Item 1.01 Entry into a Material Definitive Agreement.
The Management Agreement.
On January 3, 2020, Hunt Companies Finance Trust, Inc. (the "Company") entered
into a Management Agreement (the "Management Agreement") with OREC Investment
Management, LLC (the "Manager") pursuant to which the Manager is responsible for
implementing the Company's business strategies, subject to the oversight of the
Company's board of directors (the "Board"), and pursuant to which the Manager is
responsible for the Company's day to day operations and performing, or causing
to be performed, corporate office functions for the Company, including supplying
the Company with a management team, including a Chief Executive Officer and a
Chief Financial Officer or similar positions, along with appropriate support
personnel, that will provide the management services to the Company.
Term and Termination. The initial term of the Management Agreement ends on
January 3, 2023. The Management Agreement automatically renews for successive
one year terms beginning January 3, 2023 and each January 3 thereafter, unless
it is sooner terminated upon written notice delivered to the Company or the
Manager, as applicable, no later than 180 days prior to a renewal date either
(i) by the Company upon the affirmative vote of at least two-thirds (2/3) of the
independent directors of the Board or by a vote of at least two-thirds of the
Company's outstanding shares of common stock, based upon a determination that
(a) the Manager's performance is unsatisfactory and materially detrimental to
the Company or (b) the compensation payable to the Manager under the Management
Agreement is not fair to the Company (provided that in the instance of (b), the
Company shall not have the right to terminate the Management Agreement if the
Manager agrees to continue to provide services under the Management Agreement at
fees that at least two-thirds of the independent directors of the Board
determine to be fair, provided further that in the instance of (b), the Manager
will be afforded the opportunity to renegotiate its compensation prior to
termination) or (ii) by the Manager. The Company may also terminate the
Management Agreement at any time, including during the initial term, without the
payment of any termination fee, with at least 30 days' prior written notice from
the Company "for cause" as described in the Management Agreement. In the event
of a termination of the Manager other than a termination for cause, the Company
is required to pay a termination fee to the Manager. The termination fee is
equal to three times the sum of (a) the average annual Base Management Fee (as
defined in the Management Agreement) and (b) the average annual Incentive
Compensation (as defined in the Management Agreement), in each case, earned by
the Manager during the twenty four month period immediately preceding the
effective date of termination, calculated as of the end of the most recently
completed fiscal quarter before the effective date of termination.
Fees and Expense Reimbursements. Under the Management Agreement, the Company is
responsible for paying the Manager the following:
· Base Management Fee. The Company is required to pay the Manager an annual base
management fee equal to 1.5% of Stockholders' Equity (as defined in the
Management Agreement), payable quarterly (0.375% per quarter) in arrears.
· Incentive Fee. Starting in the first full calendar quarter following the
closing, the Company is required to pay the Manager a quarterly incentive fee,
payable in arrears in cash. The incentive fee is generally calculated as the
excess of (A) the product of (1) 20% and (2) the excess of (x) Core Earnings
(as defined in the Management Agreement) for the previous twelve (12)-month
period, over (y) the product of (I) the Stockholder Equity in the previous
twelve (12)-month period, and (II) 8% per annum, over (B) the sum of any
Incentive Compensation paid to the Manager with respect to the first three
fiscal quarters of such previous twelve month period.
For purposes of the calculation of base management fees and incentive fees
payable to the Manager, "Core Earnings" is defined as net income (loss)
attributable to the holders of the Company's common stock or, without
duplication, owners of the Company's subsidiaries, computed in accordance with
GAAP, including realized losses not otherwise included in GAAP net income (loss)
and excluding (i) non-cash equity compensation expense, (ii) the incentive
compensation paid or payable to Manager, (iii) depreciation and amortization,
(iv) any unrealized gains or losses or other similar non-cash items that are
included in net income for the applicable reporting period, regardless of
whether such items are included in other comprehensive income or loss, or in net
. . .
Item 1.02 Termination of a Material Definitive Agreement.
The information relating to the termination of that certain management
agreement, dated January 18, 2018, by and between the Company and HIM as set
forth in Item 1.01 above is incorporated herein by reference.
Item 3.02 Unregistered Sales of Equity Securities.
The information relating to the sale of 1,246,719 shares of the Company's common
stock to ORIX as set forth in Item 1.01 above is incorporated herein by
reference.
Item 5.02 Departure of Directors or Principal Officers; Election of Directors;
Appointment of Principal Officers.
In connection with the transactions described in Item 1.01 of this Current
Report on Form 8-K, on January 3, 2020, James C. Hunt resigned as the Company's
Chairman of the Board but will continue as a member of the Board. In connection
with and subsequent to the consummation of the transactions contemplated by the
Securities Purchase Agreement, on January 3, 2020, the Board appointed Interim
Chief Financial Officer James A. Briggs as Chief Financial Officer of the
Company.
James A. Briggs
Mr. Briggs, 53, currently serves as the Company's Chief Financial Officer, a
position he has held since September of 2018. Mr. Briggs is also the Chief
Accounting Officer of Hunt Real Estate Capital, and its predecessor company,
Centerline Capital Group since September of 2009, where he is responsible for
its accounting and external reporting. Previously, Mr. Briggs was the Director
of Finance for MRU Holdings, Inc., a specialty finance company. Mr. Briggs has
fifteen years of experience at JPMorgan Chase & Co. and its predecessor
companies in a variety of accounting and finance roles, including as Head of
Valuation Control and CFO for Emerging Markets, and was a senior auditor at
Ernst & Young, LLP. Mr. Briggs earned his B.B.A in Accounting from Iona College
and is a Certified Public Accountant.
Item 7.01 Regulation FD Disclosure.
On January 6, 2020, the Company issued a press release announcing its entry into
a new external management agreement with the Manager, the mutual termination of
its management agreement with HIM and its private placement with ORIX.
The information in Item 7.01 of this Current Report on Form 8-K, including
Exhibit 99.1 furnished herewith, is being furnished and shall not be deemed
"filed" for any purpose of Section 18 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), or otherwise subject to the liabilities of such
Section. The information in this Current Report on Form 8-K shall not be deemed
to be incorporated by reference into any filing under the Securities Act of
1933, as amended, or the Exchange Act, except as shall be expressly set forth by
specific reference in such filing.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits.
Exhibit No.
10.1 Management Agreement, dated January 3, 2020 by and between the Company
and OREC Investment Management, LLC
10.2 Securities Purchase Agreement, dated January 3, 2020 by and between the
Company and OREC Investment Holdings, LLC
10.3 Registration Rights Agreement, dated January 3, 2020 by and between the
Company and OREC Investment Holdings, LLC
10.4 Termination Agreement, dated January 3, 2020, by and between the Company
and Hunt Investment Management, LLC
99.1 Press Release, dated January 6, 2020
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LUMENT FINANCE TRUST, INC. 
