EXHIBIT 10.1
Amendment No. 1 to Advisory Agreement
This Amendment No. 1 dated as of October 12, 1999 to Advisory Agreement
(the "Advisory Agreement") dated effective as of January 1, 1998 by and between
HRPT Properties Trust, a Maryland real estate investment trust (the "Company"),
and REIT Management and Research, Inc., a Delaware corporation (the "Advisor").
WHEREAS, on October 12, 1999 the Company effected a spin-off of Senior
Housing Properties Trust ("Senior Housing") a wholly owned subsidiary of the
Company, by transferring to Senior Housing 93 senior housing properties and
distributing 13.2 million of Senior Housing's 26 million common shares of
beneficial interest, to the Company's shareholders (as further described in the
Company's Report on Form 8-K dated September 21, 1999 and the notes to the
unaudited pro forma consolidated financial statements of the Company therein,
filed with the Securities and Exchange Commission) (the "Spin-Off"); and
WHEREAS, effective October 12, 1999 Senior Housing entered an advisory
agreement with the Advisor to perform certain real estate investment, management
and administrative services for Senior Housing; and
WHEREAS, the Company and the Advisor are desirous of amending the
Advisory Agreement to modify the fees payable to the Advisor by the Company as a
result of the spin-off.
NOW THEREFORE, in consideration of the mutual agreements herein set
forth, the parties hereto agree as follows:
1. Section 9 of the Advisory Agreement shall be amended by deleting
such Section in its entirety and substituting the following in its place:
"9. Compensation. The Advisor shall be paid, for the services rendered by it to
the Company pursuant to this Advisory Agreement, an annual advisory fee (the
"Advisory Fee") equal to 0.7 percent of the Average Invested Capital (as defined
below) computed as of the last day of the Company's fiscal year up to
$250,000,000, plus 0.5 percent of the Average Invested Capital exceeding
$250,000,000. In addition, the Advisor shall be paid an annual incentive fee
(the "Incentive Fee") consisting of a number of shares of the Company's common
shares of beneficial interest ("Common Shares") with a value (determined as
provided below) equal to fifteen percent 15% of the product of (i) the weighted
average Common Shares of the Company outstanding on a fully diluted basis during
such year and (ii) the excess if any of "FFO Per Share" (as defined below) for
such year over the FFO Per Share for the preceding year. However, in no event
shall the Incentive Fee payable in respect of any year exceed $.01 multiplied by
the weighted average number of Common Shares outstanding on a fully diluted
basis during such year. (The Advisory Fee and Incentive Fee are hereinafter
collectively referred to as the "Fees").
For purposes of this Agreement: "Average Invested Capital" of the Company shall
mean 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 and personal property owned in connection with such real estate, all
before reserves for depreciation or bad debts or other similar noncash
reserves, computed by taking the average of such values at the end of each month
during such period minus the average of the aggregate book value (calculated as
described above) of (i) the assets transferred by the Company to Senior Housing
in connection with the Spin-Off, for all periods from October 12, 1999 through
December 31, 1999, and (ii)all of the assets of Senior Housing for all periods
after January 1, 2000. "Cash Available for Distribution to Shareholders" shall
mean, for any period, the net cash flow from operations of the Company's
investments for such period less preferred dividends, if any, and such amounts
as the Trustees, in their sole discretion, shall determine are necessary or
appropriate to discharge current debts and liabilities of the Company and to
provide reasonable reserves for the payment of non-current debts and liabilities
of the Company and for the operations of the Company, including reserves for
replacements and capital improvements and reserves, if any, required in
connection with the ownership of the Company's properties and investments.
Calculation of Average Invested Capital and Cash Available for Distribution to
Shareholders shall be made annually by the Company's independent certified
public accountants.
The Advisory Fee shall be computed and paid within thirty (30) days following
the end of each fiscal month by the Company, and the Incentive Fee shall be
computed and paid within thirty (30) days following the public availability of
the Company's annual audited financial statements for each fiscal year. Such
computations shall be based upon the Company's monthly or quarterly financial
statements, as the case may be, and shall be in reasonable detail. A copy of
such computations shall promptly be delivered to the Advisor accompanied by
payment of the Fees shown thereon to be due and payable.
The payment of the aggregate annual Fees paid for any fiscal year shall be
subject to adjustment as of the end of each fiscal year. On or before the 30th
day after public availability of the Company's annual audited financial
statements for each fiscal year, the Company shall deliver to the Advisor an
Officer's Certificate (a "Certificate") reasonably acceptable to the Advisor and
certified by an authorized officer of the Company setting forth (i) the Average
Invested Capital and Cash Available for Distribution to Shareholders for the
Company's fiscal year ended upon the immediately preceding December 31, and (ii)
the Company's computation of the Fees payable for said fiscal year.
If the aggregate annual Fees payable for said fiscal year as shown in such
Certificate exceed the aggregate amounts previously paid with respect thereto by
the Company, the Company shall include its check for such deficit and deliver
the same to the Advisor with such Certificate.
If the aggregate annual Fees payable for said fiscal year as shown in such
Certificate are less than the aggregate amounts previously paid with respect
thereto by the Company, the Company shall specify in such Certificate whether
the Advisor should (i) remit to the Company its check in an amount equal to such
difference or (ii) grant the Company a credit against the Fees next coming due
in the amount of such difference until such amount has been fully paid or
otherwise discharged.
For purposes of this Agreement: "FFO Per Share" shall mean (i) the Company's
consolidated net income, computed in accordance with generally accepted
accounting principles, before gain or loss on sale of properties and
extraordinary items, depreciation and other non-cash items,
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including the Company's pro rata share of the funds from operations (determined
in accordance with this clause) for such year of (A) any unconsolidated
subsidiary and (B) any entity for which the Company accounts by the equity
method of accounting, divided by (ii) the weighted average number of Common
Shares outstanding on a fully diluted basis during such year. For purposes of
calculating the Incentive Fee for the fiscal year ending December 31, 1999, FFO
Per Share for the Company's fiscal year ending December 31, 1999 shall be
calculated on a pro forma basis adjusted as if the Spin-Off had occurred as of
January 1, 2000. For purposes of calculating the Incentive Fee for years after
the fiscal year ending December 31, 1999, FFO Per Share for the Company's fiscal
year ending December 31, 1999 shall be calculated on a pro forma basis adjusted
as if the Spin-Off had occurred as of December 31, 1998.
Payment of the Incentive Fee shall be made by issuance of Common Shares of
Beneficial Interest under the Company's 1992 Incentive Share Award Plan. The
number of shares to be issued in payment of the Incentive Fee shall be the whole
number of shares (disregarding any fraction) equal to the value of the Incentive
Fee, as provided above, divided by the average closing price of the Company's
Common Shares of Beneficial Interest on the New York Stock Exchange during the
month of December in the year for which the computation is made."
2. Except as provided herein, each of the provisions of the Advisory
Agreement shall remain in full force and effect and this Amendment No. 1 shall
not constitute a modification, acceptance or waiver of any other provision of
the Advisory Agreement except as provided herein. Each of the parties hereto
ratifies and confirms all of its obligations under the Advisory Agreement, as
amended by this Amendment No. 1.
3. This Amendment No. 1 may be executed in any number of counterparts,
all of which taken together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1
to Advisory Agreement to be executed by their duly authorized officers, under
seal, as of the day and year first above written.
ATTEST: HRPT PROPERTIES TRUST
/s/ Xxxxx X. Xxxxxxx By: /s/ Xxxx Xxxxx
Its: Treasurer
ATTEST: REIT MANAGEMENT & RESEARCH, INC.
/s/ Xxxxx X. Xxxxxxx By: /s/ Xxxxxx X. X'Xxxxx
Its: Vice President
