Document:

PROPERTY MANAGEMENT AND LEASING AGREEMENT

 

This PROPERTY MANAGEMENT AND LEASING AGREEMENT (this “Management Agreement”) is made and entered into as of the 6th day of April, 2004, by and among COLE CREDIT PROPERTY TRUST, INC., a Maryland corporation (“COLE REIT”), COLE OPERATING PARTNERSHIP I, LP, a Delaware limited partnership (“COLE OP”), and FUND REALTY ADVISORS, INC., an Arizona corporation (the “Manager”).  

 

WHEREAS, COLE OP was organized to acquire, own, operate, lease and manage properties on behalf of COLE REIT; 

 

WHEREAS, COLE REIT intends to raise money from the sale of its common stock to be used, net of payment of certain offering costs and expenses, for investment in the acquisition or construction of income-producing real estate and other real estate-related investments (including the making or purchase of mortgage loans), some or all of which are to be acquired and held by Owner (as hereinafter defined) on behalf of COLE REIT; and 

 

WHEREAS, Owner intends to continue to retain Manager to manage and coordinate the leasing of certain of the real estate properties acquired by Owner under the terms and conditions set forth in this Management Agreement.  

 

NOW, TIHEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound hereby, do hereby agree, as follows:  

 

ARTICLE I

 

DEFINITIONS

 

Except as otherwise specified or as the context may otherwise require, the following terms have the respective meanings set forth below for all purposes of this Management Agreement, and the definitions of such terms are equally applicable both to the singular and plural forms thereof:  

 

1.1           “Affiliate” means, with respect 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 other Person; (ii) any Person 10% or more of whose outstanding voting securities are directly or indirectly owned, controlled or held, with the power to vote, by such other Person; (iii) any Person directly or indirectly controlling, controlled by or under common control with such other Person; (iv) any executive officer, director, trustee or general partner of such other Person; and (v) any legal entity for which such Person acts as an executive officer, director, trustee or general partner.  

 

1.2           “Gross Revenues” means all amounts actually collected as rents or other charges for the use and occupancy of the Properties, but shall exclude interest and other investment income of Owner and proceeds received by Owner for a sale, exchange, condemnation, eminent domain taking, casualty or other disposition of assets of Owner.  

 

1.3           “Improvements” means buildings, structures, equipment from time to time located on the Properties and all parking and common areas located on the Properties.

 

1.4           “Intellectual Property Rights” means all rights, titles and interests, whether foreign or domestic, in and to any and all trade secrets, confidential information rights, patents, invention rights, copyrights, service marks, trademarks, know-how, or similar intellectual property rights and all applications and rights to apply for such rights, as well as any and all moral rights, rights of privacy, publicity and similar rights and license rights of any type under the laws or regulations of any governmental, regulatory, or judicial authority, foreign or domestic and all renewals and extensions thereof.  

 

1.5           “Lease” means, unless the context otherwise requires, any lease or sublease made by Owner as landlord or by its predecessor.  

 

 

 

 

	
            1.6
 	
            “Management Fees” has the meaning set forth in Section 5.1 hereof.  
 

 

1.7           “Owner” means COLE REIT, COLE OP and any joint venture, limited liability company or other Affiliate of COLE REIT or COLE OP that owns, in whole or in part, on behalf of COLE REIT, any Properties.  

 

1.8           “Person” means an individual, corporation, association, business trust, estate, trust, partnership, limited liability company or other legal entity.  

 

1.9           “Properties” means all real estate properties owned by Owner and all tracts as yet unspecified but to be acquired by Owner containing income-producing improvements or on which Owner will construct improvements.  

 

1.10         “Proprietary Properties” means all modeling algorithms, tools, computer programs, know-how, methodologies, processes, technologies, ideas, concepts, skills, routines, subroutines, operating instructions and other materials and aides used in performing the duties set forth in Article 2 that relate to management advice, services and techniques regarding current and potential Properties, and all modifications, enhancements and derivative works of the foregoing.  

 

ARTICLE II

 

APPOINTMENT OF MANAGER; SERVICES TO BE PERFORMED

 

2.1           Appointment of Manager.  Owner hereby engages and retains Manager as the manager and as tenant coordinating agent of the Properties, and Manager hereby accepts such appointment on the terms and conditions hereinafter set forth; it being understood that this Management Agreement shall cause Manager to be, at law, Owner’s agent upon the terms contained herein.  

 

2.2           General Duties.  Manager shall devote its best efforts to performing its duties hereunder to manage, operate, maintain and lease the Properties in a diligent, careful and vigilant manner.  The services of Manager are to be of scope and quality not less than those generally performed by professional property managers of other similar properties in the area.  Manager shall make available to Owner the full benefit of the judgment, experience and advice of the members of Manager’s organization and staff with respect to the policies to be pursued by Owner relating to the operation and leasing of the Properties.  

 

	
            2.3
 	
            Specific Duties.  Manager’s duties include the following:  
 

 

(a)           Lease Obligations.  Manager shall perform all duties of the landlord under all Leases insofar as such duties relate to operation, maintenance, and day-to-day management.  Manager shall also provide or cause to be provided, at Owner’s expense, all services normally provided to tenants of like premises, including where applicable and without limitation, gas, electricity or other utilities required to be furnished to tenants under Leases, normal repairs and maintenance, and cleaning, and janitorial service.  Manager shall arrange for and supervise the performance of all installations and improvements in space leased to any tenant that are either expressly required under the terms of the lease of such space or that are customarily provided to tenants.  

 

(b)           Maintenance.  Manager shall cause the Properties to be maintained in the same manner as similar properties in the area.  Manager’s duties and supervision in this respect shall include, without limitation, cleaning of the interior and the exterior of the Improvements and the public common areas on the Properties and the making and supervision of repair, alterations, and decoration of the Improvements, subject to and in strict compliance with this Management Agreement and the Leases.  Construction activities undertaken by Manager, if any, will be limited to activities related to the management, operation, maintenance, and leasing of the Property (e.g., repairs, renovations, and leasehold improvements).  

 

(c)           Leasing Functions.  Manager shall coordinate the leasing of the Properties and shall negotiate and use its best efforts to secure executed Leases from qualified tenants, and to execute same on behalf of Owner, if requested, for available space in the Properties, such Leases to be in form and on terms approved by Owner and Manager, and to bring about complete leasing of the Properties.  Manager shall be responsible for the hiring of all 

 

 

leasing agents, as necessary for the leasing of the Properties, and to otherwise oversee and manage the leasing process on behalf of Owner.  

 

(d)           Notice of Violations.  Manager shall forward to Owner promptly upon receipt all notices of violation or other notices from any governmental authority, and board of fire underwriters or any insurance company, and shall make such recommendations regarding compliance with such notice as shall be appropriate.  

 

(e)           Personnel.  Any personnel hired by Manager to maintain, operate and lease the Property shall be the employees or independent contractors of Manager and not of Owner of such Property, COLE OP or COLE REIT.  Manager shall use due care in the selection and supervision of such employees or independent contractors.  Manager shall be responsible for the preparation of and shall timely file all payroll tax reports and timely make payments of all withholding and other payroll taxes with respect to each employee.  

 

(f)            Utilities and Supplies.  Manager shall enter into or renew contracts for electricity, gas, steam, landscaping, fuel, oil, maintenance and other services as are customarily furnished or rendered in connection with the operation of similar rental property in the area.  

 

(g)           Expenses.  Manager shall analyze all bills received for services, work and supplies in connection with maintaining and operating the Properties, pay all such bills when due, and, if requested by Owner, pay, when due, utility and water charges, sewer rent and assessments, and any other amount payable in respect to the Properties.  All bills shall be paid by Manager within the time required to obtain discounts, if any.  Owner may from time to time request that Manager forward certain bills to Owner promptly after receipt, and Manager shall comply with any such request.  Manager shall pay all bills, assessments, real property taxes, insurance premiums and any other amount payable in respect to the Properties out of the Account (as hereinafter defined).  All expenses shall be billed at net cost (i.e., less all rebates,
commissions, discounts and allowances, however designed).  

 

(h)           Monies Collected.  Manager shall timely collect all rent and other monies, in the form of a check or money order, from tenants and any sums otherwise due Owner with respect to the Properties in the ordinary course of business.  Owner authorizes Manager to request, demand, collect and provide receipts for all such rent and other monies and to institute legal proceedings in the name of Owner for the collection thereof and for the dispossession of any tenant in default under its Lease.  

 

(i)            Banking Accommodations.  Manager shall establish and maintain a separate checking account (the “Account”) for funds relating to the Properties.  All monies deposited from time to time in the Account shall be deemed to be trust funds and shall be and remain the property of Owner and shall be withdrawn and disbursed by Manager for the account of Owner only as expressly permitted by this Management Agreement for the purposes of performing the obligations of Manager hereunder.  No monies collected by Manager on Owner’s behalf shall be commingled with funds of Manager.  The Account shall be maintained, and monies shall be deposited therein and withdrawn therefrom, in accordance with the following:  

 

(i)            All sums received from rents and other income from the Properties shall be promptly deposited by Manager in the Account.  Manager shall have the right to designate two or more persons who shall be authorized to draw against the Account, but only for purposes authorized by this Management Agreement.  

 

(ii)           All sums due to Manager hereunder, whether for compensation, reimbursement for expenditures, or otherwise, as herein provided, shall be a charge against the operating revenues of the Properties and shall be paid and/or withdrawn by Manager from the Account prior to the making of any other disbursements therefrom.  

 

(iii)          By the 15th day after the end of each month, Manager shall forward to Owner all monies contained in the Account other than a reasonable minimum balance (to be determined jointly by Manager and Owner from time to time) and any other amounts otherwise provided in the budget, which shall remain in the Account.  

 

(j)            Ownership Agreements.  Manager has received copies of (and will be provided with copies of future) articles of incorporation, agreements of limited partnership, joint venture partnership agreements and 

 

 

operating agreements, each as may be amended from time to time, of Owner, as applicable (the “Ownership Agreements”) and is familiar with the terms thereof.  Manager shall use reasonable care to avoid any act or omission that, in the performance of its duties hereunder, shall in any way conflict with the terms of Ownership Agreements.  

 

(k)           Signs.  Manager shall place and remove, or cause to be placed and removed, such signs upon the Properties as Manager deems appropriate, subject, however, to the terms and conditions of the Leases and to any applicable ordinances and regulations.  

 

2.4           Approval of Leases, Contracts, Etc.  In fulfilling its duties to Owner, Manager may and hereby is authorized to enter into any leases, contracts or agreements on behalf of Owner in the ordinary course of the management, operation, maintenance and leasing of the Property.  

 

	
            2.5
 	
            Accounting, Records and Reports.  
 

 

(a)           Records.  Manager shall maintain all office records and books of account and shall record therein, and keep copies of, each invoice received from services, work and supplies ordered in connection with the maintenance and operation of the Properties.  Such records shall be maintained on a double entry basis.  Owner and persons designated by Owner shall at all reasonable time have access to and the right to audit and make independent examinations of such records, books and accounts and all vouchers, files and all other material pertaining to the Properties and this Management Agreement, all of  which Manager agrees to keep safe, available and separate from any records not pertaining to the Properties, at a place recommended by Manager and approved by Owner.  

 

(b)           Monthly Reports.  On or before the 15th day after the end of each month during the term of this Management Agreement, Manager shall prepare and submit to Owner the following reports and statements:  

 

	
             
 	
            (i)
 	
            rental collection record;
 

 

	
             
 	
            (ii)
 	
            monthly operating statement;
 

 

	
             
 	
            (iii)
 	
            copy of cash disbursements ledger entries for such period, if requested;
 

 

	
             
 	
            (iv)
 	
            copy of cash receipts ledger entries for such period, if requested;
 

 

(v)           the original copies of all contracts entered into by Manager on behalf of Owner during such period, if requested; and 

 

	
             
 	
            (vi)
 	
            copy of ledger entries for such period Manager, if requested.  
 

 

(c)           Budgets and Leasing Plans.  Not later than November 15 of each calendar year, Manager shall prepare and submit to Owner for its approval an operating budget and a marketing and leasing plan on each Property for the calendar year immediately following such submission.  In connection with any acquisition of a Property by Owner, Manager shall prepare a budget and marketing and leasing plan for the remainder of the calendar year.  The budget and marketing and leasing plan shall be in the form of the budget and plan approved by Owner prior to the date thereof.  As often as reasonably necessary during the period covered by any such budget, Manager may submit to Owner for its approval an updated budget or plan incorporating such changes as shall be necessary to reflect cost over-runs and the like during such period.  If Owner does
not disapprove any such budget within 30 days after receipt thereof by Owner, such budget shall be deemed approved.  If Owner shall disapprove any such budget or plan, it shall so notify Manager within said 30-day period and explain the reasons therefor.  If Owner disapproves of any budget or plan, Manager shall submit a revised budget or plan, as applicable, within 10 (ten) days of receipt of the notice of disapproval, and Owner shall have 10 (ten) days to provide notice to Manager if it disapproves of any such revised budget or plan.  Manager will not incur any costs other than those estimated in any budget except for:  

 

	
             
 	
            (i)
 	
            tenant improvements and real estate commissions required under a Lease;
 

 

	
             
 	
            (ii)
 	
            maintenance or repair costs under $5,000 per Property;
 

 

 

 

(iii)          costs incurred in emergency situations in which action is immediately necessary for the preservation or safety of the Property, or for the safety of occupants or other persons (or to avoid the suspension of any necessary service of the Property); 

 

	
             
 	
            (iv)
 	
            expenditures for real estate taxes and assessment; and
 

 

(v)           maintenance supplies calling for an aggregate purchase price less than $25,000 per annum for all Properties.

 

Budgets prepared by Manager shall be for planning and informational purposes only, and Manager shall have no liability to Owner for any failure to meet any such budget.  However, Manager will use its best efforts to operate within the approved budget.  

 

(d)           Legal Requirements.  Manager shall execute and file when due all forms, reports, and returns required by law relating to the employment of its personnel.  Manager shall be responsible for notifying Owner in the event it receives notice that any Improvement on a Property or any equipment therein does not comply with the requirements of any statute, ordinance, law or regulation of any governmental body or of any public authority or official thereof having or claiming to have jurisdiction thereover.  Manager shall promptly forward to Owner any complaints, warnings, notices or summonses received by it relating to such matters.  Owner represents that to the best of its knowledge each of its Properties and any equipment thereon will upon acquisition by Owner comply with all such requirements.  Owner authorizes Manager to disclose
the ownership of the Property by Owner to any such officials.  Owner agrees to indemnify, protect, defend, save and hold Manager and its stockholders, officers, directors, employees, managers, successors and assigns (collectively, the “Indemnified Parties”) harmless of and from any and all Losses (as defined in Section 3.5(a) hereof) that may be imposed on them or any or all of them by reason of the failure of Owner to correct any present or future violation or alleged violation of any and all present or future laws, ordinances, statutes, or regulations of any public authority or official thereof, having or claiming to have jurisdiction thereover, of which it has actual notice.  

 

ARTICLE III

 

AUTHORITY GRANTED TO MANAGER AND CERTAIN OWNER OBLIGATIONS

 

3.1           Authority As To Tenants.  Etc.  Owner agrees and does hereby give Manager the following exclusive authority and powers (all of which shall be exercised either in the name of Manager, as Manager for Owner, or in the name or Owner entered into by Manager as Owner’s authorized agent, and Owner shall assume all expenses in connection with such matters):  

 

	
             
 	
            (a)
 	
            to advertise each Property or any part thereof and to display signs thereon, as permitted by law;
 

 

	
             
 	
            (b)
 	
            to lease the Properties to tenants;
 

 

(c)           to pay all expenses of leasing such Property, including but not limited to, newspaper and other advertising, signage, banners, brochures, referral commissions, leasing commissions, finder’s fees and salaries, bonuses and other compensation of leasing personnel responsible for the leasing of the Property; 

 

(d)           to cause references of prospective tenants to be investigated, it being understood and agreed by the parties hereto that Manager does not guarantee the creditworthiness or collectibility of accounts receivable from tenants, users or lessees; and to negotiate new Leases and renewals and cancellations of existing Leases that shall be subject to Manager obtaining Owner’s approval; 

 

(e)           to collect from tenants all or any of the following:  a late rent administrative charge, a non-negotiable check charge, credit report fee, a subleasing administrative charge and/or broker’s commission; and Manager need not account for such charges and/or commission to Owner; 

 

(f)            to terminate tenancies and to sign and serve in the name of Owner of each Property such notices as are deemed necessary by Manager:  

 

 

 

(i)            to institute and prosecute actions to evict tenants and to recover possession of the Property or portions thereof; and 

 

(ii)           with Owner’s authorization, to sue for and in the name of Owner and recover rent and other sums due; and to settle, compromise, and release such actions or suits, or reinstate such tenancies.  All expenses of litigation including, but not limited to, attorneys’ fees, filing fees, and court costs that Manager shall incur in connection with the collecting of rent and other sums, or to recover possession of any Property or any portion thereof, shall be deemed to be an operational expense of the Property.  Manager and Owner shall concur on the selection of the attorneys to handle such litigation.  

 

3.2           Operational Authority.  Owner agrees and does hereby give Manager the following exclusive authority and powers (all of which shall be exercised either in the name of Manager, as Manager for Owner, or in the name of Owner entered into by Manager as Owner’s authorized agent, and Owner shall assume all expenses in connection with such matters):  

 

(a)           to hire, supervise, discharge, and pay all labor required for the operation and maintenance of each Property including but not limited to on-site personnel, managers, assistant managers, leasing consultants, engineers, janitors, maintenance supervisors and other employees required for the operation and maintenance of the Property, including personnel spending a portion of their working hours (to be charged on a pro rata basis) at the Property.  All of such employment expenses shall be deemed operational expenses of the Property.  

 

(b)           to make or cause to be made all ordinary repairs and replacements necessary to preserve each Property in its present condition and for the operating efficiency thereof and all alterations required to comply with lease requirements, and to decorate the Property; 

 

(c)           to negotiate and enter into, as Manager of the Property, contracts for all items on budgets that have been approved by Owner, any emergency services or repairs for items not exceeding $5,000, appropriate service agreements and labor agreements for normal operation of the Property, which have terms not to exceed three years, and agreements for all budgeted maintenance, minor alterations, and utility services, including, but not limited to, electricity, gas, fuel, water, telephone, window washing, scavenger service, landscaping, snow removal, pest exterminating, decorating and legal services in connection with the Leases and service agreements relating to the Property, and other services or such of them as Manager may consider appropriate; and 

 

	
             
 	
            (d)
 	
            to purchase supplies and pay all bills.  
 

 

Manager shall use its best efforts to obtain the foregoing services and utilities for the Property under terms that are as cost-effective and otherwise favorable to Manager as possible for the quality of services and utilities required.  Owner hereby appoints Manager as Owner’s authorized Manager for the purpose of executing, as Manager for said Owner, all such contracts.  In addition, Owner agrees to specifically assume in writing all obligations under all such contracts so entered into by Manager, on behalf of Owner of the Property, upon the termination of this Agreement, and Owner shall indemnify, protect, save, defend and hold Manager and the other Indemnified Parties harmless from and against any and all Losses resulting from, arising out of or in any way related to such contracts and that relate to or concern matters occurring after termination of this Agreement, but excluding matters arising out of
Manager’s willful misconduct, gross negligence and/or unlawful acts.  Manager shall secure the approval of, and execution of appropriate contracts by, Owner for any non-budgeted and non-emergency/contingency capital items, alterations or other expenditures in excess of $5,000 for any one item, securing for each item at least three written bids, if practicable, or providing evidence satisfactory to Owner that the contract amount is lower than industry standard pricing, from responsible contractors.  Manager shall have the right from time to time during the term hereof, to contract with and make purchases from Affiliates of Manager, provided that contract rates and prices are competitive with other available sources.  Manager may at any time and from time to time request and receive the prior written authorization of Owner of the Property of anyone or more purchases or other expenditures, notwithstanding that Manager may otherwise be authorized hereunder to make such purchases or
expenditures.  

 

3.3           Rent and Other Collections.  Owner agrees and does hereby give Manager the exclusive authority and powers (all of which shall be exercised either in the name of Manager, as Manager for Owner, or in the name of 

 

 

Owner entered into by Manager as Owner’s authorized agent, and Owner shall assume all expenses in connection with such matters) to collect rents and/or assessments and other items, including but not limited to tenant payments for real estate taxes, property liability and other insurance, damages and repairs, common area maintenance, tax reduction fees and all other tenant reimbursements, administrative charges, proceeds of rental interruption insurance, parking fees, income from coin operated machines and other miscellaneous income, due or to become due and give receipts therefor and to deposit all such Gross Revenue collected hereunder in the Account.  Manager may endorse any and all checks received in connection with the operation of any Property and drawn to the order of Owner, and Owner shall, upon request, furnish Manager’s depository with an appropriate authorization for Manager to make such
endorsement.  Manager shall also have the exclusive authority to collect and handle tenants’ security deposits, including the right to apply such security deposits to unpaid rent, and to comply, on behalf of Owner of the Property, with applicable state or local laws concerning security deposits and interest thereon, if any.  Manager shall not be required to advance any monies for the care or management of any Property.  Owner agrees to advance all monies necessary therefor.  If Manager shall elect to advance any money in connection with a Property, Owner agrees to reimburse Manager forthwith and hereby authorizes Manager to deduct such advances from any monies due Owner.  In connection with any insured losses or damages relating to any Property, Manager shall have the exclusive authority to handle all steps necessary regarding any such claim; provided that Manager will not make any adjustments or settlements in excess of $10,000 without Owner’s prior written consent.

 

3.4           Payment of Expenses.  Owner agrees and does hereby give Manager the exclusive authority and power (all of which shall be exercised either in the name of Manager, as Manager for Owner, or in the name of Owner entered into by Manager as Owner’s authorized agent, and Owner shall assume all expenses in connection with such matters) to pay all expenses of the Property from the Gross Revenue collected in accordance with Section 3.3 above, from the Account.  It is understood that the Gross Revenue will be used first to pay the compensation to Manager as contained in Article 5 below, then operational expenses and then any mortgage indebtedness, including real estate tax and insurance impounds, but only as directed by Owner in writing and only if sufficient Gross Revenue is available for such payments.  Nothing in this Agreement shall be
interpreted in such a manner as to obligate Manager to pay from Gross Revenue, any expenses incurred by Owner prior to the commencement of this Agreement, except to the extent Owner advances additional funds to pay such expenses.  

 

	
            3.5
 	
            Certain Owner Indemnification Obligations.
 

 

(a)           On Termination.  In the event this Agreement is terminated for any reason prior to the expiration of its original term or any renewal term, Owner shall indemnify, protect, defend, save and hold Manager and all of the other Indemnified Parties harmless from and against any and all claims, causes of action, demands, suits, proceedings, loss, judgments, damage, awards, liens, fines, costs, attorney’s fees and expenses, of every kind and nature whatsoever (collectively, “Losses”), that may be imposed on or incurred by Manager by reason of the willful misconduct, gross negligence and/or unlawful acts (such unlawfulness having been adjudicated by a court of proper jurisdiction) of Owner.  

 

(b)           Property Damage.  Etc.  Owner agrees to indemnify, defend, protect, save and hold Manager and all of the other Indemnified Parties harmless from any and all Losses in connection with or in any way related to the Property and from liability for damage to the Property and injuries to or death of any person whomsoever, and damage to property; provided, however, that such indemnification shall not extend to any such Losses arising out of the willful misconduct, gross negligence and/or unlawful acts (such unlawfulness having been adjudicated by a court of proper jurisdiction) of Manager or any of the other Indemnified Parties.  Manager shall not be liable for any error of judgment or for any mistake of fact or law, or for any thing that it may do or refrain from doing, except in cases of willful misconduct, gross negligence
and/or unlawful acts (such unlawfulness having been adjudicated by a court of proper jurisdiction).

 

3.6           Environmental Matters.  Owner hereby warrants and represents to Manager that to the best of Owner’s knowledge, no Property, upon acquisition by Owner, nor any part thereof, will be used to treat, deposit, store, dispose of or place any hazardous substance that may subject Manager to liability or claims under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42 U.S.C.A.  Section 9607) or any constitutional provision, statute, ordinance, law, or regulation of any governmental body or of any order or ruling of any public authority or official thereof, having or claiming to have jurisdiction thereover.  Furthermore, Owner agrees to indemnify, protect, defend, save and hold Manager and all of the other Indemnified Parties from 

 

 

any and all Losses involving, concerning or in any way related to any past, present or future allegations regarding treatment, depositing, storage, disposal or placement by any party other than Manager of hazardous substances on the Property.  

 

3.7           Legal Status of Properties.  Owner represents that to the best of its knowledge each Property and any equipment thereon, when by Owner, will comply with all legal requirements and authorizes Manager to disclose the identity of the Owner of the Property to any such officials and agrees to indemnify, protect, defend, save and hold Manager and the other Indemnified Parties harmless of and from any and all Losses that may be imposed on them or any of them by reason of the failure of Owner to correct any present or future violation or alleged violation of any and all present or future laws, ordinances, statutes, or regulations of any public authority or official thereof, having or claiming to have jurisdiction thereover, of which it has actual notice.  In the event it is alleged or charged that any Improvement or any equipment on a Property or any
act or failure to act by Owner with respect to the Property or the sale, rental, or other disposition thereof fails to comply with, or is in violation of, any of the requirements of any constitutional provision, statute, ordinance, law, or regulation of any governmental body or any order or ruling of any public authority or official thereof having or claiming to have jurisdiction thereover, and Manager, in its sole and absolute discretion, considers that the action or position of Owner, with respect thereto may result in damage or liability to Manager, Manager shall have the right to cancel this Agreement at any time by written notice to Owner of its election so to do, which cancellation shall be effective upon the service of such notice.  Such cancellation shall not release the indemnities of Owner set forth in this Agreement and shall not terminate any liability or obligation of Owner to Manager for any payment, reimbursement, or other sum of money then due and payable to Manager
hereunder.  

 

3.8           Extraordinary Payments.  Owner agrees to give adequate advance written notice to Manager if Owner desires that Manager make any extraordinary payment, out of Gross Revenue, to the extent funds are available after the payment of Manager’s compensation as provided for herein and all operational expenses, of mortgage indebtedness, general taxes, special assessments, or fire, boiler or any other insurance premiums.  

 

ARTICLE IV

 

EXPENSES

 

4.1           Owner’s Expenses.  Except as otherwise specifically provided, all costs and expenses incurred hereunder by Manager in fulfilling its duties to Owner shall be for the account of and on behalf of Owner.  Such costs and expenses shall include the wages and salaries and other employee-related expenses of all on-site and off-site employees of Manager who are engaged in the operation, management, maintenance and leasing or access control of the Properties, including taxes, insurance and benefits relating to such employees, and legal, travel and other out-of-pocket expenses that are directly related to the management of specific Properties.  All costs and expenses for which Owner is responsible under this Management Agreement shall be paid by Manager out of the Account.  In the event the Account does not contain sufficient funds to pay all said
expenses, Owner shall fund all sums necessary to meet such additional costs and expenses.  

 

4.2           Manager’s Expenses.  Manager shall, out of its own funds, pay all of its general overhead and administrative expenses.  

 

ARTICLE V

 

MANAGER’S COMPENSATION

 

5.1           Management Fees.  Commencing on the date hereof, Owner shall pay Manager property management and leasing fees in an amount equal to three percent (3.0%) of Gross Revenues, less all payments to third-party property management subcontractors (the “Management Fees”) on a monthly basis from the rental income received from the Properties over the term of this Management Agreement.  Manager’s compensation under this Section 5.1 shall apply to all renewals, extensions or expansions of Leases that Manager has originally negotiated.  In the event Manager assists with planning and coordinating the construction of any tenant-paid finish-out or improvements, Manager shall be entitled to receive from any such tenant an amount equal to not greater than five percent (5.0%) of the cost of such tenant improvements.  

 

 

 

5.2           Leasing Fees.  In addition to the compensation paid to Manager under Section 5.1 above, Manager shall be entitled to receive a separate fee for the Leases of new tenants and renewals of Leases with existing tenants in an amount not to exceed the fee customarily charged in arm’s length transactions by others rendering similar services in the same geographic area for similar properties as determined by a survey of brokers and agents in such area (“Leasing Fees”).  Notwithstanding the provisions of the previous sentence, Leasing Fees shall not exceed the greater of $4.50 per square foot of leased space, or 7.5% of the total lease obligation.  

 

5.3           Audit Adjustment.  If any audit of the records, books or accounts relating to the Properties discloses an overpayment or underpayment of Management Fees, Owner or Manager shall promptly pay to the other party the amount of such overpayment or underpayment, as the case may be.  If such audit discloses an overpayment of Management Fees for any fiscal year of more than the correct Management Fees for such fiscal year, Manager shall bear the cost of such audit.  

 

5.4           Additional Services.  Any services beyond those specified herein, such as sales, brokerage, loan origination and servicing, property tax reduction and risk management services, shall be performed by Manager and compensated by Owner only if the parties agree on the scope of such work and provided that the compensation to be paid therefor will not exceed that which would be paid to unrelated parties  providing such services and provided further that all such compensation must be approved by a majority of the directors of Owner.  

 

ARTICLE VI

 

INSURANCE AND INDEMNIFICATION

 

	
            6.
 	
            Insurance to be Carried.  
 

 

(a)           Manager shall obtain and keep in full force and effect insurance on the Properties against such hazards as Owner and Manager shall deem appropriate, but in any event insurance sufficient to comply with the Leases and Ownership Agreements shall be maintained.  All liability policies shall provide sufficient insurance satisfactory to both Owner and Manager and shall contain waivers of subrogation for the benefit of Manager.  

 

(b)           Manager shall obtain and keep in full force and effect, in accordance with the laws of the state in which each Property is located, employer’s liability insurance applicable to and covering all employees of Manager at the Properties and all persons engaged in the performance of any work required hereunder, and Manager shall furnish Owner certificates of insurers naming Owner as a co-insured and evidencing that such insurance is in effect.  If any work under this Management Agreement is subcontracted as permitted herein, Manager shall include in each subcontract a provision that the subcontractor shall also furnish Owner with such a certificate.  

 

6.2           Insurance Expenses.  Premiums and other expenses of such insurance, as well as any applicable payments in respect of deductibles shall be borne by Owner.  

 

6.3           Cooperation with Insurers.  Manager shall cooperate with and provide reasonable access to the Properties to representatives of insurance companies and insurance brokers or agents with respect to insurance that is in effect or for which application has been made.  Manager shall use its best efforts to comply with all requirements of insurers.  

 

6.4           Accidents and Claims.  Manager shall promptly investigate and shall report in detail to Owner all accidents, claims for damage relating to Ownership, operation or maintenance of the Properties, and any damage or destruction to the Properties and the estimated costs of repair thereof, and shall prepare for approval by Owner all reports required by an insurance company in connection with any such accident, claim, damage, or destruction.  Such reports shall be given to Owner promptly, and any report not so given within 10 (ten) days after the occurrence of any such accident, claim, damage or destruction shall be noted in the monthly operating statement delivered to Owner pursuant to Section 2.5(b).  Manager is authorized to settle any claim against an insurance company arising out of any policy and, in connection with such claim, to execute
proofs of loss and adjustments of loss and to collect and receipt for loss proceeds.  

 

 

 

6.5           Indemnification.  Manager shall hold Owner harmless from and indemnify and defend Owner against any and all claims or liability for any injury or damage to any person or property whatsoever for which Manager is responsible occurring in, on, or about the Properties, including, without limitation, the Improvements when such injury or damage shall be caused by the negligence of Manager, its agents, servants, or employees, except to the extent that Owner recovers insurance proceeds with respect to such matter.  Owner will indemnify and hold Manager harmless against all liability for injury to persons and damage to property caused by Owner’s negligence and which did not result from the negligence of misconduct of Manager, except to the extent Manager recovers insurance proceeds with respect to such matter.

 

ARTICLE VII

 

TERM AND TERMINATION

 

7.1           Term.  This Agreement shall commence on the date first above written and shall continue until the third (3rd) anniversary of such date and thereafter for three successive three (3) year renewal periods, unless on or before 30 days prior to the date last above mentioned or on or before 30 days prior to the expiration of any such renewal period, Manager shall notify Owner in writing that it elects to terminate this Agreement, in which case this Agreement shall be thereby terminated on said last mentioned date.  Either party may terminate this Agreement, without cause, by giving the other party thirty (30) days written notice.  In addition, either party may terminate this Agreement immediately upon the occurrence of any of the following:  

 

(a)           A decree or order is rendered by a court having jurisdiction (i) adjudging Manager as bankrupt or insolvent, or (ii) approving as properly filed a petition seeking reorganization, readjustment, arrangement, composition or similar relief for Manager under the federal bankruptcy laws or any similar applicable law or practice, or (iii) appointing a receiver or liquidator or trustee or assignee in bankruptcy or insolvency of Manager or a substantial part of the property of Manager, or for the winding up or liquidation of its affairs, or 

 

(b)           Manager (i) institutes proceedings to be adjudicated a voluntary bankrupt or an insolvent, (ii) consents to the filing of a bankruptcy proceeding against it, (iii) files a petition or answer or consent seeking reorganization, readjustment, arrangement, composition or relief under any similar applicable law or practice, (iv) consents to the filing of any such petition, or to the appointment of a receiver or liquidator or trustee or assignee in bankruptcy or insolvency for it or for a substantial part of its property, (v) makes an assignment for the benefit of creditors, (vi) is unable to or admits in writing its inability to pay its debts generally as they become due unless such inability shall be the fault of the other party, or (iv) takes corporate or other action in furtherance of any of the aforesaid purposes.  

 

Upon any termination pursuant to this Section 7.1, the provisions and obligations of this Agreement shall be deemed terminated, except that the obligation of the parties for fees due between one another and the obligations of indemnity set forth herein shall survive such termination.  Manager shall cooperate with Owner in transfers of management and accounting functions hereunder.  

 

7.2           Manager’s Obligations Upon Termination.  Upon the termination of this Management Agreement, Manager shall have the following duties:  

 

(a)           Manager shall deliver to Owner or its designee, all books and records with respect to the Properties.  

 

(b)           Manager shall transfer and assign to Owner, or its designee, all service contracts and personal property relating to or used in the operation and maintenance of the Properties, except personal property paid for and owned by Manager.  Manager shall also, for a period of sixty (60) days immediately following the date of such termination, make itself available to consult with and advise Owner, or its designee, regarding the operation, maintenance and leasing of the Properties.  

 

(c)           Manager shall render to Owner an accounting of all funds of Owner in its possession and shall deliver to Owner a statement of all Management Fees claimed to be due to Manager and shall cause funds of Owner held by Manager relating to the Properties to be paid to Owner or its designee.

 

 

 

7.3           Owner’s Obligations Upon Termination.  Owner shall pay or reimburse Manager for any sums of money due it under this Agreement for services and expenses prior to termination of this Agreement.  All provisions of this Agreement that require Owner to have insured, or to protect, defend, save, hold and indemnify or to reimburse Manager shall survive any expiration or termination of this Agreement and, if Manager is or becomes involved in any claim, proceeding or litigation by reason of having been Manager of Owner, such provisions shall apply as if this Agreement were still in effect.  

 

The parties understand and agree that Manager may withhold funds for sixty (60) days after the end of the month in which this Agreement is terminated to pay bills previously incurred but not yet invoiced and to close accounts.  Should the funds withheld be insufficient to meet the obligation of Manager to pay bills previously incurred, Owner will, upon demand, advance sufficient funds to Manager to ensure fulfillment of Manager’s obligation to do so, within ten (10) days of receipt of notice and an itemization of such unpaid bills.  

 

ARTICLE VIII

 

MISCELLANEOUS

 

8.1           Notices.  All notices, approvals, consents and other communications hereunder shall be in writing, and, except when receipt is required to start the running of a period of time, shall be deemed given when delivered in person or on the fifth day after its mailing by either party by registered or certified United States mail, postage prepaid and return receipt requested, to the other party, at the addresses set forth after their respect name below or at such different addresses as either party shall have theretofore advised the other party in writing in accordance with this Section 8.1.  

 

	
            Owner:
 	
            COLE OPERATING PARTNERSHIP I, LP 

c/o Cole Credit Property Trust, Inc.  

2555 E.  Camelback Road, Suite 400 

Phoenix, Arizona 85016 

Attention:  General Partner

 
 
	
            Manager:
 	
            FUND REALTY ADVISORS, INC.

2555 E.  Camelback Road, Suite 400 

Phoenix, Arizona 85016 

Attention:  Chief Executive Officer
 

 

8.2           Governing Law; Venue.  This Management Agreement shall be governed by and construed in accordance with the laws of the State of Arizona, and any action brought to enforce the agreements made hereunder or any action which arises out of the relationship created hereunder shall be brought exclusively in Maricopa County, Arizona.  

 

8.3           Assignment.  Manager may delegate partially or in full its duties and rights under this Management Agreement but only with the prior written consent of Owner.  Owner acknowledges and agrees that any or all of the duties of Manager as contained herein may be delegated by Manager and performed by a person or entity (“Submanager”) with whom Manager contracts for the purpose of  performing such duties.  Owner specifically grants Manager the authority to enter into such a contract with a Submanager; provided that, unless Owner otherwise agrees in writing with such Submanager, Owner shall have no liability or responsibility to any such Submanager for the payment of the Submanager’s fee or for reimbursement to the Submanager of its expenses or to indemnify the Submanager in any manner for any matter; and provided further that Manager
shall require such Submanager to agree, in the written agreement setting forth the duties and obligations of such Submanager, to indemnify Owner for all Losses incurred by Owner as a result of the willful misconduct or gross negligence of the Submanager, except that such indemnity shall not be required to the extent that Owner recovers issuance proceeds with respect to such matter.  Any contract entered into between Manager and a Submanager pursuant to this Section 8.3 shall be consistent with the provisions of this Agreement, except to the extent Owner otherwise specifically agrees in writing.  This Management Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns.  

 

 

 

8.4           Third Party Leasing Services.  Manager acknowledges that from time to time Owner may determine that it is in the best interests of Owner to retain a third party to provide certain leasing services with respect to certain Properties and to compensate such third party for such leasing services.  Upon the prior written consent of Manager, Owner shall have the authority to enter into such a contract for leasing services with a third party (a “Third Party Leasing Agreement”); provided that Manager shall have no liability or responsibility to Owner for any of the duties and obligations undertaken by such party, and Owner agrees to indemnify Manager for all Losses incurred by Manager as a result of acts of such third party pursuant to the Third Party Leasing Agreement.  To the extent that leasing services are specifically required to be
performed by a third party pursuant to such Third Party Leasing Agreement, Manager shall have no obligation to perform such leasing services and Owner shall have no obligation to Manager for leasing fees pursuant to Section 5.2 hereof.  To the extent that both Manager and such Third Party Leasing Agreement provides leasing services with respect to certain Properties, the Leasing fees payable to Manager pursuant to Section 5.2 hereof shall be reduced by the amounts payable with respect to such Properties to such Third Party Leasing Agreement.  

 

8.5           Third Party Management Services.  Manager acknowledges that from time to time Owner may acquire interests in Properties in which Owner does not control the determination of the party that is engaged to provide property management and other services to be provided by Manager with respect to all Properties acquired by Owner hereunder.  Upon the prior written consent of Manager, Owner shall have the authority to acquire such non-controlling interests in Properties for which a third party provides some or all of the services otherwise required to be performed by Manager hereunder (a “Third Party Management Agreement”); provided that Manager shall have no liability or responsibility to Owner for any of the duties and obligations undertaken by such third party, and Owner agrees to indemnify Manager for all Losses incurred by Manager as a
result of the acts of such third party pursuant to the Third Party Management Agreement.  To the extent that property management and other services are specifically required to be performed by a third party pursuant to such Third Party Management Agreement, Manager shall have no obligation to perform such services and Owner shall have no obligation to Manager for compensation for such services pursuant to Article V hereof.  To the extent that both Manager and such Third Party Leasing Agreement provides leasing services with respect to certain Properties, the Leasing fees payable to Manager pursuant to Section 5.2 hereof shall be reduced by the amounts payable with respect to such Properties to such Third Party Leasing Agreement.  

 

8.6           No Waiver.  The failure of Owner to seek redress for violation or to insist upon the strict performance of any covenant or condition of this Management Agreement shall not constitute a waiver thereof for the future.  

 

8.7           Amendments.  This Management Agreement may be amended only by an instrument in writing signed by the party against whom enforcement of the amendment is sought.  

 

8.8           Headings.  The headings of the various subdivisions of this Management Agreement are for reference only and shall not define or limit any of the terms or provisions hereof.  

 

8.9           Counterparts.  This Management Agreement may be executed in two or more counterparts, each of which shall be deemed an original, and it shall not be necessary in making proof of this Management Agreement to produce or account for more than one such counterpart.  

 

8.10         Entire Agreement.  This Management Agreement contains the entire understanding and all agreements between Owner and Manager respecting the management of the Properties.  There are no representations, agreements, arrangements or understandings, oral or written, between Owner and Manager relating to the management of the Properties that are not fully expressed herein.  

 

8.11         Disputes.  If there shall be a dispute between Owner and Manager relating to this Management Agreement resulting in litigation, the prevailing party in such litigation shall be entitled to recover from the other party to such litigation such amount as the court shall fix as reasonable attorneys’ fees.  

 

8.12         Activities of Manager.  The obligations of Manager pursuant to the terms and provisions of this Management Agreement shall not be construed to preclude Manager from engaging in other activities or business ventures, whether or not such other activities or ventures are in competition with Owner or the business of Owner.  

 

 

 

8.13         Independent Contractor.  Manager and Owner shall not be construed as joint venturers or partners of each other pursuant to this Management Agreement, and neither shall have the power to bind or obligate the other except as set forth herein.  In all respects, the status of Manager to Owner under this Agreement is that of an independent contractor.

 

8.14        No Third-Party Rights.  Nothing expressed or referred to in this Management Agreement will be construed to give any Person other than the parties to this Management Agreement any legal or equitable right, remedy or claim under or with respect to this Management Agreement or any provision of this Management Agreement, except such rights as shall inure to a successor or permitted assignee pursuant to Section 8.3.  

 

8.15         Ownership of Proprietary Property.  The Manager retains ownership of and reserves all Intellectual Property Rights in the Proprietary Property.  To the extent that Owner has or obtains any claim to any right, title or interest in the Proprietary Property, including without limitation in any suggestions, enhancements or contributions that Owner may provide regarding the Proprietary Property, Owner hereby assigns and transfers exclusively to the Manager all right, title and interest, including without limitation all Intellectual Property Rights, free and clear of any liens, encumbrances or licenses in favor of Owner or any other party, in and to the Proprietary Property.  In addition, at the Manager’s expense, Owner will perform any acts that may be deemed desirable by the Manager to evidence more fully the transfer of ownership of right, title and
interest in the Proprietary Property to the Manager, including but not limited to the execution of any instruments or documents now or hereafter requested by the Manager to perfect, defend or confirm the assignment described herein, in a form determined by the Manager.  

 

[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]

 

 

 

IN WITNESS WHEREOF, the parties have executed this Property Management and Leasing Agreement as of the date first above written.  

 

	
            COLE CREDIT PROPERTY TRUST, INC.

 
 
	
            By:
 	
            /s/ Christopher H. Cole
 
	
             
 	
            Christopher H. Cole
 
	
             
 	
            Chief Executive Officer and President
 

 

 

	
            COLE OPERATING PARTNERSHIP I, LP

 
 
	
            By:
 	
            Cole Credit Property Trust, Inc.

General Partner

 
 
	
             
 	
            By:
 	
            /s/ Christopher H. Cole
 
	
             
 	
            Christopher H. Cole
 
	
             
 	
            Chief Executive Officer and President
 
			

 

 

	
            FUND REALTY ADVISORS, INC.

 
 
	
            By:
 	
            /s/ Blair D. Koblenz
 
	
             
 	
            Blair D. Koblenz
 
	
             
 	
            Executive Vice PresidentADVISORY AGREEMENT

 

This ADVISORY AGREEMENT (this “Agreement”) is entered into on this the 6th day of April, 2004, by and between COLE CREDIT PROPERTY TRUST, INC., a Maryland corporation (the “Company”), and COLE REIT ADVISORS, LLC, a Delaware limited liability company (the “Advisor”).

 

WITNESSETH

 

WHEREAS, the Company will be issuing shares of its common stock, par value $.01, pursuant to a private offering to “accredited investors”

 

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 Company’s Articles of Incorporation and Sections 856 through 860 of the Internal Revenue Code;

 

WHEREAS, the Company desires to avail itself of the experience, sources of information, advice, assistance and certain facilities available to the Advisor and to have the Advisor undertake the duties and responsibilities hereinafter set forth, on behalf of, and subject to the supervision of, the Board of Directors of the Company, all as provided herein; and

 

WHEREAS, the Advisor is willing to undertake to render such services, subject to the supervision of the Board of Directors, 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 is hereby acknowledged, the parties hereto agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

The following defined terms used in this Agreement shall have the meanings specified below:

 

Acquisition Expenses.  Any and all expenses incurred by the Company, the Advisor, or any Affiliate of either in connection with the selection, 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.  Any and all fees and commissions, exclusive of Acquisition Expenses but including the  Acquisition and Advisory Fees, paid by any Person to any other Person (including any fees or commissions paid by or to any Affiliate of the Company or the Advisor) in connection with making or investing in Mortgages or the purchase, development or construction of an Asset, including, without limitation, real estate commissions, selection fees, development fees, construction fees, non-recurring management fees, loan fees, points or any other fees of a similar nature.  Excluded shall be development fees and construction fees paid to any Person not affiliated with the Sponsor in connection with the actual development and construction of any Property.

 

Acquisition and Advisory Fees.  The fees payable to the Advisor pursuant to Section 3.01(b).

 

Advisor.  Cole REIT Advisors, LLC, a Delaware limited liability company, any successor advisor to the Company, or any Person to which Cole REIT Advisors, LLC, or any successor advisor subcontracts all or substantially all of its functions.

 

Affiliate or Affiliated.  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.

 

Aggregate Assets Value.  The aggregate book value of the Assets at the time of measurement before deducting depreciation, bad debts or other similar non-cash reserves and without reduction for any debt secured by or relating to such assets; provided, however, that during such periods in which the Board of Directors is determining on a regular basis the current value of the Company’s net assets for purposes of enabling fiduciaries of employee benefit plan stockholders to comply with applicable Department of Labor reporting requirements, “Aggregate Assets Value” will equal the greater of (i) the amount determined pursuant to the foregoing or (ii) the most recent Assets’ aggregate valuation established by the Board of Directors without reduction for depreciation, bad debts or other non-cash reserves and without reduction for any debt secured by or relating to such assets.

 

Appraised Value.  Value according to an appraisal made by an Independent Appraiser.

 

Articles of Incorporation.  The Articles of Incorporation of the Company filed with the Maryland State Department of Assessments and Taxation in accordance with the Maryland General Corporation Law, as amended from time to time.

 

Assets.  Properties, Mortgages and other investments (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.  

 

Asset Management Fee.  The fee payable to the Advisor for day-to-day professional management services in connection with the Company and its investments in Assets pursuant to this Agreement.

 

Average Invested Assets.  For a specified period, the average of the aggregate book value of the Assets, computed by taking the average of such values at the end of each month during such period; provided, however, that during such periods in which the Company is determining on a regular basis the current value of its net assets for purposes of enabling fiduciaries of employee benefit plan stockholders to comply with applicable Department of Labor reporting requirements, “Average Invested Assets” will equal the greater of (i) the amount determined pursuant to the foregoing or (ii) the most recent Assets’ aggregate valuation established by the Board of Directors without reduction for depreciation, bad debts or other non-cash reserves.

 

Board of Directors.  The Board of Directors of the Company.

 

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

 

Change of Control.  Any issue, transfer or other disposition of Shares of capital stock of the Company or equity interests in the Partnership (including, without limitation, pursuant to a merger, share exchange or consolidation) which results in a Person or group of Persons beneficially owning or controlling, directly or indirectly, greater than 50% of the voting power of the Company or the Partnership.

 

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

 

Company.  Cole Credit Property Trust, Inc., a corporation organized under the laws of the State of Maryland.

 

Competitive Real Estate Commission.  A real estate or brokerage commission 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.

 

Contract Purchase Price.  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.  The total consideration provided for in the sales contract for the sale of a Property.

 

 

 

 

Dealer Manager.  Cole Capital Corporation, an Affiliate of the Advisor, or such Person selected by the Board of Directors to act as the dealer manager for an Offering.

 

Director.  A member of the Board of Directors.

 

Disposition Fee.  The fee payable to the Advisor for services provided in connection with the Sale of one or more Properties pursuant to Section 3.01(c).

 

Dividends.  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.

 

Finance Coordination Fee.  The fee payable to the Advisor for services provided in connection with the receipt of loans on one or more Properties pursuant to Section 3.01(f).

 

Gross Proceeds.  The aggregate purchase price of all Shares sold for the account of the Company through an Offering, without deduction for selling commissions, volume discounts, dealer manager fees or Organization and Offering Expenses.  For the purpose of computing Gross Proceeds, the purchase price of any Share for which reduced selling commissions 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 Offering price per Share pursuant to the prospectus or private offering memorandum for such Offering without reduction.

 

Independent Appraiser.  A Person with no material current or prior business or personal relationship with the Advisor or the Directors and who is a qualified appraiser of Real Property of the type held by the Company or of other Assets as determined by the Board of Directors.  Membership in a nationally recognized appraisal society such as the American Institute of Real Estate Appraisers or the Society of Real Estate Appraisers shall be conclusive evidence of such qualification as to Real Property.

 

Invested Capital.  The amount calculated by multiplying the total number of Shares purchased by Stockholders by the issue price, reduced by the portion of any Dividend 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.  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.  The listing of the Shares of the Company on a national securities exchange or the quotation of shares on The Nasdaq Stock Market.  Upon such Listing, the Shares shall be deemed Listed.

 

Market Value.  Upon Listing, the market value of the outstanding Shares, measured by taking the average closing price or average of bid and asked price, as the case may be, over a period of 30 days during which the Shares are traded, with such period beginning 180 days after Listing.

 

Mortgages.  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.

 

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

 

Net Sales Proceeds.  In the case of a transaction described in clause (i) (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 (i) (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 (i)(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 (i)(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 (i)(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 clause (ii) 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.  Any offering of Shares pursuant to, an effective registration statement filed under the Securities Act, or an applicable exemption therefrom, excluding Shares offered under any employee benefit plan.

 

Operating Expenses.  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 Asset Management 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 Share of Net Sales Proceeds, (vi) the Performance Fee, (vii) the Subordinated Incentive Listing Fee, (viii) Acquisition Fees and Acquisition Expenses, (ix) real estate commissions on the
Sale of Property, (x) the Finance Coordination Fee, and (xi) 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.  Any and all costs and expenses, other than selling commissions and the 2.0% dealer manager fee, incurred by the Advisor or any Affiliate m connection with the formation, qualification and registration of the Company and the marketing and distribution of its Shares, including, without limitation, the following: legal, accounting and escrow fees; printing, amending, supplementing, mailing and distributing costs; filing, registration and qualification fees and taxes; telecopier and telephone costs; and all advertising and marketing expenses, including the costs related to investor and broker-dealer sales meetings.

 

Partnership. Cole Operating Partnership I, LP, a Delaware limited partnership, through which the Company may own Assets.

 

Performance Fee.  The fee payable to the Advisor upon termination of this Agreement under certain circumstances if certain performance standards have been met pursuant to Section 4.03(b) or (c).

 

Person.  An individual, corporation, business trust, estate, trust, partnership, limited liability company or other legal entity.

 

Property or Properties.  As the context requires, any, or all, respectively, of the Real Property acquired by the Company, either directly or through joint venture arrangements or other partnership or investment interests.

 

 

 

 

Proprietary Property.  All modeling algorithms, tools, computer programs, know-how, methodologies, processes, technologies, ideas, concepts, skills, routines, subroutines, operating instructions and other materials and aides used in performing the duties set forth in Section 2.02 that relate to investment advice regarding current and potential Assets, and all modifications, enhancements and derivative works of the foregoing.

 

Real Property.  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.  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 interest) or in loans secured by real estate or both in accordance with Sections 856 through 860 of the Code.

 

Sale or Sales.  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 (i) (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.

 

Securities Act.  The Securities Act of 1933, as amended from time to time, or any successor statute thereto.  Reference to any provision of the Securities Act shall mean such provision as in effect from time to time, as the same may be amended, and any successor provision thereto, as interpreted by any applicable regulations as in effect from time to time.

 

Shares.  Any shares of the Company’s common stock, par value $.01 per share.

 

Soliciting Dealers.  Broker-dealers who are members of the National Association of Securities Dealers, 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.  Christopher H.  Cole.

 

Stockholders.  The record holders of the Company’s Shares as maintained in the books and records of the Company or its transfer agent.

 

Stockholders’ 7.5% Return.  As of each date, an aggregate amount equal to a 7.5% cumulative, noncompounded, annual return on Invested Capital.

 

Subordinated Incentive Listing Fee.  The fee payable to the Advisor under certain circumstances if the Shares are Listed pursuant to Section 3.01(e).

 

 

 

 

Subordinated Share of Net Sales Proceeds.  The fee payable to the Advisor under certain circumstances following receipt of Net Sales Proceeds pursuant to Section 3.01(d).

 

Termination Date.  The date of termination of this Agreement.

 

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.

 

2.02         Duties of the Advisor.  The Advisor undertakes to use its reasonable efforts to present to the Company potential investment opportunities and to provide a continuing and suitable investment program consistent with the investment objectives and policies of the Company as determined and adopted from time to time by the Board of Directors.  In performance of this undertaking, subject to the supervision of the Board of Directors and consistent with the provisions of the Company’s Articles of Incorporation and Bylaws, the Advisor shall, either directly or by engaging an Affiliate of the Advisor or other 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)           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 uncertificated Shares, if any, and acting as transfer agent for the Company’s Shares;

 

(d)           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;

 

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

 

(f)            subject to the provisions of Sections 2.02(i) 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 for financing and refinancing and make other changes in the asset or capital structure of, and dispose of, reinvest the proceeds from the sale of, or otherwise deal with the investments in, Assets; and (v) enter into leases of Property and service contracts for Assets and, to the extent necessary, perform all other operational functions for the maintenance and administration of such Assets, including the
servicing of Mortgages;

 

	
             
 	
            (g)
 	
            provide the Board of Directors with periodic reports regarding prospective investments in Assets;
 

 

 

 

 

 

(h)           If a transaction requires approval by the Board of Directors, deliver to the Board of Directors all documents required by them to properly evaluate the proposed transaction;

 

	
             
 	
            (i)
 	
            obtain the prior approval of the Board of Directors for any and all investments in Assets;
 

 

(j)            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;

 

(k)           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;

 

(l)            from time to time, or at any time reasonably requested by the Board of Directors, make reports to the Board of Directors of its performance of services to the Company under this Agreement;

 

	
             
 	
            (m)
 	
            provide the Company with all necessary cash management services;
 

 

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

 

(o)           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;

 

(p)           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; 

 

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

 

(r)            prepare on behalf of the Company all reports and returns required by the Securities and Exchange Commission, Internal Revenue Service and other state or federal governmental agencies; and

 

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

 

2.03         Modification or Revocation of Authority of Advisor.  The Board of Directors may, at any time upon the giving of notice to the Advisor, modify or revoke the authority set forth in Section 2.02, provided however, that such modification or revocation shall be effective upon receipt by the Advisor and shall not be applicable to investment transactions to which the Advisor has committed the Company prior to the date of receipt by the Advisor of such notification.  

 

2.04         Bank Accounts.  The Advisor may establish and maintain one or more bank accounts in its own name for the account of the Company or in the name of the Company 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 of Directors may approve, provided that no funds shall be commingled with the funds of the Advisor; and the Advisor shall from time to time render appropriate accountings of such collections and payments to the Board of Directors 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 of Directors and by counsel, auditors and authorized agents of the 

 

 

Company, at any time or from time to time during normal business hours.  The Advisor shall at all reasonable times have access to the books and records of the Company.

 

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 of Directors, in which case the Advisor shall notify promptly the Board of Directors 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 of Directors.  In such event the Advisor shall have no liability for acting in accordance with the specific instructions of the Board of Directors 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 of Directors or 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 Article V of this Agreement.

 

2.07         Other Activities of the Advisor.  Nothing herein contained 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 of Directors 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 of Directors knowledge of such condition or

circumstance.

 

ARTICLE III

 

COMPENSATION

 

	
            3.01
 	
            Fees.
 

 

(a)           Asset Management Fee.  The Company shall pay the Advisor a monthly Asset Management Fee on the last day of each month in an amount equal to 1/12th of 0.75% of Aggregate Assets Value as of the last day of the preceding month.  The Asset Management Fee may or may not be taken, in whole or in part as to any year, in the sole discretion of the Advisor.  All or any portion of the Asset Management Fee not taken as to any fiscal year shall be deferred without interest and may be taken in such other fiscal year as the Advisor shall determine.

 

(b)           Acquisition and Advisory Fees.  The Company shall pay the Advisor a fee in the amount of 3.0% of the Contract Purchase Price of each Asset as Acquisition and Advisory Fees payable at the time and in respect of funds expended for (i) the acquisition of an Asset, (ii) to the extent that such funds are capitalized, for the  development, construction or improvement of an Asset, or (iii) the making of a Mortgage.  All or any portion of any Acquisition and Advisory Fees and Acquisition Expenses not taken as to any fiscal year shall be deferred without interest and may be taken in such other fiscal year as the Advisor shall determine.

 

(c)           Disposition Fee.  If the Advisor or an Affiliate provides a substantial amount of the services (as determined by a majority of the Board of Directors) in connection with the Sale of one or more Assets, the Advisor or such Affiliate shall receive a Disposition Fee equal to 3.0% of the sales price of such Asset or Assets; provided, however, that no Disposition Fee shall be payable to the Advisor for the Sale of Assets if such Sales involve the Company selling all or substantially all of its Assets in one or more transactions designed to effectuate a business combination transaction (as opposed to a Company liquidation, in which case the Disposition Fee would be payable if the Advisor or an Affiliate provides a substantial amount of services as provided above).  The Disposition Fee 

 

 

may be paid in addition to real estate commissions paid to non-Affiliates, provided that the total real estate commissions paid to all Persons by the Company (including the Disposition Fee) shall not exceed an amount equal to the Competitive Real Estate Commission.

 

(d)           Subordinated Share of Net Sales Proceeds.  The Subordinated Share of Net Sales Proceeds shall be payable to the Advisor in an amount equal to 20.0% of Net Sales Proceeds remaining after the Stockholders have received Dividends equal to the sum of the Stockholders’ 7.5% Return and 100% of Invested Capital.  To the extent that the Subordinated Share of Net Sales Proceeds is not paid by the Company on a current basis due to the foregoing limitation, the unpaid amount will be accrued and paid at such time as the subordination conditions have been satisfied.  Following Listing, no Subordinated Share of Net Sales Proceeds other then any accrued and unpaid Subordinated Share of Net Sales Proceeds will be paid to the Advisor.

 

(e)           Subordinated Incentive Listing Fee.  Upon Listing, the Advisor shall be entitled to the Subordinated Incentive Listing Fee in an amount equal to 20.0% of the amount by which (i) the Market Value plus the total of all Dividends paid to Stockholders from the Company’s inception until the date that Market Value is determined, exceeds (ii) the sum of (A) 100% of Invested Capital and (B) the total Dividends required to be paid to the Stockholders in order to pay the Stockholders’ 7.5% 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 promissory note or any combination of the foregoing.  If the Company pays such fee with a promissory note, payment in full shall be made from the Net Sales Proceeds of the first Sale
completed by the Company after Listing, and interest will accrue at a rate deemed fair and reasonable by the Board of Directors on the date of Listing.  If the Net Sales Proceeds from the first Sale after Listing are insufficient to pay the promissory note in full, including accrued interest, 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 Sales 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, including accrued but unpaid interest, 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 of Directors based upon the Appraised Value of the Assets as of the date of election.

 

(f)            Finance Coordination Fee.  If the Advisor or an Affiliate provides a substantial amount of services (as determined by a majority of the Board of Directors) in obtaining a loan to fund the acquisition of one or more Assets or to refinance any outstanding indebtedness secured by one or more Assets, the Advisor or such Affiliate shall receive a Financial Coordination Fee equal to 1.0% of the gross proceeds of such loan.

 

(g)           Changes to Fee Structure.  In the event of Listing, the Company and the Advisor shall negotiate in good faith to establish a fee structure appropriate for a perpetual-life entity.

 

	
            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 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 reimbursement received by the Advisor pursuant to this Section 3.02, to the extent that such reimbursement shall not exceed the lesser of 2.0% of the Gross Proceeds or $800,000.  The Advisor shall be responsible for the payment of all Organization and Offering Expenses in excess of the lesser of 2.0% of the Gross Proceeds or $800,000;

 

	
             
 	
            (ii)
 	
            Acquisition Expenses incurred in connection with the selection and acquisition of Assets;
 

 

 

 

 

 

(iii)          the actual cost of goods, services and materials used by the Company and obtained from Persons not affiliated with the Advisor;

 

(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 of Directors;

 

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

 

(viii)        all expenses in connection with payments to the Board of Directors for attendance at meetings of the Board of Directors and Stockholders;

 

(ix)          expenses associated with Listing or with the issuance and distribution of securities other than the Shares, such as selling commissions and fees, advertising expenses, taxes, legal and accounting fees, Listing and registration fees;

 

(x)           expenses connected with payments of Dividends in cash or otherwise made or caused to be made by the Company to the Stockholders;

 

(xi)          expenses of organizing, redomesticating, merging, 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.  Such costs and expenses may include reasonable wages and salaries and other employee-related expenses of all employees of Advisor who are engage in the management, administration, operations, and marketing of the Company, including taxes, insurance and benefits relating to such employees, and legal, travel and other out-of-pocket expenses which are directly related to their services provided hereunder; and

 

	
             
 	
            (xiv)
 	
            audit, accounting and legal fees.
 

 

No reimbursement shall be made for costs of personnel of the Advisor or its Affiliates to the

extent that such personnel perform services in connection with services for which the Advisor receives the Acquisition and Advisory Fee or the Disposition Fee.

 

(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 of Directors request that the Advisor or any director, officer or employee thereof render services for the Company other than set forth in Section 2.02, such services shall be separately compensated at such rates and in such amounts as are agreed by the Advisor and the Board of Directors, subject to the limitations contained in the Articles of Incorporation, and shall not be deemed to be services pursuant to the terms of this Agreement.

 

ARTICLE IV

 

 

 

 

TERM AND TERMINATION

 

4.01         Term; Renewal.  Subject to Section 4.02 hereof, this Agreement 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 duty of the Board of Directors to evaluate the performance of the Advisor annually before renewing the Agreement, and each such renewal shall be for a term of no more than one year.

 

4.02         Termination.  This Agreement may be terminated at the option of either party  immediately upon a Change of Control or upon 60 days written notice without cause or penalty, by either party (in either case, if termination is by the Company, then such termination shall be upon the approval of a majority of the Board of Directors).  Notwithstanding any of 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(e) 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 Section 1, 2.05, 2.06 and 4.03 through 6.11 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 receive from the Company within 30 days after the effective date of such termination all unpaid reimbursements of expenses and all earned but unpaid fees payable to the Advisor prior to termination of this Agreement, provided that the Subordinated Incentive Listing Fee, if any, shall be paid in accordance with the provisions of Section 3.01(e).

 

(b)           Subject to the provisions of Section 4.03(e) hereof, upon termination, 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 payment of the Performance Fee equal to 20.0% of the amount, if any, by which (i) the Appraised Value of the Assets on the Termination Date, less the amount of all indebtedness secured by the Assets, plus the total Dividends paid to Stockholders from the Company’s inception through the Termination Date, exceeds (ii) Invested Capital plus an amount equal to the Stockholders’ 7.5% Return from inception through the Termination Date.  The Company shall pay such Performance Fee, with interest, 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.  Interest will accrue beginning on the Termination Date at a rate deemed fair and reasonable by the Board of Directors on the Termination Date.  If the Net Sales Proceeds from the first Sale after the Termination Date are

insufficient to pay the Performance Fee in full, plus accrued interest, then the Performance Fee shall be paid in part with such Net Sales Proceeds, and in part from the Net Sales Proceeds from the next successive Sales until the Performance Fee is paid in full, with interest.  If the  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, including accrued but unpaid interest, 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, including accrued but unpaid interest, into Shares at a price per Share equal to the fair
market value for the Shares as determined by the Board of Directors based upon the Appraised Value of the Assets on the date of election.

 

(c)           Notwithstanding the foregoing, if termination occurs upon a Change of Control, the Advisor shall be entitled to payment of the Performance Fee equal to 20.0% 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 of Directors based upon such factors as the consideration paid in connection with the Change of Control and the most recent Appraised Value, less the amount of all indebtedness secured by the Assets, plus the total Dividends paid to Stockholders from the Company’s inception through the Termination Date, exceeds (ii) Invested Capital plus an amount equal to the Stockholders’ 7.5% Return from inception through the Termination Date.  The surviving entity in the Change of Control (the “Successor”) shall pay such Performance Fee,
with interest, at such time as the Successor completes the first Sale after the Termination Date.  Payment shall be made from the Net Sales Proceeds of such Sale.  Interest will accrue beginning on the Termination Date at the rate of eight percent (8%) per annum.  If the Net Sales Proceeds from the 

 

 

first Sale after the Termination Date are insufficient to pay the Performance Fee in full, plus accrued interest, then the Performance Fee shall be paid in part with such Net Sales Proceeds,  and in part from the Net Sales Proceeds from the next successive Sales until the Performance Fee is paid in full, with interest.  If the 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, including accrued but unpaid interest, into shares of common stock of the Successor (“Successor Shares”) at a price per share equal to the average closing price of the Successor Shares over the ten trading days immediately preceding the date of such election if the Successor Shares are Listed at such time.  If the Successor Shares are not Listed at such time, the Advisor, its successors or assigns, may
elect to convert the balance of the fee, including accrued but unpaid interest, into Successor Shares at a price per share equal to the fair market value of the Successor Shares, as determined in good faith by the board of directors of the Successor based upon the appraised value of the assets of the Successor on the date of election.

 

(d)           In the event that the Advisor disagrees with the valuation of Shares pursuant to Section 4.03(b) where the Shares are not Listed, or the value of the Successor Shares pursuant to Section 4.03( c), where the Successor 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 Performance Fee owed to the Advisor, then the fair market value of such shares shall be determined by an independent appraiser of equity value selected by the Advisor and the Successor.  If the Advisor and the Successor are unable to agree upon an expert independent appraiser, then each of the Successor and the Advisor shall name one appraiser and the two named appraisers shall promptly agree in good faith to the appointment of one such appraiser
whose determination shall be final and binding on the parties.

 

(e)           In the event the Subordinated Incentive Listing Fee is paid to the Advisor following Listing, no Performance Fee will be paid to the Advisor.

 

	
             
 	
            (f)
 	
            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 of Directors a full accounting, including a statement showing all payments collected by it and a statement of all money held by it, covering the period following the date of the last accounting furnished to the Board of Directors;

 

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

 

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

 

ARTICLE V

 

INDEMNIFICATION

 

5.01         Indemnification by the Company.  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 and the Articles of Incorporation.  The foregoing indemnity shall extend, without limitation, to any claims to the extent relating to any of the events or outcomes set forth in any private offering memorandum or prospectus for any Offering as possible results, outcomes or risks associated with the business and investment
objectives of the Company.  Notwithstanding the foregoing, 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.  Any indemnification of the Advisor may be made only out of the net assets of the Company and not from Stockholders.

 

 

 

 

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 such liability, claims, damages, taxes or losses and related expenses are not fully reimbursed by insurance and are incurred by reason of the Advisor’s bad faith, fraud, willful misfeasance, willful misconduct or reckless disregard of its duties, but the Advisor shall not be held responsible for any action of the Board of Directors 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 of Directors.  The Advisor may assign any rights to receive fees or other payments under this Agreement without obtaining the approval of the Board of Directors.  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 Credit Property Trust, Inc.

2555 E. Camelback Road, Suite 400

Phoenix, Arizona 85016

Attention:  Chairman of the Board

 
 
	
            To the Advisor:
 	
            Cole REIT Advisors, LLC

2555 E. Camelback Road, Suite 400

Phoenix, Arizona 85016

Attention:  Chief Executive Officer
 

 

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         Modification.  This Agreement shall not be changed, modified, terminated or discharged in whole or in part, except by an instrument in writing signed by both parties hereto, or their respective successors or assignees.

 

6.05         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.

 

6.06         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.

 

6.07         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 other than by an agreement in writing signed by each of the parties hereto.

 

6.08         Indulgences, Not Waivers.  Neither the failure nor any delay on the part of a party to exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any other right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence.  No waiver shall be effective unless it is in writing and is signed by the party asserted to have granted such waiver.

 

6.09         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.

 

6.10         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.

 

	
            6.11
 	
            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, taken together, shall bear the signatures of all of the parties reflected hereon as the signatories.

 

 

 

 

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

 

 

 

	
             
 	
             

COLE CREDIT PROPERTY TRUST, INC.
 
	
             
 	
            By:
 	
            /s/ Christopher H. Cole
 
	
             
 	
            Christopher H.  Cole
 
	
             
 	
            Chief Executive Officer and President
 

 

 

	
             
 	
             

COLE REIT ADVISORS, LLC
 
	
             
 	
            By:
 	
            /s/ Christopher H. Cole
 
	
             
 	
            Christopher H.  Cole
 
	
             
 	
            Chief Executive Officer and President
 

 

 

 

 

 

 

FIRST AMENDMENT TO 

ADVISORY AGREEMENT

 

This First Amendment to Advisory Agreement is made as of this 9th day of May, 2005 (but effective as of the 1st day of January, 2005), by and between COLE CREDIT PROPERTY TRUST, INC., a Maryland corporation (the “Company”), and COLE REIT ADVISORS, LLC, a Delaware limited liability company (“Advisor”), and provides as follows:

 

WHEREAS, the Company and Advisor entered into an Advisory Agreement, effective as of April 6, 2004 (the “Agreement”); and

 

WHEREAS, the Company and Advisor desire to amend the Agreement in order to reduce Advisor’s monthly Asset Management Fee.  All capitalized terms used herein shall have the meaning given to them in the Agreement.

 

	
             
 	
            NOW, THEREFORE, the parties agree as follows:
 

 

1.             The first sentence of Section 3.01(a) of the Agreement is hereby amended in its entirety to read as follows:  “The Company shall pay the Advisor a monthly Asset Management Fee on the last day of each month in an amount equal to 1/12th of 0.50% of Aggregate Assets Value as of the last day of the preceding month.”

 

2.           Except as provided herein, all terms and conditions of the Agreement shall remain in full force and effect.

 

 

	
            COMPANY:
 	
            ADVISOR:

 
 
	
            COLE CREDIT PROPERTY TRUST, INC.

 

 
 	
            COLE REIT ADVISORS, LLC
 
	
            By:
 	
            /s/ Blair D. Koblenz
 	
            By:
 	
            /s/ John M. Pons
 
	
             
 	
            Blair D. Koblenz
 	
             
 	
            John M. Pons
 
	
             
 	
            Executive Vice President
 	
             
 	
            Vice President
 

 

 

 

 

 

SECOND AMENDMENT TO

ADVISORY AGREEMENT

 

This Second Amendment to Advisory Agreement is made as of January 19, 2006 (but effective as of July 1, 2005), by and between COLE CREDIT PROPERTY TRUST, INC., a Maryland corporation (the “Company”), and COLE REIT ADVISORS, LLC, a Delaware limited liability company (“Advisor”), and provides as follows:

 

WHEREAS, the Company and Advisor entered into an Advisory Agreement, effective as of April 6, 2004, which Agreement was amended on May 9, 2005  (together, the “Amended Agreement”); and

 

WHEREAS, the Company and Advisor desire to amend the Amended Agreement in order to temporarily reduce Advisor’s monthly Asset Management Fee from an amount equal to 1/12th of 0.50% of Aggregate Assets Value to 1/12th of 0.25% of Aggregate Assets Value.  All capitalized terms used herein shall have the meaning given to them in the Amended Agreement.

 

	
             
 	
            NOW, THEREFORE, the parties agree as follows:
 

 

1.             The first sentence of Section 3.01(a) of the Amended Agreement is hereby amended in its entirety to read as follows:  “The Company shall pay the Advisor a monthly Asset Management Fee on the last day of each month in an amount equal to 1/12th of 0.50% of Aggregate Assets Value as of the last day of the preceding month; provided, however, that commencing on July 1, 2005, through December 31, 2006, the Company shall pay the Advisor a monthly Asset Management Fee on the last day of each month in an amount equal to 1/12th of 0.25% of Aggregate Assets Value as of the last day of the preceding month.  Thereafter the monthly Asset Management Fee shall revert back to an amount equal to 1/12th of 0.50% of Aggregate Assets Value as of the last day of the preceding month.”

 

2.           Except as provided herein, all terms and conditions of the Amended Agreement shall remain in full force and effect.

 

 

	
            COMPANY:
 	
            ADVISOR:

 
 
	
            COLE CREDIT PROPERTY TRUST, INC.

 

 
 	
            COLE REIT ADVISORS, LLC
 
	
            By:
 	
            /s/ Blair D. Koblenz
 	
            By:
 	
            /s/ John M. Pons
 
	
             
 	
            Blair D. Koblenz
 	
             
 	
            John M. Pons
 
	
             
 	
            Executive Vice President
 	
             
 	
            Senior Vice President

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00102-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00102-of-00352.parquet"}]]