EXHIBIT 10.2
Form of Advisory Agreement
ADVISORY AGREEMENT
THIS ADVISORY AGREEMENT, dated as of ________________, 2004, is between
CNL INCOME PROPERTIES, INC., a corporation organized under the laws of the State
of Maryland (the "Company") and CNL INCOME CORP., a corporation organized under
the laws of the State of Florida (the "Advisor").
W I T N E S S E T H
WHEREAS, the Company has filed with the Securities and Exchange
Commission a Registration Statement (No. 333-108355) on Form S-11 covering
200,000,000 of its common shares, par value $.01 per share ("Shares"), to be
offered to the public, and the Company may subsequently issue securities other
than such Shares ("Securities") or otherwise raise additional capital;
WHEREAS, the Company intends to qualify as a REIT (as defined below),
and to invest its funds in investments permitted by the terms of the
Registration Statement and Sections 856 through 860 of the Code (as defined
below);
WHEREAS, the Company desires to avail itself of the experience, sources
of information, advice, 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
Board of Directors of the Company all as provided herein; and
WHEREAS, the Advisor is willing to undertake to render such services,
subject to the supervision of the Board of Directors, on the terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements contained herein, the parties hereto agree as follows:
(1) DEFINITIONS. As used in this Advisory Agreement (the "Agreement"),
the following terms have the definitions hereinafter indicated:
Acquisition Expenses. Any and all expenses incurred by the Company, the
Advisor, or any Affiliate of either in connection with the selection,
acquisition or making of any investment, including any Property, Loan or other
Permitted Investment, whether or not acquired, including, without limitation,
legal fees and expenses, travel and communication expenses, costs of appraisals,
nonrefundable option payments on property not acquired or made, accounting fees
and expenses, and title insurance.
Acquisition Fees. Any and all fees and commissions, exclusive of
Acquisition Expenses, paid by any Person or entity to any other Person or entity
(including any fees or commissions paid by or to any Affiliate of the Company or
the Advisor) in connection with making an investment including making or
investing in Loans or other Permitted Investments or the purchase,
development or construction of a Property, including, without limitation, real
estate commissions, acquisition fees, finder's fees, selection fees, development
fees, construction fees, nonrecurring management fees, consulting fees, loan
fees, points, or any other fees or commissions of a similar nature. Excluded
shall be development fees and construction fees paid to any Person or entity not
Affiliated with the Advisor in connection with the actual development and
construction of any Property. Further, Acquisition Fees will not be paid in
connection with temporary short-term investments acquired for purposes of cash
management.
Advisor. CNL Income Corp., a Florida corporation, any successor Advisor
to the Company, or any Person or entity to which CNL Income Corp. or any
successor advisor subcontracts substantially all of its functions. The Advisor
will have responsibility for the day-to-day operations of the Company.
Affiliate or Affiliated (or any derivation thereof). An affiliate of
another Person, which is defined as: (i) any Person directly or indirectly
owning, controlling, or holding, with power to vote 10% or more of the
outstanding voting securities of such other Person; (ii) any Person 10% or more
of whose outstanding voting securities are directly or indirectly owned,
controlled or held, with power to vote, by such other Person; (iii) any Person
directly or indirectly controlling, controlled by, or under common control with
such other Person; (iv) any executive officer, director, trustee or general
partner of such other Person; and (v) any legal entity for which such Person
acts as an executive officer, director, trustee or general partner.
Appraised Value. Value according to an appraisal made by an Independent
Appraiser.
Articles of Incorporation. The Articles of Incorporation of the
Company, as amended from time to time.
Asset Management Fee. The fee payable to the Advisor for day-to-day
professional management services in connection with the Company and its
investments in Properties Loans and other Permitted Investments pursuant to this
Agreement.
Assets. Properties, Loans and other Permitted Investments,
collectively.
Average Invested Assets. For a specified period, 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, or in
other Permitted Investments, 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.
Board of Directors or Board. The Directors of the Company.
Bylaws. The bylaws of the Company, as the same are in effect and may be
amended from time to time.
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Cause. With respect to the termination of this Agreement, fraud,
criminal conduct, willful misconduct or willful or negligent breach of fiduciary
duty by the Advisor, breach of this Agreement, a default by the Sponsor under
the guarantee by the Sponsor to the Company or the bankruptcy of the Sponsor.
Change of Control. A change of control of the Company of such a nature
that would be required to be reported in response to the disclosure requirements
of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act
of 1934, as amended, as enacted and in force on the date hereof (the "Exchange
Act"), whether or not the Company is then subject to such reporting
requirements; provided, however, that, without limitation, a change of control
shall be deemed to have occurred if: (i) any "person" (within the meaning of
Section 13(d) of the Exchange Act) is or becomes the "beneficial owner" (as that
term is defined in Rule 13d-3, as enacted and in force on the date hereof, under
the Exchange Act) of securities of the Company representing 8.5% or more of the
combined voting power of the Company's securities then outstanding; (ii) there
occurs a merger, consolidation or other reorganization of the Company which is
not approved by the Board of Directors of the Company; (iii) there occurs a
sale, exchange, transfer or other disposition of substantially all of the assets
of the Company to another entity, which disposition is not approved by the Board
of Directors of the Company; or (iv) there occurs a contested proxy solicitation
of the Stockholders of the Company that results in the contesting party electing
candidates to a majority of the Board of Directors' positions next up for
election.
Code. Internal Revenue Code of 1986, as amended from time to time, or
any successor statute thereto. Reference to any provision of the Code shall mean
such provision as in effect from time to time, as the same may be amended, and
any successor provision thereto, as interpreted by any applicable regulations as
in effect from time to time.
Company. CNL Income Properties, Inc., a corporation organized under the
laws of the State of Maryland.
Company Property. Any and all property, real, personal or otherwise,
tangible or intangible, including Loans and other Permitted Investments, which
is transferred or conveyed to the Company (including all rents, income, profits
and gains therefrom), and which is owned or held by, or for the account of, the
Company.
Competitive Real Estate Commission. A real estate or brokerage
commission for the purchase or sale of property, which is reasonable, customary,
and competitive in light of the size, type, and location of the property. The
total of all real estate commissions paid by the Company to all Persons
(including the Subordinated Disposition Fee payable to the Advisor) in
connection with any Sale of one or more of the Company's Properties shall not
exceed the lesser of (i) a Competitive Real Estate Commission or (ii) six
percent of the gross sales price of the Property or Properties.
Contract Purchase Price. The amount actually paid or allocated (as of
the date of purchase) to the purchase, development, construction or improvement
of property, exclusive of Acquisition Fees and Acquisition Expenses.
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Contract Sales Price. The total consideration received by the Company
for the sale of Company Property.
Director. A member of the Board of Directors of the Company.
Distributions. Any distribution of money or other property by the
Company to owners of Equity Shares, including distributions that may constitute
a return of capital for federal income tax purposes.
Equity Interest. The stock of or other interests in, or warrants or
other rights to purchase the stock of or other interests in, any entity that has
borrowed money from the Company or that is a tenant of the Company or that is a
parent or controlling Person of any such borrower or tenant.
Equity Shares. This term shall have the same meaning as the definition
of "Equity Shares" in the Company's Articles of Incorporation.
Gross Proceeds. The aggregate purchase price of all Shares sold for the
account of the Company through the Offering, without deduction for selling
commissions, volume discounts, the marketing support fee, due diligence expense
reimbursements or Organizational and Offering Expenses. For the purpose of
computing Gross Proceeds, the purchase price of any Share for which reduced or
no selling commissions or marketing support fees are paid to the Managing Dealer
or a Soliciting Dealer (where net proceeds to the Company are not reduced) shall
be deemed to be the full offering price of the Shares, with the exception of
Shares purchased pursuant to the Company's reinvestment plan, which will be
factored into the calculation using their actual purchase price.
Independent Appraiser. A qualified appraiser of real estate as
determined by the Board. Membership in a nationally recognized appraisal society
such as the Appraisal Institute ("M.A.I.") or the Society of Real Estate
Appraisers ("S.R.E.A.") shall be conclusive evidence of such qualification.
Independent Director. A Director who is not and within the last two
years has not been directly or indirectly associated with the Advisor by virtue
of (i) ownership of an interest in the Advisor or its Affiliates, (ii)
employment by the Advisor or its Affiliates, (iii) service as an officer or
director of the Advisor or its Affiliates, (iv) performance of services, other
than as a Director, for the Company, (v) service as a director or trustee of
more than three real estate investment trusts advised by the Advisor, or (vi)
maintenance of a material business or professional relationship with the Advisor
or any of its Affiliates. A business or professional relationship is considered
material if the gross revenue derived by the Director from the Advisor and
Affiliates exceeds 5% of either the Director's annual gross revenue during
either of the last two years or the Director's net worth on a fair market value
basis. An indirect relationship shall include circumstances in which a
Director's spouse, parents, children, siblings, mothers- or fathers-in-law,
sons- or daughters-in-law, or
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brothers- or sisters-in-law are or have been associated with the Advisor, any of
its Affiliates, or the Company.
Independent Expert. A Person or entity with no material current or
prior business or personal relationship with the Advisor or the Directors and
who is engaged to a substantial extent in the business of rendering opinions
regarding the value of assets of the type held by the Company.
Invested Capital. The amount calculated by multiplying the total number
of Shares issued and outstanding by the offering price per share, without
deduction for selling commissions, volume discounts, the marketing support fee,
due diligence expense reimbursements or Organizational and Offering Expenses
(which price per Share, in the case of Shares purchased pursuant to the
Company's reinvestment plan, shall be deemed to be the actual purchase price),
reduced by the portion of any Distribution that is attributable to Net Sales
Proceeds.
Joint Ventures. The joint venture or general partnership arrangements
in which the Company is a co-venturer or general partner which are established
to acquire Properties, and/or make Loans or other Permitted Investments.
Line of Credit. A line of credit initially in an aggregate amount up to
$100 million (or such greater amount as shall be approved by the Board of
Directors), the proceeds of which will be used to acquire Properties and make
Loans and other Permitted Investments and for any other authorized purpose. The
Line of Credit may be in addition to any Permanent Financing.
Listing. The listing of the Shares of the Company on a national
securities exchange or their inclusion for quotation on the National Market
system of the Nasdaq Stock Market.
Loans. Mortgage Loans and other types of debt financing provided by the
Company.
Managing Dealer. CNL Securities Corp., an Affiliate of the Advisor, or
such other Person or entity selected by the Board of Directors to act as the
managing dealer for the Offering. CNL Securities Corp. is a member of the
National Association of Securities Dealers, Inc.
Net Income. For any period, the total revenues applicable to such
period, less the total expenses applicable to such period excluding additions to
reserves for depreciation, bad debts or other similar non-cash reserves;
provided, however, Net Income for purposes of calculating total allowable
Operating Expenses (as defined herein) shall exclude the gain from the sale of
the Company's assets.
Net Sales Proceeds. In the case of a transaction described in clause
(i)(A) of the definition of Sale, the proceeds of any such transaction less the
amount of all real estate commissions and closing costs paid by the Company. In
the case of a transaction described in clause (i)(B) of such definition, Net
Sales Proceeds means the proceeds of any such transaction less the amount of any
legal and other selling expenses incurred in connection with such transaction.
In the case of a transaction described in clause (i)(C) of such definition, Net
Sales Proceeds means the proceeds of any such transaction actually distributed
to the Company from the Joint Venture. In the case of a
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transaction or series of transactions described in clause (i)(D) of the
definition of Sale, Net Sales Proceeds means the proceeds of any such
transaction less the amount of all commissions and closing costs paid by the
Company. In the case of a transaction described in clause (ii) of the definition
of Sale, Net Sales Proceeds means the proceeds of such transaction or series of
transactions less all amounts generated thereby and reinvested in one or more
Properties within 180 days thereafter and less the amount of any real estate
commissions, closing costs, and legal and other selling expenses incurred by or
allocated to the Company in connection with such transaction or series of
transactions. Net Sales Proceeds shall also include, in the case of any lease of
a Property consisting of a building only or any Loan or other Permitted
Investments, any amounts from tenants, borrowers or lessees that the Company
determines, in its discretion, to be economically equivalent to proceeds of a
Sale. Net Sales Proceeds shall not include, as determined by the Company in its
sole discretion, any amounts reinvested in one or more Properties, Loans, or
other Permitted Investments, to repay outstanding indebtedness, or to establish
reserves.
Offering. The initial public offering of Shares.
Operating Expenses. All costs and expenses incurred by the Company, as
determined under generally accepted accounting principles, which in any way are
related to the operation of the Company or to Company business, including (a)
advisory fees, (b) the Asset Management Fee, (c) the Performance Fee and (d) the
Subordinated Incentive Fee, but excluding (i) the expenses of raising capital
such as Organizational and Offering Expenses, legal, audit, accounting,
underwriting, brokerage, listing, registration, and other fees, printing and
other such expenses and tax incurred in connection with the issuance,
distribution, transfer, registration and Listing of the Shares; (ii) interest
payments; (iii) taxes; (iv) non-cash expenditures such as depreciation,
amortization and bad loan reserves; (v) the Advisor's subordinated 10% share of
Net Sales Proceeds; and (vi) Acquisition Fees and Acquisition Expenses, real
estate or other commissions on the Sale of Assets, and other expenses connected
with the acquisition, and ownership of real estate interests, Loans or other
Permitted Investments (such as the costs of foreclosure, insurance premiums,
legal services, maintenance, repair and improvement of property).
Organizational and Offering Expenses. Any and all costs and expenses,
other than selling commissions, the marketing support fee and due diligence
expense reimbursements incurred by the Company, the Advisor or any Affiliate of
either in connection with the formation, qualification and registration of the
Company and the marketing and distribution of Shares, including, without
limitation, the following: legal, accounting and escrow fees; printing,
amending, supplementing, mailing and distributing costs; filing, registration
and qualification fees and taxes; telegraph and telephone costs; and all
advertising and marketing expenses, including the costs related to investor and
broker-dealer sales meetings.
Performance Fee. The fee payable to the Advisor under certain
circumstances if certain performance standards have been met and the
Subordinated Incentive Fee has not been paid.
Permanent Financing. The financing to (i) acquire Properties and to
make Loans or other Permitted Investments; (ii) pay of any Acquisition Fees
arising from any Permanent Financing; and
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(iii) refinance outstanding amounts on the Line of Credit. Permanent financing
may be in addition to any borrowing under the Line of Credit.
Permitted Investments. All investments that the Company may acquire
pursuant to its Articles of Incorporation and bylaws, other than the short-term
investments acquired for purposes of cash management.
Person. An individual, corporation, partnership, estate, trust
(including a trust qualified under Section 401(a) or 501(c)(17) of the Code), a
portion of a trust permanently set aside for or to be used exclusively for the
purposes described in Section 642(c) of the Code, association, private
foundation within the meaning of Section 509(a) of the Code, joint stock company
or other entity, or any government or any agency or political subdivision
thereof, and also includes a group as that term is used for purposes of Section
13(d)(3) of the Securities Exchange Act of 1934, as amended, but does not
include (i) an underwriter that participates in a public offering of Equity
Shares for a period of sixty days following the initial purchase by such
underwriter of such Equity Shares in such public offering, or (ii) CNL Income
Corp., during the period ending December 31, 2004, provided that the foregoing
exclusions shall apply only if the ownership of such Equity Shares by an
underwriter or CNL Income Corp. would not cause the Company to fail to qualify
as a REIT by reason of being "closely held" within the meaning of Section 856(a)
of the Code or otherwise cause the Company to fail to qualify as a REIT.
Property or Properties. Interests in (i) the real properties, including
the buildings an equipment located thereon; or (ii) the real properties only; or
(iii) the buildings only, including equipment located therein; any of which are
acquired by the Company, either directly or indirectly through joint ventures,
or other partnerships, or other legal entities.
Prospectus. "Prospectus" means the same as that term as defined in
Section 2(10) of the Securities Act of 1933, including a preliminary prospectus,
an offering circular as described in Rule 253 of the General Rules and
Regulations under the Securities Act of 1933, as amended, or, in the case of an
intrastate offering, any document by whatever name known, utilized for the
purpose of offering and selling securities to the public.
Real Estate Asset Value. The amount actually paid or allocated to the
purchase, development, construction or improvement of a Property, exclusive of
Acquisition Fees and Acquisition Expenses.
Registration Statement. The Registration Statement (No. 333-108355) on
Form S-11 registering the Shares to be sold in the Offering.
REIT. A "real estate investment trust" as defined pursuant to Sections
856 through 860 of the Code.
Sale or Sales. (i) Any transaction or series of transactions whereby:
(A) the Company sells, grants, transfers, conveys or relinquishes its ownership
of any Property or portion thereof, including
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the lease of any Property, Loan or other Permitted Investment consisting of the
building only, and including any event with respect to any Property which gives
rise to a significant amount of insurance proceeds or condemnation awards; (B)
the Company sells, grants, transfers, conveys or relinquishes its ownership of
all or substantially all of the interest of the Company in any Joint Venture in
which it is a co-venturer or partner; (C) any Joint Venture in which the Company
as a co-venturer or partner sells, grants, transfers, conveys or relinquishes
its ownership of any Property, Loan or other Permitted Investment or portion
thereof, including any event with respect to any Property, Loan or other
Permitted Investment which gives rise to insurance claims or condemnation
awards; or (D) the Company sells, grants, conveys or relinquishes its interest
in any Loan or other Permitted Investment, or portion thereof, including any
event with respect to any Loan or other Permitted Investment, which gives rise
to a significant amount of insurance proceeds or similar awards, but (ii) shall
not include any transaction or series of transactions specified in clause
(i)(A), (i)(B), or (i)(C) above in which the proceeds of such transaction or
series of transactions are reinvested in one or more Properties, Loans or other
Permitted Investments within 180 days thereafter.
Securities. Any Equity Shares, Excess Shares, as such terms are defined
in the Company's Articles of Incorporation, any other stock, shares or other
evidences of equity or beneficial or other interests, voting trust certificates,
bonds, debentures, notes or other evidences of indebtedness, secured or
unsecured, convertible, subordinated or otherwise, or in general any instruments
commonly known as "securities" or any certificates of interest, shares or
participations in, temporary or interim certificates for, receipts for,
guarantees of, or warrants, options or rights to subscribe to, purchase or
acquire, any of the foregoing.
Shares. The up to 200,000,000 shares of common stock, per value $.01
per share, of the Company.
Soliciting Dealers. Broker-dealers that are members of the National
Association of Securities Dealers, Inc., or that are exempt from broker-dealer
registration, and that, in either case, enter into participating broker or other
agreements with the Managing Dealer to sell Shares.
Sponsor. Any Person directly or indirectly instrumental in organizing,
wholly or in part, the Company or any Person who will control, manage or
participate in the management of the Company, and any Affiliate of such Person.
Not included is any Person whose only relationship with the Company is that of
an independent property manager of the Company's Properties, Loans or other
Permitted Investments, and whose only compensation is as such. Sponsor does not
include independent third parties such as attorneys, accountants, and
underwriters whose only compensation is for professional services. A Person may
also be deemed a Sponsor of the Company by:
a. taking the initiative, directly or indirectly, in founding or
organizing the business or enterprise of the Company, either
alone or in conjunction with one or more other Persons;
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b. receiving a material participation in the Company in
connection with the founding or organizing of the business of
the Company, in consideration of services or property, or both
services and property;
c. having a substantial number of relationships and contacts with
the Company;
d. possessing significant rights to control the Company's
Properties;
e. receiving fees for providing services to the Company which are
paid on a basis that is not customary in the industry; or
f. providing goods or services to the Company on a basis which
was not negotiated at arms length with the Company.
Stockholders. The registered holders of the Company's Equity Shares.
Stockholders' 8% Return. As of each date, an aggregate amount equal to
an 8% cumulative, noncompounded, annual return on Invested Capital.
Subordinated Disposition Fee. The Subordinated Disposition Fee as
defined in Paragraph 9(c).
Subordinated Incentive Fee. The fee payable to the Advisor under
certain circumstances if the Shares are listed on a national securities
exchange.
Termination Date. The date of termination of this Agreement.
Total Proceeds. The Gross Proceeds plus Loan proceeds from Permanent
Financings and the Line of Credit that are used to make or acquire Properties,
Loans and other Permitted Investments.
Total Property Cost. With regard to any Company Property, an amount
equal to the sum of the Real Estate Asset Value of such Property plus the
Acquisition Fees paid in connection with such Property.
2%/25% Guidelines. The requirement pursuant to the guidelines of the
North American Securities Administrators Association, Inc. that, in any 12 month
period, total Operating Expenses may not exceed the greater of 2% of the
Company's Average Invested Assets during such 12 month period or 25% of the
Company's Net Income over the same 12 month period.
Valuation. An estimate of value of the Assets of the Company as
determined by an Independent Expert.
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(2) APPOINTMENT. The Company hereby appoints the Advisor to serve as
its advisor on the terms and conditions set forth in this Agreement, and the
Advisor hereby accepts such appointment.
(3) DUTIES OF THE ADVISOR. The Advisor undertakes to use its best
efforts to present to the Company potential investment opportunities and to
provide a continuing and suitable investment program consistent with the
investment objectives and policies of the Company as determined and adopted from
time to time by the Directors. In performance of this undertaking, subject to
the supervision of the Directors and consistent with the provisions of the
Registration Statement, Articles of Incorporation and Bylaws of the Company, the
Advisor shall, either directly or by engaging an Affiliate:
(a) serve as the Company's investment and financial
advisor and provide research and economic and
statistical data in connection with the Company's
assets and investment policies;
(b) provide the daily management of the Company and
perform and supervise the various administrative
functions reasonably necessary for the management of
the Company;
(c) investigate, select, and, on behalf of the Company,
engage and conduct business with such Persons as the
Advisor deems necessary to the proper performance of
its obligations hereunder, including but not limited
to consultants, accountants, correspondents, lenders,
technical advisors, attorneys, brokers, underwriters,
corporate fiduciaries, escrow agents, depositaries,
custodians, agents for collection, insurers,
insurance agents, banks, builders, developers,
property owners, mortgagors, and any and all agents
for any of the foregoing, including Affiliates of the
Advisor, and Persons acting in any other capacity
deemed by the Advisor necessary or desirable for the
performance of any of the services herein, including
but not limited to entering into contracts in the
name of the Company with any of the foregoing;
(d) consult with the officers and Directors of the
Company and assist the Directors in the formulation
and implementation of the Company's financial
policies, and, as necessary, furnish the Directors
with advice and recommendations with respect to the
making of investments consistent with the investment
objectives and policies of the Company and in
connection with any borrowings proposed to be
undertaken by the Company;
(e) subject to the provisions of Paragraphs 3(g) and 4
hereof, (i) locate, analyze and select potential
investments in Properties and Loans and other
Permitted Investments, (ii) structure and negotiate
the terms and conditions of transactions pursuant to
which investment in Properties and Loans and other
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Permitted Investments; (iii) make investments in
Properties and Loans and other Permitted Investments
in compliance with the investment objectives and
policies of the Company; (iv) arrange for financing
and refinancing and make other changes in the asset
or capital structure of, and dispose of, reinvest the
proceeds from the sale of, or otherwise deal with the
investments in, Properties, Loans and other Permitted
Investments; and (v) enter into leases and service
contracts for Company Property and, to the extent
necessary, perform all other operational functions
for the maintenance and administration of such
Company Property;
(f) provide the Directors with periodic reports regarding
prospective investments in Properties, Loans and
other Permitted Investments;
(g) obtain the prior approval of the Directors (including
a majority of all Independent Directors) for any and
all investments in Properties, Loans and other
Permitted Investments;
(h) negotiate on behalf of the Company with banks or
lenders for loans to be made to the Company and
negotiate on behalf of the Company with investment
banking firms and broker-dealers or negotiate private
sales of Shares and Securities or obtain loans for
the Company, but in no event in such a way so that
the Advisor shall be acting as broker-dealer or
underwriter; and provided, further, that any fees and
costs payable to third parties incurred by the
Advisor in connection with the foregoing shall be the
responsibility of the Company;
(i) obtain reports (which may be prepared by the Advisor
or its Affiliates), where appropriate, concerning the
value of investments or contemplated investments of
the Company;
(j) from time to time, or at any time reasonably
requested by the Directors, make reports to the
Directors of its performance of services to the
Company under this Agreement;
(k) provide the Company with all necessary cash
management services;
(l) do all things necessary to assure its ability to
render the services described in this Agreement;
(m) deliver to or maintain on behalf of the Company
copies of all appraisals obtained in connection with
the investments in Properties, Loans and other
Permitted Investments; and
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(n) notify the Board of all proposed material
transactions before they are completed.
(4) AUTHORITY OF ADVISOR.
(a) Pursuant to the terms of this Agreement (including the
restrictions included in this Paragraph 4 and in Paragraph 7), and subject to
the continuing and exclusive authority of the Directors over the management of
the Company, the Directors hereby delegate to the Advisor the authority to (1)
locate, analyze and select investment opportunities, (2) structure the terms and
conditions of transactions pursuant to which investments will be made or
acquired for the Company, (3) acquire Properties, make Loans and other Permitted
Investments in compliance with the investment objectives and policies of the
Company, (4) arrange for financing or refinancing with respect to Properties,
Loans and other Permitted Investments, (5) enter into leases and service
contracts for the Company's Property, and perform other property management
services, (6) oversee non-affiliated property managers and other non-affiliated
Persons who perform services for the Company; and (7) undertake accounting and
other record-keeping functions at the Property level.
(b) Notwithstanding the foregoing, any investment in
Properties or Loans or other Permitted Investments, including any acquisition of
Property by the Company (as well as any financing acquired by the Company in
connection with such acquisition), will require the prior approval of the
Directors (including a majority of the Independent Directors).
(c) If a transaction requires approval by the Independent
Directors, the Advisor will deliver to the Independent Directors all documents
required by them to properly evaluate the proposed investment in the Property,
Loan or other Permitted Investments.
The prior approval of a majority of the Independent Directors and a
majority of the Directors not otherwise interested in the transaction will be
required for each transaction with the Advisor or its Affiliates.
The Directors may, at any time upon the giving of notice to the
Advisor, modify or revoke the authority set forth in this Paragraph 4. If and to
the extent the Directors so modify or revoke the authority contained herein, the
Advisor shall henceforth submit to the Directors for prior approval such
proposed transactions involving investments thereafter require prior approval,
provided, however, that such modification or revocation shall be effective upon
receipt by the Advisor and shall not be applicable to investment transactions to
which the Advisor has committed the Company prior to the date of receipt by the
Advisor of such notification.
(5) BANK ACCOUNTS. The Advisor may establish and maintain one or more
bank accounts in its own name for the account of the Company or in the name of
the Company and may collect and deposit into any such account or accounts, and
disburse from any such account or accounts, any money on behalf of the Company,
under such terms and conditions as the Directors may approve, provided that no
funds shall be commingled with the funds of the Advisor; and the
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Advisor shall from time to time render appropriate accountings of such
collections and payments to the Directors and to the auditors of the Company.
(6) RECORDS; ACCESS. The Advisor shall maintain appropriate records of
all its activities hereunder and make such records available for inspection by
the Directors and by counsel, auditors and authorized agents of the Company, at
any time or from time to time during normal business hours. The Advisor shall at
all reasonable times have access to the books and records of the Company.
(7) LIMITATIONS ON ACTIVITIES. Anything else in this Agreement to the
contrary notwithstanding, the Advisor shall refrain from taking any action
which, in its sole judgment made in good faith, would (a) adversely affect the
status of the Company as a REIT, (b) subject the Company to regulation under the
Investment Company Act of 1940, or (c) violate any law, rule, regulation or
statement of policy of any governmental body or agency having jurisdiction over
the Company, its Equity Shares or its Securities, or otherwise not be permitted
by the Articles of Incorporation or Bylaws of the Company, except if such action
shall be ordered by the Directors, in which case the Advisor shall notify
promptly the Directors of the Advisor's judgment of the potential impact of such
action and shall refrain from taking such action until it receives further
clarification or instructions from the Directors. In such event the Advisor
shall have no liability for acting in accordance with the specific instructions
of the Directors so given. Notwithstanding the foregoing, the Advisor, its
directors, officers, employees and stockholders, and stockholders, directors and
officers of the Advisor's Affiliates shall not be liable to the Company or to
the Directors or Stockholders for any act or omission by the Advisor, its
directors, officers or employees, or stockholders, directors or officers of the
Advisor's Affiliates except as provided in Paragraphs 19 and 20 of this
Agreement.
(8) RELATIONSHIP WITH DIRECTORS. Directors, officers and employees of
the Advisor or an Affiliate of the Advisor or any corporate parents of an
Affiliate, or directors, officers or stockholders of any director, officer or
corporate parent of an Affiliate may serve as a Director and as officers of the
Company, except that no director, officer or employee of the Advisor or its
Affiliates who also is a Director or officer of the Company shall receive any
compensation from the Company for serving as a Director or officer of the
Company other than reasonable reimbursement for travel and related expenses
incurred in attending meetings of the Directors of the Company.
(9) FEES.
(a) Asset Management Fee. The Company shall pay to the Advisor
as compensation for the advisory services rendered to the Company under
Paragraph 3 above a monthly fee in an amount equal to 0.08334% of the Company's
Real Estate Asset Value and the outstanding principal amount of the Loans and
other Permitted Investments (the "Asset Management Fee"), as of the end of the
preceding month. Specifically, Real Estate Asset Value equals the amount
invested in the Properties wholly owned by the Company, determined on the basis
of cost, plus, in the case of Properties owned by any Joint Venture or
partnership in which the Company is a co-venturer or partner, the portion of the
cost of such Properties paid by the
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Company, exclusive of Acquisition Fees and Acquisition Expenses. The Asset
Management Fee shall be payable monthly on the last day of such month, or the
first business day following the last day of such month. The Asset Management
Fee, which will not exceed fees which are competitive for similar services in
the same geographic area, may or may not be taken, in whole or in part as to any
year, in the sole discretion of the Advisor. All or any portion of the Asset
Management Fee not taken as to any fiscal year shall be deferred without
interest and may be taken in such other fiscal year as the Advisor shall
determine.
(b) Acquisition Fees.
(i) The Company shall pay the Advisor a fee in the
amount of 3.0% of Total Proceeds as Acquisition Fees. Acquisition Fees shall be
reduced to the extent that, and, if necessary to limit, the total compensation
paid to all persons involved in the acquisition of any Property to the amount
customarily charged in arm's-length transactions by other persons or entities
rendering similar services as an ongoing public activity in the same
geographical location and for comparable types of Properties and to the extent
that other acquisition fees, finder's fees, real estate commissions, or other
similar fees or commissions are paid by any person in connection with the
transaction. In addition, Acquisition Fees shall be reduced to 1.0% of Gross
Proceeds in connection with sales in excess of 500,000 shares to a "purchaser"
(as such term is defined in the section of the Prospectus titled "The Offering
-- Plan of Distribution"), provided all such shares are purchased through the
same registered investment adviser, Soliciting Dealer, or the Managing Dealer.
The total of all Acquisition Fees and any Acquisition Expenses shall be limited
in accordance with the Articles of Incorporation.
(ii) Advisory Fee. To the extent the Acquisition
Fee is reduced in the manner described in subparagraph (9)(b)(i) above, for
investments by a stockholder in excess of 500,000 Shares, such stockholder and
any person it transfers shares to will be required to pay an annual 0.40%
Advisory Fee on its Shares to the Advisor or its Affiliates. Payment of this fee
will be withheld from Distributions otherwise payable to such stockholder. Upon
Listing, the Advisory Fee will no longer be payable to the Advisor or its
Affiliates. Other than the Company's obligation to withhold Distributions if and
when such Distributions are declared and made, and its obligation to forward
such withheld amounts to the Advisor, the Company shall have no further
obligations with respect to this fee. Further, nothing contained herein shall be
construed to imply that the Company is liable for any portion of the Advisory
Fee.
(c) Subordinated Disposition Fee. If the Advisor or an
Affiliate provides a substantial amount of the services (as determined by a
majority of the Independent Directors) in connection with the Sale of one or
more Assets, the Advisor or an Affiliate shall receive a Subordinated
Disposition Fee equal to the lesser of (i) one-half of a Competitive Real Estate
Commission or (ii) 3% of the sales price of such Property or Properties (or
comparable competitive Fee in the case of a Loan or other Permitted Investment).
The Subordinated Disposition Fee will be paid only if Stockholders have received
total Distributions in an amount equal to or greater than the sum of their
aggregate Invested Capital and their aggregate Stockholders' 8% Return. To the
extent that Subordinated Disposition Fees are not paid by the Company on a
current basis due to the
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foregoing limitation, the unpaid fees will be accrued and paid at such time as
the subordination conditions have been satisfied. The Subordinated Disposition
Fee may be paid in addition to real estate commissions paid to non-Affiliates,
provided that the total real estate commissions paid to all Persons by the
Company (including the Subordinated Disposition fee) shall not exceed an amount
equal to the lesser of (i) 6% of the Contract Sales Price of a Property or (ii)
the Competitive Real Estate Commission. In the event this Agreement is
terminated prior to such time as the Stockholders have received total
Distributions in an amount equal to 100% of Invested Capital plus an amount
sufficient to pay the Stockholders' 8% Return through the Termination Date, an
appraisal of the Properties then owned by the Company shall be made and the
Subordinated Disposition Fee on Properties previously sold will be deemed earned
if the Appraised Value of the Properties then owned by the Company plus total
Distributions received prior to the Termination Date equals or is greater than
100% of Invested Capital plus an amount sufficient to pay the Stockholders' 8%
Return through the Termination Date. Upon Listing, if the Advisor has accrued
but not been paid such Subordinated Disposition Fee, then for purposes of
determining whether the subordination conditions have been satisfied,
Stockholders will be deemed to have received a Distribution in the amount equal
to the product of the total number of Shares outstanding and the average closing
price of the Shares over a period, beginning 180 days after Listing, of 30 days
during which the Shares are traded.
(d) Subordinated Share of Net Sales Proceeds. The Subordinated Share of
Net Sales Proceeds shall be payable to the Advisor in an amount equal to 10% of
Net Sales Proceeds from Sales of Assets of the Company payable after the
Stockholders have received Distributions equal to or greater than the sum of the
Stockholders' 8% Return and 100% of Invested Capital. Following Listing, no
Subordinated Share of Net Sales Proceeds will be paid to the Advisor.
(e) Subordinated Incentive Fee. Upon Listing, the Advisor shall be paid
the Subordinated Incentive Fee in an amount equal to 10% of the amount by which
(ii) the market value of the Company, measured by taking the average closing
price or average of bid and asked price, as the case may be, over a period of 30
days during which the Shares are traded, with such period beginning 180 days
after Listing (the "Market Value"), plus the total Distributions paid to
Stockholders from the Company's inception until the date of Listing, exceeds
(ii) the sum of (A) 100% of Invested Capital and (B) the total Distributions
required to be paid to the Stockholders in order to pay the Stockholders' 8%
Return from inception through the date the Market Value is determined. The
Company shall have the option to pay such fee in the form of cash, Securities, a
promissory note or any combination of the foregoing. The Subordinated Incentive
Fee will be reduced by the amount of any prior payment to the Advisor of a
deferred, subordinated share of Net Sales Proceeds form Sales of Assets of the
Company.
(f) Loans from Affiliates. If any loans are made to the Company by an
Affiliate of the Advisor, the maximum amount of interest that may be charged by
such Affiliate shall be the lesser of (i) 1% above the prime rate of interest
charged from time to time by The Bank of New York and (ii) the rate that would
be charged to the Company by unrelated lending institutions on comparable loans
for the same purpose. The terms of any such loans shall be no less favorable
than the terms available between non-Affiliated Persons for similar commercial
loans.
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(g) Changes to Fee Structure. In the event of Listing, the Company and
the Advisor shall negotiate in good faith to establish a fee structure
appropriate for a perpetual-life entity. A majority of the Independent Directors
must approve the new fee structure negotiated with the Advisor. In negotiating a
new fee structure, the Independent Directors shall consider all of the factors
they deem relevant, including, but not limited to: (i) the amount of the
advisory fee in relation to the asset value, composition and profitability of
the Company's portfolio; (ii) the success of the Advisor in generating
opportunities that meet the investment objectives of the Company; (iii) the
rates charged to other REITs and to investors other than REITs by advisors
performing the same or similar services; (iv) additional revenues realized by
the Advisor and its Affiliates through their relationship with the Company,
including loan administration, underwriting or broker commissions, servicing,
engineering, inspection and other fees, whether paid by the Company or by others
with whom the Company does business; (v) the quality and extent of service and
advice furnished by the Advisor; (vi) the performance of the investment
portfolio of the Company, including income, conversion or appreciation of
capital, and number and frequency of problem investments; and (vii) the quality
of the Property, Loan and other Permitted Investment portfolio of the Company in
relationship to the investments generated by the Advisor for its own account.
The new fee structure can be no more favorable to the Advisor than the current
fee structure.
(10) EXPENSES.
(a) In addition to the compensation paid to the Advisor
pursuant to Paragraph 9 hereof, the Company shall pay directly or reimburse the
Advisor for all of the expenses paid or incurred by the Advisor in connection
with the services it provides to the Company pursuant to this Agreement,
including, but not limited to:
(i) the Company's Organizational and Offering Expenses;
(ii) Acquisition Expenses incurred in connection with the
selection and acquisition of Properties or the making of Loans or other
Permitted Investments for goods and services provided by the Advisor at the
lesser of the actual cost or 90% of the competitive rate charged by unaffiliated
persons providing similar goods and services in the same geographic location;
(iii) the actual cost of goods and materials used by the
Company and obtained from entities not affiliated with the Advisor, other than
Acquisition Expenses, including brokerage fees paid in connection with the
purchase and sale of securities;
(iv) interest and other costs for borrowed money,
including discounts, points and other similar fees;
(v) taxes and assessments on income or Property and taxes
as an expense of doing business;
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(vi) costs associated with insurance required in
connection with the business of the Company or by the Directors;
(vii) expenses of managing and operating Properties owned
by the Company, whether payable to an Affiliate of the Company or a
non-affiliated Person;
(viii) all expenses in connection with payments to the
Directors and meetings of the Directors and Stockholders;
(ix) expenses associated with Listing or with the issuance
and distribution of Shares and Securities, such as selling commissions and fees,
advertising expenses, taxes, legal and accounting fees, and Listing and
registration fees;
(x) expenses connected with payments of Distributions in
cash or otherwise made or caused to be made by the Directors to the
Stockholders;
(xi) expenses of organizing, revising, amending,
converting, modifying, or terminating the Company or the Articles of
Incorporation;
(xii) expenses of maintaining communications with
Stockholders, including the cost of preparation, printing, and mailing annual
reports and other Stockholder reports, proxy statements and other reports
required by governmental entities;
(xiii) expenses related to negotiating and servicing Loans
and other Permitted Investments;
(xiv) administrative service expenses (including personnel
costs; provided, however, that no reimbursement shall be made for costs of
personnel to the extent that such personnel perform services in transactions for
which the Advisor receives a separate fee at the lesser of actual cost or 90% of
the competitive rate charged by unaffiliated persons providing similar goods and
services in the same geographic location); and
(xv) audit, accounting and legal fees.
(b) Expenses incurred by the Advisor on behalf of the Company and
payable pursuant to this Paragraph 10 shall be reimbursed no less than monthly
to the Advisor. The Advisor shall prepare a statement documenting the expenses
of the Company during each quarter, and shall deliver such statement to the
Company within 45 days after the end of each quarter.
(11) OTHER SERVICES. Should the Directors request that the Advisor or
any director, officer or employee thereof render services for the Company other
than set forth in Paragraph 3, such services shall be separately compensated at
such rates and in such amounts as are agreed by the Advisor and the Independent
Directors of the Company, subject to the limitations contained in
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the Articles of Incorporation, and shall not be deemed to be services pursuant
to the terms of this Agreement.
(12) REIMBURSEMENT TO THE ADVISOR. The Company shall not reimburse the
Advisor at the end of any fiscal quarter for Operating Expenses that, in the
four consecutive fiscal quarters then ended (the "Expense Year") exceed the
greater of 2% of Average Invested Assets or 25% of Net Income (the "2%/25%
Guidelines") for such year. Within 60 days after the end of any fiscal quarter
of the Company for which total Operating Expenses for the Expense Year exceed
the 2%/25% Guidelines, the Advisor shall reimburse the Company the amount by
which the total Operating Expenses paid or incurred by the Company exceed the
2%/25% Guidelines. The Company will not reimburse the Advisor or its Affiliates
for services for which the Advisor or its Affiliates are entitled to
compensation in the form of a separate fee. All figures used in the foregoing
computation shall be determined in accordance with generally accepted accounting
principles applied on a consistent basis.
(13) OTHER ACTIVITIES OF THE ADVISOR. Nothing herein contained shall
prevent the Advisor from engaging in other activities, including, without
limitation, the rendering of advice to other Persons (including other REITs) and
the management of other programs advised, sponsored or organized by the Advisor
or its Affiliates; nor shall this Agreement limit or restrict the right of any
director, officer, employee, or stockholder of the Advisor or its Affiliates to
engage in any other business or to render services of any kind to any other
partnership, corporation, firm, individual, trust or association. The Advisor
may, with respect to any investment in which the Company is a participant, also
render advice and service to each and every other participant therein. The
Advisor shall report to the Directors the existence of any condition or
circumstance, existing or anticipated, of which it has knowledge, which creates
or could create a conflict of interest between the Advisor's obligations to the
Company and its obligations to or its interest in any other partnership,
corporation, firm, individual, trust or association. The Advisor or its
Affiliates shall promptly disclose to the Directors knowledge of such condition
or circumstance. If the Sponsor, Advisor, Director or Affiliates thereof have
sponsored other investment programs with similar investment objectives which
have investment funds available at the same time as the Company, it shall be the
duty of the Directors (including the Independent Directors) to adopt the method
set forth in the Registration Statement or another reasonable method by which
properties are to be allocated to the competing investment entities and to use
their best efforts to apply such method fairly to the Company.
The Advisor shall be required to use its best efforts to present a
continuing and suitable investment program to the Company which is consistent
with the investment policies and objectives of the Company, but neither the
Advisor nor any Affiliate of the Advisor shall be obligated generally to present
any particular investment opportunity to the Company even if the opportunity is
of character which, if presented to the Company, could be taken by the Company.
In the event that the Advisor or its Affiliates is presented with a
potential investment which might be made by the Company and by another
investment entity which the Advisor or its Affiliates advises or manages, the
Advisor and its Affiliates shall consider the investment portfolio of each
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entity, cash flow of each entity, the effect of the acquisition on the
diversification of each entity's portfolio, rental payments during any renewal
period, the estimated income tax effects of the purchase on each entity, the
policies of each entity relating to leverage, the funds of each entity available
for investment and the length of time such funds have been available for
investment. In the event that an investment opportunity becomes available which
is suitable for both the Company and a public or private entity which the
Advisor or its Affiliates are Affiliated, then the entity which has had the
longest period of time elapse since it was offered an investment opportunity
will first be offered the investment opportunity. For purposes of this conflict
resolution procedure, an investment opportunity will be considered "offered" to
the Company when an opportunity is presented to the Board of Directors for its
consideration.
(14) RELATIONSHIP OF ADVISOR AND COMPANY. The Company and the Advisor
are not partners or joint venturers with each other, and nothing in this
Agreement shall be construed to make them such partners or joint venturers or
impose any liability as such on either of them.
(15) TERM; TERMINATION OF AGREEMENT. This Agreement shall continue in
force until March 8, 2005, subject to an unlimited number of successive one-year
renewals upon mutual consent of the parties. It is the duty of the Directors to
evaluate the performance of the Advisor annually before renewing the Agreement,
and each such agreement shall have a term of no more than one year.
(16) TERMINATION BY EITHER PARTY. This Agreement may be terminated upon
60 days written notice without Cause or penalty, by either party, or by the
mutual consent of the parties (by a majority of the Independent Directors of the
Company or a majority of the Board of Directors of the Advisor, as the case may
be).
(17) ASSIGNMENT TO AN AFFILIATE. This Agreement may be assigned by the
Advisor to an Affiliate with the approval of a majority of the Directors
(including a majority of the Independent Directors). The Advisor may assign any
rights to receive fees or other payments under this Agreement without obtaining
the approval of the Directors. This Agreement shall not be assigned by the
Company without the consent of the Advisor, except in the case of an assignment
by the Company to a corporation or other organization which is a successor to
all of the assets, rights and obligations of 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 by this Agreement.
(18) Subcontracts with Affiliates. The Advisor may subcontract with an
Affiliate for a portion of the services and duties to be performed under this
Agreement without obtaining the approval of the Directors to the extent such
services or duties are primarily administrative in nature. The Advisor may
further subcontract any rights to receive fees or other payments for such
services or duties under this Agreement without obtaining the approval of the
Directors.
(19) PAYMENTS TO AND DUTIES OF ADVISOR UPON TERMINATION. Payments to
the Advisor pursuant to this Paragraph (19) shall be subject to the 2%/25%
Guidelines to the extent applicable.
(a) After the Termination Date, the Advisor shall not be
entitled to compensation for further services hereunder except it shall be
entitled to receive from the Company within 30 days after the effective date of
such termination all unpaid reimbursements of expenses and all earned but unpaid
fees payable to the Advisor prior to termination of this Agreement, exclusive of
disputed items arising out of possible unauthorized transactions.
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(b) Upon termination, the Advisor shall be entitled to payment
of the Performance Fee if performance standards satisfactory to a majority of
the Board of Directors, including a majority of the Independent Directors, when
compared to (a) the performance of the Advisor in comparison with its
performance for other entities, and (b) the performance of other advisors for
similar entities, have been met. If Listing has not occurred, the Performance
Fee, if any, shall equal 10% of the amount, if any, by which (i) the appraised
value of the assets of the Company on the Termination Date, less the amount of
all indebtedness secured by such assets, plus the total Distributions paid to
stockholders from the Company's inception through the Termination Date, exceeds
(ii) Invested Capital plus an amount equal to the Stockholders' 8% Return from
inception through the Termination Date. The Advisor shall be entitled to receive
all accrued but unpaid compensation and expense reimbursements in cash within 30
days of the Termination Date. All other amounts payable to the Advisor in the
event of a termination shall be evidenced by a promissory note and shall be
payable from time to time.
(c) The Performance Fee shall be paid in 12 equal quarterly
installments without interest on the unpaid balance, provided, however, that no
payment will be made in any quarter in which such payment would jeopardize the
Company's REIT status, in which case any such payment or payments will be
delayed until the next quarter in which payment would not jeopardize REIT
status. Notwithstanding the preceding sentence, any amounts which may be deemed
payable at the date the obligation to pay the Performance Fee is incurred which
relate to the appreciation of the Company's assets shall be an amount which
provides compensation to the terminated Advisor only for that portion of the
holding period for the respective assets during which the Advisor provided
services to the Company.
(d) If Listing occurs, the Performance Fee, if any, payable
thereafter will be as negotiated between the Company and the Advisor. The
Advisor shall not be entitled to payment of the Performance Fee in the event
this Agreement is terminated because of failure of the Company and the Advisor
to establish, pursuant to Paragraph 9(g) hereof, a fee structure appropriate for
a perpetual-life entity at such time, if any, as Listing occurs. The Performance
Fee, to the extent payable at the time of Listing, will not be payable in the
event the Subordinated Incentive Fee is paid.
(e) The Advisor shall promptly upon termination:
(i) pay over to the Company all money collected and
held for the account of the Company pursuant to this Agreement, after deducting
any accrued compensation and reimbursement for its expenses to which it is then
entitled;
(ii) deliver to the Directors a full accounting,
including a statement showing all payments collected by it and a statement of
all money held by it, covering the period following the date of the last
accounting furnished to the Directors;
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(iii) deliver to the Directors all assets, including
Properties, Loans, and other Permitted Investments, and documents of the Company
then in the custody of the Advisor; and
(iv) cooperate with the Company to provide an orderly
management transition.
(20) INDEMNIFICATION BY THE COMPANY. The Company shall indemnify and
hold harmless the Advisor and its Affiliates, including their respective
officers, directors, partners and employees, from all liability, claims, damages
or losses arising in the performance of their duties hereunder, and related
expenses, including reasonable attorneys' fees, to the extent such liability,
claims, damages or losses and related expenses are not fully reimbursed by
insurance, subject to any limitations imposed by the laws of the State of
Maryland or the Articles of Incorporation of the Company. Notwithstanding the
foregoing, the Advisor shall not be entitled to indemnification or be held
harmless pursuant to this Paragraph 20 for any activity for which the Advisor
shall be required to indemnify or hold harmless the Company pursuant to
Paragraph 21. Any indemnification of the Advisor may be made only out of the net
assets of the Company and not from Stockholders.
(21) INDEMNIFICATION BY ADVISOR. The Advisor shall indemnify and hold
harmless the Company from contract or other liability, claims, damages, taxes or
losses and related expenses including attorneys' fees, to the extent that such
liability, claims, damages, taxes or losses and related expenses are not fully
reimbursed by insurance and are incurred by reason of the Advisor's bad faith,
fraud, misconduct, or negligence, but the Advisor shall not be held responsible
for any action of the Board of Directors in following or declining to follow any
advice or recommendation given by the Advisor.
(22) 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 required by the Articles of
Incorporation, the Bylaws, or accepted by the party to whom it is given, and
shall be given by being delivered by hand or by overnight mail or other
overnight delivery service to the addresses set forth herein:
To the Directors and to the Company: CNL Income Properties, Inc.
CNL Center at City Commons
βββ βββββ ββββββ ββββββ
βββββββ, βββββββ βββββ
To the Advisor: CNL Income Corp.
CNL Center at City Commons
βββ βββββ ββββββ ββββββ
βββββββ, βββββββ βββββ
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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 Paragraph 22.
(23) MODIFICATION. This Agreement shall not be changed, modified,
terminated, or discharged, in whole or in part, except by an instrument in
writing signed by both parties hereto, or their respective successors or
assignees.
(24) 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.
(25) CONSTRUCTION. The provisions of this Agreement shall be
interpreted, construed and enforced in all respects in accordance with the laws
of the State of Florida applicable to contracts to be made and performed
entirely in said state.
(26) ENTIRE AGREEMENT. This Agreement contains the entire agreement and
understanding among the parties hereto with respect to the subject matter
hereof, and supersedes all prior and contemporaneous agreements, understandings,
inducements and conditions, express or implied, oral or written, of any nature
whatsoever with respect to the subject matter hereof. The express terms hereof
control and supersede any course of performance and/or usage of the trade
inconsistent with any of the terms hereof. This Agreement may not be modified or
amended other than by an agreement in writing.
(27) 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 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.
(28) 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.
(29) TITLES NOT TO AFFECT INTERPRETATION. The titles of paragraphs and
subparagraphs 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.
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(30) 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.
(31) NAME. CNL Income Corp. has a proprietary interest in the name
"CNL." Accordingly, and in recognition of this right, if at any time the Company
ceases to retain CNL Income Corp. or an Affiliate thereof to perform the
services of Advisor, the Directors of the Company will, promptly after receipt
of written request from CNL Income Corp., cease to conduct business under or use
the name "CNL" or any diminutive thereof and the Company shall use its best
efforts to change the name of the Company to a name that does not contain the
name "CNL" or any other word or words that might, in the sole discretion of the
Advisor, be susceptible of indication of some form of relationship between the
Company and the Advisor or any Affiliate thereof. Consistent with the foregoing,
it is specifically recognized that the Advisor or one or more of its Affiliates
has in the past and may in the future organize, sponsor or otherwise permit to
exist other investment vehicles (including vehicles for investment in real
estate) and financial and service organizations having "CNL" as a part of their
name, all without the need for any consent (and without the right to object
thereto) by the Company or its Directors.
(32) INITIAL INVESTMENT. The Advisor has contributed to the Company
$200,000 in exchange for 20,000 Equity Shares (the "Initial Investment"). The
Advisor may not sell these Equity Shares while the Advisory Agreement is in
effect, although the Advisor may transfer such Equity Shares to Affiliates. The
restrictions included above shall not apply to any Equity Shares, other than the
Equity Shares acquired through the Initial Investment, acquired by the Advisor
or its Affiliates. The Advisor shall not vote any Equity Shares it now owns, or
hereafter acquires, in any vote for the removal of Directors or any vote
regarding the approval or termination of any contract with the Advisor or any of
its Affiliates.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
CNL INCOME PROPERTIES, INC.
By:_______________________________
Name:
Its:
CNL INCOME CORP.
By:______________________________
Name:
Its:
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