Investor Relations—“Investor Relations — Corporate Governance."” You may also obtain these documents, as well as our corporate governance guidelines, in print free of charge by writing the Companyus at 333 Earle Ovington Boulevard, Suite 900, Uniondale, New York, 11553: Attention: Investor Relations. Amendments to, and waivers
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from, the senior officer code of ethics and the code of business conduct and ethics for a director or officer will be disclosed at the same website address and heading as provided above. We have filed our 20172019 Domestic Company Section 303A CEO Certification with the NYSE without any qualifications. Our Sarbanes-Oxley Section 302 Certification was filed as an exhibit to our Annual Report on Form 10-K for the year ended December 31, 2017.
2019.
Combined Principal Executive Officer and Board Chair Positions; Independent Director Committee
Positions
Mr. Kaufman serves as both our Chief Executive Officer and Chairman of the Board of Directors, which the Board has determined is the most appropriate governance structure for us. Mr. Kaufman has served in this capacity since the Company'sArbor’s formation in 2003. With over 30 years of experience in the real estate finance industry, Mr. Kaufman has a breadth of unique and specialized knowledge about our business operations. Mr. Kaufman solicits input from our Board of Directors regarding the Board agenda and processes. To facilitate coordination with the independent directors and the exercise of independent judgment by the Board of Directors, (1) the Board has established an Independent Director Committee (as described further below), which Mr. Green currently chairs as the Lead Director, and (2) our non-management directors, each of whom are independent directors under the NYSE'sNYSE’s Corporate Governance Standards, meet regularly in executive session without any members of management present. The Lead Director who chairs the executive sessions of our non-management directors facilitates communication between the independent directors and the Chairman of the Board, ensures appropriate information is sent to the Board and works with the Chairman to identify agenda and other discussion items for the Board.
Role of the Lead Director
In March 2013, the Board created the position of Lead Director and appointed William C. Green to the position. The Lead Director is responsible for (i) serving as a liaison between the Chairman and other members of the Board of Directors, (ii) presiding at, and preparing the agenda for, all executive
sessions of the non-management directors and the independent directors, (iii) working with the Chairman and members of management to schedule Board meetings and prepare agendas, (iv) working with the Chairman and members of management to assure the adequacy and timing of information provided to the Board, (v) retaining outside advisors to the Board, if necessary or desirable, and (vi) performing such other duties as may be requested by the Chairman or the Board.
Role of the Board of Directors in the Oversight of Risk Management
The Audit Committee takes the lead for the Board in oversight of our risk management activities. At least quarterly the Audit Committee receives a review of our investment portfolio and its quarterly results from our Chief Financial Officer and an internal audit report and a Sarbanes-Oxley compliance report from our internal auditor, DLA, LLC. The review of our investment portfolio and its quarterly results covers a wide range of topics and potential issues that could impact us, including matters such as investment performance, investment risks, counterparty risks of its asset management activities and balance sheet, results of operations, key financial metrics and operational and integration risks. The internal audit plan is approved by the Audit Committee and regular reports on the progress and results of the internal audit program are provided to the Audit Committee. Our independent registered public accounting firm, Ernst & Young LLP, provides the audit report. Aspects of these reports are presented to the full Board at least quarterly by either the Chairman of the Audit Committee or the member of management responsible for the given subject area. In addition, the entire Board of Directors receives reports from our General Counsel with respect to any legal or regulatory matters that could materially affect us. The Compensation Committee takes the lead for the Board in oversight of risk relating to compensation matters. The Compensation Committee considers, in establishing and reviewing our executive compensation program, whether the program encourages unnecessary risk taking and has concluded that it does not.
Director Independence
Of our eightnine directors, sixseven have been determined by our Board of Directors to be independent for purposes of the NYSE listing standards. Our independent directors are currently Messrs. Green, Lazar, Tsunis, Farrell, Schwartz and Tsunis, Drs. DykesBacon, and Helmreich and Ms. Edwards.Dr. Dykes. In determining director independence, the Board of Directors reviewed, among other things, whether any transactions or relationships currently exist, or have
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existed in the past, between each director and the Company and its subsidiaries, affiliates and equity investors or independent registered public accounting firm. In particular, the Board reviewed current or recent business transactions or relationships or other personal relationships between each director and the Company, including such director'sdirector’s immediate family and companies owned or controlled by the director or with which the director was affiliated. The purpose of this review was to determine whether any such transactions or relationships failed to meet any of the objective tests promulgated by the NYSE for determining independence or were otherwise sufficiently material as to be inconsistent with a determination that the director is independent. The Board also examined whether there were any transactions or relationships between each director and members of our senior management or our affiliates.
In reviewing the independence of Dr. Helmreich, the Board carefully reviewed whether (1) Mr. Kaufman's and Dr. Helmreich's current and prior participation on the Boards of North Shore Hebrew Academy, North Shore Hebrew Academy High School and NSH Affordable Housing of Indiana, Inc., all of which are not-for-profit organizations and (2) Dr. Helmreich's engagement since 2000 as an external consultant by North Shore Hebrew Academy in the capacity of Chairman of Academic Affairs would, based upon the totality of the circumstances, be deemed to be material so as to preclude a finding that Dr. Helmreich is independent. The Board, in particular, reviewed the materiality of the transactions to the parties involved, the compensation and timing of Dr. Helmreich's
advisory role with North Shore Hebrew Academy and the absence of any employment or compensatory capacity by Dr. Helmreich with NSH Affordable Housing of Indiana, Inc.
In reviewing the independence of Mr. Green, the Board considered that in January 2017, Ginkgo, which Mr. Green is a 33% managing member of, purchased a multifamily apartment complex, which assumed a Fannie Mae loan that we service. We carryGinkgo subsequently sold the majority of its interest in this property and currently owns a maximum loss-sharing obligation with Fannie Mae on this loan of up to 20% of the original unpaid principal balance.3.6% interest. Upon the purchase by Ginkgo, we received a 1% loan assumption fee which was governed by existing loan agreements that were in place when the loan was originated in 2015, prior to such purchase.
In reviewing the independence of Mr. Tsunis, and Dr. Helmreich, the Board considered their investmentshis investment of $50,000 and $25,000, respectively, with an affiliated entity of our Former Manager,ACM, which was formed to invest in commercial real estate on a property-by-property basis with a pool of qualified investors.
As a result of its review, the Board affirmatively determined that Messrs. Green, Lazar, Tsunis, Farrell, Schwartz and Tsunis, Drs.Bacon, and Dr. Dykes and Helmreich and Ms. Edwards were independent under the NYSE listing standards.
Board Committees
Our Board has established five standing committees, the principal functions of which are briefly described below. Matters put to a vote at any one of our five committees must be approved by a majority of the directors on the committee who are present at a meeting at which there is a quorum or by unanimous written consent of the directors on that committee. Our Board of Directors may from time to time establish certain other committees to facilitate the management of the Company.
Audit Committee
Our Board of Directors has established an Audit Committee, which is currently composed of fourfive of our independent directors, Mr.Messrs. Lazar, Green, Farrell and Bacon, and Dr. Dykes, Ms. Edwards and Mr. Green.Dykes. During 2017,2019, the Audit Committee met on five occasions.four occasions and acted by unanimous written consent once. The Audit Committee selects and appoints our independent registered public accounting firm and assists the Board in overseeing: (1) the integrity of our financial statements; (2) our independent registered public accounting firm'sfirm’s qualifications and independence; (3) the performance of our independent registered public accounting firm and our internal audit function; and (4) our compliance with legal and regulatory requirements.
Mr. Lazar currently serves as Chairman of the Audit Committee. The Board has determined that Mr. Lazar qualifies as an "Audit“Audit Committee financial expert"expert” as defined by the rules of the SEC and that each member of the Audit Committee is "financially“financially literate."” The Audit Committee is governed by a charter that has been adopted by the Board of Directors.
Compensation Committee
Our Board of Directors has established a Compensation Committee, which is currently composed of four of our independent directors, Messrs. Green, Lazar, Schwartz and Tsunis and Dr. Helmreich.Tsunis. During 2017,2019, the Compensation Committee met onceon two occasions and acted by unanimous written consent once.on three occasions. Mr. Green currently serves as the Chairman of the Compensation Committee.
The principal functions of the Compensation Committee are to: (1) evaluate the performance of our officers (as described further in "Executive Compensation"“Executive Compensation”); (2) review the compensation payable to our officers and non-employee directors; (3) review and discuss with management the compensation discussion and analysis disclosure included in this proxy statement; and (4) administer our Stock Incentive Plan and the issuance thereunder of any stockawards to our employees. The Compensation Committee is governed by a
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charter that has been adopted by the Board of Directors. The charter allows the Compensation Committee to delegate its authority to subcommittees, as appropriate. In addition, the Board delegated to our Chief Executive Officer limited authority to grant common stock in connection with (1) the hiring of senior executives in the following amounts: (a) for senior vice presidents and above, up to the lesser of (i) $150,000 or (ii) 25% of the executive’s base salary; and (b) for positions below senior vice president, up to the lesser of (i) $75,000 or (ii) 25% of the executive’s base salary and (2) the retention of key employees up to a maximum annual aggregate amount of $500,000.
Corporate Governance Committee
Our Board of Directors has established a Corporate Governance Committee, which is currently composed of fourfive of our independent directors, Drs. HelmreichDr. Dykes and Dykes, Ms. EdwardsMessrs. Bacon, Farrell, Schwartz and Mr. Tsunis. During 2017,2019, the Corporate Governance Committee met on two occasions.once and acted by unanimous written consent once. Dr. William Helmreich, currently serveswho served as Chairman of the Corporate Governance Committee, passed away on March 28, 2020. Mr. Schwartz has been appointed the Chairman of the Corporate Governance Committee.
The Corporate Governance Committee is responsible for seeking, considering and recommending to the Board qualified candidates for election as directors and recommending a slate of nominees for election as directors at each annual meeting of stockholders. The Corporate Governance Committee is also responsible for: (1) preparing and submitting to the Board for adoption the committee'scommittee’s selection criteria for director nominees; (2) reviewing and making recommendations on matters involving general operation of the Board and our corporate governance; and (3) annually recommending to the Board nominees for each committee of the Board. In addition, the committee annually facilitates the assessment of the Board of Directors'Directors’ performance as a whole and of the individual directors and reports thereon to the Board. The Corporate Governance Committee is governed by a charter that has been adopted by the Board of Directors.
Copies of the charters of the Audit Committee, the Compensation Committee and the Corporate Governance Committee are available on our website, www.arbor.com, under the heading "Investor Relations—“Investor Relations — Corporate Governance."” You may also obtain these documents in print free of charge by writing the Company at 333 Earle Ovington Boulevard, Suite 900, Uniondale, New York, 11553, Attention: Investor Relations.
Independent Director Committee
Our Board of Directors has established an Independent Director Committee, which is composed of our six independent directors, Messrs. Green, Lazar and Tsunis, Drs. Helmreich and Dykes and Ms. Edwards. Mr. Green currently serves as Lead Director and thereby chairs the Independent Director Committee.
The Independent Director Committee is responsible for, among other things, considering and voting upon matters as to which the Board of Directors determines Arbor Commercial Mortgage or its affiliates (other than the Company or its subsidiaries) or any of our directors (other than an independent director) or officers has a conflict of interest, including the approval of transactions between us and our Former Manager.
Special Financing Committee
Our Board of Directors has established a Special Financing Committee, which is currently composed of oneour Chairman, Chief Executive Officer and President, Lead Director and Chairman of our independent directors, Mr. Tsunis, and Messrs. Kaufman and Martello.the Audit Committee. During 2017,2019, the Special Financing Committee acted by unanimous written consent on sevennineteen occasions.
The Special Financing Committee is authorized to approve our guaranties of the following amendmentswith respect to credit facilities to which our direct and indirect subsidiaries are a party: (i) a credit facilities: (i)facility in a principal amount of $250,000,000 or less, with a maturity of (x) one year or less or (y) if the facility finances only one underlying mortgage loan, for the term of the underlying mortgage loan; (ii) any temporary increase in the principal amount of the obligations under a credit facility by an amount not to exceed $100,000,000$250,000,000 and for a period not to exceed ninety (90)one hundred twenty (120) days; (ii)(iii) any extension of maturity dates or borrowing expiration dates for a period not to exceed (x) one (1) year;year or (y) if the facility finances only one underlying mortgage loan, for the term of the underlying mortgage loan; and (iii) if any such approval is required,(iv) any other amendments, including but not limited to amendments to defined terms and covenants, provided that any such amendment does not result in (a)(x) an increase in the principal amount of the obligations under a credit facility by an amount exceeding $100,000,000, (b) an increase in the principal amount of the obligations under a credit facilityand/or for a period exceeding ninety (90) days,term permitted by clause (ii) above or (c)(y) an extension of a maturity date or borrowing expiration date for a period exceeding that permitted by clause (iii) above.
Strategic/Regulatory Committee
Our Board of Directors has established a Strategic/Regulatory Committee, which is currently composed of two of our independent directors, Messrs. Tsunis and Green, as well as Mr. Kaufman. Mr. Tsunis currently
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serves as Chairman of the Strategic/Regulatory Committee. During 2019, the Strategic/Regulatory Committee met on one occasion.
The Strategic/Regulatory Committee is responsible for the oversight and facilitation of our short-termand long-term strategic plans, including: (1) year.the development and oversight of our strategic planning processes and framework; and (2) actively identifying and participating in the shaping of federal, state and regulatory policies.
Non-Management Directors
As required by the NYSE'sNYSE’s Corporate Governance Standards, our non-management directors, each of whom are independent directors under the NYSE'sNYSE’s Corporate Governance Standards, meet regularly in executive session without any members of management present. The Lead Director chairs these sessions.
Stockholder and Interested Party Communications with Directors
The Board of Directors has established a process to receive communications from stockholders and other interested parties. Interested parties and stockholders may contact any or all members of the Board, including non-management directors, by mail. To communicate with the Board of Directors, any individual director or any group or committee of directors, correspondence should be addressed to the Board of Directors or any such individual director or group or committee of directors by either name or title. All such correspondence should be sent in care of the Corporate Secretary at Arbor Realty Trust, Inc., 333 Earle Ovington Boulevard, Suite 900, Uniondale, New York, 11553.
All communications received as set forth in the preceding paragraph will be opened by the office of our Corporate Secretary for the sole purpose of determining whether the contents represent a message to our directors. Any contents that are not in the nature of advertising, promotions of a product or service or patently offensive material will be forwarded promptly to the addressee. In the case of communications to the Board or any group or committee of directors, the office of the Corporate Secretary will make sufficient copies of the contents to send to each director who is a member of the group or committee to which the correspondence is addressed.
Director Nomination Procedures; Diversity
The Corporate Governance Committee generally believes that, at a minimum, candidates for membership on the Board of Directors should demonstrate an ability to make a meaningful contribution to the Board of Directors'Directors’ oversight of our business and affairs and have a record and reputation for honesthonesty and ethical conduct. The Corporate Governance Committee recommends director nominees to the Board of Directors based on, among other things, its evaluation of a candidate'scandidate’s experience, knowledge, skills, expertise, integrity, ability to make independent analytical inquiries, understanding of our business environment and a willingness to devote adequate time and effort to Board responsibilities. In making its recommendations to the Board of Directors, the Corporate Governance Committee also seeks to have the Board nominate candidates who have diverse backgrounds and areas of expertise so that each member can offer a unique and valuable perspective.
The Corporate Governance Committee may identify potential nominees by asking current directors and executive officers to notify the committee if they become aware of persons who meet the criteria described above, especially business and civic leaders in the communities in which we operate. It may also engage firms, at our expense, that specialize in identifying director candidates. As described below, the Corporate Governance Committee will also consider candidates recommended by stockholders.
The Corporate Governance Committee anticipates that once
Once a person has been identified by the committeeCorporate Governance Committee as a potential candidate, the committee will collect and review publicly available information regarding the person to assess whether the person should be considered further. If the Corporate Governance Committee determines that the candidate warrants further consideration, the Chairman or another member of the committee will contact the person. If the person expresses a willingness to be considered and to serve on the Board of Directors, the Corporate Governance Committee will request information from the candidate, review the person'sperson’s accomplishments and qualifications, including in light of any other candidates that the committee might be
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considering, and conduct one or more interviews with the candidate. In certain instances, members of the Corporate Governance Committee may contact one or more references provided by the candidate or may contact other members of the
business community or other persons that may have greater first-hand knowledge of the candidate'scandidate’s accomplishments.
In addition to director nominations and other proposed business submitted by stockholders in accordance with our bylaws, as summarized below under "Stockholder“Stockholder Proposals for 2019,"2021,” the Corporate Governance Committee will consider written recommendations from stockholders of potential director candidates. Such recommendations should be submitted to the Corporate Governance Committee in care of the Corporate Secretary at Arbor Realty Trust, Inc., 333 Earle Ovington Boulevard, Suite 900, Uniondale, New York, 11553. Director recommendations submitted by stockholders should include the following:
•
the name, age, business address and residence address of the individual(s) recommended for nomination;
•
•
the class, series and number of any shares of our stock that are beneficially owned by the individual(s) recommended for nomination;
•
•
the date such shares of our stock were acquired by the individual(s) recommended for nomination and the investment intent of such acquisition; and
•
•
all other information relating to such candidate that would be required to be disclosed pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the "Exchange Act"“Exchange Act”), including such person'sperson’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected.
Stockholder recommendations of director candidates must be delivered to the Corporate Secretary not earlier than the 120th day and not later than the close of business on the 90th day prior to the first anniversary of the date of mailing of the notice for the preceding year'syear’s annual meeting of stockholders; provided, however, that if the date of mailing of the notice for the annual meeting is advanced more than thirty days prior to or delayed by more than thirty days after the anniversary of the mailing of the notice for the preceding year'syear’s annual meeting, the stockholder recommendation and information described above must be delivered not earlier than the 120th day prior to the mailing of the notice for the upcoming annual meeting and not later than the close of business on the later of (1) the 90th day prior to the mailing of the notice for the upcoming annual meeting of stockholders and (2) the 10th day following the date on which public announcement of the mailing of the notice for the upcoming annual meeting is first made.
The Corporate Governance Committee does not employ a specific policy, practice or formula for evaluating candidates to the Board of Directors recommended by stockholders and expects to use a similar process to evaluate candidates to the Board of Directors recommended by stockholders as the one it uses to evaluate candidates otherwise identified by the committee.
Director Attendance at Annual Meeting
We do not currently maintain a policy requiring our directors to attend the annual meeting; however, attendance by our directors is encouraged. SixAll of our directors attended the 20172019 annual meeting of stockholders, of which fourseven attended by teleconferencing.
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AUDIT COMMITTEE REPORT AND DISCLOSURES
The following report of the Audit Committee (the "Audit Committee"“Audit Committee”) of the Board of Directors (the "Board“Board of Directors"Directors”) of Arbor Realty Trust, Inc., a Maryland corporation (the "Company"“Company”), does not constitute soliciting material and should not be considered filed or incorporated by reference into any other filing by the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent the Company specifically incorporates this report by reference therein.
The Audit Committee operates under a written charter adopted by the Board of Directors. The Board of Directors has determined that all members of the Audit Committee meet the independence standards established by the New York Stock Exchange.
The Audit Committee oversees the Company'sCompany’s financial reporting process on behalf of the Board of Directors. The Company'sCompany’s management has the primary responsibility for the financial statements and the reporting process, including the system of internal controls. The independent registered public accounting firm is responsible for performing an audit of the Company'sCompany’s consolidated financial statements in accordance with generally accepted accounting principles in the United States and issuing a report thereon. The Audit Committee reviews and oversees these processes, including oversight of: (1) the integrity of the Company'sCompany’s financial statements; (2) the Company'sCompany’s independent registered public accounting firm'sfirm’s qualifications and independence; (3) the performance of the Company'sCompany’s independent registered public accounting firm and the Company'sCompany’s internal audit function; and (4) the Company'sCompany’s compliance with legal and regulatory requirements.
In discharging its oversight role, the Audit Committee reviewed and discussed the audited financial statements contained in the Company'sCompany’s Annual Report to Stockholders for fiscal year ended December 31, 20172019 with the Company'sCompany’s management and independent registered public accounting firm. Management represented to the Audit Committee that the Company'sCompany’s consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States. The Audit Committee also discussed with the independent registered public accounting firm the matters required by Statement on Auditing Standard No. 61, as amended (AICPA, Professional Standards, Vol. 1, AU Section 380), as adopted by the Public Company Accounting Oversight Board ("PCAOB"(“PCAOB”) in Rule 3200T.
In addition, the Audit Committee discussed with the independent registered public accounting firm the registered public accounting firm'sfirm’s independence from the Company and its management, and the independent registered public accounting firm provided to the Audit Committee the written disclosures and letter required from the independent registered public accounting firm by PCAOB Ethics and Independence Rule 3526Communications with Audit Committee Concerning Independence.
The Audit Committee discussed with the Company'sCompany’s internal auditors and independent registered public accounting firm the overall scope and plans for their respective audits. The Audit Committee met with the internal auditors and independent registered public accounting firm, with and without management present, to discuss the results of their examinations, the evaluations of the Company'sCompany’s internal controls, and the overall quality of the Company'sCompany’s financial reporting.
Based on the review and discussions referred to above, the Audit Committee has recommended to the Board of Directors that the audited financial statements be included in the Company'sCompany’s Annual Report on Form 10-K for the year ended December 31, 20172019 for filing with the Securities and Exchange Commission.
Audit Committee:
Melvin F. Lazar (Chairman)
Archie R. Dykes
Karen K. EdwardsEdward Farrell
William C. Green
Archie R. Dykes
William C. Green
Kenneth J. Bacon*
April 9, 201814, 2020
*
Appointed as a director on April 1, 2020.
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EXECUTIVE OFFICERS
Our executive officers are elected annually by our Board of Directors and serve for a term of one year and until their respective successors are elected and qualify. Set forth below is information regarding our executive officers, as of the date of this proxy statement, unless otherwise indicated:
| Name | | | Age | | | Position | |
Ivan Kaufman(*) | | | | | Chairman of the Board of Directors, Chief Executive Officer and President | | |
Paul Elenio | | | | | Chief Financial Officer | | |
Fred Weber | | | | | Executive Vice | | |
John Caulfield | | | | | Chief Operating | | |
Gene Kilgore | | | | | Executive Vice | | |
John J. Bishar, Jr. | | | | | Executive Vice President, General Counsel and Corporate Secretary | | |
|
| ||||||
John Natalone | | | | | Executive Vice | | |
| | | | | Executive Vice | | |
| | | |
| Managing Director and Chief Credit Officer — Structured Finance | | |
|
| ||||||
Thomas Ridings | | | | | Chief Accounting Officer | ||
|
| ||||||
- (*)
Biographical information is provided above under "Board“Board of Directors—Continuing Directors."Directors — Nominees.”
Paul Elenio.Elenio. Mr. Elenio has served as our Chief Financial Officer and Treasurer since 2005. Mr. Elenio joined Arbor National Holdings, Inc., the predecessor company of our Former Manager, Arbor Commercial Mortgage,ACM, in 1991. In 1995, he was promoted to Vice President, Controller, in 2002 assumed the position of Vice President of Finance and in 2004 was further promoted to Senior Vice President, Finance. Mr. Elenio is responsible for overseeing all aspects of our financial operations. This includes financial reporting, tax planning, budgeting, and the appropriate utilization of our capital. He is also in charge of investor relations. Prior to joining Arbor Commercial Mortgage,ACM, Mr. Elenio was employed with Ernst & Young from 1989 to 1990 in the auditing department.
Fred Weber.Weber. Mr. Weber has served as our Executive Vice President—Managing Director ofPresident — Structured Finance and Principal Transactions since 2003. Mr. Weber was employed by Arbor Commercial MortgageACM from 1999 untilto 2003. At Arbor Commercial Mortgage,ACM, Mr. Weber oversaw Arbor Commercial Mortgage'sACM’s structured finance and principal transaction group, where he was responsible for origination, underwriting and closing coordination of debt and equity financing for various asset types and classes of commercial real estate nationwide. He has been involved in the mortgage banking industry for more than 20 years and has extensive real estate finance and acquisition experience. Mr. Weber is a member of the real estate finance committee of the Real Estate Board of New York. From 1997 throughto 1999, Mr. Weber was a partner and co-head of the real estate department with Kronish Lieb Weiner & Hellman LLP. Previously, Mr. Weber was a partner with the law firm of Weil, Gotshal & Manges LLP.
John Caulfield. Mr. Caulfield serveshas served as our Chief Operating Officer—Officer — Agency Lending since its inception in 1995 and is responsible for managing the overall production of Arbor'sArbor’s national sales force and overseeing the implementation of our integrated sales and marketing efforts. He has extensive experience in the mortgage finance industry and a tenured track recordtenure of more than three decades with Arbor and its family ofpredecessor companies. He is responsible for all capital market activities relating to all of Arbor'sArbor’s agency lending products. In addition, he oversees the management of agency related trading and investment banking partnerships. Mr. Caulfield manages the operations functions of Arbor's agency pipeline from screening through closing. Hepartnerships and is a member of Arbor'sour DUS Loan Committee and Executive Committee.
Gene Kilgore.Kilgore. Mr. Kilgore has served as our Executive Vice President—President — Structured Securitization since 2004. From 2001 to 2004, Mr. Kilgore was a portfolio manager for ZAIS Group, LLC, a structured finance investment advisor. From 2000 to 2001, Mr. Kilgore was director of risk finance at Barclays Capital. From 1996 to 2000, Mr. Kilgore worked at Standard & Poor'sPoor’s Ratings Service, where he was a director in the collateralized debt obligations group. He has also served as Vice President of Corporate Lending and Commercial Real Estate at Wachovia Bank.
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John J. Bishar, Jr.Jr. Mr. Bishar, Executive Vice President, General Counsel and Corporate Secretary, served as one of our directors from 2007 through 2012. In 2009, Mr. Bishar was named General Counsel of Arbor Commercial Mortgage.and ACM. From 2007 until 2008, he was the U.S. General Counsel of National Grid U.S.A., a wholly-owned subsidiary of National Grid plc, a multi-national energy delivery company. During 2009, he was the Senior Advisor to National Grid's current U.S. General Counsel. At National Grid U.S.A., Mr. Bishar was responsible for all U.S. legal matters, as well as U.S. ethics, compliance and risk reporting. National Grid plc acquired KeySpan Corporation, a large, diversified U.S. energy delivery company, in 2007. Mr. Bishar was Executive Vice President, General Counsel and Chief Governance Officer of KeySpan Corporation from 2002 until the acquisition. At KeySpan, Corporation, Mr. Bishar was responsible for the Legal Services Business Unit, the Corporate Secretary'sSecretary’s Office and for all governance and compliance matters. Prior to joining KeySpan in 2002, Mr. Bishar was a partner in the law firm of Cullen and Dykman LLP. He wasLLP, serving as the managing partner of the firm from 1993 to 2002 and a member of the firm's executive committee.2002. From 1980 to 1987, Mr. Bishar was a Vice President and the General Counsel and Corporate Secretary of LITCO Bancorporation of New York Inc.
John Natalone.
Mr. Natalone has served as our Executive Vice President — Treasury and Servicing since 1995 and is responsible for managing all of our financing and bank relationships and Arbor’s Asset and Credit Risk Management functions. In addition, he also oversees Arbor’s Treasury and Servicing operations and is a member of Arbor’s loan committee. Mr. Natalone joined Arbor National Holdings, Inc., the predecessor company of ACM, and held the title of Senior Director, Office of the President from 1991 to 1995, where he assisted the President in running various business units. Prior to joining Arbor, Mr. Natalone held positions at GE Mortgage and Ernst & Young.
Danny van der Reis. Mr. van der Reis joined Arbor in 2019. As Executive Vice President — Structured Asset Management, he is responsible for managing the structured asset management department, loan restructurings and loan workouts for all of our balance sheet loans. He also takes the lead in strategically developing and expanding our special servicing function. With more than 21 years of commercial real estate finance, loan restructuring and loan workout experience, Mr. van der Reis has an extensive background in special servicing. Prior to coming to Arbor, he worked for one of the premier special servicers in the CMBS industry for over two decades where he gained invaluable experience working out and restructuring complex CMBS loans. Mr. van der Reis was also responsible for the processing and resolution of all performing loan consent matters, including the management of credit, underwriting and structuring of sale and assumption transactions.
Andrew Guziewicz. Mr. Guziewicz joined Arbor in 2008. As Managing Director and Chief Credit Officer—Officer — Structured Finance, he oversees the underwriting process for all structured finance transactions and is a Voting Membervoting member of Arbor's Credit Committee.Arbor’s credit committee. Mr. Guziewicz has more than 2030 years of commercial mortgage underwriting experience. Prior to joining Arbor, he was a Director for Merrill Lynch & Co., Inc., where he was responsible for managing the underwriting of loans from $50 million to over $5 billion, which were originated for securitization or private placement in capital markets. He has also held positions at Deutsche Bank Securities, Inc., Aetna Real Estate Investments and GE Capital.
Thomas Murphy. Mr. Murphy has more than 25 years of professional experience in the information technology field and serves as Arbor's Executive Vice President—Chief Information Officer. Prior to joining Arbor in 2004, Mr. Murphy was the Chief Information Officer at Titleserv Inc., an electronic real estate title and settlement services company. He also brings a wealth of IT experience
to Arbor from previous positions at Bank America Mortgage, Lending Solutions, Inc., First Boston Capital Group, Lockheed Martin Information Management Systems and IBM Corporation.
Bonnie Habyan. Ms. Habyan, Executive Vice President—Marketing, joined Arbor in 2004 and her current responsibilities encompass a comprehensive scope of marketing operation functions that include corporate marketing, new business development, client systems and marketing automation. Her role was recently expanded to include the management of Arbor's technology and automation initiatives as they relate to the customer journey and loan origination process. Ms. Habyan led a team to develop and implement Arbor Loan Express (ALEX), our first automated online loan processing system, and recently was appointed to serve on Fannie Mae's DUS® Technology Subcommittee. She has been at Arbor for 13 years, serving as Vice President of Marketing and Senior Vice President before advancing to her current role.
Daniel P. Kenny. Mr. Kenny, Executive Vice President—Chief Asset Manager, Servicing and Asset Management, leads the post-closing activities in support of Arbor's agency and balance sheet lending programs. A 30-year commercial real estate industry veteran, Mr. Kenny joined Arbor in 2011. Earlier in his career, Mr. Kenny held senior-level positions at several other commercial real estate investment and lending organizations, including KeyBank, Dillon Read Capital Management UBS Investment Bank, Bayerische Hypo und Vereinsbank, Skopbank, CorEast Savings Bank and Chase Manhattan Bank.
Thomas Ridings. As Arbor'sArbor’s Chief Accounting Officer, Mr. Ridings is responsible for overseeing our accounting operations and financial reporting functions, including budgeting and internal audit. Mr. Ridings joined Arbor in 2013. Prior to joining Arbor, Mr. Ridings worked at W. P. Carey Inc., a publicly traded, diversified REITreal estate investment trust and a leading global owner and manager of commercial real estate, from 2004 to 2013. At W. P. Carey he served in various positions including Executive Director, Chief Audit Executive, Chief Risk Officer and Chief Accounting Officer. From 2000 to 2004, Mr. Ridings served in various accounting and financial reporting roles at Computer Associates, a publicly traded, global software company. Mr. Ridings also worked at Ernst & Young, LLP where he held various positions in their assurance services practice from 1990 to 2000. He is a Certified Public Accountant.
Frank Lutz. Mr. Lutz, Executive Vice President—Chief Production Officer, joined Arbor in 2018 and is responsible for overseeing all of the Company's agency lending platforms for business development and our national production network and originations team. He also serves as a liaison between our agency partners as it relates to production. Mr. Lutz has over 25 years of multifamily agency experience. Prior to joining Arbor, Mr. Lutz was a Senior Vice President, Fannie Mae Liaison with Berkadia from 2011 to 2018 and was responsible for managing Berkadia's Fannie Mae and Freddie Mac production relationships. While there, he also served as the Chairman of the Fannie Mae DUS® Advisory Council. Prior to joining Berkadia, Mr. Lutz was with Fannie Mae where he served as Senior Vice President, Customer Management for the Northeast.
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EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
Compensation Philosophy and Principles
The Compensation Committee is aware that the real estate finance industry is highly competitive and that experienced professionals have significant career mobility. We compete for executive talent with a large number of real estate investment companies and specialty finance companies, some of which are privately owned and some of which are publicly traded and have significantly larger market capitalization than us. We are a specialized company in a highly competitive industry and our ability to attract, retain and reward our "named“named executive officers"officers” and other key employees is essential to maintaining our competitive position in the real estate finance industry. For 2017,2019, our "named“named executive officers"officers” are Mr. Kaufman, our Chief Executive Officer, Mr. Elenio, our Chief Financial Officer, and Messrs. Weber, Caulfield and Kilgore, the three most highly compensated executive officers (other than our Chief Executive Officer and our Chief Financial Officer) who were serving as our executive officers as of the end of 2017.
2019.
Prior to May 31, 2017, we were externally managed and advised by Arbor Commercial Mortgage.ACM. Effective May 31, 2017, we exercised our option to fully internalize our management team and terminate the existing management agreement. Prior to the termination of the management agreement, we were required to reimburse our Former ManagerACM for a portion of the base salaries and annual cash bonuses paid to employees of our Former ManagerACM who provided services to us in accordance with the terms of the management agreement, although the Compensation Committee had the sole discretion to approve our portion of the annual cash bonus payable to the most highly compensated of these employees.us. Prior to May 31, 2017, the cash compensation and benefits paid or provided to Mr. Elenio, and disclosed and described herein, were provided by our Former Manager.ACM. Effective June 1, 2017, Mr. Elenio was compensated directly by us. Messrs. Kaufman, Weber, Caulfield and Kilgore were compensated directly by us during 2017.
2017 and thereafter.
The Compensation Committee'sCommittee’s goal is to maintain compensation programs that are competitive within our industry, reward executives if we achieve our operational, financial and strategic goals and build stockholder value. In determining the form and amount of compensation payable by us to the named executive officers, the Compensation Committee is guided by the following objectives and principles:
•
Compensation levels should be sufficiently competitive to attract, motivate and retain key executives.executives. We aim to ensure our executive compensation program attracts, motivates and retains high performance talent and rewards them for the Company achieving and maintaining a competitive position in our industry. The Compensation Committee believes that total compensation should increase with position and responsibility.
•
•
The Compensation Committee does not employ a specific policy, practice or formula regarding an allocation between cash and non-cash compensation with respect to compensation paid to our executives.
The Compensation Committee reviews, at least annually, the goals and objectives of our executive compensation plans, incentive compensation plans, equity-based plans and other compensation and employee benefit plans. The Compensation Committee believes that our compensation and benefits are competitive with itsour peers and provide appropriate incentives for strong performance.
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Compensation Setting Process
Management's
Management’s Role in the Compensation-Setting Process
The Compensation Committee believes our Chief Executive Officer, Mr. Kaufman, is in the best position to determine the responsibilities of each other named executive officer and observe how well each executive performs his responsibilities. Mr. Kaufman provides recommendations to the Compensation Committee regarding base salary levels and the form and amount of the annual cash incentive awards and stock-based compensation paid to all of our other named executive officers. Mr. Kaufman'sKaufman’s recommendations are based on his evaluation of each other named executive officer'sofficer’s performance, contribution toward achieving operational, financial and strategic goals, current and historical compensation elements and our financial performance. The Compensation Committee has the ability to modify any of these recommendations and is solely responsible for ultimately determining and approving all of our compensation arrangements for these named executive officers. Additionally, Mr. Kaufman and our other officers provide compensation and other information to the Compensation Committee upon its request.
Mr. Kaufman does not participate in any deliberations or approvals by the Compensation Committee with respect to his compensation.
See "Determining“Determining Compensation Levels"Levels” below for more information about the Compensation Committee'sCommittee’s process for determining the compensation of the named executive officers.
Compensation Consultants
The Compensation Committee'sCommittee’s charter provides the committee with the sole authority to retain, terminate, obtain advice from, oversee and compensate any compensation consulting firm or other adviser as it deems appropriate. We have provided appropriate funding to the Compensation Committee to do so.
For 2017,2019, the Compensation Committee did not engage a compensation consultant to advise on the compensation of itsour executive officers as it continued to apply the principles developed with FPL Associates, its consultant, in 2014. FPL Associates has no other relationships with us and is considered an independent third-party advisor. The Compensation Committee conducted a specific review of its relationship with FPL Associates and determined that its work for the Compensation Committee did not raise any conflicts of interest, consistent with the guidance provided under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act"“Dodd-Frank Act”), by the SEC and by the NYSE. The Compensation Committee continues to monitor the independence of its compensation consultant on a periodic basis.
Determining Compensation Levels
The Compensation Committee annually determines targeted total compensation levels, as well as the individual compensation components for the named executive officers. In making such determinations, the Compensation Committee reviews and considers: (1) recommendations of our Chief Executive Officer (for the other named executive officers); (2) historical compensation levels for
each named executive officer; (3) industry and market conditions and our future objectives and challenges; and (4) overall effectiveness of the executive compensation program. The Compensation Committee does not utilize specific performance-based goals and does not engage in benchmarking compensation, but reviews general industry trends as well as our overall performance in determining targeted total compensation levels.
Based upon its review of the applicable factors described above, the Compensation Committee approved the total compensation payable to Mr. Kaufman with respect to his service in 2017.2019. Based upon discussions and recommendations of our Chief Executive Officer, and upon its review of the applicable factors described above, the Compensation Committee approved the base salary and incentive awards of each of Messrs. Elenio, Weber, Caulfield and Kilgore with respect to their service in 2017.2019. The Compensation Committee believes these approved forms and levels of compensation are reasonable, appropriate and in line with our compensation philosophy and principles.
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Elements of Compensation
Total compensation for the named executive officers is generally comprised of the following components:
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base salary;
•
•
annual cash incentive awards;
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•
stock-based incentive awards; and
•
•
retirement and other benefits.
Other than Mr. Kaufman's Kaufman’s amended annual incentive agreement (“Annual Incentive AgreementAgreement”) described below in "Executive“Executive Compensation in 2018,"2020,” our named executive officers do not have employment, severance or change of control agreements, although their restricted stock award agreements provide for accelerated vesting upon a change of control as further described under "Stock-Based“Stock-Based Incentive Awards—Awards — Stock Awards."” All of the named executive officers are employed at will, which enables us to terminate their employment at any time and for any reason. This is consistent with our performance-based employment and compensation philosophy.
Base Salary
Salaries provide executives with a base level of income and help achieve the objectives outlined above by attracting and retaining strong talent with the skills and experience necessary to achieve our key business objectives. The Compensation Committee reviewed and approved, with respect to 2017,2019, the base salaries of Messrs. Kaufman, Elenio, Weber, Caulfield and Kilgore. Generally, base salaries are not based upon specific measures of corporate performance, but are determined by: (1) tenure of service; (2) scope and complexity of the position, including current job responsibilities; (3) an evaluation of each officer'sofficer’s individual performance and contribution to our operational, financial and strategic goals and objectives; and (4) with respect to the named executive officers other than Mr. Kaufman, the recommendations of our Chief Executive Officer. Consistent with compensation practices commonly applied in the real estate finance industry, salaries generally consist of a lower percentage of an executive'sexecutive’s total compensation, with a substantial portion of total compensation coming from incentive compensation that is tied to our performance.
Please refer to the "Summary“Summary Compensation Table for 2017"2019” below for a further description of the base salaries paid to our named executive officers with respect to their services during 2017.2019.
Annual Incentive Awards
We aim to promote a pay-for-performance culture, with a substantial portion of total compensation being "at“at risk."” The annual incentive award may be in the form of cash, stock-based awards or a combination thereof, at the discretion of the Compensation Committee. We do not have a specific policy, practice or formula regarding an allocation between the cash component and the stock-based component. These awards are designed to help achieve the objectives of the compensation program and may vary significantly from year to year. In 2017,2019, the Compensation Committee did not establish any specific performance-based goals that must be met in order to receive the annual incentive award.
The Compensation Committee believes that the structure and ultimate payout amounts of the incentive awards are appropriate to attract, retain and reward the named executive officers, are competitive with those offered by our peers, provide a strong, long-term performance and retention incentive, support a pay-for-performance culture and increase each named executive officer'sofficer’s vested interest in the Company.
The Compensation Committee determines the annual incentive awards of the named executive officers in amounts relative to each individual'sindividual’s contributions and responsibilities. Individuals with increased ability to directly impact our performance were allocated larger awards because they bear a greater proportion of the risk that compensation will decrease if we do not perform as expected. We paid cash incentive awards to the following executives with respect to their performance in 2017:
2019:
Mr. Elenio received an annual cash incentive award of $750,000$1,050,000 with respect to his work on behalf of the Company.
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Mr. Weber received an annual cash incentive award of $1,000,000 for managing our loan portfolio and origination platform.
Mr. Caulfield received an annual cash incentive award of $1,000,000 for managing our Agency origination production.
Mr. Kilgore received an annual cash incentive award of $800,000$1,000,000 for managing our securitization platform.
Our independent directors approved the payment of a $3,850,000$4,325,000 cash bonus to Mr. Kaufman with respect to his work on our behalf for the year ended December 31, 2017,2019, under the terms of an Annual Incentive Agreement described below in "Executive“Executive Compensation in 2018."
2020.”
Stock-Based Incentive Awards
Since the Company'sCompany’s formation in 2003, the Compensation Committee has granted our named executive officers (as well as certain other employees of ours, employees of the Former ManagerACM who provided services to us services and our non-management directors) stock awards, consisting of shares of our common stock that may, in the discretion of the Compensation Committee, either: (i) vest annually over a multi-year period, subject to the recipient'srecipient’s continued service to us; or (ii) vest immediately. The recipients of these awards realize value as the common stock underlying the awards vest, with the value increasing if our stock performance increases after the date of grant. Additionally, all of the common stock underlying these restricted stock awards, whether or not vested, is entitled to cash dividends paid to our stockholders because we feel that this further aligns the interests of the holders with those of our stockholders generally.
The Compensation Committee believes that stock-based awards must be sufficient in size and value to achieve our goals of both providing a strong, long-term performance and retention incentive for named executive officers and increasing their vested interest in the Company. In determining the equity component of a named executive officer'sofficer’s compensation, the Compensation Committee considers
all relevant factors, including the Company'sCompany’s performance and relative stockholder return, the awards granted in past years and the relative value of the awards.
Stock-Based Awards for 2017.2019 Performance. Consistent with its historical practice of granting annual stock-based awards to the named executive officers with respect to their service to the Company and performance in the most recently completed fiscal year, in 2018,2020, the Compensation Committee granted certain of our named executive officers stock-based awards, consisting of restricted stock with a multi-year vesting schedule under our 2017 Amended Omnibus Stock Incentive Plan ("2017 Stock Incentive Plan") with respect to their service to the Company and performance in 2017.2019. On March 5, 2018,9, 2020, the Compensation Committee granted effective March 9, 2018, an aggregate of 265,444275,635 shares of restricted stock to certain of our employees with respect to their 20172019 performance, of which 116,955104,639 shares, in the aggregate, were granted to Messrs. Elenio, Weber, Caulfield and Kilgore. One third of the shares were vested as of the date of grant and one third will vest in March 2019,on each of the first and second anniversaries of the remaining third will vest in March 2020date of grant (subject to the executives continued employment). In addition, Mr. Kaufman was granted, in accordance with his Annual Incentive Agreement: (i) 63,58445,928 shares of restricted stock, of which one quarter of the shares were vested as of the date of grant and one quarter will vest on each of the first, second and third anniversaries of the date of grant; (ii) performance-vesting restricted stock units which vest at the end of a four-year performance period based upon our achievement of total shareholder return objectives, and which entitle Mr. Kaufman to receive up to 381,503275,569 shares of common stock; and (iii) 357,569246,508 shares of restricted stock after obtaining certain performance based goals related to the integration of the acquisition of our Former Manager'sACM’s Agency business completed in 2016 (the "Acquisition"“Acquisition”), which vest in full on the third anniversary in August 2020.
July 2022.
We do not have a formal policy on timing equity compensation grants in connection with the release of material non-public information to affect the value of compensation. The Compensation Committee has generally granted stock-based awards once a year.
Future Grants of Stock Options.Options. The Compensation Committee has traditionally viewed restricted stock awards as more effective than stock options in achieving our compensation objectives. However, the Compensation Committee also considers stock options, in addition to restricted stock awards, as a viable tool to retain key employees. To the extent that the Compensation Committee decides to grant stock options in the future, it is anticipated that: (i) the exercise price for the stock options will be equivalent to the market price
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of the underlying common stock on the date of grant; (ii) the stock options will vest over a multi-year period; and (iii) the stock options will be exercisable for a maximum of ten years from the date of grant. Stock options align employee incentives with the interests of stockholders because they have value only if our stock price increases over time. The Compensation Committee believes that the ten-year term of the stock options will help focus employees on our long-term growth. Given that stock options vest over a multi-year period, stock options are intended to help retain key associates and keep employees focused on long-term performance.long-termperformance. To date, no such options have been granted.
Retirement and Other Benefits
We maintain a 401(k) plan for our employees, including the named executive officers, as a source of retirement income by enabling participants to save on a pre-tax basis and by providing Company matching contributions. All of the named executive officers participated in the 401(k) plan in 2017. We do2019.
During 2019, we did not maintain any non-qualified deferred compensation plansplan that would allow the named executive officers to elect to defer receipt (and taxation) of their base salaries, bonuses or other compensation, nor do we maintain a defined benefit pension plan.
The named executive officers are eligible to participate in our active employee flexible benefits plans, which are generally available to all our employees. Under these plans, all employees are entitled to medical, dental, vision, life insurance and long-term disability coverage. Additionally, all of our
employees are entitled to vacation, sick leave and other paid holidays. The Compensation Committee believes that our commitment to provide the employee benefits described above recognizes that the health and well-being of our employees contribute directly to a productive and successful work life that enhances results for the Company and its stockholders.
In 2017,2019, we provided all of our named executive officers with (i) $250,000 of life insurance coverage and (ii) long-term disability coverage with a maximum annual benefit of $120,000.
For further information regarding the premiums paid on the named executive officers'officers’ insurance policy, please refer to the "Summary“Summary Compensation Table for 2017"2019” below.
Advisory Vote to Approve Named Executive Officer Compensation
In the 2011 annual meeting of stockholders, the Board resolved to accept the stockholders'stockholders’ recommendation to hold an advisory vote on the compensation of our named executive officers every three years. Accordingly, we conducted an advisory vote on the compensation of our named executive officers at our 2014 and 2017 annual meetings of stockholders, at which 93% and 90%, respectively, of the votes cast were in favor of this advisory proposal. The Compensation Committee believes this favorable outcome conveyed our stockholders'stockholders’ support of the Compensation Committee'sCommittee’s decisions and the existing executive compensation programs. As a result, the Compensation Committee made no material changes in the structure of our compensation programs or pay for performance philosophy, except with respect to Ivan Kaufman'sKaufman’s Annual Incentive Agreement described in "Executive“Executive Compensation in 2018"2020” below.
We are providing our stockholders with the opportunity to vote on a non-binding, advisory resolution to approve the compensation of our named executive officers at our 2020 annual meeting of stockholders. Please see “Proposal No. 4 — Advisory Vote on Named Executive Officer Compensation” below for more information.
The Board and the Compensation Committee continue to expect to take the results of the 2017this vote and future votes into consideration when making future compensation decisions with respect to the named executive officers, but are not required to do so.
Deductibility of Executive Compensation
Prior
Subsequent to the enactment of the Tax Cuts and Jobs Act of 2017 ("(“Tax Act"Act”), which is effective for taxable years beginning after December 31, 2017, Section 162(m) of the Internal Revenue Code generally limited the deductible amount of total annualno longer allows a tax deduction for “performance-based” compensation paid by a public company to each "covered employee"“covered employee” (the chief executive officer and three other most highly compensated executive officers other than the chief financial officer) to no more than $1,000,000. Unless an exception applies, compensation otherwise deductibleover $1,000,000 in connection with equity-based awards was subjected to this limit.
Under the enacted Tax Act, the exception under Section 162(m) for "performance-based" compensation will no longer be available,one year, subject to transition relief for certain grandfathered arrangements in effect as of November 2, 2017. AmongIn addition, among the changes to Section 162(m) under the Tax Act, the
22
covered employees will be expanded to include the chief financial officer, and once one of our named executive officers is considered a covered employee, the named executive officer will remain a covered employeesemployee as long as theyhe or she receive compensation from us. The Committee has not adopted a formal policy that requires all compensation paid to the named executive officers to be fully deductible.
Executive Compensation in 2018
In 2015, we entered into2020
We have an Annual Incentive Agreement with Ivan Kaufman, which generally sets forth the agreement between Mr. Kaufman and us with respect to Mr. Kaufman'sKaufman’s annual base salary and incentive compensation from the Company commencing in 2015 and continuing during his service as Chief Executive Officer. That agreement was amended in March of 2017, primarily to providealso provides for certain incentive compensation dependent on our successful integration of the Acquisition. Under the terms of the agreement, Mr. Kaufman will have an annual base salary of $1,000,000 and an annual performance cash bonus target opportunity of 220%242% of base salary (with a threshold annual bonus
opportunity of 110%121% and a maximum annual bonus opportunity of 330%363% of base salary—salary — with the opportunity to earn an additional $550,000$605,000 annually in the event of extraordinary performance with respect to corporate capital growth goals). The goals applicable to the annual performance bonus will relate to our adjusted funds from operations, corporate capital growth (as noted above), balance sheet-management and efficiency, the relative risk of our portfolio, the growth of our Agency servicing portfolio and the Compensation Committee'sCommittee’s assessment of Mr. Kaufman'sKaufman’s leadership and achievement of subjective goals during the calendar year. These goals (and the other goals contemplated by the agreement) are to be set by the Compensation Committee of our Board of Directors.
The agreement further provides for: (i) annual grants of three-year time-vesting restricted stock with a value at grant of $550,000;$605,000; (ii) annual grants, for a five yearfive-year period ending in 2021, of performance and time based-vesting restricted stock with an annual grant value of $3,000,000, dependent on reaching certain goals relating to our integration of the Acquisition, including originations, growth in the servicing portfolio and the weighted average servicing fee; and (iii) performance-vesting restricted stock units with an annual value at grant of $3,300,000,$3,630,000, relating to our total shareholder return objectives. Each grant of performance and time based-vesting restricted stock noted in clause (ii) above will vest in full on the third anniversary of the grant date. The performance-vesting restricted stock units noted in clause (iii) above will vest, in whole or in part, based on the attainment of total shareholder return goals over a four yearfour-year period. In March 2016, 20172018, 2019 and 2018,2020, the Compensation Committee granted Mr. Kaufman performance-vesting restricted stock units under clause (iii) above, which entitle Mr. Kaufman to receive up to 421,348381,503 shares, 448,980352,427 shares and 381,503275,569 shares, respectively, of common stock which vest at the end of a four-year performance period based upon our achievement of total shareholder return objectives.
The agreement also provides for the treatment of the various incentive awards upon a termination of Mr. Kaufman'sKaufman’s employment. Among other things, the agreement provides that in the event of a termination of employment by the Company without cause or by Mr. Kaufman for good reason (as such terms are defined in the agreement), then the annual bonus for the year of termination will be paid out at the target level of performance (which is 220% of base salary), all unvested restricted stock issued pursuant to clauses (i) and (ii) in the preceding paragraph will vest in full and performance-vesting restricted stock units described in clause (iii) of the preceding paragraph will vest pro-rata based on the elapsed portion of the performance period (based upon actual performance).
The agreement also provides that the value of Mr. Kaufman'sKaufman’s annual cash bonus and equity incentive awards will increase by 10% for each increase of 25% in our GAAP equity capitalization, measured year-over-year (from December 31, 2016) through the first day of any subsequent calendar year.
In March 2018,2020, the Compensation Committee approved the salaries of Messrs. Kaufman, Elenio, Weber, Caulfield and Kilgore for 2018,2020, all of which did not increase from 2017.
2019.
The Compensation Committee intends to continue its strategy of compensating our named executive officers through programs that emphasize incentive compensation, fostering a pay-for-performance culture. To that end, a majority of executive compensation will continue to be tied to Company and individual performance, while maintaining an appropriate balance between cash and non-cash compensation.
23
Management Agreement
We were previously externally managed and advised by ACM.
Effective May 31, 2017, we exercised our option to fully internalize our management team and terminate the existing management agreement which included the transfer of approximately 100 employees.
with ACM. Prior to May 31, 2017, we were previously externally managed and advised by ACM, who provided us with a variety of advisory and professional services, vitalwhich were reimbursed to our operations, including underwriting, accounting and treasury, compliance, marketing, information technology and human resources, for which we reimbursed ACM for itsat actual costs incurred andcost. ACM’s cost included the allocable portion of the base salaries, annual cash bonuses and employee benefits paid to our Former Manager'sACM’s employees who provideprovided such services to us. PriorTherefore, prior to May 31, 2017, the cash compensation and benefits paid or provided to Mr. Elenio waswere provided by ACM and included in the management fee. Effective June 1, 2017, Mr. Elenio was compensated directly by us.
The 2017 2016 and 2015 base management fees werefee was $6.7 million, $12.6 million and $10.9 million, respectively. Aof which a portion of this amount represented our allocable portion of the base salary and annual cash bonus paid to Mr. Elenio with respect to his service to the Companyus while he was employed by ACM.
Compensation Committee Report on Executive Compensation
The Compensation Committee reviewed and discussed the "Compensation“Compensation Discussion and Analysis"Analysis” with our management. Based upon this review and their discussions, the Compensation Committee recommended that the Board of Directors include the "Compensation“Compensation Discussion and Analysis"Analysis” in our proxy statement for the 20182020 annual meeting of stockholders. In addition, the Compensation Committee considered whether our executive compensation program encourages unnecessary risk taking and has concluded that it does not.
Compensation Committee:
William C. Green (Chairman)
William Helmreich
Melvin F. Lazar
Elliot Schwartz
George Tsunis
Melvin F. Lazar
Elliot Schwartz
George Tsunis
April 9, 201814, 2020
24
Executive Compensation
Summary Compensation Table for 2017
2019
The following table sets forth the total compensation amounts paid to our named executive officers for the years ended December 31, 2017, 20162019, 2018 and 2015.2017.
| Name and Principal Position | | | Year | | | Salary ($) | | | Bonus ($) | | | Stock Awards ($)(1) | | | All Other Compensation ($)(2) | | | Total ($) | | ||||||||||||||||||
| Ivan Kaufman | | | | | 2019 | | | | | | 1,000,000 | | | | | | 4,325,000 | | | | | | 3,613,019 | | | | | | 5,700 | | | | | | 8,943,719 | | |
| Chief Executive Officer | | | | | 2018 | | | | | | 1,000,000 | | | | | | 3,850,000 | | | | | | 5,796,313 | | | | | | 5,250 | | | | | | 10,651,563 | | |
| and President | | | | | 2017 | | | | | | 1,000,000 | | | | | | 3,850,000 | | | | | | 4,612,420 | | | | | | 5,970 | | | | | | 9,468,390 | | |
| Paul Elenio | | | | | 2019 | | | | | | 500,000 | | | | | | 1,050,000 | | | | | | 339,489 | | | | | | 5,700 | | | | | | 1,895,189 | | |
| Chief Financial Officer | | | | | 2018 | | | | | | 500,000 | | | | | | 850,000 | | | | | | 349,996 | | | | | | 5,250 | | | | | | 1,705,246 | | |
| | | | | | 2017 | | | | | | 500,000 | | | | | | 750,000 | | | | | | 400,500 | | | | | | 5,970 | | | | | | 1,656,470 | | |
| Fred Weber | | | | | 2019 | | | | | | 500,000 | | | | | | 1,000,000 | | | | | | 193,991 | | | | | | 5,700 | | | | | | 1,699,691 | | |
| Executive Vice President – | | | | | 2018 | | | | | | 500,000 | | | | | | 1,000,000 | | | | | | 199,996 | | | | | | 5,250 | | | | | | 1,705,246 | | |
| Structured Finance | | | | | 2017 | | | | | | 500,000 | | | | | | 1,000,000 | | | | | | 200,250 | | | | | | 5,970 | | | | | | 1,706,220 | | |
| John Caulfield | | | | | 2019 | | | | | | 500,000 | | | | | | 1,000,000 | | | | | | 290,986 | | | | | | 5,700 | | | | | | 1,796,686 | | |
| Chief Operating Officer – | | | | | 2018 | | | | | | 500,000 | | | | | | 1,000,000 | | | | | | 299,988 | | | | | | 5,250 | | | | | | 1,805,238 | | |
| Agency Lending | | | | | 2017 | | | | | | 500,000 | | | | | | 1,000,000 | | | | | | 150,188 | | | | | | 5,970 | | | | | | 1,656,158 | | |
| Gene Kilgore | | | | | 2019 | | | | | | 500,000 | | | | | | 1,000,000 | | | | | | 290,986 | | | | | | 5,700 | | | | | | 1,796,686 | | |
| Executive Vice President – | | | | | 2018 | | | | | | 500,000 | | | | | | 900,000 | | | | | | 299,988 | | | | | | 5,250 | | | | | | 1,705,238 | | |
| Structured Securitization | | | | | 2017 | | | | | | 500,000 | | | | | | 800,000 | | | | | | 175,219 | | | | | | 5,970 | | | | | | 1,481,189 | | |
Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($)(1) | All Other Compensation ($)(2) | Total ($) | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Ivan Kaufman | 2017 | 1,000,000 | 3,850,000 | 4,612,420 | 5,970 | 9,468,390 | |||||||||||||
Chief Executive Officer | 2016 | 1,000,000 | 3,500,000 | 1,367,277 | 5,895 | 5,873,172 | |||||||||||||
and President | 2015 | 1,000,000 | 3,441,304 | 2,439,035 | 6,310 | 6,886,649 | |||||||||||||
Paul Elenio | 2017 | 500,000 | 750,000 | 400,500 | 5,970 | 1,656,470 | |||||||||||||
Chief Financial Officer | 2016 | 442,655 | (3) | 1,216,732 | (3) | 331,500 | 5,241 | 1,996,128 | |||||||||||
| 2015 | 378,334 | (3) | 420,000 | (3) | 174,750 | 5,034 | 978,118 | ||||||||||||
Fred Weber | 2017 | 500,000 | 1,000,000 | 200,250 | 5,970 | 1,706,220 | |||||||||||||
Executive Vice President— | 2016 | 500,000 | 1,250,000 | 198,237 | 5,895 | 1,954,132 | |||||||||||||
Structured Finance | 2015 | 500,000 | 1,700,000 | 174,750 | 6,293 | 2,381,043 | |||||||||||||
John Caulfield | 2017 | 500,000 | 1,000,000 | 150,188 | 5,970 | 1,656,158 | |||||||||||||
Chief Operating Officer— | 2016 | N/A | N/A | N/A | N/A | N/A | |||||||||||||
Agency Lending | 2015 | N/A | N/A | N/A | N/A | N/A | |||||||||||||
Gene Kilgore | 2017 | 500,000 | 800,000 | 175,219 | 5,970 | 1,481,189 | |||||||||||||
Executive Vice President— | 2016 | 500,000 | 800,000 | 173,441 | 5,895 | 1,479,336 | |||||||||||||
Structured Securitization | 2015 | 500,000 | 850,000 | 174,750 | 6,293 | 1,531,043 | |||||||||||||
(1)
(1)- Represents the aggregate grant date fair value of restricted common stock awards and performance-vesting restricted stock units granted in the respective years, determined in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718
Compensation—Compensation — Stock Compensation("(“ASC718"718”) and represents the probable outcome of the performance condition. See"Executive Compensation—“Executive Compensation — Compensation Discussion andAnalysis—Analysis — Compensation SettingProcess—Process — Stock-Based IncentiveAwards"Awards” for further information on stock awards.
(2)
(2)
Amounts reflect our matching contributions to the 401(k) plan and basic term life insurance.
(3)Prior to the termination of our management agreement with ACM effective May 31, 2017, Mr. Elenio did not receive cash compensation or benefits from us for serving as our executive officer, other than the cash bonus amounts that are stated below. Prior to June 1, 2017, he was employed and compensated by our Former Manager, ACM, who was reimbursed $914,628 and $798,334 in cash as our allocable portion of the annual salary and bonus payable to Mr. Elenio in 2016 and 2015, respectively. In addition, our independent directors approved the payment of a cash bonus of $750,000 by the Company to Mr. Elenio with respect to his work on behalf of the Company for the year ended December 31, 2016. See "Compensation Discussion & Analysis—Management Agreement" for further information.
2019 Ivan Kaufman Paul Elenio Fred Weber John Caulfield Gene KilgoreGrants of Stock-Based Awards for 2017The following shares of restricted common stock and performance-vesting restricted stock units were granted to the named executive officers pursuant to our stock incentive plans in effect at the grant dates and Annual Incentive Agreement during 2017.2019.Name Grant Date Number of Shares of
Stock or Units (#)(1) Grant Date Fair Value of
Stock Awards ($)(2) Ivan Kaufman 03/08/19 411,165 2,439,384 07/31/19 246,508 3,004,933 Paul Elenio 03/08/19 27,624 349,996 Fred Weber 03/08/19 15,785 199,996 John Caulfield 03/08/19 23,677 299,988 Gene Kilgore 03/08/19 23,677 299,988 Name Grant Date Number of Shares of Stock
or Units (#)(1) Grant Date Fair
Value of Stock
Awards ($)(2) 03/20/17 523,810 1,641,022 08/02/17 357,569 2,971,398 03/20/17 50,000 400,500 03/20/17 25,000 200,250 03/20/17 18,750 150,188 03/20/17 21,875 175,219
(1)(1)20172019 with respect to their 20162018 performance.
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(2)
Represents the aggregate grant date fair value of restricted common stock awards and performance-vesting restricted stock units granted in the respective years, determined in accordance with ASC 718. See "Executive Compensation—“Executive Compensation — Compensation Discussion and Analysis—Analysis — Compensation Setting Process—Process — Stock-Based Incentive Awards"Awards” for further information on stock awards.
Cash dividends are paid on all outstanding shares of restricted stock at the same rate as is paid to all stockholders, which was $0.72$1.14 per share for 2017.2019. See "Executive Compensation—“Executive Compensation — Compensation Discussion and Analysis—Analysis — Forms of Compensation—Compensation — Stock-Based Incentive Awards"Awards” for further information.
Outstanding Equity Awards at 20172019 Fiscal Year-End
The table below lists the number of shares of restricted common stock and performance-vesting restricted stock units held by each of our named executive officers as of December 31, 2017.2019.
| | | | Stock Awards | | |||||||||
| Name | | | Number of Shares or Units of Stock That Have Not Vested (#)(1) | | | Market Value of Shares or Units of Stock That Have Not Vested ($)(2) | | ||||||
| Ivan Kaufman | | | | | 2,176,525(3) | | | | | | 31,233,134 | | |
| Paul Elenio | | | | | 31,826(4) | | | | | | 456,703 | | |
| Fred Weber | | | | | 18,857(5) | | | | | | 270,598 | | |
| John Caulfield | | | | | 23,448(6) | | | | | | 336,479 | | |
| Gene Kilgore | | | | | 25,363(7) | | | | | | 363,959 | | |
| | Stock Awards | ||||||
|---|---|---|---|---|---|---|---|
Name | Number of Shares or Units of Stock That Have Not Vested (#)(1) | Market Value of Shares or Units of Stock That Have Not Vested ($)(2) | |||||
Ivan Kaufman | 1,783,471 | (3) | 15,409,189 | ||||
Paul Elenio | 49,999 | (4) | 431,991 | ||||
Fred Weber | 26,633 | (5) | 230,109 | ||||
John Caulfield | 16,236 | (6) | 140,279 | ||||
Gene Kilgore | 23,303 | (7) | 201,338 | ||||
(1)
(1)- For all named executive officers, as of December 31,
2017,2019, these shares were subject to the terms of the applicable restricted stock award agreements, and additionally for Mr. Kaufman, the Annual Incentive Agreement.
(2)
(2)
Based on the closing stock price of our common stock on December 31, 20172019 of $8.64.$14.35.
(3)
(3)
Of the 467,378993,615 unvested restricted common stock awards for Mr. Kaufman, 54,83649,289 shares vested in March 2018,2020, while 36,26530,580 shares and 18,70814,684 shares will vest in March 20192021 and 2020,2022, respectively, and 357,569 shares, 294,985 shares and 246,508 will vest in August 2020.2020, August 2021 and July 2022, respectively. The 1,316,0931,182,910 performance-vesting restricted stock
units granted to Mr. Kaufman will vest, in whole or in part, based on the attainment of total shareholder return goals over a four yearfour-year period.
- In addition, the performance vested restricted stock units excludes 445,765 shares and 421,348 shares that fully vested based on total shareholder return goals over the four-year period ended December 31, 2018 and 2019, respectively, which were net settled and paid with 203,492 shares and 215,014 shares, respectively, in February 2019 and 2020, respectively.
(4)
Of the 49,99931,826 unvested stock awards for Mr. Elenio, 33,33322,618 shares vested in March 2018,2020, while 16,6669,208 shares will vest in March 2019.2021.
(5)
(5)
Of the 26,63318,857 unvested stock awards for Mr. Weber, 18,29913,596 shares vested in March 2018,2020, while 8,3345,261 shares will vest in March 2019.2021.
(6)
(6)
Of the 16,23623,448 unvested stock awards for Mr. Caulfield, 9,98615,555 shares vested in March 2018,2020, while 6,2507,893 shares will vest in March 2019.2021.
(7)
(7)
Of the 23,30325,363 unvested stock awards for Mr. Kilgore, 16,01217,470 shares vested in March 2018,2020, while 7,2917,893 shares will vest in March 2019.2021.
2019 Ivan Kaufman Paul Elenio Fred Weber John Caulfield Gene KilgoreVested Stock-Based Awards for 2017The table below lists the number of shares of restricted common stock held by each of our named executive officers that vested (pursuant to the terms of the related restricted stock award agreement and, with respect to Mr. Kaufman, the Annual Incentive Agreement in connection to Mr. Kaufman)Agreement) during 2017.2019. Stock Awards Name Number of Shares Acquired on
Vesting (#) Value Realized on
Vesting ($)(1) 89,836 711,299 41,668 327,594 26,634 209,517 11,653 91,966 24,346 191,626 26
Stock Awards Name Number of Shares
Acquired on Vesting (#) Value Realized on
Vesting ($)(1) Ivan Kaufman(2) 488,194 7,173,537 Paul Elenio 39,284 498,562 Fred Weber 21,929 278,257 John Caulfield 21,805 276,582 Gene Kilgore 24,762 314,099 (1)Value realized equals the fair market value of the shares on the date the shares vested.(2)Includes 421,348 performance vested restricted stock units that fully vested based on total shareholder return goals over the four-year period ended December 31, 2019, which was paid with 215,014 of net settled common shares in February 2020.Potential Payments Upon Change in Control or TerminationExcept for the Annual Incentive Agreement with Mr. Kaufman entered into in March2015, and amended in March2017, as described above in"Executive“Executive Compensation in2018,"2020,” we do not maintain employment, severance or change in control agreements with any of the named executive officers and, therefore, we are not obligated to pay cash severance to any of the named executive officers, other than Mr. Kaufman, upon a termination of their employment.Change in ControlThe restricted stock award agreements that govern the shares of restricted common stock granted to the named executive officers pursuant to our2017Stock Incentive Planprovidesprovide for the full vesting of such shares in the event of a"change“change ofcontrol"control” (as defined in the agreement) of the Company. If a change in control had occurred on December 31,2017,2019, the market value of the shares of restricted common stock held by each named executive officer that would have become vested, based on the closing stock price of$8.64$14.35 on December 31,2017,2019, was equal to: (i) Mr. Kaufman,$4,038,146;$14,258,375; (ii) Mr. Elenio,$431,991;$456,703; (iii) Mr. Weber,$230,109;$270,598; (iv) Mr. Caulfield,$140,279;$336,479; and (v) Mr. Kilgore,$201,338.$363,959.
TerminationTerminationIf Mr.Kaufman'sKaufman’s employment was terminated on December 31,2017:2019: (i) by the Company without cause; or (ii) by Mr. Kaufman for"good reason"“good reason” (as defined in the agreement), the unvested shares of restricted common stock he held would have become vested and he would have been entitled to the same value described under"Change“Change inControl"Control” above. In addition, the market value of the pro-rata performance-vesting restricted stock units that would have vested based on the terms of his Annual Incentive Agreement was equal to$5,678,579,$14,880,103, based on the closing stock price of$8.64$14.35 on December 31,2017.2019.
CEO Pay RatioAs required by Section 953(b) of the Dodd-Frank Act and Item 402(u) of Regulation S-K, we are required to disclose the ratio of our medianemployee'semployee’s annual total compensation to the annual total compensation of our principle executive officer.For 2017,To identify the medianofemployee from our employee population in 2019, we compared theannual totalcompensationof allamounts of our employees, excluding the compensation of our Chairman,Chief Executive OfficerCEO and President, Mr. Kaufman,was $80,430, and the annual total compensation of Mr. Kaufman was $9,468,390. As a result, Mr. Kaufman's annual total compensation was 118 times that of the median annual total compensation of our employees.To identify the median of the annual total compensation for all of our employees, as well as to determine the annual total compensation of our median employee and Mr. Kaufman, we took the following steps:1.We determined that, as of December 31, 2017, our employee population consisted of 446 individuals with all of these individuals located in the United States. This population consisted of our full-time and part-time employees;2.To identify the median employee from our employee population, we compared the total compensation amounts of our employeesas reflected in our payroll records and reported to the Internal Revenue Service on Form W-2 for2017.2019. Since all of our employees are located in the United States, we did not make any cost-of-living adjustments in identifying the median employee. The salaries for permanent employees who were hired during20172019 and were working for us as of December 31,20172019 were annualized.We also annualized
For 2019, the total compensation ofall employees that transferred to us in connection with the internalization ofourmanagement teammedian employee was $90,667, andtermination of management agreement effective May 31, 2017; and3.With respect tothe annual total compensation of Mr. Kaufmanwe used the amountwas $8,943,719, which is reported in the"Total"“Total” column of our2017201927
Summary Compensation Table included in this proxy statement.
As a result, Mr. Kaufman’s annual total compensation was 99 times that of the annual total compensation of our median employee.
The pay ratio reported above is a reasonable estimate calculated in a manner consistent with SEC rules based on our internal records and the methodology described above. Since the rules used for identifying the median of the annual total compensation allows a variety of methodologies, application of certain exclusions and reasonable estimates and assumptions, the pay ratio reported by other companies may not be comparable to our pay ratio, as other companies have different employee populations and compensation practices and may have used different methodologies, exclusions, estimates and assumptions in calculating their pay ratios.
Director Compensation
The Compensation Committee'sCommittee’s recommendations regarding compensation of our directors are reported to, and approved by, the full Board of Directors. TheIn 2019, the Compensation Committee directly engaged FPL Associates, an independent third-party advisor, with respect to the compensation of its
directors and, in March 2017,2019, the Board of Directors approved an updated compensation program for ourthe Company’s directors, which was effective beginning in 20172019 and is summarized as follows.
below.
Each non-management director is paid a director'sdirector’s fee with a value of $145,000$175,000 per year consisting of $60,000$75,000 of cash and approximately $85,000$100,000 in stock. Also,If the Lead Directorvalue of a director’s equity ownership in Arbor, measured as of December 31 of the prior calendar year, equals or exceeds five times the cash compensation received in the prior calendar year, the director may elect to have all, or a portion of, the equity compensation to be granted the following March paid in cash in lieu of stock. The lead director is paid an additional cash fee of $50,000 per year, eachyear. The independent director who serves as chairman of the Audit Committee is paid an additional cash fee of $25,000 per year, each independent director who serves as chairman of the Compensation Committee is paid an additional fee of $15,000 per year and each independent director who serves as chairman of the Compensation Committee or Corporate Governance Committee is paid an additional cash fee of $10,000$15,000 per year. Additionally, each independent director who serves on a committee is paid an additional cash fee per year of $10,000 for the Audit Committee (other than the chairman) and the Compensation Committee (other than the chairman), and $5,000 for the Corporate Governance Committee (other than the chairman). In addition, we reimburse all directors for reasonable out-of-pocket expenses incurred in connection with their services on the Board of Directors. We also reimburse all directors up to $2,500 per year for continuing education costs incurred in connection with their services on the Board of Directors.
2017
The updated compensation program also implemented a minimum level of equity ownership for each director, beginning January 1, 2019. The required minimum level of equity ownership for each director as noted above is five times the level of total cash compensation received by each director in the prior calendar year. New directors have five years to reach the required level of equity ownership. If any director should fall below the required level of equity ownership, such director will have one year to come into compliance with the policy.
28
2019 Director Compensation Table
The following table sets forth the compensation amounts paid by us to our directors for the year ended December 31, 2017.2019. Mr. Bacon was appointed as a director in April 2020 and did not receive any director compensation in 2019.
| Name | | | Fees Earned or Paid in Cash ($) | | | Stock Awards ($)(1) | | | Total ($) | | |||||||||
| Archie R. Dykes | | | | | 86,250 | | | | | | 99,992 | | | | | | 186,242 | | |
| Edward Farrell | | | | | 85,000 | | | | | | 99,992 | | | | | | 184,992 | | |
| William C. Green | | | | | 156,250 | | | | | | 99,992 | | | | | | 256,242 | | |
| William Helmreich | | | | | 95,000 | | | | | | 99,992 | | | | | | 194,992 | | |
| Melvin F. Lazar | | | | | 106,250 | | | | | | 99,992 | | | | | | 206,242 | | |
Joseph Martello(2) | | | | | 75,000 | | | | | | — | | | | | | 75,000 | | |
| Elliot Schwartz | | | | | 83,750 | | | | | | 99,992 | | | | | | 183,742 | | |
| George Tsunis | | | | | 106,250 | | | | | | 99,992 | | | | | | 206,242 | | |
Name | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1) | Total ($) | |||||||
|---|---|---|---|---|---|---|---|---|---|---|
Archie R. Dykes | 75,000 | 85,106 | 160,106 | |||||||
Karen K. Edwards | 75,000 | 85,106 | 160,106 | |||||||
William C. Green | 135,000 | 85,106 | 220,106 | |||||||
William Helmreich | 80,000 | 85,106 | 165,106 | |||||||
Melvin F. Lazar | 95,000 | 85,106 | 180,106 | |||||||
Joseph Martello(2) | 0 | 80,100 | 80,100 | |||||||
George Tsunis | 75,000 | 85,106 | 160,106 | |||||||
(1)
(1)- Represents the aggregate grant date fair value of common stock awards granted in
2017,2019, determined in accordance with ASC 718. The number of shares and grant date fair value of common stock awards granted during20172019 are set forth below. Each of these awards consisted of shares of common stock that were issued without vesting restrictions as of the grantdate, except for Joseph Martello, who was granted restricted common shares in his capacity as a service provider to the Company whereby one third of the shares vested as of the date of grant, one third vested in March 2018 and the remaining third will vest in March 2019.
| Name | | | Number of Shares Granted (#) | | | Grant Date Fair Value of Stock Awards ($) | | ||||||
| Archie R. Dykes | | | | | 7,892 | | | | | | 99,992 | | |
| Edward Farrell | | | | | 7,892 | | | | | | 99,992 | | |
| William C. Green | | | | | 7,892 | | | | | | 99,992 | | |
| William Helmreich | | | | | 7,892 | | | | | | 99,992 | | |
| Melvin F. Lazar | | | | | 7,892 | | | | | | 99,992 | | |
Joseph Martello(2) | | | | | — | | | | | | — | | |
| Elliot Schwartz | | | | | 7,892 | | | | | | 99,992 | | |
| George Tsunis | | | | | 7,892 | | | | | | 99,992 | | |
(2)
Name | Number of Shares Granted (#) | Grant Date Fair Value of Stock Awards ($) | |||||
|---|---|---|---|---|---|---|---|
Archie R. Dykes | 10,625 | 85,106 | |||||
Karen K. Edwards | 10,625 | 85,106 | |||||
William C. Green | 10,625 | 85,106 | |||||
William Helmreich | 10,625 | 85,106 | |||||
Melvin F. Lazar | 10,625 | 85,106 | |||||
Joseph Martello(2) | 10,000 | 80,100 | |||||
George Tsunis | 10,625 | 85,106 | |||||
(2)- Mr. Martello, the Chief Operating Officer of Arbor Management, LLC (which is the managing member of ACM) did not receive
cash feesrestricted shares in 2019 for his service as adirector and was granted restricted shares of common stock in his capacity as a service provider to the Company. The number of granted shares of common stock that vested immediately on March 14, 2017 totaled 3,333 with a fair market value of $26,667 as of the grant date and the number of shares that were not vested as of December 31, 2017 totaled 6,667 with a market value of $53,336 as of December 31, 2017.
On March 5, 2018,9, 2020, the Compensation Committee granted each of our non-management directors an award of 9,770Dr. Dykes and Messrs. Farrell, Green and Schwartz 9,099 shares of fully vested common stock,stock. Dr. Helmreich and Messrs. Lazar, Martello and Tsunis elected to receive a cash payment, as permitted under our director compensation program. In addition, on April 1, 2020, in connection with his appointment as a grant datedirector, the Compensation Committee granted Mr. Bacon 16,339 shares of March 9, 2018.
fully vested common stock.
Compensation Committee Interlocks and Insider Participation
Messrs. Green, Lazar, Schwartz, Tsunis and Dr. Helmreich served as members of our Compensation Committee during 2017.2019. Dr. Helmreich hashad been retained as a part-time consultant in the capacity of Chairman for Academic Affairs by North Shore Hebrew Academy since 2000. Prior to 2000, Dr. Helmreich was the President of North Shore Hebrew Academy. Our Chairman and Chief Executive Officer, Mr. Kaufman is, and Dr. Helmreich are both memberswas, a member of the Board of Trustees of North Shore Hebrew Academy High School.
29
Equity Compensation Plan Information
The following table presents information as of December 31, 20172019 regarding the 2017our Stock Incentive Plan, which is our only equity compensation plan.
| Plan Category | | | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights | | | Weighted Average Exercise Price of Outstanding Options, Warrants and Rights | | | Number of Securities Remaining Available for Future Issuance | | |||||||||
| Equity compensation plans approved by security holders: | | | | | | | | | | | | | | | | | | | |
| Stock Incentive Plan | | | | | 0 | | | | | | N/A | | | | | | 1,377,848 | | |
| Equity compensation plans not approved by security holders | | | | | N/A | | | | | | N/A | | | | | | N/A | | |
| Total | | | | | 0 | | | | | | N/A | | | | | | 1,377,848 | | |
Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights | Weighted Average Exercise Price of Outstanding Options, Warrants and Rights | Number of Securities Available for Future Issuance | |||||||
|---|---|---|---|---|---|---|---|---|---|---|
Equity compensation plans approved by security holders: | ||||||||||
2017 Stock Incentive Plan(1) | 0 | N/A | 3,596,828 | |||||||
Equity compensation plans not approved by security holders | N/A | N/A | N/A | |||||||
| | | | | | | | | | | |
Total | 0 | N/A | 3,596,828 | |||||||
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
30
(1)On May 17, 2017, the stockholders authorized the issuance of an additional 5,000,000 shares of our common stock to be used for grants under the 2017 Stock Incentive Plan.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table indicates how many shares of our common stock and our special voting preferred stock are beneficially owned by: (i) each of our directors and each nominee for director; (ii) each of our executive officers; and (iii) all of our directors and executive officers as a group. The following table also indicates how many shares of our common stock and special voting preferred stock are beneficially owned by each person known to us to be the beneficial owner of more than five percent (5%) of the outstanding shares of our common stock and special voting preferred stock, in each case, based solely on, and as of the date of, such person'sperson’s filing of a Schedule 13D or Schedule 13G with the SEC. Unless otherwise indicated, the persons named in the following table have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them.
The following table lists separately the outstanding shares of our special voting preferred stock that are currently held by ACM and our executive officers as a separate class of our voting securities. These shares of special voting preferred stock entitle the holder to one vote on all matters submitted to a vote of our stockholders and are paired with an equal number of common units of our operating partnership ("(“OP Units"Units”), each of which is currently redeemable for cash or, at our option, shares of our common stock on a one-for-one basis. Each share of special voting preferred stock will be redeemed and cancelled by us upon the redemption of its paired operating partnership unit for cash or shares of our common stock. In December 2017, our Former Manager distributed 5,780,348 OP units to its members, which includes, but not limited to, Mr. Kaufman and his affiliated entities and certain of our officers and employees. In accordance with SEC beneficial ownership rules, the following table attributes to ACM (and to Mr. Kaufman, as the controlling owner of ACM) beneficial ownership of
the: (i) 15,450,42114,669,101 shares of special voting preferred stock currently held by ACM; and (ii) 5,349,0533,898,554 shares of common stock currently held by ACM.
| | | | Shares of Common Stock Beneficially Owned(2) | | | Shares of Special Voting Preferred Stock Beneficially Owned(2) | | | Total Shares of Voting Stock Beneficially Owned(2) | | |||||||||||||||||||||||||||
Name and Address(1) | | | Number | | | Percentage | | | Number | | | Percentage | | | Number | | | Percentage | | ||||||||||||||||||
Ivan Kaufman(3) | | | | | 4,922,761 | | | | | | 4.4% | | | | | | 14,669,101 | | | | | | 72.0% | | | | | | 19,591,862 | | | | | | 15.0% | | |
Arbor Commercial Mortgage, LLC(3) | | | | | 3,898,554 | | | | | | 3.5% | | | | | | 14,669,101 | | | | | | 72.0% | | | | | | 18,567,655 | | | | | | 14.2% | | |
| Kenneth J. Bacon | | | | | 16,339 | | | | | | * | | | | | | — | | | | | | — | | | | | | 16,339 | | | | | | * | | |
| Archie R. Dykes | | | | | 143,000 | | | | | | * | | | | | | — | | | | | | — | | | | | | 143,000 | | | | | | * | | |
| Edward J. Farrell | | | | | 21,238 | | | | | | * | | | | | | — | | | | | | — | | | | | | 21,238 | | | | | | * | | |
| William C. Green | | | | | 112,771 | | | | | | * | | | | | | — | | | | | | — | | | | | | 112,771 | | | | | | * | | |
| William Helmreich | | | | | 198,489 | | | | | | * | | | | | | — | | | | | | — | | | | | | 198,489 | | | | | | * | | |
| Melvin F. Lazar | | | | | 220,000 | | | | | | * | | | | | | — | | | | | | — | | | | | | 220,000 | | | | | | * | | |
Joseph Martello(4) | | | | | 355,114 | | | | | | * | | | | | | 3,905,997 | | | | | | 19.2% | | | | | | 4,261,111 | | | | | | 3.3% | | |
| Elliot G. Schwartz | | | | | 33,501 | | | | | | * | | | | | | — | | | | | | — | | | | | | 33,501 | | | | | | * | | |
| George Tsunis | | | | | 53,852 | | | | | | * | | | | | | — | | | | | | — | | | | | | 53,852 | | | | | | * | | |
| John J. Bishar, Jr. | | | | | 108,291 | | | | | | * | | | | | | 26,704 | | | | | | * | | | | | | 134,995 | | | | | | * | | |
John Caulfield(5) | | | | | 142,617 | | | | | | * | | | | | | 15,010 | | | | | | * | | | | | | 157,627 | | | | | | * | | |
Paul Elenio(5) | | | | | 405,161 | | | | | | * | | | | | | 23,597 | | | | | | * | | | | | | 428,758 | | | | | | * | | |
Andrew Guziewicz(5) | | | | | 56,020 | | | | | | * | | | | | | 5,374 | | | | | | * | | | | | | 61,394 | | | | | | * | | |
Gene Kilgore(5) | | | | | 409,815 | | | | | | * | | | | | | 42,641 | | | | | | * | | | | | | 452,456 | | | | | | * | | |
John Natalone(4)(5) | | | | | 471,782 | | | | | | * | | | | | | 3,859,769 | | | | | | 18.9% | | | | | | 4,331,551 | | | | | | 3.3% | | |
| Thomas Ridings | | | | | 100,691 | | | | | | * | | | | | | — | | | | | | — | | | | | | 100,691 | | | | | | * | | |
| Dennis van der Reis | | | | | 121,952 | | | | | | * | | | | | | — | | | | | | — | | | | | | 121,952 | | | | | | * | | |
Fred Weber(5) | | | | | 474,367 | | | | | | * | | | | | | 57,620 | | | | | | * | | | | | | 531,987 | | | | | | * | | |
| All directors and executive officers as a group (19 persons) | | | | | 8,132,761 | | | | | | 7.4% | | | | | | 18,782,718 | | | | | | 92.2% | | | | | | 26,915,479 | | | | | | 20.5% | | |
| Total shares outstanding | | | | | 110,625,242 | | | | | | | | | | | | 20,369,265 | | | | | | | | | | | | 130,994,507 | | | | | | | | |
| | Shares of Common Stock Beneficially Owned(2) | Shares of Special Voting Preferred Stock Beneficially Owned(2) | Total Shares of Voting Stock Beneficially Owned(2) | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name and Address(1) | Number | Percentage | Number | Percentage | Number | Percentage | |||||||||||||
Ivan Kaufman(3) | 6,294,286 | 10.1 | % | 19,471,527 | 91.7 | % | 25,765,813 | 30.8 | % | ||||||||||
Arbor Commercial Mortgage, LLC(3) | 5,349,053 | 8.6 | % | 15,450,421 | 72.8 | % | 20,799,474 | 24.9 | % | ||||||||||
Leon G. Cooperman(4) | 4,836,000 | 7.8 | % | — | — | 4,836,000 | 5.8 | % | |||||||||||
Wellington Management Company, LLP(5) | 3,876,645 | 6.2 | % | — | — | 3,876,645 | 4.6 | % | |||||||||||
BlackRock, Inc.(6) | 5,009,229 | 8.0 | % | — | — | 5,009,229 | 6.0 | % | |||||||||||
Archie R. Dykes | 124,355 | * | — | — | 124,355 | * | |||||||||||||
Karen K. Edwards | 102,905 | * | — | — | 102,905 | * | |||||||||||||
William C. Green | 92,335 | * | — | — | 92,335 | * | |||||||||||||
William Helmreich | 188,505 | * | — | — | 188,505 | * | |||||||||||||
Melvin F. Lazar | 185,000 | * | — | — | 185,000 | * | |||||||||||||
George Tsunis | 45,355 | * | — | — | 45,355 | * | |||||||||||||
Joseph Martello(7) | 118,940 | * | 82,022 | * | 200,962 | * | |||||||||||||
John J. Bishar, Jr.(7) | 107,235 | * | 26,421 | * | 133,656 | * | |||||||||||||
John Caulfield(7) | 102,619 | * | 14,851 | * | 117,470 | * | |||||||||||||
Paul Elenio(7) | 348,370 | * | 23,347 | * | 371,717 | * | |||||||||||||
Andrew Guziewicz(7) | 46,846 | * | 5,317 | * | 52,163 | * | |||||||||||||
Bonnie Habyan(7) | 102,593 | * | 5,050 | * | 107,643 | * | |||||||||||||
Daniel P. Kenny(7) | 66,816 | * | 3,414 | * | 70,230 | * | |||||||||||||
Gene Kilgore(7) | 368,861 | * | 42,189 | * | 411,050 | * | |||||||||||||
Thomas Murphy(7) | 57,750 | * | 18,027 | * | 75,777 | * | |||||||||||||
John Natalone(7) | 209,926 | * | 36,285 | * | 246,211 | * | |||||||||||||
Fred Weber(7) | 445,540 | * | 57,009 | * | 502,549 | * | |||||||||||||
Thomas Ridings | 83,678 | * | — | — | 83,678 | * | |||||||||||||
All directors and executive officers as a group (19 persons) | 9,091,915 | 14.6 | % | 19,785,459 | 93.2 | % | 28,877,374 | 34.5 | % | ||||||||||
Total shares outstanding | 62,469,535 | 21,230,769 | 83,700,304 | ||||||||||||||||
*
*- Less than one percent.
31
(1)
Unless otherwise indicated in the following footnotes, the address for each person or entity listed in the table above is 333 Earle Ovington Boulevard, Suite 900, Uniondale, New York, 11553.
(2)
(2)
Beneficial ownership is determined in accordance with the rules of the SEC and generally includes securities over which a person has voting or investment power and securities that a person has the right to acquire within 60 days of the date hereof.
(3)
(3)
Mr. Kaufman, together with (i) the Ivan and Lisa Kaufman Family Trust, (ii) the Ivan Kaufman Grantor Retained Trust and (iii) Arbor Management, LLC, the managing member of ACM and an entity owned wholly by Mr. Kaufman, beneficially own approximately 70%31% of the outstanding membership interests of ACM. Amounts provided for Mr. Kaufman also includes the shares owned, and separately disclosed, by Arbor Commercial Mortgage, LLC.ACM.
(4)
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Policy Regarding the Review, Approval or Ratification of Transactions with Related Persons
In recognition of the fact that transactions involving related parties can present potential or actual conflicts of interest or create the appearance that our decisions are based on considerations other than the best interests of the Company and its stockholders, the Board of Directors has adopted a written policy, the "Policy“Policy and Procedures With Respect to Related Person Transactions,"” which we refer to as our Related Persons Policy, which provides for the review and approval (or, if completed, ratification) by the Independent Director Committee (or, in certain circumstances, the Chair of the Independent Director Committee)independent directors of all transactions involving us and in which a related party is known to have a direct or indirect interest, including transactions required to be reported under paragraph (a) of Item 404 of Regulation S-K promulgated by the SEC. All Related Persons (as defined below) are required to report to our Corporate Secretary, who is required to submit to our Independent Director Committeeindependent directors any such related party transaction prior to its completion.
Our Related Persons Policy covers all transactions, arrangements or relationships (or any series of similar transactions, arrangements or relationships) in which we (including any of its subsidiaries) are, or will be, a participant and the amount involved exceeds $120,000, and in which any Related Person had, has or will have a direct or indirect material interest.
A "Related“Related Person,"” as defined in our Related Persons Policy, means (i) any person who is, or at any time since the beginning of our last fiscal year was, a director or executive officer of ours or a nominee to become a director of ours; (ii) any person who is known to be the beneficial owner of more than 5% of any class of our voting securities; any(iii) immediate family membermembers of any of the foregoing persons, which means any child, stepchild, parent, stepparent,including children, step-children, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law of the director, executive officer, nominee or more than 5% beneficial owner,siblings, in-laws (including brother and sister in-law), and any person (other than a tenant or employee) sharing the household of such director, executive officer, nominee or more than 5% beneficial owner;any of the forgoing persons; and any firm, corporation or(iv) other entityentities (including not-for-profit institutions) in which any of the foregoing persons is employed or is a generaldirector, officer, partner or principal, or in a similar position or in which such person hasthey have a 5% or greatermore beneficial ownership interest.
interest, or over which they exert significant influence.
In reviewing any related personRelated Person transaction, all of the relevant facts and circumstances must be considered, including (i) the related person'sRelated Person’s relationship to us and his or her interest in the transaction, (ii) the proposed aggregate value of the transaction, or, in the case of indebtedness, the amount of principal that would be involved, (iii) the benefits to us, (iv) the availability of comparable products or services that would avoid the need for a related personRelated Person transaction and (v) the terms of the transaction and the terms available to unrelated third parties or to employees generally.
Relationships with Our Former Manager
Arbor Commercial Mortgage'sACM
ACM’s Ownership Interest in the Company and Related Registration Rights
ACM currently owns 15,450,421 operating partnership units14,669,101 OP Units in our operating partnership, Arbor Realty Limited Partnership (the "Partnership"“Partnership”), representing approximately 18.5%11.2% of the partnership interestinterests in our operating partnership. Each of the operating partnership unitsOP Units currently held by ACM are paired with one share of our special voting preferred stock, each of which entitles the holder to one vote on all matters submitted to a vote of our stockholders. Combined with its direct ownership of 5,349,0533,898,554 shares of our common stock, ACM is currently entitled to a number of votes representing approximately 25.0%14.2% of the voting power of our outstanding voting securities. We have granted ACM shelf registration rights, or, if such rights are not available, demand registration rights with respect to the shares currently owned by it. ACM is also entitled to participate in primary or secondary offerings of our common stock with respect to these shares. We have also agreed to certain restrictions on the registration rights that we may grant to any other holder or prospective holder of our securities without
the prior written consent of ACM so long as we are still obligated to register any of the shares currently owned by ACM pursuant to the registration rights agreement.
Common Management
Mr. Ivan Kaufman, our Chairman and Chief Executive Officer, is also the Chief Executive Officer of Arbor Commercial Mortgage.ACM. Mr. Kaufman and entities controlled by Mr. Kaufman collectively own 70%approximately 31% of the outstanding membership interests in ACM. Mr. Joseph Martello, one of our directors, currently serves as the
33
Chief Operating Officer of Arbor Management, LLC, which is the managing member of ACM. Mr. MartelloJohn Natalone, our Executive Vice President — Treasury and Servicing, owns a 1.4%0.7% interest in ACMACM. Mr. Martello and is alsoMr. Natalone serve as the sole trusteetrustees of the Ivan and Lisa Kaufman FamilyThe KFT 2018 NY Trust for the benefit of Mr. Kaufman'sKaufman’s family, which owns a 37% interest in ACM, and a co-trustee, along with Mr. Kaufman, of the Ivan Kaufman Grantor Retained Annuity Trust, which also owns an equity46% interest in ACM. Mr. John Bishar, our Executive Vice President, General Counsel and Corporate Secretary, also serves as General Counsel to ACM. Mr. Bishar owns a 0.5% interest in ACM. Mr. Paul Elenio, our Chief Financial Officer, and Treasurer, currently serves as the Chief Financial Officer of ACM. Mr. Elenio owns a 0.4% interest in ACM. Mr. Fred Weber, our Executive Vice President — Managing Director of Structured Finance and Principal Transactions, was responsible for overseeing ACM'sACM’s structured finance and principal transactions group from 1999 until 2003. Mr. Weber owns a 1.0%1.1% interest in ACM. Mr. Gene Kilgore, our Executive Vice President—President — Structured Securitization, owns a 0.7%0.8% interest in ACM. Mr. Andrew Guziewicz, our Managing Director and Chief Credit Officer — Structured Finance, owns a 0.1% interest in ACM. Mr. John Caulfield, our Chief Operating Officer—Officer — Agency Lending, owns a 0.3% interest in ACM. Ms. Bonnie Habyan, our Executive Vice President—Marketing, owns a 0.1% interest in ACM. Mr. Daniel P. Kenny, our Executive Vice President—Chief Asset Manager, Servicing and Asset Management, owns a 0.1% interest in ACM. Mr. Thomas Murphy, our Executive Vice President—Chief Information Officer, owns a 0.3% interest in ACM. Mr. John Natalone, our Executive Vice President—Treasury and Servicing, owns a 0.6% interest in ACM. Messrs. Kaufman, Martello, Bishar, Elenio, Weber, Caulfield, Kilgore Kenny, Murphy and Natalone as well as Ms. Habyan, are all members of ACM'sACM’s executive committee.
Management and Shared Services Agreements
Prior to May 31, 2017, we were externally managed and advised by ACM. Effective May 31, 2017, we exercised our option to fully internalize our management team and terminate the existing management agreement. Prior to the termination of the management agreement, we were required to reimburse our Former ManagerACM for a portion of the base salaries and annual cash bonuses paid to employees of our Former ManagerACM who provided services to us in accordance with the terms of the management agreement.
In addition, we have entered into a shared services agreement with ACM and certain of its affiliates where we will provide limited support services to ACM and ACM will reimbursereimburses us for the costs of performing such services.
During 2019, 2018 and 2017, we incurred $2.7 million, $1.3 million and $0.7 million, respectively, of costs for services provided to ACM, all of which was reimbursed to us by ACM.
Non-Competition Agreements
We have entered into a non-competition agreement with Mr. Kaufman pursuant to which he has agreed not to pursue any structured finance opportunities in the multifamily and commercial real estate markets unless a majority of our independent directors affirmatively approves the pursuit by Mr. Kaufman of such opportunity and a majority of our independent directors and our credit committee have rejected the pursuit of such opportunity on our behalf. Mr. Kaufman has also agreed that if he is no longer an affiliate of ACM and he is no longer our Chief Executive Officer other than because of certain reasons specified in the non-competition agreement, he will not engage in the structured finance lending business for a period of one year after his departure from us. Mr. Kaufman's non-competition agreement also prohibits Mr. Kaufman from soliciting our customers or employees during its term.
In addition, in connection with the closing of the Acquisition, we entered into anothera Non-Competition Agreement with our Former ManagerACM and Mr. Kaufman pursuant to which our Former ManagerACM and Mr. Kaufman agree not to pursue loans and similar investments in commercial mortgage backed securities, the multifamily agency business, permanent and bridge commercial and multifamily mortgage loans and mezzanine and preferred equity investments in commercial and multifamily real estate ("(“Company Target Investments"Investments”). We agreed not to pursue investments in any areas other than Company Target Investments. Each party to the Non-Competition Agreement agreed to not solicit the other parties'parties’ employees.
Related Party Transactions
In certain instances our business requires our executives to charter privately-owned aircraft in furtherance of our business. In October 2019, we entered into an aircraft time sharing agreement with an entity controlled by our chief executive officer that owns a private aircraft. Pursuant to the agreement, we reimburse the aircraft owner for the required costs under Federal Aviation Administration regulations for the flights our executives’ charter.
In the first quarter of 2019, we, along with ACM, certain executives of ours and a consortium of independent outside investors, invested in AMAC Holdings III LLC (“AMAC III”), a multifamily-focused commercial real estate investment fund sponsored and managed by our chief executive officer and one of his immediate family members. We committed to a $30.0 million investment (of which $10.9 million was funded as of December 31, 2019) for an 18% interest in AMAC III. We received a $0.2 million cash distribution and recorded a $0.2 million loss in 2019 related to this investment.
In July 2019, AMAC III originated a $7.0 million mezzanine loan to a borrower to which we have an outstanding $34.0 million bridge loan. In connection with the Acquisition,AMAC III mezzanine loan, we entered into a $50.0 million preferred equity interest financingan inter-creditor agreement with ACMAMAC III. In addition, we originated a $15.6 million loan in December 2019 to finance a portionborrower which is 100% owned by AMAC III, which bears interest at a fixed rate of 3.735% and matures in January 2030.
34
In November 2018, we originated a $61.2 million bridge loan on a multifamily property owned in part by a consortium of investors (which includes, among other unaffiliated investors, certain of our officers and our chief executive officer) which owns 10% of the borrowing entity. The loan has an interest rate of LIBOR plus 4.50% with a LIBOR floor of 2.00% and matures in October 2021. In the fourth quarter of 2019, the loan commitment was reduced to $22.6 million (of which $17.4 million was funded as of December 31, 2019) and the Related Person investors liquidated their equity investment.
In October 2018, we originated a $37.5 million bridge loan, which was used to purchase price.several multifamily properties. In January 2018, this debt was paid off2019, an entity owned, in full.
part, by an immediate family member of our chief executive officer, purchased a 23.9% interest in the borrowing entity. The loan has an interest rate of LIBOR plus 4.25% with a LIBOR floor of 2.375% and matures in October 2020.
In AprilOctober 2018, we acquired a $9.4$19.5 million bridge loan which was originated by ACM. The loan was used to purchase several multifamily properties by a consortium of investors which consisted of(which includes, among other unaffiliated investors, certain of our officers includingand our chief executive officer) which owns 85% of the borrowing entity. The loan has an interest rate of LIBOR plus 4.0% with a LIBOR floor of 2.125% and matures in July 2021.
In August 2018, we originated a $17.7 million bridge loan to an entity owned, in part, by an immediate family member of our chief executive officer, who together ownowns a 10.8% interest in the borrowing entity. The loan was used to purchase several undeveloped parcels of land. The loan has a fixed interest rate of 10% and was scheduled to mature in February 2020. In September 2019, the borrower made a partial paydown of principal totaling $4.7 million and the remaining balance was paid off in January 2020.
In June 2018, we originated a $21.7 million bridge loan on a multifamily property owned in part by a consortium of investors (which includes, among other unaffiliated investors, certain of our officers and our chief executive officer) which owns 75% in the borrowing entity. The loan has an interest rate of LIBOR plus 4.75% with a LIBOR floor of 1.25% and matures in June 2021.
In April 2018, we acquired a $9.4 million bridge loan originated by ACM, of which $8.6 million was funded as of December 31, 2019. The loan was used to purchase several multifamily properties by a consortium of investors (which includes, among other unaffiliated investors, certain of our officers and our chief executive officer) which owns 75% of the borrowing entity. The loan has an interest rate of LIBOR plus 5.0% with a LIBOR floor of 1.56%1.25% and matures in January 2021.
In January 2018, we paid $50.0 million in full satisfaction of the related party financing we entered into with ACM to finance a portion of the Acquisition purchase price.
In December 2017, we acquired a $32.8 million bridge loan which was originated by ACM. The loan was used to purchase several multifamily properties by a consortium of investors which consisted of(which includes, among other unaffiliated investors, certain of our officers includingand our chief executive officer, who together ownofficer) which owns 90% of the borrowing entity. The loan hashad an interest rate of LIBOR plus 5.0% with a LIBOR floor of 1.13% and matureswas scheduled to mature in June 2020.
In October 2019, the borrower repaid this loan in full.
In the fourth quarter of 2017, we originated two bridge loans totaling $28.0 million on two multifamily properties owned in part by a consortium of investors consisting of(which includes, among other unaffiliated investors, certain of our officers includingand our chief executive officer, who together ownofficer) which owns 45% inof the borrowing entity. The loans havehad an interest rate of LIBOR plus 5.25% with LIBOR floors ranging from 1.24% to 1.54% and were scheduled to mature in the fourth quarter of 2020.
The borrower refinanced these loans with a $31.1 million bridge loan we originated in November 2019 with an interest rate of LIBOR plus 4.0%, a LIBOR floor of 1.80% and a maturity date in October 2021.
In July 2017, we originated a $36.0 million bridge loan on a multifamily property owned in part by a consortium of investors. The consortium of investors (which includes, among other unaffiliated investors, certain of our officers includingand our chief executive officer, who own anofficer) which owns a 95% interest of approximately 95% in the borrowing entity. The loan hashad an interest rate of LIBOR plus 4.5% with a LIBOR floor of 1% and matureswas scheduled to mature in July 2020.
This loan was repaid in full in August 2018.
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In May 2017, we originated a $46.9 million Fannie Mae loan on a multifamily property owned in part by a consortium of investors including(which includes, among other unaffiliated investors, certain of our officers, who together own anofficers) which owns a 17.6% interest of approximately 21.4% in the borrowing entity. We carry a maximum loss-sharing obligation with Fannie Mae on this loan of up to 5% of the original unpaid principal balance.
UPB.
In March 2017, a consortium of investors including(which includes, among other unaffiliated investors, our chief executive officer and our Former Manager,ACM) invested $2.0 million for a 26.1% ownership interest in two portfolios of multifamily properties which has two bridge loans totaling $14.8 million originated by us in 2016. The loans havehad an interest rate of LIBOR plus 5.25% with a LIBOR floor of 0.5% and were scheduled to mature in November 2018. One of the loans was repaid in full in the fourth quarter of 2017.
2017 and the remaining loan paid off in June 2018.
In January 2017, we modified a $5.0 million preferred equity investment, subsequently increasing our balance to $15.0 million, with a commitment to fund an additional $5.0 million. This investment had a fixed dividendinterest rate of 11% andthat was scheduled to mature in January 2020, however, it was repaid in full in the fourth quarter of 2017.2020. We also entered into an agreement with a consortium of investors consisting of(which include, among other unaffiliated investors, certain of our officers includingand our chief executive officer,officer) which admitted them as a member to
fund the remaining $5.0 million preferred equity investment, which was generally subordinate to our investment.
The principal balance was repaid in full in the fourth quarter of 2017.
In January 2017, Ginkgo Investment Company LLC (“Ginkgo”), of which one of our directors is a 33% managing member, purchased a multifamily apartment complex which assumed an existing $8.3 million Fannie Mae loan that we service. Ginkgo subsequently sold the majority of its interest in this property and owned a 3.6% interest at December 31, 2017.2019. We carry a maximum loss-sharing obligation with Fannie Mae on this loan of up to 20% of the original unpaid principal balance.
UPB. Upon the sale, we received a 1% loan assumption fee which was governed by existing loan agreements that were in place when the loan was originated in 2015, prior to such purchase.
In September 2016, we originated $48.0 million of bridge loans on six multifamily properties owned in part by a consortium of investors consisting of(which includes, among other unaffiliated investors, certain of our officers includingand our chief executive officer, who together ownofficer) which owns interests ranging from approximately 10.5% to 12.0% in the borrowing entities. The loans have an interest rate of LIBOR plus 4.5% with a LIBOR floor of 0.25% and were scheduled to mature in September 2019. In August 2017, a $6.8 million loan on one of the propertiesproperty paid off in full and in 2018 four additional loans totaling $28.3 million paid off in full.
In January 2019, $10.9 million of the $12.9 million remaining bridge loan paid off, with the $2.0 million remaining UPB converting to a mezzanine loan with a fixed interest rate of 10.0% and a January 2024 maturity.
In 2016, we originated a $12.7 million bridge loan and a $5.2 million preferred equity investment on two multifamily properties owned in part by a consortium of investors (which includes, among other unaffiliated investors, certain of our officers and our chief executive officer) which owns a 50% interest in the borrowing entity. The bridge loan has an interest rate of LIBOR plus 4.5% with a LIBOR floor of 0.25% and the preferred equity investment has a fixed interest rate of 10%. The bridge loan and the preferred equity investment paid off in full in May 2019.
In 2016, we originated a $19.0 million bridge loan on a multifamily property owned in part by a consortium of investors consisting of(which includes, among other unaffiliated investors, certain of our officers includingand our chief executive officer, who together own anofficer) which owns a 7.5% interest of approximately 7.5% in the borrowing entity. The loan had an interest rate of LIBOR plus 4.5% with a LIBOR floor of 0.25% and was scheduled to mature in January 2019. In January 2018, this loan paid off in full.
In November 2015, we originated a $7.1 million bridge loan on a multifamily property owned by a consortium of investors consisting of certain of our officers, including our chief executive officer, who together own an interest of approximately 7.5% in the borrowing entity. In August 2017, this loan paid off in full. The loan had an interest rate of LIBOR plus 4.5%, with a LIBOR floor of 0.25%.
In April 2015, we originated a $3.0 million mezzanine loan on a multifamily property that has a $47.0 million first mortgage initially originated by our Former Manager. The loan bore interest at a fixed rate of 12.5% and was scheduled to mature in April 2025. In January 2018, this loan paid off in full.
In 2015, we invested $9.6 million for 50% of our Former Manager'sACM’s indirect interest in a joint venture with a third party that was formed to invest in a residential mortgage banking business. As a result of this transaction, we had an initial indirect interest of 22.5% in this entity. Since the initial investment, we invested an additional $16.1 million through this joint venture in non-qualified residential mortgages purchased from the mortgage banking business'sbusiness’s origination platform (which $0.6 million was funded in 2017) and we received cash distributions totaling $16.2$16.9 million (that were classified as returns of capital) as a result of the joint venture selling most of its mortgage assets (which $3.2 million was received in 2017). We recorded a loss from these investments of $7.2 million in 2017 and income of $10.0 million and $6.0 million during 2016 and 2015, respectively. In connection with a litigation settlement related to this investment, we provided a guaranty of up to 50% of any amounts payable in connection with the settlement. Our Former Manager has also provided us with a guaranty to pay up to 50% of any amounts we may pay under this guaranty. Our maximum exposure under this guaranty totals $3.1 million.assets. We have not accrued this amount as we currentlydo not believe that we will not be required to make any nonrefundable payments under this guaranty.
In 2014, we invested $0.1 million for a 5% interest in a joint venture that owns two multifamily properties. The joint venture is comprised
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We, along with an executive officer of ours and a consortium of independent outside investors, consistinghold equity investments in a portfolio of certain of our officers, including our chief executive officer, and other related parties, who together ownmultifamily properties referred to as the “Lexford” portfolio, which is managed by an interest of 95%. In 2014, we originated two bridge loans totaling $5.0 million to the joint venture with an interest rate of 5.5% over LIBOR. During 2016, one of the loans was repaid in full and we received proceeds of $3.3 million. The maturity date of the remaining loan was extended to December 2017. During the fourth quarter of 2017, this loan was repaid in full and we received proceeds of $1.7 million.
In 2014, we originated a $30.4 million bridge loan for an office propertyentity owned primarily by a consortium of affiliated investors, including our chief executive officer and his affiliates, who together owned an interestexecutive officer of approximately 24%ours. Based on the terms of the management contract, the management company is entitled to 4.75% of gross revenues of the underlying properties, along with the potential to share in the borrowing entity. The loan matured in August 2017proceeds of a sale or restructuring of the debt. In June 2018, the owners of Lexford restructured part of its debt and was refinanced with a $43.2we originated twelve bridge loans totaling $280.5 million, bridge loan that has an interest rate of 4% over LIBOR with a LIBOR floor of 1.23% and an August 2020 maturity date. We also originated a $4.6 million mezzanine loan in 2016which were used to this entity that had a fixed interest rate of 12%, which was repaidrepay in full at maturity in August 2017. In the fourth quarter of 2017, the consortium of investors sold their ownership interestcertain existing mortgage debt and to renovate 72 multifamily properties included in the borrowing entity.
portfolio. The loans, which we originated in June 2018, have interest rates of LIBOR plus 4.0% and mature in June 2021 (with 2 one-year extension options). During 2019, the borrower made payoffs and partial paydowns of principal totaling $250.0 million. Further, as part of this June 2018 restructuring, $50.0 million in unsecured financing was provided by an unsecured lender to certain parent entities of the property owners. ACM owns slightly less than half of the unsecured lender entity and, therefore, provided slightly less than half of the unsecured lender financing. In connection with our equity investment, we received distributions totaling $3.5 million, $2.5 million and $2.5 million during 2019, 2018 and 2017, respectively. Separate from the loans we originated in June 2018, we provide limited (“bad boy”) guarantees for certain other debt controlled by Lexford. The bad boy guarantees may become a liability for us upon standard “bad” acts such as fraud or a material misrepresentation by Lexford or us. At December 31, 2019, this debt had an aggregate outstanding balance of $617.9 million and is scheduled to mature between 2020 and 2029.
General
Every transaction entered into between us and an entity in which ACM holds equity interests raises a potential conflict of interest. Conflicts of interest with respect to these investments include, among others, decisions regarding (1) whether to waive defaults of such borrower, (2) whether to foreclose on the investment and (3) whether to permit additional financing on the properties securing our investments other than financing provided by us.
Other Relationships and Related Transactions
Arbor Management, LLC, the managing member of ACM, and ACM has outstanding loans to certainone of our executive officers, summarized as follows:
The largest aggregate outstanding principal balance to Mr. Kenny during the two year period ended December 31, 2017 was $40,000 and the total outstanding balance was $20,000 as of December 31, 2017. Mr. Kenny made principal payments totaling $10,000 during each of 2017 and 2016. The interest rate on the loan is prime and interest payments totaled $975 and $1,156 during 2017 and 2016, respectively.
The largest aggregate outstanding principal balance to Mr. Caulfield during the two year period ended December 31, 20172019 was $609,500$559,500 and the total outstanding balance was $559,500$509,500 as of December 31, 2017.2019. Mr. Caulfield made principal payments totaling $25,000 during each of 20172019 and 2016.2018. There is no interest being charged on the aggregate loan balance.
Our current policies and procedures do not allow for the lending of funds to any of our directors or officers.
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PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Board of Directors, following the recommendation of the Corporate Governance Committee, (i) has nominated Dr. William HelmreichMr. Ivan Kaufman, Mr. Melvin F. Lazar and Mr. William C. Green,George Tsunis, each to serve on the Board of Directors until our annual meeting of stockholders for 20212023 and until their respective successors are duly elected and qualify.qualify and (ii) has nominated Mr. Kenneth Bacon to serve on the Board of Directors until our annual meeting of stockholders in 2021 and until his successor is duly elected and qualified. Each nominee has consented to being named in this proxy statement and to serve if elected. If, prior to the annual meeting, any nominee should become unavailable to serve, the shares of voting securities represented by a properly executed and returned proxy will be voted for such additional nominee as shall be designated by the Board of Directors, unless the Board of Directors determines to reduce the number of directors in accordance with our charter and bylaws. Election of each of the director nominees named in this Proposal No. 1 requires the affirmative vote of a plurality of all the votes cast in the election of directors at the annual meeting by holders of our voting securities. Shares represented by executed proxies will be voted, if authority to do so is not withheld, for the election of the Board of Directors'Directors’ nominees. Votes may be cast in favor of or withheld with respect to all of the director nominees, or any of them.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR"“FOR” THE
ELECTION OF THE NOMINEES FOR DIRECTORS IDENTIFIED ABOVE
ELECTION OF THE NOMINEES FOR DIRECTORS IDENTIFIED ABOVE
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PROPOSAL NO. 2
AMENDMENT AND RESTATEMENT OF THE COMPANY’S 2017 AMENDED OMNIBUS STOCK INCENTIVE PLAN TO AUTHORIZE AN ADDITIONAL 5,000,000 SHARES OF THE COMPANY’S COMMON STOCK FOR ISSUANCE UNDER THE PLAN
We are asking the Company’s stockholders to approve an amendment and restatement of the Company’s Stock Incentive Plan to authorize the issuance of an additional 5,000,000 shares of the Company’s common stock pursuant to grants of restricted stock, restricted stock units or stock options under the Stock Incentive Plan.
The Board of Directors believes that the Stock Incentive Plan is an important factor in attracting and retaining the high caliber employees and other service providers essential to the Company’s success and in aligning those individuals’ long-term interests with those of our stockholders. Therefore, on April 3, 2020, the Board of Directors approved an amendment and restatement of the Stock Incentive Plan (the “2020 Stock Incentive Plan”), subject to the approval of the Company’s stockholders at the 2020 annual meeting of stockholders, to increase the total number of shares of our common stock authorized and reserved for issuance under the Stock Incentive Plan by 5,000,000 shares such that an aggregate of 12,000,000 shares of common stock will be reserved and authorized for issuance thereunder. Since the Stock Incentive Plan’s effective date in May 2014, an aggregate of 6,326,891 shares have been granted and remain outstanding and, as of April 6, 2020, 709,753 shares remain available for future grants. If stockholder approval of the 2020 Stock Incentive Plan is obtained, the total number of shares authorized and reserved for future issuance under the 2020 Stock Incentive Plan will not exceed the total remaining available shares of 5,709,753 shares (plus any previously awarded shares that are returned to the plan as described below), which we expect to allow us to continue making equity grants for approximately 4 years (assuming that we continue to make awards consistent with our historical practice). The amendment is intended to ensure that the 2020 Stock Incentive Plan will have available the number of shares necessary to meet these needs and the Board of Directors believes that approval of the above-described amendment to the Stock Incentive Plan is in the best interests of the Company and its stockholders.
The material features of the 2020 Stock Incentive Plan are summarized below. The following summary does not purport to be complete, and is subject to and qualified in its entirety by reference to the complete text of the Stock Incentive Plan which is attached to this proxy statement as Appendix A.
General
Restricted stock awards, restricted stock units and stock options may be granted under the 2020 Stock Incentive Plan. A total of 7,000,000 shares of the Company’s common stock were originally reserved for issuance pursuant to awards under the Stock Incentive Plan, subject to adjustment upon certain corporate transactions. As of April 6, 2020, an aggregate of 6,326,891 shares granted under the Stock Incentive Plan were outstanding and 709,753 shares remained available for future grants. If any shares subject to an award are forfeited, cancelled or fail to vest, such shares will again become available for future grants under the 2020 Stock Incentive Plan.
If stockholder approval of the 2020 Stock Incentive Plan is obtained, as specified in this Proposal No. 2, the total aggregate number of shares reserved for issuance will be 12,000,000 shares (plus any previously awarded shares that are returned to the Plan, as described above), of which approximately 5,709,753 shares would remain available for future grants. On April 6, 2020, the per share closing price of the Company’s common stock was $4.99, as reported on the NYSE.
Purpose
The purpose of the 2020 Stock Incentive Plan is to enable the Company to attract and retain highly qualified personnel who will contribute to the Company’s success and to provide incentives to employees and other service providers that are linked directly to increases in stockholder value, and will therefore inure to the benefit of all of the Company’s stockholders.
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Administration
The 2020 Stock Incentive Plan is administered by the Company’s Board of Directors or, at the Board’s discretion, by a committee appointed by the Board (as applicable, the “Plan Administrator”). The Board has appointed the Compensation Committee of the Board as the Plan Administrator. The Plan Administrator has the authority to grant awards and otherwise administer the 2020 Stock Incentive Plan. All decisions made by the Plan Administrator pursuant to the provisions of the 2020 Stock Incentive Plan are final, conclusive and binding upon all persons.
Eligibility
Officers, directors, employees, consultants (including employees of ACM who provide services to the Company) and advisors of the Company, its parent or subsidiaries are eligible to receive awards under the 2020 Stock Incentive Plan.
Types of Awards
The 2020 Stock Incentive Plan provides for the grant of restricted shares of the Company’s common stock, restricted stock units and options to purchase shares of the Company’s common stock. These awards are discussed in more detail below.
Restricted Stock
A restricted stock award is an award of shares of common stock that is subject to restrictions on transferability and such other restrictions, if any, as the Plan Administrator may determine in its sole discretion. The restrictions may lapse separately or in combination at such times, under such circumstances, including, without limitation, a specified period of employment or the satisfaction of pre-established criteria, in such installments or otherwise, as the Plan Administrator may determine.
Restricted stock awards may be issued either alone or in addition to other awards granted under the 2020 Stock Incentive Plan. The recipient of a restricted stock award does not have any rights with respect to any such award until he or she has executed an award agreement evidencing the award and delivered an executed copy to the Company generally within a period of 60 days after the grant date, which may be delivered electronically.
Except to the extent restricted under the award agreement relating to the restricted stock, the recipient of a restricted stock award generally has all of the rights of a stockholder. The rights of a restricted stock award recipient upon termination of employment or service is as set forth in the award agreement governing such award and the terms of the award agreement may differ from award to award. The Company’s restricted stock awards generally provide that upon cessation of employment with or service to the Company, shares of restricted stock and any and all accrued but unpaid dividends that at the time have not been released from restrictions will be forfeited.
Restricted Stock Units
Restricted stock units are contractual rights to receive a share of common stock upon the satisfaction of vesting conditions. Recipients of restricted stock units do not have the right of stockholders with respect to shares subject to the award until the award vests and such shares are issued.
Stock Options
Options granted under the 2020 Stock Incentive Plan may be incentive stock options meeting the definition of an incentive stock option under Section 422 of the Internal Revenue Code, or options, which do not qualify as incentive stock options (referred to as nonqualified options). Each option award will be evidenced by an award agreement that specifies the option price, duration of the option, the number of shares to which the option pertains, vesting, termination and transferability rights and other provisions as the committee may determine to be appropriate. The option price for each grant will be at least equal to the fair market value (as defined in the 2020 Stock Incentive Plan) of the shares subject to the option on the grant date of the option. The date on which the Plan Administrator adopts a resolution granting an option
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shall be considered the grant date of the option, unless such resolution specifies a later date. The 2020 Stock Incentive Plan generally provides that the exercise price of an option may not be reduced following the grant date and no option shall be cancelled in exchange for a replacement option with a lower exercise price or another type of award or cash payment, in each case without approval of the Company’s stockholders.
No option may be exercised later than the tenth anniversary date of its grant. All of the shares reserved for issuance under the 2020 Stock Incentive Plan may be granted as incentive stock options. No participant may be granted options for more than 250,000 shares of common stock in any calendar year.
Adjustments Upon Certain Corporate Transactions
In the event of any merger, reorganization, consolidation, recapitalization, stock dividend or other change in corporate structure affecting the Company’s common stock, the Plan Administrator shall determine to what extent an equitable substitution or proportionate adjustment shall be made in: (i) the aggregate number of shares of the common stock reserved for issuance under the 2020 Stock Incentive Plan; (2) the kind, number and purchase price of shares of the common stock subject to outstanding awards of restricted stock granted under the 2020 Stock Incentive Plan; (3) the kind, number and exercise price of shares of common stock subject to outstanding options granted under the 2020 Stock Incentive Plan; and (4) the annual limitation on the number of options that may be granted to any participant. Other substitutions or adjustments shall be made as determined in the Plan Administrator’s discretion, including the cancellation of any outstanding awards in exchange for payment in cash or other property.
Effect of a Change in Control
The treatment of awards in the event of a change in control of the Company will be set forth in the applicable award agreement. The Company’s restricted stock award agreements have generally provided that all restrictions lapse as of the date of the change in control of the Company. The definition of a “change in control” will be provided in the restricted stock agreement and may vary from award to award. Generally a “change in control” will occur upon the occurrence of one of the following events:
•
a person is or becomes the owner of 25% or more of the voting stock of the Company (other than Mr. Kaufman or ACM);
•
directors serving on the Board of Directors on the date of the award agreement and any new directors whose election or nomination is approved or recommended by at least a two-thirds vote of the directors then still in office who either were directors on the date of the award agreement or whose election or nomination was previously so approved or recommended, cease to constitute a majority of directors;
•
consummation of a merger or consolidation of the Company or any subsidiary with any other corporation where Company securities represent less than 60% of the securities of the resulting entity; or
•
approval by the Company’s stockholders of a plan of complete liquidation or dissolution of the Company or there is consummated an agreement for the sale or disposition of all or substantially all of the Company’s assets.
Awards agreements providing for the grant of stock options will generally provide that they vest over a multi-year period. In addition, they may provide that the vesting terms of the stock options will be accelerated upon a change in control of the Company.
Amendment and Termination
The Company’s Board of Directors may amend, alter or discontinue the 2020 Stock Incentive Plan, but cannot take any action that would impair the rights of an award recipient under any previously granted award without such recipient’s consent. The Board of Directors must obtain approval of the stockholders for any amendment to the extent necessary to comply with applicable law or an applicable stock exchange listing requirement. The Plan Administrator may amend the terms of any award granted under the 2020 Stock Incentive Plan, prospectively, or retroactively, but generally may not impair the rights of any award recipient without his or her consent.
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Unless earlier terminated, the 2020 Stock Incentive Plan will terminate on June 3, 2030, provided that any awards then outstanding under the 2020 Stock Incentive Plan may extend beyond that date.
Federal Income Tax Consequences of the 2020 Stock Incentive Plan
The following discussion of certain relevant federal income tax effects applicable to stock options and restricted stock awards granted under the 2020 Stock Incentive Plan is based on current law and is a summary only, and reference is made to the Internal Revenue Code for a complete statement of all relevant federal tax provisions.
Stock Options
With respect to nonqualified options (“NSOs”), the participant will recognize no income upon grant or vesting of the option, and, upon exercise, will recognize ordinary income to the extent of the excess of the fair market value of the shares on the date of option exercise over the amount paid by the participant for the shares. Upon a subsequent disposition of the shares received under the option, the participant generally will recognize capital gain or loss to the extent of the difference between the fair market value of the shares at the time of exercise and the amount realized on the disposition.
In general, no taxable income is realized by a participant upon the grant, vesting or exercise of an incentive stock option (“ISO”). If shares of common stock are issued to a participant (“option shares”) pursuant to the exercise of an ISO granted under the 2020 Stock Incentive Plan and the participant does not dispose of the option shares within the two-year period after the date of grant or within one year after the receipt of such option shares by the participant (a “disqualifying disposition”), then, generally upon sale of such option shares, any amount realized in excess of the exercise price paid for the option shares will be taxed to such participant as capital gain (or loss). The amount by which the fair market value of the common stock on the exercise date of an ISO exceeds the purchase price generally will constitute an item which increases the participant’s “alternative minimum taxable income.”
If option shares acquired upon the exercise of an ISO are disposed of in a disqualifying disposition, the participant generally would include in ordinary income in the year of disposition an amount equal to the excess of the fair market value of the option shares at the time of exercise (or, if less, the amount realized on the disposition of the option shares), over the exercise price paid for the option shares.
Subject to certain exceptions, an option generally will not be treated as an ISO if it is exercised more than three months following termination of employment. If an option intended to qualify as an ISO is exercised at a time when it no longer qualifies as an ISO, such option will be treated as an NSO as discussed above.
In general, the Company will receive an income tax deduction at the same time and in the same amount as the participant recognizes ordinary income in respect of an option.
Restricted Stock
A participant who receives a grant of restricted stock will not recognize any taxable income at the time the award is granted, provided the shares are subject to restrictions (that is, they are nontransferable and subject to a substantial risk of forfeiture). A participant’s rights in restricted stock awarded under the 2020 Stock Incentive Plan are subject to a substantial risk of forfeiture if the rights to the shares are conditioned, directly or indirectly, upon the future performance of substantial services by the participant.
However, the participant may elect under Section 83(b) of the Internal Revenue Code to recognize compensation income in the year of the award in an amount equal to the fair market value of the shares on the date of the award, determined without regard to the restrictions. If the participant does not make a Section 83(b) election within 30 days of receipt of the restricted shares, the fair market value of the shares on the date the restrictions lapse, less any amount paid by the participant for such shares, will be treated as compensation income to the participant and will be taxable in the year the restrictions lapse.
In general, the Company will receive an income tax deduction at the same time and in the same amount as the employee recognizes ordinary income in respect of a share of restricted stock.
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Restricted Stock Units
Participants who receive restricted stock units are generally not taxed upon the grant of such awards, but instead recognize ordinary income at the time shares are delivered with respect to such awards, in an amount equal to the fair market value of such shares at the time of delivery.
Deductibility of Compensation in Excess of $1.0 Million
Subsequent to the Tax Cuts and Jobs Act of 2017 (“Tax Act”), which is effective for taxable years beginning after December 31, 2017, Section 162(m) of the Internal Revenue Code generally no longer allows a tax deduction for “performance-based” compensation paid to each “covered employee” (the chief executive officer and three other most highly compensated executive officers other than the chief financial officer) over $1,000,000 in one year, subject to transition relief for certain grandfathered arrangements in effect as of November 2, 2017. In addition, among the changes to Section 162(m) under the Tax Act, the covered employees will be expanded to include the chief financial officer, and once one of our named executive officers is considered a covered employee, the named executive officer will remain covered employees as long as they receive compensation from us. The Committee has not adopted a formal policy that requires all compensation paid to the named executive officers to be fully deductible.
Amended Plan Benefits
If shareholder approval is obtained and the Company reaches certain performance goals, the Company expects to grant up to approximately 600,000 shares of restricted common stock to Mr. Kaufman in July 2020 under our 2020 Stock Incentive Plan in connection with the terms of his Annual Incentive Agreement further described in “Executive Compensation in 2020.” In addition, the Company will be able to settle 1,458,479 performance-vesting restricted stock units (previously granted to Mr. Kaufman) in shares (rather than in cash). Other grants to be made under the 2020 Stock Incentive Plan are at the discretion of the Board or a Board committee and are not currently determinable.
Vote Required for Approval of the Amendment to the Stock Incentive Plan
Approval of the amendment to the Stock Incentive Plan requires the affirmative vote of a majority of the votes cast on the proposal at the annual meeting by holders of our voting securities; provided that the total vote cast on the proposal represents over 50% in interest of all securities entitled to vote on the proposal. For purposes of the vote on the Stock Incentive Plan, abstentions and broker non-votes will have the same effect as votes against the proposal, unless holders of more than 50% in interest of all securities entitled to vote on the proposal cast votes, in which event broker non-votes will not have any effect on the result of the vote. If stockholder approval of the amendment to the Stock Incentive Plan is not obtained, then no issuances pursuant to the Stock Incentive Plan will be made that, when combined with the number of shares previously issued pursuant to the Stock Incentive Plan and not otherwise forfeited, exceeds in the aggregate 7,000,000 shares of our common stock.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” APPROVAL OF THE AMENDMENT AND RESTATEMENT OF THE COMPANY’S 2017 AMENDED OMNIBUS STOCK INCENTIVE PLAN TO AUTHORIZE AN ADDITIONAL 5,000,000 SHARES OF THE COMPANY’S
COMMON STOCK FOR ISSUANCE UNDER THE PLAN.
COMMON STOCK FOR ISSUANCE UNDER THE PLAN.
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PROPOSAL NO. 3
RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL YEAR 2018
2020
The Audit Committee of our Board of Directors has appointed Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2018.2020. The Board has endorsed this appointment. Ernst & Young LLP audited our consolidated financial statements for the fiscal years ended December 31, 20172019 and December 31, 2016.2018. A representative of Ernst & Young LLP is expected to be present at the annual meeting and will be available to respond to appropriate questions from our stockholders and will be given an opportunity to make a statement if he or she desires to do so.
Stockholder ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm is not required by our bylaws or otherwise. However, the Board of Directors is submitting the appointment of Ernst & Young LLP to the stockholders for ratification as a matter of good corporate governance. Ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for fiscal year 20182020 requires the affirmative vote of a majority of the votes cast on the proposal at the annual meeting by holders of our voting securities.
If this appointment is not ratified by our stockholders, the Audit Committee and the Board may each reconsider its recommendation and endorsement. Even if the appointment is ratified, the Audit Committee, in its discretion, may direct the appointment of a different independent registered public accounting firm at any time during the year if it determines that such a change would be in our best interest.
Independent Accountants'Accountants’ Fees
Aggregate fees for professional services rendered for us by Ernst & Young LLP and its affiliates for fiscal years ended December 31, 20172019 and 20162018 were as follows:
| | | | 2019 | | | 2018 | | ||||||
| Audit Fees | | | | $ | 2,686,900 | | | | | $ | 2,329,303 | | |
| Audit-Related Fees | | | | | 851,943 | | | | | | 766,297 | | |
| Total | | | | $ | 3,538,843 | | | | | $ | 3,095,600 | | |
| | 2017 | 2016 | |||||
|---|---|---|---|---|---|---|---|
Audit Fees | $ | 2,178,354 | $ | 2,218,933 | |||
Audit-Related Fees | 851,032 | 395,333 | |||||
Tax Fees | — | 26,906 | |||||
All Other Fees | — | — | |||||
| | | | | | | | |
Total | $ | 3,029,386 | $ | 2,641,172 | |||
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
The Audit Fees billed were for professional services rendered for the audit of our consolidated financial statements for the fiscal years ended December 31, 20172019 and 20162018 and for other services, including compliance with the Sarbanes-Oxley Act of 2002, accounting consultations billed as audit services, review of financial statements included in Forms 10-Q, comfort letters, consents and review of our registration statements under the Securities Act and other documents filed with the SEC in those fiscal years.
The Audit-Related Fees were for professional services rendered relating to: (i) due diligence andto agreed-upon procedures for 20172019 and 2016; and (ii) services performed in connection with the internalization of our management team and termination of the management agreement and Acquisition totaling $29,008 for 2016.
The Tax Fees were for tax advisory services performed in connection with the Acquisition in 2016.
Audit Committee Pre-Approval Policy
In accordance with applicable laws and regulations, the Audit Committee reviews and pre-approves any non-audit services to be performed by Ernst & Young LLP to ensure that the work does not compromise its independence in performing audit services. The Audit Committee also reviews and pre-approves all audit services. In some cases, pre-approval of a particular category or group of services, such as tax consulting services and audit services, is provided by the full Audit Committee for up to a year and is subject to a specific budget. In other cases, the Chairman of the Audit Committee has the delegated authority from the full Audit Committee to pre-approve additional services, and such pre-approvals are then communicated to the full Audit Committee. All audit related fees were approved by the Audit Committee.
The policy contains a de minimis provision that operates to provide retroactive approval for permissible non-audit services under certain circumstances. No services were provided by Ernst & Young LLP during 20172019 and 20162018 under such provision.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"“FOR” THE RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS OUR INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM FOR FISCAL YEAR20182020
PUBLIC ACCOUNTING FIRM FOR FISCAL YEAR
44
PROPOSAL NO. 4
ADVISORY VOTE ON NAMED EXECUTIVE OFFICER COMPENSATION
In accordance with Section 14A of the Exchange Act, which was added by the Dodd-Frank Act, we are providing our stockholders with the opportunity to vote on a non-binding, advisory resolution to approve the compensation of our named executive officers as disclosed in this proxy statement. Accordingly, the following resolution will be submitted for a stockholder approval at the 2020 annual meeting of stockholders:
“RESOLVED, that the stockholders of Arbor Realty Trust, Inc. (the “Company”) approve, on an advisory basis, the compensation of the Company’s named executive officers as described in the Company’s Proxy Statement for the 2020 annual meeting of stockholders pursuant to the disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis section, the Summary Compensation Table for 2019 and the related tables and disclosures.”
Stockholders are urged to read the “Compensation Discussion and Analysis” section and the “Summary Compensation Table for 2019” and related tables and disclosures under the heading “Executive Compensation,” which provide more detail about our compensation policies and practices for our named executive officers. The Compensation Committee and the Board of Contents
Directors believe that these policies and practices are effective in providing a strong alignment of the interests of our named executive officers with those of our stockholders.
The stockholder vote on this proposal is not binding on the Board of Directors or the Compensation Committee and cannot be construed as overruling any decision made by the Board or the Committee. However, the Board of Directors and the Compensation Committee will review the voting result on the non-binding resolution and expect to take it into consideration when making future decisions regarding the compensation of our named executive officers.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE APPROVAL OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
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PROPOSAL NO. 5
ADVISORY VOTE ON THE FREQUENCY OF FUTURE ADVISORY VOTES ON NON-BINDING RESOLUTIONS TO APPROVE THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
Pursuant to Section 951 of the Dodd-Frank Act and the resulting amended proxy solicitation rules of the SEC, we are seeking an advisory stockholder vote regarding whether the non-binding resolution to approve the compensation of our named executive officers should occur every one, two or three years.
The Board of Directors asks that you recommend a frequency of “three years” for future non-binding resolutions on the compensation of our named executive officers and believes that setting an advisory vote every three years will be the most effective timeframe. Our executive compensation programs do not change significantly from year to year and we seek to be consistent in that:
•
we do not believe that our executive compensation programs encourage unnecessary or excessive risk taking that might be of concern to our stockholders, as confirmed by a review performed by the Company and reviewed by the Compensation Committee;
•
our executive compensation programs are designed to incentivize and reward performance over a multi-year period; and
•
our executive compensation program is designed to support long-term value creation and a triennial vote will allow stockholders to better judge the program in relation to our long-term performance.
The advisory vote on this proposal is not binding on the Company or the Board of Directors and cannot be construed as overruling any decision made by the Board of Directors or the Compensation Committee. However, the Board of Directors of the Company will review the result of the advisory vote and take it into consideration when making future decisions regarding the frequency of submitting to stockholders the non-binding resolution to approve the compensation of our named executive officers.
THE BOARD OF DIRECTORS RECOMMENDS AN ADVISORY VOTE OF “THREE YEARS” FOR THE FREQUENCY OF FUTURE ADVISORY VOTES TO APPROVE THE COMPENSATION
OF OUR NAMED EXECUTIVE OFFICERS
OF OUR NAMED EXECUTIVE OFFICERS
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STOCKHOLDER PROPOSALS FOR 2019
2021
Proposals received from stockholders in accordance with Rule 14a-8 under the Exchange Act are given careful consideration by our Corporate Governance Committee and our Board of Directors. If a stockholder intends to present a proposal at our 20192020 annual meeting of stockholders pursuant to Rule 14a-8 under the Exchange Act, in order for such stockholder proposal to be included in our proxy statement for that meeting, the stockholder proposal must be received by our corporate headquarters, located at 333 Earle Ovington Boulevard, Suite 900, Uniondale, New York 11553, Attention: Secretary, on or before December 11, 2018.
14, 2020.
In order for a stockholder to nominate directors or propose other business at our 20192021 annual meeting of stockholders outside of Rule 14a-8, such nominations or proposal must contain the information required by our bylaws and be received by us in accordance with our bylaws. Pursuant to our current bylaws, stockholder nominations or proposals must be submitted no later than January 10, 201913, 2021 and no earlier than December 11, 2018;14, 2020; provided, however, in the event that mailing of the notice for the 20192021 annual meeting of stockholders is advanced more than 30 days prior to or delayed more than 30 days after April 11, 2019,14, 2021, to be timely, a proposal by a stockholder must be delivered not earlier than the 120th day prior to the date of mailing of the notice for such meeting and not later than the close of business on the later of (1) the 90th day prior to the date of mailing of the notice for such meeting and (2) the tenth day following the date on which public announcement of the date of such meeting is first made.
OTHER MATTERS
Our Board of Directors knows of no other matters that have been submitted for consideration at this annual meeting. If any other matters properly come before our stockholders at this annual meeting, the persons named on the enclosed proxy card intend to vote the shares they represent in accordance with their discretion.
By Order of the Board of Directors,
John J. Bishar, Jr.
Secretary
Secretary
April 14, 2020
Uniondale, New York
Uniondale, New York
| ||
47
Appendix A
ANNUAL MEETING OF STOCKHOLDERS OF ARBOR REALTY TRUST, INC. May 15, 2018 GO GREEN e-Consent makes it easy to go paperless. With e-Consent, you can quickly access your proxy material, statements
2020 AMENDED OMNIBUS STOCK INCENTIVE PLAN
Approved by the Company’s Stockholders on June 3, 2020
Section 1. General Purpose of Plan; Definitions.
The name of this plan is the Arbor Realty Trust, Inc. 2020 Amended Omnibus Stock Incentive Plan (the “Plan”). The Plan is an amendment and other eligible documents online, while reducing costs, clutter and paper waste. Enroll today via www.astfinancial.com to enjoy online access. NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIAL: The notice of meeting, proxy statement and proxy card are available at http://www.arbor.com Please sign, date and mail your proxy card in the envelope provided as soon as possible. Please detach along perforated line and mail in the envelope provided. 20230000000000000000 0 051518 Proposal 2. Ratificationrestatement of the appointmentArbor Realty Trust, Inc. 2017 Amended Omnibus Stock Incentive Plan (the “Predecessor Plan”).
The purpose of Ernst & Young LLP as the Proposal 3. To votePlan is to enable the Company to attract and otherwise represent the undersigned on any other matter that changesretain highly qualified personnel who will contribute to the registered name(s) onCompany’s success and to provide incentives to Participants (defined below) that are linked directly to stockholder value and will therefore inure to the accountbenefit of all stockholders of the Company.
For purposes of the Plan, the following terms shall be defined as set forth below:
(a) “ACM” means Arbor Commercial Mortgage, LLC, a New York limited liability company, or any successor.
(b) “Administrator” means the Board, or if and to the extent the Board does not administer the Plan, the Committee in accordance with Section 2 below.
(c) “Award” means any award under the Plan.
(d) “Award Agreement” means, with respect to each Award, the agreement, which may not be submitted via Note: Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. Ifan electronic agreement, between the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person. THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” ALL NOMINEES LISTED IN PROPOSAL 1 AND “FOR” PROPOSAL 2. PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE x The BoardCompany and the Participant setting forth the terms and conditions of Directors recommends a vote FOR all nominees listed in Proposal 1. Proposal 1. Election of directors to serve onthe Award.
(e) “Board” means the Board of Directors of Arbor Realty Trust, Inc. NOMINEES: FOR ALL NOMINEESO William Helmreich O William C. Green WITHHOLD AUTHORITY FOR ALL NOMINEES FOR ALL EXCEPT (See instructions below) INSTRUCTIONS: To withhold authoritythe Company.
(f) “Code” means the Internal Revenue Code of 1986, as amended from time to vote fortime, or any individual nominee(s), mark “FOR ALL EXCEPT”successor thereto.
(g) “Committee” means a committee of the Board, which shall consist of two or more individuals, each of whom shall qualify as (i) a “nonemployee director” within the meaning of Rule 16b-3 and fill(ii) an “independent director” within the meaning of the New York Stock Exchange Listed Company Manual. If at any time or to any extent the Board shall not administer the Plan, then the functions of the Board specified in the circle next to each nominee you wish to withhold, as shown here: The Board of Directors recommends a vote FOR Proposal 2. FOR AGAINST ABSTAIN independent registered public accounting firm of Arbor Realty Trust, Inc. for fiscal year 2018. properly comes beforePlan shall be exercised by the meeting or any adjournment or postponement thereof inCommittee.
(h) “Common Stock” means the discretioncommon stock, par value $0.01 per share, of the proxy holder. To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that this method. Signature of Stockholder Date: Signature of StockholderDate:
(i) “ANNUAL MEETING OF STOCKHOLDERS OF ARBOR REALTY TRUST, May 15, 2018 INC. INTERNET - Access “www.voteproxy.com” and follow the on-screen instructions or scan the QR code with your smartphone. Have your proxy card available when you access the web page. TELEPHONE - Call toll-free 1-800-PROXIES (1-800-776-9437) in the United States or 1-718-921-8500 from foreign countries from any touch-tone telephone and follow the instructions. Have your proxy card available when you call. Vote online/phone until 11:59 PM EST the day before the meeting. MAIL - Sign, date and mail your proxy card in the envelope provided as soon as possible. IN PERSON - You may vote your shares in person by attending the Annual Meeting. GO GREEN - e-Consent makes it easy to go paperless. With e-Consent, you can quickly access your proxy material, statements and other eligible documents online, while reducing costs, clutter and paper waste. Enroll today via www.astfinancial.com to enjoy online access. Please detach along perforated line and mail in the envelope provided IF you are not voting via telephone or the Internet. 20230000000000000000 0 051518 independent registered public accounting firm of Arbor Realty O William Helmreich FOR ALL NOMINEES properly comes before the meeting or any adjournment or postponement thereof changes to the registered name(s) on the account may not be submitted via Note: Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person. THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” ALL NOMINEES LISTED IN PROPOSAL 1 AND “FOR” PROPOSAL 2. PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE x The Board of Directors recommends a vote FOR all nominees listed in Proposal 1. Proposal1. Election of directors to serve on the Board of Directors of Arbor Realty Trust, Inc. NOMINEES: O William C. Green WITHHOLD AUTHORITY FOR ALL NOMINEES FOR ALL EXCEPT (See instructions below) INSTRUCTIONS: To withhold authority to vote for any individual nominee(s), mark “FOR ALL EXCEPT” and fill in the circle next to each nominee you wish to withhold, as shown here: The Board of Directors recommends a vote FOR Proposal 2. FOR AGAINST ABSTAIN Proposal 2. Ratification of the appointment of Ernst & Young LLP as the Trust, Inc. for fiscal year 2018. Proposal 3. To vote and otherwise represent the undersigned on any other matter that in the discretion of the proxy holder. To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that this method. Signature of Stockholder Date: Signature of StockholderDate: NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIAL: The notice of meeting, proxy statement and proxy card are available at http://www.arbor.com COMPANY NUMBER ACCOUNT NUMBER PROXY VOTING INSTRUCTIONSCompany
- 0 ARBOR REALTY TRUST, INC. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 15, 2018 The undersigned stockholder of” means Arbor Realty Trust, Inc., a Maryland corporation (the "Company"), hereby appoints Paul Elenio, John J. Bishar,(or any successor corporation).
(j) “Disability” means the inability of a Participant to perform substantially his or her duties and Leah Fisher, and eachresponsibilities to the Company or to any Parent or Subsidiary by reason of them,a physical or mental disability or infirmity (i) for a continuous period of six months, or (ii) at such earlier time as the proxyParticipant submits medical evidence satisfactory to the Administrator that the Participant has a physical or proxiesmental disability or infirmity that will likely prevent the Participant from returning to the performance of the undersigned, with full powerParticipant’s work duties for six months or longer. The date of substitution in eachsuch Disability shall be the last day of them,such six-month period or the day on which the Participant submits such satisfactory medical evidence, as the case may be.
(k) “Eligible Recipient” means an officer, director, employee, consultant (including employees of ACM who provide services to attend the Annual Meeting of StockholdersCompany) or advisor of the Company or of any Parent or Subsidiary.
(l) “Exercise Price” means the per share price, if any, at which a holder of an Option may purchase the Shares issuable upon exercise of the Option.
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(m) “Fair Market Value” as of a particular date shall mean the fair market value of a share of Common Stock as determined by the Administrator in its sole discretion in accordance with Section 409A of the Code; provided, however, that (i) if the Common Stock is admitted to trading on a national securities exchange, fair market value of a share of Common Stock on any date shall be the average of the open and closing sale prices reported for such share on such exchange on such date or, if no sale was reported on such date, on the last date preceding such date on which a sale was reported, (ii) if the Common Stock is admitted to quotation on the National Association of Securities Dealers Automated Quotation (“Nasdaq”) System or other comparable quotation system and has been designated as a National Market System (“NMS”) security, fair market value of a share of Common Stock on any date shall be the average of the open and closing sale prices reported for such share on such system on such date or, if no sale was reported on such date, on the last date preceding such date on which a sale was reported, or (iii) if the Common Stock is admitted to quotation on the Nasdaq System but has not been designated as an NMS security, fair market value of a share of Common Stock on any date shall be the average of the highest bid and lowest asked prices of such share on such system on such date or, if no bid and ask prices were reported on such date, on the last date preceding such date on which both bid and ask prices were reported.
(n) “Incentive Stock Option” means any Option intended to be helddesignated as an “incentive stock option” within the meaning of Section 422 of the Code.
(o) “Nonqualified Stock Option” means any Option that is not an Incentive Stock Option, including any Option that provides (as of the time such Option is granted) that it will not be treated as an Incentive Stock Option.
(p) “Option” means an option to purchase Shares granted pursuant to Section 6 below.
(q) “Parent” means any corporation (other than the Company) in an unbroken chain of corporations ending with the Company, if each of the corporations in the chain (other than the Company) owns stock possessing 50% or more of the combined voting power of all classes of stock in one of the other corporations in the chain.
(r) “Participant” means any Eligible Recipient selected by the Administrator, pursuant to the Administrator’s authority in Section 2 below, to receive grants of Options and/or awards of Restricted Stock.
(s) “Restricted Stock” means Shares subject to certain restrictions granted pursuant to Section 7 below.
(t) “Restricted Stock Unit” means a contractual right to receive Shares (or its then Fair Market Value in cash) in the future, subject to the satisfaction of vesting conditions.
(u) “Shares” means shares of Common Stock reserved for issuance under the Plan, as adjusted pursuant to Sections 3 and 4, and any successor security.
(v) “Subsidiary” means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company, if each of the corporations (other than the last corporation) in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in the chain.
Section 2. Administration.
The Plan shall be administered by the Board or, at the Board’s sole discretion, by the Committee, which shall be appointed by the Board, and which shall serve at the pleasure of the Board. Pursuant to the terms of the Plan, the Administrator shall have the power and authority:
(a) to select those Eligible Recipients who shall be Participants;
(b) to determine whether and to what extent Options or awards of Restricted Stock or Restricted Stock Units are to be granted hereunder to Participants;
(c) to determine the number of Shares to be covered by each Award granted hereunder;
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(d) to determine the terms and conditions, not inconsistent with the terms of the Plan, of each Award granted hereunder; and
(e) to determine the terms and conditions, not inconsistent with the terms of the Plan, which shall govern all written instruments evidencing Options or awards of Restricted Stock or Restricted Stock Units granted hereunder.
The Administrator shall have the authority, in its sole discretion, to adopt, alter and repeal such administrative rules, guidelines and practices governing the Plan as it shall from time to time deem advisable; to interpret the terms and provisions of the Plan and any Award issued under the Plan (and any Award Agreement relating thereto); and to otherwise supervise the administration of the Plan.
All decisions made by the Administrator pursuant to the provisions of the Plan shall be final, conclusive and binding on May 15, 2018all persons, including the Company and the Participants.
Section 3. Shares Subject to Plan.
The total number of shares of Common Stock reserved and available for issuance under the Plan (net of shares of Common Stock issued pursuant to awards made under the Predecessor Plan and shares of Common Stock subject to Awards outstanding under the Predecessor Plan as of the Effective Date (as defined Section 11)) shall be 12,000,000 shares, all of which may be granted in respect of Incentive Stock Options. Such shares may consist, in whole or in part, of authorized and unissued shares or treasury shares.
To the extent that (i) any Option terminates or expires without exercise of the Option, or (ii) any Award of Restricted Stock or Restricted Stock Units is forfeited, cancelled or otherwise fails to vest (including any Option or Award of Restricted Stock or Restricted Stock Units made under the Predecessor Plan), the Shares subject to such terminated, expired or forfeited Award shall again be available for issuance in connection with future Awards granted under the Plan.
Section 4. Corporate Transactions.
In the event of any merger, reorganization, consolidation, recapitalization, spin-off, combination, stock repurchase, stock split, reverse stock split, stock dividend, extraordinary dividend, or other change in corporate structure affecting the Common Stock, an equitable substitution or proportionate adjustment shall be made in (i) the aggregate number of Shares reserved for issuance under the Plan, (ii) the kind, number and Exercise Price (if applicable) of Shares subject to outstanding Options or Restricted Stock Units granted under the Plan, (iii) the kind, number and purchase price of Shares subject to outstanding awards of Restricted Stock granted under the Plan and (iv) the limitation set forth in Section 6(i), in each case as may be determined by the Administrator, in its sole discretion. Such other substitutions or adjustments shall be made as may be determined by the Administrator, in its sole discretion. In connection with any event described in this paragraph, the Administrator may provide, in its sole discretion, for the cancellation of any outstanding awards and payment in cash or other property therefor.
Section 5. Eligibility.
Eligible Recipients may be granted Options and/or awards of Restricted Stock or Restricted Stock Units. The Participants under the Plan shall be selected from time to time by the Administrator, in its sole discretion, from among the Eligible Recipients.
The Administrator shall have the authority to grant to any Eligible Recipient who is an employee of the Company or of any Parent or Subsidiary (including directors who are also officers of the Company) Incentive Stock Options, Nonqualified Stock Options, or both types of Options, and/or Restricted Stock or Restricted Stock Units. Non-employee Directors of the Company or of any Parent or Subsidiary, consultants (including employees of ACM) or advisors who are not also employees of the Company or of any Parent or Subsidiary may only be granted Options that are Nonqualified Stock Options and/or Restricted Stock or Restricted Stock Units.
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Section 6. Options.
Options may be granted alone or in addition to other awards of Restricted Stock or Restricted Stock Units granted under the Plan. Any Option granted under the Plan shall be in such form as the Administrator may from time to time approve, and the provisions of each Option need not be the same with respect to each Participant. Participants who are granted Options shall enter into an Award Agreement with the Company, in such form as the Administrator shall determine, which Award Agreement shall set forth, among other things, the Exercise Price of the Option, the term of the Option and provisions regarding exercisability of the Option granted thereunder.
The Options granted under the Plan may be of two types: (i) Incentive Stock Options and (ii) Nonqualified Stock Options. To the extent that any Option does not qualify as an Incentive Stock Option, it shall constitute a separate Nonqualified Stock Option. More than one Option may be granted to the same Participant and be outstanding concurrently hereunder.
Options granted under the Plan shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the terms of the Plan, as the Administrator shall deem desirable:
(a) Option Exercise Price. The per share Exercise Price of Shares purchasable under an Option shall be determined by the Administrator in its sole discretion at 11:00 a.m.the time of grant but shall not, (i) in the case of Incentive Stock Options, be less than 100% of the Fair Market Value of the Common Stock on such date (110% of the Fair Market Value per Share on such date if, on such date, the Eligible Recipient owns (or is deemed to own under Section 424(d) of the Code) stock possessing more than ten percent of the total combined voting power of all classes of stock of the Company, or any Parent or Subsidiary), localand (ii) in the case of Nonqualified Stock Options, be less than 100% of the Fair Market Value of the Common Stock on such date.
(b) Option Term. The term of each Option shall be fixed by the Administrator, but no Option shall be exercisable more than ten years after the date such Option is granted; provided, however, that if an employee owns or is deemed to own (by reason of the attribution rules of Section 424(d) of the Code) more than 10% of the combined voting power of all classes of stock of the Company or of any Parent or Subsidiary and an Incentive Stock Option is granted to such employee, the term of such Incentive Stock Option (to the extent required by the Code at the time of grant) shall be no more than five years from the date of grant.
(c) Exercisability. Options shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Administrator at or after the time of grant. The Teleconference CenterAdministrator may also provide that any Option shall be exercisable only in installments, and the Administrator may waive such installment exercise provisions at any time, in whole or in part, based on such factors as the Administrator may determine, in its sole discretion.
(d) Method of Exercise. Subject to Section 6(c), Options may be exercised in whole or in part at any time during the Option period, by giving written notice of exercise to the Company specifying the number of Shares to be purchased, accompanied by (i) payment in full of the aggregate Exercise Price of the Shares so purchased in cash, (ii) delivery of outstanding shares of Common Stock with a Fair Market Value on the date of exercise equal to the aggregate Exercise Price payable with respect to the Options’ exercise; (iii) simultaneous sale through a broker reasonably acceptable to the Administrator of Shares acquired on exercise, as permitted under Regulation T of the Federal Reserve Board or (iv) payment of the Exercise Price through such other method as the Administrator may authorize from time to time in its sole discretion.
In the event a grantee elects to pay the Exercise Price payable with respect to an Option pursuant to clause (ii) above: (A) only a whole number of share(s) of Common Stock (and not fractional shares of Common Stock) may be tendered in payment, (B) such grantee must present evidence acceptable to the Company that he or she has owned any such shares of Common Stock tendered in payment of the Exercise Price (and that such tendered shares of Common Stock have not been subject to any substantial risk of forfeiture) for at least six months prior to the date of exercise, and (C) Common Stock must be delivered to the Company. Delivery for this purpose may, at the election of the grantee, be made either by (i) physical delivery of the certificate(s) for all such shares of Common Stock tendered in payment of the Exercise Price,
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accompanied by duly executed instruments of transfer in a form acceptable to the Company, or (ii) direction to the grantee’s broker to transfer, by book entry, of such shares of Common Stock from a brokerage account of the grantee to a brokerage account specified by the Company. When payment of the Exercise Price is made by delivery of Common Stock, the difference, if any, between the aggregate Exercise Price payable with respect to the Option being exercised and the Fair Market Value of the shares of Common Stock tendered in payment (plus any applicable taxes) shall be paid in cash. No grantee may tender shares of Common Stock having a Fair Market Value exceeding the aggregate Exercise Price payable with respect to the Option being exercised (plus any applicable taxes).
(e) Non-Transferability of Options. Except as otherwise provided by the Administrator or in the Award Agreement, Options may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution.
(f) Termination of Employment or Service. The rights of Participants granted Options upon termination of employment or service as a director, consultant or advisor to the Company or to any Parent or Subsidiary for any reason prior to the exercise of such Options shall be set forth in the Award Agreement governing such Options.
(g) Annual Limit on Incentive Stock Options. To the extent that the aggregate Fair Market Value (determined as of the date the Incentive Stock Option is granted) of Shares with respect to which Incentive Stock Options granted to a Participant under this Plan and all other option plans of the Company or of any Parent or Subsidiary become exercisable for the first time by the Participant during any calendar year exceeds $100,000 (as determined in accordance with Section 422(d) of the Code), the portion of such Incentive Stock Options in excess of $100,000 shall be treated as Nonqualified Stock Options.
(h) Rights as Stockholder. An Optionee shall have no rights to dividends or any other rights of a stockholder with respect to the Shares subject to the Option until the Optionee has given written notice of exercise, has paid in full for such Shares, has satisfied the requirements of Section 10(d) hereof and, if requested, has given the representation described in Section 10(b) hereof.
(i) Annual Limitation. No Eligible Recipient will be granted Options for more than 250,000 shares of Common Stock during any single calendar year.
(j) No Repricing. Other than with respect to an adjustment described in Section 4, in no event shall the Exercise Price of an Option be reduced following the grant of an Option, nor shall an Option be cancelled in exchange for a replacement Option with a lower levelexercise price or in exchange for another type of 333 Earle Ovington Boulevard, Uniondale, New YorkAward or cash payment without approval of the Company’s stockholders.
Section 7. Restricted Stock; Unrestricted Stock; Restricted Stock Units.
Awards of Restricted Stock may be issued either alone or in addition to Options or Restricted Stock Units granted under the Plan. The Administrator shall determine the Eligible Recipients to whom, and the time or times at which, awards of Restricted Stock shall be made; the number of Shares to be awarded; the price, if any, to be paid by the Participant for the acquisition of Restricted Stock; and the Restricted Period (as defined in Section 7(b)), if any, applicable to awards of Restricted Stock. The Administrator may also condition the grant of the award of Restricted Stock upon the exercise of Options or upon such other criteria as the Administrator may determine, in its sole discretion. The provisions of the awards of Restricted Stock need not be the same with respect to each Participant.
(a) Awards and Certificates. The prospective recipient of awards of Restricted Stock shall not have any rights with respect to any such Award, unless and until such recipient has executed an Award Agreement evidencing the Award (a “Restricted Stock Award Agreement”) and delivered a fully executed copy thereof to the Company, which may be delivered electronically, within a period of sixty days (or such other period as the Administrator may specify) after the award date. Except as otherwise provided below in Section 7(b), each Participant who is granted an award of Restricted Stock shall be issued a stock certificate in respect of such shares of Restricted Stock, which certificate shall be registered in the name of the Participant and shall bear an appropriate legend referring to the terms, conditions, and restrictions applicable to any such Award.
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The Company may require that the stock certificates evidencing Restricted Stock granted hereunder be held in the custody of the Company until the restrictions thereon shall have lapsed, and that, as a condition of any award of Restricted Stock, the Participant shall have delivered a stock power, endorsed in blank, relating to the Shares covered by such Award.
(b) Restrictions and Conditions. The awards of Restricted Stock granted pursuant to this Section 7 shall be subject to the following restrictions and conditions:
(i) Subject to the provisions of the Plan and the Restricted Stock Award Agreement governing any such Award, during such period, if any, as may be set by the Administrator commencing on the date of grant (the “Restricted Period”), the Participant shall not be permitted to sell, transfer, pledge or assign shares of Restricted Stock awarded under the Plan; provided, however, that the Administrator may, in its sole discretion, provide for the lapse of such restrictions in installments and may accelerate or waive such restrictions in whole or in part based on such factors and such circumstances as the Administrator may determine, in its sole discretion.
(ii) Except as provided in Section 7(b)(i), the Participant shall generally have the rights of a stockholder of the Company with respect to Restricted Stock during the Restricted Period. Certificates for unrestricted Shares shall be delivered to the Participant promptly after, and only after, the Restricted Period shall expire without forfeiture in respect of such awards of Restricted Stock except as the Administrator, in its sole discretion, shall otherwise determine.
(iii) The rights of Participants granted awards of Restricted Stock upon termination of employment or service as a director, consultant or advisor to the Company or to any Parent or Subsidiary for any reason during the Restricted Period shall be set forth in the Restricted Stock Award Agreement governing such Awards.
(c) Unrestricted Shares. Awards of unrestricted (fully vested) Shares may also be made under the Plan, in the discretion of the Administrator.
(d) Restricted Stock Units. The Administrator shall have the authority to determine the Eligible Recipients to whom Restricted Stock Units shall be granted, the number of Restricted Stock Units to be granted to each such Participant, the conditions under which the Restricted Stock Units may become vested or forfeited and such other terms and conditions, as the Administrator may determine, that are not inconsistent with the provisions of the Plan. Payment with respect to Restricted Stock Units shall be made in cash, in Shares, or in a combination of cash and Shares, as determined by the Administrator. A Participant shall have no rights to dividends or any other rights of a stockholder with respect to the Shares subject to Restricted Stock Units the Shares subject thereto have been issued to the Participant.
Section 8. Amendment and Termination.
The Board may amend, alter or discontinue the Plan, but no amendment, alteration, or discontinuation shall be made that would impair the rights of a Participant under any Award theretofore granted without such Participant’s consent. The Board shall obtain approval of the Company’s stockholders for an amendment to the extent such approval is required in order to comply with applicable law or stock exchange listing requirement.
The Administrator may amend the terms of any Award theretofore granted, prospectively or retroactively, but, subject to Section 4 of the Plan, no such amendment shall impair the rights of any Participant without his or her consent.
Section 9. Unfunded Status of Plan.
The Plan is intended to constitute an “unfunded” plan for incentive compensation. With respect to any payments not yet made to a Participant by the Company, nothing contained herein shall give any such Participant any rights that are greater than those of a general creditor of the Company.
Section 10. General Provisions.
(a) Shares shall not be issued pursuant to any Award granted hereunder unless such Award and the issuance and delivery of such Shares pursuant thereto shall comply with all relevant provisions of law,
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including, without limitation, the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and the requirements of any stock exchange upon which the Common Stock may then be listed, and shall be further subject to the approval of counsel for the Company with respect to such compliance.
(b) The Administrator may require each person acquiring Shares to represent to and agree with the Company in writing that such person is acquiring the Shares without a view to distribution thereof. The certificates for such Shares may include any legend which the Administrator deems appropriate to reflect any restrictions on transfer.
All certificates for Shares delivered under the Plan shall be subject to such stock-transfer orders and other restrictions as the Administrator may deem advisable under the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange upon which the Common Stock is then listed, and any postponementsapplicable Federal or adjournments thereof,state securities law, and the Administrator may cause a legend or legends to castbe placed on any such certificates to make appropriate reference to such restrictions.
(c) Nothing contained in the Plan shall prevent the Board from adopting other or additional compensation arrangements, subject to stockholder approval, if such approval is required; and such arrangements may be either generally applicable or applicable only in specific cases. The adoption of the Plan shall not confer upon any Eligible Recipient any right to continued employment or service with the Company or any Parent or Subsidiary, as the case may be, nor shall it interfere in any way with the right of the Company or any Parent or Subsidiary to terminate the employment or service of any of its Eligible Recipients at any time.
(d) Any delivery of Shares hereunder shall be subject to the satisfaction by the Participant of applicable withholding requirements. Unless otherwise determined by the Administrator, a Participant may elect to deliver shares of Common Stock (or have the Company withhold shares) to satisfy, in whole or in part, the amount the Company is required to withhold for taxes in connection with the exercise of an Option or the delivery of Restricted Stock or Restricted Stock Units upon grant or vesting, as the case may be. Once made, the election shall be irrevocable. The fair market value of the Shares to be withheld or delivered will be the Fair Market Value as of the date the amount of tax to be withheld is determined. In the event a Participant elects to deliver Shares of Common Stock pursuant to this Section 10(d), such delivery must be made subject to the conditions and pursuant to the procedures set forth in Section 6(d) with respect to the delivery of Common Stock in payment of the Exercise Price of Options.
(e) No member of the Board or the Administrator, nor any officer or employee of the Company acting on behalf of the undersignedBoard or the Administrator, shall be personally liable for any action, determination, or interpretation taken or made in good faith with respect to the Plan, and all votes thatmembers of the undersigned is entitledBoard or the Administrator and each and any officer or employee of the Company acting on their behalf shall, to cast at such meetingthe extent permitted by law, be fully indemnified and otherwise to represent the undersigned at the meeting with all proxies possessedprotected by the undersigned if personally present atCompany in respect of any such action, determination or interpretation.
Section 11. Effective Date of Plan.
The Plan has been adopted and approved by the meeting. Board and shall become effective as of June 3, 2020 (the “Effective Date”), subject to the approval of the stockholders of the Company.
Section 12. Term of Plan.
No Award shall be granted pursuant to the Plan on or after the tenth anniversary of the Effective Date, but Awards theretofore granted may extend beyond that date.
Section 13. Governing Law.
This proxy, when properly executed, willPlan and all questions relating to its validity, interpretation, performance and enforcement shall be votedgoverned by and construed, interpreted and enforced in accordance with the manner directed onlaws of the reverse side. If this proxy is executed but no instruction is given, this proxy will be voted "FOR" all nominees listed in Proposal 1 and “FOR” Proposal 2. The proxies are hereby authorizedState of New York, notwithstanding any New York or other conflict-of-law provisions to vote in their discretion upon such other matters as may properly come before the meeting or any adjournment or postponement thereof. (Continued and to be signed on the reverse side) 14475 1.1
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ANNUALMEETINGOFSTOCKHOLDERSOFARBORREALTYTRUST,INC.June3,2020PROXYVOTINGINSTRUCTIONSINTERNET-Access”www.voteproxy.com”andfollowtheon-screeninstructionsorscantheQRcodewithyoursmartphone.Haveyourproxycardavailablewhenyouaccessthewebpage.TELEPHONE-Calltoll-free1-800-PROXIES(1-800-776-9437)intheUnitedStatesor1-718-921-8500fromforeigncountriesfromanytouch-tonetelephoneandfollowtheinstructions.Haveyourproxycardavailablewhenyoucall.Voteonline/phoneuntil11:59PMESTthedaybeforethemeeting.MAIL-Sign,dateandmailyourproxycardintheenvelopeprovidedassoonaspossible.INPERSON-YoumayvoteyoursharesinpersonbyattendingtheAnnualMeeting.GOGREEN-e-Consentmakesiteasytogopaperless.Withe-Consent,youcanquicklyaccessyourproxymaterial,statementsandothereligibledocumentsonline,whilereducingcosts,clutterandpaperwaste.Enrolltodayviawww.astfinancial.comtoenjoyonlineaccess.NOTICEOFINTERNETAVAILABILITYOFPROXYMATERIAL:Thenoticeofmeeting,proxystatementandproxycardareavailableathttp://www.arbor.comPleasedetachalongperforatedlineandmailintheenvelopeprovidedIFyouarenotvotingviatelephoneortheInternet.204030303040000000001060320THEBOARDOFDIRECTORSRECOMMENDSAVOTE”FOR”ALLNOMINEESLISTEDINPROPOSAL1,”FOR”PROPOSALS2,3AND4ANDFOR”THREEYEARS”ONPROPOSAL5.PLEASESIGN,DATEANDRETURNPROMPTLYINTHEENCLOSEDENVELOPE.PLEASEMARKYOURVOTEINBLUEORBLACKINKASSHOWNHERExTheBoardofDirectorsrecommendsavoteFORallnomineeslistedinProposal1.Proposal1.ElectionofdirectorstoserveontheBoardofDirectorsofArborRealtyTrust,Inc.NOMINEES:TheBoardofDirectorsrecommendsavoteFORProposals2,3and4andforTHREEYEARSonProposal5.FORAGAINSTABSTAINFORALLNOMINEESWITHHOLDAUTHORITYFORALLNOMINEESFORALLEXCEPT(Seeinstructionsbelow)OIvanKaufmanOMelvinF.LazarOGeorgeTsunisOKennethJ.BaconProposal2.ApprovalofanamendmentandrestatementtotheArborRealtyTrust,Inc.2017AmendedOmnibusStockInventivePlan(the”Plan”)toauthorizeanadditional5,000,000sharesofcommonstockofArborRealtyTrust,Inc.forissuanceunderthePlan.Proposal3.RatificationoftheappointmentofErnst&YoungLLPastheindependentregisteredpublicaccountingfirmofArborRealtyTrust,Inc.forfiscalyear2020.Proposal4.AdvisoryvotetoapprovethecompensationofArborRealtyTrust,Inc.’snamedexecutiveofficersasdisclosedintheproxystatement.INSTRUCTIONS:Towithholdauthoritytovoteforanyindividualnominee(s),mark”FORALLEXCEPT”andfillinthecirclenexttoeachnomineeyouwishtowithhold,asshownhere:Proposal5.AdvisoryvoteonthefrequencyoffutureadvisoryvotestoapprovethecompensationofArborRealtyTrust,Inc.’snamedexecutiveofficers.1YEAR2YEARS3YEARSABSTAINProposal6.Tovoteandotherwiserepresenttheundersignedonanyothermatterthatproperlycomesbeforethemeetingoranyadjournmentorpostponementthereofinthediscretionoftheproxyholder.Tochangetheaddressonyouraccount,pleasechecktheboxatrightandindicateyournewaddressintheaddressspaceabove.Pleasenotethatchangestotheregisteredname(s)ontheaccountmaynotbesubmittedviathismethod.SignatureofStockholderDate:SignatureofStockholderDate:Note:PleasesignexactlyasyournameornamesappearonthisProxy.Whensharesareheldjointly,eachholdershouldsign.Whensigningasexecutor,administrator,attorney,trusteeorguardian,pleasegivefulltitleassuch.Ifthesignerisacorporation,pleasesignfullcorporatenamebydulyauthorizedofficer,givingfulltitleassuch.Ifsignerisapartnership,pleasesigninpartnershipnamebyauthorizedperson.
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ANNUALMEETINGOFSTOCKHOLDERSOFARBORREALTYTRUST,INC.June3,2020GOGREENe-Consentmakesiteasytogopaperless.Withe-Consent,youcanquicklyaccessyourproxymaterial,statementsandothereligibledocumentsonline,whilereducingcosts,clutterandpaperwaste.Enrolltodayviawww.astfinancial.comtoenjoyonlineaccess.NOTICEOFINTERNETAVAILABILITYOFPROXYMATERIAL:Thenoticeofmeeting,proxystatementandproxycardareavailableathttp://www.arbor.comPleasesign,dateandmailyourproxycardintheenvelopeprovidedassoonaspossible.Pleasedetachalongperforatedlineandmailintheenvelopeprovided.204030303040000000001060320THEBOARDOFDIRECTORSRECOMMENDSAVOTE”FOR”ALLNOMINEESLISTEDINPROPOSAL1,”FOR”PROPOSALS2,3AND4ANDFOR”THREEYEARS”ONPROPOSAL5.PLEASESIGN,DATEANDRETURNPROMPTLYINTHEENCLOSEDENVELOPE.PLEASEMARKYOURVOTEINBLUEORBLACKINKASSHOWNHERExTheBoardofDirectorsrecommendsavoteFORallnomineeslistedinProposal1.Proposal1.ElectionofdirectorstoserveontheBoardofDirectorsofArborRealtyTrust,Inc.TheBoardofDirectorsrecommendsavoteFORProposals2,3and4andforTHREEYEARSonProposal5.FORAGAINSTABSTAINFORALLNOMINEESWITHHOLDAUTHORITYFORALLNOMINEESFORALLEXCEPT(Seeinstructionsbelow)NOMINEES:OIvanKaufmanOMelvinF.LazarOGeorgeTsunisOKennethJ.BaconProposal2.ApprovalofanamendmentandrestatementtotheArborRealtyTrust,Inc.2017AmendedOmnibusStockInventivePlan(the”Plan”)toauthorizeanadditional5,000,000sharesofcommonstockofArborRealtyTrust,Inc.forissuanceunderthePlan.Proposal3.RatificationoftheappointmentofErnst&YoungLLPastheindependentregisteredpublicaccountingfirmofArborRealtyTrust,Inc.forfiscalyear2020.Proposal4.AdvisoryvotetoapprovethecompensationofArborRealtyTrust,Inc.’snamedexecutiveofficersasdisclosedintheproxystatement.INSTRUCTIONS:Towithholdauthoritytovoteforanyindividualnominee(s),mark”FORALLEXCEPT”andfillinthecirclenexttoeachnomineeyouwishtowithhold,asshownhere:Proposal5.AdvisoryvoteonthefrequencyoffutureadvisoryvotestoapprovethecompensationofArborRealtyTrust,Inc.’snamedexecutiveofficers.1YEAR2YEARS3YEARSABSTAINProposal6.Tovoteandotherwiserepresenttheundersignedonanyothermatterthatproperlycomesbeforethemeetingoranyadjournmentorpostponementthereofinthediscretionoftheproxyholder.Tochangetheaddressonyouraccount,pleasechecktheboxatrightandindicateyournewaddressintheaddressspaceabove.Pleasenotethatchangestotheregisteredname(s)ontheaccountmaynotbesubmittedviathismethod.SignatureofStockholderDate:SignatureofStockholderDate:Note:PleasesignexactlyasyournameornamesappearonthisProxy.Whensharesareheldjointly,eachholdershouldsign.Whensigningasexecutor,administrator,attorney,trusteeorguardian,pleasegivefulltitleassuch.Ifthesignerisacorporation,pleasesignfullcorporatenamebydulyauthorizedofficer,givingfulltitleassuch.Ifsignerisapartnership,pleasesigninpartnershipnamebyauthorizedperson.-0
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ARBORREALTYTRUST,INC.THISPROXYISSOLICITEDONBEHALFOFTHEBOARDOFDIRECTORSFORTHEANNUALMEETINGOFSTOCKHOLDERSTOBEHELDONJUNE3,2020TheundersignedstockholderofArborRealtyTrust,Inc.,aMarylandcorporation(the”Company”),herebyappointsPaulElenio,JohnJ.Bishar,andLeahFisher,andeachofthem,theproxyorproxiesoftheundersigned,withfullpowerofsubstitutionineachofthem,toattendtheAnnualMeetingofStockholdersoftheCompanytobeheldonJune3,2020at11:00a.m.,localtime,atTheTeleconferenceCenteronthelowerlevelof333EarleOvingtonBoulevard,Uniondale,NewYorkandanypostponementsoradjournmentsthereof,tocastonbehalfoftheundersignedallvotesthattheundersignedisentitledtocastatsuchmeetingandotherwisetorepresenttheundersignedatthemeetingwithallproxiespossessedbytheundersignedifpersonallypresentatthemeeting.Wecurrentlyintendtoholdourannualmeetinginperson.However,weareactivelymonitoringthecoronavirus(COVID-19)pandemicandaresensitivetothepublichealthandtravelconcernsourstockholdersmayhaveandtheprotocolsthatfederal,stateandlocalgovernmentsmayimpose.IntheeventitisnotpossibleoradvisabletoholdourannualmeetinginpersononJune3,2020,wewillannouncealternativearrangementsforthemeetingaspromptlyaspracticable,whichmayincludepostponingthemeetingdateand/orholdingthemeetingsolelybymeansofremotecommunication.Pleasemonitorthe”InvestorRelations”sectionofourwebsiteatwww.arbor.comforupdatedinformation.Ifyouareplanningtoattendourmeeting,pleasecheckthewebsiteoneweekpriortothemeetingdate.Asalways,weencourageyoutovoteyoursharespriortotheannualmeeting.Thisproxy,whenproperlyexecuted,willbevotedinthemannerdirectedonthereverseside.Ifthisproxyisexecutedbutnoinstructionisgiven,thisproxywillbevoted”FOR”allthenomineeslistedinProposal1,”FOR”Proposals2,3and4andfor”THREEYEARS”onProposal5.Theproxiesareherebyauthorizedtovoteintheirdiscretionuponsuchothermattersasmayproperlycomebeforethemeetingoranyadjournmentorpostponementthereof.1.1(Continuedandtobesignedonthereverseside)14475