EXHIBIT 10.1
MANAGEMENT AGREEMENT
THIS AGREEMENT, entered into as of August 4, 1997, to be effective as of
August 8, 1997, the closing date of the public offering of Common Stock on a
Registration Statement Form S-11 (No. 333-25423) of IMH COMMERCIAL HOLDINGS,
INC., a Maryland corporation (the "Company"), is by and between the Company, and
RAI ADVISORS, LLC (the "Manager");
WITNESSETH:
WHEREAS, the Company is a recently-formed corporation that intends to be taxed
as a real estate investment trust;
WHEREAS, the Company operates the Long-Term Investment Operations, which
invests primarily in Commercial Mortgages and CMBSs, and the Conduit Operations,
conducted by Imperial Commercial Capital Corporation ("ICCC"), which originates,
purchases and sells or securitizes Commercial Mortgages;
WHEREAS, the Manager's personnel have substantial experience in the purchase,
financing, servicing and administration of mortgage loans and mortgage
securities, and the Company would like to benefit from such experience in
conducting its operations;
WHEREAS, in order to obtain the benefit of the Manager's experience and to
enhance the success of its operations, the Company desires to retain the
Manager, at competitive rates and fees, primarily to perform capital, asset and
operations management services in the manner and on the terms hereinafter set
forth.
NOW, THEREFORE, in consideration of the mutual agreements herein set forth,
the parties hereto agree as follows:
1. Definitions. Whenever used in this Agreement, the following terms,
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unless the context otherwise requires, shall have the following meanings:
(a) "Affiliate" of any entity means (i) any person directly or indirectly
owning, controlling or holding with power to vote, five percent (5%) or more of
the outstanding voting securities of such entity; (ii) any person five percent
(5%) or more of whose outstanding voting securities are directly or indirectly
owned, controlled, or held with power to vote, by such entity; (iii) any person
directly or indirectly controlling, controlled by, or under common control with,
such entity; or (iv) any officer, director, partner or employee of such entity
or any person set forth in (i) - (iii) above. Any person who owns beneficially,
either directly or through one or more controlled companies, more than twenty-
five percent (25%) of the voting securities of any entity shall be presumed to
control such entity. Any person who does not so own more than twenty-five
percent (25%) of the voting securities of any entity shall be presumed not to
control such entity. A natural person shall be presumed not to be a controlled
entity.
(b) "Affiliated REIT" means any other REIT that may have been or will be
affiliated with the Company or IMH and for which the Manager will provide
services pursuant to a management agreement that is similar to this Agreement.
(c) "Agreement" means this Management Agreement.
(d) "Average Net Worth" for any period means the arithmetic average of
the sum of the gross proceeds from any sale of the Company's equity securities,
before deducting any underwriting discounts and commissions and other expenses
and costs relative to the offering, plus the Company's retained earnings less
dividends declared (without taking into account any losses incurred in prior
periods) computed by taking the daily average of such values during such period.
(e) "Board of Directors" means the Board of Directors of the Company.
(f) "CMBSs" means (1) Pass-Through Certificates and (2) REMICs.
(g) "CMO" means an adjustable or fixed-rate debt obligation (bond) that
is collateralized by Commercial Mortgages or mortgage certificates and issued by
private institutions.
(h) "Code" means the Internal Revenue Code of 1986, as amended.
(i) "Commercial Mortgages" mean commercial mortgage assets including
condo-conversion, multi-family property and cooperative apartment mortgage loans
on commercial real property such as industrial and warehouse properties, office
buildings, retail space and shopping malls, hotels and motels, nursing homes,
hospitals, congregate care facilities and senior living centers.
(j) "Commitment" means the document containing the terms pursuant to
which the Company purchases on a forward basis Mortgage Loans from various
originators, including Affiliates of the Manager.
(k) "Company" means IMH Commercial Holdings, Inc., a Maryland
corporation.
(l) "GAAP" means generally accepted accounting principles.
(m) "Governing Instruments" means the articles of incorporation or
charter, as the case may be, and bylaws of the Company or its subsidiary.
(n) "ICCC" means Imperial Commercial Capital Corporation, a California
corporation that conducts the Conduit Operations.
(o) "ICIFC" means ICI Funding Corporation, a California corporation.
(p) "IMH" means Imperial Credit Mortgage Holdings, Inc., a Maryland
corporation.
(q) "Manager" means RAI Advisors, LLC, a California limited liability
company.
(r) "Net Income" means the net income of the Company as determined by the
Code before the Manager's incentive compensation, the deduction for dividends
paid and any net operating loss deductions arising from losses in prior periods.
The Company's interest expenses for borrowed money shall be deducted in
calculating Net Income.
(s) "Offering" means the public offering of the Company's Common Stock
pursuant to a Registration Statement on Form S-11 pursuant to the Securities Act
of 1933, as amended.
(t) "Pass-Through Certificates" means securities (or interests therein)
which are Qualified REIT Assets evidencing undivided ownership interests in a
pool of mortgage loans, the holders of which receive a "pass-through" of the
principal and interest paid in connection with the underlying mortgage loans in
accordance with the holders' respective, undivided interests in the pool. Pass-
Through Certificates evidence interests in loans secured by single family, but
not multifamily or commercial, real estate properties.
(u) "Qualified REIT Assets" means (i) real property (including interests
in real property and interests in mortgages on real property), (ii) shares (or
transferable certificates of beneficial interest) in other REITs which meet the
requirements of Sections 856-859 of the Code, (iii) stock or debt instruments
(not otherwise described in (i), (ii) or (iv)) held for not more than one year
that were purchased with the proceeds of (a) an offering of stock in the Company
(other than amounts received pursuant to a dividend reinvestment plan) or (b) a
public offering of debt obligations of the Company which have maturities of at
least 5 years, and (iv) a regular or residual interest in a REMIC, but only if
95% or more of the assets of such REMIC are assets described in (i) through
(iii).
(v) "REIT" means Real Estate Investment Trust as defined under Section
856 of the Code.
(w) "REMICs" means serially maturing debt securities secured by a pool of
mortgage loans, the payments on which bear a relationship to the debt
securities, and the issuer of which qualifies as a Real Estate Mortgage
Investment Conduit under Section 860D of the Code.
(x) "Reimbursable Expenses" shall have the meaning set forth in Section 7
hereof.
(y) "Reimbursable Executive Amounts" means that amount which the Company
will reimburse the Manager, on a dollar for dollar basis, for the actual costs
of the services provided by the officers of the Company to the Manager based
upon the compensation payable to them by ICIFC pursuant to employment
agreements.
(z) "Return on Equity" means return calculated for any quarter by
dividing the Company's Net Income for such quarter by the Company's Average Net
Worth for such quarter.
(aa) "Stockholders" shall mean the owners of the stock of the Company.
(bb) "Ten Year U.S. Treasury Rate" for a quarterly period shall mean the
arithmetic average of the weekly per annum Ten Year Average Yields published by
the Federal Reserve Board during such quarter. In the event that the Federal
Reserve Board does not publish a weekly per annum Ten Year Average Yield during
any week in a quarter, then the Ten Year U.S. Treasury Rate for such week shall
be the weekly per annum Ten Year Average Yields published by any Federal Reserve
Bank or by any U.S. Government department or agency selected by the Company for
such week. In the event that the Company determines in good faith that for any
reason the Company cannot determine the Ten Year U.S. Treasury Rate for any
quarter as provided above, then the Ten Year U.S. Treasury Rate for such quarter
shall be the arithmetic average of the per annum average yields to maturity
based upon the daily closing bids during such quarter for each of the issues of
actively traded marketable U.S. Treasury fixed interest rate securities (other
than securities which can, at the option of the holder, be surrendered at face
value in payment of any federal estate tax) with a final maturity date not less
than eight nor more than twelve years from the date of each such quotation, as
chosen and for each business day (or less frequently if daily quotations shall
not be generally available) in each such quarterly period in New York City to
the Company by at least three recognized dealers in U.S. Government securities
selected by the Company.
(cc) "Unaffiliated Director" means a Director who is independent of the
Company, any manager of the Company (including the Manager) and IMH and its
Affiliates.
2. General Duties of the Manager. Subject to the supervision and approval
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of the Board of Directors, the Manager shall provide services to the Company,
and to the extent directed by the Board of Directors, shall provide similar
services to any subsidiary or Affiliate of the Company, which includes ICCC and
may also include Affiliated REITs, as follows:
(a) serve as the Company's consultant with respect to formulation of
investment criteria by the Board of Directors;
(b) advise as to the issuance of Commitments on behalf of the Company to
purchase Commercial Mortgages or purchasing Commercial Mortgages and CMBSs
meeting the investment criteria set from time to time by the Board of Directors;
(c) advise, negotiate and oversee the securitization of the Company's
Commercial Mortgages in REMICs or CMOs and negotiate terms with rating agencies
and coordinate with investment-bankers as to structure and pricing of the
securities formed by the Company as directed by the Board of Directors;
(d) advise the Company in connection with and assist in its Long-Term
Investment Operations;
(e) furnish reports and statistical and economic research to the Company
regarding the Company's activities and the services performed for the Company by
the Manager;
(f) monitor and provide to the Board of Directors on an on-going basis
price information and other data, obtained from certain nationally-recognized
dealers who maintain markets in Commercial Mortgages identified by the Board of
Directors from time to time, and provide data and advice to the Board of
Directors in connection with the selection and identification of such dealers.
(g) provide the executive and administrative personnel, office space and
services required in rendering services to the Company, which includes
contracting with appropriate third parties, which may include IMH and its
Affiliates, or any Affiliated REIT, to provide various services including
facilities and costs related therewith, technology, management information
systems, human resource administration, general ledger accounts, check
processing, accounts payable and other similar operational or administrative
services;
(h) oversee the day-to-day operations of the Company and supervise the
performance of such other administrative functions necessary in the management
of the Company as directed by the Board of Directors;
(i) advise and negotiate agreements on behalf of the Company with banking
institutions and other lenders to provide for the short-term borrowing of funds
by the Company, as directed by the Board of Directors;
(j) communicate on behalf of the Company with the holders of the equity
and debt securities of the Company as required to satisfy the reporting and
other requirements of any governmental bodies or agencies and maintain effective
relations with such holders of the Company's securities, as directed by the
Board of Directors;
(k) subject to an agreement executed by the Company, advise as to the
designation of a servicer for those loans sold by ICCC whereby ICCC has elected
not to service such loans;
(l) counsel the Company in connection with policy decisions to be made by
the Board of Directors;
(m) upon request by and in accordance with the direction of the Board of
Directors, invest or reinvest any money of the Company; and
(n) as approved and directed by the Board of Directors, perform such
other services as may be required for management and other activities relating
to the assets of the Company as the Manager shall deem appropriate under the
particular circumstances.
3. Additional Activities of Manager. Subject to the Non-Competition
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Agreement, dated the date hereof, by and among the Company, ICCC, IMH and ICIFC,
and the Right of First Refusal Agreement, dated the date hereof, by and among
the Company, ICCC, the Manager, IMH and ICIFC, nothing herein shall prevent the
Manager or its Affiliates from engaging in other businesses or from rendering
services of any kind to any other person or entity, including investment in or
advisory service to others investing in any type of real estate investment,
including investments which meet the principal investment objectives of the
Company, ICCC or their respective Affiliates. Directors, officers, employees and
agents of the Manager or Affiliates of the Manager may serve as directors,
officers, employees, agents, nominees or signatories for the Company, any
subsidiary or Affiliate of the Company or any Affiliated REIT, to the extent
permitted by its Governing Instruments, as from time to time amended, or by any
resolutions duly adopted by the Board of Directors pursuant to its Governing
Instruments. When executing documents or otherwise acting in such capacities for
the Company, such persons shall use their respective titles in the Company.
4. Records; Confidentiality. The Manager shall maintain appropriate books
of account and records relating to services performed hereunder, which books of
account and records shall be accessible for inspection by officers of the
Company or officers of any subsidiary of the Company at any time during normal
business hours. The Manager agrees to keep confidential any and all information
it obtains from time to time in connection with the services it renders
hereunder and shall not disclose any portion thereof to non-affiliated third
parties except with the prior written consent of the Company, any subsidiary of
the Company and any entity of which the Company owns an economic interest.
In addition, to the extent executive officers of the Manager provide
services to the Company and its Affiliates through this Agreement, the Manager
will cause such executive officers to enter into non-competition and
confidentiality agreements so that they will not, directly or indirectly,
compete with the business of the Company and its Affiliates, including ICCC;
provided, however, that the executive officers may provide services to IMH, any
Affiliated REIT, the Manager, and the executive officers may perform the duties
set forth in their respective employment agreements with ICIFC.
5. Obligations of Manager. Anything else in this Agreement to the contrary
notwithstanding, the Manager shall refrain from any action which in its sole
judgment made in good faith (i) would adversely affect the status of the Company
and any subsidiary of the Company as a real estate investment trust as defined
and limited in sections 856 through 860 of the Code, (ii) would violate any law,
rule or regulation of any governmental body or agency having jurisdiction over
the Company and such subsidiary, or (iii) which would otherwise not be permitted
by the Company's or its subsidiary's Governing Instruments, except if any of
such actions shall be ordered by the Board of Directors, in which event the
Manager shall promptly notify the Board of Directors of the Manager's judgment
that such action would adversely affect such status or violate any such law,
rule or regulation or the Governing Instruments and shall refrain from taking
such action pending further clarification or instructions from the Board of
Directors. If the Board of Directors thereafter instructs the Manager, despite
the Manager's notification as provided herein, to take any such action and the
Manager so acts upon the instructions given, the Manager shall not be
responsible for any loss of the Company's or its subsidiary's status as a REIT
or violation of any law, rule or regulation or the Governing Instruments caused
thereby.
6. Compensation.
(a) If the Company's annualized Return on Equity during any fiscal
quarter (computed by multiplying the Return on Equity for such fiscal quarter by
four) is in excess of the Ten Year U.S. Treasury Rate plus 2%, the Company will
pay the Manager, for such quarter, an amount equal to 25% of such excess, but in
no event shall any payment of compensation under this subsection reduce the
Company's annualized Return on Equity for such quarter to less than the Ten Year
U.S. Treasury Rate plus 2%.
(b) The Manager shall compute the compensation payable under Subsection
(a) within 60 days after the end of each calendar quarter, with the exception of
the fourth quarter for which compensation shall be computed within 30 days. In
any event, the compensation payable under Subsection (a) shall be calculated
before any income distributions are made to stockholders for the corresponding
period. A copy of the computations made by the Manager to calculate its
compensation shall thereafter be promptly delivered to any executive officer of
the Company and, upon such delivery, payment of the compensation earned under
Subsection (a) shown therein shall be due and payable within 90 days after the
end of such calendar quarter. The compensation due and payable to the Manager
under Subsection (a) shall be paid to the Manager in the subsequent quarter in
which the incentive compensation was earned. The aggregate amount of the
Manager's compensation for each fiscal year shall be adjusted within 120 days
after the end of such fiscal year so as to provide compensation for such year in
the annual amounts stated in Subsection (a) and any excess owed to, or shortfall
owed by, the Manager with respect to such compensation, collectively, shall be
promptly remitted by, or paid to, the Company. In the event that the time in
which the compensation is paid by the Company to the Manager violates the
Company's status to be taxed as a REIT, both parties shall mutually agree to
modify the time set forth in this Section in which the Manager will be paid the
compensation earned under Subsection (a).
7. Reimbursable Expenses of the Manager. Without regard to the compensation
received hereunder by the Manager, the Company or any subsidiary of the Company
shall reimburse the Manager of its expenses, as set forth in Section 8, and
without limiting the generality of the foregoing, it is specifically agreed that
the following expenses of the Company or any subsidiary of the Company
(including ICCC) shall not be paid by the Manager (collectively, "Reimbursable
Expenses"):
(a) The pro rata employment expenses of the personnel and executive
officers (who are governed by employment agreements with ICIFC, and thus, deemed
"Reimbursable Executive Amounts") employed by the Manager, including, but not
limited to, salaries, wages, payroll taxes, and the cost of employee benefit
plans;
(b) Travel and other expenses of directors, officers and employees of the
Manager and of directors, officers, or employees of the Company or any
subsidiary of the Company who are also directors, officers or employees of the
Manager, except expenses of such persons who are directors of the Company or any
subsidiary of the Company incurred in connection with attending meetings of the
Board of Directors or meetings of holders of the securities of the Company or
any subsidiary of the Company or expenses of persons who are directors,
officers, or employees of the Company or any subsidiary of the Company incurred
in connection with attending meetings, conferences or conventions which relate
solely to the business affairs of the Company or any subsidiary of the Company;
(c) Rent, telephone, utilities, office furniture, equipment and machinery
(including computers, to the extent utilized) and other office expenses (such as
asset/liability software, modeling software and other software and hardware) of
the Manager needed in order to perform its duties as set forth in Section 2
herein;
(d) Bookkeeping fees and expenses of the Company and the Manager
including any costs of computer services in connection with this function;
(e) Amounts payable by the Manager pursuant to submanagement agreements
with outside third parties to provide various services to the Company including
facilities and costs related therewith, technology, management information
systems, human resource administration, general ledger accounts, check
processing, accounts payable and other similar operational services ;
(f) Miscellaneous administrative expenses incurred in supervising and
monitoring the Company's investments or any subsidiary's investments of relating
to performance by the Manager of its functions hereunder;
(g) The cost of borrowed money of the Company;
(h) All taxes applicable to the Company or any subsidiary of the Company
including interest and penalties thereon;
(i) Legal audit, accounting, underwriting, brokerage, listing, rating
agency, registration and other fees, printing, engraving and other expenses and
taxes incurred in connection with the issuance, distribution, transfer,
registration and stock exchange listing of the Company's or any subsidiary's
equity securities or debt securities;
(j) Fees and expenses paid to independent contractors, consultants,
managers, and other agents employed directly by the Company or any subsidiary of
the Company or by the Manager at the Company's or such subsidiary's request for
the account of the Company or any subsidiary of the Company (other than the
Manager);
(k) Expenses connected with the acquisition, disposition and ownership of
the Company's or any subsidiary's investment assets (including without
limitation commitment fees, brokerage fees, guaranty fees and hedging fees),
including but not limited to ad valorem taxes, costs of foreclosure,
maintenance, repair and improvement of property and premiums for insurance on
property owned by the Company or any subsidiary of the Company; and with regard
to brokerage fees, it is understood that neither the Manager nor any of its
Affiliates shall charge a brokerage commission or similar fee to the Company or
any subsidiary of the Company in connection with the acquisition, disposition or
ownership of the Company's or any subsidiary's investment assets;
(l) The expenses of organizing, modifying or dissolving the Company or
any subsidiary of the Company;
(m) All insurance costs incurred in connection with the Company or any
subsidiary of the Company;
(n) Expenses connected with payments of dividends or interest or
distributions in each or any other form made or caused to be made by the Board
of Directors to holders of the securities of the Company or any subsidiary of
the Company;
(o) Expenses connected with the structuring of the issuance of CMBSs by
the Company or any subsidiary of the Company, including but not limited to
trustee's fees, insurance premiums, and costs of required credit enhancements;
(p) All expenses by third parties connected with communications to
holders of equity securities or debt securities of the Company or any subsidiary
of the Company and the 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 any costs of computer services in connection with this function, the
cost of printing and mailing certificates for such securities and proxy
solicitation materials and reports to holders of the Company's or any
subsidiary's securities and reports to third parties required under any
indenture to which the Company or any subsidiary of the Company is a party;
(q) Transfer agent's and registrar's fees and charges;
(r) Fees and expenses paid to directors of the Company or any subsidiary
of the Company, the cost of director and officer liability insurance and
premiums for fidelity and errors and omissions insurance;
(s) Legal, accounting and auditing fees and expenses relating to the
Company's or any subsidiary's operations;
(t) Any judgment rendered against the Company or any subsidiary of the
Company, or against any director of the Company or any subsidiary of the Company
in his capacity as such for which the Company or any subsidiary of the Company
is required to indemnify such director, by any court or governmental agency;
(u) Expenses relating to any office or office facilities maintained by
the Company or any subsidiary of the Company separate from the office of the
Manager;
(v) Expenses related to the servicing and subservicing of Commercial
Mortgages;
(w) All offering expenses (including accounting, legal, printing,
clerical, personnel, filing and other expenses) incurred by the Company, the
Manager or its Affiliates on behalf of the Company in connection with the
Offering; and
(x) Other miscellaneous expenses of the Company or any subsidiary of the
Company.
8. Computation of Reimbursable Expenses.
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(a) The Company shall reimburse the Manager for all Reimbursable Expenses
and Reimbursable Executive Amounts on a dollar for dollar basis. Furthermore,
with respect to Reimbursable Expenses and Reimbursable Executive Amounts owed by
the Manager to IMH for costs and services rendered under any submanagement
agreement with the Manager, the Company shall pay an additional service charge
of 15% on such amounts. Pursuant to submanagement agreements, the Manager shall
pay all third party service providers, on a dollar-for-dollar basis, the
aforementioned amounts received by the Manager from the Company, provided,
however, that no such 15% service charge will be paid to third party service
providers other than ICIFC.
(b) For the first three years of this Agreement, there will be a minimum
amount of $500,000 per annum (which includes the 15% service charge) payable by
the Company to the Manager for Reimbursable Expenses and Reimbursable Executive
Amounts. Thereafter, the Company shall only be responsible for the Reimbursable
Expenses and Reimbursable Executive Amounts incurred, plus the additional 15%
service charge amount due to the Manager in connection with services rendered by
ICIFC under any submanagement agreement.
(c) The Manager shall compute the Reimbursable Expenses and Reimbursable
Executive Amounts payable under Subsections (a) and (b) within 10 days after the
end of each month. A copy of the computations made by the Manager to calculate
its compensation shall thereafter be promptly delivered to any executive officer
of the Company
and, upon such delivery, payment of the compensation earned under Subsection (a)
and (b) shown therein shall be due and payable within 15 days after the end of
such month. The Reimbursable Expenses and Reimbursable Executive Amounts due and
payable to the Manager under Subsections (a) and (b) shall be paid to the
Manager in the subsequent month in which the Reimbursable Expenses and the
Reimbursable Executive Amounts were incurred.
9. Limits of Manager Responsibility. (a) The Manager assumes no
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responsibility under this Agreement other than to render the services called for
hereunder in good faith 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 5 above. The Manager, its
directors, officers, shareholders and employees will not be liable to the
Company, any subsidiary of the Company (including ICCC), the Unaffiliated
Directors or the Company's or its subsidiary's stockholders for any acts
performed by the Manager, its directors, officers, shareholders and employees in
accordance with this Agreement, except by reason of acts or omissions
constituting bad faith, willful misconduct, gross negligence or reckless
disregard of their duties. The Company or its subsidiaries (including ICCC)
shall reimburse, indemnify and hold harmless the Manager, its shareholders,
directors, officers and employees of and from any and all expenses, losses,
damages, liabilities, demands, charges and claims of any nature whatsoever in
respect of or arising from any acts or omissions of the Manager, its
shareholders, directors, officers and employees made in good faith in the
performance of the Manager's duties under this Agreement and not constituting
bad faith, willful misconduct, gross negligence or reckless disregard of its
duties.
(b) The Manager shall reimburse, indemnify and hold harmless the Company,
any subsidiaries (including ICCC), or any of their stockholders, directors,
officers and employees of and from any and all expenses, losses, damages,
liabilities, demands, charges and claims (including, without limitation,
reasonable attorneys fees) arising out of any willful and intentional
misstatements of fact made by the Manager in connection with this Agreement and
the services to be rendered hereunder.
10. No Joint Venture. The Company and the Manager are not partners or joint
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venturers with each other and nothing herein shall be construed to make them
such partners or joint venturers or impose any liabilities as such on either of
them.
11. Term. This Agreement shall continue in force until December 31, 2002
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and thereafter it may be extended with the consent of the Manager and by the
affirmative vote of a majority of the Unaffiliated Directors or by a vote of the
holders of a majority of the outstanding shares of Common Stock of the Company.
Each extension shall be executed in writing by all parties hereto before the
expiration of this Agreement or of any extension thereof. Each such extension
shall be effective for a period corresponding to the fiscal year of the Company,
but in no case exceeding twelve months.
12. Termination for Cause. This Agreement, or any extension hereof, may be
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terminated by either party for cause immediately upon written notice, (i) by a
majority vote of the Unaffiliated Directors or by a vote of a majority of the
holders of the Company's Common Stock, in the case of termination by the
Company, or, (ii) in the case of termination by the Manager, by a majority vote
of the directors of the Manager. Grounds for termination for cause will occur
with respect to a party if:
(a) Such party shall have violated any provision of this Agreement and,
after notice of such violation, shall not cure such default within 30 days; or
(b) There is entered an order for relief or similar decree or order with
respect to such party by a court having jurisdiction in the premises in an
involuntary case under the federal bankruptcy laws as now or hereafter
constituted or under any applicable federal or state bankruptcy, insolvency or
other similar laws; or such party (A) ceases or admits in writing its inability
to pay its debts as they become due and payable, or makes a general assignment
for the benefit of, or enters into any composition or arrangement with,
creditors; (B) applies for, or consents (by admission of material allegations of
a petition or otherwise) to the appointment of a receiver, trustee, assignee,
custodian, liquidator or sequestrator (or other similar official) of such party
or of any substantial part of its properties or assets, or authorizes such an
application or consent, or proceedings seeking such appointment are commenced
without such authorization, consent or application against such party and
continue undismissed for 30 days; (C) authorizes or files
a voluntary petition in bankruptcy, or applies for or consents (by admission of
material allegations of a petition or otherwise) to the application of any
bankruptcy, reorganization, arrangement, readjustment of debt, insolvency,
dissolution, liquidation or other similar law of any jurisdiction, or authorizes
such application or consent, or proceedings to such end are instituted against
such party without such authorization, application or consent and are approved
as properly instituted and remain undismissed for 30 days or results in
adjudication of bankruptcy or insolvency; or (D) permits or suffer all or any
substantial part of its properties or assets to be sequestered or attached by
court order and the order remains undismissed for 30 days.
(c) Each party agrees that if any of the events specified in this
Section 12 shall occur, it will give prompt written notice thereof to the other
party's Board of Directors after the happening of such event.
In addition to the foregoing, grounds for termination for cause will
occur with respect to the Manager if the Manager has engaged in willful
misconduct in the performance of its duties hereunder, the effect of which has a
direct material adverse effect on the financial condition and operations of the
Company and ICCC in the aggregate.
If this Agreement is terminated pursuant to this Section, such
termination shall be without any further liability or obligation of either party
to the other, except as provided in Section 15.
13. Termination Without Cause. The Company may terminate this Agreement
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without cause upon 60 days prior written notice, by a majority vote of the
Unaffiliated Directors or by a vote of the holders of a majority of the
outstanding shares of the Company's Common Stock. In the event this Agreement is
terminated by the Company without cause, or in the event this Agreement is not
renewed by the Company without cause, the Company, in addition to its
obligations under Section 15, shall pay the Manager a termination or non-renewal
fee determined by an independent appraisal. Such appraisal shall be conducted by
a nationally-recognized appraisal firm mutually agreed upon by the parties and
the costs of such appraisal shall be borne equally by the parties. If the
parties are unable to agree upon such appraisal firm within 30 days following
notice of termination or, in the event of non-renewal, the termination date,
then each party shall as soon as reasonably practicable, but in no event more
than 45 days following notice of termination or, in the event of non-renewal,
the termination date, choose a nationally-recognized independent appraisal firm
to conduct an appraisal. In such event, (i) the termination fee shall be deemed
to be the average of the appraisals as conducted by each party's chosen
appraiser and (ii) each party shall pay the costs of its appraiser so chosen.
Any appraisal conducted hereunder shall be performed no later than 45 days
following selection of the appraiser or appraisers.
14. Assignment; Subcontract. (a) This Agreement shall terminate
-----------------------
automatically in the event of its assignment, 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 Unaffiliated Directors. Such an assignment
shall bind the assignee hereunder in the same manner as the Manager is bound
hereunder and, to further evidence its obligations hereunder, the assignee shall
execute and deliver to the Company a counterpart of this Agreement. This
Agreement shall not be assignable by the Company without the consent of the
Manager, except in the case of assignment by the Company to a real estate
investment trust or other organization which is a successor (by merger,
consolidation or purchase of assets) to the Company, in which case such
successor organization shall be bound hereunder and by the terms of said
assignment in the same manner as the Company is bound hereunder.
(b) Notwithstanding the foregoing, the Company and the Manager agree
that the Manager may enter into a subcontract with any third party, including
IMH, which third party shall be approved by the Company's Board of Directors,
pursuant to which such third party will provide such of the management services
required hereunder as the Manager deems necessary, and the Company hereby
consents to the entering into and performance of such subcontract; provided,
however, that no such arrangement between the Manager and IMH or any third party
shall relieve the Manager of any of its duties or obligations hereunder.
15. Action Upon Termination. From and after the effective date of
-----------------------
termination of this Agreement, pursuant to Sections 12, 13 and 14 hereof, the
Manager shall not be entitled to compensation for further services hereunder,
but shall be paid all compensation accruing to the date of termination, subject
to adjustments on an annualized basis in accordance with Section 6(b) and
subject to the minimum amount of $500,000 per annum for the first three years.
The Manager shall forthwith upon such termination deliver to the Board of
Directors all property and documents, corporate records, reports and software of
the Company or any subsidiary of the Company then in the custody of the Manager.
16. Representations and Warranties.
------------------------------
(a) The Company hereby represents and warrants to the Manager as follows:
(i) Corporate Existence. The Company is duly organized, validly
-------------------
existing and in good standing under the laws of Maryland, has the power to own
its assets and to transact the business in which it is now engaged and is duly
qualified as a foreign corporation and in good standing under the laws of such
jurisdictions where its ownership or lease of property or the conduct of its
business requires such qualification, except for failures to be so qualified,
authorized or licensed that could not in the aggregate have a material adverse
effect on the business operations, assets or financial condition of the Company
and its subsidiaries, taken as a whole.
(ii) Corporate Power; Authorization; Enforceable Obligations. The
-------------------------------------------------------
Company has the corporate power, authority and legal right to execute, deliver
and perform this Agreement and all obligations required hereunder and has taken
all necessary corporate action to authorize this Agreement on the terms and
conditions hereof and the execution, delivery and performance of this Agreement
and all obligations required hereunder. No consent of any other person
including, without limitation, stockholders and creditors of the Company, and no
license, permit, approval or authorization of, exemption by, notice or report
to, or registration, filing or declaration with, any governmental authority is
required by the Company in connection with this Agreement or the execution,
delivery, performance, validity or enforceability of this Agreement and all
obligations required hereunder. This Agreement has been, and each instrument or
document required hereunder will be, executed and delivered by a duly authorized
officer of the Company, and this Agreement constitutes, and each instrument or
document required hereunder when executed and delivered hereunder will
constitute, the legally valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, except as such enforcement may
be limited by bankruptcy, insolvency, moratorium or similar laws now or
hereafter in effect relating to the rights and remedies of creditors generally,
and general principles of equity.
(iii) No Legal Bar to This Agreement. The execution, delivery and
performance of this Agreement and the documents or instruments required
hereunder, will not violate any provision of any existing law or regulation
binding on the Company, or any order, judgment, award or decree of any court,
arbitrator or governmental authority binding on the Company, or the charter or
Bylaws of, or any securities issued by the Company or any mortgage, indenture,
lease, contract or other agreement, instrument or undertaking to which the
Company is a party or by which the Company or any of its assets may be bound,
the violation of which would have a material adverse effect on the business
operations, assets or financial condition of the Company and its subsidiaries,
taken as a whole, and will not result in, or require, the creation or imposition
of any lien on any of its property, assets or revenues pursuant to the
provisions of any such mortgage, indenture, lease, contract or other agreement,
instrument or undertaking.
(b) The Manager hereby represents and warrants to the Company as follows:
(i) Corporate Existence. The Manager is duly organized, validly
-------------------
existing and in good standing under the laws of California, has the power to own
its assets and to transact the business in which it is now engaged and is duly
qualified as a foreign corporation and in good standing under the laws of each
jurisdiction where its ownership or lease of property or the conduct of its
business requires such qualification, except for failures to be so qualified,
authorized or licensed that could not in the aggregate have a material adverse
effect on the business operations, assets or financial condition of the Manager
and its subsidiaries, taken as a whole. The Manager does not do business under
any fictitious business name.
(ii) Company Power; Authorization; Enforceable Obligations. The
-----------------------------------------------------
Manager has the power, authority and legal right to execute, deliver and perform
this Agreement and all obligations required hereunder and has taken all
necessary action to authorize this Agreement on the terms and conditions hereof
and its execution, delivery and performance of this Agreement and all
obligations required hereunder. No consent of any other person
including, without limitations, shareholders and creditors of the Manager, and
no license, permit, approval or authorization of, exemption by, notice or report
to, or registration, filing or declaration with, any governmental authority is
required by the Manager in connection with this Agreement or the execution,
delivery, performance, validity or enforceability of this Agreement and all
obligations required hereunder. This Agreement has been, and each instrument or
document required hereunder will be, executed and delivered by a duly authorized
officer of the Manager, and this Agreement constitutes, and each instrument or
document required hereunder when executed and delivered hereunder will
constitute, the legally valid and binding obligation of the Manager enforceable
against the Manager in accordance with its terms.
(iii) No Legal Bar to This Agreement. The execution, delivery and
------------------------------
performance of this Agreement and the documents or instruments required
hereunder, will not violate any provision of any existing law or regulation
binding on the Manager, or any order, judgment, award or decree of any court,
arbitrator or governmental authority binding on the Manager, or the certificate
of incorporation or by-laws of, or any securities issued by the Manager or of
any mortgage, indenture, lease, contract or other agreement, instrument or
undertaking to which the Manager is a party or by which the Manager or any of
its assets may be bound, the violation of which would have a material adverse
effect on the business operations, assets or financial condition of the Manager
and its subsidiaries, taken as a whole, and will not result in, or require, the
creation or imposition of any lien on any of its property, assets or revenues
pursuant to the provision of any such mortgage, indenture, lease, contract or
other agreement, instrument or undertaking.
17. Arbitration.
------------
(a) Each controversy, dispute or claim between the parties arising out
of or relating to this Agreement, which controversy, dispute or claim is not
settled in writing within thirty (30) days after the "Claim Date" (defined as
the date on which a party subject to this Agreement gives written notice to the
other that a controversy, dispute or claim exists), will be settled by binding
arbitration in Orange County, California in accordance with the provisions of
the Judicial Arbitration and Mediation Services, which shall constitute the
exclusive remedy for the settlement of any controversy, dispute or claim, and
the parties waive their rights to initiate any legal proceedings against each
other in any court or jurisdiction other than the Superior Court of Orange
County (the "Court"). Any decision rendered by the arbitrator and such
arbitration will be final, binding and conclusive and judgment shall be entered
pursuant to the California Code of Civil Procedure Section 644 in any court in
the State of California having jurisdiction.
(b) Except as expressly set forth in this Agreement, the arbitrator
shall determine the manner in which the proceeding is conducted, including the
time and place of all hearings, the order of presentation of evidence, and all
other questions that arise with respect to the course of the proceeding. All
proceedings and hearings conducted before the arbitrator, except for trial,
shall be conducted without a court reporter, except that when any party so
requests, a court reporter will be used at any hearing conducted before the
arbitrator. The party making such a request shall have the obligation to arrange
for any pay for the court reporter. The costs of the court reporter shall be
borne equally by the parties.
(c) The arbitrator shall be required to determine all issues in
accordance with existing case law and the statutory laws of the State of
California. The rules of evidence applicable to proceedings at law in the state
of California will be applicable to the reference proceeding. The arbitrator
shall be empowered to enter equitable as well as legal relief, to provide all
temporary and/or provisional remedies and to enter equitable orders that will be
binding upon the parties. The arbitrator shall issue a single judgment at the
close of the proceeding which shall dispose of all of the claims of the parties
that are the subject of the proceeding. The parties hereto expressly reserve the
right to contest or appeal from the final judgment or any appealable order or
appealable judgment entered by the arbitrator. The parties hereto expressly
reserve the right to findings of fact, conclusions of law, a written statement
of decision, and the right to move for a new trial or a different judgment,
which new trial, if granted, is also to be a proceeding governed under this
provision.
18. Notices. All notices, requests, demands and other communications
-------
provided for hereunder shall be in writing (including telegraphic or facsimile
communications) and shall be in mailed (return receipt requested), telegraphed,
sent by facsimile, overnight courier or hand delivered to each party at the
address set forth as follows,
or at such other address as either party may designate by notice to the others,
and any such notice, request, demand or other communication shall be effective
upon receipt:
The Company: IMH Commercial Holdings, Inc.
00000 Xxxxxx Xxxxxx
Xxxxx Xxx Xxxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxxx,
Chief Executive Officer
The Manager: RAI Advisors, LLC
00000 Xxxxxx Xxxxxx
Xxxxx Xxx Xxxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxx
President
Either party may at any time give notice in writing to the other party of a
change of its address for the purpose of this Section 18.
19. Amendments. This Agreement shall not be amended, changed, modified,
----------
terminated or discharged in whole or in part except by an instrument in writing
signed by all parties hereto, or their respective successors or assigns, or
otherwise as provided herein. The parties hereto agree that in no event shall an
oral modification of this Agreement be enforceable or valid.
20. Successors and Assigns. This Agreement shall become effective when it is
----------------------
executed by all parties and thereafter shall be binding upon and inure to the
benefit of the parties and their respective successors and assigns.
21. Attorneys' Fees. In the event that any party shall bring an action or
---------------
proceeding in connection with the performance, breach or interpretation hereof,
then the prevailing party in such action as determined by the court or other
body having jurisdiction shall be entitled to recover from the losing party in
such action, as determined by the court or other body having jurisdiction, all
reasonable costs and expense of litigation or arbitration, including reasonable
attorney's fees, court costs, costs of investigation and other costs reasonably
related to such proceeding.
22. Governing Law. This Agreement shall be governed, construed and
-------------
interpreted in accordance with the laws of the State of California.
23. Headings and Cross References. The section headings hereof have been
-----------------------------
inserted for convenience of reference only and shall not be construed to affect
the meaning, construction or effect of this Agreement. Any reference in this
Agreement to a "Section" or "Subsection" shall be construed, respectively, as
referring to a section of this Agreement or a subsection of a section of this
Agreement.
24. Severability. The invalidity or unenforceability of any provision of
------------
this Agreement shall not affect the validity of any other provision, and all
other provisions shall remain in full force and effect.
25. Entire Agreement. This Agreement contains the entire agreement of the
----------------
parties relating to the subject matter hereof, and the parties hereto have made
no agreements, representations or warranties relating to the subject matter of
this Agreement that are not set forth otherwise herein. This Agreement
supersedes any and all prior agreements, written or oral, between the parties
hereto.
26. Waiver. Any forbearance by a party to this Agreement in exercising any
------
right or remedy under this Agreement or otherwise afforded by applicable law
shall not by a waiver of or preclude the exercise of that or any other right or
remedy.
27. Execution in Counterparts. This Agreement may be executed in one or
-------------------------
more counterparts, any of which shall constitute an original as against any
party whose signature appears on it, and all of which shall together constitute
a single instrument. This Agreement shall become binding when one or more
counterpart, individually or taken together, bear the signatures of both
parties.
[The remainder of this page intentionally left blank.]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers thereunto duly authorized as of the day and year
first above written.
IMH COMMERCIAL HOLDINGS, INC.
By: /s/ Xxxxxx X. Xxxxxxxxx
-----------------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: Chief Executive Officer
RAI ADVISORS, LLC
By: /s/ Xxxxxxx X. Xxxxxxx
---------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: President
