MANAGEMENT AGREEMENT
Exhibit
10.2
This MANAGEMENT AGREEMENT, dated as of March 5, 2010, is made and entered into by and among
ISLAND CENTERLINE MANAGER LLC, a Delaware limited liability company (the “Manager”), on the
one hand, and CENTERLINE HOLDING COMPANY, a Delaware statutory trust (“CHC”), CENTERLINE
CAPITAL GROUP INC., a Delaware corporation (“CCG” and, together with CHC, the
“Company”), jointly and severally on the other hand.
WHEREAS, the Company desires to retain the Manager to provide executive management and
strategic, restructuring and general advisory services to the Company and its Subsidiaries (as
defined below) on the terms and conditions hereinafter set forth, and the Manager desires to be
retained to provide such services upon the terms and conditions hereof; and
WHEREAS, this Agreement shall become effective upon the closing date (the “Effective
Date”) of that certain Purchase and Sale Agreement, dated as of the date hereof, by and among
C-III Capital Partners LLC, a Delaware limited liability company, CHC and the additional parties
thereto, as amended from time to time (the “Purchase Agreement”).
NOW, THEREFORE, in consideration of the representations, warranties, covenants and agreements
made herein and in any other agreements executed by the parties concurrently herewith or
contemplated hereby, and other good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, the parties agree as follows:
Section 1. Definitions. The following terms have the following meanings assigned to
them:
(a) “Adjusted EBITDA” means, for any given period, EBITDA for such period less
Corporate Interest Expense for such period, adjusted to [back out write-downs, write-ups and actual
gains and losses attributable to pre-transaction investments and other assets].
(b) “Affiliate” means, with respect to any Person, any other Person at the time
directly or indirectly controlling, directly or indirectly controlled by or under direct or
indirect common control with such Person. For purposes hereof, the terms “control,”
“controlling,” “controlled by,” and “under common control with” shall mean
the possession, directly or indirectly, of the legal power to direct or cause the direction of the
management or policies of such Person, whether through the ownership of voting securities, by
contract, or otherwise. Notwithstanding the foregoing, the Company and its Subsidiaries shall not
be deemed an Affiliate of the Manager or its Affiliates for purposes of this Agreement.
(c) “Agency Lending Business” means the business of (i) originating mortgage loans as
an agent for the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation
and similar government-sponsored entities and government agencies (each, an “Agency
Lender”), but in each case limited to lending programs of the Agency Lenders in which the
Company participates on the Effective Date, and (ii) where appropriate, closing such loans
using short-term warehouse lines of credit and selling such loans to Agency Lenders and/or
third party private investors.
(d) “Agreement” means this Management Agreement, as amended, restated or supplemented
from time to time.
(e) “B Bonds” means those certain series B certificates held initially by Centerline
Sponsor 2007-1 Securitization, LLC in connection with the Bond Transaction.
(f) “Bankruptcy” means, with respect to any Person, (a) the filing by such Person of a
voluntary petition seeking liquidation, reorganization, arrangement or readjustment, in any form,
of its debts under Title 11 of the United States Code or any other federal, state or foreign
insolvency law, or such Person’s filing an answer consenting to or acquiescing in any such
petition, (b) the making by such Person of any assignment for the benefit of its creditors, (c) the
expiration of 90 days after the filing of an involuntary petition under Title 11 of the United
States Code, an application for the appointment of a receiver for a material portion of the assets
of such Person, or an involuntary petition seeking liquidation, reorganization, arrangement or
readjustment of its debts under any other federal, state or foreign insolvency law,
provided that the same shall not have been vacated, set aside or stayed within such 90-day
period or (d) the entry against it of a final and non-appealable order for relief under any
bankruptcy, insolvency or similar law now or hereinafter in effect.
(g) “Base Management Fee” shall have the meaning set forth in Section 6 of
this Agreement.
(h) “Board of Trustees” means the Board of Trustees of CHC, as constituted from time
to time. The phrase “subject to the approval of the Board of Trustees” or phrases of similar import
and effect used in this Agreement shall mean the approval of a majority of the independent members
of the Board of Trustees or a duly appointed committee of the Board of Trustees comprised of
independent members thereof.
(i) “Bond Transaction” means the exchange of a portfolio of bonds from Centerline
0000-0 XXX Xxxxxxxxxxxxxx, XXX, Xxxxxxxxxx 0000-0 SU Securitization, LLC and Centerline 2007-1 T
Securitization, LLC to Xxxxxxx Mac, pursuant to which Xxxxxxx Mac issued series A certificates that
were sold by a placement agent and series B certificates that were held initially by SPV I for
purposes of a securitization of such portfolio that is credit enhanced by Xxxxxxx Mac pursuant to a
Bond Exchange and Sale Agreement dated as of December 1, 2007 among Xxxxxxx Mac, Centerline 0000-0
XXX Xxxxxxxxxxxxxx, XXX, Xxxxxxxxxx 0000-0 SU Securitization, LLC, Centerline 2007-1 T
Securitization, LLC, SPV I and SPV II, and the documents contemplated thereby.
(j) “Business Day” means any day except a Saturday, a Sunday or a day on which banking
institutions in New York, New York are not required to be open.
2
(k) “CHC’s Net Income” means the net income (or loss) of the CHC as determined in
accordance with GAAP and, in the case of CHC, as reported in CHC’s Filings as filed with the SEC or
any national securities exchange from time to time.
(l) “Claim” shall have the meaning set forth in Section 10(b) of this
Agreement.
(m) “Code” means the Internal Revenue Code of 1986, as amended.
(n) “Common Shares” means the common shares of beneficial interest of CHC.
(o) “Common Share Equivalents” shall mean convertible securities and rights entitling
the holder thereof to receive, directly or indirectly, Common Shares without the payment of any
consideration by such holder for such Common Shares.
(p) “Company Change of Control” means the occurrence of any of the following: (a) any
merger or consolidation of CHC or CCG with or into any Person or group of Persons (within the
meaning of Section 13 or 14 of the Exchange Act), if, after immediately giving effect to such
transaction, the shareholders of CHC prior to the transaction, other than the Manager and its
Affiliates, are no longer the beneficial owners (within the meaning of Rule 13d-3 promulgated by
the SEC under the Exchange Act) of securities representing a majority of the total voting power on
a fully diluted basis of the aggregate outstanding securities of the surviving entity normally
entitled to vote in the election of directors, managers or trustees of the surviving entity; (b)
the election to the Board of Trustees of a majority of Trustees not nominated by the Board of
Trustees or a duly appointed committee thereof; (c) any sale, transfer or other conveyance, whether
direct or indirect, of all or substantially all of the assets of CHC or CCG, on a consolidated
basis, in one transaction or a series of related transactions, if immediately after giving effect
to such transaction, the shareholders of CHC prior to the transaction, other than the Manager and
its Affiliates, are not the beneficial owners (within the meaning of Rule 13d-3 promulgated by the
SEC under the Exchange Act) of securities representing a majority of the total voting power on a
fully diluted basis of the aggregate outstanding securities of the transferee normally entitled to
vote in the election of directors, managers or trustees; or (d) the acquisition by any Person or
group of Persons (other than the Manager and its Affiliates) of securities representing the greater
of (x) 30% or more of the total voting power on a fully diluted basis of the aggregate outstanding
securities of CHC normally entitled to vote in the election of Trustees of CHC, and (y) the
percentage of such total voting power then represented by the securities beneficially owned by the
Manager and its Affiliates, provided, however, with respect to clause (d), no
Company Change of Control shall be deemed to result from any acquisition of beneficial ownership of
securities from the Manager or any of its Affiliates.
(q) “Company Indemnified Person” shall have the meaning set forth in Section
10(e) of this Agreement.
(r) “Company and Subsidiaries Expenses” means all operating and capital expenses,
other than Reimbursable Manager Expenses, related to the administration, operations, investment
activities and business and other affairs of the Company and its Subsidiaries, including the
expenses referred to in Section 2(d).
3
(s) “Corporate Interest Expense” means, for any given period, interest expense accrued
by the Company during such period with respect to (i) Term Loan indebtedness outstanding during
such period and (ii) long-term indebtedness incurred by the Company or any of its Subsidiaries
following the Effective Date to finance any merger, consolidation, acquisition or other non-organic
expansion transaction involving the Company or any of its Subsidiaries; provided,
however, that interest expense with respect to the Term Loan shall be deemed for this
purpose to be the lesser of (x) actual interest expense accrued during the period (net of
associated hedging costs accrued during the period, if applicable) and (y) the product of (1) the
average outstanding principal balance of the Term Loan outstanding during the period, multiplied by
(2) six percent (6%) divided by 365, multiplied by (3) the number of days in such period. For the
avoidance of doubt, “Corporate Interest Expense” shall not include interest with respect to
outstanding indebtedness under warehouse credit facilities, revolving credit facilities and similar
short-term borrowing arrangements.
(t) “Covered Event” shall have the meaning set forth in Section 10(b) of this
Agreement.
(u) “Dispute” shall have the meaning set forth in Section 21(a) of this
Agreement.
(v) “EBITDA” means, for any given period, CHC’s Net Income attributed to CHC
shareholders adjusted for (i) the deconsolidation of partnerships and entities as required by FASB
Accounting Standards Codification Topic 810 and (ii) the deconsolidation of the Excluded Entities
plus (a) in each case to the extent deducted in determining CHC’s Consolidated Net Income, (i)
consolidated interest expense on Corporate Debt, (ii) the Unused Facility Fee and any other unused
facility fees on Corporate Debt, (iii) preferred dividends paid, accrued or allocated to preferred
Capital Stock (if actually paid), (iv) all federal, state, local and foreign income tax expense,
(v) depreciation, depletion, and amortization expense (including mortgage servicing rights) and
other similar non-cash items, (vi) non-cash impairments of non-working capital assets, including
intangibles, (vii) non-recurring net losses from the sale or other disposition of assets acquired
by the Company prior to the Effective Date outside the ordinary course of business, (viii) non-cash
losses associated with the change in fair market value of derivatives, (ix) other non-recurring
losses, including, without limitation, one-time expenses, severance payments, charges, losses or
other payments associated with the Island Recapitalization, (x) cash revenue actually received by
CHC attributable to the B Bonds and/or bonds included in the Bond Transaction, (xi) expenses
recognized by CHC in accordance with GAAP attributable to the B Bonds and/or bonds included in the
Bond Transaction minus (b) in each case to the extent added in determining CHC’s Consolidated Net
Income, (i) all federal, state, local and foreign income tax benefits, (ii) non-cash gains related
to sales of mortgage loans, (iii) (iii) non-cash recoveries of non-working capital assets,
including intangibles, (iv) non-recurring net gains from the sale or other disposition of assets
acquired by the Company prior to the Effective Date outside the ordinary course of business, (v)
non-cash gains associated with the change in fair market value of derivatives, (vi) other non-cash
gains (including, without limitation, gains related to mortgage servicing rights), (vii) revenues
recognized by CHC in accordance with GAAP attributable to the B Bonds and/or bonds included in the
Bond Transaction, (viii) cash expenses paid by CHC in accordance with GAAP attributable to the B
Bonds and/or bonds included in the Bond Transaction.
4
(w) “Effective Date” shall have the meaning set forth in the recitals hereto.
(x) “Exchange Act” means the Securities Exchange Act of 1934, as amended.
(y) “Excluded Entities” means Centerline Financial LLC, Centerline Financial Holdings
LLC, Centerline Guarantor LLC, Centerline Equity Issuer Trust, Centerline Guaranteed Manager LLC,
Centerline Guaranteed Manager II LLC and Centerline Guaranteed Holdings LLC.
(z) “Xxxxxx Xxx” means the Federal National Mortgage Association, a shareholder-owned
government-sponsored enterprise organized and existing under the laws of the United States.
(aa) “FASB” means the Financial Accounting Standards Board.
(bb) “Xxxxxxx Mac” means the Federal Home Loan Mortgage Corporation, a
shareholder-owned government-sponsored enterprise organized and existing under the laws of the
United States.
(cc) “Fully-Diluted Adjusted EBITDA Per Share” means, for any given period, Adjusted
EBITDA for such period divided by the Weighted Average Number of CSEs outstanding during such
period.
(dd) “GAAP” means principles that are (i) consistent with the principles promulgated
or adopted by the Financial Accounting Standards Board and its predecessors and successors, as in
effect from time to time, and (ii) consistently applied with past financial statements of each
Borrower, each Guarantor and their respective Subsidiaries adopting the same principles, provided
that in each case referred to in this definition of “GAAP” a certified public accountant would,
insofar as the use of such accounting principles is pertinent, be in a position to deliver an
unqualified opinion (other than qualifications regarding changes in GAAP and as to normal year-end
adjustments) as to financial statements in which such principles have been properly applied.
(ee) “Good Reason” means, with respect to the actions and/or inactions of the Board of
Trustees, the Manager’s determination that (i) the Board of Trustees has engaged in a pattern of
conduct (actions and/or inactions) that materially interferes with the Manager’s ability to perform
its obligations pursuant to this Agreement by repeatedly failing to approve or implement the
Manager’s recommendations, advice or actions given or taken pursuant to this Agreement and (ii)
such actions or inactions are not the best interests of the shareholders of CHC (other than the
Manager and its Affiliates, in their capacities as shareholders of CHC).
(ff) “Governing Instruments” means, with respect to any Person, the articles of
incorporation and bylaws in the case of a corporation, certificate of limited partnership (if
applicable) and the partnership agreement in the case of a general or limited partnership, the
articles of formation and the operating or similar agreement in the case of a limited liability
5
company, the trust instrument in the case of a trust, and any equity holder rights plan, or
similar governing documents, in each case as amended from time to time.
(gg) “Incentive Fee” shall have the meaning set forth in Section 7(a) of this
Agreement.
(hh) “Indemnified Persons” shall have the meaning set forth in Section 10(e)
of this Agreement.
(ii) “Initial Term” shall have the meaning set forth in Section 11 of this
Agreement.
(jj) “Investment Company Act” means the Investment Company Act of 1940, as amended.
(kk) “Island Capital Group” means Island Capital Group LLC, a Delaware limited
liability company.
(ll) “Last Appraiser” shall have the meaning set forth in Section 7(d) of this
Agreement.
(mm) “LIHTC Business” means the business of (i) sponsoring funds for institutional and
retail investors that invest in affordable housing properties benefiting from the Low-Income
Housing Tax Credit or other federal and state programs that promote the development of multifamily
properties and (ii) managing such funds, including fund origination, property acquisition,
underwriting, asset management and administration.
(nn) “Losses” shall have the meaning set forth in Section 10(b) of this
Agreement.
(oo) “Majority-Owned Affiliate” means an Affiliate of a Person (i) that is directly or
indirectly controlled by such Person and (ii) in which such Person directly or indirectly owns
equity interests representing more than a 50% ownership interest in such Affiliate.
(pp) “Manager Change of Control” means Xxxxxx Xxxxxx ceasing to control or
beneficially own, directly or indirectly, at least 33% of the outstanding equity interests in the
Manager and, at such time or at any time thereafter, fewer than three of Xxxxxxx Xxxxx, Xxxxx
Xxxxxxxx, Xxxxx Xxxxx, Xxxxxx Xxxxxxxx and Xxxx Xxxxxxx are actively involved in the management and
operations of the Manager; provided, however, that Manager Change of Control shall not
result from (i) any public offering of the equity interests of Island Capital Group or the Manager
or of any equity interests in any Person that directly or indirectly owns equity interests in the
Manager, or (ii) any permitted assignment of this Agreement by the Manager in accordance with the
terms of this Agreement.
(qq) “Manager Indemnified Person” shall have the meaning set forth in Section
10(b) of this Agreement.
(rr) “Manager Indemnitors” shall have the meaning set forth in Section 10(d)
of this Agreement.
6
(ss) “Manager Representative” means any officer, director, employee, principal,
member, manager, agent or other representative of the Manager or its Affiliates.
(tt) “Mediation Request” shall have the meaning set forth in Section 21(b) of
this Agreement.
(uu) “Outside Activities” shall have the meaning set forth in Section 3(d) of
this Agreement.
(vv) “Person” means any individual, corporation, partnership, joint venture, limited
liability company, estate, trust, unincorporated association, any federal, state, county or
municipal government or any bureau, department or agency thereof and any fiduciary acting in such
capacity on behalf of any of the foregoing.
(ww) “Procedure” shall have the meaning set forth in Section 21(b) of this
Agreement.
(xx) “Procedures Review Payments” shall have the meaning set forth in Section
6(b) of this Agreement.
(yy) “Reimbursable Manager Expenses” means the following expenses paid or payable by
the Manager or any of its Affiliates (excluding the Company and its Subsidiaries), to the extent
not directly paid by the Company or any of its Subsidiaries: (i) all reasonable out-of-pocket
costs, including reasonable travel, lodging, meals and similar costs and expenses incurred by all
personnel of the Manager and its Affiliates paid or reimbursed by the Manager or its Affiliates, to
the extent that such costs and expenses relate to the administration, operations, investment
activities or other business affairs of the Company or any of its Subsidiaries (including, without
limitation, executive management and strategic, restructuring and general advisory services
provided by the Manager pursuant to this Agreement); (ii) the allocable share of the costs of
including the activities of the Manager and its Affiliates in connection with the services provided
to the Company and its Subsidiaries hereunder under directors’ and officers’ liability insurance,
investment advisor insurance, fidelity insurance and/or errors and omissions insurance maintained
by the Manager and its Affiliates and any similar insurance maintained by the Manager with respect
to the services provided under this Agreement for any period that the Company does not provide
insurance coverage in accordance with Section 5(d), whether at the election of the Manager
in accordance with Section 5(d) or otherwise; and (iii) allocable portions of all
compensation costs (including, without limitation, benefits) and general overhead expenses
(including, without limitation, office rent, supplies, telecommunications services, utilities and
the like) of personnel of the Manager and its Affiliates to the extent attributable to the services
provided to the Company and its Subsidiaries under this Agreement solely with respect to such
personnel of the Manager and its Affiliates who have been approved and on such terms as have been
approved (in advance of, during or after the rendering of such services) by the Board of Trustees.
(zz) “Renewal Term” shall have the meaning set forth in Section 11 of this
Agreement.
7
(aaa) “SEC” means the United States Securities and Exchange Commission, or any
Governmental Authority succeeding to any or all of the functions of the United States Securities
and Exchange Commission.
(bbb) “Securities Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
(ccc) “Subsidiary” means a Person of which: (a) the Company or any Subsidiary is a
general partner or managing member; or (b) voting power to elect a majority of the board of
directors, trustees or others performing similar functions with respect to such Person is held by
the Company or by any one or more of its Subsidiaries.
(ddd) “Target Adjusted EBITDA Per Share” shall mean $42.35 million divided by the
number of Common Share Equivalents outstanding on the Effective Date; provided,
however, that such per share amount shall be equitably adjusted from time to time to take
into account the effect of (i) any issuance of additional Common Shares as a dividend or other
distribution on outstanding Common Shares, (ii) any subdivision of outstanding Common Shares into a
greater number of Common Shares, or (iii) any combination or reverse split of outstanding Common
Shares into a smaller number of Common Shares, in each case following the Effective Date.
(eee) “Term” shall have the meaning set forth in Section 11 of this Agreement.
(fff) “Term Loan” means $127.5 million of original outstanding indebtedness under that
certain Second Amended and Restated Revolving Credit and Term Loan Agreement, dated as of the
Effective Date, by and among the Company, Bank of America, N.A., as administrative agent and
lender, and the other lenders and guarantors parties thereto.
(ggg) “Termination Fee” means a termination fee equal to: (i) in the case of a
termination during the first calendar year of the Term, three (3) times the Base Management Fee;
(ii) in the case of a termination during the second calendar year of the Term, three (3) times the
sum of (A) the Base Management Fee and (B) the Incentive Fee earned by the Manager for the first
calendar year of the Term; and (iii) in the case of a termination during any calendar year after
the second calendar year of the Term, three (3) times the sum of (A) the Base Management Fee and
(B) the average annual Incentive Fee earned by the Manager for the two (2) calendar years
immediately preceding the calendar year in which the termination occurs.
(hhh) “Treasury Regulations” means the regulations promulgated under the Code, as
amended from time to time.
(iii) “Trustee” means a duly elected or appointed member of the Board of Trustees.
(jjj) “Unused Facility Fee” means fees paid by Company on any undrawn portion of full
commitment on its Corporate Debt.
(kkk) “Valuation Notice” shall have the meaning set forth in Section 7(d) of
this Agreement.
8
(lll) “Weighted Average Number of CSEs” means, with respect to any given period, the
weighted average number of Common Shares and Common Share Equivalents outstanding during such
period calculated in accordance with Financial Accounting Standards Board Accounting Standards
Codification Topic 260 — Earnings per Share.
(mmm) The words “hereof,” “herein” and “hereunder” and words of similar import when used in
this Agreement shall refer to this Agreement as a whole and not to any particular provision of this
Agreement, and Section references are to this Agreement unless otherwise specified.
(nnn) The meanings given to terms defined herein shall be equally applicable to both the
singular and plural forms of such terms. The words include, includes and including shall be deemed
to be followed by the phrase “without limitation.”
Section 2. Engagement and Duties of the Manager.
(a) The Company, on behalf of itself and its Subsidiaries, hereby engages the Manager, and
delegates all requisite power and authority to the Manager, to advise and assist the Company and
its Subsidiaries, subject to the terms and conditions set forth in this Agreement, and the Manager
hereby agrees to perform the duties of the Manager set forth on Schedule A. The engagement
of the Manager shall be exclusive to the Manager except to the extent that the Manager otherwise
agrees, in its sole and absolute discretion, and except to the extent that the Manager elects, in
accordance with the terms of this Agreement, to cause the duties of the Manager hereunder to be
provided by third parties.
(b) The Manager, in rendering its services and performing its duties under this Agreement to
the Company and its Subsidiaries, will at all times and with respect to all matters be subject to
the supervision and control of the Board of Trustees and senior management of the Company. The
Manager acknowledges: (i) that the management, policies and operations of the Company and its
Subsidiaries shall remain the ultimate responsibility of the Board of Trustees acting pursuant to
and in accordance with the Governing Instruments of the Company and its Subsidiaries, (ii) the
Board of Trustees and senior management of the Company may in their sole discretion decline to
follow, reject or reverse any advice or recommendations of the Manager with respect to the
administration, operations, investment activities and business and other affairs of the Company and
its Subsidiaries, and the Manager shall be bound by such a decision of the Company and the Board of
Trustees and (iii) that the Manager has no authority to bind the Company without the prior consent
of the Board of Trustees. If there is an inconsistency between this Section 2(b) and any
other provision of this Agreement (including Schedule A hereto), this Section 2(b)
shall control.
(c) The Manager or its Affiliates may provide other services to the Company and its
Subsidiaries not contemplated by this Agreement pursuant to written agreement(s) with terms that
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 Company and its Subsidiaries; provided,
however, that any such agreements entered into with the Manager or such Affiliate shall be (i) on
terms no more favorable to the Manager or such Affiliate than would be obtained from a third party
on an arm’s length basis and (ii) approved by the Board of Trustees.
9
(d) The Manager may recommend that the Company and its Subsidiaries to retain, at the sole
cost and expense of the Company, accountants, legal counsel, appraisers, insurers, brokers,
transfer agents, registrars, investment banks, financial advisors, due diligence firms, banks and
other lenders and others to provide services to the Company, its Subsidiaries and the Manager in
connection with the businesses and affairs of the Company and its Subsidiaries, including those
that have rendered, then are rendering, or may in the future render services to the Company, its
Subsidiaries and the Manager, as the Manager deems necessary or advisable.
(e) In performing its duties under this Section 2, the Manager shall be entitled to
rely on qualified experts and professionals (including accountants, legal counsel and other service
professionals) hired by the Company or by the Manager on its own behalf in connection with its
services under this Agreement.
(f) Notwithstanding the other terms this Agreement, all matters related to (i) the
transactions contemplated by the Purchase Agreement and ancillary agreements (including
indemnification claims and other post-closing matters) and (ii) any conflict related to
compensation, indemnification or exculpation of the Manager pursuant to this Agreement, shall each
be subject to the reasonable approval of the Board of Trustees.
Section 3. Devotion of Time; Additional Activities.
(a) During the Term, the Manager shall assign to work with the Company and its Subsidiaries
personnel of the Manager and its Affiliates with suitable qualifications and experience to perform
the Manager’s duties and responsibilities under this Agreement and cause such personnel to dedicate
such time as may reasonably be required to perform the Manager’s duties. None of the officers or
employees of the Manager will be dedicated exclusively to the Company and its Subsidiaries, unless
otherwise agreed by the Manager and the Board of Trustees.
(b) The Company and its Subsidiaries (including the Board of Trustees) agree to take, or cause
to be taken, all actions reasonably required to permit and enable the Manager to carry out its
duties and obligations under this Agreement.
(c) Except as provided in Section 25, nothing in this Agreement shall (i) prevent the
Manager, any of its Affiliates, or any of their respective officers, directors, managers,
investors, partners, principals, employees, controlling Persons or other personnel, from engaging
in other businesses or from rendering services of any kind to any other Person, including investing
in, or rendering advisory services to others investing in, any type of business (including
investments that meet the principal investment objectives of the Company or any Subsidiary),
whether or not the investment objectives or policies of any such other Person are similar to those
of the Company or any Subsidiary (“Outside Activities”) or (ii) in any way bind or restrict
the Manager, any of its Affiliates, or any of their respective officers, directors, managers,
investors, partners, principals, employees, controlling Persons or other personnel from buying,
selling or trading any securities or investments for their own accounts or for the account of
others for whom the Manager, any of its Affiliates, or any of their respective officers, directors,
managers, investors, partners, principals, employees, controlling Persons or other personnel may be
acting; provided, however, that the Manager acknowledges and agrees that all
Manager Representatives
10
shall be subject to the Company’s xxxxxxx xxxxxxx policies and procedures in effect from time
to time. The Manager shall not assign any Manager Representative to provide services to the
Company or any of its Subsidiaries pursuant to the terms of this Agreement, and shall remove him
from such assignment, if his Outside Activities materially impair his ability to carry out the
services the Manager has assigned to him.
Section 4. Confidentiality. The Manager shall keep confidential any and all
information obtained in connection with the services rendered under this Agreement and shall not
disclose any such information (or use the same except in furtherance of its duties under this
Agreement) to unaffiliated third parties, except: (i) with the prior written consent of the Board
of Trustees; (ii) to the Company’s or the Manager’s legal counsel, accountants and other
professional advisors on a need to know basis; (iii) to financing sources in the ordinary course of
the Company’s and its Subsidiaries’ businesses, subject to the execution of customary
confidentiality agreements by any such financing source; (iv) to governmental officials having
jurisdiction over the Company or any Subsidiary; (v) in connection with any governmental or
regulatory filings of the Company or any Subsidiary, or disclosure or presentations to Company
investors in compliance with the Company’s Regulation FD disclosure policies and procedures; (vi)
as required by law or legal process to which the Manager or any Person to whom disclosure is
permitted hereunder is a party; (vii) to the extent such information is otherwise publicly
available through the actions of a Person other than the Manager not resulting from the Manager’s
violation of this Section 4 or, to the Manager’s knowledge, a violation of a legal or
contractual obligation to the Company that would prohibit the disclosure of such information; or
(viii) in the ordinary course of business, which the Manager, acting prudently, deems in its
reasonable discretion, necessary or appropriate in connection with carrying out its duties under
this Agreement, but subject to compliance with the Company’s Regulation FD disclosure policies and
procedures.
Section 5. Obligations of Manager; Restrictions.
(a) The Manager shall refrain from any action that, in its good faith judgment:
(i) would adversely and materially affect the Company’s or any Subsidiary’s status as an
entity intended to be exempted or excluded from registration under the Investment Company Act;
(ii) would knowingly violate any law, rule or regulation of any governmental body or agency
having jurisdiction over the Company or any Subsidiary or that would otherwise not be permitted by
the Company’s or any of its Subsidiaries’ Governing Instruments, code of conduct or other
compliance or governance policies and procedures;
(iii) would result in a material default under any contract to which the Company is a party,
including the Company’s credit facilities; or
(iv) would knowingly violate a policy or directive of the Company or any Subsidiary or any or
resolution of the Board of Trustees.
11
If the Manager is ordered to take any such action by the Board of Trustees, the Manager shall
promptly notify the Board of Trustees of the Manager’s judgment that such action would adversely
and materially affect the Company’s or any Subsidiary’s status as an entity intended to be exempted
or excluded from registration under the Investment Company Act, or violate any such law, rule or
regulation, the Company’s or any of its Subsidiaries’ Governing Instruments, code of conduct or
other compliance or governance and procedures, or any such contract. Notwithstanding the
foregoing, the Manager, its Affiliates, their respective controlling Persons, directors, officers,
members, managers, partners, owners and employees shall not be liable to the Company or any of its
Subsidiaries, or any of their respective trustees, directors, managers officers, or security
holders for acts or omissions performed in accordance with and pursuant to this Agreement, except
as provided in Section 10 of this Agreement. The Manager shall be permitted to rely in
good faith upon any written communication from the Secretary of CHC to evidence the approval of the
Board of Trustees with respect to any matter.
(b) The Manager agrees that any of its Manager Representatives who provide services to the
Company or any of its Subsidiaries pursuant to the terms of this Agreement shall be bound by all
rules, policies and procedures, including the Company’s code of conduct and other compliance and
governance policies and procedures applicable to all officers, directors, employees, agents and
other representatives of the Company and its Subsidiaries that are adopted by the Board of
Trustees, from time to time, including those required under the Exchange Act, the Securities Act,
or any national securities exchange on which any of CHC’s securities are listed, and the Manager
agrees to take, or cause to be taken, all actions reasonably required to cause such Manager
Representatives to be bound by such rules, policies and procedures to the extent applicable to such
Persons.
(c) The Manager shall provide the Board of Trustees such periodic and other reports concerning
the services rendered hereunder and the Manager’s performance of its obligations hereunder as may
be reasonably requested by the Board of Trustees.
(d) The Company shall name the Manager and its principals, officers, directors, members,
managers and employees as additional insureds under its directors’ and officers’ liability
insurance, investment advisor insurance, fidelity insurance and/or errors, omissions and liability
policies with respect to the services provided under this Agreement at the sole cost and expense of
the Company; provided, however, that the Manager may elect by written notice to the
Company to suspend the Company’s obligation to provide such insurance coverage for a period
specified in such notice, and upon the expiration of such period such obligation shall be
automatically reinstated.
Section 6. Fees and Payments.
(a) Base Management Fee. The Company shall pay the Manager an annual base management
fee (the “Base Management Fee”) for each calendar year (or portion thereof, in the case of
the first and last years of the Term) during the Term in an amount equal to $5,000,000. The Base
Management Fee shall be payable in cash in quarterly installments, due in advance on the first day
of each calendar quarter that this Agreement is in effect. The first installment shall be due on
the Effective Date and shall be pro rated based on the number of days remaining in the
12
first quarter from and after the Effective Date. The Base Management Fee shall be payable
independent of the performance of the Company and its Subsidiaries.
(b) Procedures Review Payments. During the first year of the Term of this Agreement
only, the Company shall pay the Manager restructuring advisory payments totaling $5,000,000 (the
“Procedures Review Payments”). In exchange for the Procedures Review Payments, the Manager
shall advise and assist the Audit Committee of the Board of Trustees in organizing and conducting a
comprehensive review of all of its internal policies, procedures and controls relating to fund
administration and management (including matters relating to Centerline High Yield CMBS Fund II LLC
and Centerline Diversified Risk CMBS Fund II LLC), and in connection therewith, subject to the
oversight of the Audit Committee of the Board of Trustees, shall consult with and make
recommendations to third party accountants and others engaged by the Audit Committee of the Board
of Trustees to assist in such review and establish, to the extent necessary or appropriate, new or
revised policies, procedures and controls (the “Procedures Review”). In connection with
the Procedures Review, the Manager shall also advise the Company with regards to retention of third
party professionals, including counsel, and shall assist with communications with investors and
advise the Company with regards to any discussions with investors involving resolution or
remediation of any errors that may be discovered that resulted in losses to such investors. The
Procedures Review Payments shall be payable in cash in monthly installments, commencing on the
Effective Date and continuing on the first Business Day of each of the next twelve (12) calendar
months (appropriately pro rated in the case of the first and last payments).
Section 7. Incentive Fee.
(a) The Company shall pay the Manager an annual incentive fee (an “Incentive Fee”) in
respect of each calendar year during which this Agreement was in effect for at least one day during
the Term in an amount, not less than zero, equal to the product of (x) the amount by which CHC’s
Fully-Diluted Adjusted EBITDA Per Share for such calendar year exceeds Target Adjusted EBITDA Per
Share, multiplied by (y) the Weighted Average Number of CSEs outstanding during such calendar year,
multiplied by (z) ten percent (10%). The Incentive Fee payable in respect of the first and, if
applicable, the last calendar year during which this Agreement is in effect shall be prorated,
based on the number of days in such year that this Agreement is in effect divided by 365. The
Incentive Fee shall be due and payable with respect to each calendar year annually (and following
the expiration or termination of this Agreement) in arrears, not later than March 31 for the
following year.
(b) The Incentive Fee for any calendar year shall be paid, at the election of the Board of
Trustees, in cash or in Common Shares (valued as provided in Section 7(c)), as indicated in
a written notice delivered to the Manager no fewer than ten (10) days prior to its payment;
provided, however, that if such notice from the Board of Trustees states that more
than fifty percent (50%) of the Incentive Fee is to be paid in Common Shares, then the Manager may
provide a written notice to the Company requesting that the portion of the Incentive Fee to be paid
in Common Shares be reduced to a different percentage, but not less than 50%, in which case the
Company shall pay the reduced portion in cash instead of in Common Shares.
13
(c) The number of Common Shares to be issued to the Manager as payment of all or a portion of
the Incentive Fee shall equal the dollar amount of the Incentive Fee (or portion thereof) payable
in Common Shares divided by a value determined as follows:
(i) if the Common Shares are traded on a securities exchange, then the value shall be deemed
to be the average of the closing prices of the Common Shares on such exchange during the ten (10)
Business Days prior to the date on which the Incentive Fee is paid;
(ii) if the Common Shares are not traded on a securities exchange but are actively traded
over-the-counter, then the value shall be deemed to be the average of the closing bids or sales
prices, as applicable, during the ten (10) Business Days prior to the date on which the Incentive
Fee is paid; and
(iii) if the Common Shares are not traded on a securities exchange or in the reasonable
judgment of the Board of Trustees are not actively traded over-the-counter, then the value shall be
the fair market value thereof, as reasonably determined in good faith by the Board of Trustees.
(d) If at any time the Manager shall, in connection with a determination of the value of the
Common Shares made by the Board of Trustees pursuant to Section 7(c)(iii) hereof, (i)
dispute such determination in good faith by more than five percent (5%), and (ii) such dispute
cannot be resolved between the Board of Trustees and the Manager within ten (10) Business Days
after the Manager provides written notice to CHC of such dispute (the “Valuation Notice”),
then the matter shall be resolved by an independent appraiser of nationally recognized standing
selected jointly by the Board of Trustees and the Manager within not more than twenty (20) days
after CHC’s receipt of the Valuation Notice. In the event the Board of Trustees and the Manager
cannot agree with respect to such selection within the aforesaid twenty (20)-day period, the Board
of Trustees shall select one such independent appraiser and the Manager shall select one such
appraiser within five (5) Business Days after the expiration of the twenty (20)-day period, with
one additional such appraiser (the “Last Appraiser”) to be selected by the appraisers so
designated within five (5) Business Days after their selection. Any valuation decision made by the
Last Appraiser shall be deemed final and binding upon the Board of Trustees and the Manager and
shall be delivered to the Manager and the Board of Trustees within not more than fifteen (15) days
after the selection of the Last Appraiser. All fees and expenses of any such appraiser shall be
borne by the party to this Agreement whose calculation of the value of the Common Shares, as
submitted to such appraiser, differs most from the determination of such amount by such appraiser.
(e) Notwithstanding any dispute between the Manager and CHC as to the amount of the value of
the Common Shares, the Company shall pay the Incentive Fee, which if any portion of such payment is
to be in Common Shares, is valued at a share value reasonably determined by the Board of Trustees
not later than March 31 of the year following the calendar year for which such payment is due. In
such event, following the determination of the amount of the value of the Common Shares in
accordance with the provisions of this Section 7, then (i) the Manager shall promptly repay
to the Company any amount it received but was not entitled to receive or (ii) the Company shall pay
to the Manager any additional amount to which the Manager was entitled but was not paid.
14
Section 8. Company and Subsidiary Expenses. The Company shall pay directly all or, if
and to the extent paid by the Manager or any of its Affiliates, shall reimburse the Manager and its
Affiliates, in accordance with Section 9, for all documented Company and Subsidiaries
Expenses reasonably incurred by the Manager or any of its Affiliates.
Section 9. Reimbursable Manager Expenses.
(a) The Company shall reimburse the Manager and its Affiliates for all Reimbursable Manager
Expenses, as provided in this Section 9.
(b) The Manager shall prepare reasonably detailed invoices documenting the Reimbursable
Manager Expenses incurred during each calendar quarter, and shall deliver such invoices and
appropriate supporting documentation (receipts, etc.) to the Company within forty-five (45) days
after the end of each calendar quarter. Reimbursable Manager Expenses shall be reimbursed by the
Company to (or as directed by) the Manager no later than the twentieth (20th) day following the
date of delivery of an invoice therefor.
(c) The Manager may, at its option, elect not to seek reimbursement for certain expenses
during a given quarterly period, which determination shall not be deemed to construe a waiver of
reimbursement for similar expenses in future periods.
Section 10. Limits of the Manager’s Responsibility; Exculpation; Indemnification.
(a) The Manager assumes no responsibility under this Agreement other than to comply with the
terms of this Agreement and render the services called for under this Agreement in good faith and
in the best interests of the Company and its shareholders. The Manager shall not be responsible
for any actions of the Company and its Subsidiaries in following or declining to follow any advice
or recommendations of the Manager, including as set forth in Section 5 of this Agreement,
except as set forth in this Section 10. The Manager, its Affiliates and their respective
controlling Persons, directors, officers, members, managers, partners, owners and employees will
not be liable to the Company or any of its Subsidiaries, or any of their respective controlling
Persons, trustees, directors, officers, members, managers, partners, security holders or employees
for any acts or omissions by any such Person (including errors that may result from ordinary
negligence, such as errors in the investment decision making process or in the trade process)
performed in accordance with and pursuant to this Agreement, except by reason of acts or omissions
found by a court of competent jurisdiction in a final, non-appeasable judgment to be attributable
to: (i) any such Person acting or omitting to act with deliberate dishonesty; (ii) any such Person
receiving an improper personal benefit in money, property or services; (iii) in the case of a
criminal proceeding, any such Person having had reasonable cause to believe that the act or
omission was unlawful; or (iv) the gross negligence, willful misconduct, fraud or bad faith on the
part of any such Person.
(b) The Company to the fullest extent permitted by law shall indemnify and hold harmless the
Manager, its Affiliates and their respective controlling Persons, directors, officers, members,
managers, partners, owners and employees, (each, a “Manager Indemnified Person”), from and
against any and all losses, claims, damages, liabilities, fees and expenses (including reasonable
attorneys’ fees and expenses) (collectively, “Losses”), whether or not involving a
15
third party, arising out of or in connection with or resulting from any Covered Event (as
defined below) or alleged Covered Event. The term “Covered Event” shall mean (a) any
action taken or omitted to be taken, or services performed or omitted to be performed, by a Manager
Indemnified Person, in accordance with the terms of this Agreement, or (b) any action taken, or
omitted to be taken, by the Company, any Subsidiary, any of their Affiliates or any of their
respective officers, directors, members, managers, advisors, agents, consultants, fiduciaries,
investors, lenders, partners, principals, employees, controlling Persons or professionals in
connection with any matter in which a Manager Indemnified Person has been involved pursuant to this
Agreement; provided, however, that the term “Covered Event,” with respect to a
Manager Indemnified Person, shall exclude any Losses to the extent determined by a court of
competent jurisdiction in a final, non-appealable judgment to be attributable to: (A) any such
Person acting or omitting to act with deliberate dishonesty; (B) any such Person receiving an
improper personal benefit in money, property or services; (C) in the case of a criminal proceeding,
any such Person having had reasonable cause to believe that the act or omission was unlawful; or
(D) the gross negligence, willful misconduct, fraud or bad faith on the part of any such Manager
Indemnified Person. In the event that any Manager Indemnified Person becomes involved in any
capacity in any suit, action, proceeding or investigation (a “Claim”) in connection with
any matter arising out of or in connection with the Manager’s duties hereunder (including a Covered
Event), the Company will periodically reimburse such Manager Indemnified Person for its reasonable
legal and other expenses (including the cost of any investigation and preparation) incurred in
connection therewith; provided, however, that prior to any such advancement of
expenses (i) such Manager Indemnified Person shall provide the Company with an undertaking (in form
and substance reasonably acceptable to the Board of Trustees) to promptly repay to the Company the
amount of any such expenses paid to such Manager Indemnified Person if it shall ultimately be
determined that such Manager Indemnified Person is not entitled to be indemnified by the Company as
herein provided in connection with any such Losses and (ii) such Manager Indemnified Person shall
provide the Company with a written affirmation that such Manager Indemnified Person in good faith
believes that it has met the standard of conduct necessary for indemnification hereunder; and
further provided, that the failure for any reason of the Company to advance funds to any Manager
Indemnified Person shall in no way affect such Manager Indemnified Person’s right to reimbursement
of such costs if it is ultimately determined that such Manager Indemnified Person was entitled to
indemnification pursuant to the terms hereof. If a Manager Indemnified Person is successful (in
whole or in part) in any Claim brought by such Manager Indemnified Person against the Company to
recover an advancement of expenses or indemnification, or if a Manager Indemnified Person is
successful (in whole or in part) in defending any Claim brought by the Company to recover advances
pursuant to an undertaking, then the Company shall indemnify such Manager Indemnified Person for
the fees and other expenses (including attorneys’ fees) incurred by such Manager Indemnified Person
in connection with such Claim to the fullest extent permitted by law.
(c) Any Manager Indemnified Person entitled to indemnification from the Company hereunder
shall first seek recovery under any insurance policies not maintained by the Company or its
Subsidiaries by which such Manager Indemnified Person is covered and any Manager Indemnified Person
shall obtain the written consent of the Company prior to entering into any compromise or settlement
which would result in an obligation of the Company to indemnify such Manager Indemnified Person;
provided, however, that the possibility of recovery under any such
16
insurance policies shall not preclude a Manager Indemnified Person from seeking
indemnification pursuant to this Section 10. If such Manager Indemnified Person shall
actually recover any amounts under any applicable insurance policies, it shall offset the net
proceeds so received against any amounts owed by the Company by reason of the indemnity provided
hereunder or, if all such amounts shall have been paid by the Company in full prior to the actual
receipt of such net insurance proceeds, such Manager Indemnified Person shall be subrogated, to the
extent of such payment, to any rights which such Manager Indemnified Person may have against any
applicable insurer with respect to the subject matter underlying such indemnification claim and
such Manager Indemnified Person shall assign any such rights to the Company. If the amounts in
respect of which indemnification is sought arise out of the conduct of the business and affairs of
the Company and also of any other Person for which the Manager Indemnified Person hereunder was
then acting in a similar capacity (other than acting on behalf of the Manager in connection with
providing services to the Company), then the amount of the indemnification to be provided by the
Company shall be limited to the Company’s proportionate share thereof if so determined by the Board
of Trustees acting in good faith.
(d) The Company hereby acknowledges that certain Manager Indemnified Persons have or may in
the future have certain rights to indemnification, advancement of expenses and/or insurance
provided by one or more other Manager Indemnified Persons (each, a “Manager Indemnitor” and
collectively the “Manager Indemnitors”). Without limiting the provisions of the Company in
Section 10(c), the Company hereby agrees that (i) it is the indemnitor of first resort
(i.e., its obligations to a Manager Indemnified Person are primary and any obligation of any
Manager Indemnitor to advance expenses or to provide indemnification for the same expenses or
liabilities incurred by such Manager Indemnified Person are secondary), (ii) it shall be required
to advance the full amount of expenses incurred by a Manager Indemnified Person and shall be liable
for the full amount of all expenses, judgments, penalties, fines and amounts paid in settlement, in
each case, to the extent required by this Agreement, without regard to any rights such Manager
Indemnified Person may have against any Manager Indemnitor, but only if the Manager Indemnified
Person provides an undertaking to repay such amount if it is ultimately determined that such
Manager Indemnified Person is not entitled to be indemnified by the Company, and (iii) it
irrevocably waives, relinquishes and releases the Manager Indemnitors from any and all claims
against the Manager Indemnitors for contribution, subrogation or other recovery with respect to
amounts for which the Company is liable pursuant to this Agreement. The Company further agrees
that no advancement or payment by a Manager Indemnitor on behalf of a Manager Indemnified Person
with respect to any claim for which such Manager Indemnified Person has sought indemnification from
the Company shall affect the foregoing and such Manager Indemnitor shall be subrogated to the
extent of such advancement or payment to all of the rights of recovery of such Manager Indemnified
Person against the Company. The Company and each Manager Indemnified Person agree that the Manager
Indemnitors are express third party beneficiaries of this Section 10(d).
(e) The Manager to the fullest extent permitted by law shall indemnify and hold harmless the
Company, its Subsidiaries and Affiliates and their respective trustees, directors, officers and
employees and the members, managers, partners and owners of the Company’s wholly owned Subsidiaries
(each, a “Company Indemnified Person” and together with the Manager Indemnified Persons,
the “Indemnified Persons”) from and against (i) any and all
17
Losses, whether or not involving a third party, which may be incurred arising out of or
resulting from acts or omissions of the Manager or any Manager Representative providing services
pursuant to this Agreement found by a court of competent jurisdiction in a final, non-appealable
judgment to be attributable to: (A) any such Person acting or omitting to act with deliberate
dishonesty; (B) any such Person receiving an improper personal benefit in money, property or
services; (C) in the case of a criminal proceeding, any such Person having had reasonable cause to
believe that the act or omission was unlawful; or (D) the gross negligence, willful misconduct,
fraud or bad faith on the part of any such Person, and (ii) any claims by any of the Manager’s or
its Affiliates’ employees relating to the terms and conditions of their employment by the Manager
or any of its Affiliates, as applicable.
(f) Any Company Indemnified Person entitled to indemnification from the Manager hereunder
shall first seek recovery under any insurance policies by which such Company Indemnified Person is
covered and any Company Indemnified Person shall obtain the written consent of the Manager prior to
entering into any compromise or settlement which would result in an obligation of the Manager to
indemnify such Company Indemnified Person; provided, however, that the possibility
of recovery under any such insurance policies shall not preclude a Company Indemnified Person from
seeking indemnification pursuant to this Section 10. If such Company Indemnified Person
shall actually recover any amounts under any applicable insurance policies, it shall offset the net
proceeds so received against any amounts owed by the Manager by reason of the indemnity provided
hereunder or, if all such amounts shall have been paid by the Manager in full prior to the actual
receipt of such net insurance proceeds, such Company Indemnified Person shall be subrogated, to the
extent of such payment, to any rights which such Company Indemnified Person may have against any
applicable insurer with respect to the subject matter underlying such indemnification claim and
such Company Indemnified Person shall assign any such rights to the Manager. If the amounts in
respect of which indemnification is sought arise out of the conduct of the business and affairs of
the Manager and also of any other Person for which the Company Indemnified Person hereunder was
then acting in a similar capacity, then the amount of the indemnification to be provided by the
Manager shall be limited to the Manager’s proportionate share thereof if so determined by the
Manager acting in good faith.
(g) In case any Claim is brought against any Indemnified Person in respect of which
indemnification may be sought by such Indemnified Person pursuant hereto, the Indemnified Person
shall give prompt written notice thereof to the indemnifying party, which notice shall include all
documents and information in the possession of or under the control of such Indemnified Person
reasonably necessary for the evaluation and/or defense of such Claim and shall specifically state
that indemnification for such Claim is being sought under this Section 10;
provided, however, that the failure of the Indemnified Person to so notify the
indemnifying party shall not limit or affect such Indemnified Person’s rights other than pursuant
to this Section 10 unless the failure to provide such notice results in material prejudice
to the indemnifying party. Upon receipt of such notice of Claim (together with such documents and
information from such Indemnified Person), the indemnifying party shall, at its sole cost and
expense, in good faith defend any such Claim with counsel reasonably satisfactory to such
Indemnified Person, which counsel may, without limiting the rights of such Indemnified Person
pursuant to the next succeeding sentence of this Section 10, also represent the
indemnifying party in such
18
investigation, action or proceeding. In the alternative, such Indemnified Person may elect to
conduct the defense of the Claim, if (i) such Indemnified Person reasonably determines that the
conduct of its defense by the indemnifying party could be materially prejudicial to its interests,
(ii) the indemnifying party refuses to assume such defense (or fails to give written notice to the
Indemnified Person within ten (10) days of receipt of a notice of Claim that the indemnifying party
assumes such defense), or (iii) the indemnifying party shall have failed, in such Indemnified
Person’s reasonable judgment, to defend the Claim in good faith. In no event shall the indemnifying
party be liable for fees and expenses of more than one counsel (in addition to any local counsel)
separate from their own counsel for all Indemnified Persons in connection with any one action or
separate but similar or related actions in the same jurisdiction arising out of the same general
allegations or circumstances. The indemnifying party may settle any Claim against such Indemnified
Person without such Indemnified Person’s consent, provided (i) such settlement is without any
Losses whatsoever to such Indemnified Person, (ii) the settlement does not include or require any
admission of liability or culpability by such Indemnified Person and (iii) the indemnifying party
obtains an effective written release of liability for such Indemnified Person from the party to the
Claim with whom such settlement is being made, which release must be reasonably acceptable to such
Indemnified Person, and a dismissal with prejudice with respect to all claims made by the party
against such Indemnified Person in connection with such Claim. The applicable Indemnified Person
shall reasonably cooperate with the indemnifying party, at the indemnifying party’s sole cost and
expense, in connection with the defense or settlement of any Claim in accordance with the terms
hereof. If such Indemnified Person is entitled pursuant to this Section 10 to elect to
defend such Claim by counsel of its own choosing and so elects, then the indemnifying party shall
be responsible for any good faith settlement of such Claim entered into by such Indemnified Person.
Except as provided in the immediately preceding sentence, no Indemnified Person may pay or settle
any Claim and seek reimbursement therefor under this Section 10.
Section 11. Term. Until this Agreement is terminated in accordance with its terms,
(i) this Agreement shall be in effect for an initial term commencing on the Effective Date and
expiring on the fifth (5th) anniversary of the Effective Date (the “Initial
Term”) and (ii) this Agreement shall automatically renew for a one-year term on each
anniversary date thereafter (each, a “Renewal Term” and, together with the Initial Term,
the “Term”), unless: (a) the Manager gives the Company not less than (90) days’ written
notice prior to expiration of the Initial Term, or, in the case of the expiration of the Renewal
Term, prior to the expiration of such Renewal Term, that it elects not to have this Agreement
automatically renew; or (b) the Company gives the Manager not less than ninety (90) days’ prior
written notice that it elects not to have this Agreement automatically renew and either (i) at the
time such notice is given the Company would have the right to terminate this Agreement pursuant to
Section 12 (in which case the notice shall specify the reason for such right) or (ii) the
Board of Trustees has made a determination in its good faith and reasonable judgment, based on
consultation with and advice from its financial advisor, that the total compensation payable to the
Manager pursuant to this Agreement is materially unfair to the Company and its Subsidiaries (taken
as a whole); provided, however, that the Company shall not have the right to elect
not to renew this Agreement pursuant to the foregoing clause (ii) unless (x) at least forty-five
(45) days prior to the delivery of the non-renewal notice the Company shall have delivered to the
Manager in writing a proposed fee arrangement that the Board of Trustees believes in its good faith
and reasonable judgment is fair
19
to both the Manager and the Company and its Subsidiaries and is supported by relevant
market-based benchmarks or other objective, reliable indicators of fairness and (y) the Manager
shall not have agreed to continue to provide the services under this Agreement pursuant to a
mutually agreeable revised fee arrangement prior to the time such non-renwal notice is delivered by
the Company. The Company and the Manager agree to negoatiate with one another in good faith in the
event that the Company proposes a revised fee arranagement pursuant to this Section 11.
Section 12. Termination.
(a) The Company may terminate this Agreement at any time, including during the Initial Term,
upon at least thirty (30) days’ prior written notice of termination from the Board of Trustees to
the Manager specifying the reason for termination as provided below, only if:
(i) the Manager engages in any act or omission that shall involve: the Manager acting or
omitting to act with deliberate dishonesty; the Manager receiving an improper personal benefit in
money, property or services; in the case of a criminal proceeding, the Manager having had
reasonable cause to believe that such act or omission was unlawful; or gross negligence, willful
misconduct, fraud or bad faith on the part of the Manager;
(ii) the Manager breaches or fails to perform under this Agreement in any material respect and
such breach or failure to perform shall continue unremedied for a period of thirty (30) days after
written notice thereof specifying such breach or failure to perform and requesting that the same be
remedied in such thirty (30)-day period unless such breach is not curable with such time frame and
the Manager shall have within such 30 day period diligently commenced efforts to remedy such breach
and such effort shall be continuing;
(iii) there is a commencement of any proceeding relating to the Bankruptcy or insolvency of
the Manager, including an order for relief in an involuntary Bankruptcy case or the authorization
or filing by the Manager of a voluntary Bankruptcy petition;
(iv) the Board of Trustees shall have determined, in its good faith judgment based on a
written opinion of outside legal counsel, that the failure to terminate this Agreement violates its
fiduciary duties to CHC and its shareholders under applicable law;
(v) a Manager Change of Control has occurred and the Board of Trustees reasonably determines
that such Manager Change of Control is materially detrimental to the Company and its Subsidiaries;
(vi) Xxxxxx Xxxxxx ceases to be involved in the active management and operations of the
Manager and, at such time or at any time thereafter, fewer than three of Xxxxxxx Xxxxx, Xxxxx
Xxxxxxxx, Xxxxx Xxxxx, Xxxxxx Xxxxxxxx and Xxxx Xxxxxxx (or fewer than three other individuals
reasonably approved by the Board of Trustees to replace such individuals) are involved in the
active management and operations of the Manager;
(vii) the Manager or any Person who beneficially owns 50% or more of the outstanding equity
interests in the Manager is convicted (including a plea of nolo contendere) of a felony for conduct
involving the Company’s assets, business or affairs;
20
(viii) the Manager is unable to perform its obligations under this Agreement;
provided, however, that the unavailability of any specific individual to serve as
an employee or officer of the Manager shall not be deemed to render the Manager unable to perform
its obligation under this Agreement; or
(ix) there is a dissolution of the Manager.
(b) The Company may also terminate this Agreement at any time at the election of the Board of
Trustees, for any reason not specified in Section 12(a) or for no reason, upon not less
than ninety (90) days’ prior written notice to the Manager, provided that (in addition to
amounts payable to the Manager through the date of termination pursuant to Section 13)
simultaneously with, and as a condition to the effectiveness of, such termination the Company shall
pay the Termination Fee to the Manager, in cash by wire transfer to an account of the Manager
designated in writing by the Manager.
(c) The Company may terminate this Agreement, immediately upon, and within the six (6) month
period following, a Company Change of Control, by providing written notice of such termination to
the Manager, and such termination shall be effective upon the date such notice is delivered to the
Manager, provided that (in addition to amounts payable to the Manager through the date of
termination pursuant to Section 13) simultaneously with, and as a condition to the
effectiveness of, such termination the Company shall pay the Termination Fee to the Manager, in
cash by wire transfer to an account of the Manager designated in writing by the Manager.
(d) The Manager may terminate this Agreement for any reason or for no reason at any time,
including during the Initial Term or prior to any Renewal Term, upon not less than thirty (30) days
prior written notice to the Company during the first year of the Initial Term, and thereafter upon
not less than one hundred twenty (120) days’ prior written notice to the Company.
(e) The Manager may terminate this Agreement in the event the Company becomes regulated as an
“investment company” under the Investment Company Act, with such termination deemed to have
occurred immediately prior to such event.
(f) The Manager may terminate this Agreement for Good Reason upon at least thirty (30) days’
prior written notice to the Company, which notice shall provide a reasonably detailed description
of the actions or failures to act by the Company and/or the Board of Trustees that the Manager
determined to constitute Good Reason. If the Manager terminates this Agreement pursuant to this
Section 12(f), then (in addition to amounts payable to the Manager through the date of
termination pursuant to Section 13) within five (5) Business Days following the effective
date of such termination, the Company shall pay the Termination Fee to the Manager, in cash by wire
transfer to an account of the Manager designated in writing by the Manager.
(g) The Manager may terminate this Agreement immediately upon, and within the six month period
following, the consummation of a Company Change of Control by providing written notice of such
termination to the Company, and such termination shall be effective upon the date such notice is
delivered to the Company. If the Manager terminates this Agreement
21
pursuant to this Section 12(g), then (in addition to amounts payable to the Manager
through the date of termination pursuant to Section 13) within five (5) Business Days
following the effective date of such termination, the Company shall pay the Termination Fee to the
Manager, in cash by wire transfer to an account of the Manager designated in writing by the
Manager.
(h) This Agreement shall automatically terminate upon an assignment by the Manager not in
accordance with Section 14 of this Agreement.
Section 13. Survival; Action Upon Termination. From and after the effective date of
termination of this Agreement pursuant to Section 11 or 12 of this Agreement, the
Manager shall not be entitled to compensation for further services under this Agreement, but shall
be paid all compensation and reimbursements accruing to the date of termination (including the Base
Management Fee and the Incentive Fee, if any). Upon such termination, the Manager shall (i)
promptly deliver to the Board of Trustees all property and documents of the Company then in the
custody of the Manager and (ii) otherwise cooperate with the Company, as reasonably requested by
the Company and at the Company’s sole cost and expense, in the orderly transition of the duties of
the Manager from the Manager to another external manager of the Company or to employees of the
Company. Sections 4, 8, 9, 10, 11, 12, 13,
16, 17, 18, 19, 20, 21, 23 and 25
shall survive the termination of this Agreement.
Section 14. Assignment. The Manager may not assign this Agreement, in whole or in
part, without the prior written consent of CHC after the approval of the Board of Trustees, which
consent shall not be unreasonably withheld, conditioned or delayed; provided,
however, that the Manager may assign this Agreement to any Majority-Owned Affiliate of
Island Capital Group or Xxxxxx X. Xxxxxx without the consent of CHC and the approval of the Board
of Trustees, provided that such assignee shall have the capacity and ability to provide the
services to be provided by the Manager. The assignee shall execute and deliver to the Company a
counterpart of this Agreement naming such assignee as Manager, and shall agree in writing to be
bound by the obligations hereunder. The Company may not assign this Agreement, in whole or in
part, without the prior written consent of the Manager in its sole discretion; provided,
however, that, subject to the Manager’s termination rights under Section 12, this
Agreement may be assigned to any successor entity in a Company Change of Control transaction, in
which case such successor entity shall agree to be bound by all of the terms of this Agreement and
by the terms of such assignment in the same manner as the Company is bound under this Agreement.
Section 15. Representations and Warranties.
(a) CHC and CCG, jointly and severally, hereby make the following representations and
warranties to the Manager:
(i) CHC is a statutory trust duly created, validly existing and in good standing under the
laws of the State of Delaware. CCG is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Each of CHC and CCG has all power and authority
required to execute and deliver this Agreement and to perform all of its duties and obligations
hereunder.
22
(ii) The execution, delivery, and performance of this Agreement by CHC and CCG have been duly
authorized by all necessary action on the part of CHC and CCG.
(iii) This Agreement constitutes a legal, valid, and binding agreement of CHC and CCG and is
enforceable against each of them in accordance with its terms.
(b) The Manager hereby makes the following representations and warranties to the Company:
(i) The Manager is a limited liability company duly formed, validly existing, and in good
standing under the laws of the State of Delaware. The Manager has all power and authority required
to execute and deliver this Agreement and to perform all of its duties and obligations hereunder.
(ii) The execution, delivery, and performance of this Agreement by the Manager have been duly
authorized by all necessary action on the part of the Manager.
(iii) This Agreement constitutes a legal, valid, and binding agreement of the Manager
enforceable against the Manager in accordance with its terms.
Section 16. Notices. All notices and other communications given or made pursuant
hereto shall be in writing and delivered personally or by courier, overnight delivery service,
certified or registered mail with postage prepaid, if such notice is addressed to the party to be
notified at such party’s address as set forth below, or as subsequently modified by written notice
in accordance with this Section 16. All such notices shall be duly given and effective
upon receipt (or refusal of receipt):
(a) If to the Company, to:
(b) If to the Manager:
Island Centerline Manager LLC
c/o Island Capital Group LLC
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: President
c/o Island Capital Group LLC
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: President
Section 17. Severability. The provisions of this Agreement shall be deemed severable
and the invalidity or unenforceability of any provision shall not affect the validity or
enforceability of the other provisions hereof. If any provision of this Agreement or the
application thereof to any Person or circumstance is found to be invalid or unenforceable in any
jurisdiction, (a) a suitable and equitable provision shall be substituted therefor in order to
carry
23
out, so far as may be valid and enforceable, the intent and purpose of such invalid or
unenforceable provision and (b) the remainder of this Agreement and the application of such
provision to other Persons or circumstances shall not be affected by such invalidity or
unenforceability, nor shall such invalidity or unenforceability affect the validity or
enforceability of such provision, or the application thereof, in any other jurisdiction.
Section 18. Entire Agreement; No Third Party Beneficiaries. This Agreement, including
the schedule attached hereto, constitutes the entire agreement of the parties and supersedes any
and all other prior agreements and undertakings, both written and oral, among the parties, or any
of them, with respect to the subject matter hereof. This Agreement does not, and is not intended
to, confer upon any other Person any right, benefit or remedy hereunder (other than as provided
expressly in Section 10 regarding indemnification, which is intended to be for the benefit
of the Persons covered thereby).
Section 19. Amendment; Waiver. This Agreement may be amended only in a writing signed
by all parties. Any waiver of rights hereunder must be set forth in writing and signed by the
party against whom the waiver is to be effective. A waiver of any breach or failure to enforce any
of the terms or conditions of this Agreement shall not in any way affect, limit or waive either
party’s rights at any time to enforce strict compliance thereafter with every term or condition of
this Agreement.
Section 20. Governing Law. This Agreement shall be governed by, and construed and
enforced in accordance with, the laws of the State of New York without regard to the conflict of
laws provisions thereof
Section 21. Dispute Resolution; Mediation; Jurisdiction.
(a) Except as provided for in Section 7(d), in the event of any dispute, controversy
or claim arising out of or relating to this Agreement or the breach, termination or validity hereof
(each a “Dispute”), upon the written notice of any party, the other parties shall attempt
in good faith to negotiate a resolution of the Dispute. If the other parties are unable for any
reason to resolve a Dispute within 30 days after the receipt of such notice, the Dispute shall be
submitted to mediation in accordance with Section 21(b).
(b) Any Dispute not resolved pursuant to Section 21(a) shall, at the request of either
party (a “Mediation Request”), be submitted to non-binding mediation in accordance with the
then current International Institute for Conflict Prevention and Resolution Mediation Procedure
(the “Procedure”), except as modified herein. The mediation shall be held in New York, New
York. The parties shall have 20 days from receipt by a party of a Mediation Request to agree on a
mediator. If no mediator has been agreed upon by the parties within 20 days of receipt by a party
(or parties) of a Mediation Request, then any party may request (on written notice to the other
parties), that the International Institute for Conflict Prevention and Resolution appoint a
mediator in accordance with the Procedure. All mediation pursuant to this clause shall be
confidential and shall be treated as compromise and settlement negotiations, and no oral or
documentary representations made by the parties during such mediation shall be admissible for any
purpose in any subsequent proceedings. No party shall disclose or permit the disclosure of any
information about the evidence adduced or the documents produced by the other parties in
24
the mediation proceedings or about the existence, contents or results of the mediation without
the prior written consent of such other parties except in the course of a judicial or regulatory
proceeding or as may be required by law or requested by a governmental authority or securities
exchange. Before making any disclosure permitted by the preceding sentence, the party intending to
make such disclosure shall give the other parties reasonable written notice of the intended
disclosure and afford the other parties a reasonable opportunity to protect their interests. If
the Dispute has not been resolved within 60 days of the appointment of a mediator, or within 90
days of receipt by a party of a Mediation Request (whichever occurs sooner), or within such longer
period as the parties may agree to in writing, then any party may file an action on the Dispute in
any court having jurisdiction in accordance with Section 21(c).
(c) Each of the parties hereby irrevocably and unconditionally consents to submit to the
exclusive jurisdiction of the courts of the State of New York and the courts of the United States
of America located in the City, County and State of New York for any litigation arising out of or
relating to this Agreement (and agrees not to commence any litigation relating hereto except in
such courts), and further agrees that service of any process, summons, notice or document by U.S.
registered mail to its respective address set forth in Section 16, shall be effective
service of process for any litigation brought against it in any such court. Each of the parties
hereby irrevocably and unconditionally waives any objection to the laying of venue of any
litigation arising out of this Agreement in the courts of the State of New York or the courts of
the United States of America located in the City, County and State of New York and hereby further
irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any
such litigation brought in any such court has been brought in an inconvenient forum. Each of the
parties hereby irrevocably and unconditionally waives any right it may have to trial by jury in
connection with any litigation arising out of or relating to this Agreement.
Section 22. Availability of Equitable Remedies. Since a breach of the provisions of
this Agreement or any transaction contemplated hereby could not adequately be compensated by money
damages, a party shall be entitled, in addition to any other right or remedy available to it, to an
injunction restraining such breach or a threatened breach and to specific performance of any such
provision of this Agreement and no bond or other security shall be required in connection
therewith, and the parties hereby consent to the issuance of such an injunction and to the ordering
of specific performance.
Section 23. Joint and Several Obligations; Failure to Pay. CHC and CCG shall be
jointly and severally liable for the obligations of either of them under this Agreement. If for
any reason the Company does not pay the Base Management Fee, the Incentive Fee or any other amount
due under this Agreement when due, then such amount shall accrue interest at a rate of 1% per month
and shall continue to be payable and shall be paid by the Company as soon as reasonably
practicable; provided, however, that the foregoing shall not apply to any amount
that shall have become due hereunder which is then the subject of a dispute between the parties
acting in good faith and, in any such case, no interest shall accrue on any such amount and no such
amount shall be payable hereunder until such dispute has been finally resolved in accordance with
the terms hereof. The preceding sentence shall not limit any other remedies of the Manager in the
event the amounts are not paid when due.
25
Section 24. Construction. The headings of the Sections in this Agreement are provided
for convenience only, are not part of the agreement of the parties and shall not affect the
construction or interpretation of this Agreement. The language used in this Agreement is the
language chosen by the parties to express their mutual intent, and no rule of strict construction
shall be applied against any party. This Agreement was negotiated by the parties with the benefit
of legal representation. If an ambiguity or question or intent or interpretation arises, the
Agreement shall be construed as if drafted jointly by the parties and no presumption or burden of
proof shall arise favoring and or disfavoring a party by virtue of the authorship of any of the
provisions of this Agreement.
Section 25. Non-Compete. During the term of this Agreement and during the one (1)
year period following the termination of this Agreement, the Manager shall not, and shall not cause
or permit any of its Affiliates to, directly or indirectly, engage in the LIHTC Business or the
Agency Lending Business; provided, however, that this Section 25 shall
immediately cease to apply: (i) with respect to any lending program of any Agency Lender, from and
after the time that the Company ceases to participate in such program for any reason; and (ii) in
its entirety, from and after any termination of this Agreement by the Manager pursuant to
Section 12(f) (Good Reason) or Section 12(g) (Company Change of Control) or by the
Company pursuant to Section 12(b) (No Reason) or Section 12(c) (Company Change of
Control). This Section 25 shall not prohibit the ownership by the Manager and/or its
Affiliates, collectively, of less than five percent (5%) of any class of publicly-traded security
of any company.
Section 26. Section 409A. Notwithstanding anything to the contrary in this Agreement,
in the event that one or more payments under this Agreement are subject to Section 409A of the Code
and would cause the Manager to incur any additional tax or interest under Section 409A of the Code
or any Treasury Regulations thereunder, the Company and the Manager shall, at no additional cost to
the Company, mutually amend such provision, provided that such amendment shall maintain, to the
extent practicable without any additional cost to the Company, the original intent and economic
benefit to the Manager of the applicable provision without violating the provisions of Section 409A
of the Code.
Section 27. Counterparts. This Agreement may be executed in one or more counterparts
(including by facsimile or electronic pdf submission), each of which when executed shall be deemed
to be an original, but all of which shall together constitute one and the same instrument.
Section 28. Further Actions. At any time and from time to time, each party agrees, at
its expense (except as otherwise provided for herein), to take such actions and to execute and
deliver such documents as reasonably may be necessary to effectuate the purposes of this Agreement
and any transaction contemplated hereby.
Section 29. Independent Contractor; Ownership and Control. The parties hereto
expressly acknowledge and agree that the Manager is at all times acting and performing under this
Agreement as an independent contractor, retaining control over and responsibility for its own
operations and personnel, and that no act or omission by either the Company or the Manager shall be
construed to make or constitute the other its partner, member, principal, agent, joint venturer or
associate and the parties agree to report the forgoing treatment of the Manager for tax
26
purposes in any applicable tax filing. The Company shall at all times retain and exercise
complete dominion and control over the assets and operations of the Company and its Subsidiaries.
The Company shall own and/or hold all licenses, permits and contracts obtained by it with respect
to the business of the Company.
[SIGNATURE PAGE FOLLOWS]
27
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their
representatives on the date first written above.
| COMPANY CENTERLINE HOLDING COMPANY, a Delaware statutory trust |
||||
| By: | /s/ Xxxx X. Xxxxxxxxx | |||
| Name: | Xxxx X. Xxxxxxxxx | |||
| Title: | President & CEO | |||
| CENTERLINE CAPITAL GROUP INC., a Delaware corporation |
||||
| By: | /s/ Xxxx X. Xxxxxxxxx | |||
| Name: | Xxxx X. Xxxxxxxxx | |||
| Title: | President & CEO | |||
| MANAGER ISLAND CENTERLINE MANAGER LLC, a Delaware limited liability company |
||||
| By: | /s/ Xxxxxxx Xxxxx | |||
| Name: | Xxxxxxx Xxxxx | |||
| Title: | President | |||
