EXECUTION COPY
MANAGEMENT AGREEMENT
THIS AGREEMENT, dated as of January 1, 1994 by and between ASSETS
INVESTORS CORPORATION, a Maryland corporation (hereinafter referred to as the
"Company"), and FINANCIAL ASSET MANAGEMENT CORPORATION, a Delaware corporation
(hereinafter referred to as the "Manager").
W I T N E S S E T H:
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WHEREAS, the Company owns Mortgage Assets and qualifies for the tax
benefits accorded by Section 856 through 860 of the Internal Revenue Code of
1986; and
WHEREAS, the Company has engaged and desires to continue to retain the
Manager to manage the assets of the Company and to perform administrative
services for the Company in the manner and on the terms set forth herein;
NOW, THEREFORE, in consideration of the mutual agreements herein set
forth, the parties hereto agree as follows:
Section 1. DEFINITIONS. Capitalized terms used but not defined
herein shall have the respective meanings assigned them below.
(a) "Affiliate" means, when used with reference to a specified
person, (i) any person that directly or indirectly controls or is controlled by
or is under common control with the specified person, (ii) any person that is an
officer, director or employee of, partner in or trustee
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of, or serves in a similar capacity with respect to, the specified person, or of
which the specified person is an officer, director or employee of, partner in or
trustee of or with respect to which the specified person serves in a similar
capacity, (iii) any person that, directly or indirectly, is the beneficial owner
of 5% or more of any class of equity securities issued by the specified person,
or any person 5% or more of whose equity securities are, directly or indirectly
beneficially owned by such other person, or (iv) any person that has a material
business or professional relationship with the specified person, PROVIDED,
however, that a person shall not be deemed to be an Affiliate of the Manager or
of any person that is an Affiliate of the Manager solely by reason of serving as
a director of one or more investment companies of which the Manager or an
Affiliate of the Manager serves as investment advisor or in any other capacity;
(b) "Affiliated Issuer" means any Person that issues Mortgage-
Backed Obligations and which is organized by or on behalf of the Company;
(c) "Agreement" means this Management Agreement, as amended from
time to time;
(d) "Average Invested Assets" for any period means the average
of the aggregate book value of the consolidated assets of the Company, its
trusts and subsidiaries, computed in accordance with GAAP, invested, directly or
indirectly, in equity interests in and loans secured by real
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estate, including assets that are pledged to secure Mortgage-Backed Obligations,
after reserves for depreciation or bad debts or other similar noncash reserves,
less the book value of minority interest (the portion of equity interest in a
Mortgage-Backed Obligation not owned by the Company) and the liabilities
associated with issued and outstanding Mortgage-Backed Obligations of the
Company, its trusts and subsidiaries, computed for any period by adding the
Average Invested Assets at the end of each month during such period and dividing
by the number of months in the period (provided that Average Invested Assets
shall not include (A) investments in any other REIT for which the Manager or an
Affiliate of the Manager acts as a manager and (B) cash, certificates of
deposit, treasury instruments and other non-real estate related assets);
(e) "Board of Directors" means the Board of Directors of the
Company;
(f) "CAI" means Commercial Assets, Inc., a Maryland corporation;
(g) "Cash Distribution" means any cash distribution other than
those resulting from a complete or partial liquidation of the assets of the
Company as determined by the Independent Directors;
(h) "CMO" means Collateralized Mortgage Obligations which are
secured and funded as to the payment of interest and principal by a specific
group of residential mortgage loans;
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(i) "Commercial Mortgage-Backed Obligations" means debt
Obligations which are secured and funded as to the payment of interest and
principal by a specific group of mortgage loans on multi-family or other
commercial real estate, accounts and other collateral;
(j) "Commitment" means, with respect to any Mortgage Asset, the
agreement containing the terms pursuant to which the Company agrees to acquire
on a forward basis such Mortgage Asset from any Person;
(k) "Company" means Asset Investors Corporation, a Maryland
corporation, for all purposes; provided, however, that with respect to
references to Series of Mortgage-Backed Obligations issued by the Company, the
term "Company" shall include subsidiaries of the Company which issue such
Mortgage-Backed Obligations;
(l) "Conforming Mortgage Loan" means a mortgage loan that
complies with the requirements for inclusion in a guaranty or purchase program
sponsored by any of FNMA, FHLMC or GNMA;
(m) "Direct Issuance Costs" means all fees and expenses incurred
in connection with the issuance of Mortgage-Backed Obligations issued or caused
to be issued by the Company, including trustee, accounting, consulting, legal,
rating agency, registration, printing and engraving, tax advisory and tax
preparation (but not including preparation of annual tax returns) fees and
expenses, underwriting
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discounts, up-front master servicing fees, and up-front costs of credit
enhancements;
(n) "FDIC" means the Federal Deposit Insurance Corporation or
any successor or assign or any resulting, surviving or transferee entity;
(o) "FHLMC" means the Federal Home Loan Mortgage Corporation, a
corporation organized and existing under the laws of the United States of
America, or any successor or assign or any resulting, surviving or transferee
entity;
(p) "FHLMC Certificate" means a FHLMC mortgage participation
certificate;
(q) "FNMA" means the Federal National Mortgage Association, a
corporation organized and existing under the laws of the United States of
America, or any successor or assign or any resulting, surviving or transferee
entity;
(r) "FNMA Certificate" means a FNMA mortgage pass-through
certificate;
(s) "GAAP" means generally accepted accounting principles;
(t) "GNMA" means the Government National Mortgage Association, a
corporation organized and existing under the laws of the United States of
America, or any successor or assign or any resulting, surviving or transferee
entity;
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(u) "GNMA Certificate" means a fully-modified pass-through
mortgage-backed certificate guaranteed by GNMA;
(v) "Governing Instruments" means, the Company's Articles of
Incorporation, as amended, By-Laws, as amended, and any resolutions duly adopted
by the Board of Directors;
(w) "Independent Directors" shall have the meaning ascribed to
that term in the By-Laws of the Company, as the same may be amended or
supplemented from time to time;
(x) "Internal Revenue Code" or "Code" means the Internal Revenue
Code of 1986, as amended;
(y) "Mortgage Assets" means, collectively, Mortgage Instruments,
Residual Interests, Mortgage-Backed Obligations and Non-Agency MBS Bonds;
(z) "Mortgage-Backed Obligations" means, collectively,
collateralized mortgage obligations, mortgage-backed bonds and mortgage
collateralized debt, mortgage pass-through obligations or other instruments
collateralized by, or representing interests in, mortgage debt or Mortgage
Instruments;
(aa) "Mortgage Certificates" means, collectively (i) GNMA
Certificates, (ii) FHLMC Certificates, (iii) FNMA Certificates and (iv) any
other mortgage certificates; including private label pass-through certificates,
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and other mortgage instruments as reasonably determined by the Company;
(bb) "Mortgage Instruments" means, collectively, Mortgage
Certificates and Mortgage Loans;
(cc) "Mortgage Loans" means, collectively, Conforming Mortgage
Loans and Non-conforming Mortgage Loans;
(dd) "Net Income" means the Company's taxable income including
capital gains and capital losses arising from the Company's operations in the
year they are generated before (i) the Manager's incentive compensation,
(ii) net operating loss deductions arising from losses in prior periods,
(iii) dividends from CAI, (iv) special deductions permitted by the Internal
Revenue Code in calculating taxable income for a REIT, and (v) the deduction
arising from the exercise of stock options permitted under Code Section 83 and
the deduction for dividend equivalent rights. In addition, taxable income will
also be reduced by 25% of the expense otherwise deductible for tax purposes
relating to the exercise of stock options and the issuance of Common Stock
relating to dividend equivalent rights;
(ee) "Non-Agency MBS Bonds" means interests issued in residential
mortgage loan securitizations supported by pools of non-conforming (non-agency
guaranteed) mortgage loans.
(ff) "Non-conforming Mortgage Loan" means a mortgage loan that
meets the requirements of the guaranty programs of either FNMA, FHLMC or GNMA;
except for the
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requirements with respect to the maximum original outstanding principal amounts
of such mortgage loans and such other particular requirements of such programs
presented to and approved by the Board of Directors;
(gg) "Other Mortgage Assets" means (i) interest-only
certificates, (ii) principal-only certificates, (iii) subordinated interests in
mortgage pass-through transactions and (iv) other mortgage-derivative assets;
(hh) "Person" means a natural person, corporation, partnership,
association, trust (including any beneficiary thereof), company, joint venture,
joint stock company, unincorporated organization or other entity;
(ii) "REIT" means a real estate investment trust under the
Internal Revenue Code;
(jj) "REIT Income" means taxable income computed as prescribed
for REITs under the Code prior to the "dividends paid deduction" (including the
dividends paid deduction for dividends related to capital gains) and any net
operating loss carryover;
(kk) "Residual Interests" means interests in Mortgage-Backed
Obligations that entitle the holder to receive excess cash flow from the
collateral pledged to secure such obligations;
(ll) "Repurchase Agreement" means a financing transaction
pursuant to which the Company would sell Mortgage Assets for cash and
simultaneously agree to repurchase them at a specified date for the same amount
of cash
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plus an interest component;
(mm) "Series of Mortgage-Backed Obligations" means a separate
series of Mortgage-Backed Obligations issued or caused to be issued by the
Company or an Affiliated Issuer or other person pursuant to an indenture or
other agreement;
(nn) "Servicing Agreement" means a servicing agreement between
the Company and any servicer of the Company's Mortgage Loans;
(oo) "Stockholders" means the registered owners of the shares of
common stock of the Company;
(pp) "Stockholders Equity" means GAAP Stockholders Equity;
(qq) "Ten Year U.S. Treasury Rate" for any period means the
arithmetic average of the weekly average yield to maturity for actively traded
current coupon U.S. Treasury fixed interest rate securities (adjusted to con-
stant maturities of ten years) published by the Federal Reserve Board during
such period, or, if such rate is not published by the Federal Reserve Board,
then any Federal Reserve Bank or agency or department of the federal government
selected by the Company; or, if the Company determines in good faith that for
any reason the Company cannot determine the Ten Year U.S. Treasury Rate for any
period as provided above, then the Ten Year U.S. Treasury Rate for such period
shall be the arithmetic average of the per annum average yields to maturity,
based upon the closing asked
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price on each business day during such period, as chosen and quoted in New York
City for each business day (or less frequently if daily quotations shall not be
generally available) by at least three recognized dealers in U.S. government
securities selected by the Company, for each actively traded marketable U.S.
Treasury fixed interest rate security (other than securities which can, at the
option of the holder, be surrendered at face value in payment of any federal
estate tax) with a final maturity date not less than eight nor more than twelve
years from the date of such closing asked price;
(rr) "Total Operating Expenses" means the expenses indicated in
Section 9(c)(iii);
Section 2. GENERAL DUTIES OF THE MANAGER.
The Manager undertakes to use its best efforts to (i) present to the
Company asset acquisition opportunities consistent with the policies and
objectives of the Company and (ii) furnish the Board of Directors with
information concerning the making, acquisition, holding and disposing of assets.
Subject to the supervision and control of the Board of Directors, the Manager
shall provide services to the Company and, to the extent directed by the Board
of Directors, shall provide similar services to any Affiliated Issuer, if any,
or subsidiary of the Company as follows:
(a) serve as the Company's consultant with respect to the
formulation of asset acquisition criteria and
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policy guidelines for recommendation to the Board of Directors;
(b) counsel the Company in connection with policy decisions to
be made by the Board of Directors;
(c) issue Commitments on behalf of the Company to acquire
Mortgage Assets;
(d) represent the Company in connection with the acquisition and
accumulation of Mortgage Assets;
(e) furnish reports and statistical and economic research to the
Company regarding the Company's portfolio activities and the services performed
for the Company by the Manager as reasonably requested by the Board of
Directors;
(f) monitor and provide to the Board of Directors, on an on-
going basis, rate information and other data regarding Repurchase Agreements and
alternative lending sources;
(g) negotiate and enter into agreements on behalf of the Company
with banking institutions and other lenders to provide for the borrowing of
funds by the Company;
(h) monitor and provide to the Board of Directors, on an on-
going basis, price information and other data obtained from certain nationally
recognized dealers that maintain markets in Mortgage Assets and Other Mortgage
Assets identified by the Board of Directors from time to
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time, and provide data and advice to the Board of Directors in connection with
the identification of such dealers;
(i) provide a full time chief operating officer of the Company,
a full time chief accounting officer of the Company, provide the personnel to
perform or supervise the duties of the computer programmer and analyst
(including necessary computer support staff), senior investment officer,
controller, shareholder relations, press officer, cash manager, tax manager
(including necessary support staff) (any of which functions may be performed by
the same person or persons) and other personnel necessary to manage the Company
on a day-to-day basis and provide to the Company, commencing as of the date
hereof and thereafter on a semi-annual basis, a list of all the full time and
part time employees of the Manager and a description of the functions of such
employees (for purposes of this subsection, full-time shall mean full time
obligation to both CAI and the Company);
(j) administer the day-to-day operations of the Company and
perform or supervise the performance of such other administrative functions
necessary in the management of the Company as may be agreed upon by the Manager
and the Board of Directors, including the collection of revenues and the payment
of the Company's expenses, debts and obligations and maintenance of appropriate
computer services to perform such administrative functions;
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(k) communicate on behalf of the Company with the holders of the
equity and debt securities of the Company as required to satisfy the continuous
reporting and other requirements of any governmental bodies or agencies, securi-
ties exchanges and bond indentures and to maintain effective relations with such
holders;
(l) prepare, draft and file all the Company's filings with the
Securities and Exchange Commission, PROVIDED THAT filing fees, legal fees,
accounting fees and any other third-party fees shall be the responsibility of
the Company;
(m) to the extent not otherwise subject to an agreement executed
by the Company, designate a servicer for those Mortgage Loans sold to the
Company by originators that have elected not to service such loans and arrange
for the monitoring and administering of such servicers;
(n) monitor and administer the servicing of the Company's
Mortgage Loans, other than Mortgage Loans pooled to back Mortgage Certificates
or pledged to secure Mortgage-Backed Obligations or Non-Agency MBS Bonds,
including serving as the Company's consultant with respect to the servicing of
loans; collecting information and submitting reports pertaining to the Mortgage
Loans and to moneys remitted to the Manager or the Company by servicers;
periodically reviewing and evaluating the performance of each servicer to
determine its compliance with the terms and conditions of the servicing
agreement and, if deemed
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appropriate, recommending to the Company the termination of such servicing
agreement; acting as a liaison between servicers and the Company and working
with servicers to the extent necessary to improve their servicing performance;
reviewing recommendations as to fire losses, easement problems and condemnation,
delinquency and foreclosure procedures with regard to the Mortgage Loans;
reviewing servicers' delinquency, foreclosure and other reports on Mortgage
Loans; supervising claims filed under any mortgage insurance policies; and
enforcing the obligation of any servicer to repurchase Mortgage Loans from the
Company;
(o) in accordance with criteria set up by the Board of
Directors, invest or reinvest the Company's cash consistent with the Company's
status as a REIT provided, however, that the Company shall not invest in
Commercial Mortgage-Backed Obligations;
(p) provide to the Company itself or through another appropriate
party (but the Manager shall not charge for the services of such an appropriate
party unless authorized by the Board of Directors) all services in connection
with the issuance of each Series of Mortgage-Backed Obligations or Non-Agency
MBS Bonds issued by the Company or any Affiliated Issuer, including:
(i) representing the Company with respect to the
structuring of each such Series of Mortgage-Backed Obligations or Non-
Agency MBS Bonds;
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(ii) negotiating the rating requirements with rating
agencies with respect to the rating of each such Series of Mortgage-Backed
Obligations or Non-Agency MBS Bonds;
(iii) representing the Company in connection with the
acquisition and accumulation of any Mortgage Instruments and the pooling
and exchange of Mortgage Loans into Mortgage Certificates in connection
with each Series of Mortgage-Backed Obligations or Non-Agency MBS Bonds
issued by the Company or any Affiliated Issuer;
(iv) issuing Commitments on behalf of the Company to acquire
Mortgage Instruments to be used to secure or constitute the mortgage pool
for each such Series of Mortgage-Backed Obligations or Non-Agency MBS
Bonds;
(v) with respect to the issuance of each such Series of
Mortgage-Backed Obligations or Non-Agency MBS Bonds for which the
underlying collateral consists of Mortgage Instruments owned by the Company
or an Affiliated Issuer, accumulating and reviewing all Mortgage Instru-
ments which may secure or constitute the mortgage pool for each such Series
of Mortgage-Backed Obligations or Non-Agency MBS Bonds;
(vi) with respect to the issuance of each such Series of
Mortgage-Backed Obligations or Non-Agency MBS Bonds for which the
underlying collateral
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does not consist of Mortgage Instruments owned by the Company or an Affili-
ated Issuer, reviewing interest rates, maturity dates and other attributes
of the Mortgage Instruments;
(vii) negotiating all agreements and credit enhancements with
respect to each such Series of Mortgage-Backed Obligations or Non-Agency
MBS Bonds;
(viii) organizing and administering all activities in
connection with the closing of each such Series of Mortgage-Backed
Obligations or Non-Agency MBS Bonds including all negotiations and
agreements with underwriters, trustees, servicers, master servicers and
other parties; and
(ix) performing such other services as may be required from
time to time for completing the issuance of each such Series of Mortgage-
Backed Obligations or Non-Agency MBS Bonds.
(q) provide to the Company itself or through another appropriate
party (but the Manager shall not charge for the services of such an appropriate
party unless authorized by the Board of Directors) all services in connection
with the administration of each Series of Mortgage-Backed Obligations or Non-
Agency MBS Bonds issued by the Company or any Affiliated Issuer, including:
(i) communicating on behalf of the Company with the holders
of each such Series of Mortgage-Backed Obligations or Non-Agency MBS Bonds
as
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required to satisfy the reporting and tax informational requirements of any
governmental bodies or agencies with respect to holders of each such Series
of Mortgage-Backed Obligations or Non-Agency MBS Bonds and as required to
satisfy any governmental bodies and the provisions of any indenture,
pooling and servicing agreement or other agreement with respect to each
such Series of Mortgage-Backed Obligations or Non-Agency MBS Bonds;
(ii) determining the amount of, and making, all payments
with respect to each such Series of Mortgage-Backed Obligations or Non-
Agency MBS Bonds and directing the reinvestment of principal and interest
from the Mortgage Instruments in accordance with the terms of any inden-
ture, pooling and servicing agreement or other agreement relating to each
such Series of Mortgage-Backed Obligations or Non-Agency MBS Bonds;
(iii) furnishing all reports and statistical information
required with respect to the administration of each such Series of
Mortgage-Backed Obligations or Non-Agency MBS Bonds;
(iv) working with the Company and with accountants, counsel,
trustees, servicers, master servicers and other parties with respect to the
administration of each such Series of Mortgage-Backed Obligations or Non-
Agency MBS Bonds;
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(v) assisting trustees and paying agents in distributing
all excess or residual payments with respect to each such Series of
Mortgage-Backed Obligations or Non-Agency MBS Bonds as directed by the
Company or any indenture, pooling and servicing agreement or other
agreement with respect to each such Series of Mortgage-Backed Obligations
or Non-Agency MBS Bonds;
(vi) monitoring and providing, on an on-going basis,
information with respect to each such Series of Mortgage-Backed Obligations
or Non-Agency MBS Bonds as is required by the Company;
(vii) advising the Company with respect to the administration
of each such Series of Mortgage-Backed Obligations or Non-Agency MBS Bonds;
and
(viii) performing such other services as may be required from
time to time in connection with the administration of each such Series of
Mortgage-Backed Obligations or Non-Agency MBS Bonds as the Company shall
deem appropriate under the particular circumstances.
(r) provide to the Company itself or through another appropriate
party (but the Manager shall not charge for the services of such an appropriate
party unless authorized by the Board of Directors) services in connection with
reviewing and monitoring the administration of each series of Mortgage-Backed
Obligations or Non-Agency MBS Bonds
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managed by a party other than the Manager or any of its Affiliates, including:
(i) reviewing monthly financial statements and/or other
financial data prepared by the third-party bond administrator and
distributed to the Company;
(ii) reviewing bond payment information and verifying
the excess cash flow payment received by the Company;
(iii) monitoring on-going expenses related to each series of
Mortgage-Backed Obligations or Non-Agency MBS Bonds, where expense
information has been provided to the Company;
(iv) reviewing federal income tax reports prepared by the
third-party bond administrator and distributed to the Company, including
but not limited to, reports for real estate mortgage investment conduits;
and
(v) providing and preparing for Residual Interests in
Mortgage-Backed Obligations or Non-Agency MBS Bonds which are accounted for
under a level-yield method: (A) necessary services for computing monthly
income in accordance with GAAP; and (B) the necessary calculations to
compute the carrying amount adjustment in accordance with the Company's
accounting principles.
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(s) monitor the Company's portfolio with regard to interest rate
risk and recommend to the Board of Directors, and negotiate and enter into on
behalf of the Company, transactions to reduce interest rate risk including, but
not limited to, interest rate swap agreements, forward rate agreements, interest
rate cap agreements, interest rate floor agreements and financial futures and
option contracts in accordance with the criteria established by the Board of
Directors;
(t) perform such other services as may be required from time to
time for management and other activities relating to the assets of the Company
as the Board of Directors shall deem appropriate under the particular cir-
cumstances;
(u) provide tax planning and advisory services and prepare and
file on behalf of the Company all filings required by federal, state and local
governments, including but not limited to, federal and state REIT income tax
returns (including the preparation of the related REIT qualification
calculations), personal property tax returns, sales tax returns, payroll tax
returns, franchise tax returns, annual reports and federal and state information
returns; and
(v) provide the executive, administrative and other personnel,
office space and services required in rendering services to the Company listed
in this Section 2.
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The Manager agrees to use its best efforts at all times in performing
services for the Company hereunder.
Section 3. ADDITIONAL ACTIVITIES OF MANAGER. Nothing herein shall
prevent or restrict the Manager or any of its officers, employees or Affiliates
from engaging in any business or rendering services of any kind to any other
Person, including investment in, or advisory service to others investing in, any
type of real estate assets, including assets which meet the principal portfolio
objectives of the Company, except that, without the consent of the Board of
Directors, which consent shall not be unreasonably withheld, the Manager shall
not provide general management services to any REIT or similar entity other than
the Company and its subsidiaries and affiliates other than acting as a manager
to CAI. Directors, officers, employees and agents of the Manager or Affiliates
of the Manager may serve as directors, officers, employees, agents, nominees or
signatories for the Company or any subsidiary of the Company, to the extent
permitted by their Governing Instruments, as from time to time amended, or by
any resolutions duly adopted by the Board of Directors pursuant to its Governing
Instruments. When executing documents or otherwise acting in such capacities
for the Company, such persons shall use their respective titles in the Company.
Section 4. COMMITMENTS. In order to meet the portfolio requirements
of the Company, as determined by the Board of Directors from time to time, the
Manager agrees to
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issue on behalf of the Company Commitments on such terms as are established by
the Board of Directors, including a majority of the Independent Directors, for
the acquisition of Mortgage Assets originated by, or acquired from, any Person.
Section 5. BANK ACCOUNTS. At the direction of the Board of
Directors, the Manager may establish and maintain one or more bank accounts in
the name of the Company or any subsidiary of the Company, and may collect and
deposit into any such account or accounts, and disburse funds from any such
account or accounts, under such terms and conditions as the Board of Directors
may approve; and the Manager shall from time to time render appropriate
accountings of such collections and payments to the Board of Directors and, upon
request, to the auditors of the Company or any subsidiary of the Company. Such
accounts shall be insured by the FDIC.
Section 6. RECORDS; CONFIDENTIALITY. The Manager shall maintain
appropriate books of account and records relating to services performed
hereunder, and such books of account and records shall be accessible for inspec-
tion by representatives of the Company or any subsidiary of the Company at any
time during normal business hours. The Manager shall keep confidential any and
all information obtained in connection with the services rendered hereunder and
shall not disclose any such information to nonaffiliated
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third parties except with the prior written consent of the Board of Directors.
Section 7. OBLIGATIONS OF MANAGER.
(a) The Manager shall require each seller or transferor of
Mortgage Assets to the Company to make such representations and warranties
regarding such Mortgage Assets as may, in the judgment of the Manager, be
necessary and appropriate. In addition, the Manager shall take such other
action as it deems necessary or appropriate with regard to the protection of the
Company's assets. Notwithstanding any other provision herein, the Manager shall
act in accordance with any portfolio management guidelines that may be
established by the Board of Directors and, in the absence of specific
guidelines, in accordance with industry standards.
(b) The Manager shall refrain from any action which would
adversely affect the status of the Company as a REIT or, if applicable, any
subsidiary of the Company as a REIT or as a qualified REIT subsidiary or which
would violate any law, rule or regulation of any governmental body or agency
having jurisdiction over the Company or any such subsidiary or which would
otherwise not be permitted by the Company's or such subsidiary's Governing
Instruments. If the Manager is ordered to take any such action by the Board of
Directors, the Manager shall promptly notify the Board of Directors of the
Manager's judgment that such action would adversely affect such status or
violate any
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such law, rule or regulation or the Governing Instruments and refrain from
taking such action pending further clarification from the Board of Directors.
If the Manager receives further clarification or instructions expressly ordering
that the action be taken, the Manager shall act as instructed by the Board of
Directors and shall have no liability for such action. Notwithstanding the
foregoing, the Manager, its directors, officers, stockholders and employees
shall not be liable to the Company, any Affiliated Issuer, any subsidiary of the
Company, the Independent Directors or the Company's or its subsidiary's
stockholders for any act or omission by the Manager, its directors, officers,
stockholders or employees except as provided in Section 13 of this Agreement.
Section 8. INVESTMENT COMPANY STATUS.
Notwithstanding any other provision of this Agreement to the contrary,
the Company and the Manager each shall use its best efforts to refrain from
taking any action which, in its judgment made in good faith and with the
exercise of reasonable care, would cause the Company or any subsidiary of the
Company to be required to register as an investment company under the Investment
Company Act of 1940, as amended (the "Investment Company Act"). It shall be the
duty of the Manager to perform such calculations necessary to insure that the
Company or any subsidiary of the Company shall not be required to register under
the Investment Company Act. If an action is ordered by the Board of Direc-
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tors, which in the Manager's judgment might cause such registration to be
required, the Manager shall promptly notify the Board of Directors and shall
refrain from taking such action pending further clarification or instructions
from the Board of Directors. If the Manager receives further clarification or
instructions expressly ordering that the action be taken, the Manager shall act
as instructed by the Board of Directors and shall have no liability for such
action.
Section 9. COMPENSATION.
(a) BASE FEE. Subject to Sections 9(c) and 9(e) hereof, the
Company shall pay to the Manager, for services rendered under this Agreement, a
base management fee in an amount equal to 3/8 of 1% per annum of the Average
Invested Assets of the Company during each fiscal year. An amount equal to 3/32
of 1% of the Average Invested Assets for each fiscal quarter (pro rata based on
the number of days elapsed during any partial fiscal quarter), shall be paid to
the Manager, as provided by, and subject to adjustment under, Section 9(e) of
this Agreement.
(b) INCENTIVE COMPENSATION. The Company shall pay the Manager
as incentive compensation a yearly fee, in an amount equal to 20% of the dollar
amount, if any, by which the Cash Distributions of the Company for each fiscal
year exceeds an amount equal to the Stockholders Equity multiplied by the Ten
Year U.S. Treasury Rate plus one percentage point. If the Cash Distributions of
the
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Company are less than the amount equal to the Stockholders Equity multiplied by
the Ten Year U.S. Treasury Rate plus one percentage point, the Manager shall
refund to the Company the net year-to-date incentive compensation previously
paid to the Manager during the current fiscal year, if any.
The quarterly payment of such amount by the Company to the Manager, or
refund to the Company from the Manager in the event the incentive compensation
for any year-to-date period is less than the incentive compensation computed and
paid to the Manager as of the previous year-to-date period, shall be computed
each fiscal quarter on a cumulative year-to-date basis in an amount equal to
(A) 20% of the dollar amount, if any, by which the year-to-date Cash
Distributions applicable to such fiscal quarter, exceeds an amount equal to the
Stockholders Equity for such year-to-date period multiplied by the year-to-date
Ten Year U.S. Treasury Rate plus one percentage point multiplied by the number
of quarters during such year-to-date period divided by four; and (B) minus the
year-to-date incentive compensation computed for the prior fiscal quarter. If
the year-to-date incentive compensation computed through such fiscal quarter of
the Company is less than the net year-to-date incentive compensation computed
for the previous year-to-date fiscal quarter, the Manager shall refund to the
Company the lesser of (i) the difference between the net year-to-date incentive
compensation computed for the
27
previous year-to-date fiscal quarter and the net year-to-date incentive
compensation computed for the current fiscal quarter or (ii) the net year-to-
date incentive compensation computed for the previous year-to-date fiscal
quarter, if any. Such quarterly payment shall be paid to the Manager, or
refunded to the Company, as provided by, and subject to adjustment under,
Section 9(e) of this Agreement. A sample calculation of the incentive
compensation is shown in Exhibit A.
(c) LIMITATION ON BASE FEE AND INCENTIVE COMPENSATION.
(i) REDUCTION OF BASE FEE AND INCENTIVE COMPENSATION.
During any fiscal quarter, the base management fee described in
Section 9(a) above and incentive compensation described in Section 9(b)
above shall be reduced by the amount, up to the total amount of such base
management fee and incentive compensation, by which the year-to-date Total
Operating Expenses (as defined below) of the Company and its subsidiaries
exceed the greater of 2% of its Average Invested Assets multiplied by the
number of quarters during such year-to-date period divided by four or 25%
of its year-to-date Cash Distributions through such fiscal quarter,
provided, however, that a majority of the Independent Directors may waive
part or all of any such reduction to the extent that they determine, based
upon unusual or nonrecurring factors which they deem sufficient,
28
that a higher level of expenses is justified for such year.
(ii) RECOVERY OF BASE FEE AND INCENTIVE COMPENSATION. If at
the close of any fiscal year the limitation on the base management fee and
incentive compensation pursuant to Section 9(c)(i) above is imposed, the
Manager shall be entitled to recover without interest any reduction of fees
during such fiscal year pursuant to Section 9(c)(i) when, if, and to the
extent that, the Total Operating Expenses of the Company and its
subsidiaries in any future calendar year, including the recovery of the
base management fee and incentive compensation or any portion thereof, are
less than the greater of 2% of the Company's Average Invested Assets or 25%
of its Cash Distributions for such year.
(iii) TOTAL OPERATING EXPENSES. For the purposes of Section
9(c) only, "Total Operating Expenses" for any period means the aggregate
year-to-date expenses for such period of every character payable by the
Company which constitute ordinary operating expenses of the Company,
exclusive of:
(1) expenses relating to raising capital and all
interest and discounts;
(2) taxes and license fees;
(3) expenses connected directly with the issuance,
sale and distribution, and of list-
29
ing on any stock exchange, of securities of the Company including, but not
limited to, underwriting and brokerage discounts and commissions, private
placement fees and expenses, legal and accounting costs, printing,
engraving and mailing costs, and listing and registration fees;
(4) expenses connected directly with the acquisition,
disposition, operation, maintenance, management (including the Administra-
tive fee) or ownership of the Company's assets, including but not limited
to costs of foreclosure, maintenance, repair and improvement of property,
maintenance and protection of the lien of mortgages, property management
fees, loan origination fees, servicing and master servicing fees, legal
fees, premiums for insurance on property owned by or mortgaged to the
Company, taxes, brokerage and acquisition fees and commissions, appraisal
fees, title insurance and abstract expenses, provisions for depreciation,
depletion and amortization, disposition fees and subordinated real estate
commissions, and losses on the disposition of assets and provisions for
such losses;
(5) fees and expenses payable to public accountants,
consultants, or persons employed for the Company directly by the Board of
Directors;
(6) legal, accounting and other expenses incurred in
connection with (a) formal or
30
informal administrative actions or legal proceedings which involve a
challenge of the status of the Company as a REIT, (b) advice regarding
obtaining or maintaining such status, (c) determination by the Company of
its taxable income as computed in accordance with the REIT provisions of
the Internal Revenue Code or (d) a claim that the activities of the Company
or of any member of the Board of Directors, officer or stockholder of the
Company were improper;
(7) expenses of organizing, reorganizing or
terminating the Company;
(8) non cash expenditures (including depreciation,
amortization and bad debt reserves);
(9) fees and expenses of transfer agents, registrars,
warrant agents, right agents, dividend payment and dividend reinvestment
agents, escrow holders and indenture trustees;
(10) all expenses connected with communications to
holders of securities of the Company and other bookkeeping and clerical
work necessary in maintaining relations with holders of securities,
including the costs of printing and mailing certificates for securities,
proxy solicitation materials and reports to such holders and the cost of
holding meetings of holders of securities of the Company; and
(11) legal, accounting, printing and other costs,
including clerical costs, of reports
31
required to be filed with state or federal governmental agencies.
(d) ADMINISTRATIVE FEE. Unless otherwise agreed by the parties
hereto, in addition to any other fee payable to the Manager under this
Agreement, the Manager shall be paid:
(i) for each Series of CMOs issued or owned by the Company
or any subsidiary of the Company and with respect to which the Manager or
any Affiliate of the Manager serves as manager, in the case of CMOs sold or
intended to be sold primarily to institutional investors, the lesser of
(A) $35,000 annually and (B) an annual amount equal to $35,000 multiplied
by the percentage ownership of the Company or such subsidiary of the
Company in such CMO, or in the case of CMOs sold or intended to be sold
primarily to retail investors, the lesser of (C) $10,000 annually and
(D) an annual amount equal to $10,000 multiplied by the percentage
ownership of the Company or such subsidiary of the Company in such CMO;
(ii) for each Series of CMOs issued or owned by the Company
or any subsidiary of the Company and with respect to which the Manager or
any Affiliate of the Manager does not serve as manager, in the case of CMOs
sold or intended to be sold primarily to institutional investors, the
lesser of (A) $10,000 annually and (B) an annual amount equal to $10,000
32
multiplied by the percentage ownership of the Company or such subsidiary of
the Company in such CMO, or in the case of CMOs sold or intended to be sold
primarily to retail investors, the lesser of (C) $5,000 annually and (D) an
annual amount equal to $5,000 multiplied by the percentage ownership of the
Company or such subsidiary of the Company in such CMOs; or
(iii) for each Series of Non-Agency MBS Bonds issued or owned
by the Company or any subsidiary of the Company with respect to the first
class of such Series the lesser of (A) $2,500 annually and (B) an annual
amount equal to $2,500 multiplied by the percentage ownership of the
Company or such subsidiary of the Company in such Non-Agency MBS Bonds,
and, for each additional class of such Series (C) $625 annually and (D) an
annual amount equal to $625 multiplied by the percentage ownership of the
Company or such subsidiary of the Company in such Non-Agency MBS Bond.
With respect to any series of CMOs or Non-Agency MBS Bonds issued
or acquired on any day other than the first day of the month, the applicable
portion of such fees shall be calculated as if such CMOs or Non-Agency MBS Bonds
were issued or acquired on the first day of the month following the month in
which they were issued or acquired.
Where the Manager serves as manager for a Series of CMOs issued
by the Company or any subsidiary of the Company, such fees shall be compensation
to the Manager
33
for bond administration, reinvestment direction, computer operations, special
redemption calculations, preparation in sending bondholder notices and like
functions. Where the Manager serves as manager for a Series of CMOs owned by
but not issued by the Company or any subsidiary of the Company, compensation to
the Manager shall be agreed upon between the issuer of such CMOs and the
Manager. Where the Manager does not serve as manager for a Series of CMOs
issued or owned by the Company or any subsidiary of the Company, such fees shall
be compensation for related accounting functions and overseeing the third-party
management and administration. Notwithstanding any other provision of this
Agreement, the Manager shall be entitled to reimbursement for its actual costs
in providing servicing functions for any pool of Mortgage Loans.
(e) ADJUSTMENT AND PAYMENT. The Manager shall compute the
estimated compensation payable or refundable under Sections 9(a), 9(b), 9(c) and
9(d) hereof as soon as practicable after the end of each fiscal quarter, but no
later than 50 days after the end of each such quarter. A copy of such computa-
tions shall be thereafter promptly submitted to the Company. Such compensation
shall be paid to the Manager, or refunded to the Company, on the first business
day of the third month after such fiscal quarter as payment on account, subject
to adjustment under this Section 9(e) of this Agreement. The aggregate amount
of the Manager's compensation under Sections 9(a), 9(b), 9(c) and
34
9(d) for each fiscal year shall be adjusted within: (x) 120 days after the end
of such fiscal year; or (y) 120 days after the filing of the Company's federal
income tax return for such fiscal year, whichever is later. Such adjustment
shall be made to reflect additional information provided by the Company's tax
return for such fiscal year. Any excess owed to, or refund owed by, the Manager
shall be paid to the Manager or remitted by the Manager to the Company within
ten days of presentment of the adjustment.
Section 10. COMPENSATION FOR ADDITIONAL SERVICES. If the Company
requests the Manager (or any Affiliate or any officer or employee thereof) to
render services for the Company other than those required to be rendered by the
Manager hereunder, such additional services, if performed, shall be compensated
separately on terms to be agreed upon between such party and the Board of
Directors from time to time. To the extent that the Manager or any Affiliate of
the Manager performs any brokerage, leasing, loan servicing, loan
administration, property management or other similar services for the Company
other than as required hereunder, the rate of compensation for such services
shall be either (a) the rate at which the Manager or such Affiliate of the
Manager is then performing similar services for unaffiliated parties in the same
geographic area or (b) the rate at which qualified unaffiliated persons are then
performing such services for similar investors in the same geographic area.
35
Section 11. EXPENSES OF THE MANAGER. Without regard to the
compensation received hereunder by the Manager, the Manager shall bear the
following expenses (unless agreed otherwise by the Board of Directors):
(a) Employment expenses of the personnel employed by the
Manager, including, but not limited to, salaries, wages, payroll taxes, and the
cost of employee benefit plans for such employees;
(b) Rent, telephone, utilities, office furniture, equipment,
machinery (including computers), subscriptions and such other overhead expenses
incurred in connection with the conduct of the Manager's business;
(c) Travel and other expenses of directors, officers and
employees of the Manager, except expenses of such persons incurred in connection
with attending meetings, conferences or conventions that relate solely to the
business affairs of the Company or any subsidiary of the Company;
(d) Legal, accounting and auditing fees, and tax advisory and
tax preparation fees, relating to the corporate affairs of the Manager;
(e) If the Manager or an Affiliate acts as bond administrator
for a Series of Mortgage-Backed Obligations, all expenses relating to the
performance of the services set forth in Sections 2(p) and 2(q) of this Agree-
ment for such Series of Mortgage-Backed Obligations;
36
(f) Expenses incurred (including personnel) in preparation of
the Company's monthly financial statements; and
(g) Miscellaneous administrative expenses incurred in
supervising and monitoring the Company's assets or any subsidiary's assets or
relating to performance by the Manager of its functions hereunder.
If any of the expenses set out above total $5,000 or more
individually, or $15,000 or more in the aggregate and are incurred by the
Manager in part for the purposes of the Company and in part for purposes
unrelated to the Company (including expenses incurred on behalf of CAI), the
Manager shall submit an accounting to the Company's Audit Committee of the Board
of Directors on a quarterly basis to show the allocation of such expenses. The
Manager shall also submit a quarterly schedule of its allocation of expenses
between the Company and CAI.
Section 12. EXPENSES OF THE COMPANY. The Company or any subsidiary
of the Company shall pay all of its expenses, except those that are the
responsibility of the Manager pursuant to Section 11 of this Agreement or other
provisions of this Agreement, and without limiting the generality of the
foregoing, the following expenses of the Company or any subsidiary of the
Company shall be paid by the Company or such subsidiary and shall not be paid by
the Manager:
37
(a) Expenses related to raising capital, including the cost of
borrowed money, interest payments, discounts, loan and commitment fees, points
and any other related charges;
(b) All license fees and all taxes applicable to the Company or
any subsidiary of the Company, including interest and penalties thereon;
(c) Legal, audit, accounting, underwriting, brokerage, listing,
rating agency, registration and other fees, printing, engraving and other
expenses and taxes incurred in connection with the issuance, sale, distribution,
transfer, registration and stock exchange listing of the securities of the
Company or of any subsidiary of the Company;
(d) Employment expenses, fees and out-of-pocket costs of the
Company and fees and expenses paid to employees, agents, advisers and
independent contractors, consultants, managers, and other agents (other than the
Manager) employed directly by the Company or any subsidiary of the Company or by
the Manager at the request of the Company or such subsidiary for the account of
the Company or the subsidiary;
(e) Expenses connected with the acquisition, disposition,
operation (except for those duties performed by the Manager) and ownership of
the assets of the Company or any subsidiary of the Company, including, without
limitation, commitment, appraisal, guaranty and hedging fees,
38
brokerage and acquisition fees and commissions, ad valorem taxes, costs of
foreclosure, maintenance, repair and improvement of property, maintenance and
protection of the lien of mortgages, property management fees, loan origination
fees, servicing and master servicing fees, legal fees, premiums for insurance on
property owned by the Company or any subsidiary of the Company and insurance and
abstract expenses; PROVIDED, that with regard to brokerage fees, unless approved
by a majority of the Independent Directors, neither the Manager nor any of its
Affiliates shall charge a brokerage commission or similar fee to the Company or
any subsidiary of the Company in connection with the acquisition, disposition or
ownership of the assets of the Company or the subsidiary;
(f) Expenses of organizing, reorganizing, dissolving or winding-
up the Company or any subsidiary of the Company;
(g) All insurance costs not included in paragraph (e) hereof and
incurred by the Company or any subsidiary of the Company, including without
limitation, the cost of officer and director liability insurance;
(h) Expenses connected with payments of dividends or interest or
distributions in cash or any other form made or caused to be made by the Board
of Directors to holders of the securities of the Company or any subsidiary of
the Company;
(i) Direct Issuance Costs;
39
(j) All expenses connected with communications to holders of
equity securities or debt securities of the Company or any subsidiary of the
Company and with governmental agencies and the other bookkeeping and clerical
work necessary in maintaining relations with holders of such securities and in
complying with the continuous reporting and other requirements of governmental
bodies or agencies, including, without limitation, the cost of printing and
mailing certificates for such securities and proxy solicitation materials and
reports to holders of the Company's or any subsidiary's securities and reports
to third-parties required under any indenture to which the Company or any
subsidiary of the Company is a party, except such expenses that are the
responsibility of the Manager as set forth in Section 11 hereof, including but
not limited to the expenses listed in Sections 11(a) and 11(b) incurred by the
Manager in connection with this Section 12(j);
(k) Fees and charges of any transfer agent or registrar;
(l) Fees and expenses paid to directors of the Company or any
subsidiary of the Company, except, in each case, directors who are Affiliates of
the Manager;
(m) Legal, accounting and auditing fees, and tax advisory and
tax preparation fees, relating to the operations of the Company or any
subsidiary;
(n) Legal, accounting and auditing fees, tax advisory and tax
preparation fees, consulting fees and
40
expenses relating to the administration of Mortgage-Backed Obligations issued or
caused to be issued by the Company;
(o) Any judgment rendered against the Company or any subsidiary
of the Company, or against any officer or director of the Company or any
subsidiary of the Company in his capacity as such by any court or governmental
agency;
(p) If the Manager or an Affiliate does not act as bond
administrator for a Series of Mortgage-Backed Obligations issued by an
Affiliated Issuer by or on behalf of the Company, all fees charged by the bond
administrator who performs the services set forth in Sections 2(p) and 2(q) of
this Agreement for such Series of Mortgage-Backed Obligations;
(q) Fees paid to the Manager with the approval of a majority of
the Independent Director for participation by the Company in programs operated
by the Manager for the pricing and acquisition of Mortgage Loans;
(r) Amounts payable by the Company to the Manager under Section
13 of this Agreement;
(s) Third-party fees and expenses incurred by the Manager under
Section 14 of this Agreement; and
(t) Other miscellaneous expenses in connection with the
operation of the Company or any subsidiary of the Company which are not expenses
of the Manager under Section 11 of this Agreement, provided that any such single
expense in excess of $10,000 shall be submitted to the
41
Company's Audit Committee of the Board of Directors on a quarterly basis.
Section 13. LIMITS OF RESPONSIBILITY OF THE MANAGER.
(a) The Company shall indemnify the Manager and its Affiliates
with respect to all expenses, losses, damages, liabilities, demands, charges or
claims of any nature in respect of acts or omissions of the Manager made in good
faith and in accordance with the standards set forth in this Agreement.
(b) Notwithstanding subsection (a) of this Section 13, the
Company shall not be responsible for any and all losses, damages, costs,
charges, counsel fees, payments, expenses and liabilities arising out of or
attributable to the Manager's failure to comply with the terms of this Agreement
or any action or failure or omission to act by the Manager as a result of the
gross negligence, willful misconduct or lack of good faith of the Manager or any
of its agents or as a result of its or any of their reckless disregard of its
duties and any obligations hereunder, or which arise out of the willful breach
of any representation or warranty of the Manager hereunder.
(c) The Manager shall indemnify and hold harmless the Company
with respect to all expenses, losses, damages, liabilities, demands, charges or
claims of any nature in respect of acts or omissions of the Manager not in
accordance with the standards set forth in this Agreement.
42
(d) The Manager shall promptly notify the Board of Directors of
any litigation or governmental investigation involving the Company and shall
keep the Board of Directors fully informed of the status of any such litigation
or governmental investigation.
Section 14. POOLING OF MORTGAGE LOANS; ISSUANCE OF MORTGAGE
CERTIFICATES. If the Manager determines it to be in the best interests of the
Company and consistent with the portfolio criteria approved by the Board of
Directors of the Company, the Manager shall, directly or indirectly and on
behalf of the Company, pool Mortgage Loans acquired by the Company and use its
best efforts to have Mortgage Certificates issued backed by such Mortgage Loans
which meet all underwriting and other requirements for such issuance. In
connection therewith, the Manager shall, directly or indirectly and on behalf of
the Company, apply to the respective issuer for a commitment to issue the
related Mortgage Certificates and, once such commitment has been approved,
contract to pool such Mortgage Loans and cause to be issued Mortgage
Certificates backed by such Mortgage Loans, which Mortgage Certificates shall be
owned by and registered in the name, or deposited into a depository institution
for the account, of the Company. After the issuance of such Mortgage
Certificates, unless otherwise specified by the Company, the servicer of the
related Mortgage Loans shall have all responsibilities and duties to the issuer
of such Mortgage Certificates with respect to
43
such Mortgage Loans and Mortgage Certificates, and shall service such Mortgage
Loans after the issuance of the Mortgage Certificates which they back in
accordance with the requirements of the issuer of such Mortgage Certificates.
In connection therewith, the Manager shall apply conditions of the
Servicing Agreement, and, if deemed appropriate, recommend to the Company the
termination of such Servicing Agreement; acting as a liaison between servicers
and the Company and working with servicers to the extent necessary to improve
their servicing performance; review of and recommendations as to fire losses,
easement problems and condemnation, delinquency and foreclosure procedures with
regard to the Mortgage Loans; review of servicers' delinquency, foreclosing and
other reports on Mortgage Loans; supervising claims filed under any mortgage
insurance policies; and enforcing the obligation of any servicer to repurchase
Mortgage Loans from the Company.
Section 15. NO JOINT VENTURE. The Company and the Manager are not
partners or joint venturers with each other and nothing herein shall be
construed to make them such partners or joint venturers or impose any liability
as such on either of them.
Section 16. TERM. This Agreement shall continue in force until
December 31, 1994 unless otherwise renewed or extended.
44
Section 17. TERMINATION OF AGREEMENT.
(a) Notwithstanding any other provision of this Agreement to the
contrary, this Agreement may be terminated by either party with or without cause
upon 60 days' written notice. In addition, this Agreement may be terminated at
any time by a majority vote of (i) the Independent Directors or (ii) the holders
of the Common Stock of the Company.
(b) This Agreement may be immediately terminated by the Company
by written notice of termination from the Company to the Manager upon the
occurrence of any of the following events:
(i) if the Manager shall violate any material provision of
this Agreement which, after written notice of such violation, is not cured
within 30 days;
(ii) if the Manager or any of its Affiliates shall be
adjudged bankrupt or insolvent by a court of competent jurisdiction, or any
order shall be made by a court of competent jurisdiction for the
appointment of a receiver, liquidator or trustee of the Manager or any of
its Affiliates or of all or substantially all of its property by reason of
the foregoing or approving any petition filed against the Manager or any of
its Affiliates for its reorganization and such adjudication, order or
petition has not been stayed or discharged pending appeal within 60 days of
its entry;
45
(iii) if the Manager or any of its Affiliates shall
institute proceedings for voluntary bankruptcy or shall file a petition
seeking reorganization under the federal bankruptcy laws, or for relief
under any law for the relief of debtors, or shall consent to the appoint-
ment of a receiver, or shall make a general assignment for the benefit of
its creditors, or shall admit in writing its inability to pay its debts
generally as they become due;
(iv) if any governmental authority, court or self-regulatory
authority shall withdraw, suspend or revoke or declare invalid any license,
charter, authorization or, registration required or necessary for the con-
duct by the Manager or any of its Affiliates of any material portion of its
business or businesses and such adjudication, order or petition has not
been stayed or discharged pending appeal within 60 days of its entry; or
(v) if any event or circumstances shall occur which
materially impairs the financial condition of the Manager or any of its
Affiliates or the ability of the Manager to perform its obligations
hereunder.
The Manager agrees that if any of the events specified in
subsection (b) of this Section 17 shall occur, it will give written notice
thereof to the Board of Directors within five days after the occurrence of such
event.
46
Section 18. ASSIGNMENTS.
(a) Except as set forth in Section 18(b) of this Agreement, this
Agreement shall terminate automatically in the event of its assignment, in whole
or in part, by the Manager, unless such assignment is consented to in writing by
the Company with the consent of a majority of the Independent Directors. Any
such assignment shall bind the assignee hereunder in the same manner as the
Manager is bound. In addition, the assignee shall execute and deliver to the
Company a counterpart of this Agreement naming such assignee as Manager. This
Agreement shall not be assigned by the Company without the prior written consent
of the Manager, except in the case of assignment by the Company to a REIT or
other organization which is a successor (by merger, consolidation or purchase of
assets) to the Company, in which case such successor organization shall be bound
hereunder and by the terms of such assignment in the same manner as the Company
is bound hereunder.
(b) Notwithstanding any provision of this Agreement, the Manager
may subcontract and assign any or all of its responsibilities at no additional
cost to the Company under Sections 2(p), 2(q) and 2(r) of this Agreement to any
of its Affiliates, and the Company hereby consents to any such assignment and
subcontracting.
47
Section 19. ACTION UPON TERMINATION.
(a) Except as provided in Section 19(b) of this Agreement, from
and after the effective date of termination of this Agreement, pursuant to
Sections 16, 17 or 18 of this Agreement, the Manager shall not be entitled to
compensation for further services hereunder, but shall be paid all compensation
accruing to the date of termination. Upon such termination, the Manager shall
forthwith:
(i) Pay over to the Company or any subsidiary of the
Company all money collected and held for the account of the Company or any
subsidiary of the Company pursuant to this Agreement;
(ii) Deliver to the Board of Directors a full accounting,
including a statement showing all payments collected by it and a statement
of all money held by it, covering the period following the date of the last
ended fiscal quarter;
(iii) Deliver to the Board of Directors all property and
documents of the Company or any subsidiary of the Company then in the
custody of the Manager;
(iv) Present an accounting to the Independent Directors of
any accrued compensation pursuant to Section 9 above and an accounting of
any expenses for which it seeks reimbursement; and
(v) If the Company so requests, sell the items listed on
Exhibit B back to the Company at a
48
price equal to the net book value of such items, computed in accordance
with GAAP, as of the date of termination.
(b) Notwithstanding any provisions of this Agreement, if the
Manager is terminated pursuant to Section 17(a) of this Agreement within twelve
months after the occurrence of any of the events set forth in Section 19(c)
hereunder, the Manager shall be entitled to compensation as follows:
(i) The Manager shall be paid all compensation to the date
of termination; and
(ii) On the final day of each fiscal quarter after the date
of termination and ending one year thereafter, the Manager shall receive an
amount equal to one-quarter of the average of the annual aggregate of all
compensation incurred under this Agreement and its predecessors during the
three fiscal years prior to the fiscal year in which termination occurred.
(c) The events referred to in Section 19(b) are as follows:
(i) Any corporation, person or other entity (other than the
Company, the Manager or their respective affiliates) makes a tender or
exchange offer for shares of the Company's Common Stock pursuant to which
such corporation, person or other entity acquires
48
15% or more of the issued and outstanding shares of the Company's Common
Stock;
(ii) The stockholders of the Company approve a definitive
agreement to merge or consolidate the Company with or into another
corporation or to sell or otherwise dispose of all or substantially all of
its assets, except in the case of a merger or consolidation with, or sale
to, the Manager or an affiliate of the Manager; or
(iii) Any person, within the meaning of Section 3(a)(9) or
Section 13(d)(3) of the Securities Exchange Act of 1934, acquires more than
15% (30% in the case of a passive investor) of the Company's issued and
outstanding voting securities.
Section 20. RELEASE OF MONEY OR OTHER PROPERTY UPON WRITTEN REQUEST.
The Manager agrees that any money or other property of the Company or any
subsidiary of the Company held by the Manager under this Agreement shall be held
by the Manager as custodian for the Company or such subsidiary, and the
Manager's records shall be appropriately marked clearly to reflect the ownership
of such money or other property by the Company or such subsidiary. Upon the
receipt by the Manager of a written request signed by a duly authorized officer
of the Company requesting the Manager to release to the Company or any
subsidiary of the Company any money or other property then held by the Manager
for the account of the Company or any subsidiary of the Company
50
under this Agreement, the Manager shall forthwith release such money or other
property to the Company or such subsidiary. The Manager shall not be liable to
the Company, any subsidiary of the Company, the Independent Directors, or the
Company's or its subsidiary's stockholders for any acts performed or omissions
to act by the Company or any subsidiary of the Company in connection with the
money or other property released to the Company or any subsidiary of the Company
in accordance with this Section. The Company and any subsidiary of the Company
shall indemnify the Manager, its directors, officers and employees against any
and all expenses, losses, damages, liabilities, demands, charges and claims of
any nature whatsoever, which arise in connection with the Manager's release of
such money or other property to the Company or any subsidiary of the Company in
accordance with the terms of this Section 20 of this Agreement, except insofar
as such expenses, losses, damages, liabilities, demands, charges and claims
arise out of acts of the Manager, its directors, officers and employees
constituting bad faith, willful misconduct, gross negligence or reckless
disregard of their duties. Indemnification pursuant to this provision shall be
in addition to any right of the Manager to indemnification under Section 13 of
this Agreement.
51
Section 21. REPRESENTATIONS AND WARRANTIES.
(a) The Company hereby represents and warrants to the Manager as
follows:
(i) The Company has been duly organized and is validly
existing and in good standing under the laws of the State of Maryland; the
Company has the corporate power to own its assets and to transact the
business in which it is now engaged and is duly qualified as a foreign
corporation and in good standing under the laws of each jurisdiction where
its ownership or lease of property or the conduct of its business requires
such qualification, except for failures to be so qualified, authorized or
licensed that could not in the aggregate have a material adverse effect on
the business operations, assets or financial condition of the Company and
its subsidiaries, taken as a whole. The Company does not do business under
any fictitious business name.
(ii) The Company has the corporate power and authority to
execute, deliver and perform this Agreement and all obligations required
hereunder and has taken all necessary corporate action to authorize the
execution, delivery and performance of this Agreement and all obligations
required hereunder. No consent of any other person including, without
limitation, directors, stockholders and creditors of the Company, and no
license, permit, approval or authoriza-
52
tion of, exemption by, notice or report to, or registration, filing or
declaration with, any governmental authority is required by the Company in
connection with this Agreement or the execution, delivery, performance,
validity or enforceability of this Agreement and all obligations required
hereunder. This Agreement has been, and each instrument or document
required hereunder will be, executed and delivered by a duly authorized
officer of the Company, and this Agreement constitutes, and each instrument
or document required hereunder when executed and delivered hereunder will
constitute, the legally valid and binding obligation of the Company
enforceable against the Company in accordance with its terms.
(iii) The execution, delivery and performance of this
Agreement and the documents or instruments required hereunder will not
violate any provision of any existing law or regulation binding on the
Company, or any order, judgment, award or decree of any court, arbitrator
or governmental authority binding on the Company, or the Governing
Instruments of, or any securities issued by, the Company or of any
mortgage, indenture, lease, contract or other agreement, instrument or
undertaking to which the Company is a party or by which the Company or any
of its assets may be bound, the violation of which would have a material
adverse effect on the business operations, assets or
53
financial condition of the Company and its subsidiaries, taken as a whole,
and will not result in, or require, the creation or imposition of any lien
on any of its property, assets or revenues pursuant to the provisions of
any such mortgage, indenture, lease, contract or other agreement,
instrument or undertaking.
(b) The Manager hereby represents and warrants to the Company as
follows:
(i) The Manager is duly organized, validly existing and in
good standing under the laws of the State of Delaware; the Manager has the
power to own its assets and to transact the business in which it is now
engaged and is duly qualified to do business and is in good standing under
the laws of each jurisdiction where its ownership or lease of property or
the conduct of its business requires such qualification, except for
failures to be so qualified, authorized or licensed that could not in the
aggregate have a material adverse effect on the business operations, assets
or financial condition of the Manager and its subsidiaries, taken as a
whole. The Manager does not do business under any fictitious business
name.
(ii) The Manager has the power and authority to execute,
deliver and perform this Agreement and all obligations required hereunder
and has taken all necessary corporate action to authorize the execution,
delivery and performance of this
54
Agreement and all obligations required hereunder. No consent of any other
person including, without limitation, directors and creditors of the
Manager, and no license, permit, approval or authorization of, exemption
by, notice or report to, or registration, filing or declaration with, any
governmental authority is required by the Manager in connection with this
Agreement or the execution, delivery, performance, validity or enforcea-
bility of this Agreement and all obligations required hereunder. This
Agreement has been, and each instrument or document required hereunder will
be, executed and delivered by a duly authorized agent of the Manager, and
this Agreement constitutes, and each instrument or document required here-
under when executed and delivered hereunder will constitute, the legally
valid and binding obligation of the Manager enforceable against the Manager
in accordance with its terms.
(iii) The execution, delivery and performance of this
Agreement and the documents or instruments required hereunder, will not
violate any provision of any existing law or regulation binding on the
Manager, or any order, judgment, award or decree of any court, arbitrator
or governmental authority binding on the Manager, or the Governing
Instruments of, or any securities issued by, the Manager or of any mort-
gage, indenture, lease, contract or other agreement,
55
instrument or undertaking to which the Manager is a party or by which the
Manager or any of its assets may be bound, the violation of which would
have a material adverse effect on the business operations, assets or
financial condition of the Manager and its subsidiaries, taken as a whole,
and will not result in, or require, the creation or imposition of any lien
on any of its property, assets or revenues pursuant to the provisions of
any such mortgage, indenture, lease, contract or other agreement,
instrument or undertaking.
Section 22. NOTICES. Unless expressly provided otherwise herein, all
notices, requests, demands and other communications required or permitted under
this Agreement shall be in writing and shall be deemed to have been duly given,
made and received when delivered against receipt or upon actual receipt of
registered or certified mail, postage prepaid, return receipt requested,
addressed as set forth below:
(a) If to the Company:
3600 South Yosemite Street
Suite 900
Denver, Colorado 80237
Attention: President
with a copy given in the manner prescribed above, to the
Chief Operating Officer/Chief Financial Officer, Chief
Accounting Officer and each member of the Board of Directors
at their addresses as set forth in the records of the
Company.
If to the Manager:
56
3600 South Yosemite Street
Suite 900
Denver, Colorado 80237
Attention: President
with a copy given in the manner prescribed above, to the
General Counsel at the same address.
Either party may alter the address to which communications or copies
are to be sent by giving notice of such change of address in conformity with the
provisions of this Section 22 for the giving of notice.
Section 23. 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 24. ENTIRE AGREEMENT. This Agreement contains the entire
agreement and understanding between the parties hereto 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. This Agreement may not be modified or amended other than by an
agreement in writing.
Section 25. CONTROLLING LAW. This Agreement 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 Colorado, notwithstanding any Colorado or other conflict-of-law
provisions to the contrary.
57
Section 26. COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same instrument.
Section 27. COMPUTATION OF INTEREST. Interest will be computed on
the basis of a 360-day year consisting of twelve months of thirty days each.
Section 28. INDULGENCES, NOT WAIVERS. Neither the failure nor any
delay on the part of a party to exercise any right, remedy, power or privilege
under this Agreement shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, remedy, power or privilege preclude any other or
further exercise of the same or of any other right, remedy, power or privilege,
nor shall any waiver of any right, remedy, power or privilege with respect to
any occurrence be construed as a waiver of such right, remedy, power or
privilege with respect to any other occurrence. No waiver shall be effective
unless it is in writing and is signed by the party asserted to have granted such
waiver.
Section 29. 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 matters incident thereto.
58
Section 30. SCHEDULES AND EXHIBITS. All Schedules and Exhibits
referred to herein or attached hereto are hereby incorporated by reference into,
and made a part of, this Agreement.
59
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
ASSETS INVESTORS CORPORATION
By:
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Spencer I. Browne
President and Chief
Executive Officer
FINANCIAL ASSET MANAGEMENT
CORPORATION
By:
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