EXHIBIT 10.1
TRUST MANAGEMENT AGREEMENT,
DATED AS OF May 15, 1998, BETWEEN
THE REGISTRANT AND BARON ADVISORS, INC.
TRUST MANAGEMENT AGREEMENT
AGREEMENT made as of the 15th day of May, 1998 by and between BARON CAPITAL
TRUST, a Delaware business trust (the "Trust"), and BARON ADVISORS, INC., a
Delaware corporation (hereinafter referred to as the "Management Company").
W I T N E S S E T H:
WHEREAS, the Trust is a business trust organized under the Delaware
Business Trust Act, as amended, which intends to elect to be taxed as a real
estate investment trust ("REIT") under the Internal Revenue Code of 1986, as
amended (the "Code");
WHEREAS, the Management Company is the managing shareholder of the Trust
and will engage principally in rendering management, administrative and
investment advisory services to the Trust; and
WHEREAS, the Trust desires to retain the Management Company to render
management, administrative and certain investment advisory services to the Trust
in the manner and on the terms hereinafter set forth; and
WHEREAS, the Management Company is willing to provide management,
administrative and investment advisory services to the Trust on the terms and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, the Trust and the Management Company hereby agree as
follows:
ARTICLE I
Duties of the Management Company
The Trust hereby employs the Management Company to furnish, or arrange for
Affiliates (defined in Article VIII) of the Management Company to furnish, the
management, administrative and investment advisory services described below for
the period and on the terms and conditions set forth in this Agreement, subject
to the general supervision and review by the Board of the Trust and/or a
majority of the Independent Trustees of the Trust and the prior approval of the
Board and/or a majority of the Independent Trustees in respect of certain
actions of the Trust as set forth in the Amended and Restated Declaration of
Trust ("the Declaration") for the Trust dated as of May 15, 1998. The initial
Board of the Trust consists of the Management Company and two Independent
Trustees appointed pursuant to the terms and conditions of the Declaration. The
Management Company hereby accepts such employment and agrees during such period,
at its own expense, to render, or arrange for the rendering of, such services
and to assume the obligations herein set forth for the compensation provided for
herein.
(a) Management and Administrative Services. The Management Company shall
perform (or arrange for the performance of) the management and administrative
services necessary for the operation of the Trust, including providing
managerial assistance to Baron Capital Properties, L.P. (the "Operating
Partnership"), an affiliate of the Trust, and other companies which may be owned
directly or indirectly by the Trust through which the Trust may conduct its real
estate operations and such other services related to residential apartment
properties in which the Trust may invest (as specified in the Declaration), as
shall be necessary for the operation of the Trust. The Management Company shall
also perform services related to administering the accounts and handling
relations with all holders of beneficial interests in the Trust. The Management
Company shall provide the Trust with office space, equipment and facilities and
such other services as the Management Company shall from time to time determine
to be necessary or useful to perform its obligations under this Agreement. The
Management Company shall also, on behalf of the Trust, conduct relations with
custodians, depositories, transfer agents, other shareholder service agents,
accountants, attorneys, underwriters, brokers and dealers, corporate
fiduciaries, insurers, banks and such other persons in any such other capacity
deemed to be necessary or desirable. The Management Company shall report to the
Board as to its performance of obligations hereunder and shall furnish advice
and recommendations with respect to such other aspects of the business and
affairs of the Trust as the Management Company shall determine to be desirable.
(b) Investment Advisory Services. Pursuant to the Declaration, the
Management Company in its capacity as the Managing Shareholder of the Trust is
responsible for providing investment advisory services in connection with real
estate investments the Trust may make and in connection with the money market
securities or other non-real estate investments held by the Trust (such
investments being referred to herein collectively as the "Investments"). The
Management Company shall also provide the Trust with such investment research,
advice and supervision as the latter may from time to time consider necessary
for the proper supervision of the Investments, and shall advise the Board of the
investment program for the Investments and shall determine from time to time
which Investments shall be purchased, sold or exchanged and what portion of the
Trust's assets shall be held in the various money market securities or cash,
subject always to any provisions, restrictions and limitations set forth in the
Declaration, as amended from time to time, the provisions of the Code relating
to REITs, and the Trust's investment objectives, investment policies and
investment restrictions. The Management Company shall also make determinations
with respect to the manner in which voting rights, rights to consent to
corporate action and any other rights pertaining to the Trust's Investments
shall be exercised, subject to the restrictions set forth in the immediately
preceding sentence. The Management Company shall take, on behalf of the Trust,
all actions which it deems necessary to implement its investment policies.
Subject to applicable law, the Management Company may select brokers or dealers
which are its Affiliates to effect the purchase or sale of Investments. The
Management Company, in its sole discretion, may engage professionals,
consultants and other persons whose expertise or qualifications may assist the
Management
2
Company or the Trust in connection with the Trust's business and may treat the
costs and expenses so incurred as a Trust expense.
ARTICLE II
Allocation of Charges and Expenses
(a) The Management Company. The Management Company assumes and shall pay
the expense for maintaining the administrative staff and personnel necessary to
perform its obligations under this Agreement and shall at its own expense,
provide the Trust with office space, facilities, equipment and personnel
necessary to carry out its obligations hereunder. The Management Company will
bear the administrative and service expenses associated with the management
services it is to provide for the Investments of the Trust pursuant to the terms
of this Agreement.
(b) The Trust. The Trust assumes and shall pay or cause to be paid all
other expenses of the Trust not expressly assumed by the Management Company
under this Agreement, including, without limitation: expenses of all
transactions involving the Trust, including without limitation, transactions
relating to the acquisition, leasing and disposition of properties, whether
consummated or not; valuation costs; expenses of printing reports and other
documents distributed to the Securities and Exchange Commission and holders of
beneficial interests, fees payable to the Securities and Exchange Commission,
state securities regulatory agencies and other regulatory agencies; interest;
taxes; fees and actual out-of-pocket expenses of the Independent Trustees; fees
for legal, auditing and consulting services; litigation expenses; costs of
printing proxies and other expenses related to meetings of holders of beneficial
interest; postage and other expenses properly payable by the Trust.
ARTICLE III
Compensation of the Management Company
(a) Management Fee. For the services rendered, the facilities furnished and
the expenses assumed by the Management Company under this Agreement, the Trust
shall pay to the Management Company annual compensation in an amount equal to
the sum of (i) 1% of the gross proceeds from the sale by the Trust of Common
Shares in the Trust's initial offering ("Initial Offering") pursuant to the
Prospectus dated May 15, 1998, and (ii) 1% of the initial stock price for each
unit of limited partnership interest ("Unit") in the Operating Partnership
issued in connection with the proposed Exchange Offering of Units (the "Exchange
Offering") as contemplated in the Prospectus. Except as provided below, such
compensation shall be payable in cash in equal monthly payments in advance. To
the extent that the Trust does not have funds in an amount sufficient to pay the
management fee, the Trust will accrue such fee as a liability and pay the
accrued fee at such time as it has sufficient funds available to it. Interest on
the amount of the accrued fee will be assessed at the annual rate of 10%.
Notwithstanding the foregoing, the Management Company may in its sole discretion
elect to take
3
such compensation in an equivalent amount of authorized and unissued Common
Shares of the Trust or Units in the Operating Partnership as may be determined
by the Compensation Committee of the Board of the Trust.
(b) Other Fees. In connection with the Initial Offering and the Exchange
Offering, the Management Company shall be entitled to receive the fees provided
for in Section 4.2 of the Declaration and permitted under the Agreement of
Limited Partnership of the Operating Partnership (the "Partnership Agreement"),
as applicable. In connection with any offering of shares of beneficial interest
in the Trust ("Shares") (other than the Initial Offering) and offering of Units
in the Operating Partnership, the Management Company shall be entitled to
receive market-based fees based on the amount of gross proceeds received by the
Trust or the Operating Partnership, as the case may be, in connection with such
offerings to defray organizational, distribution and offering expenses incurred
in the offer and sale of the Shares and to cover legal, accounting, consulting
and recording fees, printing, filing, postage and other miscellaneous costs
associated with such offerings. The Management Company is also entitled to
receive an investment fee in an amount equal to 4% of the aggregate subscription
price received by the Trust for Shares purchased in connection with the Initial
Offering and any subsequent offerings for the Management Company's services in
investigating and evaluating investment opportunities and assisting the Trust in
consummating its investments. The Trust will reimburse Baron Capital Properties,
Inc., the corporate trustee of the Trust, for all actual and necessary expenses
paid or incurred in connection with the operation of the Trust, including the
Trust's allocable share of the corporate trustee's overhead. The foregoing fees
and expenses are to be paid pursuant to the provisions of the Declaration and
the Partnership Agreement, as applicable, and are subject to any provisions,
restrictions or limitations set forth therein.
(c) Expense Limitations. In the event the operating expenses of the Trust,
including amounts payable to the Management Company pursuant to subsection (a)
hereof, for any fiscal year ending on a date on which this Agreement is in
effect exceed any expense limitations applicable to the Trust imposed by the
Declaration or applicable state securities laws or regulations, as such
limitations may be raised or lowered from time to time, the Management Company
shall reduce its management fee hereunder by the extent of such excess and, if
required pursuant to any such laws or regulations, will reimburse the Trust in
the amount of such excess; provided, however, to the extent permitted by law,
there shall be excluded from such expenses the amount of any interest, taxes,
portfolio transaction costs and extraordinary expenses (including but not
limited to legal claims and liabilities and litigation costs and any
indemnification related thereto) paid or payable by the Trust. Whenever the
expenses of the Trust exceed a pro rata portion of the applicable annual expense
limitations, the estimated amount of reimbursement under such limitations shall
be applicable as an offset against the monthly payment of the fee due to the
Management Company. Should two or more such expense limitations be applicable as
at the end of the last business day of the month, that expense limitation which
results in the largest reduction in the Management Company's management fee
shall be applicable.
4
ARTICLE IV
Limitation of Liability of the Management Company
(a) As more fully described in Article 3.7 of the Declaration, the
Management Company shall not be liable for any loss suffered by the Trust or the
Operating Partnership (or other company which may be directly or indirectly
owned by the Trust through which the Trust may conduct its real estate
operations) that arises out of any action or inaction of the Trust or the
Operating Partnership (or any such other company), any Trust or Operating
Partnership (or any such other company) officers, agents or Affiliates, the
Management Company, the Trustees of the Trust (comprised of the Independent
Trustees and the corporate trustee), any other members of the Board of the Trust
or any Affiliate of the Management Company, a Trustee, any other member of the
Board or any director, officer or agent of those entities (collectively,
"Managing Persons" and individually, a "Managing Person") or out of any error of
judgment or mistake of law, if the Managing Person responsible, in good faith,
determined that such course of conduct was in the best interest of the Trust or
the Operating Partnership (or any such other company) and such course of conduct
was within the scope of this Management Agreement or the Declaration and did not
constitute negligence or misconduct of the Managing Persons involved.
(b) Indemnification. The provisions of Section 3.7 of the Declaration are
hereby incorporated by reference into this Management Agreement and are
expressly approved by the Board of the Trust. The Management Company shall be
entitled to indemnification hereunder in each instance where the "Managing
Shareholder" is entitled to indemnification under said Section 3.7.
ARTICLE V
Activities of the Management Company
The services of the Management Company of the Trust to be performed under
this Management Agreement are not deemed to be exclusive, the Management Company
being free to render services to others. It is understood that Trustees, other
members of the Board, Affiliates of the Trust (other than the Independent
Trustees) and holders of beneficial interest of the Trust or of partnership
interest in the Operating Partnership are or may become interested in the
Management Company as directors, officers, employees or shareholders of the
Management Company or otherwise and that the Management Company or its
directors, officers, employees or shareholders are or may become interested in
the Trust or the Operating Partnership as Trustees (other than as an Independent
Trustee), holders of beneficial interests or partnership interests or otherwise.
5
ARTICLE VI
Duration and Termination of this Contract
This Agreement shall become effective as of the date first above written
and shall remain in force until the first anniversary thereof, and thereafter,
but only so long as such continuance is specifically approved at least annually
by (i) the Board of the Trust or the vote of a majority of the outstanding
voting securities of the Trust and (ii) a majority of the Independent Trustees
of the Trust who are not parties to this Agreement or interested persons of any
such party, by a vote cast in person at a meeting called for the purpose of
voting on such approval.
This Agreement may be terminated at any time, without the payment of any
penalty, by vote of a majority of the Independent Trustees of the Trust, by vote
of a majority of the outstanding voting securities of the Trust, or by the
Management Company, on at least 60 days' prior written notice to the other
party. This Agreement shall automatically terminate in the event of its
assignment.
ARTICLE VII
Amendments of this Agreement
This Agreement may be amended by the parties only if such amendment is
specifically approved by (i) the Board of the Trust or the vote of a majority of
the holders of outstanding voting securities of the Trust and (ii) a majority of
the Independent Trustees of the Trust, by a vote cast in person at a meeting
called for the purpose of voting on such approval.
ARTICLE VIII
Definitions of Certain Terms
The terms "vote of a majority of the outstanding voting securities,"
"Affiliate" and "affiliated person" when used in this Agreement, shall have the
respective meanings specified in the Securities Act of 1933, as amended, and the
rules thereunder.
ARTICLE IX
Governing Law
This Agreement shall be construed in accordance with the laws of the State
of New York without regard to the conflicts of law provisions thereof.
6
ARTICLE X
Notice of Non-liability
Under the Delaware Business Trust Act and Sections 3.3 and 3.4 of the
Declaration, neither the Shareholders, the Trustees nor any other members of the
Board of the Trust shall be personally liable hereunder, and the Management
Company shall look solely to the Trust property for the satisfaction of any
claim hereunder against the Trust.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
BARON CAPITAL TRUST
By: /s/ XXXXXXX X. XXXXXXX
--------------------------
Xxxxxxx X. XxXxxxx
Chief Executive Officer
BARON ADVISORS, INC.
By: /s/ XXXXXXX X. XXXXXXX
--------------------------
Xxxxxxx X. XxXxxxx
President
7
