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Exhibit 10.1
MANAGEMENT AND ADVISORY AGREEMENT
THIS MANAGEMENT AND ADVISORY AGREEMENT, is made as of June 10, 1998
(the "Agreement") by and among FORTRESS INVESTMENT CORP. , a Maryland
corporation (the "REIT"), FORTRESS PARTNERS, L. P., a Delaware limited
partnership (the "Operating Partnership," and, collectively with the REIT, the
"Company"), and FORTRESS INVESTMENT GROUP LLC, a Delaware limited liability
company (together with its permitted assignees, the "Manager").
W I T N E S S E T H :
WHEREAS, the REIT expects to qualify for the tax benefits
accorded by Sections 856 through 860 of the Internal Revenue Code of 1986, as
amended (the "Code");
WHEREAS, the REIT is the sole general partner of the Operating
Partnership and has contributed (or will contribute on the Closing Date) to the
Operating Partnership all of its assets (including, without limitation, all of
the proceeds of the offering of the Shares of the REIT, as further described in
the Offering Memorandum) and will conduct substantially all of its operations
through the Operating Partnership;
WHEREAS, the Company desires to avail itself of the
experience, sources of information, advice, assistance and certain facilities of
or available to the Manager and to have the Manager undertake the duties and
responsibilities hereinafter set forth, on behalf of the Company and subject to
the supervision of the REIT, as provided in this Agreement; and
WHEREAS, the Manager is willing to undertake to render such
services, subject to the supervision of the REIT, on the terms and conditions
hereinafter set forth.
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 in the Offering Memorandum of
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the REIT dated June 5, 1998 (the "Offering Memorandum"). In addition, the
following terms have the meanings assigned them:
(a) "Agreement" means this Management and
Advisory Agreement, as amended from time to time.
(b) "Board of Directors" means the Board of
Directors of the REIT.
(c) "Closing Date" means the date of initial
closing of the REIT's private placement of common stock identified in the
Offering Memorandum.
(d) "Code" means the Internal Revenue Code of
1986, as amended.
(e) "Exchange Act" means the Securities Exchange
Act of 1934, as amended.
(f) "Governing Instruments" means, with regard
to any entity, the articles of incorporation and bylaws in the case of a
corporation, certificate of limited partnership (if applicable) and the
partnership agreement in the case of a general or limited partnership or the
articles of formation and the operating agreement in the case of a limited
liability company.
(g) "Partnership Agreement" means the Agreement
of Limited Partnership of the Operating Partnership, dated as of June 10, 1998.
(h) "Preferred Stock Affiliate" means any
preferred stock affiliate (whether a corporation, partnership, limited liability
company or other entity), as described in the Offering Memorandum.
(i) "REIT Investments" means the assets of the
Company.
(j) "Sister Corp." means any sister company
(whether a corporation, partnership, limited liability company or other entity),
as described in the Offering Memorandum.
(k) "Special Limited Partner" has the meaning
ascribed thereto in the Partnership Agreement.
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(l) "Subsidiary" means any subsidiary of the
REIT and any partnership, the general partner of which is the REIT or any
subsidiary of the REIT and any limited liability company, the managing member of
which is the REIT or any subsidiary of the REIT.
SECTION 2. APPOINTMENT AND DUTIES OF THE MANAGER.
(a) The REIT and the Operating Partnership hereby appoint
the Manager to manage the assets of the Company subject to the further terms and
conditions set forth in this Agreement and the Manager shall use its
commercially reasonable efforts to perform each of the duties set forth herein.
The appointment of the Manager shall be exclusive to the Manager except to the
extent that the Manager otherwise agrees, in its sole and absolute discretion,
and except to the extent that the Manager elects, pursuant to the terms of this
Agreement, to cause the duties of the Manager hereunder to be provided by third
parties.
(b) The Manager, in its capacity as manager of the assets
of the Company, at all times will be subject to the supervision of the REIT's
Board of Directors and will have only such functions and authority as the
Company may delegate to it including, without limitation, the functions and
authority identified herein and delegated to the Manager hereby. The Manager
will be responsible for the day-to-day operations of the Company and will
perform (or cause to be performed) such services and activities relating to the
assets and operations of the Company as may be appropriate, including, without
limitation:
(i) serving as the Company's consultant with
respect to formulation of investment criteria and preparation of
parameters for the Company's investments, borrowings and operations
for approval by a majority of the independent members of the Board of
Directors (such approved policy guidelines, the "Guidelines") and other
policies for approval by the Board of Directors;
(ii) investigation and selection of possible
investment opportunities and acquisitions, property and investment
analysis, market and economic surveys, on-site physical inspections,
review and projection of income and construction, reno-
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vation and/or operating expenses and supervising and negotiating the
arrangement of financing;
(iii) conducting negotiations with real estate
brokers, owners of property and their agents and representatives,
investment bankers and owners of privately and publicly held real
estate companies;
(iv) engaging and supervising, on behalf of the
Company and at the Company's expense, independent contractors which
provide real estate brokerage, investment banking and leasing services,
mortgage brokerage and other financial services and such other services
as may be required relating to the Company's investments;
(v) negotiating on behalf of the Company for the
sale, exchange or other disposition of any of the Company's
investments;
(vi) coordinating and managing operations of any
joint venture or co-investment interests held by the Company and
conducting all matters with the joint venture or co-investment
partners;
(vii) coordinating and supervising, on behalf of
the Company and at the Company's expense, all property managers,
leasing agents and developers for the administration, leasing,
management and/or development of any of the Company's investments;
(viii) providing executive and administrative
personnel, office space and office services required in rendering
services to the Company;
(ix) administering the day-to-day operations of
the Company and performing and supervising 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, without limitation, the collec-
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tion of revenues and the payment of the Company's debts and obligations
and maintenance of appropriate computer services to perform such
administrative functions;
(x) communicating on behalf of the Company with
the holders of any equity or debt securities of the Company as required
to satisfy the reporting and other requirements of any governmental
bodies or agencies or trading markets and to maintain effective
relations with such holders;
(xi) counseling the Company in connection with
policy decisions to be made by the Board of Directors;
(xii) evaluating and recommending overall hedging
strategies to the Board of Directors and, upon approval by the Board
of Directors of such overall hedging strategies, engaging in hedging
activities on behalf of the Company, consistent with the Company's
status as a real estate investment trust, such approved overall hedging
strategies and the Guidelines;
(xiii) counseling the REIT regarding the
maintenance of its status as a real estate investment trust and
monitoring compliance with the various real estate investment trust
qualification tests and other rules set out in the Code and Treasury
Regulations thereunder;
(xiv) counseling the Company regarding the
maintenance of its exemption from the Investment Company Act and
monitoring compliance with the requirements for maintaining an
exemption from that Act;
(xv) assisting the Company in developing
criteria for asset purchase commitments that are specifically tailored
to the Company's investment objectives and making available to the
Company its knowledge and experience with respect to mortgage loans,
real estate and other real estate-related assets;
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(xvi) representing and making recommendations to
the Company in connection with asset privatization, investments in
operating companies, loan origination (including on a portfolio basis)
and the purchase and finance, and commitment to purchase and finance,
mortgage loans (including on a portfolio basis), real estate and other
real estate-related assets, and the sale and commitment to sell such
assets;
(xvii) monitoring the operating performance of the
Company's investments and providing periodic reports with respect
thereto to the Board of Directors, including comparative information
with respect to such operating and performance and budgeted or
projected operating results;
(xviii) investing and re-investing any moneys and
securities of the Company (including investing in short-term
investments pending investment in REIT Investments, payment of fees,
costs and expenses, or payments of dividends or distributions to
stockholders and partners of the Company) and advising the Company as
to its capital structure and capital raising;
(xix) causing the Company to retain qualified
accountants and legal counsel, as applicable, to assist in developing
appropriate accounting procedures, compliance procedures and testing
systems with respect to financial reporting obligations and compliance
with the provisions of the Code applicable to real estate investment
trusts and to conduct quarterly compliance reviews with respect
thereto;
(xx) causing the Company to qualify to do
business in all applicable jurisdictions and to obtain and maintain all
appropriate licenses;
(xxi) assisting the Company in complying with all
regulatory requirements applicable to the Company in respect of its
business activities, including preparing or causing to be prepared all
financial statements required under applicable regulations and
contractual undertakings and all reports and documents, if any,
required under the Exchange Act;
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(xxii) taking all necessary actions to enable the
Company to make required tax filings and reports, including soliciting
stockholders for required information to the extent provided by the
provisions of the Code applicable to real estate investment trusts;
(xxiii) handling and resolving all claims, disputes
or controversies (including all litigation, arbitration, settlement or
other proceedings or negotiations) in which the Company may be involved
or to which the Company may be subject arising out of the Company's
day-to-day operations, subject to such limitations or parameters as may
be imposed from time to time by the Board of Directors;
(xxiv) using commercially reasonable efforts to
cause expenses incurred by or on behalf of the Company to be reasonable
or customary and within any budgeted parameters or Guidelines set by
the Board of Directors from time to time;
(xxv) performing 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
reasonably request or the Manager shall deem appropriate under the
particular circumstances; and
(xxvi) using commercially reasonable efforts to
cause the Company to comply with all applicable laws.
Without limiting the foregoing, the Manager will perform portfolio management
services (the "Portfolio Management Services") on behalf of the Company with
respect to the Company's investments. Such services will include, but not be
limited to, consulting with the Company on the purchase and sale of, and other
investment opportunities in connection with, the Company's portfolio of assets;
the collection of information and the submission of reports pertaining to the
Company's assets, interest rates and general economic conditions; periodic
review and evaluation of the performance of the Company's portfolio of assets;
acting as liaison between the Company and banking, mortgage banking, investment
banking and other parties with respect to the purchase, financing and
disposition of assets; and other customary
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functions related to portfolio management. Additionally, the Manager will
perform monitoring services (the "Monitoring Services") on behalf of the Company
with respect to any loan servicing activities provided by third parties. Such
monitoring services will include, but not be limited to, negotiating servicing
agreements; acting as a liaison between the servicers of the assets and the
Company; review of servicers' delinquency, foreclosure and other reports on
assets; supervising claims filed under any insurance policies; and enforcing the
obligation of any servicer to repurchase assets.
(c) The Manager may enter into agreements with other parties,
including its affiliates, for the purpose of engaging one or more property
and/or asset managers for and on behalf, and at the sole cost and expense, of
the Company to provide property management, asset management, leasing,
development and/or similar services to the Company (including, without
limitation, Portfolio Management Services and Monitoring Services) with respect
to the REIT Investments, pursuant to property management agreement(s) and/or
asset management agreement(s) with terms which are then customary for agreements
regarding the management of assets similar in type, quality and value to the
assets of the Company; provided, that (i) any such agreements entered into with
affiliates of the Manager shall be (A) on terms no more favorable to such
affiliate then would be obtained from a third party on an arms'-length basis and
(B) to the extent the same do not fall within the provisions of the Guidelines,
approved by a majority of the independent members of the Board of Directors of
the Company, (ii) with respect to Portfolio Management Services, (A) any such
agreements shall be subject to the Company's prior written approval and (B) the
Manager shall remain liable for the performance of such Portfolio Management
Services, and (iii) with respect to Monitoring Services, any such agreements
shall be subject to the Company's prior written approval.
(d) The Manager may retain, for and on behalf, and at the sole
cost and expense, of the Company, such services of accountants, legal counsel,
appraisers, insurers, brokers, transfer agents, registrars, developers,
investment banks, financial advisors, banks and other lenders and others as the
Manager deems necessary or advisable in connection with the management and
operations of the Company. Notwithstanding anything contained herein to the
contrary, the Manager shall have the right to cause any such services to be
rendered by its employees or affiliates. The Company shall pay or reimburse the
Manager or its affiliates performing such services for the cost thereof;
provided, that such costs and reimbursements are no greater than those which
would be payable to outside professionals or consul-
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tants engaged to perform such services pursuant to agreements negotiated on an
arm's-length basis.
(e) As frequently as the Manager may deem necessary or
advisable, or at the direction of the Board of Directors, the Manager shall, at
the sole cost and expense of the Company, prepare, or cause to be prepared, with
respect to any of the REIT Investments (i) an appraisal prepared by an
independent real estate appraiser, (ii) reports and information on the Company's
operations and asset performance and (iii) other information reasonably
requested by the Company.
(f) The Manager shall prepare, or cause to be prepared, at the
sole cost and expense of the Company, all reports, financial or otherwise, with
respect to the Company reasonably required by the Board of Directors in order
for the Company to comply with its Governing Instruments or any other materials
required to be filed with any governmental body or agency, and shall prepare, or
cause to be prepared, all materials and data necessary to complete such reports
and other materials including, without limitation, an annual audit of the
Company's books of account by a nationally recognized independent accounting
firm.
(g) The Manager shall prepare regular reports for the Board of
Directors of the REIT to enable such Board of Directors to review the Company's
acquisitions, portfolio composition and characteristics, credit quality,
performance and compliance with the Guidelines and policies approved by such
Board of Directors.
(h) Notwithstanding anything contained in this Agreement to
the contrary, except to the extent that the payment of additional monies is
proven by the Company to have been required as a direct result of the Manager's
acts or omissions which result in the right of the Company to terminate this
Agreement pursuant to Section 15 of this Agreement, the Manager shall not be
required to expend money ("Excess Funds") in excess of that contained in any
applicable Company Account (as herein defined) or otherwise made available by
the Company to be expended by the Manager hereunder. Failure of the Manager to
expend Excess Funds out-of-pocket shall not give rise or be a contributing
factor to the right of the Company under Section 13(a) of this Agreement to
terminate this Agreement due to the Manager's unsatisfactory performance.
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(i) In performing its duties under this Section 2, the Manager
shall be entitled to rely reasonably on qualified experts hired by the Manager.
SECTION 3. ADDITIONAL ACTIVITIES OF MANAGER.
(a) The Manager hereby agrees that it shall not engage in
business with or render services to others that compete with the Company until
an amount equal to 95% of the Company's Total Equity has been invested (other
than in short-term temporary investments) by the Company (and for these purposes
contributions to a Sister Corp. or Preferred Stock Affiliate shall be deemed to
be "investments" of the Company's Total Equity). As used herein, the term
"Total Equity" shall mean the total equity capital raised by the Company,
including, without limitation, the net proceeds of the offering contemplated by
the Offering Memorandum and the net proceeds of any subsequent offering of
Common Stock or Preferred Stock by the REIT. Notwithstanding the foregoing, the
Manager and its affiliates will be permitted at any time (i) to manage the
Sister Corp., (ii) to manage Blackrock Asset Investors together with its
affiliated funds and (iii) to manage and make investments related to "Excluded
Investments." As used herein, the term "Excluded Investments" shall mean (1)
investments made, or committed to be made, by Messrs. Xxxxxx X. Xxxxx, Xxxxxx X.
Xxxxxxxx, Xxxxxx X. Xxxxxxx and Xxxx X. Xxxxxxx (collectively, the
"Principals"), the Manager and/or their respective affiliates prior to the
Closing Date, (2) investments in all of the GPF Assets that are not Option
Assets (as each term is defined in the Offering Memorandum) and all of the
Option Assets not acquired by the Company, (3) any investment as to which the
equity contributed by the Principals, the Manager or their affiliates is equal
to or less than $3,000,000 and (4) any investments made during any period of
time that the exclusivity provisions of this Agreement are not in effect (i.e.
during any period of time in which 95% or more of the Total Equity of the
Company has been invested), in each of the foregoing cases, together with any
investments relating to the foregoing investments.
(b) Except to the extent set forth in clause (a) above,
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.
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(c) Managers, members, partners, officers, employees and
agents of the Manager or affiliates of the Manager may serve as directors,
officers, employees, agents, nominees or signatories for the REIT, the Operating
Partnership or any other Subsidiary, 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 REIT's Governing Instruments. When
executing documents or otherwise acting in such capacities for the REIT, such
persons shall use their respective titles in the REIT.
SECTION 4. AGENCY. The Manager shall act as agent of the Company in
making, acquiring, financing and disposing of investments, disbursing and
collecting the Company's funds, paying the debts and fulfilling the obligations
of the Company, supervising the performance of professionals engaged by or on
behalf of the Company and handling, prosecuting and settling any claims of or
against the Company, the Board of Directors, holders of the Company's securities
or the Company's representatives or properties.
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 REIT, the Operating Partnership, or any other Subsidiary (any such account,
a "Company Account"), and may collect and deposit funds into any such Company
Account or Company Accounts, and disburse funds from any such Company Account or
Company 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 REIT, the Operating Partnership or any other Subsidiary.
SECTION 6. RECORDS; CONFIDENTIALITY. The Manager shall maintain
appropriate books of accounts and records relating to services performed under
this Agreement, and such books of account and records shall be accessible for
inspection by representatives of the REIT, the Operating Partnership, or any
other Subsidiary at any time during normal business hours upon one (1) business
day's advance written notice. The Manager shall keep confidential any and all
information obtained in connection with the services rendered under this
Agreement and shall not disclose any such information to nonaffiliated third
parties except with the prior written consent of the Board of Directors.
SECTION 7. OBLIGATIONS OF MANAGER; RESTRICTIONS.
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(a) The Manager shall require each seller or transferor of
REIT Investments to the Company to make such representations and warranties
regarding such REIT Investments 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 investments.
(b) The Manager shall refrain from any action that, in its
sole judgment made in good faith, (i) is not in compliance with the Guidelines
or (ii) would adversely affect the status of the REIT as a real estate
investment trust under the Code or that, in its sole judgment made in good
faith, would violate any law, rule or regulation of any governmental body or
agency having jurisdiction over the REIT, the Operating Partnership, or any
Subsidiary or that would otherwise not be permitted by such entity'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.
Notwithstanding the foregoing, the Manager, its directors, officers,
stockholders and employees shall not be liable to the REIT, the Operating
Partnership or any other Subsidiary, the Independent Directors, or the REIT's or
the Operating Partnership's stockholders or partners for any act or omission by
the Manager, its directors, officers, stockholders or employees except as
provided in Section 11 of this Agreement.
(c) The Manager shall not consummate any transaction which
would involve the acquisition by the Company of property in which the Manager or
any affiliate thereof has an ownership interest or the sale by the Company of
property to the Manager or any affiliate thereof, unless such transaction is
approved by a majority of the Independent Directors.
(d) The Company shall not invest in joint ventures with the
Manager or any affiliate thereof, unless (i) such investment is made in
accordance with the Guidelines or (ii) such investment is approved in advance by
a majority of the Independent Directors.
(e) The Independent Directors will review the transactions of
the Company quarterly. If the Independent Directors determine in their periodic
review of transactions that a particular transaction does not comply with the
Guide lines, then the Independent Directors will consider what corrective
action, if any, can
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be taken. If the transaction involved the acquisition of an asset from the
Manager or an affiliate of the Manager that was not approved in advance by a
majority of the Independent Directors, then the Manager may be required to
repurchase the asset at the purchase price (plus closing costs) to the Company.
(f) The Manager shall at all times during the term of this
Agreement (including the Initial Term and any renewal term) maintain a tangible
net worth equal to or greater than $1,000,000. Additionally, during such period
the Manager shall maintain "errors and omissions" insurance coverage and other
insurance coverage which is customarily carried by property and asset managers
performing functions similar to those of the Manager under this Agreement with
respect to assets similar to the assets of the Company ("Similar Assets"), in an
amount which is comparable to that customarily maintained by other managers or
servicers of Similar Assets.
SECTION 8. COMPENSATION.
(a) Commencing on the Closing Date, the Manager will receive
an annual management fee (the "Management Fee") equal to 1.50% of the Company's
"Gross Equity;" provided, however, that during remainder of 1998 following the
Closing Date, the Manager shall receive a Management Fee equal to the greater of
(i) $6,000,000 and (ii) the product of (a) 1.50% of the Company's Gross Equity
and (b) a fraction, the numerator of which is the number of days in 1998
following the Closing Date and the denominator of which is 365. The Management
Fee shall be calculated and paid monthly in arrears based upon the weighted
daily average of the Gross Equity of the Company for such month (except during
the remainder of 1998 following the Closing Date, during which period such
monthly amount is to be calculated and paid based on the terms of the proviso
set forth in the sentence immediately preceding). The term "Gross Equity" for
any period means (A) the sum of (i) the Total Equity, plus (ii) the value of
contributions made by partners other than the REIT, from time to time, to the
capital of the Operating Partnership or any other Subsidiary (reduced
proportionately in the case of a Subsidiary to the extent that the Operating
Partnership owns, directly or indirectly, less than 100% of the equity interests
in such Subsidiary), less (B) any capital dividends or capital distributions
made by the REIT to its stockholders or, without duplication, by the Operating
Partnership to its partners. The Manager will not receive any Management Fee for
the period prior to the Closing Date.
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(b) The Manager shall compute each installment of the
Management Fee within 15 days after the end of the calendar month with respect
to which such installment is payable. A copy of the computations made by the
Manager to calculate such installment shall thereafter, for informational
purposes only and subject in any event to Section 13(a) of this Agreement,
promptly be delivered to the Board of Directors and, upon such delivery, payment
of such installment of the Management Fee shown therein shall be due and payable
no later than the earlier to occur of (i) the date which is 20 days after the
end of the calendar month with respect to which such installment is payable and
(ii) the date which is two (2) business days after the date of delivery to the
Board of Directors of such computations.
(c) The Management Fee is subject to adjustment pursuant to
and in accordance with the provisions of Section 13(a) of this Agreement.
SECTION 9. EXPENSES OF THE COMPANY. The Company shall pay all of its
expenses and shall reimburse the Manager for documented expenses of the Manager
incurred on its behalf (collectively, the "Expenses"). Expenses include all
costs and expenses which are expressly designated elsewhere in this Agreement as
the Company's, together with the following:
(a) expenses in connection with the issuance and transaction
costs incident to the acquisitions, disposition and financing of investments;
(b) travel and other out-of-pocket expenses incurred by
managers, officers, employees and agents of the Manager in connection with the
purchase, financing, refinancing, sale or other disposition of a REIT
Investment;
(c) costs of legal, accounting, tax, auditing, administrative
and other similar services rendered for the Company by providers retained by the
Manager or, if provided by the Manager's employees, in amounts which are no
greater than those which would be payable to outside professionals or
consultants engaged to perform such services pursuant to agreements negotiated
on an arm's-length basis;
(d) the compensation and expenses of the Independent Directors
and the cost of liability insurance to indemnify the Company's directors and
officers;
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(e) compensation and expenses of the Company's custodian and
transfer agent, if any;
(f) costs associated with the establishment and maintenance
of any credit facilities and other indebtedness of the Company (including
commitment fees, legal fees, closing and other costs) or any securities
offerings of the Company;
(g) costs associated with any computer software or hardware
that is used solely for the Company;
(h) costs and expenses incurred in contracting with third
parties, including affiliates of the Manager, for the servicing and special
servicing of assets of the Company;
(i) all other costs and expenses relating to the Company's
business and investment operations, including, without limitation, the costs and
expenses of acquiring, owning, protecting, maintaining, developing and disposing
of the Company's investments, including appraisal, reporting, audit and legal
fees;
(j) all insurance costs incurred in connection with the
operation of the Company's business except for the sots attributable to the
insurance that the Manager elects to carry for itself and its employees;
(k) expenses relating to any office or office facilities
maintained for the Company or the REIT Investments separate from the office or
offices of the Manager;
(l) expenses connected with the payments of interest,
dividends or distributions in cash or any other form made or caused to be made
by the Board of Directors to or on account of the holders of securities or Units
of the Company, including, without limitation, in connection with any dividend
reinvestment plan;
(m) expenses connected with communications to holders of
securities or Units of the Company and other bookkeeping and clerical work
necessary in maintaining relations with holders of securities or Units and in
complying with the continuous reporting and other requirements of governmental
bodies or agencies, including, without limitation, all costs of preparing and
filing required
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reports with the Securities and Exchange Commission, the costs payable by the
Company to any transfer agent and registrar in connection with the listing
and/or trading of the REIT's stock on any exchange, the fees payable by the REIT
to any such exchange in connection with its listing, costs of preparing,
printing and mailing the REIT's annual report to its shareholders and proxy
materials with respect to any meeting of the shareholders of the REIT; and
(n) all other expenses actually incurred by the Manager which
are reasonably necessary for the performance by the Manager of its duties and
functions under this Agreement.
Without regard to the amount of compensation received under this
Agreement by the Manager, the Manager shall bear the following expenses: (i)
wages and salaries of the Manager's officers and employees; (ii) rent
attributable to the space occupied by the Manager; and (iii) all other
"overhead" expenses of the Manager.
SECTION 10. CALCULATIONS OF EXPENSES. The Manager shall prepare a
statement documenting the Expenses of the Company and the Expenses incurred by
the Manager on behalf of the Company during each calendar month, and shall
deliver such statement to the Company within 20 days after the end of each
calendar month. Expenses incurred by the Manager on behalf of the Company shall
be reimbursed monthly to the Manager on the first business day of the month
immediately following the date of delivery of such statement.
SECTION 11. LIMITS OF MANAGER RESPONSIBILITY; INDEMNIFICATION. (a) The
Manager assumes no responsibility under this Agreement other than to render the
services called for under this Agreement 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, including as set forth
in Section 7(b) of this Agreement. The Manager, its members, managers, officers
and employees will not be liable to the REIT, the Operating Partnership or any
other Subsidiary, to the Independent Directors, or the REIT's, the Operating
Partnership's or any Subsidiary's stockholders or partners for any acts or
omissions by the Manager, its members, managers, officers or employees, pursuant
to or in accordance with this Agreement, except by reason of acts constituting
bad faith, willful misconduct, gross negligence or reckless disregard of the
Manager's duties under this Agreement. The REIT and/or the Operating Partnership
shall, to the full extent lawful, reimburse, indemnify and hold the Manager, its
members, managers, officers and employees and each other Person, if any,
controlling the Manager (each, an "Indemnified Party"),
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harmless of and from any and all expenses, losses, damages, liabilities,
demands, charges and claims of any nature whatsoever (including attorneys' fees)
in respect of or arising from any acts or omissions of such Indemnified Party
made in good faith in the performance of the Manager's duties under this
Agreement and not constituting such Indemnified Party's bad faith, willful
misconduct, gross negligence or reckless disregard of the Manager's duties under
this Agreement.
(b) The Manager shall, to the full extent lawful, reimburse,
indemnify and hold the Company, its shareholders, directors, officers and
employees and each other Person, if any, controlling the Company (each, a
"Company Indemnified Party"), harmless of and from any and all expenses,
losses, damages, liabilities, demands, charges and claims of any nature
whatsoever (including attorneys' fees) in respect of or arising from the
Manager's bad faith, willful misconduct, gross negligence or reckless disregard
of its duties under this Agreement.
SECTION 12. NO JOINT VENTURE. Nothing in this Agreement shall be
construed to make the Company and the Manager partners or joint venturers or
impose any liability as such on either of them.
SECTION 13. TERM; TERMINATION.
(a) The term of this Agreement shall commence on the Closing
Date and this Agreement shall continue in force until the third anniversary of
the Closing Date (such three-year period, the "Initial Term"). Thereafter, until
this Agreement is terminated in accordance with its terms, this Agreement shall
be deemed renewed automatically each year for an additional one-year period
unless (i) a majority consisting of at least two-thirds of the Independent
Directors or a simple majority of the holders of outstanding shares of Common
Stock of the REIT, agree that there has been unsatisfactory performance that is
materially detrimental to the Company or (ii) a simple majority of the
Independent Directors agree that the Management Fee payable to the Manager is
unfair; provided, that the Company shall not have the right to terminate this
Agreement under clause (ii) foregoing if the Manager agrees to continue to
provide the services under this Agreement at a fee that the Independent
Directors have determined to be fair. If the Company elects not to renew this
Agreement at the expiration of the Initial Term or any extended term as set
forth above, the REIT shall deliver to the Manager prior written notice (the
"Termination Notice") of the Company's intention not to renew this Agreement
based upon the terms set forth in this Section 13(a) of this Agreement not less
than 60 days prior to the expiration of the then existing term. If the Company
so elects
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not to renew this Agreement, the Company shall designate the date (the
"Effective Termination Date"), not less than 60 days from the date of the
notice, on which the Manager shall cease to provide services under this
Agreement and this Agreement shall terminate on such date; provided, however,
that in the event that such Termination Notice is given in connection with a
determination that the compensation payable to the Manager is unfair, the
Manager shall have the right to renegotiate the Management Fee by delivering to
the Company, no fewer than forty-five (45) days prior to the prospective
Effective Termination Date, written notice (any such notice, a "Notice of
Proposal to Negotiate") of its intention to renegotiate its compensation under
this Agreement. Thereupon, the Company and the Manager shall endeavor to
negotiate in good faith the revised compensation payable to the Manager under
this Agreement. Provided that the Manager and the Company agree to a revised
Management Fee (or other compensation structure) within 45 days following the
receipt of the Notice of Proposal to Negotiate, the Termination Notice shall be
deemed of no force and effect and this Agreement shall continue in full force
and effect on the terms stated in this Agreement, except that the Management Fee
shall be the revised Management Fee (or other compensation structure) then
agreed upon by the parties to this Agreement. The REIT and the Manager agree to
execute and deliver an amendment to this Agreement setting forth such revised
Management Fee promptly upon reaching an agreement regarding same. In the event
that the Company and the Manager are unable to agree to a revised Management Fee
during such 30 day period, this Agreement shall terminate, such termination to
be effective on the date which is the later of (A) ten (10) days following the
end of such 30 day period and (B) the Effective Termination Date originally set
forth in the Termination Notice.
(b) In the event that this Agreement is terminated in
accordance with the provisions of Section 13(a) of this Agreement, the Company
shall pay to the Manager, on the date on which such termination is effective, a
termination fee (the "Termination Fee") equal to the amount of the Management
Fee earned by the Manager during the period consisting of the twelve (12) full,
consecutive calendar months immediately preceding such termination. The
obligation of the Company to pay the Termination Fee shall survive the
termination of this Agreement.
(c) No later than 60 days prior to the third or any subsequent
anniversary of the Closing Date, the Manager may deliver written notice to the
REIT informing it of the Manager's intention not to renew the Term, whereupon
the Term of this Agreement shall
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not be renewed and extended and this Agreement shall terminate effective on the
anniversary of the Closing Date next following the delivery of such notice.
(d) If this Agreement is terminated pursuant to this Section
13, such termination shall be without any further liability or obligation of
either party to the other, except as provided in Section 13(b) and Section 16 of
this Agreement. In addition, Section 11 of this Agreement shall survive
termination of this Agreement.
SECTION 14. ASSIGNMENT.
(a) Except as set forth in Section 14(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 REIT with the consent of a majority of the Independent Directors;
provided, however, that no such consent shall be required in the case of an
assignment by the Manager to an entity whose day-to-day business and operations
are managed and supervised jointly by the Principals. Any such permitted
assignment shall bind the assignee under this Agreement in the same manner as
the Manager is bound, and the Manager shall be liable to the Company for all
errors or omissions of the assignee under any such assignment. In addition, the
assignee shall execute and deliver to the REIT a counter part of this Agreement
naming such assignee as Manager. This Agreement shall not be assigned by the
REIT without the prior written consent of the Manager, except in the case of
assignment by the REIT to another REIT or other organization which is a
successor (by merger, consolidation or purchase of assets) to the REIT, in which
case such successor organization shall be bound under this Agreement and by the
terms of such assignment in the same manner as the REIT is bound under this
Agreement.
(b) Notwithstanding any provision of this Agreement, the
Manager may subcontract and assign any or all of its responsibilities under
Sections 2(b), 2(c) and 2(d) of this Agreement to any of its affiliates in
accordance with the terms of this Agreement applicable to any such subcontract
or assignment, and the REIT hereby consents to any such assignment and
subcontracting. In addition, provided that the Manager provides prior written
notice to the Company for informational purposes only, nothing contained in
this Agreement shall preclude any pledge, hypothecation or other transfer of any
amounts payable to the Manager under this Agreement.
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SECTION 15. TERMINATION FOR CAUSE.
(a) The Company may terminate this Agreement effective upon
sixty (60) days prior written notice of termination from the Company to the
Manager, without payment of any Termination Fee, if any act of fraud,
misappropriation of funds, or embezzlement against the Company or other willful
violation of this Agreement by the Manager in its corporate capacity (as
distinguished from the acts of any employees of the Manager which are taken
without the complicity of any of the Principals) under this Agreement or in the
event of any gross negligence on the part of the Manager in the performance of
its duties under this Agreement.
(b) The Manager may terminate this Agreement effective upon
sixty (60) days prior written notice of termination to the Company in the event
that the Company shall default in the performance or observance of any material
term, condition or covenant contained in this Agreement and such default shall
continue for a period of 30 days after written notice thereof specifying such
default and requesting that the same be remedied in such 30 day period.
SECTION 16. ACTION UPON TERMINATION. (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 under this Agreement, but shall be paid all compensation accruing to
the date of termination and, if terminated pursuant to Section 13, the
applicable Termination Fee. Upon such termination, the Manager shall forthwith:
(i) after deducting any accrued compensation and reimbursement
for its expenses to which it is then entitled, pay over to the Company or a
Subsidiary all money collected and held for the account of the Company or a
Subsidiary 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
accounting furnished to the Board of Directors with respect to the Company or a
Subsidiary; and
(iii) deliver to the Board of Directors all property and
documents of the Company or any Subsidiary then in the custody of the Manager.
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(b) In the event that this Agreement is terminated, the REIT
shall have the option, to be exercised by written notice to the Manager within
ten (10) days following such termination, to purchase from the Special Limited
Partner the right of the Special Limited Partner under the Partnership
Agreement, to receive certain preferred distributions (the "Preferred Incentive
Return") pursuant to Section 5.7 of the Partnership Agreement. In exchange
therefor the REIT will be obligated to pay the Special Limited Partner a cash
purchase price (the "Cash Price") equal to the amount of the Preferred Incentive
Return that would be distributed to the Special Limited Partner under the
Operating Partnership if all of the Company's assets were sold for cash at their
then current fair market value (taking into account, among other things,
expected future performance of the underlying investments, the "Fair Market
Value"). In the event that the REIT does not elect to exercise such option to
purchase the Preferred Incentive Return, the Special Limited Partner shall have
the right to require the REIT to do so at the Cash Price by delivering to the
REIT written notice within twenty (20) days following such termination. The Fair
Market Value shall be determined by independent appraisal to be conducted by a
nationally recognized appraisal firm mutually agreed upon by the REIT and the
Special Limited Partner. If the REIT and the Special Limited Partner are unable
to agree upon an appraisal firm, then each of the REIT and the Special Limited
Partner shall choose an independent appraisal firm to conduct an appraisal. In
such event, (i) if the appraisals prepared by the two appraisers so selected are
the same or differ by an amount that does not exceed 20% of the higher of the
two appraisals, the Fair Market Value will be deemed to be the average of such
appraisals, and (ii) if the two appraisals differ by more than 20% of the higher
of the two appraisals, the two appraisers together shall select a third
nationally recognized appraisal firm to conduct an appraisal. If the two
appraisers are unable to agree as to the identity of such third appraiser,
either of the Special Limited Partner and the REIT may request that the American
Arbitration Association ("AAA") select the third appraiser, which shall then be
selected by the AAA. The Fair Market Value will then be deemed to be the amount
determined by such third appraiser, but in no event less than the lower or more
than the higher of the first two appraisals made under this Section 16(b).
SECTION 17. RELEASE OF MONEY OR OTHER PROPERTY UPON WRITTEN REQUEST.
The Manager agrees that any money or other property of the Company or Subsidiary
held by the Manager under this Agreement shall be held by the Manager as
custodian for the Company or 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
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Manager to release to the Company or any Subsidiary any money or other property
then held by the Manager for the account of the Company or any Subsidiary under
this Agreement, the Manager shall release such money or other property to the
Company or any Subsidiary within a reasonable period of time, but in no event
later than sixty (60) days following such request. The Manager shall not be
liable to the Company, any Subsidiary, the Independent Directors, or the
Company's or a Subsidiary's stockholders or partners for any acts performed or
omissions to act by the Company or any Subsidiary in connection with the money
or other property released to the Company or any Subsidiary in accordance with
the first sentence of this Section 17. The Company and any Subsidiary shall
indemnify the Manager and its members, managers, 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 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. NOTICES. Unless expressly provided otherwise in this
Agreement, 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 (i) personal delivery, (ii) delivery by reputable overnight courier,
(iii) delivery by facsimile transmission against answerback, (iv) delivery by
registered or certified mail, postage prepaid, return receipt requested,
addressed as set forth below:
(a) If to the Company:
Fortress Investment Corp.
One Penn Plaza
000 Xxxx 00xx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xx. Xxxxxx X. Xxxxxxx
(b) If to the Manager:
Fortress Investment Group, LLC
One Penn Plaza
00 Xxxx 00xx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
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Attention: Xx. Xxxxxx X. Xxxxxxx
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 18 for the giving of notice.
SECTION 19. 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 permitted
assigns as provided in this Agreement.
SECTION 20. ENTIRE AGREEMENT. This Agreement contains the entire
agreement and understanding among the parties hereto with respect to the subject
matter of this Agreement, 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 of this
Agreement. The express terms of this Agreement control and supersede any course
of performance and/or usage of the trade inconsistent with any of the terms of
this Agreement. This Agreement may not be modified or amended other than by an
agreement in writing.
SECTION 21. 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 York, notwithstanding any New York or other conflict-of-law
provisions to the contrary.
SECTION 22. 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 23. TITLES NOT TO AFFECT INTERPRETATION. The titles of
paragraphs and subparagraphs contained in this Agreement are for convenience
only, and they
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neither form a part of this Agreement nor are they to be used in the
construction or interpretation of this Agreement.
SECTION 24. EXECUTION IN COUNTERPARTS. This Agreement may be executed
in any number of 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 of this Agreement, individually or taken
together, shall bear the signatures of all of the parties reflected hereon as
the signatories.
SECTION 25. 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 26. 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.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
REIT:
FORTRESS INVESTMENT CORP., a
Maryland corporation
By: /s/ Xxxxxx X. Xxxxxxx
Its: Chief Operating Officer and Secretary
OPERATING PARTNERSHIP:
FORTRESS PARTNERS, L.P., Delaware
limited partnership
By: Fortress Investment Corp., its general
partner
By: /s/ Xxxxxx X. Xxxxxxx
Its: Chief Operating Officer and Secretary
MANAGER:
FORTRESS INVESTMENT GROUP
LLC, a Delaware limited liability company
By: /s/ Xxxxxx X. Xxxxxxx
Its: Chief Operating Officer and Secretary
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For the purposes of Section 16(b)
of this Agreement:
SPECIAL LIMITED PARTNER:
FORTRESS PRINCIPAL INVESTMENT GROUP LLC,
a Delaware limited liability company
By: /s/ Xxxxxx X. Xxxxxxx
Its: Chief Operating Officer and Secretary
