Exhibit 10.2
FORM OF
ADVISORY AGREEMENT
AMONG
LIGHTSTONE VALUE PLUS REAL ESTATE
INVESTMENT TRUST, INC.,
LIGHTSTONE VALUE PLUS REIT
LP
and
LIGHTSTONE VALUE PLUS REIT
LLC
This Advisory Agreement (this
“Agreement”) dated as of
[ ],
2004 is among Lightstone Value Plus Real Estate Investment Trust,
Inc., a Maryland corporation (the “Company”),
Lightstone Value Plus REIT LP, a Delaware limited partnership (the
“OP”), and Lightstone Value Plus REIT LLC, a Delaware
limited liability company (the “Advisor”). The Company
and the OP are sometimes referred to herein collectively as the
“Advisees” and each individually as an
“Advisee.”
W I T N E S S E T
H:
WHEREAS, the Company is a Maryland
corporation created in accordance with applicable provisions of the
Maryland General Corporation Law, as amended from time to time (the
“Maryland GCL”); and
WHEREAS, the purposes of the Company
are, as determined from time to time by the board of directors of
the Company (the “Board of Directors”), to engage in
any lawful business or activity for which a corporation may be
created under the Maryland GCL; and
WHEREAS, the Company is the general
partner of the OP; and
WHEREAS, the Company desires, on its
own behalf and as general partner of the OP, to avail itself of the
experience, sources of information, advice and assistance of 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, all as provided herein;
and
WHEREAS, the Advisor is willing 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 mutual covenants herein contained, IT IS AGREED as
follows:
1. Definitions . Capitalized
terms used but not defined herein shall have the meaning ascribed
to them in the Company’s Charter (as herein defined), and the
following terms, as used herein, shall have the meanings set forth
below:
(a) “ Acquisition
Expenses ” shall mean expenses related to the
Advisee’s selection of, and investment in, real properties
and mortgage investments and other investments, whether or not
acquired or made, including but not limited to advertising costs,
brokerage fees, environmental, engineering and other due diligence
expenses, legal fees and expenses, travel and communications
expenses, cost of appraisals, accounting fees and expenses, title
insurance and miscellaneous other expenses.
(b) “ Acquisition Fee
” shall have the meaning set forth in Section
11(a)(i).
(c) “ Affiliate ”
means a Person who is (i) in the case of an individual, any
relative of such Person, (ii) any officer, director, trustee,
partner, manager, employee or holder of ten percent (10%) or more
of any class of the voting securities of or equity interest in such
Person; (iii) any corporation, partnership, limited liability
company, trust or other entity controlling, controlled by or under
common control with such Person; or (iv) any officer, director,
trustee, partner, manager, employee or holder of ten percent (10%)
or more of the outstanding voting securities of any corporation,
partnership, limited liability company, trust or other entity
controlling, controlled by or under common control with such
Person. For purposes of this definition,
the term “controls,”
“is controlled by,” or “is under common control
with” shall mean the possession, direct or indirect, of the
power to direct or cause the direction of the management and
policies of an entity, whether through the ownership of voting
rights, by contract or otherwise.
(d) “ Asset Management
Fee ” shall have the meaning set forth in Section
11(a)(ii).
(e) “ Average Invested
Assets ” shall mean the average, at the end of each
calendar month during the calendar quarter in respect of which an
Asset Management Fee is being calculated, of the aggregate book
value of the Advisees’ assets invested in equity interests in
and loans secured by real estate, before reserves for depreciation
or bad debt or other similar non-cash reserves.
(f) “ Board of
Directors ” shall have the meaning set forth in the
recitals hereto.
(g) “ Cause ”
shall mean (x) fraud, criminal conduct, willful misconduct or
illegal or negligent breach of fiduciary duty by the Advisor or a
breach of this Agreement by the Advisor; or (y) if any of the
following events occur: (i) the Advisor shall violate any material
provision of this Agreement, and after written notice of such
violation, shall not cure such default within 30 days or have begun
action within 30 days to cure the default which shall be completed
with reasonable diligence, (ii) the Advisor shall be adjudged
bankrupt or insolvent by a court of competent jurisdiction, or an
order shall be made by a court of competent jurisdiction for the
appointment of a receiver, liquidator, or trustee of the Advisor,
for all or substantially all of its property by reason of the
foregoing, or if a court of competent jurisdiction approves any
petition filed against the Advisor for reorganization, and such
adjudication or order shall remain in force or unstayed for a
period of 30 days, (iii) the Advisor shall institute proceedings
for voluntary bankruptcy or shall file a petition seeking
reorganization under the federal bankruptcy laws, or for relief
under any law for relief of debtors, or shall consent to the
appointment of a receiver for itself or for all or substantially
all of its property, or shall make a general assignment for the
benefit of its creditors, or shall admit in writing its inability
to pay its debts, generally, as they become due.
(h) “ Change of Control
” shall mean a change of control of the Company of a nature
that would be required to be reported in response to the disclosure
requirements of Schedule 14A of Regulation 14A promulgated under
the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), as enacted and in force on the date
hereof, whether or not the Company is then subject to such
reporting requirements; provided, however, that, without
limitation, a Change of Control shall be deemed to have occurred
if: (i) any “person” (within the meaning of Section
13(d) of the Exchange Act, as enacted and in force on the date
hereof) is or becomes the “beneficial owner” (as that
term is defined in Rule 13d-3, as enacted and in force on the date
hereof, under the Exchange Act) of securities of the Company
representing 9.8% or more of the combined voting power of the
Company’s securities then outstanding; (ii) there occurs a
merger, consolidation or other reorganization of the Company which
is not approved by the Board of Directors; (iii) there occurs a
sale, exchange, transfer or other disposition of substantially all
of the assets of the Company to another entity, which disposition
is not approved by the Board of Directors; or (iv) there occurs a
contested proxy solicitation of the Shareholders of the Company
that results in the contesting party electing candidates to a
majority of the Board of Directors’ positions next up for
election.
(i) “ Charter ”
shall mean the Articles of Incorporation of the Company dated as of
30, 2004, as amended from time to time.
(j) “ Cumulative
Non-Compound Return ” shall mean, for any period for
which a calculation thereof is being paid, the percentage resulting
from dividing (i) the total distributions paid on each distribution
payment date during such period by (ii) the product of (x) the
daily average adjusted investor capital for such period and (b) the
number of years (including fractional years) elapsed during such
period (based on a year of 365 days).
(k) “ Election Notice
” shall have the meaning set forth in Section
13(b).
(l) “ Funds From
Operations ” shall mean net income (computed in
accordance with GAAP), excluding gains or losses from debt
restructuring and sales of properties, plus depreciation of real
property and amortization, and after adjustments for unconsolidated
partnerships and joint ventures.
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(m) “ Funds From Operations
Per Weighted Average Share ” shall mean the amount equal
to four (4) times the Funds From Operations per weighted average
Share for the Company for the quarter in which an Election Notice
is delivered, based on and as described in the quarterly report of
the Company delivered to its stockholders for such
quarter.
(n) “ GAAP ”
shall mean United States generally accepted accounting principals,
consistently applied.
(o) “ Good Reason
” shall mean, with respect to the termination of this
Agreement, (x) any failure to obtain a satisfactory agreement from
any successor to an Advisee to assume and agree to perform such
Advisee’s obligations under this Agreement; or (y) any
material breach of this Agreement of any nature whatsoever by an
Advisee.
(p) “ Independent
Director ” shall have the meaning set forth in the
By-laws of the Company, as amended from time to time.
(q) “ Initial Term
” shall have the meaning set forth in Section
17(a).
(r) “ Partnership
Agreement ” shall mean the Agreement of Limited
Partnership of the OP dated as of 30, 2004, as amended and restated
from time to time.
(s) “ Person ”
shall mean an individual, corporation, partnership, joint venture,
association, company (whether of limited liability or otherwise),
trust, bank or other entity, or government or any agency or
political subdivision of a government.
(t) “ Preferred Return
” shall mean the receipt by the stockholders of the Company
of (i) a Cumulative Non-Compound Return of 7% per year on such
stockholders’ net investment, and (ii) the amount of such net
investment.
(u) “ Prospectus
” shall mean the final prospectus of the Company in
connection with the initial registration of the Shares filed with
the SEC on Form S-11, as amended and supplemented from time to
time.
(v) “ SEC ” shall
mean the United States Securities and Exchange
Commission.
(w) “ Share ”
shall mean a share of the Common Stock, par value $0.01, of the
Company.
(x) “ Special Limited
Partner ” shall have the meaning set forth in the
Partnership Agreement.
(y) “ Special Liquidation
Distribution ” shall mean the liquidation distributions
received by the Special Limited Partner pursuant to Section 13.2 of
the Partnership Agreement.
(z) “ Special Termination
Distribution ” shall mean the termination distribution
set forth in Section 13.3 of the Partnership Agreement.
(aa) “ Termination Fee
” shall have the meaning set forth in Section
17(b).
(bb) “ Total Operating
Expenses ” of a Person means the aggregate of all
expenses paid or incurred by such Person, but excluding
organization and offering expenses, interest payments, taxes,
non-cash expenditures, any Acquisition Fee or other acquisition
expenses.
2. Duties of Advisor . The
Company, on its own behalf, and as general partner of the OP,
hereby retains and appoints the Advisor as the advisor of the
Company and the OP to perform the services hereinafter set forth,
and the Advisor hereby accepts such appointment, all subject to the
terms and conditions hereinafter set forth. In the performance of
this undertaking, subject to the supervision of the Board of
Directors and consistent with the provisions of the Company’s
Charter and the Agreement of Limited Partnership of the OP (the
“Partnership Agreement”), the Advisor shall devote
sufficient resources to the administration of the Company to
discharge is obligations hereunder and shall:
a. obtain for the Advisees, furnish
and/or supervise the services necessary to perform any ministerial
functions in connection with the management of the day-to-day
operations of the Advisees;
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b. use its best efforts to seek out,
present and recommend to the Advisees, whether through its own
efforts or those of third parties retained by it, suitable
investment opportunities that are consistent with the
Advisees’ respective investment objectives and policies and
acquisition strategy and objectives, as adopted by the Board of
Directors from time to time, and negotiate on behalf of the
Advisees with respect to potential investments or the disposition
thereof;
c. exercise absolute discretion,
subject to the Board of Directors’ review, in decisions to
originate, acquire, retain or sell real properties, provided
, that , the Advisor may acquire on behalf of the Advisees
any real property with purchase price that is less than
$15,000,000, or finance such an acquisition on the Advisees’
behalf, without the prior approval of the Board of Directors if and
to the extent that:
i. the proposed acquisition or
financing would not, if consummated, violate or conflict with the
investment guidelines of the Advisees as set forth in the
Prospectus;
ii. the proposed acquisition or
financing would not, if consummated, violate the restriction set
forth in section 2(f) below; and
iii. the consideration proposed to
be paid for such real property does not exceed the fair market
value of such property, as determined by a qualified independent
real estate appraiser selected in good faith by the Advisor and
acceptable to the Independent Directors;
d. recommend investment
opportunities consistent with the Advisees’ respective
investment objectives and policies and negotiate on behalf of the
Advisees with respect to potential investments or the disposition
thereof;
e. structure the terms and
conditions pursuant to which acquisitions of properties will be
made, subject to the Board of Directors’ review;
f. arrange for financing and
refinancing of properties, subject to the Board of Directors’
prior approval if such financing or refinancing, when consummated
causes the total leverage on each such property or on all such
properties in the aggregate to exceed 75% of such property’s
or properties’, as the case may be, fair market
value;
g. obtain for the Advisees such
other services as may be required in acquiring or disposing of
investments, disbursing and collecting the funds of the Advisees,
paying the debts and fulfilling the obligations of the Advisees,
and handling, prosecuting and settling any claims of the
Advisees;
h. obtain for the Advisees such
services as may be required for property management, leasing,
mortgage brokerage and servicing, and other activities relating to
the investment portfolio of the Advisees;
i. supervise the servicing of the
Advisees’ loan portfolios;
j. administer the Advisee’s
respective bookkeeping and accounting functions, and prepare, or
cause to be prepared, statements and other relevant information for
distribution to stockholders or partners, as the case may be,
including annual and quarterly reports and any filings required by
regulatory authorities;
k. monitor operations and expenses
of the Advisees;
l. from time to time, or as
requested by the Board of Directors, make reports to the Advisees
as to its performance of the foregoing services;
m. perform any other powers of the
Board of Directors or the Company (as general partner of the OP)
which (with respect to the Company) are set forth in the Charter
and the Partnership Agreement, as applicable, which may be
delegated to it by the Board of Directors from time to
time;
n. render such other services as the
Board of Directors deems appropriate; and
o. do all things necessary to assure
its ability to render the services contemplated herein.
3. Fiduciary Relationship .
The Advisor, as a result of its relationship with the Advisees
pursuant to this Agreement, stands in a fiduciary relationship with
the stockholders of the Company and the partners of the
OP.
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4. No Partnership or Joint
Venture . The Advisees and the Advisor are not partners or
joint venturers with each other and nothing herein shall be
construed to make them partners or joint venturers or impose any
liability as such on either of them.
5. Records . At all times,
the Advisor shall keep books of account and records relating to
services performed hereunder, which books of account and records
shall be accessible for inspection by the Advisees and the
Advisee’s appointees at any time during the ordinary business
hours of the Advisor.
6. REIT Qualification; Other
Limitations on Advisor Actions . Anything else in this
Agreement to the contrary notwithstanding, the Advisor shall
refrain from any action which, in its sole judgment made in good
faith, or, in the judgment of the Board of Directors provided that
the Board of Directors give the Advisor written notice to such
effect, would (a) adversely affect the status of the Company as a
real estate investment trust pursuant to Section 856 of the Code;
(b) cause the Advisees to be classified as an “investment
company” for purposes of the Investment Company Act of 1940,
as amended, (c) cause the OP to be classified other than as a
partnership for purposes of the Code; (d) violate any law, rule,
regulation or statement of policy of any governmental body or
agency having jurisdiction over the Advisees or over their
securities, or (e) be prohibited by the Company’s Charter or
the Partnership Agreement of the OP.
7. Bank Accounts . The
Advisor may establish and maintain one or more bank accounts in the
name of the Advisees or in its own name as agent for the Advisees
and may collect and deposit in and disburse from any such account,
any money on behalf of the Advisees, under such terms and
conditions as the Board of Directors may approve, provided that no
funds in such account shall be commingled with funds of the
Advisor. From time to time and upon appropriate request, the
Advisor shall render appropriate accounting of such co
