ADVISORY AGREEMENT
Exhibit
10.3
THIS
ADVISORY AGREEMENT is made as of January 18, 2008
by and
between NEW YORK MORTGAGE TRUST, INC., a Maryland corporation (the “Company”),
NEW
YORK MORTGAGE FUNDING LLC and HYPOTHECA CAPITAL, LLC (each a “Subsidiary” and,
together with the Company’s other Subsidiaries, as defined in Section 1(u), the
“Subsidiaries”), and JMP ASSET MANAGEMENT LLC, a Delaware limited liability
company (together with its permitted assignees, the “Advisor”).
WHEREAS,
the Company is a corporation that has elected to be taxed as a real estate
investment trust for federal income tax purposes; and
WHEREAS,
the Company and Subsidiaries desire to retain the Advisor to provide investment
advisory services to the Subsidiaries on the terms and conditions hereinafter
set forth, and the Advisor wishes to be retained to provide such
services.
NOW
THEREFORE, in consideration of the mutual agreements herein set forth, the
parties hereto agree as follows:
SECTION
1. DEFINITIONS.
The
following terms have the meanings assigned them:
(a) “Agreement”
means
this Advisory Agreement, as amended from time to time.
(b) “Base
Advisory Fee”
means
the base advisory fee, calculated and paid quarterly in arrears, in an amount
equal to (i) 1/4 of Equity as of the end of the quarter multiplied by (ii)
1.50%.
(c) “Board
of Directors”
means
the Board of Directors of the Company.
(d) “Change
of Control”
means
the occurrence of any of the following:
(i) the
sale,
lease or transfer, in one or a series of related transactions, of all or
substantially all of the assets of the Advisor, taken as a whole, to any Person
other than JMP Group, Inc. or any of their respective affiliates;
or
(ii) the
acquisition by any Person or group (within the meaning of Section 13(d)(3)
or
Section 14(d)(2) of the Exchange Act, or any successor provision), including
any
group acting for the purpose of acquiring, holding or disposing of securities
(within the meaning of Rule 13d-5(b)(1) under the Exchange Act), other than
JMP
Group, Inc. or any of their respective affiliates, in a single transaction
or in
a related series of transactions, by way of merger, consolidation or other
business combination or purchase of beneficial ownership (within the meaning
of
Rule 13d-3 under the Exchange Act, or any successor provision) of 50% or more
of
the total voting power of the voting capital interests of the
Advisor.
(e) “Code”
means
the Internal Revenue Code of 1986, as amended.
(f) “Common
Share”
means
a
share of stock of the Company now or hereafter authorized as voting common
stock
of the Company.
(g) “Core
Earnings”
is
a
non-GAAP measure and is defined as GAAP net income (loss) excluding non-cash
equity compensation expense and any unrealized gains, losses or other items
that
do not affect realized net income (regardless of whether such items are included
in other comprehensive income or loss, or in net income); provided,
however,
that
Core Earnings and GAAP net income will be adjusted to exclude one-time events
pursuant to changes in GAAP and certain non-cash charges after discussions
between the Manager and the Independent Directors and approved by a majority
of
the Independent Directors.
(h) “Equity”
means,
for purposes of calculating the Base Advisory Fee, for any quarter, the greater
of (i) the net asset value of the Investments of the Subsidiaries as of the
end
of the quarter or (ii) the sum of $20,000,000 plus 50% of the net proceeds
to
the Company or its Subsidiaries of any offering of common or preferred stock,
after deducting underwriting discounts and commissions, placement fees, offering
expenses and other fees and expenses incurred by the Company or the Subsidiaries
in connection with the offering, completed during the term of this Agreement.
(i) “Exchange
Act”
means
the Securities Exchange Act of 1934, as amended.
(j) “Excluded
Assets”
means
all those U.S. Government agency mortgage-backed securities and any other assets
that, in each case, have been identified by the Company as having been allocated
to the Subsidiaries in connection with the Company’s compliance with the
requirements to maintain its exemption from regulation under the Investment
Company Act of 1940, as amended.
(k) “Federal
Reserve Board”
means
the Board of Governors of the Federal Reserve System.
(l) “GAAP”
means
generally accepted accounting principles, as applied in the United
States.
(m) “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, the
articles of formation and the operating agreement in the case of a limited
liability company, the trust instrument in the case of a trust, or similar
governing documents, in each case as amended from time to time.
(n) “Guidelines”
shall
have the meaning set forth in Section 2(b)(i).
(o) “Incentive
Compensation”
means
(A) for
each of the first three fiscal quarters of each fiscal year, an amount, not
less
than zero, equal to 25% of the product of: (i) the dollar amount by which (a)
the Core Earnings of the Subsidiaries for the quarter that are attributable
to
the Investments, before incentive compensation, divided by the quarterly average
capital of the Subsidiaries that is invested in Investments, exceeds (b) the
greater of (x) 2.00% and (y) 0.50% plus one-fourth of the Ten Year Treasury
Rate
for such quarter, and (ii) the average capital of the Subsidiaries invested
in
Investments during such quarter; and
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(B) for
the fourth fiscal quarter of each fiscal year, an amount, not less
than zero, equal to the difference between (1) 25% of the product of: (i)
the dollar amount by which (a) GAAP net income of the Subsidiaries attributable
to the Investments for the full fiscal year, before incentive compensation,
divided by the average capital of the Subsidiaries for the year that is invested
in Investments, exceeds (b) the greater of (x) 8.00% and (z) 2.00% plus the
Ten
Year Treasury Rate for such fiscal year, and (ii) the average capital of the
Subsidiaries invested in Investments for the fiscal year and (2) the amount
of
Incentive Compensation paid for the first three fiscal quarters of such fiscal
year.
(p) “Independent
Directors”
means
the members of the Board of Directors who are not officers or employees of
the
Company or the Advisor or any Person directly or indirectly controlling or
controlled by the Advisor, and who are otherwise “independent” in accordance
with the Company’s Governing Instruments and, if applicable, the rules of any
national securities exchange on which the Common Shares are listed.
(q) “Investment
Company Act”
means
the Investment Company Act of 1940, as amended.
(r) “Investment
Allocation Policy”
means
the Investment Allocation Policy attached as Exhibit
A
hereto.
(s) “Investments”
means
the investments of the Subsidiaries made or acquired by the Advisor pursuant
to
the Guidelines after the date of this Agreement for the benefit of and for
the
account of the Subsidiaries, but excluding the Excluded Assets.
(t) “Person”
means
any individual, corporation, partnership, joint venture, limited liability
company, estate, trust, unincorporated association, any federal, state, county
or municipal government or any bureau, department or agency thereof and any
fiduciary acting in such capacity on behalf of any of the foregoing.
(u) “REIT”
means
a
“real estate investment trust” as defined under the Code.
(v)
“Subsidiaries”
means
each direct and indirect subsidiary of the Company that is formed for the
purpose of holding Investments, including but not limited to Hypotheca Capital,
LLC and New York Mortgage Funding LLC.
(w) “Ten
Year Treasury Rate”
means
the average of weekly average yield to maturity for U.S. Treasury securities
(adjusted to a constant maturity of ten (10) years) as published weekly by
the
Federal Reserve Board in publication H.15, or any successor publication, during
a fiscal quarter.
(x) “Treasury
Regulations”
means
the regulations promulgated under the Code from time to time, as amended.
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SECTION
2. APPOINTMENT
AND DUTIES OF THE ADVISOR.
(a) The
Company, for itself and on behalf of the Subsidiaries, hereby appoints the
Advisor to manage the assets of the Subsidiaries subject to the further terms
and conditions set forth in this Agreement and the Advisor hereby agrees to
use
its commercially reasonable efforts to perform each of the duties set forth
herein. The appointment of the Advisor shall be exclusive to the Advisor except
to the extent that the Advisor otherwise agrees, in its sole and absolute
discretion, and except to the extent that the Advisor elects, pursuant to the
terms of this Agreement, to cause the duties of the Advisor hereunder to be
provided by third parties.
(b) The
Advisor, in its capacity as investment manager of the assets of the
Subsidiaries, at all times will be subject to the supervision of the Company
and
the Company’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 Advisor hereby. The Advisor
will be responsible for the day-to-day portfolio operations of the Subsidiaries
and will perform (or cause to be performed) such services and activities
relating to the assets and operations of the Subsidiaries as may be appropriate,
including, without limitation:
(i) as
described in greater detail in clauses (ix) and (x) below, serving as the
Company’s and the Subsidiaries’ consultant with respect to the development and
periodic review of the investment criteria and parameters for the Subsidiaries’
Investments, borrowings and operations, any modifications to which shall be
subject to the approval of a majority of the Independent Directors (such
guidelines as initially approved and as may be modified with such approval,
the
“Guidelines”).
The
initial approved Guidelines are attached as Exhibit
A
to this
Agreement.
(ii) investigating,
analyzing and selecting possible investment opportunities for the
Subsidiaries;
(iii) with
respect to prospective purchases and sales of Investments, conducting
negotiations with sellers and purchasers and their respective agents,
representatives and investment bankers;
(iv) engaging
and supervising, on behalf of the Subsidiaries and at the Subsidiaries’ expense,
independent contractors which provide investment banking, mortgage brokerage,
securities brokerage and other financial services and such other services as
may
be required relating to the Investments; provided, however, that the Advisor
shall be prohibited from originating residential mortgage loans on behalf of
the
Company and the Subsidiaries at any time prior to October 1, 2008;
(v) negotiating
on behalf of the Subsidiaries for the sale, exchange or other disposition of
any
Investments;
(vi) coordinating
and managing operations of any joint venture or co-investment interests held
by
the Subsidiaries and conducting all matters with the joint venture or
co-investment partners;
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(vii) counseling
the Company in connection with policy decisions to be made by the Board of
Directors with respect to the Subsidiaries;
(viii) evaluating
and recommending to the Company hedging strategies and engaging in hedging
activities on behalf of the Subsidiaries, consistent with such strategies,
as so
modified from time to time, with the Company’s status as a REIT, and with the
Guidelines;
(ix) assisting
the Company and the Subsidiaries in developing criteria for asset purchase
commitments that are specifically tailored to the Subsidiaries’ investment
objectives and making available to the Company and the Subsidiaries its
knowledge and experience with respect to mortgage loans, real estate, real
estate securities, other real estate-related assets and non-real estate related
assets;
(x) representing
and making recommendations to the Company and the Subsidiaries in connection
with the establishment of investment guidelines for the Subsidiaries with
respect to the purchase and finance of, and commitment to purchase and finance,
mortgage loans (including on a portfolio basis), real estate, real estate
securities, other real estate-related assets and non-real estate-related assets,
and the sale and commitment to sell such assets;
(xi) monitoring
the financial performance of the Investments and providing periodic reports
with
respect thereto to the Company and its Board of Directors, including comparative
information with respect to such performance including any reports necessary
for
the Company to meet its requirements under the Exchange Act and the Public
Subsidiary Accounting Reform and Investor Protection Act of 2002 as
amended;
(xii) investing
and re-investing any moneys and securities of the Subsidiaries;
(xiii) using
commercially reasonable efforts to cause expenses incurred by or on behalf
of
the Subsidiaries to be commercially reasonable or commercially customary and
within any budgeted parameters or expense guidelines set by the Company from
time to time; and
(xiv) performing
such other services as may be required from time to time for advisory and other
activities relating to the assets of the Subsidiaries as the Company’s
management and Board of Directors shall reasonably request.
Without
limiting the foregoing, the Advisor will perform portfolio management services
(the “Portfolio
Management Services”)
on
behalf of the Subsidiaries with respect to the 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
Subsidiaries’ portfolio of assets; the collection of information and the
submission of reports pertaining to the Subsidiaries’ assets, interest rates and
general economic conditions; periodic review and evaluation of the performance
of the Subsidiaries’ portfolio of assets; acting as liaison between the
Subsidiaries and banking, mortgage banking, investment banking and other parties
with respect to the purchase, financing and disposition of assets; and other
customary functions related to portfolio management. Additionally, the Advisor
will perform monitoring services (the “Monitoring
Services”)
on
behalf of the Subsidiaries 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 Subsidiaries; 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.
5
(c) The
Advisor may enter into agreements with other parties, including its affiliates,
to provide such services to the Subsidiaries (including, without limitation,
Portfolio Management Services and Monitoring Services) as the Advisor shall
deem
necessary or advisable in connection with the Advisor’s performance of its
duties and obligations hereunder pursuant to agreements with terms which are
then customary for agreements regarding the provision of such services to
companies that have assets similar in type, quality and value to the assets
of
the Subsidiaries; provided
that (i)
any such agreements entered into with affiliates of the Advisor shall be (A)
on
terms no more favorable to such affiliate then would be obtained from a third
party on an arm’s-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
Directors, (ii) with respect to Portfolio Management Services, (A) any such
agreements shall be subject to the Company’s prior written approval and (B) the
Advisor shall remain liable for the performance of such Portfolio Management
Services, (iii) with respect to Monitoring Services, any such agreements shall
be subject to the Company’s prior written approval and (iv) the Base Advisory
Fee payable to the Advisor shall be reduced by the amount of any fees payable
to
such other parties, although any out-of-pocket expenses incurred by such other
parties that are reimbursable shall be reimbursed by the Company.
(d) To
the
extent that the Advisor deems necessary or advisable, the Advisor may, from
time
to time, propose to retain one or more additional entities for the provision
of
sub-advisory services to the Advisor in order to enable the Advisor to perform
its services hereunder; provided
that any
such agreement (i) shall be on terms and conditions substantially identical
to
or more favorable than the terms and conditions of this Agreement, and (ii)
shall not result in an increased Base Advisory Fee or expenses to the Company
or
the Subsidiaries.
(e) As
frequently as the Advisor may deem necessary or advisable, or at the direction
of the Company, the Advisor shall, at the sole cost and expense of the Company
and/or the Subsidiaries, as applicable, prepare, or cause to be prepared, with
respect to any Investment, reports and other information with respect to such
Investment as may be reasonably requested by the Company.
(f) The
Advisor shall prepare regular reports for the Company to enable it to review
the
Subsidiaries’ acquisitions, portfolio composition and characteristics, credit
quality, performance and compliance with the Guidelines and policies approved
by
the Company’s Board of Directors.
(g) Notwithstanding
anything contained in this Agreement to the contrary, except to the extent
that
the payment of additional moneys is proven by the Company to have been required
as a direct result of the Advisor’s acts or omissions which result in the right
of the Company to terminate this Agreement pursuant to Section 15 of this
Agreement, the Advisor shall not be required to expend money (“Excess
Funds”)
in
connection with any expenses that are required to be paid for or reimbursed
by
the Company pursuant to Section 9 in excess of that contained in any applicable
Subsidiary Account (as herein defined) or otherwise made available by the
Company to be expended by the Advisor hereunder. Failure of the Advisor 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 Advisor’s unsatisfactory
performance.
6
(h) In
performing its duties under this Section 2, the Advisor shall be entitled to
rely reasonably on qualified experts and professionals (including, without
limitation, accountants, legal counsel and other professional service providers)
hired by the Advisor with the Company’s permission, at the Company’s sole cost
and expense.
(i) Notwithstanding
anything to the contrary contained herein, to the extent any action by the
Advisor requires the approval or consent of the Company or the Board of
Directors, or is to be taken at the direction of the Company or the Board of
Directors, such approval, consent or direction shall be given only by officers
or directors of the Company that are not affiliated with the Advisor or its
affiliates.
(j) Any
reference to the assets, operations, moneys, securities, investments, investment
opportunities, investment objectives or similar terminology, of the Subsidiaries
contained in this Section 2 shall refer to the assets, operations, moneys,
securities, investments, investment opportunities or investment objectives
of
the Subsidiaries, excluding the Excluded Assets.
SECTION
3. DEVOTION
OF TIME; ADDITIONAL ACTIVITIES.
(a) During
the term of this Agreement, the Advisor will designate a qualified individual
to
serve as the Chief Investment Officer of each of the Subsidiaries. Subject
to
compliance with the suitability standards of the Nominating and Corporate
Governance Committee of the Company’s Board of Directors, the Board of Directors
shall appoint such designated representative of the Advisor to serve on the
Company’s Board of Directors as its Chairman and to serve as the Chief
Investment Officer of each of the Subsidiaries effective as of the date of
this
Agreement and shall recommend such designated representative for election to
the
Company’s Board of Directors at each annual or special meeting of the Company’s
stockholders at which directors are to be elected during the term of this
Agreement.
(b) The
Company hereby agrees that the Advisor or any entity controlled by or under
common control with the Advisor shall be permitted to raise, advise or sponsor
other REITs and other funds that invest primarily in domestic mortgage-backed
securities; provided
that the
Advisor will not disadvantage the Company and the Subsidiaries with respect
to
its services provided to such other REITs or funds. The Company and the
Subsidiaries shall have the benefit of the Advisor’s best judgment and efforts
in rendering services and, in furtherance of the foregoing, the Advisor shall
not undertake activities which, in its judgment, will substantially and
adversely affect the performance of its obligations under this Agreement. When
making investment allocation decisions between the Subsidiaries, on the one
hand, and any other REIT, fund or account managed by the Advisor or any of
its
affiliates, on the other hand, the Advisor shall adhere to the Investment
Allocation Policy attached as Exhibit
B
hereto.
7
(c) Except
to
the extent set forth in clauses (a) and (b) above, nothing herein shall prevent
the Advisor or any of its affiliates or any of the officers and employees of
any
of the foregoing 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 investment, including investments
which meet the principal investment objectives of the Company and its
Subsidiaries.
(d) Officers
and employees of the Advisor or its affiliates may serve as officers, employees,
agents, nominees or signatories for any Subsidiary, to the extent permitted
by
such Subsidiary’s Governing Instruments, subject to approval by the Board of
Directors of the Company. When executing documents or otherwise acting in such
capacities for the Subsidiaries, such persons shall use their respective titles
in the Subsidiaries.
SECTION
4. AGENCY.
The
Advisor shall act as agent of the Company and its Subsidiaries in making,
acquiring, financing and disposing of Investments.
SECTION
5. BANK
ACCOUNTS.
The
Company may establish and maintain one or more bank accounts in the name of
any
Subsidiary (any such account, a “Subsidiary
Account”),
and
may direct the Advisor to collect and deposit funds into any such Subsidiary
Account, and disburse funds from any such Subsidiary Account, under such terms
and conditions as the Company may approve; and the Advisor shall from time
to
time render appropriate accountings of such collections and payments to the
Company and the Board of Directors and, upon request, to the auditors of the
Company or any Subsidiary.
SECTION
6. RECORDS;
CONFIDENTIALITY.
The
Advisor 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 Company or any
Subsidiary at any time during normal business hours upon one (1) business day’s
advance written notice. The Advisor shall keep confidential any and all
information obtained in connection with the services rendered under this
Agreement and shall not disclose any such information (or use the same except
in
furtherance of its duties under this Agreement) to nonaffiliated third parties
except (i) with the prior written consent of the Company, (ii) to legal counsel,
accountants and other professional advisors; (iii) to appraisers, financing
sources and others in the ordinary course of the Company’s and the Subsidiaries’
business; (iv) to governmental officials having jurisdiction over the Company
and the Subsidiaries; (v) in connection with any governmental or regulatory
filings of the Company and the Subsidiaries or disclosure or presentations
to
Company investors; or (vi) as required by law or legal process to which the
Advisor or any Person to whom disclosure is permitted hereunder is a party.
The
foregoing shall not apply to information which has previously become publicly
available through the actions of a Person other than the Advisor not resulting
from the Advisor’s violation of this Section 6. The provisions of this Section 6
shall survive the expiration or earlier termination of this Agreement for a
period of one year.
8
SECTION
7. OBLIGATIONS
OF ADVISOR; RESTRICTIONS.
(a) The
Advisor shall require each seller or transferor of investment assets to the
Subsidiaries to make such representations and warranties regarding such assets
as may, in the judgment of the Advisor, be necessary and appropriate. In
addition, the Advisor shall take such other action as it deems necessary or
appropriate with regard to the protection of the Investments.
(b) The
Advisor shall refrain from any action that, in its sole judgment made in good
faith, (i) is not in compliance with the Guidelines, (ii) would cause the
Company’s status as a REIT under the Code to be lost or terminated or (iii)
would violate any law, rule or regulation of any governmental body or agency
having jurisdiction over the Company or any Subsidiary or that would otherwise
not be permitted by the Company’s Governing Instruments. If the Advisor is
ordered to take any such action by the Company or the Board of Directors, the
Advisor shall promptly notify the Company and Board of Directors of the
Advisor’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 Advisor, its directors, officers,
stockholders and employees shall not be liable to the Company or any Subsidiary,
the Board of Directors, or the Company’s or any Subsidiary’s stockholders or
partners, for any act or omission by the Advisor, its directors, officers,
stockholders or employees except as provided in Section 11 of this
Agreement.
(c) The
Advisor shall not (i) consummate any transaction which would involve the
acquisition by the Subsidiaries of an asset in which the Advisor or any
affiliate thereof has an ownership interest or the sale by the Subsidiaries
of
an asset to the Advisor or any affiliate thereof, or (ii) under circumstances
where the Advisor is subject to an actual or potential conflict of interest,
in
the reasonable judgment of the Advisor, because it advises both the Subsidiaries
and another Person (not an affiliate of the Company) with which the Company
has
a contractual relationship, take any action constituting the granting to such
Person of a waiver, forbearance or other relief, or the enforcement against
such
Person of remedies, under or with respect to the applicable contract, unless
such transaction or action, as the case may be and in each case, is approved
by
a majority of the Independent Directors.
(d) The
Board
of Directors periodically reviews the Guidelines and the Subsidiaries’
portfolios of Investments but will not review each proposed investment, except
as otherwise provided herein. If a majority of the Independent Directors
determine in their periodic review of transactions that a particular transaction
does not comply with the Guidelines (including as a result of violation of
the
provisions of Section 7(c) above), then a majority of the Independent Directors
will consider what corrective action, if any, can be taken. The Advisor shall
be
permitted to rely upon the direction of the Secretary of the Company to evidence
the approval of the Board of Directors or the Independent Directors with respect
to a proposed Investment.
(e) The
Advisor shall at all times during the term of this Agreement maintain “errors
and omissions” insurance coverage and other insurance coverage which is
customarily carried by property, asset and investment Advisors performing
functions similar to those of the Advisor under this Agreement with respect
to
assets similar to the assets of the Subsidiaries, in an amount which is
comparable to that customarily maintained by other Advisors or servicers of
similar assets.
9
SECTION
8. COMPENSATION.
(a) During
the Initial Term (as defined below) of this Agreement, as the same may be
extended from time to time, the Company shall pay the Advisor the Base Advisory
Fee quarterly in arrears commencing with the quarter in which this Agreement
was
executed (with such initial payment pro-rated based on the number of days during
such quarter that this Agreement was in effect).
(b) The
Advisor shall compute each installment of the Base Advisory Fee for each quarter
with respect to which such installment is payable within two (2) business days
after completion by the Company’s registered independent public accountants of
(i) with respect to the first three fiscal quarters of each fiscal year, a
SAS
100 review of the Company’s consolidated financial statements for each such
quarter and (ii) with respect to the fourth fiscal quarter of each fiscal year,
an audit of the Company’s consolidated financial statements for such fiscal
year. The Advisor shall deliver promptly to the Company a copy of the
computations made by the Advisor to calculate such installment and, subject
to
Section 13(a) of this Agreement, the Company shall deliver payment of such
installment of the Base Advisory Fee shown therein to the Advisor within five
(5) business days thereafter.
(c) The
Base
Advisory Fee is subject to adjustment pursuant to and in accordance with the
provisions of Section 13(a) of this Agreement.
(d) In
addition to the Base Advisory Fee, the Company shall pay the Advisor quarterly
Incentive Compensation. The Incentive Compensation calculation and payment
shall
be made for each fiscal quarter in arrears following the same schedule set
forth
in Section 8(b) above.
(e) Any
portion of the Incentive Compensation payable for the fourth fiscal quarter
of a
fiscal year that is attributable to net unrealized gains of the Company with
respect to the invested capital of the Subsidiaries will be payable in Common
Shares, valued based on the
average closing price of the Common Shares during the fourth quarter with
respect to which such Incentive Compensation payment is payable as quoted or
reported on the national securities exchange on which such Common Shares are
then listed or, if the Common Shares are not then listed on a national
securities exchange, as quoted on the OTC Bulletin Board.
SECTION
9. EXPENSES
OF THE COMPANY AND SUBSIDIARIES.
The
Company and Subsidiaries shall pay all of their expenses and shall reimburse
the
Advisor for reasonable documented expenses of the Advisor incurred on their
behalf (collectively, the “Expenses”).
At
all times the Advisor shall use due care in expending funds on behalf of the
Subsidiaries. Expenses include all costs and expenses which are expressly
designated elsewhere in this Agreement as the Company’s and Subsidiaries,
together with the following:
(a) expenses
in connection with issuance and transaction costs incident to the acquisitions,
disposition and financing of Investments;
(b) costs
of
legal, tax, accounting, consulting, auditing, administrative and other similar
services rendered for the Subsidiaries by providers retained by the Advisor
or,
if provided by the Advisor’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;
10
(c) costs
associated with the establishment and maintenance of any credit facilities
and
other indebtedness of the Subsidiaries (including commitment fees, accounting
fees, legal fees, closing and other similar costs) or any securities offerings
of the Subsidiaries;
(d) costs
associated with any computer software or hardware, electronic equipment or
purchased information technology services from third party vendors that is
used
solely for the Subsidiaries and acquired at the direction of the
Company;
(e) expenses
incurred by officers, employees and agents of the Advisor for travel on the
Subsidiaries’ behalf and other out-of-pocket expenses incurred by officers,
employees and agents of the Advisor in connection with the purchase, financing,
refinancing, sale or other disposition of an Investment or establishment and
maintenance of any credit facilities and other indebtedness or any securities
offerings of the Subsidiaries;
(f) costs
and
expenses incurred with respect to settlement, clearing and custodial fees and
expenses;
(g) the
costs
of maintaining compliance with all federal, state and local rules and
regulations or any other regulatory agency applicable to the Subsidiaries or
the
Company;
(h) costs
and
expenses incurred in contracting with third parties, including affiliates of
the
Advisor, for the servicing and special servicing of assets of the
Subsidiaries;
(i) all
other
costs and expenses relating to the Subsidiaries’ business and investment
operations, including, without limitation, the costs and expenses of acquiring,
owning, protecting, maintaining, developing and disposing of Investments,
including appraisal, reporting, audit and legal fees;
(j) all
other
expenses actually incurred by the Advisor which are reasonably necessary for
the
performance by the Advisor of its duties and functions under this
Agreement.
The
Advisor may, at its option, elect not to seek reimbursement for certain expenses
during a given period, which determination shall not be deemed to construe
a
waiver of reimbursement for similar expenses in future periods. Except as noted
above, the Advisor is responsible for all costs incident to the performance
of
its duties under this Advisory Agreement, including compensation of the
Advisor’s officers and employees and other related expenses.
The
provisions of this Section 9 shall survive the expiration or earlier termination
of this Agreement to the extent such expenses have previously been incurred
or
are incurred in connection with such expiration or termination.
SECTION
10. CALCULATIONS
OF EXPENSES.
The
Advisor shall prepare a statement documenting the Expenses incurred by the
Advisor on behalf of the Subsidiaries 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 Advisor on behalf of the Subsidiaries
shall be reimbursed by the Company to the Advisor not later than the first
business day of the month immediately following the date of delivery of such
statement; provided,
however, that such reimbursements may be offset by the Advisor against amounts
due to the Company. The provisions of this Section 10 shall survive the
expiration or earlier termination of this Agreement.
11
SECTION
11. LIMITS
OF ADVISOR RESPONSIBILITY; INDEMNIFICATION.
(a) The
Advisor assumes no responsibility under this Agreement other than to render
the
services called for and perform the other obligations required to be performed
by the Advisor under this Agreement in good faith and shall not be responsible
for any action of the Company or the Board of Directors in following or
declining to follow any advice or recommendations of the Advisor, including
as
set forth in Section 7(b) of this Agreement. The Advisor, each
Person
controlling,
controlled by or under common control with the Advisor, any entity providing
sub-advisory services to the Advisor, and the officers, directors, employees,
members, partners and other representatives of any such Person
(each an
“Indemnified
Party”
and,
collectively, the Indemnified
Parties”)
will
not be liable to the Company or any Subsidiary, to the Board of Directors,
or
the Company’s or any Subsidiary’s stockholders, members or partners for any acts
or omissions by any such Person, 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 Advisor’s duties under this
Agreement or acts constituting a material breach or violation by the Advisor
of
its obligations under this Agreement. The Company shall, to the full extent
lawful, reimburse, indemnify and hold the each 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 any acts or omissions of such Indemnified Party made in good faith
in the performance of the Advisor’s duties under this Agreement and not
constituting such Indemnified Party’s bad faith, willful misconduct, gross
negligence or reckless disregard of the Advisor’s duties under this Agreement or
a material breach or violation by the Advisor of its obligations under this
Agreement.
(b) The
Advisor shall, to the full extent lawful, reimburse, indemnify and hold the
Company, its stockholders, directors, officers and employees and each other
Person, if any, controlling, controlled by or under common control with 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 Advisor’s bad faith, willful misconduct, gross
negligence or reckless disregard of its duties under this Agreement or material
breach or violation by the Advisor of its obligations under this
Agreement.
SECTION
12. NO
JOINT VENTURE.
Nothing
in this Agreement shall be construed to make the Company, any of the
Subsidiaries and the Advisor partners or joint venturers or impose any liability
as such on either of them.
12
SECTION
13. TERM;
TERMINATION.
(a) Until
this Agreement is terminated in accordance with its terms, this Agreement shall
be in effect until December 31, 2010 (the “Initial
Term”)
and
shall be automatically renewed for a one-year term each anniversary date
thereafter (a “Renewal
Term”)
unless
at least two-thirds of the Independent Directors agree that (i) there has been
unsatisfactory performance by the Advisor that is materially detrimental to
the
Company and its Subsidiaries or (ii) the compensation payable to the Advisor
hereunder is unfair; provided
that the
Company shall not have the right to terminate this Agreement under clause (ii)
above if the Advisor agrees to continue to provide the services under this
Agreement at a fee that at least two-thirds of the Independent Directors
determines to be fair pursuant to the procedure set forth below. If the Company
elects not to renew this Agreement at the expiration of the Initial Term or
any
such one-year extension term as set forth above, the Company shall deliver
to
the Advisor 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) not less than 180 days prior to the expiration of the
then
existing term. If the Company so elects not to renew this Agreement, the Company
shall designate the date (the “Effective
Termination Date”),
not
less than 180 days from the date of the notice, on which the Advisor 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 Advisor is unfair,
the
Advisor shall have the right to renegotiate such compensation 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 (represented by the Independent Directors) and the Advisor shall
endeavor to negotiate in good faith the revised compensation payable to the
Advisor under this Agreement. Provided that the Advisor and at least two-thirds
of the Independent Directors agree to the terms of the revised compensation
to
be payable to the Advisor 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 compensation payable to the Advisor
hereunder shall be the revised compensation then agreed upon by the parties
to
this Agreement. The Company and the Advisor agree to execute and deliver an
amendment to this Agreement setting forth such revised compensation promptly
upon reaching an agreement regarding same. In the event that the Company and
the
Advisor are unable to agree to the terms of the revised compensation to be
payable to the Advisor during such 45 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 45 day period and (B) the Effective
Termination Date originally set forth in the Termination Notice. The
Company may elect to terminate this agreement under the provisions of this
Section 13(a) prior to the expiration of the Initial Term if the Advisor has
failed to earn Incentive Compensation for four (4) consecutive
quarters.
(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 Advisor, on the
date on which such termination is effective, a termination fee (the
“Termination
Fee”)
equal
to the sum of (a) the average annual Base Advisory Fee and (b) the average
annual Incentive Compensation earned by the Advisor during the 24-month period
immediately preceding the date of such termination, calculated as of the end
of
the most recently completed fiscal quarter prior to the date of termination.
The
obligation of the Company to pay the Termination Fee shall survive the
termination of this Agreement.
13
(c) No
later
than 180 days prior to the anniversary date of this Agreement of any year during
the Initial Term or Renewal Term, the Advisor may deliver written notice to
the
Company informing it of the Advisor’s intention to decline to renew this
Agreement, whereupon this Agreement shall not be renewed and extended and this
Agreement shall terminate effective on the anniversary date of this Agreement
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 Sections 6, 9, 10, 13(b) and 16 of this Agreement. In addition,
Sections 8(f) and 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
Advisor, unless such assignment is consented to in writing by the Company 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 Advisor to an affiliate of the Advisor. Any such permitted assignment shall
bind the assignee under this Agreement in the same manner as the Advisor is
bound, and the Advisor 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 Company a counterpart of this Agreement naming
such assignee as Advisor. This Agreement shall not be assigned by the Company
without the prior written consent of the Advisor, except in the case of
assignment by the Company to another 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 under this Agreement
and
by the terms of such assignment in the same manner as the Company is bound
under
this Agreement.
(b) Notwithstanding
any provision of this Agreement, the Advisor 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 Company hereby
consents to any such assignment and subcontracting. In addition, provided that
the Advisor 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 Advisor under
this
Agreement.
SECTION
15. TERMINATION
FOR CAUSE.
(a) The
Company may terminate this Agreement effective upon thirty (30) days’ prior
written notice of termination from the Company to the Advisor, without payment
of any Termination Fee, if (i) the Advisor materially breaches any provision
of
this Agreement and such breach shall continue for a period of 30 days after
written notice thereof specifying such breach and requesting that the same
be
remedied in such 30 day period, (ii) the Advisor engages in any act of fraud,
misappropriation of funds, or embezzlement against the Company, (iii) there
is
an event of any gross negligence on the part of the Advisor in the performance
of its duties under this Agreement, (iv) there is a commencement of any
proceeding relating to the Advisor’s bankruptcy or insolvency, (v) there is a
dissolution of the Advisor, or (vi) there is a Change of Control of the
Advisor.
14
(b) The
Advisor may terminate this Agreement effective upon sixty (60) days’ prior
written notice of termination to the Company, without payment of any Termination
Fee, 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.
(c) The
Advisor may terminate this Agreement, without payment of any Termination Fee,
in
the event the Company becomes regulated as an “investment company” under the
Investment Company Act, with such termination deemed to have occurred
immediately prior to 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, the Advisor 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 or Section 15(b), the applicable Termination Fee. Upon such
termination, the Advisor 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 Company 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 Company with respect
to the Subsidiaries; and
(iii) deliver
to the Company all property and documents of the Company or any Subsidiary
then
in the custody of the Advisor.
SECTION
17. RELEASE
OF MONEY OR OTHER PROPERTY UPON WRITTEN REQUEST.
The
Advisor agrees that any money or other property of the Company or Subsidiary
held by the Advisor under this Agreement shall be held by the Advisor as
custodian for the Company or Subsidiary, and the Advisor’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 Advisor
of a
written request signed by a duly authorized officer of the Company requesting
the Advisor to release to the Company or any Subsidiary any money or other
property then held by the Advisor for the account of the Company or any
Subsidiary under this Agreement, the Advisor 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 Advisor
shall not be liable to the Company, any Subsidiary, the Independent Directors,
or the Company’s or a Subsidiary’s stockholders, partners or members 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 second sentence of this Section 17. The
Company and any Subsidiary shall indemnify the Advisor and its members,
sub-advisors, 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 Advisor’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 Advisor to indemnification under Section 11 of this
Agreement.
15
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 with telephonic confirmation or (iv) delivery by registered or
certified mail, postage prepaid, return receipt requested, addressed as set
forth below:
(a) If
to the
Company or any Subsidiary:
New
York
Mortgage Trust, Inc.
1301
Avenue of the Xxxxxxxx, 0xx
Xxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Attention:
President
Facsimile:
(b) If
to the
Advisor:
JMP
Asset
Management LLC
000
Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Attention:
Xxxxx X. Xxxxxxx
Facsimile:
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.
16
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 signed by
the
parties hereto.
SECTION
21. GOVERNING
LAW.
THIS
AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT
SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE
LAW
OF THE STATE OF NEW YORK.
SECTION
22. NO
WAIVER; CUMULATIVE REMEDIES.
No
failure to exercise and no delay in exercising, on the part of any party hereto,
any right, remedy, power or privilege hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, remedy, power
or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege. The rights, remedies,
powers and privileges herein provided are cumulative and not exclusive of any
rights, remedies, powers and privileges provided by law. No waiver of any
provision hereto shall be effective unless it is in writing and is signed by
the
party asserted to have granted such waiver.
SECTION
23. HEADINGS.
The
headings of the sections of this Agreement have been inserted for convenience
of
reference only and shall not be deemed part of this Agreement.
SECTION
24. 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. SEVERABILITY.
Any
provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in
any
other jurisdiction.
SECTION
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.
17
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date
first written above.
| NEW YORK MORTGAGE TRUST, INC. | ||
| |
|
|
| By: | /s/ Xxxxxx X. Xxxxx | |
|
Name: Xxxxxx X. Xxxxx |
||
| Title: Co-CEO, President, CFO | ||
| NEW YORK MORTGAGE FUNDING LLC | ||
|
|
||
| By: |
NEW YORK MORTGAGE TRUST, INC.,
its
sole member
|
|
| |
|
|
| By: | /s/ Xxxxxx X. Xxxxx | |
|
Name: Xxxxxx X. Xxxxx |
||
| Title: Co-CEO, President, CFO | ||
| HYPOTHECA CAPITAL, LLC | ||
|
|
||
| By: |
NEW YORK MORTGAGE TRUST, INC.,
its
sole member
|
|
| |
|
|
| By: | /s/ Xxxxxx X. Xxxxx | |
|
Name: Xxxxxx X. Xxxxx |
||
| Title: Co-CEO, President, CFO | ||
| JMP ASSET MANAGEMENT LLC | ||
| |
|
|
| By: | /s/ Xxxxxx X. Xxxxxx | |
|
Name: |
||
| Title: | ||
