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EXHIBIT 10.2
FIRST AMENDED AND RESTATED ADVISORY AGREEMENT
This FIRST AMENDED AND RESTATED ADVISORY AGREEMENT (this "Agreement") is
made as of November ___, 2000 between Inland Retail Real Estate Trust, Inc., a
Maryland corporation (the "Company"), and Inland Retail Real Estate Advisory
Services, Inc., an Illinois corporation (the "Advisor").
W I T N E S S E T H:
WHEREAS, the Company and the Advisor have executed that certain Advisory
Agreement dated February 11, 1999 (the "Original Agreement"), relating to
certain services to be provided by the Advisor to the Company; and
WHEREAS, the Original Agreement was subject to the terms of that certain
Property Acquisition Service Agreement, dated February 11, 1999, among Inland
Real Estate Acquisitions, Inc. ("IREAI"), the Advisor, the Company, Inland Real
Estate Advisory Services, Inc. ("IREAS") and Inland Real Estate Corporation
("IREC") (the "Original Property Acquisition Agreement") relating to services
provided by IREAI in connection with the acquisition of real estate for the
Company and IREC; and
WHEREAS, IREC has become a self-administered REIT through a merger with
IREAS and Inland Commercial Property Management, Inc., and is no longer a party
to the Original Property Acquisition Agreement; and
WHEREAS, the parties hereto desire to amend and restate the Original
Agreement to reflect that this Agreement shall no longer be subject to the terms
of the Original Property Acquisition Agreement.
NOW, THEREFORE, in consideration of the mutual covenants herein set forth,
the parties hereto agree as follows and hereby amend and restate the Original
Agreement in its entirety to read as follows:
1. DEFINITIONS. As used herein, the following terms shall have the
meanings set forth below:
(a) "Acquisition Expenses" means expenses related to the Company's
selection, evaluation and acquisition of, and investment in,
properties, whether or not acquired or made, including but not limited
to legal fees and expenses, travel and communications expenses, cost
of appraisals and surveys, nonrefundable option payments on property
not acquired, accounting fees and expenses, computer use related
expenses, architectural and engineering reports, environmental and
asbestos audits, title insurance and escrow fees, loan fees or points
or any fee of a similar nature, however designated, and personnel and
miscellaneous expenses related to the selection and acquisition of
properties. Acquisition Expenses will accrue and be paid
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on Properties purchased with the Gross Offering Proceeds, proceeds of
Shares sold via the Company's Distribution Reinvestment Program and
proceeds received from the issuance and exercise of the Soliciting
Dealer Warrants issued by the Company in connection with the Offering,
as well as on the entire purchase price of all Properties including
any acquisition financing related thereto.
(b) "Advisor Asset Management Fee" means an amount equal to 1% of the
Average Invested Assets.
(c) "Affiliate" means, with respect to any other Person: (i) any
Person directly or indirectly owning, controlling or holding, with the
power to vote 10% or more of the outstanding voting securities of such
other Person; (ii) any Person 10% or more of whose outstanding voting
securities are directly or indirectly owned, controlled or held, with
the power to vote, by such other Person; (iii) any Person directly or
indirectly controlling, controlled by or under common control with
such other Person; (iv) any executive officer, director, trustee or
general partner of such other Person; and (v) any legal entity for
which such Person acts as an executive officer, director, trustee or
general partner.
(d) "Affiliated Directors" means those Directors of the Company who
are affiliated with the Company or its Affiliates.
(e) "Articles of Incorporation" means the Articles of Incorporation
of the Company, as amended from time to time.
(f) "Average Invested Assets" means, for any period, the average of
the aggregate Book Value of the assets of the Company invested,
directly or indirectly, in equity interests and in loans secured by
real estate, before reserves for depreciation or bad debts or other
similar noncash reserves, computed by taking the average of such
values at the end of each month during such period.
(g) "Board of Directors" means the board of directors of the Company.
(h) "Book Value" of an asset means the value of such asset on the
books of the Company, before allowance for depreciation or
amortization.
(i) "Code" means the Internal Revenue Code of 1986, as amended.
(j) "Community Center" means any Shopping Center leased primarily to
one or more retail tenants providing for the sale of soft lines
(wearing apparel for men, women and children) and hard lines (hardware
and appliances) in addition to the convenience goods and personal
services provided by a Neighborhood Center, with gross leasable area
ranging from 100,000 to 300,000 or more square feet.
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(k) "Company Fixed Assets" means the real estate, together with the
buildings, leasehold interests, improvements, equipment, furniture,
fixtures and personal property associated therewith, used by the
Company in the conduct of its business.
(l) "Competitive Real Estate Commission" means the real estate or
brokerage commission paid for the purchase or sale of a Property which
is reasonable, customary and competitive in light of the size, type
and location of such Property.
(m) "Contract Price for the Property" means the amount actually paid
or allocated to the purchase, development, construction or improvement
of a Property exclusive of Acquisition Expenses.
(n) "Cumulative Return" means a cumulative, noncompounded return,
equal to 7% per annum on Invested Capital commencing upon acceptance
of the investor's subscription.
(o) "Current Return" means a noncumulative, noncompounded return,
equal to 7% per annum on Invested Capital.
(p) "Fiscal Year" means any period for which any income tax return is
submitted by the Company to the Internal Revenue Service and which is
treated by the Internal Revenue Service as a reporting period.
(q) "Gross Dollars Invested in Properties" means the amount actually
paid or allocated to the purchase, development, construction or
improvement of Properties acquired by the Company.
(r) "Gross Offering Proceeds" means the total proceeds from the sale
of the 50,000,000 Shares offered on "best efforts" basis during the
public offering period before deductions for Offering Expenses. For
purposes of calculating Gross Offering Proceeds, the purchase price
for all Shares, including those for which volume discounts apply,
shall be deemed to be $10 per Share. Unless specifically included,
Gross Offering Proceeds does not include the total proceeds from the
sale of up to 4,000,000 Shares under the Company's Distribution
Reinvestment Program during the public offering period, the purchase
price for which shall be $9.50 per Share; nor the total proceeds from
the issuance and exercise of the Soliciting Dealer Warrants.
(s) "Gross Revenues From Properties" means all cash receipts derived
from the operation of Company Fixed Assets.
(t) "Incentive Advisory Fee" means an amount equal to 15% of the net
proceeds from the sale of a Property after the Stockholders have first
received: (i) their Cumulative Return; and (ii) a return of their
Invested Capital.
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(u) "Independent Directors" means the Directors of the Company who:
(i) are not affiliated and have not been affiliated within the two
years prior to their becoming an Independent Director, directly or
indirectly, with the Company, the Sponsor or the Advisor, whether by
ownership of, ownership interest in, employment by, any material
business or professional relationship with, or as an officer or
director of the Company, the Sponsor, the Advisor or any of their
Affiliates; (ii) do not serve as a director for more than two other
REITs organized by the Company or the Advisor or advised by the
Advisor; and (iii) perform no other services for the Company, except
as Directors. For this purpose, an indirect relationship shall include
circumstances in which a member of the immediate family of a Director
has one of the foregoing relationships with the Company, the Sponsor
or the Advisor or any of their Affiliates. For purposes of determining
whether or not the business or professional relationship is material,
the aggregate gross revenue derived by the prospective Independent
Director from the Company, the Sponsor, the Advisor and their
Affiliates shall be deemed material PER SE if it exceeds five percent
of the prospective Independent Director's: (i) annual gross revenue,
derived from all sources, during either of the last two years; or (ii)
net worth, on a fair market value basis.
(v) "Invested Capital" means the original issue price paid for the
Shares reduced by prior distributions from the sale or financing of
the Company's Properties.
(w) "IREAI" means Inland Real Estate Acquisitions, Inc.
(x) "IREIC" means Inland Real Estate Investment Corporation, which is
a wholly-owned subsidiary of The Inland Group, Inc. The Advisor is a
wholly owned subsidiary of IREIC. IREIC is the Sponsor of the Company.
(y) "Management Agent" means an entity which provides property
rental, leasing, operation and management services to the Company. The
Management Agent is Inland Southeast Property Management Corp., an
Affiliate of the Advisor, or anyone which succeeds it in such
capacity.
(z) "Neighborhood Center" means any Shopping Center which is leased
primarily to one or more retail tenants providing for the sale of
convenience goods (foods, drugs and sundries) and personal services
(laundry, dry cleaning, barbering, shoe repair, etc.) for the
day-to-day living needs of the immediate neighborhood, with gross
leasable area ranging from 10,000 to 100,000 square feet.
(aa) "Net Income" means, for any period, total revenues applicable to
such period, less the expenses applicable to such period other than
additions to or allowances for reserves for depreciation, amortization
or bad debts or other similar noncash reserves; provided, however,
that Net Income shall not include the gain from the sale of the
Company's assets.
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(bb) "Offering" means the offering of Shares of the Company pursuant
to the Prospectus.
(cc) "Offering Expenses" means all those expenses incurred by and to
be paid from the assets of the Company in connection with and in
preparing the Company for registration and subsequently offering and
distributing Shares to the public, including, but not limited to,
total underwriting and brokerage discounts and commissions (including
fees and expenses of underwriters and their accountants and attorneys
paid by the Company), expenses for printing, engraving, mailing,
salaries of the Company's employees while engaged in sales activity,
charges of transfer agents, registrars, trustees, escrow holders,
depositaries, experts, expenses of qualification of the sale of the
securities under federal and state laws, including taxes and fees, and
accountants' and attorneys' fees and expenses.
(dd) "Person" means any individual, corporation, business trust,
estate, trust, partnership, limited liability company, association,
two or more persons having a joint or common interest, or any other
legal or commercial entity.
(ee) "Primary Geographical Area of Investment" of the Company means
the states east of the Mississippi River in the United States.
(ff) "Property" or "Properties" means any, or all, respectively, of
the real property and improvements thereon owned or to be owned by the
Company, directly or indirectly.
(gg) "Property Disposition Fee" means a real estate disposition fee,
payable (under certain conditions) to the Advisor and its Affiliates
upon the sale of the Company's Property in an amount equal to the
lesser of: (i)3% of the contracted for sales price of the Property; or
(ii)50% of the commission paid to third parties which is reasonable,
customary and competitive in light of the size, type and location of
such Property.
(hh) "Property Management Fee" means any fee paid to an Affiliate or
third party as compensation for management of the Company's
Properties. The Property Management Fee shall be equal to not more
than 90% of the fee which would be payable to an unrelated party
providing such services, which fee shall initially be 4.5% of the
gross revenues from the Properties.
(ii) "Prospectus" means the final prospectus of the Company in
connection with the registration of Shares filed with the Securities
and Exchange Commission on Form S-11, as amended and supplemented.
(jj) "Real Property" means improved and unimproved land, improvements,
furniture and fixtures located on or used in connection with, land and
any interest in any of the foregoing, including an interest in air and
subterranean or mineral rights.
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(kk) "Regional Center" means any Shopping Center that provides for
general merchandise, apparel, furniture and home furnishings in depth
and variety, as well as a range of services and recreational
facilities. It is built around one or two full-line department stores
of generally not less than 75,000 square feet each. A Regional Center
may have gross leasable area ranging from 250,000 to more than 900,000
square feet, and provides services typical of a business district yet
not as extensive as those of a Super Regional Center.
(ll) "REIT" means a real estate investment trust as defined in
Sections 856 through 860 of the Code.
(mm) "Retail Center" means real estate primarily improved for use as
retail establishments, principally a multi-tenant Neighborhood Center
or Community Center (but also including a Regional Center or
single-user retail facilities) or improved with other commercial
facilities which provide goods or services.
(nn) "Shares" means the shares of common stock, par value $0.01 per
share, of the Company, and "Share" means one of those Shares.
(oo) "Shopping Center" means a group of commercial establishments
planned, developed, owned and managed as a unit related in location,
size and type of shops to the trade area the unit serves. It provides
on-site parking in definite relationship to the types and sizes of
stores.
(pp) "Sponsor" means IREIC.
(qq) "Stockholders" means holders of Shares.
(rr) "Super Regional Center" means any Shopping Center that provides
for extensive variety in general merchandise, apparel, furniture and
home furnishings, as well as a variety of services and recreational
facilities. It is built around three or more full-line department
stores of generally not less than 100,000 square feet. A Super
Regional Center may have gross leasable area ranging from 600,000 to
more than 1,500,000 square feet.
(ss) "Total Operating Expenses" means the aggregate expenses of every
character paid or incurred by the Company as determined under
generally accepted accounting principles, including Advisor Asset
Management Fees, 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 taxes incurred in connection with the issuance, distribution,
transfer, registration and stock exchange listing of the Shares;
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(ii) interest payments;
(iii) taxes;
(iv) noncash expenditures such as depreciation, amortization and
bad debt reserves;
(v) the Incentive Advisory Fee payable to the Advisor; and
(vi) Acquisition Expenses, real estate commissions on resale of
Real Property and other expenses connected with the acquisition,
disposition 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 Real Property).
2. DUTIES OF ADVISOR. The Advisor shall consult with the Company and
shall, at the request of the Board of Directors or the officers of the Company,
furnish advice and recommendations with respect to all aspects of the business
and affairs of the Company. In general, the Advisor shall inform the Board of
Directors of factors which come to its attention which would influence the
policies of the Company. Subject to the supervision of the Board of Directors
and consistent with the provisions of the Articles of Incorporation, the Advisor
shall use its best efforts to:
(a) Present to the Company a continuing and suitable real estate
investment program and opportunities to make investments in Real
Properties consistent with the investment policies of the Company and
the investment program adopted by the Board of Directors and in effect
at the time and furnish the Company with advice with respect to the
making, acquisition, holding and disposition of investments and
commitments therefor. In presenting investment opportunities
hereunder, the Advisor shall comply with, and be subject to, the
provisions of that certain Property Acquisition Service Agreement,
dated the date hereof, among IREAI, the Advisor, and the Company (the
"Property Acquisition Service Agreement"), as the same may be amended
from time to time. To the extent possible, the resolution of
conflicting investment opportunities between the Company and other
investment entities advised or managed by the Advisor and its
Affiliates for a prospective investment opportunity (a "Proposed
Property") will be resolved by giving priority to the Company,
provided that the Proposed Property meets the acquisition criteria of
the Company. The Property Acquisition Service Agreement grants the
Company the first opportunity to purchase such Proposed Property which
is placed under contract by IREAI, the Advisor or its Affiliates,
provided the Company is able to close the purchase of the Proposed
Property within 60 days.
Other factors which may be considered in connection with evaluating
the suitability of the Proposed Property for investment include: (i) the
effect of the acquisition on the diversification of each entity's
portfolio; (ii) the amount of funds available for investment;
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(iii) cash flow; and (iv) the estimated income tax effects of the purchase
and subsequent disposition. The Independent Directors of the Company must,
by a majority vote, approve all actions by the Advisor or its Affiliates
which present potential conflicts with the Company as set forth in the
Property Acquisition Service Agreement.
(b) Manage the Company's day-to-day investment operations, subject to
the final paragraph of this Section 2, to effect the investment
program adopted by the Board of Directors and perform or supervise the
performance of such other administrative functions necessary in
connection with the management of the Company as may be agreed upon by
the Advisor and the Company;
(c) Serve as the Company's investment advisor, subject to the final
paragraph of this Section 2, in connection with policy decisions to be
made by the Board of Directors and, as requested, furnish reports to
the Board of Directors and provide research, economic and statistical
data in connection with the Company's investments and investment
policies;
(d) On behalf of the Company, investigate, select and conduct
relations with lenders, consultants, accountants, brokers, property
managers, attorneys, underwriters, appraisers, insurers, corporate
fiduciaries, banks, builders and developers, sellers and buyers of
investments and persons acting in any other capacity specified by the
Company from time to time, and enter into contracts with, retain and
supervise services performed by such parties in connection with
investments which have been or may be acquired or disposed of by the
Company;
(e) Cooperate with the Management Agent in connection with property
management services and other activities relating to the Company's
assets as the Advisor shall deem appropriate in the particular
circumstances, subject to the requirement that the Advisor or the
Management Agent, as the case may be, qualifies as an "independent
contractor" as that phrase is used in connection with applicable laws,
rules and regulations affecting REITs that own Real Property;
(f) Upon request of the Company, act, or obtain the services of
others to act, as attorney-in-fact or agent of the Company in making,
acquiring and disposing of investments, disbursing, and collecting the
funds, paying the debts and fulfilling the obligations of the Company
and handling, prosecuting and settling any claims of the Company,
including foreclosing and otherwise enforcing mortgage and other liens
and security interests securing investments;
(g) Assist in negotiations on behalf of the Company with investment
banking firms and other institutions or investors for public or
private sales of securities of the Company or for other financing on
behalf of the Company, but in no event in such a way that the Advisor
shall be acting as a broker, dealer, underwriter or investment advisor
in securities of or for the Company;
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(h) Maintain, with respect to any Real Property and to the extent
available, title insurance or other assurance of title and customary
fire, casualty and public liability insurance;
(i) Upon request of the Board of Directors, and subject to the final
paragraph of this Section 2, invest and reinvest any money of the
Company;
(j) Supervise the preparation and filing and distribution of returns
and reports to governmental agencies and to investors and act on
behalf of the Company in connection with investor relations;
(k) Provide office space, equipment and personnel as required for the
performance of the foregoing services as Advisor;
(l) Advise the Company of the operating results of the Company
properties, to cause the Manager to prepare on a timely basis, and to
review, for such properties operating budgets, maintenance and
improvement schedules, one, three and five year projections of
operating results and such other reports as may be appropriate;
(m) As requested by the Company, make reports to the Company of its
performance of the foregoing services and furnish advice and
recommendations with respect to other aspects of the business of the
Company;
(n) Prepare on behalf of the Company all reports and returns required
by the Securities and Exchange Commission, Internal Revenue Service
and other state or federal governmental agencies;
(o) Undertake and perform all services or other activities necessary
and proper to carry out the investment objectives of the Company; and
(p) Undertake communications with Stockholders in accordance with
applicable law and the Articles of Incorporation, provided, however,
that Affiliates of the Advisor have no obligations to the Company
other than as expressly stated herein, and the Advisor and its
Affiliates have no obligations to present to the Company any specific
investment opportunity except as described in the Prospectus.
In providing advice and services as provided in subparagraphs (a) through (p)
above of this Section 2, the Advisor shall not (i) engage in any activity which
would require it to be registered as an "Investment Advisor," as that term is
defined in the Investment Advisors Act of 1940 OR in any state securities law or
(ii) cause the Company to make such investments as would cause the Company to
become an "Investment Company," as that term is defined in the Investment
Company Act of 1940.
3. NO PARTNERSHIP OR JOINT VENTURE. The Company and the Advisor are not,
and shall not be deemed to be, partners or joint venturers with each other.
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4. RECORDS. The Advisor shall maintain appropriate books of account and
records relating to services performed hereunder, which shall be accessible for
inspection by the Company at any time during ordinary business hours.
5. REIT QUALIFICATIONS. Notwithstanding any other provision of this
Agreement to the contrary, the Advisor shall refrain from any action which, in
its reasonable judgment or in any judgment of the Board of Directors of which
the Advisor has written notice, would adversely affect the qualification of the
Company as a REIT under the Code or which would violate any law, rule or
regulation of any governmental body or agency having jurisdiction over the
Company or its securities, or which would otherwise not be permitted by the
Articles of Incorporation. If any such action is ordered by the Board of
Directors, the Advisor shall promptly notify the Board of Directors of the
Advisor's judgment that such action would adversely affect such status or
violate any such law, rule or regulation or the Articles of Incorporation and
shall refrain from taking such action pending further clarification or
instruction from the Board of Directors.
6. BANK ACCOUNTS. At the direction of the Board of Directors, the Advisor
may establish and maintain bank accounts in the name of the Company, and may
collect and deposit into and disburse from such accounts moneys on behalf of the
Company, upon such terms and conditions as the Board of Directors may approve,
provided that no funds in any such account shall be commingled with funds of the
Advisor. The Advisor shall from time to time, as the Company may require, render
appropriate accountings of such collections, deposits and disbursements to the
Board of Directors and to the auditors of the Company.
7. FIDELITY BOND. The Advisor shall not be required to obtain or maintain
a fidelity bond in connection with the performance of its services hereunder.
8. INFORMATION FURNISHED ADVISOR. The Board of Directors will keep the
Advisor informed in writing concerning the investment and financing policies of
the Company. The Board of Directors shall notify the Advisor promptly in writing
of its intention to make any investments or to sell or dispose of any existing
investments. The Company shall furnish the Advisor with a certified copy of all
financial statements, a signed copy of each report prepared by independent
certified public accountants, and such other information with regard to its
affairs as the Advisor may reasonably request.
9. COMPENSATION. The Advisor and its Affiliates shall be paid for
services rendered by the Advisor under this Agreement as follows:
(a) Acquisition Expenses, for the expenses attendant to Property
acquisitions, in an aggregate amount not in excess of 0.5% of (i) the
Gross Offering Proceeds, (ii) the gross proceeds from the sale of up
to 4,000,000 Shares pursuant to the Company's Distribution
Reinvestment Program, and (iii) the gross proceeds from the issuance
and exercise of the Soliciting Dealer Warrants, PROVIDED THAT the
Acquisition Expenses respecting any specific Property acquired by the
Company shall not exceed 6% of the gross purchase price of that
Property;
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(b) An Advisor Asset Management Fee of not more than 1% of the
Average Invested Assets. This fee will be payable quarterly in an
amount equal to one fourth of 1% of the Average Invested Assets of the
Company as of the last day of the immediately preceding quarter. For
any year in which the Company qualifies as a REIT, the Advisor may be
required to reimburse the Company certain sums as described in
Section 14;
(c) Reimbursement for the cost to the Advisor and its Affiliates for:
(i) the cost to the Advisor or its Affiliates of goods and services
used for and by the Company and obtained from unaffiliated parties;
and (ii) administrative services related thereto. "Administrative
Services" include ministerial services such as typing, record keeping,
preparation and dissemination of Company reports, preparation and
maintenance of records regarding Stockholders, record keeping and
administration of the Company's Distribution Reinvestment and Share
Repurchase Programs, preparation and dissemination of responses to
Stockholder inquiries and other communications with Stockholders and
any other record keeping required for Company purposes. Such
reimbursements are subject to limitations imposed by Sections 10(b)
and (c) hereof;
(d) An Incentive Advisory Fee equal to 15% of the remaining proceeds
from the sale of Real Properties after the Stockholders have first
received: (i) their Cumulative Return; and (ii) the return of their
Invested Capital. At such time as the business of the Advisor is
acquired by or consolidated into the Company pursuant to Section 12
hereof, the Incentive Advisory Fee shall also terminate;
(e) A Property Disposition Fee, payable upon the sale of a Real
Property equal to the lesser of: (i) 3% of the contracted for sales
price of the Real Property or (ii) 50% of the commission paid to third
parties which is reasonable, customary and competitive in light of the
size, type and location of such property ("Competitive Real Estate
Commission"). The amount paid to the Advisor, when added to the sums
paid to unaffiliated parties, shall not exceed the lesser of the
Competitive Real Estate Commission or an amount equal to 6% of the
contracted for sales price. Payment of such Property Disposition Fee
shall be made only if the Advisor provides a substantial amount of
services in connection with the sale of the particular parcel(s) of
Real Property; and
(f) The compensation and reimbursements paid by the Company to the
Advisor and its Affiliates shall be approved by a majority of the
Directors (including a majority of the Independent Directors), as
being fair and reasonable to the Company and not less favorable to the
Company than would be available from an unaffiliated source.
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10. COMPENSATION FOR ADDITIONAL SERVICES, CERTAIN LIMITATIONS.
(a) If the Company shall request the Advisor or its Affiliates to
render services for the Company other than those required to be
rendered by the Advisor hereunder, such additional services, if
performed, will be compensated separately on terms to be agreed upon
between such party and the Company from time to time in accordance
with this Section. The rate of compensation for such services and any
reimbursements to be paid by the Company to the Advisor and its
Affiliates shall be approved by a majority of the Board of Directors,
including a majority of the Independent Directors, as being fair and
reasonable to the Company and not less favorable to the Company than
would be available from an unaffiliated source.
(b) In extraordinary circumstances fully justified to the official or
agency administering the appropriate state securities laws, the
Advisor and its Affiliates may provide other goods and services to the
Company if all of the following criteria are met: (i) the goods or
services must be necessary to the prudent operation of the Company;
(ii) the compensation, price or fee must be equal to the lesser of 90%
of the compensation, price or fee the Company would be required to pay
to independent parties who are rendering comparable services or
selling or leasing comparable goods on competitive terms in the same
geographic location, or 90% of the compensation, price or fee charged
by the Advisor or its Affiliates for rendering comparable services or
selling or leasing comparable goods on competitive terms; and (iii) if
at least 95% of gross revenues attributable to the business of
rendering such services or selling or leasing such goods are derived
from persons other than Affiliates, the compensation, price or fee
charged by an unaffiliated person who is rendering comparable services
or selling or leasing comparable goods must be on competitive terms in
the same geographic location. Extraordinary circumstances shall be
presumed only when there is an emergency situation requiring immediate
action by the Advisor or its Affiliates and the goods or services are
not immediately available from unaffiliated parties. Services which
may be performed in such extraordinary circumstances include emergency
maintenance of Company properties, janitorial and other related
services due to strikes or lockouts, emergency tenant evictions and
repair services which require immediate action, as well as operating
and releasing properties with respect to which the leases are in
default or have been terminated.
(c) Permitted reimbursements shall include salaries and related
salary expenses for nonsupervisory services which could be performed
directly for the Company by independent parties such as legal,
accounting, transfer agent, data processing and duplication.
The Advisor believes that the employees of the Advisor and its Affiliates
who may perform services for the Company for which reimbursement is allowed
pursuant to Section 10(b) or 10(c), will have the experience and educational
background, in their respective fields of expertise, appropriate for the
performance of any such services.
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11. STATEMENTS. The Advisor shall furnish to the Company not later than
the 10th day of each calendar quarter, beginning with the second calendar
quarter of the term of this Agreement, a statement showing the computation of
any Advisor Asset Management Fee payable to it during such quarter under
Section 9 hereof. The Advisor shall furnish to the Company not later than the
30th day following the end of each Fiscal Year, a statement showing a
computation of: (i) the Incentive Advisory Fee, if any, payable in respect of
such Fiscal Year under Section 9 hereof; and (ii) the fees or other compensation
payable to the Advisor or an Affiliate of the Advisor with respect to such
Fiscal Year under Sections 9 and 10 hereof. The final settlement or compensation
payable under Sections 9 and 10 hereof for each Fiscal Year shall be subject to
adjustments in accordance with, and upon completion of, the annual audit of the
Company's financial statements.
12. BUSINESS COMBINATION OF THE COMPANY AND THE ADVISOR. The Company shall
have the option at any time after February 11, 2002, upon prior written notice,
during the term of this Agreement without any consent of the Advisor or its
Board of Directors or shareholders to cause the business conducted by the
Advisor (including all of its assets) to be acquired by or consolidated into the
Company. In such event, the Advisor and/or its respective shareholders will
receive in connection with such an acquisition and in exchange for terminating
this Agreement and the release or waiver of all fees payable under the
provisions of this Agreement until its stated termination, but not paid, a
determinable number of Shares. The Company will be obligated to pay any fees
accrued under this agreement for services rendered through the closing of such
acquisition.
The number of Shares to be issued by the Company to the Advisor shall be
determined as follows. The Company shall first send notice (the "Election
Notice") to the Advisor of its election to proceed with such a transaction.
Next, the net income of the Advisor, for the six month period immediately
preceding the month in which the Election Notice is delivered, as determined by
an independent audit conducted in accordance with generally accepted auditing
standards, shall be annualized. The Advisor shall bear the cost of any such
audit. Such amount shall then be multiplied by ninety percent (90%) and then
divided by the "Funds from Operations per Weighted Average Share" of the
Company. "Funds from Operations per Weighted Average Share" shall be equal to
the annualized Funds from Operations (I.E. four times the Funds from Operations
for the quarter immediately preceding the delivery of the Election Notice) per
weighted average Share for the Company for such quarter, all based upon the
quarterly report of the Company delivered to Stockholders for such quarter. The
resulting quotient shall constitute the number of Shares to be issued by the
Company to the Advisor or its shareholders, with delivery thereof and the
closing of the transaction to occur within 90 days of delivery of the Election
Notice. Any such transaction will occur, if at all, only if the Board obtains a
fairness opinion from a recognized financial advisor or institution providing
valuation services to the effect that the consideration to be paid therefor is
fair, from a financial point of view, to the Stockholders of the Company.
The Company shall not terminate this Agreement solely for the purpose of
avoiding such a business combination, such as in anticipation of the listing of
the Shares on a national stock exchange or their inclusion in a national market
system.
13. EXPENSES OF THE COMPANY. The Company shall pay all of its expenses and
shall reimburse the Advisor for its expenses as provided in Sections 9 and 10
hereof and, without limiting
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the generality of the foregoing, it is agreed that the following expenses of the
Company shall be paid by the Company:
(a) To the extent the Advisor is not expressly required to pay such
expenses pursuant to this Agreement, salaries and other employment
expenses of the personnel employed by the Company, Directors' fees and
expenses incurred in attending Directors meetings, travel and other
expenses incurred by Directors, officers and employees of the Company
and the cost of Directors' liability insurance;
(b) The cost of borrowed moneys;
(c) All taxes applicable to the Company;
(d) Legal, accounting, auditing, underwriting, brokerage, listing,
registration and other expenses and taxes incurred in connection with
the organization or termination of the Company, the issuance,
distribution, transfer, registration and stock exchange or quotation
system listing of the Company's securities;
(e) Fees and expenses paid to advisors, independent contractors, the
Management Agent, consultants, managers and other agents employed
directly by the Company or by the Advisor at the Company's request for
the account of the Company or by Affiliates of the Advisor, as
provided above;
(f) Expenses in connection with the acquisition, disposition, leasing
and ownership of investments, including to the extent not paid by
others, but not limited to, legal fees and other expenses of
professional services, maintenance, repair and improvement of property
and brokerage and sales commissions, expenses of maintaining and
managing Real Property equity interests (including the fees and
charges of the Management Agent);
(g) All insurance costs incurred in connection with the Company;
(h) Expenses connected with payments of dividends or interest or
distributions in cash or in any form made or caused to be made by the
Board of Directors to holders of securities of the Company;
(i) All expenses connected with communications to holders of
securities of the Company and the other bookkeeping and clerical work
necessary in maintaining relations with holders of securities and in
complying with the continuous reporting and other requirements of
governmental bodies or agencies, including the cost of printing and
mailing certificates for securities and proxy solicitation materials
and reports to holders of the Company's securities;
(j) Transfer agent and registrar's fees and charges; and
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(k) Expenses relating to any office or office facilities maintained
by the Company separate from the office or offices of the Advisor.
14. REIMBURSEMENT BY ADVISOR. The Advisor shall be obligated to reimburse
the Company in the following circumstances:
(a) On or before the 15th day after the completion of the annual
audit of the Company's financial statements for each Fiscal Year, the
Advisor will reimburse the Company for the amounts, if any, (i) by
which the Total Operating Expenses (including the Advisor Asset
Management Fee) of the Company for such Fiscal Year exceeded the
greater of: (a) 2% of the total of the Company's Average Invested
Assets for such Fiscal Year; or (b) 25% of the Net Income for such
Fiscal Year; PLUS (ii) equal to any deficit between the total amount
of distributions to Stockholders for such Fiscal Year and the Current
Return; provided, however, that the Company may instead permit such
reimbursements to be effected by a reduction in the amount of the
monthly payments of compensation under Section 9(a) hereof during the
balance of the Fiscal Year next following the Fiscal Year with respect
to which such reimbursement is to be made; and provided, further, that
only so much of such excess specified in clause (i) of this paragraph
(a) need be reimbursed as the Board of Directors, including a majority
of the Independent Directors of the Company, shall determine should
justifiably be reimbursed in light of such unanticipated, unusual or
nonrecurring factors as may have occurred within 60 days after the end
of an fiscal quarter of the Company for which Total Operating Expenses
(for the 12 months then ended) exceeded 2% of Average Invested Assets
or 25% of Net Income, whichever is greater, and there shall be sent to
the Stockholders a written disclosure of such fact, together with an
explanation of the factors the Independent Directors considered in
arriving at the conclusion that such higher Total Operating Expenses
were justified.
(b) If the aggregate of all Offering Expenses attendant to the
Offering (including Selling Commissions and the Marketing Contribution
and Due Diligence Expense Allowance) should exceed 15% of the Gross
Offering Proceeds OR if the aggregate of all Offering Expenses
(excluding any Selling Commissions) should exceed 5.5% of the Gross
Offering Proceeds, the Advisor shall pay directly and/or cause its
Affiliates to pay directly any such excess Offering Expenses incurred
by the Company and the Company will have no liability for such excess
expenses.
15. OTHER ACTIVITIES OF THE ADVISOR. Nothing herein contained shall
prevent the Advisor or an Affiliate of the Advisor from engaging in any other
business or activity including the rendering of services and investment advice
with respect to real estate investment opportunities to any other person or
entity and the management of other investments (including the investments of the
Advisor and its Affiliates).
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Directors, officers, employees and agents of the Advisor or of Affiliates
of the Advisor may serve as Directors, trustees, officers, employees or agents
of the Company, but shall receive no compensation (other than reimbursement for
expenses) from the Company for such service.
16. TERM; TERMINATION OF AGREEMENT. This Agreement shall have an initial
term of one year and, thereafter, will continue in force for successive one year
renewals with the mutual consent of the parties including an affirmative vote of
a majority of the Independent Directors. Each extension shall be executed in
writing by both parties hereto before the expiration of this Agreement or of any
extension thereof.
Notwithstanding any other provision of the Agreement to the contrary,
either the Company or the Advisor may terminate this Agreement, or any extension
hereof, or the parties by mutual consent or a majority of the Independent
Directors may do so, in each case upon 60 days written notice without cause or
penalty. In the event of the termination of the Agreement, the Advisor will
cooperate with the Company and take all reasonable steps requested to assist the
Board of Directors in making an orderly transition of the advisory function.
This Agreement shall terminate upon the consummation of a business
combination involving the Advisor and the Company as described in Section 12.
If this Agreement is terminated pursuant to this Section, such termination
shall be without any further liability or obligation of either party to the
other, except as provided in Section 19.
If this Agreement is terminated for any reason other than a business
combination involving the Advisor and the Company as described in Section 12,
all obligations of the Advisor and its Affiliates to offer Property to the
Company for purchase, as described in Section 2(a), shall also terminate.
17. ASSIGNMENTS. The Company may terminate this Agreement in the event of
its assignment by the Advisor except an assignment to a successor organization
which acquires substantially all of the property and carries on the affairs of
the Advisor, provided that following such assignment the persons who controlled
the operations of the Advisor immediately prior thereto all control the
operations of the successor organization, including the performance of its
duties under this Agreement; however, if at any time subsequent to such
assignment such persons shall cease to control the operations of the successor
organization, the Company may thereupon terminate this Agreement. This Agreement
shall not be assignable by the Company without the consent of the Advisor,
except in the case of assignment by the Company to a corporation, trust or other
organization which is a successor to the Company. Any assignment of this
Agreement shall bind the assignee hereunder in the same manner as the assignor
is bound hereunder.
18. DEFAULT, BANKRUPTCY, ETC. At the option solely of the Company, this
Agreement shall be terminated immediately upon written notice of termination
from the Board of Directors to the Advisor if any of the following events
occurs:
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(a) The Advisor violates any provisions of this Agreement and after
notice of such violation shall not cure such default within 30 days;
or
(b) A court of competent jurisdiction enters a decree or order for
relief in respect of the Advisor in any involuntary case under the
applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or appoints a receiver liquidator, assignee,
custodian, trustee, sequestrator (or similar official) of the Advisor
or for any substantial part of its property or orders the winding up
or liquidation of the Advisor's affairs; or
(c) The Advisor commences a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in
effect, or consents to the entry of an order for relief in an
involuntary case under any such law, or consents to the appointment of
or taking possession by a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or similar official) of the Advisor or for any
substantial part of its property, or makes any general assignment for
the benefit of creditors, or fails generally to pay its debts as they
become due.
The Advisor agrees that if any of the events specified in subsections(b)
and (c) of this Section 18 occur, it will give written notice thereof to the
Company within seven days after the occurrence of such event.
19. ACTION UPON TERMINATION. The Advisor shall not be entitled to
compensation after the date of termination of this Agreement for further
services hereunder, but shall be paid all compensation accruing to the date
of termination. Subject to the provisions of Section 12, the Advisor shall
forthwith upon a termination caused by factors other than the listing for
trading of the Shares on a national stock exchange or market:
(a) Pay over to the Company all moneys collected and held for the
account of the Company pursuant to this Agreement, after deducting any
accrued compensation and reimbursement for its expenses to which it is
then entitled;
(b) Deliver to the Board of Directors a full accounting, including a
statement showing all payments collected by it and a statement of all
money held by it, covering the period following the date of the last
accounting furnished to the Board of Directors;
(c) Deliver to the Board of Directors all property and documents of
the Company then in the custody of the Advisor; and
(d) Cooperate with the Company and take all reasonable steps
requested by the Company to assist the Board of Directors in making an
orderly transition of the Advisory function.
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20. CHANGE OF NAME. The Company recognizes that the name and mark "Inland"
have established prestige and goodwill and have acquired valuable secondary
meanings in the real estate and related industries and in the mind of the
public. The Company desires to associate itself with and benefit from the
"Inland" name, and in consideration of the grant by the Advisor and its
Affiliates of a perpetual royalty free license to the Company (which license has
been authorized), subject to the conditions set forth in this Section 20, to use
the name and mark "Inland" in connection with a real estate investment trust
throughout the United States, its territories and possessions, the Company
agrees that:
(a) The value of the "Inland" name cannot be reasonably and
adequately compensated for in damages in action at law and
unauthorized use of the "Inland" name will cause irreparable injury
and damage to the Advisor and its Affiliates. The Advisor or its
Affiliates shall be entitled as a matter of right to injunctive relief
to prevent the use of the "Inland" name by the Company in the event of
the circumstances described in Subsection (d) below.
(b) The Company agrees to use the "Inland" name and mark in a manner
which will protect the right of the Advisor and its Affiliates therein
and such use shall be as licensee for the account and benefit of the
Advisor and its Affiliates. To the extent any rights in the name or
mark "Inland" are deemed to accrue to the Company, the Company hereby
assigns any and all such rights to the Advisor and its Affiliates at
such time as they may be deemed to accrue.
(c) Nothing contained in this Agreement shall be construed an
assignment or grant to the Company of any right, title or interest in
or to the name or mark "Inland" or any other trademarks, trade names
or related service marks, insignias, logos, designs and color schemes,
it being understood that all rights relating thereto are reserved by
the Advisor and its Affiliates, except for the license hereunder to
the Company of the rights to use the name or mark as specifically and
expressly provided herein. The Company agrees to cooperate fully and
in good faith with the Advisor and its Affiliates, at the expense of
the Advisor and its Affiliates, in securing and preserving the rights
of the Advisor and its Affiliates in and to the name and mark "Inland"
and to assist the Advisor and its Affiliates in executing and causing
to be recorded such documents as may be necessary or desirable to
evidence, protect and implement the rights of the Advisor and its
Affiliates pursuant to this Agreement.
(d) At such time as the Advisor is no longer providing services to
the Company pursuant to this Agreement for some reason other than the
consummation of a business combination described in Section 12, the
Board of Directors will upon the request of the Advisor and its
Affiliates, promptly cause the name of the Company to be changed in
perpetuity to a name which does not include any reference to the name
"Inland" or any successor thereof. Without limiting the generality of
the foregoing, upon termination of this Agreement by either party for
some reason other than the consummation of a business combination
described in Section 12, the Board
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of Directors will promptly cause the name of the Company to be changed
in perpetuity to a name which does not include any references to the
name "Inland" or any successor thereof.
21. 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 provided herein.
22. SUCCESSORS AND ASSIGNS. This Agreement shall bind any successors or
assigns of the parties hereto as herein provided.
23. GOVERNING LAW. The provisions of this Agreement shall be governed,
construed and interpreted in accordance with the laws of the State of Illinois
as at the time in effect.
24. LIABILITY AND INDEMNIFICATION.
(a) The Company shall, to the fullest extent permitted by Maryland
statutory or decisional law, as amended or interpreted, and, without
limiting the generality of the foregoing, in accordance with Section
2418 of the General Corporation Law of Maryland, indemnify and pay or
reimburse reasonable expenses to the Advisor and its Affiliates,
provided, that: (i) the Advisor or other party seeking indemnification
has determined, in good faith, that the course of conduct which caused
the loss or liability was in the best interests of the Company; (ii)
the Advisor or other person seeking indemnification was acting on
behalf of or performing services on the part of the Company; (iii)
such liability or loss was not the result of negligence or misconduct
on the part of the indemnified party; and (iv) such indemnification or
agreement to be held harmless is recoverable only out of the assets of
the Company and not from the Stockholders thereof.
(b) The Company shall not indemnify the Advisor or its Affiliates for
losses, liabilities or expenses arising from or out of an alleged
violation of federal or state securities laws by such party unless one
or more of the following conditions are met: (i) there has been a
successful adjudication on the merits of each count involving alleged
securities law violations as to the particular indemnitee; (ii) such
claims have been dismissed with prejudice on the merits by a court of
competent jurisdiction as to the particular indemnitee; or (iii) a
court of competent jurisdiction approves a settlement of the claims
and finds that indemnification of the settlement and related costs
should be made and the court considering the request has been advised
of the position of the Securities and Exchange Commission and the
published opinions of any state securities regulatory authority in
which securities of the Company were offered and sold with respect to
the availability or propriety of indemnification for securities law
violations.
(c) The Company may advance amounts to persons entitled to
indemnification hereunder for legal and other expenses and costs
incurred as a result of any legal
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action for which indemnification is being sought only if all of the
following conditions are satisfied: (i) the legal action relates to
acts or omissions with respect to the performance of duties or
services by the indemnified part for or on behalf of the Company; (ii)
the legal action is initiated by a third party and a court of
competent jurisdiction specifically approves such advancement; and
(iii) the indemnified party receiving such advances undertakes to
repay the advanced funds to the Company, together with the applicable
legal rate of interest thereon, in any case(s) in which such party is
found not to be entitled to indemnification.
25. NOTICES. Any notice, report or other communication required or
permitted to be given hereunder shall be in writing unless some other method of
giving such notice, report or other communication is accepted by the party to
whom it is given and shall be given by being delivered at the following
addresses of the parties hereto:
The Company and/or the Board of Directors:
Inland Retail Real Estate Trust, Inc.
2901 Butterfield Road
Oak Brook, Illinois 60523
Attention: Ms. Roberta S. Matlin, Vice President
The Advisor:
Inland Retail Real Estate Advisory Services, Inc.
2901 Butterfield Road
Oak Brook, Illinois 60523
Attention: President
Either party may at any time give notice in writing to the other party of a
change of its address for the purpose of this Section 25.
26. CONFLICTS OF INTEREST AND FIDUCIARY DUTIES TO THE COMPANY AND TO THE
COMPANY'S STOCKHOLDERS. The Company and the Advisor recognize that their
relationship is subject to various conflicts of interest as set forth in the
Prospectus. The Advisor, on behalf of itself and its Affiliates, acknowledges
that the Advisor and its Affiliates have fiduciary duties to the Company and to
the Company's Stockholders. The Advisor, on behalf of itself and its Affiliates,
represents and agrees (i) that the Advisor and its Affiliates will endeavor to
balance the interests of the Company with the interests of the Advisor and its
Affiliates in making any determination where a conflict of interest exists
between the Company and the Advisor or its Affiliates; and (ii) that the actions
and decisions of the Advisor and its Affiliates under this Agreement (including
but not limited to actions and decisions in connection with the purchase of
Properties for the Company) will be made in the manner most favorable to the
Company and to the Company's Stockholders, so as not to breach their respective
fiduciary duties to the Company and to the Company's Stockholders.
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27. HEADINGS. The section headings hereof have been inserted for
convenience of reference only and shall not be construed to affect the meaning,
construction or effect of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the undersigned have executed this First Amended and
Restated Advisory Agreement as of the date first above written.
COMPANY:
Inland Retail Real Estate Trust, Inc.
By: /s/ Roberta S. Matlin
-----------------------------------------
Title: Vice President
ADVISOR:
Inland Retail Real Estate Advisory Services, Inc.
By: /s/ Robert D. Parks
-----------------------------------------
Title: President
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