Exhibit 10.2
MANAGEMENT AGREEMENT
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

 

 

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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 2007-1 EIT Securitization, LLC, Centerline 2007-1 SU Securitization,
LLC and Centerline 2007-1 T Securitization, LLC to Freddie Mac, pursuant to
which Freddie 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 Freddie Mac
pursuant to a Bond Exchange and Sale Agreement dated as of December 1, 2007
among Freddie Mac, Centerline 2007-1 EIT Securitization, LLC, Centerline 2007-1
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.

 

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(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).

 

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(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.

 

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(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) “Fannie Mae” 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) “Freddie 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

 

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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 Andrew Farkas 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 Jeffrey Cohen, Frank Garrison, James Aston, George Carleton and Paul
Hughson 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.

 

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(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.

 

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(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.

 

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(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.

 

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(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

 

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shall be subject to the Company’s insider trading 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.

 

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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

 

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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.

 

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(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.

 

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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

 

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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

 

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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

 

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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

 

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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

 

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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) Andrew Farkas 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
Jeffrey Cohen, Frank Garrison, James Aston, George Carleton and Paul Hughson (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;

 

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(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

 

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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 Andrew L. Farkas 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.

 

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(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:
Centerline Holding Company
625 Madison Avenue
New York, New York 10022
Attention: Secretary
(b) If to the Manager:
Island Centerline Manager LLC
c/o Island Capital Group LLC
717 Fifth Avenue, 18th Floor
New York, New York 10022
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

 

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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
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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.

 

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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

 

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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]

 

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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/ Marc D. Schnitzer         Name:   Marc D. Schnitzer       
Title:   President & CEO        CENTERLINE CAPITAL GROUP INC.,
a Delaware corporation
      By:   /s/ Marc D. Schnitzer         Name:   Marc D. Schnitzer       
Title:   President & CEO        MANAGER
 
ISLAND CENTERLINE MANAGER LLC,
a Delaware limited liability company
      By:   /s/ Jeffrey Cohen         Name:   Jeffrey Cohen        Title:  
President