EXHIBIT 10.5
ADVISORY AGREEMENT
ADVISORY AGREEMENT made as of ______, 1999 between T REIT, Inc., a Virginia
corporation (the "Company"), and Triple Net Properties, LLC, a Virginia limited
liability company (the "Advisor").
W I T N E S S E T H:
WHEREAS, the Company intends to qualify as a real estate investment trust
(a "REIT") as defined in Sections 856 through 860 of the Internal Revenue Code
of 1986, as amended (the "Code"), and to make investments of the type permitted
to qualified REITs under the Code and not inconsistent with the Articles of
Incorporation of the Company, as amended (the "Articles of Incorporation"), and
the Bylaws of the Company; and
WHEREAS, the Company desires to avail itself of the experience, sources of
information, advice and assistance of 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 (the
"Board of Directors"), 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 herein set forth;
NOW, THEREFORE, in consideration of the mutual covenants herein set forth,
the parties hereto agree as follows:
1. Definitions.
As used herein, the following terms shall have the meanings set forth
below:
(a) "Acquisition Expenses" shall mean expenses related to selecting,
evaluating and acquiring properties, whether or not acquired, including,
but not limited to, legal fees and expenses, travel and communications
expenses, cost of appraisals and surveys, nonrefundable option payments on
property not acquired, accounting fees and expenses, computer use related
expenses, architectural and engineering reports, environmental and asbestos
audits, title insurance and escrow fees, and personnel and miscellaneous
expenses related to the selection and acquisition of properties.
(b) "Affiliate" shall mean: (i) any Person directly or indirectly
owning, controlling or holding, with the 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 the 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.
(c) "Asset Management Fee" means an amount up to 1.5% of the Average
Invested Assets as described in Section 9(b).
(d) "Average Invested Assets" shall mean, for any period, the average
of the aggregate Book Value of the assets of the Company invested, directly
or indirectly, in equity interests and in loans secured by real estate,
before reserves for depreciation or bad debts or other similar non-cash
reserves, computed by taking the average of such values at the end of each
month during such period.
(e) "Book Value" of an asset shall mean the value of such asset on
the books of the Company, before allowance for depreciation or
amortization.
(f) "Common Stock" shall mean the common stock, par value $.01 per
share, of the Company.
(g) "Competitive Real Estate Commission" means the 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.
(h) "Cumulative Return" shall mean a cumulative, non-compounded
return equal to 8% per annum on Invested Capital commencing upon acceptance
by the Company of an investor's subscription.
(i) "Fiscal Year" shall mean any period for which any income tax
return is submitted by the Company to the Internal Revenue Service and
which is treated by the Internal Revenue Service as a reporting period.
(j) "Gross Offering Proceeds" shall mean the total proceeds from the
sale of Shares before deductions for Organizational and Offering Expenses.
For purposes of calculating Gross Offering Proceeds, the purchase price for
all Shares issued in the Company's initial public offering, including those
for which volume discounts apply, shall be deemed to be $10.00 per Share.
(k) "Gross Income From Properties" shall mean all cash receipts
derived from the operation of the Company's property, excluding (i) tenant
security deposits unless and until such deposits are forfeited upon a
tenant default, and (ii) proceeds from insurance claims, condemnation
proceedings, sales or refinancings.
(l) "Independent Directors" shall mean a Director who is not, and
within the last two (2) years has not been, directly or indirectly
associated with a Sponsor or the Advisor by virtue of (i) ownership of an
interest in a Sponsor, Advisor or their Affiliates, (ii) employment by a
Sponsor, the Advisor or their Affiliates, (iii) service as an officer or
director of a Sponsor, the Advisor or their Affiliates, (iv) performance of
services, other than as a Director, for the Company, (v) service as a
director or trustee of more than three (3) real estate investment trusts
organized by a Sponsor or advised by the Advisor, or (vi) maintenance of a
material business or professional relationship with a Sponsor, the Advisor
or any of their Affiliates. An indirect relationship shall include
circumstances in
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which a Director's spouse, parents, children, siblings, mothers- or
fathers-in-law, sons- or daughters-in-law or brothers- or sisters-in-law is
or has been associated with a Sponsor, the Advisor, any of their Affiliates
or the Company. A business or professional relationship is considered
material if the gross revenue derived by the Director from a Sponsor, the
Advisor and Affiliates exceeds five percent (5%) of either the Director's
annual gross revenue during either of the last two (2) years or the
Director's net worth on a fair market value basis.
(m) "Invested Capital" shall mean the total proceeds from the sale of
Shares. When a property is sold, Invested Capital will be reduced by the
lesser of (1) the net sale proceeds available for distribution from such
sale or (2) the sum of (A) the portion of Invested Capital that initially
was allocated to that property and (B) any remaining shortfall in the
recovery of Invested Capital with respect to prior sales of properties.
(n) "Net Income" shall mean, for any period, total revenues
applicable to such period, less the operating expenses applicable to such
period other than additions to or allowances for reserves for depreciation,
amortization or bad debts or other similar non-cash reserves; provided,
however, that Net Income shall not include any gain from the sale of the
Company's assets.
(o) "Organizational and Offering Expenses" shall mean those expenses
incurred by and to be paid from the assets of the Company in connection
with and in preparing the Company for registration and subsequently
offering and distributing Shares to the public, including, but not limited
to, total underwriting and brokerage discounts and commissions (including
fees of the underwriters' attorneys), expenses for printing, engraving,
mailing, salaries of employees while engaged in sales activity, charges of
transfer agents, registrars, trustees, escrow holders, depositaries,
experts, expenses of qualification of the sale of the securities under
federal and state laws, including taxes and fees, and accountants' and
attorneys' fees.
(p) "Partnership" shall mean T REIT, L.P., a Virginia limited
partnership.
(q) "Property Disposition Fee" means a real estate disposition fee,
payable (under certain conditions) to the Advisor and its Affiliates upon
the sale of the Company's property as described in Section 9(d).
(r) "Property Management Fee" shall mean any fee paid to an Affiliate
or third party as compensation for management of the Company's properties
as described in Section 9(e).
(s) "Person" shall mean any natural person, partnership, corporation,
association, trust, limited liability company or other legal entity.
(t) "Prospectus" shall mean the final prospectus of the Company in
connection with the initial registration of Shares filed with the
Securities and Exchange Commission on Form S-11, as supplemented and
amended from time to time.
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(u) "Shares" shall mean the shares of capital stock of the Company
stock.
(v) "Shareholders" shall mean holders of the Shares.
(w) "Sponsor" shall mean 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
Company assets, and whose only compensation is as such. Sponsor does not
include wholly 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:
(i) 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;
(ii) 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;
(iii) having a substantial number of relationships and contacts
with the Company;
(iv) possessing significant rights to control Company
properties;
(v) receiving fees for providing services to the Company which
are paid on a basis that is not customary in the industry; or
(vi) providing goods or services to the Company on a basis
which was not negotiated at arms length with the Company.
(x) "Total Operating Expenses" shall mean the aggregate expenses of
every character paid or incurred by the Company as determined under
generally accepted accounting principles, including fees paid to the
Advisor, but excluding:
(i) the expenses of raising capital such as Organization and
Offering Expenses, legal, audit, accounting, underwriting, brokerage,
listing, registration and other fees, printing and other such
expenses, and taxes incurred in connection with the issuance,
distribution, transfer, registration and stock exchange listing of the
Shares;
(ii) interest payments;
(iii) taxes;
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(iv) non-cash expenditures such as depreciation, amortization
and bad debt reserves;
(v) incentive fees payable to the Advisor; and
(vi) Acquisition Expenses, real estate commissions on resale of
property and other expenses connected with the acquisition,
disposition (whether by sale, exchange or condemnation) and ownership
of real estate interests, mortgage loans or other property (such as
the costs of foreclosure, insurance premiums, legal services,
maintenance, repair and improvement of property).
2. Duties of Advisor.
The Advisor shall consult with the Company and shall, at the request of the
Board of Directors or the officers of the Company, furnish advice and
recommendations with respect to all aspects of the business and affairs of the
Company. In general, the Advisor shall inform the Board of Directors of factors
that come to its attention which could influence the policies of the Company.
Subject to the supervision of the Board of Directors and consistent with the
provisions of the Articles of Incorporation, the Advisor shall use its best
efforts to:
(a) Present to the Company a continuing and suitable investment
program and opportunities to make investments consistent with the
investment policies of the Company and the investment program adopted by
the Board of Directors and in effect at the time and furnish the Company
with advice with respect to the making, acquisition, holding and
disposition of investments and commitments therefor. The Advisor is also
obligated to provide the Company with the first opportunity to purchase any
income-producing properties located in the Focus States (as such term is
defined in the Prospectus) placed under contract by the Advisor or its
Affiliates, provided that: (1) the Company has funds available to make the
purchase; (2) the Board of Directors votes to make the purchase within 7
days of being offered such property by the Advisor; and (3) the property
meets the Company's acquisition criteria as disclosed to the Advisor from
time to time;
(b) Manage the Company's day-to-day operations to effect the
investment program adopted by the Board of Directors and perform or
supervise the performance of such other administrative functions necessary
in connection with the management of the Company as may be agreed upon by
the Advisor and the Company;
(c) Serve as the Company's investment advisor in connection with
policy decisions to be made by the Board of Directors and, as requested,
furnish reports to the Board of Directors and provide research, economic
and statistical data in connection with the Company's investments and
investment policies;
(d) On behalf of the Company, investigate, select and conduct
relations with lenders, consultants, accountants, brokers, property
managers, attorneys, underwriters, appraisers, insurers, corporate
fiduciaries, banks, builders and developers, sellers and
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buyers of investments and persons acting in any other capacity specified by
the Company from time to time, and enter into contracts with, retain and
supervise services performed by such parties in connection with investments
which have been or may be acquired or disposed of by the Company;
(e) Perform such property management services and other activities
relating to the Company's assets as the Advisor shall deem appropriate in
the particular circumstances, subject to the requirement that the Advisor
qualify as an "independent contractor" as that phrase is used in connection
with applicable laws, rules and regulations affecting REITs that own real
property;
(f) Upon request of the Company, act, or obtain the services of
others to act, as attorney-in-fact or agent of the Company in making,
acquiring and disposing of investments, disbursing and collecting the
funds, paying the debts and fulfilling the obligations of the Company and
handling, prosecuting and settling any claims of the Company, including
foreclosing and otherwise enforcing mortgage and other liens and security
interests securing investments;
(g) Assist in negotiations on behalf of the Company with investment
banking firms and other institutions or investors for public or private
sales of securities of the Company or for other financing on behalf of the
Company, but in no event in such a way that the Advisor shall be acting as
a broker, dealer or underwriter of securities of the Company;
(h) On behalf of the Company, maintain, with respect to any real
property and to the extent available, title insurance or other assurance of
title and customary fire, casualty and public liability insurance with
respect to the Company's assets;
(i) At the direction of the Board of Directors, invest and reinvest
any money of the Company;
(j) Supervise the preparation and filing and distribution of returns
and reports to governmental agencies and to investors and act on behalf of
the Company in connection with investor relations;
(k) Provide office space, equipment and personnel as required for the
performance of the foregoing services as Advisor;
(l) Advise the Company of the operating results of the Company
properties, prepare on a timely basis, and review, for such properties,
operating budgets, maintenance and improvement schedules, projections of
operating results and such other reports as may be requested by the Board
of Directors;
(m) As requested by the Company, make reports to the Company of its
performance of the foregoing services and furnish advice and
recommendations with respect to other aspects of the business of the
Company;
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(n) Prepare on behalf of the Company, or engage independent
professionals to prepare, all reports and returns required by the
Securities and Exchange Commission, Internal Revenue Service and other
state or federal governmental agencies, provided that the Company is
responsible for the fees of such independent professionals;
(o) Undertake and perform all services or other activities necessary
and proper to carry out the investment objectives of the Company; and
(p) Undertake communications with Shareholders in accordance with
applicable law and the Articles of Incorporation,
provided, however, that Affiliates of the Advisor have no obligations to the
Company other than as expressly stated herein, and the Advisor and its
Affiliates have no obligations to present to the Company any specific investment
opportunity except as described in the Prospectus.
3. No Partnership or Joint Venture.
The Company and the Advisor are not, and shall not be deemed to be,
partners or joint venturers with each other.
4. Records.
The Advisor shall maintain appropriate books of account and records
relating to services performed hereunder, which shall be accessible for
inspection by the Company at any time during ordinary business hours.
5. REIT Qualifications.
Notwithstanding any other provision of this Agreement to the contrary, the
Advisor shall refrain from any action which, in its reasonable judgment or in
any judgment of the Board of Directors of which the Advisor has written notice,
would adversely affect the qualification of the Company as a REIT under the Code
or which would violate any law, rule or regulation of any governmental body or
agency having jurisdiction over the Company or its securities, or which would
otherwise not be permitted by the Articles of Incorporation. If any such action
is ordered by the Board of Directors, the Advisor shall promptly notify the
Board of Directors of the Advisor's judgment that such action would adversely
affect such status or violate any such law, rule or regulation or the Articles
of Incorporation, and shall thereafter refrain from taking such action pending
further clarification or instruction from the Board of Directors.
6. Bank Accounts.
At the direction of the Board of Directors, the Advisor may establish and
maintain bank accounts in the name of the Company, and may collect and deposit
into and disburse from such accounts any money on behalf of the Company, under
such terms and conditions as the Board of Directors may approve, provided that
no funds in any such account shall be commingled with funds of the Advisor. The
Advisor shall from time to time, as the Company may require, render
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appropriate accounting of such collections, deposits and disbursements to the
Board of Directors and to the auditors of the Company.
7. Fidelity Bond.
The Advisor shall not be required to obtain or maintain a fidelity bond in
connection with the performance of its services hereunder.
8. Information Furnished Advisor.
The Board of Directors will keep the Advisor informed in writing concerning
the investment and financing policies of the Company. The Board of Directors
shall notify the Advisor promptly in writing of its intention to make any
investments or to sell or dispose of any existing investments. The Company shall
furnish the Advisor with a certified copy of all financial statements, a signed
copy of each report prepared by independent certified public accountants, and
such other information with regard to its affairs as the Advisor may reasonably
request.
9. Compensation.
The Advisor and its Affiliates shall be paid for services rendered by the
Advisor under this Agreement as follows:
(a) The Company will reimburse the Advisor for Acquisition Expenses.
The total of all Acquisition Expenses paid in connection with the purchase
of a property may not exceed an amount equal to 6% of the contract purchase
price for the property unless a majority of the Board of Directors,
including a majority of the Independent Directors, not otherwise interested
in the transaction approve the transaction as being commercially
competitive, fair and reasonable to the Company. Notwithstanding the
foregoing, the total of all Acquisition Expenses paid in connection with
the purchase of a property from an Affiliate may not exceed 6% of the
contract purchase price for the property;
(b) An Asset Management Fee of up to 1.5% of the Average Invested
Assets. This fee will be paid or accrue quarterly, but will not be paid
until the Shareholders have received distributions equal to a cumulative
non-compounded rate of 8% per annum on their investment in the Company. If
the fee is not paid in any quarter, it will accrue and be paid once the
Shareholders have received a cumulative 8% return;
(c) The Company will reimburse the Advisor and its Affiliates for:
(i) the cost to the Advisor or its Affiliates of goods and services used
for and by the Company and obtained from unaffiliated parties; and (ii)
administrative services related thereto. "Administrative Services" include
expenses associated with travel to properties owned by the Company,
ministerial services such as typing, recordkeeping, preparation and
dissemination of Company reports, preparation and maintenance of records
regarding Shareholders, recordkeeping and administration of the Dividend
Reinvestment Program, preparation and dissemination of responses to
Shareholder inquiries and other communications with Shareholders and any
other
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recordkeeping required for Company purposes. Such reimbursements are
subject to limitations imposed by Sections 10(b) and (c) hereof;
(d) A Property Disposition Fee, payable out of the proceeds of the
sale of a property, equal to the lesser of: (i) 3% of the contracted for
sales price of the property; or (ii) 50% of the Competitive Real Estate
Commission. The amount paid, when added to the sums paid to unaffiliated
parties, shall not exceed the lesser of the Competitive Real Estate
Commission or an amount equal to 6% of the contracted for sales price.
Payment of such fee shall be made only if the Advisor provides a
substantial amount of services in connection with the sale of the property;
(e) A Property Management Fee equal to 5% of the Gross Income from
Properties. This fee will be paid monthly; and
(f) Fees for property-level services including leasing fees,
construction management fees, loan origination and servicing fees and risk
management fees; provided that any such compensation to the Advisor will
not exceed the amount which would be paid to unaffiliated third parties
providing such services and all such compensation must be approved by a
majority of the Independent Directors.
10. Compensation for Additional Services, Certain Limitations.
(a) If the Company shall request the Advisor or its Affiliates to
render services for the Company other than those required to be rendered by
the Advisor hereunder, such additional services, if the Advisor elects to
perform them, will be compensated separately on terms to be agreed upon
between such party and the Company from time to time in accordance with
this Section. The rate of compensation for such services shall be approved
by a majority of the Board of Directors, including a majority of the
Independent Directors, and shall not exceed an amount that would be paid to
nonaffiliated third parties for similar services.
(b) In extraordinary circumstances fully justified to the official or
agency administering the state securities laws, the Advisor and its
Affiliates may provide other goods and services to the Company if all of
the following criteria are met: (i) the goods or services must be
necessary to the prudent operation of the Company; or (ii) the
compensation, price or fee must be equal to the lesser of 90% of the
compensation, price or fee the Company would be required to pay to
independent parties who are rendering comparable services or selling or
leasing comparable goods on competitive terms in the same geographic
location, or 90% of the compensation, price or fee charged by the Advisor
or its Affiliates for rendering comparable services or selling or leasing
comparable goods on competitive terms. In addition, any such payment will
be subject to the further limitation described in paragraph (c) below.
Extraordinary circumstances shall be presumed only when there is an
emergency situation requiring immediate action by the Advisor or its
Affiliates and the goods or services are not immediately available from
unaffiliated parties. Services which may be performed in such
extraordinary circumstances include emergency maintenance of Company
properties, janitorial and
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other related services due to strikes or lock-outs, emergency tenant
evictions and repair services which require immediate action, as well as
operating and re-leasing properties with respect to which the leases are in
default or have been terminated.
(c) No reimbursement will be permitted to the Advisor or its
Affiliates under Section 9(c)(ii) above for items such as rent,
depreciation, utilities, capital equipment and other administrative items
and the salaries, fringe benefits and other administrative items of any
controlling persons of the Advisor, its Affiliates or any other supervisory
personnel except in those instances in which the Company believes it to be
in the best interest of the Company that the Advisor or its Affiliates
operate or otherwise deal with, for an interim period, a property with
respect to which the lease is in default or terminated. Permitted
reimbursements, except as set forth above, include salaries and related
salary expenses for non-supervisory services which could be performed
directly for the Company by independent parties such as legal, accounting,
transfer agent, data processing and duplication. Controlling persons, for
purposes of this section, include, but are not limited to those entities or
individuals holding 5% or more of the stock of the Advisor or a person
having the power to direct or cause the direction of the Advisor, whether
through ownership of voting securities, by contract or otherwise, and any
person, irrespective of his or her title, who performs functions for the
Advisor similar to those of: (a) chairman or member of the board of
directors; or (b) president or executive vice-president.
Notwithstanding the foregoing, and subject to the approval of the Board of
Directors, the Company may reimburse the Advisor for expenses related to the
activities of controlling persons undertaken in capacities other than those
which cause them to be controlling persons. The Advisor believes that the
employees of the Advisor, its Affiliates and controlling persons who perform
services for the Company for which reimbursement is allowed pursuant to Section
10 () have the experience and educational background, in their respective fields
of expertise, appropriate for the performance of such services.
The Advisor and its Affiliates may not be reimbursed by the Company for
their overhead, nor can overhead costs or expenses of the Advisor or its
Affiliates be allocated to or paid by the Company. The foregoing reimbursements
of expenses, as limited by this Agreement, will be made regardless of whether
any cash distributions are made to the Shareholders.
11. Statements.
The Advisor shall furnish to the Company not later than the 10th day of
each calendar quarter, beginning with the second calendar quarter of the term of
this Agreement, a statement showing the computation of any Asset Management Fee
payable to it during such quarter under Section 9 hereof. The Advisor shall
furnish to the Company not later than the 30th day following the end of each
Fiscal Year, a statement showing a computation of the fees or other compensation
payable to the Advisor or an Affiliate of the Advisor with respect to such
Fiscal Year under Sections 9 and 10 hereof. The final settlement of compensation
payable under Sections 9 and 10 hereof for each Fiscal Year shall be subject to
adjustments in accordance with, and upon completion of, the annual audit of the
Company's financial statements.
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12. Listing of the Shares.
If this Agreement is terminated in connection with listing for trading of
the Shares on a national exchange or market or otherwise, the Advisor will
receive, in exchange for terminating this Agreement and the giving up or waiving
of its fees then earned but not paid and all future fees, such consideration to
be determined by the Independent Directors and the Advisor. In addition, at such
time, the Company will cause the Partnership to redeem the Advisor's Incentive
Units for cash, or if agreed by both parties, units of interest in the
Partnership or Shares, for the amount the Advisor would have received if the
Partnership immediately sold all of its assets at fair market value. In the
event of such a termination of this Agreement, the Company shall thereafter be
relieved of its obligation to pay the fees contemplated by this Agreement
13. Expenses of the Company.
The Company shall pay all of its expenses and shall reimburse the Advisor
for its expenses as provided in Sections 9 and 10 hereof and, without limiting
the generality of the foregoing, it is agreed that the following expenses of the
Company shall be paid by the Company:
(a) To the extent the Advisor is not expressly required to pay such
expenses pursuant to this Agreement, salaries and other employment expenses
of the personnel employed by the Company, directors' fees and expenses
incurred in attending directors' meetings, travel and other expenses
incurred by directors, officers and employees of the Company and the cost
of directors' liability insurance;
(b) The cost of borrowed money;
(c) All taxes applicable to the Company;
(d) Legal, accounting, auditing, underwriting, brokerage, listing,
registration and other expenses and taxes incurred in connection with the
organization or operations of the Company, the issuance, distribution,
transfer, registration and stock exchange or quotation system listing of
the Company's securities;
(e) Fees and expenses paid to advisors, independent contractors and
Affiliates of the Advisor (as described herein), consultants, managers and
other agents employed directly by the Company or by the Advisor at the
Company's request for the account of the Company;
(f) Expenses connected with the acquisition, disposition, leasing and
ownership of investments, including to the extent not paid by others, but
not limited to, legal fees and other expenses of professional services,
maintenance, repair and improvement of property and brokerage and sales
commissions, expenses of maintaining and managing property equity
interests;
(g) All insurance costs incurred in connection with the Company and
its properties;
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(h) Expenses connected with payments of dividends or interest or
distributions in cash or any form made or caused to be made by the Board of
Directors to shareholders;
(i) All expenses connected with communications to shareholders and
the other bookkeeping and clerical work necessary in maintaining relations
with shareholders and in complying with the continuous reporting and other
requirements of governmental bodies or agencies, including the cost of
printing and mailing certificates for securities and proxy solicitation
materials and reports to shareholders;
(j) Transfer agent and registrar's fees and charges; and
(k) Expenses relating to any office or office facilities maintained
by the Company separate from the office or offices of the Advisor.
14. Reimbursement by Advisor.
The parties acknowledge that pursuant to the "Statement of Policy Regarding
Real Estate Investment Trusts," as revised and adopted by the North American
Securities Administrators Association on September 29, 1993, Total Operating
Expenses of the Company shall be deemed to be excessive if in any Fiscal Year
they exceed the greater of: (a) 2% of the Company's Average Invested Assets for
such Fiscal Year; or (b) 25% of the Net Income for such Fiscal Year. The
Independent Directors shall have the fiduciary responsibility of limiting such
expenses to amounts that do not exceed such limitations. Within 60 days after
the end of any fiscal quarter of the Company for which Total Operating Expenses
(for the 12 months then ended) exceed 2% of Average Invested Assets or 25% of
Net Income, whichever is greater, the Advisor shall reimburse the Company the
amount by which the aggregate expenses incurred by the Company exceed the
limitations described above, provided, however, that the Company may instead
permit such reimbursements to be effected by a reduction in the amount of the
next payments of compensation under Section 9.
15. Other Activities of the Advisor.
Subject to the provisions specifically set forth herein, the Advisor and
its Affiliates currently engage, and may engage in the future, in other
businesses or activities including the rendering of services and investment
advice with respect to real estate investment opportunities to other persons or
entities and may manage other investments (including the investments of the
Advisor and its Affiliates), including those in competition with the Company.
Directors, officers, employees and agents of the Advisor or of Affiliates
of the Advisor may serve as directors, officers, employees or agents of the
Company.
16. Term; Termination of Agreement.
This Agreement will continue in force until _________ __, 2000, subject to
successive one-year renewals with the written mutual consent of the parties
including approval of a majority of the Independent Directors.
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Notwithstanding any other provision of the Agreement to the contrary,
either the Company or the Advisor may terminate this Agreement, or any extension
hereof, or the parties by mutual consent or a majority of the Independent
Directors may do so, in each case upon 60 days written notice without cause or
penalty. In the event of the termination of the Agreement, the Advisor will
cooperate with the Company and take all reasonable steps requested to assist the
Board of Directors in making an orderly transition of the advisory function.
If this Agreement is terminated pursuant to this Section, such termination
shall be without any further liability or obligation of either party to the
other, except as provided in Section 19.
If this Agreement is terminated for any reason other than the listing of
the Shares as contemplated in Section 12, all obligations of the Advisor and its
Affiliates to offer property to the Company for purchase, as described in
Section 2(a), shall also terminate.
17. Assignments.
The Company may terminate this Agreement in the event of its assignment by
the Advisor except an assignment to a successor organization which acquires
substantially all of the property and carries on the affairs of the Advisor,
provided that following such assignment the persons who controlled the
operations of the Advisor immediately prior thereto shall control the operations
of the successor organization, including the performance of its duties under
this Agreement; however, if at any time subsequent to such assignment such
persons shall cease to control the operations of the successor organization, the
Company may thereupon terminate this Agreement. This Agreement shall not be
assignable by the Company without the consent of the Advisor, except in the case
of assignment by the Company to a corporation, trust or other organization which
is a successor to the Company. Any assignment of this Agreement shall bind the
assignee hereunder in the same manner as the assignor is bound hereunder.
18. Default, Bankruptcy, etc.
At the option solely of the Company, this Agreement shall be terminated
immediately upon written notice of termination from the Board of Directors to
the Advisor if any of the following events occurs:
(a) The Advisor violates any material provisions of this Agreement
and, after receipt of written notice of violation, such violation is not
cured within 30 days; or
(b) A court of competent jurisdiction enters a decree or order for
relief in respect of the Advisor in any involuntary case under the
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or appoints a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or similar official) of the Advisor or for any substantial
part of its property or orders the winding up or liquidation of the
Advisor's affairs; or
(c) The Advisor commences a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or
consents to the entry of an order for relief in an involuntary case under
any such law, or consents to the
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appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or similar official) of the Advisor or
for any substantial part of its property, or makes any general assignment
for the benefit of creditors, or fails generally to pay its debts as they
become due.
The Advisor agrees that if any of the events specified in
subsections (b) and (c) of this Section 18 occur, it will give written
notice thereof to the Company within 7 days after the occurrence of such
event.
19. Action Upon Termination.
The Advisor shall not be entitled to compensation after the date of
termination of this Agreement for further services hereunder, but shall be paid
all compensation accruing to the date of termination. Subject to the provisions
of Section 12, the Advisor shall forthwith upon a termination caused by factors
other than the listing for trading of the Shares on a national stock exchange or
market:
(a) Pay over to the Company all moneys 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;
(b) Deliver to the Board of Directors a full accounting, including a
statement showing all payments collected by it and a statement of all money
held by it, covering the period following the date of the last accounting
furnished to the Board of Directors;
(c) Deliver to the Board of Directors all property and documents of
the Company then in the custody of the Advisor; and
(d) Cooperate with the Company and take all reasonable steps
requested by the Company to assist the Board of Directors in making an
orderly transition of the advisory function.
20. Amendments.
This Agreement shall not be amended, 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.
21. Successors and Assigns.
This Agreement shall bind any successors or permitted assigns of the
parties hereto as herein provided.
22. Governing Law.
The provisions of this Agreement shall be governed, construed and
interpreted in accordance with the laws of the Commonwealth of Virginia as at
the time in effect.
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23. Liability and Indemnification.
(a) The Company shall, to the fullest extent permitted by Virginia
statutory or decisional law, as amended or interpreted, indemnify and pay
or reimburse reasonable expenses to the Advisor and its Affiliates,
provided, that: (i) the Advisor or other party seeking indemnification has
determined, in good faith, that the course of conduct which caused the loss
or liability was in the best interest of the Company; (ii) the Advisor or
other person seeking indemnification was acting on behalf of or performing
services on the part of the Company; (iii) such liability or loss was not
the result of negligence, misconduct or a knowing violation of the criminal
law or any federal or state securities laws on the part of the indemnified
party; and (iv) such indemnification or agreement to be held harmless is
recoverable only out of the net assets of the Company and not from the
Shareholders.
(b) The Company shall not indemnify the Advisor or its Affiliates for
losses, liabilities or expenses arising from or out of an alleged violation
of federal or state securities laws by such party unless one or more of the
following conditions are met: (i) there has been a successful adjudication
on the merits of each count involving alleged securities law violations as
to the particular indemnitee; (ii) such claims have been dismissed with
prejudice on the merits by a court of competent jurisdiction as to the
particular indemnitee; or (iii) a court of competent jurisdiction approves
a settlement of the claims and finds that indemnification of the settlement
and related costs should be made and the court considering the request has
been advised of the position of the Securities and Exchange Commission and
the published opinions of any state securities regulatory authority in
which securities of the Company were offered and sold as to indemnification
for securities law violations.
(c) The Company may advance amounts to persons entitled to
indemnification hereunder for legal and other expenses and costs incurred
as a result of any legal action for which indemnification is being sought
only if all of the following conditions are satisfied: (i) the legal
action relates to acts or omissions with respect to the performance of
duties or services by the indemnified party for or on behalf of the
Company; (ii) the legal action is initiated by a third party and a court of
competent jurisdiction specifically approves such advancement; and (iii)
the indemnified party receiving such advances undertakes to repay the
advanced funds to the Company, together with the applicable legal rate of
interest thereon, in which such party would not be entitled to
indemnification.
24. Notices.
Any notice, report or other communication required or permitted to be given
hereunder shall be in writing unless some other method of giving such notice,
report or other communication is accepted by the party to whom it is given and
shall be given by being delivered at the following addresses of the parties
hereto:
The Company and/or the Board of Directors:
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T REIT, Inc.
Xxxxx 000
0000 X. Xxxxxx Xxxxxx
Xxxxx Xxx, XX 00000
The Advisor:
Triple Net Properties, LLC
Xxxxx 000
0000 X. Xxxxxx Xxxxxx
Xxxxx Xxx, XX 00000
Either party may at any time give notice in writing to the other party of a
change of its address for the purpose of this Section 24.
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.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date
first above written.
COMPANY:
T REIT, INC., a Virginia corporation
By: _________________________________
Title: ______________________________
ADVISOR:
TRIPLE NET PROPERTIES, LLC, a Virginia limited
liability company
By: _________________________________
Title: ______________________________
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