CONTRIBUTION AGREEMENT

 

THIS CONTRIBUTION AGREEMENT (“AGREEMENT”) is made as of the 8th day of October,
2004, by and between IN RETAIL FUND, L.L.C., a Delaware limited liability
company (the “Company”), INLAND REAL ESTATE CORPORATION, a Maryland corporation
(“Inland”), and THE NEW YORK STATE TEACHERS’ RETIREMENT SYSTEM (“NYSTRS”, and
together with Inland, the “Members”).

 

RECITALS

 

A.        Reference is made to that certain Operating Agreement of the Company
dated of even date herewith (the “Operating Agreement”) pursuant to which the
sole members of the Company are the Members.  (Capitalized terms not defined
herein shall have the meaning ascribed to such terms in the Operating
Agreement).

 

B.         Inland, directly, or through one or more affiliated entities, owns
fee simple title to certain real property as more particularly described on
Exhibit A attached hereto (collectively, the “Properties”).

 

C.                    The Members have formed the Company for the purpose of
owning, operating, leasing, managing and maintaining certain parcels of real
property as described in the Operating Agreement, including the Properties.

 

D.                    As contemplated under Sections 5.1 and 6.1 of the
Operating Agreement, Inland is obligated to convey to the Company fee simple
title and all appurtenant rights in and to or related to the Properties, any and
all rights and entitlements, including without limitation, any held to develop,
consent and operate the Properties, including, without limitation, rights
arising under reciprocal easement agreements, development agreements and other
agreements respecting the development, construction or use of the Properties,
all rights of the landlord in, to or under any leases of the Properties, the
improvements thereon, whether or not such leases shall have heretofore commenced
or are to commence in the future and all rights of owner under any and all
operating or service agreements benefiting the Properties.

 

E.         The Company intends to designate to Inland single member limited
liability companies of which the Company is the sole member and manager for
purposes of holding title to each of the Properties (collectively, the
“Subsidiaries”, and each a “Subsidiary”).

 

F.         Inland, the Company and NYSTRS desire to enter into this Agreement
for purposes of effectuating Sections 5.1 and 6.1 of the Operating Agreement.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the foregoing recitals and the covenants and
promises contained herein, the parties do hereby agree as follows:

 

1.         Contribution of Property.  Pursuant to, based upon and subject to (i)
the Operating Agreement, (ii) the assumption of the Assumed Liabilities (as
defined herein) by the Company and the applicable Subsidiary as provided in
Section 2 and (iii) the terms and conditions herein set forth, Inland hereby
agrees to contribute, convey and assign to the Subsidiaries from time to time
hereafter, and Company, through its Subsidiaries, agrees to accept from Inland
as consideration for the issuance of an ownership interest in the Company as set
forth in and pursuant to the Operating Agreement, all of the following:

 

(a)        The land associated with the Properties, together with any and all
appurtenant improvements, rights, interests, easements, tenements and estates
(collectively, “Real Property”);

 

(b)        All tangible personal property owned, leased or licensed by Inland
and located on or used exclusively in connection with the operation of the Real
Property (collectively, the “Personal Property”);

 

(c)        All rights of Inland under leases listed on Schedule 1(c) hereto,
including any amendments, modifications, or supplements thereto  (collectively,
the “Leases”) together with all refundable and non-refundable security deposits;

 

(d)        All trade names owned by Inland used in connection with the
Properties and all warranties, guarantees, licenses and other matters which are
described more particularly in Schedule 1(d) hereto (collectively, the
“Rights”);

 

(e)        All permits, licenses, approvals, development rights and other
entitlements necessary, required or desirable for the use and operation of the
Real Property and the development and construction thereof which are described
more particularly in Schedule 1(e) hereto (collectively, the “Permits”);

 

(f)         All of Inland's rights under all agreements (collectively, the
“Contracts”) other than the Leases, including all rights to contribution or
indemnity, in effect with respect to the Properties; and

 

All Inland’s other rights, tangible or intangible, rebates, refunds (excluding
tax refunds for 2002 and any prior periods) and the like, of or associated with
the Properties whether now or hereafter accruing (collectively, the “General
Intangibles”).  It is the intention of the parties that no such refunds, rebates
or the like shall inure to Inland, but shall inure to the Company.

 

The date upon which each of the above is contributed to the Company with respect
to any Property shall be referred to herein as the “Property Contribution Date”
as to such Property.

2.         Assumption of Liabilities. On the terms contained in this Agreement
or in the Operating Agreement, upon and after the Property Contribution Date
applicable to any Property contributed by Inland to the Company, the Company and
the applicable Subsidiary shall assume, and agrees to discharge and perform as
and when due the following liabilities and obligations of Inland relating to the
Property (collectively, the “Assumed Liabilities”): (a) that certain
indebtedness related to the Property (including principal and interest payments
and fees accruing after the applicable Property Contribution Date), and all
obligations related thereto, of Inland pursuant to the loan agreements entered
into between Inland and the lenders described on Exhibit A with respect to the
applicable Property (collectively, the “Loan Documents”); (b) trade accounts
payable related to the Property as of the applicable Property Contribution Date
to the extent incurred in the ordinary course of business accruing after the
Property Contribution Date; (c) expenses related to the Property as of the
applicable Property Contribution Date to the extent incurred in the ordinary
course of business accruing after the applicable Property Contribution Date; and
(d) all liabilities and obligations of Inland related to the Property accruing
after the applicable Property Contribution Date under any written agreement
(including the Contracts, Leases and Permits), warranty or commitment by which
Inland is bound with respect to the Property as of the Property Contribution
Date and which is assigned and contributed to the Company.

 

3.         Contribution Consideration and Conditions. Inland and the Company
agree that all items of income and expense relating to the Properties will be
prorated as of the applicable Property Contribution Date, with Inland benefited
or liable, as applicable, to the extent such items relate to any time period up
to but not including the Property Contribution Date, and the Company benefited
or liable, as applicable, to the extent such items relate to periods on and
subsequent to the Property Contribution Date.  The method of calculating such
prorations for each of the Properties shall be made in accordance with the
Proration Agreement in the form of Exhibit B attached hereto (the “Proration
Agreement”).  Inland and the Company agree to furnish to each other and to
NYSTRS such documents and other records as each party reasonably requests in
order to confirm all adjustment and proration calculations made.  The net amount
due and payable to either Inland or the Company, as the case may be, as a result
of all such prorations may be reflected as an adjustment to any distributions to
Inland under the Operating Agreement.  All prorations will be made as of 12:01
a.m. on the applicable Property Contribution Date and any item prorated
hereunder on an estimated basis shall be reprorated once the final amounts are
known, in accordance with the Proration Agreement.  Once the reprorations have
been finally determined, either Inland shall pay the adjustment to the Company
or the Company shall pay the adjustment to Inland, as applicable, as is required
to take account of such reprorations.  Payments in connection with any such
reproration shall be paid in cash and be due within thirty (30) days of demand. 
All obligations under this paragraph shall survive the closing. 

 

4.         Cash Adjustments.  The parties agree that the Agreed Net Value of the
Properties (as defined in the Operating Agreement) shall be increased, as set
forth on a Closing Statement prepared pursuant to the Proration Agreement
prepared for each Property by the amount of the aggregate value of any cash or
cash equivalents, including, without limitation, any deposits or bonds given by
Inland (e.g. utility deposits, deposits or reserves with the any lender and/or
landscaping bonds) or amounts in any of Inland accounts, that are transferred,
directly or indirectly, to the Company (whether as part of the Inland Capital
Contribution or otherwise) on the Property Contribution Date, exclusive of any
amount attributable to net prorations as provided in Paragraph 3 above.

 

5.         Costs.  All documentary, transfer, excise, lender or similar fees and
any other property transfer costs shall be paid by the Company.  Each party
shall pay its own attorneys’ fees and all costs and expenses that relate solely
to such party’s investment in the Company.  NYSTRS shall pay its own due
diligence costs associated with the transactions contemplated hereunder.

 

6.         Conditions to Contribution.  Each Property shall be contributed to
the Company at such time as each condition described in this Section 6 hereof
have been fulfilled (or, as the case may be, waived by any party expressly
entitled to waive said condition) as to such Property; provided, however, that
the Members and the Company agree that the initial contribution of Properties
shall be made to the Company only when the conditions for the contribution of a
Property shall be fulfilled (or, as described above, duly waived) as to no less
than 4 of the Properties set forth on Exhibit A, at which time such Properties
shall be simultaneously contributed to the Company.  Inland shall provide the
Company with no less than 10 business days prior written notice of its intention
to convey a Property or Properties to the Company.

 

(a)        Joint Conditions.  The obligations of the Members and the Company to
effect the transactions contemplated herein with respect to any given Property
are subject to the fulfillment of all of the following conditions precedent, any
or all of which may be waived in whole or in part solely by the unanimous
written consent of both Members on behalf of the Company:

 

(i)         There shall have been obtained from the lender described on Exhibit
A as to the Property to be contributed the Bank Approval in the form attached
hereto as Exhibit E or such other form as may be approved by NYSTRS and Inland
in Section 11 hereof.

 

(ii)        No suit, proceeding or investigation shall have been commenced or
threatened by any governmental authority or private person on any grounds to
restrain, enjoin or hinder, or to seek material damages on account of, the
consummation of the transaction contemplated hereby.

 

(iii)       The Initial Annual Plan (consisting of the 2004 stub period budget
and the preliminary Annual Plan for 2005 as defined in the Operating Agreement)
has been approved by NYSTRS with respect to the Property being contributed on
that particular Property Contribution Date, and NYSTRS has confirmed to its
satisfaction that the Property has been operated in a manner which is materially
consistent with the 2004 stub period budget for the period from the beginning
date of the stub period budget through the Property Contribution Date.  Inland
shall cooperate with NYSTRS in promptly preparing an Initial Annual Plan for
each Property and submitting the same for NYSTRS’ approval.

 

(b)        Inland Conditions.  The obligation of Inland to contribute any
Property as contemplated by this Agreement is subject to the fulfillment of all
of the following conditions precedent with respect to said Property, any or all
of which may be waived in whole or in part solely by Inland:

 

(i)         The Company shall have received and have provided Inland with
written evidence of the NYSTRS Initial Capital Contribution with respect to said
Property (which may be made concurrently with the contribution of the Property
to the Company) as provided for in Section 5.1 of the Operating Agreement.

 

(ii)        NYSTRS shall have fulfilled all of its respective duties and
obligations required to be fulfilled under the Operating Agreement, and any
other documents contemplated therein or hereby on or prior to the Property
Contribution Date.

 

(c)        NYSTRS Conditions.  The obligation of the NYSTRS to make its Initial
Capital Contribution with respect to any given Property as contemplated
hereunder and under the Operating Agreement is subject to the fulfillment of all
of the following conditions precedent with respect to said Property, any or all
of which may be waived in whole or in part solely by NYSTRS, it being agreed
that the contribution of said Property shall not occur unless and until said
conditions are so satisfied or waived:

 

The Company and Inland shall have fulfilled all of their respective duties and
obligations required to be fulfilled under the Operating Agreement and this
Agreement, and any other documents contemplated therein or hereby on or prior to
the Property Contribution Date.

There shall have been obtained from the tenants located at the Property to be
contributed the executed Approved Estoppel Certificates or such other form of
estoppel certificate as described in Section 11 hereof. 

Between the date hereof and the Property Contribution Date of any Property,
there shall have been no material adverse changes in any of the following (each,
a “Property MAC”):  (x) the economic, physical or environmental condition of
said Property (including, for these purposes, any casualty damage of which the
cost to restore, when aggregated with the casualty damage to any other
Properties which have been previously been contributed to the Company, is
reasonably estimated to exceed $250,000, exclusive of the upgrades to be made to
the Woodfield Commons Property described in Section 6(d) hereof) and the repairs
to the flooring in the Ace Hardware store located at the Thatcher Woods
Property, or (y) any casualty damage or pending or threatened eminent domain
proceedings with respect to said Property which would entitle any “major” tenant
(as described in Section 11 hereof) of the Property the right to terminate its
lease or abate its rent, or (z) any material adverse change in the economic
condition of any “major” tenants of the Property (as described in Schedule 11).

Each representation and warranty of Inland contained in this Agreement shall be
true and correct at and as of the Property Contribution Date as though such
representation and warranty were made again with respect to the Property to be
contributed at and as of the Property Contribution Date.

(v)        Stewart Title Company (“Stewart”) has confirm that it is prepared to
issue to the Company a policy of title insurance for the Property containing
each of the endorsements listed on Schedule 7(b)-1.

(vi)       Inland has delivered to NYSTRS copies of the executed REIT Agreements
consistent with the provisions of Section 13.5(c) of the Operating Agreement.

(vii)      With respect to the contribution of the Mill Creek Property only, the
loan assumption agreement or other document delivered by the lender in
connection with the assumption of the loan shall eliminate any cross-default
provisions in the Mill Creek mortgage loan documents related to loan defaults
with respect to other properties which are not to be acquired by the Company.

(d)        Woodfield Commons.

(i)         Inland has provided to NYSTRS information regarding façade upgrades
which have been determined by Inland to be necessary with respect to the
Woodfield Commons Property.  The parties have agreed that the façade upgrades
shall not be considered a Property MAC for purpose of the contribution of
Woodfield Commons to the Company.  The parties agree that all costs and expenses
associated with the façade repair shall be borne by the Company, subject to the
inclusion of the costs of such upgrades in the Initial Annual Plan for Woodfield
Commons and approval of such plan by NYSTRS in accordance with Section 6(a)(iii)
hereof.

(ii)        Inland agrees that prior to the contribution of the Woodfield
Commons Property to the Company, Inland shall cause the previously disclosed
mold in the sprinkler riser room and in the space occupied by Enterprise Car
Rental (“Enterprise”), which are both in the Woodfield Common East location, to
be remediated in accordance with current industry standards.  Such remediation
shall be completed at Inland’s cost and expense, provided, however, that
Enterprise is obligated pursuant to its lease for the cost of such remediation,
and Inland shall be entitled to be reimbursed for its cost and expense to the
extent thereafter paid by Enterprise.  Inland will provide NYSTRS with a copy of
the close-out report obtained from the contractor who performs the remediation
prior to contribution of the Woodfield Commons Property.

(e)        Thatcher Woods.  Inland has provided NYSTRS information regarding
certain areas of the floor in the space occupied by Ace Hardware where the tiles
are not adhering to the floor, the exact cause of which is still being
determined.  The parties agree that this matter shall not be considered a
Property MAC for purposes of the contribution of Thatcher Woods to the Company. 
The parties further acknowledge and agree that $30,000 will be allocated in the
Company’s budget for the Thatcher Woods Property to complete commercially
reasonable repairs to the floor and tile; provided, however, that in the event
that the cost of such commercially reasonable repairs are in excess of $30,000,
Inland shall reimburse the Company for such excess amounts.

Title.

Title to the Real Property shall be transferred and conveyed to the applicable
Subsidiary as designated by the Company on the applicable Property Contribution
Date free and clear of all liens, claims, encumbrances or defects, other than
the Permitted Exceptions (as defined below) and the Assumed Liabilities
applicable to the Property being contributed.

Inland shall cause to be provided to the Subsidiary to which title to any
Property is being conveyed on the applicable Property Contribution Date an ALTA
1970 Form B extended coverage Owner’s policy of title insurance (“Title
Policies”) issued by Stewart Title Company (“Stewart”), showing title to the
Real Property vested in the applicable Subsidiary with liability in such portion
of the Net Agreed Value attributable to the Property being conveyed, containing
the endorsements listed on Schedule 7(b)-1 attached hereto, and subject only to
lien of real property taxes not yet due and payable and other matters set forth
on Schedule 7(b)-2 attached hereto (collectively, “Permitted Exceptions”), along
with a copy of the ALTA plat of survey in Inland’s possession up-dated within 6
months prior to the Property Contribution Date.  Company shall pay all title
insurance premiums, endorsements, surveyor and related charges for the issuance
of the Title Policy.   If Inland, after providing to Stewart such information as
Stewart shall reasonably request for purposes of issuing the endorsements listed
on Schedule 7(b)-1, cannot deliver an endorsement because Stewart Title is
unwilling or unable to issue the same, Inland shall not be liable to the Company
or NYSTRS for such failure, and the NYSTRS, at its election, shall determine
whether to waive the requirement for the delivery of the endorsement hereunder.

Title to the Leases, the Rights, the Permits, the Contracts and the General
Intangibles shall be transferred and conveyed to the designated Subsidiary on
the Property Contribution Date free and clear of all liens, claims, encumbrances
or defects, other than the Permitted Exceptions and the Assumed Liabilities.

Representations and Warranties.  Inland makes the following representations and
warranties to Company:

Except as set forth in Schedule 8(a), no consent from or notice to any federal,
state or local court or federal, state or local government bureau, department,
commission or agency, or any other person or entity whether or not governmental
in character, is required to permit Inland to execute, deliver and perform this
Agreement and convey the Properties to the Company, other than consents which
have already been obtained or will be obtained prior to any Property
Contribution Date.

Inland is a corporation duly organized, validly existing and in good standing
under the laws of the State of Maryland.  Inland has not alienated, encumbered
(other than Permitted Exceptions), transferred, optioned, leased (other than
pursuant to the Leases), assigned, transferred or otherwise conveyed its
interest or any portion of its interest in the Properties or any portion
thereof, nor has Inland entered into any agreement (other than this Agreement)
so to do.

Inland has the requisite power and authority to own and operate the Properties. 
The execution, delivery and performance of this Agreement by Inland has been
duly authorized by all necessary action and proceedings, and no further
corporate action or authorization will be necessary on the part of Inland in
order to consummate the transactions contemplated herein.

This Agreement constitutes the legal, valid and binding obligation of Inland
enforceable against Inland in accordance with its terms, except to the extent
that such enforcement may be limited by applicable bankruptcy, insolvency,
moratorium and other principles relating to or limiting the rights of
contracting parties generally.  Neither this Agreement nor the consummation of
any of the transactions contemplated hereby violates or shall violate any
provision of any agreement or document to which Inland is a party or by which
Inland is bound.

Except as expressly disclosed and described in the “Environmental Reports”,
listed on Schedule 8(e) or as otherwise disclosed on Schedule 8(e), to Inland’s
knowledge: (i) the Real Property is not in violation, nor has it been or is it
currently under, investigation for violation of any federal, state or local law,
ordinance or regulation relating to industrial hygiene, worker health and
safety, or to the environmental conditions in, at, on, under or about the Real
Property (“Environmental Law”) including, but not limited to, soil and
groundwater conditions; the Real Property has not been subject to a deposit of
any Hazardous Substance (as defined in Exhibit C hereto); (ii) neither Inland
nor any third party has used, generated, manufactured, stored or disposed in,
at, on, under or about the Real Property or transported to or from the Real
Property any Hazardous Substance; (iii) there has been no discharge, migration
or release of any Hazardous Substance from, into, on, under or about the Real
Property; and (iv) there is not now, nor has there ever been on or in the Real
Property underground storage tanks or surface impoundments, any
asbestos-containing materials or any polychlorinated biphenyls used in hydraulic
oils, electrical transformers or other equipment, and (v) there is not now any
phenolic foam located on the roof of any Property, and if there has ever been
any phenolic foam on any roof, it has been removed.

Except as set forth on Schedule 8(f), there is no pending suit, action or
arbitration, or legal, administrative, or other proceeding or governmental
investigation, formal or informal, including but not limited to eminent domain
or condemnation proceeding, proceeding to establish a new assessment district or
increase the assessments imposed by an existing assessment district, or zoning
change proceeding, pending or threatened in writing, or any judgment, moratorium
or other government policy or practice which affects any of the Properties.

Except as set forth on Schedule 8(g), there are no lawsuits, claims, suits,
proceedings or investigations pending or, to the best of Inland’s knowledge,
threatened against or affecting Inland or any of the Properties which have not
been tendered to and accepted for defense by insurance carriers (whether under a
reservation of rights or otherwise), nor, to Inland's actual knowledge, is there
any basis for any of the same, and there are no lawsuits, suits or proceedings
pending in which any Inland is the plaintiff or claimant and which relate to any
of the Properties.  There is no action, suit or proceeding pending or, to the
best of Inland’s knowledge, threatened which questions the legality or propriety
of the transactions contemplated by this Agreement.

Except for the Contracts and Permits and as Inland has disclosed in writing to
Company, and except with respect to the Leases or any matter constituting one of
the Permitted Exceptions, Inland has made no material written commitments or
representations to, or understandings or agreements with, any person, firm or
entity, any adjoining property owner or any governmental, or quasi governmental
authority which would in any way be binding on Company and, after the Property
Contribution Date, Inland shall not make or enter into any such material
commitment, representations, understandings or agreements without Company’s
written consent or agreement.

Except for the Leases, the Contracts, the Permits, and the Permitted Exceptions,
there are no contracts or agreements with respect to the occupancy of the
Properties which will be binding on the Company or the Properties after the
Property Contribution Date.  Schedule 1(c) contains a true and correct list and
description of the Leases respecting the Properties.  Subject to the Permitted
Exceptions, Inland owns, free and clear of any lien, claim or encumbrance, and
has full right, power and authority to transfer and assign, the Leases.  Inland
is currently the landlord under each lease, and Inland has not sold, assigned,
or otherwise conveyed any of its right, title or interest in, to or under the
Leases.  Except as set forth on Schedule 1(c) (i) Inland has not sent any
notices of default to any other party to any Lease, (ii) each Lease is in full
force and effect in accordance with its terms, (iii) to Inland’s knowledge, no
material default on the part of either party to any of the Leases has occurred
and is continuing and no event has occurred and is continuing which, with the
giving of notice or passage of time, or both, would constitute a so-called
“event of default” by either party or conditional limitation under a Lease and
(iv) to Inland’s knowledge, no tenant under any Lease has any right of offset or
counterclaim arising thereunder or otherwise against Inland, its successors or
any of the Properties.  True, correct and complete copies of all Leases have
been delivered to NYSTRS and to the Company.  No Lease has been amended except
as evidenced by amendments similarly delivered to Company.  The Leases
constitute the entire agreement between Inland and the other parties thereto
with respect to occupancy of the Properties.  The rent rolls (the “Rent Rolls”)
attached hereto as Schedule 8(i) have been prepared in the ordinary course of
Inland’s business, and Inland has no knowledge of any material inaccuracies
therein.  All leasing commissions accruing on or before the Property
Contribution Date have been paid or will be paid by Inland, at its sole cost and
expense, in the ordinary course of business.

Schedule 8(j) hereto contains a true, accurate and complete listing of all
Contracts, other than Leases, binding on and/or benefiting the Properties, or
Inland. Except for the Permitted Exceptions and subject to the Assumed
Liabilities, Inland owns, free and clear of any lien, claim or encumbrance, and
has full right, power and authority to transfer and assign, all Contracts, to
the extent the Contracts are assignable.   Inland has not sold, assigned, or
otherwise conveyed any of its right, title or interest in, to or under the
Contracts.   Inland has not received any written notice of a default on the part
of any party to the Contracts.  Except as set forth on Schedule 8(j), (i) Inland
has not sent any notices of default to any other party to any Contract, (ii)
each Contract is in full force and effect in accordance with its terms and (iii)
to Inland’s knowledge, no material default on the part of either party to any of
the Contracts, including a default arising as a result of the convey of the
Properties as contemplated hereunder, has occurred and is continuing and no
event has occurred and is continuing which, with the giving of notice or passage
of time, or both, would constitute a so-called “event of default” by either
party or conditional limitation under a Contract.

Schedule 8(k) identifies the Assumed Liabilities with respect to each Property
that the Company will be assuming or taking subject to at the Property
Contribution Date.  The outstanding balance of principal and (if any) accrued
and unpaid interest with respect to the Assumed Liabilities as of July 1, 2004
is set forth on Schedule 8(k), with the amount identified separately for each
Property. With the exception of any documents required to be executed in
connection with the Company’s assumption of the Assumed Liabilities, all of the
documents evidencing or securing the Assumed Liabilities, and any amendments,
supplements or modifications thereto, are listed on Schedule 8(k) attached
hereto (“Assumed Debt Documents”).  Inland has delivered to the Company true and
complete copies of all Assumed Debt Documents.  Inland has not given to, or to
Inland’s knowledge received from, any party to the Assumed Loan Documents any
written notice of any default that has not been cured.

As used in Section 8(a) through (k) above, the term “Inland” shall mean, when
appropriate, the Inland affiliated entity which owns fee simple title to the
Property for which the representation and warranty applies.

On each Property Contribution Date, Inland shall furnish the Company with a
certificate (i) stating that each representation and warranty of Inland in this
Agreement remains true and correct as of said Property Closing Date, and
re‑making each representation and warranty at and as of said date, or (ii)
identifying any changes to said representations and warranties arising as a
result of matters occurring between the date hereof and said Property Closing
Date.

Inland’s representations, warranties and indemnities shall survive for a period
of nine (9) months following the Property Contribution Date; provided, however,
that if a claim is made hereunder within such survival period, the period shall
continue until the claim is resolved.  The Company shall not be entitled to
recover any Damages against Inland or its Affiliates for a breach of this
Agreement until the aggregate amount which the Company would recover exceeds
$200,000.  In addition, the Company shall not be entitled to recover against,
and in no event shall the liability of Inland or its Affiliates for any Damages
for a breach of this Agreement in an aggregate amount exceeding $4,875,340;
provided, however, that there shall be no limit of liability of Inland for
Damages hereunder resulting from a willful or intentional breach of any
representation, warranty or covenant set forth in this Agreement.

For purposes of this Agreement, the term “Damages” shall mean all liabilities,
demands, claims, actions or causes of action, regulatory, legislative or
judicial proceedings or investigations, assessments, levies, losses, fines,
penalties, damages, costs and expenses, including reasonable attorneys’,
accountants’, investigators’, and experts’ fees and expenses, sustained or
incurred in connection with the defense or investigation of any claim; provided,
however, in no event shall Damages include any amounts which represent special,
consequential or punitive damages, or arising from loss of profits or
opportunity.

Company’s Representations.

Company is a limited liability company duly organized, validly existing and in
good standing under the laws of the State of Delaware.  The execution, delivery
and performance of this Agreement by Company has been duly authorized by all
necessary action and proceedings, and no further corporate action or
authorization will be necessary on the part of Company in order to consummate
the transactions contemplated herein.

This Agreement constitutes the legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its terms, except to
the extent that such enforcement may be limited by applicable bankruptcy,
insolvency, moratorium and other principles relating to or limiting the rights
of contracting parties generally.   Neither this Agreement nor the consummation
of any of the transactions contemplated hereby violates or shall violate any
provision of any agreement or document to which Company is a party or by which
Company is bound. 

Conveyance Instruments. In connection with the conveyance of any Property by
Inland pursuant to this Agreement, Inland and the Subsidiaries shall execute or
cause to be executed such instruments, dated as of the Property Contribution
Date, substantially in the form of Exhibits D-1 through D-5 (collectively, the
“Instruments”), as are necessary to give effect to each of the conveyances
contemplated herein, including without limitation, a special warranty deed as to
the Real Property, an assignment and assumption of leases, an assignment and
assumption of contracts and an assignment of rights and permits, including the
Rights and Permits.

Lender Approvals and Estoppels. 

Inland has delivered, or promptly following the date hereof, shall deliver to
the lenders described on Exhibit A the form of the lender approval attached
hereto as Exhibit E and made a part hereof (the “Bank Approval”). Inland shall
use commercially reasonable efforts to obtain the Bank Approval from the
applicable lender for each Property; provided, however, if any lender will not
execute the Bank Approval in the form attached hereto as Exhibit E, Inland and
NYSTRS will cooperate in good faith to negotiate a form of Bank Approval that is
acceptable to Inland, NYSTRS and the applicable lender; provided that if Inland
has used commercially reasonable efforts to attempt to obtain the Bank Approval,
Inland shall not be liable hereunder for any failure to obtain same.  Inland
shall not be required to pay any amounts to any lender to obtain the lender’s
execution of the Bank Approval, and the Company shall pay any assumption fees or
charges contemplated under the loan documents to obtain the Bank Approval.
Inland shall promptly deliver to the Company any Bank Approvals or other form of
lender consent that it receives, with a copy to NYSTRS. 

Inland shall obtain and deliver on or prior to the Property Contribution Date
applicable to any Property tenant estoppel certificates from the “major” tenants
identified on Schedule 11 attached hereto and made apart hereof, and shall
obtain and deliver tenant estoppel certificates from no less than tenants
occupying 80% of the remaining square footage at each of the Properties.  Each
such tenant estoppel certificate shall be in the form of Exhibit F attached
hereto or in the form of estoppel certificate required under such tenant’s
lease.  Inland shall send the completed estoppel certificates to NYSTRS for its
approval, which approval NYSTRS will use its reasonable efforts to provide
within 5 business days.  Inland may deliver the Estoppel Certificates to the
tenants prior to the time that they are approved by NYSTRS; provided, however,
if NYSTRS reasonably requires modifications to the information inserted by
Inland in any Estoppel Certificate, Inland agrees to modify the Estoppel
Certificate and resubmit the same to the tenant.  The forms of the fully
prepared Estoppel Certificates as approved by NYSTRS are sometime referred to
herein as the “Approved Estoppels Certificates.”  Inland shall send the Approved
Estoppels Certificates to all tenants and shall use commercially reasonable
efforts to obtain the Approved Estoppel Certificates from all tenants, provided
that Inland shall not be required to pay any amounts to said tenants or initiate
litigation against said tenants in order to obtain said Approved Estoppel
Certificates.  Inland shall promptly deliver to the Company any Approved
Estoppel Certificates or estoppel certificates in any other format that it
receives, and deliver copies of the same to NYSTRS. Estoppel Certificates, as
executed and delivered by the tenants, shall contain only immaterial exceptions,
qualifications or modifications thereto. For purposes of the foregoing, an
exception, qualification or modification shall be deemed to be “immaterial” if
such exception, qualification or modification does not (i) dispute the
enforceability of the Lease in question, (ii) disclose a material monetary or
substantial non-monetary default under the Lease, (iii) assert a term or
condition not contained in the copy of the Lease delivered to NYSTRS (or
otherwise disclosed to NYSTRS), which term or condition materially adversely
affects the economic provisions of the Lease; or (iv) contain information which
is materially inconsistent with the Rent Rolls or with any representation made
by Inland in this Agreement.

Inland shall use commercially reasonable efforts to deliver on or prior to the
Property Contribution Date applicable to any Property estoppel certificates to
be completed by the parties to any reciprocal easement agreements applicable to
any Property.  The estoppel certificates (the “REA Estoppels”) shall be in the
form attached here to Exhibit G.  Notwithstanding the delivery of the form of
REA Estoppels as provided herein, Inland shall have no obligation to obtain the
executed REA Estoppels from the parties thereto; provided, however if the REA
Estoppel is not received on the Property Contribution Date, Inland shall deliver
an estoppel certificate to the Company on the Property Contribution Date
substantially in the form attached as Exhibit G.

Termination. 

This Agreement and the transactions contemplated hereby may be terminated (i) in
their entirety at the election of either Inland or NYSTRS, upon written notice
to the other party, if the contribution of at least 4 of the Properties has not
been completed on or before December 31, 2004; and (ii) as to any given
Property, at the election of either Inland or NYSTRS, upon written notice to the
other party, if the contribution of said Property has not been completed on or
before December 31, 2004.

This Agreement and the transaction contemplated hereby may be terminated as to
any Property at the election of NYSTRS, if there has been a Property MAC.  If
the Agreement is not so terminated, then, if applicable, Inland shall assign to
the Company all insurance or condemnation proceeds (or claims with respect
thereto) relating to the Property in question and the Company shall receive a
closing credit in the amount of the deductible under any applicable insurance
policy.

If this Agreement is terminated pursuant to Section 12(a), this Agreement shall
thereafter become void and have no further force and effect and all further
obligations of the parties under this Agreement shall terminate (either in its
entirety, if the Agreement has been terminated in its entirety, or as to each
Property with respect to which the Agreement has been terminated, if this
Agreement has been terminated in part) without further liability of any party
hereto to the other in connection therewith; provided however, the termination
of this Agreement (in whole or in part) pursuant to Section 12(a) shall not
constitute a waiver by any party of any claim it may have for damages caused by
reason or, or relieve any party for liability for, any breach of this Agreement.

If this Agreement is terminated as to any Property pursuant to Section 12(b),
this Agreement shall thereafter become void and have no further force and effect
with respect to the Property for which this Agreement is being terminated, and
all further obligations of the parties under this Agreement with respect to such
Property shall terminate without further liability of any party hereto to the
other.

Bulk Sales.  Inland has requested and Company and NYSTRS have agreed that it
shall not be a condition to closing that Inland obtain a release of the Company
from the applicable governmental authorities under the provisions of state and
local laws relating to the bulk sales of real property or to the sale of a
substantial portion of a business.  In consideration therefore, Inland agrees to
reimburse the Company on demand for any state or local tax liability or other
payments that the Company is obligated to make to any governmental authority as
a result of the failure to comply with the safe harbor provisions of said laws,
including any failure to obtain a release of the Company by the applicable
governmental authorities with respect to any such liability.

Notices. All notices and demands which any party hereto is required or desires
to give shall be given in accordance with Section 16.1 of the Operating
Agreement.

Governing Law.  This Agreement and the Instruments are to be governed by and
construed in accordance with the laws of the State of Illinois notwithstanding
any conflict-of-laws doctrines of such state or any other jurisdiction to the
contrary.

Headings; Capitalized Terms.  Headings used in this Agreement are for
convenience of reference only and are not intended to govern, limit, or aid in
the construction of any term or provision thereof.  Capitalized terms not
defined herein shall have the meanings set forth in the Operating Agreement.

Amendment.  This Agreement may be amended or modified only in a writing signed
by each of the parties hereto.

Gender.  Words used herein, regardless of the number and gender specifically
used, shall be deemed and construed to include any other number, singular or
plural, and any other gender, masculine, feminine or neuter, as the context
indicates is appropriate.  The term “including” shall mean “including, but not
limited to.”

Time of the Essence.  Time shall be of the essence as to all dates and times of
performance whether contained herein or in any Instrument executed pursuant
hereto.

Severability.  The provisions of this Agreement are independent of and separable
from each other, and no provisions shall be affected or rendered invalid or
unenforceable by virtue of the fact that for any reason any other or others of
them may be invalid or unenforceable in whole or in part.

Delivery of Possession; Operation Prior to Closing.  Possession of each
Property, subject only to Permitted Exceptions, the Assumed Liabilities and the
Leases, shall be delivered to the Company on the applicable Property
Contribution Date.  Between the date hereof and the applicable Property Closing
Date, Inland shall continue to operate each Property in the same manner in which
said Property is currently being operated.

Successors and Assigns.  This Agreement will be binding upon and shall inure to
the benefit of the parties, and their respective distributees, heirs, successors
and assigns.

Waiver.  A party may, at any time or times, at its election, waive any of the
conditions to its obligations hereunder, but any such waiver shall be effective
only if contained in a writing signed by such party.  No waiver shall reduce the
rights and remedies of such party by reason of any breach of any other party. 
No waiver by any party of any breach hereunder shall be deemed a waiver of any
other or subsequent breach.

Counterparts.  This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original as against any party whose
signature appears thereon, and all of which shall together constitute one and
the same instrument.  This Agreement shall become binding when one or more
counterparts hereof, individually or taken together, shall bear the signatures
of all of the parties reflected hereon as the signatories.

Third Party Beneficiaries/Parties in Interest.  This Agreement has been made
solely for the benefit of the parties to the Agreement, and their respective
successors and permitted assigns.  Nothing in this Agreement is intended to
confer any rights or remedies under or by reason of this Agreement on any
persons other than the parties to it and their respective successors and
permitted assigns.  Nothing in this Agreement is intended to relieve or
discharge the obligation or liability of any third persons to any party to this
Agreement.

Remedies.  Inland acknowledges that pursuant to the Operating Agreement, NYSTRS,
acting alone on behalf of Company, shall have the right to exercise Company’s
rights and remedies, at law, in equity, or under this Agreement, in the event of
a breach of this Agreement by Inland.  No waiver, settlement or relinquishment
of any right or claim that Company may have under this Agreement in the event of
a breach by Inland of this Agreement shall be effective except by means of a
written instrument executed by NYSTRS.

Prevailing Party.  If any party shall commence any action against the other in
order to enforce any provision of this Agreement or to recover damages as the
result of the breach of any of the provisions of this Agreement, the prevailing
party in such action shall be entitled to recover all reasonable costs
(including reasonable attorney’s fees and paralegal’s fees) incurred in
connection therewith against the party who has breached this Agreement. 
Notwithstanding a settlement or other resolution of any such action without the
issuance of a definitive ruling by a court, including, but not limited to, any
agreement by the parties that such settlement is not an admission of liability
by either party, no such settlement or resolution shall constitute a waiver of
this Section, and each party acknowledges and agrees that it shall be entitled
to petition the court for a determination that it is the prevailing party and
entitled to recovery of its reasonable costs hereunder.

Personal Jurisdiction.  The Company and each Member hereby irrevocably consent
to the jurisdiction of the United States District Court for the District of
Delaware for purposes of any litigation among or between the Company and the
Members concerning the Company or this Agreement.  In any such proceeding, the
Company and each Member shall be deemed to have waived its right to a trial by
jury.  The parties hereto hereby individually agree that they shall not assert
any claim that they are not subject to the jurisdiction of such courts, that the
venue is improper, that the forum is inconvenient or any similar objection,
claim or arguments.  Service of process on any of the parties hereto with regard
to any such action may be made by mailing the process to such person by regular
or certified mail to the address of such person set forth herein or to any
subsequent address to which notices shall be sent.

(Signatures continue on next page)

 

IN WITNESS WHEREOF, the parties hereto have executed this Contribution Agreement
as of the date first written above.

COMPANY:

INLAND:

IN RETAIL FUND, L.L.C., a Delaware limited liability company

By:       IN RETAIL MANAGER, L.L.C.,
            a Delaware limited liability company,
            Manager

            By:       Inland Real Estate Corporation,
                        a Maryland corporation, Manager

                          /s/ Mark E. Zalatoris_____     
                        Name:_Mark E. Zalatoris______
                        Title:    Executive Vice President           

 

 

INLAND REAL ESTATE CORPORATION, a Maryland corporation

By:         /s/ Mark E. Zalatoris__                      
            Name:_Mark E. Zalatoris__________
            Title:     Executive Vice President          

 

NYSTRS:

 

The New York State Teachers’ Retirement System

 

By:_/s/ Rosemarie C. Hewig____________

Its: _Assistant General Counsel__________

By:_/s/ Terri A. Pandolfi_______________

Its: _Assistant Real Estate Officer________