ADVISORY AGREEMENT
THIS ADVISORY AGREEMENT, dated as of May 14, 2002, is between CNL
RETIREMENT PROPERTIES, INC., a corporation organized under the laws of the State
of Maryland (the "Company") and CNL RETIREMENT CORP., a corporation organized
under the laws of the State of Florida (the "Advisor").
W I T N E S S E T H
-------------------
WHEREAS, the Company filed with the Securities and Exchange Commission
a Registration Statement (No. 333-47411) on Form S-11 covering 15,500,000 of its
common shares ("Shares"), par value $.01, to be offered to the public ("Initial
Offering");
WHEREAS, the Company filed with the Securities and Exchange Commission
a Registration Statement (No. 333-37480) on Form S-11 covering 15,500,000 of its
common shares (the "2000 Offering"), par value $.01, to be offered to the
public;
WHEREAS, the Company filed with the Securities and Exchange Commission
a Registration Statement (No. 333-76538) on Form S-11 covering 45,000,000 of its
common shares (the "2002 Offering"), par value $.01, to be offered to the
public, and the Company may subsequently issue securities other than such Shares
("Securities") or otherwise raise additional capital;
WHEREAS, the Initial Offering was terminated on September 18, 2000 and
the 2000 Offering of 15,500,000 Shares commenced;
WHEREAS, the Company intends to commence the 2002 Offering of
45,000,000 Shares at such time that the 2000 Offering of 15,500,000 Shares is
terminated;
WHEREAS, the Company is currently qualified as a REIT (as defined
below), and intends to continue to invest its funds in investments permitted by
the terms of the Registration Statement and Sections 856 through 860 of the Code
(as defined below);
WHEREAS, the Company desires to avail itself of the experience, sources
of information, advice, assistance and certain facilities available to the
Advisor and to have the Advisor undertake the duties and responsibilities
hereinafter set forth, on behalf of, and subject to the supervision, of the
Board of Directors of the Company all as provided herein; and
WHEREAS, the Advisor is willing to undertake to render such services,
subject to the supervision of the Board of Directors, on the terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements contained herein, the parties hereto agree as follows:
(1) Definitions. As used in this Advisory Agreement (the "Agreement"),
the following terms have the definitions hereinafter indicated:
Acquisition Expenses. Any and all expenses incurred by the Company, the
Advisor, or any Affiliate of either in connection with the selection or
acquisition of any Property or the making of any Mortgage Loan, whether or not
acquired, including, without limitation, legal fees and expenses, travel and
communications expenses, costs of appraisals, nonrefundable option payments on
property not acquired, accounting fees and expenses, and title insurance.
Acquisition Fees. Any and all fees and commissions, exclusive of
Acquisition Expenses, paid by any person or entity to any other person or entity
(including any fees or commissions paid by or to any Affiliate of the Company or
the Advisor) in connection with making or investing in Mortgage Loans or the
purchase, development or construction of a Property, including, without
limitation, real estate commissions, acquisition fees, finder's fees, selection
fees, Development Fees, Construction Fees, nonrecurring management fees,
consulting fees, loan fees, points, the Secured Equipment Lease Servicing Fee,
or any other fees or commissions of a similar nature. Excluded shall be
development fees and construction fees paid to any person or entity not
affiliated with the Advisor in connection with the actual development and
construction of any Property.
Advisor. CNL Retirement Corp., a Florida corporation, any successor
advisor to the Company, or any person or entity to which CNL Retirement Corp. or
any successor advisor subcontracts substantially all of its functions.
Affiliate or Affiliated. As to any individual, corporation,
partnership, trust or other association (other than the Excess Shares Trust),
(i) any Person or entity directly or indirectly through one or more
intermediaries controlling, controlled by, or under common control with another
person or entity; (ii) any Person or entity, directly or indirectly owning or
controlling ten percent (10%) or more of the outstanding voting securities of
another Person or entity; (iii) any officer, director, partner, or trustee of
such Person or entity; (iv) any Person ten percent (10%) or more of whose
outstanding voting securities are directly or indirectly owned, controlled, or
held, with power to vote, by such other Person; and (v) if such other Person or
entity is an officer, director, partner, or trustee of a Person or entity, the
Person or entity for which such Person or entity acts in any such capacity.
Appraised Value. Value according to an appraisal made by an Independent
Appraiser.
Articles of Incorporation. The Articles of Incorporation of the Company
under Title 2 of the Corporations and Associations Article of the Annotated Code
of Maryland, as amended from time to time.
Asset Management Fee. The fee payable to the Advisor for day-to-day
professional management services in connection with the Company and its
investments in Properties and Mortgage Loans pursuant to this Agreement.
Assets. Properties, Mortgage Loans and Secured Equipment Leases,
collectively.
Average Invested Assets. For a specified period, the average of the
aggregate book value of the assets of the Company invested, directly or
indirectly, in equity interests in and loans secured by real estate before
reserves for depreciation or bad debts or other similar non-cash reserves,
computed by taking the average of such values at the end of each month during
such period.
Board of Directors or Board. The persons holding such office, as of any
particular time, under the Articles of Incorporation of the Company, whether
they be the Directors named therein or additional or successor Directors.
Bylaws. The bylaws of the Company, as the same are in effect from time
to time.
Cause. With respect to the termination of this Agreement, fraud,
criminal conduct, willful misconduct or willful or negligent breach of fiduciary
duty by the Advisor, breach of this Agreement, a default by the Sponsor under
the guarantee by the Sponsor to the Company or the bankruptcy of the Sponsor.
Change of Control. A change of control of the Company of such a nature
that would be required to be reported in response to the disclosure requirements
of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act
of 1934, as amended, as enacted and in force on the date hereof (the "Exchange
Act"), whether or not the Company is then subject to such reporting
requirements; provided, however, that, without limitation, a change of control
shall be deemed to have occurred if: (i) any "person" (within the meaning of
Section 13(d) of the Exchange Act) is or becomes the "beneficial owner" (as that
term is defined in Rule 13d-3, as enacted and in force on the date hereof, under
the Exchange Act) of securities of the Company representing 8.5% or more of the
combined voting power of the Company's securities then outstanding; (ii) there
occurs a merger, consolidation or other reorganization of the Company which is
not approved by the Board of Directors of the Company; (iii) there occurs a
sale, exchange, transfer or other disposition of substantially all of the assets
of the Company to another entity, which disposition is not approved by the Board
of Directors of the Company; or (iv) there occurs a contested proxy solicitation
of the Stockholders of the Company that results in the contesting party electing
candidates to a majority of the Board of Directors' positions next up for
election.
Code. Internal Revenue Code of 1986, as amended from time to time, or
any successor statute thereto. Reference to any provision of the Code shall mean
such provision as in effect from time to time, as the same may be amended, and
any successor provision thereto, as interpreted by any applicable regulations as
in effect from time to time.
Company. CNL Retirement Properties, Inc., a corporation organized under
the laws of the State of Maryland.
Company Property. Any and all property, real, personal or otherwise,
tangible or intangible, including Mortgage Loans and Secured Equipment Leases,
which is transferred or conveyed to the Company (including all rents, income,
profits and gains therefrom), and which is owned or held by, or for the account
of, the Company.
Competitive Real Estate Commission. A real estate or brokerage
commission for the purchase or sale of property which is reasonable, customary,
and competitive in light of the size, type, and location of the property. The
total of all real estate commissions paid by the Company to all Persons
(including the Subordinated Disposition Fee payable to the Advisor) in
connection with any Sale of one or more of the Company's Properties shall not
exceed the lesser of (i) a Competitive Real Estate Commission or (ii) six
percent of the gross sales price of the Property or Properties.
Construction Fee. A fee or other remuneration for acting as a general
contractor and/or construction manager to construct improvements, supervise and
coordinate projects or provide major repairs or rehabilitation on a Property.
Contract Purchase Price. The amount actually paid or allocated (as of
the date of purchase) to the purchase, development, construction or improvement
of property, exclusive of Acquisition Fees and Acquisition Expenses.
Contract Sales Price. The total consideration received by the Company
for the sale of Company Property.
Development Fee. A fee for such activities as negotiating and approving
plans and undertaking to assist in obtaining zoning and necessary variances and
necessary financing for a specific Property, either initially or at a later
date.
Director. A member of the Board of Directors of the Company.
Distributions. Any distributions of money or other property by the
Company to owners of Equity Shares, including distributions that may constitute
a return of capital for federal income tax purposes.
Equipment. The furniture, fixtures and equipment used at Retirement
Facilities by operators of Retirement Facilities.
Equity Interest. The stock of or other interests in, or warrants or
other rights to purchase the stock of or other interests in, any entity that has
borrowed money from the Company or that is a tenant of the Company or that is a
parent or controlling Person of any such borrower or tenant.
Equity Shares. Transferable shares of beneficial interest of the
Company of any class or series, including common shares or preferred shares.
Good Reason. With respect to the termination of this Agreement, (i) any
failure to obtain a satisfactory agreement from any successor to the Company to
assume and agree to perform the Company's obligations under this Agreement; or
(ii) any material breach of this Agreement of any nature whatsoever by the
Company.
Gross Proceeds. The aggregate purchase price of all Shares sold for the
account of the Company through the 2002 Offering or the 2000 Offering, as
applicable, without deduction for Selling Commissions, volume discounts, the
marketing support fee, due diligence expense reimbursements or Offering
Expenses. For the purpose of computing Gross Proceeds, the purchase price of any
Share for which reduced Selling Commissions are paid to the Managing Dealer or a
Soliciting Dealer (where net proceeds to the Company are not reduced) shall be
deemed to be $10.00.
Independent Appraiser. A qualified appraiser of real estate as
determined by the Board. Membership in a nationally recognized appraisal society
such as the American Institute of Real Estate Appraisers ("M.A.I.") or the
Society of Real Estate Appraisers ("S.R.E.A.") shall be conclusive evidence of
such qualification.
Independent Director. A Director who is not and within the last two
years has not been directly or indirectly associated with the Advisor by virtue
of (i) ownership of an interest in the Advisor or its Affiliates, (ii)
employment by the Advisor or its Affiliates, (iii) service as an officer or
director of the Advisor or its Affiliates, (iv) performance of services, other
than as a Director, for the Company, (v) service as a director or trustee of
more than three real estate investment trusts advised by the Advisor, or (vi)
maintenance of a material business or professional relationship with the Advisor
or any of its Affiliates. A business or professional relationship is considered
material if the gross revenue derived by the Director from the Advisor and
Affiliates exceeds 5% of either the Director's annual gross revenue during
either of the last two years or the Director's net worth on a fair market value
basis. An indirect relationship shall include circumstances in which a
Director's spouse, parents, children, siblings, mothers- or fathers-in-law,
sons- or daughters-in-law, or brothers- or sisters-in-law are or have been
associated with the Advisor, any of its Affiliates, or the Company.
Independent Expert. A person or entity with no material current or
prior business or personal relationship with the Advisor or the Directors and
who is engaged to a substantial extent in the business of rendering opinions
regarding the value of assets of the type held by the Company.
Initial Offering. The initial public offering of up to 15,500,000
Shares that was terminated on September 18, 2000.
Invested Capital. The amount calculated by multiplying the total number
of Shares purchased by stockholders by the issue price, reduced by the portion
of any Distribution that is attributable to Net Sales Proceeds and by any
amounts paid by the Company to repurchase Shares pursuant to the Company's plan
for redemption of Shares.
Joint Ventures. The joint venture or general partnership arrangements
in which the Company is a co-venturer or general partner which are established
to acquire Properties.
Line of Credit. A line of credit initially in an amount up to
$45,000,000, the proceeds of which will be used to acquire Properties and make
Mortgage Loans and Secured Equipment Leases.
Listing. The listing of the Shares of the Company on a national
securities exchange or over-the-counter market.
Managing Dealer. CNL Securities Corp., an Affiliate of the Advisor, or
such entity selected by the Board of Directors to act as the managing dealer for
the 2000 Offering and the 2002 Offering. CNL Securities Corp. is a member of the
National Association of Securities Dealers, Inc.
Mortgage Loans. In connection with mortgage financing provided by the
Company, the notes or other evidence of indebtedness or obligations which are
secured or collateralized by real estate owned by the borrower.
Net Income. For any period, the total revenues applicable to such
period, less the total expenses applicable to such period excluding additions to
reserves for depreciation, bad debts or other similar non-cash reserves;
provided, however, Net Income for purposes of calculating total allowable
Operating Expenses (as defined herein) shall exclude the gain from the sale of
the Company's assets.
Net Sales Proceeds. In the case of a transaction described in clause
(i)(A) of the definition of Sale, the proceeds of any such transaction less the
amount of all real estate commissions and closing costs paid by the Company. In
the case of a transaction described in clause (i)(B) of such definition, Net
Sales Proceeds means the proceeds of any such transaction less the amount of any
legal and other selling expenses incurred in connection with such transaction.
In the case of a transaction described in clause (i)(C) of such definition, Net
Sales Proceeds means the proceeds of any such transaction actually distributed
to the Company from the Joint Venture. In the case of a transaction or series of
transactions described in clause (i)(D) of the definition of Sale, Net Sales
Proceeds means the proceeds of any such transaction less the amount of all
commissions and closing costs paid by the Company. In the case of a transaction
described in clause (ii) of the definition of Sale, Net Sales Proceeds means the
proceeds of such transaction or series of transactions less all amounts
generated thereby and reinvested in one or more Properties within 180 days
thereafter and less the amount of any real estate commissions, closing costs,
and legal and other selling expenses incurred by or allocated to the Company in
connection with such transaction or series of transactions. Net Sales Proceeds
shall also include, in the case of any lease of a Property consisting of a
building only, any Mortgage Loan or any Secured Equipment Lease, any amounts
from tenants, borrowers or lessees that the Company determines, in its
discretion, to be economically equivalent to proceeds of a Sale. Net Sales
Proceeds shall not include, as determined by the Company in its sole discretion,
any amounts reinvested in one or more Properties, Mortgage Loans, or Secured
Equipment Leases, to repay outstanding indebtedness, or to establish reserves.
Offering Expenses. Any and all costs and expenses, other than Selling
Commissions, the soliciting dealer servicing fee, the marketing support fee and
due diligence expense reimbursements incurred by the Company, the Advisor or any
Affiliate of either in connection with the qualification and registration of the
Company and the marketing and distribution of Shares, including, without
limitation, the following: legal, accounting and escrow fees; printing,
amending, supplementing, mailing and distributing costs; filing, registration
and qualification fees and taxes; telegraph and telephone costs; and all
advertising and marketing expenses, including the costs related to investor and
broker-dealer sales meetings.
Operating Expenses. All costs and expenses incurred by the Company, as
determined under generally accepted accounting principles, which in any way are
related to the operation of the Company or to Company business, including (a)
advisory fees, (b) the soliciting dealer servicing fee (c) the Asset Management
Fee, (d) the Performance Fee and (e) the Subordinated Incentive Fee, but
excluding (i) the expenses of raising capital such as Offering Expenses, legal,
audit, accounting, underwriting, brokerage, listing, registration, and other
fees, printing and other such expenses and tax incurred in connection with the
issuance, distribution, transfer, registration and Listing of the Shares, (ii)
interest payments, (iii) taxes, (iv) non-cash expenditures such as depreciation,
amortization and bad loan reserves, (v) the Advisor's subordinated 10% share of
Net Sales Proceeds, and (vi) Acquisition Fees and Acquisition Expenses, real
estate commissions on the sale of property, and other expenses connected with
the acquisition, 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).
Performance Fee. The fee payable to the Advisor upon termination of
this Agreement under certain circumstances if certain performance standards have
been met and the Subordinated Incentive Fee has not been paid.
Permanent Financing. The financing (i) to acquire Assets, (ii) to pay
the Secured Equipment Lease Servicing Fee, (iii) to pay a fee of 4.5% of any
Permanent Financing, excluding amounts to fund Secured Equipment Leases, as
Acquisition Fees, and (iv) to refinance outstanding amounts on the Line of
Credit.
Person. An individual, corporation, partnership, estate, trust
(including a trust qualified under Section 401(a) or 501(c)(17) of the Code), a
portion of a trust permanently set aside for or to be used exclusively for the
purposes described in Section 642(c) of the Code, association, private
foundation within the meaning of Section 509(a) of the Code, joint stock company
or other entity, or any government or any agency or political subdivision
thereof, and also includes a group as that term is used for purposes of Section
13(d)(3) of the Exchange Act, but does not include (i) an underwriter that
participates in a public offering of Equity Shares for a period of sixty (60)
days following the initial purchase by such underwriter of such Equity Shares in
such public offering, or (ii) CNL Retirement Corp., during the period ending
December 31, 1998, provided that the foregoing exclusions shall apply only if
the ownership of such Equity Shares by an underwriter or CNL Retirement Corp.
would not cause the Company to fail to qualify as a REIT by reason of being
"closely held" within the meaning of Section 856(a) of the Code or otherwise
cause the Company to fail to qualify as a REIT.
Property or Properties. (i) The real properties, including the
buildings located thereon, or (ii) the real properties only, or (iii) the
buildings only, which are acquired by the Company, either directly or through
joint venture arrangements or other partnerships.
Prospectus. "Prospectus" means the same as that term as defined in
Section 2(10) of the Securities Act of 1933, including a preliminary Prospectus,
an offering circular as described in Rule 256 of the General Rules and
Regulations under the Securities Act of 1933 or, in the case of an intrastate
offering, any document by whatever name known, utilized for the purpose of
offering and selling securities to the public.
Real Estate Asset Value. The amount actually paid or allocated to the
purchase, development, construction or improvement of a Property, exclusive of
Acquisition Fees and Acquisition Expenses.
Registration Statement. The Registration Statement (No. 333-76538) on
Form S-11 registering the Shares to be sold in the 2002 Offering or the
Registration Statement (No. 333-37480) on Form S-11 registering the Shares to be
sold in the 2000 Offering, as applicable.
REIT. A "real estate investment trust" under Sections 856 through 860
of the Code.
Retirement Facilities. Facilities at which health care services are
provided, including, but not limited to, congregate living, assisted living, and
skilled nursing facilities, continuing care retirement communities and life care
communities, and medical office buildings and walk-in clinics.
Sale or Sales. (i) Any transaction or series of transactions whereby:
(A) the Company sells, grants, transfers, conveys, or relinquishes its ownership
of any Property or portion thereof, including the lease of any Property
consisting of the building only, and including any event with respect to any
Property which gives rise to a significant amount of insurance proceeds or
condemnation awards; (B) the Company sells, grants, transfers, conveys, or
relinquishes its ownership of all or substantially all of the interest of the
Company in any Joint Venture in which it is a co-venturer or partner; (C) any
Joint Venture in which the Company as a co-venturer or partner sells, grants,
transfers, conveys, or relinquishes its ownership of any Property or portion
thereof, including any event with respect to any Property which gives rise to
insurance claims or condemnation awards; or (D) the Company sells, grants,
conveys or relinquishes its interest in any Mortgage Loan or Secured Equipment
Lease or portion thereof, including any event with respect to any Mortgage Loan
or Secured Equipment Lease which gives rise to a significant amount of insurance
proceeds or similar awards, but (ii) not including any transaction or series of
transactions specified in clause (i)(A), (i)(B), or (i)(C) above in which the
proceeds of such transaction or series of transactions are reinvested in one or
more Properties within 180 days thereafter.
Secured Equipment Leases. The Equipment financing made available by the
Company to operators of Retirement Facilities pursuant to which the Company will
finance, through loans or direct financing leases, the Equipment.
Secured Equipment Lease Servicing Fee. The fee payable to the Advisor
by the Company out of the proceeds of the Line of Credit or Permanent Financing
for negotiating Secured Equipment Leases and supervising the Secured Equipment
Lease program equal to 2% of the purchase price of the Equipment subject to each
Secured Equipment Lease and paid upon entering into such lease or loan.
Securities. Any Equity Shares, Excess Shares, as such term is defined
in the Company's Articles of Incorporation, any other stock, shares or other
evidences of equity or beneficial or other interests, voting trust certificates,
bonds, debentures, notes or other evidences of indebtedness, secured or
unsecured, convertible, subordinated or otherwise, or in general any instruments
commonly known as "securities" or any certificates of interest, shares or
participations in, temporary or interim certificates for, receipts for,
guarantees of, or warrants, options or rights to subscribe to, purchase or
acquire, any of the foregoing.
Shares. The common shares of the Company.
Soliciting Dealers. Broker-dealers who are members of the National
Association of Securities Dealers, Inc., or that are exempt from broker-dealer
registration, and who, in either case, have executed participating broker or
other agreements with the Managing Dealer to sell Shares.
Sponsor. Any Person directly or indirectly instrumental in organizing,
wholly or in part, the Company or any Person who will control, manage or
participate in the management of the Company, and any Affiliate of such Person.
Not included is any Person whose only relationship with the Company is that of
an independent property manager of Company assets, and whose only compensation
is as such. Sponsor does not include independent third parties such as
attorneys, accountants, and underwriters whose only compensation is for
professional services. A Person may also be deemed a Sponsor of the Company by:
a. taking the initiative, directly or indirectly, in founding or
organizing the business or enterprise of the Company, either
alone or in conjunction with one or more other Persons;
b. receiving a material participation in the Company in
connection with the founding or organizing of the business of
the Company, in consideration of services or property, or both
services and property;
c. having a substantial number of relationships and contacts with
the Company;
d. possessing significant rights to control Company properties;
e. receiving fees for providing services to the Company which are
paid on a basis that is not customary in the industry; or
f. providing goods or services to the Company on a basis which
was not negotiated at arms length with the Company.
Stockholders. The registered holders of the Company's Equity Shares.
Stockholders' 8% Return. As of each date, an aggregate amount equal to
an 8% cumulative, noncompounded, annual return on Invested Capital.
Subordinated Disposition Fee. The Subordinated Disposition Fee as
defined in Paragraph 9(c).
Subordinated Incentive Fee. The fee payable to the Advisor under
certain circumstances if the Shares are listed on a national securities exchange
or over-the-counter market.
Termination Date. The date of termination of the Agreement.
Total Proceeds. The Gross Proceeds plus loan proceeds from Permanent
Financing and amounts outstanding on the Line of Credit, if any, at the time of
Listing, but excluding loan proceeds used to finance Secured Equipment Leases.
Total Property Cost. With regard to any Company Property, an amount
equal to the sum of the Real Estate Asset Value of such Property plus the
Acquisition Fees paid in connection with such Property.
2%/25% Guidelines. The requirement pursuant to the guidelines of the
North American Securities Administrators Association, Inc. that, in any 12 month
period, total Operating Expenses not exceed the greater of 2% of the Company's
Average Invested Assets during such 12 month period or 25% of the Company's Net
Income over the same 12 month period.
2000 Offering. The 2000 public offering of 15,500,000 Shares that
commenced upon completion of the Initial Offering.
2002 Offering. The 2002 public offering of 45,000,000 Shares that will
commence upon completion of the 2000 Offering.
Valuation. An estimate of value of the assets of the Company as
determined by an Independent Expert.
(2) Appointment. The Company hereby appoints the Advisor to serve as
its advisor on the terms and conditions set forth in this Agreement, and the
Advisor hereby accepts such appointment.
(3) Duties of the Advisor. The Advisor undertakes to use its best
efforts to present to the Company potential investment opportunities and to
provide a continuing and suitable investment program consistent with the
investment objectives and policies of the Company as determined and adopted from
time to time by the Directors. In performance of this undertaking, subject to
the supervision of the Directors and consistent with the provisions of the
Registration Statement, Articles of Incorporation and Bylaws of the Company, the
Advisor shall, either directly or by engaging an Affiliate:
(a) serve as the Company's investment and financial advisor and
provide research and economic and statistical data in
connection with the Company's assets and investment
policies;
(b) provide the daily management of the Company and perform and
supervise the various administrative functions reasonably
necessary for the management of the Company;
(c) investigate, select, and, on behalf of the Company, engage
and conduct business with such Persons as the Advisor deems
necessary to the proper performance of its obligations
hereunder, including but not limited to consultants,
accountants, correspondents, lenders, technical advisors,
attorneys, brokers, underwriters, corporate fiduciaries,
escrow agents, depositaries, custodians, agents for
collection, insurers, insurance agents, banks, builders,
developers, property owners, mortgagors, and any and all
agents for any of the foregoing, including Affiliates of
the Advisor, and Persons acting in any other capacity
deemed by the Advisor necessary or desirable for the
performance of any of the foregoing services, including but
not limited to entering into contracts in the name of the
Company with any of the foregoing;
(d) consult with the officers and Directors of the Company and
assist the Directors in the formulation and implementation
of the Company's financial policies, and, as necessary,
furnish the Directors with advice and recommendations with
respect to the making of investments consistent with the
investment objectives and policies of the Company and in
connection with any borrowings proposed to be undertaken by
the Company;
(e) subject to the provisions of Paragraphs 3(g) and 4 hereof,
(i) locate, analyze and select potential investments in
Properties and Mortgage Loans and potential lessees of
Secured Equipment Leases, (ii) structure and negotiate the
terms and conditions of transactions pursuant to which
investment in Properties and Mortgage Loans will be made
and Secured Equipment Leases will be offered by the
Company; (iii) make investments in Properties and Mortgage
Loans and enter into Secured Equipment Leases on behalf of
the Company in compliance with the investment objectives
and policies of the Company; (iv) arrange for financing and
refinancing and make other changes in the asset or capital
structure of, and dispose of, reinvest the proceeds from
the sale of, or otherwise deal with the investments in,
Property, Mortgage Loans and Secured Equipment Leases; and
(v) enter into leases and service contracts for Company
Property and, to the extent necessary, perform all other
operational functions for the maintenance and
administration of such Company Property;
(f) provide the Directors with periodic reports regarding
prospective investments in Properties and Mortgage Loans
and prospective lessees or borrowers of Secured Equipment
Leases;
(g) obtain the prior approval of the Directors (including a
majority of all Independent Directors) for any and all
investments in Properties and Mortgage Loans, and in
connection with the offering of Secured Equipment Leases;
(h) negotiate on behalf of the Company with banks or lenders
for loans to be made to the Company and negotiate on behalf
of the Company with investment banking firms and
broker-dealers or negotiate private sales of Shares and
Securities or obtain loans for the Company, but in no event
in such a way so that the Advisor shall be acting as
broker-dealer or underwriter; and provided, further, that
any fees and costs payable to third parties incurred by the
Advisor in connection with the foregoing shall be the
responsibility of the Company;
(i) obtain reports (which may be prepared by the Advisor or its
Affiliates), where appropriate, concerning the value of
investments or contemplated investments of the Company in
Properties, Mortgage Loans, and/or Secured Equipment
Leases;
(j) from time to time, or at any time reasonably requested by
the Directors, make reports to the Directors of its
performance of services to the Company under this
Agreement;
(k) provide the Company with all necessary cash management
services;
(l) do all things necessary to assure its ability to render the
services described in this Agreement;
(m) deliver to or maintain on behalf of the Company copies of
all appraisals obtained in connection with the investments
in Properties and Mortgage Loans;
(n) notify the Board of all proposed material transactions
before they are completed; and
(o) administer the Secured Equipment Lease program on behalf of
the Company.
(4) Authority of Advisor.
(a) Pursuant to the terms of this Agreement (including the
restrictions included in this Paragraph 4 and in Paragraph 7), and subject to
the continuing and exclusive authority of the Directors over the management of
the Company, the Directors hereby delegate to the Advisor the authority to (1)
locate, analyze and select investment opportunities, (2) structure the terms and
conditions of transactions pursuant to which investments will be made or
acquired for the Company, (3) acquire Properties, make Mortgage Loans and offer
Secured Equipment Leases in compliance with the investment objectives and
policies of the Company, (4) arrange for financing or refinancing Property,
Mortgage Loans and Secured Equipment Leases, (5) enter into leases and service
contracts for the Company's Property, and perform other property management
services, (6) oversee non-affiliated property managers and other non-affiliated
Persons who perform services for the Company; and (7) undertake accounting and
other record-keeping functions at the Property level.
(b) Notwithstanding the foregoing, any investment in Properties or
Mortgage Loans; or extension of a Secured Equipment Lease, including any
acquisition of Property by the Company (as well as any financing acquired by the
Company in connection with such acquisition), will require the prior approval of
the Directors (including a majority of the Independent Directors).
(c) If a transaction requires approval by the Independent
Directors, the Advisor will deliver to the Independent Directors all documents
required by them to properly evaluate the proposed investment in the Property,
Mortgage Loan or Secured Equipment Lease.
The prior approval of a majority of the Independent Directors and a majority
of the Directors not otherwise interested in the transaction will be required
for each transaction with the Advisor or its Affiliates.
The Directors may, at any time upon the giving of notice to the Advisor,
modify or revoke the authority set forth in this Paragraph 4. If and to the
extent the Directors so modify or revoke the authority contained herein, the
Advisor shall henceforth submit to the Directors for prior approval such
proposed transactions involving investments in Property as thereafter require
prior approval, provided, however, that such modification or revocation shall be
effective upon receipt by the Advisor and shall not be applicable to investment
transactions to which the Advisor has committed the Company prior to the date of
receipt by the Advisor of such notification.
(5) Bank Accounts. The Advisor may establish and maintain one or more bank
accounts in its own name for the account of the Company or in the name of the
Company and may collect and deposit into any such account or accounts, and
disburse from any such account or accounts, any money on behalf of the Company,
under such terms and conditions as the Directors may approve, provided that no
funds shall be commingled with the funds of the Advisor; and the Advisor shall
from time to time render appropriate accountings of such collections and
payments to the Directors and to the auditors of the Company.
(6) Records; Access. The Advisor shall maintain appropriate records of all
its activities hereunder and make such records available for inspection by the
Directors and by counsel, auditors and authorized agents of the Company, at any
time or from time to time during normal business hours. The Advisor shall at all
reasonable times have access to the books and records of the Company.
(7) Limitations on Activities. Anything else in this Agreement to the
contrary notwithstanding, the Advisor shall refrain from taking any action
which, in its sole judgment made in good faith, would (a) adversely affect the
status of the Company as a REIT, (b) subject the Company to regulation under the
Investment Company Act of 1940, or (c) violate any law, rule, regulation or
statement of policy of any governmental body or agency having jurisdiction over
the Company, its Equity Shares or its Securities, or otherwise not be permitted
by the Articles of Incorporation or Bylaws of the Company, except if such action
shall be ordered by the Directors, in which case the Advisor shall notify
promptly the Directors of the Advisor's judgment of the potential impact of such
action and shall refrain from taking such action until it receives further
clarification or instructions from the Directors. In such event the Advisor
shall have no liability for acting in accordance with the specific instructions
of the Directors so given. Notwithstanding the foregoing, the Advisor, its
directors, officers, employees and stockholders, and stockholders, directors and
officers of the Advisor's Affiliates shall not be liable to the Company or to
the Directors or Stockholders for any act or omission by the Advisor, its
directors, officers or employees, or stockholders, directors or officers of the
Advisor's Affiliates except as provided in Paragraphs 19 and 20 of this
Agreement.
(8) Relationship with Directors. Directors, officers and employees of the
Advisor or an Affiliate of the Advisor or any corporate parents of an Affiliate,
or directors, officers or stockholders of any director, officer or corporate
parent of an Affiliate may serve as a Director and as officers of the Company,
except that no director, officer or employee of the Advisor or its Affiliates
who also is a Director or officer of the Company shall receive any compensation
from the Company for serving as a Director or officer other than reasonable
reimbursement for travel and related expenses incurred in attending meetings of
the Directors.
(9) Fees.
(a) Asset Management Fee. The Company shall pay to the Advisor as
compensation for the advisory services rendered to the Company under Paragraph 3
above a monthly fee in an amount equal to one-twelfth of .60% of the Company's
Real Estate Asset Value and the outstanding principal amount of the Mortgage
Loans (the "Asset Management Fee"), as of the end of the preceding month.
Specifically, Real Estate Asset Value equals the amount invested in the
Properties wholly owned by the Company, determined on the basis of cost, plus,
in the case of Properties owned by any Joint Venture or partnership in which the
Company is a co-venturer or partner, the portion of the cost of such Properties
paid by the Company, exclusive of Acquisition Fees and Expenses. The Asset
Management Fee shall be payable monthly on the last day of such month, or the
first business day following the last day of such month. The Asset Management
Fee, which will not exceed fees which are competitive for similar services in
the same geographic area, may or may not be taken, in whole or in part as to any
year, in the sole discretion of the Advisor. All or any portion of the Asset
Management Fee not taken as to any fiscal year shall be deferred without
interest and may be taken in such other fiscal year as the Advisor shall
determine.
(b) Acquisition Fees. The Company shall pay the Advisor a fee in the
amount of 4.5% of Total Proceeds as Acquisition Fees. Acquisition Fees shall be
reduced to the extent that, and, if necessary to limit, the total compensation
paid to all persons involved in the acquisition of any Property to the amount
customarily charged in arm's-length transactions by other persons or entities
rendering similar services as an ongoing public activity in the same
geographical location and for comparable types of Properties and to the extent
that other acquisition fees, finder's fees, real estate commissions, or other
similar fees or commissions are paid by any person in connection with the
transaction. The total of all Acquisition Fees and any Acquisition Expenses
shall be limited in accordance with the Articles of Incorporation.
(c) Subordinated Disposition Fee. If the Advisor or an Affiliate
provides a substantial amount of the services (as determined by a majority of
the Independent Directors) in connection with the Sale of one or more
Properties, the Advisor or an Affiliate shall receive a Subordinated Disposition
Fee equal to the lesser of (i) one-half of a Competitive Real Estate Commission
or (ii) 3% of the sales price of such Property or Properties. The Subordinated
Disposition Fee will be paid only if Stockholders have received total
Distributions in an amount equal to the sum of their aggregate Invested Capital
and their aggregate Stockholders' 8% Return. To the extent that Subordinated
Disposition Fees are not paid by the Company on a current basis due to the
foregoing limitation, the unpaid fees will be accrued and paid at such time as
the subordination conditions have been satisfied. The Subordinated Disposition
Fee may be paid in addition to real estate commissions paid to non-Affiliates,
provided that the total real estate commissions paid to all Persons by the
Company shall not exceed an amount equal to the lesser of (i) 6% of the Contract
Sales Price of a Property or (ii) the Competitive Real Estate Commission. In the
event this Agreement is terminated prior to such time as the Stockholders have
received total Distributions in an amount equal to 100% of Invested Capital plus
an amount sufficient to pay the Stockholders' 8% Return through the Termination
Date, an appraisal of the Properties then owned by the Company shall be made and
the Subordinated Disposition Fee on Properties previously sold will be deemed
earned if the Appraised Value of the Properties then owned by the Company plus
total Distributions received prior to the Termination Date equals 100% of
Invested Capital plus an amount sufficient to pay the Stockholders' 8% Return
through the Termination Date. Upon Listing, if the Advisor has accrued but not
been paid such Subordinated Disposition Fee, then for purposes of determining
whether the subordination conditions have been satisfied, Stockholders will be
deemed to have received a Distribution in the amount equal to the product of the
total number of Shares outstanding and the average closing price of the Shares
over a period, beginning 180 days after Listing, of 30 days during which the
Shares are traded.
(d) Subordinated Share of Net Sales Proceeds. The Subordinated Share of
Net Sales Proceeds shall be payable to the Advisor in an amount equal to 10% of
Net Sales Proceeds from Sales of assets of the Company after the Stockholders
have received Distributions equal to the sum of the Stockholders' 8% Return and
100% of Invested Capital. Following Listing, no Subordinated Share of Net Sales
Proceeds will be paid to the Advisor.
(e) Subordinated Incentive Fee. Upon Listing, the Advisor shall be paid
the Subordinated Incentive Fee in an amount equal to 10% of the amount by which
(i) the market value of the Company, measured by taking the average closing
price or average of bid and asked price, as the case may be, over a period of 30
days during which the Shares are traded, with such period beginning 180 days
after Listing (the "Market Value"), plus the total Distributions paid to
Stockholders from the Company's inception until the date of Listing, exceeds
(ii) the sum of (A) 100% of Invested Capital and (B) the total Distributions
required to be paid to the Stockholders in order to pay the Stockholders' 8%
Return from inception through the date the Market Value is determined. The
Company shall have the option to pay such fee in the form of cash, Securities, a
promissory note or any combination of the foregoing. The Subordinated Incentive
Fee will be reduced by the amount of any prior payment to the Advisor of a
deferred, subordinated share of Net Sales Proceeds from Sales of assets of the
Company.
(f) Secured Equipment Lease Servicing Fee. The Company shall pay to the
Advisor out of the Proceeds of the Line of Credit or Permanent Financing as
compensation for negotiating its respective Secured Equipment Leases and
supervising the Secured Equipment Lease program a fee equal to 2% of the
purchase price of the Equipment subject to each Secured Equipment Lease upon
entering into such lease or loan.
(g) Loans from Affiliates. If any loans are made to the Company by an
Affiliate of the Advisor, the maximum amount of interest that may be charged by
such Affiliate shall be the lesser of (i) 1% above the prime rate of interest
charged from time to time by The Bank of New York and (ii) the rate that would
be charged to the Company by unrelated lending institutions on comparable loans
for the same purpose. The terms of any such loans shall be no less favorable
than the terms available between non-Affiliated Persons for similar commercial
loans.
(h) Changes to Fee Structure. In the event of Listing, the Company and
the Advisor shall negotiate in good faith to establish a fee structure
appropriate for a perpetual-life entity. A majority of the Independent Directors
must approve the new fee structure negotiated with the Advisor. In negotiating a
new fee structure, the Independent Directors shall consider all of the factors
they deem relevant, including, but not limited to: (i) the amount of the
advisory fee in relation to the asset value, composition and profitability of
the Company's portfolio; (ii) the success of the Advisor in generating
opportunities that meet the investment objectives of the Company; (iii) the
rates charged to other REITs and to investors other than REITs by Advisors
performing the same or similar services; (iv) additional revenues realized by
the Advisor and its Affiliates through their relationship with the Company,
including loan administration, underwriting or broker commissions, servicing,
engineering, inspection and other fees, whether paid by the REIT or by others
with whom the REIT does business; (v) the quality and extent of service and
advice furnished by the Advisor; (vi) the performance of the investment
portfolio of the REIT, including income, conversion or appreciation of capital,
and number and frequency of problem investments; and (vii) the quality of the
Property, Mortgage Loan and Secured Equipment Lease portfolio of the Company in
relationship to the investments generated by the Advisor for its own account.
The new fee structure can be no more favorable to the Advisor than the current
fee structure.
(10) Expenses.
(a) In addition to the compensation paid to the Advisor pursuant to
Paragraph 9 hereof, the Company shall pay directly or reimburse the Advisor for
all of the expenses paid or incurred by the Advisor in connection with the
services it provides to the Company pursuant to this Agreement, including, but
not limited to:
(i) the Company's Offering Expenses;
(ii) Acquisition Expenses incurred in connection with the selection
and acquisition of Properties for goods and services provided by the Advisor at
the lesser of the actual cost or 90% of the competitive rate charged by
unaffiliated persons providing similar goods and services in the same geographic
location;
(iii) the actual cost of goods and services used by the Company and
obtained from entities not affiliated with the Advisor, other than Acquisition
Expenses, including brokerage fees paid in connection with the purchase and sale
of securities;
(iv) interest and other costs for borrowed money, including
discounts, points and other similar fees;
(v) taxes and assessments on income or Property and taxes as an
expense of doing business;
(vi) costs associated with insurance required in connection with
the business of the Company or by the Directors;
(vii) expenses of managing and operating Properties owned by the
Company, whether payable to an Affiliate of the Company or a non-affiliated
Person;
(viii) all expenses in connection with payments to the Directors
and meetings of the Directors and Stockholders;
(ix) expenses associated with Listing or with the issuance and
distribution of Shares and Securities, such as selling commissions and fees,
advertising expenses, taxes, legal and accounting fees, Listing and registration
fees, and other Offering Expenses;
(x) expenses connected with payments of Distributions in cash or
otherwise made or caused to be made by the Directors to the Stockholders;
(xi) expenses of organizing, revising, amending, converting,
modifying, or terminating the Company or the Articles of Incorporation;
(xii) expenses of maintaining communications with Stockholders,
including the cost of preparation, printing, and mailing annual reports and
other Stockholder reports, proxy statements and other reports required by
governmental entities;
(xiii) expenses related to negotiating and servicing Mortgage Loans
and Secured Equipment Leases;
(xiv) expenses related to negotiating and servicing Secured
Equipment Leases and administering the Secured Equipment Lease program;
(xv) administrative service expenses (including personnel costs;
provided, however, that no reimbursement shall be made for costs of personnel to
the extent that such personnel perform services in transactions for which the
Advisor receives a separate fee at the lesser of actual cost or 90% of the
competitive rate charged by unaffiliated persons providing similar goods and
services in the same geographic location); and
(xvi) audit, accounting and legal fees.
(b) Expenses incurred by the Advisor on behalf of the Company and
payable pursuant to this Paragraph 10 shall be reimbursed no less than monthly
to the Advisor. The Advisor shall prepare a statement documenting the expenses
of the Company during each quarter, and shall deliver such statement to the
Company within 45 days after the end of each quarter.
(11) Other Services. Should the Directors request that the Advisor or any
director, officer or employee thereof render services for the Company other than
set forth in Paragraph 3, such services shall be separately compensated at such
rates and in such amounts as are agreed by the Advisor and the Independent
Directors of the Company, subject to the limitations contained in the Articles
of Incorporation, and shall not be deemed to be services pursuant to the terms
of this Agreement.
(12) Reimbursement to the Advisor. The Company shall not reimburse the
Advisor at the end of any fiscal quarter for Operating Expenses that, in the
four consecutive fiscal quarters then ended (the "Expense Year") exceed the
greater of 2% of Average Invested Assets or 25% of Net Income (the "2%/25%
Guidelines") for such year. Within 60 days after the end of any fiscal quarter
of the Company for which total Operating Expenses for the Expense Year exceed
the 2%/25% Guidelines, the Advisor shall reimburse the Company the amount by
which the total Operating Expenses paid or incurred by the Company exceed the
2%/25% Guidelines. The Company will not reimburse the Advisor or its Affiliates
for services for which the Advisor or its Affiliates are entitled to
compensation in the form of a separate fee. All figures used in the foregoing
computation shall be determined in accordance with generally accepted accounting
principles applied on a consistent basis.
(13) Other Activities of the Advisor. Nothing herein contained shall prevent
the Advisor from engaging in other activities, including, without limitation,
the rendering of advice to other Persons (including other REITs) and the
management of other programs advised, sponsored or organized by the Advisor or
its Affiliates; nor shall this Agreement limit or restrict the right of any
director, officer, employee, or stockholder of the Advisor or its Affiliates to
engage in any other business or to render services of any kind to any other
partnership, corporation, firm, individual, trust or association. The Advisor
may, with respect to any investment in which the Company is a participant, also
render advice and service to each and every other participant therein. The
Advisor shall report to the Directors the existence of any condition or
circumstance, existing or anticipated, of which it has knowledge, which creates
or could create a conflict of interest between the Advisor's obligations to the
Company and its obligations to or its interest in any other partnership,
corporation, firm, individual, trust or association. The Advisor or its
Affiliates shall promptly disclose to the Directors knowledge of such condition
or circumstance. If the Sponsor, Advisor, Director or Affiliates thereof have
sponsored other investment programs with similar investment objectives which
have investment funds available at the same time as the Company, it shall be the
duty of the Directors (including the Independent Directors) to adopt the method
set forth in the Registration Statement or another reasonable method by which
properties are to be allocated to the competing investment entities and to use
their best efforts to apply such method fairly to the Company.
The Advisor shall be required to use its best efforts to present a
continuing and suitable investment program to the Company which is consistent
with the investment policies and objectives of the Company, but neither the
Advisor nor any Affiliate of the Advisor shall be obligated generally to present
any particular investment opportunity to the Company even if the opportunity is
of character which, if presented to the Company, could be taken by the Company.
The Advisor or its Affiliates may make such an investment in a property only
after (i) such investment has been offered to the Company and all public
partnerships and other investment entities affiliated with the Company with
funds available for such investment and (ii) such investment is found to be
unsuitable for investment by the Company, such partnerships and investment
entities.
In the event that the Advisor or its Affiliates is presented with a
potential investment which might be made by the Company and by another
investment entity which the Advisor or its Affiliates advises or manages, the
Advisor and its Affiliates shall consider the investment portfolio of each
entity, cash flow of each entity, the effect of the acquisition on the
diversification of each entity's portfolio, rental payments during any renewal
period, the estimated income tax effects of the purchase on each entity, the
policies of each entity relating to leverage, the funds of each entity available
for investment and the length of time such funds have been available for
investment. In the event that an investment opportunity becomes available which
is suitable for both the Company and a public or private entity which the
Advisor or its Affiliates are Affiliated, then the entity which has had the
longest period of time elapse since it was offered an investment opportunity
will first be offered the investment opportunity.
(14) Relationship of Advisor and Company. The Company and the Advisor are
not partners or joint venturers with each other, and nothing in this Agreement
shall be construed to make them such partners or joint venturers or impose any
liability as such on either of them.
(15) Term; Termination of Agreement. This Agreement shall continue in force
until May 13, 2003, subject to an unlimited number of successive one-year
renewals upon mutual consent of the parties. It is the duty of the Directors to
evaluate the performance of the Advisor annually before renewing the Agreement,
and each such agreement shall have a term of no more than one year.
(16) Termination by Either Party. This Agreement may be terminated upon 60
days written notice without Cause or penalty, by either party (by a majority of
the Independent Directors of the Company or a majority of the Board of Directors
of the Advisor, as the case may be).
(17) Assignment to an Affiliate. This Agreement may be assigned by the
Advisor to an Affiliate with the approval of a majority of the Directors
(including a majority of the Independent Directors). The Advisor may assign any
rights to receive fees or other payments under this Agreement without obtaining
the approval of the Directors. This Agreement shall not be assigned by the
Company without the consent of the Advisor, except in the case of an assignment
by the Company to a corporation or other organization which is a successor to
all of the assets, rights and obligations of the Company, in which case such
successor organization shall be bound hereunder and by the terms of said
assignment in the same manner as the Company is bound by this Agreement.
(18) Payments to and Duties of Advisor Upon Termination. Payments to the
Advisor pursuant to this Paragraph (18) shall be subject to the 2%/25%
Guidelines to the extent applicable.
(a) After the Termination Date, the Advisor shall not be entitled to
compensation for further services hereunder except it shall be entitled to
receive from the Company within 30 days after the effective date of such
termination all unpaid reimbursements of expenses and all earned but unpaid fees
payable to the Advisor prior to termination of this Agreement, exclusive of
disputed items arising out of possible unauthorized transactions.
(b) Upon termination, the Advisor shall be entitled to payment of the
Performance Fee if performance standards satisfactory to a majority of the Board
of Directors, including a majority of the Independent Directors, when compared
to (a) the performance of the Advisor in comparison with its performance for
other entities, and (b) the performance of other advisors for similar entities,
have been met. If Listing has not occurred, the Performance Fee, if any, shall
equal 10% of the amount, if any, by which (i) the appraised value of the assets
of the Company on the Termination Date, less the amount of all indebtedness
secured by such assets, plus the total Distributions paid to stockholders from
the Company's inception through the Termination Date, exceeds (ii) Invested
Capital plus an amount equal to the Stockholders' 8% Return from inception
through the Termination Date. The Advisor shall be entitled to receive all
accrued but unpaid compensation and expense reimbursements in cash within 30
days of the Termination Date. All other amounts payable to the Advisor in the
event of a termination shall be evidenced by a promissory note and shall be
payable from time to time.
(c) The Performance Fee shall be paid in 12 equal quarterly
installments without interest on the unpaid balance, provided, however, that no
payment will be made in any quarter in which such payment would jeopardize the
Company's REIT status, in which case any such payment or payments will be
delayed until the next quarter in which payment would not jeopardize REIT
status. Notwithstanding the preceding sentence, any amounts which may be deemed
payable at the date the obligation to pay the Performance Fee is incurred which
relate to the appreciation of the Company's assets shall be an amount which
provides compensation to the Advisor only for that portion of the holding period
for the respective assets during which the Advisor provided services to the
Company.
(d) If Listing occurs, the Performance Fee, if any, payable thereafter
will be as negotiated between the Company and the Advisor. The Advisor shall not
be entitled to payment of the Performance Fee in the event this Agreement is
terminated because of failure of the Company and the Advisor to establish,
pursuant to Paragraph 9(h) hereof, a fee structure appropriate for a
perpetual-life entity at such time, if any, as Listing occurs.
(e) The Advisor shall promptly upon termination:
(i) pay over to the Company all money collected and held for the
account of the Company pursuant to this Agreement, after deducting any accrued
compensation and reimbursement for its expenses to which it is then entitled;
(ii) deliver to the Directors a full accounting, including a
statement showing all payments collected by it and a statement of all money held
by it, covering the period following the date of the last accounting furnished
to the Directors;
(iii) deliver to the Directors all assets, including Properties,
Mortgage Loans, and Secured Equipment Leases, and documents of the Company then
in the custody of the Advisor; and
(iv) cooperate with the Company to provide an orderly management
transition.
(19) Indemnification by the Company. The Company shall indemnify and hold
harmless the Advisor and its Affiliates, including their respective officers,
directors, partners and employees, from all liability, claims, damages or losses
arising in the performance of their duties hereunder, and related expenses,
including reasonable attorneys' fees, to the extent such liability, claims,
damages or losses and related expenses are not fully reimbursed by insurance,
subject to any limitations imposed by the laws of the State of Maryland or the
Articles of Incorporation of the Company. Notwithstanding the foregoing, the
Advisor shall not be entitled to indemnification or be held harmless pursuant to
this Paragraph 19 for any activity for which the Advisor shall be required to
indemnify or hold harmless the Company pursuant to Paragraph 20. Any
indemnification of the Advisor may be made only out of the net assets of the
Company and not from Stockholders.
(20) Indemnification by Advisor. The Advisor shall indemnify and hold
harmless the Company from contract or other liability, claims, damages, taxes or
losses and related expenses including attorneys' fees, to the extent that such
liability, claims, damages, taxes or losses and related expenses are not fully
reimbursed by insurance and are incurred by reason of the Advisor's bad faith,
fraud, willful misfeasance, misconduct, negligence 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 advice or
recommendation given by the Advisor.
(21) Notices. Any notice, report or other communication required or
permitted to be given hereunder shall be in writing unless some other method of
giving such notice, report or other communication is required by the Articles of
Incorporation, the Bylaws, or accepted by the party to whom it is given, and
shall be given by being delivered by hand or by overnight mail or other
overnight delivery service to the addresses set forth herein:
To the Directors and to the Company: CNL Retirement Properties, Inc.
CNL Center at City Commons
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
To the Advisor: CNL Retirement Corp.
CNL Center at City Commons
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Either party may at any time give notice in writing to the other party of a
change in its address for the purposes of this Paragraph 21.
(22) 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.
(23) 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.
(24) Construction. The provisions of this Agreement shall be construed and
interpreted in accordance with the laws of the State of Florida.
(25) 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.
(26) Indulgences, Not Waivers. Neither the failure nor any delay on the part
of a party to exercise any right, remedy, power or privilege under this
Agreement shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, remedy, power or privilege preclude any other or further
exercise of the same or of any other right, remedy, power or privilege, nor
shall any waiver of any right, remedy, power or privilege with respect to any
occurrence be construed as a waiver of such right, remedy, power or privilege
with respect to any other occurrence. No waiver shall be effective unless it is
in writing and is signed by the party asserted to have granted such waiver.
(27) 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.
(28) Titles Not to Affect Interpretation. The titles of paragraphs and
subparagraphs contained in this Agreement are for convenience only, and they
neither form a part of this Agreement nor are they to be used in the
construction or interpretation hereof.
(29) Execution in Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original as against any
party whose signature appears thereon, and all of which shall together
constitute one and the same instrument. This Agreement shall become binding when
one or more counterparts hereof, individually or taken together, shall bear the
signatures of all of the parties reflected hereon as the signatories.
(30) Name. CNL Retirement Corp. has a proprietary interest in the name
"CNL." Accordingly, and in recognition of this right, if at any time the Company
ceases to retain CNL Retirement Corp. or an Affiliate thereof to perform the
services of Advisor, the Directors of the Company will, promptly after receipt
of written request from CNL Retirement Corp., cease to conduct business under or
use the name "CNL" or any diminutive thereof and the Company shall use its best
efforts to change the name of the Company to a name that does not contain the
name "CNL" or any other word or words that might, in the sole discretion of the
Advisor, be susceptible of indication of some form of relationship between the
Company and the Advisor or any Affiliate thereof. Consistent with the foregoing,
it is specifically recognized that the Advisor or one or more of its Affiliates
has in the past and may in the future organize, sponsor or otherwise permit to
exist other investment vehicles (including vehicles for investment in real
estate) and financial and service organizations having "CNL" as a part of their
name, all without the need for any consent (and without the right to object
thereto) by the Company or its Directors.
(31) Initial Investment. The Advisor has contributed to the Company $200,000
in exchange for 20,000 Equity Shares (the "Initial Investment"). The Advisor may
not sell these shares while the Advisory Agreement is in effect, although the
Advisor may transfer such shares to Affiliates. The restrictions included above
shall not apply to any Equity Shares, other than the Equity Shares acquired
through the Initial Investment, acquired by the Advisor or its Affiliates. The
Advisor shall not vote any Equity Shares it now owns, or hereafter acquires, in
any vote for the removal of Directors or any vote regarding the approval or
termination of any contract with the Advisor or any of its Affiliates.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.
CNL RETIREMENT PROPERTIES, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
---------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
Its: Chairman of the Board and
Chief Executive Officer
CNL RETIREMENT CORP.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Its: President