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InfraREIT, Inc. Proxy Statement
2018 Annual
Meeting
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(4) non-cash
equity compensation; (5) goodwill impairment; and (6) subject to the approval of the Audit Committee, such other adjustments as
Hunt Manager may recommend from time to time to give effect to the intent in the calculation of cash available for distribution under the management agreement or to reflect changes in our public reporting practices.
We reimburse Hunt Manager for all third-party expenses incurred on our behalf or otherwise in connection with the operation of our business,
other than: compensation expenses related to Hunt Managers personnel (including our officers), occupancy costs incurred by Hunt Manager related to its place of business, time or project-based billing for work done by Hunt affiliates, travel
and expenses for Hunt Managers employees, fees or costs associated with professional service organizations, publications, periodicals, professional development or related matters for Hunt Manager employees and income or franchise taxes payable
by Hunt Manager, all of which will be the exclusive responsibility of Hunt Manager. Additionally, we are required to include, and have included, Hunt Manager and its affiliates under our directors and officers insurance policy, including
professional liability coverage, with limits of $50.0 million. In the event that Hunt Manager requests that additional professional liability insurance be purchased and added to our policy, Hunt Manager will bear any additional premium costs.
Pursuant to the management agreement, Hunt Manager does not assume any responsibility other than to render the services called for
thereunder and will not be responsible for any action of our Board of Directors in following or declining to follow its advice or recommendations. Further, Hunt Manager, its affiliates and their respective officers, directors, stockholders and
employees will not be liable to us, our directors, our stockholders or any partners of our Operating Partnership for acts or omissions performed in accordance with and pursuant to the management agreement, except where such liability arises as a
result of acts constituting gross negligence, willful misconduct, bad faith or reckless disregard of their duties under the management agreement. Hunt Manager has agreed to indemnify us and each of our officers, directors, employees and agents from
and against any claims or liabilities arising out of or in connection with acts of Hunt Manager constituting gross negligence, willful misconduct, bad faith or reckless disregard of their duties under the management agreement or any claims by Hunt
Managers employees relating to the terms and conditions of their employment by Hunt Manager.
The term of the management agreement
expires December 31, 2019, and will automatically renew for successive five-year terms unless a majority of our independent directors decides to terminate the agreement. If our independent directors decide to terminate the agreement, we must
give Hunt Manager notice of the termination at least one year in advance of the scheduled termination date and pay Hunt Manager a termination fee, in cash or equity, at our election, in an amount equal to three times the most recent annualized base
management fee and incentive payment amount. If we elect to pay the termination fee in equity, the fee will be paid in OP Units, which will be issued five days after the effective date of termination, with the number of OP Units based on the volume
weighted average price of our Common Stock during the 10-trading day period that precedes such effective date of termination.
We also have
the right to terminate the management agreement at any time for cause (as defined in the management agreement), and Hunt Manager may terminate the agreement at any time upon 365 days prior notice to us, provided that Hunt Manager may not
terminate the agreement effective before December 31, 2019. In these circumstances, the termination fee would not be owed to Hunt Manager.
Development Agreement
Pursuant to the development agreement with Hunt Transmission Services, L.L.C. (Hunt Developer) and Sharyland, which we entered into
in January 2015 in connection with our IPO, we have the exclusive right
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