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EXHIBIT 10.3
ADVISORY AGREEMENT
THIS ADVISORY AGREEMENT, dated as of , 1997 is between CORPORATE
PROPERTY ASSOCIATES 14 INCORPORATED, a Maryland corporation (the "Company"), and
XXXXX PROPERTY ADVISORS, a Pennsylvania limited partnership (the "Advisor").
W I T N E S S E T H:
WHEREAS, the Company has filed with the Securities and Exchange
Commission a Registration Statement (No.333- ) on Form S-11 covering shares of
its common stock ("Shares"), par value $.001, to be offered to the public, and
the Company may subsequently issue securities other than such Shares
("Securities") or otherwise raise additional capital;
WHEREAS, the Company intends to qualify as a REIT (as defined below),
and to invest its funds in investments permitted by the terms of the
Registration Statement and Sections 856 through 860 of the Code (as defined
below);
WHEREAS, the Company desires to avail itself of the experience, sources
of information, advice and assistance of, and certain facilities available to,
the Advisor and to have the Advisor undertake the duties and responsibilities
hereinafter set forth, on behalf of, and subject to the supervision of the Board
of Directors of, the Company, all as provided herein; and
WHEREAS, the Advisor is willing to render such services, subject to the
supervision of the Board of Directors, on the terms and conditions hereinafter
set forth;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements contained herein, the parties hereto agree as follows:
1. DEFINITIONS. As used in this Agreement, the following terms have the
definitions hereinafter indicated:
Acquisition Expenses. Those expenses, including but not limited to
legal fees and expenses, travel and communications expenses, costs of
appraisals, nonrefundable option payments on Property not acquired,
accounting fees and expenses, title insurance and miscellaneous expenses,
related to selection and acquisition of Properties, whether or not
acquired. Acquisition Expenses shall not include Acquisition Fees.
Acquisition Fees. The total of all fees and commissions (including any
interest thereon) paid by any party to any party in connection with the
making or investing in mortgage
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loans or the purchase, development or construction of Properties by the
Company. A Development Fee or a Construction Fee paid to a Person not
affiliated with the Sponsor in connection with the actual development or
construction of a project after acquisition of the Property by the Company
shall not be deemed an Acquisition Fee. Included in the computation of such
fees or commissions shall be any real estate commission, selection fee,
development fee (other than as described above), non-recurring management
fee, mortgage placement fee, lease-up fee, transaction structuring fee or
any fee of a similar nature, however designated. Acquisition Fees include
Subordinated Acquisition Fees. Acquisition Fees shall not include
Acquisition Expenses.
Adjusted Investor Capital. As of any date, the Initial Investor Capital
for such date reduced by any distributions on or prior to such date deemed
by the Board to be from Cash from Sales and Financings, but only to the
extent such distributions exceed the amount necessary to satisfy any
accrued but unpaid portion of the Preferred Return not satisfied by
distributions of cash generated through operations through the date Cash
from Sales or Financings are distributed by the Company.
Advisor. Xxxxx Property Advisors, a limited partnership organized under
the laws of the Commonwealth of Pennsylvania.
Affiliate. An Affiliate of another Person shall mean (i) any Person
directly or indirectly owning, controlling, or holding, with power to vote
ten percent or more of the outstanding voting securities of such other
Person, (ii) any Person ten percent or more of whose outstanding voting
securities are directly or indirectly owned, controlled, or held, with
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, or (iv) any legal entity for which such
Person acts as an executive officer, director, trustee or general partner.
Appraised Value. Value according to an appraisal made by an Independent
Appraiser.
Articles of Incorporation. Articles of Incorporation of the Company
under the General Corporation Law of Maryland, as amended from time to
time, pursuant to which the Company is organized.
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Asset Management Fee. The Asset Management Fee as defined in Section
9(a) hereof.
Average Invested Assets. Except as otherwise set forth in the
penultimate sentence in Section 9(a) and (b) hereof, for a specified
period, the average of the aggregate book value of the assets of the
Company invested, directly or indirectly, in Properties and in 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. For the purpose of
calculating the Asset Management Fee and the Performance Fee, Average
Invested Assets shall be calculated in accordance with Section 9(a) and
9(b) hereof, respectively.
Board or Board of Directors. The Board of Directors of the Company.
Bylaws. The Bylaws of the Company.
Cash from Financings. Net cash proceeds realized by the Company from
the financing of Properties or the refinancing of any Company indebtedness.
Cash from Sales. Net cash proceeds realized by the Company from the
sale, exchange or other disposition of any of its assets after deduction of
all expenses incurred in connection therewith. Cash from Sales shall not
include Cash from Financings.
Cash from Sales and Financings. The total sum of Cash from Sales and
Cash from Financings.
Cause. With respect to the termination of this Agreement, fraud,
criminal conduct, willful misconduct or willful or negligent breach of
fiduciary duty by the Advisor or a breach of this Agreement by the Advisor.
Change of Control. A change of control of the Company of a nature that
would be required to be reported in response to the disclosure requirements
of Schedule 14A of Regulation 14A promulgated under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), as enacted and in force on
the date hereof, whether or not the Company is then subject to such
reporting requirements; provided, however, that, without limitation, a
Change of Control shall be deemed to have occurred if: (i) any "person"
(within the meaning of Section
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13(d) of the Exchange Act, as enacted and in force on the date hereof)
is or becomes the "beneficial owner" (as that term is defined in Rule
13d-3, as enacted and in force on the date hereof, under the Exchange Act)
of securities of the Company representing 8.5% or more of the combined
voting power of the Company's securities then outstanding; (ii) there
occurs a merger, consolidation or other reorganization of the Company which
is not approved by the Board of Directors; (iii) there occurs a sale,
exchange, transfer or other disposition of substantially all of the assets
of the Company to another entity, which disposition is not approved by the
Board of Directors; or (iv) there occurs a contested proxy solicitation of
the Shareholders of the Company that results in the contesting party
electing candidates to a majority of the Board of Directors' positions next
up for election.
Code. Internal Revenue Code of 1986, as amended.
Company. Corporate Property Associates 14 Incorporated, a corporation
organized under the laws of the State of Maryland.
Competitive Real Estate Commission. The real estate or brokerage
commission paid in a competitive market for the purchase or sale of a
property that is reasonable, customary and competitive in light of the
size, type and location of the property.
Construction Fee. A fee or other remuneration for acting as general
contractor and/or construction manager to construct improvements, supervise
and coordinate projects or to provide major repairs or rehabilitation on a
Property.
Contract Purchase Price. The amount actually paid for or allocated (as
of the date of purchase) to the purchase, development, construction or
improvement of a Property, exclusive of Acquisition Fees and Acquisition
Expenses.
Contract Sales Price. The total consideration received by the Company
for the sale of a Property.
Cumulative Return. For the period for which the calculation is being
made, the percentage resulting from dividing (A) the total Dividends paid
on each Dividend payment date during such period (not including Dividends
paid out of Cash from Sales and Financings), by (B) the product of (i) the
average Adjusted Investor Capital for such period
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(calculated on a daily basis), and (ii) the number of years (including
fractions thereof) elapsed during such period.
Development Fee. A fee for the packaging of a Property including
negotiating and approving plans, and undertaking to assist in obtaining
zoning and necessary variances and necessary financing for the specific
Property, either initially or at a later date.
Directors. The persons holding such office, as of any particular time,
under the Articles of Incorporation, whether they be the directors named
therein or additional or successor directors.
Dividends. Dividends declared by the Board.
Equity Interest. The stock of or other interests in, or warrants or
other rights to purchase the stock of or other interests in, any entity
that has borrowed money from the Company or that is a tenant of the Company
or that is a parent or controlling Person of any such borrower or tenant.
Final Closing Date. The last date on which purchasers of Shares offered
pursuant to the Prospectus are issued such Shares.
Good Reason. With respect to the termination of this Agreement, (i) any
failure to obtain a satisfactory agreement from any successor to the
Company to assume and agree to perform the Company's obligations under this
Agreement; or (ii) any material breach of this Agreement of any nature
whatsoever by the Company.
Gross Offering Proceeds. The aggregate purchase price of Shares sold
pursuant to the Offering.
Independent Appraiser. A qualified appraiser of real estate as
determined by the Board, who is not affiliated, directly or indirectly,
with the Company, the Advisor or their respective Affiliates. Membership in
a nationally recognized appraisal society such as the American Institute of
Real Estate Appraisers or the Society of Real Estate Appraisers shall be
conclusive evidence of such qualification.
Independent Director. A Director of the Company who is not associated
and has not been associated within the last two years, directly or
indirectly, with the Sponsor or the Advisor. A Director shall be deemed to
be associated with
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the Sponsor or the Advisor if he or she (i) owns an interest in, is
employed by, has any material business or professional relationship with,
or is an officer or director of, the Sponsor, the Advisor, or any of their
Affiliates, other than as a director or trustee or officer of not more than
two other REITs organized by the Sponsor or advised by the Advisor, or (ii)
performs services, other than as a Director, for the Company. 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 the Sponsor, the Advisor, any of their Affiliates or the Company.
Individual. Any natural person and those organizations treated as
natural persons in Section 542(a) of the Code.
Initial Closing Date. The first date on which purchasers of Shares
offered pursuant to the Prospectus are issued such Shares.
Initial Investor Capital. The total amount of capital invested from
time to time by Shareholders (computed at a rate of $10 per Share for every
Share including those Shares for which reduced selling commissions were
paid in connection with their purchase from the Company). Upon completion
of the Offering, the Initial Investor Capital shall be equal to the Gross
Offering Proceeds.
Loan Refinancing Fee. The Loan Refinancing Fee as defined in Section
9(e) hereof.
Loans. The notes and other evidences of indebtedness or obligations
acquired or entered into by the Company as lender which are secured or
collateralized by personal property, or fee or leasehold interests in real
estate or other assets, including but not limited to first or subordinate
mortgage loans, construction loans, development loans, loans secured by
capital stock or any other assets or form of equity interest and any other
type of loan or financial arrangement, such as providing or arranging for
letters of credit, providing guarantees of obligations to third parties, or
providing commitments for loans. The term "Loans" shall not include leases
which are not recognized as leases for Federal income tax reporting
purposes.
Nasdaq. The national automated quotation system operated by the
National Association of Securities Dealers, Inc.
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Net Income. For any period, the total revenues applicable to such
period, less the total expenses applicable to such period excluding
additions to reserves for depreciation, bad debts or other similar non-cash
reserves; provided, however, Net Income for purposes of calculating total
allowable Operating Expenses shall exclude the gain from the sale of the
Company's assets.
Offering. The offering of Shares pursuant to the Prospectus.
Operating Expenses. All operating, general and administrative expenses
paid or incurred by the Company, as determined under generally accepted
accounting principles, except the following: (i) interest and discounts and
other cost of borrowed money; (ii) taxes (including state and Federal
income tax, property taxes and assessments, franchise taxes and taxes of
any other nature); (iii) expenses of raising capital, including
Organization and Offering Expenses, printing, engraving, and other
expenses, and taxes incurred in connection with the issuance, distribution,
transfer, registration and stock exchange listing of the Company's Shares
and Securities; (iv) expenses connected with the acquisition, disposition,
ownership and operation of real estate interests, mortgage loans, or other
property, including the costs of foreclosure, insurance premiums, legal
services, brokerage and sales commissions, maintenance, repair and
improvement of property; (v) the Acquisition Fee or Subordinated
Disposition Fee payable to the Advisor or any other party; and (vi)
non-cash items, such as depreciation, amortization, depletion, and
additions to reserves for depreciation, amortization, depletion, losses and
bad debts. Notwithstanding anything herein to the contrary, Operating
Expenses shall include the Asset Management Fee, the Performance Fee and
the Loan Refinancing Fee.
Organization and Offering Expenses. Those expenses payable by the
Company in connection with the formation, qualification and registration of
the Company and in marketing and distributing Shares, including, but not
limited to, (i) the preparing, printing, filing and delivery of the
Registration Statement and the Prospectus (including any amendments thereof
or supplements thereto) and the preparing and printing of contractual
agreements between the Company and the Sales Agent and the Selected Dealers
(including copies thereof), (ii) the preparing and printing of the Articles
of Incorporation and Bylaws, solicitation material and related documents
and the filing and/or recording of such
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documents necessary to comply with the laws of the State of Maryland
for the formation of a corporation and thereafter for the continued good
standing of a corporation, (iii) the qualification or registration of the
Shares under state securities or "Blue Sky" laws, (iv) any escrow
arrangements, including any compensation to an escrow agent, (v) the filing
fees payable to the SEC and to the National Association of Securities
Dealers, Inc., (vi) reimbursement for the reasonable and identifiable
out-of-pocket expenses of the Sales Agent and the Selected Dealers,
including the cost of their counsel, (vii) the fees of the Company's
counsel and independent public accountants, (viii) all advertising expenses
incurred in connection with the Offering, including the cost of all sales
literature and the costs related to investor and broker-dealer sales and
information meetings and marketing incentive programs, and (ix) selling
commissions, marketing fees, incentive fees and wholesaling fees and
expenses incurred in connection with the sale of the Shares.
Performance Fee. The Performance Fee as defined in Section 9(d).
Person. An Individual, corporation, partnership, joint venture,
association, company, trust, bank, or other entity, or government or any
agency or political subdivision of a government.
Preferred Return. A Cumulative Return of 6% computed from the Initial
Closing Date through the date as of which such amount is being calculated.
Property or Properties. The Company's partial or entire interest in
real property (including leasehold interests) and personal or mixed
property connected therewith.
Property Management Fee. The Property Management Fee as defined in
Section 9(f) hereof.
Prospectus. The final prospectus of the Company pursuant to which the
Company will offer up to 30,000,000 Shares, as the same may at any time and
from time to time be amended or supplemented after the effective date of
the Registration Statement.
Registration Statement. The Registration Statement on Form S-11 of
which the Prospectus is a part.
REIT. A real estate investment trust, as defined in Sections 856-860 of
the Code.
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Sales Agent. Xxxxx Financial Corporation.
Securities. Any stock, shares (other than currently outstanding Shares
and subsequently issued shares of common stock of the Company), voting
trust certificates, bonds, debentures, notes or other evidences of
indebtedness, secured or unsecured, convertible, subordinated or otherwise
or in general any instruments commonly known as "securities" or any
certificate of interest, shares or participation in temporary or interim
certificates for receipts (or, guarantees of, or warrants, options or
rights to subscribe to, purchase or acquire any of the foregoing), which
subsequently may be issued by the Company.
Selected Dealer Fee. A due diligence and management fee payable to
Selected Dealers by the Company (through the Sales Agent) of up to 1% of
the price of each Share sold by those Selected Dealers to which the Sales
Agent agrees to pay such due diligence and management fee.
Selected Dealers. Broker-dealers who are members of the National
Association of Securities Dealers, Inc. and who have executed an agreement
with the Sales Agent in which the Selected Dealers agree to participate
with the Sales Agent in the Offering.
Shareholders. Those Persons who at any particular time are shown as
holders of record of Shares on the books and records of the Company.
Shares. All of the shares of common stock of the Company, $.001 par
value, and all other shares of common stock of the Company issued in the
Offering or any subsequent offering.
Sponsor. W.P. Xxxxx & Co., Inc. and any other person directly or
indirectly instrumental in organizing, wholly or in part, the Company or
any person who will manage or participate in the management of the Company,
and any Affiliate of any such person. Sponsor does not include a person
whose only relationship to the Company is that of an independent property
manager and whose only compensation is as such. Sponsor also does not
include wholly independent third parties such as attorneys, accountants and
underwriters whose only compensation is for professional services.
Subordinated Acquisition Fee. The Subordinated Acquisition Fee as
defined in Section 9(d).
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Subordinated Disposition Fee. The Subordinated Disposition Fee as
defined in Section 9(g) hereof.
Subordinated Incentive Fee. The Subordinated Incentive Fee as defined
in Section 9(h) hereof.
Termination Date. The effective date of any termination of this
Agreement.
Termination Fee. An amount equal to 15% of the amount, if any, by which
(1) the Appraised Value of the Properties on the Termination Date, less the
amount of all indebtedness secured by such Properties, exceeds (2) the
total of the Initial Investor Capital on the Final Closing Date plus an
amount equal to the Preferred Return through the Termination Date reduced
by the total Dividends paid by the Company from its inception through the
Termination Date.
Total Property Cost. With regard to any Property, an amount equal to
the sum of the Contract Purchase Price of such Property plus the
Acquisition Fees paid in connection with such Property.
2%/25% Guidelines. The requirement that, in any 12-month period, the
Operating Expenses not exceed the greater of 2% of the Company's Average
Invested Assets during such 12-month period or 25% of the Company's Net
Income over the same 12-month period.
Underlying Real Property. Property serving as collateral for any Loan.
Valuation. An estimate of value of the assets of the Company as
determined by a Person approved by the Independent Directors, which Person
shall be independent of the Company and the Advisor.
2. APPOINTMENT. The Company hereby appoints the Advisor to serve as its
advisor on the terms and conditions set forth in this Agreement, and the Advisor
hereby accepts such appointment.
3. DUTIES OF THE ADVISOR. The Advisor undertakes to use its best
efforts to present to the Company potential investment opportunities and to
provide a continuing and suitable investment program consistent with the
investment objectives and policies of the Company as determined and adopted from
time to time by the Directors. In performance of this undertaking,
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subject to the supervision of the Directors and consistent with the provisions
of the Registration Statement, Articles of Incorporation and Bylaws of the
Company, the Advisor shall, either directly or by engaging an Affiliate:
(a) serve as the Company's investment and financial advisor
and provide research and economic and statistical data in connection
with the Company's assets and investment policies;
(b) provide the daily management of the Company and perform
and supervise the various administrative functions reasonably necessary
for the management of the Company;
(c) investigate, select, and, on behalf of the Company, engage
and conduct business with such Persons as the Advisor deems necessary
to the proper performance of its obligations hereunder, including but
not limited to consultants, accountants, correspondents, lenders,
technical advisors, attorneys, brokers, underwriters, corporate
fiduciaries, escrow agents, depositaries, custodians, agents for
collection, insurers, insurance agents, banks, builders, developers,
property owners, mortgagors, and any and all agents for any of the
foregoing, including Affiliates of the Advisor, and Persons acting in
any other capacity deemed by the Advisor necessary or desirable for the
performance of any of the foregoing services, including but not limited
to entering into contracts in the name of the Company with any of the
foregoing;
(d) consult with the officers and Directors of the Company and
assist the Directors in the formulation and implementation of the
Company's financial policies, and, as necessary, furnish the Directors
with advice and recommendations with respect to the making of
investments consistent with the investment objectives and policies of
the Company and in connection with any borrowings proposed to be
undertaken by the Company;
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(e) subject to the provisions of Sections 3(g) and 4 hereof,
(i) locate, analyze and select potential investments in Property and
Loans; (ii) structure and negotiate the terms and conditions of
transactions pursuant to which investments in Properties and Loans will
be made, purchased or acquired by the Company; (iii) make investments
in Property on behalf of the Company in compliance with the investment
objectives and policies of the Company; (iv) arrange for financing, and
refinancing and make other changes in the asset or capital structure
of, and dispose of, reinvest the proceeds from the sale of or otherwise
deal with the investments in Property and Loans; and (v) enter into
leases and service contracts for Properties and, to the extent
necessary, perform all other operational functions for the maintenance
and administration of such Properties;
(f) provide the Directors with periodic reports regarding
prospective investments in Properties and Loans;
(g) obtain the prior approval of the Directors (including a
majority of the Independent Directors) for any and all investments in
Property which do not meet all of the requirements set forth in Section
4(b) hereof and obtain the prior approval of the Independent Directors
for all investments in Loans;
(h) negotiate on behalf of the Company with banks or lenders
for loans to be made to the Company, and negotiate on behalf of the
Company with investment banking firms and broker-dealers or negotiate
private sales of Shares and Securities or obtain loans for the Company,
but in no event in such a way so that the Advisor shall be acting as
broker-dealer or underwriter; and provided, further, that any fees and
costs payable to third parties incurred by the Advisor in connection
with the foregoing shall be the responsibility of the Company;
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(i) obtain reports (which may be prepared by the Advisor or
its Affiliates), where appropriate, concerning the value of investments
or contemplated investments of the Company in Property and/or Loans;
(j) obtain for, or provide to, the Company such services as
may be required in acquiring, managing and disposing of Company
Property and/or Loans, including, but not limited to; (i) the
negotiation, making and servicing of Loans; (ii) the disbursement and
collection of Company monies; (iii) the payment of debts of and
fulfillment of the obligations of the Company; and (iv) the handling,
prosecuting and settling of any claims of or against the Company,
including, but not limited to, foreclosing and otherwise enforcing
mortgages and other liens securing the Loans;
(k) from time to time, or at any time reasonably requested by
the Directors, make reports to the Directors of its performance of
services to the Company under this Agreement;
(l) communicate on behalf of the Company with Shareholders as
required to satisfy the reporting and other requirements of any
governmental bodies or agencies to Shareholders and third parties and
otherwise as requested by the Company;
(m) provide or arrange for administrative services and items,
legal and other services, office space, office furnishings, personnel
and other overhead items necessary and incidental to the Company's
business and operations;
(n) provide the Company with such accounting data and any
other information so requested concerning the investment activities of
the Company as shall be required to prepare and to file all periodic
financial reports and returns required to be filed with the Securities
and Exchange Commission and any other regulatory agency, including
annual financial statements;
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(o) maintain the books and records of the Company;
(p) supervise the performance of such ministerial and
administrative functions as may be necessary in connection with the
daily operations of the Properties and Loans;
(q) provide the Company with all necessary cash management
services;
(r) do all things necessary to assure its ability to render
the services described in this Agreement;
(s) perform such other services as may be required from time
to time for management and other activities relating to the assets of
the Company as the Advisor shall deem advisable under the particular
circumstances;
(t) deliver to or maintain on behalf of the Company copies of
all appraisals obtained in connection with investments in Properties
and Loans; and
(u) notify the Board of all proposed transactions before they
are completed.
4. AUTHORITY OF ADVISOR.
(a) Pursuant to the terms of this Agreement (including the
restrictions included in this Section 4 and in Section 7 hereof), and subject to
the continuing and exclusive authority of the Directors over the management of
the Company, the Directors hereby delegate to the Advisor the authority to (1)
locate, analyze and select investment opportunities, (2) structure the terms and
conditions of transactions pursuant to which investments will be made or
acquired for the Company, (3) acquire Property and make Loans in compliance with
the investment objectives and policies of the Company, (4) arrange for financing
or refinancing, or make changes in the asset or capital structure of, and
dispose of or otherwise deal with, Property and Loans, (5) enter into leases and
service contracts for Properties, and perform other property level operations,
(6) oversee non-affiliated property managers and other non-affiliated Persons
who perform services for
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the Company, and (7) undertake accounting and other record-keeping functions at
the Property level.
(b) Notwithstanding the foregoing, any investment in Property,
including any acquisition of any Property by the Company (as well as any
financing acquired by the Company in connection with such acquisition), will
require the prior approval of the Directors unless, prior to completion of any
such transaction, the Advisor provides the Company with:
(i) an appraisal for the Property indicating that the
Total Property Cost of the Property does not exceed the
Appraised Value of the Property; and
(ii) a representation from the Advisor that the
Property, in conjunction with the Company's other investments
and proposed investments, at the time the Company is committed
to purchase the Property, is reasonably expected to fulfill
the Company's investment objectives and policies as
established by the Directors and then in effect.
(c) If a transaction requires approval by the Independent
Directors, the Advisor will deliver to the Independent Directors all documents
required by them to properly evaluate the proposed investment in such Property
or such Loan.
Notwithstanding the foregoing, the prior approval of the
Directors, including a majority of the Independent Directors, will be required
for transactions involving (a) investments in Properties in respect of which all
of the requirements specified in Section 4(b) hereof have not be satisfied, (b)
investments in Properties made through joint venture arrangements with
Affiliates of the Advisor, (c) investments in Properties which are not
contemplated by the terms of the Prospectus, (d) transactions that present
issues which involve conflicts of interest for the Advisor (other than conflicts
involving the payment of fees or the reimbursement of expenses), (e) investments
in equity securities, and (f) the lease of assets to the Sponsor, any Director
or the Advisor.
The Directors may, at any time upon the giving of notice to
the Advisor, modify or revoke the authority set forth in this Section 4. If and
to the extent the Directors so modify or revoke the authority contained herein,
the Advisor shall henceforth
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submit to the Directors for prior approval such proposed transactions involving
investments in Property as thereafter require prior approval, provided however,
that such modification or revocation shall be effective upon receipt by the
Advisor and shall not be applicable to investment transactions to which the
Advisor has committed the Company prior to the date of receipt by the Advisor of
such notification.
5. BANK ACCOUNTS. The Advisor may establish and maintain one
or more bank accounts in its own name for the account of the Company or in the
name of the Company and may collect and deposit into any such account or
accounts, and disburse from any such account or accounts, any money on behalf of
the Company, provided that no funds shall be commingled with the funds of the
Advisor; and the Advisor shall from time to time render appropriate accountings
of such collections and payments to the Directors and to the auditors of the
Company.
6. RECORDS; ACCESS. The Advisor shall maintain appropriate
records of all its activities hereunder and make such records available for
inspection by the Directors and by counsel, auditors and authorized agents of
the Company, at any time or from time to time during normal business hours. The
Advisor shall at all reasonable times have access to the books and records of
the Company.
7. LIMITATIONS ON ACTIVITIES. Anything else in this Agreement
to the contrary notwithstanding, the Advisor shall refrain from taking any
action which, in its sole judgment made in good faith, would adversely affect
the status of the Company as a REIT, subject the Company to regulation under the
Investment Company Act of 1940, would violate any law, rule, regulation or
statement of policy of any governmental body or agency having jurisdiction over
the Company, its Shares or its Securities, or otherwise not be permitted by the
Articles of Incorporation or Bylaws, except if such action shall be ordered by
the Directors, in which case the Advisor shall notify promptly the Directors of
the Advisor's judgment of the potential impact of such action and shall refrain
from taking such action until it receives further clarification or instructions
from the Directors. In such event the Advisor shall have no liability for acting
in accordance with the specific instructions of the Directors so given.
Notwithstanding the foregoing, the Advisor, its partners and employees, and
partners, stockholders, directors and officers of the Advisor's partners shall
not be liable to the Company, or to the Directors or Shareholders for any act or
omission by the Advisor, its partners or employees, or partners, stockholders,
directors or officers of the Advisor's partners except as provided in Sections
20 and 22 hereof.
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8. RELATIONSHIP WITH DIRECTORS. Partners and employees of the
Advisor or partners in the Advisor or any corporate parents of a partner, or
directors, officers or stockholders of any partner or corporate parent of a
partner may serve as a Director and as officers of the Company, except that no
partner in or employee of the Advisor or its Affiliates who also is a Director
or officer of the Company shall receive any compensation from the Company for
serving as a Director or officer other than for reasonable reimbursement for
travel and related expenses incurred in attending meetings of the Directors.
9. FEES.
(a) ASSET MANAGEMENT FEE. The Company shall pay to the Advisor
as compensation for the advisory services rendered to the Company hereunder an
amount equal to .5% per annum of the Average Invested Assets of the Company (the
"Asset Management Fee") calculated as set forth below. The Asset Management Fee
will be calculated monthly, beginning with the month in which the Company first
makes an investment in Properties or Loans, on the basis of one-twelfth of .5%
of the Average Invested Assets during the previous month, computed as a daily
average. The Asset Management Fee calculated with respect to each month shall be
payable monthly on the last day of such month, or the first business day
following the last day of such month. If at the end of any fiscal quarter, the
Company's Operating Expenses exceed the 2%/25% Guidelines over the immediately
preceding 12 months, payment of the Asset Management Fee will be withheld to the
extent necessary to cause the Company to satisfy the 2%/25% Guidelines. Any
portion of the Asset Management Fee not paid due to the Company's failure to
satisfy the 2%/25% Guidelines shall be paid at the end of the next fiscal
quarter to the extent such payment would not cause the Company to fail to
satisfy the 2%/25% Guidelines if such payment were to be included in the
Company's Operating Expenses for the 12 months preceding such payment. For
purposes of determining the amount of the Asset Management Fee, the Average
Invested Assets will be, in any particular month, (i) for all months during the
period from inception of the Company through December 31, 2002, the average of
the aggregate book value of the assets of the Company invested, directly or
indirectly, in equity interests, in Properties and in Loans secured by real
estate, before reserves for depreciation or bad debts or other similar non-cash
reserves, all as shown on the books of the Company on each day of such month and
(ii) for all months beginning after December 31, 2002, the estimated value of
all of the Properties determined in accordance with the most recently conducted
Valuation, plus the principal balance of all Loans. Any part of the Asset
Management Fee that
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has been subordinated pursuant to this subsection (a) shall not be deemed earned
until such time as payable hereunder.
(b) PERFORMANCE FEE. In addition to the Asset Management Fee
described in Section 9(a) above, the Company shall also pay to the Advisor as
compensation for the advisory services rendered to the Company hereunder an
amount equal to .5% per annum of the Average Invested Assets of the Company (the
"Performance Fee") calculated as set forth below. The Performance Fee will be
calculated monthly, beginning with the month in which the Company first makes an
investment in Properties or Loans, on the basis of one-twelfth of .5% of the
Average Invested Assets during the previous month, computed as a daily average.
The Performance Fee calculated with respect to each month shall be payable on a
quarterly basis on the last day of the first month of the immediately following
fiscal quarter, but only if the Company has paid Dividends to Shareholders in an
amount sufficient to pay the Preferred Return for the period beginning with the
Initial Closing Date and ending on the last day of the most recently completed
fiscal quarter. Any portion of the Performance Fee not paid due to the Company's
failure to pay the Preferred Return shall be paid by the Company, to the extent
it is not restricted by the 2%/25% Guidelines as described below, at the end of
the next fiscal quarter through which the Company has paid the Preferred Return.
If at the end of any fiscal quarter, the Company's Operating Expenses exceed the
2%/25% Guidelines over the immediately preceding 12 months, payment of the
Performance Fee will be withheld to the extent necessary to cause the Company to
satisfy the 2%/25% Guidelines. Any portion of the Performance Fee not paid due
to the Company's failure to satisfy the 2%/25% Guidelines shall be paid at the
end of the next fiscal quarter to the extent such payment would not cause the
Company to fail to satisfy the 2%/25% Guidelines if such payment were to be
included in the Company's Operating Expenses for the 12 months preceding such
payment. For purposes of determining the amount of the Performance Fee, the
Average Invested Assets will be, in any particular month, (i) for all months
during the period from inception of the Company through December 31, 2002, the
average of the aggregate book value of the assets of the Company invested,
directly or indirectly, in equity interests, in Properties and in Loans secured
by real estate, before reserves for depreciation or bad debts or other similar
non-cash reserves, all as shown on the books of the Company on each day of such
month and (ii) for all months beginning after December 31, 2002, the estimated
value of all of the Company's Properties determined in accordance with the most
recently conducted Valuation, plus the principal balance of all Loans. Any part
of the Performance Fee that has been subordinated pursuant to this subsection
(b) shall not be deemed earned until such time as payable hereunder.
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(c) ACQUISITION FEE. The Advisor may receive as compensation
for services rendered in connection with the investigation, selection and
acquisition (by purchase, investment or exchange) of Property an Acquisition Fee
payable by the seller of such Property or the Company. The total Acquisition
Fees (not including Subordinated Acquisition Fees) payable to the Advisor and
its Affiliates plus Acquisition Fees (not including Subordinated Acquisition
Fees) payable by the Company to any other party may not exceed 2.5% of the
aggregate Total Property Cost of all Properties purchased by the Company with
proceeds from the Offering (calculated after all such proceeds are invested)
unless a majority of the Directors (including a majority of the Independent
Directors) not otherwise interested in any transaction approve the excess as
being commercially competitive, fair and reasonable to the Company. The total
amount of Acquisition Fees (including Subordinated Acquisition Fees and any
interest thereon) and Acquisition Expenses paid by the Company may not exceed
six percent (6%) of the aggregate Contract Purchase Price of all Properties
purchased by the Company unless a majority of the Board (including a majority of
the Independent Directors) not otherwise interested in any transaction approves
fees in excess of this limit as being commercially competitive, fair and
reasonable to the Company. No Acquisition Fees will be payable on the
reinvestment of proceeds from the sale or refinancing of Properties.
(d) SUBORDINATED ACQUISITION FEE. In addition to the
Acquisition Fee described in Section 9(c) above, the Advisor may receive as
additional compensation for services rendered in connection with the
investigation, selection and acquisition (by purchase, investment or exchange)
of a Property a Subordinated Acquisition Fee payable by the seller of such
Property or the Company. The total Subordinated Acquisition Fees payable to the
Advisor and its Affiliates plus Subordinated Acquisition Fees payable by the
Company to any other party may not exceed 2.0% of the aggregate Total Property
Cost of all Properties purchased by the Company with proceeds from the Offering
(calculated after all such proceeds are invested) unless a majority of the
Directors (including a majority of the Independent Directors) not otherwise
interested in any transaction approve the excess as being commercially
competitive, fair and reasonable to the Company. The unpaid portion of the
Subordinated Acquisition Fee with respect to any Property shall bear interest at
the rate of [6%] per annum from the date of acquisition of such Property until
such portion is paid. Subject to the following sentence, the Subordinated
Acquisition Fee with respect to any Property shall be payable in equal annual
installments on January 1 of each of the eight calendar years following the
first anniversary of the date such
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Property was purchased. Accrued interest shall also be payable on such dates.
The portion of the Subordinated Acquisitions Fees, and accrued interest thereon,
otherwise payable for any year on January 1 of the following year shall be
payable only if the Company has paid Dividends to Shareholders in an amount
sufficient to pay the Preferred Return for the period beginning with the Initial
Closing Date and ending on the last day of such year. Any portion of the
Subordinated Acquisitions Fees, and accrued interest thereon, not paid due to
the Company's failure to pay the Preferred Return for the most recently
completed fiscal year shall be paid by the Company on January 1 following the
fiscal year through which the Company has paid the Preferred Return. In the
event that the Shares are listed for trading on a national securities exchange
or are included for quotation on Nasdaq, all Subordinated Acquisition Fees, and
accrued interest thereon, shall be due and payable on the date of such listing
or inclusion. No Subordinated Acquisition Fees will be payable on the
reinvestment of proceeds from the sale or refinancing of Properties.
(e) LOAN REFINANCING FEE. The Company shall pay to the Advisor
for all qualifying loan refinancings of Properties a Loan Refinancing Fee in the
amount of 1% of the principal amount of any loan secured by a Property. Any Loan
Refinancing Fee shall be due and payable upon the funding of the related
mortgage loan or as soon thereafter as is reasonably practicable. A refinancing
will qualify for a Loan Refinancing Fee only if (i) any new loan is approved by
the Independent Directors as being in the best interests of the Company, (ii)
payment of the fee is approved by a majority of the Independent Directors, and
(iii) the terms of the new loan represent an improvement over the terms of the
refinanced loan, the new loan materially increases the total debt secured by a
particular Property or the maturity date of the refinanced loan (which must have
a term of five years or more) is less than one year from the date of the
refinancing.
(f) PROPERTY MANAGEMENT FEE. The Advisor may cause the Company
to pay Property Management Fees for property management services rendered by the
Advisor or its Affiliates in connection with Properties acquired directly or
through foreclosure. The Advisor or an Affiliate will provide property
management services only if a Property becomes vacant or requires more active
management than contemplated at the time such Property is acquired. In either
event, the Company, by approval of the Directors (including a majority of the
Independent Directors), may engage the Advisor or an Affiliate, subject to such
Advisor's or such Affiliate's qualifying as an "independent contractor" pursuant
to Section 856(d)(3) of the Code, to provide property management services. If
such services are rendered by the Advisor or an Affiliate, the maximum Property
Management Fees which may be
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paid to the Advisor or an Affiliate will be 6% of gross revenues from commercial
Properties and 5% of gross revenues from residential Properties, plus reimbursed
expenses, paid monthly, where such entity performs property management and
leasing, re-leasing and leasing related services, or 3% of the gross revenues of
the Property if only property management services are performed by such entity.
Property Management Fees payable to the Advisor or an Affiliate for an
industrial or commercial Property leased on a long-term (defined as at least ten
years, excluding renewals) triple net basis, may not exceed 1% of the gross
revenues from such Property, except for a one-time initial leasing fee equal to
3% of total base rents payable for the first five years of the lease, payable in
five equal annual installments. Such fees to the Advisor or its Affiliate cannot
exceed the usual and customary amounts charged for similar services in the same
geographic area.
(g) SUBORDINATED DISPOSITION FEE. If the Advisor or an
Affiliate provides a substantial amount of the services (as determined by a
majority of the Independent Directors) in the sale of a Property, the Advisor or
an Affiliate shall receive a Subordinated Disposition Fee equal to the lesser of
(i) 50% of the Competitive Real Estate Commission and (ii) 3% of the Contract
Sales Price of such Property. The Subordinated Disposition Fee will be paid only
if Shareholders have received total Dividends in an amount equal to 100% of
Initial Investor Capital plus an amount sufficient to pay a Cumulative Return of
6% from the Initial Closing Date through the date payment is made. To the extent
that Subordinated Disposition Fees are not paid by the Company on a current
basis due to the foregoing limitation, the unpaid fees will be accrued and paid
at such time as the limitation has been satisfied. The Subordinated Disposition
Fee may be paid in addition to real estate commissions paid to non-Affiliates,
provided that the total real estate commissions paid to all Persons by the
Company shall not exceed an amount equal to the lesser of (i) 6% of the Contract
Sales Price of a Property or (ii) the Competitive Real Estate Commission. In the
event this Agreement is terminated prior to such time as the Shareholders have
received total Dividends in an amount equal to 100% of Initial Investor Capital
plus an amount sufficient to pay a Cumulative Return of 6% from the Initial
Closing Date through the date of termination of this Agreement, an appraisal of
the Properties then owned by the Company shall be made and the Subordinated
Disposition Fee on Properties previously sold will be deemed earned if the
Appraised Value of the Properties then owned by the Company plus total Dividends
received prior to the date of termination of this Agreement is equal to 100% of
Initial Investor Capital plus an amount sufficient to pay a Cumulative Return of
6% from the Initial Closing Date through the date of termination of this
Agreement. In the event the Company's Shares are listed on a
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national securities exchange or included for quotation on Nasdaq and, at the
time of such listing, the Advisor has accrued a Subordinated Disposition Fee
which has not been paid, for purposes of determining whether the subordination
conditions have been satisfied, Shareholders will be deemed to have received a
Dividend in an amount equal to the product of the total number of outstanding
Shares and the average of the closing prices (or average bid and asked quotes)
of the Shares over a period, beginning 180 days after listing of the Shares, of
30 days during which the Shares are traded.
(h) SUBORDINATED INCENTIVE FEE. The Subordinated Incentive Fee
shall be payable to the Advisor in an amount equal to 15% of Cash from Sales and
Financings distributed to the Shareholders after the Shareholders have received
total Dividends in an amount equal to 100% of Initial Investor Capital plus an
amount sufficient to pay the Preferred Return from the Initial Closing Date
through the date on which each distribution out of Cash From Sales and
Financings is made. In the event the Shares are listed on a national securities
exchange or included for quotation on Nasdaq, the Advisor shall be paid the
Subordinated Incentive Fee in an amount equal to 12% of the excess (the "Excess
Return") of (A) the sum (the "Hypothetical Return") of (i) the market value of
the Company, measured by taking the average closing price or bid and asked
price, as the case may be, over a period, beginning 180 days after listing of
the Shares, of 30 days during which the Shares are traded (the "Market Value")
plus (ii) the total of the Dividends paid to Shareholders from the Initial
Closing Date until the date the Shares are listed or included for quotation over
(B) the sum of (i) 100% of Initial Investor Capital and (ii) the total amount of
the Dividends required to be paid to Shareholders in order to pay the Preferred
Return through the date the Market Value is determined. The Subordinated
Incentive Fee shall be increased to 13% of the Excess Return if the Hypothetical
Return is an amount sufficient to return to investors 100% of Initial Investor
Capital plus a cumulative return of 8% or more but less than 9%; 14% if the
Hypothetical Return is an amount sufficient to return 100% of Initial Investor
Capital plus a cumulative return of 9% or more but less than 10%; and 15% if the
Hypothetical Return is an amount sufficient to return 100% of Initial Investor
Capital plus a cumulative return of 10% or more. The Cumulative return shall be
measured from the Initial Closing Date through the last day on which the Market
Value is determined. The fee may only be paid if the average closing price of
the Shares over any consecutive three-month period ending within 24 months of
the date of listing is sufficient, when added to Dividends previously paid from
the Initial Closing Date through the end of such three-month period, to return
100% of Initial Investor Capital plus a 6% cumulative return from the Initial
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Closing Date through the last day of such three-month period. The Company shall
have the option to pay such fee in the form of cash, a promissory note or any
combination thereof. The promissory note shall be fully amortizing over five
years, provide for quarterly payments and bear interest at the prime rate
announced from time to time by The Bank of New York.
(i) LOANS FROM AFFILIATES. If any loans are made to the
Company by the Advisor or an Affiliate of the Advisor, the maximum amount of
interest that may be charged by such Affiliate shall be the lesser of (i) 1%
above the prime rate of interest charged from time to time by The Bank of New
York and (ii) the rate that would be charged to the Company by unrelated lending
institutions on comparable loans for the same purpose in the locality of the
Property. The terms of any such loans shall be no less favorable than the terms
available between non-Affiliated Persons for similar commercial loans.
(j) CHANGES TO FEE STRUCTURE. In the event the Shares are
listed on a national securities exchange or are included for quotation on
Nasdaq, the Company and the Advisor shall negotiate in good faith to establish a
fee structure appropriate for a entity with a perpetual life. A majority of the
Independent Directors must approve the new fee structure negotiated with the
Advisor. In negotiating a new fee structure, the Independent Directors shall
consider all of the factors they deem relevant, including but not limited to:
(a) the size of the advisory fee in relation to the size, composition and
profitability of the Company's portfolio; (b) the success of the Advisor in
generating opportunities that meet the investment objectives of the Company; (c)
the rates charged to other REITs and to investors other than REITs by Advisors
performing similar services; (d) additional revenues realized by the Advisor and
its Affiliates through their relationship with the Company, including loan
administration, underwriting or broker commissions, servicing, engineering,
inspection and other fees, whether paid by the Company or by others with whom
the Company does business; (e) the quality and extent of service and advice
furnished by the Advisor; (f) the performance of the investment portfolio of the
Company, including income, conversion or appreciation of capital, frequency of
problem investments and competence in dealing with distress situations; and (g)
the quality of the portfolio of the Company in relationship to the investments
generated by the Advisor for its own account. The new fee structure can be no
more favorable to the Advisor than the current fee structure.
10. EXPENSES. In addition to the compensation paid to the
Advisor pursuant to Section 9 hereof, the Company shall pay directly or
reimburse the Advisor for the following expenses:
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(i) the Company's Organizational and Offering Expenses;
provided however, that within 60 days after the end of the
month in which the Offering terminates, the Advisor shall
reimburse the Company for any Organizational and Offering
Expense reimbursements received by the Advisor pursuant to
this Section 10 to the extent that such reimbursements, when
added to the balance of the Organizational and Offering
Expenses (excluding selling commissions, and fees paid and
expenses reimbursed to the Selected Dealers) paid directly by
the Company, exceed 3.5% of the Gross Offering Proceeds;
provided further, however, that the Advisor shall be
responsible for the payment of all Organizational and Offering
Expenses (excluding such commissions and such fees and expense
reimbursements) in excess of 3.5% of the Gross Offering
Proceeds;
(ii) Acquisition Expenses incurred in connection with
the initial investment of the funds of the Company;
(iii) expenses other than Acquisition Expenses incurred
in connection with the investment of the funds of the Company;
(iv) interest and other costs for borrowed money,
including discounts, points and other similar fees;
(v) taxes and assessments on income or Property and
taxes as an expense of doing business;
(vi) costs associated with insurance required in
connection with the business of the Company or by the
Directors;
(vii) expenses of managing and operating Properties
owned by the Company, whether payable to an Affiliate of the
Company or a non-affiliated Person;
(viii) fees and expenses of legal counsel for the
Company;
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(ix) fees and expense of non-affiliated auditors and
accountants for the Company;
(x) all expenses in connection with payments to the
Directors and meetings of the Directors and Shareholders;
(xi) expenses associated with listing the Shares and
Securities on a securities exchange or NASDAQ if requested by
the Directors or with the issuance and distribution of Shares
and Securities, such as selling commissions and fees, taxes,
legal and accounting fees, listing and registration fees, and
other Organization and Offering Expenses;
(xii) expenses connected with payments of Dividends in
cash or otherwise made or caused to be made by the Directors
to the Shareholders;
(xiii) expenses of organizing, revising, amending,
converting, modifying, or terminating the Company or the
Articles of Incorporation;
(xiv) expenses of maintaining communications with
Shareholders, including the cost of preparation, printing and
mailing annual reports and other Shareholder reports, proxy
statements and other reports required by governmental
entities;
(xv) expenses related to the Properties and Loans and
other fees relating to making investments including personnel
and other costs incurred in Property or Loan transactions
where a fee is not payable to the Advisor; and
(xvi) all other expenses the Advisor incurs in
connection with providing services to the Company including
reimbursement to the Advisor or its Affiliates for the cost of
rent, goods, materials and personnel incurred by them based
upon the compensation of the Persons involved and an
appropriate share of overhead allocable to those Persons.
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No reimbursement shall be made for the cost of personnel to
the extent that such personnel are used in transactions for which the Advisor
receives a separate fee.
Expenses incurred by the Advisor on behalf of the Company and
payable pursuant to this Section 10 shall be reimbursed quarterly to the Advisor
within 60 days after the end of each quarter. The Advisor shall prepare a
statement documenting the expenses of the Company during each quarter, and shall
deliver such statement to the Company within 45 days after the end of each
quarter.
11. OTHER SERVICES. Should the Directors request that the
Advisor or any partner or employee thereof render services for the Company other
than set forth in Section 3 hereof, such services shall be separately
compensated and shall not be deemed to be services pursuant to the terms of this
Agreement.
12. FIDELITY BOND. The Advisor shall maintain a fidelity bond
for the benefit of the Company which bond shall insure the Company from losses
of up to $5,000,000 and shall be of the type customarily purchased by entities
performing services similar to those provided to the Company by the Advisor.
13. REFUND BY ADVISOR. Within 60 days after the end of any
fiscal quarter of the Company which begins following the date the Company first
commences operations, if Operating Expenses of the Company during the fiscal
year, ending at the end of such quarter exceed the greater of (a) 2% of the
Average Invested Assets or (b) 25% of the Net Income of the Company during that
fiscal year and a majority of the Independent Directors find this excess amount
justified based on such unusual and non-recurring factors which they deem
sufficient, the Advisor may be reimbursed in future years for the full amount of
such excess expenses, or any portion thereof, but only to the extent such
reimbursement would not cause the Company's Operating Expenses to exceed the
2%/25% Guidelines in any such year. In no event shall the Operating Expenses
paid by the Company in any twelve month period ending at the end of a fiscal
quarter exceed the 2%/25% Guidelines. All figures used in the foregoing
computation shall be determined in accordance with generally accepted accounting
principles applied on a consistent basis. If the Advisor receives an incentive
fee for the sale of Property, Net Income, for purposes of calculating the
Operating Expenses, shall exclude the gain from the sale of such Property.
14. OTHER ACTIVITIES OF THE ADVISOR. Nothing herein contained
shall prevent the Advisor from engaging in other
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activities, including without limitation the rendering of advice to other
investors (including other REITs) and the management of other programs advised,
sponsored or organized by the Advisor or its Affiliates; nor shall this
Agreement limit or restrict the right of any director, officer, employee,
partner or shareholder of the Advisor or its Affiliates to engage in any other
business or to render services of any kind to any other partnership,
corporation, firm, individual, trust or association. The Advisor may, with
respect to any investment in which the Company is a participant, also render
advice and service to each and every other participant therein. The Advisor
shall report to the Directors the existence of any condition or circumstance,
existing or anticipated, of which it has knowledge, which creates or could
create a conflict of interest between the Advisor's obligations to the Company
and its obligations to or its interest in any other partnership, corporation,
firm, individual, trust or association. The Advisor or its Affiliates shall
promptly disclose to the Directors knowledge of such condition or circumstance.
If the Sponsor, Advisor, Director or Affiliates thereof have sponsored other
investment programs with similar investment objectives which have investment
funds available at the same time as the Company, it shall be the duty of the
Directors (including the Independent Directors) to adopt the method set forth in
the Registration Statement or another reasonable method by which properties are
to be allocated to the competing investment entities and to use their best
efforts to apply such method fairly to the Company.
The Advisor shall be required to use its best efforts to
present a continuing and suitable investment program to the Company which is
consistent with the investment policies and objectives of the Company, but
neither the Advisor nor any Affiliate of the Advisor shall be obligated
generally to present any particular investment opportunity to the Company even
if the opportunity is of character which, if presented to the Company, could be
taken by the Company.
In the event that the Advisor or its Affiliates is presented
with a potential investment which might be made by the Company and by another
investment entity which the Advisor or its Affiliates advises or manages, the
Advisor shall consider the investment portfolio of each entity, cash flow of
each entity, the effect of the acquisition on the diversification of each
entity's portfolio, rental payments during any renewal period, the estimated
income tax effects of the purchase on each entity, the policies of each entity
relating to leverage, the funds of each entity available for investment, the
amount of equity required to make the investment and the length of time such
funds have been available for investment. To the extent that a Property might be
suitable for the Company and for another investment entity which
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is advised or managed by the Advisor, the Advisor shall give priority to the
investment entity, including the Company, which has uninvested funds for the
longest period of time. The Advisor may consider the Property for private
placement only if such Property is deemed inappropriate for any investment
entity which is advised or managed by the Advisor, including the Company.
15. RELATIONSHIP OF ADVISOR AND COMPANY. The Company and the
Advisor agree that they have not created and do not intend to create by this
Agreement a joint venture or partnership relationship between them and nothing
in this Agreement shall be construed to make them partners or joint venturers or
impose any liability as partners or joint venturers on either of them.
16. TERM; TERMINATION OF AGREEMENT. This Agreement shall
continue in force until December 31, 1999, and thereafter shall be automatically
renewed from year to year, unless either party shall give notice in writing of
non-renewal to the other party not less than 60 days before the end of any such
year.
17. TERMINATION BY COMPANY. At the sole option of a majority
of the Independent Directors, this Agreement may be terminated immediately by
written notice of termination from the Company to the Advisor if, in addition to
the occurrence of events which would constitute Cause, any of the following
events occur:
(a) If the Advisor shall violate any material provision
of this Agreement, and after written notice of such violation,
shall not cure such default within 30 days or have begun
action within 30 days to cure the default which shall be
completed with reasonable diligence; or
(b) If the Advisor shall be adjudged bankrupt or
insolvent by a court of competent jurisdiction, or an order
shall be made by a court of competent jurisdiction for the
appointment of a receiver, liquidator, or trustee of the
Advisor, for all or substantially all of its property by
reason of the foregoing, or if a court of competent
jurisdiction approves any petition filed against the Advisor
for reorganization, and such adjudication or order shall
remain in force or unstayed for a period of 30 days; or
(c) If the Advisor shall institute proceedings for
voluntary bankruptcy or shall
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file a petition seeking reorganization under the federal
bankruptcy laws, or for relief under any law for relief of
debtors, or shall consent to the appointment of a receiver for
itself or for all or substantially all of 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.
Any notice of termination under Section 16 or 17 shall be
effective on the date specified in such notice, which may be the day on which
such notice is given or any date thereafter. The Advisor agrees that if any of
the events specified in Section 17 (b) or (c) shall occur, it shall give written
notice thereof to the Directors within 15 days after the occurrence of such
event.
18. TERMINATION BY EITHER PARTY. This Agreement may be
terminated immediately without penalty by the Advisor by written notice of
termination to the Company upon the occurrence of events which would constitute
Good Reason or by the Company without cause or penalty by action of the
Directors, the Independent Directors or by action of a majority of the
Shareholders, in either case upon 60 days' written notice.
19. ASSIGNMENT PROHIBITION. This Agreement may not be assigned
by the Advisor without the approval of a majority of the Directors (including a
majority of the Independent Directors); provided, however, that such approval
shall not be required in the case of an assignment to a corporation,
partnership, association, trust or organization which may take over the assets
and carry on the affairs of the Advisor, provided (i) that at the time of such
assignment, such successor organization shall be owned substantially by the then
partners of the Advisor or their Affiliates and only if such entity has a net
worth of at least $5,000,000 and (ii) that a general partner of the Advisor
shall deliver to the Directors a statement in writing indicating the ownership
structure and net worth of the successor organization and a certification from
the new Advisor as to its net worth. Such an assignment shall bind the assignees
hereunder in the same manner as the Advisor is bound by this Agreement. The
Advisor may assign any rights to receive fees or other payments under this
Agreement without obtaining the approval of the Directors. This Agreement shall
not be assigned by the Company without the consent of the Advisor, except in the
case of an assignment by the Company to a corporation or other organization
which is a successor to the Company, in which case such successor organization
shall be bound
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hereunder and by the terms of said assignment in the same manner as the Company
is bound by this Agreement.
20. PAYMENTS TO AND DUTIES OF ADVISOR UPON TERMINATION.
(a) After the Termination Date, the Advisor shall not be
entitled to compensation for further services hereunder except it shall be
entitled to receive from the Company within 30 days after the effective date of
such termination the following:
(i) all unpaid reimbursements of Organization and
Offering Expenses and of Operating Expenses payable to the
Advisor;
(ii) all earned but unpaid Asset Management Fees and
Performance Fees payable to the Advisor prior to the
termination of this Agreement;
(iii) all earned but unpaid Subordinated Acquisition
Fees and all unaccrued Subordinated Acquisition Fees, in each
case payable to the Advisor relating to the acquisition of any
Property prior to the termination of this Agreement;
(iv) all earned but unpaid Subordinated Disposition
Fees payable to the Advisor relating to the sale of any
Property prior to the termination of this Agreement;
(v) all earned but unpaid Loan Refinancing Fees payable
to the Advisor relating to the financing or refinancing of any
Property prior to the termination of this Agreement; and
(vi) all earned but unpaid Property Management Fees
payable to the Advisor or its Affiliates relating to the
management of any property prior to the termination of this
Agreement.
Notwithstanding the foregoing, in the event this Agreement is
terminated by the Company for Cause or by the Advisor for other than Good
Reason, the Advisor will not be entitled to receive the sums in subparagraphs
20(a)(i)-(vi), above. All amounts payable to the Advisor in the event of a
termination shall be evidenced by a non-interest bearing promissory note (the
"Note") having a principal amount of the unpaid amount payable to the Advisor.
(b) If this Agreement is terminated by the Company for any
reason other than Cause, by either party in connection with a
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Change of Control, or by the Advisor for Good Reason, the Advisor shall be
entitled to payment of the Termination Fee.
(c) The Termination Fee shall be paid in a manner determined
by the Directors, but in no event shall any portion of the Termination Fee
remain unpaid three years after the termination, non-renewal or substantial
modification of this Agreement, nor shall the Termination Fee be paid in less
than 12 equal quarterly installments, with interest, on the unpaid balance at
the prime rate of interest then in effect as announced by The Bank of New York.
Notwithstanding the preceding sentence, any amounts which may be deemed payable
at the date the obligation to pay the Termination Fee is incurred (i) shall be
an amount which provides compensation to the Advisor only for that portion of
the holding period for the respective Properties during which the Advisor
provided services to the Company, (ii) shall not be due and payable until the
Property to which such fees relate is sold or refinanced, and (iii) shall not
bear interest until the Property to which such fees relate is sold or
refinanced. A portion of the Termination Fee shall be paid as each Property
owned by the Company on the Termination Date is sold. The portion of the
Termination Fee payable upon each such sale shall be equal to (y) the
Termination Fee multiplied by (z) the percentage calculated by dividing the
Appraised Value (at the Termination Date) of the Property sold by the Company
divided by the total Appraised Value (at the Termination Date) of all Properties
owned by the Company on the Termination Date.
The Note for amounts payable as described above shall mature
upon the liquidation of the Company (or ten years from date of issuance
whichever is earlier) and shall be payable at any time prior to maturity. The
compensation payable under this Subsection shall be paid or delivered to the
Advisor within 30 days after funds shall become available to the Company for the
making of such payments.
(d) Notwithstanding the foregoing, the Advisor shall not be
entitled to payment of the Termination Fee in the event this Agreement is
terminated because of failure of the Company and the Advisor to establish,
pursuant to Section 9(j) hereof, a fee structure appropriate for an entity with
a perpetual life in the event the Shares are listed on a national securities
exchange or are included for quotation on Nasdaq.
(e) The Advisor shall promptly upon termination:
(i) pay over to the Company all money collected and
held for the account of the Company pursuant to this
Agreement, after
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deducting any accrued compensation and reimbursement for its
expenses to which it is then entitled;
(ii) deliver to the Directors a full accounting,
including a statement showing all payments collected by it and
a statement of all money held by it, covering the period
following the date of the last accounting furnished to the
Directors;
(iii) deliver to the Directors all assets, including
Properties and Loans, and documents of the Company then in the
custody of the Advisor; and
(iv) cooperate with the Company to provide an orderly
management transition.
21. INDEMNIFICATION BY THE COMPANY. The Company shall
indemnify and hold harmless the Advisor and its Affiliates, including their
respective officers, directors, partners and employees, from all liability,
claims, damages or losses arising in the performance of their duties hereunder,
and related expenses, including reasonable attorneys' fees, to the extent such
liability, claims, damages or losses and related expenses are not fully
reimbursed by insurance, subject to any limitations imposed by the laws of the
State of Maryland, the Articles of Incorporation or the Bylaws of the Company.
Notwithstanding the foregoing, the Advisor shall not be entitled to
indemnification or be held harmless pursuant to this Section 21 for any activity
which the Advisor shall be required to indemnify or hold harmless the Company
pursuant to Section 22.
22. INDEMNIFICATION BY ADVISOR. The Advisor shall indemnify
and hold harmless the Company from liability, claims, damages, taxes or losses
and related expenses including attorneys' fees, to the extent that such
liability, claims, damages, taxes or losses and related expenses are not fully
reimbursed by insurance and are incurred by reason of the Advisor's bad faith,
fraud, willful misfeasance, misconduct, negligence or reckless disregard of its
duties.
23. 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 by hand or
by overnight mail or
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other overnight delivery service to the addresses set forth herein:
To the Directors Corporate Property Associates 14
and to the Company: Incorporated
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
To the Advisor: Xxxxx Property Advisors
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Either party may at any time give notice in writing to the
other party of a change in its address for the purposes of this Section 23.
24. MODIFICATION. This Agreement shall not be 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 assignees.
25. SEVERABILITY. The provisions of this Agreement are
independent of and severable from each other, and no provision shall be affected
or rendered invalid or unenforceable by virtue of the fact that for any reason
any other or others of them may be invalid or unenforceable in whole or in part.
26. CONSTRUCTION. This Agreement shall be governed by,
construed and enforced in accordance with the laws of the State of New York.
27. ENTIRE AGREEMENT. This Agreement contains the entire
agreement and understanding among the parties hereto with respect to the subject
matter hereof, and supersedes all prior and contemporaneous agreements,
understandings, inducements and conditions, express or implied, oral or written,
of any nature whatsoever with respect to the subject matter hereof. The express
terms hereof control and supersede any course of performance and/or usage of the
trade inconsistent with any of the terms hereof. This Agreement may not be
modified or amended other than by an agreement in writing.
28. INDULGENCES, NOT WAIVERS. Neither the failure nor any
delay on the part of a party to exercise any right, remedy, power or privilege
under this Agreement shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, remedy, power or privilege preclude any other or
further exercise of the same or of any other right, remedy, power or privilege,
nor shall any waiver of any right, remedy, power or privilege with
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respect to any occurrence be construed as a waiver of such right, remedy, power
or privilege with respect to any other occurrence. No waiver shall be effective
unless it is in writing and is signed by the party asserted to have granted such
waiver.
29. GENDER. Words used herein regardless of the number and
gender specifically used, shall be deemed and construed to include any other
number, singular or plural, and any other gender, masculine, feminine or neuter,
as the context requires.
30. TITLES NOT TO AFFECT INTERPRETATION. The titles of
Sections and subsections contained in this Agreement are for convenience only,
and they neither form a part of this Agreement nor are they to be used in the
construction or interpretation hereof.
31. EXECUTION IN COUNTERPARTS. This Agreement may be executed
in any number of counterparts, each of which shall be deemed to be an original
as against any party whose signature appears thereon, and all of which shall
together constitute one and the same instrument. This Agreement shall become
binding when one or more counterparts hereof, individually or taken together,
shall bear the signatures of all of the parties reflected hereon as the
signatories.
32. NAME. W.P. Xxxxx & Co., Inc. has a proprietary interest in
the name "Corporate Property Associates" and "CPA(R)." Accordingly, and in
recognition of this right, if at any time the Company ceases to retain Xxxxx
Property Advisors or an Affiliate thereof to perform the services of Advisor,
the Directors of the Company will, promptly after receipt of written request
from Xxxxx Property Advisors, cease to conduct business under or use the name
"Corporate Property Associates" or "CPA(R)" or any diminutive thereof and the
Company shall use its best efforts to change the name of the Company to a name
that does not contain the name "Corporate Property Associates" or "CPA(R)" or
any other word or words that might, in the sole discretion of the Advisor, be
susceptible of indication of some form of relationship between the Company and
the Advisor or any Affiliate thereof. Consistent with the foregoing, it is
specifically recognized that the Advisor or one or more of its Affiliates has in
the past and may in the future organize, sponsor or otherwise permit to exist
other investment vehicles (including vehicles for investment in real estate) and
financial and service organizations having "Corporate Property Associates" or
"CPA(R)" as a part of their name, all without the need for any consent (and
without the right to object thereto) by the Company or its Directors.
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33. INITIAL INVESTMENT. The Advisor has contributed to the
Company $200,000 in exchange for 20,000 Shares (the "Initial Investment"). The
Advisor or its Affiliates may not sell any of the Shares purchased with the
Initial Investment during the term of this Agreement. The restrictions included
above shall not continue to apply to any Shares other than the Share acquired
through the Initial Investment acquired by the Advisor or its Affiliates. The
Advisor shall not vote any Shares it now owns or hereafter acquires in any vote
for the election of Directors or any vote regarding the approval or termination
of any contract with the Advisor or any of its Affiliates.
IN WITNESS WHEREOF, the parties hereto have executed this
Advisory Agreement as of the day and year first above written.
CORPORATE PROPERTY ASSOCIATES 14 INCORPORATED
By:__________________________________________
Name:
Title:
XXXXX PROPERTY ADVISORS
By: XXXXX FIDUCIARY ADVISORS, INC.
Its General Partner
By:_____________________________________
Name:
Title:
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