EXHIBIT 10.4

 

GOVERNANCE RIGHTS AGREEMENT

 

by and among

 

Starwood Capital Group Global, L.P.,

 

Waypoint Real Estate Group Holdco, LLC and

 

Starwood Waypoint Residential Trust

 

 

Dated as of January 31, 2014

 

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GOVERNANCE RIGHTS AGREEMENT

 

This GOVERNANCE RIGHTS AGREEMENT, dated as of January 31, 2014, is entered into
by and among Waypoint Real Estate Group Holdco, LLC (“Waypoint Holdco”),
Starwood Waypoint Residential Trust (“SRP”) and Starwood Capital Group Global,
L.P. (“SCG”).

 

RECITALS

 

WHEREAS, SCG, SWAY Management LLC (“SRP Manager”) and Waypoint Holdco have
entered into a transaction whereby SRP Manager acquired the operating company
platform previously operated by Waypoint Holdco and its Affiliates concurrently
with the completion of the Spin-Off (as defined below); and

 

WHEREAS, the Parties desire to memorialize their respective governance rights
and certain obligations with respect to SRP.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the premises and agreements hereinafter set
forth, the Parties hereto hereby agree as follows:

 

ARTICLE 1.

 

Definitions

 

Section 1.1                                    The following terms used in this
Agreement shall have the following meanings.

 

“Affiliate” means (i) any Person directly or indirectly controlling, controlled
by, or under common control with such other Person, (ii) any executive officer
or general partner of such other Person, (iii) any member of the board of
directors, board of trustees or board of managers (or bodies performing similar
functions) of such Person, and (iv) any legal entity for which such Person acts
as an executive officer or general partner.

 

“Agreement” means this Governance Rights Agreement, as amended, supplemented or
otherwise modified from time to time.

 

“Distribution Date” means the distribution date of the Spin-Off.

 

“Governing Instruments” means, with regard to any entity, the articles of
incorporation or certificate of incorporation and bylaws in the case of a
corporation, the partnership agreement in the case of a general or limited
partnership, the certificate of formation and operating agreement in the case of
a limited liability company, the trust instrument in the case of a trust, or
similar governing documents in each case as amended.

 

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“Independent Trustee” means a member of the SRP Board who is “independent” in
accordance with the rules of the NYSE or such other securities exchange on which
the common shares of SRP are listed.

 

“NYSE” means The New York Stock Exchange.

 

“Parties” means, collectively, Waypoint Holdco, SRP and SCG.

 

“Person” means any natural person, corporation, partnership, association,
limited liability company, estate, trust, joint venture, any federal, state,
county or municipal government or any bureau, department or agency thereof or
any other legal entity and any fiduciary acting in such capacity on behalf of
the foregoing.

 

“Spin-Off” means the distribution of common shares of SRP by Starwood Property
Trust, Inc. to the holders of its outstanding shares of common stock pursuant to
SRP’s Registration Statement on Form 10 (No. 001-36163).

 

“SRP Board” means the board of trustees of SRP.

 

Section 1.2                                    Interpretation.

 

As used herein, “calendar quarters” shall mean the period from January 1 to
March 31, April 1 to June 30, July 1 to September 30 and October 1 to
December 31 of the applicable year.  The words “hereof,” “herein” and
“hereunder” and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement, and Section references are to this Agreement unless otherwise
specified.  The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.  The words
include, includes and including shall be deemed to be followed by the phrase
“without limitation.”  Any definition of or reference to any agreement,
instrument, document, statute or regulation herein shall be construed as
referring to such agreement, instrument, document, statute or regulation as from
time to time amended, supplemented or otherwise modified (subject to any
restrictions on such amendments, supplements or modifications set forth
herein).  This Agreement is among financially sophisticated and knowledgeable
parties and is entered into by the Parties in reliance upon the economic and
legal bargains contained herein and shall be interpreted and construed in a fair
and impartial manner without regard to such factors as the Party who prepared,
or cause the preparation of, this Agreement or the relative bargaining power of
the Parties.

 

ARTICLE 2.

 

Board of Trustees of SRP

 

Section 2.1                                    Size of SRP Board.  From and
after the date of this Agreement and until the termination hereof, each of SCG
and Waypoint Holdco shall vote all of the voting securities of SRP over which
such party has voting control and shall take all other reasonably necessary or
desirable actions within its control (whether in its capacity as a shareholder,
trustee, member of a committee of the SRP Board or otherwise, and including,
without limitation, attendance at meetings in person or by proxy for purposes of
obtaining a quorum and execution of written

 

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consents in lieu of meetings), and SRP shall take all reasonably necessary or
desirable actions within its control (including, without limitation, calling
special SRP Board and shareholder meetings), so that the number of trustees on
the SRP Board shall be established at, and shall remain during the term of this
Agreement fixed at, nine (9) trustees.

 

Section 2.2                                    Composition of the SRP Board. 
Each of SCG and Waypoint Holdco shall vote all of the voting securities of SRP
over which such party has voting control and shall take all other reasonably
necessary or desirable actions within its control (whether in its capacity as a
shareholder, trustee, member of a committee of the SRP Board or otherwise, and
including, without limitation, attendance at meetings in person or by proxy for
purposes of obtaining a quorum and execution of written consents in lieu of
meetings), and SRP shall take all reasonably necessary or desirable actions
within its control (including, without limitation, calling special SRP Board and
shareholder meetings), so that from and after the date of this Agreement and
until the termination hereof, the following nine (9) persons shall constitute
the SRP Board:

 

(a)                                 two individuals designated by SCG, who may
be affiliates of Starwood Property Trust, Inc. or SCG at the time of any such
nomination;

 

(b)                                 two individuals designated by Waypoint
Holdco, who may be affiliates of Waypoint Holdco’s equity holders at the time of
any such nomination;

 

(c)                                  four individuals designated by SCG, each of
whom shall qualify as Independent Trustees; and

 

(d)                                 one individual designated by Waypoint
Holdco, who shall qualify as an Independent Trustee.

 

Section 2.3                                    Chairman of the SRP Board.  SCG
shall have the right to designate one member of the SRP Board as the Chairman of
the SRP Board.  SCG and Waypoint Holdco hereto agree to instruct their
respective designees on the SRP Board to take all reasonably necessary or
desirable actions within his or her control to elect the Chairman of the SRP
Board as designated by SCG.

 

Section 2.4                                    Resignation; Removal of Trustees.

 

(a)                                 In the event that any trustee ceases to
serve as a member of the SRP Board during his or her term of office, whether due
to such member’s death, disability, resignation or removal, then (i) the Person
or Persons entitled to designate the trustee who caused the vacancy shall have
the exclusive right (vis-à-vis the SRP Board, any committee of the SRP Board, or
any other party hereto) to nominate an alternate candidate for the vacated seat;
or (ii) if no Person was entitled to designate such trustee, the resulting
vacancy shall be filled by the shareholders of SRP in accordance with the
Governing Instruments of SRP.

 

(b)                                 Unless required by applicable law, SCG and
Waypoint Holdco shall not take any action for the purpose of removing a trustee
from the SRP Board without the written consent of the Person entitled to
designate such trustee.

 

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Section 2.5                                    Fiduciary Duties. 
Notwithstanding anything contained in this Agreement to the contrary, if the
trustees of the SRP Board hereto determine in good faith, after consultation
with outside legal counsel, that any action or restriction on any action
required by this Article 2 could reasonably constitute a violation of the
trustees’ fiduciary duties or other obligations under applicable laws, rules or
regulations, then, such action or restriction on such action shall not be
required pursuant to this Agreement until such time, if any, as such action or
restriction on such action could no longer reasonably constitute a violation of
such duties or obligations.

 

ARTICLE 3.

 

Officers

 

Section 3.1                                    Officers.  The initial officers
of SRP immediately following the Distribution Date are set forth on Schedule 1
hereto.  The officers of SRP shall hold their respective offices until their
respective successors have been elected or appointed or until their earlier
death, resignation or removal by the SRP Board.

 

ARTICLE 4.

 

Term; Termination

 

Section 4.1                                    Term.  This Agreement shall
become effective on the Distribution Date and shall continue in operation,
unless terminated in accordance with the terms hereof.

 

Section 4.2                                    Termination.

 

(a)                                 This Agreement shall remain in full force
and effect in perpetuity unless terminated in accordance with its terms.

 

(b)                                 This Agreement may only be terminated:
(i) upon the mutual written agreement of each of the Parties; (ii) by SCG in the
event Waypoint Holdco materially breaches the terms of this Agreement and fails
to cure such breach within thirty (30) days after receiving written notice
thereof; (iii) by Waypoint Holdco in the event SCG materially breaches the terms
of this Agreement and fails to cure such breach within thirty (30) days after
receiving written notice thereof; or (iv) by SCG or SRP if at any time after the
date hereof two or more of Gary Beasley, Doug Brien and Colin Wiel cease to
serve as officers and employees of either SRP or SRP Manager. The termination
rights set forth in this Agreement are in addition to any rights available at
law or equity (other than rights to terminate or rescind this Agreement).

 

ARTICLE 5.

 

Equitable Adjustment

 

Section 5.1                                    Equitable Adjustments.  The
Parties acknowledge and agree that this Agreement sets forth general principles
and intent with respect to the Parties’ respective rights and obligations
relating to the governance of SRP, and may not anticipate or appropriately
contemplate all facts and circumstances that may arise after the date hereof. 
Accordingly, the

 

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Parties acknowledge and agree that if SRP determines, in its reasonable
judgment, that performance of any of the obligations set forth in this Agreement
would violate any applicable law or any rule of any securities exchange on which
the securities of SRP are traded, the Parties shall negotiate in good faith to
amend or waive the applicable provisions of this Agreement in a manner that
preserves as closely as possible the principles and intent set forth in this
Agreement without violating such  law or rule.

 

ARTICLE 6.

 

Miscellaneous

 

Section 6.1                                    Notices.  All notices, requests
and demands to or upon the respective Parties hereto to be effective shall be in
writing (including by telecopy), and, unless otherwise expressly provided
herein, shall be deemed to have been duly given or made when delivered against
receipt or upon actual receipt of (i) personal delivery, (ii) delivery by
reputable overnight courier, (iii) delivery by facsimile transmission with
telephonic confirmation or (iv) delivery by registered or certified mail,
postage prepaid, return receipt requested, addressed as set forth below (or to
such other address as may be hereafter notified by the respective Parties hereto
in accordance with this Section 6.1):

 

SCG:

Starwood Capital Group

 

591 West Putnam Avenue

 

Greenwich, Connecticut 06830

 

Attention: General Counsel

 

Fax: (203) 422-7899

 

 

with a copy to:

Sidley Austin LLP

 

One South Dearborn Street

 

Chicago, Illinois 60603

 

Attention: Michael A. Gordon, Esq.

 

                  Jonathan C. Babb, Esq.

 

Fax: (312) 853-7036

 

 

Waypoint Holdco:

Waypoint Real Estate Group Holdco, LLC

 

1999 Harrison Street

 

Oakland, California 94612

 

Attention: Tamra Browne, CLO

 

Fax: (510) 550-2828

 

 

with a copy to:

Latham & Watkins LLP

 

650 Town Center Drive, 20th Floor

 

Costa Mesa, California 92626

 

Attention: William Cernius, Esq.

 

Fax: (714) 755-8290

 

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SRP:

Starwood Waypoint Residential Trust

 

1999 Harrison Street

 

Oakland, CA 94612

 

Attention: Tamra Browne

 

Fax: (510) 550-2828

 

Section 6.2                                    Binding Nature of Agreement;
Successors and Assigns.  This Agreement shall be binding upon and inure to the
benefit of the Parties hereto and their respective heirs, personal
representatives, successors and assigns as provided herein.

 

Section 6.3                                    Integration.  This Agreement
contains the entire agreement and understanding among the Parties hereto with
respect to the subject matter hereof, and supersedes all prior and
contemporaneous agreements, understandings, inducements and conditions, express
or implied, oral or written, of any nature whatsoever with respect to the
subject matter hereof.  The express terms hereof control and supersede any
course of performance and/or usage of the trade inconsistent with any of the
terms hereof.

 

Section 6.4                                    Amendments.  This Agreement, nor
any terms hereof, may not be amended, supplemented or modified except in an
instrument in writing executed by the Parties hereto.

 

Section 6.5                                    GOVERNING LAW.  THIS AGREEMENT
AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF MARYLAND, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW, EXCEPT THAT
MATTERS RELATING TO THE FIDUCIARY DUTIES OF THE GOVERNING BODIES OF EACH PARTY
AND INTERNAL CORPORATE AFFAIRS OF EACH PARTY SHALL BE GOVERNED BY THE LAWS OF
THE APPLICABLE STATE OF ORGANIZATION OF SUCH PARTY.  SUBJECT TO SECTION 6.12,
EACH OF THE PARTIES HERETO IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF
THE COURTS OF THE STATE OF MARYLAND AND THE UNITED STATES DISTRICT COURT FOR THE
DISTRICT OF MARYLAND FOR THE PURPOSE OF ANY ACTION OR JUDGMENT RELATING TO OR
ARISING OUT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY AND
TO THE LAYING OF VENUE IN SUCH COURT.

 

Section 6.6                                    WAIVER OF JURY TRIAL.  EACH PARTY
HERETO ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS
AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND, THEREFORE,
EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY
JURY IN RESPECT TO ANY ACTION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN
CONNECTION WITH OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
BY THIS AGREEMENT.

 

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Section 6.7                                    No Waiver; Cumulative Remedies. 
No failure to exercise and no delay in exercising, on the part of a Party
hereto, any right, remedy, power or privilege hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right, remedy,
power or privilege hereunder preclude any other or further exercise thereof or
the exercise of any other right, remedy, power or privilege.  The rights,
remedies, powers and privileges herein provided are cumulative and not exclusive
of any rights, remedies, powers and privileges provided by law.

 

Section 6.8                                    Costs and Expenses.  Each Party
hereto shall bear its own costs and expenses (including the fees and
disbursements of counsel and accountants) incurred in connection with the
negotiations and preparation of and the closing under this Agreement, and all
matter incident thereto.

 

Section 6.9                                    Section Headings.  The section
and subsection headings in this Agreement are for convenience in reference only
and shall not be deemed to alter or affect the interpretation of any provisions
hereof.

 

Section 6.10                             Counterparts.  This Agreement may be
executed by the Parties to this Agreement on any number of separate counterparts
(including by telecopy), and all of said counterparts taken together shall be
deemed to constitute one and the same instrument.

 

Section 6.11                             Severability.  Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.

 

Section 6.12                             Dispute Resolution.

 

(a)                                 All disputes, controversies, and
disagreements arising out of or relating to this Agreement, interpretation or
construction of this Agreement, any breach of or default under this Agreement,
or the relationship between and among the Parties by virtue of this Agreement
(referred to collectively as a “Dispute”) shall be resolved in accordance with
this Section 6.12; provided, however, that the following shall not be subject to
the provisions of this Section 6.12 and nothing herein shall be construed so as
to prevent any Party from pursuing:

 

(1)                                 any action, claim or cause of action that
the Parties may have against each other that arises from or is related to any
claim or cause of action asserted or made by a person who is not a party to this
Agreement (including, without limitation, any cross claims, counterclaims, or
claims for indemnification or contribution), in which case the Parties reserve
all rights that they may have against each other;

 

(2)                                 any action or claim for injunctive relief,
whether by way of temporary restraining order, preliminary injunction, and/or
permanent injunction, or other equitable remedies in which case the Parties
shall have the right to proceed by way of litigation through judicial
proceedings;

 

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(3)                                 any action to enforce the provisions of this
Section 6.12.

 

(b)                                 All Disputes shall be resolved by final and
binding arbitration  in accordance with the United States Arbitration Act (9
U.S.C. 1 et seq.) and the then existing rules (“Rules”) of practice and
procedure of the Judicial Arbitration & Mediation Services (“JAMS”), except to
the extent such JAMS Rules are inconsistent with the provisions of this
Agreement.  The arbitration process shall be as follows:

 

(1)                                 Any Party may commence an arbitration
proceeding in accordance with this Section 6.12(b), and shall simultaneously
notify the other Parties in writing of such commencement.  The arbitration shall
be conducted by one (1) neutral arbitrator, to be mutually selected by the
Parties within five (5) business days after notice from one party to the other.
If the Parties are unable to mutually select such arbitrator within such five
(5) business day period, then either Party may request that JAMS appoint an
arbitrator. In connection with any such request, a party may propose one or more
persons to act as the arbitrator, provided that the arbitrator shall be
independent and shall be a licensed attorney with at least ten (10) years’
experience in connection with voting agreements and similar instruments.  After
the appointment of the arbitrator, the parties shall not have the right to take
depositions and to obtain discovery by other means regarding the subject matter
of the arbitration unless the arbitrator determines, for good cause shown, that
discovery beyond the exchange of documents is necessary in the proceeding, at
which point the arbitrator shall establish the number and extent of depositions
and the extent of any other requested discovery.  The arbitrator shall have the
power to decide all other procedural issues, including the following: the date,
time and place of any hearing; the form, timing and subject matter of any
pre-hearing documents to be submitted by the parties; and any evidentiary or
procedural issues that may arise at or in connection with any arbitration
hearing.  The arbitrator shall follow the law in reaching a reasoned decision
and shall deliver a written opinion setting forth findings of fact, conclusions
of law and the rationale for the decision.

 

(2)                                 The arbitration proceeding shall be held in
New York, New York.  Each Party shall bear its own expenses (including the fees
and expenses of its attorneys, consultants and witnesses) in connection with the
arbitration proceeding, and each Party shall, on an ongoing basis, pay one-half
(½) the fees and expenses of JAMS and the arbitrator.

 

(3)                                 The final decision of the arbitrator shall
be the sole and exclusive remedy of the Parties, shall be final and shall be
fully and irrevocably accepted by the Parties.  The prevailing Party may enforce
such decision against the other Party in a court having jurisdiction in
accordance with Sections 6.5 and 6.6.  In any arbitration hereunder, the
arbitrator will not have the right to modify the terms and conditions of this
Agreement.  As a result, the rights and obligations of the Parties will be
determined in accordance with the terms and conditions of this Agreement, and
any decision will be only in accordance with the terms and conditions of this
Agreement.  The Parties will exert best efforts to have the

 

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decision rendered within ninety (90) days after a Party commences the
arbitration proceeding.

 

(c)                                  Except as necessary in court proceedings to
enforce the arbitration provisions in this Section 6.12 or an award rendered
hereunder, or to obtain interim relief, neither a party nor an arbitrator may
disclose the existence, content, or results of any arbitration hereunder,
including all evidence taken, without the prior written consent of the Parties.

 

(d)                                 In the event of any litigation arising under
Section 6.12(a)(1) — (3), the prevailing Party shall be entitled to recover
their costs and expenses, including, without limitation, reasonable attorneys’
fees.

 

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IN WITNESS WHEREOF, each of the Parties hereto has executed this Management
Agreement as of the date first written above.

 

 

Starwood Capital Group Global, L.P.

 

 

 

 

 

By:

/s/ Ellis F. Rinaldi

 

 

Name: Ellis F. Rinaldi

 

 

Title: Executive Vice President, SCGG GP, L.L.C., its general partner

 

 

 

 

 

 

 

Waypoint Real Estate Group Holdco, LLC

 

 

 

 

 

 

By:

/s/ Gary Beasley

 

 

Name: Gary Beasley

 

 

Title: Managing Director

 

 

 

 

 

 

Starwood Waypoint Residential Trust

 

 

 

 

 

 

By:

/s/ Andrew Sossen

 

 

Name: Andrew Sossen

 

 

Title: General Counsel and Secretary

 

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Schedule 1

 

Officers of SRP

 

Name

 

Position Held

Gary M. Beasley

 

Co-Chief Executive Officer

Douglas R. Brien

 

Co-Chief Executive Officer

Colin T. Wiel

 

Chief Investment Officer

Nina A. Tran

 

Chief Financial Officer

Scott T. Gable

 

Chief Operating Officer

S. Ali Nazar

 

Chief Technology Officer

Tamra D. Browne

 

General Counsel

 

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