FORM OF
ADVISORY AGREEMENT
THIS ADVISORY AGREEMENT is entered into as of ______________, 1998 (the
"Effective Date") by and between AMERICA FIRST REAL ESTATE INVESTMENT COMPANY,
INC., a Delaware corporation (the "Company"), and AMERICA FIRST REAL ESTATE
ADVISORS LLC, a Delaware limited liability company (the "Advisor").
WHEREAS, the Company is a newly-formed corporation;
WHEREAS, the Company, directly or through its Subsidiaries, invests in real
estate operating companies, under-performing commercial real estate properties,
and other real estate related investments meeting the investment criteria
established from time to time by its Board of Directors; and
WHEREAS, the Company desires to retain the Advisor to manage the operations
and investments of the Company and its Subsidiaries and to perform
administrative services for the Company and its Subsidiaries, each in the manner
and on the terms set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual agreements herein set forth,
the parties hereto agree as follows:
Section 1. DEFINITIONS. Capitalized terms used herein shall have the
respective meanings assigned them in this Section 1:
"ADJUSTED NEW ASSET VALUE" means, with respect to each individual New Asset
owned by the Company, the Beginning New Asset Value increased by additional
investments in such New Asset (which investments may be made from any
borrowings, additional equity or any other source available to the Company) and
decreased by Returns of Capital; provided, however, this Value shall not be
decreased below zero by Returns of Capital; provided, further, if, after the
final sale of a New Asset, the Adjusted New Asset Value is greater than zero,
such value shall be zero.
"ADJUSTED ORIGINAL ASSET VALUE" means, with respect to each individual
Original Asset owned by the Company, (i) for each Equity Interest in an
Operating Partnership, the amount set forth in Exhibit A which represents an
equity interest in an Operating Partnership reduced to zero upon the sale or
redesignation as a New Asset of such asset or (ii) for each GNMA as set forth in
Exhibit A, the aggregate outstanding principal amount of such GNMA decreased by
(A) borrowings which are directly or indirectly secured by such GNMA and (B)
principal repayments with respect to such GNMA.
"ADVISOR" means America First Real Estate Advisors LLC, a Delaware limited
liability company.
"AGREEMENT" means this Advisory Agreement between the Company and the
Advisor, as amended from time to time.
"BEGINNING NEW ASSET VALUE" means with respect to each individual New Asset
owned by the Company, (a) with respect to any asset directly owned by the
Company, the total consideration paid by the Company for such asset, including
all payments made in respect of equity and all debt incurred or assumed with
respect to such asset, plus any costs related to the acquisition or financing of
such asset or (b) with respect to any asset indirectly owned by the Company
through an interest in a joint venture, partnership or similar entity, the total
consideration paid by the Company for such interest, including all payments in
respect of such interest and all debt incurred, assumed or allocated with
respect to such interest, plus any costs related to the acquisition or financing
of such interest.
"BOARD OF DIRECTORS" means the board of directors of the Company.
"CAPITAL GAIN" means with respect to each individual New Asset owned by the
Company, the excess, if any, of (i) the net proceeds, net of all closing costs
(including without limitation any real estate or selling commissions), but
without deduction for any applicable mortgage indebtedness, from any partial
sale or a whole sale received by the Company upon the sale of a New Asset over
(ii) the Adjusted New Asset Value of such New Asset prior to such sale.
"CAPITAL LOSS" means with respect to each individual New Asset owned by the
Company, the deficit, if any, upon the occurrence of final sale of such Asset of
(i) the net proceeds, net of all closing costs (including without limitation any
real estate or selling commissions), but without deduction for any applicable
mortgage indebtedness, from any partial sale or a whole sale received by the
Company upon the sale of a New Asset over (ii) the Adjusted New Asset Value of
such New Asset prior to such sale.
"CASH" means cash and cash equivalents and amounts invested on a short-term
basis by the Company.
"COMMON STOCK" means the common stock, par value $0.001 per share, of the
Company.
"COMPANY" means America First Real Estate Investment Company, Inc., a
Delaware corporation.
"EFFECTIVE DATE" means the effective date of the Merger under Delaware law.
"GNMA" or "GNMAS" means the mortgage-backed securities listed on Exhibit A
to this Agreement that are guaranteed as to principal and interest by the United
States Government
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National Mortgage Association or first mortgage loans insured by the Federal
Housing Administration.
"GOVERNING INSTRUMENTS" means the articles of incorporation and bylaws, in
the case of a corporation, the limited liability company operating agreement, in
the case of a limited liability company, and the partnership agreement, in the
case of a partnership.
"INDEPENDENT DIRECTORS" means those members of the Board of Directors of
the Company who are neither executive officers of the Company nor executive
officers or directors of the Advisor.
"MERGER" means the merger of Capital Source, L.P., and Capital Source II,
L.P.-A, a Delaware limited partnership, with and into the Company pursuant to
the terms and conditions described in the Company's Prospectus/Consent
Solicitation Statement dated __________, 1998.
"NEW ASSETS" means any and all assets acquired by the Company after the
Effective Date and prior to the termination of this Agreement, and any Original
Asset designated by the Board of Directors as a redevelopment project.
"OPERATING PARTNERSHIPS" means the limited partnerships set forth in
Exhibit A to this Agreement.
"ORIGINAL ASSETS" means the assets contributed to the Company on the
Effective Date as set forth in Exhibit A, excluding any Original Asset that is
subsequently classified as a New Asset because of its classification as a
redevelopment project.
"PERSON" or "PERSONS" means an individual, partnership, corporation, trust
or other entity.
"RESTRICTED STOCK" means Common Stock issued to the Advisor for the
Incentive Fee on New Assets, which contain the restrictions described in
Section 7 hereof.
"RETURNS OF CAPITAL" means net proceeds, net of all closing costs
(including without limitation any real estate or selling commissions) but
without deduction for any applicable mortgage indebtedness, from any partial
sale or a whole sale of any asset, and principal repayments on debt obligations;
provided, however, this amount shall not be greater than the Adjusted New Asset
Value with respect to such assets.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SUBSIDIARY" means any corporation, whether now existing or in the future
established, of which the Company, directly or indirectly, owns more than 50% of
the outstanding voting
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securities of any class or classes, any business trust, partnership or similar
non-corporate form in which the Company, directly or indirectly, owns more than
50% of the beneficial interests.
"TOTAL ASSETS" means the sum of (a) Adjusted Original Asset Value, (b)
Adjusted New Asset Value, and (c) Cash, less any allowance or adjustment for the
permanent impairment of assets as reflected on the financial statements of the
Company.
Section 2. GENERAL DUTIES OF THE ADVISOR. Subject to the supervision of
the Board of Directors, the Advisor shall provide services to the Company and,
to the extent directed by the Board of Directors, shall provide similar services
to any Subsidiary of the Company, as follows:
(a) serve as the Company's consultant with respect to the formulation
of investment criteria and preparation of policy guidelines by the Board of
Directors;
(b) represent the Company in connection with the acquisition and
disposition of assets;
(c) represent the Company in monitoring the performance of its assets
and recommending strategies to improve such performance;
(d) furnish reports and statistical and economic research to the
Company regarding the investment activities and results of operations of
the Company and the services performed by the Advisor for the Company;
(e) provide the executive and administrative personnel, office space
and services required in rendering services to the Company;
(f) administer the day-to-day operations of the Company and perform
and supervise the performance of such administrative functions necessary in
the management of the Company as may be agreed upon by the Advisor and the
Board of Directors, including collection of revenues and payment of the
expenses, debts and obligations and maintenance of appropriate computer
services to perform such administrative functions;
(g) communicate on behalf of the Company with the holders of equity
and debt securities of the Company as required to satisfy the reporting and
other requirements of any governmental or regulatory bodies or agencies and
maintain effective relations with such holders;
(h) counsel the Company in connection with policy decisions to be
made by the Board of Directors;
(i) upon request by, and in accordance with the directions of, the
Board of Directors, invest or reinvest any money of the Company;
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(j) qualify and cause the Company to qualify to do business in all
applicable jurisdictions;
(k) cause the Company to retain qualified accountants and tax experts
to assist in developing appropriate accounting procedures and testing
systems and conduct quarterly compliance reviews;
(l) maintain exemption from the Investment Company Act of 1940, as
amended;
(m) arrange for the preparation and timely filing of all reports
required to be filed by the Company under the Securities Exchange Act of
1934, as amended, and under any other applicable securities laws or
regulations;
(n) comply with and use its best efforts to cause the Company to
comply with all applicable laws; and
(o) as approved and directed by the Board of Directors, perform such
other services as may be required from time to time for management and
other activities relating to the assets of the Company and its Subsidiaries
as the Advisor shall deem appropriate under the circumstances.
Without limiting the supervision of the Advisor by the Board of Directors,
the Advisor shall not sell, lease or acquire any assets, shall not make any
capital improvements or renovations to assets or borrow money on behalf of the
Company unless and to the extent authorized by the Board of Directors, whether
authorized as part of a business plan or by separate authorization.
Notwithstanding anything to the contrary contained herein, the Company may
enter into separate agreements with the Advisor or affiliates for additional
services to be provided to the Company on terms and conditions to be negotiated
by the parties to such agreements. The fees to be paid by the Company for such
additional services will be negotiated and approved by the Independent Directors
on behalf of the Company.
Section 3. ADDITIONAL ACTIVITIES. Nothing herein shall prevent affiliates
or employees of the Advisor from engaging in other businesses or from rendering
services of any kind to any other person or entity, including investment in or
advisory service to others investing in any type of real estate investment,
including investments which meet the principal investment objectives of the
Company and its Subsidiaries. Directors, officers, employees and agents of the
Advisor or affiliates of the Advisor may serve as directors, officers,
employees, agents, nominees or signatories for the Company or any of its
Subsidiaries, to the extent permitted by its Governing Instruments, as from time
to time amended, or by any resolutions duly adopted by the Board of Directors
pursuant to the Company's Governing Instruments. When executing documents or
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otherwise acting in such capacities for the Company, such persons shall use
their respective titles in the Company.
Section 4. BANK ACCOUNTS. At the direction of the Board of Directors, the
Advisor may establish and maintain one or more bank accounts in the name of the
Company or any of its Subsidiaries, and may collect and deposit into any such
account or accounts, and disburse funds from any such account or accounts, under
such terms and conditions as the Board of Directors may approve; and the Advisor
shall from time to time render appropriate accounting of such collections and
payments to the Board of Directors and, upon request, to the auditors of the
Company or any of its Subsidiaries.
Section 5. RECORDS; CONFIDENTIALITY. The Advisor shall maintain
appropriate books of account and records relating to services performed
hereunder, and such books of account and records shall be accessible for
inspection by representatives of the Company or any of its Subsidiaries at any
time during normal business hours. The Advisor shall keep confidential any and
all information it obtains from time to time in connection with the services it
renders under this Agreement and shall not disclose any portion thereof to
non-affiliated third parties except with the prior written consent of the
Company or any of its Subsidiaries.
Section 6. OBLIGATIONS OF ADVISOR.
(a) The Advisor shall require each seller or transferor of assets to
the Company to make such representations and warranties regarding such
assets as may, in the judgment of the Advisor, be necessary and
appropriate. In addition, the Advisor shall take such other action as it
deems necessary or appropriate with regard to the protection of the
Company's assets and other investments.
(b) The Advisor shall refrain from any action which, in its sole
judgment made in good faith, would violate any law, rule or regulation of
any governmental or regulatory body or agency having jurisdiction over the
Company or any such Subsidiary or which would otherwise not be permitted by
the Company's or any such Subsidiary's Governing Instruments. If the
Advisor is ordered to take any such action by the Board of Directors, the
Advisor shall promptly notify the Board of Directors of the Advisor's
judgment that such action would violate any such law, rule or regulation or
the Governing Instruments. Notwithstanding the foregoing, the Advisor, its
directors, officers, stockholders and employees shall not be liable to the
Company, any Subsidiary of the Company, the Independent Directors or the
Company's or any Subsidiary's stockholders for any act or omission by the
Advisor, its directors, officers, stockholders or employees except as
provided in Section 10 of this Agreement.
(c) The Advisor shall maintain a fidelity bond with a responsible
surety company in such amount as may be required by the Board of Directors
from time to time, covering all directors, officers, employees and agents
of the Advisor handling funds of the Company and any investment documents
or records pertaining to investments of
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the Company. Such bonds shall inure to the benefit of the Company in
respect to losses of any such property, and the premium for this bond is to
be at the expense of the Company.
(d) No later than December 15 of the year preceding the budget year,
the Advisor shall prepare and shall submit to the Board of Directors, an
annual budget and also a written business plan for such fiscal year of the
company in a form acceptable to the Board of Directors. Upon approval by
the Board of Directors, the Advisor shall be authorized to conduct the
business of the Company in accordance with the explicit provisions of the
business plan, including the borrowing, leasing, maintenance, capital
improvements, renovations and sales of assets as set forth in the business
plan. Any transaction or investment not explicitly provided in the
approved business plan shall require the prior approval of the Board of
Directors unless made pursuant to other authority expressly given to the
Advisor.
Section 7. COMPENSATION.
(a) The Company shall pay to the Advisor, for services rendered under
this Agreement, an Acquisition Fee which shall be payable each month in
arrears, commencing with the month in which the Effective Date occurs. For
purposes of this Agreement, the Acquisition Fee means an amount equal to 1%
of the increase in the Company's actual investment in all New Assets,
including any costs related to the acquisition or financing of New Assets
but excluding debt which is incurred or assumed in connection therewith.
The Acquisition Fee shall be calculated by the Advisor within 15 days after
the end of each month, and such calculation shall be promptly delivered to
the Company. The Company shall pay the fees payable pursuant to this
Section 7(a) for each month within 30 days after the end of each month.
(b) The Company shall pay to the Advisor, for services rendered under
this Agreement, an Asset Management Fee which shall be payable each month
(pro rated based on the number of days elapsed during any partial month) in
arrears, commencing with the month in which the Effective Date occurs. For
purposes of this Agreement, the Asset Management Fee means an amount equal
to .475%, on an annual basis, of the Company's Total Assets, calculated as
of the last day of each month. The Asset Management Fee shall be
calculated by the Advisor within 15 days after the end of each month, and
such calculation shall be promptly delivered to the Company. The Company
shall pay the fees payable pursuant to this Section 7(b) for each month
within 30 days after the end of each month.
(c) The Company shall pay the Advisor, for services rendered under
this Agreement, the Incentive Fee on New Assets, which shall be payable
annually in the form of Restricted Stock. For purposes of this Agreement,
the Incentive Fee on New Assets means 10% of any Capital Gain on New
Assets; provided, however, that the calculation of Capital Gain for
purposes of determining the Incentive Fee on New Assets
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shall be reduced by any Capital Loss incurred in the fiscal year for which
such fee is payable. The amount of such Restricted Stock to be issued to
the Advisor for purposes of this Section 7(c) shall be based on the average
closing price of the Common Stock for the 20 days preceding the last day of
the year for which the Incentive Fee on New Assets is payable. The Advisor
may not sell, transfer or otherwise dispose of the Restricted Stock issued
pursuant to this Section 7(c) until the earlier of: (i) the termination of
this Agreement as provided herein or (ii) five years following the issuance
of the Restricted Stock. Upon the termination of this Agreement without
cause, the Advisor shall be entitled to certain registration rights with
respect to the Restricted Stock as set forth in Section 17.
Section 8. EXPENSES OF THE COMPANY. The Company or any of its
Subsidiaries shall pay all of its expenses, including all costs associated with
third party services provided to it, and, subject to the provisions of Section 9
of this Agreement, shall reimburse the Advisor for documented expenses of the
Advisor incurred on its behalf.
Section 9. REIMBURSEMENT OF EXPENSES INCURRED BY THE ADVISOR. Subject to
the provisions of this Section 9, the Advisor shall pay all of the costs of
providing services to the Company, including personnel costs. In connection
with providing services to the Company, the Advisor shall be reimbursed by the
Company only for (i) rent, utilities, capital equipment and related expenses
associated with any office which is established and maintained by the Advisor
exclusively to provide services to the Company, (ii) expenses of third parties
which derive 25% or less of their gross revenues from providing services to the
Company, and (iii) travel expenses incurred by employees of the Advisor in
connection with travel at the request or on behalf of the Company; provided that
the Company's reimbursement of these expenses shall be limited to amounts for
them in the annual budget as approved by the Board of Directors, with any
subsequent changes approved by the Board of Directors. In addition, no
reimbursement shall be permitted for services for which the Advisor is entitled
to compensation by way of a separate fee.
Reimbursable expenses incurred by the Advisor on behalf of the Company
shall be reimbursed monthly to the Advisor within 30 days after the end of each
month. The Advisor shall prepare a statement documenting the expenses of the
Company and those incurred by the Advisor on behalf of the Company during each
month, and shall deliver such statement to the Company within 15 days after the
end of each month.
Section 10. LIMITS OF ADVISOR RESPONSIBILITY.
(a) The Advisor assumes no responsibility under this Agreement other
than to render the services called for hereunder in good faith and without
negligence, willful misconduct or breach of this Agreement, and shall not
be responsible for any action of the Board of Directors in following or
declining to follow any advice or recommendations of the Advisor, including
as set forth in Section 6(b) of this Agreement. The Advisor and its
directors, officers, stockholders and employees will not
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be liable to the Company, any of its Subsidiaries, the Independent
Directors or the Company's or its Subsidiary's stockholders for any acts or
omissions by the Advisor, its directors, officers, stockholders or
employees under or in connection with this Agreement, if the acts or
omissions were made in good faith and were not the result of negligence,
willful misconduct or breach of this Agreement by the Advisor or these
related parties. However, in no event will a director, officer,
stockholder or employee of the Advisor have any personal monetary liability
for any act or failure to act under this Agreement unless the liability
results from that person's bad faith, willful misconduct, gross negligence
or reckless disregard of that person's duties. The Company or its
Subsidiary shall reimburse, indemnify and hold harmless the Advisor and its
stockholders, directors, officers and employees of and from any and all
expenses, losses, damages, liabilities, demands, charges and claims of any
nature whatsoever (including, without limitation, reasonable attorneys'
fees) in respect of or arising from any acts or omissions of the Advisor or
its stockholders, directors, officers and employees made in good faith in
the performance of the Advisor's duties under this Agreement and, in the
case of the Advisor, not constituting negligence, willful misconduct or a
breach of this Agreement by the Advisor or, in the case of any stockholder,
director, officer or employee of the Advisor, not constituting bad faith,
willful misconduct, gross negligence or reckless disregard of that person's
duties.
(b) The Advisor shall reimburse, indemnify and hold harmless the
Company, any Subsidiary or any of their stockholders, directors, officers
and employees from any and all expenses, losses, damages, liabilities,
demands, charges and claims (including, without limitation, reasonable
attorneys' fees) arising out of any intentional misstatements of fact made
by the Advisor in connection with this Agreement and the services to be
rendered hereunder or arising out of acts or omissions by the Advisor not
in good faith or constituting negligence, willful misconduct or a breach of
this Agreement.
Section 11. NO JOINT VENTURE. The Company and the Advisor are not
partners or joint venturers with each other and nothing herein shall be
construed to make them such partners or joint venturers or impose any liability
as such on either of them.
Section 12. TERM. This Agreement shall commence on the Effective Date.
Prior to the third annual anniversary of the Effective Date, this Agreement may
only be terminated by the Company for cause as provided in Section 13 of this
Agreement or by the Advisor for cause as provided in Section 15 of this
Agreement. After such third anniversary, this Agreement shall automatically
renew for successive one-year periods unless written notice of termination is
delivered 180 days prior to the expiration of the initial three-year term or any
successive annual term by the Company to the Advisor or the Advisor to the
Company.
Section 13. TERMINATION BY COMPANY FOR CAUSE. At the option of the
Company, this Agreement shall be and become terminated upon 60 days' written
notice of termination from the Board of Directors to the Advisor if any of the
following events shall occur:
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(a) if the Advisor shall materially breach any provision of this
Agreement and, after written notice of such breach, shall not cure such
breach within 30 days or such longer period as may be reasonably necessary
to cure such breach if the Advisor is diligently pursuing all reasonable
actions necessary to cure such breach, provided, however, in no event shall
such longer period be greater than 180 days after written notice of such
breach; or
(b) there is entered an order for relief or similar decree or order
with respect to the Advisor by a court having competent jurisdiction in an
involuntary case under the federal bankruptcy laws as now or hereafter
constituted or under any applicable federal or state bankruptcy, insolvency
or other similar laws; or the Advisor (i) ceases or admits in writing its
inability to pay its debts as they become due and payable, or makes a
general assignment for the benefit of, or enters into any composition or
arrangement with, creditors, (ii) applies for or consents (by admission of
material allegations of a petition or otherwise) to the appointment of a
receiver, trustee, assignee, custodian, liquidator or sequestrator (or
other similar official) for itself or for any substantial part of its
assets or authorizes such an application or consent, (iii) authorizes or
files a voluntary petition in bankruptcy, or applies for or consents (by
admission of material allegations of a petition or otherwise) to the
application of any bankruptcy, reorganization, arrangement, readjustment of
debt, insolvency, dissolution, liquidation or other similar law of any
jurisdiction, or authorizes such application or consent, or (iv) permits or
suffers all or any substantial part of its assets to be sequestered or
attached by court order and the order remains undismissed for 30 days; or
proceedings seeking the appointment of a receiver, trustee, assignee,
custodian, liquidator or sequestrator (or other similar official) for the
Advisor or for any substantial part of its assets are commenced without
authorization, consent or application against the Advisor and continue
undismissed for 30 days; or proceedings to sequester or attach all or any
substantial part of the Advisor's assets are instituted against the Advisor
without authorization, consent and application and are approved as properly
instituted and remain undismissed for 30 days or result in adjudication of
bankruptcy or insolvency.
(c) Fraud or willful misconduct by the Advisor in connection with the
business of the Company.
(d) If this Agreement is terminated by the Company for cause pursuant
to this Section 13, the Advisor shall be entitled to receive no additional
amounts from the Company.
If any of the events specified in this Section 13 shall occur, the Advisor shall
give prompt written notice thereof to the Board of Directors upon the happening
of such event.
Section 14. TERMINATION BY COMPANY WITHOUT CAUSE. The Company may
terminate this Agreement without cause at any time after the third annual
anniversary of the Effective Date by delivering 180 days prior written notice of
termination.
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(a) In the case of termination of this Agreement by the Company
without cause or a non-renewal of this Agreement by the Company, the
termination or non-renewal must be approved by a majority vote of the
Independent Directors or by a vote of the holders of a majority of the
outstanding shares of the Company's Common Stock.
(b) In the event this Agreement is terminated by the Company without
cause or this Agreement shall not be renewed by the Company, the Company
shall pay the Advisor a termination fee equal to the sum of: (i) the amount
of the Acquisition Fee and the Asset Management Fee for the previous
twelve-month period, and (ii) the fair value of any Incentive Fee on New
Assets that would be earned on any New Assets owned by the Company on the
date of the termination. The parties shall use their best efforts to reach
a mutual agreement with respect to the amount of the Incentive Fee on New
Assets for purposes of this Section 14. If the parties are unable to agree
upon such amount within 30 days following the notice of termination, the
amount shall be determined by an independent valuation. Such valuation
shall be conducted by a valuation firm mutually agreed upon by the parties
and the costs of such valuation shall be borne equally by the parties. If
the parties are unable to agree upon such valuation firm within 60 days
following notice of termination, then each party shall as soon as
reasonably practicable, but in no event more than 75 days following notice
of termination, choose an independent valuation firm to conduct a
valuation. In such event, (x) the fee shall be deemed to be the average of
the valuations as conducted by each party's chosen valuation firm and (y)
each party shall pay the costs of its valuation firm so chosen. If one
party is unable to select a valuation firm within the time specified
herein, the valuation shall be conducted by the valuation firm chosen by
the other party. Any valuation conducted hereunder shall be performed no
later than 45 days following selection of the valuation firm or firms. Any
amounts due under this Section 14(b) shall be due and payable on the
effective date of the termination.
Section 15. TERMINATION BY ADVISOR FOR CAUSE. At the option of the
Advisor, this Agreement shall be and become terminated upon 60 days' written
notice of termination from the Advisor to the Company if any of the following
shall occur:
(a) if the Company shall materially breach any provision of this
Agreement including, without limitation, the failure to pay to the Advisor
any fee or expense when due and payable, and, after written notice of such
breach, shall not cure such breach (i) within 10 days for any monetary
default or (ii) within 30 days for all other defaults or such longer period
as may be reasonably necessary to cure such breach if the Company is
diligently pursuing all reasonable actions necessary to cure such breach,
provided, however, in no event shall such longer period be greater than 180
days after written notice of such breach;
(b) there is entered an order for relief or similar decree or order
with respect to the Company by a court having competent jurisdiction in an
involuntary case under the federal bankruptcy laws as now or hereafter
constituted or under any applicable
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federal or state bankruptcy, insolvency or other similar laws; or the
Company (i) ceases or admits in writing its inability to pay its debts as
they become due and payable, or makes a general assignment for the benefit
of, or enters into any composition or arrangement with, creditors,
(ii) applies for or consents (by admission of material allegations of a
petition or otherwise) to the appointment of a receiver, trustee, assignee,
custodian, liquidator or sequestrator (or other similar official) for
itself or for any substantial part of its assets or authorizes such an
application or consent, (iii) authorizes or files a voluntary petition in
bankruptcy, or applies for or consents (by admission of material
allegations of a petition or otherwise) to the application of any
bankruptcy, reorganization, arrangement, readjustment of debt, insolvency,
dissolution, liquidation or other similar law of any jurisdiction, or
authorizes such application or consent, or (iv) permits or suffers all or
any substantial part of its assets to be sequestered or attached by court
order and the order remains undismissed for 30 days; or proceedings seeking
the appointment of a receiver, trustee, assignee, custodian, liquidator or
sequestrator (or other similar official) for the Company or for any
substantial part of its assets are commenced without authorization, consent
or application against the Company and continue undismissed for 30 days; or
proceedings to sequester or attach all or any substantial part of the
Company's assets are instituted against the Company without authorization,
consent and application and are approved as properly instituted and remain
undismissed for 30 days or result in adjudication of bankruptcy or
insolvency;
(c) fraud or willful misconduct by the Company in connection with the
business of the Company, other than as a result of acts or omissions caused
by employees of the Advisor.
(d) in the case of termination of this Agreement by the Advisor with
cause, the Company shall pay the Advisor a termination fee equal to the sum
of: (i) the amount of the Acquisition Fee and the Asset Management Fee for
the previous twelve-month period, and (ii) the fair value of any Incentive
Fee on New Assets that would be earned on any New Assets owned by the
Company on the date of the termination. The parties shall use their best
efforts to reach a mutual agreement with respect to the amount of the
Incentive Fee on New Assets for purposes of this Section 15. If the
parties are unable to agree upon such amount within 30 days following the
notice of termination, the amount shall be determined in the manner set
forth in Section 14(b) above. Any amounts due under this Section 15 shall
be due and payable on the effective date of the termination.
If any of the events specified in this Section 15 shall occur, the Advisor shall
give prompt written notice thereof to the Board of Directors upon the happening
of such event.
Section 16. TERMINATION BY ADVISOR WITHOUT CAUSE. The Advisor may
terminate this Agreement without cause at any time after the third annual
anniversary of the Effective Date by delivering 180 days prior written notice of
termination. In the event this Agreement is terminated by the Advisor without
cause, the Advisor shall be entitled to receive twenty-five
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percent of the fair value of any Incentive Fee on New Assets that would be
earned on any New Asset owned by the Company on the date of termination. All
amounts payable to the Advisor under this Section 16 shall be paid on the third
annual anniversary of the date of termination of the Advisor, provided, however,
that if any new Asset is sold during such three-year period, the Advisor shall
be paid, at the time of sale, twenty-five percent of the Incentive Fee on New
Assets which would have been payable to the Advisor, pursuant to the terms of
this Agreement, until the Advisor receives the total amount payable under this
Section 16. The parties shall use their best efforts to reach a mutual
agreement with respect to such fee. If the parties are unable to agree upon the
fee within 30 days following the notice of termination, the amount shall be
determined in the manner set forth in Section 14(b) above.
Section 17. REGISTRATION RIGHTS. In the event of a termination of this
Agreement, any Restricted Stock held by the Advisor shall become freely
transferable, subject to any restrictions on transfer under the Securities Act
of 1933, as amended (the "Securities Act"). In such event, the Advisor shall be
entitled to the following registration rights with respect to the Restricted
Stock:
(a) DEMAND FOR REGISTRATION. The Advisor may, at its option, at any
time after termination, require the Company to use its reasonable efforts
to effect a registration of Restricted Securities under the Securities Act
(the "Demand Registration"); PROVIDED, however, that (i) the Company shall
not be required to effect such Demand Registration unless the Company is
requested to do so with respect to Restricted Securities having a market
value of not less than $1,000,000; (ii) at its option, the Company shall
not be required to effect such registration prior to three (3) months
immediately following the date on which an underwritten public offering of
equity securities (pursuant to an effective registration statement under
the Securities Act) is commenced, if such public offering is commenced
prior to the date of a request for the Demand Registration; and (iii) the
Company shall not be required to use its reasonable efforts to effect a
registration of Restricted Securities under this Section 17(a) more than
two times or, if the Company is eligible to register the Restricted Stock
on Form S-3 (or any successor Form which incorporates by reference
information about the Company and its business) three times. If, after a
Demand Registration becomes effective, the offering of securities
thereunder is or becomes subject to any stop order, injunction or other
order or requirement of the Securities and Exchange Commission (the "SEC")
that prevents or limits the sale of securities thereunder for a period of
more than five (5) Business Days, then such Demand Registration shall be
deemed not to have been effected for purposes of this Section 17(a). If
the offering is underwritten, the underwriter must be reasonably acceptable
to the Company.
(b) PIGGY-BACK REGISTRATION. Each time the Company proposes to file
a registration statement under the Securities Act with respect to an
offering by the Company for its own account or for the account of any of
its securityholders of any class of equity security (except, (i) a
registration statement on Form S-4 or S-8 (or any substitute form that is
adopted by the Commission), (ii) a registration statement filed in
13
connection with a dividend reinvestment plan, employee option plan or unit
investment trusts, or (iii) a registration statement filed in connection
with an exchange offer or offering of securities solely to the Company's
existing securityholders), and the form of registration statement to be
used permits the registration of Restricted Securities, then the Company
shall give written notice of such proposed filing to the Advisor as soon as
reasonably practicable (but in no event less than 20 days before the
anticipated filing date and no less than 30 days before the anticipated
effective date), and such notice shall offer the Advisor the opportunity to
register such Restricted Securities as the Advisor may request (which
request shall specify the Restricted Securities intended to be disposed of
by the Advisor and the intended method of distribution thereof) up to 20
days before the anticipated effective date (a "Piggy-Back Registration").
The Company shall cause the managing underwriter or underwriters of a
proposed underwritten offering to permit the Restricted Securities
requested to be included in a Piggy-Back Registration to be included on
substantially the same terms and conditions as any similar securities of
the Company or any other securityholder included therein and to permit the
sale or other disposition of such Restricted Securities in accordance with
the intended method of distribution thereof. The Advisor shall have the
right to withdraw its request for inclusion of its Restricted Securities in
any Registration Statement pursuant to this Section 17(b) by giving written
notice to the Company of such withdrawal no later than two Business Days
prior to the anticipated effective date. The Company may withdraw a
Piggy-Back Registration at any time prior to the time it becomes effective,
provided that the Company shall give prompt notice of such withdrawal to
the Advisor.
If the managing underwriter or underwriters of an underwritten
offering with respect to which Piggy-Back Registration has been requested
as provided herein shall have informed the Company, in writing, that in the
opinion of such underwriter or underwriters the total number of shares
which the Company, the Advisor and any other Persons participating in such
registration intend to include in such offering is such as to materially
and adversely affect the success of such offering (including without
limitation any material decrease in the proposed public offering price),
then the number of shares to be offered for the account of the Advisor and
all Persons (other than the Company) participating in such registration
shall be reduced or limited (to zero if necessary) pro rata in proportion
to the respective number of shares requested to be registered by such
Persons to the extent necessary to reduce the total number of shares
requested to be included in such offering to the number of shares, if any,
recommended by such managing underwriter or underwriters.
If the Company has determined to enter into an underwriting agreement
in connection therewith, all Restricted Securities to be included in such
Registration Statement shall be subject to such underwriting agreement, and
the Advisor may participate in such Registration only if it agrees to sell
its Restricted Securities on the basis provided for in such underwriting
arrangements approved by the Company and completes and/or executes all
reasonable and customary questionnaires, powers of
14
attorney, indemnities, underwriting agreements and other reasonable
documents which must be executed under the terms of such underwriting
arrangements.
(c) PROCEDURES AND LIMITATIONS.
(i) Anything in this Agreement to the contrary
notwithstanding, if at any time following termination of this
Agreement, the Company shall obtain an opinion of legal counsel (which
shall not be the Company's internal counsel), which opinion shall be
addressed to the Company and the Advisor and shall be reasonably
satisfactory to the Company and the Advisor and its counsel, that the
Registered Stock may be publicly offered in a single transaction
exempt from the registration and prospectus delivery requirements of
the Securities Act so that all transfer restrictions and restrictive
legends with respect thereto are or may be removed immediately prior
to such sale, the Company shall no longer be obligated to register the
Registered Stock.
(ii) Anything in this Agreement to the contrary
notwithstanding, the Company shall be entitled to postpone for a
period of time in its reasonable judgment, but not to exceed 120 days
(a "Blackout Period"), the filing of any registration statement in
accordance with this Section, and the preparation and/or filing of any
prospectus or any amendments or supplements to any registration
statement or prospectus, if the Company reasonably determines that any
such filing or the offering of any Registered Stock would (A) impede,
delay or otherwise interfere with any financing, offer or sale of
securities, acquisition, corporate reorganization or other significant
transaction involving the Company or any of its affiliates, or
(B) require disclosure of material information which, if disclosed at
that time, would be harmful to the interests of the Company and its
stockholders; provided, however, that, in the Blackout Period pursuant
to (B) above, the Blackout Period shall earlier terminate upon public
disclosure by the Company or public admission by the Company of such
material information. Upon notice by the Company to the Advisor of
such determination, the Advisor covenants that it shall (x) keep the
fact of any such notice strictly confidential, (y) promptly halt any
offer, sale, trading or transfer by it or any of its affiliates of any
of the Registered Stock for the duration of the Blackout Period set
forth in such notice (or until earlier terminated in writing by the
Company) and (z) promptly halt any use, publication, dissemination or
distribution of the Registration (as defined below), each prospectus
included therein, and any amendment or supplement thereto by it and
any of its affiliates for the duration of the Blackout Period set
forth in such notice (or until earlier terminated in writing by the
Company). As used in this Section 17(c), "Registration" shall mean
collectively the Demand Registration and the Piggyback Registration.
(iii) In connection with the Company's obligations with respect
to any Registration, and in accordance with the intended method or
methods of
15
distribution of the Registered Stock as described in a Registration,
the Company shall, as soon as reasonably practicable (and, in any
event, subject to the terms of this Section 17, at or before the time
required by applicable laws and regulations):
(A) furnish to the Advisor copies of the Registration,
each amendment and supplement thereto (in each case including all
exhibits thereto), the prospectus included in such Registration
and any documents incorporated therein by reference after the
initial filing of the Registration and such other documents as
the Advisor may reasonably request in order to facilitate the
disposition of the Registered Stock, and to change the
Registration as it specifically relates to the Advisor as
reasonably requested by the Advisor; as to documents incorporated
by reference, the Company shall provide such documents to the
Advisor upon the request of the Advisor;
(B) use its reasonable efforts to keep each
Registration effective for no more than 90 days; prepare and file
with the SEC post-effective amendments to such Registration as
may be necessary to maintain the effectiveness of such
Registration for this period; cause the related prospectus to be
supplemented by any required prospectus supplement, and as so
supplemented to be filed pursuant to Rules 424 and 430A under the
Securities Act and/or any successor rules that may be adopted by
the SEC, as such rules may be amended from time to time; and
comply with the provisions of the Securities Act with respect to
the disposition of all securities covered by such Registration
during the applicable period in accordance with the intended
method or methods of distribution thereof, as specified in
writing by the Advisor;
(C) except during the Blackout Period, make available
for inspection by the Advisor or by any attorney, accountant or
other agent retained by the Advisor and attorneys and
representatives of any underwriter retained by the Advisor
(collectively, the "Inspectors") all financial and other records
and pertinent corporate documents of the Company (collectively,
the "Records"), and such opportunities to discuss the business of
the Company with its officers, and use its reasonable efforts to
make available, to discuss the business of the Company, the
independent public accountants who have certified its most recent
annual financial statements to the extent reasonably necessary to
enable each Inspector to exercise its due diligence
responsibility, and cause the officers, directors and employees
of the Company to supply all information reasonably requested by
any such Inspector in connection with the Registration. Records
which the Company determines, in good faith, to be confidential
and which it notifies the Inspectors are confidential shall
16
not be disclosed by the Inspector unless (1) the disclosure of
such Records is necessary to avoid or correct a material
misstatement or omission in the Registration, (2) the release of
such Records is ordered pursuant to a subpoena or other order
from a court of competent jurisdiction or a governmental body,
(3) the disclosure of such Records is required by any
governmental regulatory body with jurisdiction over the Advisor
that had retained the Inspector, or (4) the information in such
Records has been made generally available to the public. Each
seller of Registered Stock agrees that it will, upon learning
that disclosure of such Records is sought in a court of competent
jurisdiction or by any governmental body, promptly give prior
notice to the Company and allow the Company, at its expense, to
undertake appropriate action to prevent disclosure of those
Records deemed confidential;
(D) promptly notify the Advisor, the sales or
placement agent or agents, if any, for the Registered Stock and
the managing underwriter or underwriters, if any, thereof, after
becoming aware thereof, (1) when the Registration or the
prospectus included therein or any prospectus amendment or
supplement or post-effective amendment has been filed, and, with
respect to the Registration or any post-effective amendment, when
the same has become effective, (2) of any request by the SEC for
amendments or supplements to the Registration or related
prospectus or for additional information, (3) of the issuance by
the SEC of any stop order suspending the effectiveness of the
Registration or the initiation of any proceedings for that
purpose, (4) of the receipt by the Company of any notification
with respect to the suspension of the qualification of the
Registered Stock for sale in any jurisdiction or the initiation
of any proceeding for such purpose, or (5) within the 90-day
period specified above in this Section 17 of the happening of any
event which makes any statement in the Registration or any
post-effective amendment thereto, prospectus or any amendment or
supplement thereto, or any document incorporated therein by
reference untrue in any material respect or which requires the
making of any changes in the Registration or post-effective
amendment thereto or prospectus or amendment or supplement
thereto so that they will not contain any untrue statement of a
material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein (in
the case of any prospectus, in the light of the circumstances
under which they were made) not misleading;
(E) use its reasonable efforts to obtain the
withdrawal of any order suspending the effectiveness of the
Registration or any post-effective amendment thereto;
17
(F) use its reasonable efforts to (1) register or
qualify the Registered Stock for offer and sale under such
securities or blue sky laws of such jurisdictions in the United
States as the Advisor shall reasonably request in writing and
(2) take such other actions as may be reasonably necessary or
advisable in order to enable the Advisor to consummate the
disposition in such jurisdictions of such Registered Stock;
provided, however, that the Company shall not be required for any
such purpose to (I) qualify as a foreign corporation in any
jurisdiction where it would not otherwise be required to qualify
but for the requirements of this Section, (II) consent to general
service of process in any such jurisdiction, (III) subject itself
to taxation in any such jurisdiction or (IV) make any changes its
certificate of incorporation or bylaws or enter into any
undertakings with respect to its corporate affairs;
(G) use its reasonable efforts to cause the Registered
Stock to be registered with or approved by such other
governmental agencies or authorities within the United States as
may be necessary by virtue of the business and operations of the
Company to enable the Advisor to consummate the disposition of
such Registered Stock;
(H) upon written notice from the Advisor that it
intends to publicly offer and sell the Registered Stock,
cooperate with the Advisor to facilitate the timely preparation
and delivery of certificates representing Registered Stock to be
sold, which certificates shall not bear any restrictive legends
except as required by law or otherwise.
(d) In the event that the Company would be required, pursuant to this
Section 17, to notify the Advisor, the sales or placement agent or agents,
if any, for the Registered Stock and the managing underwriters, if any,
thereof, the Company shall, subject to the other provisions of Section 17,
as soon as practicable, prepare and furnish to the Advisor, to each
placement or sales agent, if any, and to each underwriter, if any, a
reasonable number of copies of a prospectus supplemented or amended so
that, as thereafter delivered to purchasers of Registered Stock, such
prospectus shall not contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they
were made, not misleading. The Advisor agrees that, upon receipt of any
notice from the Company pursuant to this Section 17, the Advisor shall
forthwith discontinue disposition of any Registered Stock until it shall
have received copies of such amended or supplemented prospectus and, if so
directed by the Company, such seller shall deliver to the Company all
copies, other than permanent file copies, then in its possession of the
prospectus covering such Registered Stock at the time of receipt of such
notice.
18
(e) The Advisor shall furnish to the Company in writing such
information regarding the Advisor and its intended method of distribution
of the Registered Stock as the Company may from time to time reasonably
request in writing, but only to the extent that such information is
required in order for the Company to comply with its obligations under all
applicable securities and other laws and to ensure that the prospectus
relating to such Registered Stock conforms to the applicable requirements
of the Securities Act and the rules and regulations thereunder. The
Advisor shall notify the Company as promptly as practicable of any
inaccuracy or change in information previously furnished by the Advisor to
the Company or of the occurrence of any event, in either case as a result
of which any prospectus relating to the Registered Stock contains or would
contain an untrue statement of a material fact regarding the Advisor or its
intended method of distribution of such Registered Stock or omits to state
any material fact regarding the Advisor or its intended method of
distribution of such Registered Stock required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, and promptly furnish to the
Company any additional information required to correct and update any
previously furnished information or required so that such prospectus shall
not contain, with respect to the Advisor or the distribution of the
Registered Stock, an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(f) Registration Expenses. Except as set forth in the last sentence
of this (f) of Section 17, the Company agrees to bear and to pay, or cause
to be paid, promptly upon request being made therefor all expenses incident
to the Company's performance of or compliance with this Agreement,
including, without limitation: (i) all registration and filing fees and
expenses of the Securities and Exchange Commission and the National
Association of Securities Dealers, Inc., (ii) all fees and expenses in
connection with the qualification of the Registered Stock for offering and
sale under state securities or blue sky laws referred to above, including
reasonable fees and disbursements of counsel for any placement or sales
agent or underwriter (or, at the Company's option, its counsel) in
connection with such qualifications, (iii) all expenses relating to the
preparation, printing, distribution and reproduction of the Registration,
each prospectus included therein or prepared for distribution pursuant
hereto, each amendment or supplement to the foregoing, the certificates
representing the Registered Stock and all other documents relating hereto,
(iv) internal expenses (including, without limitation, all salaries and
expenses of the Company's officers and employees performing legal or
accounting duties), (v) fees, disbursements and expenses of the Company's
counsel and its other advisors and experts and independent certified public
accountants of the Company, (vi) the fees and expenses incurred in
connection with the listing of the Registered Stock on any national
exchange, including The New York Stock Exchange, and (vii) Securities Act
liability insurance (if the Company elects to obtain such insurance).
Notwithstanding the foregoing, the Advisor shall pay or cause to be paid,
as appropriate, all agency fees and commissions and underwriting discounts
and commissions attributable to the sale of
19
the Registered Stock by or on behalf of the Advisor and the fees and
disbursements of any counsel or other advisors or experts retained by the
Advisor.
Section 18. ASSIGNMENTS.
(a) This Agreement shall terminate automatically in the event of its
assignment, in whole or in part, unless such assignment is consented to in
writing by (i) the Company, with the approval of a majority of the
Independent Directors, in the case of assignment by the Advisor, and (ii)
the Advisor in the case of assignment by the Company. Any such assignment
shall bind the assignee hereunder in the same manner as the assignor is
bound. In the case of assignment by the Advisor, the assignee shall
execute and deliver to the Company a joinder agreement to this Agreement
naming such assignee as Advisor.
(b) If an assignment of this Agreement by the Company is not
consented to in writing by the Advisor, the Advisor shall be entitled to
the fees set forth under Section 14 with respect to termination of this
Agreement by Advisor for cause. If an assignment of this Agreement by the
Advisor is not consented to in writing by the Company, the Company shall be
entitled to terminate this Agreement for cause as set forth in Section 13.
(c) The acquisition of control of the Company or Advisor by any
person singly or as part of "a partnership, limited partnership, syndicate
or other group" as those terms are used within the meaning of Section
13(d)(3) of the Securities Exchange Act of 1934, as amended, shall not
constitute an assignment for purposes of this Section 18.
Section 19. ACTION UPON TERMINATION. From and after the effective date of
termination of this Agreement, the Advisor shall not be entitled to compensation
for further services hereunder, but shall be paid all compensation accruing to
the date of termination or provided in this Agreement. Upon such termination,
the Advisor shall forthwith:
(a) after deducting any accrued compensation and reimbursement for
its expenses to which it is then entitled, pay over to the Company or any
of its Subsidiaries all money collected and held for the account of the
Company or any of its Subsidiaries pursuant to this Agreement;
(b) deliver to the Board of 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 Board of Directors with respect to the Company or any of
its Subsidiaries; and
(c) deliver to the Board of Directors all property and documents of
the Company any of its Subsidiaries then in the custody of the Advisor.
20
Section 20. RELEASE OF MONEY OR OTHER PROPERTY UPON WRITTEN REQUEST. The
Advisor agrees that any money or other property of the Company or any of its
Subsidiaries held by the Advisor under this Agreement shall be held by the
Advisor as custodian for the Company or any such Subsidiary, and the Advisor's
records shall be appropriately marked clearly to reflect the ownership of such
money or other property by the Company or any such Subsidiary. Upon the receipt
by the Advisor of a written request signed by a duly authorized officer of the
Company requesting the Advisor to release to the Company or any of its
Subsidiaries any money or other property then held by the Advisor for the
account of the Company or any of its Subsidiaries under this Agreement, the
Advisor shall release such money or other property to the Company or any of its
Subsidiaries within a reasonable period of time, but in no event later than 10
days following such request. The Advisor shall not be liable to the Company,
any Subsidiary of the Company, the Independent Directors, or the Company's or
its Subsidiary's stockholders for any acts performed or omissions to act by the
Company or any of its Subsidiaries in connection with the money or other
property released to the Company or any of its Subsidiaries in accordance with
this Section 20. The Company and any of its Subsidiaries shall indemnify the
Advisor, its directors, officers, stockholders and employees against any and all
expenses, losses, damages, liabilities, demands, charges and claims of any
nature whatsoever, which arise in connection with the Advisor's release of such
money or other property to the Company or any of its Subsidiaries in accordance
with the terms of this Section 20. Indemnification pursuant to this provision
shall be in addition to any right of the Advisor to indemnification under
Section 10 of this Agreement.
Section 21. REPRESENTATIONS AND WARRANTIES.
(a) The Company hereby represents and warrants to the Advisor as
follows:
(i) The Company is duly incorporated, validly existing and in
good standing under the laws of Delaware, has full corporate power and
authority to own its assets and to transact the business in which it
is now engaged and is duly qualified or registered as a foreign
corporation and in good standing under the laws of each jurisdiction
where its ownership or lease of property or the conduct of its
business requires such qualification or registration, except where the
failure to be so qualified or registered would not in the aggregate
have a material adverse effect on the business, operations, assets or
financial condition of the Company and its Subsidiaries, taken as a
whole. The Company does not do business under any fictitious business
name.
(ii) The Company has the corporate power and authority to
execute, deliver and perform this Agreement and all obligations
required hereunder and has taken all necessary corporate action to
authorize this Agreement on the terms and conditions hereof and the
execution, delivery and performance of this Agreement and all
obligations required hereunder. No consent of any other person
including, without limitation, stockholders and creditors of the
Company, and no license, permit, approval or authorization of,
exemption by, notice or
21
report to, or registration, filing or declaration with, any
governmental or regulatory authority or agency is required by the
Company in connection with this Agreement or the execution, delivery,
performance, validity or enforceability of this Agreement and all
obligations required hereunder. This Agreement has been, and each
instrument or document required hereunder will be, executed and
delivered by a duly authorized officer of the Company, and this
Agreement constitutes, and each instrument or document required
hereunder when executed and delivered hereunder will constitute, the
legally valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, except as such
enforcement may be limited by bankruptcy, insolvency, moratorium or
similar laws now or hereafter in effect relating to the rights and
remedies of creditors generally, and general principles of equity.
(iii) The execution, delivery and performance of this Agreement
and the documents or instruments required hereunder, will not violate
any provision of any existing law or regulation binding on the
Company, or any order, judgment, award or decree or any court,
arbitrator or governmental or regulatory authority or agency binding
on the Company, or the Governing Instruments of, or any securities
issued by, the Company or any of its subsidiaries, or any mortgage,
indenture, lease, contract or other agreement, instrument or
undertaking to which the Company or any of its Subsidiaries is a party
or by which the Company, any Subsidiary of the Company or any of their
assets may be bound, the violation of which would have a material
adverse effect on the business operations, assets or financial
condition of the Company and its Subsidiaries, taken as a whole, and
will not result in, or require, the creation or imposition of any lien
on any of their property, assets or revenues pursuant to the
provisions of any such mortgage, indenture, lease, contract or other
agreement, instrument or undertaking.
(b) The Advisor hereby represents and warrants to the Company as
follows:
(i) The Advisor is duly organized, validly existing and in
good standing under the laws of Delaware, has full power and authority
to own its assets and to transact the business in which it is now
engaged and is duly qualified or registered to do business and is in
good standing under the laws of each jurisdiction where its ownership
or lease of property or the conduct of its business requires such
qualification or registration, except where the failure to be so
qualified or registered would not in the aggregate have a material
adverse effect on the business, operations, assets or financial
condition of the Advisor and its Subsidiaries, taken as a whole. The
Advisor does not do business under any fictitious business name.
(ii) The Advisor has the power and authority to execute,
deliver and perform this Agreement and all obligations required
hereunder and has taken all necessary partnership action to authorize
this Agreement on the terms and
22
conditions hereof and the execution, delivery and performance of this
Agreement and all obligations required hereunder. No consent of any
other person including, without limitation, partners and creditors of
the Advisor, and no license, permit, approval or authorization of,
exemption by, notice or report to, or registration, filing or
declaration with, any governmental or regulatory authority or agency
is required by the Advisor in connection with this Agreement or the
execution, delivery, performance, validity or enforceability of this
Agreement and all obligations required hereunder. This Agreement has
been and each instrument or document required hereunder will be
executed and delivered by a duly authorized agent of the Advisor, and
this Agreement constitutes, and each instrument or document required
hereunder when executed and delivered hereunder will constitute, the
legally valid and binding obligation of the Advisor enforceable
against the Advisor in accordance with its terms.
(iii) The execution, delivery and performance of this Agreement
and the documents or instruments required hereunder, will not violate
any provision of any existing law or regulation binding on the
Advisor, or any order, judgment, award or decree of any court,
arbitrator, or governmental or regulatory authority or agency binding
on the Advisor, or the partnership agreement of, or any securities
issued by, the Advisor or any of its Subsidiaries, or any mortgage,
indenture, lease, contract or other agreement, instrument or
undertaking to which the Advisor or any of its Subsidiaries is a party
or by which the Advisor or any Subsidiary of the Advisor or any of its
assets may be bound, the violation of which would have a material
adverse effect on the business operations, assets or financial
condition of the Advisor and its Subsidiaries, taken as a whole, and
will not result in, or require, the creation or imposition of any lien
on any of their property, assets or revenues pursuant to the
provisions of any such mortgage indenture, lease, contract or other
agreement, instrument or undertaking.
Section 22. NOTICES. Unless expressly provided otherwise herein, all
notices, requests, demands and other communications required or permitted under
this Agreement shall be in writing and shall be deemed to have been duly given,
made and received when delivered against receipt or upon actual receipt of
registered or certified mail, postage prepaid, return receipt requested. The
parties may deliver to each other notice by electronically transmitted facsimile
copies provided that such facsimile notice is followed within 24 hours by any
type of notice otherwise provided for in this Section. Any notice shall be duly
addressed to the parties as follows:
If to the Company:
--------------------------------
--------------------------------
--------------------------------
Attention:
---------------------
Telephone:
---------------------
Fax:
---------------------------
23
with a copy given in the manner prescribed above, to:
--------------------------------
--------------------------------
--------------------------------
Attention:
---------------------
Telephone:
---------------------
Fax:
---------------------------
If to the Advisor:
--------------------------------
--------------------------------
--------------------------------
Attention:
---------------------
Telephone:
---------------------
Fax:
---------------------------
with a copy given in the manner prescribed above, to:
--------------------------------
--------------------------------
--------------------------------
Attention:
---------------------
Telephone:
---------------------
Fax:
---------------------------
Either party may alter the address to which communications or copies are to
be sent by giving notice of such change of address in conformity with the
provisions of this Section 19 for the giving of notice.
Section 23. BINDING NATURE OF AGREEMENT: SUCCESSORS AND ASSIGNS. This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective heirs, personal representatives, successors and assigns as
provided herein.
Section 24. 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.
Section 25. CONTROLLING LAW. This Agreement and all questions relating to
its validity, interpretation, performance and enforcement shall be governed by
and construed, interpreted and enforced in accordance with the laws of the State
of Delaware, notwithstanding any Delaware or other conflict of law provisions to
the contrary.
24
Section 26. SCHEDULES AND EXHIBITS. All Schedules and Exhibits referred
to herein or attached hereto are hereby incorporated by reference into, and made
a part of, this Agreement.
Section 27. NO WAIVER. 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.
Section 28. AMENDMENTS. This Agreement may not be modified or amended
other than by an agreement in writing. Any amendment or modification to this
Agreement must be approved by a majority of the Independent Directors or by the
affirmative vote of the holders of a majority of the outstanding shares of the
Company's Common Stock.
Section 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.
Section 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.
Section 31. PROVISIONS SEPARABLE. The provisions of this Agreement are
independent of and separable 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.
Section 32. 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.
Section 33. COMPUTATION OF INTEREST. Interest will be computed on the
basis of a 360-day year consisting of twelve months of thirty days each.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
Company:
AMERICA FIRST REAL ESTATE INVESTMENT COMPANY, INC., a
Delaware corporation
By
-----------------------------------------------
Name: Xxxx X. Xxxxxx
Title: President and Chief Executive Officer
Advisor:
AMERICA FIRST REAL ESTATE ADVISORS LLC, a Delaware
limited liability company
By
------------------------------------------------
Name:
----------------------------------------------
Title:
---------------------------------------------
26
EXHIBIT A
LIST OF OPERATING PARTNERSHIPS
AND CORRESPONDING ORIGINAL ASSET VALUES
OUTSTANDING
EQUITY INTEREST AGGREGATE PRINCIPAL
IN OPERATING BALANCE OF MORTGAGE
PARTNERSHIP(1) NOTES (2)
Bluff Ridge $ 0 $ 3,510,035
Xxxxxxxx'x Crossing
(Oyster Cove) 1,172,814 10,927,186
Xxxxx Springs (Cypress
Landing II) 478,036 4,271,964
Water's Edge 1,033,464 5,066,536
Ponds @ Georgetown 0 7,300,416
Highland Park 2,173,990 9,001,010
Fox Hollow 843,267 N/A
Crane's Landing 2,520,696 10,229,304
Delta Crossing 1,361,576 6,538,424
Monticello 421,570 5,328,430
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TOTALS $10,005,413 $62,173,305
----------- -----------
----------- -----------
---------------
(1)Determined as of December 31, 1997 based upon the midpoint of the appraisals
prepared by Valuation Research.
(2)Figures are as of December 31, 1997 and will be adjusted to actual principal
balances as of date of execution of this agreement.
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