Exhibit 10(a)

 

AMENDED AND RESTATED ADVISORY CONTRACT

 

THIS AMENDED AND RESTATED ADVISORY CONTRACT, effective as of October 1, 2005
(the “Contract”), is entered into by and between the B. F. Saul Company (the
“Advisor”), the B. F. Saul Real Estate Investment Trust (the “Trust”) and,
solely with respect to Section A hereof, the B. F. Saul Advisory Company,
L.L.C., a wholly owned subsidiary of the Advisor (“Saul Advisory”).

 

WITNESSETH:

 

WHEREAS, on September 18, 1969, the Trust entered into an advisory contract with
the Advisor, which was amended from time to time;

 

WHEREAS, on May 1, 1972, the Trust, the Advisor and Saul Advisory entered into a
contract by which the Advisor’s interest in said advisory contract, as amended,
was assigned to Saul Advisory;

 

WHEREAS, said advisory contract, as amended from time to time, was amended and
restated in full as of July 1, 1974 and as of October 1, 1982, and has been
further amended from time to time (the advisory contract as currently in effect
is referred to herein as the “Existing Advisory Contract”);

 

WHEREAS, Saul Advisory wishes to assign its rights and obligations under the
Existing Advisory Contract to the Advisor, and the Advisor wishes to assume the
rights and obligations of Saul Advisory under the Existing Advisory Contract;

 

WHEREAS, the Trust wishes to consent to such assignment and assumption of the
rights and obligations from Saul Advisory to the Advisor;

 

WHEREAS, in connection with the assignment and assumption of the Existing
Advisory Contract, the parties hereto wish to terminate the Assignment and
Guaranty Agreement dated May 1, 1972, as supplemented and amended, between the
Advisor, Saul Advisory and the Trust (the “Assignment and Guaranty”);

 

WHEREAS, the Trust and the Advisor have also determined that it is appropriate
to amend and restate the Existing Advisory Contract;

 

WHEREAS, the Trust, in connection with its affairs, desires avail itself of the
experience, sources of information, advice, assistance, management and certain
facilities of, and available to, the Advisor, and the Trust also desires to have
the Advisor continue to undertake certain duties and responsibilities and
perform certain services as hereinafter set forth, on behalf of, and subject to
the supervision and control of, the Trustees of the Trust (the “Trustees”); and

 

WHEREAS, the Advisor is willing to undertake and perform, subject to the
supervision and control of the Trustees, the services hereinafter set forth.

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NOW, THEREFORE, in consideration of the premises and of the mutual covenants
herein contained, the parties agree as follows:

 

A. Assignment

 

Saul Advisory hereby transfers and assigns to the Advisor all of its right in
the Existing Advisory Contract (other than fees, reimbursement of expenses and
rights to indemnity related to the period prior to October 1, 2005) and agrees
to the termination of the Assignment and Guaranty.

 

B. Assumption

 

The Advisor hereby accepts such assignment of the Existing Advisory Contract and
assumes and agrees to pay, perform and discharge in full and in a timely manner
the obligations of Saul Advisory under or with respect to the Existing Advisory
Agreement, and agrees to the termination of the Assignment and Guaranty.

 

C. Trust Consent

 

The Trust hereby consents to the assignment and assumption referred to in
paragraphs A and B above, and to the termination of the Assignment and Guaranty.

 

In addition, the Trust and the Advisor agree to amend and restate the Existing
Advisory Agreement as follows:

 

1. Services and Duties of the Advisor.

 

A. The Advisor shall consult with the Trustees and officers of the Trust and
furnish them with advice and recommendations regarding the affairs of the Trust
and perform the general management, financial, accounting, information
technology, insurance, legal, tax and other administrative functions of the
Trust as a business entity. As part of the general management function, the
Advisor shall supervise B. F. Saul Property Company and other third party
contractors that perform leasing, property management, construction management,
development, property-level accounting, property tax assessments and related
disputes, and other services for the Trust. The Advisor shall also perform such
other services as the Trust determines is in the best interest of the Trust and
within the purview of this contract.

 

B. The Advisor shall avoid taking any action that, in its good faith business
judgment, would (i) subject the Trust to regulation under the Investment Company
Act of 1940, or (ii) violate any law, rule, regulation or statement of policy of
any governmental body or agency having jurisdiction over the Trust, or otherwise
not be permitted by the Declaration of Trust or Bylaws, each as amended from
time to time, of the Trust, except if such action shall be ordered by the
Trustees, in which case the Advisor shall notify promptly the Trustees 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 Trustees. In such event the Advisor shall have no liability for acting in
accordance with the specific instructions of the Trustees so given.

 

C. The Advisor shall exercise all reasonable efforts to cause any property
forming part of the Trust’s investments to be duly insured against loss or
damage by fire, with extended coverage, and against such other insurable hazards
and risks as is customary and appropriate in the circumstances, and shall
otherwise carry out the policies from time to time adopted by the Trust in
connection with the protection of such investments.

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D. The Advisor shall maintain a fidelity bond from a responsible surety company
in such amount as the Trust reasonably may specify from time to time covering
the Trust and its funds and other property, which bond shall protect the Trust
against all losses of any such funds or property from acts of the Advisor and
its directors, officers and employees.

 

E. In performing its duties under this Contract and in dealing with third
parties on behalf of the Trust, the Advisor shall act as the Trust’s agent, and
shall have full authority to act on behalf of the Trust.

 

F. It is the intention of the parties that, subject to the supervision and
control of the Trustees, the Advisor’s functions shall encompass those performed
by the senior management and corporate staff of a listed public company of
comparable size but exclude the direct real estate operating functions, which
are to be performed by B. F. Saul Property Company and other third parties under
the supervision of the Advisor.

 

2. Expenses.

 

A. The Advisor shall provide and pay for all personnel, office space, equipment
and supplies necessary for the performance of its duties under this contract.
The Trust will reimburse the Advisor for its travel, transportation and other
related expenses incurred in the performance of its duties hereunder and for all
expenses, direct and indirect, incurred for legal services in connection with
the performance of its duties hereunder (including reasonable hourly charges and
allocated overhead for in-house counsel).

 

B. The Trust shall pay directly the following expenses with respect to its
operations (or shall reimburse the Advisor for any of such expenses that the
Advisor incurs on behalf of the Trust):

 

(1) Interest and other costs of money borrowed by the Trust;

 

(2) Taxes, licenses and franchise fees imposed on the Trust, its properties, its
income or its operations;

 

(3) Finders’ fees and brokerage commissions in connection with the acquisition
and disposition of assets by the Trust;

 

(4) Fees and expenses of land planners, engineers, appraisers, architects,
contractors, leasing agents, property management agents, attorneys and other
consultants and third parties hired to perform services for the Trust;

 

(5) Costs of obtaining and maintaining capital, including but not limited to,
legal, audit, accounting, underwriting, brokerage, listing, registration and
other fees; charges of custodians, transfer agents, registrars, dividend
disbursement agents, indenture trustees, authenticating agents, paying agents,
brokers, underwriters and banks providing services to the Trust; and printing,
engraving and other expenses and taxes incurred in connection with issuance,
distribution, transfer and stock exchange listing of the Trust’s securities;

 

(6) Expenses connected directly with payments to shareholders of dividends or
distributions in cash or in any other form or payments of interest and principal
on indebtedness of the Trust;

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(7) Expenses in connection with communications to holders of the Trust’s
securities, including the cost of printing and mailing proxy solicitation
materials and other reports and the cost of holding meetings of holders of
securities;

 

(8) Fees and expenses for professional services, including outside counsel,
engineers, appraisers and auditors for the Trust;

 

(9) Trustees’ fees and other costs incurred in connection with the functioning
of the Board of Trustees and Committees thereof;

 

(10) Costs of obtaining and maintaining membership in trade associations,
including the costs of attending meetings of such associations;

 

(11) Insurance premiums and related costs; and

 

(12) Any other cost or expense that the Trust determines is more appropriately
borne by the Trust than the Advisor.

 

3. Compensation.

 

A. The Trust shall pay the Advisor monthly as compensation for its services
under this Contract a fee at the rate of $503,000 per month. Upon the request of
either the Trust or the Advisor, but at least annually, as of October 1 of each
year, the Trust and the Advisor shall review the compensation of the Advisor to
insure that it is fair and reasonable to both the Trust and the Advisor and make
any adjustment agreed upon. If they cannot agree on the amount of the
adjustment, if any, within sixty (60) days, then the dispute shall be submitted
to the Commercial Arbitration Rules of the American Arbitration Association.

 

All amounts payable to the Advisor under the subparagraph 3.A shall be due on
the last day of each month or quarter as the case may be and an estimated
payment may be made at that time or any time thereafter; however, by the mutual
agreement of the parties hereto, payment of any monthly or quarterly
compensation or reimbursement may be deferred until the precise amount of said
compensation has been calculated, but in no event shall said payment be deferred
more than thirty (30) days after the end of the applicable period.

 

4. Compensation for Other Services.

 

A. In addition to the compensation provided in paragraph 3 herein, the Advisor
and/or its affiliates may receive commissions on insurance placed by them with
respect to the property or operations of the Trust, provided that the premium
charge for any such insurance is not more than any other bona fide premium
proposed to the Trust in a competitive bid for such insurance by a reputable
company.

 

B. The Advisor and/or its affiliates may also receive compensation from the
Trust for (i) its or their services as a property manager and/or leasing agent
for property owned by the Trust, or (ii) such other services as, in the opinion
of the Trustees, are more appropriately performed by the Advisor or its
affiliates for separate compensation; provided that the terms of such agreements
have been approved by a majority of the Trust’s Independent Trustees. For
purposes of this Contract, the term “Independent Trustees” shall mean Trustees
that are without economic dependence on the Trust or the Advisor and its
affiliates of a character that might interfere with the exercise of any
independent judgment.

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5. Indemnification and Limited Liability.

 

A. The Trust will indemnify and hold harmless the Advisor, its officers,
directors and employees from and against any liabilities, claims, damages, costs
or expenses arising out of the performance by the Advisor of its duties and
services hereunder to the extent that such liabilities, claims, damages, costs
or expenses are not covered by insurance, other than those attributable to the
Advisor’s bad faith, willful misfeasance, gross negligence or reckless disregard
of the duties of the Advisor hereunder; and the Advisor will indemnify and hold
harmless the Trust, each Trustee and each shareholder individually from and
against any liabilities, claims, damages, costs or expenses incurred by reason
of acts on the part of the Advisor, its directors, officers or employees
constituting bad faith, willful misfeasance, gross negligence or reckless
disregard of the duties of the Advisor hereunder. The Advisor assumes no
responsibility under this Contract other than to render the services called for
hereunder in good faith and shall not be responsible for any action of the
Trustees in following or declining to follow any advice or recommendation of the
Advisor.

 

B. Anything in this Contract to the contrary notwithstanding, the Advisor shall
not have or make any claim under, by reason of, or in connection with this
Contract against the Trustees personally or the shareholders of the Trust, but
shall look solely to the property of the Trust for the payment of any such
claim. The Advisor hereby acknowledges that it is familiar with the Declaration
of Trust of the Trust as amended and in particular the provisions thereof
relating to the non-liability of shareholders and Trustees, to which reference
is hereby made.

 

6. Other Transactions.

 

A. Any individual, including any director, officer, shareholder or employee of
the Advisor, may serve as a Trustee, officer, attorney, agent or employee of the
Trust and may be compensated by the Trust for his services rendered in any such
capacity. However, the Advisor shall not for its own account, knowingly,
directly or indirectly, purchase or otherwise acquire any property from, or
sell, assign, lease, or make any other transfer or other disposition to the
Trust or enter into any agreement to lend any assets or property to the Trust,
or borrow any assets or property from the Trust, nor shall any director,
officer, shareholder or employee of the Advisor or any corporation, partnership,
trust or other entity with which a director, officer, shareholder or employee of
the Advisor is affiliated by reason of being a trustee of, partner with or owner
of more than one percent (1%) equity interest therein, directly or indirectly
purchase or otherwise acquire any property from, or sell, assign, lease or make
any other transfer or other disposition to, the Trust. Notwithstanding the
prohibitions in the preceding sentence, the following transactions are
permitted: (1) those between the Trust and Chevy Chase Bank, F.S.B. and its
subsidiaries; (2) those designed to accord the Trust the rights granted under
subparagraph 6.B. herein; and (3) those which have been approved, as fair and
reasonable to the Trust’s shareholders, by a majority of the Trust’s Independent
Trustees who are not otherwise connected with the transactions in question.

 

Nothing in the foregoing part of this subparagraph 6.A. shall be deemed to
prevent the Advisor, an affiliate thereof, or any corporation or other
enterprise in which the Advisor, its directors, officers, shareholders or
employees may own more than one percent (1%) equity interest therein, from
entering into business relationships (including joint ventures or partnerships)
with corporations or any other enterprises that may from time to time have
dealings with the Trust provided such interest is disclosed prior to any such
dealings.

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B. Nothing in this Contract shall limit or restrict the right of the Advisor or
any officer or employee of the Advisor, irrespective of whether he is also a
Trustee, officer or employee of the Trust, to engage in any other business or to
render services of any kind to any other partnership, corporation, firm,
individual or association. It is specifically understood and agreed that
affiliates of the Advisor are engaged, and will continue to engage, on behalf of
themselves and as agents, employees or officers for others in the business of
originating and servicing mortgage loans, the development of residential,
commercial and industrial properties, and all other phases of the general real
estate and mortgage banking business. However, before the Advisor or its
officers and directors may make or acquire any loan secured by a mortgage or any
other interest in real estate, or make or acquire any equity or other investment
in real estate for their own account or present or recommend it to others, they
are obligated to present such investment opportunity to the Trust if (i) such
opportunity is within the Trust’s current business plan, investment objectives
and policies, (ii) such opportunity is of a character that could be taken by the
Trust, and (iii) the Trust has the financial resources to take advantage of such
opportunity.

 

7. Term and Termination.

 

A. Subject to the cancellation provision in subparagraph 7.C below, this
Contract shall be in force until September 30, 2006, and shall continue
thereafter from year to year unless cancelled by either party at the end of any
contract year, upon written notice, given at least sixty (60) days prior to the
end of any such contract year.

 

B. This Contract shall terminate automatically in the event of its assignment by
the Advisor without the written consent of the Trust and shall not be assignable
by the Trust without the written consent of the Advisor, except in the case of
assignment by the Trust of substantially all of its operations and assets to a
corporation or other organization that is a successor to the Trust, and such
successor organization shall be bound hereunder and by the terms of said
assignment in the same manner as the Trust hereunder.

 

C. This Contract shall be terminated immediately upon written notice of
termination given by the Trust in the event that (a) the Advisor shall violate
any material provision of this Contract and upon written notice of such
violation, shall not cure such default within thirty (30) days or (b) the
Advisor shall be adjudged bankrupt or insolvent by a court of competent
jurisdiction or an order shall be made by a court of competent jurisdiction for
the appointment of a receiver of the Advisor and any such adjudication or order
shall remain in force or unstayed for a period of thirty (30) days.

 

D. From and after the effective date of termination of this Contract pursuant to
subparagraphs 7.A, 7.B or 7.C hereof, the Advisor shall not be entitled to
compensation under paragraph 3 herein for further services but shall be entitled
to compensation for services performed for the Trust prior to the effective date
of termination. Nothing in this paragraph shall affect the right of the Advisor
or its affiliates to receive compensation under the separate contractual
agreements referred to in paragraph 4.B. herein. Upon such termination, the
Advisor shall forthwith:

 

(1) Pay over to the Trust all money collected and held for the account of the
Trust pursuant to this Contract, after deducting any accrued compensation and
reimbursement for its expenses to which it is then entitled;

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(2) Deliver to the Trust 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 Trust; and

 

(3) Deliver to Trust all property, investments, papers, documents, records and
other materials of the Trust then in custody of the Advisor.

 

E. In the event of the termination of this Contract, the Advisor will cooperate
with the Trust and take all reasonable steps requested to assist the Trust in
making an orderly transition of the advisory function. If Advisor’s cooperation
extends past the termination of this Contract, the Trust shall pay the Advisor
reasonable compensation for such post-termination transition services.

 

8. Other Matters

 

A. Any notice, report or other communication required or permitted to be given
hereunder shall be in writing and, unless some other method of giving such
notice, report or other communication is accepted by the party to whom it is
given, shall be deemed to have been duly given or made as of the date delivered
or sent if delivered personally or sent by facsimile (providing confirmation of
transmission) or sent by prepaid overnight carrier (providing proof of delivery)
to the parties at the following addresses or facsimile numbers (or at such other
addresses or facsimile numbers as shall be specified by the parties by like
notice):

 

The Trust:    B. F. Saul Real Estate Investment Trust      7501 Wisconsin Avenue
     Suite 1500      Bethesda, Maryland 20814      Fax: 301.986-6023      Attn:
Secretary The Advisor:    B. F. Saul Company      7501 Wisconsin Avenue     
Suite 1500      Bethesda, Maryland 20814      Fax: 301.986.6023      Attn:
Secretary

 

Either party may at any time give notice in writing to the other party that it
wishes to change its address and facsimile number for the purpose of this
paragraph.

 

B. This Contract shall not be changed, modified, terminated or discharged in
whole or in part except by an instrument in writing signed by both parties
hereto.

 

C. This Contract shall bind any successors or permitted assigns of the parties
hereto.

 

D. The provisions of this Contract shall be construed and interpreted in
accordance with the laws of the State of Maryland in effect at the time (without
giving effect to the application of choice of law provisions that could result
in the application of the law of any other jurisdiction).

 

E. This Contract shall become effective as of the date first written above.

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IN WITNESS WHEREOF, the Advisor and the Trust have caused this Contract to be
executed by their duly authorized officers as of the date first written above.

 

B.F. SAUL COMPANY By:  

/s/ B. Francis Saul II

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Name:   B. Francis Saul II Title:   President B.F. SAUL REAL ESTATE INVESTMENT
TRUST By:  

/s/ B. Francis Saul III

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Name:   B. Francis Saul III Title:   Senior Vice President

 

Accepted and agreed solely with respect to Section A hereof as of the date first
written above.

 

B.F. SAUL ADVISORY COMPANY, L.L.C. By:  

/s/ Patrick T. Connors

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Name:   Patrick T. Connors Title:   Senior Vice President