EXHIBIT 10.3
ADVISORY, ADMINISTRATIVE SERVICES
AND FACILITIES AGREEMENT
BETWEEN
NATIONAL HEALTH INVESTORS, INC.
AND
MANAGEMENT ADVISORY SOURCE, LLC
THIS AGREEMENT is dated as of November 1, 2004, between NATIONAL HEALTH
INVESTORS, INC., a Maryland corporation (the "Corporation"), and MANAGEMENT
ADVISORY SOURCE, LLC, a Tennessee limited liability company (the "Advisor").
WHEREAS, the Corporation is a real estate investment trust as defined in
the Internal Revenue Code of 1986, as amended, as the same may be amended or
modified from time to time;
WHEREAS, the Corporation desires to avail itself of the Advisor's
experience, sources of information, advice, and assistance and of certain
personnel and facilities available to the Advisor and to have the Advisor
undertake the duties and responsibilities hereinafter set forth, on behalf of
and subject to the supervision of the Board of Directors of the Corporation (the
"Directors"), as provided herein;
WHEREAS, the Advisor is willing to undertake to render such services,
subject to the supervision of the Directors, on the terms and conditions
hereinafter set forth; and
WHEREAS, the relationship established by the Advisor and the Corporation
hereunder is as independent contractor irrespective of the fact that Advisor's
owner is a member of the Corporation's board.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the Corporation and the Advisor agree as follows:
1. Duties of Advisor. The Corporation hereby engages the Advisor, and the
Advisor undertakes to use its best efforts
a. to present to the Corporation a continuing and suitable investment
program and opportunities consistent with the investment policies
and objectives of the Corporation as the Directors may adopt from
time to time,
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b. to manage the day-to-day affairs and operations of the Corporation,
and
c. to provide such administrative services and facilities as are
appropriate for such management. In performance of such
undertakings, subject to the supervision and approval of the
Directors and upon their direction, and consistent with the
provisions of the Articles of Incorporation and Bylaws of the
Corporation and of any policies for the Corporation from time to
time established by the Directors after consultation with the
Advisor, the Advisor shall:
i. make or have made for the Corporation such research reports,
economic and statistical data, evaluations, analyses, opinions
and recommendations as it may deem necessary or desirable or
as the Directors of the Corporation may request with respect
to investment opportunities available to the Corporation;
ii. formulate a program for the investments of the Corporation's
assets;
iii. select and evaluate potential projects and investments for the
Corporation;
iv. make recommendations as to the nature, terms and amount of
involvement or participation in such project or investments
and the timing thereof;
v. evaluate and make recommendations as to the sale or other
disposition of assets of the Corporation;
vi. make such further recommendations as to the investments of the
Corporation as the Advisor may deem necessary or desirable;
vii. investigate and make recommendations with respect to selection
of and relations with consultants, lenders and others
(including without limitation, tenants, property managers,
accountants, mortgage loan originators, correspondents and
services, architects, engineers and other technical advisors,
attorneys, real estate and mortgage loan bankers, brokers and
dealers, corporate fiduciaries, escrow agents, depositories,
custodians, agents for collection, insurers, insurance agents,
banks, builders and developers, and persons acting in any
other capacity), in connection with the Corporation's
properties and assets;
viii. provide office and clerical facilities adequate for the
Corporation's operations and affairs;
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ix. recommend or obtain for the Corporation the services of others
to act to provide accounting, auditing, custodial, transfer
agent, registrar and other similar services, to disburse and
collect the funds of the Corporation, to pay the debts and
fulfill the obligations of the Corporation, to handle the
prosecution and settlement of any claims of the Corporation,
to oversee, handle, prepare and distribute or cause to be
distributed all communications with the existing and future
holders of the Corporation's outstanding securities, and, in
connection with the foregoing, to investigate, select and
conduct relations with custodians, transfer agents,
registrars, proxy solicitors, attorneys, accountants,
auditors, brokers and investors, and others as necessary in
connection with the Corporation's operations;
x. advise the Corporation concerning developments in the
healthcare and real estate investment trust industries
appropriate or useful to the Corporation's existing and
potential future business and investments;
xi. make recommendations to the Directors as to appropriate
distributions by the Corporation to its stockholders; and
xii. maintain or cause to be maintained records of activities
reasonably requested by the Corporation.
2. Delegation. It is understood by Corporation that Advisor may delegate to
or use the services of any third party, including Affiliates of the
Advisor, in performing its duties hereunder and generally such third party
will be subject to the supervision of the Advisor.
3. No Partnership or Joint Venture. The Corporation and the Advisor are not
partners or joint venturers with each other and nothing herein shall be
construed so as to make them such partners or joint venturers or impose
any liability as such on either of them.
4. Records. At all times, the Advisor shall keep proper books of account and
records relating to services performed hereunder, which books of
account and records shall be accessible for inspection by the Corporation
at any time during ordinary business hours. Annually, and more frequently
as reasonably requested by the Directors, the Advisor shall provide the
Directors with such information as is reasonably obtainable by the Advisor
concerning the cost to other real estate investment trusts specializing in
healthcare facility investments of administrative and advisory services
comparable to those that are the subject matter of this Agreement in order
that the Directors may evaluate the performance of the Advisor and the
efficiency of the arrangements provided for in this Agreement.
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5. Qualification as a Real Estate Investment Trust. Anything else in this
Agreement to the contrary notwithstanding, the Advisor shall refrain from
any action which, in its sole judgment made in good faith or in the
judgment of the Directors of which the Advisor has written notice, would
adversely affect the status of the Corporation as a real estate investment
trust as defined and limited in sections 856-860 of the Internal Revenue
Code of 1986, as amended, or which would violate any law, rule, regulation
or statement of policy or any governmental body or agency having
jurisdiction over the Corporation or over its securities, or which would
otherwise not be permitted by the Corporation's Articles of Incorporation
and Bylaws.
6. Bank Accounts. The Advisor, at the expense of the Corporation, may
establish and maintain one or more bank accounts in the Corporation's (or
its subsidiaries collectively hereinafter "Corporation") name, 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 Corporation,
under such terms and conditions as the Directors may approve, provided
that no funds in any such account shall be commingled with funds of the
Advisor; and the Advisor shall from time to time render appropriate
accounting of such collections and payments to the Directors and to the
auditors of the Corporation.
7. Bond. The Advisor, if and to the extent that the Directors require, shall
maintain a fidelity bond with a responsible surety company in such amount
as may be required by the Directors from time to time, covering all
directors, officers, employees and agents of the Advisor handling funds of
the Corporation and any investment documents or records pertaining to
investments of the Corporation. Such bond shall inure to the benefit of
the Corporation in respect of losses of any such property from acts of
such Directors, officers, employees and agents through theft,
embezzlement, fraud, negligence, error or omission or otherwise. The
premium for said bond shall be an expense of the Corporation.
8. Information Furnished Advisor. The Directors shall at all times keep the
Advisor fully informed with regard to the investment policy of the
Corporation, the capitalization policy of the Corporation and generally
their then current intentions as to the future of the properties and other
investments of the Corporation. In particular, the Directors shall notify
the Advisor promptly of their intention to sell or otherwise dispose of
any of the Corporation's investments or to make any new investment. The
Corporation 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 the
Corporation's affairs as the Advisor may from time to time reasonably
request.
9. Consultation and Advice. In addition to the services described above, the
Advisor shall consult with the Directors, and shall, at the request of the
Directors or the officers of the Corporation, furnish advice and
recommendations with respect to other aspects of the business and affairs
of the Corporation. In general, the Advisor shall inform the Directors
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of any factors which come to its attention which would influence the
policies of the Corporation, except to the extent that giving such
information would involve a breach of fiduciary duty.
10. Compensation to Advisor.
a. The Corporation shall pay the Advisor for its services hereunder an
annual base management fee of $2,000,000 (the "Base Fee"), payable
in monthly installments of $166,666.66 on the last day of each
month.
b. In addition to the Base Fee, the Advisor will be paid additional
performance based compensation (the "Incentive Fee"). The Incentive
Fee will be calculated by increasing the Base Fee by a factor of 1.4
times the percentage increase in fully diluted Funds From Operations
Per Share for the then current year over fully diluted Funds From
Operations Per Share of $2.00 (the "Adjusted Base Fee"). The
Incentive Fee shall be the difference in the Base Fee and the
Adjusted Base Fee. Provided further, however, in no event shall the
total Advisor's compensation, as so calculated, cause the percentage
of i) total expenses excluding interest, depreciation, amortization,
and loss reserves to ii) net revenues for the current period to
exceed 6.0% of NHI's net revenues.
c. As used in this Section 10, "Funds from Operations" means the
consolidated net income of the Corporation computed in accordance
with generally accepted accounting principles, plus depreciation and
amortization, less the amount of any gains or plus the amount of any
losses derived from the sale of previously written-down assets or
write-down of existing assets to the extent that either such gains
or losses are included in such net income. Funds from operations for
calculation in 10 c. shall exclude the amount of Advisor's
compensation.
11. Expenses of the Advisor. Except as provided in Section 12 and without
regard to the amount of compensation received hereunder by the Advisor,
the Advisor shall pay all expenses in performing its obligations
hereunder, including and in addition to the following expenses:
a. the cost of any accounting, statistical or bookkeeping equipment
necessary for the maintenance of the books and records of the
Corporation;
b. employment expenses of the officers and directors and personnel of
the Advisor and all expenses, including travel expenses, of the
Advisor, incidental to the investigation and acquisition of
properties for the Corporation prior to the time the Directors
definitively decide to acquire the property or to have the Advisor
continue with the acquisition process, whether the property is
acquired or not, and after the Directors definitively decide to
dispose of a property;
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c. advertising and promotional expenses incurred in seeking and
disposing of investments for the Corporation;
d. rent, telephone, utilities, office furniture and furnishings and
other office expenses incurred by or allocable to the Advisor for
its own benefit and account regardless of whether incurred or used
in connection with rendering the services to the Corporation
provided for in this Agreement;
e. all costs and expenses which the Advisor is obligated to pay to the
Corporation or others under any lease of property by the Advisor
from the Corporation; and
f. all miscellaneous administrative and other expenses of the Advisor,
whether or not relating to the performance by the Advisor of its
functions hereunder.
12. Expenses of the Corporation. The Corporation shall pay the following
expenses of the Corporation (except to the extent that the Advisor is
responsible for any such expenses as tenant of any property leased from
the Corporation):
a. the cost of money borrowed by the Corporation;
b. taxes on income and taxes and assessments on real property and all
other taxes applicable to the Corporation, including without
limitation, franchise and excise taxes and fees;
c. except as provided in Section 11 hereof, all ordinary and necessary
expenses incurred with respect to and allocable to the prudent
operation and business of the Corporation, including without
limitation, any fees, salaries and other employment costs, taxes and
expenses paid to Directors, officers and employees of the
Corporation who are not also employees of the Advisor;
d. fees and expenses paid to independent contractors, appraisers,
consultants, attorneys, managers and other agents retained by or on
behalf of the Corporation and expenses directly connected with the
acquisition, financing, refinancing, disposition and ownership of
real estate interests or other property (including insurance
premiums, legal services, brokerage and sales commissions,
maintenance, repair and improvement of property);
e. insurance as required by the Directors (including Directors'
liability insurance);
f. expenses connected with payments of dividends or distributions in
cash or any other form made or caused to be made by the Directors to
shareholders of the Corporation and expenses connected with payments
of interest to holders of the Corporation's Debentures;
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g. all expenses connected with communications to holders of securities
of the Corporation and the other bookkeeping and clerical work
necessary in maintaining relations with holders of securities,
including the cost of printing and mailing certificates for
securities and proxy solicitation materials and reports to holders
of the Corporation's securities;
h. transfer agent's, registrar's, dividend disbursing agent's, dividend
reinvestment plan agent's and indenture trustee's fees and charges;
i. legal, auditing, accounting, underwriting, brokerage, listing,
registration and other fees and printing, engraving and other
expenses and taxes incurred in connection with the organization of
the Corporation and the issuance, distribution, transfer,
registration and listing of the Corporation's securities.
13. Other activities of the Advisor. Nothing herein contained shall prevent
the Advisor or any of its officers, directors or employees or any of its
affiliates from engaging in other business activities related to real
estate investments, from undertaking investments permitted of them by the
Corporation's Bylaws or from acting as advisor to any other person or
entity even though having investment policies similar to the Corporation,
and the Advisor and its officers, directors or employees and any of its
Affiliates shall be free from any obligation to present to the Corporation
any particular investment opportunity which comes to the Advisor or such
persons, regardless of whether such opportunity is within the
Corporation's investment policies; provided, however, that when the
Advisor has the ability to present a particular investment opportunity
which is suitable for purchase by the Corporation and any other entities
as to which the Advisor has advisory responsibility, the Advisor will
review the investment portfolio of each entity and will decide which
entity will acquire a particular property on the basis of such factors as
it deems appropriate including, among others, cash-flow, the effect of the
acquisition on diversification of the portfolio of each, the estimated
income tax effects of the purchase, the amount of funds available and the
length of time such funds have been available for investment. In the event
a particular property is equally appropriate for investment by more than
one entity, the Advisor will offer the investment to the entity whose
funds have been available for the longest period of time.
14. Term; Termination of Agreement. This Agreement shall continue in force
from the date hereof through December 31, 2010 and thereafter from year to
year unless earlier terminated as herein provided; provided, however, that
either party may terminate this Agreement at any time in a written notice
of termination given to the other party at least ninety (90) days prior to
the effective date of such termination; and provided, further, that the
Corporation may terminate this Agreement at any time during the
continuation of any event described in Section 17 hereof or otherwise for
cause. Upon the termination of this Agreement for any reason the Advisor
shall cooperate with the Corporation to provide an orderly management
transition.
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15. Amendments. 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 assigns, or
otherwise as provided herein.
16. Assignment. This Agreement shall not be assigned or otherwise transferred
by the Advisor without the prior written consent of a majority of the
Directors of the Corporation. This Agreement shall not be assigned by the
Corporation without the consent of the Advisor, except in the case of
assignment by the Corporation to a corporation, association, trust or
other organization which is a successor to the Corporation. Such successor
shall be bound hereunder and by the terms of said assignment in the same
manner as the Corporation is bound hereunder.
17. Default, Bankruptcy, Etc. At the option solely of the Corporation, upon
vote of a majority of its Directors, this Agreement shall be and become
terminated immediately upon written notice of termination from the
Corporation to the Advisor if any of the following events shall occur:
a. If the Advisor shall violate any provision of this Agreement, and
after notice of such violation shall not cure such default within
thirty days; or
b. If the Advisor shall be adjudged bankrupt or insolvent by a court of
competent jurisdiction, or an order shall be made by a court of
competent jurisdiction, for the appointment of a receiver,
liquidator or trustee of the Advisor or of all or substantially all
of its property by reason of the foregoing, or approving any
petition filed against the Advisor for its reorganization, and such
adjudication or order shall remain in force or unstayed for a period
of thirty days; or
c. If the Advisor shall institute proceedings for voluntary bankruptcy
or file a petition seeking reorganization under the Federal
bankruptcy laws, or for relief under any law for the relief of
debtors, or shall consent to the appointment of a receiver of itself
or of all or substantially all its property, or shall make a general
assignment for the benefit of creditors, or shall admit in writing
its inability to pay its debts generally, as they become due.
The Advisor agrees that if any event specified in subsections b. and c. of
this Section 17 shall occur, it will give written notice thereof to the
Directors within seven days after the occurrence of such event.
18. Action Upon Termination. From and after the effective date of termination
of this Agreement, pursuant to Sections 14 or 17 hereof, the Advisor shall
not be entitled to compensation for further services hereunder but shall
be paid all compensation due Advisor pursuant to Section 10 accruing to
the date of termination. The Advisor shall forthwith upon such
termination:
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a. pay over to the Corporation all moneys collected and held for the
account of the Corporation pursuant to this Agreement, after
deducting any accrued compensation and reimbursement for its
expenses to which it is then entitled;
b. deliver to the Directors a full accounting, including a statement
showing all payments collected by it and a statement of all moneys
held by it, covering the period following the date of the last
accounting furnished to the Directors;
c. deliver to the Directors all property and documents of the
Corporation then in the custody of the Advisor in its capacity as
such; and
d. cooperate with the Directors to provide an orderly management
transition.
19. Miscellaneous. The Advisor assumes no responsibility under this Agreement
other than to render the services called for hereunder in good faith, and
shall not be responsible for any action of the Directors in following or
declining to follow any advice or recommendations of the Advisor. Neither
party nor its partners nor any shareholders, directors, officers or
employees of any of its partners shall be liable to the other party, its
Directors, holders of securities of the Corporation or to any successor or
assign of the Corporation for any act taken in good faith and in a manner
reasonably believed by the person acting on behalf of either party to be
in the best interests of each, or for any other act except an act
constituting bad faith, willful misfeasance, gross negligence or reckless
disregard of its duties.
20. 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 Directors and/or the Corporation:
Robert A. McCabe, Jr.
211 Commerce Street
Suite 300
Nashville, Tennessee 37201
Robert T. Webb
149 MTCS Drive
Murfreesboro, Tennessee 37129
Ted H. Welch
611 Commerce Street
29th Floor
Nashville, Tennessee 37219
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Richard F. LaRoche, Jr.
2103 Shannon Drive
Murfreesboro, TN 37129
The Advisor:
W. Andrew Adams
Management Advisory Source, LLC
P. O. Box 330607
Murfreesboro, Tennessee 37133-0607
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 20.
21. 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.
22. Governing Law. The provisions of this Agreement shall be construed and
interpreted in accordance with the laws of the State of Tennessee as at
the time in effect.
IN WITNESS WHEREOF, the Corporation and the Advisor, each by a duly
authorized officer have signed and delivered this Agreement as of the day and
year first above written.
NATIONAL HEALTH INVESTORS, INC.
By: /s/ Richard F. LaRoche, Jr.
Its Secretary
MANAGEMENT ADVISORY SOURCE, LLC
By: /s/ W. Andrew Adams
W. Andrew Adams, Manager
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