DEF 14A
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES
EXCHANGE ACT OF 1934
Filed by the
Registrant þ
Filed by a Party other than the
Registrant o
Check the appropriate box:
o Preliminary
Proxy Statement
o Confidential,
for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
þ Definitive
Proxy Statement
o Definitive
Additional Materials
o Soliciting
Material Pursuant to
§240.14a-12
ARBOR REALTY TRUST, INC.
(Name of Registrant as Specified In
Its Charter)
(Name of Person(s) Filing Proxy
Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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No fee required.
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Fee computed on table below per Exchange Act
Rules 14a-6(i)(4)
and 0-11.
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Title of each class of securities to which transaction applies:
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Aggregate number of securities to which transaction applies:
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Per unit price or other underlying value of transaction computed
pursuant to Exchange Act
Rule 0-11
(set forth the amount on which the filing fee is calculated and
state how it was determined):
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4)
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Proposed maximum aggregate value of transaction:
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by
Exchange Act
Rule 0-11(a)(2)
and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its
filing.
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1)
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Amount Previously Paid:
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Form, Schedule or Registration Statement No.:
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As filed with the Commission on April 30, 2009
Arbor
Realty Trust, Inc.
April 30,
2009
Dear Fellow Stockholders:
On behalf of the Board of Directors, I cordially invite you to
attend the Annual Meeting of Stockholders of Arbor Realty Trust,
Inc. to be held at the Teleconference Center on the lower level
of 333 Earle Ovington Boulevard, Uniondale, New York, on
June 18, 2009, at 1:00 p.m., local time. The matters
to be considered by the stockholders at the annual meeting are
described in detail in the accompanying materials.
It is important that you be represented at the annual meeting
regardless of the number of shares you own or whether you are
able to attend the annual meeting in person.
Let me urge you to mark, sign and date your proxy card today and
to return it in the envelope provided.
Sincerely,
Ivan Kaufman
Chairman and Chief Executive Officer and President
Arbor
Realty Trust, Inc.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY
MATERIALS FOR THE STOCKHOLDERS MEETING TO BE HELD ON JUNE 18,
2009
THE PROXY STATEMENT AND ANNUAL REPORT TO SECURITY HOLDERS ARE
AVAILABLE AT:
http://www.arbor.com/cm.htm
To Be Held on June 18,
2009
To the Stockholders of Arbor Realty Trust, Inc.:
The annual meeting of stockholders of Arbor Realty Trust, Inc.,
a Maryland corporation (the Company), will be held
at the Teleconference Center on the lower level of 333 Earle
Ovington Boulevard, Uniondale, New York, on June 18, 2009,
beginning at 1:00 p.m., local time. Directions to attend
the annual meeting and vote in person are available on our
website, www.arbor.com, under the heading Investor
Relations or can be obtained by calling our main telephone
number, 1-516-506-4200.
The matters to be considered by stockholders at the annual
meeting, which are described in detail in the accompanying
materials, are:
(1) a proposal to elect the three named nominees as
Class III directors, each to serve until the 2012 annual
meeting of stockholders and until their respective successors
are duly elected and qualify;
(2) a proposal to amend and restate the Companys 2003
Omnibus Stock Incentive Plan (the Stock Incentive
Plan) to authorize (i) the grant of stock options
under the Stock Incentive Plan, and (ii) the issuance of an
additional 1,250,000 shares of the companys common
stock as grants of restricted stock under the Stock Incentive
Plan or underlying stock options granted under the Stock
Incentive Plan;
(3) a proposal to ratify the appointment of
Ernst & Young LLP as the Companys independent
registered public accounting firm for fiscal year 2009; and
(4) the transaction of any other business that may properly
come before the annual meeting or any adjournment or
postponement of the annual meeting.
Stockholders of record at the close of business on
April 30, 2009 will be entitled to notice of and to vote at
the annual meeting. It is important that your shares be
represented at the annual meeting regardless of the size of your
securities holdings. A proxy statement, proxy card,
self-addressed envelope and Annual Report to Stockholders for
the fiscal year ended December 31, 2008 accompany this
notice. Whether or not you plan to attend the annual meeting in
person, please complete, date and sign the proxy card. Return it
promptly in the envelope provided, which requires no postage if
mailed in the United States. If you are the record holder of
your shares and you attend the annual meeting, you may withdraw
your proxy and vote in person, if you so choose.
By Order of the Board of Directors,
Walter K. Horn
Corporate Secretary
April 30, 2009
Uniondale, New York
Arbor
Realty Trust, Inc.
333 Earle Ovington Boulevard
Suite 900
Uniondale, New York 11553
(516) 506-4200
PROXY
STATEMENT
FOR THE ANNUAL MEETING OF
STOCKHOLDERS
To Be Held on June 18,
2009
TABLE OF
CONTENTS
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GENERAL
INFORMATION CONCERNING SOLICITATION AND VOTING
This proxy statement and the accompanying proxy card and notice
of annual meeting are provided in connection with the
solicitation of proxies by and on behalf of the Board of
Directors of Arbor Realty Trust, Inc., a Maryland corporation,
for use at the annual meeting of stockholders to be held on
June 18, 2009, at 1:00 p.m., local time, and any
adjournments or postponements thereof.
We, our, us, and the
Company each refers to Arbor Realty Trust, Inc. The
Company conducts substantially all of its operations through
Arbor Realty Limited Partnership, which we refer to as our
operating partnership, and its subsidiaries. References to
operating partnership units refer to partnership interests in
Arbor Realty Limited Partnership. The Company is externally
managed and advised by Arbor Commercial Mortgage, LLC, which we
refer to as our external manager or our
Manager.
The mailing address of our executive office is 333 Earle
Ovington Boulevard, Suite 900, Uniondale,
New York 11553. This proxy statement, the accompanying
proxy card and the notice of annual meeting are first being
mailed on or about May 1, 2009 to holders of our common
stock, par value $0.01 per share, of record on April 30,
2009. Our common stock are the only securities entitled to vote
at the annual meeting and are referred to as our voting
securities. Along with this proxy statement, we are also sending
our Annual Report to Stockholders for the fiscal year ended
December 31, 2008.
A proxy may confer discretionary authority to vote with respect
to any matter presented at the annual meeting. As of the date of
this proxy statement, management has no knowledge of any
business that will be presented for consideration at the annual
meeting and that would be required to be set forth in this proxy
statement or the related proxy card other than the matters set
forth in the Notice of Annual Meeting of Stockholders. If any
other matter is properly presented at the annual meeting for
consideration, it is intended that the persons named in the
enclosed proxy card and acting thereunder will vote in
accordance with their discretion on any such matter.
Matters
to be Considered at the Annual Meeting
At the annual meeting, our stockholders will act upon:
(1) a proposal to elect the three named nominees as
Class III directors, each to serve until the 2012 annual
meeting of stockholders and until their respective successors
are duly elected and qualify;
(2) a proposal to amend and restate the Companys 2003
Omnibus Stock Incentive Plan (the Stock Incentive
Plan) to authorize (i) the grant of stock options
under the Stock Incentive Plan, and (ii) the issuance of an
additional 1,250,000 shares of the companys common
stock as grants of restricted stock under the Stock Incentive
Plan or underlying stock options granted under the Stock
Incentive Plan;
(3) a proposal to ratify the appointment of
Ernst & Young LLP as the Companys independent
registered public accounting firm for fiscal year 2009; and
(4) the transaction of any other business that may properly
come before the annual meeting or any adjournment or
postponement of the annual meeting.
This proxy statement, form of proxy and voting instructions are
being mailed starting on or about May 1, 2009.
Solicitation
of Proxies
The enclosed proxy is solicited by and on behalf of our Board of
Directors. The expense of preparing, printing and mailing this
proxy statement and the proxies solicited hereby will be borne
by the Company. In addition to the use of the mail, proxies may
be solicited by officers and directors, without additional
remuneration, by personal interview, telephone, telegraph or
otherwise. The Company will also request brokerage firms,
nominees, custodians and fiduciaries to forward proxy materials
to the beneficial owners of voting securities held of record at
the close of business on April 30, 2009 and will provide
reimbursement for the cost of forwarding the material. In
addition, we have engaged The Altman Group to assist in
soliciting proxies from brokers, banks and other nominee holders
of our common stock at a cost of approximately $6,000, plus
reasonable
out-of-pocket
expenses.
1
Stockholders
Entitled To Vote
As of the close of business on April 30, 2009, there were
25,387,410 shares of our common stock outstanding and
entitled to vote. Each share of our common stock entitles the
holder to one vote. Stockholders of record at the close of
business on April 30, 2009 are entitled to vote at the
annual meeting or any adjournment or postponement thereof.
Required
Quorum/Vote
A quorum will be present if stockholders entitled to cast a
majority of all the votes entitled to be cast at the annual
meeting are present, in person or by proxy. If you have returned
a valid proxy or if you hold your shares of our voting
securities in your own name as holder of record and you attend
the annual meeting in person, your shares will be counted for
the purpose of determining whether there is a quorum. If a
quorum is not present, the annual meeting may be adjourned by
the chairman of the meeting or the stockholders entitled to vote
at the annual meeting, present in person or by proxy, to a date
not more than 120 days after the record date without notice
other than announcement at the meeting.
Abstentions and broker non-votes will be counted in determining
the presence of a quorum. Broker non-votes occur
when a bank, broker or other nominee holding shares for a
beneficial owner returns a properly executed proxy but does not
vote on a particular proposal because it does not have
discretionary voting power for that particular item and has not
received instructions from the beneficial owner. Under the rules
of the New York Stock Exchange (the NYSE), banks,
brokers and other nominees who hold shares in street
name may have the authority to vote on certain matters
when they do not receive instructions from beneficial owners.
Banks, brokers and other nominees that do not receive
instructions are entitled to vote on the election of directors
contained in Proposal No. 1 and the ratification of
the appointment of the independent registered public accounting
firm contained in Proposal No. 3.
Election of each of the director nominees named in
Proposal No. 1 requires the affirmative vote of a
plurality of the votes cast in the election of directors at the
annual meeting by holders of our voting securities. The
candidates receiving the highest number of affirmative votes of
the shares entitled to be voted will be elected directors.
Shares represented by properly executed and returned proxies
will be voted, if authority to do so is not withheld, for the
election of the Board of Directors nominees named in
Proposal No. 1. Votes may be cast in favor of or
withheld with respect to all of the director nominees, or any of
them. Abstentions will not be counted as having been voted and
will have no effect on the outcome of the vote on the election
of directors. Stockholders may not cumulate votes in the
election of directors. A vote withheld from a
director nominee will have no effect on the outcome of the vote
because a plurality of the votes cast at the annual meeting is
required for the election of each director.
Approval of the amendment and restatement of the Companys
2003 Omnibus Stock Incentive Plan, as specified in
Proposal No. 2, requires the affirmative vote of a
majority of the votes cast on the proposal at the annual meeting
by holders of our voting securities; provided that the total
vote cast on the proposal represents over 50% in interest of all
securities entitled to vote on the proposal. For purposes of the
vote on the Companys 2003 Omnibus Stock Incentive Plan,
abstentions will have the same effect as votes against the
proposal and broker non-votes will have the same effect as votes
against the proposal, unless holders of more than 50% in
interest of all securities entitled to vote on the proposal cast
votes, in which event broker non-votes will not have any effect
on the result of the vote.
Ratification of the appointment of Ernst & Young LLP
as the Companys independent registered public accounting
firm for fiscal year 2009, as specified in
Proposal No. 3, requires the affirmative vote of a
majority of the votes cast on the proposal at the annual meeting
by holders of our voting securities. If this selection is not
ratified by holders of our voting securities, the Audit
Committee and our Board of Directors may reconsider its
appointment and endorsement, respectively. Abstentions and
broker non-votes, if any, will not be counted as having been
voted and will have no effect on the outcome of the vote for
this proposal. Even if the selection is ratified, the Audit
Committee of the Companys Board of Directors in its
discretion may direct the appointment of a different independent
registered public accounting firm at any time during the year if
it determines that such a change would be in the best interests
of the Company and its stockholders.
2
If the enclosed proxy is properly executed and returned to us in
time to be voted at the annual meeting, it will be voted as
specified on the proxy unless it is properly revoked prior
thereto. If no specification is made on the proxy as to any one
or more of the proposals, the shares of our voting securities
represented by the proxy will be voted as follows:
(1) FOR the election of the three named nominees as
Class III directors, each to serve until the 2012 annual
meeting of stockholders and until their respective successors
are duly elected and qualify;
(2) FOR the amendment and restatement of the
Companys 2003 Omnibus Stock Incentive Plan (the
Stock Incentive Plan) to authorize (i) the
grant of stock options under the Stock Incentive Plan, and
(ii) the issuance of an additional 1,250,000 shares of
the companys common stock as grants of restricted stock
under the Stock Incentive Plan or underlying stock options
granted under the Stock Incentive Plan;
(3) FOR the ratification of the appointment of
Ernst & Young LLP as the Companys independent
registered public accounting firm for fiscal year 2009; and
(4) in the discretion of the proxy holder on any other
business that properly comes before the annual meeting or any
adjournment or postponement thereof.
As of the date of this proxy statement, we are not aware of any
other matter to be presented at the annual meeting.
Voting
If you hold your shares of our voting securities in your own
name as a holder of record, you may instruct the proxies to vote
your shares by signing, dating and mailing the proxy card in the
postage-paid envelope provided. In addition, you may vote your
shares of our voting securities in person at the annual meeting.
If your shares are held on your behalf by a broker, bank or
other nominee, you will receive instructions from such
individual or entity that you must follow in order to have your
shares voted at the annual meeting.
Voting via telephone or the Internet may also be available
depending on how you hold your shares. Please reference your
proxy card for instructions on how to vote by these methods.
Right to
Revoke Proxy
If you hold shares of our voting securities in your own name as
a holder of record, you may revoke your proxy instructions
through any of the following methods:
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send written notice of revocation, prior to the annual meeting,
to our Corporate Secretary, at 333 Earle Ovington Boulevard,
Suite 900, Uniondale, New York 11553;
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sign and mail a new, later dated proxy card to our Corporate
Secretary at the address specified above; or
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attend the annual meeting and vote your shares in person.
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If your shares are held on your behalf by a broker, bank or
other nominee, you must contact it to receive instructions as to
how you may revoke your proxy instructions.
Copies of
Annual Report to Stockholders
A copy of our Annual Report to Stockholders for the fiscal year
ended December 31, 2008 will be mailed to stockholders
entitled to vote at the annual meeting with this proxy statement
and is also available without charge to stockholders upon
written request to: Arbor Realty Trust, Inc., 333 Earle Ovington
Boulevard, Suite 900, Uniondale, New York, 11553, Attn:
Investor Relations. You may also access our Annual Report on
Form 10-K
as filed with the Securities and Exchange Commission under the
Investor Relations SEC Filings link on
our website at www.arborrealtytrust.com.
3
Voting
Results
American Stock Transfer & Trust Company, our
independent tabulating agent, will have a representative present
at the annual meeting and count the votes and act as the
Inspector of Election. We will publish the voting results in our
Quarterly Report on
Form 10-Q
for fiscal quarter ending June 30, 2009, which we plan to
file with the U.S. Securities and Exchange Commission (the
SEC) in August 2009.
Confidentiality
of Voting
We will keep all proxies, ballots and voting tabulations
confidential. We will permit only our Inspector of Election,
American Stock Transfer & Trust Company, and our
outside legal counsel to examine these documents.
Recommendations
of the Board of Directors
The Board of Directors recommends a vote:
(1) FOR the election of Mr. Horn,
Dr. Helmreich and Ms. Edwards, the three named
nominees as Class III directors, each to serve until the
2012 annual meeting of stockholders and until their respective
successors are duly elected and qualify;
(2) FOR the amendment and restatement of the
Companys 2003 Omnibus Stock Incentive Plan (the
Stock Incentive Plan) to authorize (i) the
grant of stock options under the Stock Incentive Plan, and
(ii) the issuance of an additional 1,250,000 shares of
the companys common stock as grants of restricted stock
under the Stock Incentive Plan or underlying stock options
granted under the Stock Incentive Plan;
(3) FOR the ratification of the appointment of
Ernst & Young LLP as the Companys independent
registered public accounting firm for fiscal year 2009; and
(4) in the discretion of the proxy holder on any other
business that properly comes before the annual meeting or any
adjournment or postponement thereof.
4
BOARD OF
DIRECTORS
General
Our Board of Directors presently consists of ten members.
Pursuant to our charter, the Board of Directors is divided into
three classes of directors, each serving for three years after
election and until his or her successor is duly elected and
qualifies, with one class up for election at each annual
meeting. At this years annual meeting, the term of our
three Class III directors will expire. Our other directors
will remain in office for the remainder of their respective
terms, as indicated below.
At the annual meeting, stockholders will vote on the election of
Mr. Walter K. Horn, Dr. William Helmreich and
Ms. Karen K. Edwards for a three-year term to serve until
the 2012 annual meeting of stockholders and until their
successors are duly elected and qualify.
The following table sets forth information concerning our ten
directors, including the three Class III directors who are
nominees for reelection at this years annual meeting.
Current
Directors Who are Nominees for Reelection
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Name
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Class
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Age
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New Term to Expire at Annual Meeting in
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Walter K. Horn
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III
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66
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2012
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William Helmreich
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III
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63
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2012
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Karen K. Edwards
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III
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52
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2012
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Current
Directors Whose Terms are not Expiring
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Name
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Class
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Age
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Term Expires at Annual Meeting in
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John J. Bishar, Jr.
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I
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59
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2010
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Archie R. Dykes
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78
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2010
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Joseph Martello
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53
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2010
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Kyle A. Permut
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47
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2010
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Ivan Kaufman
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II
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48
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2011
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C. Michael Kojaian
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II
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47
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2011
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Melvin F. Lazar
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II
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70
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2011
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Nominees
Walter K. Horn. Mr. Horn has served as
one of our directors since November 2003 and our Corporate
Secretary since July 2003. Mr. Horn was also our General
Counsel and Director of Compliance until his retirement from
those positions effective January 1, 2008. Mr. Horn is
also a member of Arbor Commercial Mortgages executive
committee. Mr. Horn was General Counsel of Arbor National
Holdings from 1991 until its sale in 1995 and was General
Counsel of Arbor Commercial Mortgage until March 2005.
Mr. Horns experience also includes serving as General
Counsel with Resource One, Inc. and Long Island
Trust Company.
William Helmreich. Dr. Helmreich has
served as one of our directors since June 2003.
Dr. Helmreich is the founder, and since 1980, owner and
president of Byron Research and Consulting, a market research
firm specializing in financial research, political polling,
legal consulting, and issues relating to food products and real
estate. He is a professor of Sociology at City College of New
York and the CUNY Graduate Center, where he teaches sociology of
marketing and consumer behavior. Since 2000, Dr. Helmreich
has also been retained as Chairman for Academic Affairs for
North Shore Hebrew Academy. He is a director of Transaction
Inc., North Shore Hebrew Academy, North Shore Hebrew Academy
High School and NSH Affordable Housing of Indiana, Inc., as well
as other
not-for-profit
boards, and was a Senior Vice President of Good Earth Teas for
many years.
5
Karen K. Edwards. Ms. Edwards has served
as one of our directors since August 2005. She was a Senior Vice
President at GenSpring Family Offices (formerly Asset Management
Advisors), an integrated wealth management firm, from June 2004
until October 2008. From January 2001 to August 2001, she was
the Chief Operating Officer at New Vantage Group, a firm that
manages early-stage venture funds for active angel investors.
She co-founded the Investment Banking Group at Friedman,
Billings, Ramsey & Co. (FBR), where she was a managing
director from 1992 to 2000. In that role, she was responsible
for raising equity and high yield debt capital for financial
institutions and other financial services companies. She also
developed FBRs mergers and acquisitions practice.
Ms. Edwards is a Chartered Financial Analyst and a member
and former president of the CFA Society of Washington. She is a
member and former Treasurer of Women in Housing and Finance. She
currently serves on the Alumni Board of the University of
Virginias Darden Graduate School of Business.
Continuing
Directors
John J. Bishar, Jr. Mr. Bishar has
served as one of our directors since April 2007. From August
2007 until December 31, 2008, he was the U.S. General
Counsel of National Grid U.S.A., a wholly-owned subsidiary of
National Grid plc, a multi-national energy delivery company.
Since January 1, 2009, he has been the Senior Advisor to
National Grids current U.S. General Counsel. At
National Grid U.S.A., Mr. Bishar was responsible for all
U.S. legal matters, as well as U.S. ethics, compliance
and risk reporting. National Grid plc acquired KeySpan
Corporation, a large, diversified U.S. energy delivery
company, in August of 2007. Mr. Bishar was Executive Vice
President, General Counsel and Chief Governance Officer of
KeySpan Corporation from 2002 until the acquisition. At KeySpan
Corporation, Mr. Bishar was responsible for the Legal
Services Business Unit, the Corporate Secretarys Office
and for all governance and compliance matters. Prior to joining
KeySpan in 2002, Mr. Bishar was a partner in the law firm
of Cullen and Dykman LLP. He was the managing partner of the
firm from 1993 to 2002 and a member of the firms executive
committee. From 1980 to 1987, Mr. Bishar was a Vice
President and the General Counsel and Corporate Secretary of
LITCO Bancorporation of New York Inc. Mr. Bishar is a
graduate of Georgetown University and Fordham University School
of Law.
Archie R. Dykes. Dr. Dykes has served as
one of our directors since April 2006. Dr. Dykes is lead
director of PepsiAmericas, Inc. He has served as chairman of
Capital City Holdings Inc., a venture capital organization, for
more than the past five years. Dr. Dykes served as Chairman
and Chief Executive Officer of the Security Benefit Group of
Companies from 1980 through 1987. He served as chancellor of the
University of Kansas from 1973 to 1980. Prior to that, he was
chancellor of the University of Tennessee. Dr. Dykes was
Chairman of the Board and Chief Executive Officer of Fleming
Companies, Inc. until September 2004. He assumed those roles at
Fleming in March 2003 following his service to Fleming as
Non-executive Chairman of the Board. He also serves as a
director of Raytech Corporation and Midas, Inc. Dr. Dykes
is a member of the board of trustees of the Kansas University
Endowment Association, the William Allen White Foundation and
YouthFriends, Inc. He formerly served as Vice Chairman of the
Commission on the Operation of the United States Senate and as a
member of the executive committee of the Association of American
Universities.
Joseph Martello. Mr. Martello has served
as one of our directors since June 2003. Mr. Martello is
currently Chief Operating Officer of Arbor Management, LLC, the
managing member of Arbor Commercial Mortgage. He is responsible
for management of the investment portfolio and overseeing the
day-to-day
operations within Arbor Management. Mr. Martello is also a
member of the executive committee of Arbor Commercial Mortgage.
From 1995 to 1999, Mr. Martello was Chief Financial Officer
of Arbor Commercial Mortgage. From 1990 to 1995,
Mr. Martello was the Chief Financial Officer of Arbor
National Holdings, Inc. Prior to that, he was a senior manager
with the international accounting and consulting firm of
Ernst & Young for eleven years. Mr. Martello is a
member of the American Institute of Certified Public Accountants
and the New York State Society of Certified Public Accountants,
where he is a former executive member of the Board of Directors
of the Suffolk County chapter. Mr. Martello also serves as
a director of Citala, Ltd., a privately-owned technology firm
based in Israel.
Kyle A. Permut. Mr. Permut has served as
one of our directors since August 2005. Prior to becoming one of
our directors, Mr. Permut served as a managing director
from 1997 to 2005 at Canadian Imperial Bank of Commerce (CIBC),
the largest bank in Canada and one of the 10 largest in North
America. In this position, he was head of CIBC World Markets
Debt Capital Markets Group in the United States. He was a member
of the firms USA
6
Management Committee, its executive board and the Debt Capital
Markets Management Committee. Mr. Permut retired from CIBC
in 2005.
Ivan Kaufman. Mr. Kaufman has served as
our Chairman, Chief Executive Officer and President since June
2003. Mr. Kaufman has been Chief Executive Officer and
President of Arbor Commercial Mortgage, LLC, our Manager, since
its inception in 1993. Arbor Commercial Mortgage is a national
commercial real estate finance company which specializes in debt
and equity financing for multi-family and commercial real
estate. In 1983, he co-founded a predecessor of Arbor National
Holdings Inc. and its residential lending subsidiary, Arbor
National Mortgage Inc., which became a public company in 1992
and was sold to BankAmerica in 1995. Mr. Kaufman was named
regional Entrepreneur of the Year by Inc. Magazine
for outstanding achievements in financial services in 1990.
Mr. Kaufman has also served on Fannie Maes regional
advisory and technology boards, as well as the board of
directors of the Empire State Mortgage Bankers Association.
C. Michael Kojaian. Mr. Kojaian has
served as one of our directors since June 2003. Since 1998
Mr. Kojaian has been the chief operating officer of the
Kojaian group of companies, a national multi-faceted real estate
development, investment and asset management organization.
Mr. Kojaian is the chairman of the board of
Grubb & Ellis, a commercial real estate advisory firm.
Melvin F. Lazar. Mr. Lazar has served as
one of our directors since his appointment in November 2003.
Mr. Lazar is the founder of Lazar Levine & Felix
LLP, certified public accountants, was its managing partner from
1969 until September 2002, and is still an employee of the firm,
now known as Parente Randolph LLP. Mr. Lazar specializes in
business valuations and merger and acquisition activities.
Mr. Lazar serves on the boards of directors, and is the
Chairman of the Audit Committees, of Enzo Biochem, Inc., a
publicly-held biotechnology company, and Active Media Services,
Inc., a privately-held corporate trading company.
Corporate
Governance Profile
We are committed to good corporate governance practices and, as
such, we have adopted formal corporate governance guidelines to
enhance our effectiveness. The guidelines govern, among other
things, board member qualifications, responsibilities, education
and management succession. A copy of the corporate governance
guidelines may be found at the corporate website at
www.arborrealtytrust.com under the heading Investor
Relations Corporate Governance.
The Board of Directors met on 14 occasions and acted by written
consent on 11 occasions during 2008. No incumbent director
attended fewer than 75 percent of all meetings of our Board
of Directors and the committees on which such director served
during 2008.
Senior
Officer Code of Ethics and Code of Business Conduct and
Ethics
We have adopted a senior officer code of ethics applicable to
our Chief Executive Officer, Chief Financial Officer, Chief
Credit Officer and Controller (or persons performing similar
functions to the aforementioned officers regardless of whether
such persons (1) are employed directly by the Company or
(2) are employed by Arbor Commercial Mortgage, our Manager
pursuant to a management agreement). We have also adopted a code
of business conduct and ethics applicable to all employees,
officers and directors. Both codes are available on our website
at www.arborrealtytrust.com under the heading Investor
Relations Corporate Governance. You may also
obtain these documents, as well as our corporate governance
guidelines, in print free of charge by writing the Company at
333 Earle Ovington Boulevard, Suite 900, Uniondale, New
York, 11553: Attention: Investor Relations. Amendments to, and
waivers from, the senior officer code of ethics and the code of
business conduct and ethics for a director or officer will be
disclosed at the same website address and heading provided
above. We have filed our 2008 Domestic Company Section 303A
CEO Certification with the NYSE without any qualifications. Our
Sarbanes-Oxley Section 302 Certification was filed as an
exhibit to our Annual Report on
Form 10-K
for the year ended December 31, 2008.
7
Director
Independence
Of our ten directors, seven have been determined by our Board of
Directors to be independent for purposes of the NYSE listing
standards. Our independent directors are Messrs. Bishar,
Kojaian, Lazar and Permut, Drs. Dykes and Helmreich and
Ms. Edwards. In determining director independence, the
Board of Directors reviewed, among other things, whether any
transactions or relationships currently exist, or have existed
in the past, between each director and the Company and its
subsidiaries, affiliates and equity investors or independent
registered public accounting firm. In particular, the board
reviewed current or recent business transactions or
relationships or other personal relationships between each
director and the Company, including such directors
immediate family and companies owned or controlled by the
director or with which the director was affiliated. The purpose
of this review was to determine whether any such transactions or
relationships failed to meet any of the objective tests
promulgated by the NYSE for determining independence or were
otherwise sufficiently material as to be inconsistent with a
determination that the director is independent.
The Board also examined whether there were any transactions or
relationships between each director and members of the senior
management of the Company or their affiliates. In reviewing the
independence of Dr. Helmreich, the board carefully reviewed
whether (1) Mr. Kaufmans and
Dr. Helmreichs current and prior participation on the
boards of North Shore Hebrew Academy, North Shore Hebrew Academy
High School and NSH Affordable Housing of Indiana, Inc., all of
which are
not-for-profit
organizations, (2) Dr. Helmreichs engagement
since the summer of 2000 as an external consultant by North
Shore Hebrew Academy in the capacity of chairman of Academic
Affairs of North Shore Hebrew Academy and
(3) Dr. Helmreichs prior receipt of consulting
fees from Arbor Management, LLC should, based upon the totality
of the circumstances, be deemed to be material so as to preclude
a finding that Dr. Helmreich is independent. The board, in
particular, reviewed the materiality of the transactions to the
parties involved, the compensation and timing of
Dr. Helmreichs advisory role with North Shore Hebrew
Academy and Arbor Management, LLC and the absence of any
employment or compensatory capacity by Dr. Helmreich with
NSH Affordable Housing of Indiana, Inc. In reviewing the
independence of Mr. Kojaian, the board carefully reviewed
whether (1) Mr. Kaufmans and
Mr. Kojaians co-investment in an operating company
and (2) Mr. Kojaians beneficial ownership of
approximately 4.0% of the Companys common stock, should,
based upon the totality of the circumstances, be deemed to be
material so as to preclude a finding that Mr. Kojaian is
independent. The board, in particular, reviewed the materiality
of the transactions to the parties involved. In reviewing the
independence of Mr. Bishar, the board carefully reviewed
whether Mr. Bishars position as partner in the law
firm of Cullen and Dykman LLP, which the Company has engaged and
may continue to engage in connection with various real estate
finance transactions, based upon the totality of the
circumstances, should be deemed to be material so as to preclude
a finding that Mr. Bishar is independent. In reviewing the
independence of Mr. Permut, the board carefully reviewed
whether Mr. Permuts previous designation as the legal
guardian of the then minor children of Mr. Kaufman and his wife
in the event of their death and his appointments as a secondary
successor executor under the wills of Mr. Kaufman and his
wife and as the initial successor trustee of certain of Mr.
Kaufmans estate planning vehicles should, based upon the
totality of the circumstances, be deemed to be material so as to
preclude a finding that Mr. Permut is independent. As a
result of its review, the board affirmatively determined that
Messrs. Bishar, Kojaian, Lazar and Permut, Drs. Dykes
and Helmreich and Ms. Edwards were independent under the
NYSE listing standards.
Board
Committees
Our board has established four standing committees, the
principal functions of which are briefly described below.
Matters put to a vote at any one of our four committees must be
approved by a majority of the directors on the committee who are
present at a meeting at which there is a quorum or by unanimous
written consent of the directors on that committee. Our Board of
Directors may from time to time establish certain other
committees to facilitate the management of the Company.
Audit
Committee
Our Board of Directors has established an Audit Committee, which
is composed of four of our independent directors,
Mr. Lazar, Mr. Bishar, Dr. Dykes and
Ms. Edwards. The membership of the audit committee was
increased to four directors in 2007 with the appointment of
Mr. Bishar to the Board of Directors. During 2008, the
Audit Committee met on five occasions. The Audit Committee
assists the board in overseeing (1) the integrity of the
Companys financial statements, (2) the Companys
independent registered public accounting firms
qualifications
8
and independence, (3) the performance of the Companys
independent registered public accounting firm and the
Companys internal audit function and (4) the
Companys compliance with legal and regulatory requirements.
Mr. Lazar currently serves as chairman of the Audit
Committee. The board has determined that Mr. Lazar
qualifies as an Audit committee financial expert as
defined by the rules of the SEC and that each member of the
Audit Committee is financially literate. The Audit
Committee is governed by a charter that has been adopted by the
Board of Directors.
Compensation
Committee
Our Board of Directors has established a Compensation Committee,
which is composed of four of our independent directors,
Messrs. Kojaian, Lazar and Permut and Dr. Helmreich.
During 2008, the Compensation Committee met on one occasion and
acted by written consent on two occasions. Mr. Kojaian is
currently the chairman of the Compensation Committee. The
principal functions of the Compensation Committee are to
(1) evaluate the performance of our officers;
(2) review the compensation payable to our officers and
non-employee directors; (3) evaluate the performance of
Arbor Commercial Mortgage; (4) review the compensation and
fees payable to Arbor Commercial Mortgage under our management
agreement; (5) review and discuss with management the
compensation discussion and analysis disclosure included in this
proxy statement; and (6) administer the issuance of any
stock to our employees or the employees of Arbor Commercial
Mortgage who provide services to us. The Compensation Committee
is governed by a charter that has been adopted by the Board of
Directors.
Nominating/Corporate
Governance Committee
Our Board of Directors has established a Nominating/Corporate
Governance Committee, which is composed of three of our
independent directors, Dr. Helmreich, Mr. Bishar and
Ms. Edwards. During 2008, the Nominating/Corporate
Governance Committee met on two occasions. Dr. Helmreich
currently serves as chairman of the Nominating/Corporate
Governance Committee. The Nominating/Corporate Governance
Committee is responsible for seeking, considering and
recommending to the board qualified candidates for election as
directors and recommending a slate of nominees for election as
directors at each annual meeting of stockholders. The
Nominating/Corporate Governance Committee is also responsible
for (1) preparing and submitting to the board for adoption
the committees selection criteria for director nominees;
(2) reviewing and making recommendations on matters
involving general operation of the board and our corporate
governance; and (3) annually recommending to the board
nominees for each committee of the board. In addition, the
committee annually facilitates the assessment of the Board of
Directors performance as a whole and of the individual
directors and reports thereon to the board. The
Nominating/Corporate Governance Committee is governed by a
charter that has been adopted by the Board of Directors.
Copies of the charters of the Audit Committee, the Compensation
Committee and the Nominating/Corporate Governance Committee
charter are available on our website, www.arborrealtytrust.com,
under the heading Investor Relations Corporate
Governance. You may also obtain these documents in print
free of charge by writing the Company at 333 Earle Ovington
Boulevard, Suite 900, Uniondale, New York, 11553:
Attention: Investor Relations.
Independent
Director Committee
Our Board of Directors has established an Independent Director
Committee, which is currently composed of seven of our
independent directors, Messrs. Bishar, Kojaian, Lazar and
Permut, Drs. Helmreich and Dykes and Ms. Edwards.
Dr. Dykes currently serves as chairman of the Independent
Director Committee. The Independent Director Committee is
responsible for, among other things, considering and voting upon
matters as to which the Board of Directors determines Arbor
Commercial Mortgage or its affiliates (other than the Company or
its subsidiaries) or any of our directors (other than an
independent director) or officers has a conflict of interest,
including the approval of transactions between the Company and
Arbor Commercial Mortgage. The individual who serves as the
chair of the Independent Director Committee rotates each year
among our independent directors.
In the first quarter of 2009, the Independent Director Committee
formed a subcommittee consisting of Messrs. Bishar, Lazar
and Permut to consider related party transactions proposed to be
entered by Company on the
9
one hand and Arbor Commercial Mortgage, Mr. Kaufman or any
of their respective affiliates (other than the Company) on the
other hand, when expedient approval of such transaction is
deemed by the subcommittee to be necessary or appropriate.
Non-Management
Directors
As required by the NYSEs Corporate Governance Standards,
our non-management directors meet regularly in executive session
without any members of management present. Mr. Permut
currently presides at such regularly scheduled executive
sessions of the non-management directors.
Stockholder
and Interested Party Communications with Directors
The Board of Directors has established a process to receive
communications from stockholders and other interested parties.
Interested parties and stockholders may contact any member of
the board (or all members), including non-management directors,
by mail. To communicate with the Board of Directors, any
individual director or any group or committee of directors,
correspondence should be addressed to the Board of Directors or
any such individual director or group or committee of directors
by either name or title. All such correspondence should be sent
in care of the Corporate Secretary at Arbor Realty Trust, Inc.,
333 Earle Ovington Boulevard, Suite 900, Uniondale, New
York, 11553.
All communications received as set forth in the preceding
paragraph will be opened by the office of the Companys
Corporate Secretary for the sole purpose of determining whether
the contents represent a message to our directors. Any contents
that are not in the nature of advertising, promotions of a
product or service or patently offensive material will be
forwarded promptly to the addressee. In the case of
communications to the board or any group or committee of
directors, the office of the Corporate Secretary will make
sufficient copies of the contents to send to each director who
is a member of the group or committee to which the envelope is
addressed.
Director
Nomination Procedures
The Nominating/Corporate Governance Committee generally believes
that, at a minimum, candidates for membership on the Board of
Directors should have demonstrated an ability to make a
meaningful contribution to the Board of Directors
oversight of our business and affairs and have a record and
reputation for honest and ethical conduct. The
Nominating/Corporate Governance Committee recommends director
nominees to the Board of Directors based on, among other things,
its evaluation of a candidates experience, knowledge,
skills, expertise, integrity, ability to make independent
analytical inquiries, understanding of our business environment
and a willingness to devote adequate time and effort to board
responsibilities. In making its recommendations to the Board of
Directors, the Nominating/Corporate Governance Committee also
seeks to have the Board nominate candidates who have diverse
backgrounds and areas of expertise so that each member can offer
a unique and valuable perspective.
The Nominating/Corporate Governance Committee may identify
potential nominees by asking current directors and executive
officers to notify the committee if they become aware of persons
who meet the criteria described above, especially business and
civic leaders in the communities in which we operate. It may
also engage firms, at our expense, that specialize in
identifying director candidates. As described below, the
Nominating/Corporate Governance Committee will also consider
candidates recommended by stockholders.
The Nominating/Corporate Governance Committee anticipates that
once a person has been identified by the committee as a
potential candidate, the committee will collect and review
publicly available information regarding the person to assess
whether the person should be considered further. If the
Nominating/Corporate Governance Committee determines that the
candidate warrants further consideration, the chairman or
another member of the committee will contact the person. If the
person expresses a willingness to be considered and to serve on
the Board of Directors, the Nominating/Corporate Governance
Committee will request information from the candidate, review
the persons accomplishments and qualifications, including
in light of any other candidates that the committee might be
considering, and conduct one or more interviews with the
candidate. In certain instances, members of the
Nominating/Corporate Governance Committee may contact one or
more references provided by the
10
candidate or may contact other members of the business community
or other persons that may have greater first-hand knowledge of
the candidates accomplishments.
In addition to stockholder nominations of individuals as
director nominees submitted in accordance with our bylaw, as
summarized below, the Nominating/Corporate Governance Committee
will consider written recommendations from stockholders of
potential director candidates. Such recommendations should be
submitted to the Nominating/Corporate Governance Committee in
care of the Corporate Secretary at Arbor Realty Trust, Inc., 333
Earle Ovington Boulevard, Suite 900, Uniondale, New York,
11553. Director recommendations submitted by stockholders should
include the following:
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the name, age, business address and residence address of the
individual(s) recommended for nomination;
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the class, series and number of any shares of our stock that are
beneficially owned by the individual(s) recommended for
nomination;
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the date such shares of our stock were acquired by the
individual(s) recommended for nomination and the investment
intent of such acquisition; and
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all other information relating to such candidate that would be
required to be disclosed pursuant to Regulation 14A under
the Securities Exchange Act of 1934, as amended (the
Exchange Act), including such persons written
consent to being named in the proxy statement as a nominee and
to serving as a director if elected.
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Stockholder nominations of individuals as director nominees
submitted in accordance with our bylaws must be delivered to the
Corporate Secretary not earlier than the 120th day and not
later than the close of business on the 90th day prior to
the first anniversary of the date of mailing of the notice for
the preceding years annual meeting of stockholders;
provided, however, that if the date of mailing of the notice for
the annual meeting is advanced more than thirty days prior to or
delayed by more than thirty days after the anniversary of the
mailing of the notice for the preceding years annual
meeting, the stockholder nomination, including the information
described above, must be delivered not earlier than the
120th day prior to the mailing of the notice for the
upcoming annual meeting and not later than the close of business
on the later of (1) the 90th day prior to the mailing
of the notice for the upcoming annual meeting of stockholders
and (2) the 10th day following the date on which
public announcement of the mailing of the notice for the
upcoming annual meeting is first made.
The Nominating/Corporate Governance Committee expects to use a
similar process to evaluate candidates to the Board of Directors
recommended by stockholders as the one it uses to evaluate
candidates otherwise identified by the committee.
Director
Attendance at Annual Meeting
We do not currently maintain a policy requiring our directors to
attend the annual meeting; however, attendance by our directors
is encouraged. All of our directors attended the 2008 annual
meeting.
11
AUDIT
COMMITTEE REPORT AND DISCLOSURES
The following report of the Audit Committee (the Audit
Committee) of the Board of Directors (the Board of
Directors) of Arbor Realty Trust, Inc., a Maryland
corporation (Arbor or the Company), does
not constitute soliciting material and should not be considered
filed or incorporated by reference into any other filing by the
Company under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, except to the
extent the Company specifically incorporates this report by
reference therein.
The Audit Committee operates under a written charter adopted by
the Board of Directors. The Board of Directors has determined
that all members of the Audit Committee meet the independence
standards established by the NYSE.
The Audit Committee oversees the Companys financial
reporting process on behalf of the Board of Directors. The
Companys management has the primary responsibility for the
financial statements and the reporting process, including the
system of internal controls. The independent registered public
accounting firm is responsible for performing an audit of the
Companys consolidated financial statements in accordance
with generally accepted accounting principles and issuing a
report thereon. The Audit Committee reviews and oversees these
processes, including oversight of (1) the integrity of the
Companys financial statements, (2) the Companys
independent registered public accounting firms
qualifications and independence, (3) the performance of the
Companys independent registered public accounting firm and
the Companys internal audit function and (4) the
Companys compliance with legal and regulatory requirements.
In discharging its oversight role, the Audit Committee reviewed
and discussed the audited financial statements contained in
Arbors Annual Report to Stockholders for fiscal year ended
December 31, 2008 with Arbors management and
independent registered public accounting firm. Management
represented to the Audit Committee that the Companys
consolidated financial statements were prepared in accordance
with accounting principles generally accepted in the United
States. The Audit Committee also discussed with the independent
registered public accounting firm the matters required by
Statement on Auditing Standards No. 61, as amended (AICPA,
Professional Standards, Vol. 1, AU section 380), as adopted by
the Public Company Accounting Oversight Board
(PCAOB) in Rule 3200T.
In addition, the Audit Committee discussed with the independent
registered public accounting firm the registered public
accounting firms independence from the Company and its
management, and the independent registered public accounting
firm provided to the Audit Committee the written disclosures and
letter required from the independent registered public
accounting firm by PCAOB Ethics and Independence Rule 3526
Communications with Audit Committee Concerning
Independence.
The Audit Committee discussed with the Companys internal
auditors and independent registered public accounting firm the
overall scope and plans for their respective audits. The Audit
Committee met with the internal auditors and independent
registered public accounting firm, with and without management
present, to discuss the results of their examinations, the
evaluations of the Companys internal controls, and the
overall quality of the Companys financial reporting.
Based on the review and discussions referred to above, the Audit
Committee has recommended to the Board of Directors that the
audited financial statements be included in Arbors Annual
Report on
Form 10-K
for the year ended December 31, 2008 for filing with the
Securities and Exchange Commission.
Audit Committee:
Melvin F. Lazar (Chairman)
John J. Bishar, Jr.
Archie R. Dykes
Karen K. Edwards
April 30, 2009
12
EXECUTIVE
OFFICERS
Our executive officers are elected annually by our Board of
Directors and serve for a term of one year and until their
respective successors are elected and qualify. Set forth below
is information regarding our executive officers, as of the date
of this proxy statement, unless otherwise indicated:
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Name
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Age
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Position
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Ivan Kaufman(*)
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48
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Chairman of the Board of Directors, Chief Executive Officer and
President
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Paul Elenio
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Chief Financial Officer and Treasurer
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Gene Kilgore
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Executive Vice President Structured Securitization
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Fred Weber
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Executive Vice President Structured Finance
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Walter K. Horn(*)
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66
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Corporate Secretary and Director
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John Felletter
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51
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Senior Vice President Asset Management
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Mark S. Fogel
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Senior Vice President Asset Management
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Biographical information is provided above under Board of
Directors. |
Paul Elenio. Mr. Elenio has served as our
Chief Financial Officer and Treasurer since September 2005.
Mr. Elenio joined Arbor National Holdings, the predecessor
company of our Manager, Arbor Commercial Mortgage, in 1991. In
1995, he was promoted to Vice President, Controller, in 2002
assumed the position of Vice President of Finance and in 2004
was further promoted to Senior Vice President, Finance.
Mr. Elenio is responsible for overseeing all aspects of our
financial operations. This includes financial reporting, tax
planning, budgeting, and the appropriate utilization of our
capital. He is also in charge of investor relations.
Mr. Elenio also serves on Arbor Commercial Mortgages
executive committee. Prior to joining Arbor, Mr. Elenio was
employed with Ernst & Young from 1989 to 1990 in the
auditing department.
Gene Kilgore. Mr. Kilgore has served as
our Executive Vice President Structured
Securitization since October 2004. Mr. Kilgore also serves
on Arbor Commercial Mortgages executive committee. From
September 2001 to September 2004, Mr. Kilgore was a
portfolio manager for ZAIS Group, LLC, a structured finance
investment advisor. From September 2000 to August 2001,
Mr. Kilgore was director of risk finance at Barclays
Capital. From September 1996 to September 2000, Mr. Kilgore
worked at Standard & Poors Ratings Service,
where he was a director in the collateralized debt obligations
group. He has also served as Vice President of Corporate Lending
and Commercial Real Estate at Wachovia Bank.
Fred Weber. Mr. Weber has served as our
Executive Vice President Structured Finance since
June 2003. He also continues to provide services to Arbor
Commercial Mortgage in his capacity as a continuing member of
Arbor Commercial Mortgages executive committee.
Mr. Weber was employed by Arbor Commercial Mortgage from
May 1999 until July 1, 2003. At Arbor Commercial Mortgage,
Mr. Weber oversaw Arbor Commercial Mortgages
structured finance and principal transaction group, where he was
responsible for origination, underwriting and closing
coordination of debt and equity financing for various asset
types and classes of commercial real estate nationwide. He has
been involved in the mortgage banking industry for more than
17 years and has extensive real estate finance and
acquisition experience. Mr. Weber is a member of the real
estate finance committee of the Real Estate Board of New York.
From July 1997 through February 1999, Mr. Weber was a
partner and co-head of the real estate department with Kronish
Lieb Weiner & Hellman LLP. Previously, Mr. Weber
was a partner with the law firm of Weil, Gotshal &
Manges LLP.
John Felletter. Mr. Felletter has served
as one of our Senior Vice Presidents of Asset Management since
November 2008. He was a director at UBS from 1999 to 2006. In
2006, UBS created Dillon Read Asset Management and
Mr. Felletter served as a director of the manager of that
fund from 2006 to August 2007. Mr. Felletter has also held
portfolio/asset management positions at Capital Trust (from 1998
to 1999), Phoenix Realty Securities (from 1996 to 1998), with
the J.E. Roberts/Goldman Sachs Venture (from 1994 to 1996).
Previously, Mr. Felletter worked for the Resolution
Trust Corporation, Citibank, Capital Alliance, and
Connecticut National Bank. Mr. Felletter has over
26 years of commercial real estate debt and equity
experience, including acquisitions/dispositions, loan
securitizations, exposure to troubled debt restructuring,
workout and bankruptcy and
13
oversight of portfolio monitoring, investor reporting and loan
servicing. Mr. Felletter holds the Chartered Financial
Analyst designation. Prior to his corporate career,
Mr. Felletter served as a First Lieutenant in the United
States Marine Corps.
Mark S. Fogel. Mr. Fogel has served as
one of our Senior Vice Presidents of Asset Management since
September 2005. Mr. Fogel served as our Vice
President Asset Management between July 2003 and
September 2005. Mr. Fogel was employed by Arbor Commercial
Mortgage from August 2000 until July 2003. At Arbor Commercial
Mortgage, Mr. Fogel asset managed Arbor Commercial
Mortgages structured and flow loan portfolio, where he was
responsible for risk management, loan workouts and foreclosures,
asset reporting and borrower relationship management on all
classes of commercial real estate nationwide. He has been
involved in the real estate industry for 15 years and has
extensive real estate finance, development, asset management,
and investment banking experience.
14
EXECUTIVE
COMPENSATION
Compensation
Discussion and Analysis
Compensation
Committee Composition and
Responsibility
Our Board of Directors has established a Compensation Committee,
which is comprised of four of our six independent directors. The
Compensation Committee is governed by a charter that has been
adopted by the Board of Directors. The current Compensation
Committee charter may be viewed on our website,
www.arborrealtytrust.com, under the heading Investor
Relations Corporate Governance.
The principal functions of the Compensation Committee are to
(1) evaluate the performance of our officers;
(2) review the compensation payable by the Company to our
officers and non-employee directors; (3) evaluate the
performance of Arbor Commercial Mortgage, our Manager, pursuant
to the management agreement described under
Management Agreement; (4) review
the compensation and fees payable to Arbor Commercial Mortgage
under our management agreement; (5) review and discuss with
management the Compensation Discussion and Analysis disclosure
included in our proxy statement; and (6) administer the
issuance of any equity-based incentive awards to our employees
or the employees of Arbor Commercial Mortgage who provide
services to us.
Compensation
Philosophy and Principles
The Compensation Committee acknowledges that the real estate
finance industry is highly competitive and that experienced
professionals have significant career mobility. The Company
competes for executive talent with a large number of real estate
investment companies and specialty finance companies, some of
which are privately owned and some of which have significantly
larger market capitalization than the Company. We are a
specialized company in a highly competitive industry and our
ability to attract, retain and reward our named executive
officers and other key employees is essential to
maintaining our competitive position in the real estate finance
industry. For 2008, our named executive officers are
Mr. Kaufman, our Chief Executive Officer, Mr. Elenio,
our Chief Financial Officer, and Messrs. Weber, Kilgore and
Fogel, the three most highly compensated executive officers
(other than our Chief Executive Officer and our Chief Financial
Officer). As described in Management
Agreement, all cash compensation and benefits for
Messrs. Kaufman and Elenio are paid by Arbor Commercial
Mortgage, our Manager. Therefore, the Compensation Committee
only approves the grants that may be made to
Messrs. Kaufman and Elenio under the Companys Stock
Incentive Plan.
The Compensation Committees goal is to maintain
compensation programs that are competitive within our industry,
reward executives if the Company achieves its operational,
financial and strategic goals and build stockholder value. In
determining the form and amount of compensation payable by the
Company to the named executive officers, the Compensation
Committee is guided by the following objectives and principles:
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Compensation levels should be sufficiently competitive to
attract and retain key executives. The Company aims to
ensure its executive compensation program attracts, motivates
and retains high performance talent and rewards them for the
Company achieving and maintaining a competitive position in its
industry. Total compensation should increase with position and
responsibility.
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Compensation should relate directly to performance and
incentive compensation should constitute a substantial portion
of total compensation. The Company aims to promote a
pay-for-performance
culture, with a majority of total compensation being at
risk. Accordingly, a substantial portion of total
compensation should be tied to and vary with the Companys
operational, financial and strategic performance, as well as
individual performance. Executives with greater roles and the
ability to directly impact the Companys strategic goals
and long-term results should bear a greater proportion of the
risk if these goals and results are not achieved.
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Long-term incentive compensation should align
executives interests with the Companys
stockholders. Awards of equity-based compensation encourage
executives to focus on the Companys long-term growth and
prospects and motivate executives to manage the Company from the
perspective of owners with a meaningful stake in the Company, as
well as to focus on long-term career orientation.
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There is no specific policy, practice or formula regarding an
allocation between cash and non-cash compensation.
15
The Compensation Committee reviews at least annually the goals
and objectives of the Companys executive compensation
plans, incentive compensation plans, equity-based plans and
other compensation and employee benefit plans. The Compensation
Committee believes that the Companys benefits are
competitive with its peers and provide additional incentive for
strong performance.
Compensation
Setting Process
Managements
Role in the Compensation-Setting Process
The Compensation Committee believes the Companys Chief
Executive Officer, Mr. Kaufman, is in the best position to
determine the responsibilities of each executive officer and
observe how well each executive performs his responsibilities.
Mr. Kaufman provides recommendations to the Compensation
Committee regarding base salary levels and the form and amount
of the annual cash incentive award and restricted stock awards
paid to all executive officers. The Compensation Committee may
exercise its discretion in modifying any of the recommendations
and is responsible for ultimately approving all compensation
arrangements payable by the Company to the named executive
officers. Mr. Kaufman does not participate in any
deliberations or approvals by the Compensation Committee with
respect to any equity-based or other incentive awards that our
Compensation Committee may grant to him. Additionally,
Mr. Kaufman and other officers of the Company will provide
compensation and other information to the Compensation Committee
upon their request.
Mr. Kaufmans recommendations are based on his
evaluation of the executive officers performance, their
contribution toward achieving operational, financial and
strategic goals, current and historical elements of each
executives compensation and the financial performance of
the Company.
Compensation
Consultant
The charter of the Compensation Committee provides the committee
with the sole authority to retain and terminate any compensation
consulting firm or other adviser it deems appropriate. For 2008,
the Compensation Committee did not engage a compensation
consulting firm.
Determining
Compensation Levels
The Compensation Committee annually determines targeted total
compensation levels, as well as the individual compensation
components payable by the Company to the named executive
officers. In making such determinations, the Compensation
Committee reviews and considers (1) recommendations of the
Companys Chief Executive Officer, (2) historical
compensation levels for each named executive officer,
(3) industry and market conditions and the Companys
future objectives and challenges, and (4) overall
effectiveness of the executive compensation program. The
Compensation Committee does not utilize specific
performance-based goals in determining compensation levels, but
reviews general industry trends as well as the overall
performance of the Company.
Based upon discussions and recommendations of the Companys
Chief Executive Officer, and upon its own judgment, the
Compensation Committee approved (i) the base salary, cash
incentive award and restricted stock incentive award of each of
Messrs. Weber, Kilgore and Fogel with respect to their
service in 2008, and (ii) the restricted stock incentive
award of Mr. Elenio with respect to his service in 2008.
The Compensation Committee believes these approved forms and
levels of compensation are reasonable, appropriate and in line
with the Companys compensation philosophy and principles.
Compensation recommendations regarding director compensation are
reported to, and approved by, the full Board of Directors.
Forms
of Compensation
Total compensation for the named executive officers is comprised
of one or more of the following components:
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base salary;
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annual incentive awards; and
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retirement and other benefits.
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16
Our named executive officers do not have employment, severance
or change of control agreements, although their restricted stock
award agreements provide for accelerated vesting upon our change
of control as further described under Annual
Incentive Awards Restricted Stock Awards. Our
named executive officers serve for a term of one year and until
their respective successors are elected and qualify, which
enables the Company to terminate their employment with
discretion as to the terms of any severance arrangement. This is
consistent with the Companys performance-based employment
and compensation philosophy.
Base
Salary
Salaries provide executives with a base level of monthly income
and help achieve the objectives outlined above by attracting and
retaining strong talent. Base salaries of the three named
executive officers that are payable by the Company are reviewed
and approved annually by the Compensation Committee. Generally,
base salaries are not based upon specific measures of corporate
performance, but are determined by (1) tenure of service,
(2) scope and complexity of the position, including current
job responsibilities, and (3) the recommendations of our
Chief Executive Officer, including an evaluation of each
officers individual performance and contribution to the
Companys operational, financial and strategic goals and
objectives. Consistent with compensation practices commonly
applied in the real estate finance industry, salaries generally
form a lower percentage of total compensation, with a
substantial portion of total compensation coming from incentive
compensation that is tied to Company performance.
For a further description of the base salaries paid to the named
executive officers in 2008, please refer to the 2008 Summary
Compensation Table set forth below.
Annual
Incentive Awards
The Company aims to promote a
pay-for-performance
culture, with a majority of total compensation being at
risk. The annual incentive award may be in the form of
cash, stock-based awards under the Stock Incentive Plan or a
combination thereof, at the discretion of the Compensation
Committee. The Company does not have any specific policy,
practice or formula regarding an allocation between the cash
component and the stock-based component. These awards are
designed to help achieve the objectives of the compensation
program and may vary significantly from year to year. The
Compensation Committee has not established any specific
performance-based goals that must be met in order to participate
in the annual incentive award.
The Compensation Committee believes that the structure and
ultimate payout amounts of the incentive awards are appropriate
to attract, retain and reward the named executive officers, are
competitive with those offered by our peers, provide a strong,
long-term performance and retention incentive, support a
pay-for-performance
culture, and increase the named executive officers vested
interest in the Company.
Cash
Awards
In 2008, the Compensation Committee determined the cash
incentive awards of the three named executive officers that are
payable by the Company relative to each individuals
contributions and responsibilities. Individuals with increased
ability to directly impact the Companys performance were
allocated larger awards because they bear a greater proportion
of the risk that compensation will decrease if the Company does
not perform as expected. In March 2009, the Company paid cash
incentive awards to Messrs. Weber, Kilgore and Fogel of
$750,000, $550,000 and $150,000, respectively, with respect to
their performance in 2008.
Stock-Based
Awards
Restricted Stock Awards. Since the
Companys formation in 2003, the Compensation Committee has
granted the named executive officers (as well as other employees
of the Company, employees of the Manager who provide services to
the Company and the Companys non-management directors)
restricted stock awards, consisting of shares of the
Companys common stock that vest annually over a multi-year
period, subject to the recipients continued service to the
Company. Employees realize value as the common stock underlying
these restricted stock awards vest, with the value increasing if
the Companys stock performance increases after the date of
grant. Additionally, all of the common stock underlying these
restricted stock awards, whether or not vested, are entitled to
17
cash dividends paid to the Companys stockholders. From
2003 to 2008, the Company had regularly paid quarterly dividends
to common stockholders. Therefore, the Companys historical
dividend policy provided the recipients of these restricted
stock awards (including the named executive officers) an
additional element of compensation as well as an additional
incentive to sustain or increase Company performance. All
restricted stock awards have been granted pursuant to the Stock
Incentive Plan.
Stock-Based Awards for 2008. The Compensation
Committee believes that stock-based awards must be sufficient in
size and value to provide a strong, long-term performance and
retention incentive for named executive officers, and to
increase their vested interest in the Company. In determining
the equity component of the named executive officers
compensation, the Compensation Committee considers all relevant
factors, including the Companys performance and relative
stockholder return, the awards granted in past years and the
relative value of the awards. On April 21, 2009, the
Compensation Committee granted each of Messrs. Elenio,
Weber and Kilgore 30,000 shares of common stock with
respect to their 2008 performance. In order to emphasize
employee retention at a critical time for the Company, and due
to the relatively low value of these grants based on the current
market value of the Companys common stock, all of the
common stock granted to these named executive officers in April
2009 was fully vested as of the date of grant. For the same
reasons, the Compensation Committee also decided in April 2009
to accelerate the vesting of all then unvested shares underlying
restricted stock awards previously granted to
Messrs. Elenio, Weber, Kilgore and Fogel (as well as all
other recipients of restricted stock grants to date). The
following table sets forth each named executive officer who
owned shares subject to vesting prior to such acceleration and
the number of shares that became fully vested in April 2009 due
to such acceleration:
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Number of
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Named Executive Officer
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Shares Accelerated
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Fred Weber
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130,606
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Gene Kilgore
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66,206
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Paul Elenio
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26,906
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Mark Fogel
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10,472
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All shares previously granted to Mr. Kaufman were fully
vested in April 2009. In view of his current significant
ownership of Company common stock, Mr. Kaufman was not
granted any stock-based awards for 2008.
The Company does not have a formal policy on timing equity
compensation grants in connection with the release of material
non-public information to affect the value of compensation. The
Compensation Committee has generally granted stock-based awards
once a year in the month of April.
Future Grants of Stock Options. The
Compensation Committee had viewed restricted stock awards as
more effective than stock options in achieving the
Companys compensation objectives. However, given the
current environment, the significant dislocation in the capital
and credit markets in general and the commercial real estate
market in particular, and the significant decline in the market
value of the Companys common stock over the past year, the
Compensation Committee now considers stock options, in addition
to restricted stock awards, as a viable tool to retain key
employees on a going forward basis. To the extent that the
Compensation Committee decides to grant stock options under the
Stock Incentive Plan in the future, the exercise price for the
stock options will be equivalent to the market price of the
underlying common stock on the date of grant, (ii) the
stock options will vest over a multi-year period, and
(iii) the stock options will be exercisable for ten years
from the date of grant. Stock options align employee incentives
with the interests of shareholders because they have value only
if the Companys stock price increases over time. The
Compensation Committee believes that the ten-year term of the
stock options will help focus employees on the Companys
long-term growth. Because the Companys stock options will
vest over a multi-year period, stock options are intended to
help retain key associates and keep employees focused on
long-term performance. As previously disclosed, the Company has
been re-evaluating its historical dividend policy based upon the
market environment, the Companys capital needs and its
estimated taxable income and REIT distribution requirements. As
a result, stock options may be more attractive to employees than
restricted stock awards in the near term. As discussed further
under the heading Proposal No. 2 in this
proxy statement, the Board has approved an amendment and
restatement of the Stock Incentive Plan, subject to the approval
of the Companys stockholders being sought in such
Proposal No. 2, to authorize the grant of stock
options under the Stock Incentive Plan.
18
Retirement
and Other Benefits
The Company maintains a 401(k) plan through an affiliate for all
employees, including the named executive officers, as a source
of retirement income by enabling participants to save on a
pre-tax basis and by providing Company matching contributions.
All of the named executive officers participated in the 401(k)
plan in 2008. However, the Company only made matching
contributions equal to $3,450 for each of Messrs. Weber,
Kilgore and Fogel. Arbor Commercial Mortgage made matching
contributions for Messrs. Kaufman and Elenio.
The Company does not maintain any non-qualified deferred
compensation plans that would allow executives to elect to defer
receipt (and taxation) of their base salaries, bonuses or other
compensation.
The named executive officers are eligible to participate in the
Companys active employee flexible benefits plans, which
are generally available to all Company employees. Under these
plans, all employees are entitled to medical, dental, vision,
life insurance and long-term disability coverage. Additionally,
all of the Companys employees are entitled to vacation,
sick leave and other paid holidays. The Compensation Committee
believes that the Companys commitment to provide the
employee benefits described above recognizes that the health and
well-being of the Companys employees contribute directly
to a productive and successful work life that enhances results
for the Company and its stockholders.
The Company provides all named executive officers who are
Company employees, i.e. Messrs. Weber, Kilgore and Fogel,
with (1) life insurance coverage equal to their annual
salary, subject to a maximum of $250,000, and (2) long-term
disability coverage equal to 60% of the employees current
base salary, up to a maximum annual benefit of $120,000.
For further information regarding the premiums paid on the named
executive officers insurance policy, please refer to the
Summary Compensation Table set forth below.
Deductibility
of Executive Compensation
Section 162(m) of the Internal Revenue Code generally
limits the deductible amount of total annual compensation paid
by a public company to each covered employee (the
chief executive officer and three other most highly compensated
executive officers of the Company other than the chief financial
officer) to no more than $1 million. Excluded from total
compensation for this purpose is compensation that is
performance-based within the meaning of
Section 162(m) of the Internal Revenue Code. Unless an
exception applies, compensation otherwise deductible in
connection with awards granted under the Plan will be subject to
this limit. We expect that the majority of the compensation paid
by the Company to the named executive officers in 2008 will be
deductible to the Company. The Compensation Committee will
consider various alternatives to preserving the deductibility of
compensation payments and benefits to the extent reasonably
practicable and to the extent consistent with its other
compensation objectives. The Committee has not adopted a formal
policy that requires all compensation paid to the named
executives to be fully deductible.
Executive
Compensation in 2009
In March 2009, the Compensation Committee approved the salaries
of Messrs. Weber, Kilgore and Fogel for 2009, which did not
increase from 2008.
The Compensation Committee intends to continue its strategy of
compensating the Companys named executive officers through
programs that emphasize incentive compensation, fostering a
pay-for-performance
culture. To that end, a majority of executive compensation will
continue to be tied to Company and individual performance, while
maintaining an appropriate balance between cash and non-cash
compensation.
The foregoing discussion primarily describes the compensation
philosophies, principles and practices the Compensation
Committee utilized in setting executive compensation for the
2008 fiscal year. In the future, as the Compensation Committee
continues to review each element of the executive compensation
program, these philosophies, principles and practices may change.
19
Management
Agreement
We are externally managed and advised by Arbor Commercial
Mortgage pursuant to the terms of a management agreement
described below. We believe Arbor Commercial Mortgages
experience and reputation positions it to originate attractive
investment opportunities for us. Our management agreement with
Arbor Commercial Mortgage was developed to capitalize on
synergies with Arbor Commercial Mortgages origination
infrastructure, existing business relationships and management
expertise.
Because our management agreement provides that Arbor Commercial
Mortgage assumes principal responsibility for managing our
affairs, certain of our executive officers, who are employees of
our Manager, do not receive cash compensation or benefits from
us for serving as our executive officers. They may receive
grants of equity-based incentive awards under the Stock
Incentive Plan. In their capacities as officers or employees of
our Manager or its affiliates, they devote such portion of their
time to our affairs as is required for the performance of the
duties of our Manager under the management agreement.
Mr. Ivan Kaufman, our Chairman, President and Chief
Executive Officer, serves as the Chief Executive Officer of
Arbor Commercial Mortgage. Mr. Paul Elenio, our Chief
Financial Officer, also serves as Chief Financial Officer of our
Manager. Each of Messrs. Kaufman and Elenio receives his
cash compensation and benefits from our Manager. Our Manager has
informed us that, because the services performed by its officers
or employees in their capacities as such are not performed
exclusively for us, it cannot segregate and identify that
portion of the compensation awarded to, earned by or paid to our
executive officers by our Manager that relates solely to their
services to us.
Since we currently employ only five executive officers and
32 employees in total, we rely to a significant extent on
the facilities and resources of our Manager to conduct our
operations. For performing services under the management
agreement, Arbor Commercial Mortgage receives a base management
fee and incentive compensation based on our performance. Our
Manager uses the proceeds from its base management fee in part
to pay compensation to its officers and employees who,
notwithstanding that some of them are also our officers, receive
no direct compensation from us, other than restricted stock that
the Compensation Committee may grant to them pursuant to the
Companys 2003 Omnibus Stock Incentive Plan.
Base
Management Fee
Our Manager receives an annual base management fee based on the
equity (as defined in the management agreement) of our operating
partnership. The amount of the base management fee does not
depend on the performance of the services provided by our
Manager or the types of assets it selects for our investment,
but the value of our operating partnerships equity will be
affected by the performance of these assets. The base management
fee is payable monthly in arrears in cash, calculated monthly as
a percentage of our equity and equal to 0.75% per annum of the
equity up to $400 million, 0.625% per annum of the equity
between $400 million and $800 million and 0.50% per
annum of the equity in excess of $800 million. We incurred
$3.5 million in base management fees to Arbor Commercial
Mortgage for management services rendered for the year ended
December 31, 2008. All amounts incurred have been paid to
date.
Incentive
Compensation
Our Manager is entitled to receive incentive compensation in an
annual amount equal to the product of:
(1) 25% of the dollar amount by which:
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the sum of: (i) our operating partnerships
Funds From Operations (as determined in accordance
with the management agreement) for such quarter and
(ii) gains (or losses) from debt restructuring and sales of
property per operating partnership unit (as determined in
accordance with the management agreement) for such quarter;
exceeds
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the product of (i) the weighted average (based on shares of
our common stock and operating partnership units) of
(a) the per operating partnership unit book value of the
net assets contributed by Arbor Commercial Mortgage,
(b) the $15.00 offering price per share of our common stock
in our private placement of units in July 2003, (c) the
offering price per share (including shares of common stock
issued upon exercise of warrants or options) of any subsequent
offerings by us of our common stock
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(adjusted for any prior capital dividends or distributions), and
(d) the issue price per operating partnership unit for
subsequent contributions to our operating partnership, and
(ii) the greater of (x) 9.50% per annum and
(y) the Ten Year U.S. Treasury Rate plus 3.50% per
annum; multiplied by
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(2) the weighted average number of our operating
partnership units outstanding, including operating partnership
units issued to us equal to the number of shares of our common
stock issued by us.
The incentive compensation is payable annually in arrears. The
Manager receives quarterly installments of the annual incentive
compensation in advance, which installments are calculated based
on the
12-month
period ending on the last day of the fiscal quarter with respect
to which such installment is payable. After the end of the
fiscal year, the Manager calculates the annual incentive
compensation due for the immediately preceding fiscal year. If
the annual incentive compensation for such fiscal year is less
than the sum of the quarterly installment payments made during
such fiscal year, the management agreement provides that the
Manager repay the Company the amount of such overpayment, in
cash.
At least 25% of this incentive compensation is payable to our
Manager in shares of our common stock having a value equal to
the average closing price per share for the last twenty days of
the fiscal quarter for which the incentive compensation is being
paid.
In 2008, the Company paid the Manager two quarterly installments
of the Managers estimated incentive compensation for 2008
based on the Companys results for the twelve months ended
March 31, 2008 and June 30, 2008. The amounts paid
were $2.9 million in the aggregate. The Company paid the
Manager $1.5 million in cash and 116,680 shares of the
Companys common stock, which was valued at
$1.4 million at the time payment in 2008, in satisfaction
of these quarterly installment payment obligations. After the
end of the 2008 fiscal year, the incentive compensation for 2008
was recalculated pursuant to the terms of the management
agreement and it was determined that the Manager did not earn
any incentive compensation for 2008. Therefore, the
$2.9 million amount was determined to be an overpayment of
the Managers incentive compensation for 2008. As a result,
the Company recorded $2.9 million in due from related party
in its financial statements for the year ended December 31,
2008.
21
Executive
Compensation
Summary
Compensation Table
The following table sets forth the total compensation amounts
paid to our named executive officers for the years ended
December 31, 2008, 2007 and 2006.
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All Other
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|
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Salary
|
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Bonus
|
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Stock Awards
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Compensation
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Total
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Name and Principal Position
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Year
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($)
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|
($)
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($)(1)
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|
($)
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|
($)
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Ivan Kaufman
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2008
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|
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$
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0
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(2)
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$
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0
|
(2)
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|
$
|
0
|
|
|
$
|
0
|
(2)
|
|
$
|
0
|
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Chief Executive Officer and
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|
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2007
|
|
|
$
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0
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(2)
|
|
$
|
0
|
(2)
|
|
$
|
0
|
|
|
$
|
0
|
(2)
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|
$
|
0
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President
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|
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2006
|
|
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$
|
0
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(2)
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|
$
|
0
|
(2)
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|
$
|
33,333
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|
|
$
|
0
|
(2)
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|
$
|
33,333
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Paul Elenio
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2008
|
|
|
$
|
0
|
(2)
|
|
$
|
0
|
(2)
|
|
$
|
71,307
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|
|
$
|
0
|
(2)
|
|
$
|
71,307
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Chief Financial Officer
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|
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2007
|
|
|
$
|
0
|
(2)
|
|
$
|
0
|
(2)
|
|
$
|
51,463
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|
|
$
|
0
|
(2)
|
|
$
|
51,463
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|
|
|
|
2006
|
|
|
$
|
0
|
(2)
|
|
$
|
0
|
(2)
|
|
$
|
162,848
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|
|
$
|
0
|
(2)
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|
$
|
162,848
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Fred Weber
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2008
|
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$
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500,000
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|
$
|
750,000
|
|
|
$
|
1,413,147
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|
|
$
|
4,962
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(3)
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$
|
2,668,109
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Executive Vice President
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2007
|
|
|
$
|
491,667
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|
|
$
|
200,000
|
|
|
$
|
1,254,192
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|
|
$
|
8,262
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(3)
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$
|
1,954,121
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Structured Finance
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2006
|
|
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$
|
400,000
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|
|
$
|
200,000
|
|
|
$
|
925,428
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|
|
$
|
7,776
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(3)
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$
|
1,533,204
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Gene Kilgore
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2008
|
|
|
$
|
495,833
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|
|
$
|
550,000
|
|
|
$
|
811,142
|
|
|
$
|
4,314
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(4)
|
|
$
|
1,861,289
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Executive Vice President
|
|
|
2007
|
|
|
$
|
394,583
|
|
|
$
|
600,000
|
|
|
$
|
343,297
|
|
|
$
|
7,518
|
(4)
|
|
$
|
1,345,398
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Structured Securitization
|
|
|
2006
|
|
|
$
|
235,000
|
|
|
$
|
500,000
|
|
|
$
|
255,550
|
|
|
$
|
6,955
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(4)
|
|
$
|
997,505
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|
Mark
Fogel(5)
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|
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2008
|
|
|
$
|
197,917
|
|
|
$
|
150,000
|
|
|
$
|
113,202
|
|
|
$
|
3,738
|
(6)
|
|
$
|
464,857
|
|
Senior Vice President
|
|
|
2007
|
|
|
$
|
172,917
|
|
|
$
|
125,000
|
|
|
$
|
66,688
|
|
|
$
|
6,900
|
(6)
|
|
$
|
371,505
|
|
Asset Management
|
|
|
2006
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
(1) |
|
Represents the dollar amount recognized for financial statement
reporting purposes for the years ended December 31, 2008,
2007 and 2006 in accordance with Financial Accounting Standards
Board Statement No. 123 (revised 2004)
(SFAS No. 123(R)) for restricted common
stock awards granted in 2003, 2005, 2006, 2007 and 2008 (without
reflecting estimates of forfeitures). There were no forfeitures
of any awards during 2008, 2007 or 2006. All awards are valued
based on the closing price of the Companys common stock on
the applicable date of grant. Note 12 to the Companys
consolidated financial statements included in the 2008 Annual
Report on
Form 10-K
contains more information about the Companys accounting
for stock-based compensation arrangements. Dividends are paid on
the restricted stock, whether or not vested, at the same rate
and in the same manner as paid to our other common stockholders.
Although we granted shares of restricted common stock to
Messrs. Elenio, Weber and Kilgore in April 2009 with
respect to their performance in 2008, these grants are not
reflected above because they did not give rise to a
SFAS 123(R) compensation expense in 2008. In addition, as
of April 8, 2009 the Compensation Committee accelerated the
vesting of all then unvested shares underlying previously
granted restricted common stock as of such date. See
Executive Compensation Compensation Discussion
and Analysis Forms of Compensation
Stock-Based Awards for further information. |
|
(2) |
|
Messrs. Kaufman and Elenio do not receive cash compensation
or benefits from us for serving as our executive officers. They
are employed and compensated by our Manager, Arbor Commercial
Mortgage. See Compensation Discussion &
Analysis Management Agreement for further
information. |
|
(3) |
|
Includes $3,450 for Company matching contributions to the 401(k)
plan and $1,512 for basic term life insurance for 2008, $6,750
for Company matching contributions to the 401(k) plan and $1,512
for basic term life insurance for 2007 and $6,600 for Company
matching contributions to the 401(k) plan and $1,176 for basic
term life insurance for 2006. |
|
(4) |
|
Includes $3,450 for Company matching contributions to the 401(k)
plan and $864 for basic term life insurance for 2008, $6,750 for
Company matching contributions to the 401(k) plan and $768 for
basic term life insurance for 2007 and $6,600 for Company
matching contributions to the 401(k) plan and $355 for basic
term life insurance for 2006. |
|
(5) |
|
Mr. Fogel was not a named executive officer with respect to
2006. |
22
|
|
|
(6) |
|
Includes $3,450 for Company matching contributions to the 401(k)
plan and $288 for basic term life insurance for 2008 and $6,750
for Company matching contributions to the 401(k) plan and $150
for basic term life insurance for 2007. |
Grants
of Plan-Based Awards
The following shares of restricted common stock were granted to
the named executive officers pursuant to the Companys 2003
Omnibus Stock Incentive Plan during 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards: Number of
|
|
|
Grant Date Fair
|
|
|
|
|
|
|
|
|
|
Shares of Stock or
|
|
|
Value of Stock
|
|
Name
|
|
Grant Date
|
|
|
Approval Date
|
|
|
Units
(#)(1)
|
|
|
Awards($)
|
|
|
Ivan Kaufman
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
0
|
|
|
$
|
0
|
|
Paul Elenio
|
|
|
04/02/08
|
|
|
|
03/07/08
|
|
|
|
9,340
|
|
|
$
|
153,550
|
|
|
|
|
06/30/08
|
|
|
|
06/30/08
|
|
|
|
20,000
|
|
|
$
|
180,400
|
|
Fred Weber
|
|
|
04/02/08
|
|
|
|
03/07/08
|
|
|
|
77,840
|
|
|
$
|
1,279,690
|
|
|
|
|
06/30/08
|
|
|
|
06/30/08
|
|
|
|
20,000
|
|
|
$
|
180,400
|
|
Gene Kilgore
|
|
|
04/02/08
|
|
|
|
03/07/08
|
|
|
|
43,590
|
|
|
$
|
716,620
|
|
|
|
|
06/30/08
|
|
|
|
06/30/08
|
|
|
|
20,000
|
|
|
$
|
180,400
|
|
Mark Fogel
|
|
|
04/02/08
|
|
|
|
03/07/08
|
|
|
|
9,340
|
|
|
$
|
153,550
|
|
|
|
|
(1) |
|
As of December 31, 2008, these shares were subject to the
terms of a restricted stock award agreement providing that the
shares vest subject to the continued service of the named
executive officer to the Company, but will become fully vested
upon a change of control (as defined in the
agreement) of the Company. In addition, as of April 8, 2009
the Compensation Committee accelerated the vesting of all then
unvested shares underlying previously granted restricted common
stock as of such date. See Executive
Compensation Compensation Discussion and
Analysis Forms of Compensation
Stock-Based Awards for further information. |
Cash dividends are paid on all outstanding shares of restricted
stock at the same rate as is paid to all stockholders, which was
$2.10 per share for 2008.
Outstanding
Equity Awards at Fiscal Year-End
The table below lists the number of shares of common stock held
by each our named executive officers as of December 31,
2008 that were subject to vesting (pursuant to the terms of the
related restricted stock award agreement) as of that date.
|
|
|
|
|
|
|
|
|
|
|
Stock Awards
|
|
|
|
Number of Shares or Units
|
|
|
Market Value of Shares or
|
|
|
|
of Stock That Have Not
|
|
|
Units of Stock That Have
|
|
Name
|
|
Vested (#)
|
|
|
Not Vested
($)(1)(2)
|
|
|
Ivan Kaufman
|
|
|
0
|
|
|
$
|
0
|
|
Paul Elenio
|
|
|
26,906
|
(2)
|
|
$
|
79,373
|
|
Fred Weber
|
|
|
130,606
|
(2)
|
|
$
|
385,288
|
|
Gene Kilgore
|
|
|
66,206
|
(2)
|
|
$
|
195,308
|
|
Mark Fogel
|
|
|
10,472
|
(2)
|
|
$
|
30,892
|
|
|
|
|
(1) |
|
Based on the closing price of the common stock on
December 31, 2008 of $2.95. |
|
(2) |
|
In April 2009, the Compensation Committee approved the immediate
vesting of all unvested restricted common stock awards granted
to date. See Compensation Discussion and
Analysis Forms of Compensation Annual
Incentive Awards Restricted Stock Awards for
information regarding these grants. |
23
Stock
Vested Table
The table below lists the number of shares of restricted common
stock held by each our named executive officers as of
December 31, 2008 that vested (pursuant to the terms of the
related restricted stock award agreement) during 2008.
|
|
|
|
|
|
|
|
|
|
|
Stock Awards
|
|
|
|
Number of Shares
|
|
|
Value Realized
|
|
Name
|
|
Acquired on Vesting (#)
|
|
|
on Vesting
($)(1)(2)
|
|
|
Ivan Kaufman
|
|
|
0
|
|
|
$
|
0
|
|
Paul Elenio
|
|
|
12,234
|
|
|
$
|
146,196
|
|
Fred Weber
|
|
|
47,234
|
|
|
$
|
704,816
|
|
Gene Kilgore
|
|
|
24,384
|
|
|
$
|
338,235
|
|
Mark Fogel
|
|
|
3,368
|
|
|
$
|
53,375
|
|
|
|
|
(1) |
|
Value realized equals the fair market value of the shares on the
date the shares vested. |
|
(2) |
|
In April 2009, the Compensation Committee approved the immediate
vesting of all unvested restricted common stock awards granted
to date. See Compensation Discussion and
Analysis Forms of Compensation Annual
Incentive Awards Restricted Stock Awards for
information regarding these grants. |
Potential
Payments Upon Termination of Change in Control
The Company does not maintain employment, severance or change in
control agreements with any of the named executive officers and
therefore, the Company is not obligated to pay cash severance to
any of the named executive officers upon a termination of their
employment.
Certain shares of common stock owned by the named executive
officers were subject to restricted award agreements as of
December 31, 2008. The terms of these agreements provided
for accelerated vesting of the shares upon the occurrence of a
change in control (as defined in the agreements) of
the Company. If a change in our control had occurred on
December 31, 2008 at a per share price of $2.95, the
closing price of the Companys common stock on that date,
the value of the acceleration would be the same as the dollar
amount set forth in the Outstanding Equity
Awards at Fiscal Year End.
Director
Compensation
The Compensation Committees recommendations regarding
director compensation are reported to, and approved by, the full
Board of Directors. The Compensation Committee grants restricted
stock awards to new directors upon their election to the Board
of Directors on a pro rata basis.
The following table sets forth the compensation amounts paid by
us to our directors for the year ending December 31, 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees Earned or Paid
|
|
|
Stock Awards
|
|
|
|
|
Name
|
|
in Cash ($)
|
|
|
($)(1)(2)(3)
|
|
|
Total ($)
|
|
|
John J. Bishar, Jr.
|
|
$
|
50,000
|
|
|
$
|
28,960
|
|
|
$
|
78,960
|
|
Archie R. Dykes
|
|
$
|
51,000
|
|
|
$
|
30,379
|
|
|
$
|
81,379
|
|
Karen K. Edwards
|
|
$
|
55,000
|
|
|
$
|
34,003
|
|
|
$
|
89,003
|
|
William Helmreich
|
|
$
|
48,000
|
|
|
$
|
34,980
|
|
|
$
|
82,980
|
|
Walter K.
Horn(4)
|
|
$
|
0
|
|
|
$
|
41,629
|
|
|
$
|
41,629
|
|
C. Michael Kojaian
|
|
$
|
46,000
|
|
|
$
|
34,980
|
|
|
$
|
80,980
|
|
Melvin F. Lazar
|
|
$
|
60,000
|
|
|
$
|
32,463
|
|
|
$
|
92,463
|
|
Joseph A.
Martello(4)
|
|
$
|
0
|
|
|
$
|
141,878
|
|
|
$
|
141,878
|
|
Kyle A. Permut
|
|
$
|
44,000
|
|
|
$
|
34,003
|
|
|
$
|
78,003
|
|
24
|
|
|
(1) |
|
Represents the dollar amount recognized for financial statement
reporting purposes for the year ended December 31, 2008 in
accordance with SFAS No. 123(R) for restricted common
stock awards granted in 2005, 2006, 2007 and 2008 (without
reflecting estimates of forfeitures). All awards are valued
based on the closing price of the common stock on the applicable
date of grant. Note 12 to the Companys consolidated
financial statements included in the Annual Report on
Form 10-K
for 2008 contains more information about the Companys
accounting for stock-based compensation arrangements. Dividends
are paid on the shares of restricted common stock, whether or
not vested, at the same rate and in the same manner as paid to
our other common stockholders. |
|
(2) |
|
The shares still subject to vesting at December 31, 2008
are listed in the table below. |
|
|
|
|
|
|
|
|
|
|
|
Number of Shares of
|
|
|
Market Value of
|
|
|
|
Stock That Have Not
|
|
|
Shares of Stock that
|
|
Name
|
|
Vested
(#)(*)
|
|
|
Have Not Vested
($)(**)
|
|
|
John J. Bishar, Jr.
|
|
|
1,583
|
|
|
$
|
4,670
|
|
Archie R. Dykes
|
|
|
1,583
|
|
|
$
|
4,670
|
|
Karen K. Edwards
|
|
|
1,806
|
|
|
$
|
5,328
|
|
William Helmreich
|
|
|
1,833
|
|
|
$
|
5,407
|
|
Walter K. Horn
|
|
|
2,960
|
|
|
$
|
8,732
|
|
C. Michael Kojaian
|
|
|
1,833
|
|
|
$
|
5,407
|
|
Melvin F. Lazar
|
|
|
1,722
|
|
|
$
|
5,080
|
|
Joseph Martello
|
|
|
11,972
|
|
|
$
|
35,317
|
|
Kyle A. Permut
|
|
|
1,806
|
|
|
$
|
5,328
|
|
|
|
|
(*) |
|
In addition, as of April 8, 2009 the Compensation Committee
accelerated the vesting of all then unvested shares underlying
previously granted restricted common stock as of such date. See
Executive Compensation Compensation Discussion
and Analysis Forms of Compensation
Stock-Based Awards for further information. |
|
(**) |
|
Based on the closing price of the Companys common stock on
December 31, 2008 of $2.95. |
|
|
|
(3) |
|
The grant date fair value of restricted stock awards granted
during 2008 is as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grant Date Fair
|
|
|
|
Number of Shares
|
|
|
Value of Stock
|
|
Name
|
|
Granted (#)
|
|
|
Awards ($)
|
|
|
John J. Bishar, Jr.
|
|
|
2,000
|
|
|
$
|
32,880
|
|
Archie R. Dykes
|
|
|
2,000
|
|
|
$
|
32,880
|
|
Karen K. Edwards
|
|
|
2,000
|
|
|
$
|
32,880
|
|
William Helmreich
|
|
|
2,000
|
|
|
$
|
32,880
|
|
Walter K. Horn
|
|
|
0
|
|
|
$
|
0
|
|
C. Michael Kojaian
|
|
|
2,000
|
|
|
$
|
32,880
|
|
Melvin F. Lazar
|
|
|
2,000
|
|
|
$
|
32,880
|
|
Joseph Martello
|
|
|
9,340
|
|
|
$
|
153,550
|
|
Kyle A. Permut
|
|
|
2,000
|
|
|
$
|
32,880
|
|
|
|
|
(4) |
|
Mr. Horn, who is currently our Corporate Secretary and was
our General Counsel and Director of Compliance until his
retirement from those positions effective January 1, 2008,
and Mr. Martello, the Chief Operating Officer of Arbor
Management, LLC (which is the managing member of Arbor
Commercial Mortgage, our external manager) do not receive fees
for their service as directors. The amounts shown in the Stock
Awards column of the table above relate to restricted stock
awards granted to Messrs. Horn and Martello pursuant to the
Companys 2003 Omnibus Stock Incentive Plan in their
capacities as service providers to the Company. |
25
Each of our non-management directors is paid a directors
fee of $25,000 per year. Each independent director who serves as
chairman of the Audit Committee is paid an additional fee of
$10,000 per year, each independent director who serves as
chairman of the Compensation Committee is paid an additional fee
of $5,000 per year and each independent director who serves as
chairman of the Nominating/Corporate Governance Committee is
paid an additional fee of $3,000 per year. Each non-management
director is also paid (i) a fee of $2,000 for each board or
committee meeting that he or she attends in person, and
(ii) a fee of $1,000 for each telephone board or committee
meeting that he or she attends. Effective as of January 1,
2009, non-management directors participating in weekly telephone
meetings relating to market conditions are paid the sum of $300
per meeting. In addition, we reimburse all directors for
reasonable out of pocket expenses incurred in connection with
their services on the Board of Directors. We also reimburse all
directors up to $2,500 per year for continuing education costs
incurred in connection with their services on the Board of
Directors.
Additional
Grants Made Pursuant to the Stock Incentive Plan
On April 21, 2009, we granted a total of
155,000 shares of restricted common stock to certain of our
employees and employees of our Manager, including three of our
named executive officers, Messrs. Elenio, Weber and
Kilgore. On April 21, 2009, we also granted a total of
90,000 shares of restricted common stock to all of our
directors except for Mr. Kaufman. All of the shares granted
to each award recipient were vested as of the date of grant.
Compensation
Committee Report on Executive Compensation
The Compensation Committee of the Board of Directors has
reviewed and discussed the Compensation Discussion and
Analysis with the Companys management. Based upon
this review and their discussions, the Compensation Committee
recommended that the Board of Directors include the
Compensation Discussion and Analysis in the
Companys proxy statement for its 2009 annual meeting of
stockholders.
Compensation Committee:
C. Michael Kojaian (Chair)
Kyle Permut
William Helmreich
Melvin F. Lazar
April 30, 2009
Compensation
Committee Interlocks and Insider Participation
Messrs. Kojaian and Lazar and Dr. Helmreich served as
members of our Compensation Committee during 2008 and to date.
Dr. Dykes serves and a member of this committee from
January 2008 until mid-2008. Mr. Permut has served as a
member of this committee from mid-2008 to date.
Dr. Helmreich has been retained as a part-time consultant
in the capacity of chairman for Academic Affairs by North Shore
Hebrew Academy since 2000. Prior to 2000, Dr. Helmreich was
the President of North Shore Hebrew Academy. Our Chairman and
Chief Executive Officer, Mr. Kaufman, and
Dr. Helmreich are both members of the Board of Trustees of
North Shore Hebrew Academy High School.
26
Equity
Compensation Plan Information
The following table presents information as of December 31,
2008 regarding the Companys 2003 Omnibus Stock Incentive
Plan and the incentive compensation provisions of our management
agreement with Arbor Commercial Mortgage, which are our only
equity compensation plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities to be
|
|
|
Weighted Average
|
|
|
|
|
|
|
Issued Upon Exercise of
|
|
|
Exercise Price of
|
|
|
Number of Securities
|
|
|
|
Outstanding Options,
|
|
|
Outstanding Options,
|
|
|
Remaining Available
|
|
Plan Category
|
|
Warrants and Rights
|
|
|
Warrants and Rights
|
|
|
for Future Issuance
|
|
|
Equity compensation plans approved by security holders:
|
|
|
|
|
|
|
|
|
|
|
|
|
2003 Omnibus Stock Incentive Plan
|
|
|
0
|
|
|
|
N/A
|
|
|
|
376,843
|
|
Incentive Compensation pursuant to Management
Agreement(1)
|
|
|
0
|
|
|
|
N/A
|
|
|
|
See Note 2
|
|
Equity compensation plans not approved by security holders
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
0
|
|
|
|
N/A
|
|
|
|
376,843
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Pursuant to the terms of our management agreement with Arbor
Commercial Mortgage, at least 25% of the incentive compensation
earned by our Manager is payable in shares of our common stock
having a value equal to the average closing price per share for
the last twenty days of the fiscal quarter for which the
incentive compensation is being paid. Arbor Commercial Mortgage
has the right to elect to receive 100% of the incentive
compensation in shares of our common stock. See
Compensation Discussion and Analysis
Management Agreement for information regarding the terms
of our management agreement and the incentive compensation
payable to Arbor Commercial Mortgage thereunder. Our sole
stockholder immediately prior to the date we entered into the
management agreement with Arbor Commercial Mortgage approved the
issuance of shares of our common stock to Arbor Commercial
Mortgage pursuant to the incentive compensation provisions of
the management agreement. |
|
(2) |
|
The number of securities remaining available for future issuance
to Arbor Commercial Mortgage as incentive compensation pursuant
to the management agreement depends on the amount of incentive
compensation earned by Arbor Commercial Mortgage in the future
and therefore is not yet determinable. |
See Additional Grants Made Pursuant to the Stock Incentive
Plan for restricted stock awards granted in April 2009.
27
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table indicates how many shares of our common
stock are beneficially owned by (i) each of our directors
and each nominee for director, (ii) each of our executive
officers; and (iii) all of our directors and executive
officers as a group. The following table also indicates how many
shares of our common stock are beneficially owned by each person
known to the Company to be the beneficial owner of more than
five percent (5%) of the outstanding shares of our common stock,
in each case, based solely on, and as of the date of, such
persons filing of a Schedule 13D or Schedule 13G
with the SEC. Unless otherwise indicated, the persons named in
the following table have sole voting and investment power with
respect to all shares of common stock shown as beneficially
owned by them. In accordance with SEC beneficial ownership
rules, the following table attributes to Arbor Commercial
Mortgage (and to Mr. Kaufman, as the controlling owner of
Arbor Commercial Mortgage) beneficial ownership of the
5,383,323 shares of common stock currently held by Arbor
Commercial Mortgage.
|
|
|
|
|
|
|
|
|
|
|
Shares of Common Stock
|
|
|
|
Beneficially Owned
|
|
Name and
Address(1):
|
|
Number
(2)
|
|
|
Percentage
(3)
|
|
|
Ivan
Kaufman(4)
|
|
|
5,507,872
|
|
|
|
21.7
|
%
|
Arbor Commercial Mortgage,
LLC(4)
|
|
|
5,383,323
|
|
|
|
21.2
|
%
|
Barclays Global
Investors(5)
|
|
|
1,383,669
|
|
|
|
5.5
|
%
|
John J. Bishar, Jr.
|
|
|
26,050
|
|
|
|
|
*
|
Archie R. Dykes
|
|
|
16,750
|
|
|
|
|
*
|
Karen K. Edwards
|
|
|
30,000
|
|
|
|
|
*
|
William Helmreich
|
|
|
90,100
|
|
|
|
|
*
|
Walter K.
Horn(6)
|
|
|
46,500
|
|
|
|
|
*
|
C. Michael
Kojaian(7)
|
|
|
1,016,500
|
|
|
|
4.0
|
%
|
Melvin F. Lazar
|
|
|
113,600
|
|
|
|
|
*
|
Joseph
Martello(8)
|
|
|
58,940
|
|
|
|
|
*
|
Kyle A. Permut
|
|
|
34,417
|
|
|
|
|
*
|
Paul
Elenio(9)
|
|
|
83,140
|
|
|
|
|
*
|
John Felletter
|
|
|
15,000
|
|
|
|
|
*
|
Mark
Fogel(10)
|
|
|
17,840
|
|
|
|
|
*
|
Gene
Kilgore(11)
|
|
|
142,090
|
|
|
|
|
*
|
Fred
Weber(12)
|
|
|
270,640
|
|
|
|
1.1
|
%
|
All directors and executive officers as a group (15 persons)
|
|
|
7,454,439
|
|
|
|
29.4
|
%
|
|
|
|
* |
|
Less than one percent. |
|
(1) |
|
Unless otherwise indicated in the following footnotes, the
address for each person or entity listed in the table above is
333 Earle Ovington Boulevard, Suite 900, Uniondale, New
York, 11553. |
|
(2) |
|
Beneficial ownership is determined in accordance with the rules
of the SEC and generally includes securities over which a person
has voting or investment power and securities that a person has
the right to acquire within 60 days of the date hereof. |
|
(3) |
|
The 25,387,410 shares of our common stock outstanding at
April 30, 2009 are considered the total number of shares of
our common stock outstanding for the purpose of calculating each
persons percentage of beneficial ownership of shares of
our common stock. |
|
(4) |
|
Mr. Kaufman, together with (i) the Ivan and Lisa
Kaufman Family Trust, (ii) the Ivan Kaufman Grantor
Retained Trust and (iii) Arbor Management, LLC, the
managing member of Arbor Commercial Mortgage and an entity owned
wholly by Mr. Kaufman and his wife, beneficially own
approximately 92% of the outstanding membership interests of
Arbor Commercial Mortgage. |
|
(5) |
|
Based on information included in the Schedule 13G filed by
Barclays Global Investors on February 5, 2009. The address
for Barclays Global Investors is 400 Howard Street,
San Francisco, CA 94105. |
28
|
|
|
(6) |
|
Mr. Horn, through his wife, holds a 1.4% Class B
membership interest in Arbor Commercial Mortgage. For purposes
of the SECs beneficial ownership rules, the operating
partnership units held by Arbor Commercial Mortgage are not
deemed to be beneficially owned by Mr. Horn. |
|
(7) |
|
Includes 1,000,000 shares of common stock purchased by
Kojaian Ventures, L.L.C., of which the sole members are
Mr. Kojaian and Kojaian Ventures MM, Inc., of
which Mr. Kojaian is the sole stockholder. |
|
(8) |
|
Mr. Martello holds a 1.3% Class B membership interest
in Arbor Commercial Mortgage. For purposes of the SECs
beneficial ownership rules, the operating partnership units held
by Arbor Commercial Mortgage are not deemed to be beneficially
owned by Mr. Martello. |
|
(9) |
|
Mr. Elenio holds a 0.2% Class B membership interest in
Arbor Commercial Mortgage. For purposes of the SECs
beneficial ownership rules, the operating partnership units held
by Arbor Commercial Mortgage are not deemed to be beneficially
owned by Mr. Elenio. |
|
(10) |
|
Mr. Fogel holds a 0.08% Class B membership interest in
Arbor Commercial Mortgage. For purposes of the SECs
beneficial ownership rules, the operating partnership units held
by Arbor Commercial Mortgage are not deemed to be beneficially
owned by Mr. Fogel. |
|
(11) |
|
Mr. Kilgore holds a 0.3% Class B membership interest
in Arbor Commercial Mortgage. For purposes of the SECs
beneficial ownership rules, the operating partnership units held
by Arbor Commercial Mortgage are not deemed to be beneficially
owned by Mr. Kilgore. |
|
(12) |
|
Mr. Weber holds a 0.9% Class B membership interest in
Arbor Commercial Mortgage. For purposes of the SECs
beneficial ownership rules, the operating partnership units held
by Arbor Commercial Mortgage are not deemed to be beneficially
owned by Mr. Weber. |
Section 16(a)
Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our executive
officers and directors, and persons who own more than 10% of a
class of our equity securities registered pursuant to
Section 12 of the Exchange Act, to file reports of
ownership on Forms 3, 4 and 5 with the SEC. Officers,
directors and greater than 10% stockholders are required to
furnish us with copies of all Forms 3, 4 and 5 they file.
Based solely on the Companys review of the copies of such
forms received by it, or written representations from certain
reporting persons that no filings were required for those
persons, the Company believes that during and with respect to
the fiscal year ended December 31, 2008 all filings
required by Section 16(a) of the Exchange Act were timely
made except for the following filings: the Forms 4 of Arbor
Commercial Mortgage and Ivan Kaufman, each filed on
February 12, 2008, with respect to 86,772 shares of
common stock granted to Arbor Commercial Mortgage pursuant to
the management agreement on February 6, 2008; and the
Form 4 of Ivan Kaufman, filed on April 4, 2008, with
respect to his indirect acquisition of 146 shares of common
stock on August 14, 2007 and 1,052 shares of common
stock on August 15, 2007.
29
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Policy
Regarding the Review, Approval or Ratification of Transactions
with Related Persons
In recognition of the fact that transactions involving related
parties can present potential or actual conflicts of interest or
create the appearance that Company decisions are based on
considerations other than the best interests of the Company and
its stockholders, the Board of Directors has adopted a written
policy, the Policy and Procedures With Respect to Related Person
Transactions, which we refer to as our Related Persons Policy,
which provides for the review and approval (or, if completed,
ratification) by the Independent Director Committee (or, in
certain circumstances, the Chair of the Independent Director
Committee) of all transactions involving the Company in which a
related party is known to have a direct or indirect interest,
including transactions required to be reported under paragraph
(a) of Item 404 of
Regulation S-K
promulgated by the SEC. All Related Persons are required to
report to our Corporate Secretary, who is required to submit to
our Independent Director Committee any such related party
transaction prior to its completion.
Our Related Persons Policy covers all transactions, arrangements
or relationships (or any series of similar transactions,
arrangements or relationships) in which the Company (including
any of its subsidiaries) was, is or will be a participant and
the amount involved exceeds $120,000, and in which any Related
Person had, has or will have a direct or indirect material
interest.
A Related Person, as defined in our Related Persons
Policy, means any person who is, or at any time since the
beginning of the Companys last fiscal year was, a director
or executive officer of the Company or a nominee to become a
director of the Company; any person who is known to be the
beneficial owner of more than 5% of any class of the
Companys voting securities; any immediate family member of
any of the foregoing persons, which means any child, stepchild,
parent, stepparent, spouse, sibling,
mother-in-law,
father-in-law,
son-in-law,
daughter-in-law,
brother-in-law,
or
sister-in-law
of the director, executive officer, nominee or more than 5%
beneficial owner, and any person (other than a tenant or
employee) sharing the household of such director, executive
officer, nominee or more than 5% beneficial owner; and any firm,
corporation or other entity in which any of the foregoing
persons is employed or is a general partner or principal or in a
similar position or in which such person has a 5% or greater
beneficial ownership interest.
In reviewing any related person transaction, all of the relevant
facts and circumstances must be considered, including
(i) the related persons relationship to us and his or
her interest in the transaction, (ii) the proposed
aggregate value of the transaction, or, in the case of
indebtedness, the amount of principal that would be involved,
(iii) the benefits to us, (iv) the availability of
comparable products or services that would avoid the need for a
related person transaction and (v) the terms of the
transaction and the terms available to unrelated third parties
or to employees generally.
Relationships
with Our Manager
Arbor
Commercial Mortgages Ownership Interest in Arbor and
Related Registration Rights
Arbor Commercial Mortgage currently owns 5,383,323 shares
of our common stock, representing approximately 21.2% of the
voting power of our common stock. We have granted Arbor
Commercial Mortgage shelf registration rights, or, if such
rights are not available, demand registration rights with
respect to the 5,383,323 shares currently owned by it.
Arbor Commercial Mortgage is also entitled to participate in
primary or secondary offerings of our common stock with respect
to these shares. We have also agreed to certain restrictions on
the registration rights that we may grant to any other holder or
prospective holder of our securities without the prior written
consent of Arbor Commercial Mortgage so long we are still
obligated to register any of the shares currently owned by Arbor
Commercial Mortgage pursuant to the registration rights
agreement.
Common
Management
Mr. Ivan Kaufman, our Chairman and Chief Executive Officer,
is also the Chief Executive Officer of Arbor Commercial
Mortgage. Mr. Kaufman and entities controlled by
Mr. Kaufman collectively own 92% of the outstanding
membership interests in Arbor Commercial Mortgage.
Mr. Joseph Martello, one of our directors,
30
currently serves as the Chief Operating Officer of Arbor
Management, LLC, the managing member of Arbor Commercial
Mortgage. Mr. Martello owns a 1.3% interest in Arbor
Commercial Mortgage and is also the sole trustee of the Ivan and
Lisa Kaufman Family Trust for the benefit of
Mr. Kaufmans family, which owns a 35% interest in
Arbor Commercial Mortgage, and a co-trustee, along with
Mr. Kaufman, of the Ivan Kaufman Grantor Retained Annuity
Trust, which also owns an equity interest in Arbor Commercial
Mortgage. Mr. Paul Elenio, our Chief Financial Officer and
Treasurer, currently serves as the Chief Financial Officer of
Arbor Commercial Mortgage. Mr. Elenio owns a 0.2% interest
in Arbor Commercial Mortgage. Mr. Walter Horn, our
Corporate Secretary and one of our directors, served as the
Corporate Secretary of Arbor Commercial Mortgage until his
retirement from this position effective January 1, 2008.
Mr. Horn owns a 1.4% interest in Arbor Commercial Mortgage,
which is held in his wifes name. Mr. Fred Weber, our
Executive Vice President of Structured Finance, was responsible
for overseeing Arbor Commercial Mortgages structured
finance and principal transactions group from 1999 until
July 1, 2003. Mr. Weber owns a 0.9% interest in Arbor
Commercial Mortgage. Mr. Gene Kilgore, our Executive Vice
President Structured Securitization, owns an
interest in Arbor Commercial Mortgage which represents 0.3% of
the outstanding membership interests. Mr. Mark Fogel, our
Senior Vice President Asset Management owns a 0.08%
interest in Arbor Commercial Mortgage. Each of
Messrs. Kaufman, Martello, Elenio, Weber, Kilgore and Horn
is a member of Arbor Commercial Mortgages executive
committee.
Management
and Services Agreements
We and our operating partnership have entered into a management
agreement with Arbor Commercial Mortgage, pursuant to which
Arbor Commercial Mortgage provides for the day to day management
of our operations. Arbor Commercial Mortgage is also required to
provide us with a right of first refusal with respect to all
structured finance investment opportunities in the multi-family
and commercial real estate markets that are identified by Arbor
Commercial Mortgage or its affiliates as long as such investment
opportunities are consistent with our investment objectives and
guidelines and such investment opportunities would not adversely
affect our status as a REIT. We have agreed not to pursue, and
to allow Arbor Commercial Mortgage to pursue, any opportunity in
structured finance investment opportunities in the multi-family
and commercial real estate markets if the opportunity is
rejected by our credit committee and a majority of our
independent directors. We are required to pay Arbor Commercial
Mortgage a base management fee and an incentive management fee,
as well as reimburse Arbor Commercial Mortgage for certain of
its expenses.
We and our operating partnership have also entered into a
services agreement with Arbor Commercial Mortgage pursuant to
which our asset management group provides asset management
services to Arbor Commercial Mortgage. In the event that the
services provided by our asset management group pursuant to the
agreement exceed by more than 15% per quarter the level of
activity anticipated by our Board of Directors, we will
negotiate in good faith with our Manager an adjustment to our
Managers base management fee under the management
agreement, to reflect the scope of the services, the quantity of
serviced assets or the time required to be devoted to the
services by our asset management group. As of December 31,
2008, there have been no such adjustments pursuant to the
services agreement.
Non-Competition
Agreement
We have entered into a non-competition agreement with
Mr. Kaufman pursuant to which he has agreed not to pursue
any structured finance opportunities in the multi-family and
commercial real estate markets unless a majority of our
independent directors affirmatively approves the pursuit by
Mr. Kaufman of such opportunity that a majority of our
independent directors and our credit committee have rejected on
our behalf. Mr. Kaufman has also agreed that if he is no
longer an affiliate of Arbor Commercial Mortgage and, within the
first five years of the term of the management agreement, he is
no longer our Chief Executive Officer other than because of
certain reasons specified in the non-competition agreement, he
will not engage in the structured finance lending business for a
period of one year after the earlier of his departure from us or
the regular expiration of the one year origination period
described in the management agreement. Mr. Kaufmans
non-competition agreement also prohibits Mr. Kaufman from
soliciting our customers or employees during its term.
31
Benefits
Participation Agreement
We have also entered into a benefits participation agreement
with Arbor Commercial Mortgage, pursuant to which our employees
are able to participate in any employee benefit plans maintained
by Arbor Management for the benefit of Arbor Commercial Mortgage
employees. Arbor Management charges us an amount equal to its
cost of providing benefits to each of our employees.
Related
Party Loans and Investments
Due from related party was $2.9 million at
December 31, 2008 which represents the Companys
overpayment of Arbor Commercial Mortgages incentive
compensation for 2008 pursuant to the advancement provisions of
the management agreement. See Executive
Compensation Compensation Discussion and
Analysis Management Agreement Incentive
Compensation for further details. Due to related party was
$1.0 million at December 31, 2008 and consisted of
$0.8 million of base management fees and $0.2 million
of unearned fees due to Arbor Commercial Mortgage which were
remitted by us in February 2009. Due to related party was
$2.4 million at December 31, 2007 and consisted of
$3.2 million of management fees that were due to Arbor
Commercial Mortgage and remitted in February 2008, which was
partially offset by $0.8 million of extension and filing
fees received by Arbor Commercial Mortgage which were remitted
to us in February 2008.
In December 2008, we borrowed a total $4.2 million from
Arbor Commercial Mortgage pursuant to non-interest bearing
loans. In January 2009, theses loan were repaid in full. In
2008, Arbor Commercial Mortgage purchased investment grade CDO
notes issued by our subsidiaries with an aggregate face value of
$20.4 million from third parties for $8.2 million. In
March 2009, the Company purchased $8.8 million of these CDO
notes from Arbor Commercial Mortgage for $3.2 million.
During 2006, we originated a $7.2 million bridge loan and a
$0.3 million preferred equity investment secured by
garden-style and townhouse apartments in South Carolina. We also
had a 25.0% carried profits interest in the borrowing entity. In
January 2008, the borrowing entity refinanced the property
through Arbor Commercial Mortgage and we received
$0.3 million for our profits interest as well as full
repayment of the $0.3 million preferred equity investment
and the $7.0 million outstanding balance on the bridge
loan. We retained the 25% carried profits interest.
General
Every transaction entered into between us and an entity in which
Arbor Commercial Mortgage holds equity interests raises a
potential conflict of interest. Conflicts of interest with
respect to these investments include, among others, decisions
regarding (1) whether to waive defaults of such borrower,
(2) whether to foreclose on the investment and
(3) whether to permit additional financing on the
properties securing our investments other than financing
provided by us.
Arbor Commercial Mortgage may from time to time provide
permanent mortgage loan financing to clients of ours, which will
be used to refinance bridge financing provided by us. We and
Arbor Commercial Mortgage may also make loans to the same
borrower or to borrowers that are under common control.
Additionally, our policies and those of Arbor Commercial
Mortgage may require us to enter into intercreditor agreements
in situations where loans are made by us and Arbor Commercial
Mortgage to the same borrower.
In addition, we may enter into future transactions with Arbor
Commercial Mortgage with the approval of our independent
directors.
Equity
Investments in Our Borrowers
930
Flushing & 80 Evergreen
In June 2003, Arbor Commercial Mortgage invested approximately
$0.8 million in exchange for a 12.5% preferred interest in
a joint venture, which owns and operates two commercial
properties located at 80 Evergreen and 930 Flushing Avenue in
New York City. We purchased this investment from Arbor
Commercial Mortgage in
32
August 2003. As of December 31, 2007, we contributed an
additional $1.2 million to this joint venture. We account
for this investment under the equity method.
We had a $4.8 million bridge loan and a $3.5 million
mezzanine loan outstanding to affiliated entities of the joint
venture. The loans required monthly interest payments based on
one month LIBOR and matured in November 2006 and June 2006,
respectively. The $4.8 million bridge loan was extended for
two one-year periods and had a maturity of October 2008. During
the second quarter of 2008, $4.8 million was received by us
for the repayment in full of the bridge loan on the 80 Evergreen
property from refinance proceeds of the borrower. In addition,
in August 2005, the joint venture refinanced one of these
properties with a $25 million bridge loan that we provided
which matures in August 2010 with a fixed rate of 6.45% and has
an outstanding principal balance of $24.7 million at
December 31, 2008. Proceeds from this loan were used to pay
off senior debt as well as our $3.5 million mezzanine loan.
Excess proceeds were distributed to each of the members in
accordance with the operating agreement of which we received
$1.3 million, which was recorded as a return of capital in
2005. In addition, during 2008, we recorded $0.2 million as
a return of capital from its equity investment on a capital
contribution made in 2007. As a result, we had a
$0.5 million investment as of December 31, 2008.
450 West
33rd Street
As of December 31, 2006, we had a mezzanine loan
outstanding totaling $45 million to 450 Partners
Mezz III LLC, a wholly-owned subsidiary of
450 Westside Partners, LLC and the owner of 100% of the
outstanding membership interests in 450 Partners Mezz II
LLC, who used the proceeds to refinance an office building. The
mezzanine loan was scheduled to mature in March 2015 and had a
fixed interest rate of 8.17%. We also held an equity and profits
interest in the underlying partnership of approximately 29% and
had a preferred equity investment of approximately
$2.7 million with a 12.5% return.
In May 2007, we, as part of an investor group for the
450 West 33rd Street partnership, transferred control
of the underlying property (an office building) to Broadway
Partners for a value of approximately $664.0 million. The
investor group, on a pro-rata basis, retained an approximate 2%
ownership interest in the property and 50% of the
propertys air rights which resulted in us retaining an
investment in equity affiliates of approximately
$1.1 million related to our 29% interest in the 2% retained
ownership. In accordance with this transaction, the joint
venture members agreed to guarantee $258.1 million of the
$517.0 million of new debt outstanding on the property. The
guarantee expires at the earlier of maturity or prepayment of
the debt and was allocated to the members in accordance with
their ownership percentages. The guarantee is callable, on a
pro-rata basis, if the market value of the property declines
below the $258.1 million of debt guaranteed. Our portion of
the guarantee is $76.3 million. The transaction was
structured to provide for a tax deferral for an estimated period
of seven years. We recorded deferred revenue of approximately
$77.1 million as a result of the guarantee on a portion of
the new debt.
We received approximately $134.1 million in proceeds upon
completion of this transaction of which $76.0 million
related to the 29% equity and profits interest,
$10.4 million related to yield maintenance on the
prepayment of the mezzanine debt and the 12.5% return on the
preferred equity investment, $45.0 million for the
repayment in full of the mezzanine debt and $2.7 million as
a return of the preferred equity investment. We paid an
incentive management fee to Arbor Commercial Mortgage of
approximately $21.6 million.
We recorded deferred revenue of approximately $77.1 million
as a result of the guarantee on a portion of the new debt,
prepaid expenses related to the incentive management fee on the
deferred revenue of approximately $19.0 million, an
investment in equity affiliates of approximately
$1.1 million related to our 29% interest in the 2% retained
ownership, interest income of approximately $10.4 million
and incentive management fee expense of approximately
$2.6 million for year ended December 31, 2007.
In July 2007, we purchased a $50.0 million mezzanine loan
secured by this property which matures in July 2009 and bears
interest at LIBOR plus 4.35%. The outstanding balance on this
loan was $50.0 million at December 31, 2008. Our
equity investment was approximately $1.1 million at
December 31, 2008.
1107
Broadway
In 2005, we invested $10.0 million in exchange for a 20%
ownership interest in 200 Fifth LLC, which owned two
properties in New York City. In May 2007, we, as part of an
investor group in the 200 Fifth LLC holding
33
partnership, sold the 200 Fifth Avenue property for net
proceeds of approximately $450.0 million and the investor
group, on a pro-rata basis, retained an adjacent building
located at 1107 Broadway. The partnership used the net proceeds
from the sale to repay the $402.5 million outstanding debt
on both the 200 Fifth Avenue and the 1107 Broadway
properties, and used the remaining proceeds as a return of
invested capital to the partners. As a result of the
transaction, we received $9.5 million in proceeds as a
return on our invested capital and were repaid in full on our
$137.0 million mezzanine debt, including all applicable
interest. We recorded approximately $11.4 million net, in
income before minority interest related to our 20% equity
interest, which consisted of a $24.2 million gain recorded
as income from equity affiliates and expenses of a
$9.0 million provision for income taxes and a
$3.8 million incentive management fee paid to the our
Manager. The partnership retained the 1107 Broadway
property. In December 2007, we received a $0.6 million
distribution from escrow funds related to our interest in the
200 Fifth Avenue property, which was recorded as income
from equity affiliates.
In October 2007, the partnership sold 50% of its economic
interest in the 1107 Broadway property. The partnership was
recapitalized with financing of approximately $343 million,
of which approximately $203 million was funded with the
unfunded portion to be used to develop the property. We received
net proceeds of approximately $39.0 million from this
transaction as a return of invested capital. The investor group,
on a pro-rata basis, retains a 50% economic interest in the
property, representing approximately $29 million of
capital. We recorded approximately $2.3 million net, in
income before minority interest related to our 20% equity
interest, which consisted of $4.8 million as income from
equity affiliates and expenses of a $1.8 million provision
for income taxes and a $0.7 million incentive management
fee paid to our Manager. We also recorded a $5.7 million
investment in equity affiliate and a net deferred gain of
$3.5 million related to our 10% retained interest in the
1107 Broadway property. The partnership is in the process of
developing this property into a mix of residential and retail
uses. Our equity investment was approximately $5.7 million
at December 31, 2008.
1133
York Avenue
In October 2004, we invested $0.5 million in exchange for
an 8.7% non-managing preferred interest in LBREP York Avenue
Holdings, LLC, a joint venture that was formed to operate as a
real estate business, to acquire, own, manage, develop, and sell
real estate assets. In December 2005, the joint venture issued
new debt on an existing property. The proceeds were distributed
to each of the partners in accordance with the operating
agreement of which we received $0.5 million which was
recorded as a return of our equity investment. In December 2008,
the property was sold, and as a result, we received a
distribution of approximately $0.4 million, which $7,693
was recorded as a return of capital and approximately
$0.4 million was recorded as income net in loss from equity
affiliates. In addition, as a result of the sale, we no longer
have an equity interest in this investment.
Alpine
Meadows
In July 2007, we invested $13.2 million in exchange for a
39% profits interest with an 18% preferred return in the Alpine
Meadows ski resort, which consists of approximately 2,163 total
acres in northwestern Lake Tahoe, California. Our invested
capital represents 65% of the total equity of the transaction
and we will be allocated 65% of the losses. We also provided a
$30.5 million first mortgage loan that matures in August
2009 and bears interest at pricing over one month LIBOR. The
outstanding balance on this loan was $30.5 million at
December 31, 2008. For the year ended December 31,
2008, we recorded $3.1 million in losses from this equity
investment. This amount reflects our portion of the joint
ventures losses, including depreciation expense, and was
recorded in loss from equity affiliates and as a reduction to
our investment in equity affiliates on the balance sheet. As a
result, we have a $10.2 million investment as of
December 31, 2008.
St.
Johns Development
In December 2006, we originated a $25.0 million bridge loan
with a maturity date in September 2007 with two, three month
extensions that bears interest at a fixed rate of 12%. The loan
is secured by 20.5 acres of usable land and 2.3 acres
of submerged land located on the banks of the St. Johns
River in downtown Jacksonville, Florida and is currently zoned
for the development of up to 60 dwellings per acre. In October
2007, the borrower sold the property to an investor group, in
which we have a 50% non-controlling interest, for
$25.0 million and assumed the
34
$25.0 million mortgage with a new maturity date of October
2009, and a change in the interest rate to LIBOR plus 6.48%. We
also contributed $0.5 million to cover other operational
costs of acquiring and maintaining the property.
The managing member of the investor group is an experienced real
estate developer who retains a 50% interest in the partnership
and funded a $2.9 million interest reserve for the first
year. We were required to contribute $2.9 million to fund
the interest reserve for the second year. In addition, we made
an additional capital contribution of $0.1 million during
2008, and as a result, we have a $3.5 million investment as
of December 31, 2008. We retain a non-controlling 50%
equity interest in the property and accounts for this investment
under the equity method. No income from the equity interest has
been recognized for the year ended December 31, 2008 and
2007.
Prime
Outlets
In December 2003, we invested approximately $2.1 million in
exchange for a 50% non-controlling interest in Prime Outlets
Member, LLC (POM), which owns 15% of a real estate
holding company that owns and operates a portfolio of factory
outlet shopping centers. We account for this investment under
the equity method. Additionally, we own a 16.7% carried profits
interest through a consolidated entity which has a 25% interest
in POM with a third party member owning the remaining 8.33%.
As of December 31, 2005, we had a mezzanine loan
outstanding to an affiliate entity of the joint venture for
$30.1 million. In addition, we had a $10.0 million
junior loan participation interest outstanding to an affiliate
entity of the joint venture as of December 31, 2005. The
loans required monthly interest payments based on one month
LIBOR and matured in January 2006. In June 2005, POM refinanced
the debt on a portion of the assets in its portfolio, receiving
proceeds in excess of the amount of the previously existing
debt. The excess proceeds were distributed to each of the
partners in accordance with POMs operating agreement of
which we received $36.5 million. In accordance with this
transaction, the joint venture members of POM agreed to
guarantee $38.0 million of the new debt. The guarantee
expires at the earlier of maturity or prepayment of the debt and
would require performance by the members if not repaid in full.
This guarantee was allocated to the members in accordance with
their ownership percentages. Of the distribution we received
during 2005, $17.2 million was recorded as interest income,
representing the portion attributable to the 16.7% carried
profits interest, $2.1 million was recorded as a return of
our equity investment, $8.0 million was recorded as income
from equity affiliates, representing the portion attributable to
the 7.5% equity interest, and $9.2 million was recorded as
deferred revenue, representing our portion of the
$38.0 million guarantee.
In January 2006, POM refinanced the debt on a portion of the
assets in its portfolio and repaid in full the debt that was
added in June 2005 and the $30.1 million mezzanine loan and
the $10.0 million junior loan participating interest that
we had outstanding as of December 31, 2005. As a result,
the $38.0 million guarantee was removed and we recorded the
$9.2 million of deferred revenue, $6.3 million as
interest income and $2.9 million as income from equity
affiliates. In 2006, POM refinanced the debt on a portion of the
assets in its portfolio, receiving proceeds in excess of the
amount of the previously existing debt. The excess proceeds were
distributed to each of the partners in accordance with
POMs operating agreement. In December 2006, we received a
$6.0 million distribution from POM and recorded
$4.1 million as interest income, representing the portion
attributable to the 16.7% carried profits interest, and
$1.9 million as income from equity affiliates, representing
the portion attributable to the 7.5% equity interest.
In 2007, we received distributions from POM of
$16.2 million as a result of excess proceeds from
refinancing and sales activities on certain assets in the POM
portfolio. The excess proceeds were distributed to each of the
partners in accordance with POMs operating agreement. We
recorded $11.2 million as interest income representing the
portion attributable to the 16.7% carried profits interest and
$5.0 million as income from equity affiliates representing
the portion attributable to the 7.5% equity interest.
In June 2008, we entered into an agreement to transfer our
16.67% interest in POM, at a value of approximately
$37 million, in exchange for preferred and common operating
partnership units of Lightstone Value Plus REIT L.P.
In connection with the agreement, we borrowed from Lightstone
Value Plus Real Estate Investment Trust, Inc. approximately
$33 million, which is initially secured by our 16.67%
interest in POM, has an eight year term, and bears interest at a
fixed rate of 4% with payment of the interest deferred until the
closing of the transaction. The
35
closing of this transaction occurred on March 30, 2009,
where by we exchanged our 16.67% interest in Prime Outlets for
approximately $37.0 million of preferred and common
operating partnership units in Lightstone Value Plus REIT L.P.
The $33.0 million loan is now secured by our preferred and
common operating partnership units in Lightstone Value Plus REIT
L.P. The preferred units will pay a preferred return at a fixed
rate of 4.63% and after five years, they may be redeemed by
Lightstone Value Plus REIT L.P. for cash at par and the loan
would become due upon such redemption. The transaction provides
for a tax deferral for an estimated period of five years,
subject to certain carve out provisions. In addition, we paid an
incentive management fee to our manager of approximately
$7.3 million related to this transaction during the third
quarter of 2008.
During the second quarter of 2008, we recorded approximately
$33.0 million of cash, $49.5 million of debt related
to the proceeds received from the loan secured by the
entitys 25% interest in POM which was recorded in notes
payable, a $16.5 million receivable from the third party
member share of the consolidated entitys 25% interest
which was recorded in other assets and a deferred expense
related to the incentive management fee of approximately
$7.3 million.
During 2008, we recorded interest expense of $1.0 million
relating to the consolidated entitys $49.5 million of
debt from the agreement, of which $0.3 million was charged
against income allocated to minority interest relating to the
third party members minority interest share of the
interest expense of the consolidated entity on our consolidated
statement of operations.
In the fourth quarter 2008, we received a $1.0 million
distribution from POM related to its 24.17% equity and profits
interest, the result of excess proceeds from the operations of
the business. Of the distribution we received, $1.0 million
was recorded as interest income, representing the distribution
received from the 25% profits interest, $0.3 million was
recorded as minority interest expense relating to a third party
members 8.33% minority interest share of the profits
interest and $0.3 million was recorded as income netted in
loss from equity affiliates, representing the portion received
from our 7.5% equity interest. In accordance with the agreement,
$0.7 million of the distribution relating to the 16.67%
profits interest was used to pay down a portion of the
$33 million debt. In addition, the $0.7 million will
reduce the value of our interest when exchanged for preferred
and common operating partnership units at closing, thereby
reducing our future gain.
As a result of the $1.0 million of interest expense and
$1.0 million of interest income recorded in 2008 from the
consolidated entity that hold the 25% profits interest in POM,
we recorded a decrease of $10,981 of minority interest in
consolidated entity on our consolidated balance sheet at
December 31, 2008. Our equity investment was $0 at
December 31, 2008.
On March 30, 2009, the Company exchanged its 16.67%
interest in Prime Outlets for approximately $37 million of
preferred and common operating partnership units in Lightstone
Value Plus REIT L.P. and the $33 million loan is now
secured by Arbors preferred and common operating
partnership units. In June 2013, the preferred units may be
redeemed by Lightstone Value Plus REIT L.P. for cash and the
loan would become due upon such redemption. Through a
consolidated entity, the Company expects to record in its first
quarter 2009 financial statements income of approximately
$37 million, net of minority interest expense related to
the third party members portion of income recorded. In
addition, the Company prepaid approximately $7.3 million in
incentive management fees to its manager in 2008 related to this
transaction. In accordance with the management agreement,
installments of the annual incentive fee are subject to
potential reconciliation at the end of the 2009 fiscal year. The
Company is currently evaluating the full accounting treatment
related to this transaction and will disclose its impact in the
Companys financial statements for the three months ended
March 31, 2009.
Other
Relationships and Related Transactions
Mr. Fred Weber, our executive vice president of structured
finance, continues to serve on Arbor Commercial Mortgages
executive committee and provide services to Arbor Commercial
Mortgage. Mr. Weber does not receive a salary from Arbor
Commercial Mortgage but may receive production payments from
Arbor Commercial Mortgage for originating loans on its behalf.
Mr. Walter Horn, our Corporate Secretary and one of our
directors, served as the Corporate Secretary of Arbor Commercial
Mortgage until his retirement from this position effective
January 1, 2008. Mr. Horn does not receive a salary
from Arbor Commercial Mortgage.
36
Arbor Management LLC, the managing member of Arbor Commercial
Mortgage, has made loans during the past few years to several of
our executive officers in order for them to finance their
Class B membership interests of Arbor Commercial Mortgage.
The largest aggregate outstanding principal balance to
Mr. Elenio during the two year period ended
December 31, 2008 was $47,857 and the outstanding balance
as of December 31, 2008 was $29,279. In January 2008, Arbor
Management LLC issued an additional $25,000 loan to
Mr. Elenio and Mr. Elenio made principal payments
totaling $18,578 and $6,429 during the years ended
December 31, 2008, and 2007, respectively. The interest
rate on the loans is prime and interest payments totaled $1,931
and $2,006 during the years ended December 31, 2008 and
2007, respectively. There were no loans outstanding to
Mr. Weber as of December 31, 2008 or 2007. The largest
aggregate outstanding principal balance to Mr. Kilgore
during the two year period ended December 31, 2008 was
$139,286 and the outstanding balance as of December 31,
2008 was $132,143. In January 2008, Arbor Management LLC issued
an additional $100,000 loan to Mr. Kilgore and
Mr. Kilgore made principal payments totaling $7,143 during
both the years ended December 31, 2008 and 2007. The
interest rate on the loans is prime and interest payments
totaled $5,513 and $2,535 during the years ended
December 31, 2008 and 2007 respectively. The largest
aggregate outstanding principal balance to Mr. Horn during
the two year period ended December 31, 2008 was $14,571 and
the outstanding balance as of December 31, 2008 was
$14,571. Mr. Horn did not make any principal payments
during the years ended December 31, 2008 and 2007. The
interest rate on the loan is prime and interest payments totaled
$805 and $1,186 during the years ended December 31, 2008
and 2007, respectively. The largest aggregate outstanding
principal balance to Mr. Fogel during the two year period
ended December 31, 2008 was $34,821 and the outstanding
balance as of December 31, 2008 was $33,035. In January
2008, Arbor Management LLC issued an additional $25,000 loan to
Mr. Fogel and Mr. Fogel made principal payments
totaling $1,786 during both the years ended December 31,
2008 and 2007. The interest rate on the loans is prime and
interest payments totaled $1,378 and $836 for the years ended
December 31, 2008 and 2007, respectively. Our current
policies and procedures, as well as those of Arbor Commercial
Mortgage, do not allow for the lending of funds to any of our
directors, officers or employees.
37
PROPOSAL NO. 1
ELECTION
OF DIRECTORS
The Board of Directors, following the recommendation of the
Nominating/Corporate Governance Committee, has recommended that
Mr. Walter K. Horn, Dr. William Helmreich and
Ms. Karen K. Edwards, each be elected to serve on the Board
of Directors, each until the Companys annual meeting of
stockholders for 2012 and until their respective successors are
duly elected and qualify.
Each nominee has consented to being named in this proxy
statement and to serve if elected. If, prior to the annual
meeting, any nominee should become unavailable to serve, the
shares of voting securities represented by a properly executed
and returned proxy will be voted for such additional nominee as
shall be designated by the Board of Directors, unless the Board
of Directors determines to reduce the number of directors in
accordance with the Companys charter and bylaws.
Election of each of the director nominees named in this
Proposal No. 1 requires the affirmative vote of a
plurality of the shares of our voting securities cast in the
election of directors at the annual meeting. Shares represented
by executed proxies will be voted, if authority to do so is not
withheld, for the election of the Board of Directors
nominees. Votes may be cast in favor of or withheld with respect
to all of the director nominees, or any of them.
THE BOARD
OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE
ELECTION
OF THE NOMINEES FOR DIRECTORS IDENTIFIED ABOVE.
38
PROPOSAL NO. 2
AMENDMENT
AND RESTATEMENT OF THE COMPANYS 2003 OMNIBUS STOCK
INCENTIVE PLAN
(THE
STOCK INCENTIVE PLAN) TO AUTHORIZE:
(I) THE GRANT OF STOCK OPTIONS UNDER THE STOCK INCENTIVE
PLAN, AND
(II) THE ISSUANCE OF AN ADDITIONAL 1,250,000
SHARES OF THE COMPANYS
COMMON STOCK AS GRANTS OF RESTRICTED STOCK UNDER THE STOCK
INCENTIVE PLAN OR UNDERLYING STOCK OPTIONS GRANTED UNDER THE
STOCK INCENTIVE PLAN.
We are asking the Companys stockholders to approve an
amendment to the Companys Stock Incentive Plan to
authorize (i) the grant of stock options under the Stock
Incentive Plan, and (ii) the issuance of an additional
1,250,000 shares of the companys common stock as
grants of restricted stock under the Stock Incentive Plan or
underlying stock options granted under the Stock Incentive Plan.
The Board of Directors believes that the Stock Incentive Plan is
an important factor in attracting and retaining the high caliber
employees and other service providers essential to the
Companys success and in aligning those individuals
long-term interests with those of our stockholders. Therefore,
on April 30, 2009, the Board of Directors amended the Stock
Incentive Plan, subject to the approval of the Companys
stockholders at the 2009 annual meeting of stockholders, to
increase the total number of shares of our common stock
authorized and reserved for issuance under the Stock Incentive
Plan by 1,250,000 shares such that a total of
2,385,000 shares of common stock were reserved and
authorized for issuance thereunder. As of that date, an
aggregate of 1,003,157 shares that had been granted under
the Stock Incentive Plan were outstanding and
131,843 shares remained available for future grants.
Following the stockholders approval of the amendment to
the Stock Incentive Plan, the total number of shares authorized
and reserved for future issuance under the Stock Incentive Plan
will not exceed 2,385,000 shares. The amendment is intended
to ensure that the Stock Incentive Plan will have available the
number of shares necessary to meet these needs.
On April 30, 2009, the Board of Directors also amended the
Stock Incentive Plan, subject to the approval of the
Companys stockholders at the 2009 annual meeting of
stockholders, to authorize the grant of stock options under the
Stock Incentive Plan. Given the current economic environment,
the significant dislocation in the capital and credit markets in
general and the commercial real estate market in particular, and
the significant decline in the market value of the
Companys common stock over the past year, the Board
believes that stock options, in addition to restricted stock
awards, are a viable tool to retain key employees on a going
forward basis. To the extent stock options are granted under the
Stock Incentive Plan in the future, (i) the exercise price
for the stock options will be equivalent to the market price of
the underlying common stock on the date of grant, (ii) the
stock options will vest over a multi-year period, and
(iii) the stock options will generally be exercisable for
ten years from the date of grant. Stock options align employee
incentives with the interests of shareholders because they have
value only if the Companys stock price increases over
time. The Board believes that the multi-year term of the stock
options will help focus employees on the Companys
long-term growth. Because the Companys stock options will
vest over a multi-year period, stock options are intended to
help retain key associates and keep employees focused on
long-term performance.
The Board of Directors believes that approval of the
above-described amendment to the Stock Incentive Plan is in the
best interests of the Company and its stockholders.
The material features of the Stock Incentive Plan are summarized
below. The following summary does not purport to be complete,
and is subject to and qualified in its entirety by reference to
the complete text of the Stock Incentive Plan which is attached
to this proxy statement as Appendix A.
General
Restricted stock awards may be granted under the Stock Incentive
Plan. A total of 1,135,000 shares of the Companys
common stock are currently reserved for issuance pursuant to
awards under the Stock Incentive Plan, subject to adjustment
upon certain corporate transactions. As of April 30, 2009,
an aggregate of 1,003,157 shares granted under the Stock
Incentive Plan were outstanding and 131,843 shares remained
available for future grants. If
39
any shares subject to an award are forfeited, the forfeited
shares that were subject to the award will become available for
future grants under the Stock Incentive Plan.
Upon stockholder approval of the amendment to the Stock
Incentive Plan, as specified in this Proposal No. 2,
(i) the total number of shares reserved for issuance will be
2,385,000 shares and (ii) the Company would be authorized
to grant stock options as well as restricted stock as awards
under the Stock Incentive Plan. On April 29, 2009, the per
share closing price of the Companys common stock was
$2.54, as reported on the NYSE.
Purpose
The purpose of the Stock Incentive Plan is to enable the Company
to attract and retain highly qualified personnel who will
contribute to the Companys success and to provide
incentives to employees and other service providers that are
linked directly to increases in stockholder value, and will
therefore inure to the benefit of all of the Companys
stockholders.
Administration
The Stock Incentive Plan is administered by the Companys
Board of Directors or, at the boards discretion, by a
committee appointed by the board (each, the plan
administrator). The plan administrator has the authority
to grant awards and otherwise administer the Stock Incentive
Plan. All decisions made by the plan administrator pursuant to
the provisions of the Stock Incentive Plan are final, conclusive
and binding upon all persons.
Eligibility
Officers, directors, employees, consultants (including employees
of Arbor Commercial Mortgage who provide services to the
Company) and advisors of the Company, its parent or subsidiaries
are eligible to receive awards under the Stock Incentive Plan.
As of April 30, 2009, there were approximately 60
individuals eligible to receive awards under the Stock Incentive
Plan.
Types of
Awards
The Stock Incentive Plan currently provides for the grant of
restricted shares of the Companys common stock. On
April 30, 2009, the Board approved an amendment to the
Stock Incentive Plan, subject to the approval by the
Companys stockholders being sought in this
Proposal No. 2, to authorize the grant under the Stock
Incentive Plan of options to purchase shares of the
Companys common stock. These awards are discussed in more
detail below.
Restricted
Stock
A restricted stock award is an award of shares of common stock
that is subject to restrictions on transferability and such
other restrictions, if any, as the plan administrator may
determine in its sole discretion. The restrictions may lapse
separately or in combination at such times, under such
circumstances, including, without limitation, a specified period
of employment or the satisfaction of pre-established criteria,
in such installments or otherwise, as the plan administrator may
determine.
Restricted stock awards may be issued either alone or in
addition to other awards granted under the Stock Incentive Plan.
The recipient of a restricted stock award does not have any
rights with respect to any such award until he or she has
executed an award agreement evidencing the award and delivered
an executed copy to the Company generally within a period of
60 days after the grant date.
Except to the extent restricted under the award agreement
relating to the restricted stock, the recipient of a restricted
stock award generally has all of the rights of a stockholder.
The rights of a restricted stock award recipient upon
termination of employment or service is as set forth in the
award agreement governing such award and the terms of the award
agreement may differ from award to award. The Companys
restricted stock awards generally provide that upon cessation of
employment with or service to the Company, shares of restricted
stock and any and all accrued but unpaid dividends that at the
time have not been released from restrictions will be forfeited.
40
Stock
Options
Options granted under the Stock Incentive Plan may be incentive
stock options meeting the definition of an incentive stock
option under Section 422 of the Internal Revenue Code or
options which do not qualify as incentive stock options
(referred to as nonqualified options). The award will be
evidenced by an award agreement that specifies the option price,
duration of the option, the number of shares to which the option
pertains, termination and transferability rights and other
provisions as the committee may determine to be appropriate. The
option price for each grant will be at least equal to the fair
market value (as defined in the Stock Incentive Plan) of the
shares subject to the option on the grant date of the option.
The date on which the committee adopts a resolution granting an
option shall be considered the grant date of the option, unless
such resolution specifies a later date.
No option may be exercised later than the tenth anniversary date
of its grant.
Adjustments
Upon Certain Corporate Transactions
In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend or other change in corporate
structure affecting the Companys common stock, the plan
administrator shall determine to what extent an equitable
substitution or proportionate adjustment shall be made in
(1) the aggregate number of shares of the common stock
reserved for issuance under the Stock Incentive Plan, and
(2) the kind, number and purchase price of shares of the
common stock subject to outstanding awards of restricted stock
granted under the Stock Incentive Plan. Other substitutions or
adjustments shall be made as determined in the plan
administrators discretion, including the cancellation of
any outstanding awards in exchange for payment in cash or other
property.
Effect of
a Change in Control
The treatment of restricted stock in the event of a change in
control of the Company is as set forth in the applicable award
agreement. The Companys restricted stock award agreements
generally provide that all restrictions lapse as of the date of
the change in control of the Company. The definition of a
change in control is provided in the restricted
stock agreement and may vary from award to award. Generally a
change in control will occur upon the occurrence of
one of the following events:
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a person is or becomes the owner of 25% or more of the voting
stock of the Company;
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directors serving on the board on the date of the award
agreement and any new directors whose election or nomination is
approved or recommended by at least a two-thirds vote of the
directors then still in office who either were directors on the
date of the award agreement or whose election or nomination was
previously so approved or recommended, cease to constitute a
majority of directors;
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consummation of a merger or consolidation of the Company or any
subsidiary with any other corporation; or
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approval by the Companys stockholders of a plan of
complete liquidation or dissolution of the Company or there is
consummated an agreement for the sale or disposition of all or
substantially all of the Companys assets.
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Awards agreements providing for the grant of stock options will
generally provide that they vest over a multi-year period. In
addition, they may provide that the vesting terms of the stock
options will be accelerated upon a change of control of the
Company.
Amendment
and Termination
The Companys Board of Directors may amend, alter or
discontinue the Stock Incentive Plan but cannot take any action
that would impair the rights of an award recipient without such
recipients consent. To the extent necessary and desirable,
the Board of Directors must obtain approval of the stockholders
for any amendment that would: (a) other than through
adjustment as provided in the Stock Incentive Plan, increase the
total number of shares of our common stock reserved for issuance
under the Stock Incentive Plan; (b) change the class of
officers, directors, employees, consultants and advisors
eligible to participate in the Stock Incentive Plan; or (c)
extend the maximum option term set forth in the Stock Incentive
Plan. The plan administrator may amend the terms of any award
granted under the Stock Incentive Plan, prospectively or
retroactively but generally may not impair the rights of any
award recipient without his or her consent.
The Stock Incentive Plan will terminate on June 25, 2013,
provided that any awards then outstanding under the Stock
Incentive Plan may extend beyond that date.
41
Federal
Income Tax Consequences of the Stock Incentive Plan
The following discussion of certain relevant federal income tax
effects applicable to stock options and restricted stock awards
granted under the Stock Incentive Plan is a summary only, and
reference is made to the Internal Revenue Code for a complete
statement of all relevant federal tax provisions.
Stock
Options
With respect to nonqualified options (NSOs), the
participant will recognize no income upon grant of the option,
and, upon exercise, will recognize ordinary income to the extent
of the excess of the fair market value of the shares on the date
of option exercise over the amount paid by the participant for
the shares. Upon a subsequent disposition of the shares received
under the option, the participant generally will recognize
capital gain or loss to the extent of the difference between the
fair market value of the shares at the time of exercise and the
amount realized on the disposition.
In general, no taxable income is realized by a participant upon
the grant of an incentive stock option (ISO). If
shares of common stock are issued to a participant (option
shares) pursuant to the exercise of an ISO granted under
the Stock Incentive Plan and the participant does not dispose of
the option shares within the two-year period after the date of
grant or within one year after the receipt of such option shares
by the participant (a disqualifying disposition),
then, generally (i) the participant will not realize
ordinary income upon exercise and (ii) upon sale of such
option shares, any amount realized in excess of the exercise
price paid for the option shares will be taxed to such
participant as capital gain (or loss). The amount by which the
fair market value of the common stock on the exercise date of an
ISO exceeds the purchase price generally will constitute an item
which increases the participants alternative minimum
taxable income.
If option shares acquired upon the exercise of an ISO are
disposed of in a disqualifying disposition, the participant
generally would include in ordinary income in the year of
disposition an amount equal to the excess of the fair market
value of the option shares at the time of exercise (or, if less,
the amount realized on the disposition of the option shares),
over the exercise price paid for the option shares.
Subject to certain exceptions, an option generally will not be
treated as an ISO if it is exercised more than three months
following termination of employment. If an ISO is exercised at a
time when it no longer qualifies as an ISO, such option will be
treated as an NSO as discussed above.
In general, the Company will receive an income tax deduction at
the same time and in the same amount as the employee recognizes
ordinary income.
If an option is exercised through the use of the Companys
common stock previously owned by the participant, such exercise
generally will not be considered a taxable disposition of the
previously owned shares and, thus, no gain or loss will be
recognized with respect to such previously owned shares upon
such exercise. The amount of any built-in gain on the previously
owned shares generally will not be recognized until the new
shares acquired on the option exercise are disposed of in a sale
or other taxable transaction. However, if the previously owned
shares were acquired on the exercise of an incentive stock
option and the holding period requirement for those shares was
not satisfied at the time they were used to exercise a stock
option, such use would constitute a disqualifying disposition of
such previously owned shares resulting in the recognition of
ordinary income in the amount described above.
Restricted
Stock
A participant who receives a grant of restricted stock will not
recognize any taxable income at the time the award is granted,
provided the shares are subject to restrictions (that is, they
are nontransferable and subject to a substantial risk of
forfeiture). A participants rights in restricted stock
awarded under the Stock Incentive Plan are subject to a
substantial risk of forfeiture if the rights to full enjoyment
of the shares are conditioned, directly or indirectly, upon the
future performance of substantial services by the participant.
However, the participant may elect under Section 83(b) of
the Internal Revenue Code to recognize compensation income in
the year of the award in an amount equal to the fair market
value of the shares on the date of the award, determined without
regard to the restrictions. If the participant does not make a
Section 83(b) election within 30 days of receipt of
the restricted shares, the fair market value of the shares on
the date the restrictions lapse, less any amount paid by the
participant
42
for such shares, will be treated as compensation income to the
participant and will be taxable in the year the restrictions
lapse. The Company generally will be entitled to a compensation
deduction for the amount of compensation income the participant
recognizes.
Deductibility
Limit on Compensation in Excess of $1 Million.
Section 162(m) of the Internal Revenue Code generally
limits the deductible amount of total annual compensation paid
by a public company to each covered employee
(defined as the chief executive officer and three other most
highly compensated executive officers of the Company other than
the chief financial officer) to no more than $1 million.
This includes, unless an exemption applies, compensation
otherwise deductible in connection with awards granted under the
Stock Incentive Plan. Excluded from total compensation for this
purpose is compensation that is performance-based
within the meaning of Section 162(m) of the Internal
Revenue Code. Unless an exception applies, compensation
otherwise deductible in connection with awards granted under the
Stock Incentive Plan will be subject to this limit.
New Plan
Benefits
The Company cannot determine the number of restricted stock and
stock option awards under the Stock Incentive Plan, if approved,
that will be granted in 2009 because these grants will be made
at the discretion of the Stock Incentive Plan administrator and,
accordingly, are not yet determinable.
Vote
Required for Approval of the Amendment to the Stock Incentive
Plan
Approval of the amendment to the Stock Incentive Plan requires
the affirmative vote of a majority of the votes cast on the
proposal at the annual meeting by holders of our voting
securities; provided that the total vote cast on the proposal
represents over 50% in interest of all securities entitled to
vote on the proposal. For purposes of the vote on the Stock
Incentive Plan, abstentions will have the same effect as votes
against the proposal and broker non-votes will have the same
effect as votes against the proposal, unless holders of more
than 50% in interest of all securities entitled to vote on the
proposal cast votes, in which event broker non-votes will not
have any effect on the result of the vote. If stockholder
approval of the amendment to the Stock Incentive Plan is not
obtained, then no issuances pursuant to the Stock Incentive Plan
will be made that, when combined with the number of shares
previously issued pursuant to the Stock Incentive Plan and not
otherwise forfeited, exceeds in the aggregate
1,135,000 shares of our common stock.
THE BOARD
OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE
AMENDMENT AND RESTATEMENT OF THE STOCK INCENTIVE PLAN TO
AUTHORIZE (I) THE GRANT OF STOCK OPTIONS UNDER THE STOCK
INCENTIVE PLAN, AND (II) THE ISSUANCE OF AN ADDITIONAL
1,250,000 SHARES OF THE COMPANYS COMMON STOCK AS GRANTS OF
RESTRICTED STOCK UNDER THE STOCK INCENTIVE PLAN OR UNDERLYING
STOCK OPTIONS GRANTED UNDER THE STOCK INCENTIVE PLAN.
43
PROPOSAL NO. 3
RATIFICATION
OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE
COMPANYS
INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL YEAR 2009
The Audit Committee of our Board of Directors has appointed
Ernst & Young LLP as the Companys independent
registered public accounting firm for fiscal year ending
December 31, 2009. The board has endorsed this appointment.
Ernst & Young audited our consolidated financial
statements for fiscal years ended December 31, 2008 and
December 31, 2007. A representative of Ernst &
Young is expected to be present at the annual meeting and will
be available to respond to appropriate questions from our
stockholders and will be given an opportunity to make a
statement if he or she desires to do so.
Stockholder ratification of the appointment of Ernst &
Young LLP as our independent registered public accounting firm
is not required by our bylaws or otherwise. However, the Board
of Directors is submitting the appointment of Ernst &
Young to the stockholders for ratification as a matter of good
corporate governance. Ratification of the selection of
Ernst & Young as our independent registered public
accounting firm for fiscal year 2009 requires the affirmative
vote of a majority of the shares of our voting securities cast
on the proposal at the annual meeting.
If this appointment is not ratified by our stockholders, the
Audit Committee and the board may reconsider its recommendation
and endorsement, respectively. Abstentions will not be counted
as having been voted and will have no effect on the outcome of
the vote for this proposal. Even if the appointment is ratified,
the Audit Committee in its discretion may direct the appointment
of a different independent registered public accounting firm at
any time during the year if it determines that such a change
would be in the best interests of the Company and its
stockholders.
Independent
Accountants Fees
Aggregate fees for professional services rendered for us by
Ernst & Young and its affiliates for fiscal years
ended December 31, 2008 and December 31, 2007 were as
follows:
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
Audit Fees
|
|
$
|
1,286,000
|
|
|
$
|
1,245,981
|
|
Audit-Related Fees
|
|
|
80,461
|
|
|
|
98,687
|
|
Tax Fees
|
|
|
0
|
|
|
|
0
|
|
All Other Fees
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,366,461
|
|
|
$
|
1,344,668
|
|
|
|
|
|
|
|
|
|
|
The Audit Fees billed were for professional services rendered
for the audit of our consolidated financial statements for
fiscal years ended December 31, 2008 and December 31,
2007 and for other services, including compliance with the
Sarbanes-Oxley Act of 2002, review of financial statements
included in
Form 10-Q,
issuance of comfort letters, consents and review of the
Companys registration statements under the Securities Act
that were filed with the SEC in those fiscal years.
The Audit-Related Fees were for professional services rendered
relating to (i) due diligence and
agreed-upon
procedures for 2008, and (ii) due diligence and
agreed-upon
procedures for 2007.
44
Audit
Committee Pre-Approval Policy
In accordance with applicable laws and regulations, the Audit
Committee reviews and pre-approves any non-audit services to be
performed by Ernst & Young to ensure that the work
does not compromise its independence in performing audit
services. The Audit Committee also reviews and pre-approves all
audit services. In some cases, pre-approval of a particular
category or group of services, such as tax consulting services
and audit services, is provided by the full Audit Committee for
up to a year and is subject to a specific budget. In other
cases, the chairman of the Audit Committee has the delegated
authority from the full Audit Committee to pre-approve
additional services, and such pre-approvals are then
communicated to the full Audit Committee.
The policy contains a de minimis provision that operates to
provide retroactive approval for permissible non-audit services
under certain circumstances. No services were provided by
Ernst & Young during 2008 and 2007 under such
provision.
THE BOARD
OF DIRECTORS RECOMMENDS A VOTE FOR THE
RATIFICATION
OF THE APPOINTMENT OF ERNST & YOUNG LLP
AS THE COMPANYS INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
FOR FISCAL YEAR 2009.
45
STOCKHOLDER
PROPOSALS FOR 2010
Proposals received from stockholders in accordance with
Rule 14a-8
under the Exchange Act are given careful consideration by our
Nominating/Corporate Governance Committee and our Board of
Directors. If a stockholder intends to present a proposal at the
Companys 2010 annual meeting of stockholders pursuant to
Rule 14a-8
under the Exchange Act, in order for such stockholder proposal
to be included in the Companys proxy statement for that
meeting, the stockholder proposal must be received by the
Company at its corporate headquarters, located at 333 Earle
Ovington Boulevard, Suite 900, Uniondale, New York 11553,
Attention: Secretary, on or before January 1, 2010.
In order for a stockholder proposal submitted outside of
Rule 14a-8
to be considered at the Companys 2010 annual meeting of
stockholders, such proposal must contain the information
required by the Companys bylaws and be received by the
Company in accordance with the Companys bylaws. Pursuant
to the Companys current bylaws, stockholder proposals made
outside of
Rule 14a-8
under the Exchange Act must be submitted not later than
February 1, 2010 and not earlier than January 1, 2010;
provided, however, in the event that mailing of the notice for
the 2010 annual meeting of stockholders is advanced more than
30 days prior to or delayed more than 30 days after
May 1, 2010, a proposal by a stockholder to be timely must
be delivered not earlier than the 120th day prior to the
date that mailing of the notice for such meeting is first made
and not later than the close of business on the later of
(1) the 90th day prior to the date that mailing of the
notice for such meeting is first made and (2) the tenth day
following the date on which public announcement of the date of
the 2010 annual meeting of stockholders is first made.
OTHER
MATTERS
Our Board of Directors knows of no other matters that have been
submitted for consideration at this annual meeting. If any other
matters properly come before our stockholders at this annual
meeting, the persons named on the enclosed proxy card intend to
vote the shares they represent in accordance with their
discretion.
By Order of the Board of Directors,
Walter K. Horn
Secretary
April 30, 2009
Uniondale, New York
46
Appendix A
ARBOR
REALTY TRUST, INC.
2003
OMNIBUS STOCK INCENTIVE PLAN
As
Amended and Restated on April 30, 2009,
subject to approval of the Companys
stockholders
Section 1. General
Purpose of Plan; Definitions.
The name of this plan is the Arbor Realty Trust, Inc. 2003
Omnibus Stock Incentive Plan, as amended and restated (the
Plan).
The purpose of the Plan is to enable the Company to attract and
retain highly qualified personnel who will contribute to the
Companys success and to provide incentives to Participants
(defined below) that are linked directly to stockholder value
and will therefore inure to the benefit of all stockholders of
the Company.
For purposes of the Plan, the following terms shall be defined
as set forth below:
(a) Administrator means the
Board, or if and to the extent the Board does not administer the
Plan, the Committee in accordance with Section 2 below.
(b) Award means any award under
the Plan.
(c) Award Agreement means, with
respect to each Award, the signed written agreement between the
Company and the Participant setting forth the terms and
conditions of the Award.
(d) Board means the Board of
Directors of the Company.
(e) Code means the Internal
Revenue Code of 1986, as amended from time to time, or any
successor thereto.
(f) Committee means any committee
the Board may appoint to administer the Plan. If at any time or
to any extent the Board shall not administer the Plan, then the
functions of the Board specified in the Plan shall be exercised
by the Committee.
(g) Common Stock means the common
stock, par value $.01 per share, of the Company.
(h) Company means Arbor Realty
Trust, Inc., a Maryland corporation (or any successor
corporation).
(i) Disability means the
inability of a Participant to perform substantially his or her
duties and responsibilities to the Company or to any Parent or
Subsidiary by reason of a physical or mental disability or
infirmity (i) for a continuous period of six months, or
(ii) at such earlier time as the Participant submits
medical evidence satisfactory to the Administrator that the
Participant has a physical or mental disability or infirmity
that will likely prevent the Participant from returning to the
performance of the Participants work duties for six months
or longer. The date of such Disability shall be the last day of
such six-month period or the day on which the Participant
submits such satisfactory medical evidence, as the case may be.
(j) Eligible Recipient means an
officer, director, employee, consultant (including employees of
the Manager who provide services to the Company) or advisor of
the Company or of any Parent or Subsidiary.
(k) Exercise Price means the per
share price, if any, at which a holder of an Option may purchase
the Shares issuable upon exercise of the Option.
(l) Fair Market Value as of a
particular date shall mean the fair market value of a share of
Common Stock as determined by the Administrator in its sole
discretion; provided, however, that (i) if
the Common Stock is admitted to trading on a national securities
exchange, fair market value of a share of Common Stock on any
date shall be the closing sale price reported for such share on
such exchange on such date or, if no sale was reported on such
date, on the last date preceding such date on which a sale was
reported, (ii) if the Common Stock is admitted to quotation
on the National Association of Securities Dealers Automated
Quotation
A-1
(Nasdaq) System or other comparable quotation system
and has been designated as a National Market System
(NMS) security, fair market value of a share of
Common Stock on any date shall be the closing sale price
reported for such share on such system on such date or, if no
sale was reported on such date, on the last date preceding such
date on which a sale was reported, or (iii) if the Common
Stock is admitted to quotation on the Nasdaq System but has not
been designated as an NMS security, fair market value of a share
of Common Stock on any date shall be the average of the highest
bid and lowest asked prices of such share on such system on such
date or, if no bid and ask prices were reported on such date, on
the last date preceding such date on which both bid and ask
prices were reported.
(m) Incentive Stock Option means
any Option intended to be designated as an incentive stock
option within the meaning of Section 422 of the Code.
(n) Manager means Arbor
Commercial Mortgage, LLC, a New York limited liability company.
(o) Nonqualified Stock Option
means any Option that is not an Incentive Stock Option,
including any Option that provides (as of the time such Option
is granted) that it will not be treated as an Incentive Stock
Option.
(p) Option means an option to
purchase Shares granted pursuant to Section 6 below.
(q) Parent means any corporation
(other than the Company) in an unbroken chain of corporations
ending with the Company, if each of the corporations in the
chain (other than the Company) owns stock possessing 50% or more
of the combined voting power of all classes of stock in one of
the other corporations in the chain.
(r) Participant means any
Eligible Recipient selected by the Administrator, pursuant to
the Administrators authority in Section 2 below, to
receive grants of Options
and/or
awards of Restricted Stock.
(s) Restricted Stock means Shares
subject to certain restrictions granted pursuant to
Section 6 below.
(t) Shares means shares of Common
Stock reserved for issuance under the Plan, as adjusted pursuant
to Sections 3 and 4, and any successor security.
(u) Subsidiary means any
corporation (other than the Company) in an unbroken chain of
corporations beginning with the Company, if each of the
corporations (other than the last corporation) in the unbroken
chain owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other
corporations in the chain.
Section 2. Administration.
The Plan shall be administered by the Board or, at the
Boards sole discretion, by the Committee, which shall be
appointed by the Board, and which shall serve at the pleasure of
the Board. Pursuant to the terms of the Plan, the Administrator
shall have the power and authority:
(a) to select those Eligible Recipients who shall be
Participants;
(b) to determine whether and to what extent Options or
awards of Restricted Stock are to be granted hereunder to
Participants;
(c) to determine the number of Shares to be covered by each
Award granted hereunder;
(d) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of each Award granted
hereunder; and
(e) to determine the terms and conditions, not inconsistent
with the terms of the Plan, which shall govern all written
instruments evidencing Options or awards of Restricted Stock
granted hereunder.
The Administrator shall have the authority, in its sole
discretion, to adopt, alter and repeal such administrative
rules, guidelines and practices governing the Plan as it shall
from time to time deem advisable; to interpret the terms and
provisions of the Plan and any Award issued under the Plan (and
any Award Agreement relating thereto); and to otherwise
supervise the administration of the Plan.
A-2
All decisions made by the Administrator pursuant to the
provisions of the Plan shall be final, conclusive and binding on
all persons, including the Company and the Participants.
Section 3. Shares
Subject to Plan.
The total number of shares of Common Stock reserved and
available for issuance under the Plan shall be
2,385,000 shares. Such shares may consist, in whole or in
part, of authorized and unissued shares or treasury shares.
To the extent that (i) an Option expires or is otherwise
terminated without being exercised, or (ii) any Shares
subject to any award of Restricted Stock are forfeited, such
Shares shall again be available for issuance in connection with
future Awards granted under the Plan.
Section 4. Corporate
Transactions.
In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend or other change in corporate
structure affecting the Common Stock, an equitable substitution
or proportionate adjustment shall be made in (i) the
aggregate number of Shares reserved for issuance under the Plan,
(ii) the kind, number and Exercise Price of Shares subject
to outstanding Options granted under the Plan, and
(iii) the kind, number and purchase price of Shares subject
to outstanding awards of Restricted Stock granted under the
Plan, in each case as may be determined by the Administrator, in
its sole discretion. Such other substitutions or adjustments
shall be made as may be determined by the Administrator, in its
sole discretion. In connection with any event described in this
paragraph, the Administrator may provide, in its sole
discretion, for the cancellation of any outstanding awards and
payment in cash or other property therefor.
Section 5. Eligibility.
Eligible Recipients may be granted Options
and/or
awards of Restricted Stock. The Participants under the Plan
shall be selected from time to time by the Administrator, in its
sole discretion, from among the Eligible Recipients.
The Administrator shall have the authority to grant to any
Eligible Recipient who is an employee of the Company or of any
Parent or Subsidiary (including directors who are also officers
of the Company) Incentive Stock Options, Nonqualified Stock
Options, or both types of Options,
and/or
Restricted Stock. Non-employee Directors of the Company or of
any Parent or Subsidiary, consultants (including employees of
the Manager who provide services to the Company) or advisors who
are not also employees of the Company or of any Parent or
Subsidiary may only be granted Options that are Nonqualified
Stock Options
and/or
Restricted Stock.
Section 6. Options.
Options may be granted alone or in addition to other awards of
Restricted Stock granted under the Plan. Any Option granted
under the Plan shall be in such form as the Administrator may
from time to time approve, and the provisions of each Option
need not be the same with respect to each Participant.
Participants who are granted Options shall enter into an Award
Agreement with the Company, in such form as the Administrator
shall determine, which Award Agreement shall set forth, among
other things, the Exercise Price of the Option, the term of the
Option and provisions regarding exercisability of the Option
granted thereunder.
The Options granted under the Plan may be of two types:
(i) Incentive Stock Options and (ii) Nonqualified
Stock Options. To the extent that any Option does not qualify as
an Incentive Stock Option, it shall constitute a separate
Nonqualified Stock Option. More than one Option may be granted
to the same Participant and be outstanding concurrently
hereunder.
Options granted under the Plan shall be subject to the following
terms and conditions and shall contain such additional terms and
conditions, not inconsistent with the terms of the Plan, as the
Administrator shall deem desirable:
(a) Option Exercise Price. The per
share Exercise Price of Shares purchasable under an Option shall
be determined by the Administrator in its sole discretion at the
time of grant but shall not, (i) in the case of Incentive
Stock Options, be less than 100% of the Fair Market Value of the
Common Stock on such date (110% of the Fair Market Value per
Share on such date if, on such date, the Eligible Recipient owns
(or is deemed to own under Section 424(d) of the Code)
stock possessing more than ten percent of the total combined
voting
A-3
power of all classes of stock of the Company, or any Parent or
Subsidiary), and (ii) in the case of Nonqualified Stock
Options, be less than 100% of the Fair Market Value of the
Common Stock on such date.
(b) Option Term. The term of each
Option shall be fixed by the Administrator, but no Option shall
be exercisable more than ten years after the date such Option is
granted; provided, however, that if an employee
owns or is deemed to own (by reason of the attribution rules of
Section 424(d) of the Code) more than 10% of the combined
voting power of all classes of stock of the Company or of any
Parent or Subsidiary and an Incentive Stock Option is granted to
such employee, the term of such Incentive Stock Option (to the
extent required by the Code at the time of grant) shall be no
more than five years from the date of grant.
(c) Exercisability. Options shall
be exercisable at such time or times and subject to such terms
and conditions as shall be determined by the Administrator at or
after the time of grant. The Administrator may also provide that
any Option shall be exercisable only in installments, and the
Administrator may waive such installment exercise provisions at
any time, in whole or in part, based on such factors as the
Administrator may determine, in its sole discretion.
(d) Method of Exercise. Subject to
Section 6(c), Options may be exercised in whole or in part
at any time during the Option period, by giving written notice
of exercise to the Company specifying the number of Shares to be
purchased, accompanied by (i) payment in full of the
aggregate Exercise Price of the Shares so purchased in cash,
(ii) delivery of outstanding shares of Common Stock with a
Fair Market Value on the date of exercise equal to the aggregate
Exercise Price payable with respect to the Options
exercise or (iii) simultaneous sale through a broker
reasonably acceptable to the Administrator of Shares acquired on
exercise, as permitted under Regulation T of the Federal
Reserve Board.
In the event a grantee elects to pay the Exercise Price payable
with respect to an Option pursuant to clause (ii) above:
(A) only a whole number of share(s) of Common Stock (and
not fractional shares of Common Stock) may be tendered in
payment, (B) such grantee must present evidence acceptable
to the Company that he or she has owned any such shares of
Common Stock tendered in payment of the Exercise Price (and that
such tendered shares of Common Stock have not been subject to
any substantial risk of forfeiture) for at least six months
prior to the date of exercise, and (C) Common Stock must be
delivered to the Company. Delivery for this purpose may, at the
election of the grantee, be made either by (i) physical
delivery of the certificate(s) for all such shares of Common
Stock tendered in payment of the Exercise Price, accompanied by
duly executed instruments of transfer in a form acceptable to
the Company, or (ii) direction to the grantees broker
to transfer, by book entry, of such shares of Common Stock from
a brokerage account of the grantee to a brokerage account
specified by the Company. When payment of the Exercise Price is
made by delivery of Common Stock, the difference, if any,
between the aggregate Exercise Price payable with respect to the
Option being exercised and the Fair Market Value of the shares
of Common Stock tendered in payment (plus any applicable taxes)
shall be paid in cash. No grantee may tender shares of Common
Stock having a Fair Market Value exceeding the aggregate
Exercise Price payable with respect to the Option being
exercised (plus any applicable taxes).
(e) Non-Transferability of
Options. Except as otherwise provided by the
Administrator or in the Award Agreement, Options may not be
sold, pledged, assigned, hypothecated, transferred, or disposed
of in any manner other than by will or by the laws of descent or
distribution.
(f) Termination of Employment or
Service. The rights of Participants granted
Options upon termination of employment or service as a director,
consultant or advisor to the Company or to any Parent or
Subsidiary for any reason prior to the exercise of such Options
shall be set forth in the Award Agreement governing such Options.
(g) Annual Limit on Incentive Stock
Options. To the extent that the aggregate
Fair Market Value (determined as of the date the Incentive Stock
Option is granted) of Shares with respect to which Incentive
Stock Options granted to a Participant under this Plan and all
other option plans of the Company or of any Parent or Subsidiary
become exercisable for the first time by the Participant during
any calendar year exceeds $100,000 (as determined in accordance
with Section 422(d) of the Code), the portion of such
Incentive Stock Options in excess of $100,000 shall be treated
as Nonqualified Stock Options.
A-4
(h) Rights as Stockholder. An
Optionee shall have no rights to dividends or any other rights
of a stockholder with respect to the Shares subject to the
Option until the Optionee has given written notice of exercise,
has paid in full for such Shares, has satisfied the requirements
of Section 10(d) hereof and, if requested, has given the
representation described in Section 10(b) hereof.
Section 7. Restricted
Stock.
Awards of Restricted Stock may be issued either alone or in
addition to Options granted under the Plan. The Administrator
shall determine the Eligible Recipients to whom, and the time or
times at which, awards of Restricted Stock shall be made; the
number of Shares to be awarded; the price, if any, to be paid by
the Participant for the acquisition of Restricted Stock; the
Restricted Period (as defined in Section 7(b)) applicable
to awards of Restricted Stock. The Administrator may also
condition the grant of the award of Restricted Stock upon the
exercise of Options or upon such other criteria as the
Administrator may determine, in its sole discretion. The
provisions of the awards of Restricted Stock need not be the
same with respect to each Participant.
(a) Awards and Certificates. The
prospective recipient of awards of Restricted Stock shall not
have any rights with respect to any such Award, unless and until
such recipient has executed an Award Agreement evidencing the
Award (a Restricted Stock Award Agreement) and
delivered a fully executed copy thereof to the Company, within a
period of sixty days (or such other period as the Administrator
may specify) after the award date. Except as otherwise provided
below in Section 7(b), each Participant who is granted an
award of Restricted Stock shall be issued a stock certificate in
respect of such shares of Restricted Stock, which certificate
shall be registered in the name of the Participant and shall
bear an appropriate legend referring to the terms, conditions,
and restrictions applicable to any such Award.
The Company may require that the stock certificates evidencing
Restricted Stock granted hereunder be held in the custody of the
Company until the restrictions thereon shall have lapsed, and
that, as a condition of any award of Restricted Stock, the
Participant shall have delivered a stock power, endorsed in
blank, relating to the Shares covered by such Award.
(b) Restrictions and
Conditions. The awards of Restricted Stock
granted pursuant to this Section 7 shall be subject to the
following restrictions and conditions:
(i) Subject to the provisions of the Plan and the
Restricted Stock Award Agreement governing any such Award,
during such period as may be set by the Administrator commencing
on the date of grant (the Restricted Period), the
Participant shall not be permitted to sell, transfer, pledge or
assign shares of Restricted Stock awarded under the Plan;
provided, however, that the Administrator may, in
its sole discretion, provide for the lapse of such restrictions
in installments and may accelerate or waive such restrictions in
whole or in part based on such factors and such circumstances as
the Administrator may determine, in its sole discretion.
(ii) Except as provided in Section 7(b)(i), the
Participant shall generally have the rights of a stockholder of
the Company with respect to Restricted Stock during the
Restricted Period. Certificates for unrestricted Shares shall be
delivered to the Participant promptly after, and only after, the
Restricted Period shall expire without forfeiture in respect of
such awards of Restricted Stock except as the Administrator, in
its sole discretion, shall otherwise determine.
(iii) The rights of Participants granted awards of
Restricted Stock upon termination of employment or service as a
director, consultant or advisor to the Company or to any Parent
or Subsidiary for any reason during the Restricted Period shall
be set forth in the Restricted Stock Award Agreement governing
such Awards.
Section 8. Amendment
and Termination.
The Board may amend, alter or discontinue the Plan, but no
amendment, alteration, or discontinuation shall be made that
would impair the rights of a Participant under any Award
theretofore granted without such Participants
A-5
consent. To the extent necessary and desirable, the Board shall
obtain approval of the stockholders (as described below), for
any amendment that would:
(a) except as provided in Sections 3 or 4 of the Plan,
increase the total number of Shares reserved for issuance under
the Plan;
(b) change the class of officers, directors, employees,
consultants and advisors eligible to participate in the
Plan; or
(c) extend the maximum Option term under Section 6(b)
of the Plan.
The Administrator may amend the terms of any Award theretofore
granted, prospectively or retroactively, but, subject to
Section 4 of the Plan, no such amendment shall impair the
rights of any Participant without his or her consent.
Section 9. Unfunded
Status of Plan.
The Plan is intended to constitute an unfunded plan
for incentive compensation. With respect to any payments not yet
made to a Participant by the Company, nothing contained herein
shall give any such Participant any rights that are greater than
those of a general creditor of the Company.
Section 10. General
Provisions.
(a) Shares shall not be issued pursuant to any Award
granted hereunder unless such Award and the issuance and
delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act
of 1934, as amended, and the requirements of any stock exchange
upon which the Common Stock may then be listed, and shall be
further subject to the approval of counsel for the Company with
respect to such compliance.
(b) The Administrator may require each person acquiring
Shares to represent to and agree with the Company in writing
that such person is acquiring the Shares without a view to
distribution thereof. The certificates for such Shares may
include any legend which the Administrator deems appropriate to
reflect any restrictions on transfer.
All certificates for Shares delivered under the Plan shall be
subject to such stock-transfer orders and other restrictions as
the Administrator may deem advisable under the rules,
regulations, and other requirements of the Securities and
Exchange Commission, any stock exchange upon which the Common
Stock is then listed, and any applicable Federal or state
securities law, and the Administrator may cause a legend or
legends to be placed on any such certificates to make
appropriate reference to such restrictions.
(c) Nothing contained in the Plan shall prevent the Board
from adopting other or additional compensation arrangements,
subject to stockholder approval, if such approval is required;
and such arrangements may be either generally applicable or
applicable only in specific cases. The adoption of the Plan
shall not confer upon any Eligible Recipient any right to
continued employment or service with the Company or any Parent
or Subsidiary, as the case may be, nor shall it interfere in any
way with the right of the Company or any Parent or Subsidiary to
terminate the employment or service of any of its Eligible
Recipients at any time.
(d) Unless otherwise determined by the Administrator, a
Participant may elect to deliver shares of Common Stock (or have
the Company withhold shares) to satisfy, in whole or in part,
the amount the Company is required to withhold for taxes in
connection with the exercise of an Option or the delivery of
Restricted Stock upon grant or vesting, as the case may be. Such
election must be made on or before the date the amount of tax to
be withheld is determined. Once made, the election shall be
irrevocable. The fair market value of the Shares to be withheld
or delivered will be the Fair Market Value as of the date the
amount of tax to be withheld is determined. In the event a
Participant elects to deliver or have the Company withhold
Shares of Common Stock pursuant to this Section 10(d), such
delivery or withholding must be made subject to the conditions
and pursuant to the procedures set forth in Section 6(d)
with respect to the delivery or withholding of Common Stock in
payment of the Exercise Price of Options.
(e) No member of the Board or the Administrator, nor any
officer or employee of the Company acting on behalf of the Board
or the Administrator, shall be personally liable for any action,
determination, or interpretation
A-6
taken or made in good faith with respect to the Plan, and all
members of the Board or the Administrator and each and any
officer or employee of the Company acting on their behalf shall,
to the extent permitted by law, be fully indemnified and
protected by the Company in respect of any such action,
determination or interpretation.
Section 11. Effective
Date of Plan.
(a) The Plan was originally adopted by the Board on
June 25, 2003 (the Effective Date).
(b) The Plan is amended and restated effective upon the
Boards approval on April 30, 2009, subject to the
approval by the stockholders of the Company.
Section 12. Term
of Plan.
No Award shall be granted pursuant to the Plan on or after the
tenth anniversary of the Effective Date, but Awards theretofore
granted may extend beyond that date.
Section 13. Governing
Law.
This Plan and all questions relating to its validity,
interpretation, performance and enforcement shall be governed by
and construed, interpreted and enforced in accordance with the
laws of the State of New York, notwithstanding any New York or
other conflict-of-law provisions to the contrary.
A-7
ANNUAL MEETING OF STOCKHOLDERS OFARBOR REALTY TRUST, INC.June 18, 2009NOTICE OF INTERNET
AVAILABILITY OF PROXY MATERIAL: The Notice of Meeting, Proxy Statement, Proxy Card are available at
http://www.arbor.com/cm.htmPlease sign, date and mail your proxy card in the envelope provided as
soon as possible.Please detach along perforated line and mail in the envelope
provided.20330003000000000000 3061809THE BOARD OF DIRECTORS
RECOMMENDS A VOTE FOR ALL NOMINEES LISTED IN PROPOSAL 1 AND FOR PROPOSALS 2 AND 3.PLEASE SIGN,
DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS
SHOWN HERE xThe Board of Directors recommends a vote FOR Proposal 1.The Board of Directors
recommends a vote FOR Proposal 2.FOR AGAINST ABSTAIN Proposal 1. Election of three Class III
directors to serve on the Board of Directors of Proposal 2. Approval of an amendment to Arbor
Realty Trust, Inc.s 2003 Arbor Realty Trust, Inc.Omnibus Stock Incentive Plan (the Plan) to
authorize (i) the NOMINEES:grant of stock options under the Plan, and (ii) the future FOR ALL
NOMINEESO Walter K. Hornissuance of an additional 1,250,000 shares of common stock O William
Helmreichof Arbor Realty Trust, Inc. as grants of restricted stock under WITHHOLD AUTHORITY O Karen
K. Edwardsthe Plan or underlying stock options granted under the Plan. FOR ALL NOMINEESFOR ALL
EXCEPTThe Board of Directors recommends a vote FOR Proposal 3.(See instructions below)Proposal 3.
Ratification of the appointment of Ernst & Young LLP as the independent registered public
accounting firm of Arbor Realty Trust, Inc. for fiscal year 2009.Proposal 4. To vote and otherwise
represent the undersigned on any other matter that properly comes before the meeting or any
adjournment or postponement thereof in the discretion of the proxy holder.INSTRUCTIONS: To withhold
authority to vote for any individual nominee(s), mark FOR ALL EXCEPT This proxy, when properly
executed, will be voted in the manner directed below. If this and fill in the circle next to each
nominee you wish to withhold, as shown here:proxy is executed but no instruction is given, this
proxy will be voted FOR all nominees listed in Proposal 1 and FOR Proposals 2 and 3. The
proxies are hereby authorized to vote in their discretion upon such other matters as may properly
come before the meeting or any postponements or adjournments thereof.The undersigned hereby
acknowledges receipt of Arbor Realty Trust, Inc.s Annual Report to Stockholders for the fiscal
year ended December 31, 2008 and the accompanying Notice of Annual Meeting and Proxy Statement and
hereby revokes any proxy or proxies heretofore given with respect to the matters set forth above.To
change the address on your account, please check the box at right and indicate your new address in
the address space above. Please note that changes to the registered name(s) on the account may not
be submitted via this method.Signature of StockholderDate:Signature of StockholderDate:Note: Please
sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder
should sign. When signing as executor, administrator, attorney, trustee or guardian, please give
full title as such. If the signer is a corporation, please sign full corporate name by duly
authorized officer, giving full title as such. If signer is a partnership, please sign in
partnership name by authorized person. |
ANNUAL MEETING OF STOCKHOLDERS OFARBOR REALTY TRUST, INC.June 18, 2009PROXY VOTING
INSTRUCTIONSINTERNET Access www.voteproxy.com and follow the on-screen instructions. Have your
proxy card available when you access the web page, and use the Company Number and Account Number
shown on your proxy card.TELEPHONE Call toll-free 1-800-PROXIES (1-800-776-9437) in the United
States or 1-718-921-8500 from foreign countries from anyCOMPANY NUMBER touch-tone telephone and
follow the instructions. Have your proxy card available when you call and use the Company Number
and Account Number shown on your proxy card.ACCOUNT NUMBERVote online/phone until 11:59 PM EST the
day before the meeting. MAIL Sign, date and mail your proxy card in the envelope provided as soon
as possible.IN PERSON You may vote your shares in person by attending the Annual Meeting.NOTICE
OF INTERNET AVAILABILITY OF PROXY MATERIAL: The Notice of meeting, proxy statement and proxy card
are available at http://www.arbor.com/cm.htmPlease detach along perforated line and mail in the
envelope provided IF you are not voting via telephone or the Internet.
20330003000000000000 3061809THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR ALL NOMINEES LISTED IN PROPOSAL 1 AND FOR PROPOSALS 2 AND 3.PLEASE SIGN, DATE AND RETURN
PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE xThe
Board of Directors recommends a vote FOR Proposal 1.The Board of Directors recommends a vote FOR
Proposal 2.FOR AGAINST ABSTAIN Proposal 1. Election of three Class III directors to serve on the
Board of Directors of Proposal 2. Approval of an amendment to Arbor Realty Trust, Inc.s 2003 Arbor
Realty Trust, Inc.Omnibus Stock Incentive Plan (the Plan) to authorize (i) the NOMINEES:grant of
stock options under the Plan, and (ii) the future FOR ALL NOMINEESO Walter K. Hornissuance of an
additional 1,250,000 shares of common stock O William Helmreichof Arbor Realty Trust, Inc. as
grants of restricted stock under WITHHOLD AUTHORITY O Karen K. Edwardsthe Plan or underlying stock
options granted under the Plan. FOR ALL NOMINEESFOR ALL EXCEPTThe Board of Directors recommends a
vote FOR Proposal 3.(See instructions below)Proposal 3. Ratification of the appointment of Ernst &
Young LLP as the independent registered public accounting firm of Arbor Realty Trust, Inc. for
fiscal year 2009.Proposal 4. To vote and otherwise represent the undersigned on any other matter
that properly comes before the meeting or any adjournment or postponement thereof in the discretion
of the proxy holder.INSTRUCTIONS: To withhold authority to vote for any individual nominee(s), mark
FOR ALL EXCEPT This proxy, when properly executed, will be voted in the manner directed below. If
this and fill in the circle next to each nominee you wish to withhold, as shown here:proxy is
executed but no instruction is given, this proxy will be voted FOR all nominees listed in
Proposal 1 and FOR Proposals 2 and 3. The proxies are hereby authorized to vote in their
discretion upon such other matters as may properly come before the meeting or any postponements or
adjournments thereof.JOHN SMITHThe undersigned hereby acknowledges receipt of Arbor Realty Trust,
Inc.s Annual Report to1234 MAIN STREETStockholders for the fiscal year ended December 31, 2008 and
the accompanying Notice ofAPT. 203Annual Meeting and Proxy Statement and hereby revokes any proxy
or proxies heretofore NEW YORK, NY 10038given with respect to the matters set forth above.To change
the address on your account, please check the box at right and indicate your new address in the
address space above. Please note that changes to the registered name(s) on the account may not be
submitted via this method.Signature of ShareholderDate:Signature of ShareholderDate:Note: Please
sign exactly as your name or names appear on this Proxy. When shares
are held jointly, each holder
should sign. When signing as executor, administrator, attorney, trustee or guardian, please give
full title as such. If the signer is a corporation, please sign full corporate name by duly
authorized officer, giving full title as such. If signer is a partnership, please sign in
partnership name by authorized person. |
.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . .0ARBOR REALTY TRUST, INC.THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 18, 2009The undersigned
stockholder of Arbor Realty Trust, Inc., a Maryland corporation (the Company), hereby appoints
Paul Elenio and Walter K. Horn, and each of them, the proxy or proxies of the undersigned, with
full power of substitution in each of them, to attend the Annual Meeting of Stockholders of the
Company to be held on June 18, 2009 at 1:00 p.m., local time, at The Teleconference Center on the
lower level of 333 Earle Ovington Boulevard, Uniondale, New York and any postponements or
adjournments thereof, to cast on behalf of the undersigned all votes that the undersigned is
entitled to cast at such meeting and otherwise to represent the undersigned at the meeting with all
proxies possessed by the undersigned if personally present at the meeting.This proxy, when properly
executed, will be voted in the manner directed on the reverse side. If this proxy is executed but
no instruction is given, this proxy will be voted FOR all nominees listed in Proposal 1 and FOR
Proposals 2 and 3. The proxies are hereby authorized to vote in their discretion upon such other
matters as may properly come before the meeting or any adjournment or postponement
thereof.(Continued and to be signed on the reverse side)14475 |