ADVISORY AGREEMENT Between HARTMAN ADVISORS, LLC and HARTMAN SHORT TERM INCOME PROPERTIES XX, INC July 10, 2009
Between
XXXXXXX
ADVISORS, LLC
and
XXXXXXX
SHORT TERM INCOME PROPERTIES XX, INC
July
10, 2009
1
TABLE
OF CONTENTS
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TABLE
OF CONTENTS
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2
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3
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ARTICLE
1
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3
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DEFINITIONS
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3
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ARTICLE
2
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6
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APPOINTMENT
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6
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ARTICLE
3
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6
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DUTIES
OF THE ADVISOR
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6
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3.01
Offering Services
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6
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3.02
Acquisition Services
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6
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3.03
Asset Management Services
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7
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3.04
Shareholder Services
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10
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ARTICLE
4
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10
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AUTHORITY
OF THE ADVISOR
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10
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4.03
Approval by Directors
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10
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ARTICLE
5
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11
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BANK
ACCOUNTS
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11
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ARTICLE
6
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11
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RECORDS
AND FINANCIAL STATEMENTS
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11
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ARTICLE
7
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11
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LIMITATION
ON ACTIVITIES; LIMITATION ON LIABILITY
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11
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7.01
Limitation on Activities
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11
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ARTICLE
8
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12
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RELATIONSHIP
WITH DIRECTORS AND OFFICERS
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12
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ARTICLE
9
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12
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FEES
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12
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ARTICLE
10
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13
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EXPENSES
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13
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ARTICLE
11
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15
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OTHER
SERVICES
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15
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ARTICLE
12
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15
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RELATIONSHIP
OF THE ADVISOR AND COMPANY;
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OTHER
ACTIVITIES OF THE ADVISOR
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15
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ARTICLE
13
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16
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THE
XXXXXXX NAME
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16
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ARTICLE
14
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16
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TERM
AND TERMINATION OF THE AGREEMENT
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16
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ARTICLE
15
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18
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ASSIGNMENT
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18
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ARTICLE
16
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18
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INDEMNIFICATION
AND LIMITATION OF LIABILITY
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18
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16.03
The Advisor’s Liability.
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19
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ARTICLE
17
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20
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MISCELLANEOUS
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20
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2
This
Advisory Agreement (this “Agreement”), dated as of July 10, 2009, is entered
into between Xxxxxxx Advisors, LLC, a Texas limited liability company (the
“Advisor”), and Xxxxxxx Short Term Income Properties XX, Inc., a Maryland
corporation (the “Company”).
WITNESSETH
WHEREAS,
the Company desires to avail itself of the knowledge, experience, sources of
information, advice, assistance and certain facilities available to the Advisor
(hereinafter defined) and to have the Advisor undertake the duties and
responsibilities hereinafter set forth herein on the terms set forth in this
Agreement; and
WHEREAS,
the Advisor is willing to undertake to render such services 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:
ARTICLE
1
DEFINITIONS
The
following defined terms used in this Agreement shall have the meanings specified
below:
“Acquisition
Expenses” has the meaning set forth in the Articles of
Incorporation.
“Advisor”
means (i) Xxxxxxx Advisors, LLC, a Texas
limited liability company, or (ii) any successor advisor to the
Company.
“Affiliate”
has the meaning set forth in the Articles of Incorporation. For the purposes of
this Agreement, the Advisor shall not be deemed to be an Affiliate of the
Company, and vice versa.
“Articles
of Incorporation” means the Articles of Incorporation of the Company, as amended
from time to time.
“Asset”
or “Assets” means any and all real estate investments (real, personal or
otherwise), tangible or intangible, owned or held by, or for the account of, the
Company, whether directly or indirectly through another entity or entities,
including interests in any Person or in joint ventures which directly or
indirectly own real estate investments.
“Board of
Directors” means the Board Directors of the Company.
“Bylaws”
means the Bylaws of the Company, as amended from time to time.
"Cash
Amount" means an amount of cash equal to the product of (i) the Value of a REIT
Share and (ii) the REIT Shares Amount determined as of the applicable Valuation
Date.
3
“Code”
means the 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.
“Director”
means a member of the Board of Directors of the Company.
“Fair
Market Value”, with respect to the Company’s Shares means the latest price at
which the Company sold a Share, or if the Shares are then traded or quoted on a
public exchange, the closing price of a Share on the previous trading
day.
“Gross
Proceeds” has the meaning set forth in the Articles of
Incorporation.
“Xxxxxxx”
means Xxxxx Xxxxxxx, the chief executive officer of the Advisor, and his
affiliates.
“Independent
Director” has the meaning set forth in the Articles of
Incorporation.
“Initial
Asset Value” means (i) in the case of an Asset other than a loan or other
financing, the gross purchase price of real estate investments acquired directly
by the Company, including any debt attributable to such investments, or the pro
rata share of the gross asset value of real estate investments held by entities
in which the Company invests, and (ii) in the case of a loan or other financing,
the total amount of the funds advanced.
“Initial
Investment” means aggregate real estate investments made by the Company with the
proceeds of the Initial Offering, as completed.
“Limited
Partnership Agreement” means the Limited Partnership Agreement of Xxxxxxx Short Term Income Properties XX
Operating Partnership, L.P., the Operating Partnership, as the same may
be amended and restated from time to time, if the Advisor and the Company
determine to organize that limited partnership.
“Managing
Dealer” means Xxxxx Investments, Inc., a Wisconsin corporation, or such other
entity selected by the Board of Directors to act as the managing dealer for the
Offering if the Company and the Advisor determine that having a Managing Dealer
is necessary or appropriate for the Offering.
“Offering”
means a public offering of Shares pursuant to any Prospectus.
“Operating
Expenses” has the meaning set forth in the Articles of
Incorporation.
“Operating
Partnership” means Xxxxxxx Short Term Income Properties XX Operating
Partnership, L.P., a Delaware limited partnership if the Company and the Advisor
determine to form the limited partnership.
“Organizational
and Offering Expenses” has the meaning set forth in the Articles of
Incorporation.
4
“Participation
Interest” means the 1,000 shares of convertible capital stock of the Company
issued to Xxxxxxx Advisors, LLC.
“Person”
means an individual, corporation, partnership, estate, trust, 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.
“Property
Management Agreement” means any Property Management Agreement between the
Company and the Property Manager.
“Property
Manager” means Xxxxxxx Income REIT Management, LLC, a Delaware limited liability
company, or an Affiliate thereof.
“Prospectus”
means the Company’s final prospectus for any public offering within the meaning
of Section 2(10) of the Securities Act of 1933, as amended.
“REIT”
means a “real estate investment trust” under Sections 856 through 860 of the
Code.
"REIT
Share" or “Share” means a share of common stock of the Company, par value $.001
per share (but shall not include any additional series or class of the Company’s
common stock created after the date of this Agreement).
“REIT
Shares Amount” means the Fair Market Value of the Participation
Interest.
“Securities”
means any class or series of units or shares of the Company or the Operating
Partnership, including common shares or preferred units or shares and any 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.
“Shareholders”
means the registered holders of the outstanding Shares.
“Subsequent
Investment” means a real estate investment made by the Company after it has
acquired the Initial Investments.
“Termination
Date” means the date of termination of this Agreement.
“2%/25%
Guidelines” means the limitations that the Company will not reimburse the
Advisor for any amount by which the Company’s operating expenses (including the
asset management fee) at the end of the four preceding fiscal quarters exceeds
the greater of: (A) 2% of its average invested averages, or (B) 25% of its net
income determined without reduction for any additions to reserves for
depreciation, bad debts or other similar non-cash reserves and excluding any
gain from the sale of its assets for that period. Notwithstanding the
above, the Company may reimburse the Advisor for expenses in excess of this
limitation if a majority of the independent directors determines that such
excess expenses are justified based on unusual and non-recurring
factors.
5
ARTICLE
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.
ARTICLE
3
DUTIES OF
THE ADVISOR
The
Advisor is responsible for managing, operating, directing and supervising the
operations and administration of the Company and its Assets to the fullest
extent allowed by law. The Advisor shall, either directly or by engaging an
Affiliate or third party, perform the following duties:
3.01 Offering
Services. The Advisor shall manage and
supervise:
(i) Development
of the offering, including the determination of the specific terms of the
Securities to be offered by the Company, preparation of all offering and related
documents, and obtaining all required regulatory approvals of such
documents;
(ii) Along
with the Managing Dealer, if any, approval of the participating broker dealers
and negotiation of the related selling agreements;
(iii) Coordination
of the due diligence process relating to participating broker dealers and their
review of any Prospectus and other Offering and Company documents;
(iv) Preparation
and approval of all marketing materials contemplated to be used by the Managing
Dealer or others in the Offering of the Company’s Securities;
(v) Along
with the Managing Dealer, negotiation and coordination with the transfer agent
for the receipt, collection, processing and acceptance of subscription
agreements, commissions, and other administrative support
functions;
(vi) Creation
and implementation of various technology and electronic communications related
to the Offering of the Company’s Securities; and
(vii) All
other services related to organization of the Company or the Offering, whether
performed and incurred by the Advisor or its Affiliates.
3.02
Acquisition Services.
(i) Serve
as the Company’s investment and financial advisor and provide relevant market
research and economic and statistical data in connection with the Company’s
Assets and investment objectives and policies;
6
(ii) Subject
to Section 4.03 and Article 7 hereof and the investment objectives and policies
of the Company: (a) locate, analyze and select potential investments; (b)
structure and negotiate the terms and conditions of transactions pursuant to
which investments in Assets will be made; (c) acquire Assets on behalf of the
Company; and (d) arrange for financing on behalf of the Company;
(iii) Perform
due diligence on prospective investments and create due diligence reports
summarizing the results of such work;
(iv) Prepare
reports regarding prospective investments which include recommendations and
supporting documentation necessary for the Directors to evaluate the proposed
investments;
(iv) Obtain
reports (which may be prepared by the Advisor or its Affiliates), where
appropriate, concerning the value of contemplated investments of the Company;
and
(v) Negotiate
and execute approved investments, loans, debt financing and other
transactions.
3.03
Asset Management Services.
(i) Real
Estate Services:
(a) 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,
lenders, technical advisors, attorneys, brokers, underwriters, corporate
fiduciaries, escrow agents, depositaries, custodians, agents for collection,
insurers, insurance agents, developers, construction companies and any and all
Persons acting in any other capacity deemed by the Advisor necessary or
desirable for the performance of any of the foregoing services;
(b) Negotiate
and service the Company’s debt facilities and other financings;
(c) Monitor
applicable markets and obtain reports (which may be prepared by the Advisor or
its Affiliates) where appropriate, concerning the value of investments of the
Company;
(d) Monitor
and evaluate the performance of investments of the Company; provide daily
management services to the Company and perform and supervise the various
management and operational functions related to the Company’s
investments;
(e) Coordinate
with the Property Manager on its duties under any Property Management Agreement
and assist in obtaining all necessary approvals of major property transactions
as governed by the applicable Property Management Agreement;
7
(f) Coordinate
and manage relationships between the Company and any joint venture partners;
and,
(g) Consult
with the officers and Directors of the Company and provide assistance with the
evaluation and approval of potential property dispositions, sales or
refinancings.
(ii) Accounting
and Other Administrative Services:
(a) Manage
and perform the various administrative functions necessary for the management of
the day-to-day operations of the Company;
(b) From
time-to-time, or at any time reasonably requested by the Directors, make reports
to the Directors on the Advisor’s performance of services to the Company under
this Agreement;
(c) Coordinate
with the Company’s independent accountants and auditors to prepare and deliver
to the Company’s audit committee an annual report covering the Advisor’s
compliance with certain material aspects of this Advisory
Agreement;
(d) Provide
or arrange for administrative services and items, legal and other services,
office space, office furnishings, personnel and other overhead items necessary
and incidental to the Company’s business and operations;
(e) Provide
financial and operational planning services and portfolio management
functions;
(f)
Maintain accounting data and any other information
requested concerning the activities of the Company as shall be required to
prepare and to file all periodic financial reports and returns required to be
filed with the Securities and Exchange Commission and any other regulatory
agency, including annual financial statements;
(g) Maintain
all appropriate books and records of the Company;
(h) Provide
tax and compliance services and coordinate with appropriate third parties,
including independent accountants and other consultants, on related tax
matters;
(i) Supervise
the performance of such ministerial and administrative functions as may be
necessary in connection with the daily operations of the Assets;
(j)
Provide the Company with all necessary cash management
services;
(k) Manage
and coordinate with the transfer agent the quarterly dividend process and
payments to shareholders;
8
(l) Consult
with the officers and Directors of the Company and assist the Directors in
evaluating and obtaining adequate insurance coverage based upon risk management
determinations;
(m) Provide
the officers and Directors of the Company with timely updates related to the
overall regulatory environment affecting the Company, as well as managing
compliance with such matters, including but not limited to compliance with the
Xxxxxxxx-Xxxxx Act of 2002 (the “Xxxxxxxx-Xxxxx Act”);
(n) Consult
with the officers and Directors of the Company and the Board of Directors
relating to the corporate governance structure and appropriate policies and
procedures related thereto;
(o) Perform
all reporting, record keeping, internal controls and similar matters in a manner
to allow the Company to comply with applicable law, including the Xxxxxxxx-Xxxxx
Act;
(p) find,
evaluate, present and recommend to us investment opportunities consistent with
our investment policies and objectives;
(q) structure
the terms and conditions of our acquisitions, sales and joint
ventures;
(r)
acquire properties and
make and invest in mortgage loans and other investments on our behalf in
compliance with our investment objectives and policies;
(s) arrange
for financing and refinancing of properties and other investments;
(t)
service or enter into contracts for servicing our mortgage loans;
(u) assist
us in obtaining insurance;
(v) generate
an annual budget for us;
(w) review
and analyze financial information for each property and the overall
portfolio;
(x) formulate
and oversee the implementation of strategies for the administration, promotion,
management, operation, maintenance, improvement, financing and refinancing,
marketing, leasing and disposition of our properties and other
investments;
(y) perform
investor-relations services;
(z) maintain
our accounting and other records and assisting us in filing all reports required
to be filed with the SEC, the IRS and other regulatory agencies;
(aa) engage
and supervise the performance of our agents, including our registrar and
transfer agent; and
9
(bb)
perform any other services reasonably requested by us.
3.04
Shareholder Services.
(i) Manage
communications with shareholders, including answering phone calls, preparing and
sending written and electronic reports and other communications;
and
(ii) Establish
technology infrastructure to assist in providing shareholder support and
service.
ARTICLE
4
AUTHORITY
OF THE ADVISOR
4.01 General. All
rights and powers to manage and control the day-to-day business and affairs of
the Company shall be vested in the Advisor to the fullest extent allowed by law.
The Advisor shall have the power to delegate all or any part of its rights and
powers to manage and control the business and affairs of the Company to such
officers, employees, Affiliates, agents and representatives of the Advisor or
the Company as it may from time to time deem appropriate. Any authority
delegated by the Advisor to any other Person shall be subject to applicable law
and the limitations on the rights and powers of the Advisor specifically set
forth in this Agreement or the Articles of Incorporation.
4.02 Powers
of the
Advisor. Subject
to the express limitations set forth in this Agreement, the power to direct the
management, operation and policies of the Company shall to the fullest extent
allowed by law be vested in the Advisor, which shall have the power by itself
and shall be authorized and empowered on behalf and in the name of the Company
to carry out any and all of the objectives and purposes of the Company and to
perform all acts and enter into and perform all contracts and other undertakings
that it may in its sole discretion deem necessary, advisable or incidental
thereto to perform its obligations under this Agreement.
4.03
Approval by Directors.
(i)
Notwithstanding the foregoing, any investment in Assets, including any
acquisition of an Asset by the Company or any investment by the Company in a
joint venture, limited partnership or similar entity owning real properties,
will require the prior approval of the Board of Directors. The Advisor will
deliver to the Board of Directors all documents required by it to properly
evaluate the proposed investment.
(ii) If
the Articles of Incorporation require that a transaction be approved 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
Asset. The prior approval of a majority of the Independent Directors will be
required for each transaction between the Company and the Advisor or its
Affiliates.
(iii) The
Advisor may not cause the Company to acquire or finance any property or make or
invest in any mortgage loan or other investment on the Company’s behalf without
the prior approval of the Company’s board of directors, including a majority of
its independent directors. The actual terms and conditions of
transactions involving the Company’s investments will be determined by the
Advisor, subject at all times to such board approval.
10
ARTICLE
5
BANK
ACCOUNTS
The
Advisor will maintain one or more bank accounts in the name of the Company and
will collect and deposit into any such account or accounts, and disburse from
any such account or accounts, any money on behalf of the Company.
Notwithstanding the foregoing, no funds shall be commingled with the funds of
the Advisor.
ARTICLE
6
RECORDS
AND FINANCIAL STATEMENTS
The
Advisor, in the conduct of its responsibilities to the Company, shall maintain
adequate and separate books and records for the Company’s operations in
accordance with United States generally accepted accounting principles (“GAAP”),
which shall be supported by sufficient documentation to ascertain that such
books and records are properly and accurately recorded. Such books and records
shall be the property of the Company. Such books and records shall include all
information necessary to calculate and audit the fees or reimbursements paid
under this Agreement. The Advisor shall utilize procedures to attempt to ensure
such control over accounting and financial transactions as is reasonably
required to protect the Company’s assets from theft, error or fraudulent
activity. All financial statements that the Advisor delivers to the Company
shall be prepared on an accrual basis in accordance with GAAP, except for
special financial reports which by their nature require a deviation from GAAP.
The Advisor shall maintain the necessary liaison with the Company’s independent
accountants and shall provide such accountants with such reports and other
information as the Company shall request.
ARTICLE
7
LIMITATION
ON ACTIVITIES; LIMITATION ON LIABILITY
7.01 Limitation
on Activities.
Notwithstanding
any provision in this Agreement to the contrary, the Advisor shall not take any
action which, in its sole judgment made in good faith, would (i) adversely
affect the ability of the Company to qualify or continue to qualify to be taxed
as a REIT, (ii) subject the Company or the Operating Partnership to regulation
under the Investment Company Act of 1940, as amended, (iii) violate any law,
rule or regulation of any governmental body or agency having jurisdiction over
the Company, or its Securities, or (iv) violate the Articles of Incorporation or
Bylaws. In the event that an action that would violate (i) through (iv) of the
preceding sentence has been ordered by the Board of Directors acting on behalf
of the Company, the Advisor shall notify the Board of Directors of the Advisor’s
judgment of the potential impact of such action and shall refrain from taking
such action until it receives further clarification or instructions from the
Board of Directors. In such event the Advisor shall, to the fullest extent
allowed by law, have no liability for acting in accordance with the specific
instructions of the Board of Directors so given.
11
7.02 Limitation
on Liability.
Notwithstanding
the foregoing, none of the Advisor, its Affiliates and none of their managers,
directors, officers, employees and equity-holders, shall be liable to the
Company, the Operating Partnership, if any, the Board of Directors or the
Shareholders for any act or omission by such Persons or individuals, except as
provided in this Agreement. The parties hereto intend that the limitation of
liability set forth in this section be construed and applied as written
notwithstanding any rule of construction to the contrary. without limiting the
foregoing, the limitation of liability shall, to the fullest extent allowed by
law, apply notwithstanding any state’s “express negligence rule” or similar rule
that would deny coverage based on a person’s sole, concurrent or contributory
active or passive negligence, gross negligence or strict liability. It is the
intent of the parties that, to the extent provided in this section, the
limitation of liability set forth herein shall, to the fullest extent allowed by
law, apply to a person’s sole, concurrent or contributory active or passive
negligence, gross negligence or strict liability. The parties agree that this
provision is “conspicuous” for purposes of all state laws.
ARTICLE
8
RELATIONSHIP
WITH DIRECTORS AND OFFICERS
Managers,
Directors, officers and employees of the Advisor or any direct or indirect
Affiliate of the Advisor may serve as a Director and as officers of the Company,
except that no manager, director, officer or employee of the Advisor or any of
its Affiliates who also is a Director or officer of the Company shall receive
any compensation from the Company or Operating Partnership for serving as a
Director or officer other than reasonable reimbursement for travel and related
expenses incurred in attending meetings of the Board of Directors.
ARTICLE
9
FEES
9.01 Acquisition
Fees. The Company will pay the Advisor in
cash as compensation for services described in Section 3.02 an acquisition fee
of (i) 2.5% of the Value of each real estate asset that the Company
acquires. The Company shall also reimburse the Advisor for all
out of pocket third party expenses incurred by the Advisor in connection with
such services as required by Article 10. The amount of such acquisition fees and
expenses shall be subject to any limitations contained in the Articles of
Incorporation. The Advisor shall submit an invoice to the Company following the
closing or closings of each acquisition, accompanied by a computation of the
fee. The fee shall be payable within ten (10) business days after receipt of the
invoice by the Company.
12
9.02 Asset
Management Fees. The Company will pay the Advisor in cash as
compensation for services described in Section 3.03 an asset management fee in
accordance with this Section 9.02 as well as reimburse the Advisor for all out
of pocket third party expenses incurred by the Advisor in connection with such
services as required by Article 10. Subject to any limitations contained in the
Articles of Incorporation, this asset management fee shall be earned monthly and
the amount of this asset management fee payable by the Company to the Advisor
shall equal 1/12th of 1%
multiplied by the net equity invested in real estate investments as of the end
of the applicable month. The Advisor shall submit a monthly invoice to the
Company, accompanied by a computation of the asset management fee for the
applicable period. The asset management fee shall be payable within ten business
days after receipt of the invoice by the Company.
9.03 Debt
Financing Fees. The Company will pay the Advisor in cash as compensation for
services described in Section 3.02 a debt financing fee equal to 1% of the
amount obtained under any property loan or made available to us under any other
debt financing. In no event will the debt financing fee be paid more than once
in respect of the same debt.
ARTICLE
10
EXPENSES
10.01 General. In
addition to the compensation paid to the Advisor pursuant to Article 9 hereof,
the Company shall pay directly or reimburse the Advisor for the following
expenses paid or incurred by the Advisor or Affiliates in connection with the
services provided to the Company pursuant to this Agreement, including, but not
limited to:
(i) Acquisition
Expenses incurred in connection with the selection and acquisition of Assets
including such expenses incurred related to assets pursued or considered but not
ultimately acquired by the Company;
(ii) the
actual out-of-pocket cost of goods and services used by the Company (or the
Operating Partnership, if formed) and obtained from entities not Affiliated with
the Advisor, including brokerage fees paid in connection with the purchase and
sale of Assets;
(iii) taxes
and assessments on income or Assets and taxes as an expense of doing business
and any other taxes otherwise imposed on the Company and its business or
income;
(iv) out-of-pocket
costs associated with insurance required in connection with the business of the
Company or by its officers and Directors;
(v) all
out-of-pocket expenses in connection with payments to the Board of Directors and
meetings of the Board of Directors and Shareholders;
(vi) personnel
and related employment direct costs incurred by the Advisor or Affiliates (a) in
performing the services described in Section 3.04 or (b) as otherwise approved
by Independent Directors, including but not limited to salary, benefits, burdens
and overhead of all employees directly involved in the performance of such
services, plus all out-of-pocket costs incurred;
13
(vii) out-of-pocket
expenses of maintaining communications with Shareholders, including the cost of
preparation, printing, and mailing annual reports and other Shareholder reports,
proxy statements and other reports required by governmental
entities;
(viii) audit,
accounting and legal fees, and other fees for professional services relating to
the operations of the Company and all such fees incurred at the request, or on
behalf of, the Independent Directors or any committee of the Board of
Directors;
(ix)
out-of-pocket costs for the Company to comply with all applicable
laws, regulations and ordinances;
(x) organization
and offering expenses related to the Company’s primary offering (other than
selling commissions and the dealer manager fee) in an amount up to 1.5% of gross
offering proceeds from the primary offering less any such organization and
offering expenses that the Company may pay directly. The Advisor and its
affiliates will be responsible for the payment of organization and offering
expenses related to the Company’s primary offering (other than selling
commissions and the dealer manager fee), to the extent they exceed 1.5% of gross
offering proceeds from the primary offering, without recourse against or
reimbursement by the Company; and
(xi) all
other out-of-pocket costs necessary for the operation of the Company and its
Assets incurred by the Advisor in performing its duties hereunder.
Except as
specifically provided for above in (vi) related to shareholder services expenses
or as contemplated by Article 11, the expenses and payments subject to
reimbursement by the Company in this Section 10.01 do not include personnel and
related direct employment or overhead costs of the Advisor or Affiliates.
Further, the Company shall have no liability with respect to Organizational and
Offering Expenses incurred on its behalf or on behalf of the Company in
connection with the Third Offering. The Advisor shall pay for all such
Organizational and Offering Expenses.
10.02 Reimbursement
to Advisor. Expenses incurred by the Advisor on behalf of the Company and
payable pursuant to this Article 10 shall be reimbursed to the Advisor within 10
days after the Advisor provides the Company with an invoice and supporting
documentation relating to such reimbursement.
10.03 Reimbursement
to Company. The Company shall not reimburse the Advisor during any fiscal
quarter for Operating Expenses that, in the four consecutive fiscal quarters
then ended (the “Expense Year”), exceed the 2%/25% Guidelines for such year (the
“Excess Amount”), unless the Independent Directors determine that such excess
was justified, based on unusual and non-recurring factors which they deem
sufficient, in which case the Excess Amount may be reimbursed. Any Excess Amount
paid to the Advisor during a fiscal quarter without the Independent Directors
determining that such expenses were justified shall be repaid to the Company.
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 and
the Independent Directors determined that such expenses were justified, there
shall be sent to the Shareholders a written disclosure of such fact, together
with an explanation of the factors the Independent Directors considered in
determining that such excess expenses were justified. Such determination shall
be reflected in the minutes of the meetings of the Board of Directors. 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.
14
ARTICLE
11
OTHER
SERVICES
Should
(i) the Company request that the Advisor or any manager, officer or employee
thereof render services for the Company other than as set forth in this
Agreement or (ii) there are changes to the regulatory environment in which the
Advisor or Company operates that would increase significantly the level of
services performed such that the costs and expenses borne by the Advisor for
which the Advisor is not entitled to separate reimbursement for personnel and
related employment direct costs and overhead under Article 10 of this Agreement
would increase significantly, such services shall be separately compensated at
such rates and in such amounts as are agreed by the Advisor and the Independent
Directors, subject to the limitations contained in the Articles of
Incorporation, and shall not be deemed to be services pursuant to the terms of
this Agreement.
ARTICLE
12
RELATIONSHIP
OF THE ADVISOR AND COMPANY;
OTHER
ACTIVITIES OF THE ADVISOR
12.01
Relationship. To the fullest extent allowed by law, 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.
Nothing herein contained shall prevent the Advisor from engaging in other
activities, including, without limitation, the rendering of advice to other
Persons 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 manager, director, officer, employee, or equity holder of the
Advisor or its Affiliates to engage in any other business or to render services
of any kind to any other Person. 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 promptly disclose to the
Board of 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 Person.
12.02 Time
Commitment. The Advisor shall, and shall cause its Affiliates and their
respective employees, officers and agents to, devote to the Company such time as
shall be reasonably necessary to conduct the business and affairs of the Company
in an appropriate manner consistent with the terms of this Agreement. The
Company acknowledges that the Advisor and other Affiliates of Xxxxxxx and their
respective employees, officers and agents may also engage in activities
unrelated to the Company and may provide services to Persons other than the
Company or any of its Affiliates.
15
12.03
Investment Opportunities and Allocation. The Advisor shall be required to use
commercially reasonable 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 an
investment opportunity is located, the allocation procedure set forth under the
caption “Conflicts of Interest-Competitive Activities of Xxxxxxx and its
Affiliates” in any Prospectus (as may be amended from time to time) shall govern
the allocation of the opportunity among the Company and Affiliates of the
Advisor.
ARTICLE
13
THE
XXXXXXX NAME
The
Advisor, Xxxxxxx and their Affiliates have a proprietary interest in the name
“Xxxxxxx”. The Advisor hereby grants to the Company a non-transferable,
non-assignable, non-exclusive royalty-free right and license to use the name
“Xxxxxxx” during the term of this Agreement. Accordingly, and in recognition of
this right, if at any time the Company ceases to retain Xxxxxxx or an Affiliate
thereof to perform the services of the Advisor, the Company (including the
Operating Partnership, if formed) will, promptly after receipt of written
request from Xxxxxxx, cease to conduct business under or use the name “Xxxxxxx”
or any derivative thereof and the Company and the Operating Partnership shall
change the name of the Company and the Operating Partnership to a name that does
not contain the name “Xxxxxxx” or any other word or words that might, in the
reasonable discretion of the Advisor, be susceptible of indication of some form
of relationship between the Company and the Advisor or any Affiliate thereof. At
such time, the Company will also make any changes to any trademarks, service
marks or other marks necessary to remove any references to the word “Xxxxxxx”.
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 “Xxxxxxx” as a part of their name, all without the need for any consent
(and without the right to object thereto) by the Company or the Operating
Partnership, if formed.
ARTICLE
14
TERM AND
TERMINATION OF THE AGREEMENT
14.01 Term.
This Agreement shall have an initial term of one year from the date of the
Agreement. This Agreement may be renewed for an unlimited number of successive
one-year terms upon mutual consent of the parties. Any such renewal must be
approved by a majority of the Independent Directors. The Company (through the
Independent Directors) will evaluate the performance of the Advisor annually
before renewing the Agreement, and each such renewal shall be for a term of no
more than one year. The Advisor, at no charge to the Company, shall
provide the Independent Directors with a report, no less than thirty (30) days
before the annual expiration of this Agreement’s term, setting forth all of the
compensation, in total and by category, that the Company has paid and is
expected to pay to the Advisor in the current year and in the two most recently
completed years.
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14.02 Termination
by Either Party. This Agreement may be terminated upon 60 days’ written notice
without cause or penalty by either party.
14.03 Termination
by the Company. This Agreement may be terminated immediately by the Company upon
(i) any fraudulent conduct, criminal conduct, willful misconduct or the
negligent breach of fiduciary duty of or by the Advisor, (ii) a material breach
of this Agreement by the Advisor not cured within 10 business days after the
Advisor receives written notice of such breach, or (iii) an event of the
bankruptcy of the Advisor or commencement of any bankruptcy or similar
insolvency proceedings of the Advisor. If the Company elects to
terminate the Agreement under Sections 14.02, 14.03 or 14.07, the Company first
shall have obtained the approval of a majority of its independent
directors.
14.04 Termination
by the Advisor. This Agreement may be terminated immediately by the Advisor in
the event of (i) the bankruptcy of the Company or commencement of any bankruptcy
or similar insolvency proceedings of the Company, or (ii) any material breach of
this Agreement by the Company not cured by the Company within 10 days after
written notice thereof.
14.05 Payments
on Termination and Survival of Certain Rights and Obligations. Payments to the
Advisor pursuant to this Section 14.05 shall be subject to the 2%/25% Guidelines
to the extent applicable.
(i) 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.
(ii) The
Advisor shall promptly upon termination:
(a) pay
over to the Company all money collected pursuant to this Agreement, if any,
after deducting any accrued compensation and reimbursement for its expenses to
which it is then entitled;
(b)
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;
(c)
deliver to the Directors all assets and documents of the Company then in the
custody of the Advisor; and
(d)
cooperate with the Company to provide an orderly transition of advisory
functions.
Upon the
expiration or termination of this Agreement, neither party shall have any
further rights or obligations under this Agreement, except that Articles 13, 16
and 17 shall survive the termination or expiration of this
Agreement.
17
14.06 Repurchase
of Units. In the event this Agreement expires without the consent of the
Advisor, or is terminated for any reason other than by the Advisor pursuant to
Section 14.02 or Section 14.04, the Company shall (to the fullest extent funds
are legally available for such purpose) at the election of the Advisor or any of
its Affiliates and at any time (and from time to time) after the effective date
of such expiration or termination, purchase all or a portion of
the Participation Interest (as applicable) held by the Advisor and
its Affiliates. The purchase price shall be paid in cash or, at the election of
the seller, Shares, and shall be payable within 120 days after the Advisor or
its Affiliates (as applicable) gives the Company written notice of its desire to
sell all or a portion of the Participation Interest held by such Person to the
Company. The Company agrees to keep a sufficient number of authorized but
unissued Shares available for issuance pursuant to this Section 14.06 and shall
issue Shares as may be required hereunder. The purchase price of each interest
in the Company pursuant to this Section 14.06 shall be (i) in the event the
seller elects to receive cash, the Cash Amount the seller would receive under a
redemption of such interests at their fair market value, assuming the Company
paid cash for such redemption, or (ii) in the event the seller elects to receive
Shares, the REIT Shares Amount.
14.07 Termination
upon Public Listing of Shares. Upon any listing of any class of the Company’s
shares for trading on a national securities exchange, this Agreement shall
automatically terminate. In the event of the termination of our
advisory agreement, our advisor is required to cooperate with us and take all
reasonable steps requested by us to assist our board of directors in making an
orderly transition of the advisory function.
ARTICLE
15
ASSIGNMENT
This
Agreement may be assigned by the Advisor to an Affiliate with the consent of the
Company by approval of 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 Board of Directors. This Agreement shall not be
assigned by the Company without the consent of the Advisor.
ARTICLE
16
INDEMNIFICATION
AND LIMITATION OF LIABILITY
16.01 Indemnification
by the Company. The Company shall indemnify and hold harmless the Advisor and
its Affiliates, including their respective managers, 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 Texas, the Articles of
Incorporation or Agreement of Limited Partnership of the Company, provided that:
(i) the Advisor and its Affiliates have determined that the course of conduct
which caused the loss or liability was in the best interests of the Company,
(ii) the Advisor and its Affiliates were acting on behalf of or performing
services for the Company, (iii) the indemnified claim was not the result of
negligence, misconduct, or fraud of the indemnified person or resulted from a
breach of the agreement by the Advisor, and (iv) in the event the loss,
liability or expense arises from or out of an alleged violation of federal or
state securities laws by the Advisor or its Affiliates, the conditions set forth
in at least one of clauses (A), (B) or (C) of Section 12.2(b) of the Articles of
Incorporation
must be satisfied (deeming, for purposes of this Agreement, that the Advisor or
its Affiliates are each an “Indemnitee” as such term is used in such clauses)
for the Company to provide such indemnification. Any indemnification of the
Advisor may be made only out of the net assets of the Company and not from the
Shareholders.
18
16.02 Indemnification
by the 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, willful
misconduct or reckless disregard of its duties, but the Advisor shall not be
held responsible for any action of the Board of Directors in following or
declining to follow any of the Advisor’s advice or recommendation. The parties
hereto intend that the indemnities set forth in this agreement be construed and
applied as written notwithstanding any rule of construction to the contrary.
Without limiting the foregoing, the indemnities shall, to the fullest extent
allowed by law, and to the extent provided in this agreement, apply
notwithstanding any state’s “express negligence rule” or similar rule that would
deny coverage based on an indemnified person’s sole, concurrent or contributory
active or passive negligence or strict liability or gross negligence. It is the
intent of the parties that, to the extent provided in this agreement, the
indemnities set forth herein shall, to the fullest extent allowed by law, apply
to an indemnified person’s sole, concurrent or contributory active or passive
negligence or strict liability or gross negligence. The parties agree that this
provision is “conspicuous” for purposes of all state laws.
16.03 The
Advisor’s Liability.
(i)
Notwithstanding any other provisions of this Agreement, in no event shall the
Company make any claim against the Advisor, or its Affiliates, on account of any
good faith interpretation by the Advisor of the provisions of this Agreement
(even if such interpretation is later determined to be a breach of this
Agreement) or any alleged errors in judgment made in good faith and in
accordance with this Agreement in connection with the operation of the
operations of the Company hereunder by the Advisor or the performance of any
advisory or technical services provided by or arranged by the Advisor. The
provisions of this Section 16.03(i) shall not be deemed to release the Advisor
from liability for its gross negligence.
(ii) The
Company shall not object to any expenditures made by the Advisor in good faith
in the course of its performance of its obligations under this Agreement or in
settlement of any claim arising out of the operation of the Company unless such
expenditure is specifically prohibited by this Agreement. The provisions of this
Section 16.03(ii) shall not be deemed to release the Advisor from liability for
its gross negligence.
(iii) in
no event will either party be liable for damages based on loss of income, profit
or savings or indirect, incidental, consequential, exemplary, punitive or
special damages of the other party or person, including third parties, even if
such party has been advised of the possibility of such damages in advance, and
all such damages are expressly disclaimed. In no event will the Advisor’s
aggregate liability under this agreement ever exceed the total amount of fees it
actually receives from the Company pursuant to Article 9.
19
(iv) the
parties hereto intend that the release from liability set forth in section 16.03
be construed and applied as written notwithstanding any rule of construction to
the contrary. Without limiting the foregoing, the release from liability shall,
to the fullest extent allowed by law, apply notwithstanding any state’s “express
negligence rule” or similar rule that would deny coverage based on a person’s
sole, concurrent or contributory active or passive negligence or strict
liability. It is the intent of the parties that, to the extent provided in
section 16.03, the release from liability set forth herein shall, to the fullest
extent allowed by law, apply to a released person’s sole, concurrent or
contributory active or passive negligence or strict liability. The parties agree
that this provision is “conspicuous” for purposes of all state
laws.
ARTICLE
17
MISCELLANEOUS
17.01 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
Company, the Operating Partnership or the Directors:
Xxxxxxx
Short Term Income Properties XX, Inc.
0000
Xxxxxxxxx Xxxxx 000
Xxxxxxx,
Xxxxx 00000-0000
To the
Advisor:
Xxxxxxx
Advisors, LLC
0000
Xxxxxxxxx Xxxxx 000
Xxxxxxx,
Xxxxx 00000-0000
Either
party may at any time give notice in writing to the other party of a change in
its address for the purposes of this Section 17.01.
17.02 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.
17.03 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.
17.04 Construction.
The provisions of this Agreement shall be construed and interpreted in
accordance with the laws of the State of Texas.
20
17.05 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.
17.06 Waiver.
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.
17.07 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.
17.08 Titles
Not to Affect Interpretation. The titles of Articles and Sections 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.
17.09 Counterparts.
This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original as against any party whose signature appears
thereon, and all of which shall together constitute one and the same instrument.
This Agreement shall become binding when one or more counterparts hereof,
individually or taken together, shall bear the signatures of all of the parties
reflected hereon as the signatories
IN WITNESS WHEREOF, the
parties hereto have executed this Advisory Agreement as of the date and year
first above written.
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ADVISOR
|
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XXXXXXX
ADVISORS, LLC
|
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By:
|
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Xxxxx
Xxxxxxx, Manager
|
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COMPANY
|
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XXXXXXX
SHORT TERM INCOME PROPERTIES XX, INC.
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BY:
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Xxxxx
Xxxxxxx,
President
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