Document:

Exhibit 10.1

 

CEPHALON, INC.

NON-QUALIFIED DEFERRED COMPENSATION PLAN

(As Amended and Restated Effective January 1, 2009)

 

1.                                      PURPOSE.  The purpose of the Plan is to provide
Eligible Employees with the opportunity to defer a portion of their Bonus on a
tax-favored basis.  The Corporation
intends that the Plan shall at all times be maintained on an unfunded basis for
federal income tax purposes under the Code and administered as a nonqualified “top-hat”
plan exempt from the substantive requirements of ERISA.  The Corporation also intends that the Plan be
maintained and operated in accordance with the requirements of section 409A of
the Code.  Benefit payments commencing
prior to the Effective Date are governed by the terms of the Plan as it existed
prior to the Effective Date and are either grandfathered from the requirements
of section 409A of the Code or payable pursuant to a fixed schedule as required
by, and in compliance with, section 409A of the Code.  Payments made between January 1, 2005
and December 31, 2008 that are subject to the requirements of section 409A
of the Code, the Plan has been operated in accordance with transition relief
established by the Treasury Department and Internal Revenue Service pursuant to
section 409A of the Plan.  The Plan, as
amended and restated, shall be effective as of the Effective Date.  All capitalized terms shall be as defined in
Paragraph 2 below.

 

2.                                      DEFINITIONS.  Certain terms shall be defined hereunder as
follows:

 

(a)                                  “Account”
means the bookkeeping account established by the Corporation to which are
credited Bonus Deferrals, and notational earnings and losses thereon.

 

(b)                                  “Beneficiary”
means the person, persons, trust or trusts that a Participant shall from time
to time designate in writing to receive any benefits payable to him under this
Plan in the event of his death.

 

(c)                                  “Board”
means the Board of Directors of the Corporation.

 

1

 

(d)                                  “Bonus”
means the amount earned by a Participant under the Employer’s annual Management
Incentive Compensation Plan for a particular Plan Year.

 

(e)                                  “Bonus
Deferral” means the portion of the Bonus as to which a Participant has made an
irrevocable election to defer receipt until the date specified in the
Participant’s Enrollment Agreement.

 

(f)                                    “Change
in Control” means the occurrence of a change in the ownership or effective
control of the Corporation (as defined in Treas. Reg. §1.409A-3(i)(5)(v)), a
change in effective control of the Corporation (as defined in Treas. Reg.
§1.409A-3(i)(5)(vi)), or a change in the ownership of a substantial portion of
the assets of the Corporation (as defined in Treas. Reg. §1.409A-3(i)(5)(vii)).

 

(g)                                 “Code”
means the Internal Revenue Code of 1986, as amended from time to time.

 

(h)                                 “Committee”
means the Stock Option and Compensation Committee of the Board (or any
successor thereto) or its delegate, or such other committee appointed by the
Board to administer the Plan.  If no
members have been appointed to the Committee, the Board shall act as the Committee.

 

(i)                                    “Corporation”
means Cephalon, Inc. or any successor thereto.

 

(j)                                    “Deferred
Bonus Account” means a Participant’s Account.

 

(k)                                “Effective
Date” means January 1, 2009, the effective date of this amendment and
restatement of the Plan.  The Plan was
initially effective on November 1, 1993.

 

(l)                                    “Eligible
Employee” means each Employee designated by the Committee as eligible to
participate in the Plan.

 

(m)                              “Employee”
means any individual employed by the Employer as an employee; provided,
however, to qualify as an “Employee” for purposes of the Plan, the individual
must be a member of a group of “key management or highly compensated employees”
of the Employer, within the meaning of sections 201, 301 and 401 of ERISA.

 

(n)                                 “Employer”
means the Corporation or any subsidiary of the Corporation.

 

2

 

(o)                                  “Enrollment
Agreement” means the authorization form which an Eligible Employee files with
the Committee to participate in the Plan.

 

(p)                                  “ERISA”
means the Employee Retirement Income Security Act of 1974, as amended from to
time.

 

(q)                                  “Plan”
means the Cephalon, Inc. Non-Qualified Deferred Compensation Plan, as it
may be amended from time to time.

 

(r)                                  “Plan
Year” means the period beginning on January 1 and ending on December 31.

 

(s)                                  “Separation
Date” means the last day on which a Participant is employed by an Employer on
account of a Separation from Service.

 

(t)                                    “Separation
from Service” means a Participant’s separation from service with the Employer
within the meaning of section 409A of the Code and the regulations issued
thereunder.

 

(u)                                 “Specified
Employee” means any Participant who, at any time during the twelve month period
ending on the identification date as determined by the Committee (or its
delegate), is a specified employee under section 409A of the Code, as
determined by the Committee (or its delegate). 
The determination of “specified employees,” including the number and
identity of persons considered “specified employees” and identification date,
shall be made by the Committee (or its delegate) in accordance with the
provisions of sections 416(i) and 409A of the Code and the regulations
issued thereunder.

 

(v)                                   “Specified
Time” means a specified time within the meaning of section 409A(a)(2)(A)(iv) of
the Code and the corresponding regulations.

 

(w)                                “Trust”
means a grantor “rabbi” trust.

 

(x)                                  “Unforeseeable
Emergency” means the Participant has experienced an “unforeseeable emergency”
within the meaning of Treas. Reg. §1.409A-3(i)(3)(i).

 

3

 

3.                                      PARTICIPATION.  Any person who was a Participant in the Plan
immediately prior to the Effective Date shall continue to be a Participant in
the Plan as of the Effective Date.  Any
person who becomes an Eligible Employee as of the Effective Date, or becomes an
Eligible Employee after the Effective Date, shall be eligible to become a
Participant in the Plan in accordance with the requirements of Paragraph 4
below.  A Participant who ceases as an
Eligible Employee during the Plan Year shall cease to be eligible to elect to
make future Bonus Deferrals to the Plan with respect to any subsequent Plan
Year; however, such Participant’s Bonus Deferral election with respect to the
Plan Year shall continue in effect with respect to the Bonus that is paid for
such Plan Year.  If such Participant
again qualifies as an Eligible Employee for a future Plan Year, such individual
shall be eligible to elect to make Bonus Deferrals to the Plan in accordance
with the requirements of Paragraph 4 below with respect to future Plan Years in
which such individual qualifies as an Eligible Employee.

 

4.                                      DEFERRAL
OF BONUS; GENERAL RULE AND SPECIAL RULES.

 

(a)                                  Prior
to the beginning of each Plan Year each Eligible Employee will be offered the
opportunity to make a Bonus Deferral with respect to the Bonus that is to be
earned for the performance period that begins in such Plan Year.  Any Eligible Employee may enroll in the Plan
effective as of the first day of such Plan Year by filing a completed and fully
executed Enrollment Agreement with the Committee by the date set by the
Committee, which in no event shall be later than then the December 31 of
the preceding Plan Year.  Pursuant to
said Enrollment Agreement, the Eligible Employee shall irrevocably elect,
except as provided in subparagraph (c) below, to defer the portion of the
Participant’s Bonus for such Plan Year, up to 100% of the Participant’s Bonus
for such Plan Year.  Prior to the
beginning of each Plan Year, an Eligible Employee must execute a new Enrollment
Agreement to elect to make a Bonus Deferral for such Plan Year.

 

(b)                                  If
an individual becomes an Eligible Employee after the Plan Year has commenced,
such individual shall not be eligible to elect to make a Bonus Deferral for
such Plan Year.  Instead, such individual
must wait until the next Plan Year to elect to make a Bonus Deferral, in
accordance with the requirements of subparagraph (a) above.

 

4

 

(c)                                  A
Participant’s election to defer his Bonus for any Plan Year shall be
irrevocable as of the last day of the preceding Plan Year, except that if
during the Plan Year an Eligible Employee experiences an Unforeseeable
Emergency such Eligible Employee may submit a request to the Committee on the
form provided by the Committee to cancel the Eligible Employee’s Bonus Deferral
election for such Plan Year.  If the
Committee determines that the Eligible Employee has experienced an
Unforeseeable Emergency the cessation of the Eligible Employee’s Bonus Deferrals
will be effective after the Committee’s determination.  Any Eligible Employee who ceases Bonus
Deferrals on account of an Unforeseeable Emergency shall not be eligible to
elect to make any future Bonus Deferrals for the remainder of the Plan Year in
which the Unforeseeable Emergency occurs. 
For any future Plan Year, the Eligible Employee will need to execute a
new Enrollment Agreement within the time period described in subparagraph (a) above.

 

5.                                      ELECTION
TO TIME AND FORM OF DISTRIBUTION.

 

(a)                                  At
the time he makes a deferral election, the Participant must designate in his
Enrollment Agreement whether the Bonus Deferral will commence to be paid at a
Specified Time or on account of a Separation from Service; provided, however,
that if the Participant does not specify the timing of the distribution in his
Enrollment Agreement, the distribution will be paid on the Participant’s
Separation from Service, and provided further that, irrespective of the
election made by the Participant, Paragraph 12 shall apply if the Participant
has a Separation from Service prior to the date of the Specified Time, if
elected, and Paragraph 13 shall apply in the event of the Participant’s death.

 

(b)                                  At
the time he makes a deferral election, the Participant must also designate in
his Enrollment Agreement the form of distribution; provided, however, that if
the Participant does not specify the form of the distribution in his Enrollment
Agreement, the distribution will be paid in a lump sum.  A Participant may elect to receive his
benefit under the Plan in a single lump sum or in substantially equal annual
installments over a period not to exceed ten (10) years if the payment is
on account of a Specified Time.  The only
form of payment that is payable to the Participant on account of Separation
from Service is a single lump sum.

 

5

 

6.                                      RECORDS.  The Corporation shall maintain appropriate
records of each Participant’s Bonus Deferrals with respect to each Plan
Year.  The Corporation shall credit to a
Deferred Bonus Account all Bonus Deferrals elected by the Participant.

 

7.                                      AUTHORIZED
INVESTMENTS.  Subject to
Paragraph 15, all Bonus Deferrals credited to the Deferred Bonus Account for a
Participant may be kept in cash or invested by the Corporation in such manner,
in such portions and in such amounts as the Committee, in its sole discretion,
may elect.  In the exercise of the
foregoing discretionary investment powers, the Committee may engage investment
advisers and, if it so desires, may delegate to such advisers full or limited
authority to select the assets in which the Bonus Deferrals are to be invested.

 

8.                                      INVESTMENT
INCOME.  Subject to Paragraph 15,
amounts credited to each Participant’s Deferred Bonus Account will be increased
annually at the interest rate determined by the Committee, in its sole
discretion.  Such rate shall be
determined by the Committee prior to the beginning of the applicable Plan Year
pursuant to a Committee resolution, and shall be communicated to Participant’s prior
to the beginning of the applicable Plan Year. 
The designated rate for a particular Plan Year shall apply to all Bonus
Deferrals credited to the Participant’s Deferred Bonus Account.  For 2009, the Committee has confirmed a
growth rate of five percent (5%) per annum.

 

9.                                      STATUS
OF INVESTMENTS.  All investments
made by the Corporation under this Plan will be deemed made solely for the
purpose of aiding the Corporation in measuring and meeting its obligations
under this Plan.  The Corporation shall
be the sole owner of all such investments and of all rights and privileges
conferred by the terms of the instruments evidencing such investments.  Nothing stated herein will cause such
investments or any Deferred Bonus Account to be treated as anything but the
general assets of the Corporation, nor will anything stated herein cause such
investments to represent the vested, secured or preferred interest of any
Participant or his Beneficiaries.

 

10.                               GENERAL
CREDITOR STATUS.  A Participant
shall have no claim with respect to any particular asset of the Corporation or
any other Employer, but shall be and shall remain at all times a general
unsecured creditor of the Corporation and, therefore, a Participant’s 

 

6

 

rights under the Plan shall have no priority over the rights of any
general unsecured creditor of the Corporation. 
The Plan constitutes a mere promise by the Corporation to make benefits
payments in the future.

 

11.                               FORM OF
DISTRIBUTION FOR PAYMENTS MADE PRIOR TO SEPARATION FROM SERVICE.  If a Participant has designated a Specified
Time in accordance with the requirements of Paragraph 5 above for Bonus
Deferrals for a Plan Year, the Participant’s Deferred Bonus Account for such
Plan Year shall be paid (or commence to be paid if the form designated is
annual installments) in cash in the form designated by the Participant within
sixty (60) days following the date of the Specified Time; provided, however,
notwithstanding the Specified Time designated by the Participant, that if the
Participant has a Separation from Service prior to the Specified Time, the
value of the Participant’s Deferred Bonus Account for such Plan Year shall be
paid to the Participant as provided in Paragraph 12 or 13 below, as
applicable.  The value of the amount that
shall be paid to the Participant if paid in a lump sum shall be equal to the
fair market value of the assets in such Participant’s Deferred Bonus Account as
of the date of the payment to the Participant. 
In the event the Participant elects to receive a distribution in the
form of substantially equal annual installments, the amount of each annual
installment shall be equal to the fair market value of the assets in such
Participant’s Deferred Bonus Account (or the applicable portion thereof) valued
as of the date of the payment to the Participant divided by the number of years
over which payments are to be received as elected by such Participant.  Notwithstanding the foregoing, the total
amount payable to such Participant, and correspondingly each future annual
installment, shall be appropriately increased or decreased as the case may be,
in the same manner as set forth in Paragraph 8 of this Plan, to reflect the
appreciation in value and the net income on the funds which remain invested in
the Deferred Bonus Account.

 

12.                               PAYMENTS
UPON SEPARATION FROM SERVICE. 
Notwithstanding any election made by a Participant hereunder, in the
event of a Participant’s Separation from Service for any reason (except death)
prior to the Specified Time, if any, elected by Participant for the
distribution of his Deferred Bonus Account, the balance credited to the
Participant’s Deferred Bonus Account shall be paid to the Participant in cash
in the form of a lump 

 

7

 

sum within forty-five (45) days following the first day of the seventh
month following the Participant’s Separation Date.  If a Participant’s Separation from Service
occurs after the Specified Time for Bonus Deferrals for a particular Plan Year,
the payment of such amounts for such Plan Year’s Bonus Deferrals shall continue
in accordance with the installment schedule designated by the Participant on
account of the Specified Time.  The value
of the amount that shall be paid to the Participant shall be equal to the fair
market value of the assets in such Participant’s Deferred Bonus Account as of
the date of the payment to the Participant.

 

13.                               DEATH
OF PARTICIPANT.

 

(a)                                  If
a Participant dies prior to commencement of receipt of his benefit, the Corporation
shall pay to his Beneficiary the amount credited to the Participant’s Deferred
Bonus Account in cash in the form of a lump sum.  Payment of a Participant’s Deferred Bonus
Account shall be paid to the Beneficiary within sixty (60) days following the
date of the Participant’s death.  The
value of the amount that shall be paid to the Participant’s Beneficiary shall
be equal to the fair market value of the assets in such Participant’s Deferred
Bonus Account as of the date of the payment to the Participant.

 

(b)                                  If
a Participant dies after the commencement of the payments to him under the
Plan, but before all payments have been made, the Corporation shall continue
such payments to his Beneficiary at the same times and in the same amounts as
would have been paid had the Participant lived for the entire payout period
elected by him.

 

(c)                                  A
Participant shall at all times retain the right to change the Beneficiary
designated in his Enrollment Agreement by notifying the Committee in writing on
a form to be provided by the Corporation. 
If there is no Beneficiary designated at the time of the death of the
Participant or if the designated Beneficiary does not survive the Participant,
the Beneficiary shall be the Participant’s spouse, and if no such spouse is
then living, Participant’s estate.  If
Participant’s spouse shall receive payments hereunder but die prior to payment
in full of the remainder of the deferred compensation, the balance owed by the
Corporation shall be paid to the estate of such spouse under the same payment
schedule.

 

8

 

14.                               UNFORESEEABLE
EMERGENCY.  If the Participant
experiences an Unforeseeable Emergency, the Participant may make a request to
the Committee to receive an immediate distribution from his Deferred Bonus
Account.  If the Committee determines
that the Participant has experienced an Unforeseeable Emergency, the
Corporation may make a distribution to the Participant.  The amounts distributed to a Participant
pursuant to an Unforeseeable Emergency shall not exceed the amounts necessary
to satisfy such Unforeseeable Emergency, plus amounts necessary to pay taxes
reasonably anticipated as a result of the distribution, after taking into
account the extent to which such hardship is or may be relieved through
reimbursement of compensation by insurance or otherwise or by liquidation of
the Participant’s assets (to the extent the liquidation of such assets would
not itself cause severe financial hardship). 
With respect to that portion of the Participant’s Deferred Bonus Account
which is distributed to a Participant, in accordance with this Paragraph, the
value of such amount shall be reduced from the Participant’s Deferred Bonus
Account.  Notwithstanding anything in
this Plan to the contrary, a Participant who receives a distribution pursuant
to this Paragraph 14 in any Plan Year such Participant’s deferral election for
the remainder of the Plan Year shall be cancelled and the Participant and with
respect to any future Plan Year the Participant must make a new deferral
election in accordance with Paragraph 4.

 

15.                               CHANGE
IN CONTROL.

 

(a)                                  The
Corporation shall establish a Trust with a bank or other financial institution
that is independent of the Corporation and is authorized to exercise corporate
trustee powers under applicable federal or state law, to serve as a funding vehicle
for benefits payable under the terms of this Plan.  Prior to a Change in Control or in the event
that the action contemplated hereby cannot be effected prior to a Change in
Control, then immediately upon such a Change in Control, the Corporation shall
make a contribution to the Trust in an amount, which together with any amounts
then held in the Trust, is sufficient to fully pay the Participants and their
Beneficiaries all of the benefits to which such Participants and beneficiaries
are entitled under the Plan as of the date of the Change in Control if such
benefits were then immediately due and payable. 
After 

 

9

 

a Change in Control has occurred, the Corporation shall be obligated to
continue to cause additional contributions to be made as may be necessary from
time to time to ensure that at all times the Trust contains sufficient funds,
on a current basis, to provide the entire benefits due to the Participants and
their Beneficiaries under the Plan. 
Except as may otherwise be provided in the Trust, prior to the time a
Change in Control is imminent, the Corporation may, but shall not be required
to, fund the Trust.  If the Corporation
makes a contribution to the Trust in anticipation of a Change in Control and a
Change in Control does not occur, the Corporation may, if and to the extent
permitted by the Trust, obtain the return of such contribution, together with
the earnings thereon.

 

(b)                                 In
the event of a Change in Control, the rate at which each Participant’s separate
Deferred Bonus Account shall be increased from and after the date of such
Change in Control shall not be less than the lesser of (i) ten percent
(10%) per annum, or (ii) one percentage point above the prime interest
rate then being charged by the trustee (or any other lending institution
designated by the Corporation, prior to a Change in Control) to its qualified
customers.

 

(c)                                  At
the time of the Participant’s commencement of participation in the Plan, the
Participant shall make an irrevocable one-time election with respect to his
Deferred Bonus Account whether, in the event of a Change in Control, (i) to
receive an immediate lump sum distribution of his Deferred Bonus Account as of
the date of a Change in Control, such distribution to within ninety (90) days
following the occurrence of such Change in Control, or (ii) to have his
benefits under the Plan distributed to him (or his Beneficiary) at such time or
times and in such manner as is otherwise provided in this Plan.

 

(d)                                 The
Trust shall constitute an unfunded arrangement for tax purposes and for
purposes of Title I of ERISA and the assets of the Trust shall be subject to
the claims of the creditors of the Corporation in the event of the Corporation’s
insolvency, all as set forth in the Trust. 
With respect to any payments not yet made to a Participant or
Beneficiary, nothing contained herein shall give any such 

 

10

 

Participant or Beneficiary any rights to assets that are greater than
those of a general creditor of the Corporation.

 

16.                               NO
ASSIGNMENT.  A Participant’s
rights to benefit payments under this Plan are not subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance,
attachment or garnishment by creditors of the Participant or the Participant’s
Beneficiary.

 

17.                               REVOCATION
AND AMENDMENT.  This Plan may be
amended or terminated at any time at the sole discretion of the Committee;
provided, however, that any such amendment or termination shall not affect the
rights of any Participant which may have accrued under the Plan at the time of
amendment or termination. 
Notwithstanding the foregoing, if the Committee determines that, in
order to avoid current taxation of amounts deferred under the Plan or to comply
with applicable law, additional restrictions must be placed on Participants’
rights under the Plan or to comply with applicable law, including, but not
limited to section 409A of the Code and its corresponding regulations, the
Committee or its delegate may, in its sole discretion, amend the Plan to impose
such restrictions, and/or cease deferrals under the Plan with respect to all
Deferred Bonus Accounts, affected Deferred Bonus Accounts or the affected
portions of the Deferred Bonus Accounts and no Participant consent shall be
required to make any such amendments.  If
the Committee terminates the Plan, Participants shall be entitled to a
distribution of their benefit under the Plan; provided that the Corporation
distributes to each Participant, in a lump sum payment, the balance of the
Participant’s Deferred Bonus Account as of the date the termination occurs;
provided, however, that no such termination may occur unless the Corporation
complies with the requirements of Treas. Reg. §1.409A-3(j)(4)(ix).

 

18.                               NO
EMPLOYMENT GUARANTEE.  Nothing
contained in this Plan shall be construed as conferring upon any Participant
the right to continue in the employment of the Employer.

 

19.                               AUTHORITY
OF COMMITTEE.  The Committee
shall have the full power and authority to interpret, construe and administer
this Plan.  The Committee’s
interpretations and construction hereof and actions hereunder, including any
valuation of a Deferred Bonus Account, or the amount(s) to be paid there
from, shall be binding and conclusive on all 

 

11

 

persons for all purposes.  No
member of the Committee shall be liable to any person for any action taken or
omitted in connection with the interpretation or administration of this Plan
unless attributable to his own willful misconduct or lack of good faith.  As a condition of participating in the Plan,
a Participant expressly agrees that all decisions and determinations of the
Committee shall be binding and conclusive on the Participant, the Participant’s
Beneficiaries and any other person having or claiming an interest on behalf of,
or for the benefit of, the Participant or the Beneficiary.

 

20.                               BENEFIT.  This Plan shall inure to the benefit of and
be binding upon the Corporation and the Participant, together with their
respective successors, heirs and personal representatives.

 

21.                               CLAIMS
PROCEDURES.  At any time the
Committee makes a determination adverse to a Participant or Beneficiary with
respect to a claim for payment or participation under the Plan, the Committee
shall notify the claimant in writing of such determination, such notification
shall be in a manner calculated to be understood by the claimant, and shall set
forth: (a) the specific reason or reasons for such determination; (b) a
reference to the specific provision or provisions of the Plan on which such
determination is based; (c) a description of any additional material or
information necessary to perfect the claim, and an explanation of the reason
that such material is required; and (d) a description of the Plan’s review
procedures and the time limits applicable to such procedures, including a
statement of the claimant’s right to bring a civil action under section 502(a) of
ERISA following an adverse benefit determination on review.

 

A person who receives notice of an adverse
determination by the Committee with respect to a claim may request, within
sixty (60) days of receipt of such notice, that the Committee review the
Committee’s determination.  This request
may be made on behalf of a claimant by a duly authorized representative.  The claimant or representative may review
pertinent documents and submit issues and comments with respect to the
controversy to the Committee.  The
Committee shall render a decision within sixty (60) days of a request for
review (or within one hundred and twenty (120) days under special
circumstances), which decision shall be in writing, set forth in a manner
calculated to be understood by the claimant, and shall set forth (i) the
specific reason or reasons for the 

 

12

 

decision reached; (ii) the specific provisions of the Plan on
which the decision is based; (iii) a statement that the claimant is
entitled to receive, upon request and free of charge, reasonable access to, and
copies of, all documents, records or other information relevant to the claimant’s
claim for benefits; and (iv) a statement describing any voluntary appeal
procedures offered by the Plan and the claimant’s right to obtain information
about such procedures, and a statement of the claimant’s right to bring an
action under section 502(a) of ERISA. 
A copy of the ruling shall be forwarded to the claimant.

 

22.                               WITHHOLDING
OF TAXES.  The Corporation
may make such provisions and take such actions as it may deem necessary or
appropriate for the withholding of any taxes which the Employer is required by
law or regulation of any governmental authority, whether Federal, state or
local, to withhold in connection with any benefits under the Plan, including,
but not limited to, the withholding of appropriate sums from any amount
otherwise payable to the Participant (or his Beneficiary).  Each Participant, however, shall be
responsible for the payment of all individual tax liabilities relating to any
such benefits.

 

23.                               GOVERNING
LAW.  The Plan shall be governed
by the laws of the Commonwealth of Pennsylvania.

 

24.                               LANGUAGE.  Whenever used in this Plan, the singular
number shall include the plural, the plural the singular, and the use of any
gender shall include all genders.

 

25.                               EFFECTIVE
DATE.  This Plan, as amended and
restated herein, shall be effective as of the Effective Date.

 

26.                               SECTION 409A
OF THE CODE.  The Plan is
intended to comply with the applicable requirements of section 409A of the Code
and its corresponding regulations and related guidance, and shall be
administered in accordance with section 409A of the Code to the extent section
409A of the Code applies to the Plan. 
Notwithstanding anything in the Plan to the contrary, elections to defer
Bonus to the Plan, and distributions from the Plan, may only be made in a
manner and upon an event permitted by section 409A of the Code.  To the extent that any provision of the Plan
would cause a conflict with the requirements of section 409A of the Code, or
would cause the administration of the Plan to fail to 

 

13

 

satisfy the requirements of section 409A of the Code, such provision
shall be deemed null and void to the extent permitted by applicable law.  Other than on a valid Enrollment Agreement,
in no event shall a Participant, directly or indirectly, designate the calendar
year of payment.  Notwithstanding
anything in the Plan to the contrary, in no event may a Specified Employee
commence receipt of his benefit under the Plan on account of a Separation from
Service prior to the date that is six months from his Separation Date.  For avoidance of doubt, deferrals under the
Plan are maintained on a Plan Year basis.

 

14EXHIBIT 10.1

 

FORM OF

BUSINESS MANAGEMENT AGREEMENT

 

THIS BUSINESS
MANAGEMENT AGREEMENT (this “Agreement”), dated as of
                    ,
2008, is entered into by and between INLAND DIVERSIFIED REAL ESTATE TRUST, INC.,
a Maryland corporation (the “Company”), and INLAND DIVERSIFIED BUSINESS MANAGER
& ADVISOR INC., an Illinois corporation (the “Business Manager”).

 

WITNESSETH:

 

WHEREAS, the
Company has registered with the Securities and Exchange Commission to issue
Shares (as defined in Section 1 below) in a public offering and may
subsequently issue securities other than these Shares (“Securities”);

 

WHEREAS, the
Company intends to qualify to be taxed as a REIT (as defined in Section 1
below), and intends to make investments permitted by the terms of the Articles
of Incorporation (as defined below) and Sections 856 through 860 of the Code
(as defined in Section 1 below);

 

WHEREAS, the
Company desires to avail itself of the experience, sources of information,
advice, assistance and facilities available to the Business Manager and to have
the Business Manager undertake the duties and responsibilities hereinafter set
forth, on behalf of, and subject to the supervision of, the Board of Directors
(as defined in Section 1 below), all as provided herein; and

 

WHEREAS, the
Business Manager is willing to undertake to render these services, subject to
the supervision of the Board of Directors, on the terms and conditions
hereinafter set forth.

 

NOW,
THEREFORE, in consideration of the mutual covenants set forth herein, the
parties hereto agree as follows:

 

1.             Definitions. As used herein,
the following capitalized terms shall have the meanings set forth below:

 

“Acquisition Co.” means Inland Real Estate Acquisitions,
Inc., an Illinois corporation.

 

“Acquisition Expenses” means any and all
expenses incurred by the Company, the Business Manager or any Affiliate of
either in connection with selecting, evaluating or acquiring any investment in
Real Estate Assets, including but not limited to legal fees and expenses,
travel and communication, appraisals and surveys, nonrefundable option payments
regardless of whether the Real Estate Asset is acquired, accounting fees and
expenses, computer related expenses, architectural and engineering reports,
environmental and asbestos audits and surveys, title insurance and escrow fees,
and personal and miscellaneous expenses.

 

 

“Acquisition Fees” means the total of all
fees and commissions, excluding Acquisition Expenses, paid by any Person to any
other Person (including any fees or commissions paid by or to the Company, the
Business Manager or any Affiliate of either) in connection with an investment
in Real Estate Assets or purchasing, developing or constructing a property by
the Company. For these purposes, the fees or commissions shall include any real
estate commission, selection fee, development fee, construction fee,
nonrecurring management fee, loan fee (including points), or any fee of a
similar nature, however designated, except for development fees and
construction fees paid to any Person not Affiliated with the Sponsor or
Business Manager in connection with the development and construction of a
project, or fees in connection with temporary short-term investments acquired
for purposes of cash management.

 

“Acquisition of a Real Estate Operating Company” means the
acquisition of a Real Estate Operating Company by the Company or a wholly-owned
subsidiary of the Company: (i) by purchasing a Controlling Interest in a Real
Estate Operating Company, or by merger or other business combination,
reorganization or tender offer or (ii) by acquiring all or substantially all of
a Real Estate Operating Company’s assets in a single purchase or series of
purchases.

 

“Affiliate” means, with respect to any other Person:

 

(a)           any Person directly or indirectly
owning, controlling or holding, with the power to vote, ten percent (10%) or
more of the outstanding voting securities of such other Person;

 

(b)           any Person ten percent (10%) or more
of whose outstanding voting securities are directly or indirectly owned,
controlled or held, with the power to vote, by such other Person;

 

(c)           any Person directly or indirectly
controlling, controlled by or under common control with such other Person;

 

(d)           any executive officer, director,
trustee, general partner or manager of such other Person; and

 

(e)           any legal entity for which such
Person acts as an executive officer, director, trustee, general partner or
manager.

 

“Affiliated Directors” means those directors of the Company
who are employed by the Sponsor or one of its direct or indirect subsidiaries.

 

“Articles of Incorporation” means the articles of
incorporation of the Company, as amended or restated from time to time.

 

“Average Invested Assets” means, for any period, the average
of the aggregate Book Value of the assets of the Company, including all
intangibles and goodwill, invested, directly or indirectly, in financial
instruments, debt and equity securities and equity interests in and loans
secured by Real Estate Assets including amounts invested in joint ventures,
REITs and other Real Estate Operating Companies, before reserves for
amortization and depreciation or bad debts or other similar non-cash reserves, computed
by taking the average of these values at the 

 

2

 

end of each month during the
period. For purposes of calculating the Management Fee pursuant to Section
8(a) of the Agreement, Average Invested Assets shall not include any
investments in securities.

 

“Board of Directors” means the persons holding the office of
director of the Company as of any particular time under the Articles of
Incorporation.

 

“Book Value” means the value of the particular asset on the
books and records of the Company, before any allowance for depreciation or
amortization.

 

“Code” means the Internal Revenue Code of 1986, as amended,
and the regulations promulgated thereunder or corresponding provisions of
subsequent revenue laws.

 

“Company Fixed Assets” means the Real Property, together with
the buildings, leasehold interests, improvements, equipment, furniture,
fixtures and personal property associated therewith, used by the Company in
conducting its business.

 

“Controlling Interest” means an interest equal
to or greater than fifty and one-tenth percent (50.1%) of the capital stock or
other equity of an entity.

 

“Current Return” means a non-cumulative, non-compounded
return, equal to five percent (5%) per annum on Invested Capital, paid on an
aggregate basis from distributions from all sources.

 

“Determination Date” means the day on which
Market Value is determined.

 

“Equity Stock” means all classes or series of capital stock
of the Company, including, without limit, its common stock, $.001 par value per
share, and preferred stock, $.001 par value per share.

 

“Fiscal Year” means the calendar year ending December 31.

 

“GAAP” means United States generally accepted
accounting principles as in effect from time to time, consistently applied.

 

“Gross Offering Proceeds” means the total proceeds from the
sale of 700,000,000 Shares in the Offering before deducting Offering Expenses.
For purposes of calculating Gross Offering Proceeds, the selling price for all
Shares, including those for which volume discounts apply, shall be deemed to be
$10.00 per Share. Unless specifically included in a given calculation, Gross
Offering Proceeds does not include any proceeds from the sale of Shares under
the Company’s distribution reinvestment plan.

 

3

 

“Independent Director” means any director of the Company who:

 

(a)           is not associated and has not been
associated within the two years prior to becoming an Independent Director,
directly or indirectly, with the Company, the Sponsor or the Business Manager,
whether by ownership of, ownership interest in, employment by, any material
business or professional relationship with, or as an officer or director of the
Company, the Sponsor, the Business Manager or any of their Affiliates;

 

(b)           does not serve as a director for more
than three REITs organized by the Sponsor or advised by the Business Manager or
any of its Affiliates; and

 

(c)           performs no other services for the
Company, except as a director.

 

For purposes
of this definition, a business or professional relationship will be considered
material if the gross revenue derived by the director exceeds five percent (5%)
of either the director’s annual gross revenue during either of the last two
years or the director’s net worth on a fair market value basis. An indirect
relationship shall include circumstances in which a director’s spouse, parents,
children, siblings, mothers- or fathers-in-law, sons- or daughters-in-law or
brothers- or sisters-in-law is or has been associated with the Company, the
Sponsor, the Business Manager or any of their Affiliates during the last two
years.

 

“Invested Capital” means the aggregate original issue price
paid for the Shares reduced by prior distributions, identified as special
distributions, from the sale or financing of the Company’s Real Estate Assets.

 

“Listing” means the filing of a Form 8-A (or any successor
form) to register the Shares, or the shares of common stock of any of the
Company’s subsidiaries, on a national securities exchange and the approval of
an original listing application related thereto by the applicable exchange; provided,
that the Company’s common stock, or the common stock of any of the Company’s
subsidiaries, shall not be deemed to be Listed until trading in the Shares, or
the shares of common stock of any of the Company’s subsidiaries, shall have
commenced on the relevant national securities exchange. Upon a Listing, the
Shares, or the shares of common stock of the Company’s subsidiaries, shall be
deemed Listed. A Listing shall also be deemed to occur on the effective date of
a merger in which the consideration received by the holders of the Shares is
securities of another issuer that are listed on a national securities exchange;
provided, however, that if the merger is effectuated through a
wholly owned subsidiary of the Company, the consideration received by the
Company shall be distributed to the holders of the Shares.

 

“Market Value” means the aggregate market value of all of the
Shares outstanding at the date of Listing, measured by taking the average
closing price or average of bid and asked price, as the case may be, over a
period of thirty days during which the Shares are traded, with that period
commencing 180 days after Listing.

 

“Marketing Contribution” means any and all compensation
payable to underwriters, dealer managers or other broker-dealers in connection
with marketing the sale of Shares, including, without limitation, compensation
payable to Inland Securities Corporation, and which may, in the Company’s
discretion, include reimbursement for any out-of-pocket, 

 

4

 

itemized and
detailed due diligence expenses incurred in connection with investigating the
Company or any offering of Securities made by the Company.

 

“Management Fee” means any fees payable to the Business
Manager under Section 8(a) or Section 10 of this Agreement.

 

“Net Income” means, for any period, the aggregate amount of
total revenues applicable to the period less the expenses applicable to
the same period other than additions to reserves for depreciation, bad debts or
other similar noncash reserves and Acquisition Expenses and Acquisition Fees to
the extent not capitalized, provided, however, that Net Income
shall not include any gain recognized upon the sale of the Company’s assets.

 

“Net Sales Proceeds” means the net proceeds
from the sale, grant or conveyance of any Real Estate Assets, including assets
owned by a Real Estate Operating Company that is acquired by the Company and
operated as one of its subsidiaries, remaining after paying any property
disposition fee less any costs incurred in selling the asset including,
but not limited to, legal fees and selling commissions and further reduced by
the amount of any indebtedness encumbering the asset and any amounts reinvested
in one or more Real Estate Assets or set aside as a reserve within one hundred
eighty (180) days of closing of sale, grant or conveyance.

 

“Offering” means the initial public offering of Shares on a “best
efforts” basis pursuant to the Prospectus, as amended and supplemented from
time to time.

 

“Offering Expenses” means all expenses incurred by, and to be
paid from, the assets of the Company in connection with and in preparing the
Company for registration and offering its Shares to the public, including, but
not limited to, total underwriting and brokerage discounts and commissions
(including fees and expenses of underwriters’ attorneys paid by the Company),
expenses for printing, engraving and mailing, salaries of the Company’s
employees while engaged in sales activity, charges of transfer agents,
registrars, trustees, escrow holders, depositaries and experts, expenses of
qualifying the sale of the securities under federal and state laws, including
taxes and fees and accountants’ and attorneys’ fees and expenses, and which
may, in the Company’s discretion, include reimbursement for any out-of-pocket,
itemized and detailed expenses incurred in connection with investigating the
Company or any offering of Securities made by the Company.

 

“Organization Expenses” means the
aggregate of all Offering Expenses, including Selling Commissions and the
Marketing Contribution.

 

“Permitted Investment”
means any investment that the Company may acquire pursuant to the Articles of
Incorporation or its bylaws, including any investment in collateralized
mortgage-backed securities and any investment or purchase of interests in a
Real Estate Operating Company or other entity owning Properties or loans.

 

“Person” means any individual, corporation, business trust,
estate, trust, partnership, limited liability company, association, two or more
persons having a joint or common interest or any other legal or commercial
entity.

 

5

 

“Priority Return” means a non-cumulative,
non-compounded return, equal to six percent (6%) per annum on Invested Capital,
paid on an aggregate basis from distributions from all sources.

 

“Property” or “Properties”
means interests in (i) Real Property or (ii) any buildings, structures,
improvements, furnishings, fixtures and equipment, whether or not located on
the Real Property, in each case owned or to be owned by the Company either
directly or indirectly through one or more Affiliates, joint ventures,
partnerships or other legal entities.

 

“Prospectus” has the meaning set forth in Section 2(10) of
the Securities Act of 1933, as amended (the “Securities Act”), including a
preliminary prospectus, an offering circular as described in Rule 253 of the
General Rules and Regulations under the Securities Act, or, in the case of an
intrastate offering, any document by whatever name known, utilized for the
purpose of offering and selling the Shares to the public.

 

“Real Estate Assets” means any and all
investments in: (i) Properties; (ii) loans, or other evidence of indebtedness
secured, directly or indirectly, by interests in Real Property; or (iii) other
Permitted Investments (including all rents, income profits and gains
therefrom), in each case whether real, personal or otherwise, tangible or
intangible, that are transferred or conveyed to, or owned or held by, or for
the account of, the Company or any of its subsidiaries.

 

“Real Estate Operating Company” means: (i) any
entity that has equity securities registered under Section 12(b) or 12(g) of
the Securities Exchange Act of 1934, as amended (the “Exchange Act”); (ii) any
entity that files periodic reports under Sections 13 or 15(d) of the Exchange
Act; or (iii) any entity that, either itself or through its subsidiaries:

 

(a) owns and
operates interests in real estate on a going concern basis rather than as a
conduit vehicle for investors to participate in the ownership of assets for a
limited period of time;

 

(b) has a
policy or purpose of, or the authority for, reinvesting sale, financing or
refinancing proceeds or cash from operations;

 

(c) has its
own directors, managers or managing general partners, as applicable; and

 

(d) either (1)
has its own officers and employees that, on a daily basis, actively operate the
entity and its subsidiaries and businesses, or (2) has retained the services of
an affiliate or sponsor of, or advisor to, the entity to, on a daily basis,
actively operate the entity and its subsidiaries and businesses.

 

“Real Estate Manager” means any of Inland Diversified Real
Estate Services LLC, Inland Diversified Asset Services LLC, Inland Diversified
Leasing Services LLC, Inland Diversified Development Services LLC and Inland
Diversified Global Services LLC, each a Delaware limited liability company, or
any of their successors or assigns, and any other entities owned or controlled
by the Sponsor and engaged by the Company to manage a Property or Properties.

 

6

 

“Real Property” means land, rights or interests in land
(including, but not limited to, leasehold interests), and any buildings,
structures, improvements, furnishings, fixtures and equipment located on, or
used in connection with, land and rights or interest in land.

 

“REIT” means a real estate investment trust as defined in
Sections 856 through 860 of the Code.

 

“Shares” means the shares of common stock, par
value $.001 per share, of the Company, and “Share” means one of those Shares.

 

“Selling Commissions” means any and all commissions, not to
exceed seven and one-half percent (7.5%) of the gross offering price of any
Shares, payable to underwriters, dealer managers or other broker-dealers in
connection with the sale of Shares.

 

“Sponsor” means Inland Real Estate Investment Corporation, a
Delaware corporation.

 

“Stockholders” means holders of shares of Equity Stock.

 

“Total Operating Expenses” means the aggregate expenses of
every character paid or incurred by the Company as determined under GAAP,
including the Management Fee and other fees payable hereunder, but excluding:

 

(a)           the expenses of raising capital such
as Offering Expenses, Organization Expenses, legal, audit, accounting,
underwriting, brokerage, listing, registration and other fees, printing and
other expenses and taxes incurred in connection with the issuance,
distribution, transfer, registration and listing of any shares of the Equity
Stock;

 

(b)           property expenses incurred on an
individual Property level;

 

(c)           interest payments;

 

(d)           taxes;

 

(e)           non-cash charges such as
depreciation, amortization and bad debt reserves;

 

(f)            any incentive fees payable
hereunder; and

 

(g)           Acquisition Fees, Acquisition Expenses,
real estate commissions on resale of property and other expenses connected with
acquiring, disposing and owning real estate interests, mortgage loans, or other
property (such as the costs of foreclosure, insurance premiums, legal services,
maintenance, repair and property improvements).

 

2.             Duties of the Business Manager.
The Business Manager shall consult with the Company and furnish advice and
recommendations with respect to all aspects of the business and affairs of the
Company. The Business Manager shall inform the Board of Directors of factors
that come to the Business Manager’s attention that may, in its opinion,
influence the policies of the Company. Subject to the supervision of the Board
of Directors and consistent with the 

 

7

 

provisions of the Articles of
Incorporation, the Business Manager shall use its commercially reasonable best
efforts to:

 

(a)           identify potential investment
opportunities in Real Estate Assets located both in and outside of the United
States, and consistent with the Company’s investment objectives and policies;
including but not limited to:

 

(i)            locating, analyzing and selecting
potential investments in Real Estate Assets;

 

(ii)           structuring and negotiating the terms
and conditions of acquisition and disposition transactions;

 

(iii)          arranging for financing and
refinancing and making other changes in the asset or capital structure of the
Company and disposing of and reinvesting the proceeds from the sale of, or
otherwise deal with the investments in, Real Estate Assets; and

 

(iv)          entering into leases and service
contracts, on the Company’s behalf, for Real Estate Assets and, to the extent
necessary, performing all functions necessary to maintain and administer the
Company’s assets.

 

(b)           assist the Board of Directors in
evaluating these investment opportunities;

 

(c)           provide the Board of Directors with
research and other statistical data and analysis in connection with the Company’s
assets, operations and investment policies;

 

(d)           manage the Company’s day-to-day
operations, consistent with the investment objectives and policies established
by the Board of Directors from time to time;

 

(e)           investigate, select and conduct
relations with lenders, consultants, accountants, brokers, real estate
managers, attorneys, underwriters, appraisers, insurers, corporate fiduciaries,
banks, builders and developers, sellers and buyers of investments and persons
acting in any other capacity specified by the Company from time to time, and
enter into contracts in the Company’s name with, and retaining and supervising
services performed by, such parties in connection with investments that have
been or may be acquired or disposed of by the Company;

 

(f)            cooperate with the Real Estate
Managers in connection with real estate management services and other
activities relating to the Company’s assets, subject to any requirement under
the laws, rules and regulations affecting REITs that own Real Property that the
Business Manager or the applicable Real Estate Manager, as the case may be,
qualifies as an “independent contractor” as that phrase is used in connection
with applicable laws, rules and regulations affecting REITs that own Real
Property;

 

(g)           upon request of the Company, act, or
obtain the services of others to act, as attorney-in-fact or agent of the
Company in making, acquiring and disposing of 

 

8

 

investments, disbursing and collecting the
funds, paying the debts and fulfilling the obligations of the Company and
handling, prosecuting and settling any claims of the Company, including
foreclosing and otherwise enforcing mortgage and other liens and security
interests securing investments;

 

(h)           assist in negotiations on behalf of
the Company with investment banking firms and other institutions or investors
for public or private sales of Securities of the Company or for other financing
on behalf of the Company, provided that in no event may the Business Manager
act as a broker, dealer, underwriter or investment advisor of, or for, the
Company;

 

(i)            maintain, with respect to any Real
Property and to the extent available, title insurance or other assurance of
title and customary fire, casualty and public liability insurance;

 

(j)            supervise the preparation and filing
and distribution of returns and reports to governmental agencies and to
investors and act on behalf of the Company in connection with investor
relations;

 

(k)           subject to the reimbursement of costs
associated therewith, provide office space, equipment and personnel as required
for the performance of the foregoing services as Business Manager;

 

(l)            advise the Board of Directors, from
time to time, of the Company’s operating results and coordinate preparation,
with each Real Estate Manager, of an operating budget including one, three and
five year projections of operating results and such other reports as may be
appropriate for each Real Estate Asset;

 

(m)          prepare, on behalf of the Company, all
reports and returns required by the Securities and Exchange Commission,
Internal Revenue Service and other state or federal governmental agencies
relating to the Company and its operations;

 

(n)           undertake and perform all services or
other activities necessary and proper to carry out the Company’s investment
objectives;

 

(o)           provide the Company with, or arrange
for, all necessary cash management services;

 

(p)           maintain the Company’s books and
records including, but not limited to, appraisals or fairness opinions obtained
in connection with acquiring or disposing Real Estate Assets; and

 

(q)           enter into ancillary agreements with
the Sponsor and its Affiliates to arrange for the services and licenses to be
provided by the Business Manager hereunder, as summarized on Schedule 2.9(q)
hereto.

 

3.             No Partnership or Joint Venture.
The Company and the Business Manager are not, and shall not be deemed to be,
partners or joint venturers with each other.

 

9

 

4.             REIT Qualifications.
Notwithstanding any other provision of this Agreement to the contrary, the
Business Manager shall refrain from taking any action that, in its reasonable
judgment or in any judgment of the Board of Directors of which the Business Manager
has written notice, would adversely affect the qualification of the Company as
a REIT under the Code or that would violate any law, rule or regulation of any
governmental body or agency having jurisdiction over the Company or its
Securities, or that would otherwise not be permitted by the Articles of
Incorporation. If any such action is ordered by the Board of Directors, the
Business Manager shall promptly notify the Board of Directors that, in the
Business Manager’s judgment, the action would adversely affect the Company’s
status as a REIT or violate a law, rule or regulation or the Articles of
Incorporation and shall refrain from taking such action pending further
clarification or instruction from the Board of Directors.

 

5.             Bank Accounts. At the direction
of the Board of Directors or the officers of the Company, the Business Manager
shall establish and maintain bank accounts in the name of the Company, and
shall collect and deposit into and disburse from such accounts moneys on behalf
of the Company, upon such terms and conditions as the Board of Directors may
approve, provided that no funds in any such account shall be commingled with
funds of the Business Manager. The Business Manager shall, from time to time,
as the Board of Directors or the officers of the Company may require, render
appropriate accountings of such collections, deposits and disbursements to the
Board of Directors and to the Company’s auditors.

 

6.             Fidelity Bond. The Business
Manager shall not be required to obtain or maintain a fidelity bond in
connection with performing its services hereunder.

 

7.             Information Furnished to the
Business Manager. The Board of Directors will keep the Business Manager
informed in writing concerning the investment and financing policies of the
Company. The Board of Directors shall notify the Business Manager promptly in
writing of the Board of Director’s intention to make any investments or to sell
or dispose of any existing investments.

 

8.             Compensation. Subject to the
provisions of Section 12 hereof, for services rendered hereunder the
Company shall pay to the Business Manager or its Affiliate or designee the
following:

 

(a)           A Management Fee of not more than one
percent (1%) of the Average Invested Assets, payable quarterly in an amount
equal to one-quarter of one percent (0.25%) of the Average Invested Assets of
the Company as of the last day of the immediately preceding quarter; provided
that in no event shall the Company be obligated to pay a Management Fee unless
and until all of its Stockholders have received the Current Return. The
Business Manager will determine, in its sole discretion and on a quarterly
basis, the amount of the fee, subject to the limits set forth in this Section
8(a). The obligation to pay this fee terminates if the Company acquires the
Business Manager.

 

(b)           An Acquisition Fee, equal to two and
one-half percent (2.5%) of the aggregate purchase price paid, including any
borrowings or debt assumed, upon Acquisition of a Real Estate Operating
Company; provided, however, that Acquisition Fees shall not be
paid for acquisitions solely of a fee interest in Property or for less than a 

 

10

 

Controlling
Interest in REITs or other Real Estate Operating Companies and shall not be
paid in the event that the Company acquires a Controlling Interest in an
Affiliate of the Sponsor.  The Company
shall pay, at the Business Manager’s option, Acquisition Fees either in cash or
by issuing Shares at a per share value equal to the greater of (i) the per
share offering price of common stock in the Company’s most recent public
offering; (ii) if applicable, the per share price ascribed to shares of common
stock used in the Company’s most recent Acquisition of a Real Estate Operating
Company; and (iii) $10.00 per share. Any Shares issued will be subject to
restrictions on transfer agreed upon by the Business Manager and the Company as
well as any transfer restrictions included in the Articles of Incorporation. If
the issuance of Shares to pay an Acquisition Fee would result in more than 9.8%
of the Company’s common stock being held by The Inland Group, Inc., a Delaware
corporation, and its Affiliates including the Business Manager, the Board of
Directors may waive the ownership restrictions set forth in the Articles of
Incorporation to permit the issuance of the additional Shares and the payment
of the Acquisition Fee in that instance. Any waiver by the Board of Directors
shall, as a consequence, reduce the aggregate number of Shares of the Company’s
common stock that may be held by individuals and entities other than the
Business Manager. If the Board of Directors does not waive the ownership
restrictions, the Company shall pay any excess fee in cash. The obligation to
pay this fee terminates if the Company acquires the Business Manager.

 

(c)           An incentive fee equal to fifteen
percent (15%) of the Net Sales Proceeds; provided that in no event shall
the Company be obligated to pay an incentive fee unless and until all of its
Stockholders have first received, on an aggregate basis, a ten percent (10%)
per annum cumulative, non-compounded return on, plus return of, their Invested
Capital. The obligation to pay this fee terminates if the Company acquires the
Business Manager.

 

(d)           Upon a Listing the
Company shall pay the Business Manager a listing fee equal to fifteen percent
(15%) of the amount by which (i) the Market Value plus the total distributions
paid to Stockholders in excess of the Priority Return from inception until the
Determination Date exceeds (ii) the Invested Capital, less any distributions of
Net Sales Proceeds, plus the total distributions required to be made to the
Stockholders in order to pay them the Priority Return from inception through
the Determination Date. In the event that, at the time of Listing, Stockholders
have not received a return of capital plus the Priority Return, the fee may be
paid at the time that the Priority Return is deemed earned, provided, however,
that the fee shall be calculated as described in this Section 8(d), as
if the return would have been satisfied at the time of Listing. The obligation
to pay this fee terminates if the Company acquires the Business Manager.

 

9.             Expenses.

 

(a)           In addition to the compensation paid
to the Business Manager pursuant to Section 8 or Section 10
hereof, and subject to the limits herein, the Company shall reimburse the
Business Manager, the Sponsor and its Affiliates for all expenses paid or 

 

11

 

incurred by the Business Manager, the Sponsor
or its Affiliates to provide certain services and licenses hereunder, including
all direct expenses and the costs of salaries and benefits of persons employed
by the Business Manager, the Sponsor and its Affiliates and performing services
for the Company, except for the salaries and benefits of persons who also serve
as one of the Company’s executive officers or as an executive officer of the
Business Manager.

 

(b)           Direct expenses that the Company
shall reimburse pursuant to Section 9(a) hereof include, but are not
limited to:

 

(i)            any Offering Expenses;

 

(ii)           Acquisition Expenses incurred in
connection with selecting and acquiring Real Estate Assets;

 

(iii)          the actual cost of goods and services
purchased for and used by the Company and obtained from entities not affiliated
with the Business Manager;

 

(iv)          interest and other costs for borrowed
money, including points and other similar fees;

 

(v)           taxes and assessments on income or
Real Property and taxes;

 

(vi)          premiums and other associated fees for
insurance policies including director and officer liability insurance;

 

(vii)         expenses of managing and operating Real
Estate Assets owned by the Company, whether payable to an Affiliate of the
Company or a non-affiliated Person;

 

(viii)        all fees and expenses paid to members of
the Board of Directors and the fees and costs of any meetings of the Board of
Directors or Stockholders;

 

(ix)           expenses associated with listing or
with issuing Shares and Securities, including advertising expenses, taxes,
legal and accounting fees, listing and registration fees and other Organization
Expenses and Offering Expenses except for Selling Commissions or other fees and
expenses paid by the Dealer Manager to any Soliciting Dealer (as those terms
are defined in the Dealer Manager Agreement) pursuant to that certain Dealer
Manager Agreement dated
                    ,
2008 by and between the Company and Inland Securities Corporation;

 

(x)            expenses associated with dividends
or distributions paid in cash or otherwise made or caused to be made by the
Company to Stockholders;

 

(xi)           expenses of organizing the Company
and filing, revising, amending, converting or modifying the Articles of
Incorporation or the bylaws;

 

12

 

(xii)          all expenses associated with
Stockholder communications including the cost of preparing, printing and
mailing annual reports, proxy statements and other reports required by
governmental entities;

 

(xiii)         administrative service expenses
including personnel costs in accordance with Section 9(f); provided,
however, that no reimbursement shall be made for costs of personnel to
the extent that such personnel perform services in transactions for which the
Business Manager receives a separate fee; provided, further, that
any reimbursement of personnel costs shall be subject to the restrictions set
forth in Section 9(a);

 

(xiv)        audit, accounting and legal fees;

 

(xv)         transfer agent and registrar’s fees and
charges; and

 

(xvi)        expenses relating to any offices or
office facilities maintained solely for the benefit of the Company that are
separate and distinct from the Company’s executive offices.

 

(c)           The Company shall also reimburse the
Business Manager, the Sponsor and its Affiliates pursuant to Section 9(a)
hereof for the salaries and benefits of persons employed by the Business
Manager, the Sponsor or its Affiliates and performing services for the Company.

 

(i)            In the case of the Sponsor, whose
employees also provide services for other entities sponsored by, or affiliated
with, the Sponsor, the Company shall reimburse only a pro rata
portion of the salary and benefits of these persons based on the amount of time
spent by that person on matters for the Company compared to the time spent by
that same person on all matters including the Company’s matters.

 

(ii)           Except as otherwise agreed in writing
by the Company or the Business Manager, the Company shall also reimburse Affiliates
of the Sponsor for the salaries and benefits of persons employed by these
Affiliates. The salary and benefit costs for each Affiliate shall be determined
by multiplying (A) the number of hours spent by all employees of the Affiliate
in providing services for the Company by (B) that Affiliate’s “hourly billing
rate.”  For these purposes, the “hourly
billing rate” will approximate the hourly cost to the Affiliate to provide
services to the Company based on:

 

(1)                                  the
average amount of all salaries and bonuses paid to the employees of the
Affiliate; and

 

(2)                                  an
allocation for overhead including employee benefits, rent, materials, fees,
taxes, and other operating expenses incurred by the Affiliate in operating its
business except for direct expenses reimbursed by the Company pursuant to Section
9(b) hereof.

 

13

 

(d)           The Business Manager shall prepare a
statement documenting the expenses paid or incurred by the Business Manager,
the Sponsor and its Affiliates for the Company on a quarterly basis. The
Company shall reimburse the Business Manager, the Sponsor and its Affiliates
for these expenses within forty-five (45) days after the end of each calendar
quarter.

 

(e)           The Business Manager shall direct its
employees, and shall cause the Sponsor and its Affiliates to direct their
employees, who perform services for the Company to keep time sheets or other
appropriate billing records and receipts in connection with any reimbursement
of expenses made by the Company pursuant to this Section 9. All time
sheets or other appropriate billing records or receipts shall be made available
to the Company upon reasonable request to the Business Manager.

 

(f)            Permitted reimbursements shall
include salaries and related salary expenses for nonsupervisory services that
could be performed directly for the Company by independent, non-affiliated
third parties such as legal, accounting, transfer agent, data processing and
duplication. The Business Manager believes that the employees of the Business
Manager, the Sponsor and its Affiliates who may perform services for the
Company for which reimbursement is allowed, will have the experience and
educational background, in their respective fields of expertise, appropriate
for the performance of any such services.

 

10.           Compensation for Additional
Services, Certain Limitations.

 

(a)           The Company and the Business Manager
will separately negotiate and agree on the fees for any additional services
that the Company asks the Business Manager or its Affiliates to render in
addition to those set forth in Section 2 hereof. Any additional fees or
reimbursements to be paid by the Company in connection with the additional
services must be fair and reasonable and shall be approved by a majority of the
Board of Directors, including a majority of the Independent Directors.

 

(b)           In extraordinary circumstances fully
justified to the official or agency administering the appropriate state
securities laws, the Business Manager and its Affiliates may provide other
goods and services to the Company if all of the following criteria are met:

 

(i)            the goods or services must be
necessary to the prudent operation of the Company; and

 

(ii)           if at least ninety-five percent (95%)
of gross revenues attributable to the business of rendering such services or
selling or leasing such goods are derived from persons other than Affiliates,
the compensation, price or fee charged by an unaffiliated person who is
rendering comparable services or selling or leasing comparable goods must be on
competitive terms in the same geographic location. Extraordinary circumstances
shall be presumed to exist only when there is an emergency situation requiring
immediate action by the Business Manager or its Affiliates and the goods or
services are not immediately available from 

 

14

 

unaffiliated parties. Services that may be
performed in extraordinary circumstances include emergency maintenance of
Company properties, janitorial and other related services due to strikes or
lockouts, emergency tenant evictions and repair services that require immediate
action, as well as operating and releasing properties with respect to which the
leases are in default or have been terminated.

 

11.           Statements.
The Business Manager shall furnish to the Company, not later than the tenth (10th) day of each calendar quarter,
beginning with the second calendar quarter of the term of this Agreement, a
statement computing any Management Fee, Acquisition Fee or incentive fee
payable hereunder. The Business Manager shall also furnish to the Company, not
later than the thirtieth (30th)
day following the end of each Fiscal Year, a statement computing the fees
payable to the Business Manager, the Sponsor or its Affiliates for the just
completed Fiscal Year; provided that any compensation payable hereunder
shall be subject to adjustments in accordance with, and upon completion of, the
annual audit of the Company’s financial statements.

 

12.           Reimbursement
by Business Manager. The Business Manager shall be obligated to reimburse
the Company in the following circumstances:

 

(a)           On or before the fifteenth (15th) day after the completion of the
annual audit of the Company’s financial statements for each Fiscal Year, the
Business Manager shall reimburse the Company for the amounts, if any by which
the Total Operating Expenses (including the Management Fee and other fees
payable hereunder) of the Company for the Fiscal Year just ended exceeded the
greater of:

 

(i)            two percent (2%) of the total of the
Average Invested Assets for the just ended Fiscal Year; or

 

(ii)           twenty-five percent (25%) of the Net
Income for the just ended Fiscal Year;

 

provided, however, that the Business
Manager may satisfy any obligation under this Section 12(a) by reducing
the amount to be paid the Business Manager under Section 8 or Section
10 hereunder until the Business Manager has satisfied its obligations under
this Section 12(a); provided, further, that the Board of
Directors, including a majority of the Independent Directors of the Company,
may reduce the amount due under this Section 12(a) upon a finding that
the increased expenses were caused by unusual or nonrecurring factors.

 

(b)           If the aggregate of all Organization
Expenses exceeds fifteen percent (15%) of the Gross Offering Proceeds or all
Offering Expenses (excluding any Selling Commissions and the Marketing
Contribution) exceed five percent (5.0%) of the Gross Offering Proceeds, the
Business Manager or its Affiliates shall reimburse the Company for, or pay
directly, any excess Organization Expenses or Offering Expenses incurred by the
Company above these limits.

 

15

 

13.           Other Activities of the Business
Manager. Nothing contained herein shall prevent the Business Manager or an
Affiliate of the Business Manager from engaging in any other business or
activity including rendering services or advising on real estate investment
opportunities to any other person or entity. Directors, officers, employees and
agents of the Business Manager or of Affiliates of the Business Manager may
serve as directors, trustees, officers, employees or agents of the Company, but
shall receive no compensation (other than reimbursement for expenses) from the
Company for this service.

 

14.           Term; Termination of Agreement.
This Agreement shall have an initial term of one year and, thereafter, will
continue in force for successive one year renewals with the mutual consent of
the parties including an affirmative vote of a majority of the Independent
Directors. It is the duty of the Board of Directors to evaluate the performance
of the Business Manager annually before renewing this Agreement, and each
renewal shall be for a term of no more than one year. Each extension shall be
executed in writing by both parties hereto prior to the expiration of this
Agreement or of any extension thereof.

 

Notwithstanding
any other provision of the Agreement to the contrary, this Agreement may be
terminated with the mutual consent of the parties. The Company may terminate
this Agreement without cause or penalty upon a vote of a majority of the
Independent Directors by providing no less than sixty (60) days’ written notice
to the Business Manager. In the event of the termination of the Agreement, the
Business Manager will cooperate with the Company and take all reasonable steps
requested to assist the Board of Directors in making an orderly transition of
the functions performed hereunder by the Business Manager.

 

This Agreement
shall also terminate upon the closing of a business combination between the
Company and the Business Manager.

 

If this
Agreement is terminated pursuant to this Section 14, the parties
shall have no liability or obligation to each other including any obligations
imposed by Section 2(a) hereof, except as provided in Section 17.

 

15.           Assignments. The Business
Manager may not assign this Agreement except to a successor organization that
acquires substantially all of its property and carries on the affairs of the
Business Manager; provided that following the assignment, the persons
who controlled the operations of the Business Manager immediately prior
thereto, control the operations of the successor organization, including the
performance of duties under this Agreement; however, if at any time subsequent
to the assignment these persons cease to control the operations of the
successor organization, the Company may thereupon terminate this Agreement. This
Agreement shall not be assignable by the Company without the consent of the
Business Manager, except to a corporation, trust or other organization that is
a successor to the Company. Any assignment of this Agreement shall bind the
assignee hereunder in the same manner as the assignor is bound hereunder.

 

16.           Default, Bankruptcy, etc. At
the sole option of the Company, this Agreement shall be terminated immediately
upon written notice of termination from the Board of Directors to the Business
Manager if any of the following events occurs:

 

16

 

(a)           the Business Manager violates any
provisions of this Agreement and after notice of the violation, the default is
not cured within thirty (30) days; or

 

(b)           a court of competent jurisdiction
enters a decree or order for relief in respect of the Business Manager in any
involuntary case under the applicable bankruptcy, insolvency or other similar
law now or hereafter in effect, or appoints a receiver liquidator, assignee,
custodian, trustee, sequestrator (or similar official) of the Business Manager
or for any substantial part of its property or orders the winding up or
liquidation of the Business Manager’s affairs; or

 

(c)           the Business Manager commences a
voluntary case under any applicable bankruptcy, insolvency or other similar law
now or hereafter in effect, or consents to the entry of an order for relief in
an involuntary case under any such law, or consents to the appointment of, or
taking possession by, a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or similar official) of the Business Manager or for any substantial
part of its property, or makes any general assignment for the benefit of
creditors, or fails generally to pay its debts, as they become due.

 

The Business
Manager agrees that if any of the events specified in subsections (b) and (c)
of this Section 17 occur, it will give written notice thereof to
the Company within seven (7) days after the occurrence of such event.

 

17.           Action Upon Termination. The
Business Manager shall not be entitled to compensation after the date of
termination of this Agreement for further services hereunder, but shall be paid
all compensation accruing to the date of termination. Upon termination of this
Agreement, the Business Manager shall:

 

(a)           pay over to the Company all moneys
collected and held for the account of the Company pursuant to this Agreement,
after deducting any accrued compensation and reimbursement for expenses to
which the Business Manager is entitled;

 

(b)           deliver to the Board of Directors a
full accounting, including a statement showing all payments collected by the
Business Manager and a statement of all money held by the Business Manager,
covering the period following the date of the last accounting furnished to the
Board of Directors;

 

(c)           deliver to the Board of Directors all
property and documents of the Company then in the custody of the Business
Manager; and

 

(d)           cooperate with the Company and take
all reasonable steps requested by the Company to assist the Board of Directors
in making an orderly transition of the functions performed by the Business Manager.

 

18.           Non-Solicitation. During the
period commencing on the date on which this Agreement is entered into and
ending one year following the termination of this Agreement, the Company shall
not, without the Business Manager’s prior written consent, directly or
indirectly, (i) solicit or encourage any person to leave the employment or
other service of the Business Manager or (ii) hire, on behalf of the Company or
any other person or entity, any person who has 

 

17

 

left the employment within the
one year period following the termination of that person’s employment the
Business Manager. During the period commencing on the date hereof through and
ending one year following the termination of this Agreement, the Company shall
not, whether for its own account or for the account of any other person, firm,
corporation or other business organization, intentionally interfere with the
relationship of the Business Manager with, or endeavor to entice away from the
Business Manager, any person who during the term of the Agreement is, or during
the preceding one-year period, was a customer of the Business Manager.

 

19.           Tradename and Marks. Concurrent
with executing this Agreement, the Company will enter into an agreement granting
the Company the right, subject to the terms and conditions of license
agreement, to use the “Inland” name and marks.

 

20.           Amendments. This Agreement
shall not be amended, changed, modified, terminated or discharged in whole or
in part except by an instrument in writing signed by both parties hereto, or
their respective successors or assigns, or otherwise provided herein.

 

21.           Successors and Assigns. This
Agreement shall bind any successors or assigns of the parties hereto as herein
provided.

 

22.           Governing Law. The provisions
of this Agreement shall be governed, construed and interpreted in accordance
with the internal laws of the State of Illinois without regard to its conflicts
of law principles.

 

23.           Liability and Indemnification.

 

(a)           The Company shall indemnify the
Business Manager and its officers, directors, employees and agents
(individually an “Indemnitee”, collectively the “Indemnitees”) to the same
extent as the Company may indemnify its officers, directors, employees and
agents under its Articles of Incorporation and bylaws so long as:

 

(i)            the Board of Directors has
determined, in good faith, that the course of conduct that caused the loss,
liability or expense was in the best interests of the Company;

 

(ii)           the Indemnitee was acting on behalf
of, or performing services for, the Company;

 

(iii)          the liability or loss was not the
result of negligence or misconduct on the part of the Indemnitee; and

 

(iv)          any amounts payable to the Indemnitee
are paid only out of the Company’s net assets and not from any personal assets
of any Stockholder.

 

(b)           The Company shall not indemnify any
person or entity for losses, liabilities or expenses arising from, or out of,
an alleged violation of federal or state securities laws by any party seeking
indemnity unless one or more of the following conditions are met:

 

18

 

(i)            there has been a successful
adjudication on the merits of each count involving alleged securities law
violations as to the particular person or entity;

 

(ii)           the claims have been dismissed with
prejudice on the merits by a court of competent jurisdiction as to the
particular person or entity; or

 

(iii)          a court of competent jurisdiction
approves a settlement of the claims and finds that indemnification of the
settlement and related costs should be made and the court considering the
request has been advised of the position of the Securities and Exchange
Commission and the published opinions of any state securities regulatory
authority in which securities of the Company were offered and sold with respect
to the availability or propriety of indemnification for securities law
violations.

 

(c)           The Company may pay or reimburse
reasonable legal expenses and other costs incurred by an Indemnitee in advance
of final disposition of a proceeding only if all of the following conditions
are satisfied:

 

(i)            the legal action relates to acts or
omissions with respect to the performance of duties or services by the
Indemnitee for or on behalf of the Company;

 

(ii)           the Indemnitee provides the Company
with written affirmation of the Indemnitee’s good faith belief that the
Indemnitee has met the standard of conduct necessary for indemnification by the
Company as authorized by Section 23(a) hereof;

 

(iii)          the legal action is initiated by a
third party and a court of competent jurisdiction specifically approves the
advance; and

 

(iv)          the Indemnitee receiving the advances
undertakes to repay any monies advanced by the Company, together with the
applicable legal rate of interest thereon, in any case(s) in which a court of
competent jurisdiction finds that the party is not entitled to be indemnified.

 

24.           Notices. Any notice, report or
other communication required or permitted to be given hereunder shall be in
writing unless some other method of giving such notice, report or other
communication is accepted by the party to whom it is given and shall be given
by being delivered at the following addresses of the parties hereto:

 

	
  If to the Company:

  	
  Inland Diversified Real Estate Trust, Inc.

  
	
   

  	
  2901 Butterfield Road

  
	
   

  	
  Oak Brook, IL 60523

  
	
   

  	
  Attention:

  	
  Ms. Roberta S. Matlin

  
	
   

  	
  Telephone:

  	
  (630) 218-8000

  
	
   

  	
  Facsimile:

  	
  (630) 218-4955

  

 

19

 

	
  If to the Business Manager:

  	
  Inland Diversified Business Manager & Advisor Inc.

  
	
   

  	
  2901 Butterfield Road

  
	
   

  	
  Oak Brook, IL 60523

  
	
   

  	
  Attention:

  	
  Ms. Brenda Gujral

  
	
   

  	
  Telephone:

  	
  (630) 218-8000

  
	
   

  	
  Facsimile:

  	
  (630) 218-4955

  

 

Either party
may at any time give notice in writing to the other party of a change of its
address for the purpose of this Section 24.

 

25.           Conflicts of Interest and
Fiduciary Duties to the Company and to the Company’s Stockholders. The
Company and the Business Manager recognize that their relationship is subject
to various conflicts of interest. The Business Manager, on behalf of itself and
its Affiliates, acknowledges that the Business Manager and its Affiliates have
fiduciary duties to the Company and to the Stockholders. The Business Manager,
on behalf of itself and its Affiliates, shall endeavor to balance the interests
of the Company with the interests of the Business Manager and its Affiliates in
making any determination where a conflict of interest exists between the
Company and the Business Manager or its Affiliates.

 

26.          Headings.
The section headings hereof have been inserted for convenience of reference
only and shall not be construed to affect the meaning, construction or effect
of this Agreement.

 

20

 

IN WITNESS
WHEREOF, the undersigned have executed this Business Management Agreement as of
the date first above written.

 

	
  COMPANY:

  	
   

  	
  BUSINESS MANAGER:

  
	
   

  	
   

  	
   

  
	
  INLAND DIVERSIFIED REAL ESTATE TRUST,

  INC.

  	
   

  	
  INLAND DIVERSIFIED BUSINESS MANAGER &

  ADVISOR INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  
	
  Name:

  	
   

  	
   

  	
  Name:

  	
   

  
	
  Its:

  	
   

  	
   

  	
  Its:

  	
   

  

 

 

Schedule
2.9

 

The Business
Manager shall enter into ancillary agreements with the Sponsor and its
Affiliates to arrange for the services and licenses to be provided by the
Business Manager under the Agreement, as summarized below.

 

•                                          Communications Services. Inland
Communications, Inc. will provide marketing, communications and media relations
services, including designing and placing advertisements, editing marketing
materials, preparing and reviewing press releases, distributing certain
stockholder communications and maintaining branding standards.

 

•                                          Computer Services. Inland Computer
Services, Inc., or ICS, will provide data processing, computer equipment and
support services and other information technology services, including custom
application, development and programming, support and troubleshooting, data
storage and backup, email services, printing services and networking services,
including Internet access.

 

•                                          Insurance and Risk Management Services. Inland
Risk and Insurance Management Services, Inc. will provide insurance and risk
management services, including negotiating and obtaining insurance policies,
managing sales contracts, leases and other real estate or corporate agreements
and documents and settling claims and reviewing and monitoring the Company’s
insurance policies.

 

•                                          Legal Services. The Inland Real Estate
Group, Inc. will provide legal services, including drafting and negotiating
real estate purchase and, performing due diligence and rendering legal
opinions.

 

•                                          Office and Facilities Management Services. Inland
Office Services, Inc. and Inland Facilities Management, Inc. will provide
office and facilities management services, including purchasing and maintaining
office supplies and furniture, installing telephones, maintaining security,
providing mailroom, courier and switchboard services and contracting with and
supervising housekeeping and other facilities maintenance service providers.

 

•                                          Personnel Services. Inland Human Resource
Services, Inc. will provide personnel services, including pre-employment
services, new hire services, human resources, benefit administration and
payroll and tax administration.

 

•                                          Property Tax Services. Investors Property
Tax Services, Inc. will provide property tax services, including tax reduction,
such as monitoring properties and seeking ways to lower assessed valuations,
and tax administration, such as coordinating payment of real estate taxes.

 

•                                          Software License. ICS will grant the
Business Manager a non-exclusive and royalty-free right and license to use and
copy software owned by ICS and to use certain third party software according to
the terms of the applicable third party licenses to ICS, all in connection with
the Business Manager’s obligations under the Agreement. ICS will provide the
Business Manager with all upgrades to the licensed software.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00150-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00150-of-00352.parquet"}]]