Company: RITM-PC
Filing Date: 2025-02-18
Form Type: 10-K
Source: 0001556593-25-000007
Chunk: 380

Company: Rithm Capital Corp.
Filing Date: 2025-02-18
Form: 10-K
Item: Item 8
Chunk 380
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 performance to grantees to participate in the long-term growth and financial success of Sculptor. One million profit units (“LTIP Profit Units”) are authorized for issuance under the LTIP. LTIP Profit UnitsThe LTIP Profit Units have an end date of December 31, 2028 (“End Date”) through which the LTIP Profit Units will vest subject to a service condition and the achievement of a specified minimum performance internal rate of return (“IRR”) hurdle. The LTIP Profit Units’ service condition is satisfied in three equal installments on each of the third, fourth and fifth anniversaries of the grant date. Once vested, each LTIP Profit Unit represents a right to participate in distributions from 

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RITHM CAPITAL CORP. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(dollars in tables in thousands, except share data)

Sculptor in accordance with a distribution waterfall dependent on the achieved performance IRR and the value realized by the Company in a monetization event or the End Date, whichever is earlier. In case of a monetization event or End Date, the vested awards are settled in cash.LTIP Profit Units are liability-classified equity-based awards due to a cash settlement feature. As such, the fair value of these awards is initially determined at the date of grant and is remeasured at each reporting period until settlement. Compensation expense is recognized on an accelerated basis (i.e., each tranche is recognized over its respective service period), over the requisite service period to the extent the performance condition is met or deemed probable. The requisite service period for these awards was estimated to be 5 years at the time of the grant.The Company calculates the fair value of the LTIP Profit Units at each reporting date using the risk-neutral Monte Carlo simulation pricing model which estimates the fair value of the LTIP Profit Units set over the expected term until the expected monetization event, using the risk-free interest rate and the expected volatility as inputs. The volatility used is based on historical volatility of peer companies, adjusted for size and leverage. The assumptions used are noted in the table below:20242023Risk-free interest rate4.2 %4.2 %Expected term to monetization event (in years)3.74.7Volatility42.0 %44.2 %Discount for lack of marketability(A)17.5 %20.2 %(A)The discount for lack of marketability was applied based on the Finnerty