EXHIBIT 10.6
ADVISORY AGREEMENT
ADVISORY AGREEMENT made as of _________________, 2002 between G REIT,
Inc., a Virginia corporation (the "Company"), and Triple Net Properties, LLC, a
Virginia limited liability company (the "Advisor").
WITNESSETH:
WHEREAS, the Company intends to qualify as a real estate investment
trust (a "REIT") as defined in Sections 856 through 860 of the Internal Revenue
Code of 1986, as amended (the "Code"), and to make investments of the type
permitted to qualified REITs under the Code and not inconsistent with the
Articles of Incorporation of the Company, (the "Articles of Incorporation"), and
the Bylaws of the Company; and
WHEREAS, the Company desires to avail itself of the experience, sources
of information, advice and assistance of the Advisor and to have the Advisor
undertake the duties and responsibilities hereinafter set forth, on behalf of
and subject to the supervision of the Board of Directors of the Company (the
"Board of Directors"), as provided herein; and
WHEREAS, the Advisor is willing to undertake to render such services,
subject to the supervision of the Board of Directors, on the terms and
conditions herein set forth;
NOW, THEREFORE, in consideration of the mutual covenants herein set
forth, the parties hereto agree as follows:
1. Definitions.
As used herein, the following terms shall have the meanings set forth
below:
(a) "Acquisition Expenses" shall mean expenses related to
selecting, evaluating and acquiring properties, whether or not
acquired, including, but not limited to, legal fees and expenses,
travel and communications expenses, cost of appraisals and surveys,
nonrefundable option payments on property not acquired, accounting fees
and expenses, computer use related expenses, architectural and
engineering reports, environmental and asbestos audits, title insurance
and escrow fees, and personnel and miscellaneous expenses related to
the selection and acquisition of properties.
(b) "Affiliate" shall mean: (i) any Person directly or
indirectly owning, controlling or holding, with the power to vote 10%
or more of the outstanding voting securities of such other Person; (ii)
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; (iii) any Person directly or indirectly
controlling, controlled by or under common control with such other
Person; (iv) any executive officer, director, trustee or general
partner of such other Person; and (v) any legal entity for which such
Person acts as an executive officer, director, trustee or general
partner.
(c) "Average Invested Assets" shall mean, for any 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.
(d) "Book Value" of an asset shall mean the value of such
asset on the books of the Company, before allowance for depreciation or
amortization.
(e) "Common Stock" shall mean the common stock, par value
$.01 per share, of the Company.
(f) "Competitive Real Estate Commission" shall mean the real
estate or brokerage commission paid for the purchase or sale of a
property which is reasonable, customary and competitive in light of the
size, type and location of such property.
(g) "Cumulative Return" shall mean a cumulative,
non-compounded return equal to 8% per annum on Invested Capital
commencing upon acceptance by the Company of an investor's
subscription.
(h) "Fiscal Year" shall mean any period for which any income
tax return is submitted by the Company to the Internal Revenue Service
and which is treated by the Internal Revenue Service as a reporting
period.
(i) "Gross Offering Proceeds" shall mean the total proceeds
from the sale of Shares before deductions for Organizational and
Offering Expenses. For purposes of calculating Gross Offering Proceeds,
the purchase price for all Shares issued in the Company's initial
public offering, including those for which volume discounts apply,
shall be deemed to be $10.00 per Share.
(j) "Gross Income From Properties" shall mean all cash
receipts derived from the operation of the Company's property,
excluding (i) tenant
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security deposits unless and until such deposits are forfeited upon a
tenant default, and (ii) proceeds from insurance claims, condemnation
proceedings, sales or refinancings.
(k) "Incentive Distribution" shall mean an amount equal to
15% of the Partnership's operating cash flow payable to the Advisor
after the Company has received and paid to Shareholders the sum of (i)
the Cumulative Return, and (ii) and remaining shortfall in the recovery
of Invested Capital with respect to prior sales of properties as
described in Section 9(h).
(l) "Incentive Distribution Upon Dispositions" shall mean an
amount equal to 15% of the net proceeds from the sale of a property
after the Company has received and paid to Shareholders the sum of (i)
Invested Capital initially allocated to that property, and (ii) any
remaining shortfall in the recovery of Invested Capital with respect to
prior sales of properties, and (iii) any remaining shortfall in the
Cumulative Return as described in Section 9(i).
(m) "Independent Directors" shall mean a Director who is not,
and within the last two (2) years has not been, directly or indirectly
associated with a Sponsor or the Advisor by virtue of (i) ownership of
an interest in a Sponsor, the Advisor or their Affiliates, (ii)
employment by a Sponsor, the Advisor or their Affiliates, (iii) service
as an officer or director of a Sponsor, the Advisor or their
Affiliates, (iv) performance of services, other than as a Director, for
the Company, (v) service as a director or trustee of more than three
(3) real estate investment trusts organized by a Sponsor or advised by
the Advisor, or (vi) maintenance of a material business or professional
relationship with a Sponsor, the Advisor or any of their Affiliates. An
indirect relationship shall include circumstances in which a Director's
spouse, parents, children, siblings, mothers- or fathers-in-law, sons-
or daughters-in-law or brothers- or sisters-in-law is or has been
associated with a Sponsor, the Advisor, any of their Affiliates or the
Company. A business or professional relationship is considered material
if the gross revenue derived by the Director from a Sponsor, the
Advisor and Affiliates exceeds five percent (5%) of either the
Director's annual gross revenue during either of the last two (2) years
or the Director's net worth on a fair market value basis.
(n) "Invested Capital" shall mean the total proceeds from the
sale of Shares. When a property is sold, Invested Capital will be
reduced by the lesser of (1) the net sale proceeds available for
distribution from such sale or (2) the sum of (A) the portion of
Invested Capital that initially was allocated to that property and (B)
any remaining shortfall in the recovery of Invested Capital with
respect to prior sales of properties.
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(o) "Net Income" shall mean, for any period, total revenues
applicable to such period, less the operating expenses applicable to
such period other than additions to or allowances for reserves for
depreciation, amortization or bad debts or other similar noncash
reserves; provided, however, that Net Income shall not include any gain
from the sale of the Company's assets.
(p) "Organizational and Offering Expenses" shall mean those
expenses incurred by and to be paid from the assets of the Company in
connection with and in preparing the Company for registration and
subsequently offering and distributing Shares to the public, including,
but not limited to, total underwriting and brokerage discounts and
commissions (including fees of the underwriters' attorneys), expenses
for printing, engraving, mailing, salaries of employees while engaged
in sales activity, charges of transfer agents, registrars, trustees,
escrow holders, depositaries, experts, expenses of qualification of the
sale of the securities under federal and state laws, including taxes
and fees, and accountants' and attorneys' fees.
(q) "Partnership" shall mean G REIT, L.P., a Virginia limited
partnership.
(r) "Property Disposition Fee" shall mean a real estate
disposition fee, payable (under certain conditions) to the Advisor and
its Affiliates upon the sale of the Company's property as described in
Section 9(e).
(s) "Property Management Fee" shall mean any fee paid to an
Affiliate or third party as compensation for management of the
Company's properties as described in Section 9(f).
(t) "Person" shall mean any natural person, partnership,
corporation, association, trust, limited liability company or other
legal entity.
(u) "Prospectus" shall mean the final prospectus of the
Company in connection with the initial registration of Shares filed
with the Securities and Exchange Commission on Form S-11, as
supplemented and amended from time to time.
(v) "Real Estate Commission" shall mean the real estate or
brokerage commission paid in connection with the purchase of a
property.
(w) "Shares" shall mean the shares of Common Stock of the
Company.
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(x) "Shareholders" shall mean holders of the Shares.
(y) "Sponsor" shall mean 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 also may 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 industry; or
(vi) providing goods or services to the Company on a basis
which was not negotiated at arms length with the Company.
(z) "Total Operating Expenses" shall mean the aggregate expenses of
every character paid or incurred by the Company as determined under
generally accepted accounting principles, including fees paid to the
Advisor, such as the Incentive Distribution, but excluding:
(i) the expenses of raising capital such as Organizational and
Offering Expenses, legal, audit, accounting, underwriting, brokerage,
listing, registration and other fees, printing and other such
expenses, and taxes incurred in connection with the issuance,
distribution, transfer, registration and stock exchange listing of the
Shares;
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(ii) interest payments;
(iii) taxes;
(iv) non-cash expenditures such as depreciation, amortization
and bad debt reserves;
(v) the Incentive Distribution Upon Dispositions; and
(vi) Acquisition Expenses, real estate commissions on resale of
property and other expenses connected with the acquisition,
disposition (whether by sale, exchange or condemnation) 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).
2. Duties of Advisor.
The Advisor shall consult with the Company and shall, at the request of the
Board of Directors or the officers of the Company, furnish advice and
recommendations with respect to all aspects of the business and affairs of the
Company. In general, the Advisor shall inform the Board of Directors of factors
that come to its attention which could influence the policies of the Company.
Subject to the supervision of the Board of Directors and consistent with the
provisions of the Articles of Incorporation, the Advisor shall use its best
efforts to:
(a) Present to the Company a continuing and suitable investment
program and opportunities to make investments consistent with the
investment policies of the Company and the investment program adopted by
the Board of Directors and in effect at the time and furnish the Company
with advice with respect to the making, acquisition, holding and
disposition of investments and commitments therefor. The Advisor also is
obligated to provide the Company with the first opportunity to purchase any
income producing properties located in the Focus States (as such term is
defined in the Prospectus) placed under contract by the Advisor or its
Affiliates, provided that: (1) the Company has funds available to make the
purchase; (2) the Board of Directors votes to make the purchase within 7
days of being offered such property by the Advisor; and (3) the property
meets the Company's acquisition criteria as disclosed to the Advisor from
time to time;
(b) Manage the Company's day-to-day operations to effect the
investment program adopted by the Board of Directors and perform or
supervise the performance of such other administrative functions necessary
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in connection with the management of the Company as may be agreed upon by
the Advisor and the Company;
(c) Serve as the Company's investment advisor in connection with
policy decisions to be made by the Board of Directors and, as requested,
furnish reports to the Board of Directors and provide research, economic
and statistical data in connection with the Company's investments and
investment policies;
(d) On behalf of the Company, investigate, select and conduct
relations with lenders, consultants, accountants, brokers, property
managers, attorneys, underwriters, appraisers, insurers, corporate
fiduciaries, banks, builders and developers, sellers and buyers of
investments and persons acting in any other capacity specified by the
Company from time to time, and enter into contracts with, retain and
supervise services performed by such parties in connection with investments
which have been or may be acquired or disposed of by the Company;
(e) Perform such property management services and other activities
relating to the Company's assets as the Advisor shall deem appropriate in
the particular circumstances, subject to the requirement that the Advisor
qualify as an "independent contractor" as that phrase is used in connection
with applicable laws, rules and regulations affecting REITs that own real
property;
(f) Upon request of the Company, act, or obtain the services of
others to act, as attorney-in-fact or agent of the Company in making,
acquiring and disposing of investments, disbursing and collecting the
funds, paying the debts and fulfilling the obligations of the Company and
handling, prosecuting and settling any claims of the Company, including
foreclosing and otherwise enforcing mortgage and other liens and security
interests securing investments;
(g) Assist in negotiations on behalf of the Company with investment
banking firms and other institutions or investors for public or private
sales of securities of the Company or for other financing on behalf of the
Company, but in no event in such a way that the Advisor shall be acting as
a broker, dealer or underwriter of securities of the Company;
(h) On behalf of the Company, maintain, with respect to any real
property and to the extent available, title insurance or other assurance of
title and customary fire, casualty and public liability insurance with
respect to the Company's assets;
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(i) At the direction of the Board of Directors, invest and reinvest
any money of the Company;
(j) Supervise the preparation and filing and distribution of returns
and reports to governmental agencies and to investors and act on behalf of
the Company in connection with investor relations;
(k) Provide office space, equipment and personnel as required for the
performance of the foregoing services as advisor;
(1) Advise the Company of the operating results of the Company's
properties, prepare on a timely basis, and review, for such properties,
operating budgets, maintenance and improvement schedules, projections of
operating results and such other reports as may be requested by the Board
of Directors;
(m) As 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;
(n) Prepare on behalf of the Company, or engage independent
professionals to prepare, all reports and returns required by the
Securities and Exchange Commission, Internal Revenue Service and other
state or federal governmental agencies, provided that the Company is
responsible for the fees of such independent professionals;
(o) Undertake and perform all services or other activities necessary
and proper to carry out the investment objectives of the Company; and
(p) Undertake communications with Shareholders in accordance with
applicable law and the Articles of Incorporation;
provided, however, that Affiliates of the Advisor have no obligations to the
Company other than as expressly stated herein, and the Advisor and its
Affiliates have no obligations to present to the Company any specific investment
opportunity except as described in the Prospectus. Notwithstanding the
foregoing, the Advisor hereby represents and acknowledges that it will have
fiduciary duties to the Shareholders and that the Company is making a statement
to that effect in its registration statement filed with the Securities and
Exchange Commission.
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3. No Partnership or Joint Venture.
The Company and the Advisor are not, and shall not be deemed to be,
partners or joint venturers with each other.
4. Records.
The Advisor shall maintain appropriate books of account and records
relating to services performed hereunder, which shall be accessible for
inspection by the Company at any time during ordinary business hours.
5. REIT Qualifications.
Notwithstanding any other provision of this Agreement to the contrary,
the Advisor shall refrain from any action which, in its reasonable judgment or
in any judgment of the Board of Directors of which the Advisor has written
notice, would adversely affect the qualification of the Company as a REIT under
the Code 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. If any such
action is ordered by the Board of Directors, the Advisor shall promptly notify
the Board of Directors of the Advisor's judgment that such action would
adversely affect such status or violate any such law, rule or regulation or the
Articles of Incorporation, and shall thereafter refrain from taking such action
pending further clarification or instruction from the Board of Directors.
6. Bank Accounts.
At the direction of the Board of Directors, the Advisor may establish
and maintain bank accounts in the name of the Company, and may collect and
deposit into and disburse from such accounts any money on behalf of the Company,
under such terms and conditions as the Board of Directors may approve, provided
that no funds in any such account shall be commingled with funds of the Advisor.
The Advisor shall from time to time, as the Company may require, render
appropriate accountings of such collections, deposits and disbursements to the
Board of Directors and to the auditors of the Company.
7. Fidelity Bond.
The Advisor shall not be required to obtain or maintain a fidelity bond
in connection with the performance of its services hereunder.
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8. Information Furnished Advisor.
The Board of Directors will keep the Advisor informed in writing
concerning the investment and financing policies of the Company. The Board of
Directors shall notify the Advisor promptly in writing of its intention to make
any investments or to sell or dispose of any existing investments. The Company
shall furnish the Advisor with a certified copy of all financial statements, a
signed copy of each report prepared by independent certified public accountants,
and such other information with regard to its affairs as the Advisor may
reasonably request.
9. Compensation.
The Advisor and its Affiliates shall be paid for services rendered by
the Advisor under this Agreement as follows:
(a) The Company will reimburse the Advisor for Organizational
and Offering Expenses incurred on behalf of the Company.
(b) In property acquisitions in which an Affiliate of the
Advisor or the Company acts as real estate broker, such Affiliate may
receive a Real Estate Commission from the seller or the Company of up
to 3% of the purchase price of the property.
(c) The Company will reimburse the Advisor for Acquisition
Expenses. The total of all Acquisition Expenses paid when added to any
Real Estate Commission paid in connection with the purchase of a
property may not exceed an amount equal to 6% of the contract purchase
price for the property. The total of all Acquisition Expenses paid in
connection with the purchase of all properties by the Company may not
exceed 0.5% of the Gross Offering Proceeds.
(d) The Company will reimburse the Advisor and its Affiliates
for: (i) the cost to the Advisor or its Affiliates of goods and
services used for and by the Company and obtained from unaffiliated
parties, and (ii) administrative services related thereto.
"Administrative Services" include only ministerial services such as
typing, recordkeeping, preparation and dissemination of Company
reports, preparation and maintenance of records regarding Shareholders,
recordkeeping and administration of the Company's Dividend Reinvestment
Plan, preparation and dissemination of responses to Shareholder
inquiries and other communications with Shareholders and any other
recordkeeping required for Company purposes. Such reimbursements are
subject to limitations imposed by Sections 10(b) and (c) hereof;
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(e) A Property Disposition Fee, payable out of the proceeds of
the sale of a property, equal to the lesser of (i) 3% of the contracted
for sales price of the property; or (ii) 50% of the Competitive Real
Estate Commission. The amount paid, when added to the sums paid to
unaffiliated parties, shall not exceed the lesser of the Competitive
Real Estate Commission or an amount equal to 6% of the contracted for
sales price. Payment of such fee shall be made only if the Advisor
provides a substantial amount of services in connection with the sale
of the property;
(f) The Company will pay to an Affiliate of the Advisor or a
third party a Property Management Fee equal to 5% of the Gross Income
from Properties. This fee will be paid monthly; and
(g) The Company will pay to the Advisor fees for
property-level services including leasing fees, construction management
fees, loan origination and servicing fees and risk management fees;
provided that any such compensation to the Advisor will not exceed the
amount which would be paid to unaffiliated third parties providing such
services and all such compensation must be approved by a majority of
the Independent Directors.
(h) The Partnership will pay an Incentive Distribution to the
Advisor equal to 15% of the Partnership's operating cash flow after the
Company has received and paid to the Shareholders the sum of (i) the
Cumulative Return, and (ii) any remaining shortfall in the recovery of
Invested Capital with respect to prior sales of properties. If there is
a shortfall in the Cumulative Return to Shareholders at the end of any
calendar year and the Advisor previously has received Incentive
Distributions, other than those that have been repaid previously, the
Advisor will repay to the Partnership such portion of those Incentive
Distributions sufficient to cause the Cumulative Return to be met. In
no event will the aggregate amount repaid by the Advisor to the
Partnership exceed the aggregate amount of Incentive Distributions that
the Advisor has received previously.
(i) Upon the sale of a property by the Company, the
Partnership will pay an Incentive Distribution on Dispositions equal to
15% of the net proceeds from the sale after the Company has received
and paid to the Shareholders the sum of (i) the Invested Capital that
initially was allocated to that property, (ii) any remaining shortfall
in the recovery of Invested Capital with respect to prior sales of
properties, and (iii) any remaining shortfall in the Cumulative Return.
If the Company, and in turn the Shareholders, have not received a
return of Invested Capital or if there is a shortfall in the Cumulative
Return after the sale of the last property and the Advisor previously
has received Incentive Distributions, other than Incentive
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Distributions that have been repaid previously, the Advisor will repay
to the Partnership a portion of those distributions sufficient to cause
the Company, and in turn the Shareholders, to receive a full return of
Invested Capital and the full Cumulative Return. In no event will the
aggregate amount repaid by the Advisor to the Partnership exceed the
aggregate amount of Incentive Distributions that the Advisor previously
received.
10. Compensation for Additional Services, Certain Limitations.
(a) If the Company shall request the Advisor or its Affiliates
to render services for the Company other than those required to be
rendered by the Advisor hereunder, such additional services, if the
Advisor elects to perform them, will be compensated separately on terms
to be agreed upon between such party and the Company from time to time
in accordance with this Section. The rate of compensation for such
services shall be approved by a majority of the Board of Directors,
including a majority of the Independent Directors, and shall not exceed
an amount that would be paid to nonaffiliated third parties for similar
services.
(b) In extraordinary circumstances fully justified to the
official or agency administering the state securities laws, the Advisor
and its Affiliates may provide other goods and services to the Company
if all of the following criteria are met: (i) the goods or services
must be necessary to the prudent operation of the Company; or (ii) the
compensation, price or fee must be equal to the lesser of 90% of the
compensation, price or fee the Company would be required to pay to
independent parties who are rendering comparable services or selling or
leasing comparable goods on competitive terms in the same geographic
location, or 90% of the compensation, price or fee charged by the
Advisor or its Affiliates for rendering comparable services or selling
or leasing comparable goods on competitive terms. In addition, any such
payment will be subject to the further limitation described in
paragraph (c) below. Extraordinary circumstances shall be presumed only
when there is an emergency situation requiring immediate action by the
Advisor or its Affiliates and the goods or services are not immediately
available from unaffiliated parties. Services which may be performed in
such extraordinary circumstances include emergency maintenance of
Company properties, janitorial and other related services due to
strikes or lock-outs, emergency tenant evictions and repair services
which require immediate action, as well as operating and re-leasing
properties with respect to which the leases are in default or have been
terminated.
(c) No reimbursement will be permitted to the Advisor or its
Affiliates under Section 9(d)(ii) above for items such as rent,
depreciation, utilities, capital equipment and other administrative
items and the salaries,
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fringe benefits, travel expenses and other administrative items of any
controlling persons of the Advisor, its Affiliates or any other
supervisory personnel except in those instances in which the Company
believes it to be in the best interest of the Company that the Advisor
or its Affiliates operate or otherwise deal with, for an interim
period, a property with respect to which the lease is in default or
terminated. Permitted reimbursements, except as set forth above,
include salaries and related salary expenses for non-supervisory
services which could be performed directly for the Company by
independent parties such as legal, accounting, transfer agent, data
processing and duplication. Controlling persons, for purposes of this
Section, include, but are not limited to those entities or individuals
holding 5% or more of the ownership interests of the Advisor or a
person having the power to direct or cause the direction of the
Advisor, whether through ownership of voting securities, by contract or
otherwise, and any person, irrespective of his or her title, who
performs functions for the Advisor similar to those of: (a) chairman or
member of the board of directors; or (b) president or executive
vicepresident.
Notwithstanding the foregoing, and subject to the approval of the Board
of Directors, the Company may reimburse the Advisor for expenses related to the
activities of controlling persons undertaken in capacities other than those
which cause them to be controlling persons. The Advisor believes that the
employees of the Advisor, its Affiliates and controlling persons who perform
services for the Company for which reimbursement is allowed pursuant to Section
10(b) have the experience and educational background, in their respective fields
of expertise, appropriate for the performance of such services.
The Advisor and its Affiliates may not be reimbursed by the Company for
their overhead, nor can overhead costs or expenses of the Advisor or its
Affiliates be allocated to or paid by the Company. The foregoing reimbursements
of expenses, as limited by this Agreement, will be made regardless of whether
any cash distributions are made to the Shareholders.
11. Statements.
The Advisor shall furnish to the Company not later than the 30th day
following the end of each Fiscal Year, a statement showing a computation of the
fees or other compensation payable to the Advisor or an Affiliate of the Advisor
with respect to such Fiscal Year under Sections 9 and 10 hereof. The final
settlement of compensation payable under Sections 9 and 10 hereof for each
Fiscal Year shall be subject to adjustments in accordance with, and upon
completion of, the annual audit of the Company's financial statements.
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12. Listing of the Shares.
If this Agreement is terminated in connection with listing for trading
of the Shares on a national exchange or market or otherwise, the Advisor will
receive, in exchange for terminating this Agreement and the giving up or waiving
of its fees then earned but not paid and all future fees, such consideration to
be determined by the Independent Directors and the Advisor. In addition, at such
time, the Company will cause the Partnership to redeem the Advisor's "Incentive
Limited Partnership Interests" (as defined in the Partnership's Agreement of
Limited Partnership) for cash, or if agreed by both parties, units of interest
in the Partnership or Shares, for the amount the Advisor would have received if
the Partnership immediately sold all of its assets at fair market value. In the
event of such a termination of this Agreement, the Company shall thereafter be
relieved of its obligation to pay the fees contemplated by this Agreement.
13. Expenses of the Company.
The Company shall pay all of its expenses and shall reimburse the
Advisor for its expenses as provided in Sections 9 and 10 hereof and, without
limiting the generality of the foregoing, it is agreed that the following
expenses of the Company shall be paid by the Company:
(a) To the extent the Advisor is not expressly required to pay
such expenses pursuant to this Agreement, salaries and other employment
expenses of the personnel employed by the Company, directors' fees and
expenses incurred in attending directors' meetings, travel and other
expenses incurred by directors, officers and employees of the Company
and the cost of directors' liability insurance;
(b) The cost of borrowed money;
(c) All taxes applicable to the Company;
(d) Legal, accounting, auditing, underwriting, brokerage, listing,
registration and other expenses and taxes incurred in connection with
the organization or operations of the Company, the issuance,
distribution, transfer, registration and stock exchange or quotation
system listing of the Company's securities;
(e) Fees and expenses paid to advisors, independent contractors
and Affiliates of the Advisor (as described herein), consultants,
managers and other agents employed directly by the Company or by the
Advisor at the Company's request for the account of the Company;
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(f) Expenses connected with the acquisition, disposition, leasing
and ownership of investments, including to the extent not paid by
others, but not limited to, legal fees and other expenses of
professional services, maintenance, repair and improvement of property
and brokerage and sales commissions, expenses of maintaining and
managing property equity interests;
(g) All insurance costs incurred in connection with the Company
and its properties;
(h) Expenses connected with payments of dividends or interest or
distributions in cash or any form made or caused to be made by the
Board of Directors to Shareholders;
(i) All expenses connected with communications to Shareholders and
the other bookkeeping and clerical work necessary in maintaining
relations with Shareholders and in complying with the continuous
reporting and other requirements of governmental bodies or agencies,
including the cost of printing and mailing certificates for securities
and proxy solicitation materials and reports to Shareholders;
(j) Transfer agent and registrar's fees and charges; and
(k) Expenses relating to any office or office facilities
maintained by the Company separate from the office or offices of the
Advisor.
14. Reimbursement by Advisor.
The parties acknowledge that pursuant to the "Statement of Policy
Regarding Real Estate Investment Trusts," as revised and adopted by the North
American Securities Administrators Association on September 29, 1993, Total
Operating Expenses of the Company shall be deemed to be excessive if in any
Fiscal Year they exceed the greater of (a) 2% of the Company's Average Invested
Assets for such Fiscal Year; or (b) 25% of the Net Income for such Fiscal Year.
The Independent Directors shall have the fiduciary responsibility of limiting
such expenses to amounts that do not exceed such limitations. Within 60 days
after the end of any fiscal quarter of the Company for which Total Operating
Expenses (for the 12 months then ended) exceed 2% of Average Invested Assets or
25% of Net Income, whichever is greater, the Company shall send to the
Shareholders written notice of such fact together with the determination of the
Independent Directors as to whether such higher operating expenses were
justified and if so justified, an explanation of the facts the Independent
Director considered in arriving at that conclusion also shall be included. If
the Independent Directors determine that such excess expenses are not justified,
then the Advisor shall reimburse the Company the
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amount by which the aggregate expenses incurred by the Company exceed the
limitations described above at the end of the Fiscal Year; provided, however,
that the Company may instead permit such reimbursements to be effected by a
reduction in the amount of the next payments of compensation under Section 9.
15. Other Activities of the Advisor.
Subject to the provisions specifically set forth herein, the Advisor
and its Affiliates currently engage, and may engage in the future, in other
businesses or activities including the rendering of services and investment
advice with respect to real estate investment opportunities to other persons or
entities and may manage other investments (including the investments of the
Advisor and its Affiliates), including those in competition with the Company.
Directors, officers, employees and agents of the Advisor or of
Affiliates of the Advisor may serve as directors, officers, employees or agents
of the Company.
16. Term; Termination of Agreement.
This Agreement will continue in force until __________________, 2003,
subject to successive one year renewals with the written mutual consent of the
parties including approval of a majority of the Independent Directors.
Notwithstanding any other provision of this Agreement to the contrary,
either the Company or the Advisor may terminate this Agreement, or any extension
hereof, or the parties by mutual consent or a majority of the Independent
Directors may do so, in each case upon 60 days written notice without cause or
penalty. In the event of the termination of this Agreement, the Advisor will
cooperate with the Company and take all reasonable steps requested to assist the
Board of Directors in making an orderly transition of the advisory function.
If this Agreement is terminated pursuant to this Section, such
termination shall be without any further liability or obligation of either parry
to the other, except as provided in Section 19.
If this Agreement is terminated for any reason other than the listing
of the Shares as contemplated in Section 12, all obligations of the Advisor and
its Affiliates to offer property to the Company for purchase, as described in
Section 2(a), also shall terminate.
17. Assignments.
The Company may terminate this Agreement immediately in the event of
its assignment by the Advisor except an assignment to a successor organization
which
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acquires substantially all of the property and carries on the affairs of the
Advisor, provided that following such assignment the persons who controlled the
operations of the Advisor immediately prior thereto shall control the operations
of the successor organization, including the performance of its duties under
this Agreement; however, if at any time subsequent to such assignment such
persons shall cease to control the operations of the successor organization, the
Company may thereupon immediately terminate this Agreement. This Agreement shall
not be assignable by the Company without the consent of the Advisor, except in
the case of assignment by the Company to a corporation, trust or other
organization which is a successor to the Company. Any assignment of this
Agreement shall bind the assignee hereunder in the same manner as the assignor
is bound hereunder.
18. Default, Bankruptcy, etc.
At the sole option of the Company, this Agreement shall be terminated
immediately upon written notice of termination from the Board of Directors to
the Advisor if any of the following events occurs:
(a) The Advisor violates any material provisions of this Agreement
and, after receipt of written notice of violation, such violation is
not cured within 30 days; or
(b) A court of competent jurisdiction enters a decree or order for
relief in respect of the Advisor in any involuntary case under the
applicable bankruptcy, insolvency or other similar law now or hereafter
in effect, or appoints a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or similar official) of the Advisor or for any
substantial part of its property or orders the winding up or
liquidation of the Advisor's affairs; or
(c) The Advisor commences a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect,
or consents to the entry of an order for relief in an involuntary case
under any such law, or consents to the appointment of or taking
possession by a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or similar official) of the Advisor or for any
substantial part of its property, or makes any general assignment for
the benefit of creditors, or fails generally to pay its debts as they
become due.
The Advisor agrees that if any of the events specified in
subsections (b) and (c) of this Section 18 occur, it will give written
notice thereof to the Company within 7 days after the occurrence of
such event.
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19. Action Upon Termination.
The Advisor shall not be entitled to compensation after the date of
termination of this Agreement for further services hereunder, but shall be paid
all compensation accruing to the date of termination. Subject to the provisions
of Section 12, the Advisor shall forthwith upon a termination caused by factors
other than the listing for trading of the Shares on a national stock exchange or
market:
(a) Pay over to the Company all monies collected and held for the
account of the Company pursuant to this Agreement, after deducting any
accrued compensation and reimbursement for its expenses to which it is
then entitled;
(b) Deliver to the Board of Directors a full accounting, including
a statement showing all payments collected by it and a statement of all
monies held by it, covering the period following the date of the last
accounting furnished to the Board of Directors;
(c) Deliver to the Board of Directors all property and documents
of the Company then in the custody of the Advisor; and
(d) Cooperate with the Company and take all reasonable steps
requested by the Company to assist the Board of Directors in making an
orderly transition of the advisory function.
20. 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.
21. Successors and Assigns.
This Agreement shall bind any successors or permitted assigns of the
parties hereto as herein provided.
22. Governing Law.
The provisions of this Agreement shall be governed, construed and
interpreted in accordance with the laws of the Commonwealth of Virginia, without
regard to its conflict of laws provisions.
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23. Liability and Indemnification.
(a) The Company shall, to the fullest extent permitted by Virginia
statutory or decisional law, as amended or interpreted, indemnify and
pay or reimburse reasonable expenses to the Advisor and its Affiliates,
provided, that: (i) the Advisor or other party seeking indemnification
has determined, in good faith, that the course of conduct which cased
the loss or liability was in the best interest of the Company; (ii) the
Advisor or other person seeking indemnification was acting on behalf of
or performing services on the part of the Company; (iii) such liability
or loss was not the result of negligence, misconduct or a knowing
violation of the criminal law or any federal or state securities laws
on the part of the indemnified party; and (iv) such indemnification or
agreement to be, held harmless is recoverable only out of the net
assets of the Company and not from the Shareholders.
(b) The Company shall not indemnify the Advisor or its Affiliates
for losses, liabilities or expenses arising from or out of an alleged
violation of federal or state securities laws by such party unless one
or more of the following conditions are met: (i) there has been a
successful adjudication on the merits of each count involving alleged
securities law violations as to the particular indemnitee; (ii) such
claims have been dismissed with prejudice on the merits by a court of
competent jurisdiction as to the particular indemnitee; or (iii) a
court of competent jurisdiction approves a settlement of the claims and
finds that indemnification of the settlement and related costs should
be made and the court considering the request has been advised of the
position of the Securities and Exchange Commission and the published
opinions of any state securities regulatory authority in which
securities of the Company were offered and sold as to indemnification
for securities law violations.
(c) The Company may advance amounts to persons entitled to
indemnification hereunder for legal and other expenses and costs
incurred as a result of any legal action for which indemnification is
being sought only if all of the following conditions are satisfied: (i)
the legal action relates to acts or omissions with respect to the
performance of duties or services by the indemnified party for or on
behalf of the Company; (ii) the legal action is initiated by a third
party and a court of competent jurisdiction specifically approves such
advancement; and (iii) the indemnified party receiving such advances
undertakes to repay the advanced funds to the Company, together with
the applicable legal rate of interest thereon, in which such party
would not be entitled to indemnification.
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24. Notices.
Any notice, report or other communication required or permitted to be
given hereunder shall be in writing unless some other method of giving such
notice, report or other communication is accepted by the party to whom it is
given and shall be given by being delivered at the following addresses of the
parties hereto:
The Company and/or the Board of Directors:
G REIT, Inc.
Xxxxx 000
0000 X. Xxxxxx Xxxxxx
Xxxxx Xxx, XX 00000
The Advisor:
Triple Net Properties, LLC
Xxxxx 000
0000 X. Xxxxxx Xxxxxx
Xxxxx Xxx, XX 00000
Either party may at any time give notice in writing to the other party
of a change of its address for the purpose of this Section 24.
25. Headings.
The section headings hereof have been inserted for convenience of
reference only and shall not be construed to affect the meaning, construction or
effect of this Agreement.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
COMPANY:
G REIT, INC., a Virginia corporation
By:________________________________________
Title:_____________________________________
ADVISOR:
TRIPLE NET PROPERTIES, LLC, a
Virginia limited liability company
By:________________________________________
Title:_____________________________________
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