ARC PROPERTIES, INC.
0000 Xxxxx Xxxxxx
Xxxxxxx, Xxx Xxxxxx 00000
May 31, 2002
Cedar Income Fund, Ltd.
00 Xxxxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxx Xxxxxxxxxx, Xxx Xxxx 00000
Attn: Xxx X. Xxxxxx, President
Re: Compensation Agreement
Gentlemen:
This letter confirms and comprises the agreement ("Agreement") between
(i) Cedar Income Fund, Ltd. ("Cedar") and Cedar Income Fund Partnership, L.P.
("Operating Partnership"), and any individual or entity that directly or
indirectly is controlled by Cedar and/or Operating Partnership (individually and
collectively, "Cedar Group"), (ii) SKR Management Corp. ("SKR"), Cedar Bay
Realty Advisors, Inc. ("CBRA"), Brentway Management, LLC ("Brentway"), Xxx X.
Xxxxxx ("Xxxxxx") and any individual or entity that directly or indirectly
controls, or is controlled by, or is under common control with, SKR, CBRA,
Brentway and/or Xxxxxx (individually and collectively, "Advisor Group"), and
(iii) ARC Properties, Inc. or assigns ("ARC"), regarding certain services to be
provided by ARC.
1. Scope of Services. The parties acknowledge and agree that ARC has
assisted Cedar Group and Advisor Group by providing introductions to (i) an
independent broker-dealer network through which Cedar Group and Advisor Group
may raise capital during the Term of this agreement (as defined below) for
specific properties and (ii) certain financial and financing sources for current
assets and possible future acquisitions. In addition, during the Term, ARC
agrees that it will continue in good faith to provide certain limited services
with respect to the properties acquired by Cedar Group as a result of this
Agreement (the "Properties"), specifically to (i) assist Cedar Group and Advisor
Group with the acquisition, financing, and closing of the Properties; (ii)
review the operating performance of the Properties; (iii) plan for possible
future financing, refinancing and sale of the Properties; (iv) coordinate with
third party owners or investors; and (v) continue to make its key employees
available to assist in connection with the matters set forth in this Section 1.
Finally, during the Term, ARC agrees that it will continue in good faith to
provide certain introductions to potential sources of equity and debt financing.
The parties agree that ARC shall not be obligated to provide such ongoing
services unless and until requested by Cedar Group and/or Advisor Group and only
then on an "as needed" limited basis consistent with the spirit of this
Agreement.
2. Compensation and Reimbursement of Expenses. In consideration of the
services provided and to be provided by ARC hereunder, ARC shall receive the
following compensation during the Term of this Agreement:
(a) Sharing of Advisor Group Compensation. ARC will share in any
Advisor Group compensation for any transactions in which ARC participates by
materially assisting in the (i) raising of capital for Cedar Group; (ii)
contribution of property to Cedar Group; or (iii) identification and
introduction of otherwise unknown potential acquisitions for Cedar Group which
are in fact acquired by Cedar Group (collectively "ARC Transactions").
Notwithstanding the foregoing, ARC shall not share in any fees payable by Silver
Circle Management Corp. or any other partner in any partnership (or member in
any limited liability company or shareholder in any corporation) which is
selling its interest to an ARC Affiliate. ARC's share of the Advisor Group
compensation for ARC Transactions will be equal to 20% of all property
management fees, selling commissions, finance fees, and all other fees,
compensation and the like of any kind, class or description with respect to
property which is the subject of an ARC Transaction only, whether received
directly or indirectly by Advisor Group, and including all affiliated and
inter-company transactions, in connection with ARC Transactions. However, the
following items are excluded from being treated as Compensation: (i) any rents
or additional rents or any other amounts paid or payable under any lease,
license agreement, easement agreement, option or other agreement for the use or
disposition of any property received by Cedar Group with respect to its
ownership of an interest in the property in question and (ii) any and all legal
fees paid to Advisor Group; provided that such arrangement does not have the
effect of shifting income (or expenses) within Cedar Group or Advisor Group in a
manner that results in ARC not receiving Compensation it would otherwise
receive, for example, by declining (or recharacterizing) a fee that would be
treated as Compensation in a ARC Transaction while creating a similar fee from
the party liable to pay such fee in a non-ARC Transaction. Notwithstanding any
provision herein to the contrary, Cedar Group and/or Advisor Group shall have
the absolute right, in its sole discretion, to waive, defer or modify any
compensation otherwise due to it.
(b) Warrant to Purchase Operating Units in the Operating
Partnership. Delivery, simultaneously with the execution of this Agreement, of
the executed Operating Partnership Purchase Warrant in the form attached hereto
as Exhibit A (the "Warrant"), granting to ARC the right to purchase up to
500,000 Operating Partnership Units in the Operating Partnership (which are
redeemable, subject to certain procedural requirements set forth in the
Operating Partnership's Agreement of Limited Partnership, on a one for one basis
for shares of Cedar common stock).
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(c) Compensation for Other Services. Upon completing the
acquisition by both Cedar Group and one or more entities controlled by or under
common control with ARC ("ARC Affiliates") with a contribution by ARC Affiliates
of an amount to be agreed to by the parties for The Point in Harrisburg,
Pennsylvania, and an amount to be agreed to by the parties for LA Fitness in
Fort Washington, Pennsylvania, Cedar Group shall pay ARC a consulting fee of
$100,000.00. Any and all other services provided by ARC at the request of Cedar
Group not governed by this Agreement or another agreement shall be priced on a
deal-by-deal basis at the market rate for such services.
3. Term; Termination. This Agreement shall commence on the date set
forth above and shall continue until terminated (the "Term") as provided below.
This Agreement shall be terminated upon the occurrence of any of the following
events:
(a) A writing executed by a duly authorized member of each of Cedar
Group, Advisor Group and ARC evidencing their agreement to terminate this
Agreement.
(b) The expiration, without being exercised, of the Warrant if (i)
ARC (or an affiliate) does not own any shares of Cedar stock or partnership
interests in the Operating Partnership and (ii) ARC has disposed of its entire
interests in the property or properties that were the basis for ARC's receipt of
Compensation.
(c) With respect to any property, upon sale of such property to any
third party.
(d) With respect to any future ARC Transactions (but not closed
transactions that have the potential of generating Compensation), upon any
change of control of ARC.
(e) With respect to any property, upon the sale or other disposition
of the entire interest of the ARC Affiliate.
(f) Upon the sale of CBRA and Brentway to Cedar Group or to any member
of Cedar Group, provided that in connection with such sale, ARC receives its
pro-rata share of the aggregate net purchase price received by CBRA and Brentway
(for the purposes of this calculation, pro-rata share shall mean 20% of
management and related fees from ARC Transactions collected by CBRA and Brentway
divided by the total management and related fees collected by CBRA and
Brentway).
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4. Accounting.
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(a) The Compensation as described in Section 2(a) shall accrue
commencing on the date received by Advisor Group and shall be payable to ARC in
arrears on a monthly basis within fifteen days following the end of each
calendar month. Any Compensation earned by Advisor Group but not paid until
after the Term shall, notwithstanding the termination of this Agreement, be due
and payable to ARC as provided above within fifteen days after payment by Cedar
Group.
(b) Advisor Group shall deliver to ARC a certified monthly
report prepared on management's customary accounting basis summarizing all
Compensation to be paid by Cedar Group to Advisor Group with respect to ARC
Transactions (the "Compensation Report"). The Compensation Report shall be
certified as true and correct by the President or Chief Financial Officer of
Advisor Group and delivered to ARC within thirty days following the end of each
calendar month. Advisor Group shall provide reasonable back-up documentation
regarding the Compensation upon written request of ARC. ARC shall have the
right, at its own cost, to audit Advisor Group to verify the amount of
Compensation to be paid hereunder.(1) If ARC discovers a material error (as
defined below) in the accounting, Advisor Group), shall promptly reimburse ARC
for all of its reasonable and customary out of pocket costs incurred in such
audit. For this purpose, a material error shall occur if there is an error or
discrepancy in the amount of the lesser of (X) $5,000 or (Y) 10% of (i) any
single item of Compensation, or (ii) all items of Compensation in the aggregate
shown on any Compensation Report, provided that the aggregate of all errors must
exceed $10,000.
(c) In the event Advisor Group is ever required to repay or
refund any Compensation for any reason, ARC's applicable share of such repayment
shall be offset against the payment next due hereunder.
5. Indemnification. Advisor Group agrees to indemnify and hold harmless
ARC and any individual or entity that directly or indirectly controls, or is
controlled by, or is under common control with ARC, and its officers, directors,
employees, agents, and affiliates (each an "Indemnified Party"), from and
against any losses, claims, damages or liabilities, or actions in respect
thereof to which such Indemnified Party may become subject in connection with
the services rendered pursuant to or matters which are the subject of or arise
out of the services to be provided hereunder (collectively, a "Claim"), and
agrees to reimburse promptly each Indemnified Party for any legal or other
expenses incurred by such Indemnified Party in connection with investigating,
preparing for, or defending any such Claim as such expenses are incurred.
However, Advisor Group shall not be liable in any such case to the extent that
such Claim resulted from an Indemnified Party's bad faith, negligence, or fraud,
which shall be determined mutually by the parties, but if the parties are unable
to agree, by a court of competent jursidiction in a final judgment. If Advisor
Group so elects, Advisor Group may assume the defense of such Claim, including
the employment of counsel reasonably acceptable to ARC and the payment of fees,
expenses, and disbursements of such counsel. The foregoing rights to
indemnification shall survive any termination or expiration of this Agreement,
and shall not limit any other rights that an Indemnified Party may have at law
or otherwise.
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(1) Such audit may be conducted no more frequently than one time per calendar
year at such time as reasonably approved by Advisor Group at the offices of
Advisor Group.
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6. Construction. This Agreement shall be governed by, subject to and
construed in accordance with, the laws of the State of New Jersey without regard
to conflict of law provisions.
7. Severability. If any portion of this Agreement shall be held invalid
or inoperative, then so far as is reasonable and possible the remainder of this
Agreement shall be considered valid and operative and effect shall be given to
the intent manifested by the portion held invalid or inoperative.
8. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, and together
shall constitute one and the same instrument.
9. Modification or Amendment. This Agreement may not be modified or
amended except by written agreement executed by the parties hereto.
10. Notices. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (i) upon personal delivery to the
party to be notified, (ii) when sent by confirmed facsimile; (iii) five days
after having been sent by registered or certified mail, return receipt
requested, postage prepaid; or (iv) one day after deposit with a nationally
recognized overnight courier, charges prepaid, specifying next day delivery,
with written verification of receipt. All communications shall be sent to the
address as set forth below or at such other address as either party may
designate by five days advance written notice provided in accordance with this
Section 7 to the other party hereto:
If to ARC: 0000 Xxxxx Xxxxxx
Xxxxxxx, Xxx Xxxxxx 00000
Facsimile: (000) 000-0000
Attn: Xxxxxx X. Xxxxxxx
With a copy to: Xxxxxxxxx Xxxxxxxxx
X.X. Xxx 000
Xxxxxxxx, Xxxxxxxx 00000-0000
Facsimile: (000) 000-0000
Attn: Xxxxx X. Xxxxxx, Esquire
5
If to Cedar or 00 Xxxxx Xxxxxx Xxxxxx, Xxxxx 000
Operating Partnership: Port Xxxxxxxxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Attn: Xxx X. Xxxxxx
With a copy to: Cedar Bay Realty Advisors, Inc.
00 Xxxxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxx Xxxxxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxxx, Esquire
If to SKR, Brentway, 00 Xxxxx Xxxxxx Xxxxxx, Xxxxx 000
Operating Partnership or Port Xxxxxxxxxx, Xxx Xxxx 00000
or Xxxxxx: Facsimile: (000) 000-0000
Attn: Xxx X. Xxxxxx
With a copy to: Cedar Bay Realty Advisors, Inc.
00 Xxxxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxx Xxxxxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxxx, Esquire
11. Parties. This Agreement shall be binding upon and inure solely to
the benefit of the parties hereto and each of their respective successors, legal
representative, heirs and assigns, and no other person shall have or be
construed to have any legal or equitable right, remedy or claim under, in
respect of, or by virtue of, this Agreement or any provision herein contained.
12. Delay. Neither the failure nor any delay on the part of any party
to this Agreement to exercise any right remedy, power, or privilege under this
Agreement shall operate as a waiver thereof, nor shall a waiver of any right
remedy, power, or privilege with respect to any occurrence be construed as a
waiver of such right, remedy, power, or privilege with respect to any subsequent
occurrence.
13. Recovery of Costs. If any legal action or other proceeding is
brought for the enforcement of this Agreement, or because of an alleged dispute,
breach, default or misrepresentation in connection with any of the provisions of
this Agreement, the substantially prevailing party shall be entitled to recover
reasonable attorneys' fees and other costs incurred in that action or proceeding
(and any additional proceeding for the enforcement of a judgment) in addition to
any other relief to which it or they may be entitled.
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14. Entire Agreement; Assignment. This Agreement and the attached side
letter contain the entire understanding between the parties hereto and
supersedes any prior understandings or written or oral agreements between them
respecting the subject matter hereof. ARC shall have the right, subject to Cedar
Group's consent, which shall not be unreasonably withheld, to assign its rights
hereunder to a third party; the other parties shall not have the right to assign
this Agreement.
15. Liability of Affiliates. Under no circumstances shall any
single-purpose entity controlled by Cedar Group or Advisor Group be required to
or be deemed to guaranty or otherwise be responsible for any liability of any
other person or entity.
16. Board Action. The terms of this letter agreement shall not be
binding on Cedar Group until approved by the Board of Directors of Cedar Income
Fund, Ltd., which submission for approval and decision by the Board shall occur
within ten (10) days of the date hereof.
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If the foregoing correctly sets forth the understanding among the
parties hereto, please so indicate in the space provided below for that purpose,
and return one of the signed copies of this Agreement and the attached side
letter to ARC, whereupon this Agreement shall constitute a binding agreement
among the parties.
Very truly yours,
ARC PROPERTIES, INC.,
a New Jersey corporation
By: /s/ Xxxxxx X. Xxxxxxx
----------------------------
Xxxxxx X. Xxxxxxx, President
AGREED AND ACCEPTED:
CEDAR INCOME FUND, LTD.,
Individually and on behalf of its Affiliates
By: /s/ Xxx X. Xxxxxx
---------------------------------
Its: President
CEDAR INCOME FUND PARTNERSHIP, L.P.
By: /s/ Cedar Income Fund, Ltd.
---------------------------------
CEDAR BAY REALTY ADVISORS, INC.
By: /s/ Xxx X. Xxxxxx
---------------------------------
Xxx X. Xxxxxx
Its: President
SKR MANAGEMENT CORP.,
By: /s/ Xxx X. Xxxxxx
---------------------------------
Xxx X. Xxxxxx, President
BRENTWAY MANAGEMENT, LLC,
By: /s/ Xxx X. Xxxxxx
---------------------------------
Xxx X. Xxxxxx, Chairman
/s/ Xxx X. Xxxxxx
--------------------------------------
Xxx X. Xxxxxx, Individually
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