EXHIBIT 10.1
ADVISORY AGREEMENT
between
APPLE SUITES, INC.
and
APPLE SUITES ADVISORS, INC.
ADVISORY AGREEMENT
THIS ADVISORY AGREEMENT, dated as of July 13, 1999, is between APPLE
SUITES, INC., a Virginia corporation (the "Company"), and APPLE SUITES ADVISORS,
INC., a Virginia corporation (the "Advisor").
RECITALS
A. The purpose of the Company is to invest primarily in extended-stay hotel
properties in selected metropolitan areas of the United States and, to a lesser
extent, in certain other permitted investments described in the Prospectus (as
hereinafter defined). The Company intends to qualify as a real estate investment
trust pursuant to Sections 856 through 860 of the Internal Revenue Code of 1986,
as amended.
B. The Company desires to engage the Advisor to provide information,
advice, assistance and facilities to the Company and to have the Advisor
undertake the duties and responsibilities hereinafter set forth, all subject to
the supervision of the Company's Board of Directors, on the terms and conditions
set forth herein. In consideration therefor, the Company desires to pay the
Advisor certain fees as herein set forth.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements contained herein, the parties agree as follows:
1. Definitions. For purposes of this Agreement, the following terms shall
have the meanings set forth below.
(a) "Affiliate" means (i) any Person directly or indirectly
controlling, controlled by or under common control with another Person,
(ii) any Person owning or controlling 10% or more of the outstanding voting
securities or beneficial interests of such other Person, (iii) any officer,
director, trustee or general partner of such Person and (iv) if such other
Person is an officer, director, trustee or partner of another entity, then
the entity for which that Person acts in any such capacity. "Affiliated"
means being an Affiliate of a specified Person.
(b) "Articles of Incorporation" means the Company's Articles of
Incorporation filed with the Virginia State Corporation Commission,
including all amendments, restatements or modifications thereof.
(c) "Asset Management Fee" means the fee payable to the Advisor for
its services hereunder. Such fee will be paid pursuant and subject to
Section 11 of this Agreement.
(d) "Average Invested Assets" for any period means the average of the
aggregate book value of the assets of the Company invested, directly or
indirectly, in equity interests in and loans secured by real estate, 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.
(e) "Board of Directors" means the Company's Board of Directors as of
any particular time.
(f) "Bylaws" means the Company's Bylaws, including all amendments,
restatements or modifications thereof.
(g) "Calendar Year" means the year ended December 31st and any portion
thereof treated by the Internal Revenue Service as a reporting period for
the Company.
(h) "Code" means the Internal Revenue Code of 1986, as amended from
time to time, including successor statutes thereto.
(i) "Directors" means, as of any particular time, the directors of the
Company holding office at such time.
(j) "Funds from Operation" means net income (computed in accordance
with generally accepted accounting principles) excluding gains (or losses)
from debt restructuring and sales of property, plus depreciation of real
property, and after adjustments for significant non-recurring items and
unconsolidated partnerships and joint ventures. Adjustments for
unconsolidated partnerships and joint ventures will be calculated to
reflect funds from operation on the same basis.
(k) "Independent Director" means a Director of the Company who is not
Affiliated, directly or indirectly, with the Advisor, whether by ownership
of, ownership interest in, employment by, any material business or
professional relationship with, or serving as an officer or director of,
the Advisor, or an Affiliated business entity of the Advisor (other than as
an Independent Director of up to three other real estate investment trusts
advised by the Advisor or an Affiliate of the Advisor). An Independent
Director may perform no other services for the Company, except as a
Director. Notwithstanding anything to the contrary herein, any member of a
law firm whose only material business or professional relationship with the
Company, the Advisor and their Affiliates is as legal counsel to any of
such entities shall constitute an Independent Director (unless such person
serves as a director for more than three real estate investment trusts
organized by the Advisor and its
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Affiliates). An "indirect" affiliation shall be deemed to refer to
circumstances in which a member of the "immediate family" of a Director is
Affiliated with the Advisor, and a person's "immediate family" shall mean
such person's spouse, parents, children, siblings, mother and
father-in-law, sons and daughters-in-law and brothers and sisters-in-law.
(l) "Net Income" for any period means the total revenues of the
Company for such period, less expenses applicable to such period other than
additions to reserves for depreciation or bad debts or other similar
non-cash reserves. "Net Income," for purposes of calculating Operating
Expenses in Section 15 of this Agreement, does not include the gain from
the sale of the Company's assets.
(m) "Offering" means the public offering of the Company's Common
Shares.
(n) "Operating Expenses" means all operating, general and
administrative expenses of the Company as determined under generally
accepted accounting principles (including regular compensation payable to
the Advisor), excluding, however, the following:
(i) expenses of raising capital;
(ii) interest payments;
(iii) taxes;
(iv) non-cash expenditures, such as depreciation, amortization
and bad debt reserves;
(v) incentive fees paid to the Advisor, if any; and
(vi) costs related directly to asset acquisition, operation and
disposition.
(o) "Organizational and Offering Expenses" means all expenses incurred
in connection with the formation and registration of the Company and in
qualifying and marketing the Shares under applicable federal and state law,
and any other expenses actually incurred and directly related to the
qualification, registration, offer and sale of the Shares, including such
expenses as (i) all marketing expenses and payments made to broker-dealers
as compensation or reimbursement for all costs of reviewing the Offering,
including due diligence investigations and fees and expenses of their
attorneys, accountants and other experts; (ii) registration fees, filing
fees and taxes; (iii) the costs of printing, amending, supplementing and
distributing the
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registration statement and Prospectus; (iv) the costs of obtaining
regulatory clearances of, and printing and distributing, sales materials
used in connection with the offer and sale of the Shares; (v) the costs
related to investor and broker-dealer sales meetings concerning the
Offering; and (vi) accounting and legal fees incurred in connection with
any of the foregoing.
(p) "Person" includes an individual, corporation, partnership, joint
venture, association, company, trust, bank or other entity, or government
and any agency and political subdivision of a government.
(q) "Property" or "Properties" means partial or entire equity
interests, including equity participation interests such as general
partnership interests and joint venture interests, owned by the Company in
real property as described in the Prospectus.
(r) "Prospectus" has the meaning given to that term by Section 2(10)
of the Securities Act of 1933, as amended, and as used herein, the term
means the Prospectus of the Company pursuant to which the Shares are
offered to the public.
(s) "Return Ratio" means, for any period, the ratio of Funds from
Operation to Total Contributions.
(t) "Shares" or "Common Shares" means the Common Shares of the
Company, no par value.
(u) "Shareholders" means the holders of record of the Company's Common
Shares.
(v) "Total Contributions" means the gross offering proceeds which have
been received by the Company from time to time from the sale or sales of
the Shares. Total Contributions shall be calculated to reflect the average
of the daily amounts during the period in question of the gross offering
proceeds which have been received by the Company from time to time from the
sales of Shares, to extent such Shares are issued and such sales have
actually been closed.
2. Duties of the Advisor. Subject to the terms of the Articles of
Incorporation, the Bylaws, and the supervision of the Board of Directors, the
Advisor, at its own cost and expense, unless otherwise set forth herein, on
behalf of the Company, shall:
(a) serve as the Company's investment advisor and consultant in
connection with policy and investment decisions to be made by the Board of
Directors, furnish reports to the Board of Directors, and provide research,
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economic and statistical data in connection with the acquisition,
financing, refinancing, holding, leasing and disposition of Properties and
other investments of the Company;
(b) administer the day-to-day operations of the Company and perform or
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 (including, but not limited to, entering into
contracts in the name of the Advisor or the Company) consultants,
accountants, correspondents, lenders, servicers, technical advisors,
attorneys, brokers, underwriters, corporate fiduciaries, escrow agents,
depositaries, custodians, agents for collection, insurers, insurance
agents, banks, builders, developers, property owners, mortgagors, and other
mortgage and investment participants, any and all agents for any of the
foregoing, including Affiliates of the Advisor, and Persons acting in any
other capacity deemed by the Board of Directors necessary or desirable for
the performance of any of the foregoing services;
(d) act as attorney-in-fact or agent in acquiring, financing,
refinancing, leasing and disposing of Properties and other investments, in
disbursing and collecting funds of the Company, in paying the debts and
fulfilling the obligations of the Company and in handling, prosecuting and
settling any claims of the Company, including the foreclosure or other
enforcement of any mortgage or other lien securing Properties or other
investments, and exercise its own discretion in doing so; provided that any
fees and costs payable to independent Persons incurred by the Advisor in
connection with the foregoing shall be the responsibility of the Company;
(e) negotiate on behalf of the Company with banks or other 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 the securities of the Company 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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(f) invest or reinvest any money of the Company, as directed by the
Board of Directors or subject to such discretionary powers as the Board of
Directors may from time to time delegate;
(g) if requested by the Company, provide appraisal reports on any real
property that is, or is proposed to be, acquired by the Company for
investment;
(h) at any time reasonably requested by the Board of Directors (but
not more than monthly) make reports of its performance of services to the
Company;
(i) communicate on behalf of the Company with the Shareholders of the
Company as required to satisfy the continuous reporting and other
requirements of any governmental bodies or agencies to the Shareholders and
third parties and to maintain effective relations with the Shareholders;
(j) counsel the Company in connection with policy decisions to be made
by the Board of Directors;
(k) provide the executive and administrative personnel, office space
and services required in rendering the foregoing services to the Company;
and
(l) 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 appropriate under the particular circumstances.
3. Commitments. In order to meet the investment requirements of the
Company, but only as determined by the Board of Directors, or any authorized
committee thereof, from time to time, the Advisor agrees at the direction of the
Board of Directors or any such committee to issue on behalf of the Company
commitments on such terms as are established by the Board of Directors or any
such committee, for the acquiring of Properties or other assets.
4. Duties of the Board of Directors. In order for the Advisor to fulfill
its duties, the Board of Directors shall, to the extent it deems proper, provide
the Advisor with full information concerning the Company, its capitalization and
investment policies and the intentions of the Board of Directors with respect to
future investments. The Company shall furnish the Advisor with a copy of all
audited financial statements, a signed copy of each report prepared by
independent accountants, and such other information with regard to its affairs
as the Advisor may from time to time reasonably request.
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5. Advice. In addition to the services described in Section 2 above, the
Advisor shall consult with the Board of Directors and the officers of the
Company and shall furnish them with advice and recommendations with respect to
the acquiring of Properties or commitments therefor, or other investments of, or
investments considered by, the Company, and shall furnish advice and
recommendations with respect to other aspects of the business and affairs of the
Company. In order to facilitate the investment of the funds of the Company and
enable it to avail itself of investment opportunities as they arise, the Advisor
may from time to time be granted, but is not hereby granted, the power and
authority to make and dispose of investments and to make and terminate
commitments for investments, on behalf of and in the name of the Company,
without further or express authority from the Board of Directors; provided,
however that the Board of Directors shall have the power to revoke, suspend,
modify or limit such power and authority at any time or from time to time, but
not retroactively. Unless otherwise notified by the Board of Directors, a
representative of the Advisor shall attend all regular and special meetings of
the Board of Directors, and the Board of Directors shall notify the Advisor of
such meetings.
The Advisor shall first present to the Company all investment opportunities
which are suitable for the Company, because such investment opportunities are
within the investment objectives and policies of the Company, before the Advisor
offers such opportunities to any other Person or takes for its own account. It
is expressly understood, however, that the primary investments of the Company
are expected to be existing residential apartment communities in Texas and the
southwestern region of the United States.
6. Bank Accounts. The Advisor may establish and maintain one or more bank
accounts 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, under such terms and conditions as the Board of
Directors may approve, provided that all such accounts shall be maintained in
such fashion as to make clear that the funds therein are the property of the
Company and not of the Advisor. The Advisor shall from time to time render
appropriate accountings of such collections and payments to the Board of
Directors and to the auditors of the Company.
7. Investment Undertakings. The Advisor shall use its best efforts to
assure that (i) any mortgage securing a Property of the Company shall be and
remain a valid lien upon the mortgaged property according to its terms; (ii) the
title to any Property is insured by appropriate policies of title insurance;
(iii) any Property is duly insured against loss or damage by fire, with extended
coverage, and against such other insurable hazards and risks as is customary and
appropriate in the
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circumstances; and (iv) the policies from time to time specified by the Board of
Directors with regard to the protection of the Company's investments are carried
out. Any and all fees and costs incurred by the Advisor in performing such
functions, whether payable to its Affiliates or independent Persons shall be
borne by the Company.
8. Records; Confidentiality. The Advisor shall maintain appropriate records
of all its activities hereunder and make such records available for inspection
by the Board of 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. The Advisor shall keep confidential any and all information
obtained in connection with the services rendered hereunder and shall not
disclose any such information to nonaffiliated Persons except with the prior
consent of the Board.
9. Limitation of Activities. Anything else in this Agreement to the
contrary notwithstanding:
(a) 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 real estate investment trust as defined in the Code, subject
the Company to regulation under the Investment Company Act of 1940, violate
any law, rule or regulation or would otherwise not be permitted by the
Articles of Incorporation or Bylaws of the Company, except if such action
shall be ordered by the Board of Directors, in which case the Advisor shall
notify promptly the Board of 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 Board of
Directors. Notwithstanding the foregoing, the Advisor and its stockholders,
directors, officers and employees shall not be liable to the Company, or to
the Company's Board of Directors or Shareholders for any act or omission by
the Advisor, or its stockholders, directors, officers or employees except
as provided in Section 16 of this Agreement.
(b) In performing its duties and obligations under this Agreement, the
Advisor shall abide by and comply with the provisions and policies set
forth in the Articles of Incorporation and Bylaws.
10. Relationship with Board of Directors. Employees of the Advisor may
serve as members of the Board of Directors or any committee thereof and as
officers of the Company, except that no employee of the Advisor who also is a
Director or officer of the Company shall receive any compensation from the
Company for
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serving as a Director or officer other than for reasonable reimbursement for
travel and related expenses incurred in attending meetings of the Board of
Directors or any committee thereof.
11. Fees.
(a) Asset Management Fee. The Company shall pay to the Advisor
quarterly, for services rendered under this Agreement, an Asset Management
Fee calculated as follows: The Asset Management Fee for any calendar
quarter shall be a applicable percentage of the Total Contributions. The
applicable percentage used to calculate such Asset Management Fee shall be
based upon the Return Ratio, calculated on a per annum basis, for the
preceding calendar quarter. The Asset Management Fee shall be as follows
with respect to any such quarter: 0.1% of Total Contributions if the Return
Ratio for the preceding calendar quarter is 6.0% per annum or less; 0.15%
of Total Contributions if the Return Ratio for the preceding calendar
quarter is more than 6.0% per annum but not more than 8.0% per annum; and
0.25% of Total Contributions if the Return Ratio for the preceding calendar
is above 8.0% per annum. If the Asset Management Fee is payable with
respect to any partial calendar quarter, it shall be prorated based on the
number of days elapsed during any such partial calendar quarter.
(b) Payment of Asset Management Fee. The Advisor shall compute the
compensation payable to it under Section 11(a) of this Agreement within 45
days of the end of each calendar quarter. A copy of the computations made
by the Advisor to calculate its compensation shall thereafter promptly be
delivered to the Board of Directors and, upon such delivery, payment of the
compensation earned under Section 11(a) of this Agreement shown therein
shall be due and payable within 60 days after the end of such calendar
quarter.
12. Expenses.
(a) The Company shall pay directly or reimburse the Advisor for the
following expenses in addition to the compensation provided for in this
Agreement:
(i) all costs of personnel employed by the Company and involved
in the business of the Company;
(ii) expenses incurred in connection with the initial investment
of the funds of the Company, including all direct expenses incurred in
connection with investigation and acquisition of Properties;
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(iii) interest and other costs for borrowed money, including
discounts, points and other similar fees;
(iv) taxes and assessments on income or property and taxes as an
expense of doing business;
(v) fees and commissions, including finder's fees and brokerage
commissions with respect to the acquisition and disposition of assets
of the Company, whether payable to an Affiliate of the Advisor or an
unrelated Person, including, without limitation, costs of foreclosure,
maintenance, repair and improvement of Property;
(vi) costs associated with insurance required in connection with
the business of the Company or by the Board of Directors;
(vii) expenses of managing and operating real property owned by
the Company, whether payable to an Affiliate of the Advisor or an
unrelated Person;
(viii) fees and expenses of legal counsel for the Company;
(ix) fees and expenses of independent auditors and accountants
for the Company;
(x) all expenses in connection with payments to the Board of
Directors or any committee thereof and meetings of the Board of
Directors or any committee thereof and Shareholders;
(xi) expenses associated with listing the Shares on a national
stock exchange or quoting the Shares on the NASDAQ National Market
System if requested by the Board of Directors, or with the issuance
and distribution of any additional Shares of the Company at any time,
such as taxes, legal and accounting fees, listing and registration
fees, and other expenses;
(xii) dividend and dividend distributions;
(xiii) expenses of organizing, revising, amending, converting,
modifying or terminating the Company, the Articles of Incorporation or
the Bylaws; and
(xiv) expenses of maintaining communications with Shareholders,
including the cost of preparation, printing, and mailing annual
reports and other
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Shareholder reports, proxy statements and other reports required by
governmental entities.
Expenses incurred by the Advisor on behalf of the Company and payable pursuant
to this Section, 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.
(b) Except as otherwise provided herein, the Advisor shall pay all
expenses of performing its obligations under this Agreement, including,
without limitation, the following expenses:
(i) employment expenses of the Advisor, including, but not
limited to, salaries, wages, payroll taxes, costs of employee benefit
plans, and temporary help expenses, except to the extent that such
expenses are otherwise reimbursable pursuant to Section 12(a) of this
Agreement or the Articles of Incorporation or Bylaws;
(ii) audit fees and expenses of the Advisor;
(iii) legal fees and other expenses of professional services to
the Advisor;
(iv) rent, telephone, utilities and other office expenses of the
Advisor;
(v) insurance of the Advisor; and
(vi) all other administrative expenses of the Advisor.
13. Limitation on the Advisor's Investment Advice. Notwithstanding anything
to the contrary in this Agreement, the Advisor shall not be required to, and
shall not, advise the Company as to any investments in securities, except when,
and to the extent that, the Advisor and the Company specifically agree (i) that
such advice is desirable, and (ii) that such advice can be rendered consistently
with applicable legal requirements, including any applicable provisions of
relevant "investment advisor" laws.
14. Other Services. Should the Board of Directors request that the Advisor
or any employee thereof render material services for the Company other than set
forth in Section 2, such services shall be separately compensated and shall not
be deemed to be services pursuant to the terms of this Agreement.
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15. Limitation on Operating Expenses. Within 120 days from the end of any
Calendar Year, the Advisor shall refund to the Company the amount, if any, by
which the Operating Expenses of the Company, excluding extraordinary
nonrecurring items and those items referred to in Section 14, during such
Calendar Year exceeded the greater of either of the following limitations:
(a) 2% of the Average Invested Assets of the Company for such Calendar
Year; or
(b) 25% of the Company's Net Income for such Calendar Year, determined
in accordance with generally accepted accounting principles.
The Independent Directors of the Company may determine that, because of unusual
and nonrecurring factors which they deem sufficient, a higher level of Operating
Expenses is justified for such Calendar Year. The Advisor shall be promptly
reimbursed for any payments made under this Section 15 if, in any succeeding
Calendar Year, the Operating Expenses of the Company are less than the permitted
level of Operating Expenses.
16. Advisory Responsibility. The Advisor assumes no responsibility under
this Agreement other than to render the services called for hereunder in good
faith and with integrity, and shall not be responsible for any action of the
Company in following or declining to follow any advice or recommendation of the
Advisor. Neither the Advisor, its shareholders, directors, officers nor
employees nor any of its Affiliates, nor any Person contracting with the Advisor
for services and its shareholders, directors, officers and employees nor any of
its Affiliates shall be liable to the Company or its Shareholders, except by
reason of acts constituting gross negligence or willful misconduct. The Advisor
hereby agrees to look solely to the assets of the Company for satisfaction of
all claims against the Company, and in no event shall any Shareholder, Director,
officer or agent of the Company have any personal liability for the obligation
of the Company under this Agreement.
17. Incorporation of the Articles of Incorporation and Bylaws. To the
extent the Articles of Incorporation and Bylaws impose obligations or
restrictions on the Advisor or grant the Advisor certain rights which are not
set forth in this Agreement, the Advisor shall abide by such obligations or
restrictions and such rights shall inure to the benefit of the Advisor with the
same force and effect as if they were set forth herein.
18. Fiduciary Duty and Indemnification. Subject to Section 16, the Advisor
shall have a fiduciary relationship to the Shareholders. However, the Company
shall indemnify the Advisor, to the fullest extent permitted by law, for its
liabilities and losses arising from the operations of the Company (including its
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costs and expenses, including legal fees and expenses, incurred in connection
with investigating and defending itself against such liabilities and losses) if
the following conditions are met:
(a) the Directors have determined, in good faith, that the course of
conduct which caused the liability or loss was undertaken in good faith
within what the Advisor reasonably believed to be the scope of its
employment or authority and for a purpose which it reasonably believed to
be in the best interests of the Company;
(b) the Directors have determined, in good faith, that the liability
or loss was not the result of willful misconduct, bad faith, reckless
disregard of duties or violation of the criminal law on the part of the
Advisor; and
(c) the indemnified amount is recoverable only out of the assets of
the Company and not from the Shareholders.
Notwithstanding the foregoing, indemnification will not be allowed for any
liability imposed by judgment, and costs associated therewith, including
attorneys' fees, arising from or out of a violation of state or federal
securities laws associated with the Offering of the Common Shares unless (i)
there has been a successful adjudication on the merits of each count involving
alleged securities laws violations as to the particular indemnitee, or (ii) such
claims have been dismissed with prejudice on the merits by a court of competent
jurisdiction as to the particular indemnitee or (iii) a court of competent
jurisdiction approves a settlement of the claims against a particular
indemnitee.
19. Transactions between the Advisor and the Company. All transactions
between the Advisor and the Company shall require the approval by a majority of
the Directors (including a majority of the Independent Directors) and shall
otherwise comply with the conflict of interest provisions of the Bylaws.
20. Relationship of Advisor and Company. The Company and the Advisor are
not partners or joint venturers with each other, and nothing herein shall be
construed to make them such partners or joint venturers or impose any liability
as such on either of them.
21. Other Activities. Except as otherwise expressly provided herein,
nothing contained herein shall limit the right of the Advisor or any of its
officers, directors or employees, whether or not a Director, officer or employee
of the Company, to engage in other business activities or to render services of
any kind to any other Person even if such other business activities or services
may be in direct competition with the Company.
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22. Term; Termination of Agreement.
(a) This Agreement shall have an initial term ending five years from
the date of this Agreement, and thereafter shall be renewed for additional
two-year terms upon the consent of the Directors.
(b) Prior to any renewal of this Agreement, the Independent Directors
shall review (i) the performance of the Advisor hereunder to determine its
compliance with the provisions of this Agreement, and (ii) the fees payable
to the Advisor hereunder to determine whether they are reasonable in
relation to the nature and quality of services performed. The findings of
the Independent Directors shall be recorded in the minutes of the
Directors.
(c) This Agreement shall be terminable (i) without cause by the
Advisor or (ii) without cause by a majority of the Independent Directors,
in each case upon 60 days' prior written notice to the non-terminating
party.
(d) In the event of the termination of the Advisor, the Advisor will
cooperate with the Company and take all reasonable steps requested to
assist the Directors in making an orderly transition of the advisory
function to another Person.
(e) At the sole option of a majority of the Independent Directors,
this Agreement may be terminated for cause by written notice of termination
from the Company to the Advisor if any of the following events occur:
(i) if the Advisor shall violate or default in the performance of
any material provision of this Agreement and, after written notice of
such violation or default, shall not cure such violation or default
within 30 days;
(ii) 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, or of all or substantially all
of its property by reason of the foregoing, or approving 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
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(iii) if the Advisor shall institute proceedings for voluntary
bankruptcy or shall file a petition seeking reorganization under the
federal bankruptcy laws, or for relief under any law for 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.
(f) Any notice of termination under this Section shall (except to the
extent this Section requires a different notice period) 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 subparagraph (ii) or (iii) of Section 22(e) shall occur, it
shall give written notice thereof to the Board of Directors within 5 days
after the occurrence of such event.
23. Action Upon Termination.
(a) From and after the effective date of termination of this Agreement
pursuant to Section 22 hereof, the Advisor shall not be entitled to
compensation for further services rendered hereunder, but shall be entitled
to receive from the Company within 30 days after the effective date of such
termination, an amount in cash equal to all earned but unpaid Asset
Management Fees payable to the Advisor prior to the termination of this
Agreement.
(b) Within a reasonable period of time, but in no event later than 30
days after the termination of this Agreement, the Advisor shall:
(i) pay over to the Company all money collected and held for the
account of the Company pursuant to this Agreement, after deducting any
accrued compensation and reimbursement for its expenses to which it is
then entitled;
(ii) deliver to the Board of 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 Board of Directors; and
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(iii) deliver to the Board of Directors all property and
documents of the Company then in the custody of the Advisor.
The Advisor shall be entitled to receive, promptly after such 30-day
period, reimbursement for any additional expenses to which it is entitled
(and for which it has not been reimbursed under clause (i) of Section
23(b)).
24. Assignment Prohibition. This Agreement may not be assigned by the
Advisor without the approval of a majority of the Board of Directors; provided,
however, that such approval shall not be required in the case of an assignment
to a corporation, association, trust or organization which may take over the
assets and carry on the affairs of the Advisor, provided that at the time of
such assignment, such successor organization shall be owned substantially by the
Advisor or its Affiliates and that an officer of the Advisor shall deliver to
the Board of Directors a statement in writing indicating the ownership structure
of the successor organization. Such an assignment shall bind the assignees
hereunder in the same manner as the Advisor is bound hereunder. 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 hereunder and by the terms of said assignment in the
same manner as the Company is bound hereunder.
25. Bylaws. The execution and performance of this Agreement hereby is
expressly made subject to Article VIII of the Bylaws of the Company.
26. 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 to the addresses set
forth herein:
To the Board of
Directors or
to the Company: Apple Suites, Inc.
000 X. Xxxx Xxxxxx
Xxxxxxxx, Xxxxxxxx 00000
Attn: Board of Directors
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To the Advisor: Apple Suites Advisors, Inc.
000 X. Xxxx Xxxxxx
Xxxxxxxx, Xxxxxxxx 00000
Attn: Xxxxx X. Xxxxxx
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.
27. Modification. This Agreement shall not be changed, modified, amended,
terminated or discharged, in whole or in part, except by an instrument in
writing signed by both parties hereto, or their respective successors or
assigns.
28. Shareholder Liability. No Shareholder of the Company shall be
personally liable for any of the obligations of the Company under this
Agreement.
29. 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.
30. Binding. This Agreement shall bind any successors or permitted assigns
of the parties hereto as herein provided.
31. Construction. The provisions of this Agreement shall be construed and
interpreted in accordance with the laws of the Commonwealth of Virginia.
32. 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.
33. 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 respect to any
occurrence be construed as a waiver of such
17
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.
34. 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.
35. 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.
36. 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.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement by
their duly authorized officers as of the date first written above.
APPLE SUITES, INC.
a Virginia corporation
By: /s/ Xxxxx X. Xxxxxx
------------------------------
Title: President
------------------------------
APPLE SUITES ADVISORS, INC.,
a Virginia corporation
By: /s/ Xxxxx X. Xxxxxx
------------------------------
Title: President
------------------------------
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