ADVISORY AGREEMENT
THIS AGREEMENT is made this 31st day of March, 1998 between ATLANTIC
PREFERRED CAPITAL CORPORATION, a Massachusetts corporation (the "Company"), and
ATLANTIC BANK AND TRUST COMPANY, a trust company organized under the laws of The
Commonwealth of Massachusetts (the "Advisor"). Capitalized terms used herein
shall have the meanings set forth in Section 1 of this Agreement.
WHEREAS, the Company intends to qualify as a "real estate investment trust"
("REIT") under the Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, the Company desires to avail itself of the experience and
assistance of the Advisor and to have the Advisor undertake, on the Company's
behalf, the duties and responsibilities hereinafter set forth, subject to the
control and supervision of the Board of Directors of the Company (the "Board of
Directors") as provided for herein; and
WHEREAS, the Advisor desires to render such services for the Company
subject to the control and supervision of the Board of Directors, on the terms
and conditions hereinafter set forth.
NOW THEREFORE, the parties hereto agree as follows:
SECTION 1. Definitions. As used herein, the following terms shall have the
respective meanings set forth below:
"Advisor" has the meaning set forth in the forepart of this Agreement.
"Advisor Termination Date" means the date on which this Agreement
terminates.
"Agreement" means this Advisory Agreement, as amended, modified and
supplemented from time to time.
"Board of Directors" has the meaning set forth in the forepart of this
Agreement.
"Code" has the meaning set forth in the forepart of this Agreement.
"Company" has the meaning set forth in the forepart of this Agreement.
"Gross Mortgage Assets" means for any month the weighted average book value
of the real estate mortgage assets held by the Company, before reserves for
depreciation or bad debts or other similar noncash reserves, computed at the end
of such month.
"Independent Directors" means the members of the Board of Directors of the
Company who are not either (i) current officers or employees of the Company or
(ii) current officers, directors or employees of the Advisor or any affiliate of
the Advisor.
"Operating Expenses" for any period means all of the operating expenses of
the Company (with the exception of those expenses to be borne by the Advisor in
accordance with Section 4 hereof), including without limitation the following:
(a) interest, taxes and other expenses incurred in connection with the
mortgage assets of the Company;
(b) expenses related to the officers, directors and employees of the
Company, including without limitation any fees or expenses of the directors;
(c) fees and expenses payable to accountants, appraisers, auditors,
consultants, attorneys, collection and paying agents and all other Persons who
contract with or are retained by the Company or by the Advisor on behalf of the
Company;
(d) legal and other expenses incurred in connection with advice
concerning, obtaining or maintaining the Company's status as a REIT, the
determination of the Company's taxable income, any formal or informal
administrative action or legal proceedings which involve a challenge to the REIT
status of the Company or any claim that the activities of the Company, any
member of the Board of Directors or any officer were improper;
(e) expenses relating to communications and reports to stockholders of
the Company, including without limitation the costs of preparing, printing,
duplicating and mailing the certificates for the stock of the Company, proxy
solicitation materials and reports to stockholders, and the costs of arranging
meetings of stockholders;
(f) the costs of insurance described in Section 2 hereof, including
directors and officers liability insurance covering the directors and officers
of the Company;
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(g) expenses relating to the acquisition, disposition and ownership of
real estate mortgage assets, including without limitation and to the extent not
paid by others, legal fees and other expenses for professional services and
fees;
(h) expenses connected with the payments of dividends or interest or
distributions in cash or any other form made or caused to be made by the Board
of Directors to the stockholders of the Company;
(i) expenses connected with any office or office facilities maintained
by the Company separate from the office of the Advisor, including without
limitation rent, telephone, utilities, office furniture and equipment and
machinery; and
(j) other miscellaneous expenses of the Company which are not expenses
of the Advisor under Section 4 hereof.
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"Person" means and includes individuals, corporations, limited
partnerships, general partnerships, joint stock companies or associations,
limited liability companies, joint ventures, associations, consortia, companies,
trusts, banks, trust companies, land trusts, common law trusts, business trusts
or other entities, governments and agencies and political subdivisions thereof.
"REIT" has the meaning set forth in the forepart of this Agreement.
SECTION 2. Duties of Advisor. The Advisor shall consult with the Board of
Directors and the officers of 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. Subject
to the control and discretion and at the request of the Board of Directors, the
Advisor shall:
(a) administer the day-to-day operations and affairs of the Company,
including without limitation the performance or supervision of the functions
described in this Section 2;
(b) monitor the credit quality of the mortgage loans and other real
estate mortgage assets held by the Company;
(c) advise the Company with respect to the acquisition, management,
financing, disposition of the Company's mortgage loans and other real estate
mortgage assets;
(d) represent the Company in its day-to-day dealings with Persons with
whom the Company interacts, including without limitation the Company's
stockholders, transfer agent, consultants, accountants, attorneys, mortgage loan
servicers, custodians, insurers and banks;
(e) establish and provide necessary services for the Company,
including executive, administrative, accounting, stockholder relations,
secretarial, recordkeeping, copying, telephone, mailing and distribution
facilities;
(f) provide the Company with office space, conference room facilities,
office equipment and personnel necessary for the services to be performed by the
Advisor hereunder;
(g) arrange, schedule and coordinate the regular and special meetings
of the Board of Directors required for the conduct of the affairs of the Company
or for timely action on any matters the Company is required to act upon and
implement all decisions of the Board of Directors, unless otherwise instructed,
with regard to the Company and its assets;
(h) maintain communications and relations with the stockholders of the
Company, including, but not limited to, responding to inquiries, proxy
solicitations, providing reports to stockholders and arranging and coordinating
all meetings of stockholders;
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(i) arrange for the investment and management of the investments of
the Company as described on Exhibit A attached hereto;
(j) arrange for the services of third parties to collect and
distribute funds of the Company and to perform such functions as the Board of
Directors shall from time to time require;
(k) monitor and supervise the performance of all parties who have
contracts to perform services for the Company, provided that the Advisor shall
have no duty to assume the obligations or guarantee the performance of such
parties under such contracts;
(l) establish and maintain such bank accounts in the name of the
Company as may be required by the Company and approved by the Board of Directors
and ensure that all funds collected by the Advisor in the name or on behalf of
the Company shall be held in trust and shall not be commingled with the
Advisor's own funds or accounts;
(m) make payment on behalf of the Company of all Operating Expenses;
(n) arrange for the execution and delivery of such documents and
instruments by the officers of the Company as may be required in order to
perform the functions herein described and to take any other required action;
(o) maintain insurance for the Company including liability insurance,
errors and omissions policies and officers and directors policies which shall
cover and insure the Company, members of the Board of Directors and the officers
of the Company in amounts and with deductibles and insurers approved by the
Board of Directors;
(p) maintain proper books and records of the Company's affairs,
including a detailed general ledger in accordance with generally accepted
accounting principles, and prepare and furnish or cause to be prepared and
furnished to the Board of Directors such periodic reports and accounting
information as may be required from time to time by the Board of Directors,
including, but not limited to quarterly reports of all income, expenses and
distributions of the Company;
(q) conduct all actions necessary to maintain appropriate accounting
controls and maintain all appropriate documentation of such accounting
procedures and controls;
(r) consult and work with legal counsel for the Company in
implementing Company decisions and undertaking measures consistent with all
pertinent Federal, state and local laws and rules or regulations of governmental
or quasi-governmental agencies, including, but not limited to, Federal and state
securities laws, the Code, as it relates to the Company's qualification as a
REIT, and the regulations promulgated under each of the foregoing;
(s) provide all tax preparation services on behalf of the Company,
including but not limited to, preparation of annual federal, state and local
income tax returns and estimated payments, sales/use tax returns, and
payroll/unemployment filings as deemed necessary;
(t) arrange for an annual audit of the books and records of the
Company by the accounting firm designated for such purposes by the Board of
Directors;
(u) prepare and distribute in consultation with the accountants for
the Company, annual reports which will contain audited financial statements;
(v) furnish reports to the Board of Directors and provide research,
economical and statistical data in connection with the Company's investments;
and
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(w) as reasonably 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.
SECTION 3. Compensation. The Company shall pay to the Advisor, for services
rendered by the Advisor hereunder, a management fee of 5 basis points (annually)
payable monthly in arrears based on the Gross Mortgage Assets for the
immediately preceding month.
SECTION 4. Expenses of the Advisor.
(a) Without regard to the compensation received pursuant to Section 3,
the Advisor will bear the following expenses:
(i) employment expenses of the personnel employed by the Advisor,
including without limitation salaries, wages, payroll taxes and the
cost of employee benefit plans; and
(ii) rent, telephone equipment, utilities, office furniture and
equipment and machinery and other office expenses of the Advisor
incurred in connection with the maintenance of any office facility of
the Advisor.
(b) The Company shall reimburse the Advisor within 30 days of a
written request by the Advisor, for any Operating Expenses paid or incurred by
the Advisor on behalf of the Company.
SECTION 5. Records. The Advisor shall maintain appropriate books of account
and records relating to services performed hereunder, and such books of account
and records shall be accessible for inspection by the Board of Directors or
representatives of the Company at all times.
SECTION 6. REIT Qualification and Compliance. The Advisor shall consult and
work with the Company's legal counsel in maintaining the Company's qualification
as a REIT. Notwithstanding any other provisions of this Agreement to the
contrary, the Advisor shall refrain from any action which, in its reasonable
judgment or in the judgment of the Board of Directors (of which the Advisor has
received written notice), would adversely affect the qualification of the
Company as a REIT 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 certificate of
incorporation or by-laws of the Company. Furthermore, the Advisor shall take any
action which, in its judgment or the judgment of the Board of Directors (of
which the Advisor has received written notice), may be necessary to maintain the
qualification of the Company as a REIT or prevent the violation of any law or
regulation of any governmental body or agency having jurisdiction over the
Company or its securities.
SECTION 7. Term; Termination. This Agreement shall be in full force and
effect for a term beginning on the date hereof with an initial term of five
years, and will be renewed automatically for additional one-year periods unless
the Company delivers a notice of nonrenewal to the Advisor not less than 90 days
prior to the expiration of the initial term of this Agreement or 90 days prior
to the expiration of any renewal term. Notwithstanding the foregoing, at any
time after the initial term, the Company may terminate this Agreement at any
time upon 90 days' prior notice.
SECTION 8. Other Activities of the Advisor.
(a) Nothing herein contained shall prevent the Advisor, an affiliate
of the Advisor or an officer, a director, employee or stockholder of the Advisor
from engaging in any activity, including without limitation originating,
purchasing and managing mortgage loans and other real estate assets, rendering
of services and investment advice with respect to real estate investment
opportunities to any other Person (including other REITs) and managing other
investments (including the investments of the Advisor and its affiliates).
(b) Directors, officers, stockholders, employees and agents of the
Advisor or of any affiliate of the Advisor may serve as directors, officers,
employees or agents of the Company but shall receive no compensation (other than
reimbursement for expenses) from the Company for such service.
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SECTION 9. Binding Effect; Assignment. This Agreement shall inure to the
benefit of and shall be binding upon the parties hereto and their respective
successors and assigns. Neither party may assign this Agreement or any of its
respective rights hereunder (other than an assignment to a successor
organization which acquires substantially all of the property of such party or,
in the case of the Advisor, to an affiliate of the Advisor) without the prior
written consent of the other party to this Agreement.
SECTION 10. Subcontracting. The Advisor may at any time subcontract all or
a portion of its obligations under this Agreement to any affiliate of the
Advisor without the consent of the Company or, if no affiliate of the Advisor is
engaged in the business of managing mortgage loans and other real estate assets,
to an unaffiliated third party with the approval of a majority of the Board of
Directors, including a majority of the Independent Directors. Notwithstanding
the foregoing, the Advisor will not, in connection with subcontracting any of
its obligations under this Agreement, be relieved or discharged in any respect
from its obligations under this Agreement.
SECTION 11. Liability and Indemnity of the Advisor. The Advisor assumes no
responsibilities under this Agreement other than to perform the services called
for hereunder in good faith. Neither the Advisor nor any of its affiliates,
stockholders, directors, officers or employees will have any liability to the
Company, or stockholders of the Company, or others except by reason of acts or
omissions constituting gross negligence or willful breach of any of its material
obligations under this Agreement. The Company shall indemnify and reimburse (if
necessary), in advance as incurred, the Advisor, its stockholders, directors,
officers, employees and agents for any and all expenses (including without
limitation attorneys' fees and expenses), losses, damages, liabilities, demands
and charges of any nature whatsoever in respect of or arising from any acts or
omissions by the Advisor pursuant to this Agreement, provided that the conduct
against which the claim is made was determined by such person, in good faith, to
be in the best interest of the Company and was not the result of gross
negligence by such person or willful breach of any of such person's material
obligations by such person. The Advisor agrees that any such indemnification is
recoverable only from the assets of the Company and not from the stockholders.
SECTION 12. Action Upon Notice of Non-Renewal or Termination. Forthwith
upon giving of notice of non-renewal of this Agreement by the Company or of
termination of this Agreement by the Company, the Advisor shall not be entitled
to compensation after the Advisor Termination Date for further services under
this Agreement but shall be paid all compensation accruing to the Advisor
Termination Date and shall be reimbursed for all expenses of the Company paid or
incurred by the Advisor as of the Advisor Termination Date which are
reimbursable by the Company under this Agreement. The Advisor shall promptly
after the Advisor Termination Date:
(i) deliver to the Company all assets and documents of the
Company then in the custody of the Advisor; and
(ii) cooperate with the Company and take all reasonable steps
requested to assist the Board of Directors in making an orderly
transfer of the administrative functions of the Company.
SECTION 13. No Joint Venture or Partnership. Nothing in this Agreement
shall be deemed to create a partnership or joint venture between the parties,
whether for purposes of taxation or otherwise.
SECTION 14. Notices. Unless expressly provided otherwise herein, all
notices, requests, demands and other communications required or permitted under
this Agreement shall be in writing and shall be made by hand delivery, certified
mail, overnight courier service, telex or telecopier. Any notice shall be duly
addressed to the parties as follows:
If to the Company:
Atlantic Preferred Capital Corporation
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
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If to the Advisor:
Atlantic Bank and Trust Company
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
Either party may alter the address to which communications or copies are to
be sent by giving notice of such change of address in conformity with the
provisions of this Section 14 for the giving of notice.
SECTION 15. Severability. If any term or provision of this Agreement or the
application thereof with respect to any Person or circumstance shall, to any
extent, be invalid or unenforceable, the remainder of this Agreement, or the
application of that term or provision to persons or circumstances other than
those as to which it is held invalid or unenforceable, shall not be affected
thereby, and each term and provision of this Agreement shall be valid and be
enforced to the fullest extent permitted by law.
SECTION 16. Governing Law. This Agreement and all questions relating to its
validity, interpretation, performance and enforcement shall be governed by and
construed, interpreted and enforced in accordance with the laws of The
Commonwealth of Massachusetts.
SECTION 17. 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, or otherwise as provided herein.
SECTION 18. Headings. The section headings herein 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 parties hereto have caused this Agreement to be
executed by their officers thereunto duly authorized as of the day and year
first above written.
ATLANTIC PREFERRED CAPITAL
CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: President
ATLANTIC BANK AND TRUST
COMPANY
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Chief Financial Officer
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EXHIBIT A
INVESTMENT AND FUNDS MANAGEMENT SERVICES
Investment and funds management services to be provided by the Advisor for the
Company pursuant to the Agreement shall be in accordance with applicable law and
may include, but not necessarily be limited to, the following specific services:
1. Acting as investment agent for the Company with respect to investment and
funds management activities. These include, but are not limited to,
investment of surplus funds into securities, money market instruments
and/or other assets that are qualified real estate assets as described in
paragraph 3 of Exhibit A below; sale and/or securitization of loans; other
secondary market activities; and other permissible activities as provided
for in paragraph 3 of Exhibit A below.
2. Investment and funds management activities performed by the Advisor on
behalf of the Company shall be made in a prudent manner within the laws,
statutes and appropriate regulations pertaining to such investments. These
activities are further governed and limited by the Advisor's approved
investment and funds management policies as amended from time to time.
Policy exceptions may be granted by the Board of Directors of the Company
or by the written instructions signed by two (2) authorized executive
officers of the Company.
3. The Advisor will conduct investment and funds management activities on
behalf of the Company so as to ensure that the Company complies at all
times with all provisions of the Internal Revenue Code applicable to Real
Estate Investment Trusts ("REIT"). Particularly, the Advisor will exercise
proper judgment and discretion to ensure that the Company receives income
from qualified real estate investments and invests in qualified real estate
assets as defined in and limited by the Internal Revenue Code and
regulations and rulings thereunder. The Advisor further will conduct
investment and funds management activities on behalf of the Company so as
to ensure that the Company does not incur federal or state tax to the
extent that said activities may be permissible under the Internal Revenue
Code and regulations and rulings thereunder but nevertheless would cause
the Company to incur REIT-level taxation.
4. Monthly reports of all investment and funds management activities performed
by the Advisor on behalf of the Company will be made available to the
Company as required by the officers or Board of Directors of the Company.
Reporting for regulatory or policy requirements shall be provided by the
Advisor to the Company as required.
5. The Advisor will take necessary steps to ensure that the investments and
funds management related assets and liabilities of the Company that are
managed by the Advisor are properly segregated from those of the Advisor.
The proper accounting entries which are clearly marked and identified as
those of the Company shall be made and entered by authorized personnel of
the Advisor.
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