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EXHIBIT VII
INVESTMENT ADVISORY AGREEMENT
Dated as of October 2, 1997
by and among
STRATEGIC VALUE INVESTORS INTERNATIONAL, LLC,
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA,
STRATEGIC VALUE INVESTORS INTERNATIONAL LTD.,
and
THE PRUDENTIAL INVESTMENT CORPORATION
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INVESTMENT ADVISORY AGREEMENT
THIS INVESTMENT ADVISORY AGREEMENT dated as of October 2, 1997 (this
"Agreement"), is made by and among STRATEGIC VALUE INVESTORS INTERNATIONAL, LLC,
a Delaware limited liability company ("SVI-International" and, together with
Prudential Co-Investor (as defined below) and any entities that become parties
hereto after the date hereof as described in Article 9 of the Operating
Agreement, the "International Fund Entities"), THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA, a New Jersey corporation, (together with its successors and assigns,
"Prudential Co-Investor"), STRATEGIC VALUE INVESTORS INTERNATIONAL LTD., a
Cayman Islands company (the "Manager"), and THE PRUDENTIAL INVESTMENT
CORPORATION, a New Jersey corporation (the "Investment Advisor"), and a wholly
owned subsidiary of The Prudential Insurance Company of America ("Prudential").
Each Person committing capital to any International Fund Entity (each, an
"Investor") will sign an annex to this Agreement ("Annex Number 1") confirming
such Investor's understanding and obligations with regard to the matters set
forth herein and therein.
SECTION 1. Definitions.
As used in this Agreement, the following definitions shall apply,
unless the context requires otherwise:
"Affiliate" means a Person that directly, or indirectly through one
or more intermediaries, controls, or is controlled by, or is under common
control with, a specified Person.
"Agreement" is defined in the preamble.
"Allocated Percentage" means, with respect to any Investor, the
percentage of any Investment Security allocated to such Investor on the books of
any International Fund Entity.
"Base Rate" means, at any date, the prime rate then in effect for
The Chase Manhattan Bank (or, if unavailable, another major money center bank
selected by the Investment Advisor), plus 2% per annum.
"Capital Commitment" means, with respect to any Investor, such
Investor's capital commitment to SVI-International.
"Closing" means a closing of SVI-International.
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"Code" means the Internal Revenue Code of 1986, as amended, together
with the rules and regulations promulgated thereunder.
"Contributed Capital" means, with respect to any Investor at any
date, (1) the aggregate amount of such Investor's Capital Commitment that has
been called and delivered by the Investor, less (2) the sum of (A) the amount of
such Investor's capital contributions returned to the Investor and (B) such
Investor's Allocated Percentage of any realized losses of the International Fund
Entities.
"Distributions" is defined in the Operating Agreement.
"Expenses" is defined in Section 6(a).
"Fund" means SVI-U.S., SVI-International, the co-investment
arrangement with Prudential Co-Investor, any Redemption Vehicle, any redemption
vehicle established in connection with SVI-U.S., and any similar separate or
"side" vehicle formed pursuant to the terms of any of the Other Operating
Agreements or the terms of the operating agreement of SVI-U.S. or of any
redemption vehicle established in connection with SVI-U.S., collectively.
"Fund Entity" means any of SVI-U.S., SVI-International, Prudential
Co-Investor, any Redemption Vehicle, any redemption vehicle established in
connection with SVI-U.S., and any similar separate or "side" vehicle formed
pursuant to the terms of any of the Other Operating Agreements or the terms of
the operating agreement of SVI-U.S. or any redemption vehicle established in
connection with SVI-U.S.
"Fund Investors" means any investor in the Fund.
"Fund Rate" is defined in Section 5(b).
"Indemnitee" is defined in Section 10(a).
"Independent Reviewer" means the Person selected by the Investment
Advisor to act as the independent reviewer for the Fund, including any
replacement or substitute therefor.
"Index Rate" means the NAREIT Equity Index (excluding healthcare
REITs) or, if such rate is unavailable for any period, the S&P REIT Index
(excluding healthcare REITs).
"Initial Closing" is defined in Section 3(e).
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"in Interest" means, with respect to any percentage or fraction, the
Investors voting for or against the related proposal or issue, as the case may
be, expressed in terms of a percentage or fraction of the aggregate Capital
Commitments.
"Interest" means, with respect to any Investor, the interest of such
Investor in the International Fund Entities, measured in terms of such
Investor's Capital Commitment.
"International Fund Entities" is defined in the preamble.
"Investment Advisor" is defined in the preamble.
"Investment Advisor Fee" is defined in Section 5(a).
"Investment Securities" means REIT Shares.
"Investor" is defined in the preamble.
"Manager" is defined in the preamble.
"Memorandum" means the Private Placement Memorandum dated July 1,
1997, relating to SVI-International, as supplemented by General Supplement No. 1
for SVI-International, pertaining to the offering of the Interests.
"Operating Agreement" means the Operating Agreement of
SVI-International dated October 2, 1997.
"Operating Agreements" means the Operating Agreement and the Other
Operating Agreements, collectively.
"Other Operating Agreement" is defined in the Operating Agreement.
"Partnership Units" means partnership interests in REIT
Partnerships.
"Performance Fee" is defined in Section 5(b).
"Performance Fee Determination Date" is defined in Section 5(b).
"Person" means an association, a corporation, an individual, a
limited liability company, a partnership, a trust or any other entity or
organization, including a government or an agency, board, court, department,
official, political subdivision or representative thereof or any other
governmental entity.
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"PIMS" means Prudential Investment Management Services LLC, a
Delaware limited liability company.
"PREI" means Prudential Real Estate Investors, a division of
Prudential.
"Private Investment Securities" means Investment Securities other
than Public Investment Securities.
"Prudential" is defined in the preamble.
"Prudential Co-Investor" is defined in the preamble.
"Public Investment Securities" means publicly traded Investment
Securities that are freely transferrable by SVI-International without further
registration under the Securities Act and shall not include Investment
Securities that are "restricted securities," Investment Securities acquired from
a REIT in circumstances that may cause SVI-International to be treated as a
statutory underwriter in connection with any resale of such securities, or
Investment Securities subject to "lock-up agreements" or other holding periods
(for so long as such restrictions remain effective).
"Quarterly Contributed Capital" means, for any Investor with respect
to any Quarterly Payment Date, the average of such Investor's Contributed
Capital as at the last day of each month ending within the period to which such
Quarterly Payment Date relates.
"Quarterly Payment Date" is defined in Section 5(a).
"Redemption Vehicle" is defined in the Operating Agreement.
"REIT" means any public or private real estate company or real
estate investment trust, whether or not such company qualifies as a real estate
investment trust under applicable provisions of the Code.
"REIT Partnership" means any partnership in which a REIT owns
general partnership interests or other significant partnership interests.
"REIT Shares" means shares of REITs or securities convertible,
exchangeable or exercisable into shares of REITs.
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"Securities Act" means the Securities Act of 1933, as amended,
together with the rules and regulations promulgated thereunder.
"Shortfall Amount" is defined in Section 5(b).
"Standard of Care" is defined in Section 2(b).
"Subsequent Closing" is defined in Section 3(e).
"SVI-International" is defined in the preamble.
"SVI-U.S." means Strategic Value Investors, LLC, a Delaware limited
liability company.
"Unaffiliated Investor" means an Investor other than Prudential or
Prudential Co-Investor.
"Unfunded Commitments" means any Investor Capital Commitments that
have not been called and delivered by such Investor, plus any capital
contribution returned to such Investor pursuant to Section 8.4 of the Operating
Agreement.
SECTION 2. Appointment and Authorization; Standard of Care.
a. Appointment and Authorization. Subject to and in accordance with
the terms of this Agreement, SVI-International, the Manager, Prudential
Co-Investor and any Redemption Vehicle that becomes party hereto, on the one
hand, and the Investment Advisor, on the other, hereby agree that the Investment
Advisor shall and is authorized to provide, on the terms set forth herein, the
services to SVI-International and any such Redemption Vehicle as set forth
herein, for the compensation hereinafter described.
b. Standard of Care. The Prudential Investment Corporation, acting
solely in its capacity as investment advisor hereunder, is acting as a fiduciary
for SVI-U.S. The Investment Advisor shall discharge its duties hereunder solely
in the interests of the Investors and with the care, skill, prudence and
diligence under the circumstances then prevailing that a prudent person acting
in a like capacity and familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims (the "Standard of Care").
c. Reliance on Others. In performing its duties, the Investment
Advisor shall be entitled to rely on information, opinions, reports or
statements, including financial statements and other financial data, of the
following persons or groups unless they have
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knowledge concerning the matter in question that would cause such reliance to be
unwarranted and provided that the Investment Advisor acts in good faith:
i. one or more employees or other agents of Investment Advisor
whom the Investment Advisor reasonably believes to be reliable and
competent in the matters presented; or
ii. any attorney, independent accountant, valuation
consultant, or other person as to matters that the Investment Advisor
reasonably believes to be within such person's professional or expert
competence.
SECTION 3. Duties of the Investment Advisor.
a. Services to be Provided. Subject to the approval of the Manager,
the Investment Advisor shall evaluate, structure and cause SVI-International to
consummate investments; facilitate the transfer of Investment Securities to
Redemption Vehicles formed by the Manager and SVI-International; engage the
Independent Reviewer; select any substitute or replacement Independent Reviewer
(subject to Section 3(d)); coordinate reviews by the Independent Reviewer;
manage the International Fund Entities' portfolio of Investment Securities;
effectuate borrowings and repayment of borrowings by Redemption Vehicles in
accordance with the terms hereof and of the Operating Agreement; cause the
dissolution of any vehicle constituting one of the International Fund Entities
as permitted under this Agreement and the applicable operating agreement of such
vehicle; value the Investment Securities held by the International Fund
Entities; and take such actions as are necessary and appropriate to execute the
investment objectives of the International Fund Entities and to fulfill the
obligations of the Investment Advisor as set forth herein, as referenced in the
Operating Agreement and/or as described in the Memorandum, including, without
limitation, actions in connection with the borrowing of funds and the
acquisition and disposition of Investment Securities.
b. Authority to Bind International Fund Entities. Unless revoked by
the Manager, in its sole discretion, the Investment Advisor shall have a power
of attorney pursuant to which it may execute on behalf of any International Fund
Entity, all documentation necessary or appropriate to the investigation,
acquisition, holding and disposition of Investment Securities and the borrowing
of money. Nothing in this Agreement shall be deemed to create a joint venture or
partnership between the parties with respect to the arrangements set forth in
this Agreement. For all purposes herein, the Investment Advisor shall be deemed
to be an independent contractor and independent agent, and shall act as an
independent agent in all activities undertaken with respect to the Manager and
the International Fund Entities.
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c. All Investments Require Manager's Written Approval. The Manager's
specific consent and approval in writing shall be required for all Investments
made by SVI-International. SVI-International shall not make any Investment for
which such consent and approval has not been obtained in accordance with the
policies of the Manager for giving such consent and approval.
d. Independent Reviewer.
i. The initial Independent Reviewer will be Houlihan, Lokey,
Xxxxxx & Xxxxx Financial Advisors Inc.
ii. If the Person serving as the Independent Reviewer ceases
to so serve or is unable (as a result of a conflicts of interest or
otherwise) to act with respect to any proposed investment, the Investment
Advisor shall select a replacement or substitute Independent Reviewer, as
the case may be, which replacement or substitute shall be a Person with
significant experience in the valuation, acquisition and trading of equity
securities, including securities similar to the Investment Securities
intended to be acquired by SVI-International, and shall be independent of,
and unaffiliated with, Prudential. The Investment Advisor shall give
written notice of such replacement or substitute to the Investors. Such
replacement or substitute Independent Reviewer will be deemed approved by
the Investors unless one-third or more in Interest of the Unaffiliated
Investors object in writing to such proposed replacement or substitute
within 15 days after notice with respect thereto is sent to the Investors.
Any replacement or substitute Independent Reviewer will be engaged on
terms and conditions substantially similar to those on which the initial
Independent Reviewer was engaged.
e. Closings.
i. At the direction of the Manager, the Investment Advisor
shall take such steps as may be necessary to facilitate the consummation
by SVI-International of an initial closing (the "Initial Closing") subject
to receipt of Capital Commitments from Fund Investors other than
Prudential totaling $76.5 million or more.
ii. If at the Initial Closing, the Fund shall not have
received $510 million in Capital Commitments from Fund Investors other
than Prudential, at the direction of the Manager, the Investment Advisor
shall take such steps as may be necessary to facilitate the consummation
by SVI-International of subsequent Closings (each, a "Subsequent Closing")
during the next 12 months at which additional Interests may be purchased
and Capital Commitments delivered, until $510 million in Capital
Commitments have been obtained from Fund Investors other than Prudential.
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iii. Investors acquiring Interests at a Subsequent Closing
shall be required to purchase Interests in accordance with Section 8.4 of
the Operating Agreement and to pay the expenses therein set forth and the
fees herein set forth.
iv. Subsequent Closings may involve the purchase by
SVI-International of Investment Securities from SVI-US or the sale by
SVI-International of Investment Securities to SVI-US in order to generally
maintain the proportional relationship between SVI-US and
SVI-International.
v. The amount contributed to SVI-International at any
Subsequent Closing will be distributed to the Investors admitted to
SVI-International prior to such Subsequent Closing ratably in proportion to
their Capital Commitments; provided that the Investment Advisor may direct a
portion of such amounts to instead be paid to SVI-International in order to
equitably allocate costs and expenses of SVI-International and SVI-US.
f. Valuations. The Investment Advisor shall value Investment
Securities quarterly for reporting purposes, and as and when necessary for other
purposes.
i. The Investment Advisor shall value Public Investment
Securities and any short-term marketable securities without discounts for
liquidity, block size or otherwise, at the average closing sales price for
such security for the five trading days prior to the valuation date, as
published in The Wall Street Journal.
ii. The Investment Advisor shall value Private Investment
Securities based on the value given to such Private Investment Securities
by Prudential's Comptroller's Department, Institutional Valuation Unit.
Absent known material circumstances, the Investment Advisor may base
valuation of such Private Investment Securities on valuations made by
third party appraisers or market participants, recent trades of securities
determined by the Investment Advisor to be substantially similar for such
purposes and other customary methods of valuing private or illiquid
securities; provided that Partnership Units, which are, or are expected to
become exchangeable for Public Investment Securities will be valued at the
value of such Public Investment Securities. Valuations of private
companies and their real estate are subject to numerous and various
assumptions and limitations. Many different individual assumptions may be
supportable and reasonable, but the interplay between different
assumptions, or the use of different accepted methodologies, may produce
different estimates of value for the same company or property. Valuations
should be considered only estimates of value, and not a measure of
realizable value, and are subject to change with the passage of time.
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x. XXXX to Fulfill Duties. The Investment Advisor will fulfill its
responsibilities hereunder through PREI. In addition, the Investment Advisor and
PREI may arrange to have certain services the Investment Advisor is obligated to
provide performed by Prudential or any of its Affiliates. With the consent of
the Manager, the Investment Advisor may also assign its rights and obligations
under this Agreement to another entity that is wholly owned, directly or
indirectly, by Prudential, or to Prudential, so long as the personnel
responsible for providing such services are not substantially changed, such
assignee is a registered investment advisor, and such assignee is an independent
agent with respect to the International Fund Entities.
h. Other Service Providers. With the consent of the Manager, the
Investment Advisor may from time to time engage other service providers,
including securities advisors, consultants, architects, engineers, appraisers,
legal and accounting firms, custodians, and transfer agents. Each service
provider shall be compensated by the International Fund Entities in such
proportions, on such terms and at such rates as the Investment Advisor deems
appropriate in light of the services provided subject to the consent of the
Manager. The Investment Advisor may engage Affiliates or utilize in-house staff
of Prudential or any of its Affiliates as service providers; provided that (i)
the Investment Advisor reasonably believes that engaging an Affiliate or
utilizing in-house staff of Prudential or its Affiliate is in the best interests
of the International Fund Entities; (ii) the compensation of such Affiliate or
in-house staff of Prudential or its Affiliate is comparable to that charged by
unaffiliated third parties for similar services; and (iii) the Investment
Advisor notifies the Investors of the retention of such an Affiliate or the use
of in-house staff.
SECTION 4. Investments of the International Fund Entities.
a. Permitted Investments. Proceeds from draws on Capital Commitments
and co-investment by the Prudential Co-Investor may be invested in REIT Shares
and Partnership Units in connection with, or incidentally to, the sale of real
estate by Prudential to the relevant REITs or the contribution of real estate by
Prudential to related REIT Partnerships, and, in each case, in a manner
consistent with the Memorandum.
b. Proportionate Investment. It is the intention of the Investment
Advisor that investments of SVI-International and SVI-U.S. will be made in
parallel in Investment Securities so that, to the extent practicable, Fund
Investors will each participate in investments in Investment Securities in
proportion to their Capital Commitments.
c. Fairness Opinion. Before the acquisition by SVI-International of
Investment Securities of a REIT, SVI-International shall have received a
fairness opinion with respect to the terms and conditions of such proposed
acquisition from the Independent Reviewer.
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d. Investment Restrictions. A substantial majority of the
International Fund Entities' investments shall be in entities that qualify for
taxation as real estate investment trusts (as defined in Section 856 of the
Code). International Fund Entities shall not acquire more than 40% in the
aggregate of the Investment Securities of any one REIT and its related REIT
Partnerships. Any Partnership Units to be acquired by International Fund
Entities shall be acquired and held solely by Prudential Co-Investor.
e. Allocation of Expenses. The Investment Advisor shall cause
investments and expenses to be allocated between the International Fund Entities
(subject to Section 6), on the one hand, and the U.S. Fund Entities, on the
other, pro rata in accordance with aggregate capital commitments or
contributions, as appropriate.
f. Sale of Investment Securities Prior to Termination. The
Investment Advisor shall, prior to the termination of this Agreement, endeavor
to identify opportunities for the sale, for cash, of all Private Investment
Securities; provided, however, that such Investment Securities not theretofore
sold or disposed of will be distributed in kind to the applicable Investors on a
pro rata basis as is appropriate.
g. Co-Investment by Prudential Co-Investor. Whenever the Investment
Advisor proposes that SVI-International make an investment in Investment
Securities and the Manager approves such investment, the Prudential Co-Investor
shall acquire and hold an amount of the pertinent Investment Securities and/or
Partnership Units issued by affiliates of the issuer of such Investment
Securities such that the Investment Securities and/or Partnership Units held by
Prudential Co-Investor shall at all times equal 49% of the sum of the amount of
Investment Securities acquired by SVI-International and the amount of Investment
Securities and Partnership Units acquired by Prudential Co-Investor (in each
case valued on the basis of the price established in the pertinent investment
transaction).
SECTION 5. Compensation.
a. Investment Advisor Fee. Each Investor shall pay to the Investment
Advisor a fee (the "Investment Advisor Fee") based on such Investor's
Contributed Capital from time to time. The Investment Advisor Fee shall be
payable quarterly in arrears on the last day of each calendar quarter (each a
"Quarterly Payment Date") or, if such day is not a business day, the next
succeeding business day. The amount due on each Quarterly Payment Date will be
equal to one-fourth of the sum of (i) 60 basis points times the amount of such
Investor's Quarterly Contributed Capital not in excess of $50 million as at such
date; (ii) 50 basis points times the amount of such Investor's Quarterly
Contributed Capital in excess of $50 million but not in excess of $100 million
as at such date; and (iii) 40 basis points times the amount of such Investor's
Quarterly Contributed Capital in excess of $100 million as at such date. If the
Investment Advisor Fee has not been paid within 30 days of
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the applicable Quarterly Payment Date the pertinent Investor shall be deemed to
be a "Defaulting Member" within the meaning of Section 8.3 of the Operating
Agreement.
b. Performance Fee.
i. Each Investor shall pay to the Investment Advisor a fee
(the "Performance Fee") based upon such Investor's return on its
investment. The Performance Fee shall be payable by an Investor on the
date of (a) any actual or deemed Distribution (other than a Distribution
made in connection with a Subsequent Closing) to such Investor of cash
proceeds from the sale of Investment Securities by any International Fund
Entity and (b) any Distribution of Investment Securities to such Investor
by any International Fund Entity (any such date, a "Performance Fee
Determination Date").
ii. The Performance Fee with respect to any Investor will be
equal to the sum of (a) 20% of the relevant Investor's return (after
costs, expenses and the Investment Advisor Fee but before the Performance
Fee) in excess of the return such Investor would have realized had such
Investor's Capital Contributions been invested at the Index Rate and (b)
an additional 10% of the relevant Investor's return (after costs, expenses
and the Investment Advisor Fee but before the Performance Fee) in excess
of the return such Investor would have realized had such Investor's
Capital Contributions been invested at a rate equal to the Index Rate plus
500 basis points.
iii. On each Performance Fee Determination Date with respect
to any Investor, the Performance Fee will be determined with respect to
any Investment Securities distributed on such date and any Investment
Securities proceeds with respect to which are distributed or deemed
distributed on such date. The Performance Fee will be determined by (a)
future valuing to the Performance Fee Determination Date, at the Index
Rate, each Capital Contribution made by the relevant Investor with respect
to the pertinent Investment Securities; (b) future valuing to the
Performance Fee Determination Date, at the Index Rate plus 500 basis
points, each capital contribution made by the relevant Investor with
respect to the pertinent Investment Securities; (c) future valuing to the
Performance Fee Determination Date, at the Index Rate, the amount of any
Shortfall Amount in respect of the prior Performance Fee Determination
Date, and (d) future valuing to the Performance Fee Determination Date, at
the Fund Rate, each distribution or deemed distribution (other than any
distribution that itself triggered a Performance Fee Determination Date)
made to the relevant Investor with respect to the pertinent Investment
Securities. The Performance Fee will equal the sum of (i) 20% of the
amount, if any, by which (I) the sum of the distribution being made in
respect of the pertinent Investment Securities on the Performance Fee
Determination Date plus the amount described in clause (d) above exceeds
(II) the sum of the amounts described in clauses (a) and (c) above; plus
(ii) 10% of the amount, if any, by which (III) the
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sum of the distribution being made in respect of the pertinent Investment
Securities on the Performance Fee Determination Date plus the amount
described in clause (d) above exceeds (IV) the sum of the amounts
described in clauses (b) and (c) above. If on any Performance Fee
Determination Date the amount described in clause (II) above exceeds the
amount described in clause (I) above, no Performance Fee will be due and
such excess will be carried forward to the next Performance Fee
Determination Date as a "Shortfall Amount." If on the last Performance Fee
Determination Date with respect to any Investor, there exists a Shortfall
Amount the Investment Advisor will rebate to such Investor, without
interest, an amount of Performance Fees previously paid to the Investment
Advisor with respect to such Investor equal to the lesser of the amount of
such Shortfall Amount and the amount of such Performance Fees previously
paid. For the purposes of calculating the Performance Fee, (x) the "Fund
Rate" shall mean the aggregate internal rate of return earned (i) in the
case of Prudential Co-Investor, by Prudential Co-Investor's investments
and (ii) in the case of any other investment by the International Fund
Entities, by such investments, in either case, through the applicable
Performance Fee Determination Date, assuming a sale of all such
investments for their respective fair market values as of such date and
monthly compounding and (y) any distribution that was in fact reduced by
the withholding of a payment of the Investment Advisor Fee will be treated
as having been so reduced, and any payment of the Investment Advisor Fee
made directly by the pertinent Investor and not previously treated as a
reduction of a distribution pursuant to this clause will be subtracted
from the amount of the distribution being made on the Performance Fee
Determination Date.
iv. All future value computations shall be made using monthly
compounding and the actual number of days elapsed in each month.
v. If the Performance Fee has not been paid within 30 days the
pertinent Investor shall be deemed to be a "Defaulting Member" within the
meaning of Section 8.3 of the Operating Agreement.
vi. Notwithstanding the foregoing, if, on the last Performance
Fee Determination Date with respect to any Investor, the aggregate amount
of capital contributed, and fees paid, by such Investor exceeds the sum of
the aggregate amount of cash and the value of all property actually
distributed to such Investor, the Investment Advisor will rebate to such
Investor Performance Fees previously paid by such Investor in an amount
equal to the lesser of (y) such excess and (z) Performance Fees received
by the Investment Advisor from such Investor.
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c. Invoices. The Investment Advisor will provide each Investor with
an invoice for each of the Investment Advisor Fee and the Performance Fee due
from such Investor reflecting any amounts not deducted from Distributions. Each
invoice shall reflect the amount of the Investment Advisor Fee or Performance
Fee, as the case may be, that has been paid up to the date of such invoice. Any
amount that has not been deducted as reflected in any such invoice and that is
not paid within 10 days of the date of such invoice shall bear interest at the
Base Rate.
SECTION 6. Expenses.
a. Expenses of the International Fund Entities. Each of the
International Fund Entities shall bear its share of organizational costs and
expenses and the International Fund Entities, collectively, shall bear their
share of all costs and expenses of operating the Fund. The costs and expenses
associated with operating the Fund (collectively, "Expenses") will include,
without limitation, (i) costs and expenses of meetings of Investors, and of
preparing, printing and mailing reports to Investors and of amending
organizational documents when necessary; (ii) brokers' commissions and fees of
transfer agents chargeable in connection with any securities transactions; (iii)
fees and expenses of service providers, whether affiliated with Prudential or
not, including, without limitation, securities advisors, attorneys (including,
without limitation, SVI-International's share of a one time fee of $15,000.00 to
reimburse PREI for the cost of its in-house counsel for services in connection
with creation of Fund), accountants, appraisers, contractors, architects,
engineers, consultants, insurance consultants, custodians and other agents; and
(iv) to the extent not included in the foregoing or paid out of other sources,
the costs and expenses connected with the acquisition, disposition and ownership
of the Investment Securities, and the termination of the International Fund
Entities. All such Expenses shall be allocated among International Fund Entities
and among Investors in accordance with the following principles: (1) Expenses
that relate to a particular International Fund Entity or to the Investment
Securities held thereby shall be allocated to such International Fund Entity and
to the Investors therein in proportion to their Allocated Percentages therein at
the time the Expense is incurred; (2) Expenses that relate to unconsummated
investment transactions shall be allocated to SVI-International and to the
Investors therein in proportion to their Allocated Percentages; and (3) Expenses
that relate to the Independent Reviewer shall be allocated to the Unaffiliated
Investors in proportion to their Allocated Percentages.
b. Expenses of the Investment Advisor and Administrative Services.
At its expense, the Investment Advisor, Prudential and/or PREI, shall pay the
compensation of their respective employees who provide services to the Fund,
including, without limitation, administration and portfolio management services,
provide adequate office space and any necessary office furnishings and
equipment, together with telephone service, heat, utilities, supplies and
similar miscellaneous office expenses and shall provide other necessary items of
an overhead and administrative nature.
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SECTION 7. Conflicts; Waiver.
The Investment Advisor and its Affiliates or associates or any of
their legal, financial or other advisors shall in no way be prohibited from, and
intend to, spend substantial time in connection with other businesses or
activities for third parties unrelated to SVI-International, including, but not
limited to, managing investments, advising or managing entities whose investment
objectives are the same as or overlap with those of the Fund, participating in
actual or potential investments of the Fund, providing consulting, merger and
acquisition, structuring or financial advisory services, including with respect
to actual, contemplated or potential investments of the Fund, or acting as a
director, officer or creditors' committee member of, adviser to, or participant
in, any corporation, partnership, trust or other business entity. The Investment
Advisor and its Affiliates or associates or any of their legal, financial or
other advisors may, and expect to, receive fees or other compensation from third
parties for such activities, which fees will be for the benefit of their own
account and not the Fund. Such fees may relate to actual, contemplated or
potential investments of the Fund and may be payable by entities in which the
Fund directly or indirectly, has invested or contemplates investing. Each
International Fund Entity and each Investor waives any and all rights of any
nature whatsoever that any such Person may have to object to or participate or
any such activity.
SECTION 8. Representations and Warranties of the Investment Advisor.
The Investment Advisor hereby represents and warrants to
SVI-International as of the date hereof as follows:
a. The Investment Advisor is a corporation, duly incorporated
and validly existing under the laws of the State of New Jersey, has
the full power and authority to transact the business in which it is
presently engaged and is duly qualified under the laws of each
jurisdiction where the conduct of its business requires, or the
performance of its obligations under this Agreement would require,
such qualification.
b. The Investment Advisor has full corporate power and
authority and has obtained all necessary authorization to execute,
deliver and perform this Agreement on the terms and conditions
hereof. No consent of any other Person and no license, permit,
approval or authorization of, exemption by, notice or report to, or
registration, fling or declaration with, any governmental authority
is required by the Investment Advisor in connection with this
Agreement or the execution, delivery, performance, validity or
enforceability hereof. This Agreement constitutes the legal, valid
and binding obligation of the Investment Advisor enforceable against
the Investment Advisor in accordance with its terms, subject to
bankruptcy, insolvency moratorium or
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similar laws affecting generally the enforcement of creditors'
rights and general equitable principles.
c. The Investment Advisor's execution, delivery and
performance of this Agreement and any documents and instruments
required hereunder shall not violate any provision of any existing
law or regulation binding on the Investment Advisor, or any order,
judgment, award or decree of any court, arbitrator or governmental
authority binding on the Investment Advisor, or of any mortgage,
indenture, lease, contract or other agreement, instrument or
undertaking to which the Investment Advisor is a party or by which
the Investment Advisor or any of its assets may be bound, and shall
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.
d. SVI-International is a limited liability company, duly
formed and validly existing under the laws of the State of Delaware,
has the full power and authority to transact the business in which
it is presently engaged and is duly qualified under the laws of each
jurisdiction where the conduct of its business requires or the
performance of its obligations would require, such qualification.
e. The Manager has full power and authority and has obtained
all necessary authorization to execute, deliver and perform the
Operating Agreement on the terms and conditions thereof. No consent
of any other Person and no license, permit, approval or
authorization of, exemption by, notice or report to, or
registration, fling or declaration with, any governmental authority
is required by the Manager in connection with the Operating
Agreement or the execution, delivery, performance or validity
thereof. The Operating Agreement constitutes the legal, valid and
binding obligation of the Manager enforceable against the Manager in
accordance with its terms, subject to bankruptcy, insolvency
moratorium or similar laws affecting generally the enforcement of
creditors' rights and general equitable principles.
f. The Manager's execution, delivery and performance of the
Operating Agreement and any documents and instruments required
hereunder shall 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 government authority binding on
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, and
shall 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
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such mortgage, indenture, lease, contract or other agreement,
instrument or undertaking.
SECTION 9. Liability of the Investment Advisor.
Except as otherwise required by law, the Investment Advisor and any
of its Affiliates, directors, officers, employees, shareholders, assigns,
representatives or agents shall not be liable, responsible or accountable in
damages or otherwise to the Fund or any Investor for any loss, liability,
damage, settlement cost, or other expense (including attorneys' fees) incurred
by reason of any act or omission or any such alleged act or omission performed
or omitted by such Person (including those in connection with serving on boards
of directors for companies in the Fund's portfolio) if such Person acted in a
manner consistent with the Standard of Care.
SECTION 10. Indemnification.
a. Indemnity. To the fullest extent permitted by applicable law, the
Investment Advisor, PIMS, PREI, the Independent Reviewer and any of their
respective officers, directors, agents, stockholders, partners, members,
employees, other Affiliates, and any other Person who serves at the request of
the Investment Advisor on behalf of any of the International Fund Entities (each
such Person being an "Indemnitee") shall be held harmless and be indemnified by
the International Fund Entities for any liability, loss (including amounts paid
in settlement), damages or expenses (including, without limitation, reasonable
attorneys' fees and disbursements) incurred by such Indemnitee on behalf of the
International Fund Entities or in furtherance of the interests of the
International Fund Entities or otherwise arising out of, or in connection, with
the International Fund Entities; provided, that such Indemnitee acted in a
manner consistent with the Standard of Care.
b. Advances. To the fullest extent permitted by law, expenses
(including, without limitation, legal fees) incurred by an Indemnitee in
defending any claim, demand, action, suit or proceeding shall, from time to
time, be advanced by the International Fund Entities prior to the final
disposition of such claim, demand, action, suit or proceeding upon receipt by
the International Fund Entities of an undertaking by or on behalf of the
Indemnitee to repay such amount if it shall be determined that the Indemnitee is
not entitled to be indemnified as authorized in this Section 10.
c. Limitation on Liability. The individual indemnity obligation of
each Investor will be limited to (i) the lesser of the aggregate of: (x) such
Investor's Unfunded Commitments; (y) Distributions (including Distributions in
redemption) previously made to such Investor; and (z) the Investor's Interest in
the International Fund Entities or (ii) such Investor's Capital Commitment.
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SECTION 11. Term of Agreement; Survival of Certain Terms.
a. Initial Term. Unless terminated in accordance with its terms this
Agreement shall remain in effect with respect to each International Fund Entity
until the termination of such International Fund Entity.
b. Termination. This Agreement may be terminated at any time with or
without cause upon 90 days' prior written notice (i) by SVI-International, (upon
the vote of a majority in Interest of the Unaffiliated Investors therein) or
(ii) by the Investment Advisor (but in the latter case only if this Agreement is
so terminated with respect to all International Fund Entities). Upon such
termination, the Investment Advisor shall be entitled to receive all
compensation it has earned through the effective date of such termination,
including any accrued but unpaid Investment Advisor Fee and Performance Fee.
c. Survival. Notwithstanding anything herein to the contrary,
Sections 5, 6, 10 and 11 of this Agreement shall survive any termination hereof.
SECTION 12. Notices.
Unless expressly provided otherwise herein, all notices, requests,
demands and other communications required or permitted under this Agreement
shall be in writing (including by telecopy) and shall be deemed to have been
duly given, made and received when delivered against receipt or upon actual
receipt of registered or certified mail, postage prepaid, return receipt
requested, or, in the case of telecopy notice, when received in legible form,
addressed as set forth below:
If to SVI-International or the Manager:
Strategic Value Investors International Ltd.
c/x Xxxxxx (Cayman) Limited
Coutts House
P.O. Box 707
Grand Cayman, B.W.I.
Attention: Xxxxxx Xxxxxxxx
Fax: (000) 000-0000
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with a copy to:
Prudential Real Estate Investors
0 Xxxxxx Xxxxx, 0xx Xxxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000-0000
Attention: SVI Portfolio Manager
Fax: (000) 000-0000
and to:
O'Melveny & Xxxxx LLP
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxxxx X. Xxxxx, Esq.
Fax: (000) 000-0000
If to the Investment Advisor or the Prudential Co-Investor:
Prudential Real Estate Investors
0 Xxxxxx Xxxxx, 0xx Xxxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000-0000
Attention: SVI Portfolio Manager
Fax: (000) 000-0000
with a copy to:
O'Melveny & Xxxxx LLP
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxxxx X. Xxxxx, Esq.
Fax: (000) 000-0000
Any party may alter the address or telecopy number to which
communications or copies are to be sent by giving notice of such change of
address in conformity with the provisions of this Section 12 for the giving of
notice.
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SECTION 13. Amendments; Waivers.
This Agreement may be amended only by agreement in writing of the
Investment Advisor and a majority in Interest of the Unaffiliated Investors,
provided that any amendment that materially adversely affects the Investors
shall require the approval of at least two-thirds in Interest of the
Unaffiliated Investor, and provided further that no such amendment shall be
effective if the Investment Advisor reasonably determines that such amendment
could reasonably be expected to materially adversely affect the Fund taken as a
whole. The Investment Advisor shall cause the effectuation of any such amendment
duly approved by the appropriate Investors. Except as otherwise provided herein,
no waiver of any provision nor consent to any exception to the terms of this
Agreement shall be effective unless in writing and signed by the party to be
bound and then only to the specific purpose, extent and instance so provided. No
failure on the part of any party to exercise or delay in exercising any right
hereunder shall be deemed a waiver thereof, nor shall any single or partial
exercise preclude any further or other exercise of such or any other right.
SECTION 14. Governing Law.
This Agreement shall be governed by, and construed in accordance
with, the laws of the State of New York, without regard to conflict of law
principles.
SECTION 15. Assignment.
Neither this Agreement nor any rights or obligations under it are
assignable, except that the Investment Advisor may assign its obligations
hereunder as set forth in Section 3(h).
SECTION 16. Headings.
The descriptive headings of the Articles, Sections and subsections
of this Agreement are for convenience only and do not constitute a part of this
Agreement.
SECTION 17. Parties in Interest.
This Agreement shall be binding upon and inure to the benefit of
each party and their respective permitted successors and assigns, and nothing in
this Agreement, express or implied, is intended to confer upon any other person
any rights or remedies of any nature whatsoever under or by reason of this
Agreement, except that the Investors shall be third party beneficiaries hereof.
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SECTION 18. Consent to Jurisdiction and Litigation.
All litigation relating to or arising under or in connection with
this Agreement shall be brought only in the federal or state courts of competent
jurisdiction located in the State and County of New York, which shall have
exclusive jurisdiction to resolve any disputes with respect to this Agreement.
By execution and delivery of this Agreement, each party hereto irrevocably and
unconditionally consents to the jurisdiction of such courts for any actions,
suits or proceedings arising out of or relating to this Agreement. The parties
hereto irrevocably waive any obligation of the laying of venue or based on the
grounds of forum non conveniens that it may now or hereafter have to the
bringing of any action or proceeding in such jurisdiction. No party hereto shall
be entitled to immunity whatsoever, whether characterized as sovereign immunity
or otherwise, from any legal proceedings to enforce the obligations hereunder.
Subject to Section 10, in the event of any breach of the provisions of this
Agreement, the non-breaching party shall be entitled to equitable relief,
including in the form of injunctions and orders for specific performance, where
the applicable legal standards for such relief in such courts are met, in
addition to all other remedies available to the non-breaching party with respect
thereto at law or in equity.
SECTION 19. Attorney's Fees.
In the event of any action for the breach of this Agreement or
misrepresentation by any party, the prevailing party shall be entitled to
reasonable attorney's fees, costs and expenses incurred in such action.
SECTION 20. Representation By Counsel.
Each party hereto acknowledges that such party to this Agreement has
been represented by counsel in connection with this Agreement and the
transactions contemplated by this Agreement. Accordingly, any rule of law or any
legal decision that would require interpretation of any claimed ambiguities in
this Agreement against the party that drafted it has no application and is
expressly waived.
SECTION 21. Interpretation.
The provisions of this Agreement shall be interpreted in a
reasonable manner to effect the intent of the parties hereto. Any of the terms
used herein may, unless the context otherwise requires be used in the singular
or the plural depending on the reference. All words or terms used in this
Agreement, regardless of the number or gender in which they are used, shall
include any other number or gender, as the context may require. Further,
"hereof," "herein," "hereunder," "hereto," "this Agreement" and comparable terms
refer to the entire instrument, including any exhibits or schedules to the
instrument, and not to any particular article, section or other subdivision of
the instrument. All references to SVI-International shall include all parallel
or subsidiary vehicles including Redemption
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Vehicles, if any, that may be utilized. In such circumstances, references to the
Operating Agreement shall be deemed to include references to the applicable
Other Operating Agreements. References to actions to be taken by any
International Fund Entity shall mean such actions to be taken by the Investment
Manager on behalf of such International Fund Entity or, if applicable, to the
Investment Manager causing such International Fund Entity to take such action,
unless the context clearly requires otherwise.
SECTION 22. Further Assurances.
Each party agrees to execute and deliver (or to cause the execution
and delivery of) such further instruments and to do such further acts as the
Investment Advisor deems necessary or advisable to better effectuate this
Agreement.
SECTION 23. Severability.
If any provision of this Agreement is determined to be invalid,
illegal or unenforceable by any court of competent jurisdiction or other
governmental entity, the remaining provisions of this Agreement to the extent
permitted by law shall remain in full force and effect provided that the
essential terms and conditions of this Agreement for all parties remain valid,
binding and enforceable; provided that the economic and legal substance of the
transactions contemplated is not affected in any manner materially adverse to
any party. In event of any such determination, the parties agree to negotiate in
good faith to modify this Agreement to fulfill as closely as possible the
original intents and purposes hereof. To the extent permitted by law, the
parties hereby to the same extent waive any provision of law that renders any
provision hereof prohibited or unenforceable in any respect.
SECTION 24. Counterparts.
This Agreement may be executed in any number of counterparts by
facsimile or other written form of communication, each of which shall be deemed
to be an original as against any party whose signature appears thereon, and all
of which shall together constitute one and the same instrument. This Agreement
shall become binding when one or more counterparts hereof, individually or taken
together, shall bear the signatures of all of the parties reflected hereon as
the signatories.
SECTION 25. WAIVER OF JURY TRIAL.
EACH PARTY HERETO, BY EXECUTION AND DELIVERY OF THIS AGREEMENT,
HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH.
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Investment Advisory Agreement to be executed by its duly authorized officers as
of the day and year first above written.
STRATEGIC VALUE INVESTORS
INTERNATIONAL, LLC
By: Strategic Value Investors International Ltd.
Its: Manager
By: /s/ XXXXXXX XxXXXX
-------------------------------
Name: Xxxxxxx XxXxxx
Title: Vice President
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By: /s/ XXXXX X. XXXXX
-------------------------------
Name: Xxxxx X. Xxxxx
Title: Vice President
STRATEGIC VALUE INVESTORS
INTERNATIONAL LTD.
By: /s/ XXXXXXX XxXXXX
-------------------------------
Name: Xxxxxxx XxXxxx
Title: Vice President
THE PRUDENTIAL INVESTMENT CORPORATION
By: /s/ XXXXXX X. XXXXXXXX
-------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Vice President
S-1
24
ANNEX NUMBER 1 TO INVESTMENT ADVISORY AGREEMENT
Date: ______________, 199__
The undersigned acknowledges and agrees as follows:
1. This Annex Number 1 is part of the Investment Advisory Agreement dated
October 2, 1997, to which it is attached.
2. The undersigned is a party to and a "Member" under the Operating Agreement
and or one or more Other Operating Agreements, and its notice address for
purposes hereof it as set forth thereunder.
3. The undersigned has reviewed this Annex Number 1 and the Investment
Advisory Agreement and is represented by counsel in connection therewith.
4. The undersigned will pay the Investment Advisor Fee and the Performance
Fee in accordance with the Investment Advisory Agreement.
5. The Investment Advisor may deduct or withhold from Distributions to the
undersigned any amounts payable by the undersigned in respect of any fees
or expenses relating to the Investment Advisory Agreement.
6. No Indemnitee shall be liable to the undersigned and the undersigned shall
indemnify each Indemnitee, all as set forth in Section 14 of the
Investment Advisory Agreement, and the Investment Advisor may deduct,
withhold or make capital calls for any amounts payable by the undersigned
in respect thereof.
7. The undersigned shall fulfill any other obligations it may have under
Sections 9, 10 or 14 of the Investment Advisory Agreement.
8. This Annex Number 1 shall survive the termination of the Investment
Advisory Agreement.
9. Appointment of Investment Advisor as Attorney-in-Fact: The undersigned
constitutes and appoints the Investment Advisor, and any replacement or
substitute Investment Advisor, as the undersigned's true and lawful
attorney-in-fact and agent, with full power and authority in the
undersigned's name, place and stead and to take all actions as are
necessary and appropriate to fulfill the duties of Investment Advisor as
referenced in the Investment Advisory Agreement
A-1
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and the Operating Agreement and/or as described in the Memorandum,
including, without limitation, actions in connection with the borrowing of
funds and the acquisition and disposition of Investment Securities.
The appointment by the undersigned of the Investment Advisor as
attorney-in-fact set forth shall be deemed to be a power coupled with an
interest and with full power of substitution, in recognition of the fact
that the undersigned will be relying upon the Investment Advisor to act as
contemplated by the Investment Advisory Agreement and the Operating
Agreement in any filing and other action by the Investment Advisor on
behalf of SVI-International, and such power shall, to the extent permitted
by law, survive the death, disability, incompetency, withdrawal, removal,
bankruptcy or insolvency of any Person hereby giving such power and the
transfer by the undersigned of all or part of its Interest. The foregoing
power of attorney of a transferor shall survive such transfer only until
such time as the transferee shall have been admitted to SVI-International
as a member and all required documents and instruments shall have been
duly executed, filed and recorded to effect such substitution. Any Person
dealing with SVI-International may conclusively presume and rely upon the
fact that any such instrument executed by such agent and attorney-in-fact
is authorized, regular and binding without further inquiry.
-----------------------------------
By: _________________________________
Name:
Title:
Notice Address:
_____________________________________________
_____________________________________________
_____________________________________________
Attention: __________________________________
Fax: ________________________________________
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