Exhibit 10.5
 
TAX PROTECTION AGREEMENT
 
This TAX PROTECTION AGREEMENT (this “Agreement”) is entered into as of September
27, 2013, by and among Retail Opportunity Investments Corp., a Delaware
corporation (the “REIT”), Retail Opportunity Investments Partnership, L.P., a
Delaware limited partnership (the “Operating Partnership”), each Protected
Partner identified as a signatory on Schedule I, as amended from time to time,
and each Guaranty Partner identified as a signatory on Schedule II, as amended
from time to time.
 
RECITALS
 
WHEREAS, pursuant to that certain Agreement for Sale and Purchase of Partnership
Interests, effective as of August __, 2013, between the Operating Partnership
and the “Sellers” signatory thereto (the “Purchase Agreement”), the Operating
Partnership intends to purchase all of the membership interests in SARM Five
Points Plaza, LLC, a Washington limited liability company (the “Company”) from
the Sellers;
 
WHEREAS, in connection with the Purchase Agreement, the REIT and the Operating
Partnership shall enter into this Agreement with each Seller electing to receive
common units of partnership interest in the Operating Partnership (“OP Units”)
in exchange for such Seller’s ownership interests in the Company pursuant to the
Purchase Agreement;
 
NOW, THEREFORE, in consideration of the promises and mutual agreements contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
 
ARTICLE I

 
DEFINED TERMS
 
Capitalized terms employed herein and not otherwise defined shall have the
meanings assigned to them in the Purchase Agreement.  Otherwise, for purposes of
this Agreement the following definitions shall apply:
 
Section 1.1 “Affiliate”  means, with respect to any Person, any Person directly
or indirectly controlling or controlled by or under common control with such
Person. For the purposes of this definition, “control” when used with respect to
any Person means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise, and the
terms “controlling” and “controlled” have meanings correlative to the foregoing.
 
Section 1.2 “Agreement”  has the meaning set forth in the preamble.
 
Section 1.3 “Closing Date”  means the closing of the Buyer’s acquisition of
ownership interests in the Company pursuant to the Purchase Agreement.
 
 
 

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Section 1.4 “Code”  means the United States Internal Revenue Code of 1986, as
amended.
 
Section 1.5 “Collateral”  has the meaning set forth in  ‎Section 1.24 under the
definition of “Qualified Liability.”
 
Section 1.6 “Debt Gross Up Amount”  has the meaning set forth in ‎Section 1.15
under the definition of “Make Whole Amount.”
 
Section 1.7 “Debt Notification Event” means, with respect to a Qualified
Liability for which a Guaranty Partner has previously executed a guaranty, any
transaction in which such liability shall be refinanced, otherwise repaid
(excluding for this purpose, scheduled payments of principal occurring prior to
the maturity date of such liability), or guaranteed by any of the REIT, the
Operating Partnership, or one or more of their Affiliates, or guaranteed by one
or more partners of the Operating Partnership.
 
Section 1.8 “Exchange”  has the meaning set forth in ‎Section 2.1(b) of this
Agreement.
 
Section 1.9 “Fundamental Transaction”  means a merger, consolidation or other
combination of the Operating Partnership with or into any other entity, a
transfer of all or substantially all of the assets of the Operating Partnership,
any reclassification, recapitalization or change of the outstanding equity
interests of the Operating Partnership, or a conversion of the Operating
Partnership into another form of entity.  Notwithstanding the above, a
Fundamental Transaction shall not include any transaction to the extent that a
Protected Party is provided with an opportunity to participate in such
transaction in a manner that does not result in the recognition of taxable
income or gain by such Protected Partner under Section 704(c) of the Code,
regardless of whether such Protected Partner elects to participate in such
transaction in such manner or otherwise.
 
Section 1.10 “Gross Up Amount”  has the meaning set forth in ‎Section 1.15 under
the definition of “Make Whole Amount.”
 
Section 1.11 “Guaranteed Liability” means any Qualified Liability that is
guaranteed, in whole or in part, by one or more Guaranty Partners in accordance
with ‎Section 2.4(b) of this Agreement.
 
Section 1.12 “Guaranty Opportunity” has the meaning set forth in ‎Section
2.4(b).
 
Section 1.13 “Guaranty Partner” means: (i)  each signatory on Schedule II
attached hereto, as amended from time to time; (ii) any person who holds OP
Units and who acquired such OP Units from another Guaranty Partner in a
transaction in which such person’s adjusted basis in such OP Units, as
determined for Federal income tax purposes, is determined, in whole or in part,
by reference to the adjusted basis of the other Guaranty Partner in such OP
Units; and (iii) with respect to a Guaranty Partner that is Pass Through Entity,
and solely for purposes of computing the amount to be paid under ‎Section 2.4
with respect to such Guaranty Partner, any person who (y) holds an interest in
such Guaranty Partner, either directly or through one or more Pass Through
Entities, and (z) is required to include all or a portion of the income of such
Guaranty Partner in its own gross income.
 
 
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Section 1.14 “Guaranty Permissible Liability” means a liability with respect to
which the lender permits a guaranty.
 
Section 1.15 “Make Whole Amount”  means:
 
(a)           with respect to any Protected Partner that recognizes gain under
Section 704(c) of the Code as a result of a Tax Protection Period Transfer, the
sum of (i) the product of (x) the income and gain recognized by such Protected
Partner under Section 704(c) of the Code in respect of such Tax Protection
Period Transfer (taking into account any adjustments under Section 743 of the
Code to which such Protected Partner is entitled) multiplied by (y) the Make
Whole Tax Rate, plus (ii) an amount equal to the combined Federal, applicable
state and local income taxes (calculated using the Make Whole Tax Rate) imposed
on such Protected Partner as a result of the receipt by such Protected Partner
of a payment under ‎Section 2.2 (the “Gross Up Amount”); provided, however, that
the Gross Up Amount shall be computed without regard to any losses, credit, or
other tax attributes that such Protected Partner might have that would reduce
its actual tax liability; and
 
(b)           with respect to any Guaranty Partner that recognizes gain as a
result of a breach by the Operating Partnership of the provisions of ‎Section
2.4 hereof, the sum of (i) the product of (x) the income and gain recognized by
such Guaranty Partner by reason of such breach, multiplied by (y) the Make Whole
Tax Rate, plus (ii) an amount equal to the combined Federal, applicable state
and local income taxes (calculated using the Make Whole Tax Rate) imposed on
such Guaranty Partner as a result of the receipt by such Guaranty Partner of a
payment under ‎Section 2.4 (the “Debt Gross Up Amount”); provided, however, that
the Debt Gross Up Amount shall be computed without regard to any losses, credit,
or other tax attributes that a Guaranty Partner might have that would reduce its
actual tax liability.
 
For purposes of calculating the amount of Section 704(c) gain that is allocated
to a Protected Partner, any “reverse Section 704(c) gain” allocated to such
partner pursuant to Treasury Regulations § 1.704-3(a)(6) that is treated as
reverse 704(c) gain solely as a result of the revaluation of assets of the
Company in connection with or prior to the acquisition of interests in the
Company by the Operating Partnership pursuant to the Purchase Agreement shall be
taken into account; and any "reverse 704(c) gain" resulting from any subsequent
revaluation (including a revaluation resulting in an increase in the book value
of any asset following a revaluation resulting in a decrease in the book value
of such asset) shall not be taken into account; and the total amount of 704(c)
gain and income taken into account for purpose of calculating the Make Whole
Amount shall not exceed the initial Section 704(c) gain amount as of the Closing
Date (as set forth on Exhibit A).
 
Section 1.16 “Make Whole Tax Rate”  means, with respect to a Protected Partner
who is entitled to receive a payment under ‎Section 2.2 and with respect to a
Guaranty Partner who is entitled to receive payment under ‎Section 2.4, the
highest combined statutory Federal, state and local tax rate in respect of the
income or gain that gave rise to such payment, taking into account the character
of the income and gain in the hands of such Protected Partner or Guaranty
Partner, as applicable (reduced, in the case of Federal taxes, assuming a full
deduction is allowed for income taxes paid to a state or locality), for the
taxable year in which the event that gave rise to such payment under ‎Section
2.2 or ‎Section 2.4 occurred.
 
 
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Section 1.17 “OP Agreement”  means the Agreement of Limited Partnership of
Retail Opportunity Investments Partnership, L.P., as amended from time to time.
 
Section 1.18 “Partners’ Representative”  Means Ron Sher and his executors,
administrators or permitted assigns.
 
Section 1.19 “Pass Through Entity”  means a partnership, grantor trust, or S
corporation for Federal income tax purposes.
 
Section 1.20 “Permitted Disposition”  means a sale, exchange or other
disposition of OP Units (i) by a Protected Partner or Guaranty Partner: (a) to
such Protected Partner’s or Guaranty Partner’s children, spouse or issue; (b) to
a trust for such Protected Partner or Guaranty Partner or such Protected
Partner’s or Guaranty Partner’s children, spouse or issue; (c) in the case of a
trust which is a Protected Partner or Guaranty Partner, to its beneficiaries, or
any of them, whether current or remainder beneficiaries; (d) to a revocable
inter vivos trust of which such Protected Partner or Guaranty Partner is a
trustee; (e) in the case of any partnership or limited liability company which
is a Protected Partner or Guaranty Partner, to its partners or members; and/or
(f) in the case of any corporation which is a Protected Partner or Guaranty
Partner, to its shareholders, and (ii) by a party described in clauses (a), (b),
(c) or (d) to a partnership, limited liability company or corporation of which
the only partners, members or shareholders, as applicable, are parties described
in clauses (a), (b), (c) or (d); provided, that for purposes of the definition
of Tax Protection Period, such Protected Partner or Guaranty Partner shall be
treated as continuing to own any OP Units which were subject to a Permitted
Disposition unless and until there has been a sale, exchange or other
disposition of such OP Units by a permitted transferee which is not another
Permitted Disposition.
 
Section 1.21 “Person”  means an individual or a corporation, partnership, trust,
unincorporated organization, association, limited liability company or other
entity.
 
Section 1.22 “Protected Partner”  means: (i)  each signatory on Schedule I
attached hereto, as amended from time to time; (ii) any person who holds OP
Units and who acquired such OP Units from another Protected Partner in a
transaction in which such person’s adjusted basis in such OP Units, as
determined for Federal income tax purposes, is determined, in whole or in part,
by reference to the adjusted basis of the other Protected Partner in such OP
Units; and (iii) with respect to a Protected Partner that is Pass Through
Entity, and solely for purposes of computing the amount to be paid under
‎Section 2.2 with respect to such Protected Partner, any person who (y) holds an
interest in such Protected Partner, either directly or through one or more Pass
Through Entities, and (z) is required to include all or a portion of the income
of such Protected Partner in its own gross income.
 
Section 1.23 “Protected Property”  mean that certain project commonly known as
Five Points Plaza Shopping Center in the City of Huntington Beach, County of
Orange, State of California, with street address 18593 Main St  Huntington
Beach, CA 92648, and related personal property, and any property acquired in
Exchange for the Protected Property as set forth in ‎Section 2.1(b).
 
 
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Section 1.24 “Qualified Liability” means either:
 
(a) A direct or indirect liability of the Operating Partnership (or of an entity
whose separate existence from the Operating Partnership is disregarded for
Federal income tax purposes) with respect to which all of the following
requirements are satisfied:
 
(i) the liability is secured by real property or other assets (the “Collateral”)
owned directly or indirectly by the Operating Partnership (or by an entity whose
separate existence from the Operating Partnership is disregarded for Federal
income tax purposes);
 
(ii) on the date on which the Operating Partnership designated such liability as
a Qualified Liability, the fair market value (as reasonably determined in good
faith by the Operating Partnership) of the Collateral was at least 1.5 times the
outstanding principal amount (and any accrued and unpaid interest) of the
liability and any other Qualified Liabilities secured by such Collateral at such
time, provided that if interest on such liability is not required to be paid at
least annually or if the documents evidencing such liability permit the borrower
to borrow additional amounts that are secured by the Collateral, the outstanding
principal amount of such liability shall include the maximum amount that could
be so added to the principal amount of such liability without a default;
 
(iii) the liability constitutes “qualified nonrecourse financing” as defined in
Section 465(b)(6) of the Code with respect to the Operating Partnership;
 
(iv) no other person has executed any guaranties with respect to such liability
other than: (A) guaranties by the Guaranty Partners; (B) guaranties by
Affiliates of the Operating Partnership, provided that each applicable Guaranty
Partner indemnifies each such Affiliate against any liability of such Affiliate
(to the extent such liability does not exceed such Guaranty Partner’s Required
Liability Amount) arising solely from the existence or performance of such
guaranty; and (C) recourse carve out guaranties (i.e., bad-boy guaranties); and
 
(v) the Collateral does not provide security for another liability (other than
another Qualified Liability) that ranks senior to, or pari passu with, the
liability described in clause (i) above.
 
For purposes of determining whether clause (ii) has been satisfied in situations
where one or more potential Qualified Liabilities are secured by more than one
item of Collateral, the Operating Partnership shall allocate such liabilities
among such items of Collateral in proportion to their relative fair market
values (as reasonably determined in good faith by the Operating Partnership);
 
(b) A direct liability of the Operating Partnership that
 
(i) is not secured by any of the assets of the Operating Partnership and is a
general, recourse obligation of the Operating Partnership, and
 
 
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(ii) is not provided by a lender that has an interest in the Operating
Partnership or is related to the Operating Partnership within the meaning of
Section 465(b)(3)(C) or the Code; or
 
(c)           Any other indebtedness approved by the Partners’ Representative
(or his successor or designee) in his sole and absolute discretion.
 
Section 1.25 “Required Liability Amount” means, with respect to each Guaranty
Partner, 110% of such Guaranty Partner’s estimated “negative tax capital
account” as of the Closing Date, a current estimate of which is set forth on
Exhibit B hereto for each such Guaranty Partner.
 
Section 1.26 “Section 2.4 Notice” has the meaning set forth in ‎Section 2.4(c).
 
Section 1.27 “Tax Protection Period” means, twelve (12) years; provided,
however, that such period shall end with respect to any Protected Partner or
Guaranty Partner to the extent that such Partner owns less than fifty percent
(50%) of the OP Units originally owned by the Protected Partner or Guaranty
Partner as of the Closing Date, disregarding the sale, exchange or other
disposition of any such OP Units sold, exchanged or otherwise disposed of by the
Protected Partner or Guaranty Partner in a Permitted Disposition.
 
Section 1.28 “Tax Protection Period Transfer” has the meaning set forth in
‎Section 2.1(a) of this Agreement.
 
Section 1.29 “Transfer”  means any direct or indirect sale, exchange, transfer
or other disposition, whether voluntary or involuntary.
 
Section 1.30 “Treasury Regulations” means the income tax regulations under the
Code, whether such regulations are in proposed, temporary or final form, as such
regulations may be amended from time to time (including corresponding provisions
of succeeding regulations).
 
ARTICLE II

 
TAX PROTECTIONS
 
Section 2.1   Taxable Transfers.
 
(a) Unless the Partners’ Representative expressly consents in writing to a Tax
Protection Period Transfer, during the Tax Protection Period, the Operating
Partnership shall indemnify the Protected Partners as set forth in ‎Section 2.2
if the Operating Partnership or any entity in which the Operating Partnership
holds a direct or indirect interest shall cause or permit: (i) any Transfer of
all or any portion of the Protected Property (including any interest in the
Protected Property or in any entity owning, directly or indirectly, an interest
in the Protected Property, other than the Operating Partnership) in a
transaction that results in the recognition of taxable income or gain by any
Protected Partner under Section 704(c) of the Code with respect to the Protected
Property; or (ii) any Fundamental Transaction that results in the recognition of
taxable income or gain by any Protected Partner under Section 704(c) of the Code
with respect to the Protected Property (such a Transfer or Fundamental
Transaction, a “Tax Protection Period Transfer”).
 
 
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(b) ‎Section 2.1‎(a) shall not apply to any Tax Protection Period Transfer of
the Protected Property (including any interest therein or in the entity owning,
directly or indirectly, the Protected Property): (i) in a transaction in which
no gain is required to be recognized by a Protected Partner (an “Exchange”),
including a transaction qualifying under Section 1031 or Section 721 (or any
successor statutes) of the Code; provided, however, that any property acquired
by the Operating Partnership in the Exchange shall remain subject to the
provisions of this Article II in place of the exchanged Protected Property for
the remainder of the Tax Protection Period; (ii) as a result of the condemnation
or other taking of the Protected Property by a governmental entity in an eminent
domain proceeding or otherwise, provided that the Operating Partnership shall
use commercially reasonable efforts to structure such disposition as either a
tax-free like-kind exchange under Section 1031 or a tax-free reinvestment of
proceeds under Section 1033, provided that in no event shall the Operating
Partnership be obligated to acquire or invest in any property that it otherwise
would not have acquired or invested in.
 
Section 2.2   Indemnification for Taxable Transfers.
 
(a) In the event of a Tax Protection Period Transfer described in ‎Section
2.1(a), each Protected Partner shall receive from the Operating Partnership an
amount of cash equal to the Make Whole Amount applicable to such Tax Protection
Period Transfer.  Any Make Whole Payments required under this ‎Section 2.2‎(a)
shall be made to each Protected Partner on or before April 15 of the year
following the year in which the Tax Protection Period Transfer took place;
provided that, if the Protected Partner is required to make estimated tax
payments that would include such gain, the Operating Partnership shall make
payment to such Protected Partner on or before the due date for such estimated
tax payment and such payment from the Operating Partnership shall be in an
amount that corresponds to the estimated tax being paid by the Protected Partner
at such time.
 
(b) Notwithstanding any provision of this Agreement to the contrary, the sole
and exclusive rights and remedies of any Protected Partner under ‎Section 2.1(a)
shall be a claim against the Operating Partnership for the Make Whole Amount as
set forth in this ‎Section 2.2, and no Protected Partner shall be entitled to
pursue a claim for specific performance of the covenants set forth in ‎Section
2.1(a) or bring a claim against any person that acquires the Protected Property
from the Operating Partnership in violation of ‎Section 2.1(a).
 
Section 2.3   Section 704(c) Gains.  
 
The initial amount of Section 704(c) gain allocable to each Protected Partner as
of the Closing Date is set forth on Exhibit A hereto.  The parties acknowledge
that the initial amount of such Section 704(c) gain may be adjusted over time as
required by Section 704(c) of the Code and the Regulations promulgated
thereunder.
 
Section 2.4   Debt Maintenance and Allocation.
 
(a) During the Tax Protection Period, the Operating Partnership shall: (i)
maintain on a continuous basis an amount of Qualified Liabilities at least equal
to the Required Liability Amount; and (ii) provide the Partners’ Representative,
thirty (30) days prior to the Closing Date, with a description of the nature and
amount of any Qualified Liabilities that are available to be guaranteed by the
Guaranty Partners pursuant to ‎Section 2.4‎(b) of this Agreement.  For the
avoidance of doubt, and notwithstanding any other provision of this Agreement,
the Operating Partnership shall not be required to maintain any amount of
Qualified Liabilities in excess of the aggregate Required Liability Amount of
all Guaranty Partners.
 
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(b) (i) At the Closing Date and during the Tax Protection Period as described in
‎Section 2.4‎(c), the Operating Partnership shall provide each Guaranty Partner
with the opportunity to execute a guaranty, substantially in the form attached
hereto as Exhibit C or otherwise in a form and manner that is reasonably
acceptable to the Partners’ Representative, of one or more Qualified Liabilities
that are Guaranty Permissible Liabilities in an amount up to such Guaranty
Partner’s Required Liability Amount (each such opportunity and each opportunity
required by ‎Section 2.4‎(c), a “Guaranty Opportunity”), and (ii) after the Tax
Protection Period, and for so long as a Guaranty Partner is a partner in the
Operating Partnership, the Operating Partnership shall use commercially
reasonable efforts to make Guaranty Opportunities available to each Guaranty
Partner, provided that in the case of this clause (ii), the Operating
Partnership shall not be required to incur any indebtedness that it would not
otherwise have incurred, as determined by the Operating Partnership in its
reasonable discretion; provided, however, that in the case of clauses (i) and
(ii) the aggregate amount of all guaranties required to be made available by the
Operating Partnership for execution by all Guaranty Partners need not exceed the
aggregate Required Liability Amount of all Guaranty Partners.  The Operating
Partnership shall have the discretion to identify the Qualified Liability or
Qualified Liabilities that shall be made available for guaranty by each Guaranty
Partner.  Each Guaranty Partner and its indirect owners may allocate the
Guaranty Opportunity afforded to such Guaranty Partner in any manner they
choose. The Operating Partnership agrees to file its tax returns allocating any
debt subject to a Guaranty to the applicable Guaranty Partners; provided that
the Operating Partnership shall not be required to make such allocations to the
extent it determines in good faith that there may not be “substantial authority”
(within the meaning of Section 6662(d)(2)(B)(i) of the Code) for such
allocations and so notifies the Guaranty Partner.   Each Guaranty Partner shall
bear the costs incurred by it in connection with the execution of any guaranty
to which it is a party. To the extent a Guaranty Partner executes a guaranty,
the Guaranty Partner and the Operating Partnership shall jointly deliver a copy
of such guaranty to the lender under the Guaranteed Liability.
 
(c) During the Tax Protection Period, the Operating Partnership shall not allow
a Debt Notification Event to occur unless the Operating Partnership provides at
least thirty (30) days’ written notice (a “Section 2.4 Notice”) to each Guaranty
Partner that may be affected thereby.  The Section 2.4 Notice shall describe the
Debt Notification Event and designate one or more Qualified Liabilities that may
be guaranteed by the Guaranty Partners pursuant to ‎Section 2.4‎(b) of this
Agreement in an amount equal to the amount of the refinanced or repaid
Qualifying Debt that was guaranteed by such Guaranty Partner immediately prior
to the date of the refinancing or repayment.  Any Guaranty Partner that desires
to execute a guaranty following the receipt of a Section 2.4 Notice shall
provide the Operating Partnership with notice thereof within fifteen (15) days
after the date of the Section 2.4 Notice.
 
 
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(d) Provided the Operating Partnership satisfies its obligations under ‎Section
2.4‎(a), ‎(b) and ‎(c) of this Agreement, it shall have no liability under
‎Section 2.4‎(e) for breach of ‎Section 2.4, whether or not such Guaranty
Partner accepts such Guaranty Opportunity.  In the event a Guaranty Partner does
not accept a Guaranty Opportunity, such person shall no longer be a Guaranty
Partner and shall have no further rights to be offered subsequent Guaranty
Opportunities. Furthermore, the Operating Partnership makes no representation or
warranty to any Guaranty Partner concerning the treatment or effect of any
guaranty under Federal, state, local, or foreign Tax law, and bears no
responsibility for any Tax liability of any Guaranty Partner or Affiliate
thereof that is attributable to a reallocation, by a taxing authority, of debt
subject to a guaranty (other than an act or omission that is indemnifiable under
‎Section 2.4‎(e)of this Agreement).
 
(e) If the Operating Partnership shall fail to comply with any provision of this
‎Section 2.4, the Operating Partnership shall pay, within thirty (30) days of
such failure, a Make Whole Payment to each Guaranty Partner who recognizes
income or gain as a result of such failure equal to the estimated Make Whole
Amount applicable to such failure.  Any Make Whole Payments required under this
‎Section 2.4‎(e) shall be made to each Guaranty Partner on or before April 15 of
the year following the year in which the Tax Protection Period Transfer took
place; provided that, if the Guaranty Partner is required to make estimated tax
payments that would include such gain, the Operating Partnership shall make
payment to such Guaranty Partner on or before the due date for such estimated
tax payment and such payment from the Operating Partnership shall be in an
amount that corresponds to the estimated tax being paid by the Guaranty Partner
at such time.
 
(f) Notwithstanding any provision of this Agreement to the contrary, the sole
and exclusive rights and remedies of any Guaranty Partner for a breach or
violation of the covenants set forth in ‎Section 2.4 shall be a claim a claim
against the Operating Partnership for the Make Whole Amount as set forth in
‎Section 2.4‎(e), and no Guaranty Partner shall be entitled to pursue a claim
for specific performance of the covenants set forth in ‎Section 2.4.
 
Section 2.5   Dispute Resolution. Any controversy, dispute, or claim of any
nature arising out of, in connection with, or in relation to the interpretation,
performance, enforcement or breach of this Agreement (and any closing document
executed in connection herewith) shall be governed by Section 18.11 of the
Purchase Agreement.
 
ARTICLE III

 
GENERAL PROVISIONS
 
Section 3.1   Notices.  All notices, demands, declarations, consents,
directions, approvals, instructions, requests and other communications required
or permitted by the terms of this Agreement shall be given in the same manner as
in the OP Agreement.
 
Section 3.2   Titles and Captions.  All Article or Section titles or captions in
this Agreement are for convenience only.  They shall not be deemed part of this
Agreement and in no way define, limit, extend or describe the scope or intent of
any provisions hereof.  Except as specifically provided otherwise, references to
“Articles” and “Sections” are to Articles and Sections of this Agreement.
 
 
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Section 3.3   Pronouns and Plurals.  Whenever the context may require, any
pronoun used in this Agreement shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns, pronouns and verbs
shall include the plural and vice versa.
 
Section 3.4   Further Action.  The parties shall execute and deliver all
documents, provide all information and take or refrain form taking action as may
be necessary or appropriate to achieve the purposes of this Agreement.
 
Section 3.5   Binding Effect.  This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their heirs, executors, administrators,
successors, legal representatives and permitted assigns.
 
Section 3.6   Creditors.  Other than as expressly set forth herein, none of the
provisions of this Agreement shall be for the benefit of, or shall be
enforceable by, any creditor of the Operating Partnership.
 
Section 3.7   Waiver.  No failure by any party to insist upon the strict
performance of any covenant, duty, agreement or condition of this Agreement or
to exercise any right or remedy consequent upon a breach thereof shall
constitute waiver of any such breach or any covenant, duty, agreement or
condition.
 
Section 3.8   Counterparts.  This Agreement may be executed in counterparts, all
of which together shall constitute one agreement binding on all of the parties
hereto, notwithstanding that all such parties are not signatories to the
original or the same counterpart.  Each party shall become bound by this
Agreement immediately upon affixing its signature hereto.
 
Section 3.9   Applicable Law.  This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of California, without
regard to the principles of conflicts of law.
 
Section 3.10 Invalidity of Provisions.  If any provision of this Agreement is or
becomes invalid, illegal or unenforceable in any respect, the validity, legality
or enforceability of other remaining provisions contained herein shall not be
affected thereby.
 
Section 3.11 Entire Agreement.  This Agreement contains the entire understanding
and agreement among the Partners with respect to the subject matter hereof and
amends, restates and supersedes the OP Agreement and any other prior written or
oral understandings or agreements among them with respect thereto.
 
Section 3.12 No Rights as Stockholders.  Nothing contained in this Agreement
shall be construed as conferring upon the holders of the OP Units any rights
whatsoever as stockholders of the REIT, including, without limitation, any right
to receive dividends or other distributions made to stockholders of the REIT or
to vote or to consent or to receive notice as stockholders in respect of any
meeting of stockholders for the election of directors of the REIT or any other
matter.
 
 
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Section 3.13 Tax Advice and Cooperation.  Each party hereto acknowledges and
agrees that it has not received and is not relying upon tax advice from any
other party hereto, and that it has and will continue to consult its own tax
advisors.  Each party hereto agrees to cooperate to the extent reasonably
requested by any other party in connection with the filing of any tax returns or
any audit, litigation or other proceeding related to taxes associated with the
matters described herein, such cooperation shall include the retention and, upon
request, provision of records and information that are relevant to such matters,
and making employees available on a mutually convenient basis to provide such
additional information as may reasonably be requested.
 
 
 
 
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.
 
 

      REIT:            
RETAIL OPPORTUNITY INVESTMENT CORP.,
 
a Delaware corporation
         
By:
        Name:         Title:            

 

  OPERATING PARTNERSHIP:          
RETAIL OPPORTUNITY INVESTMENT PARTNERSHIP, L.P.,
 
a Delaware limited partnership
         
By:
RETAIL OPPORTUNITY INVESTMENT CORP.
    a  Delaware corporation,               By:           Name:           Title:
           

 
 

     
PROTECTED PARTNERS:
           
SARM ENTERPRISES,
 
a California general partnership
         
By:
      Name:       Title:                      
Abby Sher
                     
Circe A. Sher
   

 
Signature Page to Tax Protection Agreement
 
 

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RACHEL SHER
           
By:
        Ronald Sher, her attorney in fact          

 

        Lacey L. Sher                 Rebecca C. Wellington                
Justin W. Sher
 

 
 

     
NIGEL I. SHER
           
By:
        Ronald Sher, her attorney in fact            

 

Signature Page to Tax Protection Agreement
 
 

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SCHEDULE I

 
PROTECTED PARTNERS
 

1.  
SARM Enterprises

2.  
Abby Sher

3.  
Nigel Sher

4.  
Circe Sher

5.  
Rachel Sher

6.  
Lacey Sher

7.  
Rebecca Wellington

8.  
Justin Sher

 
 
Schedule I-1
 
 

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SCHEDULE II
 
GUARANTY PARTNERS
 

1.  
SARM Enterprises

2.  
Abby Sher

3.  
Nigel Sher

4.  
Circe Sher

5.  
Rachel Sher

6.  
Lacey Sher

7.  
Rebecca Wellington

8.  
Justin Sher

Schedule II-1
 
 

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EXHIBIT A
 
ALLOCATIONS OF SECTION 704(c) GAIN1
 
 

    Total 704c  
Partners
 
Gain
 
SARM Enterprises
  $ 9,764,593  
Abby Sher
    422,482  
Nigel Sher
    197,247  
Circe Sher
    198,325  
Rachel Sher
    147,914  
Lacey Sher
    149,186  
Rebecca Wellington
    196,358  
Justin Sher
    196,234  
     Total
  $ 11,272,339  

 

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1 Amounts listed do not reflect adjustments under Code Section 743(b).

Exhibit A-1
 
 

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EXHIBIT B
 
 
 
REQUIRED LIABILITY AMOUNT
 

   
Required
 
Partners
 
Liability
 
SARM Enterprises
  $ 2,353,000  
Abby Sher
    109,000  
Nigel Sher
    55,000  
Circe Sher
    56,000  
Rachel Sher
    39,000  
Lacey Sher
    41,000  
Rebecca Wellington
    54,000  
Justin Sher
    54,000  
     Total
   $ 2,761,000  

 
 
Exhibit B-1
 
 

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EXHIBIT C

 
FORM OF GUARANTY
 

 

 

 

 

 
Exhibit C-1

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