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EXHIBIT 10.1
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT (this "Agreement"), dated as of
_____________, 1998, is by and between AMRESCO CAPITAL TRUST, a Texas real
estate investment trust (the "Company"), and AMREIT MANAGERS, L.P., a Delaware
limited partnership (the "Manager").
WHEREAS, the Company intends to invest in various types of real estate
related assets and to qualify as a "real estate investment trust" under the
Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, the Company desires to retain the Manager to undertake, on the
Company's behalf, the duties and responsibilities set forth in this Agreement,
subject to the direction and oversight of the Board of Trust Managers of the
Company (the "Board of Trust Managers"), on the terms and conditions set forth
in this Agreement; and
WHEREAS, the Manager desires to undertake, on the Company's behalf, the
duties and responsibilities set forth in this Agreement, subject to the
direction and oversight of the Board of Trust Managers, on the terms and
conditions set forth in this Agreement.
NOW THEREFORE, in consideration of the mutual agreements herein set
forth, the parties hereto agree as follows:
SECTION 1. Definitions. Capitalized terms used herein and not
otherwise defined herein shall have the respective meanings assigned to them
below:
(a) "AMRESCO Group" means AMRESCO, Inc. together with its
affiliated entities.
(b) "Average Invested Investment Grade Assets" means, for any
quarter, the average of the aggregate book value of the assets of the
Company on a consolidated basis (as reflected on the Company's balance
sheet) and of all of the Company's nonconsolidated taxable subsidiaries
(but excluding the Company's investment in such subsidiaries), which
either (i) have received an Investment Grade Rating from all Rating
Agencies which have rated such asset or (ii) are unrated but are
guaranteed by the U.S. government or any agency or instrumentality
thereof, before reserves for depreciation or bad debts or other similar
noncash reserves, computed by dividing (a) the sum of such values for
each of the three months during such quarter (based on the book value
of such assets as of the last day of each month) by (b) three.
(c) "Average Invested Non-Investment Grade Assets" means, for
any quarter, the average of the aggregate book value of the assets of
the Company on a consolidated basis (as reflected on the Company's
balance sheet) and of all of the Company's nonconsolidated taxable
subsidiaries (but excluding the Company's
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investment in such subsidiaries), other than Average Invested
Investment Grade Assets, before reserves for depreciation or bad debts
or other similar noncash reserves, computed by dividing (a) the sum of
such values for each of the three months during such quarter (based on
the book value of such assets as of the last day of each month) by (b)
three.
(d) "Chief Investment Officer" means the Chief Investment
Officer of the Company.
(e) "Closing Date" means the date of closing of the Company's
initial public offering of its Common Shares.
(f) "Common Shares" means the Company's common shares of
beneficial interest, $.01 par value per share.
(g) "Confidential Information" means all information of the
Company not generally known in the Company's industry or in the
financial markets which is obtained by the Manager from the Company or
directly as a result of the performance by the Manager of its services
to the Company pursuant to this Agreement.
(h) "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
(i) "Funds From Operations" or "FFO" means net income
(computed in accordance with generally accepted accounting principles)
excluding gains or losses from debt restructuring and sales of
property, plus depreciation and amortization on real estate assets and
after adjustments for unconsolidated partnerships and joint ventures.
(j) "Governing Instruments" means (i) with respect to the
Company, its Declaration of Trust and Bylaws, (ii) with respect to any
Subsidiary which is a corporation, the articles or certificate of
incorporation and bylaws of such corporation, (iii) with respect to any
Subsidiary which is a partnership, the partnership agreement of such
partnership and (iv) with respect to any Subsidiary which is a limited
liability company the articles of organization and the regulations of
such limited liability company, in each case, as the same may be
amended from time to time.
(k) "Guidelines" means general guidelines for the Company's
investments, borrowings and operations.
(l) "Investment Grade Rating" means a rating equal to or
higher than (i) "BBB-" by Standard & Poor's Rating Services, a division
of the XxXxxx-Xxxx Companies, (ii) "Baa3" by Xxxxx'x Investors
Services, Inc., (iii) "2" by National
MANAGEMENT AGREEMENT - PAGE 2
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Association of Insurance Commissioners, (iv) "BBB-" by Duff and Xxxxxx
Credit Rating Co. or (v) "BBB-" by Fitch IBCA, Inc.
(m) "Master Servicing" means providing administrative and
reporting services to securitized pools of MBS.
(n) "MBS" means mortgage-backed securities (including
commercial or multifamily mortgage backed securities and residential
mortgage backed securities).
(o) "Mezzanine Loan" means a commercial real estate loan the
repayment of which is subordinated to a senior Mortgage Loan and which
is secured either by a second lien mortgage or a pledge of the
ownership interests of the borrower. Such loans can also take the form
of a preferred equity investment in the borrower.
(p) "Mortgage Loans" means, collectively, loans secured by
real property and Mezzanine Loans.
(q) "Nasdaq" means the Nasdaq National Market.
(r) "Nonperforming Mortgage Loans" means Mortgage Loans for
which the payment of principal and/or interest is more than 90 days
delinquent.
(s) "NYSE" means the New York Stock Exchange.
(t) "REIT" means a real estate investment trust, as defined
under Section 856 of the Code.
(u) "REIT Provisions of the Code" means Sections 856 through
860 of the Code.
(v) "Securities Act" means the Securities Act of 1933, as
amended.
(w) "Special Servicer" means an entity which services
delinquent and/or defaulted Mortgage Loans, including the oversight and
management of the resolution of such Mortgage Loans by modification,
foreclosure, deed in lieu of foreclosure or otherwise.
(x) "Special Servicing" means the oversight and management of
the resolution of Mortgage Loans by workout or modification of loan
provisions, foreclosure, deed in lieu of foreclosure or otherwise, and
the control of decisions with respect to the preservation of the
collateral generally, including property management and maintenance
decisions.
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(y) "Special Servicing Rights" means rights to control the
oversight and management of the resolution of Mortgage Loans by workout
or modification of loan provisions, foreclosure, deed in lieu of
foreclosure or otherwise, and to control decisions with respect to the
preservation of the collateral generally, including property management
and maintenance decisions.
(z) "Subperforming Mortgage Loans" means Mortgage Loans for
which default is likely or imminent or for which the borrower is making
payments in accordance with a forbearance plan.
(aa) "Subsidiary" means any corporation, partnership, limited
liability company or other entity formed and controlled by the Company.
(bb) "Ten-Year U.S. Treasury Rate" means the arithmetic
average of the weekly average yield to maturity for actively traded
current coupon U.S. Treasury fixed interest rate securities (adjusted
to a constant maturity of ten years) published by the Federal Reserve
Board during a quarter, or, if such rate is not published by the
Federal Reserve Board, any Federal Reserve Bank or agency or department
of the federal government selected by the Company. If the Company
determines in good faith that the Ten-Year U.S. Treasury Rate cannot be
calculated as provided above, then the rate shall be the arithmetic
average of the per annum average yields to maturities, based upon
closing asked prices on each business day during a quarter, for each
actively traded marketable U.S. Treasury fixed interest rate security
with a final maturity date not less than eight nor more than twelve
years from the date of the closing asked prices as chosen and quoted
for each business day in each such quarter in New York City by at least
three recognized dealers in U.S. government securities selected by the
Company.
(cc) "Trust Manager" means a member of the Board of Trust
Managers.
SECTION 2. Duties of the Manager.
(a) Subject to the direction and oversight of the Board of
Trust Managers and in accordance with the Governing Instruments, the
Manager shall be responsible for the day-to-day operations of the
Company and perform (or cause to be performed as permitted herein)
services and activities relating to the assets and operations of the
Company, including, without limitation, the following:
(i) providing a complete program of investing and
reinvesting the capital and assets of the Company in pursuit
of its investment objectives and in accordance with the
Guidelines and policies adopted by the Board of Trust Managers
from time to time;
(ii) serving as the Company's consultant with respect
to formulation of investment criteria and policies and
preparation of the Guidelines by the Board of Trust Managers;
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(iii) assisting the Company in developing criteria for
asset purchase commitments that are specifically tailored to
the Company's investment objectives and making available to
the Company its knowledge and experience with respect to
Mortgage Loans, MBS, real estate and other real estate related
assets;
(iv) representing and making recommendations to the
Company in connection with the origination of Mortgage Loans,
the purchase of and commitment to purchase Mortgage Loans,
MBS, real estate and other real estate related assets, the
financing of Mortgage Loans, MBS, real estate and other real
estate related assets, and the sale and commitment to sell
Mortgage Loans, MBS, real estate and other real estate related
assets (including, without limitation, the underwriting of
Mortgage Loans, the accumulation of Mortgage Loans for
securitization and arrangement for the issuance of MBS from
pools of Mortgage Loans owned by the Company);
(v) furnishing reports and statistical and economic
research to the Company regarding market conditions in the
areas in which the Company proposes to invest as well as the
Company's activities and the services performed for the
Company by the Manager;
(vi) monitoring and providing to the Board of Trust
Managers on an ongoing basis price information and other data,
obtained from certain nationally recognized brokers or dealers
identified by the Board of Trust Managers from time to time,
and providing data and recommendations to the Board of Trust
Managers in connection with the identification of such brokers
or dealers;
(vii) providing the executive and administrative
personnel and office space and office and administrative
services required in rendering services to the Company;
(viii) monitoring the operating performance of the
Company's investments and providing periodic reports with
respect thereto to the Board of Trust Managers, including
comparative information with respect to such operating
performance and budgeted or projected operating results;
(ix) administering the day-to-day operations of the
Company and performing and supervising the performance of such
other administrative functions necessary for the management of
the Company and its assets as may be agreed upon by the
Manager and the Board of Trust Managers, including the
collection of revenues and the payment of the Company's debts
and obligations;
(x) communicating on behalf of the Company with the
holders of any equity or debt securities of the Company as
required to satisfy the
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reporting and other requirements of any governmental bodies or
agencies and to maintain effective relations with such
holders;
(xi) counseling the Company in connection with policy
decisions made or to be made by the Board of Trust Managers,
including, without limitation, policy decisions with respect
to investments, leveraging of the Company's assets, management
of the credit risk of the Company's assets, management of the
interest rate risks of the Company's assets, including
decisions with respect to hedging of the assets and compliance
with certain legal requirements;
(xii) advising the Company regarding its status as a
REIT, consulting with legal counsel as appropriate regarding
the application of the REIT Provisions of the Code to the
proposed investments and operations of the Company and
monitoring compliance by the Company with the REIT Provisions
of the Code;
(xiii) advising the Company regarding the status of its
exemption from the Investment Company Act of 1940, as amended,
consulting with legal counsel as appropriate regarding the
nature of its proposed investments and the impact of such
proposed investments on the Company's exemption from
registration under such Act and monitoring the Company's
continuing exemption from registration;
(xiv) evaluating and recommending hedging strategies
to the Board of Trust Managers and, upon approval by the Board
of Trust Managers, engaging in hedging activities on behalf of
the Company, consistent with the Company's status as a REIT
and with the Guidelines;
(xv) upon request by and in accordance with the
directions of the Board of Trust Managers, investing or
reinvesting any money of the Company, and advising the Company
as to its capital structure and capital raising;
(xvi) causing the Company to retain qualified
accountants and/or legal counsel to assist in developing
appropriate accounting procedures, compliance procedures and
testing systems with respect to financial reporting
obligations and compliance with the REIT Provisions of the
Code and to conduct quarterly compliance reviews with respect
thereto;
(xvii) causing the Company to qualify to do business
in all applicable jurisdictions;
(xviii) assisting the Company in complying with all
federal, state and local regulatory requirements applicable to
the Company in respect of its business activities, including,
without limitation, preparing or causing to be
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prepared all financial statements required under applicable
regulations and contractual undertakings and all reports and
documents, if any, required under the Exchange Act;
(xix) taking all necessary actions to enable the
Company to make required federal, state and local tax filings
and reports, including, without limitation, soliciting
shareholders for required information to the extent provided
by the REIT Provisions of the Code;
(xx) handling and resolving all claims, disputes or
controversies (including all litigation, arbitration,
settlement or other proceedings or negotiation) in which the
Company may be involved or to which the Company may be subject
arising out of the Company's day-to-day operations, subject to
such limitation or parameters as may be imposed from time to
time by the Board of Trust Managers;
(xxi) using commercially reasonable efforts to cause
expenses incurred by or on behalf of the Company to be
reasonable or customary and within any budgeted parameters or
Guidelines set by the Board of Trust Managers from time to
time;
(xxii) performing such other services as may be
required from time to time for management or other activities
relating to the assets of the Company in furtherance of the
Manager's obligations hereunder, as the Board of Trust
Managers shall reasonably request or the Manager shall deem
appropriate under the particular circumstances; and
(xxiii) using commercially reasonable efforts to cause
the Company to comply with all applicable laws.
(b) The Manager will perform portfolio management services on
behalf of the Company with respect to the Company's investments. Such
services will include, but not be limited to, consulting the Company on
purchase, sale and other opportunities, collection of information and
submission of reports pertaining to the Company's assets, interest
rates, and general economic conditions, periodic review and evaluation
of the performance of the Company's portfolio of assets, acting as
liaison between the Company and banking, mortgage banking, investment
banking and other parties with respect to the purchase, financing and
disposition of assets, and other customary functions related to
portfolio management. The Manager may enter into subcontracts with
other parties, including AMRESCO, Inc. and its affiliates, to provide
any such services to the Company.
(c) The Manager will monitor and administer the loan servicing
activities provided by servicers of the Company's Mortgage Loans, other
than loans pooled to collateralize MBS or pledged to secure MBS. Such
monitoring and administrative services will include, but not be limited
to, the following activities:
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serving as the Company's consultant with respect to the servicing of
loans; collection of information and submission of reports pertaining
to the Mortgage Loan and the moneys remitted to the Manager or the
Company by servicers; periodic review and evaluation of the performance
of each servicer to determine its compliance with the terms and
conditions of the 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, foreclosing and other reports on Mortgage Loans; advising
as to and supervising claims filed under any mortgage insurance
policies; and enforcing the obligation of any servicer to repurchase
Mortgage Loans from the Company.
(d) The Manager will perform monitoring services on behalf of
the Company with respect to loan servicing activities provided by third
parties and with respect to the Company's portfolio of Special
Servicing Rights. Such monitoring services will include, but not be
limited to: negotiating Special Servicing agreements; acting as liaison
between the servicers of the Mortgage Loans and the Company; review of
servicer's delinquency, foreclosures 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.
(e) The Manager agrees to use its commercially reasonable
efforts at all times in performing services for the Company hereunder
and in accordance with the Guidelines and policies of the Company in
effect from time to time.
SECTION 3. Obligations of the Manager and the Company.
(a) The Manager shall use commercially reasonable efforts to
determine, in good faith, whether each Mortgage Loan, MBS, real estate
or other real estate asset proposed to be acquired by the Company
conforms to the investment criteria and Guidelines of the Company
approved from time to time by the Board of Trust Managers.
(b) The Manager shall require each seller or transferor of
assets to the Company to make such representations and warranties
regarding such assets as are customarily made in similar transactions
and as may, in the judgment of the Manager, be necessary and/or
appropriate. With respect to Mortgage Loans acquired by the Company,
and to the extent consistent with prevailing industry practices, the
Manager shall use commercially reasonable efforts to require the seller
or transferor of any Mortgage Loan to the Company to agree to
repurchase any such Mortgage Loan with respect to which there is fraud
or misrepresentation. In addition, the Manager shall take all such
other action as it deems reasonably
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necessary or appropriate with regard to the protection of the Company's
investments.
(c) The Manager shall refrain from any action which, in its
sole judgment made in good faith, (i) would adversely affect the status
of the Company as a REIT under the Code, (ii) would violate any law,
rule or regulation of any governmental body or agency having
jurisdiction over the Company which violation could have a material
adverse effect on the Company, its business or assets or results of
operations or (iii) would otherwise not be permitted by the Governing
Instruments, the Guidelines, any operating policies adopted from time
to time by the Company or any agreements of the Company which have
previously been provided to the Manager. If the Manager is ordered to
take any such action by the Board of Trust Managers, the Manager shall
promptly notify the Board of Trust Managers of the Manager's judgment
that such action would adversely affect such status or violate any such
law, rule or regulation or the Governing Instruments, the Guidelines,
the operating policies adopted from time to time by the Company or any
agreements which have previously been provided to the Manager.
(d) The Manager shall cause Deloitte & Touche LLP, or another
independent accounting firm having the requisite expertise and
reputation, to review the Company's assets and operations on a
quarterly basis to determine whether the Company has complied with the
REIT Provisions of the Code. The Manager shall cause such accounting
firm to deliver to the Board of Trust Managers no later than March 31
of each year an annual report regarding compliance by the Company with
the REIT Provisions of the Code for the preceding fiscal year.
(e) The Manager shall prepare regular reports for the Board of
Trust Managers that will review the Company's acquisitions of assets,
portfolio composition and characteristics, credit quality and
compliance with the Guidelines and the operating performance of such
assets (including comparative information with respect to such
operating performance and budgeted or projected operating results).
(f) In purchasing assets for the Company, the Manager shall
endeavor to obtain on behalf of the Company terms no less favorable
than commercially reasonable terms. In assessing commercially
reasonable terms for any transaction, the Manager shall consider all
factors which it, in good faith, deems relevant, including the breadth
of the market in the asset, the price of the asset, the reasonableness
of any broker commissions both for the specific transaction and on a
continuing basis and the market terms determined in comparable arm's
length transactions.
(g) The Company agrees to take all actions reasonably required
to permit the Manager to carry out its duties and obligations under
this Agreement. The Company further agrees to make available to the
Manager all materials reasonably
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requested by the Manager to enable the Manager to satisfy its
obligations to deliver financial statements and other information or
reports with respect to the Company.
(h) The Manager agrees, at all times during which it is
serving as Manager to the Company, to (i) maintain a tangible net worth
of at least $250,000 and (ii) maintain "errors and omissions" insurance
coverage (which may be provided by a policy or policies maintained
through, and providing coverage for, other members of the AMRESCO
Group) in an amount which is comparable to that customarily maintained
by other managers or servicers of assets similar to those held by the
Company.
SECTION 4. Additional Activities of Manager.
(a) Except as expressly provided below, this Agreement shall
not prevent or restrict the Manager or any other member of the AMRESCO
Group, or any of their respective officers, directors, partners,
officers, stockholders, employees or Affiliates from engaging in other
businesses or from rendering services of any kind to any other Person,
including investment in, or advisory service to others investing in,
any type of real estate related assets, including assets which meet the
principal investment objectives of the Company; provided, however, that
during the term of this Agreement, neither the Manager, nor any other
member of the AMRESCO Group, nor any of their respective directors,
partners, officers, employees or affiliates (while acting in such
capacity only) will (i) sponsor, (ii) act as manager to or (iii) make
any significant equity investment in, any other REIT with investment
objectives substantially similar to those of the Company, without the
prior approval of a majority of the Independent Trust Managers.
(b) Directors, partners, officers, stockholders, employees and
Affiliates of the Manager or any other member of the AMRESCO Group may
serve as directors, partners, officers, stockholders, employees 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 Trust
Managers pursuant to the Company's Governing Instruments. When
executing documents or otherwise acting in such capacities for the
Company, such persons shall use their respective titles in the Company.
(c) Nothing in this Agreement shall prevent the Manager or any
other member of the AMRESCO Group from selling assets to, or engaging
in any other transaction with, the Company; provided, that any such
transactions must be effected in accordance with the Guidelines or
shall otherwise be approved in advance by a majority of the Independent
Trust Managers.
SECTION 5. Bank Accounts. At the direction of the Board of Trust
Managers, the Manager may establish and maintain one or more bank accounts in
the name of the Company, and may collect and deposit into any such account or
accounts, and disburse
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funds from any such account or accounts, under such terms and conditions as the
Board of Trust Managers may approve. The Manager shall from time to time (or at
any time upon the request of a majority of the Independent Trust Managers)
render appropriate accounting of such collections and payments to the Board of
Trust Managers and, upon request, to the auditors of the Company.
SECTION 6. Records; Confidentiality. The Manager shall maintain
appropriate books of accounts and records relating to the assets of the Company
and the services performed hereunder, and such books of account and records
shall be accessible for inspection by representatives of the Company at any time
during normal business hours. Except in the ordinary course of business or as
required by the Securities Act, the Exchange Act, NYSE, Nasdaq or any statute,
rule, regulation, order or decree of any governmental entity, the Manager agrees
not to disclose any Confidential Information to third parties who are not
Affiliates of the Manager, except with the prior approval of a majority of
Independent Trust Managers.
SECTION 7. Compensation.
(a) For services rendered under this Agreement, the Company
shall pay to the Manager a base management fee calculated and payable
quarterly in an amount equal to (i) 1% per annum of the Average
Invested Non-Investment Grade Assets of the Company and (ii) 0.50% per
annum of the Average Invested Investment Grade Assets of the Company.
(b) In addition to the base management fee, the Manager shall
be entitled to receive incentive compensation for each fiscal quarter
in an amount equal to the product of (A) 25% of the dollar amount by
which (1)(a) Funds From Operations (before the incentive fee) of the
Company for such quarter per Common Share (based on the weighted
average number of shares outstanding during such quarter) (b) plus
gains (or minus losses) from debt restructuring and sales of property
per Common Share (based on the weighted average number of shares
outstanding during such quarter), exceed (2) an amount equal to (a) the
weighted average of the price per Common Share at the initial offering
and the prices per Common Share for any subsequent issuances of Common
Shares by the Company, multiplied by (b) the Ten-Year U.S. Treasury
Rate for the respective quarter plus 3.5% multiplied by (B) the
weighted average number of Common Shares outstanding during such
period.
(c) The Manager shall compute the compensation payable under
Sections 7(a) and 7(b) within 45 days after the end of each fiscal
quarter. A copy of the computations made by the Manager to calculate
its compensation shall thereafter promptly be delivered to the Board of
Trust Managers and payment of the compensation earned under Sections
7(a) and 7(b) of this Agreement shown therein shall be due and payable
within 60 days after the end of such fiscal quarter.
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SECTION 8. Expenses.
(a) Without regard to the compensation received under this
Agreement by the Manager and subject to Sections 8(b) and 8(c), the
Manager shall bear the following expenses:
(i) employment expenses of the personnel employed by
the Manager (including, but not limited to, officers of the
Company employed by the Manager) including, but not limited
to, salaries, wages, payroll taxes and the cost of the
employee benefit plans of such personnel;
(ii) rent, telephone, utilities, office furniture,
equipment, machinery, and other office expenses of the Manager
and/or its Affiliates required for the Company's day-to-day
operations, including costs associated with accounting,
clerical, primary or Master Servicing (including all expenses
customarily paid by primary loan servicers or Master Servicers
in performing primary loan servicing or Master Servicing for
third parties) and back-office services provided by the
Manager or its affiliates;
(iii) computer hardware and software costs (including
costs associated with determining whether its systems are
"Year 2000" compliant and with modifying or replacing source
codes to bring its systems into "Year 2000" compliance),
except for any such expenses that relate solely to the
computer hardware or software used solely for the business and
operations of the Company; and
(iv) all premiums and other expenses required in
connection with "errors and omissions" insurance policies
covering officers and employees of the Manager.
(b) The Company shall pay all of its expenses except those
that are the responsibility of the Manager pursuant to Section 8(a) and
without limiting the generality of the foregoing, it is specifically
agreed that the following expenses actually incurred by or on behalf of
the Company shall be paid by the Company and shall not be paid by the
Manager or any other member of the AMRESCO Group:
(i) the cost of money borrowed by the Company,
including interest, commitment fees and other charges;
(ii) all taxes and license fees applicable to the
Company, including interest and penalties thereon;
(iii) legal, audit, accounting, underwriting,
brokerage, listing, filing, rating agency, registration and
other fees, printing, engraving and other expenses and taxes
incurred in connection with the issuance, distribution,
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transfer, registration and stock exchange listing of any
securities of the Company (including, without limitation, debt
or equity securities, options or warrants to purchase debt or
equity securities, convertible securities, etc.);
(iv) fees and expenses paid to advisors and
independent contractors, consultants, managers and other
agents (including the Manager or any other member of the
AMRESCO Group) engaged directly by the Company upon its
written request or by the Manager at the Company's written
request for the account of the Company;
(v) due diligence costs and related costs (including
legal fees, accounting and auditing fees, environmental and
engineering reviews) associated with the acquisition or
proposed acquisition or the disposition or proposed
disposition of any of the Company's assets; provided that with
respect to any proposed acquisition of assets, such asset(s)
shall have been preliminarily approved in writing for
investment by the Chief Investment Officer or the Board of
Trust Managers, and further provided that any extraordinary
costs (in excess of $500,000 with respect to any single
transaction or asset) shall be required to be approved in
advance by the Board of Trust Managers;
(vi) other expenses connected with the acquisition,
disposition, financing and ownership of the Company's assets,
including, but not limited to, commitment fees, brokerage
fees, guaranty fees, ad valorem taxes, costs of foreclosure,
maintenance, repair and improvement of property and premiums
for insurance on property owned by the Company;
(vii) costs related to hedging transactions (including
losses);
(viii) the expenses of organizing, modifying or
dissolving the Company;
(ix) costs related to advertising and marketing of
the Company's assets or services;
(x) expenses connected with payments of dividends or
interest or distributions in any other form made or caused to
be made by the Board of Trust Managers to holders of the
securities of the Company;
(xi) expenses connected with the structuring,
issuance and administration of MBS by the Company, including,
but not limited to, legal, audit, accounting, underwriting,
listing, filing, rating agency and trustee's fees, insurance
premiums and costs of required credit enhancements;
(xii) all expenses of third parties connected with
communications to holders of equity securities or debt
securities issued by the Company and
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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 securities and reports to third parties required
under any indenture to which the Company is a party;
(xiii) custodian's, transfer agent's and registrar's
fees and charges;
(xiv) compensation, fees and expenses paid to the
Independent Trust Managers, the cost of director and officer
liability insurance and premiums for any errors and omissions
insurance coverage maintained for the Company and its
employees (solely in their capacity as employees of the
Company and not in their capacity as employees of the Manager
or any other member of the AMRESCO Group);
(xv) legal, accounting, tax and auditing fees and
expenses paid to third parties relating to the Company's
operations;
(xvi) legal, expert and other fees and expenses paid
to third parties relating to any actions, proceedings,
lawsuits, demands, causes of action and claims, whether actual
or threatened, made by or against the Company, or which the
Company is authorized or obligated to pay under applicable law
or the Governing Instruments or by the Board of Trust
Managers;
(xvii) any judgment rendered against the Company, or
against any Trust Manager, director or officer of the Company
in his capacity as such for which the Company is required to
indemnify such Trust Manager, director, or officer by any
court or governmental agency, or settlement of pending or
threatened litigation; provided that such settlement is
approved or authorized by the Board of Trust Managers or is
entered into by the Manager pursuant to the discretionary
authority granted to the Manager by the Board of Trust
Managers;
(xviii) expenses relating to any office or office
facilities maintained solely for the use or benefit of the
Company exclusive of the office of the Manager;
(xix) expenses related to the accumulation and Special
Servicing of Mortgage Loans;
(xx) travel and related expenses of directors,
officers and employees of the Manager or other members of the
AMRESCO Group, and of Trust Managers, directors, officers and
employees of the Company who
MANAGEMENT AGREEMENT - PAGE 14
15
are also directors, officers or employees of the Manager or
other members of the AMRESCO Group, incurred in connection
with attending meetings of the Board of Trust Managers or
holders of securities of the Company or performing other
business activities that relate to the Company, including,
where applicable, a proportionate share of such expenses as
reasonably determined by the Manager where such expenses were
not incurred solely for the benefit of the Company;
(xxi) costs associated with computer hardware and
software, third party information services and office expenses
that relate solely to the business activities of the Company
(including the costs of bringing any systems into "Year 2000"
compliance, if such systems relate solely to the business
activities of the Company);
(xxii) any extraordinary or non-recurring costs or
charges incurred by the Company; and
(xxiii) other expenses of the Company that are not
expenses of the Manager under Section 8(a).
(c) Any due diligence investigations, underwriting and other
services typically performed by third-party consultants or service
providers (including, without limitation, legal review and
documentation) may be provided to the Company by the Manager or any
other member of the AMRESCO Group if the Manager determines in good
faith that (i) the requisite expertise is available through the Manager
or the other members of the AMRESCO Group and that (ii) either (a) such
services provided by the Manager or other members of the AMRESCO Group
are superior in quality to those available from third parties or (b)
costs savings or other efficiencies will arise from the use of such
services. The Manager will, and will cause each other member of the
AMRESCO Group to, document the time spent by its employees on such
services on behalf of the Company and will be entitled to reimbursement
for the allocable portion of salary and benefits for such employees.
(d) Notwithstanding the foregoing provisions of this Section
8, if the Company (or the Manager on behalf of the Company) incurs due
diligence and related costs with respect to a proposed acquisition of
one or more assets and all or any portion of such assets are not
acquired by the Company but are instead acquired by a member of the
AMRESCO Group, then AMRESCO or the appropriate member of the AMRESCO
Group shall, within 30 days of its receipt of an itemized statement
from the Manager reflecting the costs incurred by or on behalf of the
Company, pay or reimburse the Company for all such costs (or the
appropriate portion thereof allocable to the portion of the asset(s)
acquired).
SECTION 9. Calculations of Expenses. The Manager shall prepare a
statement documenting the expenses of the Company and those incurred by the
Manager on behalf
MANAGEMENT AGREEMENT - PAGE 15
16
of the Company during each quarter and shall deliver such statement to the
Company within 45 days after the end of each quarter. Expenses incurred by the
Manager on behalf of the Company shall be reimbursed quarterly to the Manager
within 60 days after the end of each quarter. All expenses incurred by the
Manager and submitted to the Company for reimbursement shall be reviewed by the
Independent Trust Managers on a quarterly basis.
SECTION 10. Limits of Manager Responsibility. 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 Trust Managers in following or declining to follow any advice or
recommendations of the Manager, including as set forth in Section 3(b). Neither
the Manager, nor any other member of the AMRESCO Group will be liable to the
Company, the Independent Trust Managers, the Company's shareholders or partners,
any issuer of MBS or any other party for any acts or omissions by the Manager,
any other member of the AMRESCO Group or any of their respective partners,
directors, officers, stockholders or employees under or in connection with this
Agreement, except by reason of acts constituting bad faith, willful misconduct,
gross negligence or reckless disregard of their duties. The Company shall
reimburse, indemnify and hold harmless the Manager and the members of the
AMRESCO Group and their respective stockholders, directors, partners, officers
and employees (collectively, the "Indemnified Parties") for, from and against
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 the Manager, its stockholders, directors,
partners, 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. WITHOUT
LIMITING ANY OTHER PROVISION OF THIS AGREEMENT, IT IS THE EXPRESS INTENTION OF
THE COMPANY AND THE MANAGER THAT THE COMPANY'S OBLIGATION TO INDEMNIFY THE
INDEMNIFIED PARTIES PURSUANT TO THIS SECTION 10 INCLUDES INDEMNIFICATION FOR
EXPENSES, LOSSES, DAMAGES, LIABILITIES, DEMANDS AND CHARGES AND CLAIMS OF ANY
NATURE WHATSOEVER (INCLUDING ATTORNEYS' FEES) ARISING DIRECTLY OR INDIRECTLY
FROM THE SOLE OR CONTRIBUTORY NEGLIGENCE OF ANY OF SUCH INDEMNIFIED PARTIES.
SECTION 11. No Joint Venture. The Company and the Manager are not
partners or joint venturers with each other and nothing herein shall be
construed to make them such partners or joint venturers or impose any liability
as such on either of them.
SECTION 12. Term; Termination.
(a) This Agreement shall commence on the date set forth above
and shall continue in force until the second anniversary of such date,
and thereafter, it shall be subject to successive one-year renewal
periods upon the review and approval of the Independent Trust Managers.
If the Independent Trust Managers do not resolve to renew or terminate
this Agreement within at least 90 days prior
MANAGEMENT AGREEMENT - PAGE 16
17
to the end of the then-current period of this Agreement, this Agreement
shall be automatically extended for a one-year period. The Manager
shall have the right, following the initial term of this Agreement, to
terminate this Agreement at any time upon not less than 180 days prior
written notice. The Company shall have the right, following the initial
term of this Agreement and subject to Section 12(b), to terminate this
Agreement at any time upon not less than 90 days prior written notice.
(b) In addition to such further liability or obligation of
either party to the other provided in Sections 15 and 16, if this
Agreement is terminated by the Company without cause (as "cause" is
defined in Section 14) by delivery of a notice of non-renewal or
termination pursuant to Section 12(a), the Company, in addition to its
obligations under Section 15, shall pay the Manager a termination fee
in an amount equal to the sum of the Manager's base management fee and
incentive compensation earned pursuant to Sections 7(a) and 7(b) during
the four calendar quarters immediately preceding such termination. Such
termination fee shall be paid no later than 30 days following receipt
of the accounting contemplated by Section 15(b).
SECTION 13. Assignments.
(a) Except as set forth in Section 13(b), this Agreement shall
terminate automatically in the event of its assignment, in whole or in
part, by the Manager, unless such assignment is consented to in writing
by the Company with the consent of a majority of the Independent Trust
Managers. Any such assignment approved by the Independent Trust
Managers, in their sole discretion, 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 an amendment to 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 another REIT or other
organization which (i) is a successor to the Company (by merger,
consolidation or otherwise by operation of law) or (ii) is the
purchaser of all or substantially all of the assets of the Company, in
which case such successor organization shall be bound hereunder and by
the terms of such assignment in the same manner as the Company is bound
hereunder.
(b) Notwithstanding any provision of this Agreement, the
Manager may subcontract any or assign all of its responsibilities under
this Agreement to any of its qualified Affiliates, and the Company
hereby consents to any such assignment and subcontracting; provided
that no such subcontract or assignment shall relieve the Manager of its
duties and obligations hereunder. The Manager agrees to send copies of
any subcontract or assignment to the Company promptly following its
agreement to the same.
MANAGEMENT AGREEMENT - PAGE 17
18
SECTION 14. Termination by the Company for Cause. This Agreement may be
terminated by the Company for "cause" upon 60 days' prior written notice of
termination from the Board of Trust Managers to the Manager, without payment of
any termination fee, if any of the following events shall occur:
(a) if a majority of the Independent Trust Managers shall
determine that the Manager has breached any provision of this Agreement
in any material respect and, within 30 days after receipt of written
notice of such violation, the Manager shall not have cured such
violation, provided that, if such breach is not capable of cure within
such 30-day period, the Manager shall have failed to commence to cure
such breach within such 30-day period and thereafter to diligently and
in good faith prosecute the cure of such breach and further provided,
that if such breach is not capable of cure within any period of time, a
majority of the Independent Trust Managers shall have also determined
that such breach may have a material adverse effect on the business,
operations or financial condition of the Company; 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
30 days; (iii) authorizes or files a voluntary petition in bankruptcy,
or applies for or consents (by admission of material allegations of a
petition or otherwise) to the application of any bankruptcy,
reorganization, arrangement, readjustment of debt, insolvency,
dissolution, liquidation or other similar law of any jurisdiction, or
authorizes such application or consent, or proceedings to such end are
instituted against the Manager without such authorization, application
or consent and are approved as properly instituted and remain
undismissed for 30 days or result in adjudication of bankruptcy or
insolvency; or (iv) permits or suffers all or any substantial part of
its properties or assets to be sequestered or attached by court order
and the order remains undismissed for 30 days. If any of the events
specified in this Section 14(b) shall occur, the Manager shall give
prompt written notice thereof to the Board of Trust Managers.
SECTION 15. Action Upon Termination. From and after the effective date
of termination 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
MANAGEMENT AGREEMENT - PAGE 18
19
termination and, if terminated for any reason other than for "cause" under
Section 14, the applicable termination fee. Upon such termination, the Manager
shall forthwith:
(a) after deducting any accrued compensation, any applicable
termination fee and reimbursement for its expenses permitted hereunder
to which it is then entitled, promptly pay over to the Company all
money collected and held for the account of the Company pursuant to
this Agreement;
(b) deliver to the Board of Trust Managers a full accounting,
including a statement showing all payments collected by it, all
expenses incurred 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 Trust Managers with respect to the Company; and
(c) deliver to the Board of Trust Managers all property,
documents, records and reports of the Company or pertaining to the
Company's assets or operations then in the custody of the Manager.
SECTION 16. Release of Money or Other Property Upon Written Request.
The Manager agrees that any money or other property of the Company held by the
Manager under this Agreement shall be held by the Manager as custodian for the
Company, and the Manager's records shall be appropriately marked clearly to
reflect the ownership of such money or other property by the Company. 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 any money or
other property then held by the Manager for the account of the Company under
this Agreement, the Manager shall release such money or other property to the
Company within a reasonable period of time, but in no event later than 60 days
following such request. Subject to Section 10, the Manager shall not be liable
to the Company, the Independent Trust Managers, or the Company's shareholders or
partners for any acts performed or omissions to act by the Company in connection
with the money or other property released to the Company in accordance with this
Section 16. The Company shall indemnify the Manager, its directors, officers,
stockholders, partners 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 upon written request of the Company in accordance with
the terms of this Section 16. Indemnification pursuant to this provision shall
be in addition to any right of the Manager to indemnification under Section 10.
SECTION 17. Representations and Warranties.
(a) The Company hereby represents and warrants to the Manager
as follows:
(i) The Company is duly organized and validly
existing under the laws of the jurisdiction of its
incorporation, has the power to own its assets
MANAGEMENT AGREEMENT - PAGE 19
20
and to transact the business in which it is now engaged and is
duly qualified as a foreign corporation and in good standing
under the laws of each jurisdiction where its ownership or
lease of property or the conduct of its business requires such
qualification, except for failures to be so qualified,
authorized or licensed that could not in the aggregate have a
material adverse effect on the business operations, assets or
financial condition of the Company. the Company does not do
business under any fictitious business name.
(ii) 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. No consent
of any other person, including, without limitation,
shareholders 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.
(iii) The execution, delivery and performance of this
Agreement and the documents or instruments required hereunder
will not violate any provision of any existing law or
regulation binding on the Company, or any order, judgment,
award or decree of any court, arbitrator or governmental
authority binding on the Company, or the Governing Instruments
of 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 will not result in, or
require, the creation or imposition of any lien on any of its
property, assets or revenues pursuant to the provisions of any
such mortgage, indenture, lease, contract or other agreement,
instrument or undertaking.
(b) The Manager hereby represents and warrants to the Company
as follows:
(i) The Manager is duly organized, validly existing
and in good standing under the laws of the jurisdiction of its
formation, has the power to
MANAGEMENT AGREEMENT - PAGE 20
21
own its assets and to transact the business in which it is now
engaged and is duly qualified to do business and is in good
standing under the laws of each jurisdiction where its
ownership or lease of property or the conduct of its business
requires such qualification, except for failures to be so
qualified, authorized or licensed that could not in the
aggregate have a material adverse effect on the business
operations, assets or financial condition of the Manager and
its subsidiaries, taken as a whole. The Manager does not do
business under any fictitious business name.
(ii) The Manager has the power and authority to
execute, deliver and perform this Agreement and all
obligations required hereunder and has taken all necessary
action to authorize this Agreement on the terms and conditions
hereof and the execution, delivery and performance of this
Agreement and all obligations required hereunder. No consent
of any other person including, without limitation, partners
and creditors of the Manager, and no license, permit, approval
or authorization of, exemption by, notice or report to, or
registration, filing or declaration with, any governmental
authority is required by the Manager in connection with this
Agreement or the execution, delivery, performance, validity or
enforceability of this Agreement and all obligations required
hereunder. This Agreement has been, and each instrument or
document required hereunder will be, executed and delivered by
a duly authorized agent of the Manager, and this Agreement
constitutes, and each instrument or document required
hereunder when executed and delivered hereunder will
constitute, the legally valid and binding obligation of the
Manager enforceable against the Manager in accordance with its
terms.
(iii) The execution, delivery and performance of this
Agreement and the documents or instruments required hereunder,
will not violate any provision of any existing law or
regulation binding on the Manager, or any order, judgment,
award or decree of any court, arbitrator or governmental
authority binding on the Manager, or the partnership agreement
of 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 18. 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
MANAGEMENT AGREEMENT - PAGE 21
22
received when delivered against receipt or upon actual receipt of registered or
certified mail, postage prepaid, return receipt requested, addressed as set
forth below:
(a) If to the Company:
AMRESCO Capital Trust
000 Xxxxx Xxxxx Xxxxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: President and General Counsel
(b) If to the Manager:
AMREIT Managers, L.P.
000 Xxxxx Xxxxx Xxxxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: President and General Counsel
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 assigns as
provided herein.
SECTION 20. 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.
SECTION 21. Amendment. This Agreement may not be modified or amended
other than by an agreement in writing signed by the Manager and the Company,
provided that the amendment of any provision of this Agreement requiring consent
or approval of any matter by a majority of the Independent Trust Managers may
not be amended without the approval of a majority of the Independent Trust
Managers.
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 TEXAS.
MANAGEMENT AGREEMENT - PAGE 22
23
SECTION 23. Indulgences, Not Waivers. Neither the failure nor any delay
on the part of a party to exercise any right, remedy, power or privilege under
this Agreement shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, remedy, power or privilege preclude any other or
further exercise of the same or of any other right, remedy, power or privilege,
nor shall any waiver of any right, remedy, power or privilege with respect to
any occurrence be construed as a waiver of such right, remedy, power or
privilege with respect to any other occurrence. No waiver shall be effective
unless it is in writing and is signed by the party asserted to have granted such
waiver.
SECTION 24. 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 25. 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 26. Provisions Separable. The provisions of this Agreement are
independent of and separable from each other, and no provision shall be affected
or rendered invalid or unenforceable by virtue of the fact that for any reason
any other or others of them may be invalid or unenforceable in whole or in part.
SECTION 27. Attorneys' Fees. Should any action or other proceeding be
necessary to enforce any of the provisions of this Agreement or the various
transactions contemplated hereby, the prevailing party will be entitled to
recover its actual reasonable attorneys' fees and expenses from the
non-prevailing party.
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.
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MANAGEMENT AGREEMENT - PAGE 23
24
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
"COMPANY"
AMRESCO CAPITAL TRUST
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
"MANAGER"
AMREIT MANAGERS, L.P.
By: AMREIT MANAGERS G.P., INC.
its general partner
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
MANAGEMENT AGREEMENT - PAGE 24
