Exhibit 10.28

 

OPTION AGREEMENT

(Tarpon Springs Plaza)

 

THIS OPTION AGREEMENT (this “Agreement”) is made as of August 16, 2004 by and
among, Kite Realty Group L.P., a Delaware limited partnership (“Kite Realty”),
Brentwood Land Partners, LLC, a Delaware limited liability company (“Optionor”)
and Alvin E. Kite, Jr., John A. Kite, Paul W. Kite and Thomas K. McGowan (each a
“Member” and, collectively, the “Members”).

 

R E C I T A L S

 

WHEREAS, Kite Realty, the general partner of which is Kite Realty Group Trust, a
Maryland real estate investment trust (the “REIT”), and the REIT are engaging in
various related transactions pursuant to which, among other things, (i) Kite
Realty will acquire interests in various entities that own or lease real estate
properties in which certain persons affiliated with the REIT, including the
Members, have interests, (ii) the REIT will acquire interests in certain service
businesses currently owned by persons affiliated with the REIT, including
certain of the Members and (iii) the REIT will effect an initial public offering
of its common shares and contribute the proceeds therefrom for a like number of
units of partnership interest in Kite Realty (the “Kite IPO,” and together with
the other transactions described above, the “Kite IPO Transactions”);

 

WHEREAS, Optionor owns that certain real property as described in Exhibit A
hereto (the “Land”);

 

WHEREAS, each Member currently owns the ownership interest in Optionor set forth
in Exhibit B hereto (each an “Interest” and, collectively, the “Interests”);

 

WHEREAS, the Property will be (i) managed by KRG Management, LLC, the sole
member of which is the REIT (the “Manager”), pursuant to a separate property
management agreement between Optionor and the Manager (the “Management
Agreement”), and (ii) developed by Kite Realty or an affiliated entity (the
“Developer”) pursuant to a separate development agreement between Optionor and
the Developer (the “Development Agreement”); and

 

WHEREAS, As part of the Kite IPO Transactions, Optionor desires to grant to Kite
Realty an option to acquire (in whole or in legally subdivided portions) all of
(i) Optionor’s interest in the Land and any buildings, structures, and other
improvements situated on the Land or hereinafter constructed or acquired,
(ii) any personal property owned by Optionor, situated on the Land and used by
Optionor in connection with the use, operation or maintenance of the Property
and (iii) any intangible property owned by Optionor and used solely in
connection with the use, operation or maintenance of the foregoing (the
“Property”), on the terms and conditions specified in this Agreement.

 

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and
conditions set forth herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:

 

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ARTICLE I – THE OPTION

 

1.1                                 Grant of Option.  Optionor hereby grants to
Kite Realty an option to acquire all right, title and interest of Optionor in
the Property (or any legally subdivided portion thereof) on an “as is” basis
(subject to all matters of record) on the terms and conditions set forth herein
(the “Option”).

 

1.2                                 Commencement of Option.  Kite Realty shall
have the right to exercise the Option at any time after the date upon which the
Property reaches 85% occupancy until the expiration of the Option pursuant to
Section 1.3.  Notwithstanding the foregoing, in the event the Kite IPO is not
consummated prior to January 1, 2005, this Agreement shall become null and void
and no party shall have any liability to the other parties hereunder with
respect to the transactions contemplated hereby.

 

1.3                                 Expiration of Option.  Subject to Section
6.1 hereof, the Option shall expire on the fourth anniversary of the date of
commencement of construction of the planned development on the Property (the
“Option Term”).  Optionor shall promptly notify Kite Realty in writing of such
date of commencement.

 

1.4                                 Partial Exercise of Option.  Kite Realty may
exercise the Option as to the entire Property or (subject to Section 4.1) may,
from time to time throughout the Option Term, elect to acquire one or more
legally subdivided parcels of the Property (each, a “Portion”).  If Kite Realty
elects to exercise the Option with respect to one or more Portions, the
remainder of the Property shall remain subject to the Option; it being
understood that the Option shall remain in effect as to the remaining portion of
the Property subject to Section 6.1 hereof.

 

1.5                                 Consents.  The consummation of the
transactions contemplated by this Agreement is subject to any consents required
under the “Existing Financings” and the “New Financings” (as defined in Section
3.1), and (a) in the case of the transfer of the Property, any other consents
required to be obtained prior to the transfer of the Property, or (b) in the
case of the transfer of the Interests pursuant to Section 5.3, any other
consents required to be obtained prior to the transfer of the Interests.

 

1.6                                 Subordination.  The Option granted by this
Agreement and the rights of Kite Realty hereunder are and shall be subordinate
to any Existing Financings and New Financings.

 

ARTICLE II – PROCESS FOR EXERCISE OF THE OPTION

 

2.1                                 Exercise.  Subject to Section 1.2 hereof,
the Option may be exercised during the Option Term by delivery of written notice
by Kite Realty to Optionor (the “Exercise Notice”), stating that the Option is
exercised on the terms set forth in this Agreement.  The Exercise Notice shall
specify the name of the First Appraiser (as defined in Section 3.1(a)(ii)) and
clearly identify whether it applies to the entire Property or a Portion.  The
date upon which the Exercise Notice is delivered by Optionor in accordance with
this Agreement is hereinafter referred to as the “Exercise Date.”  If the Option
is timely exercised, subject to Section 3.1(f), the Property or the Portion (as
the case may be) shall be conveyed, and the closing date of such acquisition,
transfer and conveyance (the

 

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“Closing Date”) shall occur within the later of (a) 15 days after the last day
of the month immediately following the month in which the Exercise Notice is
delivered or (b) 45 days after the determination of the FMV (as defined in
Section 3.1) of the Property (or a Portion, as applicable) at the time in
accordance with Section 3.1.  The exercise (or partial exercise) of the Option
is subject to the approval of a majority of the “independent” members of the
Board of Trustees of the REIT (as defined in the REIT’s Amended and Restated
Bylaws), as general partner of Kite Realty.

 

2.2                                 Inspection.  During the term of this
Agreement, Optionor agrees to permit Kite Realty and Kite Realty’s agents to
enter upon the Property, subject to the rights of any tenants, at reasonable
times to make such surveys, inspections and tests as may reasonably be necessary
in connection with its examination of the Property.  Kite Realty hereby agrees
to repair any damage it or its agents may cause to the Property as a result of
any such inspections or tests or any other related damage caused by Kite Realty
or its agents, and further agrees to indemnify, defend and hold Optionor,
Optionor’s managers and the Members harmless from and against any and all
claims, losses, damages and expenses, including, without limitation, reasonable
attorneys’ fees, suffered by Optionor, Optionor’s managers and/or the Members as
a direct result of the entry by Kite Realty or Kite Realty’s agents upon, or
acts upon, the Property in connection with any such inspections or tests or any
other related damage caused by Kite Realty or its agents.

 

2.3                                 Information.  Optionor agrees to permit Kite
Realty and its agents to review all books, records and other documentation
reasonably requested by Kite Realty with respect to Optionor or the Property,
which are in Optionor’s possession and control.  Optionor will provide (or cause
to be provided) a report of the status of the Property, on a quarterly basis,
which report shall include unaudited financials, the Property’s operating
history and Optionor’s current estimate of historical costs in the Property; it
being understood that, to the extent the Management Agreement remains in effect
or Kite Realty or any of its subsidiaries or affiliated companies is providing
administrative services to Optionor with respect to the Property (including,
without limitation, accounting and record-keeping services), Optionor shall be
deemed to have satisfied its obligation under this Section 2.3 to the extent
that the information requested by this Section 2.3 is available to Kite Realty
or such subsidiaries or affiliated companies pursuant to the Management
Agreement or in connection with the performance of such administrative services,
and such information should be deemed to have been delivered by Optionor to Kite
Realty pursuant to this Section 2.3 (notwithstanding any obligations with
respect to such information – confidential or otherwise – contained in the
Management Agreement or any agreement providing for the performance of such
administrative services).

 

ARTICLE III – ACQUISITION PROCESS

 

3.1                                 Acquisition Consideration. 

 

(a)                                  The acquisition consideration to be paid by
Kite Realty for the Property or any Portion thereof (the “Acquisition
Consideration”) pursuant to an exercise of the Option under Section 2.1 shall be
equal to the lesser of (i) Annualized NOI divided by 8.5% or (ii) the fair
market value (“FMV”) at the time, as determined in accordance with this Section
3.1, of the Property or the Portion, respectively, at the time; provided,
however, that, with respect to the acquisition of a Portion of the Property, for
purposes of this

 

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Agreement, the Acquisition Consideration shall mean an amount equal to the
lesser of (i) the Acquisition Consideration for the entire Property multiplied
by the quotient obtained by dividing (x) the portion of the Annualized NOI
attributable to such Portion by (y) the total Annualized NOI or (ii) the FMV of
the Portion.  “Annualized NOI” shall mean the annualized net operating income
for the Property, calculated as follows: the sum of (i) the net operating income
for the Property for the month immediately prior to the month in which the
Exercise Notice is delivered plus (ii) the net operating income for the Property
for the month in which the Exercise Notice is delivered plus (iii) the net
operating income for the Property for the month immediately following the month
in which the Exercise Notice is delivered, annualized.

 

(i)                                     FMV for this purpose shall mean the
price at which a willing buyer would buy, and a willing seller would sell, the
Property or a Portion (as applicable) in an arms-length transaction assuming the
Property or the Portion (as applicable) is sold in an orderly disposition and
each of the buyer and seller are aware of, and take into account, all relevant
factors which exist at the time. 

 

(ii)                                  In the Exercise Notice, Kite Realty shall
designate an appraiser (the “First Appraiser”) to determine FMV for the Property
or a Portion (as applicable).  Optionor then shall have 10 days after receiving
such notice to designate a second appraiser (the “Second Appraiser”) by written
notice to Kite Realty.  If Optionor fails to timely designate the Second
Appraiser, FMV shall be determined by the First Appraiser.  The First Appraiser
and the Second Appraiser each shall separately determine FMV in accordance with
Section 3.1(a) and shall provide a detailed written valuation report to each of
Optionor and Kite Realty within 45 days after the last day for designating the
Second Appraiser.  The designation of the First Appraiser shall be approved by a
majority of the members of the Board of Trustees of the REIT, which majority
must include a majority of “independent” trustees, as defined in the REIT’s
Amended and Restated Bylaws.  If only one appraiser timely submits a proper
valuation report, its FMV determination shall be final, binding and conclusive
for purposes of this Agreement.  If both appraisers timely submit proper
valuation reports, and their FMV determinations vary by 10% or less, FMV shall
be equal to the average of the two FMV determinations.  If both appraisers
timely submit proper valuation reports, and their FMV determinations vary by
more than 10%, the two appraisers shall promptly appoint a third appraiser (the
“Third Appraiser”), which shall independently determine FMV in accordance with
Section 3.1(a) and shall provide a detailed written valuation report to each of
Optionor and Kite Realty within 45 days after its appointment.  FMV shall then
be equal to the average of the two closest FMV determinations submitted by the
three appraisers.  FMV as determined in accordance with Section 3.1(a) shall be
final, binding and conclusive for purposes of this Agreement. 

 

(iii) In preparing its FMV determination, each appraiser shall be provided with
the same Property-specific source documents and information and the same access
to personnel.  Each appraiser shall determine a single point estimate of FMV,
not a range of values.  Only qualified real estate appraisers with at least five
years’ prior experience in the valuation of properties comparable to the
Property in the area in which such Property is located, and that do not have any
financial interest in any entities affiliated with the Members (excluding any
existing or prior agreement or contractual arrangement to provide advisory or
appraisal services to any such Members or any affiliates thereof), may be
validly appointed to serve as an appraiser hereunder.  Subject to

 

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Section 3.1(f), each of Optionor and Kite Realty shall pay all fees and costs of
the appraiser designated by it and one-half of all fess and costs of the Third
Appraiser, if any.

 

(b)                                 On the Closing Date, the Acquisition
Consideration shall be payable by Kite Realty, subject to Section 3.1(b)(i),
first through the assumption of all outstanding Property Indebtedness
(including, without limitation, the payment of any applicable prepayment,
assumption or other fees, costs and penalties) or, if Kite Realty so elects, the
repayment thereof, and second, with respect to any remaining unsatisfied portion
of the Acquisition Consideration, in the form of units of limited partnership
interest in Kite Realty (“Units”) or cash, in the sole and absolute discretion
of Kite Realty.  For purposes of this Section 3.1(b), subject to Section
3.1(b)(i), the value of outstanding Property Indebtedness assumed by Kite Realty
shall be the principal amount thereof and any accrued and unpaid interest, plus
any related prepayment, assumption and other fees, costs and penalties incurred
by Kite Realty in connection with Kite Realty’s assumption or repayment of such
Property Indebtedness.  The value of Units shall be their “Market Value” as
defined in Section 3.1(b)(ii), and the number of Units shall be rounded to the
nearest whole number of Units to avoid the issuance of fractional Units. 

 

(i)                                     “Property Indebtedness” shall mean (A)
any outstanding financings or other arrangements entered into by Optionor (or
any affiliate of Optionor) prior to the date hereof which relate to the Property
or the Portion (as applicable) (the “Existing Financings”), and (B) any
outstanding financings, or other arrangements entered into by Optionor (or any
affiliate of Optionor) after the date hereof which relate to the Property or the
Portion (as applicable), including, without limitation, any mezzanine or bridge
financing, or amendments or extensions of the Existing Financings (the “New
Financings”).  Notwithstanding anything to the contrary contained herein,
“Property Indebtedness” shall not include any Existing Financings or New
Financings to the extent that the aggregate of all Existing Financings and New
Financings (plus accrued and unpaid interest and any related prepayment,
assumption or other fees, costs and penalties) exceed the Acquisition
Consideration.  Notwithstanding anything to the contrary contained herein,
“Property Indebtedness” for purposes of a transfer of a Portion shall include
the outstanding balance (including, without limitation, all applicable
prepayment, assumption or other fees, costs and penalties) of all Existing
Financings and New Financings which, by their terms or as may otherwise be
required by the lenders thereunder, must be assumed, prepaid or repaid upon a
transfer of such Portion by Optionor as contemplated by this Agreement.  Any
financings or other arrangements relating to the Property in excess of the
amount of the Acquisition Consideration shall be the responsibility of Optionor
and shall be prepaid or repaid at or prior to the Closing Date.  Optionor shall
provide Kite Realty with notice of any known default under any of the Existing
Financings or New Financings and shall provide copies of any written default
notices Optionor may receive from the lenders of such financings.

 

(ii)                                  The term “Market Value” shall mean the
average closing price of the common shares of beneficial interest, $0.01 par
value per share, of the REIT (or any successor thereto) (“Common Shares”) for
the 10 consecutive trading days immediately preceding (but not including) the
Closing Date.  For purposes of determining Market Value, one Unit shall equal
one Common Share, subject to any adjustments required under the Amended and
Restated Agreement of Limited Partnership of Kite

 

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Realty, as may be amended and/or restated from time to time (the “Partnership
Agreement”), or to reflect stock splits, reclassifications, dividends in-kind
and the like.

 

(c)                                  On the Closing Date, all reserves held by
or on behalf of Optionor as required by applicable lenders or otherwise with
respect to the Property or the Portion (as applicable) shall either be
(i) retained by or returned to Optionor, or (ii) transferred to Kite Realty in
which event a credit shall be applied to increase the Acquisition Consideration
by the amount of such transferred reserves.

 

(d)                                 In exercising the Option, Kite Realty will
use reasonable commercial efforts to cooperate with Optionor and the Members to
minimize any taxes, fees or prepayment penalties payable in connection with such
exercise or the assumption or repayment of indebtedness relating to the
Property; provided that, except as otherwise set forth in this Agreement, such
cooperation shall not require Kite Realty to unreasonably delay the Closing Date
or require Kite Realty to assume additional liabilities or incur any material
amount of out-of-pocket expenses.

 

(e)                                  Pursuant to the Partnership Agreement,
Units are exchangeable into Common Shares.  It is currently anticipated that
such Common Shares will be entitled to certain registration rights consistent
with the REIT’s practice at the time such Units are issued and subject to any
restrictions or agreements affecting such rights to which the REIT or Kite
Realty is bound.

 

(f)                                    Kite Realty may decide at any time after
delivery of an Exercise Notice, but before the Closing Date, not to proceed with
the acquisition of the Property or the Portion (as applicable) as specified in
the Exercise Notice; provided, that if Kite Realty revokes such Exercise Notice
following the date on which the Second Appraiser is appointed pursuant to
Section 3.1(a)(ii), Kite Realty shall bear all of the costs and expenses of the
appraisers incurred up to the date on which Kite Realty notifies Optionor and
such appraisers of such revocation; and, provided further, that  if a final FMV
determination is made in accordance with Section 3.1 prior to Kite Realty’s
revocation of such Exercise Notice, such FMV determination shall be deemed to
constitute the FMV of the Property or Portion (as applicable) for purposes of
subsequent exercises of the Option for a period of six months following the date
of such revocation; it being understood that any such decision not to proceed
shall not result in the termination of this Agreement (including, without
limitation, the Option).

 

3.2                                 Acquisition Documentation.  On or prior to
the Closing Date (subject to Section 3.1(f)), Optionor and Kite Realty shall
acknowledge, execute, deliver and/or file (as the case may be) the closing
documentation described on Exhibit C hereto (the “Closing Documentation”). 
Optionor and Kite Realty shall thereafter additionally acknowledge, execute,
deliver and/or file (as the case may be) any and all other documents, agreements
or instruments reasonably necessary or appropriate to effectuate the
acquisition, transfer and conveyance of the Property (or a Portion, as
applicable) in accordance with the terms of this Agreement.

 

3.3                                 Withholding.  Optionor shall execute upon
the conveyance of the Property or any Portion (as applicable) such certificates
or affidavits reasonably necessary to document the inapplicability of any
federal or state tax withholding provisions, including,

 

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without limitation, those referred to in Section 7.4 below.  If Optionor fails
to provide such certificates or affidavits, Kite Realty may withhold a portion
of the Acquisition Consideration as required by the Internal Revenue Code of
1986, as amended (the “Code”) or applicable state law.

 

3.4                                 Taxes.  If the transactions contemplated by
this Agreement are consummated, then the following shall apply:

 

(a)                                  Acquisition is Treated as Contribution.  If
the Acquisition Consideration consists in whole or in part of Units, the
transfer, assignment and exchange contemplated by this Agreement shall
constitute a “Capital Contribution” to Kite Realty pursuant to Article IV of the
Partnership Agreement and is intended to be governed by Section 721(a) of the
Code, and the parties agree to report this transaction consistent with such
treatment.

 

(b)                                 Cooperation and Tax Disputes.  Optionor and
the Members, on the one hand, and Kite Realty, on the other hand, shall provide
each other with such cooperation and information relating to the Property or the
Interests as the parties reasonably may request in (i) filing any tax return,
amended tax return or claim for tax refund, (ii) determining any liability for
taxes or a right to a tax refund or (iii) conducting or defending any proceeding
in respect of taxes.  Any time after the date hereof, Kite Realty shall promptly
notify Optionor or the Members, as applicable, in writing upon receipt by Kite
Realty or any of its affiliates of notice of (i) any pending or threatened tax
audits or assessments with respect to the Property or the Interests and (ii) any
pending or threatened federal, state, local or foreign tax audits or assessments
of Kite Realty or any of its affiliates, in each case which may affect the
liabilities for taxes of Optionor or any of the Members with respect to any tax
period ending on or before the Closing Date.  Optionor and each Member shall
promptly notify Kite Realty in writing upon receipt by Optionor or such Member,
as the case may be, of notice of any pending or threatened federal, state, local
or foreign tax audits or assessments relating to the income, properties or
operations of the Property or any of the Interests.  Each of Kite Realty, on the
one hand, and Optionor and/or the Members, on the other hand, may participate at
its own expense in the prosecution of any claim or audit with respect to taxes
attributable to any taxable period ending on or before the Closing Date,
provided, that Optionor and/or the Members shall collectively have the right to
control the conduct of any such audit or proceeding or portion thereof for which
Optionor and/or such Members, as the case may be, have acknowledged liability
(except as a partner of Kite Realty) for the payment of any additional tax
liability, and Kite Realty shall have the right to control any other audits and
proceedings.  Notwithstanding the foregoing, neither Kite Realty, on the one
hand, nor Optionor and/or the Members, on the other hand, may settle or
otherwise resolve any such claim, suit or proceeding which could have an adverse
tax effect on the other party or its direct or indirect owners without the
written consent of the other party, such written consent not to be unreasonably
withheld or delayed.  Each party shall retain all tax returns, schedules and
work papers, and all material records and other documents relating thereto,
until the expiration of the statute of limitations (and, to the extent notified
by any party, any extensions thereof) of the taxable years to which such tax
returns and other documents relate and until the final determination of any tax
in respect of such years.

 

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(c)                                  Tax Allocations.  With respect to the
Property or a Portion (as applicable) that is directly or indirectly contributed
to Kite Realty as provided in Section 3.4(a) above, the parties agree that Kite
Realty shall use the “traditional method”, as described in Treasury Regulation
Section 1.704-3(b), to make allocations of taxable income and loss among the
partners of Kite Realty.

 

(d)                                 Transfer Taxes.  Kite Realty shall pay the
cost of all documentary transfer taxes arising from the sale of the Property or
a Portion (as applicable) pursuant to the exercise by Kite Realty of the Option
or from the transfer of the Interests pursuant to Section 5.3.

 

(e)                                  Closing Costs and Prorations.  Any
recording fees, escrow fees, and other closing costs (except documentary
transfer taxes as provided in Section 3.4(d) above) shall be allocated according
to custom and practice based on the location of the Property or the Portion (as
applicable).  All income and expenses of the Property or the Portion (as
applicable) shall be prorated according to custom and practice based on the
location of the Property or the Portion (as applicable).

 

(f)                                    Survivability.  This Section 3.4 shall
survive the termination of this Agreement for a period of one year from the date
of such termination.

 

ARTICLE IV – RIGHT OF FIRST REFUSAL

 

4.1                                 Right of First Refusal.   If Optionor
receives a bona fide, good faith offer from an unaffiliated third party to
purchase the entire Property (the “Offer”) at any time during the term of this
Agreement, then, subject only to Kite Realty’s right of first refusal contained
in this Article IV, Optionor shall have the right to convey the entire Property
to such third party during the term of this Agreement.  If Optionor desires to
accept the Offer, Optionor shall first give written notice (the “ROFR Notice”)
thereof to Kite Realty (the date the ROFR Notice is delivered by Kite Realty in
accordance with this Agreement is referred to as the “Notice Date”), which ROFR
Notice shall include the proposed purchase price (the “Purchase Price”), the
identity of the proposed transferee (the “Transferee”) and other material terms
(collectively, the “Acquisition Terms”) of the proposed transfer of the
Property.  Kite Realty shall have 30 days from the Notice Date either (i) to
deliver written notice to Optionor (the “OP Notice”) of its election to acquire
the entire Property for the same Purchase Price (payable in cash or Units, in
Kite Realty’s sole and absolute discretion) and otherwise on substantially the
same Acquisition Terms as set forth in the Offer, or (ii) if the Option is then
exercisable pursuant to Section 1.2 hereof, to deliver an Exercise Notice
pursuant to the exercise of its Option under Section 2.1; it being understood
that, notwithstanding anything to the contrary in this Agreement, Kite Realty
shall only be entitled to exercise the Option as to the entire Property in such
circumstance.  For purposes of this Agreement, an “unaffiliated third party”
shall mean, with respect to any Person, any Person directly or indirectly not
controlling, not controlled by or not under common control with such Person. 
For purposes of this definition, “control,” when used with respect to any
Person, shall mean the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise, and the terms “controlling” and
“controlled” have meanings correlative to the foregoing.  “Person” shall mean a
natural person, partnership (whether general or limited), trust, estate,
association, corporation, limited liability company,

 

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unincorporated organization, custodian, nominee or any other individual or
entity in its own or any representative capacity.

 

4.2                                 Acquisition Process.   If Kite Realty timely
delivers an Exercise Notice following receipt of a ROFR Notice, subject to
Section 4.1, the provisions of Article III shall govern the acquisition of the
Property.  If Kite Realty timely delivers an OP Notice following receipt of a
ROFR Notice, subject to Section 4.1, the provisions of Article III (excluding
Section 3.1(a)) shall govern the acquisition of the Property to the extent not
inconsistent with the Acquisition Terms; it being understood that if the
Purchase Price is paid in Units, the value of Units shall be their Market Value
as defined in Section 3.1(b)(ii). 

 

4.3                                 Failure to Timely Exercise Right.   If Kite
Realty fails to timely submit an Exercise Notice or OP Notice following receipt
of a ROFR Notice, Kite Realty’s rights under this Agreement with respect to the
Property shall expire and be of no further force or effect; provided, however,
that such rights shall be revived and reinstated in favor of Kite Realty in the
event Optionor does not consummate the transaction with the Transferee on terms
which are generally as good or more favorable to Optionor than the Acquisition
Terms within 90 days following the Notice Date. 

 

ARTICLE V –  ADDITIONAL AGREEMENTS AND COVENANTS

 

5.1                                 Permitted Activities by Optionor; Property
Management and Development.   Subject to the terms of this Agreement, Optionor
has the right to own, entitle, finance, operate, lease, encumber, develop and
maintain the Property during the term of this Agreement; provided that during
the term of the Management Agreement and the Development Agreement (as
applicable), all such activities shall be conducted by or through the Manager
and Developer, respectively, in accordance with the Management Agreement and the
Development Agreement. 

 

5.2                                 Marketing the Property for Sale.  Optionor
and the Members agree not to (i) affirmatively market the Property (or any
Portion thereof) for sale during the Option Term, or (ii) sell, convey or
otherwise transfer, or agree to sell, convey or otherwise transfer, all or any
portion of the Property, other than the sale of the entire Property (or a
Portion thereof) pursuant to Kite Realty’s exercise of the Option or the sale of
the entire Property in accordance with Article IV hereof.

 

5.3                                 Alternative Transaction – Interest
Acquisition. 

 

(a)                                  Consent to Alternative Transaction. 
Optionor and the Members acknowledge and understand that Kite Realty may desire
to effectuate a transfer of the Property, other than through the direct
acquisition of the Property as contemplated hereby, and that Kite Realty may
determine that it is more desirable or appropriate to accomplish the transfer of
the Property through the acquisition of 100% of the Interests (the “Interest
Acquisition”).  Optionor and the Members hereby consent to the Interest
Acquisition, and agree to cooperate with Kite Realty; provided, that the Members
receive, in the aggregate, the amount of cash or number of Units to which
Optionor would be entitled under Section 3.1 upon the sale of the Property
pursuant to this Agreement; it being understood that the form of consideration
shall be determined in the sole and absolute discretion of Kite Realty.

 

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(b)                                 Acquisition Process.  In the event that Kite
Realty elects to accomplish the transfer of the Property through the Interest
Acquisition: (i) the Exercise Notice shall specify that Kite Realty elects to
effectuate the Interest Acquisition pursuant to this Section 5.3; (ii) subject
to this Section 5.3, the provisions of Article III shall govern the Interest
Acquisition; (iii) the purchase price to be paid by Kite Realty for the
Interests shall be equal to the Acquisition Consideration for the Property as
calculated in accordance with Section 3.1, with each Member entitled to receive
such Member’s pro rata share of such Acquisition Consideration based on such
Member’s percentage interest in Optionor (as set forth in Exhibit B); (iv)
subject to Section 3.1(f), the Interests shall be conveyed, and the Closing Date
of such acquisition shall occur, within the later of (a) 15 days after the last
day of the month immediately following the month in which the Exercise Notice is
delivered or (b) 45 days after the determination of the FMV of the Property (or
a Portion, as applicable) at the time in accordance with Section 3.1; and (v) on
or prior to the Closing Date, subject to Section 3.1(f), the Members and Kite
Realty shall execute and deliver the closing documentation described on Exhibit
D hereto regarding the Interest Acquisition, and, thereafter, the Members and
Kite Realty shall additionally acknowledge, execute, deliver and/or file (as the
case may be) any and all other documents, agreements or instruments reasonably
necessary or appropriate to effectuate the Interest Acquisition in accordance
with the terms of this Agreement.

 

5.4                                 Further Assurance.   Each Member shall
execute and deliver to Kite Realty all such other and further instruments and
documents and take or cause to be taken all such other and further actions as
Kite Realty may reasonably request in order to effect the transactions
contemplated by this Agreement, including, without limitation, instruments or
documents deemed necessary or desirable by Kite Realty to effect and evidence
the Interest Acquisition in accordance with the terms of this Agreement.

 

5.5                                 Consent to Other Approvals.   Each Member
hereby acknowledges and agrees that the execution and delivery of this Agreement
by such Member shall constitute the consent, waiver or approval by such Member
and by Optionor, pursuant to applicable law or Optionor’s organizational
documents or other agreements, to the transactions contemplated hereby,
including, without limitation, the Interest Acquisition.  For the avoidance of
doubt, to the extent the consent, waiver or approval of a Member or Optionor is
required to effectuate any of the transactions contemplated by this Agreement,
such Member or Optionor shall be deemed to have given such consent, waiver or
approval pursuant hereto.

 

5.6                                 Obligation to Sell the Property or the
Interests.   Optionor and the Members hereby acknowledge and agree that, if Kite
Realty does not exercise the Option and/or the Property is not transferred in
accordance with Article IV prior to the termination of this Agreement pursuant
to Section 6.1 hereof, Optionor and the Members shall use their reasonable best
efforts to sell, convey or otherwise transfer as promptly as reasonably
practicable the entire Property or 100% of the Interests to an unaffiliated
third party.  Notwithstanding anything to the contrary herein, this Section 5.6
shall survive any termination of this Agreement indefinitely. 

 

10

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ARTICLE VI – TERMINATION

 

6.1                                 Termination of this Agreement. This
Agreement shall terminate and be of no further force or effect upon the earlier
to occur of:

 

(a)                                  the acquisition by Kite Realty of all
right, title and interest of Optionor in the Property in accordance with this
Agreement;

 

(b)                                 the termination of the Option and right of
first refusal pursuant to Section 4.3 hereof; or

 

(c)                                  the fourth anniversary of the date of
commencement of construction of the planned development on the Property; it
being understood that, if on or prior to the date of such expiration: (i) Kite
Realty has properly delivered an Exercise Notice or OP Notice, this Agreement
shall remain in effect for purposes of effectuating the acquisition of the
Property or a Portion thereof (as applicable) or the Interests pursuant to such
Exercise Notice or OP Notice, or (ii) Optionor has received an Offer for which a
ROFR Notice has not yet been delivered by Kite Realty, or less than 30 days was
elapsed since the date of the receipt by Kite Realty of the ROFR Notice, this
Agreement shall remain in effect for purposes of permitting Kite Realty to
exercise its rights under Article IV hereof and purchase the Property or the
Interests. 

 

6.2                                 Procedure if Option Terminates.

 

(a)                                  Notice of Termination.  If this Agreement
is terminated pursuant to Section 6.1(b) prior to the expiration of the Option
Term, Optionor and the Members will provide notice of such termination to Kite
Realty (the “Option Termination Notice”).  The delivery of the Option
Termination Notice shall not be a condition precedent to the effectiveness of
such termination.

 

(b)                                 Verification of Termination.  Upon receipt
of the Option Termination Notice, Kite Realty agrees that, if this Agreement is
terminated, in accordance with its terms, Kite Realty will execute, acknowledge
and deliver to Optionor in recordable form with appropriate authorization for
recording, within 10 days from request therefore, a quitclaim deed or any other
document reasonably requested by Optionor or a title insurance company to verify
the termination of this Agreement, including, without limitation, the Option.

 

(c)                                  Right to Documents.  Upon receipt of the
Option Termination Notice, Kite Realty shall forthwith deliver (or cause to be
delivered) to Optionor and shall be deemed to have assigned to Optionor (without
the execution of further documentation or instruments), any governmental
applications, permits, maps, plans, specifications and other documents in its
possession or that it has made or contracted to be made respecting the Property,
including, without limitation, all engineering reports, surveys, soil tests,
seismic studies, environmental reports, grading, flood control and drainage
plans, design renderings, market analyses, feasibility studies, proposed
tentative, parcel and final maps, and all correspondence with governmental
agencies and their personnel concerning the same (other than materials in Kite
Realty’s or any subsidiary’s or affiliated company’s possessions pursuant to the
Management Agreement and/or Development Agreement or

 

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any other continuing agreement between Kite Realty, on the one hand, and
Optionor or the Members, on the other hand).

 

6.3                                 Effects of Termination.  In the event of
termination of this Agreement pursuant to Section 6.1, the provisions of
Sections 3.4, 5.6, 6.1, 6.2 and 6.3 and Articles VIII and IX shall survive the
termination of this Agreement; it being understood that, with respect to
termination pursuant to Section 6.1(a), the provisions of this Agreement that
contemplate performance after the Closing Date and the obligations of the
parties not fully performed on the Closing Date shall survive the Closing Date
and shall not be deemed to be merged into or waived by the instruments executed
as of the Closing Date.  Notwithstanding the foregoing, nothing in this Section
6.3 shall be deemed to release any party from liability for any breach by such
party of the terms or provisions of this Agreement or to impair the right of any
party to enforce its respective rights hereunder.

 

ARTICLE VII – REPRESENTATIONS, WARRANTIES AND COVENANTS

 

As a material inducement to Kite Realty to enter into this Agreement, Optionor
and each Member hereby make to Kite Realty, severally but not jointly, each of
the representations and warranties set forth in this Article VII, which
representations and warranties are true and correct as of the date hereof, and
hereby covenant as follows:

 

7.1                                 Organization; Authority.  Optionor is duly
formed, validly existing and in good standing (to the extent applicable) under
the laws of its jurisdiction of formation.  Optionor is qualified to do business
in the state where the Property is located.  Optionor and each Member have full
right, authority, power and capacity: (a) to enter into this Agreement and each
agreement, document and instrument to be executed and delivered by or on behalf
of Optionor and such Member pursuant to this Agreement and (b) to carry out the
transactions contemplated hereby and thereby.  This Agreement and each
agreement, document and instrument executed and delivered by or on behalf of
Optionor and such Member pursuant to this Agreement constitutes, or when
executed and delivered will constitute, the legal, valid and binding obligation
of Optionor and such Member, each enforceable in accordance with its respective
terms.  The execution, delivery and performance of this Agreement and each such
agreement, document and instrument by or on behalf of Optionor and such Member:
(i) does not and will not violate any foreign, federal, state, local or other
laws applicable to Optionor or such Member or require Optionor or such Member to
obtain any approval, consent or waiver of, or make any filing with, any person
or authority (governmental or otherwise) that has not been obtained or made
prior to the date hereof (other than approvals, consents or waivers under any
New Financings); and (ii) does not and will not violate any term, conditions or
provisions of, or constitute a default under, any bond, note or other evidence
of indebtedness or any contract, lease or other instrument to which Optionor or
such Member is a party or by which the property of Optionor or such Member is
bound or affected.

 

7.2                                 Title to the Property; No Agreements to
Sell.   Optionor holds a fee interest in the Property and has not granted an
option or right of first refusal to purchase the Property to any party other
than Kite Realty.  Other than this Agreement, Optionor is

 

12

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not currently a party to any agreement to sell, transfer or otherwise encumber
or dispose of, and has no obligation (absolute or contingent) to sell, the
Property or a Portion.

 

7.3                                 Title to the Interests; No Agreements to
Sell.   Each Member owns beneficially and of record, free and clear of any
claim, lien (including, without limitation, tax liens), option, charge, security
interest, mortgage, deed of trust, encumbrance, rights of assignment, purchase
rights or other rights of any nature whatsoever of any third party
(collectively, “Encumbrances”), and has full power and authority to convey free
and clear of any Encumbrances, the Interests listed on Exhibit B hereto as owned
by such Member, except (i) Encumbrances created in favor of Kite Realty by the
transactions contemplated hereby, (ii) Encumbrances that are extinguished at or
prior to the Closing Date, and (iii) Encumbrances relating to the Existing
Financings or the New Financings.  Other than this Agreement, such Member is not
currently a party to any agreement to sell, transfer or otherwise encumber or
dispose of, and has no obligation (absolute or contingent) to sell, the
Interests owned by such Member.  Each Member covenants and agrees not to
encumber such Member’s Interests during the Option Term except in connection
with the Existing Financings and the New Financings.

 

7.4                                 Status as a United States Person.  Neither
Optionor nor any of the Members is a foreign person within the meaning of
Section 1445 of the Internal Revenue Code (“Section 1445”).  Optionor’s U.S.
taxpayer identification number and each Member’s social security number that
have previously been provided to Kite Realty are correct.  Optionor’s office
address and each Member’s home address are the addresses set forth opposite
their signatures below. Upon request by Kite Realty, Optionor and each Member
agree to complete and provide to Kite Realty a certificate of non-foreign status
substantially in the form provided in Section 1.1445-5(b)(3)(D) of the Treasury
regulations.

 

7.5                                 No Brokers.  Neither Optionor nor any of the
Members has entered into, and covenants that it or he will not enter into, any
agreement, arrangement or understanding with any person or firm which will
result in the obligation of Kite Realty to pay any finder’s fee, brokerage
commission or similar payment in connection with the transactions contemplated
hereby.

 

7.6                                 Assets.  The Property is the sole asset of
Optionor other than cash or cash equivalents.  Optionor covenants not to acquire
any assets other than those to be made part of or used in connection with the
Property.

 

7.7                                 Capital Contributions.  All cash
contributions and advances made to or for the benefit of Optionor have been used
in connection with the acquisition, entitlement, development, leasing,
financing, operation, repair and maintenance of the Property.  Optionor
covenants that all cash contributions and advances made to or for the benefit of
Optionor after the date hereof shall be used in connection with the acquisition,
entitlement, development, leasing, financing, operation, repair and maintenance
of the Property. 

 

7.8                                 Accredited Investor Status.   Each Member is
an “accredited investor” within the meaning of the federal securities laws.

 

13

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ARTICLE VIII – INDEMNIFICATION

 

Optionor and each Member, severally and not jointly, agree to indemnify Kite
Realty, its affiliates and their respective trustees, directors, officers,
members, partners, employees, agents, successors and assigns (the “Indemnitees”)
in respect of, and hold the Indemnitees harmless against, any and all
liabilities (whether absolute or contingent, known or unknown or accrued or
unaccrued), damages, judgments, fines, fees, penalties, obligations,
deficiencies, losses and expenses (including, without limitation, reasonable
fees and expenses of attorneys and accountants and including, without
limitation, amounts paid in settlement) (“Damages”) actually incurred or
suffered by any Indemnitee, and to reimburse each Indemnitee for such Damages
which are suffered or incurred by such Indemnitee or to which such Indemnitee
may otherwise become subject, arising out of or resulting from the untruth,
inaccuracy or breach of any representation or warrant of Optionor or any of the
Members contained in this Agreement, or any breach, non-fulfillment or failure
to perform any agreement or covenant of Optionor or any of the Members contained
in this Agreement.  

 

ARTICLE IX – ASSIGNMENT; TRANSFER OF INTERESTS

 

9.1                                 Kite Realty’s Right to Assignment.   Kite
Realty may not assign the Option or the right of first refusal granted pursuant
to Article IV hereby without Optionor’s prior written consent, which consent may
be conditioned, withheld or delayed in Optionor’s sole and absolute discretion;
provided, that Kite Realty may assign the Option or the right of first refusal
granted pursuant to Article IV hereby without Optionor’s consent to (i) the
REIT, (ii) any direct or indirect controlled affiliate of the REIT or Kite
Realty or (iii) any entity into which Kite Realty has merged or otherwise is the
result of a business combination directly involving Kite Realty.

 

9.2                                 Optionor’s Right to Assignment.   Optionor
may not assign its interests in this Agreement, in whole or in part, without
Kite Realty’s prior written consent, which consent may be conditioned, withheld
or delayed in Kite Realty’s sole and absolute discretion. 

 

9.3                                 Transfer of Interests.  A Member may
Transfer (as defined below) all or any portion of such Member’s Interest by
complying with the provisions of this Section 9.3.  If a proposed Transfer would
result in a “Change of Control” (as defined below), then such Member shall
provide written notice of such Transfer to Kite Realty at least 30 days prior to
the proposed Transfer (the “Transfer Notice”).  For purposes of this Section
9.3: (a) ”Transfer” shall include any sale, assignment, gift, pledge,
hypothecation, mortgage, exchange, or other disposition, other than a pledge,
mortgage, or hypothecation of or granting of a security interest in, an Interest
in connection with any Existing Financings or New Financings; and (b) “Change of
Control” shall mean (i) the Transfer of more than 50% of the voting ownership
interests in Optionor or (ii) if there is no voting ownership interest, the
Transfer of more than 50% of the equity ownership interests in Optionor. 
Notwithstanding the foregoing, no purported Transfer of all or any portion of an
Interest (whether or not such Transfer would result in a Change of Control)
shall be effective unless and until the transferee becomes a party to this
Agreement and bound by the terms and conditions of this Agreement as a “Member”
(regardless of whether or not such transferee is admitted as a member of
Optionor) by executing and delivering a counterpart signature

 

14

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page to this Agreement to Kite Realty.  Any purported transfer of an Interest in
violation of this Section 9.3 shall be null and void.

 

ARTICLE X – MISCELLANEOUS

 

10.1                           Amendment; Waiver.  This Agreement may not be
amended except by an instrument in writing signed by the parties.  No waiver of
any provisions of this Agreement shall be valid unless in writing and signed by
the party against whom enforcement is sought.

 

10.2                           Entire Agreement; Counterparts; Applicable Law. 
This Agreement (a) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, between the parties with
respect to the subject matter hereof, (b) may be executed in one or more
counterparts, each of which will be deemed an original and all of which,
including, without limitation, validity, interpretation and effect, shall
constitute but one and the same instrument and (c) shall be governed in all
respects, including, without limitation, validity, interpretation and effect, by
the laws of the State of Indiana without giving effect to the conflict of law
provisions thereof.

 

10.3                           Severability.  If any provision of this
Agreement, or the application thereof, is for any reason held to any extent to
be invalid or unenforceable, the remainder of this Agreement and application of
such provision to other persons or circumstances will be interpreted so as
reasonably to effect the intent of the parties hereto.  The parties further
agree to replace such void or unenforceable provision of this Agreement with a
valid and enforceable provision that will achieve, to the extent possible, the
economic, business and other purposes of the void or unenforceable provision and
to execute any amendment, consent or agreement deemed necessary or desirable by
Kite Realty to effect such replacement.

 

10.4                           Binding Effect.  This Agreement shall be binding
upon, and shall be enforceable by and inure to the benefit of, the parties and
their respective permitted successors and permitted assigns.

 

10.5                           Equitable Remedies.  The parties hereto agree
that irreparable damage would occur if any provision of this Agreement was not
performed in accordance with its specific terms or was otherwise breached.  It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any federal or state court located in the
State of Indiana (as to which the parties agree to submit to jurisdiction for
the purposes of such action), this being in addition to any other remedy to
which they are entitled at law or in equity.

 

10.6                           Notices.  Any notice or demand which must or may
be given under this Agreement (including, without limitation, the Exercise
Notice, the OP Notice, the ROFR Notice, the Transfer Notice and the Option
Termination Notice) or by law shall, except as otherwise provided, be in writing
and shall be deemed to have been delivered (i) when physically received by
personal delivery (which shall include the confirmed receipt of a telecopied
facsimile transmission), or (ii) three business days after being deposited in
the United States certified or registered mail, return receipt requested,
postage prepaid or

 

15

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(iii) one business day after being deposited with a nationally known commercial
courier service providing next day delivery service (such as Federal Express).

 

10.7                           Recording.  Subject to applicable consents
required under any financing related to the Property, Kite Realty shall have the
right to record a memorandum of this Agreement in the real property records of
the county in which the Property is situated.  If Kite Realty records such a
memorandum, Kite Realty covenants and agrees to record the appropriate notice of
termination or cancellation upon the expiration or earlier termination of this
Agreement.

 

10.8                           Fees and Expenses.  Except to the extent
contemplated in Section 3.1(f), Section 3.4(d), Section 3.4(e) or Article VIII
hereof, all fees and expenses incurred in connection with the execution,
delivery and performance of this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such fees and expenses.

 

10.9                           Reliance.  Each party to this Agreement
acknowledges and agrees that it is not relying on tax advice or other advice
from the other party to this Agreement, and that it has or will consult with its
own advisors.

 

[Signature page follows]

 

16

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IN WITNESS WHEREOF, each of the parties hereto has executed and delivered this
Agreement as of the date first set forth above.

 

 

Address:

 

 

OPTIONOR:

 

 

 

BRENTWOOD LAND PARTNERS, LLC

 

 

 

 

Brentwood Land Partners, LLC
c/o Kite Realty Group Trust
30 S. Meridian Street
Suite 1100
Indianapolis, Indiana  46204
Fax No.: (317) 577-5605

 

By:

/s/ JOHN A. KITE

 

Name: John A. Kite

Title:

Member

 

 

 

 

 

 

KITE REALTY:

 

 

Kite Realty Group, L.P.
c/o Kite Realty Group Trust
30 S. Meridian Street
Suite 1100
Indianapolis, Indiana  46204
Fax No.: (317) 577-5605

KITE REALTY GROUP, L.P.

 

By:

KITE REALTY GROUP TRUST, its
General Partner

 

 

By:

/s/ JOHN A. KITE

 

 

Name:

John A. Kite

 

 

Title:

President and Chief Executive
Officer

 

 

 

 

 

MEMBERS:

 

 

 

 

Alvin E. Kite, Jr.
c/o Kite Realty Group Trust
30 S. Meridian Street
Suite 1100
Indianapolis, Indiana  46204

 

 

/s/ ALVIN E. KITE, JR.

 

Alvin E. Kite, Jr.

 

 

 

 

 

John A. Kite

 

c/o Kite Realty Group Trust

/s/ JOHN A. KITE

 

30 S. Meridian Street

John A. Kite

Suite 1100

 

Indianapolis, Indiana  46204

 

 

--------------------------------------------------------------------------------

 

Paul W. Kite

 

c/o Kite Realty Group Trust

  /s/ PAUL W. KITE

 

30 S. Meridian Street

Paul W. Kite

Suite 1100

 

Indianapolis, Indiana  46204

 

 

 

 

 

Thomas K. McGowan
c/o Kite Realty Group Trust
30 S. Meridian Street
Suite 1100
Indianapolis, Indiana  46204

 

  /s/ THOMAS K. McGOWAN

 

Thomas K. McGowan

 

 

 

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EXHIBITS TO THE OPTION AGREEMENT*

 

Exhibit A

Description of Real Property

 

 

Exhibit B

Member Interests

 

 

Exhibit C

Closing Documentation (Property Transfer)

 

 

Exhibit D

Closing Documentation (Interest Acquisition)

 

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*     The registrant agrees to furnish, supplementally, a copy of omitted
Exhibits A, C and D to the SEC upon request.

 

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EXHIBIT B

 

MEMBER INTERESTS

 

Member

 

Percentage Interests

 

 

 

 

 

Alvin E. Kite, Jr.

 

30

%

 

 

 

 

John A. Kite

 

25

%

 

 

 

 

Paul W. Kite

 

25

%

 

 

 

 

Thomas K. McGowan

 

20

%

 

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