Exhibit 10(h)
ADVISORY AGREEMENT
BETWEEN
HMG/COURTLAND PROPERTIES, INC.
AND
HMG ADVISORY CORP
This Advisory Agreement made as of June 27, 1997 and effective as of
January 1, 1998 between HMG/Courtland Properties, Inc., a Delaware corporation
(the "Company"), and HMG Advisory Corp., a Delaware corporation (the "Adviser");
WITNESSETH:
WHEREAS. the Company was initially established as a Massachusetts
business trust by a Declaration of Trust on October 29, 1971, as amended and
restated from time to time (the "Declaration of Trust"), and was converted into
a corporation on July 31, 1979;
WHEREAS, the Company has qualified as a real estate investment trust
as defined in the Internal Revenue Code of 1986, as the same may be amended or
modified from time to time (which, together with any regulations and rulings
issued from time to time thereunder is hereinafter called the "Code"), and
invests its funds in the investments permitted for a real estate investment
trust;
WHEREAS, the Board of Directors of the Company decided on April 4,
1997 that it was in the Company's best interests not to renew the Company's
advisory agreement with Courtland Group, Inc., which agreement expires by its
terms on December 31, 1997;
WHEREAS, the Company desires to avail itself of the experience,
sources of information, advice and assistance of the Adviser and to have the
Adviser perform the duties and responsibilities hereinafter set forth, on behalf
of and subject to the supervision of the directors of the Company (the
"Directors"), as provided herein; and
WHEREAS, the Adviser is willing to render such services, subject to
the supervision of the Directors, on the terms and conditions hereinafter set
forth.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, and intending to be legally bound, the parties
hereto agree as follows:
1. DUTIES OF ADVISER. The Adviser shall consult with the Directors and
shall, at the request of the 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 Adviser shall inform the Directors of
any factors which come to its attention which would influence the policies of
the Company. The Adviser in performing its duties under the Agreement shall at
all times be subject to the supervision of the Directors and will have only such
authority as the Company may delegate to it as its agent. Such duties to be
performed by the Adviser shall include: (a) counseling the Company and
presenting to it investments consistent with the objectives of the Company, (b)
performing such research and investigation as the Directors may request in
connection with the policy decisions as to the type and nature of investments to
be made by the Company; (c) evaluating the desirability of acquisition,
retention and disposition of specific Company assets; (d) conducting the
day-to-day investment operations of the Company;
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(e) conducting relations with mortgage loan brokers, originators and servicers,
and determining whether loans offered to the Company meet the requirements of
the Company; and (f) providing all of the executive and administrative
personnel, office space and services required in rendering such services to the
Company.
2. NO PARTNERSHIP OR JOINT VENTURE. The Company and the Adviser are
not, and shall not be deemed to be, partners or joint venturers with each other.
3. RECORDS. The Adviser shall keep proper 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.
4. REIT QUALIFICATION. Anything else in this Agreement to the contrary
notwithstanding, the Adviser shall refrain from any action which, in its
reasonable judgement, or in the judgement of the Directors of which the Adviser
has written notice, would adversely affect the status of the Company as a real
estate investment trust as defined and limited in Sections 856, 857 and 858 of
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.
5. BANK ACCOUNTS. The Adviser may establish one or more bank accounts
in its own name, and may deposit into and disburse from such accounts, any money
on behalf of the Company, under such terms and conditions as the Directors may
approve, provided that no funds in any such account shall be commingled with the
funds of the Adviser, and the
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Adviser shall from time to time render appropriate accounting of such deposits
and payments to the Directors and to the auditors of the Company
6. BOND. The Adviser shall maintain a fidelity bond with the
responsible surety company in such reasonable amount as may be required by the
Directors from time to time covering its officers, employees and agents handling
funds and records of the Company. Such bond shall inure to the benefit of the
Company in respect of losses of such property from acts of such persons through
theft, embezzlement, fraud, negligence, error or otherwise
7. INFORMATION FURNISHED ADVISER. The Directors shall keep the Adviser
informed in writing concerning the investment and financing policies of the
Company. The Directors shall notify the Adviser promptly in writing of their
intention to make any new investments or to dispose of any existing investments.
The Directors shall furnish the Adviser with a certified copy of all financial
statements, a signed copy of each report prepared by independent public
accountants, and such other information with regard to its affairs as the
Adviser may reasonably request.
8. DEFINITIONS As used herein, the following terms shall have the
meanings set forth below:
(a) "Affiliate" means as to any corporation, partnership or trust
any person who (a) holds beneficially, directly or indirectly one
percent (1%) or more of the outstanding capital stock, shares or
equity interest in such corporation, partnership or trust, (b) is an
officer, director, partner, or trustee of such corporation,
partnership or trust or of any person which controls, is controlled
by,
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or is under common control with, such corporation, partnership or
trust, or (c) controls, is controlled by, or is under common control
with, such corporation, partnership or trust.
(b) "Average Net Worth" is defined as the average of the amount
in the shareholders' equity accounts on the books of the Company, plus
the accumulated non-cash, reserves for depreciation, depletion and
amortization shown on the books of the Company, determined at the
close of the last day of each month for the computation period.
(c) "Fiscal Year" shall mean any period for which any income tax
return is submitted to the Internal Revenue Service and which is
treated by the Internal Revenue Service as a reporting period.
(d) "Net Profits" is defined as the gross earned income of the
Company (exclusive of gains and losses from the disposition of
assets), minus all expenses other than non-cash charges for
depreciation, depletion and amortization and the incentive
compensation payable to the Adviser, and minus, all amounts expended
for mortgage indebtedness, excluding extraordinary and balloon
payments.
Except as specifically otherwise provided herein, all calculations
made in accordance with this Section 8 shall be based on statements (which may
be unaudited, except as provided herein) prepared on an accrual basis consistent
with generally accepted accounting principles, regardless of whether the Company
may also prepare statements on a different basis.
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9. REGULAR COMPENSATION. For services rendered under this Agreement.
The Adviser shall receive as regular compensation (1) a monthly fee at a rate of
$55,000 (fifty-five thousand dollars) and (2) a monthly fee of 20% of the amount
of any unrefunded commitment fees received by the Company with respect to
mortgage loans and other commitments which the Company was not required to fund
and which expired within the next preceding calendar month.
10. INCENTIVE COMPENSATION. In order to reward further the Adviser for
performance hereunder, the Company shall also pay to the Adviser, on or before
the 15th day after the completion of the annual audit of the Company's financial
statements for each Fiscal Year, incentive compensation in an amount equal to
the sum of (a) 10% of the realized capital gains (net of accumulated net
realized capital losses) and extraordinary nonrecurring items of income of the
Company for such year, plus (b) 10% of the amount, if any, by which Net Profits
of the Company for such fiscal year exceeded 8% per annum of the Average Net
Worth of the Company during such year.
11. COMPENSATION FOR ADDITIONAL SERVICES. If and to the extent that
the Company shall request the Adviser, or any of its directors, officers or
employees, to render services for the Company, other than those required to be
rendered by the Adviser under this Agreement, such additional services shall be
compensated separately on terms to be agreed upon between such party and the
Company from time to time, which terms shall be fair and reasonable and at least
as favorable to the Company as similar arrangements for comparable transactions
of which the Company is aware with organizations unaffiliated with the Adviser.
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The Adviser and its affiliates will not receive from the Company any
brokerage or similar fees for the placement of mortgages or other investments
with the Company. However, the Adviser and its Affiliates may receive normal
brokerage commissions from borrowers, buyers, sellers, lessees or other third
parties in connection with transactions involving the Company, provided that
such commissions are fully disclosed to all Directors prior to their approval of
the transaction and that such commissions (which to the extent paid by the
borrower, buyer, seller, lessee or other third party and retained by the Adviser
or its Affiliates may reduce the yield to the Company) are fair and reasonable
and in accord with the prevailing rates in the locality in which the transaction
is consummated for the type of transaction involved.
12. STATEMENTS. The Adviser shall furnish to the Company not later
than the tenth day of each calendar month a statement showing the computation of
any compensation payable to it during such month under Section 9 hereof. The
Adviser shall furnish to the Company not later than the 30th day following the
end of each Fiscal Year a statement showing the computation of the fees, if any,
payable in respect to such Fiscal Year under Sections 10 and 11 hereof. The
final settlement of compensation payable under Sections 10 and 11 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.
13. EXPENSES OF THE ADVISER. Without regard to the amount of
compensation received hereunder by the Adviser, the Adviser shall bear the
following expenses:
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(a) all salary and employment expenses of its own personnel and
of the officers and employees of the Company who are Affiliates of the
Adviser other than expenses relating to options to purchase shares of
the Company granted Affiliates of the Adviser who are also officers or
employees of the Company under a plan approved by the shareholders of
the Company;
(b) all of the administrative, rent and other offices expenses
(except those relating to a separate office, if any, maintained by the
Company) relating to its services as Adviser; and
(c) travel (to the extent not paid by any party other than the
Company or the Adviser) and advertising expenses incurred in seeking
investments for the Company.
14. EXPENSES OF THE COMPANY. Except as expressly otherwise provided in
this Agreement, the Company shall pay all its expenses not assumed by the
Adviser 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) the cost of borrowed money;
(b) taxes on income, real property and all other taxes applicable
to the Company;
(c) legal, accounting, underwriting, brokerage, transfer agent's,
registrar's, indenture trustee's, listing, registration and other
fees, printing, engraving, and other expenses and taxes incurred in
connection with the issuance,
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distribution, transfer, registration and stock exchange listing of the
Company's securities;
(d) fees and expenses of advisers and independent contractors,
consultants, managers and other agents employed directly by the
Company;
(e) expenses connected with the acquisition, disposition or
ownership of mortgages or real property or other investment assets,
including, to the extent not paid by any party other than the Company
or the Adviser, but not limited to, costs of foreclosure, costs of
appraisal, legal fees and other expenses for professional services,
maintenance, repair and improvement of property; and brokerage and
sales commissions, and expenses of maintaining and managing real
property equity interests;
(f) the expenses of organizing or terminating the Company;
(g) all insurance costs (including the cost of Director's
liability insurance) incurred in connection with the protection of the
Company's property as required by the Directors;
(h) expenses connected with payments of dividends or interest or
distributions in cash or any other form made or caused to be made by
the Directors to holders of securities of the Company including a
dividend reinvestment plan, if any;
(i) all expenses connected with communications to holders of
securities of the Company and the other bookkeeping and clerical work
necessary in maintaining relations with holders of securities,
including the cost of printing and
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mailing checks, certificates for securities and proxy solicitation
materials and reports to holders of the Company's securities;
(j) to the extent not paid by borrowers from the Company, the
expenses of administering, processing and servicing mortgage,
development, construction and other loans;
(k) the cost of any accounting, statistical, or bookkeeping
equipment necessary for the maintenance of the books and records of
the Company;
(1) general legal, accounting and auditing fees and expenses;
(m) salaries and other employment expenses of the personnel
employed or retained by the Company who are not Affiliates of the
Adviser, fees and expenses incurred by all Directors and officers in
attending Directors' meetings (including meetings of Board
committees); fees and travel and other expenses incurred by the
Directors, officers and employees of the Company who are not
Affiliates of the Adviser; and
(n) expenses relating to options to purchase shares of the
Company granted to officers and employees of the Company (including
Affiliates of the Adviser) under a plan approved by the Shareholders
of the Company
15. OTHER ACTIVITIES OF ADVISER. Nothing herein contained shall
prevent the Adviser from engaging in other business but the Adviser may not
(although its Affiliates may) otherwise engage in activities similar to those to
be performed by it for the Company, including the rendering of services and
advice to other persons and entities, the acting as a Director and the
management of other investments, (including the investments of the Adviser
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and its Affiliates). The Adviser shall counsel the Company regarding investments
and shall present to the Company a continuing flow of suitable investments which
are consistent with the objectives of the Company.
Directors,officers, employees and agents of the Adviser or of
Affiliates of the Adviser may serve as Directors, officers, employees or agents
of the Company. When executing documents or otherwise acting in such capacities
for the Company, such persons shall use their respective titles with the
Company.
16. TERM-TERMINATION OF AGREEMENT. This Agreement shall continue in
full force for a term expiring on December 31, 1998 and thereafter it may be
extended from year to year by the affirmative vote of a majority of the
Directors who are not Affiliates of the Adviser and the affirmative vote of a
majority of the shareholders of the Company present in person or by proxy at a
meeting called to renew this Agreement.
17. AMENDMENTS. This Agreement shall not be modified or terminated
except by an instrument in writing signed by both parties hereto, or their
respective, successors or assigns, or otherwise as provided herein.
18. ASSIGNMENT. This Agreement is not assignable without the consent
of the unaffiliated Directors of the Company and of the Adviser.
19. DEFAULT, BANKRUPTCY, ETC. At the option of the Directors, this
Agreement shall be terminated immediately upon written notice of termination
from the Directors to the Adviser if any of the following events shall occur:
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(a) If the Adviser shall violate any provision of this Agreement
and, after written notice of such violation, shall not cure such
default within 30 days;
(b) If the Adviser shall be adjudged bankrupt or insolvent by a
court of competent jurisdiction, or any order shall be made by a court
of competent jurisdiction for the appointment of a receiver,
liquidator or trustee of the Adviser or of all or substantially all of
its property by reason of the foregoing, or approving any petition
filed against the Adviser for its reorganization; or
(c) If the Adviser shall institute proceedings for voluntary
bankruptcy or shall file a petition seeking reorganization under the
Federal bankruptcy laws, or for relief under any law for the relief of
debtors, or shall consent to the appointment of a receiver of itself
or of all or substantially all its property, or shall make a general
assignment for the benefit of its creditors, or shall admit in writing
its inability to pay its debts generally, as they become due.
The Adviser agrees that if any of the events specified in subsections
(b) and (c) of this Section 19 shall occur, it will give written notice thereof
to the Directors within seven days after the occurrence of such event.
20. ACTION UPON TERMINATION. The Adviser 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. The Adviser shall forthwith upon such termination:
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(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 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 Directors, and
(c) deliver to the Directors all property and documents of the
Company then in the custody of the Adviser.
21. GOVERNING LAW. The provisions of this Agreement shall be construed
and interpreted in accordance with the laws of the State of Delaware as at the
time in effect.
22. MISCELLANEOUS. The Adviser assumes no responsibility under this
Agreement other than to render the services called for hereunder in good faith,
and shall not be responsible for any action of the Directors in following or
declining to follow any advice or recommendations of the Adviser. None of the
Adviser, its owners, directors, officers or employees shall be liable to the
Company, the Directors or the holders of securities of the Company except by
reason of acts constituting bad faith, willful misfeasance, gross negligence or
reckless disregard of their duties.
23. NOTICES. Any communications given hereunder shall be in writing
delivered at the following addresses of the parties hereto:
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The Directors and/or the Company:
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The Adviser:
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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 23.
IN WITNESS WHEREOF, HMG/Courtland Properties, Inc., by an authorized
officer, and HMG Advisory Corp., by an authorized officer, in such case
thereunto duly authorized, have signed these presents on June 27, 1997,
effective as of January 1, 1998.
Attest: HMG/COURTLAND PROPERTIES, INC.
By /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ By /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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Secretary Chairman of the Board
of Directors
Attest: HMG ADVISORY CORP,
By /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ By /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Secretary Chief Executive Officer
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