Document:

Exhibit 10.2

 

AGREEMENT OF PURCHASE AND SALE

AND

CONTRIBUTION AGREEMENT

 

AGREEMENT OF PURCHASE AND SALE AND CONTRIBUTION AGREEMENT (this “Agreement”) made as of this 17th day of October, 2012, between CENTENNIAL GATEWAY, LLC, a Nevada limited liability company (“Seller”), and INLAND REAL ESTATE ACQUISITIONS, INC., an Illinois corporation (“Buyer”).

 

W  I  T  N  E  S  S  E  T  H:

 

A.            Seller is the owner of fee simple title to the shopping center Property (as such term is hereinafter defined) in the State of Nevada, as identified and more particularly described in Schedule 1 attached hereto (together with all rights, privileges, development rights, air rights, rights-of-way, and easements appurtenant thereto, the “Land”).

 

B.            Seller desires to convey the Property to Buyer, and Buyer desires to acquire the Property from Seller, each upon and subject to the terms and conditions of this Agreement.

 

C.            Simultaneously with the execution of this Agreement, Buyer, as buyer, and certain affiliates of Seller (collectively, the “Affiliate Sellers”), as sellers, are entering into that certain Agreement of Purchase and Sale and Contribution Agreement (the “PSA”) pertaining to the properties more particularly described therein (collectively, the “Affiliate Properties”).

 

D.            In accordance with Article XIX below, Buyer intends to assign is rights under this Agreement to a subsidiary of Inland Diversified Real Estate Trust, Inc., a Maryland corporation (“Inland Diversified”).

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by each party hereto, and intending to be legally bound hereby, the Seller and Buyer agree as follows:

 

ARTICLE I.

 

SUBJECT OF SALE

 

Section 1.1.  Sale.  Subject to the terms and conditions of this Agreement, Seller shall convey to Buyer, (which conveyance may at Seller’s option, subject to the terms hereof, be structured partially as a sale and partially as a contribution to the capital of Operating Company (as defined below)), and Buyer and, if applicable, Operating Company shall acquire from the Seller, (a) the Land, (b) the buildings and other improvements located on the Land (the “Buildings”), and (c) except to the extent otherwise set forth herein, all of the other tangible and intangible property owned by the Seller in, on, attached to, appurtenant to, or used solely in the operation or maintenance of, the Land or the Buildings (the “Included Property” and, collectively with the Land and the Buildings, the “Property”) including, without limitation, the following:

 

(a)  Seller’s interests as landlord under all leases, licenses and other occupancy agreements for space in the Buildings for the tenants in Occupied Spaces (as defined below) per

 

 

Exhibit A-2 attached hereto (as same may be amended, modified, renewed or extended in accordance with the terms of this Agreement, the “Leases”), together with all leases, licenses and other occupancy agreements relating to the Buildings entered into by the Seller after the date hereof in accordance with the terms of this Agreement, to the extent the Leases do not expire or are not terminated prior to the Closing Date (as hereinafter defined) in accordance with the terms of this Agreement;

 

(b)  Seller’s interests, if any, in all refundable security deposits (“Security Deposits”) made by tenants (“Tenants”) under the Leases and currently held by Seller;

 

(c)  Seller’s interests, if any, in all transferable licenses, permits, certificates, approvals, authorizations, variances and consents (but excluding therefrom licenses to the extent included in the definition of Leases) (collectively, the “Permits”) issued or granted by governmental and quasi-governmental bodies, officers and authorities solely in respect of the ownership, occupancy, use and operation of the Land or the Buildings;

 

(d)  Seller’s interests, if any, in all transferable architectural, mechanical, engineering and other plans and specifications relating solely to the Land or the Buildings which are in Seller’s and/or Territory Incorporated’s (“Manager”) possession;

 

(e)  all right, title and interest of the Seller in and to any and all assignable service, utility, maintenance and other contracts and agreements affecting the Land or the Buildings (each of which existing on the date hereof being listed on Exhibit C attached hereto) (collectively, such contracts and agreements, as same may be amended, modified, renewed or extended in accordance with the terms of this Agreement, the “Service Contracts”), but only with respect to Service Contracts that are not terminated in accordance with the provisions of this Agreement;

 

(f)  all right, title and interest of Seller in and to all assignable warranties and guaranties relating solely to the Buildings and Personal Property; and

 

(g)  all right, title and interest of Seller in and to machinery, tools, equipment, fixtures and other tangible property in, on, attached to, and used by Seller solely in the operation or maintenance of, the Land or the Buildings which are owned or leased by Seller, including, without limitation, the inventory, supplies, building materials, tools, machinery and equipment listed on Exhibit D attached hereto (the “Personal Property”).

 

The Included Property shall exclude (i) all cash of any of the Seller other than the aforementioned Security Deposits, (ii) delinquent Tenant arrearages and accounts receivables as of the Closing Date (except to the extent such accounts receivable relate to CAM, Taxes and insurance for the year of Closing which shall be retained by Seller but are subject to a reconciliation pursuant to Section 6.7), (iii) Seller’s policies of title insurance, (iv) Seller’s rights under this Agreement, (v) except as otherwise set forth in this Agreement, all insurance proceeds with respect to events existing or occurring prior to, and other claims existing on, the Closing Date, (vi) any litigation or collection settlements or awards for tenant and leasing litigation or collection activity commencing prior to the Closing Date, including, without limitation, those set forth on Exhibit G, and (vii) the right to use the name “Territory” or variations thereof.

 

Section 1.2.  Structure of Contribution to Operating Company; OP Units.  Notwithstanding anything contained herein to the contrary, Seller and Buyer acknowledge and agree that Buyer’s acquisition of the Property may, at Seller’s request, on the Closing Date and subject to all other terms and conditions (including the satisfaction of conditions precedent) set forth herein, be structured for Seller pursuant to the

 

2

 

description set forth on Schedule 3 attached hereto and incorporated herein, which shall require the applicable parties executing and delivering at Closing a Limited Liability Company Agreement (an “Operating Agreement”) for each subsidiary formed (an “Operating Company”).  Such Operating Agreement shall provide for a four percent (4%) preferred return for (a) up to eight (8) years for an amount of OP Units not to exceed Ten Million Dollars ($10,000,000) and (b) not less than five (5) years for the remaining OP Units.  The Operating Agreement for the Seller and the Affiliate Sellers shall be mutually agreed to by Seller, the Affiliate Sellers, and Buyer prior to the end of the Due Diligence Period and then attached hereto as Exhibit F.  The Operating Agreement shall provide for the issuances of units in the Operating Company (the “OP Units”) with guaranteed cash flow and liquidation payments and provisions for required redemptions and/or conversion of OP units into shares of Inland Diversified, or both, if Inland Diversified is publicly traded at such time. The parties shall also agree on representations and warranties to Seller regarding the Operating Company similar to the representations of Buyer set forth in Section 9.1 below and, if requested by Seller, a guaranty or other similar agreement by Inland Diversified  assuring payment of cash flow to the Seller.  The Operating Agreement shall contain covenants, reasonably acceptable to Buyer, regarding the operation and maintenance of Operating Company.  In the event that the parties using their good faith efforts are unable to agree on the terms of the Operating Agreement (other than the business terms set forth herein, all of which have been agreed upon) prior to the end of ten (10) Business Days from the date of this Agreement either party may terminate this Agreement by written notice to the other, in which event the Deposit shall be returned to Buyer and neither party shall have any further liability hereunder except as expressly set forth otherwise.

 

ARTICLE II.

 

PURCHASE PRICE

 

Section 2.1.  Purchase Price.  The aggregate purchase price for the Property (the “Purchase Price”) is the sum of (a) FIFTY-FOUR MILLION FIVE HUNDRED THOUSAND AND 00/100 DOLLARS ($54,500,000.00) as adjusted by the amount of the Estimated Earnout Payment Amount (as defined below) (the “Initial Funding”); and (b) the Earnout Payments (as defined below) payable by Buyer to Seller in accordance with Article IV below.  The Initial Funding shall be payable by Buyer to Seller as follows:

 

(a)  Buyer shall, within one (1) Business Day after full execution of this Agreement (“Opening of Escrow”), deliver to Chicago Title & Trust Company (the “Escrow Holder”) located at 171 North Clark Street, 3rd Floor, Chicago, Illinois, Attn:  Nancy Castro, FIVE HUNDRED THOUSAND AND 00/100 DOLLARS ($500,000.00) by wire transfer of immediately available good funds to an account designated by Escrow Holder (together with any interest earned thereon, the “Deposit”).  The Deposit shall only be refundable to Buyer if Buyer terminates this Agreement in accordance with the provisions of this Agreement which expressly provide for the return of the Deposit to Buyer upon such termination.

 

(b)  Buyer shall, prior to the Closing, deliver to Escrow Holder, by bank wire transfer of immediately available funds to an account designated by Escrow Holder, the Initial Funding less the amount of the Deposit, and, if applicable, the Unit Value (as defined below).  At the Closing, Escrow Holder shall deliver to Seller the Initial Funding as adjusted to reflect prorations and other adjustments made pursuant to Article VI, and shall cause the TI/Commission Escrow (as defined in Section 4.5) to be funded from the Seller’s proceeds of the Initial Funding, pursuant to the applicable escrow agreement executed by the parties.  Seller and Buyer agree that the Initial Funding may be adjusted upward or downward, as determined by the final lease-up (and compliance with all contingencies for a funding of Earnout Payments) of the Earnout Spaces for the Property as of the Closing.

 

3

 

(c)  If applicable, Thirty Million Dollars ($30,000,000.00), less the amount of the value of the OP Units to be issued to the Affiliate Sellers under the PSA, of the Initial Funding (the “Unit Value”) shall be evidenced by the issuance of OP Units to Seller subject to and in accordance with the terms and conditions of the Operating Agreement.  The allocation of the OP Units among Seller, if any, and the applicable Affiliate Sellers shall be designated by Seller and the Affiliate Sellers not later than November 30, 2012, and memorialized on Schedule 3.  Subject to the Affiliate Sellers agreeing to take all OP units, the parties acknowledge that Seller shall have the right to elect not to receive any OP Units, in which event the entire Purchase Price shall be paid in cash or immediately available funds in accordance with this Agreement.

 

ARTICLE III.

 

TITLE EXCEPTIONS; DUE DILIGENCE.

 

Section 3.1.  Title and Surveys.  (a)  Buyer shall accept title to the Property subject only to: (i) those liens, encumbrances, covenants, conditions and restrictions of record approved by Buyer during the Due Diligence Period other than exceptions which Seller has agreed to cure or remove in accordance with subsection (c) below; (ii) the lien of general real estate taxes which are not yet due and payable; (iii) the Leases (including any executed leases for Master Lease Space and Earnout Space); and (iv) matters affecting the condition of title to the Property created by or with the written consent of Buyer (collectively, any such matters, the “Permitted Encumbrances”).

 

(b)  Subject to Seller’s obligations for certain title expenses as set forth in Article V, Buyer will order from the Title Company an owner’s title insurance policy insuring Buyer as the owner of the Property in the amount of the Purchase Price (“Title Policy”).  The only representations and warranties to be made by Seller regarding the condition of title to the Property shall be as set forth in the Deed (as defined below). On or about thirty (30) days following the Opening of Escrow, Seller shall cause the existing survey of the Property to be updated (or a new survey ordered) (the “Survey”) for the Property in accordance with the 2011 Minimum Standard Detail Requirements for ALTA/ACSM Land Title Surveys jointly established and adopted by ALTA and NSPS and includes all subject parcels, and Table A optional survey responsibilities 1, 2, 3, 4, 6(b), 7(a), 7b(1), 7(c), 8, 9, 10(a) 11(a), 13, 14, 16, 17, 18, 19 and shall provide a statement indicating that any potential encroachments identified in the process of conducting the Survey are shown.

 

(c)  Chicago Title & Trust Company through its local correspondent, Fidelity National Title (“Title Company”) will provide Buyer, within ten (10) days after the Opening of Escrow, the “Preliminary Title Report” for the Property for Buyer’s review and approval, together with legible copies of all exceptions of record.  Buyer will have thirty (30) days from the date the latest of the Preliminary Title Report, all exceptions of record set forth therein and the Survey is delivered to Buyer (the “Title Review Period”) to object to any exceptions to title set forth therein by notice delivered to Seller and Escrow Holder.  In the event Buyer fails to notify Seller in writing within said Title Review Period of any such disapproval of the matters disclosed by Buyer’s review of the Preliminary Title Report and the Survey, the state of title to and the Survey for the Property shall be deemed approved.  Seller shall have the right, but not the obligation, to elect to cure, release or remove on or before the Closing, any or all title exceptions which are objected to by Buyer during the Title Review Period and to deliver to Buyer written notice of such election within ten (10) days after the end of the Title Review Period (“Seller’s Election Period”).  Prior to expiration of the Seller’s Election Period, Seller will provide Buyer with written notice of its election to either cause all (or any) of the objected to exceptions to be removed, released or cured on or before the Closing or of its election not to cure such objections, Buyer shall have the right, by delivering written notice to Seller within ten (10) days after Seller’s Election Period, either to (i) terminate this Agreement, 

 

4

 

whereupon Escrow Holder shall immediately return the Deposit to Buyer, or (ii) elect to purchase the Property subject to all title exceptions other than exceptions which Seller has agreed to cure or remove.  If Seller fails to notify Buyer of its election not to cure objected items, it shall be deemed to have elected to cure, remove or release such items.  If Buyer fails to give timely notice electing either alternative (i) or alternative (ii), Buyer shall be deemed to have elected alternative (ii).  Notwithstanding any provision contained in this Agreement, in no event shall any financial liens or encumbrances securing payment of private debts affecting the Property (“Mortgage Liens”) (other than current taxes not yet due or payable and assessments and items created by Buyer) be deemed to be exceptions to title, and any Mortgage Liens shall, on or before the Closing Date, be paid in full by the Seller.  In the event Seller is not able to obtain any required consent for the holder of a Mortgage Lien prior to October 31, 2012 for a par payoff (with no prepayment amount or premium) of the Mortgage Lien, Seller shall notify Buyer of such failure prior to October 31, 2012.  Such failure shall not be a default hereunder by Seller, and either party may terminate this Agreement within ten (10) days of such notice from Seller without any further obligation or liability to the other party; however, in the event of such termination, Seller shall reimburse Buyer for the reasonable, out-of-pocket costs for all third-party reports incurred by Buyer, however, not to exceed $200,000 with respect to the transactions contemplated under this Agreement and the PSA, collectively to the extent that Buyer provides documentation reasonably satisfactory to Seller evidencing the payment of such costs, and the Deposit shall be returned to Buyer.  In addition, Seller shall cure all exceptions arising from instruments executed and recorded of record by Seller after the date of this Agreement except for instruments providing notices of any Leases, subordination and non-disturbance agreements with respect to Leases, landlord consents to tenant financing and other documents customarily executed by landlords with respect to tenant leases (collectively, “Recorded Lease Instruments”).  It shall also be a default if Seller fails to cure all exceptions arising from instruments executed and recorded of record by Seller after the date of this Agreement except for Recorded Lease Instruments and, in such event, this Agreement shall terminate and the Deposit shall be returned to Buyer notwithstanding the fact that the Due Diligence Period had expired.

 

Section 3.2.  Due Diligence Period; Deliveries by Seller; Buyer’s Termination Right. Buyer shall have until 5:00 P.M. (PST) on December 17, 2012 (the “Due Diligence Period”) within which to perform and conduct any and all of Buyer’s due diligence investigations, reviews, studies and inspections pertaining to the purchase of the Property, as Buyer may elect in its sole discretion.  Within five (5) days after the Opening of Escrow, Seller shall deliver or make available to Buyer for inspection, those documents, information and reports reasonably requested by Buyer in the diligence checklist attached hereto as Schedule I which are in Seller’s possession or control (including, copies of the most recent appraisals dating back no further than 2007 for the Property to the extent that they are in Seller’s possession) (collectively, the “Due Diligence Materials”).  The Due Diligence Materials do not (and are not required to) include (a) any documentation or information which Seller must keep confidential, (b) any items which are protected by any attorney-client privilege, (c) any purchase and escrow agreements and correspondence pertaining to Seller’s acquisition of the Property, (d) any documents pertaining to any potential acquisition of the Property by any past or prospective purchaser, (e) any reports prepared by Seller or any affiliate of Seller solely for the internal use of Seller, and (f) any proprietary information not relating to the physical or financial condition of the Property.  At Closing, Seller shall also execute the audit representation letter attached hereto as Schedule II and shall permit Buyer’s auditors to conduct an audit of Seller’s operations at the Property for the year of Closing and the two (2) years prior thereto subject to any qualifications required to make the representation letter true and correct.  Buyer shall conduct such audit within sixty (60) days of the Closing. Notwithstanding the foregoing, it shall not in and of itself be deemed a default by Seller under this Agreement if Seller does not deliver or make available any Due Diligence Material to Buyer unless Seller willfully fail to deliver or make available any Due Diligence Material. Buyer has the right, at any time up to and including the day on which the Due Diligence Period is to expire, to terminate this Agreement for any reason in Buyer’s sole discretion upon written notice to Seller and Escrow Holder.  

 

5

 

If Buyer fails to terminate this Agreement as provided in this Section 3.2, Buyer shall, subject to all of the other terms and conditions set forth in this Agreement, be deemed to have approved all matters pertaining to or affecting the Property, and the Deposit shall thereafter be non-refundable, except upon Seller’s default hereunder, a failure of an express condition precedent to Buyer’s obligations set forth in Section 7.2 below or any other reason expressly set forth in this Agreement.

 

Section 3.3.  No Representations Regarding Due Diligence Materials.  By making available to or furnishing Buyer with the Due Diligence Materials, Seller does not make any warranty or representation with respect to the accuracy, completeness, conclusions or statements expressed in the Due Diligence Materials, except with respect to schedules or exhibits prepared by Seller or under its direction but subject to any qualifications and limitations stated therein.

 

Section 3.4.  Access to the Property.  Subject to the provisions of this Section 3.4, Buyer and Buyer’s employees and representatives will continue to be afforded access to the Property through the Closing for Buyer’s reasonable due diligence investigations. Buyer agrees to give Seller reasonable notice prior to such entry.  At Seller’s option, Seller or Seller’s representatives may be present for any such investigations.  Buyer hereby agrees to indemnify, protect, defend (by counsel reasonably satisfactory to Seller) and hold Seller and Seller’s officers, managers, directors, employees and agents harmless from and against any and all claims, demands, losses, costs, damages, expenses and liabilities (including but not limited to personal injury and property damage claims and mechanics’ or other liens), including reasonable attorneys’ fees and litigation costs, caused by or occurring in connection with the presence of Buyer or Buyer’s agents on any of the Property or the exercise by Buyer of any of its rights under this Section 3.4.  In addition, Buyer shall keep the Property free from any liens which could arise as a result of the exercise by Buyer of any of its rights under this Section 3.4, and, Buyer shall promptly, at its sole cost and expense, restore the Property to the same condition as existed prior to its entry onto the Property.  The provisions of this Section 3.4 shall survive the Closing or any termination of this Agreement.  Buyer and/or Buyer’s employees or representatives shall not communicate or otherwise interfere with the Tenants or with the normal conduct by Seller or the Manager of its business at the Property.

 

Section 3.5.  Return of Information Upon Termination.  If this Agreement is terminated by either party pursuant to the terms of this Agreement for any or no reason, then upon Seller’s request, Buyer shall: (a) return to Seller (or destroy, as directed by Seller and confirmed in writing by Buyer) all Due Diligence Materials delivered to Buyer or its advisors, agents, representatives, or any other persons or entities acting for or on behalf of any of the foregoing (collectively, the “Receiving Party Representatives”); and (b) upon payment by Seller to Buyer of the actual costs paid by Buyer to third parties for such items or the maximum amount required by Section 3.1(c), deliver to Seller a copy of any report, study, data, analysis and survey that Buyer and/or the Receiving Party Representatives discover, commission or generate in connection with or resulting from their due diligence activities on the Property (collectively, the “Information”), provided such Information shall be provided to Seller without representation or warranty of any kind by Buyer.  The provisions of this Section 3.5 shall survive any termination of this Agreement.

 

ARTICLE IV.

 

MASTER LEASE SPACE; EARNOUT SPACE.

 

Section 4.1.   MASTER LEASE SPACES; EARNOUT SPACES.  Seller and Buyer acknowledge and agree that some of the Property will not be one hundred percent (100%) leased and occupied by Tenants as of the Closing Date.  As of the date set forth on Exhibit A-2, the parties have identified certain information (including Tenants and their Annual Rent, common area maintenance charges (“CAM”), real estate taxes (“Taxes”) and insurance) on Exhibit A-2 for the following:  (a) space occupied (“Occupied Space”) by Tenant pursuant to Leases executed with third parties (“Occupied Leases”), (b) spaces 

 

6

 

(“Master Lease Spaces”) to be initially leased by Seller pursuant to a master lease (collectively, “Master Leases”) (as shaded in yellow on Exhibit A-2), and (c) unoccupied spaces (collectively, the “Earnout Spaces”) that may be leased pursuant to Earnout Leases (as defined below) (as shaded in red in Exhibit A-2), and (d) vacant spaces (“Vacant Spaces”).  Such Exhibit (including the identification of space at the Property (and Rental Charges (as defined below), as applicable) as Occupied Spaces, Master Lease Spaces, Earnout Spaces or Vacant Spaces) shall be updated from time to time prior to Closing by Seller to reflect the leasing of space and/or vacancy thereof at the Property, and such Exhibits (including the final identification of space at the Property (and Rental Charges, as applicable) as Occupied Spaces, Master Lease Spaces, Earnout Spaces or Vacant Spaces) shall be finalized by Seller not later than three (3) Business Days prior to the Closing Date.  Seller shall, in Seller’s sole discretion, determine which spaces are Master Lease Spaces, Earnout Spaces or Vacant Spaces.  The parties acknowledge and agree that as a condition to Closing, Buyer requires the annual base rent payable under the Leases (including, without limitation, the Master Leases and the Leases set forth on Schedule IV that meet the Lease Completion Criteria as of December 31, 2012) for the Property and all of the Affiliate Properties to be at least $21,109,521 per year as of the Closing Date (“Annual Rent Requirement”); provided that no more than $575,482 of this Annual Rent Requirement shall be derived from Master Leases at the Property and the Affiliate Properties.  Buyer acknowledges and agrees that Seller shall have the sole right to lease the Master Lease Spaces and the Earnout Spaces pursuant to the terms of this Article IV and Section 15.1; provided that Buyer shall have the right to submit for Seller’s approval proposed leases for the Master Lease Spaces and the Earnout Spaces, which approval shall not be unreasonably withheld, conditioned or delayed.   This Article IV shall survive the Closing for a period of thirty-six (36) months.

 

Section 4.2.  DEFINITIONS.

 

(i)  “Base Rent Divider” shall mean .077680.

 

(ii)  “Burn-Off Lease” shall mean: (a) a Lease with a tenant listed on Exhibit A-2 that relates to Master Lease Space, (b) a Lease entered into between Seller and a third party prior to Closing in accordance with the terms of this Agreement that relates to Master Lease Space; and (c) a Post Closing Burn-Off Lease (as defined below).

 

(iii)  “Earnout Lease” shall mean: (a) a Lease with a tenant listed on Exhibit A-2 that relates to Earnout Space, (b) a Lease entered into between Seller and a third party prior to Closing in accordance with the terms of this Agreement that relates to Earnout Space; and (c) a Post Closing Earnout Lease (as defined below).

 

(iv)  “Earnout Payments” shall mean the payment(s) of a portion of the Purchase Price to be made by Buyer after Closing to Seller as set forth below in Section 4.2 with respect to Earnout Space, if any, that may not be funded at the time of Closing.  The Earnout Payments for each portion of the Earnout Space that is leased subsequent to Closing shall equal the total base rent payable by the tenant under the new lease for the Earnout Space for the initial twelve (12) months commencing when full base rent under such lease is payable (i.e., not taking into account free rent or discounted rent at the inception of the term of the lease, if any), as adjusted for any Rent Deficiency for such 12-month period, divided by the Base Rent Divider.

 

FOR EXAMPLE:  Subsequent to Closing, Seller leases a 4,000 square foot portion of the Earnout Space.  The base rent payable under such lease during the 

 

7

 

initial twelve (12) months after the full base rent under such lease is payable is $120,000.00, and such lease is a so called “triple-net” lease where the tenant pays its pro-rata share of CAM, Taxes and insurance.  When the tenant under the lease becomes a Rent Paying Tenant (as defined below), the Earnout Payment with respect to that portion of the Earnout Space shall be $1,544,799.18 (i.e. $120,000 divided by .077680).

 

FOR ANOTHER EXAMPLE:  Subsequent to Closing, Seller leases a 4,000 square foot portion of the Earnout Space.  The base rent payable under such lease during the initial twelve (12) months after the full base rent under such lease is payable is $120,000.00, but a Rent Deficiency exists under such lease in the amount of $10,000.00 per year.  When tenant under the lease becomes a Rent Paying Tenant, then the Earnout Payment with respect to that portion of the Earnout Space shall be $1,416,065.91 (i.e., $120,000.00 less $10,000.00, divided by .077680).

 

(v)  “Earnout Period” means the period of time that commences as of the Closing Date and ends thirty-six (36) months thereafter.

 

(vi)  “Estimated Earnout Payment Amount” shall mean the amount calculated by dividing the annual scheduled base rent less the scheduled Rent Deficiency, if any, as such amounts are set forth on the final Exhibit A-2 for any Earnout Space for the term of the proposed Earnout Lease by the Base Rent Divider.

 

(vii)  “Lease Completion Criteria” shall mean:

 

(A)          with respect to any Earnout Lease for an Earnout Space or Burn-Off Lease for a Master Lease Space that is not a ground lease, that: (a) the tenant thereunder (1) is in possession of its premises and is open for business, (2) has commenced paying base rent and its share of CAM, Taxes and insurance in accordance with the terms of its lease (collectively, “Rental Charges”) or, with respect to any of the Leases listed on Schedule IV attached hereto, if the applicable lease provides for a period after occupancy by tenant during which the tenant is not required to pay full Rental Charges, Seller has agreed to pay to Buyer, or deduct from any amount payable to Seller by Buyer with respect to such Lease, as applicable, an amount equal to the Rental Charges not payable by the Tenant during such period and the date for rent commencement for such tenant can be specifically determined; and (3) has executed and delivered a commencement date agreement or certificate, and “clean” estoppel certificate certifying that all obligations to be performed by landlord under its lease prior to the commencement date have been performed except minor punch-list items; (b) a final certificate of occupancy (or similar certificate) has been issued for its premises by the applicable governmental authorities; (c) the applicable contractor has provided lien waivers/releases, or Seller has escrowed with the Title Company 125% of the amount of any amount in dispute or such other amount required by Title Company to issue its extended coverage endorsement insuring over mechanic’s liens; (d) Seller provides written confirmation that all lease commissions owing with respect to the initial term of the lease for such space have been paid in full by Seller or that an 

 

8

 

amount adequate to pay such claimed commissions shall has been escrowed; (e) if applicable, the Title Company is prepared to issue a date-down endorsement of the title policy increasing the amount of coverage by the Earnout Payment due with respect to the lease for such space; and (f) Seller has paid to Buyer such amount as is necessary to reconcile and prorate, as of the due date of the Earnout Payment or the date the Master Lease Space shall be removed from the Master Lease Obligations, each as applicable, the Rental Charges; and

 

(B)          with respect to any Burn-Off Lease for a Master Lease Space that is a ground lease set forth on Schedule IV, that: (a) the tenant thereunder is in possession of its premises, (b) the actual date on which such tenant must commence paying rent can be specifically determined (the “Ground Lease Rent Payment Commencement Date”), (c) Seller has agreed to pay to Buyer, or deduct from any amount payable to Seller by Buyer with respect to the applicable ground lease, an amount equal to the applicable period prior to the Ground Lease Rent Payment Commencement Date; and (d) the tenant has executed and delivered “clean” estoppel certificate certifying that all obligations to be performed by landlord under its lease prior to the commencement date have been performed.

 

(viii)  “Rent Deficiency” shall mean, with respect to an Earnout Space, the amount, if any, by which the annual amount to be paid by a tenant in an Earnout Space as a contribution to CAM, Taxes and insurance (i.e. “triple net” charges only) is less than that tenant’s proportionate share of such items (after adjustment for contributions made by major tenants and the effect of any “opening and operating” clause) based on a fraction, the numerator of which is the square footage leased by the tenant and the denominator of which is the square footage leased by all tenants of the Property; provided, however, the parties agree that any such CAM, Taxes and insurance charge shall be appropriately accounted for based on other similar tenants within the same zone of similar size and use.

 

(ix)  “Rent Paying Tenant” means a tenant of any Earnout Space or Master Lease Space, as applicable, but only after the Lease Completion Criteria have been satisfied by the express terms of the Earnout Lease or Burn-Off Lease or have been deemed to have been satisfied by waiver by Buyer.

 

Section 4.3.  MASTER LEASE SPACE.

 

(a)  In order to supplement the Occupied Leases to meet the Annual Rent Requirement as of the Closing Date, for a period of thirty-six (36) months following the Closing Date (“Master Lease Period”), Seller shall be required to pay to Buyer, on a monthly basis, the Rental Charges as set forth on Exhibit A-2 for those Master Lease Spaces until the date a tenant of such Master Lease Space (each, a “Burn-Off Lease Tenant”) becomes a Rent Paying Tenant.  The foregoing payment obligations of Seller shall hereinafter be referred to as the “Master Lease Obligations”.

 

(b)  During the Master Lease Period, Seller shall have the right to enter the Master Lease Space and the Property in which it is located to show the Master Lease Space to prospective 

 

9

 

tenants, to place “for lease” signs on the Master Lease Space and to negotiate and present to Buyer for review and approval, and thereafter execution, one or more leases for the Master Lease Spaces (each, a “Post Closing Burn-Off Lease”).  Each Post Closing Burn-Off Lease which may be executed by Buyer after the Closing shall be documented on a lease form provided by Buyer for retail space at the Property (except in the event such prospective tenant had received Seller’s form of lease prior to the expiration of the Due Diligence Period, in which event, Seller’s form of lease shall be acceptable to Buyer), shall be at not less than the base rent set forth for the space on Exhibit A-2 for such Master Lease Space, and the proposed tenant and the form and content of the proposed Post Closing Burn-Off Lease shall otherwise be subject to the leasing parameters set forth on Schedule III attached hereto (“Leasing Parameters”) and the approval of Buyer which shall not be unreasonably withheld, conditioned or delayed.  If Buyer rejects a proposed Post Closing Burn-Off Lease for a Master Lease Space, it shall specify the reasonable basis for the rejection and the changes, which if made, would cause Buyer to approve the Post Closing Burn-Off Lease.  If a proposed Post Closing Burn-Off Lease and/or proposed tenant for a Master Lease Space which meet the foregoing criteria are not approved by Buyer on or before ten (10) Business Days after the date submitted, or Buyer provides no reasonable basis for the rejection, such proposed tenant shall be deemed to be a Rent Paying Tenant for such Master Lease Space solely for purposes of determining the amounts to be released to Buyer and Seller pursuant to Section 4.3(c) below. If, during the Master Lease Period and for six (6) months thereafter, Buyer leases any space within the Property to the prospective tenant under a Burn-Off Lease which it previously rejected  pursuant to this provision, upon material terms substantially the same or more favorable to tenant as when originally proposed, the Burn-Off Lease previously submitted shall be deemed to have been approved as and when originally proposed and, to the extent necessary, payments shall be made between the Seller and Buyer.

 

(c)  Until the date a Burn-Off Lease Tenant satisfies the Lease Completion Criteria for such space, during the Master Lease Period, Seller shall collect and retain all rent, CAM, Taxes and insurance paid by the tenant of the Master Lease Space and shall have the right and obligation to perform those obligations of the “landlord” under each Burn-Off Lease to satisfy the Lease Completion Criteria. Upon the date a Burn-Off Lease Tenant becomes a Rent Paying Tenant or is deemed to be a Rent Paying Tenant pursuant to Section 4.3(b) above, the following shall occur:

 

(i)  if the Rental Charges payable under the Burn-Off Lease, which are acceptable to Buyer in its reasonable judgment, are less than the Rental Charges set forth for such Master Lease Space on Exhibit A-2 with respect to the Master Lease Period (“Shortfall Payment”), Buyer shall pay Seller the Shortfall Payment;

 

(ii)  the Seller shall be incrementally released from the Master Lease Obligations for such Master Lease Space; and

 

(iii)  such Master Lease Space shall be deemed terminated with respect to Seller’s obligation under the Master Lease Obligations.

 

Notwithstanding anything to the contrary contained in this Agreement, Buyer acknowledges that the Master Lease Obligation is not joint and several among the Seller and the Affiliate Sellers, but Seller and each Affiliate Seller is only obligated for such Master Lease Obligations for its applicable property.

 

(d)  During the Master Lease Period, Buyer shall pay to Seller any amounts paid to Buyer by Burn-Off Lease Tenants under an executed Burn-Off Lease prior to such Tenant becoming a Rent Paying Tenant.  Buyer will provide Seller with a monthly report of payments received and 

 

10

 

amounts paid to Buyer with respect to such Burn-Off Lease Tenants and any information on communication or notices to or from such Burn-Off Lease Tenants.  Buyer shall provide a monthly invoice to the Seller of the amount due and payable under the Master Lease Obligations, which shall be paid within five (5) Business Days by Seller to Buyer in arrears based on whether or not a Burn-Off Lease Tenant has become a Rent Paying Tenant.

 

(e)  If Seller fails to pay Buyer the Master Lease Obligations required to be paid hereunder by Seller during the Master Lease Period when required, Buyer shall have the right to offset any uncontested amounts against all payments with respect to Preferred Units and Earnout Payments due to the Seller responsible for such Master Lease Obligations but only after written notice to Seller.

 

(f)  Upon the date a Burn-Off Lease Tenant becomes a Rent Paying Tenant, in no event shall Seller be responsible for any failure of that particular Burn-Off Lease Tenant to fail to pay its Rental Charges under a Burn-Off Lease or for any other default of a Burn-Off Lease Tenant, as Buyer acknowledges and agrees that such Master Lease Space shall be deemed terminated as it relates to the obligations of Seller under the Master Lease Obligations.

 

Section 4.4.  EARNOUT SPACE.

 

(a)  During the Earnout Period, Seller shall have the right to enter the Earnout Space and the Property in which it is located to show the Earnout Space to prospective tenants, to place “for lease” signs on the Earnout Space and to negotiate and present to Buyer for review and approval, and thereafter execution, one or more leases for the Earnout Spaces (each, a “Post Closing Earnout Lease”).  Each Post Closing Earnout Lease which may be executed by Buyer after the Closing shall be documented on a lease form provided by Buyer for retail space at the Property (except in the event such prospective tenant had received Seller’s form of lease prior to the expiration of the Due Diligence Period, in which event, Seller’s form of lease shall be acceptable to Buyer), shall be at not less than seventy percent (70%) of the base rent set forth for the space on Exhibit A-2 for such Earnout Space, and the proposed tenant and the form and content of the proposed Post Closing Earnout Lease shall otherwise be subject to the Leasing Parameters and the approval of Buyer which shall not be unreasonably withheld, conditioned or delayed.  If Buyer rejects a proposed Post Closing Earnout Lease for an Earnout Space, it shall specify the reasonable basis for the rejection and the changes, which if made, would cause Buyer to approve the Post Closing Earnout Lease.  If a proposed Post Closing Earnout Lease and/or proposed tenant for a Earnout Space which meet the foregoing criteria are not approved by Buyer on or before ten (10) Business Days after the date submitted, or Buyer provides no reasonable basis for the rejection, such proposed tenant shall be deemed to be a Rent Paying Tenant for such Earnout Space solely for purposes of determining the Earnout Payment to be paid to Seller by Buyer pursuant to Section 4.4(b) below.  If, during the Earnout Period and for six (6) months thereafter, Buyer leases any space within the Property to the prospective tenant which it previously rejected upon material terms substantially the same or more favorable to tenant as originally submitted, the lease entered into shall be deemed to be an Earnout Lease (regardless of whether the Earnout Period has expired), and the Earnout Payment with respect to such Earnout Lease shall be due and payable immediately to the Seller.

 

(b)  Not later than ten (10) days after each portion of the Earnout Space satisfies the Lease Completion Criteria, Buyer shall pay to Seller an Earnout Payment with respect to such portion of the Earnout Space.  Earnout Payments will be disbursed in installments as and when each Earnout Space satisfies the Lease Completion Criteria.  The obligation of Buyer to pay the Earnout Payment shall terminate as of the end of the Earnout Period as to any remaining Earnout Space for 

 

11

 

which an Earnout Lease has not been tendered to Buyer (and all of the Lease Completion Criteria fulfilled) on or before the expiration of the Earnout Period.  Until the date a tenant under an Earnout Lease satisfies the Lease Completion Criteria for such space, during the Earnout Period, Seller shall collect and retain all rent, CAM, Taxes and insurance paid by the tenant under the Earnout Lease and shall have the right and obligation to perform those obligations of the “landlord” under each Earnout Lease to satisfy the Lease Completion Criteria.  Except as set forth in Section 4.4(a) above, after the expiration of the Earnout Period, Seller waives any rights to any further Earnout Payments if the Lease Completion Criteria has not been fulfilled within the Earnout Period.

 

Section 4.5   TI/COMMISSION ESCROW.

 

On the Closing Date, Seller shall place in escrow, pursuant to a mutually agreed upon escrow agreement, an amount equal to the unpaid tenant improvement allowance and leasing commissions applicable to the Master Lease Spaces and the Earnout Spaces (which shall be set out in a final schedule to this Agreement) (“TI/Commission Escrow”).  Such amounts shall be released from the TI/Commission Escrow in order to pay such costs as necessary.  Seller shall submit a request to Buyer and escrow holder for the payment of such costs. Buyer shall have ten (10) Business Days to object to such request by providing written notice to Seller and the escrow holder, which notice shall state the amount being objected to by Buyer, the basis for the objection, and the actions, which if taken by Seller, would cause Buyer to approve the request.  Any amounts not specifically objected to by Buyer during such 10-Business Day period shall be deemed approved and shall be disbursed as requested by Seller.  At the expiration of the Master Lease Period and the Earnout Period, Buyer shall retain any amounts in the TI/Commission Escrow for any spaces which are not subject to an executed Post Closing Earnout Lease or Post Closing Burn-Off Lease.

 

Section 4.6   NEGOTIATIONS WITH PROSPECTIVE TENANTS AFTER CLOSING.

 

During the Master Lease Period and the Earnout Period, each party (the “Notifying Party”) shall have the right to notify the other party (the “Receiving Party”) if the Notifying Party makes a written offer to a prospective tenant for space in a Shopping Center.  Upon receipt of such written notice, the Receiving Party hereby covenants and agrees that it will not extend any offer with respect to leasing space in a Shopping Center to, or otherwise solicit a lease for space in a Shopping Center from, such prospective tenant for a period of six (6) months from the date of the written notice without the prior written consent of the Notifying Party.

 

Section 4.7 SURVIVAL.

 

The terms of Article IV shall survive the Closing for forty-three (43) months.

 

ARTICLE V.

 

EXPENSES.

 

Section 5.1.  Expenses.  Each party shall pay its own costs and expenses in connection with the transactions contemplated hereby, including the fees and expenses of its attorneys, accountants, consultants and engineers.

 

(a)  Buyer  shall pay (i) one half (1/2) of all of the escrow fees, if any, (ii) the entire additional cost of any endorsements to the Title Policy and the cost of extended coverage, (iii) all expenses of obtaining any lender’s title insurance policy, (iv) all county, city and state charges required to be paid to record documents in the official records of Clark County, Nevada (the 

 

12

 

“Official Records”), and (v) all due diligence expenses and charges for any engineering reports, appraisals, or environmental reports obtained by, or on behalf of, Buyer, in connection with the transactions contemplated herein.

 

(b)  Seller will pay (i) one half of all the escrow fees, if any, (ii) the premium cost of the CLTA portion of the Title Policy (standard coverage only, retaining all standard printed exceptions), (iii) the cost of the Surveys, and (iv) one hundred percent (100%) of all Clark County transfer taxes, if any, that may be due in connection with the sale of the Property.   All other closing costs that are customarily paid in a commercial real estate purchase and sale transaction in the State of Nevada or in connection with Buyer’s financing (but exclusive of costs incurred in connection with the payoff or release of Seller’s financing, which shall be paid by Seller) shall be borne by Buyer. The provisions of this Article V shall survive the Closing or termination of this Agreement.

 

ARTICLE VI.

 

APPORTIONMENTS.

 

Section 6.1.  Apportionments.  The parties shall apportion, as of the Closing Date, the following in respect of the Property in cash at Closing as an adjustment of the cash portion of the Purchase Price:

 

(a)  The rent and other sums payable by Tenants under the Leases on a collectible basis for the month of Closing and Buyer shall cause the rent and other sums for the period prior to Closing to be remitted to Seller if, as and when collected.  Buyer shall receive a credit to the Purchase Price for any concessions or abatements of rents (or for any monies or concessions to be paid to a Tenant by Landlord under a Lease) as set forth in the existing executed Leases but Buyer shall not receive a credit for any concession or abatement of rent on a Lease that has already been taken into account pursuant to Article 4. Any amount collected by Buyer, or Seller after the Closing Date, from Tenants who owe rents for periods prior to the Closing Date, shall be applied (i) first, in payment of rents for the month the Closing occurs (the “Closing Month”), (ii) second, in the payments of rents for the month following the Closing Month, and (iii) to the payment of the months prior to the month of Closing (unless otherwise designated by such tenant).  Each such amount, less any costs of collection (including reasonable attorneys’ fees) reasonably allocable thereto, shall be adjusted and prorated as provided above, and the party who receives such amount shall promptly pay over to the other party the portion thereof to which it is so entitled.  At Closing, Seller shall deliver to Buyer a schedule of all such past due but uncollected rent and other sums owed by Tenants.  Buyer shall promptly remit to Seller any such rent or other sums paid by scheduled tenants.  Buyer shall bill tenants who owe rent for periods prior to the Closing on a monthly basis for six (6) consecutive months following the Closing Date.  For amounts due Seller not collected within twelve (12) months after Closing, Seller shall have the right to sue to collect same (without the right to evict tenant) and retain any amounts recovered in connection with such suits;

 

(b)  Except where and to the extent a tenant has the obligation to pay real property taxes and assessments directly to the appropriate governmental authority and not to Seller and such tenant is not in default under its Lease, all real property taxes and assessments as customarily apportioned for real property transactions in Clark County, Nevada; with Seller paying all taxes due and payable prior to Closing;

 

(c)  Except where and to the extent a tenant has an obligation to pay the same, water, electricity, and sewer charges on all, but if any of such charges shall be payable on the basis of meter readings, then such charges shall be apportioned on the basis of the billing date from the applicable provider that occurs closest to the Closing Date; and

 

13

 

(d)  All customary items of revenue or expense (including, any outstanding utility deposits paid by Seller with respect to the development of the Property) not otherwise specifically provided for herein which are customarily prorated between a buyer and seller of real property shall be prorated as of the Closing Date in accordance with the custom governing such proration.  All advance payments to occupy space or use facilities within the Buildings shall be prorated as of the Closing Date by allocating each such payment ratably based on the number of days in the period to which the same apply.

 

(e)  Buyer shall receive a credit from Seller at Closing for all of the credit balances in any tenant CAM, Tax or Insurance reserve account and Buyer shall be obligated to reconcile such reserve accounts for each tenant for the year 2012.  Seller shall not receive a credit from Buyer for any negative balance in such accounts unless and until collected from tenants following a reconciliation of such tenant’s accounts pursuant to Section 6.7.

 

Section 6.2.  Leasing Costs.  All leasing commissions, if any, for the current or initial lease terms for Leases entered into prior to the date hereof and the cost of any improvements and tenant allowances required to be made by the landlord in the space to which any such Lease relates have been paid by Seller, except for those costs and allowances set forth on Exhibit E attached hereto (the “Leasing Costs”).  Those amounts listed on Exhibit E hereto in the column labeled “Seller Obligation” shall be referred to herein as “Seller’s Leasing Costs”.  Except as otherwise set forth on Exhibit E, Seller hereby represents that there are no leasing commissions for any renewals or extensions of the Leases entered into prior to the date hereof and that the Leasing Costs designated on Exhibit E as Seller’s Leasing Costs are the only Leasing Costs applicable to the existing Leases encumbering the Property as of the date hereof.

 

Section 6.3.  Reapportionment.  Any errors in the calculation of apportionments shall be corrected or adjusted, and paid, as soon as practicable (but not more often than monthly) after the Closing Date.  If it is impracticable to apportion certain items hereunder (including, without limitation, water and sewer charges and rents) by the Closing Date, such items shall be apportioned, and paid, as soon as practicable after the Closing Date.

 

Section 6.4.  Monthly Statements.  So long as amounts payable by Tenants for periods prior to the Closing Date remain outstanding, or any other amount that is to be apportioned between Buyer and Seller pursuant to this Article VI remains subject to apportionment or adjustment, Buyer will provide Seller with a monthly report of payments received and amounts paid by Buyer with respect to the applicable Tenants and categories of revenue and expense.  Buyer shall not modify or amend any Lease in a manner that will decrease the amount payable to Seller pursuant to this Article VI.

 

Section 6.5.    Security Deposits.  The Security Deposits (as set forth on Exhibit I) under Leases which Seller represents are all of the Security Deposits paid by tenants under the Leases shall be delivered by Seller to Buyer or Seller may elect to give Buyer a credit against cash portion of the Initial Funding in the amount of such Security Deposits.

 

Section 6.6.  Timing.  The parties further agree to meet three (3) Business Days prior to the Closing Date to agree upon the apportionments in accordance with the terms hereof.

 

Section 6.7.  Reconciliation.  No later than April 30, 2013 (or such other date after the Closing when such figures are available), Seller and Buyer shall re-prorate real and personal taxes and other items of income and expenses based upon actual bills and invoices received after the Closing (if original prorations were based upon estimates) and any other items necessary to effectuate the intent of the parties that income and expense items shall be prorated as provided in this Article.

 

14

 

Section 6.8.  Survival.  The provisions of this Article VI shall survive the Closing for a period of twenty-four (24) months.

 

ARTICLE VII.

 

CONDITIONS TO CLOSING AND THE CLOSING.

 

Section 7.1.  Conditions to Seller’s Obligation to Sell.  The obligations of Seller to consummate the transaction contemplated hereunder are each conditioned on the fulfillment of each of the following on and as of the Closing Date:

 

(a)  The delivery to Seller of the Initial Funding, prorated as provided herein, plus the payment by Buyer to the appropriate parties of any closing costs to be paid by Buyer hereunder;

 

(b)  All representations and warranties of Buyer contained in this Agreement shall, in all material respects, be true at and as of the Closing Date and Buyer shall have performed and complied in all material respects with all covenants, agreements and conditions required by this Agreement to be performed or complied with by Buyer prior to or by the Closing Date (including, but not limited to, the delivery by Buyer of the items described in Article XIII below);

 

(c)  The simultaneous closing of the transactions contemplated under the PSA;

 

(d)  Each and all of the representations and warranties of Inland Diversified and Operating Company hereunder and under the other Transaction Documents (as defined below) to which either is a party shall be true and correct in all material respects on and as of the Closing Date, as though given as of the Closing Date, and, if applicable, Inland Diversified and Operating Company shall have delivered to the Seller receiving OP Units an officer’s certificate to that effect;

 

(e)  Inland Diversified and Operating Company shall be in compliance with all covenants of Inland Diversified and Operating Company and shall have performed all obligations of Inland Diversified and Operating Company set forth in this Agreement, or set forth in any document delivered by Inland Diversified or Operating Company to such Transferor;

 

(f)  No event shall have occurred that would constitute a material default by Buyer, Inland Diversified or Operating Company under this Agreement or under any other Transaction Document or which with notice or the lapse of time, or both, would constitute such a material default by Buyer, Inland Diversified or Operating Company under this Agreement or under any such other Transaction Document; and

 

(g)  Seller, at its sole cost and expense, receiving confirmation that its mortgage lender shall accept a par prepayment of its current secured debt encumbering the Property.

 

Section 7.2.  Conditions to Buyer’s Obligation to Purchase.  The obligations of Buyer to consummate the transaction contemplated hereunder are conditioned on the fulfillment of each of the following on and as of the Closing Date:

 

(a)  All representations and warranties of Seller contained in this Agreement shall be true in all material respects at and as of the Closing Date as if such representations and warranties were made at and as of the Closing Date (except for (i) changes in facts permitted hereunder including, without limitation, as a result of actions taken by Seller in accordance with Article XV hereof or occurring from events beyond the reasonable control of Seller and (ii) Seller’s right to

 

15

 

update all of the Exhibits hereto in order to make such representations and warranties true as of the Closing Date; provided, however, that the foregoing right to update and amend the Exhibits hereto shall not be deemed to permit Seller to default under any covenant made by Seller herein), and Seller shall have performed and complied in all material respects with all covenants, agreements and conditions required by this Agreement to be performed or complied with by Seller prior to or by the Closing Date (including, but not limited to, the delivery by Seller of the items described in Article XIII).

 

(b)  The delivery by Seller to Buyer of a tenant estoppel certificate with respect to each of the Tenants at the Property in substantially the same form attached hereto as Exhibit N or otherwise covering the matters as are required to be given in connection with an estoppel certificate pursuant to a Tenant’s Lease (a “Tenant Estoppel”).  If a Tenant Estoppel is delivered by Seller to Buyer, Buyer may disapprove such Tenant Estoppel if and only if it does not contain such items as are required to be given in connection with an estoppel certificate pursuant to the Tenant’s Lease and/or contains allegations of a material default by Seller.  If Seller is unable to obtain Tenant Estoppels from all of the Tenants on or before the Closing Date, then Seller shall have the right to (i) adjourn the Closing Date for a period not to exceed thirty (30) days for Seller to obtain the missing Tenant Estoppels, or (ii) have the relevant Seller execute the missing Tenant Estoppels in its capacity as Seller of the Property; provided however, Seller must deliver a Tenant Estoppel signed by each Tenant occupying 3,000 or greater square feet (each a “Major Tenant”) and by Tenants occupying eighty percent (80%) of the remaining square footage of the Property.  Each statement made by Seller in such missing Tenant Estoppels shall constitute a warranty and representation by Seller thereunder to Buyer, which shall survive the Closing or, (z) the date on which Buyer has received an executed Tenant Estoppel signed by the applicable Tenant under the Lease in question.

 

(c)  The delivery by Seller (which shall be completed using commercially reasonable efforts) to Buyer of estoppel certificates from the current parties (“REA Parties”) under any reciprocal easement agreements with Seller benefitting the Property in substantially the same form attached hereto as Exhibit N-1 or otherwise governing the matters as are required to be given in connection with an estoppel certificate pursuant to a reciprocal easement agreement (“REA Estoppel”)  If a REA Estoppel is delivered by Seller to Buyer, Buyer may disapprove such REA Estoppel if and only if it does not contain such items as are required to be given in connection with an estoppel certificate pursuant to the applicable reciprocal easement agreement and/or contains allegations of a material default by Seller.  In addition, if Seller is unable to obtain REA Estoppels from any of the REA Parties on or before the Closing Date, Seller shall execute and deliver to Buyer a certificate in the form of Exhibit O attached hereto (each such certificate, a “Seller’s Estoppel”) with respect to such reciprocal easement agreement at such individual Seller’s Building.   Each statement in a Seller’s Estoppel made by Seller shall constitute a warranty and representation by Seller hereunder which shall survive for a period terminating on the date on which Buyer has received an executed Seller’s Estoppel signed by the applicable REA Party under the reciprocal easement agreement in question.

 

Section 7.3.  No Financing Contingency.  It is expressly acknowledged by Buyer that the Closing of the transactions contemplated by this Agreement is not subject to any lender financing contingency.

 

Section 7.4.  Closing.  The closing of the transaction contemplated herein (the “Closing”) shall occur at the offices of the Title Company on a date that is mutually agreeable to the parties but that is no earlier than November 1, 2012 and no later than December 31, 2012 (as the same may be adjourned in accordance with this Agreement, the “Closing Date”), time being of the essence, subject only to adjournment rights explicitly permitted in this Agreement.  In the event the Closing does not occur by

 

16

 

December 31, 2012, Seller shall have the right to terminate this Agreement, without any obligation or liability to Buyer.

 

ARTICLE VIII.

 

SELLER’S REPRESENTATIONS.

 

Section 8.1.  Seller’s Representations.  Subject to the Seller’s right to update Seller’s representations and warranties pursuant to the terms hereof, Seller represents and warrants to Buyer solely with respect to Seller and the Property that as of the date hereof the following representations and warranties are true in all material respects and the same shall be true in all material respects as of the Closing Date (except for (a) changes in facts permitted hereunder including, without limitation, as a result of actions taken by Seller in accordance with Article XV hereof or occurring from events beyond the reasonable control of Seller and (b) Seller’s right to update all of the Exhibits and Schedules hereto in order to make such representations and warranties true as of the Closing Date; provided, however, that the foregoing right to update and amend the Exhibits and Schedules hereto shall not be deemed to permit Seller to default under any covenant made by Seller herein):

 

(a)  Seller is duly organized, validly existing and in good standing under the laws of the State of Nevada, and Seller has full power and authority to execute and deliver this Agreement and all other documents now or hereafter to be executed and delivered by it pursuant to this Agreement (the “Seller’s Documents”) and to perform all obligations arising under this Agreement and the Seller’s Documents.  This Agreement constitutes, and the Seller’s Documents will each constitute, the legal, valid and binding obligations of Seller, enforceable against Seller in accordance with their respective terms, subject to bankruptcy, reorganization and other similar laws affecting the enforcement of creditors’ rights generally and except as may be limited by general equitable principles.

 

(b)  Exhibit A-2 attached hereto is a true and complete list of all tenants (which may be under their trade name or fictitious name) under the Leases (except for any tenants for Master Lease Space or Earnout Space) as of the date set forth on Exhibit A-2.  True and complete copies of all Leases have been made available to Buyer.  Except as otherwise specifically set forth in Exhibit B attached hereto: (i) as of the date hereof all of the Leases are in full force and effect in accordance with their respective terms; and (ii) no Tenant has given written notice of default to Seller nor has Seller actual knowledge of any material monetary default by any Tenant under its Lease, except as set forth on Exhibit B and (ii) all Tenants pay their share of CAM, Taxes and insurance except as set forth in the Leases.

 

(c)  Exhibit C attached hereto is a true and complete list of all Service Contracts affecting the Property (subject to amendments, modifications or supplements permitted pursuant to Article XV).  Except as set forth on Exhibit C, (i) to Seller’s knowledge all of the Service Contracts are in full force and effect in accordance with their respective terms, and (ii) as of the date hereof, Seller has not received from any counter party to any Service Contract a written notice claiming that Seller is in any default under such Service Contract, which material default remains uncured.

 

(d)  Seller has not received written notice of any pending or threatened condemnation or eminent domain proceedings affecting the Property or any part thereof and to Seller’s knowledge no condemnation or eminent domain proceeding is anticipated.

 

(e)  To Seller’s knowledge, except as set forth on Exhibit G attached hereto, there are no pending actions, suits, arbitrations, claims or proceedings affecting the Property or Seller

 

17

 

which would have an adverse effect on the Property or Seller’s ability to perform under this Agreement and Seller has not received any written notices of any such threatened or contemplated actions, suits, arbitrations, claims or proceedings which claims would not be fully covered by insurance (subject to deductibles).

 

(f)  Except as set forth on Exhibit G-1 attached hereto, Seller has not received any notice of any current violations of any laws, statutes, ordinances, regulations or other requirements of any governmental agency in connection with or related to the Property, including any violations of any environmental laws and to Seller’s knowledge no such violations exist as of the date hereof.

 

(g)  Attached as Exhibit E is a true, correct and complete list of (i) all leasing commission agreements entered into by Seller and in effect as of the date hereof (collectively, “Listing Agreements”), and (ii) all improvements and tenant allowances required to be made by the Seller.  Except as otherwise set forth in Section 6.2 hereof and Exhibit E, no amounts are presently due or may become due and owing thereunder.

 

(h)  Attached as Exhibit I is a list of all Security Deposits held by Seller as of the date hereof.

 

(i)  Seller represents and warrants that Seller does not have any employees and there are no unemployment taxes due by Seller.

 

(j)  Except as set forth on Exhibit G-2 attached hereto, Seller has received no notice of any special assessments and to Seller’s knowledge no special assessments pertaining to the Property are anticipated.

 

Section 8.2.  Representation Survival.  The representations and warranties in Section 8.1 shall survive for a period of twenty-four (24) months following the Closing.

 

Section 8.3.  Representation Accuracy.  Notwithstanding anything to the contrary contained in this Agreement, Seller shall be deemed to have not made any representation or warranty, and Seller shall have no obligation or liability to Buyer with respect to (a) any of the foregoing matters as to or concerning any Lease, which is stated or confirmed in a Tenant Estoppel delivered by a Tenant under its Lease and (b) the inaccuracy or breach of any representation or warranty of Seller hereunder, to the extent such inaccuracy or breach (i) is known by Buyer or the Receiving Party Representatives or included in the Leases, Service Contracts, Listing Agreements, the Information, or other written information provided or made available to Buyer or any Receiving Party Representative (collectively, the “Specified Documents”), (ii) becomes known to Buyer prior to the Closing Date and Buyer does not promptly thereafter, and in all events, prior to the Closing Date, provide written notice thereof to Seller, or (iii) arises from the act or omission of Buyer or the Receiving Party Representatives or was consented to by Buyer.

 

Section 8.4.  Limitations on Seller’s Representations.  Seller does not represent or warrant that any particular Lease, lease for the Master Lease Space or Earnout Space, or Service Contract will be in force or effect as of the Closing Date or that any Tenant under a Lease or any party to a Service Contract (other than Seller) will not be in default under its Lease or Service Contract, as applicable, unless such party’s default arises from a breach by Seller of its obligations under this Agreement.

 

18

 

ARTICLE IX.

 

REPRESENTATIONS OF BUYER.

 

Section 9.1.  Buyer’s Representations.  Buyer represents and warrants to Seller that as of the date hereof the following representations and warranties are true in all material respects and shall be true in all material respects on the Closing:

 

(a)  Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Illinois.  At the Closing Date, Buyer or its permitted assignee will be authorized to do business in the State of Nevada.  Buyer has full power and authority to execute and deliver this Agreement and all other documents now or hereafter to be executed and delivered by it pursuant to this Agreement (the “Buyer’s Documents”) and to perform all obligations arising under this Agreement and the Buyer’s Documents.  This Agreement constitutes, and the Buyer’s Documents will each constitute, the legal, valid and binding obligations of Buyer, enforceable against Buyer in accordance with their respective terms, covenants and conditions, subject to bankruptcy, reorganization and other similar laws affecting the enforcement of creditors’ rights generally, and except as may be limited by general equitable principles.  Each person or entity comprising Buyer has duly authorized and approved this Agreement and the transaction contemplated hereby.

 

(b)  This Agreement and the Buyer’s Documents do not and will not contravene any provision of the organizational documents of Buyer, any judgment, order, decree, writ, injunction or any other agreement binding on Buyer, or any provision of any existing law or regulation to which Buyer is a party or is bound.  The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby do not and will not require (except to the extent, specifically set forth herein) any consent by any third party (including, without limitation, the consent of any direct or indirect partner of Buyer).

 

(c)  Notwithstanding anything to the contrary set forth in this Agreement, if prior to the Closing Date, Buyer has or obtains knowledge that any of Seller’s representations or warranties set forth in Article VIII are untrue in any respect, and Buyer nevertheless proceeds with the Closing, then the breach by Seller of the representations and warranties as to which Buyer shall have such knowledge shall be deemed waived by Buyer, such representations and warranties shall be deemed modified to conform them to the information that Buyer shall have knowledge of and Seller shall have no liability to Buyer or its successors or assigns in respect thereof.  Buyer shall promptly notify Seller in writing within two (2) Business Days if Buyer has or obtains knowledge that any of Seller’s representations or warranties set forth in Article VIII are untrue in any respect.

 

(d)  To Buyer’s knowledge, no litigation, or governmental or agency proceeding or investigation is pending or threatened against Buyer which would materially impair or adversely affect Buyer’s ability to perform its obligations under this Agreement and consummate the transactions contemplated herein.

 

(e)  Buyer has the financial wherewithal to perform its obligations hereunder, and Buyer is not the subject of any bankruptcy, reorganization, insolvency or similar proceedings.

 

Section 9.2.  Intentionally Deleted.

 

Section 9.3.  Intentionally Deleted.

 

19

 

Section 9.4.  Survival.  The provisions of this Article IX and the representations and warranties set forth in such provisions (and all other representations and warranties of Buyer contained herein), shall survive the Closing for a period of twenty-four (24) months.

 

ARTICLE X.

 

PUBLIC DISCLOSURE — PRESS RELEASES.

 

Except to the extent required by law, prior to Closing, Seller and Buyer each agree that it will not issue any press release or advertisement with respect to this Agreement or the transactions contemplated hereby without the prior written consent of the other party hereto.

 

ARTICLE XI.

 

CONFIDENTIALITY

 

Buyer acknowledges and agrees that the confidentiality agreement executed by Buyer in favor of Seller, the Affiliate Sellers and/or Manager prior to the date hereof (the “Confidentiality Agreement”) with respect to the Property remains in full force and effect and is hereby incorporated into this Agreement for all purposes as if fully set forth herein.  Without in any way limiting the foregoing, Buyer agrees that (a) the subject matter of this Agreement and all of the terms hereof and (b) any and all materials and information provided by Seller or made available to Buyer, including, without limitation, the Information and Due Diligence Material, shall be kept strictly confidential in accordance with the terms of the Confidentiality Agreement.  The provisions of this Article XI shall survive the termination of this Agreement.

 

ARTICLE XII.

 

CONDITION OF PROPERTY; RELEASE OF CLAIMS.

 

Section 12.1.  Condition of Property.  EXCEPT AS OTHERWISE SET FORTH IN THIS AGREEMENT, BUYER IS PURCHASING THE PROPERTY “AS-IS, WHERE IS AND WITH ALL FAULTS” IN ITS PRESENT CONDITION, SUBJECT TO REASONABLE USE, WEAR, TEAR AND NATURAL DETERIORATION OF THE PROPERTY BETWEEN THE DATE HEREOF AND THE CLOSING DATE AND FURTHER AGREES THAT (a) SELLER SHALL NOT BE LIABLE FOR ANY LATENT OR PATENT OR OTHER DEFECTS IN THE PROPERTY, (b) EXCEPT AS EXPRESSLY SET FORTH HEREIN, NEITHER MANAGER, SELLER, NOR ANY OTHER RELEASED PARTY HAS MADE OR WILL MAKE OR WILL BE ALLEGED TO HAVE MADE ANY VERBAL OR WRITTEN REPRESENTATIONS, WARRANTIES, PROMISES OR GUARANTIES WHATSOEVER TO BUYER, WHETHER EXPRESS OR IMPLIED, REGARDING THE PROPERTY OR ANY PART THEREOF, OR ANYTHING RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT, AND (c) BUYER, IN EXECUTING, DELIVERING AND PERFORMING THIS AGREEMENT, HAS NOT AND DOES NOT RELY UPON ANY STATEMENT, INFORMATION, OR REPRESENTATION TO WHOMSOEVER MADE OR GIVEN, WHETHER TO BUYER OR OTHERS, AND WHETHER DIRECTLY OR INDIRECTLY, VERBALLY OR IN WRITING, MADE BY ANY PERSON, FIRM OR CORPORATION, EXCEPT AS EXPRESSLY SET FORTH HEREIN.

 

Section 12.2.  Release of Claims.  Except as otherwise set forth in this Agreement, without limiting any provision in this Agreement, Buyer, for itself and any of its successors and assigns and their affiliates, hereby irrevocably and absolutely waives its right to recover from, and forever releases and discharges, and covenants not to file or otherwise pursue any legal action (whether based on contract, statutory rights,

 

20

 

common law or otherwise) against, Seller or its affiliates or any direct or indirect partner, member, trustee, beneficiary, director, shareholder, manager, controlling person, affiliate, officer, attorney, employee, agent, contractor, tenant, representative (including, without limitation, Manager) or broker of any of the foregoing, and any of their respective heirs, successors, personal representatives, devisees, donees and assigns (each a “Released Party” and collectively, “Released Parties”) with respect to any and all suits, actions, proceedings, investigations, demands, claims, liabilities, obligations, fines, penalties, liens, judgments, losses, injuries, damages, settlement expenses or costs of whatever kind or nature, whether direct or indirect, known or unknown, contingent or otherwise (including any action or proceeding brought or threatened or ordered by any governmental authority), including, without limitation, attorneys’ and experts’ fees and expenses, and investigation and remediation costs that may arise on account of or in any way be connected with (a) the due diligence investigations by Receiving Party Representatives permitted pursuant to Section 3.4 hereof, and (b) the Property or any portion thereof including, without limitation, Section 12.1 hereof (collectively, “Claims”), including, without limitation, the physical, environmental and structural condition of the Property or any law or regulation applicable thereto, or any other matter relating to the use, presence, discharge or release of hazardous materials) on, under, in, above or about the Property; provided, however, that Buyer does not waive its rights, if any, to recover from, or release or discharge or covenant not to bring any action against (i) Seller or any other Released Party for any act that constitutes fraud, (ii) Seller for any material breach of the express representations or warranties set forth in this Agreement, subject to the limitations and conditions provided in this Agreement, or (iii) Seller for its express obligations under this Agreement.  The provisions of this Article XII shall survive the Closing.

 

ARTICLE XIII.

 

DELIVERIES AT CLOSING.

 

Section 13.1.  Deliveries at Closing.  The following documents shall be delivered to Title Company, Buyer and/or Seller, as set forth below, on or before the Closing Date:

 

(a)  Seller shall execute and deliver to Buyer a Grant, Bargain and Sale Deed in the form attached hereto as Exhibit J for the Property (the “Deed”).

 

(b)  Seller and Buyer shall execute and deliver to the other duplicate originals of notices to all Tenants stating that (a) the Property has been sold and conveyed to Buyer; and (b) such other matters as are required by applicable law or pursuant to the terms of the Leases or which either party may reasonably request (the “Tenant Notification Letters”).

 

(c)  Seller and Buyer shall execute and deliver to the other an Assignment and Assumption of Leases (the “Assignment of Leases”), in the form of Exhibit K attached hereto, pursuant to which Seller assigns and Buyer assumes all of the landlord’s right, title and interest in and to any Leases and related Security Deposits.

 

(d)  A General Assignment, in the form of Exhibit L attached hereto, pursuant to which Seller transfers, conveys and assigns to Buyer all of the Service Contracts, Permits, and the Personal Property (the “General Assignment”).

 

(e)  Seller and Buyer shall deliver to the other and Title Company such evidence as may be reasonably required by the other of the due authorization, execution and delivery by such party of this Agreement and the Seller’s Documents or the Buyer’s Documents, as the case may be.

 

21

 

(f)  Seller shall deliver to Buyer a certified rent roll which shall include a list of all tenants, their annual rent, commencement date, expiration date, all renewals, a list of all Tenants who are delinquent, as of the Closing Date, in the payment of rents, the amount of each such delinquency and the period to which each such delinquency relates.

 

(g)  Seller shall terminate or cause to be terminated, effective as of the Closing, (i) all existing property management agreements affecting the Property, (ii) all Listing Agreements (except as those Listing Agreements which related to a Master Lease Space or Earn Out Space), and (iii) those Service Contracts that Buyer has notified Seller in writing prior to the expiration of the Due Diligence Period that Buyer desires to have terminated at Closing.

 

(h)  Seller shall deliver to Buyer updated schedules of the Leases and the Service Contracts at the Property, the Listing Agreements and the Security Deposits, respectively, and certified by Seller as correct and complete in all material respects as of the Closing Date.

 

(i)  Subject to Section 7.2(b) and (c), Seller shall deliver to Buyer the Tenant Estoppels that Seller has received from the Tenants and the REA Estoppels that Seller has received from the REA Parties, or those that Seller has executed as permitted thereunder.

 

(j)  Seller shall deliver to Buyer a FIRPTA certification in the form of Exhibit M attached hereto, verified as true and signed and sworn to under penalties of perjury by a general partner or managing member of Seller.

 

(k)  Buyer shall deliver to the Title Company for delivery to Seller in accordance with this Agreement the balance of the Initial Funding pursuant to Article II above.

 

(l)  Seller shall deliver to Buyer any Security Deposits in Seller’s possession or control that have not been (i) applied to defaults as permitted by this Agreement or (ii) credited to Buyer pursuant to Section 6.5 hereof.

 

(m)  Seller and Buyer shall execute and deliver to each other a certificate updating the representations and warranties made by each of them in Articles VIII and IX, respectively.  If any of the facts contained in the representations and warranties made by Seller in Article VIII change in any material respect between the date hereof and the Closing Date, then promptly upon learning of such change in facts, Seller shall disclose such changes in writing to Buyer.

 

(n)  Seller and Buyer shall execute and deliver to each other the escrow agreement for the TI/Commissions Escrow.

 

(o)  If applicable, Seller and Inland Diversified shall have executed the Operating Agreement and the other documents related to the OP Units, including, without limitation, any additional guaranty or other agreement described in Section 1.2 (the “Transaction Documents”).

 

ARTICLE XIV.

 

DEFAULT; DAMAGES.

 

Section 14.1.  Buyer Defaults.  In the event that Buyer shall default under this Agreement prior to Closing, Buyer and Seller agree that the actual damages that Seller shall sustain as a result thereof shall be substantial and shall be extremely difficult and impractical to determine.  Buyer and Seller therefore agree that if Buyer fails to perform any or all of the obligations, terms, covenants, conditions and agreements to

 

22

 

be performed by Buyer hereunder, whether at or prior to the Closing, Seller’s remedy shall be to receive as full, complete and valid liquidated damages (and not a penalty) the Deposit held at such time by Escrow Holder together with any interest earned thereon from Escrow Holder, and thereafter neither Buyer nor Seller shall have any further liability or obligation to the other parties hereunder, except for such liabilities and obligations as are expressly stated to survive the termination of this Agreement. If Buyer shall fail to perform any or all of the obligations, terms, covenants, conditions and/or agreements to be performed by Buyer hereunder after the Closing, Seller shall have the right to pursue any rights and remedies available to Seller at law or in equity.

 

Section 14.2.  Pre-Closing Defaults.  In the event that on the Closing Date Seller has defaulted on its obligations hereunder in any material respect, then, subject to the provisions set forth below, Buyer shall be entitled, as its sole remedy, to either: (a) treat this Agreement as being in full force and effect and pursue only the remedy of specific performance against Seller; or (b) terminate this Agreement and receive a return of the Deposit together with any interest earned thereon (and the parties shall jointly instruct Escrow Holder to promptly return the Deposit, together with any interest earned thereon, to Buyer) and in the event of a willful and knowing default intended by Seller to thwart the consummation of the Closing hereunder, Seller shall reimburse Buyer for Buyer’s actual third-party costs and expenses incurred in connection with its due diligence review of the Property (evidenced by invoices or other evidence reasonably satisfactory to Seller) and Seller shall be liable to Buyer for all actual damages incurred by Buyer resulting from Seller’s default and Seller shall not have any further liability or obligation to Buyer hereunder nor shall Buyer have any further liability or obligation to Seller hereunder, except for such obligations as are specifically stated to survive the termination of the Agreement.  Buyer waives any right to pursue any other remedy at law or in equity for any default of Seller, including, without limitation, any right to seek, claim or obtain damages, other than as set forth in this Agreement or in the case of Seller’s fraud, but in no case shall Buyer seek punitive damages or consequential damages.  Notwithstanding anything to the contrary contained in this Agreement, if prior to the Closing Date, Buyer has or obtains knowledge that Seller has defaulted on its obligations hereunder in any respect, and Buyer nevertheless proceeds with the Closing, then the default by Seller as to which Buyer shall have such knowledge shall be deemed waived by Buyer and Seller shall have no liability to Buyer or its successors and assigns in respect thereof.  Buyer shall promptly notify Seller in writing within two (2) Business Days if Buyer has or obtains knowledge that Seller has defaulted on its obligations hereunder in any respect.

 

Section 14.3.   Right to Cure.  Notwithstanding anything contained herein to the contrary and without limiting any of Seller’s rights set forth in this Agreement, in the event that Seller has defaulted hereunder and such default has caused direct actual damages in a liquidated amount to Buyer, then, in such event, Seller shall be entitled, but shall not have any obligation, either: (a) prior to the Closing Date, to cure such default; or (b) provide Buyer with a credit against the Purchase Price in an amount equal to Buyer’s actual direct damages and such default shall be deemed cured in its entirety and Buyer shall remain obligated to purchase the Property without any further reduction in the Purchase Price.  In the event that Seller has defaulted hereunder and such default has caused direct actual damages in a liquidated amount to Buyer that are less than or equal to the Minimum Amount, then Buyer shall remain obligated to purchase the Property without any reduction in the Purchase Price.

 

Section 14.4.  Defaults Discovered Post Closing.  If Buyer closes the transactions contemplated by this Agreement and, after the Closing Date but before the applicable survival period (as expressly set forth in this Agreement), Buyer discovers a breach of any of Seller’s representations, warranties, covenants or indemnities hereunder or under any certificates and other documents executed at, or in connection with, the Closing, Buyer shall have the right, until the expiration of the applicable survival period, to sue Seller for actual direct damages incurred by Buyer as a result of such breach or breaches.  However, except with respect to the Master Lease Obligations, in any such event or events, Seller shall not have any liability to Buyer for all or any of such matters in excess of $2,000,000 (the “Post-Closing Damage Cap”). Except

 

23

 

with respect to the Master Lease Obligations, Buyer shall not enter any judgment or collect an amount in excess of the Post-Closing Damage Cap.  Notwithstanding anything contained herein to the contrary, if Buyer had knowledge of a default by Seller on the Closing Date and Buyer elects to close the transaction contemplated herein, Buyer shall be deemed to have irrevocably waived such default and Seller shall not have any liability with respect to such default.

 

Section 14.5.  Liabilities of Seller.  From and after the Closing Date, Buyer shall be responsible for all liabilities, claims, suits, demands, damages, judgments, costs, fines, penalties, interest and expenses arising from, or in connection with any liabilities or obligations arising from and after the Closing Date (including, without limitation, all liabilities in connection with all Leasing Costs) and Seller shall be responsible for all liabilities, claims, suits, demands, damages, judgments, costs, fines, penalties, interest and expenses accruing prior to the Closing Date.

 

Section 14.6.  Individual Seller Responsibility.  Seller’s prorata share of OP Units as set forth in the Operating Agreement and right to Earnout Payments shall secure Seller’s surviving obligations, liabilities and indemnities set forth in this Agreement.  To the extent Seller does not receive OP Units, any liability, obligation or indemnity applicable to Seller may be collected from the Affiliate Sellers on a prorata basis, but only to the extent such Affiliate Sellers are holding OP Units in excess of their prorata share.  Seller’s prorata share of OP Units shall be based on the net proceeds received by Seller at the Closing and shall be set forth on Exhibit H.

 

Section 14.7.  Waiver of Consequential Damages.  In no event shall either party be liable to the other party for any consequential, special, punitive or indirect damages for a breach of any covenant, representation or warranty under this Agreement.

 

Section 14.8.  Survival.  The provisions of this Article XIV shall survive the Closing.

 

ARTICLE XV.

 

OPERATION OF THE PROPERTY UNTIL CLOSING.

 

Section 15.1.  Operation of the Property.

 

(a)  Between the date hereof and the Closing Date, Seller shall continue to operate and maintain the Property in the ordinary course of business in accordance with present business practices.

 

(b)  During the period between the Due Diligence Period and the Closing Date, except as otherwise expressly provided in this Agreement, with respect to the Occupied Leases, Seller may not, without the prior written consent of Buyer in each instance (which consent shall not be unreasonably withheld, conditioned or delayed), (i) cancel or terminate any Lease (other than for a material default thereunder by a party other than Seller), (ii) amend or modify any Lease in any respect, (iii) renew or extend any Lease (other than pursuant to existing renewal or extension options in favor of Tenants), and (iv) apply any Security Deposit of any tenant under a Lease for a delinquency or default by such tenant (all such activity set forth in this Section 15.1(b) shall be called, “Leasing Activity”).  Between the date hereof and the Closing Date, Seller shall give Buyer notice (via the email address as set forth in Section 17.1 below) prior to doing any of the Leasing Activity referred to in this Section 15.1(b), which notice shall include the material terms of the proposed Leasing Activity as well as, if after the expiration of the Due Diligence Period, a request for Buyer’s consent thereto.  If Buyer’s consent is required and Buyer does not respond to Seller’s request for consent to its Leasing Activity within ten (10) Business Days after receipt thereof, time

 

24

 

being of the essence with respect thereto, Buyer shall be deemed to have consented to such Leasing Activity.  Notwithstanding the foregoing, Seller shall have the right, without the prior consent of Buyer, to enter into (1) leases for the Earnout Spaces and the Master Lease Space; provided, however, that after the Due Diligence Period, such leases for Earnout Spaces and the Master Lease Spaces shall be in accordance with the requirements set forth in Section 4.3(b) and Section 4.4(a) respectively, and (2) any contract which can be terminated upon thirty (30) days written notice.

 

(c)  Notwithstanding any limitation set forth herein, Seller may, without Buyer’s consent and without cost to Buyer (unless otherwise set forth herein or unless otherwise approved by Buyer) (i) take such actions, if any, with respect to the Property, reasonably necessary to comply with the terms of the Leases, and any insurance requirements or to comply with laws, rules or regulations of any governmental authority, (ii) take such actions as it deems reasonably necessary to repair any insured or uninsured casualty or damage, and (iii) take such actions with respect to the Property reasonably necessary to prevent loss of life, personal injury or property damage.

 

Section 15.2.  Continued Operation by Seller.  Prior to Closing, Seller, at its cost, will, so long as the other party thereto is not in default thereunder, continue to (or cause Seller to continue to) perform and observe in all material respects all of the covenants and conditions required to be performed by Seller in the same manner as presently performed and observed by Seller under (a) the Leases, (b) Service Contracts, (c) the Permitted Encumbrances, (d) any note, indenture, mortgage or deed of trust affecting the Property, and (e) any Permits; provided, however, that the foregoing agreement shall not limit Seller’s rights to terminate any of the foregoing agreements to the extent otherwise permitted hereunder.

 

ARTICLE XVI.

 

CASUALTY AND CONDEMNATION.

 

Section 16.1.  Condemnation.  If, prior to the Closing Date, a material part (as defined in this Section 16.1) of the Property is taken by eminent domain (or is the subject of a pending taking which has not yet been consummated), Seller shall notify Buyer of such fact promptly after obtaining knowledge thereof and Buyer, at its option, may terminate the Agreement by giving notice to Seller not later than ten (10) Business Days after receipt of Seller’s notice.  For the purposes hereof, a “material part” of the Property with respect to the taking of the Property by eminent domain shall mean either (A) the taking of any portion of the Property is reasonably estimated by Buyer and Seller to reduce the value of the Property by more than two and one-half percent (2.5%) or (B) if any Tenant occupying more than 3,000 square feet terminates its Lease at the Property as a result of the taking.  Provided, if any Tenant terminates its lease as a result of a condemnation, the Purchase Price shall be reduced using the formula for calculation of an Earnout Payment and the terminated lease shall become an Earnout Space.  If Buyer does not timely terminate the Agreement, there shall be no abatement of the Purchase Price and Seller shall assign to Buyer on the Closing Date the rights of Seller to any portion of the award that has not been used by Seller to restore or rebuild the Property, if any, for the taking, and Buyer shall be entitled to receive and keep all awards for the taking of the Property or such portion thereof. Furthermore, Buyer shall have the right to approve any settlement with the applicable governmental authority, such approval not to be unreasonably withheld, conditioned or delayed.

 

Section 16.2.  Casualty.  If, prior to the Closing Date, a material part (as defined in this Section 16.2) of the Property is destroyed or damaged by fire or other casualty (a “Damaged Property”), Seller shall promptly notify Buyer of such fact and Buyer, at its option, may terminate the Agreement by giving notice to Seller not later than ten (10) Business Days after receipt of Seller’s notice.  For the purposes hereof, a “material part” of the Property shall mean any portion of the Property where the amount required to repair or restore the destruction or damage caused by fire or other casualty is reasonably

 

25

 

estimated by Buyer and Seller to be more than two and one-half percent (2.5%) of the Purchase Price, or if any Tenant occupying more than 3,000 square feet terminates its Lease at the Property as a result of the fire or other casualty.  Provided, if any Tenant terminates its lease as a result of a casualty, the Purchase Price shall be reduced using the formula for calculation of an Earnout Payment and the terminated lease shall become an Earnout Space.  If Buyer does not elect to terminate this Agreement as aforesaid, or if there is damage to or destruction of an “immaterial part” (i.e., anything other than a material part) of the Property by fire or other casualty, there shall be no abatement of the Purchase Price and Seller shall assign to Buyer (without recourse) on the Closing Date the rights of Seller to any portion of the proceeds that has not been used by Seller to repair such casualty under Seller’s insurance policies, if any, covering the Property with respect to such damage or destruction, and Buyer shall be entitled to receive and keep any such monies received from such insurance policies (and shall be entitled to applicable deductibles, if any).  In furtherance hereof, in the event an “immaterial part” of the Property is damaged after the date hereof, Seller shall, in accordance with sound management practice, repair such damage and Buyer shall, on the Closing Date, reimburse to Seller the cost thereof, less any amount of insurance proceeds received by Seller (but not paid to Buyer) in connection therewith. Seller shall not enter into any settlement with the insurance carrier without the consent of Buyer, which shall not be unreasonably withheld, conditioned or delayed.  Seller shall not modify, terminate or otherwise permit any of Seller’s existing insurance policies to lapse or terminate prior to the Closing Date.  If any damage or destruction which occurs prior to the Closing Date is not covered by Seller’s insurance, then Buyer’s sole remedy shall be to either (a) close and receive a credit against the Purchase Price in the amount of such damage or destruction, or (b) terminate this Agreement in accordance with Section 16.3 hereof.

 

Section 16.3.  Termination.  If this Agreement is terminated pursuant to this Article XVI, the Deposit shall be returned to Buyer, at which time this Agreement shall be null and void and neither party shall have any rights or obligations under this Agreement, except that the provisions of the following shall expressly survive such termination and be enforceable by the parties after termination: Sections 3.4 and 3.5 and Article XI.

 

ARTICLE XVII.

 

NOTICES.

 

Except as otherwise set forth in this Agreement, any and all notices and demands by either party hereto to the other party, required or desired to be given hereunder shall be in writing and shall be validly given only if deposited in the United States mail, certified or registered, postage prepaid, return receipt requested, or if made by Federal Express or other delivery service which keeps records of deliveries and attempted deliveries, or if made by email transmission (receipt of which is acknowledged or if a copy thereof is delivered the following day by a delivery service which keeps records of deliveries and attempted deliveries.).  Service shall be conclusively deemed made on the first Business Day delivery is attempted or upon receipt, whichever is sooner, and addressed as follows:

 

(i)  if to Seller, to:

 

Territory Incorporated

5785 Centennial Center Blvd., #230

Las Vegas, NV 89149

Attention: Terri Sturm

Email: tsturm@territoryinc.com

 

26

 

with a copy to:

Schwartz Development I, LLC

2293 Duneville Streeet

Las Vegas, Nevada 89146

Email: jonathan@miltson.com

 

with a copy to:

Law Office of Leslie Hollmann, LLC

5785 Centennial Center Blvd., #230

Las Vegas, NV 89149

Email: leslie@hollmannlaw.com

 

and with a copy to:

Parr Brown Gee & Loveless

185 South State Street, Suite 185

Salt Lake City, Utah 84111

Attention:  David E. Gee, Esq.

Email:  dgee@parrbrown.com

 

(ii)                                  if to Buyer, to:

 

Inland Real Estate Acquisitions, Inc.

2901 Butterfield Road

Oak Brook, IL  60523

Attention:  Lou Quilici

Email:  lquilici@inlandgroup.com

 

with a copy to:

 

The Inland Real Estate Group, Inc.

2901 Butterfield Road

Oak Brook, IL  60523

Attention:  Gary Pechter

Email:  gpechter@inlandgroup.com

 

(iii)                               if to Escrow Holder, to:

 

Chicago Title Insurance

10 S. LaSalle Street, Suite 3100

Chicago, IL  60603

Attention:  Nancy Castro

Email:  Nancy.Castro@ctt.com

 

ARTICLE XVIII.

 

BROKER.

 

Other than Mountain High Real Estate Advisors and Territory Incorporated (“Brokers”), Buyer and Seller each represent and warrant that they have not dealt, directly or indirectly, with any broker. Each party hereby indemnifies and agrees to protect, defend and hold harmless the other from and against any loss, cost, damage or expense (including reasonable attorneys’ fees) by reason of the incorrectness of

 

27

 

such representation and warranty.  Seller hereby discloses to Buyer that the principal of Territory Incorporated has a direct or indirect ownership interest in the Seller.  This provision shall survive the Closing.   Seller shall be responsible for paying all real estate brokerage fees to Mountain High Real Estate Advisors and Territory Incorporated associated with this transaction, pursuant to a separate agreement between Seller and Brokers.

 

ARTICLE XIX.

 

ASSIGNMENT.

 

Neither this Agreement nor any interest hereunder shall be assigned or transferred by Seller.  Buyer may assign or otherwise transfer its interest under this Agreement to any entity directly or indirectly controlled by Buyer or to a limited liability company which is a subsidiary of a real estate investment trust or subsidiary thereof sponsored by an affiliate of Buyer formed and managed by Inland Diversified, which is treated as a tax partnership under Subchapter K of the Internal Revenue Code of 1986, as amended.  As used in this Agreement, the term “Buyer” shall be deemed to include any permitted assignee or other transferee of the initial Buyer.  Subject to the foregoing, this Agreement shall inure to the benefit of and shall be binding upon Seller and Buyer and their respective successors and assigns.

 

ARTICLE XX.

 

FURTHER ASSURANCES.

 

The parties agree to do such other and further acts and things, and to execute and deliver such instruments and documents, as either may reasonably request from time to time, on or after the Closing Date, in furtherance of the purposes of this Agreement.  The provisions of this Article XX shall survive the Closing for a period of thirty-six (36) months.

 

ARTICLE XXI.

 

MISCELLANEOUS.

 

Section 21.1.  Entire Agreement.  This Agreement and the Exhibits and Schedules attached hereto, together with the Seller’s Documents, the Buyer’s Documents and the Confidentiality Agreement, constitute the entire agreement between the parties with respect to the subject matter hereof, and all understandings and agreements heretofore or simultaneously had between the parties, including without limitation the letter of intent dated September 12, 2012 among Seller, Affiliate Sellers and Buyer, are merged in, superseded by and contained in this Agreement.

 

Section 21.2.  Modification.  This Agreement may not be waived, changed, modified or discharged orally, but only by an agreement in writing signed by the parties hereto; and any consent, waiver, approval or authorization shall be effective only if signed by the party granting such consent, waiver, approval or authorization.

 

Section 21.3.  Captions.  The table of contents, captions, Section and Article titles and Exhibit and Schedule names contained in this Agreement are for convenience and reference only and shall not be used in construing this Agreement.

 

28

 

Section 21.4.  Governing Law.  This Agreement shall be governed by and construed in accordance with the internal laws of the State of Nevada.  In the event of litigation arising under, or related to this Agreement, venue shall be in the appropriate court in Clark County, Nevada.

 

Section 21.5.  References.  The terms “hereof,” “herein,” and “hereunder” and words of similar import, shall be construed to refer to this Agreement as a whole, and not to any particular article or provision, unless expressly so stated.  All words or terms used in this Agreement, regardless of the number or gender in which they are used, shall be deemed to include any other number and any other gender as the context may require.  For the purposes of this Agreement, and without intending to expand the meaning of the phrase “commercially reasonable efforts”, the parties hereto acknowledge that commercially reasonable efforts will not be interpreted as requiring the initiation or settlement of litigation, disproportionate payouts to any partners, the payment of money (other than usual and customary expenses associated with negotiating and closing transactions of the nature set forth herein).

 

Section 21.6.  Certain Definitions.  The following terms used but not otherwise defined herein shall have the following meanings:  “Business Day” shall mean any day other than a Saturday, Sunday or bank holiday in the State of Nevada.  “Person” shall mean any natural person, a partnership, a corporation, limited liability company, a business trust and any other form of business or legal entity.

 

Section 21.7.  Exhibits and Schedules.  The Exhibits and Schedules attached hereto are hereby made part of this Agreement.

 

Section 21.8.  Successors and Assigns.  Subject to the provisions of Article XIX above, this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns.  None of the provisions of this Agreement are intended to be, nor shall they be construed to be, for the benefit of any third party except for the Released Parties pursuant to the terms hereof.

 

Section 21.9.  Attorneys’ Fees.  If any party obtains a judgment against any other party by reason of breach of this Agreement, reasonable attorneys’ fees and disbursements as fixed by the court shall be included in such judgment.

 

Section 21.10.  Severability.  If any provision of this Agreement, or the application of such provision to any person or circumstance, shall be held invalid or unenforceable, the remainder of this Agreement or the application of such provision to the person or circumstance other than those in respect of which it is invalid or unenforceable, except those provisions which are expressly made subject to or conditioned upon such invalid or unenforceable provisions, shall not be affected thereby.

 

Section 21.11.  Counterparts.  This Agreement may be executed in counterparts, each of which shall be deemed an original and all of which, when taken together, shall be deemed one and the same instrument.

 

Section 21.12.  Knowledge.  For the purposes of this Agreement, “knowledge” with respect to (a) Seller shall mean matters as to which Terri Sturm has actual, present and personal knowledge without any independent investigation or any duty or responsibility to make any inquiry, review or investigation; and (b) Buyer shall mean matters as to which Lou Quilici has actual, present and personal knowledge without any independent investigation or any duty or responsibility to make any inquiry, review or investigation.

 

Section 21.13.  No Joint and Several Liability.  Notwithstanding anything to the contrary in this Agreement, Buyer agrees that that obligations and liabilities of Seller and any Affiliate Seller shall not be joint and several and that Seller and each Affiliate Seller shall only be liable for its own default of its obligations under this Agreement or the PSA.

 

29

 

Section 21.14.  Time of Essence.  Time is of the essence of this Agreement.

 

Section 21.15.  Termination.  In the event the PSA is terminated for any reason, this Agreement shall automatically terminate.

 

Section 21.16.  Recordation.  Neither Seller nor Buyer may record this Agreement or any memorandum or notice hereof until the end of the Due Diligence Period.  Buyer may, upon five (5) Business Days prior written notice to Seller, record a memorandum of this Agreement with respect to the Property to be recorded upon the expiration of the Due Diligence Period so long as each of the following conditions are satisfied: (a) such memorandum shall terminate, by its express terms and in a manner approved by Seller, upon the earlier of the termination of this Agreement or February 28, 2013; (b) the recordation of such memorandum of this Agreement will not violate any document related to a Mortgage Lien; and (c) Buyer is not at that time in default under this Agreement.

 

Section 21.17.  1031 Exchange.  Buyer and Seller acknowledge that either party may wish to structure this transaction as a tax deferred exchange of like-kind property within the meaning of Section 1031 of the Internal Revenue Code (a “1031 Exchange”).  Each party agrees to reasonably cooperate with the other party to effect such 1031 Exchange; provided, however, that:  (i) the cooperating party shall not be required to acquire or take title to any exchange property; (ii) the cooperating party shall not be required to incur any expense (including attorneys’ fees, if any, arising in connection with the 1031 Exchange but not otherwise) or liability whatsoever in connection with the 1031 Exchange including, without limitation, any obligation for the payment of any escrow, title, brokerage or other costs incurred with respect to the 1031 Exchange; (iii) no substitution of the effectuating party shall release said party from any of its obligations, warranties or representations set forth in this Agreement or from liability for any prior or subsequent default under this Agreement by the effectuating party, its successors, or assigns, which obligations shall continue as the obligations of a principal and not of a surety or guarantor; (iv) the effectuating party shall give the cooperating party at least ten (10) business days prior notice of the proposed changes required to effect such 1031 Exchange and the identity of any party to be substituted in the escrow; (v) the effectuating party shall be responsible for preparing all additional agreements, documents and escrow instructions (collectively, the “Exchange Documents”) required by the 1031 Exchange, at its sole cost and expense; and (vi) the effectuating party shall be responsible for making all determinations as to the legal sufficiency, tax considerations and other considerations relating to the proposed 1031 Exchange, the Exchange Documents and the transactions contemplated thereby, and the cooperating party shall in no event be responsible for, or in any way be deemed to warrant or represent any tax or other consequences of the 1031 Exchange transaction arising by reason of the cooperating party’s performance of the acts required hereby.

 

(Remainder of Page Left Intentionally Blank)

 

30

 

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written.

 

	
 
    	
 
    	
BUYER:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
INLAND   REAL ESTATE ACQUISITIONS, INC.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
/s/   Lou Quilici
    
	
 
    	
 
    	
 
    	
Name:   Lou Quilici
    
	
 
    	
 
    	
 
    	
Title:   Senior Vice President
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
SELLER:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
CENTENNIAL   GATEWAY, LLC,
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
Centennial   Partners, LLC,
    
	
 
    	
 
    	
 
    	
a   Nevada limited liability company,
    
	
 
    	
 
    	
 
    	
its   Manager
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
By:
    	
/s/   Terri Sturm
    
	
 
    	
 
    	
 
    	
 
    	
Terri   Sturm, Manager
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
Schwartz   Development I, LLC,
    
	
 
    	
 
    	
 
    	
a   Nevada limited liability company,
    
	
 
    	
 
    	
 
    	
its   Manager
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
By:
    	
/s/   Jonathan Schwartz
    
	
 
    	
 
    	
 
    	
 
    	
Jonathan   Schwartz, Manager
    

 

[Signature Page to Agreement of Purchase and Sale and Contribution Agreement]

 

 

CONSENT OF ESCROW HOLDER AND
 TITLE COMPANY

 

Chicago Title & Trust Company (the “Escrow Holder” and “Title Company”) hereby agrees to: (i) accept and carry out the escrow instructions set forth in the foregoing AGREEMENT OF PURCHASE AND SALE (the “Agreement”); (ii) carry out the responsibilities of the Escrow Holder and Title Company as provided in the Agreement; and (iii) be bound by the Agreement in the performance of its duties as the Escrow Holder and Title Company; provided, that the undersigned shall have no obligations, liability or responsibility under any amendment to the Agreement unless and until the same shall be accepted by the undersigned in writing.

 

	
DATED:
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
CHICAGO   TITLE & TRUST COMPANY
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
 
    	
Authorized   Agent
    

 

 

FIRST AMENDMENT TO AGREEMENT OF PURCHASE AND SALE

 

AND

 

CONTRIBUTION AGREEMENT

 

THIS AMENDMENT (the “Amendment”) is executed as of the 20th day of December 2012 by and among INLAND REAL ESTATE ACQUISITIONS, INC., an Illinois corporation (“Buyer”) and CENTENNIAL GATEWAY, LLC, a Nevada limited liability company (“Seller”).  Seller and Buyer are sometimes collectively referred to in this Agreement as the “Parties” or individually as a “Party”.

 

RECITALS

 

A.                                    Seller and Buyer executed and delivered a certain Agreement of Purchase and Sale and Contribution Agreement, dated October 17, 2012 (the “Agreement”) pertaining to the sale and purchase of certain retail shopping centers located in Clark County, Nevada, as more fully described in the Agreement.  Any capitalized term that is used in this Amendment and not otherwise defined herein shall have the meaning set forth in the Agreement.

 

B.                                    The Parties desire to amend the Agreement as set forth below.

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:

 

1.                    Exhibit A-2.  In accordance with Section 4.1 of the Agreement, the Parties agree that Exhibit A-2 attached to the Agreement is hereby deleted in its entirety and Exhibit A-2 attached to this Amendment is hereby substituted in lieu thereof as the final Exhibit A-2 to the Agreement.

 

2.                    Post-Closing Repairs. Seller hereby agrees to perform those certain repairs set forth on Schedule 1, attached hereto and incorporated herein by this reference, which Seller specifically indicates that it will perform (the “Post-Closing Repairs”) prior to January 31, 2013.  If Seller does not perform the Post-Closing Repairs prior to January 31, 2013, Buyer shall have the right, but not the obligation, to perform the Post-Closing Repairs on behalf of Seller and if Buyer elects to do so, Seller shall reimburse and pay, within thirty (30) days after invoice therefor, Buyer for all reasonably costs and expenses paid to third parties by Buyer in so performing such Post-Closing Repairs.  If Seller fails to pay such amount within such 30-day period, Buyer shall have the right to offset any such amounts against all monthly dividend or redemption payments with respect to Preferred Units and Earnout Payments due to Seller in accordance with the terms of the Agreement.

 

 

3.                    Confidentiality.  Buyer acknowledges and agrees that the terms of this Amendment are confidential in nature.  Buyer agrees not to disclose any of the terms of the Agreement to any person outside of Buyer’s organization except: (i) to Buyer’s attorneys, accountants, lenders or prospective lenders (collectively, the “Permitted Outside Parties”), who shall agree in writing to be bound by the provisions of this Paragraph; or (ii) as may be required by law, in which event Buyer shall use commercially reasonable efforts to notify Seller of any required disclosure prior to releasing any information.

 

4.                    Closing.  Buyer acknowledges that the Due Diligence Period has expired and, subject to the terms of the Amendment, that Buyer has accepted the title and physical condition of the Properties.  Buyer and Seller agree that the Closing Date shall be December 27, 2012 or such other date if mutually agreed upon by Buyer and Seller; provided that in no event shall the Closing Date be later than December 31, 2012.

 

5.                    General Provisions.  To the extent of any conflict between the provisions of this Amendment and the provisions of the Agreement, the provisions of this Amendment shall control.  Except as set forth in this Amendment, the Parties ratify and affirm the Agreement in its entirety, and the Agreement shall remain in full force and effect.  This Amendment shall be governed by, and construed and interpreted in accordance with, the laws (excluding the choice of laws rules) of the state of Nevada.  This Amendment shall inure to the benefit of, and be binding on, the Parties and their respective successors and assigns.  This Amendment may be executed in any number of duplicate originals or counterparts, each of which when so executed shall constitute in the aggregate but one and the same document. Counterpart signature pages may be delivered by facsimile, email or other means of electronic transmission.  The provisions of this Amendment will survive the Closing.

 

(Signatures begin on following page)

 

 

IN WITNESS WHEREOF, the Parties have executed this Amendment on the date first set forth above.

 

 

	
 
    	
 
    	
BUYER:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
INLAND   REAL ESTATE ACQUISITIONS, INC.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
/s/   Lou Quilici
    
	
 
    	
 
    	
 
    	
Name:   Lou Quilici
    
	
 
    	
 
    	
 
    	
Title:   Senior Vice President
    

 

 

	
 
    	
 
    	
SELLER:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
CENTENNIAL   GATEWAY, LLC,
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:   
    	
Centennial   Partners, LLC,
    
	
 
    	
 
    	
 
    	
a   Nevada limited liability company,
    
	
 
    	
 
    	
 
    	
its   Manager
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
By:   
    	
/s/   Terri Sturm
    
	
 
    	
 
    	
 
    	
 
    	
Terri   Sturm, Manager
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
Schwartz   Development I, LLC,
    
	
 
    	
 
    	
 
    	
a   Nevada limited liability company,
    
	
 
    	
 
    	
 
    	
its   Manager
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
By:
    	
/s/   Jonathan Schwartz
    
	
 
    	
 
    	
 
    	
 
    	
Jonathan   Schwartz, Manager
    

 

 

EXHIBIT A-2

 

To

 

FIRST AMENDMENT TO AGREEMENT OF PURCHASE AND SALE AND CONTRIBUTION AGREEMENT

 

[See attached]

 

 

SCHEDULE 1

 

To

 

FIRST AMENDMENT TO AGREEMENT OF PURCHASE AND SALE AND CONTRIBUTION AGREEMENT

 

Post-Closing Repairs

 

[See attached]Exhibit 10.9

 

EXECUTION VERSION

 

 

 

INLAND TERRITORY, L.L.C.

 

LIMITED LIABILITY COMPANY AGREEMENT

 

 

Dated as of December 27, 2012

 

 

 

 

 

LIMITED LIABILITY COMPANY AGREEMENT

OF

INLAND TERRITORY, L.L.C.,

a Delaware limited liability company

 

THIS LIMITED LIABILITY COMPANY AGREEMENT (this “Agreement”) dated as of December 27, 2012 (the “Effective Date”) is made by and between Inland Territory Member, L.L.C., a Delaware limited liability company (“Inland”); and Centennial Centre, L.L.C., a Nevada limited liability company, Eastern — Beltway, Ltd., a Nevada limited liability company, Centennial Gateway, LLC, a Nevada limited liability company, and Retail Development Partners, LLC, a Nevada limited liability company (each an “Investor” and together the “Investors”).

 

Preliminary Statements

 

WHEREAS, certain of the Investors and Inland Real Estate Acquisitions, Inc., an Illinois corporation (“Acquisition”) entered into that certain Agreement of Purchase and Sale and Contribution Agreement, dated October 17, 2012 (the “Purchase and Contribution Agreement”), providing for the contribution by such Investors of certain real property therein described to a newly formed single purpose entity in exchange for a non-managing membership interest in such entity;

 

WHEREAS, Acquisition and Centennial Gateway, LLC entered into that certain Agreement of Purchase and Sale, dated October 17, 2012 (the “Purchase and Sale Agreement”), providing for the transfer by Centennial Gateway of certain real property therein described to a newly formed single purpose entity in exchange for a non-managing membership interest in such entity;

 

WHEREAS, it is a requirement of the Purchase and Contribution Agreement and the Purchase and Sale Agreement that some or all of the Investors enter into this Agreement; and

 

WHEREAS, the parties hereto now desire to enter into this Limited Liability Company Agreement in order to (i) reflect the admission of the Members as the sole Members of the Company, (ii) establish the manner in which the business and affairs of the Company shall be managed and (iii) determine the respective rights, duties and obligations of the Members with respect to the Company and each other.

 

NOW THEREFORE, the parties hereto, in consideration of the foregoing premises and the mutual covenants and agreements contained herein, hereby agree as follows:

 

 

ARTICLE I

 

DEFINED TERMS

 

The following terms shall have the following meanings when used herein:

 

Adjusted Capital Account Deficit: With respect to any Member, the deficit balance, if any, in such Member’s Capital Account as of the end of the relevant Allocation Year, after giving effect to the following adjustments: (i) credit to such Capital Account any amount that such Member is obligated to restore pursuant to any provision of this Agreement, is otherwise treated as being obligated to restore under Treasury Regulation Section 1.704-1(b)(2)(ii)(c), or is deemed to be obligated to restore pursuant to the penultimate sentences of Treasury Regulation Sections 1.704-2(g)(1) and 1.704-2(i)(5); and (ii) debit to such Capital Account the items described in Treasury Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6). The foregoing definition of Adjusted Capital Account Deficit is intended to comply with the provisions of Treasury Regulation Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.

 

Affiliate: With respect to any Person, (i) any Person directly or indirectly controlled by, controlling or under common control with such Person, (ii) any officer, director, general partner or manager of such Person, or (iii) any Person which owns, directly or indirectly, ten percent (10%) or more of any class of voting securities of such Person or which exercises control over the management of such Person. For the purposes of this Agreement, “control” when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities or other beneficial interests, by contract or otherwise; and the term “controls”, “controlling” and “controlled” have the meanings correlative to the foregoing.

 

Allocation Year: Means (i) the period commencing on the Effective Date and ending on December 31, 2012, (ii) any subsequent period commencing on January 1 and ending on the following December 31, or (iii) any portion of the period described in clause (ii) for which the Company is required to allocate Profits, Losses and other items of Company income, gain, loss or deduction pursuant to Article V.

 

Business Day: Any day other than Saturday, Sunday or any other day on which commercial banks are required or authorized by law to close in Chicago, Illinois.

 

Capital Account: The Capital Account maintained for each Member pursuant to Section 3.5.

 

Capital Contribution: With respect to any Member, the amount of money and the initial Gross Asset Value of any property contributed by such Member to the Company (net of any liabilities secured by such property or to which such property is otherwise subject).

 

Capital Expenditures: For any period, the amount expended for items capitalized under generally accepted accounting principles, consistently applied, except for such items as are otherwise classified under this Agreement.

 

2

 

Capital Transaction: Any of the following: (a) a sale, exchange, transfer, assignment or other disposition of all or a portion of any material asset of the Company or a Subsidiary other than tangible personal property that is not sold or transferred in connection with the sale or transfer of real property or a leasehold interest in real property; (b) any condemnation or deeding in lieu of condemnation of all or a portion of any material asset of the Company or a Subsidiary; and (c) any fire or other casualty to a Property or any other material asset of the Company or a Subsidiary.

 

Cash Shortfall: For any period, the excess, if any, of (a) Operating Expenses over (b) Gross Receipts.

 

Cash Shortfall Loan: A loan made by a Member (or Affiliate or other Person designated by a Member) to the Company pursuant to Section 3.3.A hereof, on the terms set forth in Section 3.3.B hereof.

 

Certificate: The Certificate of Formation for the Company filed with the Secretary of State, pursuant to Section 18-201 of the LLC Act (as hereinafter defined), as the same may be amended and restated from time to time.

 

Class A Member: The Members of the Company that hold Class A Units. The initial Class A Members are the Members described as such on Schedule A  attached hereto.

 

Class A Units: The Units of the Company that are characterized as Class A Units and listed on Schedule A  attached hereto.

 

Class B Member: The Members of the Company that hold Class B Units. The initial Class B Members are the Members described as such on Schedule A  attached hereto.

 

Class B Units: The Units of the Company that are characterized as Class B Units and listed on Schedule A  attached hereto.

 

Closing: Has the meaning set forth in Section 10.3.

 

Closing Price: On any date shall mean the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if the Common Stock is not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Common Stock is listed or admitted to trading.

 

Code: The Internal Revenue Code of 1986, as amended, or any corresponding provision or provisions of prior or succeeding law.

 

Common Stock: Means the shares of Common Stock of Inland Parent, par value $0.001.

 

3

 

Company: Inland Territory, L.L.C., a limited liability company formed under the laws of the State of Delaware, and any successor limited liability company.

 

Company Minimum Gain: Has the meaning given to the term “partnership minimum gain” set forth in Treasury Regulations §1.704-2(d).

 

Depreciation: For each Allocation Year, an amount equal to the depreciation, amortization, or other cost recovery deduction allowable with respect to an asset for such Allocation Year, except that if the Gross Asset Value of an asset differs from its adjusted basis for federal income tax purposes at the beginning of such Allocation Year, Depreciation shall be an amount which bears the same ratio to such beginning Gross Asset Value as the federal income tax depreciation, amortization, or other cost recovery deduction for such Allocation Year bears to such beginning adjusted tax basis. If any asset shall have a zero adjusted basis for federal income tax purposes, Depreciation shall be determined utilizing any reasonable method selected by the Manager.

 

Event of Bankruptcy: With respect to any Member, if such Member (i) makes an assignment for the benefit of creditors, (ii) files a voluntary petition in bankruptcy, (iii) is adjudged a bankrupt or insolvent, or has entered against it an order for relief, in any bankruptcy or insolvency proceeding, (iv) files a petition or answer seeking for itself any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any statute, law or regulation, (v) files an answer or other pleading admitting or failing to contest the material allegations of a petition filed against the Member in any proceeding of this nature, (vi) seeks, consents to or acquiesces in the appointment of a trustee, receiver or liquidator of the Member or of all or any substantial part of its properties, or (vii) 120 days after the commencement of any proceeding against the Member seeking reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any statute, law or regulation, if the proceeding has not been dismissed, or if within 90 days after the appointment without such Member’s consent or acquiescence of a trustee, receiver or liquidator of such Member or of all or any substantial part of its properties, the appointment is not vacated or stayed, or within 90 days after the expiration of any such stay, the appointment is not vacated. With respect to a Member, the foregoing definition of “Event of Bankruptcy” is intended to replace and shall supersede and replace the definition of “Bankruptcy” set forth in Sections 18-101(1) and 18-304 of the LLC Act.

 

Exchange: Means (i) the New York Stock Exchange or (ii) NASDAQ.

 

Family: With respect to a Person who is an individual, means individuals who are related to that individual by blood, marriage, or adoption.

 

Fiscal Year: Means (i) the period commencing on the date hereof and ending on December 31, 2012, and (ii) any subsequent period commencing on January 1 and ending on the earlier to occur of (A) the following December 31, or (B) the date on which all of the assets of the Company are distributed pursuant to Section 9.2 and the Certificate has been cancelled pursuant to the LLC Act.

 

4

 

Gross Asset Value: With respect to any asset, the asset’s adjusted basis for federal income tax purposes, except as follows:

 

(a)           The initial Gross Asset Value of any asset contributed by or credited to a Member to the Company shall be the gross fair market value of such asset, as determined by the Manager;

 

(b)           The Gross Asset Values of all assets of the Company shall be adjusted to equal their respective gross fair market values, as determined by the Manager, as of the following times: (i) the acquisition of an interest or an additional interest in the Company by any new or existing Member in exchange for more than a de minimis Capital Contribution; (ii) the distribution by the Company to a Member of more than a de minimis amount of property or money as consideration for an interest in the Company; (iii) the liquidation of the Company within the meaning of Treasury Regulations §1.704-l(b)(2)(ii)(g); and (iv) whenever otherwise permitted under Treasury Regulations §1.704-l(b)(2)(iv)(f); provided, however, that adjustments pursuant to clause (i) above shall be made only if the Manager determines that such adjustments are necessary or appropriate to reflect the relative economic interests of the Members;

 

(c)           The Gross Asset Value of any asset of the Company distributed to a Member shall be the gross fair market value of such asset on the date of distribution as determined in accordance with the provisions hereof;

 

(d)           The Gross Asset Values of the assets of the Company shall be increased (or decreased) to reflect any adjustments to the adjusted basis of such assets pursuant to Code Section 734(b) or Code Section 743(b), but only to the extent that such adjustments are taken into account in determining Capital Accounts pursuant to Treasury Regulations §1.704-l(b)(2)(iv)(m) and subparagraph (vi) of the definition of Profit and Losses; provided, however, that Gross Asset Values shall not be adjusted pursuant to this paragraph (d) to the extent the Manager determines that an adjustment pursuant to paragraph (b) hereof is necessary or appropriate in connection with a transaction that would otherwise result in an adjustment pursuant to this paragraph (d); and

 

(e)           If the Gross Asset Value of an asset has been determined or adjusted pursuant to paragraphs (a), (b), or (d), such Gross Asset Value shall thereafter be adjusted by the Depreciation taken into account with respect to such asset for purposes of computing Profits and Losses.

 

(f)            The Members agree that, as of the date hereof, the Gross Asset Value of each Property contributed is as set forth on Schedule B  hereto.

 

Gross Receipts: For any period, all cash receipts and revenues of the Company or a Subsidiary of any kind calculated on a cash or accrual basis (as determined by the Manager), including, without duplication (i) all Rents received by a Subsidiary, (ii) all payments received by the Company or a Subsidiary from the operators of any licensed facilities or concessions, (iii) all other forms of rent, revenue, income, proceeds, royalties, profits and other benefits paid to the Company or a Subsidiary from using, leasing, licensing, processing, operating from or in, or

 

5

 

otherwise enjoying all or any portion of each Property, (iv) all payments under business interruption insurance policies or proceeds payable under any policy of insurance covering loss of Rents, (v) any utility or other deposits returned to a Subsidiary or other refunds accruing to the Company or a Subsidiary, (vi) any interest earned on security deposits held by the Company or a Subsidiary to the extent retained by the Company or such Subsidiary, and interest earned on operating and other accounts of the Company or a Subsidiary, (vii) all amounts received by a Subsidiary from tenants at each Property in connection with the surrender of such tenants’ leases (to the extent that such amounts are not required to be deposited with any Company or Subsidiary lender), and (viii) all refunds, rebates and other recoveries of items previously charged as Operating Expenses, but excluding, (a) Capital Contributions to the Company, (b) Net Proceeds of a Capital Transaction and Net Proceeds of a Financing, (c) sums held by the Company or a Subsidiary as security deposits under leases for space at each Property unless and until applied to the satisfaction of tenants’ obligations under such leases (to the extent permitted under applicable leases and law) and (d) non-cash charges accruing to the Company or a Subsidiary in the nature of depreciation and amortization of each Property.

 

Impositions: With respect to the each Property, all taxes (including sales and use taxes), assessments (including all assessments for public improvements or benefits, whether or not commenced or completed prior to the date hereof), water, sewer or other rents, rates and charges, excises, levies, license fees, permit fees, inspection fees and other authorization fees and other charges, in each case whether general or special, ordinary or extraordinary, of every character (including all interest and penalties thereon), which at any time may be assessed, levied, confirmed or imposed by any governmental or quasi-governmental authority having jurisdiction over such Property on or in respect of or be a lien upon (i) such Property or any estate or interest therein, (ii) any occupancy, use or possession of, or activity conducted on, such Property, or (iii) the Rents from such Property or the use or occupancy thereof.

 

Inland Parent: Inland Diversified Real Estate Trust, Inc., a Maryland corporation, and the one hundred percent member of Inland.

 

Inland Preferred Return: A per annum rate equal to 17.5% per annum on Inland’s Invested Capital as adjusted from time to time, provided, however, that such rate shall be prorated for each Fiscal Year of the Company which is less than twelve (12) full months.

 

Invested Capital: With respect to each Member, the amount set forth opposite such Member’s name on Schedule A attached hereto, as increased, from to time, by any Capital Contributions (other than Initial Capital Contributions) made by such Member following the date hereof pursuant to the terms of this Agreement, and as reduced from time to time, but not below zero, by distributions made to such Member under Section 4.2(ii) hereof in the case of an Investor, and Section 4.2(iv) hereof in the case of Inland, until such time as the Invested Capital of such Member has been reduced to zero; provided that the Invested Capital of an Investor shall be further adjusted in accordance with the provisions of Section 10.5 hereof.

 

Investor LLC Interest (or LLC Interest of the Investor): The entire LLC Interest in the Company held by an Investor and any and all successors and permitted assignees of such Investor. For the avoidance of doubt the “Investor LLC Interest” shall include all of the Class B Units held by an Investor and any and all successors and permitted assignees of such Investor.

 

6

 

Investor Preferred Return: A per annum rate equal to 4% per annum on each Investor’s Invested Capital as adjusted from time to time, provided, however, that such rate shall be prorated for each Fiscal Year of the Company which is less than twelve (12) full months.

 

Investor Redemption Amount: Has the meaning set forth in Section 10.4.

 

LLC Interest: As to any Member, all of the interest of that Member in the Company including, without limitation, such Member’s (i) right to a distributive share of the Profits and Losses and cash flow of the Company, (ii) right to a distributive share of the assets of the Company and (iii) right, if any, to participate in the management of the business and affairs of the Company, as provided in this Agreement.

 

Manager: Means the Person in whom the management of the Company is vested to the extent so provided in this Agreement. Pursuant to the terms of Section 6.1 of this Agreement, the Manager is Inland.

 

Maximum Investor Recourse Debt Amount: Means the maximum amount of Company or Subsidiary nonrecourse debt that the Investors in the aggregate may guaranty under a Reimbursement Agreement. In all events, the “Maximum Investor Recourse Debt Amount” shall not exceed Fifty Million Dollars ($50,000,000) (which shall be the “Maximum Investor Recourse Debt Amount” as of the Effective Date).

 

Member: At any time, any Person admitted and remaining as a member of the Company pursuant to the terms of this Agreement. As of the date of this Agreement, the Members of the Company are Inland and the Investors.

 

Member Nonrecourse Debt: Has the meaning given to the term “partner nonrecourse debt” set forth in Treasury Regulations §1.704-2(b)(4).

 

Member Nonrecourse Debt Minimum Gain: An amount, with respect to each Member Nonrecourse Debt, equal to the Company Minimum Gain that would result if such Member Nonrecourse Debt were treated as a Nonrecourse Liability, determined in accordance with Treasury Regulations §1.704-2(i)(2) and (3).

 

Member Nonrecourse Deductions: Has the meaning given to the term “partner nonrecourse deductions” set forth in Treasury Regulations §1.704-2(i)(2). For any Allocation Year, the amount of Member Nonrecourse Deductions with respect to a Member Nonrecourse Debt equals the excess, if any, of the net increase, if any, in the amount of the Member Nonrecourse Debt Minimum Gain attributable to such Member Nonrecourse Debt over the aggregate amount of any distributions during such Allocation Year to the Member that bears the economic risk of loss for such Member Nonrecourse Debt to the extent such distributions are from proceeds of such Member Nonrecourse Debt and are allocable to an increase in Member Nonrecourse Debt Minimum Gain, determined according to the provisions of Treasury Regulations §1.704-2(i)(2).

 

Net Cash Flow: For any period, the excess of (a) Gross Receipts plus any amount, as reasonably determined by the Manager, taken out of any general reserve account established by

 

7

 

the Company or a Subsidiary over (b) Operating Expenses plus any amount, as reasonably determined by the Manager, added during such period to any such general reserve account.

 

Net Proceeds of a Capital Transaction: With respect to each Property, the net cash proceeds from a Capital Transaction less any portion thereof used to (i) establish reserves as reasonably determined by the Manager, (ii) repay any debts or other obligations of the Company or a Subsidiary (including Cash Shortfall Loans), or (iii) restore such Property following a casualty or condemnation. “Net Proceeds of a Capital Transaction” shall include all principal, interest and other payments as and when received with respect to any note or other obligation received by the Company in connection with a Capital Transaction and shall expressly exclude Net Proceeds of a Financing.

 

Net Proceeds of a Financing: With respect to each Property, the net cash proceeds from any financing transaction less any portion thereof used to (i) establish reserves as reasonably determined by the Manager, or (ii) repay any debts or other obligations of the Company or a Subsidiary (including Cash Shortfall Loans).

 

Nonrecourse Deductions: Has the meaning set forth in Treasury Regulations §1.704-2(b)(1). The amount of Nonrecourse Deductions for an Allocation Year equals the excess, if any, of the net increase, if any, in the amount of Company Minimum Gain during that Allocation Year, over the aggregate amount of any distributions during that Allocation Year of proceeds of a Nonrecourse Liability that are allocable to an increase in Company Minimum Gain, determined according to the provisions of Treasury Regulations §1 .704-2(c).

 

Nonrecourse Liability: Has the meaning set forth in Treasury Regulations §1.704-2(b)(3).

 

Operating Expenses: For any period and with respect to each Property, all expenses incurred by the Company or a Subsidiary during such period, calculated on a cash or accrual basis (as determined by the Manager), including, without duplication (subject to the exclusions described below): (i) current operating expenses and taxes incurred by the Company or a Subsidiary including (without duplication) utility charges, costs of materials, normal repair and maintenance costs, Impositions and other business taxes applicable to such Property (except as excluded below), license fees, costs of complying with any encumbrance upon such Property, premiums for insurance, fees of the Company’s or a Subsidiary’s counsel, the accounting fees, the costs of any audits and appraisals performed by the Company or a Subsidiary and any other reasonable costs which are paid for by the Company or a Subsidiary, (ii) the management fee and leasing commissions paid to a property manager by the Company or a Subsidiary pursuant to a management agreement or leasing commission agreement, (iii) Capital Expenditures incurred in accordance with the provisions hereof or as mandated by law or necessitated by an emergency for improvements to space at such Property leased to tenants, inducements granted to such tenants and leasing expenses (including leasing commissions), and (iv) payments of fees, interest and scheduled amortization of principal on any financing affecting such Property or the assets of the Company or a Subsidiary, but excluding without duplication: (A) expenditures paid or to be paid from insurance proceeds or condemnation awards available for restoration of such Property; (B) any non-cash charges from depreciation or amortization of property; (C) any expenses or

 

8

 

costs incurred in connection with a Capital Transaction that would not have been incurred but for such Capital Transaction; and (D) any payments on Cash Shortfall Loans.

 

Person: Any individual, corporation, partnership, limited liability company, association, trust or other entity or organization.

 

Profits and Losses: For any Allocation Year, the taxable income or loss of the Company for federal income tax purposes for such Allocation Year, as determined by the Manager, in accordance with Code Section 703(a) (for this purpose, all items of income, gain, loss or deduction required to be separately stated pursuant to Code Section 703(a)(1) shall be included in taxable income or loss), with the following adjustments:

 

(i)            Any income of the Company that is exempt from federal income tax and not otherwise taken into account in computing Profits or Losses hereunder shall be added to such taxable income or loss;

 

(ii)           Any expenditures of the Company described in Code Section 705(a)(2)(B), or treated as Code Section 705(a)(2)(B) expenditures pursuant to Treasury Regulations §1.704-1(b)(2)(iv)(i) and not otherwise taken into account in computing Profits or Losses hereunder shall be subtracted from such taxable income or loss.

 

(iii)          In the event the Gross Asset Value of any Company asset is adjusted pursuant to the provisions of this Agreement, the amount of such adjustment shall be taken into account as gain or loss from the disposition of such asset for purposes of computing Profits or Losses;

 

(iv)          Gain or loss resulting from any disposition of property with respect to which gain or loss is recognized for federal income tax purposes shall be computed with reference to the Gross Asset Value of the property disposed of, notwithstanding that the adjusted tax basis of such property differs from its Gross Asset Value;

 

(v)           In lieu of the depreciation, amortization and other cost recovery deductions taken into account in computing such taxable income or loss, there shall be taken into account Depreciation for such Allocation Year; and

 

(vi)          To the extent an adjustment to the adjusted tax basis of any Company asset pursuant to Code Section 734(b) is required pursuant to Treasury Regulations §1.704-1(b)(2)(iv)(m)(4) to be taken into account in determining Capital Accounts as a result of a distribution other than in liquidation of a Member’s LLC Interest, the amount of such adjustment shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases the basis of the asset) from the disposition of the asset and shall be taken into account for purposes of computing Profits and Losses.

 

The amount of the items of Company income, gain, loss or deduction available to be specially allocated pursuant to Section 5.2 hereof shall be determined by applying rules analogous to those set forth in subparagraphs (i) through (vi) above.

 

9

 

Property: Means each property described in the Purchase and Contribution Agreement and the Purchase and Sale Agreement and collectively referred to herein as the “Properties.”

 

Purchased Property: Means the shopping center properties known as Cannery Corner and Lowe’s Plaza, as more fully described on Schedule 1 of the Purchase and Contribution Agreement, and any successor properties.

 

Redemption Factor: Means 100%; provided that such factor shall be adjusted in accordance with the Antidilution Provisions of Section 10.2.C and 10.2.D hereof.

 

Redemption Invested Capital: Means (in the event that an Investor properly elects to receive the Redemption Price) an amount equal to $10 per Class B Unit being redeemed herein at such time.

 

Redemption Price: Means the Cash Redemption Price or the Stock Redemption Price, each as adjusted under the provisions of the final sentence of Section 10.2.A hereof.

 

Reimbursement Agreement: Has the meaning set forth in Section 3.7.

 

REIT Exchange Date: Means the later of (i) the date that is five (5) years after the Effective Date or (ii) the first date after the Effective Date on which Inland Parent Common Stock is listed and publicly traded on an Exchange; provided that at any time that the Inland Parent Common Stock is no longer listed and publicly traded on an Exchange, then the “REIT Exchange Date” shall no longer have occurred until such time as the Inland Common Stock is, once again, listed and publicly traded on an Exchange.

 

Rents: Collectively, all fixed, base, minimum, guaranteed, additional, retroactive, percentage, participation or escalation rents, operating cost pass-throughs, utility charges, common area maintenance or management charges, administrative charges, parking, maintenance, tax and insurance contributions payable under any lease for space at each Property, deficiency rents and liquidated damages following default by any tenant at such Property, premiums payable by any tenant at such Property upon the exercise of a cancellation privilege originally provided in any lease for space at such Property, and any rights and claims of any kind which a Subsidiary may have against any tenant at such Property.

 

Replacement Indebtedness: Any debt incurred by the Company or a Subsidiary that (i) replaces or refinances all or any portion of preexisting nonrecourse indebtedness held by the Company or a Subsidiary, and (ii) leaves the Investors in substantially the same tax position with respect to their respective share of Company or Subsidiary liabilities (to the extent allowed under applicable law) as they were immediately prior to the replacement or refinancing.

 

Subsidiary: Any Person (other than an individual) which is “controlled” by the Company (as defined in the definition of “Affiliate” above) and in which the Company beneficially owns, directly or indirectly, an economic ownership interest. For the avoidance of doubt, each Property owned by the Company shall be owned (directly or indirectly) by a wholly owned Subsidiary of the Company that is a disregarded entity or partnership for U.S. federal income tax purposes. In connection with the foregoing, all references in this Agreement to (i) the Company’s interest in a Property, and (ii) Net Cash Flow, Net Proceeds of a Capital Transaction and Net Proceeds of a

 

10

 

Financing (together with all related defined terms and provisions herein), shall refer to (x) the Company’s indirect interest in a Property through the Company’s interest in a Subsidiary, and (y) Net Cash Flow, Net Proceeds of a Capital Transaction and Net Proceeds of a Financing of a Subsidiary (as if such terms are defined in the relevant organizational documents of the applicable Subsidiary) and the distributions of such amounts by such Subsidiary to the Company.

 

Tax Matters Member: Has the meaning set forth in Section 7.4.

 

Trading Day: Means each Monday, Tuesday, Wednesday, Thursday and Friday, other than any day which securities are not traded on the Exchange or in such market and the term “ex date”, when used in respect of any issuance or distribution, shall mean the first date on which the shares trade regular way on the Exchange or in such market without the right to receive such issuance or distribution.

 

Transfer: Any sale, assignment, gift, pledge, hypothecation or other transfer, direct or indirect, by operation of law or otherwise, of a Member’s LLC Interest.

 

Treasury Regulations: The Income Tax Regulations promulgated under the Code as such regulations may be amended from time to time (including Temporary Regulations).

 

Triggering Event: Has the meaning set forth in Section 6.1.E.

 

Units: Has the meaning set forth in Section 3.1.A.

 

Unpaid Inland Preferred Return: As of any given date, the Inland Preferred Return accrued to such date less distributions made by the Company to Inland pursuant to the provisions of Sections 4.1(ii) and 4.2(iii) hereof as of such date.

 

Unpaid Investor Preferred Return: As of any given date, the Investor Preferred Return accrued to such date less distributions made by the Company to each Investor pursuant to the provisions of Sections 4.1(i) and 4.2(i) hereof as of such date; provided that the Unpaid Investor Preferred Return shall be further adjusted in accordance with the provisions of Section 10.5 hereof.

 

ARTICLE II

 

FORMATION; NAME; PRINCIPAL OFFICE; PURPOSE; TERM

 

SECTION 2.1.     Formation.

 

A.            The Company has been formed as a limited liability company pursuant to the provisions of the Delaware Limited Liability Company Act, Title 6 of the Delaware Code, Section 18-101 et seq. (the “LLC Act”). To the extent permitted by the LLC Act, the provisions of this Agreement shall override the provisions of the LLC Act in the event of any inconsistency between them.

 

B.            In order to maintain the Company as a limited liability company under the laws of the State of Delaware, the Manager shall, from time to time, take appropriate action, including

 

11

 

the preparation and filing of such amendments to the Certificate and such other assumed name certificates, documents, instruments and publications as may be required by or desirable under law, including, without limitation, action to reflect:

 

(i)            any change in the Company name; or

 

(ii)           any correction of false or erroneous statements in the Certificate or the desire of the Members to make a change in any statement therein in order that it shall accurately represent the agreement among the Members.

 

C.            Each Member shall further execute, to the extent necessary, and the Company shall file and record (or cause to be filed and recorded) and shall publish, if required by law, such other and further certificates, statements or other instruments as may be necessary or desirable under the laws of the State of Delaware or the state in which each Property is located in connection with the formation of the Company and the commencement and carrying on of its business.

 

SECTION 2.2.     Name, Registered Office, and Resident Agent; Principal Place of Business.

 

A.            The name of the Company shall be “Inland Territory, L.L.C.”

 

B.            The principal place of business and office of the Company shall be located at c/o Inland Diversified Real Estate Trust, Inc., 2901 Butterfield Road Oak Brook, Illinois 60523 or at such other places as the Manager may from time to time designate. The Company may have such additional offices and places of business as may be established at such other locations as may be determined from time to time by the Manager.

 

C.            The present address of the registered office of the Company in the State of Delaware and its resident agent for service of process in the State of Delaware are as set forth in the Certificate.

 

SECTION 2.3.     Purpose.

 

A.            The purpose and business of the Company are solely to:

 

(i)            Acquire, own, finance (using special purpose entities, Subsidiaries or otherwise), develop, redevelop, operate, lease, manage, control, sell, transfer, exchange or otherwise dispose of the Properties;

 

(ii)           Hold, manage and operate the Subsidiaries that will hold the interests in the Properties;

 

(iii)          Cause each Subsidiary to finance the Properties held by such Subsidiary; and

 

(iv)          To do and perform all acts necessary or desirable to carry out the foregoing purpose.

 

12

 

B.            Nothing in this Agreement shall be deemed to create a mutual agency between the Members with respect to any activities of the Company or the Members whatsoever. Except as expressly provided herein, no Member shall be deemed to be the agent of any other Member for any purposes and no Member shall have any authority to bind any other Member.

 

SECTION 2.4.     Term.

 

The Company shall have perpetual existence beginning on the date that the Certificate was filed with the Office of the Secretary of State of the State of Delaware; provided that the Company may be dissolved in accordance with Section 9.1 hereof.

 

SECTION 2.5.     Classification of the Company for Tax Purposes.

 

The Members hereby acknowledge their intention that the Company be classified, for federal and state income tax purposes, as a partnership and not as an association taxable as a corporation pursuant to Section 7701(a)(2) of the Code and the Regulations promulgated thereunder, and hereby agree that the provisions of this Agreement shall be applied and construed in a manner to give full effect to such intent. Accordingly, each Member, by its execution or acceptance of this Agreement, covenants and agrees that (i) it will not cause the Company to make an election under Regulations Section 301.7701-3(b) to be taxed as a corporation for federal income tax purposes (ii) it will file its own federal and state income tax returns in a manner that is consistent with tax classification of the Company as a partnership and (iii) it will not take any action which is inconsistent with such classification.

 

SECTION 2.6.     Liability of the Members.

 

No Member shall be liable under a judgment, decree or order of a court, or in any other manner for the debts or any other obligations or liabilities of the Company solely by reason of being a Member of the Company. Except as expressly provided under the terms of this Agreement, each Member shall not be required to lend any funds to the Company or to make any future contributions, assessments or payments to the Company. No Member shall have any personal liability for any repayment of any Capital Contribution of any Member.

 

SECTION 2.7.     Ownership and Waiver of Partition and Valuation.

 

The LLC Interests of each Member in the Company shall be personal property for all purposes. All property and interests in property, real or personal, owned (directly or indirectly) by the Company shall be deemed owned (directly or indirectly) by the Company as an entity, and no Member, individually, shall have any ownership of or interest in such property or interest owned (directly or indirectly) by the Company except as a Member of the Company. To avoid irreparable damage to the Company, each Member, on behalf of itself and its successors, representatives, heirs, and assigns hereby irrevocably, unconditionally and completely waives, renounces and releases each and all of the following rights that it has or may have, if any, by virtue of holding LLC Interests in the Company: (i) any right of partition or any right to take any other action that otherwise might be available to such Member for the purpose of severing its relationship with the Company or such Member’s interest in the assets held by the Company from the interest of the other Members; and (ii) any right to valuation and payment with respect to such Member’s LLC Interests or any portion thereof, except to the extent specifically set forth

 

13

 

herein. Notwithstanding any provision herein to the contrary, each Member hereby acknowledges and agrees that, pursuant to the provisions of Section 10.1.E hereof, in the event that an Investor seeks, or attempts to seek, to take any action in violation or inconsistent with the foregoing, Inland shall be permitted at any time, in its sole and absolute discretion, to deliver a Redemption Notice (as defined below) to such Investor and to thereupon immediately cause the Company to purchase such Investor’s Investor LLC Interest pursuant to the terms of Article X hereof.

 

SECTION 2.8.     Waiver of Right to Judicial Dissolution.

 

The Members agree that irreparable damage would be done to the good will and reputation of the Company if any Member should bring an action in court to dissolve the Company. Accordingly, to avoid irreparable damage to the Company each Member hereby irrevocably, unconditionally and completely waives, renounces and releases its right to seek a court decree of dissolution or to seek the appointment by a court of a liquidator for the Company. Notwithstanding any provision herein to the contrary, each Member hereby acknowledges and agrees that, pursuant to the provisions of Section 10.1.E hereof, in the event that an Investor seeks, or attempts to seek, to take any action in violation or inconsistent with the foregoing, Inland shall be permitted at any time, in its sole and absolute discretion, to deliver a Redemption Notice (as defined below) to such Investor and to thereupon immediately cause the Company to purchase such Investor’s Investor LLC Interest pursuant to the terms of Article X hereof.

 

ARTICLE III

 

MEMBERS; COMPANY CAPITAL; UNITS

 

SECTION 3.1.     Members.

 

A.            The Members’ ownership interest in the Company shall be represented by units of membership interest (“Units”). The Units of the Company shall be of two (2) classes; “Class A Units,” and “Class B Units.” The Company is hereby authorized to issue Class A Units and up to 3,000,000 Class B Units.

 

B.            The respective names, addresses for notice, class and number of Units and initial Capital Contributions of the Members are as set forth on Schedule A attached hereto. Upon execution of this Agreement, each Person listed on Schedule A hereto shall be admitted to the Company as a Member and the Company hereby issues to each such Member the number and class of Units set forth opposite such Member’s name on Schedule A hereto. Schedule A shall be amended from time to time by the Manager to reflect any changes of address, the admission of additional or substitute Members or any change to the information set forth thereon.

 

C.            Concurrently with the execution and delivery of this Agreement, and in accordance with the terms of the Purchase and Contribution Agreement and Purchase and Sale Agreement, each Member has made a Capital Contribution to the Company pursuant to Code Section 721 of an amount equal to the amount set forth opposite such Member’s name on Schedule A attached hereto (the “Initial Capital Contribution”).

 

14

 

D.            One or more Persons may be admitted to the Company as additional Members from time to time only with the unanimous written consent of the Members, provided, however, that the admission of transferees permitted pursuant to Article VIII hereof shall not require the consent of the Manager or the Members.

 

E.            In addition to any other requirements set forth in this Agreement, no Person shall be admitted to the Company as an additional or substitute Member unless and until such Person has accepted and agreed to all the provisions of this Agreement by executing a counterpart signature page hereto or an amendment to this Agreement.

 

SECTION 3.2.     Additional Capital Contributions.

 

A.            Other than the Capital Contributions of the Members required under Section 3.1, and as otherwise provided in this Agreement, no Member shall (i) be required to make any further Capital Contributions or (ii) be required to lend any funds to the Company.

 

B.            No Member shall have any obligation to make additional Capital Contributions to restore a deficit balance in its Capital Account.

 

SECTION 3.3.     Funding of Additional Cash Requirements.

 

A.            If, at any time or from time to time, the Manager determines that the Company requires additional funds, the Manager, in its sole but reasonable discretion, may:

 

(i)            Cause the Company to borrow, at market rates, the required additional funds from any third-party lender;

 

(ii)           Cause the Company to borrow the required additional funds from one or more Members (or any of their respective affiliates) willing to make such loans as “Cash Shortfall Loans” in accordance with Section 3.3.B; and/or

 

(iii)          Except as otherwise provided in Section 6.1.D, cause the Company to issue additional Units.

 

B.            Cash Shortfall Loans, if any, made pursuant to this Section 3.3 shall: (i) be evidenced by a written promissory note containing customary terms and conditions and having a final maturity date of not less than six (6) months after the date of issue, (ii) bear interest at the rate of eight percent (8%) per annum from the date due until paid in full, (iii) if required by the lending Member, but subject in all respects to the terms of any existing loans of the Company, be secured by a lien on and a security interest in all of the assets of the Company and (iv) be repaid prior to any distribution to the Members.

 

C.            Any Member who makes or proposes to make a Cash Shortfall Loan shall have the right at any time and from time to time to cause the Company to replace the Cash Shortfall Loan with a loan from a third party. The Company, acting through the Manager shall have the right at any time and from time to time to repay any Cash Shortfall Loan and replace it with a loan from a third party. Any Cash Shortfall Loan may be repaid at any time without prepayment penalty.

 

15

 

D.            The Members hereby covenant and agree to structure any Cash Shortfall Loans made pursuant to the terms of this Agreement so that such loans satisfy the “Straight Debt Safe Harbor” under Code Section 856(m) and the Treasury Regulations promulgated thereunder.

 

E.            If any Member shall lend any money to the Company, the amount of any such loan shall not be considered a Capital Contribution to the Company, increase its Capital Account or affect in any way its share of the Profits, Losses, other items of income, gain, loss or deduction or distributions of the Company.

 

SECTION 3.4.     No Third Party Beneficiaries.

 

The obligations of the Members hereunder shall not confer upon any creditor or other third party having dealings with the Company any right, claim or other benefit, including the right to require any Cash Shortfall Loans.

 

SECTION 3.5.     Capital Accounts.

 

A.            The Company shall establish and maintain a separate Capital Account for each Member in accordance with the provisions of this Section 3.5. To each Member’s Capital Account there shall be credited such Member’s Capital Contributions, such Member’s allocable share of Profits, and any items in the nature of income or gain that are specially allocated to such Member under this Agreement.

 

B.            To each Member’s Capital Account there shall be debited the amount of cash and the Gross Asset Value of any Company property distributed to such Member pursuant to any provision of this Agreement (net of liabilities secured by such distributed property that such Member is considered to assume or take subject to under Code Section 752), such Member’s allocable share of Losses, and any items in the nature of expenses or losses that are specially allocated to such Member under this Agreement.

 

C.            In the event any interest in the Company is transferred in accordance with the terms of this Agreement (i.e., Article VIII hereof), the transferee shall succeed to the Capital Account of the transferor to the extent it relates to the transferred interest. In the case of a sale or exchange of an interest in the Company at a time when an election under Code Section 754 is in effect, the Capital Account of the transferee Member shall not be adjusted to reflect the adjustments to the adjusted tax bases of Company property required under Code Sections 754 and 743, except as otherwise permitted by Treasury Regulations §1.704-l(b)(2)(iv)(m).

 

D.            In determining the amount of any liability for purposes of Section 3.5.B above, there shall be taken into account Code Section 752(c) and the Treasury Regulations promulgated thereunder, and any other applicable provisions of the Code and Regulations.

 

E.            The foregoing provisions and the other provisions of this Agreement relating to the maintenance of Capital Accounts are intended to comply with Treasury Regulations §1.704-l(b) and 1.704-2, and shall be interpreted and applied in a manner consistent with such Regulations.

 

16

 

SECTION 3.6.     Return of Capital.

 

Except as provided in Article X or as otherwise agreed by the Members, no Member shall have the right to withdraw or receive any return of its Capital Contributions. Except as provided in Article X or as otherwise agreed by the Members, no Member shall have any right to demand or receive property (other than cash) in return of its Capital Contributions.

 

SECTION 3.7.     Recourse Debt.

 

The Investors shall have the option from time to time to guarantee debt of the Company or a Subsidiary in an amount not to exceed the Maximum Investor Recourse Debt Amount; provided that while the Manager and Inland shall use their good faith efforts to assist the Investors in guarantying such debt, neither the Manager nor Inland provide any assurance that such guaranties shall be accepted or respected by any applicable lender. If an Investor elects to guarantee debt under this Section 3.7, the Company and such Investor (or Investors) agree to enter into a reimbursement agreement (the “Reimbursement Agreement”) substantially in the form attached hereto as Exhibit A. The Company shall ensure that there is a sufficient level of debt available to the Investors for any guaranty by Investors in an amount up to the Maximum Investor Recourse Debt Amount; provided that in all events, the foregoing shall not require the Company (directly or through the Subsidiaries) to have aggregate indebtedness in excess of a loan to value ratio of 50% (which ratio shall be determined based on the values of the Properties on the date hereof as set forth in the Purchase and Contribution Agreement and Purchase and Sale Agreement). The Company shall provide written notice to the Investors that are party to a Reimbursement Agreement at least thirty (30) days prior to the repayment or substitution of Company indebtedness that such Investors have guaranteed and shall provide any additional information such Investors reasonably request to permit such Investors to decide whether or not to enter into different or additional guarantees.

 

ARTICLE IV

 

DISTRIBUTIONS

 

SECTION 4.1.     Distributions of Net Cash Flow.

 

Prior to the dissolution and termination of the Company, Net Cash Flow of the Company (or Net Cash Flow of a Subsidiary that has been distributed to the Company) for any Fiscal Year shall be distributed monthly (if and to the extent available) by the Company in the following order of priority:

 

(i)            First, to the Investors, in proportion to their respective Class B Units in the Company, until such time as the Unpaid Investor Preferred Return for each Investor has been reduced to zero;

 

(ii)           Second, to the Class A Member, until such time as the Unpaid Inland Preferred Return has been reduced to zero; and

 

(iii)          Third, the balance, to the Class A Members and the Class B Members, pro rata, in proportion to their Units in the Company (regardless of class).

 

17

 

SECTION 4.2.     Net Proceeds of a Capital Transaction.

 

Prior to the dissolution and termination of the Company, Net Proceeds of a Capital Transaction of the Company (or Net Proceeds of a Capital Transaction of a Subsidiary that has been distributed to the Company) may be distributed by the Company from time to time in the sole and absolute discretion of the Manager in the following order of priority:

 

(i)            First, to the Investors, in proportion to their respective Class B Units in the Company, until such time as the Unpaid Investor Preferred Return for each Investor has been reduced to zero;

 

(ii)           Second, to the Investors, in proportion to their respective Class B Units in the Company, until such time as the Invested Capital of each Investor has been reduced to zero;

 

(iii)          Third, to the Class A Member, until such time as the Unpaid Inland Preferred Return has been reduced to zero; and

 

(iv)          Fourth, the balance, to the Class A Member. 

 

SECTION 4.3.     Net Proceeds of a Financing.

 

Net Proceeds of a Financing of the Company (or Net Proceeds of a Financing of a Subsidiary that has been distributed to the Company) may be distributed by the Company from time to time in the sole and absolute discretion of the Manager, solely to the Class A Member. Notwithstanding the foregoing, at no time shall the Company (directly or through its Subsidiaries) have aggregate indebtedness in excess of a loan to value ratio of 58% (which ratio shall be determined based on the values of the Properties on the date hereof as set forth in the Purchase and Contribution Agreement and Purchase and Sale Agreement).

 

SECTION 4.4.     Other Distribution Rules.

 

Subject to the provisions of Section 3.3, distributions in respect of an LLC Interest shall be made only to the Person or Persons that, according to the Company’s books and records, are the holders of record of the LLC Interests in respect of which such distributions are made on the actual date of distribution. Neither the Company nor the Manager shall incur any liability for making distributions in accordance with the provisions of the preceding sentence, whether or not the Company or the Manager has knowledge or notice of any Transfer or purported Transfer of ownership of any LLC Interest.

 

SECTION 4.5.     Withholding.

 

The Members hereby authorize the Company to withhold from or pay on behalf of or with respect to such Member any amount of federal, state, local, or foreign taxes that the Manager reasonably determines that the Company is required to withhold or pay with respect to any amount distributable or allocable to the Members pursuant to this Agreement, including any taxes required to be withheld or paid by the Company pursuant to Section 1441, 1442, 1445 or 1446 of the Code. The Manager shall give prompt notice to the Members with respect to which

 

18

 

withholding is effected in accordance with this Section 4.5 and shall provide such Member with a written explanation of the basis for its determination so to withhold or pay (a “Withholding Notice”). Any amount paid on behalf of or with respect to a Member pursuant to the provisions hereof shall constitute a loan by the Company to such Member, which loan shall be repaid by such Member within fifteen (15) days after notice from the Manager that such payment must be made, unless the Company withheld such payment from a distribution which would otherwise be made to such Member in accordance with the provision hereof. Any amounts so withheld shall be treated as having been distributed to such Member and shall be promptly paid, solely out of funds from the Company, by the Manager to the appropriate taxing authority. In the event that a Member fails to pay any amounts owed to the Company pursuant to this Section 4.5 when due, the Manager may, in its sole and absolute discretion, elect to make the payment to the Company on behalf of such defaulting Member, and in such event shall be deemed to have loaned such amount to such defaulting Member. For the avoidance of doubt, any distributions which would have otherwise been distributed to a Member, but are retained by the Company in accordance with this Section 4.5, shall, for all other purposes of this Agreement, be deemed to have been distributed to such Member.

 

ARTICLE V

 

ALLOCATION OF PROFITS AND LOSSES

 

SECTION 5.1.     Profits and Losses.

 

A.            Profits. After giving effect to the allocations under Section 5.2 hereof, Profits for any Allocation Year shall be allocated to the Members in the following order of priority:

 

(i)            Profits other than from a Capital Transaction (and except as otherwise provided under Section 5.1.A(iii) hereof) shall be allocated:

 

(a)           First, to the Investors, in proportion to their respective Class B Units, until the aggregate amount of Profits allocated to each Investor under this Section 5.1.A(i)(a) from the current Fiscal Year and all prior Fiscal Years equals the actual amounts distributed to the Investors pursuant to Section 4.1(i) for the current Fiscal Year and all prior Fiscal Years; and

 

(b)           Second, to the Class A Member, in the amount necessary to cause the aggregate amount of Profits allocated to Inland under this Section 5.1.A(i)(b) from the current Fiscal Year and all prior Fiscal Years to equal the amounts distributable to Inland pursuant to Section 4.1(ii) for the current Fiscal Year and all prior Fiscal Years; and

 

(c)           Third, the balance, to the Class A Members and the Class B Members, pro rata, in proportion to their Units in the Company (regardless of class).

 

(ii)           Profits from a Capital Transaction (except as otherwise provided under Section 5.1.A(iii) hereof) shall be allocated:

 

19

 

(a)                                 First, to each Member in an amount equal to the amount necessary to increase each such Member’s Capital Account to the amount distributable to such Member pursuant to Section 4.2 hereof; and

 

(b)                                 Second, the balance, to the Class A Member.

 

(iii)                               Profits arising from any Capital Transaction (including a hypothetical sale in connection with an in-kind distribution upon liquidation of the Company) occurring upon or resulting in the liquidation (within the meaning of Treasury Regulations §1.704-l(b)(2)(ii)(g)) of the Company shall be allocated:

 

(a)                                 First, to the Investors, in proportion to their respective Class B Units in the Company, until the Capital Account balance of each Investor equals the sum of (1) the Unpaid Investor Preferred Return plus (2) the Invested Capital of the Investor at such time;

 

(b)                                 Second, to the Class A Member, until the Capital Account balance of Inland equals the sum of (1) the Unpaid Inland Preferred Return plus (2) the Invested Capital of Inland at such time; and

 

(c)                                  Third, the balance, to the Class A Member.

 

B.                                    Losses. After giving effect to the allocations under Section 5.2 hereof, Loss for any Allocation Year shall be allocated to the Members in the following order of priority:

 

(i)                                     Losses other than as provided in Section 5.1.B(ii) hereof shall be allocated:

 

(a)                                 First, to the Class A Member, to the extent that the allocation of such Losses does not cause Inland to have an Adjusted Capital Account Deficit;

 

(b)                                 Second, to the Investors, in proportion to their respective Class B Units in the Company, but only to the extent that the allocation of such Losses does not cause an Investor to have an Adjusted Capital Account Deficit; and

 

(c)                                  Third, the balance, to the Class A Members and the Class B Members, pro rata, in proportion to their Units in the Company (regardless of class).

 

(ii)                                  Losses arising from any Capital Transaction (including a hypothetical sale in connection with an in-kind distribution upon liquidation of the Company) occurring upon or resulting in the liquidation (within the meaning of Treasury Regulations §1.704-l(b)(2)(ii)(g)) of the Company shall be allocated:

 

(a)                                 First, to the Investors, in proportion to their respective Class B Units in the Company, until the Capital Account balance of each Investor equals the sum of (1) the Unpaid Investor Preferred Return plus (2) the Invested Capital of the Investor at such time;

 

20

 

(b)                                 Second, to the Class A Member, the maximum amount that can be allocated without causing Inland to have an Adjusted Capital Account Deficit;

 

(c)                                  Third, to the Investors, in proportion to their respective Class B Units in the Company, in the maximum amount that can be allocated without causing an Investor to have an Adjusted Capital Account Deficit; and

 

(d)                                 Fourth, the balance, to the Class A Members and the Class B Members, pro rata, in proportion to their Units in the Company (regardless of class).

 

SECTION 5.2.               Regulatory and Special Allocations.

 

Notwithstanding any other provisions of this Article V, the special allocations provisions set forth on Schedule 5.2, which are hereby incorporated into this Section 5.2 by this reference as if set forth in their entirety, shall apply prior to any other allocations of Profits and Losses (and any items of income, gain, loss or deduction).

 

SECTION 5.3.               Other Allocation Rules.

 

A.                                    For purposes of determining the Profits, Losses, or any other items allocable to any period, Profits, Losses, and any such other items shall be determined on a daily, monthly, or other basis, as reasonably determined by the Manager using any permissible method under Code Section 706 and the Treasury Regulations thereunder.

 

B.                                    Except as otherwise provided in this Agreement, all items of Company income, gain, loss, deduction, and any other allocations not otherwise provided for shall be divided among the Members for tax purposes in the same proportions as they share Profits or Losses, as the case may be, for the Allocation Year.

 

C.                                    The Members are aware of the income tax consequences of the allocations made by this Article V and hereby agree to be bound by the provisions of this Article V in reporting their shares of Company income and loss for income tax purposes.

 

D.                                    Profits, Losses and any other items of income, gain, loss or deduction shall be allocated to the Members pursuant to this Article V as of the last day of each Fiscal Year, provided that Profits, Losses and such other items shall also be allocated at such times as the Gross Asset Values of the assets of the Company are adjusted pursuant to subparagraph (b) of the definition of “Gross Asset Value” in Article I.

 

SECTION 5.4.               Tax Allocations: Code Section 704(c).

 

A.                                    In accordance with Code Section 704(c) and the Treasury Regulations thereunder, income, gain, loss, and deduction with respect to the Properties, and any other property contributed to the capital of the Company shall, solely for tax purposes, be allocated among the Members, in any manner permitted by the Treasury Regulations and determined by the Manager in its sole and absolute discretion, so as to take account of any variation between the adjusted

 

21

 

basis of such property to the Company for federal income tax purposes and its initial Gross Asset Value.

 

B.                                    In the event the Gross Asset Value of any Company property is adjusted pursuant to paragraph (b) of the definition of Gross Asset Value, subsequent allocations of income, gain, loss, and deduction with respect to such asset shall take account of any variation between the adjusted basis of such asset for federal income tax purposes and its Gross Asset Value in a manner permitted under Code Section 704(c) and the Treasury Regulations thereunder, as determined by the Manager in its sole and absolute discretion.

 

C.                                    Any elections or other decisions relating to such allocations shall be made by the Manager, in any manner that reasonably reflects the purpose and intention of this Agreement.

 

ARTICLE VI

 

GOVERNANCE AND ADMINISTRATIVE PROVISIONS

 

SECTION 6.1.               Management of Business and Affairs.

 

A.                                    The business and affairs of the Company (directly and acting on behalf of each Subsidiary) shall be exclusively and solely vested in the Manager and no Member, other than the Manager, shall be an agent of the Company or have any authority to bind or take action on behalf of the Company.

 

B.                                    The Members hereby designate and appoint Inland to serve as the Manager of the Company. Subject to the approval of the Investors for a Major Decision, the management of the Properties shall rest with and remain the sole and absolute right, and responsibility of the Manager. The Investors agree to cooperate with the Manager by executing any consents or certificates of the Company necessary to demonstrate to a lender, tenant or service provider to the Company that the Manager has the power and authority set forth in this Section 6.1. Without limiting the generality of the foregoing, but subject to the approval rights of the Investors with respect to a Major Decision as set forth in Section 6.1.D hereof, the Manager shall have the full power and authority to do all things deemed necessary or desirable by it in its sole and absolute discretion to conduct the business of the Company (directly and acting on behalf of each Subsidiary) and to effectuate the purposes set forth in Section 2.3 hereof, including, without limitation:

 

(i)                                     the making of any expenditures, the lending or borrowing of money, the assumption or guarantee of, or other contracting for, indebtedness and other liabilities, the issuance of evidences of indebtedness (including securing of same by deed to secure debt, mortgage, deed of trust or other lien or encumbrance of the Company’s assets) and incurring of any obligations that it deems necessary for the conduct of the activities of the Company;

 

(ii)                                  the acquisition, sale, transfer, exchange or other disposition of any assets of the Company (including, but not limited to, the exercise or grant of any conversion, option, privilege, or subscription right or any other right available in connection with any assets at any time held by the Company);

 

22

 

(iii)                               the mortgage, pledge, encumbrance or hypothecation of any assets of the Company (including, without limitation, the Properties), the use of the assets of the Company (including, without limitation, cash on hand) for any purpose consistent with the terms of this Agreement which the Manager believes will directly benefit the Company and on any terms that the Manager sees fit, the lending of funds to other Persons and the repayment of obligations of the Company;

 

(iv)                              the management, operation, leasing (including the amendment and/or termination of any lease), landscaping, repair, alteration, demolition, replacement or improvement of any Property;

 

(v)                                 the negotiation, execution and performance of any contracts, leases, conveyances or other instruments that the Manager considers useful or necessary to the conduct of the Company’s operations or the implementation of the Manager’s powers under this Agreement, including contracting with property managers, contractors, developers, consultants, accountants, legal counsel, other professional advisors and other agents (including Inland Parent service providers and property managers) and the payment of their expenses and compensation out of the Company’s assets;

 

(vi)                              the distribution of Company cash and other Company assets in accordance with this Agreement and the holding, management, investment, and reinvestment of cash and other assets of the Company;

 

(vii)                           the selection and dismissal of employees of the Company (including, without limitation, employees having the title or holding the office of “president,” “vice president,” “secretary” or “treasurer”), and agents, outside attorneys, accountants, consultants and contractors of the Company and the determination of their compensation and other terms of employment or hiring;

 

(viii)                        the maintenance of such insurance for the benefit of the Company and the Members as it deems necessary or appropriate including casualty, liability and other insurance on each Property and other assets of the Company, which insurance may be obtained by a blanket insurance policy obtained by Inland Parent service providers and property managers;

 

(ix)                              the control of any matters affecting the rights and obligations of the Company, including the settlement, compromise, submission to arbitration or any other form of dispute resolution, or abandonment of any claim, cause of action, liability, debt or damages due or owing to or from the Company, the commencement or defense of suits, legal proceedings, administrative proceedings, arbitrations or other forms of dispute resolutions, and the representation of the Company in all suits or legal proceedings, administrative proceedings, arbitrations or other forms of dispute resolutions, the incurring of legal expenses and the indemnification of any Person against liabilities and contingencies to the extent permitted by law;

 

(x)                                 holding, managing, investing and reinvesting cash and other assets of the Company;

 

23

 

(xi)                              the collection and receipt of rents, revenues and income of the Company;

 

(xii)                           in addition to working capital and/or reserves required to be maintained under this Agreement, the maintenance of working capital and other reserves in such amounts as the Manager deems appropriate and reasonable from time to time;

 

(xiii)                        the making, execution and delivery of any and all deeds, leases, notes, deeds to secure debt, mortgages, deeds of trust, security agreements, conveyances, contracts, guarantees, warranties, indemnities, waivers, releases or legal instruments or agreements in writing necessary or appropriate in the judgment of the Manager for the accomplishment of any of the powers of the Manager enumerated in this Agreement; and

 

(xiv)                       taking any of the foregoing actions on behalf of any Subsidiary.

 

C.                                    In addition to and without limiting the duties and obligations of the Manager as set forth above, the Manager shall use commercially reasonable efforts to:

 

(i)                                     cause the Company, directly or through its agents, at all times to perform and comply with the provisions of any loan commitment, agreement, mortgage, deed of trust, lease, construction contract or other contract, instrument or agreement to which the Company is a party or which affects the any Property or the operation thereof;

 

(ii)                                  keep and maintain at least such insurance coverage as may be required by the holder of any mortgage or deed of trust encumbering all or any portion of any Property;

 

(iii)                               open and maintain bank accounts for funds of the Company;

 

(iv)                              employ contractors for the ordinary maintenance and repair of each Property, including installation of tenant improvements as required by leases on such Property;

 

(v)                                 retain or engage real estate brokers licensed to do business in the states in which each Property, or any part thereof, is located;

 

(vii)                           use reasonable efforts to enter into leases of space and other occupancy agreements for each Property on market terms and conditions, and in accordance with the requirements of any applicable loan;

 

(viii)                        employ such managing or other agents necessary for the operation, management and leasing of each Property including, without limitation, a property manager;

 

(ix)                              retain or engage attorneys and accountants, to the extent such professional services are required during the term of the Company; and

 

(x)                                 do any act which is necessary or desirable to carry out any of the foregoing.

 

24

 

D.                                    Notwithstanding the provisions of Section 6.1.B and 6.1.C (or any other provision of this Agreement), the Manager shall not take, nor shall the Manager or Company cause a Subsidiary to take, any of the following actions or make any of the following decisions without the prior written consent or approval of the holders of at least 80% of the Class B Units (each, a “Major Decision”):

 

(i)                                     prior to the date which is six (6) years from the Effective Date, sell, transfer, assign, convey, exchange or otherwise dispose of or transfer (a “Disposition”) all or any material portion of any Property (or any successor property) except with respect to (a) a tax deferred exchange that qualifies under Section 1031 of the Code, (b) a reinvestment that qualifies under Section 1033 of the Code, (c) any other transaction in which the Company defers gain recognition or recognizes a de  minimis gain for U.S. federal income tax purposes (i.e., the Company’s taxable gain from such transaction is less than 1% of the selling price), or (d) an involuntary disposition or forfeiture of a Property in a manner in which the provisions of clause (a) and clause (b) above are not available or applicable to the Company at any point after such involuntary disposition or forfeiture; except that this Section 6.1.D(i) shall not apply to the Disposition of Purchased Property so long as (y) such Disposition of Purchased Property does not cause the aggregate Company and Subsidiary debt amount to be less than the Maximum Investor Recourse Debt Amount and (z) the Company timely notifies the Investors of the Disposition after entering into an agreement to make such Disposition (which notice in no event shall be provided less than thirty (30) days prior to the closing of such Disposition);

 

(ii)                                  except as provided in Article VIII, admit any Person as an additional Member of the Company;

 

(iii)                               cause the Company to issue additional Class B Units;

 

(iii)                               cause the Company to transfer all or any portion of a membership interest that the Company holds in a Subsidiary;

 

(iv)                              assign all or substantially all of the assets of the Company or of a Subsidiary in trust for creditors or file on behalf of the Company or a Subsidiary a voluntary petition for relief under the bankruptcy laws or similar voluntary petition under state laws;

 

(vi)                              cause the Company or a Subsidiary to become a party to any merger, consolidation or share exchange with any Person, or dissolve or terminate the Company or a Subsidiary, if any such transaction would have a material adverse effect on an Investor; or

 

(v)                                 voluntarily repay, in whole or in part, or voluntarily substitute other debt for, any indebtedness on the Properties prior to the maturity date of such indebtedness unless such indebtedness is replaced or refinanced with Replacement Indebtedness; provided that the foregoing shall not restrict the Company or a Subsidiary from making any payments that are required to be made under the terms of the applicable loan documents of the indebtedness on the Properties.

 

25

 

E.                                     Notwithstanding anything in this Agreement to the contrary, if the Company takes a course of action that is or involves a Major Decision without the written consent or approval of the holders of at least 80% of the Class B Units (a “Triggering Event”), the Company shall upon written demand pay to each Investor an amount equal to sum of each Investor’s Invested Capital and the Investor’s Unpaid Investor Preferred Return (at the time of the Triggering Event) in complete redemption of the Investors’ Investor LLC Units. Such payment must be made no later than the first to occur of 90 days after receipt of the written demand or the end of the calendar year in which the written demand is received. Upon payment to the Investors, the Investors shall have no rights with respect to the Company, Inland and the assets of the Company either as owner, lender or otherwise and shall have no right to receive any further payments or distributions from the Company or from Inland (whether in respect of an indemnity or otherwise) under the terms of this Agreement or otherwise.

 

F.                                      The Manager shall cause the Company to arrange and maintain property, casualty and liability insurance with respect to each Property in amounts and on terms that the Manager deems necessary or appropriate and that are consistent with the amounts that may be required by the holder of any mortgage or deed of trust encumbering all or any portion of such Property.

 

G.                                    Whenever a Member (“Requesting Member”) requests that the other Member (the “Requested Member”) consent to any action required of the Requested Member under the provisions of this Agreement, notice shall be delivered by the Requesting Member to the Requested Member pursuant to the provisions of Section 11.3 hereof, which notice shall be in writing and shall include (a) a summary of the terms and conditions of the actions requested to be taken by the Requesting Member, (b) a copy of any proposed documentation, including any document to be executed by the Company or the Requested Member in connection therewith, and (c) a notice that conspicuously states that “THIS NOTICE IS BEING PROVIDED TO YOU IN ACCORDANCE WITH THE TERMS OF THE LIMITED LIABILITY COMPANY AGREEMENT OF INLAND TERRITORY, L.L.C. IF YOU DO NOT GIVE YOUR APPROVAL OR DISAPPROVAL OF THE ACTION PROPOSED IN THIS NOTICE TO BE TAKEN WITHIN TEN (10) BUSINESS DAYS AFTER THE DATE OF THIS REQUEST FOR APPROVAL, YOUR APPROVAL OF THE PROPOSED ACTION WILL BE DEEMED GIVEN.” If the Requested Member does not respond to the Requesting Member within ten (10) Business Days of its receipt of such notice (determined in the manner provided under Section 11.3 hereof), the Requested Member shall be deemed to have approved the action requested by the Requesting Member.

 

SECTION 6.2.               Duties and Conflicts.

 

A.                                    The Members, in connection with their respective duties and responsibilities hereunder, shall at all times act in good faith and, except as expressly set forth herein, any decision or exercise of right of approval, consent, disapproval or deferral of approval by a Member (including the Manager) is to be made by such Member pursuant to the terms of this Agreement in good faith, but recognizing that each Member may act in its own economic self interest and in accordance with such tax and business objectives as it deems appropriate or desirable for such Member. Except as otherwise agreed to in writing by the Members, no Member (including the Manager) or any partner, officer, shareholder or employee of any

 

26

 

Member shall receive any salary or other remuneration for its services rendered pursuant to this Agreement. Notwithstanding the foregoing, Inland Parent service providers and property managers may manage any Property pursuant to a separate management agreement the execution by the Company of which shall expressly not require the consent of the Investors.

 

B.                                    Each Member recognizes that the other Members (including the Manager) have or may have other business interests, activities and investments, some of which may be in conflict or competition with the business of the Company and that such other Member (including the Manager) is entitled to carry on such other business interests, activities and investments. No Member (including the Manager) shall be obligated to devote all or any particular part of its time and effort to the Company and its affairs.

 

C.                                    The Manager shall not be liable to the Company or to any other Member for any error in judgment, mistake or law or fact or for any other act or thing which it may do or refrain from doing in connection with the business and affairs of the Company, except in the case of an intentional breach of any provision of this Agreement (after written notice to the Manager and a reasonable time to cure) or its willful misconduct, gross negligence or bad faith.

 

SECTION 6.3                  Exculpation and Indemnification.

 

A.                                    The Company may indemnify any Person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit, proceeding or investigation, whether civil, criminal, investigative or administrative, and whether external or internal to the Company (other than an action or suit brought by or in the right of the Company), by reason of the fact that such person is or was a Manager, Member, employee or trustee of the Company, or that, such person is or was an Affiliate of a Manager, Member, employee or trustee of the Company, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such Person in connection with such action, suit or proceeding, or any appeal therein, if such Person acted in good faith and in a manner he, she, or it reasonably believed to be in or not opposed to the best interests of the Company, the liability or loss was not the result of negligence or misconduct by such Person and the indemnification is recoverable only out of the assets of the Company and not from the Members, and with respect to any criminal action or proceeding, had no reasonable cause to believe such conduct was unlawful. The termination of any action, suit or proceeding whether by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent shall not, of itself, create a presumption that the Person did not act in good faith and in a manner which he, she or it reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, that such Person had reasonable cause to believe that his, her or its conduct was unlawful.

 

Notwithstanding anything to the contrary in Section 6.3A hereof, the Company shall not indemnify any Person for losses, liabilities or expenses arising from or out of an alleged violation of federal or state securities law by such Person unless one or more of the following conditions are met: (i) there has been a successful adjudication on the merits of each count involving alleged securities law violations as to such Person, (ii) the claims have been dismissed with prejudice on the merits by a court of competent jurisdiction as to such

 

27

 

Person, 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 or sold as to indemnification for violations of securities laws.

 

B.                                    The Company may indemnify any Person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit brought by or in the right of the Company to procure a judgment in its favor by reason of the fact that he, she or it is or was a Manager, Member, employee or trustee of the Company or is or was an Affiliate of a Manager, Member, employee or trustee of the Company against expenses (including attorneys’ fees) actually and reasonably incurred by such Person in connection with the defense, settlement or appeal of such action or suit if such Person acted in good faith and in a manner such Person reasonably believed to be or not opposed to the best interests of the Company, except that the indemnification is recoverable only out of the assets of the Company and not from the Members and that no indemnification shall be made in respect of any claim, issue or matter as to which such Person shall have been adjudicated to be liable for negligence or misconduct in the performance of his, her or its duty to the Company unless and only to the extent that the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such Person is fairly and reasonably entitled to be indemnified for such expenses which the court shall deem proper.

 

Notwithstanding anything to the contrary in Section 6.3B hereof, the Company shall not indemnify any Person for losses, liabilities or expenses arising from or out of an alleged violation of federal or state securities law by such Person unless one or more of the following conditions are met: (i) there has been a successful adjudication on the merits of each count involving alleged securities law violations as to such Person, (ii) the claims have been dismissed with prejudice on the merits by a court of competent jurisdiction as to such Person, 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 or sold as to indemnification for violations of securities laws.

 

C.                                    Any indemnification under Sections 6.3.A or 6.3.B hereof (unless ordered by a court) shall be made by the Company only as authorized in the specific case upon a determination that the indemnification of the Person in question is proper in the circumstances because that Person has met the applicable standards of conduct set forth in Sections 6.3.A or 6.3.B hereof. Such determination shall be made by Inland Parent.

 

D.                                    To the extent that any Person referred to in Sections 6.3.A or 6.3.B hereof has been successful on the merits or otherwise in defense of any action, suit, proceeding or investigation, or any appeal or in defense of any claim, issue or matter therein, or on appeal

 

28

 

from any such proceeding, action, suit, claim or matter, such Person shall be indemnified against all expenses (including attorney’s fees) incurred in connection therewith.

 

E.                                     Expenses incurred in any action, suit, proceeding or investigation or any appeal therefrom may be paid by the Company in advance of the final disposition of such matter, as authorized by the Manager, only if all of the following conditions are satisfied: (i) the Person seeking payment delivers an acceptable undertaking by or on behalf of such Person to repay such amount (together with the applicable legal rate of interest thereon) if it shall ultimately be determined that such Person is not entitled to indemnification; (ii) the legal action relates to acts or omissions with respect to the performance of duties or services by the Person, for or on behalf of the Company; and (iii) the legal action is initiated by a third party who is not a Member acting in his or her capacity as such and a court of competent jurisdiction specifically approves advancement.

 

F.                                      The indemnification provided by this Section 6.3 shall not be deemed exclusive of, and shall not affect, any other rights to which any Person seeking indemnification may be entitled under any law, agreement, or otherwise, and shall continue and inure to the benefit of the heirs, executors and administrators of such a Person.

 

G.                                    The Company may purchase and maintain insurance on behalf of any Person who is or was a Manager, Member, employee or trustee of the Company against any liability asserted against such Person and incurred by him, her or it in any such capacity, or arising out of his, her or its status as such, whether or not the Company would have the power to indemnify such Person against any such liability under the provisions of this Section. Such insurance may include “tail” coverage for periods after termination of service in such capacity or after liquidation, merger, consolidation or other change in the Company.

 

H.                                   The Company may, at its cost and expense, defend with counsel of the Company’s choice or approval, any Person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding or investigation, whether civil, criminal or administrative, and whether external or internal to the Company by reason of the fact that he, she or it was acting in any capacity described in Sections 6.3.A or 6.3.B hereof if he, she or it acted in good faith and in a manner reasonably believed to be in or not opposed to the best interests of the Company and with respect to any criminal action or proceeding, had no reasonable cause to believe such conduct was unlawful.

 

SECTION 6.4                  Compliance with Certain Requirements.

 

Notwithstanding any other provision of this Agreement or any other document governing the management and operation of the Properties, the Manager shall have the right to cause the Company to take any reasonable action or to refrain from taking any action (including but not limited to using a protective trust to own assets) to (i) preserve the continued qualification of Inland Parent as a real estate investment trust under Section 856 of the Code (a “REIT”), (ii) preserve the continued qualification of any Affiliates of Inland Parent as taxable REIT subsidiaries and (iii) avoid the imposition of additional taxes on Inland Parent under Section 857 of the Code or Section 4981 of the Code and the Treasury Regulations promulgated thereunder (collectively the “REIT Rules”). The Members agree that in the event that the Manager

 

29

 

proposes to take any action (or cause the Company to take any action) to ensure the continued qualification of Inland Parent as a REIT or to avoid the imposition of additional taxes under the REIT Rules on Inland Parent, the Manager shall not have liability to any other Member for monetary damages or otherwise for losses sustained or liabilities incurred in connection with such actions.

 

ARTICLE VII

 

BOOKS AND RECORDS; RESERVES

 

SECTION 7.1.               Bank Accounts.

 

The Manager shall have authority to open bank accounts and designate signatories with respect thereto on behalf of the Company and each Subsidiary and may authorize property managers to open such bank account(s) as they shall deem necessary or desirable for the management and operation of the Properties and the conduct of Company business; provided that for the avoidance of doubt, operating cash of the Properties may by comingled in one property management account as long as the Company separately accounts for the sources and uses of all operating cash of the Company and each Subsidiary.

 

SECTION 7.2.               Books of Account.

 

The Company shall keep accurate and complete books of account and records showing the assets and liabilities, operations, transactions and financial condition of the Company and the Properties. All such books of account and records may be inspected by any Member, its designees or representatives from time to time and upon reasonable prior notice at the office of the Company or other person maintaining the same.

 

SECTION 7.3.               Operating Statements.

 

A.                                    As and when prepared or received by the Manager, the Manager shall promptly provide each Member with copies of all reports, studies, operating statements, budgets and other material documents received by the Company.

 

B.                                    Upon the request of any Member and solely to the extent that such information and reports are available to, and have been prepared or received by, the Manager, the Manager shall promptly provide such requesting Member with (i) a Net Cash Flow statement, (ii) unaudited financial statements of the Company, including statements of profit and loss for the applicable quarter, prepared in accordance with generally accepted accounting principles applied on a consistent basis, (iii) a revised projection of income and expenses of the Company for the remainder of the current Fiscal Year, (iv) in the event a Capital Transaction has occurred, a statement of the Net Proceeds of a Capital Transaction for such Capital Transaction. Upon the request of any Member and as promptly as practical after the end of each calendar year, the Manager shall forward to such requesting Member the same statements described in the preceding sentence for the preceding calendar year.

 

C.                                    As soon as practicable, but within ninety (90) days after the end of the Fiscal Year, and only after the written approval thereof by the Manager, the Tax Matters Member shall,

 

30

 

as a Company expense, furnish the Members with all necessary tax reporting information required by the Members for the preparation of their respective federal, state and local income tax returns, including each Member’s pro rata share of income, gain, loss, deductions and credits for such Fiscal Year.

 

D.                                    As soon as practicable, but in no event later than ninety (90) days after the end of the Fiscal Year, the Tax Matters Member shall, as a Company expense, furnish each Member with copies of the Company’s federal partnership Return of Income and other income tax returns, together with each Member’s Schedule K-1 or analogous schedule, which returns shall be signed by the Tax Matters Member on behalf of the Company and co-signed by the Company’s accountant as preparer.

 

E.                                     Except as otherwise provided in this Agreement, all decisions as to accounting principles, whether for the Company’s books or for income tax purposes (and such decisions may be different for each such purpose) and all elections available to the Company under applicable tax law shall be made by the Manager.

 

F.                                      Each Member shall promptly provide the Manager and/or the Tax Matters Member, as applicable, with the information necessary in order to enable the Manager and/or the Tax Matters Member to furnish the information, reports and/or statements called for pursuant to this Section 7.3. The Manager’s and/or the Tax Matters Member’s obligations to provide reports, information and filings, shall be contingent upon the receipt of the relevant information from the Members.

 

SECTION 7.4.               Tax Matters Member.

 

A.                                    Inland is hereby designated to act as the “Tax Matters Member” under Code section 6231(a)(7). To the extent provided in Code Sections 6221 through 6231 and subject to the provisions hereof, the Tax Matters Member shall represent the Company and the Members in their capacities as Members before taxing authorities or courts of competent jurisdiction in tax matters affecting the Company or the Members in their capacities as Members, and, subject to the limitations set forth in this Agreement, shall file any tax returns and execute any agreements or other documents on behalf of the Company.

 

B.                                    Subject to the limitations set forth in this Agreement, the Tax Matters Member is authorized to make any and all elections for federal, state, and local tax purposes, including, without limitation, any election, if permitted by applicable law: (i) to adjust the basis of the assets of the Company pursuant to Code sections 754, 734(b), and 743(b), or comparable provisions of state or local income tax law, in connection with Transfers of LLC Interests and Company distributions and (ii) to treat the Company as a partnership for income tax purposes (or the functional equivalent thereof under applicable state and/or local income tax law).

 

C.                                    To the extent that such matters would have a material adverse effect on any Member, the Tax Matters Member shall obtain the consent of the other Members before it can (i) extend the statute of limitations for assessment of tax deficiencies against the Members with respect to adjustments to the Company’s federal, state, or local income tax returns, or (ii) execute

 

31

 

any settlement agreement that binds the Members or otherwise affects the rights of the Company and the Members.

 

D.                                    Prior to the taking of any action and/or the making of any election by the Tax Matters Member (including all such actions and/or elections specifically referred to in this Agreement) which has a material adverse effect on the other Member, the Tax Matters Member shall provide prompt written notice of such intended action and/or election to the other Member. If the other Member sends the Tax Matters Member a written objection within thirty (30) business days of receiving the notice (or such shorter time as may be required to take such action or to make such election), the Tax Matters Member and the other Member shall confer about the intended action or election, as applicable. If agreement cannot be reached within sixty (60) business days after the receipt by the Tax Matters Member of the other Member’s written objection (or such shorter time as may be required to take such action or to make such election), the Tax Matters Member shall take the action or make the election, as applicable as originally proposed unless the other Member provides an opinion from the other Member’s regular outside legal tax counsel, or, at the option of the other Member, another nationally recognized law firm that is reasonably acceptable to the Tax Matters Member, in either case at the other Member’s sole expense, that the action or election, as applicable as proposed would more likely than not have an adverse tax consequence to the other Member. In making such determination, the other Member’s counsel (or such other law firm selected by it in accordance with the foregoing) shall be instructed to give effect to the provisions of Articles III and IV hereof. Any dispute regarding any action to be taken under this Section 7.4.D shall be submitted to arbitration in accordance with the provisions of Section 7.4.F hereof.

 

E.                                     Within five (5) business days of its receipt, the Tax Matters Member shall give written notice to the other Member of the receipt of any written notice relating to a controversy or related proceeding which has a material adverse effect on the other Member with the Internal Revenue Service or any state or local taxing authority, including, without limitation, (A) written notice that the Internal Revenue Service or any state or local taxing authority intends to examine the Company’s income tax returns for any year; (B) written notice of commencement of an administrative proceeding at the Company level related to the Company under section 6223 of the Code; (C) written notice of any final Company administrative adjustment relating to the Company pursuant to a proceeding under section 6223 of the Code; (D) any request from the Internal Revenue Service or any comparable state or local taxing agency for waiver of any applicable statute of limitations with respect to the filing of any tax return by the Company; (E) any information document requests from the Internal Revenue Service or any other taxing authority, and (F) any Form 5701 or comparable state or local audit adjustment notices. Within ninety (90) days after receipt of notice of a final Company administrative adjustment, the Tax Matters Member shall notify each Member if it does not intend to file for judicial review with respect to such adjustment.

 

F.                                      The Tax Matters Member shall keep the other Member fully and promptly informed about the status of any tax controversy or related proceeding involving the Company which could have a material adverse effect on the other Member. If, as a result of a notice provided by the Tax Matters Member under Section 7.4.E or otherwise, the other Member believes, based upon the nature of the government inquiry, that the government could be considering an adjustment that would have an adverse effect upon the other Member, then other

 

32

 

Member shall have the right to hire and retain counsel of its choice, reasonably acceptable to the Tax Matters Member, to represent the Company in connection with such issue, shall have the right to control the contest of such issue, and shall participate in such contest to the maximum extent allowable by law, but shall keep the Tax Matters Member fully informed. If the Tax Matters Member does not agree that the government could be considering an adjustment that would have an adverse effect upon the other Member, then this dispute shall be promptly submitted to a senior tax partner at a nationally recognized law firm (other than the other Member’s regular outside tax counsel) selected by the other Member and reasonably acceptable to the Tax Matters Member (the “Arbitrator”). The Arbitrator so selected shall be instructed to give effect to the provisions of this Agreement in determining whether the adjustment could have an adverse effect on the other Member. The Arbitrator’s determination shall be final and binding on the parties and if the determination is that the adjustment could have an adverse effect on the other Member, then the other Member shall have the rights set forth in this Section 7.4.F. All information provided to the Arbitrator by the Company or either Member shall be kept strictly confidential by the Arbitrator.

 

G.                                    All expenses incurred by the Tax Matters Member (including the expenses of counsel retained by the other Member to represent the Company under section 7.4.F) in connection with any tax controversy or related proceeding of the Company will be borne by the Company. Nothing herein shall be construed to restrict the Tax Matters Member from engaging an accounting or law firm to assist the Tax Matters Member in discharging its duties hereunder, so long as the compensation paid by the Company for such services is customary.

 

ARTICLE VIII

 

TRANSFER OF LLC INTERESTS

 

SECTION 8.1.               No Transfer.

 

A.                                    Except as provided in this Article VIII, no Member may Transfer any LLC Interest, except as hereinafter set forth in this Article VIII or upon prior written consent of all of the other Members, which consent may be granted or withheld in the sole and absolute discretion of the other Members. Any Transfer of an LLC Interest in contravention of this Article VIII shall be null and void and shall be deemed a material breach of, and a default under, this Agreement, and the other Members shall have all the rights and remedies available under this Agreement.

 

B.                                    For the purposes of this Article VIII the rules applicable to the Transfer of an LLC Interest shall apply in the same manner to transfers of interest in the Members; provided, however, that the following transfers are not subject to the restrictions and prohibitions on transfer set forth in this Section 8.1:

 

i.                                          direct and indirect Transfers of interests in Inland;

 

ii.                                       in the case of a transferee that is neither an existing member of an Investor nor a person controlling or controlled by an existing member of an Investor immediately prior to the Transfer, direct and indirect Transfers of interests in any Investor if (a) the transferee is an accredited investor for purposes of Rule 501 under the Securities Act of

 

33

 

1933, as amended, after such transfer, (b) such Transfers of interests in the Investor do not result in the termination of the Investor as a partnership for purposes of federal income taxation, (c) a transferee does not gain control, directly or indirectly, of the Investor as a result of the Transfer, (d) such transfer does not breach the provision of any loan documents to which the Company (or its Subsidiaries) are bound, (e) Inland is provided with at least ten (10) days advance notice of the proposed transfer, which notice shall identify the transferee and the interests to be transferred to the transferee, and (f) such transferee satisfies any internal “know-your-customer” inquiries and requirements applied by Inland in the ordinary course of its business;

 

iii.                                    direct and indirect Transfers of interests in each Investor to (a) any Affiliate of the transferor, (b) a trust for the benefit of the transferor or a trust for the benefit of a member of the transferor’s Family, or (c) an organization described in Sections 170(b)(1)(A), 170(c)(2), or 501(c)(3) of the Code; provided that (x) such transfer does not breach the provision of any loan documents to which the Company (or its Subsidiaries) are bound, (y) Inland is provided with at least ten (10) days advance notice of the proposed transfer, which notice shall identify the transferee and the interests to be transferred to the transferee, and (z) a transferee does not gain control, directly or indirectly, of the Investor as a result of the Transfer; or

 

iv.                                   pledges of all or any portion of interests in an Investor to a third-party institutional lender to secure indebtedness to such lender and the transfer of such interest to such lender upon foreclosure of the debt secured by such interest; provided that the limited liability company agreement of such Investor (i) does not permit a lender to become a member of such Investor upon such foreclosure and (ii) limits the rights of the lender to those of an assignee (i.e., such rights are limited to the right to receive distributions and allocations under the terms of such Investor’s limited liability company agreement and such lender shall at no time have voting or management rights, including the right to cause such Investor to deliver a Redemption Notice). For the avoidance of doubt, and notwithstanding any inference herein to the contrary, in the event that an interest in an Investor is pledged in the manner provided above, the lender actually forecloses on such pledged interest, and such Investor (or its direct or indirect members or owners) suffers adverse tax consequences as a result of such foreclosure or transfer, then neither the Investor, nor any direct or indirect member or owner of such Investor, shall have any rights, claims or indemnification rights against or from the Company, Inland, Inland Parent, any Subsidiary or any of their Affiliates.

 

SECTION 8.2.               Permitted Transfers.

 

A.                                    The restrictions on Transfers under Section 8.1 shall not apply to any Transfer (for any consideration or no consideration) by Inland of all or any part of its LLC Interest.

 

B.                                    The restrictions on Transfers under Section 8.1 shall not apply to any Transfer (for any consideration or no consideration) by an Investor of all or any part of its LLC Interest to (i) an Affiliate or member of such Investor so long as such Affiliate or member is an accredited investor for purposes of Rule 501 under the Securities Act of 1933, as amended, after such Transfer, (ii) a trust for the benefit of the transferor or a trust for the benefit of a member of the

 

34

 

transferor’s Family, or (iii) an organization described in Sections 170(b)(1)(A), 170 (c)(2), or 501(c)(3) of the Code; provided that (x) such transfer does not breach the provision of any loan documents to which the Company (or its Subsidiaries) are bound, (y) Inland is provided with at least ten (10) days advance notice of the proposed transfer, which notice shall identify the transferee and the interests to be transferred to the transferee, and (z) at all times the maximum number of Investors holding Units in the Company shall not exceed 12.

 

C.                                    Subject in all events to the provision of any loan documents to which the Company (or its Subsidiaries) are bound, from and after the day that is one (1) year after the Effective Date, the restrictions on Transfers under Section 8.1 shall not apply to pledges of all or any portion of an LLC Interest to a third-party institutional lender of a Member to secure indebtedness to such lender (but only to the extent that such indebtedness matures on or following the date that is five (5) years after the Effective Date), and the transfer of such LLC Interest to such lender upon foreclosure of the debt secured by such LLC Interest; but in the case of such foreclosure (y) such lender shall solely be an assignee and shall have no other rights under this Agreement except for the right to receive distributions and allocations and the right to receive the Investor Redemption Amount (but not the Redemption Price) upon meeting the requirements for delivering a Redemption Notice set forth in Section 10.1, and (z) from and after such foreclosure, Inland shall have the continuing right to deliver a Redemption Notice to such lender (without regard to the time periods described in Section 10.1.B hereof). Prior to the foreclosure of debt secured by an LLC Interest that is pledged to a Lender pursuant to this Section 8.2.C, Inland shall have no obligations whatsoever to such lender except as specifically set forth in a separate agreement executed by such lender, the Company, and the Member pledging such LLC Interest, which agreement shall be substantially in the form attached hereto as Exhibit B. Notwithstanding the foregoing, a pledge of all or any portion of an LLC Interest to a third-party institutional lender of a Member shall be prohibited if such pledge, together with any other pledges of LLC Interests hereunder, could result (following the foreclosure of all such pledges) in the number of Investors holding Units in the Company to exceed 12. For the avoidance of doubt, and notwithstanding any inference herein to the contrary, in the event that an interest in the Company is pledged in the manner provided above, the lender actually forecloses on such pledged interest, and such Investor (or its direct or indirect members or owners) suffers adverse tax consequences as a result of such foreclosure or transfer, then neither the Investor, nor any direct or indirect member or owner of such Investor, shall have any rights, claims or indemnification rights against or from the Company, Inland, Inland Parent, any Subsidiary or any of their Affiliates.

 

D.                                    A permitted transferee of a Member pursuant to Section 8.1.A, 8.2.A or 8.2B hereof that acquires the LLC Interest of a Member shall not be recognized by the Company as a Member and shall have only the rights of an assignee of the transferor Member’s LLC Interest, except upon compliance with the terms of Section 8.2.E. A Member who assigns all of its LLC Interest to a permitted transferee (other than the other Member) in accordance with the provisions of this Agreement shall nevertheless remain a Member of the Company subject to all the duties and obligations imposed on it under this Agreement until such time as the transferee of such LLC Interest is admitted to the Company as a substitute Member in accordance with Section 8.2.E. Upon any permitted assignment of an LLC Interest pursuant to Section 8.2, the transferor and transferee shall file with the Company an executed or authenticated copy of the written instrument of assignment or transfer.

 

35

 

E.                                     No transferee of the whole or a portion of a Member’s LLC Interest shall have the right to become a substituted Member in place of its transferor unless and until all of the following conditions are satisfied:

 

(i)                                     the transferor and transferee have executed and acknowledged such instruments as the Manager may reasonably deem necessary or desirable to effect such Transfer;

 

(ii)                                  a duly executed and acknowledged written instrument of transfer has been filed with the Company setting forth the intention of the transferor that the transferee become a substituted Member in its place;

 

(iii)                               the transferee accepts and agrees to be bound by all the provisions of this Agreement by executing and delivering a counterpart signature page hereto;

 

(iv)                              the transfer would not materially and adversely affect the treatment of the Company for tax purposes under the Code or the tax laws of any state in which the Company does business; and

 

(v)                                 the transferee demonstrates and agrees, to the satisfaction of the Manager determined in its sole and absolute discretion, that it has complied and shall comply with the provisions of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the USA Patriot Act), as amended from time to time.

 

SECTION 8.3.               Succession by Operation of Law.

 

A.                                    In the event of an Event of Bankruptcy with respect to a Member or the merger, consolidation, dissolution or liquidation of a Member, all of such Member’s rights to distributions and allocations by the Company, shall pass to such Member’s legal successor, but such legal successor shall not become a Member of the Company without the prior written consent of the Manager, which consent may be granted or withheld in all of the sole and absolute discretion of the Manager, and the compliance with the provisions of clauses (ii), (iii), (iv) and (v) of Section 8.2.E hereof.

 

B.                                    Upon occurrence of an Event of Bankruptcy of a Member, or any other event that causes a Member to cease to be a member of the Company, the business of the Company shall continue without dissolution. Notwithstanding any other provision of this Agreement, each Member waives any right that it might have under Section 18-801(b) of the Act to agree in writing to dissolve the Company upon the occurrence an Event of Bankruptcy or any other such event.

 

SECTION 8.4.               Additional Restrictions on Transfers.

 

The LLC Interests described in this Agreement have not been registered under the Securities Act of 1933, as amended (the “1933 Act”) or under the securities laws of the State of Delaware or any other jurisdiction (the “State Acts”). Consequently, in addition to any and all other restrictions on transferability set forth herein, the LLC Interests may not be sold, assigned,

 

36

 

pledged, hypothecated or otherwise disposed of or Transferred, except in accordance with the provisions of the 1933 Act and the State Acts.

 

ARTICLE IX

 

DISSOLUTION AND TERMINATION OF THE COMPANY

 

SECTION 9.1.               Dissolution.

 

The Company shall be dissolved and commence winding up and liquidating only upon the first to occur of any of the following:

 

A.                                    The sale, condemnation or other disposition of all of the Properties and the receipt of all consideration therefor;

 

B.                                    At any time that there are no Members; or

 

C.                                    The written election of all the Members to dissolve, wind up and liquidate the Company.

 

SECTION 9.2.               Termination.

 

Notwithstanding any other provision of this Agreement, in all cases of valid, voluntary dissolution of the Company (the parties acknowledging that the right of a Member to cause an involuntary dissolution of the Company or a partition of the Company has been expressly waived, renounced and released under Sections 2.7 and 2.8 hereof), the business of the Company shall be wound up and the Company terminated as promptly as practicable thereafter, and each of the following shall be accomplished:

 

A.                                    The Manager shall cause to be prepared a statement setting forth the assets and liabilities of the Company as of the date of dissolution, a copy of which statement shall be furnished to all of the Members.

 

B.                                    The property and assets of the Company shall be liquidated by the Manager as promptly as possible, but in an orderly and businesslike and commercially reasonable manner. The Manager may, in the exercise of its business judgment and if commercially reasonable, determine to defer the sale of all or any portion of the property and assets of the Company if deemed necessary or appropriate to realize the fair market value of any such property or assets. The proceeds of any liquidation shall be distributed to the Members, to the extent remaining after funding all Company expenses and adequate reserves, in accordance with the positive Capital Account balances of the Members.

 

SECTION 9.3.               Liquidating Member.

 

Upon the dissolution of the Company, the Manager shall act as the liquidating member (in such capacity, the “Liquidating Member”). The Liquidating Member shall, upon the dissolution and upon completion of the winding up of the affairs of the Company, file appropriate certificate(s) to such effect in the proper governmental office or offices under the

 

37

 

LLC Act as then in effect. Notwithstanding the foregoing, each Member, upon the request of the Liquidating Member, shall promptly execute, acknowledge and deliver all such documents, certificates and other instruments as the Liquidating Member shall reasonably request to effectuate the proper dissolution and termination of the Company, including the winding up of the business of the Company. Any tax matters that are continuing as of the time of such liquidation and dissolution and/or that arise after such liquidation and dissolution (if such liquidation and dissolution should ever occur) shall be governed by the provisions of Section 7.4 hereof, and the provisions of this sentence shall survive any such liquidation and/or dissolution of the Company.

 

ARTICLE X

 

REDEMPTION RIGHTS

 

SECTION 10.1. Redemption.

 

A.                                    No later than the date that is four (4) years and three (3) months after the Effective Date (the “Initial Notification Date”), the Investors shall have the right, but not the obligation, to require the Company to purchase and redeem all of their Class B Units, or any portion thereof (so long as the aggregated Investor Invested Capital and Preferred Return of such portion is at least $3,000,000), in exchange for the Investor Redemption Amount (as such term is defined in Section 10.4 hereof) or for the Redemption Price (as described in Section 10.2.A), or for both, by delivering a Redemption Notice (as defined in Section 10.1.C below). The Investors may deliver additional Redemption Notices beginning on the fifth anniversary of the Effective Date and continuing thereafter until all Investor LLC Interests have been redeemed by the Company; provided, however, that (i) a Redemption Notice may not be delivered more frequently than once every six (6) months, and (ii) the aggregate Investor Redemption Amount and Redemption Price for all Investors is equal to or greater than the lesser of (i) Three-Million Dollars ($3,000,000) and (ii) the aggregate of the Investors’ Invested Capital and Unpaid Investor Preferred Return at such time.

 

B.                                    Inland shall have the continuing right, but not the obligation, to require the Company to purchase and redeem all or any part of an Investor’s Investor LLC Interest for the Investor Redemption Amount, and such Investor shall be required to assign such Investor LLC Interest, or portion thereof, if (except as provided in Section 10.1.E hereof) a Redemption Notice is delivered by Inland at any time (and from time to time) after the date which is five (5) years and six (6) months from the Effective Date; provided that (except as provided in Section 10.1.E hereof) the closing following a Redemption Notice delivered by Inland shall not be before the date that is six (6) years after the Effective Date; provided further that notwithstanding the foregoing but subject to Section 10.1.E hereof, at any time on or prior to the date that is four (4) years and three (3) months from the Effective Date the Investors shall have the right to deliver an irrevocable written notice to Inland deferring the initial date at which Inland has the right to cause the Company to purchase and redeem up to 1,000,000 of the Class B Units (as specified by the Investors), until the eighth anniversary of the Effective Date.

 

C.                                    In order to exercise the rights to require the Company to purchase and completely redeem the Investor LLC Interest, or portion thereof (the “Redemption Units”), under this

 

38

 

Section 10.1 and, if applicable, Section 10.2, the Investor or Inland, as appropriate (the “Exercising Member”), shall deliver to the other Members and to the Company an irrevocable written notice (the “Redemption Notice”) of the exercise of such right. To be valid, each Redemption Notice shall (i) identify the number of Class B Units that constitute the Redemption Units and that are to be redeemed by the Company pursuant to such Redemption Notice, and (ii) solely in the event that such Redemption Notice has been delivered by the Investors at any time during the period beginning on the REIT Exchange Date, identify how many of the Redemption Units will be redeemed for the Redemption Price in lieu of the Investor Redemption Amount at the Closing of such redemption. The delivery of the Redemption Notice by the Exercising Member shall constitute an irrevocable commitment by the affected Investor to transfer and deliver, and the Company to purchase and redeem, such Investor’s Redemption Units for the Investor Redemption Amount or the Redemption Price, as applicable. Closing on the purchase and redemption of the Redemption Units shall take place in accordance with Section 10.3 hereof.

 

D.                                    Upon the delivery of a Redemption Notice by the Exercising Member, Inland shall have sole authority to act on behalf of the Company to obtain at Closing (as defined in Section 10.3.A below) the funds required to completely redeem the Redemption Units, including borrowing money from third-party lenders, Members or Affiliates and seeking Capital Contributions from additional Members to be admitted to the Company.

 

E.                                     Notwithstanding any provision of this Section 10.1 and this Article X to the contrary, and specifically notwithstanding the time after which Inland is permitted to deliver a Redemption Notice under Section 10.1.B hereof, Inland shall have the right, but not the obligation, in its sole and absolute discretion, to deliver a Redemption Notice to an Investor and to cause the purchase and redemption of all of such Investor’s Investor LLC Interest pursuant to the terms of this Article X, at any time if such Investor breaches any of the provisions of Sections 2.7 or 2.8 hereof.

 

F.                                      For the avoidance of doubt, and notwithstanding any inference herein to the contrary, and except for a future event with respect to Class B Units equivalent to a “stock split” or “stock dividend,” while an Investor or Inland may deliver a Redemption Notice for only a portion of the Class B Units initially issued by the Company to an Investor, the aggregate number of Class B Units that can be the subject of Redemption Notices with respect to any individual Investor cannot exceed 100% of the Class B Units initially issued by the Company to such Investor, and the aggregate number of Class B Units that can be the subject of Redemption Notices cannot exceed 100% of the Class B Units initially issued by the Company on the date hereof.

 

SECTION 10.2. Redemption Price

 

A.                                    In the event that (i) an Investor delivers a Redemption Notice to Inland in which the Investor identifies Redemption Units for which such Investor elects to receive the Redemption Price in lieu of the Investor Redemption Amount (“Redemption Price Units”), and (ii) such Redemption Notice has been delivered by the Investor to the Manager at any time during the period beginning on the REIT Exchange Date, then the Redemption Price payable by Inland to such Investor for such identified Redemption Units shall be payable, at Inland’s election, either (x) by the issuance by Inland Parent of the number of shares of its Common

39

 

Stock equal to the product, expressed as a whole number, of (i) the Redemption Price Units, multiplied by (ii) the Redemption Factor (the “Stock Redemption Price”), or (y) in cash (the “Cash Redemption Price”), with an amount of cash (in immediately available funds) equal to (i) the number of shares of Common Stock that would be issued to the Investor if the Stock Redemption Price were paid for the Redemption Price Units (taking into account the adjustments required pursuant to the definition of “Redemption Factor”) multiplied by (ii) the Current Per Share Market Price computed as of the Computation Date. The Cash Redemption Price shall, in the sole and absolute discretion of the Manager, be paid in the form of cash, or cashier’s or certified check, or by wire transfer of immediately available funds to the Investor’s designated account. Notwithstanding the general provisions of this Section 10.2.A, in the event that the Redemption Price (determined, in the case of the Stock Redemption Price, based on the Current Per Share Market Price computed as of the Computation Date) is in excess of the Redemption Invested Capital of the Investor on the date hereof, then the Redemption Price shall be reduced by an amount that is equal to fifty percent (50%) of (x) the Redemption Price at such time, minus (y) the Redemption Invested Capital of the Investor on the date hereof (which reduction, in the case of the Stock Redemption Price, shall be taken into account by reducing the number of shares to be issued to the Investor).

 

B.                                    To facilitate the ability of Inland to fully perform its obligations hereunder, Inland covenants and agrees as follows:

 

(i)                                     At all times on and after the REIT Exchange Date, Inland Parent shall reserve for issuance such number of shares of Common Stock as may be necessary to enable Inland Parent to issue such shares in full payment of the Stock Redemption Price in regard to all Investor LLC Interest held by the Investors.

 

(ii)                                  In the event that an Investor properly elects to receive the Redemption Price, Inland or Inland Parent shall be required to pay the Cash Redemption Price to the extent that payment of the Stock Redemption Price by issuance of Common Stock would disqualify Inland Parent from being characterized as a REIT.

 

(iii)                               All Common Stock delivered to the Investors under this Article X shall be duly authorized, validly issued, free of any pledge, lien, encumbrance or restriction, and the Investor that receives such Common Stock under this Article X shall be deemed the owner of such Common Stock for all purposes, including, without limitation, rights to vote or consent, receive dividends, and exercise rights; provided that notwithstanding the foregoing, in all events the Common Stock shall be subject to customary and ordinary course restrictions on transfer arising in connection with registration rights and securities law restrictions, and arising to protect the status of Inland Parent as a REIT.

 

C.                                    The Redemption Factor shall be subject to adjustment from time to time effective upon the occurrence of the following events and shall be expressed as a percentage, calculated to the nearest one-thousandth of one percent (.001%):

 

(i)                                     In case Inland Parent shall pay or make a dividend or other distribution in shares of Common Stock to all holders of the Common Stock, the Redemption Factor in effect at the opening of business on the day following the date fixed for the determination of stockholders entitled to receive such dividend or other distribution shall be increased

 

40

 

in proportion to the increase in outstanding shares of Common Stock resulting from such dividend or other distribution, such increase to become effective immediately after the opening of business on the day following the record date fixed for such dividend or other distribution.

 

(ii)   In case outstanding shares of Common Stock shall be subdivided into a greater number of shares, the Redemption Factor in effect at the opening of business on the day following the day upon which such subdivision becomes effective shall be proportionately increased, and, conversely, in case the outstanding shares of Common Stock shall be combined into a smaller number of shares, the Redemption Factor in effect at the opening of business on the day following the day upon which such combination becomes effective shall be proportionately reduced, such increase or reduction, as the case may be, to become effective immediately after the opening of business on the day following the day upon which such subdivision or combination becomes effective.

 

D.            In case the shares of Common Stock shall be changed into the same or a different number of shares of any class or classes of stock, whether by capital reorganization, reclassification, or otherwise (other than subdivision or combination of shares or a stock dividend described in subparagraph (ii) of Section 10.2.C) then and in each such event an Investor, upon the election to receive the Redemption Price, shall have the right thereafter to receive the kind and amount of shares and other securities and property which would have been received upon such reorganization, reclassification or other change by holders of the number of shares that such Investor might have received immediately prior to such reorganization, reclassification or change.

 

E.            No fractional shares shall be issued upon redemption of Class B Units. Instead of any fractional share of Common Stock which would otherwise be issuable upon redemption of the Class B Units of an Investor, Inland shall pay a cash adjustment in respect of such fraction in an amount equal to the same fraction of the current market price per share at the close of business on the day of the Closing (or, if such day is not a Trading Day, on the Trading Day immediately preceding such day).

 

SECTION 10.3.  Closing.

 

A.            Any closing of the redemption of Redemption Units by the Company pursuant to Section 10.1 or 10.2 (each, a “Closing”) shall be held at the principal offices of the Company. Subject to any other specific time periods for Closing stated in this Agreement and in the sole discretion of the Company, a Closing shall occur as follows:

 

i.      For a Redemption Notice received on or before the Initial Notification Date, the Closing shall occur no later than the fifth anniversary of the Effective Date.

 

ii.     For any Redemption Notice received after the Initial Notification Date, the Closing shall occur no later than six (6) months following the delivery of the Redemption Notice to Inland, the Investors, or the Company, as applicable; provided, however, that if the Investor Redemption Amount under such Redemption Notice exceeds $10,000,000, the Company shall have an additional three (3) months, at its sole election, to pay such

 

41

 

excess so long as it pays $10,000,000 of such Investor Redemption Amount within six (6) months following the delivery of such Redemption Notice.

 

Notwithstanding the foregoing, in the event that (i) an Investor properly elects to receive the Redemption Price at the Closing, and (ii) the Investor provides Inland with written notice, on or prior to November 1 of such calendar year, that such Investor intends to convey the Redemption Price Units or Stock Redemption Price to an organization described in Sections 170(b)(1)(A), 170 (c)(2), or 501(c)(3) of the Code, then Inland shall use its commercially reasonable good faith efforts to cause the Closing to occur on or prior to December 31 of such calendar year. The Company shall timely notify the Investors of the date of Closing.

 

B.            At the Closing, the affected Investor shall transfer and assign its Redemption Units to the Company or Inland, as applicable, free and clear of any liens, encumbrances or any interests of any third party and shall execute or cause to be executed any and all documents required to transfer fully good and clear title to the Redemption Units being transferred, including, but not limited to, any and all documents necessary to evidence such transfer. In the event that such Investor does not timely execute any and all documents necessary to evidence and effect such transfer and, in the case of a transfer of all of such Investor’s Investor LLC Interest, to reflect the complete and absolute withdrawal of such Investor from the Company at the Closing, then the Manager is hereby appointed the attorney-in-fact of, and is hereby authorized on behalf of, such Investor, to execute, acknowledge and deliver all such documents and take all such other actions as may be required to evidence and effect such transfer. Such appointment and authorization are coupled with an interest and are irrevocable. The failure by an Investor to execute any document shall not delay the Closing or cause the Closing to be ineffective.

 

C.            At each Closing, Inland shall (i) deliver the Stock Redemption Price or the Cash Redemption Price (and the Unpaid Investor Preferred Return associated with the applicable Redemption Units) and (ii) cause the Company to distribute to the Investor the Investor Redemption Amount, as applicable. If any consents from lenders or otherwise are required in order to carry out any provision of this Agreement, the parties hereby agree to cooperate in good faith and will proceed promptly and diligently to obtain all such consents; provided, however, that the failure to obtain any such consent may be waived by Inland in its sole and absolute discretion.

 

SECTION 10.4.  Investor Redemption Amount.

 

A.            The entire purchase price payable by the Company to an Investor (or its members) for Redemption Units other than Redemption Price Units (the “Investor Redemption Amount”) shall be an amount equal to the product of the following:

 

(i)    the Unpaid Investor Preferred Return as of the date of a Closing as reasonably determined by the Company’s accountant plus the Investor’s Invested Capital as of the date of the Closing and

 

(ii)   a fraction, of which the numerator is the number of the Investor’s Redemption Units other than Redemption Price Units (as set forth in the Redemption

 

42

 

Notice) and the denominator is the total outstanding Investor’s Class B Units immediately prior to the purchase and redemption.

 

The parties agree that for purposes of making the foregoing determinations, the books of the Company shall be closed as of the Closing.

 

B.            Each party hereby covenants and agrees that in the case the Company purchases and redeems all of an Investor’s Investor LLC Interest and pays the full Investor Redemption Amount and Redemption Price, as applicable, thereafter such Investor shall have no rights with respect to the Company and the assets of the Company either as owner, lender or otherwise and such Investor shall have no right to receive any further payments or distributions from the Company under the terms of this Agreement or otherwise, specifically including, but not limited to, the Unpaid Investor Preferred Return, if any, the Investor’s Capital Account and the Investor’s Invested Capital. This Section 10.4.B shall also apply to the Affiliates of the Investors at the time all Investor LLC Interests have been purchased and redeemed.

 

SECTION 10.5.  Additional Provision Relating to Redemptions.

 

Notwithstanding any provision of this Agreement to the contrary, the Invested Capital and the Investor Preferred Return of the Investors shall be calculated and determined for each Class B Unit separately. Upon the Closing of the redemption of any Redemption Units where the Investor Redemption Amount is paid, the Investor Redemption Amount paid to an Investor shall be allocated only among the Class B Units of such Investor that are being redeemed such that such payment of the Investor Redemption Amount shall be applied solely to reduce the Unpaid Investor Preferred Return and the Investor’s Invested Capital for the redeemed Class B Units. Upon the Closing of the redemption of any Redemption Units where the Redemption Price is paid, the Unpaid Investor Preferred Return and the overall Invested Capital of the applicable Investor shall be reduced solely by the amounts of the Investor Preferred Return and Invested Capital associated with the applicable Redemption Units.

 

ARTICLE XI

 

MISCELLANEOUS

 

SECTION 11.1.  Amendment.

 

Amendments to this Agreement may be proposed by the Manager or by any Member. A proposed amendment will be effective at such time as it is approved by all of the Members.

 

SECTION 11.2.  Further Assurances.

 

Each Member agrees to execute, acknowledge, deliver, file, record and publish such further certificates, amendments to certificates, instruments and documents, and do all such other acts and things as may be required by law, or as may be required to carry out the intent and purposes of this Agreement.

 

43

 

SECTION 11.3.  Notices.

 

All notices, requests or demands to be given under this Agreement from one party to the other (collectively, “Notices”) shall be in writing and shall be given by personal delivery, or by overnight courier service for next Business Day delivery at the other party’s address set forth below, or by telecopy transmission at the other party’s facsimile telephone number set forth below (with a copy of such telecopy transmission being given to receiving party by deposit, on the day of such transmission, with an overnight courier service for next Business Day delivery to the receiving party). Notices given by personal delivery (i.e. by the sending party or a messenger) shall be deemed given on the date of delivery, Notices given by overnight courier service shall be deemed given upon deposit with the overnight courier service and Notices given by telecopy transmission shall be deemed given on the date of transmission provided such transmission is completed by 5:00 p.m. (sending party’s local time) on a Business Day, otherwise such delivery shall be deemed to occur on the next succeeding Business Day. If any party’s address is a business, receipt by a receptionist, or by any person in the employ of such party, shall be deemed actual receipt by the party of Notices. Notices may be issued by an attorney for a party and in such case such Notices shall be deemed given by such party. Until further notice, notices and other communications under this Agreement shall be addressed to the parties listed below as follows:

 

(i)            If to an Investor, to:

 

Territory Incorporated

5785 Centennial Center Blvd., #230

Las Vegas, NV 89149

Attention: Terri Sturm

Email: tsturm@territoryinc.com

 

With a copy (which shall be for informational purposes only) to:

 

Law Office of Leslie Hollmann, LLC

5785 Centennial Center Blvd., #230

Las Vegas, NV 89149

leslie@hollmannlaw.com

 

and with a copy to:

 

Parr Brown Gee & Loveless

185 South State Street, Suite 185

Salt Lake City, UT 84111

Attention: David E. Gee, Esq.

Email: dgee@parrbrown.com

 

(ii)           If to the Company or Inland, to:

 

c/o Inland Diversified Real Estate Trust, Inc.

2901 Butterfield Road

 

44

 

Oak Brook, Illinois 60523

Attention: Chief Financial Officer

 

and with copies (which shall be for informational purposes only) to:

 

c/o The Inland Real Estate Group, Inc.

2901 Butterfield Road

Oak Brook, Illinois 60523

Attention: General Counsel

 

and to:

Inland Diversified Real Estate Trust, Inc.

2901 Butterfield Road

Oak Brook, Illinois 60523

Attention: Barry Lazarus

 

Any Member may designate another addressee (and/or change its address) for Notices hereunder by a Notice given pursuant to this Section. Copies of Notices are for informational purposes only, and a failure to give or receive copies of any Notice shall not be deemed a failure to give notice, and shall in no way adversely affect the effectiveness of such Notice given to the addressee party.

 

SECTION 11.4.  Independent Representation.

 

Inland hereby acknowledges and agrees that it has consulted its independent counsel with respect to the tax and non-tax consequences of its investment in the Company, and that neither the Investors nor any Investor Affiliate shall have any liability to Inland or its Affiliates as a result of any adverse consequences to Inland, or any direct or indirect partner (or other equity owner) of Inland, as a result of Inland’s investment in the Company or Inland’s ownership of an LLC Interest in the Company. Each Investor hereby acknowledges and agrees that it has consulted its independent counsel with respect to the tax and non-tax consequences of its investment in the Company, and that neither Inland nor any Inland Affiliate shall have any liability to any Investor or any Investor Affiliate as a result of any adverse consequences to an Investor or any Investor Affiliate as a result of such Investor’s investment in the Company, such Investor’s ownership of an LLC Interest in the Company or such Investor’s possible withdrawal from the Company. The foregoing provision is not intended to and shall not operate to diminish or limit the liability of either Member resulting from such Member’s breach of or default under any provision of this Agreement.

 

SECTION 11.5.  Governing Law.

 

This Agreement, the rights and obligations of the parties hereto, and any claims or disputes relating thereto shall be governed by and construed in accordance with the laws of the State of Delaware (but not including the choice of law rules thereof).

 

45

 

SECTION 11.6.  Captions.

 

All titles or captions contained in this Agreement are inserted only as a matter of convenience and for reference and in no way define, limit, extend, or describe the scope of this Agreement or the intent of any provision hereof.

 

SECTION 11.7.  Pronouns.

 

All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, and neuter, singular and plural, as the identity of the party or parties may require.

 

SECTION 11.8.  Successors and Assigns.

 

This Agreement shall be binding upon the parties hereto and their respective executors, administrators, legal representatives, heirs, successors and permitted assigns, and shall inure to the benefit of the parties hereto and their respective executors, administrators, legal representatives, heirs, successors and permitted assigns.

 

SECTION 11.9.  Extension Not a Waiver.

 

No delay or omission in the exercise of any power, remedy or right herein provided or otherwise available to a Member or the Company shall impair or affect the right of such Member or the Company thereafter to exercise the same. Any extension of time or other indulgence granted to a Member hereunder shall not otherwise alter or affect any power, remedy or right of any other Member or of the Company, or the obligations of the Member to whom such extension or indulgence is granted.

 

SECTION 11.10.  Construction.

 

None of the provisions of this Agreement shall be for the benefit of or enforceable by any creditor of the Company or any third party. No Member shall be obligated personally for any debt, obligation or liability of the Company solely by being a Member of the Company.

 

SECTION 11.11.  Severability.

 

In case any one or more of the provisions contained in this Agreement or any application thereof shall be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and other application thereof shall not in any way be effected or impaired thereby.

 

SECTION 11.12.  Consents.

 

Unless otherwise provided in this Agreement to the contrary, any consent or approval to any act or matter required under this Agreement must be in writing and shall apply only with respect to the particular act or matter to which such consent or approval is given, and shall not relieve any Member from the obligation to obtain the consent or approval, as applicable, wherever required under this Agreement to any other act or matter.

 

46

 

SECTION 11.13.  Entire Agreement.

 

This Agreement, together with the Purchase and Contribution Agreement and the Purchase and Sale Agreement and any other agreement ancillary or related hereto or thereto, contains the entire agreement among the parties hereto relating to the subject matter hereof and all prior agreements relative hereto which are not contained herein are terminated. Amendments, variations, modifications or changes herein may be made effective and binding upon the parties by, and only by, the setting forth of same in a document duly executed by each party, and any alleged amendment, variation, modification or change herein which is not so documented shall not be effective as to any party.

 

SECTION 11.14.  Rules of Construction.

 

Unless the context clearly indicates to the contrary, the following rules apply to the construction of this Agreement:

 

(i)      Words importing the singular number include the plural number and words importing the plural number include the singular number.

 

(ii)     Words of the masculine gender include correlative words of the feminine and neuter genders.

 

(iii)    The table of contents and the headings or captions used in this Agreement are for convenience of reference and do not constitute a part of this Agreement, nor affect its meaning, construction, or effect.

 

(iv)    Words importing persons include any individual, corporation, partnership, limited liability company, joint venture, association, joint stock company, trust, unincorporated organization or government or agency or political subdivision thereof.

 

(v)     Any reference in this Agreement to a particular “Article,” “Section” or other subdivision shall be to such Article, Section or subdivision of this Agreement unless the context shall otherwise require.

 

(vi)    Each reference in this Agreement to an agreement or contract shall include all amendments, modifications, and supplements to such agreement or contract unless the context shall otherwise require.

 

(vii)   When any reference is made in this document or any of the schedules or exhibits attached hereto to the Agreement, it shall mean this Agreement, together with all other schedules and exhibits attached hereto, as though one document.

 

SECTION 11.15. Counterparts.

 

This Agreement may be executed in any number of counterparts, and each such counterpart will for all purposes be deemed an original, and all such counterparts shall constitute one and the same instrument.

 

47

 

ARTICLE XII

 

REPRESENTATIONS AND WARRANTIES

 

SECTION 12.1. Representations and Warranties of Inland.

 

Inland hereby represents and warrants the following to each Investor, each of which is true and correct on the Effective Date. Inland acknowledges that the execution of this Agreement by each Investor has been made, and the transfer by each Investor of the Properties will have been made, in material reliance by each Transferor on such representations and warranties:

 

(i)       Organization and Authority. Inland is duly organized, validly existing and in good standing under the laws of the state of Delaware and has full power, authority and legal right to execute and deliver and to perform and observe the provisions of this Agreement, and all other instruments provided for therein to which it is or will be a party, and otherwise carry out the transactions contemplated hereunder and thereunder.

 

(ii)      Due Authorization. This Agreement has been duly authorized, executed and delivered by Inland, and constitutes the valid and binding obligations of Inland enforceable against it in accordance with their respective terms.

 

(iii)     No Consents Required for Execution. To the knowledge of Inland, no consent, approval or other authorization of, or registration, declaration or filing with, any governmental authority is required for the due execution and delivery of this Agreement, or any other documents to be executed by Inland hereunder, or for the performance by or the validity or enforceability thereof against Inland.

 

(iv)     No Pending Actions. Except as disclosed in Inland Parent’s most recent quarterly report filed with the SEC on Form 10-Q, Inland has not been served in any action, suit, arbitration, unsatisfied order or judgment, government investigation or proceeding, including tax audits, and to the knowledge of Inland, none of the foregoing is threatened, against or affecting Inland, seeking to enjoin, challenge or collect damages in connection with the transactions contemplated hereunder or under any of the other agreements which could reasonably be expected to cause a material adverse change in the financial condition of Inland or materially affect the ability of Inland to carry out the transactions contemplated hereunder or thereunder.

 

(v)      No Violations. The execution and delivery of this Agreement, and all other documents to be executed by Inland hereunder, compliance with the provisions hereof and thereof and the consummation of the transactions contemplated hereunder and thereunder will not result in a breach or violation of (a) to the knowledge of Inland, any governmental requirement now in effect applicable to Inland; (b) the organizational documents of Inland; (c) to the knowledge of Inland, any judgment, order or decree of

 

48

 

any governmental authority binding upon Inland; or (d) to the knowledge of Inland, any agreement or instrument to which Inland is a party or by which it is bound.

 

[SIGNATURES ON NEXT PAGE]

 

49

 

WHEREFORE, the parties hereto have duly executed this Limited Liability Company Agreement of INLAND TERRITORY, L.L.C. under seal as of the day and year first above written.

 

 

INLAND:

 

	
 
    	
INLAND   TERRITORY MEMBER, L.L.C.,
    	
 
    
	
 
    	
a   Delaware limited liability company
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:   
    	
Inland   Diversified Real Estate Trust, Inc.,
    	
 
    
	
 
    	
 
    	
a   Maryland corporation, its sole member
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    	
 
    
	
 
    	
Name:
    	
 
    	
 
    
	
 
    	
Its:
    	
 
    	
 
    

 

50

 

INVESTORS:

 

	
 
    	
CENTENNIAL CENTRE, L.L.C.,
    	
 
    
	
 
    	
a   Nevada limited liability company
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
Westdale   Development, L.L.C.,
    	
 
    
	
 
    	
 
    	
a   Nevada limited liability company,
    	
 
    
	
 
    	
 
    	
its   Manager
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
/s/   Terri Sturm
    	
 
    
	
 
    	
 
    	
 
    	
Terri   Sturm, Manager
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
EASTERN   - BELTWAY, Ltd., 
    	
 
    
	
 
    	
a   Nevada limited liability company,
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Terri Sturm
    	
 
    
	
 
    	
 
    	
Terri   Sturm, Manager
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
RETAIL   DEVELOPMENT PARTNERS, LLC,
    	
 
    
	
 
    	
a   Nevada limited liability company
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
RDP   Manager, Inc.
    	
 
    
	
 
    	
 
    	
a   Nevada corporation,
    	
 
    
	
 
    	
 
    	
its   manager
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
/s/   Terri Sturm
    	
 
    
	
 
    	
 
    	
 
    	
Terri   Sturm, President
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
CENTENNIAL   GATEWAY, LLC,
    	
 
    
	
 
    	
a   Nevada limited liability company
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:   Centennial Partners, LLC
    	
 
    
	
 
    	
a   Nevada limited liability company,
    	
 
    
	
 
    	
its   manager
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:   Sturm Enterprises, LLC
    	
 
    
	
 
    	
 
    	
a   Nevada limited liability company,
    	
 
    
	
 
    	
 
    	
its   manager
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
/s/   Terri Sturm
    	
 
    
	
 
    	
 
    	
 
    	
Terri   Sturm, Manager
    	
 
    
												

 

51

 

LIMITED LIABILITY COMPANY AGREEMENT
 OF

INLAND TERRITORY, L.L.C.

 

Names, Addresses, Invested Capital, Class of Units and Number of Units of Members

 

Schedule A

 

	
 
    	
 
    	
Initial Invested
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Name and Address
    	
 
    	
Capital
    	
 
    	
Class A Units
    	
 
    	
Class B Units
    	
 
    
	
Centennial Centre,   L.L.C.
    	
 
    	
$
    	
20,000,000
    	
 
    	
—
    	
 
    	
2,000,000
    	
 
    
	
5785 Centennial Center Boulevard,
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Suite 230
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Las Vegas, NV 89149
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Eastern — Beltway, Ltd.
    	
 
    	
$
    	
1,700,000
    	
 
    	
—
    	
 
    	
170,000
    	
 
    
	
5785 Centennial Center Boulevard
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Suite 230
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Las Vegas, NV 89149
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Retail Development Partners, LLC
    	
 
    	
$
    	
2,700,000
    	
 
    	
—
    	
 
    	
270,000
    	
 
    
	
5785 Centennial Center Boulevard
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Suite 230
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Las Vegas, NV 89149
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Centennial Gateway, LLC
    	
 
    	
$
    	
5,600,000
    	
 
    	
—
    	
 
    	
560,000
    	
 
    
	
5785 Centennial Center Boulevard,
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Suite 230
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Las Vegas, NV 89149
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Inland Territory Member, L.L.C.
    	
 
    	
$
    	
107,687,390
    	
 
    	
10,768,739
    	
 
    	
—
    	
 
    
	
c/o Inland Diversified Real Estate
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Trust, Inc.
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
2901 Butterfield Road
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Oak Brook, Illinois 60523
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
TOTALS
    	
 
    	
$
    	
137,687,390
    	
 
    	
10,768,739
    	
 
    	
3,000,000
    	
 
    

 

Centennial Center, L.L.C. owns 100% of the membership interests of Centennial Holdings, L.L.C., a Nevada limited liability company that is a disregarded entity for federal income tax purposes. Centennial Center L.L.C. has caused Centennial Holdings, L.L.C. to (i) contribute property to the Company and (ii) assign its rights to any interest in the Company to Centennial Center, L.L.C.

 

 

LIMITED LIABILITY COMPANY AGREEMENT 
 OF

INLAND TERRITORY, L.L.C.

 

Gross Asset Values of Properties Contributed, as of the Effective Date

 

Schedule B

 

	
 
    	
 
    	
Gross Asset Value as of the Effective
    	
 
    
	
Contributing Member
    	
 
    	
Date
    	
 
    
	
Centennial Centre,   L.L.C.
    	
 
    	
$
    	
128,100,000
    	
 
    
	
Eastern — Beltway, Ltd.
    	
 
    	
$
    	
62,000,000
    	
 
    
	
Centennial Gateway, LLC
    	
 
    	
$
    	
54,500,000
    	
 
    
	
Retail Development Partners, LLC
    	
 
    	
$
    	
26,200,000
    	
 
    

 

The Gross Asset Value of the Property contributed by Centennial Centre, L.L.C. includes amounts attributable to its wholly owned subsidiary, Centennial Holdings, L.L.C.

 

2

 

LIMITED LIABILITY COMPANY AGREEMENT 
 OF

INLAND TERRITORY, L.L.C.

Regulatory Allocations

 

Schedule 5.2

 

1.             Definitions.

 

The defined terms used in this Schedule 5.2 shall have meanings specified in the Limited Liability Company Agreement to which this Schedule 5.2 is attached:

 

2.             Regulatory Allocations.  

 

A.            Prior to any other allocations under Article V, the following special allocations shall be made in the following order: 

 

1.             Minimum Gain Chargeback.   Except as otherwise provided in Section 1.704-2(f) of the Treasury Regulations, notwithstanding any other provision of Section 5.2, if there is a net decrease in Company Minimum Gain during any fiscal year, each Member shall be specially allocated items of Company income and gain for such fiscal year (and, if necessary, subsequent fiscal years) in an amount equal to such Member’s share of the net decrease in Company Minimum Gain, determined in accordance with Treasury Regulations §1.704-2(g). Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each Member pursuant thereto. The items to be so allocated shall be determined in accordance with sections 1.704-2(f) (6) and 1.704-2(j) (2) of the Treasury Regulations. This Paragraph A.1 is intended to comply with the minimum gain charge back requirement in Section 1.704-2(f) of the Treasury Regulations and shall be interpreted consistently therewith.

 

2.             Member Minimum Gain Chargeback. Except as otherwise provided in Section 1.704-2(i) (4) of the Treasury Regulations, notwithstanding any other provision of Section 5.2, if there is a net decrease in Member Nonrecourse Debt Minimum Gain attributable to a Member Nonrecourse Debt during any fiscal year, each Member who has a share of the Member Nonrecourse Debt Minimum Gain attributable to such Member Nonrecourse Debt, determined in accordance with Section 1.704-2(i) (5) of the Treasury Regulations, shall be specially allocated items of Company income and gain for such fiscal year (and, if necessary, subsequent fiscal years) in an amount equal to such Member’s share of the net decrease in Member Nonrecourse Debt, determined in accordance with Treasury Regulations §1.704-2(i) (4). Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each Member pursuant thereto. The items to be so allocated shall be determined in accordance with Sections 1.704-2(i) (4) and 1.704-2(j) (2) of the Treasury Regulations. This Paragraph A.2 is intended to comply with the minimum gain charge

 

3

 

back requirement in Section 1.704-2(i) (4) of the Treasury Regulations and shall be interpreted consistently therewith.

 

3.             Qualified Income Offset.   Any Member who unexpectedly receives any adjustment, allocation, or distribution described in Treasury Regulation Section 1.704-1(b)(2)(ii)(d)(5) or (6) shall be specially allocated items of income and gain (consisting of a pro  rata  portion of each item of Company income, including gross income and gain for such year) in an amount and manner sufficient to eliminate any deficit balance in such Member’s Capital Account resulting therefrom, as quickly as possible, such allocations to be made in accordance with the “qualified income offset” provisions of Treasury Regulation Section 1.704-1(b)(2)(ii)(d)(3).

 

4.             Gross Income Allocation.   In the event any member has a deficit Capital Account at the end of any fiscal year which is in excess of the amount such Member is obligated to restore pursuant to the penultimate sentences of Treasury Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5), each such Member shall be specifically allocated items of Company income and gain in the amount of such excess as quickly as possible, provided that an allocation pursuant to this Paragraph A.4 shall be made only if and to the extent that such Member would have a deficit Capital Account in excess of such amount after all other allocations provided for in Article V have been made as if this Paragraph A.4 were not in the Agreement.

 

5              . Member Nonrecourse Deductions.   Any Member Nonrecourse Deductions for any fiscal year shall be specially allocated to the Member who bears the economic risk of loss with respect to the Member Nonrecourse Debt to which such Member Nonrecourse Deductions are attributable in accordance with Treasury Regulations §1.704-2(i) (1).

 

B.            Section 754 Adjustments.   To the extent an adjustment to the adjusted tax basis of any Company asset, pursuant to Code Section 734(b) or Code Section 743(b) is required, pursuant to Treasury Regulations §1.704-1(b)(2)(iv)(m)(2) or 1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining Capital Accounts as the result of a distribution to a Member in complete liquidation of such Member’s interest in the Company, the amount of such adjustment to Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis) and such gain or loss shall be specially allocated to the Members in accordance with their interests in the Company in the event Treasury Regulations §1.704-1(b)(2)(iv)(m)(2) applies, or to the Member to whom such distribution was made in the event Treasury Regulations §1.704-1(b)(2)(iv)(m)(4) applies.

 

4

 

LIMITED LIABILITY COMPANY AGREEMENT
 OF

INLAND TERRITORY, L.L.C.

 

Exhibit A

 

Reimbursement Agreement

 

5

 

REIMBURSEMENT AGREEMENT

 

(INLAND TERRITORY)

 

THIS REIMBURSEMENT AGREEMENT (“Agreement”) is entered into effective as of December 27, 2012 (the “Effective Date”) by and among Inland Territory, L.L.C., a Delaware limited liability company (“Company”); Centennial Centre, L.L.C., a Nevada limited liability company, Eastern — Beltway, Ltd., a Nevada limited liability company, Centennial Gateway, LLC, a Nevada limited liability company, and Retail Development Partners, LLC, a Nevada limited liability company (each, a “Reimbursor” and collectively, the “Reimbursors”); and the undersigned wholly-owned subsidiaries of the Company (each, a “Subsidiary” and collectively, the “Subsidiaries”).

 

RECITALS

 

A.            Under that certain Limited Liability Company Agreement of Inland Territory, L.L.C. (the “LLC Agreement”), dated December 27, 2012, the Reimbursors have the option from time to time to guarantee debt of the Company or a Subsidiary in an amount not to exceed the Maximum Investor Recourse Amount. All capitalized terms used in this Agreement and not otherwise defined herein shall have the same meaning given to them in the LLC Agreement.

 

B.            The Company or its Subsidiaries currently are liable to third-party lenders for nonrecourse indebtedness for the amounts set forth on Exhibit A attached hereto. In connection with such nonrecourse indebtedness, the Company and the Reimbursors have agreed that if the Company or a Subsidiary, as applicable (the “Responsible Party”), defaults on any Loan, as defined herein, and if the assets of the Responsible Party are otherwise insufficient to repay such Loan, the Reimbursors will pay or reimburse a portion of that deficiency.

 

C.            Each Subsidiary of the Company is a disregarded entity or partnership for U.S. federal income tax purposes.

 

D.            The parties desire to enter into this Agreement to evidence the Reimbursors’ reimbursement obligation with respect each Loan.

 

AGREEMENT

 

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

 

1.             Definitions. For purposes of this Agreement, the following capitalized terms shall have the following meanings unless the context clearly requires otherwise:

 

(a)           “Agreement” means this Reimbursement Agreement, as amended from time to time.

 

(b)           “Company” means Inland Territory, L.L.C., a Delaware limited liability company.

 

(c)           “Default” means an event of default under the applicable Loan Documents. 

 

 

(d)           “Lender” means with respect to any Loan, the party to whom a Responsible Party is indebted under the Loan Documents with respect to such Loan.

 

(e)           “LLC Units” has the meaning set forth in Section 2 below.

 

(f)            “Loan” means a form of indebtedness of a Responsible Party to a Lender as evidenced by a promissory note.

 

(g)           “Loan Documents” means as to any Loan, all of the promissory notes, loan agreements, deeds of trust, mortgage agreements and other agreements evidencing or securing such loan.

 

(h)           “Maximum Reimbursement Obligation” means the maximum loan amount for which a Reimbursor is responsible, and as to each Loan is set forth on Exhibit A.

 

(i)            “Reimbursement Obligation” has the meaning set forth in Section 3(a) below.

 

(j)            “Reimbursor” has the meaning set forth above.

 

(k)           “Responsible Party” has the meaning set forth above.

 

(l)            “Share” means the percentage of any Shortfall Amount for which a Reimbursor is responsible. As to each Loan, each Reimbursor’s Share is set forth on Exhibit A.

 

(m)          “Shortfall Amount” means the excess, if any, of the Maximum Reimbursement Obligation of a Loan that is in Default over (ii) the sum of all amounts recovered and the fair market value of all property obtained by the Lender, if any, from the Responsible Party under the Loan after the Default in proceedings against such Responsible Party under the applicable Loan Documents (including, without limitation, principal, interest, late fees, penalties, and costs of collection).

 

2.             Term.     Except as otherwise provided below, each Reimbursor’s obligation hereunder with respect to a Loan shall remain effective from the date hereof through the earlier of: (a) repayment in full of such Loan; (b) the sixth anniversary date of this Agreement, or such later date as the Reimbursor may irrevocably designate from time to time by written notice given to the Company at least 30 days prior to the date this Agreement would otherwise terminate; or (c) the 90th day after the date that the Reimbursor ceases to own any membership units in the Company (“LLC Units”). Notwithstanding the foregoing, if at the time a Reimbursor’s obligations hereunder with respect to a Loan would otherwise terminate, such Loan is in Default or an event has occurred which with the passage of time will result in a Default under such Loan, then this Agreement shall not terminate as to the Reimbursor and the Reimbursor’s obligations hereunder with respect to such Loan shall continue in full force and effect until such Default is cured under the terms of the Loan Documents and any required reimbursement from Reimbursor is paid in full.

 

3.             Reimbursement Obligations.

 

(a)           In the event of a Default with respect to a Loan, each Reimbursor shall contribute to the Responsible Party as to such loan, or, if directed by the Company, pay directly to the Lender on behalf of such Responsible Party, an amount equal to the Reimbursor’s allocable Share of the Shortfall Amount after the Lender has fully and completely exhausted its remedies against the assets of the Company and its Subsidiaries. Each Reimbursor’s allocable Share and maximum reimbursement liability under this Agreement with respect to each Loan is set forth on Exhibit A. No demand shall be made under this Agreement for payment or contribution of the Shortfall Amount or any portion thereof until

 

 

such time as the Lender shall have fully and completely exhausted any and all remedies it has against the other assets of the Company and its Subsidiaries (including any real and personal property securing the repayment of such Loan). For purposes of federal income taxation, a payment made by a Reimbursor to or on behalf of a Responsible Party that is a Subsidiary of the Company shall be treated as a contribution of capital to the Company. In no event shall any such payment to or on behalf of a Subsidiary constitute an investment in, or evidence or give rise to, any equity ownership in the Subsidiary. The amount that a Reimbursor is required to pay under this Agreement is referred to as its “Reimbursement Obligation.”

 

(b)           If: (i) a Reimbursor, other than an individual, distributes to one or more of its partners or members some, but not all, of the Reimbursor’s LLC Units (or the proceeds from the exchange or other disposition of some, but not all, of such LLC Units) in complete redemption of their ownership interests in the Reimbursor; (ii) no Default has occurred and is continuing with respect to any Loan; and (iii) neither a Default nor an event which with the passage of time will give rise to a Default occurs within 90 days after such distribution, then the maximum amount of the Reimbursement Obligation otherwise applicable to the distributing Reimbursor under Section 3(a) above shall be reduced by a percentage equal to a fraction the numerator of which is the number of such LLC Units distributed, exchanged, or redeemed and the denominator of which is the total number of LLC Units that the Reimbursor owned immediately prior to the distribution. For example, if 2,000 out of 10,000 LLC Units that a Reimbursor holds are distributed to a partner or member in the Reimbursor and the conditions of this Section 3(b) are met, the otherwise applicable Maximum Reimbursement Obligation of that Reimbursor as to each Loan set forth on Exhibit A would be reduced by 20%.

 

(c)           Each Reimbursor shall be liable with respect to its allocable Reimbursement Obligation until termination of that obligation under Section 2 or Section 3(b) above. Termination or reduction of a Reimbursor’s Obligations under this Agreement shall not increase, decrease, or otherwise affect the allocable Reimbursement Obligation of any other Reimbursor.

 

(d)           Notwithstanding any agreement between any Reimbursor and any other person, or any state law or interpretation thereof, no Reimbursor shall be entitled to indemnification, contribution, or reimbursement from any other person with respect to any amounts paid or payable by Reimbursor hereunder, except for Reimbursor’s right to reimbursement under any separate reimbursement agreement executed by its partners or members.

 

4.             Miscellaneous. 

 

(a)           Each Lender and its successors in interest are intended to be third-party beneficiaries of this Agreement.

 

(b)           This Agreement shall be binding upon, and shall inure to the benefit of, the successors in interest and assigns of the parties hereto.

 

(c)           This Agreement may be executed in one or more counterparts, all of which shall constitute the same agreement, and the signature of any party to any counterpart shall be deemed a signature to, and may be appended to, any other counterpart.

 

(d)           This Agreement may be amended at any time with the written consent of the Company and each Reimbursor affected by such amendment. No such amendment shall require the consent of any third party beneficiary of this Agreement.

 

(Signature pages follow; remainder of page intentionally left blank)

 

 

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

 

 

	
 
    	
COMPANY:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
INLAND TERRITORY, L.L.C.,
    	
 
    
	
 
    	
a   Delaware limited liability company,
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:   Inland Diversified Real Estate Trust Inc., its
    	
 
    
	
 
    	
managing   member
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
Name:
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
Title:
    	
 
    	
 
    

 

 

[Signatures Follow]

 

 

Signature Page to Reimbursement Agreement (Inland Territory)

 

 

RESPONSIBLE PARTIES (IN ADDITION TO THE COMPANY):

 

 

	
 
    	
Inland Diversified Las Vegas Centennial Center, L.L.C., 
    a Delaware limited liability company
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:   
    	
Inland   Territory, L.L.C., 
    
	
 
    	
 
    	
a   Delaware limited liability company, its sole member
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:   
    	
Inland   Territory Member, L.L.C., 
    
	
 
    	
 
    	
 
    	
a   Delaware limited liability company, its managing member
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
By:   
    	
Inland   Diversified Real Estate Trust, Inc., 
    
	
 
    	
 
    	
 
    	
 
    	
a   Maryland corporation, its sole member
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
Name:
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
Its:
    	
 
    
							

 

 

[Signatures Follow]

 

 

Signature Page to Reimbursement Agreement (Inland Territory)

 

 

	
 
    	
Inland Diversified Las Vegas Centennial Gateway, L.L.C., 
    a Delaware limited liability company
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:   
    	
Inland   Territory, L.L.C., 
    
	
 
    	
 
    	
a   Delaware limited liability company, its sole member
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:   
    	
Inland   Territory Member, L.L.C., 
    
	
 
    	
 
    	
 
    	
a   Delaware limited liability company, its managing member
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
By:   
    	
Inland   Diversified Real Estate Trust, Inc., 
    
	
 
    	
 
    	
 
    	
 
    	
a   Maryland corporation, its sole member
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
By:   
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
Name:
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
Its:
    	
 
    
							

 

 

[Signatures Follow]

 

 

Signature Page to Reimbursement Agreement (Inland Territory)

 

 

 

	
 
    	
Inland Diversified Las Vegas Eastern Beltway, L.L.C., 
    
	
 
    	
a   Delaware limited liability company
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:   
    	
Inland   Territory, L.L.C., 
    
	
 
    	
 
    	
a   Delaware limited liability company, its sole member
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:   
    	
Inland   Territory Member, L.L.C., 
    
	
 
    	
 
    	
 
    	
a   Delaware limited liability company, its managing member
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
By:   
    	
Inland   Diversified Real Estate Trust, Inc., 
    
	
 
    	
 
    	
 
    	
 
    	
a   Maryland corporation, its sole member
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
Name:
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
Its:
    	
 
    
							

 

 

[Signatures Follow]

 

 

Signature Page to Reimbursement Agreement (Inland Territory)

 

 

	
 
    	
Inland Diversified Henderson Eastgate, L.L.C., 
    
	
 
    	
a   Delaware limited liability company
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:   
    	
Inland   Territory, L.L.C., 
    
	
 
    	
 
    	
a   Delaware limited liability company, its sole member
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:   
    	
Inland   Territory Member, L.L.C., 
    
	
 
    	
 
    	
 
    	
a   Delaware limited liability company, its managing member
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
By:   
    	
Inland   Diversified Real Estate Trust, Inc., 
    
	
 
    	
 
    	
 
    	
 
    	
a   Maryland corporation, its sole member
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
Name:   
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
Its:
    	
 
    
							

 

 

[Signatures Follow]

 

 

Signature Page to Reimbursement Agreement (Inland Territory)

 

 

REIMBURSORS:

 

	
 
    	
CENTENNIAL   CENTRE, L.L.C., 
   a Nevada limited liability company
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:   
    	
Westdale   Development, L.L.C., 
    	
 
    
	
 
    	
 
    	
a   Nevada limited liability company, 
    	
 
    
	
 
    	
 
    	
its   Manager
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
Terri   Sturm, Manager
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
EASTERN   - BELTWAY, LTD.,
    	
 
    
	
 
    	
a   Nevada limited liability company
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    	
 
    
	
 
    	
 
    	
Terri   Sturm, Manager
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
RETAIL   DEVELOPMENT PARTNERS, LLC, 
   a Nevada limited liability company
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:   
    	
RDP   Manager, Inc.
    	
 
    
	
 
    	
 
    	
a   Nevada corporation,
    	
 
    
	
 
    	
 
    	
its   manager
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
Terri   Sturm, President
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
CENTENNIAL   GATEWAY, LLC,
    	
 
    
	
 
    	
a   Nevada limited liability company
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:   
    	
Centennial   Partners, LLC 
    	
 
    
	
 
    	
 
    	
a   Nevada limited liability company, 
    	
 
    
	
 
    	
 
    	
its   manager
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:   
    	
Sturm   Enterprises, LLC 
    	
 
    
	
 
    	
 
    	
 
    	
a   Nevada limited liability company, 
    	
 
    
	
 
    	
 
    	
 
    	
its   manager
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
By:
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
Terri   Sturm, Manager
    	
 
    

 

 

Signature Page to Reimbursement Agreement (Inland Territory)

 

 

EXHIBIT A

 

REIMBURSEMENT OBLIGATION WITH RESPECT TO LOANS

 

Loan to Inland Diversified Las Vegas Eastern Beltway, L.L.C., from Cantor Commercial Real Estate Lending, L.P., as evidenced by that certain Promissory Note dated December 27, 2012 with a principal amount of $34,100,000.

 

	
 
    	
 
    	
 
    	
 
    	
Maximum
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
Reimbursement
    	
 
    
	
Reimbursor 
    	
 
    	
Share
    	
 
    	
Obligation
    	
 
    
	
Centennial Centre,   L.L.C.
    	
 
    	
.01
    	
%
    	
$
    	
1,000
    	
 
    
	
Eastern — Beltway, Ltd.
    	
 
    	
83.92
    	
%
    	
6,766,838
    	
 
    
	
Retail Development Partners, LLC
    	
 
    	
7.41
    	
%
    	
698,245
    	
 
    
	
Centennial Gateway, LLC
    	
 
    	
8.66
    	
%
    	
597,611
    	
 
    
	
Total
    	
 
    	
100.00
    	
%
    	
$
    	
8,062,694
    	
 
    

 

Loan to Inland Diversified Las Vegas Centennial Center, L.L.C., from Cantor Commercial Real Estate Lending, L.P., as evidenced by that certain Promissory Note dated December 27, 2012 with a principal amount of $70,455,000.

 

	
 
    	
 
    	
 
    	
 
    	
Maximum
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
Reimbursement
    	
 
    
	
Reimbursor 
    	
 
    	
Share
    	
 
    	
Obligation
    	
 
    
	
Centennial Centre,   L.L.C.
    	
 
    	
0.01
    	
%
    	
$
    	
1,000
    	
 
    
	
Eastern — Beltway, Ltd.
    	
 
    	
83.92
    	
%
    	
13,981,161
    	
 
    
	
Retail Development Partners, LLC
    	
 
    	
7.41
    	
%
    	
1,442,664
    	
 
    
	
Centennial Gateway, LLC
    	
 
    	
8.66
    	
%
    	
1,234,742
    	
 
    
	
Total
    	
 
    	
100.00
    	
%
    	
$
    	
16,658,567
    	
 
    

 

Loan to Inland Diversified Las Vegas Centennial Gateway, L.L.C. and Inland Diversified Henderson Eastgate, L.L.C., from The Royal Bank of Scotland PLC, as evidenced by that certain Promissory Note dated December 27, 2012 with a principal amount of $44,385,000.

 

	
 
    	
 
    	
 
    	
 
    	
Maximum
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
Reimbursement
    	
 
    
	
Reimbursor
    	
 
    	
Share
    	
 
    	
Obligation
    	
 
    
	
Centennial Centre,   L.L.C.
    	
 
    	
0.01
    	
%
    	
$
    	
1,000
    	
 
    
	
Eastern — Beltway, Ltd.
    	
 
    	
83.92
    	
%
    	
8,807,804
    	
 
    
	
Retail Development Partners, LLC
    	
 
    	
7.41
    	
%
    	
908,845
    	
 
    
	
Centennial Gateway, LLC
    	
 
    	
8.66
    	
%
    	
777,859
    	
 
    
	
Total
    	
 
    	
100.00
    	
%
    	
$
    	
10,494,508
    	
 
    

 

 

Exhibit A to Reimbursement Agreement (Inland Territory)

 

 

LIMITED LIABILITY COMPANY AGREEMENT 
 OF

INLAND TERRITORY, L.L.C.

 

Exhibit B

 

Acknowledgment and Consent

 

 

ACKNOWLEDGMENT AND CONSENT
  (INLAND TERRITORY, L.L.C.)

 

THIS ACKNOWLEDGMENT AND CONSENT (“Agreement”) is made and entered into this        day of                       ,            (the “Closing Date”) by and among                                    (“Lender”);                                     , a [Nevada limited liability company] (“Pledgor”); and Inland Territory, L.L.C., a Delaware limited liability company (the “Company”).

 

RECITALS:

 

A.            Pledgor is a non-managing Member of the Company pursuant to that certain Limited Liability Company Agreement of Inland Territory, L.L.C., dated as of December 27, 2012 ([as amended,] the “LLC Agreement”). Under the LLC Agreement, Pledgor holds all right, title and interest in not less than [                          ] Class B Units (the “Pledged Units”) of the Company. As of the date of this Agreement, the Pledged Units are evidenced by the LLC Unit Certificate referred to on Exhibit A (the “Certificate”). All references herein to the Pledged Units shall include any and all additional or substituted non-managing Member Units, from time to time pledged to Lender pursuant to the Loan, as defined below, and all references herein to the Certificate shall include the certificates related to such additional or substituted non-managing Member Units.

 

B.            Lender is making a [description of loan purpose] in the amount of [                                             ($                            )] (as such and as hereafter amended, supplemented or otherwise modified from time to time, the “Loan”).

 

C.            The Loan is secured by all of Pledgor’s right, title and interest in the Pledged Units.

 

D.            The parties hereto desire to enter into this Agreement for the purpose of setting forth certain agreements among Lender, Pledgor, and the Company with respect to the Collateral (as hereinafter defined).

 

E.            Capitalized terms used but not otherwise defined herein shall have the respective meanings ascribed to them in the LLC Agreement.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

 

1.             Definitions. As used in this Agreement, the following terms shall have the meanings hereinafter set forth unless the context shall otherwise require.

 

 

a.             “Account” shall mean Account No.                            at [                          ,] located at [                                          ], and any replacement or successor accounts.

 

b.             “Collateral” shall mean, collectively, the Pledged Units, the Account, all registration and other rights, title interests and benefits in the Pledged Units and Account, including without any limitation, any and all securities issued or issuable on the conversion or redemption of the Pledged Units, or cash or other distributions of every kind in respect of any of the foregoing.

 

c.             “Default” shall mean any [“Event of Default”] as that term is defined in the Loan Documents.

 

d.             “Loan Documents” means [                                        ].

 

2.             Acknowledgment of Pledge. 

 

a.             In compliance with Section 8.2.C of the LLC Agreement, the Company hereby agrees, acknowledges and approves (i) the grant by Pledgor to Lender of a security interest in the Collateral pursuant to the Loan, and (ii) subject to Section 5 below, the transfer to Lender at foreclosure of the Pledged Units upon foreclosure (or transfer in lieu of foreclosure, with each reference herein to foreclosure to include such a transfer) thereon by Lender under or pursuant to the Loan. Upon execution of this Agreement by the Company, the Company agrees to note in its books and records that Pledgor has granted to Lender a security interest in the Collateral.

 

b.             The parties acknowledge and agree that by virtue of Lender holding a security interest in the Pledged Units (i) Lender is not, and in no event shall become, a Member under the LLC Agreement, (ii) prior to receiving notice of Default (unless specifically otherwise set forth in this Agreement), Company has no obligation whatsoever to Lender, and (iii) Lender does not and shall not undertake any obligations or liabilities of Pledgor of any nature whatsoever pertaining to the Pledged Units or under the LLC Agreement.

 

3.             Notices. Following receipt by the Company of written notice from Lender that a Default has occurred and is continuing (a “Default Notice”) (which notice shall specifically reference this Section 3), unless and until the Company has received written notice from Lender to the effect that Lender no longer claims any interest in the Collateral, (a) the Company shall send to Lender a copy of each notice sent to holders of Class B Units by the Company under the LLC Agreement as and when it delivers such notice to Pledgor and (b) the Company shall also send to Lender a copy of each other communication, report or other information from time to time sent to Pledgor as holder of the Pledged Units.

 

4.             Distributions. Following receipt by the Company of a Default Notice (which notice shall specifically reference this Section 4), upon the written instruction of Lender and until written instructions to the contrary are received from Lender:

 

2

 

a.                                      (i) The Company shall remit to the account, [No.                         , at                                                                                                                         ], as follows:

 

 

 

for the benefit of Lender, all cash distributions otherwise payable to Pledgor in respect of the Pledged Units. Following execution of this Agreement, and until the Company receives a Notice of Default, all rights of Pledgor as a Member (e.g., to exercise the voting or other consensual rights, to receive cash distributions, to provide a Redemption Notice to the Company) that Pledgor would otherwise be entitled to exercise in respect of the Collateral shall continue, and Lender shall have no such rights. Any amounts paid to the Account for the benefit of Lender as contemplated by the terms of the foregoing shall be treated as amounts paid or distributed to Pledgor for all purposes of the LLC Agreement, or other agreement pursuant to which the payment or distribution is made or is required to be made and shall be deemed to satisfy the obligations of the Company to make such payment thereunder. Pledgor hereby agrees that the Company shall not be deemed to be in breach of its obligations under, or in violation of the provisions of, any such agreement by virtue of having made such payments in the foregoing manner.

 

b.                                      If Pledgor shall become entitled to receive, in connection with any of the Collateral, any:

 

(i)                                     Units, including, without limitation, any certificates, representing a dividend or distribution or issued in connection with any increase or reduction of capital, reclassification, merger, consolidation, sale of assets, combination of shares or partnership units, stock or partnership units split, spin-off, or split-off;

 

(ii)                                  Options, warrants, rights or other securities or instruments, whether as an addition to, or in substitution or in exchange for, any of the Collateral, or otherwise;

 

(iii)                               Dividends or distributions payable in property other than cash, including securities issued by other than the issuer of any of the Collateral; or

 

(iv)                              Any sums paid in redemption of any of the Collateral, then the Company shall deliver the same to the Account to be held by [                                                ] as part of the Collateral for the benefit of Lender. Any amounts paid to the Account for the benefit of Lender or its designee as contemplated by the terms of the foregoing shall be treated as amounts paid or distributed to Pledgor for all purposes of the LLC Agreement, or other agreement pursuant to which the payment or distribution is made or is required to be made and shall be deemed to satisfy the obligations of the Company to make such payment thereunder. Pledgor hereby agrees that the Company shall not be deemed to be in breach of its obligations under, or in violation of the provisions of, any such agreement by virtue of having made such payments in the foregoing manner.

 

3

 

5.             Rights upon Default. 

 

a.                                      Redemption of Pledged Units; Foreclosure. In addition to the rights otherwise set forth in this Agreement (or as set forth under any other agreement, document or instrument, or under applicable law), upon delivery of written notice from the Lender to the Company and Pledgor of the occurrence of one or more Defaults, Company and Lender, as applicable, shall thereupon and thereafter during the continuance thereof have the right to do or cause to be done any one or more of the following:

 

(i)            Foreclosure. Subject to the terms and conditions of the Loan, Lender shall have the right to foreclose on or acquire the entire interest of Pledgor in all or any portion of any Pledged Units owned by Pledgor, by foreclosure or in any other manner. In the event that Lender elects to exercise its rights under this Section 5.a.i, Lender shall deliver to the Company a notice of its intent to do so no later than ten (10) business days prior to the date of any sale, public or private, or of any transfer in lieu of foreclosure, and the Company (without limitation on its own right, under applicable law, to participate in any sale or other disposition of any of the Collateral) shall reasonably cooperate, at no expense to itself, with Lender in completing its foreclosure on the affected Pledged Units in compliance with applicable laws.

 

(ii)           Redemption of Pledged Units. Company shall, upon receiving notice of a foreclosure, have the continuing right to deliver a Redemption Notice to Lender irrespective of the time periods prescribed in in Section 10.1.B of the LLC Agreement. The rights exercisable by the Company under this Section 5.a.ii may be invoked in the Company’s sole discretion, and all without further notice to or any requirement of consent by Pledgor, which hereby irrevocably and unconditionally waives any right to give any contrary instructions to the Company. The Company agrees that it will not act on any separate instructions or communications from Pledgor pertaining to the Pledged Units without the express written consent of Lender

 

b.                                      Lender as Assignee; Cessation of Pledgor’s Membership. Upon notice to the Company of the foreclosure of any Pledged Units,

 

(i)            Lender shall become an assignee of Pledgor’s LLC Interest;

 

(ii)           Lender shall have the right from time to time to deliver a Redemption Notice (with the Investors) in exchange for the Investor Redemption Amount as set forth in Article X of the LLC Agreement as long as the Redemption Notice meets the aggregate $3,000,000,000 threshold and any other requirement set forth in the LLC Agreement; except that Lender shall have no right to receive the Redemption Price;

 

(iii)          Lender shall not be entitled to transfer Pledged Units, in whole or in part;

 

(iv)          Pledgor shall cease to be a Member;

 

(v)           Lender shall not be obligated to assume, or otherwise be responsible for, any obligation Pledgor may have under the LLC Agreement or any other

 

4

 

obligation of Pledgor accrued prior to foreclosure under the LLC Agreement; provided that nothing in this subclause 5.b.(v) shall release or reduce any prior obligations of Pledgor to the Company, it being acknowledged and agreed that the Company has recourse against Pledgor only and not against Lender.

 

For the avoidance of doubt, Lender shall not have the right to receive the Redemption Price, nor shall the Lender have any other rights of a Member other than (i) the receipt of distributions and allocations under the terms of the LLC Agreement and (ii) the receipt of the Investor Redemption Amount as set forth in this Section 5.

 

6.             Representations and Warranties by the Company. The Company hereby represents and warrants to Lender that this Agreement has been duly authorized, executed and delivered by the Company, and constitutes the valid and binding obligations of the Company enforceable against it in accordance with their respective terms.

 

7.             Representations and Warranties by Pledgor. To its knowledge, Pledgor does not have any existing claims, defenses, setoff rights or rights of recoupment under the LLC Agreement, under any other agreement, or any law, rule or regulation, against or with respect to any obligation of the Company under the LLC Agreement or any other agreement.

 

8.             Liability to Pledgor. Pledgor acknowledges and understands that the Company has signed this Agreement solely as an accommodation to Pledgor. Notwithstanding anything to the contrary in this Agreement, the Company nor any of its respective officers, directors, partners, employees or agents (collectively, the “Inland Persons”) shall be liable or responsible for any loss incurred by Pledgor as a result of any act or failure to act by such Inland Person in connection with, arising out of or related to this Agreement unless such loss is finally determined by a court of competent jurisdiction to have resulted from such Inland Person’s willful misconduct or gross negligence. Pledgor assumes all risks of the acts or omissions of Lender with respect to its exercise of its rights hereunder. None of the Inland Persons shall (i) be liable or responsible for any acts or omissions of Lender or its officers, directors, partners, members, employees, affiliates, representatives or agents, including without limitation the validity of any determination by Lender that a Default has occurred or is continuing; (ii) have any responsibility for investigation into the facts and circumstances giving rise to any such determination by Lender; (iii) be liable or responsible for following the instructions of Lender in accordance with this Agreement regardless of any notice, information or instructions to the contrary received by the Company from Pledgor or any other person, including without limitation following instruction of Lender to remit distributions by the Company made in respect of the Pledged Units to Lender or the Account as directed by Lender, pursuant to Section 4 above; (iv) be deemed to have knowledge of (nor be required to know) the terms and provisions of the Loan or any related documents (other than this Agreement) or whether there is a Default or event of default under the Loan or any other related documents, and thus the Company shall be entitled to assume that there is no Default or event of default until it receives a Default Notice from the Lender and to assume that such Default or event of default is continuing until it receives a notice from the Lender that such Default or event of default (and no other Default or event of default) is no longer existing; or (v) be liable or responsible for any of the consequences of such Inland Person’s reliance on any communication or document believed by it to be genuine and

 

5

 

correct and to have been communicated or signed by the person or entity by whom it purports to be communicated or signed.

 

9.             Separate Actions; Waiver of Statute of Limitations. The obligations of the Company and Pledgor hereunder shall be in addition to any obligations of Pledgor under the Loan. Without limiting the provisions of the Loan, a separate action or actions may be brought and prosecuted against any one or more of the parties hereto whether or not action is brought against any other person or whether any other person is joined in any such action or actions. The Company and Pledgor acknowledge that there are no conditions precedent to the effectiveness of this Agreement and that this Agreement is in full force and effect and is binding on such person as of the date hereof. To the extent permitted under applicable law, Pledgor waives the benefit of any statute of limitations affecting its liability hereunder or the enforcement thereof. Lender hereby agrees that the Company shall not have any obligation or liability under the Loan or any other agreement related to the Loan except as expressly set forth herein and in the Loan Documents. Pledgor agrees that nothing set forth herein shall alter, diminish or otherwise affect its obligations under the LLC Agreement or any other agreement between Pledgor and the Company relating to the Pledged Units.

 

10.          Continuing Obligations.

 

a.             Pledgor agrees to (i) promptly pay or reimburse the Company for all out-of-pocket costs and expenses (including attorney’s fees) incurred in connection with any action requested by Lender in connection with any foreclosure of the Collateral or the exercise of any other rights or remedies of Lender under this Agreement; and (ii) indemnify and hold harmless each of the Inland Persons from and against any and all obligations, claims, losses, liabilities, damages, expenses or costs (including reasonable attorney’s fees and expenses and fees of expert witnesses) arising from or in any way connected with (x) this Agreement, or (y) the enforcement of any of the rights or remedies under this Agreement, except in the case of this clause (ii) for those arising from such Inland Person’s gross negligence or willful misconduct as finally determined by a court of competent jurisdiction. Upon foreclosure of the Pledged Units or the exercise of any other remedies by Lender with respect to the Pledged Units, Pledgor hereby agrees to make all payments and perform and fulfill all other obligations and liabilities pertaining to the Pledged Units or as a Member of the Company pursuant to the LLC Agreement that are not assumed by Lender or any other purchaser or transferee of the Pledged Units.

 

11.          Appointment as Attorney-in-Fact. Pledgor hereby appoints Lender as its true and lawful attorney-in-fact, with full power of substitution, for the purpose of carrying out the provisions of this Agreement and taking any action and executing any instruments either in the name of Pledgor or in the name of Lender, which such attorney-in-fact may deem necessary or advisable to accomplish the purposes hereof, which appointment as attorney-in-fact is irrevocable and coupled with an interest; provided, that nothing in this section shall require Lender to take any action or execute any instruments.

 

12.          Notices. Any notice, demand, request or report required or permitted to be given or made to a party to this Agreement shall be in writing and shall be deemed given or made when delivered in person or when sent by first class United States mail or commercial

 

6

 

courier service at its address set forth below or at such other address as such party may give notice of in accordance with the provisions of this Section:

 

	
Pledgor:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Lender:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
With   a copy to:
    	
 
    	
[Account   Service Provider]
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Company:
    	
 
    	
c/o   Inland Diversified Real Estate Trust, Inc. 
   2901 Butterfield Road 
   Oak Brook, Illinois 60523 
   Attention: Chief Financial Officer
    
	
 
    	
 
    	
 
    
	
With   a copy to (which shall be for information purposes only):
    	
 
    	
 

c/o   The Inland Real Estate Group, Inc. 
   2901 Butterfield Road 
   Oak Brook, Illinois 60523 
   Attention: General Counsel
    
	
 
    	
 
    	
 
    
	
and   to:
    	
 
    	
Inland   Diversified Real Estate Trust, Inc. 
   2901 Butterfield Road 
   Oak Brook, Illinois 60523 
   Attention: Barry Lazarus
    

 

13.          Assignments. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Nothing contained herein, express or implied, is intended to confer on any person other than the parties hereto or their respective successors and assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement.

 

14.          Governing Law. This Agreement and the legal relations between the parties hereto shall be governed by and construed in accordance with the internal laws of the State of [                      ] applicable to contracts made and to be performed in that State, without regard to conflict of laws principles.

 

7

 

15.          Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original but all of which together shall constitute but one agreement. This Agreement may be executed and delivered by facsimile.

 

16.          Entire Agreement; Amendments. This Agreement (including the instruments between the parties referred to herein) constitutes the entire agreement among the parties and supersedes all other prior agreements and understandings, both written and oral, among the parties, or any of them, with respect to the subject matter hereof. All references to sections, subsections, clauses, exhibits and schedules shall be deemed references to such part of this Agreement, unless the context shall otherwise require. No provisions of this Agreement may be effectively waived, changed or amended, or the termination or discharge thereof agreed to or acknowledged, orally, but only by an agreement in writing signed by the party against whom the enforcement of any waiver, change, amendment, termination or discharge is sought.

 

17.          Headings. The headings contained in this Agreement are inserted for convenience only and do not constitute a part of this Agreement.

 

18.          Invalidity. If any provision of this Agreement is held invalid or unenforceable, the remainder of this Agreement shall nevertheless remain in full force and effect.

 

19.          Attorneys’ Fees. In the event of any controversy, claim or dispute between the parties hereto arising out of or relating to this Agreement or any of the documents provided for herein, or the breach thereof, the prevailing party shall be entitled to recover from the losing party reasonable attorneys’ fees, expenses and costs.

 

[Remainder of page intentionally left blank; Signature page follows]

 

8

 

In witness thereof, the parties have duly executed this Agreement as of the date first written above.

 

 

	
 
    	
LENDER:
    
	
 
    	
 
    
	
 
    	
[                                                                  ]
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
PLEDGOR:
    
	
 
    	
 
    
	
 
    	
[                                                                  ]
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
COMPANY:
    
	
 
    	
 
    
	
 
    	
Inland Territory, L.L.C.,
    
	
 
    	
a   Delaware limited liability company
    
	
 
    	
 
    
	
 
    	
By:
    	
Inland   Territory Member, L.L.C., a
    
	
 
    	
 
    	
Delaware   limited liability company
    
	
 
    	
Its:
    	
its   Managing Member
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:   
    	
 
    
	
 
    	
 
    	
Name:
    	
 
    
	
 
    	
 
    	
Title:
    	
 
    

 

9

 

EXHIBIT A

 

PLEDGED UNITS

 

INLAND TERRITORY, L.L.C.

 

	
Certificate 
   Number
    	
 
    	
Units
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    

 

10

 

EXHIBIT B

 

INSTRUCTIONS TO REGISTER SECURITY INTEREST

 

To: Inland Territory, L.L.C. 

c/o Inland Diversified Real Estate Trust, Inc. 

Oak Brook, Illinois 60523 

Attention: Chief Financial Officer

 

Attention: Inland Territory, L.L.C., a Delaware limited liability company (the “Company”)

 

As of                                   ,         

 

You are instructed by the undersigned pledgor, [                                                , a Nevada limited liability company] (“Pledgor”), to register a security interest in the following limited liability company interests in the LLC (the “OP Units”) in the manner indicated:

 

1.             OP Units. The OP Units that are the subject of these Instructions to Register Security Interest are as follows:

 

[                            ] non-managing Class B Units owned by Pledgor and evidenced by the LLC Unit Certificate referred to on Schedule A hereto. The OP Units are pledged to [                                                                      ] (“Lender”) to secure repayment of a loan by Lender, pursuant to that certain                                                   , [dated as of the date hereof,] by and between Lender and Pledgor (as such and as may hereafter be amended, supplemented or otherwise modified from time to time, the “Loan”).

 

2.             Instructions. You are instructed to register the OP Units as subject to a security interest in favor of Lender, whose Taxpayer Identification No. is [                                ], and who on registration of its security interest shall become the registered secured party with respect to the OP Units. You are instructed to promptly so inform Lender of these Instructions to Register Security Interest.

 

3.             Confirmation of Security Interest. Pledgor has granted to Lender (and hereby confirms that Lender has) a security interest in the OP Units of Pledgor under the Limited Liability Company Agreement of Inland Territory, L.L.C., dated as of [                                        , as amended from time to time] (the “LLC Agreement”).

 

11

 

4.             Distributions and Redemptions. Following receipt by the Company of an appropriate notice of default, upon the written instruction of Lender and until written instructions to the contrary are received from Lender, (i) the proceeds of any redemption or exchange of the OP Units, whether such proceeds are cash or otherwise, shall be delivered to Account No. [insert account #, c/o information, bank name and address] (the “Securities Account”) for the benefit of Lender, and (ii) all ordinary distributions, as well as all extraordinary or liquidating distributions shall be delivered to the Securities Account at [insert bank name] for the benefit of Lender.

 

5.             Warranties. Pledgor hereby warrants for itself that: (a) it is entitled to effect the instructions hereby given; (b) its Taxpayer Identification Number is [                                      ]; (c) Lender is a lending institution that is not an affiliate of Pledgor; and (d) the Loan constitutes a bona fide loan or extension of credit.

 

6.             Delivery of Certificates. These Instructions to Register Security Interest hereby serve as notice to the Company, and to any transfer agent of the OP Units, that any certificates, confirmations, documents or other writings of any kind evidencing or relating to any OP Units shall, if issued, be registered in the name of the undersigned Pledgor and delivered directly to the Securities Account at [insert bank name] for the benefit of Lender; provided, however, that if Lender at any time delivers written notice to the Company that there has been a default under the Loan, then thereafter all certificates, confirmations, documents and other writings of any kind evidencing or relating to any OP Units shall, if requested by Lender, be issued and registered in the name of Lender, or its designee, and delivered directly to the Securities Account at [                                                      ].

 

7.             Not an Admission to the Company. The execution and acceptance of these Instructions to Register Security Interest shall not constitute consent to the admission of Lender as a substituted member of the Company. Unless otherwise provided, the Lender shall at no time be admitted as a member of the Company.

 

8.             Acknowledgement and Consent. The Company, and Pledgor have entered into that certain Acknowledgement and Consent of even date herewith (the “A&C”) pursuant to which the Company has acknowledged the pledge of the OP Units by Pledgor to Lender, subject to the terms and conditions set forth therein. In the event of any inconsistencies between the terms and provisions hereof and those of the A&C, the parties hereto agree that the terms and provisions of the A&C shall govern.

 

[Remainder of page intentionally left blank, signature page follows]

 

12

 

In witness whereof, the undersigned Pledgor has executed these Instructions to Register Security Interest as of the date first set forth above.

 

	
 
    	
PLEDGOR:
    
	
 
    	
 
    
	
 
    	
[                                                        ]
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
ACCEPTED AND AGREED
    
	
 
    	
 
    
	
 
    	
INLAND TERRITORY, L.L.C.,
    
	
 
    	
a   Delaware limited liability company
    
	
 
    	
 
    
	
 
    	
By:
    	
Inland   Territory Member, a Delaware
    
	
 
    	
 
    	
limited   liability corporation
    
	
 
    	
Its:
    	
Managing   Member
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    	
 
    
	
 
    	
 
    	
Title:
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
[TO BE SIGNED AT CLOSE]
    

 

13

 

SCHEDULE A

 

14

 

EXHIBIT C

 

LLC AGREEMENT

 

[PLEDGOR TO PROVIDE COMPLETE AGREEMENT]

 

15

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00211-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00211-of-00352.parquet"}]]