AMENDED AND RESTATED ADVISORY AGREEMENT
Exhibit 10.1
EXECUTION COPY
AMENDED AND RESTATED ADVISORY AGREEMENT
THIS AMENDED AND RESTATED ADVISORY AGREEMENT, dated as of October 1, 2009, is between
CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED, a Maryland corporation (the “Company”), and XXXXX
ASSET MANAGEMENT CORP., a Delaware corporation and wholly-owned subsidiary of W. P. Xxxxx & Co. LLC
(the “Advisor”).
WHEREAS, the Company and the Advisor entered into an initial advisory agreement, dated
November 10, 1997, which has been subsequently amended and restated;
“2%/25% Guidelines.” The requirement, as provided for in Section 13 hereof, that, in the
12-month period ending on the last day of any fiscal quarter, Operating Expenses not exceed the
greater of two percent of Average Invested Assets during such 12-month period or 25% of the
Company’s Adjusted Net Income over the same 12-month period.
Acquisition Expense. To the extent not paid or to be paid by the seller or lessee in the case
of a Property or the borrower in the case of a Loan, those expenses, including but not limited to
travel and communications expenses, the cost of appraisals, title insurance, nonrefundable option
payments on Property not acquired, legal fees and expenses, accounting fees and expenses and
miscellaneous expenses, related to selection, acquisition and origination of Properties and Loans,
whether or not a particular Property or Loan ultimately is acquired or originated. Acquisition
Expenses shall not include Acquisition Fees.
Acquisition Fee. Any fee or commission (including any interest thereon) paid by the Company
to the Advisor or, with respect to Section 9(d), by the Company to any party, in connection with
the making or investing in Loans and the purchase, development or construction of Properties by the
Company. A
Development Fee or a Construction Fee paid to a Person not affiliated with the Sponsor in
connection with the actual development or construction of a project after acquisition of the
Property by the Company shall not be deemed an Acquisition Fee. Acquisition Fees include, but are
not limited to, any real estate commission, selection fee, development fee (other than as described
above) or any fee of a similar nature, however designated. Acquisition Fees include Subordinated
Acquisition Fees unless the context otherwise requires. Acquisition Fees shall not include
Acquisition Expenses.
Adjusted Invested Assets. The average during any period of the aggregate historical cost, or
to the extent available for a particular asset, the most recent Appraised Value, of the Investment
Assets of the Company, before accumulated reserves for depreciation or bad debt allowances or other
similar non-cash reserves, computed (unless otherwise specified) by taking the average of such
values at the end of each month during such period.
Adjusted Investor Capital. As of any date, the Initial Investor Capital reduced by any
Redemptions, other than Redemptions intended to qualify as a liquidity event for purposes of this
Agreement, and by any other Distributions on or prior to such date determined by the Board to be
from Cash from Sales and Financings.
Adjusted Net Income. For any period, the total revenues recognized in such period, less the
total expenses recognized in such period, excluding additions to reserves for depreciation and
amortization, bad debts or other similar non-cash reserves; provided, however, if the Advisor
receives a Subordinated Incentive Fee, Adjusted Net Income for purposes of calculating total
allowable Operating Expenses shall exclude any gain, losses or writedowns from the sale of the
Company’s assets that gave rise to such Subordinated Incentive Fee.
Advisor. Xxxxx Asset Management Corp, a corporation organized under the laws of the State of
Delaware and wholly-owned by W. P. Xxxxx & Co. LLC.
Agreement. This Advisory Agreement.
Articles of Incorporation. Articles of Incorporation of the Company under the General
Corporation Law of Maryland, as amended from time to time, pursuant to which the Company is
organized.
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Average Invested Assets. The average during any period of the aggregate book value of the
assets of the Company invested, directly or indirectly, in Properties and in Loans, before
deducting reserves for depreciation, bad debts impairments, amortization and all other similar
non-cash reserves computed by taking the average of such values at the end of each month during
such period.
Board or Board of Directors. The Board of Directors of the Company.
Cash from Financings. Net cash proceeds realized by the Company from the financing of
Investment Assets or the refinancing of any Company indebtedness.
Cash from Sales. Net cash proceeds realized by the Company from the sale, exchange or other
disposition of any of its assets after deduction of all expenses incurred in connection therewith.
Cash from Sales shall not include Cash from Financings.
Cash from Sales and Financings. The total sum of Cash from Sales and Cash from Financings.
Change of Control. A change of control of the Company of a nature that would be required to
be reported in response to the disclosure requirements of Schedule 14A of Regulation 14A
promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as enacted
and in force on the date hereof, whether or not the Company is then subject to such reporting
requirements; provided, however, that, without limitation, a Change of Control shall be deemed to
have occurred if: (i) any “person” (within the meaning of Section 13(d) of the Exchange Act, as
enacted and in force on the date hereof) is or becomes the “beneficial owner” (as that term is
defined in Rule 13d-3, as enacted and in force on the date hereof, under the Exchange Act) of
securities of the Company representing 8.5% or more of the combined voting power of the Company’s
securities then outstanding; (ii) there occurs a merger, consolidation or other reorganization of
the Company which is not approved by the Board; (iii) there occurs a sale, exchange, transfer or
other disposition of substantially all of the assets of the Company to another entity, which
disposition is not approved by the Board; or (iv) there occurs a contested proxy solicitation of
the Shareholders of the Company that results in the contesting party electing candidates to a
majority of the Board’s positions next up for election.
Code. Internal Revenue Code of 1986, as amended.
Company. Corporate Property Associates 14 Incorporated, a corporation organized under the
laws of the State of Maryland.
Competitive Real Estate Commission. The real estate or brokerage commission paid for the
purchase or sale of a property that is reasonable, customary and competitive in light of the size,
type and location of the property.
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Construction Fee. A fee or other remuneration for acting as general contractor and/or
construction manager to construct improvements, supervise and coordinate projects or to provide
major repairs or rehabilitation on a Property.
Contract Purchase Price. The amount actually paid for, or allocated to, the purchase,
development, construction or improvement of a Property or acquired Loan or, in the case of an
originated Loan, the principal amount of such Loan, exclusive, in each case, of Acquisition Fees
and Acquisition Expenses.
Contract Sales Price. The total consideration received by the Company for the sale of
Properties and Loans.
Development Fee. A fee for the packaging of a Property including negotiating and approving
plans, and undertaking to assist in obtaining zoning and necessary variances and necessary
financing for the specific Property, either initially or at a later date.
Directors. The persons holding such office, as of any particular time, under the Articles of
Incorporation, whether they be the directors named therein or additional or successor directors.
GAAP. Generally accepted accounting principles in the United States.
Gross Offering Proceeds. The aggregate purchase price of Shares sold in any Offering.
Independent Appraiser. A qualified appraiser of real estate as determined by the Board, who
is not affiliated, directly or indirectly, with the Company, the Advisor or their respective
Affiliates. Membership in a nationally recognized appraisal society such as the American Institute
of Real Estate Appraisers or the Society of Real Estate Appraisers shall be conclusive evidence of
such qualification.
Independent Director. A Director of the Company who meets the criteria for an Independent
Director specified in the Bylaws.
Individual. Any natural person and those organizations treated as natural persons in Section
542(a) of the Code.
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Initial Closing Date. The first date on which Shares were issued pursuant to an Offering.
Initial Investor Capital. The total amount of capital invested from time to time by
Shareholders (computed at the Original Issue Price per Share), excluding any Shares received by the
Advisor or its Affiliates for any consideration other than cash.
Investment Asset. Any Property, Loan or Other Permitted Investment Asset.
Loan Refinancing Fee. The Loan Refinancing Fee as defined in Section 9(e) hereof.
Loans. The notes and other evidences of indebtedness or obligations acquired or entered into
by the Company as lender which are secured or collateralized by personal property, or fee or
leasehold interests in real estate or other assets, including but not limited to first or
subordinate mortgage loans, construction loans, development loans, loans secured by capital stock
or any other assets or form of equity interest and any other type of loan or financial arrangement,
such as providing or arranging for letters of credit, providing guarantees of obligations to third
parties, or providing commitments for loans. The term “Loans” shall not include leases which are
not recognized as leases for Federal income tax reporting purposes.
Offering. The offering of Shares pursuant to a Prospectus.
Operating Expenses. All operating, general and administrative expenses paid or incurred by
the Company, as determined under GAAP, except the following (insofar as they would otherwise be
considered operating, general and administrative expenses under GAAP): (i) interest and discounts
and other cost of borrowed money; (ii) taxes (including state and Federal income tax, property
taxes and assessments, franchise taxes and taxes of any other nature); (iii) expenses of raising
capital, including Organization and Offering Expenses, printing, engraving, and other expenses, and
taxes incurred in connection with the issuance and distribution of the Company’s Shares and
Securities; (iv) Acquisition Expenses, real estate commissions on resale of property and other
expenses connected with the acquisition, disposition, origination, ownership and operation of real
estate interests, mortgage loans, or other property, including the costs of foreclosure, insurance
premiums, legal services, brokerage and sales commissions, maintenance, repair and improvement of
property; (v) Acquisition Fees or Subordinated Disposition Fees payable to the Advisor or any other
party; (vi) non-cash items, such as depreciation, amortization, depletion, and additions to
reserves for depreciation, amortization, depletion, losses and bad debts; (vii) Termination Fees;
and (viii) Subordinated Incentive Fees paid in compliance with Section 9(i). Notwithstanding
anything herein to the contrary, Operating Expenses shall include the Asset Management Fee and the
Loan Refinancing Fee.
Organization and Offering Expenses. Those expenses payable by the Company in connection with
the formation, qualification and registration of the Company and in marketing and distributing
Shares, including, but not limited to: (i) the preparation, printing, filing and delivery of any
registration statement or Prospectus and the preparing and printing of contractual agreements
between the Company and the Sales Agent and the Selected Dealers (including copies thereof); (ii)
the preparing and printing of the Articles of Incorporation and Bylaws, solicitation material and
related documents and the filing and/or
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recording of such documents necessary to comply with the laws of the State of Maryland for the
formation of a corporation and thereafter for the continued good standing of a corporation; (iii)
the qualification or registration of the Shares under state securities or “Blue Sky” laws; (iv) any
escrow arrangements, including any compensation to an escrow agent; (v) the filing fees payable to
the SEC and to the National Association of Securities Dealers, Inc.; (vi) reimbursement for the
reasonable and identifiable out-of-pocket expenses of the Sales Agent and the Selected Dealers,
including the cost of their counsel; (vii) the fees of the Company’s counsel; (viii) all
advertising expenses incurred in connection with the Offering, including the cost of all sales
literature and the costs related to investor and broker-dealer sales and information meetings and
marketing incentive programs; and (ix) selling commissions, marketing fees, incentive fees, due
diligence fees and wholesaling fees and expenses incurred in connection with the sale of the
Shares.
Other Permitted Investment Asset. An asset, other than cash, cash equivalents, short term
bonds, auction rate securities and similar short term investments, acquired by the Company for
investment purposes that is not a Loan or a Property and is consistent with the investment
objectives and policies of the Company.
Other Permitted Investment Assets Fee. The Other Permitted Investment Assets Fee as defined
in Section 9(h).
Person. An Individual, corporation, partnership, joint venture, association, company, trust,
bank, or other entity, or government or any agency or political subdivision of a government.
Preferred Return. A Cumulative Return of seven percent computed from the Initial Closing Date
through the date as of which such amount is being calculated.
Property or Properties. The Company’s partial or entire interest in real property (including
leasehold interests) and personal or mixed property connected therewith. An investment which
obligates the Company to acquire a Property will be treated as a Property for purposes of this
Agreement.
Property Management Fee. A fee for property management services rendered by the Advisor or
its Affiliates in connection with Properties acquired directly or through foreclosure.
REIT. A real estate investment trust, as defined in Sections 856-860 of the Code.
Sales Agent. Xxxxx Financial Corporation.
Securities. Any stock, shares (other than currently outstanding Shares and subsequently
issued Shares), voting trust certificates, bonds, debentures, notes or other evidences of
indebtedness, secured or unsecured, convertible, subordinated or otherwise or in general any
instruments commonly known as
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“securities” or any certificate of interest, shares or participation in temporary or interim
certificates for receipts (or, guarantees of, or warrants, options or rights to subscribe to,
purchase or acquire any of the foregoing), which subsequently may be issued by the Company.
Selected Dealers. Broker-dealers who are members of the National Association of Securities
Dealers, Inc. and who have executed an agreement with the Sales Agent in which the Selected Dealers
agree to participate with the Sales Agent in the Offering.
Sponsor. W.P. Xxxxx & Co. LLC and any other Person directly or indirectly instrumental in
organizing, wholly or in part, the Company or any person who will control, manage or participate in
the management of the Company, and any Affiliate of any such person. Sponsor does not include a
person whose only relationship to the Company is that of an independent property manager and whose
only compensation is as such. Sponsor also does not include wholly independent third parties such
as attorneys, accountants and underwriters whose only compensation is for professional services.
Subordinated Acquisition Fee. The Subordinated Acquisition Fee as defined in Section 9(c).
Subordinated Disposition Fee. The Subordinated Disposition Fee as defined in Section 9(g)
hereof.
Subordinated Incentive Fee. The Subordinated Incentive Fee as defined in Section 9(i) hereof.
Termination Date. The effective date of any termination of this Agreement.
Termination Fee. An amount equal to 15% of the amount, if any, by which (1) the fair value of
the Investment Assets, less the amount of all indebtedness secured by such Investment Assets and
less any fees (other than the Termination Fee) payable to the Advisor, in each case as of the
Termination Date, exceeds (2) the total of the Adjusted Investor Capital plus an amount equal to
the Preferred Return through the Termination Date reduced by the total Distributions paid by the
Company from its inception through the Termination Date (other than Distributions made from Cash
from Sales and Financings that are counted in determining Adjusted Investor Capital). For purposes
of calculating this Fee (i) the fair value of any Property shall be its Appraised Value, and (ii)
any payments in respect of redeemed Shares (other than in respect of Redemptions intended to
qualify as a liquidity event for purposes of this Agreement), Shares received by the Advisor or its
Affiliates for any consideration other than cash and the Distributions in respect of such Shares
shall be excluded.
Total Property Cost. With regard to any Property or Loan, an amount equal to the sum of the
Contract Purchase Price of such Property or Loan plus the Acquisition Fees paid in connection with
such Property or Loan.
Triggering Event. With regard to any Investment Asset, the occurrence of any of the following
during the six months after the closing date of the acquisition of the Investment Asset: (a) the
failure by an obligor on an Investment Asset to pay rent, interest or principal, or other material
payment, to the Company when due (after giving effect to all applicable grace periods) or (b) the
obligor on an Investment (including a guarantor) (1) commences a voluntary case or proceeding under
applicable
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bankruptcy or reorganization law, (2) consents to the entry of a decree or order for relief in
an involuntary proceeding under applicable bankruptcy law, (3) consents to the filing of a petition
or the appointment of a custodian, receiver or liquidator, (4) makes an assignment for the benefit
of creditors, (5) admits in writing its inability to pay its debts as they come due; (6) is the
subject of a decree or order for relief entered by a court of competent jurisdiction in respect of
such obligor in an involuntary bankruptcy case or proceeding, or a decree or order adjudging such
obligor bankrupt or insolvent or appointing a custodian, receiver or liquidator for the obligor.
(a) serve as the Company’s investment and financial advisor and provide research and
economic and statistical data in connection with the Company’s assets and investment
policies;
(b) provide the daily management of the Company and perform and supervise the various
administrative functions reasonably necessary for the management of the Company;
(c) investigate, select, and, on behalf of the Company, engage and conduct business
with such Persons as the Advisor deems necessary to the proper performance of its
obligations hereunder, including but not limited to consultants, accountants,
correspondents, lenders, technical advisors, attorneys, brokers, underwriters, corporate
fiduciaries, escrow agents, depositaries, custodians, agents for collection, insurers,
insurance agents, banks, builders, developers, property owners, mortgagors, and any and all
agents for any of the foregoing, including Affiliates of the Advisor, and Persons acting in
any other capacity deemed by the Advisor necessary or desirable for the performance of any
of the foregoing services, including but not limited to entering into contracts in the name
of the Company with any of the foregoing;
(d) consult with Directors of the Company and assist the Board in the formulation and
implementation of the Company’s policies, and furnish the Board with such information,
advice and recommendations as they may request or as otherwise may be necessary to enable
them to discharge their fiduciary duties with respect to matters coming before the Board;
(e) subject to the provisions of Sections 3(g) and 4 hereof: (i) locate, analyze and
select potential investments in Investment Assets; (ii) structure and negotiate the terms
and conditions of transactions pursuant to which investments in Investment Assets will be
made, purchased or acquired by the Company; (iii) make investments in Investment Assets on
behalf of the Company in compliance with the investment objectives and policies of the
Company; (iv) arrange for financing and refinancing of, make other changes in the asset or
capital structure of, dispose of, reinvest the proceeds from the sale of, or otherwise deal
with the investments in, Investment Assets; and (v) enter into leases and service contracts
for Properties and, to the extent necessary, perform all other operational functions for the
maintenance and administration of such Properties;
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(f) provide the Board with periodic reports regarding prospective investments in
Investment Assets; the occurrence of any Triggering Event during the prior fiscal quarter;
and the amounts of “dead deal” costs incurred by the Company during the prior fiscal
quarter;
(g) obtain the prior approval of the Board (including a majority of the Independent
Directors) for any and all investments in Property which do not meet all of the requirements
set forth in Section 4(b) hereof and obtain the prior approval of the Independent Directors
for all investments in Loans;
(h) negotiate on behalf of the Company with banks or lenders for loans to be made to
the Company, and negotiate on behalf of the Company with investment banking firms and
broker-dealers or negotiate private sales of Shares and Securities or obtain loans for the
Company, but in no event in such a way so that the Advisor shall be acting as broker-dealer
or underwriter; and provided, further, that any fees and costs payable to third parties
incurred by the Advisor in connection with the foregoing shall be the responsibility of the
Company;
(i) obtain reports (which may be prepared by the Advisor or its Affiliates), where
appropriate, concerning the value of investments or contemplated investments of the Company
in Investment Assets;
(j) obtain for, or provide to, the Company such services as may be required in
acquiring, managing and disposing of Investment Assets, including, but not limited to:
(i) the negotiation, making and servicing of Loans; (ii) the disbursement and collection of
Company monies; (iii) the payment of debts of and fulfillment of the obligations of the
Company; and (iv) the handling, prosecuting and settling of any claims of or against the
Company, including, but not limited to, foreclosing and otherwise enforcing mortgages and
other liens securing the Loans;
(k) from time to time, or at any time reasonably requested by the Board, make reports
to the Board of its performance of services to the Company under this Agreement;
(l) communicate on behalf of the Company with Shareholders as required to satisfy the
reporting and other requirements of any governmental bodies or agencies to Shareholders and
third parties and otherwise as requested by the Company;
(m) provide or arrange for administrative services and items, legal and other services,
office space, office furnishings, personnel and other overhead items necessary and
incidental to the Company’s business and operations;
(n) provide the Company with such accounting data and any other information requested
by the Company concerning the investment activities of the Company as shall be required to
prepare and to file all periodic financial reports and returns required to be filed with the
Securities and Exchange Commission and any other regulatory agency, including annual
financial statements;
(o) maintain the books and records of the Company;
(p) supervise the performance of such ministerial and administrative functions as may
be necessary in connection with the daily operations of the Properties and Loans;
(q) provide the Company with all necessary cash management services;
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(r) do all things necessary to assure its ability to render the services described in
this Agreement;
(s) perform such other services as may be required from time to time for management and
other activities relating to the assets of the Company as the Advisor shall deem advisable
under the particular circumstances;
(t) arrange to obtain on behalf of the Company as requested by the Board, and deliver
to or maintain on behalf of the Company copies of, all appraisals obtained in connection
with investments in Properties and Loans; and
(u) if a transaction, proposed transaction or other matter requires approval by the
Board or by the Independent Directors, deliver to the Board or the Independent Directors, as
the case may be, all documentation reasonably requested by them to properly evaluate such
transaction, proposed transaction or other matter.
(v) on an annual basis, no later than 90 days prior to the end of each term of this
Agreement, provide the Independent Directors with a report on (1) the Advisor’s performance
during the past year, (2) the compensation paid to the Advisor during such year and (3) any
proposed changes to the compensation to be paid to the Advisor during the upcoming year if
the Agreement is renewed. The Advisor’s report shall address, among other things, (a) those
matters identified in the Company’s organizational documents as matters which the
Independent Directors must review each year with respect to the Advisor’s performance and
compensation; (b) whether any Triggering Event occurred with respect to an Investment Asset
acquired during the past year; and (c) the “dead deal” costs incurred by the Company during
the past year. If a Triggering Event has occurred, the Independent Directors may consider
whether, after taking account of the overall performance of the Advisor during the past
year, they wish to request that the Advisor refund all or a portion of the Initial
Acquisition Fee paid by the Company in respect of such Investment Asset, and if the
Independent Directors make that request, the Advisor shall refund such amount to the Company
within 60 days after receipt of such request. In addition, the Independent Directors may
request that the Advisor refund certain of the dead deal costs incurred by the Company if,
in light of the circumstances under which such costs were incurred, the Independent
Directors determine that the Company should not bear such costs.
(a) Pursuant to the terms of this Agreement (and subject to the restrictions included
in Paragraphs (b), (c) and (d) of this Section 4 and in Section 7 hereof), and subject to
the continuing and exclusive authority of the Board over the management of the Company, the
Board hereby delegates to the Advisor the authority to: (1) locate, analyze and select
investment opportunities; (2) structure the terms and conditions of transactions pursuant to
which investments will be made or acquired for the Company; (3) acquire Property, make or
acquire Loans and make or acquire Other Permitted Investment Assets in compliance with the
investment objectives and policies of the Company; (4) arrange for financing or refinancing,
or make changes in the asset or capital structure of, and dispose of or otherwise deal with,
Investment Assets; (5) enter into leases and service contracts for Properties, and perform
other property level operations; (6) oversee non-affiliated property managers and other
non-affiliated Persons who perform services for the Company; and (7) undertake accounting
and other record-keeping functions at the Investment Asset level.
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(b) The consideration paid for an Investment Asset acquired by the Company shall
ordinarily be based on the fair market value thereof. Consistent with the foregoing
provision, the Advisor may, without further approval by the Board (except with respect to
transactions subject to paragraphs (c) and (d)) invest on behalf of the Company in an
Investment Asset so long as, in the Advisor’s good faith judgment, (i) the Total Property
Cost of such Investment Asset does not exceed the fair market value thereof, and in the case
of an Investment Asset that is a Property, shall in no event exceed the Appraised Value of
such Property and (ii) the Investment Asset, in conjunction with the Company’s other
investments and proposed investments, at the time the Company is committed to purchase or
originate the Investment Asset, is reasonably expected to fulfill the Company’s investment
objectives and policies as established by the Board and then in effect. For purposes of the
foregoing, Total Property Cost shall be measured at the date the Investment Asset is
acquired and shall exclude future commitments to fund improvements. Investments not meeting
the foregoing criteria must be approved in advance by the Board.
(c) Notwithstanding anything to the contrary contained in this Agreement, the Advisor
shall not cause the Company to make investments that do not comply with Article VIII
(Restrictions on Investments and Activities) and related sections of the Bylaws.
(d) The prior approval of the Board, including a majority of the Independent Directors
and a majority of the Directors not interested in the transaction, will be required for:
(i) investments in Properties made through co-investment or joint venture arrangements with
the Sponsor, the Advisor or any of their Affiliates; (ii) investments in Investment Assets
which are not contemplated by the terms of a Prospectus; (iii) transactions that present
issues which involve conflicts of interest for the Advisor or an Affiliate (other than
conflicts involving the payment of fees or the reimbursement of expenses); (iv) investments
in equity securities; (v) the lease of assets to the Sponsor, any Director, the Advisor or
any Affiliate of the Advisor; (vi) any purchase or sale of an Investment Asset from or to
the Advisor or an Affiliate; and (vii) the retention of any Affiliate of the Advisor to
provide services to the Company not expressly contemplated by this Agreement and the terms
of such services by such Affiliate. In addition, the Advisor shall comply with any further
approval requirements set forth in the Bylaws.
(e) The Board may, at any time upon the giving of notice to the Advisor, modify or
revoke the authority set forth in this Section 4. If and to the extent the Board so
modifies or revokes the authority contained herein, the Advisor shall henceforth comply with
such modification or revocation, provided however, that such modification or revocation
shall be effective upon receipt by the Advisor and shall not be applicable to investment
transactions to which the Advisor has committed the Company prior to the date of receipt by
the Advisor of such notification.
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third party at the time such Asset Management Fee was earned or, if an appraisal has
not yet been made and accepted by the Company, (ii) $10 per share. Any part of the Asset
Management Fee that has been subordinated pursuant to this subsection (a) shall not be
deemed earned until such time as payable hereunder.
(c) SUBORDINATED ACQUISITION FEE. In addition to the Acquisition Fee described in
Section 9(b) above, the Advisor may receive as additional compensation in connection with
the investigation, selection, acquisition or origination (by purchase, investment or
exchange) of Properties and Loans a Subordinated Acquisition Fee payable by the Company to
the Advisor or its Affiliates (the “Subordinated Acquisition Fee”). The total Subordinated
Acquisition Fees paid may not exceed two percent of the aggregate Total Property Cost of all
Properties and Loans purchased and originated by the Company, measured at such time as the
Company shall have completed all Offerings (other than pursuant to its dividend reinvestment
plan) and invested substantially all of the net proceeds of such Offerings, unless a
majority of the Directors (including a majority of the Independent Directors) not otherwise
interested in any transaction approves the excess as being commercially competitive, fair
and reasonable to the Company. The unpaid portion of the Subordinated Acquisition Fee
payable to the Advisor and its Affiliates with respect to any Property or Loan shall bear
interest at the rate of six percent per annum from the date of acquisition of such Property
or Loan until such portion is paid. Subject to the following sentence, the Subordinated
Acquisition Fee with respect to any Investment Asset shall be payable in equal annual
installments on January 1 of each of the eight calendar years following the first
anniversary of the date such Asset was purchased; accrued interest on all unpaid
Subordinated Acquisition Fees shall also be payable on such dates. The portion of the
Subordinated Acquisition Fees, and accrued interest thereon, otherwise payable on any
January 1 shall be payable only if the Preferred Return through the end of the fiscal year
preceding such January 1 has been met. Any portion of the Subordinated Acquisition Fees,
and accrued interest thereon, not paid due to the Company’s failure to meet the Preferred
Return through any fiscal year end shall be paid by the Company on the January 1 following
the first fiscal year thereafter through which the Preferred Return has been met.
(d) SIX PERCENT LIMITATION. The total amount of Acquisition Fees plus Subordinated
Acquisition Fees and any interest thereon, whether payable to the Advisor or a third party,
and Acquisition Expenses may not exceed six percent of the sum of the aggregate Contract
Purchase Price of all Properties and Loans, measured for the period beginning on the date of
the initial acquisition of a Property or Loan by the Company and ending on each December 31
after the date hereof, unless a majority of the Directors (including a majority of the
Independent Directors) not otherwise interested in any transaction approves the excess as
being commercially competitive, fair and reasonable to the Company.
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A refinancing will qualify for a Loan Refinancing Fee only if the refinanced loan is
secured by Property and (i) the maturity date of the refinanced loan (which must have a term
of five years or more) is less than one year from the date of the refinancing; or (ii) the
terms of the new loan represent, in the judgment of a majority of the Independent Directors,
an improvement over the terms of the refinanced loan; or (iii) the new loan is approved by
the Board, including a majority of the Independent Directors and, in each case, the Loan
Refinancing Fee is found, in the judgment of a majority of the Independent Directors, to be
in the best interest of the Company.
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or origination of Other Permitted Investments a fee (the “Other Permitted Investment
Assets Fee”) that shall be negotiated in good faith by the Advisor and the Company and
approved by the Board (including a majority of the Independent Directors) on a case by case
basis; provided that such compensation shall be on terms not more favorable, taken as a
whole, than what the Advisor receives in respect of investments in Properties and Loans.
(i) SUBORDINATED INCENTIVE FEE. A fee shall be payable to the Advisor in an amount
equal to 15% of Cash from Sales distributable to Shareholders after Shareholders have
received a return of 100% of Initial Investor Capital (through liquidity or Distributions)
plus a Preferred Return through the date payment is made (the “Subordinated Incentive Fee”).
For these purposes the Shareholders will be deemed to have been provided liquidity if the
Shares are listed on a national security exchange or included for quotation on Nasdaq. In
the event the Shares are listed on a national securities exchange or included for quotation
on Nasdaq, the Advisor shall be paid the Subordinated Incentive Fee in an amount equal to
12% of the excess (the “Excess Return”) of (A) the sum (the “Hypothetical Return”) of (i)
the Market Value of the Company plus (ii) the total of the Distributions paid to
Shareholders from the Initial Closing Date until the date the Shares are listed or included
for quotation over (B) the sum of (i) 100% of Initial Investor Capital and (ii) the total
amount of the Distributions required to be paid to Shareholders in order to pay the
Preferred Return through the date the Market Value is determined. The Subordinated
Incentive Fee shall be increased to 13% of the Excess Return if the Hypothetical Return is
an amount sufficient to return to investors 100% of Initial Investor Capital plus a
Cumulative Return of 8% or more but less than 9%; 14% if the Hypothetical Return is an
amount sufficient to return 100% of Initial Investor Capital plus a Cumulative Return of 9%
or more but less than 10%; and 15% if the Hypothetical Return is an amount sufficient to
return 100% of Initial Investor Capital plus a Cumulative Return of 10% or more. The
Cumulative Return shall be measured from the Initial Closing Date through the last day on
which the Market Value is determined. The fee may only be paid if the average closing price
of the Shares over any consecutive three-month period ending within 24 months of the date of
listing is sufficient, when added to Distributions previously paid from the Initial Closing
Date through the end of such three-month period, to return 100% of Initial Investor Capital
plus a 6% Cumulative Return from the Initial Closing Date through the last day of such
three-month period. The return requirement will also be deemed satisfied if the total
Distributions paid by the Company has satisfied the Preferred Return requirement and the
Market Value of the Company equals or exceeds Adjusted Investor Capital. The Company shall
have the option to pay such fee in the form of a promissory note or as set forth in Section
9(l). The promissory note shall be fully amortizing over five years, provide for quarterly
payments and bear interest at the prime rate announced from time to time in The Wall Street
Journal.
15
(i) all Acquisition Expenses;
(ii) to the extent not otherwise included in Acquisition Expenses, all expenses
of whatever nature reasonably incurred and directly connected with the proposed
acquisition of any Investment that does not result in the actual acquisition of the
Investment Asset, including, without limitation, personnel costs;
(iii) expenses other than Acquisition Expenses incurred in connection with the
investment of the funds of the Company, including, without limitation, costs of
retaining industry or economic consultants and finder’s fees and similar payments,
to the
16
extent not paid by the seller of the Investment Asset or another third party,
regardless of whether such expenses were incurred in transactions where a fee is not
payable to the Advisor;
(iv) interest and other costs for borrowed money, including discounts, points
and other similar fees;
(v) taxes and assessments on income of the Company, to the extent paid or
advanced by the Advisor, or on Property and taxes as an expense of doing business;
(vi) costs associated with insurance required in connection with the business
of the Company or by the Directors;
(vii) expenses of managing and operating Properties owned by the Company,
whether payable to an Affiliate of the Advisor or a non-affiliated Person;
(viii) fees and expenses of legal counsel for the Company;
(ix) fees and expense of auditors and accountants for the Company;
(x) all expenses in connection with payments to the Directors and meetings of
the Directors and Shareholders;
(xi) expenses associated with listing the Shares and Securities on a securities
exchange or Nasdaq if requested by the Board;
(xii) expenses connected with payments of Distributions in cash or otherwise
made or caused to be made by the Board to the Shareholders;
(xiii) expenses of organizing, revising, amending, converting, modifying, or
terminating the Company or the Articles of Incorporation;
(xiv) expenses of maintaining communications with Shareholders, including the
cost of preparation, printing and mailing annual reports and other Shareholder
reports, proxy statements and other reports required by governmental entities;
(xv) expenses related to the Properties and Loans and other fees relating to
making investments including personnel and other costs incurred in Property or Loan
transactions where a fee is not payable to the Advisor other than as provided in
Section 10(b) hereof; and
(xvi) all other expenses the Advisor incurs in connection with providing
services to the Company, including reimbursement to the Advisor or its Affiliates
for the cost of rent, goods, materials and personnel incurred by them based upon the
compensation of the Persons involved and an appropriate share of overhead allocable
to those Persons as reasonably determined by the Advisor on a basis approved
annually by the Board (including a majority of the Independent Directors). No
reimbursement shall be made for the cost of personnel to the extent that such
personnel are used in transactions for which the Advisor receives a separate fee.
17
(b) Expenses incurred by the Advisor on behalf of the Company and payable pursuant to
this Section 10 shall be reimbursed quarterly to the Advisor within 60 days after the end of
each quarter, subject to the provisions of Section 13 hereof. The Advisor shall prepare a
statement documenting the Operating Expenses within 45 days after the end of each quarter.
(a) If Operating Expenses of the Company during the 12-month period ending on the last
day of any fiscal quarter of the Company exceed the greater of (i) two percent of the
Average Invested Assets during the same 12-month period or (ii) 25% of the Adjusted Net
Income of the Company during the same 12-month period, then subject to paragraph (b) of this
Section 13, such excess amount shall be the sole responsibility of the Advisor and the
Company shall not be liable for payment therefor.
(b) Notwithstanding the foregoing, to the extent that the Advisor becomes responsible
for any such excess amount or a portion thereof as provided in paragraph (a), if a majority
of the Independent Directors finds such excess amount justified based on such unusual and
non-recurring factors as they deem sufficient, the Company shall reimburse the Advisor in
future quarters for the full amount of such excess, or any portion thereof, but only to the
extent such reimbursement would not cause the Company’s Operating Expenses to exceed the
2%/25% Guidelines in the 12-month period ending on any such quarter. In no event shall the
Operating Expenses paid by the Company in any 12-month period ending at the end of a fiscal
quarter exceed the 2%/25% Guidelines.
(c) Within 60 days after the end of any twelve-month period referred to in
paragraph (a), the Advisor shall reimburse the Company for any amounts expended by the
Company in such twelve-month period that exceeds the limitations provided in paragraph
(a) unless the Independent Directors determine that such excess expenses are justified, as
provided in paragraph (b), and provided the Operating Expenses for such later quarter would
not thereby exceed the 2%/25% Guidelines.
(d) To the extent Organization and Offering Expenses payable by the Company exceed 15%
of the Gross Offering Proceeds, the excess will be paid by the Advisor.
(e) All computations made under paragraphs (a) and (b) of this Section 13 shall be
determined in accordance with generally accepted accounting principles applied on a
consistent basis.
(f) If the Advisor receives a Subordinated Incentive Fee for the sale of Property,
Adjusted Net Income, for purposes of calculating the Operating Expenses, shall exclude the
gain from the sale of such Property.
18
The Advisor shall be required to use its best efforts to present a continuing and suitable
investment program to the Company that is consistent with the investment policies and objectives of
the Company, but subject to the last sentence of the preceding paragraph, neither the Advisor nor
any Affiliate of the Advisor shall be obligated generally to present any particular investment
opportunity to the Company even if the opportunity is of character which, if presented to the
Company, could be taken by the Company.
If the Advisor or its Affiliates is presented with a potential investment which might be made
by the Company and by another investment entity which the Advisor or its Affiliates advises or
manages, the Advisor shall consider, among other things, the investment portfolio of each entity,
cash flow of each entity, the effect of the acquisition on the diversification of each entity’s
portfolio, rental payments during any renewal period, the estimated income tax effects of the
purchase on each entity, the policies of each entity relating to leverage, the funds of each entity
available for investment, the amount of equity required to make the investment and the length of
time such funds have been available for investment.
(a) If the Advisor shall breach this Agreement; provided that such breach (i) is of a
material term or condition of this Agreement and (ii) the Advisor has not cured such breach
19
within 30 days of written notice thereof or, in the case of any breach that cannot be
cured within 30 days by reasonable effort, has not taken all necessary action within a
reasonable time period to cure such breach;
(b) If the Advisor shall be adjudged bankrupt or insolvent by a court of competent
jurisdiction, or an order shall be made by a court of competent jurisdiction for the
appointment of a receiver, liquidator, or trustee of the Advisor, for all or substantially
all of its property by reason of the foregoing, or if a court of competent jurisdiction
approves any petition filed against the Advisor for reorganization, and such adjudication or
order shall remain in force or unstayed for a period of 30 days; or
(c) If the Advisor shall institute proceedings for voluntary bankruptcy or shall file a
petition seeking reorganization under the federal bankruptcy laws, or for relief under any
law for relief of debtors, or shall consent to the appointment of a receiver for itself or
for all or substantially all of its property, or shall make a general assignment for the
benefit of its creditors, or shall admit in writing its inability to pay its debts,
generally, as they become due.
Any notice of termination under Section 16 or 17 shall be effective on the date specified in
such notice, which may be the day on which such notice is given or any date thereafter. The
Advisor agrees that if any of the events specified in Section 17(b) or (c) shall occur, it shall
give written notice thereof to the Board within 15 days after the occurrence of such event.
(a) After the Termination Date, the Advisor shall not be entitled to compensation for
further services hereunder but shall be entitled to receive from the Company the following:
20
(i) all unpaid reimbursements of Organization and Offering Expenses and of
Operating Expenses payable to the Advisor;
(ii) all earned but unpaid Asset Management Fees payable to the Advisor prior
to the Termination Date;
(iii) all earned but unpaid Subordinated Acquisition Fees and interest thereon,
in each case payable to the Advisor relating to the acquisition of any Property
prior to the Termination Date;
(iv) all earned but unpaid Subordinated Disposition Fees payable to the Advisor
relating to the sale of any Property prior to the Termination Date;
(v) all earned but unpaid Loan Refinancing Fees payable to the Advisor relating
to the financing or refinancing of any Property prior to the Termination Date; and
(vi) all earned but unpaid Property Management Fees payable to the Advisor or
its Affiliates relating to the management of any property prior to the termination
of this Agreement.
(b) Notwithstanding the foregoing, if this Agreement is terminated by the Company for
Cause or by the Advisor other than for Good Reason, the Advisor will not be entitled to
receive the sums in Section 20(a) above.
(c) If this Agreement is terminated by the Company for any reason other than Cause, by
either party in connection with a Change of Control, or by the Advisor for Good Reason, the
Advisor shall be entitled to payment of the Termination Fee. Notwithstanding the foregoing,
the Advisor shall not be entitled to payment of the Termination Fee if:
(i) this Agreement is terminated because of failure of the Company and the
Advisor to establish, following good-faith negotiations pursuant to Section 9(k)
hereof, a fee structure appropriate for an entity with a perpetual life in the event
the Shares are listed on a national securities exchange or are included for
quotation on Nasdaq, or
(ii) the Subordinated Incentive Fee is paid to the Advisor as a result of the
listing of the Shares on a national securities exchange or their inclusion for
quotation on Nasdaq and this Agreement is terminated after such listing or
inclusion.
(d) Any and all amounts payable to the Advisor pursuant to Section 20(a) and Section
20(c) that, irrespective of the termination, were payable on a current basis prior to the
Termination Date either because they were not subordinated or all conditions to their
payment had been satisfied, shall be paid within 90 days after the Termination Date. All
other amounts payable to the Advisor pursuant to Section 20(a) and Section 20(c)shall be
paid in a manner determined by the Board, but in no event on terms less favorable to the
Advisor than those represented by a note (i) maturing upon the liquidation of the Company or
three years from the Termination Date, whichever is earlier, (ii) with no less than twelve
equal quarterly installments and (iii) bearing a fair, competitive and commercially
reasonable interest rate (the “Note”) . The Note, if any, may be prepaid by the Company at
any time prior to maturity with accrued interest to the date of payment but without premium
or penalty. Notwithstanding the foregoing, any
21
amounts that relate to Investment Assets (i) shall be an amount which provides
compensation to the Advisor only for that portion of the holding period for the respective
Investment Assets during which the Advisor provided services to the Company, (ii) shall not
be due and payable until the Investment Asset to which such amount relates is sold or
refinanced, and (iii) shall not bear interest until the Investment Asset to which such
amount relates is sold or refinanced. A portion of the amount shall be paid as each
Investment Asset owned by the Company on the Termination Date is sold. The portion of such
amount payable upon each such sale shall be equal to (i) such amount multiplied by (ii) the
percentage calculated by dividing the fair value (at the Termination Date) of the Investment
Asset sold by the Company divided by the total fair value (at the Termination Date) of all
Investment Assets owned by the Company on the Termination Date.
(e) The Advisor shall promptly upon termination:
(i) pay over to the Company all money collected and held for the account of the
Company pursuant to this Agreement, after deducting any accrued compensation and
reimbursement for its expenses to which it is then entitled;
(ii) deliver to the Board a full accounting, including a statement showing all
payments collected by it and a statement of all money held by it, covering the
period following the date of the last accounting furnished to the Board;
(iii) deliver to the Board all assets, including Properties and Loans, and
documents of the Company then in the custody of the Advisor; and
(iv) cooperate with the Company to provide an orderly management transition.
(i) The Advisor or Affiliate has determined, in good faith, that the course of
conduct which caused the loss or liability was in the best interests of the Company;
(ii) The Advisor or the Affiliate was acting on behalf of or performing
services for the Company; and
(iii) Such liability or loss was not the result of negligence or misconduct by
the Advisor or the Affiliate.
(b) Notwithstanding the foregoing, the Advisor and its Affiliates shall not be
indemnified by the Company for any losses, liabilities or expenses arising from or out of
the alleged violation of federal or state securities laws unless one or more of the
following conditions are met:
(i) There has been a successful adjudication on the merits of each count
involving alleged securities law violations as to the particular indemnitee;
22
(ii) Such claims have been dismissed with prejudice on the merits by a court of
competent jurisdiction as to the particular indemnitee; or
(iii) A court of competent jurisdiction approves a settlement of the claims
against a particular indemnitee and finds that indemnification of the settlement and
the related costs should be made, and the court considering the request for
indemnification has been advised of the position of the Securities and Exchange
Commission and of the published position of any state securities regulatory
authority in which securities of the Company were offered or sold as to
indemnification for violation of securities laws.
(c) The Company shall advance funds to the Advisor or its Affiliates for legal expenses
and other costs incurred as a result of any legal action for which indemnification is being
sought only if all of the following conditions are satisfied:
(i) The legal action relates to acts or omissions with respect to the
performance of duties or services on behalf of the Company;
(ii) The legal action is initiated by a third party who is not a Shareholder or
the legal action is initiated by a Shareholder acting in his or her capacity as such
and a court of competent jurisdiction specifically approves such advancement; and
(iii) The Advisor or the Affiliate undertakes to repay the advanced funds to
the Company, together with the applicable legal rate of interest thereon, in cases
in which such Advisor or Affiliate is found not to be entitled to indemnification.
(d) Notwithstanding the foregoing, the Advisor shall not be entitled to indemnification
or be held harmless pursuant to this Section 21 for any activity which the Advisor shall be
required to indemnify or hold harmless the Company pursuant to Section 22.
(e) Any amounts paid pursuant to this Section 21 shall be recoverable or paid only out
the net assets of the Company and not from Shareholders.
To the Board and to the Company: |
Corporate Property Associates 14 Incorporated 00 Xxxxxxxxxxx Xxxxx Xxx Xxxx, XX 00000 |
|||
To the Advisor: | Xxxxx Asset Management Corp. 00 Xxxxxxxxxxx Xxxxx |
00
Xxx Xxxx, XX 00000
Either party may at any time give notice in writing to the other party of a change in its
address for the purposes of this Section 23.
26. CONSTRUCTION. This Agreement shall be governed by, construed and enforced in accordance
with the laws of the State of New York.
28. INDULGENCES, NOT WAIVERS. Neither the failure nor any delay on the part of a party to
exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude
any other or further exercise of the same or of any other right, remedy, power or privilege, nor
shall any waiver of any right, remedy, power or privilege with respect to any occurrence be
construed as a waiver of such right, remedy, power or privilege with respect to any other
occurrence. No waiver shall be effective unless it is in writing and is signed by the party
asserted to have granted such waiver.
32. NAME. W.P. Xxxxx & Co. LLC has a proprietary interest in the name “Corporate Property
Associates” and “CPA(R)” Accordingly, and in recognition of this right, if at any time the Company
ceases to retain Xxxxx Asset Management Corp., or an Affiliate thereof to perform the services of
Advisor, the Company will, promptly after receipt of written request from Xxxxx Asset Management
Corp., cease to conduct business under or use the name “Corporate Property Associates” or “CPA(R)”
or any diminutive thereof and the Company shall use its best efforts to change the name of the
Company to a
24
name that does not contain the name “Corporate Property Associates” or “CPA(R)” or any other
word or words that might, in the sole discretion of the Advisor, be susceptible of indication of
some form of relationship between the Company and the Advisor or any Affiliate thereof. Consistent
with the foregoing, it is specifically recognized that the Advisor or one or more of its Affiliates
has in the past and may in the future organize, sponsor or otherwise permit to exist other
investment vehicles (including vehicles for investment in real estate) and financial and service
organizations having “Corporate Property Associates” or “CPA(R)” as a part of their name, all
without the need for any consent (and without the right to object thereto) by the Company or its
Directors.
25
IN WITNESS WHEREOF, the parties hereto have executed this Advisory Agreement as of the day and
year first above written.
CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED |
||||
By: | /s/ Xxxx X. XxXxxxxxx | |||
Name: | Xxxx X. XxXxxxxxx | |||
Title: | Managing Director and
Acting Chief Financial Officer |
|||
XXXXX ASSET MANAGEMENT CORP. |
||||
By: | /s/ Xxxxxx X. XxXxx | |||
Name: | Xxxxxx X. XxXxx | |||
Title: | President and Chief Executive Officer |
SCHEDULE A
This Schedule sets forth the terms governing any Shares issued by the Company to the Advisor
in payment of advisory fees set forth in the Agreement.
(i) any “person,” as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other
than the Company, any of its subsidiaries, any trustee, fiduciary or other person or entity holding
securities under any employee benefit plan of the Company or any of its subsidiaries), together
with all “affiliates” and “associates” (as such terms are defined in Rule 14b-2 under the Exchange
Act) of such person, shall become the “beneficial owner” (as such term is defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Company representing 25% or
more of either (A) the combined voting power of the Company’s then outstanding securities having
the right to vote in an election of the Board (“Voting Securities”) or (B) the then outstanding
common stock of the Company (in either such case other than as a result of acquisition of
securities directly from the Company);
(ii) persons who, as of the date hereof, constitute the Board (the “Incumbent Directors”)
cease for any reason, including without limitation, as a result of a tender offer, proxy contest,
merger or similar transaction, to constitute at least a majority of the Board, provided that any
person becoming a director of the Company subsequent to the date hereof whose election or
nomination for election was approved by a vote of at least a majority of the Incumbent Directors
shall be considered an Incumbent Director; or
(iii) the stockholders of the Company shall approve (A) any consolidation or merger of the
Company or any subsidiary where the stockholders of the Company, immediately prior to the
consolidation or merger, would not, immediately after the consolidation or merger, beneficially own
(as such term is defined in Rule 13d-3 under the Exchange Act), directly or indirectly, shares
representing in the aggregate 50% or more of the voting equity of the entity issuing cash or
securities in the consolidation or merger (or of its ultimate parent entity, if any), (B) any sale,
lease, exchange or other transfer (in one transaction or a series of transactions contemplated or
arranged by any party as a single plan) of all or substantially all of the assets of the Company or
(C) any plan or proposal for the liquidation or dissolution of the Company.
Notwithstanding the foregoing, a “Change of Control” shall not be deemed to have occurred for
purposes of the foregoing clause (i) solely as the result of an acquisition of securities by the
Company which, by reducing the number of Shares of Common Stock outstanding, increases (A) the
proportionate number of Shares beneficially owned by any person to 25% or more of the Shares then
outstanding, or
Sch A-1
(B) the proportionate voting power represented by the Shares beneficially owned by any person
to 25% or more of the combined voting power of all then outstanding voting Securities; provided,
however, that if any person referred to in clause (A) or (B) of this sentence shall thereafter
become the beneficial owner of any additional Shares or other Voting Securities (other than
pursuant to a Share split, Share dividend, or similar transaction), then a “Change of Control”
shall be deemed to have occurred for purposes of the foregoing clause (i).
3. Exception. Notwithstanding anything else in this Agreement to the contrary, the Shares
shall continue to vest according to the vesting schedule in Section 1 regardless of: (a) the
expiration of the Advisory Agreement for any reason other than a termination by the Company for
Cause or a resignation by the Advisor for other than Good Reason, (b) the merger of the Company and
an Affiliate of the Company or (c) any “Change of Control” of the Company in connection with a
merger with an Affiliate of the Company.
Sch A-2