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EXHIBIT 10.2
ADVISORY AGREEMENT
This ADVISORY AGREEMENT (this "Agreement") is made as of __________, 2003
between Inland Western Retail Real Estate Trust, Inc., a Maryland corporation
(the "Company"), and Inland Western Retail Real Estate Advisory Services, Inc.,
an Illinois corporation (the "Advisor").
WITNESSETH:
WHEREAS, the Company and the Advisor have agreed to enter into this
Agreement to cause the Advisor to provide certain services with respect to the
Property (as defined below) on behalf of the Company; and
NOW, THEREFORE, in consideration of the mutual covenants herein set forth,
the parties hereto agree 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 on Properties purchased with the
Gross Offering Proceeds and proceeds of Shares sold via the
Company's Distribution Reinvestment Program, 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.
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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) "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.
k) "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.
l) "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.
m) "Cumulative Return" means a cumulative, non-compounded return,
equal to 6% per annum on Invested Capital commencing upon
acceptance of the investor's subscription.
n) "Current Return" means a noncumulative, noncompounded return, equal
to 7% per annum on Invested Capital.
o) "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.
p) "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.
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q) "Gross Offering Proceeds" means the total proceeds from the sale of
the 250,000,000 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 20,000,000 Shares under the Company's
Distribution Reinvestment Program during the public offering
period, the purchase price for which shall be $9.50 per Share;
r) "Gross Revenues From Properties" means all cash receipts derived
from the operation of Company Fixed Assets.
s) "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.
t) "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.
u) "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.
v) "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.
w) "IWRREAI" means Inland Western Retail Real Estate Acquisitions,
Inc.
x) "Management Agent" means an entity which provides property rental,
leasing, operation and management services to the Company. The
Management Agent is
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Inland Southeast Property Management Corp., an Affiliate of the
Advisor, or anyone which succeeds it in such capacity.
y) "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.
z) "Offering" means the offering of Shares of the Company pursuant to
the Prospectus.
aa) "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.
bb) "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.
cc) "Primary Geographical Area of Investment" of the Company means the
states west of the Mississippi River in the United States.
dd) "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.
ee) "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.
ff) "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.
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gg) "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.
hh) "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.
ii) "REIT" means a real estate investment trust as defined in Sections
856 through 860 of the Code.
jj) "Retail Center" means real estate primarily improved for use as
retail establishments, principally multi-tenant shopping centers.
kk) "Shares" means the shares of common stock, par value $.001 per
share, of the Company, and "Share" means one of those Shares.
ll) "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. "Sponsor" means IREIC.
mm) "Stockholders" means holders of Shares.
nn) "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;
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).
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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 IWRREAI, 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;
ii) cash flow; and
iii) 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;
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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;
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;
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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.
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.
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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, and (ii) the gross proceeds from the
sale of up to 20,000,000 Shares pursuant to the Company's
Distribution Reinvestment Program, 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;
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;
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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.
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
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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.
a) From and after May ___, 2008, the Company shall have the right, but
not the obligation, to acquire the entire business, affairs,
operations and assets of the Advisor (collectively, the "Advisor's
Business") in whatever form agreed upon between the Company and the
Advisor (a "Business Combination"), as set forth in writing between
them ("Merger Agreement"). If the Company desires to acquire the
Advisor's Business in a Business Combination, the Company shall
send a written notice to the Advisor to that effect ("Election
Notice"). Any agreement with respect to a Business Combination
shall contain provisions providing for: (i) the termination of this
Agreement and all Advisory Agreements entered into pursuant hereto
and the release or waiver of all fees payable by the Company to the
Advisor under the Advisory Agreements (except for the payment of
fees due and payable under the Advisory Agreements for services
rendered by the Advisor up to and until the consummation of the
Business Combination); and (ii) the issuance of a certain number of
shares of common stock of the Company as determined below (the
"Shares") to be issued to the Advisor, or its stockholders, members
or other equity holders, as the case may be, in connection with the
Business Combination. The Advisor represents to the Company that
the Advisor has obtained the consent of its board of directors and
its shareholders to a Business Combination with the Company and
that Advisor will obtain similar consents from any future
shareholders, members or other equity holders of the Advisor.
b) The number of Shares to be issued by the Company to the Advisor
or its shareholders, members or other equity holders as the case
may be, shall be determined as follows: The net income of the
Advisor for the calendar month immediately preceding the month
in which the Merger Agreement is executed, as determined by an
independent audit conducted in accordance with generally
accepted a uditing standards, shall be annualized (the "Annual
Net Income"). The Annual Net Income 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, on the basis of four
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(4) times the Funds from Operations for the fiscal quarter
immediately preceding the month in which the Merger Agreement is
executed, per weighted ave rage Share of the Company for such
quarter as stated in the quarterly report on Form 10-Q of the
Company given to its shareholders for such quarter. The
resulting quotient shall constitute the number of Shares to be
issued by the Company to the Advisor or its shareholders,
members or other equity holders as the case may be, with
delivery thereof and the closing of the Business Combination to
occur within ninety (90) days after the date the Election Notice
is given to Advisor. Any such transaction will occur, if at all,
only if the Board of Directors of the Company obtains a fairness
opinion from an investment banking or valuation firm to the
effect that the consideration to be paid for the Business
Combination is fair, from a financial point of view, to the
Company.
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 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;
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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
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)
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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).
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 three years 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.
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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:
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:
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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.
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
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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 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
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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 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 Western Retail Real Estate Trust, Inc.
2901 Butterfield Road
Oak Brook, Illinois 60523
Attention: Ms. Roberta S. Matlin, Vice President
The Advisor:
Inland Western 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
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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.
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.
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IN WITNESS WHEREOF, the undersigned have executed this Advisory Agreement
as of the date first above written.
COMPANY:
INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.
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Title: Vice President - Administration
ADVISOR:
INLAND WESTERN RETAIL REAL ESTATE ADVISORY SERVICES, INC.
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Title: President