EXHIBIT 10.7

 

ADVISORY AGREEMENT
AMONG
TNP STRATEGIC RETAIL TRUST, INC.,
TNP STRATEGIC RETAIL OPERATING PARTNERSHIP, LP,
AND
SRT A DVISOR, LLC

 

 

 

 

  

TABLE OF CONTENTS

 

    Page       1. Definitions 1       2. Appointment 6       3. Duties of the
Advisor 6       4. Authority of Advisor 9       5. Bank Accounts 9       6.
Records, Access 9       7. Limitations on Activities 10       8. Relationship
with Directors 10       9. Fees 10       10. Expenses 12       11. Other
Services 14       12. Reimbursement to the Advisor 14       13. Covenants of the
Company and the Operating Partnership 14       14. Investment Opportunities 14  
    15. Representations and Warranties of the Company and the Operating
Partnership 15       16. Other Activities of the Advisor 15       17. Term of
Agreement 15       18. Termination by The Parties 16       19. Assignment to an
Affiliate 16       20. Payments to and Duties of Advisor Upon Termination 16    
  21. Indemnification by the Company and the Operating Partnership 17       22.
Indemnification by Advisor 18       23. Notices 18

 

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24. Modification 19       25. Severability 19       26. Construction 19      
27. Entire Agreement 19       28. Indulgences, Not Waivers 19       29. Gender
19       30. Titles not to Affect Interpretation 19       31. Execution in
Counterparts 20

 

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ADVISORY AGREEMENT

 

THIS ADVISORY AGREEMENT (this “Agreement”), dated as of August 10, 2013 (the
“Effective Date”), is entered into by and among TNP Strategic Retail Trust,
Inc., a Maryland corporation (the “Company”), TNP Strategic Retail Operating
Partnership, LP, a Delaware limited partnership (the “Operating Partnership”),
and SRT Advisor, LLC, a Delaware limited liability company (the “Advisor”).
Capitalized terms used herein shall have the meanings ascribed to them in
Section 1 below.

 

WITNESSETH

 

WHEREAS, the Company has elected to qualify as a REIT, and to invest its funds
in investments permitted by the terms of Sections 856 through 860 of the Code;

 

WHEREAS, the Company is the general partner of the Operating Partnership and
intends to conduct all of its business and make all Investments through the
Operating Partnership;

 

WHEREAS, the Amended and Restated Advisory Agreement dated as of August 7, 2010
by and among the Company, the Operating Partnership and TNP Strategic Retail
Advisor, LLC, as amended (the “Prior Advisory Agreement”), has been terminated;
and

 

WHEREAS, the Company and the Operating Partnership desire to retain the Advisor
to provide certain advisory services in accordance with the terms of this
Agreement and the Advisor desires to perform such services.

 

NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants
and agreements contained herein, the parties hereto, intending to be legally
bound, hereby agree as follows:

 

1.            Definitions.   As used in this Agreement, the following terms have
the definitions hereinafter indicated:

 

Acquisition Expenses. Any and all expenses, exclusive of Acquisition Fees,
incurred by the Company, the Operating Partnership, the Advisor, or any of their
Affiliates in connection with the selection, evaluation, acquisition,
origination, making or development of any Investments, whether or not acquired,
including, without limitation, legal fees and expenses, travel and
communications expenses, costs of appraisals, nonrefundable option payments on
property not acquired, accounting fees and expenses, title insurance premiums,
and the costs of performing due diligence.

 

Acquisition Fees. Any and all fees and commissions, exclusive of Acquisition
Expenses, paid by any Person to any other Person (including any fees or
commissions paid by or to any Affiliate of the Company, the Operating
Partnership or the Advisor) in connection with the purchase, development or
construction of any Real Estate Asset or other Investment, including real estate
commissions, selection fees, development fees, construction fees, nonrecurring
management fees, loan fees, points or any other fees of a similar nature.
Excluded shall be (i) Origination Fees and (ii) development fees and
construction fees paid to any Person not affiliated with the Advisor in
connection with the actual development and construction of a project.

 

 

 

 

Advisor. Advisor shall mean SRT Advisor, LLC, a Delaware limited liability
company, any successor advisor to the Company, the Operating Partnership or any
Person to which SRT Advisor, LLC or any successor advisor subcontracts
substantially all of its functions. Notwithstanding the foregoing, a Person
hired or retained by SRT Advisor, LLC to perform property management and related
services for the Company or the Operating Partnership that is not hired or
retained to perform substantially all of the functions of SRT Advisor, LLC with
respect to the Company or the Operating Partnership as a whole shall not be
deemed to be an Advisor.

 

Affiliate or Affiliated. With respect to any Person, (i) any Person directly or
indirectly owning, controlling or holding, with the power to vote, ten percent
(10%) or more of the outstanding voting securities of such other Person;
(ii) any Person ten percent (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.

 

Articles of Incorporation. The Articles of Incorporation of the Company, as
amended from time to time.

 

Asset Management Fee. The term “Asset Management Fee” shall mean the fee payable
to the Advisor pursuant to Section 9(e).

 

Average Invested Assets. For a specified period, the average of the aggregate
book value of the assets of the Company invested, directly or indirectly, in
Investments before deducting depreciation, bad debts or other non-cash reserves,
computed by taking the average of such values at the end of each month during
such period.

 

Board. The individuals holding such office, as of any particular time, under the
Articles of Incorporation, whether they be the Directors named therein or
additional or successor Directors.

 

Bylaws. The bylaws of the Company, as the same are in effect from time to time.

 

Cause. With respect to the termination of this Agreement, fraud, criminal
conduct, misconduct or negligent breach of fiduciary duty by the Advisor, or a
material breach of this Agreement by the Advisor.

 

Code. Internal Revenue Code of 1986, as amended from time to time, or any
successor statute thereto. Reference to any provision of the Code shall mean
such provision as in effect from time to time, as the same may be amended, and
any successor provision thereto, as interpreted by any applicable regulations as
in effect from time to time.

 

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Company. Company shall mean TNP Strategic Retail Trust, Inc., a Maryland
corporation.

 

Competitive Real Estate Commission. 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.

 

Contract Sales Price. The total consideration received by the Company for the
sale of an Investment.

 

Dealer Manager Agreement. The Dealer Manager Agreement, dated July 10, 2009, by
and among the Company, the Operating Partnership and TNP Securities, LLC.

 

Director. A member of the Board of Directors of the Company.

 

Disposition Fee. The term “Disposition Fee” shall mean the fees payable to the
Advisor pursuant to Section 9(d).

 

Distributions. Any distributions of money or other property by the Company to
Stockholders, including distributions that may constitute a return of capital
for federal income tax purposes.

 

Effective Date. Effective Date shall have the meaning set forth in the preamble.

 

Excess Amount. Excess Amount shall have the meaning set forth in Section 12.

 

Expense Year. Expense Year shall have the meaning set forth in Section 12.

 

Financing Coordination Fee. The term “Financing Coordination Fee” shall mean the
fee payable to the Advisor pursuant to Section 9(i).

 

GAAP. Generally accepted accounting principles as in effect in the United States
of America from time to time.

 

Good Reason. Either, (i) any failure to obtain a satisfactory agreement from any
successor to the Company or the Operating Partnership to assume and agree to
perform the Company’s or the Operating Partnership’s obligations under this
Agreement; or (ii) any material breach of this Agreement of any nature
whatsoever by the Company or the Operating Partnership.

 

Indemnitee. The terms “Indemnitee” and “Indemnitees” shall have the meaning set
forth in Section 21.

 

Independent Director. Independent Director shall have the meaning set forth in
the Articles of Incorporation.

 

Investments. Any investments by the Company or the Operating Partnership in Real
Estate Assets, Real Estate Related Loans or any other asset.

 

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Joint Ventures. The joint venture or partnership arrangements (other than with
the Operating Partnership) in which the Company or any of its subsidiaries is a
co-venturer or general partner which are established to own Investments.

 

Listing. The listing of the Shares on a national securities exchange or the
receipt by the Stockholders of securities that are listed on a national
securities exchange in exchange for the Company’s common stock. Upon such
Listing, the Shares shall be deemed “Listed.”

 

Loans. Any indebtedness or obligations in respect of borrowed money or evidenced
by bonds, notes, debentures, deeds of trust, letters of credit or similar
instruments, including mortgages and mezzanine loans.

 

NASAA REIT Guidelines. The Statement of Policy Regarding Real Estate Investment
Trusts as revised and adopted by the North American Securities Administrators
Association on May 7, 2007, as in effect on the date hereof.

 

Net Income. For any period, the Company’s total revenues applicable to such
period, less the total expenses applicable to such period other than additions
to reserves for depreciation, bad debts or other similar non-cash reserves and
excluding any gain from the sale of the Company’s assets.

 

Operating Partnership. Operating Partnership shall mean TNP Strategic Retail
Operating Partnership, LP, a Delaware limited partnership.

 

Operating Partnership Agreement. The Operating Partnership Agreement among the
Company, the Advisor and TNP Strategic Retail OP Holdings, LLC.

 

OP Units. Units of limited partnership interest in the Operating Partnership.

 

Origination Fees. The term “Origination Fees” shall mean the fees payable to the
Advisor pursuant to Section 9(b).

 

Person. An individual, corporation, partnership, trust, joint venture, limited
liability company or other entity.

 

Prior Advisory Agreement. The Amended and Restated Advisory Agreement dated as
of August 7, 2010 by and among the Company, the Operating Partnership and TNP
Strategic Retail Advisor, LLC, as amended.

 

Private Placement. Any offering of undivided tenant-in-common (TIC) interests in
Real Property acquired by the Operating Partnership, whereby such TIC interests
may be eligible for “like kind exchange” pursuant to Section 1031 of the Code.

 

Real Estate Assets. Any investment by the Company or the Operating Partnership
in unimproved and improved Real Property (including, without limitation, fee or
leasehold interests, options and leases) either directly or through a Joint
Venture.

 

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Real Estate Related Loans. Any investments in, or origination of, mortgage loans
and other types of real estate related debt financing, including, without
limitation, mezzanine loans, bridge loans, convertible mortgages, wraparound
mortgage loans, construction mortgage loans, loans on leasehold interests and
participations in such loans, by the Company or the Operating Partnership.

 

Real Property. Real property owned from time to time by the Company or the
Operating Partnership, either directly or through joint venture arrangements or
other partnerships, which consists of (i) land only, (ii) land, including the
buildings located thereon, (iii) buildings only or (iv) such investments the
Board and the Advisor mutually designate as Real Property to the extent such
investments could be classified as Real Property.

 

REIT. A “real estate investment trust” under Sections 856 through 860 of the
Code.

 

Sale or Sales. Any transaction or series of transactions whereby: (A) the
Company or the Operating Partnership directly or indirectly (except as described
in other subsections of this definition) sells, grants, transfers, conveys, or
relinquishes its ownership of any Real Property or portion thereof, including
the lease of any Real Property consisting of a building only, and including any
event with respect to any Real Property which gives rise to a significant amount
of insurance proceeds or condemnation awards; (B) the Company or the Operating
Partnership directly or indirectly (except as described in other subsections of
this definition) sells, grants, transfers, conveys, or relinquishes its
ownership of all or substantially all of the interest of the Company or the
Operating Partnership in any Joint Venture in which it is a co-venturer or
partner; (C) any Joint Venture directly or indirectly (except as described in
other subsections of this definition) in which the Company or the Operating
Partnership as a co-venturer or partner sells, grants, transfers, conveys, or
relinquishes its ownership of any Real Property or portion thereof, including
any event with respect to any Real Property which gives rise to insurance claims
or condemnation awards; or (D) the Company or the Operating Partnership directly
or indirectly (except as described in other subsections of this definition)
sells, grants, conveys or relinquishes its interest in any Real Estate Related
Loans or portion thereof (including with respect to any Real Estate Related
Loan, all payments thereunder or in satisfaction thereof other than regularly
scheduled interest payments) and any event which gives rise to a significant
amount of insurance proceeds or similar awards; or (E) the Company or the
Operating Partnership directly or indirectly (except as described in other
subsections of this definition) sells, grants, transfers, conveys, or
relinquishes its ownership of any other asset not previously described in this
definition or any portion thereof, but not including any transaction or series
of transactions specified in clauses (A) through (E) above in which the proceeds
of such transaction or series of transactions are reinvested by the Company in
one or more assets within 180 days thereafter.

 

Shares. The shares of the Company’s common stock, par value $0.01 per share.

 

Special OP Units. The separate series of limited partnership interests of the
Operating Partnership having the terms set forth on Annex A hereto issued to the
Advisor or one of its Affiliates in accordance with Section 9(g) as soon as
practicable after the date hereof.

 

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Stockholders. The registered holders of the Shares.

 

Termination Date. The date of termination of this Agreement.

 

Termination Event. The termination or nonrenewal of this Agreement (i) in
connection with a merger, sale of assets or transaction involving the Company
pursuant to which a majority of the Directors then in office are replaced or
removed, (ii) by the Advisor for Good Reason or (iii) by the Company and the
Operating Partnership other than for Cause.

 

Total Operating Expenses. All costs and expenses paid or incurred by the
Company, as determined under GAAP, that are in any way related to the operation
of the Company or its business, including asset management fees and other fees
paid to the Advisor, but excluding (i) the expenses of raising capital such as
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 Listing,
(ii) interest payments, (iii) taxes, (iv) non-cash expenditures such as
depreciation, amortization and bad debt reserves, (v) incentive fees paid in
compliance with the NASAA REIT Guidelines; (vi) Acquisition Fees, Origination
Fees and Acquisition Expenses, (vii) Disposition Fees on the Sale of Real
Property, and (viii) other fees and expenses connected with the acquisition,
disposition, management and ownership of real estate interests, mortgages or
other property (including the costs of foreclosure, insurance premiums, legal
services, maintenance, repair, and improvement of property). The definition of
“Total Operating Expenses” set forth above is intended to encompass only those
expenses which are required to be treated as Total Operating Expenses under the
NASAA REIT Guidelines. As a result, and notwithstanding the definition set forth
above, any expense of the Company which is not part of Total Operating Expenses
under the NASAA REIT Guidelines shall not be treated as part of Total Operating
Expenses for purposes hereof.

 

2%/25% Guidelines. 2%/25% Guidelines shall have the meaning set forth in
Section 12.

 

2.          Appointment.   The Company and the Operating Partnership hereby
appoint the Advisor to serve as their advisor on the terms and conditions set
forth in this Agreement, and the Advisor hereby accepts such appointment.

 

3.          Duties of the Advisor.   As of the Effective Date, the Advisor
undertakes to use its best efforts to present to the Company and the Operating
Partnership potential investment opportunities and to provide a continuing and
suitable investment program consistent with the investment objectives and
policies of the Company as determined and adopted from time to time by the
Board. In performance of this undertaking, subject to the supervision of the
Board and consistent with the provisions of the Articles of Incorporation and
Bylaws of the Company and the Operating Partnership Agreement, the Advisor
shall, either directly or by engaging an Affiliate:

 

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(a)          serve as the Company’s and the Operating Partnership’s investment
and financial advisor;

 

(b)          provide the daily management for the Company and the Operating
Partnership and perform and supervise the various administrative functions
reasonably necessary for the management of the Company and the Operating
Partnership;

 

(c)          investigate, select, and, on behalf of the Company and the
Operating Partnership, engage and conduct business with such Persons as the
Advisor deems necessary to the proper performance of its obligations hereunder,
including, but not limited to, consultants, accountants, correspondents,
lenders, technical advisors, attorneys, brokers, underwriters, corporate
fiduciaries, escrow agents, depositaries, custodians, agents for collection,
insurers, insurance agents, banks, builders, developers, property owners, real
estate management companies, real estate operating companies, securities
investment advisors, mortgagors, and any and all agents for any of the
foregoing, including Affiliates of the Advisor, and Persons acting in any other
capacity deemed by the Advisor necessary or desirable for the performance of any
of the foregoing services, including, but not limited to, entering into
contracts in the name of the Company and the Operating Partnership with any of
the foregoing;

 

(d)          consult with the officers and Directors of the Company and assist
the Directors in the formulation and implementation of the Company’s financial
policies, and, as necessary, furnish the Board 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 or the Operating Partnership;

 

(e)          subject to the provisions of Section 4 hereof, (i) participate in
formulating an investment strategy and asset allocation framework, (ii) locate,
analyze and select potential Investments, (iii) structure and negotiate the
terms and conditions of transactions pursuant to which acquisitions and
dispositions of Investments will be made; (iv) research, identify, review and
recommend acquisitions and dispositions of Investments to the Board and make
Investments on behalf of the Company and the Operating Partnership in compliance
with the investment objectives and policies of the Company; (v) 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, Investments; (vi) enter into leases and service contracts
for Real Estate Assets and, to the extent necessary, perform all other
operational functions for the maintenance and administration of such Real Estate
Assets; (vii) actively oversee and manage Investments for purposes of meeting
the Company’s investment objectives; (viii) select Joint Venture partners,
structure corresponding agreements and oversee and monitor these relationships;
(ix) oversee Affiliated and non-Affiliated property managers who perform
services for the Company or the Operating Partnership; (x) oversee Affiliated
and non-Affiliated Persons with whom the Advisor contracts to perform certain of
the services required to be performed under this Agreement; (xi) manage
accounting and other record-keeping functions for the Company and the Operating
Partnership; and (xii) recommend various liquidity events to the Board when
appropriate;

 

(f)          upon request, provide the Board with periodic reports regarding
prospective investments;

 

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(g)          make investments in, and dispositions of, Investments within the
discretionary limits and authority as granted by the Board;

 

(h)          negotiate on behalf of the Company and the Operating Partnership
with banks or lenders for Loans to be made to the Company and the Operating
Partnership, and negotiate on behalf of the Company and the Operating
Partnership with investment banking firms and broker-dealers or negotiate
private sales of Shares or other equity investments in the Company or the
Operating Partnership or obtain Loans for the Company and the Operating
Partnership, but in no event in such a way so that the Advisor shall be acting
as broker-dealer or underwriter; and provided, further, that any fees and costs
payable to third parties incurred by the Advisor in connection with the
foregoing shall be the responsibility of the Company or the Operating
Partnership;

 

(i)          obtain reports (which may, but are not required to, be prepared by
the Advisor or its Affiliates), where appropriate, concerning the value of
Investments or contemplated investments of the Company and the Operating
Partnership;

 

(j)          from time to time, or at any time reasonably requested by the
Board, make reports to the Board of its performance of services to the Company
and the Operating Partnership under this Agreement, including reports with
respect to potential conflicts of interest involving the Advisor or any of its
Affiliates and reports relating to the aggregate amount of advisory and other
fees and reimbursements paid to the Advisor and its Affiliates by the Company;

 

(k)          provide the Company and the Operating Partnership with all
necessary cash management services;

 

(l)          do all things necessary to assure its ability to render the
services described in this Agreement;

 

(m)          deliver to, or maintain on behalf of, the Company copies of all
appraisals obtained in connection with the investments in any Real Estate Assets
as may be required to be obtained by the Board;

 

(n)          notify the Board of all proposed material transactions before they
are completed; and

 

(o)          effect any private placement of OP Units, tenancy-in-common (TIC)
or other interests in Investments as may be approved by the Board.

 

Notwithstanding the foregoing, the Advisor may delegate any of the foregoing
duties to any Person so long as the Advisor or any Affiliate remains responsible
for the performance of the duties set forth in this Section 3. For avoidance of
doubt, the Advisor shall have no obligation to provide any guarantees of
indebtedness of the Company or the Operating Partnership.

 

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4.          Authority of Advisor.

 

(a)          Pursuant to the terms of this Agreement (including the restrictions
included in this Section 4 and in Section 7), and subject to the continuing and
exclusive authority of the Board over the management of the Company, the Board
hereby delegates to the Advisor the authority to perform the services described
in Section 3.

 

(b)          Notwithstanding the foregoing, any investment in Real Estate
Assets, including any financing thereof, will require the prior approval of the
Board, any particular Directors specified by the Board or any committee of the
Board, as the case may be.

 

(c)          If a transaction requires approval by the Independent Directors,
the Advisor will deliver to the Independent Directors all documents and other
information required by them to properly evaluate the proposed transaction.

 

(d)          The prior approval of a majority of the Independent Directors not
otherwise interested in the transaction and a majority of the Board not
otherwise interested in the transaction will be required for each transaction to
which the Advisor or its Affiliates is a party.

 

(e)          The Board may, at any time upon the giving of notice to the
Advisor, 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 Advisor and shall not be applicable to investment transactions to which the
Advisor has committed the Company or the Operating Partnership prior to the date
of receipt by the Advisor of such notification.

 

5.          Bank Accounts.   In consultation with the Company’s Board, the
Advisor may establish and maintain one or more bank accounts in the name of the
Company and the Operating Partnership 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 or the Operating Partnership, under such terms and
conditions as the Board may approve, provided that no funds shall be commingled
with the funds of the Advisor; and the Advisor shall from time to time render
appropriate accountings of such collections and payments to the Board and to the
auditors of the Company.

 

6.          Records, Access.   The Advisor shall maintain appropriate records of
all its activities hereunder and make such records available for inspection by
the Directors and by counsel, auditors and authorized agents of the Company, at
any time or from time to time during normal business hours. The Advisor shall at
all reasonable times have access to the books and records of the Company and the
Operating Partnership.

 

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7.          Limitations on Activities.   Anything else in this Agreement to the
contrary notwithstanding, the Advisor shall refrain from taking any action
which, in its sole judgment made in good faith, would (a) adversely affect the
status of the Company as a REIT, (b) subject the Company to regulation under the
Investment Company Act of 1940, as amended, or (c) violate any law, rule,
regulation or statement of policy of any governmental body or agency having
jurisdiction over the Company or its Shares, or otherwise not be permitted by
the Articles of Incorporation or Bylaws of the Company, except if such action
shall be ordered by the Board, in which case the Advisor shall notify promptly
the Board of the Advisor’s judgment of the potential impact of such action and
shall refrain from taking such action until it receives further clarification or
instructions from the Board. In such event, the Advisor shall have no liability
for acting in accordance with the specific instructions of the Board so given.
Advisor acknowledges that, pursuant to Section 8.3 of the Articles of
Incorporation, Advisor has a fiduciary responsibility and duty to the Company
and to its stockholders. Notwithstanding the foregoing, the Advisor, its
directors, officers, employees and members, and the partners, directors,
officers, members and stockholders of the Advisor’s Affiliates shall not be
liable to the Company or to the Directors or Stockholders for any act or
omission by the Advisor, its directors, officers, employees, or members, and the
partners, directors, officers, members or stockholders of the Advisor’s
Affiliates taken or omitted to be taken in the performance of their duties under
this Agreement except as provided in Section 22 of this Agreement.

 

8.          Relationship with Directors.   Subject to Section 7 of this
Agreement and to restrictions advisable with respect to the qualification of the
Company as a REIT, directors, officers and employees of the Advisor or an
Affiliate of the Advisor or any corporate parent of an Affiliate, may serve as a
Director and as officers of the Company, except that no director, officer or
employee of the Advisor or its Affiliates who also is a Director or officer of
the Company shall receive any compensation from the Company for serving as a
Director or officer other than reasonable reimbursement for travel and related
expenses incurred in attending meetings of the Board and no such Director shall
be deemed an Independent Director for purposes of satisfying the Director
independence requirement set forth in the Articles of Incorporation. Promptly
following the execution of this Agreement, the Company shall use its
commercially reasonable efforts to cause two persons mutually acceptable to the
Company and the Advisor to serve on the Board; provided that the Company shall
not be required to expand the size of the Board or to have fewer than a majority
of Independent Directors.

 

9.          Fees.

 

(a)          Acquisition Fees. The Advisor shall receive an Acquisition Fee
payable by the Company as compensation for services rendered in connection with
the investigation, selection and acquisition (by purchase, investment or
exchange) of Investments. The total Acquisition Fees payable to the Advisor or
its Affiliates shall equal 1.0% of the cost of all Investments, including
Acquisition Expenses and any debt attributed to such investments. With respect
to investments in and origination of Real Estate Related Loans, the Company will
pay the Advisor an Origination Fee in lieu of the Acquisition Fee. With respect
to the acquisition of Real Estate Assets through a Joint Venture, the
Acquisition Fee payable by the Company to the Advisor shall equal 1.0% of the
Company’s allocable cost of such Real Estate Assets, including Acquisition
Expenses and any debt attributed to such Investments. The Advisor shall submit
an invoice to the Company following the closing or closings of each Investment,
accompanied by a computation of the Acquisition Fee. The Company shall pay the
Acquisition Fee promptly following receipt of the invoice.

 

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(b)          Origination Fees. As compensation for the investigation, selection,
sourcing and acquisition or origination of Real Estate Related Loans, the
Company shall pay an Origination Fee to the Advisor for each such acquisition or
origination equal to 1.0% of the amount funded by the Company to acquire or
originate the Real Estate Related Loan, including any Acquisition Expenses
related to such investment and any debt used to fund the acquisition or
origination of the Real Estate Related Loan. The Company will not pay an
Origination Fee to the Advisor with respect to any transaction pursuant to which
the Company is required to pay the Advisor an Acquisition Fee. Notwithstanding
anything herein to the contrary, the payment of Origination Fees by the Company
shall be subject to the limitations on Acquisition Fees contained in the
Company’s Articles of Incorporation. The Advisor shall submit an invoice to the
Company following the closing or closings of each Real Estate Related Loan,
accompanied by a computation of the Origination Fee. The Company shall pay the
Origination Fee to the Advisor promptly following receipt of the invoice.

 

(c)          Limitation on Total Acquisition Fees, Origination Fees and
Acquisition Expenses. Pursuant to the NASAA REIT Guidelines, the total of all
Acquisition Fees, Origination Fees and Acquisition Expenses payable in
connection with any Investment shall not exceed 6.0% of the “contract purchase
price,” as defined in the Articles of Incorporation, of the Investment acquired.

 

(d)          Disposition Fee. In connection with a Sale in which the Advisor or
any Affiliate of the Advisor provides a substantial amount of services, as
determined by the Independent Directors, the Company shall pay to the Advisor or
its Affiliate a Disposition Fee of up to 50.0% of a Competitive Real Estate
Commission, but not to exceed 3.0% of the Contract Sales Price. With respect to
the Sale of Investments held through a Joint Venture, the Disposition Fee
payable by the Company to the Advisor shall be reduced to a percentage of the
Disposition Fee proportionate to the Company’s interest in such Joint Venture.
Any Disposition Fee payable under this Section 9(d) may be paid in addition to
real estate commissions paid to non-Affiliates, provided that the total real
estate commissions (including such Disposition Fee) paid to all Persons by the
Company for the Sale of each Investment shall not exceed the lesser of the
Competitive Real Estate Commission or an amount equal to 6.0% of the Contract
Sales Price.

 

(e)          Asset Management Fee. The Advisor shall receive the Asset
Management Fee as compensation for services rendered in connection with the
management of the Company’s assets. The Asset Management Fee shall be equal to a
monthly fee of one-twelfth (1/12th) of 0.6% of the higher of (i) aggregate cost
on a GAAP basis (before non-cash reserves and depreciation) of all Investments
the Company owns, including any debt attributable to such Investments or
(ii) the fair market value of Investments (before non-cash reserves and
deprecation) if following the date hereof the Board has authorized the estimate
of a fair market value of the Investments; provided, however, that the Asset
Management Fee shall not be less than $250,000 in the aggregate during any one
(1) calendar year. With the exception of any portion of the Asset Management Fee
related to the disposition of Investments, which shall be payable at the time of
such disposition and prorated based on the number of days such Investment was
managed by the Advisor before disposition, the Asset Management Fee shall be
calculated as of the last business day of each month during the term and of this
Agreement payable in arrears on the first business day of each month.

 

(f)          Private Placement Fee. The Operating Partnership shall reimburse
the Advisor for all offering and marketing related expenses incurred on the
Company’s or the Operating Partnership’s behalf in connection with any Private
Placement up to 2.0% of the gross proceeds of such Private Placement.

 

11

 

 

(g)          Operating Partnership Interests. The Company undertakes to use its
commercially reasonable efforts to cause the Operating Partnership to issue to
the Advisor or one of its Affiliates Special OP Units in exchange for a capital
contribution of $1,000, within 60 days of the Effective Date. Upon the earliest
to occur of the termination of this Agreement for Cause, a Termination Event or
a Listing, all of the Special OP Units shall be redeemed by the Operating
Partnership in accordance with the terms of the Operating Partnership Agreement.
Should the Company be unable to effect the issuance of the Special OP Units for
any reason, including, without limitation, as a result of the failure to receive
any necessary approvals related to such issuance, the Company shall pay the
Advisor an incentive fee in cash pursuant to this Section 9(g) in an amount
equal to the amount that the Advisor would have received had it been issued the
Special OP Units on the dates that such amount would have been paid pursuant to
the terms of the Special OP Units.

 

(h)          Exclusion of Certain Transactions. In the event the Company or the
Operating Partnership shall propose to enter into any transaction in which the
Advisor, any Affiliate of the Advisor or any of the Advisor’s directors or
officers has a direct or indirect interest, then such transaction shall be
approved by a majority of the members of the Board not otherwise interested in
such transaction, including a majority of the Independent Directors.

 

(i)          Financing Coordination Fee. As compensation for providing services
in connection with (i) any financing obtained, directly or indirectly, by the
Company or the Operating Partnership and used to acquire or originate
Investments, (ii) any financing assumed, directly or indirectly, by the Company
or the Operating Partnership in connection with the acquisition of Investments,
or (iii) the refinancing of any financing obtained or assumed, directly or
indirectly, by the Company or the Operating Partnership, the Company will pay
the Advisor a Financing Coordination Fee equal to 1.0% of the amount made
available and/or outstanding under such financing or refinancing. The Advisor
may reallow some or all of the Financing Coordination Fee to reimburse third
parties with whom the Advisor may subcontract to procure such financing. The
Advisor shall submit an invoice to the Company following the closing of any
financing obtained or assumed by the Company or the Operating Partnership,
accompanied by a computation of the Financing Coordination Fee. The Company
shall pay the Financing Coordination Fee promptly following receipt of the
invoice.

 

(j)          Other Fees. To the extent Advisor or any Affiliate receives any
fees of the type listed in this Section 9 above from any subsidiary of the
Company for services rendered to such subsidiary, then such amounts shall be
offset against any amounts due to Advisor hereunder in relation to such
services.

 

10.         Expenses.

 

(a)          In addition to the compensation paid to the Advisor pursuant to
Section 9 hereof, the Company or the Operating Partnership shall pay directly or
reimburse the Advisor for all of the expenses paid or incurred by the Advisor or
its Affiliates in connection with the services it provides to the Company and
the Operating Partnership pursuant to this Agreement, including, but not limited
to:

 

(i)          Acquisition Expenses incurred in connection with the selection and
acquisition of Investments subject to the aggregate 6.0% cap on Acquisition
Fees, Origination Fees and Acquisition Expenses set forth in Section 9(c);

 

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(ii)         the actual cost of goods and services used by the Company and
obtained from entities not affiliated with the Advisor;

 

(iii)        interest and other costs for borrowed money, including discounts,
points and other similar fees;

 

(iv)        taxes and assessments on income of the Company or Investments;

 

(v)         costs associated with insurance required in connection with the
business of the Company or by the Board;

 

(vi)        expenses of managing and operating Investments owned by the Company,
whether payable to an Affiliate of the Company or a non-affiliated Person;

 

(vii)       all expenses in connection with payments to the Directors for
attending meetings of the Board and Stockholders;

 

(viii)      expenses associated with a Listing, if applicable, or with the
issuance and distribution of Shares, such as selling commissions and fees,
advertising expenses, taxes, legal and accounting fees, listing and registration
fees, and other related expenses;

 

(ix)         expenses connected with payments of Distributions;

 

(x)          expenses of organizing, revising, amending, converting, modifying,
or terminating the Company or any subsidiary thereof or the Articles of
Incorporation or governing documents of any subsidiary;

 

(xi)         expenses of maintaining communications with Stockholders, including
the cost of preparation, printing, and mailing annual reports and other
Stockholder reports, proxy statements and other reports required by governmental
entities;

 

(xii)        [intentionally omitted]; and

 

(xiii)       audit, accounting and legal fees.

 

For the avoidance of doubt, the Advisor shall not be reimbursed for any of its
personnel costs or other overhead costs except for customary reimbursements for
personnel costs under property management agreements entered into between the
Operating Partnership and/or its Affiliates, on the one hand, and the Advisor or
its Affiliates, on the other hand.

 

(b)          Expenses incurred by the Advisor on behalf of the Company and the
Operating Partnership and payable pursuant to this Section 10 shall be
reimbursed no less than monthly to the Advisor.

 

13

 

 

(c)          The Advisor shall prepare a statement documenting the expenses of
the Company and the Operating Partnership during each quarter, and shall deliver
such statement to the Company and the Operating Partnership within 45 days after
the end of each quarter.

 

11.         Other Services.   Should the Board request that the Advisor or any
director, officer or employee thereof render services for the Company and the
Operating Partnership other than set forth in Section 3, such services shall be
separately compensated at such rates and in such amounts as are agreed upon by
the Advisor and the Board, including a majority of the Independent Directors,
subject to the limitations contained in the Articles of Incorporation, and shall
not be deemed to be services pursuant to the terms of this Agreement.

 

12.         Reimbursement to the Advisor.   The Company shall not reimburse the
Advisor at the end of any fiscal quarter in which Total Operating Expenses for
the four consecutive fiscal quarters then ended (the “Expense Year”) exceed (the
“Excess Amount”) the greater of 2% of Average Invested Assets or 25% of Net
Income (the “2%/25% Guidelines”) for such year. Any Excess Amount paid to the
Advisor during a fiscal quarter shall be repaid to the Company or, at the option
of the Company, subtracted from the Total Operating Expenses reimbursed during
the subsequent fiscal quarter. If there is an Excess Amount in any Expense Year
and the Independent Directors determine that such excess was justified based on
unusual and nonrecurring factors which they deem sufficient, then the Excess
Amount may be carried over and included in Total Operating Expenses in
subsequent Expense Years and reimbursed to the Advisor in one or more of such
years, provided that 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 determining that such excess expenses were
justified. Such determination shall be reflected in the minutes of the meetings
of the Board. The Company hereby agrees that the following shall not be taken
into account for purposes of calculating the Excess Amount: (a) amounts (i) paid
to TNP Strategic Retail Advisor, LLC or its Affiliates related to or in
connection with the termination of the Prior Advisory Agreement, the Dealer
Manager Agreement or any property management agreements or other agreements with
TNP Strategic Retail Advisor, LLC or its Affiliates or (ii) incurred in
connection with such terminations, including, without limitation, attorneys’
fees, litigation costs and expenses and amounts paid in settlement (but
excluding costs associated with obtaining lender approvals to any such
termination and engagement of the Advisor or its Affiliates as a replacement
under such agreements) and (b) Total Operating Expenses incurred prior to the
date of the execution of this Agreement. All figures used in the foregoing
computation shall be determined in accordance with GAAP applied on a consistent
basis.

 

13.         Covenants of the Company and the Operating Partnership.  
Intentionally deleted.

 

14.         Investment Opportunities.   In the event that the Advisor identifies
an investment opportunity that meets the Company’s investment criteria in an
income-producing retail property, for which the Company has sufficient
uninvested funds, the investment opportunity will first be offered to the
Company. With respect to potential non-retail property investments, in the event
that an investment opportunity becomes available that is suitable, under all of
the factors considered by the Advisor for both the Company and one or more other
Affiliates of the Advisor and for which more than one of these entities has
sufficient uninvested funds, then the entity that has had the longest time
elapse since it was offered an investment opportunity will first be offered such
opportunity. Unless the Board of Directors decides not to proceed with an
investment opportunity presented to it, the investment opportunity will not be
presented to an Affiliate of the Advisor; provided, however, that any such
investment opportunity shall not be required to be presented to the Company
during any period in which the Company does not have sufficient available funds,
or a reasonable opportunity of obtaining available funds, with which to make an
investment. The Company shall not make any Investment unless the Advisor has
recommended the Investment to the Company.

 

14

 

  

15.         Representations and Warranties of the Company and the Operating
Partnership.   The Company and the Operating Partnership, jointly and severally
represent and warrant to the Advisor as follows:

 

(a)          to the best of the Company’s and the Operating Partnership’s
knowledge, the Company and the Operating Partnership have each taken all actions
necessary to terminate the Prior Advisory Agreement, the Dealer Manager
Agreement and all other non-property management agreements with TNP Strategic
Retail Advisor, LLC or its Affiliates, and, as of the date of this Agreement,
such agreements are of no further force or effect;

 

(b)          all offerings of Shares for which any registration statement have
been filed with the Securities and Exchange Commission or any state securities
administrator have been completed or otherwise terminated; and

 

(c)          the Company has terminated its distribution reinvestment program.

 

16.         Other Activities of the Advisor.   Nothing herein contained shall
prevent the Advisor or any of its Affiliates from engaging in or earning fees
from other activities, including, without limitation, the rendering of advice to
other Persons (including other REITs) and the management of other programs
advised, sponsored or organized by the Advisor or its Affiliates; nor shall this
Agreement limit or restrict the right of any director, officer, member, partner,
employee, or stockholder of the Advisor or its Affiliates to engage in or earn
fees from any other business or to render services of any kind to any other
partnership, corporation, firm, individual, trust or association and earn fees
for rendering such services. The Advisor may, with respect to any investment in
which the Company is a participant, also render advice and service to each and
every other participant therein, and earn fees for rendering such advice and
service. Specifically, it is contemplated that the Company may enter into joint
ventures or other similar co-investment arrangements with certain Persons, and
pursuant to the agreements governing such joint ventures or arrangements, the
Advisor may be engaged to provide advice and service to such Persons, in which
case the Advisor will earn fees for rendering such advice and service.

 

17.         Term of Agreement.   This Agreement shall continue in force for a
period of twelve (12) months from the date of the Agreement, subject to an
unlimited number of successive twelve-month renewals upon mutual consent of the
parties. It is the duty of the Independent Directors to evaluate the performance
of the Advisor annually before renewing the Agreement, and each such renewal
shall be for a term of no more than twelve (12) months.

 

15

 

  

18.         Termination by The Parties.  This Agreement may be terminated:

 

(a)          immediately by the Company or the Operating Partnership for Cause
or upon the bankruptcy of the Advisor;

 

(b)          upon 60 days written notice without Cause and without penalty by a
majority of the Independent Directors of the Company; or

 

(c)          upon 60 days written notice with Good Reason by the Advisor.

 

The provisions of Sections 19 through 31 of this Agreement survive termination
of this Agreement.

 

19.         Assignment to an Affiliate.  This Agreement may be assigned by the
Advisor to an Affiliate with the approval of a majority of the Directors
(including a majority of the Independent Directors). The Advisor may assign any
rights to receive fees or other payments under this Agreement to any Person
without obtaining the approval of the Directors. This Agreement shall not be
assigned by the Company or the Operating Partnership without the consent of the
Advisor, except in the case of an assignment by the Company or the Operating
Partnership to a corporation, limited partnership or other organization which is
a successor to all of the assets, rights and obligations of the Company or the
Operating Partnership, in which case such successor organization shall be bound
hereunder and by the terms of said assignment in the same manner as the Company
and the Operating Partnership are bound by this Agreement.

 

20.         Payments to and Duties of Advisor Upon Termination.

 

(a)          After the Termination Date, the Advisor shall not be entitled to
compensation for further services hereunder except it shall be entitled to
receive from the Company or the Operating Partnership within 30 days after the
effective date of such termination all unpaid reimbursements of expenses and all
earned but unpaid fees payable to the Advisor prior to termination of this
Agreement, subject to the 2%/25% Guidelines to the extent applicable.

 

(b)          The Advisor shall promptly upon termination:

 

(i)          pay over to the Company and the Operating Partnership all money
collected and held for the account of the Company and the Operating Partnership
pursuant to this Agreement, after deducting any accrued compensation and
reimbursement for its expenses to which it is then entitled;

 

(ii)         deliver to the Board 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;

 

(iii)        deliver to the Board all assets, including all Investments, and
documents of the Company and the Operating Partnership then in the custody of
the Advisor; and

 

16

 

 

(iv)        cooperate with the Company and the Operating Partnership to provide
an orderly management transition.

 

21.         Indemnification by the Company and the Operating Partnership.  The
Company and the Operating Partnership shall indemnify and hold harmless the
Advisor and its Affiliates, including their respective directors (the
“Indemnitees,” and each an “Indemnitee”), from all liability, claims, damages or
losses resulting or arising from, or related to (i) any facts or circumstances
existing on or prior to the date of the execution of this Agreement or the entry
into this Agreement and (ii) the performance of the Advisor duties and
obligations 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, and to the extent that such
indemnification would not be inconsistent with the laws of the State of
Maryland, the Articles of Incorporation or the provisions of Section II.G of the
NASAA REIT Guidelines. Notwithstanding the foregoing, the Company and the
Operating Partnership shall not provide for indemnification of an Indemnitee for
any loss or liability suffered by such Indemnitee pursuant to clause (ii) above,
nor shall they provide that an Indemnitee be held harmless for any loss or
liability suffered by the Company and the Operating Partnership, unless all of
the following conditions are met:

 

(a)          the Indemnitee has determined, in good faith, that the course of
conduct that caused the loss or liability was in the best interest of the
Company and the Operating Partnership;

 

(b)          the Indemnitee was acting on behalf of, or performing services for,
the Company or the Operating Partnership;

 

(c)          such liability or loss was not the result of negligence or
misconduct by the Indemnitee; and

 

(d)          such indemnification or agreement to hold harmless is recoverable
only out of the Company’s net assets and not from the Stockholders.

 

Notwithstanding the foregoing, an Indemnitee shall not be indemnified by the
Company and the Operating Partnership for any losses, liabilities or expenses
arising from or out of an alleged violation of federal or state securities laws
by such Indemnitee unless one or more of the following conditions are met:

 

(a)          there has been a successful adjudication on the merits of each
count involving alleged securities law violations as to the Indemnitee;

 

(b)          such claims have been dismissed with prejudice on the merits by a
court of competent jurisdiction as to the Indemnitee; or

 

(c)          a court of competent jurisdiction approves a settlement of the
claims against the Indemnitee and finds that indemnification of the settlement
and the related costs should be made, and the court considering the request for
indemnification has been advised of the position of the Securities and Exchange
Commission and of the published position of any state securities regulatory
authority in which securities of the Company or the Operating Partnership were
offered or sold as to indemnification for violation of securities laws.

 

17

 

 

In addition, the advancement of the Company’s or the Operating Partnership’s
funds to an Indemnitee for legal expenses and other costs incurred as a result
of any legal action for which indemnification is being sought pursuant to clause
(ii) above is permissible only if all of the following conditions are satisfied:

 

(a)          the legal action relates to acts or omissions with respect to the
performance of duties or services on behalf of the Company or the Operating
Partnership;

 

(b)          the legal action is initiated by a third party who is not a
Stockholder or the legal action is initiated by a Stockholder acting in such
Stockholder’s capacity as such and a court of competent jurisdiction
specifically approves such advancement; and

 

(c)          the Indemnitee undertakes to repay the advanced funds to the
Company or the Operating Partnership, together with the applicable legal rate of
interest thereon, in cases in which such Indemnitee is found not to be entitled
to indemnification.

 

22.         Indemnification by Advisor.  The Advisor shall indemnify and hold
harmless the Company and the Operating Partnership from contract or other
liability, claims, damages, taxes or losses and related expenses including
attorneys’ fees, to the extent that such liability, claims, damages, taxes or
losses and related expenses are not fully reimbursed by insurance and are
incurred by reason of the Advisor’s bad faith, fraud, misfeasance, intentional
misconduct, negligence or reckless disregard of its duties; provided, however,
that the Advisor shall not be held responsible for any action of the Board in
following or declining to follow any advice or recommendation given by the
Advisor.

 

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 required by the Articles of
Incorporation, the Bylaws, or accepted by the party to whom it is given, and
shall be given by being delivered by hand, by facsimile transmission, by courier
or overnight carrier or by registered or certified mail to the addresses set
forth herein:

 

To the Company, the Operating Partnership and the Board:

 

  TNP Strategic Retail Trust, Inc.   4695 MacArthur Court, Suite 1100   Newport
Beach, CA 92660   Telephone: 949.798.6207   Attention:  Dee Balch, Chief
Financial Officer, with
a copy to Jeffrey Rogers, Chair of the Special
Committee of the Board of Directors    

 

18

 

 

To the Advisor: SRT Advisor, LLC   400 S. El Camino Real       Suite 1100   San
Mateo, California 94402   Telephone: (650) 343-9300   Facsimile: (650) 343-9690
  Attention:  President

 

Any party may at any time give notice in writing to the other parties 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 the 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. The provisions of this Agreement shall be construed
and interpreted in accordance with the laws of the State of Maryland.

 

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 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.

 

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.

 

19

 

  

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.

 

[Remainder of page intentionally left blank]

 

20

 

 

IN WITNESS WHEREOF, the parties hereto have executed this Advisory Agreement as
of the date and year first written above.

 

  TNP Strategic Retail Trust, Inc.         By: /s/ Jeffrey Rogers   Name:
Jeffrey Rogers   Title: Director         TNP Strategic Retail Operating
Partnership, LP         By: TNP Strategic Retail Trust, Inc.,     its General
Partner         By: /s/ Jeffrey Rogers     Name:  Jeffrey Rogers    
Title:  Director         SRT Advisor, LLC         By: /s/ Andrew Batinovich  
Name: Andrew Batinovich   Title: President and Chief Executive Officer

 

 

 

 

Annex A

 

Terms of Special OP Units

 

The terms of the Special OP Units, subject to the limitations set forth in the
Company’s charter, shall be identical to the terms of the Special OP Units
issued to the Company’s former Advisor, except that the cumulative,
noncompounded pre-tax rate of return described in Section 5.2(b)(i) of the
Operating Partnership Agreement shall be 7.0% per annum instead of 10.0% per
annum.