1
Exhibit 10.1
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT, dated as of _______ _, 1997 is between
CAREY DIVERSIFIED LLC, a Delaware limited liability company (the "Company"), and
CAREY MANAGEMENT LLC, a Delaware limited liability company (the "Manager").
W I T N E S S E T H:
WHEREAS, the Company has been formed to succeed to the net lease
business of the Corporate Property Associates series of limited partnerships and
to expand and grow the business for the benefit of its shareholders;
WHEREAS, the Company desires to avail itself of the experience,
sources of information, advice and assistance of, and certain facilities
available to, the Manager and to have the Manager 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
WHERE AS, the Manager is willing 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 Agreement, the following terms have
the definitions hereinafter indicated:
Acquisition Expenses. Those expenses of the Company related to the
selection and acquisition of properties by the Company, including but not
limited to legal fees and expenses, travel and communications expenses,
costs of appraisals and fairness letters, nonrefundable option payments on
Property not acquired, accounting fees and expenses, costs of title
reports and title insurance, transfer and recording taxes and
miscellaneous expenses.
Affiliate. With respect to any Person, (i) any Person directly or
indirectly controlling, controlled by or under common control with such
Person; (ii) any Person owning or controlling 10% or more of the
outstanding voting securities of such Person; (iii) any officer, director
or partner of such Person or of any Person specified in (i) or (ii) above;
and (iv) any entity in which any officer, director or partner of any
Person specified in (iii) above is an officer, director or partner.
Appraised Value. Value according to an appraisal made by an
Independent Appraiser.
2
Average Market Capitalization. For the relevant period, the closing
price of the Listed Shares on each trading day of the period multiplied by
the total number of Listed Shares and Listed Share Equivalent Units
outstanding on each trading day, adding the product for each day and
dividing the sum by the number of trading days in the period; provided,
however, that this definition may be adjusted to account for charges to
the capital structure of the Company. For purposes of this calculation,
the number of "Listed Share Equivalent Units" for each Subsidiary
Partnership is equal to the product of (i) the number of Subsidiary
Partnership Units outstanding for each Subsidiary Partnership and (ii) the
Exchange Ratio for each Subsidiary Partnership.
Board or Board of Directors. The Board of Directors of the Company.
Bylaws. The Bylaws of the Company.
Cash from Financings. Net cash proceeds realized by the Company from
the financing of Properties or the refinancing of any Company
indebtedness.
Cash from Sales. Net cash proceeds realized by the Company from the
sale, exchange or other disposition of any of its assets after deduction
of all expenses incurred in connection therewith. Cash from Sales shall
not include Cash from Financings.
Cash from Sales and Financings. The total sum of Cash from Sales and
Cash from Financings.
Cause. With respect to the termination of this Agreement, (a) an act
of fraud, embezzlement or theft constituting a felony or an act
intentionally against the interests of the Company which causes it
material injury, (ii) a final determination by a court of competent
jurisdiction that the Manager has committed a material breach of this
Agreement, (iii) a petition shall have been filed against the Manager for
an involuntary proceeding under any applicable bankruptcy, insolvency or
other similar law now or hereafter in effect, and such petition shall not
have been dismissed within 60 days of filing; or a court having
jurisdiction shall have appointed a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of the Manager for
any substantial portion of its property, or ordered the winding up or
liquidation of its affairs, or (iv) the Manager shall have commenced a
voluntary proceeding under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or shall have made any general
assignment for the benefit of creditors, or shall have failed generally to
pay its debts as they become due.
Change of Control. A change of control of the Company of 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, whether or not the Company is then subject to such
-2-
3
reporting requirements; provided, however, that, without limitation, a
Change of Control shall be deemed to have occurred if:
(i) any "person", as such term is used in Sections 13(d) and 14(d) of the
Act (other than the Company, any of its subsidiaries, any trustee,
fiduciary or other person or entity holding securities under any employee
benefit plan of the Company or any of its subsidiaries), together with all
"affiliates" and "associates" (as such terms are defined in Rule 12b-2
under the Act) of such person, shall become the "beneficial owner" (as
such term is defined in Rule 13d-3 under the Act), directly or indirectly,
of securities of the Company representing 25% or more of either (A) the
combined voting power of the Company's then outstanding securities having
the right to vote in an election of the Company's Board of Eligible
Directors ("Voting Securities") or (B) the then outstanding shares of
Listed Shares of the Company (in either such case other than as a result
of acquisition of securities directly from the Company);
(ii) persons who, as of the date of the closing of the Company's initial
public offering, constitute the Company's Board of Eligible Directors (the
"Incumbent Eligible Directors") cease for any reason, including without
limitation, as a result of a tender offer, proxy contest, merger or
similar transaction, to constitute at least a majority of the Board,
provided that any person becoming a Eligible Director of the Company
subsequent to the Closing of the Company's initial public offering whose
election or nomination for election was approved by a vote of at least a
majority of the Incumbent Eligible Directors shall, for purposes of this
Agreement, be considered an Incumbent Eligible Director; or
(iii) the Listed Shareholders of the Company shall approve (A) any
consolidation or merger of the Company or any subsidiary where the Listed
Shareholders of the Company, immediately prior to the consolidation or
merger, would not, immediately after the consolidation or merger,
beneficially own (as such term is defined in Rule 13d-3 under the Act),
directly or indirectly, shares representing in the aggregate 50% or more
of the voting equity of the entity issuing cash or securities in the
consolidation or merger (or of its ultimate parent entity, if any), (B)
any sale, lease, exchange or other transfer (in one transaction or a
series of transactions contemplated or arranged by any party as a single
plan) of all or substantially all of the assets of the Company or (C) any
plan or proposal for the liquidation or dissolution of the Company.
Notwithstanding the foregoing, a "Change of Control" shall not be deemed
to have occurred for purposes of the foregoing clause (i) solely as the
result of an acquisition of securities by the Company which, by reducing
the number of shares of Listed Shares outstanding, increases (x) the
proportionate number of Listed Shares beneficially owned by any person to
25% or more of the Listed Shares then outstanding or (y) the proportionate
voting power represented by the Listed Shares beneficially owned by any
person to 25% or more of the combined voting power of all then outstanding
voting Securities; provided, however, that if any person referred to in
clause (x) or (y) of this sentence shall thereafter become the beneficial
owner of any additional Listed Shares or other Voting Securities (other
than pursuant to a Listed Shares split, Listed Shares dividend, or similar
transaction), then a "Change of Control" shall be deemed to have occurred
for purposes of the foregoing clause (i).
-3-
4
Code. Internal Revenue Code of 1986, as amended.
Company. Carey Diversified LLC, a limited liability company
organized under the laws of the State of Delaware.
Consolidation. The merger of the Subsidiary Partnerships (each as
defined in the Prospectus) of the Company with and into up to nine CPA(R)
Partnerships.
Consolidation Expense. All of the costs and expenses incurred by the
Company or the CPA(R) Partnerships in connection with the Consolidation
including such expenses as: (i) the preparing, printing, filing and
delivering of the Registration Statement and the Prospectus (including any
amended partnership agreements thereof or supplements thereto); (ii) the
preparing and printing of the Prospectus, other solicitation material and
related documents and the filing and/or recording of such certificates or
other documents necessary to comply with the laws of the States of
Delaware and/or California for the formation of a limited partnership, the
merger of a limited partnership into another limited partnership and for
the continued good standing of a limited partnership; (iii) the
qualification or registration of the limited partner interests under state
securities or "Blue Sky" laws; (iv) any costs and fees of any transfer
agent, solicitation agent or financial advisor retained by the Company in
connection with the Consolidation; (v) the filing fees payable to the
United States Securities and Exchange Commission and to the National
Association of Securities Dealers, Inc.; (vi) the fees of the Company's
counsel; and (vii) all solicitation expenses incurred in connection
therewith, including the cost of all sales literature and the costs
related to investor and broker/dealer sales information meetings and the
cost of solicitation and tabulation of the consents and elections.
Contract Purchase Price. The amount actually paid for or allocated
(as of the date of purchase) to the purchase, development, construction or
improvement of a Property, exclusive of Acquisition Fees and Acquisition
Expenses.
Contract Sales Price. The total consideration received by the
Company for the sale of a Property.
Directors. The persons holding such office, as of any particular
time.
Distributions. Distributions made by the Company as declared by the
Board.
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; (ii) any material breach of this Agreement of any nature
whatsoever by the Company; or (iii) a Change in Control of the Company.
-4-
5
Independent Appraiser. A qualified appraiser of real estate as
determined by the Board, who is not affiliated, directly or indirectly,
with the Company, the Manager or their respective Affiliates. Membership
in a nationally recognized appraisal society such as the American
Institute of Real Estate Appraisers or the Society of Real Estate
Appraisers shall be conclusive evidence of such qualification.
Independent Director. A Director who, in the opinion of the Board,
is free from any relationship that would interfere with the exercise of
independent judgment. A Director who is as Affiliate of the Company or an
officer or employee of the Company or the Manager or any of their
subsidiaries or Affiliates would not qualify as an Independent Director.
Investment Committee. The committee of the board of directors of the
Manager primarily responsible for the approval of investments to be made
by the Company.
Listed Shares. A limited liability company interest in the Company
representing a share of all of the income, loss and capital of the
Company.
Loans. The notes and other evidences of indebtedness or obligations
acquired or entered into by the Company as lender which are secured or
collateralized by personal property, or fee or leasehold interests in real
estate or other assets, including but not limited to first or subordinate
mortgage loans, construction loans, development loans, loans secured by
capital stock or any other assets or form of equity interest and any other
type of loan or financial arrangement, such as providing or arranging for
letters of credit, providing guarantees of obligations to third parties,
or providing commitments for loans. The term "Loans" shall not include
leases which are not recognized as leases for federal income tax reporting
purposes.
Manager. Carey Management LLC, a limited liability company organized
under the laws of the State of Delaware.
Management Fee. The Management Fee as defined in Section 9(a)
hereof.
NYSE. The New York Stock Exchange.
Organizational Documents. The Certificate of Formation, the
Operating Agreement and Bylaws of the Company, as amended from time to
time.
Operating Expenses. All operating, general and administrative
expenses paid or incurred by the Company, as determined under generally
accepted accounting principles, except the following: (i) interest and
discounts and other cost of borrowed money; (ii) taxes (including state
and Federal income tax, property taxes and assessments, franchise taxes
and taxes of any other nature); (iii) expenses of raising capital,
including Consolidation Expenses, printing, engraving, and other expenses,
and taxes incurred in
-5-
6
connection with the issuance, distribution, transfer, registration and
stock exchange listing of the Company's Shares and Securities; (iv)
expenses connected with the acquisition, disposition, ownership and
operation of real estate interests, mortgage loans, or other property,
including the costs of foreclosure, insurance premiums, legal services,
brokerage and sales commissions, maintenance, repair and improvement of
property; (v) any fees payable to the Manager or any other party; and (vi)
non-cash items, such as depreciation, amortization, depletion, and
additions to reserves for depreciation, amortization, depletion, losses
and bad debts. Notwithstanding anything herein to the contrary, Operating
Expenses shall include the Management Fee and all other expenses
reimbursable to the Manager under the Management Agreement, the
Performance Fee and the Loan Refinancing Fee.
Performance Fee. The Performance Fee as defined in Section 9(b).
Person. An natural person, corporation, partnership, joint venture,
association, limited liability company, trust, bank, or other entity, or
government or any agency or political subdivision of a government.
Property or Properties. The Company's partial or entire interest in
real property (including leasehold interests) and personal or mixed
property connected therewith.
Prospectus. The final prospectus and consent solicitation of the
Company which describes the Consolidation and the issuance of Shares.
Registration Statement. The Registration Statement on Form S-4 which
includes the Prospectus.
Restricted Shares. Restricted Shares as defined in Section 9(b).
Securities. Any stock, shares (other than currently outstanding
Shares and subsequently issued Shares of the Company), 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 certificate of
interest, shares or participation in temporary or interim certificates for
receipts (or guarantees of, or warrants, options or rights to subscribe
to, purchase or acquire any of the foregoing), which subsequently may be
issued by the Company.
Shareholders. Those Persons who at any particular time are shown as
holders of record of Shares on the books and records of the Company.
Shares. The Listed Shares and any other limited liability company
interests issued by the Company subsequent to the Consolidation.
Termination Date. The effective date of any termination of this
Agreement.
-6-
7
Termination Fee. An amount equal to the sum of (A) any fees that
would be earned by the Manager upon the disposition of the assets of the
Company and the Subsidiary Partnerships at their appraised value measured
as of the Termination Date, and (B)(1) if the agreement is terminated by
the Company after a change in control, $50 million if the change in
control occurs on or before December 31, 1998 and thereafter, five times
the total fees paid to the Manager in the 12 months preceding the change
in control and (2) if the agreement is terminated without Cause or Good
Reason, $50 million if the agreement is terminated before December 31,
1999; $40 million if the agreement is terminated before December 31, 2000;
$30 million if the agreement is terminated before December 31, 2001; $20
million if the agreement is terminated before December 31, 2002 and $10
million is the agreement is terminated before December 31, 2003.
Total Capitalization. For a specified period, the sum of (i) the
average of the total principal amount of the debt outstanding (measured as
of the first and last day of each period) and (ii) the Average Market
Capitalization of the Company over the same period.
Total Property Cost. With regard to any Property, an amount equal to
the sum of the Contract Purchase Price of such Property plus the
Acquisition Fees paid in connection with such Property.
Valuation. An estimate of value of the assets of the Company as
determined by a Person approved by the Independent Directors, which Person
shall be independent of the Company and the Manager.
2. Appointment. The Company hereby appoints the Manager to serve as
its manager on the terms and conditions set forth in this Agreement, and the
Manager hereby accepts such appointment. The Manager shall be a "manager,"
within the meaning of the Delaware Limited Liability Company Act, of the
Company.
3. Duties of the Manager. The Manager undertakes to provide both
strategic and day-to-day management for the Company consistent with the
investment objectives and policies of the Company as determined and adopted from
time to time by the Board. In performance of this undertaking, subject to the
oversight of the Board, the Manager shall, either directly or by engaging an
Affiliate:
(a) provide the daily management of the Company and perform and
supervise the various administrative functions reasonably necessary for the
management of the Company;
(b) investigate, select, and, on behalf of the Company, engage and
conduct business with such Persons as the Manager 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,
-7-
8
including Affiliates of the Manager, and Persons acting in any other capacity
deemed by the Manager 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;
(c) consult with the officers and Directors of the Company and
assist the Directors in the formulation and implementation of the Company's
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;
(d) subject to the provisions of Sections 3(f) and 4 hereof, (i)
locate, analyze and select potential investments in Property and Loans; (ii)
structure and negotiate the terms and conditions of transactions pursuant to
which investments in Properties and Loans will be made, purchased or acquired by
the Company; (iii) make investments in Property 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 and Loans; and (v) enter into
leases and service contracts for Properties and, to the extent necessary,
perform all other operational functions for the maintenance and administration
of such Properties;
(e) provide the Directors with periodic reports regarding
prospective investments in Properties and Loans and its performance of services
to the Company under this Agreement;
(f) 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 Manager shall be acting as broker-dealer or underwriter; and provided,
further, that any fees and costs payable to third parties incurred by the
Manager in connection with the foregoing shall be the responsibility of the
Company;
(g) obtain for, or provide to, the Company such services as may be
required in acquiring, managing and disposing of Company Property and/or Loans,
including, but not limited to: (i) the negotiating, making and servicing of
Loans; (ii) the disbursement and collection of Company monies; (iii) the payment
of debts of and fulfillment of the obligations of the Company; and (iv) the
handling, prosecuting and settling of any claims of or against the Company,
including, but not limited to, foreclosing and otherwise enforcing mortgages and
other liens securing the Loans;
(h) communicate on behalf of the Company with Shareholders and third
parties as required to satisfy the reporting and other requirements of any
governmental bodies or agencies and otherwise as requested by the Company;
-8-
9
(i) provide or arrange for administrative services, office space,
office furnishings, personnel and other overhead items necessary and incidental
to the Company's business and operations;
(j) maintain the books and records of the Company and provide the
Company with such accounting data and any other information so requested
concerning the investment activities of the Company as shall be required to
prepare and to file all periodic financial reports and returns required to be
filed with the Securities and Exchange Commission and any other regulatory
agency, including annual financial statements;
(k) consult with the officers and Directors of the Company and
provide recommendations to the Directors of the Company with respect to any
offering of Securities by the Company;
(l) provide the Company with all necessary cash management services;
(m) retain for and on behalf of the Company such services of
accountants, legal counsel, appraisers, insurers, brokers, transfer agents,
registrars, developers, banks and other lenders and others as the Manager deems
necessary or advisable in connection with the management and operations of the
Company and the fulfillment of the Manager's duties as set forth herein.
(n) provide services to the Company in connection with negotiations
by the Company with investment banking firms, securities brokers or dealers and
other institutions or investors in connection with the sale of securities of the
Company and the securing of loans for the Company, provided, however, that the
Manager shall not share in any fees paid by the Company to third parties for
such services.
(o) perform such other services as may be required from time to time
for management and other activities relating to the assets of the Company as the
Manager shall deem advisable under the particular circumstances.
4. Authority of Manager.
(a) Any investment in Property, including the acquisition of
any 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
Manager's Investment Committee.
(b) Notwithstanding the foregoing, the prior approval of the Board,
including a majority of the Independent Directors, will be required for
transactions involving (i) the allocation of interests in investments made
through joint venture arrangements with Affiliates of the Manager that are
public companies; (ii) the terms of any investment made with the Manager or any
Affiliate of the Manager that is not a public company; (iii) transactions that
present issues which involve conflicts of interest for the Manager (other than
conflicts involving the payment of fees or the
-9-
10
reimbursement of expenses or joint investments); and (iv) the lease of assets to
the Manager, any director of an Affiliate of the Manager.
The Directors may, at any time upon the giving of notice to the
Manager, modify or revoke the authority set forth in this Section 4, provided,
however, that such modification or revocation shall be effective upon receipt by
the Manager and shall not be applicable to investment transactions to which the
Manager has committed the Company prior to the date of receipt by the Manager of
such notification.
If a transaction requires approval by the Independent Directors, the
Manager will deliver to the Independent Directors all documents required by them
to properly evaluate the proposed investment in such Property or such Loan.
(c) The Manager shall act as agent of the Company in making,
acquiring, financing and disposing of investments, disbursing and collecting the
Company's funds, paying the debts and fulfilling the obligations of the Company
and handling, prosecuting and settling any claims of or against the Company, the
Board or holders of securities of the Company.
5. Bank Accounts. The Manager 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,
provided that no funds shall be commingled with the funds of the Manager; and
the Manager 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 Manager shall maintain appropriate records
of all its activities hereunder and, subject to the Delaware Limited Liability
Company Act, 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 Manager shall at all reasonable times
have access to the books and records of the Company for a purpose reasonably
related to the Manager's position as a manager.
7. Limitations on Activities. Anything else in this Agreement to the
contrary notwithstanding, the Manager shall refrain from taking any action
which, in its sole judgment made in good faith, would adversely affect the
status of the Company as a limited liability company, subject the Company to
taxation other than as a partnership, subject the Company to regulation under
the Investment Company Act of 1940, would violate any law, rule, regulation or
statement of policy of any governmental body or agency having jurisdiction over
the Company, its Shares or its Securities, or otherwise not be permitted by the
Organizational Documents, except if such action shall be ordered by the
Directors, in which case the Manager shall notify promptly the Directors of the
Manager'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 Manager shall have no liability for acting in
accordance with the specific instructions of the Directors so given.
Notwithstanding the foregoing, the Manager, its members and employees,
-10-
11
and partners, stockholders, directors and officers of the Manager's members
shall not be liable to the Company, or to the Directors or Shareholders for any
act or omission by the Manager, its members or employees, or partners,
stockholders, directors or officers of the Manager's members except as provided
in Section 21 hereof.
8. Relationship with Directors. Members and employees of the Manager
or any corporate parent of a member, and directors, officers and stockholders of
any member or corporate parent of a member may serve as Directors and as
officers of the Company, except that no member in or employee of the Manager or
any of 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 for reasonable reimbursement for travel and related expenses incurred
in attending meetings of the Directors.
9. Fees.
(a) Management Fee. The Company shall pay to the Manager as
compensation for the advisory services rendered to the Company hereunder an
amount equal to .5% per annum of Total Capitalization of the Company (the
"Management Fee"). The Management Fee shall be calculated each month and
one-twelfth of the annual fee calculated shall be payable monthly on the last
day of such month, or the first business day following the last day of such
month;
(b) Performance Fee. The Company shall also pay to the Manager as
compensation for the services rendered to the Company hereunder a monthly
performance fee in an amount equal to .5% per annum of the Total Capitalization
of the Company (the "Performance Fee"). The Performance Fee shall be calculated
each month and one-twelfth of the annual fee calculated shall be payable monthly
on the last day of such month, or the first business day following the last day
of such month. The Performance Fee shall be payable in the form of Listed
Shares, the value of which shall be the closing price or the last trading day of
the month for which the fee is being paid. Such Listed Shares so payable (the
"Restricted Shares") shall vest ratably over a five-year period, with ownership
of 20% of such Restricted Shares so awarded vesting in the Manager on each
anniversary of the date on which they were awarded to the Manager, provided that
this Agreement has not been terminated on or before such date. Upon the
termination of this Agreement for any reason other than a termination for Cause
under Paragraph 16 hereof, all Restricted Shares granted to the Manager
hereunder shall vest immediately. Prior to the vesting of the ownership of such
Restricted Shares in the Manager, such Restricted Shares shall not be
transferable by the Manager.
(c) Other Fees. The Managers will be paid fees by the Company on a
transactional basis for acquisitions, dispositions and other similar
transactions. The terms of such fees will be negotiated by the Manager and the
Board of Directors.
(d) Credit for Fees Paid by Subsidiary Partnerships. The Management
Fee and the Performance Fee payable to the Manager pursuant to Section 9(a) and
9(b) shall be
-11-
12
reduced equally by one-half of the amount of any amounts received by the Manager
or its Affiliates from any of the Subsidiary Partnerships for property
management or leasing fees and distributions of cash generated by the Subsidiary
Partnerships excluding Cash From Sales and Financings.
10. Loans from Affiliates. If any loans are made to the Company by
the Manager or an Affiliate of the Manager, the interest charged by such
Affiliate to the Company on such loan shall be at a commercially reasonable
rate. The terms of any such loans shall be no less favorable than the terms
available between non-Affiliated Persons for similar commercial loans.
11. Expenses. In addition to the compensation paid to the Manager
pursuant to Section 9 hereof, the Company shall pay directly or reimburse the
Manager for the following expenses:
(a) Consolidation Expenses;
(b) Acquisition Expenses and other expenses incurred in connection
with the investment of the funds of the Company;
(c) interest and other costs for borrowed money, including
discounts, points and other similar fees;
(d) taxes and assessments on income or Property and taxes as an
expense of doing business;
(e) costs associated with insurance required in connection with the
business of the Company or by the Directors;
(f) expenses of managing and operating Properties owned by the
Company, whether payable to an Affiliate of the Company or a non-affiliated
Person;
(g) fees and expenses of legal counsel for the Company;
(h) fees and expense of non-affiliated auditors and accountants for
the Company;
(i) all expenses in connection with payments to the Directors and
meetings of the Directors and Shareholders;
(j) the annual cost of goods and materials used by the Company and
obtained from entities not affiliated with the Manager;
(k) expenses connected with payments made to Shareholders;
-12-
13
(l) expenses of organizing, revising, amending, converting,
modifying, or terminating the Company or the Organizational Documents;
(m) expenses of maintaining communications with Shareholders,
including the cost of preparation, printing and mailing annual reports and other
Shareholder reports, proxy statements and other reports required by governmental
entities;
(n) expenses related to the Properties and Loans and other fees
relating to making investments including personnel and other costs incurred in
Property or Loan transactions where a fee is not payable to the Manager;
(o) expenses related to fees paid to the NYSE or any other exchange
in connection with the Listed Shares; and
(p) all other expenses the Manager incurs in connection with
providing services to the Company including reimbursement to the Manager or its
Affiliates for the cost of rent, goods, materials and personnel incurred by them
based upon the compensation of the Persons involved and an appropriate share of
overhead allocable to those Persons.
No reimbursement shall be made for the cost of personnel to the
extent that such personnel are used in transactions for which the Manager
receives a separate transactional fee.
Expenses incurred by the Manager on behalf of the Company and
payable by the Company pursuant to this Section 11 shall be reimbursed quarterly
to the Manager within 60 days after the end of each quarter. The Manager 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.
12. Other Services. Should the Board request that the Manager or any
member or employee thereof render services for the Company other than set forth
in Section 3 hereof, such services shall be separately compensated and shall not
be deemed to be services pursuant to the terms of this Agreement.
13. Other Activities of the Manager. Nothing herein contained shall
prevent the Manager from engaging in other activities, including without
limitation the rendering of advice to other investors and the management of
other programs advised, sponsored or organized by the Manager or its Affiliates;
nor shall this Agreement limit or restrict the right of any director, officer,
employee, member or shareholder of the Manager or its Affiliates to engage in
any other business or to render services of any kind to any other partnership,
corporation, firm, limited liability company, individual, trust or association.
The Manager 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 Manager shall report to the Board 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 Manager's obligations to the
Company and its obligations to or its
-13-
14
interest in any other partnership, corporation, firm, limited liability company,
individual, trust or association. The Manager or its Affiliates shall promptly
disclose to the Board knowledge of such condition or circumstance. If the
Manager or its Affiliates 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 Manager to adopt a 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. In applying
any such method, the Manager 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, the amount of equity required to make the investment and the
length of time such funds have been available for investment. To the extent that
a Property might be suitable for the Company and for another investment entity
which is advised or managed by the Manager, the investment will be made by the
most appropriate investment entity after consideration of the factors identified
above. The Manager may consider the Property for private placement only if such
Property is deemed inappropriate for any investment entity which is advised or
managed by the Manager, including the Company.
The Manager shall be required 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 Manager nor any
Affiliate of the Manager 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.
14. Relationship of Manager and Company. The Company and the Manager
agree that they have not created and do not intend to create by this Agreement a
joint venture or partnership relationship between them and nothing in this
Agreement shall be construed to make them partners or joint venturers or impose
any liability as partners or joint venturers on either of them.
15. Term; Termination of Agreement. This Agreement shall continue in
force until December 31, 1998, and thereafter shall be automatically renewed
from year to year, unless either party shall give notice in writing of
non-renewal to the other party not less than 60 days before the end of any such
year.
16. Termination by Company. At the sole option of a majority of the
Independent Directors, this Agreement may be terminated immediately by written
notice of termination from the Company to the Manager upon the occurrence of
events which would constitute Cause.
Any notice of termination under Section 16 or 17 shall be effective
on the date specified in such notice, which may be the day on which such notice
is given or any date thereafter. The Manager agrees that if any of the events
specified in clause (ii) of the definition of
-14-
15
Good Reason shall occur, it shall give written notice thereof to the Board
within 15 days after the occurrence of such event.
17. Termination by Manager. This Agreement may be terminated
immediately without penalty by the Manager by written notice of termination to
the Company upon the occurrence of events which would constitute Good Reason.
18. Assignment Prohibition. This Agreement may not be assigned by
the Manager without the approval of the Board (including a majority of the
Independent Directors); provided, however, that such approval shall not be
required in the case of an assignment to a corporation, partnership,
association, trust, limited liability company or organization which may take
over the assets and carry on the affairs of the Manager, provided (i) that at
the time of such assignment, such successor organization shall be owned
substantially by the then members of the Manager or their Affiliates, only if
such entity has a net worth of at least $3,000,000 and (ii) that the then
members of the Manager shall deliver to the Board a statement in writing
indicating the ownership structure and net worth of the successor organization
and a certification from the assignee as to its net worth. Such an assignment
shall bind the assignees hereunder in the same manner as the Manager is bound by
this Agreement. The Manager 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
Manager, except in the case of an assignment by the Company to an organization
which is a successor to 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.
19. Payments to and Duties of Manager Upon Termination.
(a) After the Termination Date, the Manager 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 the following:
(i) all unpaid reimbursements of Consolidation
Expenses and any other expenses for which the Manager is
entitled to reimbursement;
(ii) all earned but unpaid Management Fees and
Performance Fees payable to the Manager prior to the
termination of this Agreement;
(iii) all earned but unpaid transactional fees.
All amounts payable to the Manager in the event of a
termination shall be paid by the Company in cash to the Manager within 30 days
of the Termination Date.
(b) If this Agreement is terminated by either party in
connection with a Change of Control, by the Company for any reason other than
Cause, or by the Manager for Good
-15-
16
Reason, the Manager shall be entitled to payment by the Company in cash of the
Termination Fee within 30 days of the Termination Date, and ownership of any
Restricted Shares owned by the Manager which has not yet vested in the Manager
shall immediately vest upon such termination.
(c) The Manager 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 and Loans, and documents of the Company then in the
custody of the Manager; and
(iv) cooperate with the Company to provide an orderly
management transition.
20. Limitation on Liability. The Manager shall have no
responsibility other than to render the services and take the actions described
herein in good faith and with the exercise of due care and shall not be
responsible for any action of the Board in following or declining to follow any
advice or recommendation of the Manager. The Manager, except by reason of its
own gross negligence, bad faith or willful misconduct, shall not be liable for
any action taken, omitted or suffered to be taken by it in good faith and
believed by it to be authorized or within its discretion or rights or powers
conferred upon it by this Agreement or in reasonable reliance upon the written
opinion of counsel of recognized expertise.
21. Indemnification by the Company. (a) The Company shall
indemnify and hold harmless the Manager and its Affiliates, including their
respective officers, directors, members 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 Delaware or the Organizational Documents of the Company and except with
respect to losses, claims, damages or liabilities with respect to or arising out
of the Manager's gross negligence, bad faith or willful misconduct.
Notwithstanding the foregoing, the Manager shall not be entitled to
indemnification or be held harmless pursuant to this Section 21 for any activity
which the Manager shall be required to indemnify or hold harmless the Company
pursuant to Section 22.
-16-
17
(b) Promptly after receipt by an Indemnified Party of notice
of the commencement of any action, such Indemnified Party shall, if a claim in
respect thereof is to be made against the Company, notify the Company in writing
of the commencement thereof; but the omission so to notify the Company shall not
relieve it from any liability that it may have to any Indemnified Party pursuant
to Section 21(a) hereof, unless the failure to so notify would itself constitute
gross negligence, bad faith or willful misconduct. The indemnifying party shall
assume the defense of such action with counsel chosen by it and approved by the
indemnified parties defendant in such action, unless such indemnified parties
reasonably object to such assumption on the ground that there may be legal
defenses available to them which are different from or in addition to those
available to such indemnifying party. Any indemnified party shall have the right
to employ a separate counsel in any such action and to participate in the
defense thereof but the fees and expenses of such counsel shall be borne by such
party unless such party has objected in accordance with the preceding sentence.
If an indemnifying party assumes the defense of such action, the indemnifying
party shall not be liable for any fees and expenses of separate counsel for the
indemnified parties incurred thereafter in connection with such action. In no
event shall the indemnifying parties be liable for the fees and expenses of more
than one counsel for all indemnified parties in connection with any one action
or separate but similar or related actions in the same jurisdiction arising out
of the same general allegations or circumstances. An indemnifying party shall
not be liable to an indemnified party on account of any settlement of any claim
or action effected without the consent of such indemnifying party.
22. Indemnification by Manager. The Manager shall indemnify
and hold harmless the Company from 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 Manager's bad faith,
fraud, willful misfeasance, willful misconduct, willful negligence or reckless
disregard of its duties.
23. 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 by hand or
by overnight mail or other overnight delivery service to the addresses set forth
herein:
-17-
18
To the Board and to the Company:
Carey Diversified LLC
50 Rockefeller Plaza
New York, NY 10020
To the Manager:
Carey Management LLC
50 Rockefeller Plaza
New York, NY 10020
Either party may at any time give notice in writing to the
other party of a change in its address for the purposes of this Section 23.
24. 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.
25. 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.
26. Construction. This Agreement shall be governed by,
construed and enforced in accordance with the laws of the State of New York.
27. 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.
28. 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.
-18-
19
29. 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.
30. Titles Not to Affect Interpretation. The titles of
Sections and subsections 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.
31. 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.
32. Name. W.P. Carey & Co., Inc. has a proprietary interest in
the name "Carey Diversified", "Corporate Property Associates" and "CPA(R)."
Accordingly, and in recognition of this right, if at any time the Company ceases
to retain Carey Management LLC or an Affiliate thereof to perform the services
of Manager, the Directors of the Company will, promptly after receipt of written
request from the Manager or W.P. Carey & Co., Inc., cease to conduct business
under or use the name "Carey Diversified", "Corporate Property Associates" or
"CPA(R)" 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 "Carey",
"Carey Diversified", "Corporate Property Associates" or "CPA(R)" or any other
word or words that might, in the sole discretion of the Manager, be susceptible
of indication of some form of relationship between the Company and the Manager
or any Affiliate thereof. Consistent with the foregoing, it is specifically
recognized that the Manager 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 "Carey", "Carey Diversified",
"Corporate Property Associates" or "CPA(R)" 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.
IN WITNESS WHEREOF, the parties hereto have executed this
Management Agreement as of the day and year first above written.
CAREY DIVERSIFIED LLC
By:
--------------------------------------
Name:
--------------------------------
Title:
--------------------------------
CAREY MANAGEMENT LLC
-19-
20
By:
--------------------------------------
Name:
--------------------------------
Title:
--------------------------------
-20-