EXHIBIT 10.1
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT, is entered into as of July 15, 1999, by and
between XXXXXXXXX MORTGAGE ASSET CORPORATION, a Maryland corporation
(hereinafter referred to as the "Company"), and XXXXXXXXX MORTGAGE ADVISORY
CORPORATION, a Delaware corporation (hereinafter referred to as the "Manager"),
with respect to the following:
WITNESSETH:
WHEREAS, the Company is engaged in the business of investing in mortgage
securities ("Mortgage Securities") and mortgage loans ("Mortgage Loans")
(collectively, "Mortgage Assets") and has qualified for the tax benefits
accorded to a real estate investment trust ("REIT") by Sections 856 through 860
of the Internal Revenue Code of 1986 ("Code"), as amended; and
WHEREAS, the Company 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, and wishes to enter into this
Agreement for a ten (10) year term and thereafter until the Company's board of
directors (the "Board of Directors") shall have met to take action on the
renewal or termination of this Agreement; and
WHEREAS, the Manager shall not engage in any activity which would cause it
to be required to register as an investment advisor under the Investment
Advisers Act of 1940; and
WHEREAS, the Manager shall comply with all laws applicable to it and
arising in connection with this Agreement.
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
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shall have the meanings assigned them in the currently effective Prospectus and
Form 10-K of the Company as filed with the Securities and Exchange Commission as
of the date of this Agreement. In addition, the following terms shall have the
meanings assigned to them:
(a) "Agreement" means this Management Agreement, as amended from time
to time.
(b) "Agreement Date" means the date reflected on page one as of which
this Agreement is signed and dated.
(c) "Average Net Invested Assets" means for any period the difference
between (i) the aggregate book value of the consolidated assets of the Company
and it subsidiaries, before reserves for depreciation or bad debts or other
similar noncash market value adjustments and reserves, and (ii) the book value
of average debt associated with the Company's ownership of Mortgage Assets,
computed by taking the average of such net values at the end of each month
during such period.
(d) "Average Net Worth" means for any period the arithmetic average of
the sum of the gross proceeds from any offering of its equity securities by the
Company, before deducting any underwriting discounts and commissions and other
expenses and costs relating to the offering, plus the Company's retained
earnings (without taking into account any losses incurred in prior periods)
computed by taking the average of such values at the end of each month during
such period, and shall be reduced by any amount that the Company pays for the
repurchases of Common Stock.
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(e) "Governing Instruments" means the articles of incorporation and
bylaws in the case of a corporation.
(f) "Return on Equity" means for any quarter the product of the
Company's Net Income for the quarter divided by the Company's Average Net Worth
for the quarter.
SECTION 2. General Duties of the Manager. Subject to the supervision
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of the Company's board of directors (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 subsidiary of the Company as
follows:
(a) serve as the Company's consultant with respect to formulation and
updating of investment criteria and policy guidelines for consideration by the
Board of Directors ("Guidelines");
(b) represent the Company in connection with (i) its commitments to
purchase and (ii) the purchase of Mortgage Assets, including the accumulation of
Mortgage Loans for securitization;
(c) furnish reports and statistical and economic research to the
Company regarding the Company's investments and activities and the services
performed for the Company by the Manager;
(d) 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 identified by the Board of
Directors from time to time, and provide data and advice to the Board of
Directors in connection with the identification of such dealers;
(e) administer the day-to-day operations of the Company and perform or
supervise the performance of such other administrative functions necessary or
advisable for the management of the Company as may be agreed upon by the Manager
and the Board of Directors including, without limitation, collection of the
Company's revenues and payment of the Company's expenses, debts and obligations
and maintenance of appropriate computer services to provide such administrative
functions;
(f) 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 to
holders of such securities and third parties and to maintain effective relations
with such holders of the Company's securities;
(g) designate a servicer for those Mortgage Loans sold to the Company
by originators or sellers that have elected not to service such loans and
arrange for the monitoring and administering of such servicers;
(h) counsel the Company in connection with policy decisions to be made
by the Board of Directors;
(i) upon request by and in accordance with the directions of the Board
of Directors, invest or reinvest any money of the Company;
(j) engage in hedging activities on behalf of the Company consistent
with the Company's qualification as a REIT and with the Guidelines;
(k) arrange for the issuance of Mortgage Securities from pools of
Mortgage Loans acquired by the Company, and provide to the Company itself or
through another appropriate party all services in connection with the creation
of Mortgage Securities, including:
(1) serving as consultant with respect to the structuring of each class
or series of Mortgage Securities;
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(2) negotiating the rating requirements with rating agencies with
respect to the rating of each class or series of Mortgage Securities;
(3) accumulating and reviewing all Mortgage Loans which may secure or
constitute the mortgage pool for each class or series of Mortgage Securities;
(4) negotiating all agreements and credit enhancements with respect to
each class or series of Mortgage Securities;
(5) issuing commitments on behalf of the Company to purchase Mortgage
Loans to be used to secure or constitute the mortgage pool for each class or
series of Mortgage Securities;
(6) organizing and administering all activities in connection with the
closing of each class or series of Mortgage Securities, including all
negotiations and agreements with underwriters, trustees, servicers, master
servicers and other parties; and
(7) performing such other services as may be required from time to time
for completing the creation of each class or series of Mortgage Securities.
(l) provide to the Company itself or through another appropriate party
all services in connection with the administration of each class or series of
Mortgage Securities created by the Company;
(m) provide the executive and administrative personnel, office space
and services required in rendering the foregoing services to the Company;
(n) 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
Manager shall deem necessary, advisable or appropriate under the particular
circumstances;
(o) cause the Company to qualify to do business in all applicable
jurisdictions as may be required from time to time under applicable state and
federal laws; and
(p) comply with all laws applicable to the Manager and use its best
efforts to cause the Company to comply with all laws applicable to the Company.
SECTION 3. Additional Activities of Manager.
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(a) Nothing herein shall prevent the Manager or any of its Affiliates
from engaging in other businesses or from rendering services of any kind to any
other person or entity, including investment in, or advisory service to others
investing in, any type of real estate investment, including investments which
meet the principal investment objectives of the Company. Notwithstanding
anything elsewhere in this Agreement to the contrary, the Manager shall not
engage in any activity which would cause it to be required to register as an
investment advisor under the Investment Advisers Act of 1940. In furtherance
thereof, during any twelve (12) month period, the Manager shall not (i) render
investment advice to more than fifteen (15) clients, (ii) hold itself out
generally to the public as an investment advisor, or (iii) act as an investment
advisor to any investment Company that is registered under the Investment
Company Act.
(b) 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 the
Company's Governing Instruments. When executing documents or otherwise acting
in such capacities for the Company, such persons shall use their respective
title in the Company.
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SECTION 4. Bank Accounts. At the direction of the Board of Directors,
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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 by the
Company, to the auditors of the Company or any subsidiary of the Company.
SECTION 5. Records; Confidentiality. The Manager shall maintain
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appropriate books of account and records relating to services performed
hereunder, and such books of account and records shall be accessible for
inspection 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 it obtains from time to time in connection with the services
it renders under this Agreement and shall not disclose any portion thereof to
non-affiliated third parties except with the prior written consent of the
Company, or except as may be required by applicable law or judicial process.
SECTION 6. Obligations of Manager.
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(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 be, in the judgment of the Manager, necessary, advisable
and appropriate. In addition, the Manager shall take such other action as it
deems necessary, advisable or appropriate with regard to the protection of the
Company's investments.
(b) The Manager shall refrain from any action which would adversely
affect the status of the Company or, if applicable, any subsidiary of the
Company as a REIT 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 such law, rule or regulation or the Governing Instruments.
The Manager, its directors, officers, stockholders and employees shall not be
liable to the Company, any subsidiary of the Company, or the Board of Directors,
including the "Independent Directors" (as defined in the Company's Bylaws), for
any act or omission by the Manager, its directors, officers, stockholders or
employees except as provided in Section 11 of this Agreement.
SECTION 7. Compensation.
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(a) Annual Base Management Fee. For services rendered under this
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Agreement, the Company shall pay to the Manager, commencing with the month in
which the Agreement Date occurs, an annual base management fee based on the
Average Net Invested Assets of the Company and its subsidiaries for each year,
payable monthly in arrears, as follows:
1.1% of the first $300 million of Average Net Invested Assets,
plus .8% of the portion of Average Net Invested Assets above
$300 million.
The annual base management fee shall be calculated by the Manager within fifteen
(15) days after the end of the each month, and such calculation shall be
promptly delivered to the Company. The Company shall pay to the Manager the
applicable portion of the annual base management fee payable pursuant to this
Section 7 (a) for each month within thirty (30) days after the end of each such
month. Payments of the applicable portion of the annual base management fee
shall be pro rated based on the number of days elapsed during any partial month.
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(b) Incentive Compensation. In addition to the annual base management
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fee, the Manager shall receive as incentive compensation for each fiscal quarter
an amount equal to twenty percent (20%) of the Net Income of the Company, before
Incentive Compensation, in excess of the amount that would produce an annualized
Return on Equity equal to the Ten Year U.S. Treasury Rate (average of weekly
average yield to maturity for U.S. Treasury securities (adjusted to a constant
maturity of ten (10) years) as published weekly by the Federal Reserve Board in
publication H.15 during a quarter) plus one percent (1%). The incentive
compensation calculation and payment shall be made quarterly in arrears. The
Manager shall compute the incentive compensation payable under this Section 7(b)
within forty-five (45) days after the end of each fiscal quarter. The Company
shall pay the incentive compensation with respect to each fiscal quarter within
15 days following the delivery to the Company of Manager's written statement
setting forth the computation of the incentive compensation for such quarter.
(c) If loans are made to the Company by an "Affiliate" (as such term is
defined as the Company's by-laws) of the Manager, the maximum amount of interest
that may be charged by such Affiliate shall be the prime rate publicly announced
by Citibank, N.A. from time to time plus 1% per year.
(d) Net Income of the Company, solely for purposes of calculating the
Manager's Incentive Compensation under Section 7(b), shall be determined by
calculating net income available to shareholders of Common Stock, in accordance
with generally accepted accounting principles ("GAAP"), as determined by the
Company's independent certified public accountants.
(e) The proceeds from any issue of preferred stock which may from time
to time be created and authorized for issuance by the Board of Directors (the
"Preferred Stock") shall be included in Average Net Invested Assets in
calculating the Manager's annual base management fee under Section 7(a). For
calculating the Manager's Incentive Compensation, Preferred Stock shall be
excluded from Average Net Worth and the minimum or fixed rate portion of any
Preferred Stock dividend shall be deducted from taxable income before incentive
compensation.
SECTION 8. Expenses of the Company. The Company or any subsidiary of
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the Company shall pay all of its expenses as set forth on Annex A attached, and
shall reimburse the Manager for documented expenses of the Manager reasonably
incurred on its behalf in furtherance of the Manager's responsibilities under
this Agreement. The reimbursable expenses of the Manager shall include, without
limitation, the amount of any New Mexico Gross Receipts Tax which the Manager
becomes obligated to pay based on the annual base management fees, incentive
compensation and any other receipts which the Manager derives in connection with
its service to the Company. The Manager shall be responsible for its own costs
of operation set forth under Section II on Annex A.
SECTION 9. Annual Operating Expenses Limitation Requiring Reimbursement by
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the Manager.
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(a) Subject to the adjustment as provided in paragraph (b), expenses
incurred by the Manager on behalf of the Company shall be reimbursed monthly to
the Manager within 30 days after the end of each month. The Manager shall
prepare a statement documenting the expenses of the Company and those incurred
by the Manager on behalf of the Company during each month, and shall deliver
such statement to the Company within 15 days after the end of each month.
(b) Within 120 days after the end of each of the Company's fiscal
years, the Manager shall reimburse the Company for any expense reimbursement
received by the Manager from the Company hereunder with respect to such fiscal
year to the extent that the Operating Expenses (as defined in Annex A attached
hereto) of the Company for such fiscal year exceed the greater of 2% of its
Average Net Invested Assets or 25% of its Net Income for such fiscal year;
unless a majority of the Independent Directors determines that, based upon such
unusual or nonrecurring factors which they deem sufficient, a higher level of
expenses is justified for such fiscal year, in which case, such expenses shall
be payable to the Manager in succeeding fiscal years to the extent that the
expenses of the Company are less than the greater of 2% of its Average Net
Invested Assets or 25% of its Net Income for such fiscal year. The
determination of Net Income for any period for purposes of calculating the
expense limitation will be the same as for calculating the Manager's incentive
compensation, except that the determination of Net Income for purposes of
calculating the expense limitation will include any incentive compensation
payable for such period. The amount of any Gross Receipts Tax reimbursed by the
Company to the Manager pursuant to Section 8 above, as well as the other costs
and expenses enumerated on Annex A attached hereto, are not Operating Expenses
and are not subject to the operating expense limitation set forth above.
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SECTION 10. Monitoring Servicing. The Manager will monitor and administer
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the servicing of the Company's Mortgage Loans, other than loans pooled to back
Mortgage Securities. Such monitoring and administrative services will include,
but not be limited to, the following activities: serving as the Company's
consultant with respect to the servicing of loans; collection of information and
submission of reports pertaining to the Mortgage Loans and to moneys remitted to
the Manager or the Company by Servicers; periodic review and evaluation of the
performance of each servicer to determine its compliance with the terms and
conditions of the applicable servicing agreement and, if deemed 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; review of and
recommendations as to fire losses, easement problems and condemnation,
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. The Manager may enter
into subcontracts with other parties, including its Affiliates, to provide any
such services for the Manager; provided however, all such subcontractors shall
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then be subject to the terms of this Agreement and the Manager shall provide
written notice of such subcontracts to the Company; and, provided further, in no
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event shall any such subcontracts or subcontractors contravene the Manager's
obligations and limitations set forth in Section 3 (a) of this Agreement.
SECTION 11. Limits of Manager Responsibility.
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(a) The Manager assumes no responsibility under this Agreement other
than to render the services called for hereunder in good faith and shall not be
responsible for any action of the Board of Directors in following or declining
to follow any advice or recommendations of the Manager. The Manager, its
directors, officers, stockholders and employees will 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 or omissions by the
Manager, its directors, officers, stockholders or employees under or in
connection with this Agreement, except by reason of acts constituting bad faith,
willful misconduct, gross negligence or reckless disregard of their duties. The
Company shall reimburse, indemnify and hold harmless the Manager, its
stockholders, directors, officers and employees of and from any and all
expenses, losses, damages, liabilities, demands, charges and claims of any
nature whatsoever (including, without limitation, attorneys' fees) in respect of
or arising from any acts or omissions of the Manager, its stockholders,
directors, officers and employees made in good faith in the performance of the
Manager's duties under this Agreement and not constituting bad faith, willful
misconduct, gross negligence or reckless disregard of its duties.
(b) The Manager shall reimburse, indemnify and hold harmless the
Company, any subsidiary, or any of their stockholders, directors, officers and
employees from any and all expenses, losses, damages, liabilities, demands,
charges and claims (including, without limitation, attorneys' fees) arising out
of any intentional misstatements of fact made by the Manager in connection with
the issuance of commitments to purchase Mortgage Assets on behalf of the Company
and the purchase of Mortgage Assets by the Company resulting from such
commitments.
SECTION 12. No Joint Venture. The Company and the Manager are not
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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 13. Term; Termination.
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(a) This Agreement shall commence on the Agreement Date and shall
continue in force until the next regularly scheduled Board of Directors meeting
of the Company following the tenth anniversary of the Agreement Date, and
thereafter, it may be extended only with the consent of the Manager and by the
affirmative vote of a majority of the Board of Directors, including a majority
of the Independent Directors. Each extension shall be executed in writing by
the parties hereto before the expiration of this Agreement or any extension
thereof. Each such extension shall not exceed a term of ten years.
Notwithstanding any other provision to the contrary, this Agreement, or any
extension hereof, may be terminated by the Company, upon 60 days written notice,
by majority vote of the Independent Directors or by majority vote of the
Stockholders. If this Agreement is terminated pursuant to this Section 13, such
termination shall be subject to the provisions of Section 16 of this Agreement.
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(b) Name Change Upon Termination of Management Agreement. The Company
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agrees that, if at any time the Manager or any Affiliate of the Manager shall
cease to serve generally as Manager of the Company or any Subsidiary, upon
receipt of a written request of the Manager, the Company and such Subsidiary
will cause their governing instruments, including articles of incorporation and
by-laws, to be amended so as to change the name of the Company or such
Subsidiary to a name that does not include "Xxxxxxxxx" or any approximation
thereof.
(c) The Independent Directors shall determine at least annually that
the compensation paid to the Manager is reasonable in relation to the nature and
quality of services performed and also shall supervise performance of the
Manager and the compensation paid to it to determine that the provisions of this
Agreement are being carried out. The Independent Directors shall also determine
at least annually that the total fees and expenses of the Company are reasonable
in light of all relevant factors. Each such determination shall be based upon
the following factors and all other factors the Independent Directors may deem
relevant and the findings of the Independent Directors on each of such factors
shall be recorded in the minutes of the Board of Directors:
(1) the size of the management fee in relation to the size,
compensation and profitability of the investment portfolio of the Company;
(2) the success of the Manager in generating opportunities that meet
the investment objectives of the Company;
(3) the rates charged to other real estate investment trusts and to
other investors by advisors performing similar services;
(4) additional revenues realized by the Manager and its affiliates
through their relationship with the Company whether paid by the Company or by
others with whom the Company does business;
(5) the quality and extent of service and advice furnished to the
Company;
(6) the performance of the investment portfolio of the Company,
including income, conservation or appreciation of capital, frequency of problem
investments and competence in dealing with distress situations; and
(7) the quality of the investment portfolio of the Company.
SECTION 14. Assignments.
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(a) Except as set forth in Section 13(b) of this Agreement, this
Agreement shall terminate automatically in the event of its assignment, in whole
or in part, by the Manager, unless the Company (with the approval of a majority
of the Independent Directors) consents to such assignment in advance. 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 to the contrary,
subject to Section 3(a), the Manager may subcontract and assign any or all of
its responsibilities under Sections 2(k), 2(l) and 10 of this Agreement to any
of its Affiliates, and the Company hereby consents to any such assignment and
subcontracting.
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SECTION 15. Termination by Company for Cause. At the option of the
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Company, this Agreement shall be and become terminated upon 60 days written
notice of termination from the Board of Directors to the Manager if any of the
following events shall occur:
(a) if the Manager shall violate any provision of this Agreement and,
after notice of such violation, shall not cure such violation within 30 days;
(b) there is entered an order for relief or similar decree or order
with respect to the Manager by a court having competent jurisdiction in an
involuntary case under the federal bankruptcy laws as now or hereafter
constituted or under any applicable federal or state bankruptcy, insolvency or
other similar laws; or the Manager (i) ceases, or admits in writing its
inability to pay its debts as they become due and payable, or makes a general
assignment for the benefit of, or enters into any composition or arrangement
with, creditors; (ii) applies for, or consents (by admission of material
allegations of a petition or otherwise) to the appointment of a receiver,
trustee, assignee, custodian, liquidator or sequestrator (or other similar
official) of the Manager or of any substantial part of its properties or assets,
or authorizes such an application or consent, or proceedings seeking such
appointment are commenced without such authorization, consent or application
against the Manager and continue undismissed for 30 days; (iii) authorizes or
files a voluntary petition in bankruptcy, or applies for or consents (by
admission of material allegations of a petition or otherwise) to the application
of any bankruptcy, reorganization, arrangement, readjustment of debt,
insolvency, dissolution, liquidation or other similar law of any jurisdiction,
or authorizes such application or consent, or proceedings to such end are
instituted against the Manager without such authorization, application or
consent and are approved as properly instituted and remain undismissed for 30
days or result in adjudication of bankruptcy or insolvency; or (iv) permits or
suffers all or any substantial part of its properties or assets to be
sequestered or attached by court order and the order remains undismissed for 30
days; or
(c) If any of the events specified in Section 15(b) of this Agreement
shall occur, the Manager shall give prompt written notice thereof to the Board
of Directors upon the occurrence of such event.
SECTION 16. Action Upon Termination.
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(a) From and after the effective date of termination of this Agreement,
pursuant to Sections 13, 14 or 15 of this Agreement, the Manager shall not be
entitled to compensation for further services hereunder, except pursuant to any
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separate written management termination agreement that may hereafter be
negotiated by the parties, but shall be paid all compensation accruing to the
date of termination, including deferred incentive compensation which is
recoverable in accordance with Section 7(e) of this Agreement. Upon such
termination, the Manager shall forthwith:
(1) after deducting any accrued compensation and reimbursement for its
expenses to which it is then entitled, 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;
(2) 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 accounting furnished
to the Board of Directors with respect to the Company or any subsidiary of the
Company;
(3) pay to the Company all sums set forth on the accounting referenced
in (b) above; and
(4) 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.
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(b) Upon the occurrence of (i) an "Acquisition Event" or (ii) the
termination of this Agreement by the Company (in either case, a "Termination
Event"), other than a termination for cause on the grounds set forth in Section
15 of this Agreement, the Company agrees to, and shall be obligated to, acquire
and pay for substantially all of the assets of the Manager in a transaction
intended to qualify, in the opinion of counsel reasonably acceptable to the
Manager, as a tax free reorganization pursuant to Section 368(a)(1)(A) or
368(a)(1)(C) of the Internal Revenue Code, as amended, (the "Reorganization").
The Reorganization shall be effected in a transaction intended to qualify, in
the opinion of the Company's certified public accountants, as a pooling of
interests for financial accounting purposes if such treatment is then available
and, in the determination of the Company, advisable. In consideration for the
Reorganization, the Company shall issue to the Manager an amount of publicly
registered shares of Common Stock of the Company, calculated as follows:
(1) The Manager will retain an independent certified public accountant
mutually acceptable to the Company and the Manager to prepare in accordance with
generally accepted accounting principals on the cash receipts and disbursements
method of accounting audited financial statements for the three 12 month periods
(the "Statements") over the thirty-six month period ending with the most
recently completed calendar quarter (the "Measuring Period"). The Statements
will show gross revenues received by the Manager less all expenses (excluding
bonus payments to the Manager's employees and affiliates) paid by the Manager
during the Measuring Period.
(2) The Company will issue to the Manager as payment for the
Reorganization that number of shares of Common Stock of the Company equal to
120% of the quotient of the Manager's net profit (excluding bonus payments to
the Manager's employees and affiliates) on the Statement for the 12 month period
showing the highest net profit during the Measuring Period, divided by the
dividend per share declared by the Company during the most recent fiscal quarter
in which a dividend was declared, on an annualized basis; provided, however,
that such Reorganization payment shall not be less than the sum of $5 million
for each $100 million of equity capital attributable to the Company's Common
Stock and preferred stock.
(3) "Acquisition Event" means -- (A) the acquisition by any person or
entity who or which, together with all affiliates and associates of such person
or entity shall become the beneficial owner of 20% or more of the common stock
of the Company then outstanding, but shall not include the Company, any
subsidiary or employee benefit plan thereof (collectively, "Excluded Entities"),
through an unsolicited tender offer or exchange offer or other acquisition of
such number of shares by such person, or -- (B) a change in the majority of the
Board of Directors of the Company, whether by resignation or removal, which
change occurs as a result of the acquisition of a controlling interest in the
outstanding voting stock of the Company by any person or entity, other than
Excluded Entities, or -- (C) a merger, consolidation, or reorganization between
the Company and another entity with the Company being either the surviving
entity or the acquired entity, or the transfer of assets into the Company for
stock or other equity securities of the Company, or securities exercisable or
convertible into equity securities by any person or entity, other than Excluded
Entities.
(4) The Company shall at all times keep and maintain an adequate
reserve of authorized but unissued shares available to fulfill the obligation to
issue shares pursuant to the Reorganization.
(5) Upon the occurrence of an Acquisition Event, the Company shall
promptly file a registration statement and use its best efforts to cause such
registration statement to become effective under the Securities Act of 1933, as
amended, with respect to the public offering and distribution of such shares
reserved for issuance pursuant to the Reorganization.
(6) The Company and the Manager will, as soon as possible after the
occurrence of an Acquisition Event, but in no event later than 60 days after the
Acquisition Event, take all necessary corporate action to consummate and close
the Reorganization, including the Company's issuance of the shares of common
stock to the Manager as determined in paragraph (2) above.
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SECTION 17. Release of Money or Other Property Upon Written Request. The
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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 under this Agreement, the
Manager shall release such money or other property to the Company or any
subsidiary of the Company within a reasonable period of time, but in no event
later than 30 days following such request. The Manager shall not be liable to
the Company, any subsidiary of the Company, the Independent Directors, or the
Company'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. Subject to the foregoing, the Company shall indemnify the Manager, its
directors, officers, stockholders 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 17. Indemnification pursuant to this provision
shall be in addition to any right of the Manager to indemnification under
Section 11 of this Agreement.
SECTION 18. Representations and Warranties.
--------------------------------
(a) The Company hereby represents and warrants to the Manager as
follows:
(1) The Company is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, 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.
(2) 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 this Agreement on the
terms and conditions hereof and the execution, delivery and performance of this
Agreement and all obligations required hereunder. No consent of any other person
including, without limitation, stockholders and creditors of the Company, 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 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.
(3) 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 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.
(4) Nothing in this Agreement shall or is intended to contravene any
fact or representation set forth in any prospectus, registration statement,
annual report or quarterly report as filed by the Company with the Securities
and Exchange Commission.
(b) The Manager hereby represents and warrants to the Company as
follows:
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(1) The Manager is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its formation, has the corporate
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 require 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.
(2) The Manager has the corporate power and authority to execute,
deliver and perform this Agreement and all obligations required hereunder and
has taken all necessary partnership action to authorize this Agreement on the
terms and conditions hereof and the execution, delivery and performance of this
Agreement and all obligations required hereunder. No consent of any other
person including, without limitation, partners 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 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
agent of the Manager, 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 Manager enforceable
against the Manager in accordance with its terms.
(3) 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 any securities issued by the Manager or of any mortgage,
indenture, lease, contract or other agreement, 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.
(4) Nothing in this Agreement shall or is tended to contravene any fact
or representation set forth in the Prospectus.
SECTION 19. Notice. Unless expressly provided otherwise herein, all
------
notices, request, 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. The
parties may deliver to each other notice by electronically transmitted facsimile
copies ("Fax") provided that such Fax notice is followed within twenty-four (24)
hours by any type of notice otherwise provided for in this paragraph. Any
notice shall be duly addressed to the parties as follows:
47
If to the Company: 000 Xxxx Xxxxx
Xxxxx Xx, XX 00000
Attention: Xxxxx X. Xxxxxxxxx
Copy to: Xxxxxxx X. Xxxxxxx, Esq.
Jeffers, Wilson, Xxxxx & Xxxx, LLP
00000 Xxx Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, XX 00000
If to the Manager: 000 Xxxx Xxxxx
Xxxxx Xx, XX 00000
Attention: Xxxxxxx Xxxxxxxxx
Copy to: Xxxxxxx X. Xxxxxxx, Esq.
Jeffers, Wilson, Xxxxx & Xxxx, LLP
00000 Xxx Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, XX 00000
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 19 for the giving of notice.
SECTION 20. Binding Nature of Agreement; Successors and Assigns. This
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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 21. Entire Agreement. 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. This Agreement may not be
modified or amended other than by an agreement in writing approved by the
Company (including a majority of the Independent Directors) and the Manager.
SECTION 22. 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 New Mexico, notwithstanding any New Mexico or other conflict of law
provisions to the contrary.
SECTION 23. 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.
SECTION 24. 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, 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 25. Titles Not to Affect Interpretation. The titles of paragraphs
-----------------------------------
and subparagraphs contained in this Agreement are for convenience only, and they
neither form a part of this Agreement nor are they to be used in the
construction or interpretation hereof.
48
SECTION 26. Execution in Counterparts. This Agreement may be executed in
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any number of counterparts, including electronically transmitted counterparts,
each of which shall be deemed to be an original as against any party whose
signature appears thereon, and all of which shall together constitute one and
the same instrument. this Agreement shall become binding when one or more
counterparts hereof, individually or taken together, shall bear the signatures
of all of the parties reflected hereon as the signatories.
SECTION 27. Provisions Separable. The provisions of this Agreement are
---------------------
independent of and separable from each other, and no provision shall be affected
or rendered invalid or unenforceable by virtue of the fact that for any reason
any other or others of them may be invalid or unenforceable in whole or in part.
SECTION 28. Gender. Words used herein regardless of the number and gender
------
specifically used, shall be deemed and construed to include any other number,
singular or plural, and any other gender, masculine, feminine or neuter, as the
context requires.
SECTION 29. Computation of Interest. Interest will be computed on the
-------------------------
basis of a 360-day year consisting of twelve months of thirty days each.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have executed this Management
Agreement as of the date first written above.
"Company"
XXXXXXXXX MORTGAGE ASSET CORPORATION
a Maryland corporation
By: /s/ Xxxxx X. Xxxxxxxxx
-------------------------
Xxxxx X. Xxxxxxxxx, President
"Manager"
XXXXXXXXX MORTGAGE ADVISORY CORPORATION,
a Delaware corporation
By: /s/ Xxxxxxx Xxxxxxxxx
-----------------------
Xxxxxxx Xxxxxxxxx, Chairman
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ANNEX A
Definition of "Operating Expenses"
I. The term "Operating Expenses" means all of the Company's ordinary and
necessary operating expenses of every type including, but not limited to, costs
of operating, owning, acquiring, carrying, monitoring the servicing of and
disposing of the Company's assets, including software and costs of equipment
related thereto, and costs of organizing any subsidiary of the Company, costs of
issuing, servicing, paying dividends or interest on, selling or reacquiring any
instrument or security or mortgage asset (whether or not a security), costs
preparatory to entering into a business or activity, costs of winding up or
disposing of a business or activity, interest, points, fees, finance costs,
costs of maintaining compliance with governmental requirements of any type,
taxes, losses, bad debts of any type, in each case incurred by or on behalf of
the Company regardless whether such expenses and costs would be treated as
current costs or expenses for tax purposes or under generally accepted
accounting principles.
II. The term "Operating Expenses" of the Company shall not include the
following:
(A) employment expenses of the Manager's personnel (including
Directors, officers, and employees of the Company who are directors, officers,
or employees of the Manager or its Affiliates), other than the expenses of those
employee services listed in Section I above; and
(B) rent, telephone, utilities, and office furnishings and other office
expenses of the Manager (except those relating to a separate office, if any,
maintained by the Company).
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