ADVISORY AGREEMENT
EXHIBIT 10.1
THIS ADVISORY AGREEMENT (this “Agreement”), dated as of , 2006, is
entered into between Landwin REIT, Inc., a Maryland corporation (the “Company”), Landwin,
L.P. (the “Operating Partnership,” and collectively with the Company, the “Fund”),
and Landwin Advisors, LLC, a Delaware limited liability company (the “Advisor”).
RECITALS:
WHEREAS, the Company intends to qualify as a REIT (as defined below), and to invest, through
the Operating Partnership, its funds in investments permitted by the terms of the Articles (as
defined below) and Sections 856 through 860 of the Code (as defined below);
WHEREAS, the Fund desires to avail itself of the experience, sources of information, advice
and assistance of, and certain facilities available to, the Advisor and to have the Advisor
undertake the duties and responsibilities set forth herein on behalf of the Fund, subject to the
supervision of the Board of Directors of the Company and the general partner of the Operating
Partnership; and
WHEREAS, the Advisor is willing to undertake to render such services, subject to the
supervision of the Board of Directors and the general partner of the Operating Partnership, on the
terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements
contained herein, the parties hereto, intending to be legally bound, hereby agree as follows:
1. Definitions. As used in this Agreement, the following terms have the definitions
hereinafter indicated:
“Acquisition Expenses” means any and all expenses incurred by the Company, the
Advisor, the Operating Partnership, or any Affiliate thereof in connection with the selection or
acquisition of any Real Estate Asset, including, without limitation, legal fees and expenses,
travel and communications expenses, costs of appraisals, nonrefundable option payments on property
not acquired, accounting fees and expenses, title insurance premiums, and other closing and
miscellaneous expenses related to selection and acquisition of Real Estate Assets, whether or not
acquired.
“Acquisition Fee” means any and all fees and commissions, exclusive of Acquisition
Expenses, paid by any Person to any other Person (including the Landwin Acquisition Fee (as defined
in Section 8(a)) and any other fees or commissions paid by or to any Affiliate of the Fund or the
Advisor) in connection with the making or investing in mortgage loans or the purchase, development
or construction of any property or other Real Estate Asset, including, without limitation, real
estate commissions, Development Fees and Construction Fees (except as provided in the following
sentence), nonrecurring management fees, loan fees or points, or any other fees or commissions of a
similar nature. Excluded are all Development Fees or Construction Fees paid to any Person or entity
not affiliated with the Sponsor or Advisor in
connection with the actual development and construction of any property or other Real Estate
Asset.
“Advisor” means Landwin Advisors, LLC, a Delaware limited liability company, any
successor advisor to the Company, or any person or entity to which Landwin Advisors, LLC or any
successor advisor subcontracts certain of its functions.
“Affiliate” means, (A) any Person directly or indirectly owning, controlling, or
holding, with power to vote, 10% or more of the outstanding voting securities of such other Person,
(B) any Person 10% or more of whose outstanding voting securities are directly or indirectly owned,
controlled, or held, with the power to vote, by such other Person, (C) any Person, directly or
indirectly, controlling, controlled by, or under common control with such other Person, (D) any
executive officer, director, trustee, general partner or manager of such other Person, or (E) any
legal entity for which such Person acts as an executive officer, director, trustee, general partner
or manager.
“Appraised Value” means value according to an appraisal made by an Independent Expert.
“Articles” means the Articles of Incorporation of the Company dated as of October 19,
2005, as amended from time to time.
“Asset Management Fee” means the fee described in Section 8(b) hereof.
“Average Invested Assets” means, for a specified period, the average of the aggregate
book value of the assets of the Company invested, directly or indirectly, in equity interests in
and loans secured by real estate, before reserves for depreciation or bad debts or other similar
non-cash reserves, computed by taking the average of such values at the end of each month during
such period.
“Board” means the Board of Directors of the Company.
“Cause” means (i) any fraud, criminal conduct, willful misconduct or willful breach of
duty by the Advisor, (ii) any material breach of this Agreement by the Advisor not cured by the
Advisor within 15 days of the Advisor’s receipt of notice of such breach from the Fund, or (iii)
the bankruptcy of the Advisor.
“Code” means the Internal Revenue Code of 1986, as amended from time to time, or any
successor statute thereto. Reference to any provision of the Code shall mean such provision as in
effect from time to time, as the same may be amended, and any successor provision thereto, as
interpreted by any applicable regulations as in effect from time to time.
“Company” means Landwin REIT, Inc., a corporation organized under the laws of the
State of Maryland.
“Competitive Real Estate Commission” means a real estate or brokerage commission paid
for the purchase or sale of property which is reasonable, customary and competitive in light of the
size, type and location of the Real Estate Asset.
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“Construction Fee” means a fee or other remuneration for acting as general contractor
and/or construction manager to construct improvements, supervise and coordinate projects or to
provide major repairs or rehabilitation for a Real Estate Asset.
“Control” means, with respect to a Person, the possession (directly or indirectly) of
the power to direct or cause the direction of the management and policies of such Person, whether
through ownership of voting securities, by contract or otherwise.
“Contract Purchase Price” means the amount actually paid for a Real Estate Asset or
allocated to the purchase, development, construction or improvement of a property, exclusive of
Acquisition Fees and Acquisition Expenses.
“Development Fee” means a fee for the packaging of a Real Estate Asset, including the
negotiation and approval of plans, and any undertaking to assist in obtaining zoning and necessary
variances and financing for a specific property, either initially or at a later date.
“Director” means a member of the Board of Directors of the Company.
“Disposition Fee” means the fee described in Section 8(c) hereof.
“Dividends” means any dividends or other distributions of money or other property by
the Company to the Stockholders, including distributions that may constitute a return of capital
for federal income tax purposes.
“Fund” means the Company and the Operating Partnership, collectively.
“Good Reason” means (i) any failure by the Company or the Operating Partnership to
obtain a satisfactory agreement from a successor entity to the Company or the Operating Partnership
to assume and agree to perform the Fund’s obligations under this Agreement, or (ii) any material
breach of this Agreement by the Fund not cured by the Fund within 15 days of the Fund’s receipt of
notice of such breach from the Advisor.
“Gross Proceeds” means the aggregate purchase price of all Shares sold for the account
of the Company, without deduction for the formation fee or other Organization and Offering
Expenses.
“Independent Director” means a Director who is not, and within the last two years has
not been, directly or indirectly associated with the Advisor or Sponsor by virtue of (i) ownership
of an interest in the Advisor, the Sponsor or any of their Affiliates, (ii) employment by the
Advisor, the Sponsor or any of their Affiliates, (iii) service as an officer, or director of the
Advisor, the Sponsor or any of their Affiliates, (iv) performance of services, other than as a
Director, for the Company, (v) service as a director, trust manager or trustee of more than three
real estate investment trusts advised by the Advisor or organized by the Sponsor, or (vi)
maintenance of a material business or professional relationship with the Advisor, the Sponsor or
any of their Affiliates. A business or professional relationship is considered material if the
gross revenue derived by the Director from the Advisor or Sponsor and their Affiliates exceeds 5%
of either the Director’s annual gross revenue, derived from all sources, during either of the last
two years or the Director’s net worth on a fair market value basis. An indirect relationship shall
include
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circumstances in which a Director’s spouse, parents, children, siblings, mothers- or
fathers-in-law, sons- or daughters-in-law or brothers- or sisters-in-law is or has been associated
with the Advisor or Sponsor or any of their Affiliates or the Company.
“Independent Expert” means a Person or entity with no material current or prior
business or personal relationship with the Advisor or any of the Directors who is engaged to a
substantial extent in the business of rendering opinions regarding the value of assets of the type
held by the Company.
“Invested Capital” means, with respect to the Stockholders, as of any relevant date,
an amount equal to the excess of (i) the aggregate amount of cash contributed or deemed contributed
by the Company to the Operating Partnership from the gross proceeds of the issuance by the Company
of Shares to the Stockholders, over (ii) the sum of (A) the cumulative distributions of Net Sales
Proceeds (as defined in the OP Partnership Agreement) made to the Company pursuant to Section
5.1(c) of the OP Partnership Agreement as of such date and distributed to the Stockholders, and (B)
the cumulative amounts paid to the Stockholders to repurchase Shares under the Company’s share
redemption plan as of such date.
“Joint Ventures” means the joint venture or general partnership arrangements in which
the Company or the Operating Partnership is a co-venturer or partner that are established to
acquire Real Estate Assets.
“Landwin Acquisition Fee” means the acquisition fee described in Section 8(a) hereof.
“Listing” means the listing of Shares on a national securities exchange or quotation
of the Shares on the National Market System or the SmallCap Market of the Nasdaq Stock Market.
“Listing Date” means the date on which a Listing occurs.
“Net Income” means for any period, the total revenues of the Fund applicable to such
period, less the total expenses of the Fund applicable to such period excluding additions to
reserves for depreciation, bad debts or other similar non-cash reserves; provided, however, that
Net Income for purposes of calculating total allowable Operating Expenses under Section 10 hereof
excludes the gain from the sale of the Fund’s assets.
“Net Sales Proceeds” means in the case of a transaction described in clause (a) of
the definition of Sale, the proceeds of any such transaction less the amount of all real estate
commissions and closing costs paid by the Company. In the case of a transaction described in
clause (b) of such definition, Net Sales Proceeds means the proceeds of any such transaction less
the amount of any legal and other selling expenses incurred in connection with such transaction.
Net Sales Proceeds shall not include any reserves established by the Company in its sole
discretion.
“Offering” means any public offering of Shares pursuant to a Prospectus that is
registered with the Securities and Exchange Commission, excluding Shares offered under any employee
benefit plan.
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“Operating Expenses” means, for purposes of Section 10 hereof, all costs and expenses
incurred by the Fund, the Advisor or any of their respective Affiliates, as determined under
generally accepted accounting principles, which in any way are related to the operation of the Fund
or to the Fund’s business, including advisory fees, but excluding (i) Organization and Offering
Expenses, (ii) interest payments, (iii) taxes, (iv) non-cash expenditures such as depreciation,
amortization and bad debt reserves, (v) incentive fees payable to the Advisor, including the
Disposition Fee and Subordinated Share of Net Proceeds, (vi) the subordinated participation in net
sales proceeds, distribution upon listing and distribution upon termination to be received by the
Advisor pursuant to the OP Partnership Agreement, (vii) Acquisition Fees and Acquisition Expenses,
and (viii) real estate commissions on the resale of property and other expenses connected with the
acquisition, disposition and ownership of real estate interests, mortgage loans, or other property
(such as the costs of foreclosure, insurance premiums, legal services, maintenance, repair, and
improvement of property).
“Operating Partnership” means Landwin, L.P., a Delaware limited partnership, and any
successor thereof.
“OP Partnership Agreement” means the Amended and Restated Agreement of Limited
Partnership of the Operating Partnership, as the same may be amended from time to time.
“Organization and Offering Expenses” means any and all costs and expenses, incurred by
the Advisor or any of its Affiliates, including the Sponsor, in connection with the formation,
qualification and registration of the Company and the Operating Partnership and the marketing and
distribution of the Shares, including, without limitation, the following: introduction fee, closing
fee, legal, accounting, underwriting, brokerage, listing, registration and escrow fees and
expenses; salaries of employees while engaged in sales activity; printing, amending, supplementing,
mailing and distributing costs; filing, registration, Listing and qualification fees and taxes;
telegraph and telephone costs; and all advertising and marketing expenses, including all costs
related to investor meetings.
“Person” means an individual, corporation, partnership, limited partnership, limited
liability company, estate, trust (including a trust qualified under Section 401(a) or 501(c)(17) of
the Code), a portion of a trust permanently set aside for or to be used exclusively for the
purposes described in Section 642(c) of the Code, association, private foundation within the
meaning of Section 509(a) of the Code, joint stock company or other entity and also includes a
group as that term is used for purposes of Section 13(d) (3) of the Securities Exchange Act of
1934, as amended.
“Prospectus” has the meaning set forth in Section 2(10) of the Securities Act of 1933,
as amended (the “Securities Act”), including a preliminary Prospectus, an offering circular
as described in Rule 256 of the General Rules and Regulations under the Securities Act or, in the
case of an intrastate offering, any document by whatever name known, utilized for the purpose of
offering and selling securities to the public.
“Real Estate Assets” means unimproved and improved real property and Real Estate
Related Investments or any direct and indirect interest therein (including, without limitation, fee
or leasehold interests, options, leases, partnership and joint venture interests, equity and debt
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securities of entities that own real property, first or second mortgages on real property,
mezzanine loans directly or indirectly secured by real property, and other contractual rights in
real estate).
“Real Estate Related Investments” means mortgage loans secured by, or preferred equity
investments (as described in the description of Real Estate Related Investments in the Prospectus,
as amended from time to time) in entities that own, real property (including first or subordinated
mortgages on real property and mezzanine loans directly or indirectly secured by real property).
“REIT” means a “real estate investment trust” as defined in Section 856 of the Code
and applicable Treasury Regulations.
“Remaining Capital” means, with respect to the Stockholders, as of any relevant date,
an amount equal to the excess of (i) the aggregate amount of cash contributed or deemed contributed
by the Company to the Operating Partnership from the gross proceeds of the issuance by the Company
of Shares to the Stockholders, over (ii) the cumulative amounts paid to the Stockholders to
repurchase Shares under the Company’s share redemption plan as of such date.
“Sale” means, with respect to any Real Estate Asset, any transaction or series of
transactions whereby:
(a) the Fund directly or indirectly (except as described in other subsections of this
definition) sells, grants, transfers, conveys or relinquishes its ownership of any Real
Estate Asset, including, without limitation, any event with respect to any Real Estate Asset
that gives rise to a significant amount of insurance proceeds or condemnation awards; or
(b) any Joint Venture directly or indirectly sells, grants, transfers, conveys, or
relinquishes its ownership of any Real Estate Asset, including any event with respect to any
real property which gives rise to insurance proceeds or condemnation awards.
“Securities” means the Shares or any other stock or other evidences of equity or
beneficial or other interests, voting trust certificates, bonds, debentures, notes or other
evidences of indebtedness, secured or unsecured, convertible, subordinated or otherwise, or in
general any instruments commonly known as “securities” or any certificates of interest, shares or
participations in, temporary or interim certificates for, receipts for, guarantees of, or warrants,
options or rights to subscribe to, purchase or acquire, any of the foregoing.
“Shares” means the shares of the Company’s common stock, par value $.01 per share.
“6% Return” means, with respect to the Stockholders, an amount calculated like simple
interest at the rate of six percent (6%) per annum calculated on the varying daily balances of
Invested Capital during the period to which the 6% Return relates, and determined on the basis of a
360-day year/30-day month, cumulative for the period for which such 6% Return is being determined.
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“Sponsor” means any Person directly or indirectly instrumental in organizing, wholly
or in part, the Company or any Person who will control, manage or participate in the management of
the Company, and any Affiliate of such Person. Not included is any Person whose only relationship
with the Company is that of an independent property manager of Company assets, and whose only
compensation is as such. Sponsor does not include wholly independent third parties such as
attorneys, accountants, and underwriters whose only compensation is for professional services. A
Person may also be deemed a Sponsor of the Company by:
(i) taking the initiative, directly or indirectly, in founding or organizing the
business or enterprise of the Company, either alone or in conjunction with one or more other
Persons;
(ii) receiving a material participation in the Company in connection with the founding
or organizing of the business of the Company, in consideration of services or property, or
both services and property;
(iii) having a substantial number of relationships and contacts with the Company;
(iv) possessing significant rights to control Company properties;
(v) receiving fees for providing services to the Company which are paid on a basis
that is not customary in the Company’s industry; or
(vi) providing goods or services to the Company on a basis which was not negotiated at
arms length with the Company.
“Stockholders” means the holders of record of Shares maintained in the Company’s books
and records.
“Subordinated Share of Net Sales Proceeds” means the amount described in Section 8(d).
“Termination Date” means the date of termination of this Agreement pursuant to Section
14 hereof.
2. Appointment. The Fund hereby appoints the Advisor to serve as its advisor on the
terms and conditions set forth in this Agreement, and the Advisor hereby accepts such appointment.
3. Duties of the Advisor. The Advisor shall undertake to present to the Fund
opportunities to invest in Real Estate Assets and to provide a continuing and suitable investment
program consistent with the investment objectives and policies of the Fund as determined and
adopted from time to time by the Board. In performance of this undertaking, subject to the
supervision of the Board and consistent with the provisions of the Company’s Prospectus, initially
filed on November 7, 2005 (and any amendments or supplements thereto), the Articles, the Bylaws of
the Company and the OP Partnership Agreement, the Advisor shall, either directly or by engaging an
Affiliate:
a. serve as the Fund’s investment advisor;
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b. perform and supervise the various administrative functions reasonably necessary for
the daily management of the Fund;
c. maintain and preserve the books and records of the Fund;
d. investigate, select, engage and conduct business with, on behalf of the Fund, such
Persons as the Advisor deems necessary to the proper performance of its obligations
hereunder, including but not limited to appraisers, consultants, accountants, contractors,
leasing agents, correspondents, lenders, technical advisors, attorneys, real estate brokers,
broker-dealers, underwriters, corporate fiduciaries, escrow agents, transfer agents,
depositaries, custodians, agents for collection, insurers, insurance agents, banks,
builders, developers, property managers, mortgagors, mortgage brokers, real estate research
firms and any and all agents for any of the foregoing, including Affiliates of the managers
or members of the Advisor or of the Company’s directors, and Persons acting in any other
capacity deemed by the Advisor necessary or desirable for the performance of any of the
services described in this Section 3, including but not limited to entering into contracts
in the name of the Company or the Operating Partnership with any of the foregoing;
e. consult with the officers of the Company and the Board and assist the Board in the
formulation and implementation of the Fund’s financial and investment policies, and, as
necessary, furnish the Board with advice and recommendations with respect to the making of
investments consistent with the investment objectives and policies of the Fund and in
connection with any borrowings proposed to be undertaken by the Fund;
f. subject to the provisions of Section 4 hereof, (i) locate, analyze and select
potential investments in Real Estate Assets for the Fund, (ii) structure and negotiate the
terms and conditions of transactions pursuant to which investments in Real Estate Assets
will be made by the Fund; (iii) make investments in Real Estate Assets on behalf of the Fund
in compliance with the investment objectives and policies of the Fund; (iv) arrange for
financing and refinancing and make other changes in the asset or capital structure of, and
dispose of, reinvest the proceeds from the sale of, or otherwise deal with the Fund’s
investments in, Real Estate Assets; (v) enter into leases and service contracts for Real
Estate Assets; (vi) supervise property management, leasing, development and construction
services provided by third parties for the Fund’s Real Estate Assets; and (vii) to the
extent necessary, perform all other operational functions for the maintenance and
administration of Real Estate Assets held by the Fund;
g. if and to the extent that the Advisor deems appropriate, negotiate on behalf of the
Fund with banks or lenders for loans to be made to the Fund or with respect to its Real
Estate Assets, and negotiate on behalf of the Fund with investment banking firms and
broker-dealers or negotiate private sales of Partnership Units (as defined in the OP
Partnership Agreement) or obtain loans for the Fund, but in no event in such a way so that
the Advisor shall be acting as broker-dealer or underwriter; and provided, further, that any
fees and costs payable to third parties incurred by the Advisor in connection with the
foregoing shall be the responsibility of the Fund;
h. provide the Fund with all necessary cash management services;
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i. establish and maintain one or more bank accounts in its own name for the account of
the Fund or in the name of the Fund, and collect and deposit into any such account or
accounts, and disburse from any such account or accounts, any money on behalf of the Company
or the Operating Partnership, as applicable; provided that no funds shall be commingled with
the funds of the Advisor; and provided further that the Advisor shall from time to time
render appropriate accountings of such collections and payments to the Board and to the
auditors of the Fund;
j. provide the Board with reports of the Advisor’s performance of services under this
Agreement from time to time, or at any time reasonably requested by the Board;
k. obtain reports (which may be prepared by the Advisor or Affiliates of the managers
of the Advisor), where appropriate, concerning the value of the Fund’s investments in Real
Estate Assets;
l. provide the Board with periodic reports regarding prospective investments in Real
Estate Assets;
m. deliver to or maintain on behalf of the Fund copies of all appraisals obtained in
connection with the investments in Real Estate Assets;
n. to the extent that the approval of the Board or the Independent Directors is not
otherwise required, notify the Board of all proposed material transactions before they are
completed; and
o. do all other things reasonably necessary to assure its ability to render the
services described in this Agreement.
4. Authority of Advisor.
a. Pursuant to the terms of this Agreement (including the restrictions included in this
Section 4 and in Section 6 hereof), and subject to the continuing and exclusive authority of
the Board over the management of the Company, the Fund hereby delegates to the Advisor the
authority to perform, on behalf of the Fund, the services described in Section 3 hereof.
b. The Advisor hereby acknowledges its authority under this Agreement is subject to the
investment limitations described in Articles IX of the Articles and the approvals
required for certain transactions between the Advisor or its Affiliates and the Company as
set forth in Article X of the Articles.
c. If any transaction requires approval by the Board or the Independent Directors under
the Articles, the Advisor will deliver to the Board or the Independent Directors, as
applicable, all documents required by them to properly evaluate the proposed transaction.
d. The Board may, at any time upon the giving of notice to the Advisor, modify or
revoke the authority set forth in this Section 4 on behalf of the Company (including the
Company in its capacity as general partner of the Operating Partnership).
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5. Records; Access. The Advisor shall maintain appropriate records of all its
activities hereunder and make such records available for inspection by the Fund and by counsel,
auditors and authorized agents of the Fund at any time or from time to time during normal business
hours. The Advisor shall at all reasonable times have access to the books and records of the Fund.
6. Limitations on Activities. Notwithstanding anything else in this Agreement to the
contrary, the Advisor shall refrain from taking any action which, in its sole judgment made in good
faith, would (a) adversely affect the status of the Company as a REIT, (b) subject the Company to
regulation under the Investment Company Act of 1940, as amended, (c) violate any law, rule,
regulation or statement of policy of any governmental body or agency having jurisdiction over the
Company (including federal and state securities laws), or (d) otherwise not be permitted by the
Articles, the Bylaws of the Company or the OP Partnership Agreement; except if such action shall be
ordered by the Board, in which case the Advisor shall notify promptly the Board of the Advisor’s
judgment of the potential impact of such action and shall refrain from taking such action until it
receives further clarification or instructions from the Board. In such event, the Advisor shall
have no liability for acting in accordance with the specific instructions of the Board so given.
Notwithstanding the foregoing, the Advisor, its directors, officers, members, managers and
employees and the directors, officers, managers, stockholders, members, partners and employees of
the Advisor’s Affiliates shall not be liable to the Company or the Operating Partnership for any
act or omission by the Advisor, its directors, officers, members, managers, employees or Affiliates
except as provided in Sections 15 and 16 of this Agreement.
7. Relationship with Directors. Officers, members, managers and employees of the
Advisor or any Affiliate of the Advisor may serve as Directors and as officers of the Company;
provided, that no officer, member, manager or employee of the Advisor or its Affiliates who also is
a Director or officer of the Company shall receive any compensation from the Company for serving as
a Director or officer of the Company other than reasonable reimbursement for travel and related
expenses incurred in attending meetings of the Board.
8. Fees.
a. Acquisition Fees and Expenses.
Subject to the following sentence, the Fund shall pay to the Advisor, as
compensation for services rendered by the Advisor in connection with the
investigation, selection and acquisition (by purchase, investment or exchange) of
Real Estate Assets, a fee (the “Landwin Acquisition Fee”) in an amount equal
to 5.50% of (i) for any Real Estate Asset acquired by the Fund directly or
indirectly other than a Real Estate Related Investment, the Contract Purchase Price
of the underlying property, and (ii) for any Real Estate Related Investment acquired
by the Fund directly or indirectly, the Appraised Value of the underlying property,
in the case of this subsection (ii), not to exceed 5.50% of the funds advanced by
the Fund for the purchase of the Real Estate Related Investment. The total of all
Acquisition Fees (including the Landwin Acquisition Fee) and any Acquisition
Expenses incurred by the Advisor and reimbursed by the Company in accordance with
Section 9(a)(ii) hereof shall not exceed an amount equal to 6.0% of (i) for
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any Real Estate Asset acquired by the Fund directly or indirectly other than a
Real Estate Related Investment, the Contract Purchase Price of the underlying
property, and (ii) for any Real Estate Related Investment acquired by the Fund
directly or indirectly, 6.0% of the amount of the underlying loan or investment in
preferred equity securities. The Landwin Acquisition Fee payable with respect to the
acquisition of any Real Estate Asset shall be paid to the Advisor by the Fund at the
time of such acquisition. The Advisor may elect, in its sole discretion, to defer
(without interest) payment of any Landwin Acquisition Fee by providing written
notice of such deferral to the Fund.
b. Asset Management Fee.
On the last day of each month, the Fund shall pay the Advisor an “Asset
Management Fee” in an amount equal to one-twelfth of 1.75% of (i) for any Real
Estate Asset held by the Fund directly or indirectly as of the last day of the
preceding month other than a Real Estate Related Investment, the Contract Purchase
Price of the underlying property, and (ii) for any Real Estate Related Investment
held by the Fund directly or indirectly as of the last day of the preceding month,
the Appraised Value of the underlying property, in the case of this subsection (ii),
not to exceed one-twelfth of 1.75% of the funds advanced by the Fund for the
purchase of the Real Estate Related Investment. The Advisor may elect, in its sole
discretion, to defer (without interest) payment of the Asset Management Fee in any
month by providing written notice of such deferral to the Fund.
c. Disposition Fee.
If the Advisor or one of its Affiliates provides a substantial amount of
services (as determined by a majority of the Independent Directors) in connection
with the Sale of one or more Real Estate Assets, the Fund shall pay to the Advisor
or such Affiliate a Disposition Fee equal to the lesser of (A) one-half of a
Competitive Real Estate Commission, and (B) 3.0% of the proceeds of the Sale of such
Real Estate Asset; provided, however, that no Disposition Fee shall be payable to
the Advisor for Real Estate Assets Sales if such Sales involve the Company selling
all or substantially all of its Real Estate Assets in one or more transactions
designed to effectuate a business combination transaction (as opposed to a Company
liquidation, in which case the Disposition Fee would be payable if the Advisor or an
Affiliate provides a substantial amount of services as provided above). Any
Disposition Fee payable under this section may be paid in addition to real estate
commissions paid to non-Affiliates, provided that the total real estate commissions
(including such Disposition Fee) paid to all Persons by the Company for each Real
Estate Asset shall not exceed an amount equal to the lesser of (i) 6.0% of the
aggregate Contract Sales Price of each Real Estate Asset or (ii) the Competitive
Real Estate Commission for each Real Estate Asset.
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d. Changes to Fee Structure.
In the event of Listing, the Company and the Advisor shall negotiate in good
faith to establish a fee structure appropriate for a perpetual life entity.
9. Expenses.
a. Subject to Section 10 hereof, in addition to the compensation paid to the Advisor
pursuant to Section 8 hereof, the Fund shall pay directly or reimburse the Advisor and its
Affiliates for all of the costs and expenses paid or incurred by the Advisor or such
Affiliates that are in any way related to the operation of the Fund or to the Fund’s
business, including, but not limited to:
i. the Organization and Offering Expenses; provided, however, that within 60
days after the end of the month in which an Offering terminates, the Advisor shall
reimburse the Company for any Organization and Offering Expenses reimbursement
received by the Advisor pursuant to this Section 9 to the extent that such
reimbursement of expenses associated with the Offering exceeds 15.0% of the Gross
Proceeds. The Advisor shall be responsible for the payment of all such Organization
and Offering Expenses in excess of 15.0% of the Gross Proceeds;
ii. subject to Section 8(a), all Acquisition Expenses incurred in connection
with the investigation, selection and acquisition of a Real Estate Asset in an
amount equal to up to 0.5% of (A) for any Real Estate Asset acquired by the Fund
directly or indirectly other than a Real Estate Related Investment, the Contract
Purchase Price of the underlying property, and (B) for any Real Estate Related
Investment acquired by the Fund directly or indirectly, the Appraised Value of the
underlying property, in the case of this subsection (B), not to exceed 0.5% of the
funds advanced by the Fund for the acquisition of the Real Estate Asset;
iii. the actual cost of goods and services used by the Fund and obtained from
entities not affiliated with the Advisor, other than Acquisition Expenses,
including, but not limited to, fees of appraisers, consulting fees, accounting fees,
legal fees, brokerage fees and underwriting fees paid in connection with the
purchase and sale of securities, fees paid to escrow agents, transfer agents,
corporate fiduciaries and custodians, collection agent fees, depositary fees, loan
fees, mortgagor fees and other banking fees, insurance premiums and fees to
builders, developers, contractors, property managers and leasing agents;
iv. interest and other costs for the Fund’s indebtedness, including discounts,
loan fees, points and other similar fees;
v. taxes and assessments on income or property of the Fund and taxes as an
expense of doing business;
vi. costs associated with insurance required in connection with the business of
the Fund (including directors’ and officers’ liability insurance);
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vii. expenses of managing and operating Real Estate Assets owned by the Fund,
whether or not payable to the Advisor or any Affiliate or the managers or members of
the Advisor, including the costs of maintaining, repairing and improving any
property;
viii. expenses associated with the disposition of Real Estate Assets,
including, subject to Section 8(c), real estate commissions;
ix. all expenses in connection with payments to the Directors and meetings of
the Board and the Stockholders;
x. expenses associated with Listing or with the issuance and distribution of
Shares and Securities, such as selling commissions and fees, advertising expenses,
taxes, legal and accounting fees, Listing and registration fees;
xi. expenses connected with payments of Dividends in cash or otherwise made or
caused to be made by the Company to the Stockholders;
xii. expenses of maintaining communications with Stockholders, including the
cost of preparation, printing, and mailing annual reports and other Stockholder
reports, proxy statements and other reports required by governmental entities;
xiii. administrative service, accounting, finance, internal audit or investor
relations expenses (including personnel costs for the provision of all services
under this Agreement; provided, however, that no reimbursement shall be made for
costs of personnel to the extent that such personnel perform services in
transactions for which the Advisor receives a separate fee);
xiv. audit, accounting and legal fees relating to the operations of the Fund;
and
xv. all other costs and expenses in any way relating to the operation of the
Fund or the Fund’s business (other than any fees payable to the Advisor or
Affiliates of the managers or members of the Advisor by the Fund).
b. Subject to Section 10 hereof, expenses incurred by the Advisor or its Affiliates on
behalf of the Fund and payable pursuant to this Section 9 shall be reimbursed to the Advisor
or such Affiliates no less than quarterly by the Fund within 60 days after the end of each
quarter. The Advisor shall prepare a statement documenting the expenses of the Fund during
each quarter, and shall deliver such statement to the Fund within 45 days after the end of
each quarter. The Advisor may elect, in its sole discretion, to defer (without interest) any
reimbursement of expenses payable pursuant to this Section 9 for any quarter by providing
written notice of such deferral to the Fund.
10. Operating Expenses. The Fund shall not reimburse the Advisor for Operating
Expenses that in the fiscal year then ended exceed the greater of 2% of Average Invested Assets or
25% of Net Income (the “2%/25% Rule”) for such year. Within 60 days after the end of each
fiscal quarter, the Advisor will reimburse the Fund for any amounts by which the Operating
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Expenses exceeded the 2%/25% Rule for the 12 months then ended, unless a majority of the
Independent Directors determine, based on such unusual and non-recurring factors which they deem
sufficient, that such excess was justified. Any such determination by the Independent Directors and
the reasons supporting such determination shall be reflected in the minutes of the meetings of the
Board of Directors. Within 60 days after the end of any fiscal quarter of the Fund for which
Operating Expenses (for the 12 months just ended) exceed the 2%/25% Rule, the Advisor shall send a
written disclosure of such fact to the Stockholders, together with an explanation of the factors
the Independent Directors considered in arriving at the conclusion that such higher Operating
Expenses were justified, if applicable.
11. Other Services. Should the Fund request that the Advisor or any director, officer
or employee thereof render services for the Fund other than set forth in Section 3, such services
shall be separately compensated at such rates and in such amounts as are approved by the
Independent Directors, subject to the limitations contained in the Articles and subject to the
2%/25% Rule to the extent such compensation represents Operating Expenses, and shall not be deemed
to be services pursuant to the terms of this Agreement.
12. Other Activities of the Advisor. The Advisor may not engage in any business or
rendering of advice to other Persons (including other REITs) that is not conducted pursuant to this
Agreement. The Advisor will devote sufficient resources to the management of the Fund to discharge
its duties under Section 3 hereof. The managers of the Advisor may engage in one additional real
estate project per year in which the Fund does not participate. This Agreement shall not limit or
restrict the right of any director, officer, manager, member or employee of the Advisor or its
Affiliates to engage in any other business or to render services of any kind to any other Person.
The Advisor may, with respect to any investment in which the Fund is a participant, also render
advice and service to each and every other participant therein. If the Sponsor, the Advisor, or any
Director, or Affiliates thereof, have sponsored other investment programs with similar investment
objectives which have investment funds available at the same time as the Fund, it shall be the duty
of the Board (including the Independent Directors) to adopt a reasonable method by which
investments are to be allocated to the competing investment entities and to use their best efforts
to apply such method fairly to the Fund.
13. Relationship of the Advisor and the Fund. Nothing in this Agreement shall be
construed to make the Fund and the Advisor partners or joint venturers or impose any liability as
such on either of them.
14. Term; Termination of Agreement.
a. Unless terminated in accordance with Section 14(b) hereof, this Agreement shall
continue in force until the first anniversary of the date hereof. Thereafter, this Agreement
will renew automatically if not terminated by either party at least 60 days prior to the
expiration of the applicable term. Prior to the 60-day notice period, the Board shall
evaluate the performance of the Advisor in accordance with Section 12.2 of the Articles.
Each such renewal shall be for a term of no more than one year. The failure of the parties
to renew this agreement prior to the expiration of its term shall constitute a termination
of this Agreement.
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b. This agreement may be terminated:
i. for any reason by the Company or the Advisor, upon 60 days written notice to
the other party; provided that, if termination is by the Company, then such
termination must be approved by a majority of the Independent Directors;
ii. by the Company or the Operating Partnership at any time for Cause; or
iii. by the Advisor at any time for Good Reason.
c. Upon termination, the Fund shall promptly pay to the Advisor any fees then due and
payable and any reimbursable expenses incurred as of the Termination Date. Notwithstanding
the termination of this Agreement, Sections 8, 9, 10 and 11 shall continue in full force and
effect until all amounts payable thereunder to the Advisor are paid in full.
d. The Advisor shall promptly upon termination:
iv. pay over to the Fund all money collected and held for the account of the
Fund pursuant to this Agreement, after deducting any accrued compensation and
reimbursement for its expenses to which it is then entitled;
v. deliver to the Board a full accounting, including a statement showing all
payments collected by it and a statement of all money held by the Advisor, covering
the period following the date of the last accounting furnished to the Board;
vi. deliver to the Fund all assets, including all Real Estate Assets, and
documents of the Fund then in the custody of the Advisor; and
vii. cooperate with the Fund to provide an orderly management transition.
15. Indemnification by the Company.
a. Indemnification. Subject to the limitations of Section 15.a.i and ii, the
Company shall indemnify and hold harmless the Advisor and its Affiliates, including their
respective officers, directors, manager, stockholders, partners, members and employees (the
“Indemnitees”), as permitted by the laws of the State of Maryland and subject to the
limitations of Section II.G. of the North American Securities Administrators, Inc. Statement
of Policy Regarding Real Estate Investment Trusts (the “NASAA Guidelines”) in effect
from time to time from all liability, claims, damages or losses arising in the performance
of their duties hereunder (collectively, “Claims”), and related expenses, including
reasonable attorneys’ fees; provided, however, that in no event shall this sentence enlarge
the indemnification permitted below under Section 15.a.i and ii consistent with the NASAA
Guidelines. Notwithstanding anything to the contrary in this Section 15, an Indemnitee shall
not be entitled to indemnification or be held harmless pursuant to this Section 15 for any
activity which the Indemnitee shall be required to indemnify or hold harmless the Company
pursuant to Section 16 and:
-15-
i. The Company will not indemnify any Indemnitee unless:
A. The Indemnitee has determined in good faith that the course of
conduct which caused the loss, liability or expenses was in the
best interests of the Company;
B. The Indemnitee was acting on behalf of the Company or performing
services for the Company;
C. Such liability or loss was not the result of:
1. In the case of any Indemnitee other than an Independent
Director, negligence or misconduct by the Indemnitee, or
2. In the case that the Indemnitee is an Independent
Director, gross negligence or willful misconduct by the
Indemnitee; and
D. Any indemnification or agreement to hold harmless may be paid
only out of the Net Assets of the Company and no portion may be
recoverable from the Stockholders;
ii. Notwithstanding anything to the contrary in Section 15(a)(i), the Company
will not indemnify any Indemnitee for losses, liabilities or expenses arising from
or out of an alleged violation of federal or state securities laws unless one or
more of the following conditions are met:
A. there has been a successful adjudication on the merits of each
count involving alleged securities law violations as to the
particular Indemnitee;
B. such claims have been dismissed with prejudice on the merits by
a court of competent jurisdiction as to the particular Indemnitee;
or
C. a court of competent jurisdiction approves a settlement of the
claims against the particular Indemnitee and finds that
indemnification of the settlement and related costs should be made,
and the court considering the matter has been advised of the
position of the Securities and Exchange Commission and of the
published position of any state securities regulatory authority in
which securities of the Company were offered or sold as to
indemnification for securities law violations.
b. Advancement of Expenses. The Company shall pay or reimburse reasonable legal
expenses and other costs incurred by an Indemnitee in advance of final disposition of any
and all Claims only if all of the following conditions are satisfied:
-16-
i. the Claim relates to acts or omissions with respect to the performance of
duties or services on behalf of the Company;
ii. either (A) the Claim was initiated by a third party who is not a
Stockholder, or (B) if the Claim was initiated by a Stockholder, the initiating
Stockholder was acting in his or her capacity as such and the advancement was
approved by a court of competent jurisdiction; and
iii. the Indemnitee provides the Company with a written undertaking to repay
the amount paid or reimbursed by the Company, together with the applicable legal
rate of interest thereon, if it is ultimately determined that the Indemnitee did not
comply with the requisite standard of conduct and is not entitled to
indemnification.
16. Indemnification by Advisor. The Advisor shall indemnify and hold harmless the Fund
from contract or other liability, claims, damages, taxes or losses and related expenses including
attorneys’ fees, to the extent that such liability, claims, damages, taxes or losses and related
expenses are not fully reimbursed by insurance and are incurred by reason of the Advisor’s bad
faith, fraud, willful misfeasance, intentional misconduct, gross negligence or reckless disregard
of its duties, but the Advisor shall not be held responsible for any action of the Board in
following or declining to follow any advice or recommendation given by the Advisor.
17. Voting of Shares and Partnership Units. The Advisor shall not vote any Shares or
Partnership Units (as defined in the OP Partnership Agreement) it now owns, or hereafter acquires,
in any vote of the Stockholders for the election of Directors or in any vote of the Stockholders or
the Limited Partners (as defined in the OP Partnership Agreement) regarding the approval or
termination of any contract with the Advisor or any of its Affiliates, including this Agreement.
18. Notices. Any notice required or permitted to be given or made to a party under
this Agreement shall be in writing and shall be deemed given or made when delivered if delivered in
person, sent by first class United States mail, by overnight delivery or via facsimile to such
party at the address of such party set forth below or such other address of which such party shall
notify the other parties in writing. Notwithstanding the foregoing, a party may elect to deliver
any such notice by E-mail, or by any other electronic means, in which case such communication shall
be deemed given or made one day after being sent.
-17-
To the Company, the Operating Partnership, or the Board: |
Landwin REIT, Inc. 00000 Xxxxxxx Xxxx. Xxxxx 000 Xxxxxx, XX 00000 Facsimile: 000-000-0000 |
|
To the Advisor:
|
Landwin Advisors, LLC 00000 Xxxxxxx Xxxx. Xxxxx 000 Xxxxxx, XX 00000 Facsimile: 000-000-0000 |
19. Assignment to an Affiliate. This Agreement may be assigned by the Advisor to an
Affiliate of the Advisor only with the prior approval of a majority of the Board (including a
majority of the Independent Directors). The Advisor may assign any rights to receive fees or other
payments under this Agreement without obtaining the approval of the Board. This Agreement shall not
be assigned by the Company or the Operating Partnership without the consent of the Advisor, except
in the case of an assignment by the Company or the Operating Partnership to a successor to all of
the assets, rights and obligations of the Company or the Operating Partnership, respectively, in
which case such successor shall be bound hereunder and by the terms of said assignment in the same
manner as the Company and the Operating Partnership are bound by this Agreement.
20. Modification. This Agreement shall not be changed, modified, terminated or
discharged, in whole or in part, except by an instrument in writing signed by each of the parties
hereto, or their respective successors or assigns.
21. Severability. The provisions of this Agreement are independent of and severable
from each other, and no provision shall be affected or rendered invalid or unenforceable by virtue
of the fact that for any reason any other or others of them may be invalid or unenforceable in
whole or in part.
22. Construction. The provisions of this Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of Maryland without regard to the principles
of conflicts of laws thereof.
23. Entire Agreement. This Agreement contains the entire agreement and understanding
among the parties hereto with respect to the subject matter hereof, and supersedes all prior and
contemporaneous agreements, understandings, inducements and conditions, express or implied, oral or
written, of any nature whatsoever with respect to the subject matter hereof. The express terms
hereof control and supersede any course of performance and/or usage of the trade inconsistent with
any of the terms hereof. This Agreement may not be modified or amended other than by an agreement
in writing.
-18-
24. Waivers. Neither the failure nor any delay on the part of a party hereto 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.
25. Number and 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.
26. Headings. The headings contained in this Agreement are for convenience only, do
not form a part of this Agreement and are not to be used in the construction or interpretation
hereof.
27. 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.
28. Name. Landwin Management, LLC, an Affiliate of the Advisor, has a proprietary
interest in the name “Landwin.” Accordingly, and in recognition of this right, if at any time the
Fund ceases to retain the Advisor or one of its Affiliates to perform the services of the Advisor
under this Agreement, the Fund will promptly cease to conduct business under or use the name
“Landwin” or any variation or diminutive thereof and each of the Company and the Operating
Partnership shall use its best efforts to change their respective names (and the names of any of
their subsidiaries) to a name that does not contain the name “Landwin” or any other word or words
that might, in the sole discretion of the Advisor, be susceptible of indication of some form of
relationship between the Fund and the Advisor or any Affiliate thereof. Consistent with the
foregoing, the parties acknowledge and agree that one or more of the Advisor’s Affiliates has
organized or sponsored, and intends to continue to organize and sponsor, other investment vehicles
(including vehicles for investment in real estate) and financial and service organizations having
“Landwin” as a part of their name, all without the need for any consent (and without the right to
object thereto) by the Company or the Operating Partnership.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have executed this Advisory Agreement as of the date
and year first above written.
| LANDWIN REIT, INC. | ||||||
| By: | ||||||
| Name: | ||||||
| Title: | ||||||
| LANDWIN, L.P. | ||||||
| By: | Landwin, LLC its general partner |
|||||
| By: | ||||||
| Name: | ||||||
| Title: | ||||||
| LANDWIN ADVISORS, LLC | ||||||
| By: | ||||||
| Name: | ||||||
| Title: | ||||||
-20-
