Document:

Exhibit 10.2

 

MANAGEMENT AGREEMENT

 

This MANAGEMENT AGREEMENT is made as of December 19, 2012 (the “Effective Date”) by and among SILVER BAY REALTY TRUST CORP., a Maryland corporation, on behalf of itself and its Subsidiaries (the “Company”), SILVER BAY OPERATING PARTNERSHIP L.P., a Delaware limited partnership (the “Operating Company”), PRCM REAL ESTATE ADVISERS LLC, a Delaware limited liability company (together with its permitted assignees, the “Manager”), and (as to Sections 3(a) and 9 only) PINE RIVER CAPITAL MANAGEMENT L.P., a Delaware limited liability company (“Pine River Capital”), and PINE RIVER DOMESTIC MANAGEMENT L.P., a Delaware limited liability company (“PRDM”).

 

WHEREAS, the Company is a corporation that intends to elect and to qualify to be taxed as a REIT for federal income tax purposes;

 

WHEREAS, in connection with the management of single-family properties and other real estate assets, the Company, the Operating Company and Silver Bay Property Corp., a wholly-owned subsidiary of the Manager, are entering into a Property Management and Acquisition Services Agreement concurrently with this Agreement (the “Property Management and Acquisition Services Agreement”);

 

WHEREAS, the Manager previously provided certain management services to Two Harbors (as defined below) under that certain Acquisition Services Agreement, Management Agreement and Letter Agreement, each dated as of February 3, 2012 (collectively, the “Predecessor Management Agreements”);

 

WHEREAS, the Predecessor Management Agreements have been terminated as of the date hereof, except with respect to certain on-going post-termination obligations; and

 

WHEREAS, the Company, the Operating Company and each of the Subsidiaries desire to retain the Manager to provide management and advisory services to them on the terms and conditions hereinafter set forth, and the Manager wishes to be retained to provide such services.

 

NOW THEREFORE, in consideration of the mutual agreements herein set forth, the parties hereto agree as follows:

 

Section 1.                                           Definitions.  The following terms have the following meanings assigned to them:

 

(a)                                 “Advisers Act” means Investment Advisers Act of 1940, as amended.

 

(b)                                 “Affiliate” means a Person that directly, or indirectly through one or more intermediaries, controls or is controlled by or is under common control with, the Person specified; for the avoidance of doubt, Provident Real Estate Advisors LLC is not an Affiliate of the Manager.

 

(c)                                  “Agreement” means this Management Agreement, as amended from time to time.

 

(d)                                 “Assets” means the assets of the Company and the Subsidiaries.

 

(e)                                  “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 60 days after the filing of an involuntary petition under Title 11 of the Unites 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 60-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.

 

(f)                                   “Board of Directors” means the Board of Directors of the Company.

 

(g)                                  “CLA Founders” means CLA Founders LLC, a Delaware limited liability company.

 

(h)                                 “Code” means the Internal Revenue Code of 1986, as amended.

 

(i)                                     “Common Stock” means shares of the Company’s common stock, par value $0.01 per share.

 

(j)                                    “Company” has the meaning set forth in the first paragraph of this Agreement.

 

(k)                                 “Company Account” has the meaning set forth in Section 5 of this Agreement.

 

(l)                                     “Company Indemnified Party” has the meaning set forth in Section 11(b) of this Agreement.

 

(m)                             “Convertible Securities” means any evidences of indebtedness, shares or other securities directly or indirectly convertible into or exchangeable or redeemable for Common Stock, including Partnership Common Units, but excluding Options.

 

(n)                                 “Effective Termination Date” has the meaning set forth in Section 13(a) of this Agreement.

 

(o)                                 “Excess Funds” has the meaning set forth in Section 2(l) of this Agreement.

 

(p)                                 “Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

(q)                                 “Expenses” has the meaning set forth in Section 9 of this Agreement.

 

(r)                                    “Fair Market Value” means the value of one share of Common Stock, Preferred Stock or OPCO Equity, as the case may be, determined as follows:

 

(i)                                     If the shares are then listed on a national stock exchange, the closing sales price per share on the exchange for the last preceding date on which there was a sale of shares on such exchange.

 

(ii)                                  If the shares are not then listed on a national stock exchange but are then traded on an over-the-counter market, the average of the closing bid and asked prices for the shares in such over-the-counter market for the last preceding date on which there was a sale of such shares on such market.

 

(iii)                               If neither (i) nor (ii) applies, such value as the Compensation Committee of the Company as appointed by the Board of Directors in its discretion may in good faith determine.

 

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(s)                                   “Formation Transaction Documentation” means the agreements and plans of merger, the contribution agreements and related documents and agreements pursuant to which the Company or the Operating Partnership shall acquire certain properties and/or equity interests from certain Affiliates of Provident and Two Harbors Operating Company LLC concurrently with the Initial Public Offering.

 

(t)                                    “Fully-Diluted Market Capitalization” means

 

(i)                                     the Fair Market Value of one share of Common Stock multiplied by the number of shares of Common Stock issued and outstanding; plus

 

(ii)                                  the Fair Market Value of one share of Common Stock multiplied by the maximum number of shares of Common Stock issuable pursuant to any outstanding Options or Convertible Securities that are (1) held by any Person other than the Company or a Subsidiary of the Company and (2) In-the-Money; minus the aggregate consideration payable to the Company upon the exercise, conversion and/or exchange of such Options or Convertible Securities; plus

 

(iii)                               the Fair Market Value of one share of Preferred Stock multiplied by the number of shares of such Preferred Stock issued and outstanding; plus

 

(iv)                              the Fair Market Value of one share of Preferred Stock multiplied by the maximum number of shares of such Preferred Stock issuable pursuant to any outstanding Preferred Options or Preferred Convertible Securities that are (1) held by any Person other than the Company or a Subsidiary of the Company and (2) In-the-Money; minus the aggregate consideration payable to the Company upon the exercise, conversion and/or exchange of such Preferred Options or Preferred Convertible Securities; plus

 

(v)                                 the Fair Market Value of one unit of OPCO Equity multiplied by the number of shares of such OPCO Equity issued and outstanding; plus

 

(vi)                              the Fair Market Value of one unit of OPCO Equity multiplied by the maximum number of shares of such OPCO Equity issuable pursuant to any outstanding OPCO Options or OPCO Convertible Securities that are (1) held by any Person other than the Company or a Subsidiary of the Company and (2) In-the-Money; minus the aggregate consideration payable to the Company upon the exercise, conversion and/or exchange of such OPCO Options or OPCO Convertible Securities.

 

(u)                                 “Governing Instruments” means, with regard to any entity, the articles or certificate 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 or certificate of formation and the operating agreement in the case of a limited liability company, the trust instrument in the case of a trust, or similar governing documents, in each case as amended from time to time.

 

(v)                                 “Guidelines” has the meaning set forth in Section 2(c) of this Agreement.

 

(w)                               “Indemnitee” has the meaning set forth in Section 11(b) of this Agreement.

 

(x)                                 “Indemnitor” has the meaning set forth in Section 11(c) of this Agreement.

 

(y)                                 “Independent Directors” means the members of the Board of Directors who are not officers or employees of the Manager or any Person directly or indirectly controlling or controlled by

 

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the Manager, and who are otherwise “independent” in accordance with the Company’s Governing Instruments and policies and, if applicable, the rules of any national securities exchange on which the Company’s common stock is listed.

 

(z)                                  “Investment Company Act” means Investment Company Act of 1940, as amended.

 

(aa)                          “Initial Public Offering” means the initial public offering of the Common Stock.

 

(bb)                          “Initial Term” has the meaning set forth in Section 14(a) of this Agreement.

 

(cc)                            “In-the-Money” means with respect to any security exercisable, convertible into, exchangeable or redeemable for another security, that the amount of consideration payable to the Company upon such exercise, conversion or exchange is less than the Fair Market Value of the security to be received upon such exercise, conversion, exchange or redemption.

 

(dd)                          “Investment Committee” means the Manager’s investment committee that will oversee, advise and consult with respect to the Company’s investment strategy, acquisition of Assets, sourcing, financing and leveraging strategies and compliance with the Company’s Guidelines.

 

(ee)                            “Joint Venture” means any Person for which the Manager provides investment management and advisory services and for which the Company, the Operating Company or the Subsidiaries are partial but not sole beneficial owners.

 

(ff)                              “Management Fee” means a management fee, calculated and paid (in cash) quarterly in arrears, in an amount equal to 0.375% of the daily average Fully-Diluted Market Capitalization of the preceding quarter (a 1.5% annual rate) minus the “Base Management Fee” (as defined in the Property Management and Acquisition Services Agreement) received by the Manager or its Affiliates.

 

(gg)                            “Manager” has the meaning set forth in the first paragraph of this Agreement.

 

(hh)                          “Manager Indemnified Party” has the meaning set forth in Section 11(a) of this Agreement.

 

(ii)                                  “Monitoring Services” has the meaning set forth in Section 2(c) of this Agreement.

 

(jj)                                “Mutual Shared Services Agreement” means the Mutual Shared Services and Facilities Agreement, dated as of December 19, 2012, between the Manager and Silver Bay Property Corp.

 

(kk)                          “OPCO Equity” shall mean all Partnership Units, but excluding Options, Convertible Securities, Preferred Options or Preferred Convertible Securities with respect to the Operating Company.

 

(ll)                                  “OPCO Convertible Securities” shall mean any evidences of indebtedness, shares or other securities directly or indirectly convertible into or exchangeable or redeemable for OPCO Equity, but excluding OPCO Options.

 

(mm)                  “OPCO Option” shall mean rights, options or warrants to subscribe for, purchase or otherwise acquire OPCO Equity or OPCO Convertible Securities.

 

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(nn)                          “Operating Company” has the meaning set forth in the first paragraph of this Agreement.

 

(oo)                          “Option” shall mean rights, options or warrants to subscribe for, purchase or otherwise acquire Common Stock or Convertible Securities.

 

(pp)                          “Partnership Common Unit” has the meaning set forth in the Limited Partnership Agreement of the Operating Company as may be amended from time to time.

 

(qq)                          “Partnership Unit” has the meaning set forth in the Limited Partnership Agreement of the Operating Company as may be amended from time to time.

 

(rr)                                “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.

 

(ss)                              “Pine River” means, separately and collectively, Pine River Capital, PRDM and their direct and indirect subsidiaries; provided, however, that the term “Pine River” shall not include the Company or any of the Subsidiaries.

 

(tt)                                “Portfolio Management Services” has the meaning set forth in Section 2(c) of this Agreement.

 

(uu)                          “Preferred Convertible Securities” shall mean any evidences of indebtedness, shares or other securities directly or indirectly convertible into or exchangeable or redeemable for Preferred Stock, but excluding Preferred Options.

 

(vv)                          “Preferred Option” shall mean rights, options or warrants to subscribe for, purchase or otherwise acquire Preferred Stock or Preferred Convertible Securities.

 

(ww)                      “Preferred Stock” shall mean any share of the capital stock of the Company other than Common Stock or Convertible Securities.

 

(xx)                          “Property Management and Acquisition Services Agreement” has the meaning set forth in the recitals of this Agreement.

 

(yy)                          “Provident” means, separately and collectively, Provident Real Estate Advisors LLC, a Minnesota limited liability company, and its direct and indirect subsidiaries; provided, however, that the term “Provident” shall not include the Company or any of the Subsidiaries.

 

(zz)                            “REIT” means a “real estate investment trust” as defined under the Code.

 

(aaa)                   “Renewal Term” has the meaning set forth in Section 14(a) of this Agreement.

 

(bbb)                   “Securities Act” means the Securities Act of 1933, as amended.

 

(ccc)                      “Shared Services Agreement” means the Shared Services and Facilities Agreement, dated as of December 19, 2012, between the Manager and PRDM.

 

(ddd)                   “Subsidiary” means any subsidiary of the Company; any partnership, the general partner of which is the Company or any subsidiary of the Company; any limited liability company, the

 

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managing member of which is the Company or any subsidiary of the Company; and any corporation or other entity of which a majority of (i) the voting power of the voting equity securities or (ii) the outstanding equity or other beneficial interests is owned, directly or indirectly, by the Company or any subsidiary of the Company.

 

(eee)                      “Termination Fee” has the meaning set forth in Section 14(b) of this Agreement.

 

(fff)                         “Termination Notice” has the meaning set forth in Section 14(a) of this Agreement.

 

(ggg)                      “Treasury Regulations” means the regulations promulgated under the Code as amended from time to time.

 

(hhh)                   “Two Harbors” means, separately and collectively, Two Harbors Investment Corp., a Maryland corporation, and its direct and indirect subsidiaries; provided, however, that the term “Two Harbors” shall not include the Company or any of the Subsidiaries.

 

Section 2.                                           Appointment and Duties of the Manager.

 

(a)                                 The Company and each of the Subsidiaries hereby appoints the Manager to manage the Assets and the day-to-day operations of the Company and the Subsidiaries subject to the further terms and conditions set forth in this Agreement and the Manager hereby agrees to use its commercially reasonable efforts to perform each of the duties set forth herein.  The appointment 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, pursuant to the terms of this Agreement, to cause the duties of the Manager hereunder to be provided by third parties.

 

(b)                                 The parties acknowledge that (i) the Manager is a special purpose vehicle formed initially for the principal purpose of providing property management and acquisition services to entities managed by Two Harbors and Provident; (ii) the Manager’s principal purpose following the Initial Public Offering will be to serve as the investment manager of the Company; (iii) the Manager is an affiliate of PRDM; and (iv) the Manager performs its services for the Company in part through the personnel and facilities of PRDM.

 

(c)                                  The Manager, in its capacity as manager of the Assets and the day-to-day operations of the Company and the Subsidiaries, at all times will be subject to the supervision of the Company’s Board of Directors and will have only such functions and authority as the Company may delegate to it, including the functions and authority identified herein and delegated to the Manager hereby.  The Manager will be responsible for the day-to-day operations of the Company and the Subsidiaries and will perform (or cause to be performed) in accordance with the Guidelines (as defined below) such services and activities relating to the Assets and operations of the Company and the Subsidiaries as may be appropriate, including:

 

(i)                                     serving as the Company’s and the Subsidiaries’ consultant with respect to the periodic review of the investment guidelines and other parameters for the acquisition of Assets, financing activities and operations, any modifications to which shall be approved by a majority of the Independent Directors (such guidelines as initially approved and attached hereto as Exhibit A, as the same may be modified with such approval, the “Guidelines”), and other policies for approval by the Board of Directors;

 

(ii)                                  forming the Investment Committee;

 

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(iii)                               investigating, analyzing and selecting possible investment opportunities and acquiring, financing, retaining, selling, restructuring or disposing of Assets;

 

(iv)                              using commercially reasonable efforts to cause expenses incurred by the Company and the Subsidiaries or on their behalf to be commercially reasonable or commercially customary and within any budgeted parameters or expense guidelines set by the Board of Directors from time to time;

 

(v)                                 with respect to prospective purchases, sales or exchanges of Assets, conducting negotiations and entering into agreements on behalf of the Company and the Subsidiaries with sellers, purchasers, brokers, auctioneers and other parties, and their respective agents and representatives;

 

(vi)                              advising the Company and the Subsidiaries on, and negotiating and entering into, on behalf of the Company and the Subsidiaries, repurchase agreements, credit finance agreements, securitizations, applications and agreements relating to programs established by the U.S. government, including Fannie Mae, Freddie Mac, Ginnie Mae, the Federal Housing Administration and the Department of Housing and Urban Development, commercial paper, interest rate swap agreements and other hedging instruments, custodial agreements, other secured and unsecured forms of borrowing, and all other agreements and engagements required for the Company and the Subsidiaries to conduct their business;

 

(vii)                           engaging and supervising, on behalf of the Company and the Subsidiaries and at the Company’s expense, independent contractors that provide investment banking, securities brokerage, mortgage brokerage, other financial services, due diligence services, underwriting review services, legal and accounting services, transfer agent and registrar services, and all other services as may be required relating to the Assets;

 

(viii)                        coordinating and managing operations of any joint venture or co-investment interests held by the Company and the Subsidiaries and conducting all matters with the joint venture or co-investment partners;

 

(ix)                              arranging marketing materials, advertising, industry group activities (such as conference participations and industry organization memberships) and other promotional efforts designed to promote the Company’s business;

 

(x)                                 providing executive and administrative personnel, office space and office services required in rendering services to the Company and the Subsidiaries;

 

(xi)                              entering into on behalf of the Company and/or the Subsidiaries leases and service contracts in connection with the Assets, administering the day-to-day operations and performing and supervising the performance of such other administrative functions necessary to the management of the Company and the Subsidiaries as may be agreed upon by the Manager and the Board of Directors, including the collection of revenues and the payment of the debts and obligations of the Company and the Subsidiaries and maintenance of appropriate computer and technological services to perform such administrative functions;

 

(xii)                           communicating on behalf of the Company and the Subsidiaries with the holders of any of their equity or debt securities as required to satisfy the reporting and other requirements of any governmental bodies or agencies or trading markets and to maintain effective relations with such holders;

 

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(xiii)                        counseling the Company in connection with policy decisions to be made by the Board of Directors;

 

(xiv)                       counseling the Company regarding the maintenance of its qualification as a REIT and monitoring compliance with the various REIT qualification tests and other rules set out in the Code and Treasury Regulations thereunder and using commercially reasonable efforts to cause the Company to qualify for taxation as a REIT and to maintain such qualification;

 

(xv)                          counseling the Company and the Subsidiaries regarding the maintenance of their exclusions from the status of an investment company required to register under the Investment Company Act, monitoring compliance with the requirements for maintaining such exclusions and using commercially reasonable efforts to cause them to maintain such exclusions from such status;

 

(xvi)                       assisting the Company and the Subsidiaries in developing criteria for asset purchase commitments that are specifically tailored to the Company’s investment objectives and making available to the Company and the Subsidiaries its knowledge and experience with respect to single-family properties, the residential rental market, mortgage loans, real estate, real estate-related securities, other real estate-related assets and non-real estate-related assets;

 

(xvii)                    furnishing reports and statistical and economic research to the Company and the Subsidiaries regarding their activities and services performed for the Company and the Subsidiaries by the Manager, including reports with respect to potential conflicts of interest involving the Manager or any of its Affiliates;

 

(xviii)                 monitoring the operating performance of Assets and providing periodic reports with respect thereto to the Board of Directors, including comparative information with respect to such operating performance and budgeted or projected operating results;

 

(xix)                       investing and reinvesting any moneys and securities of the Company and the Subsidiaries (including investing in short-term investments pending the acquisition of other Assets, payment of fees, costs and expenses, or, subject to declaration by the Board of Directors, payments of dividends or distributions to stockholders and partners of the Company and the Subsidiaries) and advising the Company and the Subsidiaries as to their capital structure and capital raising;

 

(xx)                          causing the Company and the Subsidiaries to retain qualified accountants, auditors and legal counsel, as applicable, to assist in developing appropriate accounting procedures and systems, internal controls and other compliance procedures and testing systems with respect to financial reporting obligations and compliance with the provisions of the Code applicable to REITs and to conduct quarterly compliance reviews with respect thereto;

 

(xxi)                       assisting the Company and the Subsidiaries in qualifying to do business in all applicable jurisdictions and to obtain and maintain all appropriate licenses;

 

(xxii)                    assisting the Company and the Subsidiaries in complying with all regulatory requirements applicable to them in respect of their business activities, including preparing or causing to be prepared all financial statements required under applicable regulations and contractual undertakings and all reports and documents, if any, required under the Exchange Act, the Securities Act, or stock exchange requirements;

 

(xxiii)                 assisting the Company and the Subsidiaries in taking all necessary action to enable them to make required tax filings and reports, including soliciting stockholders and partners for

 

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required information to the extent required by the provisions of the Code applicable to REITs, and providing all other necessary tax services for the Company and the Subsidiaries;

 

(xxiv)                handling and resolving all litigation, claims, disputes or controversies (including all litigation, arbitration, settlement or other proceedings or negotiations) in which the Company and/or the Subsidiaries may be involved or to which they may be subject arising out of their day-to-day operations (other than with the Manager or its Affiliates), subject to such limitations or parameters as may be imposed from time to time by the Board of Directors;

 

(xxv)                   representing and making recommendations to the Company and the Subsidiaries in connection with the purchase and financing of, and commitment to purchase and finance, single-family properties or other real estate assets, real estate-related securities and loans, title insurance, other real estate-related assets and non-real estate-related assets, the sale and commitment to sell such assets, and participation in real estate auctions;

 

(xxvi)                advising the Company and the Subsidiaries with respect to and structuring long-term financing vehicles for the Assets, and offering and selling securities publicly or privately in connection with any such structured financing;

 

(xxvii)             performing such other services as may be required from time to time for management and other activities relating to the Assets and business of the Company and the Subsidiaries as the Board of Directors shall reasonably request or the Manager shall deem appropriate under the particular circumstances; and

 

(xxviii)          using commercially reasonable efforts to cause the Company and the Subsidiaries to comply with all applicable laws.

 

Without limiting the foregoing, the Manager will perform portfolio management services (the “Portfolio Management Services”) on behalf of the Company and the Subsidiaries with respect to the Assets.  Such services will include consulting with the Company and the Subsidiaries on the purchase and sale of, and other investment opportunities in connection with, the Assets; the collection of information and the submission of reports pertaining to the Assets, interest rates and general economic conditions; periodic review and evaluation of the performance of the Assets; acting as liaison between the Company and the Subsidiaries and broker, banking, mortgage banking, investment banking and other parties with respect to the purchase, financing and disposition of Assets; and other customary functions related to portfolio management. Additionally, the Manager will perform monitoring services (the “Monitoring Services”) on behalf of the Company and the Subsidiaries with respect to any property acquisition and property management activities provided by third parties.

 

(d)                                 For the period and on the terms and conditions set forth in this Agreement, the Company and each of the Subsidiaries hereby constitutes, appoints and authorizes the Manager as its true and lawful agent and attorney-in-fact, in its name, place and stead, to negotiate, execute, deliver and enter into such real estate purchase agreements, property management agreements, title insurance agreements, leases, credit finance agreements and arrangements and securities repurchase and reverse repurchase agreements and arrangements, brokerage agreements, interest rate swap agreements, custodial agreements and such other agreements, instruments and authorizations on their behalf, on such terms and conditions as the Manager, acting in its sole and absolute discretion, deems necessary or appropriate.  This power of attorney is deemed to be coupled with an interest.

 

(e)                                  The Manager may enter into agreements with other parties, including its Affiliates, for the purpose of engaging one or more parties for and on behalf, and at the sole cost and

 

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expense, of the Company and the Subsidiaries to provide property management, asset management, leasing, development and/or other services to the Company and the Subsidiaries (including Portfolio Management Services and Monitoring Services) pursuant to agreement(s) with terms which are then customary for agreements regarding the provision of services to companies that have assets similar in type, quality and value to the Assets of the Company and the Subsidiaries; provided that (i) any such agreements entered into with Affiliates of the Manager shall be (A) on terms no more favorable to such Affiliate than would be obtained from a third party on an arm’s-length basis and (B) approved by a majority of the Independent Directors, (ii) with respect to Portfolio Management Services, the Manager shall remain liable for the performance of such Portfolio Management Services, and (iii) with respect to Monitoring Services, any such agreements shall be subject to the Company’s prior written approval.  Notwithstanding the foregoing, the Shared Services Agreement, the Mutual Shared Services Agreement and the Property Management and Acquisition Services Agreement shall not be subject to further review or approval by the Independent Directors prior to their termination, unless such agreements shall be amended, in which case such amendment shall be subject to the foregoing limitations on agreements between the Manager and its Affiliates.

 

(f)                                   The Company and the Operating Company acknowledge and agree that the Manager and Pine River are, concurrently with the execution of this Agreement, entering into a Sub-Management Agreement with CLA Founders LLC (the “Sub-Management Agreement”), and nothing herein shall limit the ability of the Manager or Pine River to enter into and perform their respective obligations under the Sub-Management Agreement or otherwise limit the effectiveness of such agreement.  After the date of this Agreement, to the extent that the Manager deems necessary or advisable, the Manager may, from time to time, propose to retain one or more additional entities for the provision of sub-advisory services to the Manager in order to enable the Manager to provide the services to the Company and the Subsidiaries specified by this Agreement; provided that any such agreement (i) shall be on terms and conditions substantially identical to the terms and conditions of this Agreement or otherwise not adverse to the Company and the Subsidiaries, and (ii) shall be approved by the Independent Directors of the Company.

 

(g)                                  The Manager may retain, for and on behalf and at the sole cost and expense of the Company and the Subsidiaries, such services of accountants, legal counsel, appraisers, insurers, brokers, transfer agents, registrars, developers, investment banks, valuation firms, financial advisors, due diligence firms, underwriting review firms, banks and other lenders and others as the Manager deems necessary or advisable in connection with the management and operations of the Company and the Subsidiaries.  Notwithstanding anything contained herein to the contrary, the Manager shall have the right to cause any such services to be rendered by its employees or Affiliates.  Except as otherwise provided herein, the Company and the Subsidiaries shall pay or reimburse the Manager or its Affiliates performing such services for the cost thereof; provided that such costs and reimbursements are no greater than those which would be payable to outside professionals or consultants engaged to perform such services pursuant to agreements negotiated on an arm’s-length basis.

 

(h)                                 The Manager may effect transactions by or through the agency of another Person to provide to or procure for the Manager and/or its Affiliates goods, services or other benefits (including real estate brokerage or referral services research and advisory services; economic and political analysis, including valuation and performance measurement; market analysis, data and quotation services; computer hardware and software incidental to the above goods and services; clearing and custodian services and investment-related publications), which can reasonably be expected to benefit the Company and the Subsidiaries as a whole and may contribute to an improvement in the performance of the Company and the Subsidiaries, or assist the Manager or its Affiliates in providing services to the Company and the Subsidiaries, where no direct payment is made for such goods, services or other benefits but instead the Manager and/or its Affiliates undertake to place business with such Person.

 

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(i)                                     As frequently as the Manager may deem necessary or advisable, or at the direction of the Board of Directors, the Manager shall, at the sole cost and expense of the Company and the Subsidiaries, prepare, or cause to be prepared, with respect to any Asset, reports and other information with respect to such Asset as may be reasonably requested by the Company.

 

(j)                                    The Manager shall prepare, or cause to be prepared, at the sole cost and expense of the Company and the Subsidiaries, all reports, financial or otherwise, with respect to the Company and the Subsidiaries reasonably required by the Board of Directors in order for the Company and the Subsidiaries to comply with their Governing Instruments or any other materials required to be filed with any governmental body or agency, and shall prepare, or cause to be prepared, all materials and data necessary to complete such reports and other materials including an annual audit of the Company’s and the Subsidiaries’ books of account by a nationally recognized registered independent public accounting firm.

 

(k)                                 The Manager shall prepare regular reports for the Board of Directors to enable the Board of Directors to review the Company’s and the Subsidiaries’ acquisitions, portfolio composition and characteristics, credit quality, performance and compliance with the Guidelines and policies approved by the Board of Directors.

 

(l)                                     Notwithstanding anything contained in this Agreement to the contrary, except to the extent that the payment of additional moneys is proven by the Company to have been required as a direct result of the Manager’s acts or omissions which result in the right of the Company and the Subsidiaries to terminate this Agreement pursuant to Section16 of this Agreement, the Manager shall not be required to expend money (“Excess Funds”) in connection with any expenses that are required to be paid for or reimbursed by the Company and the Subsidiaries pursuant to Section 9 in excess of that contained in any applicable Company Account or otherwise made available by the Company and the Subsidiaries to be expended by the Manager hereunder. Failure of the Manager to expend Excess Funds out-of-pocket shall not give rise or be a contributing factor to the right of the Company and the Subsidiaries under Section 14(a) of this Agreement to terminate this Agreement due to the Manager’s unsatisfactory performance.

 

(m)                             In performing its duties under this Section 2, the Manager shall be entitled to rely reasonably on qualified experts and professionals (including accountants, legal counsel and other service providers) hired by the Manager at the Company’s and the Subsidiaries’ sole cost and expense.

 

Section 3.                                           Devotion of Time; Additional Activities.

 

(a)                                 The Manager and its Affiliates will provide the Company and the Subsidiaries with a management team, including a Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, Chief Technology Officer, General Counsel and other support personnel, to provide the management services to be provided by the Manager to the Company and the Subsidiaries hereunder, the members of which team shall devote such portion of their time to the management of the Company and the Subsidiaries as is necessary to enable the Company and the Subsidiaries to operate their business.  The Manager shall not be obligated to dedicate itself exclusively to the management of the Company or the Subsidiaries nor shall the Manager’s personnel be obligated to dedicate any specific portion of their time to the Company; provided, however, that the Manager devotes sufficient resources to the Company’s business to discharge its obligations to the Company under this Agreement.  Notwithstanding anything to the contrary in this Agreement, the Manager shall dedicate itself exclusively to the management of the Company, including the Subsidiaries and Joint Ventures, for 36 months following the Effective Date, and neither the Manager, Pine River nor any of their Affiliates will compete with the Company, its Subsidiaries or its Joint Ventures for 36 months following the Effective Date.

 

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(b)                                 Subject to the last sentence of Section 3(a), nothing in this Agreement shall (i) prevent the Manager, Pine River, Provident, or any of their Affiliates, officers, directors, employees or personnel, from engaging in other businesses or from rendering services of any kind (including the services to be provided to the Company hereunder) to any other Person, including investing in, or rendering advisory services to others investing in, any type of business (including acquisitions of assets that meet the principal investment objectives of the Company), whether or not the investment objectives or policies of any such other Person or entity are similar to those of the Company or (ii) in any way bind or restrict the Manager, Pine River, Provident or any of their Affiliates, officers, directors, employees or personnel from buying, selling or trading any securities or investments for their own accounts or for the account of others for whom Pine River, Provident or any of their Affiliates (other than the Manager), officers, directors, employees or personnel may be acting.

 

(c)                                  Managers, partners, officers, employees, personnel and agents of the Manager or Affiliates of the Manager may serve as directors, officers, employees, personnel, agents, nominees or signatories for the Company and/or any Subsidiary, to the extent permitted by their Governing Instruments or by any resolutions duly adopted by the Board of Directors pursuant to the Company’s Governing Instruments.  When executing documents or otherwise acting in such capacities for the Company or the Subsidiaries, such persons shall use their respective titles in the Company or the Subsidiaries.

 

Section 4.                                           Agency.  The Manager shall act as agent of the Company and the Subsidiaries in making, acquiring, financing, managing and disposing of Assets, disbursing and collecting the funds of the Company and the Subsidiaries, paying the debts and fulfilling the obligations of the Company and the Subsidiaries, supervising the performance of professionals engaged by or on behalf of the Company and the Subsidiaries and handling, prosecuting and settling any claims of or against the Company and the Subsidiaries, the Board of Directors, holders of the Company’s securities or representatives or properties of the Company and the Subsidiaries.

 

Section 5.                                           Bank Accounts.  The Manager may establish and maintain one or more bank accounts in the name of the Company or any Subsidiary (any such account, a “Company Account”), and may collect and deposit funds into any such Company Account or Company Accounts, and disburse funds from any such Company Account or Company Accounts; and the Manager shall from time to time render appropriate accountings of such collections and payments to the Board of Directors and, upon request, to the auditors of the Company or any Subsidiary.

 

Section 6.                                           Records; Confidentiality.  The Manager shall maintain appropriate books of accounts and records relating to services performed under this Agreement, and such books of account and records shall be accessible for inspection by representatives of the Company or any Subsidiary at any time during normal business hours upon reasonable advance notice.  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 Directors; (ii) to legal counsel, accountants and other professional advisors to the Company; (iii) to appraisers, financing sources and others in the ordinary course of the Company’s business; (iv) pursuant to the order of 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 the Company’s stockholders or prospective stockholders; (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 reasonably required to perform the services under this agreement; or (viii) to the extent such information is otherwise publicly available.  The foregoing shall not apply to information which has previously become publicly available through the actions of a Person other than the Manager not resulting from the

 

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Manager’s violation of this Section 6.  The provisions of this Section 6 shall survive the expiration or earlier termination of this Agreement for a period of one year.  The Manager shall cause its agents, representatives and subcontractors to keep confidential any such information to the same degree set forth in this Section 6.

 

Section 7.                                           Obligations of Manager; Restrictions.

 

(a)                                 The Manager shall require each seller or transferor of investment assets to the Company and the Subsidiaries to make such representations and warranties regarding such assets as may, in the judgment of the Manager, be necessary and appropriate.  In addition, the Manager shall take such other action as it deems necessary or appropriate with regard to the protection of the Assets.

 

(b)                                 The Manager shall refrain from any action that, in its sole judgment made in good faith, (i) is not in compliance with the Guidelines, (ii) would adversely and materially affect the status of the Company as a REIT under the Code, (iii) would adversely and materially affect the Company’s or any Subsidiary’s status as an entity intended to be exempted or excluded from investment company status under the Investment Company Act or (iv) would 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 Subsidiary’s Governing Instruments.  If the Manager is ordered to take any such action by the Board of Directors, the Manager shall promptly notify the Board of Directors of the Manager’s judgment that such action would adversely and materially affect such status or violate any such law, rule or regulation or the Governing Instruments. Notwithstanding the foregoing, the Manager, its officers, stockholders, members, managers, personnel, directors, any Person controlling or controlled by the Manager and any Person providing sub-advisory services to the Manager shall not be liable to the Company or any Subsidiary, the Board of Directors, or the Company’s or any Subsidiary’s stockholders, members or partners, for any act or omission by any such Person except as provided in Section 11 of this Agreement.

 

(c)                                  The Board of Directors shall periodically review the Guidelines and the Company’s portfolio of Assets but will not review each proposed investment, except as otherwise provided herein.  If a majority of the Independent Directors determine in their periodic review of transactions that a particular transaction does not comply with the Guidelines, then a majority of the Independent Directors will consider what corrective action, if any, can be taken.  The Manager shall be permitted to rely upon the direction of the Secretary of the Company to evidence the approval of the Board of Directors or the Independent Directors with respect to a proposed investment.

 

(d)                                 Neither the Company nor the Subsidiaries shall invest in any security structured or issued by, or purchase or sell any Asset from or to, Pine River, Provident, any entity managed by the Manager or any venture or Affiliate of any of them unless (i) the transaction is made in accordance with the Guidelines; (ii) the transaction is approved in advance by at least a majority of, or a committee appointed by, the Independent Directors; and (iii) the transaction is made in accordance with applicable laws.

 

(e)                                  The Manager shall use its best efforts at all times during the term of this Agreement to maintain “errors and omissions” insurance coverage and other insurance coverage which is customarily carried by property, asset and investment managers performing functions similar to those of the Manager under this Agreement with respect to assets similar to the assets of the Company and the Subsidiaries, in an amount which is comparable to that customarily maintained by other managers or servicers of similar assets.

 

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(f)                                   Any investment in, or acquisition or sale of assets from or to, Pine River, Provident, any entity managed by the Manager or any venture or Affiliate of any of them shall require the approval of the Independent Directors or a committee appointed by the Independent Directors.

 

(g)                                  If at any time the Manager shall have reason to believe that there is a conflict between its duties and obligations to the Company and its duties and obligations to any other client, the Manager shall notify the Company immediately.  In the event of any such conflict of interest, the Manager and the Company shall negotiate in good faith regarding the establishment of appropriate policies and procedures to ensure that conflicts of interest are resolved in a manner that is fair and equitable to all parties.  Without limiting the foregoing, the Manager will put in effect appropriate procedures under the circumstances to ensure that the proprietary data of the Company and the Subsidiaries’ is protected and is neither disclosed to any third party without the Company’s consent nor used to give any party an improper competitive advantage.  In allocating expenses between the Company and other clients, the Manager will allocate expenses that are specific to a given client to such client, and will allocate expenses that are determined by the Manager, acting in good faith, to be attributable to more than one client on a fair and equitable basis among the various clients for which such expenses were incurred.  The Manager shall act in good faith to represent and treat all of its clients substantially equally, including the Company, in rendering services, and shall, upon the Company’s reasonable request, provide data and reports on a confidential basis evidencing the allocation of expenses among different clients (whose identities may be withheld), including vacancy rates, turnover rates and average lease terms in each relevant market.

 

Section 8.                                           Compensation.

 

(a)                                 Subject to Section 8(d), during the Initial Term and any Renewal Term (each as defined below), the Company shall pay the Manager the Management Fee quarterly in arrears commencing with the quarter in which this Agreement was executed (with such initial payment pro-rated based on the number of days during such quarter that this Agreement was in effect).

 

(b)                                 The Manager shall compute each installment of the Management Fee within 30 days after the end of the fiscal quarter with respect to which such installment is payable. A copy of the computations made by the Manager to calculate such installment shall thereafter, for informational purposes only, promptly be delivered to the Board of Directors and, upon such delivery, payment of such installment of the Management Fee shown therein shall be due and payable in cash no later than the date which is five business days after the date of delivery to the Board of Directors of such computations.

 

(c)                                  The  Management Fee  paid  to  the  Manager  for  the  first  year  after  the  completion of  the  IPO  shall  be  reduced by  an  amount  equal  to  (i)  0.1875%  of  the  daily  average  Fully-Diluted  Market Capitalization  of  the  preceding  quarter  multiplied  by  0.7362  (the  “Two  Harbors  Reduction”),  plus  (ii) 0.1875%  of  the  daily  average  Fully-Diluted  Market  Capitalization  of  the  preceding  quarter  multiplied  by 0.2638  (the  “Provident  Reduction”).  In  all  cases,  the  final reduction  of  the  Management  Fee  shall be  pro- rated  based on  the  number  of  days  between  the  first  anniversary of  the  closing  of  the  IPO  and  the  end  of the  immediately  preceding  quarter.  Capitalized  terms  used  in  this  Section  8(c)  and  not  otherwise  defined herein  shall  have  the  meaning  set  forth  in  the  Formation  Transaction  Documentation.  Notwithstanding anything  to  the  contrary,  however,  the  aggregate  amount  of  the  Two  Harbors  Reduction  shall  be  capped  at $3,821,040  (increased  if  the  underwriters  exercise  their  over-allotment option  in  the  IPO  by  an  amount equal  to  $0.1021  multiplied  by  the  number  of  additional  shares  of  Common  Stock  issued  as  a  result  of such  exercise),  and  shall  cease  to  accrue  if  and  when  it  reaches  such  amount.

 

Section 9.                                           Expenses of the Company.  Excepting those expenses that are specifically the responsibility of the Manager as set forth herein, the Company shall pay all of its expenses and shall reimburse the Manager for all documented costs and expenses of the Manager incurred by the Manager in the provision of the management and advisory services under this Agreement and otherwise in the conduct of the Manager’s business (collectively, the “Expenses”), and if such costs and expenses are incurred as a result of provision of services to other clients of the Manager, the reimbursement of such 

 

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costs and expenses shall be allocated between the Company and such other clients in a fair and equitable manner as determined by the Manager in good faith.  The Manager agrees to act prudently to manage the Expenses, with particular attention to the ratio of Expenses to Fully-Diluted Market Capitalization; and in any case such costs and reimbursements shall be in amounts which are no greater than those which would be payable to outside professionals or consultants engaged to perform such services pursuant to agreements negotiated on an arm’s-length basis.  The Independent Directors or a committee appointed by the Independent Directors shall periodically review the Manager’s allocation of expenses.  If a majority of the Independent Directors or the committee determines in its periodic review of expenses that the allocation of expenses is unfair or inequitable, then a majority of the Independent Directors will consider what corrective action should be taken.  Expenses include all costs and expenses of the Manager incurred on behalf of the Company or the Subsidiaries, including those expressly designated elsewhere in this Agreement as the Company’s and the following:

 

(a)                                 expenses in connection with the acquisition, disposition and financing of Assets;

 

(b)                                 costs of legal, tax, accounting, third party administrators for the establishment and maintenance of the books and records, consulting, auditing, administrative, and other similar services rendered for the Company and the Subsidiaries by providers retained by the Manager or, if provided by the Manager’s personnel, in amounts which are no greater than those which would be payable to outside professionals or consultants engaged to perform such services pursuant to agreements negotiated on an arm’s length basis;

 

(c)                                  the compensation and expenses of the Company’s directors and the cost of liability insurance to indemnify the Company’s directors and officers;

 

(d)                                 costs associated with the establishment and maintenance of any of the Company’s or any Subsidiary’s secured and unsecured forms of borrowings (including commitment fees, accounting fees, legal fees, closing and other similar costs) or any of the Company’s or any Subsidiary’s securities offerings (including the Initial Public Offering);

 

(e)                                  expenses in connection with the application for, and participation in, programs established by the U.S. government;

 

(f)                                   expenses connected with communications to holders of the Company’s or any Subsidiary’s securities and other bookkeeping and clerical work necessary in maintaining relations with holders of such securities and in complying with the continuous reporting and other requirements of governmental bodies or agencies, including all costs of preparing and filing required reports with the Securities and Exchange Commission, the costs payable by the Company to any transfer agent and registrar in connection with the listing and/or trading of the Company’s stock on any exchange, the fees payable by the Company to any such exchange in connection with its listing, and costs of preparing, printing and mailing the Company’s annual report to its stockholders and proxy materials with respect to any meeting of the Company’s stockholders;

 

(g)                                  costs associated with any computer software or hardware, electronic equipment or purchased information technology services from third party vendors that is used for the Company and the Subsidiaries;

 

(h)                                 expenses incurred by managers, officers, personnel and agents of the Manager for travel or entertainment on the Company’s behalf and other out-of-pocket expenses incurred by managers, officers, personnel and agents of the Manager in connection with the provision of services under this Agreement;

 

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(i)                                     costs and expenses incurred with respect to market information systems and publications, pricing and valuation services, research publications and materials, including financial analytics and market data, and settlement, clearing and custodial fees and expenses;

 

(j)                                    compensation and expenses of the Company’s custodian and transfer agent, if any;

 

(k)                                 the costs of maintaining compliance with all federal, state and local rules and regulations or any other regulatory agency;

 

(l)                                     all taxes and license fees;

 

(m)                             all insurance costs incurred in connection with the operation of the Company’s business and the Company’s allocable portion of the premiums related to the Manager’s insurance coverage, as provided below;

 

(n)                                 costs and expenses incurred in contracting with third parties, including Affiliates of the Manager, for the servicing and special servicing of the Assets;

 

(o)                                 all other costs and expenses relating to the business of the Company and the Subsidiaries and investment operations, including the costs and expenses of acquiring, owning, protecting, maintaining, developing and disposing of Assets, including appraisal, valuation, reporting, audit and legal fees;

 

(p)                                 expenses relating to any office(s) or office facilities, including disaster backup recovery sites and facilities, maintained for the Company and the Subsidiaries or Assets separate from the office or offices of the Manager;

 

(q)                                 expenses connected with the payments of interest, dividends or distributions in cash or any other form authorized or caused to be made by the Board of Directors to or on account of holders of the Company’s or any Subsidiary’s securities, including in connection with any dividend reinvestment plan;

 

(r)                                    any judgment or settlement of pending or threatened proceedings (whether civil, criminal or otherwise) against the Company or any Subsidiary, or against any trustee, director or officer of the Company or of any Subsidiary in his capacity as such for which the Company or any Subsidiary is required to indemnify such trustee, director or officer by any court or governmental agency;

 

(s)                                   all costs and expenses relating to the development and management of the Company’s website;

 

(t)                                    all other expenses actually incurred by the Manager (except as described below) which are reasonably necessary for the performance by the Manager of its duties and functions under this Agreement; and

 

(u)                                 any costs and expenses (including those described above) incurred by a sub-adviser engaged by the Manager pursuant to Section 2(f) in connection with the provision of sub-advisory services in respect of the Manager, including such costs and expenses of CLA Founders; provided, however, that the reimbursement of any such costs and expenses shall be subject to the same limitations set forth in this Agreement on the reimbursement of the costs and expenses of the Manager.

 

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The Company shall reimburse the Manager for, without duplication, the Company’s allocable share of (i) the salary, bonus, benefit and other compensation costs (other than Equity Grants, as defined below) of the personnel of Manager and its Affiliates who provide services to the Company under this Agreement, including compensation paid by the Manager to its personnel serving as the Company’s principal financial officer and general counsel and personnel employed by the Manager as in-house legal, tax, accounting, consulting, auditing, administrative, information technology, valuation, computer programming and development and back office resources to the Company and (ii) to the extent not paid pursuant to clause (i), any amounts for personnel of the Manager’s Affiliates arising under the Shared Services Agreement, Mutual Shared Services Agreement or similar future arrangement.  The Company’s share of such out-of-pocket costs shall be based upon the Manager’s commercially reasonable estimates of the percentage of time devoted by such personnel of the Manager and its Affiliates to the Company’s and the Subsidiaries’ affairs.  The Manager shall provide the Company with such information as the Company may reasonably request to support the determination of the Company’s share of such costs.  Notwithstanding anything to the contrary in this Agreement, the Manager shall be responsible for the compensation paid by the Manager to its personnel serving as the Company’s Chief Executive Officer and personnel of the Manager and professionals providing data analytics directly supporting the investment function of the Company.

 

The Company may issue equity grants under the Company’s equity incentive plan (“Equity Grants”) to personnel of the Manager, Pine River Capital, PRDM and their Affiliates; provided, however, that Equity Grants shall not be granted to any partner of Pine River Capital or PRDM, or to personnel whose compensation is not reimbursable under this Agreement including the Chief Executive Officer of the Company and personnel of the Manager and professionals providing data analytics directly supporting the investment function of the Company.  In establishing the total compensation package for a person who receives Equity Grants, the Manager, Pine River Capital, PRDM and their Affiliates shall include such Equity Grants as a component of such compensation package, such that Equity Grants represent a portion of total compensation rather than additional compensation for such person.

 

In addition, the Company’s obligation to reimburse the Manager for Expenses shall include an obligation to pay the Company’s allocable  portion of (i) rent, telephone, utilities, office furniture, equipment, machinery and other office, internal and overhead expenses of the Manager and its Affiliates required for the operations of the Company and the Subsidiaries, including arising under the Shared Services Agreement, Mutual Shared Services Agreement or similar future arrangement, and (ii) premiums related to the insurance coverage referred to in Section 7(e).  After the expiration of the exclusivity period described in Section 3(a), these expenses will be allocated between the Manager’s other clients and the Company in a fair and equitable manner as determined by the Manager in good faith.  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.  The Company will reimburse the Manager for all organizational, formation and offering costs it has incurred on behalf of the Company upon consummation of the Company’s Initial Public Offering.

 

The provisions of this Section 9 shall survive the expiration or earlier termination of this Agreement to the extent such expenses have previously been incurred or are incurred in connection with such expiration or termination.

 

Section 10.                                    Calculation and Payment of Expenses.  The Manager shall prepare a statement documenting the Expenses of the Company and the Subsidiaries and the Expenses incurred by the Manager on behalf of the Company and the Subsidiaries during each fiscal quarter, and shall deliver such statement to the Company within 30 days after the end of each fiscal quarter. Expenses incurred by the Manager on behalf of the Company and the Subsidiaries shall be reimbursed by the Company to the Manager on the fifth business day immediately following the date of delivery of such statement; provided,

 

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however, that such reimbursements may be offset by the Manager against any amounts due to the Company and the Subsidiaries.  The provisions of this Section 10 shall survive the expiration or earlier termination of this Agreement.  All obligations of the Company under this Agreement to pay any fees, reimbursements, indemnities or other amounts to the Manager shall be paid by the Operating Company.

 

Section 11.                                    Limits of Manager Responsibility; Indemnification.

 

(a)                                 The Manager assumes no responsibility under this Agreement other than to render the services called for under this Agreement and shall not be responsible for any action of the Board of Directors in following or declining to follow any advice or recommendations of the Manager, including as set forth in Section 7(b) of this Agreement.  The Manager, CLA Founders, their respective officers, members, managers and personnel, any Person controlling or controlled by the Manager or CLA Founders and any such Person’s officers, stockholders, members, managers, personnel and directors, and any Person providing sub-advisory services to the Manager will not be liable to the Company or any Subsidiary, to the Board of Directors, or the Company’s or any Subsidiary’s stockholders, members or partners for any acts or omissions by any such Person, pursuant to or in accordance with this Agreement, except by reason of acts or omissions constituting reckless disregard of the Manager’s duties under this Agreement which has a material adverse effect on the Company and the Subsidiaries, bad faith, fraud, willful misconduct or gross negligence, as determined by a final non-appealable order of a court of competent jurisdiction.  The Company and the Operating Company shall, to the full extent lawful, reimburse, indemnify and hold the Manager, CLA Founders, their respective officers, stockholders, directors, members and personnel, any Person controlling or controlled by the Manager or CLA Founders and any Person providing sub-advisory services to the Manager, together with the managers, officers, directors and personnel of the Manager, CLA Founders and their respective officers, members, directors, managers and personnel (each a “Manager Indemnified Party”), harmless of and from any and all expenses, losses, damages, liabilities, demands, charges and claims of any nature whatsoever (including attorneys’ fees) in respect of or arising from any acts or omissions of such Manager Indemnified Party not constituting such Manager Indemnified Party’s reckless disregard of the Manager’s duties under this Agreement which has a material adverse effect on the Company and the Subsidiaries, bad faith, fraud, willful misconduct or gross negligence.

 

(b)                                 The Manager shall, to the full extent lawful, reimburse, indemnify and hold the Company (or any Subsidiary) and its directors and officers (each, a “Company Indemnified Party” and together with a Manager Indemnified Party, the “Indemnitee”), harmless of and from any and all expenses, losses, damages, liabilities, demands, charges and claims of any nature whatsoever (including attorneys’ fees) in respect of or arising from the Manager’s reckless disregard of the Manager’s duties under this Agreement which has a material adverse effect on the Company and the Subsidiaries, bad faith, fraud, willful misconduct or gross negligence.

 

(c)                                  The Indemnitee will promptly notify the party against whom indemnity is claimed (the “Indemnitor”) of any claim for which it seeks indemnification; provided, however, that the failure to so notify the Indemnitor will not relieve the Indemnitor from any liability which it may have hereunder, except to the extent such failure actually prejudices the Indemnitor.  The Indemnitor shall have the right to assume the defense and settlement of such claim; provided, that the Indemnitor notifies the Indemnitee of its election to assume such defense and settlement within 30 days after the Indemnitee gives the Indemnitor notice of the claim.  In such case, the Indemnitee will not settle or compromise such claim, and the Indemnitor will not be liable for any such settlement made without its prior written consent.  If the Indemnitor is entitled to, and does, assume such defense by delivering the aforementioned notice to the Indemnitee, the Indemnitee will (i) have the right to approve the Indemnitor’s counsel (which approval will not be unreasonably withheld, delayed or conditioned), (ii) be obligated to cooperate in furnishing evidence and testimony and in any other manner in which the Indemnitor may reasonably

 

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request and (iii) be entitled to participate in (but not control) the defense of any such action, with its own counsel and at its own expense.

 

Section 12.                                    Intellectual Property.

 

(a)                                 All Intellectual Property created or developed in connection with the Manager’s performance of this Agreement or otherwise and the Intellectual Property Rights associated therewith shall be the sole and exclusive property of the Manager.  The Company and Operating Company (on behalf of themselves and any Subsidiary) shall assign and do hereby assign to the Manager all Intellectual Property Rights in such Intellectual Property.  For the term if this Agreement, the Manager hereby grants the Company, Operating Company and their Subsidiaries a non-exclusive, worldwide, fully paid up, royalty-free, non-sub-licensable, non-transferable license and right to use the Intellectual Property made in connection with the Manager’s performance of this Agreement for their business purposes.  The Company and the Operating Company will, or will cause their Subsidiaries to, upon request of the Manager, do, execute, acknowledge and deliver or cause to be done, executed, acknowledged and delivered all such further acts, deeds, assignments, transfers, conveyances, powers of attorney and assurances as may be requested by the Manager to carry out the intent of this Agreement or to otherwise perfect, record, confirm, or enforce the Manager’s rights in and to the Intellectual Property.

 

(b)                                 Definitions.

 

(i)                                     “Intellectual Property” means all work product, documents, code, works of authorship, programs, manuals, developments, processes, formulae, data, specifications, fixtures, tooling, equipment, supplies, processes, inventions, discoveries, improvements, trade secrets, and know-how or similar rights.

 

(ii)                                  “Intellectual Property Rights” means the worldwide right, title, and interest in any Intellectual Property and any goodwill appurtenant thereto, including, without limitation, all copyrights, copyright renewals or reversions, trademarks, trade names, trade dress rights, inventions, priority rights, patent rights, patents, and any other rights or protections in connection therewith or related thereto.

 

Section 13.                                    No Joint Venture.  Nothing in this Agreement shall be construed to make the Company (or any Subsidiary) and the Manager partners or joint venturers or impose any liability as such on either of them.

 

Section 14.                                    Term; Termination.

 

(a)                                 Until this Agreement is terminated in accordance with its terms, this Agreement shall be in effect until the third anniversary of the Effective Date (the “Initial Term”) and shall be automatically renewed for a one-year term (a “Renewal Term”) upon the expiration of the Initial Term and upon the expiration of each Renewal Term unless at least two-thirds of all of the Independent Directors determine that there has been unsatisfactory performance by the Manager that is materially detrimental to the Company and the Subsidiaries.  If the Company elects not to renew this Agreement at the expiration of the Initial Term or any Renewal Term as set forth above, the Company shall deliver to the Manager prior written notice (the “Termination Notice”) of the Company’s intention not to renew this Agreement based upon the terms set forth in this Section 14(a) not less than 180 days prior to the expiration of the then existing term.  If the Company so elects not to renew this Agreement, the Company shall designate the date (the “Effective Termination Date”), not less than 180 days from the date of the notice, on which the Manager shall cease to provide services under this Agreement, and this Agreement shall terminate on such date; provided, however, that in the event the Termination Notice is given in

 

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connection with a determination that there has been an unsatisfactory performance by the Manager, the Manager shall have 30 days after such notice to remedy the unsatisfactory performance.

 

(b)                                 In recognition of the level of the effort required by the Manager to establish, grow, improve and manage the Company and the Subsidiaries and the commitment of resources by the Manager, in the event that this Agreement is terminated in accordance with the provisions of Section 14(a) or Section 16(b) of this Agreement, the Company shall pay to the Manager, on the date on which such termination is effective, a termination fee (the “Termination Fee”) equal to 4.5% of the daily average Fully-Diluted Market Capitalization for the most recently completed fiscal quarter prior to the date of termination.  The obligation of the Company to pay the Termination Fee shall survive the termination of this Agreement.

 

(c)                                  No later than 180 days prior to the anniversary date of this Agreement of any year during the Initial Term or Renewal Term, the Manager may deliver written notice to the Company informing it of the 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.  The Company is not required to pay to the Manager the Termination Fee if the Manager terminates this Agreement pursuant to this Section 14(c).

 

(d)                                 If this Agreement is terminated pursuant to Section 14 or Section 16 of this Agreement, such termination shall be without any further liability or obligation of either party to the other, except as provided in Sections 6, 9, 10, 14(b), 16(b), and 17 of this Agreement.  In addition, Sections 12, 13(d) and 21 of this Agreement shall survive termination of this Agreement.

 

Section 15.                                    Assignment.

 

(a)                                 Except as set forth in Section 15(b) of this Agreement, this Agreement shall terminate automatically in the event of its “assignment” (as defined under the Advisers Act), in whole or in part, by the Manager, unless such assignment is consented to in writing by the Company with the consent of a majority of the Independent Directors; provided, however, that no such consent shall be required in the case of an assignment by the Manager to Pine River, Provident or any of their respective Affiliates.  Any such permitted assignment shall bind the assignee under this Agreement in the same manner as the Manager is bound, and the Manager shall be liable to the Company for all errors or omissions of the assignee under any such assignment.  In addition, the assignee shall execute and deliver to the Company a counterpart of this Agreement naming such assignee as Manager.  This Agreement shall not be assigned by the Company without the prior written consent of the Manager, except in the case of assignment by the Company to another REIT or other organization which is a successor (by merger, consolidation, purchase of assets, or similar transaction) to the Company, in which case such successor organization shall be bound under this Agreement and by the terms of such assignment in the same manner as the Company is bound under this Agreement.

 

(b)                                 Notwithstanding any provision of this Agreement, the Manager may subcontract and assign any or all of its responsibilities under Sections 2(c), 2(d) and 2(e) of this Agreement to any of its Affiliates in accordance with the terms of this Agreement applicable to any such subcontract or assignment, and the Company hereby consents to any such assignment and subcontracting.  In addition, provided that the Manager provides prior written notice to the Company for informational purposes only, nothing contained in this Agreement shall preclude any pledge, hypothecation or other transfer of any amounts payable to the Manager under this Agreement.  In addition, the Manager may assign this Agreement to any of its Affiliates without the approval of the Independent Directors.

 

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Section 16.                                    Termination for Cause.

 

(a)                                 Notwithstanding anything provided in Section 14, the Company may terminate this Agreement effective upon 30 days’ prior written notice of termination from the Company to the Manager, without payment of any Termination Fee, if (i) the 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 90 days after written notice of such breach if the Manager takes steps to cure such breach within 30 days of the written notice), (ii) the Manager engages in any act of fraud, misappropriation of funds, or embezzlement against the Company or any Subsidiary that results in direct, uncompensated harm to the Company or any Subsidiary, (iii) there is an event of any bad faith, willful misconduct or gross negligence on the part of the Manager in the performance of its duties under this Agreement that results in direct, uncompensated harm to the Company or any Subsidiary, (iv) there is a commencement of any proceeding relating to the Manager’s Bankruptcy or insolvency, including an order for relief in an involuntary bankruptcy case or the Manager authorizing or filing a voluntary bankruptcy petition, (v) there is a dissolution of the Manager or (vi) the Manager is convicted of a felony (including a plea of nolo contendere).

 

(b)                                 The Manager may terminate this Agreement effective upon 60 days’ prior written notice of termination to the Company in the event that the Company shall default in the 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 default if the Company takes steps to remedy such default within 30 days of the written notice).  The Company is required to pay to the Manager the Termination Fee if the termination of this Agreement is made pursuant to this Section 16(b).

 

(c)                                  The Manager may terminate this Agreement, without payment of any Termination Fee to the Manager, 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.

 

Section 17.                                    Action Upon Termination.  From and after the effective date of termination of this Agreement, pursuant to Sections 14 or 16 of this Agreement, the 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 Section 14(a) or Section 16(b), the applicable Termination Fee.  Upon such termination, the Manager shall forthwith:

 

(a)                                 after deducting any accrued compensation and reimbursement for its expenses to which it is then entitled, pay over to the Company or a Subsidiary all money collected and held for the account of the Company or a Subsidiary pursuant to this Agreement;

 

(b)                                 deliver to the Board of Directors a full accounting, including a statement showing all payments collected by it and a statement of all money held by it, covering the period following the date of the last accounting furnished to the Board of Directors with respect to the Company or a Subsidiary; and

 

(c)                                  deliver to the Board of Directors all property and documents of the Company or any Subsidiary then in the custody of the Manager.

 

21

 

Section 18.                                    Release of Money or Other Property Upon Written Request.  The Manager agrees that any money or other property of the Company or any Subsidiary held by the Manager under this Agreement shall be held by the Manager as custodian for the Company or Subsidiary, and the Manager’s records shall be appropriately marked clearly to reflect the ownership of such money or other property by the Company or such Subsidiary. Upon the receipt by the Manager of a written request signed by a duly authorized officer of the Company requesting the Manager to release to the Company or any Subsidiary any money or other property then held by the Manager for the account of the Company or any Subsidiary under this Agreement, the Manager shall release such money or other property to the Company or any Subsidiary within a reasonable period of time, but in no event later than 30 days following such request.  The Manager shall not be liable to the Company, any Subsidiary, the Independent Directors, or the Company’s or a Subsidiary’s stockholders, members or partners for any acts performed or omissions to act by the Company or any Subsidiary in connection with the money or other property released to the Company or any Subsidiary in accordance with the second sentence of this Section 18.  The Company and any Subsidiary shall indemnify the Manager and the other Manager Indemnified Parties against any and all expenses, losses, damages, liabilities, demands, charges and claims of any nature whatsoever, which arise in connection with the Manager’s release of such money or other property to the Company or any Subsidiary in accordance with the terms of this Section 18.  Indemnification pursuant to this provision shall be in addition to any right of the Manager or any such other Manager Indemnified Party to indemnification under Section 11 of this Agreement.

 

Section 19.                                    Notices.  Unless expressly provided otherwise in this Agreement, all notices, requests, demands and other communications required or permitted under this Agreement shall be in writing and shall be deemed to have been duly given, made and received when delivered against receipt or upon actual receipt of (i) personal delivery, (ii) delivery by reputable overnight courier, (iii) delivery by facsimile transmission with telephonic confirmation or (iv) delivery by registered or certified mail, postage prepaid, return receipt requested, addressed as set forth below:

 

(a)                                 If to the Company:

 

Silver Bay Realty Trust Corp.
 601 Carlson Parkway

Suite 250

Minnetonka, MN  55305
 Attention:  General Counsel

 

(b)                                 If to the Manager:

 

PRCM Real Estate Advisers LLC
 601 Carlson Parkway

Suite 250

Minnetonka, MN  55305
 Attention:  General Counsel

 

Either party may alter the address to which communications or copies are to be sent by giving notice of such change of address in conformity with the provisions of this Section 19 for the giving of notice.

 

Section 20.                                    Binding Nature of Agreement; Successors and Assigns.  This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, personal representatives, successors and permitted assigns as provided in this Agreement.

 

22

 

Section 21.                                    Entire Agreement.  This Agreement contains the entire agreement and understanding among the parties hereto with respect to the subject matter of this Agreement, and supersedes all prior and contemporaneous agreements, understandings, inducements and conditions, express or implied, oral or written, of any nature whatsoever with respect to the subject matter of this Agreement.  The express terms of this Agreement control and supersede any course of performance and/or usage of the trade inconsistent with any of the terms of this Agreement.  This Agreement may not be modified or amended other than by an agreement in writing signed by the parties hereto.

 

Section 22.                                    GOVERNING LAW.  THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES TO THE CONTRARY.

 

Section 23.                                    No Waiver; Cumulative Remedies.  No failure to exercise and no delay in exercising, on the part of any party hereto, any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.  The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law.  No waiver of any provision hereunder shall be effective unless it is in writing and is signed by the party asserted to have granted such waiver.

 

Section 24.                                    Headings.  The headings of the sections of this Agreement have been inserted for convenience of reference only and shall not be deemed part of this Agreement.

 

Section 25.                                    Counterparts.  This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, and all of which shall together constitute one and the same instrument.  This Agreement shall become binding when one or more counterparts of this Agreement, individually or taken together, shall bear the signatures of all of the parties reflected hereon as the signatories.

 

Section 26.                                    Severability.  Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

 

Section 27.                                    Gender.  Words used herein regardless of the number and gender specifically used, shall be deemed and construed to include any other number, singular or plural, and any other gender, masculine, feminine or neuter, as the context requires.

 

[SIGNATURE PAGE FOLLOWS]

 

23

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.

 

	
 
    	
SILVER BAY REALTY TRUST CORP.,
    
	
 
    	
a   Maryland Corporation
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ David N. Miller
    
	
 
    	
 
    	
Name: David N. Miller
    
	
 
    	
 
    	
Title: Chief Executive Officer and President
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
SILVER BAY OPERATING PARTNERSHIP L.P.,
    
	
 
    	
a Delaware limited partnership
    
	
 
    	
 
    
	
 
    	
By:
    	
SILVER   BAY MANAGEMENT LLC,
    
	
 
    	
 
    	
a Delaware limited liability company,
    
	
 
    	
 
    	
Its General Partner
    
	
 
    	
 
    
	
 
    	
 
    	
By:
    	
SILVER   BAY REALTY TRUST CORP.,
    
	
 
    	
 
    	
 
    	
a Maryland corporation,
    
	
 
    	
 
    	
 
    	
Its Managing Member
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ David N. Miller
    
	
 
    	
 
    	
Name: David N. Miller
    
	
 
    	
 
    	
Title: Chief Executive Officer and President
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
PRCM REAL ESTATE ADVISERS LLC,
    
	
 
    	
a Delaware limited liability company
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ David N. Miller
    
	
 
    	
 
    	
Name: David N. Miller
    
	
 
    	
 
    	
Title: Chief Executive Officer 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
With respect to Sections 3(a) and 9 only:
    
	
 
    	
 
    	
 
    
	
 
    	
PINE RIVER CAPITAL MANAGEMENT L.P.
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Jeff Stolt 
    
	
 
    	
 
    	
Name: Jeff Stolt
    
	
 
    	
 
    	
Title: Chief Financial Officer
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
PINE RIVER DOMESTIC MANAGEMENT L.P.
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Jeff Stolt
    
	
 
    	
 
    	
Name: Jeff Stolt
    
	
 
    	
 
    	
Title: Chief Financial Officer
    

 

 

Exhibit A

 

·                  No investment shall be made that would cause the Company to fail to qualify as a REIT for U.S. federal income tax purposes; and

 

·                  No investment shall be made that would cause the Company or any Subsidiary to be required to register as an investment company under the Investment Company Act.

 

·                  Investments shall be limited to (a) single-family properties and investments that are directly related to the acquisition, maintenance, ownership and leasing thereof; provided that bulk purchases of assets that are within the foregoing guideline may include other assets to the extent the purchase of such other assets is necessary in order to effect such bulk purchases; and (b) up to 5% of the Company’s assets may consist of other investments.

 

·                  Until appropriate investments can be identified, the Company may invest available cash in interest-bearing and short-term investments, that are consistent with (i) the Company’s intention to qualify as a REIT, and (ii) the Company’s and each Subsidiary’s exemption from “investment company” status under the Investment Company Act.

 

Exh. A-1Exhibit 10.3

 

PROPERTY MANAGEMENT AND ACQUISITION SERVICES AGREEMENT

 

This Property Management and Acquisition Services Agreement (the “Agreement”) is made and entered into as of December 19, 2012 (the “Effective Date”), by and between Silver Bay Property Corp., a Delaware corporation (“Manager”) and Silver Bay Operating Partnership, L.P., a Delaware limited partnership (“Parent”) (each sometimes referred to as a “Party” and, collectively, the “Parties”) with reference to the following:

 

RECITALS

 

A.                                    Parent, through certain of its current and future Affiliates (each, an “Owner” and collectively referred to herein as “Owner”), is the indirect owner of the portfolio of single-family residential properties.  Parent and Owner intend to supplement such portfolio by acquiring additional single-family or other residential properties within such metropolitan areas as may be designated from time-to-time by Parent (together, the “Geographic Areas”).

 

B.                                    Manager is engaged in the business of acquiring, leasing and managing single-family and other residences located in the Geographic Areas.

 

C.                                    Manager may enter into third-party acquisition and property management service agreements to carry out its duties and responsibilities set forth below.

 

D.                                    Upon the terms and conditions set forth below, Parent desires to retain the services of Manager to:  (i) identify, evaluate and purchase single-family and other residential properties located in the Geographic Areas on behalf of Parent and Owner; and (ii) operate, maintain, repair, manage and lease the Properties (as defined herein) on behalf of Parent and Owner.

 

E.                                     The properties owned by Parent or Owner as of the Effective Date, together with any properties evaluated or acquired pursuant to this Agreement or made subject to this Agreement pursuant to an Acquisition Notice (as defined below) are collectively referred to as the “Properties” and individually as a “Property.”

 

F.                                      Manager intends to identify properties for potential purchase on behalf of Parent and Owner in the Geographic Areas through multiple channels including: foreclosure auctions (“Auction Properties”); negotiated purchases, including short sale and other public listings (together, “MLS Properties”); and portfolio sales (“Bulk Properties”).

 

G.                                    Unless the context otherwise specifies or requires, the Parties intend that capitalized terms used in this Agreement shall have the meanings set forth herein and on Exhibit A.

 

NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Parent and Manager agree as follows:

 

1.                                      APPOINTMENT; PROFESSIONAL MANAGEMENT STANDARDS.

 

1.1                               Engagement.  Parent hereby engages Manager to be the manager of the Properties, and Manager hereby accepts the engagement, on the terms and conditions set forth herein.  Parent also engages Manager as Parent’s and Owner’s non-exclusive representative to assist Parent and Owner in identifying, evaluating and acquiring single-family and other

 

 

properties located in the Geographic Areas as provided in this Agreement, and Manager accepts the engagement.

 

1.2                               Manager Status.  It is expressly understood and agreed by the Parties that Manager is an independent contractor performing services for Owner or Parent and shall not be deemed to be a joint venturer, partner or employee of Owner or Parent.  In the performance of its duties hereunder, Manager shall act solely as an independent contractor of Parent but only to the extent expressly set forth herein.  Parent and Manager agree that the limited agency expressly granted herein is terminable in accordance with the provisions of this Agreement.  Notwithstanding any such agency, except as may be explicitly contemplated in this Agreement, Manager shall not pledge Owner’s or Parent’s credit or incur any liabilities or obligations in Parent’s or Owner’s name without Parent’s or Owner’s prior written consent, which Parent or Owner may withhold or grant in Parent or Owner’s sole discretion.

 

1.3                               Standards.  Manager will perform the Services required by Manager to be performed under this Agreement (the “Services”) in conformance with the following standards (the “Standards”) (a) in accordance with commercially reasonable professional standards, (b) in compliance with all Legal Requirements; (c) using skill, good judgment, good faith and commercially reasonable efforts; and (d) in accordance with those standards and instructions that Parent may issue from time to time regarding the Properties, except to the extent prohibited by Legal Requirements.  Parent acknowledges and agrees that Manager may subcontract with third parties to perform all or any part of the Services, provided that no such subcontract shall relieve Manager of any of its obligations hereunder.

 

1.4                               REIT Compliance.  Manager acknowledges that Silver Bay Realty Trust Corp. (“Silver Bay Trust”), which owns a majority interest in Parent, intends to qualify as a “real estate investment trust” (a “REIT”) within the meaning of Section 856(a) of the Internal Revenue Code of 1986, as amended (the “Code”).  As such, Silver Bay Trust will be required to derive specified percentages of its gross income from, among other things, “rents from interests in real property” and “charges for services customarily furnished or rendered in connection with the rental of real property, whether or not such charges are separately stated,” in the Geographic Areas (“Customary Services”).  In addition, Silver Bay Trust must not derive more than a de minimis amount of “impermissible tenant service income” (“Impermissible Income”) within the meaning of Section 856(d)(2)(C) and 857(d)(7) of the Code.  Impermissible Income generally includes any amount received or accrued by the REIT for services rendered or to be rendered to the tenants of its real property.  However, for this purpose a REIT is not deemed to be providing services if (i) the services are provided through either an “independent contractor” (within the meaning of Section 856(d)(3) of the Code) from whom the REIT does not derive or receive any income or a “taxable REIT subsidiary” (“TRS”) of the REIT and (ii) the cost of such services are borne by the independent contractor or the TRS rather than the REIT, a separate charge is received and retained by the independent contractor or the TRS and the independent contractor or the TRS is adequately compensated for its services.  It is intended that Manager is an “independent contractor” of Silver Bay Trust and shall provide only Customary Services unless otherwise approved by Parent.  Manager shall consult with Parent as to which services Manager may perform for tenants from time to time.  Any services other than Customary Services may only be performed by Manager in such manner as will not cause Silver Bay Trust to realize Impermissible Income.  In that regard and notwithstanding anything to the contrary herein, Manager shall not be reimbursed for the costs

 

 

incurred in performing any non-Customary Services, but shall charge a separate amount for such services and retain all amounts derived from the performance of such non-Customary Services.

 

2.                                      TERM.

 

2.1                               Initial Term.  The initial term of this Agreement shall commence on the Effective Date and end on the one year anniversary of the Effective Date (the “Term”).

 

2.2                               Renewal.  Following the initial Term and each Renewal Term (as defined below), this Agreement shall automatically and without further action by either Party be extended for an additional one (1) year period (each a “Renewal Term”).

 

2.3                               Early  Termination.  Notwithstanding the foregoing, this Agreement may be terminated as provided in Section 12.

 

3.                                      PROPERTIES.

 

3.1                               Properties Acquired Pursuant to this Agreement.  Properties that Manager assists Owner to acquire pursuant to this Agreement shall automatically become subject to this Agreement on the date when acquired by Owner.

 

3.2                               Other Future Properties Acquired by Owner.  From time to time hereafter, Parent and Owner shall have the right at their sole option to cause additional single-family and other residential properties located within one or more Geographic Areas that are acquired by Owner but not acquired pursuant to this Agreement to become Properties that are subject to the terms of this Agreement by notice to Manager (an “Acquisition Notice”).

 

4.                                      MANAGER’S RESPONSIBILITIES — PROPERTY MANAGEMENT.

 

4.1                               Management and Maintenance.  Manager shall maintain and manage the Properties in conformance with the Standards.

 

4.2                               Leasing.  Manager shall use commercially reasonable efforts to keep the Properties leased.

 

4.2.1                                 Lease and Leasing Forms.  Manager shall lease the Properties using a lease form deemed appropriate by Manager (each, a “Lease Form”), which may include any lease form conforming to the Association of Realtors Residential Real Estate Lease Form for the state in which the Qualified Property is located.

 

4.2.2                                 Lease Parameters.  Manager shall screen prospective tenants and negotiate leases for the Properties in a commercially reasonable manner.

 

4.2.3                                 Authority.  Subject to the terms of this Agreement, Manager is authorized to enter into Leases with Tenants on behalf of Owner or Parent.

 

 

4.3                               Marketing.

 

4.3.1                                 Advertising.  Manager shall use commercially reasonable efforts and advertising to attract, procure and retain Tenants at each of the Properties.  If Manager elects to advertise one or more of the Properties through a multiple listing service, Parent authorizes Manager to install and use a lockbox on the Property containing the key to the Property.

 

4.3.2                                 Cooperation.  Manager shall cooperate with outside brokers and agents in securing Tenants for the Properties.

 

4.4                               Legal Proceedings and Legal Counsel.  Manager may file unlawful detainer actions and actions to recover rent, late charges, insufficient fund charges and other amounts payable by a Tenant.  Manager may file other actions as directed by Parent.

 

4.5                               Government Approvals/Rental Taxes.  Manager shall timely secure such individual tax or business licenses in the name of Owner or Parent as may be required for the rental of the Properties and shall register each Property with appropriate governmental authorities as a rental property to the extent required by Legal Requirements in the applicable Geographic Areas.  Manager will make such filings and timely pay such taxes and fees and submit monthly sales tax forms with the appropriate governmental agency.

 

4.6                               Cooperation With Financing and Sales Efforts.  Manager and its Employees shall cooperate with and provide commercially reasonable transaction support to Owner and Parent in connection with the financing, sale, or any other transfer or disposition of any or all of the Properties.

 

4.7                               Accounts.

 

4.7.1                                 Trust Deposit Account.  Subject to applicable local law, all funds received by Manager as a refundable security deposit (the “Security Deposits”) in connection with Leases shall be placed in trust for Parent’s or Owner’s benefit into an account at a financial institution whose deposits are insured by the Federal Deposit Insurance Corporation (the “FDIC”) and in a manner to indicate the custodial nature of such account (the “Trust  Deposit Account”).

 

4.7.2                                 Trust Operating Account.  Subject to applicable local law, except for Security Deposits as provided above in Section 4.7.1, all Gross Collections shall be placed in trust for Parent’s or Owner’s benefit into an account at a financial institution whose deposits are insured by the FDIC and in a manner to indicate the custodial nature of such account (the “Trust Operating Account”).

 

4.7.3                                 Trust Acquisition Account.  Manager shall also establish the Trust Acquisition Account in accordance with Section 5.7.1 b. of this Agreement.

 

4.7.4                                 Access to Accounts.  Parent shall be given read-only access to the Trust Deposit Account and the Trust Operating Account (and the Trust Acquisition Account, as described in Section 5.7.1 b.).  On the Effective Date, Manager will give the account number and access password to Parent.

 

 

4.8                               Disbursements.

 

4.8.1                                 Requests for Funds.  Manager may provide a request to Parent with respect to funding the Trust Operating Account for the ensuing month to the extent reasonably required, based upon the Gross Collections for the preceding month and anticipated expenses.

 

4.8.2                                 Operating Expenses.  Subject to Section 1.4, Manager shall pay all Operating Expenses on a timely basis from the funds in the Trust Operating Account.

 

4.8.3                                 Remittance to Parent.  Subject to Section 1.4, each month, after deducting all authorized Operating Expenses and Performance Expenses from the Gross Collections from the Properties for the immediately preceding calendar month, the net remaining amount of Gross Collections shall be remitted by Manager to Parent.

 

4.9                               Data Room and Reports.

 

4.9.1                     Reports. Manager shall cause such statements, reports and documentation as Parent may reasonably request relating to the Properties to be delivered to Parent at the times and in the forms reasonably requested by Parent.

 

4.9.2                                 Cooperation.  Manager will cooperate with Parent and its agents in reconciling any discrepancies found in statements and providing reasonably requested backup for income and expense items to satisfy Parent’s accountants and administrators.

 

4.10                        Filing of Tax and Other Returns and Reports.  Manager shall timely prepare and file all returns and other documents required under the Federal Insurance Contributions Act (FICA) and the Federal Unemployment Tax Act, or any similar federal or state legislation, and all withholding tax returns required for Manager and its Employees and for contractors or material suppliers, including 1099s and W-2s.  Manager will timely pay all amounts required to be paid under the Federal Unemployment Tax Act, or any similar federal or state legislation, and all withholding taxes.  Manager shall also timely prepare and file the following:  (a) all payroll forms and reports concerning Employees; (b) workers’ compensation forms; (c) business and property tax forms; and (d) any applicable health, welfare or other forms.

 

4.11                        Records.

 

4.11.1              Records.  Manager shall organize and maintain accurate records of all of the information and data prepared by or utilized by Manager in the performance of its duties, including the following (collectively, the “Records”).

 

4.11.2                          Inspection of Records.  All such Records shall be maintained at Manager’s offices.  The Records at Manager’s office shall be open for inspection by Parent at all reasonable times.  Manager shall keep safe and intact all such Records for a period of three (3) years after their creation.  Parent reserves the right to have an audit made of all Records, wherever located.  The provisions of this Section shall survive any termination of this Agreement.

 

4.11.3                          Compliance With Laws.  Notwithstanding Manager’s obligations to cause each of the Properties to comply with all Legal Requirements, Manager shall not take any

 

 

such action if Parent has notified Manager that Parent is contesting or has affirmed its intention to contest and promptly institute proceedings contesting such Legal Requirements, unless failure to comply promptly with any such Legal Requirements would expose Manager to civil and/or criminal liability.

 

4.11.4                          Other Forms of Compensation Prohibited.  Manager agrees that its compensation as described in Section 6.2 below is to be paid in consideration of all services to be rendered pursuant to the terms of this Agreement by Manager.  All rebates, discounts or commissions collected by Manager, or credited to Manager’s use, that relate to the purchasing of supplies or to the rendering of services for the Properties, shall reduce Reimbursements due from Parent hereunder.  Manager shall not collect or charge any undisclosed fee, rebate or discount in connection with the management or leasing of the Properties.

 

4.11.5                          Inspections of Properties.  Manager shall cooperate with Parent and Parent’s representatives in order to allow them to inspect the Properties at all reasonable times.

 

5.                                      MANAGER’S RESPONSIBILITIES — PROPERTY ACQUISITIONS.

 

5.1                               Identification, Evaluation and Acquisition of Properties.  Manager shall exercise commercially reasonable efforts to identify Properties for acquisition within the Geographic Areas that meet the criteria established by Parent and Owner from time to time (“Qualified Properties”), to evaluate each Property that it identifies, taking into account all customary and commercially reasonable factors that would bear upon its ability to meet such criteria and to acquire such Qualified Properties on Owner’s behalf upon terms that are in accordance with this Agreement.

 

5.2                               Inspections.

 

5.2.1                     For MLS Properties, Manager shall not be required to hire a home, roof or termite inspector to inspect each Property, but will order such inspections if requested by Parent, along with other inspectors for such other Building Systems to the extent that Manager may reasonably conclude such inspectors are necessary or that Parent may request that Manager hire.

 

5.2.2                     Unless otherwise specified by Parent, for Auction Properties and Bulk Properties, Manager shall conduct commercially reasonable due diligence of the Qualified Properties given the parameters of the applicable auction or bulk sale (including time frames).  For example, such commercially reasonable efforts could be satisfied, in certain circumstances, by a visit to the Property to assess external conditions, although commercial reasonableness should be assessed on a case-by-case basis.

 

5.3                               Form of Contract.

 

5.3.1                     For MLS Properties, Manager shall prepare for Owner’s approval and signature offers to be submitted for the purchase of Qualified Properties on an agreement (each, a “Purchase Contract”) in a form approved by Parent.  Alternatively, the parties acknowledge that if Manager is authorized pursuant to a separate power of attorney or other agreement between Owner and Manager, Manager may sign such Purchase Contract as Owner’s attorney-in-fact.  The Parties recognize that the parameters of the applicable sale of MLS Properties may require that Manager use only a purchase contract or addendum thereto other than the approved

 

 

form of Purchase Contract.  In the circumstances contemplated by the preceding sentence, Manager will use its commercially reasonable judgment to determine the suitability of such purchase contract and, to the extent requested by Parent, shall review a sampling of such purchase contracts with Parent to develop with Parent guidelines regarding such suitability.

 

5.3.2                     Parent may provide to Manager any further modifications to form Purchase Contracts that Parent or Owner may desire at any time and if so submitted, Manager will incorporate the changes into Purchase Contracts going forward.

 

5.3.3                     For Auction Properties and Bulk Properties, the parameters of the applicable auction or bulk sale may require that Manager use (a) only an alternative approved form of Purchase Contract or (b) no Purchase Contract and the property transfer may simply be effected by a deed or other similar form of title conveyance documentation.  In the circumstances contemplated by clause (a) of the preceding sentence, Manager will use its commercially reasonable judgment and good faith efforts to conform any alternative approved Purchase Contract as closely as possible to the form Purchase Contracts contemplated by this Section 5.3, and if that is not practicable given the parameters of the applicable auction, then Manager shall seek direction from Parent prior to submission of any Purchase Contract; and in the circumstances contemplated by clause (b) of the preceding sentence, Manager is allowed to proceed by using the deed or other similar form of title conveyance documentation.

 

5.3.4                     Unless otherwise directed by Parent, Manager shall submit all contracts relating to the purchase of Bulk Properties to Parent for review and approval.

 

5.4                               Title Insurance.  Manager shall obtain an American Land Title Association standard owner’s policy of title insurance (or the applicable state-specific equivalent thereof) for a Qualified Property in favor of Owner if and as directed by Parent.

 

5.5                               Reports and Records.

 

5.5.1                     Status Reports.  Manager shall keep Parent informed as to Manager’s progress in identifying and evaluating Qualified Properties by populating the Data Room with such information.

 

5.5.2                     Closing Reports.  Manager shall deliver a copy of the final form of each closing or settlement statement(s) that is prepared in connection with the closing and settlement of each Property acquisition to Parent following the closing of each Property acquisition, together with copies of the deed, title insurance policy and any other appurtenant closing documents.

 

5.5.3                     Original Conveyance Documents.  Following the closing of the acquisition for each Property, Manager shall deliver all original deeds, titles or similar conveyance documents to Parent.

 

5.6                               Limitations on Manager’s Authority.  Except as may be authorized in this Agreement (or in a separate written agreement between Owner and Manager), Manager shall have no authority to make oral or written warranties or representations on behalf of

 

 

Parent or Owner and shall advise all prospective sellers of a Qualified Property to conduct their own independent investigation.

 

5.7                               Special Provisions Regarding Certain Property Acquisitions.

 

5.7.1                     Prior to Manager’s submission of any Purchase Contract for any Auction Property or Bulk Properties, the following terms will also apply:

 

a.              Bearing in mind the expected parameters and procedures typically established for purchases of Auction Properties and Bulk Properties (including time frames), Parent and/or Owner will provide to Manager in writing sufficient delegation of authority (including powers of attorney as appropriate) to permit Manager to effectuate purchases of Auction Properties and Bulk Properties to the extent necessary and in a materially comparable manner to the means by which Manager may effectuate purchases of MLS Properties as contemplated by this Agreement.

 

b.              Manager may provide a request to Parent with respect to anticipated earnest money deposits and/or closing funds for the acquisition of Auction Properties.  Subject to applicable local law, all such funds delivered by Parent or Owner to Manager shall be placed in trust for Parent’s and Owner’s benefit into an account at a financial institution approved in advance by Parent whose deposits are insured by the FDIC and in a manner to indicate the custodial nature of such account (the “Trust Acquisition Account”).  Parent shall be given read-only access to the Trust Acquisition Account.  On the Effective Date, Manager will give the account number and access password to Parent.

 

c.               Following completion of the steps identified in subsections a. and b. above, Manager may effectuate purchases of Auction Properties and Bulk Properties pursuant to this Agreement.

 

6.                                      PARENT’S RESPONSIBILITIES.

 

6.1                               Funding of Accounts.  Parent shall promptly provide the funds requested by Manager pursuant to Section 4.8.1 and shall cause to be maintained sufficient funds in the Trust Operating Account to enable Manager to pay all Operating Expenses and Performance Expenses in a timely manner.  Parent shall also promptly provide the funds requested by Manager pursuant to Section 5.7.1 b.

 

6.2                               Compensation and Reimbursement.

 

6.2.1                     Commencing on the first (1st) day of the first (1st) calendar month following the Effective Date, Parent shall pay Manager a monthly fee equal to five percent (5%) of the difference of (i) total Performance Expenses incurred in the immediately preceding calendar month minus (ii) any Performance Expenses reimbursed or management fee paid to Manager by a Subsidiary of Parent pursuant to a separate agreement (the “Base Management  Fee”).  Partial months shall be prorated.

 

6.2.2                     Commencing on the first (1st) day of the first (1st) calendar month following the Effective Date, Parent shall reimburse Manager for any Operating Expenses and Performance Expenses incurred by Manager in the immediately preceding calendar month less

 

 

any Performance Expenses or Operating Expenses reimbursed or management fees paid by a Subsidiary of Parent or pursuant to a separate agreement (the “Reimbursement”); provided, however, that if such Performance Expenses are incurred as a result of provision of services, in whole or in part, to other clients of Manager, the reimbursement of such costs and expenses shall be allocated between the Parent and Owner and such other clients in a fair and equitable manner as determined by the Manager in good faith.  Partial months shall be prorated.

 

6.2.3                     Manager shall be entitled to deduct the Base Management Fee and the Reimbursement for the immediately preceding calendar month from the Trust Operating Account.  If Parent determines that Parent has paid fees to Manager in excess of the amounts required under this Agreement, Manager shall reimburse any such excess amounts to Parent within five (5) business days after receipt of Parent’s written request for such excess amounts, which written request shall be accompanied by reasonable proof of such excess amounts.

 

6.3                               Income Tax Returns.  Each of Parent and Owner shall be responsible for preparing its own income tax returns.

 

7.                                      NO DISCRIMINATION.

 

Parent and Manager acknowledge it is unlawful to discriminate in the leasing of any of the Properties based upon any discrimination that is prohibited by applicable law.  Manager and its Employees and Affiliates shall not permit any discrimination against or segregation of any person or group of persons on account of age, race, color, religion, creed, handicap, sex or national origin in the leasing or occupancy of the Properties, the selection or location of the Properties, the number of residents or the use of any services or amenities offered by Manager or its Affiliates; nor shall Manager allow any such discrimination in its employment practices.

 

8.                                      INSURANCE AND INDEMNITY.

 

8.1                               Carried by Manager.  Manager shall at all times obtain and keep in force the following types of policies of insurance with such limits and other terms as Manager deems commercially reasonable:

 

8.1.1                                 a commercial general liability policy of insurance;

 

8.1.2                                 statutory workers’ compensation and employers’ liability insurance;

 

8.1.3                                 umbrella liability insurance;

 

8.1.4                                 a fidelity bond or crime insurance including employee dishonesty coverage; and

 

8.1.5                                 professional liability or errors and omissions insurance.

 

The limits of the foregoing insurance shall not limit the liability of Manager nor relieve Manager of any obligation hereunder.  All insurance carried by Manager shall be primary to and not contributory with any similar insurance carried by Parent or Owner, whose insurance shall be considered excess insurance only.  Manager shall name Parent and Owner and their respective directors, officers, members, managers, employees, and agents as named or additional insureds

 

 

on the commercial general liability and umbrella liability policies; and name Parent and Owner as Loss Payee on the crime insurance policy.  Manager shall not do or permit to be done anything that invalidates the required insurance policies.

 

8.2                   Carried by Parent.  Parent shall at all times obtain and keep in force, at no expense to Manager, the following types policies of insurance with respect to the Properties:

 

8.2.1                                 a commercial general liability policy of insurance; and

 

8.2.2                                 umbrella liability insurance.

 

Parent and Owner shall name Manager and its respective directors, officers, members, managers, employees, and agents as named or additional insureds on the commercial general liability and umbrella liability policies.

 

8.3                               Insurance Policies.  The policies shall not contain any intra-insured exclusions as between insured persons or organizations.  The policies required herein shall be issued by companies duly licensed or admitted to transact business in the state where the Properties are located, and maintaining during the policy term a “General Policyholders Rating”, as set forth in the most current issue of AM Best’s Insurance Guide, of A/VII or higher.  In the event of a rating downgrade below the required minimum level, Manager shall immediately replace the policy with a carrier that has the agreed-upon minimum rating.

 

8.4                               Waiver of Subrogation.  Each Party shall request its respective insurance carriers to waive any right to subrogation that such companies may have against Owner, Parent or Manager, as the case may be, so long as the insurance is not invalidated thereby.

 

8.5                               Indemnity by Manager.  Manager shall, to the fullest extent permitted by applicable law, indemnify, defend (with counsel reasonably acceptable to Parent) and hold harmless Parent, Owner and their respective Affiliates, managers, members, certificate holders, partners, shareholders, directors, officers, employees and agents for, from and against any and all claims, liabilities, losses, damages, costs and expenses (including all costs and reasonable attorneys’ fees, late fees, interest and penalties) (collectively, “Liabilities”) arising from the bad faith, gross negligence, intentional misconduct or fraud of Manager (but not third parties who are not Affiliates of Manager engaged by Manager to perform portions of the Services) or any of its Employees in connection with the management and leasing of the Properties.  The provisions of this Section 8.5 shall survive the expiration or termination of this Agreement.

 

8.6                               Indemnity by Parent.  Parent shall, to the fullest extent permitted by applicable law, indemnify, defend (with counsel reasonably acceptable to Manager) and hold harmless Manager and its Affiliates, managers, members, certificate holders, partners, shareholders, directors, officers, employees and agents for, from and against any and all Liabilities arising as a direct result of Manager’s management of the Properties and performance of Manager’s duties under this Agreement, except to the extent arising as a result of:  (a) any material breach by Manager of this Agreement or the terms of any Lease; (b) the failure of Manager or any of its Employees to comply with Legal Requirements; (c) the bad faith, gross negligence, intentional misconduct or fraud of Manager or any of its Employees in connection with the management and leasing of the Properties or (d) any Liabilities incurred by or asserted by Manager’s Employees that are solely related to their employment by Manager.

 

 

The provisions of this Section 8.6 shall survive the expiration or termination of this Agreement.

 

8.7                               Limitation of Liability.  Except with respect to claims for indemnity under Sections 8.5, 8.6 or 17.2.3 of this Agreement, in no event shall either Party’s liability for any Liabilities (other than a claim by Owner for amounts that should have been properly remitted under Section 4.8.3 or a claim by manager for any Base Management Fees or Reimbursement (each, an “Excluded Claim”))  arising out of or in connection with this Agreement (when aggregated with such Party’s liability for all other Liabilities, other than Excluded Claims, arising out of or in connection with this Agreement) exceed an amount equal to 12 times the average monthly Fees paid to Manager in the 12 months preceding the date of such Liabilities plus amounts recoverable and actually recovered from any third party.

 

8.8                               Consequential Damages.      Notwithstanding anything to the contrary in this Agreement or at law or in equity, neither party shall be liable to the other Party or its subsidiaries or affiliates for punitive, special, indirect, incidental or consequential damages (including damages for loss of business profits, loss of data, loss of use, business interruption or any other loss), however caused, under any theory of liability, arising from or relating to any claim made under this Agreement or regarding the provision of or the failure to provide the Services or any other services.  The foregoing limitation will not limit either Party’s obligations with respect to payment of damages of any kind included in an award or settlement of a third party claim under any indemnity provisions specified herein.

 

9.                                      REPRESENTATIONS AND WARRANTIES.

 

9.1                               Representations, Warranties and Covenants of Manager.  Manager covenants, represents and warrants to Parent as of the Effective Date and any date a Property becomes subject to this Agreement:

 

9.1.1                                 Due Organization and Authorization.  Manager is a corporation organized, validly existing and in good standing under the laws of the State of Delaware.  Manager has full power to enter into this Agreement; the execution, delivery and performance of this Agreement have been duly and validly authorized by all necessary corporate action on the part of Manager; and this Agreement, when executed and delivered by the Parties, shall be the valid and binding obligation of Manager.

 

9.1.2                                 No Conflicts.  Manager has delivered to Parent a certified copy of its certificate of incorporation and bylaws together with a resolution authorizing Manager to enter into this Agreement.  The execution, delivery and performance of this Agreement by Manager shall not: (a) conflict with or result in a breach of any provision of its certificate of incorporation or bylaws; (b) cause a default under any agreement to which Manager is a party or by which any of its assets may be bound; or (c) require any consent or approval that has not been obtained or at the appropriate time shall not have been obtained.

 

9.1.3                                 Litigation.  There is no pending, or, to the knowledge of Manager, threatened, claim or litigation, arbitration proceeding, or action of any kind against Manager, the outcome of which could have a material adverse effect on the financial position, results of

 

 

operations, or business of Manager, taken as a whole, or which could question the validity of this Agreement.

 

9.1.4                                 Licenses.  Manager and its Employees possess all licenses and permits under the laws of the state in which the Properties are located as are necessary for them to perform their respective duties set forth in this Agreement, and all such licenses and permits are in good standing.

 

9.1.5                                 Financial Success.  Manager has not relied on any historical financial statement of the Properties, or any projection of earnings or any statements as to the possibility of future success or other similar matter that may have been delivered or made available to Manager, and Manager understands that neither Parent nor Owner makes or has made any guarantee as to the future financial success of the Properties.

 

9.2                               No Parent or Owner Warranties or Representations as to the Properties.  Manager acknowledges and agrees that neither Parent nor Owner has made, nor shall Parent nor Owner be deemed to have made, any warranty or representation, express or implied, with respect to any of the Properties, including any warranty or representation as to: (a) its fitness, design or condition for any particular use or purpose; (b) the quality of the material or workmanship therein; (c) the existence of any defect, latent or patent; (d) compliance with specifications; (e) quality; (f) durability; (g) operation; or (h) compliance of the Properties with any law.

 

9.3                               Representations and Warranties of Parent.  Parent represents and warrants to Manager as follows:

 

9.3.1                                 Authorization.  Parent is a limited partnership organized, validly existing and in good standing under the laws of the State of Delaware.  Parent has full power to enter into this Agreement, the execution, delivery and performance of this Agreement have been duly and validly authorized by all necessary limited partnership action on the part of Parent, and this Agreement, when executed and delivered by the Parties, shall be the valid and binding obligation of Parent.

 

9.3.2                                 No Conflicts.  The execution, delivery and performance of, this Agreement by Parent shall not: (a) conflict with or result in a breach of any provision of its formation or constituent documents; or (b) cause a default under any agreement to which Parent is a party or by which any of its assets may be bound or (c) require any consent or approval that has not been obtained or at the appropriate time shall not have been obtained.

 

9.3.3                                 Litigation.  There is no pending, or, to the knowledge of Parent, threatened, claim or litigation, arbitration proceeding, or action of any kind against Parent, the outcome of which could have a material adverse effect on the financial position, results of operations, or business of Parent or the Properties taken as a whole, or which could question the validity of this Agreement.

 

10.                               CONFIDENTIALITY.

 

Manager acknowledges that in connection with performing services for Parent under this Agreement, Manager will have access to Confidential Information, which is the proprietary and

 

 

non-public information of Parent, Silver Bay Trust, or both Parent and Silver Bay Trust. Manager will shall exercise reasonable commercial efforts to protect the confidentiality of all of the Confidential Information and agrees to restrict access to the Confidential Information to those Employees, agents, advisors or representatives who have a need to know the Confidential Information in order for Manager to fulfill its obligations under this Agreement and who have been advised of the confidential and proprietary nature of the Confidential Information (the “Authorized Professionals”).  Manager shall use reasonable commercial efforts to prevent unauthorized disclosure or use of the Confidential Information and acknowledges and agrees that it shall be responsible for its failure or the failure by any of its Authorized Professionals to adhere to the provisions of this Article 10.  Manager understands and acknowledges and will inform its Authorized Professionals that Silver Bay Trust is a public company, and that the securities laws of the United States (as well as applicable stock exchange regulations) prohibit any Person who has material, non-public information concerning Silver Bay Trust from purchasing or selling Silver Bay Trust’s securities when in possession of such information and from communicating such information to any other Person under circumstances in which it is reasonably foreseeable that such Person is likely to purchase or sell such securities in reliance upon such information. The provisions of this Article 10 shall survive any termination of this Agreement.

 

11.                               EXCLUSIVITY.

 

11.1            Manager agrees that Parent and Owner shall be entitled to engage other Persons to operate, repair, maintain, manage and lease other single-family and other residential properties, including properties within the Geographic Areas; provided, however that Parent or Owner, as applicable, shall notify Manager of any such activities within the Geographic Areas.

 

11.2            For the first thirty-six (36) months following the Effective Date (the “Exclusivity Period”), Manager shall provide the Services exclusively to Parent, Owner and their respective Affiliates.  Following the Exclusivity Period, Manager shall be entitled from time to time to operate, repair, maintain, manage and lease single-family and other residential properties within the Geographic Areas on behalf of Persons other than Parent and Owner; provided that Manager shall comply with all of its duties and obligations set forth in this Agreement.  If Manager shall at any time have reason to believe that there is a conflict between its duties and obligations to Parent and its duties and obligations to any other Person, Manager shall notify Parent immediately.

 

12.                               TERMINATION.

 

12.1                        Termination.

 

12.1.1              Voluntary Termination.  Manager may terminate this Agreement at any time during the Term or any Renewal Term upon ninety (90) days written notice to Parent if suitable replacement services have been identified by Manager or its parent.

 

12.1.2              Termination of Management Agreement.  If there is a termination or expiration for any reason of that certain Management Agreement dated as of December 19, 2012, by and among PRCM Real Estate Advisers LLC, a Delaware limited liability company, Silver Bay Trust and Parent, either Party may elect to terminate this Agreement simultaneously therewith by providing written notice to the other Party.

 

 

12.2                        Effect of Dispositions.  Notwithstanding anything to the contrary in this Agreement, at the option of Parent, this Agreement shall automatically and immediately terminate with respect to any Property upon the sale or other disposition of that Property.

 

12.3                        Termination for Cause Without Prior Notice.  In addition to all other rights, remedies and recourses available by law, the occurrence of any of the following items shall permit, at Parent’s option, termination of this Agreement by 30 days written notice with (the occurrence of any of which shall constitute “Cause”):  (a) dissolution or termination of the corporate existence of Manager (other than by reason of merger, consolidation, reorganization, reconstitution or otherwise, in which case the Manager shall assign its rights and obligations under this agreement to the successor organization, which shall be bound under this Agreement and by the terms of such assignment in the same manner as the Manager is bound under this Agreement); (b) termination or suspension of any of Manager’s licenses required to perform the Services pursuant to Legal Requirements unless remedied within 30 days of receipt of the notice of termination; (c) cessation on Manager’s part to continue to do business; (d) bankruptcy, insolvency, or assignment for the benefit of creditors of Manager; (e) appointment of a receiver, liquidator or trustee of Manager by court order; (f) bad faith, gross negligence, intentional misconduct or fraud in the performance of Manager’s duties and obligations under this Agreement that results in material and uncompensated harm to Owner or Parent; (g) any breach of any material representation, warranty or covenant of Manager if 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 90 days after written notice of such breach if the Manager takes steps to cure such breach within 30 days of the written notice); (h) Manager engages in any act of fraud, misappropriation of funds, or embezzlement against Parent or any Owner that results in direct, uncompensated harm to the Parent or any Owner; or (i) a final non-appealable determination against Manager or any of its Employees of any civil action or investigation by any licensing board or other governmental or quasi-governmental entity which would materially impair Manager’s ability to provide Services hereunder.

 

12.4                        Effect of Termination.  On termination or expiration of this Agreement, Parent and Manager agree as follows:

 

12.4.1                          Manager shall deliver to Parent as quickly as reasonably practical but in any event within ten (10) days following the termination date of this Agreement all original Records relating to the Properties (including all electronic or digital records and all of the content of the website that relates to the Properties).  Manager must (a) make such delivery via one or more electronic formats utilizing technology that is then available to Manager at no additional cost to Manager (unless such cost is borne in full by Owner or Parent) and that will allow Parent to continue to use the materials to the same degree of functionality as Manager using comparable technology, and (b) provide each original record in hard copy format as Parent may request at Parent’s expense.  Manager may retain copies of any transferred records at its own expense which will remain subject to the confidentiality provisions of Article 10 of this Agreement.

 

12.4.2                          Manager shall deliver to Parent all keys to the Properties and all other items of personal property owned by Owner or Parent and in Manager’s possession.

 

 

12.4.3                          Manager shall have no further access to the Data Room, nor the right to withdraw any amount from the Trust Deposit Account, Trust Operating Account or Trust Acquisition Account.

 

12.4.4                          Manager shall cooperate in transferring the Trust Deposit Account, Trust Operating Account and Trust Acquisition Account, as directed by Parent, except as otherwise required under the applicable landlord/tenant or similar laws of the Geographic Areas.

 

12.4.5                          Any payments for Parent or Owner’s account received by Manager following expiration of this Agreement shall forthwith be forwarded to Parent.

 

12.4.6                          Manager shall immediately transfer control of any pending litigation against Tenants or former Tenants to Parent or its designee.

 

12.4.7                          Manager shall, within thirty (30) days of such termination (and, in the event of a disposition of the Properties, on or before the deadline set forth in the applicable sale contract), deliver a final accounting reflecting the balance of income and expenses for the Properties as of the date of termination.

 

12.4.8                          Manager’s right to compensation shall immediately cease upon the effective date of the termination and shall be prorated through that date.

 

12.4.9                          The limited agency relationship created under this Agreement shall cease, and thereafter Manager shall have no further right or authority to act for or on behalf of Owner or Parent.

 

12.4.10                   Each Party shall, after the expiration or termination hereof, make any information pertaining to this Agreement reasonably available to the requesting Party if needed for any bona fide accounting or tax-related purpose.

 

13.                               NOTICES.

 

13.1                        Notice of Legal Proceedings.  If either Party becomes aware of any action, suit, investigation or other proceeding (at law or in equity or before any governmental authority) that may affect either Party, the Owner or any of the Properties or this Agreement, then such Party shall promptly provide the other Party with notice thereof.

 

13.2                        Notice of Certain Defaults.  If either Party becomes aware of any breach of, or default under, any contract, agreement or other instrument, which breach or default adversely affects or could reasonably be expected to adversely affect the Properties or this Agreement, then such Party shall promptly provide the other Party with notice thereof.

 

14.                               LIMITATION ON RECOURSE.

 

14.1                        Limits of Recourse by Manager.  Manager agrees to look solely to Parent for the satisfaction of any liability or obligation arising under this Agreement or the transactions contemplated hereby, or for the performance of any of the covenants, warranties, obligations or other agreements contained herein, and further agrees not to sue or otherwise seek to enforce any personal obligation against Owner, Parent’s Affiliates or any of Owner’s Affiliates with

 

 

respect to any matters arising out of or in connection with this Agreement or the duties and obligations contemplated hereby.

 

14.2                        Limits of Recourse by Parent.  Parent agrees to look solely to Manager for the satisfaction of any liability or obligation arising under this Agreement or the transactions contemplated hereby, or for the performance of any of the covenants, warranties, obligations or other agreements contained herein, and further agrees not to sue or otherwise seek to enforce any personal obligation against any of Manager’s stockholders or Affiliates thereof with respect to any matters arising out of or in connection with this Agreement or the duties and obligations contemplated hereby.

 

15.                               POWER OF ATTORNEY.

 

To the extent herein specified, for the term of this Agreement, Parent grants a Special Power of Attorney to Manager with limited powers as provided below and authorizes Manager to act as Parent’s Attorney in Fact in relation to the Properties, in each case in compliance with the Standards: (a) to make contracts for any and all utilities including electricity, gas, water, waste management, etc.; (b) to put these services in place in the Parent’s name (until a Tenant takes occupancy of the pertinent Property) with billing delivered to Manager; (c) to obtain utility account information for the Properties; (d) to communicate and act on Parent’s behalf with respect to all HOA matters; (e) to obtain any and all required sales tax licenses relative to the rents to be collected from the Properties; (f) to engage tenancies using the Lease Form and to terminate tenancies; (g) to deliver to Tenants all notices required by all landlord/tenant laws in the applicable Geographic Areas; and (h) to prosecute, release, settle and otherwise pursue all legal actions in strict accordance with Section 4.4 hereof.

 

16.                               INTELLECTUAL PROPERTY.

 

16.1                        Generally.  All Intellectual Property (other than the trademark SILVER BAY and any future trademark using the words SILVER BAY with a design and/or tagline (the “Trademark”)) made in connection with the Manager’s performance of this Agreement or otherwise and the Intellectual Property Rights associated therewith shall be the sole and exclusive property of the Manager.  Parent, on behalf of itself and each direct or indirect subsidiary (its “Subsidiaries”), shall assign and does hereby assign to the Manager all Intellectual Property Rights in such Intellectual Property (other than the Trademark).  For the term of this Agreement, the Manager hereby grants Parent and its Subsidiaries a non-exclusive, worldwide, fully paid up, royalty-free, non-sub-licensable, non-transferable license and right to use the Intellectual Property made in connection with the Manager’s performance of this Agreement for their business purposes.  Parent will, or will cause its Subsidiaries to, upon request of the Manager, do, execute, acknowledge and deliver or cause to be done, executed, acknowledged and delivered all such further acts, deeds, assignments, transfers, conveyances, powers of attorney and assurances as may be reasonably requested by the Manager to carry out the intent of this Agreement or to otherwise perfect, record, confirm, or enforce the Manager’s rights in and to the Intellectual Property.

 

 

16.2                        Definitions.

 

16.2.1                          “Intellectual Property” means all work product, documents, code, works of authorship, programs, manuals, developments, processes, formulae, data, specifications, fixtures, tooling, equipment, supplies, processes, inventions, discoveries, improvements, trade secrets, and know-how or similar rights.

 

16.2.2                          “Intellectual Property Rights” means the worldwide right, title, and interest in any Intellectual Property and any goodwill appurtenant thereto, including, without limitation, all copyrights, copyright renewals or reversions, trademarks, trade names, trade dress rights, inventions, priority rights, patent rights, patents, and any other rights or protections in connection therewith or related thereto.

 

17.                               MISCELLANEOUS.

 

17.1                        Construction/Interpretation.  The titles of Articles, Sections, paragraphs and  Exhibits in this Agreement are so used only for convenience in locating various provisions of this Agreement and shall not be deemed to affect the interpretation or construction of such provisions.  References to Articles, Sections, paragraphs and Exhibits are, unless specified otherwise, references to articles, sections, paragraphs and exhibits of this Agreement.  Words of any gender shall include each other gender.  Words in the singular shall include the plural and words in the plural shall include the singular.  The words “include” and “including” shall be interpreted as if followed by the words “without limitation.”  Exhibits to this Agreement are hereby incorporated by this references as though fully set forth in this Agreement.

 

17.2                        Relationship of the Parties.  The relationship of Manager to Parent is that of an agent with limited authority as described herein and otherwise, as an independent contractor, and it is not that of an employee, partner or joint venturer.

 

17.3                        Force Majeure.  If either Party is delayed or prevented from fulfilling any obligations (other than an obligation to pay money) under this Agreement by any Force Majeure Event, then such Party shall not be liable under this Agreement for such delay or failure, provided that such Party shall use reasonable efforts to mitigate the effect of such event.

 

17.4                        No Assignment; Successors.  Except in connection with a merger, consolidation, sale of substantially all of its assets or other similar transaction, Manager may not assign its rights or obligations hereunder with the prior written consent of Parent, by operation of law or otherwise.  Except with the prior written consent of Manager, which shall not be unreasonably withheld or delayed, Parent may not assign its rights or obligations hereunder, by operation of law or otherwise; provided, however, that Parent may, without Manager’s prior consent, assign its rights or obligations hereunder to any entity which controls, is controlled by or is under common control with Parent.  This Agreement shall be for the benefit of and binding upon the permitted heirs, successors and assigns of the Parties.

 

17.5                        Waiver of Trial by Jury.  PARENT AND MANAGER, WITH ADVICE OF LEGAL COUNSEL OF THEIR CHOICE, HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY IRREVOCABLY WAIVE THEIR RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR CAUSE OF ACTION ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT, THE PROPERTIES OR ANY COURSE OF 

 

 

CONDUCT, COURSE OF DEALING, STATEMENTS OR ACCOUNTS OF ANY PARTY.  THIS PROVISION IS A MATERIAL INDUCEMENT FOR EACH OF PARENT AND MANAGER ENTERING INTO THIS AGREEMENT.

 

17.6                        Counterparts; Electronic Signatures.  This Agreement may be executed by original or facsimile signature in any number of counterparts, each of which shall be an original, but such counterparts together shall constitute one and the same instrument.  Signatures delivered by facsimile or by portable document format via electronic email shall be acceptable as original signatures.

 

17.7                        Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of Minnesota, without reference to the choice of laws and conflicts of law rules and principles of such state.

 

17.8                        Venue.  Manager hereby agrees that all actions or proceedings initiated by Manager and arising directly or indirectly out of this Agreement shall be litigated in the Hennepin County District Court, Minneapolis, Minnesota, or at Parent’s election in the Federal District Court for the District of Minnesota.  Manager hereby expressly submits and consents in advance to such jurisdiction in any action or proceeding commenced by Parent in such court.  The exclusive choice of forum set forth in this Section 17.8 shall not be deemed to preclude the enforcement, by Parent, of any judgment obtained in any other forum or the taking, by Parent, of any action to enforce the same in any other appropriate jurisdiction, and Manager hereby waives the right, if any, to collaterally attack any such judgment or action.

 

17.9                        Recitals.  The Recitals on page 1 of this Agreement are incorporated herein as part of this Agreement, and the Parties agree that they are true and correct.

 

17.10                 Modification.  This Agreement may not be modified or amended except by a written agreement executed by both Parties and only to the extent set forth therein.

 

17.11                 Severability.  If any Article, Section, paragraph, sentence, clause or phrase contained in this Agreement becomes or is held by any court of competent jurisdiction to be illegal, null or void or against public policy, the remaining Articles, Sections, paragraphs, sentences, clauses or phrases contained in this Agreement shall not thereby be construed to also be illegal, null and void or against public policy.

 

17.12                 No Third Party Beneficiaries.  This Agreement creates rights in favor of Parent, Owner, Manager and Silver Bay Trust only, and shall not be construed as creating any rights enforceable by any other Person.

 

17.13                 Subordination and Attornment.  Manager agrees that the lien, operation and effect of any mortgage, deed of trust or other security device in place on the Properties, including any financing arrangements secured by equity pledges of Owner, and the beneficiary’s right to payment under the loan documents in connection therewith shall be superior to and shall have priority over this Agreement as well as any claim, security interest or right to payment of Manager arising out of or in any way connected with the Services.  In furtherance of the foregoing, Manager hereby fully and completely subordinates to the lien, operation and effect of, such beneficiary’s right to payment under such loan documents the following:  (a) its rights under this Agreement; (b) any claim or security interest Manager may 

 

 

now or hereafter have against the Properties and/or the rents, issues, profits and income therefrom; and (c) any right to payment of Manager arising out of or in any way connected with its services performed under this Agreement.

 

17.14                 Further Assurances.  Each Party shall take all such actions, and execute all such documents, as the other Party shall reasonably request to give effect to this Agreement.

 

17.15                 Entire Agreement.  It is agreed that there are no prior or contemporaneous oral agreements between the Parties with respect to the subject matter of this Agreement other than powers of attorney contemplated by this Agreement and this Agreement supersedes and cancels any and all prior discussions, negotiations and writings between the Parties which may have occurred with respect to the subject matter of this Agreement.

 

18.                               SPECIAL TRUSTEE PROVISIONS.

 

Manager acknowledges and agrees that:

 

18.1                        Without the express prior written consent of the Trustee in its individual capacity (which may be withheld or conditioned by such Trustee in its individual capacity for any reason in good faith), no real property of the Owner (including any residential property) shall be taken or titled in the name of a Trustee, and no mortgage or other lien of the Owner on any real property shall be taken or recorded in the name of a Trustee (except when the Parent or Manager determines in its reasonable discretion that a court of competent jurisdiction or the related county recorder requires, or Legal Requirements in the particular case require, that such real property must be taken or titled, or such mortgage or other lien must be taken or recorded, in the name of the Certificate Trustee, in which case such consent of such Trustee shall not be required but written notice shall be given to such Trustee); and

 

18.2                        Unless Trustee in its individual capacity grants its express prior written consent to the contrary (which may be withheld or conditioned by the Trustee in its individual capacity for any reason in good faith):

 

18.2.1                          Any real property (including any residential property) shall be taken and titled, and any mortgage or other lien on any real property shall be taken and recorded, only in the name of the Owner, in the name of the Parent or Manager as nominee of the Owner, or in the name of another nominee of the Owner (other than a Trustee) pursuant to a nominee agreement (except when the Parent or Manager determines in its reasonable discretion that a court of competent jurisdiction or the related county recorder requires, or Legal Requirements in the particular case require, that such real property must be taken or titled, or such mortgage or other lien must be taken or recorded, in the name of the Certificate Trustee, in which case such consent of such Trustee shall not be required but written notice shall be given to such Trustee); and

 

18.2.2                          The Certificateholders, Parent or Manager as the case may be shall cause the deed or certificate of sale of any real property (including any residential property) to be taken and such real property to be titled, only in the name of the Owner, in the name of the Parent or applicable Manager as nominee of the Owner, or in the name of another nominee of the Owner (other than a Trustee) pursuant to a nominee agreement, and the Certificateholders, Parent or Manager as the case may be shall cause any mortgage or other lien on any real property to be taken and recorded only in the name of the Owner, in the name of the Parent or Manager as 

 

 

nominee of the Owner, or in the name of another nominee of the Owner (other than a Trustee) pursuant to a nominee agreement (except when the Parent or Manager determines in its reasonable discretion that a court of competent jurisdiction or the related county recorder requires, or Legal Requirements in the particular case require, that such real property must be taken or titled, or such mortgage or other lien must be taken or recorded, in the name of the Certificate Trustee, in which case such consent of such Trustee shall not be required but written notice shall be given to such Trustee).

 

18.2.3                          Manager agrees to indemnify, defend, and hold harmless the Trustee (as such and in its individual capacity) from and against any and all Liabilities which may be imposed on, incurred by or asserted at any time against such Trustee (as such or in its individual capacity) in any way relating to or arising out of any act or omission by the Manager inconsistent with the provisions of this Article 18.

 

18.2.4                          Trustee (as such and in its individual capacity) is an intended third party beneficiary of this Agreement and Manager’s obligations thereunder.

 

18.2.5                          Capitalized terms used in this Article 18 but not otherwise defined herein shall have the following meanings:

 

a.                          “Trustee” means the trustee of an Owner trust appointed to serve as trustee pursuant to a master trust agreement or other similar agreement;

 

b.                          “Certificate Trustee” means the Trustee that issues the Trust Certificate;

 

c.                           “Trust Certificate” means the certificate issued to evidence the beneficial ownership interest in the trust; and

 

d.                          “Certificateholder” means the holder of the Trust Certificate(s).

 

*                                         *                                         *

 

[Signature Page Follows]

 

 

IN WITNESS WHEREOF, the Parties have executed this Property Management and Acquisition Services Agreement as of the Effective Date.

 

 

	
MANAGER:
    	
 
    	
PARENT:
    
	
 
    	
 
    	
 
    
	
SILVER BAY PROPERTY CORP., a Delaware   corporation
    	
 
    	
SILVER BAY OPERATING PARTNERSHIP L.P.,
    
	
 
    	
 
    	
a Delaware limited partnership
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By: SILVER BAY MANAGEMENT   LLC,
    
	
 
    	
 
    	
a Delaware limited   liability company,
    
	
 
    	
 
    	
its General   Partner
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/ David N. Miller
    	
 
    	
By: SILVER BAY   REALTY TRUST CORP.,
    
	
Name:
    	
David N. Miller
    	
 
    	
a Maryland corporation,
    
	
Title:
    	
Chief Executive   Officer
    	
 
    	
its Sole Member
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
/s/    David N. Miller
    
	
 
    	
 
    	
Name:
    	
David N. Miller
    
	
 
    	
 
    	
Title:
    	
Chief Executive Officer and President
    
									

 

 

EXHIBIT A

 

CERTAIN DEFINITIONS

 

 “Affiliate” of a Person means a Person who, directly or indirectly through one or more intermediaries, owns or controls, is owned or controlled by or is under common control or ownership with the Person in question.  For purposes of this definition, “own” or “ownership” means ownership by one Person of fifty percent (50%) or more of the voting stock of the controlled Person, in the case of a corporation or, in the case of Persons other than corporations, entitlement of the controlling Person, directly or indirectly, to receive fifty percent (50%) or more of the dividends, profits or similar economic benefit from the controlled Person; and “control” means the possession, directly, or indirectly, of the power to direct or cause the direction of the management and policies of the controlled Person.

 

 “Building Systems” means the electrical, mechanical, plumbing, heating, ventilating, and air conditioning, hot water, landscape irrigation, swimming pool, spa fountain or other circulation or filtration systems at a Property.

 

“Compensation Expenses” means all salary, bonus, benefit and other compensation costs of the personnel of Manager but excluding such amounts related to PRCM REA’s Chief Executive Officer or data analytics professionals, PRCM Shared Expenses and Manager Shared Expenses.

 

“Confidential Information” means all confidential and proprietary information Parent discloses to Manager, including non-public financial information, strategic business plans or initiatives of the Parent, any Owner, Silver Bay Trust or any of their respective Affiliates, and includes the terms and conditions of this Agreement, the Records and any other information that derives independent economic value, actual or potential, from not being generally known to the public or to other Persons who can obtain economic value from its disclosure or use and is the subject of efforts that are reasonable under the circumstances to maintain its secrecy (and includes information developed internally or received from a third party subject to a continuing obligation to maintain its confidentiality).  Confidential Information may be in written, oral or electronic form, and, and includes those portions of written memoranda, notes, analyses, reports, compilations, or studies prepared by the Manager or its Authorized Professionals that contain or are derived from such information.  The term “Confidential Information” does not include information which: (a) is now or is in the future in the public domain through no fault of Manager or its Authorized Professionals; (b) prior to disclosure pursuant to this Agreement, is properly within the legitimate possession of Manager; (c) subsequent to disclosure pursuant to this Agreement, is lawfully received from a third party having rights in the information and to the knowledge of Manager, is not restricted from disclosing the information; (d) is independently developed by Manager without use of or benefit from access to Confidential Information; or (e) is obligated to be produced by law, under order of a court of competent jurisdiction or other similar requirement of a governmental agency, so long as Manager provides Parent with prior written notice, if permitted by law, of any required disclosure pursuant to such law, order, rule, regulation, or requirement.

 

 

“CCRs” means, collectively, the declarations of covenants, conditions, easements and restrictions of any HOA plus the applicable bylaws of the HOA and its rules and regulations.

 

“Data Room” means an electronic data room, database or other centralized depository or electronic information related to the Properties.

 

 “Employees” means those Persons employed by the Manager to provide the services described in this Agreement to or for the benefit of the Properties.

 

“Environmental Laws” means and includes all federal, state and local laws including statutes, regulations, ordinances and other governmental restrictions and requirements and common law relating to the presence, discharge or remediation of air pollutants, water pollutants or process wastewater or otherwise relating to the protection of human health, the environment, toxic or hazardous substances, pesticides, herbicides, fertilizer, mold, asbestos or radon, including, but not limited to, the Federal Solid Waste Disposal Act, the Federal Clean Air Act, the Federal Clean Water Act, the Federal Resource Conservation and Recovery Act, the Toxic Substances Control Act, the Federal Insecticide, Fungicide and Rodenticide Act, the Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (“CERCLA”), the Federal Water Pollution Control Act, the Federal Occupational Safety and Health Act (“OSHA”), the Federal Emergency Planning and Community Right to Know Act, the Federal Mine Safety Act, the Federal Safe Drinking Water Act, regulations of the Environmental Protection Agency, Nuclear Regulatory Agency and any other federal agency, and regulations of any state department of natural resources or state environmental protection agency now or at any time hereafter in effect.

 

“Force Majeure Event” means any act occasioned by a cause beyond the reasonable control of Parent or Manager including casualties, war, insurrection, strikes, lockouts, civil unrest and governmental actions, travel advisories issued by governmental authorities, revolution, insurgency, terrorism, sabotage, hurricanes, earthquakes or other natural catastrophes or extreme weather conditions and any other causes that threaten public safety generally or that create a substantial disruption in commercial activities in the area in which the Properties are located.

 

“Gross Collections” means all amounts actually collected in respect of all the Properties, including, rents, utility payments and deposit forfeitures, fees received for applications or credit checks, interest earned on the Trust Operating Account, interest earned on the Trust Deposit Account in excess of related banking charges, and other collected revenues.

 

 “HOA” means any homeowners or condominium association that includes one or more of the Properties.

 

“Lease” means a lease agreement for one of the Properties entered into in accordance with this Agreement.

 

 “Leasing Incentives” means referral fees, gift cards, vouchers, coupons or other inducements given by Manager as an inducement for the execution of any Tenant lease for one of the Properties in accordance with the Leasing Plan.

 

 

“Leasing Plan” means the plan developed by Manager and approved by Parent, as amended from time to time with the approval of both Parties.

 

“Legal Requirements” means governmental statutes, laws, constitutions, codes, ordinances, regulations or rules of governmental entities having jurisdiction over the Manager or the Properties, orders of any insurance company, and the CCRs, rules and regulations and bylaws of any HOAs.

 

“Manager Shared Expenses” means those compensation and other costs and expenses of PRCM REA paid by Manager pursuant to the Mutual Shared Services Agreement except to the extent related to compensation of PRCM REA’s Chief Executive Officer or data analytics professionals.

 

“Mutual Shared Services Agreement” means that certain Mutual Shared Services Agreement dated as of               , by and between Manager and PRCM REA.

 

 “Operating Expenses” means all expenses incurred by Manager on behalf of Parent or any Owner and all other expenses incurred by Manager that are reasonably and necessarily incurred in connection with the acquisition, operation, maintenance, repair, management and leasing of the Properties during the Term, including Manager Shared Expenses, capital expenditures, rental taxes, utilities, casualty and liability insurance premiums, real and personal property taxes, costs and expenses of Operating Supplies, Leasing Incentives, advertising, costs of debt service, fees paid to third party property managers, acquisition agents or contractors, broker commissions and HOA fees, but excluding Compensation Expenses.

 

 “Operating Supplies” means consumables used by Manager or its Employees in the operation of the Properties, including light bulbs, cleaning supplies, batteries, furnace filters, pool chemicals, and other items of a similar nature.

 

“Overhead Expenses” means all costs and expenses incurred by the Manager in the conduct of its business, but excluding Operating Expenses, Compensation Expenses, PRCM Shared Expenses and Manager Shared Expenses.

 

“Performance Expenses” means the Compensation Expenses and Overhead Expenses.

 

“Person” means any natural person, or any partnership, joint venture, limited liability company, limited partnership, corporation, association, trust or trustee, or any other legal entity.

 

“PRCM Shared Expenses” means those compensation and other costs and expenses of Manager paid by PRCM REA pursuant to the Mutual Shared Services Agreement.

 

“Tenant” means, collectively, any person leasing or otherwise entitled to occupy any one of the Properties pursuant to a Lease.

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