EXHIBIT 10(C)
ADVISORY AGREEMENT
THIS ADVISORY AGREEMENT ("Agreement") is made this ____ day of
_____________, 1996 by and between CHEVY CHASE PREFERRED CAPITAL CORPORATION, a
Maryland corporation (the "Company"), and CHEVY CHASE BANK, F.S.B., a federally
chartered and federally insured stock savings bank (the "Advisor"). Capitalized
terms used herein shall have the meanings set forth in Section 1 of this
Agreement.
WHEREAS, the Company intends to qualify as a "real estate investment
trust" ("REIT") under the Internal Revenue Code of 1986, as amended (the
"Code"); and
WHEREAS, the Company desires to avail itself of the experience and
assistance of the Advisor and to have the Advisor undertake, on the Company's
behalf, the duties and responsibilities hereinafter set forth, subject to the
control and supervision of the Board of Directors of the Company (the "Board of
Directors") as provided for herein; and
WHEREAS, the Advisor desires to render such services to the Company
subject to the control and supervision of the Board of Directors, on the terms
and conditions hereinafter set forth.
NOW THEREFORE, the parties hereto agree as follows:
SECTION 1. DEFINITIONS.
As used herein, the following terms shall have the respective meanings
set forth below:
"Advisor" has the meaning set forth in the forepart of this Agreement.
"Advisor Termination Date" means the date on which this Agreement
terminates.
"Agreement" means this Advisory Agreement, as amended, modified and
supplemented from time to time.
"Board of Directors" has the meaning set forth in the forepart of this
Agreement.
"Code" has the meaning set forth in the forepart of this Agreement.
"Company" has the meaning set forth in the forepart of this Agreement.
"Independent Directors" means the members of the Board of Directors
who are not current officers or employees of the Company or current directors,
employees or officers of the Advisor or any affiliate of the Advisor.
"Operating Expenses" for any period means all of the operating
expenses of the Company (with the exception of those expenses to be borne by the
Advisor in accordance with Section 4 hereof), including without limitation the
following:
a) interest, taxes and other expenses incurred in connection with the
real estate mortgage assets of the Company;
b) expenses related to the officers, directors and employees of the
Company, including without limitation any fees or expenses of the directors;
c) fees and expenses payable to accountants, appraisers, auditors,
consultants, attorneys, collection and paying agents and all other Persons who
contract with or are retained by the Company or by the Advisor on behalf of the
Company;
d) legal and other expenses incurred in connection with advice
concerning, obtaining or maintaining the Company's status as a REIT, the
determination of the Company's taxable income, any formal or informal
administrative action or legal proceedings which involve a challenge to the REIT
status of the Company or any claim that the activities of the Company, any
member of the Board of Directors or any officer were improper;
e) expenses relating to communications and reports to stockholders of
the Company, including without limitation the costs of preparing, printing,
duplicating and mailing the certificates for the stock of the Company, proxy
solicitation materials and reports to stockholders, and the costs of arranging
meetings of stockholders;
f) the costs of insurance described in Section 2 hereof, including
directors and officers liability insurance covering the directors and officers
of the Company;
g) expenses relating to the acquisition, disposition and ownership of
real estate mortgage assets, including, without limitation and to the extent not
paid by others, legal fees and other expenses for professional services and
fees;
h) expenses connected with the payments of dividends or interest or
distributions in cash or any other form made or caused to be made by the Board
of Directors to the stockholders of the Company;
i) expenses connected with any office or office facilities maintained
by the Company separate from the office of the Advisor, including without
limitation rent, telephone, utilities, office furniture and equipment and
machinery; an d
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j) other miscellaneous expenses of the Company which are not expenses
of the Advisor under Section 4 hereof.
"Person" means and includes individuals, corporations, limited
partnerships, general partnerships, joint stock companies or associations,
limited liability companies, joint ventures, associations, consortia, companies,
trusts, banks, trust companies, land trusts, common law trusts, business trusts
or other entities, governments and agencies and political subdivisions thereof.
"REIT" has the meaning set forth in the forepart of this Agreement.
SECTION 2. DUTIES OF THE ADVISOR.
The Advisor shall consult with the Board of Directors and the officers
of the Company and shall, at the request of the Board of Directors and/or the
officers of the Company, furnish advice and recommendations with respect to all
aspects of the business and affairs of the Company. Subject to the control and
discretion and at the request of the Board of Directors, the Advisor shall:
a) administer the day-to-day operations and affairs of the Company,
including without limitation the performance or supervision of the functions
described in this Section 2;
b) monitor the credit quality of the real estate mortgage assets held
by the Company;
c) advise the Company with respect to the acquisition, management,
financing and disposition of the Company's real estate mortgage assets;
d) represent the Company in its day-to-day dealings with Persons with
whom the Company interacts, including without limitation stockholders of the
Company, the transfer agent of the Company, consultants, accountants, attorneys,
servicers of the Company's mortgage loans, custodians, insurers and banks;
e) establish and provide necessary services for the Company, including
executive, administrative, accounting, stockholder relations, secretarial,
recordkeeping, copying, telephone, mailing and distribution facilities;
f) provide the Company with office space, conference room facilities,
office equipment and personnel necessary for the services to be performed by the
Advisor hereunder;
g) arrange, schedule and coordinate the regular and special meetings
of the Board of Directors required for the conduct of the affairs of the Company
or for timely action on any matters the Company is required to act upon and
implement all decisions of the Board of Directors, unless otherwise instructed,
with regard to the Company and its assets;
h) maintain communications and relations with the stockholders of the
Company, including, but not limited to, responding to inquiries, proxy
solicitations, providing reports to stockholders and arranging and coordinating
all meetings of stockholders;
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i) arrange for the investment and management of any short-term
investments of the Company;
j) arrange for the services of third parties to collect and distribute
funds of the Company and to perform such functions as the Board of Directors
shall from time to time require;
k) monitor and supervise the performance of all parties who have
contracts to perform services for the Company, provided that the Advisor shall
have no duty to assume the obligations or guarantee the performance of such
parties under such contracts;
l) establish and maintain such bank accounts in the name of the
Company as may be required by the Company and approved by the Board of Directors
and ensure that all funds collected by the Advisor in the name or on behalf of
the Company shall be held in trust and shall not be commingled with the
Advisor's own funds or accounts;
m) make payment on behalf of the Company of all Operating Expenses;
n) arrange for the execution and delivery of such documents and
instruments by the officers of the Company as may be required in order to
perform the functions herein described and to take any other required action
contemplated by the terms of this Agreement;
o) arrange for insurance for the Company, including liability
insurance, errors and omissions policies and officers and directors policies,
which shall cover and insure the Company, members of the Board of Directors and
the officers of the Company in amounts and with deductibles and insurers
approved by the Board of Directors;
p) maintain proper books and records of the Company's affairs and
furnish or cause to be furnished to the Board of Directors such periodic reports
and accounting information as may be required from time to time by the Board of
Directors, including, but not limited to, quarterly reports of all income,
expenses and distributions of the Company;
q) consult and work with legal counsel for the Company in implementing
Company decisions and undertaking measures consistent with all pertinent
Federal, state and local laws and rules or regulations of governmental or quasi-
governmental agencies, including, but not limited to, Federal and state
securities laws, the Code, as it relates to the Company's qualification as a
REIT, and the regulations promulgated under each of the foregoing;
r) consult and work with accountants for the Company in connection
with the preparation of financial statements, annual reports and tax returns;
s) arrange for an annual audit of the books and records of the Company
by the accounting firm designated for such purposes by the Board of Directors;
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t) prepare and distribute in consultation with the accountants for the
Company, annual reports to stockholders which will contain audited financial
statements;
u) furnish reports to the Board of Directors and provide research,
economical and statistical data in connection with the Company's investments;
and
v) as reasonably requested by the Company, make reports to the Company
of its performance of the foregoing services and furnish advice and
recommendations with respect to other aspects of the business of the Company.
SECTION 3. COMPENSATION OF THE ADVISOR.
The Company shall pay to the Advisor, for services rendered by the
Advisor hereunder, an advisory fee equal to Two Hundred Thousand Dollars
($200,000.00) per year, payable in equal quarterly installments.
SECTION 4. EXPENSES OF THE ADVISOR.
a) Without regard to the compensation received pursuant to Section 3
hereof, the Advisor shall bear the following expenses:
(i) employment expenses of the personnel employed by the Advisor,
including without limitation salaries, wages, payroll taxes and the cost of
employee benefit plans; and
(ii) rent, telephone equipment, utilities, office furniture and
equipment and machinery and other office expenses of the Advisor incurred in
connection with the maintenance of any office facility of the Advisor.
b) The Company shall reimburse the Advisor within 30 days of a written
request by the Advisor for any Operating Expenses paid or incurred by the
Advisor on behalf of the Company.
SECTION 5. RECORDS.
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 the Board of Directors and representatives
of the Company at all times.
SECTION 6. REIT QUALIFICATION AND COMPLIANCE.
The Advisor shall consult and work with the Company's legal counsel in
maintaining the Company's qualification as a REIT. Notwithstanding any other
provisions of this Agreement to the contrary, the Advisor shall refrain from any
action which, in its reasonable judgment or in the judgment of the Board of
Directors (of which the Advisor has received written notice), would
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adversely affect the qualification of the Company as a REIT or which would
violate any law, rule or regulation of any governmental body or agency having
jurisdiction over the Company or its securities, or which would otherwise not be
permitted by the articles of incorporation or by-laws of the Company.
Furthermore, the Advisor shall take any action which, in its judgment or the
judgment of the Board of Directors (of which the Advisor has received written
notice), may be necessary to maintain the qualification of the Company as a REIT
or prevent the violation of any law or regulation of any governmental body or
agency having jurisdiction over the Company or its securities.
SECTION 7. TERM; TERMINATION.
This Agreement shall be in full force and effect for a term beginning
on the date hereof with an initial term of three years, and will be renewed
automatically for additional one-year periods unless the Company delivers a
notice of nonrenewal to the Advisor not less than 60 days prior to the
expiration of the initial term of this Agreement or 60 days prior to the
expiration of any renewal term. Notwithstanding the foregoing, at any time
after the initial term, the Company may terminate this Agreement at any time
upon 60 days' prior written notice; provided, however, that as long as any
shares of the Company's ___% Noncumulative Exchangeable Preferred Stock, Series
A, par value $5.00 per share, remain outstanding, any decision by the Company
either not to renew this Agreement or to terminate this Agreement must be
approved by a majority of the Board of Directors, as well as by a majority of
the Independent Directors.
SECTION 8. OTHER ACTIVITIES OF THE ADVISOR.
a) Nothing herein contained shall prevent the Advisor, an affiliate of
the Advisor or an officer, director, employee or stockholder of the Advisor from
engaging in any activity, including without limitation originating, purchasing
and managing real estate mortgage assets, rendering of services and investment
advice with respect to real estate investment opportunities to any other Person
(including other REITs) and managing other investments (including the
investments of the Advisor and its affiliates).
b) Officers, directors, employees, stockholders and agents of the
Advisor or of any affiliate of the Advisor may serve as officers, directors,
employee or agents of the Company, but shall receive no compensation (other than
reimbursement for expenses) from the Company for such service.
SECTION 9. BINDING EFFECT; ASSIGNMENT.
This Agreement shall inure to the benefit of and shall be binding upon
the parties hereto and their respective successors and assigns. Neither party
may assign this Agreement or any of its respective rights hereunder (other than
an assignment to a successor organization which acquires substantially all of
the property of such party or, in the case of the Advisor, to an affiliate of
the Advisor) without the prior written consent of the other party to this
Agreement.
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SECTION 10. SUBCONTRACTING.
The Advisor may at any time subcontract all or a portion of its
obligations under this Agreement to one or more affiliates of the Advisor that
are involved in the business of managing real estate mortgage assets without the
consent of the Company. If no affiliate of the Advisor is engaged in the
business of managing real estate mortgage assets, the Advisor may, with the
approval of a majority of the Board of Directors, as well as a majority of the
Independent Directors, subcontract all or a portion of its obligations under
this Agreement to unrelated third parties. Notwithstanding the foregoing, the
Advisor will not, in connection with subcontracting any of its obligations under
this Agreement, be discharged or relieved in any respect from its obligations
under this Agreement.
SECTION 11. LIABILITY AND INDEMNITY OF THE ADVISOR.
The Advisor assumes no responsibilities under this Agreement other
than to perform the services called for hereunder in good faith. Neither the
Advisor nor any of its affiliates, stockholders, directors, officers or
employees will have any liability to the Company, stockholders of the Company or
others except by reason of acts or omissions constituting gross negligence or
willful breach of any of the Advisor's material obligations under this
Agreement. The Company shall indemnify and reimburse (if necessary) the
Advisor, its stockholders, directors, officers, employees and agents for any and
all expenses (including without limitation attorneys' fees and expenses),
losses, damages, liabilities, demands and charges of any nature whatsoever in
respect of or arising from any acts or omissions by the Advisor pursuant to this
Agreement, provided that the conduct against which the claim is made was
determined by such Person, in good faith, to be in the best interests of the
Company and was not the result of gross negligence by such Person or willful
breach of any of such Person's material obligations by such Person. The Advisor
agrees that any such indemnification is recoverable only from the assets of the
Company and not from the stockholders.
SECTION 12. ACTION UPON NOTICE OF NON-RENEWAL OR TERMINATION.
Forthwith upon giving of notice of non-renewal of this Agreement by
the Company or of termination of this Agreement by the Company, the Advisor
shall not be entitled to compensation after the Advisor Termination Date for
further services under this Agreement, but shall be paid all compensation
accruing to the Advisor Termination Date and shall be reimbursed for all
expenses of the Company paid or incurred by the Advisor as of the Advisor
Termination Date which are reimbursable by the Company under this Agreement.
The Advisor shall promptly after the Advisor Termination Date:
(i) deliver to the Company all assets and documents of the Company
then in the custody of the Advisor; and
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(ii) cooperate with the Company and take all reasonable steps
requested to assist the Board of Directors in making an orderly transfer of the
administrative functions of the Company.
SECTION 13. NO JOINT VENTURE OR PARTNERSHIP.
Nothing in this Agreement shall be deemed to create a joint venture or
partnership between the parties, whether for purposes of taxation or otherwise.
SECTION 14. 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 made by hand delivery, certified mail,
overnight courier service, telex or telecopier. Any notice shall be duly
addressed to the parties as follows:
If to the Company:
Chevy Chase Preferred Capital Corporation
0000 Xxxxxxxxxxx Xxxxxx
Xxxxx Xxxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx, Xx.
If to the Advisor:
Chevy Chase Bank, F.S.B.
0000 Xxxxxxxxxxx Xxxxxx
Xxxxx Xxxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx, Xx.
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 14 for the giving of notice.
SECTION 15. SEVERABILITY.
If any term or provision of this Agreement or the application thereof
with respect to any Person or circumstance shall, to any extent, be invalid or
unenforceable, the remainder of this
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Agreement, or the application of that term or provision to persons or
circumstances other than those as to which it is held invalid or unenforceable,
shall not be affected thereby, and each term and provision of this Agreement
shall be valid and be enforced to the fullest extent permitted by law.
SECTION 16. GOVERNING 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 Maryland,
notwithstanding any Maryland choice of law rules that would apply the
substantive law of any other jurisdiction.
SECTION 17. AMENDMENTS.
This Agreement shall not be amended, 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 assigns, or otherwise as
provided herein.
SECTION 18. HEADINGS.
The section headings herein have been inserted for convenience of
reference only and shall not be construed to affect the meaning, construction or
effect of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their officers thereunto duly authorized as of the date first
above written.
CHEVY CHASE PREFERRED CAPITAL
CORPORATION
By: _______________________________
Name: _________________________
Title: ________________________
CHEVY CHASE BANK, F.S.B.
By: _______________________________
Name: _________________________
Title: ________________________
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