PORTFOLIO MANAGEMENT AGREEMENT

Transcription

1 PORTFOLIO MANAGEMENT AGREEMENT THIS PORTFOLIO MANAGEMENT AGREEMENT (this Agreement ) is effective as of November, 2018 (the Effective Date ), by and among CIC MEZZANINE INVESTORS, L.L.C., an Illinois limited liability company (the Fund ), and COMMUNITY INVESTMENT CORPORATION, an Illinois corporation ( CIC or Adviser ). The Fund and Adviser are sometimes referred to herein individually as a Party and collectively as the Parties. R E C I T A L S: A. The Fund intends to invest in a portfolio comprised of real estate loans to owners of multifamily rental apartments in the City of Chicago and Chicago metropolitan area (the Investments ). B. The Fund desires to retain Adviser to underwrite, originate and service the Investments and to provide the services delegated to it under the LLC Agreement (defined below). C. Adviser has agreed to provide the services delegated to it in accordance with the terms of this Agreement. NOW, THEREFORE, in consideration of the above recitals and the mutual obligations contained herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties hereby agree as follows: 1. Definitions. Capitalized terms not defined herein shall have the meanings set forth in the Limited Liability Company Agreement of the Fund, dated as of November, 2018, as amended, modified, supplemented and restated from time to time (the LLC Agreement ). 2. Engagement of Adviser. The Fund hereby retains Adviser to perform, and Adviser hereby agrees to undertake, the origination and servicing responsibilities set forth in this Agreement. Additionally, the Fund hereby retains Adviser to perform, and Adviser hereby agrees to undertake, the portfolio accounting services set forth in this Agreement. 3. Investment Origination. Adviser shall act on the Fund s behalf to originate new Investments which in Adviser s opinion are consistent with the investment parameters set forth in the LLC Agreement. (a) Responsibilities. In the performance of its responsibilities as originator of new Investments, Adviser shall have such power and authority and shall perform such duties, as specifically delegated or required herein, as well as such power, authority and duties as are reasonably incident thereto, except as expressly limited by the terms of this Agreement. Without limiting the generality of the foregoing, Adviser s authority and duties as originator shall include the following: (i) Solicit and evaluate new opportunities for Investments which, in Adviser's opinion are consistent with the Fund's investment strategy; 1

2 (ii) information; Provide Investment acquisition recommendations and supporting (iii) Perform customary due diligence in connection with prospective Investments; provided that Adviser shall have the right to retain, at the Fund s expense to the extent not reimbursed by a borrower, other parties to assist in performing due diligence in connection with prospective Investments; (iv) Identify material issues discovered in the course of performing due diligence in connection with Investments; (v) Provide calculations and supporting documentation of annual cash flow returns and internal rates of return; (vi) Negotiate term sheets for the acquisition of Investments utilizing forms approved by the Fund and incorporating material terms which have been approved in writing by the Fund; (vii) Negotiate and prepare all documentation required for the actual closing of approved Investments; provided that Adviser shall have the right to retain, at the Fund s expense to the extent not reimbursed by a borrower, other parties to assist in performing the negotiation and preparation of closing documentation; and (viii) Provide all other services customarily associated with the origination of new Investments, but excluding appraisal, accounting, legal and risk management services. (b) Limitations on Authority. Notwithstanding the grant of broad discretion to Adviser in the exercise of its responsibilities as originator of Investments, the following actions may be taken by Adviser only with the consent of the Fund: (i) the Fund; and Approve term sheets to make or acquire Investments on behalf of (ii) Make or consent to any alteration of the material terms of a term sheet which has been approved and accepted by the Fund. (c) Custody Arrangements. Adviser will at no time have custody of any Fund s assets. All of the Fund s cash and securities assets, if any, shall be held by one or more clearing houses, broker-dealers, banks, trust companies or other entities ( Custodians ) approved by Adviser and engaged by the Fund. Adviser shall not be liable or responsible for any act or omission by any Custodian. The Fund is responsible for paying all fees and expenses charged by Custodians with respect to the Investments. 4. Servicing. Except as otherwise provided herein, Adviser shall act as the exclusive servicer for all of the Investments held by the Fund from time to time, regardless of whether such Investments were originated by the Fund or acquired by the Fund from any other source, and 2

3 regardless of whether such Investments are held directly by the Fund or indirectly through one or more subsidiaries. The Fund shall deliver to Adviser all original documents and files with respect to all the Investments, which shall be held by Adviser on behalf of the Fund throughout the term of this Agreement. (a) Servicing Responsibilities. In the performance of its servicing responsibilities, Adviser shall have such power and authority and shall perform such duties, as specifically delegated or required herein, as well as such power, authority and duties as are reasonably incident thereto, except as expressly limited by the terms of this Agreement. Adviser shall exercise its power and authority to manage all matters pertaining to the administration and servicing of the Investments in a manner consistent with good business practices of the commercial loan servicing industry. Without limiting the generality of the foregoing, the authority of Adviser to be exercised in the servicing of the Investments includes, but is not limited to the following responsibilities: (i) Keep and maintain all original Investment documents, correspondence, reports and other written material relating to the Investments. (ii) Keep a complete and accurate account of, and properly apply, all sums collected by it on account of each Investment for principal and interest, taxes, assessments and other charges. (iii) Review and maintain, on a daily, monthly or on an as needed basis, as applicable, transaction data for the Investments with respect to advances, repayments, interest payments, interest accrued, fees charged and any other transactions that may occur on the Investments. Without limitation on the foregoing, Adviser will review, maintain and make available to the Fund upon request, the following: (1) Daily cash receipts report; (2) Monthly month end report of cash activity by Investment; (3) Monthly bank account reconciliations. (iv) All collected funds, including payments received from borrowers for interest, principal and other required payments, shall be deposited by borrowers directly into an operating account in the name of the Fund. Both Adviser and the Fund will have daily access to information regarding the operating account via computer terminal. Authorized signatories on this account will include individuals designated by Adviser as well as individuals designated by the Fund. If the average balances maintained in the operating account are substantial, and Adviser determines that it is financially prudent to do so, Adviser shall link the operating account to one or more overnight investment accounts in the name of the Fund. Net earnings on the operating account (if any) will accrue to the benefit of the Fund. (v) Deposits to the operating account shall also include the following: 3

4 (1) Funds remitted by applicants for new Investments for the purpose of paying due diligence, legal and other administrative costs incurred in connection with the origination of an Investment. Adviser is authorized to make disbursements from the operating accounts to pay invoices from vendors providing such origination services. (2) Funds remitted by borrowers with respect to an Investment including, for example, reserves for interest, real estate taxes, insurance premiums or other purposes, cash flow sweeps and other deposits required by the applicable Investment documents. Adviser is authorized to make disbursements from the operating accounts to apply such funds in accordance with the applicable Investment documents. (vi) Capital contributions received by the Fund pursuant to Capital Calls shall be deposited into an investment account in the name of the Fund. After the funds are deposited, Adviser shall be authorized to disburse the required amount for the benefit of the borrower on the applicable Investment. (vii) If necessary to protect the Fund s interests in any Investment (as determined by Adviser in its reasonable discretion), Adviser shall have the right, but not the obligation, to advance funds from its own account for the benefit of the Fund to pay to the proper parties when and if due, taxes, special assessments, ground rents and premiums on hazard insurance, and similar charges which if not paid would impair the value of the Investment or any collateral securing payment of the Investment. The Fund shall promptly upon receipt of Adviser's statement therefor, reimburse Adviser the amount advanced. (viii) Adviser shall be authorized to execute and deliver to borrowers all appropriate notices required by the applicable Investment documents or by applicable law, regarding interest rate adjustments, tax information or otherwise. (ix) If an Investment has not been fully advanced, Adviser shall receive and process all requests for the advance of funds made in accordance with the Investment documents. Adviser will not, without the prior written consent of the Fund, make any advance if Adviser has actual knowledge of the occurrence of any event or existence of any condition which would relieve the Fund from any obligation to make the advance. Notwithstanding any provision hereof, Adviser shall have no obligation to advance its own funds or to advance any funds received from the Fund which are subject to collection. (x) Adviser shall use reasonable efforts to provide the Fund, as soon as practicable after actual knowledge thereof is acquired by an officer of Adviser primarily responsible for the servicing relationship: (A) notice of the existence of any default by the borrower under an Investment, which, if such action were authorized in the manner provided in this Agreement, would allow the Fund to declare the entire amount owing under the Investment immediately due and payable and to commence (with respect to secured Investments) foreclosure on the collateral 4

5 for such Investment; and (B) any factual information which has a material effect on the creditworthiness of borrower. Failure to disclose any information required to be provided by this paragraph shall not result in any liability upon, or right to make a claim against Adviser except where such failure is a result of the willful misconduct or gross negligence of Adviser. (b) Limitations on Authority. Notwithstanding the grant of broad discretion to Adviser in the exercise of its servicing responsibilities, the following actions may be taken by Adviser only with the consent of the Fund: (i) Make or consent to any release, substitution or exchange of any collateral for an Investment, other than any partial releases authorized by or provided for in the Investment documents, or any release or substitution of any guarantor of borrower's obligation under the Investment; provided, however, this restriction shall not apply to a release of collateral in the ordinary course of Adviser's administration of the Investment and the exercise of reasonable judgment in connection with a disposition of assets permitted by the Investment documents; (ii) to default; Accelerate or extend the final maturity date of an Investment prior (iii) Consent to a reduction in the amount of, or a delay in the due date of, any scheduled payment of principal or interest; (iv) Make or consent to an alteration of any of the material terms of the Investment documents; (v) Waive any material event of default under the Investment documents or any other agreement or document related to the Investment, or knowingly waive or release any material right or remedy that the Fund has against the borrower under the Investment documents; and (vi) Sue upon or otherwise incur any extraordinary expense in connection with the Investment unless Adviser believes in good faith that any such action cannot await the consent of the Fund and that the expense therefor is reasonable under the circumstances. (c) Investment Defaults. If Adviser becomes aware of the occurrence of an event of default under any Investment which, if such action were authorized in the manner provided in this Agreement, would allow Adviser to declare the entire amount owing under the Investment immediately due and payable and (with respect to secured Investments) commence foreclosure on the collateral for such Investment, Adviser will make a proposal to the Fund within a reasonable time suggesting a course of action, including, to the extent permissible under the Investment documents, whether to: (i) grant waivers or extensions of time, (ii) accelerate the indebtedness represented thereby, (iii) commence judicial collection action, (iv) commence repossession or foreclosure action with respect to the collateral and/or (v) take some other specified action. If the Fund accepts the proposal, Adviser will pursue the proposed course of action on the Fund s behalf. 5

6 (d) Servicing Indemnity. To the extent not reimbursed by a borrower, and without limiting the obligation of any borrower to do so, the Fund hereby agrees to indemnify and reimburse Adviser for: (i) Expenses incurred by Adviser in connection with collection of any Investment (including foreclosure on collateral) after default for which payment is made to independent agents or contractors who are not (in the absence of consent by the Fund) employees of Adviser, including attorneys, public officials, sales agents, title insurance companies, appraisers and the like, and the cost of proper maintenance, preservation and improvement of the collateral, to the extent such expenses are either included within a proposal which is approved by the Fund, or are required to be advanced, in Adviser s reasonable judgment, to preserve and protect the Fund's interest in an Investment prior to the time the approval of the Fund is obtained. (ii) Any and all (A) liabilities, obligations, losses, damages, penalties, judgments, or claims incurred by, or asserted against Adviser (including, without limitation, arising from actions by governmental agencies or third parties alleging violation of state or federal environmental laws or the occurrence of environmental torts) based on Adviser's actions taken as servicer in accordance with this Agreement or in any way related to or arising out of any Investment or enforcement of any of the terms thereof or of the Investment documents, and (B) costs, disbursements, and expenses (including attorneys' fees) incurred by Adviser defending such claims, except in any event, and to the extent that the actions of Adviser upon which such claims are based are held to constitute willful misconduct, gross negligence, a violation of applicable law or a material breach of this Agreement by Adviser. 5. Standard of Care for Servicing and Origination. (a) Adviser shall seek to perform its origination and servicing functions in conformity with (i) this Agreement, (ii) the applicable Investment documents, (iii) all applicable state, federal and other governmental laws, rules and regulations and procedures, and (iv) prudent commercial lending and servicing practices. (b) Notwithstanding anything to the contrary in this Agreement, Adviser shall not be held to the standard of care of a fiduciary or agent and shall not be a fiduciary or agent for the Fund, but shall exercise only the same care in the origination and servicing of Investments as it exercises for similar investments which it holds or has held for its own account and risk. Notwithstanding the foregoing, (A) Adviser shall not be liable for any error in judgment or for any action taken or omitted to be taken by it hereunder except for its gross negligence or willful misconduct, and (B) Adviser may rely on legal counsel, independent public accountants and other experts selected or accepted by it with due care and shall not be liable for any action taken or omitted to be taken in good faith by Adviser in accordance with the advice of such counsel, accountants or experts. 6

7 6. Portfolio Accounting Services. Adviser agrees to provide all basic accounting services required by the Fund, including, without limitation the following: (a) Account for all income and expenses of the Fund, including depositing all income in appropriate accounts and making payment of the Fund s obligations from the Fund s assets; (b) for the Fund; Prepare and deliver to each of the investors quarterly financial statements (c) Prepare (or cause to be prepared) and file (or cause to be filed) all of the Fund's income tax returns, withholding forms and similar filings which the Fund is required to file with applicable federal, state and local taxing authorities; (d) Arrange for and obtain from the Fund's independent accounting firm an annual audited financial statement for the Fund; (e) its partners; Prepare and deliver all notices and other correspondence from the Fund to (f) Establish and coordinate the Fund's banking relationships, and arrange for timely disbursements of proceeds from the Fund s Investments to pay its obligations as and when due; (g) Maintain records of the capital accounts of all members; and (h) At the request and direction of the Fund, obtain and administer credit facilities to support the Fund's operations. Adviser shall have the right to engage a third-party accountant at the Fund s expense to provide the portfolio accounting services, in which event Adviser shall monitor and supervise the performance of such portfolio accounting services. 7. Good Faith Performance. Adviser shall perform its obligations under this Agreement in good faith and shall act in the best interests of the Fund without consideration as to how the services provided by each of them may affect the performance of any other assets which are not owned by the Fund and are owned or managed by Adviser or its respective affiliates. 8. Compensation to Adviser. (a) As compensation for the services of Adviser in monitoring and overseeing the Investments, the Fund will pay Adviser a portfolio management fee (the Management Fee ) in an amount equal to 2% per annum of Aggregate Invested Capital. The Management Fee shall be paid monthly in arrears in an amount equal to one-twelfth (1/12) of the Management Fee, calculated as of the last day of each month (which amount will be prorated for any partial period) and payable within fifteen (15) days of the end of each month. Any change in Aggregate Invested Capital during the period for which the Management Fee is calculated shall be prorated for such period. 7

8 (b) All origination, commitment, administration, due diligence and other similar fees paid by borrower or sponsors to the Fund in connection with the Investments will be paid to and retained by the Adviser and will not be shared with the Fund. (c) The Fund shall promptly reimburse the Adviser for all Company Expenses incurred by the Adviser relating to the investigation and monitoring of the Investments and the operation, management and administration of the Fund and the Investments. Not by way of limitation of the foregoing, the Adviser shall have the right to engage third parties to provide legal, accounting, auditing and tax preparation services at the Fund s expense. Notwithstanding the foregoing, the Fund shall not reimburse the Adviser for rent or for salaries and benefits of the employees of Adviser or other similar overhead expenses. 9. Representations and Warranties. (a) Adviser's Representations and Warranties. Adviser represents and warrants to the Fund that: (i) Adviser is organized, validly existing and in good standing under the laws of the jurisdiction in which it is organized, and has full power and authority to execute, delivery and perform its obligations under this Agreement. (ii) This Agreement has been duly and validly authorized, executed and delivered by Adviser, and is legal, valid, binding and enforceable against Adviser in accordance with its terms. (iii) The personnel of Adviser charged with carrying out its responsibilities under this Agreement are individuals experienced in providing the services which Adviser has agreed to perform. (b) The Fund s Representations and Warranties. The Fund represents and warrants to Adviser that: (i) The Fund is duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is organized, and has full power and authority to execute, deliver and perform its obligations under this Agreement. (ii) This Agreement has been duly and validly authorized, executed and delivered by the Fund, and is legal, binding and enforceable against the Fund in accordance with its terms. 10. Term. The initial term of this Agreement shall commence on the Effective Date and shall end upon the final liquidation and winding up of the Fund, unless sooner terminated in accordance with Paragraph Termination. (a) In the event Adviser has been removed as manager of the Fund pursuant to Section 6.04 of the LLC Agreement, the Fund shall have the right to terminate this 8

9 Agreement at any time, with or without cause, by giving written notice thereof to Adviser not less than thirty (30) days in advance of the termination date specified in such notice. (b) Any termination of this Agreement shall not affect the rights or obligations of the Parties arising out of the performance of this Agreement prior to such termination. Without limiting the generality of the foregoing, the Fund shall be obligated to pay, and Adviser shall be entitled to receive, any compensation provided in this Agreement which has been earned but remains unpaid on the date of termination. (c) Upon any termination of this Agreement, Adviser shall cooperate with the Fund by transferring all documents relating to the Investments in their possession to the Fund. 12. Limitation on Liability and General Indemnity. (a) Adviser shall not be liable for any action taken, omitted or suffered to be taken by Adviser in good faith and reasonably believed by Adviser to be authorized or within the discretion or rights or powers conferred upon Adviser by this Agreement, or in accordance with specific directions or instructions from the Fund; provided, however, that such acts or omissions do not constitute fraud, gross negligence or willful misconduct. Adviser shall not be responsible for the acts, omissions, defaults or misconduct of any broker, consultant, appraiser, contractor, attorney, accountant, bookkeeper or other agent or independent contractor retained by it, if any such person was not an affiliate of Adviser and was selected and retained by Adviser with reasonable care. (b) The Fund shall indemnify and hold Adviser and its respective managers, members, partners, principals, officers, directors, shareholders, agents and employees harmless from and against any and all loss, liability, damage, costs or expense (including, without limitation, attorneys' fees and disbursements) incurred relating to the Fund or arising in connection with this Agreement or any Investment acquired by the Fund; provided, however, that any act or omission giving rise to any such loss, liability, damage, cost or expense shall not result from the fraud, gross negligence or willful misconduct of the indemnitee. 13. No Assignment. Adviser may not assign or transfer its rights under this Agreement, in whole or in part, without the prior written consent of the Fund. 14. Notices. Any notice, demand or request given under this Agreement shall be given in writing, and shall be made by personal delivery or sent by United States registered or certified mail, postage prepaid, return receipt requested or sent by a reputable overnight courier, addressed as follows, provided that each Party shall copy the other Party on all notices to the Fund: If to the Fund, to: c/o Community Investment Corporation 222 South Riverside Plaza Suite 380 Chicago, Illinois Attn: John Markowski 9

10 If to Adviser, to: With copy to: c/o Community Investment Corporation 222 South Riverside Plaza Suite 380 Chicago, Illinois Attn: John Markowski Drane & Freyer Limited 200 W. Madison Street Suite 2800 Chicago, IL Attn: Scott A. Drane or to such other address as any Party may designate in writing mailed to the Parties as provided herein. 15. Miscellaneous. (a) This Agreement shall, to the fullest extent possible, be construed to be consistent with the LLC Agreement. If the provisions of this Agreement shall conflict with the provisions of the LLC Agreement, the provisions of the LLC Agreement shall control. (b) This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of Illinois. (c) This Agreement constitutes the entire agreement among the Parties hereto with respect to the subject matter hereof and may not be modified, waived or terminated orally. (d) The provisions of this Agreement shall not be construed for the benefit of any third party, except as otherwise specifically provided herein. (e) The terms, conditions and provisions of this Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns. (f) The invalidity or unenforceability of any provision of this Agreement shall not impair the validity or enforceability of the remainder of this Agreement. (g) The Parties do not intend to create a partnership, a joint venture, an association taxable as a corporation or a trust for federal income tax purposes under this Agreement. (h) This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument. 10

11 (i) Facsimile and pdf signatures of the Parties shall have the same legal effect as an original signature. (j) The headings in this Agreement are intended for convenience of reference and shall be given no effect in the interpretation of this Agreement. [The balance of this page has been intentionally left blank.] 11

12 IN WITNESS WHEREOF, the Parties have executed the foregoing Agreement on the day and year first above written. CIC MEZZANINE INVESTORS, L.L.C., an Illinois limited liability company By: Community Investment Corporation, an Illinois not-for-profit corporation, its manager By: Name: Title: COMMUNITY INVESTMENT CORPORATION, an Illinois not-for-profit corporation By: Name: Title: