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Exhibit
10.1
ADVISORY AGREEMENT
BETWEEN
APPLE REIT NINE,
INC.
AND
APPLE NINE ADVISORS,
INC.
THIS ADVISORY AGREEMENT,
dated as of
,
2008, is between APPLE REIT NINE, INC., a Virginia corporation (the
“Company”), and APPLE NINE ADVISORS, INC., a Virginia
corporation (the “Advisor”).
RECITALS
A. The purpose of the Company
is to invest primarily in hotels, residential apartment communities
and other income-producing real estate in selected metropolitan
areas of the United States. The Company intends to qualify as a
real estate investment trust pursuant to Sections 856 through 860
of the Internal Revenue Code of 1986, as amended.
B. The Company desires to
engage the Advisor to provide information, advice, assistance and
facilities to the Company and to have the Advisor undertake the
duties and responsibilities hereinafter set forth, all subject to
the supervision of the Company’s Board of Directors, on the
terms and conditions set forth herein. In consideration therefor,
the Company desires to pay the Advisor certain fees as herein set
forth.
NOW, THEREFORE, in
consideration of the foregoing and of the mutual covenants and
agreements contained herein, the parties agree as
follows:
1. Definitions . For
purposes of this Agreement, the following terms shall have the
meanings set forth below.
(a) “Affiliate”
means (i) any Person directly or indirectly controlling,
controlled by or under common control with another Person,
(ii) any Person owning or controlling 10% or more of the
outstanding voting securities or beneficial interests of such other
Person, (iii) any officer, director, trustee or general
partner of such Person and (iv) if such other Person is an
officer, director, trustee or partner of another entity, then the
entity for which that Person acts in any such capacity.
“Affiliated” means being an Affiliate of a specified
Person.
(b) “Articles of
Incorporation” means the Company’s Articles of
Incorporation filed with the Virginia State Corporation Commission,
including all amendments, restatements or modifications
thereof.
(c) “Asset Management
Fee” means the fee payable to the Advisor for its services
hereunder. Such fee will be paid pursuant and subject to
Section 11 of this Agreement.
(d) “Average Invested
Assets” for any period means the average of the aggregate
book value of the assets of the Company invested, directly or
indirectly, in equity interests in and loans secured by 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.
(e) “Board of
Directors” means the Company’s Board of Directors as of
any particular time.
(f) “Bylaws”
means the Company’s Bylaws, including all amendments,
restatements or modifications thereof.
(g) “Calendar
Year” means the year ended December 31st and any portion
thereof treated by the Internal Revenue Service as a reporting
period for the Company.
(h) “Code” means
the Internal Revenue Code of 1986, as amended from time to time,
including successor statutes thereto.
(i) “Company Net
Income” for any period means the total revenues of the
Company for such period, less expenses applicable to such period
other than additions to reserves for depreciation or bad debts or
other similar non-cash reserves. “Company Net Income,”
for purposes of calculating Operating Expenses in Section 15
of this Agreement, does not include the gain from the sale of the
Company’s assets.
(j) “Directors”
means, as of any particular time, the directors of the Company
holding office at such time.
(k) “Modified Net
Income” means net income (computed in accordance with
generally accepted accounting principles) excluding gains (or
losses) from debt restructuring and sales of property, plus
depreciation of real property, and after adjustments for
significant non-recurring items and unconsolidated partnerships and
joint ventures. Adjustments for unconsolidated partnerships and
joint ventures will be calculated to reflect modified net income on
the same basis.
(l) “Offering”
means the public offering of the Company’s Units.
(m) “Operating
Expenses” means all operating, general and administrative
expenses of the Company as determined under generally accepted
accounting principles (including regular compensation payable to
the Advisor), excluding, however, the following:
(i) expenses of raising
capital;
(ii) interest
payments;
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(iii) taxes;
(iv) non-cash expenditures,
such as depreciation, amortization and bad debt;
(v) reserves;
(vi) incentive fees paid to
the Advisor, if any; and
(vii) costs related directly
to asset acquisition, operation or disposition.
(n) “Organizational and
Offering Expenses” means all expenses incurred in connection
with the formation and registration of the Company and in
qualifying and marketing the Units under applicable federal and
state law, and any other expenses actually incurred and directly
related to the qualification, registration, offer and sale of the
Units, including such expenses as (i) all marketing expenses
and payments made to broker-dealers as compensation or
reimbursement for all costs of reviewing the Offering, including
due diligence investigations and fees and expenses of their
attorneys, accountants and other experts; (ii) registration
fees, filing fees and taxes; (iii) the costs of printing,
amending, supplementing and distributing the registration statement
and Prospectus; (iv) the costs of obtaining regulatory
clearances of, and printing and distributing, sales materials used
in connection with the offer and sale of the Units; (v) the
costs related to investor and broker-dealer sales meetings
concerning the Offering; and (vi) accounting and legal fees
incurred in connection with any of the foregoing.
(o) “Person”
includes an individual, corporation, partnership, joint venture,
association, company, trust, bank or other entity, or government
and any agency and political subdivision of a
government.
(p) “Property” or
“Properties” means partial or entire equity interests,
including equity participation interests such as general
partnership interests and joint venture interests, owned by the
Company in real property as described in the Prospectus.
(q) “Prospectus”
has the meaning given to that term by Section 2(10) of the
Securities Act of 1933, as amended, and as used herein, the term
means the Prospectus of the Company pursuant to which the Units are
offered to the public.
(r) “Return
Ratio” means, for any period, the ratio of Modified Net
Income to Total Contributions.
(s)
“Shareholders” means the holders of record of the
Company’s Units.
(t) “Total
Contributions” means the gross offering proceeds which have
been received by the Company from time to time from the sale or
sales of the Units. Total Contributions shall be calculated to
reflect the average of the daily amounts during the period in
question of the gross offering proceeds which have been received by
the Company from time to time from the sales of Units, to extent
such Units are issued and such sales have actually been
closed.
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(u) “Units” means
the Units of the Company. Each Unit consists of one Common Share
and one Series A preferred share of the Company.
2. Duties of the
Advisor . Subject to the terms of the Articles of
Incorporation, the Bylaws, and the supervision of the Board of
Directors, the Advisor, at its own cost and expense, unless
otherwise set forth herein, on behalf of the Company,
shall:
(a) serve as the
Company’s investment advisor and consultant in connection
with policy and investment decisions to be made by the Board of
Directors, furnish reports to the Board of Directors, and provide
research, economic and statistical data in connection with the
acquisition, financing, refinancing, holding, leasing and
disposition of Properties and other investments of the
Company;
(b) administer the day-to-day
operations of the Company and perform or supervise the various
administrative functions reasonably necessary for the management of
the Company;
(c) investigate, select and,
on behalf of the Company, engage and conduct business with
(including, but not limited to, entering into contracts in the name
of the Advisor or the Company) consultants, accountants,
correspondents, lenders, servicers, technical advisors, attorneys,
brokers, underwriters, corporate fiduciaries, escrow agents,
depositaries, custodians, agents for collection, insurers,
insurance agents, banks, builders, developers, property owners,
mortgagors, and other mortgage and investment participants, any and
all agents for any of the foregoing, including Affiliates of the
Advisor, and Persons acting in any other capacity deemed by the
Board of Directors necessary or desirable for the performance of
any of the foregoing services;
(d) act as attorney-in-fact
or agent in acquiring, financing, refinancing, leasing and
disposing of Properties and other investments, in disbursing and
collecting funds of the Company, in paying the debts and fulfilling
the obligations of the Company and in handling, prosecuting and
settling any claims of the Company, including the foreclosure or
other enforcement of any mortgage or other lien securing Properties
or other investments, and exercise its own discretion in doing so;
provided that any fees and costs payable to independent Persons
incurred by the Advisor in connection with the foregoing shall be
the responsibility of the Company;
(e) negotiate on behalf of
the Company with banks or other lenders for loans to be made to the
Company, and negotiate on behalf of the Company with investment
banking firms and broker-dealers or negotiate private sales of the
securities of the Company or obtain loans for the Company, 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;
(f) invest or reinvest any
money of the Company, as directed by the Board of Directors or
subject to such discretionary powers as the Board of Directors may
from time to time delegate;
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(g) if requested by the
Company, provide appraisal reports on any real property that is, or
is proposed to be, acquired by the Company for
investment;
(h) at any time reasonably
requested by the Board of Directors (but not more than monthly)
make reports of its performance of services to the
Company;
(i) communicate on behalf of
the Company with the Shareholders of the Company as required to
satisfy the continuous reporting and other requirements of any
governmental bodies or agencies to the Shareholders and third
parties and to maintain effective relations with the
Shareholders;
(j) counsel the Company in
connection with policy decisions to be made by the Board of
Directors;
(k) provide the executive and
administrative personnel and services required in rendering the
foregoing services to the Company; and
(l) perform such other
services as may be required from time to time for management and
other activities relating to the assets of the Company as the
Advisor shall deem appropriate under the particular
circumstances.
3. Commitments . In
order to meet the investment requirements of the Company, but only
as determined by the Board of Directors, or any authorized
committee thereof, from time to time, the Advisor agrees at the
direction of the Board of Directors or any such committee to issue
on behalf of the Company commitments on such terms as are
established by the Board of Directors or any such committee, for
the acquiring of Properties or other assets.
4. Duties of the Board of
Directors . In order for the Advisor to fulfill its duties, the
Board of Directors shall, to the extent it deems proper, provide
the Advisor with full information concerning the Company, its
capitalization and investment policies and the intentions of the
Board of Directors with respect to future investments. The Company
shall furnish the Advisor with a copy of all audited financial
statements, a signed copy of each report prepared by independent
accountants, and such other information with regard to its affairs
as the Advisor may from time to time reasonably request.
5. Advice . In
addition to the services described in Section 2 above, the
Advisor shall consult with the Board of Directors and the officers
of the Company and shall furnish them with advice and
recommendations with respect to the acquiring of Properties or
commitments therefor, or other investments of, or investments
considered by, the Company, and shall furnish advice and
recommendations with respect to other aspects of the business and
affairs of the Company. In order to facilitate the investment of
the funds of the Company and enable it to avail itself of
investment opportunities as they arise, the Advisor may from time
to time be granted, but is not hereby granted, the power and
authority to make and dispose of investments and to make and
terminate commitments for investments, on behalf of and in the name
of the Company, without further or express authority from the Board
of Directors; provided, however that the Board of Directors shall
have the power to revoke, suspend, modify or limit such power and
authority at any time or from time to time, but not retroactively.
Unless otherwise notified by the Board of Directors, a
representative of the Advisor shall attend all regular and special
meetings of the Board of Directors, and the Board of Directors
shall notify the Advisor of such meetings.
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6. Bank Accounts . The
Advisor may establish and maintain one or more bank accounts 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 all
such accounts shall be maintained in such fashion as to make clear
that the funds therein are the property of the Company and not of
the Advisor. The Advisor shall from time to time render appropriate
accountings of such collections and payments to the Board of
Directors and to the auditors of the Company.
7. Investment
Undertakings . The Advisor shall use its best efforts to assure
that (i) any mortgage securing a Property of the Company shall
be and remain a valid lien upon the mortgaged property according to
its terms; (ii) the title to any Property is insured by
appropriate policies of title insurance; (iii) any Property is
duly insured against loss or damage by fire, with extended
coverage, and against such other insurable hazards and risks as is
customary and appropriate in the circumstances; and (iv) the
policies from time to time specified by the Board of Directors with
regard to the protection of the Company’s investments are
carried out. Any and all fees and costs incurred by the Advisor in
performing such functions, whether payable to its Affiliates or
independent Persons shall be borne by the Company.
8. Records;
Confidentiality . 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 time
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