EXHIBIT 10.3
to S-11
MANAGEMENT AND SERVICING AGREEMENT
This MANAGEMENT AND SERVICING AGREEMENT ("Agreement") dated as of [ ],
2003, between DELPHI PROPERTIES, INC., a Maryland corporation (the "REIT"),
DELPHI PROPERTIES HOLDINGS, LLC, a Maryland limited liability company
("Holdings", and together with the REIT, the "REIT Entities "), and DELPHI
CORPORATION, a Delaware corporation (the "Manager").
W I T N E S S E T H:
WHEREAS, the principal business objective of the REIT is to acquire
and, through Holdings, hold mortgage assets and other authorized investments
that will generate net income for distribution to REIT stockholders and the REIT
intends to elect to be treated as a real estate investment trust for federal
income tax purposes; and
WHEREAS, the REIT Entities desire to have the Manager manage and
administer all of their business and affairs and the Manager has the capability
to provide the management, administrative and other services provided for herein
and is willing to perform and discharge such services for the REIT Entities on
the terms and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual terms and covenants
contained herein, and other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties agree as follows:
Section 1. Duties of the Manager.
(a) Duties with Respect to the REIT Entities. The Manager
agrees to take or cause or arrange for other appropriate persons or entities to
take all such actions that it, in the exercise of its good faith judgment,
believes is necessary or appropriate for the management or administration of the
REIT Entities' business and affairs. Notwithstanding anything to the contrary in
this Agreement, the Manager shall not take any action that the REIT Entities
direct the Manager not to take. The Manager shall consult with the Board of
Directors and the officers of the REIT Entities and shall, at the request of the
Board of Directors and/or the officers of the REIT Entities, furnish advice and
recommendations with respect to all aspects of the business and affairs of the
REIT Entities. Subject to the control and discretion of, and at the request of,
the Board of Directors of the REIT (the "Board of Directors"), the Manager
shall:
(i) administer the day-to-day operations and affairs of the
REIT Entities, including, without limitation, the performance or
supervision of the functions described in this Section 1;
(ii) monitor the credit quality of the assets held by the REIT
Entities;
(iii) advise the REIT Entities with respect to the
acquisition, management, financing and disposition of the REIT
Entities' assets;
(iv) represent the REIT Entities in their day-to-day dealings
with persons with whom the REIT Entities interact, including, without
limitation, stockholders of the REIT, the transfer agent of the REIT,
consultants, accountants, attorneys, custodians, insurers and banks;
(v) establish and provide necessary services for the REIT
Entities, including executive, administrative, accounting, stockholder
relations, secretarial, record-keeping, copying, telephone, mailing and
distribution facilities;
(vi) procure necessary insurance coverage for the REIT
Entities;
(vii) maintain communications and relations with the
stockholders of the REIT, including, but not limited to, responding to
inquiries, proxy solicitations, providing reports to stockholders and
arranging and coordinating all meetings of stockholders;
(viii) monitor and supervise the performance of all parties
who have contracts to perform services for the REIT Entities, provided
that the Manager shall have no duty to assume the obligations or
guarantee the performance of such parties under such contracts;
(ix) arrange for the execution and delivery of such documents
and instruments by the officers of the REIT as may be required in order
to perform the functions herein described and to take any other
required action contemplated by the terms of this Agreement;
(x) consult and work with legal counsel for the REIT in
implementing REIT decisions and undertaking measures consistent with
all pertinent federal, state and local laws and rules or regulations of
governmental or quasi-governmental agencies, including, but not limited
to, federal and state securities laws and tax laws, as they relate to
the REIT's qualification, and the maintenance of its qualification as a
real estate investment trust;
(xi) take any action which, in the Manager's judgment or the
judgment of the Board of Directors (of which the Manager has received
written notice), may be necessary to maintain the qualification of the
REIT as a real estate investment trust for U.S. federal income tax
purposes, unless otherwise instructed by the Board of Directors, or
prevent the violation of any law or regulation of any governmental body
or agency having jurisdiction over the REIT or its securities;
(xii) take any action which, in the Manager's judgment or the
judgment of the Board of Directors (of which the Manager has received
written notice), may be necessary to operate the REIT Entities in a
manner that will not subject the REIT Entities to regulation under the
Investment Company Act of 1940 including, but not limited to monitoring
the assets of the REIT Entities to ensure that such entities maintain
at least 55% of their respective total assets in qualifying interests
under the Investment Company Act of 1940;
(xiii) refrain from any action which, in the Manager's
reasonable judgment or in the judgment of the Board of Directors (of
which the Manager has received written
2
notice), may adversely affect the qualification of the REIT as a real
estate investment trust, unless otherwise instructed by the Board of
Directors, or which would violate any laws, rule or regulation of any
governmental body or agency having jurisdiction over the REIT or its
securities, or which would otherwise not be permitted by the Articles
of Incorporation, as amended, or By-laws of the REIT;
(xiv) consult and work with the accountants and the audit
committee for the REIT in connection with the preparation of financial
statements, periodic reports, annual reports and tax returns;
(xv) prepare and distribute, in consultation with the
accountants and audit committee for the REIT, periodic reports and
annual reports to stockholders that will contain audited financial
statements; and
(xvi) furnish reports to the Board of Directors and provide
research, economical and statistical data in connection with the REIT
Entities' investments; and as reasonably requested by the REIT , make
reports to the REIT of its performance of the foregoing services and
furnish advice and recommendations with respect to other aspects of the
business of the REIT Entities.
(b) Duties with Respect to the REIT Entities' Policies. The Manager
shall, at all times in connection with the performance and observance of its
duties and obligations under this Agreement, refrain from taking any actions
that would prevent the REIT Entities from complying with the policies adopted by
the Board of Directors, as they may be amended, supplemented or otherwise
modified by the Board of Directors at any time or from time to time. Upon its
receipt of notice thereof, the Manager shall thereupon comply with such policies
as so amended, supplemented or modified.
Section 2. Servicing Assets.
(a) If the REIT Entities obtain any assets that are not the
primary obligations of the Manager (the "Servicing Assets"), the Manager will
service the Servicing Assets with the same degree of care as the Manager
exercises with respect to similar assets held by it for its own account;
provided that the Manager will not be liable for any error of judgment or for
any action taken or omitted to be taken by it, except actions taken by reason of
the Manager's gross negligence or willful misconduct. Without limitation of the
generality of the foregoing, the Manager (i) may consult with legal counsel,
including counsel for any borrower, lender or guarantor of any Servicing Asset,
independent public accountants or experts, and shall not be liable for any
action taken in good faith or omitted to be taken in good faith by it in
accordance with the advice of such counsel, accountants or experts, (ii) makes
no warranty or representation and shall not be responsible for any statement,
warranty or representation made by any borrower, lender or guarantor in
connection with any Servicing Asset or in connection with any document relating
to any Servicing Asset or for the financial condition of any borrower, lender or
guarantor or for the value of any collateral, (iii) shall not be responsible for
the performance or observance by any borrower, lender or guarantor of any of the
terms, covenants or conditions of any loan or other document evidencing or
relating to any Servicing Asset and shall not have any duty to inspect the
property (including the books and records) of any borrower, lender or guarantor,
(iv)
3
makes no warranty or representation and shall not be responsible for the due
execution, legality, validity, enforceability, genuineness, sufficiency or
collectability of any loan or other document evidencing or relating to any
Servicing Asset or any collateral for any Servicing Asset, (v) makes no
representation or warranty concerning the value or existence of any collateral
or the perfection or enforceability of any security interests relating to any
Servicing Asset, and (vi) shall incur no liability in respect of any Servicing
Asset or under any loan or other document evidencing or relating to any
Servicing Asset or in respect of any collateral for any Servicing Asset by
acting upon any notice, consent, certificate or other instrument or writing
believed by the Manager to be genuine and signed or sent by the proper party.
(b) The Manager shall not, without the REIT's prior written consent,
agree to the modification or waiver of any of the terms of any loan or other
document evidencing or relating to any Servicing Asset, consent to any action or
failure to act by any borrower, lender or guarantor, or exercise any rights
which the Manager may have in respect of any Servicing Asset or under any loan
or other document evidencing or relating to any Servicing Asset or with respect
to any collateral for any Servicing Asset, if the exercise of any of such rights
would (i) waive any payment default; (ii) forgive any of the principal amount of
or reduce the principal amount of, or rate of interest on, any Servicing Asset;
(iii) postpone any date fixed for any payment of principal of or interest on any
Servicing Asset; (iv) release any guaranty or collateral except as otherwise
contemplated in any loan or other document evidencing or relating to any
Servicing Asset; (v) extend the maturity date of any Servicing Asset; (vi)
increase the lending formulas or advance rates on any Servicing Asset; or (vii)
amend or modify the financial covenants contained in the loan or other documents
evidencing any Servicing Asset in any way that would make such financial
covenants any less restrictive.
(c) In the event: (i) any default under a Servicing Asset shall be
continuing for more than 30 days, (ii) a Servicing Asset is placed in a
non-performing status, or (iii) any other development occurs that adversely
affects the value of a Servicing Asset, the Manager shall promptly give the REIT
written notice of such event. The Manager shall thereafter take such action as
the REIT may deem necessary to protect the interests of both the Manager and the
REIT Entities. In the event the Manager shall fail to timely take any such
action as directed by the REIT, the REIT may directly take any and all actions
it deems necessary to protect its interests in the Servicing Asset. At the
REIT's direction, and on behalf of the REIT Entities, the Manager may deal with
any of the borrowers or guarantors of the Servicing Asset for the purpose of
entering into forbearance agreements, moratoriums, and general work-out plans
designed to cure the default and restore the Servicing Asset to good standing;
provided, the REIT may, in its discretion, deal directly with any of the
borrowers or guarantors in the event it determines that the Manager is not
satisfactorily following the REIT's directions and, notwithstanding anything in
this Agreement to the contrary, the Manager shall, at all times, only take
action or inaction that is consistent with guidelines established by the REIT or
otherwise only with the REIT's consent.
Section 3. Other Duties of the Manager.
(a) The Manager shall segregate and hold all funds collected
and received by the REIT Entities under and pursuant to this Agreement separate
and apart from any of its own funds and general assets and shall establish and
maintain one or more accounts, in the form of time deposit or demand accounts,
titled "Delphi Corporation in trust for Delphi Properties, Inc."
4
or "Delphi Corporation in trust for Delphi Holdings, LLC", as applicable (the
"REIT Entities' Accounts"). Each REIT Entities' Account shall be established
with a depository institution acceptable to the REIT. All funds deposited in the
REIT Entities' Accounts shall at times be fully insured to the full extent
permitted under applicable law. Funds deposited in the REIT Entities' Accounts
may be drawn on by the Manager in accordance with this Section 3. The Manager
shall deposit in the REIT Entities' Accounts within one Business Day (as such
term is defined in Section 4 hereof) of receipt, and retain therein, all
collections received by the REIT Entities under and pursuant to this Agreement
as well as any and all other amounts received by the REIT Entities whatsoever.
Any interest paid on funds deposited in the REIT Entities' Accounts by the
depository institutions in which the REIT Entities' Accounts are established
shall accrue to the benefit of the REIT Entities.
(b) The Manager is hereby authorized, from time to time, to
withdraw funds from the REIT Accounts for the following purposes:
(i) to pay itself the Management Fee;
(ii) to pay dividends to the holders of the REIT's Common
Stock and Series A Preferred Stock, each as defined in the REIT's
Articles of Incorporation, as amended;
(iii) to pay all of the REIT Entities' accounts payable and
other liabilities and obligations incurred by the REIT Entities in the
ordinary course of the REIT Entities' business; and
(iv) to pay all other amounts directed to be paid by the Board
of Directors or the REIT's officers, at the direction of the Board of
Directors.
Section 4. Management Fee. As compensation for the performance of the
Manager's duties and obligations under this Agreement, the Manager shall be
entitled to receive a management fee, on an annualized basis, of 0.10% of the
average daily outstanding principal balance of the mortgage notes receivable
plus any other REIT-qualified assets held by the REIT during each year. Such
management fee shall be payable on the [ ] day of each [ ], [ ], [ ] and [ ],
commencing on [ ], 2003, or in each case on the first Business Day immediately
thereafter if the [ ] day in any month is not a Business Day. As used herein,
the term "Business Day" shall mean any day other than a Saturday, a Sunday, or a
day on which commercial banks are authorized or obligated by law, regulation or
executive order to close in Michigan.
Section 5. Independence of the Manager. For all purposes of this
Agreement, the Manager shall be an independent contractor and shall not be
subject to the supervision of the REIT with respect to the manner in which it
accomplishes the performance of its duties and obligations hereunder. Unless
expressly authorized by the REIT, the Manager shall have no authority to act for
or represent the REIT Entities in any way (other than as permitted hereunder)
and shall not otherwise be deemed an agent of the REIT Entities.
Section 6. Indemnification by the Manager. The Manager agrees to
indemnify, defend and hold harmless the REIT Entities and each of their
stockholders, directors, officers, agents and independent contractors, as
applicable, for (i) any and all liabilities, losses, damages
5
and expenses that may be incurred in connection with or as a result of any
negligent act or omission or willful misconduct by the Manager in connection
with any activity undertaken or omitted to be taken by the Manager with respect
to this Agreement, (ii) any breach by the Manager of any representation or
warranty herein or any failure by the Manager to perform or observe any
agreement or covenant herein, and (iii) any third party claims, liabilities,
losses, damages or expenses, or actions in respect thereof, arising out of or in
connection with this Agreement. The indemnities set forth in the preceding
sentence shall survive the resignation or removal of the Manager and the
termination of this Agreement and shall include reasonable fees and expenses of
counsel and other expenses of litigation.
Section 7. Other Activities of the Manager. Nothing herein contained
shall prevent the Manager, an affiliate of the Manager or an officer, director,
employee or stockholder of the Manager from engaging in any activity, including,
without limitation, originating, purchasing and managing real estate mortgage
assets, rendering services and investment advice with respect to real estate
investment opportunities to any other Person (including other real estate
investment trusts) and managing other investments (including the investments of
the Manager and its affiliates). Officers, directors, employees, stockholders
and agents of the Manager or of any affiliate of the Manager may serve as
officers, directors, employees or agents of the REIT Entities, but shall receive
no compensation from the REIT Entities for such service.
Section 8. Termination. The parties may terminate this Agreement at any
time without penalty by mutual agreement in writing. Such written mutual
agreement to terminate shall specify the date on which the termination hereof
shall be effective.
Section 9. Action upon Termination, Resignation or Removal. Promptly
upon the termination of this Agreement pursuant to Section 8, the Manager shall:
(a) deliver to the REIT all assets and documents of the REIT Entities
then in the custody of the Manager; and
(b) cooperate with the REIT and take all reasonable steps requested to
assist the Board of Directors in making an orderly transfer of the
administrative functions of the REIT Entities.
The Manager shall be entitled to be paid all fees accruing to it to the date of
such termination.
Section 10. Amendment. Any term or provision of this Agreement may be
amended, waived, discharged or terminated, but only by an instrument in writing
signed by the parties hereto.
Section 11. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF MICHIGAN.
Section 12. Headings. 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.
6
Section 13. Counterparts. This Agreement may be executed in
counterparts, all of which when so executed shall together constitute but one
and the same agreement.
Section 14. 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.
IN WITNESS WHEREOF, the parties have caused this Management Agreement
to be duly executed and delivered as of the day and year first above written.
DELPHI PROPERTIES, INC.
By:
------------------------------------
Name:
Title
DELPHI PROPERTIES HOLDINGS, LLC
By: Delphi Properties, Inc., as Agent
By:
------------------------------------
Name:
Title
DELPHI CORPORATION
By:
------------------------------------
Name:
Title:
7