Management Agreement (2009)Full Document 

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MANAGEMENT AGREEMENT
by and between
Starwood Property Trust, Inc.
and
SPT Management, LLC
Dated as of August      , 2009

 


 

          MANAGEMENT AGREEMENT, dated as of August      , 2009, by and between Starwood Property Trust, Inc., a Maryland corporation (the “Company”), and SPT Management, LLC, a Delaware limited liability company (the “Manager”).
W I T N E S S E T H:
          WHEREAS, the Company is a newly formed corporation which intends to invest in Target Assets (as defined below) and intends to qualify as a real estate investment trust for federal income tax purposes and will elect to receive the tax benefits accorded by Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Code”); and
          WHEREAS, the Company desires to retain the Manager to administer the business activities and day-to-day operations of the Company and to perform services for the Company in the manner and on the terms set forth herein and the Manager wishes to be retained to provide such services.
          NOW THEREFORE, in consideration of the premises and agreements hereinafter set forth, the parties hereto hereby agree as follows:
     Section 1. Definitions.
               (a) The following terms shall have the meanings set forth in this Section 1(a):
          “Additional Underwriting Discount” means (i) the Manager Conditional Payment, plus (ii) the Conditional Payments as defined in Section 2(d) of the IPO Underwriting Agreement, in each case to the extent paid by the Company.
     “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, (iii) any member of the board of directors or board of managers (or bodies performing similar functions) of such Person, and (iv) any legal entity for which such Person acts as an executive officer or general partner.
     “Agreement” means this Management Agreement, as amended, supplemented or otherwise modified from time to time.
     “Automatic Renewal Term” has the meaning set forth in Section 10(a) hereof.

 


 

     “Bankruptcy” means, with respect to any Person, (a) the filing by such Person of a voluntary petition seeking liquidation, reorganization, arrangement or readjustment, in any form, of its debts under Title 11 of the United States Code or any other U.S. federal or state or foreign insolvency law, or such Person’s filing an answer consenting to or acquiescing in any such petition, (b) the making by such Person of any assignment for the benefit of its creditors, (c) the expiration of 60 days after the filing of an involuntary petition under Title 11 of the Unites States Code, an application for the appointment of a receiver for a material portion of the assets of such Person, or an involuntary petition seeking liquidation, reorganization, arrangement or readjustment of its debts under any other U.S. federal or state or foreign insolvency law, provided that the same shall not have been vacated, set aside or stayed within such 60-day period or (d) the entry against such Person of a final and non-appealable order for relief under any bankruptcy, insolvency or similar law now or hereinafter in effect.
     “Base Management Fee” means the base management fee, calculated and payable quarterly in arrears, in an amount equal to one-fourth of 1.50% of the Company’s Equity.
     “Board” means the board of directors of the Company.
     “Board Investment Committee” means a committee consisting solely of members of the Board formed for the primary purpose of (1) periodically reviewing the Company’s investments and (2) pursuant to the Investment Guidelines, approving certain investments proposed to be made by the Company.
     “Business Day” means any day except a Saturday, a Sunday or a day on which banking institutions in New York, New York are not required to be open.
     “Claim” has the meaning set forth in Section 8(c) hereof.
     “Closing Date” means the date of closing of the Initial Public Offering.
     “Code” has the meaning set forth in the Recitals.
     “Co-Investment and Allocation Agreement” refers to the co-investment and allocation agreement, dated August      , 2009, by and among the Company, the Manager, and Starwood Capital Group Global, L.P.
     “Common Stock” means the common stock, par value $0.01, of the Company.

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     “Company” has the meaning set forth in the Recitals.
     “Company Indemnified Party” has meaning set forth in Section 8(b) hereof.
     “Conditional Payment Period” has the meaning set forth in Section 6(i) hereof.
     “Conduct Policies” has the meaning set forth in Section 2(l) hereof.
     “Confidential Information” has the meaning set forth in Section 5 hereof.
     “Core Earnings” means the net income (loss), computed in accordance with GAAP, excluding (i) non-cash equity compensation expense, (ii) the Incentive Compensation, (iii) depreciation and amortization, (iv) any unrealized gains or losses or other non-cash items that are included in net income for the applicable reporting period, regardless of whether such items are included in other comprehensive income or loss, or in net income, and (v) one-time events pursuant to changes in GAAP and certain non-cash charges, in each case after discussions between the Manager and the Independent Directors and approved by a majority of the Independent Directors.
     For the avoidance of doubt, the exclusion of depreciation and amortization from the calculation of Core Earnings shall only apply to Target Assets consisting of debt investments related to real estate to the extent that the Company forecloses upon the property or properties underlying such debt investments.
     “Effective Termination Date” has the meaning set forth in Section 10(b) hereof.
     “Equity” means (a) the sum of (1) the net proceeds from all issuances of the Company’s equity securities since inception (allocated on a pro rata basis for such issuances during the fiscal quarter of any such issuance), plus (2) the Company’s retained earnings 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 or any of its Subsidiaries has paid to repurchase the Company’s Common Stock since inception. Equity excludes (1) any unrealized gains and losses and other non-cash items that have impacted stockholders’ 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 Independent Directors and approval by a majority of the Independent Directors.

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     “Equity Incentive Plans” means the equity incentive plans adopted by the Company to provide incentive compensation to attract and retain qualified directors, officers, advisors, consultants and other personnel, including the Manager and Affiliates and personnel of the Manager and its Affiliates, and any joint venture affiliates of the Company.
     “Exchange Act” means the Securities Exchange Act of 1934, as amended.
     “GAAP” means generally accepted accounting principles in effect in the United States on the date such principles are applied.
     “Governing Instruments” means, with regard to any entity, the articles of incorporation or certificate of incorporation and bylaws in the case of a corporation, the partnership agreement in the case of a general or limited partnership, the certificate of formation and operating agreement in the case of a limited liability company, the trust instrument in the case of a trust, or similar governing documents in each case as amended.
     “Incentive Compensation” means the incentive management fee calculated and payable with respect to each calendar quarter (or part thereof that this Agreement is in effect) in arrears in an amount, not less than zero, equal to the difference between (1) the product of (a) 20% and (b) the difference between (i) Core Earnings of the Company for the previous 12-month period, and (ii) the product of (A) the weighted average of the issue price per share of the Common Stock of all of the Company’s public offerings of Common Stock multiplied by the weighted average number of shares of Common Stock outstanding (including, for the avoidance of doubt, any restricted shares of Common Stock, restricted stock units or any shares of Common Stock underlying other awards granted under one or more of the Company’s Equity Incentive Plans) in the previous 12-month period, and (B) 8%, and (2) the sum of any Incentive Compensation paid to the Manager with respect to the first three calendar quarters of such previous 12-month period; provided, however, that no Incentive Compensation shall be payable with respect to any calendar quarter unless Core Earnings for the 12 most recently completed calendar quarters is greater than zero.
     For purposes of calculating the Incentive Compensation prior to the completion of a 12-month period during the term of this Agreement, Core Earnings shall be calculated on the basis of the number of days that this Agreement has been in effect on an annualized basis.
     For the avoidance of doubt, the Company’s payment of the Additional Underwriting Discount shall not be an expense of the Company pursuant to GAAP and therefore, shall not affect the calculation of the Incentive Compensation (or the calculation of Core Earnings for purposes of the Incentive Compensation).

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     If the Effective Termination Date does not correspond to the end of a calendar quarter, the Manager’s Incentive Compensation shall be calculated for the period beginning on the day after the end of the calendar quarter immediately preceding the Effective Termination Date and ending on the Effective Termination Date, which Incentive Compensation shall be calculated using Core Earnings for the 12-month period ending on the Effective Termination Date.
     “Indemnified Party” has the meaning set forth in Section 8(b) hereof.
     “Independent Director” means a member of the Board who is “independent” in accordance with the Company’s Governing Instruments and the rules of the NYSE or such other securities exchange on which the shares of Common Stock are listed.
     “Initial Public Offering” means the Company’s sale of Common Stock to the public through underwriters pursuant to the Company’s Registration Statement on Form S-11 (No. 333-159754).
     “Initial Term” has the meaning set forth in Section 10(a) hereof.
     “Investment Advisory Agreement” means an agreement between the Manager and Starwood Capital Group Management, LLC, a Connecticut limited liability company, as may be amended from time to time, whereby the latter agrees to provide the Manager with the personnel, services and resources necessary for the Manager to perform its obligations and responsibilities under this Agreement in exchange for certain fees payable by the Manager.
     “Investment Company Act” means the Investment Company Act of 1940, as amended.
     “Investment Guidelines” means the investment guidelines approved by the Board, a copy of which is attached hereto as Exhibit A, as the same may amended, restated, modified, supplemented or waived pursuant to the approval of a majority of the entire Board (which must include a majority of the Independent Directors) and the Manager Investment Committee.
     ”IPO Underwriting Agreement” means the Underwriting Agreement, dated August ___, 2009, by and among the Company, the Manager and the underwriters of the Initial Public Offering.
     “Last Appraiser” has the meaning set forth in Section 6(g) hereof.

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     “Legacy Loan PPIF” means a public-private investment fund established under the PPIP’s Legacy Loan Program.
     “Legacy Securities PPIF” means a public-private investment fund established under the PPIP’s Legacy Securities Program.

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