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Exhibit V
INVESTMENT ADVISORY AGREEMENT
Dated as of October 2, 1997
by and between
STRATEGIC VALUE INVESTORS, LLC
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 between STRATEGIC VALUE INVESTORS, LLC, a Delaware
limited liability company ("SVI-U.S." and, together with any entities that
become parties hereto after the date hereof as described in Section 6, the "U.S.
Fund Entities"), 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 U.S. 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.
"Affiliated Securities" is defined in Section 6(c).
"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 U.S. 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-U.S.
"Closing" means a closing of SVI-U.S.
"Code" means the Internal Revenue Code of 1986, as amended, together
with the rules and regulations promulgated thereunder.
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"Collection Accounts" is defined in Section 5(b).
"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 by the Investment Advisor and delivered by the Investor on or prior
to such date, less (2) the sum of (A) the amount of such Investor's Capital
Commitments returned to the Investor on or prior to such date and (B) such
Investor's Allocated Percentage of any realized losses of the U.S. Fund
Entities.
"Disposition Proceeds" shall have the meaning set forth in the
Operating Agreement.
"Distributions" shall have the meaning set forth in the Operating
Agreement.
"Drawdown Date" is defined in Section 3(e).
"Drawdown Notice" is defined in Section 3(e).
"ERISA" means the Employee Retirement and Income Security Act of
1974, as amended, together with the rules and regulations promulgated
thereunder.
"Expenses" is defined in Section 11(a).
"Final Action Notice" is defined in Section 6(b).
"Final Redemption Date" is defined in Section 6(b).
"Final Redemption Request" is defined in Section 6(b).
"Final Redemption Request Date" is defined in Section 6(b).
"Fiscal Year" shall have the meaning set forth in the Operating
Agreement.
"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-International, 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-International or of any redemption vehicle established by SVI-
International, 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-International, and any similar separate or "side" vehicle
formed pursuant to the terms
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of any of the Operating Agreements or the terms of the operating agreement of
SVI-International or of any redemption vehicle established by
SVI-International.
"Fund Investors" means any investor in the Fund.
"Fund Rate" is defined in Section 10(b).
"Identified Investment Security" is defined in Section 6(b).
"Indemnitee" is defined in Section 15(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 partial monthly period, the S&P
REIT Index (excluding healthcare REITs).
"Initial Closing" is defined in Section 3(d).
"Initial Redemption Request Date" is defined in Section 6(b).
"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 U.S. Fund Entities, measured in terms of such Investor's Capital
Commitment.
"Investment Advisor" is defined in the preamble.
"Investment Advisor Fee" is defined in Section 10(a).
"Investment Period" means the 24 month period commencing at the
closing of the first acquisition on Investment Securities by SVI-U.S., which
period may be extended for another 12 months with the consent of two-thirds in
Interest of Unaffiliated Investors.
"Investment Proceeds" is defined in Section 5(b).
"Investment Securities" means REIT Shares and Partnership Units,
collectively.
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"Investor" is defined in the preamble.
"Line of Credit" is defined in Section 6(e).
"Memorandum" means the Private Placement Memorandum dated July 1,
1997, relating to SVI-U.S., as amended, restated, supplemented or otherwise
modified, pertaining to the offering of the Interests.
"Operating Agreement" means the Operating Agreement of SVI-U.S.
dated October 2, 1997.
"Operating Agreements" means the Operating Agreement and the Other
Operating Agreements, collectively.
"Other Operating Agreement" is defined in Section 6(c).
"Partnership Units" means partnership interests in REIT
Partnerships.
"Performance Fee" is defined in Section 10(b).
"Performance Fee Determination Date" is defined in Section 10(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.
"PIMS" means Prudential Investment Management Services LLC, a
Delaware limited liability company.
"PREI" means Prudential Real Estate Investors, a division of
Prudential.
"Preliminary Action Notice" is defined in Section 6(b).
"Private Investment Securities" means Investment Securities other
than Public Investment Securities.
"Prudential" is defined in the preamble.
"Prudential Co-Investor" means Prudential or an entity established
by Prudential through which Prudential will make certain investments alongside
SVI-International as described in the Memorandum.
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"Public Investment Securities" means publicly traded Investment
Securities that are freely transferrable by SVI-U.S. 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-U.S. 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 10(a).
"Redemption Vehicle" is defined in Section 6(c).
"Reinvestment Period" means, if the Capital Commitments are called
substantially in full prior to the second anniversary of the first purchase of
Investment Securities by SVI-U.S., the period commencing on the date on which
all Capital Commitments are called substantially in full and ending on such
second anniversary; provided that, if the Investment Period is extended,
references to "second anniversary" shall be deemed to be references to "third
anniversary."
"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 or equivalents thereof of REITs.
"Sales Election" is defined in Section 7(a).
"Sales Election Deadline" is defined in Section 7(b).
"Securities Act" means the Securities Act of 1933, as amended,
together with the rules and regulations promulgated thereunder.
"Shortfall Amount" is defined in Section 10(b).
"Standard of Care" is defined in Section 2(b).
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"Subsequent Closing" is defined in Section 3(d).
"SVI-International" means Strategic Value Investors International,
LLC, a Delaware limited liability company.
"SVI-U.S." is defined in the preamble.
"Unaffiliated Investor" means an Investor other than Prudential and
Prudential Co-Investor.
"Unfunded Commitments" means any Investor Capital Commitments that
have not been called by the Investment Advisor and delivered by such Investor
plus any capital contribution returned to such Investor pursuant to Section 8.4
of the Operating Agreement.
"U.S. Fund Entities" is defined in the preamble.
"Venture Capital Operating Company" has the meaning set forth in
Department of Labor regulation 29 C.F.R. ss. 2510.3 - 101(d).
SECTION 2. Appointment and Authorization; Standard of Care; Reliance
on Others.
a. Appointment and Authorization. Subject to and in accordance with
the terms of this Agreement, SVI-U.S. and any Redemption Vehicle that becomes
party hereto and the Investment Advisor hereby agree that the Investment Advisor
shall and is authorized to provide, on the terms set forth herein, the services
to SVI-U.S. 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 knowledge concerning the matter in
question that would cause such reliance to be unwarranted and provided that the
Investment Advisor acts in good faith:
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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. The Investment Advisor shall direct,
manage and administer the operations of SVI-U.S. and any Redemption Vehicle. In
connection therewith the Investment Advisor shall evaluate, structure and
consummate investments for SVI-U.S., make calls on the Capital Commitments in
connection with the acquisition of Investment Securities or otherwise as
permitted herein; engage the Independent Reviewer; select any substitute or
replacement Independent Reviewer (subject to Section 3(c)); coordinate reviews
by the Independent Reviewer; manage the U.S. Fund Entities' portfolio of
Investment Securities; determine the timing and amount of dividends and
distributions to be made to Investors; cause the formation and maintenance, as
necessary and appropriate of Redemption Vehicles and the transfers of Investment
Securities thereto; 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 U.S.
Fund Entities as permitted under this Agreement and the applicable operating
agreement of such vehicle or to cause the amendment of such operating agreements
pursuant to their respective terms; value the Investment Securities held by the
U.S. Fund Entities; determine whether to honor redemption requests in kind or in
cash or in some combination thereof and coordinate the execution of the same;
administer requests for redemptions; and prepare and distribute to Investors
reports, all in the manner generally contemplated and described in the
Memorandum; and take such actions as are necessary and appropriate to execute
the investment objectives of the U.S. 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 U.S. Fund Entities. Subject to Section 16, the
Investment Advisor shall have full power and authority to act on behalf of the
U.S. Fund Entities and to bind or obligate the U.S. Fund Entities. 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.
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c. Independent Reviewer.
i. The initial Independent Reviewer will be Houlihan, Lokey,
Xxxxxx and 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-U.S., 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.
d. Closings.
i. The Investment Advisor may, in its sole direction, cause
SVI-U.S. to hold a 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, the Investment Advisor may cause SVI-U.S. to hold
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.
iii. At the Initial Closing, Prudential's Capital Commitment
will equal 49% of all Capital Commitments to SVI-U.S. At each Subsequent
Closing, Prudential's Capital Commitment will be increased so that
Prudential's Capital Commitment will at all times equal 49% of all Capital
Commitments to SVI-U.S.
iv. Investors acquiring Interests at a Subsequent Closing
shall be required to purchase Interests at a price determined in
accordance with Section 8.4
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of the Operating Agreement and to pay the expenses therein set forth and
the fees herein set forth.
v. Subsequent Closings may involve the purchase by SVI-U.S. of
Investment Securities from SVI-International or the sale by SVI-U.S. of
Investment Securities to SVI-International in order to generally maintain
the proportional relationship between SVI-U.S. and SVI-International.
vi. The amount contributed to SVI-U.S. at any Subsequent
Closing will be distributed to the Investors admitted to SVI-U.S. 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-U.S. and SVI-International.
e. Capital Calls.
i. Subject to subparagraph (iv) below, the Investment Advisor
may call for capital contributions from the Investors by giving Investors
written notice (each a "Drawdown Notice"), setting forth (i) the aggregate
amount drawn, (ii) each Investor's share thereof, (iii) the date on which
such amounts are due (the "Drawdown Date"), which shall be at least 10
business days after the date of such Drawdown Notice, (iv) the account
into which the funds drawn should be deposited and (v) with respect to
each Investor, such Investor's total Capital Commitment, the amount drawn
from such Investor to date, and the amount remaining to be drawn from such
Investor immediately following such Drawdown Date. Notwithstanding the
foregoing, at initial closing, the Investment Advisor shall not be
required to provide 10 business days' notice but will provide notice as
far in advance of the initial closing as possible.
ii. Each Investor shall be obligated to deliver to the account
so designated in immediately available funds such Investor's share of the
amount drawn prior to 10:00 a.m. (New York time) on the Drawdown Date.
iii. Any Investor who fails to fund such Investor's share of a
draw in conformity herewith shall be a "Defaulting Member" within the
meaning of Section 8.3 of the Operating Agreement.
iv. The Investment Advisor may call for capital only (y) in
connection with the proposed acquisition of Investment Securities, and the
payment of related Expenses, which draw must be made either (I) against
Unfunded Commitments or, (II) during a Reinvestment Period, in an
aggregate amount not in excess of Disposition Proceeds (net of deductions
for expenses) previously distributed
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by the U.S. Fund Entities to the Investors, or (z) pursuant to and in
conformity with Section 6.2 of the Operating Agreement and Section 15.
Notwithstanding the foregoing, all amounts contributed to the U.S. Fund
Entities at a Subsequent Closing and distributed to the existing Investors
admitted to a U.S. Fund Entity prior to such Subsequent Closing may be
drawn down from such Investors at any time during the Commitment Period.
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.
x. XXXX to Fulfill Duties.
i. 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. 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 and such assignee is
a registered investment advisor.
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ii. If at any time Xxxxxxx Xxxxxxxx ceases to be a portfolio
manager for the Fund, the Investors shall have no further obligations to
contribute capital to SVI-U.S. for the purpose of purchasing Investment
Securities and SVI-U.S. shall have no further right to purchase Investment
Securities, except, in each case, for the purchase of Investment
Securities that are subject to commitment letters or other documentation
at such time.
h. Other Service Providers. 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 U.S. Fund
Entities in such proportions, on such terms and at such rates as the Investment
Advisor deems appropriate in light of the services provided. 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 U.S. 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 U.S. Fund Entities.
a. Permitted Investments. The Investment Advisor shall invest the
Capital Commitments 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. Fairness Opinion. Before the acquisition by SVI-U.S. of
Investment Securities of a REIT or REIT Partnership, the Investment Advisor
shall require the Independent Reviewer to issue a fairness opinion with respect
to the terms and conditions of such proposed acquisition.
c. Investment Restrictions. The Investment Advisor shall cause a
substantial majority of the U.S. Fund Entities' investments to be in entities
that qualify for taxation as real estate investment trusts (as defined in
Section 856 of the Code). The Investment Advisor shall cause the Fund to acquire
no more than 40% in the aggregate of the Investment Securities of any one REIT
and its related REIT Partnerships. No more than 49% of the total Investment
Securities acquired by SVI-U.S. in respect of any one REIT and its related REIT
Partnerships will be in the form of Partnership Units of the related REIT
Partnerships.
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d. Investment Mechanics.
i. At or shortly prior to the closing of the first acquisition
of Investment Securities by SVI-U.S., the Investment Advisor will draw the
Capital Commitments ratably in proportion to Capital Commitments in an
amount sufficient to pay organizational costs of SVI-U.S.
ii. SVI-U.S. may acquire Investment Securities directly for
cash or, in circumstances in which Prudential has received Investment
Securities from the REIT or REIT Partnership whose Investment Securities
are to be acquired by SVI-U.S., SVI-U.S. may acquire such Investment
Securities in part for cash and in part as a contribution from Prudential.
iii. In the case of the acquisition of Investment Securities
solely for cash, the Investment Advisor shall call Capital Commitments
ratably in proportion to Capital Commitments in an aggregate amount
sufficient to acquire the Investment Securities (and to pay related costs
and expenses).
iv. In the case of the acquisition of Prudential's share of
the Investment Securities as a contribution from Prudential, the
Investment Advisor shall call Capital Commitments of the Unaffiliated
Investors ratably in proportion to Capital Commitments of such
Unaffiliated Investors, in an aggregate amount sufficient to purchase the
Investment Securities allocable to such Unaffiliated Investors, and
Prudential will contribute to SVI-U.S. Investment Securities (valued on
the basis of the price established in the investment transaction) such
that 49% of the full amount of the Investment Securities so contributed
and so purchased will be allocable to Prudential. In such case, the
Investment Advisor may call for additional amounts to pay related costs
and expenses.
v. In the case of the acquisition of Prudential's share of the
Investment Securities in part as a contribution from Prudential and in
part for cash, the Investment Advisor shall cause SVI-U.S. to take the
actions described in subparagraphs (iii) and (iv) above in such
combination as the Investment Advisor deems appropriate.
e. Allocation of Expenses. The Investment Advisor shall cause
investments and expenses to be allocated between the U.S. Fund Entities (subject
to Section 11), on the one hand, and SVI-International and Prudential
Co-Investor, on the other, pro rata in accordance with the aggregate amounts of
capital commitments of each.
f. Sale of Investment Securities Prior to Termination. The
Investment Advisor shall endeavor, prior to the termination of this Agreement,
to cause all Private Investment Securities to be sold or otherwise disposed of
for cash; provided, however, that
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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.
SECTION 5. Distributions.
a. Operating Agreement. The Investment Advisor shall cause the U.S.
Fund Entities to make Distributions to the Investors in accordance with the
provisions of the Operating Agreements. The Investment Advisor may withhold from
any such Distribution to an Investor (i) any Investment Advisor Fees or
Performance Fees then due by such Investor, (ii), subject to Section 11(a), such
Investor's share of any amounts then owing for Expenses of the U.S. Fund
Entities, (iii) such Investor's share of any capital call made in conformity
with Section 3(e) that is then pending, (iv) any taxes required to be withheld
by the pertinent U.S. Fund Entity in respect of such Investor, and (v) any
amount that the Investment Advisor deems is advisable to hold as a reserve for
expenses and liabilities of the U.S. Fund Entities, subject to Section 11(a).
Any amounts withheld under clauses (i), (iii) and (iv) above shall be deemed to
have been distributed for all purposes under this Agreement and the Operating
Agreements. Any amount withheld and deemed distributed under clause (iii) and
the preceding sentence shall be deemed to have been recontributed by the
pertinent Investor in response to the pertinent capital call. Such distributions
shall be made as and when determined by the Investment Advisor, in its sole
discretion, but in any event no later than the termination of the U.S. Fund
Entities.
b. Collection Account. The Investment Advisor shall cause the U.S.
Fund Entities to deposit dividends received on Investment Securities and
proceeds received by the U.S. Fund Entities from the sale of Investment
Securities (other than proceeds from sales in connection with repayments of
indebtedness of Redemption Vehicles) (such proceeds, "Investment Proceeds") into
one or more accounts for the U.S. Fund Entities ("Collection Accounts") or
invest such amounts in short-term, investment grade securities. The Investment
Advisor shall, in its sole discretion, withdraw and apply such amounts in
payment of the Expenses of the U.S. Fund Entities or hold such amounts in the
Collection Account in order to create reserves for anticipated costs and
expenses of the U.S. Fund Entities.
SECTION 6. Redemptions.
a. Generally. Investors may request redemptions with respect to all,
but not less than all, of their Allocated Percentages of any Public Investment
Securities, and, in addition, Prudential may request a redemption with respect
to all, but not less than all, of its Allocated Percentage of any Investment
Security that consists of Partnership Units that relate to Investment Securities
that are Public Investment Securities, by, in any such case, complying with the
notice requirements of Section 6(b). In addition, whenever any Unaffiliated
Investors request redemptions with respect to any Public Investment Securities,
Prudential shall be deemed to have requested a redemption with respect to the
same Public
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Investment Securities (or, in the event Prudential has an interest through
SVI-U.S. in any Partnership Units obtained in connection with the transactions
in which SVI-U.S. acquired such Public Investment Securities, a redemption with
respect to a combination of such Partnership Units and such Public Investment
Securities (in such proportions as Prudential shall designate)) in the minimum
amount required so that, following all such redemptions, both Prudential's
aggregate percentage interest in the profits and contributed capital of SVI-
U.S. and Prudential's percentage interest in the profits and capital of the
Redemption Vehicle formed to effectuate such redemption shall be not more than
49%. Subject to Section 6(f), the Investment Advisor may in its sole discretion
respond to any actual (or, in the case of Prudential, a deemed) redemption
request with respect to Public Investment Securities by distributing to the
pertinent Investor (i) such Investor's Allocated Percentage thereof in kind,
(ii) the value in cash, determined as set forth in Section 3(f), of such
Investor's Allocated Percentage of such Public Investment Securities or (iii)
some combination of (i) and (ii) above. The Investment Advisor shall respond to
any redemption request by Prudential in respect of Partnership Units by
distributing the Partnership Units subject thereto to Prudential. Subject to the
preceding sentence, the Investment Advisor shall honor all redemption requests
with respect to a particular Investment Securities ratably and with the same
consideration.
b. Notices -- Preliminary and Final. Redemptions may be requested,
on March 15 and September 15 of each year (each an "Initial Redemption Request
Date"), in accordance with the following procedures:
i. An Investor who wishes to request a redemption should send
a notice to such effect to the Investment Advisor within 30 days prior to
the applicable Initial Redemption Request Date. The notice must be
received on or before the relevant Initial Redemption Request Date and
must specify (a) one or more securities with respect to which redemption
is sought (any such security, an "Identified Investment Security") and (b)
if the Investment Advisor determines to make a cash payment, whether the
Investor wishes to receive its redemption proceeds by wire transfer to an
identified account of the Investor at any domestic commercial bank that is
a member of the Federal Reserve System, or by check.
ii. Within 10 business days after the applicable Initial
Redemption Request Date, the Investment Advisor shall forward to each
Investor a notice (the "Preliminary Action Notice") setting forth (i) each
redemption request received or deemed received (including the identity of
the Fund Investors requesting a redemption), (ii) a description of any
changes in the rights associated with the pertinent Investment Securities
as a result of the redemption, (iii) whether the Investment Advisor has
preliminarily elected to effect redemptions pursuant thereto in cash or in
kind and (iv) if the redemption may be effected in cash, to the extent
available, a description of any Line of Credit to be utilized and an
explanation of the rationale for leveraging the Investment Securities.
Each Investor shall have an
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opportunity to re-evaluate its redemption request or its failure to
request a redemption in light of the initial proposed action specified in
the Preliminary Action Notice. Not later than five (5) business days after
the date of the Preliminary Action Notice (such date the "Final Redemption
Request Date"), each Investor that wishes to cancel or modify its
redemption request and each Investor that failed to submit a redemption
request must notify the Investment Advisor by sending a new or modified
redemption request (a "Final Redemption Request") specifying the
Investment Securities with respect to which such Investor has finally
decided to request redemption, and containing the other information
required to be contained in the redemption request made on or before the
Initial Redemption Request Date. If a Final Redemption Request in proper
form is not received from an Investor on or before the Final Redemption
Request Date, such Investor shall be deemed to have made its request as
set forth in the request made on or before the Initial Redemption Request
Date or, if no such request had been made, to waive its right to redeem
during the period in question.
iii. Within five (5) business days after the Final Redemption
Request Date, the Investment Advisor shall determine, in its sole
discretion, how to best satisfy the redemption requests, and will forward
a notice to each Investor (the "Final Action Notice") advising as to such
action and as to the approximate date on which distributions or payments
are intended to be made (the "Final Redemption Date"). Such action may be
different than as stated in the Preliminary Action Notice.
c. Redemption Vehicles. Whenever a redemption is to be effectuated
with respect to Partnership Units or with respect to Public Investment
Securities held by SVI-U.S., the Investment Advisor shall cause to be formed a
new entity (a "Redemption Vehicle") for the purpose of holding, for the account
of the nonredeeming Investors and, in cases in which it has an interest in
Public Investment Securities with respect to which it has not requested
redemption, Prudential, (i) in the case of a redemption with respect to
Partnership Units, the Investment Securities of issuers affiliated with the
issuer of such Partnership Units ("Affiliated Securities") that are not to be
distributed to Investors in connection with such redemption and (ii) in the case
of a redemption with respect to Public Investment Securities, the Identified
Investment Securities that are not to be distributed to Investors in connection
with such redemption. Each Redemption Vehicle shall be a limited liability
company governed by an operating agreement (each, an "Other Operating
Agreement") with terms substantially the same as those of the Operating
Agreement (except as relates to Closings, Partnership Units and other matters
not relevant to such Redemption Vehicle or not required to be reiterated in such
Other Operating Agreement). The Investment Advisor shall cause each Redemption
Vehicle to become a party to this Agreement. No Redemption Vehicle shall hold
securities of more than one issuer or affiliate group of issuers. Redemption
Vehicles shall be formed in connection with redemptions as follows:
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i. In the case of a Final Action Notice that specifies that a
redemption will be made solely with respect to an Identified Investment
Security that is a Public Investment Security, the Investment Advisor will
cause SVI-U.S. to form the relevant Redemption Vehicle, contribute the
pertinent Identified Investment Securities to such Redemption Vehicle,
distribute interests in the Redemption Vehicle to Investors in proportion
to their Allocated Percentages in such Identified Investment Securities,
and cause such Redemption Vehicle to make the redemptions specified in the
Final Action Notice in cash, in kind, or in combination, as so specified.
If any redemption is to be made in cash, the pertinent Redemption Vehicle
shall borrow the cash as described in Section 6(e) at any time after the
Investors have been distributed their respective interests in the
Redemption Vehicle.
ii. In the case of a Final Action Notice that specifies that a
redemption will be made solely with respect to an Identified Investment
Security that consists of Partnership Units, the Investment Advisor will
cause SVI-U.S. to distribute to Prudential all of the Partnership Units
constituting the Identified Investment Securities and will thereafter
cause SVI-U.S. to form the relevant Redemption Vehicle, contribute the
Affiliated Securities to such Redemption Vehicle, and distribute interests
in such Redemption Vehicle to the Unaffiliated Investors in proportion to
their Allocated Percentages in the Affiliated Securities.
iii. In the case of a Final Action Notice that specifies that
a redemption will be made both with respect to an Identified Investment
Security that consists of Partnership Units and with respect to an
Identified Investment Security that consists of the related Affiliated
Securities, the Investment Advisor shall cause SVI-U.S. to form the
relevant Redemption Vehicle, contribute the Affiliated Securities to such
Redemption Vehicle, distribute to Prudential all of the Partnership Units
in question, distribute interests in the Redemption Vehicle to
Unaffiliated Investors in proportion to their Allocated Percentages in the
Affiliated Securities, and cause such Redemption Vehicle to make the
redemptions specified in the Final Action Notice in cash, in kind, or in
combination as so specified.
Notwithstanding the foregoing, the Investment Advisor may
cause a Redemption Vehicle to hold Partnership Units so long as (i) no
indebtedness is incurred by such Redemption Vehicle in connection with
such redemption or (ii) any indebtedness incurred by such Redemption
Vehicle is equally and ratably secured by Partnership Units and REIT
Shares.
d. Subsequent Redemptions by Redemption Vehicles. In the case of a
Final Action Notice that specifies that a redemption will be made with respect
to an Identified Investment Security held by a Redemption Vehicle, the
Investment Advisor will cause the Redemption Vehicle in question to make the
redemptions specified in such Final Action Notice, in cash, in kind, or in
combination, as so specified.
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e. Line of Credit.
i. The Investment Advisor shall cause any Redemption Vehicles
that is to make a redemption in cash to obtain a line of credit (the "Line
of Credit") to provide funds for such redemption. Such Line of Credit
shall be from a lender unaffiliated with Prudential, and shall be on such
terms as the Investment Advisor deems appropriate under the circumstances.
If necessary, the Investment Advisor may cause the U.S. Fund Entities to
pledge their interests in REIT Shares to a lender under a Line of Credit
to secure loan commitment related to such Line of Credit. No Redemption
Vehicle shall borrow in excess of 50% of the value of its assets as of the
date of the borrowing. The Investment Advisor shall take steps it deems
necessary (including selling a portion of the pertinent Investment
Securities and repaying all or a portion of such indebtedness) so that the
indebtedness incurred pursuant to the Line of Credit obtained by a
Redemption Vehicle is maintained at a level that does not exceed 50% of
the value of the assets of such Redemption Vehicle; provided that the
Investment Advisor shall not be required to take such steps if such ratio
is not met due to temporary market fluctuations.
ii. The Investment Advisor may secure the Line of Credit in
whole or part with the Investment Securities and cash held by the
Redemption Vehicle borrowing thereunder.
iii. Expenses related to the Line of Credit and debt service
on amounts borrowed thereunder shall be expenses of the pertinent
Redemption Vehicle, and shall be payable out of the proceeds from the sale
Investment Securities held by the Redemption Vehicle or dividends or other
Distributions payable in respect of such Investment Securities.
f. Limitations on Redemptions. The Investment Advisor may deny any
redemption request if the Investment Advisor determines in its reasonable
discretion that making a redemption pursuant thereto may (i) adversely affect
the ability of any U.S. Entity (including the Redemption Vehicle that would be
formed in connection with such redemption) to qualify as a "Venture Capital
Operating Company" within the meaning of ERISA; or (ii) have material adverse
tax or regulatory consequences for Investors.
SECTION 7. Sales Election.
a. Generally. If the Investment Advisor determines to sell or
transfer any Investment Security other than a sale or transfer (i) to a
Redemption Vehicle, (ii) of Partnership Units in connection with any redemption,
or (iii) to pay debt service in respect of a borrowing by a Redemption Vehicle,
each Investor may elect instead to receive a distribution in kind of its
Allocated Percentage of such Investment Security (a "Sales Election").
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b. Notice to Investor; Election. The Investment Advisor shall notify
each Investor in writing of the Investment Advisor's decision to sell or
transfer a specified Investment Security, and shall include in such notification
the Investment Advisor's best estimate of the approximate price to be received
and the anticipated timing of the proposed sale or series of sales. No later
than 5 business days from the date of each such notice (such fifth day, the
"Sales Election Deadline"), each Investor shall have the right to elect in
writing to receive its Allocated Percentage of the Investment Securities in
question. The actual price and timing of sales may vary from the Investment
Advisor's estimates as set forth in its notice to Investors. No such variance
shall require the Investment Advisor to make an additional notice or give rise
to any further election by Investors with respect to the Investment Securities
in question.
c. Distribution. Simultaneous with the consummation of the sale of
the specified Investment Securities, the Investment Advisor shall cause the
pertinent U.S. Fund Entity to distribute to each Investor making a Sales
Election, such Investor's Allocated Percentage of the amount sold of such
Investment Securities. For all purposes of this Agreement and the Operating
Agreements, such distribution shall be deemed to be a distribution of the value,
determined by reference to the sale of the specified Investment Securities, of
the Investment Securities distributed.
d. Holdback. No Investor shall sell, transfer or otherwise dispose
of any portion of its interest in any Investment Security received pursuant to a
Sales Election or any other security of the issuer of such Investment Security
held by such Investor, until the earlier of (i) 6 months after the Sales
Election Deadline or (ii) the date on which the pertinent U.S. Fund Entity has
sold, transferred or otherwise disposed of all of its interest in such
Investment Securities.
SECTION 8. Reports.
a. The books and records of the U.S. Fund Entities shall be kept
according to the accrual method of accounting, and shall be audited as of the
end of each Fiscal Year by a firm of independent certified public accountants of
national recognition and standing selected by the Investment Advisor. Within 60
days after the end of each Fiscal Year, the Investment Advisor shall cause to be
prepared and mailed to the Investors a report of such accountants, setting forth
as at the end of such Fiscal Year:
i. a balance sheet of the U.S. Fund Entities;
ii. a statement of the net income or net loss for such year
and such Investor's share thereof;
iii. a statement of cash flow;
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iv. a statement of such Investor's Capital Account; and
v. the amount of such Investor's share in each U.S. Fund
Entity's taxable income or loss for each year, in the form required by the
Code and applicable regulations and in sufficient detail to enable it to
timely prepare its federal, state and other tax returns;
In addition, concurrently with the report of such accountants, the Investment
Advisor shall cause to be mailed to the Investors, if not already contained in
such report to be provided to the Investors by such accountants, a report
containing a statement of any fees received by the Investment Advisor or any of
its Affiliates in connection with Fund's activity.
The Investment Advisor shall also cause to be delivered to any
Investor upon request such other information as shall be needed by such Investor
in order to enable it to timely file any of its tax returns and will also from
time to time furnish such other information as any Investor may reasonably
request for the purpose of enabling it to timely comply with any reporting or
filing requirements imposed or permitted by any statute, rule, regulation or
otherwise by any governmental agency or authority, or to furnish to, or
otherwise be used in connection with its relationship with, any regulatory
authority.
b. Within 45 days after the end of each of the first three fiscal
quarters in each Fiscal Year, the Investment Advisor shall cause to be prepared
and mailed to each Investor a report of the Investment Advisor setting forth the
(unaudited) information described in Section 8(a)(i)-(v) and a report containing
a statement of fees received by the Investment Advisor or any of its Affiliates
in connection with the Fund's activities.
SECTION 9. Tax and ERISA Matters.
a. Pursuant to the delegation of authority more particularly
described in the Operating Agreement, the Investment Advisor shall function as
the "Tax Matters Partner" for purposes of Section 6231 of the Code of each U.S.
Fund Entity and will have the exclusive authority and discretion to make any
elections required or permitted to be made by any U.S. Fund Entity under the
Code or any other tax laws; provided that the Investment Advisor shall not cause
any U.S. Fund Entity to be excluded from the partnership taxation provisions of
Subchapter K of the Code.
b. The Investment Advisor shall use its reasonable best efforts to
cause each U.S. Fund Entity to qualify as a Venture Capital Operating Company.
Concurrently with the closing of the first acquisition of Investment Securities
by SVI-U.S., the Investment Advisor shall obtain an opinion of counsel which
opinion shall state whether SVI-U.S. should qualify as a Venture Capital
Operating Company on the date of such closing.
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Annually, the Investment Advisor shall provide a certificate to each Investor
stating that the Investment Advisor believes that SVI-U.S. and each Redemption
Vehicle should have qualified as a Venture Capital Operating Company on the
applicable day of such "annual valuation period" or otherwise is not deemed to
have "Plan Assets" under ERISA.
c. If the Investment Advisor determines that the same is required to
prevent legal restrictions or requirements applicable to any Investor or any
U.S. Fund Entity from having a material adverse effect on any such Investor or
entity, the Investment Advisor may, in its sole discretion: (i) cause the U.S.
Fund Entity in question to dissolve and distribute its assets in accordance with
the Operating Agreement or the pertinent Other Operating Agreement; (ii) cause
all or a portion of the Interests of any Investor to be redeemed in a manner
generally consistent with Section 6; or (iii) cause the Operating Agreement, any
Other Operating Agreement or this Agreement to be amended (provided that no such
amendment may be made unilaterally if such amendment would have a material
adverse effect on any Investor).
SECTION 10. 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 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 U.S. Fund Entity
and (b) any Distribution of Investment Securities to such Investor by any
U.S. Fund Entity (any such date, a "Performance Fee Determination Date").
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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 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 by the U.S. Fund Entities' investments through the
applicable
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Performance Fee Determination Date assuming a sale of all 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.
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 11. Expenses.
a. Expenses of the U.S. Fund Entities. Each of the U.S. Fund
Entities shall bear its share of organizational costs and expenses and the U.S.
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
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or not, including, without limitation, securities advisors, attorneys
(including, without limitation, SVI-U.S.'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 U.S. Fund Entities. All such Expenses shall be allocated among U.S. Fund
Entities and among Investors in accordance with the following principles: (1)
Expenses that relate to a particular U.S. Fund Entity or to the Investment
Securities held thereby shall be allocated to such U.S. 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 Partnership Units
shall be allocated to Prudential; (3) Expenses that relate to Affiliated
Securities shall be allocated to the Investors with Allocated Percentages with
respect thereto in proportion to such percentages; (4) Expenses that relate to
unconsummated investment transactions shall be allocated to SVI-U.S. and to the
Investors therein in proportion to their Allocated Percentages; and (5) 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.
SECTION 12. 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, 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 U.S. Fund
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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 13. Representations and Warranties of the Investment
Advisor.
The Investment Advisor hereby represents and warrants to SVI-U.S. 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 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.
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d. SVI-U.S. 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.
SECTION 14. 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 15. 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 U.S. Fund Entities (each such
Person being an "Indemnitee") shall be held harmless and be indemnified by the
U.S. 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
U.S. Fund Entities or in furtherance of the interests of the U.S. Fund Entities
or otherwise arising out of, or in connection, with the U.S. 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 U.S. Fund Entities prior to the final disposition of
such claim, demand, action, suit or proceeding upon receipt by the U.S. 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 15.
c. Limitation on Liability. The individual indemnity obligation of
each Investor will be limited to the lesser of (i) the aggregate of: (x) such
Investor's Unfunded
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Commitments; (y) Distributions (including Distributions in redemption)
previously made to such Investor; and (z) the Investor's Interest in the U.S.
Fund Entities or (ii) such Investor's Capital Commitment. The Investment Advisor
shall not call capital for the purpose of satisfying the foregoing obligations
in an amount in excess of the sum of such Investor's Unfunded Commitment and
Distributions to such Investor that represent returns of capital.
SECTION 16. 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 U.S. Fund Entity until the
termination of such U.S. Fund Entity.
b. Termination. This Agreement may be terminated at any time with or
without cause upon 90 days' prior written notice by (i) SVI-U.S. (upon the vote
of a majority in Interest of the Unaffiliated Investors therein) or (ii) the
Investment Advisor (but in the latter case, subject to Section 9(c), only if
this Agreement is so terminated with respect to all U.S. 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 10, 11, 15 and 16 of this Agreement shall survive any termination
hereof.
SECTION 17. 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-U.S.:
c/o Prudential Real Estate Investors
0 Xxxxxx Xxxxx, 0xx Xxxxx
Arbor Circle South
Parsippany, New Jersey 07054-4493
Attention: SVI Portfolio Manager
Fax: (000) 000-0000
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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
If to the Investment Advisor:
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 17 for the giving of
notice.
SECTION 18. Amendments; Waivers.
Subject to Section 9, 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
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thereof, nor shall any single or partial exercise preclude any further or other
exercise of such or any other right.
SECTION 19. 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 20. 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(g).
SECTION 21. 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 22. 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.
SECTION 23. 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 15, 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
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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 24. 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 25. 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 26. 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-U.S. shall include all parallel or
subsidiary vehicles including Redemption 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 U.S. Fund Entity shall mean such actions to be taken
by the Investment Manager on behalf of such U.S. Fund Entity or, if applicable,
to the Investment Manager causing such U.S. Fund Entity to take such action,
unless the context clearly requires otherwise.
SECTION 27. 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.
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31
SECTION 28. 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 29. 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 30. 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.
[Remainder of Page Intentionally Left Blank]
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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, LLC
By: The Prudential Investment Corporation
Its: Attorney-in-Fact
By: /s/ XXXXXX X. XXXXXXXX
--------------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Vice President
THE PRUDENTIAL INVESTMENT CORPORATION
By: /s/ XXXXXX X. XXXXXXXX
--------------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Vice President
S-1
33
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 15 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 7, 10, 11 or 15 of the Investment Advisory Agreement.
8. Appointment of Investment Advisor as Attorney-in-Fact:
The undersigned irrevocably 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 (a) the execute,
acknowledge, deliver, file and record in the appropriate public offices
all certificates or other instruments (including counterparts
A-1
34
of the Operating Agreement) that the Investment Advisor deems appropriate
to continue SVI-U.S. as a limited liability company in the jurisdiction in
which SVI-U.S. conducts business, including amendments to the Operating
Agreement necessary to correct scriveners' errors, and from and after the
date on which the undersigned becomes a Defaulting Member, all documents
and instruments (including transfer and sale documents) that the
Investment Advisor deemed necessary to implement the rights and remedies
set forth in Section 8.3 of the Operating Agreement, (b) to take all
actions necessary and to execute and deliver all documents, certificates
and other instruments (including Other Operating Agreements) in connection
with the formation of Redemption Vehicles in accordance with Section 6(c)
of the Investment Advisory Agreement and the subsequent operation of such
Redemption Vehicles and (c) to take all actions as are necessary and
appropriate to fulfill the duties of Investment Advisor as referenced in
the Investment Advisory Agreement 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-U.S., 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 undersigned shall survive such transfer
only until such time as the transferee shall have been admitted to
SVI-U.S. 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-U.S. 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.
X-0
00
0. This Annex Number 1 shall survive the termination of the Investment
Advisory Agreement.
-------------------------
By:
-------------------------------------
Name:
Title:
Notice Address:
---------------------------------------------
---------------------------------------------
---------------------------------------------
Attention:
----------------------------------
Fax:
----------------------------------------
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