Exhibit 10.2
Form of Advisory Agreement
FORM OF ADVISORY AGREEMENT
THIS ADVISORY AGREEMENT, dated as of ________________, 1997, is between
CNL AMERICAN REALTY FUND, INC., a corporation organized under the laws of the
State of Maryland (the "Company") and CNL REAL ESTATE ADVISORS, INC., a
corporation organized under the laws of the State of Florida (the "Advisor").
W I T N E S S E T H
WHEREAS, the Company has filed with the Securities and Exchange
Commission a Registration Statement (No. 333-9943) on Form S-11 covering
16,500,000 of its common shares ("Shares"), par value $.01, to be offered to the
public, and the Company may subsequently issue securities other than such Shares
("Securities") or otherwise raise additional capital;
WHEREAS, the Company intends to qualify as a REIT (as defined below),
and to invest its funds in investments permitted by the terms of the
Registration Statement and Sections 856 through 860 of the Code (as defined
below);
WHEREAS, the Company desires to avail itself of the experience, sources
of information, advice, assistance and certain facilities available to the
Advisor and to have the Advisor undertake the duties and responsibilities
hereinafter set forth, on behalf of, and subject to the supervision, of the
Board of Directors of the Company all as provided herein; and
WHEREAS, the Advisor is willing to undertake to render such services,
subject to the supervision of the Board of Directors, on the terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements contained herein, the parties hereto agree as follows:
(1) Definitions. As used in this Advisory Agreement (the
"Agreement"), the following terms have the definitions hereinafter indicated:
Acquisition Expenses. Any and all expenses incurred by the Company, the
Advisor, or any Affiliate of either in connection with the selection or
acquisition of any Property or the making of any Mortgage Loan, whether or not
acquired, including, without limitation, legal fees and expenses, travel and
communications expenses, costs of appraisals, nonrefundable option payments on
property not acquired, accounting fees and expenses, and title insurance.
Acquisition Fees. Any and all fees and commissions, exclusive of
Acquisition Expenses, paid by any person or entity to any other person or entity
(including any fees or commissions paid by or to any Affiliate of the Company or
the Advisor) in connection with making or investing in Mortgage Loans or the
purchase, development or construction of a Property, including, without
limitation, real estate commissions, acquisition fees, finder's fees,
selection fees, development fees, construction fees, nonrecurring management
fees, consulting fees, loan fees, points, or any other fees or commissions of a
similar nature. Excluded shall be development fees and construction fees paid to
any person or entity not affiliated with the Advisor in connection with the
actual development and construction of any Property.
Advisor. CNL Real Estate Advisors, Inc., a Florida corporation, any
successor advisor to the Company, or any person or entity to which CNL Real
Estate Advisors, Inc. or any successor advisor subcontracts substantially all of
its functions.
Affiliate or Affiliated. As to any individual, corporation,
partnership, trust or other association (other than the Excess Shares Trust),
(i) any Person or entity directly or indirectly through one or more
intermediaries controlling, controlled by, or under common control with another
person or entity; (ii) any Person or entity, directly or indirectly owning or
controlling ten percent (10%) or more of the outstanding voting securities of
another Person or entity; (iii) any officer, director, partner, or trustee of
such Person or entity; (iv) any Person ten percent (10%) or more of whose
outstanding voting securities are directly or indirectly owned, controlled, or
held, with power to vote, by such other Person; and (v) if such other Person or
entity is an officer, director, partner, or trustee of a Person or entity, the
Person or entity for which such Person or entity acts in any such capacity.
Appraised Value. Value according to an appraisal made by an
Independent Appraiser.
Articles of Incorporation. The Articles of Incorporation of the Company
under Title 2 of the Corporations and Associations Article of the Annotated Code
of Maryland, as amended from time to time.
Asset Management Fee. The fee payable to the Advisor for day-to-day
professional management services in connection with the Company and its
investments in Properties , Mortgage Loans and any securitization vehicle
pursuant to this Agreement.
Assets. Properties, Mortgage Loans and Secured Equipment Leases,
collectively.
Average Invested Assets. For a specified period, the average of the
aggregate book value of the assets of the Company invested, directly or
indirectly, in equity interests in and loans secured by real estate before
reserves for depreciation or bad debts or other similar non-cash reserves,
computed by taking the average of such values at the end of each month during
such period.
Board of Directors or Board. The persons holding such office, as of any
particular time, under the Articles of Incorporation of the Company, whether
they be the Directors named therein or additional or successor Directors.
Bylaws. The bylaws of the Company, as the same are in effect from time
to time.
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Cause. With respect to the termination of this Agreement, fraud,
criminal conduct, willful misconduct or willful or negligent breach of fiduciary
duty by the Advisor, breach of this Agreement, a default by the Sponsor under
the guarantee by the Sponsor to the Company or the bankruptcy of the Sponsor.
Change of Control. A change of control of the Company of such 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, as enacted and in force on the date hereof (the "Exchange
Act"), 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) 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 of Directors of the Company; (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
of Directors of the Company; or (iv) there occurs a contested proxy solicitation
of the Stockholders of the Company that results in the contesting party electing
candidates to a majority of the Board of Directors' positions next up for
election.
Code. Internal Revenue Code of 1986, as amended from time to time, or
any successor statute thereto. Reference to any provision of the Code shall mean
such provision as in effect from time to time, as the same may be amended, and
any successor provision thereto, as interpreted by any applicable regulations as
in effect from time to time.
Company. CNL American Realty Fund, Inc., a corporation organized under
the laws of the State of Maryland.
Company Property. Any and all property, real, personal or otherwise,
tangible or intangible, including Mortgage Loans and Secured Equipment Leases,
which is transferred or conveyed to the Company (including all rents, income,
profits and gains therefrom), and which is owned or held by, or for the account
of, the Company.
Competitive Real Estate Commission. A real estate or brokerage
commission for the purchase or sale of property which is reasonable, customary,
and competitive in light of the size, type, and location of the property. The
total of all real estate commissions paid by the Company to all Persons
(including the Subordinated Disposition Fee payable to the Advisor) in
connection with any Sale of one or more of the Company's Properties shall not
exceed the lesser of (i) a Competitive Real Estate Commission or (ii) six
percent of the gross sales price of the Property or Properties.
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Contract Purchase Price. The amount actually paid or allocated (as of
the date of purchase) to the purchase, development, construction or improvement
of property, exclusive of Acquisition Fees and Acquisition Expenses.
Contract Sales Price. The total consideration received by the Company
for the sale of Company Property.
Director. A member of the Board of Directors of the Company.
Distributions. Any distributions of money or other property by the
Company to owners of Equity Shares, including distributions that may constitute
a return of capital for federal income tax purposes.
Equipment. The furniture, fixtures and equipment used at Restaurant
Chains and Hotel Chains.
Equity Interest. The stock of or other interests in, or warrants or
other rights to purchase the stock of or other interests in, any entity that has
borrowed money from the Company or that is a tenant of the Company or that is a
parent or controlling Person of any such borrower or tenant.
Equity Shares. Transferable shares of beneficial interest of the
Company of any class or series, including common shares or preferred shares.
Good Reason. With respect to the termination of this Agreement, (i) any failure
to obtain a satisfactory agreement from any successor to the Company to assume
and agree to perform the Company's obligations under this Agreement; or (ii) any
material breach of this Agreement of any nature whatsoever by the Company.
Gross Proceeds. The aggregate purchase price of all Shares sold for the
account of the Company through the Offering, without deduction for Selling
Commissions, volume discounts, the marketing support and due diligence expense
reimbursement fee or Organizational and Offering Expenses. For the purpose of
computing Gross Proceeds, the purchase price of any Share for which reduced
Selling Commissions are paid to the Managing Dealer or a Soliciting Dealer
(where net proceeds to the Company are not reduced) shall be deemed to be
$10.00.
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Hotel Chains. The national and regional hotel chains, primarily limited
service, extended stay and full service chains, to be selected by the Advisor,
and who themselves or their franchisees will either (i) lease Properties
purchased by the Company, (ii) become borrowers under Mortgage Loans, or (iii)
become lessees or borrowers under Secured Equipment Leases.
Independent Appraiser. A qualified appraiser of real estate as
determined by the Board. Membership in a nationally recognized appraisal society
such as the American Institute of Real Estate Appraisers ("M.A.I.") or the
Society of Real Estate Appraisers ("S.R.E.A.") shall be conclusive evidence of
such qualification.
Independent Director. A Director who is not and within the last two
years has not been directly or indirectly associated with the Advisor by virtue
of (i) ownership of an interest in the Advisor or its Affiliates, (ii)
employment by the Advisor or its Affiliates, (iii) service as an officer or
director of the Advisor or its Affiliates, (iv) performance of services, other
than as a Director, for the Company, (v) service as a director or trustee of
more than three real estate investment trusts advised by the Advisor, or (vi)
maintenance of a material business or professional relationship with the Advisor
or any of its Affiliates. A business or professional relationship is considered
material if the gross revenue derived by the Director from the Advisor and
Affiliates exceeds 5% of either the Company's annual gross revenue during either
of the last two years or the Director's net worth on a fair market value basis.
An indirect relationship shall include circumstances in which a Director's
spouse, parents, children, siblings, mothers- or fathers-in-law, sons- or
daughters-in-law, or brothers- or sistersin-law is or has been associated with
the Advisor, any of its Affiliates, or the Company.
Independent Expert. A person or entity with no material current or
prior business or personal relationship with the Advisor or the Directors and
who is engaged to a substantial extent in the business of rendering opinions
regarding the value of assets of the type held by the Company.
Invested Capital. The amount calculated by multiplying the total number
of Shares purchased by stockholders by the issue price, reduced by the portion
of any Distribution that is attributable to Net Sales Proceeds and by any
amounts paid by the Company to repurchase Shares pursuant to the Company's plan
for redemption of Shares.
Joint Ventures. The joint venture or general partnership arrangements
in which the Company is a co-venturer or general partner which are established
to acquire Properties.
Line of Credit. A line of credit in an amount up to $45,000,000, the
proceeds of which will be used to acquire Properties and make Mortgage Loans and
Secured Equipment Leases.
Listing. The listing of the Shares of the Company on a national
securities exchange or over-the-counter market.
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Managing Dealer. CNL Securities Corp., an Affiliate of the Advisor, or such
entity selected by the Board of Directors to act as the managing dealer for the
Offering. CNL Securities Corp. is a member of the National Association of
Securities Dealers, Inc.
Mortgage Loans. In connection with mortgage financing provided by the
Company or in which the Company invests, the notes or other evidence of
indebtedness or obligations which are secured or collateralized by real estate
owned by the borrower.
Net Income. For any period, the total revenues applicable to such
period, less the total expenses applicable to such period excluding additions to
reserves for depreciation, bad debts or other similar non-cash reserves;
provided, however, Net Income for purposes of calculating total allowable
Operating Expenses (as defined herein) shall exclude the gain from the sale of
the Company's assets.
Net Sales Proceeds. In the case of a transaction described in clause
(i)(A) of the definition of Sale, the proceeds of any such transaction less the
amount of all real estate commissions and closing costs paid by the Company. In
the case of a transaction described in clause (i)(B) of such definition, Net
Sales Proceeds means the proceeds of any such transaction less the amount of any
legal and other selling expenses incurred in connection with such transaction.
In the case of a transaction described in clause (i)(C) of such definition, Net
Sales Proceeds means the proceeds of any such transaction actually distributed
to the Company from the Joint Venture. In the case of a transaction or series of
transactions described in clause (i)(D) of the definition of Sale, Net Sales
Proceeds means the proceeds of any such transaction less the amount of all
commissions and closing costs paid by the Company. In the case of a transaction
described in clause (ii) of the definition of Sale, Net Sales Proceeds means the
proceeds of such transaction or series of transactions less all amounts
generated thereby and reinvested in one or more Properties within 180 days
thereafter and less the amount of any real estate commissions, closing costs,
and legal and other selling expenses incurred by or allocated to the Company in
connection with such transaction or series of transactions. Net Sales Proceeds
shall also include, in the case of any lease of a Property consisting of a
building only, any Mortgage Loan or any Secured Equipment Lease, any amounts
from tenants, borrowers or lessees that the Company deter-
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mines, in its discretion, to be economically equivalent to proceeds of a Sale.
Net Sales Proceeds shall not include, as determined by the Company in its sole
discretion, any amounts reinvested in one or more Properties, Mortgage Loans, or
Secured Equipment Leases, to repay outstanding indebtedness, or to establish
reserves.
Offering. The initial public offering of Shares.
Operating Expenses. All costs and expenses incurred by the Company, as
determined under generally accepted accounting principles, which in any way are
related to the operation of the Company or to Company business, including (a)
advisory fees, (b) the Soliciting Dealer Servicing Fee, (c) the Asset Management
Fee, (d) the Performance Fee and (e) the Subordinated Incentive Fee, but
excluding (i) the expenses of raising capital such as Organizational and
Offering Expenses, legal, audit, accounting, underwriting, brokerage, listing,
registration, and other fees, printing and other such expenses and tax incurred
in connection with the issuance, distribution, transfer, registration and
Listing of the Shares, (ii) interest payments, (iii) taxes, (iv) non-cash
expenditures such as depreciation, amortization and bad loan reserves, (v) the
Advisor's subordinated 10% share of Net Sales Proceeds, (vi) the Secured
Equipment Lease Servicing Fee and (vii) Acquisition Fees and Acquisition
Expenses, real estate commissions on the sale of property, and other expenses
connected with the acquisition, and ownership of real estate interests, mortgage
loans or other property (such as the costs of foreclosure, insurance premiums,
legal services, maintenance, repair and improvement of property).
Organizational and Offering Expenses. Any and all costs and expenses,
other than Selling Commissions, the 0.5% marketing support and due diligence
expense reimbursement fee, and the Soliciting Dealer Servicing Fee incurred by
the Company, the Advisor or any Affiliate of either in connection with the
formation, qualification and registration of the Company and the marketing and
distribution of Shares, including, without limitation, the following: legal,
accounting and escrow fees; printing, amending, supplementing, mailing and
distributing costs; filing, registration and qualification fees and taxes;
telegraph and telephone costs; and all advertising and marketing expenses,
including the costs related to investor and broker-dealer sales meetings.
Performance Fee. The fee payable to the Advisor upon termination of
this Agreement under certain circumstances if certain performance standards have
been met and the Subordinated Incentive Fee has not been paid.
Permanent Financing. The financing to acquire Assets, to pay the
Secured Equipment Lease Servicing Fee to pay a fee of 4.5% of any Permanent
Financing, excluding amounts to fund Secured Equipment Leases, as Acquisition
Fees, and to refinance outstanding amounts on the Line of Credit.
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Person. An individual, corporation, partnership, estate, trust
(including a trust qualified under Section 401(a) or 501(c)(17) of the Code), a
portion of a trust permanently set aside for or to be used exclusively for the
purposes described in Section 642(c) of the Code, association, private
foundation within the meaning of Section 509(a) of the Code, joint stock company
or other entity, or any government or any agency or political subdivision
thereof, and also includes a group as that term is used for purposes of Section
13(d)(3) of the Securities Exchange Act of 1934, as amended, but does not
include (i) an underwriter that participates in a public offering of Equity
Shares for a period of sixty (60) days following the initial purchase by such
underwriter of such Equity Shares in such public offering, or (ii) CNL Real
Estate Advisors, Inc., during the period ending December 31, 1997, provided that
the foregoing exclusions shall apply only if the ownership of such Equity Shares
by an underwriter or CNL Real Estate Advisors, Inc. would not cause the Company
to fail to qualify as a REIT by reason of being "closely held" within the
meaning of Section 856(a) of the Code or otherwise cause the Company to fail to
qualify as a REIT.
Property or Properties. (i) The real properties, including the
buildings located thereon, or (ii) the real properties only, or (iii) the
buildings only, which are acquired by the Company, either directly or through
joint venture arrangements or other partnerships.
Prospectus. "Prospectus" means the same as that term as defined in
Section 2(10) of the Securities Act of 1993, including a preliminary Prospectus,
an offering circular as described in Rule 256 of the General Rules and
Regulations under the Securities Act of 1933 or, in the case of an intrastate
offering, any document by whatever name known, utilized for the purpose of
offering and selling securities to the public.
Real Estate Asset Value. The amount actually paid or allocated to the
purchase, development, construction or improvement of a Property, exclusive of
Acquisition Fees and Acquisition Expenses.
Registration Statement. The Registration Statement (No. 333-9943)
on Form S-11 registering the Shares to be sold in the Offering.
REIT. A "real estate investment trust" under Sections 856 through 860
of the Code.
Restaurant Chains. The national and regional restaurant chains,
primarily fast-food family-style, and casual-dining chains, to be selected by
the Advisor and who themselves or their franchisees will either (i) lease
Properties purchased by the Company, (ii) become borrowers under Mortgage Loans
or (iii) become lessees or borrowers of Secured Equipment Leases.
Sale or Sales. (i) Any transaction or series of transactions whereby:
(A) the Company sells, grants, transfers, conveys, or relinquishes its ownership
of any Property or portion thereof, including the lease of any Property
consisting of the building only, and including any event with respect to any
Property which gives rise to a significant amount of insurance
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proceeds or condemnation awards; (B) the Company sells, grants, transfers,
conveys, or relinquishes its ownership of all or substantially all of the
interest of the Company in any Joint Venture in which it is a co-venturer or
partner; (C) any Joint Venture in which the Company as a co-venturer or partner
sells, grants, transfers, conveys, or relinquishes its ownership of any Property
or portion thereof, including any event with respect to any Property which gives
rise to insurance claims or condemnation awards; or (D) the Company sells,
grants, conveys or relinquishes its interest in any Mortgage Loan or Secured
Equipment Lease or portion thereof, including any event with respect to any
Mortgage Loan or Secured Equipment Lease which gives rise to a significant
amount of insurance proceeds or similar awards, but (ii) not including any
transaction or series of transactions specified in clause (i)(A), (i)(B), or
(i)(C) above in which the proceeds of such transaction or series of transactions
are reinvested in one or more Properties within 180 days thereafter.
Secured Equipment Leases. The Equipment financing made available by the
Company to operators of Restaurant Chains and Hotel Chains pursuant to which the
Company will finance, through loans or direct financing leases, the Equipment.
Secured Equipment Lease Servicing Fee. The fee payable to the Advisor
by the Company out of the proceeds of the Line of Credit or Permanent Financing
for negotiating Secured Equipment Leases and supervising the Secured Equipment
Lease program equal to 2% of the purchase price of the Equipment subject to each
Secured Equipment Lease and paid upon entering into such lease or loan.
Securities. Any Equity Shares, Excess Shares, as such term is defined
in the Company's Articles of Incorporation, any other stock, shares or other
evidences of equity or beneficial or other interests, 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 "securities" or any certificates of interest, shares or
participations in, temporary or interim certificates for, receipts for,
guarantees of, or warrants, options or rights to subscribe to, purchase or
acquire, any of the foregoing.
Shares. The up to 16,500,000 shares of the common stock of the Company
to be sold in the Offering.
Soliciting Dealers. Broker-dealers who are members of the National
Association of Securities Dealers, Inc., or that are exempt from broker-dealer
registration, and who, in either case, have executed participating broker or
other agreements with the Managing Dealer to sell Shares.
Soliciting Dealer Servicing Fee. An annual fee of .20% of Invested
Capital on December 31 of each year, commencing in the year following the year
in which the Offering terminates, payable to the Managing Dealer , which in turn
may reallow all or a portion of such fee to the Soliciting Dealers whose clients
hold Shares on such date.
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Sponsor. Any 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 such Person.
Not included is any Person whose only relationship with the Company is that of
an independent property manager of Company assets, and whose only compensation
is as such. Sponsor does not include independent third parties such as
attorneys, accountants, and underwriters whose only compensation is for
professional services. A Person may also be deemed a Sponsor of the Company by:
a. taking the initiative, directly or indirectly, in founding or
organizing the business or enterprise of the Company, either
alone or in conjunction with one or more other Persons;
b. receiving a material participation in the Company in
connection with the founding or organizing of the business of
the Company, in consideration of services or property, or both
services and property;
c. having a substantial number of relationships and contacts with
the Company;
d. possessing significant rights to control Company properties;
e. receiving fees for providing services to the Company which are
paid on a basis that is not customary in the industry; or
f. providing goods or services to the Company on a basis which
was not negotiat- ed at arms length with the Company.
Stockholders. The registered holders of the Company's Equity Shares.
Stockholders' 8% Return. As of each date, an aggregate amount equal to
an 8% cumulative, noncompounded, annual return on Invested Capital.
Subordinated Disposition Fee. The Subordinated Disposition Fee as
defined in Paragraph 9(c).
Subordinated Incentive Fee. The fee payable to the Advisor under
certain circum- stances if the Shares are listed on a national securities
exchange or over-the-counter market.
Termination Date. The date of termination of the Agreement.
Total Proceeds. The Gross Proceeds plus loan proceeds from Permanent
Financing, excluding loan proceeds used to finance Secured Equipment Leases.
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Total Property Cost. With regard to any Company Property, an amount
equal to the sum of the Real Estate Asset Value of such Property plus the
Acquisition Fees paid in connection with such Property.
2%/25% Guidelines. The requirement pursuant to the guidelines of the
North American Securities Administrators Association, Inc. that, in any 12 month
period, total Operating Expenses not exceed the greater of 2% of the Company's
Average Invested Assets during such 12 month period or 25% of the Company's Net
Income over the same 12 month period.
Valuation. An estimate of value of the assets of the Company as
determined by an Independent Expert.
(2) Appointment. The Company hereby appoints the Advisor to serve as
its advisor on the terms and conditions set forth in this Agreement, and the
Advisor hereby accepts such appointment.
(3) Duties of the Advisor. The Advisor undertakes to use its best
efforts to present to the Company potential investment opportunities and to
provide a continuing and suitable investment program consistent with the
investment objectives and policies of the Company as determined and adopted from
time to time by the Directors. In performance of this undertaking, subject to
the supervision of the Directors and consistent with the provisions of the
Registration Statement, Articles of Incorporation and Bylaws of the Company, the
Advisor shall, either directly or by engaging an Affiliate:
(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
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services, including but not limited to entering into
contracts in the name of the Company with any of the
foregoing;
(d) consult with the officers and Directors of the
Company and assist the Directors in the formulation
and implementation of the Company's financial
policies, and, as necessary, furnish the Directors
with advice and recommendations with respect to the
making of investments consistent with the investment
objectives and policies of the Company and in
connection with any borrowings proposed to be
undertaken by the Company;
(e) subject to the provisions of Paragraphs 3(g) and 4
hereof, (i) locate, analyze and select potential
investments in Properties, Mortgage Loans and
potential lessees of Secured Equipment Leases, (ii)
structure and negotiate the terms and conditions of
transactions pursuant to which investment in
Properties, Mortgage Loans will be made and
Secured Equipment Leases will be offered by the
Company; (iii) make investments in Properties,
Mortgage Loans and enter into Secured
Equipment Leases on behalf of the Company in
compliance with the investment objectives and
policies of the Company; (iv) arrange for financing
and refinancing and make other changes in the asset
or capital structure of, and dispose of, reinvest the
proceeds from the sale of, or otherwise deal with the
investments in, Property, Mortgage Loans and
Secured Equipment Leases; (v) evaluate
various options in connection with the securitization
of Mortgage Loans and investing in a securitization
vehicle; and (vi) enter into leases and service
contracts for Company Property and, to the extent
necessary, perform all other operational functions
for the maintenance and administration of such
Company Property;
(f) provide the Directors with periodic reports regarding
prospective investments in Properties, Mortgage Loans
and ive lessees or borrowers of Secured Equipment
Leases;
(g) obtain the prior approval of the Directors (including
a majority of all Independent Directors) for any and
all investments in Properties, Mortgage Loans, in
connection with the offering of Secured Equipment
Leases or the securitization of Mortgage 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
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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 Properties, Mortgage Loans, and/or
Secured Equipment Leases;
(j) from time to time, or at any time reasonably
requested by the Directors, make reports to the
Directors of its performance of services to the
Company under this Agreement;
(k) provide the Company with all necessary cash
management services;
(l) do all things necessary to assure its ability to
render the services described in this Agreement;
(m) deliver to or maintain on behalf of the Company
copies of all appraisals obtained in connection with
the investments in Properties, Mortgage Loans;
(n) notify the Board of all proposed material
transactions before they are completed; and
(o) administer the Secured Equipment Lease program on
behalf of the Company.
(4) Authority of Advisor.
(a) Pursuant to the terms of this Agreement (including the
restrictions included in this Paragraph 4 and in Paragraph 7), and subject to
the continuing and exclusive authority of the Directors over the management of
the Company, the Directors hereby delegate 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 Properties, make Mortgage Loans,
securitize Mortgage Loans and offer Secured Equipment Leases in compliance with
the investment objectives and policies of the Company, (4) arrange for financing
or refinancing Property, Mortgage Loans and Secured Equipment Leases, (5) enter
into leases and service contracts for the Company's Property, and perform other
property management services, (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 Property level.
-13-
(b) Notwithstanding the foregoing, any investment in
Properties, Mortgage Loans ; extension of a Secured Equipment Lease, including
any acquisition of Property by the Company (as well as any financing acquired by
the Company in connection with such acquisition); or securitization of Mortgage
Loans will require the prior approval of the Directors (including a majority of
the Independent Directors).
(c) If a transaction requires approval by the Independent
Directors, the Advisor will deliver to the Independent Directors all documents
required by them to properly evaluate the proposed investment in the Property,
Mortgage Loan or Secured Equipment Lease.
The prior approval of a majority of the Independent Directors and a
majority of the Directors not otherwise interested in the transaction will be
required for each transaction with the Advisor or its Affiliates.
The Directors may, at any time upon the giving of notice to the
Advisor, modify or revoke the authority set forth in this Paragraph 4. If and to
the extent the Directors so modify or revoke the authority contained herein, the
Advisor shall henceforth submit to the Directors for prior approval such
proposed transactions involving investments in Property as thereafter require
prior approval, 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.
(5) Bank Accounts. The Advisor may establish and maintain one or more
bank accounts in its own name for the account of the Company or in the name of
the Company and may collect and deposit into any such account or accounts, and
disburse from any such account or accounts, any money on behalf of the Company,
under such terms and conditions as the Directors may approve, provided that no
funds shall be commingled with the funds of the Advisor; and the Advisor shall
from time to time render appropriate accountings of such collections and
payments to the Directors and to the auditors of the Company.
(6) Records; Access. The Advisor shall maintain appropriate records of
all its activities hereunder and make such records available for inspection by
the Directors and by counsel, auditors and authorized agents of the Company, at
any time or from time to time during normal business hours. The Advisor shall at
all reasonable times have access to the books and records of the Company.
(7) Limitations on Activities. Anything else in this Agreement to the
contrary notwithstanding, the Advisor shall refrain from taking any action
which, in its sole judgment made in good faith, would (a) adversely affect the
status of the Company as a REIT, (b) subject the Company to regulation under the
Investment Company Act of 1940, or (c) violate any law, rule, regulation or
statement of policy of any governmental body or agency having jurisdiction over
the Company, its Equity Shares or its Securities, or otherwise
-14-
not be permitted by the Articles of Incorporation or Bylaws of the Company,
except if such action shall be ordered by the Directors, in which case the
Advisor shall notify promptly the Directors of the Advisor's judgment of the
potential impact of such action and shall refrain from taking such action until
it receives further clarification or instructions from the Directors. In such
event the Advisor shall have no liability for acting in accordance with the
specific instructions of the Directors so given. Notwithstanding the foregoing,
the Advisor, its directors, officers, employees and stockholders, and
stockholders, directors and officers of the Advisor's Affiliates shall not be
liable to the Company or to the Directors or Stockholders for any act or
omission by the Advisor, its directors, officers or employees, or Stockholders,
directors or officers of the Advisor's Affiliates except as provided in
Paragraphs 20 and 21 of this Agreement.
(8) Relationship with Directors. Directors, officers and employees of
the Advisor or an Affiliate of the Advisor or any corporate parents of an
Affiliate, or directors, officers or stockholders of any director, officer or
corporate parent of an Affiliate may serve as a Director and as officers of the
Company, except that no director, officer or employee of the Advisor or its
Affiliates who also is a Director or officer of the Company shall receive any
compensation from the Company for serving as a Director or officer other than
reasonable reimbursement for travel and related expenses incurred in attending
meetings of the Directors.
(9) Fees.
(a) Asset Management Fee. The Company shall pay to the Advisor
as compensation for the advisory services rendered to the Company under
Paragraph 3 above a monthly fee in an amount equal to one-twelfth of .60% of the
Company's Real Estate Asset Value , the outstanding principal amount of the
Mortgage Loans (the "Asset Management Fee") and the amount invested in a
securitization vehicle, as of the end of the preceding month. Specifically, Real
Estate Asset Value equals the amount invested in the Properties wholly owned by
the Company, determined on the basis of cost, plus, in the case of Properties
owned by any Joint Venture or partnership in which the Company is a co-venturer
or partner, the portion of the cost of such Properties paid by the Company,
exclusive of Acquisition Fees and Expenses. The Asset Management Fee shall be
payable monthly on the last day of such month, or the first business day
following the last day of such month. The Asset Management Fee, which will not
exceed fees which are competitive for similar services in the same geographic
area, may or may not be taken, in whole or in part as to any year, in the sole
discretion of the Advisor. All or any portion of the Asset Management Fee not
taken as to any fiscal year shall be deferred without interest and may be taken
in such other fiscal year as the Advisor shall determine.
(b) Acquisition Fees. The Company shall pay the Advisor a fee
in the amount of 4.5% of Total Proceeds as Acquisition Fees. Acquisition Fees
shall be reduced to the extent that, and, if necessary to limit, the total
compensation paid to all persons involved in the acquisition of any Property to
the amount customarily charged in arm's-length transactions by other persons or
entities rendering similar services as an ongoing public
-15-
activity in the same geographical location and for comparable types of
Properties and to the extent that other acquisition fees, finder's fees, real
estate commissions, or other similar fees or commissions are paid by any person
in connection with the transaction. The total of all Acquisition Fees and any
Acquisition Expenses shall be limited in accordance with the Articles of
Incorporation.
(c) Subordinated Disposition Fee. If the Advisor or an
Affiliate provides a substantial amount of the services (as determined by a
majority of the Independent Directors) in connection with the Sale of one or
more Properties, the Advisor or an Affiliate shall receive a Subordinated
Disposition Fee equal to the lesser of (i) one-half of a Competitive Real Estate
Commission or (ii) 3% of the sales price of such Property or Properties. The
Subordinated Disposition Fee will be paid only if Stockholders have received
total Distributions in an amount equal to the sum of their aggregate Invested
Capital and their aggregate Stockholders' 8% Return. To the extent that
Subordinated Disposition Fees are not paid by the Company on a current basis due
to the foregoing limitation, the unpaid fees will be accrued and paid at such
time as the subordination conditions have been satisfied. The Subordinated
Disposition Fee may be paid in addition to real estate commissions paid to
nonAffiliates, provided that the total real estate commissions paid to all
Persons by the Company shall not exceed an amount equal to the lesser of (i) 6%
of the Contract Sales Price of a Property or (ii) the Competitive Real Estate
Commission. In the event this Agreement is terminated prior to such time as the
Stockholders have received total Distributions in an amount equal to 100% of
Invested Capital plus an amount sufficient to pay the Stockholders' 8% Return
through the Termination Date, an appraisal of the Properties then owned by the
Company shall be made and the Subordinated Disposition Fee on Properties
previously sold will be deemed earned if the Appraised Value of the Properties
then owned by the Company plus total Distributions received prior to the
Termination Date equals 100% of Invested Capital plus an amount sufficient to
pay the Stockholders' 8% Return through the Termination Date. Upon Listing, if
the Advisor has accrued but not been paid such Subordinated Disposition Fee,
then for purposes of determining whether the subordination conditions have been
satisfied, Stockholders will be deemed to have received a Distribution in the
amount equal to the product of the total number of Shares outstanding and the
average closing price of the Shares over a period, beginning 180 days after
Listing, of 30 days during which the Shares are traded.
(d) Subordinated Share of Net Sales Proceeds. The Subordinated
Share of Net Sales Proceeds shall be payable to the Advisor in an amount equal
to 10% of Net Sales Proceeds from Sales of assets of the Company after the
Stockholders have received Distributions equal to the sum of the Stockholders'
8% Return and 100% of Invested Capital. Following Listing, no Subordinated Share
of Net Sales Proceeds will be paid to the Advisor.
(e) Subordinated Incentive Fee. Upon Listing, the Advisor
shall be paid the Subordinated Incentive Fee in an amount equal to 10% of the
amount by which (i) the market value of the Company, measured by taking the
average closing price or average of bid and asked price, as the case may be,
over a period of 30 days during which the Shares are traded,
-16-
with such period beginning 180 days after Listing (the "Market Value"), plus the
total Distributions paid to Stockholders from the Company's inception until the
date of Listing, exceeds (ii) the sum of (A) 100% of Invested Capital and (B)
the total Distributions required to be paid to the Stockholders in order to pay
the Stockholders' 8% Return from inception through the date the Market Value is
determined. The Company shall have the option to pay such fee in the form of
cash, Securities, a promissory note or any combination of the foregoing. The
Subordinated Incentive Fee will be reduced by the amount of any prior payment to
the Advisor of a deferred, subordinated share of Net Sales Proceeds from Sales
of assets of the Company.
(f) Secured Equipment Lease Servicing Fee. The Company shall
pay to the Advisor out of the Proceeds of the Line of Credit or Permanent
Financing as compensation for negotiating its respective Secured Equipment
Leases and supervising the Secured Equipment Lease program a fee equal to 2% of
the purchase price of the Equipment subject to each Secured Equipment Lease upon
entering into such lease or loan.
(g) Loans from Affiliates. If any loans are made to the
Company by an Affiliate of the Advisor, the maximum amount of interest that may
be charged by such Affiliate shall be the lesser of (i) 1% above the prime rate
of interest charged from time to time by The Bank of New York and (ii) the rate
that would be charged to the Company by unrelated lending institutions on
comparable loans for the same purpose. The terms of any such loans shall be no
less favorable than the terms available between non-Affiliated Persons for
similar commercial loans.
(h) Changes to Fee Structure. In the event of Listing, the
Company and the Advisor shall negotiate in good faith to establish a fee
structure appropriate for a perpetuallife entity. A majority of the Independent
Directors must approve the new fee structure negotiated with the Advisor. In
negotiating a new fee structure, the Independent Directors shall consider all of
the factors they deem relevant, including, but not limited to: (i) the amount of
the advisory fee in relation to the asset value, composition and profitability
of the Company's portfolio; (ii) the success of the Advisor in generating
opportunities that meet the investment objectives of the Company; (iii) the
rates charged to other REITs and to investors other than REITs by Advisors
performing the same or similar services; (iv) additional revenues realized by
the Advisor and its Affiliates through their relationship with the Company,
including loan administration, underwriting or broker commissions, servicing,
engineering, inspection and other fees, whether paid by the REIT or by others
with whom the REIT does business; (v) the quality and extent of service and
advice furnished by the Advisor; (vi) the performance of the investment
portfolio of the REIT, including income, conversion or appreciation of capital,
and number and frequency of problem investments; and (vii) the quality of the
Property, Mortgage Loan and Secured Equipment Lease portfolio of the Company in
relationship to the investments generated by the Advisor for its own account.
The new fee structure can be no more favorable to the Advisor than the current
fee structure.
(10) Expenses.
-17-
(a) In addition to the compensation paid to the Advisor
pursuant to Paragraph 9 hereof, the Company shall pay directly or reimburse the
Advisor for all of the expenses paid or incurred by the Advisor in connection
with the services it provides to the Company pursuant to this Agreement,
including, but not limited to:
(i) the Company's Organizational and Offering Expenses;
(ii) Acquisition Expenses incurred in connection with the
selection and acquisition of Properties for goods and services provided by the
Advisor at the lesser of the actual cost or 90% of the competitive rate charged
by unaffiliated persons providing similar goods and services in the same
geographic location;
(iii) the actual cost of goods and services used by the
Company and obtained from entities not affiliated with the Advisor, other than
Acquisition Expenses, including brokerage fees paid in connection with the
purchase and sale of securities;
(iv) interest and other costs for borrowed money, including
discounts, points and other similar fees;
(v) taxes and assessments on income or 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 Company or a non-affiliated
Person;
(viii) all expenses in connection with payments to the
Directors and meetings of the Directors and Stockholders;
(ix) expenses associated with Listing or with the issuance
and distribution of Shares and Securities, such as selling commissions and fees,
advertising expenses, taxes, legal and accounting fees, Listing and registration
fees, and other Organization and Offering Expenses;
(x) expenses connected with payments of Distributions in
cash or otherwise made or caused to be made by the Directors to the
Stockholders;
(xi) expenses of organizing, revising, amending, converting,
modify- ing, or terminating the Company or the Articles of Incorporation;
-18-
(xii) expenses of maintaining communications with
Stockholders, including the cost of preparation, printing, and mailing annual
reports and other Stockholder reports, proxy statements and other reports
required by governmental entities;
(xiii) expenses related to negotiating and
servicing Mortgage Loans Secured Equipment Leases;
(xiv) expenses related to negotiating and
servicing Secured Equipment Leases and administering the Secured Equipment Lease
program;
(xv) administrative service expenses (including personnel
costs; provided, however, that no reimbursement shall be made for costs of
personnel to the extent that such personnel perform services in transactions for
which the Advisor receives a separate fee at the lesser of actual cost or 90% of
the competitive rate charged by unaffiliated persons providing similar goods and
services in the same geographic location); and
(xvi) audit, accounting and legal fees.
(b) Expenses incurred by the Advisor on behalf of the Company
and payable pursuant to this Paragraph 10 shall be reimbursed no less than
monthly to the Advisor. The Advisor shall prepare a statement documenting the
expenses of the Company during each quarter, and shall deliver such statement to
the Company within 45 days after the end of each quarter.
(11) Other Services. Should the Directors request that the Advisor or
any director, officer or employee thereof render services for the Company other
than set forth in Paragraph 3, such services shall be separately compensated at
such rates and in such amounts as are agreed by the Advisor and the Independent
Directors of the Company, subject to the limitations contained in the Articles
of Incorporation, and shall not be deemed to be services pursuant to the terms
of this Agreement.
(12) Fidelity Bond. The Advisor shall maintain a fidelity bond for the
benefit of the Company which bond shall insure the Company from losses of up to
$10 million per occurrence and shall be of the type customarily purchased by
entities performing services similar to those provided to the Company by the
Advisor.
(13) Reimbursement to the Advisor. The Company shall not reimburse the
Advisor at the end of any fiscal quarter for Operating Expenses that, in the
four consecutive fiscal quarters then ended (the "Expense Year") exceed (the
"Excess Amount") the greater of 2% of Average Invested Assets or 25% of Net
Income (the "2%/25% Guidelines") for such year. Any Excess Amount paid to the
Advisor during a fiscal quarter shall be repaid to the Company. If there is an
Excess Amount in any Expense Year and the Independent Directors determine that
such Excess Amount was justified, based on unusual and nonrecurring factors
which they deem sufficient, the Excess Amount may be carried over and included
in Operat-
-19-
ing Expenses in subsequent Expense Years, and reimbursed to the Advisor in one
or more of such years, provided that Operating Expenses in any Expense Year,
including any Excess Amount to be paid to the Advisor, shall not exceed the
2%/25% Guidelines. Within 60 days after the end of any fiscal quarter of the
Company for which total Operating Expenses for the Expense Year exceed the
2%/25% Guidelines and the Independent Directors determine that the Excess Amount
was justified, there shall be sent to the Stockholders a written disclosure of
such fact, together with an explanation of the factors the Independent Directors
considered in determining that such Excess Amount was justified. Such
determination shall be reflected in the minutes of the meetings of the Board of
Directors. The Advisor shall reimburse the Company within 60 days after the end
of the Expense Year the amount by which the total Operating Expenses paid or
incurred by the Company exceed the 2%/25% Guidelines. The Company will not
reimburse the Advisor or its Affiliates for services for which the Advisor or
its Affiliates are entitled to compensation in the form of a separate fee. All
figures used in the foregoing computation shall be determined in accordance with
generally accepted accounting principles applied on a consistent basis.
(14) Other Activities of the Advisor. Nothing herein contained shall
prevent the Advisor from engaging in other activities, including, without
limitation, the rendering of advice to other Persons (including other REITs) and
the management of other programs advised, sponsored or organized by the Advisor
or its Affiliates; nor shall this Agreement limit or restrict the right of any
director, officer, employee, or stockholder of the Advisor or its Affiliates to
engage in any other business or to render services of any kind to any other
partnership, corporation, firm, individual, trust or association. The Advisor
may, with respect to any investment in which the Company is a participant, also
render advice and service to each and every other participant therein. The
Advisor shall report to the Directors the existence of any condition or
circumstance, existing or anticipated, of which it has knowledge, which creates
or could create a conflict of interest between the Advisor's obligations to the
Company and its obligations to or its interest in any other partnership,
corporation, firm, individual, trust or association. The Advisor or its
Affiliates shall promptly disclose to the Directors knowledge of such condition
or circumstance. If the Sponsor, Advisor, Director or Affiliates thereof have
sponsored other investment programs with similar investment objectives which
have investment funds available at the same time as the Company, it shall be the
duty of the Directors (including the Independent Directors) to adopt the method
set forth in the Registration Statement or another reasonable method by which
properties are to be allocated to the competing investment entities and to use
their best efforts to apply such method fairly to the Company.
The Advisor shall be required to use its best efforts to present a continuing
and suitable investment program to the Company which is consistent with the
investment policies and objectives of the Company, but 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. The
Advisor or its Affiliates may make such an investment in a property only after
(i) such investment has been offered to the Company and all public partnerships
and
-20-
other investment entities affiliated with the Company with funds available for
such investment and (ii) such investment is found to be unsuitable for
investment by the Company, such partnerships and investment entities.
In the event that 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 and its
Affiliates shall consider 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 and the
length of time such funds have been available for investment. In the event that
an investment opportunity becomes available which is suitable for both the
Company and a public or private entity which the Advisor or its Affiliates are
Affiliated, then the entity which has had the longest period of time elapse
since it was offered an investment opportunity will first be offered the
investment opportunity.
(15) Relationship of Advisor and Company. The Company and the Advisor
are not partners or joint venturers with each other, and nothing in this
Agreement shall be construed to make them such partners or joint venturers or
impose any liability as such on either of them.
(16) Term; Termination of Agreement. This Agreement shall continue in
force until ________ __, 1998, subject to an unlimited number of successive
one-year renewals upon mutual consent of the parties. It is the duty of the
Directors to evaluate the performance of the Advisor or annually before renewing
the Agreement, and each such agreement shall have a term of no more than one
year.
(17) Termination by Either Party. This Agreement may be terminated upon
60 days written notice without Cause or penalty, by either party (by a majority
of the Independent Directors of the Company or a majority of the Board of
Directors of the Advisor, as the case may be).
(18) Assignment to an Affiliate. This Agreement may be assigned by the
Advisor to an Affiliate with the approval of a majority of the Directors
(including a majority of the Independent Directors). The Advisor may assign any
rights to receive fees or other payments under this Agreement without obtaining
the approval of the Directors. This Agreement shall not be assigned by the
Company without the consent of the Advisor, except in the case of an assignment
by the Company to a corporation or other organization which is a successor to
all of the assets, rights and obligations of the Company, in which case such
successor organization shall be bound hereunder and by the terms of said
assignment in the same manner as the Company is bound by this Agreement.
-21-
(19) Payments to and Duties of Advisor Upon Termination. Payments
to the Advisor pursuant to this Section (19) shall be subject to the 2%/25%
Guidelines to the extent applicable.
(a) After the Termination Date, the Advisor shall not be
entitled to compensation for further services hereunder except it shall be
entitled to receive from the Company within 30 days after the effective date of
such termination all unpaid reimbursements of expenses and all earned but unpaid
fees payable to the Advisor prior to termination of this Agreement.
(b) Upon termination, the Advisor shall be entitled to payment
of the Performance Fee if performance standards satisfactory to a majority of
the Board of Directors, including a majority of the Independent Directors, when
compared to (a) the performance of the Advisor in comparison with its
performance for other entities, and (b) the performance of other advisors for
similar entities, have been met. If Listing has not occurred, the Performance
Fee, if any, shall equal 10% of the amount, if any, by which (i) the appraised
value of the assets of the Company on the Termination Date, less the amount of
all indebtedness secured by such assets, plus the total Distributions paid to
stockholders from the Company's inception through the Termination Date, exceeds
(ii) Invested Capital plus an amount equal to the Stockholders' 8% Return from
inception through the Termination Date. The Advisor shall be entitled to receive
all accrued but unpaid compensation and expense reimbursements in cash within 30
days of the Termination Date. All other amounts payable to the Advisor in the
event of a termination shall be evidenced by a promissory note and shall be
payable from time to time.
(c) The Performance Fee shall be paid in 12 equal quarterly
installments without interest on the unpaid balance, provided, however, that no
payment will be made in any quarter in which such payment would jeopardize the
Company's REIT status, in which case any such payment or payments will be
delayed until the next quarter in which payment would not jeopardize REIT
status. Notwithstanding the preceding sentence, any amounts which may be deemed
payable at the date the obligation to pay the Performance Fee is incurred which
relate to the appreciation of the Company's assets shall be an amount which
provides compensation to the Advisor only for that portion of the holding period
for the respective assets during which the Advisor provided services to the
Company.
(d) If Listing occurs, the Performance Fee, if any, payable
thereafter will be as negotiated between the Company and the Advisor. The
Advisor shall not be entitled to payment of the Performance Fee in the event
this Agreement is terminated because of failure of the Company and the Advisor
to establish, pursuant to Paragraph 9(h) hereof, a fee structure appropriate for
a perpetual-life entity at such time, if any, as Listing occurs.
(e) The Advisor shall promptly upon termination:
-22-
(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 Directors 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 Directors;
(iii) deliver to the Directors all assets, including
Properties, Mortgage Loans, and Secured Equipment Leases, and documents of the
Company then in the custody of the Advisor; and
(iv) cooperate with the Company to provide an orderly
management transition.
(20) Indemnification by the Company. The Company shall indemnify and
hold harmless the Advisor and its Affiliates, including their respective
officers, directors, partners and employees, from all liability, claims, damages
or losses arising in the performance of their duties hereunder, and related
expenses, including reasonable attorneys' fees, to the extent such liability,
claims, damages or losses and related expenses are not fully reimbursed by
insurance, subject to any limitations imposed by the laws of the State of
Maryland or the Articles of Incorporation of the Company. Notwithstanding the
foregoing, the Advisor shall not be entitled to indemnification or be held
harmless pursuant to this paragraph 20 for any activity for which the Advisor
shall be required to indemnify or hold harmless the Company pursuant to
paragraph 21. Any indemnification of the Advisor may be made only out of the net
assets of the Company and not from Stockholders.
(21) Indemnification by Advisor. The Advisor shall indemnify and hold
harmless the Company from contract or other liability, claims, damages, taxes or
losses and related expenses including attorneys' fees, to the extent that such
liability, claims, damages, taxes or losses and related expenses are not fully
reimbursed by insurance and are incurred by reason of the Advisor's bad faith,
fraud, willful misfeasance, misconduct, negligence or reckless disregard of its
duties, but the Advisor shall not be held responsible for any action of the
Board of Directors in following or declining to follow any advice or
recommendation given by the Advisor.
(22) Notices. Any notice, report or other communication required or
permitted to be given hereunder shall be in writing unless some other method of
giving such notice, report or other communication is required by the Articles of
Incorporation, the Bylaws, or accepted by the party to whom it is given, and
shall be given by being delivered by hand or by overnight mail or other
overnight delivery service to the addresses set forth herein:
To the Directors and to the Company: CNL American Realty Fund, Inc.
000 Xxxx Xxxxx Xxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
To the Advisor: CNL Real Estate Advisors, Inc.
000 Xxxx Xxxxx Xxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 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 Paragraph 22.
(23) Modification. This Agreement shall not be changed, modified,
terminated, or discharged, in whole or in part, except by an instrument in
writing signed by both parties hereto, or their respective successors or
assignees.
(24) Severability. The provisions of this Agreement are independent of
and severable from each other, and no provision shall be affected or rendered
invalid or unenforceable by virtue of the fact that for any reason any other or
others of them may be invalid or unenforceable in whole or in part.
(25) Construction. The provisions of this Agreement shall be
construed and interpreted in accordance with the laws of the State of Florida.
(26) Entire Agreement. This Agreement contains the entire agreement and
understanding among the parties hereto with respect to the subject matter
hereof, and supersedes all prior and contemporaneous agreements, understandings,
inducements and conditions, express or implied, oral or written, of any nature
whatsoever with respect to the subject matter hereof. The express terms hereof
control and supersede any course of performance and/or usage of the trade
inconsistent with any of the terms hereof. This Agreement may not be modified or
amended other than by an agreement in writing.
(27) 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.
-23-
(28) Gender. Words used herein regardless of the number and gender
specifically used, shall be deemed and construed to include any other number,
singular or plural, and any other gender, masculine, feminine or neuter, as the
context requires.
(29) Titles Not to Affect Interpretation. The titles of paragraphs and
subparagraphs contained in this Agreement are for convenience only, and they
neither form a part of this Agreement nor are they to be used in the
construction or interpretation hereof.
(30) Execution in Counterparts. This Agreement may be executed in any
number of counterparts, 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.
(31) Name. CNL Real Estate Advisors, Inc. has a proprietary interest in
the name "CNL." Accordingly, and in recognition of this right, if at any time
the Company ceases to retain CNL Real Estate Advisors, Inc. or an Affiliate
thereof to perform the services of Advisor, the Directors of the Company will,
promptly after receipt of written request from CNL Real Estate Advisors, Inc.,
cease to conduct business under or use the name "CNL" or any diminutive thereof
and the Company shall use its best efforts to change the name of the Company to
a name that does not contain the name "CNL" 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 "CNL" 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.
(32) Initial Investment. The Advisor has contributed to the Company
$200,000 in exchange for 20,000 Equity Shares (the "Initial Investment"). The
Advisor or its Affiliates may not sell any of the Equity Shares purchased with
the Initial Investment for a period of one year following completion of the
Offering and may only sell Equity Shares representing the Initial Investment
through the market on which the Equity Shares are normally traded. The
restrictions included above shall not apply to any Equity Shares, other than the
Equity Shares acquired through the Initial Investment, acquired by the Advisor
or its Affiliates. The Advisor shall not vote any Equity Shares it now owns, or
hereafter acquires, in any vote for the removal of Directors or any vote
regarding the approval or termination of any contract with the Advisor or any of
its Affiliates.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
CNL AMERICAN REALTY FUND, INC.
By:_______________________________
Name:
Its:
CNL REAL ESTATE ADVISORS,
INC.
By:______________________________
Name:
Its:
