DEF 14A of Rithm Property Trust Inc.
Filed Apr 10, 2024 · FY20230001104659-24-045310
Interests of Great Ajax’s Directors and Executive Officers in the Transaction (see page 75)
Interests of Great Ajax’s Directors and Executive Officers in the Transaction (see page 75) In considering the Great Ajax Board’s recommendation, you should be aware that the directors and executive officers of Great Ajax have interests in the Transaction that may be different from, or in addition to, your interests generally and that may present actual or potential conflicts of interests. These interests include: • Three of the members of the Great Ajax Board, Lawrence Mendelsohn, Russell Schaub and Steven Begleiter, indirectly own interests in the Current Manager, and, therefore, will receive a portion of the shares of Common Stock that will be due to the Current Manager in connection with the termination of the Current Management Agreement. • Prior to the Exchange, Flexpoint was a minority holder of the Preferred Stock and the corresponding warrants. However, the other holders of Preferred Stock together controlled the Preferred Stock, holding an aggregate of approximately 74% of the outstanding Preferred Stock prior to the Exchange, and had the ability to force an exchange for Common Stock without Flexpoint’s consent, since Flexpoint only held approximately 26% of the outstanding Preferred Stock prior to the Exchange. An employee of Flexpoint, Steven L. Begleiter, is a director of Great Ajax. The Exchange was completed in accordance with the terms of each of the Exchanged Securities. • After the principal documents of the Transaction were executed, the Great Ajax Board, acting on the recommendation of the Compensation Committee, approved a special grant of shares of Common Stock, in an aggregate amount of $15,000 to Paul Friedman, the Great Ajax Board’s lead independent director. The shares were issued at a price per share of $4.87, which represents the trailing five-day average closing price of the Common Stock on the NYSE as of the date of the Securities Purchase Agreement. The Great Ajax Board was aware of these interests and considered them, among other matters, when approving the Transaction and documents, agreements, and transactions contemplated thereby, including the issuance of the Shares, issuance of Warrants, and payment to the Current Manager. The Great Ajax Board approval was recommended by the Great Ajax Special Committee, comprised entirely of independent, disinterested directors. For additional information, see “The Transaction — Interests of Great Ajax’s Directors and Executive Officers in the Transaction” beginning on page 75.
Interests of Great Ajax’s Directors and Executive Officers in the Transaction
Interests of Great Ajax’s Directors and Executive Officers in the Transaction In considering the recommendation of the Great Ajax Board to approve the Proposals, Stockholders should be aware that directors and executive officers of Great Ajax have interests in the Transaction that may differ from, or be in addition to, the interests of Stockholders generally and that may present actual or potential conflicts of interests. The Great Ajax Board was aware of, and considered the interests of, its directors and executive officers in reaching their respective decisions, which is the reason the Great Ajax Board decided to reauthorize the Great Ajax Special Committee. The Transaction was approved by the Great Ajax Special Committee, comprised solely of independent, disinterested directors, and the Great Ajax Special Committee engaged a financial adviser and counsel. The Great Ajax Special Committee recommended the Transaction to the Great Ajax Board for its approval and the Transaction was approved by a majority of the Great Ajax Board, including a majority of independent, disinterested directors.
Vote of Directors and Executive Officers
Vote of Directors and Executive Officers As of the Record Date, Great Ajax’s directors and executive officers were entitled to vote 1,027,536 shares of Common Stock. Great Ajax expects that all of its directors and officers will vote their shares “FOR” each of the Proposals. Great Ajax has entered into Support Agreements with its directors and officers, pursuant to which such directors and officers have agreed to vote their shares “FOR” each of the Proposals.
Proposal 3 — Election of Directors Proposal
Proposal 3 — Election of Directors Proposal The Great Ajax Board is currently comprised of eight directors. As part of the Transaction and conditioned upon the approval of the Stockholders of the Election of Directors Proposal, the Great Ajax Board will be reconstituted as follows: the Great Ajax Board will become a five-member board, two members of which will be existing directors, one member of which will be a director nominated by Rithm, one member of which will be a new independent director and one temporarily vacant directorship. Great Ajax expects that the Nominating and Corporate Governance Committee will identify a qualified nominee to fill the vacant directorship and, upon the approval of the majority of the Great Ajax Board, fill the vacant directorship following the consummation of the Transaction. In accordance with the Great Ajax Bylaws, no Stockholder approval is required to reduce the number of directors on the Great Ajax Board.
Board composition
Board composition Going forward, in connection with negotiating the Transaction, Great Ajax and Rithm discussed the appropriate structure and composition for the Great Ajax Board with a view to rationalizing the board of directors — minimizing operating costs, while maintaining an independent board of directors composed of talented directors with the skills and attributes to contribute to Great Ajax’s future success. The parties agreed that at least initially a board of directors composed of five directors would balance these objectives. As previously indicated, in order to preserve continuity, two of Great Ajax’s current independent directors, including Great Ajax’s lead director, Mr. Friedman, and Ms. Haggerty, are proposed to continue their board service. Each of Mr. Friedman and Ms. Haggerty, as indicated in their brief biographies, bring to bear decades of financial services experience and public company board service. The new independent director candidate, Mr. Hoffman, adds an important additional complementary skillset to the board of directors. As noted below, Mr. Hoffman previously served on the Great Ajax Board, is a veteran of the mortgage industry, and is a financial expert. The Nominating and Corporate Governance Committee considered each of these nominees based on the committee’s criteria, as well as based upon Great Ajax’s intended new investment focus and recommended to the Great Ajax Board their nomination. The nominees listed below have been recommended by the Great Ajax Board for election to serve as directors until the 2025 annual meeting of stockholders and until their successors are duly elected and qualified. Based on its review of the relationships between the director nominees and us, the Great Ajax Board has affirmatively determined that the following directors are “independent” directors under the rules of the NYSE and under applicable rules of the Securities and Exchange Commission: Paul Friedman, Mary Haggerty and Daniel Hoffman. The Great Ajax Board knows of no reason why any nominee would be unable to serve as a director. If any nominee is unavailable for re-election or service, the Great Ajax Board may designate a substitute nominee and the persons designated as proxy holders on the proxy card will vote for the substitute nominee recommended by the Great Ajax Board. Under these circumstances, the Great Ajax Board may also, as permitted by the Great Ajax Bylaws, decrease the size of the Great Ajax Board. In accordance with the Great Ajax Bylaws, the Great Ajax Board by unanimous written consent, determined that from this election forward, the Great Ajax Board will be comprised of five directors.
Nominees for Election as Directors
Nominees for Election as Directors The following table sets forth the name and age of each nominee for director, indicating all positions and offices with Great Ajax currently held by the nominee.
Nominees for Election as Directors
| Name | Age | Title | Director Since | Proposed Committee Assignment | | Paul Friedman | 69 | Director | 2016 | Audit, Compensation, Nominating and Corporate Governance | | Mary Haggerty | 64 | Director | 2021 | Audit, Compensation | | Daniel Hoffman | 64 | Director | — | Audit, Nominating and Corporate Governance | | Michael Nierenberg | 61 | Director | — | N/A |
Nominees for Election as Directors
Set forth below are descriptions of the backgrounds and principal occupations of each of the nominees. Paul Friedman has been a member of the Great Ajax Board since July 7, 2016. Mr. Friedman has served on the Board of Directors of Oppenheimer Holdings Inc. since July 2015 and is currently the lead independent director, Chair of its Compliance Committee and a member of its Compensation Committee. Mr. Friedman has also served on the Board of Directors of Tiptree Inc. since August 2016 and is currently Chair of its Audit Committee. From November 2009 to March 2015, Mr. Friedman served as the Senior Managing Director and Chief Operating Officer of Guggenheim Securities LLC. From June 2008 to October 2009, Mr. Friedman served as the Managing Director of Mariner Investment Group. Mr. Friedman spent 27 years at Bear Stearns & Co. Inc. from 1981 to 2008, most recently holding the position of Chief Operating Officer of its Fixed Income Division. Mr. Friedman is a Certified Public Accountant and has a M.S. in Finance and Accounting from New York University, Stern School of Business, and a B.A. in Economics from Colgate University. Mr. Friedman brings an extensive amount of operational and risk management experience to the Board as well as a deep knowledge of the financial services industry. Mary Haggerty has been a member of the Great Ajax Board since March 8, 2021. Ms. Haggerty has served on the Board of Directors of Claros Mortgage Trust, Inc. since November 2021 and is currently Chair of its Audit Committee. Ms. Haggerty retired in March 2020 from JPMorgan Chase as a Managing Director in Capital Markets. She joined JPMorgan during the merger with Bear Stearns in 2008 and served the combined companies for 28 years. Most recently, Ms. Haggerty led the Portfolio Management Group in Capital Markets and spearheaded the restructuring of Chase Home Lending’s mortgage servicing portfolio. Prior to that, she led several businesses in the Securitized Products Group of JPMorgan Securities, including Plymouth Park Tax Services (a business that invested in delinquent real estate taxes), the Securitized Products Transaction Management Group, and EMC Mortgage Corporation (a residential mortgage special servicer). At Bear Stearns, as Senior Managing Director and Co-Head of Mortgage Finance, she built and managed its residential mortgage origination, acquisition, warehouse lending and mortgage finance businesses. Ms. Haggerty served as a board member of J.P. Morgan Residential Mortgage Acceptance Corp. between July 2009 and March 2020, a board member of Reoco, Inc. between December 2008 and March 2020 and a board member of Bear Stearns Residential Mortgage Corporation between April 2011 and December 2018. Ms. Haggerty began her career as a Certified Public Accountant at Arthur Young & Company. She has a B.S. degree in accounting from the State University of New York at Albany, is a board member of The University at Albany Foundation, and serves as a member of the Dean’s Advisery Council for the School of Business. Ms. Haggerty also serves as board member and Treasurer of Virtual Enterprises International, Inc., a national educational non-profit that develops entrepreneurial skills in middle and high school students utilizing a work-based learning environment and academic standards-based education. Ms. Haggerty’s background in investment banking paired with her experience in various director roles provide her with the expertise to serve as a director. Daniel Hoffman is the Founder and CEO of The Monday Group, a multi-family office, since its founding in 2023. Mr. Hoffman was a Managing Director at Cerberus Capital Management, a residential real estate fund, from May 2016 to May 2023. He was a Managing Director and Co-Head of U.S. Securitized Products and Head of Sales at Royal Bank of Canada Capital Markets, from September 2015 to May 2016. He had been an independent director of the Great Ajax Board, and served as the head of the Great Ajax Board’s Audit Committee from its inception to June 2016. Mr. Hoffman was a Managing Director at Amherst, Pierpont Securities, a broker-dealer specializing in mortgage and mortgage related securities, from May 2010 to August 2015. He was Head of Fixed Income Sales at Amherst until August 2013 when he accepted a position as an Adjunct Professor of Real Estate Finance at Baruch College, one of the schools of the City University of New York. Mr. Hoffman remained an adjunct professor until June 2015. From July 2008 until May 2010, he was a Managing Director at the Royal Bank of Scotland. Prior thereto, Mr. Hoffman was with Bear, Stearns & Co. Inc. as a Senior Managing Director in the Fixed Income Division. He was Head of Mortgage Sales, Interest Rate Sales and headed the Middle Markets sales team. Mr. Hoffman was at Bear, Stearns for 22 years, primarily focused on mortgages (all types), asset-backed securities, commercial mortgages, CDOs (collateralized debt obligations) and CLOs (collateralized loan obligations). Mr. Hoffman received his B.S. in Economics from the State University of New York at Binghamton and his M.B.A. in Finance from the University of Chicago Booth School of Business. Mr. Hoffman’s over 25 years of experience in the mortgage securities market and his broad-based investment banking experience qualify him to serve as a director. Michael Nierenberg has been a member of the Rithm Board since November 2013 and Chairman of the Rithm Board since May 2016. Mr. Nierenberg was appointed as Chief Executive Officer and President of Rithm on November 13, 2013. From November 2013 until June 2022, Mr. Nierenberg served as a Managing Director at Fortress. From December 2020 until June 2022, Mr. Nierenberg also served as Chief Executive Officer and Chairman of the board of Fortress Capital Acquisition Corp., and, from January 2021 until June 2022, as a member of its Audit and Compensation Committees. Prior to becoming Chief Executive Officer of Rithm, Mr. Nierenberg served as a Managing Director and head of Global Mortgages and Securitized Products at Bank of America Merrill Lynch. Mr. Nierenberg joined Bank of America Merrill Lynch in November 2008 from JP Morgan, where he was head of Global Securitized Products and a member of the management committee of the investment bank. Prior to his tenure at JP Morgan, Mr. Nierenberg held a range of senior leadership positions during fourteen years with Bear, Stearns & Co. Inc., including Head of Interest Rate and Foreign Exchange Trading Operations, Co-Head of Structured Products and Co-Head of Mortgage-Backed Securities Trading. From 2006 to 2008, he was a member of Bear Stearns’s Board of Directors. Mr. Nierenberg spent seven years at Lehman Brothers prior to joining Bear Stearns and was instrumental in building the company’s adjustable-rate mortgage business. Mr. Nierenberg’s knowledge, skill, expertise and experience as described above qualify him as a director. The affirmative vote of a plurality of all the votes cast at the Meeting is necessary for the election of a director. Therefore, the four individuals with the highest number of affirmative votes will be elected to directorships. Abstentions and other shares not voted (whether by broker non-vote or otherwise) will not be counted as votes cast and will have no effect on the result of the vote. There is no cumulative voting with respect to the election of directors. THE GREAT AJAX BOARD RECOMMENDS A VOTE “FOR” EACH OF THE NOMINEES SET FORTH ABOVE.
Overview
Overview Great Ajax is externally managed by the Current Manager under the terms of the Current Management Agreement, pursuant to which the Current Manager provides Great Ajax with all of the personnel required to manage Great Ajax’s operations, including Great Ajax’s executive officers. The Current Manager or Gregory makes all decisions relating to the compensation of such officers based on factors it deems appropriate. Great Ajax does not directly or indirectly reimburse the Current Manager for the compensation paid to Great Ajax’s executive officers. Great Ajax does not provide any of Great Ajax’s executive officers with pension benefits or nonqualified deferred compensation plans. Great Ajax does not have any employment agreements with any person (except with Ms. Doyle as described below under “Employment Agreement with Ms. Mary Doyle”) and is not obligated to make any payments to any of Great Ajax’s executive officers upon termination of employment or a change in control. See the section entitled “Certain Relationships and Related Party Transactions — Current Management Agreement.” Under the Current Management Agreement, Great Ajax pays a quarterly base management fee based on Great Ajax’s consolidated stockholders’ equity per annum and a quarterly and annual incentive management fees based on its cash distributions to its stockholders for the applicable period. Great Ajax’s executive officers are officers or employees of the Current Manager and Gregory and receive compensation from them as appropriate. The Current Manager and its affiliates’ principal compensation philosophy is to seek to align the interests of its professionals with those of its investors and investors in the vehicles that it manages. This alignment is achieved in a number of ways including through the practice of paying annual incentive compensation partly in the form of equity-based awards that are subject to vesting. The Current Manager and its affiliates take into consideration various factors in determining the total compensation payable to its professionals, including the type, scope and level of responsibility of the professional, competitive market dynamics, the individual contributions made by the professional to the success of the Current Manager and its affiliates, and corporate citizenship exhibited by the professional. Except for certain equity grants, the Current Manager compensates each of Great Ajax’s executive officers. Great Ajax’s compensation policies focus mainly on retaining and attracting employees necessary to operate and grow Great Ajax’s business, and to compensate such employees in a manner that will align their interests with the interests of Great Ajax’s stockholders. The Current Manager, in its discretion, determines the levels of base salary and cash incentive compensation earned by its officers and whether and to what extent Great Ajax’s officers will be provided with pension, deferred compensation and other employee benefit plans and programs. Great Ajax has adopted the 2016 Plan, under which Great Ajax may provide incentive compensation to non-employee directors, executive officers, key employees and service providers in order to stimulate their efforts toward Great Ajax’s continued success, long-term growth and profitability and to attract, reward and retain key personnel. At Great Ajax’s 2023 annual meeting of stockholders, Great Ajax asked the stockholders to vote to approve, on an advisory basis, the compensation of Great Ajax’s named executive officers. Although the advisory stockholder vote on executive compensation was non-binding, the Compensation Committee has considered, and will continue to consider, the outcome of this vote each year when making compensation decisions for our executive officers. A substantial majority of the stockholders who voted on the “say-on-pay” proposal at Great Ajax’s 2023 annual meeting of stockholders approved the compensation of Great Ajax’s named executive officers. The Compensation Committee determined that no significant additional changes were needed to the executive compensation program in 2023. In connection with the Transaction, the Compensation Committee evaluated the Amendment to the 2016 Plan and recommended that the Great Ajax Board approve the Amendment and asks the Stockholders to approve the Amendment, as described in the section entitled “Proposal 5 — Equity Incentive Plan Proposal.”
Compensation Program
Compensation Program As an externally managed company, Great Ajax utilizes a hybrid approach to the compensation program for its named executive officers and payment of Great Ajax’s management fees to the Current Manager. The Current Manager is responsible under the Current Management Agreement for all cash compensation paid to Great Ajax’s named executive officers. Equity incentive compensation that is awarded to Great Ajax’s named executive officers from time to time is the responsibility of Great Ajax and is determined by Great Ajax Board’s Compensation Committee in accordance with the 2016 Plan. As described in more detail in the following sections, Great Ajax believes that the terms of the Management Agreement and the utilization of the 2016 Plan effectively align the interests of Great Ajax and the Current Manager with those of Great Ajax’s business, Great Ajax’s named executive officers and, most importantly, Great Ajax’s stockholders. Cash Compensation Great Ajax does not pay any cash compensation to its named executive officers or to any other employees of the Current Manager who support Great Ajax’s business. The Current Manager is responsible for all cash compensation for Great Ajax’s executive officers and for making decisions relating thereto based on such factors as the Current Manager determines appropriate. However, the Current Manager takes into consideration the interests of Great Ajax in ensuring that its compensation philosophy is consistent with Great Ajax’s objectives and consults with Great Ajax’s Compensation Committee concerning the cash compensation that it proposes to pay to its employees who serve as Great Ajax’s executive officers. The cash compensation paid by the Current Manager to Great Ajax’s executive officers includes salaries and performance-based bonuses for services provided to Great Ajax. Cash compensation paid by the Current Manager to the individuals serving as Great Ajax’s executive officers, includes salaries that are derived in part from the management fee Great Ajax pays to the Current Manager and in part from various other revenue streams generated by the Current Manager in its ordinary course of operations as an asset manager. However, the Current Manager takes into consideration the interests of Great Ajax in ensuring that its compensation philosophy is consistent with Great Ajax’s objectives and consults with Great Ajax’s Compensation Committee concerning the cash compensation that it proposes to pay to its employees who serve Great Ajax’s executive officers. The cash compensation paid by the Current Manager to Great Ajax’s executive officers includes salaries and performance-based bonuses for services provided to Great Ajax that are derived in part from the management fee that Great Ajax pays to the Current Manager. The Current Management Agreement does not require that any specified amount or percentage of the management fees that Great Ajax pays to the Current Manager be allocated to Great Ajax’s named executive officers. However, Great Ajax estimates that the aggregate compensation of Great Ajax’s named executive officers that may reasonably be associated with their management of Great Ajax (exclusive of any salary or other arrangements payable to Great Ajax’s executive officers that is attributable to their roles as employees of the Current Manager) totaled $2,184,368 for 2023. This aggregate amount represents approximately 28.1% of the $7,769,000 in total management fees and reimbursements paid by Great Ajax to the Current Manager for 2023. Of the aggregate cash compensation paid by the Current Manager to Great Ajax’s named executive officers in 2023 that was reasonably associated with their management of Great Ajax, Great Ajax estimates that approximately 54% represented fixed compensation (e.g., salaries) and 46% represented variable compensation (e.g., performance-based bonuses). The Current Manager does not use a specific formula to calculate the variable pay portion of Great Ajax’s named executive officers’ compensation. Generally, in determining each executive’s variable pay, the Current Manager will take into account factors such as the individual’s position, his or her contribution to Great Ajax’s business, the performance of Great Ajax, market practices, and, with respect to the Chief Executive Officer and President, the recommendations of Great Ajax’s Compensation Committee, and applies its discretion in considering and weighing such factors. Cash compensation to Great Ajax’s Chief Financial Officer, Ms. Doyle, is paid by the Current Manager, Gregory and Gaea and based on the employment agreement as described under “Employment Agreement with Ms. Mary Doyle.” The Current Manager does not use a specific formula to calculate the cash compensation for Great Ajax’s CFO. In determining Great Ajax’s CFO’s compensation, the Current Manager takes into account factors such as her contribution to Great Ajax’s business, the performance of Great Ajax, market practices and comparisons with peers, the recommendations of Great Ajax Board’s Compensation Committee, and applies its discretion in considering and weighing such factors. Equity Compensation The Great Ajax Board has delegated its administrative responsibilities under the 2016 Plan to the Compensation Committee. Great Ajax Board’s Compensation Committee, which consists solely of independent directors, is responsible for overseeing the equity incentive component of Great Ajax’s compensation program and approves and recommends all equity awards granted pursuant to the 2016 Plan, which awards are then ratified by the Great Ajax Board. Great Ajax grant equity compensation to Great Ajax’s named executive officers and pay part of Great Ajax’s management fees to the Current Manager in equity awards under the 2016 Plan. Such equity compensation paid to Great Ajax’s named executive officers and the Current Manager is designed to align the interests of Great Ajax’s employees, the Current Manager and personnel of the Current Manager and its affiliates who support the Current Manager in providing services to Great Ajax under the Current Management Agreement with those of the Stockholders, by allowing the Current Manager and personnel of the Current Manager and its affiliates to share in the creation of value for the Stockholders through stock appreciation and dividends. These awards further provide flexibility to Great Ajax in Great Ajax’s ability to enable the Current Manager and its affiliates who support the Current Manager to attract, motivate and retain talented individuals. Restricted shares of Common Stock issued to Great Ajax’s independent directors in respect to a portion of their annual director fees are also issued under this plan. We periodically review Great Ajax’s equity compensation program to ensure it reflects strong governance practices and the best interests of the Stockholders, while striving to meet the following core objectives: • Pay for Performance — Great Ajax’s equity compensation program is designed to generate and reward superior individual and collective performance by ensuring that equity compensation is commensurate with the level of achieved company results. • Strengthen Great Ajax’s Ability to Retain Great Ajax’s Work Force — Great Ajax is a specialized company operating in a highly competitive industry, and its continued success depends on retaining its talented executive team. Great Ajax’s equity compensation program is designed to attract and retain highly qualified executives whose abilities and expertise are critical to Great Ajax’s long-term success and Great Ajax’s competitive advantage. Continued success over the long term will create opportunities for Great Ajax’s named executive officers through their common stock ownership by enabling them to participate in any future appreciation of Common Stock and receive dividends. •
Compensation Program
Align Interests with Stockholders — Great Ajax is committed to using its equity compensation program to increase executive stock ownership over the long term and focus Great Ajax’s named executive officers’ attention on creating value for the Stockholders. Great Ajax believes that equity ownership directly aligns the interests of Great Ajax’s named executive officers with those of the Stockholders and encourages Great Ajax’s named executive officers to focus on creating long-term stockholder value. Accordingly, Great Ajax’s named executive officers are prohibited from hedging company stock. Restricted stock that are granted to Great Ajax’s named executive officers under Great Ajax’s 2016 Plan provide for ratable vesting on an annual basis over a three-year period, with accelerated vesting occurring under certain circumstances, as described in greater detail below under “Payments Upon Termination or Change in Control.” Under certain circumstances, Great Ajax’s named executive officers may be required to forfeit their respective restricted stock awards pursuant to Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”), the Sarbanes-Oxley Act of 2002, applicable stock exchange listing rules, or any claw back or recoupment policy adopted by the Great Ajax Board or Compensation Committee. The restricted stock awards are treated as issued and outstanding as of the grant date and each named executive officer is entitled to vote the shares and receive dividends as declared and paid thereon; however, the restricted stock remains subject to forfeiture if the executive officer does not comply with the terms of the award agreement, including where the executive officer voluntarily terminates his or her employment with the Current Manager prior to any applicable vesting dates. In 2023, the Compensation Committee and the Great Ajax Board did not approve a grant of any shares of restricted common stock under the 2016 Plan to our named executive officers. The decision was a result of the obligations Great Ajax had during the relevant period under the merger agreement with EFC, which limited such grants and the decision to prioritize such grants to directors and other employees over our named executive officers. Management Fees We believe our performance is one of the important factors in determining compensation and our management fees to the Current Manager are linked closely to our performance. Under the Current Management Agreement, Great Ajax pays a quarterly base management fee based on our stockholders’ equity and quarterly and annual incentive management fees based on our cash distributions to stockholders for the applicable period. The Current Manager is entitled to an incentive fee only if the sum of dividends declared by the Great Ajax Board from REIT taxable income plus an increase in our book value per share, in combination, exceed 8.00% on an annualized basis, which on an annualized basis exceeds 8.00% of our book value per share, and upon earnings exceeding certain thresholds for a given series of calendar quarters. The incentive fee is payable at the same time that the dividend is payable to our stockholders. The Current Manager will not receive any incentive fee in respect of a dividend constituting a return of capital. Great Ajax believes structuring its management fees to be tied closely to our performance along with partial payment of such fees in equity awards, better aligns the Current Manager’s interests with our stockholders and mitigates the possibility of excessive risk taking. Role of Compensation Consultant in Compensation Decisions The Compensation Committee has not engaged a compensation consultant to date. Role of Named Executive Officers in Equity-Based Compensation Decisions Great Ajax Board’s Compensation Committee makes all equity-based compensation decisions related to Great Ajax’s named executive officers. Great Ajax Board’s Compensation Committee receives input from Mr. Mendelsohn, our Chief Executive Officer, regarding the equity compensation and performance of named executive officers other than himself, including recommendations as to the equity compensation levels that he believes are commensurate with an individual’s job performance, skills, experience and qualifications to Great Ajax, as well as with our compensation philosophy, external market data and considerations of internal equity. Mr. Mendelsohn regularly attends meetings of our Compensation Committee, except when the Compensation Committee is meeting in executive session or when his own equity compensation arrangements are being considered. The Compensation Committee communicates its views and decisions regarding equity compensation arrangements for Great Ajax’s named executive officers to Mr. Mendelsohn, who is generally responsible for implementing such arrangements. Tax Treatment of Compensation Section 162(m) of the Code disallows a federal income tax deduction for any publicly held corporation with respect to individual compensation exceeding $1.00 million in any taxable year paid to a corporation’s chief executive officer and certain other executive officers; beginning in 2018, pursuant to a change to Section 162(m), this limitation generally applies to payments made to employees or former employees who held those positions at any time beginning in 2017, or to their beneficiaries. The changes to Section 162(m) also greatly restrict the ability to design compensation for these officers in a way to ensure its deductibility for a company subject to Section 162(m). Great Ajax does not have any employees whose compensation exceeded $1.00 million in 2018. Great Ajax does not believe that Section 162(m) has been or is currently applicable to Great Ajax and, therefore, Great Ajax does not currently consider the effects of Section 162(m) on the compensation paid to our named executive officers by the Current Manager or the degree to which it would be advisable to structure the amount and form of equity compensation to our named executive officers so as to maximize our ability to deduct it. If Great Ajax was to determine that Section 162(m) was applicable to itself, the Compensation Committee retains the discretion to provide compensation in an amount or form that would not be deductible under Section 162(m) in circumstances under which it believes the exercise of such discretion would be in the best interest of Great Ajax. The 2016 Plan provides that, with respect to awards intended to qualify for relief from the limitations of Section 162(m) of the Code, the maximum number of shares that may underlie awards over any three-year period to any eligible person may not exceed 500,000 as options and 500,000 as other grants. If Great Ajax was subject to Section 162(m), these limitations on awards would be required under prior Section 162(m) to qualify for deduction of payments to certain officers to settle the awards. As indicated above, Great Ajax’s management does not believe that Section 162(m) is applicable to Great Ajax and, moreover, these limitations on awards no longer qualify payments of the awards for deduction; therefore, management does not currently consider and has not previously considered such restrictions in connection with the granting of prior awards. Compensation Risk Assessment
Summary Compensation Table
Summary Compensation Table
Summary Compensation Table
| Name and principal position | Year | Salary ($) | Bonus ($) | Stock awards ($)(1) | Option Awards ($) | Non-equity incentive plan compensation ($) | Change in pension value and nonqualified | All other compensation ($) | Total ($) | | Lawrence Mendelsohn(2) | 2023 | — | — | — | — | — | — | — | — | | | 2022 | — | — | 167,360 | — | — | — | — | 167,360 | | | 2021 | — | — | 179,060 | — | — | — | — | 179,060 | | Mary Doyle | 2023 | 419,792(3) | 234,576(3) | — | — | — | — | — | 654,368 | | | 2022 | 400,000(3) | 213,000(3) | 83,680 | — | — | — | — | 696,680 | | | 2021 | 315,000(4) | 285,000(4) | 102,320 | — | — | — | — | 702,320 | | Russell Schaub(5) | 2023 | — | — | — | — | — | — | — | — | | | 2022 | — | — | 20,920 | — | — | — | — | 20,920 | | | 2021 | — | — | 102,320 | — | — | — | — | 102,320 |
Summary Compensation Table
(1) The amounts reported in the “Stock Awards” column represent the aggregate grant date fair value of awards of restricted shares of common stock calculated under US GAAP ASC 718. Under ASC 718, the grant date fair value is calculated using the closing market price of Great Ajax’s common stock on the date of grant. (2) Mr. Mendelsohn is an employee of the Current Manager and is not paid cash compensation by Great Ajax. (3) Amounts represent compensation for Ms. Doyle’s service as Great Ajax’s Chief Financial Officer pursuant to her employment agreement dated March 4, 2022. (4) Amounts represent compensation for Ms. Doyle’s service as Great Ajax’s Chief Financial Officer pursuant to her employment agreement dated March 4, 2019. (5) Mr. Schaub is an employee of Gregory and is not paid cash compensation by Great Ajax.
Grant of Plan-Based Awards
Grant of Plan-Based Awards There were no plan-based awards granted during the 2023 fiscal year to Great Ajax’s named executive officers.
Outstanding Equity Awards at Fiscal Year End
Outstanding Equity Awards at Fiscal Year End
Outstanding Equity Awards at Fiscal Year End
| | Option awards | | | | | Stock awards | | | | | Name | Number of securities underlying unexercised options (#) exercisable | Number of securities underlying unexercised options (#) unexercisable | Equity incentive plan awards: number of securities underlying unexercised unearned options (#) | Option exercise price ($) | Option expiration date | Number of shares or units of stock that have not vested (#) | Market value of shares or units of stock that have not vested(1) ($) | Equity incentive plan awards: number of unearned shares, units or other rights that have not vested (#) | Equity incentive plan awards: market or payout value of unearned shares, units or other rights that have not vested(1) ($) | | Lawrence Mendelsohn | — | — | — | — | — | 17,667 | 201,103 | 17,667 | 201,103 | | Mary Doyle | — | — | — | — | — | 9,333 | 106,947 | 9,333 | 106,947 | | Russell Schaub | — | — | — | — | — | 5,333 | 65,107 | 5,333 | 65,107 |
Outstanding Equity Awards at Fiscal Year End
Market value amounts are based on grant date fair value.
Options Exercises and Stock Vested during 2023
Options Exercises and Stock Vested during 2023
Options Exercises and Stock Vested during 2023
| | Option awards | | Stock awards | | | Name | Number of shares acquired on exercise (#) | Value realized on exercise ($) | Number of shares acquired on vesting (#) | Value realized on vesting(1) ($) | | Lawrence Mendelsohn | — | — | 9,833 | 110,102 | | Mary Doyle | — | — | 7,333 | 78.940 | | Russell Schaub | — | — | 5,333 | 58,020 |
Options Exercises and Stock Vested during 2023
(1) Realized value on vesting is based on grant date fair value.
Pay Versus Performance
Pay Versus Performance Compensation paid to Great Ajax’s Chief Executive Officer and other named executives were calculated based on shares granted each year using the grant date stock price and adjusted for any previously issued shares that were unvested and fully vested each year and considered any dividends that have been paid. The following table summarizes the compensation paid to Great Ajax’s Chief Executive Officer and other named executives and company performance measures.
Pay Versus Performance
| | Summary compensation table total for PEO(1) ($) | Compensation actually paid to PEO(1)(4) ($) | Average summary compensation table total for non-PEO named executive officers(2) ($) | Average compensation actually paid to non-PEO named executive officers(1)(5) ($) | Value of initial fixed $100 investment based on: | | Net (loss)/ income attributable to common stockholders ($) | Company selected measure book value ($) | | Year | | | | | Total stockholder return ($) | Peer group total stockholder return(3) ($) | | | | 2023 | — | (21,891) | — | (8,975) | 100 | 49 | (49,261) | 9.99 | | 2022 | 167,360 | 61,758 | 52,300 | (5,553) | 109 | 48 | (14,850) | 13.00 | | 2021 | 179,060 | 226,653 | 102,320 | 140,977 | 143 | 73 | 41,775 | 15.92 | | 2020 | 38,200 | (6,345) | 76,400 | 77,247 | 118 | 69 | 33,608 | 15.59 |
Pay Versus Performance
(1) Lawrence Mendelsohn, Great Ajax’s CEO, was Great Ajax’s principal executive officer. (2) Includes compensation for Ms. Doyle and Mr. Schaub. (3) Great Ajax’s peer group includes FNMR, which includes comparable mortgage REITs and helps provide a benchmark for Great Ajax’s own total stockholder return. (4) In accordance with the requirements of Item 402(v)(2)(iii) of Regulation S-K, the following adjustments were made to the amounts reported for Mr. Mendelsohn in the Summary Compensation Table. Importantly, the dollar amounts do not reflect the actual amount of compensation earned by or paid to Mr. Mendelsohn during the applicable year.
Pay Versus Performance
| Description(a) | 2020 ($) | 2021 ($) | 2022 ($) | 2023 ($) | | Reported Summary Compensation Table | 38,200 | 179,060 | 167,360 | — | | Reported Stock Awards Deduction(b) | 38,200 | 179,060 | 167,360 | — | | Equity Award Adjustments(c) | (44,545) | 47,593 | (105,602) | (21,891) | | Compensation Actually Paid | (6,345) | 226,653 | 61,758 | (21,891) |
Pay Versus Performance
(a) Mr. Mendelsohn received no pension benefits in the fiscal years presented from Great Ajax under defined pension or defined contribution plans. (b) Total grant date fair value of equity awards reporting in the “Stock awards” column in the Summary Compensation Table for applicable year.
Relationship Between “Compensation Actually Paid” and Performance Measures
Relationship Between “Compensation Actually Paid” and Performance Measures The descriptions below describe the relationship of “compensation actually paid” to Great Ajax’s CEO and executive officers to the total stockholder return, net income and Company selected measure book value across the years ended December 31, 2023, 2022, 2021 and 2020. Total Stockholder Return Compensation actually paid to Great Ajax’s CEO for the years ended December 31, 2023, 2022, 2021 and 2020 was $(22) thousand, $0.1 million, $0.2 million and $(6) thousand, respectively. Compensation actually paid to executive officers excluding the CEO for the years ended December 31, 2023, 2022, 2021 and 2020 was approximately $(9) thousand, $(6) thousand, $0.1 million and $77 thousand, respectively. The calculation to determine compensation actually paid to Great Ajax’s CEO and executive officers is detailed above and is calculated in accordance with item 402(v)(2)(iii) of Regulation S-K. Great Ajax’s cumulative total stockholder return (“TSR”), which is calculated off an initial fixed $100 investment for the last three completed fiscal years was $100.21, $108.64, $143.29 and $118.21, respectively. The Compensation Comparison Group (“CCG”) TSR, which is calculated off the same initial fixed $100 investment for the same four-year period was $48.61, $47.74, $73.00 and $68.64, respectively. Great Ajax used FNMR for its CCG TSR, which contains comparable mortgage REITs and helps provide a benchmark for Great Ajax’s own total stockholder return. Compensation actually paid to Great Ajax’s CEO, Great Ajax’s TSR and CCG TSR all decreased for the year ended December 31, 2023 versus 2022 and for the year ended December 31, 2022 versus 2021. In comparison compensation actually paid to Great Ajax’s CEO, Great Ajax’s TSR and CCG TSR all increased for the year ended December 31, 2021 versus 2020. Similarly, compensation actually paid to Great Ajax’s executive officers excluding the CEO, Great Ajax’s TSR and CCG TSR all decreased for the year ended December 31, 2023 versus 2022 and for the year ended December 31, 2022 versus 2021. In comparison compensation actually paid to Great Ajax’s executive officers excluding the CEO, Great Ajax’s TSR and CCG TSR all increased for the year ended December 31, 2021 versus 2020. Net Income Great Ajax had consolidated net losses for the years ended December 31, 2023 and 2022 of $(47) thousand and $(15) thousand, respectively, and consolidated net income attributable to common stockholders of $42 thousand and $34 thousand for the years ended 2021 and 2020, respectively. The compensation actually paid to Great Ajax’s CEO and Great Ajax’s consolidated net loss/income decreased for the years ended December 31, 2023, 2022 and 2021. Great Ajax’s consolidated net income attributable to common stockholders increased for the year ended December 31, 2021 vs 2020. Similarly, this was the same trend for compensation actually paid to Great Ajax’s executive officers excluding the CEO and Great Ajax’s consolidated net loss/income attributable to common stockholders for the same comparative years. Company-Selected Measure: Book Value Great Ajax’s book value was $9.99, $13.00, $15.92 and $15.59 as of December 31, 2023, 2022, 2021 and 2020, respectively. The compensation actually paid to Great Ajax’s CEO and Great Ajax’s book value decreased for the years ended December 31, 2023, 2022 and 2021. Great Ajax’s book value increased for the year ended December 31, 2021 vs 2020. Similarly, this was the same trend for compensation actually paid to Great Ajax’s executive officers excluding the CEO and Great Ajax’s book value for the same comparative years.
Pension Benefits
Pension Benefits Great Ajax’s named executive officers received no benefits in the 2023 fiscal year from Great Ajax under defined pension or defined contribution plans.
Nonqualified Deferred Compensation
Nonqualified Deferred Compensation We do not have a nonqualified deferred compensation plan that provides for deferral of compensation on a basis that is not tax-qualified for Great Ajax’s named executive officers.
Potential Payments Upon Termination or Change in Control
Potential Payments Upon Termination or Change in Control Great Ajax’s named executive officers are employees of the Current Manager or its affiliates and therefore Great Ajax generally has no obligation to pay them any form of compensation upon their termination of employment. However, the 2016 Plan provides that, in the event of a “change in control” (as such term is defined in the 2016 Plan and does not include the Transaction), the following would apply: (i) where awards are not being assumed or continued, all outstanding awards, excluding performance awards (as such term is defined in Great Ajax’s 2016 Plan), will be deemed to have vested and the shares subject thereto will be delivered, and all Dividend Equivalent Rights (as such term is defined in Great Ajax’s 2016 Plan) shall be deemed to have vested and the shares subject thereto shall be delivered, immediately prior to the occurrence of such change in control. For performance awards, if less than half of the performance period has lapsed, the awards would be converted into restricted stock or stock units assuming target performance has been achieved (or unrestricted stock if no further restrictions apply). If more than half the performance period has lapsed, the awards shall be converted into restricted stock or stock units based on actual performance to date (or unrestricted stock if no further restrictions apply). If actual performance is not determinable, then performance awards shall be converted into restricted stock or stock units assuming target performance has been achieved, based on the discretion of the Compensation Committee (or unrestricted stock if no further restrictions apply); and (ii) where awards are being assumed or continued, the 2016 Plan and awards theretofore granted would continue in the manner and under the terms so provided in the event of any change in control to the extent that provision is made in writing in connection with such change in control for the assumption or continuation of the awards theretofore granted, or for the substitution for such awards for new awards relating to the stock of a successor entity, or a parent or subsidiary thereof, with appropriate adjustments as to the number of shares (disregarding any consideration that is not common stock) and option and stock appreciation rights exercise prices. Notwithstanding the change of control provisions, the 2016 Plan provides the Compensation Committee with the authority, among other things, to vest all unvested shares on the Transaction closing date. The estimated value at vesting to the names executives is as follows:
Potential Payments Upon Termination or Change in Control
| | Stock Awards | | | Name | Number of shares vesting at closing(#) | Estimated Value at Vesting(1) | | Lawrence Mendelsohn | 17,667 | 60,456 | | Mary Doyle | 9,333 | 31,938 | | Russell Schaub | 5,333 | 18,250 |
Potential Payments Upon Termination or Change in Control
The estimated value at vesting is based on the average 5-day closing price of Great Ajax from March 14, 2024 to March 20, 2024. In addition, Great Ajax provided a termination notice to the Current Manager under the Current Management Agreement on February 26, 2024. For more information regarding the termination of the Current Manager, see the section entitled “Proposal 4 — Management Proposal” starting on page 90.
Pay Ratio
Pay Ratio The pay ratio disclosure rules of Item 402(u) of Regulation S-K requires an issuer to disclose the ratio of the total compensation of the median employee of the issuer and its consolidated subsidiaries, if any, to the total compensation of Great Ajax’s Chief Executive Officer. Because Great Ajax is externally-managed and therefore has no employees, Great Ajax was unable to calculate the pay ratio, and has not provided this disclosure.
COMPENSATION OF DIRECTORS
COMPENSATION OF DIRECTORS The independent directors receive an annual fee of $140,000. On February 22, 2022, the Great Ajax Board authorized an increase in the annual compensation of Great Ajax’s independent directors from $100,000 to $140,000, payable quarterly, half in shares of Great Ajax’s Common Stock and half in cash, unless otherwise determined by the Great Ajax Board. On July 25, 2023, and on October 25, 2023, the Great Ajax Board authorized that the compensation for Great Ajax’s independent directors for the corresponding quarters will be paid in cash. The number of the shares is determined in the same manner as the value of the shares to be paid to the Current Manager as part of its base management fee (see the section entitled “Certain Relationships and Related Party Transactions — Current Management Agreement”) and the value of the shares is based on of the closing price of the shares on the issuance date. The non-independent directors, including Mr. Begleiter, are not entitled to any compensation for their service. Great Ajax reimburses all Great Ajax’s directors for their reasonable travel expenses incurred in connection with their attendance at board and committee meetings. Pursuant to the Director Plan (see the section entitled “Certain Relationships and Related Party Transactions — Director Plan”), directors which the Great Ajax Board identified as independent directors (see “Corporate Governance and Board Matters — Independence of Directors” above) were each granted restricted stock awards of 2,000 shares of Common Stock. The awards were subject to a one-year vesting period, except for the award granted to Ms. Haggerty, who joined the Great Ajax Board March 2021, and which vested immediately. Through the end of the fourth quarter of 2021, the chair of each committee of the Great Ajax Board other than the Audit Committee and the Investment Supervisory Committee also received an additional cash payment of $10,000 per year. Through the fourth quarter of 2021, the chair of the Audit Committee received an additional cash payment of $15,000 per year. On February 22, 2022, the Great Ajax Board authorized an increase in the additional cash payment to the chair of each committee. Beginning the first quarter of 2022, the chair of each committee of the Great Ajax Board other than the Audit Committee and the Investment Supervisory Committee receives an additional cash payment of $15,000 per year. The chair of the Audit Committee receives an additional cash payment of $20,000 per year. Also, during the second quarter of 2023, due to conflicts of interests by certain members of the Great Ajax Board, the Great Ajax Board established the Great Ajax Special Committee. The directors on the Great Ajax Special Committee received a one-time cash payment of $20,000, except for the lead independent director who received a one-time cash payment of $30,000. Also in March 2023, each member of the Great Ajax Board was granted a restricted stock award of 5,000 shares of Common Stock, which were subject to a one-year vesting period. Also, in March 2023, each member of the Great Ajax Board was granted restricted stock awards of 5,000 shares of Common Stock, which are subject to a one-year vesting period. The following table sets forth information regarding the compensation paid during 2023 to each of Great Ajax’s independent directors:
COMPENSATION OF DIRECTORS
| Name | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1) | Total ($) | | John C. Condas | 125,000 | 65,306 | 190,306 | | Paul Friedman | 150,000 | 65,306 | 215,306 | | Mary Haggerty | 125,000 | 65,306 | 190,306 | | Jonathan Bradford Handley, Jr | 125,000 | 65,306 | 190,306 | | J. Kirk Ogren, Jr | 155,000 | 65,306 | 220,306 |
COMPENSATION OF DIRECTORS
Includes payment of the portion of quarterly directors’ fees payable in shares of Common Stock.