Document:

Exhibit

	
					
	 

Exhibit 10.1

CREE, INC.
CHANGE IN CONTROL AGREEMENT
(for Section 16 Officers other than the Chief Executive Officer)

THIS AGREEMENT (the “Agreement”) is entered into on this 13th day of July, 2016 (the “Effective Date”), between Cree, Inc. (the “Company”) and Frank Plastina (“Executive”).

In consideration of the mutual covenants and agreements hereinafter set forth and intending to be legally bound hereby, the parties hereto agree as follows:
1.Duties and Scope of Employment.

(a)Positions and Duties.  Executive will continue to serve as Interim Executive Vice President and General Manager Power/RF, reporting to the Company’s Chief Executive Officer and President (“CEO”).  Executive will render such business and professional services in the performance of Executive’s duties, consistent with Executive’s positions within the Company, as will reasonably be assigned to him by the CEO.  The period Executive is employed by the Company as a Section 16 Officer is referred to herein as the “Employment Term”.  The term “Section 16 Officer” means a Company employee who is designated by the Company, at its discretion and consistent with applicable law, as being subject to the reporting requirements of Section 16 of the Securities Exchange Act of 1934, as amended.

(b)Obligations.  During the Employment Term, Executive will devote Executive’s full business efforts and time to the Company.  For the duration of the Employment Term, Executive agrees not to actively engage in any other employment, occupation, or consulting activity for any direct or indirect remuneration without the prior approval of the CEO (which approval will not be unreasonably withheld); provided, however, that Executive may, without the approval of the CEO, serve in any capacity with any civic, educational, or charitable organization, provided such services do not interfere with Executive’s obligations to Company.

2.At-Will Employment.  Executive and the Company agree that Executive’s employment with the Company constitutes “at-will” employment.  Executive and the Company acknowledge that this employment relationship may be terminated at any time, upon written notice to the other party, with or without good cause or for any or no cause, at the option either of the Company or Executive.  However, as described in this Agreement, Executive may be entitled to severance benefits depending upon the circumstances of termination of Executive’s employment.  Executive agrees to resign from all positions held with the Company and its affiliates immediately following the termination of Executive’s employment as a Section 16 Officer if the Company's Board of Directors (the "Board") or the CEO so requests.

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3.Term of Agreement.  This Agreement shall commence on the Effective Date and shall continue for the duration of the Employment Term.  The CEO or the Compensation Committee of the Board of Directors (the “Committee”) or the Executive may discontinue the Executive’s status as a Section 16 Officer, thereby terminating the Employment Term and this Agreement, at any time.  Notwithstanding any contrary provision in this Section 3, (i) in the event of the commencement of a tender offer or the Company and another party enter into a written agreement that contemplates a transaction, the consummation of either of  which would result in a Change in Control as defined in Subsection (i)-(vi) of such definition, this Agreement will continue until the occurrence of either the resulting Change in Control or the termination or expiration of the tender offer or the written agreement without the occurrence of a Change in Control, whichever comes first, and (ii) in the event a Change in Control (including without limitation a resulting Change in Control as described in the preceding clause (i)) occurs during the Employment Term, this Agreement will continue for not less than twelve (12) months after the date of the Change in Control.  

4.Compensation.

(a)Base Salary.  As of the Effective Date, the Company will pay Executive an annual salary in an amount determined by the Committee as compensation for Executive’s services (such annual salary, as is then effective, to be referred to herein as “Base Salary”).  The Base Salary will be paid periodically in accordance with the Company’s normal payroll schedule and practices and be subject to the usual, required withholdings.  Executive’s salary will be subject to review by the Committee not less than annually, and adjustments will be made in the discretion of the Committee.

(b)Incentive Compensation.  Executive will be eligible to receive incentive compensation payable for the achievement of individual performance goals established by the CEO and corporate performance goals established by the Committee.  The Committee will determine Executive’s annual target incentive award level.  The actual earned incentive, if any, payable to Executive for any fiscal period of the Company will depend upon the extent to which the applicable performance goal(s) are achieved.  For each fiscal quarter of the Company, the CEO will establish applicable individual performance goal(s).  For each fiscal year of the Company, the Committee will establish applicable corporate performance goal(s).  Executive’s incentive compensation will be subject to the terms and conditions of the Company’s incentive plan or arrangement designated by the Committee for this purpose, including but not limited to continued employment requirements and payment date terms that are designed to cause the incentive compensation to be exempt from or in compliance with Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and the guidance thereunder (collectively “Section 409A”).

(c)Long-Term Incentive.  Executive will be eligible to receive long-term incentives subject to terms and conditions established by the Committee, the underlying Cree, Inc. 2004 Long-Term Incentive Compensation Plan, the 2013 Long-Term Incentive Compensation Plan or any successor plan thereto, and the Committee’s terms and conditions for the applicable type of award, including vesting criteria such as continued service or performance objectives.

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5.Employee Benefits.  Executive will be eligible to participate in all Company employee benefit plans, policies, and arrangements that are applicable to other executive officers of the Company in accordance with the terms of such plans, policies, and arrangements as may exist from time to time.  

6.Expenses.  The Company will reimburse Executive for reasonable travel, entertainment, and other expenses incurred by Executive in the furtherance of the performance of Executive’s duties hereunder, in accordance with the Company’s expense reimbursement policy as in effect from time to time.  To the extent that any such reimbursement does not qualify for exclusion from Federal income taxation, the Company will make the reimbursement only if the corresponding expense is incurred during the term of this Agreement and the reimbursement is made on or before the last day of the calendar year following the calendar year in which the expense is incurred, the amount of expenses eligible for such reimbursement during a calendar year will not affect the amount of expenses eligible for such reimbursement in another calendar year, and the right to such reimbursement is not subject to liquidation or exchange for another benefit from the Company.

7.Termination of Employment.  In the event of Executive’s Termination of Employment with the Company, Executive will be entitled to any (a) unpaid Base Salary accrued up to the date of such Termination of Employment (the “Termination Date”) paid in accordance with the schedule specified in Section 4(a) above, (b) any incentive compensation that is earned as of Executive’s Termination Date in accordance with the terms and conditions of the applicable incentive plan or arrangement but has not yet been paid, which amount, if any, will be paid in accordance with the terms and conditions of the applicable incentive arrangement, (c) pay for accrued but unused vacation that the Company is legally obligated to pay Executive, which amount will be paid in the first regular payroll cycle occurring after the Termination Date, except as provided in Section 8(b) below, (d) benefits or compensation as provided under the terms of any employee benefit and compensation agreements or plans applicable to Executive, (e) unreimbursed business expenses required to be reimbursed to Executive, which amount, if any, will be paid in accordance with Section 6 above, and (f) rights to indemnification Executive may have under the Company’s Articles of Incorporation, Bylaws, this Agreement, or a separate indemnification agreement, as applicable.  In addition, if during the Employment Term, the Termination of Employment is initiated by the Company without Cause or by Executive for Good Reason, and the Termination of Employment is In Connection with a Change in Control, Executive will be entitled to the amounts and benefits specified in Section 8(a) below.  If, however, during the Employment Term, the Termination of Employment is initiated by the Company with Cause or by Executive not for Good Reason, or the Termination of Employment is not In Connection with a Change in Control, Executive will be entitled only to those amounts and benefits, if any, specified in Section 8(d), below.  For purposes of clarity, a Termination of Employment initiated by the Company without Cause or by the Executive for Good Reason in connection with a sale of assets constituting a Change in Control in which the Successor does not assume the Company’s obligations under this Agreement, will constitute a Termination of Employment In Connection with a Change in Control for which Executive will be entitled to the amounts and benefits specified in Section 8(a) below.

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8.Severance.

(a)Change in Control Benefits.  If Executive’s Termination of Employment is initiated by the Company without Cause or by Executive for Good Reason during the Employment Term, and if, but only if, the Termination of Employment during the Employment Term is In Connection with a Change in Control (but not by the Company in connection with the death or LTD Disability of Executive or in connection with a sale of assets constituting a Change in Control in which the Successor employs Executive and assumes the Company’s obligations under this Agreement), then, subject to Section 9, Executive will receive: 

(i)continued payment of Base Salary for twenty-four (24) months, paid in accordance with the schedule specified in Section 4(a) above, but commencing within thirty (30) days following Termination of Employment with payments retroactive to that date, except as provided in Section 8(b) below;

(ii)a lump sum payment equal to two (2) times Executive’s target annual incentive award (consisting of both the individual performance component and the corporate performance component) for the fiscal year in which the Termination Date occurs, paid within ninety (90) days following the Termination Date, except as provided in Section 8(b) below;

(iii)a lump sum payment equal to twenty-four (24) multiplied by the COBRA premium in effect for the type of medical, dental and vision coverage in effect for Executive (e.g., family coverage vs. employee-only coverage) at the time of Executive’s Termination of Employment, paid within ninety (90) days following the Termination Date, except as provided in Section 8(b) below; and

(iv)full accelerated vesting with respect to Executive’s then outstanding, unvested stock options, time-vested restricted stock awards and other equity awards that vest solely based on the passage of time, as well as, for the purpose of this subsection only, the $3,000,000 in equity value promised in Executive’s offer letter with the Company, which equity value has not been issued to the Executive as of the Effective Date of this Agreement but shall be paid out in cash if this Section 8(a) is triggered, less the amount of equity value actually granted to Executive in the Company’s 2016 fiscal year (with such equity value determined in accordance with the Company’s standard practices at the time of grant)(for the avoidance of doubt, any such then outstanding, unvested stock options, time-vested restricted stock awards and other equity awards that vest solely based on the passage of time actually granted to Executive in the Company’s 2016 fiscal year shall accelerate pursuant to the first clause of this Section 8(a)(iv));

A termination for “Good Reason” has not occurred and is not and may not be triggered (either at the time of consummation of the transaction or within the timeframes specified in the definition of “In Connection with a Change in Control”) by a transaction that would constitute (i) the initial public offering of the stock of a Business Unit of the Company; or (ii) the sale, transfer or other disposition of a substantial portion of the stock or assets of the Company or a Business Unit or a similar transaction unless 

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the Board, in each case, in its sole discretion, has determined such transaction to constitute a Change in Control.  Notwithstanding the foregoing, in connection with a transaction that has been determined to be a Change in Control by the Board, but the Company offers the Executive employment with the Company in another Business Unit (or with the Company generally), on such terms and conditions as may be determined by the Company in its sole discretion, so long as the pay and benefits for Executive are substantially similar prior to such Change in Control (without any regard as to the title, job, duties, reporting relationship or authorities of Executive in his/her new role), no amount will be payable for a Change in Control based upon this Section 8(a), and thereafter, such new job title, duties, reporting relationship, authorities, pay and benefits shall control for the purposes of this Agreement with respect to any subsequent termination of Executive.  Furthermore, for the avoidance of doubt, Good Reason cannot be triggered, and therefore shall not be capable of applying to Executive under this Section 8(a), if (a) his/her employment is not primarily with and for the Business Unit that is sold (as described in the preceding sentence) or (b) the Executive’s job duties and responsibilities are not materially diminished after a sale of the stock or assets of a Business Unit (and a reduction in the aggregate asset size of the Company as a result of a sale of the stock or assets of a Business Unit shall not alone constitute a diminution in the Executive’s job duties and responsibilities).

(b)Section 409A Payment Provisions; Possible Payment Delay in Event Executive is a Specified Employee.  For purposes of Section 409A, each installment payment of severance specified in Sections 7(c) and 8(a)(i), (ii) and (iii) above is a separate payment; all payments specified in Sections 7(c) and 8(a)(i), (ii) and (iii) above made through the date that is 2-1⁄2 months following the later of the last day of the calendar year containing the Termination Date and the last day of the Company’s fiscal year containing the Termination Date  (the “Short-Term Deferral Deadline”) are intended to be exempt from Section 409A under the short-term deferral rule;  all such payments made after the Short Term Deferral Deadline are intended to be exempt from Section 409A under the severance pay exemption specified in Treasury Regulation §1.409A- 1(b)(9)(iii) (the “Severance Pay Exemption”); in the event that Executive is a Specified Employee on the Termination Date, all such payments made after the Short Term Deferral Deadline, that exceed the limits of the Severance Pay Exemption, and that would be paid earlier than the Six-Month Delay Payment Date will be delayed until the Six-Month Delay Payment Date to the extent required to satisfy Subsection 409A(a)(2)(B)(i) of the Code; on that date, the Company will pay Executive a lump sum consisting of all payments that would have been paid to Executive prior to the Six-Month Delay Payment Date had Executive not been a Specified Employee, increased for interest at the short-term Federal rate in effect on the Termination Date for the period beginning on the date each component of such lump sum would have been paid had Executive not been a Specified Employee and ending on the Six-Month Delay Payment Date; however, if Executive dies after the Termination Date but before such lump sum payment is made, it will be paid to Executive’s estate without regard to any six-month delay that otherwise applies to Specified Employees.

(c)Parachute Payment Limitation. Notwithstanding the provisions of Section 8(a) above, if (i) any payments or benefits received or to be received by 

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Executive, whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company or any person whose actions result in a Change in Control, constitute "parachute payments" (such payments or benefits being hereinafter referred to as the "Parachute Payments") within the meaning of Section 280G(b)(2) of the Code, and (ii) the aggregate present value of the Parachute Payments reduced by any excise tax imposed under Section 4999 of the Code (or any similar tax that may hereafter be imposed) (the "Excise Tax") would be less than 3 times Executive's "base amount" as defined in Section 280G(b)(3) of the Code, then, in lieu of that portion of the Parachute Payments to which Executive would otherwise be entitled under subsections (i), (ii), and (iii) of Section 8(a) above, the Company shall pay Executive an amount (if any) such that the aggregate present value of the Parachute Payments is equal to 2.99 times such base amount (the resulting amount that is payable under subsections (i), (ii), and (iii) of Section 8(a) is the "Capped Amount"). The Capped Amount shall be apportioned and substituted for the amounts that would otherwise have been payable under subsections (i), (ii), and (iii) of Section 8(a) above but for this Section 8(c) on a prorata basis, and each such amount shall be paid at the time specified in the corresponding subsection of Section 8(a) above except as provided in Section 8(b) above. For this purpose, proration shall be accomplished by multiplying each amount that would otherwise have been payable under subsections (i), (ii), and (iii) of Section 8(a) above but for this Section 8(c) by a fraction, the numerator of which is the Capped Amount and the denominator of which is the aggregate amount that would otherwise have been payable under subsections (i), (ii), and (iii) of Section 8(a) but for this Section 8(c). For purposes of this Section 8(c), the base amount, the present value of the Parachute Payments, the amount of the Excise Tax and all other appropriate matters shall be determined by the Company’s independent auditors in accordance with the principles of Section 280G of the Code and based upon the advice of tax counsel selected by such auditors.

(d)Voluntary Termination without Good Reason; Termination for Cause.  If Executive’s employment with the Company terminates voluntarily by Executive without Good Reason or is terminated for Cause by the Company, then, except as provided in Section 7, (i) all further vesting of Executive’s outstanding equity awards will terminate immediately, and Executive’s outstanding equity awards will terminate in accordance with the terms and conditions of the applicable award agreement(s), (ii) all payments of compensation by the Company to Executive hereunder will terminate immediately, and (iii) Executive will be entitled to receive benefits, including severance benefits, only in accordance with the Company’s then established plans, programs, and practices other than this Agreement.

(e)Termination due to Death or LTD Disability.  If Executive’s employment is terminated by reason of Executive’s death or LTD Disability, then, except as provided in Section 7, (i) Executive’s outstanding equity awards will vest and terminate in accordance with the terms and conditions of the applicable award agreement(s); (ii) all payments of compensation by the Company to Executive hereunder will terminate immediately, and (iii) Executive will be entitled to receive benefits, including severance benefits, only in accordance with the Company’s then established plans, programs, and practices other than this Agreement. 

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(f)Sole Right to Severance.  This Agreement is intended to represent Executive’s sole entitlement to severance payments and benefits in connection with a termination of Executive’s employment In Connection with a Change in Control, except for such payments and benefits to which Executive would be entitled as an employee of the Company in the absence of this Agreement.

9.Conditions to Receipt of Severance; No Duty to Mitigate.  

(a)Separation Agreement and Release of Claims.  The receipt of any severance pursuant to Section 8 will be subject to Executive signing and not revoking a release of claims in substantially the form attached as Exhibit A, but with any appropriate modifications, reflecting changes in applicable law, as are necessary or appropriate to provide the Company with the protection it would have if the release were executed as of the Effective Date.  No severance will be paid or provided unless and until the release of claims is timely executed and returned by Executive to the Company, becomes effective and has not been timely revoked in accordance with the terms thereof prior to the date on which severance payments are required to commence under Section 8.  The Company will complete and provide to Executive the release of claims in sufficient time so that if Executive timely executes and returns it, the revocation period will expire before severance payments are required to commence under Section 8.

(b)Nondisparagement.  As a condition to receipt of severance, during the Employment Term and for twelve (12) months thereafter, Executive will not knowingly disparage, criticize, or otherwise make any derogatory statements regarding the Company, its directors, or its officers.  The foregoing restrictions will not apply to any statements that are made truthfully in response to a subpoena or other compulsory legal process.

(c)Other Requirements.  Executive’s receipt of continued severance payments will be subject to Executive continuing to comply with the terms of the Confidential Information Agreement.

(d)No Duty to Mitigate.  Executive will not be required to mitigate the amount of any payment contemplated by this Agreement, nor will any earnings that Executive may receive from any other source reduce any such payment.

(e)Generally Disabled; LTD Disability.  The provisions of this Section 9(e) will control in the event of conflict between this Section 9(e) and any other language in this Agreement.  If Executive becomes Generally Disabled during the Employment Term, the Company will not be in breach of this Agreement and Executive will not be entitled to severance pursuant to Section 8(a) on account of the Company, in its sole discretion, taking any action that would otherwise be considered Good Reason under Section 10(i) below provided that such action remains in effect only for so long as Executive remains Generally Disabled.  If Executive is Generally Disabled for more than ninety-one (91) days (whether or not consecutive) in a rolling twelve (12) month period, the Company will not be in breach of this Agreement and Executive will not be entitled to severance per Section 8(a) on account of the Company permanently taking any action that would otherwise be considered Good Reason under Section 10(i) below.  If Executive is 

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Generally Disabled during the Employment Term and the Company terminates Executive’s employment without Cause prior to the date that he is determined to have an LTD Disability, such termination will be considered Termination of Employment by the Company without Cause for purposes of Section 8(a) of this Agreement; provided that, in such circumstances, Executive will only be eligible for the severance benefits set forth in items (i), (ii) and (iii) of Section 8(a) of this Agreement.  If Executive ceases to be Generally Disabled before Executive’s employment is terminated by reason of LTD Disability, subject to the notice and cure provisions in Section 10(i), for purposes of Section 8(a) of this Agreement Executive will have the right to terminate Executive’s employment for Good Reason (if the Termination of Employment is In Connection with a Change in Control) on account of any event or circumstances that occurred while Executive was Generally Disabled that would otherwise have constituted Good Reason except for the provisions of this Section 9(e) unless such event or circumstances has already been cured by the Company or consented to by Executive; provided that, in such circumstances, Executive will only be eligible for the severance benefits set forth in items (i), (ii) and (iii) of Section 8(a) of this Agreement.  Notwithstanding any language herein to the contrary, nothing in this paragraph creates a right to severance benefits other than if Executive’s Termination of Employment is during the Employment Term In Connection with a Change in Control. 

10.Definitions.  

(a)Act.  For purposes of this Agreement, “Act” means the Securities Exchange Act of 1934, as now in effect or as hereafter amended.

(b)Benefit Plans.  For purposes of this Agreement, “Benefit Plans” means plans, policies, or arrangements that the Company sponsors (or participates in) and that immediately prior to the Termination Date provide Executive, Executive’s spouse, and/or Executive’s eligible dependents with medical, dental, or vision benefits.  The term “Benefit Plans” does not include plans, policies, or arrangements providing for any other type of benefit (including, but not by way of limitation, financial counseling, disability, life insurance, or retirement benefits).

(c)Business Unit.  For purposes of this Agreement, “Business Unit” shall mean a subsidiary or a business division or business segment of the Company in which the Executive is primarily employed.  For the avoidance of doubt, a Change in Control pursuant to Section 10(e)(vi) shall not apply to Executive if his/her employment is not primarily with and for the Business Unit that is sold.

(d)Cause.  For purposes of this Agreement, “Cause” means (i) Executive’s willful and continued failure to perform the duties and responsibilities of Executive’s position that is not corrected after one written warning detailing the concerns and offering Executive a reasonable period of time to cure; (ii) any material and willful violation of any federal or state law by Executive in connection with Executive’s responsibilities as an employee of the Company; (iii) any act of personal dishonesty taken by Executive in connection with Executive’s responsibilities as an employee of the Company with the intention or reasonable expectation that such may result in personal enrichment of 

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Executive; (iv) Executive’s conviction of, or plea of nolo contendere to, or grant of prayer of judgment continued with respect to, a felony that the Board reasonably believes has had or will have a material detrimental effect on the Company’s reputation or business; or (v) Executive materially breaching Executive’s Confidential Information Agreement, which breach is (if capable of cure) not cured within thirty (30) days after the Company delivers written notice to Executive of the breach.

(e)Change in Control.  For purposes of this Agreement, a “Change in Control” will be deemed to have occurred upon the happening of any of the following events: 

(i)Any “Person” as defined in Section 3(a)(9) of the Act, including a “group” (as that term is used in Sections 13(d)(3) and 14(d)(2) of the Act), but excluding the Cree Entities and any employee benefit plan sponsored or maintained by the Cree Entities (including any trustee of such plan acting as trustee), who together with its “affiliates” and “associates” (as those terms are defined in Rule 12b-2 under the Act) becomes the “Beneficial Owner” (within the meaning of Rule 13d-3 under the Act) of more than 50% of the then-outstanding shares of common stock of the Company or the combined voting power of the then-outstanding securities of the Company entitled to vote generally in the election of its directors. For purposes of calculating the number of shares or voting power held by such Person and its affiliates and associates under this clause (i), there shall be excluded any securities acquired by such Person or its affiliates or associates directly from the Cree Entities.

(ii)A sale or other disposition of all or substantially all of the Company’s assets is consummated, other than such a sale or disposition that would not have constituted a Change of Control under clause (iv) below had it been structured as a merger or consolidation.

(iii)The shareholders of the Company approve a definitive agreement or plan to liquidate the Company.

(iv)A merger or consolidation of the Company with and into another entity is consummated, unless immediately following such transaction (1) more than 50% of the members of the governing body of the surviving entity were Incumbent Directors (as defined in clause (v) below) at the time of execution of the initial agreement providing for such transaction, (2) no “Person” (as defined in clause (i) above), together with its “affiliates” and “associates” (as defined in clause(i) above), is the “Beneficial Owner” (as defined in clause (i) above), directly or indirectly, of more than 50%  of the then-outstanding equity interests of the surviving entity or the combined voting power of the then-outstanding equity interests of the surviving entity entitled to vote generally in the election of members of its governing body, and (3) more than 50% of the then-outstanding equity interests of the surviving entity and the combined voting power of the then-outstanding equity interests of the surviving entity entitled to vote generally in the election of members of its governing body is “Beneficially Owned”, directly or indirectly, by all or substantially all of the individuals and entities who were the “Beneficial Owners” of the shares of common stock of the Company immediately prior 

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to such transaction in substantially the same proportions as their ownership immediately prior to such transaction.

(v)During any period of 24 consecutive months during the Employment Term, the individuals who, at the beginning of such period, constitute the Board (the “Incumbent Directors”) cease for any reason other than death to constitute at least a majority thereof; provided, however, that a director who was not a director at the beginning of such 24 month period shall be deemed to have satisfied such 24 month requirement, and be an Incumbent Director, if such director was elected by, or on the recommendation of or with the approval of, at least two-thirds of the directors who then qualified as Incumbent Directors either actually, because they were directors at the beginning of such 24 month period, or by prior operation of this clause (v), but excluding for this purpose any such individual whose initial assumption of office is in connection with an actual or threatened election context subject to Rule 14a-11 of Regulation 14A promulgated under the Act or other actual or threatened solicitation of proxies or consents by or on behalf of a “Person” (as defined in clause(i) above) other than the Board.

(vi)The sale, transfer or other disposition of a substantial portion of the stock or assets of the Company or a Business Unit or a similar transaction as the Board, in each case, in its sole discretion, may determine to be a Change in Control; provided, however, that the term “Change in Control” shall not include (i) a transaction the sole purpose of which is to change the state of the Company’s incorporation; or (ii) the initial public offering of the stock of a Business Unit of the Company, and any subsequent sell down of the stock of the Business Unit by the Company.

(f)Confidential Information Agreement.  For purposes of this Agreement, “Confidential Information Agreement” shall refer to the version of Employee Agreement Regarding Confidential Information, Intellectual Property, and Noncompetition in effect for Executive as of the relevant date; provided that, with respect to Executive’s post-termination obligations, it shall refer to the version of such agreement in effect as of Executive’s Termination Date.

(g)Cree Entities.  For purposes of this Agreement, “Cree Entities” means the Company and its successors and assigns as well as any corporation which is a member of a controlled group of corporations (as defined in Section 414(b) of the Code, as modified by Section 415(h) of the Code) which includes the Company; any trade or business (whether or not incorporated) which is under common control (as defined in Section 414(c) of the Code, as modified by Section 415(h) of the Code) with the Company; any organization (whether or not incorporated) which is a member of an affiliated service group (as defined in Section 414(m) of the Code) which includes the Company; and any other entity required to be aggregated with the Company pursuant to regulations under Section 414(o) of the Code. 

(h)Generally Disabled.  For purposes of this Agreement, “Generally Disabled” means that Executive is unable, with reasonable accommodation, to perform the material and substantial duties of Executive’s position due to illness or injury or 

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physical or mental incapacity as determined by the Committee consistent with its obligations to the Company’s shareholders.  

(i)Good Reason.  For purposes of this Agreement, except as provided in Section 8(a)(iv) or Section 9(e) above, “Good Reason” means the occurrence of any of the following, without Executive’s consent and not due to Cause, within the timeframes specified in the definition of “In Connection with a Change in Control”: (i) a material reduction in  Executive's authority, duties or responsibilities;  (ii) a material reduction in Executive's base salary, other than a one-time reduction that also is applied to substantially all other executive officers of the Company, provided that Executive's reduction is substantially proportionate to the reduction applied to substantially all other executive officers; (iii) the Company requiring Executive to report to anyone other than the CEO (or an acting Chief Executive Officer in the event of the Chief Executive Officer’s absence), the Board, a committee of the Board, or a chief executive officer or General Manager of a Business Unit, if Executive was reporting to such person on the Effective Date of this Agreement; or  (iv)  the Company requiring Executive to relocate Executive’s principal place of business or the Company relocating its headquarters, in either case to a facility or location outside of a thirty-five (35) mile radius (or such longer distance that is the minimum permissible distance under the circumstances for purposes of the involuntary separation from service standards under the Treasury Regulations or other guidance under Section 409A of the Code) from Executive’s current principal place of employment; provided, however, that Executive will only have Good Reason if he provides notice to the Chief Executive Officer of the existence of the event or circumstances constituting Good Reason specified in any of the preceding clauses within ninety (90) days of the initial existence of such event or circumstances and if such event or circumstances is not cured within thirty (30) days after Executive gives such written notice.  If Executive initiates Termination of Employment for Good Reason, the actual Termination of Employment must occur within thirty (30) days after expiration of the cure period.  Executive’s failure to timely give notice of the occurrence of a specific event that would otherwise constitute Good Reason will not constitute a waiver of Executive’s right to give notice of any new subsequent event that would constitute Good Reason that occurs after such prior event (regardless of whether the new subsequent event is of the same or different nature as the preceding event).  Executive’s actions approving in writing (or by such other means as is reliable and verifiable) any change, reduction, requirement or occurrence (that otherwise may be considered Good Reason) in Executive’s role as an officer of the Company will be considered consent for the purposes of this Good Reason definition.

(j)In Connection with a Change in Control.  For purposes of this Agreement, a Termination of Employment with the Company is “In Connection with a Change in Control” if Executive incurs a Termination of Employment during the Employment Term either within (i) the period of time between the commencement of a tender offer or the Company and another party entering into a written agreement that contemplates a transaction the consummation of either of which would result in a Change in Control as defined in Subsections (i), (ii), (iv), (v) or (vi) of such definition and the occurrence of either the resulting Change in Control or the termination or expiration of the tender offer or the written agreement without the occurrence of a Change in Control, or (ii) 

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twelve (12) months following a Change in Control (including without limitation a resulting Change in Control as described in the preceding clause (i)).

(k)LTD Disability.  For purposes of this Agreement, “LTD Disability” will mean that Executive is “Partially Disabled” or “Total Disabled” within the meaning of the Company’s current long-term disability plan (or such similar term or terms in any long-term disability plan of the Company that replaces its current long-term disability plan) and has satisfied the elimination period for benefits eligibility under such plan.

(l)Six-Month Delay Payment Date.  For purposes of this Agreement, “Six-Month Delay Payment Date” means the payment date associated with the first regular payroll cycle after passage of six months following the Termination Date.  

(m)Specified Employee.  For purposes of this Agreement, “Specified Employee” will have the meaning prescribed by Subsection 409A(a)(2)(B)(i) of the Code, as such meaning may be amended from time to time.     

(n)Termination of Employment.  For purposes of this Agreement, “Termination of Employment” will have the meaning as prescribed by Treasury Regulation § 1.409A-1(h)(1)(ii), as such meaning may be amended from time to time.

11.Tax Treatment; Section 409A Compliance.  Executive acknowledges and agrees that the Company has made no representations as to the tax treatment of the compensation and benefits provided pursuant to this Agreement.  This Agreement is designed with the intent that all payments hereunder shall either be exempt from or in compliance with the requirements of Section 409A, and the Agreement shall be interpreted in a manner consistent with that intent.  The parties agree to work together to effectuate the intent of this provision, including but not limited to revising the timing and/or form of any payment hereunder as may be permitted by and necessary to ensure the terms and conditions applicable to such payments comply with Section 409A. 

12.Indemnification.  Subject to applicable law, Executive will be provided indemnification to the maximum extent permitted by the Company’s bylaws and Articles of Incorporation, with such indemnification to be on terms determined by the Board or any of its committees, but on terms no less favorable than provided to any other Company officer or director and subject to the terms of any separate written indemnification agreement.

13.Assignment.  This Agreement will be binding upon and inure to the benefit of (a) the heirs, executors, and legal representatives of Executive upon Executive’s death, and (b) any Successor of the Company.  Any such Successor of the Company will be deemed substituted for the Company under the terms of this Agreement for all purposes.  For this purpose, “Successor” means any person, firm, corporation, or other business entity which at any time, whether by purchase, merger, or otherwise, directly or indirectly acquires all or substantially all of the assets or business of the Company, or of the applicable Business Unit of the Company.  None of the rights of Executive to receive any form of compensation payable pursuant to this Agreement may be assigned or transferred 

12

except by will or the laws of descent and distribution.  Any other attempted assignment, transfer, conveyance, or other disposition of Executive’s right to compensation or other benefits will be null and void.

14.Notices.  All notices, requests, demands, and other communications called for hereunder will be in writing and will be deemed given (a) on the date of delivery if delivered personally, (b) one business day after being sent overnight by a well-established commercial overnight service, or (c) four days after being mailed by registered or certified mail, return receipt requested, prepaid and addressed to the parties or their successors at the following addresses, or at such other addresses as the parties may later designate in writing:
If to the Company:

Attn: Senior Vice President, Administration 
Cree, Inc.
4600 Silicon Drive
Durham, NC 27703
If to Executive:
at the last residential address known by the Company.

15.Severability.  If any provision hereof becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable, or void, this Agreement will continue in full force and effect without said provision.

16.Arbitration.  The Company and Executive agree that any and all disputes arising out of the terms of this Agreement, Executive’s employment by the Company, Executive’s service as an officer or director of the Company, or Executive’s compensation and benefits, their interpretation, and any of the matters herein released, will be subject to binding arbitration in Durham, North Carolina before the American Arbitration Association under its National Rules for the Resolution of Employment Disputes, supplemented by the North Carolina Rules of Civil Procedure.  The Company and Executive agree that the prevailing party in any arbitration will be entitled to injunctive relief in any court of competent jurisdiction to enforce the arbitration award.  The Company and Executive hereby agree to waive their right to have any dispute between them resolved in a court of law by a judge or jury.  This paragraph will not prevent either party from seeking injunctive relief (or any other provisional remedy) from any court having jurisdiction over the Company and Executive and the subject matter of their dispute relating to Executive’s obligations under this Agreement and the Confidential Information Agreement.

17.Expenses of Enforcement.  In the event of a dispute relating to this Agreement arising during the term of Executive’s employment with the Company or within three (3) years following the termination of this Agreement, the Company will reimburse Executive’s fees and expenses as incurred quarterly, including reasonable attorneys’ fees, 

13

in connection with such dispute, provided that (i) Executive provides the Company with written documentation substantiating the amount of such fees and expenses, and (ii) Executive prevails on at least one material issue in such dispute or an arbitrator does not determine that Executive’s legal positions were frivolous or without legal foundation.  The Company will make such reimbursement payments quarterly based on the written substantiation documentation submitted by Executive to the Company during the prior quarter; in no event will any reimbursement be made later than the end of the calendar year next following the calendar year in which the expense was incurred by Executive; Executive must provide such written substantiation in time for the Company to make such reimbursement by such deadline.  In the event Executive does not so prevail or in the event of a determination by the arbitrator that Executive’s legal positions were frivolous or without legal foundation (in either case, a “Resolution”), Executive will repay to the Company any amounts previously reimbursed by it and Executive will reimburse the Company for its fees and expenses, including reasonable attorneys’ fees, incurred in connection with the dispute, both within a reasonable period of time not to exceed sixty (60) days following the date of the Resolution.  The amount of expenses eligible for reimbursement under this Section 17 during a calendar year will not affect the amount of expenses eligible for reimbursement under this Section 17 in another calendar year, and the right to such reimbursement is not subject to liquidation or exchange for another benefit from the Company.  

18.Integration.  This Agreement, together with the Confidential Information Agreement and the standard forms of equity award agreements and grant notices that describe Executive’s outstanding equity awards, represents the entire agreement and understanding between the parties as to the subject matter herein and supersedes all prior or contemporaneous agreements whether written or oral.  No waiver, alteration, or modification of any of the provisions of this Agreement will be binding unless in a writing that is signed by duly authorized representatives of the parties hereto.  

19.Waiver of Breach.  The waiver of a breach of any term or provision of this Agreement, which must be in writing, will not operate as or be construed to be a waiver of any other previous or subsequent breach of this Agreement.

20.Survival.  The Confidential Information Agreement, the Company’s and Executive’s responsibilities under Sections 7, 8, 9, and 11, and Sections 12, 16, and 17 will survive the termination of this Agreement.

21.Headings.  All captions and Section headings used in this Agreement are for convenient reference only and do not form a part of this Agreement.

22.Tax Withholding.  All payments made pursuant to this Agreement will be subject to withholding of applicable taxes.

23.Governing Law.  This Agreement will be governed by the laws of the State of North Carolina (with the exception of its conflict of laws provisions).

14

24.Acknowledgment.  Executive acknowledges that he has had the opportunity to discuss this matter with and obtain advice from Executive’s private attorney, has had sufficient time to, and has carefully read and fully understands all the provisions of this Agreement, and is knowingly and voluntarily entering into this Agreement.

25.Counterparts.  This Agreement may be executed in counterparts, and each counterpart will have the same force and effect as an original and will constitute an effective, binding agreement on the part of each of the undersigned.
IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company by a duly authorized officer, as of the day and year written below.

	
							
	COMPANY:
	 
	 

	 
	 
	 
	 
	 
	 
	 

	CREE, INC.
	 
	 
	 
	 

	 
	 
	 
	 
	 
	 
	 

	 
	 
	 
	 
	 
	 
	 

	/s/ Charles M. Swoboda
	 
	Date:
	 
	July 13, 2016

	Charles M. Swoboda
	 
	 
	 
	 

	Chief Executive Officer and President
	 
	 
	 
	 

	 
	 
	 
	 
	 
	 
	 

	 
	 
	 
	 
	 
	 
	 

	 
	 
	 
	 
	 
	 
	 

	OFFICER:
	 
	 
	 
	 

	 
	 
	 
	 
	 
	 
	 

	/s/ Frank Plastina
	 
	Date:
	 
	July 13, 2016

	Frank Plastina
	 
	 
	 
	 

15Exhibit

Exhibit 10.1
FORM OF
ADVISORY AGREEMENT
This ADVISORY AGREEMENT (this “Agreement”) is entered into on this [●]th day of [●], 2016, by and between COLE OFFICE & INDUSTRIAL REIT (CCIT III), INC., a Maryland corporation (the “Company”), and COLE CORPORATE INCOME ADVISORS III, LLC, a Delaware limited liability company.
W I T N E S S E T H
WHEREAS, the Company intends to issue shares of its Class A common stock, par value $0.01 per share, and its Class T common stock, par value $0.01 per share, to the public, upon registration of such shares with the U.S. Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended from time to time, or any successor statute thereto, as interpreted by any applicable regulations as in effect from time to time (the “Securities Act”);
WHEREAS, the Company intends to qualify as a real estate investment trust and to invest its funds in investments permitted by the terms of the Articles of Incorporation of the Company (and any amendments and/or restatements thereof) filed with the Maryland State Department of Assessments and Taxation in accordance with the Maryland General Corporation Law, as amended from time to time (the “Articles of Incorporation”), and Sections 856 through 860 of the Internal Revenue Code of 1986, as amended from time to time, or any successor statute thereto (the “Code”);
WHEREAS, the Company desires to avail itself of the experience, sources of information, advice, assistance and certain facilities available to Cole Corporate Income Advisors III, LLC, a Delaware limited liability company, any successor advisor to the Company, or any Person to which Cole Corporate Income Advisors III, LLC, or any successor advisor subcontracts all or substantially all of its functions (collectively, the “Advisor”), and to have the Advisor undertake the duties and responsibilities hereinafter set forth, on behalf of, and subject to the supervision of, the Board of Directors of the Company (the “Board”), all as provided herein; and
WHEREAS, the Advisor is willing to undertake to render such services, subject to the supervision of the Board, on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE I
DEFINITIONS
1.01 Definitions. For purposes of this Agreement:
“2%/25% Guidelines” shall mean the requirement pursuant to the NASAA Guidelines that, in any four consecutive fiscal quarters, total Operating Expenses not exceed the greater of 2% of Average Invested Assets during such period or 25% of Net Income over the same period.
“Acquisition Expenses” shall mean any and all expenses incurred by the Company, the Advisor, or any Affiliate of either in connection with the selection, evaluation, structuring, acquisition or development of any Asset, 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, and title insurance premiums.
“Acquisition Fees” shall mean the fees payable to the Advisor pursuant to Section 3.01(b) of this Agreement.
“Advisory Fee” shall mean the fee payable to the Advisor pursuant to Section 3.01(a) of this Agreement.

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“Affiliate” or “Affiliated” shall mean, as to any 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 Person; (ii) any Person 10% or more of whose outstanding voting securities are directly or indirectly owned, controlled, or held, with power to vote, by such other Person; (iii) any Person, directly or indirectly, controlling, controlled by, or under common control with such Person; (iv) any executive officer, director, trustee or general partner of such Person; and (v) any legal entity for which such Person acts as an executive officer, director, trustee or general partner.“Appraised Value” shall mean the implied value of an Asset based upon a valuation made by the Board in its determination of Estimated NAV, conducted by or with the material assistance or confirmation of an Independent Expert. The Appraised Value will be used beginning on the valuation date utilized in determining the Estimated NAV.
“Assets” shall mean Properties, Mortgages and other direct or indirect investments in equity interests in, or loans secured by, Real Property (other than investments in bank accounts, money market funds or other current assets, whether of the proceeds from an Offering or the sale of an Asset or otherwise) owned by the Company, directly or indirectly through one or more of its Affiliates.
“Average Invested Assets” shall mean, for a specified period, the average of the aggregate Values of the Assets during such period, computed by taking the average of such Values at the end of each business day during such period.
“Book Value” shall mean the book value of an Asset calculated in accordance with accounting principles generally accepted in the United States, before reserves for depreciation, amortization, bad debts or other similar non-cash reserves, including any capital improvements and any recognized impairment with respect to such Asset.
“Bylaws” shall mean the bylaws of the Company, as the same are in effect as amended from time to time.
“Change of Control” shall mean any event (including, without limitation, issue, transfer or other disposition of Shares of capital stock of the Company or equity interests in the Partnership, merger, share exchange or consolidation) after which any “person” (as that term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) is or becomes the “beneficial owner” (as defined in Rule 13d-j of the Securities Exchange Act of 1934, as amended), directly or indirectly, of securities of the Company or the Partnership representing greater than 50% or more of the combined voting power of the Company’s or the Partnership’s then outstanding securities, respectively; provided, that, a Change of Control shall not be deemed to occur as a result of any widely distributed public offering of the Shares.
“Class A Shares” shall mean shares of the Company’s Class A common stock, par value $0.01 per share.
“Class T Shares” shall mean shares of the Company’s Class T common stock, par value $0.01 per share.
“Company” shall have the meaning set forth in the Preamble.
“Competitive Real Estate Commission” shall mean a 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 the Property.
“Construction Fee” shall mean a fee or other remuneration for acting as general contractor and/or construction manager to construct improvements, supervise and coordinate projects or to provide major repairs or rehabilitations on a Property.
“Contract Purchase Price” shall mean the amount actually paid or allocated in respect of the purchase, development, construction or improvement of an Asset, or the amount of funds advanced with respect to a Mortgage, exclusive of Acquisition Fees and Acquisition Expenses.
“Contract Sales Price” shall mean the total consideration provided for in the sales contract for the sale of a Property.
“Dealer Manager” shall mean Cole Capital Corporation, an Affiliate of the Advisor, or such Person selected by the Board to act as the dealer manager for an Offering.
“Director” shall mean a member of the Board of Directors.
“Disposition Fees” shall mean the fees payable to the Advisor pursuant to Section 3.01(d) of this Agreement.

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“Distributions” shall mean any dividends or other distributions of money or other property by the Company to owners of Shares, including distributions that may constitute a return of capital for federal income tax purposes.“Estimated NAV” shall mean a per share estimated value of the Company’s shares determined by the Board based on valuations of the assets and liabilities of the Company conducted by, or with the material assistance or confirmation of, an Independent Expert and derived from a methodology that conforms to standard industry practice.
“Financing” shall mean any origination, assumption or refinancing of any indebtedness or obligation.
“Financing Coordination Fee” shall mean the fees payable to the Advisor pursuant to Section 3.01(e) of this Agreement.
“Gross Proceeds” shall mean the aggregate purchase price of all Shares sold for the account of the Company through an Offering, without deduction for Selling Commissions, volume discounts, any marketing support and due diligence expense reimbursements, dealer manager fees, distribution and stockholder servicing fees, or Organization and Offering Expenses. For the purpose of computing Gross Proceeds, the purchase price of any Share for which reduced Selling Commissions or dealer manager fees are paid to the Dealer Manager or a Soliciting Dealer (where net proceeds to the Company are not reduced) shall be deemed to be the full amount of the price per share for such Share pursuant to the Prospectus for such Offering without reduction.
“Independent Director” shall mean a Director who is not, and within the last two years has not been, directly or indirectly associated with the Sponsor or the Advisor by virtue of (i) ownership of an interest in the Sponsor, the Advisor or any of their Affiliates, (ii) employment by the Sponsor, the Advisor or any of their Affiliates, (iii) service as an officer or director of the Sponsor, the Advisor or any of their Affiliates, (iv) performance of services, other than as a Director, for the Company, (v) service as a director or trustee of more than three real estate investment trusts organized by the Sponsor or advised by the Advisor or (vi) maintenance of a material business or professional relationship with the Sponsor, the Advisor or any of their Affiliates. A business or professional relationship is considered “material” per se if the gross revenue derived by the prospective Independent Director from the Sponsor, the Advisor and their Affiliates exceeds 5.0% of either (x) the prospective Independent Director’s annual gross revenue, derived from all sources, during either of the last two years, or (y) the prospective Independent Director’s net worth on a fair market value basis. An indirect relationship with the Sponsor or the Advisor shall include circumstances in which a Director’s spouse, parent, child, sibling, mother- or father-in-law, son- or daughter-in-law, or brother- or sister-in-law is or has been associated with the Sponsor, the Advisor, any of their Affiliates or the Company.
“Independent Expert” shall mean a Person who (i) has no material current or prior business or personal relationship with the Advisor or the Directors and (ii) is engaged to a substantial extent in the business of rendering opinions regarding the value of Assets of the type held by the Company.
“Initial Investment” shall have the meaning set forth in Section 6.11.
“Invested Capital” shall mean the amount calculated by multiplying the total number of Shares purchased by Stockholders by the issue price at the time of such purchase, reduced by the portion of any Distribution that is attributable to Net Sales Proceeds and by any amounts paid by the Company to repurchase Shares pursuant to the Company’s plan for repurchase of Shares.
“Joint Ventures” shall mean the joint venture or partnership arrangements in which the Company or the Partnership is a co-venturer or general partner which are established to acquire or hold Assets.
“Listing” or “Listed” shall mean the approval of the Company’s application to list the Shares by a national securities exchange and the commencement of trading in the Shares on the respective national securities exchange. Upon such Listing, the Shares shall be deemed Listed.
“Market Value” shall mean, upon Listing, the market value of the outstanding Shares, measured by taking the average closing price for a single Share over a period of 30 consecutive trading days, with such period beginning 180 days after Listing, multiplying that number by the number of Shares outstanding on the date of measurement.
“Mortgages” shall mean, in connection with mortgage financing provided, invested in or purchased by the Company, all of the notes, deeds of trust, security interests or other evidences of indebtedness or obligations, which are secured or collateralized by Real Property owned by the borrowers under such notes, deeds of trust, security interests or other evidences of indebtedness or obligations.

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“NASAA Guidelines” shall mean the Statement of Policy Regarding Real Estate Investment Trusts published by the North American Securities Administrators Association, Inc. on May 7, 2007, and in effect on the date hereof.“Net Income” shall mean, 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 any Assets. If the Advisor is paid a Subordinated Performance Fee in connection with a Listing, “Net Income” for purposes of calculating Total Operating Expenses, shall exclude the gain from the Sale of any Assets.
“Net Sales Proceeds” shall mean, in the case of a transaction described in clause (A) of the definition of Sale, the proceeds of any such transaction less the amount of selling expenses incurred by or on behalf of the Company, including all real estate commissions, closing costs and legal fees and expenses. In the case of a transaction described in clause (B) of such definition, Net Sales Proceeds means the proceeds of any such transaction less the amount of selling expenses incurred by or on behalf of the Company, including any legal fees and expenses and other selling expenses incurred in connection with such transaction. In the case of a transaction described in clause (C) of such definition, Net Sales Proceeds means the proceeds of any such transaction actually distributed to the Company from the Joint Venture less the amount of any selling expenses, including legal fees and expenses incurred by or on behalf of the Company (other than those paid by the Joint Venture). In the case of a transaction or series of transactions described in clause (D) of the definition of Sale, Net Sales Proceeds means the proceeds of any such transaction (including the aggregate of all payments under a Mortgage or in satisfaction thereof other than regularly scheduled interest payments) less the amount of selling expenses incurred by or on behalf of the Company, including all commissions, closing costs and legal fees and expenses. In the case of a transaction described in clause (E) of such definition, Net Sales Proceeds means the proceeds of any such transaction less the amount of selling expenses incurred by or on behalf of the Company, including any legal fees and expenses and other selling expenses incurred in connection with such transaction. In the case of a transaction described in the last sentence of the definition of Sale, Net Sales Proceeds means the proceeds of such transaction or series of transactions less all amounts generated thereby which are reinvested in one or more Assets within 180 days thereafter and less the amount of any real estate commissions, closing costs, and legal fees and expenses and other selling expenses incurred by or allocated to the Company in connection with such transaction or series of transactions. Net Sales Proceeds shall also include any consideration (including non-cash consideration such as stock, notes, or other property or securities) that the Company determines, in its discretion, to be economically equivalent to proceeds of a Sale, valued in the reasonable determination of the Company. Net Sales Proceeds shall not include any reserves established by the Company in its sole discretion.
“Offering” shall mean any public offering and sale of Shares pursuant to an effective registration statement filed under the Securities Act, other than Shares offered under any employee benefit plan.
“Operating Expenses” shall mean all costs and expenses paid or incurred by the Company, as determined under generally accepted accounting principles, which are in any way related to the operation of the Company or to Company business, including the Advisory Fee, but excluding (i) the expenses of raising capital such as Organization and Offering Expenses, legal, audit, accounting, underwriting, brokerage, listing, registration, and other fees, printing and other such expenses and tax incurred in connection with the issuance, distribution, transfer, registration and Listing of the Shares, (ii) interest payments, (iii) taxes, (iv) non-cash expenditures such as depreciation, amortization and bad debt reserves, (v) the Subordinated Performance Fee, (vi) Acquisition Fees and Acquisition Expenses, (vii) real estate commissions on the Sale of Property, and (viii) other fees and expenses connected with the acquisition, disposition, management and ownership of real estate interests, mortgage loans or other property (including the costs of foreclosure, insurance premiums, legal services, maintenance, repair and improvement of property).
“Organization and Offering Expenses” shall mean any and all costs and expenses incurred by and to be paid from the Assets in connection with the formation of the Company and the qualification and registration of an Offering, and the marketing and distribution of Shares, including, without limitation, total underwriting and brokerage discounts and commissions (including fees of the underwriters’ attorneys); expenses for printing, engraving and amending registration statements or supplementing prospectuses; mailing and distributing costs; salaries of employees while engaged in sales activity; telephone and other telecommunications costs; all advertising and marketing expenses (including the costs related to investor and broker-dealer sales meetings); charges of transfer agents, registrars, trustees, escrow holders, depositories and experts; and fees, expenses and taxes related to the filing, registration and qualification of the sale of the Shares under federal and state laws, including taxes and fees and accountants’ and attorneys’ fees.“Partnership” shall mean Cole Corporate Income Operating Partnership III, LP, a Delaware limited partnership, through which the Company may own Assets.
“Person” shall mean an individual, corporation, business trust, estate, trust, partnership, limited liability company or other legal entity.

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“Property” or “Properties” shall mean, as the context requires, any, or all, respectively, of the Real Property acquired by the Company, either directly or indirectly (whether through joint venture arrangements or other partnership or investment interests).
“Prospectus” has the meaning set forth in Section 2(10) of the Securities Act, including a preliminary prospectus, an offering circular as described in Rule 253 of the General Rules and Regulations under the Securities Act or, in the case of an intrastate offering, any document by whatever name known, utilized for the purpose of offering and selling securities of the Company to the public.
“Real Property” shall mean land, rights in land (including leasehold interests), and any buildings, structures, improvements, furnishings, fixtures and equipment located on or used in connection with land and rights or interests in land.
“REIT” shall mean a corporation, trust, association or other legal entity (other than a real estate syndication) that is engaged primarily in investing in equity interests in real estate (including fee ownership and leasehold interests) or in loans secured by real estate or both in accordance with Sections 856 through 860 of the Code.
“Restricted Person” shall have the meaning set forth in Section 4.04.
“Sale” or “Sales” shall mean any transaction or series of transactions whereby: (A) the Company or the Partnership directly or indirectly (except as described in other subsections of this definition) sells, grants, transfers, conveys, or relinquishes its ownership of any Property or portion thereof, including the lease of any Property consisting of a building only, and including any event with respect to any Property which gives rise to a significant amount of insurance proceeds or condemnation awards; (B) the Company or the 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 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 Partnership as a co-venturer or partner sells, grants, transfers, conveys, or relinquishes its ownership of any Property or portion thereof, including any event with respect to any Property which gives rise to insurance claims or condemnation awards; (D) the Company or the Partnership directly or indirectly (except as described in other subsections of this definition) sells, grants, conveys or relinquishes its interest in any Mortgage or portion thereof (including with respect to any Mortgage, all repayments thereunder or in satisfaction thereof other than regularly scheduled interest payments) and any event with respect to a Mortgage which gives rise to a significant amount of insurance proceeds or similar awards; or (E) the Company or the 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. Notwithstanding the foregoing, “Sale” or “Sales” shall not include any transaction or series of transactions specified in clause (A) through (E) above in which the proceeds of such transaction or series of transactions are reinvested in one or more Assets within 180 days thereafter.
“Selling Commissions” shall mean any and all commissions payable to underwriters, dealer managers or other broker-dealers in connection with the sale of the Shares, including, without limitation, commissions payable to the Dealer Manager.
“Shares” shall mean any shares of the Company’s common stock, par value $0.01 per share, including Class A Shares and Class T Shares.
“Soliciting Dealers” shall mean broker-dealers who are members of the Financial Industry Regulatory Authority, Inc., or that are exempt from broker-dealer registration, and who, in either case, have executed participating broker or other agreements with the Dealer Manager to sell Shares.
“Sponsor” shall mean Cole Capital Advisors, Inc., a corporation organized under the laws of Arizona.
“Stockholders” shall mean the record holders of the Shares as maintained in the books and records of the Company or its transfer agent.“Stockholders’ 6.0% Return” shall mean, as of any date, an aggregate amount equal to a 6.0% cumulative, non-compounded, annual return on Invested Capital.
“Subordinated Performance Fee” shall mean the fee payable to the Advisor under certain circumstances as described in Section 3.01(c).
“Termination Date” shall mean the date of termination of this Agreement.

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“Value” shall mean, for an Asset, either: (i) the Book Value or (ii) if the Board has determined an Estimated NAV, then, with respect to any Asset included in the calculation of such Estimated NAV, the Appraised Value. Any capital improvements subsequently made to Assets valued at an Appraised Value and not included in the determination of such Appraised Value will be valued at cost until the Board determines a new Estimated NAV.

ARTICLE II
THE ADVISOR
2.01 Appointment. The Company hereby appoints the Advisor to serve as its advisor on the terms and conditions set forth in this Agreement, and the Advisor hereby accepts such appointment. By accepting such appointment, the Advisor acknowledges that it has contractual and fiduciary responsibility to the Company and the Stockholders.
2.02 Duties of the Advisor. Subject to Section 2.07, the Advisor undertakes to use its commercially reasonable best efforts to present to the Company potential investment opportunities 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 Company’s most recent Prospectus for Shares, Articles of Incorporation and Bylaws, the Advisor shall, either directly or by engaging a duly qualified and licensed Affiliate of the Advisor or other duly qualified and licensed Person:
 
		
	(a)
	serve as the Company’s investment and financial advisor and provide research and economic and statistical data in connection with the Assets and the Company’s investment policies;

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

		
	(c)
	provide property management and leasing services;

		
	(d)
	maintain and preserve the books and records of the Company, including stock books and records reflecting a record of the Stockholders and their ownership of the Company’s Shares;

		
	(e)
	investigate, select, and, on behalf of the Company, 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, mortgagors, property management companies, transfer agents 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 with any of the foregoing;

		
	(f)
	consult with, and provide information to, the officers of the Company and the Board and assist the Board 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;

		
	(g)
	subject to the provisions of Sections 2.01(i), 2.02(j) and 2.03 hereof, (i) locate, analyze and select potential investments in Assets, (ii) structure and negotiate the terms and conditions of transactions pursuant to which investment in Assets will be made; (iii) make investments in Assets on behalf of the Company or the Partnership in compliance with the investment objectives and policies of the Company; (iv) arrange, structure and negotiate financing and refinancing and make other changes in the asset or capital structure of, and dispose of, reinvest the proceeds from the sale of, or otherwise deal with the investments in, Assets; (v) enter into leases of Property and service contracts for Assets; and (vi) review and analyze each Property’s operating and capital budget; and, to the extent necessary, perform all other operational functions for the maintenance and administration of such Assets, including the servicing of Mortgages;

		
	(h)
	provide the Board with periodic reports regarding prospective investments in Assets;

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	(i)
	if a transaction requires approval by the Board or the Independent Directors, deliver to the Board or the Independent Directors, as applicable, all documents required by them to properly evaluate the proposed transaction;

		
	(j)
	obtain the prior approval of a majority of the Independent Directors and a majority of the Board not otherwise interested in any transaction with the Advisor or its Affiliates;

		
	(k)
	negotiate on behalf of the Company with banks or lenders for loans to be made to the Company, negotiate on behalf of the Company with investment banking firms and broker-dealers, and negotiate private sales of Shares and other securities of the Company or obtain loans for the Company, as and when appropriate, 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;

		
	(l)
	obtain reports (which may be prepared by or for the Advisor or its Affiliates), where appropriate, concerning the value of investments or contemplated investments of the Company in Assets;

		
	(m)
	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 under this Agreement;

		
	(n)
	provide the Company with, or assist the Company in arranging for, all necessary cash management services;

		
	(o)
	deliver to or maintain on behalf of the Company copies of all appraisals obtained in connection with the investments in Assets;

		
	(p)
	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, requiring and disposing of Assets, 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 comprising any of the Assets;

		
	(q)
	arrange for the disposal of Properties on the Company’s behalf in compliance with the Company’s investment objectives and policies as stated in the Company’s most recent Prospectus for Shares and advise the Board in connection with liquidity opportunities;

		
	(r)
	supervise the preparation and filing and distribution of returns and reports to governmental agencies and to Stockholders and other investors and act on behalf of the Company in connection with investor relations;

		
	(s)
	oversee recruitment and hiring of Persons who will have direct responsibility for the operations of each Property, which may include, but is not limited to, on-site managers and building and maintenance personnel, and direct and establish policies for such Persons;

		
	(t)
	provide office space, equipment and supplies as required for the performance of the foregoing services as Advisor;

		
	(u)
	assist the Company in preparing all reports and returns required by the U.S. Securities and Exchange Commission, Internal Revenue Service and other state or federal governmental agencies;

		
	(v)
	advise the Board on the timing and method of providing liquidity opportunities to the Stockholders; and

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

2.03 Authority of Advisor. Pursuant to the terms of this Agreement, including the duties set forth in Section 2.02 and the restrictions included in this Section 2.03 and in Section 2.06, 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 (i) find and evaluate investment opportunities for the Company and the Partnership consistent with the Company’s investment objectives, (ii) structure the terms and conditions of transactions pursuant to which investments will be made or acquired for the Company or the Partnership, (iii) acquire Properties, make and acquire Mortgages and other loans and invest in other Assets in compliance with the investment objectives and policies of the Company, (iv) arrange for financing and refinancing of Assets, (v) enter into leases for the Properties and service contracts for the Assets with duly qualified and licensed non-affiliated and Affiliated Persons, including oversight of non-affiliated and Affiliated Persons that perform property management, acquisition, advisory, disposition or other services for the Company, and (vi) arrange for, or provide, accounting and other record-keeping functions at the Asset level.

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The Board may, at any time upon the giving of notice to the Advisor, modify or revoke the authority set forth in this Section 2.03, provided however, that such modification or revocation shall be effective upon receipt by the Advisor or such later date as is specified by the Board and included in the notice provided to the Company and such modification or revocation shall not be applicable to investment transactions to which the Advisor has committed the Company prior to the date of receipt by the Advisor of such notification, or, if later, the effective date of such modification or revocation specified by the Board.
2.04 Bank Accounts. The Advisor may establish and maintain one or more bank accounts in the name of the Company, including the designation of authorized signatories, 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, under such terms and conditions as the Board may approve, provided that no funds of the Company or the Partnership shall be commingled with the funds of the Advisor; and the Advisor shall from time to time, upon request by the Board, its Audit Committee or the auditors of the Company, render appropriate accountings of such collections and payments to the Board, its Audit Committee and the auditors of the Company.
2.05 Records; Access. The Advisor shall maintain appropriate records of all its activities hereunder and make such records available for inspection by the Board and by counsel, auditors and authorized agents of the Company, at any time or from time to time, upon reasonable request, during normal business hours. The Advisor shall at all reasonable times have access to the books and records of the Company.
2.06 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, (c) violate any law, rule, regulation or statement of policy of any governmental body or agency having jurisdiction over the Company, the Shares or its other securities, or (d) not be permitted by the Articles of Incorporation or Bylaws, 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. Notwithstanding the foregoing, the Advisor, its directors, officers, employees and stockholders, and the directors, officers, employees and stockholders of the Advisor’s Affiliates shall not be liable to the Company or to the Board or the Stockholders for any act or omission by the Advisor, its directors, officers, employees or stockholders, or for any act or omission of any Affiliate of the Advisor, its directors, officers, employees or stockholders, except as provided in Section 5.02 of this Agreement.
2.07 Other Activities of the Advisor. Nothing in this Agreement shall prevent the Advisor or its Affiliates from engaging in 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, employee, or stockholder of the Advisor or its Affiliates to engage in any other business or to render services of any kind to any other Person. 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. The Advisor shall report to the Board the existence of any condition or circumstance, existing or anticipated, of which it has knowledge, which creates or could create a conflict of interest between the Advisor’s obligations to the Company and its obligations to or its interest in any other Person. The Advisor or its Affiliates shall promptly disclose to the Board knowledge of such condition or circumstance. If the Sponsor, Advisor, any Director or Affiliates thereof have sponsored other investment programs with similar investment objectives which have investment funds available at the same time as the Company, it shall be the duty of the Board (including the Independent Directors) to adopt the method set forth in the Company’s most recent Prospectus for its Shares or another reasonable method by which investments are to be allocated to the competing investment entities and to use their best efforts to apply such method fairly to the Company.

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ARTICLE III
COMPENSATION
3.01 Fees.
		
	(a)
	Advisory Fee. On the last day of each month, the Company shall pay to the Advisor a monthly Advisory Fee based upon the monthly Average Invested Assets. The Advisory Fee shall be calculated according to the following schedule:

	
				
	Monthly Average Invested Assets
	 
	Annual Fee Rate for 
Assets in Each Range

	$0 — $2 billion
	 
	0.75
	%

	Over $2 billion — $4 billion
	 
	0.70
	%

	Over $4 billion
	 
	0.65
	%

The Advisory Fee shall be applied according to the above schedule for each level of monthly Average Invested Assets, resulting in a blended annualized rate for fees paid in respect of Average Invested Assets in excess of $2 billion. For example, the annualized rate for fees paid in respect of Average Invested Assets of $5 billion is 0.71% (i.e. the quotient of (1) the sum of (x) the product of $2 billion multiplied by 0.75%, and (y) the product of $2 billion multiplied by 0.70%, and (z) the product of $1 billion multiplied by 0.65%, divided by (2) $5 billion). Any portion of the Advisory Fee may be deferred and paid in a subsequent period upon the mutual agreement of the parties hereto.
		
	(b)
	Acquisition Fees. The Company shall pay the Advisor, or an Affiliate of the Advisor, a fee in the amount of 2.0% of the Contract Purchase Price of each Asset as Acquisition Fees. The total of all Acquisition Fees and any Acquisition Expenses shall be limited in accordance with the Articles of Incorporation. Acquisition Fees shall be paid as follows: (1) for real property (including properties where development/redevelopment is expected), at the time of acquisition, (2) for development/redevelopment projects (other than the initial acquisition of the real property), at the time a final budget is approved, and (3) for loans and similar assets (including without limitation mezzanine loans), quarterly based on the value of loans made or acquired. In the case of a development/redevelopment project subject to clause (2) above, upon completion of the development/redevelopment project, the Advisor shall determine the actual amounts paid. To the extent the amounts actually paid vary from the budgeted amounts on which the Acquisition Fee was initially based, the Advisor will pay or invoice the Company for 2.0% of the budget variance such that the Acquisition Fee is ultimately 2.0% of amounts expended on such development/redevelopment project. Any portion of the Acquisition Fee may be deferred and paid in a subsequent period upon the mutual agreement of the parties hereto.

		
	(c)
	Subordinated Performance Fee. The Company shall pay the Advisor a Subordinated Performance Fee in connection with any one of the following events:

		
	(1)
	Upon Listing, the Advisor shall be entitled to a Subordinated Performance Fee in an amount equal to 15.0% of the amount by which (i) the Market Value of the Company’s outstanding Shares plus distributions paid by the Company prior to Listing, exceeds (ii) the sum of (A) 100% of Invested Capital and (B) the total Distributions required to be paid to the Stockholders in order to pay the Stockholders’ 6.0% Return from inception through the date that Market Value is determined. The Company shall have the option to pay such fee in the form of cash, Shares, a non-interest bearing promissory note, or any combination of the foregoing. If the Company pays such fee with a non-interest bearing promissory note, payment in full shall be made from the Net Sales Proceeds of the first Sale completed by the Company after Listing. If the Net Sales Proceeds from the first Sale after Listing are insufficient to pay the promissory note in full, then the promissory note shall be paid in part with such Net Sales Proceeds, and in part from the Net Sales Proceeds from the next successive Sale until the amount owing pursuant to such promissory note is paid in full. If the promissory note has not been paid in full within five years from the date of Listing, then the Advisor, or its successors or assigns, may elect to convert the unpaid balance into Shares at a price per Share equal to the average closing price of the Shares over the ten trading days immediately preceding the date of such election. If the Shares are no longer Listed at such time as the promissory note becomes convertible into Shares as provided by this paragraph, then the price per Share, for purposes of conversion, shall equal the fair market value for the Shares as determined by the Board based upon the Appraised Value of the Assets as of the date of election.

-9-

		
	(2)
	Upon a Sale of the Company or all of, or substantially all of, the Company’s Assets, the Advisor shall be entitled to the Subordinated Performance Fee in an amount equal to 15.0% of Net Sale Proceeds remaining after the Stockholders have received Distributions equal to the sum of the Stockholders’ 6.0% Return and 100% of Invested Capital. The Company shall have the option to pay such fee in the form of cash, Shares, a non-interest bearing promissory note, or any combination of the foregoing.

		
	(3)
	Upon termination of this Agreement, unless such termination is by the Company because of a material breach of this Agreement by the Advisor or occurs upon a Change of Control, the Advisor shall be entitled to receive a payment of the Subordinated Performance Fee equal to 15.0% of the amount, if any, by which (i) the Appraised Value of the Assets, including any applicable portfolio premium or discount, on the Termination Date, less the amount of all indebtedness secured by the Assets, plus the total Distributions paid to Stockholders from the Company’s inception through the Termination Date, exceeds (ii) Invested Capital plus an amount equal to the Stockholders’ 6.0% Return from inception through the Termination Date. The Company shall pay such Subordinated Performance Fee at such time as the Company completes the first Sale after the Termination Date. Payment shall be made from the Net Sales Proceeds of such Sale. The Company shall have the option to pay such fee in the form of cash, Shares, a non-interest bearing promissory note, or any combination of the foregoing. If the Net Sales Proceeds from the first Sale after the Termination Date are insufficient to pay the Subordinated Performance Fee in full, then the Subordinated Performance Fee shall be paid in part with such Net Sales Proceeds, and in part from the Net Sales Proceeds from the next successive Sale until the Subordinated Performance Fee is paid in full. If the Subordinated Performance Fee has not been paid in full within five years from the Termination Date, then the Advisor, its successors or assigns, may elect to convert the balance of the fee into Shares at a price per Share equal to the average closing price of the Shares over the ten trading days immediately preceding the date of such election if the Shares are Listed at such time. If the Shares are not Listed at such time, the Advisor, its successors or assigns, may elect to convert the balance of the fee into Shares at a price per Share equal to the fair market value for the Shares as reasonably determined by the Board. Notwithstanding the foregoing, if termination occurs upon a Change of Control, the Advisor shall be entitled to payment of the Subordinated Performance Fee equal to 15.0% of the amount, if any, by which (i) the value of the Assets on the Termination Date as determined in good faith by the Board, including a majority of the Independent Directors, based upon such factors as the consideration paid in connection with the Change of Control and the most recent Appraised Value of the Assets, including any applicable portfolio premium or discount, less the amount of all indebtedness secured by the Assets, plus the total Distributions paid to Stockholders from the Company’s inception through the Termination Date, exceeds (ii) Invested Capital plus an amount equal to the Stockholders’ 6.0% Return from inception through the Termination Date. No deferral of payment of the Subordinated Performance Fee may be made under this paragraph of this Section 3.01(c). In the event that the Advisor disagrees with the valuation of Shares pursuant to this Section 3.01(c) where the Shares are not Listed for purposes of determining the number of Shares to be issued to the Advisor following the Advisor’s election to convert the balance of the Subordinated Performance Fee owed to the Advisor, then the fair market value of such Shares shall be determined by an Independent Expert of equity value selected by the Advisor.

		
	(d)
	Disposition Fee. If the Advisor or an Affiliate of the Advisor provides a substantial amount of the services (as determined by a majority of the Independent Directors) in connection with the Sale of one or more Properties (or the Company’s entire portfolio), the Advisor or such Affiliate shall receive a Disposition Fee equal to up to one-half of the real estate or brokerage commission paid to the Company by Persons not affiliated with the Advisor on the Sale of the Property, not to exceed 1% of the Contract Sales Price of each Property sold; provided, however, in no event may the total Disposition Fee paid to the Advisor or an Affiliate of the Advisor, and any Persons not affiliated with the Advisor, exceed the lesser of (i) the Competitive Real Estate Commission or (ii) 6.0% of the Contract Sales Price of a Property.

		
	(e)
	Financing Coordination Fee. For services provided by the Advisor in connection with any Financing to acquire Property, the Company shall pay the Advisor a Financing Coordination Fee in the amount of 1% of the amount available and/or outstanding under such Financing; provided, however, (i) the Advisor shall not be entitled to such fee on any refinanced indebtedness or obligation where the Advisor previously received such a fee on the original indebtedness or obligation unless (1) the maturity date of the original indebtedness or obligation is scheduled to occur less than one year after the date of the refinanced indebtedness or obligation and the refinanced indebtedness or obligation has a term of at least five years or (2) the refinanced indebtedness or obligation is approved by a majority of the Independent Directors, and (ii) no such fee will be paid in connection with any loans advanced by an Affiliate of the Advisor. No Financing Coordination Fees will be paid on loan proceeds from any line of credit unless all net offering proceeds received as of the date proceeds from the line of credit are drawn for the purpose of acquiring properties or other permitted investments (other than reasonable working capital reserves) have been invested. In addition, with respect to any revolving line of credit, the Advisor shall receive Financing Coordination Fees only in connection with 

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amounts being drawn for the first time and not upon any re-drawing of amounts that previously had been repaid by the Company.
3.02 Expenses.
		
	(a)
	In addition to the compensation paid to the Advisor pursuant to Section 3.01 hereof, the Company shall pay directly or reimburse the Advisor, as applicable, for all of the expenses paid or incurred by the Advisor in connection with the services it provides to the Company pursuant to this Agreement, including, but not limited to:

(i) Organization and Offering Expenses; provided, however, that within 60 days after the end of the month in which an Offering terminates, the Advisor shall reimburse the Company for any Organization and Offering Expenses reimbursed by the Company to the Advisor to the extent that such reimbursements exceed 1.0% of the Gross Proceeds raised in the completed Offering and the Advisor shall be responsible for the payment of Organization and Offering Expenses in excess of 1.0% of the Gross Proceeds; and provided, further, that the Company shall not reimburse the Advisor for Organization and Offering Expenses in connection with an Offering that relates solely to the offer and sale of Shares pursuant to a distribution reinvestment plan;
(ii) Acquisition Expenses incurred in connection with the selection and acquisition of Assets in an amount estimated to be up to 0.5% of the Contract Purchase Price;
(iii) the actual cost of goods, services and materials used by the Company and obtained from Persons not affiliated with the Advisor, other than Acquisition Expenses, including property management and leasing services;
(iv) interest and other costs for borrowed money, including discounts, points and other similar fees;
(v) taxes and assessments on income or property and taxes as an expense of doing business;
(vi) costs associated with insurance required in connection with the business of the Company or by the Board;
(vii) expenses of managing and operating Assets owned by the Company, whether payable to an Affiliate of the Company, including total compensation and personnel-related expenses, unless otherwise waived, in whole or in part, by the Affiliate in its sole discretion, of all on-site and off-site employees of the Affiliate who are engaged in the operation, management, maintenance and leasing or access control of the Asset, or to a non-affiliated Person;
(viii) all expenses in connection with payments to the Board for attendance at meetings of the Board and Stockholders;
(ix) expenses associated with Listing or with the issuance and distribution of Shares and other securities of the Company, such as Selling Commissions and fees, advertising expenses, taxes, legal and accounting fees, and Listing and registration fees;
(x) expenses connected with payments of Distributions in cash or otherwise made or caused to be made by the Company to the Stockholders;(xi) expenses of organizing, reorganizing, liquidating or dissolving the Company or amending the Articles of Incorporation or the Bylaws;
(xii) expenses of any third party transfer agent for the Shares and 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;
(xiii) administrative service expenses, including all costs and expenses incurred by Advisor in fulfilling its duties hereunder, including but not limited to, the total compensation and personnel-related expenses of all employees of Advisor or its Affiliates who are engaged in the management, administration, operations, and marketing of the Company and its Assets; provided, however, that the Company shall not reimburse the Advisor for compensation paid to (1) persons who are executive officers of the Company or (2) employees in connection with services for which the Advisor receives an Acquisition Fee, Financing Coordination Fee or Disposition Fee; and
(xiv) audit, accounting and legal fees, and other fees and expenses associated with regulatory compliance.
		
	(b)
	Expenses incurred by the Advisor on behalf of the Company and payable pursuant to this Section 3.02 shall be reimbursed no less than quarterly to the Advisor within 60 days after the end of each quarter. The Advisor shall prepare a statement documenting the expenses of the Company during each quarter, and shall deliver such statement to the Company within 45 days after the end of each quarter.

3.03 Other Services. Should the Board request that the Advisor or any director, officer or employee thereof render services for the Company other than set forth in Section 2.02, or should the Advisor or an Affiliate of the Advisor provide a substantial 

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amount of the services (as determined by a majority of the Independent Directors) in connection with the Sale of one or more Assets that are not Properties, such services shall be separately compensated at such rates and in such amounts as are agreed by the Advisor and the Board, 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; provided, however, in no event may the compensation agreed upon by the Advisor and the Board in connection with the Sale of one or more Assets that are not Properties, if any, exceed 1% of the total consideration provided for in the sales contract for the sale of each such Asset sold; and provided, further, that any such compensation must be approved by a majority of the Independent Directors.
3.04 Reimbursement to the Advisor. The Company shall not reimburse the Advisor, at the end of any fiscal quarter, for any Operating Expenses to the extent that, in the four consecutive fiscal quarters then ended (the “Expense Year”) the Operating Expenses exceed (the “Excess Amount”) the greater of (i) 2% of Average Invested Assets or (ii) 25% of Net Income (the “2%/25% Guidelines”) for that period of four consecutive quarters unless the Independent Directors determine that such excess was justified, based on unusual and nonrecurring factors which the Independent Directors deem sufficient. If the Independent Directors do not approve such excess as being so justified, any Excess Amount paid to the Advisor during a fiscal quarter shall be repaid to the Company. If the Independent Directors determine such excess was justified, then within 60 days after the end of any fiscal quarter of the Company for which total reimbursed Operating Expenses for the Expense Year exceed the 2%/25% Guidelines, the Advisor, at the direction of the Independent Directors, shall cause such fact to be disclosed in the next quarterly report of the Company or in a separate writing and sent to the stockholders, together with an explanation of the factors the Independent Directors considered in determining that such excess expenses were justified. The Company will ensure that such determination will be reflected in the minutes of the meetings of the Board. All figures used in the foregoing computation shall be determined in accordance with generally accepted accounting principles applied on a consistent basis.

ARTICLE IV
TERM AND TERMINATION
4.01 Term; Renewal. Subject to Section 4.02 hereof, this Agreement has a one-year term and shall continue in force until the first anniversary of the date hereof. Thereafter, this Agreement may be renewed for an unlimited number of successive one-year terms upon mutual consent of the parties. It is the Board’s duty 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 one year.4.02 Termination. This Agreement will automatically terminate upon Listing. This Agreement also may be terminated at the option of either party upon 60 days’ written notice without cause or penalty (if termination is by the Company, then such termination shall be upon the approval of a majority of the Independent Directors). Notwithstanding the foregoing, the provisions of this Agreement which provide for payment to the Advisor of expenses, fees or other compensation following the date of termination (i.e., Sections 3.01(c) and 4.03) shall continue in full force and effect until all amounts payable thereunder to the Advisor are paid in full. The provisions of Sections 2.05, 2.06 and 4.03 through 6.10 shall survive the termination of this Agreement.
4.03 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 and receive from the Company within 30 days after the effective date of such termination all unpaid reimbursements of expenses, subject to the provisions of Section 3.04 hereof, and all contingent liabilities related to fees payable to the Advisor prior to termination of this Agreement, provided that the Subordinated Performance Fee, if any, shall be paid in accordance with the provisions of Section 3.01(c).

		
	(b)
	The Advisor shall promptly upon termination:

(i) pay over to the Company all money collected and held for the account of the Company pursuant to this Agreement, after deducting any accrued compensation and reimbursement for its expenses to which it is then entitled;
(ii) deliver to the 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 the Assets, and documents of the Company then in the custody of the Advisor; and
(iv) cooperate with, and take all reasonable actions requested by, the Company to provide an orderly management transition.

-12-

4.04 Non-Solicitation. Except as consented to in writing by the Advisor, during the period commencing on the effective date of this Agreement and ending one year following the Termination Date, the Company shall not, and shall cause any other affiliated or related Person not to, directly or indirectly (a) solicit or encourage any officer, director or management employee, or any other employee with whom the Company or its affiliates came into contact in connection with the services to be provided under this Agreement (each, a “Restricted Person”) to leave the employment or other service of the Advisor or any of its Affiliates, or (b) hire or pay any compensation to any Restricted Person currently employed or engaged by the Advisor or any of its Affiliates, or who has left the employment of or engagement by the Advisor or any of its Affiliates within the period beginning one year prior to the Termination Date and ending one year following the Termination Date. During the period commencing on the effective date of this Agreement and ending one year following the Termination Date, the Company will not, whether for its own account or for the account of any other Person, intentionally interfere with the relationship of the Advisor or any of its Affiliates with any Person who during the term of this Agreement is or was a lender, investor, tenant, co-developer, joint venturer or client of, or maintained a contractual relationship with, the Advisor or any of its Affiliates.

ARTICLE V
INDEMNIFICATION
5.01 Indemnification by the Company.
 
		
	(a)
	The Company shall indemnify and hold harmless the Advisor and its Affiliates, including their respective officers, directors, partners and employees, from all liability, claims, damages or losses arising in the performance of their duties hereunder, and related expenses, including reasonable attorneys’ fees, to the extent such liability, claims, damages or losses and related expenses are not fully reimbursed by insurance, subject to any limitations imposed by the laws of the State of Maryland, the Articles of Incorporation and the NASAA Guidelines under the Articles of Incorporation. The Company shall not indemnify or hold harmless the Advisor or its Affiliates, including their respective officers, directors, partners and employees, for any liability or loss suffered by the Advisor or its Affiliates, including their respective officers, directors, partners and employees, nor shall it provide that the Advisor or its Affiliates, including their respective officers, directors, partners and employees, be held harmless for any loss or liability suffered by the Company, unless all of the following conditions are met: (i) the Advisor or its Affiliates, including their respective officers, directors, partners and employees, have 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 its Affiliates, including their respective officers, directors, partners and employees, were acting on behalf of or performing services of the Company; (iii) such liability or loss was not the result of negligence or misconduct by the Advisor or its Affiliates, including their respective officers, directors, partners and employees; and (iv) such indemnification or agreement to hold harmless is recoverable only out of the Company’s net assets and not from Stockholders. Notwithstanding the foregoing, the Advisor and its Affiliates, including their respective officers, directors, partners and employees, shall not be indemnified by the Company for any losses, liability 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 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; and (iii) a court of competent jurisdiction approves a settlement of the claims against a particular 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 were offered or sold as to indemnification for violations of securities laws.

		
	(b)
	The Articles of Incorporation provide that the advancement of Company funds to the Advisor or its Affiliates, including their respective officers, directors, partners and employees, for legal expenses and other costs incurred as a result of any legal action for which indemnification is being sought is permissible 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 on behalf of the Company; (ii) 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 his or her capacity as such and a court of competent jurisdiction specifically approves such advancement; (iii) the Advisor or its Affiliates, including their respective officers, directors, partners and employees, undertake to repay the advanced funds to the Company together with the applicable legal rate of interest thereon, in cases in which such Advisor or its Affiliates, including their respective officers, directors, partners and employees, are found not to be entitled to indemnification.

-13-

		
	(c)
	Notwithstanding the provisions of this Section 5.01, the Advisor shall not be entitled to indemnification or be held harmless pursuant to this Section 5.01 for any activity which the Advisor shall be required to indemnify or hold harmless the Company pursuant to Section 5.02.

5.02 Indemnification by Advisor. The Advisor shall indemnify and hold harmless the Company from contract or other liability, claims, damages, taxes or losses and related expenses including attorneys’ fees, to the extent that (i) such liability, claims, damages, taxes or losses and related expenses are not fully reimbursed by insurance and (ii) are incurred by reason of the Advisor’s bad faith, fraud, misfeasance, misconduct, negligence or reckless disregard of its duties. 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.

ARTICLE VI
MISCELLANEOUS
6.01 Assignment to an Affiliate. This Agreement may be assigned by the Advisor to an Affiliate of the Advisor with the approval of a majority of the Board (including a majority of the Independent Directors). The Advisor may assign any rights to receive fees or other payments under this Agreement without obtaining the approval of the Board. This Agreement shall not be assigned by the Company without the consent of the Advisor, except in the case of an assignment by the Company to a corporation or other organization which is a successor to all of the assets, rights and obligations of the Company, in which case such successor organization shall be bound hereunder and by the terms of said assignment in the same manner as the Company is bound by this Agreement. This Agreement shall be binding on successors to the Company resulting from a Change of Control or sale of all or substantially all the assets of the Company or the Partnership, and shall likewise be binding upon any successor to the Advisor.
6.02 Relationship of Advisor and Company. The Company and the Advisor are not partners or joint venturers with each other, and nothing in this Agreement shall be construed to make them such partners or joint venturers or impose any liability as such on either of them.
6.03 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 or by overnight mail or other overnight delivery service to the addresses set forth herein:
	
			
	To the Directors and to the Company:
	  
	Cole Office & Industrial REIT (CCIT III), Inc.

	 
	  
	2325 E. Camelback Road, Suite 1100

	 
	  
	Phoenix, Arizona 85016

	 
	  
	Attention: Chief Executive Officer and President

	 
	 
	 

	To the Advisor:
	  
	Cole Corporate Income Advisors III, LLC

	 
	  
	2325 E. Camelback Road, Suite 1100

	 
	  
	Phoenix, Arizona 85016

	 
	  
	Attention: President

Either party shall, as soon as reasonably practicable, give notice in writing to the other party of a change in its address for the purposes of this Section 6.03.
6.04 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.
6.05 Choice of Law; Venue. The provisions of this Agreement shall be construed and interpreted in accordance with the laws of the State of Arizona, and venue for any action brought with respect to any claims arising out of this Agreement shall be brought exclusively in Maricopa County, Arizona.

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6.06 Entire Agreement. This Agreement contains the entire agreement and understanding among the parties hereto with respect to the subject matter hereof, and supersedes all prior and contemporaneous agreements, understandings, inducements and conditions, express or implied, oral or written, of any nature whatsoever with respect to the subject matter hereof. The express terms hereof control and supersede any course of performance and/or usage of the trade inconsistent with any of the terms hereof. This Agreement may not be modified or amended, in whole or in part, except by an agreement in writing signed by each of the parties hereto, or their respective successors or assignees.
6.07 Waiver. 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.
6.08 Gender; Number. 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.
6.09 Headings. The titles and headings 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.6.10 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 the counterparts hereof, individually or taken together, shall bear the signatures of all of the parties reflected hereon as the signatories.
6.11 Initial Investment. The Advisor or one of its Affiliates has contributed $200,000 (the “Initial Investment”) in exchange for the initial issuance of Class A Shares of the Company. The Advisor or its Affiliates may not sell any of such shares purchased with the Initial Investment while the Advisor acts in an advisory capacity to the Company; provided, however, the Advisor and its Affiliates may transfer such shares to their Affiliates. The restrictions included above shall not apply to any Shares acquired by the Advisor or its Affiliates other than such shares acquired through the Initial Investment. Neither the Advisor nor its Affiliates shall vote any Shares they now own, or hereafter acquire, or consent to have such Shares voted on matters submitted to the Stockholders regarding (i) the removal of Cole Corporate Income Advisors III, LLC or any of its Affiliates as the Advisor; (ii) the removal of any member of the Board or (iii) any transaction by and between the Company and the Advisor, a member of the Board or any of their Affiliates.
6.12 Cole Name. The Advisor and its Affiliates have a proprietary interest in the name “Cole.” The Advisor hereby grants to the Company a non-transferable, non-assignable, non-exclusive royalty-free right and license to use the name “Cole” during the term of this Agreement. Accordingly, and in recognition of this right, if at any time the Company ceases to retain the Advisor or one of its Affiliates to perform advisory services for the Company, the Company shall, promptly, but in any case within 30 days (or such longer period of time as agreed to by the Advisor in its sole discretion), after receipt of a written request from the Advisor, cease to conduct business under or use the name “Cole” or any derivative thereof and the Company shall change its name and the names of any of its subsidiaries to a name that does not contain the name “Cole” or any other word or words that might, in the reasonable discretion of the Advisor, be susceptible of indication of some form of relationship between the Company and the Advisor or any its Affiliates. At such time, the Company will also make any changes to any trademarks, servicemarks or other marks necessary to remove any references to the word “Cole.” Consistent with the foregoing, it is specifically recognized that the Advisor or one or more of its Affiliates has in the past and may in the future organize, sponsor or otherwise permit to exist other investment vehicles (including vehicles for investment in real estate) and financial and service organizations having “Cole” as a part of their name, all without the need for any consent (and without the right to object thereto) by the Company. The Advisor shall have discretion over the Company’s use of the name “Cole” and the Company’s use of the “Cole” name will be in strict accordance with any quality standards and specifications that may be established by Advisor and communicated to Company from time to time.
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IN WITNESS WHEREOF, the parties hereto have executed this Advisory Agreement as of the date and year first above written.
	
				
	 
	COLE OFFICE & INDUSTRIAL REIT (CCIT III), INC.

	 
	 
	 
	 

	 
	By:
	 
	 

	 
	 
	 
	Name:

	 
	 
	 
	Title:

	 
	 
	 
	 

	 
	COLE CORPORATE INCOME ADVISORS III, LLC

	 
	 
	 
	 

	 
	By:
	 
	 

	 
	 
	 
	Name:

	 
	 
	 
	Title:

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