EXHIBIT 10.3

 

ASSET MANAGEMENT AGREEMENT (the “Agreement”), dated as of December 21, 2012,
among ALTISOURCE RESIDENTIAL CORPORATION, a Maryland corporation
(“Residential”), ALTISOURCE RESIDENTIAL, L.P., a Delaware limited partnership
(the “Partnership”), and ALTISOURCE ASSET MANAGEMENT CORPORATION, a U.S. Virgin
Islands corporation (the “Asset Manager”).

 

RECITALS

 

WHEREAS, Residential and the Partnership desire to retain the Asset Manager as
their exclusive provider of asset management and corporate governance services,
on the terms and conditions hereinafter set forth, and the Asset Manager wishes
to be retained to provide such services.

 

NOW, THEREFORE, in consideration of the premises and for other good and valuable
consideration, the parties hereby agree as follows:

 

1.             Duties of the Asset Manager.

 

(a)           Residential and the Partnership, each hereby employs the Asset
Manager to provide asset management and corporate governance services to
Residential and the Partnership, subject to the supervision of the Board of
Directors of Residential (the “Board of Directors”) and the general partner of
the Partnership (the “General Partner”), for the period and upon the terms
herein set forth, in each case, (x) in accordance with the investment
objectives, policies and restrictions set forth by the Board of Directors and
the General Partner, and (y) in accordance with all other applicable federal,
state and territorial laws, rules and regulations. Without limiting the
generality of the foregoing, the Asset Manager shall, during the term and
subject to the provisions of this Agreement, (i) determine the composition of
Residential’s and the Partnership’s portfolio of Real Estate Assets (as defined
herein), the nature and timing of the changes therein and the manner of
implementing such changes (including through the sale or purchase of Real Estate
Assets); (ii) identify, evaluate and negotiate the structure of the investments
in Real Estate Assets made by Residential and the Partnership; (iii) perform due
diligence on prospective investments in Real Estate Assets; (iv) monitor
Residential’s and the Partnership’s investments in Real Estate Assets;
(v) provide corporate governance services to Residential and the Partnership;
and (vi) provide Residential with such other research and related services as
Residential may, from time to time, reasonably require. In the event that
Residential determines to acquire debt or other financing for the purpose of any
investment in Real Estate Assets, the Asset Manager will arrange for such
financing on Residential’s behalf, subject to the oversight and approval of the
Board of Directors and the General Partner. If it is necessary for the Asset
Manager to make investments in Real Estate Assets on behalf of Residential or
the Partnership through a special purpose vehicle, the Asset Manager shall have
authority to create or arrange for the creation of such special purpose vehicle
and to make such investments in Real Estate Assets through such special purpose
vehicle.  For purposes of this Agreement, the term “Real Estate Assets” shall
include the following asset classes: (A) single-family residential properties
for rental, (B) non-performing residential mortgage loans, (C) title insurance
and reinsurance, and (D) any other similar assets or investments as may be
agreed to between the parties.

 

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(b)           The Asset Manager hereby accepts such employment and agrees during
the term hereof to render the services described herein for the compensation
provided herein.

 

(c)           The Asset 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 Residential or the
Partnership in any way or otherwise be deemed an agent of Residential or the
Partnership.

 

(d)           The Asset Manager shall keep and preserve for the period required
by Residential and the General Partner any books and records relevant to the
provision of its asset management and corporate governance services to
Residential or the Partnership and shall specifically maintain all books and
records with respect to Residential’s or the Partnership’s portfolio
transactions and shall render to Residential such periodic and special reports
as Residential or the General Partner may reasonably request. The Asset Manager
agrees that all records that it maintains for Residential and the General
Partner are the property of Residential and/or the Partnership and will
surrender promptly to Residential or the Partnership, as applicable, any such
records upon Residential’s or the General Partner’s request, provided that the
Asset Manager may retain a copy of such records.

 

(e)           The Asset Manager is the sole holder of common stock of NewSource
Reinsurance Company Ltd. (“NewSource”). The Asset Manager shall vote its shares
of common stock in NewSource independently of its obligations under this
Agreement and without regard to the effects of such vote on Residential or the
Partnership.  Residential and the Partnership hereby confirm that the Asset
Manager has no duty to consider their views or interests in voting the NewSource
shares of common stock and will not request the Asset Manager to vote such
shares in any particular way.

 

2.             Devotion of Time; Additional Activities.

 

(a)           So long as Residential and the Partnership, in the aggregate, have
on hand the Minimum Capital Amount, the Asset Manager will not contract or
engage with any other party to provide the same or substantially similar
services as set forth herein without the prior written consent of Residential
and the Partnership, which may be withheld by Residential and the Partnership in
their sole discretion. For purposes of this Section 2(a), “Minimum Capital
Amount” means, as of the applicable measurement date, an average of $50,000,000
of capital available for investment over the previous two fiscal quarters.

 

(b)           The Asset Manager and its affiliates will provide Residential and
the Partnership with a management team, including a chief executive officer, a
chief financial officer, a general counsel and other appropriate support
personnel. The Asset Manager is not obligated to dedicate any of its personnel
exclusively to Residential or the Partnership, nor is the Asset Manager or its
personnel obligated to dedicate any specific portion of its or their time to
Residential or the Partnership.

 

(c)           Managers, partners, officers, employees, personnel and agents of
the Asset Manager or affiliates of the Asset Manager may serve as directors,
officers, employees, personnel, agents, nominees or signatories for Residential
and/or the Partnership, to the extent

 

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permitted by their governing documents or by any resolutions duly adopted by the
Board of Directors pursuant to Residential’s governing documents or approval by
the General Partner in accordance with the Partnership’s governing documents.
When executing documents or otherwise acting in such capacities for Residential
or the Partnership, such persons shall use their respective titles in
Residential or the Partnership.

 

3.             Reimbursement of Expenses. Residential shall reimburse the Asset
Manager on a monthly basis for (a) direct and indirect expenses it incurs or
payments in makes on behalf of Residential, the Partnership or any other
respective subsidiaries thereof, including, but not limited to, the allocable
compensation and routine overhead expenses of all employees and staff of the
Asset Manager, when and to the extent engaged in providing asset management and
corporate governance services hereunder, (b) all other necessary or appropriate
expenses allocable to Residential, the Partnership or any other respective
subsidiaries thereof or otherwise reasonably incurred by the Asset Manager in
connection with the performance of the Asset Manager’s duties hereunder and
(c) all costs and expenses incurred by the Asset Manager in connection with
operations of Residential, the Partnership or any other respective subsidiaries
thereof or any transactions in which Residential, the Partnership or any other
respective subsidiaries thereof engage.  Without limiting the foregoing,
Residential shall reimburse the Asset Manager (to the extent incurred by the
Asset Manager) and retain all responsibility for those costs and expenses
relating to: (i) the organization and corporate governance of Residential, the
Partnership or any of the respective subsidiaries thereof; (ii) calculating the
net asset value of Residential, the Partnership or any other respective
subsidiaries thereof (including the cost and expenses of any independent
valuation firm); (iii) fees and expenses payable to third parties, including
agents, consultants or other advisors, in monitoring financial and legal affairs
for Residential, the Partnership or any other respective subsidiaries thereof
and in monitoring investments in Real Estate Assets held by any of the foregoing
and performing due diligence on their prospective investments in Real Estate
Assets; (iv) interest payable on debt, if any, incurred to finance investments
in Real Estate Assets by Residential, the Partnership or any other respective
subsidiaries thereof; (v) offerings of the equity or other securities of
Residential, the Partnership or any of their respective subsidiaries; (vi) asset
management and incentive fees payable to third parties; (vii) fees payable to
third parties, including agents, consultants or other advisors, relating to, or
associated with, evaluating and making investments in Real Estate Assets;
(viii) transfer agent and custodial fees; (ix) federal, state and territorial
registration fees; (x) all costs of registration and listing the capital stock
or other securities of Residential, the Partnership or any other respective
subsidiaries thereof on any securities exchange; (x) federal, state and local
taxes; independent directors’ fees and expenses; (xi) costs of preparing and
filing reports or other documents required by the Securities and Exchange
Commission or any other cost of compliance with federal or state securities
laws; (xii) costs of any reports, proxy statements or other notices to
stockholders, including printing costs; (xiii) the portion of the directors and
officers/errors and omissions liability insurance, and any other insurance
premiums allocable to Residential, the Partnership or any other respective
subsidiaries thereof; (xiv) direct costs and expenses of administration,
including printing, mailing, long distance telephone, copying, secretarial and
other staff, independent auditors and outside legal costs; and (xv) all other
expenses incurred by the Asset Manager in connection with administering the
business of Residential, the Partnership or any subsidiary thereof.

 

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4.             Compensation of the Asset Manager.

 

(a)           On the last day of each fiscal quarter of Residential, Residential
agrees to pay, and the Asset Manager agree to accept, as compensation for the
services provided by the Asset Manager hereunder, an incentive fee (the
“Incentive Fee”) as hereinafter set forth and by way of example on Exhibit I
attached hereto:

 

(i)            first, 2% of the amount of cash dividends paid by Residential to
its shareholders with respect to such cash during such fiscal quarter until the
Quarterly Per Share Distribution Amount exceeds the First Threshold during such
fiscal quarter, as such amount may be adjusted from time to time pursuant to
Section 4(d) hereof;

 

(ii)           second, 15% of the amount of additional cash dividends paid by
Residential to its shareholders with respect to such cash during such fiscal
quarter until the Quarterly Per Share Distribution Amount exceeds the Second
Threshold during such fiscal quarter, as such amount may be adjusted from time
to time pursuant to Section 4(d) hereof;

 

(iii)          third, 25% of the amount of cash dividends paid by Residential to
its shareholders with respect to such cash during such fiscal quarter until the
Quarterly Per Share Distribution Amount exceeds the Third Threshold during such
fiscal quarter, as such amount may be adjusted from time to time pursuant to
Section 4(d) hereof; and

 

(iv)          thereafter, 50% of the amount of cash dividends paid by
Residential to its shareholders with respect to such cash during such fiscal
quarter.

 

Notwithstanding the foregoing, in the case of cash dividends of Cash From
Capital Transactions paid by Residential to its shareholders, no Incentive Fee
shall be paid to the Asset Manager in accordance with this Section 4(a) unless
and until a hypothetical holder of one share of Class B Common Stock acquired on
the Separation Date has received with respect to such share of Class B Common
Stock, during the period since the Separation Date through such date,
distributions of Available Cash that are deemed to be Cash From Capital
Transactions in an aggregate amount equal to $12.74; provided that in
calculating such amount, any dividends of Cash From Capital Transaction paid to
holders of Class A Common Stock in preference to holders of Class B Common Stock
shall be deemed have been distributed to all of Residential’s stockholders on a
pari passu basis.

 

(b)           For purposes of this Agreement Residential shall be deemed to have
made quarterly distributions to its shareholders of all of its Available Cash.

 

(c)           For purposes of this Section 4, the following terms shall have the
following meanings:

 

(i)            “Available Cash” shall mean, with respect to any fiscal quarter:

 

A.                                    the sum of:

 

(1)                                 all cash receipts of Residential during such
quarter from all sources (including, without limitation, distributions of cash
received from the Partnership and cash proceeds from Capital Transactions); and

 

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(2)                                 any reduction in reserves with respect to
such quarter from the level at the end of the prior quarter;

 

B.                                    less the sum of:

 

(1)                                 all cash disbursements of Residential during
such quarter, including, without limitation, disbursements for operating
expenses, taxes, if any, debt service (including, without limitation, the
payment of principal, premium and interest), capital expenditures and
contributions, if any, to the Partnership; and

 

(2)                                 any reserves established with respect to
such quarter, and any increase in reserves established with respect to prior
quarters, in such amounts as the Board of Directors determines in its reasonable
discretion to be necessary or appropriate (x) to provide for the proper conduct
of the business of Residential and its subsidiaries (including, without
limitation, reserves for future capital expenditures or the purchase or other
acquisition of Real Estate Assets) or (y) because the distribution of such
amounts would be prohibited by applicable law or by any loan agreement, security
agreement, mortgage, debt instrument or other agreement or obligation to which
Residential or any of its subsidiaries is a party or by which any of them is
bound or by which any of their assets are subject.

 

Notwithstanding the foregoing, “Available Cash” with respect to any fiscal
quarter shall include any cash receipts (to the extent such cash receipts are
attributable to transactions and operations during such quarter) received by
Residential after the end of such quarter.

 

(ii)           “Capital Transactions” shall mean (a) borrowings, refinancings or
refundings of indebtedness and sales of debt securities (other than for working
capital purposes and other than for items purchased on open account in the
ordinary course of business) by Residential or its subsidiaries, (b) sales of
equity interests by Residential or its subsidiaries and (c) sales or other
voluntary or involuntary dispositions of any assets of Residential or its
subsidiaries (other than (x) sales or other dispositions of assets in the
ordinary course of business, (y) sales or other dispositions of other current
assets including, without limitation, receivables and accounts and (z) sales or
other dispositions of assets as a part of normal retirements or replacements),
in each case prior to the commencement of the dissolution and liquidation of
Residential.  For the purposes of this definition, sales or other dispositions
of assets in the ordinary course of business shall be deemed to include all
sales or other dispositions of assets by Residential other than the sale or
other disposition by Residential or its subsidiaries, in a single transaction or
series of related transactions, of assets that have an aggregate value in excess
of 50% of the aggregate value of all assets held by Residential and its
subsidiaries on a consolidated

 

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basis immediately prior to the consummation of such transaction or, in the case
of a series of related transactions, the first such transaction.

 

(iii)          “Cash From Capital Transactions” shall mean, at any date, any
proceeds received by Residential or its subsidiaries with respect to a Capital
Transaction, net of any (i) reasonable transaction expenses incurred by
Residential or its subsidiaries in connection therewith or (ii) payments or
prepayments of principal and premium required by reason of loan agreements
(including, without limitation, covenants and default provisions therein) or by
lenders, in each case, in connection with such Capital Transaction; provided,
that any payment or prepayment of principal, whether or not then due, shall be
deemed, at the election and in the discretion of the Board of Directors to be
refunded or refinanced by any indebtedness incurred or to be incurred by
Residential or its subsidiaries simultaneously with or within 180 days prior to
or after such payment or prepayment to the extent of the principal amount of
such indebtedness so incurred.

 

(iv)          “Class A Common Stock” shall mean the Class A Common Stock, $0.01
par value per share, of Residential.

 

(v)           “Class B Common Stock” shall mean the Class B Common Stock, $0.01
par value per share, of Residential.

 

(vi)          “First Threshold” shall mean $0.161 per share.

 

(vii)         “Quarterly Per Share Distribution Amount” shall mean the aggregate
amount of dividend distributions made during the applicable quarter divided by
the average number of shares of common stock of Residential outstanding as of
the applicable dividend distribution date.

 

(viii)        “Second Threshold” shall mean $0.193 per share.

 

(ix)          “Separation Date” shall have the meaning ascribed to such term in
the Separation Agreement, dated December 21, 2012 by and between Residential and
Altisource Portfolio Solutions S.A.

 

(x)           “Third Threshold” shall mean $0.257 per share.

 

(xi)          “Thresholds” shall mean each of the First Threshold, Second
Threshold and Third Threshold.

 

(d)           Each of the Thresholds shall be adjusted from time to time as
follows:

 

(i)            In the event of the payment of any dividend of Cash from Capital
Transactions by Residential to its shareholders, each of the Thresholds shall be
reduced to by an amount equal to the applicable Threshold multiplied by a
fraction (i) the numerator of which shall be the amount of distributions of
Available Cash that are deemed to be Cash From Capital Transactions that a
hypothetical holder of one share of Class B Common Stock acquired on the
Separation Date has received with respect to such share of Class B Common Stock,
during the period since the Separation Date through such date, and
(ii) denominator of which shall be

 

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$12.74; provided that in no event shall such fraction be greater than 1;
provided further that in calculating the numerator of such fraction, any
dividends of Cash From Capital Transactions paid to holders of Class A Common
Stock in preference to holders of Class B Common Stock shall be deemed have been
distributed to all of Residential’s stockholders on a pari passu basis.

 

(ii)           If Residential at any time subdivides (by any stock split, stock
dividend, reclassification, recapitalization or other similar transaction) its
common stock into a greater number of shares, the Thresholds shall be
proportionately decreased.  If Residential at any time combines (by reverse
stock split, reclassification, recapitalization or other similar transaction)
its common stock into a smaller number of shares, the Thresholds shall be
proportionately increased.

 

(e)           Residential shall make any payments due hereunder to the Asset
Manager or to the Asset Manager’s designee as the Asset Manager may otherwise
direct.

 

5.             Regulatory Matters.  Each of Residential and the Partnership
acknowledges that the Asset Manager is not registered as an investment adviser
under the Investment Advisers Act of 1940, as amended (the “Advisers Act”) and
that the parties do not anticipate that the Asset Manager shall be required to
so register in connection with the provision of asset management services by the
Asset Manager pursuant to this Agreement since the Asset Manager is not
providing advice to Residential or the Partnership with respect to the purchase,
sale or investment of securities as defined under the Advisers Act. 
Notwithstanding anything contained herein to the contrary, each of the parties
acknowledges and agrees that in the event the services to be provided by the
Asset Manager pursuant to the terms of this Agreement are expanded, the Asset
Manager may be required to register under the Advisers Act; provided, however,
the Asset Manager shall not be required to perform any additional services
pursuant to this Agreement if the Asset Manager determines in its sole
discretion that the provision of such services will require the Asset Manager to
register under the Advisers Act.  The Asset Manager agrees that its activities
will at all times be in compliance in all material respects with all applicable
federal, state and territorial laws governing its operations and investments.

 

6.             Employment of the Asset Manager.

 

(a)           The Asset Manager may engage in any other business or render
similar or different services to others including, without limitation, the
direct or indirect sponsorship or management of other investment based accounts
or commingled pools of capital, however structured, having investment objectives
similar to those of Residential or the Partnership, so long as its services to
Residential and the Partnership hereunder are not impaired thereby, and nothing
in this Agreement shall limit or restrict the right of any manager, partner,
officer or employee of the Asset Manager 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. The Asset Manager assumes no responsibility under this
Agreement other than to render the services called for hereunder. It is
understood that directors, officers, employees, partners and shareholders of
Residential or the Partnership are or may become interested in the Asset Manager
and its affiliates, as directors, officers, employees, partners, stockholders,
members, asset managers or otherwise, and that the Asset Manager and directors,
officers, employees, partners, stockholders, members and managers of the Asset

 

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Manager and its affiliates are or may become similarly interested in Residential
or the Partnership as shareholders or partners or otherwise.

 

(b)           During the term of this Agreement, (i) Residential shall hold all
of its assets and investments through the Partnership, (ii) the Asset Manager
shall be the exclusive provider of asset management and corporate governance
services to Residential and the Partnership, and (iii) Residential and the
Partnership shall not employ or contract with any other party to receive the
same or substantially similar services as set forth herein without the prior
written consent of the Asset Manager, which may be withheld by the Asset Manager
in its sole discretion.

 

7.             Responsibility of Dual Directors, Officers and/or Employees.  If
any person who is a manager, partner, officer or employee of the Asset Manager
is or becomes a director, officer and/or employee of Residential or the
Partnership and acts as such in any business of Residential or the Partnership,
then such manager, partner, officer and/or employee of the Asset Manager shall
be deemed to be acting in such capacity solely for Residential or the
Partnership, as applicable, and not as a manager, partner, officer or employee
of the Asset Manager or under the control or direction of the Asset Manager,
even if paid by the Asset Manager.

 

8.             Limitation of Liability of the Asset Manager; Indemnification. 
The Asset Manager (and its officers, managers, partners, agents, employees,
controlling persons, members and any other person or entity affiliated with the
Asset Manager) shall not be liable to Residential or the Partnership for any
action taken or omitted to be taken by the Asset Manager in connection with the
performance of any of its duties or obligations under this Agreement or
otherwise as an asset manager of Residential or the Partnership with respect to
the receipt of compensation for services, and each of Residential and the
Partnership shall indemnify, defend and protect the Asset Manager (and its
officers, managers, partners, agents, employees, controlling persons, members
and any other person or entity affiliated with the Asset Manager, each of whom
shall be deemed a third party beneficiary hereof) (collectively, the
“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 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
Partnership, its partners, or Residential or its shareholders) arising out of or
otherwise based upon the performance of any of the Asset Manager’s duties or
obligations under this Agreement or otherwise as an asset manager of Residential
and the Partnership. Notwithstanding the preceding sentence of this Paragraph 8
to the contrary, nothing contained herein shall protect or be deemed to protect
the Indemnified Parties against or entitle or be deemed to entitle the
Indemnified Parties to indemnification in respect of, any liability to
Residential or its shareholders, or the Partnership or its partners, to which
the Indemnified Parties would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of the Asset
Manager’s duties or by reason of the reckless disregard of the Asset Manager’s
duties and obligations under this Agreement.

 

9.             No Joint Venture. Nothing in this Agreement shall be construed to
make Residential, the Partnership and the Asset Manager partners or joint
venturers or impose any liability as such on any of them.

 

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10.          Term; Termination.

 

(a)           This Agreement shall be in effect until December 21, 2027 (the
“Initial Term”) and shall be automatically renewed for a one-year term each
anniversary date thereafter (a “Renewal Term”) unless terminated by either party
in accordance with this Section 10.

 

(b)           Subject to Section 11 below, neither Residential nor the
Partnership may terminate this Agreement unless (i) in the case of a termination
by the Partnership, the General Partner determines that there has been
unsatisfactory performance by the Asset Manager that is materially detrimental
to the Partnership or (ii) in the case of a termination by Residential, at least
two-thirds of the Independent Directors (as defined herein) agree that (x) there
has been unsatisfactory performance by the Asset Manager that is materially
detrimental to Residential or (y) the compensation payable to the Asset Manager
hereunder is unreasonable; provided that Residential shall not have the right to
terminate this Agreement under clause (ii)(y) above if the Asset Manager agrees
to continue to provide the services under this Agreement at a reduced fee that
at least two-thirds of the Independent Directors determines to be reasonable
pursuant to the procedure set forth below. If Residential or the Partnership
elects not to renew this Agreement at the expiration of the Initial Term or any
Renewal Term as set forth above, Residential or the Partnership, as applicable
(the “Terminating Party”), shall deliver to the Asset Manager prior written
notice (the “Termination Notice”) of such Terminating Party’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. If the
Terminating Party so elects not to renew this Agreement, such Terminating Party
shall designate the date (the “Effective Termination Date”), not less than 180
days from the date of the notice, on which the Asset Manager shall cease to
provide services under this Agreement, and this Agreement shall terminate on
such date; provided, however, that in the event that such Termination Notice is
given in connection with a determination that the compensation payable to the
Asset Manager is unfair, the Asset Manager shall have the right to renegotiate
such compensation by delivering to Residential, no fewer than 45 days prior to
the prospective Effective Termination Date, written notice (any such notice, a
“Notice of Proposal to Negotiate”) of its intention to renegotiate its
compensation under this Agreement. Thereupon, Residential (represented by the
Independent Directors) and the Asset Manager shall endeavor to negotiate in good
faith the revised compensation payable to the Asset Manager under this
Agreement. Provided that the Asset Manager and at least two-thirds of the
Independent Directors agree to the terms of the revised compensation to be
payable to the Asset Manager within 45 days following the receipt of the Notice
of Proposal to Negotiate, the Termination Notice shall be deemed of no force and
effect and this Agreement shall continue in full force and effect on the terms
stated in this Agreement, except that the compensation payable to the Asset
Manager hereunder shall be the revised compensation then agreed upon by the
parties to this Agreement. Each of the parties agrees to execute and deliver an
amendment to this Agreement setting forth such revised compensation promptly
upon reaching an agreement regarding same. In the event that Residential and the
Asset Manager are unable to agree to the terms of the revised compensation to be
payable to the Asset Manager during such 45-day period, this Agreement shall
terminate, such termination to be effective on the date which is the later of
(A) 10 days following the end of such 45-day period and (B) the Effective
Termination Date originally set forth in the Termination Notice.  For purposes
of this Agreement, “Independent Directors” shall mean the members of the Board
of Directors who are not officers or employees of the Asset Manager or any
person or entity directly or indirectly controlling or

 

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controlled by the Asset Manager, and who are otherwise “independent” in
accordance with Residential’s organizational documents.  Notwithstanding the
foregoing, neither Residential nor the Partnership may terminate this Agreement
pursuant to this Section 10 during the first twenty-four (24) months of the
Initial Term.

 

(c)           In recognition of the level of the upfront effort required by the
Asset Manager to structure and acquire the assets of Residential and the
Partnership and the commitment of resources by the Asset Manager, in the event
that this Agreement is terminated in accordance with the provisions of
Section 10(a) of this Agreement, Residential shall pay to the Asset Manager, on
the date on which such termination is effective, a termination fee (the
“Termination Fee”) equal to three (3) times the sum of the average annual
Incentive Fee during the 24-month period immediately preceding the date of such
termination, calculated as of the end of the most recently completed fiscal
quarter prior to the date of termination. The obligation of Residential to pay
the Termination Fee shall survive the termination of this Agreement.

 

(d)           No later than 180 days prior to the anniversary date of this
Agreement of any year during the Initial Term or Renewal Term, the Asset Manager
may deliver written notice to Residential informing it of the Asset Manager’s
intention to decline to renew this Agreement, whereupon this Agreement shall not
be renewed and extended and this Agreement shall terminate effective on the
anniversary date of this Agreement next following the delivery of such notice.
Residential is not required to pay to the Asset Manager the Termination Fee if
the Asset Manager terminates this Agreement pursuant to this Section 10(c).

 

(e)           If this Agreement is terminated pursuant to Section 10, such
termination shall be without any further liability or obligation of either party
to the other, except as provided in Sections 1(d), 3, 10(b), 11(b), 11(c) and 12
of this Agreement. In addition, Sections 8 and 16 of this Agreement shall
survive termination of this Agreement.

 

11.          Termination for Cause.

 

(a)           Residential or the General Partner may terminate this Agreement
effective upon 30 days’ prior written notice of termination from the Board of
Directors or the General Partner to the Asset Manager, without payment of any
Termination Fee, if (i) the Asset Manager, its agents or its assignees
materially breaches any provision of this Agreement and such breach shall
continue for a period of 30 days after written notice thereof specifying such
breach and requesting that the same be remedied in such 30-day period (or 60
days after written notice of such breach if the Asset Manager takes steps to
cure such breach within 30 days of the written notice), (ii) the Asset Manager
engages in any act of fraud, misappropriation of funds, or embezzlement against
Residential or the Partnership, (iii) there is an event of any gross negligence
on the part of the Asset Manager in the performance of its duties under this
Agreement, (iv) there is a commencement of any proceeding relating to the Asset
Manager’s bankruptcy or insolvency, including an order for relief in an
involuntary bankruptcy case or the Asset Manager authorizing or filing a
voluntary bankruptcy petition, or (v) there is a dissolution of the Asset
Manager.

 

(b)           The Asset Manager may terminate this Agreement effective upon 60
days’ prior written notice of termination to Residential in the event that
Residential shall default in the

 

10

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performance or observance of any material term, condition or covenant contained
in this Agreement and such default shall continue for a period of 30 days after
written notice thereof specifying such default and requesting that the same be
remedied in such 30-day period (or 60 days after written notice of such breach
if Residential takes steps to cure such breach within 30 days of the written
notice). Residential is required to pay to the Asset Manager the Termination Fee
if the termination of this Agreement is made pursuant to this Section 11(b).

 

(c)           The Asset Manager may terminate this Agreement in the event
Residential becomes regulated as an “investment company” under the Investment
Company Act of 1940, as amended, with such termination deemed to have occurred
immediately prior to such event. Residential shall pay to the Asset Manager the
Termination Fee in the event that this Agreement is terminated pursuant to this
Section 11(c).

 

12.          Action Upon Termination. From and after the effective date of
termination of this Agreement, pursuant to Sections 10 or 11 of this Agreement,
the Asset Manager shall not be entitled to compensation for further services
under this Agreement, but shall be paid all compensation accruing to the date of
termination and, if terminated pursuant to Sections 10(a), 11(b) or 11(c), the
applicable Termination Fee. Upon such termination, the Asset Manager shall
deliver to the Board of Directors all property and documents of Residential or
the Partnership then in the custody of the Asset Manager.

 

13.          Notices.  Any notice under this Agreement shall be given in
writing, addressed and delivered or mailed, postage prepaid, to the other party
at its principal office.

 

14.          Amendments.  This Agreement may be amended by mutual consent of the
parties.

 

15.          Entire Agreement; Governing Law.  This Agreement contains the
entire agreement of the parties and supersedes all prior agreements,
understandings and arrangements with respect to the subject matter hereof. This
Agreement shall be construed in accordance with the laws of the State of New
York.

 

[The remainder of this page intentionally left blank]

 

11

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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of
the date first written above by their duly authorized representatives.

 

 

ALTISOURCE RESIDENTIAL CORPORATION

 

 

 

 

 

By:

/s/ Stephen H. Gray

 

Name:

Stephen H. Gray

 

Title:

General Counsel and Secretary

 

 

 

ALTISOURCE RESIDENTIAL, L.P.

 

 

 

By:

Altisource Residential GP, LLC, its general partner

 

By:

Altisource Residential Corporation, its sole member

 

 

 

 

 

By:

/s/ Stephen H. Gray

 

Name:

Stephen H. Gray

 

Title:

General Counsel and Secretary

 

 

 

ALTISOURCE ASSET MANAGEMENT CORPORATION

 

 

 

By:

/s/ Ashish Pandey

 

Name:

Ashish Pandey

 

Title:

Chief Executive Officer

 

[ASSET MANAGEMENT AGREEMENT]

 

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EXHIBIT I

 

EXAMPLE OF CASH-FLOW DISTRIBUTION WATERFALL

 

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