Department of Development

Economic Development Loan Policies Cuyahoga County Department of Development Adopted Effective ___________, 2018

a | P a g e

Contents FEDERAL FUNDING: .................................................................. Error! Bookmark not defined. GRANTS: ............................................................................. Error! Bookmark not defined.

Overview ................................................................................ Error! Bookmark not defined. Purpose of this Manual ........................................................... Error! Bookmark not defined. Maintenance of the Manual........................................................................................................ 1

Definitions ........................................................................... Error! Bookmark not defined. Application Process .................................................................................................................... 2

Appropriate Loan Programs / Soliciting Loan Applications ................................................................... 2

Application Intake ................................................................. Error! Bookmark not defined. Project Budget ...................................................................................................................... 6

Borrower Type ..................................................................... Error! Bookmark not defined. Confidentiality ...................................................................... Error! Bookmark not defined. Conflicts of Interest .............................................................. Error! Bookmark not defined. Project Eligibility ................................................................... Error! Bookmark not defined. Ineligible Projects .................................................................. Error! Bookmark not defined. Deferment/Rejection of Applications ............................................................................................ 7

Financial Due Diligence .................................................................................................................. 7

Basic Loan Underwriting Standards ............................................................................................. 7

Physical Development Feasibility ................................................................................................. 9

Operational Viability .............................................................................................................. 10

Submission of Summary of Recommendation to Fiscal Office ............... Error! Bookmark not defined. Approval and Lending Authorities .................................................................................................. 12

Loan Committee/CCCIC Recommendation ...................................................................................... 12

Council/BOC Approval ............................................................................................................ 13

Loan Encumbrance ................................................................. Error! Bookmark not defined. Terms, Commitment, Legal Structure, & Closing ................................................................................. 13

Loan Terms ........................................................................................................................ 13

Term Sheet ......................................................................... Error! Bookmark not defined. Loan Documents .................................................................... Error! Bookmark not defined. Outside Counsel Selection........................................................................................................ 13

Closing .............................................................................................................................. 13

b | P a g e

Loan Disbursements .............................................................................................................. 14

Disbursement Control ............................................................................................................ 14

Records Management ............................................................................................................ 14

Portfol Policy ...................................................................................................................... 15

Job Creation Monitoring and Enforcement.................................................................................... 15

Intake and Accounting of Loan Repayments .................................................................................. 15

Loan Monitoring and Servicing .................................................................................................. 15

Delinquencies and Loan Workouts .................................................................................................. 15

Delinquency Procedures ......................................................................................................... 15

Loan Work-Outs and Settlements .............................................................................................. 16

Write-Offs .......................................................................... Error! Bookmark not defined. Loan Balance Reductions/Forgiveness .......................................... Error! Bookmark not defined.

Waivers ................................................................................................................................ 17

APPENDIX A ............................................................................. Error! Bookmark not defined. Definitions ........................................................................... Error! Bookmark not defined.

APPENDIX B ............................................................................. Error! Bookmark not defined. Loan Program Summaries ........................................................ Error! Bookmark not defined.

APPENDIX C ............................................................................. Error! Bookmark not defined. CONFLICT OF INTEREST POLICY: ......................... Error! Bookmark not defined. ACKNOWLEDGMENT AND FINANCIAL INTEREST DISCLOSURE STATEMENT .................................................................. Error! Bookmark not defined. APPENDIX D ............................................................................. Error! Bookmark not defined.

STANDARD TERMS AND CONDITION FOR COUNTY LOANS ....................... Error! Bookmark not defined. APPENDIX E .............................................................................. Error! Bookmark not defined.

APPLICATION CHECKLIST ........................................................... Error! Bookmark not defined. APPENDIX F .............................................................................. Error! Bookmark not defined.

BUSINESS INVESTMENT PROJECT SUMMARY – LOAN REQUEST (Being Revised 6/27/17) ......... Error! Bookmark not defined.

APPENDIX G ............................................................................. Error! Bookmark not defined. Cuyahoga County Community Improvement Corporation Code of Regulations ......... Error! Bookmark not defined. Article 1 – Membership ................................................. Error! Bookmark not defined. Article 2 – Organizational and Annual Meetings ........... Error! Bookmark not defined. Article 3 – Board of Trustees ......................................... Error! Bookmark not defined. Article 4 – Meetings of the Board of Trustees ............... Error! Bookmark not defined.

c | P a g e

Article 5 – Officers ........................................................ Error! Bookmark not defined. Article 6 – Duties of Officers......................................... Error! Bookmark not defined. Article 7 – Notice Rules for Meetings ........................... Error! Bookmark not defined. Article 8 – Committees .................................................. Error! Bookmark not defined. Article 9 – Annual Report .............................................. Error! Bookmark not defined. Article 10 – Indemnification of Trustees and Officers .. Error! Bookmark not defined. Article 11 – Amendments to Code of Regulations ........ Error! Bookmark not defined.

APPENDIX H ............................................................................................................................56

STREAMLINED CUYAHOGA COUNTY ECONOMIC DEVELOPMENT LOAN/GRANT PROCESS………..…………56

1 | P a g e 11/6/2018 4:46 PM

Overview Purpose of this Manual The Cuyahoga County Department of Development (the “DOD”) has prepared this policy manual to provide the County’s administration & staff members, loan & other review committees, legislators & decision-makers with guidelines for consistent and prudent delivery and continued management of the DOD economic development products set forth in Appendix A. These loan products are designed to effectively foster economic growth and job creation in our community, in accordance with the County’s current Five-Year Economic Development Plan (“ED Plan”). Additional loan programs are administered by third party partners of the County and are subject to separate policies. (For purposes of this manual, “Director of Development” means the County’s Chief Economic Development Officer or the Chief Economic Development Officer’s designee.)

Cuyahoga County Lending Mission As a general matter of policy, the County serves as a “gap financer” providing capital to bring qualified and catalytic projects that are intended to spur additional job creation, neighborhood revitalization, economic growth & investment. The programmatic requirements and underwriting standards herein will be utilized to determine eligibility and amount of County lending. The County, as a gap financier, will only fund up to 40% of the total project costs. Senior financing is required to cover, at a minimum, 50% of the total project costs. A minimum equity contribution of 10% is required from the Borrowers.

Maintenance of the Manual This policy manual shall be reviewed and may be updated as necessary, as determined by the DoD Director and Deputy Chief.

The Director of Development has appointed the Deputy Chief Economic Development Office to be responsible for the following:

• maintaining and monitoring this policy manual and any subsequent addendums;

• developing policy amendments;

• presenting policy amendments to any appropriate review body, if any; and

• circulating notices of policy amendments and obtaining required acknowledgement of receipt from staff when changes occur.

DISCLAIMER – Federal Funding: Loans provided with federal funding are required to adhere to legislative rules and regulations as set forth in the Code of Federal Regulations and therefore may deviate from the requirements as outlined in this manual. A list of applicable sections, linked where appropriate, is provided in Appendix B.

2 | P a g e 11/6/2018 4:46 PM

Definitions All capitalized terms used in this Procedures manual that are not otherwise defined shall have the meanings assigned to them in Appendix C.

Loan Application Policies Subject Loan Programs / Loan Applications Processing Summary pages for each of the current loan programs administered by the Cuyahoga County DoD are attached as Appendix A. Requests for assistance that do not meet the qualifications for the loan programs set forth in Appendix A will be reviewed and, where appropriate, referred out to third party lending partners/administrator(s) of other loan programs for review. In addition, eligibility for a County loan will require the prospective borrower’s acknowledgement that certain fees must be paid and certain documents submitted for review, as further described in the Department’s Economic Development Loan Procedures Manual (“Procedures Manual”).

Confidentiality All documents submitted shall be subject to Ohio’s public records laws. All information regarding the personal, business and financial affairs of applicants/ borrowers are maintained in accordance with applicable provisions of Ohio’s public records laws. All employees shall ensure that records and information are properly safeguarded. Unauthorized access or use is prohibited and will result in employee discipline.

Conflicts of Interest The DoD has adopted a Conflict of Interest Policy, a copy of which is attached as Appendix D. All County employees involved in a borrower evaluation or loan approval are required to fill out a conflict of interest form and self-certify that they have no conflict of interest on the project being considered, this will include executive staff as well as council members and staff.

Borrower Eligibility Only the following types of Borrowers are eligible to apply for funding from the DoD subject to further applicable loan program eligibility criteria set forth in Appendix A:

• For-Profit Commercial/Industrial Business/Property Owner/Occupant in existence for at least 3 years;

• For-Profit Real Estate Investor/Developer in existence for at least 3 years;

• Hybrid – For-Profit Developer and Owner/Occupant related entities;

• Not-for-Profit organizations in existence for at least five years and registered with the State of Ohio;

• Political subdivisions of the State of Ohio located within Cuyahoga County.

3 | P a g e 11/6/2018 4:46 PM

Prior to any award, Borrowers will be required to register with the Inspector General in accordance with Section 501.19 of the Cuyahoga County Code.

The County in its sole discretion may perform a background investigation of any prospective borrower.

Project Eligibility Project eligibility will be determined by the DoD based upon information received from the Borrower through full completion of the Preliminary Project Information Form and the eligibility criteria of the applicable loan program as set forth in Appendix A and the guidelines set forth herein.

Some standards that will be considered in determining project eligibility include:

Direct Impact Measures

A project may warrant economic development assistance if it directly supports an objective set forth in the ED Plan through one or more of the following, without limitation:

• Job Creation or Retention;

• Capital Investment;

• Physical Improvement of Property/Blight Elimination;

• Neighborhood Revitalization/Placemaking;

• Provision of Access to Needed Services Currently Unavailable in a Community;

• Increased Tax Revenues to municipalities or County

• Other Return on Investment (ROI) measures & standards

Indirect Impact Measures

A project may also warrant economic development assistance if it indirectly supports an objective or strategy in the ED Plan through one or more of the following, without limitation:

• Creation of a place-based, neighborhood amenity or other highly visible symbol of positive economic change for a community;

• long term economic and employment growth potential;

• significant and evident supply chain impact;

• workforce innovation and development;

• other secondary effects of the Project that result in positivie economic change for the community.

Municipality Participation

The DoD strongly prefers local municipal participation in each project that is presented to DOD. If the documentation provided by a prospective borrower (e.g. sources and uses) does not indicate any local municipal participation, the Loan Officer shall inquire with the

4 | P a g e 11/6/2018 4:46 PM

applicant whether the municipality was already approached. The loan officer is required to contact the respective municipality’s economic development department (or responsible entity) to inquire about the possibility of the municipality providing funding or other assistance to the proposed project.

5 | P a g e 11/6/2018 4:46 PM

Recommendation Memo

Where DoD staff has determined that a project meets applicable eligibility requirements, the loan officer and Economic Development Administrator (“ED Administrator”) will prepare a “Recommendation Memo” with summary descriptions of the project, proposed total project financing, and proposed County participation for submission by the Director to the County Executive. In most cases, this memo will be a single page.

Ineligibility

Borrowers

A prior or current Borrower with a history of delinquency on a DoD loan, outstanding or otherwise, may be determined ineligible. The Preliminary Project Information Forms should be forwarded to the Loan Portfolio Manager (“LPM”) for a review of any prior or current loan history prior to any internal project review. (For purposes of this manual, references to LPM include any Assistant LPM.)

Projects

Absent a properly approved waiver, projects with the following characteristics are ineligible for funding through the DoD:

Speculative Projects

Speculative projects (e.g., projects with indeterminate tenants) are highly risky and are generally ineligible for funding. Exceptions to this policy may be considered for sites that are seeking County investment to become “development ready” or that require brownfields cleanup or infrastructure investment. These projects will be evaluated on a case-by-case basis in conjunction with County third party partners such as Team NEO, Greater Cleveland Partnership, and the Fund for our Economic Future.

Speculative projects include:

• speculative business attraction developments;

• speculative mixed-use real estate developments.

Projects Inconsistent with the Five-Year Economic Development Plan

Projects that do not support an Objective set forth in the most current Cuyahoga County Five-Year Economic Development Plan (“ED Plan”;[insert link]) or that are otherwise inconsistent with a strategy set forth in the ED Plan are ineligible for funding absent a clear public benefit; such projects may include, but are not limited to:

• projects competing for a local customer base or relocating within municipality or trade areas

• projects for which sufficient private-market financing is readily available;

• schools and government facilities;

• residential projects (exclusive of mixed-use projects);

6 | P a g e 11/6/2018 4:46 PM

• projects incompatible with prevailing community standards;

• standalone retail projects (will be evaluated on a case-by-case basis particular if part of a large mix use project).

Letters of Intent Project eligibility must be approved by the Director of DoD, in consultation with the County Executive. The County will issue a non-binding Letter of Intent (LOI) and Loan Application to those Applicants whose proposals have been accepted for review and consideration. The Applicant must submit the completed Application, along with all requested supporting documents, to the DoD for further consideration.

Project Budget In connection with a loan request, prospective borrowers are required to submit a complete projected budget pro forma, including detailed uses and sources. Certain costs are eligible for reimbursement from County funds, while others are not. Refer to the loan program summaries in Appendix A for eligibility requirements for each loan program.

The following are examples of costs that are generally eligible for reimbursement:

• Real estate acquisition and improvement costs, including:

o Acquisition

o New Construction and/or Rehabilitation

o General Conditions

o Site Work

o Demolition

o Environmental Remediation;

o Base/Shell Work;

o Interior Finishes;

o Tenant Improvements/Tenant Allowance;

o Furniture, Fixtures and Equipment.

• Machinery and equipment acquisition and installation costs;

• Soft costs (only for certain professional services that are deemed reasonable as determined by the DOD in accordance with industry standards):

o Architectural & Engineering

o Environmental Surveys & Analyses

o Land Surveys

7 | P a g e 11/6/2018 4:46 PM

Not Eligible: The following are examples of costs that are generally NOT eligible for reimbursement from County funds:

• Leasehold Improvements done by Tenant(s)

• Working Capital

• Legal Fees

• Relocation Costs; (An exception may be made in extraordinary, competitive business attraction circumstances)

• Rolling Stock

• Operational Costs

Deferment/Rejection of Applications The DoD may, after preliminary review and approval from the Director of Development, determine the County is unable to finance a project. When this occurs, staff may suggest alternative options, which may include referrals to other government or economic development agencies, or to private financial institutions. DoD staff shall properly document all determination and/or referrals, including the reason for the rejection and the details of any referral. An applicant may resubmit an application after addressing all issues identified in the original determination.

Due Diligence Once a complete, signed Loan Application is submitted, DoD staff will undertake a financial due diligence review, including basic underwriting, business profit and loss projections, feasibility of the actual physical development of the project, and the long-term operational viability of the project and/or borrower. If an Applicant has received financing from Cuyahoga County DoD prior to the current request for financing, such due diligence shall include a review of the Applicants performance on prior loan obligations to the County.

The DoD may utilize the services of an outside consultant to review a proposal and offer an opinion as to the structure and viability of a complex project. The Applicant will be so advised prior to DoD utilizing such services. Any fees charged by the consultant shall be paid by the Applicant.

Basic Loan Underwriting Standards All loans will be evaluated and ranked by the risk standards outlined in Appendix E. This will be the joint responsibility of the Deputy Chief Economic Development Officer, LPM, and ED Administrator, in conjunction with the assigned loan officer. Internal departmental risk ratings will be incorporated into the write up presented to the Board of Trustees of the Cuyahoga County Community Improvement Corporation (“CCCIC”) as part of its review and utilized to evaluate and monitor a project’s ongoing viability and repayment capacity. The following, without limitation, shall be evaluated as part of the DoD underwriting process.

8 | P a g e 11/6/2018 4:46 PM

Cash Flow / Debt Service Coverage The expected Debt Service Coverage Ratio ("DSCR") for a project must be calculated. The DSCR for borrowers shall be calculated using information from the financial statements provided by the prospective borrower. A minimum DSCR of 1.20 is required, unless a minor deviation from the DSCR is otherwise approved by the Director of Development. In no event shall the DSCR go below 1.0.

Secured Collateral Value All loans shall be collateralized (subject to borrower net worth considerations described below). Collateral valuation calculation must utilize the ratios described below, and must be calculated against County debt and any other debt of equal or senior lien priority.

• Real Estate: For loans secured by real property, prospective borrowers are required to submit an “as-is” and “as-improved” appraisal (prepared by an MAI or State of Ohio state-certified appraiser), and a Phase I environmental audit (prepared by a certified environmental engineer). Secured commercial real estate will be valued at 90% of its MAI or State of Ohio-certified appraised value. Where real property serving as collateral is highly specialized, there shall be an allowance for reduced liquidation value.

• Machinery & Equipment: For loans secured by machinery and/or equipment (“M&E”), prospective borrowers are required to submit appraisals of all such M&E. New secured M&E will be valued at up to 70% of acquisition cost less estimated removal cost. Secured used M&E will be valued at up to 40% of original acquisition cost less depreciation and estimated removal cost. The degree to which M&E will be valued will be based on reasonable staff recommendation.

• Cash Assets: Secured cash assets and borrower-funded debt service reserves will be valued at 100%.

• Non-Cash Financial Assets: Secured non-cash assets will be valued at 90% unless the asset is of a sufficiently speculative nature that it is reasonable to apply a lower ratio. The degree to which non-cash assets will be valued will be based on reasonable staff recommendation.

• Receivables: Secured accounts receivables will be valued at 0%-40% of the lower of current level or last three years average level. No value will be ascribed to subordinated receivable liens. The degree to which receivables will otherwise be valued will be based on reasonable staff recommendation. Maximum value will be ascribed to receivables if a lock-box mechanism is in place.

• Inventory: Secured inventory will be valued at 0%-15% of the lower of current level or last three years average level. No value will be ascribed to subordinated inventory liens. The degree to which inventory will otherwise be valued will be based on reasonable staff recommendation.

9 | P a g e 11/6/2018 4:46 PM

Guarantees The DoD requires personal guarantees of the majority owners of the borrower as a condition of borrowing. The DoD requires corporate guarantees of any parent entity or a related entity of the borrowing entity.

Profitability & Net Worth Considerations If a borrower or corporate guarantor has at least three years of level or upward trending profitability and net worth in excess of 200% of the total project costs, the 100% loan collateralization requirement may, with the approval of CCCIC, be reduced and/or the personal guarantee requirement may be waived or limited.

Minimum Equity Participation The DoD imposes a minimum equity contribution requirement of 10% of total project costs. The County may allow previously incurred costs or expenses for the project as contributing toward the equity contribution per the sole discretion of the Director of Development.

Assuming a project is deemed eligible for County funding following completion of the basic underwriting described above, the DoD loan officer will complete further due diligence including the following, without limitation.

Physical Development Feasibility

Project Cost Analysis As noted above, a prospective borrower must present a detailed project budget and/or pro forma, including a schedule of "uses and sources," as part of the application process. Both the budget and financing shall be examined to ensure that they are realistic and reasonable given current and anticipated market conditions. As part of its review, the DoD shall consider both documented and identifiable costs, as well as estimated costs.

• Documented and identifiable costs include:

o purchase price of real or personal property (as set forth in the Agreement of Sale);

o construction cost estimates set forth in any guaranteed maximum price contract;

o costs set forth in quotes and service agreements;

o financing fees and interest costs.

• Estimated costs shall be evaluated in relation to benchmarks currently applicable in NE Ohio including, without limitation:

o professional cost estimates that are subject to change;

o construction cost benchmarks;

o non-construction cost benchmarks;

10 | P a g e 11/6/2018 4:46 PM

Financing Source Analysis As part of its detailed project budget, a prospective borrower must present a complete schedule of non-County funding sources for its project. The borrower must provide tangible evidence of all non-County funding sources, including, without limitation:

• debt commitments (which may be conditioned on securing County funding);

• Proof of equity, including financial statements and/or tax returns of the borrower and guarantor(s);

Policies Regarding "Non-Cash" Equity, Developer Fees, and Reimbursements: The County shall use the following standards in reviewing and evaluating the value of non-cash equity value.

• Real Property: The value of real property contributions must be substantiated by a current "as-is" appraisal. If the property was recently acquired at a substantially lower price, the County may reject the appraised value in favor of a value comparable to the recent purchase price.

• Guarantees: Secured or unsecured guarantees for County’s loans or other loans have no equity value with respect to County's minimum equity participation standards.

• No Other Reimbursements: The County will not reimburse a borrower for non-cash participation in excess of the minimum equity required for the project (e.g., if a developer contributes land worth $500,000 to a $2 million project, and the minimum equity requirement is 10%, or $200,000, County will not permit the refunding of $300,000 to the developer).

Operational Viability In order to evaluate the operational viability of a project, the DoD shall undertake the following reviews:

Cash Flow Analysis As part of the application, a prospective borrower must present documents that loan officers can utilize to perform quantitative cash flow analyses. Such documents include financial statements and operating projections with assumptions. Depending on the project, either or both financial statement and proforma analysis must be conducted.

Financial Statement Submission Requirements: A prospective borrower must submit three (3) years of prior audited or compiled financial statements. Certain loan programs require the submission of up to five years of CPA-prepared financial statement projections. Refer to the loan program summaries set forth in Appendix A for specific submission requirements.

• Corporate Financial Statement Review: A prospective borrower shall submit for analysis financial statements for the following, without limitation:

• all owners

• all guarantors, including lease guarntors

11 | P a g e 11/6/2018 4:46 PM

• all tenants occupying more than 30% of the project property, if not the borrower

• Personal Financial Statement Review (if applicable): Analysis of personal financial statements and personal tax returns is required.

Proforma Debt Service Coverage Analysis Preliminary budget and proforma analysis is required for all borrowers. The DoD shall undertake the following review and analysis as part of the proforma analysis utilizing one or more of the following revenue analysis methods, or other methods as may be common or applicable to the project:

• Market Benchmark Analysis: A project's potential revenue-generating capacity is best understood by analyzing it with respect to the following researched market benchmarks:

o Revenue / Operating Cost: Market revenue benchmarks typically consist of revenue or operating cost per a given unit of real estate (e.g., a square foot of office or retail space, a parking space, a hotel room, hospital bed, a stadium seat, etc.). Revenue benchmarks are typically available in the relevant, current industry reports.

o Stabilized Occupancy: Occupancy is the market average level of stabilized revenue-generating utilization of a particular real estate facility. [For Real Estate Projects]

o Absorption Rate: Absorption is the rate over time that a project takes to achieve stabilized occupancy levels. [For Real Estate Projects]

• Lease Analysis: The basic terms of the leases shall be reviewed thoroughly to understand the degree to which their structures safeguard project revenue. Key terms to review include:

o Rental Rate, Lease Area;

o Initial Term Length (amortization schedule shall not exceed the initial lease term);

o Step-Ups;

o Operating Costs Pass-throughs;

o Tenant's ability to terminate;

o Lease Guarantees; and

o Tenant Credit.

• Operating Agreement Analysis: Where a project will be operated by an independent operating company under an "operating agreement" and/or "franchise agreement”, all relevant agreements must be reviewed to determine how they impact revenues and operating costs.

• Miscellaneous Revenue Sources: Where a project includes miscellaneous revenue generating components (i.e., parking, retail space, etc.) the income generating potential

12 | P a g e 11/6/2018 4:46 PM

of such components shall be analyzed utilizing the market benchmarks described above.

• Operating Cost Assumptions: Basic operating costs of a project should be estimated utilizing market benchmarks and other research. Data from similar projects in which the County has participated in the past may also be utilized to estimate operating costs.

• Professional Feasibility Studies: Where the DoD determines that market benchmark data and in-house analysis expertise are insufficient to prepare adequate financial projections and conduct proforma analysis, the County shall require a feasibility study to be prepared by an expert third-party professional (e.g., specialized economic development finance expert, appraiser or other qualified consultant, as appropriate). Such a professional should act on an independent basis and should provide appropriate assurances that the feasibility study is reasonable and realistic. Market & feasibility studies are a requirement for consideration of real estate projects. All costs associated with any third-party analysis shall be borne by the applicant.

Approval and Lending Authorities

Loan Review and Approval All satisfactorily completed loan applications and the results of the loan officer’s analysis of the application must be reviewed and recommended by the Board of Trustees of the Cuyahoga County Community Improvement Corporation’s (“CCCIC”) in order to advance to the legislative approval stage. All applications recommended by the CCCIC will then be submitted to either the Cuyahoga County Board of Control (“BOC”) or the Cuyahoga County Council (“Council”) for final legislative approval.

Borrowers must adhere and/or agree to any modifications to the proposed project that are requested by the CCCIC as a condition to submission of its Application for final approval by the County. These modifications must be accurately memorialized in the CCCIC meeting minutes. A copy of these minutes must be maintained in the borrower loan file.

The CCCIC is the primary financial reviewer, collateral reviewer, and oversight mechanism for DoD loan transactions. With few exceptions (e.g., loans for brownfield clean-up projects), loan financing proposals are submitted by DoD staff to the CCCIC Board of Trustees in the form of a loan "Write-up”. A Write-up describes the project and summarize the basic loan terms, address the applicable financial due diligence items, and demonstrate that the project under review meets the basic underwriting criteria as required. The format of the Write-up is more fully described in the Procedures Manual.

The CCCIC meets regularly to review proposed loans. Following review, the CCCIC members vote in accordance with their governing documents whether to recommend, table for additional information, or not recommend a loan for presentation to County Council or the County Board of Control, as applicable, for consideration. Minutes of the CCCIC meetings are maintained by the Greater Cleveland Partnership.

13 | P a g e 11/6/2018 4:46 PM

Term Sheet Upon formal recommendation of a loan and its terms by the CCCIC to the County Council or the BOC, the DoD shall issue a Term Sheet to the applicant, signed by the Directoror the Director’s designee. The Term Sheet shall outline the project parameters, the loan terms, County’s standard loan covenants and policies, and other program-specific requirements, terms and conditions, as set forth in Appendix F. The applicant must acknowledge its understanding and acceptance of the Term Sheet by returning a signed copy of the Term Sheet to the DOD within five business days of its receipt.

Council/BOC Approval After the borrower has signed and returned the Term Sheet, the DoD will present the proposed loan to County Council or the Board of Control, as required by the County Code. Council or the BOC will review and approve, hold for additional information or disapprove the loan request in accordance with applicable policies and procedures.

Terms, Loan Documents & Closing Loan Terms Loan terms are negotiated and agreed upon with a prospective borrower prior to CCCIC Board of Trustees review. Terms are generally dictated by underwriting and due diligence as described above, and the underlying loan program requirements as identified in Appendix A. Each loan shall specify any conditions to disbursement, a due date, the rate of interest, the default rate of interest, the manner late charges are calculated, the grace period for a payment (if any), terms of forgiveness, if any, and the conditions of default. The terms and structure of the loan will be memorialized in the applicable loan documents, as more fully described in the Procedures manual; the loan documents shall include a Workforce Development Agreement (see Exhibit A).

Outside Counsel Selection While the DoD utilizes the Cuyahoga County Law Department as its primary legal counsel to draft legal documents and to prepare for loan closing, larger and more complex transactions (typically investor/developer deals) may require retaining the services of outside legal counsel. The Cuyahoga County Law Department will determine if outside legal counsel is warranted and make the appropriate firm selection. In such an event, the borrower shall sign a letter acknowledging that it will cover all legal costs incurred by the County in connection with the project, regardless of whether or not the loan closes.

Closing A loan must close no later than one year following the date of legislative approval by either the Board of Control or County Council, as applicable, unless closing is otherwise extended by the Director. When a loan has not closed and the loan closing in not extended, funds will be decertified on the one-year anniversary of the date of such approval.

14 | P a g e 11/6/2018 4:46 PM

Loan Disbursements Upon satisfaction of all conditions to disbursement as set forth in the loan agreement, loan proceeds will be disbursed on a reimbursement basis, pursuant to appropriate draw requests submitted by borrower. The County’s preferred method of disbursement is by check.

The County reserves the right to terminate the Loan if the initial disbursement of Loan funds has not occurred within six months of closing.

The County shall not be obligated to disburse any portion of the Loan after six months following the Completion Date, as defined in the Loan Agreement, if funds have not been previously requested by the Borrower.

The County may hold back 5% of the Loan, to be released up Project Completion, as defined in the Loan Agreement.

Disbursement Control DoD staff shall ensure that reimbursement requests are for identified eligible project expenses

Ensuring Maximum Value-Added to Collateral: DoD staff must ensure that the proposed project is being developed with loan proceeds on time and on budget by maintaining regular communication with the borrower and obtaining relevant documentation.

Budget Revisions/Change Orders: The budget and/or construction schedule may change during the construction term. In the event a change occurs please refer to Procedures Manual.

Coordination of Funding Sources: Internal and external funding sources must be coordinated to ensure full equity investment, ensure pro-rata debt investment by the various project lenders, and ensuring that funds are not spent on ineligible items.

Pari-Passu Disbursement: The County and any other lenders may agree to fund on a pari-passu, or pro-rata basis.

Cost Verification and Construction Oversight: The County requires verification of total project cost, not just the costs funded by County, in order to ensure that its funding is being spent on eligible items, that equity has been invested appropriately, and that bank funding is occurring as contemplated in the loan documents. All verified costs must be counted against the appropriate budget areas. Funds will be released only in accordance with the approved budget, with proper documentation; construction inspection reports and other factors may apply.

Records Management All documentation related to the project shall be maintained electronically in the DoD’s Portfol system, including all documents related to the project as a lead (as defined by Portfol and the LPM). In addition, all signed loan documents shall be uploaded to the County’s agenda management system (currently OnBase).

15 | P a g e 11/6/2018 4:46 PM

Portfol Portfol is the department’s project and loan management system of record. All project information, beginning when the project is a “lead” and concluding with loan closing or project termination, shall be entered into Portfol by the development officer responsible for the project. After a lead is converted to a loan in Portfol, Portfol entries can be made by the LPM, only.

All department staff responsible for entering information into Portfol are required to attend periodic Portfol training, as determined by the Director, Deputy Director and LPM. Evidence of participation will be maintained by the LPM.

Job Creation Monitoring and Enforcement All loans and grants requiring job creation and/or retention are to be tracked by the assigned staff within the DoD in accordance with the job-retention and/or creation provisions of the loan or grant agreement, but not less than annually. The results of such monitoring will be entered into Portfol and reported quarterly.

Intake and Accounting of Loan Repayments The LPM and/or assigned staff receive and record all loan repayment checks received by the Department.

Loan Monitoring and Servicing Loans will be monitored by the LPM with respect to loan repayment, maintenance of insurance, updating of collateral including UCC filings, submission of financial statements, and achievement of employment objectives and other covenants/milestones. The Loan Portfolio Manager will report quarterly to the Director and Deputy Chief Economic Development Officer regarding the status of the portfolio; the report will include, without limitation, loans past due more than twice during the previous quarter, loans delinquent more than twice in the previous quarter, and loans in default referred to collection, in accordance with this Policy Manual.

The LPM will invoice the Borrower in accordance with the note. Where interest and principal payments are deferred for more than 12 months, the LPM will provide Borrower a statement semi-annually setting forth amounts accrued, if any, and specifying when payments are to begin.

Delinquency, Default and Loan Workouts (Note: These issues are more fully addressed in the ED Loan Procedures Manual)

Delinquency/Default 10-30 Days past due:

If a repayment is received after the grace period stated in the Note, it is considered late up to and including day 30, at which point applicable late fees will be applied. The LPM may

16 | P a g e 11/6/2018 4:46 PM

provide a written late notice where any payment is not received after the applicable grace period.

31 to 60 Days past due:

Repayments not received on or after 31 days are delinquent and subject to additional collection actions including credit bureau reporting; applicable late fees will be applied. The LPM will provide a written late notice to a borrower where any payment is not received after 31 days after the due date.

61 to 90 Days Delinquent:

A borrower shall be deemed “in default” and receive a default notice where a repayment is received on or after 61 days after the due date in the invoice provided. Subject to any pending work-out negotiation: i) applicable late fees and a default-interest rate, if any, may be applied; and ii) such Borrower may be subject to additional collection actions including, the commencement of appropriate legal action.

91+ Days Delinquency:

If any payment is not received within 90 days of the due date in the invoice provided, the loan file may be forwarded for collection, which may include appropriate legal action, subject to any pending work-out negotiations.

Loan Work-Outs, Write-Offs, and Settlements Requests for loan workouts, restructuring and/or settlements shall be submitted to the LPM for review and recommendation to the Deputy Chief, who will make a recommendation to the Director of Development. Approval of any negotiated work-out or settlement, including, without limitation, any reduction of forgiveness of any principal, interest, or fees, must be approved by the County Executive or the County Executive’s authorized designee. The DoD is not required to apply late fees or default interest rates, or refer a loan for collection, where a borrower is participating in work-out negotiations actively and in good faith, as determined by the Deputy Chief and LPM.

17 | P a g e 11/6/2018 4:46 PM

Waivers of these Policies The waiver of any policy set forth herein shall require the recommendation of the Loan Portfolio Manager and Deputy Chief, and the written approval of the Director of Development.

18 | P a g e 11/6/2018 4:46 PM

Attachments – to be developed

Appendix A DoD ED Products Appendix B Federal Regulations References Appendix C Definitions Appendix D Conflict of Interest Policy Appendix E Risk Rating Appendix F Standard Terms and Conditions Exhibit A Workforce Development Agreement