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Exhibit
10.1
ADVISORY
AGREEMENT
THIS ADVISORY
AGREEMENT, effective as of October 20, 2007, is between WELLS
REAL ESTATE INVESTMENT TRUST II, INC., a Maryland corporation (the
“Company”), and WELLS CAPITAL, INC., a Georgia
corporation (the “Advisor”).
W I T N E S S E T
H
WHEREAS, the
Company has filed with the Securities and Exchange Commission a
Registration Statement on Form S-11 (no. 333-125643) (the
“Registration Statement”) covering the issuance of
common stock;
WHEREAS, the
Company qualifies as a REIT (as defined below), and intends to
invest its funds in investments permitted by the terms of the
Company’s Articles of Incorporation and Sections 856 through
860 of the Code (as defined below);
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, the parties hereto agree as
follows:
1.
Definitions . As used in this Advisory Agreement (the
“Agreement”), the following terms have the definitions
hereinafter indicated:
Acquisition
Expenses . Any and all expenses, excluding the fee payable to
the Advisor pursuant to Section 8(b), incurred by the Company,
the Advisor, or any Affiliate of either in connection with the
selection, acquisition or development of any Property, 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, 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 purchase,
development or construction of any Property. Included in the
computation of such fees or commissions shall be any real estate
commissions, acquisition fees, finder’s fees, selection fees,
Development Fees, Construction Fees, nonrecurring management fees,
loan fees, points, or any other fees or commissions of a similar
nature. Excluded shall be Development Fees and Construction Fees
paid to Persons not Affiliated with the Advisor in connection with
the actual development and construction of a Property.
Adjusted
Cost . The sum of (a) the actual amount invested on behalf
of the Company in the Properties plus (b) with respect to
Joint Ventures, the actual amount invested on behalf of the Company
in the Joint Ventures plus the Company’s allocable share of
capital improvements made by the Joint Venture from cash flows
generated by the Joint Venture (in all cases excluding from the
calculation thereof amounts relating to Vacant Properties), until
such time as Advisor may estimate the value of all interests the
Company holds in Properties or Joint Ventures for ERISA reporting
purposes; and after such time, “Adjusted Cost” means
the lesser of (1) sum of (x) the actual amount invested
on behalf of the Company in the Properties plus (y) with
respect to Joint Ventures, the actual amount invested on behalf of
the Company in the Joint Ventures plus the Company’s
allocable share of capital improvements made by the Joint Venture
from cash flows generated by the Joint Venture (in all cases
excluding from the calculation thereof amounts relating to Vacant
Properties), or (2) the aggregate value of the Company’s
interest in the Properties and Joint Ventures as established in
connection with the most recent estimated valuation to assist ERISA
fiduciaries in fulfilling their annual valuation and reporting
responsibilities.
Advisor .
Wells Capital, Inc., a Georgia corporation, any successor advisor
to the Company, or any Person(s) to which Wells Capital, Inc. or
any successor advisor subcontracts substantially all of its
functions.
Affiliate or
Affiliated . An Affiliate of another Person includes only the
following: (i) any Person directly or indirectly controlling,
controlled by, or under common control with such other Person;
(ii) 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; (iii) any legal entity
for which such Person acts as an executive officer, director,
trustee, or general partner; (iv) 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; and (v) any executive officer, director, trustee, or
general partner of such other Person. An entity shall not be deemed
to control or be under common control with an Advisor-sponsored
program unless (i) the entity owns 10% or more of the voting
equity interests of such program or (ii) a majority of the
board (or equivalent governing body) of such program is comprised
of Affiliates of the entity.
Appraised
Value . Value according to an appraisal made by an Independent
Appraiser.
Articles of
Incorporation . The Articles of Incorporation of the Company
under Title 2 of the Corporations and Associations Article of the
Annotated Code of Maryland, as amended from time to
time.
Asset Management
Fee . The Asset Management Fee payable to the Advisor as
defined in Section 8(a).
Asset Management
Fee Ceiling . The ceiling on the Asset Management Fee as
defined in Section 8(a).
Average Invested
Assets . For a specified period, the average of the aggregate
book value of the assets of the Company invested, directly or
indirectly, in Properties and Loans secured by
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real estate before reserves
for depreciation or bad debts or other similar non-cash reserves,
computed by taking the average of such values at the end of each
month during such period.
Board of
Directors or Board . The persons holding such office, as of any
particular time, under the Articles of Incorporation of the
Company, whether they be the Directors named therein or additional
or successor Directors.
Bylaws . The
bylaws of the Company, as the same are in effect from time to
time.
Capped O&O
Expenses . All Organizational and Offering Expenses other than
selling commissions and the dealer manager fee as described under
“Plan of Distribution” in the Registration
Statement.
Cash from
Financings . Net cash proceeds realized by the Company from the
financing of Property or from the refinancing of any Company
indebtedness.
Cash from
Sales . Net cash proceeds realized by the Company from the
sale, exchange or other disposition of any of its assets after
deduction of all expenses incurred in connection therewith. Cash
from Sales shall not include Cash from Financings.
Cash from Sales
and Financings . The total sum of Cash from Sales and Cash from
Financings.
Ceiling
Excess . The extent to which the Asset Management Fee Ceiling
exceeds the sum of the three previous monthly Asset Management Fee
payments, as defined in Section 8(a).
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 .
Wells Real Estate Investment Trust II, 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 property which is reasonable, customary,
and competitive in light of the size, type, and location of the
property.
Conflicts
Committee . “Conflicts Committee” shall have the
meaning set forth in the Articles of Incorporation.
Construction
Fee . A fee or other remuneration for acting as general
contractor and/or construction manager to construct improvements,
supervise and coordinate projects or to provide major repairs or
rehabilitation on a Property.
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Contract Sales
Price . The total consideration received by the Company for the
sale of a Property.
Cumulative
Return . For the period for which the calculation is being
made, the percentage resulting from dividing (A) the total
Distributions paid on each Distribution date during such period
(without regard to Distributions paid out of Cash from Sales and
Financings), by (B) the product of (i) the average
Invested Capital for such period (calculated on a daily basis), and
(ii) the number of days elapsed during such period.
Development
Fee . A fee for the packaging of a Property, including
negotiating and approving plans, and undertaking to assist in
obtaining zoning and necessary variances and necessary financing
for the Property, either initially or at a later date.
Director . A
member of the Board of Directors of the Company.
Disposition
Fee . The Disposition Fee as defined in Paragraph
8(c).
Distributions . Any 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.
Gross
Proceeds . The aggregate purchase price of all Shares sold for
the account of the Company through an Offering, without deduction
for Organization and Offering Expenses.
Independent
Appraiser . A person or entity with no material current or
prior business or personal relationship with the Advisor or the
Directors, who is engaged to a substantial extent in the business
of rendering opinions regarding the value of assets of the type
held by the Company, and who is a qualified appraiser of real
estate as determined by the Board. Membership in a nationally
recognized appraisal society such as the American Institute of Real
Estate Appraisers (“M.A.I.”) or the Society of Real
Estate Appraisers (“S.R.E.A.”) shall be conclusive
evidence of such qualification.
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 Distribution that is attributable to Net Sales
Proceeds and by any amounts paid by the Company to repurchase
Shares pursuant to the Company’s plan for redemption of
Shares.
Joint
Venture . Any joint venture, limited liability company or other
Affiliate of the Company that owns, in whole or in part on behalf
of the Company, any Properties.
Listing .
The listing of the Shares on a national securities exchange or
over-the-counter market.
NASAA
Guidelines . The NASAA Statement of Policy Regarding Real
Estate Investment Trusts as in effect on the date
hereof.
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Net Asset
Value . The excess of (i) the aggregate of the Adjusted
Cost over (ii) the aggregate outstanding debt of the Company
and the Partnership (excluding debt borrowed for purposes other
than acquiring or refinancing Properties).
Net Income .
For any period, the total revenues applicable to such period, less
the total expenses applicable to such period excluding additions to
reserves for depreciation, bad debts or other similar non-cash
reserves; provided, however, Net Income for purposes of calculating
total allowable Operating Expenses (as defined herein) shall
exclude the gain from the sale of the Company’s
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 all real estate commissions and
closing costs paid by the Company. 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 any legal 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. 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 and reinvested in
one or more Properties within 180 days thereafter and less the
amount of any real estate commissions, closing costs, and legal and
other selling expenses incurred by or allocated to the Company in
connection with such transaction or series of transactions. Net
Sales Proceeds shall not include any reserves established by the
Company in its sole discretion.
Offering .
Any offering of Shares that is registered with the SEC, excluding
Shares offered under any employee benefit plan.
Operating
Expenses . All costs and expenses incurred by the Company, as
determined under generally accepted accounting principles, which in
any way are related to the operation of the Company or to Company
business, including fees paid to the Advisor, 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 loan reserves, (v) incentive fees paid in compliance
with Section IV.F. of the NASAA Guidelines and
(vi) Acquisition Fees, Acquisition Expenses, real estate
commissions on resale of property, and other expenses connected
with the acquisition, disposition, and ownership of real estate
interests, mortgage loans or other property (such as the costs of
foreclosure, insurance premiums, legal services, maintenance,
repair and improvement of property).
Organization and
Offering Expenses . All expenses incurred by and to be paid
from the assets of the Company in connection with and in preparing
the Company for registration of and subsequently offering and
distributing its Shares to the public, which may include but are
not limited to, total underwriting and brokerage discounts and
commissions (including fees of the underwriters’ attorneys);
expenses for printing, engraving and mailing; salaries of
employees
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while engaged in sales
activity; charges of transfer agents, registrars, trustees, escrow
holders, depositaries and experts; and expenses of qualification of
the sale of the securities under Federal and State laws, including
taxes and fees, accountants’ and attorneys’
fees.
Partnership
. Wells Operating Partnership II, L.P., a Delaware limited
partnership formed to own and operate properties on behalf of the
Company.
Person . An
individual, corporation, partnership, estate, trust (including a
trust qualified under Section 401(a) or 501(c) (17) of
the Code), a portion of a trust permanently set aside for or to be
used exclusively for the purposes described in Section 642(c)
of the Code, association, private foundation within the meaning of
Section 509(a) of the Code, joint stock company or other
entity, or any government or any agency or political subdivision
thereof, and also includes a group as that term is used for
purposes of Section 13(d)(3) of the Securities Exchange Act of
1934, as amended.
Property or
Properties . Any real property or properties transferred or
conveyed to the Company or the Partnership, either directly or
indirectly.
Property
Manager . Any entity that has been retained to perform and
carry out at one or more of the Properties property management
services, excluding persons, entities or independent contractors
retained or hired to perform facility management or other services
or tasks at a particular Property, the costs for which are passed
through to and ultimately paid by the tenant at such
Property.
REIT . A
“real estate investment trust” under Sections 856
through 860 of the Code.
Sale or
Sales . (i) Any transaction or series of transactions
whereby: (A) the Company or the Partnership sells, grants,
transfers, conveys, or relinquishes its ownership of any Property
or portion thereof, including the transfer of any Property that is
the subject of a ground lease, 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 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; or (C) any joint venture 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, but (ii) not including any transaction or series of
transactions specified in clause (i) (A), (i) (B), or
(i) (C) above in which the proceeds of such transaction
or series of transactions are reinvested in one or more Properties
within 180 days thereafter.
Shares . The
Company’s shares of common stock, par value $0.01 per
share.
Stockholders
. The registered holders of the Shares.
Stockholders’ 8% Return . As of each date, an
aggregate amount equal to an 8% Cumulative Return.
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Subordinated
Incentive Fee . The fee payable to the Advisor under certain
circumstances if the Shares are listed on a national securities
exchange or over-the-counter market as defined in Paragraph
8(e).
Subordinated
Performance Fee Due Upon Termination . Subordinated Performance
Fee Due Upon Termination means a fee equal to (1) 10% of the
amount, if any, by which (a) the Appraised Value of the
Company’s Properties at the Termination Date, less amounts of
all indebtedness secured by the Company’s Properties, plus
total Distributions through the Termination Date exceeds
(b) the sum of Invested Capital, plus Distributions
attributable to Net Sales Proceeds, plus total Distributions
required to be made to the stockholders in order to pay the
Stockholders’ 8% Return from inception through the
termination date less (2) any prior payment to the Advisor of
a Subordinated Share of Net Sales Proceeds.
Subordinated
Share of Net Sales Proceeds . The Subordinated Share of Net
Sales Proceeds as defined in Paragraph 8(d).
Termination
Date . The date of termination of the Agreement.
Vacant
Property . A Property that has been economically vacant for
(i) the period from acquisition until the applicable
measurement date, if less than six months or (ii) at least six
months as of the applicable date of measurement.
2%/25%
Guidelines . The requirement pursuant to the NASAA Guidelines
that, in any 12-month period, total Operating Expenses not exceed
the greater of 2% of the Company’s Average Invested Assets
during such 12-month period or 25% of the Company’s Net
Income over the same 12-month period.
2.
Appointment . The Company hereby appoints the Advisor
to serve as its advisor and asset manager on the terms and
conditions set forth in this Agreement, and the Advisor hereby
accepts such appointment.
3. Duties and
Authority of the Advisor . The Advisor undertakes to use
its reasonable efforts (1) to present to the Company potential
investment opportunities to provide a continuing and suitable
investment program consistent with (i) the investment
objectives and policies of the Company as determined and adopted
from time to time by the Board and (ii) the investment
allocation method described at Section 11(b) of this agreement
and (2) to manage, administer, promote, maintain, and improve
the Properties on an overall portfolio basis in a diligent manner.
The services of the Advisor are to be of scope and quality not less
than those generally performed by professional asset managers of
other similar property portfolios. The Advisor shall make available
the full benefit of the judgment, experience and advice of the
members of the Advisor’s organization and staff with respect
to the duties it will perform under this Agreement. The Advisor
shall also obtain Property Managers, which may include Affiliates
of the Advisor, to manage, promote, and lease the Properties. To
facilitate the Advisor’s performance of these undertakings,
but subject to the restrictions included in Paragraphs 4 and 7 and
to the continuing and exclusive authority of the Board over the
management of the Company and the Partnership, the Company hereby
delegates to the Advisor the authority to, and the Advisor hereby
agrees to, either directly or by engaging an Affiliate:
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(a) serve as the
Company’s investment and financial advisor and provide
research and economic and statistical data in connection with the
Company’s assets and investment policies;
(b) provide the
daily management of the Company and perform and supervise the
various administrative functions reasonably necessary for the
management of the Company;
(c) maintain and
preserve the books and records of the Company, including a stock
ledger reflecting a record of the Stockholders and their ownership
of the Company’s Shares and acting as transfer agent for the
Company’s Shares and maintaining the accounting and other
record-keeping functions at the Property and Company
levels;
(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, 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 the Company and assist the Board in
the formulation and implementation of the Company’s financial
policies, and, as necessary, furnish the Board with advice and
recommendations with respect to the making of investments
consistent with the investment objectives and policies of the
Company and in connection with any borrowings proposed to be
undertaken by the Company;
(f) oversee the
performance by the Property Managers of their duties, including
collection and proper deposits of rental payments and payment of
Property expenses and maintenance;
(g) conduct
periodic on-site property visits to some or all (as the Advisor
deems reasonably necessary) of the Properties to inspect the
physical condition of the Properties and to evaluate the
performance of the related Property Manager of its
duties;
(h) review, analyze
and comment upon the operating budgets, capital budgets and leasing
plans prepared and submitted by each Property
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