Exhibit (e)(1)
ADVISORY SERVICES AGREEMENT BETWEEN
XXXXX GOVERNMENT INCOME TRUST II
AND
XXXXX REALTY ADVISORS LIMITED PARTNERSHIP
Agreement dated as of this 11th day of September, 1991, between XXXXX
GOVERNMENT INCOME TRUST II (the "Trust"), a Massachusetts business trust, and
XXXXX REALTY ADVISORS LIMITED PARTNERSHIP (the "Advisor"), a Massachusetts
limited partnership.
W I T N E S S E T H:
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WHEREAS, the Trust is a business trust organized under the laws of The
Commonwealth of Massachusetts, which intends to qualify as a real estate
investment trust as defined in the Internal Revenue Code of 1986, as the same
may be amended or modified from time to time (which, together with any
regulations and rulings thereunder, is hereafter called the "Code"), and to
invest its funds in the investments permitted in its Declaration of Trust;
WHEREAS, the Trust is authorized to offer to the public during its
Initial Public Offering up to 18,750,000 shares of beneficial interest (the
"Shares");
WHEREAS, the Trust has filed a registration statement with the
Securities and Exchange Commission under the Securities Act of 1933, as amended,
covering certain of its securities to be offered to the public, and the Trust
may thereafter sell additional securities or otherwise raise additional capital;
WHEREAS, the Trust desires to avail itself of the experience, sources
of information, advice, assistance 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
Trustees (the "Trustees") of the Trust, all as provided herein; and
WHEREAS, the Advisor is willing to render such services, subject to the
supervision of the Trustees, on the terms and conditions hereinafter set forth:
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, IT IS AGREED as follows:
1. DUTIES OF ADVISOR. The Trust hereby retains the Advisor as
investment advisor of the Trust to perform the services hereinafter set forth,
and the Advisor hereby accepts such appointment, subject to the terms and
conditions hereinafter set forth. The Advisor undertakes to use its best efforts
to present to the Trust: (a) investment
opportunities consistent with the investment policies and objectives of the
Trust; and (b) investment opportunities consistent with such investment programs
as the Trustees may adopt from time to time. In performance of this undertaking,
subject to the supervision and review of the Trustees and consistent with the
provisions of the Trust's Declaration of Trust, the Advisor or its Affiliates
shall:
(i) obtain, furnish and supervise the performance of such
ministerial functions in connection with the management of the
day-to-day operations of the Trust subject to the supervision of the
Trustees;
(ii) exercise absolute discretion, subject to the Trustees'
review, in decisions to acquire, retain, sell, service or negotiate
future prepayment of Mortgages;
(iii) seek out, present and recommend investment opportunities
consistent with the Trust's investment policies and objectives, and
negotiate on behalf of the Trust with respect to potential investments
or the disposition thereof;
(iv) when necessary, serve as the mortgagee of record for the
Mortgages of the Trust and in that capacity hold escrows on behalf of
mortgagors in connection with the servicing of Mortgages, which it may
deposit with various banks including banks with which it may be
affiliated;
(v) obtain for the Trust such services as may be required in
acquiring and disposing of investments, disbursing and collecting the
funds of the Trust, paying the debts and fulfilling the obligations of
the Trust, and handling, prosecuting and settling any claims of the
Trust, including foreclosing and otherwise enforcing Mortgages and
other liens securing investments;
(vi) obtain for the Trust such services as may be required for
property management, mortgage brokerage and servicing, and other
activities relating to the investment portfolio of the Trust;
(vii) evaluate, structure and negotiate potential prepayments
or sales of Mortgages, coordinating with government agencies and FNMA
and FHLMC in connection therewith;
(viii) monitor and verify computations of Additional Interest
payments and monitor operations and expenses of the properties
underlying the Mortgages;
(ix) from time to time, or as requested by the Trustees, make
reports to the Trust as to its performance of the foregoing services;
(x) exercise absolute discretion, subject to the Trustees'
review, in any decision to list the Shares on any national securities
exchange; and
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(xi) do all things necessary to assure its ability to render
the services contemplated herein.
2. FIDUCIARY RELATIONSHIP. The Advisor, as a result of its relationship
with the Trust pursuant to this Agreement, stands in a fiduciary relationship
with the Trust and its Shareholders. Accordingly, the Advisor will use its best
efforts to present to the Trust suitable investments which are consistent with
the investment objectives and policies of the Trust. Except for the allocation
of investment opportunities between the Trust and Affiliates as described in the
prospectus, the Advisor shall be obligated to present an investment opportunity
to the Trust if (i) such opportunity is of a character which could be taken by
the Trust, (ii) such opportunity is compatible with the Trust's investment
objectives and policies and (iii) the Trust has the financial resources to take
advantage of such opportunity, before the Advisor may take advantage of such
opportunity for its own account or present or recommend it to others.
3. NO PARTNERSHIP OR JOINT VENTURE. The Trust and the Advisor are not
partners or joint venturers with each other and nothing herein shall be
construed to make them partners or joint venturers or impose any liability as
such on either of them.
4. RECORDS. At all times, the Advisor shall keep books of account and
records relating to services performed hereunder, which books of account and
records shall be accessible for inspection by the Trust at any time during the
ordinary business hours of the Advisor.
5. REIT QUALIFICATION. Anything else in this Agreement to the contrary
notwithstanding, the Advisor shall refrain from any action (including, without
limitation, furnishing or rendering services to tenants of property or managing
or operating real property) which, in its sole judgment made in good faith, or,
in the judgment of the Trustees, provided that the Trustees give the Advisor
written notice to such effect, would: (a) adversely affect the status of the
Trust as a real estate investment trust pursuant to Sections 856 through 860 of
the Code; (b) violate any law, rule, regulation or statement of policy of any
governmental body or agency having jurisdiction over the Trust, or over its
securities; or (c) be prohibited by the Trust's Declaration of Trust.
6. BANK ACCOUNTS. The Advisor may establish and maintain one or more
bank accounts in its own name and may collect and deposit in any such account,
and disburse from any such account, any money on behalf of the Trust, under such
terms and conditions as the Trustees may approve, provided that no funds in such
account shall be commingled with funds of any other Person. From time to time
and upon appropriate request, the Advisor shall render appropriate accounting of
such collections and payments to the Trustees and the auditors of the Trust.
7. BOND. If required by the Trustees, the Advisor will maintain a
fidelity bond with a responsible surety company in such amounts as may be
required by the Trustees, covering all directors, officers, employees and agents
of the Advisor handling funds of the Trust and investment documents or records
pertaining to investments of the Trust. Such bonds shall inure to the benefit of
the Trust in respect of losses from acts of
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such directors, officers, employees and agents through theft, embezzlement,
fraud, negligence, error or omission or otherwise. The premiums on such bond
shall be paid by the Trust.
8. INFORMATION FURNISHED TO THE ADVISOR.
(a) The Trustees shall, at all times, keep the Advisor fully
informed with regard to the investment policy of + the Trust, including any
specific types of Mortgages or investments desired, the desired geographical
areas of investments, and any criteria or conditions established by the Trustees
as to whether the Trust will make a particular investment, the capitalization
policy of the Trust (including the policy with regard to the incurrence of
indebtedness by the Trust) and their intentions as to the future operations of
the Trust. In particular, the Trustees shall notify the Advisor promptly of
their intention to sell or otherwise dispose of any of the Trust's investments,
to make any new investment, to incur any indebtedness or to issue any additional
Shares in the Trust.
(b) The Trust shall furnish the Advisor with a copy of all
financial statements of the Trust, a signed copy of each report prepared by the
independent certified public accountants, and such other information with regard
to the Trust's affairs as the Advisor may from time to time reasonably request.
9. CONSULTATION AND ADVICE. In addition to the services described
above, the Advisor shall consult with the Trustees and shall, at the request of
the Trustees, furnish advice and recommendations with respect to other aspects
of the business and affairs of the Trust.
10. DEFINITIONS. To the extent not defined below, capitalized terms
used herein will have the meaning given to them in the Prospectus. As used
herein, the following terms shall have the meanings set forth below:
(a) "ACCOUNTANTS" means Coopers & Xxxxxxx, Boston
Massachusetts, a successor thereto, or another firm of
independent certified public accountants selected by the
Trustees.
(b) "ACQUISITION EXPENSES" means expenses (other than the
Acquisition Fee) incurred by the Trust relating to selection
and acquisition of Mortgages, whether or not acquired,
including the fees and expenses of lawyers, appraisers,
engineers, architects and accountants, Affiliate costs, travel
and communications expenses, costs of appraisals,
non-refundable option payments on Mortgages not acquired, and
accounting fees and expenses, but not fees and commissions
paid by any Person to any Person in connection with the
selection or purchase of any Mortgage by the Trust, whether
designated as a real estate commission, acquisition fee,
finder's fee, selection fee, non-recurring management fee,
consulting fee or any fee of similar nature however designated
and however treated for tax or accounting purposes, and not
any loan fees ("points").
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(c) "ACQUISITION FEE" means a fee payable to the Advisor or
its Affiliates equal to 2.5% of the Gross Proceeds for
services rendered in connection with the origination or
acquisition of mortgages by the Trust. In the event that any
other fee or commission is incurred by any party, whether
designated as a real estate commission, acquisition fee,
finder's fee, selection fee, non-recurring management fee,
consulting fee or any fee of similar nature however designated
and however treated for tax or accounting purposes (but
excluding Origination Fees and a development fee, if any, paid
to any person not affiliated with the Sponsor in connection
with the development of a project, after acquisition of land
by the Trust), it shall be paid by the Advisor or its
Affiliates out of the Acquisition Fee. In the event that the
total of such other fees or commissions exceeds 2.5% of the
Gross Proceeds, such excess will be paid by the Advisor or its
Affiliates.
(d) "ADDITIONAL INTEREST" means Minimum Additional Interest,
Shared Appreciation Interest, Shared Income Interest,
Participating Appreciation Interest and Participating Income
Interest, as those terms are defined in the Prospectus.
(e) "ADVISOR" means Xxxxx Realty Advisors Limited Partnership,
or any other Person who is responsible for directing or
performing the day-to-day business affairs of the Trust,
including a Person to which the Advisor subcontracts
substantially all such functions.
(f) "AFFILIATE" means, when used with reference to a specified
Person, (i) any Person that directly or indirectly through one
or more intermediaries controls or is controlled by or is
under common control with the specified Person, (ii) any
Person that is an officer of, partner in or trustee of, or
serves in a similar capacity with respect to, the specified
Person or of which the specified Person is an officer, partner
or trustee, or with respect to which the specified Person
serves in a similar capacity, and (iii) any Person that,
directly or indirectly, is the beneficial owner of 10% or more
of any class of voting securities of the specified Person or
of which the specified Person is directly or indirectly the
owner of 10% or more of any class of equity securities or in
which the specified Person has a substantial beneficial
interest. A person who is a partner in a partnership or joint
venture with the Trust shall not be deemed an Affiliate of the
Trust if such Person is not otherwise an Affiliate of the
Trust as defined in the preceding sentence.
(g) "ASSET MANAGEMENT FEE" means the asset management fee
payable to the Advisor under the provisions of this Agreement.
(h) "AVERAGE INVESTED ASSETS" means the average of the
aggregate book value of the assets of the Trust for any period
invested, directly or indirectly, in Mortgages, before
reserves for depreciation or bad debts or
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similar non-cash reserves, computed by taking the average of
such values at the end of each month during such period.
(i) "CASH FROM DISPOSITION OF MORTGAGES" means the cash
received by the Trust as a result of a Repayment or Sale,
including any Preferred Return Interest, Participating
Appreciation Interest and Shared Appreciation Interest but
excluding any other interest, less (i) all costs, expenses,
debts and liabilities of the Trust required to be paid as a
result of the repayment or sale and (ii) any reserves for
contingent liabilities to the extent deemed reasonable by the
Trust provided that, at the expiration of such period as the
Trust shall deem advisable, the balance of such reserves shall
be included in Cash from Disposition of Mortgages.
(j) "COMPETITIVE REAL ESTATE COMMISSION" means that real
estate or brokerage commission paid for the purchase or sale
of a property which is reasonable, customary and competitive
in light of the size, type and location of such property.
(k) "CUMULATIVE RETURN ON INVESTED CAPITAL" means a percentage
return equal to eleven percent (11%) per annum on Invested
Capital calculated from the respective dates on which the sale
of Shares to the Shareholders occur through the most recent
fiscal year completed prior to the transaction giving rise to
the computation. In calculating whether the Cumulative Return
on Invested Capital has been satisfied, only distributions by
the Trust of cash will be considered.
(l) "DECLARATION OF TRUST" means the declaration of trust,
certificate or articles of incorporation or other governing
instrument pursuant to which the Trust is organized as amended
and/or amended and restated from time to time.
(m) "DIVIDEND" means a dividend paid by the Trust from any
source (including mortgage interest payments, amortization,
mortgage prepayments and, in the case of PIMs and PIMIS, cash
flow and appreciation participation interests) in respect of
the Shares. A Dividend may include a return of capital to the
Shareholders and/or a payment of ordinary income, capital gain
or items of tax preference.
(n) "FHA" means the Federal Housing Administration.
(o) "FHLMC" means the Federal Home Loan Mortgage Corporation.
(p) "FNMA" means the Federal National Mortgage Association.
(q) "GNMA" means the Government National Mortgage Association.
(r) "GROSS PROCEEDS" means the total proceeds from the sale of
Shares pursuant to the Initial Public Offering of Shares
before deductions for
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Organizational and Offering Expenses, sales commissions, the
Participator Serving Fee, the Non-Accountable Allowance, and
due diligence reimbursement.
(s) "INDEPENDENT TRUSTEES" means the Trustees who: (i) are 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
services as an officer or director of, the Advisor or its
Affiliates; (ii) do not serve as a director or trustee for
more than two other REITs organized by the Sponsor; and (iii)
perform no other services for the Trust, except as Trustees.
For this purpose, an indirect relationship shall include
circumstances in which an immediate family member of a Trustee
has one of the foregoing relationships with the Advisor or the
Trust.
(t) "INITIAL PUBLIC OFFERING" means the offering of up to
$375,000,000 shares pursuant to the Prospectus, which offering
will commence on the date of the Prospectus and will end not
later than two years from the date of the Prospectus.
(u) "INVESTED CAPITAL" means $20.00 per share less all
Dividends which constitute: (i) proceeds from the Repayment
or Sale of Mortgages; or (ii) Shared Appreciation Interest
and Participating Appreciation Interest.
(v) "MBS" means guaranteed mortgage-backed securities issued
or originated under or in connection with the housing programs
of GNMA, FNMA, or FHLMC.
(w) "MORTGAGE" means collectively PIMIs (Insured Mortgages and
Additional Loans), PIMs, Single-Family MBS, Multi-Family MBS,
Operating Loans, Other Mortgages, or participations in any of
the foregoing, which, under the REIT Provisions of the Code,
would be considered to be qualifying real estate assets for
the purposes of the Trust's qualification as a REIT.
(x) "NON-ACCOUNTABLE ALLOWANCE" means the allowance paid by
the Trust through an Affiliate of the Advisor to the Sales
Agent and selected dealers.
(y) "ORGANIZATIONAL AND OFFERING EXPENSES" means those
expenses incurred in connection with, and in preparing the
Trust for, registration under the federal and state securities
laws and subsequently offering and distributing the Shares to
the public, including certain marketing expenses and all
advertising expenses but not including sales commissions, the
Participation Servicing Fee, the Non-Accountable Allowance, or
the
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Advisor's sales incentives paid to broker-dealers in
connection with the distribution of the Shares, or due
diligence reimbursement.
(z) "ORIGINAL INVESTMENT" means $20.00 per Share.
(aa) "PARTICIPATION SERVICING FEE" means a fee paid to the
Advisor or an Affiliate equal to 1.5% of the gross proceeds of
the offering, prepaid for the servicing of the participation
features of the PIMIs and PIMs, including, but not limited to,
servicing the monthly receipt of Minimum Additional Interest,
Participating Income Interest and Shared Income Interest as
well as realization of Shared Appreciation Interest
Participating Appreciation Interest and Preferred Return
Interest and other activities related to realizing the Trust's
participation interest.
(bb) "PERSON" means any individual, partnership, corporation,
trust, governmental body or agency, or other entity of any
type.
(cc) "PROPERTY MANAGEMENT FEE" means a fee paid to the Advisor
or its Affiliates by the Trust in the event of a default on a
Mortgage and subsequent foreclosure on the underlying property
or receipt of deed in lieu of such foreclosure, if the Advisor
or its Affiliates perform property management services with
respect to such property. The fee shall be in an amount
customarily charged in arm's-length transactions by other
firms rendering comparable services for comparable properties
in the localities where such properties are located, but in no
event to exceed 5% of the gross receipts from residential
properties under management (including all rent-up, leasing
and re-leasing fees and bonuses, and leasing related services
paid to any Person, except for locator services performed by
non-Affiliates in certain geographic areas where such locator
services are not customarily included in property management
services). Such fees shall include any fees paid to any other
person for property management services with respect to the
properties under management by the Trust or its Affiliates.
(dd) "PROSPECTUS" means the Prospectus of the Trust used in
connection with its public offering of Shares, as supplemented
or amended.
(ee) "REAL ESTATE BROKERAGE FEE" means a fee paid to the
Advisor or its Affiliates in the event that the Trust
forecloses on a property securing a Mortgage and sells such
property. Such fee shall be reasonable, customary and
competitive, taking into consideration the size, type and
location of the property provided, however, such fees shall be
paid only if the Advisor or its Affiliates perform a
substantial amount of services in the sales effort, in which
case such fees shall not exceed the lesser of (i) one-half of
the brokerage commission paid or (ii) three percent (3%) of
the contracted for sales price.
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(ff) "REIT" means a real estate investment trust described in
sections 856 through 860 of the Code (the "REIT Provisions").
(gg) "REPAYMENT OR SALE" means the repayment of principal or
prepayment of a Mortgage to the extent classified as a return
of capital for federal income tax purposes, the exercise by
the Trust of its Repayment Rights, and the sale, exchange or
other disposition of a Mortgage.
(hh) "SHAREHOLDERS" means holders of Shares.
(ii) "SHARES" means the shares of beneficial interest, without
par value, of the Trust.
(jj) "SUBORDINATED INCENTIVE FEE" means a fee paid to the
Advisor or an Affiliate equal to 4% of Cash from Disposition
of Mortgages, payable only if all Shareholders have received
an aggregate return equal to their Invested Capital and a
Cumulative Return on Invested Capital equal to 11% on an
annual noncompounded basis. In no event will the Subordinated
Incentive Fee exceed an amount equal to 15% of Cash from
Disposition of Mortgages remaining after payment to the
Shareholders of an amount equal to the sum of (i) 100% of
their Original Investments, and (ii) an annual cumulative
return of 6% on such original Investments less all prior
distributions of Cash from Disposition of Mortgages.
(kk) "TOTAL OPERATING EXPENSES" means all operating, general,
and administrative expenses of the Trust as determined by
generally accepted accounting principles exclusive of the
expenses of raising capital, interest payments, taxes,
non-cash expenditures (i.e., depreciation, amortization, bad
debt reserve), the Subordinated Incentive Fee, and other costs
related directly to a specific Mortgage investment by the
Trust, such as expenses for originating, acquiring, servicing
or disposing of a Mortgage.
(ll) "TRUSTEES" means any trustees of the Trust.
11. ASSET MANAGEMENT FEE. The Trust shall pay to the Advisor as partial
compensation for the services rendered to the Trust hereunder an Asset
Management Fee equal to 0.75% of the Average Invested Assets of the Trust, per
annum, payable quarterly, beginning in the twenty-fifth month after the date of
the Prospectus.
12. OTHER FEES OF THE ADVISOR.
(a) The Trust shall pay to the Advisor an Acquisition Fee for
services rendered in connection with the acquisition of Mortgages in an amount
equal to 2.5% of the Gross Proceeds. The Advisor and its Affiliates will be
reimbursed on an accountable basis for Acquisition Expenses incurred up to 0.5%
of the Gross Proceeds and will receive a non-accountable Acquisition Expense
allowance of 1.5% of the Gross Proceeds. Acquisition Expenses in excess of 2% of
the Gross Proceeds will be paid by the Advisor or Affiliates.
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(b) The Trust shall pay to the Advisor or its Affiliates a
Participation Servicing Fee equal to 1.5% of the Gross Proceeds, prepaid for the
servicing of the participation features of the PIMs and PIMIs, including, but
not limited to, servicing the monthly receipt of Minimum Additional Interest,
Participating Income Interest and Shared Income Interest as well as realization
of Shared Appreciation Interest, Participating Appreciation Interest and
Preferred Return Interest and other activities related to realizing the Trust's
participation interest.
(c) The Trust shall pay to the Advisor a Subordinated
Incentive Fee equal to 4% of the Cash from Disposition of Mortgages; the payment
of which fee being subordinated to the prior payment to Shareholders of an
aggregate return equal to their Invested Capital plus an amount which equals an
11% per annum Cumulative Return on Invested Capital on a noncompounded basis.
Once the Shareholders have received their Cumulative Return on Invested Capital,
the Cash from Disposition of Mortgages shall be paid 100% to the Advisor or an
Affiliate as a fee until it has received an amount equal to 4% of the Cash from
Disposition of Mortgages, after which such cash shall be paid 96% as a Dividend
to Shareholders and 4% as a fee to the Advisor or its Affiliates. In no event
will the Subordinated Incentive Fee exceed an amount equal to 15% of Cash from
Disposition of Mortgages remaining after payment to the Shareholders of an
amount equal to the sum of (i) 100% of their Original Investments, and (ii) an
annual cumulative return of 6% on such Original Investments less all prior
distributions of Cash from Disposition of Mortgages.
(d) The Trust may pay to the Advisor or its Affiliates a Real
Estate Brokerage Fee in the event the Trust forecloses on a property securing a
Mortgage and sells such property. Such fee shall be reasonable, customary and
competitive, taking into consideration the size, type and location of the
property provided, however, such fees shall be paid only if the Advisor or its
Affiliates perform a substantial amount of services in the sales effort, in
which case such fees shall not exceed the lesser of (i) one-half of the
brokerage commission paid or (ii) three percent (3%) of the contracted for sales
price. In addition, the amount paid when added to the sums paid to unaffiliated
parties in such a capacity shall not exceed the lesser of the Competitive Real
Estate Commission or an amount equal to 6% of the contracted for sales price.
13. COMPENSATION FOR ADDITIONAL SERVICES. In the event of a default on
a Mortgage and subsequent foreclosure on the underlying property or a deed in
lieu of such foreclosure, the Advisor or its Affiliates may perform property
management services with respect to the properties underlying the Mortgages. In
such event, the Trust may pay a Property Management Fee equal to an amount
customarily charged in arm's-length transactions by other firms rendering
comparable services for comparable properties in the localities where such
properties are located, but in no event to exceed 5% of the gross receipts from
residential properties under management (including all rent-up, leasing and
re-leasing fees and bonuses, and leasing related services, paid to any Person,
except for locator services performed by non-Affiliates in certain geographic
areas where such locator services are not customarily included in property
management services). Such fees shall include any fees paid to any other Person
for property management services with respect to the properties under management
by the Trust or its Affiliates.
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14. STATEMENTS. Prior to the payment of any fees hereunder, the Advisor
shall furnish to the Trust a statement showing the computation of the fees, if
any, payable under Sections 11, 12 and 13 hereof.
15. EXPENSES OF THE TRUST.
(a) The Trust shall pay all of its expenses. Without limiting
the foregoing, it is specifically agreed that the following expenses of the
Trust shall be paid by the Trust and shall not be paid by the Advisor:
(i) The cost of money borrowed by the Trust;
(ii) taxes on income and taxes and assessments on real
property and all other taxes applicable to the Trust;
(iii) fees and expenses paid to independent contractors,
mortgage servicers, consultants, managers and other agents employed by or on
behalf of the Trust;
(iv) expenses directly connected with the acquisition,
ownership, and disposition of investments, or other property and with the
purchase of Mortgages (including the costs of foreclosure, insurance premiums,
legal services, brokerage and sales commissions, maintenance, repair and
improvement of property);
(v) expenses of maintaining and managing real estate equity
interests, processing and servicing mortgage and other loans and managing the
Trust's other investments;
(vi) insurance coverage in connection with the business of the
Trust (including, to the extent permitted under the Declaration of Trust,
officers' and Trustees' liability insurance);
(vii) the expenses of revising, amending, converting,
modifying or terminating the Trust or revising, amending or modifying its
organizational documents;
(viii) expenses connected with payments of Dividends or
interests or distributions in cash or any other form made or caused to be made
by the Trustees to Shareholders;
(ix) all expenses connected with communications to
Shareholders and other bookkeeping and clerical work necessary in maintaining
relations with the Shareholders, including the cost of printing and mailing
share certificates, proxy solicitation materials and reports to Shareholders;
(x) the cost of any accounting, statistical or bookkeeping
equipment necessary for the maintenance of the books and records of the Trust;
(xi) transfer agent's and registrar's fees and charges; and
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(xii) other legal, accounting and auditing fees and expenses
as well as any costs incurred in connection with any other litigation in which
the Trust is involved and in the examination, investigation or other proceedings
conducted by any regulatory agency with respect to the Trust.
(b) The Trust shall reimburse the Advisor and its Affiliates
for: (i) the actual costs to the Advisor or its Affiliates of goods, materials
and services used for and by the Trust obtained from unaffiliated parties; (ii)
administrative services necessary to the operation of the Trust; (iii) the cost
of certain personnel employed by the Trust and directly involved in the
organization and business of the Trust including persons who may be employees or
officers of the Advisor and its Affiliates; and (iv) legal, accounting, transfer
agent, data processing, duplicating and investor communications services
performed by employees or officers of the Advisor and its Affiliates which could
be performed directly for the Trust by independent parties. The amounts charged
to the Trust for services performed pursuant to clause (ii) above will not
exceed the lesser of: (a) the actual cost of such services; or (b) the amount
which the Trust would be required to pay to independent parties for comparable
services. No reimbursement will be allowed to the Advisor or its Affiliates for
services performed pursuant to clause (ii) above unless the Advisor or its
Affiliates have the appropriate experience and expertise to perform such
services.
(c) The Trust will reimburse the Advisor for any travel
expenses incurred in connection with the services provided hereunder and for
advertising expenses incurred by it in seeking any investments or seeking the
disposition of any investments held by the Trust.
16. LIMITATION ON EXPENSES, REFUND AND COMPENSATION.
(a) The annual Total Operating Expenses of the Trust may not
exceed in any fiscal year the greater of: (1) 2% of the Average Invested Assets
of the Trust during such fiscal year; or (2) 25% of the Trust's Net Income
during such fiscal year. The Independent Trustees have a fiduciary
responsibility to limit the Trust's annual Total Operating Expenses to amounts
that do not exceed the limitations described above. The Independent Trustees
may, however, determine, with the approval of the California Commissioner of
Corporations, that a higher level of Total Operating Expenses is justified for a
given fiscal year because of unusual or non-recurring expenses.
Within 60 days after the end of any fiscal quarter of the
Trust for which Total Operating Expenses (for the 12 months then ended) exceeded
both 2% of the Average Invested Assets of the Trust and 25% of the Trust's Net
Income, there shall be sent to Shareholders a written disclosure of such fact.
If the Independent Trustees determine that such higher Total Operating Expenses
are justified, such disclosure will also contain an explanation of the
Independent Trustees conclusion. In the event the Independent Trustees determine
that such excess expenses are not justified, the Advisor shall reimburse the
Trust for the excess amount within 60 days after the end of the Trust's fiscal
year.
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(b) The Declaration of Trust provides that the Independent
Trustees are to determine at least annually that the amount of compensation
which the Trust contracts to pay the Advisor is reasonable in relation to the
nature and quality of the services performed, based on the factors set forth in
the Declaration of Trust and such other factors as they deem relevant, including
the size of the fee in relation to size, composition and profitability of the
portfolio of the Trust, the success of the Advisor in generating opportunities
that meet the investment objectives of the Trust, the rates charged to other
REITs and to investors other than REITs by advisors performing similar services,
the amount of additional revenues realized by the Advisor and its Affiliates for
other services performed for the Trust, the quality and extent of service and
advice furnished by the Advisor, the performance of the investment portfolio of
the Trust and the quality of the portfolio of the Trust in relationship to the
investments generated by the Advisor for its own account.
17. OTHER ACTIVITIES OF ADVISOR. Nothing in this Agreement shall
prevent the Advisor or any of its officers, directors or employees or any of its
Affiliates from engaging in other business activities related to real estate,
mortgage investments or other investments whether similar or dissimilar to those
made by the Trust or from acting as advisor to any other person or entity having
investment policies whether similar or dissimilar to those of the Trust
(including another real estate investment trust).
18. TERM; TERMINATION OF AGREEMENT. This Agreement shall continue in
force for a period of one year from the date of the commencement of the
offering. Thereafter, it may be renewed annually, subject to an evaluation of
the performance of the Advisor by the Trustees. Notice of renewal shall be given
in writing by the Trust to the Advisor not less than 60 days before the
expiration of this Agreement or of any extension thereof.
This Agreement shall be terminable (i) without cause by the Advisor or
(ii) without cause by a majority of the Independent Trustees, each without
penalty, and each upon 60 days' prior written notice to the non-terminating
party.
In the event of the termination of the Advisor, the Advisor will
cooperate with the Trust and take all reasonable steps requested to assist the
Trustees in making an orderly transition of the advisory function.
19. AMENDMENTS. 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 assigns, or
otherwise as provided herein.
20. ASSIGNMENT. This Agreement may not be assigned by the Advisor,
without the written consent of the Trust, except to a corporation or other
person which controls, is controlled by, or is under common control with the
Advisor, or a corporation, association, trust or other successor organization
which may take over the property and carry on the affairs of the Advisor. Any
assignee of the Advisor shall be bound hereunder to the same extent as the
Advisor. This Agreement shall not be assigned by the Trust without the written
consent of the Advisor, except to a corporation, association, trust or other
organization which is a successor to the Trust. Such successor shall be
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bound hereunder to the same extent as the Trust. Notwithstanding anything to the
contrary contained herein, the economic rights and obligations of the Advisor
hereunder, including the right to receive all compensation hereunder, may be
sold, transferred or assigned by the Advisor without the consent of the Trust.
21. ACTION UPON TERMINATION. From and after the effective date of
termination of this Agreement, pursuant to Section 18 hereof, the Advisor shall
not be entitled to compensation for further service rendered hereunder but shall
be paid all compensation and reimbursed for all expenses accrued through the
date of termination, including a proportionate share of any Subordinated
Incentive Fee which may be payable pursuant to Section 12(c) as a result of any
subsequent maturing, disposition, financing or retirement of an investment by
the Trust based upon the portion of the total period that the investment was
held by the Trust that the Advisor served as investment advisor. The Advisor
shall forthwith upon such termination:
(a) pay over to the Trust all moneys collected and held for
the account of the Trust pursuant to this Agreement, after deducting any accrued
compensation and reimbursement for its expenses to which it is then entitled;
(b) deliver to the Trust a full accounting, including a
statement showing all payments collected by it and a statement of all moneys
held by it, covering the period following the date of the last accounting
furnished to the Trust; and
(c) deliver to the Trust all property and documents of the
Trust then in the custody of the Advisor.
22. INCORPORATION OF THE DECLARATION OF TRUST. To the extent the
Declaration of Trust imposes obligations or restrictions on the Advisor or
grants 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.
23. MISCELLANEOUS. The Advisor assumes no responsibility under this
Agreement other than to render the services called for hereunder in good faith,
and shall not be responsible for any action of the Trust in following or
declining to follow any advice or recommendations of the Advisor. Neither the
Advisor, its shareholders, directors, officers nor employees shall be liable to
the Trust, the Shareholders or to any successor or assignee of the Trust, except
by reason of acts constituting negligence or misconduct, as long as the course
of conduct was determined in good faith to be in the best interests of the
Trust. The Advisor hereby agrees to look solely to the assets of the Trust for
satisfaction of all claims against the Trust, and in no event shall any
Shareholder, Trustee, officer or agent of the Trust have any personal liability
for the obligations of the Trust under this Agreement.
24. NOTICES. Any notice, report or other communication required or
permitted to be given hereunder shall be in writing, and shall be given by
delivering such notice by
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hand or by certified mail, return receipt requested, postage prepaid, at the
following address of the parties hereto:
Xxxxx Government Income Trust II
000 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Xxxxx Realty Advisors Limited Partnership
000 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Either party may at any time change its address for the purpose of this
Section 24 by like notice.
25. HEADINGS. The section headings hereof have been inserted for
convenience of reference only and shall not be construed to affect the meaning,
construction or effect of this Agreement.
26. GOVERNING LAW. The provisions of this Agreement shall be construed
and interpreted in accordance with the laws of The Commonwealth of Massachusetts
as at the time in effect.
IN WITNESS WHEREOF, the undersigned have caused this agreement to be
signed as of the day and year first above written.
XXXXX GOVERNMENT INCOME TRUST II
By: /s/ Xxxxxxxx Xxxxxx
------------------------------------
Name: Xxxxxxxx Xxxxxx
Title:
XXXXX REALTY ADVISORS LIMITED PARTNERS
By: KMI Corporation, its general partner
By: /s/ Xxxxx X. Xxxxxxxx
------------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: President
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