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EXHIBIT 10.1
MANAGEMENT AGREEMENT
MANAGEMENT AGREEMENT, dated as of February 11, 1997, by and among
AMERICAN RESIDENTIAL INVESTMENT TRUST, INC., a Maryland corporation (the
"Company"), and HOME ASSET MANAGEMENT CORP., a Delaware corporation (the
"Manager"), with respect to the following:
W I T N E S S E T H:
WHEREAS, the Company intends to invest in Mortgage Assets and expects
to continue to qualify for the tax benefits accorded by Sections 856 through 860
of the Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, the Company desires to retain the Manager to manage the
investments of the Company and to perform certain administrative services for
the Company in the manner and on the terms set forth herein;
NOW, THEREFORE, in consideration of the mutual agreements herein set
forth, the parties hereto agree as follows:
SECTION 1. DEFINITIONS. Capitalized terms used but not defined herein
shall have the respective meanings assigned them below:
(a) "Affiliate" means, with respect to any person, another person that
directly, or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with such person.
(b) "Agency Certificates" means Pass-Through Certificates guaranteed by
FNMA, FHLMC or GNMA.
(c) "Agreement" means this Management Agreement.
(d) "Average Net Worth" for any period means (i) Twenty Million One
Hundred Seventy-Two Thousand and 00/100 Dollars ($20,172,000.00) plus (ii) the
arithmetic average of the sum of the gross proceeds from any sale of the
Company's equity securities after the effective date of this Agreement
(including exercise of warrants and stock options), before deducting any
underwriting discounts and commissions and other expenses and costs relative to
the sale, plus the Company's retained earnings (without taking into account any
losses incurred in prior periods and excluding amounts reflecting taxable income
to be distributed as dividends and amounts reflecting valuation allowance
adjustments) computed by taking the daily average of such values during such
period.
(e) "Board of Directors" means the Board of Directors of the Company.
(f) "Code" means the Internal Revenue Code of 1986, as amended.
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(g) "Company" means New REIT, a Maryland corporation, and its
successors.
(h) "FHLMC" means the Federal Home Loan Mortgage Corporation.
(i) "FNMA" means the Federal National Mortgage Association.
(j) "GAAP" means generally accepted accounting principles.
(k) "GNMA" means Governmental National Mortgage Association.
(l) "Governing Instruments" means the articles or certificate of
incorporation or other charter, as the case may be, and bylaws of the Company
and its subsidiaries.
(m) "Investment Company Act" means the Investment Company Act of 1940,
as amended from time to time.
(n) "Gross Mortgage Assets" means for any month the weighted average
book value of the Mortgage Assets, before reserves for depreciation or bad debts
or other similar noncash reserves, computed at the end of such month.
(o) "Manager" means MDC REIT Management Co., a Delaware corporation.
(p) "Mortgage Assets" means (i) Mortgage Loans and (ii) Mortgage
Securities.
(q) "Mortgage Securities" means Pass-Through Certificates and any other
forms of security backed by or evidencing an interest in Mortgage Loans.
(r) "Mortgage Loans" means loans secured by mortgages on single-family,
multifamily or commercial real estate properties.
(s) "Net Income" means the net income of the Company determined in
accordance with GAAP before the Manager's incentive compensation, the deduction
for dividends paid and any net operating loss deductions arising from losses in
prior periods. The Company's interest expenses for borrowed money shall be
deducted in calculating Net Income.
(t) "Pass-Through Certificates" means securities (or interests therein)
which are Qualified REIT Assets evidencing undivided ownership interests in a
pool of mortgage loans, the holders of which receive a "pass-through" of the
principal and interest paid in connection with the underlying mortgage loans in
accordance with the holders' respective, undivided interests in the pool.
Pass-Through Certificates may evidence interests in loans secured by
single-family, multifamily or commercial, real estate properties.
(u) "Qualified REIT Assets" means Pass-Through Certificates, Mortgage
Loans, Agency Certificates and other assets of the type described in Code
Section 856(c)(6)(B).
(v) "Real Estate Assets" means interests in real property, interests in
mortgages on real property, and regular interests in REMICS as described in Code
Section 856(c)(6)(B).
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(w) "REIT" means Real Estate Investment Trust as defined under Section
856 of the Code.
(x) "REIT Provisions of the Code" means Sections 856 through 860 of the
Code.
(y) "Return on Equity" means return calculated for any quarter by
dividing the Company's Net Income for such quarter by the Company's Average Net
Worth for such quarter.
(z) "Securities Purchase Agreement" means the Securities Purchase
Agreement, dated as of February 11, 1997, among the Manager, MDC Reit Holdings
LLC, the Company and the Purchasers named therein, as amended from time to time.
(aa) "Stockholders" shall mean the owners of the stock of the Company.
(bb) "Stockholders Agreement" means the Stockholders Agreement,
Irrevocable Proxy and Voting Agreement, dated as of February 11, 1997, among
stockholders of the Manager.
(cc) "Ten Year U.S. Treasury Yield" shall mean the average yield to
maturity for actively traded marketable U.S. Treasury fixed interest rate
securities (adjusted to constant maturities of 10 years).
(dd) "Ten Year U.S. Treasury Rate" for a quarterly period shall mean
the arithmetic average of the weekly per annum Ten Year Average Yields published
by the Federal Reserve Board during such quarter. In the event that the Federal
Reserve Board does not publish a weekly per annum Ten Year Average Yield during
any week in a quarter, then the Ten Year U.S. Treasury Rate for such week shall
be the weekly per annum Ten Year Average Yields published by any Federal Reserve
Bank or by any U.S. Government department or agency selected by the Company for
such week. In the event that the Company determines in good faith that for any
reason the Company cannot determine the Ten Year U.S. Treasury Rate for any
quarter as provided above, then the Ten Year U.S. Treasury Rate for such quarter
shall be the arithmetic average of the per annum average yields to maturity
based upon the daily closing bids during such quarter for each of the issues of
actively traded marketable U.S. Treasury fixed interest rate securities (other
than securities which can, at the option of the holder, be surrendered at face
value in payment of any federal estate tax) with a final maturity date not less
than eight (8) nor more than twelve (12) years from the date of each such
quotation, as chosen and for each business day (or less frequently if daily
quotations shall not be generally available) in each such quarterly period in
New York City and quoted to the Company by at least three (3) recognized dealers
in U.S. Government securities selected by the Company.
(ee) "Unaffiliated Directors" shall mean (i) following the date that
the Company becomes subject to the periodic reporting requirements under Section
13 of the Securities Exchange Act of 1934, those members of the Board of
Directors of the Company who are the "Independent Directors" as defined in the
Company's Governing Instruments, and (ii) prior to such date, those directors of
the Manager appointed by Crescent (as defined in the Stockholders Agreement).
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SECTION 2. GENERAL DUTIES OF THE MANAGER.
(a) Administrative Services to be Provided by Manager. Subject to the
oversight of the Board of Directors, the Manager shall provide services to the
Company, and to the extent directed by the Board of Directors, shall provide
similar services to any subsidiary of the Company as follows:
(1) serve as the Company's consultant with respect to
formulation of investment criteria and preparation of policy guidelines
("Guidelines");
(2) assist the Company in developing criteria for
Mortgage Asset purchase commitments that are specifically tailored to the
Company's long-term investment objectives, which shall include making available
to the Company its knowledge and experience with respect to mortgage loan
underwriting criteria;
(3) represent the Company in connection with the purchase
of and commitment to purchase Mortgage Assets, including the formation of
Mortgage Asset purchase commitment criteria;
(4) 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 supporting services in connection
with the creation of Mortgage Securities including:
(a) serving as consultant with respect to the
structuring of each series of Mortgage Securities;
(b) negotiating the rating requirements with
rating agencies with respect to the rating of each series of Mortgage
Securities;
(c) identifying and reviewing all Mortgage Loans
which may secure or constitute the mortgage pool for each series of Mortgage
Securities;
(d) negotiating all agreements and credit
enhancements with respect to each series of Mortgage Securities;
(e) issuing commitments on behalf of the Company
to purchase Mortgage Loans to be used to secure or constitute the mortgage pool
for each series of Mortgage Securities;
(f) organizing and administering all activities
in connection with the closing of each series of Mortgage Securities, including
all negotiations and agreements with underwriters, trustees, servicers, master
servicers and other parties;
(g) performing such other services as may be
required from time to time for completing the creation of each series of
Mortgage Securities; and
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(h) providing to the Company itself or through
another appropriate party all services in connection with the administration of
each series of Mortgage Securities created by the Company;
(5) furnish reports and statistical and economic research
to the Company regarding the Company's activities and the performance of the
Manager;
(6) monitor and provide to the Board of Directors on an
ongoing basis price information and other data, which price information and data
shall be obtained from certain nationally recognized dealers and other entities
that maintain markets in Mortgage Assets as selected by the Board of Directors
from time to time, and provide advice to the Board of Directors to aid the Board
of Directors in the selection of such dealers and entities;
(7) administer the day-to-day operations of the Company
and perform and supervise the performance of such other administrative functions
necessary in the management of the Company as may be agreed upon by the Manager
and the Board of Directors, including the collection of revenues and the
payments of the Company's expenses, debts and obligations and maintenance of
appropriate computer services to perform such administrative functions;
(8) designate a servicer and/or subservicer for those
Mortgage Loans sold to the Company by originators that have elected not to
service such loans and arrange for the monitoring and administering of such
servicing;
(9) counsel the Company in connection with policy
decisions to be made by the Board of Directors;
(10) evaluate and recommend hedging strategies to the
Board of Directors and, upon approval by the Board of Directors, facilitate the
implementation and monitor the performance of these strategies;
(11) supervise compliance with certain REIT Provisions of
the Code dealing with asset and income tests and Investment Company Act status,
including setting up a system to monitor hedging activities on a periodic basis
for such compliance;
(12) establish quality control procedures for the assets
of the Company, including audits of loan underwriting files, hire any agents
with particular knowledge and expertise as may be appropriate to perform any
such quality control procedures and administer, perform and supervise the
performance of the quality control procedures of the Company and perform and
supervise the performance of such other functions related thereto as may be
necessary or advisable to assist in the performance of such procedures and the
attainment of the purposes thereof;
(13) upon request by and in accordance with the directions
of the Board of Directors, invest or reinvest any money of the Company;
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(14) conduct, or cause to be conducted, a legal document
review of each Mortgage Loan acquired to verify the accuracy and completeness of
the information contained in the mortgage notes, security instruments and other
pertinent documents in the mortgage file;
(15) provide the Company with data processing, legal and
administrative services to the extent required to implement the business
strategy of the Company;
(16) provide all actions necessary for compliance by the
Company with all Federal, state and local 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 Securities Exchange Act of 1934, as amended;
(17) provide all actions necessary to enable the Company
to make required Federal, state and local tax filings and reports and generally
enable the Company to maintain its status as a REIT, including soliciting
shareholders for required information to the extent provided in the REIT
Provisions of the Code;
(18) communicate on behalf of the Company with the holders
of the equity and debt securities of the Company as required to satisfy the
reporting and other requirements of any governmental bodies or agencies and to
maintain effective relations with such holders; and
(19) perform such other services as may be required from
time to time for management and other activities relating to the assets of the
Company as the Board of Directors shall reasonably request or the Manager shall
deem appropriate under the particular circumstances.
(b) Cooperation of the Company. The Company agrees to take all actions
reasonably required to permit the Manager to carry out its duties and
obligations hereunder. The Company further agrees to make available all
materials reasonably required to enable the Manager to satisfy its obligations
to deliver financial statements and any other information or reports with
respect to the Company pursuant to the Securities Purchase Agreement.
SECTION 3. ADDITIONAL ACTIVITIES OF MANAGER. Nothing herein shall
prevent the Manager or any of its officers, directors, employees or Affiliates
from engaging in other businesses or from rendering services of any kind to any
other person or entity, including the purchase of, or advisory service to others
investing in, any type of real estate investment, including investments which
meet the principal investment objectives of the Company, except that the Manager
and its officers, directors and employees shall not provide any such services to
any residential mortgage REIT other than the Company or another REIT sponsored
by the Manager or its Affiliates which has operating policies and strategies
different in one or more material respects from those of the Company, as
confirmed by a majority of the Unaffiliated Directors. Directors, officers,
employees and agents of the Manager or Affiliates of the Manager may serve as
trustees, 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
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Company's Governing Instruments. When executing documents or otherwise acting in
such capacities for the Company, such persons shall use their respective titles
in the Company.
SECTION 4. BANK ACCOUNTS. At the direction of the Board of Directors,
the Manager may establish and maintain one or more bank accounts in the name of
the Company or any subsidiary of the Company, and may collect and deposit into
any such account or accounts, and disburse funds from any such account or
accounts, under such terms and conditions as the Board of Directors may approve;
and the Manager shall from time to time render appropriate accountings of such
collections and payments to the Board of Directors and, upon request, to the
auditors of the Company or any subsidiary of the Company.
SECTION 5. RECORDS: CONFIDENTIALITY. The Manager shall maintain
appropriate books of account and records relating to services performed
hereunder, and such books of account and records shall be accessible for
inspection by representatives of the Company or any subsidiary of the Company at
any time during normal business hours. Except in the ordinary course of business
of the Company, the Manager shall, and shall use its best efforts to cause each
of its Affiliates to, keep confidential any and all information they (or such
Affiliates) obtain from time to time in connection with the services they (or
such Affiliates) render under this Agreement and shall not disclose any portion
thereof to non-affiliated third parties (other than lenders to, and holders of
stock or warrants of, the Manager) except with the prior written consent of the
Company.
SECTION 6. OBLIGATIONS OF MANAGER.
(a) The Manager shall use its best efforts to provide that each
Mortgage Asset conforms to the purchase criteria of the Company and shall
require each seller or transferor of Mortgage Assets to the Company to make such
representations and warranties regarding such Mortgage Assets as may, in the
judgment of the Manager, be necessary and appropriate. In addition, the Manager
shall take such other action as it deems necessary or appropriate with regard to
the protection of the Company's investments.
(b) The Manager shall refrain from any action which, in its sole
judgment made in good faith, would adversely affect the status of the Company
or, if applicable, any subsidiary of the Company as a REIT or which, in its sole
judgment made in good faith, would violate any material 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. Notwithstanding the foregoing, the Manager, its directors,
officers, stockholders and employees shall not be liable to the Company, any
subsidiary of the Company, the Unaffiliated Directors or any stockholders of the
Company or any of its subsidiaries 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 cause an annual compliance report to be prepared
for each fiscal year of the Company commencing with fiscal year 1997 by a firm
independent of the
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Manager and its Affiliates and having the proper expertise to determine
compliance with the REIT Provisions of the Code and related matters and shall
deliver each report for a fiscal year to the Company no later than March 31 of
the following year.
SECTION 7. COMPENSATION OF THE MANAGER.
(a) Base Management Fee. For services rendered under this Agreement,
the Company shall pay to the Manager, commencing on the date hereof and payable
as described below, a base management fee equal to the monthly portion of the
per annum percentage of Gross Mortgage Assets of the Company and its
subsidiaries as set forth below:
Type of Gross Mortgage Assets Per Annum Fee
----------------------------- -------------
Gross Mortgage Assets Consisting of Agency
Certificates 1/8 of 1%
Gross Mortgage Assets other than Agency
Certificates 3/8 of 1%
On the first day of each month, the Company shall pay to the Manager
an amount equal to the Manager's good-faith estimate of the base management fee
for such month. (For the first month of this Agreement, such amount will be
pro-rated according to the number of days of such month this Agreement is in
effect and will be payable on the date hereof.) The final base management fee
for each month shall be calculated by the Manager within 15 days after the end
of such month, and such calculation shall be promptly delivered to the Company.
The Company shall pay any amount payable pursuant to Section 7(a) for such month
in excess of the estimate already paid within 30 days after the end of such
month. To the extent the estimate paid exceeds the amount due, the excess shall
be credited to the base management fee due in respect of a subsequent month.
(b) Incentive Compensation. In addition to the base management fee, the
Manager shall receive as incentive compensation for each fiscal quarter an
amount equal to 25% of the Net Income of the Company for such fiscal quarter in
excess of the amount that would produce an annualized Return on Equity
(calculated by multiplying the Return on Equity for such fiscal quarter by four)
equal to the Ten Year U.S. Treasury Rate for such fiscal quarter plus 2%. The
incentive compensation calculation and payment shall be made quarterly in
arrears. 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 fee for such
quarter. In connection with the Company's annual audit, the Manager shall
compute any final adjustments to the incentive compensation payable under this
Section 7(b) within 45 days after the end of each fiscal year and any required
adjustments shall be paid by the Company or the Manager as appropriate within 15
days after delivery of such computation to the Company by the Manager.
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SECTION 8. EXPENSES OF THE COMPANY.
(a) Expenses of the Manager. Without regard to the compensation
received hereunder by the Manager, the Manager shall bear the following
expenses:
(1) Employment expenses of the personnel employed by the
Manager, including, but not limited to, salaries, wages, payroll taxes, and the
cost of employee benefit plans;
(2) Travel and related expenses of directors, officers
and employees of the Manager and of trustees, directors, or employees of the
Company or any subsidiary of the Company who are also directors, officers or
employees of the Manager, except expenses of such persons who are trustees or
directors of the Company or any subsidiary of the Company incurred in connection
with attending meetings of the Board of Directors or meetings of holders of the
securities of the Company or any subsidiary of the Company or expenses of
persons who are directors, officers, or employees of the Manager incurred in
connection with attending meetings or performing other business activities which
relate solely to the business affairs of the Company or any subsidiary of the
Company;
(3) Rent, telephone, utilities, office furniture,
equipment and machinery (including computers, to the extent utilized) and other
office expenses (such as asset/liability software, modeling software and other
software and hardware) of the Manager needed in order to perform its duties as
set forth in Section 2 herein;
(4) Bookkeeping fees and expenses including any costs of
computer services, other than in connection with communications under Section
8(b)(x), in connection with this function; and
(5) Miscellaneous administrative expenses incurred in
supervising and monitoring the Company's investments or any subsidiary's
investments or relating to performance by the Manager of its functions
hereunder.
(b) Expenses of the Company. The Company or any subsidiary of the
Company shall pay all of its expenses except those which are the responsibility
of the Manager pursuant to Section 8(a) of this Agreement, and without limiting
the generality of the foregoing, it is specifically agreed that the following
expenses of the Company or any subsidiary of the Company shall not be paid by
the Manager:
(1) The cost of the borrowed money;
(2) All taxes applicable to the Company or any subsidiary
of the Company including interest and penalties thereon;
(3) Legal, audit, accounting, underwriting, brokerage,
listing, rating agency, registration and other fees, printing, engraving and
other expenses and taxes incurred in connection with the issuance, distribution,
transfer, registration and stock exchange listing of the Company's or any
subsidiary's equity securities or debt securities;
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(4) Fees and expenses paid to advisors and independent
contractors, consultants, managers, and other agents engaged directly by the
Company or any subsidiary of the Company or by the Manager at the Company's or
such subsidiary's request for the account of the Company or any subsidiary of
the Company (other than the Manager);
(5) Expenses connected with the acquisition, disposition
and ownership of the Company's or any subsidiary's investment assets, including
but not limited to commitment fees, brokerage fees, guaranty fees and hedging
fees, ad valorem taxes, costs of foreclosure, maintenance, repair and
improvement of property and premiums for insurance on property owned by the
Company or any subsidiary of the Company;
(6) The expenses of organizing, modifying or dissolving
the Company or any subsidiary of the Company;
(7) All insurance costs incurred in connection with the
Company or any subsidiary of the Company;
(8) Expenses connected with payments of dividends or
interest or distributions in any other form made or caused to be made by the
Board of Directors to holders of the securities of the Company or any subsidiary
of the Company;
(9) Expenses connected with the structuring of the
issuance of Mortgage Securities by the Company or any subsidiary of the Company,
including but not limited to trustee's fees, insurance premiums, and costs of
required credit enhancements;
(10) All expenses of third parties connected with
communications to holders of equity securities or debt securities of the Company
or any subsidiary of the Company and the other bookkeeping and clerical work
necessary in maintaining relations with holders of such securities and in
complying with the continuous reporting and other requirements of governmental
bodies or agencies, including any costs of computer services in connection with
this function, the cost of printing and mailing certificates for such securities
and proxy solicitation materials and reports to holders of the Company's or any
subsidiary's securities and reports to third parties required under any
indenture to which the Company or any subsidiary of the Company is a party;
(11) Transfer agent's and registrar's fees and charges;
(12) Fees and expenses paid to trustees or directors of
the Company or any subsidiary of the Company, the cost of director and officer
liability insurance and premiums for fidelity and errors and omissions
insurance;
(13) Legal, accounting and auditing fees and expenses
relating to the Company's or any subsidiary's operations;
(14) Any judgment rendered against the Company or any
subsidiary of the Company, or against any trustee or director of the Company or
any subsidiary of the Company in his capacity as such for which the Company or
any subsidiary of the Company is required to indemnify such trustee or director,
or any court or governmental agency;
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(15) Expenses relating to any office or office facilities
maintained by the Company or any subsidiary of the Company exclusive of the
office of the Manager;
(16) Expenses related to the servicing and subservicing of
Mortgage Loans;
(17) Travel and related expenses of personnel of the
Manager when attending meetings or performing other business activities which
relate solely to the Company or any subsidiary of the Company; and
(18) Other miscellaneous expenses of the Company or any
subsidiary of the Company which are not expenses of the Manager under Section
8(a).
SECTION 9. EXPENSE REIMBURSEMENT TO THE MANAGER. 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.
SECTION 10. MONITORING SERVICING. The Manager will monitor and
administer the servicing of the Company's Mortgage Loans constituting or
underlying the Company's Mortgage Assets, other than loans pooled to back
Mortgage Securities not originated by the Company. 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
Mortgage Loans; collection of information and submission of reports pertaining
to the Mortgage Loans and to monies 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 and foreclosure procedures with
regard to the Mortgage Loans; review of servicers' delinquency, foreclosure and
other reports on Mortgage Loans; supervising claims filed under any mortgage
insurance policies; and enforcing the obligation of any servicer to repurchase
Mortgage Loans from the Company. The Manager may enter into subcontracts with
other parties, including its Affiliates, to provide any such services for the
Manager; provided, however, that to the extent that the Manager subcontracts
services for which the Manager is responsible for bearing the cost pursuant to
Section 8(a) of this Agreement, the Manager, and not the Company, shall be
responsible for any such costs associated with such subcontract.
SECTION 11. LIMITS OF MANAGER RESPONSIBILITY.
(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
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Manager, including as set forth in Section 6(b) of this Agreement. The Manager,
its directors, officers, stockholders and employees will not be liable to the
Company, any Mortgage Security issuer, any subsidiary of the Company, its
subsidiary's stockholders or the Unaffiliated Directors 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 or
omissions constituting bad faith, willful misconduct, gross negligence or
reckless disregard of their duties under this Agreement. The Company and its
subsidiaries shall reimburse, indemnify and hold harmless the Manager, its
directors, officers, stockholders 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, trustees, 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 material fact made by the
Manager in connection with performance of its activities hereunder.
SECTION 12. NO JOINT VENTURE. The Company and the Manager are not
partners or joint venturers with each other, and nothing herein shall be
construed to make them such partners or joint venturers or impose any liability
as such on any of them.
SECTION 13. TERM: TERMINATION: TERMINATION FEE.
(a) This Agreement shall commence on the date set forth in the preamble
and shall continue in force until the second anniversary of such date, and
thereafter it shall be renewed automatically for successive one-year periods
unless a notice of non-renewal is timely delivered as described below. The
Company may elect to prevent the automatic renewal of this Agreement only by
vote of both a majority of the Board of Directors and a majority of the
Unaffiliated Directors followed by delivery of a written notice of non-renewal
to the Manager at least 60 days prior to the end of the then-current period of
this Agreement, which notice shall set forth the date of the Board of Directors'
vote not to renew. This Agreement shall terminate at the expiration of the
then-current period in which such notice of non-renewal is delivered.
(b) In addition to such further liability or obligation of either party
to the other provided in Section 16 of this Agreement, if this Agreement is
terminated without cause (as "cause" is defined in Section 15) by delivery of a
notice of non-renewal pursuant to Section 13(a), the Company, in addition to its
obligations under Section 16, shall pay the Manager a termination fee in an
amount equal to the greater of (i) the fair market value of this Agreement
(without giving effect to the notice of termination under Section 13(a))
determined by an independent appraisal or (ii) three times the total of the
compensation payable to the Manager hereunder for the four most recently
completed calendar quarters ending on or prior to the date of termination of
this Agreement. Such appraisal shall be conducted by a nationally-recognized
appraisal firm mutually agreed upon by the parties and the costs of such
appraisal shall be borne equally by the
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parties. If the parties are unable to agree upon such appraisal firm within 30
days following delivery of the notice of non-renewal, then each party shall, as
soon as reasonably practicable, but in no event more than 45 days following
delivery of the notice of non-renewal, choose a nationally-recognized
independent appraisal firm to conduct an appraisal. In such event, (i) the fair
market value amount shall be deemed to be the average of the appraisals as
conducted by each party's chosen appraiser and (ii) each party shall pay the
costs of its appraiser so chosen. Any appraisal conducted hereunder shall be
performed no later than 45 days following selection of the appraiser or
appraisers. The termination fee payable by the Company shall be paid within 30
days following receipt of the final appraisal to be obtained hereunder.
SECTION 14. ASSIGNMENTS. Except as set forth in this Section 14, this
Agreement shall terminate automatically in the event of its assignment, in whole
or in part, by the Manager (other than the pledge of amounts payable to the
Manager hereunder to secure the Manager's obligations to its lenders), unless
such assignment is consented to in writing by the Company with the consent of a
majority of the Unaffiliated Directors. Any such assignment shall bind the
assignee hereunder in the same manner as the Manager is bound. In addition, the
assignee shall execute and deliver to the Company a counterpart of this
Agreement naming such assignee as Manager. This Agreement shall not be assigned
by the Company without the prior written consent of the Manager, except in the
case of assignment by the Company to a REIT or other organization which is a
successor (by merger, consolidation or purchase of assets) to the Company, in
which case such successor organization shall be bound hereunder and by the terms
of such assignment in the same manner as the Company is bound hereunder.
SECTION 15. TERMINATION BY COMPANY FOR CAUSE. At the option of the
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 (termination for any of such events shall
constitute termination for "cause"):
(a) if a majority of the Unaffiliated Directors determines that the
Manager has violated this Agreement in any material respect and, after notice of
such violation, the Manager has failed to cure such violation within 60 days; or
(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 60 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
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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 60
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 60
days. 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 happening of such event.
SECTION 16. ACTION UPON TERMINATION. From and after the effective date
of termination of this Agreement, pursuant to Sections 13, 14 or 15 of this
Agreement, except as otherwise specified in Section 13(b) of this Agreement, the
Manager shall not be entitled to compensation for further services hereunder,
but shall be paid all compensation accruing to the date of termination,
including accrued and unpaid incentive compensation.
Upon such termination, the Manager shall forthwith:
(a) 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;
(b) 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; and
(c) 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.
SECTION 17. RELEASE OF MONEY OR OTHER PROPERTY UPON WRITTEN REQUEST.
The Manager agrees that any money or other property of the Company or any
subsidiary of the Company held by the Manager under this Agreement shall be held
by the Manager as custodian for the Company or such subsidiary, and the
Manager's records shall be appropriately marked clearly to reflect the ownership
of such money or other property by the Company or such subsidiary. Upon the
receipt by the Manager of a written request signed by a duly authorized officer
of the Company requesting the Manager to release to the Company or any
subsidiary of the Company any money or other property then held by the Manager
for the account of the Company or any subsidiary of the Company under this
Agreement, the Manager shall release such money or other property to the Company
or such subsidiary of the Company within a reasonable period of time, but in no
event later than the later to occur of (i) 30 days following such request and
(ii) the earliest time following such request that remittance will not cause the
Manager to violate any law or breach any agreement to which it or the Company is
a party. The Manager shall not be liable to the Company, any subsidiaries of the
Company, the unaffiliated Directors, or the Company's or its subsidiaries'
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 17 and not constituting bad faith, willful misconduct, gross negligence
or reckless disregard of its duties.
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The Company and any subsidiary of 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 unless such expenses, losses, damages,
liabilities, demands, charges and claims arise in connection with acts or
omissions which constitute bad faith, willful misconduct, gross negligence or
reckless disregard of its duties. 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 Maryland, has the power to own its assets and to
transact the business in which it is now engaged and is duly qualified 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 power and authority to execute,
deliver and perform this Agreement and all obligations required hereunder and
has taken all necessary 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. Except as shall have been obtained, 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
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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 (other than the pledge of amounts payable to the Manager hereunder
to secure the Manager's obligations to its lenders).
(b) The Manager hereby represents and warrants to the Company as
follows:
(1) The Manager is duly organized, validly existing and in
good standing under the laws of Delaware, 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 requires such qualification, except for failures to be so qualified,
authorized or licensed that could not in the aggregate have a material adverse
effect on the business operations, assets or financial condition of the Manager
and its subsidiaries, taken as a whole. The Manager does not do business under
any fictitious business name.
(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 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. Except as
shall have been obtained, no consent of any other person including, without
limitation, stockholders 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 officer
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 the governing instruments of, 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.
SECTION 19. NOTICES. Unless expressly provided otherwise herein, all
notices, requests, demands and other communications required or permitted under
this Agreement shall be in writing and shall be deemed to have been duly given,
made and received when (1) delivered by
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hand, (2) otherwise delivered against receipt therefore or (3) upon actual
receipt of registered or certified mail, postage prepaid, return receipt
requested. The parses 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:
(a) If to the Company:
000 Xxxxxx Xxxx Xxxxxx
Xxxxx 000X
Xxx Xxx, XX 00000
Attn: Xxxx X. Xxxxxxx, Xx.
Fax: (000) 000-0000
with a copy given in the manner prescribed above, to:
Xxxxxxxx Xxxxx, Esq.
Xxxxxx, Xxxx & Xxxxxxxx LLP
Xxx Xxxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Fax: (000) 000-0000
(b) If to the Manager:
000 Xxxxxx Xxxx Xxxxxx
Xxxxx 000
Xxx Xxx, XX 00000
Attn: Xxx Xxxxxx
Fax: (000) 000-0000
with a copy given in the manner prescribed above, to:
Xxxxxxx X. Xxxxxxx, Esq
Xxxxx & Xxxxx
Xxx Xxxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Fax: (000) 000-0000
Any 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
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.
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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.
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 California, notwithstanding any California 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 preclude any other or
further exercise of the same or 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.
SECTION 26. 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 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.
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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.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
AMERICAN RESIDENTIAL INVESTMENT TRUST, INC.
By: ________________________________________
Xxxx X. Xxxxxxx, Xx.,
Chief Executive Officer
HOME ASSET MANAGEMENT CORP.
By: ________________________________________
Xxxxx X. Xx Xxxxx,
President
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FIRST AMENDMENT TO MANAGEMENT AGREEMENT
This First Amendment to Management Agreement (the "Amendment") is
entered into as of August __, 1997 by and between American Residential
Investment Trust, Inc., a Maryland corporation (the "Company") and Home Asset
Management Corp., a Delaware corporation (the "Manager").
RECITALS
The Company and the Manager entered into that certain
Management Agreement dated as of February 11, 1997 (the "Management Agreement"),
whereunder Manager agreed to manage the investments of the Company and perform
certain administrative services for the Company pursuant to the terms thereof;
For a variety of business reasons, the Company desires to
retain, and the Manager desires to provide, certain of the Manager's employees
to serve as employees of the Company in addition to their service as employees
of the Manager; and
Manager has entered into Employment Agreements with certain
of the employees (the "Employment Agreements") which the Company desires to
employ.
NOW, THEREFORE, in consideration of the mutual promises herein set
forth and for other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto agree to amend the
Management Agreement as follows:
1. Amendment to Section 7(b).
Section 7(b) of the Management Agreement is hereby amended to
read in its entirety as follows:
"(b) Incentive Compensation. In addition to the base
management fee, the Manager shall receive as incentive compensation for each
fiscal quarter an amount equal to 25% of the Net Income of the Company for such
fiscal quarter in excess of the amount that would produce an annualized Return
on Equity (calculated by multiplying the Return on Equity for such fiscal
quarter by four) equal to the Ten Year U.S. Treasury Rate for such fiscal
quarter plus 2%. The incentive compensation calculation and payment shall be
made quarterly in arrears. 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 fee for such quarter. In connection with the Company's annual audit,
the Manager shall compute any final adjustments to the incentive compensation
payable under this Section 7(b) within 45 days after the end of each fiscal year
and any required adjustments shall be paid by the Company or the Manager as
appropriate within 15 days after delivery of such computation to the Company by
the Manager. For purposes of this Section 7(b), any payments made by the Company
and reimbursed by the Manager pursuant to Sections 8(c)
21
and 9(b) hereof shall be deemed to have been made directly by the Manager and
not by the Company."
2. Amendment to Section 8.
Section 8 of the Management Agreement is hereby amended to
insert the following as SubSection (c):
"(c) Expenses Associated with Employees of Both the Company
and the Manager. Notwithstanding the provisions set forth in Section 8(a) of
this Agreement, the Company shall be responsible for all compensation and
expenses related to retention by the Company of employees of the Manager to
provide the services set forth in Section 2 of this Agreement, including, but
not limited to, salaries, wages, payroll taxes, and the cost of employee benefit
plans."
3. Amendment to Section 9.
Section 9 of the Management Agreement shall be amended to read
in its entirety as follows:
"SECTION 9. Expense Reimbursements.
(a) Reimbursements to the Manager. 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) Reimbursements to the Company. All expenditures incurred
by the Company pursuant to Section 8(c) hereof shall be reimbursed monthly by
the Manager within 30 days after the end of each month. The Company shall
prepare a statement documenting such expenses during each month, and shall
deliver such statement to the Manager within 15 days after the end of each
month."
4. Amendment to Employment Agreement.
In furtherance of paragraphs 1 and 2 hereof, Manager shall
cause to be executed such Amendments and addendums to the Employment Agreements
as necessary to carry out the intent and purpose of this Amendment.
5. Full Force and Effect of Management Agreement.
Unless expressly amended by the terms of this Amendment, all
remaining provisions of the Management Agreement shall remain in full force and
effect.
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6. Controlling Law.
This Amendment 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 California,
notwithstanding any California or other conflict of law provisions to the
contrary.
7. Titles Not to Affect Interpretation.
The titles of paragraphs and subparagraphs contained in this
Amendment are for convenience only, and they neither form a part of this
Amendment nor are they to be used in the construction or interpretation hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date first written above.
AMERICAN RESIDENTIAL INVESTMENT TRUST, INC.
By: __________________________________________________
Xxxx X. Xxxxxxx, Xx., Chief Executive Officer
HOME ASSET MANAGEMENT CORP.
By: __________________________________________________
Xxxxx X. Xx Xxxxx, President
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