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Number of Meetings of the Board
of Directors and Attendance in
20162023
The Board
of Directors met
ninesix times during
the calendar year ended December 31, 2016,2023, including both regularly scheduled and special meetings. Each director attended at least 75% of the meetings of the Board
of Directors and of the committees of the Board
of Directors on which such director served during the calendar year ended December 31,
2016.2023. The Company expects each director serving on its Board
of Directors to regularly attend meetings of the Board
of Directors and the committees on which such director serves, and to review, prior to meetings,
materialmaterials distributed in advance of such meetings. A director who is unable to attend a meeting is expected to notify the Chairman of the Board
of Directors or the
chairpersonChair of the appropriate committee in advance of such meeting.
TheAdditionally, the Company expects each director to attend the annual meetings of
stockholdersshareholders, and a director who is unable to attend such a meeting
(which it is understood will occur on occasion) is expected to notify the Chairman of the Board
of Directors in advance of such meeting. Each
incumbent director
other than Mr. Dishnerthen in office attended our
20162023 annual meeting of
stockholders.Report of the Audit Committee
The Board of Directors has appointed an Audit Committee consisting of three directors. All of the members of the Audit Committee are “independent” as defined in the NYSE listing standards.
The Audit Committee’s job is one of oversight, as set forth in its charter. It is not the duty of the Audit Committee to prepare the Company’s financial statements, to plan or conduct audits or to determine that the Company’s financial statements are complete and accurate and are in accordance with generally accepted accounting principles (“GAAP”). The independent registered public accounting firm is responsible for auditing the financial statements and expressing an opinion as to whether those audited financial statements fairly present the financial position, results of operations and cash flows of the Company in conformity with GAAP.
The Audit Committee has reviewed and discussed the Company’s audited financial statements with management and with Deloitte & Touche LLP, the Company’s independent registered public accounting firm for the calendar year ended December 31, 2016. The Audit Committee has also discussed with Deloitte & Touche LLP the other matters required to be discussed under Auditing Standard No. 1301.
The Audit Committee has received from Deloitte & Touche LLP the written disclosures and the letter required by applicable requirements of the Public Company Accounting Oversight Board regarding Deloitte &
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Touche LLP’s communications with the Audit Committee concerning independence, has discussed Deloitte & Touche LLP’s independence with Deloitte & Touche LLP and has considered the compatibility of non-audit services with independence of the independent registered public accounting firm.
Based on the review and discussions referred to above, the Audit Committee recommendedPursuant to the Board of Directors that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the calendar year ended December 31, 2016 for filing with the SEC.
Respectfully submitted by the Audit Committee of the Board of Directors.
Strauss Zelnick (Chairperson)
Richard D. Bronson
Camille J. Douglas
Information on Corporate Governance and Communications with the Board of Directors
The Company maintains a corporate governance section on its website to provide relevant information to stockholders and other interested parties. Corporate governance information available on the website includes the charters of the Audit Committee, Nominating and Corporate Governance Committee and Compensation Committee of the Board of Directors, the Corporate Governance Guidelines of the Company, the Code of Business Conduct and Ethics, directors, employees and their immediate families may not purchase, sell, acquire or dispose of any securities issued by the CodeCompany and all other entities affiliated with Starwood Capital Group, including any derivative instruments relating to these securities, without prior approval from the Company’s legal counsel.
How to Communicate with the Board
The Board casts a wide net for information and values input from a variety of Ethics applicablestakeholders, including shareholders. We have therefore created a variety of means for our shareholders to communicate with us. These include:
writing to us via mail (as described below);
writing to the Principal Executive OfficerBoard’s dedicated email address (provided below);
attending our annual meeting;
voting your proxies;
calling our Investor Relations Department (203-422-7788);
taking part in our shareholder engagement discussions; and
Senior Financial Officers of the Company. This information is available on the Company’s website, www.starwoodpropertytrust.com, under the heading “Investor Relations” and the subheading “Corporate Governance,” and the information is also available in print without charge to any stockholder upon written request to the Company’s Secretary at Starwood Property Trust, Inc., 591 West Putnam Avenue, Greenwich, Connecticut 06830. attending our periodic investor days.
Any interested party may initiate communications with the Board,
of Directors, the Chairman
of the Board, the Lead Independent Director, the
Independent Directorsindependent directors as a group,
any committee of the Board or any individual director or directors by writing to our Secretary at the address set forth above. You should indicate on the outside of the envelope the intended recipient of your communication
(i.e.(i.e., the full Board,
of Directors, the
Independent Directorsindependent directors as a group or any individual director or directors).
In addition, interested parties may contact the Board, the Chairman of the Board, the Lead Independent Director, the independent directors as a group, any committee of the Board or any individual director or directors electronically via email to the Board’s designated email address: BoardofDirectors@stwdreit.com. The Board
of Directors has instructed our
SecretaryGeneral Counsel to review such
mail and email correspondence and, at his discretion, not to forward items if he deems them to be of a commercial or frivolous nature or otherwise inappropriate for the recipient’s consideration.
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Delinquent Section 16(a) Reports
Section 16(a) of the Exchange Act requires the Company’s directors, executive officers and persons beneficially owning more than ten percent of a registered class of the Company’s equity securities to file reports of beneficial ownership and changes in such ownership on Forms 3, 4 and 5 with the SEC and the NYSE. These persons are also required to furnish the Company with copies of all Forms 3, 4 and 5 that they file. Based solely on the Company’s review of the copies of such Forms it has received, the Company believes that all its executive officers, directors and greater than ten percent beneficial owners complied with all filing requirements applicable to them since January 1, 2023, other than the filing of a Form 4 for Mr. Dishner reporting two transactions, which was filed late on August 14, 2023 and the filing of a Form 4 for Mr. Sternlicht reporting one transaction, which was filed late on March 16, 2023.
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NON-EMPLOYEE DIRECTOR COMPENSATION
Executive directors do not receive compensation for serving on the Board. For these purposes, an “executive director” is a member of the Board who is also an employee of Starwood Capital Group or an affiliate thereof, including the Company. For 2023, each non-executive director was entitled to receive a $110,000 annual cash retainer, payable in quarterly installments in conjunction with quarterly meetings of the Board. In addition, directors serving in the following roles were entitled to receive these additional annual cash retainers: our Lead Independent Director: $40,000; our Audit Committee Chair: $20,000; each member of the Audit Committee: $10,000; our Compensation Committee Chair: $15,000; each member of the Compensation Committee: $7,500; our Nomination and Corporate Governance Committee Chair: $10,000; each member of the Nominating and Corporate Governance Committee: $2,500; and each member of the Investment Committee: $2,500.
In addition, in 2023, each non-executive director was entitled to an equity award of $140,000, payable in the form of restricted shares of common stock that vest on the one-year anniversary of the date of grant, subject to the director’s continued service on the Board, under the Starwood Property Trust, Inc. 2022 Equity Plan (the “2022 Equity Plan”); and reimbursement of reasonable travel expenses incurred in connection with attending Board and committee meetings.
The table below summarizes the compensation paid by the Company to its non-executive directors for the calendar year ended December 31, 2023.
Richard D. Bronson | | | 177,500 | | | 140,442 | | | — | | | — | | | — | | | — | | | 317,942 |
Camille J. Douglas | | | 122,500 | | | 140,442 | | | — | | | — | | | — | | | — | | | 262,942 |
Deborah Harmon(2) | | | 110,000 | | | 140,442 | | | — | | | — | | | — | | | — | | | 250,442 |
Solomon J. Kumin | | | 120,000 | | | 140,442 | | | — | | | — | | | — | | | — | | | 260,442 |
Fred Perpall | | | 122,500 | | | 140,442 | | | — | | | — | | | — | | | — | | | 262,942 |
Fred S. Ridley | | | 120,000 | | | 140,442 | | | — | | | — | | | — | | | — | | | 260,442 |
Strauss Zelnick | | | 142,500 | | | 140,442 | | | — | | | — | | | — | | | — | | | 282,942 |
(1)
| Represents the aggregate grant date fair value of awards of restricted shares of common stock calculated under the Financial Accounting Standard Board’s Accounting Codification Topic 718. Each grant date fair value is calculated using the closing price of our common stock on the date of grant as reported by the NYSE. On September 29, 2023, each non-executive director was granted an annual equity award equal to 7,258 restricted shares of common stock. The closing price of our common stock on September 29, 2023 was $19.35. As of December 31, 2023, each of the non-executive directors held 7,258 unvested shares of restricted stock, for a total unvested share count of 50,806. |
(2)
| Ms. Harmon was appointed to the Board effective as of April 6, 2023. |
The Compensation Committee and the Board aim to provide and maintain competitive director compensation levels and minimize the complexity of the Company’s fee structure. For 2024, it is expected that each non-executive director will be entitled to receive the same levels of compensation, on the same terms, for service as a member of the Board and as a member of the committees of the Board as for 2023.
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The Board has adopted a guideline for equity ownership equal to at least three times the value of the annual Board membership cash retainer. When this guideline was implemented in 2011, directors had (i) five years from the time of the implementation of this guideline in 2011 or (ii) five years from the time of their election to the Board, whichever is later, to obtain this level of equity ownership. Restricted stock awards made by the Company in connection with service on the Board and its committees may be counted toward achieving the equity ownership guidelines. As of March 6, 2024, 15,210,282 shares of common stock were available for issuance under the 2022 Equity Plan (determined on a combined basis with the 2022 Manager Equity Plan (defined below)) and 50,806 shares of common stock were subject to unvested awards granted to non-executive directors under the 2022 Equity Plan.
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We are a leading diversified real estate finance company—and the largest commercial mortgage real estate investment trust in the United States based on market capitalization. We are passionate about our business and want to share a summary of accomplishments of which we are proud. We also believe it is important to provide insight into how we think of ourselves and our larger purpose as a corporate citizen, which supports our ability to create value for our shareholders. We utilize a multi-cylinder investment platform that enables us to collaborate with Starwood Capital Group’s approximately 5,000 employees across its 16 global offices to find investment opportunities in our core focus areas of real estate and infrastructure. A few highlights regarding our Company are provided below:
We have shares publicly
traded on the NYSE | | | We have the ability to leverage the platform of Starwood Capital Group, a leading private investment firm with over 32 years of experience and broad operating expertise across virtually every real estate asset class |
Capital deployed since our
inception in August 2009 | | | Portfolio across our Commercial and Residential Lending, Infrastructure Lending, Investing & Servicing and Property Business Segments |
Employees and ~50 additional people employed by the Manager or other providers that are fully dedicated to the Company’s business and operations | | | We have the size and expertise to successfully execute large, complex real estate transactions | | | We are one of the largest commercial mortgage special servicing businesses in the United States |
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| | | $2.0 billion investment in an affordable housing fund, which consists of 15,057 units of rent restricted multi-family properties. This fund, which the Company manages, is one of the largest providers and owners of affordable housing in the U.S. |
| | | As of December 2023, we owned 15,057 apartment units that provide housing to approximately 40,000 people, 98% of whom represent households earning around 60% of the median household income for each property’s region. |
| | | In every one of our communities, we have preserved all in-place affordability restrictions on our properties. We provide support services to residents such as the Soldiers to Scholars program, which offers free rent, utilities and maintenance to military veterans who are obtaining a college degree and free transportation to medical and retail destinations at seniors-only communities. |
| | | Since the purchase of our infrastructure lending platform in 2018, we have financed $840 million of renewable energy assets, including wind, hydro, solar and geothermal projects. |
| | | Since 2018, our renewable portfolio generated over 11,200 gigawatt hours of energy, avoiding over 11.2 million tons of CO2 emissions. |
| | | As of year-end 2023, the Company’s Commercial Real Estate Lending portfolio included $3.8 billion of loans where the underlying asset has or is seeking an energy certification. This represents 24% of our Commercial Real Estate Lending portfolio. |
| | | Our residential lending business has deployed over $13.4 billion since 2016, advancing financial inclusion by providing mortgages to many high-quality borrowers who might otherwise struggle to secure access to housing credit. |
| | | In our owned real estate portfolio, we run several initiatives focused on energy efficiency and cost savings, such as: |
| | • | | | a utility tracking program that enables efficient monitoring of water and electric use across portfolios; and |
| | • | | | water conservation programs that invest in more efficient kitchen and bathroom fixtures, reducing water usage by approximately 42% on average. In 2023, the value of these savings was approximately $20 million. |
Through our commercial real estate lending business, we evaluate environmental risks associated with our investments. | | | • We utilize a Phase I environmental site assessment to identify environmental conditions that may have a material impact on the property being assessed.
• We assess a property’s sustainability and marketability by reviewing characteristics including LEED certification, tenant amenities (such as bike storage and repair facilities), neighborhood walkability ratings and electric car charging stations.
• We conduct periodic property site visits which include physical inspection of the assets that include environmental considerations. |
| | | | | | |
Investing in renewable energy projects and integrating environmental due diligence into our lending practices. | | | Making affordable housing available for thousands of families. | | | Advancing financial inclusion by helping to make home ownership possible for people who can’t get traditional bank loans. |
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To further our commitment to sustainability, we have aligned our social and environmental disclosures with market-leading frameworks SASB (Sustainability Accounting Standards Board) and TCFD (Task Force on Climate-related Financial Disclosures). The Company has identified the Mortgage Finance, Real Estate and applicable portions of the Asset Management & Custody Activities and Commercial Bank Sector Standards as most relevant to our business, as well as TCFD alignment, which highlights our climate-related considerations for the organization. The disclosures are publicly available on our website and can be viewed at the following link: https://www.starwoodpropertytrust.com/corporate-responsibility (note that information provided on our website is not incorporated by reference into this Proxy Statement). In addition, an affiliate of our Manager, Starwood Capital Group, is proud to be a signatory of the United Nations-supported Principles for Responsible Investment.
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On a regular basis throughout the year, our management team—including our CEO and Chairman of the Board—attends investor conferences and holds one-on-one meetings and calls with investors to gain a better understanding of the issues that are important to existing and potential shareholders. We also interact with our shareholders’ stewardship and proxy voting teams and our directors remain open to engagements where valuable and appropriate.
During 2023, our management team held approximately 140 individual and group meetings with shareholders representing approximately 34% of our outstanding shares to discuss, among other topics, our business, financial and operating performance, our capital allocation priorities and our corporate governance and executive compensation. We use the information gathered in these meetings to help inform our governance and decision-making and ensure our interests remain aligned with those of our shareholders.
We have approximately 300 employees across offices located in Greenwich, New York, Miami Beach, Los Angeles, Charlotte, Stamford, London and San Francisco. We strive to be an employer of choice, and are therefore highly focused on creating and maintaining best in class recruitment, retention and compensation programs and a culture designed to encourage performance, integrity and well-being.
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OUR EXECUTIVE OFFICERS
Information concerning
The following chart lists the names, ages terms and positions with the Company and business experience of the executive officers of the Company is set forth below. Ages shown for all executive officers are asCompany. For additional information on Mr. Sternlicht see the section of December 31, 2016.this Proxy Statement entitled “Our Board—Proposal 1: Election of Directors.”
Barry S. Sternlicht | | | 5663
| | | Chairman of the Board of Directors and Chief Executive Officer |
Jeffrey F. DiModica, CFA | | | 5056
| President
|
Andrew J. Sossen
| 40
| Chief Operating Officer, General Counsel, Chief Compliance Officer, Secretary and Executive Vice President
|
Rina Paniry | | | 4350
| | | Chief Financial Officer, Treasurer, Principal Financial Officer and Chief Accounting Officer |
In addition to Mr. Sternlicht, for whom biographical information is provided in the section of this Proxy Statement entitled “Proposal 1: Election of Directors,” the following individuals serve as the Company’s executive officers.
Jeffrey F. DiModica, CFA, has been the Company’s President since September 2014. He has also served as a Managing Director of an affiliate of the Manager since July 2014. Mr. DiModica served as a director of the Company from its inception in 2009 until July 2014. From 2007 to 2014, Mr. DiModica was a Managing Director and the Head of MBS/ABS/CMBS Sales and Strategy for the Royal Bank of Scotland (“RBS”), a global financial services firm. In that role, he was responsible for the distribution of mortgage-backed securities (“MBS”), asset-backed securities (“ABS”) and commercial mortgage-backed securities (“CMBS”) to institutional clients, including banks, hedge funds, insurance companies and money managers. Previously, from 2001 to 2007, Mr. DiModica headed the Boston sales office for RBS. Prior to joining RBS, from 1993 to 2001, Mr. DiModica sold derivative and MBS products to institutional clients for Merrill Lynch in Boston. Mr. DiModica began his career in the Merchant and Investment Banking Group of the Commercial Real Estate Department at Chemical Bank from 1989 to 1991. Mr. DiModica is a member of the Young Presidents Organization and serves on the Board of Virtual Enterprises International, a non-profit focused on teaching career and entrepreneurial skills to inner city high school students. Mr. DiModica is also the founding President of MitoAction, a non-profit organization that provides education, support and advocacy for patients and families affected by mitochondrial disease. Mr. DiModica received a Bachelor of Science / Bachelor of Arts degree with a concentration in Finance from Boston University, a Master of Business Administration degree from the Amos Tuck School at Dartmouth College and his Chartered Financial Analyst designation in 1995.
Andrew J. Sossen has been the Company’s Chief Operating Officer since July 2011 and the Company’s General Counsel, Chief Compliance Officer, Secretary and Executive Vice President since January 2010. Prior to joining the Company, Mr. Sossen served from 2006 to 2009 as the General Counsel of KKR & Co.’s asset management business and of KKR Financial Holdings LLC, a publicly traded specialty finance company, where he was a member of senior management and was integrally involved in the policy and strategic decision-making, as well as the day-to-day operations, of the businesses. Mr. Sossen previously served as a trustee of Starwood Waypoint Residential Trust, a publicly traded REIT that subsequently merged with another party and became Colony Starwood Homes (“SWAY”). Mr. Sossen’s career began at Simpson Thacher & Bartlett LLP, where he was a member of the firm’s corporate department, specializing in capital markets and mergers and acquisitions. Mr. Sossen received both a Juris Doctor degree and a Bachelor of Arts degree from the University of Pennsylvania.
Rina Paniry has been the Company’s Chief Financial Officer, Treasurer, Principal Financial Officer and Chief Accounting Officer since May 2014. She has also served as an employee of Starwood Capital Operations, LLC since May 2014. Previously, Ms. Paniry served from 2013 to 2014 as the Chief Financial Officer and from 2006 to 2013 as the Chief Accounting Officer of LNR Property LLC (“LNR Property”), a wholly owned subsidiary of the Company that was acquired by the Company in 2013. Prior to joining LNR Property, she spent 11 years at Deloitte & Touche in various roles, principally in the real estate industry and in the functional areas of audit and mergers and acquisitions. Ms. Paniry is a Certified Public Accountant in Florida. Ms. Paniry received a Bachelor of Accounting degree, a Bachelor of Management Information Systems degree and a Master of Accounting degree from Florida International University.
JEFFREY F. DIMODICA,
CFA
President of the Company
| | | | | | EXPERIENCE
• President of the Company since September 2014
• Managing Director of an affiliate of the Manager since July 2014
• Director of the Company from its inception in 2009 until July 2014
• Managing Director and the Head of MBS/ABS/CMBS Sales and Strategy, where Mr. DiModica was responsible for the distribution of mortgage-backed securities (“MBS”), asset-backed securities (“ABS”) and CMBS to institutional clients, including banks, hedge funds, insurance companies and money managers, Royal Bank of Scotland (2007-2014); joined 2001
• Sold derivative and MBS products to institutional clients for Merrill Lynch in Boston, Massachusetts (1993-2001)
• Chemical Bank, Merchant and Investment Banking Group of the Commercial Real Estate Department (1989-1991)
EDUCATION
• BS/BA, with a concentration in Finance, Boston University
• MBA, Amos Tuck School of Business at Dartmouth College
• Chartered Financial Analyst
OTHER
• Advisory Board member of the Posse Foundation, a non-profit that has given full scholarships to over 10,000 inner city leaders to attend 64 national universities
• Founding President of MitoAction, a non-profit organization that provides education, support and advocacy for patients and families affected by mitochondrial disease
|
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RINA PANIRY
Chief Financial Officer, Treasurer, Principal Financial Officer and Chief Accounting Officer of the Company
| | | | | | EXPERIENCE
• Chief Financial Officer, Treasurer, Principal Financial Officer and Chief Accounting Officer of the Company since May 2014
• Employee of Starwood Capital Operations, LLC since May 2014
• Chief Financial Officer (2013-2014) of LNR Property LLC, a wholly-owned subsidiary of the Company that was acquired by the Company in 2013; previously Chief Accounting Officer (2006-2013)
• Spent 11 years at Deloitte & Touche in various roles, principally in the real estate industry and in the functional areas of audit and mergers and acquisitions
EDUCATION
• BAcc/BA in Management Information Systems, Florida International University
• MAcc, Florida International University
• Certified Public Accountant in Florida
|
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We believe that our competitive compensation, outstanding benefits, training opportunities and stimulating work environment help us attract and retain people with exceptional financial and real estate skills. These benefits and opportunities include:
Exceptional Employee Benefits
Medical, prescription, dental and vision insurance for all employees and their families
401(k) plan with company match incentive
Employee Stock Purchase Plan (“ESPP”) with a discounted share purchase plan
Subsidized life and disability insurance
Paid time off for holidays, personal days and vacation
Gym subsidies, annual health screenings and flu shots
Matching charitable contributions
Education assistance programs
Commuter subsidy programs
| | | | | | | | | |
• Regular review and monitoring of employee turnover and reasons behind it
• Regular review and monitoring of employee demographic data
• Conduct regular Pulse Surveys to “take the pulse” of a large segment of employees to see how they feel about the Company, their work, our improvement progress and more
• Approximately 23% of employees have a tenure of 15+ years | | | • Our Employee Handbook includes a discrimination, harassment and retaliation prevention policy
• Programs to support diverse talent include:
○ Mentoring initiatives
○ Targeted college recruitment programs | | | | | | 39% |
| | of employees identify as female |
| | | | | 43% |
| | of employees identify as racially diverse |
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Employee Training and Talent Management
Management and leadership training opportunities, including women in leadership training
One-on-one coaching
Professional designations
On average, 10-20% of employees participate in some form of management and leadership training programs each year
Approximately 30% of job openings are filled internally
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, DIRECTORS AND MANAGEMENT
The following table sets forth the beneficial ownership of our Common Stockcommon stock as of March 17, 20176, 2024 with respect to:
each of the Company’s directors and director nominees;
each of the Company’s named executive officers; and
all of the Company’s directors, director nominees and executive officers as a group.
Except as indicated in the table below, the business address of each person listed in the table below is the address of our principal executive offices, Starwood Property Trust, Inc., 591 West Putnam Avenue, Greenwich, Connecticut 06830.
Directors and Named Executive Officers | Amount and Nature Of
Beneficial Ownership | Percent of
Class |
Richard D. Bronson(1)(2) | | 48,801 | | * |
Jeffrey F. DiModica(3) | | 129,797 | | * |
Jeffrey G. Dishner | | 150,963 | | * |
Camille J. Douglas(1) | | 24,801 | | * |
Solomon J. Kumin(4) | | 14,509 | | * |
Rina Paniry | | 106,893 | | * |
Andrew J. Sossen | | 92,398 | | * |
Barry S. Sternlicht(5) | | 5,719,106 | | 2.2% |
Strauss Zelnick(1)(6) | | 41,801 | | * |
Directors and Executive Officers as a Group (9 persons) | | 6,329,069 | | 2.4% |
Richard D. Bronson(1)(2) | | | 91,815 | | | * |
Jeffrey F. DiModica | | | 925,984 | | | * |
Jeffrey G. Dishner(3) | | | 652,354 | | | * |
Camille J. Douglas(1) | | | 63,315 | | | * |
Deborah Harmon | | | 7,258 | | | * |
Solomon J. Kumin(1) | | | 57,523 | | | * |
Rina Paniry | | | 466,730 | | | * |
Fred Perpall(1) | | | 27,406 | | | * |
Fred S. Ridley(1) | | | 37,295 | | | * |
Andrew Sossen(4) | | | — | | | — |
Barry S. Sternlicht(5) | | | 15,703,482 | | | 5.0% |
Strauss Zelnick(1)(6) | | | 84,815 | | | * |
Directors and Executive Officers as a Group (11 persons) | | | 18,117,977 | | | 5.8% |
| (1)
| Includes 24,8017,258 shares of unvested restricted Common Stockcommon stock granted to each of Messrs. Bronson and Zelnick and Ms. Douglasthe non-executive directors pursuant to the Director Stock2022 Equity Plan. |
| (2)
| Includes 15,000 shares owned by Mr. Bronson’s spouse. |
| (3)
| Includes 5,542 shares of restricted Common Stock granted to Mr. DiModica when he was a non-executive director pursuant to the Director Stock Plan. |
| (4) | Includes 14,509 shares of restricted Common Stock granted to Mr. Kumin as a non-executive director pursuant to the Director Stock Plan. |
| (5) | Includes 253,421609,132 shares owned in a trust of which Mr. SternlichtDishner is the trustee. |
(4)
| Mr. Sossen resigned as our Chief Operating Officer, General Counsel, Chief Compliance Officer, Secretary and Executive Vice President effective April 28, 2023. |
(5)
| Includes 2,342,126 shares held by entities directly or indirectly controlled by Mr. Sternlicht and 233,333 shares issuable upon the vesting on March 31, 2024 of restricted stock units granted to the Manager. |
(6)
| Includes 11,800 shares owned in trusts of which Mr. Zelnick is the trustee and includes 2,600 shares owned by Mr. Zelnick’s spouse. |
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The following table sets forth certain information relating to the beneficial ownership of our
Common Stockcommon stock by each person, entity or group known to the Company to be the beneficial owner of more than five percent of our
Common Stockcommon stock based on a review of publicly available statements of beneficial ownership filed with the SEC on Schedules 13D and
13G through March 17, 2017.Name and Address of Beneficial Owner | Amount and Nature Of
Beneficial Ownership | Percent of
Class |
BlackRock, Inc.(1)
55 East 52nd Street
New York, New York 10055
| | 20,118,648 | | | 7.8 | % |
| | | | | |
| | | | | |
The Vanguard Group(2)
100 Vanguard Boulevard
Malvern, Pennsylvania 19355
| | 19,388,303 | | | 7.6 | % |
| | | | | |
| | | | | |
13G.
BlackRock, Inc.(1)
50 Hudson Yards
New York, New York 10001 | | | 30,065,059 | | | 9.6% |
The Vanguard Group(2)
100 Vanguard Boulevard
Malvern, Pennsylvania 19355 | | | 28,852,499 | | | 9.2% |
| (1)
| Based on information as of December 31, 20162023 set forth in Schedule 13G/A filed with the SEC on January 27, 201724, 2024 by BlackRock, Inc., which has sole voting power with respect to 19,160,10829,606,692 shares of Common Stockcommon stock and sole dispositive power with respect to 20,118,64830,065,059 shares of Common Stock.common stock. BlackRock, Inc. did not report any shared voting or dispositive power with respect to shares of common stock. |
| (2)
| Based on information as of December 31, 201629, 2023 set forth in Schedule 13G/A filed with the SEC on February 10, 201713, 2024 by The Vanguard Group, which has sole voting power with respect to 150,598no shares of Common Stock,common stock, shared voting power with respect to 21,386105,004 shares of Common Stock,common stock, sole dispositive power with respect to 19,228,65628,423,644 shares of Common Stockcommon stock and shared dispositive power with respect to 159,647428,855 shares of Common Stock.common stock. |
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Unless otherwise indicated, all shares set forth in the tables above are owned directly and the indicated person has sole voting and investment power with respect thereto. Unless otherwise indicated, the percentage of beneficial ownership is calculated based on 260,142,504313,873,770 shares of Common Stockcommon stock outstanding as of March 17, 2017.6, 2024. In accordance with SEC rules, each listed person’s beneficial ownership includes:
all shares of our Common Stockcommon stock the investor actually owns beneficially or of record;
all shares of our Common Stockcommon stock over which the investor has or shares voting or dispositive control (such as in the capacity as a general partner of an investment fund); and
all shares of our Common Stockcommon stock the investor has the right to acquire within 60 days (such as shares of restricted Common Stock that are currently vested or which are scheduled to vest within 60 days).days.
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HOW OUR EXECUTIVES ARE PAID
Compensation Discussion and Analysis
None of the named executive officers of the Company is currently an employee of the Company. We are managed by the Manager, pursuant to the terms of the Management
Agreement. AllAgreement, and all of our named executive officers are employees of an affiliate of the Manager. Because the Management Agreement
with the Manager provides that the Manager is responsible for managing the Company’s affairs,
each of the Company’s Chief Executive Officer and
each of its other current executive officers (other than Ms. Paniry), each of whom is
also an executive of Starwood Capital Group or an affiliate thereof,
dodoes not receive cash compensation from the Company for serving as
one of the Company’s executive officers. Instead, the Company pays the Manager management fees and
reimbursements,reimbursement amounts, as described in the section of this Proxy Statement entitled “Certain Relationships and Related Transactions—Management Agreement,” and, at the discretion of the Compensation Committee of the Board,
of Directors, the Company may also grant
equity-based awards directly to our executive officers or to the Manager,
equity-based awards, as described in the section of this Proxy Statement entitled “Certain Relationships and Related Transactions—Grants of Equity Compensation to the Manager.” Mr. Sternlicht, our Chairman
of the Board and Chief Executive Officer, does not receive any direct compensation from the Manager or the Company for his services as Chairman
andof the Board or Chief Executive Officer of the Company, and the Company does not reimburse Starwood Capital Group or any of its affiliates for compensation paid to Mr. Sternlicht. Mr. Sternlicht is, however, the controlling equityholder of the parent of the Manager and, accordingly, has an interest in the fees paid and equity awards granted to the Manager.
The
Company also considersBoard believes in regular interaction with shareholders on a broad variety of topics. We use the
resultsinformation gathered in these meetings to help inform our decision-making and ensure our interests remain aligned with those of
the stockholder advisory vote on executive compensation. At our
2016 annual meetingshareholders. For a description of
stockholders, stockholders voted to approve, on an advisory basis, our
executive compensation. The Company did not make any change to the Company’s executive compensation programengagement efforts in
response to this advisory vote.2023, please see “Our Company—Shareholder Engagement.”
We have not paid directly, and do not intend to pay directly, any cash compensation to our named executive officers (other than Ms. Paniry). Mr. Sossen,Ms. Paniry, the Company’s Chief OperatingFinancial Officer, General Counsel,Treasurer, Principal Financial Officer and Chief ComplianceAccounting Officer, Secretary and Executive Vice President has been seconded to the Company by an affiliate of the Manager under the terms of thea Secondment Agreement, dated effective as of January 1, 2014 (the “Sossen Secondment Agreement”), between such affiliate of the Manager and the Company, pursuant to which the Company reimburses the affiliate of the Manager for certain of its expenses incurred in connection with his service in these roles, including annual base salary and annual cash bonus (as well as employee benefit costs and any related employee withholding taxes). Ms. Paniry, the Company’s Chief Financial Officer, Treasurer, Principal Financial Officer and Chief Accounting Officer, has similarly been seconded to the Company by an affiliate of the Manager under the terms of the Secondment Agreement, dated effective as of January 1, 2014 (the “Paniry Secondment Agreement”), among such affiliate of the Manager, the Company and LNR Property, but the Company and certain of its subsidiaries directly pay the expenses incurred in connection with her service in these roles, including annual base salary and annual cash bonus (as well as employee benefit costs and any related employee withholding taxes). Mr. Sossen, the Company’s former Chief Operating Officer, General Counsel, Chief Compliance Officer, Secretary and Executive Vice President was seconded to the Company by an affiliate of the Manager under the terms of a Secondment Agreement, effective as of January 1, 2014 (the “Sossen Secondment Agreement”), between such affiliate of the Manager and the Company, pursuant to which the Company reimbursed such affiliate of the Manager for certain of its expenses incurred in connection with Mr. Sossen’s service in such roles as an executive of the Company, including annual base salary and annual cash bonus (as well as employee benefit costs and related employee withholding taxes). The Company does not pay or make any reimbursement with respect to Mr. DiModica’s compensation
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(other than for dividend equivalents paid by the Manager or one of its affiliates on equity-based compensation awards). For additional details, see the section of this Proxy Statement entitled “Certain Relationships and Related Transactions—Management Agreement—Reimbursement of Expenses.”
The annual base salary for
20162023 of Mr. DiModica, the Company’s President, was
$400,000$600,000 and his cash bonus for
20162023 was
$2,200,000. Mr. Sossen’s annual base salary for 2016 was $350,000 and his cash bonus for 2016 was $1,300,000.$3,000,000. Ms. Paniry’s annual base salary for
20162023 was $600,000 and her cash bonus for
20162023 was
$850,000.$1,631,700. Mr. Sossen’s annual base salary for 2023 was $425,000, although we note that Mr. Sossen resigned from his position as Chief Operating Officer, General Counsel, Chief Compliance Officer, Secretary and Executive Vice President of the Company effective April 28, 2023. No cash bonus was paid to Mr. Sossen for 2023.
Messrs. DiModica’s and Sossen’s and Ms. Paniry’s annual base salaries were recommended by
ourthe Chairman
of the Board and Chief Executive Officer in consultation with the Manager,
with the assistance of Meridian, the Compensation Committee’s independent outside compensation consultant, based on a general understanding of compensation
practicepractices in our industry
and a comparison against our peers, as well as anticipated salary requirements of other candidates who could potentially fill the positions. The Compensation Committee reviewed and approved Messrs. DiModica’s and Sossen’s and Ms. Paniry’s annual base salaries for
2016. Messrs.2023. Mr. DiModica’s
and Sossen’s and Ms. Paniry’s cash bonuses for
20162023 were recommended by
ourthe Chairman
of the Board and Chief Executive Officer in consultation with the Manager, with the assistance of Meridian,
Compensation Partners, LLC (“Meridian”), the Compensation Committee’s independent outside compensation consultant, based upon a review of compensation paid by the Compensation Peer Group (as defined below) for comparable positions as well as broader industry compensation
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levels (including an evaluation of industry survey data provided by Meridian), as described below under “—Independent Compensation Consultant.” The Compensation Committee reviewed and approved Messrs.Mr. DiModica’s and Sossen’s and Ms. Paniry’s cash bonuses for 2016.2023. In approving Messrs.Mr. DiModica’s and Sossen’s and Ms. Paniry’s cash bonuses, the Compensation Committee targeted amounts approximately equal tobetween the midpoint50th and 75th percentile of the market data reviewed by the committee, including Compensation Peer Group and survey data.
Approximately 24% of the cash compensation paid to our named executive officers was
for fixed pay
(i.e.(i.e., base salary) and approximately 76% was
for incentive pay
(i.e.(i.e., cash bonus). The Compensation Committee did not apply any fixed metrics in determining the amount of the applicable cash bonuses to be paid for
2016.2023. Rather, it took into consideration a range of factors, including the performance of the
Company’sprice per share of the common stock, profitability of the Company
(including net income attributable to the Company and Distributable Earnings, a non-GAAP financial measure defined below), operations of the Company, risk management policies and practices of the Company, investment activity of the Company, management of the Company’s capital structure and
completed acquisitions and
dispositions completed during the year.dispositions.
Equity-Based Compensation
The Compensation Committee may
from time to time pursuant to our equity incentive plans, grant our named executive officers certain
equity-based awards, including stock options, restricted shares of Common Stock, restricted stock units, dividend equivalent rights and other equity-based awards. Where appropriate, these awards are designed to align the interests of our named executive officers with those of our
stockholdersshareholders by allowing our named executive officers to share in the creation of value for our
stockholdersshareholders through capital 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 the Company. These awards provide a further benefit to us by enabling our Manager to attract, motivate and retain talented individuals to serve as our executive officers.
In 2016,2023, the Company granted 33,02249,445, 44,950 and 51,560 restricted shares of Common Stockcommon stock to Messrs. DiModica and Sossen and Ms. Paniry, respectively, pursuant to the 2022 Equity Plan, which, in each case, vest annually in equal amounts over a three-year period, with the first vesting having occurred on March 15, 2017, subject to Ms. Paniry’ssuch named executive officer’s continued service to the Company, pursuant towith the Equity Plan.first installment vesting upon the first anniversary of the effective date (March 15, 2024). In determining thiseach of these equity-based awardawards for 2016,2023, the Compensation Committee did not apply any fixed metrics. Rather, similar to its determination of the applicable cash bonuses for 2016, itCompensation Committee took into consideration a range of factors, including the performance of the Company’s common stock, profitability of the Company (including net income attributable to the Company and Distributable Earnings, a non-GAAP
34 STARWOOD PROPERTY TRUST |
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financial measure defined below), operations of the Company, risk management policies and practices of the Company, investment activity of the Company, management of the Company’s capital structure and
completed acquisitions and
dispositions completed during the year.dispositions. Messrs. DiModica’s and Sossen’s and Ms. Paniry’s equity-based
awardawards for
2016 was2023 were recommended by our Chairman
of the Board and Chief Executive Officer. The Compensation Committee also considered input from Meridian, its independent outside compensation consultant, as described below under “—Independent Compensation Consultant.”
In 2016, none of our other named executive officers received equity-based awards.
Indemnification
We have also entered into an indemnification agreement with each of our named executive officers that provides for indemnification, to the fullest extent permitted by applicable law and subject to certain conditions, with respect to certain expenses and claims that such named executive officer incurs or becomes party to by reason of the fact that such named executive officer is or was an officer, director, trustee, employee or agent of the Company or any of our subsidiaries or affiliates. Pursuant to such indemnification agreements, our named executive officers may also obtain advancement of certain of such expenses. Such indemnification will be reduced to the extent that such directors are indemnified under the directors’ and officers’ liability insurance maintained by the Company. A copy of the form of such indemnification agreements is an exhibit to the Company’s Annual Report on Form 10-K for the calendar year ended December 31, 2015, as filed with the SEC.
Role of Compensation Committee
The Compensation Committee reviews and, where applicable, approves base salary and target bonus levels as well as any equity-based awards to be made to our named executive officers based on recommendations from the Company’s Chairman
of the Board and Chief Executive Officer and outside compensation consultants. Information on the Compensation Committee’s processes and procedures for consideration of executive compensation
are addressedis set forth in the section of this Proxy Statement entitled
“Corporate Governance—“Our Board—How the Board
of Directorsis Structured and Operates—Board and Committee Meetings—Compensation Committee.”
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Independent Compensation Consultant
Meridian provides executive compensation consulting services to the Compensation Committee. Meridian, amongAmong other things:things, Meridian:
participates in the design of the Company’s executive compensation programs;
provides and reviews market data and advises the Compensation Committee on setting executive compensation levels and the competitiveness and reasonableness of the Company’s executive compensation program;
reviews and advises the Compensation Committee regarding the elements of the Company’s executive compensation program, including as relativehow it compares to the Company’s peers; and
reviews and advises the Compensation Committee regarding director compensation.
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In
2016,December 2023, as part of the review of
Messrs.Mr. DiModica’s
and Sossen’s and Ms. Paniry’s compensation, Meridian assisted the Compensation Committee with comparing previous executive compensation levels to (a) the executive compensation levels at
12twelve other publicly traded
mortgage REITs and
specialized finance companiesfive other entities including diversified REITs and retail REITs that have characteristics that are similar to those of the Company
(the(collectively, the “Compensation Peer Group”) and (b) executive compensation levels in the broader industry (based on general industry survey data provided by Meridian). The companies
currently comprisingthat comprised the Compensation Peer Group are:
American Capital, Ltd.
Capstead Mortgage Corporation
Colony Financial, Inc. (now known as Colony Capital, Inc.)
iStar Financial Inc.
Ladder Capital Corp
MFA Financial, Inc.
NorthStar Realty Finance Corp. (now known as Colony NorthStar Inc.)
RAIT Financial Trust
Realty Income Corporation
Redwood Trust, Inc.
Spirit Realty Capital, Inc.
W. P. Carey Inc.
AGNC Investment Corp. | | | DigitalBridge Group, Inc. |
Annaly Capital Management, Inc. | | | Realty Income Corporation |
Apollo Commercial Real Estate Finance, Inc. | | | Spirit Realty Capital, Inc. |
Arbor Realty Trust, Inc. | | | Walker & Dunlop, Inc. |
Blackstone Mortgage Trust, Inc. | | | W. P. Carey Inc. |
Chimera Investment Corporation | |
KKR Real Estate Finance, Inc. | | | |
Ladder Capital Corp | | | |
New York Mortgage Trust, Inc. | | | |
Redwood Trust, Inc. | | | |
TPG RE Finance Trust, Inc. | | | |
MFA Financial, Inc. | | | |
Meridian does not,
and did not in the calendar year ended December 31, 2023, provide any other services to the Company or the Manager.
Role of Chief Executive Officer
As noted above, the Compensation Committee is responsible for reviewing and, where applicable, approving compensation for our named executive officers. Our Chairman of the Board
of Directors and Chief Executive Officer, Mr. Sternlicht, annually reviews the performance of each member of senior management (other than
Mr. Sternlicht’shis own performance). Recommendations based on these reviews, including salary adjustments, annual bonuses and equity-based
grants,awards, if any, are presented by Mr. Sternlicht to the Compensation Committee. All
compensation decisions for
20162023 made by the Compensation Committee with respect to the named executive officers (other than Mr. Sternlicht) were made after deliberation with Mr. Sternlicht. As noted elsewhere in this Proxy Statement, Mr. Sternlicht does not receive any direct compensation for his services as Chairman
of the Board and Chief Executive Officer of the Company, and the Company does not reimburse Starwood Capital Group or any of its affiliates for compensation paid to Mr. Sternlicht. Mr. Sternlicht is, however, the controlling equityholder of the parent of the Manager and, accordingly, has an interest in the fees paid and equity awards granted to the Manager.
In addition, at various times during the year at the request of the Compensation Committee, Mr. Sternlicht attends Compensation Committee meetings, or portions of Compensation Committee meetings, to provide the Compensation Committee with information regarding the Company’s operational performance, financial performance or other topics requested by the Compensation Committee to assist the Compensation Committee in making its compensation decisions.
36 STARWOOD PROPERTY TRUST |
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As noted elsewhere in this Proxy Statement, the Company does not pay any cash compensation to our named executive officers (other than Ms. Paniry). Rather, cash compensation is paid to such named executive
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officers, other than Mr. Sternlicht, by the Manager or its affiliates. Mr. Sternlicht receives no cash compensation for his service as our Chairman of the Board and Chief Executive Officer, although, as the controlling equityholder of the parent of the Manager, he has an interest in the fees paid and equity awards granted to the Manager. The Company reimburses an affiliate ofdoes not reimburse the Manager for Mr. Sossen’s cash compensation. No reimbursement is madeor its affiliates for Mr. DiModica’s cash compensation. In addition, from time to time, equity awards arehave been granted to Mr. DiModica by the Manager or its affiliates. No portion of the management fee is allocated to compensation paid by the Manager or its affiliates to our named executive officers.
The Manager provides the day-to-day management of the Company’s operations. This arrangement enables the Company to have access to the Manager’s
more than 2,000over 5,000 employees around the globe to provide transaction flow and insight into economic and local market trends. In addition, this arrangement gives the Company access to the Manager’s seasoned executive team, which has an average of
2632 years of industry experience. We believe that this arrangement has contributed significantly to our success. The management fee compensates the Manager for these services that it provides to the Company.
Compensation Committee Report
The Compensation Committee has reviewed and discussed the CD&A included in this Proxy Statement with management. Based on that review and discussion, the Compensation Committee recommended to the Board
of Directors that the CD&A be included in this Proxy Statement.
Respectfully submitted by the Compensation Committee of the
Board of Directors.Board.
Richard D. Bronson (Chairperson)(Chair)
Solomon J. Kumin
Strauss Zelnick
As noted elsewhere in this Proxy Statement, Mr. Sternlicht does not receive any direct compensation from the Company or the Manager for his services as Chairman of the Board and Chief Executive Officer of the Company, and the Company does not reimburse Starwood Capital Group or any of its affiliates for compensation paid to Mr. Sternlicht. Because the Company does not pay, or provide reimbursement for, any direct compensation to Mr. Sternlicht, the Company is not able to calculate and provide a ratio of the median employee’s annual total compensation to the total annual compensation of Mr. Sternlicht.
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Summary Compensation Table
The following table provides information regarding compensation earned by each of the Company’s named executive officers for the calendar year ended December 31,
2016,2023, as well as for the calendar years ended December 31,
20152022 and
2014.2021. As described in the CD&A included in this Proxy Statement, none of the named executive officers of the Company are employees of the Company and the Company did not directly pay any cash compensation to the named executive officers (other than Ms. Paniry) for or in such calendar years. The cash amounts shown for Mr. Sossen include the amounts of his compensation paid by an affiliate of the Manager for which the Company reimbursed such affiliate of the Manager for his services for the year in question. The Company does not pay or make any reimbursement with respect to Mr. DiModica’s
compensation.Name and Principal Position | Calendar
Year | Salary
($) | Bonus
($) | Stock
Awards
($) | Non-Equity
Incentive Plan
Compensation
($) | All Other
Compensation
($) | Total
($) |
Barry S. Sternlicht
Chairman and
Chief Executive Officer(1)
| | 2016 | | | — | | | — | | | — | | | — | | | — | | | — | |
| 2015 | | | — | | | — | | | — | | | — | | | — | | | — | |
| 2014 | | | — | | | — | | | — | | | — | | | — | | | — | |
Jeffrey F. DiModica
President(2)
| | 2016 | | $ | 400,000 | | $ | 2,200,000 | | | — | | | — | | | — | | $ | 2,600,000 | |
| 2015 | | $ | 400,000 | | $ | 1,800,000 | | $ | 2,500,008 | | | — | | | — | | $ | 4,700,008 | |
| 2014 | | $ | 176,923 | | $ | 796,500 | | | — | | | — | | | — | | $ | 973,423 | |
Andrew J. Sossen
Chief Operating Officer,
General Counsel, Chief
Compliance Officer,
Secretary and Executive
Vice President
| | 2016 | | $ | 350,000 | | $ | 1,300,000 | | | — | | | — | | | — | | $ | 1,650,000 | |
| 2015 | | $ | 350,000 | | $ | 1,200,000 | | $ | 908,606 | | | — | | | — | | $ | 2,458,606 | |
| 2014 | | $ | 300,000 | | $ | 1,450,000 | (3) | $ | 500,006 | | | — | | | — | | $ | 2,250,006 | |
Rina Paniry
Chief Financial Officer,
Treasurer, Principal
Financial Officer and Chief
Accounting Officer(4)
| | 2016 | | $ | 600,000 | | $ | 850,000 | | $ | 635,343 | (5) | | — | | | — | | $ | 2,085,343 | |
| 2015 | | $ | 600,000 | | $ | 800,000 | | $ | 852,150 | | | — | | | — | | $ | 2,252,150 | |
| 2014 | | $ | 534,140 | | $ | 450,000 | | $ | 424,676 | | | — | | | — | | $ | 1,408,816 | |
Barry S. Sternlicht
Chairman of the Board and Chief
Executive Officer(2) | | | 2023 | | | — | | | — | | | — | | | — | | | — | | | — |
| | 2022 | | | — | | | — | | | — | | | — | | | — | | | — |
| | 2021 | | | — | | | — | | | — | | | — | | | — | | | — |
Jeffrey F. DiModica
President | | | 2023 | | | 600,000 | | | 3,000,000 | | | 935,005 | | | — | | | — | | | 4,535,005 |
| | 2022 | | | 500,000 | | | 2,800,000 | | | 964,265 | | | — | | | — | | | 4,264,265 |
| | 2021 | | | 484,615 | | | 2,815,000 | | | 10,100,023 | | | — | | | — | | | 13,399,638 |
Rina Paniry
Chief Financial Officer, Treasurer, Principal Financial Officer and Chief Accounting Officer | | | 2023 | | | 600,000 | | | 1,631,700 | | | 975,000 | | | — | | | — | | | 3,206,700 |
| | 2022 | | | 600,000 | | | 1,575,000 | | | 1,133,803 | | | — | | | — | | | 3,308,803 |
| | 2021 | | | 600,000 | | | 1,575,000 | | | 2,500,396 | | | — | | | 30,941 | | | 4,706,337 |
Andrew J. Sossen
Former Chief Operating Officer, General Counsel, Chief Compliance Officer, Secretary and Executive Vice President(3) | | | 2023 | | | 246,212 | | | — | | | 850,005 | | | — | | | — | | | 1,096,217 |
| | 2022 | | | 425,000 | | | 1,475,000 | | | 717,583 | | | — | | | — | | | 2,617,583 |
| | 2021 | | | 400,000 | | | 1,738,000 | | | 2,215,364 | | | — | | | 30,941 | | | 4,384,305 |
(1)
| (1)Represents the aggregate grant date fair value of awards of restricted shares of common stock calculated under the Financial Accounting Standard Board’s Accounting Codification Topic 718. Each grant date fair value is calculated using the closing price of our common stock on the date of grant as reported by the NYSE. With respect to 2023, on March 9, 2023, Mr. DiModica was granted an award of 49,445 restricted shares of common stock, Mr. Sossen was granted an award of 44,950 restricted shares of common stock and Ms. Paniry was granted an award of 51,560 restricted shares of common stock. The closing market price of our common stock on the March 9, 2023 date of grant was $18.91. These 2023 awards were granted for performance in 2022. In March 2024, Mr. DiModica and Ms. Paniry were granted awards of 31,957 and 40,231 restricted shares of common stock, respectively, for performance with respect to 2023. These March 2024 awards had grant date fair values of $650,000 and $818,300, respectively. |
(2)
| Mr. Sternlicht does not receive any direct compensation from the Manager or the Company for his services as the Chairman of the Board and Chief Executive Officer of the Company, and the Company does not reimburse Starwood Capital Group or any of its affiliates for compensation paid to Mr. Sternlicht. Mr. Sternlicht is, however, the controlling equityholder of the parent of the Manager and, accordingly, has an interest in the fees paid and equity awards granted to the Manager. |
| (2)(3)
| Mr. DiModica was appointedSossen resigned as the Company’sour Chief Operating Officer, General Counsel, Chief Compliance Officer, Secretary and Executive Vice President effective as of September 18, 2014.April 28, 2023. |
| (3) | Mr. Sossen received $250,000 of his 2014 cash bonus subsequent to the filing of the proxy statement for the 2015 annual meeting of stockholders.38 STARWOOD PROPERTY TRUST |
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| (4) | Ms. Paniry was appointed as the Company’s Chief Financial Officer, Treasurer, Principal Financial Officer and Chief Accounting Officer effective as of May 7, 2014. |
| (5) | On March 21, 2016, Ms. Paniry received an annual award of 33,022 restricted shares of Common Stock. The amount reported in this column is based on a closing price of $19.24 per share of Common Stock on the date of grant. |
Grants of Plan-Based Awards During Calendar Year Ended December 31,
20162023
The following table provides information regarding plan-based awards granted to the Company’s named executive officers during the calendar year ended December 31,
2016.Name | Grant Date | All Other
Stock Awards:
Number of Shares
of Stock or Units
(#) | Grant Date
Fair Value
of Stock or
Unit Awards
($) |
Barry S. Sternlicht | N/A | | — | | | — | |
Jeffrey F. DiModica | N/A | | — | | | — | |
Andrew J. Sossen | N/A | | — | | | — | |
Rina Paniry
| | | | | | | |
Restricted Stock Award | March 21, 2016 | | 33,022 | (1) | $ | 635,343 | |
2023.
Barry S. Sternlicht | | | N/A | | | — | | | — |
Jeffrey F. DiModica
Restricted Stock Award | | | March 9, 2023 | | | 49,445(1) | | | 935,005 |
Rina Paniry
Restricted Stock Award | | | March 9, 2023 | | | 51,560(1) | | | 975,000 |
Andrew J. Sossen
Restricted Stock Award | | | March 9, 2023 | | | 44,950(1) | | | 850,005 |
(1)
| The restricted shares received by Mr. DiModica, Ms. Paniry and Mr. Sossen pursuant to this awardthese awards vest in annual installments over a three-year period with the first vesting having occurred on March 15, 2017.2024 for Mr. DiModica and Ms. Paniry. Mr. Sossen’s restricted shares were forfeited upon his resignation effective April 28, 2023. |
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Outstanding Equity Awards at December 31,
20162023
The following table provides information regarding outstanding equity awards of the Company’s named executive officers as of December 31,
2016. | Stock Awards |
Name | Number of
Shares or
Units of Stock
That Have
Not Vested
(#) | Market Value
of Shares or
Units of Stock
That Have
Not Vested
($)(7) |
Barry S. Sternlicht | | — | | | — | |
Jeffrey F. DiModica
| | | | | | |
Restricted Stock Unit Award | | 68,139 | (1) | $ | 1,495,651 | |
Andrew J. Sossen
| | | | | | |
Restricted Stock Award | | 21,863 | (2) | $ | 479,893 | |
Rina Paniry
| | | | | | |
Restricted Stock Award | | 1,204 | (3) | $ | 26,428 | |
Restricted Stock Award | | 1,403 | (4) | $ | 30,796 | |
Restricted Stock Award | | 16,397 | (5) | $ | 359,914 | |
Restricted Stock Award | | 33,022 | (6) | $ | 724,833 | |
2023.
Stock Awards
Barry S. Sternlicht | | | — | | | — |
Jeffrey F. DiModica | | | | | | |
Restricted Stock Award | | | 49,445(1) | | | 1,039,334 |
Restricted Stock Award | | | 27,102(2) | | | 569,684 |
Restricted Stock Award | | | 500,000(3) | | | 10,510,000 |
Restricted Stock Unit Award | | | 10,062(4) | | | 211,503 |
Rina Paniry | | | | | | |
Restricted Stock Award | | | 51,560(5) | | | 1,083,791 |
Restricted Stock Award | | | 32,609(6) | | | 685,441 |
Restricted Stock Award | | | 11,959(7) | | | 251,378 |
Restricted Stock Award | | | 64,461(8) | | | 1,354,970 |
Andrew J. Sossen | | | | | | |
Restricted Stock Award | | | —(9) | | | — |
(1)
| Reflects a restricted stock unit award granted by our Manager to Mr. DiModica, which vests in annual installments over a three-year period that began on March 15, 2023. The remaining 49,445 restricted shares that had not vested as of December 31, 2015.2023 and the vesting dates for such restricted shares are as follows: 16,481 shares on March 15, 2024, 16,481 shares on March 15, 2025 and 16,483 shares on March 15, 2026. |
(2)
| Reflects a restricted stock award granted to Mr. DiModica, which vests in annual installments over a three-year period that began on March 15, 2022. The numberremaining 27,102 restricted shares that had not vested as of December 31, 2023 and the vesting dates for such restricted shares are as follows: 13,550 shares on March 15, 2024 and 13,552 shares on March 15, 2025. |
(3)
| Reflects a restricted stock award granted to Mr. DiModica’sDiModica which cliff vested on January 1, 2024. |
(4)
| Reflects a restricted stock unit award granted to Mr. DiModica which vests in annual installments over a three-year period that began on March 15, 2021. There were 10,062 restricted stock units that had not vested as of December 31, 20162023 and the respective vesting dates for such restricted stock units are as follows: 34,069vested on March 31, 2017 and 34,070 on March 31, 2018.15, 2024. |
| (2) | Reflects a restricted stock award granted to Mr. Sossen which vests in 50% installments on each of March 18, 2016 and September 18, 2017. The remaining 21,863 unvested restricted shares will vest on September 18, 2017. |
| (3) | Reflects a restricted stock award granted to Ms. Paniry which vests in quarterly installments over a three-year period that began on June 30, 2014. The remaining 1,204 unvested restricted shares will vest on March 31, 2017. |
| (4)(5)
| Reflects a restricted stock award granted to Ms. Paniry, which vests in annual installments over a three-year period that began on March 16, 2015.15, 2023. The number of Ms. Paniry’sremaining 51,560 restricted shares that had not vested as of December 31, 20162023 and the respective vesting dates for such restricted shares are as follows: 70017,186 shares on March 16, 2017 and 70315, 2024, 17,186 shares on March 16, 2018.15, 2025 and 17,188 shares on March 15, 2026. |
| (5) | Reflects a restricted stock award granted to Ms. Paniry which vests in 50% installments on each of March 18, 2016 and September 18, 2017, respectively. The remaining 16,397 unvested restricted shares will vest on September 18, 2017. |
| (6)
| Reflects a restricted stock award granted to Ms. Paniry, which vests in annual installments over a three-year period that began on March 21, 2016.15, 2022. The number of Ms. Paniry’sremaining 32,609 restricted shares that had not vested as of December 31, 20162023 and the vesting dates for such restricted shares are as follows: 11,00616,304 shares on March 15, 2017, 11,0062024 and 16,305 shares on March 15, 2018 and 11,0102025. |
(7)
| Reflects a restricted stock award granted to Ms. Paniry which vests in annual installments over a three-year period that began on March 15, 2019.2021. There were 11,959 restricted shares that had not vested as of December 31, 2023 and such restricted shares vested on March 15, 2024. |
(8)
| (7)Reflects a restricted stock award granted to Ms. Paniry which cliff vested on March 15, 2024. |
(9)
| Mr. Sossen resigned as our Chief Operating Officer, General Counsel, Chief Compliance Officer, Secretary and Executive Vice President effective April 28, 2023. His then remaining 138,249 unvested restricted shares were forfeited upon his resignation. |
(10)
| The amountamounts reported in this column isare based on aour common stock’s closing price of $21.95 per share of Common Stock$21.02 on December 30, 2016.29, 2023. |
40 STARWOOD PROPERTY TRUST |
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Stock Vested in Calendar Year Ended December 31,
20162023
The following table provides information for each named executive officer with respect to the vesting of stock awards during the calendar year ended December 31,
20162023 and the value realized upon such vesting.
| Stock Awards |
Name | Number of
Shares Acquired
on Vesting
(#)(1) | Value
Realized on
Vesting
($)(2) |
Barry S. Sternlicht | | — | | | — | |
Jeffrey F. DiModica | | 34,069 | | $ | 644,926 | |
Andrew J. Sossen | | 28,861 | | $ | 563,881 | |
Rina Paniry | | 22,982 | | $ | 449,288 | |
Barry S. Sternlicht | | | — | | | — |
Jeffrey F. DiModica | | | 77,461 | | | 1,358,666 |
Rina Paniry | | | 50,260 | | | 881,560 |
Andrew J. Sossen | | | 34,674 | | | 608,182 |
| (1)
| Represents the vesting of restricted stock awards under the 2017 Equity Plan. |
| (2)
| Value realized on vesting of restricted stock awards is the aggregate fair market value on the datedate(s) of vesting. Fair market value is based on the closing price of the Company’s Common Stockcommon stock as reported by the NYSE. |
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Potential Post-Employment Payments and Payments upon Change in Control
The Company does not have employment or severance agreements with any of its named executive officers and is not obligated to make any payments to any of its named executive officers upon
a termination of employment or change in control of the Company. In the event that any named executive officer’s service to the Company is terminated either by the Company for
Causecause or by such named executive officer for any reason, any and all unvested awards of restricted
shares of Common Stockstock and restricted stock units that the Company has granted to such named executive officer under the
2022 Equity Plan
or its predecessor plan will be immediately forfeited by the named executive officer.
However, any and all unvested awards of restricted
shares of Common Stockstock and restricted stock units that the Company has granted to a named executive officer under the
2022 Equity Plan
or its predecessor plan will vest
in full immediately upon (a) the termination of such named executive officer’s service to the Company by the Company without
Causecause and, in the case of Ms. Paniry, by such named executive officer for good reason; (b) in the case of Ms. Paniry, the termination of such named executive officer’s service to the Company due to death or
(b)disability; or (c) a Change in Control prior to the termination of
suchthe named executive officer’s service to the Company. Assuming, for the sake of analysis, that a termination of service without
Causecause or a Change in Control
(or, in the case of Ms. Paniry, a resignation of employment for good reason or Ms. Paniry’s termination of employment due to death or disability) took place on
the last business day of the calendar year ended December 31,
2016,2023, the value of the vested awards of restricted
shares of Common Stockstock and restricted stock units of each named executive officer would be the same as the respective value set forth in the third column, “Market Value of Shares or Units of Stock That Have Not Vested,” of the table presented in the section of this Proxy Statement entitled “—Outstanding Equity Awards at December 31,
2016.2023.” Under
both the
2022 Equity
Plan: (i) “Cause” generally means (A) any actions or omissions by the named executive officer representing a fraud or willful misconduct against the Company or an affiliate of the Company, (B) any commission by the named executive officer of any felony, (C) any violation by the named executive officer of any material written policy of the Company, (D) any failure by the named executive officer to perform or satisfy any of his or her duties or obligations to the Company or any affiliate of the Company or any grossly negligent or reckless disregard of any such duties or obligations or (E) any failure by the named executive officer to devote his or her full working-timePlan and
attention (other than due to physical or mental incapacity or customary and reasonable time off for vacations and holidays) to the performance of his or her duties to the Company and any affiliates of the Company, provided, however, that upon written notice from the Company of any matter in the foregoing clauses (D) or (E), the named executive officer will be given 15 days from the delivery of such notice to cure such matter to the satisfaction of the Company; and (ii)its predecessor plan: “Change in Control” generally means a change in the ownership or effective control of the Company or a change in the ownership of a substantial portion of the assets of the Company, provided, however, that a transaction or series of transactions effected with the Manager and/or any affiliates of the Manager through the acquisition of
Common Stockcommon stock or other securities of the Company (regardless of the form of such transaction or series of transactions) or changes to the membership of the Board
of Directors will not constitute a Change in Control.
We have not included tables for pension benefits or nonqualified deferred compensation because, due to the limited nature of our compensation program, we have nothing to report with respect to these items.
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Pay Versus Performance
2023 | | | — | | | — | | | 2,945,974 | | | 2,700,278 | | | 125.96 | | | 79.21 | | | 339,213 | | | 662,566 |
2022 | | | — | | | — | | | 3,396,884 | | | 1,578,165 | | | 99.49 | | | 69.19 | | | 871,475 | | | 726,297 |
2021 | | | — | | | — | | | 7,496,760 | | | 9,094,143 | | | 120.03 | | | 91.49 | | | 447,739 | | | 794,116 |
2020 | | | — | | | — | | | 3,613,987 | | | 3,643,526 | | | 88.37 | | | 77.80 | | | 331,689 | | | 585,299 |
(1)
| Mr. Sternlicht served as the Company’s principal executive officer for the entirety of 2020 – 2023 and the Company’s other named executive officers for each of these years were Jeffrey F. DiModica, Andrew J. Sossen (resigned effective April 28, 2023) and Rina Paniry. |
(2)
| Amounts reported in this column represent (i) the total compensation reported in the Summary Compensation Table for the applicable year in the case of Mr. Sternlicht and (ii) the average of the total compensation reported in the Summary Compensation Table for the applicable year for the Company’s named executive officers for the applicable year other than the principal executive officer for such years. |
(3)
| Mr. Sternlicht does not receive any direct compensation from the Manager or the Company for his services as the Chairman of the Board and Chief Executive Officer of the Company, and the Company does not reimburse Starwood Capital Group or any of its affiliates for compensation paid to Mr. Sternlicht. |
(4)
| Amounts reported in this column represent the compensation actually paid to the Company’s named executive officers other than Mr. Sternlicht in the indicated fiscal year, based on the average total compensation for such named executive officers reported in the Summary Compensation Table for the indicated fiscal year and adjusted as shown in the table below: |
Summary Compensation Table - Total Compensation(b) | | | $2,945,974 | | | $3,396,884 | | | $7,496,760 | | | $3,613,987 |
- Grant Date Fair Value of Stock Awards Granted in Fiscal Year(c) | | | $(920,003) | | | $(938,550) | | | $(4,938,594) | | | $(1,089,710) |
+ Fair Value at Fiscal Year-End of Outstanding and Unvested Stock Awards Granted in Fiscal Year(d) | | | $707,708 | | | $736,389 | | | $5,828,590 | | | $1,775,664 |
+ Change in Fair Value of Outstanding and Unvested Stock Awards Granted in Prior Fiscal Years(e) | | | $579,420 | | | $(1,554,917) | | | $378,157 | | | $(238,795) |
+ Fair Value at Vesting of Stock Awards Granted in Fiscal Year That Vested During Fiscal Year(f) | | | $— | | | $— | | | $— | | | $— |
+ Change in Fair Value as of Vesting Date of Stock Awards Granted in Prior Fiscal Years For Which Applicable Vesting Conditions Were Satisfied During Fiscal Year(g) | | | $(42,764) | | | $(61,641) | | | $329,230 | | | $(417,620) |
- Fair Value as of Prior Fiscal Year-End of Stock Awards Granted in Prior Fiscal Years That Failed to Meet Applicable Vesting Conditions During Fiscal Year(h) | | | $(570,057) | | | $— | | | $— | | | $— |
= Compensation Actually Paid | | | $2,700,278 | | | $1,578,165 | | | $9,094,143 | | | $3,643,526 |
(a)
| Please see footnote 1 for the named executive officers included in the average for each indicated fiscal year. |
(b)
| Represents the average Total Compensation as reported in the Summary Compensation Table for the reported named executive officers in the indicated fiscal year. |
(c)
| Represents the average aggregate grant date fair value of the stock awards granted to the reported named executive officers during the indicated fiscal year, computed in accordance with FASB ASC 718. |
(d)
| Represents the average aggregate fair value as of the indicated fiscal year-end of the reported named executive officers’ outstanding and unvested stock awards granted during such fiscal year, computed in accordance with FASB ASC 718. |
(e)
| Represents the average aggregate change in fair value during the indicated fiscal year of the outstanding and unvested stock awards held by the reported named executive officers as of the last day of the indicated fiscal year, computed in accordance with FASB ASC 718. |
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(f)
| Represents the average aggregate fair value at vesting of the stock awards that were granted to the reported named executive officers and vested during the indicated fiscal year, computed in accordance with FASB ASC 718. |
(g)
| Represents the average aggregate change in fair value, measured from the prior fiscal year-end to the vesting date, of each stock award held by the reported named executive officers that was granted in a prior fiscal year and which vested during the indicated fiscal year, computed in accordance with FASB ASC 718. |
(h)
| Represents the average aggregate fair value as of the last day of the prior fiscal year of the reported named executive officers’ stock awards that were granted in a prior fiscal year and which failed to meet the applicable vesting conditions (such as through forfeiture) in the indicated fiscal year, computed in accordance with FASB ASC 718. |
(5)
| Pursuant to rules of the SEC, the comparison assumes $100 was invested on December 31, 2019 in our common stock. Historic stock price performance is not necessarily indicative of future stock price performance. |
(6)
| The TSR Peer Group consists of the Bloomberg REIT Mortgage Index (BBREIT:IND), an independently prepared index that includes companies in the U.S. mortgage REIT industry. |
(7)
| As noted in the CD&A, for 2023, the Compensation Committee determined that Distributable Earnings continues to be viewed as a core driver of the Company’s performance and stockholder value creation. Distributable Earnings, a non-GAAP financial measure, is used to compute the Company’s incentive fees to its external manager and is an appropriate supplemental disclosure for a mortgage REIT. For the Company’s purposes, Distributable Earnings is defined as GAAP net income (loss) excluding non-cash equity compensation expense, the incentive fee due to the Company’s external manager, acquisition costs associated with successful acquisitions, depreciation and amortization of real estate and associated intangibles, any unrealized gains, losses or other non-cash items recorded in net income (loss) for the period and, to the extent deducted from net income (loss), distributions payable with respect to equity securities of subsidiaries issued in exchange for properties or interests therein. The amount is adjusted to exclude one-time events pursuant to changes in GAAP and certain other non-cash adjustments as determined by the Company’s external manager and approved by a majority of the Company’s independent directors. Refer to the Company's Annual Reports on Form 10-K for the years ended December 31, 2023 and 2022 for additional information regarding Distributable Earnings, including reconciliations of GAAP net income to Distributable Earnings for each of the years presented above. |
Relationship Between Pay and Performance
We believe the “Compensation Actually Paid” in each of the years reported above and over the four-year cumulative period are reflective of the Compensation Committee’s emphasis on “pay-for-performance” as the “Compensation Actually Paid” fluctuated year-over-year, primarily due to the result of our stock performance. However, it should be noted that the Compensation Committee does not currently evaluate “Compensation Actually Paid” as calculated above (pursuant to Item 402(v)(2) of Regulation S-K) as part of its executive compensation determinations.
The following is a list of performance measures, that in the Company’s assessment represent the most important performance measures used by the Company to link compensation actually paid to the Named Executive Officers for 2023:
Profitability of the Company:
| ○ | Net Income Attributable to the Company |
Performance of the Company’s common stock
Investment activity of the Company
Completed acquisitions and dispositions
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The following is a graphical representation of the relationship between average “Compensation Actually Paid” to the Company's non-PEO named executive officers and (i) the Company's total shareholder return (which is also compared to its peer group total shareholder return), (ii) Net Income Attributable to the Company and (iii) Distributable Earnings, the Company-Selected Measure.
44 STARWOOD PROPERTY TRUST |
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Equity Compensation Plan Information
The following table provides information regarding the number of shares of our
Common Stockcommon stock that may be issued under the Company’s equity compensation plans as of December 31,
2016. | (a) | (b) | (c) |
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
Compensation Plans
(Excluding Securities
Reflected in Column (a)) |
Equity compensation plans approved by security holders | | 281,250 | | | N/A | | | 2,262,763 | |
Equity compensation plans not approved by security holders | | — | | | — | | | — | |
Total | | 281,250 | | | N/A | | | 2,262,763 | |
Equity compensation plans approved by security holders | | | 875,000(1) | | | N/A | | | 18,318,990(2) |
Equity compensation plans not approved by security holders | | | — | | | — | | | — |
Total | | | 875,000 | | | N/A | | | 18,318,990 |
(1)
| Represents unvested RSUs under the 2017 Manager Equity Plan and 2022 Manager Equity Plan. |
(2)
| Includes 16,510,282 shares reserved for issuance under the 2022 Manager Equity Plan and 2022 Equity Plan (on a combined basis) and 1,808,708 shares reserved for issuance under the ESPP. |
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At the Annual Meeting, stockholders will be asked to vote to approve the 2017 Manager Equity Plan (Proposal 4) and the 2017 Equity Plan (Proposal 5), which, if approved, will succeed and replace the Manager Equity Plan, Equity Plan and Director Stock Plan, as applicable.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCESection 16(a) of the Exchange Act requires the Company’s directors, executive officers and persons beneficially owning more than ten percent of a registered class of the Company’s equity securities to file reports of beneficial ownership and changes in such ownership on Forms 3, 4 and 5 with the SEC and the NYSE. These persons are also required to furnish the Company with copies of all Forms 3, 4 and 5 that they file. Based solely on the Company’s review of the copies of such Forms it has received, the Company believes that all of its executive officers, directors and greater than ten percent beneficial owners complied with all filing requirements applicable to them during the calendar year ended December 31, 2016, other than (i) the filing of a Form 4 for Mr. Sternlicht reporting one transaction, which was inadvertently filed late on March 8, 2016 on behalf of Mr. Sternlicht, (ii) the filing of a Form 4 for Mr. Dishner reporting one transaction, which was inadvertently filed late on March 10, 2017 on behalf of Mr. Dishner and (iii) the filing of a Form 4 for Ms. Paniry reporting two transactions, one of which was inadvertently filed late on March 17, 2017 on behalf of Ms. Paniry. The Company has recently evaluated the cause of such delinquent filings and is putting in place controls to prevent future delinquent filings.
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ADVISORY VOTE ON EXECUTIVE COMPENSATION
Pursuant to Section 14A of the Exchange Act, we are providing
stockholdersshareholders with an opportunity to vote to approve, on an advisory basis, the compensation of our named executive officers as disclosed in this Proxy Statement. The advisory vote on executive compensation described in this proposal is commonly referred to as a “say-on-pay vote.”
AtIn accordance with the preference expressed by our
2016 annual meeting of stockholders, stockholders voted to approve, on anshareholders, we hold this advisory
basis, our executive compensation. At the 2011 annual meeting of stockholders, we asked our stockholders to indicate if we should hold an advisory vote
on the compensation of our named executive officers every one, two or three years (a vote commonly referred to as a “say-on-frequency vote”). Because at such 2011 annual meeting of stockholders our stockholders voted in favor of an annual advisory vote, we again are asking our stockholders to approve the compensation of our named executive officers
as disclosed in this Proxy Statement in accordance with the SEC’s rules. We are holding another say-on-frequency vote at the Annual Meeting (see Proposal 3), and we expect to hold a say-on-pay vote on an annual
basis in the foreseeable future.basis.
As described in the CD&A included in this Proxy Statement, none of the named executive officers of the Company are employees of the Company and the Company has not directly paid, and does not intend to directly pay, any cash compensation to the named executive officers (other than Ms. Paniry). However, we are charged by an affiliate of the Manager for certain of its expenses incurred in employing certain of our named executive officers. Additionally, from time to time we may grant to our named executive officers equity-based awards pursuant to
our equity incentive plans,the 2022 Equity Plan, which we believe serve to align the interests of
our named executive officers with the interests of our
stockholdersshareholders in receiving attractive risk-adjusted dividends and growth.
This proposal gives our
stockholdersshareholders the opportunity to express their views on the overall compensation of our named executive officers and the philosophy, policies and practices described in this Proxy Statement. For the reasons discussed above, we are asking our
stockholdersshareholders to indicate their support for our named executive officer compensation by voting
FOR the following resolution at the Annual Meeting:
“RESOLVED, that Starwood Property Trust, Inc.’s
stockholdersshareholders approve, on an advisory basis, the compensation of the named executive officers, as disclosed in the Proxy Statement pursuant to the compensation disclosure rules of the U.S. Securities and Exchange Commission, which disclosure includes the Compensation Discussion and Analysis, the Summary Compensation Table and the other related tables and
disclosure.disclosures.”
The say-on-pay vote is an advisory vote and, therefore, it will not bind the Company or
our Board of Directors.the Board. However, the Board
of Directors and the Compensation Committee will consider the voting results as appropriate when making decisions regarding executive compensation.
Recommendation of the Board
of Directors
The Board of Directors recommends a vote FOR the approval, on an advisory basis, of the compensation of our named executive officers as disclosed in this Proxy Statement.
46 STARWOOD PROPERTY TRUST |
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PROPOSAL 3:
ADVISORY VOTE ON FREQUENCY OF ADVISORY VOTE ON EXECUTIVE COMPENSATIONIn addition to the say-on-pay proposal (Proposal 2), we are asking stockholders to cast an advisory vote on the frequency with which the Company should provide stockholders with an opportunity to vote to approve, on an advisory basis, its executive compensation. Pursuant to Section 14A of the Exchange Act, we are asking stockholders whether future say-on-pay votes should be held every one, two or three years. This non-binding vote is held at least every six years, and we held our last say-on-frequency vote at the 2011 annual meeting of stockholders. We have held annual say-on-pay votes starting with the 2011 annual meeting of stockholders.
After careful consideration of this proposal, our Board of Directors recommends that stockholders vote for holding a say-on-pay vote each year for a number of reasons. The Board of Directors believes that holding an annual advisory vote on the Company’s executive compensation has worked well. Holding an annual advisory vote on the Company’s executive compensation will continue to allow stockholders to provide the Company with direct and immediate feedback on the most recent executive compensation disclosures and other information presented in its proxy statements and to react promptly to emerging trends in executive compensation. It also gives the Board of Directors and the Compensation Committee the opportunity to evaluate individual compensation decisions each year in light of the ongoing feedback from stockholders.
Stockholders are not voting to approve or disapprove the Board of Director’s recommendation. Instead, stockholders will be able to specify one of four choices with respect to this proposal: one year, two years, three years or abstain. The option that receives the highest number of votes cast by stockholders will be considered by the Board of Directors as stockholders’ recommendation as to the frequency of the advisory vote on the Company’s executive compensation.
The say-on-frequency vote is an advisory vote, and therefore it will not bind the Company or our Board of Directors. However, the Board of Directors and the Compensation Committee will consider the voting results as appropriate when adopting a policy on the frequency of future say-on-pay votes. Notwithstanding the Board of Director’s recommendation and the outcome of the stockholder vote, the Board of Directors may in the future decide to hold say-on-pay votes more or less frequently and may vary its policy based on various factors, including discussions with stockholders and adoption of material changes to compensation programs.
Recommendation of the Board of Directors
The Board of Directors recommends a vote to approve, on an advisory basis, holding the advisory vote on the Company’s executive compensation EACH YEAR.
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PROPOSAL 4:
APPROVAL OF THE 2017 MANAGER EQUITY PLAN
On March 27, 2017, the Board of Directors approved the 2017 Manager Equity Plan, which provides for the grant of stock options, stock appreciation rights (“SARs”), restricted shares of Common Stock, restricted stock units and other equity-based awards, including dividend equivalents, to the Manager. At the same time, the Board of Directors approved the 2017 Equity Plan (together with the 2017 Manager Equity Plan, the “Proposed Plans”), which provides for the same types of equity-based awards to natural persons who provide services to the Company, including employees of the Manager. If the Proposed Plans are approved, the maximum number of shares that may be subject to awards granted under either the 2017 Manager Equity Plan or the 2017 Equity Plan, determined on a combined basis, will be 11,000,000 shares of Common Stock.
If the 2017 Manager Equity Plan is approved by stockholders, the Company will be able to issue equity-based incentives to the Manager, which may in turn issue incentives to the directors, officers and employees of, and advisors and consultants to, the Manager and its affiliates. In addition, if the 2017 Manager Equity Plan is approved by stockholders, the Manager Equity Plan will terminate, except that any outstanding awards granted under Manager Equity Plan will remain in effect in accordance with their terms. If the 2017 Manager Equity Plan is not adopted by stockholders, the Manager Equity Plan and all outstanding awards granted thereunder will remain in effect in accordance with their terms. As of March 20, 2017, 831,612 shares remained available for future grants under the Manager Equity Plan, the Equity Plan and the Director Stock Plan, which will cease to be available for future grants if the stockholders approve the 2017 Manager Equity Plan and the 2017 Equity Plan.
We are asking stockholders to approve the 2017 Manager Equity Plan, as it will allow the Company and the Manager to continue to attract, retain and motivate talented service providers who are critical to the Company's long-term success and growth.
Purpose of the 2017 Manager Equity Plan
The 2017 Manager Equity Plan is intended to afford an incentive to the Manager to increase its efforts on behalf of the Company and to promote the success of the Company’s business.
Description of the 2017 Manager Equity Plan
Under the 2017 Manager Equity Plan, the Company may grant stock options, SARs, restricted shares of Common Stock, restricted stock units and other equity-based awards, including dividend equivalents, to the Manager. The following description is a summary of the 2017 Manager Equity Plan as it is presented to stockholders for approval, and is qualified in its entirety by reference to the complete text of the 2017 Manager Equity Plan, which is attached as Appendix A to this Proxy Statement.
Eligibility. Awards under the 2017 Manager Equity Plan may be granted only to the Manager. The Manager may in turn issue incentives to the directors, officers, employees of, or advisors or consultants to, the Manager or an affiliate of the Manager. In determining the type of award to be granted and the terms and conditions of such award, the Board of Directors will take into account any factors that the Board of Directors may deem relevant in connection with accomplishing the purposes of the 2017 Manager Equity Plan.
Administration. The 2017 Manager Equity Plan will be administered by the Board of Directors. Except with respect to an amendment, modification, suspension or early termination of the 2017 Manager Equity Plan, the Board of Directors has appointed the Compensation Committee to administer the 2017 Manager Equity Plan. The Board of Directors (including the Compensation Committee pursuant to its delegated authority) has the authority in its discretion to administer the 2017 Manager Equity Plan and to exercise all the powers and authorities either specifically granted to it under the 2017 Manager Equity Plan or necessary or advisable in the administration of the 2017 Manager Equity Plan, including, without limitation, the authority to grant awards, determine the type and number of awards to be granted, the number of shares of Common Stock to which an award may relate and the terms, conditions, restrictions and performance criteria relating to any award and make all other determinations deemed necessary or advisable for the administration of the 2017 Manager Equity Plan. Neither the Board of Directors nor the Compensation Committee will, without obtaining the approval of the Company’s stockholders, (i) reduce the base or purchase price of any previously granted stock option or SAR, (ii) cancel any previously granted stock option or SAR for another stock option or SAR with a lower purchase or
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base price or (iii) cancel any previously granted stock option or SAR in exchange for cash or another award if the purchase or base price of such stock option or SAR exceeds the fair market value of a share of Common Stock on the date of such cancellation, in each case other than in connection with a change in control of the Company (as defined in the 2017 Manager Equity Plan).
Available Shares. Following approval by stockholders, the maximum number of shares that may be made subject to awards granted under either the 2017 Manager Equity Plan or the 2017 Equity Plan, determined on a combined basis, will be 11,000,000 shares of Common Stock. If any shares of Common Stock are surrendered to or withheld by the Company as payment of either the exercise price of an award granted under the 2017 Manager Equity Plan, the Manager Equity Plan, the 2017 Equity Plan, the Equity Plan or the Director Stock Plan and/or withholding taxes in respect of such an award, the shares of Common Stock that were subject to such award will not again be available for awards under the 2017 Manager Equity Plan or the 2017 Equity Plan. If any awards granted under the 2017 Manager Equity Plan, the Manager Equity Plan, the 2017 Equity Plan, the Equity Plan or the Director Stock Plan are cancelled, forfeited, settled in cash or otherwise terminated without the issuance of shares of Common Stock, the shares that were subject to such award will be available for re-issuance under the 2017 Manager Equity Plan or the 2017 Equity Plan. Shares issued under the 2017 Manager Equity Plan may be authorized but unissued shares or shares that have been reacquired by the Company.
In the event that the Board of Directors determines that any dividend or other distribution (whether in the form of cash, Common Stock, or other property, but not including a regular cash dividend), 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 the Manager under the 2017 Manager Equity Plan, then the Board of Directors will make equitable changes or adjustments to any or all of: (i) the number and kind of shares of stock or other property (including cash) that may thereafter be issued in connection with awards; (ii) the number and kind of shares of stock or other property (including cash) issued or issuable in respect of outstanding awards; (iii) the exercise price relating to any award; and (iv) the performance goals, if any, applicable to outstanding awards. In addition, the Board of Directors 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 stock).
Termination and Amendment. The 2017 Manager Equity Plan will expire on May 4, 2027, unless terminated earlier by the Board of Directors. The Board of Directors may terminate, amend, modify or suspend the 2017 Manager Equity Plan in whole or part at any time, provided that any amendment that requires stockholder approval in order to comply with law, regulation or any stock exchange requirement will not be effective unless approved by the requisite vote of stockholders.
Upon termination of the Management Agreement by the Company for cause or by the Manager for any reason other than for cause or due to a change in the Manager's compensation under the Management Agreement, any then unvested awards held by the Manager under the 2017 Manager Equity Plan will be immediately forfeited and cancelled without consideration. Upon any other termination of the Management Agreement or a change in control of the Company (as defined in the 2017 Manager Equity Plan), any award granted under the 2017 Manager Equity Plan 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.
Terms of Awards. The Board of Directors may grant stock options, SARs, restricted stock, restricted stock units or other stock-based awards, including dividend equivalents, under the 2017 Manager Equity Plan on such terms and conditions as the Board of Directors deems consistent with the purposes of the 2017 Manager Equity Plan. Such awards may be granted with vesting, value and/or payment contingent upon attainment of one or more performance goals. Payments to be made by the Company upon the grant, vesting or exercise of an award may be made in such forms as the Board of Directors determines, including, without limitation, cash, shares of Common Stock or other property and may be made in a single payment or on a deferred basis. Each award will be evidenced by an award agreement containing the terms and conditions applicable to such award.
Each stock option will be exercisable for no more than ten years after its date of grant. The exercise price of an option will not be less than 100% of the fair market value of a share of Common Stock on the date of grant. The exercise price for shares of Common Stock subject to a stock option may be paid (i) in cash or by an
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exchange of Common Stock previously owned by the Manager, (ii) by authorizing the Company to withhold whole shares of Common Stock otherwise issuable pursuant to the exercise of such stock option, (iii) through a “broker cashless exercise” procedure approved by the Board of Directors or (iv) a combination of the above.
Each SAR will be exercisable for no more than ten years after its date of grant. The base price of an SAR will not be less than 100% of the fair market value of a share of Common Stock on the date of grant, provided that the base price of an SAR granted in tandem with a stock option will be the exercise price of the related stock option. An SAR entitles the holder to receive upon exercise (subject to withholding taxes) an amount equal to the difference between the fair market value of the shares of Common Stock on the exercise date and the base price of the SAR.
Unless otherwise determined by the Board of Directors, following a grant of restricted stock, the Manager will have all of the rights of a stockholder of the Company, including the right to vote and receive dividends or distributions with respect to shares of restricted stock; provided, however, that any dividends or distributions paid with respect to restricted stock in the form of shares of Common Stock or other property will be subject to the same restrictions as the underlying restricted stock.
Prior to settlement of a restricted stock unit, the Manager will have no rights as a stockholder of the Company with respect to such restricted stock unit. The Board of Directors is authorized to grant to the Manager the right to received dividend equivalent payments and/or distribution equivalent payments for the period prior to settlement of the award, subject to such conditions and restrictions as the Board of Directors may establish. Unless otherwise determined by the Board of Directors, any such dividend equivalents or distribution equivalents will be paid or credited on the dividend payment date, as though each restricted stock unit held by the Manager were a share of outstanding Common Stock.
New Plan Benefits
All awards under the 2017 Manager Equity Plan will be made in the future at the discretion of the Board of Directors, and therefore are not determinable.
U.S. Federal Income Tax Consequences
The following is a brief summary of some of the U.S. federal income tax consequences generally arising with respect to grants and awards under the 2017 Manager Equity Plan. This discussion does not address all aspects of the U.S. federal income tax consequences of participating in the 2017 Manager Equity Plan that may be relevant to the Manager in light of its investment or tax circumstances and does not discuss any state, local or non-U.S. tax consequences of participating in the 2017 Manager Equity Plan. This section is based on the Internal Revenue Code, of 1986, as amended (the “Code”), its legislative history, existing and proposed regulations under the Code and published rulings and court decisions, all as in effect as of the date of this document. These laws are subject to change, possibly on a retroactive basis.
The Manager will not recognize taxable income at the time restricted stock is granted and the Company will not be entitled to a tax deduction at that time, unless the Manager makes an election to be taxed at that time. If such election is made, the Manager will recognize compensation taxable as ordinary income at the time of the grant in an amount equal to the excess of the fair market value for the shares at such time over the amount, if any, paid for those shares. If such election is not made, the Manager will recognize compensation taxable as ordinary income at the time the restrictions constituting a substantial risk of forfeiture lapse in an amount equal to the excess of the fair market value of the shares at such time over the amount, if any, paid for those shares. The amount of ordinary income recognized by making the above-described election or upon the lapse of restrictions constituting a substantial risk of forfeiture is deductible by the Company as compensation expense. In addition, if the Manager receives dividends with respect to restricted stock for which the above-described election has not been made and prior to the time the restrictions constituting a substantial risk of forfeiture lapse will recognize compensation taxable as ordinary income, rather than dividend income, in an amount equal to the dividends paid and the Company will be entitled to a corresponding deduction.
The Manager will not recognize taxable income at the time a restricted stock unit is granted and the Company will not be entitled to a tax deduction at that time. Upon settlement of restricted stock units, the Manager will recognize compensation taxable as ordinary income in an amount equal to the fair market value of any shares delivered and the amount of any cash paid by the Company, and the Company will be entitled to a corresponding deduction.
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The Manager will not recognize taxable income at the time a stock option is granted and the Company will not be entitled to a tax deduction at that time. The Manager will recognize compensation taxable as ordinary income upon exercise of a stock option equal to the excess of the fair market value of the shares purchased over their exercise price, and the Company will be entitled to a corresponding deduction.
The Manager will not recognize taxable income at the time SARs are granted and the Company will not be entitled to a tax deduction at that time. Upon exercise, the Manager will recognize compensation taxable as ordinary income in an amount equal to the fair market value of any shares delivered and the amount of cash paid by the Company, and the Company will be entitled to a corresponding deduction.
The taxation of other stock based awards will depend on how such awards are structured. The Company may deduct, as a compensation expense, the amount of ordinary income recognized by the Manager in connection with the 2017 Manager Equity Plan at the time such ordinary income is recognized by the Manager.
Recommendation of the Board of Directors
The Board of Directors recommends a vote FOR the approval of the 2017 Manager Equity Plan.
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PROPOSAL 5:
APPROVAL OF THE 2017 EQUITY PLAN
On March 27, 2017, the Board of Directors approved the 2017 Equity Plan, which provides for the grant of stock options, SARs, restricted shares of Common Stock, restricted stock units and other equity-based awards, including dividend equivalents, to natural persons who provide services to the Company, including its directors, officers, employees, advisors, consultants or other third party service providers, including employees of the Manager or its affiliates. At the same time, the Board of Directors approved the 2017 Manager Equity Plan, which provides for the same types of equity-based awards to the Manager. If the Proposed Plans are approved, the maximum number of shares that may be subject to awards granted under either the 2017 Equity Plan or the 2017 Manager Equity Plan, determined on a combined basis, will be 11,000,000 shares of Common Stock.
If the 2017 Equity Plan is approved by stockholders, the Company will be able to issue equity-based incentives to natural persons who provide services to the Company, including employees of the Manager. In addition, if the 2017 Equity Plan is approved by stockholders, it will succeed and replace both the Equity Plan and the Director Stock Plan (together, the “Prior Plans”), which will terminate, except that any outstanding awards granted under Prior Plans will remain in effect in accordance with their terms. If the 2017 Equity Plan is not adopted by stockholders, the Prior Plans and all outstanding awards granted thereunder will remain in effect in accordance with their terms. As of March 20, 2017, 831,612 shares remained available for future grants under the Equity Plan, Manager Equity Plan and the Director Stock Plan, which will cease to be available for future grants if the stockholders approve the 2017 Equity Plan and the 2017 Manager Equity Plan.
We are asking stockholders to approve the 2017 Equity Plan, as it will allow the Company to continue to attract, retain and motivate talented service providers who are critical to the Company's long-term success and growth.
Purpose of the 2017 Equity Plan
The 2017 Equity Plan is intended to afford an incentive to the directors, officers, employees, advisors, consultants or other third party service providers to the Company, including employees of the Manager or its affiliates, to increase their efforts on behalf of the Company and to promote the success of the Company’s business.
Description of the 2017 Equity Plan
Under the 2017 Equity Plan, the Company may grant stock options, SARs, restricted shares of Common Stock, restricted stock units and other equity-based awards, including dividend equivalents, to natural persons who provide services to the Company, including its directors, officers, advisors and consultants, and employees of the Manager and its affiliates. The following description is a summary of the 2017 Equity Plan as it is presented to stockholders for approval and is qualified in its entirety by reference to the complete text of the 2017 Equity Plan, which is attached as Appendix B to this Proxy Statement.
Eligibility. Awards under the 2017 Equity Plan may be granted to natural persons who, as of the date of grant, provide services to the Company as directors (six persons as of the date hereof, subject to change), officers (four persons as of the date hereof, subject to change), employees, advisors, consultants or other third party service providers, including employees of the Manager or one of its affiliates. In determining the persons to whom awards may be granted, the type of award to be granted and the terms and conditions of such award, the Board of Directors will take into account any factors that the Board of Directors may deem relevant in connection with accomplishing the purposes of the 2017 Equity Plan.
Administration. The 2017 Equity Plan will be administered by the Board of Directors. Except with respect to an amendment, modification, suspension or early termination of the 2017 Equity Plan, the Board of Directors has appointed the Compensation Committee to administer the 2017 Equity Plan. The Board of Directors (including the Compensation Committee pursuant to its delegated authority) has the authority in its discretion to administer the 2017 Equity Plan and to exercise all the powers and authorities either specifically granted to it under the 2017 Equity Plan or necessary or advisable in the administration of the 2017 Equity Plan, including, without limitation, the authority to grant awards, determine the type and number of awards to be granted, the number of shares of Common Stock to which an award may relate and the terms, conditions, restrictions and performance criteria relating to any award and make all other determinations deemed necessary or advisable for
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the administration of the 2017 Equity Plan. Neither the Board of Directors nor the Compensation Committee will, without obtaining the approval of the Company’s stockholders, (i) reduce the base or purchase price of any previously granted stock option or SAR, (ii) cancel any previously granted stock option or SAR for another stock option or SAR with a lower purchase or base price or (iii) cancel any previously granted stock option or SAR in exchange for cash or another award if the purchase or base price of such stock option or SAR exceeds the fair market value of a share of Common Stock on the date of such cancellation, in each case other than in connection with a change in control of the Company (as defined in the 2017 Equity Plan).
AvailableShares. Following approval by stockholders, the maximum number of shares that may be made subject to awards granted under either the 2017 Equity Plan or the 2017 Manager Equity Plan, determined on a combined basis, will be 11,000,000 shares of Common Stock. If any shares of Common Stock are surrendered to or withheld by the Company as payment of either the exercise price of an award granted under the 2017 Equity Plan, a Prior Plan, the 2017 Manager Equity Plan or the Manager Equity Plan and/or withholding taxes in respect of such an award, the shares of Common Stock that were subject to such award will not again be available for awards under the 2017 Equity Plan or the 2017 Manager Equity Plan. If any awards granted under the 2017 Equity Plan, a Prior Plan, the 2017 Manager Equity Plan or the Manager Equity Plan are cancelled, forfeited, settled in cash or otherwise terminated without the issuance of shares of Common Stock, the shares that were subject to such award will be available for re-issuance under the 2017 Equity Plan or the 2017 Manager Equity Plan. Shares issued under the 2017 Equity Plan may be authorized but unissued shares or shares that have been reacquired by the Company.
In the event that the Board of Directors determines that any dividend or other distribution (whether in the form of cash, Common Stock, or other property, but not including a regular cash dividend), 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 2017 Equity Plan, then the Board of Directors will make equitable changes or adjustments to any or all of: (i) the number and kind of shares of stock or other property (including cash) that may thereafter be issued in connection with awards; (ii) the number and kind of shares of 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 Board of Directors 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 stock).
Termination and Amendment. The 2017 Equity Plan will expire on May 4, 2027, unless terminated earlier by the Board of Directors. The Board of Directors may terminate, amend, modify or suspend the 2017 Equity Plan in whole or part at any time, provided that any amendment that requires stockholder approval in order to comply with law, regulation or any stock exchange requirement will not be effective unless approved by the requisite vote of stockholders.
Unless otherwise determined by the Board of Directors, all unvested awards granted under the 2017 Equity Plan that are held by a participant who has ceased to provide services to the Company will be immediately cancelled and forfeited without consideration. The applicable award agreement will include the terms under which a stock option or SAR remains exercisable following termination of service with the Company. Upon a change in control of the Company (as defined in the 2017 Equity Plan), any award granted under the 2017 Equity Plan 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 have been fully achieved.
Terms of Awards. The Board of Directors may grant stock options, SARs, restricted stock, restricted stock units or other stock-based awards, including dividend equivalents, under the 2017 Equity Plan on such terms and conditions as the Board of Directors deems consistent with the purposes of the 2017 Equity Plan. Such awards may be granted with vesting, value and/or payment contingent upon attainment of one or more performance goals. Payments to be made by the Company upon the grant, vesting or exercise of an award may be made in such forms as the Board of Directors determines, including, without limitation, cash, shares of Common Stock or other property and may be made in a single payment or on a deferred basis. Each award will be evidenced by an award agreement containing the terms and conditions applicable to such award.
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Each stock option will be exercisable for no more than ten years after its date of grant. The exercise price of an option will not be less than 100% of the fair market value of a share of Common Stock on the date of grant. The exercise price for shares of Common Stock subject to a stock option may be paid (i) in cash or by an exchange of Common Stock previously owned by a participant, (ii) by authorizing the Company to withhold whole shares of Common Stock otherwise issuable pursuant to the exercise of such stock option, (iii) through a “broker cashless exercise” procedure approved by the Board of Directors or (iv) a combination of the above.
Each SAR will be exercisable for no more than ten years after its date of grant. The base price of an SAR will not be less than 100% of the fair market value of a share of Common Stock on the date of grant, provided that the base price of an SAR granted in tandem with a stock option will be the exercise price of the related stock option. An SAR entitles the holder to receive upon exercise (subject to withholding taxes) an amount equal to the difference between the fair market value of the shares of Common Stock on the exercise date and the base price of the SAR.
Unless otherwise determined by the Board of Directors, following a grant of restricted stock, a participant will have all of the rights of a stockholder of the Company, including the right to vote and receive dividends or distributions with respect to shares of restricted stock, provided, however, that any dividends or distributions paid with respect to restricted stock in the form of shares of Common Stock or other property will be subject to the same restrictions as the underlying restricted stock.
Prior to settlement of a restricted stock unit, a participant will have no rights as a stockholder of the Company with respect to such restricted stock unit. The Board of Directors is authorized to grant to a participant the right to received dividend equivalent payments and/or distribution equivalent payments for the period prior to settlement of the award, subject to such conditions and restrictions as the Board of Directors may establish. Unless otherwise determined by the Board of Directors, any such dividend equivalents or distribution equivalents will be paid or credited on the dividend payment date, as though each restricted stock unit held by the participant were a share of outstanding Common Stock.
New Plan Benefits
The following table shows information regarding restricted shares of Common Stock granted to non-employee directors on October 13, 2016, the effectiveness of which was made subject to stockholder approval of the 2017 Equity Plan, as the successor to the Director Stock Plan. The amounts reported in the “Dollar Value ($)” column for such awards are based on a closing price of $21.90 per share of Common Stock on October 13, 2016.
Name and Position | Dollar Value ($) | Number of
Restricted Shares |
Richard D. Bronson, non-employee director of the Company | $ | 14,081.70 | | | 643 | |
Solomon J. Kumin, non-employee director of the Company | $ | 14,081.70 | | | 643 | |
Camille J. Douglas, non-employee director of the Company | $ | 14,081.70 | | | 643 | |
Strauss Zelnick, non-employee director of the Company | $ | 14,081.70 | | | 643 | |
Other than with respect to the restricted shares set forth above, all other awards under the 2017 Equity Plan will be made in the future at the discretion of the Board of Directors, and therefore are not determinable.
U.S. Federal Income Tax Consequences
The following is a brief summary of some of the U.S. federal income tax consequences generally arising with respect to grants and awards under the 2017 Equity Plan. This discussion does not address all aspects of the U.S. federal income tax consequences of participating in the 2017 Equity Plan that may be relevant to participants in light of their personal investment or tax circumstances and does not discuss any state, local or non-U.S. tax consequences of participating in the 2017 Equity Plan. This section is based on the Code, its legislative history, existing and proposed regulations under the Code and published rulings and court decisions, all as in effect as of the date of this document. These laws are subject to change, possibly on a retroactive basis. Each participant is advised to consult his or her own tax advisor concerning the application of the U.S. federal income tax laws to such participant’s particular situation, as well as the applicability and effect of any state, local or non-U.S. tax laws before taking any actions with respect to any of the following awards.
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A participant will not recognize taxable income at the time restricted stock is granted and the Company will not be entitled to a tax deduction at that time, unless the participant makes an election to be taxed at that time. If such election is made, the participant will recognize compensation taxable as ordinary income (and subject to income tax withholding in respect of an employee) at the time of the grant in an amount equal to the excess of the fair market value of the shares at such time over the amount, if any, paid for those shares. If such election is not made, the participant will recognize compensation taxable as ordinary income (and subject to income tax withholding in respect of an employee) at the time the restrictions constituting a substantial risk of forfeiture lapse in an amount equal to the excess of the fair market value of the shares at such time over the amount, if any, paid for those shares. The amount of ordinary income recognized by making the above-described election or upon the lapse of restrictions constituting a substantial risk of forfeiture is deductible by the Company as compensation expense, except to the extent the deduction limits of Section 162(m) of the Code apply. In addition, if the participant receives dividends with respect to restricted stock for which the above-described election has not been made and prior to the time the restrictions constituting a substantial risk of forfeiture lapse will recognize compensation taxable as ordinary income (and subject to income tax withholding in respect of an employee), rather than dividend income, in an amount equal to the dividends paid and the Company will be entitled to a corresponding deduction, except to the extent the deduction limits of Section 162(m) of the Code apply.
A participant will not recognize taxable income at the time a restricted stock unit is granted and the Company will not be entitled to a tax deduction at that time. Upon settlement of restricted stock units, the participant will recognize compensation taxable as ordinary income (and subject to income tax withholding in respect of an employee) in an amount equal to the fair market value of any shares delivered and the amount of any cash paid by the Company, and the Company will be entitled to a corresponding deduction, except to the extent the deduction limits of Section 162(m) of the Code apply.
A participant will not recognize taxable income at the time a stock option is granted and the Company will not be entitled to a tax deduction at that time. A participant will recognize compensation taxable as ordinary income (and subject to income tax withholding in respect of an employee) upon exercise of a stock option equal to the excess of the fair market value of the shares purchased over their exercise price, and the Company will be entitled to a corresponding deduction.
A participant will not recognize taxable income at the time SARs are granted and the Company will not be entitled to a tax deduction at that time. Upon exercise, the participant will recognize compensation taxable as ordinary income (and subject to income tax withholding in respect of an employee) in an amount equal to the fair market value of any shares delivered and the amount of cash paid by the Company, and the Company will be entitled to a corresponding deduction.
The taxation of other stock based awards will depend on how such awards are structured. Subject to the deduction limitations under Section 162(m) of the Code, the Company may deduct, as a compensation expense, the amount of ordinary income recognized by the participant in connection with the 2017 Equity Plan at the time such ordinary income is recognized by the participant.
Recommendation of the Board of Directors
The Board of Directors recommends a vote FOR the approval of the 2017 Equity Plan.
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PROPOSAL 6:
RATIFICATION OF APPOINTMENT OF DELOITTE & TOUCHE LLP TO BE THE COMPANY’S INDEPENDENT REGISTERED PUBLIC
FOR THE CALENDAR YEAR ENDING DECEMBER 31, 2024
Proposed Independent Registered Public Accounting Firm
Deloitte
& Touche LLP, independent certified public accountants,has served as the independent registered public accounting firm of the Company and its subsidiaries for the calendar year ended December 31,
2016.2023. The Audit Committee has appointed Deloitte
& Touche LLP to be the Company’s independent registered public accounting firm for the calendar year ending December 31,
20172024 and has further directed that the appointment of the independent registered public accounting firm be submitted for ratification by the
stockholdersshareholders at the Annual Meeting.
Although there is no requirement that
Deloitte & Touche LLP’sDeloitte’s appointment be terminated if the ratification fails, the Audit Committee will consider, as appropriate, the appointment of other independent registered public accounting firms if the
stockholdersshareholders choose not to ratify the appointment of
Deloitte & Touche LLP.Deloitte. The Audit Committee may terminate the appointment of Deloitte
& Touche LLP as our independent registered public accounting firm without the approval of the
stockholdersshareholders whenever the Audit Committee deems such termination appropriate.
Representatives of Deloitte
& Touche LLP are expected to be present at the Annual Meeting. The representatives of Deloitte
& Touche LLP will be given the opportunity to make a statement, if they so desire, and will be available to respond to appropriate questions from
stockholders.shareholders.
Recommendation of the Board
of Directorsand its Audit Committee
The Board
of Directors and its Audit Committee recommend a vote
FOR the ratification of the appointment of Deloitte & Touche LLP as the independent registered public accounting firm for the Company for the calendar year ending December 31,
2017.2024.38
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INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMOn February 16, 2017, the
The Audit Committee
has appointed Deloitte
& Touche LLP to serve as the Company’s independent registered public accounting firm for the calendar year ending December 31,
2017, subject to stockholder ratification.2024. The Audit Committee considered the non-audit services provided by Deloitte
& Touche LLP and determined that the provision of such services was compatible with maintaining
Deloitte & Touche LLP’sDeloitte’s independence.
The following table presents fees for professional audit services rendered by Deloitte
& Touche LLP with respect to the Company’s annual financial statements for the calendar years ended December 31,
20162023 and
20152022 and fees billed for other services rendered by Deloitte
& Touche LLP during those periods.
| 2016 | 2015 |
Audit Fees(1) | $ | 2,141,192 | | $ | 2,000,989 | |
Audit Related Fees(2) | $ | 5,000 | | $ | 5,753 | |
Tax Fees(3) | $ | 201,237 | | $ | 523,247 | |
All Other Fees(4) | $ | 323,153 | | $ | 164,400 | |
Total Fees | $ | 2,670,582 | | $ | 2,694,389 | |
Audit Fees(1) | | | 2,719,950 | | | 2,811,720 |
Audit Related Fees | | | — | | | — |
Tax Fees(2) | | | 43,425 | | | 53,250 |
All Other Fees(3) | | | 3,790 | | | 3,790 |
Total Fees | | | 2,767,165 | | | 2,868,760 |
| (1)
| Audit Fees primarily represent, for the calendar years ended December 31, 20162023 and 2015,2022, fees for the audits and quarterly reviews of the consolidated financial statements filed with the SEC in annual reports on Form 10-K and quarterly reports on Form 10-Q, as well as work generally only the independent registered public accounting firm can be reasonably expected to provide, such as statutory audits, accounting consultations, and reviewissuances of consent and comfort letters included in documents filed with the SEC, including certain current reports on Form 8-K.SEC. |
| (2) | Audit Related Fees primarily represent, for the calendar years ended December 31, 2016 and 2015, fees for the Company’s subscription to Deloitte & Touche LLP’s online accounting and reporting technical library. |
| (3)
| Tax Fees primarily represent, for the calendar years ended December 31, 20162023 and 2015,2022, fees for professional services for tax compliance, tax advice and tax planning. |
| (4)(3)
| All Other Fees primarily represent, for the calendar years ended December 31, 20162023 and 2015,2022, fees in connection with debtfor the Company’s subscription to Deloitte’s online accounting and equity offerings and certain other transactions completed or contemplated during the years.reporting technical library. |
Pre-Approval Policies for Services of Independent Registered Public Accounting Firm
In accordance with Audit Committee policy and requirements of law, the Audit Committee pre-approves all services to be provided by the independent registered public accounting firm, including all audit services, audit-related services, tax services and other services. In some cases, the full Audit Committee provides pre-approval
of certain services for up to a year,
such as those related to a particular defined task or scope of work,
and subject to a specific budget. The Audit Committee has authorized its
ChairpersonChair to pre-approve additional services and, if the
ChairpersonChair of the Audit Committee pre-approves a service pursuant to this authority, he or she reviews the matter with the full Audit Committee at its next regularly scheduled meeting. To avoid potential conflicts of interest, the law prohibits a publicly traded company from obtaining certain non-audit services from its independent registered public accounting firm. The Company obtains these services from other firms as needed.
For the calendar years ended December 31, 20162023 and 2015,2022, all services provided by Deloitte & Touche LLP were pre-approved by the Audit Committee pursuant to such policies.
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Procedures
Requests or applications to provide services that require specific approval by
Report of the Audit Committee
The Board has appointed an Audit Committee consisting of four directors. All of the members of the Audit Committee orare “independent” as defined in the NYSE listing standards.
The Audit Committee’s job is one of oversight, as set forth in its Chairperson will be submitted tocharter. It is not the duty of the Audit Committee to prepare the Company’s financial statements, to plan or its Chairperson,conduct audits or to determine that the Company’s financial statements are complete and accurate and are in accordance with generally accepted accounting principles (“GAAP”). The independent registered public accounting firm engaged by the Company is responsible for auditing the financial statements and expressing an opinion as to whether those audited financial statements fairly present the case mayfinancial position, results of operations and cash flows of the Company in conformity with GAAP.
The Audit Committee has reviewed and discussed the Company’s audited financial statements with management and with Deloitte & Touche LLP, the Company’s independent registered public accounting firm for the calendar year ended December 31, 2023. The Audit Committee has also discussed with Deloitte & Touche LLP the other matters required to be discussed under the applicable requirements of the Public Company Accounting Oversight Board and the SEC.
The Audit Committee has received from Deloitte & Touche LLP the written disclosures and the letter required by bothapplicable requirements of the Public Company Accounting Oversight Board regarding Deloitte & Touche LLP’s communications with the Audit Committee concerning independence, has discussed Deloitte & Touche LLP’s independence with Deloitte & Touche LLP and has considered the compatibility of non-audit services with the independence of the independent registered public accounting firmfirm.
Based on the review and discussions referred to above, the Audit Committee recommended to the Board that the audited financial statements be included in the Company’s Chief Financial Officer, and must include a joint statement as to whether, inAnnual Report on Form 10-K for the viewcalendar year ended December 31, 2023 for filing with the SEC.
Respectfully submitted by the Audit Committee of the independent public accounting firm and the Company’s Chief Financial Officer, the request or application is consistent with the rules of the SEC on auditor independence and the requested services are not non-audit services prohibited by the SEC.Board.
Strauss Zelnick (Chair)
Richard D. Bronson
Camille J. Douglas
Fred Perpall
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company is party to the Management Agreement with the Manager, pursuant to which the Manager provides the day-to-day management of the Company’s operations. The Management Agreement requires the Manager to manage the Company’s business affairs in conformity with the policies and the investment guidelines that are approved and monitored by the
Company’s Board of Directors.Board. The Management Agreement had an initial three-year term and is now renewed for one-year terms unless terminated by either the Company (upon payment of a termination fee if terminated without cause per the terms of the Management Agreement) or the Manager.
The terms of the Management Agreement, as amended, are reflected in the below descriptions of the base management fee and incentive fee calculations.
The Company pays the Manager a base management fee in an amount equal to 1.5% of the Company’s
stockholders’shareholders’ equity, per annum, calculated and payable quarterly in arrears in cash. For purposes of calculating the base management fee, the Company’s
stockholders’shareholders’ equity means: (a) the sum of (i) the net proceeds from all issuances of the Company’s equity securities since inception
and equity securities of subsidiaries issued in exchange for properties (allocated on a pro rata basis for such issuances during the
calendarfiscal quarter of any such issuance), plus (ii) the Company’s retained earnings
and income to non-controlling interests with respect to equity securities of subsidiaries of the Company issued in exchange for properties at the end of the most recently completed calendar quarter (without taking into account any non-cash equity compensation expense incurred in current or prior periods), less (b) any amount that the Company has paid to repurchase its
Common Stockcommon stock since inception. It also excludes (1) any unrealized gains and losses and other non-cash items that have impacted
stockholders’shareholders’ equity as reported in the Company’s financial statements prepared in accordance with GAAP, and (2) one-time events pursuant to changes in GAAP, and certain non-cash items not otherwise described above, in each case after discussions between the Manager and the
Company’s Independent Directorsindependent directors and approval by a majority of the
Company’s Independent Directors.independent directors. As a result, the Company’s
stockholders’shareholders’ equity, for purposes of calculating the management fee, could be greater or less than the amount of
stockholders’shareholders’ equity shown on the Company’s financial statements. The Manager uses the proceeds from its management fee, in part, to pay compensation to its officers and personnel who, notwithstanding that certain of them also are the Company’s officers, receive no cash compensation directly from the Company. The management fee is payable independent of the performance of the Company’s portfolio.
The management fee of the Manager is calculated within 30 days after the end of each quarter and such calculation is promptly delivered to the Company. The Company is obligated to pay the management fee in cash within five business days after delivery to the Company of the written statement of the Manager setting forth the computation of the management fee for such quarter.
The Company pays the Manager an incentive fee with respect to each calendar quarter (or any part thereof that the Management Agreement is in effect) in arrears. The Manager is entitled to be paid the incentive fee with respect to each calendar quarter if (a) the Company’s Core Earnings (as defined below) for the previous twelve-month period exceeds an 8% threshold and (b) the Company’s Core Earnings for the twelve most recently completed calendar quarters is greater than zero. The incentive fee is an amount, not less than zero, equal to the difference between (a) the product of (i) 20% and (ii) the difference between
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(1) the Company’s Core Earnings
(as defined below) for the previous
12-monthtwelve-month period, and (2) the product of (A) the weighted average of the issue price per share of
Common Stockcommon stock of all of the Company’s public offerings of
Common Stockcommon stock and including issue price per equity security of subsidiaries of the Company issued in exchange for properties multiplied by the weighted-average number of all shares of
Common Stockcommon stock outstanding (including any restricted stock units, any restricted shares of
Common Stockcommon stock and any other shares of
Common Stockcommon stock underlying awards granted under the Company’s equity incentive plans)
and equity securities of subsidiaries issued in exchange for properties or interests therein in the previous
12-monthtwelve-month period, and (B) 8% and (b) the sum of any incentive fee paid to the Manager with respect to the first three calendar quarters of such previous
12-monthtwelve-month period; provided, however, that,
(x) no incentive fee is payable with respect to any calendar quarter unless Core Earnings for the 12 most recently completed calendar quarters is greater than zero and (y) as provided in an amendment to the Management Agreement entered into on December 4, 2014 to account for the Company’s spin-off of SWAY
(a predecessor company of Invitation Homes), which contained the Company’s single family residential business, (the “SWAY Spin-Off”), for purposes of clause (a)(i)(2)(A) above, on and after January 31, 2014, the computation of the weighted-average issue price per share of
Common Stockcommon stock is decreased to give effect to the book value per share on January 31, 2014 of the assets of SWAY, and the computation of the average number of shares of
Common Stockcommon stock outstanding is decreased by the weighted-average number of shares of SWAY distributed in the SWAY Spin-Off on January 31, 2014.
One half of each quarterly installment of the incentive fee is payable in shares of the Company’s common stock so long as the ownership of such additional number of shares by the Manager would not violate the 9.8% stock ownership limit set forth in the Company’s charter, after giving effect to any waiver from such limit that the Board may grant in the future. The remainder of the incentive fee is payable in cash. The number of shares to be issued to the Manager is equal to the dollar amount of the portion of the quarterly installment of the incentive fee payable in shares divided by the average of the closing prices of the Company’s common stock on the NYSE for the five trading days prior to the date on which such quarterly installment is paid.TABLE OF CONTENTS
“Core Earnings” is a non-GAAP measure and(also referred to as Distributable Earnings) is defined under the Management Agreement as GAAP net income (loss) excluding (a) non-cash equity compensation expense, (b) the incentive fee, (c) depreciation and amortization of real estate and associated intangibles, (d) acquisition costs associated with successful acquisitions, (e) any unrealized gains, losses or other non-cash items recorded in net income (loss) for the period regardless of whether such items are included in other comprehensive income or loss, or inand (f) to the extent deducted from net income (f)(loss), distributions payable with respect to equity securities of subsidiaries issued in exchange for properties or interests therein. The amount is adjusted to exclude one-time events pursuant to changes in GAAP and (g) certain other non-cash adjustments, in each case after discussions betweenas determined by the Manager and the Company’s Independent Directors and after approval by a majority of the Company’s Independent Directors.
independent directors.
Reimbursement of Expenses
The Company is required to reimburse the Manager for the expenses described below. Expense reimbursements to the Manager are made in cash on a monthly basis following the end of each month. The Company’s reimbursement obligation is not subject to any dollar limitation.limitation, but is subject to review by the independent directors. Because the Manager’s personnel perform certain legal, accounting and due diligence tasks, and other services that outside professionals or outside consultants otherwise would perform, the Manager is paid or reimbursed for the documented cost of performing such tasks, provided that such costs and reimbursements are in amounts which are no greater than those which would be payable to outside professionals or consultants engaged to perform such services pursuant to agreements negotiated on an arm’s-length basis.
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The Company also pays all operating expenses, except those specifically required to be borne by the Manager under the Management Agreement. The expenses required to be paid by the Company include, but are not limited to:
expenses in connection with the issuance and transaction costs incident to the acquisition, disposition and financing of the Company’s investments;
costs of legal, tax, accounting, consulting, auditing and other similar services rendered for the Company by providers retained by the Manager or, if provided by the Manager’s personnel, in amounts which are no greater than those which would be payable to outside professionals or consultants engaged to perform such services pursuant to agreements negotiated on an arm’s-length basis;
the compensation and expenses of the Company’s directors and the cost of liability insurance to indemnify the Company’s directors and officers;
costs associated with the establishment and maintenance of any of the Company’s credit facilities, other financing arrangements, or other indebtedness of the Company (including commitment fees, accounting fees, legal fees, closing and other similar costs) or any of the Company’s securities offerings;
expenses connected with communications to holders of the Company’s securities or of the Company’s subsidiaries and other bookkeeping and clerical work necessary in maintaining relations with holders of such securities and in complying with the continuous reporting and other requirements of governmental bodies or agencies, including, without limitation, all costs of preparing and filing required reports with the SEC, the costs payable by the Company to any transfer agent and registrar in connection with the listing and/or trading of the Company’s stock on any exchange, the fees payable by the Company to any such exchange in connection with its listing, costs of preparing, printing and mailing the Company’s annual report to its stockholdersshareholders and proxy materials with respect to any meeting of the Company’s stockholders;
shareholders;
costs associated with any computer software or hardware, electronic equipment or purchased information technology services from third party vendors that is used for the Company;
expenses incurred by managers, officers, personnel and agents of the Manager for travel on the Company’s behalf and other out-of-pocket expenses incurred by managers, officers, personnel and agents of the Manager in connection with the purchase, financing, refinancing, sale or other disposition of an investment or establishment and maintenance of any of the Company’s securitizations or any of the Company’s securities offerings;
costs and expenses incurred with respect to market information systems and publications, research publications and materials and settlement, clearing and custodial fees and expenses;
compensation and expenses of the Company’s custodian and transfer agent, if any;
the costs of maintaining compliance with all federal, state and local rules and regulations or any other regulatory agency;
all taxes and license fees;
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all insurance costs incurred in connection with the operation of the Company’s business except for the costs attributable to the insurance that the Manager elects to carry for itself and its personnel;
costs and expenses incurred in contracting with third parties;
all other costs and expenses relating to the Company’s business and investment operations, including, without limitation, the costs and expenses of acquiring, owning, protecting, maintaining, developing and disposing of investments, including appraisal, reporting, audit and legal fees;
expenses relating to any office(s) or office facilities, including, but not limited to, disaster backup recovery sites and facilities, maintained for the Company or its investments separate from the office or offices of the Manager;
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expenses connected with the payments of interest, dividends or distributions in cash or any other form authorized or caused to be made by the Board of Directors to or on account of holders of the Company’s securities or of the Company’s subsidiaries, including, without limitation, in connection with any dividend reinvestment plan;
any judgment or settlement of pending or threatened proceedings (whether civil, criminal or otherwise) against the Company or any subsidiary, or against any trustee, director, partner, member or officer of the Company or of any subsidiary in his capacity as such for which we or any subsidiary is required to indemnify such trustee, director, partner, member or officer by any court or governmental agency; and
all other expenses actually incurred by the Manager (except as described below) which are reasonably necessary for the performance by the Manager of its duties and functions under the Management Agreement.
TheExcept as was required under the Sossen Secondment Agreement and reimbursements for certain other personnel as permitted under the Management Agreement, the Company and its subsidiaries do not reimburse the Manager or its affiliates for the salaries and other compensation of its personnel (including pursuant to the Paniry Secondment Agreement), except that, pursuant to the Sossen Secondment Agreement, the Company is responsibleother than for reimbursing an affiliate of the Manager’s expenses incurred in connection with Mr. Sossen’s service as the Company’s Chief Operating Officer, General Counsel, Chief Compliance Officer, Secretary and Executive Vice President, including annual base salary, annual cash bonus, employee benefits and any related employee withholding taxes.
dividend equivalents paid on equity-based compensation.
In addition, the Company may be required to pay its pro rata portion of rent, telephone, utilities, office furniture, equipment, machinery and other office, internal and overhead expenses of the Manager and its affiliates required for the Company’s operations.
Fees Incurred and Paid for
20162023
For the calendar year ended December 31,
2016,2023, the Company incurred
$61.0$87.3 million in base management fees, of which
$45.4$65.4 million was paid during the calendar year ended December 31,
2016.2023 and $21.9 million was paid in February 2024. For the calendar year ended December 31,
2016,2023, the Company incurred
$32.8$35.7 million in incentive
compensationfees payable to the Manager, of which
$13.8$16.2 million was paid during the calendar year ended December 31,
2016.2023. One half of the incentive
fee paidfees incurred during the calendar year ended December 31,
2016 was2023 were paid in
Common Stock,common stock, as required by the Management Agreement. In February
2017,2024, an additional
$19.0$19.5 million of the total incentive
feefees was paid, one half of which was similarly paid in
Common Stock.common stock. The Company also was obligated to reimburse the Manager for
$5.6$8.0 million of certain expenses incurred on the Company’s behalf during the calendar year ended December 31,
2016,2023, of which
$2.7$4.6 million was paid during the calendar year ended December 31,
2016.Grants of Equity Compensation to the Manager
Under the Company’s equity incentive plans, our Compensation Committee is authorized to approve grants of equity-based awards to the Company’s officers or directors and to the Manager and its personnel and affiliates. On January 2, 2014, the Company granted to the Manager 2,000,000 restricted stock units. This award of restricted stock units vests ratably on a quarterly basis over a three-year period that began on March 31, 2014. On January 31, 2014, in connection with the SWAY Spin-Off, the Company granted to the Manager 489,281 restricted stock units. Of these restricted stock units, 99,480 vested ratably on a quarterly basis over a 21-month period that began on March 31, 2014 and 389,801 vests ratably over a three-year period that began on March 31, 2014. On May 18, 2015, the Company granted to the Manager 675,000 restricted stock units. This award of restricted stock units vests ratably on a quarterly basis over a three-year period that began on June 30, 2015. On March 15, 2017, the Company granted to the Manager 1,000,000 restricted stock units. This award of restricted stock units vests ratably on a quarterly basis over a three-year period that begins on June 30, 2017. These awards
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of restricted stock units, once vested, are settled in shares of Common Stock. The Manager is entitled to receive “distribution equivalents” with respect to these restricted stock units, whether or not vested, at the same time and in the same amounts as distributions are paid to the Company’s holders of Common Stock.
The Company’s Chief Executive Officer is also an executive of Starwood Capital Group. As a result, the Management Agreement between the Company and the Manager was negotiated between related parties, and the terms, including fees and other amounts payable, may not be as favorable to the Company as if it had been negotiated with an unaffiliated third party. The Management Agreement is intended to provide the Company with access to the Manager’s pipeline of investment opportunities, personnel and experience in capital markets, credit analysis, debt structuring and risk and asset management, as well as assistance with corporate operations, legal and compliance functions and governance.
701 Seventh Avenue Financing The independent directors of the Board have approved the Management Agreement. Mr. Sternlicht and Refinancing
In October 2012,Mr. Dishner recused themselves from such approval.
Grants of Equity Compensation to the Manager
Under the Company’s equity incentive plans, our Compensation Committee is authorized to approve grants of equity-based awards to the Company’s officers and directors and to the Manager and its personnel and affiliates. On November 9, 2020, the Company and Starwood Distressed Opportunity Fund IX, an affiliate of our Chief Executive Officer andgranted to the Manager (“Fund IX”1,800,000 restricted stock units that vest ratably on a quarterly basis over a three-year period that began on December 31, 2020.
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On November 23, 2022, the Company granted to the Manager 1,500,000 restricted stock units. These awards of restricted stock units, once vested, are settled in shares of common stock. The Manager is entitled to receive “distribution equivalents” with respect to these restricted stock units, whether or not vested, at the same time and in the same amounts as distributions are paid to the Company’s holders of common stock.
On April 28, 2022, at the Company’s 2022 annual meeting of shareholders, shareholders approved the Starwood Property Trust, Inc. 2022 Manager Equity Plan (the “2022 Manager Equity Plan”),
co-originated a $475.0 million first mortgage and mezzanine loan (the “701 Seventh Avenue Financing”)which allows for the
acquisition and redevelopmentissuance of
up to 18,700,000 stock options, stock appreciation rights, restricted stock units or other equity-based awards or any combination thereof (determined on a
10-story retail building located at 701 Seventh Avenue incombined basis with the
Times Square area of Manhattan (the “701 Seventh Avenue Property”) through a joint venture.In January 2014, the Company and a third party partner refinanced the 701 Seventh Avenue Financing with an $815.0 million first mortgage and mezzanine financing to facilitate the further development of the 701 Seventh Avenue Property (the “701 Seventh Avenue Refinancing”). Fund IX did not participate in the 701 Seventh Avenue Refinancing. As such, the joint venture distributed $31.6 million to Fund IX for the liquidation of Fund IX’s interest in the joint venture. Additionally, the 701 Seventh Avenue Refinancing triggered the issuance2022 Equity Plan) to the lendersManager. The maximum number of a 20% passivesuch equity interest (the “Passive Equity Interest”) inawards that may be issued to the 701 Seventh Avenue Property in accordance withManager shall be reduced by the termsnumber of the 701 Seventh Avenue Financing. The Companyshares of common stock issued and Fund IX owned 75% and 25% of a joint venture, respectively, which owned 75% of the entity holding such Passive Equity Interest. The first mortgage and mezzanine financingawards granted under the 701 Seventh Avenue Refinancing were paid off in full in November 2016.
2022 Equity Plan. The 2022 Manager Equity Plan succeeded and replaced the previous manager equity plan.
SEREF and
Private AccountRelated Transactions
In December 2012, the Company acquired 9,140,000 ordinary shares for approximately $14.7 million in Starwood European Real Estate Finance Limited, a debt fund that is managed by an affiliate of the Manager and is listed on the London Stock Exchange (“SEREF”), in connection with SEREF’s initial public offering,
(the “SEREF Investment”), which equated to an approximate 4% ownership interest in SEREF.
During the year ended December 31, 2023, 1,892,313 shares were redeemed by SEREF, for proceeds of $2.5 million, leaving 7,247,687 held as of December 31, 2023. Prior to that, there were no share redemptions by SEREF. As of December 31,
2016,2023, the Company’s shares represented an approximate 2% ownership interest in SEREF.
The Company co-originates, along with SEREF and/or certain other investment funds affiliated with the Manager, various foreign currency denominated loans to third party borrowers in which each lender holds a separate portion of the loan. The loans are independently underwritten and legally separate, and the transaction is directly between the Company and the third party borrower. As a result, the Company does not consider these to be related party transactions.
Office Campus Loan Investment
In August
2013,2017, the Company
co-originated GBP-denominatedoriginated a $339.2 million first mortgage and mezzanine
loans (the “Battersea Park Loans”) with SEREF. The Battersea Park Loans were collateralized by a development of a retirement community and nursing home in Battersea Park, London, England. The Company and SEREF committed $11.3 million and $22.5 million, respectively,loan for the
two Battersea Park Loans. The first mortgage loan boreacquisition of an office campus located in Irvine, California. An affiliate of the Manager has a non-controlling equity interest
at 5.02% andin the
mezzanine loan bore interest at 15.12%.borrower. The first mortgage and
mezzanine loan are each interest-only and carry interest rates of one-month LIBOR plus 2.25% and one-month LIBOR plus 4.50%, respectively. The loans had an initial maturity of September 2020 with two one-year extension options, both of which were exercised. During 2022, the
mezzanine loans were paid off in full in May 2016 and June 2016, respectively.loan agreement was amended to extend the maturity to September 2023. In September 2013,August 2020, the Company co-originatedreceived a EUR-denominated first mortgage loan with SEREF (the “Finland Loan”). The Finland Loan was for a total commitment of $126.9$245.0 million of whichpartial repayment on the loans. In August 2023, the Company funded $53.8received a $29.4 million at closing. The Finlandfinal repayment on the loan.
Energy Loan
bore interest at three-month EURIBOR plus 7.00% and was originally secured by a portfolio of retail properties located throughout Finland. The Finland Loan was paid off in full in April 2016.
In
October 2013,February 2019, the Company
co-originatedacquired a
GBP-denominated $467.2$60.0 million participation in a $925.0 million first
mortgage loan with SEREF that was secured bypriority infrastructure term loan. In April 2019 and July 2019, the
Heron Tower in London, England (the “Heron Tower Loan”). The facility was advanced in October 2013Company acquired participations of $5.0 million and $16.0 million, respectively, in a
single utilization, with SEREF taking $29.2$350.0 million
ofupsize to the
total advance.term loan. The
most senior tranche funded by the Company, which was of $340.6 million, carried a return of LIBOR plus 3.90% and the other tranche funded by the Company, which was of $97.3 million, carried a fixed rate of 5.61% per annum. The Heron Tower Loan was paid off in full in April 2016.In November 2013, the Company co-originated a GBP-denominated first mortgage loan with SEREF that is secured by Centre Point, an iconic tower located in Central London, England (the “Centre Point Loan”), and
four
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domestic natural gas power plants. The Company’s outstanding participations, totaling $60.7 million
as of
the initial $88.3 million funding and committed to future funding of $264.8 million. The first tranche funded carries interest at a fixed rate of 8.55% and the remaining tranchesDecember 31, 2023, currently bear interest at
three-month LIBOR (with a floor of 1.00%)one-month SOFR plus
7.00%, unless the fixed rate option is elected. In December 2014, the Centre Pointe Loan was amended to increase the total commitment by $70.5 million, which made the Company’s total commitment equal to $329.1 million. The Centre Point Loan matures3.86% and mature in December
2017.In June 2014, the Company co-originated a GBP-denominated $173.2 million first mortgage loan with private funds affiliated with the Manager that is secured by Baltimore Wharf, a 46-story residential tower and 18-story housing development containing a total of 366 private residential and affordable housing units located in London, England (the “Baltimore Wharf Loan”). The Baltimore Wharf Loan bore interest at one-month LIBOR (with a floor of 1.00%) plus 7.65% and was paid off in full in March 2017.
In July 2014, the Company co-originated a EUR-denominated $119.6 million mortgage loan with SEREF and other private funds affiliated with the Manager for the refinancing and refurbishment of a 239-key full service hotel located in Amsterdam, Netherlands (the “Amsterdam Loan”). The Amsterdam Loan bore interest at three-month EURIBOR (with a floor of 0.50%) plus 7.00% and was paid off in full in July 2016.
In December 2014, the Company co-originated a GBP-denominated $244.6 million mortgage loan with SEREF and other private funds affiliated with the Manager for the refinancing of Aldgate Tower, a new office tower located in London, England (the “Aldgate Tower Loan”). The Aldgate Tower Loan bore interest at three-month LIBOR plus 4.50% and was paid off in full in April 2016.
In June 2016, the Company co-originated a GBP-denominated $108.9 million first mortgage loan with SEREF for the development of a three-property mixed use portfolio located in Greater London, England (the “Greater London Loan” and, together with the SEREF Investment, Battersea Park Loans, Finland Loan, Heron Tower Loan, Centre Point Loan, Baltimore Wharf Loan, Amsterdam Loan and Aldgate Tower Loan, the “SEREF and Private Account Transactions”). The Company originated $87.1 million of such commitment and SEREF originated $21.8 million of such commitment. The Greater London Loan bears interest at one-month LIBOR plus 5.75% and matures in June 2019.
LNR Property Acquisition
In April 2013, the Company completed the acquisition (the “LNR Property Acquisition”) of all the outstanding equity interests of LNR Property from Aozora Investments LLC, CBR I LLC, iStar Marlin LLC, Opps VIIb LProp, L.P. and VNO LNR Holdco LLC (collectively, the “LNR Property Sellers”), for approximately $730 million pursuant to a purchase and sale agreement among the Company, LNR Property and the LNR Property Sellers. At the time, LNR Property was a diversified real estate services and investment company that, among other things, invested in commercial real estate securities, whole loans and equity. An additional $194 million was paid by SOF-IX U.S. Holdings, L.P., an affiliate of our Chief Executive Officer and the Manager (“SCG”), in connection with SCG’s acquisition of certain assets of LNR Property and its subsidiaries immediately prior to the completion of the LNR Property Acquisition, pursuant to a purchase and sale agreement among SCG, LNR Property and the LNR Property Sellers. The assets acquired by SCG included, among other things, a 50% interest in LNR Property’s equity interest in Ten-X (formerly known as Auction.com), a privately-held entity which provides services to sellers of residential, commercial, multi-family and hospitality properties, land and performing and non-performing notes and loan pools in an auction format.
In connection with the LNR Property Acquisition, the Company entered into several additional arrangements with SCG or its affiliates, including a shared services agreement that allows for the provision of certain transitional and shared services to LNR Property’s commercial property business, which was acquired by SCG (the “Shared Services Agreement”). Under the Shared Services Agreement, the services are to be provided for a period of up to three years, and include general ledger support, human resources services and information technology support. The fees for each of these services vary depending upon the nature of the service being provided. In 2016, the subsidiary of the Company earned approximately $0.1 million in such fees from SCG.
B-Notes Purchase
In April 2013, the Company purchased two B-notes for $146.7 million from entities substantially all of whose equity was owned by an affiliate of the Manager. The B-notes are secured by two Class-A office buildings located in Austin, Texas. In May 2013, the Company sold senior participation interests in the B-notes to a third
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party, generating $95.0 million in aggregate proceeds. The Company retained the subordinated interests. In October 2015, the Company sold one of the subordinated interests in the B-Notes to a third party, generating $29.2 million in aggregate proceeds.
Regional Mall Securitization Investments
In December 2013, the Company acquired a subordinate CMBS investment in a securitization from a third party (the “2013 Regional Mall Securitization Investment”). The borrowers are several special purpose entities that are affiliates of the Manager and indirectly owned and controlled by2025. Starwood Capital Group. The 2013 Regional Mall Securitization Investment was acquired for $84.1 million and is secured by five regional malls in Ohio, California and Washington. InEnergy Group (which became Lotus Infrastructure Partners effective January 2016, we acquired an additional $9.7 million of this subordinate CMBS Investment.
SCG Core-Plus Investment
In October 2014, the Company committed $150.0 million for a 33% limited partner equity interest in SCG Core-Plus Retail Fund, L.P.1, 2023), an affiliate of the Manager, (“SCG Core-Plus”),is the borrower under the term loan.
In March 2022, the Company originated a new loan on the development and recapitalization of luxury rental cabins with a total commitment of $200.0 million, of which $132.0$148.5 million was fundedoutstanding as of December 31, 2023. The loan has a term of 24 months with three one-year extension options and it bears interest at SOFR plus 6.50% plus fees. Certain members of the Company’s executive team and board of directors own equity interests in October 2014. An unaffiliatedthe borrower. In July 2023, the Company agreed to a 10-month 300 bps interest payment deferral, which during the year ended December 31, 2023 amounted to $2.3 million.
In March 2020, the Company entered into an office lease agreement with an entity which is controlled by the Company’s Chairman and CEO through majority equity ownership of the entity. The leased premises serve as the Company’s new Miami Beach office following the expiration of the Company’s former lease in Miami Beach. The lease, as amended in September 2022, is for 64,424 square feet of office space, commenced July 1, 2022 and has an initial term of 15 years from the monthly lease payment commencement date of November 1, 2022. The lease payments are based on an annual base rate of $52.00 per square foot that increases by 3% each November, plus the Company’s pro rata share of building operating expenses. Prior to the execution of this lease, the Company engaged an independent third party
has made an additional investment asleasing firm and external counsel to advise the independent directors of its board of directors on market terms for the lease. The terms of the lease and the subsequent amendment were approved by the Company’s independent directors. In April 2020, the Company provided a
limited partner in SCG Core-Plus on substantially similar terms.$1.9 million cash security deposit to the landlord. During the year ended December 31,
2016,2023, the Company
received net capital distributionsmade payments to the landlord under the terms of
$7.2the lease of $1.3 million
which reducedfor reimbursements relating to tenant improvements and $6.6 million for rent, parking and the Company’s
carrying value to $125.0 million aspro rata share of
December 31, 2016. SCG Core-Plus was established for the purpose of acquiring andbuilding operating
four regional shopping malls located in Florida, Michigan, North Carolina and Virginia. All leasing services and asset management functions for the acquired properties are conducted by an affiliate of the Manager that specializes in redeveloping, managing and repositioning retail real estate assets. In addition, another affiliate of the Manager serves as the general partner of SCG Core-Plus. In consideration for its services, such general partner earns incentive distributions that are payable once the Company, along with the other limited partners, receives 100% of its capital and a preferred return of 8%.Single-Borrower CMBS Investment
In March 2015, the Company purchased a subordinate single-borrower CMBS from a third party for $58.6 million which is secured by 85 U.S. hotel properties. The borrower is an affiliate of Fund IX, an affiliate of the Company’s Manager.
expenses.
Other Related Party Arrangements
During 2016, the Company established a co-investment fund whichthat provides key personnel with the opportunity to invest in certain properties included in the Company’s Real Estate Investing and Servicing business segment. These personnel include certain employees of the Company, including Messrs.Mr. DiModica, and Sossen, as well as employees of affiliates of the Manager (the “Fund Participants”). The fund carries an aggregate commitment of $15.0 million and owns a 10% equity interest in the subsidiary of the Company which owns such properties. As of December 31, 2016,2023, the Fund Participants have funded $4.9 million of such commitment, and it is the Company’s current expectation that there will be no additional funding of this commitment. In an effort to retain key personnel, the Fund Participants are entitled to a promote on their investment, whereby operating profits are distributed assuming implied leverage of 60% on the Fund Participants’ capital accounts. This promote is paid after the Company, as general partner of the fund, earns a 5% preferred return. During 2016,2023, the non-controlling interests related to this fund recognized incomereceived cash distributions of $0.8$1.9 million.
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Highmark Residential (“Highmark”), an affiliate of the Manager, provides property management services for the Company’s Woodstar I and Woodstar II Portfolios. Fees paid by the Company to Highmark are calculated as 3% of gross receipts. During the year ended December 31, 2023, property management fees charged by Highmark were $6.0 million.
Ms. Harmon, one of our directors, has a brother who is an employee of Newmark. In 2023, the Company paid a total of $45,000 to Newmark in exchange for real estate broker services in the ordinary course of business and $162,375 from or on behalf of the CMBS securitization trusts for which a subsidiary of the Company has been appointed to act as the special servicer. The annual gross revenues of Newmark in 2023 was $2.47 billion. For more information regarding CMBS securitization trusts and the role of a special servicer, see below under the heading “CMBS Securitization Trusts and Special Servicing.”
Camille Douglas, a director for the Company, has a child that is employed as a senior associate for the Company. Ms. Douglas’s child received compensation in excess of $120,000, at a level consistent with other employees at a similar level of responsibility.
Disclosure Regarding Fred Ridley
One of our directors, Mr. Ridley, is a partner with Foley & Larder LLP (“Foley”), a global law firm that is comprised of approximately 1,100 lawyers across 25 offices worldwide. In fiscal year 2023, Foley collected no legal fees directly from the Company and $782,772 from or on behalf of the CMBS securitization trusts for which a subsidiary of the Company has been appointed to act as the special servicer. For more information regarding CMBS securitization trusts and the role of a special servicer, see below under the heading “CMBS Securitization Trusts and Special Servicing.” Notwithstanding the legal fees paid to Foley, the Board determined that Mr. Ridley is an independent director (under NYSE listing standards or otherwise) due to the below factors:
Mr. Ridley did not personally perform or supervise any legal services to the Company or its subsidiaries in 2023 and does not personally receive fees or other compensation for these services. Accordingly, there is no direct financial tie to the legal fees which could compromise Mr. Ridley’s independence.
Foley was first retained by a subsidiary of the Company more than 20 years ago, well before Mr. Ridley was appointed to the Board. Mr. Ridley’s appointment was not related to Foley’s provision of legal services, and Foley does not receive any additional benefit as a result of Mr. Ridley being appointed to the Board.
The fees paid to Foley amounted to less than 0.1% of the law firm’s consolidated gross annual revenue for 2023.
| • | The $782,772 in payments in 2023 to Foley were paid by or on behalf of trusts for which a subsidiary of the Company, LNR Partners LLC (“LNR”), has been appointed to act as the special servicer. This was particularly important to the Board in determining Mr. Ridley’s independence. For accounting purposes, the assets of the trusts are consolidated in the Company’s financials despite the fact that the Company has either no or limited equity and voting interests in the trusts. Foley was retained on behalf of each trust that LNR serviced, and was not retained to represent LNR in its individual capacity or to represent the Company in these matters. |
By way of background, LNR’s primary business is administering the default side of loan servicing for CMBS securitization trusts. LNR retains third party contractors, including law firms such as Foley, to perform legal services related to the collection and restructuring of defaulted loans. Pursuant to its contractual agreements, LNR is prohibited from receiving kickbacks or other benefits from contractors providing services to the trust and LNR has a duty to obtain the most cost effective services. In addition, the CMBS securitizations designate a certificate holder representative (“CCR”) that oversees the special servicer throughout the entire workout of the loan, serving as the ultimate decision maker on behalf of the trust, including the retention of third party vendors in connection with major decisions in accordance with the servicing standard. In general, under the servicing agreements, a CCR has the authority to remove the special servicer without cause at any time. Foley is one of over 59 law firms retained to provide the trusts with legal services. In 2023, the trusts serviced by LNR paid approximately $19,006,730 to various
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law firms for legal services related to defaulted loans. Foley received approximately 4% of that total amount. The Company considers these services to be transactional support for the loans in special servicing. In connection with the provision of these services, Foley was not given access to sensitive Company information and was not involved in the Company’s or LNR’s strategic decisions.
For all of the above reasons, the Board is confident that the relationships described above do not affect Mr. Ridley’s ability to exercise his independent judgment with respect to any matter before the Board.
CMBS Securitization Trusts and Special Servicing
CMBS are bonds with payments derived from a loan or a pool of loans on commercial real estate. CMBS securitization is the process by which a loan, or more commonly a group or pool of loans, are packaged together to create CMBS, which are issued and then held by a Real Estate Investment Mortgage Conduit, referred to generally as a CMBS securitization trust. The trust has three agents that have specific roles and authority to act on behalf of the trust: the trustee serves as the holder of title to the loans in the trust; the master servicer provides loan servicing on performing loans; and the special servicer attempts to work out distressed or defaulted loans and provides certain consents on behalf of the trust that are required under the loan documents. As noted above, LNR is a special servicer for certain CMBS securitization trusts. When a loan owned by a trust goes into default or is going into default, the loan is transferred to LNR for servicing.
Related Party Transaction Practice
The Board
of Directors does not have a written policy regarding the approval of related party transactions. However, it is the practice of the Board
of Directors to seek approval of the non-executive directors for any related party transaction (which means any transaction or series of transactions in which the Company or any of its subsidiaries is or are to be a participant, the amount involved exceeds $120,000, and a “related person” (as defined under SEC rules) has a direct or indirect material interest) involving a potential conflict of interest. Further, when the Board
of Directors has previously approved an equity investment in a party that contemplates the right to participate in subsequent debt investments with such party in the ordinary course of the Company’s business
(e.g.(e.g., the
SEREFdisclosures under “-SEREF and
Private Account Transactions)Related Transactions”), it is the practice of the Board
of Directors to seek separate approval of the non-executive directors for any such individual debt investment if the Company is not investing on a
pari passu basis with such party.
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STOCKHOLDER PROPOSALS FORINFORMATION CONCERNING THE 2018 ANNUAL MEETING AND VOTING
Shareholders Entitled to Vote
The Board has fixed March 6, 2024 as the record date for the determination of shareholders entitled to notice of and to vote their shares of the Company’s common stock, par value $0.01 per share (“common stock”), at the Annual Meeting. As of March 6, 2024, the Company had outstanding 313,873,770 shares of common stock. Each share of common stock entitles its holder to one vote.
Attending the Virtual Annual Meeting
In order to provide expanded access, improved communication and cost savings for our shareholders and our Company, our Annual Meeting will be a completely “virtual” meeting of shareholders, which will be conducted via live webcast. You will be able to attend the Annual Meeting online and submit your questions during the meeting by visiting www.virtualshareholdermeeting.com/STWD2024. Such questions must be confined to matters properly before the Annual Meeting and of general Company concern. You will also be able to vote your shares electronically at the Annual Meeting. To participate, you will need your 16-digit control number included on your proxy card or on the instructions that accompanied your proxy materials. The Company will post the rules of conduct for the Annual Meeting to its investor relations website prior to the meeting. A recording of the Annual Meeting will be available at www.virtualshareholdermeeting.com/STWD2024 following the Annual Meeting.
The meeting will begin promptly at 2:00 p.m., Eastern Time on May 3, 2024. We encourage you to access the meeting prior to the start time. Online access will open at 1:45 p.m., Eastern Time, and you should allow ample time to log in to the meeting webcast and test your computer audio system. We recommend that you carefully review the procedures needed to gain admission in advance.
We will have technicians ready to assist you with any technical difficulties you may have accessing the virtual meeting. If you encounter any difficulties accessing the virtual meeting during check-in or during the meeting, please call the technical support number that will be posted on the virtual shareholder meeting login page www.virtualshareholdermeeting.com/STWD2024.
The presence in person (i.e., virtually via live webcast for this year’s Annual Meeting) or by proxy of shareholders entitled to cast a majority of all the votes entitled to be cast at the Annual Meeting constitutes a quorum for purposes of transacting business at the Annual Meeting. Abstentions and broker non-votes are counted as present and entitled to vote for purposes of determining a quorum.
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Proposals
A “broker non-vote” occurs when a bank, broker or other nominee that holds shares for a beneficial owner in “street name” (referenced herein as a “broker”) does not vote on a particular proposal because that broker does not have discretionary voting power for that particular item and has not received instructions from stockholdersthe beneficial owner. If you hold your shares in street name, the rules of the NYSE provide the record holder (i.e., your broker) with the authority to vote your shares only on certain “routine” matters when it does not receive voting instructions from you. At the Annual Meeting, a broker will have discretionary authority to vote shares on the ratification of the appointment of Deloitte as the Company’s independent registered public accounting firm for the calendar year ending December 31, 2024 (Proposal 3), but will not have discretionary authority as to the other proposals presented: the election of director nominees (Proposal 1) and the advisory proposal regarding executive compensation (Proposal 2).
If you hold your shares in street name, please ensure that your shares are given carefulvoted at the Annual Meeting by timely submitting voting instructions to your broker according to the instructions provided by your broker.
Election of each nominee for the nine director positions (Proposal 1) requires the affirmative FOR vote of a plurality of all votes cast at the Annual Meeting. This means that the director nominee with the most votes for a particular seat is elected for that seat. Votes “withheld” from one or more director nominees therefore will have no effect on the outcome of the vote with respect to the election of directors. However, in an uncontested election of directors, any nominee for director who receives a greater number of votes “withheld” from his or her election than votes “for” his or her election is expected to tender his or her written resignation to the Chairman of the Board for consideration by the Nominating and Corporate Governance Committee. For additional details regarding our director resignation policy and the election of directors, see the section of this Proxy Statement entitled “Our Board—Proposal 1: Election of Directors.” In tabulating the voting results, abstentions and, if applicable, broker non-votes, will have no effect on the election of directors.
The affirmative FOR vote of a majority of votes cast at the Annual Meeting is required for the approval, on an advisory basis, of the Company’s executive compensation as disclosed in this Proxy Statement (Proposal 2) and to approve the ratification of the appointment of Deloitte as the Company’s independent registered public accounting firm for the calendar year ending December 31, 2024 (Proposal 3). In tabulating the voting results for each such proposal, abstentions and, if applicable, broker non-votes, are not treated as “votes cast” and will have no effect on the result of such vote.
Although the advisory vote on the Company’s executive compensation as disclosed in this Proxy Statement (Proposal 2) is non-binding, the Board will review the results of these votes and will take them into account as appropriate when making decisions regarding executive compensation.
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You may vote at the Annual Meeting in any of the following ways:
Submitting a Proxy by Telephone or via the Internet: If you are a shareholder of record, you may appoint your proxy by telephone or via the Internet until 11:59 p.m., Eastern Time, on May 2, 2024, by following the instructions on the enclosed proxy card. Easy-to-follow prompts allow you to submit a proxy for your shares and confirm that your instructions have been properly recorded. The Company’s telephone and Internet proxy submission procedures are designed to authenticate shareholders by using individual control numbers. If you hold your shares in street name, please check your voting instruction card provided with the proxy materials or contact your broker to determine whether you will be able to provide your instructions by telephone or via the Internet.
Submitting a Proxy by Mail: If you are a shareholder of record, you can appoint your proxy by marking, dating and signing your proxy card and returning it by mail in the postage-prepaid envelope provided to you. If submitted by mail, your proxy must be received by the close of business on May 2, 2024, to be counted. If you hold your shares in street name, you can instruct your broker to vote by following the directions on your voting instruction card provided with the proxy materials.
By casting your vote in any of the ways listed above, you are authorizing the individuals listed on the proxy to vote your shares in accordance with your instructions.
Virtually at the Annual Meeting: Shareholders of record may vote virtually during the Annual Meeting by visiting www.virtualshareholdermeeting.com/STWD2024. To vote, you will need your 16-digit control number included in your proxy materials or on your proxy card.
Please note that even if you plan to attend the Annual Meeting, we encourage you to submit a proxy in advance to ensure your shares are represented. Your voting virtually during the Annual Meeting will automatically result in the revocation of any previously submitted proxy.
If you are a shareholder of record and you properly complete, sign and return a proxy card or use the telephone or Internet voting procedures, as applicable, to authorize the named proxies to vote your shares, and your proxy card or other proxy authorization is received by the Company in accordance with Rule 14a-8 undertime to be voted at the Exchange Act. Stockholder proposals are eligible for consideration for inclusion inAnnual Meeting, your shares will be voted as specified, unless your proxy is properly revoked prior thereto. As noted above, you may also vote your shares at the virtual Annual Meeting. If you submit a signed proxy card but no specification is made on the proxy statementcard as to any one or more of the proposals, the shares of common stock represented by the proxy will be voted as follows:
FOR the election of each of the director nominees;
FOR the approval, on an advisory basis, of the Company’s executive compensation as disclosed in this Proxy Statement; and
FOR the ratification of the appointment by the Audit Committee of Deloitte as the independent registered public accounting firm of the Company for the 2018 annualcalendar year ending December 31, 2024.
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A person submitting a proxy has the power to revoke it at any time before it is exercised by (a) attending the Annual Meeting and voting virtually during the meeting, of stockholders if they are received by the Company on or before December 1, 2017. Any proposal should be directed(b) duly executing and delivering a proxy bearing a later date prior to the attentionAnnual Meeting or (c) sending written notice of revocation to the Company’s Secretary at Starwood Property Trust, Inc., 591 West Putnam Avenue, Greenwich, Connecticut 06830. In order for a stockholder proposal submitted outside of Rule 14a-8 to be considered “timely” within the meaning of Rule 14a-4(c), such proposal06830, which must be deliveredreceived by the Company’s Secretary by 5:00 p.m., Eastern Time, on May 2, 2024 to have any effect. Attending the Annual Meeting by itself does not automatically revoke any earlier submitted proxy.
Confidentiality of Voting
The Company keeps all proxies, ballots and voting tabulations confidential as a matter of practice. The Company only allows its proxy solicitor, Innisfree M&A Incorporated (“Innisfree”), and its Inspector of Election, American Election Services, LLC (“AES”), examine these documents. Occasionally, shareholders provide written comments on their proxy card, which then may be forwarded to the Company’s Secretarymanagement by AES.
Tabulation of Voting Results
AES, the Company’s independent tabulating agent, will count the votes and act as the Inspector of Election at the Annual Meeting.
The Company will pay the expenses of soliciting proxies in connection with this Proxy Statement. Proxies may be solicited in person or by mail, telephone, electronic transmission and/or facsimile transmission on the Company’s behalf by directors, officers or employees of the Company or its subsidiaries, without additional compensation. The Company asks brokerage houses and other custodians, nominees and fiduciaries to forward soliciting materials to the beneficial owners of the stock held of record by such persons and to obtain authority to execute proxies, for which the Company will reimburse such persons. Innisfree has been engaged to assist in the solicitation of proxies for the Company for a fee of $20,000 plus reasonable out-of-pocket expenses. When recording votes by telephone or via the Internet, the Company will use procedures designed to authenticate shareholders’ identities, which will allow shareholders to authorize the voting of their shares in accordance with their instructions and confirm that their instructions have been recorded properly.
A list of shareholders entitled to vote at the Annual Meeting will be available at the virtual Annual Meeting at the Company’s principal executive offices
not later than the last dateat Starwood Property Trust, Inc., 591 West Putnam Avenue, Greenwich, Connecticut 06830, and open to examination by any shareholder for
submission of stockholder proposals under the Company’s Bylaws. In order for a proposalany purpose germane to
be “timely” under the Company’s Bylaws, it must be received not less than 90 days (i.e., December 31, 2017) nor more than 120 days (i.e., December 1, 2017) prior to the first anniversary of the date of the mailing of the notice for the 2017 Annual Meeting, March 31, 2017; provided, however, that in the event that the date of the mailing of the notice for the 2018 annual meeting of stockholders is advanced or delayed by more than 30 days from such anniversary date, notice by stockholders to be timely must be received not earlier than the 120th day prior to the date of mailing of the notice for the 2018 annual meeting of stockholders and not later than the close of business on the later of the 90th day prior to the date of mailing of the notice for the 2018 annual meeting of stockholders or the 10th day following the day on which disclosure of the date of mailing of the notice for the 2018 annual meeting of stockholders is made.OTHER MATTERS
The Board of Directors knows of no other business to be brought before the Annual Meeting. If any other matters properly come before the Annual Meeting, including a proposal omitted from this Proxy Statement in accordance with Rule 14a-8 underby contacting the Exchange Act, the proxies will be voted on such matters in accordance with the judgmentSecretary of the persons named as proxies therein, or their substitutes, present and acting at the meeting.
No person is authorized to give any information or to make any representation not contained in this Proxy Statement, and, if given or made, such information or representation should not be relied upon as having been authorized. The delivery of this Proxy Statement shall not, under any circumstances, imply that there has not been any change in the information set forth herein since the date of the Proxy Statement.
Company.
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ADDITIONAL INFORMATIONAvailability of Annual Report and Proxy Materials on the Internet
This Proxy Statement and our annual report for the calendar year ended December 31, 2023 are available at www.proxyvote.com by using the control number that is provided to you on your proxy card. You may also view such materials on our website at www.ir.starwoodpropertytrust.com/proxymaterials. Please submit any such request to the attention of the Company’s Secretary, Starwood Property Trust, Inc., 591 West Putnam Avenue, Greenwich, Connecticut 06830.
Recommendations of the Board
The Board recommends a vote:
FOR the election of each of the director nominees;
FOR the approval, on an advisory basis, of the Company’s executive compensation as disclosed in this Proxy Statement; and
FOR the ratification of the appointment by the Audit Committee of Deloitte as the independent registered public accounting firm of the Company for the calendar year ending December 31, 2024.
The SEC has adopted rules that permit companies and intermediaries such as brokers to satisfy delivery requirements for proxy statements and annual reports with respect to two or more
stockholdersshareholders sharing the same address by delivering a single proxy statement and annual report addressed to those
stockholders.shareholders. This process, which is commonly referred to as “householding,” potentially provides extra convenience for
stockholdersshareholders and cost savings for companies. The Company and some brokers household proxy materials, delivering a single proxy statement and annual report to multiple
stockholdersshareholders sharing an address unless contrary instructions have been received from the affected
stockholders.shareholders. Once you have received notice from your broker or the Company that they or the Company will be householding materials to your address, householding will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in householding or would prefer to receive a separate proxy statement and annual report, please notify your broker if your shares are held in a brokerage account or the Company if you hold registered shares. You can notify the Company by phone at
(203) 422-7700203-422-7700 or send a written request to the Company’s Secretary at Starwood Property Trust, Inc., 591 West Putnam Avenue, Greenwich, Connecticut 06830. If you so request, we will have delivered the requested separate proxy statement and annual report promptly following our receipt of your request.
If your household has received multiple copies of proxy statements and annual reports, you can request the delivery of single copies in the future by notifying the Company as set forth above.
By Order of the Board of Directors,
Andrew J. Sossen
Secretary
Dated: March 31, 2017
Greenwich, Connecticut
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APPENDIX A
STARWOOD PROPERTY TRUST, INC.
Other Matters
2017 MANAGER EQUITY PLAN The Board knows of no other business to be brought before the Annual Meeting. If any other matters properly come before the Annual Meeting, including a proposal omitted from this Proxy Statement in accordance with Rule 14a-8 under the Exchange Act, the proxies will be voted on such matters in accordance with the judgment of the persons named as proxies therein, or their substitutes, present and acting at the meeting. No person is authorized to give any information or to make any representation not contained in this Proxy Statement, and, if given or made, such information or representation should not be relied upon as having been authorized. The delivery of this Proxy Statement shall not, under any circumstances, imply that there has not been any change in the information set forth herein since the date of the Proxy Statement. TABLE OF CONTENTS
STARWOOD PROPERTY TRUST, INC.
2017 MANAGER EQUITY PLAN
SHAREHOLDER PROPOSALS FOR THE 2025 ANNUAL MEETING
Proposals received from shareholders are given careful consideration by the Company. Shareholder proposals are eligible for consideration for inclusion in the proxy statement for the 2025 annual meeting of shareholders in accordance with Rule 14a-8 under the Exchange Act if they are received by the Company on or before November 22, 2024. Any proposal should be directed to the attention of the Company’s Secretary at Starwood Property Trust, Inc., 591 West Putnam Avenue, Greenwich, Connecticut 06830. In order for a shareholder proposal or nomination submitted outside of Rule 14a-8 to be considered timely under the Company’s Bylaws, it must be received not less than 90 days nor more than 120 days prior to the first anniversary of the date of the mailing of the notice for the prior annual meeting, with certain exceptions. For the 2025 annual meeting of shareholders, any such proposal or nomination should be received no earlier than November 22, 2024 and no later than December 22, 2024, and must otherwise meet the requirements set forth in our Bylaws. In addition to satisfying the foregoing requirements under our Bylaws, to comply with the universal proxy rules, stockholders who intend to solicit proxies in support of director nominees other than management’s nominees must provide notice that sets forth the information required by Rule 14a-19 under the Exchange Act no later than March 4, 2025.
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STARWOOD PROPERTY TRUST INC.
2017 MANAGER EQUITY PLAN1. Purpose; Types of Awards.
The purpose of the Starwood Property Trust Inc. 2017 Manager Equity Plan (the “Plan”) is to issue equity-based incentives to SPT Management, LLC, a Delaware limited liability company (the “Manager”), which may in turn issue incentives to the directors, officers, employees of, or advisors or consultants to, the Manager or an Affiliate (as defined in Section 2) of the Manager, in order to increase their efforts on behalf of the Company and to promote the success of the Company’s business. The Plan provides for the grant of stock options, stock appreciation rights, restricted stock, restricted stock units and other equity-based awards.
This Plan replaces the Starwood Property Trust Inc. Manager Equity Plan, as amended, which shall terminate on the date on which this Plan is approved by the Company’s stockholders, except that any outstanding awards granted under the Predecessor Plan, as amended, shall remain in effect in accordance with their terms.
2. Definitions.
For purposes of the Plan, the following terms shall be defined as set forth below:
(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 and (iii) any legal entity for which such Person acts as an executive officer or general partner.
(b) “Award” means any Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit or Other Stock-Based Award granted under the Plan.
(c) “Award Agreement” means any written agreement, contract or other instrument or document evidencing an Award.
(d) “Board” means the Board of Directors of the Company.
(e) “Change of Control” means 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 Section 409A of the Code; provided, however, that a transaction or series of transactions effected with the Manager and/or any Affiliate of the Manager, through the acquisition of Stock or other Company securities (regardless of the form of such transaction or series of transactions), changes to the membership of the Board or otherwise, shall not constitute a Change of Control for purposes of the Plan or any Award.
(f) “Code” means the Internal Revenue Code of 1986, as amended from time to time, and the rules and regulations promulgated thereunder.
(g) “Committee” means the committee established by the Board to administer the Plan, the composition of which shall at all times consist of “non-employee directors” within the meaning of Rule 16b-3 under the Exchange Act.
(h) “Company” means Starwood Property Trust Inc., a Maryland corporation, or any successor corporation.
(i) “Effective Date” means May 4, 2017, the date on which the Plan was approved by the Company’s stockholders.
(j) “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, and the rules and regulations promulgated thereunder.
(k) “Fair Market Value” means, with respect to Stock or other property, the fair market value of such Stock or other property determined by such methods or procedures as shall be established from time to time by the Board. Unless otherwise determined by the Board in good faith, the per share Fair Market Value of Stock as of a particular date shall mean (i) the closing sales price per share of Stock on the national securities exchange on which the Stock is principally traded, for the last preceding date on which there was a sale of such Stock on such exchange; (ii) if the shares of Stock are then traded in an over-the-counter market, the average of the closing bid and asked prices for the shares of Stock in such over-the-counter
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market for the last preceding date on which there was a sale of such Stock in such market; or (iii) if the shares of Stock are not then listed on a national securities exchange or traded in an over-the-counter market, such value as the Board, in its sole discretion, shall determine.
(l) “Management Agreement” means the Management Agreement, dated as of August 17, 2009, by and between the Company and the Manager, as such may be amended from time to time.
(m) “Manager” means SPT Management, LLC, a Delaware limited liability company.
(n) “Option” means a right, granted to the Manager under Section 6(b)(i), to purchase shares of Stock.
(o) “Other Stock-Based Award” means a right or other interest granted to the Manager that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, Stock, including but not limited to unrestricted shares of Stock or dividend equivalent rights.
(p) “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.
(q) “Plan” means this Starwood Property Trust Inc. 2017 Manager Equity Plan, as amended from time to time.
(r) “Predecessor Plan” means the Starwood Property Trust Inc. Manager Equity Plan.
(s) “Restricted Stock” means an Award of shares of Stock to the Manager under Section 6(b)(iii) that may be subject to certain restrictions and to a risk of forfeiture.
(t) “Restricted Stock Unit” or “RSU” means a right granted to the Manager under Section 6(b)(iv) to receive Stock, cash or other property at the end of a specified period, which right may be conditioned on the satisfaction of specified performance or other criteria.
(u) “Securities Act” means the Securities Act of 1933, as amended from time to time, and the rules and regulations promulgated thereunder.
(v) “Stock” means shares of the common stock, par value $0.01 per share, of the Company.
(w) “Stock Appreciation Right” or “SAR” means the right granted to the Manager under Section 6(b)(ii) to be paid an amount measured by the appreciation in the Fair Market Value of Stock from the date of grant to the date of exercise of the right.
3. Administration.
The Plan shall be administered by the Board. Except with respect to the amendment, modification, suspension or early termination of the Plan, the Board may appoint a Committee to administer all or a portion of the Plan. To the extent that the Board so delegates its authority, references herein to the Board shall be deemed references to the Committee. The Board may delegate to one or more agents such administrative duties as it may deem advisable, and the Committee or any other person to whom the Board has delegated duties as aforesaid may employ one or more persons to render advice with respect to any responsibility the Board or such Committee or person may have under the Plan. No member of the Board or 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 Board shall have the 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) grant Awards; (ii) determine the type and number of Awards to be granted, the number of shares of Stock to which an Award may relate and the terms, conditions, restrictions and performance criteria relating to any Award; (iii) determine whether, to what extent, and under what circumstances an Award may be settled, cancelled, forfeited, exchanged, or surrendered; (iv) make adjustments in the terms and conditions of Awards; (v) construe and interpret the Plan and any Award; (vi) prescribe, amend and rescind rules and regulations relating to the Plan; (vii) determine the terms and provisions of the Award Agreements (which need not be identical for each grant); and (viii) make all other determinations deemed necessary or advisable for
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the administration of the Plan. All decisions, determinations and interpretations of the Board shall be final and binding on all persons, including but not limited to the Company, any parent or subsidiary of the Company, the Manager (or any person claiming any rights under the Plan from or through the Manager) and any stockholder. Notwithstanding any provision of the Plan or any Award Agreement to the contrary, except as provided in the second paragraph of Section 5, neither the Board nor the Committee shall, without obtaining the approval of the Company’s stockholders, (a) reduce the purchase or base price of any previously granted Option or SAR, (b) cancel any previously granted Option or SAR in exchange for another Option or SAR with a lower purchase or base price or (c) cancel any previously granted Option or SAR in exchange for cash or another award if the purchase or base price of such Option or SAR exceeds the Fair Market Value of a share of Stock on the date of such cancellation, in each case other than in connection with a Change of Control.
4. Eligibility.
Awards under the Plan may be granted only to the Manager. In determining the type of Award to be granted and the terms and conditions of such Award (including the number of shares to be covered by such Award), the Board shall take into account such factors as the Board shall deem relevant in connection with accomplishing the purposes of the Plan.
5. Stock Subject to the Plan.
The maximum number of shares of Stock reserved for the grant of Awards under the Plan shall be equal to 11,000,000, less any shares of common stock issued or subject to awards granted under the Company’s 2017 Equity Plan, subject to adjustment as provided herein. Stock 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 shares of Stock are surrendered to or withheld by the Company as payment of either the exercise price of an award granted under this Plan, the Predecessor Plan or the Company’s Equity Plan, Non-Executive Director Stock Plan or 2017 Equity Plan and/or withholding taxes in respect of such an award, the shares of Stock that were subject to such award shall not again be available for Awards under the Plan. If any shares subject to an award granted under this Plan, the Predecessor Plan or the Company’s Equity Plan, Non-Executive Director Stock Plan or 2017 Equity Plan are forfeited, cancelled, exchanged or surrendered or if such an award is settled in cash or otherwise terminates or expires without a distribution of shares to the Manager (other than as provided in the immediately preceding sentence), the shares of Stock 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 of Stock 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.
In the event that the Board shall determine that any dividend or other distribution (whether in the form of cash, Stock, or other property, but not including a regular cash dividend), recapitalization, Stock split, reverse split, reorganization, merger, consolidation, spin-off, combination, repurchase, or share exchange, or other similar corporate transaction or event, affects the Stock such that an adjustment is appropriate in order to prevent dilution or enlargement of the rights of the Manager under the Plan, then the Board shall make equitable changes or adjustments to any or all of: (i) the number and kind of shares of Stock or other property (including cash) that may thereafter be issued in connection with Awards; (ii) the number and kind of shares of 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 Board 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 Stock).
6. Terms of Awards.
(a) General. The term of each Award shall be for such period as may be determined by the Board. Subject to the terms of the Plan and any applicable Award Agreement, payments to be made by the Company upon the grant, vesting, maturation or exercise of an Award may be made in such forms as the Board shall determine at the date of grant or thereafter, including, without limitation, cash, Stock or other property, and may be made in a single payment or transfer, in installments or on a deferred basis. The Board may make rules relating to installment or deferred payments with respect to Awards, including the rate of
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interest to be credited with respect to such payments. In addition to the foregoing, the Board may impose on any Award or the exercise thereof, at the date of grant or thereafter, such additional terms and conditions, not inconsistent with the provisions of the Plan, as the Board shall determine.
(b) Terms of Specified Awards. The Board is authorized to grant the Awards described in this Section 6(b), under such terms and conditions as deemed by the Board to be consistent with the purposes of the Plan. Such Awards may be granted with vesting, value and/or and payment contingent upon attainment of one or more performance goals. Except as otherwise set forth herein or as may be determined by the Board, each Award granted under the Plan shall be evidenced by an Award Agreement containing such terms and conditions applicable to such Award as the Board shall determine at the date of grant or thereafter.
(i) Options. The Board is authorized to grant Options to the Manager on the following terms and conditions:
(A) Exercise Price. The exercise price per share of Stock purchasable under an Option shall be determined by the Board, 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 of Stock on the date of grant of such Option. The exercise price for Stock subject to an Option may be paid (i) in cash or by an exchange of Stock previously owned by the Manager, (ii) by authorizing the Company to withhold whole shares of Stock otherwise issuable pursuant to the exercise of such Option, (iii) through a “broker cashless exercise” procedure approved by the Board (to the extent permitted by law) or (iv) a combination of the above, in any case in an amount having a combined value equal to such exercise price. An Award Agreement may provide that the Manager may pay all or a portion of the aggregate exercise price by having shares of Stock with a Fair Market Value on the date of exercise equal to the aggregate exercise price withheld by the Company.
(B) Term and Exercisability of Options. The date on which the Board adopts a resolution expressly granting an Option shall be considered the day on which such Option is granted. Options shall be exercisable over the exercise period (which shall not exceed ten years from the date of grant), at such times and upon such conditions as the Board may determine, as reflected in the Award Agreement; provided, that the Board shall have the authority to accelerate the exercisability of any outstanding Option at such time and under such circumstances as it, in its sole discretion, deems appropriate. An Option may be exercised to the extent of any or all full shares of Stock as to which the Option has become exercisable, by giving written notice of such exercise to the Board or its designated agent.
(C) Other Provisions. Options may be subject to such other conditions including, but not limited to, restrictions on transferability of the shares acquired upon exercise of such Options, as the Board may prescribe in its discretion or as may be required by applicable law.
(ii) Stock Appreciation Rights. The Board is authorized to grant SARs to the Manager on the following terms and conditions:
(A) In General. Unless the Board determines otherwise, an SAR granted in tandem with an Option may be granted at the time of grant of the related Option or at any time thereafter. An SAR granted in tandem with an Option shall be exercisable only to the extent the underlying Option is exercisable. Payment of an SAR may made in cash, Stock, or property as specified in the Award or determined by the Board.
(B) Right Conferred. An 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 of Stock on the date of exercise over (2) the base price of the SAR (which in the case of an SAR granted in tandem with an Option shall be equal to the exercise price of the underlying Option, and which in the case of any other SAR shall be such price as the Board may determine, provided it is no less than 100% of the Fair Market Value of a share of Stock on the date of grant of such SAR).
(C) Term and Exercisability of SARs. The date on which the Board adopts a resolution expressly granting an SAR shall be considered the day on which such SAR is granted. SARs shall be exercisable over the exercise period (which shall not exceed the lesser of ten years from the
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date of grant or, in the case of a tandem SAR, the expiration of its related Award), at such times and upon such conditions as the Board may determine, as reflected in the Award Agreement; provided, that the Board shall have the authority to accelerate the exercisability of any outstanding SAR at such time and under such circumstances as it, in its sole discretion, deems appropriate. An SAR may be exercised to the extent of any or all full shares of Stock as to which the SAR (or, in the case of a tandem SAR, its related Award) has become exercisable, by giving written notice of such exercise to the Board or its designated agent.
(D) Other Provisions. SARs may be subject to such other conditions including, but not limited to, restrictions on transferability of the shares acquired upon exercise of such SARs, as the Board may prescribe in its discretion or as may be required by applicable law.
(iii) Restricted Stock. The Board is authorized to grant Restricted Stock to the Manager on the following terms and conditions:
(A) Issuance and Restrictions. Restricted Stock shall be subject to such restrictions on transferability and other restrictions, if any, as the Board may impose at the date of grant or thereafter, which restrictions may lapse separately or in combination at such times, under such circumstances, in such installments, or otherwise, as the Board may determine. The Board may place restrictions on Restricted Stock that shall lapse, in whole or in part, only upon the attainment of one or more performance goals. Unless otherwise determined by the Board, following a grant of Restricted Stock, the Manager shall have all of the rights of a stockholder including, without limitation, the right to vote Restricted Stock and the right to receive dividends thereon.
(B) Certificates for Stock. Restricted Stock granted under the Plan may be evidenced in such manner as the Board shall determine. If certificates representing Restricted Stock are registered in the name of the Manager, such certificates shall bear an appropriate legend referring to the terms, conditions and restrictions applicable to such Restricted Stock, and the Company shall retain physical possession of the certificate.
(C) Dividends/Distributions. Unless otherwise determined by the Board, dividends and 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 Board, and in any event shall be payable in cash or in shares of Stock having a Fair Market Value equal to the amount of such dividends or distributions. Unless otherwise determined by the Board, Stock 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 Stock or other property has been distributed.
(iv) Restricted Stock Units. The Board is authorized to grant RSUs to the Manager, subject to the following terms and conditions:
(A) Award and Restrictions. Delivery of Stock, cash or other property, as determined by the Board, will occur upon expiration of the period specified for RSUs by the Board during which forfeiture conditions apply, or such later date as the Board shall determine. The Board may place restrictions on RSUs that shall lapse, in whole or in part, only upon the attainment of one or more performance goals.
(B) Dividend/Distribution Equivalents. The Board 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 RSU. Dividend equivalents or distribution equivalents may be paid currently or credited to an account for the Manager, and may be settled in cash or Stock, as determined by the Board. Any such settlements, and any such crediting of dividend equivalents or distribution equivalents or reinvestment in Stock, may be subject to such conditions, restrictions and contingencies as the Board shall establish, including the reinvestment of such credited amounts in Stock equivalents. Unless otherwise determined by the Board, 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 RSU held by such Manager were a share of outstanding Stock.
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(v) Other Stock-Based Awards. The Board is authorized to grant Awards to the Manager in the form of Other Stock-Based Awards, as deemed by the Board to be consistent with the purposes of the Plan. Awards granted pursuant to this paragraph may be granted with vesting, value and/or payment contingent upon the attainment of one or more performance goals. The Board shall determine the terms and conditions of such Awards at the date of grant or thereafter. Without limiting the generality of this paragraph, Other Stock-Based Awards may include grants of shares of Stock that are not subject to any restrictions or a substantial risk of forfeiture.
7. Termination of Management Agreement. Upon termination of the Management Agreement either (i) by the Company for “cause” (as defined in the Management Agreement) or (ii) by the Manager for any reason other than for “cause” (as defined in the Management Agreement) or other than due to an adverse change in the Manager’s compensation thereunder, 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 Section 409A of the Code, 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 Section 409A of the Code.
8. Change in Control. In the event of a Change in 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; provided, however, that for any Award subject to Section 409A of the Code, no payment may be made to the Manager unless the transaction constituting a Change in Control also constitutes, within the meaning of Section 409A of the Code, a “change in the ownership or effective control” of the Company or a “change in the ownership of a substantial portion of the assets” of the Company.
9. General Provisions.
(a) Nontransferability. Awards granted to the Manager under the Plan shall not be transferable by Manager and shall be exercisable only by the Manager.
(b) No Right to Continued Service. Nothing in the Plan or in any Award, any Award Agreement or other agreement entered into pursuant hereto shall confer upon the Manager the right to continue to provide services to the Company or any parent or subsidiary 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.
(c) Taxes. The Company or any parent or subsidiary of the Company is authorized to withhold from any Award granted, any payment relating to an Award under the Plan, including from a distribution of Stock, or any other payment to the Manager, amounts of withholding and other taxes due in connection with any transaction involving an Award, and to take such other action as the Board may deem advisable to enable the Company and the Manager to satisfy obligations for the payment of withholding taxes and other tax obligations relating to any Award.
(d) Effective Date; Amendment and Termination.
(i) The Plan shall take effect upon the Effective Date, subject to the approval of the Company’s stockholders.
(ii) 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 stockholder 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 stockholders. The Board may at any time and from time to time amend any outstanding Award in whole or in part. Notwithstanding the foregoing sentence of this clause (ii), 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.
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(e) Expiration of Plan. Unless earlier terminated by the Board pursuant to the provisions of the Plan, the Plan shall expire on the tenth anniversary of the Effective Date. No Awards shall be granted under the Plan after such expiration date. The expiration of the Plan shall not affect adversely any of the rights of the Manager, without the Manager’s consent, under any Award theretofore granted.
(f) No Rights to Awards; No Stockholder Rights. The Manager shall have no claim to be granted any Award under the Plan. Each Award may be subject to different terms and conditions, as determined by the Board. Except as provided specifically herein, the Manager shall have no rights as a stockholder with respect to any shares covered by an Award until the date of the issuance of a stock certificate to the Manager for such shares.
(g) Unfunded Status of Awards. The Plan is intended to constitute an “unfunded” plan for incentive and deferred compensation. With respect to any payments not yet made to the Manager pursuant to an Award, nothing contained in the Plan or any Award shall give the Manager any rights that are greater than those of a general creditor of the Company.
(h) No Fractional Shares. No fractional shares of Stock shall be issued or delivered pursuant to the Plan or any Award. The Board shall determine whether cash, other Awards or other property shall be issued or paid in lieu of such fractional shares or whether such fractional shares or any rights thereto shall be forfeited or otherwise eliminated.
(i) Regulations and Other Approvals.
(i) The obligation of the Company to sell or deliver Stock with respect to any Award granted under the Plan shall be subject to all applicable laws, rules and regulations, including all applicable federal and state securities laws, and the obtaining of all such approvals by governmental agencies as may be deemed necessary or appropriate by the Board.
(ii) Each Award is subject to the requirement that, if at any time the Board determines, in its absolute discretion, that the listing, registration or qualification of Stock issuable pursuant to the Plan is required by any securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory body is necessary or desirable as a condition of, or in connection with, the grant of an Award or the issuance of Stock, no such Award shall be granted or payment made or Stock issued, in whole or in part, unless listing, registration, qualification, consent or approval has been effected or obtained free of any conditions not acceptable to the Board.
(iii) In the event that the disposition of Stock acquired pursuant to the Plan is not covered by a then-current registration statement under the Securities Act and is not otherwise exempt from such registration, such Stock shall be restricted against transfer to the extent required by the Securities Act or regulations thereunder, and the Board may require the Manager receiving Stock pursuant to the Plan, as a condition precedent to receipt of such Stock, to represent to the Company in writing that the Stock acquired by the Manager is acquired for investment only and not with a view to distribution.
(iv) The Board may require the Manager, as a condition precedent to receipt of an Award or of shares of Stock, to enter into a stockholder agreement or “lock-up” agreement in such form as the Board shall determine is necessary or desirable to further the Company’s interests.
(j) Governing Law. The Plan and all determinations made and actions taken pursuant hereto shall be governed by the laws of Maryland without giving effect to the conflict of laws principles thereof.
(k) Section 409A. It is intended that the payments and benefits under the Plan comply with, or as applicable, constitute a short-term deferral or otherwise be exempt from, the provisions of Section 409A of the Code. 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 Section 409A of the Code will have no force and effect until amended to comply therewith (which amendment may be retroactive to the extent permitted by Section 409A of the Code).
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APPENDIX B
STARWOOD PROPERTY TRUST, INC.
2017 EQUITY PLAN
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STARWOOD PROPERTY TRUST, INC.
2017 EQUITY PLAN
0001465128 6 2023-01-01 2023-12-31
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STARWOOD PROPERTY TRUST INC.
2017 EQUITY PLAN
1. Purpose; Types of Awards.
The purposes of the Starwood Property Trust Inc. 2017 Equity Plan (the “Plan”) are to afford an incentive to the directors and officers, employees, advisors, consultants and other third party service providers of Starwood Property Trust Inc. (the “Company”) who are in any case natural persons and providing services to the Company, including without limitation individuals who are employees of the Manager or one of its Affiliates who are providing services to the Company, to continue as directors, officers, employees, advisors, consultants or other third party service providers, to increase their efforts on behalf of the Company and to promote the success of the Company’s business. The Plan provides for the grant of stock options, stock appreciation rights, restricted stock, restricted stock units and other equity-based awards.
This Plan succeeds and replaces the Starwood Property Trust Inc. Equity Plan, as amended, and the Starwood Property Trust Inc. Non-Executive Director Stock Plan which shall terminate on the date on which this Plan is approved by the Company’s stockholders, except that any outstanding awards granted under the Predecessor Plans shall remain in effect in accordance with their terms.
2. Definitions.
For purposes of the Plan, the following terms shall be defined as set forth below:
(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 and (iii) any legal entity for which such Person acts as an executive officer or general partner.
(b) “Award” means any Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit or Other Stock-Based Award granted under the Plan.
(c) “Award Agreement” means any written agreement, contract or other instrument or document evidencing an Award.
(d) “Board” means the Board of Directors of the Company.
(e) “Change of Control” means 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 Section 409A of the Code; provided, however, that a transaction or series of transactions effected with the Manager and/or any Affiliate of the Manager, through the acquisition of Stock or other Company securities (regardless of the form of such transaction or series of transactions), changes to the membership of the Board or otherwise, shall not constitute a Change of Control for purposes of the Plan or any Award.
(f) “Code” means the Internal Revenue Code of 1986, as amended from time to time, and the rules and regulations promulgated thereunder.
(g) “Committee” means the committee established by the Board to administer the Plan, the composition of which shall at all times consist of “non-employee directors” within the meaning of Rule 16b-3 under the Exchange Act.
(h) “Company” means Starwood Property Trust Inc., a Maryland corporation, or any successor corporation.
(i) “Effective Date” means May 4, 2017, the date on which the Plan was approved by the Company’s stockholders.
(j) “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, and the rules and regulations promulgated thereunder.
(k) “Fair Market Value” means, with respect to Stock or other property, the fair market value of such Stock or other property determined by such methods or procedures as shall be established from time to time by the Board. Unless otherwise determined by the Board in good faith, the per share Fair Market Value of Stock as of a particular date shall mean (i) the closing sales price per share of Stock on the national securities exchange on which the Stock is principally traded, for the last preceding date on which there was
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a sale of such Stock on such exchange; (ii) if the shares of Stock are then traded in an over-the-counter market, the average of the closing bid and asked prices for the shares of Stock in such over-the-counter market for the last preceding date on which there was a sale of such Stock in such market; or (iii) if the shares of Stock are not then listed on a national securities exchange or traded in an over-the-counter market, such value as the Board, in its sole discretion, shall determine.
(l) “Management Agreement” means the Management Agreement, dated as of August 17, 2009, by and between the Company and the Manager, as such may be amended from time to time.
(m) “Manager” means SPT Management, LLC, a Delaware limited liability company.
(n) “Option” means a right, granted to a Participant under Section 6(b)(i), to purchase shares of Stock.
(o) “Other Stock-Based Award” means a right or other interest granted to a Participant that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, Stock, including but not limited to unrestricted shares of Stock or dividend equivalent rights.
(p) “Participant” means an eligible person who has been granted an Award under the Plan.
(q) “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.
(r) “Plan” means this Starwood Property Trust Inc. 2017 Equity Plan, as amended from time to time.
(s) “Predecessor Plans” means (i) the Starwood Property Trust Inc. Equity Plan, as amended, and (ii) the Starwood Property Trust Inc. Non-Executive Director Stock Plan.
(t) “Restricted Stock” means an Award of shares of Stock to a Participant under Section 6(b)(iii) that may be subject to certain restrictions and to a risk of forfeiture.
(u) “Restricted Stock Unit” or “RSU” means a right granted to a Participant under Section 6(b)(iv) to receive Stock, cash or other property at the end of a specified period, which right may be conditioned on the satisfaction of specified performance or other criteria.
(v) “Securities Act” means the Securities Act of 1933, as amended from time to time, and the rules and regulations promulgated thereunder.
(w) “Separation from Service” shall have the meaning attributed to such term under Section 409A of the Code.
(x) “Stock” means shares of the common stock, par value $0.01 per share, of the Company.
(y) “Stock Appreciation Right” or “SAR” means the right granted to a Participant under Section 6(b)(ii) to be paid an amount measured by the appreciation in the Fair Market Value of Stock from the date of grant to the date of exercise of the right.
3. Administration.
The Plan shall be administered by the Board. Except with respect to the amendment, modification, suspension or early termination of the Plan, the Board may appoint a Committee to administer all or a portion of the Plan. To the extent that the Board so delegates its authority, references herein to the Board shall be deemed references to the Committee. The Board may delegate to one or more agents such administrative duties as it may deem advisable, and the Committee or any other person to whom the Board has delegated duties as aforesaid may employ one or more persons to render advice with respect to any responsibility the Board or such Committee or person may have under the Plan. No member of the Board or 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 Board shall have the 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) grant Awards; (ii) determine the persons to whom and the time or times at which
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Awards shall be granted; (iii) determine the type and number of Awards to be granted, the number of shares of Stock to which an Award may relate and the terms, conditions, restrictions and performance criteria relating to any Award; (iv) determine whether, to what extent, and under what circumstances an Award may be settled, cancelled, forfeited, exchanged, or surrendered; (v) make adjustments in the terms and conditions of Awards; (vi) construe and interpret the Plan and any Award; (vii) prescribe, amend and rescind rules and regulations relating to the Plan; (viii) determine the terms and provisions of the Award Agreements (which need not be identical for each Participant); and (ix) make all other determinations deemed necessary or advisable for the administration of the Plan. All decisions, determinations and interpretations of the Board shall be final and binding on all persons, including but not limited to the Company, any parent or subsidiary of the Company, any Participant (or any person claiming any rights under the Plan from or through any Participant) and any stockholder. Notwithstanding any provision of the Plan or any Award Agreement to the contrary, except as provided in the second paragraph of Section 5, neither the Board nor the Committee shall, without obtaining the approval of the Company’s stockholders, (a) reduce the purchase or base price of any previously granted Option or SAR, (b) cancel any previously granted Option or SAR in exchange for another Option or SAR with a lower purchase or base price or (c) cancel any previously granted Option or SAR in exchange for cash or another award if the purchase or base price of such Option or SAR exceeds the Fair Market Value of a share of Stock on the date of such cancellation, in each case other than in connection with a Change of Control.
4. Eligibility.
Awards may be granted, in the discretion of the Board, to individuals who are, as of the date of grant, directors or officers, employees, advisors, consultants or other third party service providers of the Company, who in any case are natural persons and providing services to the Company, including without limitation individuals who are employees of the Manager or one of its Affiliates. In determining the persons to whom Awards shall be granted and the type of any Award (including the number of shares to be covered by such Award), the Board shall take into account such factors as the Board shall deem relevant in connection with accomplishing the purposes of the Plan.
5. Stock Subject to the Plan.
The maximum number of shares of Stock reserved for the grant of Awards under the Plan shall be equal to 11,000,000, less any shares of common stock issued or subject to awards granted under the Company’s 2017 Manager Equity Plan, subject to adjustment as provided herein. Stock 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 shares of Stock are surrendered to or withheld by the Company as payment of either the exercise price of an option or stock appreciation right granted under this Plan, a Predecessor Plan or the Company’s Manager Equity Plan or 2017 Manager Equity Plan and/or withholding taxes in respect of an award granted under any of such plans, the shares of Stock that were subject to such award shall not again be available for Awards under the Plan. If any shares subject to an award under this Plan, any of the Predecessor Plans or the Company’s Manager Equity Plan or 2017 Manager Equity Plan are forfeited, cancelled, exchanged or surrendered or if such an award is settled in cash or otherwise terminates or expires without a distribution of shares to the Participant (other than as provided in the immediately preceding sentence), the shares of Stock 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 of Stock 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.
In the event that the Board shall determine that any dividend or other distribution (whether in the form of cash, Stock, or other property, but not including a regular cash dividend), recapitalization, Stock split, reverse split, reorganization, merger, consolidation, spin-off, combination, repurchase, or share exchange, or other similar corporate transaction or event, affects the Stock such that an adjustment is appropriate in order to prevent dilution or enlargement of the rights of Participants under the Plan, then the Board shall make equitable changes or adjustments to any or all of: (i) the number and kind of shares of Stock or other property (including cash) that may thereafter be issued in connection with Awards; (ii) the number and kind of shares of Stock or other property (including cash) issued or issuable in respect of outstanding Awards; (iii) the exercise price, base price
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or purchase price relating to any Award and (iv) the performance goals, if any, applicable to outstanding Awards. In addition, the Board 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 Stock).
6. Terms of Awards.
(a) General. The term of each Award shall be for such period as may be determined by the Board. Subject to the terms of the Plan and any applicable Award Agreement, payments to be made by the Company upon the grant, vesting, maturation or exercise of an Award may be made in such forms as the Board shall determine at the date of grant or thereafter, including, without limitation, cash, Stock or other property, and may be made in a single payment or transfer, in installments or on a deferred basis. The Board may make rules relating to installment or deferred payments with respect to Awards, including the rate of interest to be credited with respect to such payments. In addition to the foregoing, the Board may impose on any Award or the exercise thereof, at the date of grant or thereafter, such additional terms and conditions, not inconsistent with the provisions of the Plan, as the Board shall determine.
(b) Terms of Specified Awards. The Board is authorized to grant the Awards described in this Section 6(b), under such terms and conditions as deemed by the Board to be consistent with the purposes of the Plan. Such Awards may be granted with vesting, value and/or and payment contingent upon attainment of one or more performance goals. Except as otherwise set forth herein or as may be determined by the Board, each Award granted under the Plan shall be evidenced by an Award Agreement containing such terms and conditions applicable to such Award as the Board shall determine at the date of grant or thereafter.
(i) Options. The Board is authorized to grant Options to Participants on the following terms and conditions:
(A) Exercise Price. The exercise price per share of Stock purchasable under an Option shall be determined by the Board, 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 of Stock on the date of grant of such Option. The exercise price for Stock subject to an Option may be paid (i) in cash or by an exchange of Stock previously owned by the Participant, (ii) by authorizing the Company to withhold whole shares of Stock otherwise issuable pursuant to the exercise of such Option, (iii) through a “broker cashless exercise” procedure approved by the Board (to the extent permitted by law) or (iv) a combination of the above, in any case in an amount having a combined value equal to such exercise price. An Award Agreement may provide that a Participant may pay all or a portion of the aggregate exercise price by having shares of Stock with a Fair Market Value on the date of exercise equal to the aggregate exercise price withheld by the Company.
(B) Term and Exercisability of Options. The date on which the Board adopts a resolution expressly granting an Option shall be considered the day on which such Option is granted. Options shall be exercisable over the exercise period (which shall not exceed ten years from the date of grant), at such times and upon such conditions as the Board may determine, as reflected in the Award Agreement; provided, that the Board shall have the authority to accelerate the exercisability of any outstanding Option at such time and under such circumstances as it, in its sole discretion, deems appropriate. An Option may be exercised to the extent of any or all full shares of Stock as to which the Option has become exercisable, by giving written notice of such exercise to the Board or its designated agent.
(C) Termination of Service. Subject to Section 7, an Option may not be exercised unless (1) the Participant is then providing services to the Company and (2) the Participant has continuously maintained such relationship since the date of grant of the Option; provided, that the Award Agreement may contain provisions extending the exercisability of Options, in the event of specified terminations of service, to a date not later than the expiration date of such Option.
(D) Other Provisions. Options may be subject to such other conditions including, but not limited to, restrictions on transferability of the shares acquired upon exercise of such Options, as the Board may prescribe in its discretion or as may be required by applicable law.
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(ii) Stock Appreciation Rights. The Board is authorized to grant SARs to Participants on the following terms and conditions:
(A) In General. Unless the Board determines otherwise, an SAR granted in tandem with an Option may be granted at the time of grant of the related Option or at any time thereafter. An SAR granted in tandem with an Option shall be exercisable only to the extent the underlying Option is exercisable. Payment of an SAR may made in cash, Stock, or property as specified in the Award or determined by the Board.
(B) Right Conferred. An SAR shall confer on the Participant 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 of Stock on the date of exercise over (2) the base price of the SAR (which in the case of an SAR granted in tandem with an Option shall be equal to the exercise price of the underlying Option, and which in the case of any other SAR shall be such price as the Board may determine, provided it is no less than 100% of the Fair Market Value of a share of Stock on the date of grant of such SAR).
(C) Term and Exercisability of SARs. The date on which the Board adopts a resolution expressly granting an SAR shall be considered the day on which such SAR is granted. SARs shall be exercisable over the exercise period (which shall not exceed the lesser of ten years from the date of grant or, in the case of a tandem SAR, the expiration of its related Award), at such times and upon such conditions as the Board may determine, as reflected in the Award Agreement; provided, that the Board shall have the authority to accelerate the exercisability of any outstanding SAR at such time and under such circumstances as it, in its sole discretion, deems appropriate. An SAR may be exercised to the extent of any or all full shares of Stock as to which the SAR (or, in the case of a tandem SAR, its related Award) has become exercisable, by giving written notice of such exercise to the Board or its designated agent.
(D) Termination of Service. Subject to Section 7, an SAR may not be exercised unless (1) the Participant is then providing services to the Company and (2) the Participant has continuously maintained such relationship since the date of grant of the SAR; provided, that the Award Agreement may contain provisions extending the exercisability of SARs, in the event of specified terminations of service, to a date not later than the expiration date of such SARs (or, in the case of a tandem SAR, its related Award).
(E) Other Provisions. SARs may be subject to such other conditions including, but not limited to, restrictions on transferability of the shares acquired upon exercise of such SARs, as the Board may prescribe in its discretion or as may be required by applicable law.
(iii) Restricted Stock. The Board is authorized to grant Restricted Stock to Participants on the following terms and conditions:
(A) Issuance and Restrictions. Restricted Stock shall be subject to such restrictions on transferability and other restrictions, if any, as the Board may impose at the date of grant or thereafter, which restrictions may lapse separately or in combination at such times, under such circumstances, in such installments, or otherwise, as the Board may determine. The Board may place restrictions on Restricted Stock that shall lapse, in whole or in part, only upon the attainment of one or more performance goals. Unless otherwise determined by the Board, a Participant granted Restricted Stock shall have all of the rights of a stockholder including, without limitation, the right to vote Restricted Stock and the right to receive dividends thereon.
(B) Forfeiture. Subject to Section 8, upon termination of service to the Company during the applicable restriction period, Restricted Stock and any accrued but unpaid dividends that are then subject to restrictions shall be forfeited; provided, that the Board may provide, by rule or regulation or in any Award Agreement, or may determine in any individual case, that restrictions or forfeiture conditions relating to Restricted Stock will be waived in whole or in part in the event of terminations resulting from specified causes, and the Board may in other cases waive in whole or in part the forfeiture of Restricted Stock.
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(C) Certificates for Stock. Restricted Stock granted under the Plan may be evidenced in such manner as the Board shall determine. If certificates representing Restricted Stock are registered in the name of the Participant, such certificates shall bear an appropriate legend referring to the terms, conditions and restrictions applicable to such Restricted Stock, and the Company shall retain physical possession of the certificate.
(D) Dividends/Distributions. Unless otherwise determined by the Board, dividends 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 Board, and in any event shall be payable in cash or in shares of Stock having a Fair Market Value equal to the amount of such dividends and distributions. Unless otherwise determined by the Board, Stock 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 Stock or other property has been distributed.
(iv) Restricted Stock Units. The Board is authorized to grant RSUs to Participants, subject to the following terms and conditions:
(A) Award and Restrictions. Delivery of Stock, cash or other property, as determined by the Board, will occur upon expiration of the period specified for RSUs by the Board during which forfeiture conditions apply, or such later date as the Board shall determine. The Board may place restrictions on RSUs that shall lapse, in whole or in part, only upon the attainment of one or more performance goals.
(B) Forfeiture. Subject to Section 8, upon termination of service to the Company prior to the vesting of RSUs, or upon failure to satisfy any other conditions precedent to the delivery of Stock or cash to which such RSUs relate, all RSUs and any accrued but unpaid dividend equivalents that are then subject to deferral or restriction shall be forfeited; provided, that the Board may provide, by rule or regulation or in any Award Agreement, or may determine in any individual case, that restrictions or forfeiture conditions relating to RSUs will be waived in whole or in part in the event of termination resulting from specified causes, and the Board may in other cases waive in whole or in part the forfeiture of RSUs.
(C) Dividend/Distribution Equivalents. The Board is authorized to grant to Participants the right to receive dividend equivalent payments and/or distribution equivalent payments for the period prior to settlement of the RSU. Dividend equivalents or distribution equivalents may be paid currently or credited to an account for the Participant, and may be settled in cash or Stock, as determined by the Board. Any such settlements, and any such crediting of dividend equivalents or distribution equivalents or reinvestment in Stock, may be subject to such conditions, restrictions and contingencies as the Board shall establish, including the reinvestment of such credited amounts in Stock equivalents. Unless otherwise determined by the Board, any such dividend equivalents or distribution equivalents shall be paid or credited, as applicable, on the dividend payment date to the Participant as though each RSU held by such Participant were a share of outstanding Stock.
(v) Other Stock-Based Awards. The Board is authorized to grant Awards to Participants in the form of Other Stock-Based Awards, as deemed by the Board to be consistent with the purposes of the Plan. Awards granted pursuant to this paragraph may be granted with vesting, value and/or payment contingent upon the attainment of one or more performance goals. The Board shall determine the terms and conditions of such Awards at the date of grant or thereafter. Without limiting the generality of this paragraph, Other Stock-Based Awards may include grants of shares of Stock that are not subject to any restrictions or a substantial risk of forfeiture.
7. Termination of Service. Unless otherwise determined by the Board, all unvested Awards then held by a Participant who ceases to provide services to the Company, whether through a Separation from Service or because of reassignment by such Participant’s employer, shall be immediately cancelled and forfeited without consideration. The terms of Award Agreements shall set forth the terms under which an Option or Stock Appreciation Right may remain exercisable following such a termination of service with the Company.
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8. Change in Control. In the event of a Change in 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; provided, however, that for any Award subject to Section 409A of the Code, no payment may be made to the holder of such Award unless the transaction constituting a Change in Control also constitutes, within the meaning of Section 409A of the Code, a “change in the ownership or effective control” of the Company or a “change in the ownership of a substantial portion of the assets” of the Company.
9. General Provisions.
(a) Nontransferability. Unless otherwise provided in an Award Agreement, Awards shall not be transferable by a Participant except by will or the laws of descent and distribution and shall be exercisable during the lifetime of a Participant only by such Participant or his guardian or legal representative.
(b) No Right to Continued Service, etc. Nothing in the Plan or in any Award, any Award Agreement or other agreement entered into pursuant hereto shall confer upon any Participant the right to continue as a director of, or continue to provide services to, the Company or any parent, subsidiary or Affiliate of the Company or the Manager 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 such Participant’s service.
(c) Taxes. The Company or any parent or subsidiary of the Company is authorized to withhold from any Award granted, any payment relating to an Award under the Plan, including from a distribution of Stock, or any other payment to a Participant, amounts of withholding and other taxes due in connection with any transaction involving an Award, and to take such other action as the Board may deem advisable to enable the Company and Participants to satisfy obligations for the payment of withholding taxes and other tax obligations relating to any Award. This authority shall include authority to withhold or receive Stock or other property and to make cash payments in respect thereof in satisfaction of a Participant’s tax obligations. The Board may provide in the Award Agreement that in the event that a Participant is required to pay any amount to be withheld in connection with the issuance of shares of Stock in settlement or exercise of an Award, the Participant may satisfy such obligation (in whole or in part) by electing to have the Company withhold a portion of the shares of Stock to be received upon settlement or exercise of such Award that is equal to the minimum amount required to be withheld.
(d) Effective Date; Amendment and Termination.
(i) The Plan shall take effect upon the Effective Date, subject to the approval of the Company’s stockholders.
(ii) 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 stockholder 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 stockholders. The Board may at any time and from time to time amend any outstanding Award in whole or in part. Notwithstanding the foregoing sentence of this clause (ii), 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 any Participant, without such Participant’s consent, under any Award theretofore granted under the Plan.
(e) Expiration of Plan. Unless earlier terminated by the Board pursuant to the provisions of the Plan, the Plan shall expire on the tenth anniversary of the Effective Date. No Awards shall be granted under the Plan after such expiration date. The expiration of the Plan shall not affect adversely any of the rights of any Participant, without such Participant’s consent, under any Award theretofore granted.
(f) Deferrals. The Board shall have the authority to establish such procedures and programs that it deems appropriate to provide Participants with the ability to defer receipt of cash, Stock or other property payable with respect to Awards granted under the Plan.
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(g) No Rights to Awards; No Stockholder Rights. No Participant shall have any claim to be granted any Award under the Plan. There is no obligation for uniformity of treatment among Participants. Except as provided specifically herein, a Participant or a transferee of an Award shall have no rights as a stockholder with respect to any shares covered by the Award until the date of the issuance of a stock certificate to him for such shares.
(h) Unfunded Status of Awards. The Plan is intended to constitute an “unfunded” plan for incentive and deferred compensation. With respect to any payments not yet made to a Participant pursuant to an Award, nothing contained in the Plan or any Award shall give any such Participant any rights that are greater than those of a general creditor of the Company.
(i) No Fractional Shares. No fractional shares of Stock shall be issued or delivered pursuant to the Plan or any Award. The Board shall determine whether cash, other Awards or other property shall be issued or paid in lieu of such fractional shares or whether such fractional shares or any rights thereto shall be forfeited or otherwise eliminated.
(j) Regulations and Other Approvals.
(i) The obligation of the Company to sell or deliver Stock with respect to any Award granted under the Plan shall be subject to all applicable laws, rules and regulations, including all applicable federal and state securities laws, and the obtaining of all such approvals by governmental agencies as may be deemed necessary or appropriate by the Board.
(ii) Each Award is subject to the requirement that, if at any time the Board determines, in its absolute discretion, that the listing, registration or qualification of Stock issuable pursuant to the Plan is required by any securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory body is necessary or desirable as a condition of, or in connection with, the grant of an Award or the issuance of Stock, no such Award shall be granted or payment made or Stock issued, in whole or in part, unless listing, registration, qualification, consent or approval has been effected or obtained free of any conditions not acceptable to the Board.
(iii) In the event that the disposition of Stock acquired pursuant to the Plan is not covered by a then-current registration statement under the Securities Act and is not otherwise exempt from such registration, such Stock shall be restricted against transfer to the extent required by the Securities Act or regulations thereunder, and the Board may require a Participant receiving Stock pursuant to the Plan, as a condition precedent to receipt of such Stock, to represent to the Company in writing that the Stock acquired by such Participant is acquired for investment only and not with a view to distribution.
(iv) The Board may require a Participant receiving Stock pursuant to the Plan, as a condition precedent to receipt of such Stock, to enter into a stockholder agreement or “lock-up” agreement in such form as the Board shall determine is necessary or desirable to further the Company’s interests.
(k) Registration on Form S-8. The Company shall file with the Securities and Exchange Commission a registration statement on Form S-8 with respect to the securities to be offered to Participants under the Plan and shall during the term of the Plan keep such registration statement effective.
(l) Governing Law. The Plan and all determinations made and actions taken pursuant hereto shall be governed by the laws of Maryland without giving effect to the conflict of laws principles thereof.
(m) Section 409A. It is intended that the payments and benefits under the Plan comply with, or as applicable, constitute a short-term deferral or otherwise be exempt from, the provisions of Section 409A of the Code. 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 Section 409A of the Code will have no force and effect until amended to comply therewith (which amendment may be retroactive to the extent permitted by Section 409A of the Code). To the extent required in order to avoid accelerated taxation and/or tax penalties under Section 409A of the Code, amounts that would otherwise be payable and benefits that would otherwise be provided pursuant to this Plan during the six-month period immediately following Participant’s termination of employment shall instead be paid on the first business day after the date that is six months following Participant’s termination of employment (or upon Participant’s death, if earlier).
