by and between
Starwood Property Trust, Inc.
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 Persons 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 Companys 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 Companys 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.
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
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 Companys
equity securities since inception (allocated on a pro rata basis for such issuances during
the fiscal quarter of any such issuance), plus (2) the Companys 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 Companys 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 Companys 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
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 Companys 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 Companys
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 Companys 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).
If the Effective Termination Date does not correspond to the end of a calendar quarter,
the Managers 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
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 Companys 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 Companys sale of Common Stock to the public through
underwriters pursuant to the Companys 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.
Legacy Loan PPIF means a public-private investment fund established under the PPIPs
Legacy Loan Program.
Legacy Securities PPIF means a public-private investment fund established under the
PPIPs Legacy Securities Program.