| • | accurate, complete, objective, relevant, timely and understandable disclosure in our SEC reports and other public communications; | | | | | | | | | | • | compliance with applicable governmental laws, rules and regulations; | | • | the protection of Company assets, including corporate opportunities and confidential information; | | • | prompt internal reporting of violations of the Code of Ethics to appropriate persons identified in the Code of Ethics; and | | • | accountability for adherence to the Code of Ethics. |
Any waiver of the Code of Ethics may be made only by our Board or one of our board committees. The Code of Ethics is posted in the “Investor Relations-Corporate Governance” section of our website, www.agmit.com.www.agmit.com. We intend to satisfy the disclosure requirement regarding any amendment to, or a waiver of, a provision of the Code of Ethics by posting such information on our website.
Board’s Role in Risk Oversight The Board is responsible for overseeing our risk management policies and practices. Our executive officers, including our Chief Risk Officer, who are responsible for our day-to-day risk management practices, regularly present to the Board on our overall risk profile and the processes by which such risks are mitigated. Our Manager also regularly reports to the boardBoard on various matters related to our risk exposure. Through regular and consistent communication, our Manager provides reasonable assurances to our Board that all of our material operational and investment risks, including among others, liquidity risk, interest rate risk and capital market risk, are understood and addressed.
Cybersecurity
Cybersecurity is a growing risk for companies. While our Audit Committee is tasked with overseeing cybersecurity risks, it is of particular concern to the full Board, as well. Our Manager reports at least annually to the full Board regarding the steps our Manager is taking to protect the Company and its assets from cyber attacks or intrusions. Our Manager has developed a comprehensive framework that is designed to prevent, detect, address and mitigate the risk of unauthorized access, misuse, computer viruses and other events that could have a security impact. This framework includes an incident response plan and a third party vendor management program. Board Meetings and Annual Meeting of Stockholders The Board held 3518 meetings (including regularly scheduled and special meetings) in 2020,2021, and each director who was a director in 20202021 attended at least 75% of the aggregate of (i) the total number of meetings of the Board (held during the period for which such person has been a director) and (ii) the total number of meetings held by all committees of the Board on which such person served (during the periods that such person served). We have a
policy that directors attend each annual meeting of stockholders. All of our directors serving in June 2020May 2021 attended the 20202021 annual meeting of stockholders. The independent directors have the opportunity to meet in executive session at least once per quarter during a regularly scheduled board meeting without management. As the lead independent director, Mr. LaManna presidespresided at the executive sessions of the independent directors.directors in 2021. Committee Membership The current committees of the Board are the Audit Committee, the Compensation Committee, and the Nominating and Corporate Governance Committee. The table below provides current Board committee membership information.information and information regarding the number of meetings held in 2021.
| Director | Director | Audit | Compensation | Nominating and Corporate Governance | Director | Audit | Compensation | Nominating and Corporate Governance | Debra Hess | Debra Hess | (1) | | Debra Hess | C, E | M | - | Joseph LaManna | | | | Dianne Hurley | Dianne Hurley | | - | Dianne Hurley | M, E | — | M | Joseph LaManna(1) | | Joseph LaManna(1) | M | C, L | Peter Linneman | Peter Linneman | - | | | Peter Linneman | - | C | M | Number of Meetings Held in 2020 | 5 | 7 | | Number of Meetings Held in 2021 | | Number of Meetings Held in 2021 | 5 |
M - Member C - Chairman E - Audit Committee Financial Expert L - Lead Independent Director
(1) Ms. Hess servesMr. LaManna is not standing for reelection at the Annual Meeting.
The table below provides our Board committee memberships to be effective as of May 2, 2022 should all of our audit committee financial expert.nominees be elected at the Annual Meeting. | | | | | | | | | | | | Director | Audit | Compensation | Nominating and Corporate Governance | Debra Hess | M, E | M | C, L | Dianne Hurley | C, E | — | M | Matthew Jozoff | M | M | — | Peter Linneman | — | C | M |
M - Member C - Chairman E - Audit Committee Financial Expert L - Lead Independent Director
Board Committees Below is a description of each committee of the Board. Each of the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee has adopted a charter, which is available at our website at www.agmit.com under the heading “Investor Relations – Corporate Governance.” Audit Committee Our Audit Committee consists of Mses. Hess and Hurley and Mr. LaManna, each of whom is an independent director and “financially literate” under the rules of the NYSE. Our Board also determined that Mr. Jozoff, as a prospective Audit Committee member, is an independent director and “financially literate” under the rules of the NYSE. Ms. Hess chairs our Audit Committee and serves as oureach of Mses. Hess and Hurley are audit committee financial expert,experts, as that term is defined by the SEC. Our Audit Committee assists the Board in overseeing:
•our internal controls over financial reporting;
•our accounting and financial reporting processes;
•the integrity and audits of our consolidated financial statements;
•our compliance with legal and regulatory requirements;
•our information technology security program;
•the qualifications and independence of our independent auditors; and
•the performance of our independent and internal auditors. Our Audit Committee is responsible for engaging independent registered public accounting firms, reviewing with the independent registered public accountants the plans and results of the audit engagement, approving professional services provided by the independent registered public accountants, reviewing the independence of the independent registered public accountants, considering the range of audit and non-audit fees, and reviewing the adequacy of our internal controls over financial reporting. Compensation Committee Our Compensation Committee consists of Messrs. Linneman and LaManna and Ms. Hess, each of whom is an independent director under the rules of the NYSE. Our Board also determined that Mr. Jozoff, as a prospective
Compensation Committee member, is an independent director under the rules of the NYSE. Dr. Linneman chairs our Compensation Committee. The responsibilities of our Compensation Committee include evaluating the performance of our executive officers; reviewing the compensation payable by us, if any, to our executive officers; evaluating the performance of our Manager; reviewing the equity compensation and fees payable to our Manager under the management agreement; administering our equity incentive plans and any other compensation plans, policies and programs; discharging our Board’s responsibilities relating to compensation payable to our independent directors; and reviewing and recommending to the Board compensation plans, policies and programs. Nominating and Corporate Governance Committee Our Nominating and Corporate Governance Committee consists of Messrs. LaManna and Linneman and Ms. Hess,Hurley, each of whom is an independent director under the rules of the NYSE. Our Board also determined that Ms. Hess, as Nominating and Corporate Governance Committee Chair-elect, is an independent director under the rules of the NYSE. Mr. LaManna chairs our Nominating and Corporate Governance Committee. Our Nominating and Corporate Governance Committee is responsible for seeking, considering and recommending to our Board qualified candidates for election as directors and recommending a slate of nominees for election as directors at each annual meeting of stockholders. The committee also recommends to our Board the appointment of each of our executive officers. It also periodically prepares and submits to our Board for adoption the committee’s selection criteria for director nominees. It reviews and makes recommendations on matters involving the general operation of our Board and our corporate governance and annually recommends to our Board the nominees for each committee of the Board. In addition, the committee annually conducts an evaluation of the performance of our Board, both individually and collectively. Other Committees Our Board may from time to time establish other committees to facilitate the management of the Company. Stock Ownership Guidelines Our minimum share ownership guidelines for directors require that each director acquire and maintain a minimum number of shares equal to four times the basic annual cash retainer payable to non-employee directors within four years of becoming subject to the guidelines. From time to time, the Nominating and Corporate Governance Committee of the Board will review each director’s compliance with the guidelines and may grant exceptions to the guidelines as it deems appropriate. All of our directors are either currently in compliance with the minimum share ownership guidelines or are still within the four year grace period for compliance. Our minimum share ownership guidelines for executive officers require that our Chief Executive Officer, President, Chief Investment Officer and Chief Financial Officer acquire and maintain a minimum equity investment in the company of 15,0005,000 shares of our common stock. Any executive officer elected to an office subject to the minimum share ownership guidelines after the minimum share ownership guidelines became effective must be compliant within three years of the date of his or her election. Until the minimum equity investment is met, an executive officer subject to the guidelines must retain all of our common stock granted to him or her as compensation. From
time to time, the Nominating and Corporate Governance Committee of the Board will review each executive officer’s compliance with the guidelines and may grant exceptions to the guidelines as it deems appropriate and market-competitive on a case-by-case basis. All of our executive officers subject to the minimum share ownership guidelines are currently in compliance therewith. Policy Prohibiting Pledging and Hedging of Our Securities Our Policy Prohibiting Pledging and Hedging of AG Mortgage Investment Trust, Inc. Securities applies to each of our directors and executive officers, and states that each such person is prohibited from (i) making or maintaining any pledges of our securities or otherwise holding our securities in a margin account and (ii) engaging in any
hedging transactions with respect to our securities, including, without limitation, the use of financial instruments, such as prepaid variable forward contracts, equity swaps, collars or exchange funds. Compensation Committee Interlocks and Insider Participation Our Compensation Committee consists solely of the following independent, non-employee directors: Messrs. Linneman and LaManna and Ms. Hess. None of the members of our Compensation Committee, nor any prospective member of our Compensation Committee, is or has been an employee or officer of us or any of our affiliates. During 2020,2021, none of the Company's executive officers served on the compensation committee (or other committee serving an equivalent function) of another entity whose executive officers served on the Compensation Committee or Board. Communication with the Board and Independent Directors Our Board or any individual director may be contacted by any party via mail at the address listed below: Board of Directors AG Mortgage Investment Trust, Inc. 245 Park Avenue, 26th Floor New York, New York 10167 Attn: General Counsel We believe that providing a method for interested parties to communicate directly with our independent directors, rather than the full Board, provides a confidential, candid, and efficient method of relaying any interested party’s concerns or comments. As discussed above, our lead independent director is Mr. LaManna.LaManna and, effective as of May 2, 2022, our lead independent director will be Ms. Hess. The independent directors can be contacted by any party via mail at the address listed below: Independent Directors AG Mortgage Investment Trust, Inc. 245 Park Avenue, 26th Floor New York, New York 10167 Attn: General Counsel The Company does not screen mail except when warranted for security purposes, and all correspondence will be forwarded to our Board, any specified committee or individual directors as specified in the correspondence.
CORPORATE SOCIAL RESPONSIBILITY
Angelo Gordon is committed to corporate social responsibility. We recognize the importance of developing a strong corporate social responsibility program, including environmental, social and governance ("ESG") policies, and believe that the implementation of such a program benefits Angelo Gordon's employees and supports long-term value creation for our stockholders. Angelo Gordon's values of integrity, fairness, honesty and entrepreneurship guide our business and commitment to social responsibility. Angelo Gordon's corporate social responsibility strategy consists of four pillars:
•Diversity & Inclusion; •Operational Impact / Governance; •Responsible Investing; and •Community Engagement.
Diversity & Inclusion
Angelo Gordon's diversity and inclusion policies are organized around three pillars: (1) education, (2) attraction, and (3) retention / development.
Educate: Angelo Gordon regularly conducts diversity and inclusion trainings with leadership and across the firm, promoting a diverse and inclusive culture where all voices are welcomed and heard.
Attract: Angelo Gordon supports diverse recruitment, opportunity, and retention through its active partnerships with diverse recruitment organizations and diversity and inclusion-focused initiatives, such as:
•Girls Who Invest; •Seizing Every Opportunity (SEO); •FastTrack; •iMentor; •Posse Foundation; and •Toigo Foundation.
Hiring managers at Angelo Gordon are expected to expand diversity in prospective candidate pools and are required to attend additional diversity and inclusion training and workshops.
Retain and Develop: The AG Diversity Council and AG Women's Network drive networking, awareness and engagement initiatives.
Further, our Board is committed to seeking highly qualified individuals from minority groups (including gender and ethnically / racially diverse groups) to include in the pool from which board nominees are selected. One-third of the members of our Board of Directors are female.
Operational Impact / Governance
We are committed to good corporate governance practices that strengthen alignment of interests with our stockholders. We have adopted and adhere to a Code of Business Conduct and Ethics covering, among other things, compliance with laws, rules and regulations, avoidance and management of conflicts of interest, strict prohibitions against insider trading, usurping corporate opportunities, and discrimination and harassment, in addition to general provisions ensuring that employees act honestly and ethically. As an extension of these policies, we maintain a whistleblower / ethics hotline with anonymous reporting options. This code is applicable to our directors and to all of Angelo Gordon's employees who provide services to us, including our officers.
Further examples of our strong governance framework include:
•2/3 of our Board members are independent and our Board establishes a lead independent director; •33% of our Board members are female; •We are committed to Board refreshment (5.2 years average director tenure following the Annual Meeting); •Shares received as director compensation are subject to a lock-up for the duration of such director's tenure; •Established common stock ownership minimums, with a policy prohibiting pledging or hedging; •We do not have a classified board and we hold annual elections of directors; •Adopted Corporate Governance Guidelines & Code of Business Conduct and Ethics; •Our Board and each committee conduct annual self-assessments;
•Our Board committees are comprised solely of independent directors; and •Regular meetings of independent directors without management and with independent auditors.
In addition, Angelo Gordon embraces opportunities to reduce our environmental impact. Angelo Gordon has invested in best-in-class compliance, risk and internal control processes and platforms, delivered by teams with deep industry and firm experience. Angelo Gordon has robust cyber-security monitoring and action plans, safeguarding investor and firm information and data. Angelo Gordon is also a signatory of the Standard Board for Alternative Investments (SBAI).
Further, our principal office is headquartered in a LEED Gold Certified Building with close access to a major public transportation hub, enabling Angelo Gordon's employees to commute efficiently.
Responsible Investing
Angelo Gordon promotes responsible investing principles in many ways, including:
•Established ESG policy for its residential and consumer debt business which integrates environmental, social and governance factors into our investment strategy; •Participated in industry recognized transactions generated by its partnerships with community development financial institutions (CDFIs); •Became a signatory to the UN Principles of Responsible Investing (PRI) in October 2021; and •Implemented a robust due diligence process, including an anti-money laundering (AML) policy, with established Know-Your-Customer (KYC) procedures. ◦Utilizing industry tools to mitigate environmental, geographic, and climate-related risks.
In addition, in December 2021, Angelo Gordon hired a dedicated Head of ESG to lead and drive a best-in-class, strategic approach to ESG integration and opportunity across Angelo Gordon's global platform.
Community Engagement
Angelo Gordon has a long history of supporting its employees' dedication of time, resources and passion in having a positive impact on the communities in which they live and work. Angelo Gordon's philanthropic platform, AG Gives, focuses on:
•Volunteering opportunities for employees through partnerships such as: ◦NYC Cares ◦Habitat for Humanity ◦SuitUp ◦iMentor •Charitable giving to support community organizations and initiatives and other non-profits through financial, in-kind and other donations, including clothing and food drives.
◦Angelo Gordon supports employee charitable contributions with a targeted matching program
•Educating Angelo Gordon employees about issues facing different communities, how various organizations are responding, and how employees can get involved or provide support.
PROPOSAL 2: RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Audit Committee of our Board has appointed the accounting firm of PricewaterhouseCoopers LLP as our independent registered public accountants for the year ending December 31, 2021,2022, and recommended the ratification of this appointment by our stockholders. PricewaterhouseCoopers LLP has served as our independent registered public accountants since our initial public offering in July 2011 and is considered by our management to be well qualified. We expect that a representative of PricewaterhouseCoopers LLP will be present at the Annual Meeting to respond to appropriate questions. RECOMMENDATION OF THE BOARD: THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2021.2022. The voting requirements for this proposal are described above and in the “General Information About The Annual Meeting And Voting” section.
AUDIT COMMITTEE MATTERS Fee Disclosure The following is a summary of the fees billed to the Company by PricewaterhouseCoopers LLP for professional services rendered for the fiscal years ended December 31, 20202021 and 2019:2020: | | | Fiscal Year Ended December 31, | | Fiscal Year Ended December 31, | | | 2020 | 2019 | | 2021 | 2020 | Audit Fees(1) | Audit Fees(1) | $1,401,475 | $1,466,048 | Audit Fees(1) | $1,049,380 | $1,401,475 | Audit-Related Fees | Audit-Related Fees | — | Audit-Related Fees | — | Tax Fees(2) | Tax Fees(2) | 199,100 | 214,600 | Tax Fees(2) | 184,500 | 199,100 | All Other Fees | All Other Fees | — | All Other Fees | — | | | | | | Total | Total | $1,600,575 | $1,680,648 | Total | $1,233,880 | $1,600,575 |
(1) “Audit Fees” consist of fees and related expenses for professional services rendered in connection with the audits of our consolidated financial statements performed by PricewaterhouseCoopers LLP. Audit Fees include fees related to the audit of internal control over financial reporting, the review of the Company’s quarterly reports on Form 10-Q, and the issuance of consents and comfort letters related to equity offerings and registration statements. In 20202021 and 2019,2020, fees and expenses related to the issuance of consents and comfort letters included in the total Audit Fees were $39,000$90,000 and $125,000,$39,000, respectively. (2) “Tax Fees” consist of fees and related expenses for professional services for tax compliance, tax advice and tax planning. These services included assistance regarding federal and state tax compliance and tax planning and structuring. Pre-Approval Policy All audit, tax and other services provided to us were reviewed and pre-approved by the Audit Committee in accordance with the terms of the Audit Committee’s charter. In addition, our Audit Committee has established a pre-approval policy pursuant to which a list of specific services within certain categories of services, including audit, audit-related, tax and other services, are specifically pre-approved, subject to an aggregate maximum fee established annually and payable by the Company for each category of pre-approved services. Any service that is not included in the approved list of services must be separately pre-approved by the Audit Committee. In addition, all audit and permissible non-audit services in excess of the pre-approved fee level, whether or not included on the pre-approved list of services, must be separately pre-approved by the Audit Committee.
AUDIT COMMITTEE REPORT The audit committee (the “Audit Committee”) of the board of directors (the “Board”) of AG Mortgage Investment Trust, Inc. (the “Company”) has furnished the following report to stockholders of the Company in accordance with rules adopted by the Securities and Exchange Commission (the “SEC”). The Audit Committee is composed of three directors, each of whom is independent and "financially literate" under the rules of the NYSE. The Board has determined that each of Ms. Hess and Ms. Hurley is an “audit committee financial expert” as defined by the rules of the SEC. The Audit Committee has the duties and powers described in its written charter adopted by the Board ofon February 26, 2020. A copy of the charter is available on the Company's website at www.agmit.com. The Company’s management has primary responsibility for establishing and maintaining effective internal controls over financial reporting, preparing the Company’s consolidated financial statements in accordance with U.S. generally accepted accounting principles, and managing the public reporting process. PricewaterhouseCoopers LLP, the Company’s independent registered public accounting firm (“PwC”), is responsible for forming and expressing opinions on the conformity of the Company’s audited consolidated financial statements in accordance with U.S. generally accepted accounting principles, in all material respects, and on the effectiveness of the Company’s internal controls over financial reporting. The Audit Committee reviewed and discussed with management the Company’s audited consolidated financial statements for the year ended December 31, 2020,2021, including a discussion of the acceptability and appropriateness of significant accounting policies and management’s assessment of the effectiveness of the Company’s internal controls over financial reporting. The Audit Committee discussed with the Company’s independent registered public accounting firm matters related to the conduct of the audits of the Company’s consolidated financial statements and internal controls over financial reporting. The Audit Committee also reviewed with management and the independent registered public accounting firm the reasonableness of significant estimates and judgments made in preparing the consolidated financial statements, as well as the clarity of the disclosures in the consolidated financial statements and related notes. The Audit Committee does not itself prepare financial statements or perform audits, and its members are not auditors or certifiers of the Company's financial statements. The Audit Committee has discussed with the Company’s independent registered public accounting firm the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board (“PCAOB”). The Audit Committee has also received and reviewed the written communications from PwC as required by the applicable requirements of the PCAOB regarding PwC's communications with the Audit Committee concerning independence and has discussed with PwC its independence. Based on the reviews and discussions described in this report, and subject to the limitations on the role and responsibilities of the Audit Committee referred to in this report and in the Company’s Audit Committee charter, the Audit Committee recommended to the Board (and the Board approved) the audited consolidated financial statements and related notes be included in the Annual Report on Form 10-K for the year ended December 31, 20202021 for filing with the SEC. The Audit Committee also selected and appointed PwC as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 20212022 and is presenting this appointment to the Company’s stockholders for ratification.
By the Audit Committee Debra Hess (Chair) Dianne Hurley Joseph LaManna
PROPOSAL 3: APPROVAL ON AN ADVISORY BASIS OF OUR EXECUTIVE COMPENSATION At our 2018 annual meeting, we asked our stockholders to vote, on an advisory basis, to recommend the frequency with which we would provide future advisory votes on named executive officer compensation. At our 2018 annual meeting, 98% of our stockholders who voted on the “say on frequency” proposal voted, on an advisory basis, to hold future advisory votes on named executive officer compensation each year. Taking into consideration the recommendation of the stockholders, our Board elected to hold advisory votes on named executive officer compensation each year. In the future, our Board may reconsider the frequency with which we hold advisory votes on named executive officer compensation. Our Board is committed to corporate governance best practices and recognizes the significant interest of stockholders in executive compensation matters. We are providing this advisory vote as required pursuant to the rules of the SEC. We are asking our stockholders to indicate their support for our named executive officer compensation as disclosed in this Proxy Statement. This vote is not intended to address any specific item of compensation, but rather the overall policies and practices that apply to the compensation of our named executive officers. We will ask our stockholders to vote “FOR” the following resolution at the Annual Meeting: “RESOLVED, that the stockholders approve, on an advisory basis, the compensation of the Company’s named executive officers, as disclosed in the Company’s Proxy Statement for the 20212022 Annual Meeting of Stockholders pursuant to the compensation disclosure rules of the SEC, including the Compensation Discussion and Analysis, the compensation tables and the other related disclosure.” While this vote is advisory and not binding on us or the Compensation Committee, it will provide information to us and the Compensation Committee regarding stockholder sentiment about our executive compensation policies and practices. Our Board and our Compensation Committee value the opinions of our stockholders. In the event there is a significant vote against the named executive officer compensation as disclosed in this Proxy Statement, we will consider our stockholders’ concerns, and the Compensation Committee will evaluate whether any actions are necessary to address those concerns. As described in detail under the heading “Executive Compensation” below, we are externally managed by our Manager, pursuant to the management agreement between our Manager and us. Our Manager pursuant to a delegation agreement dated as of June 29, 2011, has delegated to Angelo Gordon the overall responsibility of our Manager’s day-to-day duties and obligations arising under our management agreement. In 2020,2021, we did not have any employees whom we compensated directly with salary, other cash compensation or stock-based compensation. A portion of our named executive officers’ compensation was paid out of funds from management fees we pay to our Manager and the expense reimbursement we pay to our Manager. We have not paid, and do not intend to pay, any cash compensation to our named executive officers. We do not provide our named executive officers with pension benefits, termination payments or other incidental payments. RECOMMENDATION OF THE BOARD: THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE APPROVAL, ON AN ADVISORY BASIS, OF OUR EXECUTIVE COMPENSATION. The voting requirements for this proposal are described in the “General Information About the Annual Meeting and Voting” section above.
EXECUTIVE COMPENSATION
Named Executive Officers
Our named executive officers for 20202021 were:
| | | | | | | Name | | Title | David N. Roberts | | Chairman and Chief Executive Officer and President | Brian C. SigmanT.J. Durkin(1)
| | President | Anthony Rossiello | | Chief Financial Officer and Treasurer | T.J. DurkinNicholas Smith(1) | | Chief Investment Officer | Andrew Parks | | Chief Risk Officer | Raul E. MorenoJenny B. Neslin(2)
| | General Counsel and Secretary | Christopher D. Moore(3)(2) | | Former General Counsel and Secretary |
(1)Mr. Sigman resigned effective December 31, 2020. On December 30, 2020, the Board approved the appointment of Anthony W. Rossiello as Chief Financial Officer of the Company, effective on January 1, 2021. (2)Mr. Moreno resigned effective December 14, 2020.
(3)Mr. Moore was appointed interim General Counsel and Secretary effective December 14, 2020. On March 31, 2021, the Board approvedappointed Mr. Durkin, then serving as the appointmentCompany's Chief Investment Officer, as President of Jenny B.the Company and Mr. Smith as Chief Investment Officer of the Company, each effective on April 12, 2021. Mr. Durkin resigned as the Company's Chief Investment Officer effective April 12, 2021 to facilitate Mr. Smith's appointment.
(2) On March 31, 2021, the Board appointed Ms. Neslin as General Counsel & Secretary of the Company, effective on April 5, 2021. Mr. Moore resigned effective April 5, 2021 to facilitate Ms. Neslin's appointment.
Compensation Discussion and Analysis Our Compensation Discussion and Analysis describes our compensation program, objectives and policies for the executive officers named in this Proxy Statement and our executive officers generally. Overview of Compensation Program We have no employees. We are externally managed by our Manager, pursuant to a management agreement between our Manager and us. Because the management agreement provides that our Manager is responsible for managing our affairs, our executive officers, all of whom are employees of our Manager or an affiliate of our Manager, do not receive cash compensation from us. Instead, our executive officers are compensated by our Manager or an affiliate of our Manager, in part, with the management fee we pay to our Manager and with the expense reimbursement we provide to our Manager related to compensation. The management agreement provides for our reimbursement to the Manager of the allocable share of annual base salary, bonus, and any related withholding taxes and employee benefits paid to our chief financial officer, general counsel and other non-investment personnel based on the percentage of time those individuals spent on our affairs or another agreed upon methodology fair to the Company. We do not determine the compensation payable to personnel, including our executive officers, by our Manager or its affiliates. Our Manager or its affiliates, in their discretion, determine the levels of base salary, cash incentive compensation and other benefits earned by our executive officers. Cash and Other Compensation Our named executive officers and other personnel who conduct our business are employees of our Manager or its affiliates. Accordingly, we do not pay or accrue any salary or bonus for our executive officers. Equity-Based Compensation Our Compensation Committee may, from time to time, grant equity awards in the form of restricted stock, stock options, restricted stock units or other types of awards to our Manager or to our named executive officers pursuant to
our equity incentive plans. These awards are designed to align the interests of our named executive officers with those of our stockholders by allowing our named executive officers to share in the creation of value for our
stockholders through stock appreciation and dividends. These equity awards are generally subject to vesting requirements over a number of years and are designed to promote the retention of management and to achieve strong performance for our Company. These awards further provide flexibility to us in enabling our Manager to attract, motivate and retain talented individualsindividuals.
Notwithstanding the foregoing, following the execution of the Third Amendment to our management agreement in November 2021 related to the incentive fee, the Compensation Committee no longer expects to continue its historical practice of making periodic equity grants to the Manager pursuant to the Company's 2021 manager equity incentive plan. We believe our equity-based compensation policies are particularly appropriate since we are an externally managed real estate investment trust, or REIT. REIT regulations require us to pay at least 90% of our earnings to stockholders as dividends. We have not and do not intend to either backdate stock options or grant stock options retroactively. Presently, we do not have designated dates on which we grant stock option awards. We do not intend to time stock options grants with our release of material nonpublic information for the purpose of affecting the value of executive compensation.
To further align the interests of management and our stockholders, Angelo Gordon, an affiliate of our Manager may, in its discretion, grant to its employees separate awards of shares of our common stock that Angelo Gordon and its affiliates acquired from us, including shares acquired in connection with the completion of our initial public offering, received from us in lieu of cash for a portion of the first and second quarters of 2020 base management fees or acquired in our public common stock offering completed in November 2021 when the Manager purchased 700,000 shares at the public offering price not subject to any underwriting discounts or commissions. Awards based on shares of our common stock made by our Manager to our named executive officers are generally subject to time-based vesting conditions and are not made pursuant to our Company's equity incentive plans. Our compensation committee is aware of the terms of equity awards made by Angelo Gordon out of the shares of our common stock our Manager previously acquired from us. Angelo Gordon determines the amounts of any awards of shares of our common stock held by Angelo Gordon to our named executive officers and other recipients. In connection with 2021 bonus compensation, in January 2022, Angelo Gordon granted an aggregate of 607,500 shares of our common stock to our executive officers and other employees of our Manager or an affiliate of our Manager providing services to us. As of the date of this proxy statement, Angelo Gordon holds 365,791 shares of our common stock that may be granted to our executive officers and its employees. Compensation in 20202021 We did not pay any compensation of any kind to our named executive officers during the year ended December 31, 2020.2021. We do not provide any of our executive officers with any cash compensation, pension benefits or nonqualifiednon-qualified deferred compensation plans. The compensation that we reimbursed to our Manager for our allocable share of the 20202021 compensation of our Chief Financial Officer, Chief Risk Officer and our General Counsel is discussed in this Proxy Statement in “Other Matters – Certain Relationships and Related Transactions – Management Agreement.” For 2020,2021, the named executive officers as a group received aggregate salaries of $0.5$0.8 million and aggregate performance-based incentive bonuses for 20202021 of $2.6$8.2 million from the Manager, based on the percentage of time such officers spent managing affairs of the Company. These amounts collectively represent 43%132% of the aggregate management fees the Company paid to the Manager during 2020.2021. On an aggregated basis, based on the percentage of time the named executive officers spent managing affairs of the Company, such officers received 16%8.7% of their total compensation in the form of base salaries and the remaining 84%91.3% in the form of performance-based incentive bonuses. The performance-based incentive bonuses for 2021 include awards of our common stock made by our Manager to certain of our named executive officers. Such awards are subject to time-based vesting conditions.
Our Manager and its affiliates do not use a specific formula to calculate the variable or incentive pay portion of our named executive officers’ compensation. Additionally, our Manager and its affiliates do not explicitly set future
variable or incentive compensation on the basis of the compensation the named executive officers earned in prior years. Generally, in determining each executive’s variable or incentive pay, our Manager and its affiliates will take into account factors such as the individual’s position, his or her contribution to our Company and market practices. We did not, nor did our Manager or its affiliates, retain a compensation consultant in connection with the compensation of our named executive officers in 2020.2021.
Summary Compensation Table
Our named executive officers are not our employees and are not paid compensation by us. We have not paid any compensation to our named executive officers for the years ended December 31, 2018,2019, December 31, 20192020 or December 31, 2020.2021.
Grants of Plan Based Awards in 20202021 We did not grant any shares of restricted stock, options, restricted stock units or other incentive compensation to our named executive officers during the year ended December 31, 2020.2021. Outstanding Equity Awards at Fiscal Year-End As of December 31, 2020,2021, there was no outstanding award of equity made to any of our named executive officers.
Options Exercised and Stock Vested As of December 31, 2020,2021, we had not issued any outstanding options to purchase shares of common stock to any of our named executive officers. No option to purchase shares of our common stock or restricted shares of common stock granted by the Company to any of our named executive officers vested in 2020.
As previously disclosed, on July 1, 2017, we granted 60,000 restricted stock units to our Manager that vested ratably over a three year period ending on July 1, 2020. Our Manager allocated 21,000 of the 60,000 restricted stock units to certain of our named executive officers - 5,000 restricted stock units to David N. Roberts, 10,000 restricted stock units to T.J. Durkin, 2,000 restricted stock units to Brian C. Sigman, and 4,000 restricted stock units to Raul E. Moreno. Each allocation decision made by the Manager was reported to and discussed with our Board. The remaining unvested 7,002 of those units allocated to our named executive officers vested on July 1, 2020.2021.
Pension Benefits We do not provide any of our named executive officers with pension benefits. Nonqualified Deferred Compensation We do not provide any of our named executive officers with any nonqualified deferred compensation plans. Potential Payments Upon Termination of Employment We do not have any employment agreement with any of our named executive officers and are not obligated to make any payment to them upon termination of employment. Potential Post-Employment Payments and Payments on a Change in Control We do not have any employment agreements with any of our named executive officers and are not obligated to make any post-employment payments to them or any payments upon a change of control.
Compensation Policies and Practices as They Relate to Risk Management We did not pay any compensation of any kind to our named executive officers and did not have any employees during the year ended December 31, 2020.2021. Therefore, our compensation policies and practices are not reasonably likely to have a material adverse effect on us. We pay our Manager a management fee that is a percentage of our stockholders’ equity, as that term is defined in the management agreement. We believe this management fee structure helps guard against our Manager making higher risk investments to achieve higher management fees as might be the case if the management fee was based on total assets or returns on investments. In addition, beginning with the 2023 calendar year, our Manager has the ability to earn an incentive fee that is based, in large part, upon our
achievement of targeted levels of adjusted net income, as calculated in accordance with the management agreement. The incentive fee is computed and paid annually generally on adjusted net income that includes unrealized gains driven by mark-to-market increases on investments. The incentive fee is payable in cash or, at the Board's option, in shares of our common stock. We have designed our compensation policy in an effort to provide the proper incentives to our executive officers and our Manager to maximize our performance in order to serve the best interests of our stockholders. These compensation policies and practices do not place undue emphasis on or incentivize the maximization of net income at the expense of other criteria, such as preservation of capital. Our Board monitors our compensation policies and practices to determine whether our risk management objectives are being met.
COMPENSATION COMMITTEE REPORT The Compensation Committee of the Board of AG Mortgage Investment Trust, Inc. (the "Company") has reviewed and discussed the Compensation Discussion and Analysis contained in this Proxy Statement with management of the Company. Based on that review and discussion, the Compensation Committee recommended to the Board (and the Board has approved) that the Compensation Discussion and Analysis be included in the Company’s Proxy Statement. By the Compensation Committee Peter Linneman (Chair) Debra Hess Joseph LaManna
DIRECTOR COMPENSATION Director Compensation Our Compensation Committee is responsible for discharging our Board’s responsibilities relating to compensation payable to our non-employee directors. Our Compensation Committee annually evaluates compensation paid to our non-employee directors and may, from time to time, recommend to the full Board changes to such compensation as appropriate. Our Compensation Committee did not retain a compensation consultant in connection with establishing the compensation paid to our non-employee directors for 2020.2021. The Company does not pay director compensation to directors who are also employees of our Manager or its affiliates (i.e., David N. Roberts and T.J. Durkin).
Each member of our Board who is not an employee of our Manager or its affiliates received annual compensation for service as a director during 20202021 as follows: •Each non-employee director receives an annual base fee of $160,000,$150,000, of which $80,000$70,000 is payable in unrestricted cash and the other $80,000 is payable in shares of restricted common stock. As discussed further below, our non-employee directors received shares of our common stock in lieu of the cash component of the annual base fee for the quarter ended March 31, 2020.
•The lead independent director receives an additional annual fee of $25,000.
•In addition, the chairmanchair of our Audit Committee receives an annual fee of $25,000, and the chairs of our Compensation and Nominating and Corporate Governance Committees each receivesreceive an annual fee of $10,000. In light of the COVID-19 pandemic and the related significant market disruption and volatility experienced during 2020, with the approval of all of our non-employee directors, our Board determined to pay the cash component of the annual base fee to non-employee directors for the quarter ended March 31, 2020 in shares of the Company’s common stock. In addition, effective January 1, 2021 upon recommendation by our Compensation Committee, our Board approved a decrease in the cash component of the annual base fee payable to non-employee directors to $70,000 from $80,000.
2020 Director Compensation Table
The following table summarizes the compensation that we paid to our non-employee directors for their services in fiscal year 2020:2021: | | | | | | | | | | | | Name | Fees Earned or Paid in Cash | Stock Awards | Total | Arthur Ainsberg(1) | $17,379 | $57,375 | $74,754 | Andrew L. Berger(2) | 1 | 38,797 | 38,798 | Debra Hess | 78,760 | 106,240 | 185,000 | Joseph LaManna | 86,259 | 107,101 | 193,360 | Peter Linneman | 67,508 | 102,492 | 170,000 | Dianne Hurley(3) | 6,777 | 6,775 | 13,552 | David N. Roberts | — | — | — | T.J. Durkin | — | — | — | Brian C. Sigman(4) | — | — | — |
| | | | | | | | | | | | Name | Fees Earned or Paid in Cash(1) | Stock Awards | Total | Debra Hess | $95,012 | $79,988 | $175,000 | Joseph LaManna | 105,012 | 79,988 | 185,000 | Peter Linneman | 80,012 | 79,988 | 160,000 | Dianne Hurley | 70,012 | 79,988 | 150,000 |
(1)Mr. Ainsberg did not stand for re-election at the 2020 annual meeting Amounts include cash in lieu of stockholders. (2)Mr. Berger resigned from the Board on March 25, 2020.
(3)Ms. Hurley was appointedfractional shares relating to the Board on December 1, 2020.
(4)Mr. Sigman did not stand for re-election atportion of the 2020 annual meeting of stockholders.compensation paid in stock.
The annual cash and equity compensation for our non-employee directors is paid quarterly in arrears in cash.arrears. The number of shares of restricted common stock to be issued each quarter to each non-employee director is determined based on the average of the high and low prices of the Company’s common stock on the New York Stock Exchange on the last trading day of each fiscal quarter. In addition, the restricted common stock issued to non-employee directors may not be sold or transferred during such director’s term of service on the Board.
Each member of our Board is also reimbursed for reasonable out-of-pocket expenses associated with service on the Board and Committee thereof and with attendance at or participation in board meetings or committee meetings, including reasonable travel expenses.
Equity Incentive Plans Information
We have adopted equity incentive plans to provide incentive compensation to attract and retain qualified directors, executive officers, advisors, consultants and other resources, including our Manager and personnel of our Manager and its affiliates.
The following table presents certain information about our equity incentive plans as of December 31, 2020:
| | | | | | | | | | | | 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 under Equity Incentive Plans (Excluding Securities Reflected in the First
Column of this Table) | Equity Incentive Plans Approved by Stockholders | — | $— | 1,879,680 | Equity Incentive Plans Not Approved by Stockholders | — | — | — | Total | — | $— | 1,879,680 |
COMMON STOCK OWNERSHIP OF EXECUTIVE OFFICERS, DIRECTORS AND SIGNIFICANT STOCKHOLDERS Ownership of Common Stock by Directors and Executive Officers The following table sets forth, as of March 29, 2021,8, 2022, beneficial ownership of the Company’s common stock by each named executive officer, each director and director nominee, and by all directors and executive officers as a group. Beneficial ownership reported in the below table has been presented in accordance with SEC rules. Unless otherwise indicated, all directors and executive officers have sole voting and investment power with respect to the shares shown, and the address of each beneficial owner reported in the below table is c/o AG Mortgage Investment Trust, Inc., 245 Park Avenue, 26th Floor, New York, New York 10167. | Name of Beneficial Owner | Name of Beneficial Owner | Shares Beneficially Owned | Percent of Class(1) | Name of Beneficial Owner | Shares Beneficially Owned | Percent of Class(1) | David N. Roberts | David N. Roberts | 352,216 | * | David N. Roberts | 451,034 | 1.9% | T.J. Durkin | T.J. Durkin | 68,500 | * | T.J. Durkin | 272,832 | 1.1% | Brian C. Sigman | 45,500 | * | | Raul E. Moreno(2) | 5,407 | * | | Andrew Parks | — | | Debra Hess | | Debra Hess | 21,994 | * | Dianne Hurley | | Dianne Hurley | 7,651 | * | Matthew Jozoff | | Matthew Jozoff | — | Peter Linneman | Peter Linneman | 60,722(3) | * | Peter Linneman | 27,136(2) | * | Joseph LaManna | Joseph LaManna | 70,111 | * | Joseph LaManna | 46,932 | * | Debra Hess | 45,296 | * | | Dianne Hurley | 2,266 | * | | Christopher D. Moore | — | | All directors and executive officers as a group (13 persons) | 650,018 | 1.40% | | Nicholas Smith | | Nicholas Smith | 166,666 | * | Andrew Parks | | Andrew Parks | — | Anthony Rossiello | | Anthony Rossiello | 33,334 | * | Jenny B. Neslin | | Jenny B. Neslin | 50,000 | * | All directors and executive officers as a group (11 persons) | | All directors and executive officers as a group (11 persons) | 1,077,579 | 4.5% |
* Represents ownership of less than one percent. (1)As of March 29, 2021,8, 2022, we had 46,503,43923,915,293 shares of our common stock outstanding. (2)Based on information available to the Company as of December 14, 2020. (3)All shares owned by Peter Linneman are held jointly with his spouse.
Ownership of Common Stock by Certain Significant Stockholders As of March 29, 2021,8, 2022, unless otherwise indicated below, the following are beneficial owners of more than five percent of our outstanding common stock: | | | | | | | | | Name and Address of Beneficial Owner | Shares Beneficially Owned
| Percent of Class(1)
| EJF Capital LLC
2107 Wilson Boulevard
Suite 410
Arlington, VA 22201 | 2,812,388(2)
| 6.05% |
| | | | | | | | | Name and Address of Beneficial Owner | Shares Beneficially Owned | Percent of Class(1) | Hill Country Asset Management, LP(2) | 1,882,468 | 7.9% | Beach Point Capital Management LP(3) | 1,387,609 | 5.8% |
(1)As of March 29, 2021,8, 2022, we had 46,503,43923,915,293 shares of our common stock outstanding. (2)Information obtained solely by reference to the amended Schedule 13G/A13G filed with the SEC on March 29, 2021January 31, 2022 by EJF Capital LLC.Hill Country Asset Management, LP ("Hill Country"). Of the reported shares, EJF Capital LLCHill Country reported that it has sole voting power for 0 shares, shared voting power for 2,812,3881,882,468 shares, sole dispositive power for 0 shares and shared dispositive power for 2,812,3881,882,468 shares. The address of the principal business office of Hill Country, Master Fund, Mr. Olson and Mr. Kuhn is c/o Hill Country Asset Management L.P., 2770 US Highway 290, Dripping Springs, TX 78620. (3)
PROPOSAL 4: APPROVAL OF THE AG MORTGAGE INVESTMENT TRUST, INC. 2021 MANAGER EQUITY INCENTIVE PLAN
Background to the Proposal
The Company adopted the AG Mortgage Investment Trust, Inc. Manager Equity Incentive Plan on July 6, 2011 (the “2011 Manager Plan”), which will automatically terminate on July 6, 2021. The Board believes that the 2011 Manager Plan has benefited the Company by providing incentive compensation to attract and retain qualified directors, executive officers, advisors, consultants and other personnel, including our Manager and affiliates and personnel of our Manager and its affiliates.
Pursuant to the Company’s 2020 Equity Incentive Plan, which became effective as of April 15, 2020 following approval by our stockholders at the Company’s 2020 annual stockholders meeting, the Company is not permitted to issue any shares of our common stock under the 2011 Manager Plan. In order to continue the ability to provide the incentive compensation opportunities available under the 2011 Manager Plan, the Board, on April 7, 2021, adopted the AG Mortgage Investment Trust, Inc. 2021 Manager Equity Incentive Plan (the “2021 Manager Plan”), subject to the approval of shareholders. The Board believes the 2021 Manager Plan will benefit the Company in the same manner as the 2011 Manager Plan. If the 2021 Manager Plan is not approved by shareholders, then the Company will no longer be able to grant equity awards to the Manager as part of its incentive compensation program. If the 2021 Manager Plan is approved by shareholders, outstanding awards previously granted under the 2011 Manager Plan will remain in effect subject to their original terms, but no additional awards will be granted under the 2011 Manager Plan after the 2021 Manager Plan becomes effective.
RECOMMENDATION OF THE BOARD:
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE APPROVAL OF THE 2021 MANAGER EQUITY INCENTIVE PLAN.
The voting requirements for this proposal are described in the “General Information About the Annual Meeting and Voting” section above.
Shares Available and Outstanding
The Company maintains two equity incentive plans, the 2011 Manager Plan and the 2020 Equity Incentive Plan. The table below summarizes the shares outstanding and available under each plan as of March 31, 2021.
| | | | | | (as of March 31, 2021) | | Total common shares outstanding | 46,503,439 | | Shares remaining available for future grant under the 2011 Manager Plan(1)
| — | | Shares subject to outstanding full value awards under the 2011 Manager Plan | — | | Shares subject to outstanding stock options under the 2011 Manager Plan | — | | Shares remaining available for future grant under the 2020 Equity Incentive Plan | 1,857,350 | | Shares subject to outstanding full value awards under the 2020 Equity Incentive Plan | — | | Shares subject to outstanding stock options under the 2020 Equity Incentive Plan | — | |
(1) Following the effective date of the 2020 Equity Incentive Plan, no additional awards may be granted under the 2011 Manager Plan.
On March 31, 2021, the closing price for the Company’s common stock as reported on the NYSE was $4.03.
Summary of the 2021 Manager Plan
The summary of the 2021 Manager Plan appearing below is qualified in its entirety by the actual terms of the 2021 Manager Plan, a complete copy of which is attached to this Proxy Statement as Appendix A and incorporated by reference herein. As used in this summary, the term “Award” means an option, stock appreciation right, restricted stock, restricted stock unit, or other share-based award granted under the 2021 Manager Plan. Notwithstanding the adoption of the 2021 Manager Plan by the Board and its approval by shareholders, no Award may be granted, and no shares of common stock may be issued, pursuant to the 2021 Manager Plan before approval by the shareholders.
Administration
The Compensation Committee, as appointed by our Board, has the full authority (1) to administer and interpret the 2021 Manager Plan, (2) to authorize the granting of Awards, (3) to determine the number of shares of common stock to be covered by each Award, (4) to determine the terms, provisions and conditions of each Award (which may not be inconsistent with the terms of the applicable equity incentive plan), (5) to prescribe the form of instruments evidencing such Awards, and (6) to take any other actions and make all other determinations it deems necessary or appropriate in connection with the 2021 Manager Plan or the administration or interpretation thereof; however, neither the Compensation Committee nor the Board may take any action under the 2021 Manager Plan that would result in a repricing of any stock option without having first obtained the consent of our stockholders. The Compensation Committee will have authority to grant of stock options, stock appreciation rights, restricted shares of common stock, restricted stock units, dividend equivalent rights and other equity-based awards to the Manager. As used in this summary, the term “administrator” means the Compensation Committee.
Eligibility
Only our Manager is eligible to participate in the 2021 Manager Plan.
Share Authorization
The maximum aggregate number of shares of common stock that may be made subject to Awards under the 2021 Manager Plan is 1,720,275 shares of common stock. The potential dilution resulting from issuing all 1,720,275 shares of common stock authorized under the 2021 Manager Plan, combined with shares available for future grants under our 2020 Equity Incentive Plan would be approximately 7.7% on a fully-diluted basis as of March 31, 2021. As of March 31, 2021, there were no shares subject to outstanding awards under our 2020 Equity Incentive Plan or our 2021 Manager Plan.
If any vested Award under the 2021 Manager Plan is paid or otherwise settled without the issuance of shares of common stock, or any share of common stock is surrendered to or withheld by us as payment of the exercise price of an Award and/or withholding taxes in respect of an Award, the shares of common stock that were subject to such Award will not be available for re-issuance under the 2021 Manager Plan.
If any Award under the 2021 Manager Plan is cancelled, forfeited or otherwise terminated without the issuance of shares of common stock (except as described in the immediately preceding sentence), the shares of common stock that were subject to such Award will be available for re-issuance under the 2021 Manager Plan.
In the event the Compensation Committee determines any dividend or other distribution (whether in the form of cash, common stock, or other property), recapitalization, stock split, reverse split, reorganization, merger, consolidation, spin-off, combination, repurchase, or share exchange, or other similar corporate transaction or event, affects the common stock such that an adjustment is appropriate in order to prevent dilution or enlargement of the rights of participants under the 2021 Manager Plan, then the Compensation Committee will make equitable changes or adjustments to any or all of: (i) the number and kind of shares of common stock or other property (including cash) that may thereafter be issued in connection with Awards; (ii) the number and kind of shares of common stock or other property (including cash) issued or issuable in respect of outstanding Awards; (iii) the exercise price, base price or purchase price relating to any Award and (iv) the performance goals, if any, applicable to outstanding
Awards. In addition, the Compensation Committee may determine that any such equitable adjustment may be accomplished by making a payment to the Award holder, in the form of cash or other property (including but not limited to shares of common stock). Awards under the 2021 Manager Plan are intended to either be exempt from, or comply with, Section 409A of the U.S. Internal Revenue Code of 1986 (the “Code”).
Awards
Options. The administrator, consistent with the terms of the 2021 Manager Plan, will prescribe the terms of each option granted to the Manager. The option price cannot be less than the fair market value of the shares of common stock on the date the option is granted. The administrator will determine the method and form by which the option price is paid. Such form may include, without limitation, cash, exchange of shares of common stock previously owned by the Manager, through a “broker cashless exercise” procedure approved by the administrator, or a combination of the above, in any case in an amount having a combined value equal to the option price; provided that the administrator may require that any shares of common stock exchanged by the Manager have been owned by the Manager for at least six months as of the date of exercise. In no event, will the 2021 Manager Plan permit a “reload feature” in which replacement stock options are issued to the Manager in exchange for shares of common stock held by the Manager upon exercise of an option. The maximum period in which an option may be exercised will be fixed by the administrator but cannot exceed ten years.
Stock Appreciation Rights. The administrator also is authorized to grant stock appreciation rights to the Manager under the 2021 Manager Plan. A stock appreciation right entitles the Manager to receive a payment of up to the amount by which the fair market value of a common share on the date of exercise of the stock appreciation right exceeds the fair market value of a common share on the date the stock appreciation right was granted. A stock appreciation right will be exercisable at such times and subject to such conditions as may be established by the administrator. The amount payable upon the exercise of a stock appreciation right may be settled in cash, shares of common stock or property. The maximum period in which a stock appreciation right may be exercised will be fixed by the administrator but cannot exceed ten years.
Restricted Stock. The 2021 Manager Plan also permits the grant of restricted stock to the Manager under the 2021 Manager Plan. The restricted stock will be subject to such restrictions on transferability, risk of forfeiture and other restrictions, if any, as the administrator may impose. The restrictions may lapse separately or in combination at such times, under such circumstances, in such installments or otherwise, as the administrator may determine on the grant date or thereafter. During the restricted period, the restricted stock may not be sold, transferred, pledged, hypothecated, margined, or otherwise encumbered by the Manager. Except to the extent otherwise provided in the award agreement, the Manager granted restricted stock will have all the rights of a shareholder, including the right to vote the restricted stock and the right to receive dividends thereon.
Restricted Stock Units. The 2021 Manager Plan also permits the grant of restricted stock units to the Manager under the 2021 Manager Plan. Settlement of a grant of restricted stock units will occur upon the expiration of the restricted period specified in the award agreement or, if permitted by the administrator, at a later date selected by the Manager in accordance with the rules and regulations established by the administrator. The administrator may place restrictions on restricted stock units that will lapse, in whole or in part, only upon the attainment of one or more performance goals. The administrator is authorized to grant to the Manager the right to receive dividend equivalent payments and/or distribution equivalent payments for the period prior to the settlement of the restricted stock unit.
Other Share-Based Awards. The administrator is also authorized to grant to the Manager such other Awards that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, shares of common stock, as deemed by the administrator to be consistent with the purposes of the 2021 Manager Plan, including, without limitation, rights convertible or exchangeable into shares of common stock, purchase rights for shares of common stock, Awards with value and payment and/or settlement contingent upon performance of the Company or any other factors designated by the administrator, and Awards valuedsolely by reference to the value ofamended Schedule 13G filed with the SEC on February 8, 2022 by Beach Point Capital Management LP ("Beach Point Capital"). Of the reported shares, of common stock or the value of securities of or the performance of specified subsidiaries. The administrator will determine the terms and conditions of such Awards. Shares of common stock delivered pursuant to an Award in the nature of a purchase right will be purchasedBeach Point Capital reported that it has sole voting power for such consideration, paid0 shares, shared voting power for at such1,387,609 shares, sole
times, by such methods,dispositive power for 0 shares and in such forms, including, without limitation, cash, sharesshared dispositive power for 1,387,609 shares. The address of common stock or a combination thereof, as the administrator will determine. Cash awards, as an element of or supplement to any other Award under the 2021 Manager Plan, may also be granted to the Manager under the 2021 Manager Plan.
Amendment and Termination
Our Board may generally amend or terminate the 2021 Manager Plan at any time, subject to stockholder approval as required to comply with applicable laws, regulations or stock exchange requirements, provided that no amendment may adversely affect an outstanding Award without the Manager’s consent. Unless earlier terminated by our Board, the 2021 Manager Plan will expire on the tenth anniversary of its adoption (provided that Awards granted under the plan before expiration will continue to apply in accordance with their terms).
Upon termination of the management agreement by us for cause or by our Manager for any reason other than for cause or pursuant to a termination notice thatBeach Point Capital is given in connection with a determination that the compensation payable to our Manager is not fair, any then unvested Awards held by our Manager will be immediately forfeited and cancelled without consideration. Upon any other termination of the management agreement or change in control of us (as defined under the 2021 Manager Plan and described in more detail below), any Award that was not previously vested will become fully vested and/or payable, and any performance conditions imposed with respect to the Award will be deemed to be fully achieved, provided, that with respect to an Award that is subject to Section 409A of the Code, a change in control of us must constitute a “change of control” within the meaning of Section 409A of the Code.
Change in Control
Upon a change in control, the 2021 Manager Plan provides that any Award that was not previously vested will become fully vested and/or payable, and any performance conditions imposed with respect to the Award will be deemed to be fully achieved.
Under the 2021 Manager Plan, the term “change in control” is generally defined to include (i) the acquisition of at least fifty percent (50%) of either (A) the Company’s then outstanding shares of common stock or (B) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors; provided, however, that the following acquisitions will not constitute a change of control: (I) any acquisition by the Company or any Affiliate of the Company; (II) any acquisition by any employee benefit plan sponsored or maintained by the Company or an Affiliate of the Company; or (III) in respect of an Award held by the Manager, any acquisition by the Manager or any group of persons including the Manager, (ii) a change in the membership of the Board during any twenty-four month period such that the continuing directors (as defined in the 2021 Manager Plan) cease for any reason to constitute a majority of the Board, (iii) the transfer or other disposition of all or substantially all of the business or assets of the Company and its subsidiaries to any person that is not an affiliate of the Company, and (iv) the consummation of a business combination (as defined in the 2021 Manager Plan), unless immediately following the Business Combination fifty percent (50%) or more of the total voting power of the entity resulting from such Business Combination is held by the holders of the outstanding voting securities of the Company entitled to vote generally in the election of directors.
Federal Income Tax Consequences
Counsel has advised the Company regarding the federal income tax consequences of the 2021 Manager Plan. No income is recognized by a participant at the time an option or stock appreciation right is granted. If the option is an incentive stock option, no income will be recognized upon the participant’s exercise of the option. Income is recognized by a participant when he disposes of shares of common stock acquired under an incentive stock option. The exercise of an option that is not an incentive stock option and the exercise of a stock appreciation right generally is a taxable event that requires the participant to recognize, as ordinary income, the difference between the shares of common stock’s fair market value and the option price or the amount paid in settlement of the stock appreciation rights.1620 26th Street Suite 6000n, Santa Monica, CA 90404.
Income is recognized on account of the grant of a stock award when the first become transferable or are no longer subject to a substantial risk of forfeiture. At that time the participant recognizes income equal to the fair market value of the shares of common stock.
No income is recognized upon the grant of a performance share award or an incentive award. Income will be recognized on the date that payment is made under the performance share award or incentive award.
The employer (either the Company or a subsidiary) will be entitled to claim a federal income tax deduction on account of the exercise of an option that is not an incentive stock option or stock appreciation right or the vesting of a stock award or the settlement of a performance share award or an incentive award. The amount of the deduction is equal to the ordinary income recognized by the participant. The employer will not be entitled to a federal income tax deduction on account of the grant or the exercise of an incentive stock option. The employer may claim a federal income tax deduction on account of certain dispositions of shares of common stock acquired under an incentive stock option.
OTHER MATTERS Certain Relationships and Related Transactions Our Manager is a subsidiary of Angelo Gordon. Two of our current executive officers and directors/nominated directors (David N. Roberts and T.J. Durkin) and all of our other executive officers are employees of Angelo Gordon or its affiliates. To avoid any actual or perceived conflict of interest with our Manager, our Board has approved investment guidelines and policies providing that an investment in any security structured or managed by our Manager and its affiliates, and any sale of our assets to our Manager and its affiliates or any entity managed by our Manager and its affiliates, will comply with all applicable law, our compliance policies, and the compliance policies of Angelo Gordon and our Manager. Our independent directors have approved parameters within which our Manager and its affiliates may act as our counterparty and provide broker, dealer and lending services to us in order to enable transactions to occur in an orderly and timely manner. Angelo Gordon and/or our Manager may in the future change then-existing, or adopt additional, conflicts of interest resolution policies and procedures. Our independent directors periodically review our Manager’s and Angelo Gordon’s compliance with these conflicts of interest provisions. Related Person Transaction Policy Our Board has adopted a policy (the “Related Person Transaction Policy”) regarding the approval of any “related person transaction,” which is any transaction or series of transactions in which (i) we or any of our subsidiaries is or are to be a participant, (ii) the amount involved exceeds one hundred twenty thousand dollars ($120,000), and (iii) a “related person” (as defined under SEC rules) has a direct or indirect material interest. Under the Related Person Transaction Policy, a related person would need to promptly disclose to our Secretary or Assistant Secretary any related person transaction and all material facts about the transaction. Our Secretary or Assistant Secretary, in consultation with outside counsel, to the extent appropriate, would then assess and promptly communicate that information to the Audit Committee of our Board. Based on its consideration of all of the relevant facts and circumstances, the Audit Committee will review, approve or ratify such transactions as appropriate. The Audit Committee will not approve or ratify a related person transaction unless it shall have determined that such transaction is in, or is not inconsistent with, our best interests and does not create a conflict of interest. If we become aware of an existing related person transaction that has not been approved under this policy, the transaction will be referred to the Audit Committee which will evaluate all options available, including ratification, revision or termination of such transaction. Our Related Person Transaction Policy requires any director who may be interested in a related person transaction to recuse himself or herself from any consideration of such related person transaction. Affiliated Transactions Policy Our Board has also adopted a policy (the “Affiliated Transactions Policy”) regarding the approval of any transaction with affiliates that are not “related persons,” as that term is defined in the Related Person Transaction Policy. The Affiliated Transactions Policy is meant to supplement the existing policies and procedures of the Related Person Transaction Policy. The Affiliated Transactions Policy applies to all transactions between Angelo Gordon, or any entity or account managed by an affiliate of Angelo Gordon, and us (an “Affiliated Transaction”). All Affiliated Transactions must be permitted within our investment guidelines and contractual agreements, comply with applicable law and regulations, satisfy the requirements of Angelo Gordon’s cross trade policy and comply with any other requirement deemed necessary by our General Counsel. Affiliated Transactions that satisfy each of the foregoing criteria are presumed to be fair, reasonable and within the Affiliated Transaction Policy. On a quarterly basis, our management team delivers a complete list and appropriate supporting documentation of the Affiliated Transactions entered into during the quarter to the Audit Committee for its review. Based on its consideration of allreview and confirmation to the relevant facts and circumstances, the Audit Committee will approve and/or ratify an Affiliated Transaction to ourCompany's independent directors if, in its determination, such Affiliated Transaction is fair, reasonable and within the Affiliated Transactions Policy.directors.
Management Agreement We entered into a management agreement with AG REIT Management, LLC, our Manager, in connection with our initial public offering. Our management agreement with our Manager provides for the day-to-day management of our operations. Our Manager pursuant to a delegation agreement dated as of June 29, 2011, has delegated to Angelo Gordon the overall responsibility of our Manager’sits day-to-day duties and obligations arising under our management agreement. The management agreement requires our Manager to manage our business affairs in conformity with the investment policies that are approved and monitored by our Board. Pursuant to the terms of our management agreement, our Manager is obligated to supply us with our management team, including a chief executive officer, chief financial officer and chief investment officer or similar positions, along with appropriate support personnel, to provide the management services to be provided by our Manager to us as described in the management agreement. We are obligated to reimburse our Manager or its affiliates for the allocable share of the compensation, including, without limitation, annual base salary, bonus, any related withholding taxes and employee benefits, paid to (i) our chief financial officer based on the percentage of time spent on our affairs, (ii) our general counsel based on the percentage of time spent on our affairs, and (iii) other corporate finance, tax, accounting, internal audit, legal, risk management, operations, compliance and other non-investment personnel of our Manager and its affiliates who spend all or a portion of their time managing our affairs based upon the percentage of time devoted by such personnel to our affairs. In their capacities as executive officers or personnel of our Manager or its affiliates, they will devote such portion of their time to our affairs as is necessary to enable us to operate our business. For the yearyears ended December 31, 2021 and December 31, 2020, the Company recorded $6.3 million and $7.4 million, respectively, of reimbursable expenses payable to the Manager, of which approximately $1.5 million and $1.2 million, respectively, related to the Company’s allocable share of annual compensation reimbursed to our Manager for our Chief Financial Officer, Chief Risk Officer, and General Counsel based on the percentage of time such officers spent on the Company’s affairs. For the year ended December 31, 2021, the Manager agreed to waive its right to receive expense reimbursements of $0.8 million.
The initial term ofPursuant to the management agreement, was three years. Thewe pay to our Manager a management agreement renews automatically each year forfee, calculated and payable quarterly in arrears in an additional one-year period, unless we or the Manager exerciseamount equal to 1.50% of our respective termination rights. As of the date hereof, no event of termination has occurred. Our Manager is entitled to receive a termination fee from us should the management agreement be terminated under certain circumstances
Stockholders’ Equity, per annum. For the yearyears ended December 31, 2021 and December 31, 2020, our Manager earned management fees of $6.8 million and $7.2 million.million, respectively.
On April 6, 2020, we executed an amendment to the management agreement, with the Manager pursuant to which the Manager agreed to defer our payment of the management fee and reimbursement of expenses, effective the first quarter of 2020 through September 30, 2020, or such other time2020. All deferred expense reimbursements were paid as we and the Manager agreed. As of December 31, 2020, the Company has reimbursed the Manager for expenses through the fourth quarter ofSeptember 30, 2020.
On September 24, 2020, we executed an amendment with the Manager (the “Second Management Agreement Amendment”) to the management agreement, pursuant to which the Manager agreed to receive a portion of the accrueddeferred base management fee in shares of common stock. Pursuant to the Second Management Agreement Amendment, the Manager agreed to purchase (i) 1,215,370405,123 shares of common stock in full satisfaction of the deferred base management fee of $3.8 million payable by us in respect to the first and second quarters of 2020 and (ii) 154,50051,500 shares of common stock in satisfaction of $0.5 million of the base management fee payable by us in respect to the third quarter of 2020. The shares of common stock issued to the Manager were valued at $3.15$9.45 per share based on the midpoint of the estimated range of our book value per share as of August 31, 2020. The remaining third quarter 2020 management fee was paid in the normal course of business. On November 22, 2021, we executed an amendment (the “Third Amendment”) to the management agreement, pursuant to which we agreed to include an incentive fee, in addition to a base management fee. Pursuant to the Third Amendment, the Manager waived the annual incentive fee with respect to the fiscal years ending December 31, 2021 and December 31, 2022, and the annual incentive fee will first be payable with respect to the fiscal year ending December 31, 2023.
The annual incentive fee with respect to each applicable fiscal year will be equal to 15% of the amount by which our cumulative adjusted net income from the date of the Third Amendment exceeds the cumulative hurdle amount, which represents an 8% return (cumulative, but not compounding) on an equity hurdle base consisting of the sum of
(i) our adjusted book value (calculated in the manner described in our public filings) as of October 31, 2021, (ii) $80.0 million, and (iii) the gross proceeds of any subsequent public or private common stock offerings by us. The annual incentive fee will be payable in cash, or, at the option of our Board of Directors, shares of our common stock or a combination of cash and shares.
The initial term of the management agreement was three years. Pursuant to the Third Amendment, the term of the management agreement was extended until June 30, 2023, unless earlier terminated in accordance with its terms. Thereafter, the management agreement will continue to renew automatically each year for an additional one-year period, unless the Company or the Manager exercise its respective termination rights. As of the date hereof, no event of termination has occurred. Our Manager is entitled to receive a termination fee from us should the management agreement be terminated under certain circumstances.
Following the execution of the Third Amendment the Compensation Committee no longer expects to continue its historical practice of making periodic equity grants to the Manager pursuant to the Company's 2021 manager equity incentive plan.
Secured debt
On April 10, 2020, in connection with the first of a series of forbearance agreements (collectively, the "Forbearance Agreement"), we issued a secured promissory note (the “Note”"Note") to the Manager evidencing a $10 million loan (the "First Loan") made by the Manager to us. Additionally, on April 27, 2020, in connection with the second Forbearance Agreement, we entered into an amendment to the Note to reflect an additional $10 million loan (the "Second Loan") by the Manager to us. The $10 million loan made by the Manager on April 10, 2020First Loan was
repaid in full with interest when it matured on March 31, 2021, and the $10 million loan made on April 27, 2020Second Loan was repaid in full with interest when it matured on July 27, 2020. The unpaid balance of the Note accrued interest at a rate of 6.0% per annum. Interest on the Note was payable monthly in kind through the addition of such accrued monthly interest to the outstanding principal balance of the Note.
Common Stock Offering
On November 17, 2021, we, along with the Manager, entered into an underwriting agreement (the "Underwriting Agreement"), with Credit Suisse Securities (USA) LLC, JMP Securities LLC, and Wells Fargo Securities, LLC, as representatives of the underwriters (the "Underwriters"), for the issuance and sale of 7,000,000 shares of our common stock. We also provided the Underwriters a 30-day option to purchase up to an additional 1,050,000 shares of Common Stock. The transaction contemplated by the Underwriting Agreement closed on November 22, 2021, with the Underwriters' option exercised and closed on December 15, 2021. The Manager and David N. Roberts, our Chairman and Chief Executive Officer, participated in the underwritten offering and purchased 700,000 and 200,000 shares of our common stock, respectively, at the public offering price of $10.25 per share and such purchases were not subject to any underwriting discounts or commissions. Transactions with Red Creek Asset ManagerManagement LLC In connection with ourthe Company’s investments in reperforming and non-performingresidential mortgage loans, and Non-QM Loans (as defined below), we engagethe Company engages asset managers to provide advisory, consultation, asset management and other services. Beginning in November 2015, weThe Company engaged Red Creek Asset Management LLC (“("Asset Manager”Manager"), an affiliate of the Manager and a direct subsidiary of Angelo Gordon, as the asset manager for certain of our reperforming and non-performingits residential mortgage loans. Beginning in September 2019, we engaged the Asset Manager as the asset manager for our Non-QM Loans. We payThe Company pays the Asset Manager separate arm’s-length asset management fees as assessed and confirmed periodically by a third-party valuation firm for our reperforming and non-performing loans and Non-QM Loans. In the third quarter of 2019, the third-party assessment of asset management fees resulted in our updating the fee amount for our reperforming and non-performing loans. We also utilized the third-party valuation firm to establish the fee level for Non-QM Loans in the third quarter of 2019. For the year ended December 31, 2020, thefirm. The fees paid by usthe Company to the Asset Manager totaled $2.2 million and $2.7 million. These fees include amounts paid directly by usmillion for the years ended December 31, 2021 and amounts paid by trustees in securitizations in which we own residual interests.2020, respectively.
Transactions with Arc Home
On December 9, 2015, we,the Company, alongside private funds under the management ofmanaged by Angelo Gordon, through AG Arc LLC, one of ourthe Company’s indirect subsidiaries (“affiliates ("AG Arc”Arc"), formed Arc Home LLC (“("Arc Home”Home"). In June 2016,The Company has an approximate 44.6% interest in AG Arc. Arc Home closed on the acquisition of a Fannie Mae, Freddie Mac, FHA, VA and Ginnie Mae seller/servicer of residential mortgages. Through this subsidiary, Arc Home originates conforming, Government, Jumbo, Non-QM, and other non-conforming residential mortgage loans and retains the mortgage
servicing rights associated with the loans it originates. Arc Home is led by an external management team. The Board of Managers of Arc Home consists of members appointed by us and affiliates of our Manager. Our investment in Arc Home had a fair value of $53.4 million and $45.3 million onas of December 31, 2020. We have an approximate 44.6% interest in AG Arc.2021 and December 31, 2020, respectively.
Arc Home may sell loans to us, third partiesthe Company, to third-parties, or to affiliates of ourthe Manager. Arc Home may also enter into agreements with us, third parties,third-parties or affiliates of ourthe Manager to sell rights to receive the excess servicing spread related to MSRs that it either purchases from third-parties or originates. The Company, directly or through its MSRs (“Excess MSRs”). In March 2017,subsidiaries, previously entered into agreements with Arc Home entered into an agreement with us to sell Excess MSRs, and aspurchase rights to receive the excess servicing spread related to certain of Arc Home's MSRs. As of December 31, 2020,2021, the Company did not hold any of these Excess MSRs. These Excess MSRs had a fair value of approximately $3.5 million. In connection with our investments in Excess MSRs purchased throughmillion as of December 31, 2020.
During 2021, Arc Home we paybegan selling sold loans to the Company. Arc Home sold Non-QM Loans and GSE Non-Owner Occupied Loans with an administrative feeunpaid principal balance of $613.7 million and $198.9 million to Arc Home. Forthe Company, respectively, during the year ended December 31, 2020, the administrative fees paid by us to Arc Home totaled $0.2 million.2021.
During 2020, Arc Home began selling Non-QM Loans to a private fund under the management of Angelo Gordon. Arc Home sold $57.4 million ofNon-QM Loans with an unpaid principal balance of Non-QM Loans$613.3 million and $57.4 million to this affiliate of the Manager during 2020.the years ended December 31, 2021 and 2020, respectively.
Mortgage Acquisition Trust I LLC
OnIn August 29, 2017, we,2020, the Company, alongside private funds under the management of Angelo Gordon, sold its Ginnie Mae Excess MSR portfolio to Arc Home for total proceeds of $18.9 million. The portfolio had a total unpaid principal balance of $3.5 billion. The Company's share of the total proceeds approximated $8.5 million, representing its approximate 45% ownership interest. Arc Home subsequently sold its Ginnie Mae MSR portfolio to a third-party.
In July 2021, the Company, alongside private funds under the management of Angelo Gordon, sold its remaining Agency Excess MSRs to Arc Home for total proceeds of $9.9 million. The portfolio had a total unpaid principal balance of $2.0 billion. The Company's share of the total proceeds was $2.7 million, representing its approximate 45% ownership interest. Arc Home subsequently sold its MSR portfolio to a third party. Mortgage Acquisition Trust I Restructured Financing Arrangement
On August 29, 2017, the Company, alongside private funds managed by Angelo Gordon, formed Mortgage Acquisition Holding I LLC (“MATH”("MATH") to conduct a residential mortgage investment strategy. The Company has an approximate 44.6% interest in MATH. MATH in turn sponsored the formation of an entity called Mortgage Acquisition Trust I LLC (“MATT”("MATT") to purchase predominantly “Non-QM” loans, which are residential mortgage loans that are not deemed “qualified mortgage,” or “QM,” loans under the rules of the Consumer Financial Protection Bureau. Non-QMs are not eligible for delivery to Fannie Mae, Freddie Mac, or Ginnie Mae.Non-QM Loans. MATT made an election to be treated as a real estate investment trust beginning with the 2018 tax year.
In furtherance As of this business, MATH’s sponsoring funds have agreedDecember 31, 2021, MATT primarily holds retained tranches from past securitizations which continue to provide upreduce in size due to $75.0 million of capital to MATH. This commitment was increased by $25.0 million to $100.0 million on March 28, 2019 and by $5.0 million
to $105.0 million on August 23, 2019 with amendments to the MATH LLC Agreement. On April 3, 2020, the financing arrangements within MATT were restructured as described belowongoing principal repayments and the previously mentioned commitment was removed. The Company has an approximate 44.6% interest in MATH.does not expect to acquire additional investments within this equity method investment.
On April 3, 2020, we,the Company, alongside private funds under the management of Angelo Gordon, restructured ourits financing arrangements in MATT (“("Restructured Financing Arrangement”Arrangement"). The Restructured Financing Arrangement requiresrequired all principal and interest on the underlying assets in MATT to be used to pay down principal and interest on the outstanding financing arrangement. As of April 3, 2020, the Restructured Financing Arrangement wasdid not ahave mark-to-market facilitymargin calls and iswas non-recourse to us.the Company. The Restructured Financing Arrangement providesprovided for a termination date of October 1, 2021. At the earlier of the termination date or the securitization or sale by usthe Company of the remaining assets subject to the Restructured Financing Arrangement, the financing counterparty will be(which is a non-affiliate) was entitled to 35% of the remaining equity in the assets. WeThe Company evaluated this restructuring and concluded it was an extinguishment of debt. MATT has chosenchose to make a fair value election on the newthis financing arrangement and we will treatthe Company treated this arrangement consistently with this election.
On January 29, 2021, the Company, alongside private funds under the management of Angelo Gordon, entered into an amendment with respect to its Restructured Financing Arrangement in MATT. The amendment converted the existing financing to a mark-to-market facility that is recourse to the Company and Restricted Stock Unitsthe private funds managed by Angelo Gordon that invest in MATT up to the below mentioned commitment from MATH to MATT. Upon amending the agreement, the Company settled the premium recapture fee with the financing counterparty.
Since our IPO, we have grantedOn January 29, 2021, the Company alongside private funds under the management of Angelo Gordon, entered into an aggregateamendment to the MATH LLC Agreement, which requires MATH to fund a capital commitment of 105,794$50.0 million to MATT. The Company, through its investment in MATH, is responsible for its pro-rata share of the capital commitment. Subsequent to year end, this agreement was amended and 120,320 shares of restricted common stockthe capital commitment to our independent directors under our equity incentive plans, dated July 6, 2011 (the “2011 Equity Incentive Plans”) and our 2020 Equity Incentive Plan, respectively. As of December 31, 2020, all the shares of restricted common stock grantedMATT was reduced to our independent directors have vested. Further, since our IPO, we have issued 40,250 shares of restricted common stock to our Manager and 120,000 restricted stock units to our Manager under our 2011 Equity Incentive Plans.$35.0 million.
Other transactions with affiliatesSecuritization Transactions
In March 2019, in accordance with our Affiliated Transactions Policy, we executed one trade whereby we acquired a real estate security from an affiliate ofFebruary 2020, the Manager (the “March 2019 Selling Affiliate”). As of the date of the trade, the security acquired from the March 2019 Selling Affiliate had a total fair value of $0.9 million. The March 2019 Selling Affiliate sold the real estate security through a BWIC (Bids Wanted in Competition). Prior to the submission of the BWIC by the March 2019 Selling Affiliate, we submitted our bid for the real estate security to the March 2019 Selling Affiliate. The pre-submission of our bid allowed us to confirm third-party market pricing and best execution. In June 2019, we,Company, alongside private funds under the management of Angelo Gordon, participated through our unconsolidated ownership interest in MATT in a rated Non-QM Loan securitization, in which Non-QM Loans with a fair market value of $408.0 million were securitized. Certain senior tranches in the securitization were sold to third parties with us and private funds under the management of Angelo Gordon retaining the subordinate tranches, which had a fair market value of $42.9 million as of June 30, 2019. We have a 44.6% interest in the retained subordinate tranches.
In July 2019, in accordance with our Affiliated Transactions Policy, we acquired certain real estate securities from an affiliate of the Manager (the “July 2019 Selling Affiliate”). As of the date of the trade, the real estate securities acquired from the July 2019 Selling Affiliate had a total fair value of $2.0 million. As procuring market bids for the real estate securities was determined to be impracticable in the Manager’s reasonable judgment, appropriate pricing was based on a valuation prepared by independent third-party pricing vendors. The third-party pricing vendors allowed us to confirm third-party market pricing and best execution.
In September 2019, we, alongside private funds under the management of Angelo Gordon, participated through our unconsolidated ownership interest in MATT in a rated Non-QM Loan securitization, in which Non-QM Loans with a fair market value of $415.1 million were securitized. Certain senior tranches in the securitization were sold to third parties with us and private funds under the management of Angelo Gordon retaining the subordinate tranches, which had a fair market value of $28.7 million as of September 30, 2019. We have a 44.6% interest in the retained subordinate tranches.
In October 2019, in accordance with our Affiliated Transactions Policy, we acquired certain real estate securities from an affiliate of the Manager (the “October 2019 Selling Affiliate”). As of the date of the trade, the real estate securities acquired from the October 2019 Selling Affiliate had a total fair value of $2.2 million. The October 2019 Selling Affiliate sold the real estate securities through a BWIC. Prior to the submission of the BWIC by the October 2019 Selling Affiliate, we submitted its bid for the real estate securities to the October 2019 Selling Affiliate. The pre-submission of our bid allowed us to confirm third-party market pricing and best execution.
In November 2019, we, alongside private funds under the management of Angelo Gordon, participated through our unconsolidated ownership interest in MATT in a rated Non-QM Loan securitization, in which Non-QM Loans with a fair market value of $322.1 million were securitized. Certain senior tranches in the securitization were sold to third parties with us and private funds under the management of Angelo Gordon retaining the subordinate tranches, which had a fair market value of $21.4 million as of December 31, 2019. We have a 44.6% interest in the retained subordinate tranches.
In February 2020, we, alongside private funds managed by Angelo Gordon, participated through our unconsolidated ownership interest in MATT in a rated Non-QM Loan securitization, in which Non-QM Loans with a fair value of $348.2 million were securitized. Certain senior tranches in the securitization were sold to third-parties with usthe Company and private funds under the management of Angelo Gordon retaining the subordinate tranches, which had a fair value of $26.6 million as of March 31, 2020. We haveThe Company has a 44.6% interest in the retained subordinate tranches.
In July 2020, in accordance with our Affiliated Transactions Policy, we sold certain real estate securities to an affiliate of the Manager (the “July 2020 Acquiring Affiliate”). As of the date of the trade, the real estate securities sold to the July 2020 Acquiring Affiliate had a total fair value of $1.9 million. The July 2020 Acquiring Affiliate purchased the real estate securities through a BWIC. Prior to our submission of the BWIC, the July 2020 Acquiring Affiliate submitted its bid for the real estate securities to us. The July 2020 Acquiring Affiliate’s pre-submission of its bid allowed us to confirm third-party market pricing and best execution.
In August 2020, we,the Company, alongside private funds under the management of Angelo Gordon, participated through ourits unconsolidated ownership interest in MATT in a rated Non-QM Loan securitization, in which Non-QM Loans with a fair value of $226.0 million were securitized. Certain senior tranches in the securitization were sold to third-parties with usthe Company and private funds under the management of Angelo Gordon retaining the subordinate tranches, which had a fair value of $24.3 million as of September 30, 2020. We haveThe Company has a 44.6% interest in the retained subordinate tranches.
In August 2020, we,May 2021, the Company, alongside private funds under the management of Angelo Gordon, participated through its unconsolidated ownership interest in MATT in a rated Non-QM Loan securitization, in which Non-QM Loans with a fair value of $171.4 million were securitized. Certain senior tranches in the securitization were sold our Ginnie Mae Excess MSR portfolio to Arc Home for total proceedsthird parties with the Company and private funds under the management of $18.9 million.Angelo Gordon retaining the subordinate tranches, which had a fair value of $25.7 million as of June 30, 2021.
In November 2021, the Company, alongside a private fund under the management of Angelo Gordon, participated in a rated Non-QM Loan securitization, in which Non-QM Loans with a fair value of $225.9 million were securitized. Upon evaluating its investment in the VIE, the Company determined it was not the primary beneficiary and, as a result, did not consolidate the securitization trust. Certain senior tranches in the securitization were sold to third-parties with the Company and the private fund under the management of Angelo Gordon retaining the subordinate tranches, which had a fair value of $44.0 million as of December 31, 2021. The portfolioCompany has a 40.9% interest in the retained subordinate tranches which represents its continuing involvement in the securitization trust. Transactions under the Company's Affiliated Transaction Policy In July 2020, in accordance with the Company’s Affiliated Transactions Policy, the Company sold certain real estate securities to an affiliate of the Manager. As of the date of the transaction, these real estate securities had a total unpaid principal balancefair value of $3.5 billion. Our share of$1.9 million. The purchase occurred by the total proceeds approximated $8.5 million, representing our approximate 45% ownership interest. Arc Home subsequently sold its Ginnie Mae MSR portfolioaffiliate submitting an offer to purchase the securities to the Company in a third-party.competitive bidding process. This allowed the Company to confirm third-party market pricing and best execution.
In October 2020, in accordance with ourthe Company’s Affiliated Transactions Policy, wethe Company acquired certain real estate securities and Excess MSRs from an affiliate of the Manager (the “October 2020 Selling Affiliate”).Manager. As of the date of the trade, thetransaction, these real estate securities and Excess MSRs acquired from the October 2020 Selling Affiliate had a total fair value of $0.5 million and $20.0 thousand, respectively. As procuring market bids for the real estate securities was determined to be impracticable in the Manager’s reasonable
judgment, appropriate pricing was based on a valuation prepared by third-party pricing vendors. The third-party pricing vendors allowed the Company to confirm third-party market pricing and best execution.
In March 2021, in accordance with our Affiliated Transactions Policy, we sold certain real estate securities to an affiliate of the Manager. As of the date of the transaction, these real estate securities had a total fair value of $6.9 million. The purchase occurred by the affiliate submitting an offer to purchase the securities to us in a competitive bidding process. This allowed us to confirm third-party market pricing and best execution.
Delinquent Section 16 ReportsIn April 2021, in accordance with our Affiliated Transactions Policy, we sold certain CMBS to affiliates of the Manager. As of the date of the transaction, the CMBS sold to the buyer had a total fair value of $16.8 million. Pricing was based on valuations prepared by third-party pricing vendors in accordance with our policy. The third-party pricing vendors allowed us to confirm third-party market pricing and best execution.
Section 16(a)In July 2021, in accordance with our Affiliated Transactions Policy, we sold certain real estate securities to affiliates of the Exchange Act requires the Company’s executive officers, directors and persons who own more than ten percent (10%) of a registered classManager. As of the Company’s equitydate of the transaction, these real estate securities had a total fair value of $17.6 million. The purchase occurred by the affiliate submitting an offer to purchase the securities to file certain reports with the SEC regarding ownership of,us in a competitive bidding process. This allowed us to confirm third-party market pricing and transactions in, the Company’s securities. These executive officers, directors and stockholders are also required by SEC rules to furnish the Company with copies of all Section 16(a) reports that are
filed with the SEC. Based solely on a review of copies of such forms received by the Company and written representations received by the Company from certain reporting persons, the Company believes that for the year ended December 31, 2020 all Section 16(a) reports required to be filed by the Company’s executive officers, directors and ten percent (10%) stockholders were filed on a timely basis with the exception of one Form 3 and one Form 4 filing, each for Alison Halpern, the Company’s Chief Accounting Officer for the year ended December 31, 2020.best execution.
In October 2021, in accordance with our Affiliated Transactions Policy, we purchased through one of our unconsolidated affiliated entities certain real estate securities from affiliates of the Manager. As of the date of the transaction, these real estate securities had a total fair value of $3.5 million. Pricing was based on valuations prepared by third-party pricing vendors in accordance with our policy. The third-party pricing vendors allowed us to confirm third-party market pricing and best execution.
In November 2021, MATT exercised its call rights on two securitization trusts in which it held interests in the subordinate tranches. Upon exercising its call rights and acquiring the remaining residential mortgage loans within the trusts, MATT sold the loans to us and a private fund under the management of Angelo Gordon in accordance with our Affiliated Transactions Policy. As of the date of the transaction, the residential mortgage loans sold to us and the private fund had a total fair value of $181.8 million and $183.6 million, respectively. Pricing was based on valuations prepared by third-party pricing vendors in accordance with our policy. The third-party pricing vendors allowed us to confirm third-party market pricing and best execution.
Stockholder Proposals Any stockholder intending to present a proposal at our 20222023 annual meeting of stockholders and have the proposal included in the proxy statement for such meeting must, in addition to complying with the applicable laws and regulations governing submissions of such proposals, submit the proposal in writing to us no later than December 17, 2021.November 21, 2022. To be included in the proxy statement, the proposal must comply with the requirements of Rule 14a-8 of the Exchange Act. Pursuant to our current bylaws, any stockholder intending to nominate a director or present a proposal at an annual meeting of our stockholders without seeking to have such a nomination or proposal included in the proxy statement for such annual meeting, must notify us in writing not less than 120 days nor more than 150 days prior to the first anniversary of the date of the proxy statement for the preceding year’s annual meeting. Accordingly, any stockholder who intends to submit such a nomination or proposal at our 20222023 annual meeting of stockholders must notify us in writing of such proposal by December 17, 2021,November 21, 2022, but in no event earlier than November 17, 2021.October 22, 2022. However, in the event that the 20222023 annual meeting of stockholders is advanced by more than 30 days or delayed by more than 60 days from the first anniversary of the date of the 20212022 annual meeting of stockholders, notice by the stockholder to be timely must be received no earlier than the 120th day prior to the date of the meeting and not later than 5:00 p.m., Eastern Time, on the later of the 90th day prior to the date of the meeting or the 10th day following the date of the first public announcement of the meeting.
Any such nomination or proposal should be sent to AG Mortgage Investment Trust, Inc., 245 Park Avenue, 26th Floor, New York, New York 10167, Attn: General Counsel, and, to the extent applicable, must include the information required by our bylaws. Access to SEC Reports A copy of the Company’s Annual Report, including financial statements, is being furnished concurrently herewith to all stockholders as of the Record Date. Please read it carefully. Stockholders may obtain a copy of the Annual Report or Proxy Statement, without charge, by visiting our website at http://www.agmit.com or by writing AG Mortgage Investment Trust, Inc., 245 Park Avenue, 26th Floor, New York, New York 10167, Attn: General Counsel. These materials are also available at http://www.proxyvote.com. Upon request to our General Counsel, the exhibits set forth on the exhibit index of the Company’s Annual Report may be made available at a reasonable charge (which will be limited to our reasonable expenses in furnishing such exhibits). “Householding” of Proxy Statement and Annual Report The SEC rules allow for the delivery of a single copy of the Notice or set of proxy materials to any household at which two or more stockholders reside, if it is believed the stockholders are members of the same family. This delivery method, known as “householding,” will save us printing and mailing costs. Duplicate account mailings will be eliminated by allowing stockholders to consent to such elimination, or through implied consent, if a stockholder does not request continuation of duplicate mailings. Brokers, dealers, banks or other nominees or fiduciaries that hold shares of our common stock in “street” name for beneficial owners of our common stock and that distribute proxy materials and the Notice they receive to beneficial owners may be householding on your behalf. Depending upon the practices of your broker, bank or other nominee or fiduciary, you may need to contact them directly to discontinue duplicate mailings to your household. If you wish to revoke your consent to householding, you must contact your broker, bank or other nominee or fiduciary.
If you hold shares of our common stock in your own name as a holder of record, householding will not apply to your shares. Also, if you own shares of our common stock in more than one account, such as individually and also jointly with your spouse, you may receive more than one set of our proxy materials. To assist us in saving money and to provide you with better stockholder services, we encourage registered holders of our stock to have all of your accounts registered in the same name and address. You may do this by contacting the Company’s transfer agent, American Stock Transfer & Trust Company, LLC, by telephone at (800) 937-5449 or in writing at American Stock Transfer & Trust Company, LLC, 6201 15th Avenue, Brooklyn, New York 11219. If you wish to request extra copies free of charge of any annual report to stockholders or proxy statement, please send your request to AG Mortgage Investment Trust, Inc., 245 Park Avenue, 26th Floor, New York, New York, 10167, Attn: General Counsel, or contact our General Counsel via telephone at (212) 692-2000. You can also refer to our website at www.agmit.com. Information at, or connected to our website is not and should not be considered part of this Proxy Statement.
APPENDIX A
AG MORTGAGE INVESTMENT TRUST, INC. MANAGER EQUITY INCENTIVE PLAN
Effective April 7, 2021
1.PURPOSES. The purposes of this AG Mortgage Investment Trust, Inc. Manager Equity Incentive Plan (the "Plan") are to afford an incentive to AG REIT Management, LLC, a Maryland limited liability company (the "Manager") to: (a) continue as the Manager for the AG Mortgage Investment Trust, Inc. (the "Company"); (b) increase its efforts on behalf of the Company; and (c) promote the success of the Company’s business. The Plan provides for the grant of stock options, restricted shares of common stock, restricted stock units, stock appreciation rights, and other equity-based awards.
2.DEFINITIONS. For purposes of the Plan, the following terms are defined as set forth below, in addition to such terms defined in Section 1 above:
a."Affiliate" means (i) any Person directly or indirectly controlling, controlled by, or under common control with such other Person, (ii) any executive officer or general partner of such other Person or (iii) any legal entity for which such Person acts as an executive officer or general partner. For purposes of this definition, the terms "control", "controlled by" and "under common control with" mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of an entity, whether through the ownership of voting securities, by contract or otherwise.
b."Applicable Laws" means the requirements relating to, connected with, or otherwise implicated by the administration of long-term incentive plans under applicable state corporation laws, United States federal and state securities laws, the Code, any stock exchange or quotation system on which the Shares are listed or quoted, applicable accounting standards and the Applicable Laws of any foreign country or jurisdiction where Awards are, or will be, granted under the Plan.
c."Award" means any Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, or Other Share-Based Award granted to the Manager under the Plan.
d."Award Date" means the date upon which an Award is made to the Manager under the Plan, although, in the case of any Award for which the Exercise Price, Fair Market Value, or other applicable value is determined with reference to the average weighted Share price or Share price over a particular measurement period, the Award shall not be treated as granted and subject to applicable securities law or securities exchange reporting until the applicable value is determined.
e."Award Agreement" means any written agreement between the Company and the Manager that evidences and sets out the terms and conditions of an Award.
f."Board" means the Board of Directors of the Company.
g."Change of Control" means:
i.the acquisition (whether by purchase, merger, consolidation, combination or other similar transaction) by any Person of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of more than 50% (on a fully diluted basis) of either (A) the then outstanding Shares, taking into account as outstanding for this purpose such Shares issuable upon the exercise of options or warrants, the conversion of convertible stock or debt, and the exercise of any similar right to acquire such Shares or (B) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that for purposes of the Plan, the following acquisitions shall not constitute a Change of Control: (I) any acquisition by the Company or any Affiliate of the Company; (II) any acquisition by any employee benefit plan sponsored or maintained by the Company or any Affiliate of the Company; or (III) in respect of an Award held by the Manager, any acquisition by the Manager or any group of Persons
including the Manager (or any entity controlled by the Manager or any group of Persons including the Manager);
ii.during any period of 24 months, individuals who, at the beginning of such period, constitute the Board (the "Incumbent Directors") cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to the date hereof, whose election or nomination for election was approved by a vote of at least two-thirds of the Incumbent Directors then on the Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without written objection to such nomination) shall be an Incumbent Director; provided, however, that no individual initially elected or nominated as a director of the Company as a result of an actual or threatened election contest, as such terms are used in Rule 14a-12 of Regulation 14A promulgated under the Exchange Act, with respect to directors or as a result of any other actual or threatened solicitation of proxies or consents by or on behalf of any person other than the Board shall be deemed to be an Incumbent Director;
iii.the sale, transfer or other disposition of all or substantially all of the business or assets of the Company and its Subsidiaries to any Person that is not an Affiliate of the Company; or
iv.the consummation of a reorganization, recapitalization, merger, consolidation, or other similar transaction involving the Company (a "Business Combination"), unless immediately following such Business Combination 50% or more of the total voting power of the entity resulting from such Business Combination (or, if applicable, the ultimate parent entity that directly or indirectly has beneficial ownership of sufficient voting securities eligible to elect a majority of the board of directors (or the analogous governing body) of such resulting entity), is held by the holders of the Outstanding Company Voting Securities immediately prior to such Business Combination.
Notwithstanding the foregoing to the contrary, to the extent Section 409A of the Code applies with respect to an Award and a payout trigger under such Award includes a Change of Control, then addition to the foregoing any such Change of Control must also constitute a change in ownership or effective control of the Company, or a change in the ownership of a substantial portion of the assets of the Company, in any case, within the meaning of Treasury Regulation 1.409A-3(i)(5).
a."Code" means the U.S. Internal Revenue Code of 1986, as amended from time to time. Any reference to a section of the Code herein shall include any regulations or other guidance of general applicability promulgated under such section, and shall further include any successor or amended section of such section of the Code that is so referred to and any regulations thereunder.
b."Committee" means the Compensation Committee of the Company’s Board of Directors, or any successor committee with responsibility for employee compensation, or, in the absence of a committee with responsibility for employee compensation, the Board itself; provided, however, that, unless otherwise determined by the Board, the Committee shall consist solely of two or more directors, each of whom shall be a "non-employee director" within the meaning of Rule 16b-3 under the Exchange Act.
c."Company" means AG Mortgage Investment Trust, Inc., a Maryland Corporation, or any successor corporation.
d."Exchange Act" means the U.S. Securities Exchange Act of 1934, as amended from time to time, and the rules and regulations promulgated thereunder.
e."Fair Market Value" means, with respect to Shares or other property, the fair market value of such Shares or other property determined by such methods or procedures as shall be established from time to time by the Committee. Unless otherwise determined by the Committee in good faith, the Fair Market Value of a Share as of a particular date shall mean (i) the closing sales price per Share on the national securities exchange on which the Share is principally traded, for the last preceding date on which there was a sale of Shares on such exchange; (ii) if the Shares are then traded in an over-the-counter market, the average of the closing bid and asked prices for the Shares in such
over-the-counter market for the last preceding date on which there was a sale of Shares in such market; or (iii) if the Shares are not then listed on a national securities exchange or traded in an over-the-counter market, such value as the Committee, in its sole discretion, shall determine.
f."Management Agreement" means the management agreement between the Manager and the Company.
g."Manager" means AG REIT Management, LLC, or any successor entity.
h."Option" means an Award with a right, granted to the Manager under Section 5(b) below, to purchase Shares at a specified price during specified time periods. All Options granted hereunder shall be treated as non-qualified stock options which are not intended to satisfy the requirements of Code Section 422.
i."Other Share-Based Award" means an Award granted to the Manager under Section 5(f) below.
j."Person" means any natural person, corporation, partnership, association, limited liability company, estate, trust, joint venture, any federal, state, or municipal government or any bureau, department or agency thereof or any other legal entity and any fiduciary acting in such capacity on behalf of the foregoing.
k."Restricted Stock" means an Award of Shares, granted to the Manager under Section 5(d) below, that may be subject to certain restrictions and to a risk of forfeiture.
l."Restricted Stock Unit" or "RSU" means an Award with a right, granted to the Manager under Section 5(e) below, to receive Shares, cash or a combination thereof at the end of a specified restricted period, which right may be conditioned on the satisfaction of specified performance or other criteria.
m."Securities Act" means the U.S. Securities Act of 1933, as amended from time to time, and any rules or regulations promulgated thereunder.
n."Share" means a share of the Company’s common stock, par value $0.01 per share.
o."Stock Appreciation Right" or "SAR" means an Award with a right, granted to the Manager under Section 5(c) below, to be paid an amount measured by the appreciation in the Fair Market Value of Shares from the Award Date to the date of exercise of the right.
p."Subsidiary" means, with respect to the Company, any "subsidiary corporation" within the meaning of Code Section 424(f).
3.ADMINISTRATION.
a.Authority of the Committee. The Plan shall be administered by the Committee. The Committee may employ one or more persons to render advice with respect to any responsibility the Committee may have under the Plan. No member of the Committee shall be liable for any action taken or determination made in good faith with respect to the Plan or any Award granted hereunder. The Committee shall have full and final authority, in its discretion, subject to and not inconsistent with the express provisions of the Plan, to administer the Plan and to exercise all the powers and authorities either specifically granted to it under the Plan or necessary or advisable in the administration of the Plan, including, without limitation, the authority to:
i.administer and interpret the Plan;
ii.authorize the granting of Awards;
iii.determine the number of Shares to be covered by each Award;
iv.determine the terms, provisions, and conditions of each Award (which may not be inconsistent with the terms of the Plan), including determination of Fair Market Value; and whether, to what extent, and under what circumstances, an Award may be settled in cash, Shares, other securities, other Awards, or other property;
v.prescribe the form of instruments evidencing Awards; and
vi.take any other actions and make all other determinations that it deems necessary or appropriate in connection with the Plan or the administration and interpretation thereof, including correction of any defect (including but not limited to amending an Award Agreement to comply with Applicable Laws) and reconciliation of any inconsistency in the Plan or any Award Agreement in the manner and to the extent it shall deem desirable to carry out the purposes of the Plan.
The Committee may not take any action that would result in a repricing of any Option without having first obtained the consent of the Company’s shareholders. All decisions, determinations and interpretations of the Committee shall be final and binding on all persons, including but not limited to the Company, the Manager (or any person claiming any rights under the Plan from or through the Manager) and any shareholder.
a.Limitation of Liability. The senior officers of the Company are authorized and directed to do all things and execute and deliver all instruments, undertakings and applications as they in their absolute discretion consider necessary for the implementation of the Plan. The Board, the Committee, and each member thereof will be entitled to, in good faith, rely or act upon any report or other information furnished to him or her by any officer or employee of the Company or any Subsidiary, the Company’s independent auditors, consultants or any other agents assisting in the administration of the Plan. The Board, the Committee, members thereof, and any officer or employee of the Company or any Subsidiary thereof acting at the direction or on behalf of the Board or the Committee will not be personally liable for any action or determination taken or made in good faith with respect to the Plan, and will, to the extent permitted by law, be fully indemnified and protected by the Company with respect to any such action or determination.
4.SHARES SUBJECT TO PLAN.
a.Subject to adjustment as provided in Section 9 below, Awards may be made under the Plan beginning on the Effective Date for up to an aggregate of 1,720,275 Shares. At all times, the Company will reserve and keep available a sufficient number of Shares in such manner as it may consider appropriate in order to satisfy the requirements of all outstanding Awards made under the Plan and all other outstanding but unvested Awards made under the Plan that are to be settled in Shares.
b.Shares issued under the Plan may, in whole or in part, be authorized but unissued Shares or Shares that shall have been or may be reacquired by the Company in the open market, in private transactions or otherwise. If any vested Award granted under the Plan is paid or otherwise settled without the issuance of Shares, or if Shares are surrendered to or withheld by the Company as payment of either the exercise price of an Award and/or withholding taxes in respect of an Award, the Shares that were subject to such Award shall not again be available for Awards under the Plan. If any Shares subject to an Award are forfeited, cancelled, exchanged or surrendered or if an Award terminates or expires without a distribution of Shares to the Manager (other than as provided in the immediately preceding sentence), the Shares with respect to such Award shall, to the extent of any such forfeiture, cancellation, exchange, surrender, termination or expiration, again be available for Awards under the Plan. Upon the exercise of any Award granted in tandem with any other Award, such related Award shall be cancelled to the extent of the number of Shares as to which the Award is exercised and, notwithstanding the foregoing, such number of Shares shall no longer be available for Awards under the Plan.
c.No fractional Shares shall be issued or delivered pursuant to the Plan or any Award, and the Committee shall determine whether cash, other securities, or other property shall be paid or transferred in lieu of any fractional Shares, or whether such fractional Shares or any rights thereto shall be canceled, terminated, or otherwise eliminated.
5.TERMS AND CONDITIONS OF AWARDS. All Awards will be evidenced by a written agreement between the Company and the Manager setting forth the specific terms of the Award (an "Award Agreement"). Such terms and conditions shall include the following, as well as such other provisions, not inconsistent with the Plan, as may be deemed advisable by the Committee:
a.General. Awards may be granted on the terms and conditions set forth in this Section 5. In addition, the Committee may impose on any Award or the exercise thereof, at the Award Date or thereafter, such additional terms and conditions, not inconsistent with the provisions of the Plan, as the Committee shall determine, including terms requiring forfeiture of Awards in the event of
termination of service by the Manager. The Committee shall retain full power and discretion to accelerate, waive, or modify, at any time, any term or condition of an Award that is not mandatory under the Plan.
b.Options. The Committee is authorized to grant Options to the Manager on the following terms and conditions:
i.Exercise Price. The exercise price per Share purchasable under an Option shall be determined by the Committee, but in no event shall the per Share exercise price of any Option be less than 100% of the Fair Market Value of a Share on the Award Date of such Option.
ii.Time and Method of Exercise. The Committee shall determine the time or times at which or the circumstances under which an Option may be exercised in whole or in part (including based on achievement of performance goals and/or future service requirements), the methods by which such exercise price may be paid or deemed to be paid, and the form of such payment. Such form may include, without limitation, cash, exchange of Shares previously owned by the Manager, through a "broker cashless exercise" procedure approved by the Committee (to the extent permitted by law) or a combination of the above, in any case in an amount having a combined value equal to such exercise price; provided that the Committee may require that any Shares exchanged by the Manager have been owned by the Manager for at least six months as of the date of exercise. An Award Agreement may provide that the Manager may pay all or a portion of the aggregate exercise price by having Shares with a Fair Market Value on the date of exercise equal to the aggregate exercise price withheld by the Company. To the extent that the Committee permits the use of a "cashless exercise" to exercise any Option, the Committee may designate a securities brokerage firm or firms through which all such exercises must be effected. Notwithstanding anything contained herein to the contrary, in no event will the Plan permit a "reload feature," in which replacement stock options are issued to the Manager in exchange for Shares held by the Manager upon exercise of an Option. In no event may an Option remain exercisable more than ten (10) years following the Award Date.
c.Stock Appreciation Rights. The Committee is authorized to grant SARs to the Manager on the following terms and conditions:
i.Right Conferred. A SAR shall confer on the Manager a right to receive an amount with respect to each Share subject thereto, upon exercise thereof, equal to the excess of:
1.the Fair Market Value of one Share on the date of exercise over
2.the Fair Market Value of one Share on the Award Date.
ii.Other Terms. The Committee shall determine at the Award Date or thereafter, the time or times at which and the circumstances under which a SAR may be exercised in whole or in part (including based on achievement of performance goals and/or future service requirements), the method of exercise, method of settlement, form of consideration payable in settlement, method by or forms in which Shares will be delivered or deemed to be delivered to the Manager, whether or not a SAR shall be in tandem or in combination with any other Award, and any other terms and conditions of any SAR. SARs may be either freestanding or in tandem with other Awards. In no event may a SAR remain exercisable more than ten (10) years following the Award Date. A SAR granted in tandem with an Option shall be exercisable only to the extent the underlying Option is exercisable. Payment of a SAR may be made in cash, Shares, or property as specified in the Award Agreement or determined by the Committee.
d.Restricted Stock. The Committee is authorized to grant Restricted Stock to the Manager on the following terms and conditions:
i.Grant and Restrictions. Restricted Stock shall be subject to such restrictions on transferability, risk of forfeiture and other restrictions, if any, as the Committee may impose, which restrictions may lapse separately or in combination at such times, under such circumstances (including based on achievement of performance goals and/or future service requirements), in such installments or otherwise, as the Committee may determine
on the Award Date or thereafter. During the restricted period applicable to the Restricted Stock, the Restricted Stock may not be sold, transferred, pledged, hypothecated, margined, or otherwise encumbered by the Manager.
ii.Certificates for Shares. Restricted Stock granted under the Plan may be evidenced in such manner as the Committee shall determine. If certificates representing Restricted Stock are registered in the name of the Manager, the Committee may require that such certificates bear an appropriate legend referring to the terms, conditions and restrictions applicable to such Restricted Stock, that the Company retain physical possession of the certificates, and that the Manager deliver a stock power to the Company, endorsed in blank, relating to the Restricted Stock.
iii.Dividends/Distributions. Except to the extent otherwise provided in any Award Agreement, the Manager granted Restricted Stock shall have all of the rights of a shareholder, including the right to vote the Restricted Stock and the right to receive dividends thereon (subject to any mandatory reinvestment or other requirement imposed by the Committee). Unless otherwise determined by the Committee, dividends or distributions paid on Restricted Stock shall be paid at the dividend or distribution payment date, provided that such payments may be deferred to such date as determined by the Committee, and in any event shall be payable in cash or in Shares having a Fair Market Value equal to the amount of such dividends and distributions. Unless otherwise determined by the Committee, Shares distributed in connection with a stock split or stock dividend, and other property distributed as a dividend or distribution, shall be subject to restrictions and a risk of forfeiture to the same extent as the Restricted Stock with respect to which such Shares or other property has been distributed.
iv.Section 83(h) Election. If the Manager makes an election pursuant to Code Section 83(b) concerning Restricted Stock, the Manager shall be required to promptly file a copy of such election with the Company.
e.Restricted Stock Units. The Committee is authorized to grant Restricted Stock Units to the Manager on the following terms and conditions:
i.Award and Restrictions. Settlement of an Award of Restricted Stock Units shall occur upon expiration of the restricted period specified in the Award Agreement (or, if permitted by the Committee, at a later date selected by the Manager in accordance with rules and regulations established by the Committee). The Committee may place restrictions on Restricted Stock Units that shall lapse, in whole or in part, only upon the attainment of one or more performance goals.
ii.Dividend/Distribution Equivalents. The Committee is authorized to grant to the Manager the right to receive dividend equivalent payments and/or distribution equivalent payments for the period prior to settlement of the Restricted Stock Unit. Dividend equivalents or distribution equivalents may be paid currently or credited to an account for the Manager, and may be settled in cash or Shares, as determined by the Committee. Any such settlements, and any such crediting of dividend equivalents or distribution equivalents or reinvestment in Shares, may be subject to such conditions, restrictions and contingencies as the Committee shall establish, including the reinvestment of such credited amounts in Share equivalents. Unless otherwise determined by the Committee, any such dividend equivalents or distribution equivalents shall be paid or credited, as applicable, on the dividend payment date to the Manager as though each Restricted Stock Unit held by the Manager was a Share.
f.Other Share-Based Awards. The Committee is authorized, subject to limitations under Applicable Laws, to grant to the Manager such other Awards that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, Shares, as deemed by the Committee to be consistent with the purposes of the Plan, including, without limitation, rights convertible or exchangeable into Shares, purchase rights for Shares, Awards with value and payment and/or settlement contingent upon performance of the Company or any other factors designated by the Committee, and Awards valued by reference to the value of Shares or the value of securities of or the performance of specified Subsidiaries. The Committee shall determine the
terms and conditions of such Awards. Shares delivered pursuant to an Award in the nature of a purchase right granted under this Section 5(f) shall be purchased for such consideration, paid for at such times, by such methods, and in such forms, including, without limitation, cash, Shares or a combination thereof, as the Committee shall determine. Cash awards, as an element of or supplement to any other Award under the Plan, may also be granted pursuant to this Section 5(f).
g.Vesting. Except as provided otherwise in an Award Agreement, Awards generally will vest over a minimum period of three (3) years or shall be subject to a performance-based vesting schedule, except in the event of a Change of Control or other special circumstances.
6.TERMINATION OF MANAGEMENT AGREEMENT. Upon termination of the Management Agreement either (i) by the Company for Cause (as described in the Management Agreement) or (ii) by the Manager for Cause (as described in the Management Agreement or) for any reason other than pursuant to a Termination Notice (as defined in the Management Agreement) that is given in connection with a determination that the compensation payable to the Manager is not fair, all unvested Awards then held by the Manager and all accrued and unpaid dividends or dividend equivalents related thereto shall be immediately cancelled and forfeited without consideration. Upon termination of the Management Agreement for any reason other than as enumerated in the immediately preceding sentence, any Award that was not previously vested will become fully vested and/or payable, and any performance conditions imposed with respect to the Award will be deemed to be fully achieved; provided, however, that for any Award subject to Code Section 409A, no payment may be made to the Manager unless the termination of the Management Agreement also constitutes a "separation from service" within the meaning of Code Section 409A.
7.CHANGE OF CONTROL. In the event of a Change of Control, any Award that was not previously vested will become fully vested and/or payable, and any performance conditions imposed with respect to the Award will be deemed to be fully achieved.
8.CONDITIONS UPON ISSUANCE OF SHARES.
a.The Manager will have none of the rights of a shareholder (including, but not limited to, the right to receive dividends or other distributions from the Company, voting rights, or rights under any rights offering) until such time as such Shares have been recorded on the Company’s official shareholder records as having been issued to the Manager.
b.No Shares shall be issued under this Plan or pursuant to any Award Agreement until and unless the issuance and delivery of such Shares pursuant thereto shall comply with all relevant provisions of law, including, without limitation, the Securities Act, the Exchange Act, the rules and regulations promulgated thereunder, and the rules of any stock exchange having jurisdiction over the securities of the Company.
c.The Company may, to the extent deemed necessary or advisable by the Committee, postpone the issuance or delivery of Shares until completion of such registration or qualification of such Shares or other required action under any federal or state law, rule or regulation, listing or other required action with respect to any stock exchange or automated quotation system upon which the Shares or other securities of the Company are listed or quoted, or compliance with any other obligation of the Company, as the Committee may consider appropriate, and may require the Manager to make such representations, furnish such information and comply with or be subject to such other conditions as it may consider appropriate in connection with the issuance or delivery of Shares in compliance with Applicable Laws, rules, and regulations, listing requirements, or other obligations.
9.RECAPITALIZATION. In the event that the Committee shall determine that any dividend or other distribution (whether in the form of cash, Shares, or other property), recapitalization, Share split, reverse split, reorganization, merger, consolidation, spin-oft combination, repurchase, or share exchange, or other similar corporate transaction or event, affects the Shares such that an adjustment is appropriate in order to prevent dilution or enlargement of the rights of the Manager under the Plan, then the Committee shall make equitable changes or adjustments to any or all of: (a) the number and kind of Shares or other property (including cash)
that may thereafter be issued in connection with Awards; (b) the number and kind of Shares or other property (including cash) issued or issuable in respect of outstanding Awards; (c) the exercise price, base price or purchase price relating to any Award and (d) the performance goals, if any, applicable to outstanding Awards. In addition, the Committee may determine that any such equitable adjustment may be accomplished by making a payment to the Award holder, in the form of cash or other property (including but not limited to Shares).
10.TRANSFER RESTRICTIONS. Unless otherwise determined by the Committee, an Award may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner. Notwithstanding the foregoing, the Manager may allocate all or a portion of any Award, or ownership or profits interests in the any Award, to the Manager’s officers or other personnel of the Manager or its Affiliates. Any such allocation shall not affect the other applicable terms of the Plan or the Award. To the extent that any Award is transferable, such Award shall contain such additional terms and conditions as the Committee deems appropriate.
11.CONSTRUCTION. The Committee shall administer, construe, interpret, and exercise discretion under the Plan and each Award Agreement in a manner that is consistent and in compliance with a reasonable, good faith interpretation of all Applicable Laws, and that avoids (to the extent practicable) the classification of any Award as "nonqualified deferred compensation" for purposes of Code Section 409A, as determined by the Committee, or if an Award is subject to Code Section 409A, in a manner that complies with Code Section 409A. The Plan will be administered and interpreted in a manner consistent with this intent, and any provision that would cause the Plan or any Award to fail to satisfy Code Section 409A will have no force and effect until amended to comply therewith (which amendment may be retroactive to the extent permitted by Code Section 409A).
12.NO RIGHT TO CONTINUED SERVICE. Nothing in the Plan or in any Award, Award Agreement or other agreement entered into pursuant hereto shall confer upon the Manager a right to continue to provide services to the Company or any parent, subsidiary, or Affiliate of the Company or to be entitled to any remuneration or benefits not set forth in the Plan or such Award Agreement or other agreement or to interfere with or limit in any way the right of the Company to terminate the Management Agreement in accordance with its terms.
13.SEVERABILITY. If any provision of the Plan, an Award or an Award Agreement is determined by a court of competent jurisdiction to be invalid, illegal, or unenforceable in any jurisdiction, or as to any person or Award, such provision shall be construed or deemed to be amended to resolve the applicable infirmity, unless the Committee determines that it cannot be so construed or deemed amended without materially altering the Plan or the Award, in which case such provision shall be stricken as to such jurisdiction, person, or Award, and the remainder of the Plan and any such Award shall remain in full force and effect.
14.TERMINATION AND AMENDMENT OF THE PLAN.
a.The Board may at any time and from time to time terminate, amend, modify or suspend the Plan in whole or in part; provided, however, that unless otherwise determined by the Board, an amendment that requires shareholder approval in order for the Plan to comply with any law, regulation or stock exchange requirement shall not be effective unless approved by the requisite vote of shareholders. The Committee may at any time and from time to time amend any outstanding Award in whole or in part. Notwithstanding the foregoing sentences, no amendment or modification to or suspension or termination of the Plan or amendment of any Award shall affect adversely any of the rights of the Manager, without the Manager’s consent, under any Award theretofore granted under the Plan.
b.The Board may, subject to receipt of requisite regulatory approval, where required, and without further shareholder approval, in its discretion make the following amendments to the Plan:
i.amending typographical, clerical and grammatical errors;
ii.reflecting changes to applicable securities laws; and
iii.ensuring that the Shares issued under the Plan will comply with any provisions respecting income tax and other laws in force in any country or jurisdiction of which the Manager may from time to time be resident or a citizen.
c.In the event the Plan or any Award issued hereunder fails to meet the applicable requirements of Code Section 409A, then the Plan and the applicable Award Agreement shall be deemed to be modified (and shall otherwise be amended by the Committee, in its sole and absolute discretion), to the limited extent necessary to satisfy the requirements of Code Section 409A and the regulations thereunder.
15.APPLICABLE LAW. This Plan shall be interpreted and construed in accordance with the laws of the State of Maryland without giving effect to its conflict or choice of law rules or principles that might otherwise refer construction or interpretation of this Plan to the substantive law of another jurisdiction.
16.EFFECTIVE DATE AND DURATION OF PLAN. The Plan is effective as of April 7, 2021, subject to any required shareholder approval. The Plan shall remain in full force and effect from the date of shareholder approval hereof and from year to year thereafter until amended or terminated in accordance with Section 14 above. The Plan shall automatically terminate on the tenth anniversary of the date on which it was adopted.
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