FORM OF AMENDED AND RESTATED INVESTMENT ADVISORY MANAGEMENT AGREEMENT
EXHIBIT
10.4
FORM OF AMENDED AND RESTATED INVESTMENT ADVISORY
This AMENDED AND RESTATED INVESTMENT ADVISORY MANAGEMENT AGREEMENT (this “Agreement”)
is made this [ ] day of [ ], 2007, by and among NY CREDIT CORP., a Maryland corporation (the
“Company”), NYCC GP LLC, a Maryland limited liability company, NY CREDIT OPERATING
PARTNERSHIP LP, a Delaware limited partnership (the “Operating Partnership” and, together
with the Company and its current and future other subsidiaries, the “Companies”), and NY
CREDIT ADVISORS LLC, a Delaware limited liability company (the “Manager”).
WHEREAS, NY Credit Trust, a Maryland real estate investment trust (the “Trust”), the Operating
Partnership and the Manager entered into the Investment Advisory Management Agreement, dated as of
November 10, 2006 (the “Existing Agreement”);
WHEREAS, the Trust was merged into a subsidiary of the Company with such subsidiary surviving
the merger and the Company replaced the Trust as a party to the Existing Agreement;
WHEREAS, the Company is a newly organized Maryland corporation that intends to elect to be
treated as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986,
as amended (the “Code”) beginning with its taxable year ending December 31, 2007;
WHEREAS, the Company will conduct all of its operations and make substantially all of its
investments through the Operating Partnership and through subsidiaries of the Company and the
Operating Partnership;
WHEREAS, the Company and the Operating Partnership desire to retain the Manager to furnish
investment advisory services to the Companies on the terms and conditions hereinafter set forth,
and the Manager wishes to be retained to provide such services; and
WHEREAS, the parties hereto desire to enter into this Agreement to incorporate the amendments
previously agreed to in the First Amendment to the Existing Agreement, dated as of April 19, 2007;
NOW, THEREFORE, in consideration of the premises and for other good and valuable
consideration, the parties hereby agree as follows:
1. Appointment and Duties of the Manager.
(a) The Company and the Operating Partnership hereby appoint the Manager to act as the
investment adviser to the Companies and to manage the investment and reinvestment of the assets of
the Companies, subject to the supervision of the Company’s board of directors (the “Board of
Directors”) and the Operating Partnership’s investment committee (the “Investment
Committee”), for the period and upon the terms herein set forth, in accordance with (x) the
investment objectives, policies and restrictions that are adopted by the Board of Directors, as
such objectives, policies and restrictions shall be amended or supplemented from time to time, (y)
all applicable foreign, U.S. federal, state and local laws, rules and regulations, and (z) the
Company’s charter and by-laws and the Operating Partnership’s agreement of limited partnership, in
each case, as amended from time to time, and the Manager hereby agrees to use its commercially
reasonable efforts to perform each of the duties set forth herein. Without limiting the
generality of the foregoing, the Manager shall, during the term and subject to the provisions
of this Agreement, (i) serve as the Companies’ consultant with respect to the periodic review of
the investment criteria and parameters for the Companies’ investments, borrowings and operations
for the approval of the Board of Directors (provided that the Company will not approve investments
recommended by the Manager without the separate approval of the Investment Committee); (ii)
investigate, analyze and select possible investment opportunities; (iii) conduct negotiations with
sellers and purchasers and their agents and representatives, investment bankers and owners of
privately and publicly held real estate companies, (iv) engage and supervise, on the Companies’
behalf and at the Companies’ expense, independent contractors that provide investment banking,
mortgage brokerage, securities brokerage and other financial services and such other services as
may be required relating to the Companies’ investments; (v) nominate certain members of the
Investment Committee for the approval of the Board of Directors in accordance with Section
2 below; (vi) negotiate on the Companies’ behalf for the sale, exchange or other disposition of
any of the Companies’ investments, including the purchase or sale of the Companies’ assets or
securities; (vii) coordinate and manage operations of any joint venture or co-investment interests
held by the Companies and conduct all matters with any joint venture or co-investment partners;
(viii) provide executive and administrative personnel, office space and office services required in
rendering services to the Companies; (ix) administer the Companies’ day-to-day operations and
perform and supervise the performance of such other administrative functions necessary to the
Companies’ management as may be agreed upon by the Manager and the Board of Directors, including
the collection of revenues and the payment of the Companies’ debts and obligations and maintenance
of appropriate computer services to perform such administrative functions; (x) communicate on the
Companies’ behalf with the holders of any of the Companies’ equity or debt securities as required
to satisfy the reporting and other requirements of any governmental bodies or agencies or trading
markets and to maintain effective relations with such holders; (xi) counsel the Companies in
connection with policy decisions to be made by the Board of Directors; (xii) evaluate and recommend
to the Investment Committee modifications to the hedging strategies in effect and engage in overall
hedging strategies and activities on the Companies’ behalf, consistent with the Company’s status as
a REIT and with the investment guidelines; (xiii) counsel the Companies regarding the maintenance
of the Company’s status as a REIT and monitor compliance with the various REIT qualification tests
and other rules set out in the Code and Treasury Regulations thereunder; (xiv) counsel the
Companies regarding the maintenance of the Company’s exemption from the Investment Company Act of
1940, as amended (the “Investment Company Act”) and monitor compliance with the
requirements for maintaining an exemption from the Investment Company Act; (xv) assist the
Companies in developing criteria for asset purchase commitments that are specifically tailored to
the Companies’ investment objectives and making available to the Companies the Manager’s knowledge
and experience with respect to mortgage loans, real estate, real estate-related securities, other
real estate-related assets and non-real estate-related assets; (xvi) represent and make
recommendations to the Companies in connection with the purchase and finance and commitment to
purchase and finance mortgage loans (including on a portfolio basis), real estate, real
estate-related securities, other real estate-related assets and non-real estate-related assets, and
the sale of and commitment to sell such assets; (xvii) monitor the operating performance of the
Companies’ investments, including asset management, and provide periodic reports with respect
thereto to the Investment Committee and the Board of Directors, including comparative information
with respect to such operating performance and budgeted or projected operating results; (xviii)
invest or reinvest on a non-discretionary basis any money of the Companies (including investing in
short-term investments pending investment in long-term asset investments, payment of fees, costs
and expenses, or payments of dividends or distributions to the Companies shareholders and
partners), and advise the Companies as to capital structure and capital raising; (xix) assist the
Companies in retaining qualified accountants and legal counsel, as applicable, to assist in
developing appropriate accounting procedures, compliance procedures and testing systems with
respect to financial reporting obligations and compliance with the REIT provisions of the Code and
to conduct quarterly compliance reviews with respect thereto; (xx) assist the Companies in
qualifying to do business in all applicable jurisdictions and to obtain and maintain all
appropriate licenses; (xxi) assist the
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Companies in complying with all regulatory requirements applicable to the Companies in respect
of their business activities, including preparing or causing to be prepared all financial
statements required under applicable regulations and contractual undertakings and all reports and
documents, if any, required under the Securities Exchange Act of 1934; (xxii) take all necessary
actions to enable the Companies to make required tax filings and reports, including soliciting
shareholders for required information to the extent provided by the REIT provisions of the Code;
(xxiii) handle and resolve all claims, disputes or controversies (including all litigation,
arbitration, settlement or other proceedings or negotiations) in which the Companies may be
involved or to which they may be subject arising out of the Companies’ day-to-day operations,
subject to such limitations or parameters as may be imposed from time to time by the Board of
Directors; (xxiv) use commercially reasonable efforts to cause expenses incurred by or on behalf of
the Companies to be reasonable or customary and within any budgeted parameters or expense
guidelines set by the Board of Directors from time to time; (xxv) perform such other services as
may be required from time to time for management and other activities relating to the Companies’
assets as the Board of Directors or the Investment Committee shall reasonably request or the
Manager shall deem appropriate under the particular circumstances; (xxvi) open and maintain all
bank accounts of the Companies, segregated from any accounts of the Manager, and monitor all of the
Companies’ banking matters; (xxvii) open and maintain all securities accounts, segregated from any
accounts of the Manager, with “qualified custodians,” as defined in rules promulgated under the
Investment Advisers Act of 1940; (xxviii) use commercially reasonable efforts to cause the
Companies to comply with all applicable laws; and (xxix) perform such other services as may be
required from time to time for management and other activities relating to the assets of the
Companies as the Board of Directors shall reasonably request or the Manager or shall deem
appropriate under particular circumstances. Subject to the provisions of this Agreement, the
Manager shall have the power and authority on behalf of the Companies to effectuate investment
decisions for the Companies including the execution and delivery of all documents relating to the
Companies’ investments and the placing of orders for other purchase or sale transactions on behalf
of the Companies. In the event that the Companies determine to acquire debt financing, the Manager
will arrange for such financing on the Companies’ behalf, subject to the oversight and approval of
the Board of Directors. If it is necessary for the Manager to make investments on behalf of the
Companies through a special purpose vehicle, the Manager shall have authority to create or arrange
for the creation of such special purpose vehicle and to make such investments through such special
purpose vehicle in accordance with all applicable foreign, U.S. federal, state and local laws,
rules and regulations.
(b) The Manager may enter into agreements with other parties, including its affiliates, for
the purpose of engaging one or more parties for and on behalf, and at the sole cost and expense, of
the Companies to provide asset management, leasing, development and/or other services to the
Companies, where such agreement(s) contain terms which are then customary for agreements regarding
the provision of services to companies that have assets similar in type, quality and value to the
assets of the Companies; provided that such agreement shall be on terms that are then customary for
management of assets similar in type, quality and value to the assets of the Companies; and
provided further that any such agreements entered into with affiliates of the Manager shall be on
terms no more favorable to such affiliate than would be obtained from a third party on an
arm’s-length basis.
(c) The Manager may retain, for and on behalf, and at the sole cost and expense, of the
Companies, such services of accountants, legal counsel, appraisers, insurers, brokers, transfer
agents, registrars, developers, investment banks, financial advisors, banks and other lenders and
others as the Manager deems necessary or advisable in connection with the management and operations
of the Companies. Notwithstanding anything contained herein to the contrary, the Manager shall
have the right to cause any such services to be rendered by its affiliates; provided that payment
for such services shall be 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. The Companies shall pay or
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reimburse the Manager or its affiliates performing such services for the cost thereof, as set
forth in Section 3(a).
(d) The Manager shall for all purposes herein provided be deemed to be an independent
contractor and, except as expressly provided or authorized herein, shall have no authority to act
for or represent the Companies in any way or otherwise be deemed an agent of the Companies.
(e) The Manager shall keep and preserve for the period of six years (or such longer period as
may be required by law) any books and records relevant to the provision of its investment advisory
services to the Companies and shall specifically maintain all books and records with respect to the
Companies’ portfolio transactions and shall render to the Board of Directors and the Investment
Committee such periodic and special reports as the Board of Directors or the Investment Committee
may reasonably request. The Manager agrees that all records that it maintains for the Companies
are the property of the Companies and will surrender promptly to the Companies any such records
upon the Companies’ request, provided that the Manager may retain a copy of such records. The
Manager shall keep confidential any non-public information obtained in connection with the services
rendered under this Agreement and shall not disclose any such information (or use such information
except in furtherance of its duties under this Agreement), except (i) with the prior written
consent of the Board of Directors; (ii) to legal counsel, accountants and other professional
advisors, so long as the Manager informs such persons of the confidential nature of such
information and directs them to treat such information confidentially in accordance with this
Section 1(d); (iii) as required by law or legal process to which the Manager is a party or
in connection with the Manager’s assertion in any judicial or non-judicial proceeding of any claim,
counterclaim or defense against the Companies; or (iv) information that has previously become
available through the actions of a person other than the Manager not resulting from the Manager’s
violation of this Section 1(d). The provisions of this Section 1(d) shall survive
the expiration or earlier termination of this Agreement.
2. Investment Committee.
(a) During the term of this Agreement, the General Partner agrees to cause the Operating
Partnership to maintain a five member Investment Committee consisting of two members nominated by
the Manager (the “Manager Appointees”), the Chief Executive Officer of the Company (the
“CEO”) and two members appointed by the Board of Directors (the “Board
Appointees”), which Board Appointees will be members of the Company’s senior management. No
person other than the Manager and the Board of Directors may nominate members for service on the
Investment Committee.
(b) Each member of the Investment Committee will serve until the next succeeding anniversary
of the date of this Agreement and until his or her successor is duly nominated and approved, or his
or her earlier death, resignation, inability to serve or removal as provided in this Section
2. Within 15 days following each anniversary of the date of this Agreement or any date on
which a Manager Appointee is removed from the Investment Committee as provided in this Section
2, the Manager shall provide the Board of Directors with a written list of nominees for service
on the Investment Committee (the “Nominee Notice”).
(c) Each Manager Appointee will be approved by the Board of Directors unless the Board of
Directors, in its reasonable discretion, delivers written notice to the Manager within ten days
following receipt by the Board of Directors of the Nominee Notice, of the rejection of any Manager
Appointee together with the basis for such rejection. If the Board of Directors fails to respond
within such ten-day period, each of the Manager Appointees nominated in the Nominee Notice will be
deemed approved by the Board of Directors. In the event that any Manager Appointee is rejected by
the Board of
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Directors, the Manager will have the exclusive right and obligation to nominate a replacement
Manager Appointee to the Board of Directors for approval in accordance with Section 2(b)
and this Section 2(c).
(d) The CEO may not be removed from the Investment Committee unless he or she ceases to be CEO
of the Company. Subject to the foregoing sentence, any member of the Investment Committee may be
removed at any time, with or without cause, by the Board of Directors, and any Manager Appointee
may be removed at any time, with or without cause, by the Manager.
(i) Upon the removal of any Board Appointee, the Board of Directors shall appoint a
replacement Board Appointee.
(ii) Upon the removal of any Manager Appointee by the Board of Directors, the Board of
Directors shall notify the Manager in writing identifying the Manager Appointee so removed.
Following the Manager’s receipt of such notice, the Manager shall nominate a replacement
Manager Appointee for approval by the Board of Directors in accordance with Sections
2(b) and (c).
(iii) In the event the Manager elects to cause the removal of a Manager Appointee, the
Manager shall notify the Company and the Operating Partnership in writing, identifying the
Manager Appointee to be removed and nominating a replacement Manager Appointee for approval
by the Board of Directors in accordance with Sections 2(b) and (c).
Following the Company’s and the Operating Partnership’s receipt of such notice, the Company
shall remove or cause to be removed such Manager Appointee from the Investment Committee.
(e) Subject to the following sentence, consummation of any sale, transfer, acquisition or
disposition (each, a “Transfer”) of assets by the Companies that is recommended by the
Manager will require the majority approval of all of the members of the Investment Committee. In
any case in which any Manager Appointee on the Investment Committee or any of his or her affiliates
has an economic interest in a Transfer (other than as a result of its economic interest in the
Company or the Operating Partnership and its or their operations or through its ownership interest
in the Manager), (i) such Manager Appointee will not be entitled to vote on such Transfer, but will
be permitted to attend any meetings of the Investment Committee at which such Transfer is discussed
and/or voted upon, and (ii) such Transfer will require the majority approval of the remaining
members of the Investment Committee.
3. Companies’ Responsibilities and Expenses Payable by the Companies. The Companies
shall pay all of its expenses and shall reimburse the Manager or its affiliates for documented
expenses of the Manager and its affiliates incurred on their behalf (collectively, the
“Expenses”). Without limiting the generality of the foregoing, Expenses include all costs
and expenses which are expressly designated elsewhere in this Agreement as the Companies’, together
with the following:
(a) all costs and expenses associated with the formation and capital raising activities of the
Companies, including, without limitation, the costs and expenses of any 144A transaction or private
placement by the Companies, the preparation of the Companies’ registration statements, any and all
costs and expenses of an initial public offering of any of the Companies, any subsequent offerings
and any filing fees and costs of being a public company, including, without limitation, filings
with the Securities and Exchange Commission (the “SEC”), the National Association of
Securities Dealers, Inc. and the New York Stock Exchange, Inc. (and any other exchange or
over-the-counter market), among other such entities;
(b) all costs and expenses in connection with the acquisition, disposition, development,
protection, maintenance, financing, hedging, administration and ownership of the Companies’
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investments, including, without limitation, costs and expenses incurred in contracting with
third parties, including affiliates of the Manager, to provide such services, such as legal fees,
accounting fees, consulting fees, trustee fees, appraisal fees, insurance premiums, 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 Companies;
(c) costs and expensees of legal, tax, accounting, consulting, auditing, administrative,
marketing and other similar services rendered for the Companies by third-party providers retained
by the Manager or, if provided by the Manager’s affiliates, in amounts which are no greater than
those which would be payable to outside professionals or consultants engaged to perform such
services pursuant to agreements negotiated on an arm’s-length basis;
(d) the compensation and expenses of the Company’s directors (excluding those directors who
are officers of the Manager) and the cost of liability insurance to indemnify the Company’s
directors and officers;
(e) all costs and expenses of money borrowed by the Companies, including, without limitation,
principal, interest and the costs associated with the establishment and maintenance of any credit
facilities and other indebtedness of the Companies (including commitment fees, accounting fees,
legal fees, closing and other costs) or any securities offerings of the Companies;
(f) expenses connected with communications to holders of securities of the Companies and 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, without limitation, all costs of preparing and filing required reports with
the SEC, the costs payable by the Companies to any transfer agent and registrar in connection with
the listing and/or trading of any of the Companies’ securities on any exchange, the fees payable by
the Companies to any such exchange in connection with its listing, costs of preparing, printing and
mailing the Company’s annual report to its shareholders and proxy materials with respect to any
meeting of the shareholders of the Company;
(g) 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 Companies and
for design and maintenance of the Companies’ web site;
(h) expenses incurred by managers, officers, employees and agents of the Manager and its
affiliates for travel solely on the Companies’ behalf and other out-of-pocket expenses incurred by
managers, officers, employees and agents of the Manager and its affiliates 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
Companies; provided, that the Companies shall only be responsible for a proportionate share of such
expenses, as determined by the Manager in good faith, where such expenses were not incurred solely
for the benefit of the Companies ;
(i) costs and expenses incurred with respect to market information systems and publications,
research publications and materials, and settlement, clearing and custodial fees and expenses
applicable solely to the Companies;
(j) compensation and expenses of the Companies’ custodian and transfer agent, if any;
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(k) the costs of maintaining compliance with all federal, state and local rules and
regulations or any other regulatory agency applicable to the Companies;
(l) all taxes and license fees, including interest and penalties thereon;
(m) all insurance costs incurred in connection with the operation of the Companies’ business
except for the costs attributable to the insurance that the Manager elects to carry for itself and
its employees;
(n) costs and expenses incurred in contracting with third parties, including affiliates of the
Manager, for the servicing and special servicing of assets of the Companies;
(o) all other costs and expenses relating to the Companies’ 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;
(p) expenses relating to any office(s) or office facilities, including but not limited to
disaster backup recovery sites and facilities, maintained for the Companies or separate from the
office or offices of the Manager;
(q) expenses connected with the payments of interest, dividends or distributions in cash or
any other form authorized or caused to be made by the Board of Directors to or on account of the
holders of securities of the Companies, including, without limitation, in connection with any
dividend reinvestment plan;
(r) subject to Section 9, any judgment or settlement of pending or threatened
proceedings (whether civil, criminal or otherwise) against the Companies, or against any trustee,
director or officer of the Companies in his capacity as such for which the Companies are required
to indemnify such trustee, director or officer by any court or governmental agency, or settlement
of pending or threatened proceedings or by the organizational documents of the Companies;
(s) rent, telephone, utilities, office furniture, equipment, and machinery and other office
and overhead expenses of the Manager and its affiliates required for the Companies’ operations;
provided, that the Companies shall only be responsible for a proportionate share of such expenses,
as determined by the Manager in good faith, where such expenses were not incurred solely for the
benefit of the Companies; provided that for the period from the date of this Agreement through the
one-year anniversary of this Agreement, Expenses related to this clause (s) shall not be reimbursed
in excess of $1.2 million;
(t) all fees paid to and expenses of third-party advisors and independent contractors,
consultants, managers and other agents engaged by the Companies or by the Manager for the account
of the Companies and all employment expenses of the personnel employed by the Companies (excluding
any personnel which are also employed by the Manager), including, without limitation, the salaries,
wages, equity based compensation of such personnel, payroll taxes and the incremental cost for
administering employee benefit plans of the Manager which are used by such personnel;
(u) all expenses of organizing, modifying or dissolving the Companies and costs preparatory to
entering into a business or activity, or of winding up or disposing of a business activity of the
Companies; and
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(v) all other expenses actually incurred by the Manager and its affiliates which are
reasonably necessary for the performance by the Manager of its duties and functions under this
Agreement.
4. Compensation of the Manager. The Company and the Operating Partnership jointly and
severally agree, and agree to cause the other Companies, to the extent applicable, to pay in cash,
and the Manager agrees to accept, as compensation for the services provided by the Manager
hereunder, the Base Management Fee and the Incentive Fee (each as defined below) as hereinafter set
forth. The Companies shall make any payments due hereunder to the Manager or to the Manager’s
designee as the Manager may otherwise direct. To the extent permitted by applicable law, the
Manager may elect, or the Companies may adopt a deferred compensation plan pursuant to which the
Manager may elect, to defer all or a portion of its fees hereunder for a specified period of time.
The payment of the Base Management Fee and the Incentive Fee may be allocated by the Company among
the Companies pursuant to methodology agreed to by the Manager and the Company from time to time.
(a) During the term of this Agreement, the Company and/or the Operating Partnership shall, and
shall cause the other Companies to, to the extent applicable pay the Manager a management fee (the
“Base Management Fee”) based on Equity, paid quarterly in arrears in cash, as follows:
(1) 0.4375% of Equity up to $600,000,000 of Equity;
(2) in the event that Equity is greater than $600,000,000, the amount set forth
in Section 4(a)(1) above plus 0.3750% of Equity in excess of $600,000,000
and up to $1,200,000,000; and
(3) in the event that Equity is greater than $1,200,000,000, the amounts set
forth in Sections 4(a)(1) and 4(a)(2) above plus 0.3125% of Equity
in excess of $1,200,000,000.
“Equity,” as of the end of each fiscal quarter, is defined as (computed in accordance with
accounting principles generally accepted in the United States (“GAAP”)) (1) the total
common and preferred equity of the Company and the Operating Partnership, on a combined basis,
excluding, as applicable (2) any unrealized gains or losses, or other items that do not affect
realized net income.
(i) The Base Management Fee shall be payable quarterly in arrears in cash, and the
Manager shall calculate each payment and deliver such calculation to the Board of Directors,
within 15 days following the last day of each fiscal quarter. The Companies shall make each
payment of the Base Management Fee (each, a “Base Management Fee Payment”) to the
Manager within 20 days following the last day of the fiscal quarter with respect to which
such Base Management Fee Payment is payable.
(ii) The Base Management Fee shall also be calculated for any partial fiscal quarter
for any party on a prorated basis.
(b) During the term of this Agreement, the Company and/or the Operating Partnership shall, and
shall cause the other Companies to, to the extent applicable, pay the Manager an annual incentive
fee (the “Incentive Fee”) in an amount equal to the product of:
(i) 25% of the dollar amount by which (a) the Operating Partnership’s Adjusted Earnings
(before giving effect to the payment of the Incentive Fee) per unit of limited partnership
interest in the Operating Partnership (each, an “OP Unit”) for such year (based on
the
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weighted average number of OP Units outstanding for such year, including OP Units
issued to the Company corresponding to outstanding common shares of beneficial interest)
exceed (b) an amount equal to (A) the weighted average offering price (1) per common share
of beneficial interest in all offerings of common shares of beneficial interest and (2) per
OP Unit in all contributions to the Operating Partnership (other than contributions by the
Company of the proceeds raised in connection with any securities offering) multiplied by (B)
the greater of (1) 9.0% and (2) the ten-year U.S. treasury rate for such year plus 3.0%, up
to a maximum of 11.0%; multiplied by
(ii) the weighted average number of OP Units outstanding during such year, including OP
Units issued to the Company corresponding to outstanding common shares of beneficial
interest.
“Adjusted Earnings” is defined as the Operating Partnership’s net income (computed in
accordance with GAAP) excluding unrealized gains (or losses), plus real estate depreciation and
amortization, and after adjustments for unconsolidated partnerships and joint ventures.
(c) Upon request by the Manager, the Company, the Operating Partnership and the Manager shall
cooperate and negotiate in good faith to grant the Manager a profits participation interest as a
member in the Operating Partnership and/or one or more other subsidiary partnerships or limited
liability companies through which the Company or the Operating Partnership shall own its assets and
grant the Manager a profits participation interest in such subsidiary in lieu of all or a portion
of the management fee income otherwise payable to the Manager under this Agreement.
5. Compliance with Laws. The Manager agrees that its activities will at all times be
in compliance in all material respects with all applicable foreign and U.S. federal, state and
local laws governing its operations and investments.
6. Excess Brokerage Commissions. The Manager is hereby authorized, to the fullest
extent now or hereafter permitted by law, to cause the Companies to pay a member of a national
securities exchange, broker or dealer an amount of commission for effecting a securities
transaction in excess of the amount of commission another member of such exchange, broker or dealer
would have charged for effecting that transaction, if the Manager determines in good faith, taking
into account such factors as price (including the applicable brokerage commission or dealer
spread), size of order, difficulty of execution, and operational facilities of the firm and the
firm’s risk and skill in positioning blocks of securities, that such amount of commission is
reasonable in relation to the value of the brokerage and/or research services provided by such
member, broker or dealer, viewed in terms of either that particular transaction or its overall
responsibilities with respect to the Companies’ portfolio, and constitutes the best net results for
the Companies.
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7. Exclusivity.
(a) None of the Manager, BRK Management LLC (“BRK”) or any entity controlled by BRK
will sponsor any entity (other than the Company and the Companies) which is primarily engaged in
the business of originating, acquiring, structuring, selling and trading commercial real estate
loans and securities, including mortgage loans, subordinate interests in first mortgages, bridge
loans, mezzanine debt, preferred equity, net leased real estate and commercial mortgage-backed
securities. Subject to the preceding sentence of this Section 7(a) and to Section
7(b), nothing in this Agreement will limit or restrict the right of any person to engage in any
other business or to devote his or her time and attention in part to any other business, whether of
a similar or dissimilar nature, or to receive any fees or compensation in connection therewith.
(b) If this Agreement is terminated for any reason, neither BRK nor any entity controlled by
BRK may act in the capacity of a manager (including acting as an investment manager) for the
Company or any of the Companies for a period of two years following such termination.
(c) Subject to Section 1(b), so long as this Agreement or any extension, renewal or
amendment remains in effect, the Manager shall be the only external investment adviser for Company
and the Companies, and no person shall make or have authority to make investment decisions for the
Company or the Companies other than the Investment Committee and the Board of Directors or any
committee thereof.
8. Dual Responsibilities. It is understood that trustees, officers, employees,
partners, shareholders, members and managers of any of the Companies are or may become interested
in the Manager and its affiliates, as trustees, officers, employees, partners, shareholders,
members, managers or otherwise, and that the Manager and trustees, officers, employees, partners,
shareholders, members and managers of the Manager and its affiliates are or may become similarly
interested in the Companies as trustees, officers, employees, partners, shareholders, members,
managers or otherwise. If any person who is an officer, employee, member or manager of the Manager
is or becomes a trustee, officer, employee, partner, shareholder, member or manager of any of the
Companies and acts as such in any business of the Companies, then such officer, employee, member
and/or manager of the Manager shall be deemed to be acting in such capacity solely for the
Companies, and not as an officer, employee, member or manager of the Manager or under the control
or direction of the Manager, even if paid by the Manager.
9. Limitation of Liability of the Manager; Indemnification. The Manager (including
its past, present and future officers, employees, managers, members, the respective affiliates of
each such member, and any other person or entity affiliated with the Manager) shall not be liable
to the Companies for any action taken or omitted to be taken by the Manager in connection with the
performance of any of its duties or obligations under this Agreement or otherwise as an investment
adviser of the Companies, except for actions for which it is judicially determined that Manager
acted with willful misfeasance, bad faith, recklessness or gross negligence in the performance of
the Manager’s duties, and the Company and the Operating Partnership shall, and shall cause the
Companies to, jointly and severally indemnify, defend and protect the Manager (including its past,
present and future officers, employees, managers, members, the respective affiliates of each such
member, and any other person or entity affiliated with the Manager, each of whom shall be deemed a
third party beneficiary hereof) (collectively, the “Manager Indemnified Parties”) and hold
them harmless from and against all damages, liabilities, costs and expenses (including reasonable
attorneys’ fees and amounts reasonably paid in settlement) incurred by the Manager Indemnified
Parties in or by reason of any pending, threatened or completed action, suit, investigation or
other proceeding (including an action or suit by or in the right of the Company or its security
holders) arising out of or otherwise based upon the performance of any of the Manager’s duties or
obligations under this Agreement or otherwise as an investment adviser of the Companies or arising
out of or in
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connection with the offering of securities by any of the Companies, except with respect to any
particular Manager Indemnified Party, for actions for which it is judicially determined that such
Manager Indemnified Party caused the Manager to act with willful misfeasance, bad faith,
recklessness or gross negligence in the performance of the Manager’s duties. The Manager shall
indemnify, defend and protect the Companies (including their past, present and future trustees,
officers, employees, partners, shareholders, members, managers and any other person or entity
affiliated with the Companies) (the “Companies Indemnified Parties”) and hold them harmless
from and against all damages, liabilities, costs and expenses (including reasonable attorneys’ fees
and amounts reasonably paid in settlement) incurred by the Companies Indemnified Parties in or by
reason of a final adjudication of any pending, threatened or completed action, suit, investigation
or other proceeding in which it is judicially determined that Manager acted with willful
misfeasance, bad faith, recklessness or gross negligence in the performance of the Manager’s
duties, it being agreed hereunder that neither (i) a loss incurred by the Companies with respect to
any of its investments negotiated, acquired or handled by the Manager, nor (ii) the mere allocation
of a transaction to the Companies or to any other entity, which allocation is claimed to have been
made when a conflict of interest existed, shall be deemed in and of themselves (and absent a final
adjudication to the contrary) to be the willful misfeasance, bad faith, recklessness or gross
negligence in the performance of the Manager’s duties.
10. Term and Termination of Agreement.
(a) This Agreement shall become effective as of the first date above written and shall remain
in effect through June 30, 2009 (the “Initial Term”), and, subject to this Section
10(a) and Section 10(b) below, thereafter shall be renewed automatically for successive
annual periods (each, a “Renewal Term”) unless either (x) at least two-thirds of the
independent directors on the Board of Directors or (y) holders of a majority of the Company’s
outstanding common shares of beneficial interest, vote not to renew based in each case on (1)
unsatisfactory performance by the Manager that is materially detrimental to the Company or (2) a
determination that the compensation payable to the Manager hereunder is not fair; provided,
however, that neither the Company nor the Operating Partnership shall have the right to terminate
this Agreement under clause (2) above if the Manager agrees to continue to provide the services
under this Agreement for compensation that at least two-thirds of the independent directors on the
Board of Directors determines to be fair pursuant to the procedures set forth below. In the event
the Company and the Operating Partnership elect not to renew this Agreement at the expiration of
the Initial Term or any Renewal Term, the Company shall deliver to the Manager written notice (a
“Termination Notice”) of the Company’s and Operating Partnership’s intention not to renew
this Agreement based upon the terms set forth in this Section 10(a) not less than 180 days
prior to the expiration of the then existing term. Such Termination Notice will include the reason
for such termination (i.e., clause (1) or (2) above), how such determination was made
(i.e., clause (x) or (y) above) and the date on which the Manager shall cease to provide
services under this Agreement, which date will be the expiration date of the then existing term,
and this Agreement shall terminate on such date (the “Effective Termination Date”).
Notwithstanding the foregoing, in the event that such Termination Notice is given pursuant to
clause (2) above, the Manager shall have the right to renegotiate such compensation by delivering
to the Company, no fewer than 45 days prior to the 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 independent directors on the Board of Directors
and the Manager shall negotiate in good faith the revised compensation payable to the Manager under
this Agreement. In the event that the Manager and at least two-thirds of the independent directors
on the Board of Directors agree to the terms of the revised compensation prior to the Effective
Termination Date, 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 Manager under Section 4 shall be the revised compensation then
agreed upon. The Company, the Operating Partnership and the Manager agree to execute and deliver
an amendment to this Agreement setting forth such revised compensation within ten
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days after reaching an agreement regarding the same. In the event that two-thirds of the
independent directors on the Board of Directors and the Manager are unable to agree to the terms of
the revised compensation prior to the Effective Termination Date, this Agreement shall terminate as
of the Effective Termination Date originally set forth in the Termination Notice. In recognition
of the level of initial effort required by the Manager to structure and acquire the Companies’
assets and the commitment of resources by the Manager, upon any non-renewal of this Agreement
pursuant to this Section 10(a), the Manager will be paid a termination fee equal to three
times the sum of the Base Management Fee and the Incentive Fee for the 12-month period preceding
the date of non-renewal, calculated as of the end of the most recently completed fiscal quarter
prior to the date of non-renewal (the “Termination Fee”). The obligation of the Companies
to pay the Termination Fee shall survive the termination of this Agreement.
(b) The Company or the Operating Partnership may also terminate the management agreement, upon
30 days’ prior written notice from the Board of Directors for Cause. For purposes hereof,
“Cause” is defined as (x) a final determination by a court of competent jurisdiction that
(a) the Manager has materially breached any provision of this Agreement and such breach continues
for a period of 60 days after written notice thereof specifying such breach and requesting that the
same be remedied in such 60-day period, (b) the Manager has committed fraud, misappropriation of
funds, or embezzlement against the Companies, or (c) the Manager has acted with willful
misfeasance, bad faith, recklessness or gross negligence with respect to its duties under this
Agreement, or (y) (a) the commencement of any proceedings relating to the Manager’s bankruptcy or
insolvency or (b) the dissolution of the Manager. If the Manager is terminated for Cause as set
forth in this Section 10(b), such termination shall be without payment of the Termination
Fee. The Manager agrees that if any of the events specified above occur, it will give prompt
written notice thereof to the Board of Directors after the occurrence of such event.
(c) This Agreement shall terminate at the option of the Manager, upon 30 days’ prior written
notice to the Company and the Operating Partnership, without payment of the Termination Fee, in the
event the Company or the Operating Partnership becomes regulated as an investment company under the
Investment Company Act, with such termination deemed to occur immediately prior to such event.
(d) Other than as set forth in Section 10(c), this Agreement shall terminate at the
option of the Manager, upon 180 days’ prior written notice to the Company and the Operating
Partnership, without payment of the Termination Fee.
(e) The provisions of Section 9 of this Agreement shall remain in full force and
effect, and the Manager shall remain entitled to the benefits thereof, notwithstanding any
termination of this Agreement. Further, notwithstanding the termination or expiration of this
Agreement as aforesaid, the Manager shall be entitled to any amounts owed under Section 4
through the date of termination or expiration and Section 9 shall continue in force and
effect and apply to the Manager and its representatives as and to the extent applicable.
11. IPO True-Up. Immediately prior to the completion of the Company’s initial public
offering of its common shares of beneficial interest (the “IPO Completion Date”), the
Company will pay or cause to be paid or distributed (a) any accrued but unpaid Base Management Fee
to the Manager, (b) any accrued but unpaid Incentive Fee to the Manager, (c) Expenses to the
Manager, each in accordance with this Agreement, and (d) all remaining Adjusted Earnings in
accordance with the Partnership Agreement, in each case that were incurred or earned during the
period from the date of this Agreement through the IPO Completion Date.
12. Notices. Any notice under this Agreement shall be given in writing, addressed and
delivered or mailed, postage prepaid, to the Company and the Operating Partnership at 000 Xxxx
Xxxxxx, Xxxxx
00
0000, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxxxx Xxxxxxx, or to the Manager at 000 Xxxx
Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxxxx Xxxxxxx.
13. Amendments. This Agreement may be amended by mutual consent of the parties
hereto.
14. Assignments. Subject to Section 1(b) hereof, neither (A) the Company or
the Operating Partnership without the consent of the Manager, nor (B) the Manager, may assign their
respective rights and obligations hereunder under any circumstances.
15. Entire Agreement. The Manager assumes no responsibility under this Agreement other
than to render the services called for hereunder. This Agreement contains the entire agreement of
the parties and supersedes all prior agreements, understandings and arrangements with respect to
the subject matter hereof.
16. Governing Law. This Agreement shall be construed in accordance with the laws of
the State of New York.
17. Severability. Wherever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law, but if any provision
of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
18. Counterparts. This Agreement may be executed in multiple counterparts,
each of which shall constitute an original, but all of which shall constitute one document.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed on the
date written above.
NY CREDIT CORP. |
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By: | ||||
Name: | ||||
Title: | ||||
NY CREDIT OPERATING PARTNERSHIP LP By: NYCC GP LLC, its general partner |
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By: | ||||
Name: | ||||
Title: | ||||
NY CREDIT ADVISORS LLC |
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By: | ||||
Name: | ||||
Title: | ||||
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