EXHIBIT 10.3
ADVISORY SERVICE AGREEMENT
This Advisory Service Agreement ("Agreement") is made as of this 20th day
of October 1997, by and between Xxxxxxx Bank (the "Advisor"), a federal savings
bank with an office located at Waterbury, CT and Xxxxxxx Preferred Capital
Corporation ("WPCC"), a Connecticut corporation with an office located at
Waterbury, CT.
WITNESSETH THAT:
WHEREAS, WPCC intends to qualify as a "real estate investment trust"
("REIT") under the Internal Revenue Code of 1986, as amended (the "Code");
WHEREAS, WPCC desires to obtain from the Advisor various advisory and
management services to avail itself of the experience and assistance of the
Advisor and to have the Advisor undertake, on WPCC's behalf, the duties and
responsibilities hereinafter set forth, subject to the control and supervision
of the Board of Directors of WPCC as provided for herein; and
WHEREAS, the Advisor desires to render such advisory and management
services to the Company subject to the control and supervision of the Board of
Directors of WPCC, on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth and other good and valuable consideration, the parties
hereby agree as follows:
1. TERM.
The term of this Agreement shall commence as of October 20, 1997 and shall
continue until October 19, 1999. Unless a notice to terminate this Agreement is
sent by either party to the other party at least ninety (90) days prior to
October 19, 1999, this Agreement shall be automatically renewed for a one year
period. Thereafter, the Agreement shall continue to be automatically renewed for
successive one year periods unless a termination notice is sent by either party
to the other party at least ninety (90) days prior to the end of the then
existing renewal term.
2. ADVISORY SERVICES.
The Advisor shall consult with the Board of Directors and the officers of
WPCC and shall, at the request of the Board of Directors and/or the officers of
WPCC, furnish advice and recommendations with respect to all aspects of the
business and affairs of WPCC. Subject to the control and discretion and at the
request of the Board of Directors of WPCC, the Advisor shall provide the
following services (together with the services set forth in Section 6 and
Section 7 hereof, the "Services"):
(a) administer the day-to-day operations and affairs of WPCC, including
without limitation the performance or supervision of the functions
described in this Section 2;
(b) monitor the credit quality of the real estate mortgage assets held by
WPCC;
(c) advise WPCC with respect to the acquisition, management, financing and
disposition of WPCC's real estate mortgage assets;
(d) establish and provide necessary services for WPCC, including executive,
administrative, human resource, accounting and control, technical
support, secretarial, recordkeeping, copying, mailing and distribution
facilities;
(e) provide WPCC with office space pursuant to a lease, conference room
facilities, office equipment and supplies (including computers, copy
machines and fax machines) and personnel necessary for the Services to be
performed by the Advisor hereunder and to perform the daily business of
WPCC;
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(f) arrange for the investment and management of any short-term investments
of WPCC and provide any investment and fund management services in a
manner consistent with Exhibit D to the Master Service Agreement, dated
March 17, 1997, between the Advisor and WPCC;
(g) monitor and supervise the performance of all parties who have contracts
to perform services for WPCC, provided that the Advisor shall have no
duty to assume the obligations or guarantee the performance of such
parties under such contracts;
(h) establish and maintain such bank accounts in the name of WPCC as may be
required by WPCC and approved by the Board of Directors of WPCC and
ensure that all funds collected by the Advisor in the name of or on
behalf of WPCC shall be held in trust and shall not be commingled with
the Advisor's own funds or accounts;
(i) arrange for the execution and delivery of such documents and instruments
by the officers of WPCC as may be required in order to perform the
functions herein described and to take any other required action
contemplated by the terms of this Agreement;
(j) arrange for insurance for WPCC including liability insurance, errors and
omissions policies and officers and directors policies, which shall cover
and insure WPCC, members of the Board of Directors and the officers of
WPCC in amounts and with deductibles and insurers approved by the Board
of Directors of WPCC;
(k) maintain proper books and records of WPCC's affairs and furnish or cause
to be furnished to the Board of Directors such periodic reports and
accounting information as may be required from time to time by the Board
of Directors of WPCC, including, but not limited to, quarterly reports of
all income, expenses and distributions of WPCC;
(l) consult and work with legal counsel for WPCC in implementing WPCC
decisions and undertaking measures consistent with all pertinent federal,
state and local laws and rules or regulations of governmental or
quasi-governmental agencies, including, but not limited to, federal and
state securities laws, the Code as it relates to WPCC's qualification as
a REIT, and the regulations promulgated under each of the foregoing;
(m) consult and work with independent accountants for WPCC in connection with
the preparation of financial statements, annual reports and tax returns;
(n) prepare and distribute in consultation with the independent accountants
for WPCC, annual reports to stockholders which contain audited financial
statements;
(o) furnish reports to the Board of Directors of WPCC, which include reports
concerning WPCC's investments;
(p) maintain custody of the documents related to WPCC's mortgage assets; and
(q) as reasonably requested by WPCC, make reports to WPCC of its performance
of the foregoing Services and furnish advice and recommendations with
respect to other aspects of the business of WPCC.
3. OPERATING EXPENSES; EXPENSES OF THE ADVISOR.
(a) "Operating Expenses" for any period means all of the operating expenses
of WPCC (with the exception of those expenses to be borne by the Advisor
in accordance with Section 3(b) hereof), including without limitation,
the following:
(i) interest, taxes and other expenses incurred in connection with the
real estate mortgage assets of WPCC;
(ii) expenses related to the officers, directors and employees of WPCC,
including without limitation any fees or expenses of the directors;
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(iii) fees and expenses payable to accountants, appraisers, external
auditors, consultants, attorneys, collection and paying agents and
all other persons who contract with or are retained by WPCC or by
the Advisor on behalf of WPCC;
(iv) legal and other expenses incurred in connection with advice
concerning, obtaining or maintaining WPCC's status as a REIT, the
determination of WPCC's taxable income, any formal or informal
administrative action or legal proceedings which involve a
challenge to the REIT status of WPCC or any claim that the
activities of WPCC, any member of the Board of Directors or any
officer of WPCC were improper;
(v) expenses relating to communications and reports to stockholders of
WPCC, including without limitation the costs of preparing,
printing, duplicating and mailing the certificates for the stock of
WPCC, proxy solicitation materials and reports to stockholders, and
the costs of arranging meetings of stockholders;
(vi) the costs of insurance described in Section 2 hereof, including
directors and officers liability insurance covering the directors
and officers of WPCC;
(vii) expenses relating to the acquisition, disposition and ownership of
real estate mortgage assets of WPCC, including, without limitation
and to the extent not paid by others, legal fees and other expenses
for professional services and fees;
(viii)expenses connected with the payments of dividends or interest or
distributions in cash or any other form made or caused to be made
by the Board of Directors to the stockholders of WPCC;
(ix) expenses connected with any office or office facilities maintained
by WPCC separate from the office of the Advisor, including without
limitation rent, telephone, utilities, office furniture and
equipment and machinery; and
(x) other miscellaneous expenses of WPCC which are not expenses of the
Advisor under Section 3(b) hereof.
(b) Without regard to the compensation received pursuant to Section 4
hereof, the Advisor shall bear the following expenses:
(i) employment expenses of the personnel employed by the Advisor,
including without limitation salaries, wages, payroll taxes and the
cost of employee benefit plans; and
(ii) rent, telephone equipment, utilities, office furniture and
equipment and machinery and other office expenses of the Advisor
incurred in connection with the maintenance of any office facility
of the Advisor.
(c) WPCC shall reimburse the Advisor within 30 days of a written request by
the Advisor for any Operating Expenses paid or incurred by the Advisor on behalf
of WPCC.
4. FEES.
(a) An annual advisory fee of $150,000 shall be payable by WPCC to the
Advisor for Services rendered by the Advisor hereunder. Payment by WPCC is due
and payable monthly upon receipt of an invoice from the Advisor.
(b) The Advisor may revise the rate set forth in Paragraph 4(a) above to
reflect changes in the actual costs incurred by the Advisor in providing the
Services to WPCC.
5. PERFORMANCE OF SERVICES; CHANGES.
(a) In performing Services under this Agreement, the scope of work
undertaken by the Advisor and the manner of its performance shall be
substantially the same as for similar work performed by the Advisor for
transactions on its own behalf, with such modifications as may be appropriate in
order to accomplish the purposes of this Agreement.
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(b) The Advisor shall give WPCC reasonable notice of all changes affecting
WPCC's activities as these changes pertain to the Services. If a change referred
to in Paragraph 5(a) above (including a revision of the annual advisory fee
pursuant to Section 4(b) hereof) is not acceptable to WPCC, WPCC may terminate
this Agreement upon thirty (30) days' notice, provided such notice is given
within ten (10) days after WPCC has received notice of the change.
6. MAINTENANCE OF RECORDS; EXAMINATIONS.
The advisor shall at all times, establish and maintain appropriate books of
account, records and accounting practices related to the Services performed
hereunder and permit such examinations as may be required by relevant state and
federal agencies. Such books and records shall be accessible for inspection by
the Board of Directors of WPCC and representatives of WPCC at all times. It is
understood and agreed that the performance of the Services is or might be
subject to regulation and examination by authorized representatives of state and
federal agencies, including but not limited to, the Office of Thrift Supervision
and the Federal Deposit Insurance Corporation. Each party is and shall be
authorized to submit or furnish to any such regulatory agency reports,
information, assurances and other data as may be required by or reasonably
requested of it under applicable laws and regulations, including, without
limitation, any appropriate notifications concerning the initiation or
termination of this Agreement or any of the Services provided to WPCC.
7. REIT QUALIFICATION AND COMPLIANCE.
The Advisor shall consult and work with WPCC's legal counsel in maintaining
WPCC's qualification as a REIT. Notwithstanding any other provisions of this
Agreement to the contrary, the Advisor shall refrain from any action which, in
its reasonable judgment or in the judgment of the Board of Directors of WPCC (of
which the Advisor has received written notice), would adversely affect the
qualification of WPCC as a REIT or which would violate any law, rule or
regulation of any governmental body or agency having jurisdiction over WPCC or
its securities, or which would otherwise not be permitted by the amended and
restated certificate of incorporation or by-laws of WPCC. Furthermore, the
Advisor shall take any action which, in its judgment or the judgment of the
Board of Directors of WPCC (of which the Advisor has received written notice),
may be necessary to maintain the qualification of WPCC as a REIT or prevent the
violation of any law or regulation of any governmental body or agency having
jurisdiction over WPCC or its securities.
8. SUBCONTRACTING.
The advisor may at any time subcontract all or a portion of its obligations
under this agreement to one or more affiliates of the Advisor that are involved
in the business of managing real estate mortgage assets without the consent of
WPCC. If no affiliate of the Advisor is engaged in the business of managing real
estate mortgage assets, the Advisor may, with the approval of a majority of the
Board of Directors of WPCC, subcontract all or a portion of its obligations
under this Agreement to unrelated third parties. Notwithstanding the foregoing,
the Advisor will not, in connection with subcontracting any of its obligations
under this Agreement, be discharged or relieved in any respect from its
obligations under this Agreement.
9. OTHER ACTIVITIES OF THE ADVISOR.
(a) Nothing herein contained shall prevent the Advisor, an affiliate of the
Advisor or an officer, director, employee or stockholder of the Advisor from
engaging in any activity, including without limitation originating, purchasing
and managing real estate mortgage assets, rendering of services and investment
advice with respect to real estate investment opportunities to any other person
(including other REITs) and managing other investments (including the
investments of the Advisor and its affiliates).
(b) Officers, directors, employees, stockholders and agents of the Advisor
or of any affiliate of the Advisor may serve as officers, directors, employees
or agents of WPCC, but shall receive no compensation (other than reimbursement
for expenses) from WPCC for such service.
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10. LIMITATIONS OF LIABILITY.
THE ADVISOR SHALL USE ITS BEST EFFORTS TO PROVIDE COMPETENT PERSONNEL AND
RELIABLE EQUIPMENT FOR THE purpose of performing Services for WPCC under this
Agreement. The liability of the Advisor to WPCC for any loss due to the
Advisor's performing or failing to perform the Services shall be limited to
those losses sustained by WPCC which are a direct result of the Advisor's
negligence or willful misconduct. Because of the nature of the Services to be
performed hereunder and because of the impracticability, difficulty or
impossibility of ascertaining and measuring the Advisor's liability to WPCC or
any third party for any loss or damage by reason of any error caused by the
Advisor's negligence or otherwise, the parties hereby agree that under no
circumstances shall the Advisor be liable for any consequential or special
damages and in no event shall the Advisor's total combined liability to WPCC for
all claims arising under or in connection with this Agreement be more than the
total amount of all fees payable by WPCC to the Advisor under this Agreement
during the year immediately preceding the year in which the first claim giving
rise to any such liability arises. For purposes of this Section 10, a "year"
shall be deemed to begin on October 20th and run until October 19th of the
ensuing calendar year. If the Advisor carries insurance against the type of loss
incurred, WPCC agrees to cooperate in furnishing proof of loss in a form
satisfactory to the Advisor's insurance company and to assist the Advisor and
its insurance company in settlement of this claim.
11. FORCE MAJEURE.
Neither party shall be responsible for any resulting loss if fulfillment of
any term or provision of this agreement is delayed or prevented by fire, flood,
earthquake, act of God, labor difficulties or by any other cause not within the
control of the party whose performance is delayed or prevented. If the foregoing
shall occur and such situations shall continue to prevent performance for a
continuous period of sixty (60) days, then either party may notify the other
party of its intention to terminate this Agreement and this Agreement shall
terminate upon receipt of such notice.
12. DEFAULT; REMEDIES.
(a) The occurrence of any of the following shall be an event of default
("Event of Default") hereunder:
(i) the failure of WPCC to pay any fee or charge within 30 days after
its receipt of an invoice or written request for reimbursement from
the Advisor for fees or expenses reimbursable hereunder;
(ii) the filing of a petition in bankruptcy by or against either party
or the appointment of a receiver for either party which petition or
appointment is not discharged within thirty (30) days; or
(iii) a material breach by either party of any of its obligations
hereunder.
(b) In the event of any Event of Default, the non-breaching party shall
provide a written notice of such Event of Default and a demand that such Event
of Default be cured. In the event that the breaching party fails in good faith
to cure such Event of Default within fifteen (15) days following receipt of such
notice and demand, the non-defaulting party may terminate this Agreement by
notice to the defaulting party.
(c) In the event of a termination by either party pursuant to this Section
12(b), WPCC shall nonetheless remain liable for the payment to the Advisor of
all reasonable outstanding fees and charges as of the date of such termination.
13. INDEPENDENT CONTRACTOR.
In performing the Services, the Advisor shall be deemed to have an
independent contractual relationship with WPCC and shall not be deemed to have
any contractual or other relationship with WPCC's mortgagors. Nothing in this
Agreement shall be deemed to create a joint venture or partnership between the
parties. In no event shall any of WPCC's mortgagors be considered a third party
beneficiary of this Agreement. To the extent that third parties may make claims
against the Advisor arising out of the Services provided hereunder, WPCC agrees
to indemnify and hold harmless the Advisor from and against all loss, liability,
claim, action, demand, or suits, including attorney's fees arising therefrom.
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14. RELATIONSHIP OF PARTIES; ASSIGNMENT.
Each of the parties hereto hereby acknowledges that it is an affiliate of
the other party hereto. WPCC shall not assign this Agreement nor any of its
rights or obligations hereunder without the prior written consent of the
Advisor. The Advisor may assign this Agreement and any of its rights and
obligations (including, without limitation, its obligation to provide Services)
to any affiliate of WPCC. In the event WPCC is no longer an affiliate of the
Advisor or its successors or assigns, this Agreement shall automatically
terminate.
15. SEVERABILITY.
Whenever possible, each provision of the Agreement shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Agreement is held to be prohibited by or invalid under
applicable law, such provision will be in effect only to the extent of such
prohibition or invalidity, without invalidating the remainder of the provisions
of this Agreement.
16. CONFIDENTIALITY.
The Advisor shall regard and preserve as confidential all data of a
proprietary and/or confidential nature related to the business of WPCC. The
Advisor will take the same precautions to preserve such confidential information
as it takes with respect to the Advisor's own confidential information.
17. NOTICES.
All notices to be sent under this Agreement shall be mailed by first class
mail, postage prepaid and addressed as follows:
If to the Advisor: Xxxxx X. Xxxxxxxx
Executive Vice President
Xxxxxxx Bank
Xxxxxxx Plaza
000 Xxxx Xxxxxx
Xxxxxxxxx, XX 00000
If to WPCC: Xxxxxxx X. Xxxxx
Vice President and Secretary
Xxxxxxx Preferred Capital Corporation
000 Xxxx Xxxxxx
Xxxxxxxxx, XX 00000
Either party may give written notice to the other to change the place of the
mailing of such notices.
18. ENTIRE AGREEMENT.
This Agreement constitutes the entire agreement of the parties hereto. It
shall supersede any and all other previous writings and communications between
the parties.
19. AMENDMENT.
No modification or amendment of this Agreement shall be valid unless such
modification or amendment is in writing and executed by both parties.
20. GOVERNING LAW.
This Agreement shall be governed by, and construed and enforced in
accordance with, the laws of the State of Connecticut.
21. HEADINGS.
The section headings herein have been inserted for convenience of reference
only and shall not be construed to affect the meaning, construction or effect of
this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their authorized representatives as of the date first written above.
XXXXXXX BANK
By:
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Name: Xxxxx X. Xxxxxxxx
Title: Executive Vice President
XXXXXXX PREFERRED CAPITAL CORPORATION
By:
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Name: Xxxxxxx X. Xxxxx
Title: Vice President and Secretary
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